http://www.asiaviews.org/?content=153499ym32dddw4&headline=20070906020423
The central bank's expensive facelift
AsiaViews, Edition: 32/IV/Sept/2007
SUSPICIONS of bribery by Bank Indonesia of a number of members of the
House of Representatives (DPR) have been heard for some time. In 2003, an
outlay of the bank's Rp31.5 billion was discovered to have ended up in the DPR,
in order to safeguard the bank's interests. An audit by the Supreme Audit
Agency (BPK) uncovered the method and the cover-up.
A Tempo source explained how BI's money to the DPR was part of a project
to improve the bank's image. The reputation of the central bank had been
tarnished after a number of its top officials went on trial for corruption
charges linked to the Bank Indonesia Liquidity Assistance (BLBI) program.
The project to improve the bank's image involved legal experts, DPR
members and the media. BI fully defended their officials charged with
corruption, spending a total of Rp100 billion on the project. How was it all
carried out? The following is the result of Tempo's investigation.
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NO comment, no comment!
This was the response of most of Bank Indonesia's top officials when
confronted by the media. It seemed they had agreed to keep silent whenever they
were asked about the suspected bribes which the bank paid out to a number of
DPR members, even though, for the previous two weeks, news of this had been in
all the papers.
The letter which Tempo sent to a number of senior BI officials was
forwarded to their public relations division. The problem was that Budi Mulia,
the bank's director for strategic planning and assigned spokesman, only gave
Anton Septian of Tempo a brief comment: "At this time I have no comment." Then
he just smiled, even though Tempo was ready to ask him questions.
This case started with the findings of an audit conducted by BPK on BI's
2004 financial reports. It was discovered that Rp100 billion in cash had been
paid by Bank Indonesia to a number of people: DPR members, lawyers and experts.
A total of Rp31.5 billion went to some members of the DPR's Finance and
Banking Commission. A total of Rp42.7 billion was used to handle the legal
affairs of seven high-ranking BI officials charged with suspicion of corruption
with regard to the BLBI funds.
The accounting for these BLBI funds was divided into two categories. A
total of Rp27.7 billion was used to pay the fees of 10 law firms. Another Rp15
billion was given in the form of cash to indicted BI officials.
The BPK audit reported that the cash given to these suspects was returned
in 2004. However, the first time this huge amount of money was disbursed, it
ended up in different places and is believed to have been used to secure the
interests of Bank Indonesia and its officials.
A Tempo source who understands the intricacies of this case said the flow
of funds was part of a BI plan to build up its image. Just what kind of a
project was this? Here is the story:
In 1999, said the source, a Bank Indonesia financial report was given a
disclaimer by the BPK, which meant that the BPK refused to comment on the
report. At first glance, the evaluation gave the bank a low score regarding its
operations. The bank received the same rating in 2000. In 2001 and 2002, BI
received a score of "acceptable with exceptions." In 2003, the bank's financial
report was rated "acceptable without exceptions and a paragraph with
explanations."
What caused all this? The main problem seemed to be the bank's inability
to stem the BLBI flow of funds, which had climbed to Rp144.5 trillion. These
funds were given out as loans to a number of banks which had been affected by
the 1997 financial crisis.
It was recently discovered that when they were disbursing these funds
there were abuses of authority and suspected corruption. A number of the bank's
top officials were eventually indicted. They included Paul Sutopo, Heru
Supraptomo and Hendro Budiyanto. All three were sentenced to one year and five
months' imprisonment after they lost their case at the appellate court in June
2005.
Soedradjad Djiwadono, the former Governor of Bank Indonesia for the
1996-1998 period, and three other former directors were also named as suspects
in May 2002.
The Soedradjad case was dropped, among other reasons because the
prosecutors did not have enough evidence. "Pak Soedradjad was only involved at
the policy level, not with technical matters on the ground," said Luhut
Pangaribuan, one of his lawyers.
The BLBI case, said the Tempo source, "had made the image of Bank
Indonesia black-and-blue." The case was featured every day in the newspapers,
and every day at the DPR the bank was equally "battered." The general level of
trust toward the bank dropped drastically. Morale among officials at BI's head
office in Kebon Sirih began to wane.
Then a public relations strategy was devised. The project to restore the
bank's good image was first contemplated at a meeting on June 3, 2003-a few
days after Burhanuddin Abdullah was chosen as the new BI Governor in May 2003.
The meeting was chaired personally by Burhanuddin. A number of
activities, some urgent and some secondary, were discussed. After making some
calculations, the cost of the project was estimated at Rp100 billion.
The difficulty was, according to the source, Bank Indonesia did not have
a budget for these activities. A way out was sought. It was agreed that the
funds would be borrowed from the Indonesian Banking Development Board (LPPI), a
BI subsidiary operating in the field of education.
Members of the bank's board of governors who sat on the supervisory board
of this educational body were assigned to arrange the release of the funds. In
the first phase, Rp50 billion was to be released.
The second meeting was held the following month, on July 22, 2003.
Technical matters were discussed. A committee was formed, called the Social and
Public Development Committee (PPSK). Aulia Pohan and Maman Somantri-both BI
deputy governors-were appointed as coordinators. The PPSK was to operate for a
period of one year.
The details of the PPSK's assignment were also discussed at the meeting,
including conducting research, publishing articles and writing books about
monetary policy and social activities. However, the types of social activities
to be conducted were not detailed.
This meeting also determined that the funds to be withdrawn from this
educational body would be reduced from Rp100 billion to Rp71.5 billion. The
mechanism for returning the money to the LPPI was also discussed.
The decisions made in the meeting were endorsed by the members of the
board of governors, among them: Burhanuddin Abdullah, Anwar Nasution, Aulia
Pohan, Maulana Ibrahim, Maman Soemantri, Bun Bunan Hutapea and Aslim Tadjuddin.
Then the funds began to flow. Some of the money was given directly to
attorneys advising BI officials who were named suspects in the BLBI case.
A list issued by the BPK notes that there were at least three lawyers for
Sudrajat Djiwandono. They were: Albert Hasibuan, who received Rp1.43 billion;
Luhut Pangaribuan, who received Rp1.43 billion, and another lawyer who received
Rp550 million.
Hendro Budianto was aided by two legal teams. T. Nasrullah was paid Rp1.3
billion and a lawyer with the initials ABK was paid Rp5.4 billion. Maiyasyak
Johan, the legal representative of Paul Sutopo, was paid Rp6.7 billion. Some of
his lawyers told Tempo that they received the money from BI as their legal
fees.
Meanwhile, the funds which flowed to the DPR Finance and Banking
Commission were divided into two major categories. One was to resolve the
problem of Rp15 billion in BLBI funds. The other was to push for the amendment
to the Law on Bank Indonesia, which came to Rp16.5 billion.
According to BI documents obtained by Tempo, funds for DPR members were
given to them through Antony Zeidra Abidin, a member of the Finance and Banking
Commission, and member of the Golkar Party who is currently Deputy Governor of
Jambi province. The money in varying amounts was deposited in installments.
Speaking to Tempo, Abidin denied the accusation that he was a paymaster
"appointed" by Bank Indonesia.
Why was the DPR so important to Bank Indonesia? At that time, the DPR was
debating intensively on amending Law 23/1999 on Bank Indonesia. The
deliberation reached a deadlock regarding a number of points. One of them was
the formation of a Supervisory Council and a Financial Services Authority
(FSA).
The Finance Department felt the FSA was needed to oversee the banking
industry. This oversight function was to be held not just by BI, because they
also operated on the ground. Meanwhile, Bank Indonesia officials had a contrary
view. They felt that this supervisory function should reside solely with BI
since it was within their authority.
A Tempo source who sat on the Finance and Banking Commission at that time
said that the debate over the FSA intensified when a number of businessmen and
economic observers intervened. "Each was vying for influence," said the source.
The amendment passed in December 2003. What became of the FSA? The
deliberations on it were delayed until December 31, 2010. This means that the
seniors at Bank Indonesia will have the upper hand for a rather long time.
Understandably, top BI officials were elated with the DPR's decision.
This Tempo source said that the most crucial issue regarding the proposed
amendment was Article 75, which regulates the dismissal of all members of the
board of governors after the amended law goes into effect. This is the article
which will later determine if the existing board of governors will retain their
positions or be replaced.
Because it was not settled in the DPR, on several occasions the fierce
debate over Article 75 continued at hotels. The amendment also eliminated the
proposal to replace the bank's board of governors. It was another victory for
Bank Indonesia's top officials.
The polemic over the BLBI problem was also hotly debated in the DPR. Top
BI officials argued on whether the BLBI program was a government policy
implemented by Bank Indonesia. "So, it would not be proper for BI officials to
go on trial," said the source.
After repeated negotiations, a political decision was finally made on
July 3, 2003. The Finance Department, Bank Indonesia and the Finance and
Banking Commission agreed to resolve the BLBI case in 30 days.
To settle the matter, the government issued a letter of debt for the BLBI
funds in the amount of Rp144.5 trillion. In February 2006, the administration
of President Yudhoyono formed a special team to resolve this problem.
Was the "victory" of Bank Indonesia due to funds going to the DPR? Antony
Zeidra Abidin denies this. Only the establishment of the Financial Services
Authority was delayed. "So BI did not benefit from it," said Abidin.
Abidin said he had asked the BPK to meet with a member of another
commission, before the BPK audit was completed. "I explained to the BPK that
the charges were untrue," said Abidin.
One Tempo source who took part in deliberating the amendment, said that
some of the money from BI was used to fund comparative studies trips by DPR
members to several countries, including Argentina, Europe and other places. "I
myself traveled several times to Europe on these trips," said this Tempo
source, who is also charged with receiving the Bank Indonesia funds.
Of interest is the role of BPK Chairman Anwar Nasution, who admitted to
sending a report to the Corruption Eradication Commission (KPK) regarding this
case. According to a Tempo source, the BPK document which reached the KPK was
not sent by the BPK leader, but by another person who "is concerned with" the
BI case. When the BI story first broke, it turned out that Anwar Nasution had
attended the July 22 meeting in his capacity as a Bank Indonesia deputy
governor.
Does this mean that Anwar also approved the project? He denied taking
part in the process of disbursing the funds to the DPR. He emphasized that each
person's role in the meeting needs to be assessed. "I was there to talk about
returning the money to the foundation," said Anwar.
Three weeks ago, speaking to Tempo, Budi Mulia emphasized that "the news
about us giving money to DPR members is only a rumor." He added that each
activity of Bank Indonesia has a budget, including to cover costs for publicity
and communications. "BI is periodically audited by internal and external
bodies."
Budi Mulia's statement clearly contradicts the Tempo source who verified
that the project to improve the bank's image in 2003 was not budgeted. "That is
precisely the reason why BI officials later sought another source of funding,
namely from the Indonesian Banking Development Foundation (YPPI)," said this
Tempo source.
This source then added that the administrators of the YPPI had even
forced top BI officials to sign a letter confirming their debt to the YPPI on
November 28, 2006. "This was after the Indonesian Banking Development
Foundation asked the bank for the money back but there was no response," said
the Tempo source.
Perhaps internally, Bank Indonesia has returned the funds to the YPPI,
for instance, by lending the Foundation land which can be rented out. The
interesting question is what will become of the BPK audit on funds being paid
out to the DPR members? How will BI officials take responsibility for this?
There are still many questions to which "no comment" is an unacceptable
response.
The lawyers speak out
A number of lawyers have admitted to receiving funds from Bank Indonesia
as legal fees.
Albert Hasibuan:
I received Rp1.43 billion from Bank Indonesia as a legal fee for
providing counsel on the Soedradjad Djiwandono case. I received that money
directly from BI, not from Soedradjad.
Luhut Pangaribuan:
At that time I was one of Soedradjad Djiwandono's laywers. Was the amount
I received Rp1.43 billion? It might have been. I forget. I was his lawyer for
about two years.
Maiyasyak Johan:
I received payment from the central bank according to the contract.
However, I cannot mention the amount because that is a confidential matter.
By Wenseslaus Manggut, Agoeng Wijaya
Tempo, No. 01/VIII/04-10 September 2007
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