Pezim vows `street fight’ over charges

Insider trading allegations against Murray Pezim and two other common directors of Calpine Resources (VSE) and Prime Resources Group (VSE) dramatically overshadowed recent meetings where Prime and Calpine shareholders approved a plan to merge the two companies. Although pleased that the controversial merger was approved overwhelmingly, Pezim promised a “street fight” with British Columbia securities regulators over allegations that he and others made a series of transactions on the basis of material information that was not made public.

“There is absolutely no foundation to these charges and we are getting ready for the greatest fight ever,” a defiant Pezim said. He also told reporters that the allegations were holding up about $15 million in financings for various companies in the Prime group, most of which are active in northwestern British Columbia.

Pezim, well-known lawyers John Ivany and Lawrence Page, and Prime Resources Group were all named in the notice of hearing issued March 30 by the British Columbia Securities Commission. The hearing is slated for April 17, but the possibility that Pezim, Page and Ivany could be prohibited from becoming or acting as directors of reporting companies has already cast a pall of uncertainty over the local investment community.

In the event of a ruling against Pezim, Ivany and Page, local industry observers speculate that control and management of Prime group companies would likely “go east” from Vancouver to Prime’s largest single shareholder, Toronto-based Corona (TSE). “This is having a terrible, terrible impact on our financings,” Pezim told The Northern Miner. “We had thought we would have the busiest and best summer ever, but you can forget that now. Our office has been devastated.”

Prime Resources Group and other companies under its umbrella were expecting to carry out multimillion- dollar work programs on various properties near Calpine’s 50% owned Eskay Creek high-grade gold deposit north of Stewart, B.C. In the past year, many of these companies have been volume leaders on the Vancouver Stock Exchange.

Although Pezim’s career has had about as many ups and downs as the Vancouver Stock Exchange, he is credited with having financed exploration and development of a number of important mineral discoveries, including gold deposits at Hemlo, La Ronge, and more recently, Eskay Creek.

Pezim may be facing the greatest challenge of his career, but he was able to make a joke at his own expense when he urged those on hand for the meetings to purchase season tickets for his British Columbia Lion’s football team.

“It’s important,” he quipped. “I might be out of a job.”

With the stakes being so high, Pezim had no kind words for British Columbia’s recently appointed superintendent of brokers, Wade Nesmith.

“He’s out to make a name for himself,” Pezim said.

Some critics of the Vancouver Stock Exchange are applauding Nesmith’s tough stance, saying it will improve the exchange’s tarnished reputation.

Nesmith told The Northern Miner because of the scope of the matters to be resolved, he expects the hearing could last “several days, if not weeks.” But he declined to comment on whether the notice of hearing would be amended to include additional matters not mentioned in the March 30 notice, as has been widely speculated.

In the notice of hearing it is alleged that senior management of Prime and Calpine failed to make “timely and adequate disclosure” of material facts or material changes and engaged in a number of purchases, sales and trades involving Calpine and Prime shares on the basis of information not generally disclosed. Specifically, these involve the release of assay results from the drill program at Eskay Creek during July and August of 1989, and material particulars of a Calpine private placement.

Nesmith had promised not to interfere with the Calpine and Prime meetings as long as the outcome of the merger vote did not hinge on the four million shares involved in these transactions.

The merger was approved by 99.94% of Prime shareholders and 96.4% of Calpine shareholders. The newly merged company, to be called Prime Resources Group, will have about 41 million shares outstanding.

Had these shares been eliminated — and had 844,300 shares against the merger arrived in time to be counted — the outcome of the Calpine vote would have been 87.3% in favor, surpassing the 75% majority required for approval. At the Calpine meeting it was noted that a “vocal opponent” of the merger, believed to be former Calpine director George Oughtred, did not meet the deadline to vote his block of shares by proxy.

Now that the merger is a fait accompli, the local investment community is obviously hopeful that the insider trading allegations will be resolved as quickly as possible.

Stephen Semeniuk of L.O.M. Western Securities in Vancouver said difficulties in arranging financing would be a blow for northwestern British Columbia, given that Prime group companies are key players there and the working season is so short.

“I think a year ago this would have been devastating,” he said. “But fortunately enough momentum has built up and this year money is being raised outside the Prime group for programs in the area.”

Semeniuk also noted that on the issue of disclosure, major companies often go for lengthy periods without releasing results, even when they are material to the junior companies with which they are involved.

“I would hate to think there is a different standard being applied to Prime,” he said.