Jury Finds For Local Miners in Multi-Million Dollar Fraud Suit Brought By World’s Largest Gold Mining Company

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Tisdel Law Firm successfully defended two Western Slope miners and their closely held company against fraud charges brought by Barrick Goldstrike Mines, Inc., a subsidiary of one of the largest gold mining companies in the world.

On Thursday, July 22, 2010 following a ten day trial, a jury sitting in Gunnison, Colorado vindicated local gold miners Lance Barker and Ken Orvis and their company Au Mining, Inc., by finding them not liable on all charges brought against them by Barrick Goldstrike Mines, Inc., a subsidiary of Canadian mining giant Barrick Gold Corporation. Barrick brought the suit, Barrick Goldstrike, Mines, Inc. v. Barker, Orvis, and Au Mining, Inc., in Gunnison, Colorado District (Case No. 07CV55), alleging that Barker and Orvis artificially inflated the value of gold ore shipments they delivered to Barrick’s Goldstrike facility outside of Carlin, Nevada from 2001 to 2006 by adding man-made gold to samples taken at the facility, an act known as “salting”. The ore came from the Golden Wonder Mine, a high grade telluride ore deposit located outside of Lake City, Colorado, which Au Mining operated from 1997 to 2006. Barrick brought claims for fraud, breach of contract, and unjust enrichment against Barker, Orvis, and Au Mining, seeking damages in excess of $22 million, which Barrick claimed was the amount it overpaid for the ore due to the alleged salting.

Barrick claimed that the samples were salted and that Defendants had the motive and opportunity to salt the samples when Mr. Barker and Mr. Orvis participated in the sampling of the shipped ore at the Goldstrike facility. The samples were obtained by shoveling ore samples into five gallon buckets, which were then sealed and delivered to Barrick’s assay laboratory where the gold content of the samples was determined. Au Mining was paid based on a formula multiplying the assays and the tonnage of ore delivered from the Golden Wonder Mine. Barrick alleged that between 2001 and 2006, the defendants added man-made gold to the samples during these shoveling events.

However, the jury heard testimony from a large number of Barrick employees who worked side-by-side with Mr. Barker and Mr. Orvis when the ore was sampled and who testified that they never saw Mr. Barker or Mr. Orvis put any foreign gold in the samples. The defendants testified that they participated in the sampling events only because they were asked to help out because Barrick did not properly staff the sampling events with its own employees. Their testimony was corroborated by a number of Barrick’s own employees who stated that the company was not properly staffed to conduct the sampling without the defendants’ assistance.

In support of its claims, Barrick relied on the testimony from Dr. R.J. Watling, a Professor of Forensic Science at the University of Western Australia who opined that based on his examination of scanning electron microscopic images of the gold contained in the samples, the samples contained a type of “microcrystalline” gold that did not exist in nature and therefore was man-made and artificially added to the samples.

In response, the defendants offered the testimony of Dr. Paul Spry, a Professor of Geology at Iowa State University and an expert in telluride ore deposits who opined that the alleged manmade gold naturally precipitated from boiling solution during volcanic mineral deposition events. The jury saw evidence that the “microcrystalline” gold existed in a sample Barrick taken directly from the Golden Wonder Mine after the litigation commenced as well as other samples taken from the mine.

While Barrick argued that only the defendants had the motive the salt the samples, the defendants offered sworn testimony and documents from Barrick’s own employees that raised questions about Barrick’s motive to falsely accuse the defendants. The evidence revealed that Barrick commingled Au Mining ore with higher tonnages of lower grade ores in its process and for five years never could definitively account for the gold contained in Au Mining’s ore. Yet, evidence obtained from Barrick’s own accounting records showed that Barrick estimated a net profit of $8.7 million attributed to Au Mining’s ore.

The evidence presented at trial revealed flaws in Barrick’s gold recovery processes, and included emails in which senior Barrick management admitted problems with its “Toll Ore Program”, which refers to Barrick’s practice of purchasing outside ores from third-party vendors such as Au Mining. Such evidence included an internal email written by Barrick senior management which states that “logistically Goldstrike doesn’t have the people or equipment in place to perform an accurate Met accounting on high grade materials”.

On its website, Barrick claims to be the “gold industry leader” and to have “the gold industry’s largest unhedged production and reserves”.

Barrick is represented in the case by Francis M. Wikstrom, Michael P. Petrogeorge, and Nicole G. Farrell of Parsons Behle & Latimer in Salt Lake City, Utah and Luke J. Danielson of Gunnison, Colorado. The defendants are represented by Roger F. Sagal, Andrew A. Mueller, and Mark T. Howe of the Tisdel Law Firm, P.C. in Ouray, Colorado and Michael T. Mihm of Starrs Mihm, LLP in Denver, Colorado.

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