SII Focus 19th June 2020

Mongolia and its strange path to IOC membership

Mongolia is a small country with a proud Olympic history. It is the most sparsely populated country in the world, and roughly half of its 3.3 million population live in its capital, Ulaanbaatar. Due to its location and elevation at over 4,000 feet above sea level, it is the coldest capital city in the world. Ulaanbaatar is literally a long way from anywhere else. The nearest major city, Beijing, is over 700 miles away.

For such a small nation, Mongolia boxes above its weight. It has attended every edition of the Olympic Games since 1964, bar its part in the boycott of the Moscow 1984 Olympics. It has won 26 Olympic medals, two of them Gold. 

Perhaps due to its remote location combined with rich mineral resources such as gold, corruption appears to be a problem in Mongolia. Transparency International gives the country a score of 35 out of 100 (a low score indicates corruption), and ranks it as 106 out of 198 (where 198 is the most corrupt country). Reporting on corruption also appears to be a problem, and it is alleged that  new laws are being used to target journalists who do so.

It is alleged that such corruption involves a former Prime Minister of the country, as well as a former President of the Mongolian Olympic Committee (MYOX). As such, it came as a surprise to many in Mongolia when the International Olympic Committee (IOC) proposed that the son of the former Prime Minister, and Acting MYOX President, should be appointed as an IOC Member.

Paradise Papers

Battushig Batbold, the Acting President of the MYOX, is the owner of Future Monson Holdings, a company listed in the Paradise Papers. The 13.4 million documents published as part of an investigative journalism project show how some – but importantly not all – offshore companies were utilised in tax avoidance schemes. As such, the mere existence of the company doesn’t imply any wrongdoing. 

Future Monson Holdings was incorporated in the British Virgin Islands (BVI) in January 2010, when Battushig Batbold was just 23. A year earlier, he had finished his Bachelor’s degree in Economics at the University of Chicago, his LinkedIn profile reveals. He worked as an analyst for Morgan Stanley in London from 2009-11 and in 2012, began an MBA at Harvard. As such, a cynic might question why the young professional is listed as the owner and only shareholder of Future Monson Holdings in the BVI.

Owning offshore companies appears to be a family trait. Sükhbaataryn Batbold, the former Prime Minister of Mongolia, is Battushig Batbold’s father. He is listed as the owner of Boroo Mongolia Mining Corporation Limited, registered in the Bahamas in 1997. Boroo Gold Mine is owned by Australia’s OZD Group, which entered into a partnership to develop the mine – which it now owns – in 1998. This was during Sükhbaataryn Batbold’s business career, before he entered politics in 2000. 

The reason for Sükhbaataryn Batbold’s establishment of the Bahamas company in connection to the mine is not immediately clear. It is understood that certain tax exemptions were agreed as part of the deal to sell the company, and it has been alleged that the Bahamas company was used to avoid US$100 million in tax.

Sükhbaataryn Batbold denies any such allegations. A statement released by Altai Holdings LLC in September 2016, following a Guardian report connecting Boroo Mongolia Mining Corporation Limited to him, denies any impropriety. It points out that he resigned from this and other corporate roles in 2000 before becoming Deputy Foreign Minister, and that Boroo Gold ‘paid taxes and fees to the Mongolian government’. 

The statement also reveals that Altai Holdings was involved in the deal. Sükhbaataryn Batbold founded Altai Holdings in 1992, which Battushig Batbold has chaired since 2016. Bat-Ochir Sukhbaatar, Battushig Batbold’s uncle, is also listed as a shareholder in two offshore companies based in the BVI. 

One of the reasons that the Batbolds’ offshore accounts are significant news in Mongolia is because it is illegal for people in public office to establish offshore entities. However, all of the Batbolds’ offshore entities were founded before this prohibition was introduced. As such, the Batbolds have always argued that there was nothing criminal in them opening offshore entities, as it was not illegal for them to do so when the companies were set up. In addition, they argue that the companies are no longer active.

‘The company was never operational and no longer exists’, replied Battushig Batbold via email, when questioned about the true purpose of Future Monson Holdings. A follow up question, asking why the company was incorporated in the BVI by him when it was never operational and never used, went unanswered. 

‘Regulating Private and Public Interests of those in Public Service and Preventing Conflicts of Interest’ is a 2012 legislation passed by Sükhbaataryn Batbold. However Article 10.1, which prohibits people in public office from establishing offshore entities, was added on 13 April 2017. This was after articles concerning the Panama Papers began to be published in 2016. As such, it would appear that none of the Battbolds’ offshore accounts breach Mongoloan law.

‘The choice of a BVI parent vehicle was the pre-condition of the foreign investors to invest in Mongolia’, read a statement provided to the International Consortium of Investigative Journalists (ICIJ), which led the Panama Papers project. ‘This was not, and is not, a breach of Mongolian law. It was legal then, as it is now, for public officials to invest and own shares with no restrictions. Mr Batbold’s business was created in the 1990s many years before entering any public office.’

This statement confirms that Boroo Mongolia Mining Corporation was set up as part of the agreement for overseas companies to operate the Boroo Gold Mine. It also doesn’t deny that the company was established by Sükhbaataryn Batbold. However, the function of Future Monson Holdings, the company established by Battushig Batbold, is still a mystery.

Allegations of malpractice sill surround the deal regarding the Boroo Gold Mine. It is alleged that the Babolds received 12 metric tonnes of Gold as part of the deal for overseas investors to operate the mine. There is, of course, no evidence that Future Monson Holdings is connected to this, as it was established over ten years later.

The alleged corruption was raised in Parliament during a 2015 debate about whether OZD Group subsidiary Centerra Gold should be allowed to own the mine in Gatsuurt, given the allegations surrounding the Boroo Mine. “Centerra Gold has no moral right to operate in Mongolia”, said Gantömöriin Uyanga, an MP. “When Boroo Gold left, the Mongolian government was left US$2 million in debt. But one person, Sükhbaataryn Batbold, became rich by receiving 12 tonnes of Gold.”

In 2019, a ton of gold was worth US$46.5 million. Twelve tonnes would be worth $558 million. Banking and hiding such wealth would present a serious conundrum.

Controlling sport

Battushig Batbold is not the first of his family to be involved with sport. As well as being former Prime Minister his father, Sükhbaataryn Batbold, was President of the Mongolian Wrestling Association for ten years until 2012. As such, he was a member of the Mongolian Olympic Committee (MYOX) which his son now leads, as Acting President. 

Battushig Batbold has had a meteoric rise through the world of sports governance. In 2015 when he was 25, he became President of the Mongolian Badminton Association and in May 2017, he was elected to the Badminton World Federation (BWF) Council. In April 2018, he was appointed as a member of the IOC’s Marketing Commission.

Battushig Batbold has been the Acting President of the MYOX since its President, Demchigjav Zagdsuren, announced his intention to retire in December 2018. This followed serious allegations against him about which the IOC were notified, as reported by The Sports Integrity Initiative in July 2017. In short, he was sentenced to three years imprisonment for selling off land owned by the MYOX, but later received a pardon.

A complaint was lodged with the IOC’s Ethics Committee (PDF below) following Demchigjav Zagdsuren’s announcement of his intention to step down. It is understood that he has still not officially tendered his resignation as MYOX President, 18 months later. He is still listed as MYOX President on the Association of National Olympic Committees’ (ANOC) internet site, and on the Olympic Council of Asia’s (OCA) internet site.

‘The IOC Chief Ethics and Compliance Officer, on behalf of the IOC Ethics Commission, received a letter about the NOC President, however could not find any new elements/allegations other than those already known and investigated in the past’, read an emailed statement from the IOC last year. ‘The IOC has been monitoring the situation of this NOC for many years and, after careful analysis of the allegations raised against the NOC President years ago and in view of the decisions taken by the competent Courts in Mongolia, had concluded that it had no reason to intervene. In the meantime, the NOC President was re-elected by the NOC General Assembly on 24 March 2017, on the basis of the NOC Statutes adopted by the NOC General Assembly on 16 September 2016 and duly approved by the IOC. Should you require any further information, we suggest that you contact the Mongolian NOC directly.’

Under the Olympic Charter, delegates appointed by national federations are supposed to make up the membership of a National Olympic Committee (NOC). ‘In other words, an individual cannot continue to represent a federation in the NOC General Assembly if he/she is no longer a member of the executive body of this federation’, reads a clarification from the IOC (PDF below). Whistleblowers allege that the Statutes of the MYOX have been deliberately manipulated to exclude the Presidents of Mongolian national sporting federations from voting at the MYOX General Assembly, so that Demchigjav Zagdsuren and Battushig Batbold cannot be ousted from controlling it.

In January 2019, a new complaint was filed by the Mongolian Biathlon Association (PDF below). It alleges that Article 14.3 of the MYOX Statutes mandates that only delegates at the 2017 MYOX General Assembly can be members of the MYOX. It alleges that as a result of this, all of Mongolia’s sporting federations lost their membership of the NOC to the 167 people present at the 2017 General Assembly – i.e. those in power at the time of Demchigjav Zagdsuren’s announcement that he would resign.

L-R: Enkhbatyn Badar-Uugan, Demchigjav Zagdsuren, and Battushig Batbold…

Today, Demchigjav Zagdsuren remains as President of the Mongolian Weightlifting Federation, which he has led since 2011. Weightlifting has recently had its own share of corruption issues. On the right is a picture of Demchigjav Zagdsuren and Battushig Batbold at the November 2018 Association of National Olympic Committee (ANOC) General Assembly in Tokyo, shortly before Demchigjav Zagdsuren announced his intention to resign. The third person pictured is Enkhbatyn Badar-Uugan, a retired boxer who is Secretary General of the MYOX. More on him later.

Of course, a photograph is not evidence of any wrongdoing. But whistleblowers allege that it highlights the connections between the two men. They argue that Battushig Batbold has not sought to change Article 14.3; and that he has done little to advance Demchigjav Zagdsuren’s official resignation. They also allege that Battushig Batbold was never put forward as a candidate to become Vice President of the MYOX, but that he suddenly appeared on the candidate list for the 2017 General Assembly, where he was appointed over five other candidates.

It would also appear that national federations are being manipulated in order to consolidate power at the MYOX. It was alleged that a similar tactic was employed by Dr. Hassan Moustafa, President of the International Handball Federation (IHF), to consolidate power at an international federation level.

How this alleged manipulation of national federations plays out in practice is illustrated by a situation involving Mongolia’s equestrian federation. A complaint has also been filed with the country’s anti-corruption commission (IAAC) about the establishment of a new equestrian federation. Z.Ariunbold, President of the country’s equestrian federation established in 1993, alleges that Battushig Batbold, Enkhbatyn Badar-Uugan, and D.Dashzeveg conspired to create the Mongolia Federation for Traditional and Selective Equestrian Sports, which it told the international equestrian federation (FEI) and the IOC had replaced his federation.

Enkhbatyn Badar-Uugan is the Secretary General of the MYOX, and is the third person featured in the above picture. At a widely reported1 press conference, Z.Ariunbold alleged that Enkhbatyn Badar-Uugan sent a letter to the IOC stating that the newly established federation would represent Mongolia in equestrian sport, and that D.Dashzeveng sent a similar letter to the FEI. 

The FEI’s database confirms that the new federation was registered as Mongolia’s official equestrian federation in 2020. ‘This Federation was affiliated with the FEI from 1998 to 2017’, it reads. ‘It was re-affiliated with the FEI in 2020’. 

However a statement from the new federation confirms that it is not the same federation that was affiliated with the FEI until 2017. ‘Since sending a team to the 2006 Asian Championships in Doha, Mongolian athletes have not competed in foreign or international competitions and the Mongolian Equestrian Federation, a non-governmental organisation registered with the IOC, has not paid membership fees’, it reads. ‘The development of Mongolia’s equestrian or Olympic equestrian sport has largely come to a halt due to its non-participation and expulsion from the Mongolian National Olympic Committee due to its long absence from reporting and paying taxes. Therefore, a group of young people came together to revive the Olympic equestrian sport […] However, Olympic equestrian sport is almost forgotten in Mongolia. Secondly, it needs public support to be revived and thirdly, it is a sport that requires lots of money, so we must have well known, political, business and sports figures related to equestrian sports. Therefore T.Davaadorj, J.Dashdorj, D.Dash – the first master of equestrian sports, the first professional equestrian coach of Mongolia – and D.Tsogtbaatar, the member of the State Great Hural, the Minister of Foreign Affairs, a hurdler, a wrestler, Associations, local branches of the Mongolian Equestrian Federation, and young people interested in the development of Olympic equestrian sports have joined forces to establish the “Mongolia Federation for Traditional and Selective Equestrian Sports”.

Article 28 of the Olympic Charter specifies that a NOC can only recognise one governing body for each sport governed by an international federation. As outlined in the Mongolian Biathlon Association letter, Article 14.3 specifies that the 167 people present at the 2017 General Assembly will remain as NOC members for four years – i.e. until 2021. The situation with the equestrian federation suggests that moves are in play in order to create new national federations that are loyal to the old MYOX regime.

Back to the Future

In summary, it is alleged that Battushig Batbold established an offshore entity in 2010 when he was 23. This was over ten years after his father’s company – which he now heads – was involved in the controversial sale of a gold mine to overseas investors that involved allegations of embezzlement. He argues that the company was never operational – in that case, what was it established for?

In addition, it would appear that he has done nothing to speed up the resignation of a former MYOX President who was sentenced for embezzling funds destined for Olympic development projects. He has also not changed a controversial aspect of the MYOX Statutes that appear to keep the national federation heads from 2017 in control of the MYOX. It would also appear that he is being investigated for manipulating national federations in order to maintain the status quo after this provision comes to an end.

As such, he appears to present an odd choice for an IOC Member. But then Tamás Aján, former President of the International Weightlifting Federation (IWF), sat at the IOC’s top table and even spoke out against the type of corruption he was later found to be a part of. Is history about to repeat itself yet again?

Footnotes

1. https://livetv.mn/p/12419; https://eguur.mn/34819/; http://www.arslan.mn/politics/news/608636.shtml

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