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Lippo Karawaci shares plunge on arrest of officials

Alleged bribery over Meikarta project mars Indonesian builder's prospects

Lippo's costly high-rise development, Meikarta, is pictured in April 2018. (Photo courtesy of Lippo Group) 

JAKARTA -- Shares in Lippo Karawaci, one of Indonesia's largest property developers and a unit of the Chinese-Indonesian conglomerate Lippo Group, slid 5.5% in Tuesday's trading after Indonesia's anti-corruption agency named four people affiliated with the Indonesian conglomerate as suspects in an alleged bribery scheme related to the developer's flagship project, Meikarta.

Indonesia's Corruption Eradication Commission, or KPK, announced Monday evening that it had arrested and named nine people as suspects, four of whom are people affiliated with Lippo Group, including the group's operational director, Billy Sindoro, according to a KPK official. Five others are officials from the Bekasi district -- where the Meikarta is being built -- including Bekasi regent Neneng Hassanah Yasin, who was just elected last year from the Golkar Party, a member of the ruling coalition.

The KPK alleges that people affiliated with Lippo Group promised 13 billion rupiah ($854,000) in bribes to Bekasi officials in exchange for property and other permits. Authorities seized 90,000 Singapore dollars ($65,000) from a consultant hired by Lippo in a raid on Sunday.

Lippo Karawaci's latest troubles come as investor concerns grow over the group's finances. Moody's, a credit rating agency, has downgraded Lippo three times in the past 18 months. On Monday, its shares closed at 290 rupiah, down 40.5%, year-to-date, before Tuesday's swoon. 

Meikarta is a new township outside Jakarta that is being developed primarily by Lippo Cikarang, Lippo Karawaci's main subsidiary. When he announced the project in May last year, James Riady, Lippo Group's chief executive, said Meikarta would span at least 2,200 hectares and have 100 skyscrapers. Lippo also opened the 278 trillion rupiah project to outside investors.

The bribery allegations are the latest setback for Meikarta, which has been hampered by problems ranging from a lawsuit over alleged failure to pay huge advertising bills, to permitting problems and claims from salespeople that they have not been paid.

Concerns have also been raised over the state of Lippo Karawaci's books. The company's cash flow is deteriorating and it is increasingly dependent on asset sales to service its debts. Last week, the Nikkei Asian Review revealed that stock exchange authorities had rebuked the company for failing to report financial results on time. Lippo Karawaci's problems have been aggravated in recent months by the rupiah's depreciation. More than 90% of the group's $1 billion in debt is denominated in dollars.

Representatives for Lippo Group did not immediately respond to an email request for comment.

This is the second time in a week that people connected to Lippo Group have been taken into custody by the KPK.

Eddy Sindoro, a former Lippo Group executive according to local reports, surrendered to Indonesian authorities in Singapore last week, after two years on the run, following his being named a suspect by the anti-graft agency in another bribery case related to legal disputes allegedly involving Lippo Group subsidiaries.

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