Investment firms named in Bre-X lawsuit

Investment firms named in Bre-X lawsuit

HOUSTON (Reuter): Investment firms J.P. Morgan & Co, Lehman Brothers Inc and Nesbitt Burns Inc have been named as defendants in a shareholder lawsuit charging Canada's Bre-X Minerals Ltd with mining fraud.

The suit, filed earlier but amended last Friday to include the three firms, charges that shareholders were misled into believing that Bre-X was the owner of a giant gold deposit in Indonesia that ultimately proved to be a sham.

It said the investment companies knew there were questions about the validity of Bre-X's claims, but that they helped hype the company's stock for their financial gain.

J.P. Morgan was hired as a financial advisor to Bre-X in September 1996, while Lehman Brothers issued a number of "influential and extremely positive" reports about the company starting in November of the same year, the suit said.

Nesbitt Burns, based in Canada, was an underwriter of Bre-X public stock offerings and a syndicator of its private stock placements, said the lawsuit, which was filed in federal court in Texarkana, Texas.

Spokesmen for J.P. Morgan and Lehman Brothers, which is a unit of Lehman Brothers Holdings Inc, said they had not seen the lawsuit and could not comment. Nesbitt Burns could not be reached, but the company earlier denied any wrongdoing.

The Texarkana suit does not specific damages sought, but requests classification as a class action to include all shareholders who bought Bre-X stock between Jan. 17, 1994 and May 2, 1997. It combines a number of other shareholder suits filed earlier in the United States and Canada against Bre-X and Bre-X officials.

The lawsuit charges that Bre-X executives deliberately misled investors into thinking that the company's Busang deposit in Indonesia held as much as 200 million ounces of gold.

But, after would-be Busang partner Freeport-McMoRan Copper & Gold Inc of New Orleans issued a statement in March saying it had found "insignificant" deposits at the site, Bre-X's once high- flying stock took a massive tumble.

On May 3, independent consultant Strathcona Mineral Services Ltd, hired by Bre-X, confirmed Freeport-McMoRan's findings and said drilling samples from Busang had been "salted" with gold from elsewhere to give the impression of rich deposits.

Bre-X filed for bankruptcy in May after the Strathcona report was issued.