PART 2
Crystallex International Corporation -
Untangling Cristinas' documents , Part 2
Crystallex International Corporation KRYShares issued 340000001998-04-14 close $6.7Wednesday Apr 15 1998THE CRYSTALLEX PAPER TRAIL Part two of two by Stockwatch Business Reporter As detailed in Part One, the outcome of the July 15, 1997 Venezuelan supreme court ruling over Cristinas 4 and 6 denied Crystallex leave to sue the government over its granting of the gold rights to Placer Dome. The ruling admitted Crystallex's challenge over the copper rights. Both sides are appealing the decisions. Placer says Crystallex's legal challenges are futile and will lead nowhere. The farfetched worst that could happen would be for the same court that issued the denial to change its mind and permit a challenge on how the government granted the gold rights. "In that event, for the first time in all this brouhaha, the actual merits of the issues in dispute will be debated," says Placer's Hugh Leggatt, confident such an outcome would favour the Placer-CVG joint venture, Minca. If the court denies the Placer-CVG appeal and allows Crystallex's copper rights challenge to go to trial, the only ones to benefit from the exercise will probably be the lawyers. "This is not a concern to us because the copper rights legally will revert eventually to the holder of the gold rights," Mr Leggatt contends. "The gold rights are what's key because the law says whoever has the gold rights has first dibs on the copper rights," which are subsidiary to the gold. Crystallex and its subsidiary Inversora Mael, of course, see it differently. It believes a trial over either the gold or copper rights, or both, will eventually lead to the "enforcement" of its ownership rights that the court has established at a certain point in time - 1986. Gaining title today -- neither party has it, according to the government -- would require unravelling a series of court decisions, ratifications and agreements that took place after 1986. What now is before the court does not indicate such an unravelling is in the cards. Still, Crystallex's Marc Oppenheimer and his supporters cling to such a hope. Based on the idea that the court "already gave us title in its 1991, '96 and '97 decisions," he said in a July 18, 1997 release, "We are asking the court, based on Mael's ownership, to strip from CVG the grants to mine copper and gold that were improperly conferred by the ministry of mines. The admission of any of our motions recognizes our underlying ownership - which includes the right to mine gold at Las Cristinas." Placer's Hugh Leggatt counters by saying even if the copper rights go to trial and the judge determines that Placer or CVG derived them improperly, those will not be granted to Crystallex but will revert to the state. In turn, the Venezuelan government, which clearly has been irritated, annoyed and embarrassed by the Crystallex-Mael court applications made against it -- and is probably even less happy about the delay in construction of the mine at Las Cristinas -- will most likely turn around and hand them back to Minca as soon as it possibly can, Mr Leggatt contends. "THE GOVERNMENT LOVES US" Despite the fact Crystallex and the government have been on the opposite sides of a highly charged legal dispute that has resulted in significant unemployment in Venezuela's Bolivar state, the Crystallex board tells investors the company is popular with both locals and the government. In a full-page public letter to shareholders in the March 25 Financial Post, board chairman Robert Fung said: "We reiterate, today more than ever, that Crystallex enjoys a good working relationship with Venezuela and its government." What Mr Fung kept out of his advertisement was that about 600 soon-to-be laid-off employees of Minca at Las Cristinas staged a protest against Crystallex, according to a February 11 report from Platt's Energy Wire news service. States the Platt's report: "The workers are blaming Crystallex" for their unemployment. "The firing of the workers has resulted in economic upheaval in the region." In addition, a Reuter report of October 3 suggests Crystallex is not a popular commodity in Caracas, either. The story quotes CVG president Elias Nadim Ynaty as saying his government firmly backs Placer in the dispute. Mr Ynaty, a member of Venezuela's economic cabinet, said Crystallex was ruining the country's plans to modernize its mining industry with North American capital. Mr Fung also went on record as saying "the acquisition of the Santa Elena 7 and 8, Carabobo and San Miguel concessions were executed in full compliance with Venezuelan law and Crystallex's disclosures are accurate." What he declined to mention was the company's title to those concessions was declared null and void by the government on July 5, 1995 and that Crystallex has only admitted this in minimalist-profile disclosure statements. That nullification was the result of an investigation by a special congressional committee led by Congressman Rafael Rodriguez Acosta. His 58-page report documented numerous allegations against Crystallex, along with some government officials and directors of a government-sanctioned mining co-operative, events that led to the illegal transfer of title of the so-called Carabobo properties to Crystallex. According to Mr Acosta, Crystallex was the central figure in the report that detailed allegations of disappearances, bullying, corruption, bribery, beatings, fraudulent business practices - and even the illegal sale of alcohol. Crystallex's disclosure statements counter these setbacks by insisting it has an application before the supreme court to reverse the nullification. After nearly three years, however, Crystallex has not offered an update about that application. Congressman Acosta claims the court dismissed the application soon after it was made in the summer of 1995. A letter, including a photocopy of the Spanish original, was distributed by Mr Acosta to reporters at the Miami investment conference in March that appears to contradict Mr Fung's nation-wide statement. Dated January 12, 1996, the letter confirms to the president of the Asociacion Cooperativa de Produccion Minera del Sur that his organization is the sole title holder of the Carabobo concessions. The letter was written by Orlando Cendeno from the Ministry of Energy and Mines, and was addressed to Ventura Mauricio Herrera. "According to the Memorandum No. DM-258 of November 17, 1995 from the Department of Mines, the transference of title of the concessions Santa Elena 7, Santa Elena 8, San Miguel 8, and Carabobo was voided because it was found to have been pre-empted as absolutely null," the letter states. "In this sense the above-mentioned concessions remain in the ownership of its initial title holder, the Asociacion Cooperative Minera de Produccion del Sur, RD, which you represent." Repeated efforts to have Mr Acosta's staff secure documented evidence of a court dismissing Crystallex's application, however, have not been successful. KRY's Mr Oppenheimer, on the other hand, does not make himself available for comment one way or the other. "ONE MORE RULING AND THE GOLD IS OURS" The July 15, 1997 |
