Canada's Bre-X says dead geologist ordered fraud

Canada's Bre-X says dead geologist ordered fraud

TORONTO (Reuter): Investigators hired by Canada's Bre-X Minerals Ltd have said its dead chief geologist, Michael de Guzman, orchestrated the world's biggest gold swindle deep in the jungles of Indonesia.

The investigators' report released Tuesday said de Guzman, who died of an apparent suicide shortly before the fraud was exposed, led a small group of Bre-X employees who salted samples from the Busang site over a four-year period.

Bre-X hired Forensic Investigative Associates Inc (FIA) to probe the mining scandal last spring when the C$6 billion stock market darling was reduced to worthless paper after Busang was found to be a scam.

Bre-X released a three-page summary of the agency's 430-page interim report Tuesday.

The FIA report absolved Chief Executive Officer David Walsh and several other key players in the Busang saga of any wrongdoing.

But it said exploration chief John Felderhof's role in the affair "is still an open question".

FIA said it had "reasonable and probable grounds" to believe that de Guzman and Bre-X employee Cesar Puspos conspired with others "to defraud Bre-X and the public in Canada and elsewhere through the deceitful salting scheme".

It said the tampering began in December 1993 to prevent the Busang site from being closed after initial assay tests indicated there was no gold.

"We believe Michael de Guzman, who may or not have been at Busang at the time, instructed Cesar Puspos to salt samples for the two subsequent holes," the report said.

FIA said the salting continued until early March 1997 and eventually drew in other Bre-X employees at the site.

On March 19, de Guzman fell out of a helicopter as he returned to the project to meet with geologists from Bre-X partner Freeport-McMoRan Copper & Gold Inc.

"We believe he killed himself when faced with the prospect of having to be exposed for salting Bre-X samples," FIA said.

Dozens of lawyers in Canada and the United States have launched class-action suits against Bre-X and its officials on behalf of angry shareholders.

A lawyer representing about 100 Canadian investors in Bre-X, said Tuesday he expected to file the latest of several multi- million-dollar lawsuits against the company and its management with an Alberta court yesterday.

FIA investigators said they found no evidence that Walsh, his wife or other senior officials were involved or had any knowledge of the tampering in Indonesia.

Of Bre-X's former exploration chief, FIA said "the issue of John Felderhof's participation or knowledge is still an open question and judgment on him must be reserved until the appropriate additional investigation has been completed".

Felderhof, who was fired by Bre-X in the wake of the scandal and now lives in the Cayman Islands, has denied any knowledge of tampering at Busang.

The top investigator in the case for the Royal Canadian Mounted Police, which began a worldwide investigation into the scandal in May, said he was unable to comment on the FIA report until yesterday.

"I just want to go through it a little bit more...there won't be anything done tonight on it," Insp. Peter Macauley said.