Judge lets Asarco sue Mexican owners

WASHINGTON — A federal judge has refused to throw out a lawsuit filed by Asarco against its Mexican owners in a ruling that eventually could help the bankrupt U.S. mining and smelting company recover billions of dollars to help pay off environmental and asbestos-related claims, including hundreds of millions in claims from Washington state.

The lawsuit alleges Americas Mining, a subsidiary of Grupo Mexico, S.A. de C.V., "fraudulently" stripped Asarco LLC of its lucrative holding in two Peruvian copper mines just as Asarco was teetering on the edge of bankruptcy.

The decision by U.S. District Judge Andrew Hanen in Brownsville, Texas, clears the way for a trial next spring. In preparing for the trial, Asarco lawyers say they will question members of one of Mexico's wealthiest families, brothers German Larrea Mota-Velasco and Genaro Larrea Mota-Velasco, as part of the case.

The Larrea family controls Grupo Mexico, the largest Mexican mining company and the third-largest producer of copper in the world. The Larrea brothers have been executives of Grupo Mexico, Americas Mining and Asarco. The family is considered one of the 100 or so richest in Mexico, dubbed the "fantasticos" because of their economic, political and social clout.

"There is a lot at stake," said Irv Terrell, a Houston lawyer representing Asarco. "This is the ballgame."

A lawyer for Americas Mining did not return phone calls seeking comment.

Americas Mining had sought to have the lawsuit filed by Asarco dismissed, claiming the Peruvian mining interests were actually held by another Grupo Mexico subsidiary and denying there had been any effort to defraud Asarco's creditors.

For nearly a century, Asarco operated a copper smelter in Ruston, next to Tacoma. The smelter was shut down 22 years ago. Washington state has filed a $600 million claim against Asarco alleging arsenic, lead and other hazardous substances from the smelter's 562-foot smokestack contaminated more than 1,000 square miles in Pierce, Thurston and King counties.

State officials have conceded they might receive only pennies on the dollar for their claims. The state also has opened negotiations with banks that are interested in buying the claims at a discount.

A former Fortune 500 company, Asarco filed for bankruptcy in 2005 in what has become the nation's largest pollution-related bankruptcy case.

Nearly $11 billion worth of environmental claims have been filed by 16 states, the federal government, two Indian tribes and private parties. The claims involve 75 sites nationwide, including many federal Superfund sites. If Asarco is unable to pay for the cleanups, federal and state taxpayers would be on the hook.

In addition, 95,000 asbestos claims worth an estimated $2.7 billion have been filed against Asarco.

Grupo Mexico bought Asarco in 1999. Four years later, Grupo engineered the sale of Asarco's 54 percent interest in the Peruvian mines to another of its subsidiaries for $765 million. The U.S. Justice Department initially sought to block the deal but eventually dropped its objections after Grupo Mexico agreed to fund a roughly $100 million environmental-cleanup trust fund.

By some estimates the mines are now worth between $7 billion and $8 billion, as the recent price of copper has soared to nearly $4 a pound. Copper was selling for less than $1 a pound when Grupo Mexico bought Asarco.

The mine sale came as Asarco was slipping toward bankruptcy. But as copper prices rose, Asarco's finances have improved. It now has more than $750 million in the bank as it prepares a reorganization plan to emerge from bankruptcy. Grupo Mexico is interested in regaining control, and a handful of investment firms also have expressed an interest.

Judge Hanen has barred Americas Mining from transferring the Peruvian mine shares to another of Grupo Mexico's subsidiaries or selling them.

Hanen, in a 50-page opinion issued last month, said Asarco's claims of "fraudulent conveyance," "aiding and abetting" and "conspiracy" could proceed. Hanen also indicated punitive damages against Americas Mining could be imposed.