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Indonesia raids home of Lippo Group CEO in bribery probe

Lawyer said Meikarta developer 'very surprised and deeply regretted' the case

Meikarta, a new township, is being built in the Bekasi district on the eastern fringes of Jakarta.    © Antara/Reuters

JAKARTA -- Indonesia's anti-corruption agency said on Thursday it had raided 10 locations, including the home of Lippo Group CEO James Riady, as part of an investigation into an alleged bribery plot related to the conglomerate's flagship real estate project, Meikarta.

The raid comes after the Corruption Eradication Commission, or KPK, announced on Monday it had arrested and named nine people as suspects, four of whom are affiliated with Lippo Group, on allegations that they promised officials from the Bekasi district -- where Meikarta is being built -- 13 billion rupiah ($855,613) in exchange for property and other permits.

A KPK official said that the agency had conducted raids from Wednesday evening, and that it had confiscated several documents and financial statements to ascertain whether there was any organizational involvement in the case.

"In response to the recent news coverage on the Indonesian KPK matter, we confirm that a search did occur at Mr James Riady’s residence," said Sylvia McKaige of Salween Group , spokesperson for James Riady. "The search proceeded orderly and professionally, and as stated in the official summary report, there were no documents/items found or seized in relation to the case. Mr Riady remains fully committed to assisting the KPK in their efforts as is necessary."

Meikarta, a new township outside Jakarta, is being developed by Mahkota Sentosa Utama, a subsidiary of Lippo Cikarang, which is 54%-owned by Lippo Karawaci, a unit of Lippo Group and one of Indonesia's largest property developers.

A lawyer hired by Mahkota released a statement on Wednesday -- after the arrests on Monday -- saying it was "very surprised and deeply regretted the incident" adding that it "will not hesitate to give strict sanctions and actions" to members it finds to have committed any crime.

Lippo Karawaci shares dropped 4.8% to 274 rupiah each on Thursday, while shares in Lippo Cikarang ended the day unchanged.

Ratings agency Moody's released a report on Thursday saying that the bribery allegation alone does not affect the "B3" credit rating of Lippo Karawaci at this stage, but is a credit negative nonetheless "because it highlights the company's corporate governance challenges and potential reputational damage that will hurt both investor and consumer confidence."

Concerns over Lippo Karawaci's books had been raised over the past months, with the company's cash flow deteriorating and it becoming increasingly dependent on asset sales to service its debts.

S&P Global Ratings also released a memo on Thursday, saying "any adverse impact of the bribery case on the progress and cash flows of Meikarta... could put further pressure on its liquidity."

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