Bre-X and Stornoway

Global ran a documentary about Bre-X last night. The Canadian version of the Enron scandal tied to both Mulroney and Bush. I wonder why Bush always seems to be tied to a corporate scandal: http://geology.about.com/cs/mineralogy/a/aa042097.htm

Bre-X was a rags to riches Canadian mining company listed on the Calgary stock exchange that claimed to strike gold in Indonesia. Outsourcing the mining industry. Great idea. The news of the gold rush created quite a frenzy: http://archives.cbc.ca/economy_business/business/topics/1211/

But if you click on the third video Bre-X bubble busts you will see the dream came to a crashing halt. They lied about the gold they found and all the hype was fake. However, this was common on the Vancouver Stock Exchange.

A fake company would create a lot of hype, investors would invest and even though the company didn’t exist, the stock would rise rapidly because of the hot tip. Then the crooks would sell and disappear to Florida having made a fortune right before the stock crashes.

Not only were they not persecuted, they would come back in 6 months and do it all over again. You would think that investors wouldn’t want to touch them with a ten foot pole. Not so. Groups formed plotting stocks trying to find out which ones were the fake hype companies so they could invest in them and pull out right before it crashed. I kid you not. I saw them.

The New York Times remembers the Vancouver Stock Exchange legacy: http://query.nytimes.com/gst/fullpage.html?res=9D02E1DE1030F935A35756C0A961958260
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Do you really think those guys went honest when they were swallowed up by the Toronto Stock Exchange? The Bre-X scandal was in the Calgary exchange. Enron was in the US. The NY Times is right, Canada does need better laws against corporate criminals. The US has better laws but their enforcement of those laws is very selective.

Especially when you see Thomas E. White, the former Enron book cooker promoted to become the Pentagon’s official book cooker: http://www.scoop.co.nz/stories/HL0210/S00052.htm