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UIA 58 th CONGRESS – FLORENCE/ITALY Litigation Session – “Interesting Cases” October 31, 2014 Shareholder Dispute Randy J. Aliment Williams Kastner & Gibbs, PLLC 601 Union Street, Suite 4100 Seattle, WA 98101 – USA Telephone: (206) 628-6600/Fax: (206) 628-6611 Email: raliment@williamskastner.comraliment@williamskastner.com © UIA 2009
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THE MONEY’S IN THE DIRT Client Mining Corporation was formed to own and operate The Idaho Mine. Second largest silver mine in North America Shut down in the late 1980s due to aging equipment, high operating and maintenance costs and increasing safety issues. Operated under outdated articles of incorporation and bylaws.
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THE MONEY’S IN THE DIRT 3 Major Shareholders Mine Operator (Died in 2010) owned 25% Heirs claim the deceased operator’s 25% interests as their own and filed several lawsuits 2 Businessmen owned 25% each Remaining 25% were owned by 16 individuals in return for cash and loans converted into ownership interests. No shareholder agreement regarding ownership interests. Ore reserves estimated at over $1 billion, but significant capital infusion required to access it. No distributions or dividends were ever paid to any shareholders.
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THE MONEY’S IN THE DIRT Very little in the form of official books and financial statements. Annual meetings were not held on a consistent basis, and when they were held, no minutes were prepared. EPA filed lawsuit against the mine. Clean up cost estimated to be in excess of $30 million.
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THE MONEY’S IN THE DIRT Due to the EPA lawsuit and little cash flow, mining operation was suspended. One offer provided the mine with $1 million in a non-refundable, due diligence deposit. Allegedly transferred into various personal and mine bank accounts – due to FDIC insurability concerns. Limited supporting information for the various bank accounts as well as the movement of funds.
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THE MONEY’S IN THE DIRT Later $60 million offer has been rejected. Four lawsuits were filed by certain Shareholders alleging a number of claims.
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POTENTIAL ISSUES How are the transferred funds into various bank accounts accounted for? Are the various capital contributions (cash, land, equipment) of the 2 primary investors due if the mine is sold? How are interest percentages determined for the 16 individual shareholders, if no supporting documents states their ownership interest? How does the EPA lawsuit impact the determination of ownership interests?
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MEDIATED RESOLUTION Reviewed bank statements, corporate books, cancelled checks, and correspondences. Interviewed shareholders In Person Conference Call Performed hypothetical payout scenarios for the distribution of mine sale proceeds based on various imputed interest rates. All litigation settled. New Mine Manager chosen. Offer to purchase Mine now being considered.
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