Gafoor Building, Fort - US $ 1.6 million, 18 acres at Weligama - US $ 300,000
and Bandaranaike Walauwwa - US $ 3 million
Two British nationals in collaboration with a leading law firm and other locals are running a real estate firm in the country selling Sri Lankan lands at inflated prices to foreign buyers, making huge profits completely tax free, thereby cheating the government of revenue while also breaking immigration laws.
Circumventing and violating Sri Lankan laws both with regard to land and resident permits, this consortium is consciously and deliberately evading government taxes. They are doing so having learnt that bribery and corruption in Sri Lanka opens doors to big bucks with an almost near certainty that the long arm of the law will rarely catch a cunning expat.
British born Giles Scott and Ivan Robinson own and manage a real estate company called LankaRealEstate. Our investigation found that LankaRealEstate does not pay any taxes to the Sri Lankan government despite having huge taxable income in the last two years. A textbook study for officials of the Inland Revenue Department.
Lankarealestate.com (Private) Limited is a private limited liability company incorporated in Sri Lanka on February 26, 2003 bearing Registration Number: N (PVS) 33090 under the Companies Act of 1982 with an authorised capital of Rs. 20,000,000 divided into 2,000,000 shares of Rs. 10 each.
The registered office of the company as per Companies Form 36 dated March 19, 2003 is situated at No. 40 Galle Face Court 2, Colombo 3. The Secretaries to the Company are Secratarius (Private) Limited of 40 Galle Face Court 2, Colombo 3.
The subscribers to the Memorandum and Articles of Association are, Sriyantha Gilbert Senaratne - Attorney-at-Law, 01 (One) Share, 40 Galle Face Court 2, Colombo 3, Ms. Lilamani Seneviratne, Company Secretary, 01 (One) Share, also at 40, Galle Face Court 2, Colombo 3.
The Directors of the Company as per Companies Form 48 filed on April 9, 2003 are, Sriyantha Gilbert Senaratne, 40 Galle Face Court 2, Colombo 3. Ms. Lilamani Seneviratne, 40 Galle Face Court 2, Colombo 3, and Giles Lucian Scott, The Dome, Galle Face Court 2, Colombo 3 appointed with effect from April 8, 2003.
Despite these facts, Giles Scott claims to have no official status within LankaRealEstate claiming he only "helps out as a friend." A claim, we have proof is a complete falsehood.
Scott in fact is still very much in control of the company after being appointed as director in April 2003, for all intents and purposes. The advertisements published in the Serendib in-flight magazine on Sri Lankan Airlines still carry his personal telephone number for enquiries.
LankaRealEstate also advertises on their website and in their newsletters sent to clients that they donate a percentage of the commissions earned on land sales to the local community. In their website, they state, "We also donate a percentage of profits to community projects within the vicinity of property that is sold by us."
However, The Sunday Leader could not find proof of any such donations in any of the local communities in which LankaRealEstate has sold properties.
Ivan Robinson works out of the Galle office for LankaRealEstate and has been in Sri Lanka for almost a year, acting as its agent, officially designated as executive director. He is here on a holiday visa, and is thus working illegally.
In order to secure resident visas when foreigners buy property in Sri Lanka and wish to reside on it, LankaRealEstate on its web page advises potential clients that, "it is advisable to look at the options of setting up a BOI company with which to buy your property." Under Section 16 of the BOI Act, approval for foreign investors would ensure a one year resident visa.
Clients are directed for legal advice to Sriyantha Senaratne, a director of LankaRealEstate as well as senior partner of the well renowned law firm, Simon & Associates.
In order to own land and houses in Sri Lanka foreigners are compelled by law to pay a 100% transfer tax to the government.
To circumvent this, Senaratne has discovered a loop-hole in the law. The foreign buyer is advised by Senaratne to transfer the full monies for the purchase, but on paper will legally hold only 24% shares of a "BOI approved company" after having nominated "locals" who would be on a "company board" holding the balance 76% shares of the property.
We found that in most sales enacted by LankaRealEstate the 76% shares are held in trust by Secretarius Holdings Pvt Ltd, a sister company of Simon & Associates. Secretarius Holdings is also Company Secretary to LankaRealEstate.
The 76% shares held by Secretarius, are by way of blank, share transfer forms which can be transferred at a future date to the foreign shareholder if, a company lawyer confided, "the current law on stamp duty is amended." A deed of trust is also drawn up by the law firm as the local company holds the majority shares for the foreign owner, in trust. Additionally, is a letter from the major shareholders in Sri Lanka that they are holding the property for the foreign owner as nominees while they lease the land to the foreigner for 99 years. Thus the expatriate owner has dual protection.
A clever but cunning method of circumventing the law while ensuring the government makes no extra cash. Asked if this method could be construed to be illegal as well as being unethical, Sriyantha Senaratne said, "There are no laws in Sri Lanka which state that circumventing laws is illegal. As for being unethical I don't think so - it's merely a case of structuring a business that will avoid certain taxes, which is common in many investment ventures."
Senaratne who confirmed that he functions also as a director for LankaRealEstate when quizzed on the company not having paid any government taxes to date replied "I suppose their accountants will have to go into it and ensure that taxes are indeed paid up." Why this has not been done since LankaRealEstate has been in operation since 2003, Senaratne could not say.
The issue in a nutshell is this. Through an assortment of companies with localised names like Cinnamon Hill Holdings (Private) Limited and Nagenahira Abiyavurthi (Private) Limited (literally translated meaning Eastern Development) Giles Scott and Ivan Robinson have been exploiting unsuspecting owners of property on the south and east coast by buying from them cheap through what seemingly is a local group of buyers.
They in turn sell the property to foreigners through LankaRealEstate, a brokerage company that is foreign managed - thereby appearing to the buyers to be 'best friends' who get the best deal for the client - when in fact the buyer is being fleeced as well.
Lankarealestate.com (Private) Limited is a brokerage company that sells land to foreigners by advertising properties on the world wide web as www.lankarealestate.com
They claim that they are selling lands that belong to locals and that they charge 5% for their services. Since they are foreigners familiar with Sri Lanka they are offering a service to other foreigners who feel comfortable with this arrangement.
If LankaRealEstate is demanding a 5% commission from both the buyer and the seller they should have declared their income from all sales. Which as we now have proof, they have not done.
These companies (Cinnamon Holdings and Nagenahira Abiyavurthi) have Sri Lankan names so that the buyers think they are dealing with local sellers. When the transaction is complete the foreign buyers meet only Sriyantha Senaratne and Viren Perera who the buyers see as Sri Lankans owning the properties that they are buying. Viren Perera is a director of Nagenahira Abiyavurthi, Sriyantha Senaratne while an attorney-at-law and senior partner of Simon & Associates is also a director of LankaRealEstate.
This same group first buys land from locals willing to sell through various companies. They then advertise these properties on the internet at an inflated price. This way they make a killing while the original owner gets but a fraction of the selling price.
A case in point is the sale of 604 perches at Weligama, Galle. Mark Pare and Heather Potter came to Sri Lanka to buy real estate on the beach. They were shown a block of land next to the Weligama Bay Beach Hotel. The lankarealestate.com site offers this land at Rs. 120,000 per perch.
Mark Pare and Heather Potter through their company Pandana (Private) Limited gave an advance of Rs. 5 million to LankaRealEstate to buy this property. Then the trouble began. Another broker approached these foreigners and offered the same land for 90,000 a perch with the 5% commission to the broker being paid by the seller.
Lankarealestate.com had asked that the buyer pay the 5% commission as well. The price was also inflated by Rs. 20,000 per perch. The foreign buyers confronted Ivan Robinson with the scam, who was forced to seek Scott's intervention at damage control.
When we spoke with Mark Pare he admitted there had been a problem but that it had now been sorted out. Giles Scott also admitted that a problem had arisen one which seriously "implicated my integrity as well as that of my associate," but, which he said, "had all been sorted out."
Mark Pare said a 71/2% commission had been paid by him in the transaction. Two brokers had been involved, one, Scott and the other a local whom Pare and Potter never met.
Another case in point involves the purchase of land at Pottuvil. In November 2003, this consortium, LankaRealEstate, Nagenahira and Cinnamon Hills purchased 83 acres in Pottuvil Point from some Sri Lankan Tamils who were living abroad. This is perhaps one of the most valuable beach properties in Sri Lanka with a wave that is known worldwide by discerning surfers. The land was purchased in the name of Nagenahira Abiyavurthi (Private) Limited. Most of the purchase price was paid overseas and a small sum paid locally to keep stamp fees down.
However, when Viren Perera and Giles Scott, the new owners of this land went to take over the property a few days after Velupillai Pirapaharan's birthday that November, they found that the LTTE had settled 138 Tamil families on their land.
The new owners panicked and approached first the Karuna faction, which released a press statement that they do not as policy confiscate land belonging to foreigners. Karuna agreed to return it to them but with the LTTE taking on Karuna militarily at the same time this undertaking had little effect.
They then made a pilgrimage to Kilinochchi to plead with the LTTE. This consortium includes Thilan Wijesinghe and Nick Clayton. The LTTE wanted a settlement and offered the consortium the same sum declared as the purchase price on local documentation which was a fraction of what had been paid abroad.
When the consortium realised the game was up they began negotiations with the LTTE. The LTTE agreed to give them the beachfront in exchange for the rest of the land that the settlers would remain on. One of the conditions was that the consortium build houses for the settlers as well as a temple. If these conditions were met the LTTE agreed to give the consortium their blessing. The consortium agreed to this deal since even powerful political support from certain key ministers in the then UNP government had failed them.
On December 26, 2004 the tsunami destroyed Pottuvil Point and with it all the huts of the 130 odd families who were squatting on the land owned by the consortium.
Giles Scott, Viren Perera and yet another organisation they own called the East Pole Foundation immediately went into action, launching a joint appeal on a web page called 'LankaRealAid' asking for donations towards the tsunami relief effort. The East Pole Foundation was relying for its credibility on Ulpotha which it claimed it had created.
Such donations they stated must be made to Scott's personal bank account in the UK to: HSBC, Sloane Square Branch, London or to the East Pole Foundation account in Hong Kong. On their internet site, Scott and Viren Perera maintain that LankaRealAid has been established as an informal entity by them, to act as a direct and indirect channel for immediate aid to areas that have been particularly badly affected by the tsunami.
Interestingly, both Scott and Perera when quizzed by The Sunday Leader asserted that all their tsunami relief efforts were concentrated in Arugam Bay, Panama and Pottuvil North. Viren Perera denied their joint appeal for funds in the wake of the tsunami had been to overcome an agreement the duo had made with the LTTE. What he did say was that they had of their own accord and goodwill decided to build homes for the over 130 families who had been squatting on their newly purchased property.
A rather dubious statement given that Perera and Scott were even preparing to petition courts to try and evict the Tamil families who had squatted on their property.
What plans Perera and Scott now have for this land is not known. According to Perera, "There is no rush now. It can remain as it is even for the next two years."
With the development of tourism on the cards Perera, Scott, Thilan Wijesinghe and Nick Clayton will have no difficulty convincing investors that 83 acres of prime land with beach frontage at Pottuvil Point is a goldmine. This should no doubt prove easy with pliable lawyers and offshore companies.
And it is in this backdrop there is now a petition signed by 50 families in Ulpotha protesting the recent assault of Saman Senanayake, the scion of the original owners of Ulpotha. The petition demands that village and hereditary rights be preserved and official controls brought in. The villagers claim that Viren Perera and Giles Scott have corrupted the entire region with a party lifestyle and designer drugs. Senanayake claims he was beaten up allegedly by employees of Perera and Scott in his father's property at Ulpotha after he was seen showing and explaining an earlier edition of The Sunday Leader that carried a story on Perera and Scott to local villagers.
Giles Scott and Viren Perera jointly control Ulpotha (Private) Limited that owns the tourist facility, Ulpotha - a lifestyle resort - established by the Cultural Survival Trust in 1994 situated at the base of the Galgiriwiya mountain range. The shareholders of the company are Viren Perera (1) share, Carman Perera (1) share and the rest of the shares belong to The East Pole Foundation Limited of Common Chambers Road Town, British Virgin Islands with Giles Scott as its representative on the board. Comprising of 12 acres, Ulpotha, literally translates as water source, referring to the spring which feeds the tank bordering the property.
At a cost of US$ 150 a day the Ulpotha experience of "living the tradition" does not come cheap. Catering exclusively to foreigners, Ulpotha has a unique setting created originally by the Cultural Survival Trust with Ashley de Vos designing the concept behind the visitor accommodation and Channa Daswatte designing the walauwa.
But even here, an issue has arisen with a Cultural Survival Trustee speaking on condition of anonymity to The Sunday Leader, claiming that both Giles Scott and Viren Perera have played dirty on the original concept and the team that created it. But that is another story.
A singular aspect emerges crystal clear. And that is Scott and Robinson as real estate "agents" do not have any professional ethics. They are not registered locally with anybody and are responsible to nobody but themselves. As a result, they have no code of conduct and make up the rules as they go along amassing wealth that passes freely through a series of bank accounts with no accountability. They are also defrauding the government of legitimate revenue. They are also selling land all over Sri Lanka deciding on the future of some of the countries most valuable natural resources. And most importantly they are not short of cash.
Land grabbing and the so-called claim to cultural preservation that follows it are powerful tools in seducing gullible foreigners who depend on the internet for their information in sponsoring and patronising such ventures. The original owners, the villager, loses all round while remaining the cultural animator for all visitors.
| Giles Scott says... Giles Scott claims, "I have nothing to do with LankaRealEstate. Ivan Robinson is executive director of the company. I don't think I have any shareholdings in the company. I just help out. I only handle their web page for them." Scott went onto to say that he and Ivan Robinson "are friends" and Robinson "pays him a commission" now and then, when Scott "helps" in effecting the sale of a land advertised by LankaRealEstate. Asked if he pays any taxes to the Sri Lanka government given that he is earning off a business venture in the country, Scott admitted he does not. When confronted with evidence that contrary to his claim, Scott was indeed a director of LankaRealEstate as per Companies Form 48 filed on April 9, 2003 and in that context should be aware of the financial dealings of the company, Scott replied he had no control of the company finances until after March last year. According to Scott, his former business partner now turned rival, Ikram Odaya ran the company and managed the finances. Ikram Odaya when contacted said, "I ran it legitimately with all transactions being entered. I did not go into paying taxes. I ran it as a manager of the company and they took it over from there when I resigned." Ivan Robinson says. When we spoke with Ivan Robinson he was very reluctant to divulge what visa he holds. But when pressed, finally admitted, "Yes, I am here on a tourist visa." Questioned further, Robinson admitted that he is executive director of LankaRealEstate and while managing and controlling the real estate company earns a handsome remuneration for his services in the business. "Robinson must be deported" Controller, Immigration and Emigration Department, W. A. Nishankar, said, "If Ivan Robinson is indeed in the country on a tourist visa doing business or otherwise employed, then we have to deport him immediately." Some of the properties on sale brokered by Lanka Real Estate... Location Size Price 10 minutes from Weligama Bay 18 acres US$300,000 Gaffoor Building Colombo Fort 116.72 perches US$1,600,000 Bandaranaike Walauwwa Full valuation report with plans and floor layout available upon request.The property is situated in Kotahena within the administrative limits of Colombo Municipal Council. US$3,000,000 |
Courtesy: The Sunday Leader (Colombo) of 20 March 2005