No evidence Bre-X head involved in gold fraud, court told
TORONTO (CP) - The former head of Bre-X Minerals cannot be held liable for an alleged massive fraud by his company without evidence he was involved, court heard at a class action hearing today.
David Walsh and other company directors can only be held personally liable if there's evidence they acted outside their roles as officers, Walsh's lawyer Alan Lenczner said.
"No where in the statement of claim is there an allegation the directors and officers acted outside that capacity," Lenczner said.
The hearing comes almost a year to the day after the Calgary-based company first revealed trouble at its Busang property in Indonesia.
On March 26, 1997, Bre-X announced insignificant amounts of gold had been found at the Busang site, which they had earlier touted as one of the biggest gold discoveries in history. The results were later confirmed in an audit that alleged a massive fraud had been committed.
Investors have filed a series of class action suits in Canada and the United States to try to recover their losses.
The Ontario class action is the first lawsuit to get to court and alleges Bre-X insiders and analysts knowingly misled investors about the company for personal gain.
Stock prices for Bre-X shares soared upon word of the supposed gold discovery in Busang. After the truth came out, stock plummeted and the company declared bankruptcy.
Bre-X insiders allegedly pocketed $150-million selling company stock and the analysts' pay was allegedly tied to how much Bre-X stock was sold to investors.
But Lenczner argued that Walsh could not be held responsible for signing media releases that made false claims about the amount of gold at the site.
"If the press releases turned out to be wrong in the end that doesn't make the officers or any directors liable because somebody had to put (the releases) out," Lenczner said outside of court.
This week's hearing is the first stage in the class action process. Once the motions are decided, the judge will have to determine if the case can be certified as a class action. After that, a trial on the allegations will start.
