Judge: Asarco's parent directors breached duty - East Valley Tribune: Business

Judge: Asarco's parent directors breached duty

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Posted: Tuesday, September 2, 2008 8:23 pm | Updated: 8:58 pm, Fri Oct 7, 2011.

TUCSON - A federal judge in Texas has ruled that directors of a parent unit of Arizona-based Asarco LLC breached their fiduciary duties to the Arizona-based copper mining company's creditors by transferring its stock ownership in a Peruvian mining concern.

Asarco is now in bankruptcy reorganization — and fighting to keep from being reacquired by its parent, Grupo Mexico SAB. The company has been under independent directors appointed by a bankruptcy judge after Asarco filed for reorganization in 2005.

Asarco and Southern Peru Holdings LLC contended in a civil lawsuit filed last year that Grupo Mexico, which acquired Asarco in 1999, saddled Asarco with a long-term debt load of nearly $1.8 billion.

Grupo Mexico arranged a transaction to acquire Asarco's majority position in Southern Peru.

It created a subsidiary of Asarco called Southern Peru Holding Co. to which it had Asarco transfer its 54 percent ownership of Southern Peru stock.

Then, Grupo Mexico formed another subsidiary, Americas Mining Corp., into which it transferred Asarco's stock, according to a 190-page opinion issued Saturday by U.S. District Judge Andrew Hanen in Brownsville, Texas.

"The evidence clearly establishes AMC's substantial assistance in structuring and closing the transaction that constituted the directors' breach," Hanen wrote. "Therefore, the court finds that AMC knowingly participated in Asarco's directors' breach of fiduciary duty."

The judge added that Asarco's creditors were harmed "by AMC aiding and abetting Asarco's directors' breach of fiduciary duty" and the transaction was designed "to leave a cash-starved Asarco with less cash than it had prior to the transfer."

Documents from the four-week trial indicated that Asarco's interest in Southern Peru in April 2002 was $817 million.

Hanen did rule in Grupo Mexico's favor in rejecting Asarco's claim of a conspiracy between the parent company and AMC.

But he found that AMC and Asarco's directors reached an agreement to siphon off the Southern Peru stock "with calloused indifference to the interests of Asarco's creditors."

The judge said that showed that Asarco met its burden of proof in claiming that element of conspiracy.

The court said that Asarco failed to prove, however, that AMC engaged in the type of "egregious conduct" warranting punitive damages.

Asarco's lawsuit against Americas Mining Corp. sought $8.25 billion in actual damages.

"The court ... has found that the plaintiffs have prevailed on several of their causes of action," Hanen said.

He deferred ruling on damages, giving both sides until Sept. 15 to submit briefs before he enters a final ruling.

Calls to attorneys for Asarco and Grupo Mexico were not immediately returned Tuesday.

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