CORRUPTION UPDATE - KEY CONVICTIONS IN BI

UNCLAS SECTION 01 OF 02 JAKARTA 000030

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E.O. 12958: N/A
TAGS: PGOV KJUS KCOR ID
SUBJECT: CORRUPTION UPDATE - KEY CONVICTIONS IN BI
CORRUPTION SCANDAL

REF: A. JAKARTA 00019

B. JAKARTA 00004

C. 08 JAKARTA 2151

JAKARTA 00000030 001.2 OF 002



1. (U) This message is Sensitive but Unclassified--Please
handle accordingly.


2. (SBU) SUMMARY: The Anti-Corruption Court sentenced two
former legislators to prison for their roles in the 2003 Bank
Indonesia corruption scandal. So far several high-level GOI
officials have been convicted for their roles in this case.
The Attorney General's Office and the Supreme Court are
filing separate charges against Indonesia Corruption Watch
for defamation. Although both institutions have been plagued
with corruption, they are currently engaged in USG-supported
modernization and reform programs. END SUMMARY.

FORMER LEGISLATORS CONVICTED ON CORRUPTION CHARGES


3. (U) On January 8, the Anti-Corruption Court sentenced
former legislators Hamka Yandhu and Antony Zeidra Abidin to
prison for their roles in the 2003-2004 Bank Indonesia
(Central Bank) corruption scandal. Yandhu was sentenced to
three years and fined approximately USD 23,000. Abidin, who
was evasive during the trial, was sentenced to four and a
half years and fined approximately USD 14,000. The two
former lawmakers were members of the Indonesian Parliament
(DPR)'s financial commission responsible for amendments to
the Bank Indonesia (BI) law and oversaw a dispute between
Bank Indonesia and the Finance Ministry over how to resolve
unpaid debts relating to the BI liquidity support scandal.


4. (U) The ever-widening scandal regarding BI liquidity
support, commonly known as "BLBI," has led to the conviction
of several former GOI officials: former legislators, former
Bank Indonesia officials, as well as a former prosecutor
(reftel C). In 2003 and 2004, Yandhu and Abidin are said to
have channeled between USD 35,000 to USD 116,589 (2003-2004
dollars) of unlawfully disbursed Indonesian Banking
Development Foundation (YPPI) funds to 52 former members of
the national legislature (DPR) and kept approximately USD 3.6
million for themselves. The BLBI emergency liquidity credits
went to commercial banks during the 1997-98 Asian financial
crisis. Of the $16 billion in BLBI loans issued after 1997,
approximately a third were not repaid.

AGO AND SUPREME COURT HIT BACK ON CORRUPTION ALLEGATIONS


5. (U) The Attorney General's Office (AGO) filed a complaint
for defamation against anti-corruption watchdog, Indonesia
Corruption Watch (ICW),on January 7. The AGO filed the
complaint after a newspaper report, citing ICW as a source,
alleged the AGO had misappropriated recovered assets from
corruption cases. The article highlighted a discrepancy
between the numbers published by the AGO and those of the
Supreme Audit Agency. The AGO explained that the court
verdicts determined whether the recovered assets were
returned to the Audit Board or the original owners of the
funds.


6. (U) The Supreme Court also filed a formal complaint
against the ICW. In it, the Supreme Court denied its
justices had paid USD 1 million to members of the DPR to

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ensure the recent passage of a law extending the retirement
age of Supreme Court justices from 67 to 70 years of age.
Saying it had been unfairly singled out amidst a host of such
accusations, ICW responded that it had received reports
alleging bribery attempts during the discussion of the bill
but had not accused Supreme Court justices of passing those
bribes.

USG-SUPPORTED REFORM


7. (SBU) Both the AGO and the Supreme Court have been
criticized for corruption in their ranks. After the arrest
in April 2008 and subsequent conviction in the
Anti-Corruption Court of a former anti-corruption prosecutor
for his role in the BLBI corruption scandal, the AGO has
struggled to maintain credibility as an effective
anti-corruption body (reftel A). Amidst the swirl of
corruption allegations, however, USG assistance is quietly
working to improve these institutions. USDOJ/OPDAT is
building the professional capability of the AGO through the
AGO's Anti-Corruption Task Force and USAID is supporting
AGO's bureaucratic reform. MCC assistance is overhauling the
Supreme Court administration, including the establishment of
an information desk, a transparency decree, a staffing
assessment and a complete inventory of court physical assets.
This quiet progress is not readily evident to public and
anti-corruption watchdogs, which readily voice frustration
with the perceived lack of progress and tend to take their
allegations directly to the media.

HEFFERN