CORRUPTION UPDATE -- TOMMY SUHARTO AND BANK

C O N F I D E N T I A L SECTION 01 OF 02 JAKARTA 001759 SIPDIS DEPT FOR EAP, EAP/MTS, EAP/MLS, INL INL FOR ROESS/BARCLAY DEPT FOR EEB/IFD/OMA DOJ/OPDAT FOR LEHMANN/ALEXANDRE/JOHNSON MCC FOR LONGI SINGAPORE FOR BAKER TREASURY FOR M.NUGENT NSC FOR E.PHU E.O. 12958: DECL: 09/16/2018 TAGS: PGOV KJUS KCOR ID SUBJECT: CORRUPTION UPDATE -- TOMMY SUHARTO AND BANK INDONESIA CASES CONTINUE TO MAKE HEADLINES REF: JAKARTA 1691 AND PREVIOUS JAKARTA 00001759 001.2 OF 002 Classified By: Pol/C Joseph L. Novak, reasons 1.4(b+d). ¶1. (C) SUMMARY: In the latest corruption news, the legal tussle between the GOI and Tommy Suharto--son of former president Suharto--continues to escalate after the Finance Ministry seized $134 million of Suharto's assets. The case involves unpaid taxes and corruption tied to a now-defunct automobile company headed by Suharto. ¶2. (C) SUMMARY (Con'd): In the meantime, a clutch of Indonesian politicians and activists--criticizing the Attorney General's Office--has urged the Corruption Eradication Commission (KPK) to launch an investigation into the "BLBI" corruption case. Defending itself, the AGO says it had very good reasons to drop the investigation. The case involves massive financial fraud at the Indonesian central bank, Bank Indonesia (BI),earlier this decade. The KPK has also announced it would begin investigating a second corruption scandal at BI involving a senior official. Amid all the chaotic headlines, the good news is that the GOI's anti-corruption effort continues to be robust. END SUMMARY. TOMMY SUHARTO VS. FINANCE MINISTER ¶3. (SBU) The GOI is involved in a donnybrook legal tussle with Tommy Suharto, the notorious son of the former president. In an effort to recover lost state assets, Finance Minister Sri Mulyani Indrawati on August 28 seized USD $134 million in assets owned by PT Timor Putra Nasional, a now-defunct automotive firm headed by Tommy Suharto. This firm had enjoyed "national car producer status" and was granted special car importation tax breaks. The seizure of the funds occurred after the Supreme Court overturned an Appeals Court ruling that annulled the sales and purchase agreements of Timor,s assets and asked the car firm to pay its debt to the treasury. PRESSURING THE KPK TO INVESTIGATE SCANDAL ¶4. (SBU) In other corruption-related news, the KPK is under increased pressure to investigate the BLBI corruption scandal. In a joint declaration issued on September 15, members of the Indonesian House of Representatives (DPR),the Regional Representative Council (DPD),public organizations, and anti-corruption activists urged the Commission to investigate all aspects of the "BLBI" corruption scandal. The declaration was prompted by the Anti-Corruption Court's September 4 conviction of former anti-corruption prosecutor Urip Tri Gunawan in connection with the BLBI scandal (see reftels). (Note: The BLBI case involves emergency liquidity credits extended by Bank Indonesia, BI, the central bank, to commercial banks during the 1997-1998 financial crisis. Of the USD $16 billion BLBI loans issued since 1997, approximately one-third have not been repaid.) ¶5. (SBU) In response to the request, the KPK spokesperson stated that the Commission would accept the investigation if the Supreme Court agreed the investigation into the BLBI scandal should continue. Although the AGO has been under significant pressure to re-open the investigation, officials there have maintained that re-opening the case would violate several regulations. The AGO has indicated that there is no JAKARTA 00001759 002.2 OF 002 structural impediment to having the KPK take over the investigation and re-open the case as long as the AGO's appeal to close the investigation, currently being reviewed by the Supreme Court, is rejected. A SECOND BANK INDONESIA SCANDAL ¶6. (SBU) The KPK announced on September 15 that it would begin formal investigations into a second major corruption scandal involving BI. According to a report released by the Financial Transaction Report Analysis Center (PPATK),over 460 traveler's checks were received and cashed by 41 legislators following the election of Miranda S. Goelton as BI Senior Deputy Governor in 2004. (Note: The DPR Commission on financial affairs elects senior BI officials. During the 2004 election, Goelton won 41 of 56 possible votes.) ¶7. (SBU) One legislator admitted to receiving a bribe in exchange for his vote. On August 20, Indonesian Democratic Party of Struggle (PDI-P) lawmaker Agus Condro Prayitno admitted to receiving USD $54,900 in traveler's checks after voting for Goelton. According to the KPK, Agus voluntarily reported the illegal payouts to the KPK. In his testimony and subsequent statements to the press, he stated that he and four colleagues each received USD $54,900 from Emir Moeis, a PDI-P party member, who served as chief of the DPR Commission. Vote-buying allegations were reportedly rife at the time of the election, but no investigation was conducted due to lack of evidence. ¶8. (SBU) The illegal payouts were discovered while the KPK was investigating other former members of the Indonesian Parliament (DPR) regarding their involvement in the illegal distribution of BI funds to 52 members of the former DPR Commission on financial affairs in 2003 (see reftels). PDI-P lawmaker Agus was one of the 52 former members of the DPR Commission who received illegally distributed BI funds. Emir Moeis is also implicated in the Bank Indonesia 2003 illegal payout scandal. Since January 2008, the KPK has arrested six active lawmakers from Golkar, the Democratic Party (PD),the United Development Party (PPP),and the National Awakening Party (PKB) for alleged bribery. WHEN BAD NEWS IS GOOD NEWS ¶9. (C) The GOI's anti-corruption drive continues to be robust as the KPK moves forward with investigations and prosecutions. President Susilo Bambang Yudhoyono has publicly called for the KPK, the AGO and the police to "equally" investigate and prosecute corruption. The statement was released after widespread allegations that the KPK was reluctant to prosecute corruption allegations close to the president's office, specifically those involving Aulia Pohon, the father-in-law of one of SBY's sons. In fact, the KPK does not seem bashful and says it is investigating Pohon. In the meantime, the AGO--under great pressure--continues to try to find its role in the overall anti-corruption effort while insisting that it is acting properly in the BLBI case. HUME