PHILADELPHIA – A New Mexico mineral company is seeking confirmation of a multimillion-dollar arbitration award against a Pennsylvania investment group owned by a woman arrested by the FBI and charged with running a Ponzi scheme.
Southern Minerals Group, LLC of Silver City, N.M., filed suit in the U.S. District Court for the Eastern District of Pennsylvania on June 5 versus CV Investments, LLC, of Conshohocken, seeking to affirm a huge arbitration award nearly $22 million.
Southern Minerals Group operates a magnetite ore sales operation within the Cobre Mine complex, which is located about three miles northeast of Bayard, New Mexico.
CV Investments is a Pennsylvania limited liability company with its principal place of business located in Conshohocken, and its related entities are owned, controlled and operated by Ms. Brenda Ann Smith.
“On Aug. 27, 2019, Smith was arrested by the Federal Bureau of Investigation for allegedly operating a Ponzi scheme and was subsequently charged by the U.S. Attorney for the District of New Jersey with five criminal counts, including four counts of wire fraud and one count of securities fraud,” the litigation states.
At the same time of the Department of Justice’s action, the U.S. Securities and Exchange Commission filed a civil complaint in the U.S. District Court for the District of New Jersey against Smith and a number of her various corporate entities for violations of securities laws.
“On Sept. 10, 2019, the District Court judge issued an order freezing the assets and bank accounts of Smith and the various entities she controlled, including CVI. Smith remains incarcerated pending the outcome of her criminal proceeding but can, and did, accept service and filings at the correctional facility where she has been held throughout the arbitration and in the other suits lodged against her and various entities she controls,” the litigation adds.
Both parties in this case were part of a Magnetite Concentrates Purchase and Sale agreement dated April 7, 2017, where CVI “agrees to purchase from seller up to 400,000 tons of such magnetite concentrates for the price of $80 per ton.” Furthermore, any disputes were to be governed by the American Arbitration Association.
SMG filed an arbitration demand on Sept. 20, 2019, seeking an arbitration award for breach of the agreement, breach of the implied covenant of good faith and fair dealing, damages, inclusive of interest, for liquidated amounts, lost profit damages, punitive damages, attorney’s fees, costs plus any and all other relief.
Retired Philadelphia County Court of Common Pleas Judge Mark I. Bernstein was appointed as the case arbitrator on Dec. 6, 2019. On May 29, Bernstein issued his Final Award.
“The Arbitrator found that SMG is entitled to relief in its favor. Specifically, the arbitrator found that: (I) CVI materially breached the PSA; (II) CVI breached the covenant of good faith and fair dealing; (III) CVI’s bad faith acts warranted punitive damages under New Mexico law; (IV) CVI’s bad faith acts warranted the application of the maximum interest rate available under New Mexico law; and (V) CVI must bear the cost of the arbitration,” the petition states.
“The Arbitrator awarded damages and costs as follows: $4,215,000 in liquidated damages as of March 1, 2020; $14,090,599 in lost profits; $3,600,000 in punitive damages; $23,660 in arbitration costs; pre-judgment and post-judgment interest of 15 percent is applicable to the liquidated damages; and post-judgment interest of 15 percent is applicable to all other damages and costs. The Arbitrator declined to award attorneys’ fees as requested by SMG.”
SMG now petitions the Court to confirm the arbitration Final Award of $21,929,259, plus pre- and post-judgment interest.
The plaintiff is represented by Daniel M. Jaffe of Slover & Loftus in Washington, D.C. and Lisa Carney Eldridge of Clark Hill, in Philadelphia.
The respondent has not yet secured legal counsel.
U.S. District Court for the Eastern District of Pennsylvania case 2:20-cv-02643
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com