Today, anything that the public sees in the media about the MiG deal, would invariably centre around Udayanga Weeratunga. In the past months and weeks, the media has reported that Weeratunga had 16 bank accounts in Sri Lanka (which have since been frozen) with total deposits equivalent to about USD 1.5 million. According to a recent media report the FCID has claimed that money was credited to these accounts at various times from Panama and Latvia. In addition to involvement in the MiG deal, the yahapalana authorities have accused Udayanga of killing a subordinate and even stealing furniture from the residence of the Sri Lankan Ambassador in Russia. Weeratunga, for his part, has charged that a witch hunt is being carried out against him and publicly refused to make things easier for the hunters by presenting himself in Sri Lanka to be victimised.

Today, with an international arrest warrant hanging over him, Weeratunga is a fugitive from the FCID and it is through him that the MiG matter is being kept alive in the media. Weeratunga was, in fact, involved in the MiG deal as a facilitator. As Sri Lanka’s Honorary Consul in Ukraine at the time and later as the Ambassador to Russia, it was inevitable that he would play some role in facilitating a government to government deal between Sri Lanka and Ukraine. On 26 March 2015, the FCID first stuck to the parameters of the original newspaper reports about the MiG deal of 2006 and was all about the difference in the price between the MiG-27s bought in 2000 and in 2006, and the payment thereof being made to Bellimissa Holdings instead of direct to UKRINMASH.

However from laster things took a different turn. The FCID said that the 2006 contract for the supply of four MiG-27s and the overhaul of four other MiG aircraft had been signed in two different places with UKRINMASH and Bellimissa Holdings signing the contract at the official residence of Udayanga Weeratunga, the Sri Lankan Ambassador to Russia, with the contracts being thereafter brought to Colombo by Weeratunga to be signed by the Air Force Commander. From this point, the entire focus of the FCID investigation shifted to Udayanga Weeratunga. As the previous parts of this article would indicate, the facts do not allow for the allegations about the price difference or the payment of the purchase price to a party other than UKRINMASH to be sustained.

Weeratunga on the other hand would appear to provide much better grist for the mill. Even Weeratunga’s posture and body language during these ‘sightings’ received wide publicity. It was claimed in October 2016 that Weeratunga had brought the 2006 MiG contract in quadruplicate to be signed by the Air Force Commander after it had been signed by the representatives of UKRINMASH and Bellimissa Holdings in Russia.

Upon the Air Force Commander placing his signature on it, he had left one copy with the Air Force and had taken away the other three copies saying that they had to be given to UKRINMASH and Bellimissa Holdings.

How the contract became a forgery

Most importantly, the FCID said it had contacted the Ukrainian Justice Ministry through the Sri Lankan Justice Ministry and that the Ukrainian Attorney General’s Department had informed Sri Lanka by letter dated 24 June 2016 that no contract had been signed between the Sri Lankan Air Force and UKRIMNASH and that UKRINMASH had not signed any contract with Bellimissa Holdings either. Based on this letter, the FCID said the 2006 contract bearing No: SLAF/2006/07/AIR for the supply of four MiG-27 aircraft and the overhaul of four other MiG aircraft was a forged one, which Weeratunga had presented to the Air Force Commander and obtained his signature on it through misrepresentation.

To bolster the forgery charge, the FCID claimed that when examining the previous correspondence pertaining to this transaction the signature of UKRINMASH Director D. A. Peregudov in the contract appears different to his signature in other correspondence with the Air Force. The embassy official in Russia who had witnessed the signatures on the 2006 MiG contract had also told the FCID that he did not know the persons who had signed on behalf of UKRINMASH and Bellimissa Holdings and that there appeared to be a difference between the signature of D.A.Peregudov as it appears in the contract and his earlier correspondence with the government of Sri Lanka. On this basis, the FCID claimed that Weeratunga had committed the offence of forgery under Sections 454 and 457 of the Penal code.

Furthermore, the FCID said the money paid for the MiG aircraft had not been sent to the UKRINMASH account by the Sri Lankan government but to the account of Bellimissa Holdings Ltd and further that Bellimissa Holdings had not sent the money to UKRINMASH and, therefore, Weeratunga was complicit in preparing a forged document and defrauding money from the state which amounts to the offences of ‘cheating’ and the use of forged documents coming under Sections 400 and 459 of the Penal Code. The FCID is also investigating Weeratunga under Section 5 of the Offences Against Public Property Act No: 12 of 1982 which is about the dishonest misappropriation of public property through the falsification of documents.

The FCID claimed that the original contract No: SLAF/2006/07/AIR for the supply of four MiG-27 aircraft and the overhaul of four other MiG aircraft had been in the possession of the Air Force until 4 June 2009 when it was taken into the custody of now retired Air Vice Marshall Jayanath Kumarasiri to be produced as evidence and that it had been in the possession of this officer until 12 September 2014 when he retired but that there is no evidence to show that it had been handed over to the clerks in his department when he retired and that the original copy is now missing.

Thus, the investigation into the MiG deal has strayed very far from the original issues raised by a section of the press about the difference in the prices of the aircraft and the payment of the money to a party other than UKRINMASH.

It’s being said that there was no contract between UKRINMASH and the Air Force when four fully overhauled MiG-27s were delivered to Sri Lanka and four other MiG aircraft already in the possession of the Air Force were taken from Sri Lanka all the way to Ukraine for overhaul and brought back and all eight planes are still in the possession of the Air Force.

Other than the contract itself, there are many other letters exchanged between UKRINMASH and the Sri Lanka Air Force pertaining to this transaction. It was after perusing this documentation that the FCID claimed that the signature of UKRINMASH Director D. A. Peregudov on the contract and in other correspondence do not match. With regard to the alleged mismatch between Peregudov’s signatures, Weeratunga has said the contract for the purchase of four MiG-27s and the overhaul of four other MiG aircraft of 26 July 2006 had been signed by Gennadii Studenikin the then Deputy Director of UKRINMASH, who was authorised to sign on behalf of D. A.Peregudov, Director of UKRINMASH.

This Studenikin had come to Sri Lanka to negotiate the contract with the Air Force and it had been he who had taken Air Commodore E.G.I.P De Silva the head of aeronautical engineering of the Air Force and Air Vice Marshall W. D. R. M. J. Goonetillke at different times to inspect the UKRINMASH facilities and it was he who had also signed the final acceptance certificates for all eight aircraft along with E. G. I. P De Silva of the Air Force.

The Ukrainian AG’s department may have written back saying that they have no evidence of a contract between UKRINMASH and the SLAF but it has to be remembered that after the MiG transaction of 2006, Ukraine experienced a violent and disruptive political coup with an elected President being forcibly deposed and the country itself being dismembered.

The present holders of power in Ukraine are the mortal enemies of the previous powers that were. Control over UKRINMASH, a state owned enterprise has also obviously changed. This background has to be taken into account when evaluating the veracity of the letter received from the Ukrainian AG’s Department. The fact that the present authorities in Ukraine cannot find any contract between the SLAF and UKRINMASH does not mean that it did not exist. The FCID’s own reports indicate that the copy of the original contract is a genuine copy of the original. In any event, there are many other documents that prove that a contract existed between UKRINMASH and the SL Air Force.

Kickbacks and the Panama connection

For example, there is the ‘letter of guarantee’ dated 9 June 2006 written by Air Force Commander Donald Perera to UKRINMASH Director D.A.Peregudov guaranteeing that the contract for the supply of four MiG-27s and the overhaul of four other MiG aircraft will be signed before 30 June 2006. This letter guaranteed payment terms in the UKRINMASH letter of 26 April 2006 and requested them to begin the overhaul of the planes without waiting for the contract to be signed in view of the possibility of the resumption of war in Sri Lanka. This was sent off by the Air Force Commander without any intervention from Weeratunga. UKRINMASH had in fact started overhauling the aircraft on the strength of this letter and a team from the SL Air Force had been stationed at the plant in Ukraine to observe the overhaul process every step of the way.

Getting a government to government agreement signed by the foreign party at the Sri Lankan Ambassador’s premises in the presence of the Ambassador is also an accepted practice and is one of the purposes for which countries maintain embassies in foreign countries.

The FCID’s report stating that there was more than USD 1.5 million in Weeratunga’s Sri Lankan accounts was published in the media in a manner suggesting that this could be the kickbacks from the MiG deal. However, Weeratunga has said that this money represents his savings which he has remitted to Sri Lanka from time to time over the past two decades. His NRFC accounts in the Commercial Bank and HSBC had been started in 1990 and 1999 respectively. The factors that would give Weeratunga the benefit of the doubt in this regard is that he had been a businessman in Ukraine for many years and from the early 1990s, he had taken it upon himself to entertain visiting Sri Lankan ministers – an exercise that people of restricted means would not undertake. His appointment as Sri Lanka’s Honorary Consul in Ukraine after a personal interview with Lakshman Kadirgarmar in 1999 also indicates that he was deemed to have the means to hold such a position.

Recent media reports said that the FCID had found that money had been credited to Weeratunga’s Sri Lankan accounts from Panama and Latvia. The name ‘Panama’ automatically conjures up images of black money and kick backs. However, offshore companies and bank accounts in places like Panama are perfectly legal and those who provide banking services to these front companies are top European banks such as Credit Suisse, HSBC and Societe Generale. These mechanisms are used mostly by legitimate businesses with crooks also using them to stash away ill-gotten gains. Weeratunga has said that the money that has come into his accounts from places like Panama are the proceeds of his tea export business. In Ukraine and that he has been remitting money to Sri Lanka through the same channels as other Sri Lankan exporters of tea to Russia and Ukraine.

That our export trade receives payments through the offshore accounts of their buyers overseas is well known. If an exporter has money remitted to his account from Panama, that by itself is no indication that it has been illegitimately earned. Merely stating that Weeratunga had money remitted to his account from Panama is not going to get anyone anywhere unless it is specifically proved that the said money was the kickback received from the MiG deal. It is very unlikely that anyone trying to hide his money would get it openly remitted to his Sri Lankan accounts from an account in Panama. In any event all such remittances to Sri Lanka are scrutinized by the Financial Intelligence Unit of the Central bank and if there had been anything suspicious about these remittances, it would have come to the notice of the FIU long ago.

Concluded

Rajapaksa govt.’s controversial MiG deal – Part III

The other key question in relation to the purchase and overhaul of MiG aircraft in 2006 was that the payment had not been made to the supplier – the Ukrainian state owned company UKRINMASH, but to a front company by the name of Bellimisa Holdings Ltd. In 2000 when the Chandrika Kumaratunga government bought six MiG-27s and one MiG-23UB trainer, the supplier was DS Alliance of Singapore. However DS Alliance was a middleman and all the MiG aircraft purchased in 2000 were actually supplied by UKRINMASH the manufacturers of MiG planes in Ukraine. The policy of the Rajapaksa government was to eliminate the middleman so they directly approached UKRINMASH. In the ‘letter of offer’ handed over by UKRINMASH to the Ministry of Defence on 6 February 2006, it was specifically stated that this offer for the supply and overhaul of aircraft was being made in conjunction with a financier providing financing to the manufacturer and that the payment should be made to the financier.

The UNP government of 2001-2004 had also made overtures to UKRINMASH for the supply of four MiG- 27 aircraft and in the letter of offer they had sent to the then Defence Minister Tilak Marapone on 22 April 2003, UKRINMASH had specified that the payment should be made to a finance company and that they will inform Sri Lanka of the name of this company within three days of signing the contract. The method of payment laid out in the offer made to the then Defence Minister in 2003 is word for word the same as the offer made to the Rajapaksa government in 2006. D.A.Peregudov a Director of UKRINMASH wrote to the Defence Ministry explaining that UKRINMASH is a fully state owned enterprise and that according to Ukrainian law, they cannot trade on credit terms and they cannot provide credit facilities for two years as requested by Sri Lanka. Hence a financier by the name of Bellimissa Holdings Ltd would provide financing for the transaction.

The contract of 26 July 2006 for the supply of four MiG-27 aircraft and the overhaul of four other MiG aircraft, had three signatories – the Commander of the Sri Lanka Air Force as the buyer, UKRINMASH as the seller and Bellimissa Holdings Ltd as the designated party which was to receive the payment. This is a legally binding contract under Ukrainian, Sri Lankan and international law between two government agencies in Sri Lanka and Ukraine. The reason why a financier was not necessary when seven MiG aircraft were bought in 2000 was because the middleman DS Alliance of Singapore functioned as the financier. Section 23.1 of the contract signed on 26 July 2006 specified that the buyer and the seller are aware that Bellimissa Holdings Ltd shall be involved to provide financing to facilitate the transaction and that all payments under this contract including freight charges shall be paid to Bellimissa Holdings Ltd.

When the Invoice for the purchase and overhaul of the MiG aircraft was sent by UKRINMASH to the Commander of the Air Force on 31 July 2006, it was once again specified that the Bank of Ceylon should open letters of credit in favour of Bellimissa Holdings Ltd. When a state owned enterprise in a foreign country enters into a legally binding contract for the supply of aircraft, the buyer has to make the payment as the seller specifies. There was nothing secret about the payment being made to Bellimissa Holdings Ltd, because they too were a signatory to the legal contract. These MiG aircraft were purchased directly from the manufacturers in Ukraine, the payment was made, the aircraft were delivered, they were used in the war and those aircraft are still in the possession of the Air Force. Of the MiG aircraft bought or overhauled in 2006, not a single was lost due to terrorist attacks or flying accidents.

Govt. procurement procedure

The 2006 newspaper articles about irregularities in this deal appeared to suggest that this was a shady deal furtively carried out between Gotabhaya Rajapaksa and the Ukrainian Company with Udayanga Weeratunga acting as the go-between. However, from the beginning to the end, all the proper procedures were adhered to in this transaction. Many state officials were involved and it was a proper government procurement. There was the special three member Cabinet Appointed Tender Board (CATB) to evaluate whole the transaction. As is the usual practice, the CATB in the MiG transaction was headed by the Secretary of a different ministry – M.S.Jayasinghe, Secretary to the Ministry of the Nation Building and Economic Development. Gotabhaya Rajapaksa Secretary to the Ministry of Defence and S.B.Divaratne Deputy Secretary to the Ministry of Finance were the other members of the CATB.

Then there was the Technical and Financial Evaluation Committee (TEC) appointed by the National Procurement Agency which was headed by Air Vice Marshall W.D.R.M.J. Goonetillke, and made up of Air Commodore E.G.I.P De Silva – Director Aeronautical Engineering of the Sri Lanka Air Force, H.D.Weerasiri – Accountant Ministry of Defence, Dr D.P.T.Nanayakkara – Senior Lecturer University of Moratuwa, J.V.Premaratne – Deputy Director (Airworthiness) Civil Aviation Authority and Mrs K.D.R. Olga – Accountant Department of National Budget, Ministry of Finance. When the Cabinet Appointed Tender Board met on 5 May 2006, it was observed that UKRINMASH had further to a request made by the Air Force agreed to give the government of SL a discount of USD 40,000 on the cost of the whole transaction.

However the CATB was not satisfied with this discount and recommended to Cabinet that a negotiating committee be appointed to obtain a further discount. Accordingly, the Cabinet appointed a negotiating committee headed by P.A.Prematilleke – Director General Department of State Accounts of the General Treasury. On 16 May 2006, Prematilleke wrote to UKRINMASH drawing attention to the fact that this was a government to government transaction and that UKRINMASH had a long term relationship with the SLAF (on account of the MiG-27s bought previously). He pointed out that the discount offered by them amounted to only 0.27% of the total price and asked for a discount equal to 0.84% of the total price. Furthermore Prematilleke requested UKRINMASH to reduce the interest rate on the deferred payment terms from 1.5% to 0.75%.

On 20 May 2006, UKRINMASH wrote back to the head of the Cabinet Appointed Negotiating Committee stating that the finance package was worked out jointly with their financier (Bellimissa Holdings) and that this included pre-payments that had to be made to suppliers to prevent price inflation and therefore they were unable to make any further reductions in the price. The four MiG-27s that were going to be purchased from UKRINMASH in 2006 needed an ‘end user certificate’ so that the international community knows who will be using these weapons. The four MiG aircraft that were already in the possession of the air Force and were to be overhauled had been issued with their end user certificates at the time they were bought in 2000 and therefore did not need fresh end user certificates.

The End User Certificate No: SLAF/J-45001106 issued by T.M.P.D. Tennakoon the Chief Purchasing Officer of the Air Force on 15 July 2006 states clearly that the Sri Lanka Air Force authorises M/s Bellimissa Holdings Ltd to purchase from Ukraine four MiG-27 aircraft after overhaul and that the Sri Lanka Air Force confirms that the aircraft purchased from Ukraine are intended solely for use by Sri Lanka and will not be re-exported, sold, leased or transferred to any third party without the permission of the export control authorities in Ukraine. Thus the End User Certificate also makes clear the role of Bellimissa Holdings in this transaction.

According to the reports that appeared in the print media about the MiG deal back in 2006, Udayanga Weeratunga the former Sri Lankan Ambassador in Russia and a close kinsman of the Rajapaksas had been involved in this transaction as an intermediary. It was said that in February 2006, Weeratunga had met the Chairman of DS Alliance, T.S. Lee in Singapore and had requested that Lee introduce him to UKRINMASH to discuss the acquisition of four additional MiG-27s and the overhaul of four other MiG aircraft for the SL Air Force. Thereafter, Weeratunga had allegedly been involved in the MiG deal every step of the way and he had been present on 6 February 2006, at a meeting between Defence Secretary Gotabaya Rajapaksa, and UKRINMASH Director D.A. Peregudov where the latter had personally presented the UKRINMASH ‘offer letter’ to the Sri Lankan side. It was even said that Weeratunga had been in and out of Air Force Headquarters on no less than 25 occasions to facilitate the MiG deal.

Udayanga Weeratunga’s role

The assertion that Udayanga Weeratunga had approached the owner of DS Alliance to obtain an introduction to UKRINMASH sounds odd because Weeratunga had lived the better part of his life in Ukraine and knew the language, so why would he need to be introduced to UKRINMASH by a Singaporean? UKRINMASH is not an underground arms dealer but a legitimate State owned entity in Ukraine. Besides, Udayanga Weeratunga had been a businessman and a prominent member of the small Sri Lankan community in Ukraine and he maintained close contact with the successive Sri Lankan Ambassadors in Russia who were accredited to Ukraine. UKRINMASH had been selling weapons to Sri Lanka since the early 1990s, and Weeratunga knew UKRINMASH well and did not need any introduction from the owner of DS Alliance.

Sri Lanka never had close relations with Ukraine, so few politicians visited that country. In 1991 A.R.Mansoor the Minister of Trade in the Premadasa government had visited Ukraine and met the Ukrainian Minister of Trade. At that time, as a member of the Sri Lankan community living in Ukraine, Weeratunga had helped Minister Mansoor’s delegation and given them a dinner at his house. In 1999, the then Foreign Minister Lakshman Kadirgarmar had issued letters to the Sri Lankan embassy in Russia appointing Weeratunga as Sri Lanka’s Honorary Consul in Ukraine. (Though he had been appointed Honorary Consul by the Sri Lankan side, he needed to obtain Ukrainian citizenship to be acknowledged as the Honorary Consul for Sri Lanka, by the Ukrainian side. Since he never applied for Ukrainian citizenship, his appointment as Honorary Consul remained without diplomatic formalisation, but he played the role on behalf of the Sri Lankan government.)

Weeratunga was no stranger to the Air Force. As a member of the Sri Lankan community living in Ukraine, he had been meeting Air Force officers who had been visiting Ukraine from the time the first AN-32 aircraft had been bought from that country in 1992, and most if not all such visitors to Ukraine had been either to his home or his restaurant to have Sri Lankan meals. One important incident that had taken place when Weeratunga was the Honorary Consul in Ukraine in 2004 was the detaining of two AN-32 planes that had been repaired at the Kiev Aviation repair Plant 410 and was returning to Sri Lanka via Russia at the Rostov airport because no permission had been granted to the government of Sri Lanka to transport ‘weapons’ across Russian territory. Around 30 Sri Lankan Air Force personnel had been on board the detained aircraft.

At the time of the incident President Chandrika Kumaratunga had not been in SL and neither had the Russian Ambassador in Colombo. Prime Minister Mahinda Rajapaksa had immediately summoned the Acting Russian Ambassador in Colombo and explained matters to him and put Weeratunga in contact with the Russian authorities to sort the matter out. The Russians had reversed the process by preparing paperwork to convey the impression that no such examination or detention of SL aircraft had taken place, and the AN-32s had been sent back to Kiev.

In 2002, the then Minister of Plantation Industries Lakshman Kiriella had turned up in Ukraine with a delegation from the tea trade. One of the purposes of his visit had been to get the Ukrainian special customs levy on tea packages of less than three kilos removed. Kiriella had failed in the attempt but later in 2004 when Mahinda Rajapaksa had been Prime Minister, the Deputy Minister of trade in Ukraine had visited Sri Lanka and at a request made by MR on Weeratunga’s intervention, the levy had been abolished. In 2003, the Interior Minister in the UNP government John Amaratunga had visited Ukraine and had been taken to UKRINMASH by Udayanga Weeratunga. At this meeting the then Director of UKRINMASH had suggested to Minister Amaratunga that Sri Lanka should have a satellite based maritime surveillance system covering Sri Lanka’s territorial waters so as to be able to cut off the LTTE’s arms supplies.

On Kiriella’s and Amaratunga’s visits, Weeratunga had assembled other members of the Sri Lankan community living in Ukraine and accorded the delegations a dinner at his restaurant in Kiev. Back in 2006 when reports first started appearing about the MiG deal, Uadaynga Weeratunga was only a peripheral character in the controversy. At that time, the entire focus was on the issue of the price difference in the MiG-27s bought in 2000 and 2006 and the question of the money having been paid to Bellimissia Holdings instead of direct to UKRINMASH. Today however the main issues that were highlighted in the original newspaper reports back in 2006 have been pushed into the background and Udayanga Weeratunga and his involvement in the MiG deal has become the main focus of the ongoing FCID investigation.

Tomorrow: Why the FCID now focuses on Udayanga Weeratunga