The former Governor of Central Bank, Arjun Mahendran was in the public eye last week as he took to the witness box to testify before the Presidential Commission of Inquiry investigating into the Treasury bond issue, although he is legally not inclined to give evidence.
Monday (18) started with Perpetual Treasuries Limited Chief Executive Officer Kasun Palisena yet again testifying before the PCoI. Palisena has been testifying since August 7, 2017. There were several witnesses taken in between, however, Palisena is the longest to be examined, cross examined and re examined before the Treasury Bond Commission.
New Charlie
In the previous week, when the Attorney General’s panel cross examined, Palisena was asked who he refers to as ‘Little Johnny’. According to Palisena they called small scale clients of their company as ‘Little Johnny’ even though the AG panel begged to differ, and suggested that this ‘Little Johnny’ is a specific person. It was also revealed that payments to this ‘Little Johnny’ was categorized as ‘Boss’ payment’, with ‘boss’ meaning Arjun Aloysius.
This week, the question was, “who is ‘New Charlie?” To complicate the matter, ‘New Charlie’ happened to be ‘Little Johnny’s Narahenpita Guy.’ Deputy Solicitor General Milinda Gunatilaka played a telephone call recording between Kasun Palisena and his ‘boss’ Arjun Aloysius.
In the telephone conversation, which has taken place on February 1 2016, Palisena tells Aloysius that there is ‘New Charlie’ who ‘can take down the 2026 bond’. 2026 means a bond maturing in the aforesaid year. Aloysius seemed confused as to who is going to take down the 2026 bond, so he goes on to ask, “Is ‘Little Johnny’ going to take it down”? Palisena corrects his ‘boss’ and says, ‘No, no, it is Little Johnny’s Narahenpita guy a.k.a ‘New Charlie’.
Following the telephone conversation, DSG Gunatilake and the Tribunal continuously questioned Palisena as to who ‘Little Johnny’ and ‘New Charlie’ are. Palisena quite skillfully evaded all the questions and said, these nick names are not for specific persons.
DSG Milinda Gunatilleke: Who is this ‘New Charley’?
Palisena: Could be someone from that point
DSG MG: It clearly says ‘Narahenpita’. So don’t waste time. Tell us who this person is?
P: It was some time back. So I cannot recall exactly who that was.
DSG MG: It was very clear that you and Aloysius are talking about the 2026 bond and about some individuals. Your answer is deceitful. It is self evident from this conversation that Aloysius was aware about this Little Johnny and the others. So I’m asking one final time, “Who is this Little Johnny? Was it Kaveen Karunamurti (DFCC dealer) or Saman Kumara (EPF Dealer)?
The witness denied knowing anything.
DSG MG exclaimed, “Even your boss did not know who ‘New Charlie’ was, but you clearly seemed to know him!” and once again reminded Palisena, “there is a limit to lying.”
DSG MG: In this conversation you refer to him as, ‘this is Little Johnny’s Narahenpita guy’.
P: Yes
DSG MG: The ETF is in Narahenpita, right?
P: Yes
DSG MG: Tell the truth at least now, and disclose the names of these people.
P: It could be anyone.
Former Governor testifies
Monday evening ended with curious journalists asking Mahendran’s legal counsels whether Mahendran would appear before the Commission and most importantly, ‘will he testify?’ The much anticipated testimony of Aloysius turned into an anti-climax, the public and the media were rather skeptical as to whether Mahendran would testify or not. There was no solid response and anticipation kept rising.
On Tuesday (19) Arjun Mahendran appeared before the Treasury Bond Commission accompanied by his counsels, led by, President’s Counsel Romesh de Silva. At the outset, De Silva PC rose with a statement and a submission.
De Silva PC pointed out that Arjun Mahendran is not a resident of Sri Lanka, so that, he cannot be compelled to give evidence, nor is he compellable to give an affidavit or to respond to any summon.
“Mr. Mahendran is not legally obliged to give evidence. We are also aware of the order the Commission gave, in particular, regarding Aloysius. Well aware of all these facts, Mr. Mahendran has decided to give evidence in order to assist the Commission.” Romesh de Silva PC informed the Tribunal.
“My submission is that Mahendran is not a citizen of Sri Lanka and should be treated with dignity without being insulted by the officers assisting the Commission. If that happens we reserve our rights to make an application at that time to withdraw.” Romesh de Silva PC said.
The Tribunal pointed out that the Commission has endeavoured to treat all witnesses in a fair and equal manner. It is our duty to treat all in the witness box with respect. There was an audible “Why have we to treat him with reverence?” and a few chuckles from the Attorney General’s panel following De Silva PC’s submission.
The Auctions
Mahendran then took the witness box to give evidence with regard to the February 27 2015 auction as well as the March 29, 31, 2016 auctions which are under the scrutiny of the Commission, according to its mandate.
Mahendran’s position was that he was in full agreement with the Tender Board decision taken on February 27, 2015 auction to accept bids for Rs 10.5 billion. He also disagreed with the Auditor General’s position that a loss was incurred by the government at the said auction. Mahendran also expressed his disagreement with the Auditor General’s loss calculation in his special audit report on the Treasury bond issue. Mahendran said, he was not involved in the decision making processes of the March 29 and 31 2016 auctions, under the Commission’s probe.
Speaking of the backdrop at which the February 27 2015 auction was held, Mahendran said, the biggest economic issue the newly appointed government faced in 2015 was the large debts it had to service. For March 2015, the government requirement was Rs. 72 billion which is a large sum of money, and drastic actions were necessary to meet the demand, Mahendran pointed out.
RSPC: So it was in that background this Treasury bond was advertised?
AM: Yes.
RSPC: How much was advertised?
AM: Rs 1 billion at 12.5 coupon rate.
RSPC: Why advertise for 1 billion when the requirement was 13.5 billion?
AM: I was not sure why. I had discussed with the Deputy Governor in charge and other officials on how to raise this money. They told me they were going to advertise 1 billion as government requirement.
RSPC: But why?
AM: They told me, if they advertised higher, the market would be aware of the high requirements and the yield would go up. The PDD officers told me it is their preferred way of advertising. They also said, they could raise the rest of the money through Private Placements, about which I was not particularly happy. But I gave them the benefit of the doubt.
Explaining further, Mahendran said, “I was expecting the Secretary to the Finance Ministry to send me an amended cash flow following this sudden requirement of 13.5 billion. But the amended cash flow requirement only came in by the end of April.”
Allegations were levelled against Mahendran that the cash flow requirement for the month of March does not indicate the said sudden government requirement.
The Letter
At previous proceedings, Mahendran’s counsels marked a letter said to have been given by former Finance Minister, which the AG’s panel noted to be undated. De Silva PC who was questioning Mahendran asked several questions on the aforesaid letter.
De Silva PC asked if the letter confirms that a request was made to the Governor on February 26 2015 to raise Rs. 75 billion within a month, urgently needed for a road development project, to which Mahendran answered in the affirmative.
When asked as to how he got the said letter, Mahendran said the letter was given by then Finance Minister in June 2016 as a refreshment of memory on what took place at the February 26 2015 meeting. According to Mahendran, he requested the said letter prior to going before the second COPE subcommittee investigating into the Treasury bond issue.
However, at Friday’s proceedings, while cross examining Mahendran, Acting Solicitor General Dappula de Livera suggested that the aforesaid letter is not an authentic document. ASG de Livera pointed out that the said the letter neither has a date nor a file number. When ASG de Livera asked how is it that this letter is crisp and fresh, Mahendran said, the letter had been enclosed in an envelope which was securely placed in an air-conditioned environment. ASG De Livera suggested that the aforesaid letter was “fabricated” to be presented to the Treasury Bond Commission and went on to say, it was prepared at a later stage to justify Mahendran accepting a large volume of bids at the February 27 2015 auction.
The letter “was fabricated and he had produced it to the Commission to defend himself against the serious allegations.” ASG De Livera said.
Meanwhile, the PCoI issued an order on Arjun Mahendran’s two mobile phones which were surrendered to the CID for investigations. According to the order, the examination of the two mobile phones provided by Arjun Mahendran had revealed that the data covering a significant period of time during the Commission’s mandate cannot be located. Before proceeding further with the investigation, the Commission wished to receive Mahendran’s explanation as to what could have happened. The Commission made the order following Additional Solicitor General Yasantha Kodagoda informing the Tribunal that certain data are not available in Mahendran’s mobile phones.
Postponement
On Wednesday, the Attorney General’s Department requested the Treasury Bond Commission for an adjournment until Friday. Acting Solicitor General Dappula de Livera, forwarding a motion, stated that they needed time to prepare for the cross examination so that they are seeking an adjournment until the said date. Former Governor Arjun Mahendran’s legal representative, President’s Counsel Romesh de Silva expressed certain concerns over the motion of adjournment.
He pointed out that, as representatives of Mahendran, they “did not have a clue that they (AG’s panel) are making such a motion. The Commission in fact yesterday said, the cross examination will begin today, and at that stage the AG’s officers did not make such a motion, De Silva PC pointed out. He said, he believes, the AG’s panel, which consist of three President’s Counsels are very much capable of cross examination.”
“Still they say they are not ready to cross examine! For some strange reason they are not ready to cross examine, possibly because he (Mahendran) is telling the truth!” De Silva pointed out. However, De Silva PC did not object to the motion. In answer to De Silva PC, ASG Livera pointed out that the AG’s panel assisting the Commission did not only focus on Arjun Mahendran. “We have hundred and one witnesses. Mahendran’s evidence is not the only evidence we are looking at.” De Livera PC said. De Silva PC retorted that the Tribunal with all its experience will know that “People just don’t get up and say we can’t cross examine.”
ASG Livera pointed out that the AG’s panel has volumes of evidence and material to focus on, when cross examining Arjun Mahendran. “We do not want to let go of any important matter. His evidence is critical for the investigation. I am sure a proper examination should be done. We have received volumes of evidence and proceedings. Mahendran’s evidence is purely on oral testimony. So, to perform our task, this adjournment is very important.” he said.
Friday, September 22
Chairman of the Commission, Supreme Court Judge Justice K.T. Chitrasiri said the Tribunal is ready to examine Mahendran.
Cross examination commences
The cross-examination of Mahendran commenced at the Presidential Commission of Inquiry on Friday, September 22.
Mahendran was questioned on the famous “Breakfast meeting”, which took place on February 26, 2015. According to Mahendran, it was attended by then Finance Minister Ravi Karunanayake, Minister of Highways Kabir Hashim, then Advisor to the Prime Minister, Malik Samarawickrama, the Deputy Governors, Secretary to the Treasury and Road Development Authority officials.
Mahendran said an urgent funding requirement of Rs. 75 billion was discussed at this meeting. Following the Cabinet meeting on February 24, 2015, Prime Minister Ranil Wickremesinghe had wanted Mahendran to speak with the RDA and get the exact figure of the funding requirement.
The Commission will resume on October 2 2017.