Another chapter in the Bre-X Minerals Ltd. saga has closed with the company’s bankruptcy trustee dropping its suit against the estate of the firm’s founder, David Walsh, and chief geologist, John Felderhof.
The Ontario Superior Court of Justice agreed to dismiss a suit brought by Deloitte & Touche Inc. against Walsh, Felderhof, and others, over the apparent fraud at Bre-X, given a lack of resources to prosecute the case and the remote possibility that it could recover anything for Bre-X’s creditors.
The decision notes that the initial case was brought against a number of firms, including banks and engineering firms, but that it has now “dwindled down to claims associated with allegations of insider trading” against Felderhof, his ex-wife, and the estate of David Walsh, the deceased former president of Bre-X. Now, Deloitte has brought a motion seeking a discontinuance of the action without costs, and the remaining defendants consent to the motion, it says.
The court’s decision indicates that Deloitte has agreed to drop the case because, as Bre-X’s trustee in bankruptcy, it lacks the financial resources to continue prosecuting the action; and, it believes that “there are no reasonable prospects of any meaningful recovery, even if it were successful at trial.”
As of Jan. 30, the Bre-X estate had only about $79,000 in cash, it says, and it has concluded that “the vast majority of monies received by the remaining defendants from the sale of their Bre-X shares has either been spent or is unlikely to be traceable.”
Moreover, it’s far from certain that it could win its case. The court notes that the allegations in the case brought by Deloitte has “many features in common” with charges brought against Felderhof by the Ontario Securities Commission (OSC). It brought eight charges against him. The trial began in 1999 and was concluded in 2007 with Felderhof acquitted on all charges.
OSC will not appeal Felderhof acquittal
The court decision notes, “Deloitte has concluded that it will face enormous difficulties in making any meaningful recovery on any judgment obtained in this action and given the outcome of the OSC proceedings, a successful outcome is far from assured.”