And "The Prize" is:
Trail goes cold for RCMP in Bre-X investigation
Officers so far unable to question key geologist Felderhof
Tuesday, August 12, 1997
By Paul Waldie
The Globe and Mail
A team of RCMP officers has been stymied in its investigation of the Bre-X Minerals Ltd. scandal,
including being unable to interview John Felderhof, a key figure in the saga.
The investigation "is just spread all over the world and there is no compulsion on anybody to talk to the
police any more," said Staff Sergeant Bill Ralstin of the Royal Canadian Mounted Police's commercial
crime unit in Calgary.
Six RCMP officers returned from Indonesia last week after a month-long trip to investigate alleged
fraud at Bre-X's Busang site.
The allegations surfaced in May when an independent audit found no gold at the supposedly rich
Busang deposit and said a massive fraud had been committed.
Sources in Jakarta say the RCMP had difficulty accessing Busang because of jurisdictional conflicts
with local police. Industry sources also say many leads had dried up by the time the RCMP arrived in
Jakarta.
Staff Sgt. Ralstin couldn't comment on the sources' information, but he confirmed that the RCMP's
investigation isn't going well.
However, he added that the RCMP expected problems investigating the case from the outset because
it involves people from several countries including Canada, Indonesia, Australia and the Philippines.
"It's probably much like we'd expected," he said. "We knew what we were getting into."
Staff Sgt. Ralstin said investigators have requested an interview with Mr. Felderhof but there is no
guarantee he will co-operate.
"Mr. Felderhof might or might not be agreeable to an interview," he said. "There has been negotiation.
[The interview] hasn't happened yet."
Mr. Felderhof is a Canadian-trained geologist who was instrumental in Bre-X acquiring Busang in
1993. He also touted the deposit as the richest gold find in the world, helping drive Bre-X's share
price to more than $280 last fall, not taking into account a 10-for-one split. After the audit in May,
Bre-X's shares plunged to pennies.
In a statement released last month from his home in the Cayman Islands, Mr. Felderhof said he was
not involved in any fraud and still believes there is a significant amount of gold at Busang.
Toronto lawyer Joe Groia, who represents Mr. Felderhof, declined to comment when asked yesterday
about the RCMP's request for an interview.
Private investigators hired by Bre-X have linked the fraud to former company geologist Michael de
Guzman, who died in March after he fell out of a helicopter on the way to Busang.
However, the investigators say others were likely also involved, including several former Bre-X
geologists who live in the Philippines and have been told by their lawyers not to comment on the case.
But many Bre-X investors are questioning the independence of the private investigators.
Calgary-based Bre-X announced in May that it hired Forensic Investigative Associates Inc. of
Toronto to head a private investigation into the alleged fraud. FIA is chaired by Rod Stamler, a former
RCMP associate commissioner.
Mr. Stamler is also a director of a gold mining company called Iamgold Ltd., based in Markham,
Ont.
Dermod Travis, a spokesman for a group of Quebec shareholders suing Bre-X, said Mr. Stamler's ties
to Iamgold raise questions about a possible conflict of interest.
"I find it unusual. It would certainly not be a relationship I would enter into if I were in the same shoes
[as Mr. Stamler]," Mr. Travis said.
Greg Chorny, an Ontario-based investor who is part of another group suing Bre-X, said he has no
confidence in FIA's investigation.
"I have no faith in anything Mr. Stamler or anybody else paid by Bre-X management comes up with in
their studies," Mr. Chorny said.
But Mr. Stamler said FIA is committed to producing an independent report and has not been
instructed to slant the conclusions.
"We were mandated to go out and find what happened," he said. "We are not limited by any further
sort of direction."
Mr. Stamler added that he disclosed his Iamgold ties when he started the Bre-X case in May.
"I [approached] it very fairly and openly at the outset and said, 'There it is, and if anybody has any
problems, please let me know.' "
Mr. Stamler added that Iamgold operates in Africa and has had no relationship with Bre-X. He also
said that having some background in gold mining has been an asset for him in the Bre-X case.
FIA investigators have also been trying to interview Mr. Felderhof. According to Mr. Groia, Mr.
Felderhof agreed to meet with the investigators last month on the condition that he receive a copy of
FIA's final report. However, according to Mr. Groia, Bre-X's lawyers turned down the request and
FIA has not asked for a subsequent interview.
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