An investor is suing Ray De Motte, the president of the company trying to reopen the Sunshine Mine, claiming that De Motte bilked him out of nearly $3.4 million through fraudulent business practices.
James D. Christianson of Vancouver, Wash., invested in Sterling Mining Co. and other companies that De Motte and his associates controlled or had a financial interest in during a two-year period, according to the suit filed this week in federal court in Tacoma.
Christianson bought his first Sterling stock in 2003, the suit said. Several months later, he met De Motte at a silver investment conference in Coeur d’Alene. De Motte painted a favorable picture of prospects at the defunct Sunshine Mine, indicating that it could be producing silver in as little as 18 months when he knew that reopening the mine was realistically eight years away, the suit alleges. De Motte persuaded Christianson to invest heavily in Sterling Mining and other questionable ventures, including a charter plane service out of Wallace and dilapidated Silver Valley real estate, according to the suit.
“I obviously disagree with the allegations,” De Motte said Friday afternoon. “I plan to vigorously defend my reputation.”
“The allegations are absolutely false,” said Mike Branstetter, De Motte’s attorney. “We will have our day in court, and we will vigorously defend the litigation.”
The Sunshine Mine near Kellogg was a prolific silver producer over the last century and one of the Silver Valley’s largest private employers when it shut down in 2001. Sterling Mining is leasing the mine from a Nevada firm that bought it from bankruptcy trustees. Sterling’s nine employees in Kellogg are working to rehabilitate the mine, De Motte said.
According to the suit, Christianson is seeking to recover more than $3.2 million in financial losses, plus interest and other compensation. In addition to De Motte, the suit names Sterling director Carol Stephan and Melanie Farrand, a business partner of De Motte’s.
Christianson said he learned about Sterling through Pennaluna & Co., a Coeur d’Alene firm that specializes in penny mining stocks. According to the suit, a Pennaluna stock broker represented the stock as a good investment and vouched for De Motte’s “business acumen” and conservative approach to finances. Christianson bought 75,000 Sterling shares in spring 2003, and eventually became a large shareholder, according to the suit.
A year later, the suit said, the broker suggested that Christianson sell his stock. Sterling’s stock was trading around $7 per share, and Christianson could have realized $525,000 from the sale, according to the suit.
But De Motte demanded that Christianson not sell his stock, the suit said. Based on De Motte’s comments, Christianson did not sell, though unbeknownst to him, De Motte and other insiders were selling their stock, according to the suit.
Sterling Mining was never registered with the U.S. Securities and Exchange Commission, as De Motte had promised, which would have provided greater financial transparency for investors, the suit said. De Motte also demanded that Christianson invest in his other ventures to prove his “loyalty to De Motte and Sterling,” the suit said.
One of the investments was Air Wallace, which was supposed to be a private airline charter that would bring investors to Idaho to tour the Sunshine Mine, the suit said. The charter never materialized, and the money Christianson contributed is unaccounted for, according to the suit.
Christianson also invested in a company that bought up commercial property in the Silver Valley, with the idea that property values would rise when the Sunshine reopened, the suit said. Many of the buildings were vacant and dilapidated, the suit said. In addition, the properties were purchased with minimal down payments and loans that carried balloon payments, and therefore a high risk of default, according to the suit.
The suit also alleges that De Motte engaged in securities fraud. De Motte was a director and investor in several other penny mining stocks, and purportedly told Christianson that he planned to reactivate the largely dormant companies. De Motte encouraged Christianson to buy up stock in several of the firms, the suit said. After reassuring Christianson that he was keeping his shares, De Motte sold his stock when the price was high, and Christianson was stuck with devalued stock, the suit said.
According to the suit, Christianson invested $2.2 million in Sterling Mining, and nearly $1.2 million in businesses that De Motte and his associates either controlled or had financial interests in.
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe now to get breaking news alerts in your email inbox
Get breaking news delivered to your inbox as it happens.