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Protecting Whistleblowers since 1977

Sri Lanka Corruption

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In early 2009, GAP began to hear from anonymous whistleblowers in Sri Lanka who were concerned about official misconduct with respect to IMF funds. After regularly providing updates on several political and judicial developments in Colombo, GAP released two reports that chronicle a series of unlawful transactions involving privatization. Both transactions transferred valuable revenue-producing enterprises from the public to well-connected corporate ownership. The reports are Unlawful Privatization in Sri Lanka: The Role of the Auditors, and Corrupt Privatization Does Not Deter IFI Lending to Sri Lanka.

Among other things, the two reports detail the machinations of P.B. Jayasundera, the Secretary to the Treasury, during a period when unlawful privatizations occurred in Sri Lanka.

The reports also recount the role of the Minister of Economic Reform responsible for the corrupted privatization of Lanka Marine Services (LMSL) and Sri Lanka Insurance Corporation (SLIC), Milinda Moragoda. Moragoda’s ministry managed the Public Enterprise Reform Commission, where P.B. Jayasundera, the appointed Chairman, supervised the fraudulent transactions. Shortly before the Parliamentary Committee on Public Enterprises exposed the sales of LMSL and SLIC as corrupt, Moragoda switched political parties and lobbied for a new political appointment with the governing party.

The recently re-elected President, Mahinda Rajapaksa, appointed Moragoda Minister of Justice in July, 2009, just as the Supreme Court issued the second of its judgments on corrupt privatization finding the terms of the sale of SLIC unlawful. As a result of Moragoda’s political maneuver, the Attorney General, who was directing the Criminal Investigations Division responsible for prosecution of those responsible for the two illegal transactions, found himself under the purview and supervision of Moragoda.

The fact that no prosecutions have resulted from the fraudulent sale of either LMSL or SLIC is of great concern to the whistleblowers on these transactions in Sri Lanka.

At the same time, as Jayasundera returned to the post in which he had manipulated privatizations illegally, the World Bank proceeded with its own seventy-five million dollar project in Sri Lanka. This project involved a corporation with close ties to former World Bank official Mohamad Muhsin, who was permanently debarred from employment at the Bank for his own acceptance of bribes in 2006.

On November 24, 2009, Sri Lankan President Mahinda Rajapaksa told the public that “Bribery and corruption ruined the country. We have the legal frameworks to tackle corruption. What is lacking is the proper implementation of this legislation.” On fraud and corruption, however, the President’s actions are inconsistent with his rhetoric. Two fraudulent privatizations annulled by the Supreme Court of Sri Lanka remain uninvestigated and high level appointments made by the President himself effectively block even the prospect of a future investigation. In addition, Rajapaksa’s administration is rife with conflicts of interest, nepotism and cronyism that have cost the people of Sri Lanka billions of dollars at a time when they desperately need public services due to the consequences of a protracted civil war and a devastating tsunami.

Inaction on Corruption in Sri Lanka

The professional association setting out regulations and standards of professional conduct for accountants in Sri Lanka is the Institute of Chartered Accountants of Sri Lanka (ICASL). The Institute is quasi-statutory body to which the government grants funds and appoints nominees, and as such, it has a legal obligation to pursue allegations of misconduct and fraud. As long ago as August, 2005 the ICASL had received a complaint about the misconduct of Ernst & Young and PricewaterhouseCoopers (PWC) in the privatization of Sri Lanka Insurance Corporation. Two years later, in July, 2007, a ten-member Ethics Committee of the ICASL, decided that prima facie cases of professional misconduct by both Ernst & Young and PWC did exist.

When the Ethics Committee reports a prima facie case of misconduct against a member of the Institute, the Council of the ICASL is required to appoint a Disciplinary Committee for the purpose of conducting an inquiry. The Committee, however, was not appointed until 2008, and it inquired into the misconduct of PWC, but not Ernst & Young. The failure to investigate the conduct of Ernst & Young in SLIC transaction represents a serious breach of professional duty and fiduciary responsibility by the society for auditors and accountants in Sri Lanka. In addition, in its SLIC judgment, the Supreme Court ordered that Ernst & Young be removed immediately as the Auditors of SLIC, and subsequently ordered that the Auditor General carry out an audit for the entire period during which SLIC was under privatized management.

On March 4th, 2010, a letter was sent to the ICASL once again protesting the Institute’s lack of action regarding its apparently corrupt members. Among other things, the writer protests, the induction of Sujeewa Mudalige as the President of the ICASL on 8 March 2010 is outrageous. As a partner in PWC, Mudalige played a pivotal role in the fraudulent SLIC privatisation. Further, the guest of honor at the induction was P.B. Jayasundera, whose actions throughout the SLIC privatization process were characterized by the Supreme Court of Sri Lanka as shocking to the conscience.

Sri Lankan Whistleblower Nihal Sri Ameresekere Discusses International Corruption and Fraud

In June 2011, Sri Lankan whistleblower, chartered accountant and public interest activist Nihal Sri Ameresekere sat down with GAP Executive Director Bea Edwards to discuss international corruption and fraud. Ameresekere is the author of six books on these subjects, and is known for exposing corruption, fraud and nepotism within the Sri Lankan government. He also served as a key player in the implementation of the UN Convention Against Corruption.

September 2011 - Ameresekere's Book Series Updated, Launched: Ameresekere, also the former Director of the Public Enterprise Reform Commission of Sri Lanka, has published a series of books outlining, in detail, the corruption and fraud that affected the "reforms" implemented by the government of Sri Lanka over the course of the past fifteen years. In his capacity as a chartered accountant, political activist and whistleblower, Ameresekere explains the complex mechanics of large scale economic crime at the nexus between the public and private sectors. His books elucidate fraud associated with privatization in Sri Lanka, tax evasion, and the manipulation of legislation for the benefit of private interests. The books represent an important contribution to international efforts designed to strengthen and enforce the UN Convention Against Corruption.