End in sight for Bank Century circus
By Gary LaMoshi
DENPASAR, Bali - An investigation of Indonesia's Bank Century, which required a
bailout in 2008 that eventually climbed to 6.7 trillion rupiah (US$720
million), has been taken up by the quasi-independent Corruption Eradication
Commission (KPK), a move that should end the political
circus surrounding the looted lender.
KPK investigators can now focus on so far unsubstantiated charges that
legislators have flung at the government as well as bankers yet to be tried for
participating in the fraud. Months of opposition grandstanding have found no
evidence to back charges that bailout funds were siphoned to last year's
re-election campaign of President Susilo Bambang Yudhoyono (SBY) or to members
of his cabinet.
Attempts to tar Vice President Boediono, the central bank chief at
the time of the bailout, and Finance Minister Sri Mulyani Indrawati with the
corruption brush have also come to naught. The pair of technocrats who
authorized the bailout came into the scandal with sterling credentials
internationally, burnished by keeping Indonesia's economy growing despite the
global recession. They'd also steered clear of Indonesia's political cesspool,
which made them tempting targets for mudslinging lawmakers.
Parliamentary efforts to ignite Bank Century into a full-blown crisis likely
fizzled last week. The House of Representatives voted 325-312 that the bailout
violated laws, directing law enforcement agencies to investigate further. Three
of the erstwhile partners in Yudhoyono's ruling coalition - Golkar, the United
Development Party and Prosperous Justice Party - voted with the opposition in
an embarrassingly undisciplined session.
Yudhoyono's allies headed off a more damaging proposal that would have
specifically accused Boediono and Mulyani of wrongdoing. They look set to
retain their cabinet positions, much to the relief of the international
As Indonesian banking scandals go, Bank Century is a relatively straightforward
affair. Regulators began uncovering Bank Century's problems in 2005, and by
late 2008 the bank faced a liquidity crunch that led to a wave of withdrawals,
putting it on the verge of collapse. With financial turmoil spreading globally
from Wall Street, Indonesian authorities believed that a bank failure - even a
small one such as Bank Century - could put the entire banking system at risk
and shatter international confidence in Indonesia's finances.
Eleven years after
The government instinctively feared a possible repeat of the 1997-98 Asian
financial crisis in which Indonesia suffered the most damage. Then, the
rupiah's exchange value fell to one-sixth of its pre-crisis level, wreaking
economic havoc that spawned political turmoil, deadly rioting, and at least one
near military coup. Recovery in some areas of the economy remains spotty, even
a dozen years later.
Central bank chief Boediono ordered the Bank Century bailout and Mulyani, as
head of the president's Financial System Stability Committee, approved it under
authority granted by Yudhoyono. Because the president was traveling at the
time, Mulyani said she informed then-vice president Jusuf Kalla of her decision
by text message. State regulators took over Bank Century on November 21, 2008,
estimating that the bailout would cost 670 billion rupiah, one-tenth of the
final amount. At the time, there was scant opposition to the move, and many
legislators voicing outrage last week had spoken in favor of the bailout in
Law enforcement officials moved swiftly to arrest Robert Tantular, a key Bank
Century shareholder, and issued arrest warrants for Hesham Al Warraq and Rafat
Ali Rizvi, who owned a majority stake through their company, Gulf Asia
Holdings. Tantular was convicted of fraud last September, receiving a four-year
sentence and a fine of 50 billion rupiah, a fraction of what auditors say was
his share in fraud that totaled as much as 25 trillion rupiah. Authorities
reportedly have recovered just 13.7 billion rupiah of the bank's missing funds.
Following the trial, Rizvi issued a joint statement with Al Warraq denying
links with Tantular and offered to cooperate with police if they dropped
charges against them. The pair remain fugitives sought under international
warrants. They are believed to be in Singapore, which has no extradition treaty
The Bank Century saga may have ended there, pushed from the spotlight by last
year's presidential campaign that culminated in Yudhoyono's landslide
re-election in July and bomb blasts that rocked two Jakarta luxury hotels just
a week later. But before his vice presidential term ended on October 20, Kalla
- who ran against Yudhoyono for the presidency - began raising questions about
the Bank Century bailout nearly a year after the fact, challenging its legality
on the basis that he wasn't consulted at the time.
Kalla's questions gave opposition lawmakers - riled that Yudhoyono had won
so handily andhad assembled a six-party coalition representing three-quarters of
the votes in the House of Representatives - an opening to attack the new
government. The Bank Century issue suited politicians because House members had
no role or responsibility for it, giving them unbridled opportunity to accuse
and fulminate without consequences.
Legislators charged that the bailout funneled campaign funds to Yudhoyono's
Democrat Party and tried to link the rescue to last year's other sizzling
post-election scandal, a plot by police and court officials to frame KPK
To be sure, there are legitimate questions about the Bank Century bailout, such
as where did all the money go and why did the original estimate of the bailout cost
subsequently skyrocket. But it also presents an opportunity to address the
broader bailout process and bank regulation, with an eye toward reform.
Instead, lawmakers turned the bailout into a witch hunt to fight rather than
Target of opportunity
Yudhoyono's overwhelming mandate and his second-term cabinet, minus first-term
elements of the corrupt establishment who tied business to politics, made it
crucial for entrenched interests to strike back. "They found their chance in
Bank Century," Wimar Witoelar, spokesman for former president Abdurrahman
Wahid, said. "The case was taken over by serious money, acquiring politicians
and media support in the most cynical cabal since 2001" when reformer Wahid was
ousted from the presidency on phony corruption charges, he claimed.
Witoelar placed Golkar chairman and Yudhoyono first-term minister Aburizal
Bakrie at the center of efforts to discredit Boediono and Mulyani, even though
Golkar is part of Yudhoyono's ruling coalition. Bakrie and Brothers, the family conglomerate,
a bedrock of the business establishment that prospered under Suharto, has a
pending tax case that could cost it up to 10 trillion rupiah, and Witoelar
believes that sparked a vendetta against Mulyani.
Yudhoyono could have put an end to the Bank Century distraction months ago if
he had staunchly defended Boediono and Mulyani, which he belatedly did
following the House vote last week. Instead, he let lawmakers and
anti-corruption protestors - supporting, if not supported by, the most hardcore
corrupt elements in Indonesian politics and business - have their shout. He
also offered conciliatory words to the coalition parties that had voted with
Critics have long said that Yudhoyono isn't tough enough on his political
enemies. It is true that no one has emerged to replace Kalla and enforce a
measure of discipline among lawmakers, but the president can be forgiven for
acting dismissively in the face of a blatantly political exercise lacking in
logic or substance. In the bigger picture Yudhoyono apparently sees keeping his
coalition intact as a blueprint for progress, creating a legacy of government
by cooperation and persuasion rather than corruption and payoff.
Unfortunately, entrenched opponents of good governance, whether they call
themselves partners or opponents of the ruling coalition, will be waiting for
their next opportunity to derail those reform efforts. They hope Yudhoyono's
relatively clean regime will be an interlude, not a turning point, in
Indonesia's history of venal politics.
Longtime editor of award-winning investor rights advocate eRaider.com, Gary
LaMoshihas written for Slate and Salon.com, and works an adviser to
Writing Camp (www.writingcamp.net). He
first visited Indonesia in 1994 and has tracking its progress ever since.