When prosecutors charged Men Narong with breach of trust in Phnom Penh Municipal Court on March 20, he was hit by something far more substantial than what usually accompanies a misdemeanor charge: He was jailed and ordered to fork over $5 million to be released on bail.
Legal experts say the bail is unusually high, if not unprecedented, and the defense offered by Men Narong’s lawyer for the misdemeanor is a simple one.
“The arrest is a violation of the legal procedure. This is a business dispute,” attorney Uch Sophal said Wednesday by telephone.
That defense is too often heard in breach of trust cases, and legitimately so, some legal experts say.
People in the business community and legal experts have long criticized the 15-year-old breach of trust law as a weapon used to intimidate business partners when they disagree with the plaintiffs.
Rather than file in civil court as they should, plaintiffs often go to criminal court where pretrial detentions can encourage defendants to settle much faster than if they were free, they say.
The result of this misuse of the law, intended to cover crimes such as embezzlement, they say, is serious: It frightens away potential investors who want avoid the risk of jail.
“The problem is like this: in our country it is easy to misuse the court like this,” said Sok Sam Oeun, executive director of the Cambodian Defenders Project. He estimated that 90 percent of the breach of trust cases that his office handles are only contractual disputes.
People charged with breach of trust receive a simple choice, he said.
“If you don’t want to go to jail you will get the money,” Sok Sam Oeun said. “Because of the big court system and corruption the rich people can use the breach of trust this way.”
Often cases result from defaults on loans, a situation that doesn’t meet the requirement of criminal intent, he said.
Local attorney Koy Neam said corruption in the court system is a frequent culprit for misuse of the breach of trust law.
“A court judge can connive with the people who file criminal cases in order to put pressure on the borrower because the borrower fears detention,” Koy Neam said. “These cases can be stopped at the prosecutor’s desk if it has no criminal merit.”
But accusations of corruption can be hard to prove, so more oversight is necessary into pretrial detention, he said.
“The government should look into how to use the pretrial detention properly,” he said, adding that a portion of the long-awaited new criminal code, which is not yet finalized, includes a provision for penalizing those who file malicious cases.
The consequences of the breach of trust law go beyond individuals sitting in jail, according a 2008 report from the International Finance Corporation, the private sector arm of the World Bank.
The report estimated that Cambodia loses at least $5 million per year in investment solely due to fear of breach of trust. The report based that conclusion on a survey of potential investors.
“The cost represents the money that would have come to Cambodia if not for investors concern over being improperly charged with breach of trust,” the report said.
Some in the business community say they avoid the court system as much as they can because of its faults.
CPP Senator and commodities tycoon Mong Reththy said in 20 years of doing business in Cambodia he has never turned to the courts for relief and recommends that other business people avoid it as well.
“I just try to solve through negotiations, but I don’t go to the courts,” he said. “[Business people] don’t want to go to jail and the public to know their stories.”
Khaou Phallaboth, president of the Khaou Chuly Group, said breach of trust and other costly legal entanglements are a frequent concern for business people.
“It’s always very painful and costly to go through the court to settle those issues,” said Khaou Phallaboth, whose company is involved in construction, agriculture, and cement production. “The judicial system is still very much not fully mature.”
However Chiv Songhak, president of the Cambodian Bar Association, said he is working with the Ministry of Justice to make sure courts better differentiate between civil and criminal matters.
“Owing debt is not a breach of trust,” he said.
He added that the misuse of breach of trust is not always malicious.
Civil judges have less authority than criminal judges to do things like hold people in contempt, he said. Without that power, civil judges have more difficulty enforcing their decisions and consequently people who need a judgment quickly turn to criminal court.
Appeal Court Prosecutor Hanrot Raken on Friday declined to comment on whether breach of trust is used improperly in provincial and municipal courts.
Justice Ministry Deputy Cabinet Chief Bunyay Narin on Wednesday referred questions to judicial development Director-General Phov Samphy, who could not be reached for comment Wednesday, Thursday and Sunday, though on Friday he said he could not comment because he was at a conference.
In the case of Men Narong, his attorney said that the arrest and criminal charges came as a complete surprise to his client, who is the publisher of the government and business directory “Who’s Who in Cambodia.”
He found himself under arrest March 17 at the Phnom Penh International Airport where he was picking up a friend, attorney Uch Sophal said. By March 20 he was ordered by Phnom Penh Municipal Court Judge Chan Madina to pay $5 million to be freed.
The dispute results from Men Narong’s purchase of 427 hectares in Koh Kong for a British client, he said. The British man is upset about the profit Men Narong collected in the deal, Uch Sophal said.
The British man, whose name he could not recall, is demanding $12 million: $9 million to cover money he paid Men Narong, and $3 million in travel expenses, he said.
“This must be resolved as a civil case because it is a business dispute, regardless of how much money is involved,” he said.
Phnom Penh Municipal Court Deputy Prosecutor Plang Sophal, who asked that Uch Sophal be charged, could not be reached on Sunday.
Judge Chan Madina said by telephone Thursday that the case is a criminal matter, but declined to explain why.
“Just know that I am working on it as a criminal case as charged by the prosecutor,” she said.
