A file photograph of the Bre-X Minerals building in Calgary. The company collapsed in 1997.Patrick Price/Reuters
Bre-X Minerals Ltd. collapsed in 1997 amid allegations its massive gold find in Indonesia was a fraud, prompting a flurry of police investigations, regulatory probes and lawsuits seeking up to $5-billion in damages for shareholders. Now, 16 years later, the saga is petering out with shareholders no richer and the mystery about what happened at Bre-X's gold find in Busang still unsolved.
Deloitte & Touche Inc., the bankruptcy trustee charged with recovering money for investors, has given up its legal action against several former Bre-X executives, banks and other companies involved in the gold project. In court filings, Deloitte argued it had run out of money to pursue the case and probably wouldn't win anyway. A class-action lawsuit launched in Ontario on behalf of shareholders has also run out of steam and will likely be dropped now that the trustee's case has ended.
"This motion is the anticlimax of the Bre-X saga," Ontario Superior Court Justice Paul Perell said in agreeing to discontinue the trustee's case this month. An Alberta court is expected to make a similar ruling in May on the trustee's request to end the case there as well.
"That's pretty much it," said Calgary lawyer Clint Docken, who has been involved in various cases on behalf of investors for years. Mr. Docken said the trustee's suit was the best chance shareholders had to recover something.
"What has the trustee got to show for 16 years of litigation? Almost nothing," he said. "Biggest fraud in Canadian history and no accountability. It's very sad. We'll never know [what happened]."
Mr. Docken noted that while shareholders have gotten next to nothing, Deloitte received $3.9-million in fees and paid its lawyers $8-million. All that is left in the Bre-X estate is $79,000, according to court filings. A lawyer representing the trustee was not available for comment.
It is an inconclusive end to a scandal that shook the Canadian mining industry and left roughly 40,000 Bre-X shareholders wondering what happened when samples of Bre-X's supposedly rich gold find revealed a far smaller deposit. An investigation by the RCMP went nowhere and no one was ever charged with fraud. The only Bre-X executive to face any quasi-criminal action was chief geologist John Felderhof, who was acquitted of charges of insider trading and misleading shareholders in 2007.
Little also came of a move by the trustee to freeze the assets of Mr. Felderhof, his ex-wife Ingrid and former Bre-X chief executive officer David Walsh, who died in 1998.
The Felderhofs had moved to Cayman Islands by the time of Bre-X's collapse and had pocketed $75-million selling company shares between 1994 and 1996, court filings show. But nearly all of that money has vanished. Mr. Felderhof, 72, now lives in a sparse home in the Philippines, where he spends much of his time gardening, and court filings show he has just $250,000 to his name.
Ms. Felderhof, who still lives in Cayman Islands, "does not have substantial cash on hand," the trustee indicated in a court document.
Mr. Walsh and his wife, Jeanette, moved to the Bahamas, where Ms. Walsh still has a home. Court filings show that while the couple earned $19-million on their Bre-X holdings, Mr. Walsh's estate is essentially bankrupt and faces a $30-million charge from the Canada Revenue Agency. No other assets have been found, the trustee said.
Based on the scant funds available to recover and with little money left to pursue any claims, "the trustee has reluctantly reached the conclusion that it is appropriate to discontinue the [lawsuit] and other related litigation including [the asset freeze]," the trustee said in a court filing.
Paul Waldie