Flames of corruption and rampant economic mismanagement

| by Mangala Samaraweera

( September 14, 2012, Colombo, Sri Lanka Guardian) In an incongruous turn of events the Colombo Stock Exchange has become the third best performing stock market in the world, over the last month, according to reports in the state media and broadcasters affiliated to business tycoons under scrutiny by independent securities regulators. The report comes just weeks after the appointment of Nalaka Godahewa as Chairman of the Securities and Exchange Commission, a move that has been likened to putting a fox in charge of the hencoop.

Godahewa is SEC chairman for one reason and one reason only – to protect the interests of the very market mafia that is running the bourse to the ground and is therefore, supposed to be under scrutiny by the regulator. Godahewa is an appointment sanctioned and mooted by the mafia, run by business tycoons whose affiliations to the incumbent regime need no second telling.

Rampant corruption, cronyism and insider trading has led to the implosion of the CSE, which was the world’s best performing stock market just months after the end of the conflict, buoyed by Sri Lanka’s post-war potential and investor confidence. That same confidence has been turned on its head today, with the same market being rocked by scandal and allegations of unimaginable corruption. The CSE has seen its value plunge by 26 percent over the last year, as state appointed securities regulator after regulator have quit in disgust at the way the market is being run.

Last month, Securities and Exchange Commission Chairman Tilak Karunaratne quit his position, saying he could no longer fight against a ‘mafia of crooks’ preventing SEC investigations into ‘pump and dump’ cons that were shaking the market to its core and completely swindling the small retailers investing in the market. Karunaratne, upon his resignation from the post for which he was handpicked by President Mahinda Rajapaksa said brokers were involved in the scams that were being perpetrated by a handful of high net worth individuals manipulating the stock exchange. Karunaratne’s predecessor at the SEC Indrani Sugathadasa, a highly respected public servant also resigned last year, saying she was unwilling to “compromise her principles.” Currently, there are 17 high profile cases of insider trading and other irregularities under investigation at the SEC. Many of them, Karunaratne has claimed have been put on the backburner on the instructions of higher echelons of power. According to Karunaratne, he was given a not so subtle message to quit his post through emissaries of the very man who placed him in the chair, Mahinda Rajapaksa.

The story of the Colombo Stock Exchange is therefore, now becoming abundantly clear and the lack of investigation and acceptance of this status quo by the ruling regime has been criticized by international financial lending agencies such as the IMF, whose loan tranches to Sri Lanka are conditional on fiscal responsibility on the part of the Sri Lankan state. The bubble that was the CSE soon after the end of the war, has now burst, resulting in the bourse losing more than 5 billion dollars in value within six months, leaving the high profile stakeholders in the Stock Exchange desperately seeking scapegoats for mitigating their losses. Ably assisted by brokers, they are preying on the carefully invested savings of ordinary people, spurring them on to invest in dud companies by pumping money into the dodgy stocks, only to flee when the time is right with their winnings, leaving the small investor high and dry, often with less capital than they started out with.

The time has come therefore, to stop bandying words. The crisis in Sri Lanka’s stock exchange is simply put, a money laundering Ponzi scheme, orchestrated by certain high net worth individuals; individuals that are protected by the regime because they also look after the financial interests of the ruling family. The breakdown of the rule of law, that is leading to the enactment of the law of the jungle in every aspect of Sri Lankan life at the hands of this regime has now pervaded the financial system, a harbinger of almost certain collective doom for the citizenry at large.

Laughably, these same individuals, led by the likes of Dilith Jayaweera claim that the bourse is suffering from over-regulation – an incredulous charge since unprecedented insider trading and market manipulation notwithstanding, not a single individual in Sri Lanka has been prosecuted and jailed for securities fraud.

With the government firmly on the side of these white collar crooks, because of the wealth they wield, the question of who will protect the small investor must be raised. Who will come to their defence when they trust in the government’s reassurances that the stock market is a safe investment and feed their savings to the corporate sharks lurking beneath the surface of the murky waters of the exchange?

As the government aims to obtain more international loans to finance its extravagant habits and courts international image building by holding the Commonwealth Parliamentary Conference in Colombo, an agenda dominated by Rule of Law issues and democracy, one has to marvel at this regime’s tremendous ability to orchestrate public relations stunts while the country is being engulfed in flames of corruption and rampant economic mismanagement.

The government, in its blasé acceptance of the Sugathadasa and Karunaratne resignations and appointment of Godahewa as their regulatory successor, proves beyond doubt that they take no issue with the fat cats continuing to fill their pockets with stolen gold, as long as a share is carefully apportioned out to the regime in exchange for its silence.