SMF denies accusations of fraudulence

SMF denies accusations of fraudulence

JAKARTA (JP): The publicly listed multifinance firm PT Sinar
Mas Multifinance (SMF) has denied allegations that its president,
and the vice president of brokerage firm PT Layang Mega
Securities (LMS), were involved in a massive fictitious share
transaction totaling Rp 51 billion (US$3.65 million).

"The allegation made by LMS has twisted the facts and harmed
the reputation of SMF," SMF president Francisca Iskandar told
journalists at the weekend.

SMF is controlled by the publicly listed Bank Internasional
Indonesia, the financial arm of Indonesia's second-largest
conglomerate.

She said the allegation started on June 4 when SMF demanded
LMS return its stocks bought through the brokerage firm after
previous orders to sell them were not executed by LMS.

LMS is controlled by the owners of the publicly listed marine
and agriculture products exporter PT Sekar Bumi and confectionery
manufacturer PT Sekar Laut.

"As a result, SMF suffered a financial loss of Rp 28.5 billion
because we couldn't sell the shares when the prices were high,"
she said, adding that SMF had used the service of LMS since 1997
and started to experience the trouble in February.

She said that because SMF's demand wasn't responded to by LMS,
the company reported the incident to police on June 9.

But she said she was surprised to find out that LMS had asked
the police to arrest her for a fictitious share transaction
arranged together with LMS vice president Trijono Sugandhi, who
allegedly admitted to the crime.

Francisca said that because of the false allegation, she filed
a suit with the South Jakarta Court, which then confiscated the
assets belonging to LMS and the Sekar Group, including a golf
course and a hotel and other properties in Surabaya, East Java.

The incident became public when LMS and its legal consultants
Rudy Lontoh, Denny Kailimang & Associates held a press conference
on Thursday accusing that Francisca and Trijono had arranged the
Rp 51 billion fictitious share transaction between January and
May by establishing an investment vehicle called Idah Fund.

Their action resulted in a fictitious Rp 51 billion claim on
LMS, said company legal adviser Bambang Hartono, reported the
Media Indonesia daily.

"We admit that there had been a supervision failure at LMS.
The fictitious transaction has tarnished the image of LMS," said
company president Harry Fong Jaya, pointing out that the problem
had caused a failure to honor obligations to customers, which
according to the daily, totaled Rp 35.7 billion.

Francisca, however, said that Trijono was forced by Harry and
other LMS top executives to confess to the alleged crime on June
4 in a meeting which was also attended by "four bullies".

"To clarify this incident by law, a court hearing is being
scheduled," she said.

BII

In a separate development, Bank Internasional Indonesia (BII)
has slashed its housing mortgage interest rate from 50 percent to
30 percent following a demonstration last week by customers
demanding the bank return the rate to the precrisis level of
between 18 percent and 19 percent.

"After considering the difficulties faced by our customers,
and the current economic situation, we decided to subsidize the
interest rate," BII managing director Doddy Susanto said over the
weekend.

He stressed, however, that for the time being, BII couldn't
fulfill the demand to lower rates to between 18 percent and 19
percent.

Interest rates in Indonesia have soared sky high with Bank
Indonesia's one-month benchmark rate now standing at 58 percent
aimed to curb inflation and stabilize the rupiah exchange rate
against the U.S. dollar.

Demonstrations were staged at BII's headquarters on Tuesday
and Thursday by 50 customers claiming to represent 400 colleagues
demanding the lowering of the rates.

On Wednesday, BII shares dropped and some brokers said the
demonstration caused fears that the country's fourth-largest
private bank might have a similar fate to giant Bank Central
Asia, which was recently rushed by depositors who got nervous
with its links to the family of former president Soeharto.

"There has been no indication of a run on the bank," said
Doddy, adding that BII had enough cash reserves to cover any
problem loans and that its housing loans only represented 15
percent of its lending activities. (rei)