BOARD01932

• Board Meeting Date: 5/22/2000
• Description: Flood Section - Rio Grande Basin - Alamosa River Watershed Project
• Board Meetings - Doc Type: Memo

L<B>and</B> <B>mine</B>

Page 16 of20

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In addition to its other problems, Galactic had
attracted the interest of the U.S. Securities and
Exchange Commission, which questioned the
company's claims about the amount of gold at
Summitville.

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Roger Leonard, the mine manager, had taken issue
in 1986 with a press release, signed by Friedland,
that claimed vast, untapped reserves at
Summitville.

Leonard called the press release "misleading" and
"just plain wrong."

He said he voiced his complaints at the time to Ed
Roper, the company's mining expert, and to several
other executives, but not to Friedland. Leonard said
Roper told him to "shut up about this."

A few months later, Leonard was fired. But that
didn't silence the warnings. Other executives and
outside consultants also said the company's claims
could not be substantiated.

That was what the SEC concluded, and the agency
forced Galactic to alter its claims in literature
circulated to investors.

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By December 1991, just over a year before Galactic
declared bankruptcy, the company had recovered
294,364 ounces of gold at Summitville. That was far
less than the 547,190 ounces predicted in the
business plan Galactic had submitted to the Bank
of America in 1985.

Further, the gold was worth less than predicted
because the market was depressed.

In the late 1980s, gold prices hovered below $400.
Galactic had hoped prices would climb back to the
1980 level, when gold sold for more than $600 an
ounce.

Prices did rise slightly and the mine broke even in
1987, but even that "was done with accounting
tricks," Wyman said.

Friedland continued to believe the price eventually

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5/7/00