IBRA urged to seek foreign auditors for Bank Bali scandal

IBRA urged to seek foreign auditors for Bank Bali scandal

JAKARTA (JP): Chairman of the International Review Committee
(IRC) Mar'ie Muhammad urged the Indonesian Bank Restructuring
Agency (IBRA) on Tuesday to appoint an international auditor to
validate its internal audit result on the alleged Bank Bali
scandal.

He said he ordered payment of all interbank claims on closed-
down banks be temporarily suspended until the completion of an
international audit to ensure that the "internal procedure at
IBRA is working properly".

"I have sent a letter to the Chairman of IBRA regarding these
points," Mar'ie told reporters.

Mar'ie, a former finance minister, said it was most imperative
to uphold the credibility of IBRA because the agency was the
center for restructuring of the country's banking sector.

He added that the agency controlled some 40 percent of the
national assets.

"Maintaining the credibility of IBRA is very strategic," he
asserted.

The five-member IRC is an independent committee, which was set
up on June 30 under the guidance of the International Monetary
Fund (IMF) and the Asian Development Bank (ADB) to provide advice
to the government on the country's economic reform programs.

The Bank Bali scandal has put into question the credibility of
IBRA, Indonesia's largest and most powerful economic entity,
which was set up early last year to help the government
restructure and recapitalize the ailing banking sector.

IBRA is in control of some Rp 600 trillion (US$85.7 billion)
worth of various assets from closed and nationalized banks which
will either be sold or restructured.

Banking law expert Pradjoto revealed the Bank Bali scandal
late last month, accusing several businessmen affiliated to the
ruling Golkar Party colluded with a deputy chairman of IBRA to
force Bank Bali to provide some Rp 546 billion in fees to help
the bank recoup some Rp 904 billion in interbank claims on
closed-down banks.

IBRA confirmed the transaction but has yet to investigate
whether its deputy chairman responsible for interbank claims
settlements was involved.

Under the government blanket guarantee scheme launched early
last year, all obligations of closed banks, including interbank
claims, are guaranteed by IBRA, an agency under the Ministry of
Finance.

Pradjoto also said other senior government officials were
involved in the scandal, but he didn't reveal any names.

There have been increasing accusations that the huge fee was
partly used to finance campaigning activities of the ruling
Golkar Party, such as vote buying.

Bank analysts also believe there are other cases similar to
the Bank Bali affair aimed at raising funds to secure the
reelection of President B.J. Habibie in November's presidential
election.

"But the Bank Bali affair must not cause a setback in the
efforts to restructure the banking sector," Mar'ie said.

"Most of all, the Bank Bali case must not ruin the program,"
he added.

He said that the IRC supported IBRA's step to conduct an
internal audit to probe the alleged scam.

"But to maintain the independency of the internal audit, IBRA
must appoint an international auditor to validate the result," he
said.

As part of the internal audit process, IBRA has suspended
Pande Lubis, the deputy chairman allegedly involved in the
scandal.

Mar'ie also urged the government to publicly disclose the
result of the audit on the Bank Bali case.

"I think other IRC members will welcome this idea," he said.

Minister of Justice/ State Secretary Muladi said here on
Tuesday that President B.J. Habibie had ordered Minister of
Finance, the chairman of IBRA and the central bank governor to
investigate the Bank Bali scam,

Muladi said the President strongly denied press reports that
he was involved in the fraud.

Investigate Rudy

Separately, deputy chairman of the Indonesian Bar Association
(Ikadin) Sudjono, urged on Tuesday the deputy attorney general
for special crimes to immediately investigate Rudy Ramli, the
former president of Bank Bali.

Sudjono told reporters that Bank Bali was a publicly listed
company which involved the investments of a great number of
people.

"Irregularities or fraud at this bank not only adversely
affects the interest of the investing public, but also damages
the credibility of the Jakarta Stock Exchange," Sudjono added.

He hailed the National Police for acting quickly to impose a
travel ban on Rudy to safeguard his investigation and eventual
prosecution.

Separately, noted economist Sri Mulyani said on Tuesday that
Bank Bali scandal demonstrated the structural weakness of IBRA.

She said that the huge assets and power held by IBRA were
vulnerable to abuse, including by people outside the agency.

"That's why the government has to set up a competing
institution designed to check the agency," she said.

She said that the small team of the IRC was far from
sufficient to oversee a huge organization as IBRA, with more than
1,000 staff members and some 40 banks in its hands.

"It is impossible for the IRC to supervise IBRA and review all
of its policies," she added. (rei/udi/prb)