IBRA starts legal action against five ex-bank owners

IBRA starts legal action against five ex-bank owners

Dadan Wijaksana and Damar Harsanto, The Jakarta Post, Jakarta

In an apparent bid to appease public criticism, the Indonesian
Bank Restructuring Agency (IBRA) started another round of legal
action against five former bank owners who have been deemed
uncooperative in settling their debts to the state.

IBRA chairman Syafruddin Temenggung, accompanied by
Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti,
handed over files on the cases to police on Tuesday.

"This is part of the government's efforts to uphold the law,"
Syafruddin told reporters during a press conference after handing
over the documents to National Police chief Da'i Bachtiar.

The five former owners of closed banks are Fadel Muhammad
(former owner of Bank Intan and currently the governor of
Gorontalo Province), Trijono Gondokusumo (Bank Putera Surya
Perkasa), Santosa Sumali (Bank Bahari and Bank Metropolitan), and
Baringin Panggabean and Joseph Januardy (Bank Namura Internusa
Maduma).

The former bank owners owe the state some Rp 2.18 trillion
(around US$240 million), a relatively small amount compared to
the size of the debts owed by other high profile ex-bank owners.

This means that the government will probably continue to come
under criticism for being too soft in taking action against the
larger debtors.

Some 35 ex-bank owners became indebted to the state after the
government injected around Rp 145 trillion worth of liquidity
support funds to help their banks stay afloat during the
financial crisis of the late 1990s.

But an audit by the Supreme Audit Agency (BPK) revealed that
most of the money was misused by the bank owners, who also
violated legal lending limit rulings by channeling their banks'
money to affiliated businesses, a practice that contributed to
the financial crisis.

For more than four years, the government has failed to recoup
the money.

But instead of taking strong legal action, President Megawati
Soekarnoputri late last year issued a decree allowing IBRA to
exonerate the debtors of their banking crimes in the past as long
as they were cooperative in settling their debts. This led to a
public outcry.

Among of the ex-bank owners to be given legal immunity were
the Salim family (former owners of BCA who owe more than Rp 52
trillion to the government), and Sjamsul Nursalim (former owner
of the now-defunct Bank BDNI), another large debtor.

Over the years, IBRA has more often than not ended up on the
losing side in the courts against the errant debtors. The agency
previously filed legal charges against 10 ex-bank owners, but the
cases mostly ended up with the courts acquitting the bankers of
all charges.

One of the most controversial cases took place several weeks
ago when a Jakarta court acquitted the former co-owner of the
now-defunct Bank Umum Nasional (BUN), Kaharudin Ongko, of all
charges.

The court instead sent the bank's former president, Leonard
Tanubrata, to jail for 10 years.

The court argued that as a commissioner, Kaharudin was not
responsible for any of the activities undertaken by the bank's
directors.

For the same reason, the court had also earlier acquitted the
former owner of the now-defunct Modern Bank, Samadikun Hartono.

Syafruddin has said that in order to avoid further losses, the
agency had modified its litigation strategy to leave it better
equipped in the legal struggles against recalcitrant debtors.

He cited one profound difficulty, the fact that courts often
cite company law to limit the scope of any charges to the board
of directors, thus excluding shareholders.

"This makes it difficult for us to hold the companies'
shareholders responsible for failing to repay their debts to the
state," Syafruddin said.

To overcome that, he said, the agency was finalizing a new
strategy, which would include the entire management of a troubled
bank -- including its directors, commissioners and shareholders
-- in one legal action.