A conservation group on Monday asked federal regulators to investigate possible insider trading involving the owner of the Pebble copper and gold mine and an analyst who tracks the company’s stock.
Earthworks believes securities analyst John Tumazos “received and disclosed insider information" to investors in the weeks before the Trump administration in July released a decision favoring the project, according to a complaint filed with the Securities and Exchange Commission.
The value of Northern Dynasty Minerals’ stock rose sharply following the July announcement. Northern Dynasty Minerals is based in Canada and owns the Pebble Partnership, the company aiming to develop the mine.
Northern Dynasty and Tumazos separately dismissed the allegations raised in the four-page complaint.
“I think this is all made-up crap,” said Tumazos, owner of New Jersey-based Very Independent Research, on Tuesday.
“Northern Dynasty Minerals Ltd. has viewed last night’s report on CNN, and unequivocally rejects all of the claims and insinuations contained within it as baseless and unfounded,” said Sean Magee, vice president of public affairs for the company.
A former regulator with the Canadian equivalent of the SEC, where the complaint may be headed, said the allegations should be investigated. Also, a former SEC regulator said the complaint is more specific than most insider-trading complaints, but added that it will have a big hurdle to clear because the agency is able to investigate only a fraction of the complaints it receives.
Earthworks in April filed a broader complaint against the project, in part asserting that Northern Dynasty misrepresented the project’s value to investors. The SEC declined to consider that case, said Alan Septoff, a spokesman with the Washington, D.C.-based group.
CNN initially reported this story.
The U.S. Army Corps of Engineers is currently reviewing an application for the project, and is expected to release a final decision next year. Opponents fear the Corps will give the go-ahead to the mine, which they assert will damage salmon-producing headwaters of the valuable Bristol Bay salmon fishery.
Pebble Limited submitted the application to the Corps in late 2017.
The Environmental Protection Agency on July 30 removed a potential restriction on the project put in place under President Barack Obama, the so-called ‘pre-emptive veto’ that mine supporters fear EPA would use to kill the project.
The value of Northern Dynasty shares rose 37% on the day of the decision, and trading activity jumped by a factor of five compared to recent levels, according to the complaint.
The complaint suggests that Tumazos received advance knowledge of EPA’s plans in the weeks before the EPA decision was made and was able to relay that to investors, after communicating with Ron Thiessen, chief executive of Northern Dynasty, who spoke with investors in June at a meeting organized by Tumazos.
“Whether trades were made resulting in profits by people who had access to this inside information is beyond my client’s knowledge or resources,” said the complaint, filed by Lin Deola, a Montana-based private attorney representing Earthworks in the case. “Also, my clients have no information as to who disclosed this non-public information to Northern Dynasty’s CEO. But it is apparent that someone disclosed this information prior to the July 30, 2019, public announcement and trades were made based upon this information."
Earthworks is not certain that laws were broken, Deola said on Tuesday. “They simply want the issue investigated,” she said.
Tumazos said he has not relayed any improper information to investors. He said conservation groups are poised to challenge the project at every opportunity.
“I don’t expect any securities regulator to take this seriously,” he said.
Joe Groia, a former director of enforcement with the Ontario Securities Commission, the SEC counterpart in Canada, said there is “definitely trading here that needs to be very carefully looked at by regulators."
“But it is premature to say if there is insider trading here,” he said.
SEC, if it takes the case, would communicate with the OSC and determine which agency should lead an investigation, he said.
Northern Dynasty shares are traded in Canada, as well as on the New York Stock Exchange, he said.
Jordan A. Thomas, a former assistant director in SEC’s enforcement division who helped develop the agency’s whistleblower program, said the complaint is more detailed than most insider-trading complaints received by the SEC.
But proving wrongdoing in such cases is challenging, he said.
“What I can tell you is it’s more credible than many tips the SEC receives for insider trading,” he said. “But they get 30,000 tips complaints or referrals a year, and they can only actively investigate 2,000 to 3,000 of those. So whether this one makes the cut is hard to say.”