Bre-X Minerals, the junior mining company whose fabulous Busang gold deposit turned out to be a fraudulent sample factory, is at last where it belongs — in the hands of a bankruptcy trustee. Its liabilities are enormous and, apart from a few nutcases on the Internet, nobody contends that the company has any assets other than the telephones that adorned its Calgary boiler room.
And it is heartening to note that the Alberta Court of Queen’s Bench has placed Bresea Resources, the parent company that owned a large block of Bre-X shares and the Bre-X building in Calgary, into receivership. The court did this over the objections of Bresea’s management, which had proposed that Bresea’s court protection be extended for 120 days to allow it to restructure.
Bresea’s chairman, the disgraced but still impudent David Walsh, insisted Bresea could buy a package of oil and gas properties from Shell Canada for $86 million, which would have been funded with $20 million of Bresea’s assets, plus $66 million in debt financing. The court was certainly right in deciding Walsh’s record as chairman of Bre-X meant he should not be managing Bresea.
Even if his claims that he had no knowledge of the Busang salting conspiracy are true, then he is admitting that no fewer than three direct warnings that Busang was a fraud were not quite enough to convince him there was something wrong. Anyone that dim should not be trusted with other people’s money, or around anything as inflammable as a gas well.
The court rejected Walsh’s impertinence, even though one group of Bresea shareholders, represented by Windsor, Ont., class action lawyer Harvey Strosberg, indicated it had no objection to Walsh’s proposal. This points to another problem in unravelling the Bre-X scam. Competing class actions have started to work at cross-purposes, with one group, largely Ontario-based, accepting a deal with Bresea’s current management, while others, represented by lawyers in British Columbia, Alberta and the U.S., are urging the court to force Bresea into bankruptcy. The wrangles between sets of plaintiffs buy more time for the defendants.
Lawyers for the plaintiffs have naturally cast their nets as wide as possible, naming not just the company and its directors, but the brokerage houses and consultants that investors say they relied on for accurate opinions on Bre-X and Busang. In response, defendants, and even some possible witnesses, are maintaining a silence that will keep the facts buried for as long as the court actions last.
This plays into the hands of management, allowing Walsh and other employees of Bre-X to receive salaries and bonuses even as they construct a defence against the suits. It lets Walsh hide behind his claim that he was “just the money guy,” led along by his vice-chairman John Felderhof.
Felderhof, in turn, remains comfortable and untouchable on Grand Cayman, a wisp of land in the Caribbean where the principal cash crops are banking secrecy and capital shelters. Felderhof, who heard the same warnings as Walsh, was on the Busang site regularly, and kept in touch with salters Michael de Guzman, Jerome Alo and Cesar Puspos by fax. He knows plenty about the conspiracy but will tell nothing.
We may be a long time finding out the truth; in the interim, those who lost on Bre-X can perhaps enjoy a little black humor at Sudbury writer Colin Firth’s Bre-X Scam web site (http://www.bre-xscam.com). David Walsh, meantime, could try his hand at running a strip mill. He certainly has all the brass he needs.