Indonesian lawyers fail to agree Suharto settlement

JAKARTA (Reuters) - Indonesia's state prosecutors said on Tuesday they had failed to reach an out-of-court settlement in a $1.5 billion lawsuit against former President Suharto, adding they would pursue the case in court.

The suit filed by the attorney-general's office is part of efforts to recover state funds allegedly misused by Suharto's charitable foundations and is considered an important test of Indonesia's clampdown on corruption.

In May, President Susilo Bambang Yudhoyono chose a new attorney-general and justice minister in a cabinet reshuffle in an attempt to revive his anti-corruption campaign. Some critics say the anti-graft drive has failed to take on the country's most powerful figures.

Suharto, 86, who resigned under pressure following civil unrest in 1998 after 32 years in power, was previously charged with graft but escaped prosecution when he was deemed too ill to stand trial.

"We agreed to disagree. We will continue the case in court," state prosecutor Dachmer Munthe told reporters on Tuesday following mediation talks at the attorney general's office. But he said an out-of-court settlement was still not ruled out.

One of Suharto's lawyers, Juan Felix Tampubolon, said the meeting failed to reach an agreement because the prosecutors' proposal was no different from the content of the suit.

"We are optimistic of winning the court case because we know for sure that no rule was violated by the foundation," Tampubolon said.

Prosecutors are seeking a total of $440 million of state funds in the suit, and a further 10 trillion rupiah ($1.07 billion) in damages for alleged misuse of funds in one of Suharto's foundations, court documents showed.

The foundation collected donations from businessmen and other sources to provide scholarships. Many organisations regarded such donations as more or less compulsory during Suharto's rule.

Suharto's lawyers have dismissed the civil suit as a political stunt. The former president and members of his family have denied any wrongdoin