BULLETIN: The SEC has gone to federal court in Utah to seek penalties against a precious metals company and associated firms and individuals, amid spectacular allegations that a PR firm sold the unregistered securities of its own corrupt penny-stock client and a disbarred attorney enabled the scam by issuing a bogus opinion letter.
Utah has been identified by the interagency Financial Fraud Enforcement Task Force as a hotbed of fraud, and the SEC’s allegations against Copper King Mining Corp. and its co-defendants read like a work of fiction — but the agency says they are true.
Charged along with the company was its former President and Chief Executive Officer Mark D. Dotson, 52, of Milford. Also charged were Alexander Lindale LLC, a Salty Lake City PR firm; PR executive Wilford R. Blum, 58, of Salt Lake City, and Stephen G. Bennett, 52, of of Merrimack, New Hampshire.
Bennett formerly was licensed to practice law in Utah, but was disbarred in November 2001 for commingling clients’ money with his personal bank accounts, the SEC said.
Blum is the general manager of Alexander Lindale, the PR firm.
Despite Bennett’s disbarment, he provided “stock tradability opinion letters to Copper King which stated Alexander Lindale could have unrestricted Rule 504 stock issued to it pursuant to a purported transactional exemption provided under Minnesota state securities law,” the SEC charged.
Because of Bennett’s bogus opinion letter and manipulations by Dotson and Blum, the PR firm sold unregistered securities issued by Copper King and profited handsomely, the SEC charged.
“Bennett’s stock tradability opinion letters were used as the legal authority that enabled Copper King’s stock transfer agent to issue and distribute the company’s stock pursuant to Blum’s instructions,” the SEC said.
All in all, the SEC said, the PR firm and Blum raised more than $12.2 million in proceeds from Blum’s improper sales of Copper King stock from 2008 through 2010.
Meeanwhile, “Blum provided Copper King with approximately $9,063,567 in cash or services while Alexander Lindale received approximately $3,291,352 from Blum’s sales of Copper King stock,” the SEC said.
Among other things, the PR firm is accused by the SEC of improperly paying contractors with unrestricted Copper King stock and hiring “television celebrities to appear on radio talk shows and in infomercials endorsing and touting the merits of investing in the company.”
The firm and Blum also “arranged for Copper King to be publicized on billboards throughout various Western states and to author and issue press releases that emphasized the purported value and quantity of precious metals that could be extracted and processed from Copper King’s mining and milling operations,” the SEC charged.
Dotson was accused of posting “false and misleading” information on the copper company’s website and of providing false information to the PR firm, which allegedly regurgitated Dotson’s lies and made millions of dollars by hyping the company and selling its stock .
Investors were misled by Dotson into believing the copper firm would be capable within five years of processing 2,500 tons of ore per day and extracting $1.21 billion in precious metal, including 230 million pounds of copper, 11.5 million ounces of silver and 115,100 ounces of gold, the SEC charged.
As president and CEO, the SEC said, Dotson “knew that the mill had no operational history or process to extract copper, gold, and silver from the ore.
“As a result, Dotson knew that it was misleading to assign recovery amounts and market values to these supposed recoveries,” the SEC charged. “In addition, Dotson knew the mill could not process 2,500 tons of ore per day as the mill did not have, among other things, a sufficient water supply to process the ore through the milling cycle.”
Meanwhile, the SEC charged, Dotson also knew that “Copper King was permitted to mine only a single twenty acre parcel and that the productive life of the mine site was only two years, not ten as stated on the company’s Internet website.”
Among the allegations against the PR company is that it issued issued false press releases, including one in which it was claimed that Copper King had found a single customer to purchase “all metals produced at the mine” for the life of the mine.