Karangasem residents prepare for gloomy festivities

Indah Setiawati ,  The Jakarta Post ,  Karangasem   |  Tue, 03/10/2009 4:30 PM  |  Bali

The Dewa Mas village chief in Karangasem, Bali, had hoped to celebrate a particularly joyous Galungan *Hindu festival* this year after investing Rp 17 million (approximately US$1,400) in the Develop Karagasem Cooperative (KKM), an organization promising members a return of 150 percent every three months for their financial commitment.

When Bali Provincial Police shut down the co-op based on allegations it was running a Ponzi scheme and stealing from investors, village chief Nyoman Mangku Pura was naturally very concerned about the impact this would have on both himself and local villagers.

"I think for Karangasem residents, Galungan will be very gloomy this year. Most of us put our money into KKM so we could make a little cash ahead of the festivities, which are normally quite expensive," he told The Jakarta Post on Friday.

Mangku Pura is not alone. Almost all of the villages 675 families had a stake in the co-op for various reasons, many after some quick cash to fund the Galungan and Kuningan festivities and the Saka New Year, also known as Nyepi.

"I just don't understand why police did not shut the co-op earlier, before it gained such a huge number of members and trust," he said.

"Or at least there should have been some sort of warning from the government so we would stop investing."

Mangku said he was enticed by the prospect of making a profit without having to work hard.

He said many people trusted the co-op management because they saw others making significant profits and wanted to get in on the scheme. Many said at the time that *seeing is believing' and increased their investments.

Villager Ketut Sulandra said he was initially suspicious of the extreme return promised by the KKM, but in the end he could not resist temptation when he saw others making double and triple their investments in profit.

"In the beginning, I did not trust the KKM. I kept wondering how they could generate the money to pay members," he said.

"The attraction with the co-op was spread by word of mouth."

Sulandra, who thought the co-op would last until the end of this year, said he eventually invested his entire family savings of Rp 30 million into the scheme in January, promising himself he would withdraw it by March once he had made enough to build a home.

The KKM, he said, had around 72,000 members and offered to pay back 50 percent of the investment value within the first two and a half months.

"Members would receive the same amount again three times a year, which encouraged them to re-invest and increase their profit."

He said his extended family had chipped in to invest Rp 13 million and planned to add another Rp 7 million to build a family temple but the KKM was closed before they could get reap any reward.

"Now, I do not anticipate having the money to build my house or a family temple," he said.

A similar situation also occurred in Tengading village. Nyoman Widia, a resident, said locals running the temple management board heard about the co-op and invested Rp 50 million, hoping to earn enough to reconstruct their temple.

"Now they are responsible for reimbursing those who did not get any money back, " he said.

Many Karangasem residents said they hoped the KKM would re-open if it could be show the co-op was not breaking the law, because they believed it could make them prosperous.

The Bali provincial administration has set a special team to help police investigate the case by registering all the members and their history of investments. The team has also been assigned the task of coming up with a way to return money to investors.

The team was established to back a similar team formed earlier by the Karangasem regency administration after it was discovered many of the investors in the KKM were actually from outside the regency.

Police shut down the KKM operation on Feb. 20 and confiscated a total of Rp 312 billion in cash, gold and automotive ownership documents in the raid.

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