In 1995, Bre-X Minerals burst from the ranks of Canada’s junior mining companies to become the toast of markets across North America. It was considered a “can’t miss” by gold analysts at many of the top brokerage firms on the strength of reports that it had discovered, at Busang, Indonesia, the biggest gold find the world had ever seen. By 1997, it was revealed that the Busang properties contained insignificant amounts of gold. An independent consultant hired to investigate various discrepancies reported that the core samples had been tampered with, resulting in the falsification of assay values (assaying is the process of subjecting the samples to specified testing procedures to determine what quantity of a given mineral is present). Billions of dollars in stock market value evaporated; shares that traded at about $286 fell to pennies and were delisted, leaving many people with huge losses. 

The debacle spawned an array of police investigations, regulatory probes, and class action lawsuits in Canada and Texas. Twenty years later, the lawsuits are over with investors recouping next to nothing. The only person ever charged in relation to Bre-X was John Felderhof, the chief geologist of Bre-X. He was charged with eight violations of the Ontario Securities Act, including four based on insider trading. The Ontario Securities Commission (OSC) alleged that Felderhof sold $84 million of Bre-X stock in 1996 while having information about the company that had not been publicly disclosed. After a lengthy and controversial trial, he was acquitted. The OSC was unable to prove beyond a reasonable doubt that Felderhof had knowledge of the fraud at the time he sold the shares.

After the dismissal of the remaining class actions, lawyer Clint Docken, who represented some of the investors, stated, “It’s a sad day …. We have arguably Canada’s largest (ever) fraud and no accountability. There’s no criminal accountability, there’s no regulatory accountability and (now) there doesn’t appear to be any civil liability.” What factors do you think contributed to the lack of accountability?