Tuesday, March 10, 2009

Fall of Lalith Kothalawala

Overnight Lalith Kothalawala one of the most successful businessmen in Sri Lanka has become a villain. Most leftists loathed him anyway all this time because of their anti big business feelings but now everyone is putting kotalawala in the same boat as Sakwithi(saw indi saying something about a foot in twitter). Am I missing something here people, because I think it is not fair to call this man a thief.

He did a business, took money from people, promised them fortunes and got busted. What is the crime here? Doing a business? Promising over 30% interest is naive for a businessmen of his caliber, but does it qualify as cheating? Please pardon my ignorance and let me know if I have missed something here folks.


Anonymous said...

Lalith Kotalawala was a bigger crook than Sakwithi.Golden Key scandal is the biggest white collar crime in Sri Lankan history.He helped him self millions of rupees as his allowance from the company.His wife claimemd retirement gratuity for 25 years after having worked only for only eighteen years.Kotalawala robbed himself and allowed others too to rob.He will go in the history as one of the biggest crooks Sri Lanka has ever produced!I have commented about the issue in by blog
Sri Lankan Doctors Comments

Sri Lankan Doctor

Liberal Lanka said...

@Sri Lankan Doctor

I read your blog. I think most of your arguments are unethical marketing sort of things. Anyway what is the exact fraud he has committed in the Golden Key case? They pay themselves extraordinary amounts that is true. But that is the case in most companies. I think these big shots paying themselves huge amounts should be a problem of the shareholders.

Veena said...

I knew this day would come for Lalith Kotalawala. This is what happens when you over diversify your business, venturing into all the avenues your hands can grab on to (Ceylinco Snacks? I mean come on!!!)

Plus, there was no value addition in the group itself. He simply took money from one business and invested in the other one. As far as I know, only Ceylinco Life had cash reserves, which was used to pay thumping amount of bonuses for the pain in the ass insurance agents.

Why can't these so called "Business Tycoons" just follow the simple rules of managing a business and stop being greedy.

who else but me said...

nothing wrong with promising a 30% interest as long as you can deliver it. your customers hold you to that. my mom has an FD with F&G and interests of around three months is due. don't commit to things you can't deliver. it's a simple rule in business.

Sam said...

Business come with risk. If anyone believes they can earn 30% or even 1% without any risk, they are utter idiots or they are criminals. If someone invests with Kathalawala, they also take the same risk like him. Once the business failed, you can’t go on jailing people for it. We are quite eager destroy our business ability in this country. How many times Hyundai and other top Korean leaders failed or accused of so many things. when that happen, not only government, even people backed them up, I believe that because Koreans by nature, smarter than us. And that is why they are developed countries, while we rally wealthy people to be bankrupt.

Anonymous said...

hello Sam

crime here is not paying themselves hefty amounts(that is shareholders problem), or paying 30% interest. if somebody is willing to take the risk, they can bet their money on that.

but the real crime is taking deposits as a non registered finance company, and failing to pay his clients what he promised them. you cannot a legal business like Hyundai to a illegal business like GK.

maf said...

Hi LL,

There are 2 or possibly 3 actions which Kotalalela et al committed which could be considered criminal:
1.he ran a finance company promising ludicrous rates of return without proper approval and took in depositors
2.he mis-managed said deposits for his own and his 500-odd companies benefits with little to know corporate governance
3. he seemed to run a ponzi scheme (please see http://en.wikipedia.org/wiki/Ponzi_scheme) in that new deposits funded older redemptions.

The anger and frustration of those who have been taken for a ride also constitutes to his "con"-man image especially as he had a very high profile image of himself and the charity he allegedly gave.

TheWhacksteR said...

well his business model was a basic scam. aka a ponzi scheme. where he would 'roll money' and pay off old investors with the investments of new ppl.

The problem is not only Kotalawala. He did this because the central bank and the govt authorities allowed him to. The people didnt care as long as they got the returns, and now their screaming for blood cos their money is lost. I agree with Sam on risk and return. Investors should have been more prudent.

The whole system is to be blamed. and a LARGE proportion of it should go to our number one financial regulator the central bank. Especially considering that this was all undeclared funds that were being laundered in the F&G group.

i wrote abt it here (http://going-global-global.blogspot.com/2009/03/local-ponzi-rising.html) if you'll excuse me putting links on your comments stream :)

interesting times indeed.

Anonymous said...

Has anyone got any idea abt Central Finnance. I have invested heavily on it. Can that also crumble. It gives 18%

Anonymous said...

Lalith Kothalawala seeks Rs. one billion damage from Central Bank Chief Ajith Niward Cabral(Lanka-e-News, June 26, 2008, 6.40 PM)

Anyone noted that there was a clash between the Central Bank Chief & Mr kothalawala? I wonder there is a connection between the fall of kothalawala & this clash.

Anonymous said...

I think you are correct. I expand your points little bit.
1. he ran a finance company (depository institution)without proper approval. He set up a business module which is GK to take deposits to by pass this law. So, the Credit Card Company took deposit as "security deposits" and issued a promissory note. Advantage for him is no supervision, no auditing, no regulation. He can do whatever he wants to do for those cash deposits. If it is a registered finance company, there are restrictions for the risky investments.

2.he mis-managed said deposits for his own and his 500-odd companies benefits with little to know corporate governance
Mis-management is not a crime. He spent those money for his charities, foreign assets.

3. he seemed to run a ponzi scheme (please see http://en.wikipedia.org/wiki/Ponzi_scheme) in that new deposits funded older redemptions.

Or this is similar to pyramid scheme. In USA, Ponzi and Pyramid schemes are illegal

4. Possible wire fraud. I am not a legal expert but he used his Ceylinco Fast Cash to collect the money overseas and pay in rupee without sending the collected foreign money toSL. In order to pay in rupee get the cash, he used depositor’s money.

Anonymous said...

Central Finance is a registered depository taking institute. But I think it is a better finance company. This is regulated by CBSL.

You can also deposit money for 20% at Sampath or BOC for 60 months

Anonymous said...

Central fiance is a well managed company backed with companies like central industries.
The problem with Ceylinco was as somebody posted here there was no value addition to the business. They were just rolling the money. The land business too they just buy any land at an unrealistically high price just to increase their asset base which ultimately turned out to be toxic assets. Salaries and perks are paid without any consideration and not keeping with the profit generated by the business.
Above all Lalith Kothalawela went on a ego boosting trip at the expense of the depositors.

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