Nov. 5 (Bloomberg) -- Indonesia’s most senior detective resigned after being implicated in an alleged plot against the country’s anti-corruption agency that has set back the government’s pledge to stamp out graft.

Commissioner General Susno Duadji quit today, national police spokesman Nanan Soekarna said on MetroTV, without giving a reason. Duadji’s name came up in a taped conversation involving businessman Anggodo Widjojo in which he appeared to be scheming against the Corruption Eradication Commission, or KPK.

The arrest last week of two KPK officials sparked rallies and an Internet campaign on Facebook by Indonesians demanding President Susilo Bambang Yudhoyono protect the graft-busting agency from corruption within the police force and legal system. Yudhoyono began his second term on Oct. 20 vowing to target the bribery and extortion that deter foreign investment.

“This is a make-or-break moment,” said Umar Juoro, head of the Jakarta-based Center for Information and Development Studies. “Growth is burdened by a perception of legal uncertainty. If this case goes on and on, investors will think legal certainty isn’t getting any better, it’s getting worse.”

Yudhoyono needs foreign investment to meet his aim of economic growth rivaling that seen in China or India. Gross domestic product in Indonesia expanded 4 percent in the three months ended June 30, against 7.9 percent for China and 6.1 percent in India. Investor optimism over Yudhoyono’s second term helped the Jakarta Composite Index more than double this year, making it Asia’s best performing benchmark.

Less Corrupt

Indonesia ranked 126th in Berlin-based Transparency International’s corruption-perception index for 2008, up from 143 a year earlier. The police force was the public institution most prone to receiving bribes, a 2008 survey by the non- government watchdog showed.

Police chief Bambang Hendarso Danuri reports to the president. Duadji has denied any wrongdoing.

Police named Chandra Hamzah and Bibit Rianto, two deputy chairmen of the anti-graft agency, as suspects in September after receiving information from KPK chief Antasari Azhar that there were irregularities in how the agency imposed travel bans. Azhar is on trial for the murder of the husband of his 23-year- old lover and former caddy.

Police last month arrested Hamzah and Rianto for abusing their powers when issuing travel bans against corruption subjects, including Anggodo’s brother who is a suspect in a graft scandal involving the forestry ministry. Both officials have denied any wrongdoing, and were released yesterday.

Anti-graft groups have accused the police of using their investigation of the KPK to protect high-ranking officials in Yudhoyono’s government. The KPK has convicted governors, politicians and policemen since it was formed in late 2003.

Facebook, Rallies

More than 800,000 people in Indonesia joined the protest on networking site Facebook and street protests against the police investigation took place in several cities.

“Yudhoyono was elected because of his past achievements in curbing corruption, which was mostly done by the KPK,” said Juoro, who is a commissioner at PT Bank Internasional Indonesia Tbk. “If he can sort things out and save the KPK, there will be more support for Yudhoyono.”

Yudhoyono said today that in his first 100 days he would root out the “judiciary mafia,” responsible for bribery of police and judges, extortion and intimidation to secure favorable court judgments.

“This mafia can be found in the police, in the Attorney General’s office, in the courts, in the departments and in the KPK,” Yudhoyono said.

Independent Probe

Earlier, he said officials mentioned in the tapes, which were played publicly two days ago, should be suspended pending an independent inquiry he set up Nov. 2. He didn’t cite Duadji by name.

Anggodo, who has complained about the KPK wiretap, has confirmed the recordings. He denied he was trying to frame the anti-graft officers.

Anggodo is being questioned by police over the wiretap. In a meeting at the office of the team set up for Yudhoyono’s inquiry, the timber tycoon asked for protection. “I’m afraid of the KPK,” he said. “I’m ready to be questioned. I’ll sleep here if I may.”

Members of the inquiry team will be present whenever Anggodo is being questioned by police over the recordings, said team leader Adnan Buyung Nasution. “I don’t want to hear stories you go on a plane and flee,” Nasution told the businessman.

The tapes also mentioned deputy attorney general Abdul Hakim Ritonga. Attorney General Hendarman Supandji told reporters today Ritonga also intends to resign if “he has become a burden to the institution.” Ritonga denied any wrongdoing.

Anggodo, in a conversation with someone thought to be his brother’s employee, was heard saying he would try to help his brother with the KPK investigations. “I will help by going to Susno and Ritonga,” he purportedly said. In a later chat with the same person, Anggodo supposedly said: “Just tell people that I have talked to Susno and I’m doing what he instructed. I’ll talk to Ritonga again tomorrow.”

To contact the reporter on this story: Achmad Sukarsono in Jakarta at asukarsono@bloomberg.net

Last Updated: November 5, 2009 05:23 EST