Tuesday September 16, 1997
Bre-X president Walsh to face cross-examination, court
rules
CALGARY (CP) - Lawyers for shareholders of Bre-X Minerals Ltd. got permission Tuesday to
cross-examine the company's president in their bid to bankrupt the embattled gold explorer.
Chairman David Walsh will likely be questioned by lawyers before the parties return to court next
month to argue over whether Bre-X can continue to spend money while under court protection.
Justice Robert Cairns of Court of Queen's Bench granted the
cross-examination and gave Calgary lawyer Clint Docken leave to file a claim
on behalf of more than 75 Alberta shareholders.
Money which rightfully belongs to investors is instead being spent on fruitless investigations of one of
the biggest frauds in Canadian mining history, Docken said outside court.
"I'm not sure the shareholders are getting value on the money that's being spent," he said.
"The monitor has spent $1 million, the investigator has spent $1 million, and there's another $1 million
that's planning on being spent between now and the end of October.
"Our interest is to attempt to recover as much as we can for the investors. We're not sure there's a lot
of value in ongoing investigations."
Lawyers will be permitted to examine Walsh only on information contained in the affidavit Bre-X filed
in May seeking protection from creditors, Cairns ruled. In the affidavit, Walsh describes the company
as a victim of fraud.
Docken was one of a battery of lawyers from across Canada and the U.S. who were in court
Tuesday to try to give investors the power to oversee the company's accounts and petition it into
bankruptcy.
The sooner Bre-X is bankrupt, the better the chance that smaller investors could get back a sizable
portion of their initial investment, he added.
Bre-X has had more than five months to design a restructuring plan that would satisfy the courts, but
court-appointed monitor Price Waterhouse has seen no evidence of a plan, Docken said.
"Our concern is that there's nothing in any of the monitor's reports at this point that indicate there's
been any progress towards that."
In fact, Bre-X wants to pay the legal costs for a group of directors including chairman David Walsh,
says an affidavit filed last week by Price Waterhouse vice-president Kurt Bonokoski.
The lawyers also want Bre-X to sue company officers and directors to recover their profits from
alleged illegal insider trading in company stock. Those directors made more than $100 million last year
selling Bre-X shares, trading records show.
Bre-X has given seven directors including Walsh and former vice-chairman John Felderhof $100,000
US each out of a $5-million trust fund set up offshore in 1996. Any additional money from the fund is
supposed to be approved by Price Waterhouse.
Stock in the company crashed last spring when what it said was a huge gold find in Indonesia turned
out to be a fraud. The collapse cost investors $6 billion.
In a separate report to the court, Bonokoski said Bre-X has not prepared a reorganization plan and
will likely seek an extension of the Oct. 31 deadline. The hearing is scheduled to resume Oct. 2.
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