Prosecutors probe alleged Bapepam irregularities

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.