Bapepam, BI criticized over Bank Lippo case

Bapepam, BI criticized over Bank Lippo case

The Jakarta Post, Jakarta

The Capital Market Supervisory Agency (Bapepam) and Bank
Indonesia received strong criticism for failing to adequately
punish the board of directors and commissioners of the publicly
listed Bank Lippo in an alleged financial scam.

The Indonesian Corruption Watch (ICW) said on Tuesday that
there was a strong indication now that Bapepam and Bank Indonesia
were trying to protect the perpetrators from being charged with
heavier punishment for their crime.

ICW said it was considering a law suit against Bapepam
Chairman Herwidayatmo and Bank Indonesia senior deputy governor
Anwar Nasution at the State Administrative Court.

"We'll study the possibility of taking legal action because we
think the chairman of Bapepam and the (senior) deputy governor of
BI have not carried out their authority honestly ... It's an
abuse of power," said ICW coordinator Teten Masduki.

Bapepam announced on Monday that it would hand out a fine of
Rp 2.5 billion (US$280,000) to the board of directors of Bank
Lippo for misleading the public in claiming an unaudited third
quarter financial report as audited.

The auditor was given a Rp 3.5 million fine.

The announcement was made in a joint press conference with
Bank Indonesia, the finance ministry, and the Indonesian Bank
Restructuring Agency (IBRA).

In the press conference, Anwar said that Bank Indonesia could
not yet find any irregularities in the Bank Lippo case.

There has been strong pressure against Bank Indonesia to bar
the current board of directors and commissioners from owning a
bank here because of their crime in the alleged scam.

ICW criticized the financial authorities for reducing the Bank
Lippo case to a mere financial report case. The watchdog said
that the case should have been seen as a serious corruption
scandal which could cause the state serious financial losses.

ICW said that the administrative penalty from Bapepam was too
lenient, citing Law No. 7/1992 on banking which stipulated that
the penalty for such a crime was at least five years in jail with
a maximum fine of up to Rp 200 billion. While according to the
1995 capital market law, the sanction is a jail term of up to 10
years and an administrative penalty of Rp 15 billion.

Bank Lippo in November issued a third quarter financial report
in the mass media describing the bank as healthy. It claimed the
report had been audited, but the Jakarta Stock Exchange (JSX)
found out later that it had not been audited.

The bank also submitted another third quarter financial report
to the JSX, but this time the report said the bank was not
healthy and suffering financial losses.

The press later unveiled the case, and many analysts said that
it was part of a deliberate attempt by the bank's former owner,
the Riady family, to regain control of the bank from the
government at a huge discount. Such an action would cause the
state to suffer dearly as the government had to spend a lot of
money to bailout the bank in the late 1990s. IBRA now owns a 59
percent stake in the bank.

There has also been allegations of share manipulation by
brokerages linked to the bank's former owner, who have also been
alleged of quietly repurchasing the bank's shares without
reporting it to the authority as required by the law.

Meanwhile, State Minister for National Development Planning
Kwik Kian Gie also criticized Bapepam for giving light sanctions
to the Bank Lippo management and for reducing the seriousness of
the scandal.

"This is a serious (scandal). But Bapepam chairman and IBRA
chairman are playing it down," he said.