Lawyer ‘investigating’ Melancthon quarry investment

By Bill Tremblay Orangeville Banner Nov 30, 2012 

The Highland Companies’ failed quarry plan in Melancthon has caught the attention of a securities arbitration law firm.

The New York City-based Zamansky & Associates announced Thursday (Nov. 29) it is investigating if the Baupost Group’s stake in the quarry violated its obligations to investors. 

“Our law firm represents investors in hedge funds and securities,” said Jacob Zamansky, the principal attorney of the law firm. “We were asked to look at the situation.”

Zamansky said his firm is investigating if the quarry proposal was a diversion from the hedge fund’s objective to primarily invest in distressed debt and undervalued securities. 

“(Baupost has) gone into a field where they had little expertise and did not get the investors on board,” Zamansky claimed. “Buying in farmland in (Melancthon) and deciding to make it into a limestone quarry is something they don’t have expertise in.”

The investigation will also probe if the risks associated with the quarry plan were sufficiently disclosed. 

“You expect a certain investment discipline,” Zamansky said. “We’re looking at whether the fund breached its fiduciary duty to its investors.” 

On Nov. 21, The Highland Companies, backed by Baupost, announced it would withdraw its application to mine aggregate in the Township of Melancthon and end its plan to restore the Dufferin County rail corridor. 

“We acknowledge that the application does not have sufficient support from the community and government to justify proceeding with the approval process,” said John Scherer of Highland in a news release. 

Baupost did not provide public comment when contacted by The Banner.  Highland spokesperson Lindsay Broadhead said the company does not comment on its financial situation. 

“Highland itself is a private company,” Broadhead said. 

Zamansky, a Forbes.com contributor and former United States Federal Trade Commission prosecutor, is known for winning a securities arbitration case against Merrill Lynch and its analyst Henry Blodget in 2001. The case was followed by an investigation into conflicts of interest on Wall Street by New York Attorney General Elliot Spitzer and ended in a $1.4 billion global settlement.  

The Baupost investigation is expected to conclude “in a couple of weeks,” according to the lawyer.