Subject: AFR: Bribery Case Rocks Timor Treaty

Received from Joyo Indonesia News

Australian Financial Review

Friday, March 5, 2004

Bribery Case Rocks Timor Treaty

By Trevor Sykes with Andrew Burrell

East Timor's Prime Minister, Mari Alkatiri, has angrily rejected claims he accepted $US2.5million in bribes from oil and gas company ConocoPhillips to secure an investment in the Timor Sea, threatening to sue the company for including them in a legal action in the US.

"I have not, nor have I ever, taken bribes from ConocoPhillips or any other party. I regard these allegations as far-fetched and frivolous," Alkatiri said.

"I understand that corruption has the potential to ruin Timor-Leste's [East Timor] prospects; that is why it is my personal mission to build Timor-Leste on principles of integrity, honesty and transparency."

Alkatiri said he had not been named as a respondent in the legal action, but he was seeking advice over a possible legal action in relation to the "defamatory" allegations as he considered Oceanic's claim to be "vexatious" and to have been filed in bad faith.

"Timor-Leste is the newest and one of the poorest countries in the world," he said.

"Such allegations come as a highly unfortunate distraction at this difficult and crucial time of nation building.

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"I understand that corruption has the potential to ruin Timor-Leste's prospects; that is why it is my personal mission to build Timor-Leste on principles of integrity, honesty and transparency."

The Australian Government has been accused of helping to bribe Alkatiri in the sensational statement of claim filed in the US District Court in Washington by the US-based Oceanic Exploration Company.

Oceanic alleges the Australian government was aware of and participated in the bribery of Alkatiri, whose parliamentary salary is $US450 a month.

When he took office, Alkatiri was hostile to the division of oilfields in the Timor Sea, which Australia negotiated with Indonesia in 1989. However, Alkatiri subsequently moderated his stance and the East Timorese government agreed to a modification of the 1989 agreement in 2002.

Oceanic's filing alleges that in November 2002, members of the ruling Fretilin party individually went to Australian officials to receive $US50,000 in payments from ConocoPhillips, which has interests in several valuable oil and gas leases in the Timor Sea.

The statement names an Australian official who is alleged to have made the payments.

The filing claims that former Australian governments colluded with Indonesia during the invasion of East Timor in 1975 and acquiesced in Indonesia's subsequent transfer of Oceanic's oil interests to another US company, ConocoPhillips. The leases cover the valuable Bayu Undan, Elang/Kakatua and Sunrise gas/oil fields in the Timor Gap.

Oceanic is claiming $US10billion damages for the alleged theft of the leases. As the claim is being made under the USA's draconic Racketeer Influenced and Corrupt Organisations Act (RICO), any damages finding would be automatically trebled, which means the ambit claim is actually for $US30billion.

A spokesman for the Minister for Foreign Affairs, Alexander Downer, said the federal government was not aware of the legal action and had not seen the documents lodged with the US court.

"These sound like outrageous allegations," the spokesman said. "Australian officials would not get involved in that sort of thing."

He said the government would be able to make a more detailed response to the allegations once it had examined any court documents.

A spokesperson for ConocoPhillips said the company had received Oceanic's court filing and was reviewing it.

The filing names ConocoPhillips and several of its subsidiaries as the main defendants, but other defendants include the Timor Sea Designated Authority for the Joint Petroleum Development Area, the Timor Gap Joint Authority for the Zone of Co-operation and Indonesia's national oil company Pertamina.

Oceanic's filing gives details of the alleged bribery of Alkatiri, specifying dates, amounts and his Australian bank account details.

After East Timor became independent in 1999, Alkatiri - referring to the Timor Gap Treaty - said his party "would not legitimise a treaty between a thief and the receiver of stolen goods". He said he believed the Timor Gap Treaty had been illegal. In July 2001, Australia and East Timor signed a Memorandum of Understanding to agree that the Timor Sea arrangement would govern joint exploitation of Area A in the gap. That agreement was signed by Alkatiri as Economic Minister of the transitional East Timorese government and by Alexander Downer on behalf of Australia.

Oceanic alleges that during this time, Alkatiri sometimes used his brother Ahmed to collect bribes made by foreign companies, including ConocoPhillips. In the six months before the signing of the Memorandum of Understanding, Oceanic alleges Ahmed received $US74,000 from ConocoPhillips which was paid into Australian bank accounts.

Oceanic said those accounts were with the ANZ Bank in the Darwin suburb of Casuarina. Alkatiri allegedly holds account number 5376-18038 there and another account allegedly used to deposit bribes was account number 5606-24866.

In August 2001, the Fretilin party - led by Alkatiri - won a majority in the new East Timor parliament. East Timor was continuing to insist on higher tax rates on the oilfields. The Oceanic filing alleges that senior ConocoPhillips executives held meetings with Alkatiri after which the East Timorese Government had decided to retain the previous tax rates.

Oceanic claims: "Earlier, at the end of October, Mari Alkatiri and Ahmed Alkatiri, on his brother's behalf, received approximately $US44,000, which ultimately were paid into bank accounts in Australia at the ANZ Bank in Casuarina. These payments were made by ConocoPhillips in order to influence the decision by East Timor to reduce its tax rates.

"Oceanic and Petrotimor, both in a visit and discussions with provisional officials of the East Timorese Government and in a public announcement in early March 2002, offered to fund litigation in the International Court of Justice on behalf of East Timor in order that East Timor could pursue the entirety of its legitimate rights under international law to the natural resources of the Timor Sea.

"After Oceanic and Petrotimor made this offer, Australia - without public fanfare - withdrew from the compulsory jurisdiction of the International Court of Justice all disputes pertaining to delimitation of maritime zones. Alkatiri at the time described this action by Australia as 'a lack of confidence in us and an unfriendly act'."

Oceanic also alleges ConocoPhillips paid for the East Timor's independence day celebrations, held on May 20, 2002.

During the celebrations, ConocoPhillips allegedly arranged for over $US2million to be paid to Alkatiri. The bribe is said to have been paid, in varying amounts, into a Westpac bank account in Casuarina, in Ahmed's name.

Oceanic alleges that in transactions with Westpac, Ahmed used four different names: Ahmad Alkatiri, Ahmad Bin Hamud Alkatiri, Ahmed Alkatiri and Ahmade Hamute Alkatiri.

Oceanic also alleges that between May and July 2002, additional bribes totalling $US138,000 were given to Ahmed and Mari and transported to the ANZ accounts.

Fretilin party members were allegedly given $50,000 bribes through Australian officials in November 2002. In the following month, they ratified the Timor Sea Treaty.

Around the end of 2002, Mari, through Ahmed, received another sum of about $US54,000 from ConocoPhillips to ensure his approval of the treaty ratification. These funds also went into the ANZ accounts.

A spokeswoman for ANZ said the bank was aware of the allegations, but "because it is about fraud it is a police matter so we can't really comment further than that."

A spokesman for Westpac said the bank was "unaware of these allegations and customer confidentiality prevents us from commenting on customer accounts."

Oceanic has protested against the loss of the leases since 1975. The lawsuit against ConocoPhillips was listed for hearing in the Federal Court in December 2001. However, a dispute over jurisdiction meant none of the claims were ever outlined. In February 2003, the Full Court ruled that the Federal Court had no jurisdiction over the dispute.

The ruling said: "The court has no jurisdiction to determine or will not adjudicate upon claims which depend upon the exercise by the executive of the prerogative in relation to foreign affairs and, particularly in the present context, involving the territorial boundaries of Australia's claim to the continental shelf between Australia and East Timor."

Oceanic owns 80per cent of Petrotimor, which originally held the leases. The filing says Oceanic is bringing the action "to redress the harm caused by defendant's theft, misappropriation and conversion of oil and natural gas resources within the plaintiffs' 14.8million acre concession area in the Timor Sea". Oceanic alleges there was a deliberate scheme to deprive it of the leases.

The filing describes the Timor Sea as one of the world's major hydrocarbon reserves, containing as much oil and natural gas as those in all of Australia and valued at more than $US50billion. That sounds a big call on the Timor Sea fields.

Of more political and financial interest is the claim that over 30 years "Australia, Indonesia and ConocoPhillips, with varying efforts at different times, stole the plaintiffs' oil and natural gas rights granted to it by Portugal".

Oceanic says that Australia, since at least the late 1960s, coveted the Timor Sea oil and natural gas fields and to this end had encouraged Indonesia to invade and annex East Timor.

Oceanic originally applied to the Portuguese government in 1968 for the concessions off the south coast of East Timor. Between 1969 and 1974, Oceanic explored the area, gathered seismic information and compiled maps in preparation for drilling.

Oceanic alleges that after the Indonesian invasion of 1975, its offices were targeted and troops removed all confidential exploration data.

Oceanic claimed ConocoPhillips had been paying bribes to President Suharto for at least 20 years to secure and maintain its position as the largest oil and gas leaseholder in Indonesia. After the annexation of East Timor, Indonesia gave ConocoPhillips the exploration data that had been stolen from Oceanic and ConocoPhillips used the data to secure the lion's share of exploration rights for the Timor Sea.

Oceanic claims that after the withdrawal of Indonesia from East Timor, Australia had pressured the newly formed nation to ratify the development decisions made by Australia and Indonesia in the Timor Sea. ConocoPhillips promised Australia it would invest $US1.5billion in building an undersea pipeline from the fields to Darwin.

"ConocoPhillips also began to pay regular and substantial bribes to the Prime Minister of East Timor, Mari Alkatiri, and to others," the filing stated. "As a direct result of the bribes, ConocoPhillips secured confirmation of its interests in the Timor Sea and Alkatiri reduced the tax rate imposed upon ConocoPhillips. Those bribes, over several years, amounted to more than $US2.5million, or over 500 times Alkatiri's yearly official salary."

The claims reopen the two sorest points in Australia's relationship with East Timor by alleging that Australia condoned the 1975 invasion and that East Timorese parliamentarians had to be bribed before they would ratify the Timor Gap treaty.

The Timor Gap has been a longstanding dispute.


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