BUN abused Rp 5 trillion of liquidity support

BUN abused Rp 5 trillion of liquidity support

JAKARTA (JP): Tycoon Kaharudin Ongko and banker Leonard
Tanubrata of the now defunct Bank Umum Nasional misappropriated
more than Rp 5 trillion (US$476 million) of Bank Indonesia
liquidity support funds to finance affiliated businesses,
prosecutors said on Monday.

Attorney General's Office spokesman Muljohardjo revealed that
investigators found that the two suspects had violated banking
rules by continuing to avail of the liquidity funds despite the
bank's precarious financial situation.

"Ongko, as the vice chairman of the bank's board of
commissioners, knew about the condition in which the bank found
itself but continued to draw on liquidity support funds to
finance his own companies which were also facing financial
problems at the time.

"Meanwhile, the investigators have discovered that Tanubrata,
as BUN president director, approved the loans to companies
affiliated with the Ongko group," he told journalists.

The Ongko group owns several businesses, including life
assurance, banking and finance companies, as well as a ceramic
tile maker.

The convicted magnate Mohamad "Bob" Hasan, who was a
commissioner of the now defunct bank, is also a suspect in the
case.

The liquidity support funds, known as BLBI, were supposed to
only be used to reimburse depositors after massive runs hit the
banking industry during the bleakest period of the economic
crisis in 1997.

Some Rp 144.5 trillion (US$14.45 billion) of the liquidity
support funds were channeled to 48 banks between 1997 and 1999.

According to an investigative audit conducted by the Supreme
Audit Agency (BPK), more than Rp 138 trillion, or 95 percent of
the funds, were either misused or were extended in violation of
banking regulations.

Another prosecutor revealed that BUN received some Rp 12.067
trillion in liquidity support funds from the central bank between
Dec. 22, 1997 and June 15, 1998.

The suspects allegedly misappropriated more than Rp 5
trillion.

"We are still calculating the total losses suffered by the
state in this case," the prosecutor, who requested anonymity,
told journalists at his office.

He said that Ongko and Tanubrata had yet to be detained and
that this was part of a strategy being pursued by the
prosecutors.

"We know what we're doing. Just wait and see ... to detain a
suspect is easy but we have to consider everything involved in
the investigation," he said.

The source added that the irregularities were only possible
due to the lax supervision conducted by the central bank which at
the time applied an open door policy in channeling the emergency
loans to commercial banks.

"Each bank received different treatment. The BI directors
seemed to overlook the irregularities and allowed the banks to
take the loans without issuing them with warnings, even if they
failed to meet the conditions imposed, including a healthy
balance sheet.

"Moreover, some of the (ailing) banks even asked the (BI)
directors for such facilities," he added.(bby)