Faithful readers know that last December 8 GAB reported on a New York case alleging that while in office former Mongolian Prime Minister Sukhbaatar Batbold conspired with a South Korean couple to embezzle hundreds of millions of dollars from his government.  Brought by three Mongolian government agencies, the complaint seeks to prevent the sale of two New York condominiums the agencies say are registered in the couple’s name but beneficially owned by Batbold until a case in Mongolia is resolved. In that case, the three agencies plus the Metropolitan Prosecutor’s Office ask that Batbold, the Korean couple, and others compensate the government for the damages it suffered from their corrupt acts.

The December 8 post and a second one December 23 drew a considerable number of comments. About half said the charges were fabricated and half said it was about time Batbold was held accountable.  But none addressed the facts alleged. It was only on January 5 GAB received any substantive comment on the charges — in the form of a letter from Batbold advisor Batbayar Sh. He there denied Batbold had done anything wrong, asserted the Mongolian case was politically motivated, and asked that the posts be taken down. Although Batbayar claimed the two posts were riddled with errors, as GAB explained in its January 6 post reprinting his letter, he identified no inaccuracies in either the December 8 or December 23 post.

Batbayar has now sent a second letter. It again denies Batbold has done anything wrong and, unlike the earlier letter, adds some facts to back up the denial. The text of this second letter along with GAB’s comments on the points it raises follows.

Dear Mr. Matthew C. Stephenson and Mr. Messick,

In your recent blog entry, 6 Jan, you refer to the letter I sent you and suggest it doesn’t point to inaccuracies in your previous blogs. Regrettably, you have chosen to ignore the facts I presented. Therefore, I will go through the most egregious – there are so many that even this rather long letter cannot cover them all. I hope that you stand for fair and accurate reporting, and based on objective facts it will become clear that there is a well-orchestrated and politically motivated campaign to smear Mr. Batbold’s good name and reputation.

“Kleptocracy Strikes Mongolia? The Batbold Case”

In the very first sentence you state: “the Mongolian government has charged former Prime Minister Batbold Sukhbaatar”. This is simply not true. The Mongolian government is not a party to this case, clear and simple. It has not filed a claim or charged Mr. Batbold with anything.

In a letter to Justice Ostrager in New York, the lawyer of Mr. Batbold states: “We have communicated with the leaders of both mining companies and their supervisory agency (which are named as Plaintiffs – added by me) and all three entities have confirmed that they neither authorized nor requested the filing of this action. The cabinet secretariat of Mongolia – the agency that represents the government – has similarly confirmed that these claims were filed without government request.” During the proceedings, serious doubts on authority were expressed by the justice.

Regrettably, neither of those facts – that the Mongolian government has not authorized filing of this action and the serious doubts expressed on this matter during the court proceedings – were reflected in your first blog. Furthermore, you continue to refer to the Mongolian government in your subsequent blogs – each time fundamentally misrepresenting the reality.

GAB comment: New York State Supreme Court case 656507/2020 is captioned “Agency for Policy Coordination on State Property, Erdenet Mining Corporation, Erdenes Oyu Tolgoi LLC, Plaintiffs versus Batbold Sukhbaatar [and others].”  There has been no motion filed to change the listed plaintiffs since the case was filed. The 199 documents in the case are available here. 

In this same sentence, you write that Mr. Batbold was “charged”. Mr. Batbold was not “charged” as you say with any crime, now or before.

GAB Comment. Paragraph one of the complaint in the New York case states: “Plaintiffs bring this action in connection with their efforts to recover losses suffered as a result of illegal and fraudulent acts in connection with two of Mongolia’s most prized natural resources, the Erdenet copper mine and the Oyu Tolgoi copper-gold mine, committed by Batbold Sukhbaatar [and other named individuals].”

You made a reference to the New York court documents, thus, clearly you have read them. However, you chose to ignore the most fundamental facts already in those documents: “the Mongolian government” has not filed proceedings against Mr. Batbold and it is wrong for you to insist it has. Mr. Batbold wasn’t charged with anything and it is not true to state the opposite.

You write that “while the favors are unspecified, it is not too much of a reach to think they involved sweetening Ivanhoe/Rio Tinto’s take from Oyu Tolgoi.” Again, this is not true on so many levels.

The supposed “favors” are detailed in the other side’s affidavit – that Ivanhoe/Rio Tinto received a “reduced interest rate on its repayment of the Mongolian government’s share of the initial capital costs of the project, as well as a substantial reduction in its Mongolian tax obligations”. These allegations are completely false and baseless.

When Mr. Batbold became Prime Minister, after the original agreements were already signed, the interest the Mongolian side paid to investors (i.e. Ivanhoe/Rio Tinto) on the amount it borrowed from those same investors to fund its equity investment was reduced – benefiting only Mongolia, not investors. In fact, the interest rate was reduced from 9.9%+LIBOR (effectively above 12% at that time) to 6.5%+US Treasury rate (effectively around 6.6%), which decreased the interest rate burden on the Mongolian side by almost a half!

GAB Comment: A lowering of the interest rate when the agreement was renegotiated is itself not evidence no wrongdoing was involved.  It could reflect nothing more than that the going interest rates had fallen significantly between the signing of the original agreement and its renegotiation. What is needed to assay the claim about the lowering of the interest rate is information on what the going interest rate was at the time of the initial agreement and at its renegotiation. 

As for the tax reduction, in Mongolia the cabinet has no power to reduce taxes, it is solely in the power of the Parliament. Contrary to the allegations, Mr. Batbold’s government proposed to the Parliament to effectively increase the taxes on the investors by terminating the double taxation agreements with the Netherlands and Luxembourg, a law which the Parliament enacted. The taxes effectively increased on the project to 20% from 0-10%.

GAB Comment: It is not the stated tax rate that matters in resource concession agreements but the effective rate of taxation, the amount actually paid as percentage of earnings. Only a thorough audit can determine that. GAB would urge Mongolian parliamentarians to insist that the operations of all concessionaires dating to the time of Batbold’s service as Prime Minister be carefully examined by independent auditors. This is the only way to ensure Mongolia is receiving the agreed share of revenues.

Thus, it is simply not true that alleged “favors” were “given” to the investors. In fact, by reducing the interest rate burden on Mongolia and making a proposal to increase the taxes, Mongolia’s benefits from this project increased by several hundreds of millions of dollars, reducing the benefits to the investors by the same magnitude. Thus, as there were no alleged “favors”, there were no imaginary “kickbacks”. If anyone reads the document submitted even by the opposite side to the New York court, these facts are there for all to see. To deny that these actions were favorable for Mongolia and not favorable for Rio Tinto/Ivanhoe Mines represents either total misunderstanding of the facts or very sinister intention to create a fake, false alt-reality.

Further you state, “The New York case together with similar ones in Hong Kong and London seeks a freeze on assets Batbold holds”. Fact: Mr. Batbold doesn’t even own or have any interest in the properties in question, which was stated officially by him and by his representatives in all jurisdictions mentioned. This was already stated in New York by the time of publishing the blog, but you chose to ignore it.

You write, “with assistance from lawyers, accountants, and other enablers, Batbold allegedly established some 100 shell companies in at least ten countries to conceal his actions and hide his wealth.” Fact: the plaintiffs identify only assets owned by third parties other than Mr. Batbold, and make unfounded claims on the basis of nothing other than circumstantial innuendo. This fact was already stated in the New York case by the time you published the blog and again you chose to ignore this fact.

GAB Comment.  The evidence that Batbold is the true, “beneficial” owner of the New York condominiums and properties in other jurisdictions is recounted in the affidavit of Jules Kroll. That affidavit shows an ordinary middle-class South Korean husband and wife at the center of a complex network of offshore holding companies controlling tens of millions of dollars in properties in New York, London, and Hong Kong. These same two individuals earlier purchased tens of millions of dollars of ore from Mongolian state-owned companies while Batbold was Prime Minister.  Documents filed in the New York case show the couple is very close to Batbold and to his family.  To rebut the obvious inference that the couple were involved in helping Batbold steal money from the people of Mongolia and are now helping him hide it, both Batbold and the couple need to explain their relationship.

Your blog states, “some put it down to an intra-party power struggle and the desire of newer members to cleanse the party of its corruption-shaded past. Others say it reflects citizens’ growing demand that those who have stolen the nation’s wealth be held accountable.” The attacks against Mr. Batbold may well be politically motivated following the naming of him by his party as a potential Presidential candidate for this year’s election but they are not an intra-party matter. He has a well-earned reputation and the respect of party colleagues, and no smear campaign from opponents on the other side of the political divide will change this. It is deeply insulting to suggest that a person who dedicated his life to serving his nation and created companies that employ thousands would steal from his country.

GAB Comment. GAB reads the English language reporting on Mongolia as suggesting not all party  members are as enthused about Batbold’s candidacy as Batbayar writes.

Your blog states, “Batbold and the others named in the New York case have yet to respond to the substance of the charges. It is hard to imagine what the defense could be given the astonishing amount of detail presented in the complaint and supporting documents.” Fact: the response was already available for the public to read on the New York Court website at the time you published your blog. It delved very deeply into the substance of the case which is a politically-motivated campaign against Mr. Batbold aimed at engaging foreign courts in attacking him.

GAB Comment.  Until Batbold provides a full and complete explanation of his relationship to the South Korean couple – why his children have been photographed using the couple’s apartments, the couple’s attendance at Batbold family weddings, and the like, — questions about his actions will remain unanswered.

Finally, regarding this blog posted on 8 December 2020, you fail to mention the most important and simplest of facts: the court heard both sides on all the matters relevant and made an initial decision not to continue the freezing order against the properties owned by third parties and shortly after that the opposite side decided to discontinue the case against Mr. Batbold.

GAB Comment. The documents in the case file show the freeze order was dissolved when the nominal owners of the condominiums agreed not to transfer the property during the pendency of the case.  This is a typical way such cases are addressed in the United States and says nothing about the merits of the charges.

On, to the next blog: “Kleptocracy Strikes Mongolia? The Batbold Case. Part II”

Here you say, “GAB would welcome comments or even a guest post addressing the substance of the claims against former Prime Minister Batbold.” Fact: not true. I’ve sent comments and they have been ignored.

GAB Comment.  GAB has received two letters from Batbayar, one dated January 5 and reprinted in full in GAB’s January 6 post, and this one reprinted in full here.

“Indeed, the only fact about the case that has appeared since the Offshore Alert article, at least in the English language press, is a story in today’s Times…” Not true. You again fail to mention that the case against Mr. Batbold was discontinued after the judge made an initial finding not to freeze the properties that are owned by a third party. These are the most important developments that you chose to ignore. 

On, your most recent blog commenting on my response: “Kleptocracy Strikes Mongolia? A Batbold Advisor Replies”

Even in your latest blog you fail to mention the fact that the court case regarding Mr. Batbold in New York was discontinued by the other side voluntarily on their own will after the judge in New York made an initial ruling not to freeze assets belonging to third parties after hearing all relevant facts, not only jurisdiction and immunity, as you allege, but also on merit.

GAB Comment.  See the penultimate response above.

Here, you also say that “Batbold’s children now live in or use properties registered to the couple”. This is not true.

GAB Comment.  Document numbered 28 in the New York case, marked as Exhibit G,  provides on pages 74 to 100 numerous examples of Batbold’s children or other of his relatives living in apartments owned by corporations connected to the couple. For example, a Lexis-Nexis search shows Batbold’s son Battushig living in apartment 411 at 360 Newbury Street in Boston.  At the time, the apartment was owned by the Massachusetts corporation Kosmatus which Kim Hak Seon, the South Korean wife, had incorporated. Her husband Chooyoung Cheong was its sole officer.  Until examples such as this are explained, the suspicion of wrongdoing will not be dispelled.

For the sake of brevity, I am not able to mention all the inaccuracies and false allegations made or repeated in your blog even in this rather long letter, so I am only going through just some major ones. Hopefully, you will review the facts that I highlighted for the sake of objective reporting.

I am sure that you would agree that using the words “alleged” or just repeating the false allegation after someone doesn’t mean that one is freed from the very basic obligation to simply fact-check his/her writing. Repeating falsehoods makes the same damage as creating those falsehoods. Unfortunately, we can see how creating “alternative facts”, “alt-reality” or simply giving a breathing space to false narratives can damage the reality we all live in, can take a life away from truth and one day become even bigger than the reality itself.

In the case of Mr. Batbold this is exactly what the opposite side is after. The claims are politically-motivated and designed to denigrate Mr. Batbold’s well-deserved reputation internationally and in Mongolia as a progressive and effective leader. The facts speak for themselves:

– During Mr. Batbold’s premiership, Mongolia’s economy grew at 17.3%, one of the highest rates globally and the highest recorded in the history of Mongolia, according to the World Bank;

– Poverty was reduced by double digits and family incomes doubled;

– Mr. Batbold initiated the Mongolia-Cambridge Education Initiative to reform state school education in accordance with Cambridge Assessment International Education standards;

– He spearheaded cooperation between the Mongolian and the London stock exchanges;

– He initiated cooperation with the Canadian Public Service Commission to reform Mongolia’s public service in accordance with the best international standards;

– He initiated “European Standards reform” and called in his inaugural speech for reform along the best international standards in governance and law, including fighting corruption;

– It was during his term that Mongolia became certified as fully transparent under the Extractive Industry Transparency Initiative, initiated by the British Government

-He hosted and held negotiations with world leaders such as leaders of the two neighboring countries, Russia and China, the Vice President (currently President-elect) Joe Biden, Chancellor Merkel, State Secretary Clinton among many others.

As a private person, Mr. Batbold is one of the most successful entrepreneurs in Mongolia. He started his business when the country just started on its journey towards a market economy and democracy. By the time he entered politics, the company was already one of Mongolia’s largest business conglomerates, with interests in retail, foreign trade, cashmere processing, telecommunications, tourism and hospitality.

GAB Comment. Batbold’s many accomplishments suggest he is indeed a talented, capable individual. The tragedy in so many countries is low pay, weak enforcement, an absence of a civic culture, and an uncertain future post-government lead such individuals to commit acts of corruption.

There are serious questions to be asked of those behind this smear campaign, and on this you’re noticeably silent. Why are the documents submitted to the civil court in Mongolia by the opposite side are designated as “top secret” and why Mr. Batbold’s lawyers have no access to them even after 2 months? If lawyers have no access to court documents, what is the intention of those proceedings and how fair the proceedings will be? Why was Mr. Batbold’s name removed from New York proceedings only after the media attack in Mongolia started already? Hopefully, GAB readers will be able to draw their own conclusions.

GAB Comment. GAB would welcome an explanation as to why the case file is sealed as well as additional information on the case or the facts alleged in the pleadings.

Yours sincerely,

Batbayar Sh.