Greed-to-Grief, No. 12

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The body was found deep in the jungles of Indonesia. The hands and feet were surgically removed, yet the conclusion was that this was the body of Michael de Guzman, chief geologist of Bre-X, a gold-mining company where he led the effort that discovered an enormous new gold deposit.

Only problem was that the “discovery” was fraudulent.

As tiny Canada-based Bre-X partnered with established industrial companies to buy into the discovery and then assist with mining the gold, these partners did something we just don’t see enough of: they performed due diligence and tested the mine themselves to see if it would be worth committing their companies and resources to the project.

Gold mining is not a simple business. In the case of the Bre-X mine, it involved “hard-rock” mining, which is different than panning for gold in a stream in that hard-rock mining involves heavy machinery, drilling, and blasting.

Gold bars are not just sitting there underground waiting to be discovered. Gold dust and deposits are embedded in and between the rocks well below the surface. The rocks need to be removed or detonated to get at the gold, then the gold is carefully purified and processed into bullion or bars

Before the partners came in and ruined all the fun, Bre-X investors went into a frenzy over the discovery. The company’s stock went from $0.20 per share to over $200 once the news that the largest gold deposit in history belonged to Bre-X.

The “hero” in the middle of it all was none other than Michael de Guzman. As the company’s chief geologist, this was his find and his moment of glory.

Bre-X’s shares were the star of the stock market for almost three years as investors bid up the price of the company that discovered and now owned a massive amount of gold. All it had to do was mine it. And that’s where it fell apart with the industrial partners.

As the company’s stock price cratered, costing investors billions, and marking the biggest scandal ever to rock the Canadian stock exchange, where was de Guzman?

While the fraud was being uncovered, de Guzman allegedly committed suicide. According to the only witness, de Guzman jumped out of a helicopter and plunged to his death in that Indonesian jungle.

But how did his hands and feet get surgically removed? In a coincidence that did not seem random, a body went missing from a nearby morgue around the same time as the body of de Guzman was purportedly found.

The coroner did not believe the surgically mutilated body was Michael de Guzman and current speculation is that de Guzman is living with one of his four wives that are scattered around the world. If a guy can keep four wives separated and not knowing of each other, faking his suicide should not have been too much for him to handle.

The story does not end there. After his “death,” one of de Guzman’s wives received wire transfers of hundreds of thousands of dollars that could have only come from de Guzman and the illicit $5.0 million he made on stock sales.

To add to the myth, several credible sources have spotted a plastic-surgery altered version of de Guzman running around his home country of the Philippines. One source even said he had lunch with him.

You get the feeling this story still has a ways to go.

 Key Takeaways

• Big announcements are easy. Having the announcement survive scrutiny is hard.

• Let’s hear a round of applause for the industrial companies that were smart enough to do some diligence, unlike the big companies that fell for the falsehoods like Theranos without performing diligence.

• If you are going to stick your neck out for the company like de Guzman did, will the company defend you if you are wrong or make a mistake? Think about it.

Things I think about

One of the most common job interview questions is, “Tell me about yourself.” So, why is it that most candidates are unprepared for this and babble on way too long?

Recommended reading

Zero Fail: The Rise and Fall of the Secret Service
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The Nightingale
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When Genius Failed
The collapse of hedge fund Long-Term Capital Management, and how it almost brought down the global financial system.

Run the Storm
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The Wave
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Interview Success Secrets
My short video course on successful interviewing.

See the full reading list here.