Monday, September 15, 2008

Asarco Followup-5

"Mexican mining company Grupo Mexico SAB [GMSAB] has unveiled its plan to win back control of Asarco LLC and take the copper-mining company out of bankruptcy, a proposal that calls for investing $2.7 billion in Asarco to repay creditors. ... In its bankruptcy plan [GMSAB] calls [Vendanta's] proposed sale 'improper' because it has made a higher offer for Asarco", David McLaughlin at the WSJ, 28 August 2008.

"A U.S. judge found that Mexican mining company [GMSAB], the world's third biggest copper company by production, commited fraud against U.S. mining company Asarco LLC--the latest twist in a long-running legal battle over control of the U.S. firm. Judge Andrew Hanen in Brownsville, Texas said the Mexican company defrauded the U.S. firm's creditors when, in 2003, it transferred Asarco's stake in its valuable Peruvian copper company to another [GMSAB] unit shortly before Asarco declared bankruptcy. In Saturday's decision, disclosed on Tuesday, the judge said the Mexican company acted 'to structure and accomplish the ... transfer, knowing that the transaction as contemplated would constitute a transfer in fraud of Asarco's creditors. ... For years, critics of the Asarco maneuver have argued that [GMSAB] put its U.S. unit into Chapter 11 to avoid paying Asarco's liabilities, which amount to paying extensive environmental clean-up charges as a result of more than a century of mining and refining across the Western U.S. ... Attorneys for ... Asarco claimed victory and the company's bankruptcy-court appointed directors are asking for damages of $8 billion following the ruling. [GMSAB] issued a statement highlighting the judge's ruling to deny the plaintiffs punitive damages. ... But the court did find [GMSAB] hindered payment to some of Asarco's creditors. That opens the possibility that Juge Hanen could rule Asarco deserves to get its SPCC shares back. [GMSAB] is appealing that part of the ruling", my emphasis, Joel Millman at the WSJ, 3 September 2008.

I'll say again, GMSAB should never have been permitted to propose anything in this case.

There is less to Hanen's ruling than meets the eye. Absent a punitive damages award, what incentive has a "big shot" like GMSAB to avoid bad behavior? Again, where are the indictments? Hey Johnny Sutton, Texas most hated US Attorney, where are you? Didn't you decline to indict a Mexican national who had 743 pounds of marijuana in his car for drug smuggling, but sent Ramos and Compean, the "Border Patrol Two" to prison? Why haven't Asarco's executives and attorneys been indicted? Did Bush's direct this to secure favor with Mexico? Or is bankruptcy fraud, 18 US 152, only prosecuted against nobodys like Switzer? Hanan should have granted Asarco summary judgment on this one and ordered the SPCC shares returned. Here are my previous posts mentioning Asarco:

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