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INDONESIA: Mining Company Notes U.S. Review of Payments to Indonesian Military

by Katharine Q. SeelyeThe New York Times
January 19th, 2006

Executives of Freeport-McMoRan Copper and Gold have acknowledged that the mining company is under scrutiny by the federal government regarding payments it made to the Indonesian military.

The information was made public on Tuesday during a conference call with investors. In a subsequent filing with the Securities and Exchange Commission, the company said that it had "received informal inquiries from governmental agencies" in the United States related to its support of Indonesian security institutions. The company also said it was "fully cooperating" with those inquiries.

Freeport shares fell more than 2 percent, to $60.26, yesterday after news of the inquiry, despite an announcement by the company, which is based in New Orleans, that its fourth-quarter profits had more than doubled as gold prices surged to $540 an ounce.

The disclosure by Freeport followed a report by The New York Times last month that from 1998 through 2004, Freeport paid individual military and police officers and military units nearly $20 million to secure its operations in the Indonesian province of Papua, where it runs the world's largest gold mine.

In the past, Freeport has refused requests by the New York City Pension Fund, a shareholder, to review its policy on paying the police and military. The fund argues that the payments may violate the Foreign Corrupt Practices Act, which forbids American companies to bribe foreign officials. Freeport says its payments are within American and Indonesian laws.

In response to the article, Freeport posted on its Web site a letter sent to editors at The Times saying the Dec. 27 article and a subsequent editorial contained "disturbing and provocative misstatements" about its Papua operations and that the article had "ignored the practicalities of conducting business in a remote area."

Stanley S. Arkin, a lawyer for the company, declined to elaborate. In the Indonesian capital, Jakarta, the vice chairman of Indonesia's anticorruption commission said yesterday that if Freeport had made payments to individual officers, "that's corruption."

Company documents obtained by The Times show that Freeport made monthly payments to more than a score of individual officers from 1998 through 2004. The company publicly reported paying military units in 2001 and 2002, but has not acknowledged that the money went to individual officers over seven years.

The Indonesian anticorruption official, Erry Riyana Hardjapamekas, said that his agency would support any American agency that started an investigation into the payments.

Jane Perlez and Raymond Bonner contributed reporting from Jakarta, Indonesia, for this article.



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