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A Mongolian court has found three former executives of a foreign-owned mining company guilty of tax evasion and sentenced them to prison terms of more than five years each, ending a three-year case that spooked foreign investors.
The court in Ulan Bator on Friday delivered the guilty verdicts and prison terms to Justin Kapla, a US citizen, and Philippine nationals Hilarion Cajucom and Cristobal David.
Kapla and David were given sentences of five years and 10 months each, while Cajucom received five years and six months.
The three were all former executives of SouthGobi Sands, which is 100 per cent owned by Toronto- and Hong Kong-listed SouthGobi Resources.
There was no immediate word on any appeal plans.
The verdict is likely to send a chilling message to foreign investors in Mongolia, where the economy has been badly hit by a collapse in foreign investment and in commodity prices.
Mongolia, for decades a tightly controlled Soviet satellite, shook off communism a quarter-century ago but has struggled to cash in on its rich natural bounty amid political disputes and resource nationalism.
Mongolian authorities raided the offices of SouthGobi Resources' mining unit, SouthGobi Sands, in May 2012. SouthGobi mines the Ovoot Tolgoi coal deposit in the Gobi desert, 40km from the Chinese border.
The raid followed SouthGobi Resources' acceptance of an offer from Aluminum Corp of China Ltd to buy a majority stake.
The deal sparked controversy over the prospect of a Chinese state-owned company taking control of the mine. Mongolia adopted new laws that year to curb foreign investment, in effect blocking the deal.
Mongolia has historically been hesitant to hand strategic assets to China after centuries of feuding between the neighbours.
SouthGobi Sands was fined 35.3 billion tugriks (HK$141 million) "to compensate for loss from the state", the prosecutors' statement said.
SouthGobi Resources has denied allegations of wrongdoing.
Kapla, a former president and executive director of SouthGobi Sands, Cajucom and David had been forbidden from leaving Mongolia for more than two years amid suspicions the company had failed to pay sufficient taxes.
In November, the Office of the United Nations High Commissioner for Human Rights registered a claim against the Mongolian state on Kapla's behalf.
The US embassy in Ulan Bator swiftly issued a statement after the trial, saying it was marred by communication issues.
"Several embassy officials attended the trial, including Ambassador Piper Campbell, and noted that there were interpretation problems during the trial," the statement said.
"Because of these problems, the defendants stated during the trial that they could not understand the interpretation, nor could they express themselves clearly," it said.
The statement said the length of the case and the exit ban had led to "enormous hardship" for Kapla and that the embassy "will continue to monitor the situation closely".
Other foreigners have been detained in similar circumstances. A former lawyer for SouthGobi, Sarah Armstrong, was held in late 2012 as a witness in the case.
After weeks of interrogation and considerable media attention, she was allowed to leave.
Additional reporting by Reuters and Bloomberg


Mongolian court convicts American, Filipino mining firm executives over tax evasion

Justin Kapla (inset) was one of the SouthGobi executives found guilty of tax crimes in Mongolia. In this file photo, coal is loaded onto SouthGobi Energy trucks. Photo: Bloomberg, AFP

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Court in Ulan Bator sentences American, two Filipinos to more than five years, as US embassy criticises handling of case involving mining firm


A Mongolian court has found three former executives of a foreign-owned mining company guilty of tax evasion and sentenced them to prison terms of more than five years each, ending a three-year case that spooked foreign investors.


Mongolian court convicts American, Filipino mining firm executives over tax evasion

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Court in Ulan Bator sentences American, two Filipinos to more than five years, as US embassy criticises handling of case involving mining firm

Court in Ulan Bator sentences American, two Filipinos to more than five years, as US embassy criticises handling of case involving mining firm