Solv-Ex's Campbell permanently disqualified
2004-11-05 14:02 ET - Street Wire
by Stockwatch Business Reporter
Former Solv-Ex Corp. lawyer Herbert M. Campbell has been permanently disqualified from practising before the Securities and Exchange Commission. The disqualification -- resulting from an administrative proceeding -- results from his part in the 1990s promotion of Solv-Ex, a would-be bitumen producer. Judge Robert G. Mahony found that Mr. Campbell "recklessly violated" U.S. securities laws with misleading news releases.
The permanent disqualification prevents Mr. Campbell, a lawyer, from serving as counsel to a public company again. Mr. Campbell was already banned from the U.S. markets for his part in the Solv-Ex promotion.
The Solv-Ex promotion
Solv-Ex developed a process in the 1980s and 1990s that it claimed would produce marketable bitumen from Alberta's vast oil sands. The company raised $73-million (all figures in U.S. dollars) in 1996 to supposedly bring the technology to fruition.
Fuelled by news of its prospects, Solv-Ex's price began rising from $5 to peak at $38 in February, 1996.
Mr. Campbell, along with chief executive officer John S. Rendall, said Solv-Ex would commence selling marketable bitumen in early 1997 at a rate of of 100,000 barrels per month. The company claimed it could run the bitumen, derived from oil sands, through a filtering process that would render it suitable for sale.
Judge Mahony's decision
Judge Mahony said this process was more hogwash than anything else. He said the company performed tests on its filtering process at an independent lab that showed it could not produce bitumen on either a consistent or marketable basis.
Despite the test results, Mr. Campbell issued a news release on March 31, 1997, announcing the beginning of bitumen production at the company's Lease 5 site in Alberta.
Judge Mahony said this news release was also misleading. He said even if the company was able to produce bitumen at a commercial level, the bitumen was not marketable due to the filtering problems.
Even assuming the bitumen was marketable, Judge Mahony said Solv-Ex had nowhere to sell its bitumen, and Mr. Campbell knew it. The company had signed a letter of intent with Gibson Petroleum Company Ltd. to purchase the bitumen, but it could not meet the terms of the letter. Gibson specified that the bitumen was to be processed with a visbreaker, a factory-sized plant that Solv-Ex did not own and could not afford to buy.
Judge Mahony said Mr. Campbell had access to all of the negative tests and other information about Solv-Ex's technology, but he still "created a misleadingly optimistic picture of the prospects." Judge Mahony said Mr. Campbell should have known the information he issued was false or misleading.
The Securities and Exchange Commission, represented by Edward C. Schweitzer, asked Judge Mahony to permanently ban Mr. Campbell from practicing before the commission.
Mr. Campbell, for his part, said there was nothing that indicated the level of misconduct alleged by the SEC, and argued against a permanent disqualification. He claimed none of the SEC's evidence indicated he knew the public statements were misleading.
Mr. Campbell also argued that an earlier SEC ban already prevented him from serving public companies, and there was no need for a permanent disqualification. He said he does not plan on practising before the commission again, but a permanent disqualification would be detrimental to his career as a lawyer.
Judge Mahony disagreed. He said Mr. Campbell's reckless violations of the U.S. Securities Act were not isolated, and spanned a two-year period. He said Mr. Campbell, along with Mr. Rendall, portrayed Solv-Ex as a company with an assured stream of substantial revenue, when in fact there was no hope of achieving such lofty goals.
John Rendall
Judge Mahony, in his decision, relied heavily on the April 6, 2000, civil decision of Judge Bruce D. Black.
In that decision, Judge Black found that Mr. Rendall and Mr. Campbell violated the U.S. Securities Act. He said they used false and misleading statements to fuel the Solv-Ex promotion. In a civil action, the SEC banned the pair from the markets as a result of Judge Black's findings.
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