Troubles of ETI, Swarnamahal Financial Services multiply | Sunday Observer

Troubles of ETI, Swarnamahal Financial Services multiply

10 January, 2021

For decades the Edirisinghe name has been among the top echelons of family-owned businesses in Sri Lanka. But after years of legal troubles stemming from the finance companies run by the family business group, this week they faced a devastating fall from grace after the four Edirisinghe siblings Jeewaka, Nalaka, Asanka and Deepa Eidirisnghe were arrested by Police on numerous finance-related charges.

Their problems began when on July 13, 2020 the Central Bank of Sri Lanka decided to cancel the licence of Edirisinghe Trust Investments Ltd. (ETI) which had existed since 1967 and its subsidiary Swarnamahal Financial Services (SFS) due to insufficient capital and financial problems regarding repaying depositors’ money on-demand as well as before maturity.

Its depositors had then taken to the streets demanding justice and their money to be repaid.

This resulted in President Gotabaya Rajapaksa appointing a Presidential Commission of Inquiry consisting of Retired Supreme Court Judge K.T. Chitrasiri, retired Solicitor General Suhada Gamlath, Senior Banker D.M. Gunasekara in January 2020 to investigate the alleged irregularities in Edirisinghe Trust Investments Ltd. (ETI) and to also provide relief to those affected.

The recent directives by the Attorney General to arrest the directors were, therefore, based on the findings of this Commission. In its final report submitted to the President in October 2020, the Presidential Commission noted that ETI Investments had not followed proper procedures in their conduct from inception. It was also revealed that ETI had invested its assets in other institutions and it had not been supervised by the Central Bank.

The Commission had also pointed out several offenses had been committed in violation of Sri Lanka’s Company Law, the Financial Cooperation Act, the Money Laundering Act, the Financial Information Reporting Act, the Legal Framework for the transfer of lands to foreigners as well as the penal code by its observations and recommendations. ETI had also failed to maintain the required liquidity position since 2011 while the company was accused by its clients of not honouring the depositor’s request for money withdrawals since 2011. At the time the CBSL said ETI and SFS had become insolvent due to various irregularities that had taken place since 2011.

Taking ETI as an example the Commission also noted the need to reform the Non-Banking Financial Institutions Supervision Department of the Central Bank that supervises and regulates finance companies.

The President agreed at the time noting that the Central Bank cannot evade its responsibility in this matter, “The Central Bank is obligated to protect depositors if any irregularities are discovered in a financial institution. The Central Bank has failed in its duty” the President said. The CID in October 2020 also grilled several CBSL employees asking why its officials had not taken action when a large number of depositors had clearly been in peril.

The Commission report was then forwarded to the Attorney General to take immediate legal action and to execute the recommendations of the aforesaid Commission report on alleged finance and property irregularities of ETI after the Cabinet too gave its nod to the report.

As a result on January 5, the Attorney General had directed the Inspector General of Police (IGP) to conduct a criminal investigation against the Directors of the ETI Finance and Swarnamahal Jewellers Ltd. over their involvement in operating an unauthorised finance business. Accordingly, Jeewaka Edirisinghe, Deepa Edirisinghe and Asanka Edirisinghe were arrested on the same day by the CID, acting on further directives from the Attorney General. Nalaka Eidirisnghe handed himself over to the CID the next day.

Though the siblings managed to post bail on January 6, the legal troubles faced by the family only multiplied during the week when Attorney General Dappula De Livera directed IGP C.D Wickramaratne to commence investigations into the four, who were also former directors of yet another company started by the family, ETI Finance. He later directed the IGP to arrest the siblings and produce them before courts.

The suspects, who were arrested and released on bail just two days before, were therefore arrested again on Thursday (07) by the Criminal Investigations Department (CID). Police Spokesman, DIG Ajith Rohana said Jeevaka, Nalaka, Asanka, and Deepa Edirisinghe were arrested under offenses committed as the former directors of ETI Finance. The allegations against the four are over the unauthorised acceptance of deposits worth Rs 13.7 billion, misappropriation, money laundering, criminal breach of trust and other offenses under the Finance and Business Act.

The Government also took steps to provide relief to nearly 2,500 depositors of ETI who suffered due to the collapse of the company.

According to estimates ETI owes at least Rs. 20 billion to its former clientele. In June, the President’s Media Division announced that depositors with less than Rs. 600,000 invested with ETI Finance will receive their monies back. “This move will be the first phase of returning monies to depositors,” the release said.

President Gotabaya Rajapaksa at the time assured that the assets of ETI will be assessed and taken over without litigation and monies owed to the public will be returned. The President had also stressed that depositors must be repaid “even by seizing all properties owned by the institution”. A fundamental rights petition filed against the Directors by the Depositors also continues to be heard in courts.