The following is an excerpt from NASD hearing involving Solv-Ex. Scanned and OCRed from public documents ABQ Court.
MR. DONOHOE: I would also ask that if you have seen any errors or misstatements or, in your opinion, mischaracterizations in any of those documents, you address them at the beginning of your presentation.
The Panel has had an opportunity to go through the materials that have been submitted by the company and the materials prepared by the staff and they are quite familiar with the case at this point. Having had a brief opportunity to speak with each other, they would ask that you focus on a couple of things:
First, if you would turn to the Analyst's Memo. that would probably be the best way for me to point you in the direction that we want you to go. If you could go to the first page of the Analyst's Memo.
MR. CAMPBELL: Yes, sir.
MR. DONOHOE: If you go to basically where the analyst is summarizing the concerns, they've got them broken out as a, b, c and c. The Panel would like you to focus on (a), where basically the staff concluded that Solv-Ex did not adequately prepare -- I'm sorry. They don't want you to focus on that. They want you to
focus on (b) and (c), where the staff concluded that Solv-Ex misled the investment community by claiming that its processes and "technology" were unique and by masking the effects on operating costs from changes in projected production volume and process and plant modifications. -
And on (c), where the staff concluded that Solv-Ex failed to adequately inform public shareholders of the potential operating and economic uncertainties associated with its "initial stage plant".
In addition, the Panel is interested in knowing where the company is today with respect to the quantitative requirements for continued listing and what the company's plans are to ensure that it emerges from bankruptcy and the business is viable going forward.
With respect to (a) and (d), they have read the company's responses, they are satisfied with the company's responses.
We have a limited amount of time so I think your time would be better spent focusing on the other issues that I've highlighted.
One matter which
right at the start is the
MR. CAMPBELL: All right.
First of all, I received last night a number of exhibits to the documents which I had not previously seen.
, I feel compelled to address fact that throughout the first five or six months of 1996 in my dealings with Andrew Labadie of the Nasdaq staff, as well as some other people involved with Nasdaq, --
MR. DONOHOE: You mean 1997?
MR. CAMPBELL: Yes, excuse me, 1997.
Number one, Nasdaq was assured of our willingness and desire to cooperate in any way we could.
As a part of the voluminous correspondence between Mr. Labadie and myself, as well as correspondence to Mr. Rendall, I had been repeatedly assured that our discussions as well as documents presented, given, to Nasdaq, would be retained in confidentiality unless we were advised to the contrary. I think that is in fact reflected in one of my letters.
When I learned last night of the manner in
which this investigation has been conducted in terms of making information, which I don't even have the details concerning, available to competitors of Solv-Ex, I was absolutely astonished.
It is unfortunate that information concerning Mr. Labadie's written records of-his conversations with members of those competitors were similarly not made available to Solv-Ex.
I know from my discussions with Mr. Labadie that he keeps copious and detailed notes; But the very thought, contrary to representations made to me, that he would go to competitors who have every desire in the world as to why it would be better for them for Solv-Ex not to succeed and for us not to have access to the results of those discussions, is to me fundamentally unfair. And while I realize this is an informal proceeding, it violates every concept of what I would consider to be due process.
MR. BARKER: May I ask a question?
MR. CAMPBELL: Yes, sir.
MR. BARKER: This is a fairly serious
allegation.
MR. CAMPBELL: Yes, sir.
MR. BARKER: Is it conceivable that Mr. Labadie was talking to your competitors to learn more about the process, that this was just an investigation? He went into substantial detail about your process. Is it conceivable that he was just doing an inquiry into the process?
MR. CAMPBELL: Yes, that is conceivable.
To recount one of the conversations, I said, "Andrew, you seem to have learned a great deal about oil sand technology and processing in a very short period of time. I'm very curious as to how you are doing so. Are you a technical person by background?". And he said, No, that he was an economist and that he had requested an information package from Suncor. And I complimented him on the degree to which he had picked up knowledge.
The problem with going to a competitor, aside from the antitrust implications that could very well be created by their responses to him, I made it known to him that it might not be in the best interests of either
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of those companies to have us succeed, and I went into
the reasons why.
Irrespective of whether he was trying to learn about the technology, to make representations to me that information was being shared with those competitors, to me, is unconscionable.
For example, if you are corresponding with the director of investors relations of Suncor, which is a publicly traded company, listed on Amex in the United States as well as the Toronto Stock Exchange, you would expect that if questions related to processing or technical matters, that man would consult with other people. But, in the final analysis, it is so naive to think that the director of public relations of a competitor public company would do anything but cast negative aspersions on Solv-Ex and its technology -- I don't see how anybody could be so naive as to think otherwise.
I have made it clear to him in conversations that Solv-Ex has not enjoyed a particularly good relationship with either Suncor or Syncrude. And to see
the extent of the communications both with Syncrude and Suncor compels me to the conclusion that until such time as we are provided access to information which has undoubtedly had a very heavy role in casting the staff's Opening Statement and Memorandum, I believe that this hearing should be adjourned until we're given opportunity for that information.
MR. DONOHOE: In my opening statement you will notice that what the Panel is interested in are listing issues and they're not interested in your technology versus the technologies of your competitor or particular management decisions that you've made. And that's why they have -- that's why they are not interested in pursuing the statements that are in (a) and (d).
What this Panel is interested in, which-has nothing to do with your competitors, are the disclosure issues and are the current compliance issues --
MR. CAMPBELL: Right.
MR. DONOHOE: -- with respect to the quantitative criteria. And that's where they're going and I think that that is --
MR. DONOHOE:
MR. CAMPBELL: All right. I must --
MR. DONOHOE: -- that's very relevant.
MR. CAMPBELL: -- respectfully disagree with you in reading the language of (b). "Solv-Ex misled the investment community by claiming that its processes and 'technology' were unique and by masking the effects on operating costs from changes in projected production volume and process and plant modifications."
I would like to put --
MR. BARKER: Why don't you address that, then?
MR. CAMPBELL: I will. But before I do that, I want to put in the record my first supplemental document. It's a transcript of proceedings in the United States Bankruptcy Court in Albuquerque and it relates to the precise issue which I am discussing in terms of disclosure of information to competitors.
The sum and substance of this transcript of
. .
proceedings is a verbal order by a federal judge requiring that the SEC not communicate with our competitors and that any people with whom they discuss proprietary information may only have access to it under
what I'm
a protective order.
So that, even though Mr. Labadie may not have perceived it as being something relatively serious, it's quite serious to this company and it was serious to a federal judge in Albuquerque.
MR. DONOHOE: Mr. Labadie also doesn't work for the SEC and he is not bound by that.
MR. CAMPBELL: That's somewhat irrelevant to
saying.
(Exhibit No. 1 marked for identification and entered into the record.)
MR. CAMPBELL: Now, let's proceed with the (b).
First, I should mention that Mr. Devenny, who is Dr. David Devenny, he is an independent consult with very, very extensive experience in oil sands. So that when we -- if we want to address certain technology issues, he can both provide me with assistance, in addition to responding to questions which I may pose to him that may help clarify some of these things.
First, the comment on ''misled the investment
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