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Subject: [perempuan] WSJ Page
One/Jakarta: Tangle of
04/07/2005 01:33 Bribes Creates Trouble for
Monsanto
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The Wall Street Journal
Tuesday, April 5, 2005
PAGE ONE
Seed Money
In Indonesia, Tangle of Bribes
Creates Trouble for Monsanto
Lobbying Effort for Permits
Included $50,000 in Cash;
The SEC Brings Charges
Love Blossoms on Reality TV
By PETER FRITSCH and TIMOTHY MAPES
Staff Reporters of THE WALL STREET JOURNAL
JAKARTA, Indonesia -- In early January, U.S. government prosecutors nabbed
a
big company in an unusual corruption case. Agricultural and biotechnology
giant Monsanto Co. agreed to pay $1.5 million to settle charges of bribing
Indonesian government officials. In seeking permission to sell genetically
modified
seed, Monsanto made $750,000 in payoffs to officials during a six-year
period,
according to a January complaint filed by the U.S. Securities and Exchange
Commission.
The filing cited gifts including golf memberships, luxury travel and money
to
buy land. The links to specific Monsanto executives in many of these cases
remain unclear. But investigators focused on one payment that paints a
vivid
picture of Monsanto's efforts to sway policy: a $50,000 cash gift to
Indonesia's
Environment Minister.
The SEC complaint refers to those involved only in general terms. According
to several people close to the matter, one is a former Monsanto executive
and
seasoned U.S. diplomat who now heads the American Chamber of Commerce in
Beijing. Working on his behalf was an ambitious young American lobbyist
with a
secret past who became famous when he left his pregnant wife for an
Indonesian
movie star. The lobbyist worked for a Jakarta-based company founded by
Harvey
Goldstein, the son of a Brooklyn, N.Y., cop. People who know him say he
took the
name Mohammed Harvey Goldstein as part of his marriage to a Muslim woman.
The story behind the $50,000 bribe sheds light on the tangled world of
Indonesian business and politics. Indonesia has long been known for its
venality, a
problem compounded by the 1998 fall of President Suharto and the unstable
political environment that followed. Authorities there are now making a
public
show of repairing the nation's reputation and see Monsanto as a test of
their
resolve. Local investigators have asked the SEC to share its evidence,
something
the agency has not done, citing the confidentiality of its investigation
and
the lack of a treaty covering the sharing of information between the two
countries.
For Monsanto, based in St. Louis, the case is a black eye. Although
prosecutors don't allege that Monsanto's top executives knew about the
bribes, they do
contend the corruption continued unabated because of the company's lax
oversight.
At the time of the settlement, Monsanto's General Counsel Charles W. Burson
said in a written statement that the company "accepts full responsibility
for
these improper activities, and we sincerely regret that people working on
behalf of Monsanto engaged in such behavior." He added that the company has
"terminated" the employees involved as well as its relationship with the
lobbying
firm.
In an interview, Monsanto Chief Executive Hugh Grant shook his head when
asked if he had any involvement with the Indonesian lobbying firm. He says
Monsanto uncovered evidence of the wrongdoing and brought it to the
attention of U.S.
authorities. "We solved the puzzle...but it should never have happened," he
says. "It's not who we are."
At the center of the story is Michael A. Villarreal, who grew up shuttling
between U.S. military postings and divorced parents. In 1989 he ran afoul
of the
law when he was arrested in Panama City, Fla., and charged with armed
robbery. He was sentenced to probation and community service tutoring kids
at Camp
David Gonzalez, a detention center in Calabasas, Calif. "I got a second
chance,"
he says.
Because Mr. Villarreal was a juvenile at the time, his record was expunged
from the public record and his plan to enter Pepperdine University went
ahead as
scheduled. He earned a degree in political science in 1994 and married his
college sweetheart the same year.
The newlyweds decided to seek their fortune in Indonesia, the exotic and
then-booming Southeast Asian nation where Mr. Villarreal's wife had grown
up. Mr.
Villarreal, who is now 33 years old, quickly became fluent in Indonesian
and
rubbed shoulders with ministers and movie stars after he found work as a
lobbyist.
At the time, Monsanto was trying to win approval from the Indonesian
government to sell genetically modified seeds. Monsanto wanted to move away
from
slower-growth businesses, such as selling chemicals and fertilizers. It
ultimately
wanted to sell corn seeds in Indonesia but decided to start with cotton, a
less controversial product because it isn't eaten.
The collapse of President Suharto's regime, which tipped the country into
anarchy, set back Monsanto's lobbying efforts. Dissatisfied with progress
made by
its local consultant, Monsanto turned to a local firm, PT Harvest
International Indonesia. Harvest was founded in 1990 by Mr. Goldstein, 65,
who has
advised foreign companies doing businesses in Indonesia for decades.
A well-connected lobbyist, Mr. Goldstein is also Gambia's consul to
Indonesia. The red, blue and green flag of Gambia, a country of 1.4 million
people on
the west coast of Africa, hangs outside the entrance to Mr. Goldstein's
Jakarta
office.
It's not clear how or why Mr. Goldstein was appointed to that position, but
it gives him privileged access to official government and diplomatic
functions.
He was one
of the few foreign businessmen able to arrange meetings for clients with
President Suharto.
Mr. Goldstein converted to Islam in order to marry a Muslim woman from
Malaysia and took the name Mohammed Harvey Goldstein, say people who know
him. The
couple later divorced and Mr. Goldstein has remarried.
Shortly after Monsanto hired Harvest in 1998, the account was handed to Mr.
Villarreal, who had joined the lobbying firm a few years earlier. Bungaran
Saragih, a former Indonesian agriculture minister, says he was lobbied
repeatedly
by Mr. Villarreal and Charles M. Martin, who was then Monsanto's chief
public-
and government-affairs officer in Asia.
Mr. Saragih says Mr. Martin paid him a courtesy call before leaving
Monsanto
in late 2002. During that meeting Mr. Martin reflected on his time in
Indonesia, according to the minister, saying: "When the government plays
classical
music, we play classical music; when it plays jazz, we play jazz; if it
plays
bribery, we play bribery; but if it plays clean, that is what we like."
Mr. Martin, 60, the current head of the American Chamber of Commerce in
Beijing, didn't respond to repeated attempts to seek comment.
In early 2001, Monsanto had a small breakthrough. The Agriculture Ministry
gave farmers on the island of Sulawesi permission to grow Monsanto's
cotton.
But only a few weeks later, the Environment Ministry reversed course. It
issued a fresh decree saying Monsanto had to first subject its cotton to
environmental assessment tests that would measure its impact on the local
flora.
In August 2001, Nabiel Makarim was tapped as environment minister after a
new
government came to power. Monsanto applied a full-court press to persuade
the
government to nullify the decree, according to Mr. Villarreal and several
Indonesian officials. As part of the effort, Mr. Villarreal accompanied Mr.
Makarim on a December VIP visit to Monsanto's headquarters. Mr. Makarim
didn't
reverse the decision.
It was at this point, according to the SEC's complaint and people familiar
with the matter, that Mr. Martin, the Monsanto public- and
government-affairs
officer, intervened. Before joining Monsanto, he had spent much of his
career
with the U.S. State Department in Asia, with postings in Beijing, Hong Kong
and
Manila. Now, he told Mr. Villarreal to pay the minister $50,000, people
familiar with the matter say.
Even before the cash changed hands, Mr. Martin made attempts to cover
Monsanto's tracks, according to people familiar with the matter. These
people say he
instructed Mr. Villarreal to disguise the $50,000 as consulting fees billed
by
Harvest. The actual invoices totaled $66,000 in order to include some
unspecified taxes relating to the supposed billing, according to the SEC
complaint.
The SEC complaint details the "false invoices" but doesn't name Mr. Martin
specifically. It instead refers to a "Senior Monsanto Manager."
Just before Christmas 2001, Mr. Martin sent an e-mail from his Monsanto
account to Mr. Villarreal's private e-mail requesting an invoice for
$66,000 and
instructing that it relate to trips made to the U.S. "In this case, it can
say
arrangements for the visit and Harvest staff accompanying on the visits,"
Mr.
Martin wrote, according to the e-mail, which The Wall Street Journal has
viewed. "Specify how many man-hours were spent and what rate. This should
all be on
the invoice," the e-mail continues.
According to the SEC complaint, the invoices were submitted to Monsanto
before one of the trips being expensed had even been made.
In early February 2002, on instruction from Mr. Martin and with the
knowledge
of Mr. Goldstein, Mr. Villarreal personally delivered $50,000 in cash to
the
minister's home, say the people close to the case.
Speaking generally, Mr. Villarreal says it was not his practice to bribe
officials. Asked specifically if he passed a bribe to Mr. Makarim, Mr.
Villarreal
equivocated. "Well, I have to be careful how I answer that," he says,
citing
his need to avoid contradicting testimony to U.S. prosecutors.
Mr. Makarim, 59, the government minister, says he didn't take a bribe from
Harvest or Monsanto. He says he was working from his Jakarta home the day
in
question and that Mr. Villarreal had probably visited him. "He came over
all the
time in those days," Mr. Makarim says.
In a brief telephone interview, Mr. Goldstein says "it's probably very
true"
that Mr. Villarreal passed a bribe. As for his role, Mr. Goldstein says,
without elaborating, "I'm quite confident in what I did and didn't do. A
lot of it
I really don't know." He referred further questions to his attorneys,
which,
through the attorneys, he declined to answer.
"The investigations in both [Indonesia and the U.S.] are ongoing," John T.
Walsh, a New York attorney retained by Mr. Goldstein and Harvest, wrote in
a
letter to The Wall Street Journal. "Mr. Goldstein does not want to make any
public statements that may hinder or jeopardize those ongoing
investigations."
In the letter, Mr. Walsh notes that Mr. Goldstein appeared "voluntarily"
before investigators in both countries and that neither he nor Harvest has
been
charged or sanctioned for illegal activity in either country.
Adnan Wirawan, another of Mr. Goldstein's attorneys, who is based in
Jakarta,
says in an interview: "Harvey approved the $50,000 [for Mr. Villarreal]
while
he was in Florida on vacation." He says Mr. Goldstein didn't know what the
money was for.
In the end, Mr. Makarim didn't give Monsanto what it wanted. The government
never scrapped the environmental-impact studies. In 2003, Monsanto
shuttered
its efforts to sell genetically modified seed in Indonesia.
Monsanto alerted the SEC to possible wrongdoing at its Indonesian
subsidiary,
PT Monagro Kimia, in 2002. It had become aware of financial irregularities
at
the unit in March 2001, according to the SEC and the U.S. Department of
Justice, which is also investigating the case. Monsanto investigated the
allegations but didn't uncover the $50,000 payment, the SEC complaint says.
According to the SEC, local Monsanto officials operated free of oversight
and
avoided detection for years. The SEC says Monsanto didn't conduct audits of
its Indonesian operations, as required by Indonesian law, between 1996 and
2001.
Under pressure from U.S. prosecutors, Mr. Villarreal cut a deal and told
them
what he knew about Monsanto's dealings with officials and the role of
Harvest, according to people familiar with the matter. In return for
turning over
evidence, he says, he has been granted immunity from prosecution in the
U.S.
In May 2004, Mr. Goldstein abruptly fired his protégé. Mr. Villarreal says
his boss cited an occasion when Mr. Villarreal paraded around the office
with
Sophia Latjuba, a top model and movie star and Mr. Villarreal's girlfriend.
Mr.
Villarreal's then-pregnant wife was back in the U.S. studying opera
singing.
Colleagues who knew her were embarrassed by the incident, Mr. Villarreal
recalls being told by his boss.
Mr. Villarreal says he believes the real reason for his dismissal was a
desire to distance Harvest from the Monsanto scandal, which was heating up
behind
the scenes.
In Indonesia, Mr. Villarreal had become a tabloid sensation because of his
affair with Ms. Latjuba. In December, he starred in a nationally televised
reality show about his life with the actress, who is now his fiancée. Every
night
for a week, "Prologue to a Happy Day" followed the couple as they were
driven
around town in a blue BMW, chatting on their cellphones, shopping in
Jakarta's
fanciest malls and preparing for a lavish engagement party at a swanky
hotel.
In early January 2005, the SEC filed a complaint in the U.S. District Court
for the District of Columbia charging Monsanto with violating the Foreign
Corrupt Practices Act. It stated that between 1997 and 2002 Monsanto failed
to
record, or inaccurately recorded, about $700,000 in "illicit payments to at
least
140 current and former Indonesian government officials and their family
members." That's in addition to the $50,000 bribe, which the complaint
detailed at
length.
According to the SEC filing, Monsanto's Indonesian unit established a
network
of local units through which it processed fake and over-invoiced sales.
"The
management team for Monsanto's Indonesian affiliates then siphoned monies
from
these unauthorized and improperly documented sales, in part, to finance
payments to Indonesian government officials," the SEC's complaint says. One
of
those payments was $374,000 for the land and construction of a home for a
wife of
a senior official in the Ministry of Agriculture, according to the
complaint.
The SEC complaint doesn't allege that Messrs. Martin, Villarreal and
Goldstein played a role in these bribes to Indonesian officials. Johannes
Bijlmer, who
was president of Monsanto's Indonesian unit at the time, declined to
comment,
citing a confidentiality agreement he signed with his former employer.
In January, the SEC and the Justice Department said Monsanto agreed to pay
$1.5 million to settle the charges without admitting or denying the
allegations.
Both are still investigating the matter. So is Indonesia's newly created
Corruption Eradication Commission, which has asked the U.S. government and
Monsanto for their evidence in the case. So far, that co-operation has not
been
forthcoming.
Mr. Burson, Monsanto's general counsel, says he intends to cooperate but is
constrained by the investigations. Richard W. Grime, assistant director of
the
SEC's enforcement division, says the investigative record remains private
and
there is no treaty with Indonesia to allow an exchange of evidence.
Erry Riyana Hardjapamekas, the deputy chairman of the Corruption
Eradication
Commission, has interviewed Messrs. Goldstein, Villarreal and Makarim and
intends to recall the three men for more questioning. After appearing
before the
commission, each man denied wrongdoing in statements to the local press.
Messrs. Goldstein and Villarreal are no longer on speaking terms. Indeed,
Mr.
Goldstein has made common cause with Mr. Villarreal's jilted wife, Louisa
Ibbotson, in an apparent effort to discredit him. Ms. Ibbotson, who now has
an
infant daughter by Mr. Villarreal, is in the process of divorcing her
husband.
In January, Ms. Ibbotson sent Mr. Goldstein an e-mail -- viewed by The Wall
Street Journal -- which describes in detail Mr. Villarreal's 1989 arrest
for
armed robbery. Mr. Villarreal acknowledges the arrest, which he calls a
youthful
indiscretion.
Mr. Villarreal is now trying to set up his own consulting firm in Jakarta.
Mr. Martin's current job is president of the American Chamber of Commerce
in
Beijing. His responsibilities include lobbying the Chinese government on
behalf
of U.S. industry.
---- John R. Wilke and Scott Kilman contributed to this article.
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