November 12, 1999 19:30
Bre-X investors settle with Nesbitt Burns
By Luke McCann
TORONTO, Nov 12 (Reuters) - Bre-X investors have agreed to drop their case against brokerage firm Nesbitt Burns, the brokerage said on
Friday, ending a long-running dispute connected with one of the world's biggest gold mining and stock market scandals.
In return, Nesbitt agreed to cover the investors' court costs.
An original class action by the investors, who claimed to have been misled by the brokerage about the worthiness of investing in Bre-X, was
dismissed by an Ontario judge in May.
The investors appealed that Ontario court's decision and Friday's agreement with Nesbitt Burns, the brokerage arm of Bank of Montreal , settles
that appeal.
Calgary-based Bre-X, once the toast of Canada's mining sector for its discovery of an apparently massive gold mine in the Indonesian jungle,
began to disintegrate almost three years ago after it was revealed the Busang mine contained insignificant traces of gold.
Bre-X's share price eventually collapsed and the company went into bankruptcy, wiping out more than $3 billion worth of investments. Investors
have filed a series of class actions in Canada and the United States to try to recover some of their losses.
In 1998 lawyers for the plaintiffs submitted to a provincial court that Nesbitt Burns and other brokerages had a fiduciary duty on behalf of their
clients to investigate Bre-X and ensure the company was a proper and viable investment.
The lawsuit claimed the brokerages violated that duty and Canada's Competition Act when they provided research reports recommending
purchases of Bre-X stock.
But last May the Ontario Superior Court dismissed a proposed class action against Nesbitt Burns and its mining analyst Egizio Bianchini,
ending proceedings which started in 1997.
"We decided not to engage in a long court action, basically because we wanted to get it resolved," Nesbitt Burns spokesman Ian Blair said on
Friday.
"We were confident all along that this would be settled in our favor anyway, but from a sound, practical business point of view this could have
gone on quite a while, and the costs of litigation can get very high," he said.
Harvey Strosberg, lawyer for the plaintiffs, said the decision was difficult, adding: "It removes the risks of litigation for the representative plaintiffs
and will allow the remaining action to be more aggressively pursued against Bre-X, Bresea and the insiders."
($1=$1.46 Canadian) |
