theglobeandmail.com
Court seizes Bre-X assets
Judge clears way for lawsuits against company executives
Thursday, October 16, 1997
By Brent Jang
Alberta Bureau
CALGARY -- An Alberta court has seized the assets of Bre-X Minerals Ltd. and cleared the
way for lawsuits against the disgraced gold mining company, including claims against company
president David Walsh and former chief geologist John Felderhof.
Bre-X and its related companies, Bresea Resources Ltd. and Bro-X Minerals Ltd., have roughly
$33-million in net working capital (current assets minus current liabilities).
"It is in my view expedient and proper that the remaining monies be paid into court as it relates to
these three companies," Mr. Justice Robert Cairns of the Alberta Court of Queen's Bench ruled
yesterday.
Bre-X and its affiliates had been operating under court protection since May 8. The Calgary-based
company had been given until the end of October to file a reorganization plan.
But lawyers representing Bre-X shareholders successfully argued that Bre-X, whose highly touted
gold find in Indonesia turned out to be a fraud, has not prepared any such plan.
All Bre-X has done since May is "squander" millions of dollars on legal and investigative fees, rather
than developing a strategy that would benefit shareholders, said Harvey Strosberg of Windsor, Ont.
He leads a team of lawyers from Ontario, Quebec and British Columbia who plan to file a
class-action lawsuit in Ontario within days.
Mr. Strosberg said the action will target Mr. Walsh, Mr. Felderhof and others who profited from
alleged illegal insider trading in Bre-X stock, which had been valued as high as $6-billion last year
before crashing as its Busang mine was exposed as a hoax.
Any money recovered will represent a small portion of what people have lost from investing in
Bre-X, but Mr. Strosberg said "this is an important step to seeing justice for the shareholders."
He estimated that Bre-X's management and directors, both current and former, gained more than
$140-million from selling Bre-X stock while the company was still flying high. "We don't know if
that's the extent of the trading. That's the extent of the reported trading," Mr. Strosberg said outside
the courtroom.
He said individuals who profited from the Bre-X affair, including Mr. Felderhof, Mr. Walsh and Mr.
Walsh's wife, Jeanette, "will have to explain to a court whether this was [illegal] insider trading.
"You can run but you can't hide in this case. We're coming after these people," Mr. Strosberg said.
"Here we come. Ready or not."
Howard Gorman, a lawyer representing Bre-X, had told the court that Price Waterhouse Ltd. has
been doing a good job since being appointed as the monitor for Bre-X's assets and records.
However, the judge said it was in the best interests of shareholders to eliminate "impediments" that
stand between creditors and Bre-X's assets.
That decision removes the protection that Bre-X and its affiliates had from its creditors under the
Companies' Creditors Arrangement Act, with respect to the lawsuits.
After Oct. 31, the CCAA will likely be officially lifted.
It also paves the way for various lawsuits to proceed, including one headed by Clint Docken, a
lawyer who filed a suit in Calgary last week on behalf of 115 shareholders.
Some legal observers have said that it would be better if the dozen or so lawsuits were consolidated
into just a few claims.
Mr. Strosberg said he's pleased to be forging ahead, expressing frustration that Bre-X had been
allowed to spend money for the past five months, including fees paid to Price Waterhouse and
private investigators.
Those investigators blamed dead geologist Michael de Guzman for orchestrating the scam at
Bre-X's Busang property. In March, Mr. de Guzman fell out of a helicopter en route to Busang,
where Bre-X once touted that it was sitting on the world's richest gold deposit.
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