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)