Canadian Shenanigans (updated and corrected) « Mining Blog

Canadian Shenanigans (updated and corrected)

9. November 2012,

Canadian Shenanigans

The From Money to Metal wiki database has just posted three new entries which have a lot in common. They relate to allegedly fraudulent schemes, used by private promoters to profit from boosting a mining company’s stock price – even when there’s little or nothing in the ground to justify doing so.

All three schemes were played out by Canadian citizens in North America.

Take Kelly Fielder. He’s alleged to have raised money for a capital pool company and defrauded the man who gave it to him; he’s also currently promoting a gold“ shell” company. See:

Then there’s Bobby Genovese, a flamboyant private equity and venture capitalist who’s been accused, along with others, of holding undisclosed control over tens of millions of shares in a US company called Liberty Silver. Allegedly this created a huge rally in the company’s share value, just before trading was suspended and the price collapsed. See:

Most intriguing perhaps is Tom Coldicutt, a former Vancouver stockbroker, currently facing civil fraud charges in the United States for an OTC-BB (Over The Counter Bulletin Board) “shell selling scheme”.

“Shell” (sometimes called “front” companies) are outfits, listed on a stock exchange or similar market, which may in reality have no assets to back their credibility. Unsuspecting, or naïve, investors who put money into them may end up in debt, while originators of the scheme become considerably better off – at least for a short while.

The United States Securities & Exchange Commission (SEC) claims that Coldicutt and his wife Elizabeth employed a network of nominee officers and directors that allowed them to create fifteen purported “mining companies”. According to the SEC, Coldicutt then sold the companies as shells, grossing US$4.8-million in dodgy profits [Stockwatch, 24 October, 2012; Street Wire, 23 October 2012].

The SEC mantains that the couple never intended to run the companies as exploration outfits, “merely form[ing them] to be sold as clean shells for the benefit of the Coldicutts and their network of corporate nominees”.

One example of this was a company called Mesquite Mining Inc, incorporated in October 2007 by one of Mrs. Coldicutt’s friends “who knew nothing about mining”. Although Mesquite raised $25,000 in a public offering purportedly made by 25 shareholders, “all of the money came from the Coldicutts”, according to the SEC.

Shell shock

Like “many other companies in the scheme”, Mesquite abandoned mining after obtaining its listing. In June 2009, Mr. Coldicutt negotiated an agreement to sell the company as a shell, obtaining $225,000. (The company then became Mesa Energy Holdings Inc., an OTC-BB oil and gas company whose share price went to $3.50 a share in 2010, but has now toppled to 17.9 cents.)

The other defendants in this case include Mr. Coldicutt’s office manager who allegedly convinced her sister and a friend to serve as nominee officers and directors of two Coldicutt companies. Another defendant is a former housekeeper to the Coldicutts which the SEC claims provided the names of 200 investors that purportedly subscribed to offerings in at least 12 of the Coldicutt companies.

Another defendant is San Diego lawyer Robert Weaver who “wrote opinion letters, served as securities counsel to the companies and helped prepare regulatory filings£. The final defendant is Mrs. Coldicutt’s son from a prior marriage, Christopher Greenwood. The SEC says he helped set up Las Rocas Mining Inc., a shell that Mr. Coldicutt ultimately sold for $760,000.

The Coldicutts have disputed the SEC’s contention that they only created the companies to sell them at a profit, arguing they were all formed to pursue genuine mining activities and only sold off as shells “after exploration activities showed [their properties] not to have commercial potential.”

At the time of writing, no trial date had been set for a hearing of the case.

However, it seems that the dark shadows, cast by the Bre-X scandal fifteen years ago, aren’t easily going to be dispersed. See:

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