Isn't Civelli involved with Jordex/iTech?
B.C. Securities Commission BCSEC
Shares issued
Tue 1 Feb 2000 Street Wire
Also Delgratia Mining Corp (DELGF)
Also (U:CENMF)
by Brent Mudry
While open courts are a fundamental element of Canada's justice system, and
sealed files, secret hearings and secret decisions are extremely rare, two
Vancouver judges have protected major securities secrets of controversial
Swiss financier Carlo Civelli and banned stock promoter Terry Alexander for
more than six months. The secret Civelli-Alexander file sheds significant
light on one of Canada's biggest recent stock frauds, the Delgratia Mining
salt job, and may reveal new details on an even bigger stock fraud, Arakis
Energy, Mr. Alexander's other notably disastrous promotion.
The Civelli-Alexander file and proceedings were sealed with iron-clad gag
orders, despite the strong objections of the defendants, Eric Lavarack, the
former president of Central Minera, Delgratia's successor, and David Rodger
Manning, a fellow dissident former vice-president of the controversial
company.
While the seal on the highly sensitive file has now finally been lifted,
numerous key documents remain sealed, with their contents secure from the
prying eyes of the media, the investing public and the authorities,
including the United States Securities and Exchange Commission, the British
Columbia Securities Commission, the National Association of Securities
Dealers, which have all investigated the suspicious promotions of both
Delgratia and Arakis, and the Federal Bureau of Investigation, which probed
the Delgratia salt job fraud.
The unsealed portions of the secret Civelli-Alexander file reveals that Mr.
Civelli, or his publicity-shy offshore clients, allegedly owned half of
Philgold Investments, the offshore company of controversial geologist
Charles Ager which vended in to Delgratia the worthless salted Josh
property in Nevada for $13-million (U.S.). The secret file also reveals
that a mysteriously tampered geological report may have been sent to
inquiring Nasdaq officials.
The top-secret documents also allege Mr. Lavarack and Mr. Manning were
ousted from Central Minera when they refused to go along with a bizarre
scheme of Mr. Civelli and Mr. Alexander to show there really was gold at
the salted Josh property.
Even more intriguing is that the two B.C. judges, Mr. Justice Ian Pitfield
and Mr. Justice Robert Baumann, imposed and maintained such highly-unusual
and notably-broad sealing orders, months after Mr. Alexander was fined
$1.2-million and banned for 20 years for his major Arakis securities
violations. Mr. Alexander's Arakis transgressions involved dubious dealings
with a number of offshore accounts which played prominent roles in the
Delgratia-Central Minera promotion and are linked to Mr. Civelli.
While the Civelli-Alexander file was recently unsealed, it is half-empty,
with voluminous sensitive affidavit and exhibit materials still sealed.
Vancouver lawyer John Frank, who represents Central Minera and Mr. Civelli,
declines to comment on when the remaining top-secret files might be
unsealed. He is also loathe to make any mention, no matter how vague, as to
what might be in these sensitive documents. "I have no comment on that,"
Mr. Frank told Stockwatch.
Mr. Frank confirms that Central Minera is his primary client on the case,
and he declines to comment whether he represents the controversial Swiss
money-man Mr. Civelli on any other matters. "As you know, Mr. Civelli is a
shareholder of Central Minera," Mr. Frank says.
On further questioning, Mr. Frank concedes he does not know if Mr. Civelli
is an official shareholder, or if he owns his shares through various
offshore accounts. "How do you know he is a shareholder?," asked a
reporter. "I do not know ... I have no primary evidence," the lawyer
replied.
"How do you know then?" asked the reporter. "It is essentially the same as
you ... the word on the street is that he is," replied the lawyer. Although
Mr. Civelli's role is apparently well known on Howe Street, the secretive
Zurich financier's name has never been raised publicly by the BCSC in their
investigations of Delgratia, Arakis and Mr. Alexander.
It remains a mystery as to how Mr. Frank managed to persuade the B.C.
judges to keep the Civelli-Alexander file under wraps. "There was no
written argument ... it was done was on an expedited basis," Mr. Frank told
Stockwatch. The lawyer declined to offer any insight into his sealing
arguments.
While the secret to the sealing arguments remains unknown, the strong
opposition by lawyer Patrick Abrioux, representing Mr. Lavarack and Mr.
Manning, is not. Mr. Abrioux unsuccessfully argued that his clients' June 2
affidavits should not be sealed from public access, and the sealing hearing
itself should not be held "in camera," shrouded by secrecy.
"Based on the circumstances of this case, public policy concerns override
any alleged duty of confidentiality," stated Mr. Abrioux in his outline.
The defence lawyer reminded the judge of the principles of Canada's open
court system. "The fundamental proposition is that the public is entitled
to uninhibited access to a court of law and its judicial records," stated
Mr. Abrioux in his outline. The lawyer noted that public access may be
restricted by the presiding judge, but once the trial is over the
prohibition may no longer be effective.
"The burden of proof is on the person who seeks to prevent disclosure by
showing as a matter of principle and not just convenience that the document
or object should be protected from public scrutiny," stated Mr. Abrioux.
The defence lawyer unsuccessfully argued that Central Minera and Mr.
Civelli failed to meet the onerous burden required to invoke a broad shroud
of secrecy on their file.
Mr. Abrioux also reminded the judge that while Central Minera succeeded in
using its lawsuit and other actions to make serious allegations against Mr.
Lavarack and Mr. Manning, and attack both their personal and professional
integrity, they were unable to defend themselves publicly in court.
"As a result of the publication ban and order sealing the file which is
currently in place, Lavarack and Manning have, for a period in excess of
five months, been unable to take the necessary steps to defend themselves
in an attempt to mitigate the serious damage which has been done to their
personal and professional reputations. The plaintiff's allegations against
Lavarack and Manning's integrity are unequivocally denied and need to be
aggressively defended," stated Mr. Abrioux in his outline.
In its suit, filed on May 19, soon after Mr. Lavarack and Mr. Manning
departed, Central Minera accused the pair of taking $400,000 (U.S.) in
unauthorized termination-related payments, although they claim the payments
were entirely proper.
While Lavarack's June 2 affidavit remains sealed and at least one of Mr.
Manning's affidavits is also still sealed, Mr. Abrioux described their
contents to the judge in blunt terms. "It is submitted that the Lavarack
and Manning affidavits set out a strong prima facie case of a fraud of
significant proportions being perpetrated on the company by Dr. Charles
Ager and, perhaps his associate Terry Alexander," stated Mr. Abrioux in his
outline.
The defence lawyer told the judge that Central Minera had not presented any
evidence to the court which either defended or explained the conduct of Mr.
Ager and Mr. Alexander.
The outline also reveals that before his ouster, Mr. Lavarack, acting on
behalf of Central Minera, was about to compel Mr. Ager to contribute to a
class action settlement, or sue the vendor of the salted property if he did
not pay his share.
In early May of 1999, in the wake of Mr. Lavarack and Mr. Manning's ouster,
Central Minera had a new board which was more favourable to Mr. Ager, Mr.
Alexander and Mr. Civelli and their find-the-phantom-gold scheme. New
president Gordon Ellis was a former business associate of Mr. Ager,
according to one affidavit, still sealed. Mr. Alexander's personal
secretary, Anne Eilers, was appointed corporate secretary.
"It is submitted that, with the present composition of the plaintiff's
board of directors an action by it against Ager will never take place. That
is why Lavarack and Manning have instructed counsel to seek leave of the
court to commence a derivative action," stated Mr. Abrioux's outline,
noting a still-sealed affidavit of Mr. Manning.
In March of 1999, before Mr. Lavarack was terminated, Vancouver lawyer Hein
Poulus, representing Central Minera, drafted a statement of claim against
Mr. Ager. This draft and all other details remain sealed in the secret
Civelli-Alexander file.
"Obviously, if Mr. Poulus had ultimately been instructed to proceed with
the action against Mr. Ager on behalf of the company, then the information
which the plaintiff now seeks to be sealed would undoubtedly have been in
the public domain since it would have formed the basis of the allegations
against Ager," stated Mr. Abrioux in his outline.
The defence lawyer unsuccessfully argued that Mr. Frank's claims of
solicitor/client privilege and breach of confidence did not meet the test
required to win a broad secrecy order. "It is submitted that there can be
no confidence maintained if the purpose is to prevent the disclosure of
iniquities ... this is precisely what the plaintiff is seeking to do in
this case," stated Mr. Abrioux.
The defence lawyer also told the judge that Central Minera and Mr. Civelli
sought to prevent his clients Mr. Lavarack and Mr. Manning from making full
answer and defence in the suit by restraining their ability to make use of
information which they received in their capacity as senior executives of
the company. "No duty of confidentiality can extend to any misconduct of
such a nature that it ought in the public interest to be disclosed to
others," stated Mr. Abrioux in his outline.
"It is submitted that the public policy considerations are such that they
should, in the circumstances of this case, override any alleged
solicitor/client privilege or duty of confidentiality ... a prima facie
case of fraud is sufficient to override solicitor/client privilege and,
accordingly, also override any fiduciary duty of confidentiality of a
former director or officer of a company," stated Mr. Abrioux.
After hearing the assorted arguments, Judge Pitfield supported Mr. Frank,
echoing fellow bencher Judge Baumann's earlier sealing order, and kept the
sensitive Civelli-Alexander file under a tight seal, which remains in place
for many of the most intriguing documents.
After reading Stockwatch's initial Monday article on the secret Delgratia
file, Mr. Frank took issue with only one point. Stockwatch noted that Mr.
Frank operates independently at the same address and phone number as
Anfield Sujir Kennedy & Durno, a prominent Howe Street law firm whose
founding partner David Anfield has been targeted by the BCSC and the SEC
for production of extensive client files relating to legendary boiler-room
operator Irving Kott.
Mr. Frank wants to make clear his distance from Mr. Anfield. "The only
relationship is we happen to be on the same floor and share a switchboard
... I have my own telephone number," Mr. Frank told Stockwatch. The lawyer
uses the same address as Anfield Sujir and the same main phone number,
although he has his own direct number.
"I know David Anfield to see him ... as do probably several hundred
thousand other people ... that is a low blow," says Mr. Frank.
(Readers wishing more details of the secret Civelli-Alexander Delgratia
file may refer to a Streetwire dated Jan. 31, under the symbol BCSEC.)
(c) Copyright 2000 Canjex Publishing Ltd. canada-stockwatch.com
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