Court verdict on Manulife upsets Canadians

Court verdict on Manulife upsets Canadians

Rendi A. Witular, The Jakarta Post, Jakarta

The Central Jakarta Commercial Court declared on Thursday
insurance firm PT Asuransi Jiwa Manulife Indonesia (AJMI)
bankrupt in a hugely controversial decision which some say would
further deteriorate investors confidence in the country.

AJMI is the local unit of Canadian insurance company Manulife
Financial Corp., which has been in a legal battle over the past
two years with its former local partner, the Dharmala Group, not
only in Indonesia but also in Singapore and Hong Kong.

Dharmala was Indonesia's leading business conglomerate,
controlled by the Gondokusumo family, prior to the 1997 financial
crisis.

Manulife's chief legal counsel for Asia, Mitch New, said in a
statement that the court's decision was "upsetting" and would
deter investment in Indonesia.

"A decision that's obviously been bought and paid for by the
Gondokusumo family. We will bring this decision to everyone's
attention, in the Indonesian government, World Bank, and the
IMF," New was quoted by Bloomberg as saying.

Meanwhile, in an internal memo obtained by The Jakarta Post,
AJMI president Philip Hampden-Smith said the management had
decided to temporarily shut down its offices in Indonesia,
starting Thursday afternoon. He added the company would also
appeal to the Supreme Court.

Canadian Ambassador to Indonesia Ferry de Kerckhove said he
was "deeply disappointed," and was "concerned about the effect
this decision will have on the reputation of Indonesia as a home
for the foreign investment that Indonesia so dearly needs to
rebuild its economy."

"This is a matter which has received the attention of the
highest levels of our governments, including the personal
involvement of the Canadian Prime Minister.

"It will continue to be a pivotal part of our relations with
the government of Indonesia. We hope that this decision will not
have a negative affect on that relationship," he told the Post in
response to the court ruling.

Canada is part of the Consultative Group on Indonesia (CGI),
Indonesia's major creditors consortium.

The bankruptcy ruling was made after a receiver of the now
defunct PT Dharmala Sakti Sejahtera (DSS), the one-time partner
of Manulife in AJMI, filed a bankruptcy petition on May 14 on the
grounds that AJMI had refused to pay Rp 22.4 billion in dividends
in 1999 to DSS.

The court, presided over by Judge Hasan Basri, said that AJMI
should have paid the dividend since it had booked a profit
amounting to Rp 183 billion that year.

But Manulife has said there was no dividend declared for the
period in question.

The ruling means that the company's assets will be sold off by
a court-appointed liquidator.

Manulife currently has a 71 percent stake in AJMI. The World
Bank's financial arm International Finance Corp., and local firm
PT Tirta Dana Nugraha own a nine percent and 20 percent stake
respectively.

Established in 1985, AJMI is the fourth-largest life insurance
company in the country with total assets worth Rp 3.1 trillion.

DSS previously owned a 40 percent stake in the company. But
after the heavily indebted company was declared bankrupt in May
2000, Manulife bought the shares for Rp 170 billion at a
government auction in October.

The transaction, however, was immediately contested by Roman
Gold Assets, which claimed to have previously bought the shares
for Rp 354.4 billion in Singapore from Western Samoa-based
Highmead. The latter had reportedly acquired power of attorney
over the shares from Hong Kong's Harvest Hero International.

Since then, Manulife had been facing a series of lawsuits in
Jakarta, which some said were being orchestrated by the
Gondokusumo family to win back the AJMI stake.

In a related development, however, a Singapore High Court
issued an injunction against Suyanto Gondokusumo of the Dharmala
Group, his wife Jacqueline and mother Tinawati, preventing them
from disposing of assets in Singapore. They also have to provide
the court with a list of assets in Singapore. The ruling was
issued after Manulife filed legal action on May 17.

Bloomberg said that the suit also named Suyanto's sister-in-
law Lanny Angkosubroto, Roman Gold Assets and its director,
Surabaya businessman Haryono Winarta, and Jakarta-based lawyer
Lucas for damages for conspiring to defraud Manulife.