Wed, 16 Apr 2003

Lippo gets new management, Mochtar retained as chairman

Zakki Hakim, The Jakarta Post, Jakarta

Shareholders of publicly listed Bank Lippo appointed Joseph Luhukay as the new president of the bank at an extraordinary shareholders meeting on Tuesday.

But the meeting retained former controlling shareholder Mochtar Riady as chairman of the board of commissioners, a decision which some said could derail efforts to instill investor confidence in the bank, whose image has been tarnished by reports of financial scams, allegedly conducted by the former management.

Syafruddin Temenggung, the chairman of the Indonesian Bank Restructuring Agency (IBRA), which holds a controlling 59 percent stake in Bank Lippo, declined to explain to the media why the agency defied public concern by retaining Mochtar as the bank's chairman.

The move to reshuffle the management of Bank Lippo came following reports of alleged financial scams aimed at allowing the Riady family to regain control of the bank for a very cheap price at the expense of the state, which bailed the bank out during the late 1990s banking crisis.

The Riady family currently holds a 9.5 percent stake in Bank Lippo, while the remaining shares are held by minority investors.

The country's banking and capital market authorities are still investigating the alleged scam. The Capital Market Supervisory Agency (Bapepam) recently imposed a penalty of Rp 2.5 billion on Bank Lippo's management for issuing misleading information to the public in November last year.

Luhukay is an executive at consulting firm Ernst & Young and was a former chief operating officer of the Jakarta Initiative Task Force, which is in charge of facilitating debt restructuring talks between local firms and foreign creditors. He replaces I Gusti Made Mantera.

In addition to Luhukay, five other directors were also appointed by IBRA. Two other directors represented the Riady family.

On the nine-member board of commissioners, IBRA assigned five people, while the three others are Roy Tirtadji, Rudi Toha Bachrie and Masagoes Ismail Ning, who are closely associated with the Riady family. They were also on the board previously.

Meanwhile, the chairman of the Indonesian Security Investors Society (Missi), Murdani, said as a minority shareholder he was disappointed because the interests of the former owner remained strong as reflected in the new management composition.

He was hoping that no family members or people closely linked to the former owner would sit on the Bank Lippo board of directors and commissioners in order to restore the bank's image.

"I don't expect the new management to deliver significant improvement," he said.

Separately, State Minister of State Enterprises Laksamana Sukardi said that the government had violated the IMPA agreement by assigning more than two nominees to sit on the board of directors and commissioners.

But he said that the move was needed to help resolve the image problem of Bank Lippo.

He said that the new management composition was a result of negotiations with the former owner of Bank Lippo.

The IMPA agreement is a document containing the details of a bank recapitalization agreement signed in 1999 by the government and the former owner. The contents of the document have never been disclosed to the public.