Speaking of glass houses..here's the Globe piece...note the part about the relative now owning Walsh's mystery company....Anything you'd like to tell us, mikesloan?
Bre-X report reveals legal fund
$5-million trust set up last December to
help executives defray costs, monitor says
Thursday, June 12, 1997
By Janet McFarland and Paul Waldie
The Globe and Mail
Bre-X Minerals Ltd. set up a $5-million (U.S.) trust fund last December to help cover legal costs for seven senior officers and directors, a
new report shows.
The revelation was contained in a 32-page report by Price Waterhouse Ltd., the monitor appointed to oversee Bre-X while it is under
court-approved bankruptcy protection.
Bre-X shareholder Greg Chorny, who represents a group of investors suing the company, was angered to learn of the fund and questioned why
it was set up in December, five months before there was any indication that Bre-X's site in Indonesia, once believed to have contained the
world's largest gold deposit, was a fraud.
"They are out of their minds," Mr. Chorny said. "That is a goddamned misuse of shareholders' money.
"That money does not belong to the directors, it belongs to the shareholders of the company. The court should not allow Bre-X directors and
management to use those monies to fend off shareholder suits."
The fund is intended as security to back Bre-X's indemnity of its officers and directors against legal action, the report says. Bre-X has so far paid
$100,000 to each of the seven people as an advance on the trust fund, which was set up in an unidentified offshore location, according to the
report.
Among its other revelations, the report says private investigators hired by Bre-X last month to investigate the fraud scandal surrounding its
Busang site have billed the company almost $1-million. Lawyers have billed $517,000 to date, and the monitor has received $325,000.
The report also reveals that Bre-X's parent company, Bresea Resources Ltd., lent $500,000 to Arm-X Minerals Ltd. in January. Arm-X
is a previously unknown private company owned by David Walsh, the founder and chief executive officer of the company.
The report says the loan has not been repaid, and the ownership of Arm-X was recently transferred to a relative of Mr. Walsh.
"What's in [the monitor's report] is incredible, absolutely incredible. And that's just the start," Mr. Chorny said.
The report says the trustee of the offshore legal fund has recently frozen payment on claims to the fund until it is satisfied they qualify under the
fund's terms.
The report does not identify which directors qualify for the financial help. But Bre-X listed eight officers and directors in its TSE listing statement
last April, and one officer, treasurer John Thorpe, left the company last fall.
The remaining seven officers and directors included Mr. Walsh, chief geologist John Felderhof, chief financial officer Rolando Francisco,
vice-president Stephen McAnulty, corporate secretary Jeannette Walsh (Mr. Walsh's wife) and directors Paul Kavanagh and Hugh Lyons. Since
Bre-X's Busang gold site was labelled a fraud by an independent auditor, all those officers except the Walshes and Mr. McAnulty have left the
company.
The report says Bre-X and its senior officials are now facing a total of 12 class action lawsuits from angry shareholders, including three filed in
Canada and nine filed in U.S. courts.
At least two other Canadian suits are expected to be filed, one in Calgary and one in Quebec. Dermod Travis, a spokesman for the Quebec group,
said affidavits will be sworn out tomorrow and the suit will be filed next week. He said about 500 Bre-X shareholders have contacted the group.
Most of the lawsuits filed to date name Bre-X, but a few also name its parent, Bresea.
However, the monitor's report shows that most of the cash left in the organization is in Bresea, which may be out of the reach of most Bre-X
shareholders.
It says Bre-X had cash of $8.76-million at May 31, while Bresea held $26.16-million and small Bro-X Minerals Ltd., another related
company, had $762,000.
Bre-X got a cash infusion on April 30, just days before a report was released by Strathcona Mineral Services Ltd. exposing Busang as a fraud.
After the report, Bre-X shares, which were once valued in the billions, collapsed and are now virtually worthless.
The company sold its office building in downtown Calgary to Bresea for $2.3-million in cash.
The building and land were appraised at $1.3-million. The building's contents were valued at $1-million.
The report also shows Bresea lent Far East Mining Services Ltd. $2.14-million in 1996 to provide it with working capital. The nature of Far East
Mining's relationship to Bresea is not disclosed, but the report says Bresea is negotiating repayment of the money. |
