Bre-X Minerals Ltd.'s former chief geologist John Felderhof is suing his defunct ex-employer for breach of contract, claiming he is owed a year's severance that wasn't paid after he left the firm in 1997.
Mr. Felderhof was to be paid $90,000 (U.S.) a year in base salary by Bre-X under a three-year contract signed in June, 1995, according to the claim, but he was terminated "without notice and without cause" in May, 1997, after a report said there was no gold in the firm's Busang mining site in Indonesia.
Mr. Felderhof also wants to recover unspecified legal expenses, because the Bre-X bylaws provided for the indemnification of directors and officers, the claim says.
Bre-X is bankrupt, and its remaining assets are under the control of trustee Deloitte & Touche.
Mr. Felderhof's claims against Bre-X are included in a statement of defence he filed in December in response to a $3-billion (Canadian) class-action lawsuit against him, other Bre-X insiders, the estate of Bre-X founder David Walsh, and the company itself.
That massive suit, first filed by Bre-X's Canadian investors in 1997, is slowly winding its way through the courts. An Ontario Superior Court judge set a schedule for the process, which required the delivery of statements of defence in December. The schedule projects that the trial should start about a year from now.
The class-action suit essentially alleges that Bre-X insiders knowingly misled investors about the company for personal gain.
Mr. Felderhof is one of the targets of another massive class-action civil suit under way in the United States, and he's the subject of a continuing insider trading case launched by the Ontario Securities Commission.
In his defence filing for the Canadian class-action suit, Mr. Felderhof says all the mining experts and technical consultants hired by Bre-X expressed complete confidence that the Busang site held large amounts of gold, and they "consistently praised the project."
"To Felderhof's knowledge, none of these independent experts ever expressed any material concern about Busang or the results from the project," the statement says.
None of the firm's legal or financial advisers, the investment analysts who followed the company, the regulators who approved its listings, and the big mining firms that wanted to establish joint ventures with Bre-X ever expressed any concern either, the filing says.
The statement is scathing in its criticism of the March, 1997, report of Strathcona Mineral Services Ltd., which said the Busang site did not have an economically feasible gold deposit and there was evidence of sample tampering.
The Strathcona review was "cursory and careless," the filing says, and the conclusions were drawn before the firm completed a "thorough, accurate, fair or complete investigation" of the property.
After the completion of the "negligently prepared" Strathcona report, which discussed early warning signs of tampering, Mr. Felderhof was "summarily dismissed by Bre-X," the filing says.
In the document, Mr. Felderhof denies, as he has all along, that he had anything to do with tampering of samples from the Busang site. However, "given Strathcona's rush to judgment, how extensive any such tampering might be, remains and will likely remain unknown," the filing says.
Because of Strathcona's careless investigation it may never be known how much gold there is at Busang, or how the salting scheme arose, the statement says.
As for the claim in the class-action suit that Bre-X officers and directors conspired to salt the samples and hide information from investors, that is "vexatious, frivolous and wholly without merit," Mr. Felderhof's defence statement says.
Bre-X investors should have known that mineral exploration is a speculative and risky business, and their losses were caused by failing to exercise reasonable care in investing in Bre-X, the statement adds.