Pezim and associates take centre stage at hearings

With television cameras rolling and flashbulbs popping, mining promoter Murray Pezim and associates John Ivany and Lawrence Page appeared in front of the British Columbia Securities Commission on July 9. Opening remarks were delivered by Gregory Walsh, lawyer for the province’s Superintendent of Brokers (SB). The three men face allegations that they failed to make proper disclosure of assays results and particulars of a private placement involving Prime Resources and Calpine Resources. It is also alleged that the trio profited from this undisclosed information, failed to carry out their duties properly as directors of public companies, and misled the Vancouver Stock Exchange on a number of issues.

At the time, Pezim, Page and Ivany were directors and officers of both Calpine Resources and Prime Resources, the latter company now known as Prime Resources Group (VSE). The allegations cover a period from July to October, 1989, when Calpine (now a subsidiary of Prime) was operating a drill program at its 50% owned Eskay Creek project north of Stewart, B.C.

In his chronology of events, Walsh placed considerable emphasis on a July 14 press release issued by Calpine which reported that it had arranged a private placement to issue two million units at a price of $2 per unit (one share and one share- purchase warrant). The release did not name a purchaser, or what affect the purchase would have on Calpine.

The press release did state that the funds would be used for Calpine’s share of exploration expenses at Eskay Creek. Walsh said the “ostensible purpose” may have been to raise funds, but he alleged it was also the start of a process whereby Prime could significantly increase its interest in Calpine “at the lowest possible price.”

Furthermore, Walsh said the SB has “concerns” that at the time, Prime’s senior management was in possession of results from drill holes that indicated an extension of the 21 zone at Eskay Creek.

On Aug. 10, Prime announced it was the party purchasing the two million units — thereby increasing its fully diluted stake in Calpine to 36% — which the SB alleges “was not timely disclosure.”

Several days earlier, Aug. 2, Calpine had announced a number of assay results from drilling at Eskay Creek, including the first mention of hole 109. It was reported to have intersected a 50-ft. interval that contains sections with “significant visible gold” within a 660-ft. interval. It was also noted that assays for this hole were not expected “for two to three weeks.”

Walsh alleges that during this period, up until results from hole 109 were released, senior management of Prime engaged in a series of transactions, including the re- pricing of stock options, for personal profit or for the benefit of Prime over Calpine.

At the hearing it was disclosed that one of the transactions brought about benefits of $573,000 to Pezim, and $2.5 million to each of Ivany and Page.

Walsh also noted that the SB had “concerns” about conflict of interest and fiduciary duty with respect to these transactions because of the “interlocking directorships” of Prime and Calpine.

“Pezim, Page and Ivany did not have significant shares of Calpine at the time these events were alleged to have occurred,” he stated. “By far the principals’ main financial interest was in Prime.”

Walsh also addressed concerns that senior management of Calpine did not release assays from hole 109 in a timely manner, particularly in light of widely publicized rumors of spectacular results. He noted that gold assays were received by Prime Explorations on Aug. 14, and final values (lead, zinc, etc.) on Aug. 18. The assays for all metals were released in a press release dated Aug. 21, 1989.

This may turn into a key issue as lawyers for Prime and its senior management are bound to argue that time was required to prepare a press release because of the intervening weekend (Aug. 19-20).

On the second day of the hearing, however, it was learned that Prime asked for and received results from 20 samples from hole 109 on Aug. 10, the results being faxed to Prime Explorations from the assay lab that same day.

Finally, it is also alleged that Pezim, Ivany and Page did not disclose on a timely basis the fact that a client denied obligation to pay for a sizable block of shares in its public offering in the fall of 1989.

At press time, only John Ivany’s lawyer, Leon Getz, made an opening statement in which he said Walsh’s opening statement was “full of errors, misunderstandings and significant inaccuracies.”

He also stated that his client — “a decent, serious-minded and restrained man” — did not exercise a single option and should be judged “only for his own conduct” and not that of his associates.

The hearing continues, and is expected to run for as many as five weeks.