The Trust Fund has made an investment in a partly state owned leasing and finance company violating the Cabinet Decision of August 282018 , public interest activists and University student unions alleged.
In a bid to formalise investments of the Mahapola Trust Fund, Cabinet of Ministers had decided in August 28 2018 to liquidate National Wealth Cooperation Limited and the National Wealth Securities Limited, investment management sub companies of the Fund, and invest all Mahapola Funds only in state banks and Central bank bonds.
Violating this cabinet decision, the present authorities of the fund has invested a sum of over Rs.1.26 billion (Rs.1,263 million ) in a fixed deposit of Peoples Leasing & Finance Company, a private firm listed in Colombo Stock Exchange.
Peoples Leasing & Finance Company is not a fully owned entity of the Peoples Bank which has only 75 percent of the shares of the company, an official said adding that this investment was risky as the Cabinet has clearly stipulated that all investments of Mahapola Funds should be confined to state banks.
The two fund management companies set up to handle Mahapola Trust Fund are billed to be liquidated after incurring losses of over Rs. 2.5 billion during the last 15 years, Cabinet Memorandum presented by then Higher education Minister Wijayadasa Rajapaksa revealed.
According to an assessment of losses computed by the Higher Education Ministry in the period 2003-2017 the fund had incurred an estimated Rs. 1.687 billion loss of earnings.
The loss incurred by the Mahapola Principal Fund from 2013 to 2014 due to investments under an interest rate below the average market interest rate was Rs. 567.21 million.
Amidst these irregularities, in a gazette, notification issued on 21 September 2015 Mahapola has been transferred to the Ministry of International Trade and Development Strategy under Minister Malik Samarawickrama.
Subsequently fund used to invest in shares through Wealth Trust Securities even though government owned National Wealth Securities is there for such matters.
Money held by the Mahapola Higher Education Scholarship Trust Fund, which is estimated to be about Rs. 10 billion has been managed by the Natwealth Corporation (NWC), and is a State-owned entity.
Funds held by the NWC were in turn invested by its subsidiary Natwealth Securities, which functions as the trading arm of NWC.
Natwealth Securities then invested the funds in a variety of State and non-State instruments including commercial papers, asset backed trust certificates, bonds and treasury bills.
A complaint was lodged with the Bribery or Corruption investigation Commission, alleging that funds given to Natwealth Securities was traded in an unfair manner at a loss to the Mahapola Trust Fund.
According to a list of all non-state investments made by Natwealth Securities ,this trading arm dealt with many companies including Rs. 306 million of commercial papers with People’s Merchant Finance, Melsta Regal Finance, and Asset Backed Trust Certificates of Rs. 194.7 million with Peoples Leasing and Finance Plc.
The largest component of over Rs. 1 b is in summary debentures, with top banks and leasing companies including Bank of Ceylon, Commercial Bank, First Capital Holdings, HDFC Bank, LB Finance, Nations Trust, Seylan and Sampath Bank.
The primary issue during the past period was the fact that funds of the National Wealth Corporation Limited and Nat Wealth Securities Limited were being diverted to an external company allowing it to make investments haphazardly.
It was also revealed at the Presidential Commission of Inquiry that these companies suffered heavy losses due to the Central Bank bond scam.