Handy & Harman seeks protection after millions in gold disappears

U.S. precious metals refiner Handy & Harman has been forced to seek bankruptcy protection in federal court following the disappearance of US$12.5 million of gold from a vault in Peru.

According to court records, claims by 20 creditors against the Connecticut-based company could exceed $100 million. Eric Henzy, lawyer for Handy & Harman, told Reuters that the missing gold “left us in a position where we could not meet all of the claims of our customers.” The company intends to remain in business, he said, but a low-grade processing plant in South Windsor, Conn., has already been closed. The company may also sell or close unprofitable facilities.

The largest creditor against the company, the U.S. subsidiary of Golden West Refining Group of Australia, is the U.S. Mint, with a claim of $29 million.

The gold was discovered missing when an internal audit in February uncovered discrepancies between the transaction reconstructions and explanations given by then-president Barry Wayne. The gold is suspected to have gone missing after September 1999, the time of the last inventory.

According to Golden West, the gold appears to have been released back to the Peruvian company “in an unauthorized manner.”

Although an investigation by accounting firm KPMG is not yet finished, Golden West says other losses in other parts of the business have been uncovered and that the company will be forced to write down some of its assets.

Court protection is the latest chapter for the embattled company. In March, two Handy & Harman executives and two consultants, as well as three other U.S. and six South American residents, were indicted in connection with an alleged scheme that defrauded the Argentine government out of $130 million.

According to the Justice Department, the elaborate scheme involved shipping precious and non-precious metals to the U.S. at inflated prices in order to bilk the Argentine government out of export incentives based on the price of the goods. The products shipped were often scrap.

Shell and existing companies owned by co-conspirators were fronts used to purchase the goods. According to federal attorneys, this created the illusion that hundreds of millions of dollars worth of metal was being shipped from Argentina, thus qualifying for government export incentives.

Those indicted face a laundry list of charges, including conspiracy, customs fraud, wire fraud, bank fraud and money-laundering.

U.S. residents arrested in March are Barry Wayne, former president of South Windsor Metallurgical, a subsidiary of Handy & Harman; Richard Searle, former vice-president of marketing for both South Windsor and Handy & Harman; and Michel Verleysen and Carlos Axel Augspach, both of whom were consultants to Handy & Harman.

Also arrested and facing similar charges in connection with the alleged scheme are executives of New York-based MTB Bank, including: John Bartholomew, president; Amanda Aymar, senior vice-president of international banking; and Visitacion Souto, vice-president.

Among the six South Americans charged are: Alvarado Meneses-Diaz, former vice-president of MTB Bank; Antonio Roberto Lanusse; former part-owner of Banco Baires, a defunct Argentine bank; Luis Maria Mazziotti, part-owner of Banco Baires; Miguel Seligmann, former part-owner of Argentine metals exporter Casa Piana; and Eduardo Vasquez, an officer of Casa Piana.

Golden West managing director Michael Ryan will take over as president of Handy & Harman following the recent resignation of Anthony Pearce.