The land deals behind the downfall of Indonesia’s top judge

Under Hambit, the business of government was carried out in a series of high-end hotels and restaurants in Jakarta, the capital of Indonesia, 1,000 kilometers (620 miles) from Gunung Mas. There he would deal personally with investors who sought land in Gunung Mas. In Indonesia’s palm oil boom, district bureaucracies played a cursory role, doing the bidding of bupatis like Hambit who could wield their enormous powers unilaterally.

Those who earned an audience with Hambit first had to pass through a man who acted as his fixer in Jakarta. On condition of anonymity, he spoke to us one evening in the lobby of a hotel. Hambit, he said, had wanted to deal with genuine investors, but had been deluged with “brokers” who only wanted permits in order to sell them to someone else. It was the fixer’s job to screen them out. He would meet them first, before arranging investors regarded as credible to see the bupati.

The fixer described Hambit as a gregarious and humble man. The two had traveled to Germany together during Hambit’s first term, where the bupati had been inspired by the well-paved roads and wind turbines. “His motivation was to make Gunung Mas famous,” the fixer said. “He wanted a better life for Gunung Mas, but it wasn’t easy.”

Though he praised Hambit’s character, the fixer was candid about the system in which he operated. Even genuine investors would make under-the-table payments for the privilege of obtaining a license. The fixer referred to it as a “cycle of evil” between government and investors. But he insisted Hambit had made little profit through this means, as it was swallowed up in other ways. “They say the ghost eats the devil’s money,” he explained, using an Indonesian proverb. “It means money obtained illegally will be taken by others.”

Soliciting bribes in exchange for issuing licenses was a straightforward way for bupatis to make money. But it was also a good way to get arrested by the KPK. Intercepting politicians in the act of receiving cash payments, often through wiretaps and sting operations, was the agency’s bread and butter. This was brought into relief in mid-2012, when a bupati from the island of Sulawesi, Amran Batalipu, was caught accepting 3 billion rupiah, then equivalent to $300,000, from the subordinates of a businesswoman in return for granting her company an oil palm plantation license. Amran’s undoing was a KPK wiretap. He was jailed for seven-and-a-half years.

But some bupatis quickly learned they could make far more money in a way that fell outside the glare of the KPK. Operating without oversight, the bupatis could issue licenses to shell companies set up by their cronies or relatives. Even with just an initial permit, the value of a shell company — existing only on paper, perhaps registered to a residential address — could rocket from zero to millions of dollars. The cronies or relatives, acting as proxies, could in turn sell the company on to a major plantation firm. Yadyn Amin, a KPK prosecutor, told us it would be “suicide” for a bupati to register such a company in their own name. But if the listed owner was someone they could control, the bupati could effectively hold shares off the books. “They can be like a shadow,” he said.

The process provided the corruption — a bupati marshaling state assets for his or her own benefit — with a veneer of legality. It was not inherently illegal to give permits to a family member. Indonesia’s corruption law demanded more: that the licensing process break some other regulation, and that the state incur measurable losses as a result. A suitcase full of cash might take a bupati down. But a wire transfer of millions, via a family member, could be clean.

Jeffrey Winters, a Northwestern University professor who studies oligarchy in Indonesia and elsewhere, told us the “narrow” definition of corruption in Indonesian law creates vast grey areas. “There are thousands of examples like this that are clearly acts of corruption by any global standard, but which Indonesian power-players have managed to isolate in a murky zone of ‘odious but not necessarily illegal’,” he wrote in an email. “This leaves a huge part of the Indonesian patronage game intact and difficult to prosecute. It also means that officials spend a great deal of their time and talent scheming about ways to be wildly corrupt but avoid the specific Indonesian definition of corruption.”

We interviewed staff involved in acquisitions at one of the world’s largest palm oil firms, and due-diligence lawyers from Indonesia and Malaysia. All of them confirmed that buying assets from someone connected closely to a bupati, even a family member, would effectively present no legal risk. That they might be channeling millions of dollars to corrupt politicians was not a concern. Anangga Roosdiono, founder of Roosdiono & Partners, which carries out due diligence for plantation firms, went further. He suggested it would be an advantage. “As long as I know the deal will stay quiet, I will do the deal,” he told us at his office in Jakarta, taking the voice of a prospective buyer. “Because if I know that the bupati is behind this, as long as he is there my whole business will be safe.” Anangga had advised his clients not to do such deals. “But some of our clients still insist,” he said.

In Gunung Mas, millions of dollars from such deals went to the man who would later bribe Akil Mochtar on Hambit’s behalf: Cornelis Nalau Antun.

***

Cornelis was born in 1973, in a village not far from Hambit’s own. He too had left the interior of Borneo, eventually going to work for mining companies in Jakarta. Television coverage of his trial showed a round-faced man with glasses and a receding hairline. He looked like the manager of a corporate office accidentally parachuted into a major graft case, with a fleshy build that spoke to a life lived away from the forest. By the time the deals went down in Gunung Mas, his home was a lime-green mansion in Palangkaraya, incongruously squeezed behind squat concrete dwellings in a dusty, unpaved corner of the town.

After the arrest, Arton, the deputy bupati, told reporters in Jakarta that Cornelis was Hambit’s nephew. During his trial, Cornelis testified that he and Hambit had begun to grow close in 2007, when he joined the campaign team for Hambit’s first election. Hambit referred to him affectionately as “Lis,” and the younger man had been at his side through the most critical moments of his political career, performing some of the riskiest roles.

During the corruption trial, Cornelis told the court he had agreed to bribe Akil out of respect for Hambit. But he also said they had formed a pact: Before the end of Hambit’s second term, in the middle of 2018, the outgoing bupati would anoint Cornelis his successor. The payoff was contingent on Hambit winning reelection and consolidating his power, which in turn relied on a flow of money to the campaign. Their bond would course through politics and business, and into the blurred space between the two.

At some point, likely midway through Hambit’s first term, he and Cornelis established a plan to exploit the bupati’s control of land, using the kind of scheme that would fly beneath the radar of Indonesia’s enforcement agencies. Two sources — Hambit’s fixer, and another man close to the people involved in the deals — told us the idea came from Hambit, who instructed his protégé to set up shell companies that would serve as vehicles for selling licenses. “Hambit saw the opportunity,” the fixer said. “He asked Cornelis, ‘Make the company with your name and do it.’” Once that was done, according to the second source, Cornelis “knew the permits would be sorted. It was done quickly.”

Cornelis founded his first shell company in April 2011, naming his younger brother Guntur as a minor shareholder. Later that year he formed a partnership with two other men who could provide the skills, experience and contacts he lacked. Elan Gahu, a Dayak from the east of the province, had already served as co-founder and director of a shell company formed in Gunung Mas in 2009. Within a year, it had obtained a license from Hambit and been sold to a Malaysian firm for $4.6 million. It was precisely the kind of deal Cornelis sought to replicate. An old friend of Elan’s named Edwin Permana, with whom he shared roots in a district east of Gunung Mas, was brought on as the third partner. Together they would incorporate three more shell companies.

Edwin had worked as a land-clearing contractor for oil palm firms in West and Central Kalimantan. He also brought to the table a connection to another Malaysian firm, CB Industrial Product, cash-rich and hungry for land.

***

CB Industrial Product, or CBIP, had made its first foray into Indonesia’s plantation sector in 2009, two years before Cornelis and his partners came together. It bought an 85 percent share in a company registered in Singapore with a license for 80 square kilometers (31 square miles) of forest in Lamandau, a hilly district 170 kilometers (106 miles) west of Gunung Mas. Very quickly it ran into legal trouble.

CBIP was formed in 1980 as an engineering firm, and its core business remained the production of equipment for palm oil factories. Its chairman, Yusof Basiron, is a prominent figure in the world of Malaysian palm oil. He sat on the board of Sime Darby, a multibillion-dollar company part-owned by the Malaysian government. He was also CEO of the Malaysian Palm Oil Council, a state-funded body dedicated to promoting the commodity to the world. It did so in part by brazenly denying the industry’s well-documented role in a litany of social and environmental abuses, including the theft of indigenous lands and the destruction of forests and peat swamps, a key driver of climate change. In a 2010 presentation to industry representatives that was typical of the form, Basiron characterized NGO campaigners highlighting the role of palm oil firms in deforestation as “paid agents” of “EU trade protectionists.”

Over time, CBIP was drawn toward the lucrative business of developing plantations, first in Malaysian Borneo and later in Indonesia. Soon after acquiring the Lamandau concession, the firm sparked a conflict with Dayaks in the village of Cuhai. The village chief, a diminutive, razor-sharp man in his mid-30s named Darius Pilos Pagi, investigated CBIP’s subsidiary, unearthing evidence he claimed proved it had begun clearing forest without all of the required permits. In 2010, following a request from the Lamandau parliament, the police looked into the case. But their inquiry went nowhere. As the chief continued his own investigation, he found further evidence suggesting why.

Darius obtained documents from a confidential source within the company, suggesting that Iwan Setia Putra, the CBIP subsidiary’s general manager, had sought to bribe the police to kill the investigation. The documents, seen by The Gecko Project and Mongabay, include an internal memo from Putra requesting 400 million rupiah, then equivalent to $45,000, to “solve the problem” with the police. Bank documents confirm the money was subsequently transferred to him. Two weeks later, the police mothballed the investigation. (Putra declined to answer questions relating to this payment. CBIP declined our requests for an interview.)

In a letter sent later to enforcement agencies in Jakarta, including the KPK, Darius wrote that CBIP had made his people “beggars in our own home.” He argued there was evidence of a “conspiracy” between CBIP and the Lamandau bupati. But the findings from Darius’s investigation sank without a trace. CBIP suffered no tangible consequences from its brush with the law, and went out in search of yet more land to add to its portfolio.  

In early 2011, after CBIP’s legal troubles died down, Edwin Permana began working for CBIP in Lamandau, a contractor with the firm told us. At the same time, Cornelis and Hambit’s scheme in Gunung Mas was germinating. Elan Gahu, Edwin’s old friend with a track record in Gunung Mas, would bring the trio together. Soon, CBIP would be drawn into a far bigger scandal.

***

By the beginning of 2012, all the pieces were in place. Cornelis and his partners had set up the shell companies, Hambit was ready to issue the licenses and CBIP was prepared to buy them. The partners drew clear roles. Elan would handle administrative duties. Edwin would oversee the logistics of clearing dense rainforests. Cornelis would deal with their political patron.

Over the course of nine months in 2012, Cornelis and his partners sold four shell companies to CBIP. The licenses covered almost 60 square kilometers (232 square miles), enough to make them the largest landowners in the district. The concessions overlapped with Tuyun and dozens of other villages, including those trying to keep plantations at bay. The deals were structured so that the full amount was only payable to Cornelis and his partners once the companies had advanced through the permitting process. But as soon as the deals with CBIP were signed, Hambit pushed them through quickly.

Done properly, the permitting process can take years. For these companies, Hambit made sure it took a matter of weeks. To do so he had to ignore the fact that environmental impact assessments had not been carried out. That decision meant the affected villagers did not know about the projects for months more and rendered the process illegal. But it also ensured more money flowed before the election.

In the dying days of Hambit’s first term, he would squeeze in one more license, granted to a fifth shell company set up by Cornelis that he would later sell to CBIP as well. By the time the deals were all completed, Cornelis and his partners would make $9.2 million, simply by shuffling papers between Hambit and CBIP. But they also each retained a small percentage in the shell companies. As paper licenses were transformed into real, sprawling plantations, they would make much more. Within a few years, once the land was all planted, Cornelis’ slim share alone could be worth almost $20 million.

The partners were proud of their success. They became a tight-knit group, drinking beer together on balmy nights in Palangkaraya. But they remained bound to the bupati who was responsible for their swiftly changed circumstances. And for Hambit, their job was not over.

 

Part 3: ‘Do we have the money, Lis?’