January 10, 1998
You pays your money ...
Bre-X chief blames investors for huge losses
By SANDRA RUBIN -- The Financial Post
TORONTO -- Former Bre-X Minerals Ltd. exploration chief John Felderhof says he bears no
responsibility to people who bought shares of the disgraced company based on his boast it could be
sitting on 200 million oz. of gold.
The law realizes "reasonable investors" would not put cash on the line based on "vague, optimistic
predictions," he said in his long-awaited legal response to a blockbuster class action suit filed in
Texas.
He's asking the court to toss out the case.
It's the first time Felderhof, who headed the Bre-X exploration team, has offered a detailed
counter-attack to investors' charges he and others made negligent misrepresentations to defraud the
public and engaged in improper trading.
The Dutch-born geologist says in his motion to dismiss that he can't be held to account by investors
who bought Bre-X -- or analysts who recommended it -- after hearing him brag it was a "monster"
deposit and that he personally felt "very comfortable with a potential of 200 million oz."
Ditto for his insistence "I'm 110% confident that the gold is there" after doubts about Busang first
surfaced.
"The law recognizes that reasonable investors should not consider 'soft' opinions or vague,
optimistic predictions important or relevant in making investment decisions," says his motion, filed
with the court Jan. 5.
He also charged no one has proven he knew the statements were false when he made them.
Felderhof has been living at his $3 million US gated Cayman Islands home since the scandal broke,
protesting his innocence by fax but declining all interviews.
In 45 pages of legal arguments, Bre-X's former top man in Indonesia attacks charges he was
negligent for permitting bags of untested core samples to lie around the site unsealed, providing the
opportunity for someone to add outside gold. He argues that he shouldn't have been expected to see
signs of tampering because he spent most of his time at an office in Jakarta.
"Plaintiffs do not explain why Felderhof, as Bre-X's general manager officing (sic) in Jakarta, should
have known when bags were sealed or unsealed in and around Busang -- 1,000 miles away," the
motion asserts.
The document also pounces on claims that Felderhof should have noticed the Busang gold was
alluvial, with the rounded characteristics of gold panned from a river, when it was supposed to come
from bedrock. It says there is no proof he was ever aware of the problem.
The motion also argues Bre-X hired outside consultants, such as Kilborn Engineering and Normet
Pty. Ltd., and "many mining industry analysts, geologists and other experts were invited to Busang to
observe and comment on Bre-X's operations."
Again, his lawyers pounced on the question of proof.
Investors "have failed to allege, because they cannot, that any reputable experts suggested early on
to Felderhof that there was any concern that the core samples were being salted. A corporate officer
cannot 'see' and 'do' all things under his dominion."
Felderhof, who made $71 million trading in company stock, attacked charges of insider trading,
saying there aren't even any allegations he sold any shares any later than September 1996 -- six
months before the fraud was uncovered. The motion also said Canadian investors should not be
included in the Texas suit.
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