|BUSINESSWEEK ONLINE : AUGUST 14, 2000 ISSUE|
|INTERNATIONAL -- ASIAN BUSINESS
Suharto's Moment of Truth? (int'l edition)
This trial might be in earnest
Former Indonesian President Suharto has been accused of many things, from genocide in East Timor to illegally amassing a multibillion-dollar fortune. But he has successfully avoided serious judicial scrutiny since riots forced him to resign in May, 1998. Until now, that is. On July 27, a week after enraged students marched on Suharto's Jakarta home with a grotesque effigy and chants of ''Hang Suharto!,'' Attorney General Marzuki Darusman declared the ailing ex-dictator fit to stand trial. Suharto, Darusman said, would be arraigned in court by Aug. 10.
Suharto will not be tried for the alleged atrocities that have made him infamous. Instead, Darusman is narrowing his charges to those he believes are provable. The core allegation is that Suharto, as chairman of a charitable foundation, laundered almost $600 million he then used to finance family investments. In a case that could last up to a year, Suharto faces a term of 12 to 15 years if he's convicted of corruption. Frail at age 79, Suharto would have to count that a life sentence.
With a river of public protest threatening to burst its banks, Darusman has little choice but to force Suharto into a courtroom. The question now is whether the government's case against the former leader, which has not yet been filed, will be enough to calm Indonesia's roiling political waters--and restore faith in its frayed judicial system. Darusman and others in the government of President Abdurrahman Wahid also hope the Suharto trial will help revive economic confidence, especially among foreign investors. But on this point, Wahid himself may prove to be a problem: Earlier this year he promised to pardon Suharto if he was ever convicted of abusing his power.
The Suharto case bears more than a passing resemblance to the long legal wrangling surrounding Ferdinand Marcos, the late Filipino President, who was also suspected of stealing billions. Amid numerous alleged offenses, the Indonesian government has limited its case according to the admissible evidence it can compile. In an interview in his Jakarta office on July 25, Darusman acknowledged that he had limited his charges, but he was confident that he could make them stick.
DUTCH CONDUIT? Darusman said that his staff has uncovered evidence that Suharto used one of the seven foundations he controlled--he declined to name which one--to collect ''charitable'' donations from the Indonesian government. Eventually, says Darusman, the donations wound up in Suharto family ventures. The government's suit will charge that the funds gathered by the foundation--$571 million over some years--were transferred through Bank Indonesia to Indoverbank, an Amsterdam commercial bank that the central bank owns.
According to Darusman, the Dutch-based bank would then move the funds into offshore tax shelters. At that point, the funds were disguised as direct foreign investment and went into ''joint ventures'' with the Suharto family in Indonesia, sometimes as ''liquidity credits''--a term for Bank Indonesia loans to local financial institutions. ''Specifically, the transactions linked the foundation to Indoverbank liquidity credits,'' says Darusman. ''It was a very unconventional way of circulating money that eventually wound up back in Indonesia.''
Business Week first reported Indoverbank's suspected role as a capital conduit in February. Neither Suharto's lawyers nor Indoverbank President Muhamad Muchtar responded to written questions about the allegations Darusman intends to advance in court.
Local bankers and business execs say that if Suharto is put behind bars on any charge--''even jaywalking or littering,'' as a Jakarta venture capitalist put it--it would be sufficient to signal a clean break from the past and a return to the rule of law. ''You have to understand how bad our legal system is,'' says a banker who has dealt with Suharto family businesses.
Indeed, recent government rulings have done little to end suspicions of massive corruption by the Suhartos. And that has made it difficult for Indonesia to attract the foreign investment it needs to get its economy back on track. Last year, Darusman's predecessor, Andi Ghalib, closed an investigation into Suharto's wealth without making any charges. In effect, Ghalib accepted Suharto's modest accounting of his personal wealth: $2.4 million in a savings account, all of it collected in rent on a local property. Suharto's son Hutomo Mandala Putra, or Tommy, was subsequently acquitted on charges of defrauding a government agency in a real estate scam.
Even with the pending trial, political activists in Jakarta are skeptical that Darusman's case is an honest effort to press charges that will stick. Most assert that the attorney general, who is a vice-chairman of Golkar, the ruling party under Suharto, is simply doing the least he can get away with in a volatile environment. In narrowing the charges, they say, he is not only sparing Suharto but avoiding the kind of wide-ranging trial that would incriminate incumbent politicians. ''Students and human rights activists are not happy,'' says attorney Muchtar Pakpahan, chairman of the Indonesian Prosperity Trade Union, an influential opposition force. ''Darusman's efforts are just cosmetic.''
CRUCIAL DISTINCTION. Darusman insists he's out to get his man. But inconsistencies in the government camp aren't doing much to deflect skepticism. In his interview, Darusman said that Suharto would be charged with abuse of power as well as corruption. Two days later, he announced publicly that his case would rest upon corruption charges alone. The distinction is crucial. Wahid's amnesty offer earlier this year related to possible political charges against Suharto. Now that Darusman has excluded such allegations, it's not clear how--or even whether--the President will tip his hand. At this point, even Darusman says the court could still declare Suharto unfit for trial.
Whatever happens, the Suharto case presents the risk of renewed political conflagration. A presidential pardon could prove an instant disaster. But a trial will be fraught, too. A verdict of not guilty could prompt more violence. Even if Suharto is convicted, protesters may not be satisfied unless the government also presses a human rights case against him.
At the same time, Wahid may now want to prove that his government has moved beyond the past Suharto symbolizes. While Wahid is temperamentally committed to reconciliation rather than confrontation, he is also a staunch Darusman ally. And he was apparently disappointed in early July when Suharto's family refused to negotiate the return of $25 billion to state coffers. Wahid then announced findings that Suharto had withdrawn $8 million in state funds from foreign banks just days before he resigned. The retooled case against Indonesia's longtime strongman could well be Wahid's payback.
By Michael Shari in Jakarta
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Suharto's Moment of Truth? (int'l edition)
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