Fri, 05 Sep 2003

Stubborn prosecutors

The stubbornness of the Attorney General's Office (AGO) in its attempts over the past month to take back Rp 546.5 billion (US$64.3 million) -- related to the Bank Bali corruption case -- from the Indonesian Bank Restructuring Agency (IBRA) is a snub to the government and confounds lawyers.

AGO has argued -- against the legal opinion of almost all other lawyers -- that as executor of the Supreme Court's decision it is "legally bound" to claim the money from IBRA and return it to PT Era Giat Prima, after chairman Djoko S. Tjandra had been acquitted by the Supreme Court of any charges of corruption.

The top prosecutors' threat -- to charge IBRA with corruption if it fails to return the funds to AGO -- is raising suspicions as to why state attorneys are suddenly so determined to enforce (what they claim in this case to be) the letter of the law.

This idealistic law enforcement is a striking contrast to the AGO's utterly poor performance in prosecuting other corruption suspects, such as Prajogo Pangestu and Hardiyanti (Tutut) Rukmana -- the eldest daughter of former president Soeharto. Miserably, AGO even failed recently to execute the Supreme Courts's four- year jail sentence for former banker Samadikun Hartono. Samadikun's whereabouts are currently unknown.

The Bank Bali scandal exploded in mid-1999 during a due diligence by Standard Chartered Bank, who was at that time interested in buying 20 percent of Bank Bali's shares.

The investigative audit discovered that Bank Bali's majority owner Rudy Ramli had transferred Rp 546.5 billion to Era Giat Prima. This was used as a fee to enable the politically- influential broker to get Bank Bali's inter-bank claims paid by IBRA -- which is the manager of the government's blanket guarantee on bank deposits and claims.

However, a subsequent special audit by PricewaterhouseCoopers and another special investigation by the House of Representatives found that the transaction between Bank Bali and Era Giat Prima had been legally defective from the outset, because the company had not made any payment to take over the bank's claims.

Moreover, as the debtor was IBRA (meaning the government), Bank Bali did not require the service of any other party to collect its claims. Likewise, if Bank Bali was not able to collect the money, the claims did not meet the requirements for reimbursement. No other party would have been able to make the claims viable for payment, unless they colluded with IBRA or Bank Indonesia -- which was in charge of verifying the validity of such claims.

The investigations also uncovered that after Era Giat Prima learned its dealings with Bank Bali had aroused government suspicion, the company restored the right to collect the bank's claims to Bank Bali in March, 1999. Hence, it was Bank Bali and not Era Giat Prima that collected and received the payment for the claims from IBRA.

This evidence clearly proves that -- even though Rp 546.5 billion was seized -- the money was not connected to the corruption case against Djoko Tjandra, particularly since IBRA (as the debtor) had already annulled the Bank Bali-Era Giat Prima deal in October, 1999.

Set against this legal background, the AGO's dogged determination -- to seize back the money from IBRA -- is highly questionable.

Although, In hindsight, this stubbornness could reflect the frustrations of top prosecutors, because their cases against main defendants in the Bank Bali scandal -- Djoko Tjandra, Rudy Ramli, IBRA former executive Pande Lubis and former central bank governor Sjahril Sabirin -- were all defeated in court.

But, for AGO to snub the government with such an irrational demand is playing a very dangerous game. Especially, in regards to the establishment of legal certainty and the viability of the banking industry in general.

Seizing back the money from IBRA would endanger the solvency of Bank Permata -- which was set up in 2001 merged from several nationalized banks, including Bank Bali. This bank was recapitalized by the government with Rp 10.5 trillion in bonds and Rp 1.16 trillion in cash. The Rp 546.5 billion -- which AGO has claimed to be a legal evidence in Djoko Tjandra's corruption case -- formed part of the cash injection.

President Megawati Soekarnoputri should intervene in resolving, once and for all, the legal tug of war between AGO and IBRA. Allowing these insensible debates to drag on could destroy the public's confidence in Bank Permata, now the country's seventh largest bank.