Palm oil executives arrested in bribery scandal in Indonesia

  • In a sting operation on Friday, Indonesia’s anti-corruption agency caught a representative of Indonesia’s Sinarmas conglomerate bribing a pair of provincial legislators from Central Kalimantan.
  • The firm wanted the politicians to avoid an investigation into the pollution of Lake Sembuluh in Seruyan, a district in Central Kalimantan. Local residents and activists say the lake, which is ringed by plantations and mills, has been contaminated by palm oil processing waste and pesticides.
  • The company also wanted the provincial legislators to tell the media that its operating permits were in order, according to the KPK.

JAKARTA — Three executives from one of Indonesia’s biggest palm oil firms were arrested over the weekend by the nation’s anti-graft agency after an employee was caught bribing politicians to kill an inquiry into water pollution and plantation licenses in Borneo, the agency said on Sunday.

The executives work for Sinarmas, a sprawling conglomerate owned by Indonesia’s billionaire Widjaja family. One of them, Edy Saputra Suradja, has been a vice president of PT Sinar Mas Agro Resources and Technology (SMART) since 2008. SMART is one of the Widjaja family’s main palm oil arms, presiding over dozens of plantations and mills across Indonesia. Edy tendered his resignation after the scandal broke.

The two other executives, Willy Agung Adipradhana and Teguh Dudy Syamsury Zaldy, are the chief executive and legal director, respectively, of PT Binasawit Abadi Pratama, a smaller company operating near Lake Sembuluh in Seruyan district, in the Bornean province of Central Kalimantan. The lake is ringed by oil palm plantations and mills and has become severely polluted, with residents complaining of itchy skin after swimming in its waters and the collapse of fish stocks.

Four members of the Central Kalimantan provincial legislature were also named as suspects in the case, Indonesia’s anti-graft agency, the KPK, announced in a press conference on Oct. 28. Legislators had been investigating reports from Seruyan residents that companies had contaminated Lake Sembuluh by dumping palm oil processing waste in its waters, the agency said.

“The fish aren’t as abundant anymore,” James Watt, a farmer who lives a short walk from the lake, told Mongabay last year during an investigation into corruption in Seruyan. “The difference is the investors are here. The oil palm plantations are here.”

James Watt at Lake Sembuluh. Image by Leo Plunkett for The Gecko Project.

The case came to light when the KPK received a tip about a planned meeting in Jakarta between Binasawit representatives and provincial legislators, during which the bribery was supposed to take place.

On Oct. 26, KPK investigators arrested Tira Anastasya, who works in Binasawit’s financial department, together with two members of the Central Kalimantan legislature, Edy Rosada and Arisavanah, at the food court of a shopping mall in Central Jakarta, shortly after the money was handed over, according to a KPK timeline of events.

The KPK also secured 240 million rupiah ($16,000) in cash inside a black plastic bag.

After that, the KPK moved to arrest four Sinarmas executives at the conglomerate’s headquarters in Jakarta: Edy, the SMART vice president; Willy, the Binasawit CEO; Feredy, a Binasawit director; and Jo Daud Darsono, the CEO of SMART. Of those, only Edy and Willy have been charged in the case. Teguh, the Binasawit legal director who has also been charged, turned himself in to the KPK.

Four legislators — Borak Milton and Punding L.H. Bangkan, as well as Edy and Arisavanah — have been charged in the case. Several other legislators have been arrested by the KPK.

Sinarmas said in a statement that it “deeply regrets” the emergence of the scandal.

“We hope our business units and their subsidiaries operating in Indonesia operate in accordance with Indonesia’s laws and regulations,” the firm said.

“We will fully cooperate with the investigation process and we hope the issue can be resolved quickly.”

KPK deputy head Laode Syarif, right, addresses the press on Oct. 28 as two of his colleagues display the confiscated bribe money. Image by Indra Nugraha for Mongabay.

Permits in focus

The KPK isn’t only looking at water pollution. After provincial legislators followed up on residents’ complaints about the quality of the lake, they discovered problems with Binasawit’s permits, according to the KPK.

Sinarmas wanted to pay off the legislators not only to kill the inquiry into water pollution but also to tell the media that Binasawit’s permits were in order, the agency said.

“Don’t forget, the one that issued the permits was the district government,” Laode Syarif, deputy head of the KPK, said at the press conference.

“We have to look at when [Binasawit] started operating, so we can see who issued the permits,” Laode said.

According to documents published on the website of the Roundtable on Sustainable Palm Oil and a provincial government database, the permits underpinning Binasawit’s operations were issued by Darwan Ali, who was the head of Seruyan district from 2005 to 2015.

Last year Mongabay in collaboration with the The Gecko Project published an investigation into Darwan’s licensing practices, showing he had issued licenses for 18 enormous oil palm plantations to as many shell companies formed by his relatives and cronies. Instead of developing the plantations, these individuals flipped the companies, with the licenses attached, to conglomerates owned by the billionaire Kuok and Rachmat families for millions of dollars.

Today Seruyan, and especially the Lake Sembuluh area, is home to one of the largest expanses of oil palm in Indonesia.

“The lake is dirty because people bathe in it and poop in it,” Darwan’s son Ahmad Ruswandi, who became head of the Seruyan district legislature after losing a 2013 bid to replace his father as district chief, told Mongabay and The Gecko Project last year. “If there weren’t any companies, the lake would still be dirty.”

Land concessions for oil palm plantations encircle Lake Sembuluh and the villages on its shores, on the island of Borneo.

Lake Sembuluh is surrounded by eight factories milling palm fruit into crude palm oil, according to Save Our Borneo (SOB), an NGO based in Central Kalimantan.

SOB director Safruddin said the lake was contaminated not only with waste from the mills but also with pesticides from the plantations surrounding it.

Laode, the KPK deputy head, said corruption in the forestry, plantation and environmental sector was “very harmful” to both the environment and people.

“Especially if the corruption is aimed to cover up the dumping of waste in a lake which is a source of life and an ecosystem,” he added. It’s a place people depend on for their livelihoods.”

That’s why the KPK is paying special attention to corruption in the natural resource sector, including the plantation sector, Laode said, adding that the government should use the bribery scandal as a jumping-off point to review permits that have been issued for plantations around Lake Sembuluh.

In September, President Joko Widodo signed a three-year moratorium on new permits for oil palm plantations in Indonesia and ordered a review of existing permits.

Dimas Hartono, head of the Central Kalimantan chapter of the Indonesian Forum for the Environment (Walhi), said the permit review should pay special attention to the province.

“We appreciate the KPK’s work in the sting operation,” he said. “Hopefully this case can be followed up because this kind of bad practice has been going on for a long time.”

Dimas Hartono in Palangkaraya, the capital of Central Kalimantan province. Image by Leo Plunkett for The Gecko Project.

Banner: Lake Sembuluh. Image by Leo Plunkett for The Gecko Project.

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