Indonesia prosecutors suspects fraud behind insurer's financial woes

JAKARTA, Dec 18 (Reuters) - Indonesian prosecutors believe they have found evidence of fraud at troubled state life insurer Jiwasraya, the lead prosecutor for the case said on Wednesday, after the insurer failed to pay more than 17,700 maturing policies.

Jiwasraya’s customers, who claim to be owed 16.42 trillion rupiah ($1.17 billion) for maturing bancassurance savings plans, have been pressing authorities including the government and members of parliament to find a solution to the case.

“This is a big case with a very wide scope,” lead prosecutor Adi Toegarisman told a news conference, saying his team had interviewed at least 89 witnesses and there were links to 13 companies.

His team identified individuals suspected to be involved in fraud and he said he expected to name them in due course, citing a requirement to compile evidence for at least three months before filing charges.

Attorney General Sanitiar Burhanuddin told the same news conference that prosecutors had found Jiwasraya’s former management had put nearly its entire portfolio in the stock market and mutual funds in assets with poor returns.

This was likely to have resulted in potential state losses of 13.7 trillion rupiah, he said, without explaining how the figure was calculated.

Asked for comment, Jiwasraya President Director Hexana Tri Sasongko told Reuters in a text message: “We respect the legal process and direct all matters related to this (investigation) to shareholders and law enforcement officials.”

Hundreds of Jiwasraya customers have lobbied a parliamentary commission overseeing state-owned enterprises (SOE) to resolve the situation, including some South Koreans who bought the product from the Indonesian banking unit of Hana Financial Group .

Lee Kang Hyun, a vice president of Samsung Electronics Indonesia, told a hearing he represented some 470 Koreans who had lost their money. He said appeals to regulators in South Korea and Indonesia had not worked so far.

“We bought it because it offered a very high interest rate. And it was offered by Jiwasraya, which is state owned,” Lee said, explaining their reason for investing in the savings plan.

Indonesia’s finance ministry has already said it does not intend to bail out Jiwasraya, while the SOE ministry said it was looking to sell shares to investors to raise money.

President Joko Widodo said in a statement Jiwasraya’s problems were not easy to solve, but the government had drawn up some plans, promising things would be resolved.

$1 = 14,080.0000 rupiah Reporting by Tabita Diela and Maikel Jefriando Writing by Gayatri Suroyo; Editing by Ed Davies and Emelia Sithole-Matarise