October 27, 2007 / 11:48 AM / 12 years ago

Indonesia's Pertamina fined for perjury in Karaha case

JAKARTA, Oct 27 (Reuters) - Indonesia’s state oil and gas firm Pertamina has paid $500,000 to Karaha Bodas of the United States because a former Pertamina official committed perjury in a court case, a lawyer for the Indonesian firm said on Saturday.

Pertamina and Karaha agreed in 1994 to develop a geothermal energy project in Indonesia’s West Java province, but the plan stalled after the 1997-98 Asian financial crisis, triggering a long legal battle.

Karaha, which had spent $111 million on the project, in 1999 asked a Swiss arbitration panel to force Pertamina to repay its lost investment and cover future profits.

The tribunal awarded Karaha — which is owned by Caithness Energy LLC and FPL Energy LLC, a subsidiary of FPL Group (FPL.N) — $261 million in 2000, but the legal battle dragged on in the U.S. courts.

Karaha said that the case took far longer to settle and incurred additional legal costs because a Pertamina official gave false information in court regarding the ownership of certain petroleum refineries in Indonesia, according to a court document seen by Reuters. Karaha had asked for $8.2 million in sanctions.

Ainun Naim, who was Pertamina’s chief financial officer at the time, had denied that the refineries were owned by Pertamina, according to the document, which meant Karaha could not recover money owed to it by seizing the proceeds from petroleum sales.

“The court finds that Pertamina engaged in willful misconduct, through the falsification of deposition testimony, and that this misconduct cannot be allowed to go without penalty,” according to a document from the U.S. district court, Southern District of New York.

“The court has decided to impose sanctions on Pertamina in the amount of $500,000,” according to the court document, which was dated April 2007.

“We have paid that amount of money several months ago to Karaha according to the court decision. We did not appeal because the cost for appeal is expensive,” Simson Pandjaitan, Pertamina’s lawyer, told Reuters.

“We are ready to face any other law suit by Karaha. We predict Karaha will not stop to sue (Pertamina),” Pandjaitan said.

Naim told Reuters on Saturday that he did not want to comment because he had not followed the issue.

In 2006, the U.S. supreme court turned down an appeal by Pertamina, which was seeking to overturn the decision to award $261 million in compensation to Karaha.

Pertamina’s lawyer said that the firm had paid around $300 million, including interest, to Karaha to settle the dispute.

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