Saturday, June 6, 1998
Walsh's death could hurt defendants' case
Canoe Money's Bre-X package
By SANDRA RUBIN
The Financial Post
The secrets Bre-X Minerals Ltd. president David Walsh took to the grave could
have a "devastating" impact on some of the remaining defendants still facing class
action lawsuits for their role in the fraud, a key lawyer said Friday.
The hard-drinking, hard-smoking promoter died Thursday of a brain
hemorrhage, so he will never take the stand to tell the world his side of the Bre-X
story.
Lawyers representing investors who lost billions in the stock's collapse said their
claims will be largely unaffected, continuing against Walsh's estate. But defence lawyers were
bracing for more severe implications.
"It's a devastating blow for many of the defendants. He had evidence that everyone wanted and we
now can't have," said the lawyer, who asked not to be named. "He was a front-line person who had
access to all the goods and all the bads about this property, whatever they were and whenever they
arose.
"If he was a dupe, if the closest insider -- the man who had the most to win and lose in all this --
was a dupe himself, then it's easier to see how the rest of us were duped as well."
Bay Street brokerages, Wall Street investment banks, consultants who worked on the Indonesian
property, and Bre-X's officers and directors have all been hit with multibillion lawsuits stemming
from the salting scandal. If Walsh was kept in the dark, as he always claimed, it could be vital to
their defence strategy.
"Ultimately, if Walsh was found in court to be a 'dupe,' then clearly those reporting to him, or
through others to him, could not have possessed a higher level of knowledge than the person at the
top of the chain," said another defence lawyer, who also asked not to be identified.
Walsh was rushed to hospital from his Bahamas home early Sunday with a ruptured blood vessel in
his brain. He was on life support for four days before dying at 2:15 p.m. on Thursday.
The complete story of what happened deep in the Borneo jungle may have died with him. The
second lawyer said things can be pieced together from documents and witnesses, but "at the end of
the day, we won't have as complete a record as we would like."
The late Bre-X promoter is the second of three original players whose voices will never be heard in
court. Geologist Michael de Guzman fell or leapt to his death from a helicopter days before the
swindle was exposed -- leaving only exploration chief John Felderhof still alive.
"You have Felderhof who led the exploration division, and who are his two key guys?" said the
lawyer. "You look of Felderhof's left and Felderhof's right.
"On his left you've got the guy raising all the capital -- which is Walsh doing
the promotion and building the company -- and you've got the other guy in
day-to-day control over what's going on at Busang. And they're both dead.
It's weird. It's just weird."
Felderhof said in a handwritten statement faxed from the Cayman Islands he was "deeply
saddened."
"Although we did not always agree on every decision, I always believed that David was trying to do
the utmost for shareholders," he wrote. "I know that the past year has been very hard on David and
his family, as it has been on mine.
"I very much regret that David will not be standing with me and the others at Bre-X as we continue
the fight to clear our names and reputation."
Walsh insisted to the end he had relied on Felderhof's expertise. In an affidavit sworn out on May
15, his final statement on the fraud, he said, "I am not a geologist."
"My role at Bre-X was to raise the finances necessary ... John Felderhof, a renowned geologist,
managed and supervised the Indonesian properties. I believed that Bre-X had made a discovery of a
rich gold reserve at Busang."
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