Posted on Fri, Apr. 03, 2009
last updated: April 07, 2009 02:51:51 PM
WASHINGTON — A mining company controlled by one of Mexico's richest families has been ordered to pay Asarco an estimated $6 billion in stock and damages — money that eventually could be used to pay for the cleanup of dozens of seriously polluted mining and smelting sites across the West.
The order, by a federal judge in Texas, involved the "fraudulent transfer" of stock in a Peruvian mining company once owned by Asarco.
Asarco, a 110-year-old mining and smelting company based in Tucson, Ariz., filed for bankruptcy nearly four years ago. This week's judgment against Grupo Mexico SA de CV could help pay off more than $1 billion in environmental claims from Washington and eight other states, along with the federal Environmental Protection Agency.
The bankruptcy is considered the largest environmental-related bankruptcy ever, and the judgment is thought to be one of the largest ever ordered by a trial court.
"This is a complete victory, and the thing that is most satisfying is that a big part of money will go to environmental cleanup in the western United States," said Irv Terrell, a Houston lawyer who handled Asarco's case against Grupo Mexico.
Efforts to contact Grupo Mexico and lawyers for Americas Mining Corp., the Grupo subsidiary that held the Peruvian mine stock, were unsuccessful.
Grupo Mexico purchased Asarco in a highly leveraged buyout in 1999 to get its hands on Asarco's majority interest in two lucrative Peruvian copper mines, Terrell alleged in the case.
In a ruling in October, U.S. District Judge Andrew Hanen in Brownsville, Texas, agreed.
Hanen ruled that Grupo Mexico had fraudulently transferred Asarco's Peruvian mining interests to Americas Mining Corp. as part of a conspiracy designed to force Asarco into bankruptcy. Hanen said Grupo Mexico and Americas Mining directors had dictated the terms of the transfer to isolate the mines from Asarco's creditors, knowing that Asarco was teetering.
Asarco wanted the stock back, while Grupo Mexico-AMC continued to deny wrongdoing.
Hanen had hoped the two sides would reach a settlement, but when that failed he issued an order late Wednesday returning more than 260 million shares of the Peruvian mining stock to Asarco, along with $1.35 billion in monetary damages. Terrell said the stock was valued at about $4.7 billion based on the current share price.
"Justice has prevailed," said Joseph Lapinsky, Asarco's chief executive. "This award is for the benefit of Asarco's creditors in the bankruptcy proceeding and should assist the company in its effort to emerge from Chapter 11 in the coming months."
Terrell said he would not be surprised if Grupo Mexico appealed Hanen's judgment.
"I assume it will be appealed because it was so hard fought all the way," Terrell said.
For more than a century, Asarco operated mines and smelters throughout the West. When it entered bankruptcy, the company faced more than $11 billion in environmental claims involving 75 sites, including 20 federal Superfund sites, and 95,000 asbestos-related aims. Asarco also faced billions of dollars in claims from other creditors, including banks that had provided financing over the years.
In a separate but related case, U.S. Bankruptcy Judge Richard Schmidt in Corpus Christi, Texas, has whittled the environmental claims down considerably in recent years.
The claims by the banks and others were secured and will be paid first, while there is less certainty about how unsecured claims such as the environmental and asbestos ones will be paid.
Taxpayers could be on the hook for the cleanup if the bankruptcy claims are paid in full.
Sterlite Industries Ltd., an India-based natural resources company, has agreed to buy Asarco for $1.7 billion. But Elliott Furst, a senior counsel in the ecology division of the Washington State Attorney General's Office, said it had become clear that even with that offer, the environmental claims weren't going to be paid at "100 cents on the dollar."
Grupo Mexico still might challenge the sale to Sterlite and seek to regain control of Asarco. Following the bankruptcy, Grupo Mexico lost operational control of Asarco.
Mexico's Larrea family controls Grupo. Among those testifying in Hanen's court was German Larrea, the head of the family and one of the richest men in Mexico.
Asarco initially valued the Peruvian mining stock at more than $10 billion. But as the price of copper has dropped from its record high because of the global economic slowdown, so has the value of the Peruvian mining stock.
Sterlite Industries originally agreed to pay $2.6 billion for Asarco, but lowered its offer by roughly $900 million as the price of copper plummeted.
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