FORMER BRE-X GEOLOGIST DIES.
Acquitted on charges of insider trading
John Felderhof, the Bre-X geologist who played a central role in one of the biggest stock market scandals in Canadian history, has died. He was 79 years old.
Felderhof was the only person to face formal charges in the infamous gold mining fraud, but was acquitted of insider trading and other securities violations in 2007. The verdicts came 10 years after the revelation that supposedly rich samples from Bre-X Minerals Ltd.’s Indonesian mine had been “salted” with gold from outside the mine, a discovery that sent the miner’s high-flying stock — the company was valued at $6 billion at its peak — into free-fall.
The scandal shook Canada’s capital markets along with the country’s reputation on the global stage, as the supposedly enormous gold find had drawn interest from industry giants including U.S.-based Freeport-McMoRan.
Felderhof, the vice-chairman and chief geologist at Bre-X, had sold more than $80-million worth of his company’s stock in 1996, not long before the fraud was exposed and wiped out hundreds of millions of dollars in shareholder value.
He faced charges of insider trading and authorizing misleading news releases, but the judge in the case ruled that the tampering that affected thousands of core samples was sophisticated, and that Felderhof could have reasonably believed there was a large gold deposit at the Busang mine.
Two of the other main players in the Bre-X saga had died by the time Felderhof was charged and faced trial. David Walsh, the company’s chief executive, died of a brain aneurysm in 1998 at the age of 52. Geologist Michael de Guzman fell to his death from a helicopter in the Indonesian jungle in 1997, just a week before Freeport-McMoRan revealed it found “insignificant” amounts of gold at the Bre-X mine.
Felderhof never regained his career or reputation as a geologist after his acquittal, according to his Toronto lawyer Joe Groia, who successfully defended him against the charges levelled by the Ontario Securities Commission.
On Monday, Groia told Financial Post it was a “difficult day” for him after learning that Felderhof had died of natural causes in the Philippines.
“John was a man who I came to respect enormously for his tenacity and I always regretted not being able to do more for him,” Groia said.
“Notwithstanding his talents as a geologist, he never was able to work again in his field. And that leaves me feeling very sad for him, his family and the Canadian capital markets.”
Felderhof, who was born in Holland in 1940 and had moved to Canada in his teens, was greeted “warmly but with great caution” when he attended a large mining conference in Toronto following his acquittal, Groia said. Felderhof had moved to the Philippines around 2005, said the lawyer, who was told of Felderhof’s death there by members of his family including his ex-wife.
The Bre-X scandal dominated the news in Canada as it unfurled, and led to class-action lawsuits from angry shareholders who had been pulled in by the junior miner’s apparent discovery of one of the world’s largest gold deposits deep in the Indonesian jungle.
After the Indonesian government insisted the junior miner bring in a larger, more-experienced partner, Toronto-based Barrick Gold Corp. was among the industry heavyweights that vied for a piece of the project. Barrick lost out to Freeport-McMoRan and Barrick’s then-CEO, Peter Munk, later told Felderhof’s trial that he was shocked to learn there was no gold and that a fraud of such magnitude could happen in Canada.
The dramatic elements of the Bre-X story even captured Hollywood’s attention, inspiring a 2017 movie called Gold that starred Oscar-winner Matthew McConaughey as the CEO of fictitious Reno, Nev.-based Washoe Mining Inc.
HE NEVER WAS ABLE TO WORK AGAIN IN HIS FIELD.