Wednesday 8 October 1997
Bre-X report a waste of money:
Lawyer
CALGARY - A report that says Bre-X Minerals president David Walsh
didn't know employees were salting ore samples in Indonesia is little more
than a boondoggle itself, says the lawyer for shareholders in Alberta.
A private investigator's report commissioned by Bre-X and parts of which
were released earlier this week concluded Walsh knew nothing of geologist
Michael de Guzman's plot to make investors believe a barren tract of
Indonesian rock was the world's largest gold deposit.
But Clint Docken, who is preparing a suit against the company on behalf of
more than 100 Alberta investors, suggested it's not just a matter of who
perpetrated the fraud.
The question is whether Bre-X management had a duty to keep a closer eye
on activities in Indonesia.
"The issue isn't who is criminally responsible for what happened. The issue is
who is legally or civilly responsible for what happened," Docken said
Wednesday before a meeting with Walsh in a court-ordered examination for
discovery.
"This is an expensive report that hasn't answered any questions or offered
any conclusions that weren't there from the very beginning.
"There's very limited value to the report, (which) was paid for by the
investors."
The report says people at the company were "involved in criminal activity
from its inception and that the criminal activity continued for three years and
three months," said Tom Ajamie, a Houston lawyer who is heading up one
of the U.S. class-action suits.
"Where were the directors? Where were the advisers during this
three-year-and-three-month period. This wasn't a gold company - this was a
salting company."
Harvey Strosberg, a Windsor lawyer representing Ontario investors suing
the company, said the report's conclusions aren't relevant to the court case
because it was commissioned by Bre-X.
However, he added that it does confirm that Bre-X employees were
involved in a fraud.
"The interesting issue here is that on any stretch of the imagination, I think
there is no question about Bre-X's liability."
Bre-X shareholders lost billions in May when the fraud was exposed and
sent the company's worth tumbling from $6 billion to just pennies a stock.
Walsh, who has said little since that time, eluded reporters Wednesday by
taking a service elevator to his meeting with Docken.
Mining analysts said they're no longer interested in who sprinkled gold into
ore samples. They want to know why it took more than three years for the
truth to come out.
"It doesn't surprise me that the on-site geologists were implicated. They
would have to be," said Vancouver analyst Doug Leishmann.
"But to me it's irrelevant who put the gold in the bags. What's more
important is who allowed this situation to evolve and I think that's more of a
management thing."
Leishmann also said he suspects the company was keeping information from
the financial community such as results of independent lab analyses of the ore
and details of Bre-X's battle last year with the Indonesian government over
the legal title to the land.
The $2.5-million report by Forensic Investigative Associates, said to be
more than 400 pages long, should be taken with a grain of salt because it
was commissioned and paid for by the company, said Leishmann.
"When I look back at Bre-X, every press release, every little bit of
information they ever put out, everyone will have to regard as suspect," he
said.
"Why should I put my faith in this report?"
The full report has been forwarded to the RCMP. It was immediately sealed
and forwarded to the Alberta attorney general's office, said RCMP
spokeswoman Deleen Schoff.
The Mounties are continuing their investigation, she said.
The report said de Guzman and project manager Cesar Puspos began
salting ore samples with gold in December 1993 to prevent the company
from shutting down the exploration project.
It says De Guzman, who died in March after falling from a helicopter over
the Indonesian jungle, made more than $4.5 million from the salting scheme,
while Puspos collected more than $2.1 million.
It also says de Guzman likely killed himself by jumping from the helicopter
because he faced being exposed. But members of de Guzman's family
believe he was murdered and say he did not make millions.
"If they are really good investigators, then they would have known where my
sister-in-law lives, how much money she has in the bank, and how much we
have gotten since my brother died, which is actually nothing," said Simplicio
(Jojo) de Guzman.
On the question of John Felderhof, the senior geologist and former Bre-X
vice-chairman who remains holed up in the Cayman Islands, the report was
vague and diplomatic.
"The issue of John Felderhof's participation or knowledge is still an open
question," it said.
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