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Indonesian Family Forged Arkansas Links More Than a Decade Ago

By Susan Schmidt and Michael Weisskopf
Washington Post Staff Writers
Sunday, October 20, 1996; Page A27

The billionaire Riady family of Indonesia got its first toehold in American industry through Bill Clinton's Arkansas more than a decade ago, forging links into the state's insular business and legal circles that still serve them today.

It was the strangest of beginnings in America, one that is still spinning off odd and intriguing relationships. Some in the cast of characters have been bit players before in controversies that have engulfed the Clintons ever since they left Little Rock four years ago.

The Riadys were already owners of a vast Asian conglomerate when they first started doing business in Arkansas in 1983. They got help from, of all places, the U.S. government, which provided $2 million to the Riady's company that would in turn be lent to minority businesses.

After that not-so-humble start more than a decade ago, the Riady family's Lippo Group in Jakarta is engaged in dealings with Arkansas industrial giants such as Wal-Mart and Tyson Foods, and has multiple lines into the Clinton administration, not the least of which is James Riady's personal relationship to the president. A closer look into Riady's past, gleaned from interviews, bank records, government documents and other sources shows how far the tentacles of this Indonesian family reached and provides a window into how his long relationship with Clinton took hold.

The Riadys were introduced to Arkansas through Little Rock billionaire Jackson T. Stephens, whose investment banking firm is the largest in the country outside New York. Stephens got to know Riady in 1977 when Lippo was weighing whether to buy Bert Lance's financial interest in the National Bank of Georgia. Lance at the time was budget director to President Jimmy Carter, a Stephens official said, demonstrating an interest even then by the Indonesians in political connections as well as financial. The company was then looking for a U.S. bank to help finance its export deals.

Although the Georgia sale fell through, Stephens officials struck up a relationship with family patriarch Mochtar Riady and invited his son James to Little Rock to learn about international banking. Thus began Lippo's improbable immersion into the clubby, virtually all-white world of Arkansas politics and finance that few outsiders, much less foreign nationals, had learned to penetrate.

James Riady assimilated into Little Rock society, buying a comfortable home in an area called Pleasant Valley and joining a country club where he could socialize with others in Little Rock's corporate gentry. Fluent in English and gregarious, he and his wife, Ailyn, hosted frequent dinner parties. And like most of the state's wealthiest business owners, they got to know Arkansas' young governor and his wife, whose Rose law firm did legal work for the state's corporate elite, including, now, the Riadys.

Their first Arkansas venture was Mochtar Riady's creation of Lippo Finance & Investment Inc., a lending company financed in part by the Small Business Administration and formed to make loans to small, minority-owned businesses.

As a foreign national, Mochtar Riady was unable to serve as chairman to a company whose very existence was owed to the U.S. government's SBA program. So Riady hired Carter's recently departed SBA administrator, Vernon Weaver, for the job instead. Weaver listed then-Governor Bill Clinton as a character reference in his application to the SBA, according to government sources who have examined the company records. Weaver is now Clinton's U.S. representative to the European Union.

The company made loans to Asian businesses located in Little Rock, Los Angeles and New York. In 1984, Lippo and Stephens joined forces to buy a 30 percent stake in Worthen Bank Corp., Arkansas' largest financial institution with ambitions to develop international business. Worthen took over the SBA company, but surrendered its SBA license in 1987.

Republican sources said committees in the House and Senate have asked the SBA to immediately turn over all Lippo's company records, including details about the government-backed loans it financed.

In the course of its Arkansas dealings with Worthen, the Riadys ended up joint owners of the First National Bank in Mena, a remote mountain hamlet known for nothing if not international intrigue. An airstrip at Mena is at the center of long-standing but unproven allegations that it was used for running guns to the Contras in Nicaragua.

One of Worthen's stockholders during this period was lawyer Joseph Giroir, who was then managing partner at the Rose Law Firm with Hillary Clinton, Webster L. Hubbell and Vincent Foster.

Giroir left Rose in the late 1980s, but has maintained ties to the Riadys. Just a day after James Riady visited Clinton in the White House in April 1993, Giroir set up a company intended to create partnership ventures with Lippo. The following year, he was able to capitalize on the U.S. decision to renew China's most-favored-nation trading status.

Since then, Giroir has publicly discussed his efforts to broker ventures between Lippo and Tyson Foods, which has been trying to increase its chicken exports to the Far East. Tyson and Wal-Mart, which already has a store in a Lippo-owned complex in Indonesia, have pressed for and won Clinton administration backing for a controversial new airport near their headquarters in northern Arkansas that they hope could become a cargo gateway to Asia.

With the help of White House adviser Thomas F. "Mack" McLarty, Tyson and Wal-Mart last year got the Federal Aviation Administration to provide $21 million in initial funding for the project whose price may ultimately run into the hundreds of millions.

Giroir is also involved in a cable television venture with Lippo. In January 1994, he and Betty Tucker, wife of then Arkansas Governor Jim Guy Tucker, traveled to Jakarta with Giroir to study the possibility investing in a cable franchise with Lippo. The Tuckers formerly owned a cable television franchise that for years turned handsome profits but that later came to haunt them. Jim Tucker, who resigned his office this summer after a conviction in a Whitewater-related fraud case, faces a second trial arising from his cable dealings.

Several players in that drama turn up in the new controversy surrounding Lippo. Tucker's former lawyer, John Haley, a co-defendant in the cable case, is divorced from Maria Haley, a Clinton appointee to the Export-Import Bank. Haley's longtime law partner, Mark Grobmyer, is a golfing buddy of President Clinton's who attended an Oval Office meeting with Riady and passed out business cards presenting himself as "White House liaison" to Riady executives in Jakarta.

But perhaps the most interesting player is Hubbell, the one-time associate attorney general now in jail for defrauding the Rose Law Firm and its clients. He has refused to tell Congress why Lippo paid him a large but undetermined amount of money after he left the Justice Department. He flatly rejected the contention, posed bluntly by Whitewater Republicans, that Lippo was in effect paying him to keep quiet in the Whitewater investigation as a favor to Clinton.

© Copyright 1996 The Washington Post

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