According to the official version of events, Bre-X's exploration manager threw himself from an Alouette helicopter on March 19, 1997, while it was cruising 800 feet above the Indonesian jungle. With his body wracked by hepatitis B and his conscience tortured by his many lies, he could take it no more. He left behind a few hastily scrawled suicide notes, a Rolex watch and a slew of unanswered questions.
Days later, it was revealed that de Guzman had helped carry out the biggest mining fraud in modern history. Drill results from Calgary-based Bre-X's property in Busang, Indonesia, had been faked to indicate a massive GOLD find. When others tried to confirm the deposit, they found nothing. The stock, which surged from pennies to more than $280 a share, plunged. In all, investors were duped out of $6 billion.
Even back then, however, there were doubts about de Guzman's apparent suicide. To fully understand why, it helps to understand the man himself. Chubby little Mike de Guzman, the womanizing polygamist. The veteran Filipino geologist who couldn't get colleagues to take his wild theories seriously until he was credited with perhaps the greatest find of all time. The man who drove his staff mercilessly in pursuit of glory and wealth, and to whom deception came as naturally as his easy smile.
Despite his diminutive stature, de Guzman was quite a basketball player in his youth. He excelled at high school hoops in Manila and dreamed of playing on the Philippines' national team, until one night he was attacked by a gang of thugs who beat him and shattered his knee. For the rest of his life, he walked with an awkward limp.
Though he could no longer star on the basketball court, de Guzman never lost his love of the spotlight. Associates described him as a gregarious companion who liked to party hard and sing karaoke. He had a wife and six children in the Philippines. But his career demanded constant travel to distant mining outposts, giving him plenty of opportunity to indulge his affection for the opposite sex. Over the years, he married three other women around Asia, and managed to keep them all secret from each other.
For de Guzman, Busang was the pinnacle of an otherwise unremarkable career, much of it spent chasing gold deposits along fault lines and spent volcanoes in Southeast Asia with his buddy John Felderhof, a Dutch-born prospector who would become chief geologist for Bre-X. Busang had been sporadically explored in the 1980s, and in 1989 an Australian company called Montague gave up on the property and walked away. Bre-X stepped in and, in 1993, made its first claim to find significant amounts of gold. By 1997, the company said it had found up to 200 million ounces - almost four times the size of the world's biggest known deposit.
The Busang discovery made the Bre-X team rock stars in the mining world. In early March of 1997, de Guzman made a presentation to analysts and industry execs at the annual Prospectors and Developers Association convention at Toronto's posh Royal York Hotel. He was, by now, a multi-millionaire thanks to the surging value of his stock options, and this convention cemented his celebrity status. He cracked jokes, revelled in his new fame, and spent his free time at a Toronto strip club, regaling the dancers with tales of his wealth and bravado. What no one knew was that half a world away, geologists with Bre-X's partner, Freeport-McMoRan Copper & Gold, had discovered the secret of Busang. They called de Guzman and told him to get back to Indonesia right away.
Within days, de Guzman was dead. Or so we were told.
Associates say de Guzman didn't seem much like a man about to end it all. He joked and chatted with his Filipino mates on the long flight back to Asia. He made a stop in Singapore for a medical checkup to monitor his ongoing struggle with malaria and hepatitis. On March 18, he checked in to a hotel in Balikpapan with Bre-X metallurgist Rudy Vega, and wrote a memo to Felderhof, detailing an upcoming meeting with Indonesia's Ministry of Mines. He explained that financial data and a corporate history were being prepared. He mentioned that his doctors recommended seeing a specialist for his liver, and finished by saying that he'd be back in Jakarta at the end of the month and would update him later.
After faxing the memo to Felderhof, he and Vega went out boozing at a nearby karaoke bar, where de Guzman belted out one of his favourite tunes, Frank Sinatra's My Way, before heading back to the hotel. The two boarded the helicopter the next day, still a little hung over. Vega got off in Samarinda. De Guzman continued on toward Busang, but he never arrived.
The Bre-X hoax was revealed just days later, and it quickly became clear that some of the world's most sophisticated analysts and executives had been sucked in by a deception so simple, a child could have conceived it. After drilling core samples, the rock is crushed so it can be tested for mineral content. At some point between drilling and testing, someone got into Bre-X's samples and literally sprinkled loose gold into the crushed rock. It appears the gold was purchased from local Dayak tribesmen who panned in the nearby rivers.
Perhaps that's why it took so long to discover. No one thought for a minute that anybody would try something so brazen on such a massive scale. But when Freeport, Bre-X's operating partner, hand-picked by the Indonesia government, drilled holes right next to Bre-X's they came up empty. As the investigation proceeded, all roads led back to de Guzman, and questions swirled around his apparent death. Had he faked the whole thing to escape punishment when it became clear his lies were about to be uncovered? Or was he the scapegoat, murdered so that the living could blame it all on the dead guy?
Circumstances surrounding de Guzman's plunge only fuelled the rumours. The body wasn't recovered from a jungle swamp for four days, by which time it was already severely decomposed and partially eaten by wild boars. It was hastily examined and cremated without confirmation of dental records. Fingerprint evidence was inconclusive. DNA tests were never done. Some said he was carrying a bag with US$300,000 cash on the day he disappeared. But no one can say for sure; the money was never found.
For more than eight years, that was all we knew about the mysterious death of Michael de Guzman. Lots of theories, deep doubts, and nothing more. But a couple of weeks ago, the ghost of Bre-X reappeared. One of de Guzman's widows said she received a $25,000 money order from her supposedly dead husband earlier this year. She told a reporter from Malaysia's The Straits Times that the money arrived from a Citibank branch in Brazil. "I never believed he was dead," she said. And given the surreal nature of the whole sordid Bre-X affair, her belief is hard to dismiss. With a fortune of at least $5 million in illicit Bre-X stock profits, de Guzman could be living in anonymous luxury in some tropical hideaway. But Genie de Guzman never produced any proof of the money transfer and has since gone silent, leaving us to ponder the same old questions all over again.
Naturally, any suggestion de Guzman might be alive stirs up intense interest among those who watched the Bre-X disaster unfold. Thousands of people, most of them Canadians and Americans, lost a fortune when the truth about Busang was revealed. But the humiliation of Bre-X goes deeper than that.
Canada has long carried a reputation as a haven for swindlers and stock promoters. In 1989, Forbes magazine labelled the Vancouver Stock Exchange the "scam capital of the world." We've never been able to shake that image, and Bre-X still stands as Exhibit A for those who consider this country an investment backwater of crooks, liars and ineffectual cops. That, more than anything, is what sustains our fascination with de Guzman: the nagging realization that no one has ever really been brought to justice for Bre-X. And, in all likelihood, no one ever will be.
The RCMP abandoned its criminal investigation in 1999, after spending almost two years reviewing more than 600,000 documents related to the case. The Mounties said there wasn't enough evidence to hope for a conviction. The six-year statute of limitations for securities violations and insider trading has also elapsed, so even civil charges against de Guzman are out of the question.
David Walsh, the rotund, chain-smoking founder of Bre-X, made close to $35 million selling stock. He withdrew to the Bahamas when his company began to unravel, and denied any part in the fraud. In 1998, he died after suffering a brain aneurysm. Whatever he knew about the Busang heist, he took to the grave.
Felderhof, the chief geologist who made $84 million selling Bre-X stock, is the only person ever to face charges. In 1999, the Ontario Securities Commission charged him with eight counts of insider trading and making false statements. He has denied any role in the fraud, and for a long time continued to insist there was gold in Busang. The case was bogged down for years in procedural wrangling and only recently re-started. Felderhof could face a fine of up to $8 million, and several years in prison, if he is found guilty, but because the charges aren't criminal, he can't be extradited from his Cayman Islands home. He's free to spend the rest of his days in his Caribbean paradise, regardless of the trial's outcome.
Even more depressing is the knowledge that it could all happen again. The scandal exposed weaknesses in the system that have never been fixed. Canada's police forces still lack the resources to track and prosecute sprawling frauds, and the various provincial market regulators remain uncoordinated, underfunded and undermanned.
Eight years have passed, and still the memory of Bre-X provokes shame and anger in this country. It made fools of us all: the analysts and journalists who breathlessly reported the faked results, the executives who clamoured to partner with Bre-X, the investors who got sucked in to the hype, and the authorities who were seemingly powerless to do anything about it.
Is Michael de Guzman dead or alive? Our abiding interest gives the answer. He is alive and well, living the high life somewhere ... in our minds at least, if not in reality.
He always will be.
Maclean's June 13, 2005
Author STEVE MAICH