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)