RICK NESS TESTIFIES IN NEWMONT CASE THIS WEEK

S E C R E T JAKARTA 010539

SIPDIS

INFO ASEAN PACIFIC ECONOMIC COOPERATION FORUM
DEPT OF COMMERCE WASHDC
DEPT OF ENERGY WASHINGTON DC

NOFORN
SIPDIS

DEPT FOR EAP/MTS, EB/ESC, AND CA/OCS/ACS/EAP
DEPT ALSO FOR OES/IET AND OES/ETC
DOE FOR TOM CUTLER/PI-32 AND JANE NAKANO/PI-42
COMMERCE FOR WILLIAM GOLIKE/USDOC 4430

E.O. 12958: DECL: 08/24/2026
TAGS: EMIN CASC SENV EINV PHUM ID
SUBJECT: RICK NESS TESTIFIES IN NEWMONT CASE THIS WEEK

REF: 05 JAKARTA 02757 (GOI MOVES RAISE NEWMONT

CONCERNS)

Classified By: Resources Officer Kurt van der Walde, reason 1.4 (b) and
(d)


1. (C) Summary. Newmont mining executive and Amcit Richard
Ness is scheduled to take the stand in his own defense this
week on August 25 in a Manado, North Sulawesi courthouse. He
faces fifteen years in prison if convicted on charges of
polluting Buyat Bay, the site of the now-closed Newmont
Minahasa Raya (NMR) gold mine in North Sulawesi. Over the
past year, Newmont has offered a vigorous defense, making
full use of copious amounts of hard scientific evidence.
They have convincingly rebutted each spurious contention made
by the prosecution. The lack of firm evidence of a crime and
the highly questionable manner in which the prosecution has
conducted itself make the potential consequences for Ness all
the more serious. Ness and the NMR defense team are under no
illusions, however, that having the facts and the law on
their side will lead to an acquittal. They continue to
believe the verdict will be decided in Jakarta based on
political calculations. The weakness of the case and the
strong political pressure GOI elements have reportedly
exerted on the judges raise troubling questions about the
respect for the rule of law and contract sanctity in
Indonesia. A verdict may be handed down in October.
Representatives from the Embassy or Consulate General
Surabaya have attended all but one of the approximately 40
trial sessions. End Summary.

NMR,s Defense: No Credible Evidence of Pollution
-------------- ---


2. (C) Newmont has been clear in its defense since the
allegations of environmental damage began to percolate in
2004 as the mine prepared to close. First, NMR argued that
they complied with the terms of their contract of work at all
times, at times exceeding what was required by the contract.
Second, they argued that they adhered to the highest
standards of environmental stewardship and met or exceeded
all requirements under their environmental permit. In plain
terms, Newmont argued that no reputable scientific evidence
existed to indicate that the environment and waters of Buyat
Bay are polluted. The prosecution has continued to point to
one deeply flawed water sampling by the Indonesian police as
evidence of pollution. After a year of trial testimony, the
prosecution has been unable to offer any credible scientific
evidence of environmental pollution in Buyat Bay. No other
scientific investigators have been able to reproduce results
consistent with those of the police water sample. All other
samples of water from the bay, including those by respected
international laboratories have concluded that the water in
and around Buyat Bay is cleaner than that off the coasts of
California, Japan, England, and Australia.


3. (C) Newmont,s lawyers and scientific experts decisively
rebutted a second important prosecution charge that NMR,s
operations damaged the coral reef in the bay. Color
underwater photographs, time and date stamped from the week
of June 5 and introduced into evidence during the hearing
that same week, showed a vibrant and thriving undersea
environment. A marine biology expert witness for the defense
testified that the coral reefs were robust in the bay. The
only damage he found was caused by the local villagers who
had made a practice of fishing with explosives. In contrast,
the prosecution offered no expert witness to support their
claims. Nor were they able to challenge the testimony of the
NMR expert witness.


4. (C) The prosecution made much of the fact in early
sessions that Newmont never received a permanent
environmental permit from the Environment Ministry for its
Sub-sea Tailings Placement (STP) method to dispose of mine
tailings. In testimony on June 14, Environment Ministry
staff, testifying for the prosecution, admitted that the
company had been granted a contract of work by the GOI that
specifically included plans for STP. They also admitted that
an inter-agency GOI committee had approved the company,s
environmental impact study, which also included the STP
program. They further testified that the entire program of
environmental permits had only been introduced in 2000 and
included a five year grace period for mines already in
operation. The Environment Ministry staff acknowledged that
the Newmont mine ceased operations in 2004.

Death of &Baby Andini8 Re-examined
--------------


5. (C) The NMR defense team also knocked back the
prosecution,s most inflammatory allegation: that the
pollution in the bay contributed to the death of an infant,
christened in the local and international press as &Baby
Andini.8 The infant,s death received sensational headlines
in Indonesia and was widely reported internationally by the
New York Times as having been caused by a &mystery
illness.8 NGO activists originally claimed that the baby
died from Minimata Disease, which is caused by severe mercury
poisoning. Scientific evidence soon showed that that mercury
levels in the bay were nowhere near those required to induce
the malady. The prosecution and NGO activists then alleged
that the pollution in the bay had caused the baby to suffer
from severe dermatitis, spawning massive infections, which
ultimately killed the baby.


6. (C) At the June 2 hearing, Dr. Sandra Rotty, head of the
local rural health clinic, testified that the infant did
suffer from a common form of dermatitis prevalent among ten
percent of the local population. She said the condition was
easily treatable with widely available medicine, which she
provided to the family at no cost. She said she also later
referred Andini and her parents to Dr. Winsy Warouw, head of
the dermatology at the local university medical school, when
the baby did not seem to be responding to the medication.
Dr. Winsy confirmed that Andini,s condition was curable with
common antibiotics. Winsy testified he had wanted the baby
admitted to the hospital at no cost to the parents. He said
Andini,s mother originally consented to admit the baby to
the hospital only to reverse herself after consulting with
her NGO benefactors. Rotty testified she made a home visit
to examine Andini a few days before her death and that the
dermatitis had spawned an upper respiratory infection. Rotty
again provided the appropriate medicine, again at no charge.
After the baby,s death, Rotty said she returned to Andini,s
home and found her original and most recent prescriptions
both unused. Rotty said Andini,s mother told her that she
withheld the medication on advice of her NGO benefactors.
Winsy testified that the baby,s original dermatitis was
caused by poor nutrition and hygiene, not toxic poisoning.

Friction Between Newmont,s Attorneys
--------------


7. (C) Perhaps the only discordant note for NMR has been the
occasional friction between its Indonesian lawyers and
expatriate legal counsel over the tone and tactics the
company should adopt in exposing GOI misconduct and
confronting powerful political actors publicly and in the
media. The company,s American and Australian lawyers have
chafed occasionally at what they perceive to be timidity on
the part of the Indonesian lawyers in their reluctance to
criticize GOI ministers and President Susilo Bambang
Yudhoyono (SBY). In particular, the expats became highly
exercised when the local lawyers chose to de-emphasize video
of then Energy and Mineral Resources Minister SBY,s visit to
the Buyat Bay mine site in 2000. The video shows SBY
complimenting NMR executives for their environmental
stewardship and community development practices, while also
commenting on the pristine nature of the bay. The defense
did show the video in court in an abbreviated form, but chose
not to release the video to print and television reporters
who would have given it wide national exposure. The
Indonesian lawyers argued that any victory in the court of
public opinion would have been far outweighed by such a
public loss of face for SBY.


8. (C) However, in general Newmont,s expatriate lawyers have
expressed a high degree of satisfaction with the quality of
the Jakarta-based local lawyers who lead the defense. They
take a decidedly dimmer view of the company,s Manado-based
lawyers.

The Prosecutorial Circus
--------------


9. (C) Throughout the one year trial, the prosecution has had
no discernable, coherent legal strategy. The chief
prosecutor has made a practice of staying away from the
hearing when the defense,s most embarrassing witnesses are
to testify. In the early part of the trial villagers from
Buyat Bay testified for the prosecution. Bizarrely, the
prosecutors evidently decided that it might be a good
strategy to seek to berate and intimidate their own
witnesses, who were already clearly uncomfortable and
nervous. The intimidation resulted in confused and
contradictory testimony by the villagers and in one case
tears.


10. (C) On March 31, the prosecution called Professor Muladi,
Justice Minister during the Suharto era and State Secretary
under President Habbibe, to testify for reasons they never
made quite clear. He swept into the courtroom almost an hour
late with a retinue that included Environment Minister
Witoelar and several prominent members of the Attorney
General,s staff, all of whom flew in with him from Jakarta.
Rather than speak to the facts of the case, Muladi embarked
on a long-winded disquisition on the nature of constitutional
law in Indonesia. At the end of his ninety minute lecture,
he announced that he had to catch a plane back to Jakarta and
would not be able to stay around to be questioned by the
defense. The chief judge was dismayed but still deferential
and inquired whether Muladi would be available to return the
following week. Muladi said he would try to return but could
make no promises, and he, in fact, did not return. Under
Indonesian law his testimony cannot be part of the final
record since the defense never had a chance to cross-examine
him.


11. (C) Former Environment Minister and current DPR member
Sonny Keraf was equally unresponsive during his testimony on
January 27. He faced intense questioning from the defense on
the technical data and policy actions surrounding the
decision to bring criminal charges against NMR. Keraf was
unresponsive on virtually every question, responding with
variations on the following: &I just did what my staff told
me to do. I didn,t concern myself with the scientific or
legal details. Ask my staff.8 Even the prosecutors stumped
their own witness. At one point the chief prosecutor asked
the former minister to detail through what means the
Environment Ministry informed NMR that they were to cease STP
in Buyat Bay. Keraf looked perplexed and said, &I don,t
know. Ask my assistant.8 After a pause he said, &We told
them in many ways, many ways.8


12. (C) NMR lawyers and executives were particularly pleased
on March 3 when NMR was able to confront its principal
accuser, Dr. Rignolda Djamaludin, a professor at Sam
Ratulangi University. Rignolda has been the leading NGO
activist in Indonesia against the Denver-based mining giant
since NMR began operations in Buyat Bay in 1994, according to
NMR executives. The prosecution called Rignolda as an expert
scientific witness. Although he is a marine biologist he
offered supposedly expert testimony on medicine, chemistry,
toxicology, oceanography, fisheries, and sociology. At one
point a clearly exasperated chief judge asked him, &So now
you,re an expert on coral reefs, too?8 Newmont lawyers
used skillful questioning to bring Rignolda,s claims to any
sort of scientific expertise into doubt. They asked him
during cross-examination to name and explain the two
principal methods of scientific investigation (inductive and
deductive reasoning). Rignolda paused for several moments
before replying, &Well, there,s aerial photography and
water sampling.8

Comment
--------------


13. (C) Throughout the ordeal, Rick Ness and other NMR
officials have been clear in their belief in their innocence
on legal and scientific grounds. They have taken little
solace in the strong case they have presented, however. Ness
has told us repeatedly that he believes the trial will be
decided based on political factors. Our early conversations
on this case with key presidential advisor Dino Djalal
(reftel) left no room for doubt that political calculations
would weigh heavily in the verdict. The GOI has always told
us that any outcome in the case had to prove politically
defensible. According to Ness, the prosecution,s decision
to defy the chief judge,s July 28 order to re-sample the
water of Buyat Bay reflects their confidence in the political
backing they enjoy from Jakarta. NMR local counsel told us
that none of them could ever recall a similar act of defiance
by a prosecutor in a criminal case. NMR did comply with the
judge,s order and their results were consistent with all the
others that showed the bay to be in pristine condition.


14. (C) Even if Ness were not facing 15 years in prison, the
nature of the proceedings and the weakness of the
prosecution's case raise troubling concerns for the sanctity
of contracts in Indonesia and the rule of law. Ness expects
a verdict in October, barring further delays, though they
have been frequent in this trial. Ness is well known in
Indonesia and a former Vice President of AmCham, and a guilty
verdict would very likely be a severe blow to the investment
climate in Indonesia and a setback to the GOI,s attempts to
lure foreign investment. Even an acquittal is not a foregone
winner for the GOI,s investment drive. The length and cost
of the trial (Newmont tell us that their defense is costing
them USD 12 million per month for the last 18 months) may
have a chilling effect on potential foreign investors for
years to come, regardless of the trial result.


15. (S/NF) On the margins of the trial, we have picked up
oblique references from NMR executives that they have
prepared contingency plans in the event of Ness,s final
conviction. In social settings after the hearings in Manado,
they have given hints that Newmont has engaged a private
security firm to smuggle Ness out of the country if he is
convicted after all appeals have been exhausted. Given the
lack of even the most basic evidence that any crime was
committed, and the clear political overtones in the decision
to bring the case to trial, Newmont executives give the
impression of feeling justified in spiriting Ness out of the
country so that he does not spend a day in jail.
PASCOE