CIFL-When the chicken flew the coop

CIFL-When the chicken flew the coop
Sunday Times Business Editorial

The Business Times today publishes two interesting reports – both dealing with the role of directors, their behaviour, ethics, values and good governance.

The first is an audit carried by the Central Bank in 2011 of the crisis-hit CIFL finance company while the second is a voluntary code of ethics and best practices for corporates and their board of directors presented by CA Sri Lanka and the Securities and Exchange Commission (SEC). This report is now available on the website of the Colombo Stock Exchange and is a document for public consumption.

The voluntary code is a classic case of ‘Physician heal thyself” for, the current drivers of the code themselves are not entirely free of accusations of unethical activities. For example, SEC Chief Nalaka Godahewa is under a cloud of suspicion over allegedly, irregular dealings in the Krrish development project while CA Sri Lanka former President Asite Talwatte, Co-Chairman of the institute’s Corporate Governance Committee, also had his share of problems many years ago.

Reverting back to the CIFL crisis, the Central Bank audit report is a case study of how not to run a finance company or for that matter, how a corrupt management ran a finance company raking in millions of rupees from hapless depositors.
Central Bank rules were blatantly broken so much so that at one point the regulator says the company was operating like a dreaded ‘PONZI’ scheme. Ponzi is a scam promising high returns to investors.

For the record here are some of the significant points in the CIFL audit:

n A major part of the reported income comprised unearned income, which actually should have been eliminated when accounting for profits. Therefore at present CIFL’s performance is exaggerated by accruing unearned income from joint venture projects carried out in collaboration with ASPIC Homes.

n The Board of Directors of a RFC is responsible for ensuring the strength, safety and soundness of the company. Our overall conclusion is that the Board of CIFL has failed in achieving this objective.

n CIFL major shareholder Deepthi Perera played a dominant role in the decisions made of the Board Meetings held in 2009. His excessive-influence is viewed as hindering the independence of the Board, which curtails progressive decision-making towards the well-being of all stake holders. Though his presence is not visible at subsequent Board Meetings, we feel that his dominance is still present in most of the major decisions made by the company, especially as he’s the Aspic Group Chairman, and the extent of fraudulent related party transactions done by CIFL and fraudulent accounting entries passed by CIFL in relation to parties related to the Aspic Group.

n The Chairman has exceeded the maximum number of eligible years that a director can be in service, by serving as a Director on the Board for the past 33 years.

n Excess recruitment of marketing staff merely for the purpose of increasing the deposit base. The marketing staff amounted to 160 members, which exceed 50 per cent of the total staff that is viewed as a superfluous expenditure. Also the lack of training received, lack of integrity and dire need to achieve deposits targets has lead to uncontrollable and unethical behaviour by staff, which includes customer deception.

n The overall risk exposure of CIFL was considered very high, given the inadequacy of resources to mitigate the risks.
n Currently with no earnings from 61.4 per cent assets concentrated in real estate, CIFL is dependent on new deposits to meet expenses and repayments, thus operating as a ponzi scheme.

n CIFL, part of the Aspic Group, continues unethical, fraudulent business practices specifically with respect to real estate transactions similar to those found in the other group companies such as Industrial Finance Ltd (IFL), a distressed RFC.
This is only the tip of the iceberg in the way business was conducted at the CIFL, a company that is now before courts in a dispute over the terms of the repayment plan.

While the Central Bank’s audit report is very revealing and has tackled the core of the crisis – mismanagement and abuse of power -, it also made a set of recommendations to resurrect the company which included immediate action to infuse new capital or find a strategic investor to meet core capital requirements.

Thus two years ago the regulator was aware of the evolving crisis at CIFL but various attempts to bring in new investments failed as the new investors themselves were not ‘above board’. The last-named, the Maloney’s of Touchwood fame, promised to infuse foreign capital but that too didn’t work and desperate depositors then sought solace in the judiciary to right the wrongs of the directors. The Maloney’s have also run away from Touchwood which is facing its own crisis.
This brings us back to the CA Sri Lanka-SEC Corporate Governance Code which in the backdrop of the happenings in many companies, listed or otherwise, is unlikely to make any impact in the shift towards a more morally and ethically responsible corporate culture.
Voluntary codes are fine as long as professionals ensure their implementation. Unfortunately, in many cases, these codes are just mouthed at conferences or seminars dealing with good governance. Hardly put into practice or practice by the book!

http://www.sundaytimes.lk/131027/business-times/cifl-when-the-chicken-flew-the-coop-66710.html

K.Haputantri wrote:CIFL-When the chicken flew the coop
Sunday Times Business Editorial

The Business Times today publishes two interesting reports – both dealing with the role of directors, their behaviour, ethics, values and good governance.
The first is an audit carried by the Central Bank in 2011 of the crisis-hit CIFL finance company while the second is a voluntary code of ethics and best practices for corporates and their board of directors presented by CA Sri Lanka and the Securities and Exchange Commission (SEC). This report is now available on the website of the Colombo Stock Exchange and is a document for public consumption.
The voluntary code is a classic case of ‘Physician heal thyself” for, the current drivers of the code themselves are not entirely free of accusations of unethical activities. For example, SEC Chief Nalaka Godahewa is under a cloud of suspicion over allegedly, irregular dealings in the Krrish development project while CA Sri Lanka former President Asite Talwatte, Co-Chairman of the institute’s Corporate Governance Committee, also had his share of problems many years ago.
Reverting back to the CIFL crisis, the Central Bank audit report is a case study of how not to run a finance company or for that matter, how a corrupt management ran a finance company raking in millions of rupees from hapless depositors.
Central Bank rules were blatantly broken so much so that at one point the regulator says the company was operating like a dreaded ‘PONZI’ scheme. Ponzi is a scam promising high returns to investors.
For the record here are some of the significant points in the CIFL audit:
n A major part of the reported income comprised unearned income, which actually should have been eliminated when accounting for profits. Therefore at present CIFL’s performance is exaggerated by accruing unearned income from joint venture projects carried out in collaboration with ASPIC Homes.
n The Board of Directors of a RFC is responsible for ensuring the strength, safety and soundness of the company. Our overall conclusion is that the Board of CIFL has failed in achieving this objective.
n CIFL major shareholder Deepthi Perera played a dominant role in the decisions made of the Board Meetings held in 2009. His excessive-influence is viewed as hindering the independence of the Board, which curtails progressive decision-making towards the well-being of all stake holders. Though his presence is not visible at subsequent Board Meetings, we feel that his dominance is still present in most of the major decisions made by the company, especially as he’s the Aspic Group Chairman, and the extent of fraudulent related party transactions done by CIFL and fraudulent accounting entries passed by CIFL in relation to parties related to the Aspic Group.
n The Chairman has exceeded the maximum number of eligible years that a director can be in service, by serving as a Director on the Board for the past 33 years.
n Excess recruitment of marketing staff merely for the purpose of increasing the deposit base. The marketing staff amounted to 160 members, which exceed 50 per cent of the total staff that is viewed as a superfluous expenditure. Also the lack of training received, lack of integrity and dire need to achieve deposits targets has lead to uncontrollable and unethical behaviour by staff, which includes customer deception.
n The overall risk exposure of CIFL was considered very high, given the inadequacy of resources to mitigate the risks.
n Currently with no earnings from 61.4 per cent assets concentrated in real estate, CIFL is dependent on new deposits to meet expenses and repayments, thus operating as a ponzi scheme.
n CIFL, part of the Aspic Group, continues unethical, fraudulent business practices specifically with respect to real estate transactions similar to those found in the other group companies such as Industrial Finance Ltd (IFL), a distressed RFC.
This is only the tip of the iceberg in the way business was conducted at the CIFL, a company that is now before courts in a dispute over the terms of the repayment plan.
While the Central Bank’s audit report is very revealing and has tackled the core of the crisis – mismanagement and abuse of power -, it also made a set of recommendations to resurrect the company which included immediate action to infuse new capital or find a strategic investor to meet core capital requirements.
Thus two years ago the regulator was aware of the evolving crisis at CIFL but various attempts to bring in new investments failed as the new investors themselves were not ‘above board’. The last-named, the Maloney’s of Touchwood fame, promised to infuse foreign capital but that too didn’t work and desperate depositors then sought solace in the judiciary to right the wrongs of the directors. The Maloney’s have also run away from Touchwood which is facing its own crisis.
This brings us back to the CA Sri Lanka-SEC Corporate Governance Code which in the backdrop of the happenings in many companies, listed or otherwise, is unlikely to make any impact in the shift towards a more morally and ethically responsible corporate culture.
Voluntary codes are fine as long as professionals ensure their implementation. Unfortunately, in many cases, these codes are just mouthed at conferences or seminars dealing with good governance. Hardly put into practice or practice by the book!

Dear K.Haputantri,

Your detailed correspondence clearly confirms all what I have been stating for sometime now,

Deepthi Perera had full control of the Board of CIFL and Aspic due to his personal shareholding of both companies, and has influenced all decisions for the absolute betterment of his person,

He has started numerous Finance and Construction developments on his hearsay and has squandered My Investment and Depositers deposits for his personal gains,

The facts are he should be accountable and brought to the courts for illegal accountancy in conjunction with his company accountant who lodged documentation in conjunction with Deepthi Perera, the fraudulent documentation to entice Investors and so forth,

I thoroughly enjoyed your decisive statements and your insight to how matters have transpired.

Regards

Wayne Abbott

Cheated Foreign Investor

""CIFL major shareholder Deepthi Perera played a dominant role in the decisions made of the Board Meetings held in 2009. His excessive-influence is viewed as hindering the independence of the Board, which curtails progressive decision-making towards the well-being of all stake holders. Though his presence is not visible at subsequent Board Meetings, we feel that his dominance is still present in most of the major decisions made by the company, especially as he’s the Aspic Group Chairman, and the extent of fraudulent related party transactions done by CIFL and fraudulent accounting entries passed by CIFL in relation to parties related to the Aspic Group.""



As you can see DP involvement in CIFL in 2009, As I openly stated many times, that's when the CIFL had a Deposit Run in 2009. Their Chairman got ill due to the Pressure and Deputy Chairman Left the Company with out even informing, Other Directors was not reporting to work. CEO resigned and left the Country So there was virtually no one responsible for the Crisis, and Staff of CIFL requested me to Come back to Sri Lanka and to Involve in this matter. "Do people or CBSL expect me to stay silent when my company is getting busted? NO. I got involved and managed the Situation, Sold most of Assets of Aspic, Personal Cars, and paid the Depositors, There were No one to Help at the time of the Deposit run CIFL had enough liquidity, but was not enough for a week, Total Unpaid amount piled up to 600 Million, and CBSL came for the Audit, they met me too, but why they dont publish those audit reports? NO one was there to help CIFL, during the same period there were few companies taking over all of our senior Staff, CBSL was Sleeping, Then in 2011, they publish this Audit Report. Mrs, Jayasingha the Chief Auditor had a 2 Hour Meeting with me in CIFL before they publish this audit report, I told her how we handled the Situation, it was Not influence, after 2009, I did not have to go to any board meetings because Board was back together, thats why there was no evidence of my participation in to meetings, But still they goes on writing, " We FEEL Deepthi Perera influenced after that " How can CBSL can write about how they Feel.

Then why they don't mention about the financial Crisis, 600 Million deposit run, directors disappearance, aren't they important to them? Why they have to write this in 2011? why not 2009?

Of course I have to intervene if the responsible board vanish during a crisis, And regulator close their eyes, why do you expect me to do? just stay and waiting to see that my investment is drained? NO i don't i wanted to bring it back to track, and after that management was back again with the directors, there are many documents to see that, The truth is CIFL was abandoned in 2009. So i had to intervene, and Intervene is not influence,

With regards to the Aspic Land Transactions, in 2009, CIFL did not had real estate assets, they Just had a book entry called Homagama Project. And Aspic Decide to transfer their Assets to CIFL/Homagama Project, at a Cost Basis, But the Interest receivable was set off, And CBSL auditors have seen the Transaction documents and assets were bought in to books, How come they say now they are fraudulent transactions? All the transactions were approved by the directors and minutes were inspected by CBSL during the Audits, Can it be a fraud? Has Aspic got any Benefit out of it? made any profits? gain? any person got a gain? NO they were done to strengthen the balance sheet of CIFL. Many CBSL meetings I have told them I am transferring the assets of ASPIC to CIFL they were aware about this, I cant comment on the entries of CIFL because I have not done the Accounts of the Company.

Another question is IF CIFL was a Ponzi Scheme why CBSL approved it to go to the IPO? aren't they become Ponzi too? Did Deepthi Perera Influenced CBSL, SEC,CSE all the people? CBSL easily could forward this Audit report to SEC CSE if they want to protect any one, why they haven't done it? If they knew Aspic and CIFL has done fraudulent land Transactions they approved our accounts and with the Same accounts we were approved to go to the IPO? So this clearly evident that CBSL accepted the transactions

So in 2008 CBSL approved the transaction to ASPIC to Purchase IFL. IFL had a 250 Million Provision at the Same year, IN 2009 after 6 Months of the Take over IFL too Had a deposit run, But how did CBSL then approved ASPIC to take over Former Next Finance, That also Deethi perera Influenced the Monitory Board and CBSL of Sri Lanka.

When the IFL was given to next Shareholders and Directors with CBSL approval, All the assets of Aspic Corporation was Trasferd, this includes, 6 Story Apartment Building, 24 House housing in Mount Laveeniea, 20 Houses in kandy, Aspic Entertainment, and more. But they never invested a rupee in to the Company. So 6 Months after taking over IFL and after Transferring all the assets to match the liability GAP which was the previous Provision which CBSL knew, ASPIC is still to be blamed? and the people who took over the responsibility are not to be seen, NO investigation, No inquiry Why? Deepthi Perera Influenced?

Aspic Corporation as a Company has done many sacrifices than any others to protect these companies, We lost the entire assets companies due to the financial Crisis, We sold Industrial Finance for a Zero Consideration to Protect the Depositors and Transferred all the assets of Aspic to IFL. Thats why Aspic Got no Assets today. I challenge if any one can prove if ASPIC or any aspic director or me or any of my relatives got financial benefits, Every one use the words crooks, fraudsters, con man, cheaters, for the people around, what have we cheated? where we have cheated? who has taken depositors money? Has directors got wealth gain, have I got a wealth gain? NO

When The Directors wanted to Change the CEO on 2011 CBSL refused, NO reasons were mentioned, in 2012 May it was rejected, No reasons, 2102, December again rejected, No reasons, If the company was bad, mismanaged, why was this rejection for the Change of CEO, what was the Agenda?

When CIFL recruited few Staff from Grameen Company, next day a call came from Director Non Banking, " Do not recruit employees from Grameen." But in 2013 10 Employees went from CIFL to Grameen, what was that?

CBSL deliberately vigilantly by using their powers made sure CIFL collapse, This was not a deposit run, this was not an industry crises, this was a man made crisis,

After refusing 3 times to appoint a new CEO, CBSL came and fired the CEO of CIFL with in 4 Hours, this would have done two years ago and get a Professional this wouldn't have happened, And they Appointed a CEO who came and Sign Post Dated Cheques and Now company is in Courts, "I overheard the Conversation of CBSL Non banking Director Openly States, We don't mind a collapse of another Finance Company. Huh, if you don't mind now you can handle it, What have you done? Nothing,

I was waiting for a longtime with out commenting to see whats the opinion of the people, And when it is unbearable I decide to comment on behalf of the people who worked for CIFL,

I do know there is Pain, Injustice, suffering to people who have deposited and also shareholders of CIFL. I do not state that management was perfect and everything what we did correct, I do not saying CIFL is out of responsibility towards Depositors and Stake Holders,

All what I was trying to say is,
'
CIFL would have Operated re structured and paid all the Liabilities,

CIFL Had a Plan, to re structure,'

IF CBSL wanted Me, or Aspic Corporation out of the Business, they would have write to us and Ask us to sell the Shares to a Nominee of them, this clearly states in the Finance Act.

If the Staff or Directors were influenced CBSL could easily ask me or Aspic, which they never did.

CBSL witnessed the Interest Income increase was more than 150% During the 2012 Year. Which was the Key to the revival, why have they not allowed the company to operate.

Was this entire collapse because CBSL wanted Deepthi Perera out of Financial Business, if so they would have told me.

Not only CIFL every failing organisations have negative net-worth, How many large organizations and Airlines, banks in the country are facing this, But all of them have a right to get up, re-structure and protect their business. You just cant say, Directors, or staff or me robbed, cheated, conned depositors money, We too failed, in a Deposit run many fails, unless you are backed by either government or if you are very very cash rich, And after the deposit run, No lending, that means reduction of Interest Income, and increase of Cost because you need to create more liabilities to payback the depositors, this is the phenomena in Finance Business, So with 3 Billion Depositors and No lending for 2 Years Since 2009, Where would CIFL go, Directors cant do Magic, We could not find new investors, Company managed the way it could, there can be many experts, analysts, giving their opinion now, Yes there would have things done differently, there would have things CIFL shouldn't have done But can we go back on time and change those? All what we can do is, Plan and re structure and get up now,

After the reaction of CBSL, I wrote a letter to the president of Sri Lanka, to the Governor of Central Bank
explaining what could happen, I asked for a permission to intervene in the matter, open discussion to explore possibilities, the answer was negative, Why they cant give a simple hearing? How can be a responsible Government body can become so immoral,

At last, I hope all these top intelligent smart people will re structure CIFL and Bring a Investor to give a hope of light to the Depositors.

Deepthi_Perera1971 wrote:

After the reaction of CBSL, I wrote a letter to the president of Sri Lanka, to the Governor of Central Bank
explaining what could happen, I asked for a permission to intervene in the matter, open discussion to explore possibilities, the answer was negative, Why they cant give a simple hearing? How can be a responsible Government body can become so immoral,

Imo, they've (including the depositors) already lost faith in you, so the response would by all means is acceptable.
In addition to this, they may have their own agenda..

There are very intelligent guys in the adversary board I guess.. In every troubled waters, they try to fish.. Some would've been successful and some were complete fiasco..

Wayne, I clearly informed you not to bring ur misery to all the CIFL, TWOD posts and whine here..

What kind of an investor are u who has not looked after your money for 9 years and suddenly appear like u woke up from a coma?

I smell a rat in your actions.. So be careful before u lose a place in this forum. If you cannot prove us u've taken any action or have proof against your allegations to other parties, we may have no choice than banning you from this forum... After all, we've given u more than fair chances to settle you disputes with the concerned parties, if your not interested or having taken no steps towards it, forum cannot do anything beyond this. Its not our money.

On the other hand, to me, you portray your self like an utter liar than Deepthi or Maloneys.. I have reiterate, sadly, cuz u failed to send admins proof.

This is your last warning.. Settle ur dispute with Deepthi outside forum (or use PM facility).

If you continue to post this and that and the wrong doings of anybody to your heart consent without a single fact, Ur done and gone..

Geez.. U must be the only English who doesn't have any integrity at all.. Coming back crawling to this forum to inform us you've been cheated yet failed to prove a single point..

Are you this Dumb or it runs in your blood????

Where are your FACTS???