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.