Banking body exposes alleged corruption

JAKARTA (JP): A newly established watchdog organization, the Center for Banking Crisis (CBC), released on Tuesday a 29-page report detailing alleged corrupt and collusive practices by central bank officials and bankers.

The report, titled the White Book, is the first of four volumes which CDC says it will publish to demonstrate the extent of central bank executives' involvement with bankers in the granting of liquidity credits which condoned legal lending limit violations.

"We possess solid proof, including documentation, to substantiate this report," said CDC president A. Deni Daruri at a media book launch.

Deni said his organization obtained some of the evidence from central bank officials who were disgusted by corrupt practices committed by some of their colleagues.

Amien Rais, chairman of the National Mandate Party (PAN) and a presidential aspirant, was present at the book launch. He said the report should prompt the government to act decisively in following up allegations disclosed in the book.

"Now that various forms of malfeasance have been detailed in this report, there is no longer any excuse for law enforcement agencies not to act because of lack of evidence.

"If this report still fails to force the government to act, I think there is a big conspiracy in the system to protect big debtors, bad bankers and corrupt (officials)," Amien said.

The report alleges that Bank Indonesia as the lender of last resort provided emergency liquidity support to several banks far in excess of the value of their collateral.

"Many bankers used liquidity support from the central bank to speculate on the rupiah, because the liquidity injection was made at the same time as Bank Indonesia was selling dollars to defend the rupiah," the report said.

CBC urged the government to prosecute Bank Indonesia officials who, it alleged, had behaved corruptly and violated banking laws.

The report singled out several former managing directors of the bank and several economic ministers as suspects who should be investigated and brought to court for their involvement in various banking scandals.

The report said most private national banks violated legal lending limits (connected lendings), and several banks tried to hide the breaches by setting up paper companies as loan recipients.

The report cited instances of malpractice by Bank Aspac (already closed), Bank Danamon (nationalized), Bank Dagang Nasional Indonesia (closed) and Bank International Indonesia (bailed out under the government-sponsored recapitalization program).

Among the malfeasance cases detailed in the report were the embezzlement of withholding income tax collected from negotiable certificates of deposits, excessive provision of bank guarantees, tax evasion and illegal derivative transactions.

The report listed the names of 77 paper companies used by a private national bank as recipients of credit, which actually went to companies owned or affiliated with the bank's controlling shareholder. (02)