Albuquerque Journal from Albuquerque, New Mexico • Page 8

A8 ALBUQUERQUE JOURNAL Sunday, September 14, 1986 Ore Draws Doubtful' Claims Barbara Apparently Has Vanished CONTINUED FROM PAGE A1 THE ASSOCIATED PRESS ore, but this can be overcome." SAN FRANCISCO A Santa Clara, man well-known for his fast-talking Callahan also claims to have found a $260 million mineral deposit including gold and television commercials for Furniture USA. Bob North Mineralogist, geologist silver the Tres Hermanas Mountains Glen Schwab Former mine owner apparently has disappeared following the area of Luna County and a body of platinum-rich ore in the Jicarilla Moun closing of a gold mine he operated in Mexico. tains in Lincoln County. Maurice Ed Barbara reportedly dropped The Bureau of Mines say these also are Unfounded. from sight last month after initial accounts that his mining company had exaggerated "The only platinum found in New Mex gold production figures to impress inves-1 ico, other than trace deposits, comes from ill i i I meteorites," Eveleth said.

tors. A spokeswoman at Furniture USA's Santa Callahan countered Bureau of Mines Clara headquarters said she didn't know his criticism in his assays. He referred to geologists, metallurgists and mining engineers at the Socorro facility as inept, bungling and "pseudo 1 I 1 "Alter more than 20 years of dealing with these professional it has wnereaDouts. ine teiepnone at Dynapac the company that operated the gold mine, was answered by a message machine. The Furniture USA spokeswoman said Barbara's sons, Robert and Ed were out of town on business and couldn't be reached Friday.

The sons were part owners of Dynapac. Dynapac was incorporated in July 1984 as an array of companies, but its primary venture was Golden Gulch Inc. been difficult for me and several others not to come to the conclusion that there is a conspiracy in this great land to halt all mining, research and Callahan wrote in his assay on the Tres Hermanas ore. JOURNAL PHOTOS JIM THOMPSON Golden Gulch Mining Co. offices in Truth or Consequences.

Bureau of Mines officials, who cooperate Basin by an American company, Gold Shield Exploration and Development Corp. Investigators said about SO percent of Gold Shield's purported assets are gold claims in the Roswell area. But the Bureau of Mines' North said he has given testimony to the commission that gold deposits in the Roswell area are virtually nonexistent. North said there are indications that as many as three corporations are trying to sell investments in gold mining claims in the Roswell area. The Golden Gulch gold mine located on the Ladder Ranch southwest of Truth or Consequences, and efforts to market stock in the company that owns it, raise different questions.

Dynapac Inc. acquired Golden Gulch from Glen Schwab of Truth or Consequences in 1984 and issued reports estimating gold reserves in the billion-dollar range. Revenue estimates were $93.6 million in gold sales for the first year of operation. Assay reports were circulated stating that the mine, which is now closed, could produce $7.8 million in gold a month. Public stock issued by Dynapac totaled more than 20 million shares and for more than a year the mine was touted in over-the-counter stock reports.

Dynapac stock currently is traded over the counter at about 20 cents a share after reaching a high of $8 a share last year. After they acquired Golden Gulch, the new mine owners estimated gold was being produced at a cost of $50 an ounce, with a tremendous profit. But Schwab, former Dynapac employees and the Bureau of Mines while conceding the claim does have gold question whether it is anything more than a marginal operation. Dyanpac was founded by Maurice Ed Barbara of Santa Clara, to manufacture a pushbutton sofa bed. No sofa beds were manufactured but the company started buying Golden Gulch Inc.

from Schwab in the summer of 1984. "I didn't want to sell to him," Schwab said in a recent interview. "I told him no several times. Finally he sent a jet to come pick me Schwab agreed to become partners and with anyone seeking information regarding mineral deposits in New Mexico, say attempts to market investment packages in Callahan's mineral deposits are under investigation in several states. Callahan did not return telephone calls to the Journal.

I "A marketing scheme that touted a sup- jxweaiy goia-ncn mine near Silver City also has drawn fire from regulators. A lawsuit filed in Providence, R.I.. bv the Federal Trade Commission several months ago contends telephone salesmen told prospective investors that $9,600 would buy 3,000 tons of ore that would vield 545,000 in gold and silver. According to the FTC, the sales pitch touted the Volcano Mine near Silver City as having 10 million tons of proven gold ore reserves. The FTC alleges no more than 180,000 to 360,000 tons were available at the mine.

The FTC also said the company took in office challenging the Masero assay report. "If you had an operation that moved 800 tons of placer ore an hour you might clear $67,000 a month profit might," Schwab said. The Journal could not reach Barbara for comment despite several calls and messages left on an answering machine. But in an interview with Cable News Network, which first raised questions about the mine, Barbara said North did not know what he was talking about. He also defended his $50-an-ounce production cost, claiming he was the only one who knew the real figures.

Schwab said there are almost 4,000 investors in Dynapac who have lost in excess of $10 million. SEC filings estimate the number of stockholders at 3,900 with more than 10 million shares issued. The course of Dynapac and the Golden Gulch mine is intertwined with the lives of the Fingado family. David Fingado, a 28-year-old assayist, was the original on-site assayer at the mine a post he held until resigning last spring. According to family members and friends, Fingado quit because he believed prospective stock purchasers were being given inaccurate information about the mine's gold-producing potential Fingado outlined his objections to an investigative team from Cable News Network.

One week before the interview was broadcast, Fingado died in a one-car accident near Hatch. Dona Ana County District Attorney Douglas Driggers said last week he was not satisfied with a State Police investigation, which found no indications of foul play in the accident. Driggers, citing discrepancies in some eivdence presented to him in the case reports, said he wanted a more thorough investigation. State Police Captain John Denko said Fingado's blood alcohol level was "very high." "At this time there does not appear to be any indications that this was anything else besides an accident," Denko said prior to Driggers request that the investigation be reopened. Fingado's uncle, Don Fingado, also worked at the Golden Gulch mine as a metallurgist.

He took samples of what he said were gold concentrates from Golden Gulch to the Bureau of Mines. The bureau's North and Harris said the concentrates showed amalgamated gold, gold filings and a concentration of gold to ore that was suspicious. "One of these on its own would not be enough to say the concentrate had been salted, but the three together can only lead to that conclusion," Harris said. In March 1985 the Securities and Exchange Commission suspended trading in Dynapac stock for 10 days because of questions concerning the company's financial condition, assets, business operations, 1 securities transactions and the accurracy of publicity surrounding the company. The action was followed by a six-month suspension by the National Association of Securities Dealers.

The SEC began an investigation in the spring of 1985 and has been in contact with Bureau of Mines officials. SEC officials would not comment on the status of investigation. The New Mexico Attorney General's -office began making preliminary inquiries into Dynapac's operations this summer but a spokesman said the investigation has been put on hold pending the investigation into Fingado's death. production is running at a weekly average of 1,500 ounces, silver production equals 1,000 (ounces) per week and platinum is being produced in smaller amounts averaging 100 ounces per month. Management estimates present ore reserves to have a life of more than 20 years and be worth more than $1 billion.

"The new system is efficient, simple to operate and requires fewer operators and monitoring personnel. All this results in a cost of gold produced by Dynapac at about $50 per ounce," James E. Ryan of the National Securities Corp. wrote. In an Associated Press story Friday, Ryan was quoted as saying that when he visited the mine "everything was rosy." Now, he said, "there are a lot of people that are very frustrated by the fact that management has not made a statement.

The mine is closed down, and everybody is trying to find out why;" In advertisements in the National OTC Stock Journal, Barbara was quoted as saying revenue from gold should be $7.8 million a month or $93.6 million in the first year of operation. But according to reports Dynapac filed with the Securities and Exchange Commission, total gold sales for 1985 amounted to $556,060 or about 1,700 ounces. In the first six months of 1986, the company reported to the SEC that it had sold $1.3 million in gold or about 4,500 ounces. From the start, geologists and mining engineers at the Bureau of Mines had doubts about Golden Gulch. "The figures didn't make any sense given the history of the area," said North.

"There is gold in the area but not in the concentrations this company was claiming." In March 1985, North wrote the Securities and Exchange Commission's Denver $1.7 million from investors around the country who bought about 600,000 tons of ore. "You have to be careful of anvone who sells the ore before being refined," Eveleth eventually sold out completely to Barbara, He is now involved in a lawsuit throueh said In return for the investor's monevi the i'whlchw hopes to recover his gold claims. sales pitch promised Volcano Mine would In October 1984, Barbara commissioned refine the gold ore using a new assay of thi Golden Gulch claims. Ken Masero, a California geologist, com mar wouia recover 50 percent of all the precious metals in the ore. The FTC lawsuit named Volcano Mine several other companies and three individuals as defendants.

The case is still pending. An FTC spokesman said the agency is seeking a settlement that would return money to investors. pleted the assays and estimated the ore contained .23 ounces of gold per ton. Masero estimated the mine could produce $7.8 million worth of gold a month. More than a year later, the company claimed it was producing 5,000 ounces of gold per month, along with 1,000 ounces of silver, according to the Silver Barron, a stock tip sheet in the precious minerals investment field.

Another tout sheet produced by the National Securities Corporation stated after an inspection of the mine that "gold Questions about New Mexico gold claims cross international boundaries. The Alberta Securities Commission of Canada has been investigating the takeover of a Canadian company, Great Western Sealed Information Hampers Attorneys for Anaya CONTINUED FROM PAGE A1 with people who had contact with the FBI a lack of objectivity befitting a U.S. attorney. The interviews, in the form of affidavits, and testimony from transcripts of earlier closed hearings were included in more than 1,200 pages of documents released last Wednesday. The Anayas had attempted to keep the case closed, but Campos ruled the case should be open, with the exception of grand jury material.

His decision was upheld by the 10th Circuit Court. One of those people who gave an affidavit used by Anaya's attorneys is Charles Daniels. He is an Albuquerque lawyer who represented two unnamed clients before a grand jury investigating the award of the state fiscal agent and correspondent bank contracts. Daniels said in an affidavit that he called Lutz after his clients were subpoenaed to find out what he was interested in. He said Lutz responded by saying "that if my clients could give him Gov.

Toney Anaya, he would be interested in working out something with them. I "I responded that my clients knew of no, criminal conduct that the governor had committed and if that was really what he was looking for we could be of no assistance," Daniels said. Daniels also told Attorney General Paul Bardacke, June 30 hearing, Cunningham was asked what proof he had to support his allegations. Campos: "You tell me, Mr. Cunningham, what hard evidence you have that the IRS is being used by Mr.

Lutz's office." Cunningham: "Well, the hard evidence that we have is that there is no denial in the two affidavits that they got information from the FBI." The affidavits are those of IRS agents Matthew O'Nuska and Russell Godby. Transcripts also show a disagreement over what constitutes grand jury information. Lutz maintains independent interviews by FBI agents aren't grand jury information and that it is permissible to pass such information on to the IRS. Lutz said the FBI gave the IRS "very little detail and we didn't give them conclusions. We gave them basically the allegations that had been made." Cunningham said that if any allegations, such as one that Anaya took a payoff from a State Fair contractor, were used in the U.S.

attorney's attempt to get summonses issued on various banks, the information was a grand jury matter. Motives are central to the argument by Anaya's attorneys that information was passed on improperly. They are attempting to show through interviews Lutz if he wins the appeal. "If we can lay down some guidelines for the proper conduct of federal officials, if we can get that done, I'll walk away from it," he said in an interview Thursday. Anaya's attorneys claim that by passing on allegations suggesting Anaya enriched himself in office, Lutz is trying to use the IRS to conduct a criminal investigation.

Lutz would then take the results to a grand jury, they say. Lutz counters that Anaya is trying to sneak a look at what the grand jury has in its possession. "This is an attempt to discover what the grand jury is doing and I think the issue is whether it (the IRS) has a right to investigate the matter independently of the grand jury," Lutz testified in a March 13 closed hearing. Lutz has indicated the grand jury investigation has been put on hold until after Jan. 1, when the governor leaves office.

The allegations of Anaya's attorneys add up to what they say is a violation of judicial rules governing the secrecy of grand juries. In an exchange between Campos and Anaya attorney David Cunningham at a who was at the grand jury assisting Lutz, that his clients couldn't "deliver the governor." "Mr. Bardacke immediately protested to me that he had no such goal and that I had no reason for believing so. At that point Mr. Lutz volunteered to Mr.

Bardacke: that he had, in fact, made the earlier statement to said. In his questioning of Godby, IRS group manager the criminal division, Cunningham seized an opportuni-' ty to cast some doubt on their motives. Godby was1 asked what made the investigation of Anaya's personal finances worthwhile. Godby responded: "Actually, what makes this case worthwhile is' because of the subject of the investigation. One of our national priorities, right up there with money, laundering, fraudulent tax shelters, narcotics, is polili-, cal corruption and the fact, you know, that the person is who he is." Cunningham: "Are you telling me that if you are a public figure and people make specious allegation's against you, that you automatically go and get their bank records?" Godby went on to explain that the IRS investigates' secretly because taxpayers can be damaged if it becomes public that they are being scrutinized for possible criminal tax violations.

There is some evidence in the testimony, however, that Lutz wanted to keep the FBI from an unwarranted "fishing expedition." Godby said he wanted to know at one point if the IRS should be participating in the grand jury and recalled the FBI felt Lutz wasn't being as aggressive as he might be. "I recall some discussion about difficulties that the FBI felt they had because Mr. Lutz was not pursuing every avenue that the FBI thought they ought to pursue what I recall specifically being said in that meeting (May 2, 1985 between the IRS and the FBI) was that Mr. Carlson (Joel Carlson, former special agent in charge in Albuquerque, now in Louisville) was unhappy about the latitude may not be a good word, but the degree that his agency was able to go to to investigate this. He wanted to go much further, get much more documentation, and I think even more witnesses." Godby said in his testimony that Lutz was concerned about a possible fishing expedition "and we didn't want any allegations of that occuring." In their arguments before Campos, Anaya's attorneys said Lutz has misused the term "target," by identifying Anaya in 1984 as the target of a grand jury.

A U.S. Attorneys' manual defines "target" as a putative defendant, someone generally considered to be accused of a crime. "The U.S. Attorney has given no valid explanation for his improper designation. At this point, the only logical explanation appears to be harassment and possible said Cunningham" Governor Gets Loan for Legal Fees By David Staats OF THE JOURNAL'S CAPITOL BUREAU extra battle, either a legal or public relations battle, to prove that point," he said.

U.S. Attorney William Lutz said Anaya would be unlikely to recover his expenses from the government if he wins his case. Anaya has appealed a federal district judge's July decision to uphold the summonses to the 10th U.S. Circuit Court of Appeals in Denver. "As a general matter, legal fees are not recoverable," Lutz said.

Anaya said investigations by Lutz have cost individuals thousands of dollars in legal fees "spent needlessly" by people hauled before grand juries. The governor said he does not intend to sue Lutz over the "constant harassment, innuendo, character assassination" in connection with Lutz's so-far unsuccessful efforts to uncover wrongdoing by Anaya. He said he would feel vindicated if the appeals court sides with him. "If we get that done, I'll walk away from it," Anaya said. "The most that any person has to offer is integrity.

If I can get that re-established for myself and family, I will feel vindicated and satisfied." Anaya said the state hasn't paid any of the costs of his lawsuit. That was confirmed by Albert Gallegos, director of the state Risk Management Division, which provides insurance that covers public officials in most civil lawsuits. The law firm's $150,000 contract for general services to the Division through June 30 was amended in May to add $125,000. had to increase the contract to White, Koch because we have given them quite a few cases and because they've been quite successful with difficult cases," Gallegos said in an earlier interview. Asking the state to pick up the governor's legal costs is an "interesting question; it might be worth pursuing," Anaya said Thursday.

The governor said he might be able to make a legal argument that it's his office, not himself, that's under attack by the government's continuing investigation of possible political corruption. But Anaya added that he wouldn't seek to have the state reimburse him. "I don't want to take on that i SANTA FE Gov. Toney Anaya says he's had to borrow money he won't say how much to pay legal fees in his 6-month-old tax lawsuit against the federal government. "At some point in time, I'm undoubtedly going to have to ask for some help from personal friends," the governor said in an interview Thursday.

Anaya, who receives a salary, plus expenses, as governor and has other income from real-estate investments, also declined to say how much his court battle has cost. "I can tell you it's substantial," he said. In March, Anaya and his wife, Elaine, went to court to block the Internal Revenue Service from enforcing eight summonses the IRS issued to third parties for information about the Anayas' 1983-84 tax liabilities. The governor contends those summonses, and others issued since, were intended to harass him. The Anayas engaged the Santa Fe law firm of White, Koch, Kelly McCarthy to represent them.

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