State-run SriLankan Airlines had given advertising deals of over 450 million rupees to firms controlled by one family, where then- Chief Executive Kapila Chandrasena had at times ordered payments without formal contracts, a commission of inquiry was told.
A Presidential Commission of Inquiry into fraud and malpractice at SriLankan Airlines was told that an internal audit had queried the contracts as far back as 2014, and written agreements were not available or missing in some cases.
Saminda Perera, Senior Marketing Manager of SriLankan, said that dozens of deals for hoardings and light boxes were awarded to Kuma Stickers (Pvt) Ltd and Vihanga Marketing & Advertising Services (Pvt) Ltd, which were controlled by one family.
The loss-making airline made the highest payments to the two advertising firms in the 2014/15 financial year, up to 140.8 million rupees. Since then, payments have slowed down to just 25 million rupees each over the past two financial years, the commission was told.
Perera said that SriLankan’s marketing department had not conducted a contract review by internal and independent financial and insurance experts for many of the agreements.
“The marketing department does not have expertise in things like finance and insurance,” he said.
An internal audit had flagged this at the beginning of 2014, and only agreements entered into since had contract reviews, he said.
Perera also said that he was not able to locate some of the documents related to agreements with the two firms.
Further, in between lapses of agreements and renewing them, the then SriLankan CEO Kapila Chandrasena had provided interim approval via e-mail to continue payments of more than Rs. 10 million to the two companies for periods of one to two months, he said.
“Without an agreement, payments cannot be made,” Perera said.
Deputy Solicitor General Milinda Pathirana termed these payments illegal.
Retired Supreme Court Judge Anil Gunarathna who is the Presidential Commission Chair, questioned how nearly all the contracts could have been awarded to these two companies.
“Was the tender process followed? How were only Kuma and the son’s companies the only suppliers?” Gunarathna asked.
Perera said that he was not at the SriLankan marketing department during the time period in question to know for sure. The commission ordered any documents on procurement to be submitted at the next hearing.
“From what I know, they had the size of hoardings required. If they had small ones in a location, they were willing to put up larger ones. Also, the airline went and identified locations and they fabricated hoardings,” he said.
Commissioner Gunarathna said that it was ‘mysterious’ that Kuma Stickers and Vihanga Marketing & Advertising Services owned so much land to be able to put up hoardings where the airline wanted to place them.
Only one other company, Anra Digital Image Suppliers (Pvt) Ltd, had provided hoarding services to SriLankan during the period, for a billboard off Elephant Pass in Jaffna.
Kuma Stickers however has been the sole supplier of light boxes and advertisements on trolleys at the airport since there is a one supplier principal inside the facility, Perera said.
Perera said that the airline has not entered into any agreement with Kuma Stickers and Vihanga Marketing & Advertising Services recently, except to transfer the title of one agreement for supplying light boxes at the airport from Mihin Lanka, when the budget airline was absorbed into SriLankan.
“We now have only three hoardings in Katunayake (Airport), Reid Avenue and the Expressway, because we have a low budget and because this commission is ongoing,” he said.
Perera said that these three hoardings was awarded through competitive tenders.
SriLankan has accumulated over 170 billion rupees in losses by the end of March 31, 2018, and is currently struggling to even pay the fuel bill to the Ceylon Petroleum Corporation, another state-run firm.
Former President Mahinda Rajapaksa cancelled a profitable management contract SriLankan had with Emirates in 2008, and appointed his brother-in-law Nishantha Wickramasinghe as the airline’s Chairman.
Under Wickramasinghe’s purview the airline tumbled into losses amid allegations of mismanagement and corruption and a preliminary inquiry led by J C Weliamuna, a lawyer, recommended a criminal probe.
A board and top management appointed by the current administration in 2015 also failed to turn the airline around. A second board has promised a turnaround in three years.