In 1999, International Monetary Fund authorities contracted with the
accounting firm of Arthur Andersen to audit the Indonesian power
company, PLN. According to an article appearing in the
Indonesian newsmagazine, D&R, the audit has discovered hundreds of
millions of dollars missing or unaccounted for in U.S.-backed electric
power projects.
The news report, written by D&R investigative journalist Febrina
Siahaan, contains an exclusive interview of Indonesian power officials
who openly admit to corruption involving U.S. officials.
The largest U.S.-sponsored power project in Indonesia is called
Paiton. The coal burning electric plant was built by Edison Mission
Energy and is located in East Java. Mission Energy is
also a partner of Indonesia's Lippo Group, a consortium part owned by
Indonesian billionaire Moctar Riady and the Chinese Army China
International Trust and Investment Corporation bank (CITIC).
Paiton has accumulated losses over $280 million. PLN estimated that
their electric company has lost over $18 billion in total.
According to the former president/director of PLN, Adhi Satriya, "It
happened because there were so many people that 'used' Suharto's power
when he was still in charge. The Paiton project by itself is the largest
loss for PLN. Corruption occurred in all parts of the project."
The Paiton power plant is expected to produce electricity at a cost
of 8 cents per kilowatt-hour. However, the Indonesians cannot even
afford to pay the agreed price of 2 cents per kilowatt-hour, a six-cent
loss to PLN for every watt generated. Yet, ironclad contracts note that
the Paiton plant has to be paid for, whether it is running or not.
"With this condition actually, PLN doesn't deserve to go on anymore,"
stated Adhi.
On Nov. 16, 1994, Bill Clinton, Secretary of State Warren Christopher
and Secretary of Commerce Ron Brown traveled to Jakarta, Indonesia, for
the Asia Pacific Economic Conference. In Jakarta, Clinton signed deals
to supply Indonesia with electric power using U.S. taxpayer loans. The
deals were worth billions to U.S. corporations such as Cal Energy,
Mission Energy and General Electric.
"As markets expand, as information flows, the roots of an open
society will grow and strengthen and contribute to stability," stated
Clinton during the 1994 signing.
Instead, Mr. Clinton has brought bankruptcy and more poverty to the
riot-stricken country. Their transition from the rule of Suharto has not
been an easy one with billions missing.
In September 1994, long before Clinton signed the power deal, the
Commerce Department documented that President Suharto had also cut his
daughter in for a bribe. According to a 1994 Commerce document, ".75%
ownership" of the $2 billion Paiton project was given -- at no cost --
to dictator Suharto's second daughter, Siti Hediati Prabowo.
Prabowo's ".75%" ownership totals to a free gift from the U.S.
taxpayers of $15 million. The $15 million was part of a $50 million
bribe split between Ms. Prabowo and another Suharto
relative. The money was given in the form of a no payback loan based on
profits from the Paiton power plant. In return for the kickback, the
Indonesian president selected Mission Energy, a
company owned by major Clinton donors, to build the Paiton power plant
in East Java.
Newly released documents provided by the Overseas Private Investment
Corporation (OPIC) show that Prabowo and her brother-in-law, Hashim
Djojohadikusumo, were given a total "2.5%" ownership in the Paiton power
project, through their local company, BHP. OPIC blacked out several of
the documents to keep them secret for personal and business privacy
reasons.
According to a May 1999 letter written by Mission Energy Senior Vice
President Robert E. Driscoll, "BHP holds a 15% interest in the project.
To date, BHP has made capital contributions of approximately $50
million. To facilitate these contributions EME, Mitsui, and GE Capital
extended loans to BHP to be repaid out of BHP's project dividends. The
loans carry a market rate of interest and other commercial terms. Until
the loans are repaid in full, BHP is permitted to receive only 35% of
the dividends to which it is otherwise entitled."
Of course, with a loss of six cents per kilowatt-hour, Paiton will
never turn a profit or pay off on dividends. Thus, "35%" of nothing
equals nothing.
In addition, Prawabo's brother-in-law, Hashim, also received an
exclusive, no bid, no cut, contract to supply coal for the power plant.
According to the 1999 letter from Mission Energy, Hashim is "an
Indonesian businessman of considerable reputation who was recommended to
EME by, among others, the then U.S. Ambassador to Indonesia."
The reason for such vocal support from the U.S. ambassador may have
also have an easy explanation. According to another document obtained
from the U.S. Commerce Department, "Warren Christopher is on Edison
Mission's board of directors."
The 1998 Commerce memo states quite clearly that the Paiton project
was of extreme importance to the Clinton administration. During the
period of 1994 through 1996, Christopher had a vested interest in seeing
the Paiton project to completion.
There are several parties interested in the success or failure of the
Paiton project. The major investors in Paiton, according to D&R reporter
Febrina Siahaan, recently traveled to Jakarta.
The EXIM (Export-Import) banks of the United States and Japan have
combined with banks from Australia, Switzerland and communist China to
press the Indonesian government not to
default on power plant loans.
In fact, several big banks stand to lose money, including BA Asia,
Chase Manhattan, Fuji, Sakura, Barclary PLC, Credit Lyonnes, Industrial
Bank of Japan and Union Bank of Switzerland.
According to the Commerce Department, there are also U.S. companies
with contracts inside Indonesia who have an interest in the failure of
the Paiton power plant, "Both EXIM and OPIC confirmed that if the 1200
MW Paiton project were to go on line, it would most likely wipe out any
further GOI (Government of Indonesia) need for other power plants. Thus,
several other major U.S. power developers with other projects, in
varying stages of completion, are potential competitors with Edison for
power purchase agreements."
Corruption knows no party, and does not adhere to national boundaries
or ethnic origin. The electric power scandal covered the globe in
Clinton led corruption. The Clinton administration's offer of free cash
for kickbacks and donations are standard business practices, according
to General Manager of Corporate relations for brother-in-law Hashim's
coal company, Jannus Hutapea.
"It's natural," stated Jannus. "This kind of practice occurs in every
country in this world."
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