MAC/20: Mines and Communities

IV. Vested Interests

Published by MAC on 2001-05-01

IV. Vested Interests

(a) Freeport and the Indonesian and U.S. Governments

In last year alone, Freeport made a profit of US$ 1.9 billion, which represents 47 percent of Papua's Gross Domestic Product. Of that total, roughly 7 percent or $130 million was paid in taxes to the Indonesian government, making Freeport Indonesia's biggest tax contributor. PT Freeport Indonesia, the Freeport subsidiary in which the Indonesian government holds approximately a 10 percent stake, owns a 20 percent share of the mine, while the U.S.-based Freeport McMoRan owns 80 percent. Presumably, the U.S. government also profits from taxes paid by the U.S. mining giant.

The two major political parties in the U.S. also benefit from corporate campaign contributions by Freeport. Indeed, Freeport reportedly has sought to increase its influence with U.S. government officials through its campaign contributions. An apparent link between OPIC's 1996 temporary reinstatement of Freeport's political risk insurance (through December 1996) and Freeport contributions to the Democratic National Committee is troubling and warrants further investigation.

According to a February 1997 article in the Austin Chronicle, sources close to OPIC stated that, after the agency reinstated Freeport's political risk insurance, then-OPIC President Ruth Harkin -- who is married to U.S. Senator Tom Harkin (a Democrat from Iowa) -- stated that she had persuaded Freeport's Chief Executive Officer James Robert ("Jim Bob") Moffett to contribute $100,000 to the Democratic National Committee (DNC).

As cited in the Austin Chronicle piece, according to U.S. Federal Election Commission documents, Freeport-McMoRan gave the DNC $40,000 on August 26, 1996. On September 6, 1996, the wives of Freeport's top executives, Chief Financial Officer Richard Adkerson, vice chairman Rene Latiolais, and Chief Investment Officer Charles Goodyear, wrote checks to the DNC totaling $35,000. Four days later, Mr. Moffett's wife Louise wrote a check to the DNC for $2,500, bringing the total amount of contributions by Freeport spouses to $77,500 within a two-week period.

Based on figures from U.S. Federal Election Commission records, Freeport placed second in total financial contributions from the U.S. mining industry to U.S. elections during the 1999-2000 election cycle. Freeport's contributions were $262,703, $53 less than the top contributor.[19]

Financially, there is much at stake for Freeport itself, as well as the Indonesian and U.S. governments.

(b) Military Interests

Since 1996, Freeport's operational costs for military and police forces (military barracks, offices, etc.) has amounted to US$34,839,137.37 or Rupiah 278,713,098,960. This amount is divided among five groups: TNI, Police, Security, Government Relations and the Community Liaison Office. Each of these groups has its own operational costs code. The military has vested interests in maintaining its presence in the Freeport mining area. Only 25 percent of the military's operational budget is covered by the Indonesian government, with the remaining 75 percent raised by the military itself using a number of legal and illegal methods, including trafficking in stolen goods and endangered species. Freeport represents a major source of income for the military in meeting its budget deficit. It is unclear how Freeport's auditor, the firm of Arthur Andersen, has accounted for the company's expenditures to the military and police.

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