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The Bre-X Saga:
Fortune or Folly?
Walsh tried to get $25M after
fraud uncovered
Thursday 2 April 1998
Paul Waldie, The Canadian Press
David Walsh, the former head of Bre-X
Minerals, and his wife Jeanette tried to
withdraw $25.3 million Cdn from bank
accounts in the Bahamas days after
Bre-X's Busang gold property was
declared a fraud, Bahamian court
records show.
The Walshes' bank, Ansbacher
Bahamas, refused to release the money because of
concerns about the couple's liability in the Busang
scandal, the documents show.
The Walshes took Ansbacher to the Bahamian
Supreme Court last summer and succeeded in
withdrawing their money last fall.
Its whereabouts is unclear, and Alan Lenczner, a
Toronto lawyer representing the Walshes, said
Wednesday he is unaware of any further attempts to
seize the couple's assets.
The Walshes live in the Bahamas and are named in a
series of lawsuits involving Calgary-based Bre-X. The
suits were filed by investors trying to recover $3 billion
they lost when Bre-X collapsed following an audit
which found insignificant gold at the Busang site in
Indonesia and said tampering had occurred.
In an audit released May 3, 1997, Strathcona Mineral
Services said Busang was a fraud.
Bahamian court documents show that on May 12,
1997, Jeanette Walsh asked Ansbacher to close a
personal account and the account of Balogh
Investments, a Bahamian company she created in 1995
to hold proceeds from her Bre-X share sales.
Balogh had a complex ownership structure designed
by Ansbacher to conceal her ownership, court records
show.
The accounts held $15.2 million in cash plus 1.6
million Bre-X shares.
Three days later, David Walsh asked to close his
personal account and the account of Hearn Ltd., a
Bahamian company he created in 1996 for his Bre-X
share sales. The accounts contained $10.1 million in
cash.
Court records also show he tried to transfer his
accounts to a Canadian bank in April 1997, but
Ansbacher refused because of the pending release of
the Strathcona report.
In an affidavit, Ansbacher's managing director, David
Fawkes, said the requests were refused because the
bank feared it could be sued for releasing money that
might be seized as part of the investor lawsuits or the
police investigation into Busang.
The RCMP investigation of the fraud began within
days of the Strathcona report. The first lawsuit against
Bre-X was also filed within days of the report.
Ansbacher "does not wish to prejudice the interest of
its valued customers," the bank said in court
documents. "At the same time, it considers that it
would be irresponsible to ignore the published
information and possibility that the monies in the Bank
are the proceeds of a fraud." Jeanette Walsh took the
bank to court in June 1997, arguing that Ansbacher had
no right to withhold the money merely because of
allegations. She also denied any involvement in alleged
tampering at Busang.
A judge sided with Ansbacher and ruled that it should
notify the RCMP about the accounts, to give the
police roughly two months to file a motion to seize the
funds.
"There are now grounds for believing that the funds
and securities or much of them may have been
obtained through fraudulent activities on investors who
invested in the shares of Bre-X Minerals Ltd.," Justice
Emmanuel Osadebay ruled on July 29.
RCMP spokeswoman Deleen Schoff would not
comment Wednesday on whether the force was
notified about the court case or if it has taken any
steps to freeze the Walshes' assets.
Shortly after Osadebay's ruling, David Walsh filed a
lawsuit against Ansbacher. This time, a judge sided
with Walsh, and ordered the bank to release his
accounts.
"On the state of the evidence before me, I can find
nothing which indicates that Walsh was personally
involved in the salting of samples, or that he knew or
had any information of such a scheme," Justice Anita
Allen ruled on Aug. 19, 1997. She noted that in 1996,
David Walsh sold just 300,000 of the nine million
Bre-X shares he owned.
"In my view, if he were involved in the fraud, or knew
of its existence, I would expect him to sell, not all of
his shares, as that would be too obvious, but a greater
proportion than he sold."
Ansbacher "is obliged to honor the instructions of
Walsh," she ruled.
It is not clear at what point Jeanette Walsh was also
allowed to withdraw her money, but Lenczner said he
is unaware of any restrictions on her money.
The Walshes have been more fortunate than former
Bre-X vice-chairman John Felderhof, who lives in the
Cayman Islands.
Felderhof is also named in the investor lawsuits and his
assets were frozen through a Cayman Islands court
order obtained in December by Deloitte and Touche,
the accounting firm that was appointed trustee of
Bre-X when it declared bankruptcy last fall. Deloitte
has also filed a lawsuit against all Bre-X directors on
behalf of the company.
Felderhof is believed to have pocketed more than $70
million selling Bre-X stock.
Deloitte accountant Ross Nelson confirmed
Wednesday that no action has been taken yet to freeze
the Walshes' assets.
"The trustee is reviewing the actions of all of the
insider traders and folks that we have already sued," he
said. "We will do whatever we think is appropriate in
the circumstances."
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