Insiders' stock "selling spree" cited in suit
Golden Rule Resources Ltd GNU
Shares issued 26,654,081 Feb 23 close $0.95
Tue 24 Feb 98 Street Wire
Also Hixon Gold Resources Inc (HXG)
by Brent Mudry
A Philadelphia class action suit contends the collapsed promotion of the
Stenpad gold property in Ghana was merely a ploy for insiders of Hixon Gold
and Golden Rule Resources insiders to dump 1.8 million of their shares at
"artificially inflated prices," reaping gross proceeds of more than $12.3
million. In a suit filed Monday in US District Court, Eastern District of
Pennsylvania, lawyer Robert Roseman claims the Stenpad promotion pushed
Golden Rule shares from $1.50 in fall 1996 to an all-time high of $13 in
spring 1997, while Hixon shares rose from $1 to $12. When the Stenpad
lustre rubbed off last May, Golden Rule shares plunged to less than $3. The
named defendants are Golden Rule, Glen Harper, Larry Lahusen, Frederick
Wynne, Jens Hansen, Robert Ingram and James Devonshire.
The suit, written with a flair for the dramatic, peppers its pleadings with
colourful language. Mr Roseman, who professes to have "extensive"
experience in actions involving financial fraud, outlines the Stenpad
promotion and the insiders' "stock selling spree." The veteran lawyer
claims that insiders lured investors with visions of substantial
high-quality gold finds, so the market would value Hixon and Golden Rule as
"growth stocks. . . creating a high price earnings multiple." The suit
notes that "contrary to the upbeat and bullish reports" released by Golden
Rule, two reports from the Ghanian minerals commission made "startling
revelations" that the big gold find was a bust. "Market reaction to the
devastating disclosures of May 15 1997 was swift, dramatic and decidedly
negative," states Mr Roseman.
The class action lawyer claims that insiders, including Mr Harper,
concealed facts about the Ghanian operations until the government report
"laid such deception bare." To illustrate his case, Mr Roseman includes two
handy charts with his suit. One plots the rise and fall of Golden Rule's
stock price, compared to heavy insider selling. The other contrasts Golden
Rule's performance against that of the Toronto Gold & Metal sub-index
during the period in question.
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