The Rise and Fall of Arjuna Mahendran: Insider Trading Scandal Shook Sri Lanka’s Financial Market
The name Arjuna Mahendran once struck fear and awe in Sri Lanka’s financial market. He was a Singaporean-born Sri Lankan investment banker, financier, and CEO of the National Development Bank of Sri Lanka. Mahendran’s career in the banking industry spanned over 30 years, and he held top positions in various financial institutions, including the Bank of America and Credit Suisse. In January 2015, he was appointed as the Governor of the Central Bank of Sri Lanka, and that’s when his downfall began.
The Appointment of Arjuna Mahendran as Governor
The appointment of Mahendran as the governor of the Central Bank of Sri Lanka was considered by many to be a good move as he was a highly respected financial expert. However, the appointment was surrounded by controversy as he was a foreign national and was not a citizen of Sri Lanka.
The Treasury Bond Scandal
Mahendran’s downfall began with the infamous Treasury Bond Scandal in 2015. The scandal involved the alleged insider trading of Treasury bonds worth billions of rupees, leading to significant losses for the government and the public. Mahendran’s son-in-law, Arjun Aloysius, was accused of being involved in the scam. The scandal soon became a political issue, and the opposition parties demanded Mahendran’s resignation.
The Investigation and Impact of the Scandal
An investigation was initiated by the Parliament’s Committee on Public Enterprises (COPE), and it was found that Mahendran was directly involved in the scandal. This led to his resignation from the position of governor. The scandal had a significant impact on the country’s economy, with the depreciation of the Sri Lankan rupee and a decline in foreign investments.
The Criminal Investigation and Extradition
Following the COPE investigation, a criminal investigation was initiated, and Mahendran fled the country. However, he was arrested in connection with the scam by the Interpol in Singapore and was later extradited to Sri Lanka.
The Trial and Conviction of Mahendran
Mahendran’s trial began in 2019, and he was prosecuted on charges of insider trading and securities fraud. The Attorney General of Sri Lanka stated that Mahendran had given undue favours to Perpetual Treasuries, a financial institution in which his son-in-law had an interest. In 2021, Mahendran was found guilty and sentenced to 5 years of rigorous imprisonment in absentia, and a warrant was issued for his arrest.
The Impact of the Scandal on Sri Lanka’s Financial Market
The Treasury Bond Scandal had a significant impact on Sri Lanka’s financial market, with a decline in investor confidence and a fall in the country’s credit rating. The scandal also led to a political crisis, with opposition parties calling for the resignation of the then Prime Minister. The scandal highlighted the need for transparency and accountability in the country’s financial sector.
The Role of the Media in Exposing the Scandal
The media played a vital role in exposing the Treasury Bond Scandal. Journalists investigated and published articles that shed light on the scam, leading to public outcry and political pressure.
Lessons Learned from the Scandal
The Treasury Bond Scandal highlighted the importance of transparency and accountability in the financial sector. It also underscored the need for proper systems and checks to prevent corrupt practices, and the need for ethical conduct in the banking industry.
Conclusion
The Treasury Bond Scandal was a wake-up call for the Sri Lankan financial sector and a lesson for the country’s political leaders. The fallout from the scandal had a far-reaching impact on the country’s economy and its reputation. It highlighted the need for accountability, transparency and governance in the financial sector to prevent corrupt practices.
FAQs
Q1. What was the Treasury Bond Scandal?
The Treasury Bond Scandal was an insider trading scandal involving the alleged corruption and manipulation of the bond market in Sri Lanka.
Q2. Who was involved in the scam?
Arjun Aloysius, the son-in-law of former Central Bank Governor Arjuna Mahendran, and his company, Perpetual Treasuries, were accused of being involved in the scam.
Q3. What was the impact of the scandal on Sri Lanka’s economy?
The scandal had a significant impact on Sri Lanka’s economy, with a decline in the country’s credit rating and a fall in investor confidence.
Q4. What was Mahendran’s sentence?
Arjuna Mahendran was sentenced to 5 years of rigorous imprisonment in absentia.
Q5. What were the lessons learned from the scandal?
The scandal highlighted the need for transparency and accountability in the financial sector and underscored the importance of proper systems and checks to prevent corrupt practices.