Maganaguma’s Rs 200 Crore fraud | Sunday Observer
Details revealed:

Maganaguma’s Rs 200 Crore fraud

8 January, 2023
Part of the internal audit reports regarding the Rs 200 Crore sent to the chairman
Part of the internal audit reports regarding the Rs 200 Crore sent to the chairman

Celebrating the beginning of the New Year, not only Government departments, corporations, and other institutions, but also private institutions, open a table of milk-rice and sweets. In this meeting, the main goals are discussed, such as how to successfully run the company’s activities in the New Year, correct previous deficiencies, and strengthen employee-employee bonds.

It is also a Sri Lankan tradition that after the heads of the institutions open the New Year table, the other employees enjoy the milk, rice, and other refreshments and begin the New Year with a good heart. But what if you were attacked by milk rice instead of eating it? This article is about an incident that occurred on January 2, at Maga Neguma Peliyagoda Main Office.

The head office of Maga Neguma under the Ministry of Transport and Highways is located on a large land area of about 5 acres on Nava Nuge Road, Peliyagoda.

There are 980 employees working there. Chairman Yogendra Perera, Executive Director Mahesh Wickrama, and a group of others came to perform religious rites with the employees on New Year’s Day and for the amicable party that will be held afterwards.

The National Anthem was sung, the national flag was hoisted, and the President was to address the Assembly. But suddenly, a trade union representative grabbed the microphone and insulted the Minister, the Chairman, and the Executive Director, after which a group of people took milk rice from the dining table and threw it at the Chairman, the Executive Director, and the management. A group of people tried to prevent the work, and some people threw the food items, including milk and rice, they had picked up on the ground.

The Chairman and the Executive Director went to their offices on the upper floor after the commotion. They were not even allowed to leave the room by these people. Yogendra Perera, chairman of the Peliyagoda Maga Neguma head office, was interviewed about this incident.

“Of course, there is a different story behind this protest or the attack with milk rice. I took up the job on October 5, 2022; before that, I worked for the State Commercial Statutory Corporation from 2020 to 2022. The company, which was making losses, became profitable. Also, after taking over the organisation, I thoroughly researched the organisation’s structure, operations, and financial affairs. We were told that Rs. 200 million were also missing while we were investigating. The Ministry of Highways and Road Development Authority was informed in this regard.

Accordingly, a comprehensive investigation was conducted. A special committee was appointed by the Road Development Authority. Three people in the accounting department, including the chief accountant, were unable to provide a proper answer about the money. There are no related documents. No payment methods exist. No acceptable answer was received from them. Then we suspended them. Currently, investigations are being carried out in this regard by the Criminal Investigation Department.

It is believed that those who were banned from work incited the people and carried out sabotage work. But it seems that they are trying to cover up this true story by telling various fake stories. According to the complaint made to the police regarding the incident that day, two people were arrested within a few hours. Both of them are residents of the Beliatta area. One is the chairman of the drivers’ association for the road project, and the other is a committee member. As a result of subsequent investigations, two more suspects were arrested.

Four suspects

After presenting the four suspects arrested by the Peliyagoda Police to Colombo Additional Magistrate Keminda Perera, the police asked the Magistrate to remand the suspects as investigations are also being carried out on another group of employees of the same institution in relation to the incident. But the lawyers who appeared for the defence ssid that this situation has arisen due to the fact that the chairman did not listen to the grievances of the employees of the concerned institution.

The defence lawyer said that there was no conspiracy behind the incident and that the workers’ protest arose because there were no solutions to the problems, and he asked the court to release his clients on bail.

Colombo Additional Magistrate Keminda Perera, who considered both sides, ordered the release of the concerned suspects on bail of Rs. 100 000 each. Also, January 16, was fixed for consideration of the relevant complaint.

Although they were granted bail by the court, the four have been suspended until the investigations are completed. According to the CCTV camera evidence, another group of people are also going to be arrested.

According to the chairman, the fraud behind this incident is as follows:

Looking at the fraud, it appears that money has been misappropriated in the roadway project since 2018.

It is clear from the investigations that are being carried out that the money has not been misappropriated but has been misplaced, and no one has even found out what happened to it.

There is a mutual agreement that is made through the company banks, through which the leads and contracts are carried out. But the agreements made with some such companies are missing. Despite such a situation, contractors have been paid. How was the money paid? For what purpose? It is reported that there are no key points, such as expenditure headings, in the accounts.

It is also reported that a company that is not registered for VAT has been reimbursed an amount of Rs. 35 million. All these are part of the big financial scams and are currently being investigated by the Criminal Investigation Department. The chairman said that the suspension of those investigations will be led by the chief accountants who were suspended last year. The chairman referred the misappropriation of funds by the administration to the audit, where the main problems identified were pointed out under several headings.

Accordingly, as of September 30, 2022, the value of advances not covered by bank guarantees was Rs. 2556 million.

The value of service providers at risk of advance recovery is Rs. 973 million. There are no bill details pledged to obtain an advance.

Inadequate staff assigned for bank guarantee-related work and not assigning specific duties and supervision of bank guarantee-related work.

Failure to maintain physical bank guarantee registers (Bond Register).

Accordingly, it shows that the value of advances not covered by bank guarantees is Rs. 2,556 million, and the value of outstanding advances from project advances given to suppliers as of 30 September 2022 is Rs. 3071 million.

A valid bank guarantees

For that, the value of valid bank guarantees held by the institution is Rs. 515 million. Accordingly, it has been observed that the value of Rs. 2556 million are not covered by bank guarantees. It is said that for the above Rs. 2556 million, the validity period of the bank guarantees has been extended, but such extension letters were not received till the initiation of the investigation. It has also been revealed that the value of service providers who are at risk of recovering advances is Rs. 973 million. That is Rs. one billion. It has been revealed that there is a risk of irrecoverable advances, whose value is Rs. 973 million and there are 39 identified service providers.

It has been confirmed that there are two service providers worth more than Rs. 200 million. They have been identified as 2K Construction (pvt) Ltd., Business Promoters, and Partners Engineering (pvt) Ltd., and there is a serious risk to the assets of 2K Construction. In addition, it has been revealed in the audit conducted by the internal auditor regarding the non-encashment of bank guarantees. Accordingly, the original copies of the guarantees related to Rs. 18,518,000 and Rs. 9,020,163, in guarantees No. APG/ANP/21/007 and APG/ANP/21/006, which matured on May 12, 2022, at Seylan Bank, have not been submitted. As a result, serious issues with the company’s assets related to those guarantees have arisen since the maturity date.

Some Rs. 61 million are not mentioned in the account as outstanding advances from suppliers, ranging from one to Rs. 10 million, and the number of suppliers concerned is 20. Also, it has been revealed in the audit that the outstanding advance value of three suppliers ranging from Rs. 10 to 20 million is Rs. 53,639,361.

In particular, advances of Rs. 21 million related to the service provider St. George’s Endeavors have not been recovered since 2015. In addition to this, many accounts also show full cash payments without deducting advance payments. The first is a check for Rs. 35,514,030.15 made out to K Construction (pvt) Ltd on 24 August 2021, with check number 158892.

Also, there have been reports of seven suppliers who cannot collect advances in relation to the Ranmavati Project. Under that, a monetary problem of Rs. 23,281,419 has arisen. The money was to be collected on 30 September 2022.

The audit has also investigated the advances that have not been settled for a long time. Under that, Rs. 2,000,000 related to Premium Decor Company in 2015 and Rs. 63,588 related to Texon Technologies Company in 2016 have been reported. In addition, an amount of Rs. 8,768,573 has been shown for non-presentation of bills while making payments based on the progress of project advances.

A number of issues have also been raised regarding the retention money to be paid, where issues have been raised regarding Rs 7,529,883. Under that, Rs. 3,976,265 related to Basnayake Construction Private Limited, Rs. 2,399,618 related to Cosmos Technology Institute, and Rs. 1,154,000 related to James Wood Walkers Institute are reported. Apart from this, it has been observed that there is no information on the bills kept for getting advances, no supervision of bank guarantee work, no maintenance of bank guarantee documents, and not enough employees are assigned.

In particular, there are reports that only Rs. 8 million have been kept as collateral for bank guarantees of Rs. 510 million. Accordingly, a serious situation has arisen where no guarantees have been submitted for Rs. 502 million.

It has been found that there is a risk of Rs. 358 million in respect of other receivables due in respect of 2K Construction (Pvt) Ltd.

Earlier, in 2011, investigations were initiated about a large-scale financial fraud at the Menaguma Road Construction Machinery Company. It was through the then-established Financial Crimes Division. But it was overshadowed by the problem of the legitimacy of the Financial Crimes Unit. At that time, there were many accusations, including the illegal spending of 679,753 US dollars to lay concrete, 10 million dollars to buy a shovel machine, and excavating a black stone in the land of Kaduwela Korathota Estate with that machine.

The head office at Peliyagoda Nuge Road has billions of pieces of machinery. It is easy for anyone who wants to misuse them. only if the first chair of the institution is not investigated. But this time, the filing of a complaint with the Criminal Investigation Department against the relevant suspects three weeks before the chairman’s appointment may have led to this crisis.

But the employees tell a different story. They say that the chairman and the executive director are responsible for preparing to fire a group of 40 workers who were hired for a road construction project, for evicting the workers from the quarters given to the workers, and for the electricity and water bills of those quarters.

However, management points out that, due to the retirement age for Government employees, personnel who are not currently involved in any project have retired due to the completion of that age. The chairman also mentioned that Maga Neguma owns the country’s largest granite mill used for road construction, which is located in Kekirawa Ganewalpola. A company with such resources should make a lot of money, but that hasn’t happened in the past. Such large-scale fraudsters, no matter how cheap, should face appropriate punishment.