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The Haunting Of Bank Bali


Finance: Bailouts

The Haunting of Bank Bali

A secret buyback bid could put financial reform at risk

Rudy Ramli is a man on the run. The former CEO of Bank Bali, who was sacked when the government nationalized his failed bank in July, sleeps in a different Jakarta hotel every night. He's hiding from Indonesian auditors, police, and the press, all of whom want to ask Ramli about a scandal involving payment of an absurdly high fee to a company connected with the ruling party. They also want to know whether he is trying to regain control of the bank by secretly buying up shares. Reached on his mobile phone, Ramli confirms he is attempting a takeover, but won't reveal the details or his location. "Why should people know where I am?" he asks.

Just a few weeks ago, London's Standard Chartered Bank finally seemed ready to lock up a deal with the Indonesian government to take over Bank Bali. But in August, it was discovered that anonymous investors had managed to accumulate a 39% stake in Bank Bali by buying shares through a German clearinghouse. Behind the move, finance sources say, is Ramli.

Even though Jakarta had nationalized Bank Bali in July, it didn't get around to wiping out the stakes of existing shareholders. This was supposed to happen in late October, after Standard Chartered closed its $123 million acquisition of a 20% stake. Bank Bali then was supposed to issue new stock that would dilute the holdings of existing shareholders to negligible levels. But the investor group moved before this could happen. So even though Standard Chartered was given management control in July, the shadow investors now may have a big enough stake to block the sale.

If the Standard Chartered deal falls apart, the damage to Jakarta's financial reforms could be immense. "Other potential foreign investors are going to be watching this transaction to see how it progresses," warns Douglas K. Beckett, head of Standard Chartered's management team at Bank Bali. A probe by PricewaterhouseCoopers is due in early September. Both the International Monetary Fund and the World Bank have threatened to cut off further funding for Jakarta until it clears up the mess. "An unsatisfactory solution would be a disaster scenario," said IMF Asia-Pacific Director Hubert Neiss.

The saga began in March, when Bank Bali, on the verge of collapse from bad loans, applied for government rescue. The bank's management was not deemed by Indonesia's central bank to be "fit and proper," and Bank Bali was led into negotiations with foreign investors. In April, Standard Chartered won the bid for 20% of the bank, with the option of buying the remainder. But in July, auditors PricewaterhouseCoopers found the bank had diverted

$80 million to a company controlled by the ruling Golkar party's deputy treasurer. Authorities say that money was destined to bankroll the reelection efforts of President Habibie.NO REASON. Justice Minister Muladi has ordered a wider investigation. The Golkar deputy treasurer, Setya Novanto, has said his firm took the $80 million as a fee for collecting problem loans that Bank Bali had made to other nationalized banks. Bankers say the fee was ridiculously high and that Bank Bali had no reason to pay it because the government had already guaranteed the loan repayments.

Standard Chartered is continuing to fight: Acquiring Bank Bali would give it 280 branches and 1 million customers nationwide. So Standard Chartered is demanding full disclosure from the regulators on who owns the 39% stake. Former CEO Ramli won't admit he's the one buying the shares. A statement issued by his lawyers denied any wrongdoing in the Bank Bali scandal: "Nothing went to Rudy Ramli. All Rudy Ramli left with was an empty briefcase." Could be. But he's certainly left one juicy scandal.By Michael Shari in JakartaReturn to top

TABLE

The Deepening Debacle at Bank Bali

MARCH

Bank Bali, hobbled by bad debts, applies for government rescue. Government instead puts bank stake up for sale.APRIL

Standard Chartered makes winning bid to buy 20% of Bank Bali, with an option to buy the rest later on.JULY

An audit shows that $80 million in Bank Bali funds was diverted, allegedly for President Habibie's reelection campaign.MID-AUGUST

Apparently to thwart Standard Chartered's takeover, anonymous investors buy a 39% stake in Bank Bali.LATE AUGUST

The IMF warns of "disaster" if the Bank Bali case is not resolved. PricewaterhouseCoopers is hired to investigate the bank.

DATA: BUSINESS WEEKReturn to top


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