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Bre-X Minerals Ltd - Street Wire
IDA fines broker of Bre-X's "Mike and his Mighty Ducks"
Bre-X Minerals Ltd BXM
Shares issued 219,103,330
Mon 16 Jun 2003 Street Wire
See (*IDA) Street Wire
by Brent Mudry
A small Montreal brokerage which helped Bre-X Minerals fall guy Michael de
Guzman and four of his Indonesian "prospector" associates, mostly
undeclared insiders, make millions of dollars through options exercises has
been fined a total of $144,000 by the Investment Dealers Association of
Canada.
The IDA fined Resolution and former senior broker Gaston English $50,000
each, plus $22,000 each in investigative costs, on Monday for handling
scores of dubious transactions in September, 1996. The case is the only
resolved prosecution stemming from the multibillion-dollar Bre-X debacle,
one of the world's biggest frauds in the last century.
The regulator found Mr. English guilty of 43 violations, largely for
letting late Bre-X promoter David Walsh open the Indonesian accounts, and
other third party accounts for Bre-X, affiliate Bresea Resources, a Walsh
family foundation and Mr. Walsh's two sons, Brett Walsh and Sean Walsh.
(Almost 330,000 Bre-X shares, worth $4.47-million, were sold in the Walsh
sons' accounts in a one-week period in November, 1996.)
Resolution was found guilty of 13 violations. A number of the dubious stock
trades were not even registered in Resolution's books and records. At the
time, Mr. English was the president, chief executive officer and "ultimate
designated person" of brokerage Obligations Montreal Inc., now Resolution
Capital.
The IDA case, with the Indonesian clients' identities largely shrouded in
secrecy, offers the only known public insight into any Bre-X stock trading
done by the late Mr. de Guzman and his Indonesian associates, the Filipino
nationals dubbed "Mike and the mighty ducks" by John Felderhof, Bre-X's
exploration vice president.
The Bre-X gold promotion collapsed within weeks of Mr. de Guzman falling
out of a helicopter in March, 1997, and was later commonly accepted as a
massive salting job. Despite extensive police, regulatory and media
investigation and speculation, no evidence has ever been proven in court
that Mr. de Guzman, any of his associates, Mr. Walsh, Mr. Felderhof or
anyone else had any idea that Bre-X's Busang deposit in Indonesia, once
touted as the world's biggest gold find was actually an alleged hoax. A
month before Mr. de Guzman's fall to earth, Mr. Felderhof told analysts,
fund managers and the media that he was confident the deposit contained a
potential 200 million ounces of gold.
Virtually all of the case documents on the IDA's Web site, including the
notice of hearing issued last August, refer only to five mystery Indonesian
clients with the initials M.G., presumably Mr. de Guzman, C.P., presumably
key associate Ceasar Puspos, J.A., presumably Bre-X metallurgist Jerry Alo,
J.N. and R.R. The IDA publicly identified only Mr. de Guzman by name in a
brief press release in April, after finding Resolution and Mr. English
guilty after a 12-day hearing.
Broker Mr. English opened the Indonesian client accounts for Mr. Walsh,
without having any contact with Mr. de Guzman and the other clients, on
Sept. 16, 1996. Once opened, the accounts were quickly used to exercise
Bre-X options and whisk the profits offshore. Three of the accounts,
including Mr. de Guzman's, sold Bre-X shares the same day they were opened,
while the J.N. account sold shares worth $645,000 three days before the
account was even opened.
The de Guzman account, based on Mr. Walsh's instructions, made a
$1.26-million profit, after options exercise charges of $25,000, while the
C.P. and J.N. accounts each made profits of $632,000. The proceeds of the
de Guzman and C.P. accounts were sent to Bank Universal Jakarta, while the
J.N. proceeds were went to Bank Dagang Negara.
The other two accounts waited until Oct. 29 or 30, 1996, to cash in on
options exercises, with the $754,000 proceeds of the J.A. account and the
$377,000 proceeds of the R.R. account both sent by Resolution to accounts
at Hongkong and Shanghai Bank.
Resolution broker Mr. English forgot to answer scores of questions on
account opening forms, including how long he knew his Indonesian clients,
how he met them, whether anyone else had trading authorization, and key
"know your client" details.
(c) Copyright 2003 Canjex Publishing Ltd. stockwatch.com
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