Investor Beats Mining Disaster Charges

Earlier this year, the U.S. Department of Justice argued successfully for Canadian courts to freeze $152 million in assets owned by Robert Friedland in order to pay for the clean-up of the cyanide and heavy metal contamination of a mine in the San Juan mountains of southwestern Colorado.

But a Canadian judge early last month lifted the asset freeze, ruling that there wasn't enough evidence to hold the dual Canadian-U.S. citizen responsible for the toxic spill at the Summitville mine.

Galactic began to mine gold in Summitville, using a relatively new method of spraying cyanide on low-grade ore to extract the precious metal.

Despite claims by previous mine engineers that there was no new gold to be found, investors put their faith in Friedland, who raised $200 million including $15 million from a major Quebec pension fund. The company's stock soared from two dollars per share to $10 in just six months.

With a loan from Bank of America and engineering help from the California engineering giant Bechtel, Galactic carved out a huge basin in the side of the mountain and piled millions of tons of crushed ore over plastic liners.

The liners apparently ripped immediately after installation because Galactic was in such a hurry to extract gold that the company laid them down in the depths of winter. Cyanide started to leak into a nearby creek, despite attempts to pump the contaminated water back into the rock heap.

Over the course of the next few years, some 35 million pounds of cyanide solution were poured over ore to produce 280,000 ounces of gold, at a loss of $85 million.

In September 1990, an anonymous tipster brought the situation to the attention of the U.S. Environmental Protection Agency (EPA). After toxic spills killed all aquatic life along a 17-mile stretch of the Alamosa River, the agency moved to clean up the site in December by seizing a $6.7 million bond posted by Galactic.

Friedland had resigned all his positions with the company less than month before this incident. Two weeks after the government claimed the bond, Galactic, which ceased mining operations about a year earlier, declared bankruptcy.

Last August, the U.S. government decided to formally charge Friedland with helping to create the Summitville mess, which to date has cost $80 million to clean up.

Justice Department attorneys then secretly asked Canadian courts to freeze Friedland's assets because of worries that he would put his money -- which included $500 million from the sale of his share in a Canadian nickel mine -- out of reach of the U.S. government.

They underscored their concern by noting that ownership of Friedland's mansion in Vancouver had been moved to a company in the British Virgin Islands and his Denver-based companies had transferred their operations to Singapore, while the man himself claimed to live in Sydney, Australia.

In 200 pages of sworn testimony admitted into Canadian courts, Krasovec said Friedland admitted mistakes were made during construction of the waste pits, but he "didn't respond" when it was suggested that the liners be "ripped down and reconstructed."

Friedland flew back to Canada in October to testify in his defense. He submitted a 1995 report from an EPA inspector who pointed out that Friedland was not in charge of day-to-day operations at the mine.

"I intend to correct the record....Nobody likes to be accused of being an environmental rapist," he told interviewers in Toronto.

Early last month, Judge Robert Sharpe accepted Friedland's defense that there was insufficient evidence to hold the multi-millionaire liable for contamination from the mine, and he ordered that the freeze on his assets be lifted.

"It's a very powerful judgment that speaks for itself. The injunctions, which amounted to an entirely unwarranted restraint of my property and denial of my civil rights, have now been decisively thrown out," said a triumphant Friedland in a statement issued in Singapore.

This is not the first time that Friedland has escaped harsh censure from the U.S. legal system. In 1969, he was sentenced to two years in a youth corrections facility selling the hallucinogenic drug LSD. He served several months before being paroled for the incident.