BLBI trials a cost of poor judiciary

BLBI trials a cost of poor judiciary

Berni K. Moestafa, The Jakarta Post, Jakarta

The billions of dollars in misused Bank Indonesia liquidity
support (BLBI) funds still missing despite the court trials of
abusive bankers, highlights the cost of a judiciary ranked among
the worst in the world.

Three former Bank Indonesia directors were sentenced last week
to between two to three years in prison for mischannelling Rp
18.37 trillion of BLBI funds. The court ordered one of the
convicted bankers to pay a fine of Rp 20 million, but none were
ordered to return any part of the abused loans.

The verdicts were the latest in a series of similar attempts
to recoup the Rp 138 trillion (US$ 15.5 billion) in BLBI funds
bankers misused between 1997 and 1999.

The liquidity support was issued to help banks cope with mass
runs against them during the height of the 1997-1998 financial
crisis.

Of the total BLBI funds, around Rp 29.92 trillion have gone to
trial under 17 separate cases, but the courts have ordered the
return of only Rp 2.82 trillion from the 14 cases tried so far.

"It goes against our sense of justice," said National Law
Commission secretary Frans Hendra Winarta on Sunday.

Corruption carries a maximum sentence of life in prison, but
prosecutors have refrained from demanding the full penalty,
except for those bankers who remain at large and were tried in
absentia.

Hendra saw no reason for the court to be lenient, considering
the amount of money bankers had siphoned and the consequent
devastating impact on the country's budget.

The government raised funds for the BLBI using bonds for which
it must now allocate trillions of rupiah every year to repay
principles and interest rates, toward which Rp 55 billion is
scheduled to be paid this fiscal year.

To finance the bonds, the government had to slash spending on
subsidies and development programs under an austerity drive that
has mostly hurt the poor.

"Why, then, have prosecutors demanded lenient sentences which
the judges have further reduced," asked Hendra. He suspected
bribery.

A report by the Indonesian Corruption Watch (ICW) last year
showed that corruption was endemic at Indonesian courts. It said
bribery ran through the entire rank of the judiciary, from the
police, prosecutors, courts and on up to the Supreme Court.

The report came within days after a visiting United Nations
legal expert counted Indonesia's judiciary among the worst he had
ever seen worldwide.

Besides the BLBI cases, the government is also pressing
bankers to repay around $10 billion of loans they admitted to
having abused during the financial crisis.

In a bid to avoid legal charges, the debtors agreed on debt
settlement schemes that allowed for a gradual repayment. Until
now, payment has been minimal and critics now demand the debtors
be brought to court.

With the poor showing in the BLBI cases, however, Hendra
warned that legal charges may look less frightening now to
recalcitrant debtors.

"A court settlement should always be the last resort ... but
once taken, judges must be able to hand down stern verdicts," he
said.