Bribery and Airlines: Business as Usual
Her Majesty’s crooks
Bribes from Rolls-Royce to Garuda chief rock Indonesia
The naming of Garuda Indonesia’s former chief, Emirsyah Satar, by the Corruption Eradication Commission as a bribery suspect in the purchase of Rolls-Royce aircraft engines is just the latest chapter of a long string of such cases stretching across Asia and across generations.
Indeed, the British aerospace giant, the world’s third-largest engine manufacturer after General Electric and CFM International, has been implicated in allegations of bribery not just from Garuda but the AirAsia Group, China Eastern Airlines and Thai Airways for paying bribes over a 24-year period from 1989 to 2013.
Satar’s involvement is disheartening. He was appointed president director of Garuda in 2005 and resigned from the top post at the national flag carrier in December 2014, three months before he was due to end his term. The airline lost US$22 million between 2006 and 2012 before he and his management team began to turn it around.
Satar has been accused of accepting at least €1.2 million (US$1.28 million) and $180,000 as well as “other things” allegedly valued at US$2 million through a middleman named Sutikno Soedarjo, who has also been named a suspect. Some reports speculate that as much as US$20 million was paid in bribes to Indonesian officials. He has denied the charge.
As president director, he had played a major role in Garuda’s recovery. The airline for several years was banned from landing in European Union airports because of its disastrous safety record, as were all other Indonesian carriers, and because of Indonesia’s lax air travel safety supervision. The Indonesian flag carrier was allowed to fly to Europe in 2016 and expects to start flights to the United States in 2017. It gained a five-star rating from aviation research company Skytrax in 2014.
Rolls-Royce has owned up to paying illegal commissions in both Indonesia and China. Aircraft purchases bristle with handles to clutch for those looking for illegal money. Airplanes mostly are not bought off the shelf. They are a huge collection of individual systems, each bought from a different contractor and each presenting a chance to get rich. With CTE International, General Electric, United Technologies and Rolls-Royce, for instance, looking for lucrative engine contracts, each is seeking to outdo the other. Backhanders are a way of getting ahead of the game.
That goes for the avionics, the engines, the hulls themselves and, in the case of military aircraft, the guns, the rockets, targeting systems and other features.
In the 1960s, for instance, Lockheed Aircraft was named for bribing officials in Germany, Netherlands, Italy, Saudi Arabia and Japan, where it brought down the government of Prime Minister Kakuei Tanaka and ultimately resulted in the passage in the United States of the Foreign Corrupt Practices Act, which makes it illegal for companies and their officers to buy influence with foreign governments via personal payments or rewards.
There were spectacular cases in Malaysia and Thailand in the 1980s. Thailand, in fact, has set up a special task force to probe engine procurement in the wake of Rolls-Royce’s apology and admission to having paid bribes in several countries in addition to Indonesia.
Before naming Satar a suspect, the KPK questioned him and his wife late last month. Satar’s assets doubled in three years from Rp19.9 billion in 2010 to Rp48.7 billion in 2013.
The KPK has also imposed a six-month travel ban on the two suspects in the case as well as three other witnesses — former president director at Garuda Maintenance Facilities Hadinoto Soedigno, former Garuda vice president for asset management Agus Wahyudo and businesswoman Sallyawati Rahardja.
Soetikno is the owner of a Singapore-based company, which was allegedly used as a broker to orchestrate the bribe from the British engineering giant, which produces Trent 700 engines for Airbus A330 aircraft.
The investigation into the high-profile case, which involved cooperation between the KPK, Britain’s Serious Fraud Office and Singapore’s Corrupt Practices Investigation Bureau, has also sent signals that the commission is flexing its muscles over multinational white-collar corruption.
The KPK has hinted that more officials from Garuda Indonesia could be involved. “Emirsyah’s alleged corrupt practices are believed to have involved other actors,” KPK spokesperson Febri Diansyah said on January 21.
Febri said the antigraft body would start summoning witnesses for questioning at the end of January, as its investigators were still studying evidence they had recently seized at five locations.
“This is a warning for those who think that it is safe to engage in bribery outside our jurisdiction, like in Singapore,” Febri told a press conference.
The Garuda case is the third transnational graft case in the KPK’s history.
The first centered around a bribery case at state oil and gas firm Pertamina to secure a 2004-2005 fuel additive contract worth $4 million for British fuel additives manufacturer Innospec. In the case, Jakarta sent former Pertamina executive Suroso Atmo Martoyo and two brokers to prison, while a British court sentenced four Innospec executives. The joint investigation also involved authorities from Singapore in relation to a bank used by Suroso.
The KPK also uncovered the bribery case of Izedrik Emir Moeis, a politician from the Indonesian Democratic Party of Struggle (PDI-P), now the ruling party, who received money from French infrastructure giant Alstom to pave the way for the firm to obtain a $268 million coal-fired power plant in Tarahan, Lampung, in 2004.
The KPK investigation comes only days after Rolls-Royce agreed to pay £497 million to the UK’s SFO after the UK High Court approved the out-of-court settlement that will prevent the firm from being prosecuted by British investigators. Individual executives, however, can still be charged.
A study by Indonesia Corruption Watch in 2016 found that prison terms for graft convicts average only 2.2 years. With remission on several national holidays such as Christmas, Idul Fitri, Independence Day and National Heroes Day, simply because of “good behavior”, they are able to regain freedom even faster.
Based on Transparency International’s Corruption Perception Index 2016, Indonesia is ranked 90 among 176 countries in its efforts to fight corruption, which is worse than the 2015 index, where Indonesia’s rank rose to 88th from 107th in the previous year.