Goldman Sachs has lost a court appeal in Indonesia over whether it should return shares in property developer Hanson International to tycoon Benny Tjokrosaputro in a legal tussle over ownership.
Benny, president director of Hanson International, sued the US bank for Rp 15 trillion ($1.1 billion), accusing it of making “unlawful” trades in the shares and claiming ownership of 425 million shares.
Goldman said Goldman Sachs International had bought the Hanson shares from New York hedge fund Platinum Partners in a series of “valid” transactions on the Indonesia Stock Exchange (IDX) between February 2015 and December 2015.
The South Jakarta District Court ruled in favor of Benny in November last year, ordering the US firm to return shares and pay Rp 321 billion in compensation.
The Jakarta High Court upheld this verdict on Thursday (19/07). The ruling, published on its website, said Goldman’s transactions had been done without Hanson’s knowledge and were against Indonesian law.
Hanson shares last traded at Rp 127 apiece, valuing a parcel of 425 million shares at about $3.7 million.
The bank planned to appeal the decision, Goldman Sachs spokesman Edward Naylor said.
A lawyer for Benny, Oscar Sagita, declined to comment as he had not yet reviewed the judgment.
The lawsuit has been seen by some legal experts as a litmus test for Southeast Asia’s largest economy, which has launched its biggest drive for foreign investment in a decade.
At stake in the Goldman case is the protection of the rights of foreigners, amid a general lack of transparency in Indonesian court proceedings, they say.
Benny had pledged Hanson shares to Platinum in return for funding on the basis he could get the shares back upon repayment, according to court documents.
Such a repurchase agreement, or a repo, effectively acts as a loan but the deal involves temporarily transferring legal ownership of the shares.
Goldman Sachs International bought the Hanson shares from Platinum as a hedge for the derivatives it had entered into with the fund, a bank spokesman has said.
In late 2014, New York-based Platinum fell into financial difficulties and had trouble paying back a large number of investors, according to US authorities.
Goldman started selling the Hanson shares in 2015, but was forced to stop after Benny filed a police complaint, which he followed up with the lawsuit.
Goldman says in its court filings that it “understands” Platinum originally acquired the Hanson shares from an entity named Newrick Holdings, rather than from Benny.
According to the “Panama Papers” online database as of 2015, which compiled millions of leaked documents from law firm Mossack Fonseca, Newrick is a company registered in the British Virgin Islands in which Benny was a shareholder.