Hello charred;
Crystallex's latest lawsuits not valid, claim parties
Crystallex International Corporation KRY
Shares issued 36,933,966 Aug 19 close $0.90
Fri 20 Aug 99 Street Wire
LEGAL CHALLENGE MAKES NO SENSE, SAYS CARACAS LAWYER
by Stockwatch Business Reporter
Investors will have to take the word of Crystallex International when it
says it has filed a pair of lawsuits in Caracas in a renewed bid to win the
mineral rights for Cristinas 4 & 6.
After many statements about considering its legal position -- and
considering, and considering -- the company finally announced on Aug. 4,
1999, that it wanted to "resolve the continuing uncertainty over the
ownership of the concessions." The first claimed lawsuit purportedly
challenges the basis upon which Corporacion Venezolana de Guayana (CVG) was
given the right to issue a work contract to Minca, the CVG-Placer joint
venture exploiting Las Cristinas. The second claimed lawsuit purportedly
challenges the basis upon which Crystallex subsidiary Inversora Mael signed
a waiver with the Venezuelan government in 1991 in which it disavowed any
claim on the concessions.
No one, not even interested parties such as Placer Dome, the government of
Venezuela, the state-owned CVG, or the companies' joint venture, or Minca,
has been notified of two legal actions announced by Crystallex with much
fanfare on Aug. 4.
Minca is developing a $575-million (U.S.) open-pit mine at Las Cristinas.
Placer placed the project on hold in July, citing the low price of gold.
Crystallex began its challenge for the mining rights in March, 1997.
Placer's head of Venezuelan operations, Carl Gagnier, says his company's
lawyers understand that Crystallex made a submission of some kind earlier
this month. The court, however, may not divulge its contents -- or notify
interested parties -- until it admits the case. Conveniently or
inconveniently for Crystallex, the court began a month-long holiday nine
days after Crystallex made its submission.
"It hasn't been registered," says Mr. Gagnier. "If you want to sue
somebody, my understanding is that it doesn't start until the other person
has been notified. You may have an action, but it's not valid until the
other person has been notified."
Senior Caracas mining lawyer Allan Brewer-Carias expresses doubt that the
term "filing," as used by Crystallex to describe its legal step to renew
its challenge for the concessions, is accurate. Asked if it is proper to
say the lawsuits have been filed with the court, Dr. Carias responded: "No,
no," explaining that the term filing implies acceptance by the court. "The
court has to accept it. That's the beginning of a very long legal
procedure." He says a better description of Crystallex's action is that it
made a submission -- an action that just about anyone on the planet can do.
Dr. Carias, who wrote an academic book about the Cristinas case in 1998
called El Caso Las Cristinas (The Las Cristinas Case), had no knowledge of
Crystallex's renewed legal effort until told of it by a Stockwatch reporter
two weeks after the company's announcement. The announcement received big
play in the Canadian news media, but apparently Crystallex's pair of press
releases were not promoted as much in Venezuela.
In June, 1998, the Supreme Court of Venezuela declared Crystallex's
challenge of April, 1997, to be inadmissible because the Vancouver-based
mining junior had no standing before the court -- meaning it was not an
interested party to the concessions -- and that even if it had standing, it
had no case to bring forward. One of five supreme court justices dissented
from the majority decision. Dr. Carias says that because Crystallex's
previous lawsuit was rejected in a final and unappealable ruling, there
exists no legal reason why the company would think the court would even
consider this 1999 legal effort.
A second rejection could conceivably take even longer than the 15 months
the court took to consider Crystallex's first request to sue the
government, or it could take just a few weeks, Dr. Carias says. He said it
was unlikely the court would sit on the submission indefinitely.
Asked if Crystallex's statements on the matter make any sense from a legal
perspective, Dr. Carias replied, "No, not at all." He says one of the
lawsuits -- a challenge against Presidential Decree 1409 granting CVG the
right to issue work contracts -- may have some legal basis and could
conceivably affect ownership of mineral rights at Las Cristinas. The
problem for Crystallex, Dr. Carias says, is that whatever may eventually be
decided with respect to 1409, it will only interest the government, CVG and
Placer. "The challenge of the decree could have some legal basis, but no
effect at all regarding the concessions or the rights that Crystallex
pretends on the concessions. It has no effect at all regarding Crystallex,"
he contends.
Crystallex, he asserts, has nothing to do with the matter.
In New York, lawyer Michael Swick, whose firm Milberg Weiss is leading a
class-action lawsuit against Crystallex, says the company is merely trying
to "stick their foot in the door again," adding that the challenge, while
making little legal sense, could be used as a tactic in its defence against
allegations of fraud and deception. "At this point, if they back off, it
looks like we're right," he says. Milberg Weiss claims Crystallex ran its
1997-98 promotion based on a hopeless legal case that it dressed up as a
substantial and legitimate court challenge and that it knew all along it
had no case.
"These guys just don't stop," Mr. Swick marvels.
Crystallex is defending itself against the fraud-on-the-market charges,
saying that it fully disclosed all material facts and risks associated with
its challenge in the Venezuelan courts. With written submissions behind it
in U.S. District Court, Southern District of New York, oral arguments
before a judge on Crystallex's motion to dismiss are scheduled for Sept.
13.
At this point, Crystallex has no interest in revealing contents of the well
adveritsed twin lawsuits. "If the courts release them, then I will get them
to you," says Richard Marshall, vice-president of corporate development. He
explains that good corporate manners prevents the company from divulging
their contents. "When they become public, then I'll get them to you. We're
not going to break any protocol or rules down there."
He adds: "Our attorneys won't release it. Once it's record in the court,
then we can get it to you."
Crystallex's most recent public-relations exercise also contained
allegations that CVG has "publicly stated that it is re-evaluating its
position in relations to the concessions" following Placer Dome's
announcement to suspend development work on the concessions. Further, the
company reported on Aug. 10, "At least one major mining company has
indicated its interest in pursuing development of the concessions."
The news release fails to name either the CVG official who made the
statements or the mining company that may covet Las Cristinas.
Placer spokesman Hugh Leggatt says he draws a blank on both accounts. "I
haven't heard that they (CVG) are thinking of giving any thought to some
other partner," Mr. Leggatt says. "It is news to me."
Crystallex's Mr. Marshall says he has nothing to add to the press release,
and does not know the name of the company that is supposedly waiting in the
wings to take over from Placer and reactivate the project. "I don't know,"
he says. "I don't sit in those meetings."
Mr. Marshall says the release in question was written by the company's
legal counsel, McCarthy Tetrault, which did not cite the source of its
information. "There is another mining company that has expressed publicly
that they think the project would be of merit," Mr. Marshall assured. "Our
attorneys are quite comfortable with our statements. They have seen the
supporting background information."
A Dow Jones dispatch from Caracas dated July 20, however, quotes an
unidentified CVG official as saying the minority partner was not consulted
about Placer's decision to suspend construction -- an allegation Placer
denies. Further, a Reuters dispatch of July 22 says CVG boss Clemente
Scotto declined to answer a reporter's questions about whether the company
might consider reassigning the Cristinas partnership. Such a move, however,
implies that some other company could reduce Placer's estimated $240 (U.S.)
total cost to extract gold from the site, which is now shut down as a
result of gold's current low price.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
With regards,Frank |
