I

n December 2010, Nathaniel Rothschild, a scion of the international banking family, lashed out at critics for being overly cynical toward the Bakries at an event in Jakarta.

“If you know them, or you get to actually talk to people who have done business with them, in my experience, the view of the Bakries is universally good.”

His admiration of the family, one of Indonesia’s most politically wired, was conveyed a few days after a deal was made with the Bakries to form Bumi Plc, whose asset, PT Bumi Resources, is the world’s biggest exporter of thermal coal.

Less than two years into the venture, that goodwill seems to have evaporated as Rothschild ranted and raved about a string of financial irregularities at PT Bumi, culminating in his decision to resign from the Bumi board and vowing to fight “from outside the tent”.

“As you know, the board announced last month that it had learned of ‘allegations concerning, among other matters, potential financial and other irregularities’, and commissioned an urgent investigation. Given the scale of the alleged irregularities, as well as other facts not yet in the public domain, it would be a disgrace to proceed with, or even to entertain, the proposal made by the Bakries last Wednesday,” wrote Rothschild, 41, in his resignation letter to Bumi chairman Samin Tan — a close friend of the Bakries.

Following an intense feud with Rothschild that began last year, the Bakrie Group proposed withdrawing from Bumi by revoking their indirect stake in Bumi Plc and retaking control over their crown-jewel company, PT Bumi. They also proposed purchasing Bumi’s majority stake in PT Berau Coal Energy.

Should the board agree with the proposal, Bumi will be left merely as a cash shell.

Rothschild, in his letter, also criticized Samin’s support for the Bakrie Group’s proposal.

Citing reports and sources, he claimed that the Bakries would reimburse Samin for his investment in Bumi “at a price of £10.91 per share, while other investors [will] see an estimated return of just £4.30 a share. This is a clear breach of the spirit and, I believe, the letter of the takeover code,” he said.

In response to the allegations, Samin said the issue was a separate, bilateral matter between Borneo (Samin’s company), which controls a 23.8 percent stake in Bumi, and the Bakries. “As far as I am concerned, it is outside Bumi,” said Samin.

“It is, however, important to note that I have made the declaration to the board of Bumi of my role as the requested mediator in the recent negotiations and Borneo’s ongoing discussions with the Bakries with respect to agreeing to the terms of the dissolution of the joint venture. I have also made it clear to the board that the potential commercial settlement between Borneo and Bakrie is one of the terms of the dissolution.”

Samin also said the board was still waiting for results of the Bakrie Group’s proposal review.

“The priority now is on the PT Bumi swap against the Bakries’ ownership in Bumi,” Samin said, adding that JP Morgan and Rothschild Bank have been appointed to review the proposal and provide their recommendation to the board.

In response to Rothschild’s resignation, Bakrie family spokesman Chris Fong said: “We support the board’s request for Rothschild to resign and we are glad that he followed such a request promptly by stepping down. We understand that this was the result of serious discussions with the senior independent directors over a letter sent to them during the weekend by Samin.

“We understood that Samin was looking to reduce the number of non-executive directors. If this is the case, then the process become slightly easier,” he said.

The feud between Rothschild and the Bakries, according to analysts, has revealed the complexity of venturing with emerging market entities.

To foreigners, such a dispute might indicate a high degree of political interference in Indonesia’s investments, given the fact that the family’s patriarch, Aburizal Bakrie, is the presidential candidate for the 2014 election for the Golkar Party — Indonesia’s second-largest party, founded by former dictator Soeharto.