Sri Lanka arrests ex-central bank deputy governor; four other over alleged bond scam

COLOMBO (Reuters) - Sri Lankan police on Monday arrested a former central bank deputy governor and four board members of primary dealer Perpetual Treasuries Ltd for their suspected involvement in an alleged government bond scam in 2015.

Police arrested Paththinige Samarasiri, the former deputy governor of the central bank, Geoffrey Aloysius, the chairman of Perpetual Treasuries, and three directors “as part of ongoing investigations on the bond issue”.

The five were ordered detained until April 5, police spokesman Ruwan Gunasekara said.

Perpetual Treasuries has denied any wrongdoing. Nalin Ladduwahetty, attorney for Samarasiri, said his client had not committed any crime, deploring that he had been remanded in custody when the court could have released him on bail.

The central bank has said it will conduct a forensic investigation into the sale of the 30-year government bonds in 2015 that is being investigated on suspicion of insider dealing as well as earlier bond trades.

The auction was originally planned at a modest 1 billion rupees but was then scaled up 10 times to meet government borrowing needs.

In February 2018, police arrested Arjun Aloysius, owner of Perpetual and its CEO Kasun Palisena. They were released on bail in January. Aloysius is the son-in-law of Arjuna Mahendran, who was central bank governor at the time of the auction.

Arjun Aloysius, Mahendran and Palisena have all denied wrongdoing.

President Maithripala Sirisena has accused Singapore of not helping to extradite Mahendran who is being sought as part of the investigation.

The Singapore government last week said it was waiting for proper documentation from the Sri Lankan government to follow the extradition process.