Graft scandal: Mining giant fingers Speaker

Setya Novanto.
Setya Novanto.

Its Indonesia head says he secretly recorded Speaker asking for billions of dollars in shares

JAKARTA • The operator of one of the world's biggest copper and gold mines is at the centre of a major political scandal in Indonesia after confirming that the Speaker of Parliament tried to extort shares from the company to ensure its contract extension.

Mr Maroef Sjamsoeddin, head of Freeport McMoRan's Indonesian operations, told Parliament's ethics panel that he secretly recorded a meeting in which Speaker Setya Novanto asked for a 20 per cent stake, estimated to be worth billions of dollars, in the US-based company's Indonesia unit.

His remarks on Thursday came after Energy and Mineral Resources Minister Sudirman Said reported Mr Setya to the ethics panel last month and submitted a transcript of the conversation recorded by Mr Maroef. In the recording, Mr Maroef said, Mr Setya indicated that a 20 per cent stake be given to President Joko Widodo and Vice-President Jusuf Kalla.

Mr Setya allegedly told the Freeport executive that he could ensure the miner's contract would be extended from 2021 to 2041.

In the recording...
Speaker of Parliament Setya Novanto indicated that a 20 per cent stake be given to Indonesian President Joko Widodo and Vice-President Jusuf Kalla. He allegedly told Freeport executive Maroef Sjamsoeddin that he could ensure the miner's contract would be extended from 2021 to 2041.

Mr Maroef told the ethics panel that he met Mr Setya along with businessman Muhammad Reza Chalid on their request to discuss business at a Jakarta hotel in May and June. "I took the initiative to record it... because I was by myself and there were two of (them)," he said, adding he had used his phone to record the last meeting with the pair.

"The Parliament Speaker and his friend Reza told me they wanted a 20 per cent stake and also asked for a hydroelectric power project," he said. The pair said they were working with Chief Security Minister Luhut Pandjaitan and also wanted to be involved in Freeport's planned smelter project, he added.

Jakarta already has a 9.36 per cent stake in Freeport's Indonesian operations, and is due to take another 10.64 per cent stake under existing regulations.

Freeport had asked for an extension of its contract to give it legal certainty before investing billions of dollars in an underground phase at its Grasberg gold and copper sites in Papua province. Mr Luhut said earlier this week that Jakarta would not extend Freeport's contract early as local regulations say negotiations can begin only two years before the contract ends in 2021, local media reported.

Mr Joko is "monitoring and following this carefully", Cabinet Secretary Pramono Anung told reporters yesterday. "Some of it is hyperbole and some of it is fact. Let the ethics council investigate it," he said, referring to the recording.

Mr Kalla was quoted by Kompas newspaper yesterday as saying the Freeport case was just the tip of the iceberg and the government will pull out all stops to "clean up corruption no matter what happens".

The allegations threaten to further erode investor confidence in Indonesia, analysts said. "The multifarious affair surrounding (Mr Setya) reeks of the sort of shady dealings... which make investing and operating in Indonesia extremely precarious," said Concord Consulting.

Amid the probe, a mining ministry official said Freeport must propose a price for a 10.64 per cent stake it is required to divest from its Indonesian subsidiary on or by Jan 12. "They have 90 days after Oct 14," coal and minerals director-general Bambang Gatot said yesterday, referring to Freeport. Once it has received the offer, Indonesia will decide within 60 days whether it will buy the stake or offer it to a state-owned enterprise or regional government, he said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 05, 2015, with the headline 'Graft scandal: Mining giant fingers Speaker'. Print Edition | Subscribe