Fadel wins suit against IBRA, could set a bad presedent

Fadel wins suit against IBRA, could set a bad presedent

The Jakarta Post, Jakarta

The former owner of the now defunct Bank Intan, Fadel
Muhammad, won his suit against Bank Indonesia and the Indonesian
Bank Restructuring Agency (IBRA) over the closure of Bank Intan
in the wake of the late 1990s financial crisis.

Fadel's legal victory could set a bad precedent for IBRA's
restructuring efforts, including holding former bank owners
responsible for past banking crimes that contributed to the
economic crisis.

"The court verdict will give other bank owners the incentive
to file suit. This is a bad precedent," said banking law expert
Pradjoto.

The South Jakarta District Court ordered Bank Indonesia and
IBRA to pay Fadel some Rp 23.5 billion (US$2.64 million).

"The court declares that the defendants violated the law,"
presiding judge Sudaryatno said during the hearing on Wednesday.

Bank Indonesia, the court ruled, had broken an agreement it
signed with Fadel in 1996. Under the agreement, which was to
expire on Oct. 31, 2011, the central bank was to give Bank Intan
15 years to restructure.

However, Bank Indonesia broke the agreement by handing over
Bank Intan to IBRA, which is responsible for restructuring the
country's ailing banking industry following the economic crisis,
the verdict said.

Bank Intan was one of 38 banks shut down by the government in
March 1999 in a bid to clean up the banking industry.

The government closed the banks because their capitalization
had severely worsened and bailing them out would have been more
costly for the state than shutting them down.

Banking analyst Mirza Adityaswara said Fadel's case would only
further convince the public that the government and IBRA could
not win legal cases against former bank owners accused of
misusing billions of dollars in state funds.

Fadel, who is now the governor of the province of Gorontalo,
is among 35 former bank owners who owe massive debts to the
state. For more than four years, IBRA has unsuccessful attempted
to collect this money.

The agency began legal action against some of the ex-bankers
on Tuesday, filing police reports against five of them, including
Fadel.

The court ordered Bank Indonesia and IBRA on Wednesday to pay
Fadel Rp 23.5 billion because that is the sum he gave to Bank
Indonesia following the agreement to restructure Bank Intan.

However, the court dismissed Fadel's petition for Rp 500
billion in nonmaterial losses.

Lawyers for the central bank and IBRA said they would appeal
the ruling, with one member of the team calling the ruling
"unfair".

"We were just restructuring under Bank Indonesia's orders. Any
agreements made by Bank Indonesia with other parties are none of
IBRA's business," he said after the hearing.