Indonesia - Citibank serves up cautionary tale in Bali

BALI - When Bali's Ubud Writers and Readers Festival announced its title sponsorship agreement with Citibank last year, administrators and fans undoubtedly felt the annual literary gathering could count on a secure financial base.

They also may have felt, sheepish with political incorrectness, that the US-based global bank's support was better insulated from scandal and shame than an arrangement with an Indonesian company. They were wrong on both counts.

"I was under the impression it was a three-year deal," Ubud festival founder and director Janet de Neefe said. "I was pretty disappointed."

Citibank withdrew its sponsorship in June, leaving the Ubud festival scrambling to align its lofty ambitions for this year's eighth edition, running October 5-9, with a suddenly barebones budget. The bank abandoned its Ubud sponsorship in the wake of two high-profile scandals that came to light almost simultaneously in March. Befitting an erstwhile patron of the arts, Citibank's troubles range from the comic to tragic.

Banker Barbie

Citibank wealth manager Malinda Dee, one of Jakarta's best known forty-somethings, was arrested in March amid allegations she had stolen an estimated US$2 million from more than 120 depositors. For 15 years as a senior customer relations manager, Dee had persuaded wealthy clients to deposit funds with Citibank. She offered "Priority Banking" accounts with a minimum starting deposit of $50,000, about 17 times Indonesia's per capita annual GDP.

According to her attorney, Batara Simbolon, Dee didn't really steal the money, she just borrowed it for other investments. Only a fraction of her allegedly fleeced clients initially came forward to claim losses, perhaps because they didn't want police scrutinizing the origins of their wealth too closely. "For Citibank, it's not important where the money comes from but that it stays there," Simbolon said.

In contrast to her days on the fashion and society pages, Dee has taken to wearing Islamic attire, including the hijab (headscarf), for court appearances. Citibank wouldn't comment on the case since it is still in litigation, but it is reportedly cooperating with prosecutors. Dee's case was ready to proceed to trial at the South Jakarta District Court, the Jakarta Post reported on September 14, citing Attorney General Office spokesman Agung Noor Rahmat. Dee will be charged with allegedly violating the 2008 Law on Money Laundering, the report said.

A knowledgeable source said the bank has taken steps to avert future frauds, including increasing rotation among relationship managers, so that the relationships don't get too cozy.

Political debt

While the Dee scandal can inspire a chuckle since no one got hurt except rich people and their banker, the story of Irzen Okta is strictly tragic. The head of the miniscule National Unifying Party, Okta had a Citibank credit card, the product many international banks use as a beachhead in overseas markets. Okta had run up a bill of 48 million rupiahs ($5,486) that with interest and late fees had climbed to over 100 million rupiahs.

Debt collectors in late March this year came to Okta's house outside Jakarta that he shared with his wife and two teenage daughters. He convinced them to leave with a promise that he would visit t a Citibank branch in the capital the next day to try to settle the debt. At the branch, he went into a room with three debt collectors and underwent "harsh interrogation", according to a police spokesman. Witnesses heard banging on tables, chairs kicked, and Okta taunted and intimidated. Citibank denies reports that Okta was beaten, even though his blood was found in the room. What's not in dispute is that 50-year-old Okta never left the room alive, collapsing on the floor dead of a brain hemorrhage.

Police have charged five Citibank contract debt collectors in connection with Okta's death. "We found no evidence of physical violence from our own internal investigations," Citibank regional spokesman James Griffiths said. According to the bank, all debt collectors - employees or contractors - are held to a code of conduct that prohibits violence.

Citibank chief country officer Tigor Siahaan, appointed in June to try to repair the bank's image, said Okta's deadly hemorrhage could have stemmed from natural causes. The bank offered a "compassionate" settlement to Okta's family, but his widow rejected it. She is instead suing Citibank for $350 million.

In May, Bank of Indonesia regulators handed down punishment against Citibank for the two scandals. The central bank and financial regulator barred Citibank from issuing new credit cards for two years, and from opening new branches or adding "Priority Banking" customers for a year. It also forced Citibank to hire 1,400 debt collectors as employees in place of using contractors. The change aims at giving Citibank greater control and accountability in its collection operation, though regulators admit there is little they can do to dictate tactics.

In June, Citibank dropped its Ubud sponsorship, which had provided the festival with cash and services worth about $150,000, covering an estimated one-third of the total budget. Bank spokesman Griffiths said the end of the sponsorship was a "business decision" and noted, "Citi Indonesia's priority for community support has been towards areas such as micro-finance, education and financial education."

Happy ending

The 2011 Ubud Writers Festival sponsor story has, at least, a happy ending. Early this month, Australia's ANZ Bank stepped up to become the naming sponsor for the event that will bring 100-plus writers from more than 20 countries to this town in the hills, long recognized as Bali's cultural hub.

"This is an ideal vehicle for us," ANZ chief executive officer for Indonesia Joseph Abraham said. "Ubud has become a showcase for Indonesian writers. It brings Indonesia to the world and the world to Indonesia as well as building bridges between Indonesia and Australia." Abraham, a 20-year veteran of Standard Chartered Bank who joined ANZ in 2008, said the sponsorship fitted the ANZ "super regional strategy" focusing on Australia, New Zealand and the Asia Pacific region while highlighting "the richness of Indonesia".

The thirst for growth and lighter regulation are reasons why banks like Citibank previously and ANZ now want to support events like the Ubud Writers and Readers Festival, as well as why Citibank didn't watch some of its operations closely enough. One doesn't necessarily lead to the other, and ANZ has a chance to prove it - for many years to come, Ubud, the event's organizers, and writers and readers worldwide hope.

By Muhammad Cohen 

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