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Ex-Bre-X geologist found not guilty - Metro US

Ex-Bre-X geologist found not guilty

Felderhof

John Felderhof, the lone remaining key figure in the multibillion-dollar gold fraud committed by Calgary-based Bre-X Minerals Ltd., was found not guilty yesterday of insider trading and misleading investors in the only prosecution brought in the biggest gold mining scam in Canadian history.

The ruling, delivered in a Toronto courtroom by Ontario Court Justice Peter Hryn, comes nearly seven years after the trial began, and about a decade after Bre-X’s massive gold find in Indonesia was exposed as a scam.

The Ontario Securities Commission accused him in 1999 of four counts of each charge, saying he illegally sold $84 million (now worth $79 million) of Bre-X stock in 1996, and issued misleading press releases touting the property’s rich gold content.

Soon after, independent surveys showed the company’s Busang gold deposit in Indonesia was worthless.

Shares of the company, which had soared to value the firm at around $6 billion, collapsed to nothing, costing thousands of investors their savings.

But Judge Peter Hryn said the OSC failed to prove that the former Bre-X geologist should have known that samples from the site were faulty.

“I prefer the evidence that there were not red flags that should have been apparent to Felderhof,” Hryn said.

He said that the tampering of samples was sophisticated and took place over sufficient time as to make the results plausible and reasonable to people involved.

Felderhof, who would have faced up to two years in prison and a fine for each count, was not in court.

His lawyer said the decision should help restore Felderhof’s reputation.

“The fact that many investors have singled him out and have said that he’s the one to blame has been an enormous struggle for him,” said Joe Groia.

Dead and gone

  • Other key players in the scandal are dead. Geologist Mike de Guzman died mysteriously after tumbling from a helicopter, and chief executive and founder, David Walsh, died in the Bahamas of a brain aneurysm after the fraud was exposed.

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