Bapepam shifts probe from Lippo's owners to management
Dadan Wijaksana, The Jakarta Post, Jakarta
The Capital Market Supervisory Agency (Bapepam) indicated on Monday it might impose sanctions on Bank Lippo's management -- rather than the bank's commissioners and former owners -- for having issued two different financial reports.
"A financial report comes within the responsibility of the management. If they let themselves be influenced (by any party), then it's their fault," Bapepam Chairman Herwidayatmo said.
He was referring to the bank's issuance of dual reports late last year, which sparked allegations that the management was acting under the influence of the bank's former owners, if not actually deliberately representing them, as part of a maneuver by the former owner to regain control of the publicly-listed bank.
Herwidayatmo's statement dashed earlier hopes that all the parties involved -- management, former owners and commissioners -- would face punishment.
The capital market watchdog will likely now focus its probe more on the bank's management rather than the commissioners or the former owners.
To make matters worse, the outcome of the investigation conducted by the agency will determine what action will be taken by the other relevant financial authorities against the bank. If Bapepam decides to let parties other than Lippo's management walk free, it is difficult to imagine that the other institutions involved will not do likewise.
The Ministry of Finance, the Indonesian Bank Restructuring Agency (IBRA), Bank Indonesia and the Attorney's General Office (AGO) are currently also conducting investigations into the Lippo scandal.
All, however, are awaiting the results of the Bapepam investigation, which is expected to be completed on March 17.
The Lippo saga started in November when the bank reported a third quarter net profit of Rp 99 billion and a 24.8 percent capital adequacy ratio (CAR) as of September. But another report, issued only a month later, showed that the bank had posted a loss of Rp 1.27 trillion and its CAR had declined to an alarming level of around 4 percent over the same period.
Lippo initially claimed that the first report had been audited, but the Jakarta Stock Exchange later found out that this was not true, meaning that the investing public had been mislead.
Critics said the bank's argument that the losses and capital deterioration had resulted from the fact that it had to make huge provisions to cover the declining value of foreclosed assets did not make sense.
As the foreclosed assets referred mostly to property assets -- a sector that was steadily improving -- there was no reason for a decline in prices to have occurred. Thus, the critics say the bank's claims were baseless.
Analysts have even suggested that the entire debacle was part of a systematic attempt by the management to clear the way for the bank's former owners, the Riady family, to buy back Lippo shares at a low price from the government, which now controls a 59 percent stake in the bank after the late 1990s bailout.