The company’s three executives, former president director Hendrisman Rahim, former financial director Hary Prasetyo and former finance and investment division head Syahmirwan, have been sentenced to life in prison for embezzling insurance premium revenue, resulting in Rp 16.8 trillion (US$1.15 billion) in state losses.

They had traded and invested the fund in multiple low quality assets over the course of 10 years, allegedly with the help of asset management companies, businessmen and fund managers that had allegedly manipulated the fund for their own personal gain.  

The three executives were found guilty of violating Article 2 of the 2001 Corruption Law and Article 55 of the Criminal Code, and received the maximum sentence for the crime, which is rarely used for corruption convicts.  

Their illegal property will also be confiscated by the country to recover the state losses, as stated in Article 18 of the 2001 law.

It started with company ‘window dressing’

During a trial session at the Central Jakarta District Court in September, prosecutors revealed how the three executives had planned and executed the crimes in a meticulous manner, which they had conducted from 2008 until 2018.

In 2008, the three Jiwasraya executives had planned to increase the value of the company’s asset portfolio in an instant as an attempt to polish the insurer’s bleak financial report that year — a move known as window dressing.

They later sought help from Joko Hartono Tirto, a director of asset management company PT Maxima Integra and a longtime friend of Hery.

Joko then suggested the three Jiwasraya executives put all of the company’s stock portfolio in a limited participation mutual fund (RDPT) product in PT Treasure Fund Investama (TFI), one of several investment management companies controlled by publicly listed mining company PT Trada Alam Minera president commissioner Heru Hidayat.

The three Jiwasraya executives, Heru and Joko met in early 2009 to follow up the plan.

In their meeting, Heru pushed Jiwasraya to also invest in stocks of several publicly listed companies. Before selling those shares to Jiwasraya, Heru, along with publicly listed property firm PT Hanson International president director Benny Tjokrosaputro, had boosted their company shares’ prices through “pump-and-dump”, a stock price manipulation scheme.

The three Jiwasraya executives later agreed with Heru’s offer. But that agreement, however, paved the way for the three Jiwasraya executives, Heru, Benny and Joko to commit more fraud using the insurer’s funds.

The three executives granted Heru and Benny the control to invest a part of the insurer’s Rp 91.1 trillion premium revenue from 2008 until 2018 on stocks and mutual funds, with all the investment process directly executed by Joko.

Heru and Benny successfully gained Rp 4.65 trillion from carrying out the pump-and-dump scheme on stocks of several companies, including those affiliated with both of them, and selling those shares to Jiwasraya.

During the same period, Heru and Benny also directed 13 investment management companies to place the insurance fund in 21 mutual fund products, which channeled the money to stocks of companies affiliated with both of them. As a result, Benny and Heru pocketed Rp 12.15 trillion.

After successfully gaining profits from those illicit transactions, Benny and Heru later gave various forms of gifts to the three Jiwasraya executives, including cash, travel packages and luxurious cars, via Joko in relation to their cooperation in managing the insurance fund.

How the case was uncovered

In 2018, the Jiwasraya executives stepped down from their positions. But their departure left a financial predicament that might be hard to resolve by the newly appointed Jiwasraya directors.

The valuation of the manipulated stocks and mutual funds plummeted at the bourse after the departure of the executives, leading Jiwasraya to experience a decline in its investment portfolio values. The company also endured a capital loss since those investments had failed to yield returns.

In October 2018, the new Jiwasraya management announced its failure to pay out around Rp 800 billion in matured policies of the JS Saving Plan, one of the insurer’s bancassurance products launched in 2015, through a circular to its policyholders.

The state insurer later booked an unaudited loss of Rp 15.3 trillion during the same year after making a profit of Rp 360.3 billion in 2017, prompting the Supreme Audit Agency (BPK) to conduct a preliminary investigation into the company’s financial performance in 2018.

The agency later found that the company’s failure to pay out matured policies, along with the sudden losses, were likely caused by investment mismanagement.

In October 2019, then-state-owned enterprises minister Rini Soemarno filed a report on alleged fraud in the state insurer with the Attorney General’s Office (AGO), hoping that the office could uncover the culprits behind the mismanagement.

The office later commenced its investigation into the alleged fraud on Dec. 27, 2019 and finally named the three Jiwasraya executives, Heru, Benny and Joko as suspects in the case a month later. The AGO also named the 13 investment management companies and former Financial Services Authority (OJK) official Fakhri Hilmi as suspects in June.

Due to the state losses, Indonesian Anti-Corruption Community (MAKI) coordinator Boyamin Saiman said the Jiwasraya case was arguably one of the biggest graft cases in the country.

The case, he said, had undermined public trust in the insurance sector, which had only marred the reputation of the entire financial service sector in the country.

He added that the case had had a detrimental effect on the insurer's policyholders as they might have endured financial distress due to Jiwasraya’s failure to pay out their matured policies. As of February, the company still had to fulfil its obligation to return Rp 16 trillion in matured policies.

Will there be more suspects?

Prosecutors have demanded life sentences for Benny and Heru and forced them to return a total of Rp 16.8 trillion, which they had allegedly embezzled from Jiwasraya.

The AGO recently announced it had named publicly listed capital market brokerage company PT Himalaya Energi Perkasa director Pieter Rasiman as a new suspect in the case. The office accused him of assisting Joko to commit the investment fraud.

The office also summoned 11 witnesses for questioning regarding the case on Monday and Thursday, consisting of executives and employees of various asset management companies.

“In total, we have questioned around 200 witnesses over the past five months and we have committed to continue finding new facts surrounding the case,” said AGO spokesman Hari Setiyono.