Lawyers preparing Bre-X suits aim at TSE, SNC-Lavalin
By SANDRA RUBIN
The Financial Post
Angry shareholders of Bre-X Minerals Ltd. are considering slapping the Toronto Stock Exchange with million of dollars in lawsuits for its handling of the affair.
And the Bre-X fallout started to rock SNC-Lavalin Group Inc. yesterday as the circle of blame widened.
Five class-action suits filed in the U.S. have focused squarely on Bre-X and SNC-Lavalin, which owns Kilborn Engineering, the firm that verified Bre-X's estimates of Busang's reserves.
After falling 65› Tuesday, SNC-Lavalin shares (snca/tse) were hammered down another 15› to $15.20 yesterday in heavy trading of 1.9 million shares as investors mulled over possible legal problems.
But the Montreal-based company is insisting it merely provided an accurate reading of samples provided by Bre-X. Spokeswoman Suzanne Laland dismissed suggestions that Kilborn should have taken its own samples before signing its name to the report.
"It was not our mandate," she said. "We can't say to a client: 'We don't trust you.' "
But the whole company has been hurt -- as shown by the falling share price, said analyst Chris Sears. "They're the ones who came up with the calculations, they're the ones who bandied about the 71 million-ounce figure," said Sears, of MacDougall, MacDougall & MacTier Inc. in Montreal. "I think their reputation has been tainted by putting their name on a report where they got the reserves from people who don't have the best reputation. And they just signed the report.
People are starting to realize it didn't do everything to protect its good Kilborn name." It appears the TSE could also be called on to protect its name before the Bre-X fallout is over. At least one group of Canadian investors, being organized by Montreal law firm Lauzon elanger, is not ruling out including the exchange in a class-action suit.
"There are a lot of questions about what happened -- whether it's with Bre-X, its directors, consultants or the TSE," said lawyer Yves Lauzon, who is spearheading the drive. "It's too early to say who is responsible, but if we discover the TSE has in any way been negligent, we'll go after them." Many shareholders are still livid over the TSE's decision to resume trading in Bre-X last Thursday -- over the company's objections and just an hour before the start of a long weekend. "There are people who very well might have a great claim against the exchange -- especially if the audit turns up a big
ore body," shareholder activist Greg Chorney said from his home in Aurora, Ont.
"These people will be left out of the stock with no recourse, through no fault of their own, when the exchange should have done the Timbuktu [Gold Corp.] thing, which was to freeze the stock and let it trade when the audit was done." Meanwhile, Fred Ketchen, chairman of the TSE's trading policy committee, said senior TSE officials were right to lift the trading halt. The president of the TSE is Rowland Fleming.
"Since all material information at that time was in the public domain, I think the stock exchange was justified by its policy
to try and keep trading halts to a minimum," he said. "That's what they do in New York."
Meanwhile, it was also confirmed yesterday that the roots of Bre-X's legal problems started long before the recent stock disaster.
Lawyer Paul Yetter said concerned investors had asked his Houston law firm in December to investigate corporate goings-on.
"We've been working on the Bre-X saga for four months now," he said from his Houston office. "And we've had people investigating Jakarta for a couple of months."
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