| Bre-X Shareholder Class Action |
The first announcement estimated that the site contained 30 million ounces of gold. In 1996, a second estimate predicted 60 million ounces of gold. In 1997, another analysis predicted over 200 million ounces, an amount equal to 8% of the entire world’s gold supply. During this time, shares in Bre-X rose from pennies to over $280. At its peak, Bre-X shares traded at $286.50 on the Toronto Stock Exchange. The exchange listed Bre-X in its TSE 300 index and there was talk of listing the stock on the influential Dow Jones Industrial Average.
Problems for Bre-X began in March of 1997 when their top geologist, Micheal de Guzman, fell from a helicopter to his death under mysterious circumstances. His body was discovered in the jungle four days later and was identified from dental records. Less than a week later the US firm of Freeport-McMoRan announced that its own analysis of the site showed “insignificant amounts of gold.” Freeport-McMoRan was one of the many companies who was looking to take over or merge with Bre-X. When its due dilligence produced such negative reports, investors began to frantically sell Bre-X shares. Bre-X commissioned their own report on the site but refused to comment when the results were not favourable.
A third party, Strathcona Minerals, was commissioned to give an independent report. On May 4, 1997, they announced that the previous Busang ore samples had been salted with gold dust. Their tests confirmed that shavings from gold jewelry had been added to the ore samples. It was also revealed that de Guzman had access to the site and handled the samples throughout the original testing. Shortly after this announcement, trading in Bre-X shares was suspended and the company filed for bankruptcy protection.
David Walsh moved to the Bahamas and died there in 1998 while still claiming to be innocent of any wrongdoing. Felderhof moved to the Cayman Islands and has not returned to Canada or the US. Since the Cayman Islands does not have an extradition treaty with Canada, he did not return to Canada even when the Ontario Securities Commission charged him with insider trading in 2000. On May 12, 2005, the National Post published a front page story asking whether de Guzman was still alive. According to the story, one of de Guzman’s wives had received a money order from him dated February 2005. This was yet another bizarre twist in the Bre-X story that had been at the forefront of Canadian financial markets for over 10 years.
Docken & Company represents a number of investors in the ongoing legal battle to recover money that was invested in Bre-X. A partial settlement of this action was reached that has allowed some investors to recoup some of their losses. Docken & Company is part of a team of lawyers throughout Canada and the US who are working on this claim.
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