Over Rs. 450 m UL ads given sans contracts on ex-CEO orders: Official

Thursday, 19 July 2018 00:19 -     - {{hitsCtrl.values.hits}}

By Maleesha Sulthanagoda

Over Rs. 450 million worth of advertising contracts were awarded to Kuma Stickers Ltd. on the orders of former SriLankan CEO Kapila Chandrasena without a tender process since 2006, a top official of the national carrier told the Presidential Commission of Inquiry (PCoI) yesterday. 

The PCoI appointed to probe into allegations of frauds and misconduct in SriLankan Airlines, SriLankan Catering, and Mihin Lanka Ltd. heard that the national carrier awarded the bulk of its billboard advertising to Kumar Stickers even though its other advertising was contracted to formal media buying agencies that followed tender process.  

SriLankan Airlines Network Planning and Research Manager Priya Epitawala, testifying before the PCoI, said that the then-CEO of the national carrier Kapila Chandrasena ordered that all advertisement contacts be given to Kuma Stickers as “they helped the Government”.

SriLankan also awarded almost all of their advertisement contracts from 2011 onwards to Kuma Stickers and Vihanga Marketing, which is controlled by the same family. UL Senior Marketing Manager Sidath Perera, testifying before the PCoI earlier, revealed the airline gave all their advertisement contracts, agreements, contract extensions and flex changes to Kuma Stickers Ltd., Vihanga Marketing and Advertising Ltd. from 2011 to 2018. The documents provided by Perera also showed that the then-CEO Kapila Chandrasena had ordered payments to the advertising firms even after the valid contracts had lapsed.

Perera, providing evidence before the PCoI, said that the national carrier awarded advertisement agreements for light boxes and hoardings worth over Rs. 450 million during the last seven years to Kuma Stickers Ltd., and Vihanga Marketing and Advertising Ltd. The national carrier also made the highest payments to the firms in 2014-2015 of Rs. 140 million. He also noted that the payments have been reduced to Rs. 25 million over the last two years after the new administration took over the airline in 2015. 

He went on to say that an internal audit was also carried out by the airline, and written agreements and contacts were found to be missing or were not available. According to the documents provided, it was evident to the PCoI that the UL marketing department had not conducted proper contract reviews incorporating internal and external experts on many of the agreements. 

Even though the internal audit of the airline had flagged these agreements, proper procedures were only followed on agreements signed after 2014, the PCoI heard. 

Perera also said that most of the documents pertaining to agreements and contact extensions could not be found by him, but he agreed to continue searching. The PCoI was told that in between lapses of agreement renewals, UL CEO Kapila Chandrasena provided interim approval through e-mail to continue with payments totaling more than Rs. 10 million. 

“According to the company guidelines, payments can’t be made without a signed and validated agreement. It is illegal to make payments unaccompanied by agreements,” Perera told the PCoI. 

It was also highlighted to the commission that most of the hoardings placed by the family-owned firms were in the most populated province of the country. 

SriLankan Airlines also awarded advertisement contacts where they had hired media buying agencies to conduct advertising campaigns on TV, Radio and newspapers.  

Grant McCaan Erikson, Saatchi and Saatchi, and Starcom Worldwide were the media buying and advertising agencies, but none of them had control over awarding hoarding and light box contracts, which were done separately, Perera told the PCoI.