Not Over Yet Head of deposit insurance agency tells hearing legal woes led to loss-making saleFormer customers of Bank Century, now Bank Mutiara, demand justice at the KPK’s offices. (Antara Photo/Puspa Perwitasari)
House Lawmakers Seek to Revive Bank Century Probe
JANUARY 20, 2015
Jakarta. Several lawmakers are pushing for the revival of a House of Representatives inquiry committee into the controversial bailout of the now-defunct Bank Century.
In 2008, the government forked over a Rp 6.7 trillion ($530 million) bailout to the ailing bank. Critics at the time said the revelation that wealthy donors to then-President Susilo Bambang Yudhoyono’s re-election campaign were among the bank’s clients raises questions of propriety, if not legality.
On Monday, the House held a hearing with from Indonesia’s deposit insurance agency (LPS), which took over control of Bank Century following the bailout. The bank has since been renamed Bank Mutiara.
Several lawmakers questioned the LPS’s move to sell a 99 percent stake in the lender to J Trust, a Tokyo-listed financial institution for Rp 4.41 trillion.
“You have led us to believe the selling price for Bank Mutiara was as good as it gets. [The sale] has caused state losses and someone must pay or suffer the legal consequences,” Golkar Politician Muhammad Misbakhun told LPS officials at the hearing.
LPS commissioner Siswanto said that of the 18 companies which initially expressed interest in taking over the bank, only J Trust stayed. “Other investors were not willing to take the legal risks surrounding Bank Mutiara at the time,” he said.
Siswanto was referring to lawsuits by Saudi businessmen Hesham Al Warraq and Rafat Ali Rizvi, the bank’s former co-owners, seeking compensation for what they allege was an illegal expropriation of their shares in Bank Century.
Rizvi brought a claim in 2011 through the World Bank’s arbitration arm, the International Center for Settlement of Investment Disputes, seeking compensation for Indonesia’s alleged illegal expropriation of his shares in Bank Century.
After two hearings, the ICISD rejected Rizvi’s claim on jurisdictional grounds in 2013.
Separately, Al Warraq brought a claim the same year in the United Nations Commission on International Trade Law, alleging that Indonesia violated investment agreement rules under the Organization of the Islamic Conference, a treaty organization to which Indonesia is party.
Like Rizvi’s suit, Al Warraq also sought the reversal for his alleged wrongful conviction in absentia for fraud and money laundering by Indonesia’s courts in 2002. In that case, prosecutors alleged the two embezzled more than $300 million from the bank.
Although UNCITRAL controversially accepted jurisdiction in Al Warraq’s case — over Indonesia’s objections — a later ruling in December 2014 rejected his claims on merits.
According to LPS commissioner Siswanto, Al Warraq and Rizvi’s cases caused other investors to back away forcing the government to sell the lender to J Trust at a loss.
Misbakhun said the sale only served as further proof the government shouldn’t have saved the lender in the first place.
“I am asking that the House to create a recommendation, to set a motion at the House plenary so that the House can revive the Century supervisory committee to monitor the legal process [surrounding the bailout],” he said.
Misbakhun was one of the lawmakers who instigated the inquiry into the bailout in the House’s 2009-2014 session. At the time, Misbakhun was affiliated with the Prosperous Justice Party (PKS).
Several lawmakers expressed support for reviving the committee.
“I agree that it is better that the Century supervisory committee be revived,” said Maruarar Sirait of the Indonesian Democratic Party of Struggle (PDI-P).
Testifying earlier this year in the corruption case against former Bank Indonesia deputy governor Budi Mulya, former Finance Minister Sri Mulyani defended the decision by the government’s now-defunct Financial System Stability Committee (KSSK), which she chaired, to bail out the lender, which she said prevented Indonesia’s banking system from collapsing.
Budi was sentenced to 10 years in prison the court found him guilty of violating Article 2 of the Anti-Corruption Law’s “joint corruption” statute.
Sri Mulyani is not a suspect in the case.