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INDONESIA: Monsanto Inquiry Begins


Wall Street Journal
May 27th, 2004

JAKARTA, Indonesia -- Indonesia's new anticorruption commission has begun its own investigation into allegations that U.S. biotechnology concern Monsanto Co. bribed an Indonesian government official two years ago, providing an early test of the new body's ability to crack down on graft.

The U.S. Department of Justice has been investigating the suspicious Monsanto payment, which could have violated the U.S. Foreign Corrupt Practices Act. Under that law, a company can face a maximum fine of $2 million per violation, while an individual faces up to five years' imprisonment. The U.S. Securities and Exchange Commission also can impose fines.

The investigation was sparked by Monsanto itself, which alerted U.S. regulators in late 2002 to financial irregularities at its Indonesian business. That led to the firing of some Indonesian employees. Monsanto said it is cooperating with authorities.

Indonesia's own investigation will be the first into the activities of a foreign company in Indonesia by the agency which was established in December. There has been skepticism about whether the new agency can make much headway against Indonesia's deeply entrenched corruption problem, an issue often cited as one of Indonesia's biggest obstacles to increased foreign investment.

In an interview, Erry Riyana Hardjapamekas, the vice chairman of Indonesia's Corruption Eradication Commission, said he has summoned officials from Monsanto's Indonesian unit, PT Monagro Kimia, to explain news reports that the company authorized an improper $50,000 payment to an Indonesian government official in early 2002. Mr. Erry said his agency is seeking information from U.S. authorities and would attempt to identify and prosecute the government official who allegedly received the bribe.

Edwin Saragih, Monsanto's head of government and public affairs in Indonesia, said the company intends to meet with the Commission in the next few days to discuss the matter. He declined to say whether Monsanto would reveal the name of the government official allegedly involved.

Monsanto sells Roundup brand herbicide and corn seed in Indonesia, a market that generates less than 1% of the company's global annual revenue. Monsanto closed its genetically modified cotton sales operations in 2003 after two unsuccessful years amid complaints over yields and pricing. During the year ended Dec. 31, 2003, Monsanto's world-wide sales totaled $5.06 billion.

Indonesia set up its anticorruption commission in December after years of delays in response to calls from the International Monetary Fund and other organizations for more effective measures to stop graft in government. Indonesia is regularly ranked among the most corrupt countries in the world by international watchdogs such as Transparency International.

Some critics have complained that the Indonesian Parliament declined to appoint individuals with reputations as aggressive anticorruption fighters to the panel. Others, however, have said the commission should be given time to prove its worth.

Apart from the nascent investigation into Monsanto, the commission also is assisting police in probing corruption allegations against Abdullah Puteh, who is the governor of Aceh, a natural-gas rich province on the northern tip of Sumatra island.

Mr. Abdullah has been accused by citizens' groups of embezzling millions of dollars in government funds in the province, where a war is raging between the military and separatist rebels. He has repeatedly denied the charges.



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