Graft worth $27.3m suspected at Tugu

Graft worth $27.3m suspected at Tugu

JAKARTA (JP): The Supreme Audit Agency (BPK) has found
irregularities involving over Rp 260 billion (about US$27.36
million) in insurance firm PT Tugu Pratama Indonesia, which is
owned by state oil and gas company Pertamina.

The BPK's report, a copy of which was obtained by The Jakarta
Post, said that it had found irregularities in the transfer of
Tugu shares, its tax and dividend payments, and other
inefficiencies that amounted to a total potential loss of Rp 260
billion.

Legislators criticized on Wednesday Pertamina's slow response
in following up on the BPK's findings.

"With this amount (Rp 260 billion), the Tugu case should have
been long ago revealed to the public," legislator Pramono Anung
said during a hearing between Pertamina and the House of
Representatives' Commission VIII, which among others things
oversees the energy and mining sectors.

Pertamina, Anung said, should have brought the BPK's report to
the Attorney General's Office immediately on learning of the
indications of graft.

The report, dated Dec. 19, 2000, said indications of tax
irregularities had been found in the payment of Tugu dividends,
resulting in losses of Rp 39.10 billion to the state.

The BPK also questioned donations of Rp 33 billion made by the
insurance company to various foundations and organizations.

Other inefficiencies reported were related to the supply of
seven official cars worth Rp 4.56 billion to former members of
Pertamina's board of directors, and questionable investment
decisions costing Rp 100.08 billion.

It also suspected a loss of Rp 50.49 billion under what the
BPK called a dubious transfer of Tugu shares to the Pertamina
pension fund. The report did not say by whom the shares had been
transferred.

Tugu is 20 percent owned by the Pertamina pension fund.

Pertamina itself owns 45 percent of Tugu, while the remaining
35 percent is still the subject of a dispute between Pertamina
and PT Nusantara Ampera Bhakti (Nusamba).

Nusamba is a widely diversified business group, which is 80
percent owned by the Dakab, Dharmais and Supersemar foundations
linked to former president Soeharto.

The government had seized assets from the three foundations,
following the laying of corruption charges against Soeharto in
1999.

Mohamad "Bob" Hasan has a 10 percent stake in the business
group, with the remaining 10 percent being owned by Soeharto's
eldest son Sigit Hardjojudanto.

Hasan was one of Soeharto's closest associates.

Pertamina had intended to purchase the Nusamba stake, but
hesitated on suspicion that the 35 percent stake consisted of
empty shares.

If Nusamba had acquired the 35 percent stake in Tugu for free,
Pertamina would refuse to pay Nusamba for the stake.

Since its founding in 1981, Tugu has grown to become the
country's largest insurance company, largely due to the monopoly
it enjoyed over indemnity insurance in the oil and gas sector for
over a decade.

Although Hasan was only a minority shareholder in Tugu, he
practically controlled the insurance company during the Soeharto
era.

Under Hasan's control, the company reportedly charged
Pertamina marked up premium rates.

Hasan is now serving a two year sentence after being found
guilty of stealing $75 million in reforestation funds belonging
to the Ministry of Forestry.

During the hearing, legislators questioned Pertamina's
inability to solve its dispute with Nusamba.

Pertamina announced in 1999 that it planned to acquire
Nusamba's stake, but on Wednesday Pertamina president Baihaki
Hakim said the company had not yet completed the purchase.

However, Nusamba has reportedly transferred its 35 percent
stake to the Indonesian Bank Restructuring Agency (IBRA) as a
guarantee for the repayment of Hasan's debts to local banks.

Baihaki said that the company and IBRA were conducting
financial due diligence to verify Nusamba's stake in the
insurance firm.

Pertamina, he said, was waiting for the BPK to finalize its
report before bringing the case to the Attorney General's Office.

"The process takes time, but we want to go through it
systematically," Baihaki said at the hearing. (bkm)