Permata rejects demand to return disputed funds

Permata rejects demand to return disputed funds

P.C. Naommy, The Jakarta Post, Jakarta

Bank Permata president Agus Martowardojo said on Tuesday the bank
would not return Rp 546.5 billion in disputed funds to PT Era
Giat Prima (EGP) despite demands by the prosecutor's office.

"I'm convinced that the funds legally belong to Bank Bali (now
Bank Permata) ... I'm not thinking of withdrawing the funds,"
Agus said following a meeting at the South Jakarta Prosecutor's
Office.

The head of the prosecutor's office, R. Himawan Kaskawa, said
his office would execute the Supreme Court decision ordering Bank
Permata to return the funds to EGP.

Himawan said his office would wait for the right time to
implement the court's ruling.

Bank Permata and EGP have been involved in a lengthy battle
over the funds for the past year.

The case began in 1999 when EGP clinched a deal with the
former owner of Bank Bali (the bank was merged with four other
banks two years ago to form Bank Permata, the country's 10th
largest bank in terms of assets) to help the bank recover about
Rp 900 billion funds owed it by two banks that had been closed
down.

Under the government's bank guarantee program, the now defunct
Indonesian Bank Restructuring Agency (IBRA) would have covered
the obligations of the closed banks. This means Bank Bali was
entitled to recover its funds from IBRA without the services of a
middleman.

But at the time, Bank Bali seemed to be having difficulties in
retrieving the money and EGP offered its services.

With the help of an IBRA insider, EGP managed to retrieve the
funds. But before the company could obtain its huge Rp 546.5
billion fee, the case was leaked to the press. The Bank Bali
scandal also had a political flavor, as EGP was owned by
businessman Djoko Tjandra, who was linked to the then ruling
Golkar Party.

Following the public furor, IBRA canceled the transaction and
Djoko and other top IBRA and government officials allegedly
involved in the case were brought to court. The Bank Bali scandal
was seen as a factor in the failure of B.J. Habibie to be
reelected president during the 1999 elections.

Last year, the Supreme Court dismissed criminal charges
against Djoko and ordered Bank Permata to pay the money to EGP,
which would be a serious financial blow to the bank and could
force the government (or taxpayers) to bail out the bank.

Agus insisted that IBRA had the legal right to cancel the deal
between Bank Bali and EGP.

"According to Law No. 10/1998 and Government Regulation No.
17/1999, IBRA has the right to make such a ruling. And with the
cancellation, the funds belong to Bank Bali (now Bank Permata),"
said Agus.

According to Law No. 10/1998 on banking, IBRA had the right to
review, cancel, end, or change any contracts between ailing banks
and third parties.

Government Regulation No. 17/1999 on IBRA says the agency has
the right to review, cancel, end, and/or change any contracts
between banks and third parties that result in losses for the
banks.

There has also been increased criticism of the prosecutor's
office in this case, with critics saying the office should be
focusing on filing for a review of the case rather than helping
EGP get the disputed funds.