To all
I obtained a copy of the DEC 4 1998 Solv-Ex filing NM District Court in Bernalillo (ABQ)It's 24 pages long so get confortable or hit the next key. It was OCR'd with a dyslexic scanner, my apologizes for any mis-scans. If you need an accurate copy I suggest you contact the clerk.
SI doesn't seem to like very long post so I will break into smaller parts.
SECOND JUDICIAL DISTRICT COURT ENDORSED
COUNTY OF BERNALILLO FILED IN MY Of Fice THIS ~
STATE OF NEW MEXICO d
DEC 0 41998 ~
SOLV-EX CORPORATION and ,3.e_° 9 ~ ~
JOHN D. HENTSCHEL, d/lo/a clerk District Court b
CHARTER OAK CAPITAL, ;5
Plaintiffs
vs.,
vs.
DEUTSCHE BANK AG, DEUTSCHE MORGAN
GRENFELL, INC., MORGAN GRENFELL
ASSET MANAGEMENT LTD., PARKER
QUILLEN, QUILCAP CORPORATION,
MARTIN ZWEIG, ZWEIG ADVISORS,
MICHELLE SAR IAN, FAHNESTOCK & CO., INC.,
GEORGE VOELKER, TIM RICE, RICE ICE,
VOELKER BROS. & FRANTZEN, LEE
MIKLES, MAR K MILLER, MIKLES/MILLER
MANAGEMENT, INC., STANLEY TRILLING ILLING,
TRILLING PARTNERS, PAINE WEBBER GROUP,
INC., MANUEL ASENSIO, ASENSIO & CO., and
WEIR-JONES ENGINEERING CONSULTANTS LTD,
Defendants.
CV- 98 11647
COMPLAINT TO RECOVER DAMAGES FOR INJURIES FROM FROM
BREACH OF CONTRACT, FRAUD, AIDING AND ABETTING TORTIOUS
CONDUCT, INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE,
BREACH OF FIDUCIARY DUTY, AIDING AND ABETTING BREACH OF
FIDUCIARY DUTY, UNJUST ENRICHMENT CONSPIRACY, CONSPIRACY AND
VIOLATION
OF THE NEW MEXICO SECURITIES ACT ACT OF 1986, AND FOR
IMPOSITION OF A CONSTRUCTIVE TRUST
By their attorneys, plaintiffs Solv-Ex Solv-Ex Corporation and John D. d/lo/a
Charter Oak Capital, file this this Original Complaint against defendants Deutsche Bank A, Deutsche
Morgan Grenfell Inc., Morgan Grenfell Asset Management Ltd. (collectively, the "Deutsche Bank
defendants"); and Parker Quillen, Quilcap Corporation, Martin Zweig, Zweig Advisors, Michelle
Sarian, Fahnestock & Co., Inc., George Voelker, Tim Rice, Rice VoeLker Bros. & Frantzen, Lee
~:
Mikles,Mark Miller, Mikles/Miller Management Inc., Stanley Trilling, Trilling Partners, Paine Webber Group, Inc., Manuel Asensio, Asensio & Co., and Weir-Jones Engineering Consultants Ltd. (collectively, the "Short Seller defendants"). Upon knowledge with respect to themselves and their own acts, and upon information and belief with respect to all other persons and matters, plaintiffs allege as follows:
Nature of the Action
I. Plaintiffs bring this action against a coterie of short sellers of Solv-Ex stock who mounted a malicious campaign to destroy it as an ongoing concern. In so doing, they conspired to breach confidentiality agreements with plaintiffs, to disrupt their valuable business opportunities, and to widely publish -- including within this State -- numerous lies and half-truths about Solv-Ex. These defendants acted solely out of avarice, with no regard for the wrongs they perpetrated or harm they caused to plaintiffs or the public.
2. Likewise, Solv-Ex asserts claims against various Deutsche Bank entities. Through the covert activities of their key employee/agent Peter Young and his accomplices, they misused confidential information of Solv-Ex and manipulated the market for its stock, all in breach of their confidentiality commitments. Their acts were part of an audacious and illegal scheme to enrich themselves and further their interests, without regard for the damages caused to others.
3. The inevitable effect of defendants' wrongdoing was to whipsaw Solv-Ex in the marketplace, fatally crippling its effort to finance its business. Once among the most promising New Mexico companies, one valued in the market at over $800 million, Solv-Ex was forced into bankruptcy last year. It only recently emerged, after extensive efforts to reorganize. The damages
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that defendants have caused are grievous. Accordingly, plaintiffs have come to this Court to recover the massive sums they are owed by defendants.
Parties
Plaintiff Solv-Ex Corporation is incorporated under the laws of New Mexico. Since the early 1980s, it has had its principal place of business in this County, currently at 2121 MenaulNE, Albuquerque, New Mexico.
5. Charter Oak Capital is an assumed name registered under the laws of Califomia to plaintiff John D. Hentschel, a resident of California. Charter Oak maintains its principal place of business in California.
6. Defendant Deutsche Bank AG (' DeutscheBank") is organized under the laws of the Federal Republic of Germany, with its principal place of business in Frankfurt, Germany.
7. Defendant Deutsche Morgan Grenfell, Inc. ("DMG") is incorporated under the laws of Delaware, with its principal place of business in New York City. It now evidently operates under the name Deutsche Bank Securities, Inc.
8. Defendant Morgan Grenfell Asset Management Ltd. ("Morgan Grenfell") is organized under the laws of the United Kingdom, with its principal place of business in London, England.
9. Defendant Parker Quillen is a resident of New York and is the owner and principal officer of defendant Quilcap Corporation.
1 O. Defendant Quilcap Corporation is incorporated under the laws of New York, with its principal place of business in New York City. It now evidently operates under the name Quilcap International Corporation.
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11. a resident of New York.
12. Defendant Zweig Advisors is an investment advisory firm organized under the laws of Delaware, with its principal place of business in New York City.
13. Defendant Sarian is an employee of defendant Fahnestock & Co., Inc. and a resident of New York.
14. Defendant Fahnestock & Co., Inc. is incorporated under the laws of New York, with its principal place of business in New York City.
15. Defendants Rice and Voelker are principals of defendant Rice, Voelker Bros. & Frantzen. They both are residents of Louisiana.
16. Defendant Rice, Voelker Bros. & Frantzen ("Rice Voelker") is incorporated under the laws of Louisiana, with its principal place of business in New Orleans. It now evidently operates under the name Rice, Voelker, L L.C.
17. DefendantMikles/Miller Management, Inc. ("Mikles/Miller")is incorporated under the laws of California, with its principal place of business in Santa Monica, California
18. Defendants Mikles and Miller are principals of defendant Mikles/Miller Management, Inc. They both are residents of California.
19. Defendant Trilling is a senior vice president in the Los Angeles office of defendant Paine Webber Group, Inc. and is a principal of defendant Trilling Partners.
20. Defendant Trilling Partners is an affiliate of defendant Paine Webber Group, Inc., with its principal place of business in California
Defendant Martin Zweig is a principal of defendant Zweig Advisors and is
21. Defendant Paine Webber Group, Inc. is incorporated under the laws of Delaware, with its principal place of business in New York City.
22. Defendant Manuel Asensio, a resident of New York, is the chairman, chief executive officer, and president of defendant Asensio & Co.
23. Defendant Asensio & Co. is incorporated under the laws of Delaware, with its principal place of business in New York City.
24. Defendant Weir-Jones Engineering Consultants, Ltd. ("Weir-Jones") is a Canadian technical consulting firm, with its principal place of business in Vancouver, British Columbia, Canada.
Jurisdiction and Venue
25. Jurisdiction and venue are proper in this Court. Material transactions giving rise to plaintif fs' causes of action occurred in this County, and Solv-Ex maintained its principal place of business in this County during all relevant time periods.
26. No federal claims are expressly or impliedly stated herein. The citizenship of the parties is not diverse. This lawsuit cannot properly be filed in, nor removed to, federal district court.
Factual Allegations
27. Solv-Ex is engaged in the development of processes for the extraction of bitumen from oil sands, among othertechnologies. Bitumen is a hydrocarbon compound that can be upgraded into pipeline quality crude oil. Solv-Ex has developed a patented process for the extraction of bitumen to produce product at commercially attractive costs. It has also developed a patented process for recovery of minerals, including alumina, from the tailings residue of the oil
sands extraction process. Solv-Ex largely developed and has tested its patented processes at a pilot plant operation here in Albuquerque.
28. The operational processes, test methods, and results achieved at Solv-Ex's facilities are confidential and commercially valuable confidential information. Likewise, its feasibility studies, financial plans, third-party evaluations, marketing plans, and forecasts are confidential. In addition, many of Solv-Ex's developments, future planning, and planned operational details are confidential and subject to the same precautions. (This and other nonpublic Solv-Ex information collectively will be referred to hereafter as "Confidential Solv-Ex Information.")
29. During the relevant time periods, Solv-Ex owned properties and conducted operations in the province of Alberta, Canada, where oil sands exist in commercial quantities. SolvEx's oil sands leases in Alberta were estimated to contain four billion barrels of recoverable oil. To exploit its holdings in Alberta and to prove the commercial viability of its processes, Solv-Ex undertook to build a plant on its Alberta properties to process bitumen. Financing the construction required that Solv-Ex raise funds from both private and public sources.
30. In 1995, Solv-Ex retained Charter Oak to assist in acquiring. Charter Oak was entrusted with certain Confidential Solv-Ex Information to which interested parties were granted access, upon agreeing to keep the informationconfidential and to use it only for limited purposes associated with Solv-Ex's financing. In the event Charter Oak was successful in securing the financing, it was entitled to certain fees and commissions.
31. The conduct of defendants rendered Solv-Ex unable to secure financing sufficient to complete the construction of its Alberta plant, among other endeavors. Their conduct included the misuse of Confidential Solv-Ex Informationby certain short sellers, for the purpose of
denigrating Solv-Ex stock and thereby reaping short seller gains; and by the Deutsche Bank defendants, for the purpose of cornering Solv-Ex stock and thereby benefitting investment portfolios owned or controlled by them. The actions of defendants also impacted Charter Oak's ef forts to locate financing, depriving it of fees-and commissions to which it otherwise would have been entitled.
Short Seller Defendants
32. In early 1996, the Quilcap, Zweig, and Mikles/Miller defendants contacted Charter Oak to express their interest in participating in a debt financing for Solv-Ex. This was a ruse. In fact, they had no intention of assisting either Solv-Ex or Charter Oak, but were instead using this approach to obtain access to Confidential Solv-Ex Information.
33. At the time, the Quilcap, Zweig, and Mikles/Miller defendants already had assumed a short position in Solv-Ex stock or were actively working with others who had shorted Solv-Ex stock. (Short sellers agree to sell stock they do not own in the expectation that the market price of the securities will decline before the date they are to deliver the shares. In this way, they seek to profit from downward price movements of the stock.) By February 15, 1996, the short interest in Solv-Ex had risen to 2.75 million shares, more than four times its level the prior year.
34. On January 31, 1996, the Quilcap defendants executed a Solv-Ex confidentiality agreement. They pledged, among over things, not to use Solv-Ex information for any purpose other than financing and not to copy, distribute, or reproduce confidential information without the prior written consent of Charter OaL The MikleslMillerand Zweig defendants executed identical confidentiality agreements on February 9, 1996 and February 12, 1996, respectively.
35. These defendantsdeceived Plaintiffs by misrepresenting/hat these defendants intended to use the Confidential Solv-Ex Information in connection with the debt financing then being considered and for no other purpose. Thereafter, in reliance on representations made by the Quilcap, Zweig, and Mikles/Millerdefendants, including in the executed confidentialityagreements, Charter Oak disclosed Confidential Solv-Ex Information to them and arranged for direct communication between them and Solv-Ex's management.
36. Shortly after the execution of its confidentiality agreement, the Quilcap defendants falsely represented that they had retained Weir-Jones to assist them in evaluating SolvEx's planned operations and projects, for the purpose of evaluating Solv-Ex for financing purposes. On February 3, 1996, they requested that Solv-Ex representativesspeak directly with representatives of Weir-Jones. Reasonably relying on representations of the Quilcap defendants, representatives of Solv-Ex discussed its plans, operations, processes, and projects with Weir-Jones.
37. The Zweig, Quilcap, and Mikles/Miller defendants and Weir-Jones then conspired with other short sellers of Solv-Ex stock to injure the company. They shared with them Confidential Solv-Ex Information and enlisted their assistance in misusing the information to drive down Solv-Ex's stock. The objective of their scheme was to undermine Solv-Ex's efforts to locate financing and destroy the value of its stock. Willing participants in the scheme included defendants Sarian and her employer Fahnestock; Rice, Voelker, and their investmentcompany; Trilling and his employers Trilling Partners and Paine Webber, and Asensio and his company.
38. Among other Confidential Solv-Ex Information, the Zweig, Quilcap, and Mikles/Miller defendants wrongfully obtained information/hat Solv-Ex was involved in discussions with a potential underwriter for a public offering of its securities. One or more of the Short Seller
defendants thereafterdisclosedand misrepresented/his inforrnationto Dan Dorfrnan, then a financial reporter on CNBC, who repeated the misrepresentations to the public. In addition, one or more of the Short Seller defendants, including Sarian, Zweig, Miller, and Rice Voelker, contacted the potential underwriterwiththe intention of interfering with Solv-Ex's relationship. As a result, the prospective underwriter refrained from further discussions at that time.
39. The Short Seller defendants also orchestrated the publication of a critical February 16, 1996 article in Barron 's magazine concerning Solv-Ex, which was based in part on Confidential Solv-Ex Information. The article, which is incomplete and inaccurate, was in fact prepared by a writer who relied largely or entirely on the Short Seller defendants' misrepresentations, having never visited Solv-Ex nor contacted it for information regarding its technology. The Short Seller defendants intended that the Barron 's article damage Solv-Ex. They knew, according to one short seller, that Solv-Ex stock would "get slammed hard on this."
40. Despite these attacks, Solv-Ex diligently tried to complete its needed financing. It announced on March 1 1, 1996 a placement of $40 million for 1,081,967 shares of its stock, done through FIBA Nordic Securities (UK) Ltd. ("FIBA"). Ten days later, on [March 21, 1996, Solv-Ex announced a second placement of $30.69 million for a like number of shares of its stock, again done through FIBA.
41. The Short Seller defendants then re-doubledtheireffortsto destroy Solv-Ex. Having amassed a large and risky short position in its stock, the Short Seller defendants were desperate to sabotage Solv-Ex and its financing efforts and prevent completion of its Alberta plant and commercialization of its technology. In the words of one of defendant Zweig's agents (as
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reflected in a March 20, 1996 e-mail), if Solv-Ex's financing was successful, these defendants knew "we'd be screwed pretty badly."
42. The centerpiece of their renewed assault was the illegal disclosure of Confidential Solv-ExInformationprovidedto Weir-Jones,including its report critical of Solv-Ex's technology. On the pretense that it was evaluating Solv-Ex's technology for potential investors, Weir-Jones secured access to Solv-Ex plans, strategies, and other business secrets. In fact, WeirJones highlighted in the written report that it "contains confidential and proprietary information."
43. Acting in concert with other Short Seller defendants, defendant Quillen publicized the Weir-Jones report to influential third parties. These defendants knew that the report was intentionally incomplete and inaccurate and was in fact formulated with their connivance. Both the contents and the disclosure of the Weir-Jones report were intended to damage Solv-Ex.
44. At the behest of the Short Seller defendants, on March 25, 1996, CNBC reporter Dorfman, one of the recipients of the report, broadcast another negative story on Solv-Ex. He specifically cited the Weir-Jones report for the proposition that Solv-Ex's technology "may not work." In addition to Dorfman, the Short Seller defendants provided a copy of the Weir-Jones report to five Canadian stock analysts, three other media representatives, and at least one member of the Parliament for the Province of Alberta, Canada, where Solv-Ex owned its extensive oil sands properties and was building its processing plant.
45. Other Short Seller defendants, including Rice Voelker and Miller, obtained additional confidential inforrnationconcenung the Weir-Jones work. On February 7, 1996, Voelker received from Quillen a transcription of a confidential telephone conference call held between representatives of Solv-Ex and Weir-Jones on February 5, 1996. On February 29, 1996, Miller -10
contacted Weir-Jones directly, which disclosed confidential informationconcerning technical aspects of Solv-Ex's Alberta plant.
46. The Short Seller defendants also orchestrated the publication of a damaging March 22, 1996 Wall Street Journal article entitled, "U.S. Probes Trading in Stock of Solv-Ex." Sarian, Miller, Zweig, and perhaps other defendants provided intentionally incomplete and inaccurate informationto the article's author concerning Solv-Ex and its of ricers, which the article repeated to the world. |
