Saturday, 21 December 2013 00:00
By Ashwin Hemmathagama Our Lobby Correspondent
Opposition lawmaker Dr. Harsha de Silva yesterday cautioned the House to find new ways to prevent financial frauds taking examples from the Golden Key and the recent Central Investment and Finance Limited (CIFL) debacles. “There is no point in us inventing laws unless they follow it,” he said exposing the “Ponzi scheme of the CIFL”.
Showing how the CIFL has misled the depositors Dr. de Silva said: “In a letter dated 12 June 2011 CIFL confirms to have received approval from the stock exchange to raise an additional Rs. 400 million. They claim to have followed the regulations of the Central Bank of Sri Lanka (CBSL). But there is another document issued on 30 April 2011 by the CBSL detaining its onsite report on CIFL. According to this report, at the time of examination the overall risk exposure of CIFL was very high given the inadequate resources to mitigate the risk.
“Currently with no earnings from 61% of assets which are concentrated in real-estate, the CIFL is dependent on new deposits to meet expenses and the repayments plus operating a Ponzi scheme. How can the CIFL issue a letter going against the CBSL report? The Bank Supervision Department of the CBSL has done a good job by identifying the Ponzi scheme. But why was this report put under the carpet? Was this given to SEC and CSE?” queried Dr. de Silva.
According to him, the CBSL report shows credit risks related to noncompliance with directives, accrued interest direction and provisions for bad and doubtful debt directions.
“There is no single borrower limit compliance. Credit administration weakness, non-availability of customer evaluation, unethical credit related practices, default interest, and investment risk are also sighted in it.
“CIFL’s legal ownership for six properties is worth Rs. 984 million and this accounts for 97% of the assets. How did this company manage to get an all-clear nod from the CBSL, SEC, and the CSE to raise more money from innocent people? Is it because of the high ups they got the clear? Has money changed hands? This is a junk company. They have violated everything.
“Where is good governance? Now the CBSL is saying no finance company is liquidated. Yes that is because the innocent depositors are forced to convert 60% of their deposits into non-voting shares, which has absolutely no value. The Directors of this company have withdrawn millions of their personal deposits and have held the other deposits of the innocent people. There are over 10,000 who are unable to withdraw their money,” charged Dr. de Silva.