Bre-X: Strathcona report confirms scam
It had all the elements of a great novel: a dramatic rags to riches story, a mysterious suicide (or was it murder?) and a scandalous international fraud. But the Bre-X saga wasn't fiction — much to the chagrin of the many who lost money in 1997. Thousands of investors were duped by the small Calgary-based mining company that falsely claimed to have struck gold in Indonesia.
As reporter Michael Colton points out, Bre-X has done enormous harm to the reputation of the Canadian mining industry. Even Prime Minister Jean Chrétien is doing damage control, publicly touting Canada's mining industry as "the most capable and most competent in the world." Meanwhile, investors are expressing their astonishment. "Never in my wildest dreams would I imagine this could happen in Canada in the year 1997," says Greg Chorney, who lost several million dollars in the fiasco.
• On May 6, the day after the Strathcona report was released, Bre-X stock plummeted to 80 cents a share. It continued to drop and was de-listed from all stock exchanges several days later.
• The Strathcona report concluded that the gold samples had been "salted". This means someone enhanced drilling results by adding a bit of gold dust to the rock before it reached the testing (or "assay") laboratory. It's called salting because, originally, the fraudulent process involved putting gold dust into a salt shaker and sprinkling it onto the rocks.
• Bre-X is Canada's biggest salting scandal by far, but not its first. In the 1970s, for instance, a Canadian company called Tapin Copper was involved in a well publicized salting scam.
• Author Diane Francis writes about a humorous salting attempt in her book Bre-X: The Inside Story. Some Quebec geologists sprayed rock samples with gold, then sprayed them with hairspray to prevent the gold from washing off in the lab. They used a scented hairspray and were subsequently caught.
• David Walsh had had a previous brush with scandal. In the 1970s he worked at Eastern Trust (later Canada Permanent Trust) in Montreal. A crooked stockbroker at Yorkton Securities used various trust accounts, including one Walsh was responsible for, to "wash" stolen share certificates. In other words, the broker made it look like there was market activity occurring through the use of fictitious accounts. It appears that Walsh didn't ask any questions, but it's unclear if he knew what was going on or not.
• Even after the Strathcona report was released, Bre-X's John Felderhof - who had since fled to his home in the Cayman Islands - was still maintaining that there were substantial gold deposits in Busang.
Program: The World At Six
Broadcast Date: May 5, 1997
Guest(s): Greg Chorney, Jean Chrétien, Vivian Danielson, Clint Docken, Jack Geller, Bill Hess
Reporter: Michael Colton, Brenda McGelligott
Last updated: April 18, 2013
Page consulted on December 6, 2013
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