Police complete case files on corruption at KBC

Abdul Khalik, Jakarta

The police announced on Tuesday that they were ready to hand over to the prosecution service the case files on three suspects allegedly involved in graft in the Karaha Bodas Company (KBC) power project.

Some observers said this could help the government avoid having to paying huge damages to the U.S.-based firm.

Previously, the police had named Priyanto, the former head of the geothermal division at state oil and gas firm PT Pertamina, one of his staff members, Syafei Sulaiman, and American Robert McKichan as suspects for their alleged roles in fictitious transactions and cost mark-ups during the geothermal power project.

"We have found that there is enough evidence to conclude that they were involved in graft during their terms as Pertamina supervisors for the project by inventing fictitious transactions and marking up the cost of the project," said Suyitno.

He said the police had yet to question McKichan, who is abroad, as the American had refused to comply with the police summons.

"We will forward his case file to the prosecutors even though we haven't questioned him yet. He can be tried in absentia, if necessary," said Suyitno.

He said that the police would continue to seek evidence on whether KBC officers had bribed Pertamina to obtain the power project without going through a tender.

Suyitno said that the police had questioned a large number of witnesses in the case, including Minister of Energy and Mineral Resources Purnomo Yusgiantoro and former top PLN official M. Zuhal.

KBC signed a contract with Pertamina in 1994 to develop two geothermal power plants in Garut, West Java. But in the wake of the late 1990s economic crisis, the government canceled dozens of power projects including the Karaha Bodas project.

This prompted KBC to bring Pertamina to a Geneva arbitration board in 2000, which subsequently ruled in KBC's favor. The panel ordered Pertamina to pay some US$261.1 million in damages to KBC.

Pertamina filed two appeals in Switzerland, but was unsuccessful in both. A U.S. court froze Pertamina's bank accounts in the U.S. at the request of KBC. The U.S. Supreme Court is expected to rule on the case later this year.

State Minister for State Enterprises Laksamana Sukardi has said that Pertamina should pay the damages, and honor the decision of the arbitration panel.

But he said that the government would negotiate with KBC to reduce the amount of damages Pertamina would have to pay. The total amount to be paid now stands at around $290 million, including interest.

Meanwhile, some observers have said that the government should provide the police evidence on corruption to the U.S. court in the hope of obtaining a ruling against KBC.

National Police chief Gen. Da'i Bachtiar has also said that the government should not pay the damages pending the completion prior to the bringing of the corruption proceedings to a final conclusion.

KBC is controlled by the Florida-based FPL Group Inc. and Caithness Energy LLC of New York, in a partnership with local firm PT Sumarah Daya Sakti, which is linked to Tantyo Sudharmono, the son of the country's former vice president Sudharmono.