Tuesday, May 29, 2007

Royal Jester Mervyn Silva Does Kelaniya

Enough said, ne? Fools tend to speak for themselves.

Saturday, May 26, 2007

Inside Story of the Telecom Deal

The expose done by Sonali Samarasinghe is rerproduced here, in the interest of readers who do not have access to either print or electronic publications of The Sunday Leader... A related report was also published in The Sunday Times

Inside Story of the Telecom Deal - by Sonali Samarasinghe

Controversy surrounds the sale of Sri Lanka Telecom (SLT) shares purportedly to a Malaysian company, orchestrated by none other than President Mahinda Rajapakse himself, with allegations highly placed individuals stand to gain from the pointless private transfer that would bring no revenue to the state.

With even top government officials and politicos surprised and silenced by the audacity of the Rajapakse clan, allegations also abound President Rajapakse forced NTT to sell out a large number of its shares to a company of his choice.

In fact when NTT Communications Chief Suzuki, former CEO Shuhei Anan and CEO Shoji Takahashi were to pay a courtesy call on President Rajapakse last year during a visit to Sri Lanka, they were in for a rude shock.

Unimpeachable sources told The Sunday Leader Rajapakse had inquired of the NTT team if they had plans to sell the shares. On receiving a negative answer Rajapakse allegedly strongly advised them they should sell their shares and followed this advice by triggering off a series of unfortunate events that eventually forced the hand of NTT.

Forced to Sell
Following Rajapakse's advice to sell and leave, NTT were allegedly subjected to harassment that included arbitrary decisions on hiring and firing SLT personnel by the government, and decisions on certain issues taken over the head of the NTT appointed CEO in violation of the management agreement. SLT CEO Takahashi was out of the island and couldn't be contacted.

With a disgusted NTT now willing to sell its shares in SLT, all President Rajapakse had to do was table a cabinet memorandum and gain cabinet approval. This he easily did by his curious style of 'one a minute' without even consulting the minister in charge of the subject, Rauf Hakeem.

Even a blue chip company like John Keells that showed an interest in getting into the business could not get a look in for reasons that will not be gone into here because of the fears entertained by its top management.

The controversial deal between GTH and GOSL is expected to be closed this Thursday, May 31 according to documentation in our possession.

GTH a Green Horn
The sale is to be made by NTT to Global Telecommunications Holdings (GTH), a company recently incorporated in Netherlands solely for the purpose of buying out a large chunk of NTT shares in Sri Lanka Telecom. It is to be done contravening sale conditions including that a company doing so must have been established for a minimum 25 years and have at least 15 years experience in telecommunications. GTH is hardly a few months in existence without a single employee in its pay roll.

That the Public Enterprises Reform Commission (PERC) no less has raised eyebrows at this deal in written comments speaks volumes for the behind the scenes goings on.

The present shareholding structure has the government with 49.5 % shares, NTT with 35.2 percent and the public representing some 28,000 shareholders with 15.3 percent.

The present deal is for NTT to divest 25.3 percent holdings to GTH leaving a minority stake of 9.9 with them.

Allocation of Directors
The question naturally arises why NTT will sell only 25.3% and hold on to 9.9%. The answer is simple. In terms of the termination clause in the current shareholders agreement signed in November 2002 between NTT and the government, the agreement lapses if the shareholding of either party drops below 10 per cent and therefore to give GTH full management control, NTT's stake must drop below the magical 10%.

Furthermore for every 10% of shares held a shareholder is entitled under the current Shareholder Agreement to one director and if there is a part thereof over 5% again the shareholder is entitled to one director.

Technically however if NTT holds less than 10% they are not even entitled to a director on the board. However GTH with 25.3 % shares will be entitled to four directors in terms of the deal struck with the President, and the government with 49.5 % will be entitled to five directors.

However nowhere in this agreement did it state that if NTT wanted to sell its shares it had to get prior approval from the Government of Sri Lanka.

Coming Events Casts their Shadows
There is of course another consideration. If perchance at a later date GTH is able to buy the remaining NTT shares (possible under the new Draft Shareholder Agreement in terms of the exit clause) bringing their share of this high profile public quoted company upto 30% then they would trigger the mandatory provisions of the Takeovers and Mergers Code and will have to make a mandatory offer to the rest of the shareholders. GTH can therefore easily increase its share in this national asset.

However the government in reality holds well over 50 % of the shares with the Treasury owning 49.5 % and small percentages held by EPF 1.98%, Bank of Ceylon 0.27% etcetera from the 15.3 percent. Therefore with the annulment of the existing Shareholder Agreement and management contract with NTT which would come into effect upon the share transfer, the government has the opportunity to take back full control of Sri Lanka Telecom - especially as many of the SLT officials themselves had gained enough managerial and skills experience during the NTT period of control.

But that is not to be and therein lies the multi million dollar question.

Instead Rajapakse has opted to have NTT transfer 25.3 percent to a company that compared extremely poorly with NTT in terms of management skills and commercial performance and grant full management rights.

Ironically it is Mahinda Rajapakse, who came to power on a bhoomiputra anti privatisation platform in keeping with the policies of the Marxist socialists that now single handedly closes the deal with GTH and paves the way for it to take full management control. Mind you the new company is entitled to a TV channel - a privilege not afforded to NTT - all for just a 25% stake.

Maxis of Malaysia, the name bandied about in the media as being the company buying into SLT is in fact far removed from GTH in the company family tree, though closely connected if not in terms of assets in terms of key personnel.

UNP Vows Action
The UNP has already vowed to take action to get the government to come clean with UNP Parliamentarian Lakshman Seneviratne calling it the country's biggest fraudulent deal. Seneviratne last week told The Sunday Leader Basil Rajapakse is allegedly involved in the deal and 'everybody knows what that means.' He also said the UNP was investigating allegations that the LTTE had links to GTH and Maxis Telecom.

Meanwhile last Tuesday Rajapakse ally and JVP Parliamentary Group Leader Wimal Weerawansa accused a 'powerful person in government' of accepting a US $ 10 million commission to facilitate the sale of SLT shares to a Tamil businessman from Malaysia.

Hundred Million Smackers
The talk in the market is that the broker of the deal will make more than US$ 100 million.
Connected to GTH is one Augustus Ralph Marshall, a Malaysian of Sri Lankan Tamil descent from Jaffna, who interestingly was in Japan recently at about the same time Basil was on an official visit to Japan.

Maxis of Malaysia is controlled by a wealthy Malaysian tycoon, Ananda Krishnan Tatparanandam who is also of Sri Lankan Tamil descent, hailing from Jaffna. He is said to have an indirect holding of 47.05 % of Maxis. The reclusive Krishnan whose net worth is estimated at some US$ 4.3 billion has interests in oil, power, entertainment, property and gaming.

The website www.boi.lk/famous/ananda.asp states the 68 year old made his fortune from property, gaming and oil trading and was looking to position himself as South Asia's communications baron.

Though Krishnan's first entrepreneurial venture was in oil trading he quickly moved on to gambling in Malaysia and a quarter of his wealth comes from the gambling business, lottery, horse racing and wagering.

Be that as it may, the cabinet paper to approve the share sale was signed by President Rajapakse and presented in March while Minister of Ports and Telecommunications Rauf Hakeem had earlier claimed he was not even aware of the contents.

Although on Tuesday Weerawansa called on Treasury Secretary P.B. Jayasundera to take responsibility for the deal, on Wednesday, Jayasundera washed his hands off the deal stating it was a private sale between NTT and Global Telecommunications Holdings and the Treasury would get involved only with regard to the management contract. The facts below will prove otherwise.

Furthermore economic experts told The Sunday Leader Sri Lanka Telecom is a high profile public quoted entity that is also regulated and therefore it is unusual the sale of shares was not informed to the large number of public shareholders.

One cannot merely decide to sell off a large number of shares bypassing the market place and at a price one wants, as the share is already public. Sources at the Colombo Stock Exchange said such shares will have to be traded on the floor of the exchange.

Tiger Talk
Meanwhile posters accusing the government of selling Sri Lanka's premier stock to Tiger operatives have blistered the walls of Colombo even as former presidential confidant and cabinet minister Sripathi Sooriyaarachchi earlier accused President Rajapakse of having struck a deal with the Wanni terrorist group during his election campaign. It is in this backdrop that the deal to sell the high profile SLT shares have to be viewed.

And it is in this backdrop The Sunday Leader now investigates this deal. Here are the details.
Let's start at the beginning for sake of clarity.

Cabinet approval was granted on July 31, 1997 to divest 35% of shares in Sri Lanka Telecom at the value of US$225 million together with the management of SLT to Nippon Telegraph & Telephone Corp. (Japan). (NTT)

The selection of the strategic investor was conducted through a competitive bidding process and the Technical Evaluations Committee at the time evaluated the bids on a set of strict criteria including

a minimum 25 years of establishment of the company,
minimum 15 years in telecom operations,
more than 7000 employees to be engaged in telecom marketing in a single market,
More than one million main telephone lines in operation in any single market
10 per 100 teledensity in any single market,
more than 20,000 public phones including those operated by a subsidiary company

Accordingly NTT was selected and 35 % shares divested under a set of divestiture conditions that included that GOSL shall retain 51% of the shares and the investor shall retain at least 20% of the shares during the first five years, the rationale being that minimum ownership requirements will safeguard the GOSL and public as well as management interest.

It was also a condition that after five years the GOSL and the investor may sell their shares, with first option offered to either party; the rationale being that the shares held by the investor is not transferred to a party not approved by the GOSL.

On November 13, 2002 a new shareholder agreement was signed between the Government and NTT under the UNP administration giving certain rights to both parties with no clause calling for the NTT to obtain approval for a transfer of its shares to another party.

However the proposed draft shareholder agreement to be finalised end May between GTH and GOSL is alarming in that it is extremely wide in scope and confers a great deal of power to GTH.

But More on that Anon
Now let us focus on recent events that led the Rajapakse family down this particularly dangerous path.

In 2006 President Rajapakse forces the hand of NTT Japan and a series of events related to the management of SLT compels NTT in disgust to take the path of least resistance and agree mildly to sell out a large number of its shares.

Meanwhile interestingly enough Basil Rajapakse visited Japan in the third week of February to brief the Japanese government on the current political situation in Sri Lanka, bypassing Foreign Minister Rohitha Bogollagama. Curiously in Japan at about the same time is one Ralph Marshall, the key player in Global Telecommunications Holdings.

NTT Letter
With Rajapakse forcing NTT to bend to his bidding, on March 14, 2007 Vice President of Corporate Planning, NTT Communications Corporation, Jun Sawada wrote to Treasury Secretary P.B. Jayasundera providing him with a profile of Global Telecommunications Holdings NV (GTH) along with their assessment and recommendation.

The letter states, "GTH is a special purpose investment vehicle incorporated in the Netherlands Antilles and is an indirect wholly owned subsidiary of Usaha Tegas Sdn Berhad (UTSB). Given that GTH is an unlisted special purpose vehicle set up to acquire our NTT Communications Corporation (NTTCom) stake in Sri Lanka Telecom (SLT), it shall not have any employees or a CEO until the proposed transaction is completed. UTSB shall fund GTH to meet its obligations under the terms of the proposed transaction. Currently Mr. Ralph Marshall (director of UTSB) and other UTSB group executives are managing GTH."

What is UTSB
This letter copied to Ralph Marshall is vital in that it gives details of GTH and its parent company UTSB. The letter informs that UTSB incorporated in Malaysia is an investment holding company with control equity positions in entities involved in telecommunications, broadcast and media, energy, commercial property development and leisure, and entertainment.

In the 2006 fiscal year UTSB both as a group and parent company posted a total revenue of US$186 million and US$ 19 million respectively and a net profit of US$161 million and US$ 16 million respectively. Total assets in the year ended 2006 as a group and parent were US$2.7 billion and US$1.2 billion and total shareholders' equity as a group and parent was US$1.9 billion and US$1.1 billion respectively.

There are four publicly listed companies namely, Maxis Communications Bhd (Maxis), Astro All Asia Networks plc, Tanjong plc and MEASAT Global Bhd.

NOTE: PERC itself states in its report that even though NTT says UTSB has control equity positions in entities operating in various sectors, they have not stated whether Maxis is a direct subsidiary of UTSB.

In fact a look at the corporate structure (see elsewhere on page) clearly shows it is not.
PERC also points out the following with regard to the revenue of the companies as stated in the letter:

With regard to UTSB as a group and a parent company posting US$186 million and US$ 19 million respectively for 2006, PERC points out that the revenues of the unqualified bidders in phase 1 of the 1997 bids posted far higher revenues as far back as 1996 and 1995 with Hutchison Telecom posting US$ 4,525 million and Malaysia Telecom posting US$2,118 million.

Even with regard to UTSB assets PERC points out that the total assets of the losing bidders in 1997 was far higher, some as much as US$ 16.3 billion

What is Maxis
Maxis claims in its website to be Malaysia's leading telecommunications company with more than 13 million subscribers that offers a portfolio of voice and data services across wireless, fixed line and internet platforms. According to the NTT letter, Maxis revenues in 2006 before tax, depreciation and amortisation was US$2.2 billion and Maxis has acquired a 51 % stake in PT Natrindo Telepon Selular (NTS) Indonesia and a 74% stake in Aircel India.

However the only connection GTH has with Maxis is that it is a totally separate company in a large corporate structure (see box). The relationship is so far removed Maxis will almost certainly have no dealings whatsoever with GTH.

Nevertheless, the NTT Vice President in his letter to the Treasury Secretary states, "Having had extensive discussions with GTH, we feel confident that GTH could enhance the existing partnership between GOSL and NTTCom. GTH has a good understanding of NTTCom's role in the development of SLT and is supportive of our objectives in Sri Lanka. Further GTH has assured us that they will be able to meet the expectations of GOSL."

Sawada also states "We believe that GTH by having Maxis as one of its group companies, has a solid track record as a telecommunications operator with a leading position in Malaysia and strong mobile operations in India and Indonesia." (See elsewhere for copy of letter.)

PERC Piqued
PERC dismisses the NTT assertions on the suitability of GTH with one fell sweep. Commenting on the NTT letter PERC points out that the same letter in only its second paragraph has stated that GTH was incorporated recently in the Netherlands Antilles and GTH has no employees and CEO.

"It is questionable," says PERC, "as to what extent NTT's assessment and recommendations are reliable.

Therefore it is clear that GTH is an unlisted company incorporated hurriedly and recently for the sole purpose of acquiring NTT shares in SLT, will not have any employees or a CEO until the transaction is complete and is an indirect wholly owned subsidiary of UTSB. According to the NTT letter GTH will also be funded by UTSB to meet its obligations under the terms of the proposed transaction.

So pray why was President Rajapakse's personal choice, GTH, incorporated in Netherlands Antilles and not in Malaysia since the parent company UTSB that has undertaken to fund GTH is a Malaysian company?

It must be noted that GTH also has no business operations nor a CEO and does not have any employees or an address in the Netherlands. Its letterhead gives a c/o Menara Maxis address in Malaysia.

Nevertheless on March 21, 2007 cabinet approved President Rajapakse's Draft Memorandum on 'Sale of Shares of Sri Lanka Telecom Limited belonging to NTT Communications Corporation to Global Telecommunications Holdings NV' and the decision was communicated to the Treasury Secretary.

On March 27, 2007 President Rajapakse tabled a cabinet memorandum as Minister of Finance.
Which stated inter alia that;

1) NTT has sought consent from the Government of Sri Lanka (GOSL) to a partial divestiture of its stake in SLT to Global Telecommunications Holding NV (Malaysia)
Note : However GTH is not even incorporated in Malaysia
The memorandum also states,
2) That SLT is currently a public listed company managed by NTT in terms of the Shareholders Agreement between NTT of Japan and GOSL. The CEO is appointed from among NTT directors as provided in the agreement.
3) That NTT has sought consent of the GOSL to divest 25.3% of the holdings to GTH leaving them with a minority stake of 9.9% with a right for NTT to nominate one of the GTH directors to be appointed to SLT board to represent NTT.
4) That the Shareholders Agreement should be renegotiated
5) That the Shareholders Agreement including provisions relating to the appointment of Chief Executive Officer and other management aspects and ownership issues will have to be renegotiated with the recommended party acceptable to GOSL.
6) That a committee be appointed comprising secretaries to the Ministries of Finance, Post and Telecommunications, Defence, Chairman Public Enterprises Reform Commission (PERC), Chairman Board of Investment (BOI) and the Director General, Securities and Exchange Commission (SEC).
7) The committee will go into the acceptability of GTH and negotiate a new Shareholders Agreement and approve the transfer of 25.3 percent of NTT shares.
8) PERC would facilitate this exercise and prepare the agreement subject to the approval of the Attorney General. (See elsewhere on this page for copy of Cabinet Memorandum.)

In the meantime on March 30, 2007 Ralph Marshall, the man who was in Japan at about the time Basil was, had an extensive discussion with President Mahinda Rajapakse at Temple Trees where he fully briefed the President on the progress of the negotiations between GTH and NTT. So much for the deal being between two private parties with no government involvement.

Marshall quickly follows up the meeting with a letter dated April 3 in which he confirms four specific undertakings given by Rajapakse to him. The letter on a GTV letterhead bears no designation for Marshall. Throw you mind back to the letter sent on March 14 by NTT to Treasury Secretary Jayasundera where they state that until the transaction is complete it shall not have any employees or a CEO but that Marshall, a director of the UTSB group and other executives of UTSB will manage GTH. Hence the absence of a title.

The President according to Marshall agrees inter alia to NTT retaining a 9.9% interest in SLT, which is subject to exit provisions exercisable by both parties at the end of the second year following the initial divestiture by NTT and that the combined 35.2 interest of GTH and NTTC be entitled to four directorships on the board of SLT as a consequence of the exit provisions referred to in (1) above. (See box for full letter.)

Therefore, it is proved beyond doubt that the President was intimately involved in negotiating this deal and not a mere silent partner coming into play only at the time of finalising the management contract after the private share transaction between NTT and GTH is concluded as made out by the government.

A Cabinet Appointed Committee meeting is subsequently held as per cabinet decision on 17.04.2007.

The minutes of the first meeting were circulated by Director PERC, E. Arumugam with another meeting scheduled for 26.04.2007.

Matters vital to the SLT in particular and to the national interest in general surfaced at this meeting according to its minutes. They are inter alia as follows:

(1) The original agreement in 1997 between NTT and GOSL was signed as part of a divestiture where the country received a major investment and where ownership and management had to be given in order to obtain the required skills and management expertise.
(2) With the GTH there is no investment or benefit to the country in monetary terms. Therefore giving the CEO position to GTH must be based on a benefit to GOSL alone.

GTH to Get More Powers and Benefits than NTT
Mind you even though the GTH deal will not benefit the state at all and is merely a private transaction albeit orchestrated by Rajapakse, it is proposed that they will get more benefits such as appointment of key management staff like Chief Financial Officer and Chief Operations Officer and choice of Chief Executive Officer as well.

(3) In fact Chairman, SLT, Asoka de Silva pointed out according to the minutes that SLT had already received a draft Shareholders' Agreement (SHA) from the Malaysian party with more powers than those included in the present Shareholders Agreement such as the appointment of Chief Financial Officer (CFO) and Chief Operations Officer (COO) in addition to the CEO of SLT and its subsidiaries which they opposed. Subsequently SLT had received an amended SHA which was studied by them as well as by two external lawyers and forwarded to the Attorney General's Department.

PERC Shocked by Proposed Deal
A copy of a report prepared by PERC was also tabled at this first meeting where PERC had in writing submitted a number of reservations over the deal and pointed out why such a deal not only contravened well established conditions of sale in the public interest but also why the deal would be detrimental to Sri Lanka Telecom (see box for extracts of PERC observations).

PERC also observed that Maxis itself whether linked to GTH or otherwise is not suitable as a stakeholder in SLT. The company commenced commercial operations only 11 years and nine months ago and its fixed line operations are marginal. In fact a comparison of revenues in US dollars of SLT, NTT and Maxis in the table below as per the PERC report, will only prove that Maxis has no value to bring to Sri Lanka Telecom.

In millions of US$
Fixed line 273 33,440 53
Mobile 34 30,057 1,606
Total 306 63,497 1,659

New Shareholder Agreement
Meanwhile the proposed Draft Shareholder Agreement (SHA) between GTH, NTT and GOSL is to be signed at the time 25.3 % of NTT shares are transferred to GTH with management rights.

(1) Clause 'D' of the new agreement states that "NTTC and GTH have agreed to the partial sale of NTTC's equity holding in SLT to GTH in order to maximise the synergies and expertise offered by both companies (particularly in light of the fast growing mobile telecommunications market in Sri Lanka) for the substantial benefit of SLT's shareholders and the people of Sri Lanka."

However one will see by its own letter signed by Marshall sent to President Rajapakse on April 3, that the reason for GTH's primary entry to SLT is to provide their own expertise in the growing mobile market.

SLT however is essentially a fixed line operator and Mobitel is only a very small part of its business. Perhaps say business experts, if GTH is coming in specially for mobile phone industry experience, then SLT should have considered divesting part of Mobitel to GTH rather than Sri Lanka Telecom itself and instead grant them a management contract to resuscitate Mobitel.

(2) The Draft clause 'F' states that NTT's retained shares are subject to certain exit provisions exercisable by either of NTT and GTH towards the expiration of the second year following the share sale and purchase transaction under the share sale agreement.

Exit Clause
This is alarming given that the exit clause grants the right to GTH to purchase the balance of NTT shares though there is no provision for GOSL to exercise its right of first refusal which in fact was embodied in the original SHA of 1997. This clause will in effect permanently bar GOSL from taking control of SLT.

The management of SLT as proposed is also detrimental to SLT and to GOSL, its largest shareholder.

With regard to the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer the Draft at clause '9' states that the GOSL and GTH must exercise their voting rights to appoint a GTH director nominated by GTH as the CEO of SLT.

Extensive Powers to CEO
The appointment of CEOs to any of SLT's key operating subsidiaries and associate companies and the appointment of the CFO and COO of both the SLT and its operating subsidiaries and associate companies shall come under restricted matters and will thus require the consent of both the GOSL and the GTH.

Furthermore the SLT CEO has been conferred with extensive powers and full control over the appointment or removal of all employees of SLT unless it is the removal or appointment of a senior executive coming under restricted matters.

The CEO could also incur any expenditure or enter into any commitment on behalf of SLT on matters not included in the business plan up to an aggregate of US$500,000.

Sweeping Clause
And in one sweeping clause in Schedule 3(4) it states that notwithstanding anything to the contrary in the agreement including in the restricted matters, the CEO is authorised to incur any expenditure and enter into any commitment without limit or cost provided the details of the commitment have been disclosed in the relevant approved annual business plan.

Note: By making the appointment of CEO, CFO and COO a restricted matter GTH has acquired the right of veto over key management positions although they own even less than NTT did, that is only 25.3 percent of the shares.

The position of the CEO was offered to NTT in 1997 as there was a huge investment into the country. In this case it is merely a private transaction between two foreign entities and the money will be generated outside Sri Lanka and will also remain outside of Sri Lanka.

GTH is not compelled to make any contribution or investment to Sri Lanka or SLT. There will be zilch foreign exchange inflow into the country.

However this draft SHA hands over unlimited management control to GTH with no fall back option or even a limitation clause. Therefore even if the majority shareholders including the GOSL desire to change management they will be held in a binding clasp by a minority foreign body unable to move. Mind you these sweeping powers which are much more than those enjoyed by NTT with a 35 per cent stake are to be given to GTH which will have only a 25 per cent stake. Pray why?

Rajapakse must answer why GTH is given unlimited powers when even NTT which is obviously the superior commercial enterprise did not get it. Is GTH bringing in some unusual expertise? Why hand over everything on a platter to GTH if it is a private transaction between two outside parties when the government could have taken full control of the management with the lapsing of the existing SHA? Intriguing eh!

Furthermore handing over complete management control to a minority shareholder who will not be bringing a cent into the SLT coffers will invariably lead to abuse of power with all procurement decisions to be decided by the GTH appointed CEO as well.

Experts in the field livid over the government's subterfuge point out that handing over management control of state owned entities to private companies is privatisation and totally against the Mahinda Chinthana policy.

Clause 9.2 (b) refers to Schedule 3 which lists out the CEO's powers. Again the powers are limitless, giving a minority shareholder unlimited powers for an unlimited time.

Clause 9.3 of the Draft titled Management Agreement states the GOSL and GTH agree to enter into good faith discussions with a view to entering into a separate management agreement (together with SLT) within (3) months of the date of this agreement that details the roles of GTH and the establishment of board sub committees (if appropriate) in relation to the operation, management and governance of SLT and similar processes such as limits of authority, procurement and investment committees and technology strategy.

Pray what is the purpose of this clause other than perhaps to extract a separate management fee from Sri Lanka Telecom for no value addition at all.

Clause 11(a) deals with universal service obligation and states that during the terms of this agreement GOSL represents and warrants that there shall be no universal service obligation imposed on SLT and the procurement and tender procedure for SLT will be determined by the board of directors of SLT.

Therefore by this the Government of Sri Lanka loses all rights to direct SLT to play a role in national development for instance with regard to rural infrastructure. And mind you it has over a 50% stake. Mind boggling, what!

The question is why President Rajapakse is relinquishing the right of the state to harness its own resources towards national development. Why is it that a foreign body is being given limitless powers over a state even though there is absolutely no benefit to the state since it is essentially a private transaction of NTT wanting to sell its shares.

That readers is perhaps the hundred million dollar question.

Questions PERC has Raised
(1) Why is GTH incorporated in Netherlands Antilles and not in Malaysia, particularly when UTSB has undertaken to fund GTH.

(1) GTH is recently incorporated and thus violated two of the requirements for the 1997 bids namely that the age of the bidding company should be more than 25 years and that the company should have been in telecom operations for more than 15 years.

(2) The proposed investor UTSB is stated as having revenue and assets far below the revenue and assets of all three unqualified bidders in the 1997 bid. GTH does not even have a website for themselves.

(3) Question on the suitability of GTH by comparing contravening paragraphs in its own letter to Treasury Secretary and calls NTT's assessment questionable.

(4) According to NTT, the GTH claim to fame is its link to Maxis. PERC states even if this were so Maxis itself is more a mobile operator and not a fixed line operator and therefore unsuitable to the needs of SLT

Government Artillery Takes Aim at The Sunday Leader

President Mahinda Rajapakse's Co-Ordinating Secretary Sajin Vass Gunawardene has revealed plans to freeze The Sunday Leader accounts and force it out of business. Gunawardene has told confidants the Government was planning to get court orders on the pretext of investigating the accounts of Leader Publications and force it to shut down.

The Government earlier adopted a similar strategy to force the closure of the Maubima and Sunday Standard newspapers by freezing its bank accounts.

Gunawardene whose corrupt dealings were earlier exposed by The Sunday Leader has also said that he was spearheading the campaign to force The Sunday Leader out of business to put a lid on criticism of the Government.

Source: The Sunday Leader (subsription required)

Friday, May 25, 2007

Highflying Presidential Joyrides -- Is it a Violation of Tender Procedures?

The creation of Mihin Air, the "budget airline" of Sri Lanka was shrouded in secrecy, with none other than the Minister of Aviation himself unaware of the true story behind it. While there are many alarming questions sans answers regarding the need, financial and operational viability of the whole exercise, the concentration of this post is not necessarily Mihin Air. Rather, it is the recently formed habit of President Rajapaksa to charter airplanes at his fancy to glob-trot -- apparently at the advice of his astrologers.

The first point of concern is this business of chartering aircraft. President Rajapaksa is the first president to do this on a consistent basis. President Premadasa did this a couple of times (to India & back) during his impeachment motion. I would assume President Kumaratunga did so as well, although I don't remember anything specifically.

As everybody knows, all government purchases are done through tender. Tenders are placed, service providers bid, the tender evaluated, and finally awarded based on the evaluation. The question I have is whether there was any sort of tender published for "providing aircraft charter services to the president?"

Of course, it is understandable that this cannot be done for every single trip he undertakes (especially at the current frequency of travel). However, it would be practical to call for such a tender and grant services, say for example, for five years. The charges then could be based on miles flown, or hours hired, and/or combination of such factors.

From all information I have been able to gather, this does not seem to be the case. The cost of chartering seems to be a private agreement between the Rajapaksa administration (i.e. presidential secretariat) and Mihin Air. A private deal, in other words. Considering the people behind Mihin Air, and the personal interest shown by President Rajapaksa no less, this is indeed not surprising.

The ownership of Mihin Air and who its investors are not very clear. What is clear is that Mihin Air is not a government enterprise. This makes the President brushing off SriLankan Airlines (partially owned by the government) for a totally private enterprise without calling tender even more bizzare.

That said, it was President Rajapaksa who submitted the papers to the Cabinet to get Mihin Air approved. That too after it was exposed that Mihin Air was about to fly without Cabinet approval. That story will be highlighted on LWB next week, which was originally exposed in the Sunday Leader (who else?).

For now, the thought to ponder is -- does the President have the right to call for and purchase services bypassing available state services, without calling for tenders?

Tuesday, May 22, 2007

Tough-Talking Sri Lanka IGP Victor Perera -- All Fart, No Shit

For a country that is currently witnessing a rising wave of crime and lawlessness, the tough-talking current Inspector General of Police, Victor Perera definitely comes across as "all fart, no shit."

In spite of all the high-profile abductions, killings, and threats that are prevalent, the Police has not been able to bring a single culprit to court -- let alone convict. It seems, the Police force is only interested in being the hound-dogs of their political masters . Further, their only competence seems to be arresting opposing businessmen and journalists on cooked-up charges of terrorism and money laundering -- the popular choice these days.

It would do us all good to remember that the current wave of abductions and demands for ransom is not a first-time occurrence. Some time ago, a similar thing started to happen where kids were involved. However, that wave was halted with some crack investigations of the Police force and their counterpart, the CID.

This time around, the will seems to have been blunted. Some reports suggest that there are some wanna-be powerful, ministers claiming to be blue-blooded descendents from Sri Lankan royalty are behind these. Some reports also the involvement of Karuna. Either way, the bottom line is that these things continue to happen with impunity.

Having said that, I would like to acknowledge the few dedicated officers of the Police who continue their work in spite of the greatest difficulties. The CID officers who refused to pass the buck to junior officers, and arrest Lasantha Wickramatunga is a fine example (consequently, they were transferred out).

Sri Lanka IGP Victor Perera -- All Fart, No Shit

Related Links
Asian Human Rights Commission: "
SRI LANKA: An epidemic of lawlessness"
Related video clip of recent demands for ransom

JVP Makes US$ 10M Commission Charge on Telecom Deal

JVP parliamentary group leader Wimal Weerawansa yesterday accused a powerful person in government of accepting a US$ 10 million commission to facilitate the sale of SLT shares to a Tamil businessman from Malaysia.

Weerawansa made this allegation in parliament yesterday amidst growing controversy over the sale of SLT shares held by NTT of Japan to Maxis of Malaysia. The JVP member also charged that the President as Finance Minister and Treasury Secretary P. B. Jayasundera must take responsibility for this state of affairs.

Following Weerawansa’s statement, UNP Gampaha District parliamentarian John Amaratunga called on the member to name the powerful personality who had accepted the US$ 10 million commission.

Leader of the House and Health Minister Nimal Siripala de Silva also called upon the JVP parliamentarian to name the person who had accepted the commission without making baseless allegations. Weerawansa responded to de Silva stating that he was trying to get him to name the person because the government wanted to know the name.

The JVP parliamentarian also charged that it was wrong of the cabinet of ministers to agree to sell SLT shares held by NTT to a Malaysian company simply because a powerful person was to benefit to the tune of US$ 10 million.

Speaker W. J. M. Lokubandara then questioned Weerawansa if he was ready to take the full responsibility of the allegation made by him.

Weerawansa responded by saying that he would not make such a statement if he was not ready to accept responsibility. He also requested the Speaker to make allocations for a full day debate to be held on the deal in parliament.

Also speaking on the issue, UNP Kurunegala District MP Dayasiri Jayasekera said that government ministers remained silent on the issue, as they did not approve of the deal. He also said that although Minister Rauf Hakeem was in-charge of the relevant portfolio, he did not present the cabinet paper for cabinet approval and he was not aware of it either.

Responding to the statement, Post and Telecommunication Minister Rauf Hakeem said the cabinet paper was presented by the Finance Ministry as the Treasury too had shares of SLT. He also said a cabinet sub committee was currently looking into the matter.

UNP Colombo District parliamentarian Ravi Karunanayake questioned as to why the government was now privatizing state assets after presenting a policy of non privatsiation through the Mahinda Chinthana. The UNP called for the appointment of a parliamentary select committee to probe the matter.

Source: The Morning Leader
Previous post on LWB regarding the sale of SLT shares

Monday, May 21, 2007

Over US$4 Million to Fund Mahinda Rajapaksa's Foreign Visits

A small fact finding effort and calculation by LWB has revealed that Sri Lankan President has spent over $4 million dollars over the last two years to fund as much as twelve visits. While such travel is expected from a head-of-state, what makes this figure significant is that Rajapaksa's combined delegations adds up to over 640 during this same period.

In calculating this figure, various news reports and official press-releases were used to obtain information on the number of days the visit lasts, and the number of members in the delegation. A fully-loaded cost of US$1,200/day/member was estimated considering the daily allowance of US$500 given to travelling members and other costs such as hotel, food, telephone, drinks and incidentals (shopping?).

Airfare and charter-costs are not included in this figure. However, I would guess that each charter-flight would cost a few-hundred thousand dollars at least.

At a time when Sri Lanka is increasingly receiving negative reactions from the international community, and President Rajapaksa himself declaring he doesn't really care what other countries have to say, what benefits these visits have accrued to the country would be an interesting question. Trade? Investment? Aid?

Kawda Mewata Waga Kiyanne?

Back to The Future: Abductions, Assassinations & Burnt Bodies

A collection of a recent wave of murders in Sri Lanka. Significant to note is that these do not seem to be murders done for personal issues, and that they are not in the so-called "operational areas."

Mahaoyawatte – 3 decapitated bodies (27-Apr, 2006)
Avissavella – 2 decapitated bodies
Panadura – 1 dead body in a van (10-Jun, 2006)
Colombo – 1 person assassinated in a mosque (30-Jun, 2006)
Ambalangoda -- 2 people assassinated (30-Jun, 2006)
Negombo – Abductee found dead, shot in the head (8-Oct, 2006)
Hanvella – 1 decapitated body (26-Nov, 2006)
Wennappuwa – 1 dead body (14-Jan, 2007)
Bandaragama – 1 dead body, bound & burnt (15-May, 2007)

Saturday, May 19, 2007

Heard It Through the Grapevine

Foreign Affairs - Bungling Bogollagama
Rumor has it that the ministry of Foreign Affairs is about to go up in flames, this time about a pretty lady Bogollagama brought over from the Board of Investment. She is apparently now heading the "Economic" section of the Ministry. According to the grapevine, sparks are all set to fly this week. Hmm.... Wolfowitz, seems like you've got company.

Me Tarzan. Tarzan Like Girl.
Wimal Weerawansa's tryst with a girl from the villages, whom he brought to Colombo and got employed at Lake House has taken yet another turn. This time, it was the Mrs who had gone and made a complaint against this girl with the Police. Rumor is that Weerawansa approached someone at Temple Trees, trying to put a lid on the investigation. Let's see whether Tarzan starts howling once trying to deflect the issue.

Sinister Moves Behind the Investigation of Morawewa Thero's Murder

Investigations are not compltete yet. However, Mahinda Rajapaksa "confirms" it was the LTTE.
East is "completely liberated" LTTE threat reduced by 95%. Yet, monks are being assassinated.

News Report:
A Buddhist monk in Morawewa has alleged the involvement of several state officials in the assassination of chief monk of the Pabbatharama Viharaya, Morawewa, Ven. Handungamuwe Nandarathana Thero last Sunday.

Chief incumbent of Morawewa Sri Gajaba Gallen Rajamaha Viharaya, Ven. Kalutara Somarathana Thero observed that although investigations have revealed the real assassins of Ven. Nandarathana Thero, the probe was currently at a standstill due to pressure from higher authorities.

The Thero told The Sunday Leader that the LTTE was not involved in the assassination and that it was carried out by people known well by Ven. Nandarathana Thero.

"How can the government say the LTTE killed the Thero when LTTE activities in this area has been reduced by 95%. It is unfair to make such a statement. Also, the assassins were known to the Thero," he said.

"How can the government or anyone claim it was the LTTE when investigations were in the initial stages?" the Thero questioned.

According to the Thero, informed sources have revealed to him that the investigation could no longer proceed as the President had declared the LTTE to be the assassins. "So now even if the investigations have proven otherwise, they say they cannot proceed with it. It is unfair as the real assassins are free. The officers investigating have not been given the order to proceed with the investigation," the Thero said.

Ven. Somarathana Thero explained that on the day of the assassination, Ven. Nandarathana Thero was on his bike getting ready to visit the Thaulwewa army camp when two motorcycles approached him at the temple.

"Ven. Nandarathana Thero had looked at those who were on the bikes and said, 'Ah, good that you came.' Do these words not say that the Thero knew his assailants," he asked.

According to Ven. Somarathana Thero, the assassinated monk had earlier written a letter on the threats to his life by several people including another monk and several laymen, but there was no mention of any threat from the LTTE.

"Ven. Nandarathana Thero was criticised by some for his actions. He always tried to bridge the gap between races. He also took the initial step of ordaining a Tamil youth, many criticised this. Many accused him of being an LTTE sympathiser," Ven. Somarathana Thero said.

He also observed that some internet pages have carried stories accusing Ven. Nandarathana Thero of being an LTTE sympathiser and had accused him of attending a Pongu Thamil festival as well. "The LTTE has not claimed responsibility for the assassination and has said the monk worked for the betterment of the people irrespective of class or creed," Ven. Somarathana Thero said.

Ven. Somarathana Thero also said that he was in possession of the letter written by Ven. Nandarathana Thero on the threat to his life and that he would present it to the police for investigation.

"Ven. Nandarathana Thero always fought for what was right and was always with the people trying to bridge the gap between the races," Ven. Somarathana Thero said.

Ali-Koti Givisuma & Ranil Lokka

Lakshman Seneviratne speaks about the so-called Ali-Koti Givisuma, and the folks who should have and may have benefited from it.

Friday, May 18, 2007

Clarification Regarding the Million-Dollar Homes of the Rajapaksa Clan

The purpose of listing this information was primarily for public declaration, as opposed to question how they may have acquired the money to purchase houses in California. This is Sri Lankan law that was circumvented by the Rajapaksa clan by simply introducing laws tailor-made to their needs.

Although eyebrows may be raised as to how such properties may have been purchased considering their combined lack of professional qualifications or educations and/or experience in business. Also, please keep in mind the $4.5M figure used is an AVERAGE for a house of similar size & bed-rooms, in very close proximity. Exact price of this house can vary up or down, although not significantly.

While mortgages are an obvious and most probable option, as a rule of thumb credit for such ventures are only given such that payment of debt is no more than 30% of disposable household income. Payment of debt includes payment for credit cards, automobile, child-support, student loans, etc, etc.

A simple reverse calculation for a $4.5 million dollar mortgage, on a 30 year loan at an interest rate of 4% will require a monthly payment of $21,000. If this represents 30% of disposable household income, then full monthly income is $70,000. This converts to $840,000 annual income.

Since the United States does not have a tax treaty with Sri Lanka, it would be interesting to know whether taxes for this income has been paid.

$4.5-Million Dollar Home for Basil in California -- Look it up Yourself

There is a law in Sri Lanka that requires public officials from declaring their assets to the government. This is also a requirement of those holding political office, including MP's. However, recently a law was sneaked in that exempted a very narrowly cut selection from requiring to do so.

According to new regulations, public officials who have dual citizenship and have property / assets overseas are not required to declare their assets. One can only imagine, who exactly benefits from this tailor-made regulation introduced during the Rajapaksa administration.

LankaWhistleBlower did some freelance investigations using publicly available information to uncover some information. Based on the information that we came up, the average market value of the primary residencies of Basil & Gotabaya Rajapakse are as follows:

Basil Rajapaksa
- Primary residence listed in Fontana, California
- 3 bedroom house
- Average market price - $4.5-million

Gotabaya Rajapakse
- Primary residence listed in San Dimas, California
- House is in the name of his wife, Ioma Rajapakse
- Average market price - $995,000 for an old house

Want to confirm the information yourself? Here's how. Read on.

  1. Visit Yahoo!People search -- http://people.yahoo.com
  2. Enter "First Name" Basil and "Last Name" Rajapaksa (spell correctly)
  3. Use the "Phone & Address Search"
  4. Copy the address to Google Maps or Google Earth to see the location
  5. To find the prices of houses in the surrounding area, type the ZIP code and "homes" into Google Search (note: NOT in Google Maps). This would be, "92336 homes" for Basil, for example.
  6. Click on the first link that Google returns "Find results for 92336 homes in Housing search"
  • Confirm Ioma Rajapaksa is indeed Gotabaya's wife by typing her name into Google
  • Then look her up on Yahoo People Search


All information disclosed here is obtained through publicly available information, free of charge. Anyone aware of the tools can do this. The only thing I've done is just compiled it.

After all, as the public we not only have to obey laws but understand the purpose of law. When things are done to circumvent not only law, but its purpose, then information such as this at least in my opinion, becomes worthwhile publishing.

Wednesday, May 16, 2007

Sonali Samarasinghe Gets it all Wrong

According to news reports, CID officials are said to have visited the office of Leader Publications to question investigative journalist Sonali Samarasinghe. Sonali writes revealing investigative pieces that appear in the The Sunday Leader, The Morning Leader and Irudina newspapers.

During interrogations that lasted from 9am to 2pm, She has been questioned about the sources, methods and procedures of her investigations. Of course, when she refused to divulge her sources the CID had threatened to take her to courts.

Sonali thinks that this is an attack on the free media of the country. Damn wrong!

See, the CID wanted to learn something from her. Having failed to successfully conduct a single investigation whether it be Tiran Alles' links to the LTTE, Helping Hambantota funds, GoldQuest, or Johnston Fernando stealing cutlery, so on and so forth, the CID has finally realized that they are nothing but a bunch of pansies who are incapable carrying out proper investigations.

Thus, the only thing they wanted was to have Ms. Samarasinghe give them a nice lesson on investigative tactics and ethics. Pavu ne, to accuse them of trying to harass the media?!?

Vandinna giya devale oluve kadan vatuna!!

Lanka Can Do Without Foreign Aid, But Can the Rajapaksa Clan?

President Rajapaksa is reported to have said that Sri Lanka "can do" (what, I might add) without foreign aid.

But the million dollar question floating around is, whether the Rajapaksa clan of Mahinda-Gotabaya-Basil can follow suit and do without the foreign aid. Of course, while tapping into local resources is still a feasible option, the lack of foreign aid to fund the 10% donation to Rajapakse Private Limited is a worrying prospect.

Mr. 10-percent didn't come around for nothing, no?

Tuesday, May 15, 2007

Sale of SLT to GTH of Malaysia Proceeds in Secrecy as Questions of Corruption Looms

Questions are being asked as to why the portion of Sri Lanka Telecom (SLT) held by NTT of Japan is being sold to Global Telecom Holdings (GTH) of Malaysia with utmost secrecy and urgency.

The legality of the whole exercise is further questioned as SLT is a public company, listed in the Colombo Stock Exchange. A little over 15% (15.3%) of the enterprise is held by the public, who flocked to purchase its shares during the IPO making it one of the most successful public offerings in Sri Lankan history.

Extract from News Reports:
"Given that 15.3% of the company is owned by the public, the fact that none of its 28,000 shareholders were informed of the deal is both illegal and unethical," UNP MP Dayasiri Jayasekera said at a press conference yesterday.

Jayasekera further said that tenders had not been called and normal procedure had been flouted in the process of drawing up the deal.

"Why would President Mahinda Rajapakse single handedly close the deal with a Malaysian company without looking at any other offers, unless he had some personal interest or a lot to gain monetarily, even at the cost of the country, from this deal?" Jayasekera questioned.

Jayasekera said the UNP had evidence to show the owners of the Malaysian company Global Telecom Holdings, which had purchased NTT’s shares, were close associates of President Mahinda Rajapakse, and moreover had helped him financially during his last presidential campaign.

"Not only have valuable national assets been sold to this company, but the deal also entitles Global Telecom Holdings to a TV Channel. Why these privileges?" Jayasekera further asked.
He also inquired if Post and Telecommunications Minister Rauf Hakeem, under whose ministry telecommunications currently was, even knew about this deal.

"Sri Lanka Telecom is one of our profit making ventures, and the Mahinda Rajapakse regime before coming to power promised they would disallow privatization and deal with profit making institutions appropriately."

"Instead they’re blatantly selling public property," Jayasekera said.

Sripati Exposes Multi-Million Dollar Rajapakse-LTTE Deal in Parliament

Sripati Sooriyarachchi recently made shocking admissions in the Parliament of Sri Lanka regarding a monetary exchange between Gotabaya Rajapakse and the LTTE, with the approval of then presidential candidate Mahinda Rajapakse.

The deal, according to the revelations made was to "assure" the support of the LTTE for the Rajapakse-campaign vis-a-vis blocking the northern-Tamil populace from voting at the election. This proved to be a crucial turnaround in the election, which Rajapakse went on win with a razor-thin majority.

The following video clips (broken down due to size/time restrictions by YouTube) shows MP Sripati Sooriyarachchi making these revelations and allegations against the self-proclaimed war-hero Gotabaya Rajapakse. Gotabaya Rajapakse served in the Sri Lanka Army for a brief period before deserting the ranks and fleeing to the United States, where he has assumed permanent residency as a preliminary step towards citizenship.

Clip 1 - Prelude -- MP Range Bandara Sets the Pace

Clip 2 - Sripati Makes Exposure, Acknowledges, and Offers Evidence

Clip 3 - Conclusion