American Justin Kapla along with Filipinos Hilarion Cajucom Jr. and Cristobal David have been wrongfully detained in Mongolia for 815 days. Although Mongolia’s courts stated on multiple occasions that the prosecution had insufficient evidence in the legal case against them in Mongolia, they have been in the medieval circumstances of Mongolia’s jails for the past 13 days now.
In the tax evasion case against the three former employees of SouthGobi Resources, Mongolia's judicial system put them and SouthGobi’s tax liability in infinite jeopardy. When the court ruled the prosecutor had insufficient evidence (or when the prosecutor failed to appear for a court hearing), the court gave the prosecutor a set amount of time - and then extensions as needed - to build up better evidence.
Two weeks ago on a Thursday the prosecutor came to court with newly revised evidence to present and requested probation sentences for the three men. The court hearing extended to Friday. On Friday, the prosecutor entered court and changed the sentencing request to prison. All three men were given sentences between 5 ½ and 6 years and taken to jail at the end of the court hearing that Friday, January 30.
At the same time their former employer SouthGobi was fined U.S. $18 million dollars for taxes ostensibly evaded and now due. This number is a significant reduction from when the case started and SouthGobi was accused of a U.S. $170 million liability (i.e. the final tax liability assessed is 11% of that originally claimed). However, $18 million is still far in excess of SouthGobi cash on hand. If the ruling stands, an astute local analyst believes, “SouthGobi’s toast.” It is unclear what will happen to SouthGobi’s assets if the company is not able to have the penalty lowered on appeal.
SouthGobi has been a controversial company in Mongolia for a long time stemming from having a large coal mine very close to the Chinese border; and ownership tie-ins to the also controversial majority foreign owned world class Oyu Tolgoi copper-gold mine.
During the run up to 2012’s parliamentary elections in Mongolia, a deal to sell SouthGobi’s majority stake to Chinese interests was quashed by a hasty Foreign Investment Law created to block the transaction and gain popular votes. As the law was done in haste, it was poorly drafted and has stifled foreign investment since despite subsequent legal changes to try and re-welcome foreign investment.
The three men accused were respectively President (Mr. Kapla) and Financial Manager for SouthGobi during the time of the alleged tax evasion (Mr. David was Financial Manager from 2007 to April 2011; Mr. Cajucom from that date for about one year). The CEO during the same time period in question had left the country and company prior to charges being brought. Reports suggest no former executives currently outside Mongolia were named in the case.
Under Mongolia’s visa exit ban policy, Mr. Kapla discovered he was banned from leaving the country when he attempted travel on November 19, 2012. Messrs. Cajucom and David have been in Mongolia longer without leave as Mr. Kapla did visit his family in Minnesota in the summer of 2012. While detained in Mongolia with infinite jeopardy the men have missed family holidays, birthdays, funerals (including Mr. David’s father) and visiting ill failing relatives.
Prior to their relocation to jail 13 days ago, the three men were able to live and work within Mongolia’s borders. They merely had to walk around with a cloud of accusation hanging over their heads while awaiting the next turn in their case.
The three men faced a legal system wherein having a better case than the prosecution only meant the prosecution would be given more time to build a better case. Mr. Kapla began to understand this possibility and officially brought their case to the United Nations Office of the High Commissioner for Human Rights (OHCHR) on November 17, 2014. The government of Mongolia has 6 months from that date to respond to the United Nations.
Information gathered from local business, investment, legal and journalist professionals over the past 13 days indicates:
• All three men are limited to 40 minutes outside their jail cells per week (two 20 minute opportunities to get fresh air).
• Their current jail only allows the men to lay in bed in their jail cells between 10pm and 6am.
• During the rest of the day, rules require them to either be sitting or standing.
• They have a right to shower once every 12 days but had not yet received that right as per the last visitor who leaked any details.
• Mr. Cajucom and Mr. David are sharing a cell.
• Mr. Cajucom is in poor health.
• It is believed all three men will at a future date be transferred from their current lodging to a maximum security prison.
• While there have been no reports of denied visits as yet, various sources have stated it is common practice in Mongolia to deny visitations to people in prison (including family members and legal professionals).
• There are voices in Mongolia’s government that have spoken out against the sentences and have called for legal reforms in light of this case but reform is typically a slow process that is measured in years – not months – in Mongolia.
• Sentiment suggests the men will wait for an appeal hearing for between 6 months and 1 year.
• Some experts believe upon appeal, the men may have their sentences reduced to probation and time served and be allowed to leave the country. (The same experts are uncertain if the men would be allowed to work in or visit Mongolia again which is potentially problematic for Mr. Kapla’s family as his wife and children are Mongolian.)
• Some experts have held out a hope that President Elbegdorj will grant the three men a pardon prior to appeal.
• Others believe the men will serve their full sentences.
Many people around the world are wrongfully detained and jailed. Two things make this case different than many of those. First, ultimately the fall out from this case is bad for Mongolia’s economy including the sovereignty of its economy. Second, while people in Mongolia are proud that they have had democratic elections since 1990, the aspects of their legal system on display show the country continues to behave somewhere between an oligarchy and the one-party state it was from 1921 to 1990. Future reports will delve further into the details of the relationship between this case, Mongolia's failing economy, how and why Mongolia's government has failed its people and why Mongolia's citizens have voted for people who fail them.
Also in this article series
Day 829: Three SouthGobi Executives Pardoned From Prison Sentences By Mongolia's President
Day 828: Mongolia’s Endless Legal Flexibility
Day 826: Mongolia Resolves To Resolve Problems With Rio Tinto By Year End
Day 825: Pausing To Reflect On Mongolia’s Economic Retreat
Day 824: Requesting IMF Aid Because GDP Grew "Only 7.8%" Reveals Mongolia's Expectations
Day 823: Porsche Fanfare, A Promise, Wrongful Imprisonments, Mongolia Celebrates New Year
Day 822: Alleged Tax Evasion That Sent Three To Prison Suggest More Guilty In Mongolia
Day 821: America Needs To Step Up Protection Of Its Own In Mongolia's Prison
Day 820: Mongolia Thanks China That Currency Descends Slowly Instead Of Plummeting
Day 819: Mongolia's Mining Squabbles Squander Sovereignty And Gift China Power
Day 818: Mongolia's Lacking Due Process Versus Families On Social Media
Day 817: Mongolia Has Chance To Shine Or Face Legal Global Image Failure
Day 816: Mongolia Prefers Economic Suicide Over Ending SouthGobi Vendetta
