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-Caveat Lector-
http://www.newsmax.com/archives/articles/2002/10/30/153928.shtml
Memo to Mondale http://www.softwar.net/paiton4.html
The Mondale Mistake
Charles R. Smith
Wednesday, Oct. 30, 2002
Former VP Linked to Corrupt Deals
The Democrats have made a big mistake in selecting former Vice President Walter
Mondale to take over the late Paul Wellstone's bid for Minnesota's Senate seat.
The former VP, now in his late 70s, has baggage from his years in the Clinton
administration, when he served as U.S. ambassador to Tokyo.
One documented scandal linked to the Democrat candidate is a 1995 memo written
by U.S. Indonesian Ambassador Barry to then-Ambassador Walter Mondale, seeking
help from Japan for a power plant in Java. The subject of the cable directed to
Mondale was "JEXIM Funding For Paiton Project."
In the February 1995 cable to Ambassador Mondale in Tokyo, Barry wrote, "I would
like to ask your support for a project that is expected to generate over half a
billion dollars in U.S. exports. ... This 2 billion dollar [project] is the
first major private power project in Indonesia and is a splendid example of
cooperation between both the private and public sectors of the U.S. and Japan."
"The board of Japan EXIM will consider its portion of the funding package for
Paiton this week," wrote Barry. "Would you be able to convey the USG's strong
support for this project to JEXIM? I appreciate your help."
The $2.5 billion Paiton electric power plant in East Java was 40 percent owned
by California-based Edison Mission Energy Co., a unit of Edison International,
32.5 percent owned by Japan's Mitsui & Co. and 12.5 percent owned by a unit of
General Electric Co.
U.S. Knew of Indonesian Corruption
A 1994 Commerce Department report found in the files of convicted Chinagate
figure John Huang noted that the Indonesian "Paiton" power plant had encountered
difficulties with financing because the "Asian Development Bank (ADB)" knew it
contained money for a Suharto family member.
"ADB had raised concern about first family involvement during its consideration
of the $50 million financial portion," states the Paiton Project document found
in Huang's files. "Ambassador Barry stated that the project is facing two
problems
(i) the ADB financing may cave in and (ii) EXIM financing. Regarding ADB,
technical questions have been satisfied, but ADB is skiddish [sic] about
involvement of Indonesia's first family (a minority shareholder is married to
Pres. Suharto's daughter)."
According to the documents, 15 percent of Paiton was held by an Indonesian group
led by businessman Hashim Djojohadikusumo, whose brother-in-law is a general in
the Indonesian army and the son-in-law of former President Suharto. The
documentation shows that a ".75%" ownership in the Paiton power plant was given
to the daughter of Indonesian President Suharto.
".75%" of the Paiton project was reserved for Suharto's daughter Prabowo.
Prabowo's cut amounted to an instant $15 million in cash. Her kickback, along
with a cut for "brother-in-law" Hashim and various other Suharto relatives, was
provided up front, in cash, in the form of a $50 million loan. The $50 million
loan was to be paid back by the profits (dividends) returned from the $2.6
billion Paiton project.
Billion-Dollar Project in Court
In October 1999, Indonesia's state-owned electricity company, PT Perusahaan
Listrik Negara (PLN), filed suit to cancel the U.S.- and Japanese-sponsored
electric power project, claiming the arrangement was "full of elements of
corruption, cronyism and nepotism."
The PLN allegations of criminal activities surrounding an Indonesian power plant
are backed by documented evidence. Ironically, the documents are classified
State Department cables, many of which were copied to then-Ambassador Walter
Mondale in Japan.
For example, an October 1998 State Department cable from U.S. Ambassador J.
Stapleton Roy, also copied to the U.S. Embassy in Tokyo, shows that U.S.
officials met with Indonesian Director General of Electricity Endro Utomo
Notodisoerjo. Endro, according to the cable, was more than honest about the
Suharto family.
Corruption, Collusion and Nepotism
"Commenting on corruption, collusion and nepotism (KKN), Endro said that in the
past there was no separation between 'power' (not electric but former first
family power) and business. 'All the IPP's have a relation with power, and it is
still going on,' added Endro."
Despite the frantic cable from Roy, the Clinton administration already knew
about the bribes built inside the Paiton power project as early as 1994.
According to a declassified document obtained from the Overseas Private
Investment Corporation (OPIC), U.S. legal teams were concerned about the Suharto
family involvement.
In October 1994, OPIC legal counsel Peter Ballinger wrote a memorandum that
closely reviewed the problems with the Paiton project. According to Ballinger,
"There are two relatives involved in the project, President Suharto's second
daughter, Siti Hediati, and her brother-in-law, Hashim Djojohadikusumo. They
have a combined interest in the Paiton project of 2.5% through their investments
in one of the project Sponsors, P.T. Batu Hitan Perksasa."
"In addition," wrote Ballinger. "They have a minor ownership in two of the
companies involved in the coal supply chain. While their interest in the project
is small, it will be subject to further due diligence in the finance and legal
review process."
The due diligence review ended in 1995 with the Asian Development Bank (ADB)
refusing to finance the Paiton power project because of the "Suharto"
first-family concerns.
Mondale - Our Man in Tokyo
In response, President Clinton frantically put together a consortium of U.S. and
Japanese banks to finance the deal, complete with the kickback to Suharto's
family. Paiton was so important to Bill Clinton that he pressed for personal
letters from Ron Brown and then Indonesian Ambassador Barry. Barry, in turn,
pressed Mondale to convince Tokyo to approve the financial deals.
Ambassador Barry wanted Mondale to strong-arm the Japanese Export-Import Bank
into lending money for the corrupt project. In the end, Mondale succeeded in
convincing the Japanese to help finance the deal.
An Indonesian government audit revealed that the Paiton power plant has
accumulated losses of over $280 million. PLN, the Indonesian power company,
estimated that it had lost over $18 billion total to Suharto corruption inside
various power plant contracts.
At their request, the U.S. legal counsel for PLN quietly obtained copies of the
Paiton documents from this reporter. PLN officials used the Clinton
administration documents to file a lawsuit against in the Indonesian courts,
charging that U.S. officials knew the Paiton power plant contract was "corrupt
from the beginning."
PLN also acquired other U.S. government documents, all legally obtained by the
Freedom of Information Act. The documents clearly show that Clinton
administration officials were aware of "corruption, collusion and nepotism"
inside the electric power trade deals made with Suharto.
In December 1999, the Indonesian court ruled that the entire $2.6-billion-dollar
Paiton power plant contract was illegal.
What Did Mondale Know and When Did He Know It?
The illegal use of U.S. taxpayer monies for bribes and kickbacks is a violation
of several federal laws, including the Foreign Corrupt Practices Act and RICO
laws concerning bribery of government officials. Foreknowledge of such actions
can also be considered a crime under federal conspiracy laws.
Either Walter Mondale was aware of the Indonesian corruption or he was not
reading the secret State Department cables sent to him by the U.S. ambassador in
Jakarta. It is certain that Walter Mondale did read enough of his correspondence
to seek Japanese help in financing the corrupt power plant deal.
Either way, Walter Mondale is neither qualified to fill the shoes of Paul
Wellstone nor to serve in the U.S. Senate.
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