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RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #0356/01 0550758
ZNR UUUUU ZZH
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FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8067
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHKO/AMEMBASSY TOKYO 1547
RUEHBJ/AMEMBASSY BEIJING 4735
RUEHBY/AMEMBASSY CANBERRA 2033
RUEHUL/AMEMBASSY SEOUL 4413
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 000356 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/IFD/OMA 
TREASURY FOR IA-SETH SEARLS 
SINGAPORE FOR SUSAN BAKER 
COMMERCE FOR 4430-BERLINGUETTE 
DEPARTMENT PASS FEDERAL RESERVE SAN FRANCISCO FOR FINEMAN 
DEPARTMENT PASS EXIM BANK 
DOJ/OPDAT FOR JOHNSON/LEHMANN/ALEXANDRE 
DOJ/AFMLS FOR SAMUEL 
 
E.O. 12598: N/A 
TAGS: EFIN EINV ECON KCOR PGOV ID
SUBJECT: BANK INDONESIA SCANDAL - OUSTING THE OLD 
 
 
¶1. (SBU) Summary: The scandal involving Bank Indonesia (BI) senior 
officials paying "grease money" to the Parliament (DPR) to pass bank 
legislation is regarded by some insiders as politically motivated to 
prevent Burhannudin Abdullah from continuing in a second term as BI 
Governor.  The Anti-Corruption Commission (KPK) is continuing the 
investigation of the case based on Supreme Audit Board (BPK) reports 
that exposed illegal payments from Bank Indonesia's Indonesian 
Banking Development Foundation between 2003 and 2004.  These 
payments were made both to attorneys to settle Bank Indonesia 
Liquidity Assistance (BLBI) cases and to DPR members.  This case is 
significant as the first KPK case to bring charges against former 
and current Parliamentarians.  End Summary. 
 
The Investigation: Auditors and 
Anti-Corruption Commission Go after BI 
-------------------------------------- 
 
¶2. (SBU) The KPK named BI governor Burhannuddin Abdullah along with 
BI Legal Affairs Director Oey Hoey Tiong and BI Surabaya office 
Director Rusli Simanjuntak as suspects in late January.  Tiong and 
Simanjuntak were detained in mid-February and fifteen other BI 
officials are banned from international travel until further notice, 
according to media reports.  The KPK alleged that BI officials paid 
Rp 31 billion ($3.4 million) in bribes to legislators and law 
enforcement officials in 2003 and 2004.  According to the BPK, which 
reported to the KPK in September 2007, BI disbursed Rp 96.25 billion 
or $10.5 million ($7.5 million from the Indonesian Banking 
Development Foundation and $3 million from the BI budget) to 
lawmakers and law enforcers to resolve ongoing legal problems of BI 
officials involved in misuse of Bank Indonesia Liquidity Assistance 
(BLBI) funds and to pass banking legislation. 
 
Is He or Isn't He Dirty? 
------------------------ 
 
¶3. (SBU) Abdullah is no longer a candidate for a second term (he 
withdrew from the running after the allegations were made public) 
and President Yudhoyono has already named two nominees to the 
position (see septel).  Some members of the Parliament saw KPK's 
action as politically motivated with the election of the new BI 
Governor just weeks way.  Maruarar Sirait, a member of Parliament's 
Financial Affairs Commission (Commission XI), stated to the press, 
"We hope KPK's decision was taken after considering every relevant 
factor," adding that BI under Abdullah's leadership has achieved 
success in maintaining macro-economic and banking stability.  "If 
the position of BI governor is disturbed for a short-sighted 
political aim, the national economy could be placed in danger," 
Sirait said. 
 
¶4. (SBU) Another member of the Commission XI, Rizal Djalil, is 
concerned that the decision of the KPK could hurt BI's policies and 
tasks, and thus adversely affect the Indonesian economy.  "BI's 
policies should be protected, as the central bank's position is very 
strategic in the national economy.  Accordingly, BI should be 
protected from politically-tainted stunts," he said.  BI Governor 
Abdullah was generally well regarded as a competent manager and 
policy-maker, though not always the best communicator.  Among the 
universe of corrupt minister-level officials, Abdullah seems to be 
one of the least dirty ones.  Other contacts however say that 
Abdullah "must be dirty" after five years as head of BI, and that 
the politically cautious KPK must have plenty of evidence against 
him to think it can win its case. 
 
Grease Money to the DPR: Everyone Does It 
----------------------------------------- 
 
¶5. (SBU) It is common practice for government ministries and other 
interested parties pay "grease money" to Parliamentarians to amend 
or pass legislation.  Government ministries often budget funds to 
push through legislation which they support.  One of the oft-cited 
reasons for the three-year delay in the tax law amendments is that 
the new Director General for Tax refuses to pay the Parliament to 
pass it.  Instead, the DPR has reportedly been pressuring the 
Indonesian Chamber of Commerce KADIN to pay for the amendments. 
Yunus Husein, Chairman of the Indonesian Financial Transaction 
 
JAKARTA 00000356  002 OF 002 
 
 
Reports and Analysis Center (PPATK), Indonesia's Financial 
Intelligence Unit, published an editorial on February 18 
acknowledging that "If Bank Indonesia had not expended the funds, 
the legislation would have remained unresolved or delayed at the 
House of Representatives."  Husein also told the Embassy in a 
meeting on February 21 that this case is "very complicated" and used 
the Indonesian expression, as he did in his editorial, of "eating 
the fruit of a dilemma."  He also said the KPK will also have to 
look carefully at the recipients of the bribe. 
 
Why Go After BI? 
---------------- 
 
¶6. (SBU) None of the reports from contacts or the media note that BI 
officials bribed the DPR for personal enrichment or to secure a job, 
but rather to pass legislation concerning the banking sector.  It is 
unclear why the BPK and KPK went after this BI case now.  There are 
several theories.  One is that the head of the BPK, Anwar Nasution 
(who was a BI Deputy Governor himself at the time of the alleged 
bribes to the DPR in 2003-2004) is aggressive in his role as Supreme 
Auditor and wants to clean house partly by trumpeting abuses in the 
media.  Some observers have described him as a "blunt instrument" 
and a "tough Batak."   A commercial banking contact said that 
Nasution sought to regain a Deputy Governor position for himself by 
discrediting the current lot.  (Note: Nasution is a Harvard-trained 
economist and it is widely known that he has been unhappy as head of 
the BPK.)  An expat consultant who has worked in Indonesia for more 
than a decade said this is normal practice to force out the head of 
a major agency who wanted to stay on.  "Create a scandal, force an 
exit," this contact replied cynically.  With inside candidates now 
somewhat tainted and a scandal engulfing BI, SBY was forced to 
nominate outsiders. 
 
Just Scratching the Surface 
--------------------------- 
 
¶7. (SBU) The BI scandal is the first KPK case to bring charges 
against former and current Parliamentarians.  In its first four 
years, the KPK did not investigate one case involving Parliament. 
While it is a positive development for the KPK - and AGO - to be 
investigating alleged corruption in Parliament, this case is just 
scratching the surface on Parliamentary corruption.  The 
Parliamentarians named in this case are two of many other DPR 
members likely to have received bribes in this specific case, 
according to multiple sources. 
 
HUME