Banking Irregulatities - Page A1
January 30, 1997 Djkarta Interests in Bank Tied to Irregularities in Clinton Campaign Funds
Edward Mirabian, Financial EditorLOS ANGELES DESK - Money-laundering charges and now banking irregularities are besetting Djakarta bank opened by long-time friends and associates of president Clinton and the first lady.
Meanwhile, the high profile scandal is being played-down in the Los Angeles, California headquarters of the Lippo Bank. It is housed in a non-descript canary building where it shares space with a drug pharmacy in the Chinatown district of Los Angeles.
Congressional investigators are preparing to question former Commerce Dept. aide John Huang about his relationship with the Lippo Bank and his role in the affairs of the Djakarta bank.
Specifically Congress wants to know when Huang, as acting president and later vice-chairman of Lippo Bank, first became involved in the alleged money-laundering scheme for the Clinton-Gore Campaing. They also want to know whether he used his pull as a Clinton appointee to coerce regulators from cracking down on the American operations of the troubled bank.
A Lippo Bank's troubles are only the latest for Huang, whose overseas fund-raising for President Clinton's reelection effort has sparked controversy. On Nov. 12, 1996, Commerce asked its inspector general to examine records that 'appear to present questions concerning the conduct' of Huang while he was at the agency.
in the 1980's James T. Riady, of Lippo Bank told U.S. investors that the bank would become a $1 billion institution by this time providing trade financing for importers in California, most of them Asian American. Riady is the 39-year-old son of Mochtar Riady, one of Indonesia's most powerful financiers and a frequent guest at the Clinton White House.
However, the younger Riady's California Lippo Bank has been a bust. The $110-million bank has lost $16.5 million since 1990. That was the result of write-downs> of bad real-estate loans. The only reason the Lippo Bank has survived because the Riadys somehow got their hands on an additional $20.5 million in new capital they used to purchased millions more in the Djakarta bank's bad loans.
Published report of the Regulators at the Federal Deposit Insurance Corporation decline to comment on how bad the bank's finances are.
BUSINESS WEEK magazine recently reported that an internal FDIC memo notes that 'earnings are poor, are overstated and that large net operating losses for 1996 are highly likely.' If Riady doesn't pony up more capital, regulators may slap the bank for a third time with a 'cease and desist' order. 'This has been a marginal bank for years,' says consultant Bert Ely, who analyzed Lippo Bank's condition for BUSINESS WEEK.
That's no surprise to former associates. They say Riady's style of lending, based largely on trust and character, has been a disaster in the U.S. The approach unnerved officials at Little Rock-based Worthen Bank, in which the Riadys bought a 15% stake in 1983. Worthen officials shut down an international division launched by James Riady in 1988. 'We ask for security and signatures; they lend on a handshake,' says one former associate.
Congress plans to interrogate Huang over money-laundering allegations raised by the FDIC. According to investigators, FDIC examiners in June, 1990, filed a criminal referral to authorities for suspected money laundering after discovering that a 21-year-old teller, with or without knowledge of her supervisor, made over 900 suspicious wire transfers totaling $7 million over 11 months to a Riady bank in Hong Kong.
The FDIC alleges that the teller routinely made transfers of just under $10,000 [the threshold at which reports must be filed with regulators] from 13 phony bank accounts to the Hong Kong bank.
Congress also wants to know why, as a top Commerce appointee, Huang got two 1995 calls from an FDIC official, Ken Quincy, who had overseen examinations of Lippo Bank. And just why Huang was in the White House over 70 times about that time. Commerce phone logs reviewed by BUSINESS WEEK show Quincy even offering a time and date to meet. Huang couldn't be reached; an FDIC spokesman says Quincy has 'no recollection' of placing the calls.
Lippo Bank's current manager, James Per Lee, who joined the bank in 1991 and became president in 1994, denies that any questionable activity has ever occurred.
Yet, bank examiners made the Lippo bank boost its non performing assets [mostly bad real estate loans] from $759,000 to $4.2 million last year, despite the cyclic rebound in California real estate.