Thursday, March 26, 1998
Bre-X directors 'got some 'splaining to do'
By SANDRA RUBIN
The Financial Post
The idea that directors of Bre-X Minerals Ltd. can't be held liable for press
releases claiming the company was sitting on a massive gold find is
"ridiculous," lawyer Harvey Strosberg, who is leading a class action suit,
argued yesterday.
Lawyers for Bre-X chief executive David Walsh and other directors of the firm had stated
previously that officers and directors can't be held personally liable for inflated claims because they
were acting in their corporate capacity, not as individuals.
But Strosberg attacked their argument as illogical.
"Is the logic David Walsh could go and intentionally make fraudulent statements and - even though
he sells off millions of shares - get off because he was smart enough to put it on company
letterhead?" he asked.
"That is not the law. If it were the law, it would make Ontario the fraud capital of the world."
It was Strosberg's first chance to respond to a barrage of criticism of his pleading from lawyers for
various defendants who are trying to have chunks of the lawsuit rewritten or deleted before it goes to
trial.
The defendants have all argued that Strosberg failed to plead cause, and to show who made what
false statement causing which investor to buy Bre-X stock.
"After listening to the efforts of my 15 friends and their minions behind them, you'd get the idea that
a standard of perfection is required," Strosberg said at the start. "If I'd spent hundreds of hours and
hundreds of thousands of dollars, I could have come up with a better pleading. Luckily, that is not
what is required."
He told Ontario Court Judge Warren Winkler that he has set out clear evidence of
misrepresentation and the defendants must now answer.
"As Ricky Ricardo would say: You've got some 'splaining to do, Lucy."
Strosberg also defended his argument that several brokerage firms violated the Competition Act in
issuing false statements and research reports about Bre-X, saying it's "consumer welfare legislation."
"To suggest this act wasn't meant to cover securities is nonsense."
Earlier in the day, the lawyer representing ScotiaMcLeod Inc., L‚vesque Beaubien Geoffrion Inc.,
Midland Walwyn Capital Inc. and Toronto Dominion Securities Inc. argued Strosberg failed to
show the plaintiffs named in the pleadings relied on the brokerages' recommendations.
Benjamin Zarnett said that in L‚vesque's case, while the client says he bought the stock on Feb. 18,
1997, on L‚vesque's recommendation, it actually put a "sell" on Bre-X shares that day. He said in
Midland's case, the plaintiff bought the shares June 24, 1996 - a month before Midland initiated
coverage of the stock.
Zarnett also said there was not enough information on the TD Securities pleading to determine a
direct link.
Michael Birley, the lawyer representing CIBC Wood Gundy Securities Inc., called Strosberg's
pleading "boilerplate," complaining whole paragraphs are repeated verbatim against different
defendants.
"All of the brokers are alleged to be 'one of the principal promoters of Bre-X,' " he told the judge,
adding that the same problem plagues the pleadings against the analysts. CIBC analyst Bruno Kaiser
"has a billion-dollar case against him, but it's not pleaded with any particularity."
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