Standard Chartered Bank

Standard Chartered refers alleged corruption in Indonesian firm to authorities

PUBLISHED : Wednesday, 28 September, 2016, 12:45am
UPDATED : Wednesday, 28 September, 2016, 12:45am

Standard Chartered said on Tuesday that it has referred allegations of impropriety at an Indonesian power plant company that the bank’s private equity arm invested in to “the appropriate authorities”.

The Wall Street Journal earlier said that the bank faced an investigation by the US Department of Justice into whether it failed to stop alleged misconduct at MAXpower Group Pte Ltd, which builds and operates gas-fired power plants in Southeast Asia.

“Standard Chartered takes very seriously allegations of impropriety in any of our private equity investments. We proactively referred this matter to the appropriate authorities and have conducted our own review,” a spokesman for the bank said in an emailed statement.

Two sources familiar with the matter said that the “appropriate authorities” included the US Department of Justice.

The Indonesian company allegedly paid bribes to win contracts and US prosecutors are investigating whether StanChart failed to stop the misconduct, the Wall Street Journal said, citing sources and legal reports it has reviewed.

An internal audit at MAXpower found evidence of bribery and other misconduct, the Journal said, saying those findings were echoed in a report from a law firm hired by MAXpower.

In response MAXpower said the newspaper report gave a “one-sided and partial view of the operations and events at MAXpower and as such do not give a full, or true view.

“Since the restructuring of the company’s shareholding and management in mid-2015 the company has implemented robust remedial actions including enhanced internal controls.

We have engaged and continue to work with professional advisory firms to fully investigate issues and questions that have been raised. Accordingly, it would be inappropriate for the company to comment further at this stage.”

Standard Chartered’s private equity arm first invested in MAXpower in 2012 and last year invested an additional US$60 million to become the majority owner.

The bank has been reducing the size of its private equity business in recent years, axing jobs and selling investments as part of a wider restructuring of the bank.

Bloomberg reported earlier this month that Standard Chartered was considering spinning out its entire private equity business to its managers.

The allegations about MAXpower come as the bank awaits a decision from US authorities over whether it will remain under supervision for several more years under a deferred prosecution agreement relating to past lapses in its internal procedures aimed at preventing the handling of illegal payments.