[Antara] The Christmas Scandal

One of the largest scandals since the start of the financial crisis

In a recent white paper made public by an anonymous individual who wishes to refer to himself as “Santa 

Claus”, several large conglomerates in Indonesia were exposed to have engaged in accounting and financial

statement fraud. Among these conglomerates are the Salim Group and Astra International, companies that 

have garnered the faith and support of investors before and during the crisis. Specifically, non-existent 

assets were added to balance sheets and the value of liabilities were manually reduced on paper. Cash 

flows were tweaked to reflect positive inflows and healthy cash conversion cycles to fool investors into 

purchasing their shares and bonds, although in reality many of these companies were already in large debt, 

with many engaging in debt rollovers with no prospect of repaying their loans in the near future. Moreover, 

although many banks and financial institutions were suspicious of such activities and saw little hope in 

these companies servicing their debts, given the severity of the crisis, they were willing to make risky 

loans that did not adhere to regulatory standards.

Exacerbating the crisis is the fact that corruption was involved behind the scenes. Bapepam (Badan 

Pengawas Pasar Modal), the main regulatory authority over the publishing of financial statements by 

publicly listed companies, turned a blind eye against financial statement fraud committed by these 

conglomerates. Though audits and inspections were carried out, the results were faked to reflect these 

companies as  “financially healthy” and publicly disclosed information was deemed verified and valid. On 

the other hand, Bank Indonesia (BI), the main regulatory authority overseeing the banking sector, approved

of the risky lending practices carried out by banks despite the outright violation of banking sector 

regulations. Further investigations revealed that Bapepam had been colluding with the major conglomerates to 

overlook regulatory violations, with authorities in the Board siphoning cash worth over a million rupiahs 

directly from the pockets of chief executive and finance officers of the companies. Theories were proposed 

that Suharto was pulling the strings behind the scenes given that cronyism was rampant in Indonesia, with 

most of the authorities in the Ministry of Finance (which runs Bapepam) being close friends of the 

President. There were also rumours that Suharto had bribed key officers in the BI overseeing stress tests, 

audits and inspections, and compliance in the banking sector. This was substantiated by the fact that 

Suharto had close ties with the CEOs of major banks that ran the economy. Others alluded to the fact that 

the conglomerates had colluded with Suharto in exchange for leniency from the BI. 

Following the public disclosure of such information, investor confidence plunged within 2 hours of the 

opening of the stock market, with the Jakarta Stock Exchange experiencing a 35% dip. The mass selling of 

assets triggered a greater panic amongst investors as share prices continued to decline for the next few 

hours. Speculative attacks against the rupiah ensued, with the rupiah now falling by 6.7% in value against 

the USD. A recession is expected to occur soon.