Tax office seeks arrest of U.S.-based power company KBC executives
Tax office seeks arrest of U.S.-based power company KBC executives
The Jakarta Post, Jakarta
The tax office started pursuing three executives of the U.S.-
based power firm Karaha Bodas Company (KBC) on Monday, saying the
government had given it the OK to jail them on charges of tax
evasion.
"As the Minister of Finance has signed the decree authorizing
the arrest of these people, we will start the arrest process
today," Director General of Taxes Hadi Purnomo said, adding that
the decree was signed on Nov. 12 -- the last working day before
the long Idul Fitri holiday.
Hadi acknowledged, however, that his office was in the dark
about their whereabouts or whether they had left the country.
Under a 2001 regulation, the tax office is allowed to jail
uncooperative taxpayers for up to a year without trial.
The tax office holds the three persons responsible for
accounting fraud in fiscal year 1998-1999, which allegedly
defrauded the state of Rp 12 billion (about US$1.3 million) in
potential value-added tax (VAT) revenue.
The three, including two foreign citizens, are identified by
the initials of RDMC (KBC director), MC (KBC finance manager),
and LSP (KBC director appointed by the firm's local partner). KBC
is owned by Caithness Energy of Florida and Power & Light Co.,
both U.S. firms, and local partner PT Sumirah Daya Sakti.
Aside from the tax office, the police are also seeking to
arrest the three persons on fraud charges.
The police started the hunt the three several months ago after
KBC won a court case with state oil and gas company Pertamina in
the United States, as a result of which the state firm was
ordered to pay KBC US$291 million in damages.
The government argues that the hunt for the three persons is
part of the anticorruption drive, but most analysts see it as
crude retaliation against KBC. They also consider the effort to
be useless as the arrest of the three persons would do nothing to
change the court's decision ordering Pertamina to pay damages to
KBC.
KBC was one of dozens of independent power producers (IPPs)
whose projects were put on ice by the government following the
economic crisis in the late 1990s. KBC at the time had a contract
with Pertamina to develop a geothermal power project in West
Java.
A Swiss arbitration court ruled in 2000 that Pertamina must
pay damages to KBC for the termination of the project. In
expensive yet ultimately fruitless litigation, Pertamina
challenged the arbitration ruling in the U.S., Canadian, Hong
Kong and Singaporean courts.
Early this year, a U.S. court rejected Pertamina's appeal
against the arbitration award.