North of 60 Mining News - The mining newspaper for Alaska and Canada's North

The world's largest mining hoax fades for long periods, without ever disappearing completely.

Now the insider trading case against John Felderhof, former chief geologist of Bre-X Minerals, is back before the Ontario Superior Court, seven years after the scam was exposed and 31 months after it was adjourned amid deep acrimony between rival attorneys.

Felderhof has been charged with unloading Bre-X shares worth C$84 million in 1996 based on information not disclosed to investors who were immersed in a share-buying frenzy, drawn by claims of a possible 200 million ounce gold find (worth US$90 million these days) in Indonesia.

If convicted, Felderhof faces a maximum two-year sentence and a C$150 million fine.

Calgary-based Bre-X, whose shares peaked at C$201.75 in mid-1996, collapsed in 1997 after independent samples taken from the Busang mine in the Indonesian jungle showed that its much-touted gold find was a swindle.

Battle over development rights

At the time, Bre-X was immersed in a battle with Toronto-based Barrick Gold over rights from the Indonesian government to develop Busang.

Since resuming the trial in December, the Ontario court has heard that Barrick, which wanted a 75 percent stake, "threatened and coerced" Bre-X during negotiations on a possible joint venture.

Felderhof's defense attorney Joseph Groia said Barrick suggested to Bre-X during the talks that the junior company might have trouble getting Indonesian approval without Barrick as a partner.

Groia suggested to Rolando Francisco, the former chief financial officer of Bre-X, that the terms Barrick was offering got progressively worse as the talks advanced.

He said in a letter to then-Chief Executive Officer David Walsh, who died of a stroke in mid-1998, that Barrick Chairman Peter Munk was close to pulling out of the proposed joint venture.

Felderhof anxious to salvage reputation

Groia has told the Toronto Sun that Felderhof is anxious to try and salvage his reputation.

He said Felderhof "feels he has not done anything wrong from a legal standpoint … I think he would say that he, like so many other people, regrets very much not figuring out earlier there were problems in the process."

Millions of investors, many of them in the United States, feel differently.

From holders of shares in a company that was once valued at C$5 billion, they suddenly saw their paper fortunes go up in smoke, although many had long since sold their shares and become multi-millionaires.

Those who were left behind wanted Felderhof's scalp, but the Royal Canadian Mounted Police, the U.S. Securities and Exchange Commission and the FBI all passed up the chance to prosecute.

Fewer witnesses, computer access

That left the Ontario Securities Commission, often accused of using a feather-duster to fight fraud, to take up the case, which it did by filing eight criminal charges of insider trading and issuing misleading press releases against Felderhof.

The initial 70 days of proceedings were notable mostly for clashes between Groia and commission prosecutor Jay Naster, allowing time for only two witnesses to take the stand.

The commission has since brought in a respected Toronto attorney Frank Marrocco as its lead lawyer for the remainder of the trial, after both sides had been ordered by the Ontario Court of Appeal to get back to business and act like professionals.

The securities regulator now plans to call fewer witnesses in the hope that the tangled case can be unraveled within three months.

Computers have also been installed to speed up proceedings by giving the judge, attorneys and spectators quick access to more than 300 boxes of evidence and data.

Even so, Groia is arguing that the commission is unfairly trying to pin all of the Bre-X blame on Felderhof, when Walsh and former Bre-X geologist Michael de Guzman are both dead. In addition, Francisco has already struggled with a fading memory, telling the court he was unable to recall names, findings and meetings - a problem many observers think will reduce the chances of justice being served.