December 31, 1997
Felderhof hit by suit
Former Bre-X official target of $3-billion action
By GLEN WHELAN -- Calgary Sun
A flood of legal action against Bre-X Minerals Ltd. has finally engulfed its
elusive chief geologist John Felderhof with the launch of a $3-billion lawsuit.
Deloitte & Touche, receiver-manager for the insolvent Calgary company,
filed the monster suit against Felderhof in a Cayman Island court earlier this
month.
Legal documents claim Felderhof was negligent and in breach of his
fiduciary duties while in charge of operations at the Busang property in
In-donesia, once touted as the largest gold find in history.
And reports from the Cayman Islands say Felderhof's assets were frozen
by a court there -- so much so his lawyers had to move in and fight to free
up cash for him to make it through Christmas.
Tests this spring showed the Indonesian find was a scam, sending Bre-X
stock plummeting back to its penny stock roots.
Felderhof, then vice-president of Bre-X, was overseeing operations when, according to the
company, geologist Michael de Guzman and other staff rigged core samples to suggest the deposit
contained up to 70-million oz. of gold.
De Guzman later committed suicide.
The lawsuit, uncovered this week by the Miami-based business newsletter Offshore Alert, was filed
in the Grand Court of the Cayman Islands on Dec. 19.
Named in the Deloitte & Touche lawsuit is Felderhof, his wife Ingrid and a company she controls
called Spartacus Corp.
Felderhof's wife is included because the former Bre-X executive is believed to have transferred
some or all of his assets into her name.
Ingrid Felderhof holds the deeds to the couple's $3-million mansion in the ultra-exclusive Vista Del
Mar community in the Caymans, their $1.2-million beachfront condo and a $450,000 cottage
retreat. Insiders say she also owns Spartacus and may hold millions through the
Cayman-incorporated firm.
Lawyers for Deloitte & Touche arrived at the $3-billion figure because it represented the sum of all
Canadian lawsuits involving Bre-X.
"The number being claimed is a derivative of actions against Bre-X itself, along with a large number
of other defendants," said Ross Nelson, senior VP of Deloitte & Touche in Calgary.
It's the first legal action against the 56-year-old Felderhof launched from within the Caribbean
nation, a famous tax haven.
It could also be the first in a string of suits by Deloitte & Touche against Bre-X executives, including
former president David Walsh.
"I'm sure they're looking into getting Walsh as well," said Offshore Alert publisher David Marchant.
"It might just be a matter of time before he's targeted."
Walsh, founder of Bre-X and its most vocal promoter before the massive scandal, is now a
permanent resident of the Ba-hamas and could not be reached for comment.
Felderhof has been holed up on Grand Cayman Island since Bre-X's multibillion-dollar gold play
unravelled.
Although Felderhof has denied knowledge of the gold-salting scheme that triggered Bre-X stock's
meteoric rise, he has refused to return to Canada to face courts and investors.
Cayman Island officials are still considering an application by Felderhof for permanent-resident
status, which is available with a minimum investment of $250,000.
Meanwhile, the miners, brokers and lawyers on the Mining Standards Task Force seeking ways to
avoid another Bre-X-type scandal have delayed their report for up to six months.
And fear is growing in mining circles the report might end up doing the wrong thing -- writing new
laws instead of more policing.
"If they come up with strict technical controls, it will just kill the business," said Dale Hendricks, a
Bre-X investor.
-- With files from The Financial Post
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