[Robert Long]: It was one of the biggest crimes committed in the century.
[SPEAKER_10]: A crooked cop pulls off a bank job worth over $10 million.
[Kevin Stevens]: He was talented, well-organized, and incredibly intelligent. He committed the perfect crime, then mocked authorities.
[SPEAKER_10]: It's hard to describe the arrogance. He just figured he was untouchable. Find out how he did it, next on Masterminds.
[Kevin Stevens]: Nobody should die that way. I've never seen anything that horrific. One of the duties of a pathologist is to determine the cause of death.
[SPEAKER_10]: Medford, Massachusetts. In the early 80s, this quiet suburb of Boston was booming.
[William Lisano]: People had jobs, people had money, people were spending money, people were making money.
[Kevin Stevens]: There was a lot of money around, and there was a lot of money in the bank.
[SPEAKER_10]: And the richest bank in Medford was Depositors Trust. Its security system was state-of-the-art.
[Kevin Stevens]: The alarm is wired into both the alarm company and the police station. The vault has 18 inches of reinforced concrete.
[SPEAKER_10]: There were massive time-locked steel doors. Inside was a safe and a thousand double-key deposit boxes. The vault seemed impregnable. But on Memorial Day weekend, 1980, the unthinkable happened. Depositors' Trust became the scene of the largest bank burglary in New England's history.
[William Lisano]: Come that Tuesday morning, the bank opened, and they opened up and said, oh my God, what happened here?
[SPEAKER_10]: 10 million in cash and jewels was gone. 1,000 armor-plated deposit boxes had been smashed open. The highly sophisticated silent alarm hadn't gone off. And the reinforced concrete ceiling had a hole blown through it.
[William Lisano]: It was incredibly bizarre. This is the type of job you see in Hollywood. That's the type of crime this was.
[Dave Burns]: The FBI was immediately notified and had jurisdiction over the crime scene. They did an extensive investigation.
[SPEAKER_10]: There were no witnesses, no fingerprints, and no burglary tools.
[Kevin Stevens]: Well, there was no evidence because they had been so careful about covering their tracks. They had made sure that anything that went into the bank came out with them. In that sense, it was the perfect crime. It's an immediate big story. And it's not just a big story at the Medford level. It's a big story at the state level and at the federal level.
[Dave Burns]: The question then arose as to who were the suspects and who could have possibly perpetrated a job of this magnitude, but there was really no prime suspects at that point, other than the fact that it had to be a bunch of professionals.
[SPEAKER_10]: The gang was led by a professional, a professional police officer, Captain Jerry Clemente, a career cop obsessed with money and power, had pulled off a multi-million dollar heist. The question is, how did he do it? Police Captain Jerry Clemente is the mastermind behind a $10 million heist at the Medford, Massachusetts Depositors Trust. The burglary is the climax of years of corruption that started with his first night on the force when he was partnered with a veteran cop named Crusher.
[Kevin Stevens]: They were going through Medford and they saw this guy running down the street holding a stolen lawn chair. To Jerry's surprise, Crusher knows the thief. He turned out to be another cop. Guy picks up the lawn chair, goes away. Crusher says to Jerry, two things, Jerry. Number one, if you see a cop with a television, a piece of furniture, anything at all, mind your own business. Whatever he's doing is his business. Number two, don't play high and mighty. The lesson he learned was corruption was accepted. It was easy to move beyond that almost imperceptibly to a point where you were doing wholesale corrupt activities.
[SPEAKER_10]: Jerry quickly discovers he has a talent for planning and executing burglaries. He furnishes his entire house with stolen goods. But he's also a brave cop. Early in his career, Clemente is awarded a Medal of Valor for his role in the takedown of an armed gangster.
[William Lisano]: He had a good reputation in law enforcement circles. You know, he was a good guy, solid guy, you know, a go-to guy.
[SPEAKER_10]: But his double life as criminal and crime fighter soon spills over into his personal affairs.
[Kevin Stevens]: Here's a married man with a family living, you know, a happily married life in a community on the surface, who at the same time is having a clandestine sexual affair. So it certainly must have been part of Jerry's makeup to want to lead a double life.
[SPEAKER_10]: As Clemente moves up through the ranks of law enforcement, he's drawn to more ambitious crimes. He partners with Sergeant Tom Doherty.
[Robert Long]: Tom Doherty was always a rogue. He was arrogant, out of control, and basically abused his badge.
[SPEAKER_10]: from probably the first day you wore it. In 1978, Clemente and Doherty pulled their first big job. The target?
[Robert Long]: The police department. They would steal the police promotional exam before it was given, make copies of it, sell it for $5,000 to somebody who wanted to be a police chief someplace. They manipulated and controlled who they wanted in command positions in the city and town police departments. They were very powerful back at that time, very powerful. And Jerry Clemente was at the top of it.
[SPEAKER_10]: Then in 1980, Clemente and Doherty see an opportunity to become multi-millionaires. They decide to hit depositors' trust.
[Kevin Stevens]: They both knew in the back of their minds that this was the big score. This was, of all the planned criminal activities that they were involved in, this was the one that was going to set them up for life. Because Tommy had his own safety deposit box in the bank, he was able to go in and case the place. While he was in there, he mentally paced off the dimensions of the vault, noted where the safes were, where the deposit boxes were.
[SPEAKER_10]: Based on this information, Clemente knows he needs a specialized team to pull off the job. He recruits fellow crooked cop Joe Banks and a gangster known as Brother O'Leary.
[Robert Long]: They're going to have to bypass the alarm, so they need an alarm guy, and that was Bucky Barrett.
[Dave Burns]: Bucky Barrett was, by all accounts, an expert at alarms and was, by all accounts, a professional burglar.
[Kevin Stevens]: The alarm was a major obstacle that the gang had to get over because it was wired in to both the Medford police station and to the alarm company. And it was a silent alarm. So if you triggered it at the bank, you wouldn't know that it had gone off.
[SPEAKER_10]: Bucky realizes he'll have to bypass the alarm using sophisticated electronics. He assembles a device to block the outgoing signal. For two months, Clemente and Bucky Barrett return to the bank each night to test every wire.
[Kevin Stevens]: He had to test each wire individually to figure out which was the alarm wire so he could set up the bypass box and disable the alarm. Jerry also makes reconnaissance patrols.
[William Lisano]: They made dry runs, staked out the bank, much the way police officers would stake out an alleged scene of a crime. I mean, they staked out their scene of the crime.
[SPEAKER_10]: Confident it's a go, Clemente now sets a date for the heist, the Memorial Day weekend.
[Dave Burns]: During Memorial Day weekend in 1980, there were a number of public events going on, including a carnival. A lot of noise, a lot of commotion into the late night hours. That really worked very well for the conspirators.
[Kevin Stevens]: The team now makes final preparations. They had acetylene torches, they had dynamite, they had special magnesium burning rods, carbide core bits for the drills. Everything that they needed for any eventuality, they had prepared carefully ahead of time.
[SPEAKER_10]: The night of the burglary, the gang moves into position. Clemente is confident he won't be discovered because his lookout man is the senior cop on duty for the entire city of Medford, Tommy Doherty.
[Kevin Stevens]: If anybody did come along, he'd be able to make sure they moved on. Or if they came too close, he could tell them to go away because he was, after all, a police officer.
[SPEAKER_10]: With everything in place, Clemente sets his plan in motion.
[Dave Burns]: The steps of the burglary began with them bypassing the alarm system at the rear of the building. After that was accomplished, Jerry Clemente picked the lock to the shop next door. which gave them access to the upper loft area.
[SPEAKER_10]: Inside the shop's attic, they break through the wall leading to the bank.
[Kevin Stevens]: That wall was made of cinder blocks. So in a matter of minutes, they had smashed through there. They were able to crawl into the crawl space above the vault.
[Dave Burns]: So they then could start the tunnels through the actual ceiling of the vault. Using power from a nearby fuse box, they start to drill through the vault ceiling.
[Kevin Stevens]: And they knew exactly where to drill in order to create the hole, from Tommy having mentally cased the place.
[William Lisano]: You know, the old story, plan your work, work your plan. Everything was done exact to a T. They knew what they had to do. They were all disciplined guys.
[Kevin Stevens]: At each step of the way, they would pause and wait, report back to Tommy. Tommy would make sure that nobody had heard anything, that nothing was being reported. He'd have a good look around. Then he'd give them the okay to go on to the next stage of the operation.
[SPEAKER_10]: But an hour into the job, there's a big problem. Doherty radios Clemente to shut everything down and keep quiet. The owners of Brigham's restaurant next to the bank have come to take inventory. Clemente has Doherty spring into action.
[Kevin Stevens]: Tommy went in, told these people, I'm sorry, we've had some criminal activity around here lately. We really can't have you doing inventory in the middle of the night, and got them to leave and go home.
[Robert Long]: And they were quite impressed that, geez, great police response here.
[SPEAKER_10]: Doherty gives Clemente the all clear. Above the vault, the men resume working on the 18 inches of steel-reinforced concrete. Clemente has brought dynamite, but he knows he's taking a risk.
[Dave Burns]: The risk obviously being they're in the middle of a downtown area in Medford, that that would be heard by the neighbors and that they would be discovered.
[SPEAKER_10]: They pile sandbags on the dynamite to direct the blast downward and muffle the sound.
[Kevin Stevens]: As it happens, nobody reported any sound. It's possible that people heard a loud bang, but maybe they thought it was revelry from the carnival.
[Dave Burns]: The explosives were able to dislodge the concrete, but it still left the wire mesh that had to be cut with an acetylene torch.
[SPEAKER_10]: It's hot, time-consuming work, but by 3 a.m. they break through the vault ceiling.
[Kevin Stevens]: So when they dropped down into the vault, they had all of this debris all over the place and all of this dust floating in the air. Their main target is the safe.
[Dave Burns]: At the rear of the vault was a larger safe, which the bank used for their cash for their customers.
[SPEAKER_10]: Bucky sets to work with an acetylene torch. O'Leary and Bang start prying open the safety deposit boxes. It takes an hour to cut through the safe's hinges.
[Kevin Stevens]: Bucky opens the safe. There's only 60 grand. They're all incredibly disappointed. Months of preparation, careful planning, high risk, incredible expectations, and they're sitting there with $60,000.
[Dave Burns]: Unfortunately, they found a very small amount of cash, principally because it was Memorial Day weekend and most of the cash had already been removed by the bank employees and sent to the Federal Reserve for the weekend.
[SPEAKER_10]: There's nothing more Jerry can do.
[Kevin Stevens]: They've run out of time. It's in May, so there's an early dawn, and they got to be out of there before it gets light. It's not turning out exactly the way that they thought it would, so they'll go back to Joe's house. So Jerry says, well, we've got two more nights to come back in and to go through and break open as many of these safety deposit boxes as we can.
[Dave Burns]: Had this been your typical burglars, they would never have risked going back the second or third night. But Jerry Clemente knew that with three active police officers involved in this conspiracy, they had an absolute control over preventing anyone from law enforcement ever detecting that they were inside that vault.
[SPEAKER_10]: Back in the vault, they set to work on the safety deposit boxes. But the problem is, it's taking 15 minutes to open each one.
[Dave Burns]: Initially, they were breaking through these cylinder locks by manually using a screwdriver and breaking out these cylinder locks. They found that took an annoying amount of time.
[Kevin Stevens]: So then he discovered this new method, which was basically to use the chisel and hammer to break off the hinges.
[SPEAKER_10]: It was much faster and enabled him to open more doors in a quicker way. Over the next two nights, the gang uses this new method to break into 1,000 deposit boxes and empty the vault.
[Kevin Stevens]: So there was close to $2 million in cash, but there was also pink diamonds, rare jewels, ordinary diamonds, expensive watches.
[William Lisano]: They were lugging so much stuff out of there, they were exhausted, and they were doing it under the protection of the police. It's frightening.
[SPEAKER_10]: They were the police. 72 hours after breaking into the vault, Clemente and his crew escape with $10 million in cash and jewels.
[Kevin Stevens]: Well, the first thing they did is they split the cash six ways. So they all got their take of the cash, which was about 200 grand apiece.
[SPEAKER_10]: But dividing the jewelry is much more difficult.
[Dave Burns]: Problem was is then jewelry is identifiable, and they had a problem of how could they get rid of it and convert that into cash.
[SPEAKER_10]: Clemente decides to leave it with Joe Banks. Now all he has to do is wait, and he and his crew will be very rich. But this treasure will set one gang member against another and threatens to destroy them all. Jerry Clemente and his crew of crooked cops. have pulled off a brilliantly planned bank burglary, netting more than 10 million in cash and jewels.
[Robert Long]: When the bank manager came in on Tuesday morning, he found, on the floor of the vault, papers in empty boxes between knee-deep and four feet high. One of the people who came to protect the scene until the FBI arrived was Sergeant Thomas Dougherty.
[SPEAKER_10]: The robberies lookout man is now a spy inside the investigation. Daugherty keeps Clemente informed of FBI progress.
[Dave Burns]: The speculation was there had to be an insider involved. There had to be someone with local knowledge. A number of people were interviewed, including Tom Daugherty, Jerry Clemente. Both of them were on duty during part of that weekend. But while there was a lot of speculation and rumor that Jerry Clemente was, in fact, a mastermind, there was no physical evidence connecting him to the burglary.
[SPEAKER_10]: When investigators try to shake Clemente's alibi, his mistress, Barbara Hickey, backs him up.
[Dave Burns]: He instructed her that if she were asked where he was on those nights, that she was to say that he was with her for the entire night.
[SPEAKER_10]: Knowing authorities have nothing concrete.
[Kevin Stevens]: Clemente Stonewalls. The fact that Jerry is a captain in the police department means that he understands police procedure. He understands the rules of evidence. He knows what it is that they need in order to prove that he did it. He also knows that they can't put it together. So he feels that even though they have strong suspicions, and even though they can make life difficult for him, that he's in the clear.
[SPEAKER_10]: The FBI continues to investigate. They put Clemente under 24-hour surveillance, but Clemente knows he's being watched.
[William Lisano]: Without knowing the guy, it's hard to describe the arrogance. He just figured he was untouchable. They had thrown everything they had at him, and he walked away.
[SPEAKER_10]: As the case against him grows cold, Clemente lies low, waiting for the statute of limitations to run out.
[Kevin Stevens]: Jerry's very conscious that at this stage, they have less than a year to go, and they're home and dry in the depositors' trust heist.
[William Lisano]: The clock was ticking. And honestly, unless something happened, this was going to be an unsolved crime.
[SPEAKER_10]: But just as police are about to abandon the investigation, Clemente is hit with a crisis. Tommy Doherty and Joe Bang start spinning out of control. They're both using cocaine heavily.
[Kevin Stevens]: They're both incredibly paranoid.
[Robert Long]: And soon, the friction between them with the free base and being paranoid, and they also started to think one of them might be dropping a dime on the other. And that's when the whole ball started rolling down the hill.
[William Lisano]: All of a sudden, guns are out. Joe Bangs gets shot. It's the worst thing that could have happened. One, that Tommy shot him. Two, that he didn't kill him, because it just brought total chaos to their whole operation.
[SPEAKER_10]: The state cops arrive to investigate the shooting. They find drugs and jewelry in Joe Bangs' car.
[Kevin Stevens]: That jewelry allowed a clear link to be made between Joe and the depositors' trust heist. And it allowed the police to put pressure on Joe.
[SPEAKER_10]: With police leaning on one gang member and another in jail, Jerry Clemente is facing the greatest threat of his criminal career.
[Kevin Stevens]: So his life is basically turned upside down. But he knew that if he just kept his cool, and that if the others kept their cool, that they couldn't be broken.
[SPEAKER_10]: With the discovery of the stolen jewelry, police are determined to bring down Clemente and his gang. Adrenaline gets fired up a little more.
[Robert Long]: It's one of the biggest crimes committed in the century. I mean, these are bad cops. If you're a bad cop, you want to get them.
[SPEAKER_10]: While authorities build their case against Clemente, Tommy Doherty goes on trial for the shooting of Joe Bangs. Doherty's lawyer presses Bangs about the jewelry found in his car.
[Robert Long]: Isn't it true, Mr. Bangs, that you had a kilo of cocaine in the trunk of your car? Yes, it is. And isn't it true that you had some jewelry in the trunk of your car? Yes, it is. And I suppose that jewelry was stolen, too. Bangs responded. He finally had had it. He goes, yes, sir, it was stolen jewelry. I stole it with your defendant on Memorial Day weekend, 1980. and the whole court went into an uproar. It was the biggest break that came along on it.
[SPEAKER_10]: Doherty is found guilty, and Joe Bangs tells prosecutors everything about the depositors' trust heist. But police need more.
[Dave Burns]: Joe Bangs carried a lot of baggage and had very low credibility. The problem we faced was that a jury would say, you're only saying this and implicating others because you want to save your own skin.
[SPEAKER_10]: Investigators then get a break when they learn Clemente has left his mistress, Barbara Hickey.
[Robert Long]: They were working with her and working with her and working with her, and they were getting nowhere with her, none at all. And so they were kind of throwing up their hands and going, turning to leave when she said to him, well, I don't know if this helps, but would it make any difference that he came home one night that weekend loaded with dust and dirt all over him? Does that make cement powder and that type of thing, would that be helpful to you?
[Kevin Stevens]: For Jerry Clemente, Barbara Hickey's turning on the gang is the worst thing that could possibly happen. It brings down the whole gang.
[SPEAKER_10]: house of cards. Jerry Clemente is arrested and charged with four counts of breaking and entering with intent to commit a felony. Although the evidence against him is strong, he's unconcerned, continuing to believe he's pulled off the perfect heist.
[Kevin Stevens]: Jerry was always super confident. He always had faith in his ability to get out of any situation that he might find himself in. He knew how to cover his tracks, he knew how to make sure that the right people were involved, and he knew how to make sure that when it came down to it, the odds were stacked in his favor.
[Dave Burns]: He was an intelligent, articulate guy. He had spent a lot of time planning and preparing for this burglary, and yet, I think, to the end, never believed that the government would be able to prove and have a jury believe and convict him of the crime.
[SPEAKER_10]: But at his trial, his former mistress, Barbara Hickey, is the prosecution's star witness.
[Barbara Hickey]: Out of a clear blue sky, he said that he was going to have a lot of money, and he would never have to work a day in his life again.
[SPEAKER_10]: Her testimony finally puts the corrupt cop behind bars.
[Kevin Stevens]: Jarrett got 30 to 40 years, so it was the maximum sentence, and they nailed it.
[Dave Burns]: It's particularly satisfying when it's a police officer, and you realize that this is someone who had corrupted the system, who had breached his trust, and who should be brought to justice.
[SPEAKER_10]: After 10 years in jail, Jerry Clemente is paroled. He is currently without a job and is fighting for his police pension. One man masterminds the largest gold mining scam in history.
[SPEAKER_08]: Surely one of the biggest frauds in the history of the world. Probably the biggest mining fraud of all time. He outwitted scientists, analysts, and the world's leading investors.
[SPEAKER_10]: There was always some science backing up this fraud. He turned a penny stock into a billion dollar scam and made himself millions. Find out how, next on Masterminds. On December 13th, 1993, a lone prospector entered the darkest jungles of Borneo and discovered the biggest gold strike of the 20th century.
[SPEAKER_11]: These series of jungle hills in Indonesia, which all have been formed by a volcano, were lying on top of a pool of gold.
[SPEAKER_10]: The prospector staked a claim on behalf of a small mining company named Briax. He ordered rock samples drilled and sent for testing.
[SPEAKER_11]: There was some interesting core results, and it seemed like this could be one of those junior plays that made people a lot of money.
[SPEAKER_10]: Independent auditors assessed the size of the gold deposit as astronomical.
[SPEAKER_11]: And they started to realize that they had what they thought was an elephant deposit, a great big puddle of gold.
[SPEAKER_10]: Breac stock took off like a rocket. The prospector used the money to expand his operation. He cleared hundreds of acres of jungle and brought in sophisticated excavation machinery.
[SPEAKER_11]: The analysts on Bay Street and Wall Street got caught up in the excitement. And every time they published more details about this gold find in Indonesia, the market capitalization of the company, the size of the company would jump. This company went from $1 or $2 to $286. This was the largest gold deposit in the world.
[SPEAKER_10]: Back in Indonesia, the prospector kept uncovering more and more gold.
[SPEAKER_08]: Gold was trading at $350 US an ounce. If you multiply it out, It's about 70 billion dollars U.S.
[SPEAKER_10]: Fueled by greed, everyone from boardroom executives to middle class suburbanites wanted in on the action.
[SPEAKER_08]: Everybody wanted to be the suitor to walk down the aisle with reacts.
[SPEAKER_10]: Even the corrupt Indonesian government tried to muscle in. But what no one knew was there was no gold, not one ounce. The lone prospector cashed in his company's stock options and made off with millions, leaving investors devastated.
[SPEAKER_11]: People who have basically put a lot of their life savings into Brex lose everything. And I know of several individuals who committed suicide.
[SPEAKER_10]: The prospector had engineered an unparalleled gold rush, outsmarting scientists, analysts, and investors. His name was Michael de Guzman. The question is, how did he do it? Michael de Guzman has convinced the world to invest in a gold mine that isn't there, turning a penny stock into a billion-dollar venture and lining his pockets with millions.
[SPEAKER_08]: Michael de Guzman was a Filipino geologist who worked in Indonesia.
[SPEAKER_10]: For years, de Guzman struggles for recognition in an industry dominated by large American mining companies. Mike de Guzman knew he was smart.
[SPEAKER_11]: He had fabulous marks. He had an engineering degree, but he never got a great job. He never got a crack at a great job. It's very difficult for the Filipinos, even with extremely good engineering training, to get senior jobs with the big mining companies.
[SPEAKER_10]: While exploring the jungles of Borneo, de Guzman devises a plan to make himself rich. Unable to get the support he needs to find a gold mine, he decides to invent one. Michael de Guzman was going to get the wealth that he could never aspire to otherwise. de Guzman reasons that the most convincing site for the world's largest gold mine is on the Indonesian island of Borneo.
[SPEAKER_01]: In the area around Indonesia is an area which is quite unusually rich in gold. Gold mines are associated with volcanic activity quite a bit. So areas where you get volcanoes, people find gold mines.
[SPEAKER_10]: De Guzman concocts a geological theory to capitalize on what the experts already believe.
[SPEAKER_08]: And the theory essentially was where there are extinct volcanoes, you're going to kind of have a plug of minerals like gold that are fairly close to the surface.
[SPEAKER_10]: Now de Guzman must find someone with credibility to sell his idea to the world. He targets geologist John Felderhoff.
[SPEAKER_08]: John Felderhoff is the very sort of person you would imagine that would be crazy enough to go through the jungles of Kalimantan or Borneo, wearing hip waders and looking for gold.
[SPEAKER_01]: He had actually a well-established reputation of having discovered a gold mine in Indonesia.
[SPEAKER_10]: De Guzman convinces Felderhoff to find a foreign investor who's willing to take risks and not ask questions. Felderhoff recommends a businessman from Western Canada.
[SPEAKER_11]: David Walsh was this promoter. He'd been bankrupt. He'd been sort of living out of the trunk of his car. He was the kind of guy who was always talking up a story.
[SPEAKER_10]: Walsh has flown to Indonesia, where he's wined and dined in the finest hotel in Jakarta.
[SPEAKER_11]: Walsh was at a point where he was looking for some promising properties, and he spent basically his last few bucks to take a trip to Indonesia.
[SPEAKER_10]: With nothing more than a few rocks, maps, and some questionable data, de Guzman sells Walsh on investing 80 grand on a property in Borneo that he's never even seen. It's called Busang.
[SPEAKER_11]: The thing that made the Briex fraud credible in everybody's eyes was that one of the largest gold mines in the world is in the Indonesian islands, about 70 miles away from what became Busang.
[SPEAKER_10]: In exchange for their work exploring Busan, de Guzman demands stock options for himself and Felderhoff. Now de Guzman sets out to turn this penny stock company into a corporation worth billions. He starts by hiring a young Filipino staff, over which he has total control.
[SPEAKER_08]: So the person really in charge on site in Busan was Michael de Guzman.
[SPEAKER_10]: De Guzman orders his team to drill core samples. Once extracted, the core sample is split in two. Typically, half is stored on site. The other half is then crushed and sent to a lab to be tested, determining how much gold is present. But because de Guzman knows the property has no gold, he employs an age-old mining trick called salting.
[SPEAKER_01]: Salting refers to adding gold to the ore. Usually what would happen is you'd have a gold mine and you'd go there and you'd take gold nuggets, sprinkle it around the way you'd sprinkle salt around.
[SPEAKER_10]: De Guzman orders the crushed rock moved to a locked shed where he's sure to have absolute privacy. Inside, he devises an ingenious method of salting the samples with gold filed from his wedding ring.
[SPEAKER_01]: Adding it to the ground up rock, as far as I know, that's not been done before. That was quite a, that was a novel twist.
[SPEAKER_11]: The challenge to Michael is then taking 40 pounds of rock, figuring out exactly how many gold flakes should go in there. In other words, there's three ounces of gold per ton of rock. So he's got to do a fair amount of division, and he's got to carefully weigh out his gold.
[SPEAKER_01]: If he'd grabbed a teaspoonful and chucked it in, the gold gray would have been phenomenal, and he would have gone, and it would have attracted attention.
[SPEAKER_10]: De Guzman's calculations are perfect. The lab results suggest high levels of gold without raising suspicion. De Guzman has his front man, John Felderhoff, call David Walsh at his home in Western Canada and tell him the good news. The lab results are the equivalent of a hot tip.
[SPEAKER_11]: The market came to really look forward to these results. You know, there'd be a big excitement. Walsh would say, on Tuesday, we should have core results for you. Tuesday would come, sure enough, there'd be 10 or 12 new holes.
[SPEAKER_10]: As each consecutive lab result is posted, it appears that more and more gold is being found in Busan. Investors rush to buy Bre-X shares listed on the Alberta Stock Exchange in Canada. There's so much drilling at Busang that de Guzman needs a larger supply of gold in order to keep salting the thousands of samples.
[SPEAKER_11]: There's a lot of local Indonesian natives who make their living, or at least a part of their living, by panning for gold in the rivers. Michael befriended this fellow and started buying gold off him. So over a period of about two years, Michael bought about $61,000 worth of gold off this guy.
[SPEAKER_10]: Meanwhile, investors anxious to get in on the deal send over an independent auditor to review all de Guzman's records. The auditor demands to see de Guzman's core samples.
[SPEAKER_01]: But de Guzman hasn't saved half the samples. They did split their core all right, but they only kept 10 centimeters out of every meter. That's very unusual.
[SPEAKER_10]: To prevent the auditor from becoming suspicious, de Guzman is ready with an explanation. He cites a phenomenon called the nugget effect, in which the gold is distributed unevenly. De Guzman insists he must crush all of the sample in order to get an accurate reading.
[SPEAKER_01]: The key was crushing up all the coal. Nobody could check. Having crushed up all the coal, basically they destroyed the evidence.
[SPEAKER_10]: But when the auditor takes a closer look at the samples, he's suspicious about the river gold purchased by de Guzman.
[SPEAKER_11]: The gold you get from penning in a river looks quite different from the gold that you find at the bottom of a gold mine. River gold gets rounded around the edges. The flakes of gold are shaped by the forces of the water and the weather.
[SPEAKER_10]: De Guzman uses his theory of volcanic pools to explain why this kind of gold is precisely what you would expect at Busan. Within hours, the Bre-X website announces the successful audit, and the stock rises dramatically. You could watch this stock move. It would go from $20 to $30 in the space of three weeks. Building on his success with the auditor, de Guzman now moves to drive the stock price even higher.
[SPEAKER_11]: They looked at their maps, and they said, OK, well, if there's gold here, maybe there'll be gold over here as well. And that's when they got into Boozang II.
[SPEAKER_10]: De Guzman finds enough surface gold to convince David Walsh to finance drilling for what he claims is a second massive gold deposit. Once again, De Guzman has Felderhoff fire off a message to David Walsh. We've got a monster by the tail. Walsh pounces on it. He applies for Bre-X to be listed on the Nasdaq and the Toronto Stock Exchange.
[SPEAKER_08]: Wall Street and investors elsewhere, and analysts elsewhere, were totally on side, were totally enthusiastic, were totally hypnotized by the rising stock price, by the rising claims of Bre-X.
[SPEAKER_10]: Now de Guzman makes his boldest claim. Based on drilling results from Busan-2, he declares that Bre-X has the largest gold deposit in the world.
[SPEAKER_05]: The investors just looked at the rising stock price and said, this must be real.
[SPEAKER_10]: Having built Bre-X into a company worth $6 billion, and with its stock price at nearly $300 a share, it's time for de Guzman to start cashing in. He and his team sell enough shares to be rewarded with over $100 million.
[SPEAKER_11]: When Felderhoff and when Walsh and when de Guzman started selling a part of their holdings, but not all of it, people just figured, well, that's just guys who've had a tough run all their lives and they're just taking out some insurance.
[SPEAKER_10]: De Guzman is now worth millions, but what he doesn't know is the Indonesian government is about to make a move that threatens to reveal his scam. Michael de Guzman has pulled off the biggest fraud in mining history. He's fooled the world's leading investors, turned a penny stock into a billion-dollar venture, and lined his pockets with millions. But he's now facing a real crisis.
[SPEAKER_11]: The beginning of the end for Briex was a problem in Indonesia. The Indonesian government, which is hideously corrupt, decides to challenge Briex's claim to this fabulous deposit.
[SPEAKER_10]: In August of 1996, the Indonesian government revokes Briex's exploration permit and opens the property to other mining companies.
[SPEAKER_05]: The government itself was going to get very much involved in the ownership of the deposit. And they were going to invite who they wanted to see to develop the deposit.
[SPEAKER_08]: So what you saw unfold in rather ugly fashion between the summer of 1996 and the spring of 1997 was this fight amongst major companies for a piece of the action.
[SPEAKER_10]: Michael de Guzman knows his drilling records will soon come under scrutiny from the other mining companies, a move that's sure to reveal the Breach's fraud. Desperate, he destroys all his records at Busan, claiming it was an accidental fire.
[SPEAKER_11]: What went up in smoke that day would ultimately help cover the trail of the conspirators that did this fraud.
[SPEAKER_10]: The Indonesian government forces Briex to accept a new mining partner, Freeport McMoran. From now on, Briex owns only 45% of Busan. When news gets out, Briex stock drops $1 billion. But de Guzman counters. He releases new drilling results that dramatically increase the estimated gold reserves underground.
[SPEAKER_07]: They had previously said that they had 57 million reserves, and they increased that to slightly over 70 million reserves. Given that the ownership that they had in percentage went down to make the value be the same, they had to increase the reserves. Bre-X stock rises again.
[SPEAKER_10]: Shareholders are thrilled. In the spring of 1997, de Guzman and his team are invited to be guests of honor at Bre-X's annual shareholder meeting in Toronto, Canada.
[SPEAKER_11]: Michael de Guzman made a presentation as part of the REACT's annual meeting to talk about what he'd found and to talk about what the different drill results had proven that was underneath the ground. He was able to stand before shareholders with this fabulously expensive stock, a company that's worth $5 billion, and said, look, we did the best deal we could under the circumstances. We're all rich.
[SPEAKER_08]: Isn't this great? He was wildly applauded, considered a hero. His theories of mining, even though they were slightly unusual, seem to be validated by the results.
[SPEAKER_10]: But on the other side of the world, Bre-X's new partner is anxiously drilling for gold, only yards away from where de Guzman had drilled.
[SPEAKER_11]: And their samples came up empty. They weren't finding the gold that Michael de Guzman had said was there.
[SPEAKER_08]: When de Guzman got the phone call, we don't seem to find any of the gold you say is there. Get your story behind, back to Indonesia pronto, pal, and explain this to us.
[SPEAKER_10]: After three years and billions of dollars, time is running out for the mastermind behind the world's largest fraud. When Briex's powerful new partner doesn't find gold at Busan, Michael de Guzman is forced back to Indonesia.
[SPEAKER_11]: The next morning, he climbs into the back of a helicopter driven by a Indonesian Air Force officer, takes off over the jungle. He's about 400 or 500 feet in the air over some of the deepest rainforest in all of Indonesia. And the pilot looked into the back seat, and de Guzman was gone. Guzman had jumped out of the helicopter apparently.
[SPEAKER_10]: Three days later, the Indonesian army claims to find de Guzman's body. It's badly decomposed and partially eaten by animals. It's so gruesome, the authorities won't let his family view the remains.
[SPEAKER_05]: It was very difficult to believe that they took two, three days, I recall, to find the body when, in fact, the pilot said he did set the GPS recorder, so they should have been able to find the spot.
[SPEAKER_10]: Rumors swirl about de Guzman's death. Was it suicide, murder, or yet another perfectly planned deception?
[SPEAKER_11]: If you wanted to disappear anywhere on this planet, Indonesia would be one of the easier places to do it. That you could, for a few hundred dollars, purchase a recently deceased body.
[SPEAKER_10]: Independent drilling takes place directly beside where de Guzman took thousands of samples. And not a single ounce of gold is found.
[SPEAKER_11]: They go and they drill their own core samples, and the security they have around that is unmatched. They are drilling two or three feet away from where Briexus sets up tons of gold. All they find is rock flake. There is no gold there.
[SPEAKER_06]: It looked so good. It couldn't be real. I mean, it was too good to be real.
[SPEAKER_11]: It's an unbelievable revelation. They just can't believe that this fabulous deposit, in fact, never existed.
[SPEAKER_10]: Investors around the world suddenly realize they've been had.
[SPEAKER_11]: Walsh is just flabbergasted. He cannot believe that this is happening. And it's at that point that the Breach team in Toronto realizes that they've got nothing to go on, that their stock is going to zero because this was a massive fraud. Shares themselves are only useful as wallpaper.
[SPEAKER_10]: David Walsh adamantly denies any knowledge of the fraud. He moves to the Bahamas with his wife. Two years later, he dies of a massive heart attack.
[SPEAKER_11]: John Felderhoff continues to live in a gorgeous home right next to the Yacht Club in the Cayman Islands where there's no tax and there's also no extradition treaty with Canada for white collar crimes.
[SPEAKER_10]: Michael de Guzman, the mastermind behind the greatest mining scam of all time, is supposedly laid to rest.
[SPEAKER_11]: I compare him to Rumpelstiltskin. He was able to turn a very small amount of gold into a huge amount. He spun a story into a huge amount of gold.
[SPEAKER_08]: No criminal charges have arisen out of the Briac scandal. No one has ever spent a day in jail as a result of it.
[SPEAKER_11]: The fraud itself has changed the way that Canadian regulators look at the mining industry.
[SPEAKER_07]: It would be somewhat more difficult to pull off a similar type of scam, but it isn't impossible. It probably still could be done again.
[SPEAKER_05]: The adage, caveat emptor, is indeed true. Buyer beware.
[SPEAKER_10]: In spite of class action lawsuits, not one investor has ever been compensated. A harsh reality for thousands of ordinary people who invested their life savings in Bre-X and were left penniless.
[SPEAKER_11]: I actually believe that Michael de Guzman is alive. I don't think that he did fall out of that helicopter. I believe that he faked his own death and that he's enjoying the money that he scammed at Bre-X.