Lippo Bank California fights for comeback

Lippo Bank California fights for comeback

LOS ANGELES (AP): Bad loans and worse publicity linking owner
James Riady and former chief executive John Huang to questionable
campaign contributions in Washington nearly put Lippo Bank
California out of business.

But the future is looking brighter for the tiny commercial
bank which, from its Chinatown headquarters, caters to small and
medium-sized businesses in California's Asian business community.

Bolstered by the sale of some non-performing loans and a US$ 6
million cash infusion from Riady, Lippo recently reported its
first quarterly profit in three years.

Equally important, the bank appears no longer to hold the
attention of Senate investigators examining the legality of
foreign donations to the Democratic National Committee during the
1996 presidential campaign.

"Our name has basically dropped out of the investigation,"
bank president James Per Lee said in a recent interview. "We want
to get this behind us and get back to running the bank."

Lippo, with about $92 million in assets, takes its name from
Lippo Group, the international business empire led by Riady's
father, Mochtar Riady. But it is not part of Lippo Group, or its
subsidiary, Lippo Bank of Indonesia.

Per Lee had been scheduled to appear in September before the
Senate investigating committee. He was to answer questions about
Riady's request that Lippo Group send money to Lippo Bank to
cover expenses, including a $50,000 donation to the Democrats.

But his appearance was canceled shortly before he was to
testify.

Per Lee said in the interview he was not aware of the
transaction at the time, but research showed it was handled like
any other.

"I had no reason to know. I didn't know," he said of the
transaction. "The last thing you or anyone else in this country
wants is for banks to judge the propriety of checks that are
written."

Riady purchased a controlling interest in the state-chartered
bank in 1984, when it was based in San Francisco and operated as
the Bank of Trade of California. Huang was named president and
chief executive from 1986 to 1988, but has not held a position
since then.

Before the Senate investigation began, Per Lee's principal
concern was getting the bank out from under the burden of bad
real estate loans made in the 1980s that prompted four cease and
desist orders from the Federal Deposit Insurance Corp.

With its offices in Chinatown and employees fluent in Asian
languages, Lippo carved out a niche among immigrants who often
were uncomfortable dealing with larger U.S. banks.

In 1990, recession set in and the real estate market
collapsed. Payments on many of the bank's loans began to falter.

"The underwriting standards were not what they should have
been," said Per Lee. "Second, it was followed by one of the worst
economic downturns. If it had just been one or the other, it
probably wouldn't have been so bad."

A number of small banks ran onto hard times after the
recession struck, said Jack Kyser, chief economist for the
Economic Development Corp. of Los Angeles County.

"In the early 1990s, the California economy went through a
major restructuring. Anybody who was doing real estate loans was
sweating bullets," he said.

Since taking over as president and CEO in 1994, Per Lee has
cut costs by closing one of the bank's two branches, laid off 25
employees, sold off some of the non-performing loans and
tightened credit screening.

In April, Riady added $6 million to the bank's capital
reserves, a move aimed at easing regulators' concerns about the
remaining non-performing loans.

A team from the FDIC is scheduled to visit in November in what
Per Lee hopes will lead to lifting of the last cease and desist
order.

"We're getting the results that we want in terms of asset
quality," he said.