Asarco trial to begin

Arizona-based mining company ASARCO alleges that its parent company, Grupo Mexico, systematically stripped its assets and left behind little more than a shell. Grupo Mexico is a mining conglomerate headed by Chairman and Chief Executive German Larrea Mota-Velasco. The company is the world’s third largest producer of copper, and has mining interests in several South American locations. ASARCO filed for bankruptcy in 2005, and during the process a bankruptcy judge removed Grupo Mexico’s control over the company due to allegations that the parent company was stripping ASARCO’s assets. ASARCO’s legal battle begins on Monday May 12, with the beginning of a multi-billion dollar civil lawsuit it has brought against Grupo Mexico. German Larrea Mota-Velasco is expected to testify during the trial. Among ASARCO’s claims are that Grupo Mexico knew it faced potential liabilities of more than $1 billion when it acquired the ASARCO company in 1999, as well as the responsibility of cleaning up to twenty Superfund sites. In addition, ASARCO claims that Grupo Mexico stripped the subsidiary of assets, including Peruvian copper mines that ASARCO once had a significant stake in and were the company’s most significant asset. ASARCO claims the parent company did this to prevent the mines being used to pay ASARCO’s creditors. ASARCO also claims that Grupo Mexico used the fact that it controlled all the parties in the transaction to its own advantage, because it allowed the parent company to underpay ASARCO for the mines. The US Department of Justice had initially blocked the asset transfer, but eventually negotiated an agreement with Grupo Mexico that required the company to set up a $100 million trust fund for environmental clean-up. The outcome of this civil case will likely determine whether or not many of ASARCO’s creditors-including contaminated sites in many western states, as well as bond creditors and former employees and others suffering from asbestos-related diseases that the company is liable for-will see any money when the company emerges from bankruptcy. Some estimates put the value of claims and other liabilities ASARCO is responsible for at tens of billions of dollars. Among the total is several billion dollars worth of lawsuits relating to exposure to asbestos, lead, and other toxins. More than $165 million will be allotted to clean up environmental damage at eight different Montana sites. ASARCO is seeking more than $10.5 million from Americas Mining Corp., a subsidiary of Grupo Mexico. The $10.5 billion would come from the return of the Peruvian Copper mine holdings and from dividends from those mines. G. Irvin Terrell, lead attorney for ASARCO, said “We hope this fund can be used in great part to clean up many of the sites across the West.” (Source: Asbestos and Mesothelioma News)