KBC used forged documents to back its claim: Police

KBC used forged documents to back its claim: Police

Abdul Khalik, Jakarta

The police have accused U.S.-based Karaha Bodas Company (KBC)
of using fake documents in its lawsuit against state oil and gas
firm PT Pertamina at the International Court of Arbitration.

National Police anticorruption chief Brig. Gen. Indarto said
on Wednesday that the KBC and certain Pertamina officials had
fabricated transaction and payroll documents, among others, to
allow them to mark up the cost of the Karaha Bodas geothermal
power project.

"We have discovered the fake documents, which we believe were
used at the arbitration court," Indarto told reporters.

The police are investigating a corruption case involving the
Karaha Bodas power project and named three suspects on Tuesday,
including the former head of the geothermal division at
Pertamina, Priyanto, his subordinate Syafei Sulaiman and Robert
D. McCutchen of the KBC for their roles in concocting fictitious
transactions to inflate the cost of the project.

The government hopes if it can prove that the KBC power plant
project was mired in corruption, it can avoid paying damages to
the U.S. firm.

The KBC signed a contract with Pertamina to develop two
geothermal power plants in Garut, West Java, but the project,
along with dozens of other power projects, was suspended by the
government in the wake of the late 1990s economic crisis.

The firm filed a lawsuit in 2000 against Pertamina for breach
of contract at the Geneva-based arbitration court. The following
year, the court ruled in favor of the KBC and ordered Pertamina
to pay US$261.1 million in damages.

Pertamina has not yet paid the damages, as the government is
attempting to negotiate with the KBC to reduce the amount, which
has now inflated to over $290 million due to accumulated
interest.

Pertamina previously filed two appeals to the court, but was
unsuccessful in both. A U.S. court froze Pertamina's accounts in
that country at the request of the KBC, while the U.S. Supreme
Court is expected to rule on the case in September.

Although State Minister of State Enterprises Laksamana Sukardi
has said in national media that the government would order
Pertamina to honor the arbitration court's ruling and pay
damages, National Police chief Da'i Bachtiar suggested to
withhold payment until the completion of the corruption
proceedings.

"We have two choices here. If we can take the (corruption)
case to court quickly and get a verdict, we can use it as a basis
to avoid paying damages. Or, if it looks like the court will take
a long time to make a decision, we can pay now but reclaim it
later," said Indarto.

Legal expert Luhut M. Pangaribuan said the new evidence could
be used to demand the annulment of the arbitration court's
ruling.

Under Indonesian law, a decision based on fake documentation
must be annulled.

"Although it is a little too late, we must try to present the
new evidence to the U.S. court to avoid paying damages after we
get a decision from our court. However, it will all depend on
their interpretation as to whether the new evidence is valid," he
said.