Utah copper mine deceived investors with fraudulent claims, SEC says
SALT LAKE CITY — A Utah mining company misled thousands of investors with false claims of huge copper deposits and nine-figure revenue projections, according to a Securities and Exchange Commission complaint.
Federal regulators allege Copper King Mining issued fraudulent public statements and press releases, sold unregistered securities and prepared false stock tradability opinion letters. Copper King acquired privately held Western Utah Copper Co., in 2008 to turn it into a publicly-traded company.
Copper King hired Midvale public relations firm Alexander Lindale to mount a campaign to attract investors that included billboards, celebrity endorsements and infomercials. The firm and its general manager Wilford R. Blum are named in the complaint as is Stephen G. Bennett, a disbarred attorney who handled the stock opinion letters.
In March 2009, Copper King hosted a media event at its site in Milford where former CEO Mark Dotson boasted of an "ocean of copper" that could rival the size of Kennecott's Bingham Canyon mine. He said it would employ 200 people.
Dotson posted on the company's website information such as the value of copper and silver extracted from the mine would exceed $1.2 billion within five years; the mill could process 2,500 tons a day and that revenues would hit $103 million annually, according to the complaint filed in U.S. District Court.
"Dotson knew that these claims were false and misleading," the complaint says. "In fact, Dotson knew that Copper King was permitted to mine only a single 20-acre parcel and that the productive life of the mine site was only two years, not 10 as stated on the company’s Internet website."
Copper King filed for Chapter 11 protection in May 2010 leading to Dotson's departure. John Bryan, who specializes in taking companies out of bankruptcy, became CEO. The alleged SEC violations occurred before he took over.
"We've cooperated and worked very closely with the SEC since the very beginning of this case," he said from his office in Los Angeles. "We're doing everything in our power to assist them."
Bryan said the company intends to comply with all SEC regulations and that he expects an amicable resolution.
"We cannot have any exaggerated data ever again. That's an absolute must for the business going forward," he said. He estimated the company drew in about 6,700 equity investors.
Copper King has paid $15 million to its senior secured creditors and anticipates filing a Chapter 11 exit plan in 30 days, though some hurdles remain, Bryan said. An investor has stepped in to fund the company moving forward.
Bryan said while Dotson's claims were exaggerated, there are "substantial" copper deposits at the site. Still, he said that needs to be studied and confirmed by an independent third party.
About 10 people currently work at the mine doing maintenance and reclamation, he said.
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