Former top govt officials named in loan scam report

Former top govt officials named in loan scam report

JAKARTA (JP): The House of Representatives concluded on
Tuesday there was the possibility former president Soeharto, his
associates and former top government officials were involved in a
multibillion dollar scam involving Bank Indonesia liquidity
support to ailing banks.

Head of the House Special Investigating Team Sukowalujo
Mintohardjo named former coordinating minister for the economy,
finance and industry Ginandjar Kartasasmita, former finance
ministers Mar'ie Muhammad, Fuad Bawazir and Bambang Subianto as
well as Bank Indonesia Governor Sjahril Sabirin and his
predecessor Soedrajad Djiwandono among those implicated.

"We found indications of abuse in the channeling of the
funds," Sukowalujo told a news conference for the announcement of
the findings.

The team recommended that the attorney general follow up on
the House's findings.

The team also implicated the owners of several recipient banks
in the loan abuse, including Soeharto's children.

Soeharto associates implicated in the scam are Mohamad "Bob"
Hasan, former owner of the now defunct Bank Umum Nasional, and
Anthony Salim, a former owner of BCA.

The team also identified Bank Indonesia's deputy governors
Miranda Gultom and Aulia Pohan among the officials who should be
investigated further.

Sukowalujo did not elaborate on the role officials might have
played in collusion which could have led to the misuse of Rp 80
trillion in emergency liquidity support.

However, he said it might have been caused by a lack of
coordination between the central bank as the fund provider and
the Ministry of Finance as the supervisor.

"The fund channeling and supervision either went wrong, or
there was political interference, which meant an abuse of power."

The bank liquidity support policy was launched in September
1997 when confidence in the country's banking system plunged due
to the economic crisis.

Bank Indonesia channeled Rp 164 trillion (US$23 billion) as of
January 1999 to ailing banks, of which Rp 80 trillion was
believed to have been misused.

The team provided a chronological breakdown of the findings
from its more than one-month investigation. It spanned the period
shortly before the economic crisis hit Indonesia in July 1997,
after the crisis started to affect banks, which led to the
liquidity support decision and the government blanket guarantee
program in January 1998, and after the central bank began to
channel its liquidity support funds through January 1999.

Suko said several banks already showed negative balance sheets
before the crisis, but they were not suspended from interbank
clearing transactions.

During the crisis, the rupiah depreciated sharply against the
U.S. dollar while bank interest rates soared, with the government
applying a tight money policy, Suko said.

"Money was scarce and banks rushed to the central bank to
obtain emergency liquidity support."

Furthermore, he said, when the government closed 16 banks in
November 1997, the public lost confidence in domestic banks and
began to withdraw deposits.

During the four months between the announcement of the
government blanket guarantee program in January 1998 and May
1998, the team noted a sharp increase in the amount of liquidity
funds channeled, from Rp 47 trillion to Rp 119 trillion.

He said the amount of liquidity funds mounted until it reached
its cumulative present figure of Rp 164 trillion.

The team recommended that the government review its current
blanket guarantee for bank deposits and claims, and prepare the
establishment of a deposit insurance body to cover the risk of
bank closures. (bkm)