US embassy cable - 03TEGUCIGALPA2461

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. 
 
--------------------------------------------- ---------------- 
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