The Family Firm

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How did Suharto Inc. attain its wealth, its power and its hold over the imaginations of millions of Indonesians? When Suharto became acting President of Indonesia in 1967, his unique blend of forcefulness and Javanese political subtlety was already manifest. The ousting of "President for Life" Sukarno, the nationalist founder of the country, took two years and, through an accompanying anti-communist purge, claimed as many as 500,000 lives. But Suharto, an obscure general from a hardscrabble village in central Java, led an outwardly modest life. He and his late wife Siti Hartinah ("Madam Tien") initially lived in a simple bungalow in the Menteng district of Jakarta and drove a 1964 Ford Galaxy. That was in marked contrast to Sukarno, the self-styled "God-King," with his grand presidential palace and his glamorous third wife Dewi, a former Japanese hostess at Tokyo's Copacabana nightclub.

Behind the facade, however, Suharto showed an early interest in making money. In the 1950s, he was allegedly involved in sugar smuggling and other extra-military activities in Central Java that may have cost him command of the Army's Diponegoro Division during a 1959 anti-corruption drive. In his autobiography, Suharto asserts that he bartered sugar for rice to ease a local food shortage and that he did not benefit personally. In any case, the military transferred Suharto to a less influential position at the army staff college in Bandung, West Java.

In 1966, Suharto Inc. began to take shape. Before being officially named President, Suharto issued Decree No. 8 to seize two Sukarno-controlled conglomerates with combined assets of $2 billion. They became PT Pilot Project Berdikari, a company that Suharto placed under the management of Achmad Tirtosudiro, a former general who now heads a powerful Muslim organization founded by President Habibie. The firm was to become one of the main levers of the Suharto empire.

The President's fortunes began to soar along with those of a few close associates, most prominently Liem Sioe Liong and The Kian Seng, better known as Mohammad "Bob" Hasan. In late 1969, Suharto gave a partial monopoly--it later became total--over the import, milling and distribution of wheat and flour to PT Bogasari Flour Mills, controlled by Liem's Salim Group. Over the years Liem--known as "Uncle Liem" to the Suharto brood--and Hasan became Suharto's most trusted non-family associates and eventually amassed vast commercial empires.

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. But the foundations were also giant slush funds for the investment projects of the Suhartos and their cronies, as well as for the ex-President's political machine, Golkar. According to George Aditjondro, a sociology lecturer at Australia's University of Newcastle, they ultimately numbered 97 and were controlled by Suharto, his wife (who died in 1996), her relatives in the countryside, his cousin and half-brother, the six children, their spouses and parents, trusted military men and associates such as Habibie, Hasan and Liem. "The foundations bought stocks, built companies, lent money to businessmen," says Adnan Buyung Nasution, a lawyer who last year tried unsuccessfully to set up an independent commission on the Suharto wealth.

The foundations accepted "donations," though they were often less than voluntary. Beginning in 1978, all state-owned banks were required to give 2.5% of their profits to both the Dharmais and Supersemar foundations, according to former Attorney General Soedjono Atmonegoro. Suharto's Decree No. 92, in 1996, required that each taxpayer and company making more than $40,000 a year donate 2% of income to the Dana Sejahtera Mandiri foundation, set up to support poverty-alleviation programs (the order was rescinded last July). To this day, civil servants and members of the military donate a portion of their monthly salaries to the Amal Bakti Muslim Pancasila foundation, which was used by Suharto to win Muslim support.

While "donations" provided most of the foundations' revenue, there were other sources as well. In 1978, Suharto foundations took control of 60% of Bank Duta, a leading private bank, according to a former Bank Duta official. That share was gradually increased to 87%. The foundations invested heavily in private companies established by Suharto family members and cronies. After that, a helpful ministry or state-owned firm would award a contract or a monopoly to those companies.

Since Suharto's downfall, the foundations have been a major target of Indonesian investigators. Soon after Suharto's resignation, then-Attorney General Soedjono examined the books of the four largest yayasan. What he found was unsettling. "These foundations were set up to deliver social services," he says, "but Suharto had distributed the money to his children and friends." Soedjono discovered that one of the largest foundations, Supersemar, had dispersed 84% of its funds on unauthorized pursuits, including loans to companies owned by Suharto's children and friends. Suharto, as chairman, had to sign any check over $50,000. Soedjono submitted a preliminary report on his findings to President Habibie last June. He was fired five hours later. (The President says Soedjono was dismissed because he stepped outside the line of command on another matter.)

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