For Thursday, February 11, 1999
Accusations fly over
Bre-X 'intimidation'
Heated exchange: Felderhof
lawyer blasts key witness for
'reckless' statements
Canoe Money's Bre-X package
By SANDRA RUBIN
The Financial Post
A U.S. lawyer for John
Felderhof, Bre-X
Minerals Ltd.'s chief
geologist, is being accused of "secretly"
sending a "threatening letter" to an expert
testifying on behalf of shareholders who lost
their savings in the notorious gold fraud.
The allegation surfaced just as another
important development for Bre-X investors
was revealed. Late Friday, lawyers leading a
U.S.-based class action filed a motion asking
a Texas judge to reconsider a recent ruling
barring Canadians from the suit.
The charge of intimidation was levelled at
Andrius Kontrimas -- Mr. Felderhof's main
U.S. counsel -- by Houston lawyer Paul
Yetter, who is leading the 23-firm class
action lawsuit.
In a Feb. 1 letter obtained by the Financial
Post, Mr. Yetter accused Mr. Kontrimas of a
"gross breach of ethical obligations" in
writing to Michael Lawrence, whose
testimony is being used to build the case that
Mr. Felderhof was a participant in the
$6-billion fraud.
In an affidavit filed in U.S. Federal Court in
March, Mr. Lawrence -- president of the
Australian Institute of Mining and Metallurgy
-- listed 10 points highly critical of the
former Bre-X exploration chief.
He started with Mr. Felderhof's remark five
weeks before the salting scandal was
exposed that he was "quite comfortable" with
estimates that Busang contained 200 million
ounces of gold.
"The recklessness of his public statements
are clear from the record," Mr. Lawrence
said in his sworn statement. "He ignored the
metallurgical, petrological and numerous
other red flags.
"He knew the deposit's tonnage and grade,
metallurgy, etc. were too good to be true."
Mr. Felderhof has said from his luxury
Cayman Islands home that he played no role
in the salting scandal and that he, too, was a
victim.
Mr. Kontrimas wrote Mr. Lawrence on
Dec. 21 warning: "It has come to our
attention that you have been making false and
defamatory statements regarding our client
and the operation at Busang.
"We hereby put you on notice that our client
intends to hold you and your company
personally responsible for any false or
misleading statements. To our knowledge,
you have never been to Busang and therefore
have no personal knowledge of how Bre-X
conducted its operations there."
Mr. Yetter fired back an angry letter, copied
to all the lawyers working on the Bre-X file,
accusing Mr. Kontrimas of using intimidation
tactics.
"Although the absence of gold at Busang is
now an admitted fact, and the scandal ranks
among the world's greatest business frauds,
you threaten Mr. Lawrence that if he
continues 'to rely on hearsay as fact' he does
so at his own 'peril.'
"Your letter is an arrogant and blatant
attempt to bully Mr. Lawrence. It is
inappropriate and a gross breach of ethical
obligations to the court. I can only conclude
that you intended to try to intimidate Mr.
Lawrence."
Mr. Kontrimas denied he was bullying
anyone and said in an interview that he felt
he had to act after learning Mr. Lawrence has
been publishing papers about Busang
containing statements he says will be proven
untrue.
"All we did is tell him to get his facts
straight and not to rely on hearsay," Mr.
Kontrimas insisted.
"He's a person that has some stature as
president of the Australian Institute of Mining
and Metallurgy -- but he hasn't been to
Busang and he doesn't have the facts. So he
should keep his powder dry until the trial."
Meanwhile, in a motion filed Friday
evening, lawyers asked Federal Court Judge
David Folsom to reconsider last month's key
ruling that bars Canadians from the
Texas-based suit on the grounds none of the
damage they suffered was linked directly
with actions in the United States.
The motion points out there are two
affidavits filed with the court from Canadian
shareholders who said they "directly relied"
on resource estimates by J.P. Morgan & Co.
in the decision to buy Bre-X stock.
The Canadian shareholders each swore they
read a 1996 J.P. Morgan statement pegging
Busang as a 150-million ounce deposit, and
each said he was "impressed" by the
statements and "relied on the J.P. Morgan
representations" in acquiring shares of the
Calgary-based exploration firm.
The 14-page motion also asks the judge to
reconsider on legal grounds: it says Canadian
shareholders do not have to prove "direct
reliance" on misrepresentations made in the
United States in order to be eligible under
U.S. securities law and, the filing also says,
under U.S. law, there is a concept called
"supplemental jurisdiction," which allows a
federal judge to hear non-federal claims that
arise out of an ongoing case.
If the motion is denied, the lawyers still
have the right to appeal the main ruling. |
