Why did Brookfield Asset Management file Billionaire James Pattison's 13G with the SEC?

. . . and cut him a sweetheart deal?

What was the sweetheart deal?

On November 27th 2008, one day after Brookfield created the Hammerstone Corp, Brookfield offered billionaire Pattison 30% of Birch Mountain's $1.6B asset ---- before PWC even had time to market or sell the asset. How can Brookfield make a deal with an asset that's in receivership and they didn't yet own? You can view the sweetheart deal here:  http://www.brookfieldclassaction.com/Assignment%20And%20Option%20Agreement.pdf

Remember this?

"In court documents, the plaintiffs also single out Vancouver billionaire Jim Pattison, a Brookfield director. He is not named as a defendant, but the plaintiffs allege that he not only held a Birch Mountain debenture of his own, but also signed an option agreement allowing him to take a 30-per-cent stake in Brookfield’s new owner of the limestone quarry, known as Hammerstone Corp. The shareholders allege in court documents that this “preferential treatment” given to an insider like Mr. Pattison, which was never disclosed to the receivership judge, could have violated disclosure or insider-trading rules. Mr. Pattison could not be reached for comment Tuesday." (Jeff Gray - The Globe and Mail Squeezed-Out Birch Mountain shareholders take on Brookfield)

Why did Brookfield file James Pattison's share disclosure after shareholders voted?

It seems billionaire James Pattison was on the board of Brookfield Asset Manangement. It seems (according to his SEC filing) that he owned a control block of shares of Birch Mountain but never got around to disclosing those shares in Canada or the US in a timely manner. So, none of the Birch shareholders knew that an insider at Brookfield already held a control block of Birch shares when they voted for the debenture in May of 2008. It was only after Brookfield served notice of an Event of Default to Birch and then filed their Early Warning Report that we also find out about Pattison's shares. 

In the US we call a situation that looks similar - securities fraud. When Ivan Boesky was implicated as buying and holding stocks for Michael Milken until Milken needed them for a takeover - it was called stock parking. I think Milken went to jail over that and other securities violations. http://articles.latimes.com/1990-04-21/business/fi-1282_1_michael-milken

Stock Parking
"Stock parking represents collusion and artificial manipulation of the market. As is often the case with SEC regulations, the severity of the punishment for colluding to park shares largely depends on the severity of the infraction; the number of shares traded, the amount of taxable income unregistered and the scale of the conspiracy." Read more: Parking Definition | Investopedia http://www.investopedia.com/terms/p/parking.asp#ixzz3xMV54Izi

Oh, right.  And the stock price had been plummeting, remember?

So, I guess the question is - was Brookfield engaging in Stock Parking with one of their directors, Pattison?

Déjà vu anyone?

From Seeking Alpha

"North American Palladium: A Broken Dream Or The End Of A Long Journey For Shareholders"

"Today, the company released this stunning "recapitalization transaction," in which PAL is basically saying that the actual shareholders are almost totally wiped out, and Brookfield (BAM) will take possession of the mine, not later than June 30, 2015. Unless, a buyer is found quickly with a superior proposal, which is totally unrealistic."

Isn't this right out of the Birch Mountain "stealthy acquisition playbook" written by Corporate gangsters?

Here's the link to the article. Take some antacid before you read it. 

Seeking Alpha - North American Palladium

Hall of Fame names Lanny McDonald C.O.B.

Congratulations to our Brookfield Class Action lawsuit

Representative Plaintiff - Lanny!!!

"TORONTO (AP) Lanny McDonald has been a member of the Hockey Hall of Fame since 1992.

Now he's the man in charge.

McDonald was selected as chairman of the board of the Hockey Hall of Fame on Wednesday, succeeding the late Pat Quinn."

Lanny trophy


The "Thieves of Bay Street" and "Legalized Thieft"

The "Thieves of Bay Street" by Bruce Livesey

"The logjam over who would control Stelco and bring it out of CCAA was broken in the fall of 2005 when the leadership of the steelworkers' union formed an alliance with three investment pools: Brookfield/Tricap, Bay Stree's Sunrise Partners LP and the American  hedge fund Appaloosa Management LP."

"The a loan of $150 million from the Ontario government, Brookfield invested $55 of equity and offered up bridge financing of $375 million to buy the company in conjunction with Appaloosa and Sunrise. However, this sale meant wiping out the value of all the shares held by Stelco's original shareholders - a total of $167 million. The got it for a song," says Pollitt, of the investment house Pollitt & Co., Inc. And Gerstenberger, who broke with the union's leadership and refused to negotiate with the Bay Street firms, call it "legalized theft."

"In late 2007, Brookfield and its partners unloaded Stelco - a mere twenty months after buying it - to U.S. Steel for US $1.1 billion. At that time, Stelco's new shares were selling at $38.5. For its investment Brookfield/Tricap made more than $330 million in profit, while Appaloosa and Sunrise cashed in more than $180 million - which was more than seven times their original equity investment, plus profit from interest, fees and debt."

If you read Bruce Livesey's book and then you read the Statement of Claim on the official web site for the class action lawsuit against Brookfield you will see that the modus operandi for the "Thieves of Bay Street" carries the same characteristic fingerprints in dealing with Birch Mountain.

  • $1.67 Billion dollar asset "acquired" by Brookfield/Tricap for less than $50 Million.
  • An equity investment of less than ~$35 Million. ~$16 Million of that 35 Million was used to pay Brookfield Bridge Lending leaving ~$11M for Birch after deducting usurious fees for the financing.
  • Within approximately 11 months Brookfield/Tricap owned the Birch assets and wiped out shareholders.

If you want to know more about Brookfield Asset Management and how they operate, SIFMA has done some very good work:

"In response to a U.S. Securities and Enforcement Commission comment, Brookfield recently came close to acknowledging that it has a pyramidal control structure in the “Risk Factors” section of a prelaunch filing for its Brookfield Property Partners unit: “The company at the top of the chain may control the company at the bottom of the chain even if its effective equity position in the bottom company is less than such controlling interest,” the document states."

Bruce Livesey continues in a Huffington Post Q&A article:


"Because the laws are so weak, they can steal, they can misrepresent themselves, they can [promote] an investment product when in fact they know it’s going to go bad, and they don’t go to jail. They don’t get charged. That’s what I began to find, and it was just very new to me."

"Yes. It’s sort of astonishing. There [are] a few organizations or investors’ groups which have been banging the drum as best they can over these issues for years, and when I've asked if they can produce a victim for me to talk to, it’s always a struggle. Because people are enormously embarrassed that they’ve lost all their money.

Most of them, especially if they’ve accrued a good amount of savings, chances are they’re middle class, they’re college educated, they’re professionals, and they’re shocked that they somehow managed to lose their money. They feel like they should have somehow prevented it from happening."

"The regulatory issue is huge. If you removed the police force from Toronto, you would see a lot of shit happen. The same thing basically exists in the financial industry, where you don’t have a police force, so they do a lot of evil as a result. In Canada, we have one of the most, if not the most, abysmal regulatory system in the developed world.

We need a national securities regulator. That’s long overdue. We should have tougher penalties on investment fraud, we should be sending more people to jail and make it more of a criminal thing. Because in Canada we have this tendency -- we hit people with securities violations, which are clearly cases of fraud, but we don’t criminally prosecute them."

And according to a review in MacLeans:

"Why is Canada so prone to fraud? Bay Street’s clubby culture is one factor. CEOs live in the same tony Toronto neighbourhoods as their boards of directors, corporate lawyers and accountants, and send their children to the same schools. Canadian regulators are criticized for being toothless and seemingly incapable of putting anyone in jail."

How does the preferential James Pattison deal shake-out?

Remember the sequence of events:

5 Nov 2008 Birch Receivership

26 Nov 2008 Hammerstone Corporation created by Brookfield

27 Nov 2008 Sweetheart deal given to James Pattison

What does the deal look like deconstructed? If the asset of Birch Mountain is acquired by Brookfield then Pattison gets 30%. What is 30% of 1.6 billion?

Download Pattison Secret Option Agreement dissected

How does Brookfield Tricap sell something they don't yet own?


Here's the sequence:

5 Nov 2008 Birch Mountain forced into receivership.

26 Nov 2008 Alberta 1439442 later to become Hammerstone Corporation was created by Brookfield.

27 Nov 2008 James Pattison receives a sweetheart deal from Alberta 1439442 in exchange for selling his debenture shares to Brookfield.

9 Jan 2008 Brookfield Hammerstone purchases the $1.6 billion dollar asset for less than $50 million.

How can Brookfield create a sweetheart deal with one of their own directors to sell an asset they don't even own?

Download 1 Pattison Option Agreement FINAL

Mirror, Mirror, on the wall . . .

. . .who is the financial advisor behind them all?

What does this:

Delaware court rules RBC Capital Markets misled investors by Tim Kiladze, Globe and Mail

have to do with us?

 In our Statement of Claim we make mention of the role of RBC. Three significant events involving RBC, in the course of advising Birch Mountain, raise serious questions.

1. Why did RBC, Birch's paid financial advisor, downgrade Birch Mountain at the same time Davenport Securities recommended BMD as a STRONG BUY?

2..  RBC, Birch's paid financial advisor, was leading the "exploration of strategic alternatives to enhance shareholder value, joint venture, merger, sale of the company." RBC, similar to the situation in the article cited above, was responsible for shopping Birch around.

3.  RBC, advises Birch to reject a bought deal that would have provided enough capital to work through the year and into profitablity and instead to accept the death spiral toxic financing provided by Brookfield/Tricap.

See any similarities? But wait . . . there is more to the story . . .

Also in the Statement of Claim:  What is the role of Jim Pattison, if any?

Ahhhh, the plot thickens.

Amended SOC filed and served in Alberta

Let's see. . . Where were we?

We appealed the jurisdiction motion in Ontario and were on our way to Alberta. We retained Docken and Co. and were advised to appeal to the Supreme Court of Canada on the juridiction. Last November (2012) we exhausted our attempts to have our case heard in Ontario.

What is obvious to us is not obvious to the courts. We are suing Brookfield and Brookfield resides in Ontario. However, the courts have ruled that the actions took place in Alberta and therefore we have to take our case there.

We have changed representation and have hired Anthony Merchant of the Merchant Law Group. The result has been an amended Statement of Claim which was filed/served to Brookfield/Tricap in Alberta on July 25th, 2013.

There are a few changes and we'll highlight them in the next post. In the meantime, please take a look at the amended Statement of Claim: Download 2013-07-25 FILED Amended Statementof Claim (2)

The amended version of the Statement of Claim is more concise and contains some new language. Look for the words "deemed" and "but for" as they point out some very significant facts.

We have elaborated on those facts here on this blog. We encourage you to use the search box in the left blue sidebar to go back and read about those facts. 

If you have any questions please contact us by emailing birchmountain@hushmail.com.





Sad News - Don Dabbs

Don Dabbs, cofounder of Birch Mountain Resources, left us April 14th, 2014, as a result of a massive heart attack.  Don was Senior V.P. & Director of  Birch Mountain Resources but he was much more than that to everyone who knew him. Don, was a thoughtful, intelligent, caring, decent man with a long successful and varied carrier. He will be missed by everyone who knew him and in particular his life partner and loving wife Karol. Here is a link to his obituary.

In honor of Don's passion and commitment to environmental endeavors Champion Stakeholders, LLC has donated 50 trees to the Gallatin National Forest via the Arbor Foundation.

(Our sincerest apologies for this late post as we have been dealing with numerous computer/technology issues).