Jaguar Financial alleges Glen Eagle US$115M bank confirmation a sham

Vancouver – Questions are being raised over the authenticity of Glen Eagle Resources‘ (GER-V) sources of as much as US$115 million in funding that it has said it secured to finance the now failed acquisition of a 45% stake in Kinbauri Gold‘s (KNB-V) Spanish assets.

Jaguar Financial (JFC-T) alleges a bank confirmation Glen Eagle received from its latest financier, a Middle Eastern company called Midco for Construction Works, is not an authentic document. The document, purporting to come from the Kuwait Finance House (KFH), a large Kuwaiti bank, and which is written in Arabic, is said by Glen Eagle to confirm Midco for Construction Works’ account balance of US$115 million.

But Jaguar Financial president Vic Alboini says it hired legal counsel in Kuwait through its law firm Skadden and associates in New York to investigate the veracity of the letter and that it has been informed by its lawyers in Kuwait that KFH says the letter was not issued by it. In a press release Jaguar Financial says KFH told its lawyers, who visited KFH’s offices, that the signature on the letter comes from a manager who last worked for the bank eight years ago, that neither the letterhead nor the stamp on the bank confirmation is KFH’s and finally that the way in which the letter is drafted does not conform to KFH’s style.

Glen Eagle president Jean Labrecque contests the allegations. “I was appalled and totally flabbergasted when I read the (Jaguar Financial) press release yesterday (July 20),” he says. Labrecque says it is all news to him and that the investors he is working with in the Middle East deny Jaguar Financial’s allegations.

In its own press release Glen Eagle questions Jaguar Financial’s role in the matter given that Jaguar Financial “has a direct interest in discrediting any financial assistance available to Glen Eagle and that the purported lack of authenticity is based on allegations by unnamed Kuwaiti legal counsel engaged by Jaguar.”

Jaguar Financial owns about 10% of Kinbauri’s shares and has opposed Glen Eagle’s acquisition of Kinbauri in favour of an all-cash takeover bid made by Orvana Minerals. But in calling into question Glen Eagle and its financial backers Jaguar Financial maintains that it is only trying to maximize its return from any transaction involving Kinbauri.

In response to the allegations Labrecque says Glen Eagle is conducting its own investigation into the matter and needs time to get all the facts. He also says he believes the money will, in the end, come through. “It looks like we are going to have reconfirmation of the bank and this time we’ll make sure it is notarized and everything,” Labrecque says.

Jaguar Financial, however, is not the only organization or individual to recently question the authenticity of Glen Eagle’s stated sources of funding. Both Kinbauri and an Ontario Superior Court judge have drawn similar conclusions in respect to two sources of financing Glen Eagle has announced since May.

First Glen Eagle said it arranged at least US$32 million from a consortium of European Banks, through partner Paradise Peak Holdings, a Costa Rican company run by a Canadian named Brian Newman who Labrecque says comes from a wealthy Quebec family in the construction industry. That US$32 million was the original source of funding that Glen Eagle said it had arranged in its letter of intent with Kinbauri to acquire a 45% stake in its Spanish assets.

Though Glen Eagle reported that the European Consortium fell through in early June, it also said at the time that it was still confident it could find more money through its partner Paradise Peak. Court documents in the case Kinbauri v. Glen Eagle Resources, filed after the deal did eventually fall apart, show that Glen Eagle then proposed to Kinbauri a second funding arrangement a day after it advised it of the failed European consortium.

This time Glen Eagle provided Kinbauri with letters which promised that Nicola Torciano, president of Fema Deutschland GmbH and the co-owner of Fraccari, wanted to purchase gold from Kinbauri’s future production in Spain and that a Swiss organization called Liberty Finanz & Trust would make US$35 million available to fund Kinbauri’s flagship asset, the El Valle/Carles project in northern Spain, through a Credit Suisse account, once, presumably Torciano, committed the cash.

The day after receiving these documents Kinbauri, however, terminated its agreement with Glen Eagle. In a press release Kinbauri questioned somewhat indirectly whether Glen Eagle would ever have been able to come through with the money. Kinbauri “advised Glen Eagle that it did not receive sufficient comfort that the new funding arrangements necessary to complete the transaction were available.”

The next to raise questions about the legitimacy of Glen Eagle’s funding arrangements was the Ontario Superior Court in proceedings related to the failed Glen Eagle transaction. While at this point little has been substantially decided on the breach of contract issue, Ontario Justice H.J. Wilton-Siegel, bears down hard on the trustworthiness of Glen Eagle’s reported financial agreements and backers in a recent decision over how the case should proceed.

“First, Kinbauri says that it could reasonably conclude, on the basis of the material before it on June 4, that Glen Eagle’s alleged financing was a sham,” Wilton-Siegel writes in a decision filed July 6. “As mentioned, there is some, perhaps considerable, basis for this conclusion given the absence of any evidence from Glen Eagle regarding the proposed source of the financing or the contemplated structure of the financing or the financing arrangements.”

But Labrecque does not sound fazed about Glen Eagle’s doubters.

In regard to Glen Eagle’s US$115 million he says: “I know the funds will be proved up. I always thought it (the Midco for Construction Works financing) was proper.” And he reiterates his earlier point that he believes Glen Eagle will soon receive confirmation of the funds. “But (this time) we’ll make sure beyond any doubt,” he says

He also maintains faith in his partners, who he admits, he has not met. The US$115 million financing – which Glen Eagle has said would be used for either the Kinbauri transaction or other acquisitions – has been arranged, he says, by Hossam Shatta, a Middle Eastern consultant whose clients include the Saudi Royal family.

Labrecque says he came in contact with Shatta through Newman’s Paradise Peak Holdings. (Labrecque did not respond to requests for Newman and Shatta’s contact information.) Labrecque says Shatta and Newman have worked together for nearly a decade and that both do not know anything about Jaguar Financial’s claim that the US$115 million bank guarantee is inauthentic.

“We’re running a very straight operation,” Labrecque says. With 23 million shares issued and almost no options, “you’re not running a scam,” he says. “You’re running a very proper business.”

But Jaguar Financial’s Alboini questions how a company of Glen Eagle’s size could manage to arrange such sizable investments and wonders who knew about the bank confirmation that he alleges is a fake.

“First thing is that…Glen Eagle has a market cap of about $3 million and was proposing to invest US$32 million with an option to invest another US$5 million,” Alboini says. “That’s US$37 million with a market cap of three.”

Secondly, Alboini says, Paradise Peak operates out of a two bedroom condominium in Mississauga. (Labrecque responds that the office was only a mailing address and the company is in fact based in Costa Rica.)

“Number three,” Alboini says. “In checking in mining circles, there was nobody that had heard of Paradise Peak and you know that sort of raised a question of authenticity.

“And I guess there was no surprise to us when Kinbauri issued a press release saying they did not have sufficient comfort (in Glen Eagle).”

Thus Alboini says: “It raises a lot of questions about who knew what and who was involved and who was not involved. We’re not going to speculate on that because we just don’t know.”

But Labrecque waves away the question over the authenticity of its proposed financial backers. “Right now it’s sheer speculation,” he says.