Bre-X shareholders can't sue brokers, says Ontario judge

  Ontario Court Justice Warren Winkler said investors can sue Bre-X and its former officers and other principals in a class action and he asked the lawyers to set out a litigation plan for the court's approval.

  However, he dismissed an attempt to include big brokerage firms that had provided stock advice touting Bre-X as a stellar investment. The company's prized possession was later proved to be a fraud and investors lost billions of dollars in one of the biggest stock swindles ever.

  "I have found that the claims pleaded against the brokers and analysts, including Nesbitt Burns, First Marathon and their respective analysts . . . raise common issues," said Winkler.

  "However, I do not consider a class proceeding to be the preferable procedure for their resolution. I have not found any common issues to exist in the claim of negligence."

  Lawyers for the brokerages and analysts, including prominent firms Nesbitt Burns and First Marathon Securities, had maintained that only investors who could prove individual reliance on investing advice could be legitimate plaintiffs in a Bre-X class action.

  Thousands of Bre-X investors lost billions of dollars as the company's fabled Indonesian gold deposit was found to be a hoax. Calgary-based Bre-X collapsed in 1997 and shares that were once valued valued at more than $6 billion on the stock market became worthless.

  "The decision today certified the case against Bre-X and the insiders but refused the certification request against SNC Lavalin and the brokers and their analysts," said John Campion, a lawyer representing Nesbitt Burns.

  "Absent an appeal there is no class-action against them in Ontario."

  Thursday's legal ruling is the third major development this week on the Bre-X Minerals front.

  On Wednesday, the RCMP decided not to lay criminal charges in the case, saying they could not gather enough evidence to prove a criminal conspiracy. They also cited uncooperative witnesses and jurisdictional red tape during their investigation.

  The day before, the Ontario Securities Commission charged former Bre-X senior vice-president John Felderhof with eight counts of violating Ontario securities laws.

  But those charges of insider trading and releasing false news are not Criminal Code counts and are not extraditable offences. That means Felderhof -- believed to be living in the Cayman Islands -- can't be forced to return to Canada.

  Felderhof has denied any knowledge of the fraud.

  Angry shareholders in the United States are also seeking to file class-action charges against Bre-X in a Texas court.

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