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'Evasive' Ken Wikeley loses US$1.5M OMG suit

Thursday 18th April 2013

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Ken Wikeley has lost a US$1.5 million lawsuit brought by an investor in a failed mining venture related to Orion Minerals Group in a judgement that describes the businessman as "frequently evasive under cross-examination."

Wikeley is best known for his involvement in Rainbow Corporation in the 1980s, as managing director of Aquaria 21 in the 1990s, and in the affairs of the serial NZX Listing Rules infringer, Plus SMS.

Judge Stephen Kos found for the plaintiffs in his April 10 judgement, dismissing arguments from Wikeley's lawyer that loans from the trustees of the Genset Trust were actually payments for shares in Edel Metals Group or weren't enforceable because they hadn't been ratified by shareholders as a major transaction.

"Mr Wikeley's present contention that what he structured, and described at the time, as a loan was in fact subscription for share capital is in my view opportunistic nonsense," Judge Kos says.

"Much of his evidence seemed calculated to deflect attention from the real issues. Or to offer somewhat improbable explanations for why documents did not mean what they appeared to say," the judgement says. "I did not regard him as a reliable witness."

Genset Trust had invested US$250,000 in the Chilean mining start-up OMG in 2008 and that year trustee Michael Jacomb visited Chile, where, according to the judgement, he met Wikeley, who was by then "captivated" by a new business idea - a prototype rock crusher - in which he saw a separate opportunity.

"I thought there was a fortune to be made from it," Wikeley said in evidence. "It all seemed like an amazing opportunity to me."

The judged noted in his judgement that "nothing in evidence suggested that Mr Wikeley had relevant technical qualifications or experience in mining engineering."

Genset, whose substantial cash reserves came from the sale of a large electrical engineering business in 2004, had come a cropper with investments touted by Wikeley before. In 2006, Wikeley "induced" Jacomb to invest in Plus SMS, a listed telecommunications firm that failed in 2009.

Still, he was persuaded to loan US$1.5 million to Edel Metals (EGM), set up in late 2008 to buy mining equipment including the crusher technology from German-Iranian businessman Parviz Gharagozlu and his Chilean associates.

EMG issued 100 million unpaid $1 shares, of which the trust held about 24 percent and the remaining 76 percent by Geier Ltd, which was notionally owned by a number of parties in Chile linked to Wikeley, including Gharagozlu.

Jacomb insisted on personal guarantees from Wikeley for 50 percent of the funds advanced to EGM, the judgement shows.

Judge Kos ruled that because of the $100 million of unpaid capital, the loans couldn't be deemed a major transaction requiring approval of 75 percent of EMG's shareholders.

He did allow that 12 million OMG shares transferred to the trust as security for the EMG loans by Wikeley needed to be taken into account and ordered that any sale proceeds from those shares needed to be deducted from the judgement debt and any remaining transferred back to Wikeley.

Shares of OMG, which abandoned its South Ame3rican mining dreams and is now focussed on investments in China, last traded at 2.2 cents.

Wikeley has a long track record as a businessman and the judgement notes that "by his own admission he has had a chequered career."

He had at one time owned a share of the electrical firm whose proceeds funded the Genset trust.

BusinessDesk.co.nz

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