By Lee Su Shyan

AN INDONESIAN private banking client of Merrill Lynch is embroiled in a legal suit with the United States bank - a likely forerunner of court battles to come amid the financial crisis fallout.

Jakarta-based businessman Prem Harjani, 49, is suing Merrill Lynch for US$90 million (S$136 million) for losses made when the US investment bank sold his Indonesian-listed shares without his knowledge.

Mr Prem also has Singapore business interests, owning a hedge fund outfit and investment company in Singapore called Renaissance Capital.

In May, Renaissance Capital was granted a credit facility of up to US$17 million by Merrill Lynch. Mr Prem claims that there was no clause in the agreement limiting the use of the credit facility to certain markets only.

In June, he wanted to use the facility to buy 120 million shares of PT Triwira Insanlestari, a mining equipment company and coal distribution agent listed on the Jakarta Stock Exchange. The shares were then trading at 1,100 rupiah (S$0.001 Singapore cents) each.

The total deal worth US$14 million was approved by the private banker at Merrill Lynch who took his order, and his supervisors, Mr Prem claims.

However, on the same day, after the purchase had been made, the bank informed Mr Prem that there had been a mistake in allowing the credit facility to be used to buy these shares.

The bank wanted Mr Prem to repay the loan, but at that point he did not have the funds on hand to settle the purchase. Merrill Lynch force-sold the shares.

The shares last traded at 600 rupiah.

Mr Prem later raised about US$2 million (S$3 million) in July and paid it to the bank, but Merrill Lynch wants the rest of the sum repaid.

The legal tussle started when Merrill Lynch took out a suit against Mr Prem last month in the Singapore High Court, claiming he defrauded the bank.

According to Mr Prem, Merrill Lynch also wrote to the Jakarta Stock Exchange's capital supervisory board saying that he had manipulated the market.

Since then, Mr Prem has lodged a suit in Jakarta, claiming US$90 million in losses, saying that the bank had sold his shares without his knowledge.

The latest development has seen Merrill Lynch successfully persuading the courts in Singapore to issue a Mareva injunction on Mr Prem's Singapore assets. This means he cannot move or sell assets such as Renaissance Capital.

Mr Prem has now managed to obtain a court date early next month to appeal against the injunction.

The businessman claims that he was urged by the Merrill Lynch private bankers to open the credit facility. They visited his office often. Mr Prem insists that there was no mention that he could not use the credit facility to buy Indonesian shares.

When contacted about the case, a Merrill Lynch spokesman said: 'Merrill Lynch denies the allegations, which are without merit. [It] is pursuing necessary action to recover an outstanding debt. Merrill Lynch has previously reported the matter to the relevant authorities.'

For his part, Mr Prem is not entirely free of controversy. In 2002, he was cautioned by Indonesia's capital markets regulator for making misleading financial statements about a company he owned.

But he told The Straits Times that the incident is behind him - the matter has been settled and the fine paid up.

Mr Prem said: 'I am 100 per cent OK. I am ready to fight. People are being bullied by banks. Banks promise only for the sake of getting money from the client to invest in their product.'

This article was first published in The Straits Times on December 09, 2008.