Canadian Lawyer

w w w . C A N A D I A N L a w y e r m a g . c o m A P R I L 2 0 1 7 11 \ AT L A N T I C \ C E N T R A L \ W E S T REGIONAL WRAP-UP Bre-X, a Calgary-based junior min- ing company led by David Gordon Walsh, reported that its geologists had discovered incredibly rich gold deposits deep in the Indonesian jungle. Six years before in 1989, Bre-X started on the Alberta Stock Exchange at 30 cents a share. By early 1996, Bre-X was trading at above $280 per share. A lot of people became paper millionaires, and those who were lucky or smart enough to cash in reaped staggering rewards. But just like in the story of Cinderella, midnight struck. By March 1997, the euphoria, and the dollars, began to vanish and there was no Prince Charming to make things right. The precipitous tumble began when the geologist who "discovered" the gold deposit, Michael de Guzman, fell out of a helicopter near the site. It took five days to find the body, which had been ravaged by jungle animals and was difficult to identify. De Guzman had gone to the site directly from a miners' conference in Toronto at which Felder- hof had been named Canada's Prospec- tor of the Year. At about the same time Felderhof was receiving his accolades, he was also receiving reports from inde- pendent geologists hired to confirm de Guzman's discovery. Those independent reports indicated only "insignificant amounts of gold were found." That is why de Guzman was dispatched to Indonesia and that may be why he fell out of the helicopter. In May 1997, facing eight lawsuits and an RCMP investigation, Bre-X sought and obtained protection under the Companies' Creditors Arrangement Act. By November 1997, Deloitte & Touche Inc were appointed as trustees in bankruptcy of Bre-X Minerals Ltd. Two weeks before that, Calgary-based Larry Robinson was one of the lawyers retained to act for Deloitte. Robin- son is now retired, but he recalls that a few days after the bankruptcy was announced, he visited Bre-X's four- storey brick office building on the edge of Kensington across the river from downtown Calgary. For weeks, the build- ing had been besieged by the media, distraught shareholders and investigators. But it was now closed. "I went there just to look around. It was just an ordinary office." He says he did the same thing with other bankruptcies he handled. "I just liked to get a feel for the places." Robinson remembers Calgary as being "quite exciting at the time, oil was booming, people had lots of money." But for him the Bre-X story is a tragic one "not because of what happened to the principals," he points out, "but it was tragic because of what happened to the shareholders and the creditors." The Deloitte operation to recover whatever assets could be gathered involved "a wide-ranging, no-holds-barred effort," Robinson remembers. Private investigators were involved. As part of the recovery campaign, Robinson appeared in court not only in Canada but also in the Philippines. Deloitte brought other court actions in the Cayman Islands and elsewhere. But Deloitte's extensive efforts proved largely fruitless. No one was ever criminally charged in the affair and only a fraction of the funds were ever recovered. In 1998, while the many matters surrounding Bre-X were still before the courts, Walsh died. He had moved to the Bahamas with his wife and suf- fered a brain aneurysm. He was 52. His Toronto lawyer, Alan Lenczner, told The New York Times Walsh "always viewed himself as a victim along with everyone else." Lenczner said Walsh "claimed he had nothing to do with the tampering nor could he have known about it." The third man in the Bre-X scan- dal was Felderhof. He was a fearless prospector who had operated in some of the toughest jungles and deserts in the world. When still in his 20s, he played a key role in the discovery of a huge copper-gold deposit in Papua New Guinea. It was Felderhof who introduced de Guzman to Walsh and Bre-X. After spending years in court, Felderhof was, in 2007, finally acquit- ted on all charges and has since retired to an island in the Phillipines where, according to The Northern Miner, he lives modestly running a small lunch counter and convenience store. In the Bre-X scandal, millions of dollars were made and millions of dol- lars were lost. There were inquiries and police investigations, but in the end, no one was convicted of anything and the civil actions were abandoned because there was almost no money left. — GEOFF ELLWAND STR NEW /REUTERS THE ONLY PERSON IN ANY WAY LINKED TO BRE-X WHO IS STILL BEFORE THE COURTS IS TORONTO SECURITIES LAWYER JOE GROIA.

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