Asarco parent asks court to examine directors' and counsel's role in bankruptcy, expense accrual

By Caroline Salls

Pittsburgh, June 12 - Asarco LLC parent Grupo Mexico, SAB de CV said it has asked the judge overseeing Asarco's bankruptcy case to examine "questionable actions" taken by the company's board of directors and legal counsel Baker Botts, which Grupo Mexico alleges are costing Asarco's creditors and shareholders millions in unnecessary expenses, according to a Group Mexico news release.

Grupo Mexico also said Asarco has promoted several misconceptions in connection with its fraudulent conveyance lawsuit against Grupo Mexico subsidiary Americas Mining Corp., which is being heard in the U.S. District Court for the Southern District of Texas.

The parent company said the misconceptions include Asarco's allegation that Grupo Mexico stripped it of a valuable asset and left it to "die on the vine."

According to the release, the 2003 sale of Asarco's majority stake in Southern Peru Copper Corp. to Americas Mining was actually "part of a very successful restructuring undertaken by Grupo Mexico during a difficult operating period and low copper prices."

Grupo Mexico said it has always intended to maintain Asarco's assets as part of its long-term productive facilities, and it continues to demonstrate that commitment through its submission of a full payment plan to Asarco and its creditors.

"Despite Asarco's continuous effort to blame its financial troubles on the SPCC sale, Asarco did not file for bankruptcy protection until two-and-a-half years after the restructuring, and only then after a debilitating four-month labor strike and the constant pressure from the DOJ and Environmental Protection Agency over unresolved environmental claims," Grupo Mexico said in the release.

Grupo Mexico said it believes that Asarco's troubles stem largely from poor legal advice from Baker Botts, which incorrectly convinced the company's board members that the Chapter 11 process would solve all of the company's problems by quickly resolving its environmental and unknown asbestos liabilities at a very low cost.

"Instead, just the opposite has occurred," Grupo Mexico said in the release.

"Three years and millions of dollars in legal fees later, the company still faces numerous unresolved liabilities, has reached unnecessarily high settlements on others and has been largely unable to take advantage from the dramatic turnaround in commodity prices."

In addition, the parent company said "Baker Botts' hefty legal expenses are being padded even further through Asarco's fraudulent conveyance lawsuit."

Grupo Mexico said it also believes that the members of Asarco's board of directors who approved the Americas Mining lawsuit should be held accountable for the unnecessary expenses, "which otherwise could be used to pay environmental claims and creditors."

Asarco, a Tucson, Ariz., mining company, filed for bankruptcy on Aug. 9, 2005 in the U.S. Bankruptcy Court for the Southern District of Texas. Its Chapter 11 case number is 05-21207.

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