Friedland sues United States — Former mine owner seeking damages

The first wayward trickle from the ill-fated Summitville gold mine led to a flood of environmental and legal controversy — and it’s not over yet.

Canadian lawyers representing Robert Friedland (inset) have launched a $150-Million suit against the U.S. and certain officials in the U.S.

Environmental Protection Agency (EPA) and Department of Justice who were involved in secretly obtaining an injunction to seize US$152 million of his Canadian assets in August 1996.

Those assets included the shares of Inco Friedland was awarded when Diamond Fields Resources (then owner of the massive Voisey’s Bay nickel-Copper-Cobalt project) was taken over by the nickel giant.

The U.S. seized Friedland’s shares to cover the costs of the cleanup of the abandoned Summitville mine site in Colorado, which the EPA took over in 1993, claiming he was personally liable.

Justice Robert Sharpe of the Ontario Court struck down the injunction in November 1996, rejecting it as having been improperly obtained by the U.S.

Since the court’s rebuke, the U.S. has abandoned the ex parte orders it also obtained in Colorado and British Columbia last year.

In rejecting the U.S. allegations, Justice Sharpe noted that: * the extent of non-disclosure and misstatements by the U.S was “serious and fundamental;”

* the insinuation by the U.S. that Friedland had arranged his affairs to avoid his legal obligations is totally unsupported by the evidence; * it was misleading of the U.S. to paint the picture that Friedland alone made all crucial decisions relating to the mine and its operations; * Friedland had nothing to do with the abandonment of the Summitville mine site.

The U.S. was ordered to pay Friedland’s legal fees and related expenses.

Friedland’s counterclaim, filed in the Ontario Court, General Division, alleges that representatives of the EPA and the Department of Justice abused the processes of the U.S. and Canadian courts by making false allegations against Friedland and by withholding material information from the courts.

The suit also alleges damages for libel contained in a news release issued by the Department of Justice to state its brief success in impounding Friedland’s property.

Friedland is seeking $150 million, but he has said that any money recovered from the U.S. through the counterclaim will be donated to Canadian charities (to be chosen later).

“Officials of EPA and the U.S. Justice Department mounted an illegitimate, secret attack on my ability to pursue business interests, followed by a public relations campaign to discredit me in the international business community,” Friedland said in a press release.

“They falsely maligned my credibility as a businessman and as a responsible corporate officer, as well as my reputation as a person who honors his legal responsibilities.”

The Summitville mine was active in the late 1800s and early 1900s but lay dormant throughout the 1960s and 1970s.

In 1984, Summitville Consolidated Mining, a unit of now-defunct Galactic Resources of Vancouver (of which Friedland was chairman and president until 1990) initiated open-pit mining of gold ore from rocks surrounding the historic underground workings, and heap-leached the ore to produce gold and silver.

According to a U.S. Geological Survey report, environmental problems developed soon after the initiation of open-pit mining. Cyanide-bearing processing solutions began leaking into an underdrain system beneath the heap-leach pad, where they then mixed with acid ground waters from the Cropsy waste dump. Also, several times over the course of mining, cyanide solutions leaked from transfer pipes directly into the Wightman Fork.

Summitville Consolidated Mining had ceased active mining and begun environmental remediation, only to declare bankruptcy in December 1992 and abandon the mine site. The mine had cost $200 million to build, but gold sales over its short life netted only $120 million.

At the request of the state of Colorado, the EPA took over the site and began a remediation program, with initial work focused on increased treatment of the heap-leach solution to avert a release of cyanide solution from the heap.

The EPA has estimated that the cleanup cost will total US$152 million, but because water treatment is expected to be required in perpetuity, precise cost estimates have been difficult to make.

According to Howard Shapray, Friedland’s Canadian counsel, the mining executive has been “inaccurately and unfairly portrayed” as personally responsible for the environmental conditions at Summitville.

Shapray also stated that risk assessments prepared by the EPA’s contractor “indicate a significant over-reaction” by the agency in its activities at Summitville.

“These reports conclude that risk levels for human health were easily met in the Alamosa River basin prior to any remediation by EPA,” he said. “Any attempt to achieve the level of risk reduction for aquatic life proposed by EPA would require remediation to pre-Mining conditions of the mid-19th century.”

He said a recently prepared independent study regarding a cost benefit analysis of the EPA’s actions at the Summitville site casts doubt on the appropriateness and wisdom of the agency’s expenditures.

“When the people of Colorado learn the truth about EPA’s actions at Summitville, it will expose an even greater scandal than the conduct of the government attempting to obtain the injunction against Friedland last year,” Shapray said. “Responsible people have concluded that mismanagement under EPA has exacerbated the environmental problems.”