AGO to investigate alleged Bank Lippo manipulation

Dadan Wijaksana, The Jakarta Post, Jakarta

The Attorney General's Office said it had set up a special team to investigate alleged manipulation by Bank Lippo's management to allow the former owner to regain control of the bank at a huge discount, which would come at the expense of further losses to the state.

Edwin Situmorang, the Attorney General's Office director for special investigations, told reporters on Tuesday that the team was established in a bid to respond to months of public outcry over the Lippo case.

"Since all the talks surrounding Lippo erupted a few months ago, we've decided to set up a special intelligence team to look into this.

"We've been working for around 10 days now," Edwin said during a meeting hosted by his office with a number of prominent analysts and anticorruption figures, who had come to report alleged wrongdoings committed by the management and board of commissioners of Lippo.

Citing lack of data, Edwin added that the investigation would focus for the moment on corruption practices, but could later be widened if new findings surface.

Therefore, he added, the team welcomed inputs from any party to facilitate the investigation, such as those coming from the group of experts his office received on Tuesday.

"This is in line with what we have been doing for the past 10 days and will definitely add to the accuracy of our data," said Edwin, who also heads the special team.

The group of experts who visited the Attorney General's Office a number of well-known economists and anticorruption crusaders, representing both individuals and institutions. Among others, they were; legal activists Bambang Wijoyanto and Teten Masduki; economists Faisal Basri, Dradjat Wibowo; and financial analyst Lin Che Wei.

Aside from conveying their concerns over further losses if Lippo's wrongdoings continue, their intention was also to counter an earlier lawsuit filed by one of Lippo's board of directors against Che Wei for defamation.

Only recently, Rudi T. Bachrie filed a suit against Che Wei with the police after the latter wrote two articles in the local print media highlighting maneuvers by the management aimed at intentionally destroying the bank's capital and thus its shares.

In the meeting, Che Wei defended his articles by saying that he could prove that there was a systematic effort by the Lippo management to clear the way for the bank's former owner, the Riady family, to buy back the bank's shares at low prices.

Che Wei said there were at least three strong indications that could back his argument.

The dual financial reports, indications of manipulation in the stock market that destroyed the bank's shares, and a sudden and huge rise in provision, which led up to a drop in the bank's capital.

Late last year, the bank issued two financial reports.

While in November the reports showed a net profit of Rp 99 billion and a 24.8 percent capital adequacy ratio (CAR), as of December, another report -- issued only a month later -- said that the bank posted Rp 1.27 trillion in losses and saw its CAR decline to around 4 percent during the same period.

The management had claimed the bank's CAR was down because it had to allocate around Rp 1 trillion in provision to cover the deteriorating value in its foreclosed assets -- some Rp 2.7 trillion in mainly property assets it seized from its defaulted debtors.

But Che Wei, backed up by other economists, has said that it was only a maneuver aimed at justifying the bank's long-standing plans for a rights issue, which if realized, would dilute the government's shares in the bank and worse still, would pave the way for the comeback of the former owner.

All these have led to a rapid decline in the bank's shares. Since the management issued its December version of its reports, shares of Lippo have declined by around 10 percent. Throughout 2002, the shares had even declined by more than 40 percent.

Under the current price, the government's 59 percent stake in the bank would only be worth around Rp 600 billion, compared to the around Rp 7.2 trillion in state funds the government had to inject when it recapitalized the bank in 1999. Lippo's shares are currently traded around Rp 250 per share.