Thousands of miles and a world of difference separates the jungles of Indonesia and the prairies of St. Paul, but in the 1990s, the two shared a connection in a case that went down in the history books as one of Canada’s biggest frauds.
“Bre-X? I haven’t thought about that in years,” comes a similar refrain from several people asked about the story of the controversial gold-exploration company that made and broke fortunes. But long-time St. Paul residents know it well – and are still full of speculation on who invested, who went from being paper millionaires to cashing their chips out at the right time, and who lost hundreds of thousands as the stock cratered when the supposed gold mine turned out to be a fraud.
While the Hollywood treatment of the Bre-X scandal came out this past week, with Gold starring Matthew McMcConaughey, St. Paul won’t be in the picture. But back in the 1990s, residents were very much in the centre of media attention, as a high concentration of investors came from the town of then-5,200.
“It was very interesting in those days. I had interviews with the New York Times, the Wall Street Journal,” said former mayor John Trefanenko, recalling the days of frenzied glee where St. Paul was touted as home to as many as 200 people who had made a fortune by jumping on the Bre-X bandwagon.
It all began when a local banker, John Kutyn, uncovered the Bre-X stock, with Kutyn not being shy about sharing the hot tip with family and friends. Back then, around 1995, the tiny company traded only on the tiny Alberta Stock Exchange for about $2 CDN; more local people bought in when Guy Drouin, a broker and also owner of this newspaper at the time, started recommending the stock.
“Many put the money in and took it out a few days later,” Trefanenko recalled, saying he knew of someone that put in $7,000 and cashed out shortly after, doubling the investment in the process, while recalling another business person made enough money to buy a new truck, costing about $40,000.
In an episode of CBC’s The National that aired on March 11, 1996, reporter Kelly Crowe interviewed people on the streets of St. Paul, with more than one person saying they knew someone or other that had made money or struck it rich, with one lady claiming to know five millionaires. Crowe described the heady rush as gold fever in the streets of St. Paul, and dubbed investors’ success as a “rags to riches story.”
The penny stock soared, rising from less than $2 CDN to highs of $286 CDN, at one point. ‘
But in 1997, the visions of gold were ground into dust. Things began unraveling when Bre-X geologist Mike de Guzman mysteriously plunged to his death from a helicopter over the Borneo jungle. Shortly after, the stock tumbled when the company announced its gold reserves might have been overstated.
An April 1997 issue of the St. Paul Journal describes it as such: “Like vultures hovering over an impending meal, media from around the world descended on St. Paul last Wednesday and Thursday, in search of tales of woe concerning the battered stock, Bre-X.”
Not everyone lost faith in the stock, however.
“There’s nothing wrong with Bre-X, mark my words,” local businessman Jack Kindermann was quoted as saying in The Wall Street Journal after Guzman’s death.
When reached in his home in St. Paul on Friday, Kindermann said he got in on the ground floor, after hearing from Kutyn’s wife and friends who’d had success with Bre-X, and seen for himself its meteoric rise.
He bought the stock at just above $80, and for a while, he and his friends were on top of the world, he said. The Journal took a picture of a group of five or six of these Bre-X millionaires, on top of the UFO landing pad. For a time, “money flew like crazy,” he said.
“I had quite a few – I’m not going to tell you how much,” he said, adding he made more than six figures on the stock. He was confident that it was a good investment, though, having seen for himself a stack of geologist reports attesting to the value of the mine.
When Guzman died, he said he thought, ‘Oh my God, what should I do?” But the stock didn’t drop – at least not at first, he said, adding, “It still went up; it still went up.’
Two months after Guzman’s death, the hoax truly began to disintegrate, with an independent report concluding the gold find was a fraud; the discovered samples had merely been “salted” with gold dust.
Businessman Lorne Buryn was one of the people that invested in the stock, but said he never made the riches that people still seem to believe he did.
“I basically got my money back,” he said, adding like Trefanenko, he was wary of the promises of the stock and got out well before it crashed, thinking at the time – ‘If it’s too good to be true, it’s probably not true.’
But he remembers the excitement before the crash, saying, “I remember it being a big thing; everyone was trying to get in on the ground floor and then everyone was trying to get out – but there was nothing to get out of.”
Others’ lives were radically altered by the rise and crash of Bre-X.
Kutyn reportedly sold his Bre-X holdings before the stock crash, with reports saying the banker moved to New Zealand afterwards. Others, like Kindermann, lost out, with him telling reporters at the time that he lost half a million dollars in the venture; now, he estimates his loss as closer to a million.
“I would be on the top of the world,” he said. “Now I got nothing.”
Bre-X chief executive and founder David Walsh died in the Bahamas of a brain aneurysm after the fraud was exposed. The company’s senior geologist John Felderhof, the only person ever to be charged in the fiasco, underwent a seven-year trial only to be found not guilty of insider trading and misleading investors.
It was a deeply unsatisfying end for defrauded investors that would spend another seven years chasing class-action lawsuits, the last of which were dismissed in 2014.
News of a movie that was loosely based on the Bre-X scandal piqued people’s interest, with Trefanenko and Kindermann among those saying they’d be interested to see the Hollywood treatment of the story.
After his initial shock of losing life savings to the scandal, Kindermann seems philosophical about it all now.
“I would go see the movie, see what they have to say,” he said, adding it’s been too many years to let it affect him. “In all my days I worked hard . . . I had a helluva life, I had two houses in Arizona, two big cars in Arizona, boats, seven different planes. Now I realize – what’s money?”
“As long as you got your health, who gives a darn?”
While some may go see Gold as dispassionate observers, others like Kindermann will watch, seeing it as one version of yet another incredible story in St. Paul’s history books.
