St. Elias dissidents deny defamation allegations

2013-03-13 13:51 ET - Street Wire

by Mike Caswell

St. Elias Mines Ltd. dissidents Gilby and Darcy Hastman deny that they participated in a campaign of defamatory statements that targeted the company and its chief executive officer, Lori McClenahan. They say any damage the company suffered was its own doing.

The Hastmans are responding to a defamation case that St. Elias and Ms. McClenahan launched in the Supreme Court of British Columbia on Feb. 15, 2013. The suit complained about a defamatory campaign that included a number of anonymous forum posts co-ordinated with a news release that the Hastmans issued. The forum posts, one of which said that Ms. McClenahan should be in jail "right along side Bernie Madoff," left readers with the impression that Ms. McClenahan is corrupt, the suit claimed.

In their response to the suit, the Hastmans specifically deny that they had any role with the forum posts. They admit to writing a news release that criticized the company, but say the information in the release was accurate. They ask that the suit be dismissed.

The defamation suit

The allegations against the men are contained in a notice of claim that St. Elias filed at the Vancouver courthouse on Feb. 15, 2013. The defendants are the Hastmans and former St. Elias director Murry Braucht, who is working with the dissidents. Also named were a number of anonymous forum posters the company has not yet identified.

The suit complained about a series of messages on Stockhouse, Agoracom and other sites that accused St. Elias of misleading investors. One message, by a user named "Kherson," accused management of secretly taking gold from one of the company's properties, the suit stated. The message read: "If the ore that has been mined, has been processed and the monies made have been pockeedt [sic] by someone other than SLI, then yes Lori and the gang will be standing in front of a judge. Whatever is going on behind the scenes with SLI, we need a Forensic Audit ... ."

Another post, by an author named "Rinky," accused management of wanting "all the gold for themselves," the suit complained. "Rinky" also urged shareholders to vote for the dissidents at the then-upcoming AGM. He said the company needed a plan for salvation from the "Wicked Witch of the West" and that Ms. McClenahan belongs in jail, "right along side Bernie Madoff."

The company said that the posts were part of a campaign by the dissident group to discredit management. They came around the same time as the dissidents set up an on-line petition titled "A Call for Investigation Into St. Elias Mines Ltd." According to the suit, the petition implied that management had engaged in some sort of "egregious conduct," had published inaccurate news and had acted in a conflict of interest, among other things.

St. Elias further complained that the Hastmans issued a defamatory news release on Jan. 17, 2013, around the time of the posts. The release referred to statements by management and said that, "Nothing could be further from the truth." As St. Elias sees it, the release meant the company's management were liars and "ought not to be believed."

The suit sought an injunction restraining the defendants from publishing defamatory material, as well as general damages, special damages, aggravated damages, punitive damages and court costs. Vancouver lawyer John Sullivan of Harper Grey LLP filed the suit on the company's behalf.

Hastmans' response

The Hastmans, in a response filed on March 11, 2013, deny that they took part in any campaign to anonymously discredit Ms. McClenahan or St. Elias. According to the response, they had nothing to do with the forum posts or the on-line petition that the lawsuit complains of. They say they have only been trying to gain representation on the company's board.

The Hastmans admit to publishing the news release the company complains of, but they say all the information it contained was true. Even if the release were false or defamatory, it was fair comment made honestly on a matter of public interest. In legal terms, the Hastmans say the libel defences of fair comment and responsible communication apply to the release.

If St. Elias or Ms. McClenahan did suffer any damage, they caused that damage themselves, the response states. The Hastmans ask that the suit be dismissed. Vancouver lawyer James Schmidt of Fraser Milner Casgrain LLP filed the response on their behalf.

Braucht's response

Also answering the lawsuit is Mr. Braucht. In a March 13, 2013, response, he too denies that he had any role with the anonymous forum posts and says he did not conspire with anybody in a campaign to defame the company and Ms. McClenahan.

Even if St. Elias or Ms. McClenahan did suffer any damages, those damages were caused by events for which Mr. Braucht had no responsibility, the response states. Among other things, he cites the company's poor share price, excessive promotional expenses, Ms. McClenahan's promises that the stock would rise, and Ms. McClenahan's "unprofessional conduct at presentations and meetings with shareholders and others." (The response provides no examples.)

Mr. Braucht asks that the suit be dismissed. Vancouver lawyer Marko Vesely of Lawson Lundell LLP filed the response on his behalf.

The defamation case comes amidst an effort by the Hastmans and others to replace Ms. McClenahan and the company's existing board. They complain that management took significant stock-based compensation as the stock fell to 11 cents from $2. The dissidents lost the vote at the company's Dec. 27, 2012, annual general meeting, but they have since filed a court case seeking to overturn the AGM results. They claim that the company unfairly disallowed their proxies, denying them a substantial victory. St. Elias has not yet responded to that case in court, but it did issue a news release in which it said it planned to "vigorously defend itself."

The stock closed at nine cents Thursday.