A U.S. mining company accused its Mexican parent company Monday of stripping it of its most valuable assets and forcing it into bankruptcy as it launched its $10.5 billion federal lawsuit against the company.
Asarco, which is operating under bankruptcy protection, was left with no way to pay thousands of creditors and a huge environmental bill for mines it owned throughout the U.S.
In his opening statement, G. Irvin Terrell, attorney for Asarco, described parent Grupo Mexico as a greedy company that did all it could to strip Asarco of its "crown jewel," a controlling stake in Southern Peru Copper Corp.
Asarco is suing Americas Mining Co., a subsidiary of Grupo Mexico, for $10.5 billion. Grupo Mexico is owned by one of Mexico's wealthiest families, headed by German Larrea.
Terrell said the leaders of Grupo Mexico knew that transferring Asarco's controlling stake in two Peruvian copper mines to Americas Mining Corp. would leave the company with a gaping hole in its cash flow. But rather than sell it through a competitive auction to the highest bidder, it made an insider transfer to its own subsidiary.
Grupo Mexico kept Asarco on life support, he said, until the transfer was complete. Its leaders resigned from its board and left Asarco to flounder into bankruptcy, Terrell said.
The U.S. Department of Justice initially moved to block the transfer, but eventually negotiated an agreement with Grupo Mexico that required it to pay $765 million, including $100 million to set up an environmental trust fund to pay claims.
Defense attorney Brian Antweil made it clear that the federal government's approval will form the foundation of his defense. Americas Mining paid a fair price and the deal would not have happened without the Justice Department's approval, he said.
AMC sold Asarco's shares in the Peruvian mines because Asarco was desperate for cash. "The sale of SPCC was in the best interest of Asarco," he said.
On the line in this trial will be a chance for a long list of Asarco's creditors _ western states struggling to clean up polluted sites, asbestos victims, bond creditors and more _ to get paid.
In addition to mining interests from Mexico to Chile that make it the world's third-largest copper producer, Grupo Mexico also controls the country's largest railroad. Forbes ranked Larrea at No. 127 on its list of the world's billionaires with a fortune estimated at $7.3 billion.
The trial has been scheduled for four weeks before U.S. District Judge Andrew Hanen.
Asarco claims Grupo Mexico, which acquired Asarco in 1999, knew that it faced potential liabilities exceeding $1 billion over asbestos claims as well as environmental cleanup of 20 Superfund sites around the U.S. So Grupo Mexico transferred the Peruvian copper mines to AMC to protect it from being used to pay thousands of creditors.
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