Federal securities regulators have filed suit against Copper King Mining Corp., former President Mark Dotson and stock promoter Wilford Blum over the sale of millions of dollars of unregistered company shares.
The Securities and Exchange Commission contends Dotson made numerous false and misleading claims about Copper King while serving as company president and CEO from January 2008 until he was ousted in March 2010.
And it alleges Blum, whom the agency describes as a "self-employed stock promoter," raised $12.3 million selling unregistered shares of the stock from 2008 through 2010. Of that amount, the SEC said Blum and his company, Alexander Lindale LLC, turned over $9 million to Copper King, while keeping $3.2 million.
Dotson couldn’t be reached for comment Friday. Blum, however, said he just made a mistake.
"It was one of those things where I made a mistake and got caught," the Salt Lake City man said. "All I was trying to do was raise money to help keep 150 families working. So if that is a sin, then so be it."
Blum pointed out the SEC’s lawsuit is a civil and not a criminal matter. "The last thing I need is the whole world to think I have committed a criminal act — and I haven’t."
Copper King, which built and for a short time operated a $60 million copper mill just outside Milford in Utah’s Beaver County, filed for Chapter 11 bankruptcy a little more than a year ago. The case is still open in U.S. Bankruptcy Court for Utah.
It was the machinations that involved fundraising for Copper King and its mill that the SEC objected to in its lawsuit, filed in U.S. District Court for Utah.
The SEC alleges Dotson stated in 2008 that the company expected to extract more than 230 million pounds of copper, 11.5 million ounces of silver and 115,100 ounces of gold from its Beaver County mining property within five years.
"Dotson knew that these claims were false and misleading," the SEC’s lawsuit states. "In fact, Dotson knew that Copper King was permitted to mine only a single 20-acre parcel, and that the productive life of the mine site was only two years, not 10 as stated on the company’s website."
The SEC also alleges that in an effort to obtain financing for the company, Copper King, Dotson and Blum offered to sell the company’s shares under a rule that allows the sale of up to $1 million of stock in a 12-month period. Yet it alleges that Blum proceeded to buy and sell far more shares than were authorized.
The agency said Blum represented that his company, Alexander Lindale, was buying Copper King stock for investment purposes and not with a view to distribute the stock to the public. However, the SEC argues that "within hours of having Copper King stock issued to Alexander Lindale, Blum immediately began to distribute or resell Copper King stock to individual investors and entities."
In its complaint, the SEC is asking the court to issue an order directing Blum to disgorge all ill-gotten gains. It also is asking for it to bar Copper King, Dotson and Blum from violating securities laws and from participating in any offering of a penny stock in the future.
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