Prosecutors probe alleged Bapepam irregularities

Rendi A. Witular, The Jakarta Post, Jakarta

Prosecutors are investigating officials at the capital market watchdog over "lenient" punishments imposed by the agency on some companies found to have committed serious market violations.

The acting chairman of the Capital Market Supervisory Agency (Bapepam), Darmin Nasution, said the Attorney General's Office (AGO) had summoned a number of officials from the agency for questioning over several past cases handled by the agency.

"The AGO has questioned why the officials gave offenders lenient penalties for violations that could have been followed up with litigation," Darmin said recently at the Jakarta Stock Exchange.

Darmin refused to elaborate, suggesting any questions be directed to Bapepam's head of inspection and investigation, Abraham Bastari, who is aware of the investigation by the Attorney General's Office.

When contacted, however, Abraham, said he was unaware of any investigation by the Attorney General's Office.

"We usually coordinate and discuss with the AGO on cases. I do not know if they are investigating us .... I don't even remember the last time we met with AGO officials," Abraham said.

Abraham's unit is responsible for investigating suspected capital market violations, and to report to the Bapepam chairman any violations that could be considered criminal in nature and thus taken to the courts.

A source at Bapepam said the Attorney General's Office was focusing on cases handled by the agency's former chairman, Herwidayatmo, who was recently appointed an executive director at the World Bank for Southeast Asia.

Herwidayatmo, who was named a suspect in a corruption case involving the privatization of the Jakarta International Container Terminal, along with former state minister for state enterprises Tanri Abeng, was replaced as Bapepam chairman by Darmin in November this year. He had been in the position since 2000.

The source said that among the cases being reviewed by the Attorney General's Office was a 2003 case involving Bank Lippo and a 2004 case involving state-owned pharmaceutical firm PT Indofarma.

Bapepam was criticized last year after it concluded that violations committed by Bank Lippo were not criminal in element, despite evidence that Bank Lippo's management misled the public in claiming an unaudited financial report had been audited.

The agency imposed a Rp 2.5 billion (US$280,000) fine on the bank's management.

Bapepam also was criticized for doing nothing more than fining Indofarma Rp 28.9 billion for overstating its 2001 assets, sales and net profit, in a bid to increase the price of the company's shares.

Analysts say the fact that only one market violation was taken to the Attorney General's Office by Bapepam in 2004 indicates the agency's lack of enthusiasm for enforcing the law.

In its year-end report, the agency said that in 2004 it imposed a total of Rp 11.03 billion in fines on 314 listed companies, 47 securities houses, four custodian banks, 12 securities administration firms, two assessing firms and six directors and commissioners.

Some analysts say the agency is generally tough on small firms and firms that do not have any connections, and is lenient toward large and well-connected firms. This, they say, creates the impression that Bapepam officials collude with larger companies.