Lots of news in today's Financial Post. Here's a bit.
Friday, May 23, 1997
TSE named in new Bre-X class action suit
Felderhof gives back mining award
The damage that Bre-X caused pension funds
By KEITH DAMSELL
Vancouver Bureau The Financial Post
The Toronto Stock Exchange has been named in a class-action lawsuit for its role in the Bre-X
Minerals Ltd. gold scandal.
Exchange officials were "negligent" when they failed to verify the unsubstantiated gold reserve
claims made by Calgary-based Bre-X, said Vancouver lawyer David Klein yesterday.
"Everyone from Bre-X Minerals, its directors and officers, to brokers and regulators appears to
have been so caught up in gold fever that they lost sight of their responsibilities to investors," Klein
said.
A writ of summons under the Class Proceedings Act was filed in the Supreme Court of British
Columbia yesterday afternoon.
In addition to the TSE, the list of defendants in the action includes Toronto brokerage Nesbitt
Burns Inc., its mining analyst Egizio Bianchini, and assay lab Kilborn Engineering Pacific Ltd.
Kilborn was hired by Bre-X to undertake resource calculations at Busang as part of a mine
feasibility study.
Bre-X Minerals and six officials with the company are also named, including president and chief
executive David Walsh and his wife Jeanette.
The two-page writ is filed on behalf of Bill and Anne Williams of Surrey, B.C., who invested
$53,000 in Bre-X shares. No dollar figure is named in the action.
But the number of plaintiffs is expected to grow to 100 or more as Alberta-based shareholders
join the action. There is no provision for class action lawsuits under Alberta law.
"Everyone who wishes to will be able to participate," Klein said.
The exchange "bent its own rules" when it added Bre-X to the TSE 300 index before the stock
had been listed for a required year, Klein said.
(Under a 1991 TSE provision, a company may be included in the index after just six months if the
market capitalization reaches a certain level.)
For its part, Nesbitt Burns acted negligently toward its clients when it "aggressively promoted"
Bre-X stock, Klein said.
Officials at Bre-X Minerals, the TSE and Kilborn's Montreal parent SNC-Lavalin Group Inc. all
declined to comment on the legal action.
"We're satisfied our firm and analyst acted appropriately and we intend to vigorously defend the
claim," said Nesbitt Burns spokesman Paul Gammal.
On May 4, independent assay lab Strathcona Mineral Services Ltd. revealed there was no gold in
Bre-X's fabled Busang property in Indonesia. In 1996, company officials had suggested there
might be as much as 200 million ounces of gold at Busang.
Bre-X, which had a lofty market capitalization of $6.8 billion only a year ago, is now practically
worthless. Its shares were delisted by the TSE about two weeks ago.
The B.C. class action is the ninth lawsuit levelled against Bre-X in recent weeks.
In the U.S., it is expected that six lawsuits will be consolidated into a single action in the next week
to 10 days. The case is likely to proceed in either New York or Texas.
In Canada, the B.C. suit is the third action in the works. Klein, an experienced class-action
lawyer, is acting as co-counsel for a Bre-X lawsuit filed in Montreal. An action has been filed on
behalf of a Windsor, Ont., investor.
"The case is too complex for a single firm to handle," Klein said.
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