End in sight for gold fraud case

Nearly a decade after the multi-billion-dollar Bre-X Minerals gold fraud, the trial of the man accused of lying about the company's Indonesian gold deposit is finally about to wrap up.

John Felderhof, formerly the Calgary firm's chief geologist, is accused of selling C$84 million ($120.3 million) of Bre-X stock in 1996, months before the company's Busang gold deposit was found to be worthless.

Lawyers for the Ontario Securities Commission (OSC), Canada's largest regulator, are expected to wrap up their final submissions by Saturday (NZ time).

Bre-X, now defunct, said it had made a huge gold find in Indonesia in the early 1990s. But the deposit was disclosed as a hoax in 1997 when independent analysis showed ore samples had been "salted" with gold dust and fragments shaved off jewellery.

Shares in the C$6 billion firm, which had soared from penny-stock status to more than C$280 in the frenzy to buy into such a huge gold find, collapsed to nothing, costing thousands of investors their savings.

The Felderhof trial has been winding its way through courts since 1999.

Felderhof has pleaded not guilty to eight charges of insider trading and misleading investors.

He has not been present for the trial since his surprise appearance in March last year and is believed to be living in the Cayman Islands.

His is the only prosecution brought in the Bre-X affair, a fact that has prompted some to hold the case up as an example of ineffectual Canadian market enforcement.

"The losers out of these are always the Canadian investor. Bre-X is just another example," said forensic accountant Al Rosen.

Complicating matters were the deaths of two of the main players shortly after the fraud was uncovered.

The company's founder David Walsh died of a brain aneurysm in 1998 and geologist Michael de Guzman is believed to have thrown himself from a helicopter over Indonesia's jungle in 1997.

However, rumours have persisted that De Guzman is alive, including news reports last year claiming he was living in Brazil.

If convicted, Felderhof faces up to two years' imprisonment for each count, plus additional fines related to any gains from illegal trading.

Justice Peter Hryn is expected to take a few months to make his decision.

- REUTERS