Indonesian palm oil tycoon fined record $3.71b, first graft penalty based on losses to economy

Surya Darmadi (right), the owner of Duta Palma group, was sentenced to 15 years in prison. PHOTO: TEBO STATE PROSECUTER'S OFFICE

JAKARTA - An Indonesian court has sentenced palm oil tycoon Surya Darmadi to 15 years in prison and fined him a record 41.9 trillion rupiah (S$3.71 billion) – the first time a penalty for corruption was determined based on losses to the economy, on top of losses to the state.

The owner of Duta Palma group has been convicted of corruption, money laundering and tax evasion. He had bribed officials in Sumatra to allow his companies to grow oil palm trees on land previously declared as natural forest, and on land that his companies did not have proper permits to cultivate. The total area of land involved is more than 36,000ha.

Surya, 71, has been ordered to pay 2.2 trillion rupiah for inflicting losses from potential taxes and other income that the state could have received from plantation companies with proper permits. He also has to pay another 39.7 trillion rupiah for losses to the economy as a result of his action, according to the Feb 23 verdict.

State prosecutors had on several occasions attempted to have defendants punished with a fine as a result of losses to the economy, but judges had rejected doing that on the grounds that it was difficult to estimate such losses with minimal doubts.   

Surya’s case dates back to 2014 when the authorities found a money trail from him to then corruption defendant Annas Maamun.

According to the authorities, during his term as Riau provincial governor, Annas had received a 3 billion rupiah bribe as an initial payment for his support to change the status of an 18,000ha natural forest in Riau to plantation land status, hence allowing Surya’s company to plant oil palm trees there.  

The court also found Surya guilty of having his four companies operate on plantation land in Indragiri Hulu of Riau province without full permits.

Surya was on the 2018 Forbes’ list as Indonesia’s 28th richest person, with 20.7 trillion rupiah in net worth. He was not on the list in other years.

Dr Sylvester Riza, from Jakarta-based firm SRF Lawyers, called the verdict a breakthrough, praising the hefty fine.

“We hope this verdict will be upheld by the higher courts and such harsh punishments can be applied to any party who has been proven guilty of committing a similar offence,” he told The Straits Times.

Indonesia’s legal system allows defendants to appeal against a ruling in the High Court, and then in the Supreme Court if they lose again, or are not satisfied with the ruling by the High Court.

An independent lawyer believes that the case could easily be overturned in the higher courts. He said that it has been overblown, pointing out that Surya’s plantation business is relatively small, unlike that of scores of giant companies with plantation concessions spanning hundreds of thousands of hectares – whose governance is questionable.

“The fact that a small plantation group became the one that got such a huge record fine is rather suspicious. Some legal cases do have political motives,” said the lawyer, who spoke on condition of anonymity, arguing that sometimes evidence presented in court was filtered by state prosecutors.

He cited the example of another corruption defendant, Lin Che Wei, who was given a one-year jail term in 2022 for conspiring with government officials to help palm oil companies get export permits illegally that later caused domestic prices of cooking oil to soar.

This was despite Lin having records of message chats with a statement saying that he refrained from taking part in making decisions and opting to remain a government adviser that provided data and analysis.

Observers said Lin’s case was politically motivated.

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