The Ontario Securities Commission revived the long-delayed Bre-X Minerals Ltd. trial with a new legal team and high-tech courtroom equipment in an effort to counter mounting criticism about the slow pace of securities justice in Canada.
When the case resumed Monday in Ontario Superior Court, after a 3½-year adjournment, there was no trace of the furious sparring matches and legal challenges that had all but paralyzed prosecution of the infamous gold mining swindle case.
The company's geologist, John Felderhof, has been charged with selling $84-million worth of Bre-X shares in 1996 while in possession of negative inside information.
In 1997 more than $5-billion of shareholder wealth at Bre-X was wiped out when the company revealed that its claims to the world's largest gold mining deposit in the Indonesian jungle were false. Mr. Felderhof has pled not guilty to the charges.
Lead by a new lawyer, courtly securities veteran Frank Marrocco, the OSC Monday sought to set a tone of civility and efficiency in a trial that had previously disintegrated into name-calling.
Whereas the OSC's former prosecutor Jay Nastor frequently quarrelled with Mr. Felderhof's combative lawyer Joseph Groia, Mr. Marrocco calmly debated legal points and gently referred to Mr. Groia as “my friend.”
To help speed up a case that is bogged down by more than 300 boxes of evidence and data, the OSC has for the first time installed computers in a courtroom and transferred the case materials into digital format. The system allows a team of OSC technicians attending the session to quickly call up evidence on computer screens that are available for the judge, lawyers and spectators.
“We have to prosecute this case in an orderly and efficient way to demonstrate that cases can start and finish within a reasonable time frame,” Mr. Marrocco said during a break in the proceedings.
Despite the OSC's best intentions, Mr. Felderhof's lawyer, Mr. Groia, estimated the case, which has already eaten up 70 trial days for only two witnesses, would drag on until the end of next year.
“This case has become strange at so many levels,” Mr. Groia said during a break. “It is an old case now and there has been so much heartache.”
Two of Bre-X's former executives, geologist Michael de Guzman and company founder David Walsh have died.
Mr. Groia has argued that the OSC is unfairly seeking to hold Mr. Felderhof solely responsible for a devastating corporate scandal that had many authors.
But even the case against Mr. Felderhof has proceeded at a sluggish pace.
Only two witnesses had given testimony before the case was adjourned in early 2001 by the OSC. The OSC sought the break to launch an unsuccessful legal battle to have the case's judge, Mr. Justice Peter Hryn, removed for allegedly showing bias in favour of Mr. Groia.
Seven years after the Bre-X fraud was revealed, it appears the main legacy of the Indonesian gold play is a motherlode of legal fees. An army of lawyers has been retained over the years to represent companies and experts ensnared in case.
Although hundreds of documents and dozens of witnesses will be examined in the trial, the mystery of how so many respected financial analysts, geologists, mining executives and bankers were duped by the Bre-X discovery will likely never be solved.
The main challenge is the death of two of the company's key players, Mr. de Guzman and Mr. Walsh. The other problem is that witnesses memories have faded in the seven years since the fraud was revealed.
Monday, Mr. Groia attempted to question Bre-X's chief financial officer Rolando Francisco about the many engineering, banking and geological firms that had visited Bre-X's Busang mining site and authored glowing reports about the gold deposit.
To help jog Mr. Francisco's memory about the various consultants and advisers, Mr. Groia displayed letters and memos on courtroom computer screens. But on many occasions, the witness could not recall names, findings and meetings, saying “I don't remember” or “I cannot say one way or another.”
When at one point Mr. Francisco could not recall the name of a mining executive and referred Mr. Groia to testimony he had given at the trial in 2001. “It will be in my earlier testimony, I can't recall the name now.”
The case resumes Tuesday and is expected to continue until Thursday. Further court dates have been set for later this month and throughout next year.
© The Globe and Mail
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