Major palm oil company execs arrested for bribery in Indonesia

Earlier this week Reuters reported on a bribery scandal in Indonesia that has resulted — so far — in the arrests of seven people, including senior executives of palm company Sinar Mas Agro Resources and PT Binasawit Abadi Pratama. The vice president of Sinar Mas and several members of the Central Kalimantan parliament are named as suspects in the case according to the KPK, Indonesia’s anti-corruption commission, which made the arrests.

Both Sinar Mas Agro and Binasawit are subsidiaries of Singapore-listed palm oil giant Golden Agri-Resources Ltd., the second largest palm oil company in the world.

Because GAR is also embroiled in environmental and human rights conflicts through its investment in Golden Veroleum Liberia, Friends of the Earth has been actively raising concerns about the company with all of the company’s investors.

Conservation news site Mongabay reports that the arrests this week were specifically due to Sinar Mas’s attempt to pay off politicians to avoid an investigation into pollution in a lake in Central Kalimantan (Indonesian Borneo), which is ringed by oil palm plantations and mills and has been grossly contaminated by palm oil waste and pesticides.

It should come as no surprise that the palm oil industry and big agribusiness in general is tied up in financial crimes, illegality and other investment risks; in fact, we briefed the U.S. Senate on the matter — and on this very company — just last month.

Indeed, since July of this year, Friends of the Earth has been reaching out directly to all of GAR’s major U.S. investors — BlackRock, Vanguard, Dimensional Fund Advisors, Northern Trust, TIAA and CalPERS — to ask them to use their stakes in the company to seek deep reforms to its governance practices, or exclude GAR from their portfolios. In particular, Friends of the Earth members have sent 30,000 letters to BlackRock, GAR’s second largest U.S. shareholder, asking BlackRock — the world’s largest asset manager and one that likes to talk up its concerns about sustainability and good governance — to step up to the plate, given its roughly $35 million stake in the company. (BlackRock also has over $100 million in Sinar Mas, the company whose senior executives are now awaiting trial in Indonesia. Northern Trust and Dimensional Fund Advisors have significant holdings in Sinar Mas as well.) GAR is also listed on the Dow Jones Sustainability Index and has received financing from CitiGroup and the Dutch firm Robeco.

Until now, some of these firms have engaged directly with GAR, but none of them, as far as we know, have taken steps to exclude the company from their portfolios, or looked at potential legal concerns regarding their business ties to the company.

Perhaps the arrest of senior executives for bribery and corruption will motivate them to take a more serious look.

Header image via Creative Commons.