Angry hedge fund seeks redress in international courts over missing funds
Some of the last vestiges of one of
Indonesia’s biggest scandals – the collapse of PT Bank Century TBK in 2008 and
its subsequent US$710 million bailout – are playing out in a Singapore
courtroom, where a Mauritius-based hedge fund is trying to find out what became
of more than US$115 million that the fund claims as its own.
That is only part of
the money that Weston International Capital’s subsidiary, Weston International
Asset Recovery Co. Ltd., is seeking across the world. Weston specializes in
buying up distressed debt. It is alleging that the Bank Century debt it bought
has disappeared into a pretzel palace of companies spread from Japan to
Singapore to Switzerland to Cyprus and to a number of other unknown countries. Weston is trying to corner the new owners of
Bank Century, a mysterious Japanese trust, in courts across the world.
The story began in
2011, according to John Liegey, Weston’s CEO, when he had lunch with an
official from the Netherlands-based ING Bank, who “told me a story about a
US$215 million loan they made to a multi-millionaire British businessman named
Rafat Rizvi, and that ING had collateral in a portfolio worth US$725 million
that they were facing difficulties collecting.”
Weston spent six
months doing due diligence and eventually took over the collection process for
two convertible bonds issued by Bank Century, underwritten by the London-based
Nomura International Plc plus over US$700 million of Nomura debt obligations
with the idea that through litigation and other means, the debt could be
converted into equity or cash as a recovery on the loan collateral.
Unprecedented Fraud
“We looked at the
portfolio and determined there were two Bank Century Convertible bonds we knew
we could collect on, totaling US$80 million of defaulted debt,” Liegey said. “But when we started unfolding the extent of
the Bank Century fraud, it was beyond anything I have ever seen in 38 years in
this business.”
Asked why he made the
decision to buy into distressed debt in Indonesia, with its opaque courts and
fungible financial system, Liegey, who founded the Weston International Capital
subsidiary in Mauritius in 2011, replied: “My board of directors and
shareholders ask me that almost every day.”
Weston has been suing
in courts in Mauritius, Hong Kong, New York and most lately in Singapore to try
to recover the money. Weston did succeed in
collecting over US$10 million cash and the rest in convertible bonds notes and
Nomura-issued fund linked notes bringing the total to US$725 million in the
Hong Kong courts in 2013. The disposition of the
securities is still being negotiated.
Weston and its wholly
owned subsidiary, First Global Funds Ltd., believe much of the money still to
be collected is still in the hands of Robert Tantular, the Bank Century
beneficial owner who went to jail in 2008 and remains in prison today –
although Indonesian prisons tend to be porous and well-wired inmates often are
able to take extended leave.
Quintessential Indonesian Story
Bank Century is a
quintessentially Indonesian story. The bank capsized in 2008 at the height of
the global financial crisis, threatening the entire banking system to the point
that then-Finance Minister Sri Mulyani and Boediono, then-Central Bank
Governor, poured US$710 million into the effort to save the corruption-riddled
financial institution, a move that cost Sri Mulyani her job as opponents of
reform attacked her in the Indonesian legislature on charges of
corruption.
Much of the funds
poured into the bank to save it consequently disappeared, spirited out to
Indonesian and Singaporean banks. The scandal largely brought economic and
political reform efforts championed by former President Susilo Bambang
Yudhoyono to a stop. Some US$350 million of Indonesian Government bailout money
appears to be completely untraceable and is believed to be in the hands of some
of Indonesia’s most prominent politicians.
Although 26 Bank Indonesia
auditors were inside Bank Century during its dying days in 2008, led by Deputy
Governor Budi Mulya, Tantular continued to siphon money out until the day the
bank was expropriated, allegedly defrauding Bank Century shareholders and
depositors. Budi Mulya ended up being sent to prison in 2014 for taking loans
from Bank Century while regulating the Bank.
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