Bank Jakarta defied warnings: Lawyers

Bank Jakarta defied warnings: Lawyers

JAKARTA (JP): Government lawyers revealed yesterday that the
liquidated Bank Jakarta, owned by President Soeharto's half
brother Probosutedjo, had been ailing over the past several years
and that it had ignored dozens of warning letters prior to its
closure in November.

In a hearing for the bank's lawsuit against the government at
the Jakarta State Administrative Court yesterday, lawyers
representing the Minister of Finance and Central Bank Governor
said the bank had been experiencing financial difficulties since
June 1994.

The lawyers said the difficulty was caused by bad debt the
bank had channeled, mostly to its own business groups.

One of the lawyers, A. Zen. Umar Purba, said the government
had repeatedly asked the bank's management to fix its ailment.

"The government called on the bank to increase its capital,
replace the management and invite new investors," Purba said.

But the calls went unanswered, Purba said, accusing the bank
of being uncooperative and lacking commitment to overcome its
problems.

"The basic reason for the liquidation was the bank's unhealthy
condition," Purba said, adding that the bank had also violated
the legal lending limit.

According to the government's lawyers, the violation of the
legal lending limit had reduced the bank's solvability. This had
resulted in liabilities which were greater than its assets.

Data provided by the government's lawyers showed that in 1997
the bank's liabilities were Rp 248 billion, greater than the
bank's assets which were running at Rp 243.7 billion.

Another set of data showed that up to August last year the
bank's bad debt reached Rp 151.9 billion while its losses were Rp
18.6 billion.

The government's lawyers added that there were at least 26
warning letters which had been sent to the bank, dated from April
1994 to September 1997. They said most of the warnings went
unheeded.

"It was clear that the bank's condition was not only
threatening its own business, but also threatened the national
banking system," government lawyer Luhut M.P. Pangaribuan told
the court.

Luhut denied the bank's earlier argument that 250 employees
had to lose their jobs because of the liquidation.

"Had the plaintive complied with the government's reprimands
and warnings, those employees would not have lost their jobs,"
Luhut said.

The defendant's lawyer Abdul Fickar Hadjar, however, said that
the bank thought they were just ordinary letters, not warnings.

The hearing was adjourned until Jan. 27 to hear the
plaintiff's reply.

Bank Jakarta was one of 16 insolvent banks closed by the
government in November following the announcement of the
financial bailout package from the International Monetary Fund.

But it soon filed a suit against the decision. It also
appealed to remain in operation while the case was being heard.

The Jakarta State Administrative Court issued a by-verdict
earlier this month allowing the bank to reopen while the case was
being heard, but the high court then issued a letter ordering it
to "disregard" the by-verdict.

Chief of the Jakarta State Administrative Court Lintong Oloan
Siahaan said last week the by-verdict remained valid. (10)