Whatever the results of Bumi plc’s extraordinary general meeting (EGM) in London on Thursday, the Bakries need to clean up alleged regularities in order to help restore the reputation of its crown jewel, Jakarta-listed PT Bumi Resources, analysts say.
Bumi Resources has been under the spotlight for alleged financial irregularities after a whistleblower brought documents to the firm’s 29.2 percent owner, Bumi plc, in September last year.
The documents reportedly exposed US$1 billion in financial malfeasance in Bumi plc’s Indonesian assets, which are its stake in Bumi Resources and a 84.7 percent stake in PT Berau Coal Energy.
Bumi plc, in which Indonesian investor Bakrie Group indirectly owns 23.8 percent, decided to involve law firm Macfarlanes LLP to conduct an investigation into the allegations. However, the probe’s results have been kept from the public as the firm was unable to gather enough evidence to substantiate the allegations because of Bumi Resources’ refusal to cooperate.
The allegations also sparked a high-ranking corporate showdown in Bumi plc involving Bakrie Group and Nathaniel Rothschild, who controls around a 14 percent stake in Bumi plc.
Bumi plc has said that it would continue “to take the allegations extremely seriously and will make a considered decision on seeking recoveries based on careful evaluation of the associated costs”. It also said that it would cooperate with the Indonesian regulator OJK.
However, OJK said it has not been contacted by Bumi plc.
“I could not give further comments on that for now. Because, they also denied it [the allegation]. We have not received any report over the matter and have not been contacted,” OJK commissioner Nurhaida said on Thursday.
The Bakries, whose politically connected family includes Golkar party chairman and presidential candidate Aburizal Bakrie, seemed to use legal measures to restore its name.
“We have taken these damaging accusations extremely seriously by instigating a judicial process with a court-appointed, independent auditor who will launch an investigation,” Bakrie Group senior vice president Christopher Fong said.
Co-founder Nat Rothschild’s overhaul plan and bid to oust the current board was put to a shareholder vote in London on Thursday in a public showdown between the financier and his one-time partners.
Rothschild wants to remove at least 12 of the 14 current directors and bring in a new board including himself.
The outcome of the vote, which will decide the short-term future of one of the world’s largest exporters of thermal coal, hangs in the balance after a last-minute sale by a major Indonesian investor earlier this week. Nat had admitted that he might lose the vote. The results of the meeting will be announced on Friday.
Bumi Resources said last November that its audit committee had obtained approval from the South Jakarta District Court to perform an independent investigation over the alleged financial fraud. The result of the investigation, which also includes allegations that its subsidiary PT Bumi Resources Minerals misused funds amounting US$110 million, must be reported to the South Jakarta district court within 90 days.
As of Thursday, the court had yet to issue a ruling.
“The report is confidential and already submitted by the court-appointed experts,” Bumi Resources director and corporate secretary Dileep Srivastava said in a text message on Thursday.
Bumi Resources, which previously ran a hotel and tourism business before finally turning to the mining sector by acquiring PT Arutmin and PT Kaltim Prima Coal, has moved to balance the negative perceptions caused by the widely reported allegations by launching its own counter investigation, separate from that of Macfarlanes, according to capital market observer Yanuar Rizky.
“The court will rule and it is recorded in the state dossier. It is a legal matter. If any shareholder with a stake in Bumi Resources is not satisfied with the ruling, they can propose [to include it in] the agenda of Bumi Resources’ shareholders meeting. If such a move is approved, an auditor will be appointed to conduct a review,” Yanuar said.
Fong also said that the Bakries had requested police investigations in both Indonesia and United Kingdom surrounding the providence of the allegedly stolen documents, which were used as the legal basis of Macfarlanes’ investigation. He said that the stolen documents had been doctored to provide a misleading view.
“We have nothing to hide from these investigations and believe that Nat Rothschild needs to and will be required by the authorities to fully explain where he obtained these stolen documents. Once this information becomes public, we believe the perception issues surrounding Bumi Resources will be resolved as will shareholder trust and value,” he added.
The Bakries have been linked to several problems in the capital market. In 2010, three companies under the conglomeration, namely PT Bakrie and Brothers (BNBR), PT Bakrie Sumatra Plantations (UNSP) and PT Energi Mega Persada (ENRG), were each fined Rp 500 million (US$51,500) by the Indonesia Stock Exchange (IDX) for a failure to properly explain discrepancies in the amount of money placed as deposits at PT Bank Capital.
The three Bakrie companies reported that they had time deposits worth Rp 9.05 trillion in Bank Capital in their first quarter financial reports of 2010. However, Bank Capital’s total deposits at that time were only Rp 2.69 trillion.
The family also remains under the spotlight for PT Minarak Lapindo Jaya, a subsidiary of PT Lapindo Brantas, whose business allegedly caused a mudflow in Sidoarjo, East Java. As recently reported, the company, which is partly owned by the Bakrie family, has not complied with its obligation to pay Rp 800 billion in damages to victims of the mudflow.
In 2008, Bakrie Life failed to return around Rp 360 billion invested by some 250 clients in its insurance-based product Diamond Investa. The company blamed the global economic crisis as the main factor for the failure. The company’s former clients remain locked in struggle to seek the return of their investments.
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