The OAG has accused the FIDF - an arm of the central bank set up to rescue troubled financial institutions - of providing Bt4.396 billion to Phatra Thanakit to repay the principal and interest to the holders of its promissory notes, even though the Fund, according to the OAG, didn't have to offer the money to help the company.

The OAG said there was no evidence to show that the company had suspended the payments, or had been asked to cease its operation, or its license had been revoked. However, Phatra Thanakit was closed down shortly after repaying the promissory notes.

A source from the FIDF said the Fund could explain its decision.

"It was normal procedure. We had to negotiate with the company to minimise the damage so the finance company could repay the money to the depositors before it closed down," the source said.

The source added that in fact the Fund had received a good deal from Kasikornbank, the major shareholder of Phatra Thanakit Co Ltd, because it provided the financial support to enable the company to buy promissory notes for only Bt4.39 billion, compared to Phatra Thanakit's total promissory notes of around Bt50 billion. "It caused the least damage compared to other financial institutions," the source said.

Phatra Thanakit was among the troubled financial companies that collapsed because of the financial crisis in 1997.

The source from FIDF however noted that the Fund did not favour Kasikornbank. He said that the Fund negotiated with Kasikornbank before the closure of Phatra Thanakit simply because of the different procedure.

He said the Fund would choose to assist the troubled companies before or after closure by considering the circumstances and symptoms of each financial company. He said as Phatra Thanakit's situation was not as severe compared to the others, the Fund chose to act before the closure of the company.

The other source from FIDF said the Fund acted according to procedure. He said, "It's like when there are two dead persons, you choose to bury one and cremate the other, and people keep asking why we didn't bury them both."

The OAG had earlier charged the former management of FIDF with favouritism, for providing financial support to Phatra Thanakit in 1999, causing damage to the government to the tune of Bt4.396 billion.

The OAG accused the Fund management and related persons of violating the accountability law on government officials BE 2539. The Royal Thai Police is collecting evidence for a criminal case while a government investigative committee is looking into the penalty subject to a civil case.

In 1999, MR Chatu Mongkol Sonakul was the central bank governor and Chaktip Nitibhon was the FIDF manager.

The allegation was made in the annual fiscal report of the OAG in 2004, which was submitted to the National Legislative Assembly for consideration on November 30 this year.

The report said the FIDF directors and other high-ranking senior government officials had abused their power by supporting a finance company. As a result, they violated the Bank of Thailand Act BE 2485.

The FIDF decision was allegedly in favour of a certain company. The OAG report said that FIDF required other finance companies to follow strict requirements but provided special treatment to this company, which ultimately benefited a major banking firm that was a major shareholder.

Kasikornbank is now a major shareholder of Phatra Finance. At that time, Kasikornbank signed an agreement with the Fund and Phatra Thanakit in which the Fund agreed to provide financial support to the troubled company of no more than Bt4.396 billion. The outstanding debt was repaid by Kasikornbank.

Anoma Srisukkasem

The Nation