The Court of Justice of Mongolia has found that SouthGobi Sands (SGS) and three of its former employees are guilty of tax evasion offences, and has given them jail sentences. SGS is the Mongolian operating subsidiary of SouthGobi Resources.
SouthGobi Resources announced on January 7 that the company had been informed that the re-investigation by the State Investigation Agency into alleged violations of Mongolian taxation law against three former employees of SGS, and against SGS as ‘civil defendant’ had been completed and that the case had been transferred back to the Second District Criminal Court of Justice for trial.
The trial commenced on January 28 and on January 30 the panel of appointed judges from the Second District Criminal Court of Justice found the three former employees guilty of tax evasion and gave sentences ranging from five years and six months to five years and 10 months of imprisonment in the correctional facilities of strict regimen in Mongolia.
Although SGS was not a party to the criminal proceedings and was not allowed to call witnesses in its own defence, the Court declared it to be financially liable as a ‘civil defendant’ for a penalty of MNT35.3 billion (approximately US$18.1 million). The company is awaiting written reasons for the Court’s judgment. The company has been advised that the penalty would only be payable after a final appeal.
Notwithstanding the intention to file appeals by SGS and its three former employees, SouthGobi Resources understands that under Mongolian law the former employees will not be granted bail after the Court’s sentence and have been remanded into custody.
Company president and CEO Enkh-Amgalan Sengee said: “We are extremely disappointed by the Court’s decision. The conclusions reached by the experts as highlighted in their report presented to the Court are erroneous and there is a complete lack of evidence to support this harsh verdict. We fully support our former employees and will lodge an immediate appeal against the Court’s decision.”