It's All In The Family

By John Colmey and David Liebhold/Jakarta

When protesting students and street mobs finally drove Suharto, Indonesia's long-serving President, from office a year ago, he stood meekly to the side as his successor, B.J. Habibie, took the oath of office. Then Suharto slipped quietly from view. But the onetime autocrat has been far busier than most of his countrymen realize. In July 1998 the U.S. Treasury's attention was caught by reports that a large sum of money linked to Indonesia had been shifted from a bank in Switzerland to one in Austria. As part of a four-month investigation that covered 11 countries, TIME has concluded that $9 billion of Suharto money was transferred from Switzerland to a nominee bank account in Vienna. Not bad for a man whose presidential salary was $1,764 a month when he left office.

Those billions are just part of the Suharto wealth. Though the Asian financial crisis has trimmed the family empire considerably, the former President and his children retain a sizable fortune. TIME correspondents found indications that at least $73 billion passed through the family's hands between 1966 and last year. Evidence indicates that Suharto and his six children still have a conservatively estimated $15 billion in cash, shares, corporate assets, real estate, jewelry and fine art. The treasure was accumulated over three decades from a skein of companies and monopolies dominating vast sectors of the country's economic activity--from oil exports to incoming Mecca pilgrims--and from the Suhartos' interests in some 13,900 sq. mi. of Indonesian property, an area the size of Belgium.

When TIME published its 14-page report in Asia last week, it touched off shock waves. Suharto denies he has any bank deposits abroad and insists that his wealth amounts to just 46.9 acres of land, plus $2.4 million in savings, and he went on television on Friday to tell the nation he has done nothing wrong. His lawyers informed TIME that he intended to file suit for "false" charges that "defamed and humiliated" him. But an avid public savored details confirming suspicions of corruption and private profiteering that have swirled around the Suhartos for decades. On Friday, protesters demanding the former President be put on trial clashed with police. Attorney General Andi Muhammad Ghalib, who oversees an official inquiry into the family's wealth that has been creeping along inconclusively, told reporters, "I will set up a legal team to ask for confirmation from TIME." Amid dozens of newspaper, radio and TV reports, Indonesia's two leading magazines announced they are writing cover stories about the expose, which appeared just as Indonesia was preparing for the first post-Suharto elections in June.

Indonesians clearly deserve to know if their former ruler used his political power to enrich his family. According to TIME's investigation, the six Suharto offspring have significant equity in at least 564 companies, and their overseas interests include hundreds of other firms, scattered from the U.S. to Uzbekistan and Nigeria. The Suhartos also possess plenty of the trappings of wealth. In addition to a $4 million hunting ranch in New Zealand and a half share in a $4 million yacht moored in Australia, youngest son Hutomo Mandala Putra (nicknamed "Tommy") owns a 75% stake in an 18-hole golf course with 22 luxury apartments in England. Bambang Trihatmodjo, Suharto's second son, has an $8 million penthouse in Singapore and a $12 million mansion in an exclusive neighborhood of Los Angeles, just up the street from his brother Sigit Harjoyudanto's $9 million home. Eldest daughter Siti Hardiyanti Rukmana ("Tutut") may have sold her Boeing 747-200 jumbo jet, but the family's fleet of planes included, at least until recently, four other jets.

No one has proved that the Suhartos broke any laws amassing such possessions. Their companies consist mostly of operating entities that turn profits, create jobs and import Western technology. Nonetheless, the code of secrecy shielding the family's fortune is breaking down.

There seems to be little doubt that the family grew wealthy at the expense of the nation. Suharto laid the foundation by establishing an intricate nationwide system of patronage that kept him in power for 32 years. His children, in turn, parlayed their ties to the presidency into the role of middlemen for government purchases and sales of oil products, plastics, arms, airplane parts and petrochemicals. They held monopolies on the distribution and import of major commodities. They obtained low-interest loans by colluding with or even strong-arming state bankers. Subarjo Joyosumarto, managing director of Bank Indonesia, describes an environment that "made it difficult for the state banks to refuse [Suharto's offspring]." A former business associate of the children estimates that on commissions alone, they skipped tax payments of between $2.5 billion and $10 billion.

During his long reign, Suharto led an outwardly modest life. Behind the facade, however, he showed an appetite for making money. In the 1950s, he was allegedly involved in sugar smuggling that may have cost him command of an army division during a 1959 anticorruption drive. Suharto asserts that he bartered sugar for rice to ease a local food shortage and did not benefit personally, but he was transferred to a less influential position at the army staff college.

In 1966 Suharto Inc. began to take shape. Before being officially named President, Suharto issued Decree No. 8, allowing him to seize two conglomerates with combined assets of $2 billion. They were recast as PT Pilot Project Berdikari, one of the companies that became a main lever of the family empire. But the bedrock of the Suharto fortune was the presidential yayasan, or foundation. Dozens were set up, ostensibly as charities, and they have in fact funded a large number of hospitals, schools and mosques. However, the foundations were also giant slush funds for investment projects of the Suhartos and their cronies as well as for the ex-President's political machine. The foundations accepted "donations," which were often less than voluntary. Beginning in 1978, all state-owned banks were required to give 2.5% of their profits to two foundations, according to former Attorney General Soedjono Atmonegoro. Suharto's Decree No. 92, in 1996, required each taxpayer and company making more than $40,000 a year to donate 2% of income to another foundation, set up to support poverty-alleviation programs. The foundations invested heavily in private companies established by family members and cronies.

Soon after Suharto's resignation, then-Attorney General Soedjono examined the books of the four largest yayasan. "Suharto had distributed the money to his children and friends," he says. Soedjono discovered that one of the largest foundations had disbursed 84% of its funds on unauthorized pursuits, including loans to companies owned by Suharto's children and friends. Suharto, as chairman, had had to sign any check over $50,000. Soedjono submitted a preliminary report on his findings to President Habibie last June and was fired five hours later. (Habibie says Soedjono was dismissed because he stepped outside the line of command on another matter.)

Few areas were more lucrative than the family's oil businesses. Pertamina imported and exported much of its oil through two small companies in which Tommy and older brother Bambang acquired significant stakes in the mid-1980s. According to a senior official in Habibie's government, the firms received average commissions of 30[cents] to 35[cents] per bbl., totaling more than $50 million in fiscal year 1997-98.

"The children," as the Suharto offspring are known, were key participants in the family treasure hunt. Sigit, the eldest son, was apparently pushed into business by his mother, Madam Tien, whose own behind-the-scenes dealings in the 1970s earned her the nickname "Madam Tien Percent." Two sources who worked on Jakarta's Soekarno-Hatta International Airport project say that by the time its two terminals were finished in 1984, $78.2 million had been handed to Sigit in markups that appeared as cost overruns. Second son Bambang was given a slice of the lucrative business of importing and distributing basic commodities, such as wheat, sugar, soybeans and rice. Through sugar trading alone, he is estimated to have earned as much as $70 million a year, essentially for stamping documents. Eldest child Tutut became the queen bee of the clan. At the peak of her power, according to sources close to the family, investors seeking to meet her first had to pay a "consulting fee" of up to $50,000 to her minions.

Neither Suharto nor his children responded to requests for interviews, though lawyers for the former President and son Bambang asserted that their clients did nothing illegal. "He told me, 'I don't have one cent abroad,'" says Otto Cornelis Kaligis, Suharto's top lawyer, of his client.

In an interview at the State Palace, Habibie told TIME he will not cover up for his former mentor. But he has neither frozen the family's holdings nor followed up in any meaningful way. The man in daily charge of the investigation, Attorney General Ghalib, a three-star general in the Indonesian military, told TIME before its story appeared that he had found no evidence that his former supreme commander wrongly acquired state assets. Ghalib has been moving slowly, and some of his staffers fear his efforts are not serious.

A genuine investigation will probably have to await a new government. The June 7 parliamentary election, to be followed by a presidential vote in November, could change the political equation substantially. But Suharto has at least one strong legal shield: the presidential decrees that laid the foundation for Suharto Inc. were each carefully approved by his rubber-stamp parliament. Moreover, Jakarta has a statute of limitations on most offenses that would exclude crimes committed before 1981. For Suharto of Indonesia, that--along with $9 billion in an Austrian bank--should offer considerable comfort in retirement.

--With reporting by Zamira Loebis, Jason Tedjasukmana and Lisa Rose Weaver/ Jakarta, Laird Harrison/Los Angeles, Isabella Ng/Hong Kong, Kate Noble/London and other bureaus

With reporting by Zamira Loebis, Jason Tedjasukmana and Lisa Rose Weaver/Jakarta, Laird Harrison/Los Angeles, Isabella Ng/Hong Kong, Kate Noble/London and other bureaus