Freeport's shareholders ask military payments probe

The comptroller of New York City,representing shareholders of city pension funds, is asking U.S. investigators to determine the legality of payments made by mining giant Freeport-McMoRan Copper & Gold Inc. to the Indonesian military in Papua, agency reported Monday.

Comptroller William C. Thompson Jr. requested both the U.S. Justice Department and the Securities and Exchange Commission (SEC) to investigate whether Freeport's financial support for security forces on Papua "constitutes possible violations of theForeign Corrupt Practices Act (and) the Securities Exchange Act," documents obtained by Dow Jones Newswires indicate.

Efforts to contact an Indonesia-based Freeport-McMoRan spokesman about the requests were unsuccessful.

The requests were prompted by reports from The New York Times and the environmental group Global Witness that Freeport directly paid "large sums" to Indonesian military officers, Thompson said in a letter dated Jan. 26 to U.S.Attorney General Alberto Gonzales.

"(Freeport) had previously claimed that it made payments to reimburse the government for the provision of security services at Freeport's mining operations in West Papua," the letter said.

"While the Foreign Corrupt Practices Act does permit some corporate payments to host countries for such purposes, the large number of payments made directly into the private bank accounts of individual army officers raises serious questions as to whether the statute was violated."

The letter says the comptroller is the custodian and investment adviser of the five New York City Pension Funds, which hold 590,350 shares in Freeport-McMoRan common stock.

Thompson's Jan. 26 letter to SEC Chairman Christopher Cox asked for a probe of Freeport-McMoRan's Indonesian military payments to determine if the firm violated the SEC's Rule 14a-9 "by making false or misleading statements in its 2004 and 2005proxy statements."

The requests reflect the fallout of a New York Times report last month that Freeport-McMoRan made payments of nearly US$20 million to military and police officials posted around the company's massive Grasberg gold mine in remote Papua province from 1998 to 2004.

Those allegations were first disclosed in Global Witness's "Paying for Protection" report in July 2005.

Freeport-McMoRan has said it gave "financial support" to Indonesian security officials in Papua for items including infrastructure and logistics, according to a letter by the company's chief executive, Richard Adkerson, posted Jan. ll onthe company Web site.

Minister of Defense Juwono Sudarsono said Wednesday he has ordered an investigation of Freeport-McMoRan's military payments on Papua to determine if the firm broke the law. (*)