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SHAREHOLDER LITIGATION IS OLD HAT ... LITIGATION AGAINST REGULATORS IS A NEW SUIT!!
The Bre-X Saga:
Fortune or Folly?
Bre-X faces local lawsuit Herald's on
scene
Thursday 10 April 1997
Vicki Barnett, Calgary Herald
The trials of Bre-X Minerals Ltd. will soon land on their
front
doorstep when a local law firm slaps the beleaguered gold
exploration company with a Calgary-based lawsuit.
"We've been instructed by several clients to file a claim,
and we will
be doing that within the next several weeks. Our intention
is to file a
group action," said Clint Docken of Docken & Company.
"There are a lot of investors here, and Bre-X is here."
The revelation came as Bre-X released a technical report
Wednesday that attempted to shed some light on how it
conducted
its tests on its recently questioned Busang gold deposit
in Indonesia.
The grounds for the Calgary legal action are expected to
be similar
to those cited in lawsuits launched in Ontario and the
United States,
which allege that Bre-X officials were involved in insider
trading
while failing to disclose information that might affect
share prices.
Bre-X had little to say about the pending suit.
"I'm not aware of it and we won't comment on lawsuits,"
said Bre-X
president David Walsh.
The tiny exploration firm, which soared in worth on the
stock
market after claiming it found the world's largest gold
deposit, has
had serious troubles since the mysterious death of chief
geologist
Mike de Guzman last month.
Within days, Bre-X's new partner in the project,
Freeport-McMoRan Cooper and Gold Inc., said its initial
tests of
Busang found insignificant amounts of gold, sending Bre-X
shares
plummeting on stock markets. On Wednesday, shares in Bre-X
drifted down to $1.76 from Tuesday's close of $2.29 before
settling
at $2.27 in heavy trading.
Docken said the Calgary suit might also be filed against
stock
market regulators for a breach of their duty to protect
investors.
Walsh implored the Toronto Stock Exchange to halt trading
on
Bre-X until independent tests on Busang are completed.
Ralph Sahrman, a Vancouver-based lawyer with Lang,
Michener,
Lawrence and Shaw said he's also looking into a suit
against
regulators. The firm is representing clients in Alberta
and British
Columbia who want to participate in a class-action suit
launched
against Bre-X in Texas.
Sahrman couldn't say how many Albertans have joined the
Texas
suit.
He noted many Canadian clients involved in that lawsuit
were
referred by brokers at Nesbitt Burns Inc. and RBC Dominion
Securities Inc. because "their clients are a big whack of
the retail
clients."
Brokers are "keeping their heads down" these days, Sahrman
said.
"There's a lot of water to go under the bridge yet."
Docken and Sahrman agreed many more people will likely
become
involved in suing Bre-X and others as they become aware of
what's
happened. Docken noted, for instance, mutual-fund holders
might
not yet be aware of how funds have been devalued because
of their
involvement with Bre-X.
The seven class-action law suits launched against Bre-X in
the
United States will likely be merged through the federal
court system,
but the Canadian suits will proceed separately in
different provinces,
Docken predicted.
The first Canadian lawsuit against Bre-X was launched in
Windsor,
Ont.
There's intense competition among American lawyers trying
to get
into the business of suing Bre-X, said Sahrman. One U.S.
lawyer,
whose firm is already in on the action, described it as "a
feeding
frenzy."
Meanwhile, Bre-X's report to analysts, which was posted on
the
company's website, offered a step-by-step explanation of
how the
core samples were collected at the Busang site and assayed
to
determine the levels of gold.
Mining analyst John Kaiser told Reuters News Agency that
most
crushing of core samples occurred at an Indonesian lab off
the
Busang site.
"It would seem to rule out the possibility that the
project crew
tampered with it," Kaiser said.
-- With files from Stephen Ewart
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