Court filing says former directors pillaged it
LES BLUMENTHAL; The News Tribune
Last updated: August 27th, 2007 01:23 AM (PDT)
WASHINGTON, D.C. – The heads of one of Mexico's wealthiest families and
other former executives of Asarco "systematically liquidated" its most
valuable assets, leaving the mining and smelting company in bankruptcy
and facing billions of dollars in environmental and asbestos-related
claims, according to a new court filing.
The complaint, filed by a group of Asarco's creditors, seeks at least
$100 million in damages from German Larrea Mota-Velasco and his brother,
Genaro Larrea Mota-Velasco, along with seven other former directors and
officers of Asarco. At the same time they were running Asarco, the
Larreas and others held similar positions with Asarco's parent company,
Grupo Mexico, S.A. de C.V.
"Almost from the beginning, the actions by the directors and officers
demonstrated that their loyalties were to Grupo Mexico … resulting in
devastating financial loses to Asarco," according to the complaint.
Officials at Grupo Mexico did not return phone calls or an e-mail
Among the allegations are that the nine named in the complaint
engineered the 2002 sale of Asarco's majority interest in two highly
coveted Peruvian copper mines to another of Grupo Mexico's subsidiaries
in a "sweetheart deal" worth about $765 million. By some estimates, the
mines then were worth more than $1 billion. Today, as the price of
copper has soared, they could be worth $7 billion to $8 billion.
Washington state, which has filed $600 million worth of environmental
claims against Asarco, did not join in the complaint. But the state
could benefit if the mines were returned to Asarco and the company had
more cash to pay off claims.
"This case keeps getting layers added to layers," said Elliott Furst, a
senior counsel in the Washington Attorney General's Ecology Division. He
said the state was too focused on proving its environmental claims to
join in the case against Grupo Mexico and Asarco's former directors and
For more than 100 years, Asarco operated a copper smelter on the border
of Tacoma and Ruston. The state claims arsenic, lead and other toxic
substances emitted from the smelter contaminated more than 1,000 square
miles in Pierce, Thurston and King counties.
The smelter, closed in 1985, has been demolished, the site mostly
cleaned and sold to a developer. The state, however, insists that water,
air and soil were contaminated in the tri-county area. It will have to
defend its claim in late September in the Texas bankruptcy court hearing
Washington state's claim is the second-largest filed. Overall, nearly
$11 billion worth of environmental claims have been filed by 16 states,
two Indian tribes, the federal government and private parties. If Asarco
is unable to pay for the environmental cleanups at more than 75 sites
nationwide, federal and state taxpayers might have to foot the bill.
In addition, 95,000 asbestos-related claims have been filed against
Asarco, up to $2.7 billion.
Grupo Mexico, which bought Asarco in 1999, is the third-largest copper
producer in the world. The Larrea family is considered part of Mexico's
"fantasticos," the 100 or so superrich families in that country who are
socially, politically and economically connected.
Though he wasn't named directly, the complaint suggests that another of
Mexico's superrich, Carlos Slim, might have benefited from the sale of
the Peruvian mines.
Slim, who made much of his fortune in the telecom industry, might have
recently surpassed Microsoft founder Bill Gates as the richest man in
The complaint quotes Genaro Larrea as saying Slim, a "close associate"
of Grupo Mexico's principals, and his Mexican bank had bought $100
million of Asarco bonds at a deep discount. As part of the proceeds from
the mine sale, those bonds were paid off at face value, according to the
Suing the directors and officers of a company that has sought bankruptcy
protection is not unusual.
"It is not uncommon to bring an action against officers and directors of
a bankrupt company for breaching their fiduciary responsibilities," said
Leif Clark, a University of Texas law professor and a federal bankruptcy
judge. But in the Asarco case, Clark said, it might become complicated
because those named in the complaint are residents of Mexico.
According to the complaint, the former Asarco officials not only
stripped the company of its interest in the Peruvian mines, but also
neglected Asarco's core mining business, sold lands with confirmed
copper reserves at raw land prices and cashed in insurance policies that
covered potential environmental and asbestos-related liabilities to fund
The nine directors and company officials resigned after the Peruvian
mines were sold to Americas Mining Corp., a Grupo subsidiary.
Asarco is now being run by directors approved by the bankruptcy judge.
The complaint was filed in the bankruptcy court earlier this month. The
case is scheduled for trial next spring.
Even as the legal battles unfold, Furst said some banks and other
financial institutions have approached Washington state and other
claimants in the bankruptcy about buying their claims at a discount.
The banks, believing the demand for copper worldwide will continue to
grow, hope the claims they buy at a discount might eventually be worth
more or, as Asarco emerges from bankruptcy, they could receive stock in
"There is a lot of speculation Asarco could be worth more than people
think," Furst said. As for Washington state selling its claims, Furst
said that "it might make sense to do it at some point."
Les Blumenthal: email@example.com
Originally published: August 27th, 2007 01:23 AM (PDT)
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