He Turned a Bleeding Company Profitable, Then Faced 19 Years in Prison 🏛️

A Lifelong Company Man 👷

Milawarma, often referred to by his nickname Emil, had spent over two decades climbing the ranks of PT Bukit Asam, a government-owned, publicly listed coal mining operator. Starting in the 1990s, he rose from junior roles to eventually lead the company. His tenure as CEO marked a period of significant transformation for PTBA. Under his leadership, the company posted robust profits and diversified its operations.

The acquisition of PT SBS was one of the major milestones during his leadership.

PT SBS was a small, financially distressed mining contractor with less than 20 employees and only two active contracts. Between 2012 and 2014, SBS had accumulated negative equity and was unable to continue operations. Nevertheless, PTBA saw potential in the company as part of its long-term strategy 💡.

The idea of creating an internal mining services arm was already part of PTBA’s 2012 strategic roadmap. The company wanted to reduce its reliance on third-party contractors, gain control over production costs, and improve operational efficiency 🚜.

To support this transformation, PTBA hired Booz & Co, a well-known international consulting firm, which recommended establishing a special purpose vehicle for acquisitions and joint ventures. This triggered a series of key actions leading up to the transaction.

The Transaction and Its Strategic Rationale 📝

This is a detailed account of the steps leading to the final transaction.

• 📩 In mid-2013, PT SBS approached PTBA with a proposal to provide mining services at one of PTBA’s sites.

• 👀 Rather than signing a service contract, PTBA’s management identified a broader opportunity: acquiring equity in PT SBS.

• 💰 In October 2013, PT SBS formally offered to sell 90% of its shares for approximately USD 4 million.

• 📝 PTBA began evaluating the proposal through internal discussions and assessments.

• 🤝 External consultants were engaged to assist in the process:

  • 📈 Bahana Securities as financial advisor

  • 🏢 KJPP Ruky Safrudin & Rekan for asset valuation

  • ⚖️ NKN Legal as legal counsel

• 🧑‍💼 Internal board presentations were conducted to review the deal.

• ✅ By early 2015, the acquisition was finalized.

The final deal involved the acquisition of a 95 percent stake in PT SBS through PTBA’s investment arm, PT Bukit Multi Investama. The equity investment amounted to approximately IDR 48 billion, with an additional IDR 49 billion provided as loans to SBS to support its operations and capital needs 💵.

This investment was consistent with PTBA’s goal of having a vertically integrated mining value chain. By internalizing overburden removal and other mining support services, PTBA expected to reduce costs and improve its bargaining power.

Bahana Securities had concluded that acquiring SBS would be more efficient than starting a new subsidiary from scratch. In the assessment process, Bahana and the other advisers reviewed SBS’s operational potential, future contracts, and the ability to become financially solvent under new ownership.

PTBA’s Board of Commissioners gave conditional approval. The acquisition was signed on 28 January 2015 🗓️.

Prosecutors’ Allegations 🚨

Several years later, the acquisition would become the subject of a corruption investigation. Prosecutors alleged that PTBA had overpaid for PT SBS, resulting in a state loss of IDR 162 billion.

This figure was based on a valuation report by accounting firm Chaeroni & Rekan, which focused on the negative equity of PT SBS at the time of acquisition. Since PTBA is a state-owned enterprise, any financial harm it suffers can be classified as a state loss under Indonesia’s corruption laws ⚖️.

The prosecution argued that the negative equity meant SBS was essentially worthless at the time of purchase. They further asserted that the acquisition provided an unjust benefit to SBS’s previous owner, Tjahyono Imawan, who had sold his shares and received repayment of shareholder loans.

In response, the defense pointed out several flaws in this line of reasoning.

• 💰 PTBA’s total investment in SBS was IDR 97 billion, comprising equity and shareholder loans — not a direct cash payout to previous shareholders.

• 📉 Negative equity does not automatically mean a company has no value. SBS still had ongoing operations, equipment, and potential long-term contracts.

• 📜 PTBA was not legally obligated to cover SBS’s past liabilities, making the negative equity calculation irrelevant for valuation purposes.

Chaeroni’s audit was also questioned during the trial. The auditor himself did not testify due to his prior conviction in a corruption case, which undermined the credibility of the prosecution’s expert witness 🚫.

⚖️ What Did the Courts Conclude?

In 2023, the Palembang Corruption Court delivered its ruling. The court dismissed the prosecutor’s claim of a state loss, citing three main reasons:

1. The assets acquired and the resulting profits clearly existed. PTBA’s investment became shares and loans in SBS, which had since posted consistent profits and improved its equity position.

2. The valuation method used by the prosecution’s auditor was deemed flawed and inconsistent with public accounting standards 📉.

3. There was no evidence of unlawful enrichment or personal gain. Since no funds were misappropriated, and all investments were made transparently and used for business development, there was no crime under anti-corruption laws.

Milawarma and the other defendants were acquitted. His civil rights and professional reputation were formally restored.

📌 Key Takeaways for SOE Leaders and Advisors

This case underscores the risks that state-owned enterprise executives face, even when making decisions that are ultimately beneficial to the company. There are three key takeaways.

• First, acquiring distressed assets carries legal and political risks ⚠️. Even when there is clear strategic rationale and post-acquisition success, such deals can be retroactively questioned, especially if procedures are not perfectly followed.

• Second, post-transaction performance can influence legal outcomes 📊. In this case, the strong recovery of SBS played a decisive role in undermining the claim of a state loss. If the acquisition had failed, the legal interpretation might have been different.

• Third, procedural imperfections are often unavoidable in complex bureaucratic environments. Even with extensive external advice, and complete corporate approval, something will almost always fall short of the ideal. These gaps can be exploited in legal proceedings, regardless of business intent.

The story of Milawarma and SBS is a cautionary tale for leaders in the public sector 🧾. Strategic risk-taking, even when commercially sound, can result in criminal prosecution if the political and legal environment shifts. For now, the court has ruled in favor of reason and commercial logic. But the line between business failure and corruption remains perilously thin in many jurisdictions.

Source: 

• Decision of District Court of Palembang No 69/Pid.Sus-TPK/2023/PN.Plg