World Of Secrets - The Six Billion Dollar Gold Scam: 7. Blame

Episode Date: April 7, 2025

The hunt to discover who was behind the six billion dollar gold scam begins, and Suzanne brings new information to light on how it was perpetrated. But who was to blame and will anyone be held to account?Please note, this episode contains difficult subject matter, including references to suicide and death.The Six Billion Dollar Gold Scam was first published in May 2024.

This BBC podcast is supported by ads outside the UK. Hi, I'm Su Lin Wong. I'm a journalist at The Economist. And for the past year, I've been investigating how the CEO of a bank in rural Kansas was duped out of $47 million. This wasn't your classic scam. He'd been ensnared by a new global criminal industry, He'd been ensnared by a new global criminal industry, one that's coming for you and me. My new series is called Scam, Inc. To listen and subscribe, just search Economist Podcasts Plus. From the BBC's investigations podcast, World of Secrets, here's the seventh episode of our guest season, the $6 billion gold scam from the BBC World

Service and CBC. Over to Suzanne Wilton. First a warning. The following episode contains difficult subject matter, including references to suicide and death. One of the strange things about the Brix story is the amount of heartache that it caused to so many different people. There were times where I thought there was some kind of Brix curse. I don't believe in the boogeyman and I don't believe in curses as a general matter, but there's something about Breaks that's hard to explain other than hellfire and damnation.

I also don't believe in the boogeyman or curses, but the number of Brex execs, lawyers, expert witnesses, investigators, and even journalists who've worked on this story and had tragedy befall them during or shortly after is quite unbelievable. I can think of four people I personally know who either lost their lives or experienced some kind of unrelated tragedy following their involvement with Brex. Like the investors. We lost everything. My husband was sick for four years.

We worked hard for our money. We probably would have had that extra money to pursue more medical help. There are stories all around here in Alberta and all around Canada of people taking their lives. They were just so confident that it wasn't a scam. This was their lottery ticket for life. The fallout from Briex ruined many lives and inflicted unprecedented damage on the mining industry and financial markets in both Indonesia and Canada. I'm Suzanne Wilton from the BBC World Service and CBC.

This is the $6 billion gold scam. This is the $6 billion gold scam. A story about the lengths people will go to in pursuit of getting rich. This is episode seven. Blame. Graham Farquharson and Henrik Thalenhorst's devastating report hit Briex hard. John Felderhoff, Briex's chief geologist, was fired and the rest of the company execs quit. In May 1997, the Royal Canadian Mounted Police began their investigation into the scam. Briex sought bankruptcy protection and nine class action suits were filed against them. The CEO of Briex, David Walsh, continued to profess his innocence. At first, he insisted

there had been no fraud. But as the evidence mounted, he claimed, like everyone else, that he'd been taken in by the deception. To escape the fallout in Canada, David and his wife, Jeanette Walsh, moved from Calgary to Nassau in the Bahamas. But not long after they arrived, two masked gunmen burst into their home. They tied Walsh up and threatened to shoot him unless he turned over all his money. Was this just a random attack on an aging but clearly rich Canadian couple or something more? An attempt to silence David Walsh? We can't be sure.

But what we do know is the incident ended peacefully. know is the incident ended peacefully. But then, three weeks after that break-in, David Walsh was rushed to hospital. The founder of Briex Minerals is on life support tonight. David Walsh suffered a stroke at his Oceanside Villa outside Nassau Sunday morning, just two days after the Bahamas Supreme Court froze all of his assets, Walsh's family is now trying to decide whether to keep him on life support. David Walsh died on the 4th of June, 1998. His body was left to medical science. There were three men who turned Boussang into the biggest gold discovery in the world. Michael de Guzman, David Walsh, and John Felderhoff. Now only one of them was left alive.

Unsurprisingly, Felderhoff became the main target of all those investor questions. Was he in on the scam? What did he know and when? While rifling through journalist Jennifer Wells-Briech's documents, I came across a Royal Canadian Mounted Police polygraph test that he'd taken. The report unequivocally concludes that John Felderhoff is telling the truth when answering the relevant questions that were asked of him, and it further concludes that John Felderhoff was in no way involved in the tampering or

salting of Boussain core samples. So, John Felderhoff passed a lie detector test. Those are not admissible in court, but certainly may or may not shed some light on what he did or didn't know. or didn't know. Although the Royal Canadian Mounted Police looked into Briex, in 1999 they dropped the investigation, stating there was insufficient evidence.

They went on to say, this was in part because of the international laws protecting witnesses outside of Canada from testifying, they could not be compelled to give evidence. The day before the Royal Canadian Mounted Police dropped their case, the Ontario Securities Commission charged John Felderhoff with violating Ontario security laws. There were four counts of insider trading and four of issuing false press releases, which allegedly exaggerated the amount of gold. No one else from Brex's board of directors or anyone associated with the Busan project

was indicted. Nonetheless, the investors would have their day in court with the last man standing, John Felderhoff. I knew that the case itself would have real risks attached. A national newspaper said that I had become a pariah by agreeing to represent John. After spending 10 days in the Cayman Islands listening to Felderhoff tell his side of the story, Joe Groya, one of Canada's top securities litigation lawyers, decided to take on the

case. I had a couple of what I thought to be non-serious death threats. The case centered around the shares that John Felderhoff sold in 1996 for 84 million and whether or not he knew things about Brex at that time that he should have disclosed to the market. From his home in the tax haven of the Cayman Islands, Felderhoff put in a plea of not guilty to all eight charges. At that time, John Felderhoff didn't believe there had been a scam. There was an interview that was given

where John talked about the possibility there could be as much as 80 million ounces and that got picked up and got reported but that was never in an official press release. It was said that he should have known that the numbers they were reporting were inaccurate. These results were provided to Felderhof and BREX execs by Filipino geologists under the management of Michael Deguzman. The core samples would be sent for testing. They would get results and they would plug them into a computer program called data mining program, overseen by de Guzman, used an algorithm to estimate how much gold there could be based on the drill samples. Contrary to what most people might think, the amount of gold needed in a gold sample

to give a massive valuation is actually incredibly small. We all grow up in this cartoon world where, you know, gold deposits, they're thought to be the size of a grapefruit or the size of a watermelon, and that's not the way it works in real life. For the defense, it was important to make it crystal clear to the judge that it was more than feasible for the tampering to have occurred without Felderhoff's knowledge. With a reputation as a bit of a maverick, Groya decided to use a prop to illustrate how little gold you need

to find in a ton of rock to establish a large deposit. of rock to establish a large deposit. I brought in a cardboard box that had been a refrigerator box, so imagine a three feet by three feet by six feet. And that box happened to be very close to the weight of a ton of rock from Busan. And I then got a package of demerara brown sugar and we sprinkled probably two dozen grains of sugar into little vials. And I actually gave samples out to the reporters at the opening of the case.

And I said to the judge, if you believe that sugar is gold, that's the amount of gold you need to find in this big box to have the fabulously successful gold project that Breaks was going to be. And people were astonished. were astonished. Although the amount of gold required to make the scam work might have been tiny,

those following the trial wanted to know how John Felderhoff, as the chief geologist, could have missed so many other red flags. missed so many other red flags. Hi, I'm Su Lin Wong. I'm a journalist at The Economist, and for the past year, I've been investigating how the CEO of a bank in rural Kansas was duped out of $47 million. This wasn't your classic scam. He'd been ensnared by a new global criminal industry,

one that's coming for you and me. My new series is called Scam, Inc. To listen and subscribe, just search Economist Podcasts Plus. Free Port geologist Dave Potter believed John Felderhoff may have missed so many red flags because his focus was elsewhere. I got to say something about John right there. I think John actually had a real soft spot in his heart for the Dyack people. And I think if John didn't know, he might have been distracted by his vision for helping those people. I'll give him that potential, although I still think he knew.

Although I still think he knew. Chief geologist is described by the guys on site as a seagull because he flies in, he shits on everybody, then he flies out again. I know that because I was one once. Not a seagull, that is, a chief geologist. I suspect John didn't do quite enough shitting. Roger Marjorie Banks also has a theory. I think Felderhof was honest, but I think he was blind to a huge scam going on behind his back.

Perhaps because of the size of it. Maybe the key to it, just the boldness, the sheer audacity of what was being done and the fact that people were a bit naive, a bit innocent and it slipped through the net. On July 31st, 2007, six years after John Felderhoff's trial began, Judge Peter Rinn finally reached his own conclusion. On all charges, he found Felderhoff not guilty. It was devastating news for the people who'd lost their relatives, life savings, and pensions in the Breaks scam. The judge said, I'm satisfied on a balance of probabilities that Felderhoff has proven

that he took all reasonable care. In other words, the judge was saying that John Felderhoff was oblivious to the Salting scam that was being perpetrated. It was a triumph for his lawyer Joe Groya. Had John lost those charges, he would have been sent to jail for many years and would have had to pay millions of dollars in fines. It was a landmark victory. But the trial took its toll on Felderhof.

Suzanne Felderhof, whose father was John Felderhof's cousin, first learnt about the enormity of Briex and her family's connection to it while on holiday. And I was chatting with a Canadian fellow tourist and we exchanged our names and she said, oh my God, what was your last name? Felderhof, that man ruined so many lives. And then I really realized, wow, what is the impact of the Felderhof name on the Canadians? It totally ate him alive, this whole story.

and ate him alive, this whole story. In the years after the court case, Suzanne visited John several times. I found him in all my visits very heavy. He was constantly contemplating and chewing on the story what could have happened. I think that must have weighed very heavily on John's mind, being so overwhelmed about the change of events. The idea that Mike the Gooseman was the one who betrayed him in this way

was so unbelievable to him that he just couldn't wrap his mind around it. There were many people who didn't speak at John Felderhof's trial, but some of them are now willing to talk and tell us how they believe this extraordinary scam was orchestrated, and perhaps more importantly, who was in on it and who wasn't. Michael de Guzman's Indonesian wife, Jeannie, was with him when he was working in Busan. She is still dealing with the repercussions of what happened.

It's a burden. I have to live my life as it is, a modest life. If I look good, I get ridiculed. I have been living my life like that for so many years. Jeannie says she feels it's time to tell the truth about her husband, so she can live out her final years in peace. I use a motorbike so that people can see that I am poor. I can actually live well, but I can't stand being ridiculed.

Oh, that's the result of tricking people. Her husband is tricking people, lying to people. Now a pensioner. She wants those who were swindled to know it was not Deguzman who cheated them out of their investments. That's why I dare to speak. Because the one who invests their money to buy the stocks are all pensioners They hold to grudge against Mike. Maybe they swear on him This is all because of Mike de Guzman that we all went poor

When it is actually not Mike who made them like that Mike was only a field manager for projects It was his subordinates that play the game manager for projects. It was his subordinates that played the game. Mike's subordinates, as Jeannie refers to them, were Briex's crew of Filipino geologists. There was Rudy Vega and Jerry Aloe, who extracted the samples, and geologists Bobby Ramirez and Cesar Puzpos, who logged the samples and oversaw general operations. Australian geologist Mansur Geiger is known as the real Indiana Jones of Borneo. He's been searching for gold in Indonesia for several years. Like many people, he has opinions about John Felderhoff.

It started looking rather odd. They were sending their samples from Busan all the way to Samarinda, to some warehouse, where it would seem to disappear for a while, and then end up in the lab in Balikpapan, which is the same lab I was using. And there I'd find their samples laid out and looked at my rocks and their rocks and said, well, why aren't I getting such good results? I mean, it's very similar geology.

Very early on amongst us real jungle geos of the day, something wasn't smelling all that right. Now people have asked me, did John have anything to do with it? Well, as exploration manager, which VP exploration manager, which I was, if your samples are disappearing into some funny little warehouse along the way for a couple of weeks and not getting to the lab, I'd be all over it. Where on earth are the samples?

Why the delay? So if he didn't know, he should have. Yeah. Yeah. Dave Potter, Freeport's chief geologist, also had questions about Briex's process. They would ship it by river to San Marinda and they would put it in a warehouse. Now the assay lab is right there in San Marinda so it could have went directly to the assay lab is right there in San Marino, so it could have went directly to the assay lab, but it went to the warehouse first. And I kind of think that's where they did the salting.

In the previous episode, we heard how Freeport geologist Andrew Neal had spotted that the gold in the briac samples must have come from a stream. This was something Dave Potter and Mansur Giger were able to corroborate for me. There were local gold panners around. They bought a bit of gold and they worked out this very sophisticated system of salting, what we call the salting of the core

by adding gold into their drill core. They evidently bought alluvial gold and the reason they did it like this, they bought alluvial gold from the rivers around the site where they were at because they wanted to make sure that the gold, you can type gold, it's kind of like a fingerprint, and they wanted to make sure that the gold that they typed was similar to the gold that was in that original deposit. Alluvial gold is the name for the type of gold found in flowing water. Although it would have some of the same properties or fingerprint as gold that might be found in Busan, the scratch marks it gets

from being dragged along the riverbed are also a giveaway that it couldn't have come from the ground. Suzanne Felderhoff had her own piece of the jigsaw involving Cesar Puspos, albeit it was an account someone else had given to her. There was this witness who saw Puspos tampering with these bags. He told me that, that he saw that. Well, he was there and they were working in the jungle and at some point he, there's this river and on, I think on the boat they put these bags in there,

shipped off to the laboratory in San Marinda and just halfway that river somewhere there was this shack and the witness saw that Pus Pus was sort of standing on these bags with something what he described as he had a pen in his hand and made these clicking movements and he saw that something was added to his back. That's what I was told. And he said, what are you doing there? And this person then was startled and stopped what he was doing. It's a rule in mining that at no point during a sample's chain of custody should a bag be

opened or have anything added. While I was in Jakarta, I met with Brix's former finance manager Bernard Lyotte. He says he also witnessed Cesar Puzpo's opening sample bags when he visited the drill corps at night. At the summer in the office, I saw actually a bunch of bags containing samples. And they took me to other store where they keep the drilling core. It's a big warehouse near the river. Were the bags open or closed?

The sample bag. Oh, I saw they are mixing blah blah blah, you know? Organizing mixing the bag and blah blah blah. In the night, not during the day. When asked by a journalist for the Wall Street Journal Not that during the day. When asked by a journalist for The Wall Street Journal in May 1997, Cesar Puzpos said the only reason he opened the bags was to check that none had been broken in transit. He also stated that he had no idea how the samples were spiked. César Puzpos was summoned by subpoena to the Manila headquarters of the Philippine

National Bureau of Investigation. There, he was questioned by four Royal Canadian Mounted Police. The Canadians grilled him for four hours, mainly about John Felderhoff and whether he knew about the salting. Geologist Dave Potter had his own suspicions on who was in on it and who wasn't. It was very well planned out and that was the Philippine side of it. So I think it started with a let's just do it once and then pretty soon they saw how much money was to be made if they kept doing it because remember the stock went from a penny stock to like $286 a

share and a lot of those guys were being paid with stock options. They tried it once and it worked and they went, holy smokes, look at this stock price and we got options at a penny a share. Keep going boys, this is going to work. And then they did, they kept going. But I don't think there was a huge syndicate in the background. They really put a lot of effort into making it believable. And that wasn't John doing that. That was the guys out there on the field, the Goosemen and the people in the camp

who were taking care of handling the Corps and assaulting them. If the Filipino geologists were indeed the ones perpetrating the scam, then geologist Roger Marjorie Banks can understand why they might have been motivated to do what they did. People used quite a lot in Indonesia, geologists from the Philippines. My own company did that too,

because they were technically very competent guys. And also they mixed in well, they blended the local population, they, and I'm sad to say they were cheap. And Australian geologists or Canadian geologists would probably have been doing three weeks on, two weeks off. But the Philippine geologists would be doing more like 12 weeks on and two or three weeks off and didn't cost as much. And of course these guys from the Philippines knew that they were being exploited to some extent. I, not knowing any of the blokes that Bre-X employed,

I suspect that many of them felt they were being a little bit exploited with the wages they were being earned, being offered, and I decided to make some money on the side as best they could. And their best was very, very good indeed. Boy, was that some scam. Cesar Puzbos and the other Filipino geologists all denied salting the Corps,

and none of them were ever charged by the Royal Canadian Mounted Police or the Indonesian authorities in relation to the Briax scam. We've attempted to contact Cesar Puspos and the other Filipino geologists, but have not received any responses. Suzanne Felderhof is sure that whatever was going on, de Guzman would have known. De Guzman was the guy. He did everything. He was everywhere.

He was a control kind of person. So his second right-hand man was Cesar Puspos, but he was very much the second guy. He would follow orders from the Goosemans. So John said it would have been difficult for anybody to do anything without Mike the Gooseman knowing about it. A few years ago, Joe Groya was asked to give a talk at the Prospectors and Developers Association Conference about the lessons of Brix. He decided to take his one-time client, John Felderhoff, along with him.

We were a little worried because he hadn't been back to Canada for a number of years. So we were not broadcasting the fact that he was there. So he came with some of my colleagues and sat at a table in the corner of the lecture hall and I went up and gave the talk and it seemed to be greeted with some skepticism by some of the people but it was certainly welcomed by others. So at the end one of the people in the audience said, so where is Mr. Felderhoff? Where is he hiding out? And I thought probably it was the goodest time as any. And so I said,

well, if you look three tables to your left, there you will see John sitting with some of my colleagues. And that caused a bit of a commotion. Several people went up and talked to him for quite a long time afterwards. I think he was grateful that he had this opportunity to start to try and get himself back into the geological profession. Now, he never really succeeded. John tried for years afterwards to find a job doing what he loved the most, which was exploring for mineral deposits.

But unfortunately, that could never really come to pass. John Felderhoff died in 2019. It was Joe Groya who broke the news to the press. Many lives were ruined by the Brieck scam, families broken, livelihoods lost, and the not guilty verdict was a bitter disappointment. But with the death of John Felderhoff, there was no one else left to blame. Breaks became known as the perfect crime,

a story in which no one faced jail. And that still remains the case some 25 years on. But there are those who believe this story isn't done yet. They say that if you want to know what really happened at Brex, you need to look again at Michael de Guzman and his last helicopter ride. Coming up in the next episode of the $6 billion gold scam, the investigation into the death of Michael de Guzman leads me to the reporter who questions the official narrative. See, the skeptical journalist in me finds that very interesting. Why?

To say, we just want you to accept that Michael is dead because we accept that he's dead. The manner of his death doesn't matter to us. I think that goes against human nature. And discover evidence which seems to go against everything we've been told. The individuals are dead for one to two weeks. The composition doesn't lie. So I think the body was already dead. dead. The six billion dollar gold scam is produced by BBC Scotland productions for the BBC World Service and CBC. I'm Suzanne Wilton. Our lead producer is Kate Bissell. Producers Anna Miles, Mark Rickards. Storyant Jack Kibble-White.

Music and Sound Design by Hannes Brown. Additional Sound Design and Audio Mix by Joel Cox. Executive Editor Heather Kane Darling. At CBC, Veronica Simmons and Willow Smith are senior producers. Chris Oak is executive producer. Cecil Fernandez is executive producer. And Arif Noorani is the director.

At the BBC World Service, Anne Dixie is senior podcast producer. And John Manel is the podcast commissioning editor. Thanks for listening. Hi, I'm Su Lin Wong. I'm a journalist at The Economist, and for the past year I've been investigating how the CEO of a bank in rural Kansas was duped out of $47 million. This wasn't your classic scam. He'd been ensnared by a new global criminal industry, one that's coming for you and me. My new series is called Scam Inc. To listen and subscribe, just search Economist Podcasts Plus.