The Tequila Files

In a mysterious case which appears increasingly likely to be linked to an elaborate scam, two foreign mining executives were reportedly found dead on Saturday in the Rio Santa Rosa which divides Jalisco and Nayarit.

Local authorities have denied any knowledge of the two bodies said to have been discovered by farmers, floating in the river between the municipalities of Ixtlan del Rio, Nayarit and Hostotipaquillo, Jalisco. A briefcase was reportedly discovered nearby, containing documents pertaining to Michael Davies and Derald Johnston, the respective CEO and treasurer of U.S. mining firm Southridge Minerals Inc.

Spanish-language newspapers El Informador and El Occidental reported that authorities in Nayarit were investigating the case and awaiting the results of an autopsy at a morgue in Tepic. However, the Nayarit Attorney General’s Office told the Reporter on Monday that it was not in possession of the bodies and could not confirm any details of the case.

The U.S. Consulate in Guadalajara also said it could not confirm the story, while the Hostotipaquillo municipal government said on Tuesday that it knew nothing about the case.

The mining firm in question has not released any information regarding the apparent death of its executives and did not respond when contacted by the Reporter on Monday or Tuesday.

A subsidiary of Southridge Enterprises based in Dallas, Texas, Southridge Minerals states on its website that it is focused on gold and silver mining and “is currently focused on projects in Jalisco and Nayarit States of Mexico.”

The firm says that in 2010 it paid 7.5 million dollars for exclusive concessions to mine the Cinco Minas and Gran Cabrera mines respectively located 100 and 135 kilometers northwest of Guadalajara, but this is disputed by Canadian mining firm Bandera Gold Ltd., which claims ownership of both mines and displays the concession certificates on its website.

On February 5, Bandera Gold CEO Stephen Roehrig released a statement claiming  “press releases issued by Southridge Enterprises, Inc. (‘SRGE’ or ‘Southridge’) contain false and misleading statements about current mining activity and SRGE’s alleged ownership of the Cinco Minas project.”

Roehrig told the Reporter on Tuesday that Bandera Gold paid 6.5 million dollars to Minera San Jorge for a 60-percent share in Cinco Minas in 2005, but then never received the paperwork proving its stake in the mine. Bandera Gold subsequently issued a legal embargo to prevent operations at the mine until the dispute was settled.

To disprove Southridge’s claims that it has been mining in Cinco Minas, Roehrig cites an independent report by International Safety and Security Firm, which visited the site in December 2012 and confirmed with video and photographic evidence that “the Cinco Minas mine, equipment, and mill has been completely non-operational for some time (presumably many years).”

Further investigation revealed that Southridge Enterprises is a corporation with a shady past to put it lightly. A 2006 article by British newspaper The Guardian revealed that now-defunct subsidiary Southridge Ethanol was essentially a fake company established as part of a “pump and dump” scam.

“Pump and dump” is a form of fraud which involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme “dump” their overvalued shares, the price falls and investors lose their money.

During its investigation, The Guardian attempted to contact Alex Smid, then chief executive of Southridge Enterprises, but received no response from the listed telephone numbers or email addresses.

In 2010 the Vancouver Sun reported that Canadian authorities issued an arrest warrant for Smid for four counts of tax evasion and tax fraud allegedly committed from 2002 to 2004.

Later that year an investigation by PinkInvesting.com described Smid as a “seasoned criminal involved with the Mexican and Russian Mafia whose unscrupulous practices date back to 1980. His criminal feats include extortion, blackmail, loan sharking, counterfeiting, prime bank fraud and identity fraud.”

Smid’s current whereabouts are unknown. He is no longer listed on the Southridge website but a recent investigation by the U.S. government showed that much of the public information provided by the firm is untruthful.

On December 28, 2012, the U.S. Securities and Exchange Commission (SEC) announced it had “temporarily suspended trading in the securities of Southridge because of questions regarding the accuracy of statements made by Southridge in press releases to investors concerning, among other things, the company’s business operations and arrangements.”

With pump and dump scams reliant on aggressive PR campaigns to attract investors, the SEC was clear to “caution broker-dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company.”

The latest dubious press release came on Monday, stating that Southridge had sold its concession to the Cinco Minas to Mexican mining firm Minera San Jorge. The phone number listed for Minera San Jorge did not appear to be functional and CEO Jaime Arturo Anaya Trejo did not reply to the Reporter when contacted via email.

At this time it is unclear what fate befell Michael Davies and Derald Johnston but it seems most likely that the story of their death was planted in the local press and it remains possible that theirs were false identities invented as part of this elaborate con.