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by Sarath Mohottala, Retired Assistant Commissioner, Corporative Development

Following the astonishing news of the death of another Infant Bank - Pramuka, business community and stakeholders are eagerly awaiting to see how the culprits/white collar criminals behind this crime are being punished. But as it always happens in Sri Lanka, the end result is very obvious. No one will be penalised other than poor depositors, stakeholders and employees of the company.

Stakeholders' rights

Since the Monetary Board of the Central Bank has taken a decision to liquidate the bank stakeholders will be compensated by the liquidator under the Court supervision.

But there is no guarantee whatsoever that all stakeholders would be fully compensated. Everything depends on how much can be realised by disposing the company assets.

First the net liabilities (Government taxes and statutory levies) will be settled and depositors can expects to get their money back depending on the availability of the disposal proceeds of bank assets.

The sad news is that the company does not have enough realisable assets to pay-off the depositors in full and therefore it is not necessary to mention about shareholders, who will not get anything. (warning to so-called reputed auditors.

At least this time make sure to make a provision in your auditees accounts where they have deposits or investments in this bank). So shall we, stakeholders keep our mouth shut and await until such time regulators decide everything or don't we have a right and duty to bring this white colour criminals who are responsible to this crime to justice.

Directors' Liability

According to the Central Bank, the actions of the Pramuka Directors had resulted in the Monetary Board's decision to liquidate the bank, and there had been serious fraud, mismanagement, unsound, improper and imprudent practices at the Bank by those who were responsible for the affairs of the Bank.

So, if there were fraud and willful mismanagement, these criminals who fraudulently misused the poor depositors' money shall ultimately be in jail and their personal assets which they acquired by stealing the poor depositors' money should be acquired and disposed and such proceeds too shall be utilised to pay the poor depositors.

The Central Bank Monetary Board of which decided to liquidate the Pramuka and cancel its licence cannot keep the stakeholders in the dark. It should reveal the said fraudulent and mismanagement activities of the Directors to the stakeholders, so that stakeholders could decide whether to take legal action against this crime. If the Central Bank does not reveal those activities, stakeholders shall seek a Court order against the Monetary Board of the Central Bank.

Auditors' Liability

Stakeholders have a right to sue the company auditors too. There is a big question over the role of the auditors in this issue. How did this mismanagement of hundreds of million of poor depositors money had happened without the knowledge of the auditors? Didn't they have a clue about this. If so, what is the purpose of doing audit, and getting a mere certificate from the auditors.

Have they been negligent in doing their audit, and if so, what the cost of such negligence which they have to pay back to the stakeholders? We may end up with another Enron - Arthur Andreson story. But no one is above the Board and get the company auditors to answer to stakeholders/Court queries and let them to get their name cleared or evaporate through that process.

The most painful fact, which prompted me to write this is the fate of Rs. 900 million deposit made by Samurdhi and Corporate Rural Banks. This amounts to more than 25% of the total deposits of Pramuka. These are really poor rural people's money, and that is one significant reason why white collar criminals involved in this crime shall be severely punished.

They should not be allowed to be unreasonably enriched at the expenses of the poor. Also whether these Rural Development Banks and Samurdhi Bank followed the proper approval procedures prior to invest in the infant Pramuka Bank too shall be punished.

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