Soeharto probe likely to fail

By Jeffrey Winters

CHICAGO, Illinois, United States (JP): Indonesia's former president Soeharto and some of his family members have been outspoken and even pugnacious in their claims that they have not amassed huge and illegal fortunes over the course of the New Order. He has even made the remarkable claim that he is "poor" (or people have done so on his behalf).

There are good reasons for Soeharto to adopt this posture. One is that by making such bold claims, the many Indonesians who don't want to believe their ex-president could be so greedy (rakus) can be lulled back into the same satisfied and comfortable naivete they maintained for decades.

There is another group who are happy he is putting up such a strong public-relations fight because they have stolen a lot of money too, and they would like all talk of tracking and recovering assets to stop before it becomes a snowball that engulfs their smaller, though still significant, fortunes.

But there is an even more important reason Soeharto and his allies dare to thumb their noses at critics demanding that his fortune be revealed and returned to the people from whom it was stolen. He is obviously confident no one will be able to prove how much money he has or where it is hidden.

His confidence is well-grounded.

Tracking hidden and stolen wealth is an extremely difficult process requiring some of the most talented lawyers and investigative accountants in the world (just ask the frustrated Filipinos about this).

The only thing the half-hearted investigations being done by the Attorney General in Jakarta will produce is a whitewash for Soeharto. I doubt the Attorney General or his staff would get very far, even if they wanted to.

The truth is that without a serious effort involving first a criminal trial and conviction in Indonesia, and then a coordinated international investigation executed by the world's very best money chasers (who charge substantial fees for their highly specialized work), Indonesians have no chance of recovering much, if any, of Soeharto's wealth.

Probably the best that can be hoped for is the seizure of some of the Soeharto family's domestic assets.

Let me explain why this is so. First, no one will find any foreign accounts in Soeharto's name, either in Switzerland and Germany, where he used to keep large deposits, or in Austria, where he was recently rumored to have transferred a major part of his assets. Readers should note that Austria is a much more secretive and secure place to hide ill-gotten wealth than the more famous location, Switzerland.

Why are there no accounts in Soeharto's name? Because Soeharto is shrewd and had enough money to hire the very best legal advice and assistance to launder and hide his wealth.

How is it done? Let me give just one example. Soeharto's first step would be to give "power of attorney" (powerful signing rights) to a lawyer working on his behalf. Then the first lawyer would open a similar power-of-attorney arrangement with a second lawyer. This would be done for a third time and maybe even for a fourth time.

Then, as the money moved from attorney to attorney, accounts and deposits would be made in the name of each attorney or even the name of their law firm. Therefore, the final deposit in a Swiss or Austrian bank account would be in the name of a lawyer, and that lawyer may not even know that it is Soeharto's money he or she is handling via the chain of powers-of-attorney.

In fact, it is very likely that the lawyer does not know the origin of the money. Part of the safety in this type of operation comes from keeping each link in the money-laundering process as ignorant as possible about earlier links in the chain. Each link in the chain deals only with the previous member. A crucial step in tracking own the money would be to identify the first link in the chain -- the attorney or attorneys who worked directly for Soeharto in person.

From there, it would be possible to follow all subsequent transactions and power-of-attorney contracts leading to the deposits themselves.

Increasingly banks are coming under pressure to conduct at least some basic investigation of their depositors and document who they are, and where their money is coming from. This is supposed to occur, especially when the sums of money involved are very large -- as would be the case when Soeharto moved his money.

The problem is, most banks do not follow these procedures very well, there is weak international enforcement and Swiss and Austrian banks in particular are the least diligent in documenting who depositors are and the sources of major deposits or transfers.

Why do they do this?

Because it is very profitable to receive and hold these deposits or transfer them to other banks for a fee. Furthermore, intermediary lawyers always get very good fees for entering into power-of-attorney arrangements with other lawyers and handling large sums of money without asking questions. In fact, this is a very common practice among lawyers, especially those handling cross-border transactions, transfers, and deposits.

This is why Soeharto and his cronies can laugh at their critics. They know that the Habibie government and senior figures in the Armed Forces (ABRI), nearly all of whom have been in bed with Soeharto for their entire careers, are not enthusiastic about finding and recovering the money.

They know that even if a determined government were in power, the chances of success would be very low.

There is another reason Soeharto and his associates can taunt the Indonesian public. In order for skilled accountants and investigators to track and recover the ill-gotten wealth of fallen government leaders like Soeharto, they must first have evidence that laws were broken. This is not a trivial matter and it has been a major obstacle to the Philippines' efforts to recover the wealth of the Marcos family.

No one has yet demonstrated that Soeharto broke any laws as he built his fortune, and more disturbing still, he may not have acted illegally.

This is not a trivial matter, and it may prove to be the most important obstacle to chasing and recovering his assets. To give Soeharto a generous cut from projects may not have been illegal, strictly speaking, and anyway it could be very hard to prove.

Also, a tremendous share of Soeharto's fortune was channeled through foundations (yayasan), and there is virtually no Indonesian law governing the conduct of foundations. If there is no law, there can be no illegal action. And before international accountants and investigators can do their work, they need clear proof that laws were broken.

No wonder Soeharto, his family members, and other cronies have the confidence to declare they have done nothing wrong as they enriched themselves. Despite amassing fortunes in the billions of U.S. dollars, the sad truth is that Indonesian laws might be so weak that legally speaking, their claims of innocence could be true.

Soeharto and those who surrounded and worked closely with him for so many years deserve to pay for the harm they inflicted on the people of Indonesia over three decades.

The best way to bring Soeharto to justice would probably be to put him on trial for the disappearances, torture, and massacres that occurred under his rule.

Indonesians could handle this challenge themselves and would not have to rely on the cooperation of secretive and collusive bankers in Europe and the Caribbean.

The writer is a lecturer in political science at Northwestern University, Chicago, U.S.A.