MERENDON MINING REQUESTING RETRACTION IN ICP

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 002461

SIPDIS

STATE FOR WHA/CEN TKELLY, SAN SALVADOR FOR FCS DTHOMPSON

E.O. 12958: DECL: 10/16/2013
TAGS: EINV EFIN ECON HO
SUBJECT: MERENDON MINING REQUESTING RETRACTION IN ICP


Classified By: Ambassador Larry L. Palmer for reasons 1.5 (b) and (d)


1. (U) This is an action request (see paragraph 2).


2. (SBU) Summary and Action Request: The Embassy has received
complaints from Canadian citizen Merendon Mining Corp. Ltd.
President Gary Sorenson and now from his U.S. attorney,
William Rogers of the law firm Arnold and Porter, regarding
the content of an International Company Profile (ICP) on
Merendon de Honduras. Both Sorenson and Rogers have urged
the issuance of a new ICP and indicated their intention to
pursue multiple routes to achieve this goal (apparently a
reference to a possible legal challenge). Copies of the ICP
and all pertinent correspondence are being faxed and fedexed
to both the Department of Commerce and State desk officers.
An interim response was sent to Rogers on October 13 (text
provided in para 10). The Embassy requests guidance from the
Department of Commerce General Counsel's office on any
further action that should be taken. End Summary and Action
Request.

Background on Merendon
--------------


3. (C) Merendon Mining Corp. Ltd. and Merendon de Honduras
are both part of Merendon Group, along with several related
companies in Honduras, Venezuela and Peru. Merendon and its
president Gary Sorenson are involved in a legal dispute with
Amcit Angel Lorie over unrepaid funds that Lorie lent to
Sorenson in the United States. The dispute spilled over into
Honduras when Lorie began to seek title to Merendon property
in Honduras; in 2001, Lorie began requesting Embassy advocacy
with the Honduran judicial system. Correspondence from Mr.
Lorie on the underlying issues in the dispute (included in
the information sent to Washington) raised questions about
business practices by both Mr. Lorie and the Merendon
companies.


4. (C) In 2000 and 2001, the Economic section of the Embassy
was informed of indications of money laundering activities by
Merendon, as well as an ongoing Canadian government
investigation into the company. In 2002, Sorenson came in to
meet with Econcouns about notices he had received, from
prominent Honduran banks, closing the company's accounts.
The apparent purpose of the visit was to see if the U.S.
government was in some way involved. Note: These bank
account closings occurred immediately after the strengthened
Honduran money laundering law was passed by Congress and
entered into force, in early 2002. Sorenson expressed his
belief that the Honduran banks and authorities do not
understand his company's mutual and equity fund approach to
raising capital for his company. End Note.


5. (C) We have since learned that some Merendon financial
transactions are being reviewed by the Honduran Financial
Information Unit (FIU). To date, however, the FIU has not
found sufficient evidence of money laundering to prepare a
case. We have also learned that Sorenson was found guilty of
securities fraud in Canada in October 2000 for selling
securities without permission of the Alberta Securities
Commission. He was restricted from participating in the
parent company's board of directors in Canada for two years.


6. (C) Merendon's operations in Honduras are unusual. The
company does not do any actual mining (extraction) in
Honduras, except for some possible purchase of product from
placer operations. Thus, the company was importing gold from
other places for refining and re-export. This type of
activity is distinct from all other Canadian mining companies
operating in Honduras (with mining permits to explore or
exploit particular deposits). Merendon has expanded into
Venezuela during the 2002-2003 time period, a difficult time
for foreign investment. And here in Honduras, we understand
that Merendon is currently discussing investments in a hotel
project on the island of Guanaja owned by a U.S. citizen. No
other foreign mining companies operating in Honduras are, to
our knowledge, branching out into hospitality services.

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Requests for International Company Profile Report on Merendon
-------------- --------------



7. (SBU) Thus, the Embassy had a variety of questions and
concerns about Merendon operations in Honduras when Emboffs
became aware that the FCS section received from the Commerce
Department Export Assistance Center in Reno, NV, a request
for an ICP on Merendon for Kevin Wilson representing U.S.
company Rockwell Holdings. For four weeks, the FCS section
repeatedly called company officals in attempts to obtain the
requested data for the ICP. Based upon the previously known
concerns and four weeks' of delays in finally returning the
information, the FCS office of Embassy Tegucigalpa submitted
the referenced ICP.

8. (SBU) The Embassy has received demands for Embassy
retraction of negative comments from Amcit Peter Johnson (not
a representative of Merendon or Rockwell Holdings),Canadian
government employee Shad Prashad -- currently on detail to
Merendon, Gary Sorenson, and most recently on September 25,
William Rogers. All of these parties have inaccurately
charged that the Embassy has distributed the report publicly
and therefore has done harm to the company. We understand
from communications with the Commerce Department's Honduras
desk officer that an ICP is only released to the requesting
client and is not made public. The post should not discuss
the report with anyone other than the client.


9. (SBU) It might be useful to note that the original
requestor of the ICP, Mr. Kevin Wilson, wrote to Merendon's
Florida attorney, Mr. Larry Adair on June 18, 2003. In the
letter, Mr. Wilson explains that he requested the ICP by
pretending to be a potential investor. He indicated that he
did this in order to create an easy-to-follow guide of
independent sources that any potential lender could contact
to perform their own due diligence on Merendon. His request
to the Reno Export Assistance Center appears to have been a
trial run. Mr. Wilson is not himself an Amcit or a true
potential investor.


10. (SBU) Begin Text of Interim Response to William Rogers.
Mr. William D. Rogers
Arnold and Porter
555 Twelfth Street, NW
Washington, D.C. 20004

Dear Mr. Rogers:

Thank you for your letter of September 25, 2003 concerning
the International Company Profile (ICP) of your client,
Merendon Mining, written by the Commercial Section of the
U.S. Embassy. As you indicated in your letter, the ICP was
requested by Mr. Kevin Wilson through the Commerce
Department's office in Reno, Nevada. We have been told by
the Department of Commerce that this report was not published
and has not been distributed to anyone other than Mr. Wilson.
The Embassy similarly has not provided copies to any other
outside party. The Embassy has also been instructed by the
Department of Commerce to refer any inquiries regarding the
ICP to the Department of Commerce.

We are forwarding the complete package of information
provided by Mr. Sorenson, along with your letter, to the
legal department of the Department of Commerce for review.

Please do not hesitate to contact the Department of Commerce
directly should you have any further questions.

Sincerely,

(signature)

Larry L. Palmer
Ambassador

End Text of Interim Response to William Rogers.
Palmer