The Family Firm

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CHILDREN OF FORTUNE For years, Indonesia's corruption was the kind of petty favor-buying and commission-giving commonly found in the developing world. Two factors pushed the country into a league of its own. The first was Indonesia's position as an up-and-coming star performer in the Asian economic miracle, which brought a cascade of funds pouring into businesses and real estate. The World Bank estimates that between 1988 and 1996, Indonesia received more than $130 billion in foreign investment. "All this has been possible under the eyes of the West, which supported Suharto for 30 years," says Carel Mohn, spokesperson for Transparency International, a non-governmental organization based in Berlin.

The second factor was "the children," as the Suharto kids are known. All six are involved in business, a calling for which they were groomed from an early age. "I remember when we were younger, me and Bambang and his other friends would go over to Uncle Liem's house," says a childhood pal of Suharto's second son. "Uncle Liem would always give us a package of money wrapped in newspaper." The package, he recalls, would contain banknotes worth $1,000 or more. Says Wati Abdulgani, a businesswoman who dealt with a family company in the 1980s: "The kids saw what was being given to their uncles and they thought, 'What about us, when we grow up?'"

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." A friend of Mrs. Suharto recalls a conversation with her at the time the government was building Jakarta's Soekarno-Hatta International Airport. "She told me, 'I want Sigit to learn about business,'" says the friend. "I told her I thought he should first finish university. She said, 'No, no, Sigit can't think straight.'" Two sources who worked on the airport project say that by the time both terminals were finished in 1984, $78.2 million had been given to Sigit in markups that appeared as cost overruns. He graduated to bigger deals. The collection of ticket proceeds from a national lottery, set up in 1988 by the Department of Social Affairs, was handled by a Sigit-linked company until Muslim leaders' anti-gambling protests forced its closure in 1993. "The gambling scheme earned Sigit and his company millions of dollars every week," says Christianto Wibisono of the Indonesian Business Data Center, which has been gathering information on Suharto-related businesses and other firms since 1980.

Second son Bambang, who founded the Bimantara Group in 1981 with two members of his former rock band, was helped in business by Uncle Liem. From 1967 until last year, the National Logistics Agency (Bulog) imported and distributed basic commodities such as wheat, sugar, soybeans and rice through Suharto-linked companies, including six belonging to Liem. At Bambang's request, Liem gave him a slice of the business. Through sugar trading alone, the son is estimated to have earned as much as $70 million a year, essentially for stamping documents. The system worked so well that each of the children was given a cut as he or she moved into business, a practice that continued until last year. From 1997 to '98, Liem had a contract from Bulog to import about 2 million tons of rice valued at $657 million. As part of that contract, Suharto's youngest daughter Siti Hutami Endang Adiningsih ("Mamiek") imported 300,000 tons of rice worth $90.3 million. Over the past 18 years, under the pretense of stabilizing food prices, the Suhartos' deals with Bulog have earned them an estimated $3 billion to $5 billion, according to a former government official.

Eldest child Tutut rose to become the queen bee of the Suharto clan. The base of her empire is Citra Lamtoro Gung Group, and its first big business was building and operating toll roads. The group's toll-road arm won its first project in 1987 after the government turned down two competing bids. Financing came from two government banks, a state-owned cement company and a Suharto foundation. When the president of state-owned Bank Bumi Daya turned down Tutut's request for an interest-free loan, he was fired. By the mid-1990s, her roads were earning $210,000 a day, and in 1995 the concession on her Intra Urban Tollway System, the most lucrative in Indonesia, was extended through the year 2024. Explains Teddy Kharsadi, director of corporate affairs at toll-road company PT Citra Marga Nusaphala: "The extension was a reasonable consequence of our investment."

Tutut's empire also includes telecommunications, banking, plantations, flour milling, construction, forestry, sugar-refining and trading. Foreign companies learned to take on a Suharto as a partner if they wanted to do business in Indonesia, and Tutut was first on most lists. "A lot of big multinationals insisted on having the right connections, and these were certainly useful to them," says Graeme Robertson, an Australian-born Indonesian citizen whose Swabara Group is active in coal and gold mining. At the peak of Tutut's power, according to sources close to the family, investors seeking to meet her first had to pay as much as $50,000 as a "consulting fee" to her minders.

In the early 1990s, Indonesia began to heed the advice of market-oriented economists to privatize many of its state firms. The First Family was a major beneficiary. Suharto ended the state telecommunications monopoly in 1993--by giving licenses for an international direct-dial operation and for Indonesia's first digital mobile phone network to Bambang's PT Satelit Palapa Indonesia (Satelindo). At the same time, state-owned PT Telkom transferred its customer base to Satelindo when it launched its own satellite, the country's third, with the help of a $120 million loan from the U.S. Export-Import Bank. TIME has learned that Jakarta gave Satelindo the licenses and Telkom's customers without a tender or payment. Thanks to the government, Bambang found himself in control of the company, which the market valued at $2.3 billion in 1995 when a subsidiary of Germany's Deutsche Telekom paid $586 million for a 25% stake. Bambang also received a major share of a $90 million facilitation fee from Deutsche Telekom as part of the sale.


The Suharto children's interests became so extensive they started colliding with each other. Bambang and Tutut vied to set up their own television stations. Tommy competed with brother Sigit in aviation and with Bambang in shipping and car production. In 1990 the government solicited bids for a contract to provide switching equipment for 350,000 telephone lines. Japan's NEC teamed up with a company controlled by Bambang. Competitor AT&T gave Tutut a 25% share in its local venture, now called PT Lucent Technologies Indonesia. The project was ultimately split 50-50 between Tutut's AT&T group and Bambang's NEC. In 1996, Tutut came up against Sigit for rights to develop the vast Busang gold mine in East Kalimantan. Tutut's partner, Canadian company Barrick Gold, was opposed by Sigit's partner, Bre-X Minerals. This time, both sides lost; Busang turned out to be the biggest hoax in mining history.

The competition grew so intense that the Suharto progeny began seeking monopolies in ever-narrower lines of business. Bambang got a contract to import the special paper used by the national mint. Tutut took over the processing of drivers' licenses. A company owned by Sigit's wife, Elsye, became the sole authorized producer of Indonesia's mandatory identification cards. In 1996 Suharto grandson Ari Sigit devised a scheme to sell $0.25 revenue stickers as proof of tax payment for every bottle of beer and alcohol consumed in Indonesia (that business collapsed when producers stopped shipping beer to tourist mecca Bali in protest). Nine months before Suharto's resignation, Ari was gearing up to launch a "national shoe project"--all Indonesian children would have to buy school shoes from his company. "At the end," says an American lawyer with 20 years' experience in Indonesia, "the only thing that was transparent was the corruption."

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