PricewaterhouseCoopers named to check bank scandal audit

PricewaterhouseCoopers named to check bank scandal audit

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
has appointed PricewaterhouseCoopers as an independent auditor to
validate the agency's internal audit on the Bank Bali scandal.

The agency said in a statement issued late on Friday that the
involvement of an international auditor is intended to ensure
that the investigation process is valid and not influenced by any
parties.

"In principle, PricewaterhouseCoopers has agreed to do the
job," IBRA said.

The agency said that the appointment of the foreign auditor
was in line with the policy of the International Review
Committee, an independent committee set up in June with the
encouragement of the International Monetary Fund and the Asian
Development Bank to advise the government on economic programs.

IBRA also said that it had asked the central bank to freeze
all bank accounts of people implicated in the Bank Bali scam,
which sent shivers through the local financial and stock markets
last week and irked the IMF.

"As part of the investigation process in the Bank Bali case,
IBRA has asked Bank Indonesia to freeze the accounts of those
related to this case. The move is needed in a bid to secure the
funds (transferred out of Bank Bali)," IBRA chairman Glenn S.
Yusuf said.

The agency said the preliminary investigation showed that IBRA
transferred Rp 904 billion (about US$116 million at the current
rate) on June 1 into Bank Bali's account at the central bank.

The fund was a payment on Bank Bali's interbank claims on
closed down banks, which are guaranteed by IBRA under the
government's blanket guarantee program.

IBRA said the transfer of funds to Bank Bali was in line with
existing regulations and procedures.

But the agency said that on June 3, some Rp 404 billion was
transferred into the bank accounts of PT Era Giat Prima (EGP), of
which Rp 284 billion was transferred to the account of Joko
Tjandra at state Bank Negara Indonesia's (Bank BNI) Kuningan
branch in South Jakarta.

The agency also said that Rp 120 billion was transferred on
the same day from Joko's account to EGP's account also at Bank
BNI Kuningan.

The agency said that on June 10, another Rp 141 billion was
transferred from Bank Bali's account at the central bank to EGP's
account at Bank BNI, and then this was immediately transferred to
Joko's account at the same bank.

The total funds transferred out of Bank Bali to both EGP and
Joko amount to Rp 545 billion.

Banking law expert Pradjoto revealed late last month that Rp
546 billion had been transferred out of Bank Bali to EGP as a
commission to help the bank recoup its Rp 904 billion interbank
claims on closed down banks.

EGP is controlled by Joko and his business associate Setya
Novanto, both of which are affiliated to the ruling Golkar Party.

Pradjoto had accused IBRA deputy chairman Pande Lubis and
other top government officials of also being involved in the
scam.

Pradjoto said that Bank Bali might have had to use the
services of EGP because the bank had lost patience waiting for
the payment of the interbank claims.

IBRA said that the agency's internal audit team was now
focussing its investigation on the deal made by Bank Bali and EGP
in January because "the transaction is unusual".

EGP earlier claimed that its transaction with Bank Bali was
merely a loan buyout deal, or a factoring transaction.

But IBRA doubted this, pointing out that EGP should have paid
Bank Bali up front as would be the case in a typical loan buyout.

"The agency is investigating the factoring transaction and its
legal basis," IBRA said, adding that it would also study how the
bank made the decision.

IBRA also said that the delay in the payment of Bank Bali
interbank claims on the closed down bank was due to
administrative problems on the part of the bank, improvement of
the government's blanket guarantee program and pending the
issuance of the government bonds.

The government issued Rp 53.7 trillion in bonds to finance the
blanket guarantee program.

The government had to revise the ruling on the blanket
guarantee program in May to allow more interbank claims to be
covered, because many bank debtors were late in reporting their
interbank debts.

"Because of the above factors, the interbank claims which were
filed by Bank Bali in February were finally paid in June," IBRA
said.

The agency also said that it would proceed with plans to
recapitalize Bank Bali.

But it said the government will not cover the additional
recapitalization costs resulting from the loss of the Bank Bali
funds.

IBRA demanded that former Bank Bali president Rudy Ramli and
EGP return the money to the bank.

Publicly listed Bank Bali is expected to offer a rights issue
to finance its recapitalization program. The government has plans
to buy up to 80 percent of the issue, while the U.K.-based
Standard Chartered Bank has signed an investment agreement with
IBRA to purchase the remaining 20 percent.

Bank Bali needed Rp 4.3 trillion to lift its capital adequacy
ratio from minus 31 to the minimum 4 percent level.(rei)