PHOENIX (CN) – Directors and shareholders of a mining company claim in court that the company’s president and his daughter “manipulated the stock value of United Mines for their own benefit,” while the company was losing $9 million.
United Mines Inc., whose stock trades over the counter, four of its directors and three shareholders sued CEO Glenn E. Martin, his daughter Nicole M. Breen, and Gem Management Group, in Maricopa County Court.
Martin, United Mines CEO, president, CFO and executive vice president, and Breen, the company’s secretary and treasurer, “illegally issued stock in United Mines to themselves, GEM Management, the entity controlled by them, and various friends and supporters,” according to the complaint.
“Defendant Nicole M. Breen is the daughter of defendant Glenn E. Martin,” the complaint states. Gem Management Group is an Arizona LLC “owned and controlled by defendants Glenn E. Martin and Nicole M. Breen,” it adds.
“In a situation that has become far too common today in public markets, a small group of people have used a public company purely to further their own interests,” the complaint states. “In this case, those people are defendants Glenn E. Martin and his daughter, Nicole M. Breen, who through a series of stock scams and manipulations, among other acts, have victimized United Mines and more than two hundreds (200) shareholders.”
The plaintiffs claim that Martin and Breen “manipulated the stock value of United Mines for their own benefit, and filed false and fraudulent 10-Qs (the quarterly reports) and 10-Ks (the annual reports) with the Securities and Exchange Commission over the objection of the independent members of the Board of Directors.”
United Mines, a mining business focusing on gold, silver, and copper, “has yet to produce a single ounce of any precious metal or a dollar in revenues, although it did generate more than $2 million in losses in 2011 alone and, accumulated losses of $7 million through 2011,” according to the complaint.
The plaintiff directors claim the defendants “forged the signatures of the independent members of the board on the last 10-K for 2011; sold assets of United Mines without the knowledge or approval of the Board of Directors or shareholders; [and] have paid management fees in the form of cash and stock to GEM Management Group … without the approval of the board.”
The plaintiffs claim Martin and Breen also “paid themselves salaries in the form of cash and stock without board approval; have failed to pay critical monthly bills, and have engaged in a pattern of defrauding professionals by accepting services then refusing to pay their fees; have failed to file federal and state income tax returns for at least the last several years, and plaintiffs believe have also failed to pay payroll taxes or file quarterly returns for years.”
The plaintiffs say the Board of Directors fired Martin and Breen on June 12, but Martin refuses to provide access to company books and records and is still operating United Mines. Martin “has orchestrated a sham shareholders meeting for July 25, 2012, designed to remove the directors who fired him as an officer,” the complaint states.
The plaintiffs say that “a shareholders meeting of this time would be so tainted by the defendants’ illegal and unauthorized stock sales, the illegal issuance of common stock to themselves, their money laundering scheme, and their stock manipulation scams, that it would have no meaning other than as an endorsement of what plaintiffs submit is the criminal conduct of the defendants.”
The directors claim that Martin and Breen “paid their own personal expenses and monthly bills with corporate funds; have consistently for a period of years refused access to the books and records of United Mines to the Board of Directors; have engaged in a money laundering scheme through illegal sales of stock; and transported a hazardous substance (i.e., cyanide used to refine silver which is rated as a Class 6 poison by the EPA) without a permit or the approval of the EPA or the Arizona Department of Environmental Quality.”
The complaint continues: “Defendant Glenn Martin transported more than 3,000 pounds of cyanide across sixty (60) miles through commercial and residential areas without authority and without a permit. For the record, defendant Glenn E. Martin has a prior felony conviction for conspiracy to possess cocaine with intent to distribute and related felony drug offenses.”
The plaintiffs seek disgorgement, compensatory, punitive and treble damages for racketeering, fraud, and breach of fiduciary duty, among other things. They also seek an injunction preventing the defendants from running the shareholders meeting on July 25, where the plaintiffs say Martin will try to regain control over United Mines.
They are represented by James Laganke.