Graftbusters Said to Probe Bank J Trust Fraud

A 10-year-old scandal has re-erupted in Jakarta’s South District Court with an attempt to push the fearsome Corruption Eradication Commission, or KPK, to investigate Boediono, a quiet, well-regarded technocrat who is the former Indonesian vice president and governor of the central bank, Bank Indonesia, for corruption in the 2008 bailout of the scandal-ridden Bank Century.

But sources in Jakarta say this is a sideshow perpetrated behind the scenes by Bambang Soesatyo and H. Mukhamad Misbakhun, both businessmen-politicians and foot soldiers for Golkar, the country’s oldest political party. Misbakhun was jailed for several months in 2009 over irregularities uncovered in the original expropriation of Bank Century.

“Elections are coming up and the dinosaurs want to appear relevant,” said a Jakarta source, dismissing the court action.

Bank Century, believed to have been the repository of hundreds of millions of dollars in political funds, was eventually taken over by the Indonesian Bank Deposit Insurance Corporation (LPS), a quasi-government agency that insures investor deposits. The ailing bank was later renamed Bank Mutiara and refloated although the government kept control of it through the LPS, which was then headed by Kartika Wirjawatmodjo, now the head of the state-owned Bank Mandiri, the country’s biggest bank. It was auctioned in 2014 to the Tokyo-based financial Japanese services corporation J Trust Ltd.

LPS banking officials, under the orders of Bank Indonesia and Boediono, were said to have poured Rp8,011 trillion (US$830 million) into Bank Century to keep it afloat in 2008, only to have at least US$350 million in bailout funds disappear out to Singaporean banks. Its putative owner, Robert Tantular, eventually was sentenced to 20 years in prison. It also resulted in the jailing of former Bank Indonesia Deputy Governor Budi Mulya for accepting bribes from Tantular.

According to Asia Sentinel sources, several international agencies have for several months been running global criminal probes into the circumstances behind the 2014 sale, in which J Trust appears to have got the troubled bank for a fraction of the LPS-stated sale price of US$368 million.

The investigations seem to have been triggered by a series of stories in Asia Sentinel that began in April of 2017 into the activities of Bank Mutiara and its mutation from Bank Century and eventually into Bank J Trust Indonesia.

The allegations behind the Asia Sentinel stories also triggered the filing of a US$710 million money laundering and embezzlement lawsuit by five plaintiffs led by the Mauritius-based Weston International Capital Ltd that was filed in Mauritius last September against the LPS, Kartika and 19 other defendants including J Trust Ltd, whose chairman and controlling shareholder is Nobuyoshi Fujisawa, who seems to have fallen off the Forbes Magazine list as one of Japan’s 50 richest men.

Indonesian sources say the KPK is said to be looking to attempt to get to the bottom of the alleged theft of US$830 million of injections into the bank over the years by officials of the Bank Insurance Deposit Corporation – including the foregone US$368 million J Trust purchase price plus more than US$250 million of additional losses incurred by Bank J Trust between the 2014 and 2018 fiscal years. Global investigators are believed to be looking at a total fraud of at least US$1.85 billion and counting.

The real target of the KPK may be not J Trust itself but rather Kartika and the LPS over the alleged sale price and conditions of the Bank Mutiara sale – supposedly for the equivalent of the US$368 million and investigating whether only US$28 million was ever paid by J Trust in cash. The remainder seems to have been forgiven including a Rp3 trillion (US$245 million) defaulted shariah note issued by the LPS with the approval of Bank Indonesia. Shortly after the Bank J Trust purchase, J Trust was believed to have added more than US$300 million in goodwill to its balance sheet to reflect the true Bank J Trust purchase price.

In actuality, the KPK may be attempting to determine whether J Trust was a Boediono or Yudhyono insider who was offered terms for the purchase of the bank that weren’t offered to the other 20-odd bidders in 2014. According to the LPS’s books, it appears that the Rp3 trillion shariah loan was eventually written off in 2015, as Asia Sentinel reported at the time, meaning the Indonesian taxpayers endured a US$245 million loss. That raises questions whether J Trust seductively induced Indonesian government officials to get Bank Mutiara at a knockdown price.

In the four years since Mutiara mutated into Bank JTrust, it has lost more than US$250 million, raising concerns that given Indonesia’s lax banking regulatory regime, the bank losses covered by J Trust allowed for J Trust funds to be roundtripped in and out of Japan, Indonesia, Singapore, Thailand, Russia and other countries, particularly Cyprus, a state known for warehousing Russian and other flight capital.

In earlier incarnations, the bank transferred tens of millions to FBME Bank Ltd., a tarnished Tanzanian-based institution whose operations were almost exclusively in Cyprus. FBME Bank was shut down in 2014 by the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) after a three-year court fight, which denied FBME Bank access to the US financial system, through which almost all of the world’s financial transactions pass.

Although officers of the Tokyo-based J Trust Ltd led by Fujisawa previously were connected to one of Japan’s biggest financial scandals – the failure of Livedoor, an internet service provider that sank in 2006 amid charges of securities fraud – J Trust has managed to attract a single large investor in the Kirkland, Washington-based Taiyo Pacific Funds LLP, who’s former chief investment officer was Wilbur Ross, the Trump administration’s commerce secretary. The California Public Employees Retirement System, or Calpers, is also an investor brought in by Taiyo Pacific along with Invesco, its ultimate parent and others.

Taiyo Pacific markets itself as Japan’s largest activist investor, which specializes in tutoring and mentoring the management of companies it invests in. It appears to be very close to its largest investment vehicle, J Trust and its CEO Nobuyoshi Fujisawa.

There has been little disclosure by J Trust of these KPK investigations and criminal allegations to the press or global regulators. Most importantly, J Trust shareholders, with the possible exception of Taiyo Pacific, seem to be in the dark about what could amount up to US$1 billion of losses stemming from the KPK investigations and lawsuits tied to Group Lease PCL in Thailand.

Sources in Thailand indicated that criminal fraud proceedings were filed by Group Lease PCL against J Trust Asia and Nobuyoshi Fujisawa only last week in addition to US$254 million of lawsuits and global Mareva Orders filed by J Trust Asia against Group Lease PCL over the last three months.