By David Baines,
The Vancouver Sun
The chief executive officer of a Vancouver-based junior mining company that is closely associated with Vancouver mining magnate Frank Giustra has been accused by the Thai government of plundering millions of dollars from the now-defunct Bangkok Bank of Commerce, according to documents obtained by The Vancouver Sun.
Andre Agapov, a Russian national who is now living in London, is CEO and a director of Rusoro Mining Ltd., which is based in Vancouver and trades on the TSX Venture Exchange.
In a request for assistance issued to the U.S. government in March 2002, Thai authorities named Agapov as a co-conspirator along with Krekkiat Jalichan, the bank's former managing director, and Jalichan's former adviser, Rakesh Saxena, as well as numerous others, in a scheme to defraud the Bangkok Bank of Commerce of hundreds of millions of dollars in the mid-1990s.
Giustra, who has become fabulously wealthy promoting mining deals throughout the world, and his right-hand man, Gordon Keep, have had a close business and financial relationship with Rusoro, initially through their publicly traded merchant-banking firm, Endeavour Financial Corp., and more recently through their private financial advisory firm, Fiore Capital Corp. In an interview this week, Keep said he became aware of the allegations against Agapov in a report done by a private investigation firm at the request of a U.S. investment banking company about three years ago. He said the report addressed the allegations, but because it is confidential, he declined to provide details. He said he also made other inquires, but once again declined to provide details. "The net result is that I felt comfortable dealing with Andre," he said, adding that, as far as he can determine, Agapov has acted appropriately as a senior officer and director of Rusoro.
Giustra declined to discuss the matter.
Thailand's current position with respect to its charges against Agapov is not clear. Several years have passed, and there have been frequent regime changes in Thailand. Agapov was out of the country last week and could not be reached for comment. It is clear, however, that Thailand has been pressing its cases against the other accused. Last September, Jalichan was convicted on corruption charges relating to the bank scandal and sentenced to 20 years in prison. Last week, he was convicted on more charges and handed an additional 20-year sentence. At least four other people implicated in the scandal have also been imprisoned.
Saxena, who fled to Vancouver after the scandal came to light, is currently under house arrest in Richmond while the Canadian justice department, at the behest of the Thai government, attempts to extradite him to Thailand. When the Thai government issued its request for assistance in May 2002, it noted that Agapov had been "issued a prosecution order, however, his extradition has not been sought because the Royal Thai government still could not find his whereabouts."
If that was the case, it certainly isn't now. Agapov is reportedly living in London and has been actively involved in Rusoro, which has made headlines in recent weeks due to its hostile bid for control of Gold Reserve Corp., a Toronto Stock Exchange-listed company based in Spokane, Wash. Litigation surrounding the takeover bid established that Giustra has a close business relationship with Agapov and his father Vladimir Agapov, who serves as Rusoro's chairman. It also provided evidence that Endeavour Financial, which provided financial advisory services to both Rusoro and Gold Reserve, may have double-crossed Gold Reserve to further its own interests.
Gold Reserve's major asset is the Brisas gold property in Venezuela. Since 1993, it has spent about $230 million developing the property, and established reserves totalling 10.2 million ounces of gold and 1.4 million pounds of copper, with a gross value of $10 billion. Last year, however, Venezuela President Hugo Chavez revoked the company's mining permit, along with a similar permit issued to Crystallex International Corp., a Toronto-based company that is trying to develop the adjacent property, Las Cristinas. As a result of the permit cancellations, the share prices of both companies plunged.
Chavez, meanwhile, has been developing strong ties with the Agapovs. According to a Nov. 6 report in the Venezuelan daily El Universal, he "will offer Russian Rusoro an association to develop the huge gold mines Las Cristinas and Brisas." If this becomes reality, Rusoro will have been literally handed the keys to an enormous contiguous gold deposit that could be mined with a single production facility and potentially generate huge profits.
So far, however, Gold Reserve has successfully rebuffed Rusoro's takeover attempts. In February, it sought and obtained an injunction against Rusoro in Ontario Superior Court on grounds that it had been betrayed by its financial adviser, Endeavour Financial Corp. Endeavour is a Vancouver-based company listed on the Toronto Stock Exchange. From 2001 to 2007, its chairman was Giustra, a long-time Vancouver broker-turned-mining promoter. His long-time associate, Keep, served as Endeavour's managing director until July 2007.
Giustra and Keep are no longer officers or directors of Endeavour, but they maintain close ties. They established a private merchant-banking firm called Fiore Financial Corp., which is located in the same downtown Vancouver office as Endeavour. Through Fiore Financial, they continue to provide financial advisory services on an "exclusive" basis to Endeavour.
According to the injunction decision, handed down by Judge Peter Cumming, Gold Reserve entered into a financial advisory agreement with Endeavour in October 2004. From then until December 2008, Gold Reserve paid Endeavour advisory fees totalling $1.2 million. During this period, Gold Reserve provided Endeavour with confidential information on the Brisas property. The advisory agreement included confidentiality clauses that, among other restrictions, prohibited Endeavour from using any of the information "for its own purpose or benefit or to the detriment or intended probable detriment of Gold Reserve."
Meanwhile, on April 3, 2007, Rusoro hired Endeavour to provide financial advisory services. So now Endeavour was acting for both companies, but there was a fundamental difference in their relationships. Endeavour, Giustra and Keep had no vested interest in Gold Reserve, but they had a big vested interest in Rusoro.
Cumming said evidence established Giustra, Keep and related entities were involved in the business combination that created Rusoro in 2006, and "Giustra, together with the Agapovs, must agree on the terms of the release from escrow of a pool of 97,960,667 shares of Rusoro."
Keep also became a Rusoro director, corporate secretary and executive committee member. The judge noted that, according to Gold Reserve, in the fall of 2006 "Mr. Giustra advanced the possibility of doing a business combination between Gold Reserve and Rusoro without disclosing that both he and Endeavour had a financial interest in Rusoro."
Gold Reserve said it was not interested.
On Aug. 21, 2008, Rusoro made a friendly offer to acquire Gold Reserve, which was rejected. More overtures were made in September and October, and once again rebuffed. Rusoro then decided to make a hostile takeover bid, and to proceed with Endeavour as its financial adviser. By that time, Endeavour was not only Rusoro's financial adviser, it was a shareholder and creditor. It owned 7.5 million Rusoro shares, plus warrants to buy another seven million shares. Rusoro had also agreed to pay Endeavour 5.5 million shares for its assistance in the takeover bid, and it owed Endeavour some $10 million US.
On Nov. 16, Rusoro decided to proceed with its hostile bid, but according to Judge Cumming, "neither Rusoro nor Endeavour told anyone at Gold Reserve of Rusoro's intention until Dec. 12, 2008," when Rusoro gave Gold Reserve 36 hours to consider the matter.
On Dec. 14, Gold Reserve advised Endeavour and Rusoro that the bid could not proceed because "it was tainted by Endeavour's possession of confidential information belonging to Gold Reserve." The next day, just seven minutes after Rusoro publicly announced its takeover bid, Endeavour terminated its advisory agreement with Gold Reserve via e-mail. Two days later, on Dec. 16, Gold Reserve filed a lawsuit against Rusoro and Endeavour, claiming $550 million in damages and asking for an injunction to prevent Rusoro from proceeding with its bid.
In his Feb. 10 decision, Judge Cumming said the "intertwined relationships between Endeavour and Rusoro raise a serious issue that Endeavour improperly preferred the interests of its client Rusoro to those of its client Gold Reserve and led Endeavour to breach its duties to Gold Reserve. Endeavour and Rusoro argued there was no evidence to suggest that Rusoro misused any confidential information provided by Gold Reserve, but the judge was skeptical.
"I say that these proclamations of innocence are suspicious. The very same team at Endeavour who gained the confidential information of Gold Reserve then acted for Rusoro in preparing and advising on the Rusoro offer, the merits of which would be aided significantly by their intimate knowledge and evaluation of the confidential detailed information of Gold Reserve. Endeavour has a significant existing financial stake in Rusoro as both a creditor and shareholder. Rusoro was also to gain very significantly in compensation if the Rusoro offer was successful. ... The self-interest of the personnel of Endeavour and Rusoro suggest that the protestations of innocence are disingenuous."
He granted an injunction prohibiting Rusoro from proceeding with its hostile takeover bid, and prohibiting Endeavour from assisting in that bid, until a full trial on the matter is held. Rusoro, meanwhile, has filed a prospectus for a $100-million equity offering. The underwriters, Canaccord Capital and GMP Securities, have agreed to buy the entire issue for subsequent distribution to their clients.
The prospectus, signed by Andre Agapov, was receipted by the B.C. Securities Commission this week and is due to close on Wednesday.
"We were not aware of any detrimental information about Mr. Agapov," said Martin Eady, the commission's director of corporate finance.
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