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)