Bula directors regret failure to detect `fraud'

The board of directors of Bula Resources has expressed its "deep regret" at its failure to detect the "fraud" perpetrated against shareholders during its stewardship.

In a circular to shareholders ahead of an extraordinary general meeting on November 16th next, the board said the "traumatic" experience of the past 18 months had led the company to undertake a fundamental analysis of how former Bula chairman and chief executive, Mr Jim Stanley, could have perpetuated "this fraud".

"As the people entrusted with protecting the interests of the shareholders, we deeply regret that this occurred during our stewardship. The fact of the perpetration of this fraud through both internal and external collusion by what was then a trusted officer of the company having made it exceptionally difficult to identify and prove does not lessen the sense of annoyance and embarrassment felt by your board," it states.

The document explains the primary purpose of the investigation ordered by the Tanaiste, Ms Harney, and undertaken by Mr Lyndon MacCann was to establish the ownership of the shares held in Bula by Mir Oil. The principal finding of the report was that Mr Jim Stanley was and had at all material times been the sole beneficial owner of Mir Oil, the company from which Bula bought a share in the Aki-Otyr Russian oilfield.

"The conclusion that Mr Stanley is and has at all material times been the sole beneficial owner of Mir Oil conflicts directly with the verbal and written statements provided to Bula by Mr Stanley prior to the completion of its deal with Mir Oil. This conclusion also presents prima facia evidence that Mr Stanley perpetrated a fraud on Bula."

Responding to the investigation and subsequent report compiled by Mr MacCann, Bula notes the re-focusing of the company's business away from the former Soviet Union. It further stresses to shareholders its investment focus on North Africa and the Middle East and maintenance of North American and Dutch portfolios of oil and gas production and exploration interests.

The board has also been strengthened it says, with the appointment of four additional directors and Bula has enhanced its corporate governance procedures. It points to the investigation of the transaction with Mir Oil and the initiation of legal actions against Mr Stanley and Mir Oil. "It is the intention of the board to vigorously pursue the above legal actions, together with other potential actions arising from this affair which are being considered with the company's solicitors, with the objective of recovering appropriate compensation for Bula and its shareholders as a result of the losses which the company has incurred in respect of its transaction with Mir Oil."

The board adds though that it remains mindful of the need to pursue legal actions which are not only likely to be successful, but which can reasonably be expected to result in the recovery of sufficient damages to justify the investment of management time and the company's financial resources necessary to pursue such legal actions.

"Apart from the civil legal actions being pursued by the company, it is our belief that the circumstances of this affair are such that it would appear possible that serious criminal charges may be brought against certain persons. Before any such criminal proceedings can be initiated it will be necessary for the police authorities in the relevant jurisdictions to investigate the matter and if their investigation indicates that there has been a breach of the criminal law, the matter will be passed to the criminal prosecutions agency in each of these jurisdictions which must then decide whether the circumstances justify bringing a case before the courts in each jurisdiction." Officers of Bula have held two meetings with the Garda Bureau of Fraud Investigation about this matter and is currently compiling all original documentation that will be necessary to support its intended statement. It has also been in contact with police authorities in other jurisdictions.