Court case tries patience of Comaplex shareholders (April 17, 1989)

For the past 15 months, Fink has waited while the Ontario Securities Commission (OSC) investigates the circumstances surrounding the allegedly illegal takeover of Calgary-based Comaplex by a Swiss merchant bank.

Meanwhile, Fink has been unable to arrange any public financing for Comaplex’s joint venture mineral exploration projects and lawyers involved in the case say it could be years before the company can return to normal business activity.

“It’s difficult to operate when you can’t get public financing and underwritings involving your company aren’t being honored,” said Fink.

Because the investigation could result in criminal charges being laid against a former employee of Schaffhauser Kantonalbank of Switzerland, the case has been referred to the Ontario Supreme Court. As a result, Fink and Comaplex’s shareholders face further delays in sorting out the company’s future.

Comaplex’s interests include a 25% stake in Vancouver-based metal explorer Redfern Resources (VSE), which has an option to earn a 40% interest in the Tulsequah Chief zinc deposit in northwestern British Columbia from Cominco Resources (N.M., Mar 6 /89), and a number of producing oil wells in Alberta and Saskatchewan.

Fink’s troubles began back on Nov 28, 1987, when Schaffhauser revealed to the OSC that it held about 75% of Comaplex’s 5.6 million outstanding shares. Three days later a cease trading order was placed on the Comaplex issue.

The OSC says Schaffhauser breached Ontario securities rules by not providing full disclosure regarding the share acquisitions. The Comaplex issue hasn’t traded on The Toronto Stock Exchange since then. Under the Ontario Securities Act, a purchaser must either report to the OSC or issue a news release within 60 days of having acquired 5% of the shares of a public company.

But Kurt Amsler, chief executive officer of Schaffhauser, says the shares were acquired without his knowledge by one of the bank’s assistant managers who is alleged to have collaborated with German promoter and former Comaplex director Ulrich Chmiel in making the purchases.

Amsler says by the time he was told that some of the shares had been bought with money from customer accounts, the Comaplex share price had increased from $2.05 (in January 1987) to over $11 (by October 1987). Approximately four million Comaplex shares are now held by Kantonalbank and its customers.

Chmiel also bought and sold undisclosed amounts of Comaplex shares through Liberian investment firms Montenero International Co. and Sanlos Trading Inc., according to insider trading reports. As a result, those companies have been included in the investigation.

“In no sense are Comaplex executives to blame for this,” said OSC lawyer Nancy Ross. Chmiel was appointed to the Comaplex board at request of the company’s European investors. He resigned when the OSC investigation was announced.

But that won’t make it any easier for the courts to sort out some of the many questions which have still to be answered in the Comaplex case.

“It’s tough to tell who is really at fault,” said Ross.

It could be at least a year before the court and the OSC decides whether or not the bank must comply with trading regulations by making a follow up offer to all of Comaplex’s shareholders, she said.

In Ontario, companies or persons making a takeover bid are required to extend the offer at an equal price to minority shareholders. “But because the shares were bought by the bank and Montenero at prices ranging from $3.85 to $9.50, no one knows what the shares are really worth,” said Ross. The OSC inquiry has been put on hold until a decision is rendered by the Ontario court.

When the trial begins, Comaplex lawyers will argue that it doesn’t matter who acquired the shares, control of the company has now changed and the court must decide quickly who is responsible for complying with Ontario’s takeover bid guidelines.

Shaffhauser has said all along that since its employee acquired the shares without bank permission, it should be regarded as a victim rather than the perpetrator of any wrongdoing.

“Nearly half the Comaplex shares purchased by the employee had not been allocated by him to customer accounts but rather had been purchased for unidentified parties who were represented to be future customers of the bank,” said Amsler.

But Fink says there is a more pressing issue to be dealt with. “All we are saying is that the company can’t continue being harmed like this,” said Fink, who has been prevented by the cease trading order from obtaining public financing for the company’s joint venture projects.

As a result, he was forced to find other companies to fund Comaplex’s share of costs at two joint venture gold and base metal properties in the Northwest Territories where the company’s stake has been diluted down to 25% from 50%.

While Fink says his company has spent about $500,000 in preparation for the court hearing, Comaplex has been saved from severe finanical trouble by revenues from its oil and gas properties.

According to Fink, shareholders have been as good as can be expected under the circumstances. “Everyone recognizes the dilemma we are confronted with, but they are starting to get impatient,” he said.

Comaplex Resources (TSE) President George Fink says he is a patient man but his tolerance level is being severely tested by one of the most complicated and unusual investigations in recent mining history.

For the past 15 months, Fink has waited while the Ontario Securities Commission (OSC) investigates the circumstances surrounding the allegedly illegal takeover of Calgary-based Comaplex by a Swiss merchant bank.

Comaplex’s interests include a 25% stake in Vanouver-based metal explorer Redfern Resources (VSE), which has an option to earn a 40% interest in the Tulsequah Chief zinc deposit in northwestern British Columbia from Cominco Resources (N.M.. Mar 6/89). Comaplex’s assets also include a number of producing oil wells in Alberta and Saskatchewan.

The long wait was recently extended when the OSC agreed to postpone its inquiry until legal proceedings brought about by Comaplex against Schaffhauser Kantonalbank of Switzerland are heard in the Ontario Supreme Court.

Meanwhile, Fink has been unable to arrange any public financing for Comaplex’s joint venture mineral exploration projects and lawyers involved in the case say it could be years before the company can return to normal business activity.

“It’s difficult to operate when you can’t get public financing and underwritings involving your company aren’t being honored,” said Fink.

Fink’s troubles began back on Nov 28, 1987, when Schaffhauser revealed to the OSC that it held about 75% of Comaplex’s 5.6 million outstanding shares. Three days later a cease trading order was placed on the Comaplex issue and it hasn’t traded on the Toronto Stock Exchange since then.

The OSC says Schaffhauser breached Ontario securities rules by not providing full disclosure regarding the share acquisitions. Under the Ontario Securities Act, a purchaser must either report to the OSC or issue a news release within 60 days of having acquired 5% of the shares of a public company.

But Kurt Amsler, chief executive officer of Schaffhauser, says the shares were acquired without his knowledge by one of the bank’s assistant managers who is alleged to have collaborated with German promoter and former Comaplex director Ulrich Chmiel in making the purchases.

Amsler says by the time he was told that some of the shares had been bought with money from customer accounts, the Comaplex share price had increased from $2.05 (in January 1987) to over $11 (by October 1987). Approximately 4 million Comaplex shares are now held by Kantonalbank and its customers.

Chmiel also bought and sold undisclosed amounts of Comaplex shares through Liberian investment firms Montenero International Co. and Sanlos Trading Inc., according to insider trading reports. As a result, those companies have been included in the investigation.

“In no sense are Comaplex executives to blame for this,” said OSC lawyer Nancy Ross. Chmiel was appointed to the Comaplex board at request of the company’s European investors. He resigned when the OSC investigation was announced.

But that won’t make it any easier for the courts to sort out some of the many questions which have still to be answered in the Comaplex case.

“It’s tough to tell who is really at fault,” said Ross.

It could be at least a year before the court and the OSC decides whether or not the bank must comply with trading regulations by making a follow up offer to all of Comaplex’s shareholders, she said.

In Ontario, companies or persons making a takeover bid are required to extend the offer at an equal price to minority shareholders. “But because the shares were bought by the bank and Montenero at prices ranging from $2.05 to $11, no one knows what the shares are really worth,” said Ross.

When the trial begins this fall, Comaplex lawyers will argue that it doesn’t matter who acquired the shares, control of the company has now changed and the court must decide quickly who is responsible for complying with Ontario’s takeover bid guidelines.

Shaffhauser has said all along that since its employee acquired the shares without bank permission, it should be regarded as a victim rather than the perpetrator of any wrongdoing.

“Nearly half the Comaplex shares purchased by the employee had not been allocated by him to customer accounts but rather had been purchased for unidentified parties who were represented to be future customers of the bank,” said Amsler.

But Fink says there is a more pressing issue to be dealt with. “All we are saying is that the company can’t continue being harmed like this,” said Fink, who has been prevented by the cease trading order from obtaining public financing for the company’s joint venture projects.

As a result, he was forced to find other companies to fund Comaplex’s share of costs at two joint venture gold and base metal properties in the Northwest Territories where the company’s stake has been diluted down to 25% from 50%.

While Fink says his company has spent about $500,000 in preparation for the court hearing, Comaplex has been saved from severe finanical trouble by revenues from its oil and gas properties.

According to Fink, shareholders have been as good as can be expected under the circumstances. “Everyone recognises the dilemma we are confronted with, but they are starting to get impatient,” he said.

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