PC is not alone...LOL
El Nino denies misusing exploration money
2013-04-23 13:56 ET - Street Wire
by Mike Caswell
El Nino Ventures Inc. denies claims that it misused $2-million in exploration money. The company says the allegations come from an unhappy joint venture partner, and are "not based on any fact." If they were true, the company would have had troubles with both its auditor and the TSX Venture Exchange.
The company is responding to a court petition filed in the Supreme Court of British Columbia by privately held GCP Group Ltd., which has a joint venture with El Nino for the Kasala project in the Democratic Republic of the Congo. GCP claimed that there were substantial problems with El Nino's accounting of exploration money on the property. El Nino listed $4.6-million in exploration expenses in its financial statements, when it only spent $2.6-million, according to the petition. Company money was used for a ring, paintings and a fishing trip, the petition claimed.
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| Jay Oness |
El Nino, however, says there is no substance to those claims. "They're not based on any fact," says chief operating officer Jay Oness. They arose because GCP's principal, George Kavvadias, does not understand public company filing documents, according to Mr. Oness. El Nino's auditor approved and signed off on the company's financials. "If there had been a problem ... we couldn't have gone forward," Mr. Oness says.
The allegations arose out of a lengthy dispute over El Nino's option agreement for Kasala. Mr. Kavvadias, a businessman from Congo, granted the company an option to acquire up to a 70-per-cent interest in the property in May, 2007. The deal called for El Nino to operate the property and pay for exploration.
The problems began in September, 2009, when Mr. Kavvadias sued El Nino in B.C., claiming that the company owed him $81,000 in consulting fees for managing the project. El Nino countersued, contending that it had in fact overpaid Mr. Kavvadias by $100,000. The parties were able to settle that dispute out of court, but their relationship did not improve.
After that lawsuit, Mr. Kavvadias took steps to frustrate the El Nino's operation of the project, the company claims. He did not pay employees, and he denied the company access to joint venture records and access to the site. He also continued to act as the general manager of the joint venture company, when there was no basis for him to do so, El Nino says.
The final strain on the relationship came in March, 2010, when El Nino was to make the last property payment. Before making the payment, El Nino discovered that GCP did not have clean title to the permits. There was a lien on the property from a third party, the company claims. Before making its final payment on the ground, El Nino sought some assurances from GCP. Rather than provide any assurances, GCP instead issued notices of default to El Nino on the property agreement.
That led to litigation in Congo, in which El Nino claimed victory, as well as an arbitration process in B.C. The purpose of the petition over exploration money was to compel testimony from El Nino's former chief financial officer, David Frost, at the arbitration. GCP claimed that Mr. Frost had information about misuse of money by El Nino, and sought a court order compelling him to attend the arbitration. El Nino did not oppose the petition for Mr. Frost's testimony.
The arbitration hearing is scheduled for May 16