The Bre-X saga - Report exonerates Walsh of fraud (corporate, Canada)
by Timothy Moore in Vancouver and Scott Haggett in Calgary
The chief executive of Bre-X Ltd, David Walsh, was claimed to have had no knowledge that company
geologists had salted drilling samples from the Busang gold property.
A report by Forensic Investigative Associates Inc (FIA) was released in October but not as a full report
until last month.
FIA, a Canadian private investigation company, was hired by Bre-X to investigate the fraud following
the company's collapse in April.
At one point, Bre-X claimed to have discovered as much as 200 million ounces of gold on its Busang
property. The company grew to a market capitalisation of $C6 billion before being delisted and declared
bankrupt in early November. The company and its former executives are defendants in a number of
lawsuits.
Among FIA's conclusions are that none of Bre-X's employees in Canadian offices were involved in the
fraud. In particular, the report said: "There is no evidence that David Walsh was either involved in or
had knowledge of any of the illegal activities that took place in Indonesia."
The report also cleared Walsh's wife, Jeannette, and their son, Brett. Jeannette Walsh was secretary of
Bre-X; Brett Walsh worked in investor relations.
The investigators said they were unable to draw any conclusions with respect to John Felderhof, Bre-X's
former chief geologist. That reflects Felderhof's refusal to answer any questions.
"For the most part (Felderhof's) public statements amount to little more than complete denials and
general observations," the report said. "In light of the fact that he is a former director of a public
company which, along with its shareholders, has been victimised by an enormous and skilfully
manipulated geographically based fraud, his failure to contribute anything useful to the resolution of this
matter is, to say the least, curious in the extreme.
"The evidence to date gives us reasonable and probable grounds to believe that several long-standing
associates of Felderhof, along with others, conspired to defraud Bre-X and the public," the report said.
As announced in October, the report said the so-called "salting" of drill samples from the company's
gold property in Indonesia was likely carried out by Bre-X project manager Cesar Puspos at the
instructions of his boss, Michael de Guzman, who committed suicide on March 19, shortly before it
became known that the Busang site contained no gold.
According to the FIA report, the salting operation at Busang began in December 1993 after the first two
holes drilled at the remote site showed no gold.
Salting continued, using various methods and involving other Busang employees, until early March,
orchestrated by de Guzman using river gold purchased from a local gold panner.
The tampering was carried out at the Busang site itself until 1995, producing erratic results. The salting
operation was then moved to Bre-X's Samarinda office in Indonesia, where the sample bags of crushed
ore were opened, seeded with gold and sent on to an assay laboratory.
The Bre-X saga continued (corporate, Canada)
ExBresea Resources Ltd, an affiliate of now-defunct Bre-X Minerals Ltd, may lose its bankruptcy
protection status which would enable investors to recover some of the $C3 billion they lost when the
Busang discovery was exposed as fraudulent almost a year ago.
Canada's leading daily newspaper, the Globe & Mail, said geologists recruited by Bresea shareholders
are discussing plans to pull the defunct company out of court protection and restart it under new
management.
The group, led by US-based Ecuadorian Minerals Corporation's exploration manager John Sutcliffe,
asked David Walsh, president of Bresea and formerly head of Bre-X, to call a special shareholders'
meeting by early next month to elect the geologists as the company's new board of directors.
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