Bre-X scandal haunts former president even at deathJune 5, 1998
Web posted at: 5:15 a.m. EDT (0915 GMT)
TORONTO (Reuters) - David Walsh, the maverick Canadian mining promoter who died in the Bahamas Thursday, pocketed millions of dollars as a key figure in one of the world's biggest gold frauds and left a legacy of recriminations and lawsuits.
The pot-bellied, chain-smoking former president of Bre-X Minerals Ltd. died at Doctors Hospital in Nassau just four days after a massive stroke left him on life support. He was 52.
"David was overweight, he smoked and he drank. If anybody was a candidate for a heart attack, I would say he was a good one," family friend George Damianos told Reuters from the Bahamas.
Walsh rose from the ashes of personal bankruptcy to become a multimillionaire in 1995 when reports of a major gold find in the Indonesian jungle catapulted Calgary-based Bre-X from an unknown penny stock to a $4 billion company.
Bre-X officials, including Walsh and geologists John Felderhof and Michael de Guzman, touted the company's Busang deposit on Borneo as the gold find of the century. The company's stock soared and major mining companies clamored for the chance to participate in a mine-building project there.
Scheme begins to unravel
But it began to unravel on March 19, 1997 when De Guzman mysteriously plunged to his death from a helicopter en route to a meeting with geologists from Bre-X's potential partner, Freeport-McMoRan Copper and Gold Inc.
New Orleans-based Freeport soon released a report indicating it could find no significant traces of gold at Busang, triggering panicked selling of Bre-X stock and the eventual collapse of the Canadian company.
An independent audit later concluded that Bre-X's data on Busang was falsified on a scale "without precedent in the history of mining anywhere in the world."
The Bre-X fraud wiped out billions of dollars worth of investments and spawned a string of lawsuits by cheated investors.
When asked to explain his role in the fraud, Walsh said he was the innocent victim of a deception perpetrated by other company officials.
"We share the shock and dismay of our shareholders and others that the gold we thought we had at Busang now appears not to be there," Walsh said at the time Bre-X collapsed.
Even in seclusion, Walsh unable to escape scandal
Walsh then retreated into seclusion at his oceanfront mansion near Nassau and a life of comfortable leisure. When Bre-X stock was still riding high, Walsh and other company officials quietly sold shares and stashed more than $25.5 million in foreign bank accounts.
Despite keeping a low-profile in the Bahamas, Walsh and his wife Jeannette could never escape the Bre-X scandal.
The Bahamian Supreme Court on Friday froze the Walshes' assets in the country, estimated at about $21 million, at the request of Bre-X bankruptcy trustee Deloitte & Touche.
The court then put the Walshes on an allowance of $3,000 a week and ordered them to disclose all their assets worldwide.
Walsh and his wife also faced a series of lawsuits filed by furious Bre-X investors in Canada and the United States.
"David had a story to tell and we may not fully hear that story and that's unfortunate," Clint Docken, a Calgary-based lawyer representing about 200 investors suing Bre-X, said the day before Walsh died.
Friends said the growing pressure of the lawsuits weighed upon Walsh.
"He took this whole incident very hard. There was no laughing and joking and running about town. He hoped to clear himself," Damianos said.
Walsh rode a financial roller coaster
Raised in a wealthy suburb of Montreal, Walsh followed his father and grandfather into stockbroking. After dabbling unsuccessfully in oil and gas, Walsh created Bre-X Minerals Ltd. in 1989 and ventured into mining.
By 1992 his exploration efforts had dried up and he and his wife declared bankruptcy, clearing away almost $40,000 in credit card debt.
Almost broke, Walsh scraped together $6,900 to start exploring in Indonesia and persuaded friends to invest $138,000 for a stake in the area now known Busang deep in the jungles of Indonesia's East Kalimantan province.
That gamble paid off handsomely at first. Bre-X's fortunes soared and Walsh became enormously wealthy and a celebrity in the mining world.
But when the fraud was revealed, his world crashed down around him.
By some accounts Walsh believed he would one day clear his name and emerge from the aftermath of Bre-X. "Hey, I'm still a young man. There's lots of time," he told the Toronto Sun newspaper in an interview last week.
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