Walsh's death could hurt
defendants' case
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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