The Indonesian government that left power in 2014 was a vast criminal conspiracy that stole as much as US$12 billion from taxpayers and laundered it through international banks, with as many as 30 officials in on the scheme, according to a massive 488-page investigation filed with the Mauritian Supreme Court last week.
The report, a forensic analysis known as a testament in evidence, was compiled by a task force of investigators and lawyers in Indonesia, London, Thailand, Singapore, Japan and other countries, that was filed along with an 80-page affidavit containing the allegations. It also implicates a string of international financial institutions including Nomura, Standard Chartered Bank, United Overseas Bank (Singapore) and others.
Bank Century the Start
Much of the fraud is alleged to revolve around the creation and subsequent failure of the notorious PT Bank Century Tbk, which capsized spectacularly in 2008 and which was colloquially known as “SBY’s bank,” a reference to then-President Susilo Bambang Yudhoyono because it was believed to contain slush funds tied to the Democratic Party, which Yudhoyono heads. The bank was recapitalized in 2008 and renamed Bank Mutiara.
The current fraud involves a mysterious ¥97.682 billion (US$989.1 million) rights offering by the J Trust financial group in Tokyo in 2013, which gave J Trust the resources to purchase Bank Century, which was taken over by the government, recapitalized after hundreds of millions of dollars were stolen, and renamed Bank Mutiara in 2009.
The sources of the J Trust rights offering, on the Tokyo Stock Exchange, have never been identified. The proceeds were supposed to be used by J Trust to purchase Bank Mutiara from the LPS in 2014.
The Mauritius-based Weston International Capital Ltd was a thwarted suitor in that auction along with several other banks. The 488-page analysis accuses Indonesian officials of rubberstamping the purchase and assessing J Trust officials as “fit and proper” to run the bank although they supposedly had never run a retail commercial bank and in fact had been involved in the huge Livedoor Credit scandal in 2005 in Tokyo.
Did J Trust get it Free?
As Asia Sentinel has reported, there is no evidence that J Trust ever paid off the US$366.67 million to buy the bank. LPS records indicate that J Trust actually paid only 6.8 percent of that amount, or US$24.14 million upfront, and that was 33 days after the alleged sale date. The remainder was covered via Bank Indonesia by a sharia loan promissory note through the LPS for the remainder. In 2015, according to LPS records, the insurance corporation wrote down Rp3.065 trillion (US$230.65 million) on the sharia promissory note to zero.
The plaintiffs allege that the Bank Mutiara sale was “conspiratorially executed through an illegal, private, nontransparent share purchase agreement” designed by Kartika Wirjoatmodjo, Indonesia’s top banker, and others “with the real intention of plundering the LPS treasury and insurance reserves in amounts exceeding US$1.05 billion over 10 years “in order to unjustly enrich kleptocrats while defrauding the state of Indonesia and priority creditors, namely the plaintiffs.”
Weston, which commissioned the report, has waged a bellicose five-year legal campaign in courts across the world to reclaim what it alleges is US$620 million stolen from it from 2008 to 2015. Weston alleges they were cheated through the fraudulent Mutiara sale ”prompting concealment, embezzlement and money laundering” led by Indonesia’s Bank Deposit Insurance Corporation and its former CEO, Kartika, now CEO of PT Bank Mandiri, Indonesia’s largest bank. Subsequent claims by Weston and its subsidiaries in a barrage of lawsuits have run their demands to more than US$1.24 billion.
KPK on the trail
Asia Sentinel’s three-year series of stories on the affair in 2017 triggered an ongoing investigation by the Indonesian Corruption Eradication Commission (KPK) into the activities of the Bank Deposit Insurance Corporation, an independent private-sector institution that insures depositor funds that is known by its Indonesian acronym LPS. A source told Asia Sentinel last week that the probe, involving officials including the highly respected Kartika, who is president of the Indonesian Bankers Association, and is still moving forward.
It is extremely doubtful if not outright fanciful to think Yudhoyono would ever be prosecuted in Indonesia if indeed he were implicated, Indonesian sources say unanimously. However, Boediono, the former governor of Bank Indonesia, the country’s central bank may be another story as far as the KPK is concerned.
In the current case filed by Weston units in Port-Louis, Indonesian authorities insist that the Mauritian courts have no jurisdiction over the matter. Weston has filed objections stating the Mauritian Supreme Court does have authority and the High Court of Singapore is said to be close to ruling on the point of law.
US G-Men on the trail
The alleged conspirators may face bigger trouble from the US Treasury and Justice Departments because of reports of laundering of funds through the US-dollar SWIFT electronic transfer system, through which almost all of the world’s financial transactions pass. The Treasury Department has initiated a wide-ranging campaign against money laundering across the globe, headed by Marshall Billingslea, Assistant Secretary for Terrorist Financing and Financial Crime, in an attempt to stop the flow of billions of dollars that wash through the financial system every day.
Sources say the US officials are now beginning to look at Indonesian transactions, especially those that passed through Standard Chartered Bank (Singapore), Wells Fargo (NY), United Overseas Bank (Singapore) and the Cyprus branch of FBME, the notorious Tanzanian bank that was shut in by the Financial Crimes Enforcement Network, or FinCEN, a unit of the Treasury Department in 2014.
It was US investigators for the Justice Department who played the dominant role in compiling evidence against Prime Minister Najib Razak of Malaysia and other principals in the looting of the state-backed 1Malaysia Development Bhd. As with the 1MDB affair, large amounts of the Bank Century money are believed to have been invested in California real estate.
In fact, the 488-page testimony in evidence report made available to Asia Sentinel outlines fraud many times bigger than has ever been described before. According to the report, the affair harkens back to the creation in 2004 of Bank Century. The bank is alleged to have been the repository of hundreds of millions of dollars controlled by Yudhoyono, known universally as SBY, and the Democratic Party, which he headed. Yudhoyono came to power on a reformasi platform and was regarded as a considerably more able and honest chief executive than his predecessors.
A ”collective primary group of 30 Republic of Indonesia government executives” collaborated for more than 15 years “in an effort to steal, launder and conceal over US$6 billion of crimes under the orders of the previous President of Indonesia, and former Bank Indonesia Governor and ROI Vice President Boediono,” the report says.
Bank Indonesia and the LPS have allegedly acted as “concealers and co-conspirators” since 2003, operating as a “perfect organized criminal group as defined…under the United Nations Convention Against Corruption (“UNCAC”) and the United Nations Convention Against Transnational Organized Crime (“UNTOC”).
In fact, the report states the theft took place over five different phases, beginning with Bank Indonesian regulatory malfeasance and failure to regulate, but then moved into consecutive stages, with the LPS, the central bank and the Financial Services Authority of Indonesia, among others, involved in “embezzlement, theft, fraud, bribery, concealment, statutory audit fraud and money laundering” of unprecedented proportions.
Although the Bank Century scandal has been covered exhaustively in both domestic and international media, the report raises new allegations, reporting that Bank Century was fraudulently created and licensed in the first place, with its assets inflated by worthless notes contributed from Nomura International PLC units as well as promissory notes from its then-bank president, Robert Tantular, and his associates.
When the global financial system crashed in 2008, Indonesia’s Financial System Stability Committee (KSSP) led by Central Bank Governor Boediono and others increased US$75 million of emergency capital injections to the equivalent of US$732.66 million to try to save the bank. Immediately more than US$290 million of slush funds and illegal campaign bribes were laundered out of Bank Century and into Bank Central Asia, Bank J P Morgan, Bank Danaman and Bank Mandiri, according to an Indonesian State Audit Bureau Report dated Dec. 23, 2011.
According to the report, accounts at Bank Century were allegedly forged to bear the name of Budi Sampoerna, the tobacco magnate and one of Indonesia’s richest men. In fact the accounts eventually totaling US245 million although Sampoerna allegedly maintained only Rp196.874 billion (US$13.12 million at current exchange rates) in the Bank.
According to the Indonesian Audit Board, principal owner Tantular and other Bank Century officials created more than 2,000 fake accounts for Tantular alone to inflate Bank Century’s fraudulent loan portfolio using the phony Nomura securities to support capital adequacy ratios required by Bank Indonesia.
In fact, the report alleges, “Bank Century and Robert Tantular were handpicked…to safeguard illegally allowed campaign funds and when it was discovered in 2008 that Tantular had stolen over US$500 million from Bank Century… a team of government kleptocrats led by Bank Indonesia, the LPS, Financial Services Authority and the Ministry of Law and Human Rights were sent into the bank to try to clean up the mess, return illicit campaign funds held in forged Budi Sampoerna accounts and lay all of the blame on Tantular’s partners, Rafat Ali Rizvi and Hesham Al Warraq, who to this day are falsely blamed for Tantular’s theft, embezzlement and money laundering of US$365 million.
“The story of the LPS/Bank Indonesia conspiracy to defraud the ROI and Bank Century creditors of more than US$6 billion from 2004 to 2018 begins here,” the report continues.
Despite the theft of an estimated US$36 billion by the country’s onetime leader Suharto, the report calls the subsequent events “the greatest kleptocratic theft in Indonesia’s history” and describes a conspiracy to loot and launder the bank deposit insurance unit’s treasury, including by “LPS Executives, Bank Indonesia Governors and Deputy Governors, Financial Authority/OJK Commissioners and Ministry of Law and Human Rights Ministers and Deputy Ministers in conjunction with Bank Century/Bank Mutiara/Bank JTrust Commissioners, Directors and Executives in partnership with Tantular and the Tantular family.”
Huge House of Cards
The report describes a huge house of cards made up of valueless notes and commercial paper issued by Nomura Bank units, fraudulent promissory notes by Tantular and Nomura amounting to more than US$11 billion of allegedly worthless instruments between 2003 and 2008, all relying on inflated monthly Standard Chartered Bank (Singapore) Net Asset Values that were never verified by Bank Indonesia regulators including former Deputy Gov. Budi Mulya and Gov. Abdullah, both convicted of bribery, money laundering and embezzlement.
First Global Funds Ltd, a Weston affiliate, claimed in a lawsuit filed in 2016 that Nomura Bank helped to defraud the system of US$732 million through the issuance of securities bearing no value from inception. Nomura executives to this day claim they had no knowledge of what backed the securities to Bank Century in exchange for tens of millions of US dollars of underwriting and placement fees.
Weston, in suits filed in courts across the world, alleges that the Indonesians laundered the stolen money out in both US dollars and rupiah via the SWIFT system through US and UK banks including Wells Fargo, Wachovia Bank, HSBC, Standard Chartered Bank, United Overseas Bank, Bank Raykat Indonesia, Bank Negara Indonesia, Bank Central Asia (Indonesia), ANZ Bank, National Australia Bank (NAB), Citibank Indonesia, New York and Hong Kong and multiple other smaller banking and brokerage institutions.
In the meantime, Bank JTrust Indonesia appears to have turned into a money-losing machine of astonishing proportions.