Harassment of Manulife

Harassment of Manulife

The legal jam in which Canadian Manulife Financial Corp. has
found itself after legally buying the assets of bankrupt Dharmala
Sakti Sejahtera through a government-authorized auction in
Jakarta last month is raising great doubts over the government's
asset disposal program, one of the major sources of state
revenue.

The speed at which the police moved to arrest a senior
executive of PT Asuransi Jiwa Manulife Indonesia and freeze US$20
million of the company's funds merely on the basis of a complaint
from Roman Gold Assets Ltd., an unknown company based in the
British Virgin Islands tax-haven area, is raising big questions
about the integrity of the law enforcement system, especially the
police.

Yet no less devastating is the subsequent erosion of
confidence in the bankruptcy law and its enforcement institution,
the Commercial Court, which is supposed to play a crucial role in
forcing recalcitrant debtors to negotiate in good faith.

While we should allow legal experts to decide on the legal
row, we cannot help but feel dumbfounded by the manner in which
the police have pursued the case.

Thus far, the first fact we know is that Manulife bought the
40 percent stake in PT Asuransi Jiwa Manulife (that was owned by
Dharmala) through a government-mandated auction held in October
after Dharmala was declared bankrupt by the Commercial Court in
June. Manulife, as the sole bidder, won the stake at Rp 170
billion ($18 million). The deal was concluded in good faith and
the transaction increased the Canadian company's shareholding in
PT Asuransi Jiwa Manulife to 91 percent, with the remaining 9
percent held by the International Finance Corporation, the
private-sector arm of the World Bank.

The second fact is that Roman Gold, which the police
previously knew nothing about, suddenly came up with a complaint.
It disputed the fact that it had bought the Dharmala stake from
Highmead Ltd., a company based in Western Samoa that is also
completely unknown to the police, through a Rp 350 billion deal
in Singapore on Oct. 19 or one week before the auction in
Jakarta. Roman Gold's director Haryono Winarta claimed that prior
to the purchase, he examined documents provided by Highmead Ltd.,
which showed that Highmead had the right to sell the Dharmala
shares after the latter company was declared bankrupt. The timing
of this deal, one week before the official auction in Jakarta in
late October, should nonetheless raise eyebrows because the
publicly listed Dharmala was declared bankrupt in early June.

Surprisingly though, the police acted quickly -- unusually
fast indeed for such a matter, given the police's inertia in
handling more high-profile cases -- without first investigating
the legitimacy of the complaint.

Instead of immediately arresting and detaining for three weeks
a senior executive of Manulife and ordering the freezing of $20
million of Manulife's funds, the police should have first
investigated how Roman Gold could have purchased the Dharmala
assets. If Roman Gold is truly a viable investment company with
an international network and concluded the deal in good faith, it
should have known that Dharmala had been declared bankrupt in
Jakarta in June.

Instead of immediately "harassing" PT Asuransi Jiwa Manulife,
the Jakarta-based subsidiary of the giant Manufacturers Life
Insurance Co., the police should have first investigated how and
when the Western Samoan company, an entity completely unknown to
them, acquired the Dharmala shares. The police should have asked
the Jakarta Stock Exchange management and the Capital Market
Supervisory Agency about when Dharmala sold its stake or granted
power of attorney over the stake to the Western Samoan company.

It should be noted that the bankruptcy suit against Dharmala
was filed in February and, based on Indonesia's Bankruptcy Law, a
conservatory attachment should be imposed on the assets of the
debtor, in this case Dharmala, during the bankruptcy proceeding.

Needless to say, the resolution of the legal dispute over the
Dharmala shares in PT Asuransi Jiwa Manulife will determine
public confidence in Indonesia's legal system, notably the
bankruptcy proceedings, which are so vital in resolving the huge
corporate debt overhang.

After the debacle over the Standard Chartered Bank's deal to
acquire 20 percent of Bank Bali shares last year, the Manulife
case will further determine investor confidence in the legality
and real value of the tens of billions of dollars in assets which
have yet to be disposed by the Indonesian Bank Restructuring
Agency to fuel a faster and stronger recovery of the economy.