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What of negligent directors and auditors?

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Pic: SriLankan Airlines Facebook page Pic: SriLankan Airlines Facebook page

SriLankan Airlines and the Weliamuna Report

Large-Scale corruption will continue to thrive so long as professionals – particularly auditors and lawyers (i) are not held accountable (ii) ‘named & shamed’ (iii) punished – for dereliction of duty and wrongdoing. Can any large-scale corruption occur without the complicity of professionals? Are not accountants and auditors the first line of defense against corruption in all entities dealing with financial resources?

This is precisely what is avoided even by purported good governance activists and the media in Sri Lanka. Although they talk the hind legs off a donkey on the evils of corruption, they fail to bite the bullet in regard to ‘naming & shaming’ professionals and bigwigs in the corporate sector.

Based on the Prime Minister’s statement, the J.C. Weliamuna Report into alleged corruption and abuse of power in SriLankan Airlines confirms this malady.

The Report which confirms in shocking detail what the discerning public has long suspected appears to have missed the wood for the trees by neglecting to give due attention to the fact that the alleged corruption and abuse of power by Chairman, Nishantha Wickramasinghe, Kapila Chandrasena (CEO) and others took placeunder the watch of the airline’s long standing auditors – Ernst & Young and its Board of Directors which included Messrs. Susantha Ratnayake, Nihal Jayamanne PC, Sunil G Wijesinha, Sanath Ukwatte and Manilal Fernando – many of them also in its Audit Committee – some even as Chairmen!

What does this convey about the professionals concerned and the private sector projected as the country’s ‘engine of growth’?

The Weliamuna Report while rightly recommending “criminal investigations” into instances of alleged corruption which includes the entire re-fleeting process with brand-new aircraft costing $2.3 billion and “noting instances” where former Chairman Wickramasinghe and some others in top management should be“prosecuted” is apparently silent on proposed punitive action against the airline’s auditors and Board of Directors for any negligence of fiduciary responsibility inimical to the public interest.

Mihin Lanka
Since we are on the subject of airlines, was it not a Past President of the ICASL and the OPA – Mr. Lakshman Watawala who was mainly responsible for the alleged “within 24 hours” BOI approval of ‘Mihin Lanka‘ not withstanding his reported admission to then COPE member Ravi Karunanayake (now Minister of Finance) “under normal circumstances it would take six to eight weeks at least”! (‘The Sunday Leader’ 10 December 2006).
The question is – will the government hold Mr. Watawala who has responsibility for many accounting bodies accountable?

Ernst & Young
The case of the airline’s longstanding auditors – Ernst & Young is intriguing.

Does not the question also arise why auditors are allowed to hold office in the same entity for extended periods?

Ernst & Young (together with PwC) was faulted for ‘Professional Misconduct’ by (i) the Supreme Court (ii) the Attorney-General (iii) Parliament’s COPE vis-à-vis the fraudulent privatization of the Sri Lanka Insurance Corporation. The ‘Supreme Court’ (SC FR Application No: 158/2007) in its landmark Judgment delivered on 4 June 2009, held the SLIC privatisation to be “illegal and invalid ab initio” and had ordered the removal“forthwith” of the auditors, Ernst & Young.

Although ICASL’s ‘Ethics’ Committee more than eight years ago endorsed the findings of its Investigating ‘Panel’ that a prima-facie case of ‘Professional Misconduct’ had been established against Ernst & Young and PwC and all their Partners, the ICASL has still not concluded its purported investigation of my ‘complaint’ of ‘professional misconduct’ made as far back as 8 August 2005. This appears to be of no interest to anyone!

It must be noted that (i) Dr. P.B. Jayasundera – former Treasury Secretary and former Chairman of the airline was Senior Policy Advisor to Ernst & Young (ii) The auditors of the private media controlled Press Complaints Commission of Sri Lanka as per its website is Ernst & Young.

Any guesses who the auditors are of Transparency International Sri Lanka of which Mr. J.C. Weliamuna is Chairman? As per its website it is Ernst & Young!

To cap it all, the incumbent President of ICASL – Mr. Arjuna Herath is a Partner of Ernst & Young.

Since it seems inappropriate to have the ICASL under the Ministry of Trade and Commerce, it is suggested that it be brought under the ambit of either the Ministry of Finance or Ministry of Policy Planning and Economic Affairs.

Conclusion
On the subject of ‘complicity’ Wikipedia makes the following observation:
“An individual is complicit in a crime if he is aware of its occurrence and has the ability to report the crime, but fails to do so. As such, the individual effectively allows criminals to carry out a crime despite potentially being able to stop it from happening, either directly or by contacting the authorities. The offender is a de facto accessory to the crime, rather than an innocent bystander.”

In this instance we are referring to auditors and Board Directors with fiduciary responsibility!

Those reluctant to hold professionals accountable and ‘name & shame’ wrongdoers have clearly lost the moral authority to speak of good governance and any pretense to combat corruption.
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