Friday, August 31, 2012

Colgate V Disthene : A Stunning Decision

Judge to order liquidation of Buckingham mining company for mismanagement

Willis Mountain
Willis Mountain in Buckingham County is home of the world's largest kyanite mine.
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One of the state's most closely held mining companies, fiercely controlled for more than a half century by a Buckingham County family, could go into receivership and be dissolved in coming weeks under a court decision that concludes the company oppressed minority shareholders and misapplied millions of dollars in corporate assets. 
In a stunning decision issued Thursday that followed years of intrafamily legal wrangling within the Dixon family and its operation of the Kyanite Mining Corp., a Fairfax County judge said in a 41-page ruling that she will appoint a receiver "to wind up and liquidate the business and affairs of the corporation."
Circuit Judge Jane Marun Roush, named to hear the case after local judges recused themselves and who heard more than two weeks of testimony in the case earlier this summer, called her decision a "drastic" yet appropriate remedy in light of testimony that she said showed a long history of unfair stock manipulation, exorbitant salaries for company officers, and a use of assets that embellished the estates of company leaders and allowed other assets to languish unproductively.
Alan D. Wingfield, lead attorney for Kyanite, which has been represented by the Richmond-based Troutman Sanders law firm and is now known as the Disthene Group Inc., said in an email Thursday that "Disthene is considering its next steps in this lengthy court case."
Thomas M.  Wolf, who tried the case with John H. Craddock Jr. and Michele K. Burke, all of LeClairRyan, issued a joint statement describing the ruling as "a historic decision that will be cited in legal treatises for years to come.  It shows that there are enforceable legal protections for minority shareholders."
Disthene controls kyanite surface mines in Buckingham County south of Charlottesville that are the world's largest producer of the mineral, which is used as a heat-tolerant component in refractory processes involved in steel-making and other industrial applications.

The Dixon family mining operations and other holdings, including the Cavalier Hotel in Virginia Beach and thousands of acres of old-growth woodlands in central Virginia, have been controlled since 1974 by Gene B. Dixon Jr., 69, who assumed that role upon the death of his father in 1974.
Legal actions have been ongoing for several years and generally have pitted Dixon Jr., his son and other company officials against three minority shareholders:  the husband of Gene Dixon's deceased sister and her two children, Curtis Dixon Colgate and Sharon M. Newcomb.
Kyanite Mining Corp. is one of rural Buckingham's largest employers but is virtually unknown of outside its tight circle of business interests.  More evident to the general public are the hundreds of acres of mined moutaintop land visible along U.S. 15 south of Dillwyn.
Wolf said during the summer trial that there likely would be little change in day-to-day operations at the mining company if the minority stockholders were successful in their case. The valuable property could be taken under control by new owners or continue under the Dixon family under a new business plan determined by the court and receiver or mutual agreement of the parties.    
(This has been a breaking news update. Check back for more details as they become available. Read more in tomorrow's Richmond Times-Dispatch.) 

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