Most of the executives at the deeply troubled Bank JTrust Indonesia appear to have been forced out or quietly departed over recent months amid rumors that the Indonesian Bank Deposit Insurance Corporation is about to once again take control of the bank and sell it to new owners.
Takeover candidates are said to be either the Bandung-based PT Bank Jabar Banten, owned by East Java government interests, PT Bank Sinarmas, affiliated with the Sinar Mas conglomerate, or Saikyo Bank Japan.
The sale is rumored at the equivalent of US$50 million, which means the Tokyo-based J Trust Co. Ltd. would have potentially incurred losses exceeding US$300 million. That is a far cry from the US$366.65 million the bank was allegedly sold for when J Trust bought it under questionable circumstances in 2014.
Departure widely expected
The departure of J Trust is widely expected as it faces liquidity issues in Japan and fraud charges lodged by Group Lease PCL, a Thailand-based hire-purchase company, in Cambodia. On Nov. 19, 2018, the President and CEO Nobuyoshi Fujisawa, at J Trust’s presentation of its second-quarter 2018 results in Tokyo, said J Trust was seeking to sell off 40 percent of the bank and cede operational control to anybody who wanted to take it over.
Fujisawa acknowledged that “We bought a failed bank, but we did not expect to fail not only once but twice in our restructuring efforts. If we had never bought J Trust Bank Indonesia, I suppose our earnings would be better.”
So far, the Indonesian unit’s furloughed President Director, Rituso Ando, the head of credit risk Haryanto Budi Purnomo, the head of treasury, foreign exchange and derivatives Rio Lanasier and managing director Helmi Arief Hidayat as well as all the treasury department’s treasurers and all the commercial loan collection officers are said to have left, been fired or are leaving the bank, which is now down to only two directors, neither of whom have any experience running a treasury or deposit-taking book at the bank.
Mismanagement and corruption
The bank boasts a spectacular history of mismanagement and corruption. It was born as Bank Century in 2004 and capsized in 2008, its demise and bailout ensnaring cabinet ministers and top Bank Indonesia officials, with more than US$1.5 billion stolen and moved overseas by former management led by the bank’s president, Robert Tantular, and his family. The bank is widely believed in Jakarta to have been the repository of hundreds of millions of dollars in slush funds belonging to the Indonesian Democratic Party headed by former President Susilo Bambang Yudhoyono.
As Asia Sentinel reported on April 10, vast sums disappeared out of Bank Century under the quasi-government bank deposit insurance corporation’s management in 2008 and 2009 as the Indonesian government struggled to save it. The bank was expropriated by the LPS, led by Bank Mandiri, on November 20, 2008 when ex-Mandiri executives Maryono and Ahmed Fajar arrived at only to discover the bank had a negative net worth of US$ 816.8 million and only US$512.46 million in assets.
According to a report by UK money-laundering expert Peter Barrie- Brown, enormous amounts went into and out of FBME Bank and Saab Financial (Jersey) Ltd from 2006 to 2014, a dissolved company whose now-liquidated successor and alter ego is known as Saab Financial (Bermuda) Ltd, itself now also in liquidation.
In his report, Barrie-Brown said: “The number of separate reasons for being suspicious are so many in total that I rate the whole arrangement and its operation to be the greatest collection of suspicious circumstances I have ever encountered in real life.”
Enter Bank Mutiara
Bank Century was recapitalized as Bank Mutiara in 2008 and 2009 under the administration of the Bank Deposit Insurance Corporation, more widely known by its Indonesian acronym LPS, which reports directly to the office of the Indonesian president.
The LPS went in search of buyers in 2014. Although it was offered to 18 would-be purchasers, it found few takers and the bank was eventually sold to J Trust in a transaction that appears to have been anything but arms-length. The LPS sale in fact appeared to be structured so that J Trust was the only bidder, with preferential, predetermined terms negotiated by the former LPS CEO, Kartika Wirjoatmodjo and Nobuyoshi Fujisawa, the J Trust CEO. The Japanese concern renamed it Bank JTrust after supposedly agreeing to pay the equivalent of US$366.65 million in cash.
But the LPS audit records make it look like J Trust paid nothing for the bank. Wire transfer records from J Trust Co. do not indicate a payment of Rp4.455.1 trillion on Nov. 20, 2008 and the LPS audits document a full loss of IDR 8.011 trillion for the FYE 2015 booked as a payment against insurance claim reserves. Asia Sentinel has repeatedly sought a response from J Trust executives without reply.
Allegations of laundering
Since its takeover by J Trust, allegations have arisen in several court jurisdictions of hundreds of millions of dollars moved overseas by the Japanese, some of it to the notorious FBME unit in Cyprus via Saab Financial, both of which were closed for good at the behest of US authorities in 2017 amid allegations of money-laundering for Russian Mafiosi, sub-Saharan satraps, pornographers, internet scam authors and others.
The bank has been the victim of severe mismanagement, having now dissipated all of the 2008 to 2019 LPS and J Trust capital injections totaling Rp10.9 trillion (US$1.001 billion), partly because of problems with its inherited US$914.7 million non-performing loan portfolio.
In addition, J Trust’s affiliated unit, PT JTrust Investments Indonesia, has been the recipient of more than US$300 million of Bank JTrust’s nonperforming loan portfolio since 2015 and is now reported by J Trust, according to the company’s financial reports, to have a negative net worth of $70 million as of Dec 31, 2018, with another US$92 million in bad loans expected to be injected into PT JTrust Investments Indonesia or sold to Sinarmas by the end of May.
There are additional questions over the propriety of the recently rumored sale of Bank JTrust to Bank Jabar Banten, also known as Bank BJB, which is said to have troubling loan portfolio problems of its own. Rio Lanasier, the highly regarded former Bank JTrust treasury director, is expected to become the new chief financial officer of Bank BJB shortly. Bank BJB is jointly owned by the West Java Provincial Government and a long list of individual West Java cities and districts. The recently installed President- Director, Yuddy Renaldi, was an NPL workout officer at Bank Mandiri and Bank Negara, reporting to Kartika Wirjoatmodjo and then Achmad Baiquni, the CEO of the state-owned Bank Negara Indonesia.
National bank ambitions
Baiquni and Kartika, the president and CEO of the state-owned bank Mandiri, the country’s biggest bank, are said to be overseeing the potential sale or merger into Bank BJB in a bid to become a national bank otherwise known as a BAKU Bank 4. The rumored transaction has little time to close before any reported changes in President Widodo’s cabinet appointing new ministers who could block it, potentially forcing Bank JTrust’s bankruptcy and insolvency yet again.
Reporting by Asia Sentinel since 2016 over the sale of the bank and other controversies has since stirred an investigation by Indonesia’s formidable Corruption Eradication Commission, better known by its initials KPK. Among targets of the investigation are said to be the widely respected former Indonesian Vice President Boediono, who served as the Bank Indonesia governor, Kartika, then the head of the Bank Insurance Deposit Corporation, now the president director of Bank Mandiri, the country’s biggest bank and Tantular, Bank JTrust’s previous owner and controlling shareholder, who was recently released from jail.
Sources in Jakarta say as many as 40 current and previous LPS, Bank Indonesia and government officials have been interviewed. Officials at Bank JTrust, J Trust Co and the LPS appear to be attempting to hide records of more than US$6 billion in money laundering trails and a further US$6 billion in audit fraud, all of which has to be produced in the global courts of Thailand, Cambodia, Cyprus, Hong Kong, the BVI, Mauritius and Singapore.
Cash flow problems
In the meantime, J Trust Co. is believed to have severe cash flow problems of its own stemming from US$1.8 billion in condominium loan guarantees in Japan. Its share price has rebounded slightly off its recent low of 344 (US$3.13) to 428 although that is still a long way from its 2013 high of ¥3940 (US$35.40).
JTrust Asia PTE, the subsidiary fighting Group Lease Thailand for US$256 million, reported in December that it is almost out of cash and J Trust’s CEO Fujisawa is also reported to have fled Singapore for Tokyo to oversee what may be J Trusts’ final days.
Major shareholders, many of which have bailed out, still include the Kirkland, Washington-based Taiyo Pacific Funds LLP, whose former chief investment officer was Wilbur Ross, President Donald Trump’s commerce secretary. Others are Vanguard, BlackRock, Dimensional Fund Advisers and State Street, all primarily index funds, as well as Merrill Lynch and Co. and Goldman Sachs according to Bloomberg reports.
J Trust faces more than US$1 billion in fraud and money laundering lawsuits in several countries over its operations and has run into financial difficulty with several of its units. It is heavily invested in Tokyo’s flagging condominium market and market reports say the financial conglomerate’s liquidity and Japanese regulatory problems are growing.