Govt lacks political will to resolve Bank Lippo plight

Govt lacks political will to resolve Bank Lippo plight

Zakki Hakim, The Jakarta Post, Jakarta

The decision to retain Mochtar Riady as the chairman of Bank
Lippo's board of commissioners reflected the government's lack of
political will to resolve the problems at the publicly-listed
bank, a legal banking expert said.

Law expert Sutan Remy Sjahdeini said on Wednesday that the
Indonesian Bank Restructuring Agency (IBRA), which represents the
government as the controlling shareholder of the bank, should
have exercised its influence by removing Mochtar and his
associates both from the board of directors and commissioners.

An extraordinary shareholders meeting of the publicly-listed
bank on Tuesday appointed six new directors (out of the total
nine-member board of directors), most of them representing IBRA,
which owns a 59 percent stake in the bank. Mochtar, the former
owner of the bank, owns a 9.7 percent stake, while the remainders
are held by the public investors.

But the meeting decided to retain Mochtar as the chairman of
the board of the commissioners. Two board members close to him
were also retained, while six others were newly elected, also
mostly representing IBRA.

But many analysts were disappointed with the decision to keep
Mochtar and his friends in the bank's management and board of
commissioners, saying that to improve the image of the bank it
was essential that people linked to Mochtar must be dismissed
from the bank.

There has been allegations that the bank's former owner had
been involved in illegal maneuvers designed to eventually allow
them to regain control of Bank Lippo at a very cheap price, but
at the expense of the state which had paid dearly to bailout the
bank during the 1997 financial crisis.

The Capital Market Supervisory Agency (Bapepam) has previously
imposed a penalty on Bank Lippo management for giving misleading
information to the public late last year.

Bank Indonesia and Bapepam are still in the process of
investigating other alleged wrongdoings, including share trade
manipulation and wrongful asset revaluation.

Analysts have said that all these have baffled investors, and
that the authorities must act quickly to protect the interests of
investors, including the government.

The result of the shareholders meeting cannot be annulled,
except if the central bank could prove the alleged financial
scam.

Elsewhere, Sjahdeini said the penalty given to the Bank Lippo
management should provide sufficient reason for IBRA to
completely change the bank's management and board of
commissioners as stipulated under the Investment Management and
Performance Agreement (IMPA), signed by the agency and the bank's
former owner in 1999 when the government made the bailout.

The IMPA document had never been disclosed to the public. But
State Minister of State Enterprises Laksamana Sukardi, a former
Bank Lippo top executive, said that the government actually had
already violated IMPA by assigning more than two nominees for the
board of directors and management.

Sjahdeini, however, said that if the IMPA was deemed to move
against the public interest, the government could appeal to the
court to annul the contract.

The document was made during the previous administration of
B.J. Habibie, a hand-picked successor of former authoritarian
president Soeharto, whose family members and close friends owned
the troubled banks rescued by the government's costly bailout
program.