One of Mexico's richest men and the alleged "mastermind" of a deal that Asarco LLC attorneys say stripped the Arizona-based mining company of its most valuable asset is expected to testify Tuesday as a four-week trial in federal court enters its final days.
German Larrea is chief executive and chairman of Grupo Mexico, parent company of Americas Mining Corp., which bought the controlling stake in two Peruvian copper mines from Asarco, another Grupo Mexico subsidiary.
Asarco is suing for more than $10 billion in damages because its lawyers contend that the transfer of Southern Peru Copper Corp. was fraudulent and placed Asarco on a course for bankruptcy.
Tuesday's expected appearance by such a powerful business figure as Larrea, who has a reputation for shunning the spotlight, is expected to be the trial's highlight.
Larrea's testimony was in doubt last week when attorneys for Americas Mining suddenly announced he would not be coming. They said that his videotaped deposition should suffice, but U.S. District Judge Andrew Hanen agreed with Asarco's attorneys that Larrea must appear.
Brian Antweil, an attorney for Americas Mining, said in his opening statement last month that Larrea would testify that his biggest mistake was allowing Asarco to file for bankruptcy protection.
"You'll see no evil empire, no Godfather sequel," Antweil said at the time.
But during a break in the trial Monday, G. Irvin Terrell, lead attorney for Asarco LLC said, "I believe that Mr. Larrea was the mastermind of what happened to Asarco."
A request for comment from Grupo Mexico's corporate offices in Mexico City was not immediately answered Monday.
Larrea and his family were ranked No. 127 on Forbes magazine's list of billionaires this year with an estimated net worth of $7.3 billion.
Much of the wealth was inherited from Larrea's father, Jorge Larrea Ortega. He was known as Mexico's "King of Copper" and bought two of Mexico's largest copper mines from the government. The elder Larrea died in 1999, but German Larrea had been running Grupo Mexico since 1994.
Shortly after his father's death, German Larrea orchestrated the $2.2 billion purchase of Asarco, placing Grupo Mexico among the top three copper producers in the world. In December 1999, Larrea became chief executive of Southern Peru Copper, a position he held until 2004. He remains its chairman.
In addition to Grupo Mexico's extensive mining interests, it also controls the country's largest railroad and in February acquired Mexico's second-largest movie theater company in terms of screens.
Asarco LLC alleges that Larrea and Grupo Mexico knew that selling Asarco's controlling stake in Southern Peru Copper would create a cash flow problem for the century-old company, and instead of selling to the highest bidder, it underpaid in an insider deal to its own subsidiary. The goal, Asarco LLC argues, was to hold onto Asarco's "crown jewel" _ the Peruvian copper mines _ but keep them out of reach of Asarco's long list of creditors.
Asarco faced some $1 billion in liabilities from various polluted Superfund sites around the U.S. and a slew of asbestos-related claims.
Americas Mining counters that Asarco was desperate for cash and selling Southern Peru Copper was in its best interest.
On the line in the trial is a chance for Asarco's creditors _ western states struggling to clean up polluted sites, asbestos victims, bond creditors and more _ to get paid.
Asarco, which operates three mines and a smelter in Arizona and a copper refinery in Amarillo, filed for bankruptcy protection in August 2005. The U.S. Department of Justice initially moved to block the transfer of Southern Peru Copper but eventually negotiated an agreement with Grupo Mexico that required it to pay $765 million, including $100 million to set up an environmental trust fund to pay claims.
Late last month, Sterlite Industries Ltd., an Indian company, appeared to make a successful bid to buy Asarco for $2.6 billion. That bid is awaiting approval from the bankruptcy court. Grupo Mexico opposes the sale.
Larrea has endured a rough stretch in recent months. With copper prices soaring, Southern Peru Copper, which also has mines in Mexico, saw its production drop 34 percent during the first quarter compared with the same period last year, according to its latest filing with the Securities and Exchange Commission.
It attributed the drop to a long-running strike at its Mexican Cananea mine, just south of the Arizona border. The mine operated at 27 percent capacity during the first quarter, according to the filing.
In February 2006, Larrea was criticized when 65 miners perished in a coal mine explosion in Coahuila state and only two of their bodies were recovered before efforts were suspended.