MP Kiriella overreaches on recovery of bond transactions losses

Fact Check

On 02 February 2020, Lankadeepa reported MP Lakshman Kiriella claiming that LKR 10 billion in estimated losses arising from irregular bond transactions post-January 2015 should not be considered a loss. His argument is based on over LKR 12 billion of counter-party assets being frozen in response to investigations. He contrasts this with the losses estimated for the 2002-2015 period, where there has been no asset freeze to support the recovery of losses.

FactCheck evaluated the MP’s argument on two levels. First, it checked the numbers and information presented by the MP; and second, the conclusion he derives from it.

First, we looked at the MP’s figures. The LKR 10 billion the MP cites as the estimated loss appears to be a rounding-up of the estimated maximum loss of LKR 9.68 billion—for post-January 2015 bond transactions—noted in Table 89 of the Central Bank Forensic Report 4.

The MP refers to the issuance of LKR 5,600 billion worth of Treasury bonds between 2002-2015 which resulted in significant losses. Table 18 of Forensic Report 1 confirms the issuance of LKR 5,600 billion in bonds as direct placements and Table 58 summarises the estimated losses from these issuances as LKR 10.47 billion. Therefore, the MP’s claim in relation to bond issuances between 2002-2015 is correct.

The MP also claimed that the government froze LKR 12 billion of Perpetual Treasuries’ assets. Following its own investigations and in accordance with the findings of other inquiries relating to irregular bond issuances in 2015, the Central Bank prevented the alienation of funds from Perpetual Treasuries on 7 November 2016 and later froze their bank accounts—including two accounts which held LKR 12.5 billion in assets. On 24 January 2018, the Central Bank extended this asset freeze to all 28 Perpetual Group companies. Then, on 1 February 2018—pursuant to a request by the CID—the Colombo High Court issued an order extending this asset freeze. The order was given to prevent the transfer of assets relating to the irregular bond transactions, which occurred in 2015. No such action has been reported with regard to the estimated losses of LKR 10.47 billion relating to the LKR 5,600 billion worth of bonds issued in the 2002-2015 period.

Therefore, all of the MP’s claims in relation to bond issuances, estimated losses, and the freezing of assets are consistent with what is reported in the Central Bank Forensic Reports and available in public sources.

Second, we looked at the conclusion the MP derives from this information: that there is, consequently, no loss incurred by the post-January 2015 transactions. Several investigations, such as those conducted by the Committee on Public Enterprises (COPE), the Auditor General’s Department, the Presidential Commission, and the Central Bank of Sri Lanka have already determined that a loss was incurred. Judicial proceedings are ongoing. Therefore, there is only a potential—not an actual—recovery of losses at present. Thus, the MP’s argument that losses were not incurred is an overreach.

The MP is correct in all his claims regarding bond transactions and estimated losses. However, his claim that a loss has not been experienced from the post-January 2015 bond transactions cannot be sustained as final recovery of assets has not yet materialised.

Therefore, we classify the MP’s statement as PARTLY TRUE.

*FactCheck’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck will revisit the assessment.