Beware of swindlers
In a startling revelation concerning the Golden Key
fiasco, Deputy Solicitor General Yasantha Kodagoda told Court on
Friday that the failed finance companies of the Ceylinco Group
continued to accept deposits even after they became insolvent
way back in March 2008.
According to him, the depositors and creditors were not told
of their liquidity problems and no action has been taken by the
directors to liquidate the company.
This is indeed is a wilful defrauding of public that carries
criminal liability. It shows the extent to which the Companies
in question had been confident in the magic name of their parent
establishment while accepting deposits they knew they were not
going to return. This amounts to daylight robbery - keeping
unsuspecting depositors in the dark of the true position while
continuing to accept their money.
Today, hardly a day passes without a media report of an
arrest of some swindler who had fleeced the public by accepting
deposits promising high interest. This it appears had been the
easy road for some to riches.
The Sakvithis, Danduwam Mudalalies may well be only the tip
of the iceberg. It appears that the racket had taken deep root
in the financial system fuelled by greed of a section of the
public. Bogus finance companies had been mushrooming while the
authorities had been asleep and unsuspecting people taken for a
jolly good ride.
True, finance companies did play a supplementary role to the
established banks and was a vital cog in the economic wheel
particularly in the early days of the open economy. Many of the
finance companies offered even better terms than Banks and in
most instances garnered the lions share of the business and a
bigger stake in the commercial ventures. The best example was
the financing offered to the nascent private bus service in the
The booming business made them offer better interest to
depositors with the money being shovelled into still more
enterprises. However, the demand made more and more players
enter the field making it a crowded marketplace. A majority of
them were shady individuals which were subsequently proved when
they fled the country with the loot.
The cracks first appeared with the collapse of the HPT in the
late 80s which for the first time in Sri Lanka saw depositors
stranded. Then too the Central Bank was blamed for not having in
place a proper regulatory mechanism. But from the Golden Key
fiasco it appears that the public had failed to learn their
True, the solidity behind the names of certain Finance
Companies would have more than assured the depositors of the
safety of their money. But given the astronomical sums deposited
it seems they have certainly thrown all caution to the wind. The
collapse of well-known finance companies have already jolted the
financial system with a heavy run on deposits.
True, the Central Bank has taken measures to overcome the
immediate problem. But not before public confidence in the
entire Banking system had been dealt a huge dent. Should people
stop investing in the financial markets the economy could grind
to a halt, for it goes without saying that it is the continued
flow of financial resources through the Banking system that
keeps the economy ticking.
The Central Bank should take steps to arrest this crisis of
confidence not just by streamlining administration of the failed
Finance Companies but also allaying the fears of prospective
depositors. According to reports the jailed Directors of the two
Finance companies are to hold an extraordinary general meeting
to establish an independent trust to facilitate repayment of
some 5,600 depositors. It is believed that 30 percent of the
deposited money could be raised by the sale of F&G assets alone.
On top of this, Ceylinco Chairman Lalith Kotalawela,
according to media reports, had been taken during the weekend
from prison to the Central Bank for an evaluation of his assets
to be disposed of in order to pay back depositors of Golden Key
Hopefully the long wait of the traumatized depositors would
end soon. Hopefully their plight would act as a deterrent to
other would-be depositors not to be consumed by greed and
moreover not to be taken in by attractive commercials of finance
companies that are intended to hoodwink the customers.