Attorney General’s letter to Parliament – A response by T. Rusiripala

By Janitha Devapriya

I confess that I do not have a copy of the Attorney General’s letter to Parliament which was tabled and therefore based my comments on the first page news item that appeared in the Daily FT of 8 March, which was also carried in the front page of another English Daily on the same date. I wish to give my comments and observations on the response of Mr. T. Rusiripala (Daily FT, 21 March), to my previous article on the subject, who says that the points raised by me tantamount to a gross misrepresentation of facts. Let us therefore look at them again. 

One matter that he is harping on is my mention about the Prime Minister’s reference of the COPE report to the Attorney General. What I stated in my article was that it was the Prime Minister who first referred the COPE report to the Attorney General for his advice as announced by the PM in Parliament. Since none of us are privy to the contents of the PM’s communication, it could be assumed that he would have sought legal opinion on many matters contained in the COPE report including the validity of the bonds issued since 2008. 

No doubt, the Attorney General would have replied to the Secretary General of Parliament as a separate communication in reply to the reference made after the Parliamentary debate on the COPE report and another to the PM’s office. The chronology is of little importance here as the AG apparently sent two communications containing his legal opinion in response to the two separate references. The point I tried to make was that the Prime Minister referred the COPE report to the Attorney General before the Parliament did and I was not trying to prove anything with this comment. 

Rusiripala goes on to state that ‘the fact of the matter is that the reference of the COPE report to the AG by the PM was not an action approved or endorsed by Parliament’. I do not believe that the PM’s action needs approval or endorsement by Parliament or any other body since the COPE report, once tabled in the house becomes a public document which was thereafter picked up by the media and members of the public. I submit that anyone can refer it for legal opinion to his or her lawyers depending on the particular needs. In the case of the PM, he too can exercise this right and appropriately referred it to the Attorney General, who is the State’s Chief Legal officer and also due to the fact that the Central bank, which functions under the PM’s ministry, was the subject of the COPE investigation. 

A civil matter

Rusiripala interestingly quotes an observation made by the President at a public meeting where he says that the President stated that the AG had opined that the bond scam issue was a civil matter and the President therefore had made a decision to refer it to an independent commission of inquiry. Now Rusiripala buttresses the point I tried to make in my previous article that the bond transactions of 27 February 2015 cannot be classified as a fraud, which entails criminal proceedings in court, unless the five elements constituting a fraud are established with credible evidence. If the said opinion of the AG referred to by the President and quoted by Rusiripala was in fact given by him, the bond transactions in question cannot be referred to as a fraud or a scam and the Attorney General therefore appears to have quite rightly determined that it is a civil matter, requiring the Central Bank to initiate action. 

If I may quote a section of the AG’s opinion “the content of the COPE report points to the possibility of several transgressions known to the law, including market manipulation, insider dealing and non-compliance with mandatory procedure”, and in this context, I understood the word ‘possibility’ to give the expression that it could be ‘chance, likelihood or probability’ of transgressions known to the law in the areas of market manipulations, insider trading and non-compliance with mandatory procedure and I highlighted this to emphasise the fact that it has to be proved with firm evidence, which I presume the Attorney General too thought similarly.

The controversial Gazette 

He goes on to deride me for mentioning the controversial Gazette in my article. What I said was, “such a doubt in fact ensued when the Attorney General’s representative queried about the gazette that authorised the issue of bonds in question at the Presidential Commission of Inquiry where it was found that the concerned gazette was invalid because it did not carry the signature of the Finance Minister, either previous or current...”

Rusiripala appears to be agreeing with me by terming it as the gazette fiasco, which I mentioned as an unpardonable blunder of the Central bank. It is true that the Attorney General did not refer to the gazette in his letter but the issue of the gazette is a legal requirement in terms of section 4 ( 1 ) of the Registered Stocks and Securities Ordinance No. 7 of 1937 and what the AG did was to allay any doubts or fears that may be created in the minds of the bond holders on the validity of their holdings, particularly since these are Government paper which cannot be dishonoured under any circumstances and without this re assurance, there would have been calamitous repercussions in the financial market. 

I never connected the AG’s opinion on the validity of the bonds with the controversial and invalid gazette but merely mentioned it to highlight the fact that doubts were created in the minds of some bond holders whereas Rusiripala tries to assert that ‘no commotion expressed by anybody on the legality and validity of the previous bonds’ and goes on to accuse me of confusing readers and causing embarrassment to the authorities. I have no such desire but the said gazette has already created so much confusion and embarrassment in the Central Bank and the Government is now earnestly considering legislation to overcome such problems. 

Prima facie

Then Rusiripala tries to enlighten me on the term ‘prima facie,’ for which I am thankful. I too looked for it in the free dictionary in Google to see what I may have missed and according to the basic meaning, it says ‘in common parlance the term prima facie is used to describe the apparent nature of something upon initial observation’. He goes further and says: ‘Devapriya fails to understand that there is something called a prima facie on which civil and criminal remedies may be availed of and the AG clearly states in his letter the sections and the regulations under which such actions can be taken. Only a nincompoop will expect the AG to conclude convictions before a trial.’ 

I am glad that he mentions this. Just as much as no one can conclude a conviction before a trial, so it is with regard to the bond transactions of 27 February 2015 and the COPE investigation is not a trial but a fact finding exercise. It is true that some of the findings are alarming but such matters need to be investigated fully and presented in the appropriate judicial courts with unimpeachable evidence. After a final determination, every interested person can castigate the persons or companies involved but in the meantime, everyone appears to be hauling the persons or organisations named in the COPE report over the embers and try to burn them alive.

In terms of the AG’s opinion, who is quoting the Registered Stocks and Securities ordinance, section 21 (D) (5), which says, “In the event of the Government incurring any liability or making payment of any sum due as principal, interest or redemption proceeds with regard to scripless Treasury Bonds, and where such liability arises or such payment is made in consequence, or by reason, of any default of a direct participant or a dealer direct participant, such participant shall be liable on demand by the Government, to indemnify the Government with respect to such liability or payment,” it is obviously necessary to determine the loss if any incurred by the Government through the said bond sale as quite rightly emphasised by the Attorney General who says, “Furthermore, a reasonable estimation of damages assessed by a method that could be substantiated before a court of law would be required. In this regard, it would be necessary to provide a precise quantification of the loss suffered by the Government.”

This means that the estimation of alleged losses already presented may not be acceptable in courts at this time. I say ‘alleged’ losses because this is not admissible in a legal frame yet. In my article, what I said was that the Central Bank should initiate investigations on possible market manipulations and therefore his comment, ‘Alas! The minister in charge of the CBSL then becomes responsible according to Devapriya!!!’ is totally irrelevant. He is also questioning from where the ‘if’ came. Pardon me, as I said in the beginning, I do not have the copy of AG’s letter and I picked it up from the Daily FT report and verified it from a front page news item on the matter in another English daily.

Former Governor’s visit to PDD

I mentioned the visit of the former Governor to the PDD where the bond bids were being processed in my article because this is the incident widely bandied about to fix a nexus for insider dealing and I emphasised the need to find hard evidence to establish it and resort to legal action. Rusiripala is trying to find such a nexus by stating that Perpetual Treasuries’ bid for very large chunks of the bonds available for sale at the auction through another primary dealer, Bank of Ceylon just because one of its directors is said to be connected to the former governor. My contention was that there could have been connections of the said primary dealer to other persons in the Central Bank. 

Rusiripala too states this, “What Devapriya has failed to comprehend is all those officers at the PDD and the front office are capable of passing information. Not only in this instance but in all other instances also, that is a fact. But nothing of the sort has been alleged before or after.” Merely because nothing of the sort has been alleged, it does not mean that insider dealing involving others had not taken place.

Another point Rusiripala tries to highlight is, “At all these forums the witnesses have clearly stated that Arjuna Mahendran on his second visit to the auction floor at about 12.30 p.m. has asked the PDD officials to take Rs. 20 billion, the total of the bids received in that auction. When the PDD officials argued against it, the Governor has insisted that they take Rs. 10 billion. Arjuna Mahendran has done this according to evidence tendered, after examining the bid list.” It is pertinent to note that in the evidence given by one senior official of the Central Bank at the COPE investigation, it was stated that ‘the Governor never ordered to “do it” but only inquired “why don’t you go for 10?”’ (meaning up to 10 billion bids). (Page 24 COPE Report)

He goes on to quote the evidence given by the dealers at BOC to the COPE, perhaps as a possible link to augment the theory of insider trading allegedly engaged by Perpetual Treasuries. However, the BOC should determine whether the dealers had the authority to enter into an arrangement with the said primary dealer where huge sums were involved and whether they got the nod from the BOC corporate management to go ahead in such a short time. It may also be relevant to note the observation in the COPE report, “Primary dealers, certain officials of the Central bank, the Employees Provident Fund, and certain officials of the banks including Bank of Ceylon, have engaged in malpractices, working as a rogue ring in order to earn undue profits within the bond issuing process.” (Page 51 COPE Report)

Evidence

As for evidence given by some officials of the Central Bank and others outside, at the COPE investigation, it remains to be seen whether such evidence could stand the rigorous probing and questioning if the matter ends up in the appropriate court of law, as recommended by the AG. One senior official of the Central bank admitted contradiction of evidence given by him in the COPE investigation and what he proffered at the Presidential Commission of Inquiry. 

MP Bandula Goonewardene had egg on his face when he boasted to the media that he had volumes of vital documentary evidence to be presented at the COI but when he presented himself, he had nothing worth to be considered as evidence since the documents he had were unauthenticated and unsigned photocopies of some print outs. The Commission severely reprimanded him. Though it may look that there is an abundance of evidence against Arjuna Mahendran and Perpetual Treasuries, it will be vigorously scrutinised by the courts when presented and what would stand up to such testing will only be admissible.

So Mr. Rusiripala, let me thank you for crediting me with a response to my earlier article but I am afraid I am not persuaded to change my position on the matter even with your eloquent reasoning. I do not wish to continue with this correspondence after this since the valuable space in the FT maybe taxed and perhaps some readers may find it boring in the rush.