Mining Co. Pres Cleared of Fraud
DENVER (AP) _ The president of a mining company who announced a multibillion-dollar gold find in Bolivia was cleared of violating federal securities law.
Federal District Judge Weinshienk, in a ruling issued Friday in Denver, said Golden Eagle International President Terry Turner might have issued the announcement prematurely, but he was not reckless.
Weinshienk said Turner acted reasonably in concluding a well-credentialed geologist’s report of ``world-class gold reserves″ on the company’s mining properties was accurate. The report later was found to be flawed.
Turner’s announcement on May 22, 1998, triggered an increase in the Salt Lake City company’s penny stock, from 12 cents a share to a high of almost 60 cents before the Securities and Exchange Commission suspended trading.
The SEC alleged Turner knowingly or recklessly issued a false announcement, which reported Bolivian geologist Guido Paravicini’s discovery of an estimated 236 million ounces of gold in a mining region the company controls in Cangalli, Bolivia.
In a four-day trial, SEC attorneys argued Turner had not even thoroughly read Paravicini’s final report, which was later criticized by other experts as deeply flawed.
In September 1998, Golden Eagle reported in SEC filings there was insufficient basis to claim such staggering reserves. The stock price sank to 25 cents a share.
But securities regulators contend Turner continued to mislead investors because he didn’t issue a news release retracting the company’s initial claims.
Weinshienk said the company’s SEC filings gave sufficient notice of the study’s revised figures. But she strongly advised Turner, a mining lawyer, to either promptly remove the May 1998 press release from the company’s Web site or issue a new one saying the study contained flawed calculations.
Weinshienk rejected the SEC’s recommendations to fine Turner $50,000 and issue an injunction against him on the basis that he is likely to continue making exaggerated claims.
``The court is persuaded that there will not be a problem in the future,″ Weinshienk said. ``I’m sure he’ll consult with his securities attorneys in the future.″
Golden Eagle’s claim came in the wake of a worldwide slump in gold prices to less than $300 an ounce and a false report of a similar-sized deposit by Canadian Bre-X Minerals, whose claims turned into the largest scandal in the gold industry.