Guest Post: Indonesian Anticorruption Institutions at Risk, Part 2: Legislative Amendments Spell Disaster for the KPK

GAB is pleased to welcome Simon Butt, Professor of Indonesian Law and Director of the Centre for Asian and Pacific Law, the University of Sydney, to contribute a two-part series on recent developments in Indonesia. Today’s post, the second of the two, is a revised and expanded version of an article that Professor Butt originally published on Indonesia at Melbourne.

As I discussed in yesterday’s post, Indonesia’s anticorruption commission (the Komisi Pemberantasan Korupsi, or KPK) has found itself under serious attack since it began to pursue powerful political figures. Members of the national parliament, many of whom have found themselves in the KPK’s sights, have long threatened to use their legislative power to weaken the KPK and undermine its independence. For many years the KPK has managed to stave off such threats, thanks mainly to strong leadership and public support. But the KPK has found itself in a weakened state in recent months. It lost its first case in its 17-year history, and more significantly, the KPK’s leadership team has been replaced with a new group of problematic commissioners, whose terms commence next year. And last month, on September 17th, the parliament took advantage of this vulnerability and finally made good on its threat to amend the 2002 statute that established the KPK. These amendments, which attack the very institutional features and powers the KPK has used to build its impressive track record, are disastrous for the KPK and Indonesia’s fight against corruption. Continue reading

Guest Post: Indonesian Anticorruption Institutions at Risk, Part 1: The Significance of the KPK’s First Acquittal

GAB is pleased to welcome Simon Butt, Professor of Indonesian Law and Director of the Centre for Asian and Pacific Law, the University of Sydney, to contribute a two-part series on recent developments in Indonesia. Today’s post, the first of the two, is a revised and expanded version of an article that Professor Butt originally published on the East Asia Forum.)

Over the past decade or so, Indonesia’s anticorruption commission (the Komisi Pemberantasan Korupsi, or KPK) had managed to deflect numerous efforts of powerful politicians and senior law enforcement figures to reduce its independence and effectiveness. However, last month Indonesia’s national parliament appears to have successfully hobbled the Commission, with the support of President Joko Widodo. The effort to weaken the Commission began with the appointment of a new batch of commissioners, widely condemned as being sympathetic to the regime or likely to be ineffective. This was followed by amendments to the Commission’s founding statute that are clearly designed to render the Commission ineffective in investigating and prosecuting corruption.

An important precursor to these events was the KPK’s first loss in court. Until this past July, the KPK had not, since its establishment in 2003, lost any of the hundreds of cases it had brought to full trial. This was a remarkable achievement in a country renowned for deeply entrenched and widespread corruption at the highest levels, particularly in government institutions and the courts.

But on July 11, 2019, the KPK’s perfect record was broken when a divided three-judge Supreme Court panel voted to acquit Syafruddin Arsyad Temenggung, the former chair of the Indonesian Bank Restructuring Agency. Temenggung had been convicted at trial (in one of Indonesia’s specialized anticorruption courts) for a scheme in which a businessman, Sjamsul Nursalim, overstated the value of assets used to repay government assistance funds he had received after the 1997 Asian Economic Crisis. According to the prosecution, by improperly approving the discharge of Nursalim’s debt, Temenggung caused the Indonesian state to lose 4.5 trillion rupiah (well over USD 300 million). Temenggung’s lawyers argued, among other things, that there was no proof that their client had obtained any benefit from Nursalim in exchange for discharging the debt, and that their client was simply doing his job and had not committed any crime. The trial court rejected these defences, convicted Temenggung, and sentenced him to 12 years’ imprisonment. On the first appeal, the Jakarta High Provincial Court affirmed the conviction and increased the prison sentence to 15 years. But Temenggung then appealed to the Supreme Court, and there he prevailed. At time of writing, the Supreme Court judgment acquitting Temenggung has not yet been made publicly available. Nevertheless, according to media reports, two of the three judges on the panel voted to acquit Temenggung, though for somewhat different reasons, while the third judge would have affirmed the conviction.

Given that the KPK probably lacks a legal basis for asking the Supreme Court to reconsider its decision, the KPK appears to have now suffered its first defeat in its 15-year history. The loss of this case is a major blow on its own terms, because it was the KPK’s largest-ever case in monetary terms, involving over twice the alleged state loss than its previous largest case. But the significance of this acquittal may be much broader, and raises a number of questions about the future of corruption eradication efforts in Indonesia. Continue reading

A Cultural Defense to Bribery? The Solomon Islands’ Approach

Gift-giving usually has positive connotations as an expression of love, respect, friendship, gratitude, or celebration. However, when the recipient is a public official, there is always the concern that the “gift” is nothing but a thinly-veiled bribe. For this reason, countries around the world have placed restrictions on the character and value of gifts that public officials are allowed to accept. But in societies where giving gifts – including, perhaps especially, to powerful or influential figures – is an important part of the culture, treating all (sufficiently large) gifts as unlawful bribes is more than usually challenging. Indeed, a recurring question for anticorruption reformers is whether or how anti-bribery law should make allowances for local cultural norms and practices, especially those related to gift-giving. This question – often framed as one of “cultural relativism” – frequently comes up in the context of developing countries (such as Indonesia or various Pacific islands), though it is not exclusive to such countries (see, for example, discussion of this same issue in South Korea).

One country that has recently faced the challenge of regulating cultural gift-giving to and by public officials is the Solomon Islands – a small state in the Pacific Ocean consisting of over nine hundred islands, a population of about 600,000, and a rich and fascinating history. For years, the Solomon Islands has been dealing with pervasive corruption at all levels of government, most notably in natural resources management, which has had disastrous ramifications for the country’s economic development (see here, here, and here). Like other Pacific islands, the Solomon Islands is home to a practice of traditional gift-giving to and by public officials, which in many other jurisdictions could be viewed as legally problematic. According to a local custom (as explained in an official government document), public officials, as members of their community, are “expected to contribute to community events such as weddings, funerals, feasts or church gatherings” and are “obligated to reciprocate with gifts if and when they visit communities and are presented with gifts.”

In July 2018, as part of a comprehensive national anticorruption scheme, the Solomon Islands’ Parliament enacted the much anticipated Anti-Corruption Act (ACA). The ACA is especially notable, and unusual, in its approach towards customary gifts and bribery. Instead of capping the monetary value or limiting the type of gifts which public officials are allowed to accept, the ACA introduced a new cultural defense to the offence of bribery of public officials. According to this defense, a public official who accepts or solicits something of value, as well as the individual who offers or gives it, is not guilty of bribery if the defendants can prove that their respective acts were conducted: (1) “in accordance with custom,” (2) “openly, in the course of a traditional exchange of gifts,” and (3) “for the benefit of a community or group of people and not for an individual.” According to Prime Minister Rick Houenipwela, the ACA’s cultural defense is required as part of the government’s obligation “to respect our customs and traditional cultures” as “a multi-ethnic post conflict country.” However, the cultural defense has been criticized by many, including the Parliament’s Bills and Legislation Committee (see here and here) and Transparency Solomon Islands, which referred to this defense as “a good example of bad law.”

In this post, I do not attempt to answer the question whether the Solomon Islands’ customary gift giving should be criminalized. I do wish to argue, however, that even if we assume that local gift-giving customs are worth protecting, the ACA’s cultural defense to bribery in its current form is highly susceptible to misuse and may undermine the government’s anticorruption efforts. Both the Solomon Islands and other jurisdictions that might be considering a similar cultural defense should take heed of four significant problems with the defense as currently written: Continue reading

Some Preliminary Thoughts on US v. Hoskins and its Implications for FCPA Enforcement

The US Foreign Corrupt Practices Act (FCPA) is aggressively enforced but rarely litigated—most actions are brought against corporate entities that settle with the government. For that reason, any judicial opinion on the FCPA’s meaning, especially one from an appellate court, will attract a great deal of attention.

A couple weeks back, a US federal appeals court based in New York decided such a case, US v. Hoskins. The case addressed the question of whether a foreign national whose relevant conduct took place entirely outside the United States could be charged, not with violating the FCPA, but with conspiracy to violate the FCPA and/or aiding and abetting an FCPA violation. I’m a bit late to the discussion of Hoskins, which has already produced a great deal of commentary in the FCPA blogosphere (see here, here, here, here, and here). But for what it’s worth, here’s my quick summary of what the case is about, followed by some knee-jerk thoughts and observations about its significance. Continue reading

Can the KPK and the Indonesian Public Finally Root Out State-Sanctioned Corruption? Updates from Novanto’s Corruption Scandal

Indonesia’s Corruption Eradication Commission (KPK), established in 2003, has had many successes, including prosecutions of several former Ministers, the former Governor of Indonesia’s Central Bank, and a former Chief of Police. As of the end of last year, the KPK had tried and convicted a total of 119 members of parliament and 17 governors, among others. Now, the KPK is on the verge of catching one of its biggest fish yet: Setya Novanto, former Speaker of Indonesia’s House of Representatives Speaker. Novanto was finally detained, indicted, and brought to trial at the end of last year for his alleged embezzlement of 2.3 trillion rupiah (approximately US$170 million) from a 5.9 trillion rupiah national electronic identity card (e-ID) project. Novanto allegedly played a central role in allowing the mark up e-ID procurement costs in order to steal millions and redistribute them to the pockets of around 100 public officials, including approximately $7.4 million for himself. Novanto had been implicated in many previous scandals, but had managed to avoid punishment. This time, prosecutors are seeking a jail term of at least 16 years, plus a repayment of $7.4 million he is suspected of plundering. Novanto denied all the allegations and blamed the Interior Ministry, but the evidence, gathered and submitted by the KPK, is against him. With the final judgment to be made soon, the KPK is on the verge of winning one of the biggest corruption cases against a senior politician.

If the KPK wins this case, it would be an important victory, demonstrating the KPK’s power, as an independent anticorruption agency, to hold accountable even the most powerful politicians, and inspiring the Indonesian public to hold politicians to higher ethical standards. At the same time, though, a victory in this case won’t mean that the war against endemic corruption of has been won: the legislature and other powerful state actors will continue to fight back, especially by weakening the power of the KPK. Civil society, and the public at large, must continue to be vigilant to provide the backing the KPK needs to retain its power and independence.

Continue reading

What Chinese Cuisine and Deferred Prosecution Agreements Have in Common

As Kees noted Monday, the use of American-style deferred prosecution agreements (DPAs) to resolve corporate corruption cases short of trial is on the rise.  The United Kingdom, France, Argentina, and most recently Singapore now permit prosecutors to suspend or even drop altogether the prosecution of a firm for a corruption offense in return for the accused firm paying a fine, adopting measures to prevent future offenses, and cooperating with ongoing investigations.  Australia and Canada are on the verge of approving DPAs, and influential voices in India and Indonesia are urging their adoption too.

Apostles say DPAs allow governments to realize the benefits of a criminal conviction without the need for a lengthy, expensive, arduous trial against a well-funded corporate defendant where defeat is always a risk.  Former U.K. Attorney General Lord Peter Goldsmith told a New Delhi audience last October that once India begins using DPAS, companies would start coming forward and admit wrongdoing.  During the recent debate in Singapore one commentator observed that DPAs “provide an incentive to corporate entities to confront criminal conduct within their ranks,” and a group of Indonesian professors claim DPAs will be particularly valuable in their country.   In Indonesia, conviction of a corporation provides no assurance the defendant will not commit the same offense again while, they write, a DPA does.

DPA evangelists are about to learn what DPAs have in common with Chinese cuisine.  The first-time visitor to China soon discovers that Chinese food in China is unlike Chinese food at home.  Beef broccoli tastes much different outside China than in. Connoisseurs of DPAs will shortly find that what American prosecutors are able to cook up looks much different when prepared abroad.     Continue reading

Dispatches from the UNCAC Conference of States Parties, Part 1: Revisiting the Jakarta Principles of Anti-Corruption Agencies

Last month, the UN Convention Against Corruption (UNCAC) Conference of States Parties (COSP) was held in Vienna, Austria. In addition to the formal meetings of government representatives, the COSP also featured a number of panels, speeches, and other side events, at which leading experts discussed and debated a range of anticorruption topics. GAB is delighted that Northwestern Pritzker School of Law Professor Juliet Sorensen and her student Kobby Lartey, who attended the COSP, have offered to share highlights of some of the most interesting sessions in a series of guest posts. Today’s post is the first in that series.

Though specialized anticorruption agencies (ACAs) are dismissed by some as redundant or ineffective, last month’s COSP panel on “Revisiting the Jakarta Principles: Strengthening Anti-Corruption Agencies’ Independence and Effectiveness” made a strong case for ACA’s importance to the fight against corruption. (The Jakarta Principles are drawn from a 2012 statement drafted by anticorruption practitioners and experts from around the world; these broad, aspirational principles help anticorruption to protect themselves, and to offer inspiration for their work.) The panel, which included ACA commissioners from Indonesia, France, Romania, and Burkina Faso, as well as representatives from Transparency International, the UNODC, and UNDP, the panel highlighted the diverse struggles and successes of member states’ ACAs. Continue reading