SOE executives face probe over Bank Global fiasco

SOE executives face probe over Bank Global fiasco

Rendi A. Witular and Eva C. Komandjaja, The Jakarta Post, Jakarta

State-owned enterprise (SOE) executives who had invested
corporate pension funds in Bank Global Internasional bonds may be
given the axe if they are proven to have colluded in the
decision, a minister said.

State Minister of State Enterprises Sugiharto said on Friday
that the ministry was investigating the case on suspicions that
the investment was not based on a prudent and sound decision.

"We regret the decision made by a number of SOEs to invest in
a small bank without knowing the risk... We will take stern
action against those who are proven to have abused their power
and to have not conducted sufficient risk management," he said.

Sugiharto has issued an instruction for ministerial officials
to investigate possible irregularities in the pension fund
investment.

The instruction comes amid reports that a number of SOEs --
such as insurance firms PT Jamsostek, PT Jiwasraya and PT Taspen,
and the pension units of oil and gas firm PT Pertamina's and
mining firm PT Aneka Tambang -- had invested a combined Rp 188
billion (US$20.8 million) in Bank Global bonds.

Meanwhile, the Indonesian Securities Investors Society (MISI)
has criticized both Bank Indonesia and the Indonesian Capital
Market Supervisory Agency (Bapepam) for being too slow to take
action over the ailing bank, even though irregularities in its
management had been apparent for several months.

MISI chairman ND Murdani accused Bapepam officials of
misguiding investors by withholding information about the
suspected fraud at Bank Global and thus incurring huge financial
losses for investors.

Elsewhere, police announced that they had captured Bank Global
employee Steven, who was wanted for attempting to destroy
documentation connected to the alleged fraud.

"We detained Steven on Thursday night. He is directly and
indirectly involved in trying to destroy the bank's documents,"
said National Police spokesman Brig. Gen. Soenarko, adding that
the suspect had also tried to escape with about Rp 16.5 billion
of the bank's money.

Police have detained 11 executives of Bank Global so far, and
are hunting for Bank Global president director Irawan Salim and
operational director Rico Santoso, who are still at large.

Earlier this week, Bank Indonesia announced a temporary, one-
month suspension on the operations of Bank Global, as its
financial condition had deteriorated from a capital adequacy
ratio (CAR) of 8 percent to minus 39 percent over the last two
months.

The central bank also alluded to suspected lending fraud as
another reason for the suspension.

It is strongly suspected that the banking authority may decide
to close down the bank, as investors are unlikely to bail it out.

Under the existing blanket guarantee program, the government
guarantees time deposits and savings of a all liquidated banks;
but it will not reimburse bond investors.

In June 2003, the bank issued Rp 400 billion in 10-year bonds
that had received an A- rating from PT Kasnic Kredit Rating
Indonesia.

The bonds, however, were categorized as sub-debt notes, which
means that investors were unsecured and would be the last to get
their hands on Bank Global assets if it is liquidated.