Just to show us all that the crooks are still out there ..
RCMP arrest former gold exploration CEO Paterson on 9 counts of fraud
Although junior explorer Southwestern Resources no longer exists, its former CEO has been arrested on fraud charges stemming from publication of bogus drilling results on a China gold property.
Author: Dorothy Kosich
Posted: Tuesday , 21 Dec 2010
RENO, NV -
<!--[if gte mso 10]>
<style>
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:"Table Normal";
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:"";
mso-padding-alt:0cm 5.4pt 0cm 5.4pt;
mso-para-margin:0cm;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:"Calibri","sans-serif";
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:"Times New Roman";
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:"Times New Roman";
mso-bidi-theme-font:minor-bidi;}
</style>
<![endif]-->
The Royal Canadian Mounted Police have arrested former Southwestern Resources CEO John Paterson with nine counts of fraud in connection with the alleged tampering of assay results.
From 2002 to 2007 Southwestern Resources released a series of assay results indicating the company had found a very rich gold deposit at its Boka gold project in the Yunnan Province of China. By 2004 Paterson earned Cdn$5.2 million in salary in options as the company's market value had soared to $830 million.
Southwestern properties included the Liam gold-silver project northwest of Arequipa, Peru, as well as other Peruvian projects.
Paterson resigned from Southwestern in June 2007. By July 19, 2007, the company announced that a review of drill results showed "the integrity of certain drill core samples was compromised." The news resulted in a massive sell-off of shares, generating a one day loss in value of C$157.7 million.
The B.C. Securities Commission began an investigation, which determined Paterson had sold 50,000 shares in the company at a net profit of $298,240 three days before the false results were made public.
The admission by the Southwestern board generated a class action lawsuit by shareholders, which resulted in a July 2009 settlement agreement of C$15.5 million.
Southwestern Resources received $4.2 million in cash, securities and assets from John Paterson and $3 million from his wife Joan Paterson. The agreement revealed that Snowden Mining Industry had reviewed the assay results and found 433 discrepancies in gold grades reported in 24 news releases between March 7, 2003 and Feb. 21, 2007.
Paterson resigned from Southwestern in June 2007. The company sold the Boka Project in 2008.
In early 2009 Peruvian precious metals miner Hochschild Mining agreed to buy Southwestern Resources for $17.5 million in cash. At the time Southwestern had early stage gold, silver, copper and iron ore exploration projects in southern Peru. The acquisition also gave Hochschild control of the Liam joint venture property, which consists of more than 282,000 hectares.
A geologist, Paterson agreed to a lifetime ban from the B.C. securities market. He admitted to the B.C. Securities Commission last year that he increased grades and incorporated false numbers in the company's data base, which were incorporated into the news releases and signed off by him.
B.C. Crown prosecutors finally filed criminal fraud charges which resulted in Paterson's arrest Saturday at his home on Salt Spring Island between Vancouver Island and the B.C. mainland. He appeared in Vancouver Provincial Court Monday.
Each count of the nine counts of fraud carries a maximum penalty of 14 years in prison.
