Teaching devious business tycoons a lesson

Teaching devious business tycoons a lesson

Widodo Dwi Putro, Institute for Social and Economic Research,
Education and Information (LP3S), Jakarta

Debtors formerly owning or managing banks have yet to return
hundreds of trillions of rupiah of state funds that they obtained
on loan. Originally, problem banks obtained this money under the
Bank of Indonesia Liquidity Support (BLBI) program, a loan scheme
intended to set them free from the squeeze of the monetary
crisis. What has happened, however, is a breach of promise and
trickery. These debtors have become smarter, more cunning in
evading their debt responsibilities. Quite a few of them have
gone abroad while many others have all of a sudden become ill or
destitute.

The attitude of these debtors reflects the Dutch saying "hoe
grote geest, hoe groter beest", the smarter someone is -- in the
context of a business tycoon, the richer he is -- the beastlier
he will become.

Bad debts would never have occurred if the government's policy
did not excessively pamper business tycoons. The case of these
bad debts would not have been protracted if law enforcement
institutions had from the very beginning -- i.e. when the loans
were channeled -- considered bad debtors and parties extending
the loans as criminals.

Those involved in loan channeling -- be they direct
perpetrators, the parties asking the loans to be channeled or
those persuading or abetting the channeling of the credits --
must be prosecuted because the loans extended to these debtors
exceeded the credit ceiling (BPMK) permitted by virtue of Law No.
10/1998 on the principles of banking affairs. A criminal
investigation into this case can be conducted even if there is no
complaint from the Indonesian Bank Restructuring Agency (IBRA).
IBRA's decision to postpone any legal action against bad debtors
for three months is irrelevant in the criminal proceedings of the
case.

In addition, as a civil case, it carries a penalty which is no
less severe than the punishment demanded when the case is
considered a criminal one. Supreme Court Regulation No. 1/2000
carries the penalty of imprisonment for debt in the case of
defaulting big-wig debtors. So, ill-meaning debtors can then be
incarcerated in state penitentiary set by the relevant court of
law and forced to meet their obligations. Prison terms for this
crime are for six months and can be renewed every six months for
a maximum of three years.

Some circles, however, have objected to the imposition of this
imprisonment-for-debt penalty, arguing that in a civil case a
penalty like this is tantamount to a human rights violation. This
argumentation is lame as the imprisonment-for-debt penalty
stipulated in Supreme Court Regulation No. 1/2000 is quite
different from the instrument of hostage-taking regulated in
Articles 209 and 224 of the Criminal Code.

The difference is that by virtue of the Supreme Court
regulation, the penalty is imposed on financially capable
debtors who refuse to pay their debts. This is confirmed in
Article 4 of Supreme Court Regulation No. 1/2000, which
stipulates that imprisonment-for-debt will only be imposed on
"big-wig" debtors sustaining debts of no less than Rp 1 billion.

Therefore, it is irrelevant to claim the imprisonment-for-debt
instrument is against human rights because it is these business
tycoons who have really violated human rights by refusing to pay
back their debts. This refusal has damaged the state's economy,
inflicting greater losses than the purported violation of a
person's human rights when they are subjected to imprisonment for
debt. Besides, these delinquent debtors feast upon the state's
funds or, more accurately, they can be considered as having
looted the public's money.

Since the Supreme Court issued its imprisonment-for-debt
regulation, there has not been a single bad debtor subjected to
this penalty. It is often the case that efforts to apply the
imprisonment-for-debt stipulation on a bad debtor often fail at
court.

Take, for example, the Gondokusumo family of the Darmala
Group. DeMat Investment (a subsidiary of Darmala), has borrowed
US$13 million from Danamon Bank. They could actually settle their
debts but, unfortunately, have been totally non-cooperative. So,
IBRA filed a request to the South Jakarta District Court,
requesting the court hand out prison sentences to five members of
the Gondokusumo family. However, the request could not be granted
by the council of judges on the grounds that the evidence
presented was not in order.

Another example also occurred at South Jakarta District Court,
which rejected a request for imprisonment for debt as made by the
IBRA against one of the giant debtors, Wellwin Finance (HK)
Limited (Ongko Group). In fact, the debtors admitted sustaining a
debt to the state totaling Rp 270 billion, an amount of money
that is too large for them to pay back. Of course, this failure
of IBRA to impose prison sentences on bad debtors has not only
disadvantaged the state but also the entire Indonesian people,
who are currently enduring an acute economic crisis.

The public can actually play a significant role as a pressure
group without having to violate the law. They can creatively take
a position as part of the legal culture by urging business
tycoons to comply with the law.

By comparison, in countries where people enjoy a high level of
legal consciousness, irresponsible business tycoons are
ostracized and are not easily able to have long-term
relationships with other businessmen. A good example is what
happened in the Philippines, where the public once boycotted a
beverage product because they believed the producer had inflicted
huge losses to the people and the state.