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     paddy
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Username: paddy
Post Number: 422
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| | Friday, August 01, 2008 - 03:39 am: |  
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I decided to put this information here so as to not upset Sway. It is a series of postings by the author of the " SKEPTICAL CPA" and deal with the on-going legal battle over the future of Asarco and perhaps the demise of Grupo Mexico.
I will post them by date .
These are a collection of postings from the website "Skeptical CPA" . The story behind the posts has all the makings for a "Resource 'soap' Opera" involving the DOJ, Asarco, and Grupo Mexico [ also known by some as the mexican mafia ].
http://www.usw.org/media_center/news_articles?id=0021
Now we have an entrance by Sterlite so it is truly has the makings for a global "soap" opera. Seriously, in my opinion, this is a very serious case and should Grupo win it will be a travesty of justice . Grupo treats their workers like objects of little value. The Cananea Mine has been on strike since last July over health and safety conditions which have been verified. Grupo was also responsible for killing 65 coal miners . Government did nothing . Grupo closed the mine and did not try to recover the bodies of the Miners. They said it was too dangerous-perhaps that should have read TOO EXPENSIVE. Hell they were just Miners.
POST # 1
Sunday, June 1, 2008
Bankruptcy Finagling
"Two court cases in Texas are set to begin Wednesday that will help determine the future of Mexican conglomerate Grupo Mexico SA [GMSA] and that of its former U.S. mining unit Asarco, a company the Mexican firm bought amid controversy a decade ago and lately placed in bankruptcy protection. ... Any bid will have to be rich enough to satisfy more than $1 billion in outstanding cleanup claims by federal and state governments against Asarco for environmental damage associated with a century of mining across the Western U.S.. ... Crucially, [GMSA] says it will submit an offer of its own. Also Wednesday, pretrial motions are being heard in civil proceedings due to begin in a U.S. district court in Brownsville, where Asarco's current mangement is suing [GMSA], alleging that the Mexican company stripped Asarco of its key assets and forced the company into bankruptcy to avoid paying its environmental obligations. An unfavorable ruling in the civil case could cost [GMSA] around $10 billion, including punitive damages. ... Essentially, Mr. [German] Larrea is hoping to win control of Asarco again in the bankruptcy case, so that if he loses the civil suit and must return assets to Asarco, he would arguably be returning them to another company under his control, say lawyers familiar with the case. ... Ironically, [GMSA's] core holdings in the state of Sonora had at one time had belonged to Asarco before being nationalized by previous Mexican regimes. In 1999, [GMSA] outbid U.S. mining leaders Phelps Dodge and Cyprus Amax Minerals to acquire Asarco. In 2004, [GMSA] shifted Asarco's controlling stake in another large mining unit, Southern Peru Copper Corp. [SPCC], into one of its other subsidiaries. ... A shift in federal law in the 1990s allowed companies to shed some environmental laibilities through bankruptcy, where governmental and outside groups seeking cleanup funds have to compete with bondholders, suppliers and other creditors. In February 2007, resolution of the bankruptcy proceedings was complicated when Asarco's trustees--appointed by the bankruptcy court--sued [GMSA], charging fraudulent conveyance in the [SPCC] transaction. ... Today, after five years of rising prices, the value of Asarco's [SPCC] shares would be valued at considerably more, up to $10 billion by some estimates", WSJ, 30 April 2008.
This case stinks. That indictments haven't been passed out like candy bars at Halloween, I see as another instance of Bush's DOJ not doing its job. I refer the DOJ to two cases: US v. Switzer, 257 F2d 139 (1958) and US v. West, 22 F3d 586 (1994). I concluded GMSA effected a fraudulent conveyance in the SPCC transaction. Such transaction might also be criminal under 18 USC 152, bankruptcy fraud. In Switzer, in 1949 a NY attorney divided a client, Berkeley Jewelers, into two entites, one held the assets the other the liabilities. One went bankrupt. The court held Switzer's conduct criminal. In West, West delayed his bankruptcy a year and a day from a transaction, thinking the trustee would ignore it. West's conduct was held criminal. Where is the DOJ to prosecute Larrea and any attorney who was involved in this fiasco? Nowhere as our State Department might object to such prosecution. I have followed Asarco for years. Full disclosure: I was once an Asarco stockholder and was surprised GMSA outbid Phelps Dodge and Cyprus. Within a few years it was obvious why.
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paddy
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Post Number: 423
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| | Friday, August 01, 2008 - 03:43 am: |
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POST # 2
Wednesday, June 11, 2008
Asarco Followup
"Highlighting the growing global clout of companies from emerging markets, India's Vedanta Resources, PLC reached a $2.6 billion deal to purchase the assets of a bankrupt U.S. copper miner, Asarco LLC, people familiar with the transaction said. ... Groupo Mexico [GM] said it will challenge the sale. ... Jorge Lazlade, vice president and general counsel for Asarco Inc., the [GM] entity that is the nominal owner of Asarco LLC denied the asset-stripping claim and said the suit was a legal tactic designed to damage [GM]", WSJ, 31 May 2008.
I wish Vedanta well with its new acquisition and hope it wipes the legal floor with GM.
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paddy
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| | Friday, August 01, 2008 - 03:46 am: |
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POST # 3
Tuesday, June 17, 2008
Asarco Followup-2
"German Larrea, head of Mexico's largest copper-mining company, took the stand in U.S. District Court here [Brownsville] Tuesday, denying charges that he looted U.S. miner Asarco in order to leave the historic company too indebted to pay for environmental cleanup work across the U.S. Mr. Larrea, chairman of Grupo Mexico SA [GMSA], said that the decision to put Asarco in Bankruptcy in 2005 was a 'low-cost solution' aimed at cleaning up Asarco's outstanding liabilities. Mr. Larrea said he never dreamed the bankruptcy process would drag on for years and said U.S. Chapter 11 law was different than in Mexico. ... If found guilty, [GMSA] could pay penalties exceeding $10 billion, including punitive damages. ... According to U.S. environmentalists and some U.S. regulators, Mr. Larrea's overall strategy was to free his company from Asarco's many legal liabilities, while simultaneously seeking to retain the U.S. Unit's most lucrative copper holdings. In 2003, [GMSA] shifted profitable mining interests owned by Asarco into the Mexican parent's other corpoate holdings", my emphasis, Joel Millman (JM) at the WSJ, 11 June 2008.
JM, wake up. Shouldn't Larrea have left the courtroom in handcuffs? What does the DOJ do? It prosecutes Melvyn Weiss, but lets Larrea walk. This case has striking similarities to US v. Switzer, 257 F2d 139 (1958). What is the DOJ waiting for? I think it can walk into the case with Larrea's "admission against interest". A "low-cost solution", means? What can we expect from a DOJ that thinks a $50 million fine will deter BP from future misconduct? See my 1 and 11 June 2008 posts on Asarco, also 22 November 2007 and 6 January, 29 February, 19 March and 13 May 2008 on BP. This looks like another DOJ orchestrated miscarriage of justice.
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paddy
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| | Friday, August 01, 2008 - 03:51 am: |
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POST # 4
Sunday, June 29, 2008
Asarco Followup-3
"The takeover of U.S. copper giant Asarco LLC by India's Vedanta Resources PLC may have hit a bump Friday. A judge presiding over a U.S. bankruptcy court in Texas signaled he might give Grupo Mexico SA [GMSA], Asarco's estranged corporate parent, one last chance to resume control of its U. S. subsidiary. ... The Mexican company has promised to pay all creditors in full and take Asarco, a copper-mining company in Tucson, Ariz., out of bankruptcy. Until now, the court has kept [GMSA] from filing its plan. ... But Thursday, the Mexican mining company proposed to recapitalize Asarco at $4.1 billion, part of that amount coming from Asarco's own assets, with the rest as a cash infusion from [GMSA]. ... Since it bought Asarco in 1999, [GMSA] has complained Asarco faced an unknown amount of liability from environmental claims because of a century of mining across the western U.S.", Joel Millman & David McLaughlin at the WSJ, 14 June 2008.
How much cash will GMSA contribute to its plan? I wouldn't let GMSA propose a plan. Southern Copper Corp.'s (PCU-NYSE) 2007 Form 10-K and 2008 Proxy Statement reveal GMSA held 221.1 million PCU shares, worth $22.8 billion at $102.95 each. On 1 April 2005 PCU issued GMSA 134.4 million shares in an "apparently" unrelated transaction. Assuming the balance, 86.7 million (221.1 - 134.4) were "old" Asarco shares, as I see it, GMSA holds an Asarco asset worth $8.9 billion (86.7 x $102.95). Judge Richard Schmidt should tell GMSA and its lawyers "get lost". GMSA put Asarco into bankruptcy in August 2005, after the 134.4 million shares were issued. Do I smell a "usurpation of corporate opportunity" suit here? Where's the FBI, SEC, DOJ? What's going on? Is this a bankruptcy fraud, 18 USC 152? Should GMSA's lawyer-client privilege be lost under the "crime-fraud exception"? Stay tuned
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paddy
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| | Friday, August 01, 2008 - 03:59 am: |
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POST # 5
Wednesday, July 16, 2008
Asarco Followup-4
"A U.S. judge on Tuesday breathed new life into Mexico mining giant Grupo Mexico SA's [GMSA] efforts to win back its U.S. subsidiary, Asarco, LLC, despite Asarco's plan to sell its assets to an Indian metals group. Judge Richard Schmidt of the U.S. Bankruptcy Court in Corpus Christi, Texas, gave [GMSA] permission to file a reorganization plan for the company, something the Mexican company has been barred from doing so far in Asarco's bankruptcy case. ... [GMSA] said its own plan would top the $2.7 billion and satisfy Asarco's many creditors, including federal and state environmental agencies. ... 'Although we disagree with the court's ruling in granting bid protections to Sterlite Industries, we are gratified that we should have the right to file our own reorganization plan,' said Luc Despins of the New York firm Milbank Tweed, which represented [GMSA]. ... Throughout the case Asarco has resisted [GMSA's] efforts to regain control. Asarco says it was forced into bankruptcy in an attempt by the Mexican parent to avoid paying Asarco's environmental liabilities resulting from its mining activities", WSJ, 2 July 2008.
What's Judge Schmidt doing? That GMSA effected a fraudulent transfer in relieving Asarco of its Southern Copper shares seems obvious to me. GMSA has "dirty hands" and should be thrown out of court. Or a lot worse. The GMSA-Asarco situation reminded me of a case I encountered 18 years ago, Voest-Alpine v. Vantage, 919 F2d 206 (3rd Cir., 1990). "On June 13, 1986, the day after VATCO filed for summary judgment against Paige, the Stablers, through their attorney in that action and in conjunction with their secured lender, New Jersey National Bank (NJNB), to which they owed over $1.5 million, put the Paige Group up for sale. ... That purchase was found by the district court to have been structured 'through a "foreclosure" by NJNB in order to launder the assets [in question] and cleanse the Paige Group of its unsecured debt'," my emphasis. Didn't German Larrea (GL) admit GMSA wanted to do this with respect to Asarco's environmental liabilities? Or did I fail to understand what GL said? "Before the foreclosure, Paige was a troubled but going business with assets of over $1.7 million, a debt to NJNB of $1.5 million (guaranteed by the Stablers whose known assets were about $300,000), and debts to unsecured creditors of about $800,000, which included the debt owed to VATCO. After the August 8, 1986 transactions, Paige had no assets and no secured debts. It did, however, continue to owe its unsecured creditors, who for their part, however, now had no Paige assets from which to collect". Sound familiar? What happened to Asarco's interest in Southern Copper?
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