JAKARTA - THE Indonesian attorney general's office said on Friday it had dropped a graft case against former president Suharto's son involving a lucrative clove monopoly because the funds had been returned to the government.

Hutomo 'Tommy' Mandala Putra, youngest son of the former autocratic leader, is under investigation over various deals as the government attempts to recover funds from Indonesia's powerful dynasty.

In the 1990s, Tommy Suharto chaired an agency tasked with regulating the trade of cloves, a key ingredient of a popular local brand of cigarettes.

The government gave a loan to the clove monopoly agency (BPPC) led by Tommy so the agency had funds to buy clove directly from farmers.

On Friday, the attorney general's spokesman, Mr Jasman Pandjaitan, said the case had led to a loss of 759 billion rupiah to the state.

He added that there was no criminal case against Tommy Suharto because he had paid 900.7 billion rupiah (S$124.2 million) to the government.

'The state loss was returned, so the allegation that there is a state loss is not proven,' Mr Pandjaitan said.

A travel ban on Tommy has been lifted following the dropping of the case.

Like other Suharto children, Tommy became a super-rich business mogul during his father's three-decade rule.

Tommy owned numerous businesses including an airline and a failed national car project.

He was conditionally released from jail in 2006, after serving a third of his original sentence for plotting the murder of a Supreme Court judge who had convicted him in another graft case.

The former president, who died in January, was himself charged with graft, but escaped prosecution because the Supreme Court chief justice declared him too ill to stand trial.

Suharto and his family members deny any wrongdoing.

The government's attempts to recover the alleged state loss during Suharto's era are a test case for President Susilo Bambang Yudhoyono, who had promised to tackle endemic graft in the country and has said he will run for a second term in 2009 elections. -- REUTERS