Bapepam shifts probe from Lippo's owners to management

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.