December 7, 2015 / 2:21 PM / 2 years ago

Speaker of Indonesian parliament denies Freeport extortion allegation

JAKARTA (Reuters) - The speaker of Indonesia’s parliament on Monday denied seeking to extort shares in the local unit of Freeport McMoRan Inc to ensure a contract extension for the mining firm, a member of the assembly’s ethics panel said.

Speaker of Indonesia's parliament Setya Novanto leaves an ethics panel hearing in Jakarta, Indonesia December 7, 2015. REUTERS/Garry Lotulung

Freeport, which operates one of the world’s biggest copper and gold mines, is at the center of a major political scandal after the head of its Indonesian operations told the panel last week he had secretly recorded a meeting in which speaker Setya Novanto asked for a 20 percent stake.

The panel summoned Novanto for questioning on Monday, but the speaker - a senior member of Indonesia’s second-biggest political party, Golkar - asked for a closed-door hearing.

“What is clear is that he denied the accusations or reports, including the contents of the recording that became the basis for the ethics council to hear this case,” council member Akbar Faisal told reporters after the hearing.

Journalists thronged the parliament on Monday, but a row of security officers kept them out of the room where the hearing was held.

Novanto dodged the journalists, entering by a side entrance. His assistant did not respond to telephone calls seeking comment.

“We have to respect the process,” President Joko Widodo told reporters. “But if it is said that there is profiteering, asking for shares, that is not done. This is about decency, morality, and the authority of the state.”

Analysts say the allegations could further erode investor confidence in Indonesia, which is routinely ranked as one of the world’s most corrupt countries.

Anti-corruption group Transparency International says its surveys show the parliament is perceived to be among Indonesia’s most corrupt institutions.

The contract extension and now the scandal are more headaches for Freeport in Indonesia, where new rules have banned the export of unprocessed minerals, forcing mining groups to build smelters.

The Indonesian government already has a 9.36 percent stake in Freeport’s Indonesian operations, and is due to take another 10.64 percent stake under existing regulations.

U.S.-based Freeport had sought the contract extension to give it legal certainty before investing billions of dollars in an underground phase at its Grasberg gold and copper sites in Papua province.

In the recording, said Freeport’s Indonesia head, Maroef Sjamsoeddin, Novanto indicated that a 20 percent stake be given to Widodo and Vice President Jusuf Kalla.

Novanto allegedly told the Freeport executive that he could ensure the miner’s contract would be extended from 2021 to 2041.

Golkar, the parliamentary speaker’s party, supported Widodo’s opponent in the 2014 presidential election.

Reporting by Fergus Jensen and Arzia Tivany Wargadiredja; Additional reporting by Jakarta bureau; Writing by Eveline Danubrata; Editing by Clarence Fernandez

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