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.