Bankruptcy Finagling

"Two court cases in Texas are set to begin Wednesday that will help determine the future of Mexican conglomerate Grupo Mexico SA [GMSA] and that of its former U.S. mining unit Asarco, a company the Mexican firm bought amid controversy a decade ago and lately placed in bankruptcy protection. ... Any bid will have to be rich enough to satisfy more than $1 billion in outstanding cleanup claims by federal and state governments against Asarco for environmental damage associated with a century of mining across the Western U.S.. ... Crucially, [GMSA] says it will submit an offer of its own. Also Wednesday, pretrial motions are being heard in civil proceedings due to begin in a U.S. district court in Brownsville, where Asarco's current mangement is suing [GMSA], alleging that the Mexican company stripped Asarco of its key assets and forced the company into bankruptcy to avoid paying its environmental obligations. An unfavorable ruling in the civil case could cost [GMSA] around $10 billion, including punitive damages. ... Essentially, Mr. [German] Larrea is hoping to win control of Asarco again in the bankruptcy case, so that if he loses the civil suit and must return assets to Asarco, he would arguably be returning them to another company under his control, say lawyers familiar with the case. ... Ironically, [GMSA's] core holdings in the state of Sonora had at one time had belonged to Asarco before being nationalized by previous Mexican regimes. In 1999, [GMSA] outbid U.S. mining leaders Phelps Dodge and Cyprus Amax Minerals to acquire Asarco. In 2004, [GMSA] shifted Asarco's controlling stake in another large mining unit, Southern Peru Copper Corp. [SPCC], into one of its other subsidiaries. ... A shift in federal law in the 1990s allowed companies to shed some environmental laibilities through bankruptcy, where governmental and outside groups seeking cleanup funds have to compete with bondholders, suppliers and other creditors. In February 2007, resolution of the bankruptcy proceedings was complicated when Asarco's trustees--appointed by the bankruptcy court--sued [GMSA], charging fraudulent conveyance in the [SPCC] transaction. ... Today, after five years of rising prices, the value of Asarco's [SPCC] shares would be valued at considerably more, up to $10 billion by some estimates", WSJ, 30 April 2008.

This case stinks. That indictments haven't been passed out like candy bars at Halloween, I see as another instance of Bush's DOJ not doing its job. I refer the DOJ to two cases: US v. Switzer, 257 F2d 139 (1958) and US v. West, 22 F3d 586 (1994). I concluded GMSA effected a fraudulent conveyance in the SPCC transaction. Such transaction might also be criminal under 18 USC 152, bankruptcy fraud. In Switzer, in 1949 a NY attorney divided a client, Berkeley Jewelers, into two entites, one held the assets the other the liabilities. One went bankrupt. The court held Switzer's conduct criminal. In West, West delayed his bankruptcy a year and a day from a transaction, thinking the trustee would ignore it. West's conduct was held criminal. Where is the DOJ to prosecute Larrea and any attorney who was involved in this fiasco? Nowhere as our State Department might object to such prosecution. I have followed Asarco for years. Full disclosure: I was once an Asarco stockholder and was surprised GMSA outbid Phelps Dodge and Cyprus. Within a few years it was obvious why.