NEWMONT POLLUTION CASE: NOT GUILTY ON ALL COUNTS

UNCLAS SECTION 01 OF 02 JAKARTA 001148

SIPDIS

DEPT FOR EAP/MTS, EAP/PD AND EB/ESC/IEC
DEPT PASS OPIC, EXIM, TDA
DOE FOR CUTLER/PI-32 AND GILLESPIE/PI-32
COMMERCE FOR 4430/BERLINGUETTE

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EMIN CASC EINV PREL KPAO ID
SUBJECT: NEWMONT POLLUTION CASE: NOT GUILTY ON ALL COUNTS


1. (SBU) Summary: American citizen Richard Ness and U.S. mining
firm Newmont were declared not guilty on all counts of environmental
pollution by a five judge panel in Manado, North Sulawesi on April

24. In dismissing all counts, the chief judge Ridwan Damanik said
both Ness and Newmont had "the right to reclaim their good name."
The panel said it found no evidence of pollution at the Buyat Bay
mine site and that Newmont had complied with all GOI laws and
regulations. The chief judge also decisively rejected the
prosecution's basic premise in bringing criminal charges. A crowd
of over 400 people, split between pro and anti-Newmont protestors,
demonstrated noisily outside the courthouse. The GOI has the right
to file a notice of appeal of the verdict within seven days.
Prosecutors gave no public indication, however, of their proposed
next steps. The Embassy issued a press release saying "this
positive resolution will undoubtedly have a beneficial effect on
Indonesian and foreign investor confidence." The American Chamber
of Commerce issued a statement saying it was "encouraged" by the
acquittal. End summary.


No Evidence of Pollution, Permits in Order
--------------


2. (SBU) American citizen Richard Ness and U.S. mining firm Newmont
were declared not guilty on all counts of environmental pollution by
a five judge panel in Manado, North Sulawesi on April 24. The
verdict is the culmination of more than two years of criminal
investigations and legal proceedings surrounding Newmont's
Indonesian gold mining subsidiary Newmont Minahasa Raya (NMR).
Richard Ness, an American citizen and President of NMR, had been
facing three years in jail and a $55,000 fine if found guilty. NMR
had been facing a $110,000 fine. As with virtually every previous
session of the court, Embassy observers attended to monitor the case
and show high level USG interest. The Economic Counselor and the
Information Officer were present for the rendering of the verdict.


3. (U) The Chief Judge began the hearing with a long discussion of
the subsidiary principle in Indonesian mining and environmental law,
which says that criminal law is used only as a last result after
regulatory action, civil litigation, and international arbitration
have failed. The judge immediately rejected the argument that
environmental damage to Buyat Bay was especially grave, which was
the initial standard for proceeding directly to criminal case. He
cited ample evidence to the contrary from several independent labs.
NMR legal experts told us this was an important indicator of how the
verdict would unfold. Judge Damanik did say the GOI would have been
well within its rights to proceed directly to a criminal prosecution
if the dispute was generating public unrest or creating fear among
the alleged victims. He immediately swatted away that possibility
by saying that the fear generated in this case resulted from a
concerted public relations campaign rather than any real public
health emergency. The chief judge then concluded that the GOI had
not met the basic threshold for voiding subsidiarity.


4. (U) The panel said it agreed that Newmont Minahasa Raya (NMR) was
not warned, much less sanctioned over the initial pollution charges.
He also said it was clear that NMR made good faith efforts to
comply with the GOI law and met or exceeded GOI regulatory and legal
requirements. He added that the body of evidence presented during
the trial indicated Buyat Bay was not polluted. The judge made
mention of NMR's $30 million goodwill agreement signed last year as
evidence of Newmont's good faith efforts to resolve the dispute,
further undercutting the GOI's decision to resort to criminal
sanctions. Finally he made reference to NMR's Contract of Work
(COW) with the GOI that specifically calls for arbitration or
mediation in the case of alleged environmental damage.


5. (U) The judges found that the tailings from the mine did not
constitute the legal definition of hazardous waste as the GOI had
charged. The judges also found that NMR had done a proper,
thorough, and comprehensive environmental impact assessment, which
was approved by the GOI. Regarding the GOI's assertion that NMR
lacked the proper permits for mining, the judges found that the GOI
had been deficient in taking administrative action to approve the
final permits and never informed NMR to cease mining in the absence
of a definitive GOI permit determination. The judges concluded,
therefore, that approval from then Environment Minister Sony Keraf
was a permit.

Prosecution May Appeal Within 7 Days
--------------

JAKARTA 00001148 002 OF 002




6. (U) In summation, the chief judge said that taking into account
no evidence of pollution existed, that NMR had a valid permit to
mine, and that NMR had made a commitment under the goodwill
agreement to monitor the health of the bay and villagers for ten
years, they absolved NMR of all charges. The chief judge concluded
by saying both Ness and NMR have the right to have their good name
restored. We have seen no reaction yet from the GOI on whether they
will appeal the decision. Under Indonesian law they have seven days
to file a notice of intent to appeal and a further seven days to
file the paperwork. If the GOI does appeal, the trial will revert
to Jakarta and be taken up immediately by the Supreme Court.


7. (SBU) Following the hearing and using previously approved
Department text, the embassy released the following statement: "We
are pleased with today's decision in Manado to acquit Mr. Richard
Ness and Newmont Mining Corporation's Indonesian affiliate, PT.
Newmont Minahasa Raya, on charges of causing environmental damage to
Buyat Bay. This positive resolution will undoubtedly have a
beneficial effect on Indonesian and foreign investor confidence."


8. (SBU) The Jakarta-based American Chamber of Commerce also
released the following statement: "AmCham Indonesia is encouraged by
the acquittal of PT Newmont Minahasa Raya and Mr. Richard Ness, its
President Director, of all charges in the Buyat Bay Pollution case.
We are sure that Mr. Ness and his family are relieved that this
ordeal is finally over. The Indonesian judges in Manado should be
respected for the integrity of their decision, which was based on
the factual evidence presented. This case has received widespread
attention from the press in the United States and around the world
and has had a negative impact on foreign investment in Indonesia.
We hope that this decision will reassure the investment community of
the Government's commitment to legal certainty and the rule of law
of Indonesia."


9. (SBU) Comment: We are the first attest to the great personal
trauma visited on Rick Ness and his family, as well as the financial
damage to Newmont, by this lengthy and controversial case. That
said, in our view it turned out as well as could be expected. We
are heartened by the performance of Chief Judge Damanik, who was
impressive in his strong focus on the facts of the case, despite
hundreds of chanting demonstrators today. Given the frequent
expressions of concern about the judiciary here, we are glad to see
in this instance that a panel of jurists listened intently and made
their decisions based on the facts in accordance with the rule of
law. We have been most impressed with Chief Judge Damanik's
integrity and impartiality throughout the 21 months of the trial.
Depending on how the GOI moves forward, the ruling should resolve
the largest single cloud hanging over Indonesia's investment
climate, particularly over the mining sector. End comment

HEFFERN