This is sweet lovely music to all shareholders' ears:
Tuesday, May 5, 1998
Walshes' assets frozen
Injunction covers bank accounts, real estate belonging to Bre-X CEO and his
wife
By SANDRA RUBIN
The Financial Post
The bankruptcy trustee has tightened the legal ropes around
Bre-X Minerals Ltd. chairman David Walsh and his wife
Jeannette, with an injunction in the Bahamas freezing their assets.
It's also filed a lawsuit alleging they cheated investors on expense
accounts and the bill for a failed venture.
News of the freeze came yesterday on the first anniversary of the
Strathcona report confirming Bre-X, far from being the greatest
gold find of the century, was among the world's greatest stock
frauds.
The Walshes face lawsuits stemming from the scandal over and
above the huge class action suits filed in Canada and the U.S.
"We don't want to get into a situation where we sue in Canada,
win, then go to collect and there's nothing there," said Ross Nelson, partner at bankruptcy trustee
Deloitte & Touche Inc. in Calgary.
"So this is a way of going in and freezing those assets while the litigation runs, so that if we're
successful, there's money there."
The freeze covers the couple's personal bank accounts and the accounts of three Bahamian
corporations they're believed to own -- Heam Ltd., Balogh Investments Inc. and Walco Holdings
Ltd. The Walshes are also prohibited from selling their property in Cable Beach.
The writ from the Supreme Court of the Commonwealth of the Bahamas also
obliges the pair to disclose all their worldwide holdings to the trustee. That
information will not be made public at this point.
The injunction closely resembles one Deloitte slapped on Bre-X exploration chief John Felderhof in
the Cayman Islands in December. Like Felderhof, the Walshes have been put on a weekly
allowance. Nelson declined to reveal the amount.
Deloitte also quietly filed a lawsuit in Calgary last month to get about $10 million back from the
Walshes and their son, Sean.
The statement of claim alleges the trio charged $655,098 in personal expenses to a Bre-X
American Express credit card, but that "such expenses were not business expenses."
"It's our allegation that the American Express bill was simply arriving at Bre-X and being paid every
month," said Nelson. "There was not sufficient information there to establish that it was for any valid
business purpose."
David Walsh responded in his statement of defence that he could not get a personal credit card
because he had declared bankruptcy in 1992 and he had signing privileges on his son's card. He
denied there was a Bre-X credit card. Walsh said all his business expenses were supported by
invoices and said he paid personal expenses on Sean Walsh's card himself.
The suit also says Walsh was paid US$160,000 by Bre-X in September 1996 for a personal
investment he had made two years earlier in an Indonesian eco-tourism venture that had since failed.
Nelson said Deloitte believes Walsh put in for the money after the venture's collapse.
"That's our view," he said. "There was never any indication in the records, or directors' minutes that
this was an investment authorized or approved by Bre-X."
Walsh's statement of defence says it was "a requirement of doing business in Indonesia that there be
a demonstration and provision of benefits to the local economy.
"Bre-X did not have sufficient funds to initiate the venture and, as a result, defendant David Walsh
advanced the sum of US$160,000. When Bre-X had sufficient funds, the advance ... was repaid."
In its suit, Deloitte is also going after Walsh for US$6 million that Bre-X was forced to pay out for
allegedly bungling definite ownership of the Busang property.
The court document says that under Walsh's guidance, Bre-X struck a deal for US$80,000 in 1993
for an 80% interest in a joint venture that held the key contract of work on Busang. But the
transaction proved ineffective and, despite another deal and another US$20,000, Bre-X was forced
to fork over US$6 million.
"We're saying the senior officer of the company who claimed to have expertise in mining and mining
operations in Indonesia, and the raising of money, should have put in place the proper things to
ensure they got good clean title right at the beginning," Nelson said.
Walsh's statement of defence counters "it was his honest belief that the option had been properly
documented and obtained with the assistance of appropriate legal counsel."
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