Chalk one up for the shareholders. Felderhof led the pack by making about $69 million (this excludes any shorting which may have been done by our honest Felderhof).
Thursday, October 16, 1997
Shareholders win first rounds in Bre-X
battle
By MEL DUVALL
Calgary Bureau The Financial Post
Shareholders of Bre-X Minerals Ltd. scored several victories in court yesterday in their attempt to
hold directors and officers accountable for what may be the biggest mining fraud in history.
Alberta Court of Queen's Bench Judge Robert Cairns swept away restrictions that have prevented
shareholders from launching lawsuits against Bre-X's directors and its advisers who are protected
under the Companies' Creditors Arrangement Act.
Lawyer Harvey Strosberg said it was a "watershed" event that will, among other things, allow
shareholders to go after the reportedly $140 million made by Bre-X insiders prior to reports about
widespread salting at the company's Indonesian mine sites.
In addition, Cairns ordered that all the assets of Bre-X and its sister companies, Bro-X Minerals
Ltd. and Bresea Resources Ltd., be seized by the court.
The order was made in response to shareholders' concerns that the company's remaining assets
were being rapidly depleted by ongoing administration fees and "useless" investigations.
"We basically got everything we were looking for here today," said Clint
Docken, a Calgary lawyer who is filing suits on behalf of about 115 investors.
"The court has initiated a process which should result in a number of benefits for investors."
Bre-X lawyer Howard Gorman attempted to fight requests to place the company into receivership
or court protection, by saying all the actions undertaken by the company have been in the best
interest of shareholders.
Cairns said that while he was not indicating that Bre-X management acted improperly, he felt it was
in the best interests of all parties that the court assume control of remaining monies.
According to a Price Waterhouse report filed Tuesday, Bre-X had net working assets of just $5.7
million at Sept. 30, while Bresea had cash assets of $27.5 million and Bro-X had $614,000. At its
peak, Bre-X had a market capitalization close to $6 billion.
Strosberg and Docken said they plan to file suits against directors and officers of Bre-X, and
advisers such as SNC-Lavalin Group Inc. and J. P. Morgan & Co. Inc., as soon as they can get the
paperwork ready.
"This is like a fight -- you can run but you can't hide," said Strosberg. "In this case, we're coming
after these people. We're coming after them with everything that we have."
Bre-X president David Walsh has denied any knowledge of the salting operation and last week
released a report from private investigators hired by the company that exonerated the Calgary-based
management and directors.
Strosberg said his lawsuit, to be filed in Ontario, would seek to recover profits made by Walsh, his
wife Jeanette Walsh, vice-president Steve McAnulty, exploration chief John Felderhof and other
insiders from stock sales.
"Mr. Felderhof was the leader of the band, making about $69 million," he said. "We're going to
chase that money."
The investigation, which was not related to another probe being conducted by the RCMP, pinned
the blame largely on Bre-X chief geologist Michael de Guzman, who died of an apparent suicide in
March shortly before the fraud was exposed.
The report said it was "an open question" whether exploration chief John Felderhof was involved.
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