Tuesday, May 19, 1998
Walsh says he believed there was gold in Busang
By SANDRA RUBIN
The Financial Post
David Walsh, Bre-X Minerals Ltd.'s chief executive and its chief stock promoter, has told a Texas court he
shouldn't be held to account for the multibillion-dollar gold swindle because he relied on information
provided by "renowned geologist" John Felderhof and other board members.
Walsh - who is alleged to have made about $25 million selling Bre-X shares - is asking to be excused from a
U.S.-based class-action lawsuit on the grounds he genuinely believed the tiny Calgary exploration firm was
sitting on a massive strike.
"I believed that Bre-X had made a discovery of a rich gold find at the Busang project," Walsh said in a
two-page affidavit, sworn out on Friday and filed in Texarkana, Tex.
Bre-X stock was delisted over a year ago, vaporizing about $3 billion in shareholders' money.
Walsh described his job as simply raising the funds necessary for Bre-X to pay its bills. "I am not a
geologist," he said. "Defendant John Felderhof, a renowned geologist, managed and supervised the Indonesian
properties and provided geological expertise through a team of geologists recruited by him and employed by
Bre-X, or its subsidiaries."
Paul Yetter, the lawyer leading the Texas suit, said Walsh is merely joining the game of pass the buck.
"The finger pointing continues," he said. "Of course I agree that Mr. Walsh's fellow executives and Bre-X's
advisers are responsible for the scandal, but their wrongs do not make him innocent."
Felderhof, who is alleged to have made about $50 million trading in Bre-X stock, has denied in court filings
he was at the centre of Bre-X's mining operations in Indonesia. He says he was the "general manager" working
out of an office in Jakarta and was rarely at the Busang mine site. He says he was not responsible for
day-to-day operations at Busang.
But Walsh painted a different picture, saying Bre-X's Indonesian management "determined what exploration
properties would be acquired and what exploration activities would be carried out at any given time."
He also pointed the finger at fellow director Paul Kavanagh, a respected geologist, and consultants such as
SNC-Lavalin Inc., which carried out an independent resource calculation using salted core provided by
Bre-X.
"In addition to Mr. Felderhof, the Bre-X board had a geologist as an outside director and employed two
senior personnel, all of whom had extensive experience in the mining industry," Walsh said in his affidavit.
"Moreover, Bre-X hired numerous qualified independent consultants who were significantly involved in the
analysis of the deposit."
Walsh, a resident of the Bahamas, pointed out that as soon as he learned independent tests of Busang found
"insignificant amounts of gold," he alerted the RCMP and the Indonesian police.
He also stated he commissioned a report from private investigators at Forensic Investigative Associates Inc.,
which cleared him of any wrongdoing.
Walsh and his wife had their Bahamas assets frozen earlier this month by Bre-X bankruptcy trustee Deloitte &
Touche Inc. They are fighting the injunction.
Walsh's lawyers also said in the motion to dismiss since he is a Canadian, who has never been a resident of
the U.S., and the salting of core samples was not carried out in the U.S., their client should not be answerable
to a U.S. court.
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