Last week, reports that General Director of state-owned Erdenet Mining Corporation Kh.Badamsuren had used company funds to pay his daughter B.Buyanjargal’s tuition fees at the University of Toronto in Canada was made public. The transaction was made on July 18, 2019.
According to shilendans.gov.mn, a web portal of public expenditure report, the amount of tuition fee paid to the University of Toronto in Canada is 102,385,101.24 MNT, roughly 35,900 USD.
While many considered this a clear example of abuse of power, some also raised the question whether if such benefit for the director was covered under his contract.
In this article, I would like to share what I found to believe that it was theft from the state budget.
First of all, the Mongolian Law on State and Local Property clearly defines that budget/money of a state-owned enterprise is a state property and anyone who has the power to spend such budget is obligated to act in limited scope, including the director.
According to articles 5.1.2 and 6.1.2, assets resulting from production or service of state-owned enterprises are considered to be state property.
Article 5. State property
1. The following items except that indicated in paragraph 2, Article 4 where the state may own, use, dispose of assets considered as state property:
2) Property owned by state-owned enterprises;
Article 6. Purchase of stock for the State property
1. Purchasing assets for the
state property shall be made in following form:
2) Assets resulting from production, service;
Accordingly, this law also regulates what could be offered to people like Kh.Badamsuren, a director of a state-owned company.
As some people believe, it very well may be true that offering such advantages or benefits to the director could be allowed under a contract to bring good management to state-owned enterprises. However, it does not look like this was the case.
Kh.Badamsuren has been working as the general director of Erdenet since April 3, 2017, according to opendata.burtgel.gov.mn – an official web page by state registration authority. There are benefits to be offered to the director but in limited scope.
Under Article 19.1.8, the contract for directors for self-financing (state-owned) enterprise shall reflect wages and salary remuneration regulated by this law.
Accordingly, Article 19.1.12 specifies that “other conditions except unlawful” shall be reflected in the contract. However, it is the law’s principle that state authorities and official are prohibited from doing anything that is not specified in the law. In other words, unless it’s specifically allowed by law that the director’s family may enjoy benefits from his employee, it is unlawful even if the contract allows it.
The benefits which a state-owned company director shall or may enjoy is specified in Article 20 of the law. In particular, articles 20.4.1 and 20.4.2 limits the benefits a director of state-owned companies are entitled to.
Article 20. Assets right and obligation of the director
4. The following incentives to be given to the director can be stated in the contract:
1) To give a particular percentage from the profit gained by the enterprise in a particular period;
2) To give a particular cash remuneration due to the fulfillment of their contract duties.
None of these covers benefit to the family. In other words, in case the conditions for him to receive a particular percentage from the profit or cash remuneration are fulfilled, it must be transferred to their own account with clear transaction description matching with the above-mentioned legally regulated incentive.
Yet, the transaction description in question read, “Tuition fee for Buyanjargal Badamsuren, 2019 – 2020, se.ROSI account: BADAM1003423547”. And then, after it became public knowledge, whoever is in charge changed the transaction description and removed Kh.Badamsuren’s daughter’s name from the shilendans web page.
The tuition transaction report on shilendans.mn on November 1, 2020.
The tuition transaction report on shilendans.mn made public by twitter user and former Deputy Minister of Transportation B.Tsogtgerel.
It’s so typical of higher state officials to try to hide their blunder and not take responsibility rather than an immediate apology.
There are reasonable legal grounds to open a criminal case against Kh.Badamsuren over this unlawful use of state funds. This action falls under abuse of power or office that are criminalized by articles 22.1, 22.8 and 22.9 of the Criminal Code of Mongolia. These are crimes applicable to public officials whose private interest and official duty is regulated under the Law of Mongolia on Anti-Corruption and the Law of Mongolia on the Regulation of Public and Private Interests and Prevention of Conflict of Interest in Public Service. Specifically, articles 22.1, 22.8 and 22.9 are applicable to public officials who have abused their power, gave advantage to others or used/spent state budget or non-budgetary assets inappropriately.
Article 4.1.3 of Anti-Corruption Law categorizes Kh.Badamsuren’s position as a public official. “Managers and administrative officials of state or locally owned legal entities or legal entities with state or local equity; shall be considered as a public official.”
Definition of the subjects of crimes under articles 22.1, 22.8, and 22.9 refers to article 4.1 of the Law of Mongolia on the Regulation of Public and Private Interests and Prevention of Conflict of Interest in Public Service.
There is absolutely reasonable legal grounds to open a criminal case and investigate the issue further unless there are some important information yet unknown to the public. The public is questioning why it’s taking this long for the relevant authorities, such as Independent Authority Against Corruption, to take necessary measures on this case. If we are to believe that Mongolia is a country with a rule of law, rather than a rule of men, the people deserve to know why a follow-up action was not taken immediately upon the release of such obvious corruption allegation.
