To doomsters, particularly Bill- a must-read on Crystallex...good for
a laugh and maybe some profits. Do full DD on this one though.
Crystallex International Corporation - Street Wire.
Untangling Cristinas' documents , Part 2
Crystallex International Corporation KRY
Shares issued 34,000,000 Apr 14 close $6.70
Wed 15 Apr 98 Street Wire.
THE 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 decision is only one of four court cases in which judges'
rulings have been circulated. Although the impression from Crystallex's
many supporters is often that these are part of a series of rulings and
appeals - with the final prize to be handed out by the court now mulling
the current appeals - this is not the case. There are, in fact, two
separate legal issues dealt with in the four documented court cases.
One issue alone was dealt with in the July 15, 1997 ruling. That ruling
dealt with whether or not to admit for trial the manner in which the
mineral rights were granted by the government to Placer-CVG. The court
dealt Crystallex a blow by not allowing it to sue over the gold rights. It
admitted the company's challenge over the copper rights, however.
The other three rulings were related to each other, and have allowed
Crystallex to fashion the impression that the courts generally have sided
with it in this dispute. This legal stream began on October 26, 1988, when
Inversora Mael filed an appeal against a resolution issued by the Ministry
of Energy and Mines.
In Resolution No. 29, made on April 14, 1988, the ministry declared Mael
was not allowed to take title of the concessions because the ministry had
not been properly notified of the 1986 change of ownership from Ramon
Torres to Mael. Mr Torres had bought the concessions in the same year from
the ageing Dot de Lemon for about $19,500.
The Trial Court admitted the case in November 1988, with Mael seeking the
official gazetting of its title acquisition of two years earlier. According
to a summary of Judge Cecilia Sosa Gomez's ruling dated May 9, 1991, deputy
attorney general Grace Patruyo Patruyo argued the case should be dismissed
because, among other reasons, the original title holder, Mrs Culver, "did
not comply with the formalities demanded by Article 15 of the Law of Mines"
in transferring title to Mr Torres.
In a ruling on the procedures that took place, the court determined
otherwise and in favour of Mael. It said the transfer procedure followed by
Torres and Mael was valid.
Wrote Judge Gomez in 1991: "The assignment of rights on the concessions of
alluvial gold mines denominated Cristina 4 and Cristina 6 made by citizen
Do Culver Witney de Lemon to Ramon Torres . . . was made by the transaction
that they registered with the First Court of First Instance in Commercial
Matters (in Miranda) dated on April 16, 1986 . . . Now then, the truth is
that neither the assignor nor the assignee gave notice personally to the
Ministry of Energy and Mines; however, the court before which the above
mentioned transaction was registered gave notice of such a fact to the
ministry, by remitting to it certified copy of the instrument containing
the transfer, whereby the objective aimed at by Article 15 of the Law of
Mines was certainly achieved."
Continues the judge in her ruling: "The court observes that, in the first
place, the administration (ministry) failed to comply with its obligation,
inasmuch as it having been informed of the transfer of the mining
concessions and having received certified copy of the instrument containing
the same, it must have proceeded to publish it in the official Gazette of
the Republic of Venezuela, for the purpose of complying with the last part
of Article 15 of the Law of Mines.
NO POINT IN POSTING, JUDGE SAYS
In a notable and usually overlooked section of her 1991 ruling, Judge Gomez
notes that the rights of Mael to enjoy the transfer exist irrespective of
whether or not the notice is ever physically posted in the official gazette
- a purely housekeeping act that eventually took place in May 1997. This
posting has continually been gloated about by Crystallex as the definitive
act of recognizing its rights to Cristinas 4 and 6. In fact, the judge had
ruled that the 1986 transfer from Mr Torres to Mael did, indeed take place.
Whether or not further court cases from KRY were required - or were simply
promotable window dressing - is another matter.
Said the judge: "Now then, the said omission may not be imputed with
prejudice to the administered party's rights, by declaring that the
assignment has not been perfected because of not having been published in
the Official Gazette of the Republic of Venezuela, because if that had been
the intention of the legislator, the latter would have been expressly set
forth."
That statement did not prevent Crystallex and Mael from going back to court
in 1996 and 1997 to obtain further rulings that reordered the government to
physically post the Torres-Mael transfer in the official gazette.
So why all that lawyer time and expense - over i-dotting and t-crossing -
to perfect past rights that were subsequently be signed away by Mael?
Mr Oppenheimer is disinclined to answer that question, or any others, but
Mr Leggatt tried his hand at explaining the judicial fortitude of KRY and
Mael. "That's been our position all along," he says, explaining the
futility and pointlessness of the move. "It's a regulatory detail and
doesn't have any effect on the underlying title, which had been forfeited
and returned to the government and then granted to Placer Dome's joint
venture."
Still, Judge Gomez was insistent Mael be able to reconfirm its predated
alluvial gold rights; the bedrock rights were not mentioned by the court,
even though the Torres-Mael transfer introduced them. She called the
transfer of alluvial rights "perfectly valid", "has been proven", and the
appeal for the annulment of Resolution No. 29 against the transfer "is
legally justified."
The October 16, 1996 decision reaffirmed the May 9, 1991 ruling.
Conspiracy and corruption theories notwithstanding, the reason the
government refused to obey the court and simply gazette the 1986 change of
ownership is not known because no official explanation from the government
has been made public. It is speculated, however, that in addition to the
notion that the posting was of little consequence, events at that time were
in motion that would result in the waiving by Inversora Mael of any rights
with regard to the Cristinas concessions.
Indeed, in July 30, 1991, Mael waived its right to make any kind of title
challenge over Las Cristinas in exchange for concessionary benefits handed
out by CVG. That agreement took place well after Mael's "title victory" of
May 9, 1991.
CONFUSING THE COURT
Judge Gomez in her 1996 ruling also noted that on May 16, 1996, a four-man
team of Mael lawyers filed a petition in court to "abstain from approving
the above mentioned waiver." Apparently Mael, in a convoluted and pointless
motion, filed a request for the court to disregard the waiving of the
application of its May 9, 1991 decision, which was firm and final.
Judge Gomez appeared to have difficulty in understanding what it was the
Mael team wanted from the court. She said lawyer Jesus Garcia Arenas, "in a
most confused manner, waived the recourse brought," adding: "In the first
place, this court must emphasize that it considers that what the attorney
in fact of the plaintiff intends to waive is the appeal for annulment for
illegality filed, which gave rise to this present trial. This is equivalent
to intending to waive the suit."
The intentions of Mael's confused motion are no clearer today, but Judge
Gomez denied it and Mael's lawyers appear to have let the matter drop.
DON'T WORRY, WE'LL CALL
Stockwatch has been attempting to gain comment from the company's board of
directors about the various court rulings and other questions, including
those arising from an allegation made by congressman Acosta that it does
not have an appeal before the courts regarding the "absolute nullification"
of title to the so-called Carabobo concessions.
To date, those attempts have been unsuccessful, despite near daily messages
that were left for New Jersey-based Mr Oppenheimer since March 17.
One call, however, was received from a Richard Marshall early on Tuesday,
March 31. Mr Marshall, who uses the title vice-president, says Mr
Oppenheimer is "going to be unavailable for the next couple of days,"
adding: "We'll be happy to try to put something together for a discussion
with he and the attorneys." Which Crystallex attorneys - those familiar
with the case in Caracas, or those briefed in libel law - Mr Marshall did
not say.
Mr Marshall did, however, appear content to suggest the company's president
may not be available for comment until after the court rules on whether to
admit its appeal of the July 15, 1997 decision. (That decision bars
Crystallex from suing the government over its granting of the gold rights
to Minca.) "I'm not saying after," Mr Marshall says in muddled obfuscation.
"I'm saying obviously, once a court issues a decision, people will know
exactly where the ball's fallen and there'll be less rush to judgement."
Uh-huh.
EXPERTS OFFER OPINIONS
Crystallex advocates say there is evidence that supports their position
that Mael never waived its rights with regard to Cristinas and that the
court decisions on gazetting the title transfer from Mr Torres to Mael in
1986 have effect today.
In a curious chat site posting on the Internet, a letter written by a
blue-chip expert appears to endorse Crystallex's position. Dr Roman Duque
Corredor, described as a former professor of mining and oil law at two
Venezuelan universities, as well as a former justice of the Political
Administrative Hall of the Supreme Court of Justice, appears also to agree
with KRY that because it was ruled Mael took ownership in 1986, then
Crystallex should be the owner today.
The undated, unsigned letter is silent on the reason for its existence.
Usually such expert opinions state clearly who commissioned them, and for
what purpose. The unanswered question that arises is its reason for
existing.
Further, it is not known if the document was ever entered as evidence in
court. Certainly, it was not cited in any of the official court records
reviewed by Stockwatch. Accordingly, it is unknown whether the retired
professor was a paid consultant for Crystallex or whether his legal opinion
was rendered free of charge in the interests of fundamental justice.
In addition, a key portion of the document appears to have words missing,
and at least one part is incorrect.
"The mining rights over the deposits of the Cristina 4 and 6 concessions
belong (sic) Inversora Mael, CA since, according to a decision of the
Political Administrative Hall of the Supreme Court of Justice dated May 9,
1991, 'The acquisition of such concessions by Inversora Mael is valid since
May 16, 1986.'"
Besides the apparently missing words in the first sentence, Dr Corredor's
direct quotation cannot be found in the May 9, 1991 ruling - at least, not
in the version found in Crystallex's BCSC public file.
Dr Corredor also says the waiver agreement between Torres-Mael and the
executors of the unclaimed estate of Mrs Culver in July 1991, "had the
intention of establishing the basis for a future negotiation that never
took place." He adds: "Thus, the waivers that Inversora Mael made with
respect to its rights were not perfected because the mentioned negotiation
did not take place and this was a condition precedent agreed between two
parties."
Placer's lawyers in Caracas have responded to questions about Dr Corredor's
statement regarding the supposed negotiations and how this may or may not
have affected Mael's July 1991 waiver.
In an informal written reply, a Placer legal adviser says nowhere in the
waiver agreement of July 30, 1991 was there any mention of further
negotiations. "In fact, they (Mael) obtained at least four properties for
waiving their possible rights in Cristinas," the legal source says. "Some
of these mining properties have been negotiated by Mael and have kept
others. They are still paying surface taxes on some of them. Obviously,
they don't believe that there was a need for future negotiations."
Crystallex-Mael lawyer Ricardo Cottin says Mael "waived its right to claim
compensation damages against CVG due to the illegal exploitation of its
concession. In exchange, CVG awarded four mining contracts to Inversora
Mael."
Oddly, Mr Cottin says that in the waiver agreement, Mael "emphasized the
validity of its ownership rights over Cristinas 4 and 6." Mr Cottin did not
quote the appropriate clause of the waiver that would support his
contention. Further, he says, the agreement "had no provisions whatsoever
regarding the renouncement, waiving, transfer or extinction of Inversora
Mael ownership rights over Cristinas 4 and 6."
This appears to place Mr Cottin squarely in conflict with Justice Lopez,
who in her July 15, 1997 ruling quoted Minca-CVG lawyers in the court
record as saying the July 30, 1991 waiver "provides for the abandonment by
the now appellant (Mael) to any action relating to Las Cristinas
concessions."
In any event, Mr Cottin's letter continues, such a waiver "would have been
invalid" because according to the mining law, the "renouncement, waiving,
transfer or extinction of concession rights must be made" before the
ministry.
Not by Justice Lopez, nor any of the many submissions in the July 15, 1997
ruling - nor, indeed, in any of the four court cases reviewed - was it
mentioned that such a waiver would fail to agree with the mining law.
Three days after the judge's July 1997 decision, however, Mr Oppenheimer
told investors: "The court has once again confirmed that Mael is the sole
registered title holder for the concession." He added that at no point in
her ruling was it even suggested that anyone else but Mael owns Las
Cristinas.
Crystallex's president is extremely careful about what he says and who he
says it to. Northern Miner editor Vivian Danielson tried to pin down Mr
Oppenheimer for comment at the Miami mining-investment conference held in
March, but he turned away after saying, "I'm not going to comment on
Placer's statements."
Mr Oppenheimer does, however, chat with Roy Carson, editor of the
pro-Crystallex VHeadline/VENews Internet website which complains that the
mainstream media cannot get a handle on the fact that the courts have
repeatedly affirmed Crystallex's ownership rights. "The North American
media still has to wake up to the fact that the supreme court has already
established the title to Las Cristinas 4 and 6 as belonging to Inversora
MAEL, which is a subsiduary (sic) company of Crystallex International," Mr
Carson writes in an April 9 posting. "But it's doubtful if that the
AWAKENING of the media will occur simply as the result of a fourth ruling
clearing the legal pathway to Mael's title by the removal of only eight or
all 11 resolutions erroneously placed on the property" by the government.
Mr Carson's latest Crystallex story had only two statements from Mr
Oppenheimer. One was the hopelessly mangled metaphor: "We don't make a
practise of counting our chickens before, but quite a few of them have
already been hatched."
His second comment is: "It was interesting to see, in a recent Stockwatch
piece, that PDG was actually admitting that it didn't have the rights . . .
that it has only work contracts with the CVG!"
The Carson story also carried a doting account of recent events at
Crystallex, including encouraging developments at its Albino mine site, and
the fact that Las Cristinas 4 and 6 "is NOT the only focus of KRY
management's intentions." According to Mr Carson's heavily caps-locked chat
with Mr Oppenheimer, Venezuelan families left in abject poverty - "kicked
off the land" - by Placer's joint venture with CVG are now gainfully
employed by Crystallex.
An interview with Placer officials was not included in the April 9 story,
but Mr Carson offers the inexplicable comment that PDG's goose "is more
than simply cooked," and: "It'll be more than simply painfully obvious to
the mandarins at PDG that not only their bridges but the last boat is
burned when the (supreme court) does in fact drop the fourth (court ruling)
on their tender toes."
Mr Oppenheimer remains unavailable for either sensible comment or mangled
metaphors.
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