MANADO, Indonesia, Nov 10 (Reuters) - Prosecutors asked on Friday for a three-year jail sentence for the president director of an Indonesian unit of U.S.-based Newmont Mining Corp., on trial over pollution charges in a controversial case.

Environmentalists see it as a test of whether Indonesia is serious about tackling pollution, while some business groups say the charges are unjustified and the action will scare off foreign investors.

Chief prosecutor Purwanta told the Manado district court in North Sulawesi province that Newmont Minahasa Raya (NMR) had polluted the environment and its president director, American Richard Ness, did nothing to stop it.

The prosecutor also demanded the company be fined 1 billion rupiah ($110,000 dollars) and Ness pay 500 million rupiah or serve an additional six months in prison.

Ness told reporters after the hearing: "The recommendation is absolutely a complete mockery of your court system."

"It seems like whoever wrote those charges never sat at this court... They just don't understand the evidence," he said.

Newmont's lawyer Luhut Pangaribuan said in a statement issued by the company that the prosecution had failed to prove any of its allegations.

Under Indonesian law, a prosecution sentencing demand serves as a strong recommendation for the court. But judges have the right to ignore the advice when considering their verdict.

The maximum sentence for Ness allowed by law would be 10 years.

Prosecutors accuse NMR of dumping toxic substances into a bay near its now defunct gold mine, making villagers sick.

A team led by Indonesia's Environment Ministry said in 2004 that arsenic and mercury content in tailings dumped by Newmont in Buyat Bay had contaminated sediment and entered the food chain.

However, other tests failed to find abnormal levels of pollutants, and the company says its practices were safe and authorised by the government.

Newmont opened the North Sulawesi gold mine in 1996 and closed the site after the last ore was processed in August 2004.

The company also operates Asia's second-largest copper mine, Batu Hijau, on eastern Sumbawa island, which produced 718 million pounds of copper and 719,000 ounces of gold last year.

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