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Wilmar's record payout of S$928m marks Indonesia's deepening crackdown on palm oil graft
[JAKARTA] The Indonesian authorities' seizure of 11.8 trillion rupiah (S$928 million) from agri-giant Wilmar Group is not only the country's largest asset confiscation, but also unprecedented for the company voluntarily handing the amount over in cash – a move legal experts say enables prosecutors to sidestep the complexities of liquidating seized property.
The move throws a spotlight on Jakarta's stepped-up efforts to root out graft in the palm oil sector, following allegations of misconduct during a severe shortage of cooking oil in late 2021 to early 2022, which exposed governance lapses in one of Indonesia's most vital industries.
Harli Siregar, the spokesperson for the Attorney-General's Office (AGO), told The Business Times: 'This was the largest seizure of funds in the history of ongoing cases.'
The sum, representing nearly two-thirds of Wilmar's net income last year, was handed over at the authorities' request as a gesture of the company's 'good faith and innocence' in the ongoing case.
Abdul Fickar Hadjar, a criminal law specialist at Trisakti University, said the confiscated funds could strengthen the prosecution's appeal against the ruling by a lower court in March, which had acquitted Wilmar and two other palm oil companies.
He said: 'This makes it easier for prosecutors to present additional evidence in the Supreme Court appeal. Seized assets are typically in the form of valuables like property or goods, which are more difficult to use as evidence because they usually need to be auctioned off first.'
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The Wilmar case, still unfolding amid Indonesia's broader push to reform its palm oil industry, is now before the country's Supreme Court, which will review the lower court's judgment on points of law.
Palm oil purge
In 2023, Indonesia, the world's largest producer and exporter of palm oil, set up a task force to enhance governance in the industry and to boost state revenue.
The AGO said it has handed over to the state some 217,000 hectares of palm oil plantation land – assets seized from corruption cases over the last seven years.
The last major seizure was made in a high-profile case involving tycoon Surya Darmadi, the owner of the Duta Palma Group, who was convicted of corruption over illegal changes in land use in Riau province between 2003 and 2022. He was sentenced to 15 years in prison.
Last September, his appeal was thrown out by the Supreme Court, which upheld the jail sentence. Three months later, the AGO confiscated around five trillion rupiah in cash from the tycoon.
Largest haul
At a briefing held at the AGO's premises on Tuesday (Jun 17), members of the press were shown towering stacks of 100,000 rupiah banknotes confiscated in the Wilmar case. Observers deemed the striking display as a vivid testament to the scale of the corruption scandal.
At a press briefing on Tuesday, Indonesia's Attorney-General's Office put on show trillions of rupiah in seized assets from the corruption case involving Wilmar Group and export permits for crude palm oil products. PHOTO: ATTORNEY-GENERAL'S OFFICE, JAKARTA
Siregar said that the funds identified as state losses could be used to support the revitalisation of Indonesia's palm oil industry.
In its statement, however, Wilmar said the funds were a security deposit ahead of the Supreme Court ruling on the 2022 palm oil export case, in which five Wilmar subsidiaries were accused of misconduct during the cooking oil crunch in the country.
The company stated that the deposit will be refunded if the Supreme Court upholds the lower court's decision, but may be partially or fully forfeited if the ruling is overturned.
Although the lower court had ruled in favour of Wilmar and two other palm oil traders in March, that verdict is now under fire, given the AGO's appeal against it, and the controversy that arose from judges having been accused of accepting bribes to rule in favour of the accused.
Hadjar from Trisakti University said that while repaying state losses does not negate potential criminal liability, Wilmar's willingness to provide the security deposit could be viewed as a mitigating factor, depending on how the Supreme Court assesses the case.
He also added that the company's move to surrender the funds may help the company manage the potential economic fallout.
Sustainability in question
The ongoing corruption case involving Wilmar Group's Indonesian units could pose a significant challenge to the company's reputation as a global sustainability leader in the palm oil industry.
Observers say the case underscores the complex challenges multinational companies face in maintaining consistent governance and ethical standards across different jurisdictions – a crucial concern for investors and stakeholders who are increasingly prioritising sustainability and corporate responsibility.
Professor Lawrence Loh, director of the Centre for Governance and Sustainability at the NUS Business School, said Wilmar has long positioned itself at the forefront of sustainable palm oil production.
He warned that the case could hurt its reputation, especially among clients in markets such as Europe which are sensitive to environmental, social and governance (ESG) factors, as well as in the increasingly ESG-conscious Asian markets of China and India.
'The case primarily affects the governance aspect, as it involves (allegations of) lapses in business integrity and ethics,' he said.
'While cooperating with the authorities and returning funds may mitigate the ESG impact, they do not eliminate the underlying concerns about governance weaknesses. Rebuilding the company's reputation will be its most critical priority,' he added.
In a statement on Tuesday, Wilmar Group said its five subsidiaries maintain that all their actions were carried out in good faith and without corrupt intent.
On Wednesday, the shares of the group's Singapore-listed entity, Wilmar International, fell S$0.08 or 2.7 per cent to S$2.93, with 19 million shares traded.
