Spanish Mountain sues former CEO Yau
2024-07-17 18:53 ET - Street Wire
by Mike Caswell
Spanish Mountain Gold Ltd. has filed a civil fraud lawsuit in the Supreme Court of British Columbia against the company's former chief executive officer, Larry Yau, claiming that he took $439,750 in unapproved expenses and received a $240,000 severance payment he was not entitled to collect. According to the suit, Mr. Yau falsified board meeting minutes and concealed his expenses under an investor relations heading. The company is seeking damages for breach of duty, among other things.
The allegations are contained in a notice of claim that Spanish Mountain filed at the Vancouver courthouse on July 10, 2024. The lawsuit identifies Mr. Yau as a resident of Richmond, B.C., who was an officer or director of Spanish Mountain from May 31, 2015. The company says that it dismissed him as CEO on March 4, 2023, before it discovered his misconduct. As part of his departure, Mr. Yau received $240,000 in severance pay.
The problems, as set out in the suit, arose when Spanish Mountain began looking into "irregularities" in the company's financial management after Mr. Yau's departure. The company says that it discovered Mr. Yau had claimed and received $439,750 in unapproved expenses, which he recorded as "weekday accommodation" in Vancouver. He made the claim despite having a residence in Richmond that was within close commuting distance of the company's office, the suit states. Mr. Yau falsified minutes of a board meeting that purportedly approved the expense, Spanish Mountain says.
Spanish Mountain claims that Mr. Yau used the company's money to pay off his debts, purchase property, and to pay expenses associated with his home, including the mortgage, utility bills and maintenance. (Mr. Yau and his wife have owned the home since at least 1996, Spanish Mountain says.) He also used the money to buy shares or exercise options for Spanish Mountain shares, the suit claims.
Other accusations against Mr. Yau stem from abuse of the Canada Emergency Response Benefit program, better known as CERB. The program allowed those off work in the COVID-19 pandemic to collect payments from the government. According to the suit, Mr. Yau directed the approval of furlough notices for himself and other employees, allowing those employees to collect CERB benefits while they continued to perform their normal duties for Spanish Mountain. As part of that effort, he directed a one-time salary adjustment of $71,000 for his benefit, Spanish Mountain claims.
In legal terms, Spanish Mountain claims that Mr. Yau breached his duty, committed civil fraud and was unjustly enriched, among other things. The company is seeking appropriate damages and a court order tracing the money that he received. That includes the $439,750 housing benefit, the $71,000 salary adjustment and the $240,000 severance package, which Spanish Mountain says it would not have paid had it known of his misconduct.
Vancouver lawyer Melanie Harmer of McMillan LLP filed the lawsuit on behalf of Spanish Mountain. Mr. Yau has not yet filed a response.
Spanish Mountain closed at 18.5 cents Tuesday, up a penny.
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