Century's founder arrested, BI execs probed

Rendi A. Witular ,  The Jakarta Post ,  Jakarta   |  Fri, 11/28/2008 10:57 AM  |  Business

The National Police has detained Robert Tantular, one of the key controlling shareholders of ailing Bank Century, for allegedly requesting the bank's management to breach the existing banking regulations.

According to police, Robert's request ultimately resulted in the recent mess at Century, which came under the management of the government-sanctioned Deposit Guarantee Agency (LPS) after its capital plunged below zero.

"Robert's orders to the management have jeopardized the bank. We have to detain him out of concern he will flee," National Police director for banking and special economy, Brig. Gen. Edmond Ilyason, said Thursday.

Edmon declined to give a specific example of how Robert's actions had damaged the bank's sustainability.

The police picked up Robert at his office in Senayan, Central Jakarta, on Tuesday evening. Robert received an overseas travel ban from the immigration office on Saturday, at the request of the Finance Ministry.

National Police chief detective Comr. Gen. Susno Duadji said Robert had put the bank at risk by regularly interfering in its management, preventing them from doing their jobs in line with banking regulations.

"We're charging him with breaching Articles 50 and 50a of the banking law. He has made the bank run counter to principles of prudent banking," said Susno. He declined to elaborate.

Robert, whose father Hashim Tantular founded the bank in 1989, has been confirmed by the central bank as a controlling shareholder in Century, along with Rafat Ali Rivsi, from the UK, and Hesham Alwarraq from Saudi Arabia.

Officially, Robert has a 9 percent stake in Century via PT Century Mega Investindo, and Rivsi and Alwarraq have 11.23 percent through First Gulf Asia Holding Limited.

But analysts suspect that in practice they control most of the 55 percent of the shares currently in public circulation.

Bank Indonesia (BI) has accused Century's controlling shareholders of hiding the bank's assets, worth around US$123 million, in Singapore and the United Kingdom in the form of securities portfolios.

The government took control of Century at BI's request after the bank's capital adequacy ratio (CAR) plunged to negative 2.3 percent from around 18 percent in September.

The government, via the LPS, has provided Rp 2 trillion (US$173 million) to keep Century afloat, Rp 1 trillion of which was channeled there Monday.

BI has said the Century fiasco was due to an "inherited problem" resulting from the imprudent purchase in 2002 of high-risk notes worth $225 million. On Oct. 30, Century defaulted on loan repayments for the note exchange amounting to $56 million.

The default triggered a run on deposits by Century's major corporate depositors, causing the bank to teeter.

However, lawmakers and analysts blamed BI for compromising too much with Century despite several incidents that should have forced BI to close down the bank.

In 2002, for example, former BI deputy governor Aulia Pohan decided to spare Bank CIC, as Century was known before it merged with Bank Pikko and Bank Danpac in late 2004, even though it was bogged down by a negative CAR and abuse.

Aulia, who is the father-in-law of President Susilo Bambang Yudhoyono's eldest son, is now a suspect in custody for his alleged involvement in a bribery case implicating legislators.

Susno said the police would soon question BI officials who had been supervising Century to net more suspects.

"We are going to investigate BI officials but as witnesses first. Other parties with knowledge about Century will be investigated as well," said Susno.

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