Former Southwestern Resources CEO admits fraud

TORONTO (Reuters) - Former Southwestern Resources Chief Executive John Paterson has admitted reporting false results for the company's China gold project and selling company shares before the results were revealed to be a fraud in 2007, according to a securities settlement.

In a statement on Thursday, the British Columbia Securities Commission said Paterson admitted to fraud and illegal insider trading, and will be banned for life from trading securities in British Columbia or acting as a corporate director or officer.

According to an agreed statement of facts, Paterson, a trained geologist, admitted altering assay result certificates. The certificates provided the data for company press releases touting high-grade gold strikes at its Boka gold project in China's Hunan province.

"Instead of transferring the actual assay certificate data, Paterson transferred data containing the discrepancies into Southwestern's database," the regulator said.

He then prepared the company's press releases, which included the discrepancies. The company claimed at one point that Boka contained more than 3 million ounces of gold.

He sold 50,000 shares of Southwestern on July 16 -- for proceeds of about C$300,000 (159,000 pounds) -- three days before Southwestern said it had found errors and was withdrawing all of the drill results, triggering a sharp drop in the shares.

The regulator said it would have imposed a C$3.5 million fine on Paterson, but that he had already used all of his assets to settle a lawsuit last year.

MEMORIES OF BRE-X

The implosion of Southwestern was one of the top mining stories of 2007, reviving memories of the infamous Bre-X gold salting scandal of the 1997, when a C$6 billion company collapse to nothing after gold results at a site in Indonesia were revealed as false.