Below is an e-mail is from Harper’s Chief of Staff, Ian Brodie, which comes from from the heady idealistic days of November 13, 2006. In Brodie’s supreme opinion it was okay to break the income trust promise on the basis that “the alternative was to abandon all other tax cut plans as the corporate tax base quickly disappeared”.
Perhaps someone could provide Ian Brodie with a real world update, as his nifty boss engineered the worst of both worlds. There have been no tax cuts instituted by this government (apart from those subsidized by the federal government at the expense of all Canadians for the exclusive benefit of Quebeckers), and we are now also witnessing the rapid disappearance of the corporate tax base, as most abundantly evidenced by BCE, whose purchase by private equity was induced by the income trust tax which will result in the loss of $793 million a year in taxes to Ottawa. Meanwhile the betrayal (his word) on income trusts back in November was just the beginning of a long litany of subsequent betrayals by this government. As to his point about certain choices not being pretty, I can say one thing. Come the next election, Canada’s New Government has certainly made Canadians’ election choices very easy indeed.
That said, would Ian Brodie consider the fall of Canada’s New Government (TM) to be an epic event, or just an epidemic event brought on by a bad case of ubiquitous betrayal?
This would be a more compelling analysis if the government weren’t already in the midst of a steady program of cutting tax rates, including corporate taxes, across the board. The alternative to breaking the election promise and taxing trusts was to abandon all other tax cut plans as the corporate tax base quickly disappeared. Instead, Flaherty acted quickly, in the face of rapidly changing conditions, to break the trusts promise and save the rest of the government’s promises. Not a pretty choice, to be sure, but hardly an epic betrayal either.
Ian Brodie
Chief of Staff / Chef de cabinet
Office of the Prime Minister / Cabinet du Premier ministre
Ottawa, Canada, K1A 0A2
Office / bureau : 613.992.4211
Thursday, July 12, 2007
Ian Brodie on Broken Promises and Epic Betrayals
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22 comments:
What an idiot. Is Brodie as stupid as he sounds or is he completely ignorant of the facts? Canadians deserve better from people in positions like Brodie's. We deserve honesty and truth and if nothing else, at least the ability of the individual to get the facts straight. Just more of Harper's Lies and deceit...I guess people like Brodie will sell out their self respect for a good paying job.
What is an epic betrayal is (a) the deceit of a senior government official saying that trusts cause an erosion of the tax base when he knows the exact opposite to be true, (b) the legislated discrimination against many small individual investors, so that (c) some few super-rich pension funds or foreign investors can prey on the assets of the trusts.
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Canadian Press
July 12, 2007 at 6:10 PM EDT
TORONTO — — Legacy Hotels Real Estate Investment Trust [LGY.UN-T], Canada's largest hotel trust with Fairmont and Delta properties, is being acquired for $2.5-million in cash by Caisse de dépôt et placement du Québec and its partners.
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The end result will be that the little guy and gal will be forced into low yield investments, and have their financial security and quality of life diminished. We trusted these people, Stephen Harper, Ian Brodie, Jim Flaherty, et al; they have lied to us, and used the power of government against us--and against our very own government. Tax revenues too will be diminished. We will have less income and will pay more tax. That is the epic betrayal.
" Instead, Flaherty acted quickly, in the face of rapidly changing conditions, to break the trusts promise and save the rest of the government’s promises. Not a pretty choice, to be sure, but hardly an epic betrayal either.--Ian Brodie
My God , who stole the real Conservative Party & what have you done with them???????--I hope Peter McKay is proud!!!!!--he sold us down the river where the river is inhabited by sharks like Mr Brodie & his crew of not so smart or just plain dishonest people.
I am glad he put this stuff in writing--we at least have something to make us feel better as we watch our valued income trusts go into the crapper over the next few years.
Still pissed in Rodney----Dr mike P.
Rapidly changing conditions? Harper ramped up the conversions to trusts as well as the increase in investments when he Explicitly Stated he would protect seniors investments in Income Trusts and not change the taxation on them. He opened up the floodgates that are now being called "rapidly changing conditions".
In fact these rapidly changing conditions were adding to the tax base as millions of units holders paid their taxes at their marginal tax rate...much higher than the corporate tax rate.
Flaherty knee jerk reacted to threats from BCE, Teles and Encana to convert and instead on analyzing and understanding he simply killed them...along with a few billion in taxes as these companies go to private pension plan equity and foreign owners.
Not a pretty choice at all...an uninformed choice and a very damaging one at that.
If Brodie does not understand this he should be fired. If he does understand then he should be fired for lying. I wonder if he can actually hold his head up around his friends, he looks so stupid.
"Flaherty knee jerk reacted to threats from BCE, Teles and Encana to convert and instead on analyzing and understanding he simply killed them."
It's my opinion that the "threat" of BCE conversion was deliberately orchestrated between Flaherty and Sabia in order to provide Flaherty for a tipping point. This would then allow BCE to basically privatize itself, giving Sabia a big fat windfall in the process. For those 2, it's a win-win. For the rest of us poor ordinary sods, we've been fleeced again by a pack of selfish, greedy liars. Just like the last round of piratizations, I mean privatizations, under that explective deleted Mulroney.
Jack Layton's too busy trying to save us a buck for being too lazy or too stupid to avoid ATM fees. Jack Mr. Bo-Jangles Layton (he likes to dance in the lights of reporters)will never join the Libs to take the Cons down because when he does he goes down with them...along with Judy What-a-shitface-lies and her buddies Rosen and Urquhart.
Caisse checks into hotel business
GORDON PITTS
Globe and Mail Update
July 12, 2007 at 8:58 PM EDT
TORONTO — An investment group led by the giant Caisse de dépôt et placement du Québec has agreed to buy Canada's largest hotel trust, Legacy Hotels Real Estate Investment Trust, in a $2.5-billion deal that includes the historic Fairmont Le Château Frontenac in Quebec City and Fairmont Royal York in Toronto.
The deal, the latest move in a wave of consolidation in the property trust sector, amounts to $12.60 a unit, all-cash agreement – a 20-per-cent premium over Legacy's 30-day average trading price on the Toronto Stock Exchange on Feb. 28.
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The 20% premium sounds excellent. But notice the date—Feb 28, 2007. That’s in the darkest days just before the passage of the budget. Why doesn’t the reporter used the 52-week high of $15 on June 15? Or the recent 60-average of $13.45? One is 16%, the other is a 6% discount?
Suppose that the purchaser is really paying a premium. Why would they do that? The obvious answer is that they expect to be tax-free.
This deal smells bad in another way. The trust is sitting on a huge inventory of prime real estate. Real estate values in AB have tripled in the last four years, and increased handsomely across Canada. Is the unit-holder getting full disclosure?
Good observation Katie--I had not picked up the Feb 28 date--who was writing this copy , Jim Flaherty??
The question I keep asking myself is "why is it only us who can see what is really going on here"--are Canadians not enlightened enough to see what is happening before our eyes.
I think this will not hit home until it affects everyones wallets in the form of higher taxes--this time is not far off.
My other question is on whom or what will Jim "it`s not my fault" Flaherty blame this whole mess.
Jimmy , the time is almost here to pay the piper--I personally , am looking forward to the day when I can say "stick a fork in him , he is almost done"--may that be sooner than later , before it is too late !!
Mike
Dr. Mike,
You ask a question that has me greatly puzzled. There’s a hidden agenda, and/or the Tories have been played for fools. Two news stories of this morning are relevant.
In the New York Times, there’s a story about the private equity financial engineers exempting themselves from tax. In the Globe & Mail, there’s a story about the PMO calling for input from political staffers in Ottawa.
In the NYT
==============================
Tax Loopholes Sweeten a Deal for Blackstone
By DAVID CAY JOHNSTON
Lee Sheppard, a tax lawyer who critiques deals for Tax Notes magazine and has studied the Blackstone arrangement, said it was a reminder of the disconnect between the tax debate in Congress and how the tax system actually operates at the highest levels of the economy.
“These guys have figured out how to turn paying taxes into an annuity,” Ms. Sheppard said. “What people don’t realize is that the private equity managers, the investment bankers, all the financial intermediaries, are in control of their own taxation and so the debate in Washington about what tax rate to pay misses the big picture.”
The debate in Congress is about whether most of the compensation that fund managers earn should be taxed at the 35 percent rate that applies to other highly paid Americans, or at the 15 percent rate for capital gains.
…
The Blackstone partners’ tax deal, however, is for the sale of part of their stake in the management firm, which is why their profits were taxed at the usual 15 percent tax rate for capital gains. Other private equity firms and hedge funds that have gone public, or plan to, make use of similar techniques, their documents show.
The Fortress Investment Group, which went public in February, uses a form of this tax structure. Two funds that plan to go public soon, Kohlberg Kravis Roberts and Och-Ziff Capital Management, describe similar tax strategies in their preliminary disclosure documents.
All three firms declined to comment. However, several tax lawyers, who could not be quoted by name because their firms had restricted them from making public comments on these issues, agreed in principle with the analysis of the tax structure’s implications.
No Blackstone official would speak for attribution. A spokesman, who insisted on not being identified, said only that such an analysis of the tax implications of Blackstone’s deal was “totally flawed.”
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Of course, as you know, there is a private equity firm named in the above that is active in Canada. How does this apply to Canada? The financial engineers are figuring out “how to turn paying taxes into an annuity.” Their income comes from taxes that otherwise would be paid.
In the G&M
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From Friday's Globe and Mail
July 13, 2007 at 4:02 AM EDT
OTTAWA — The Prime Minister's Office is asking Conservative political workers on Parliament Hill to help draw up a long-term blueprint that could form the basis of new priorities for cabinet ministers and a possible fall Throne Speech.
The request is contained in an e-mail from the Prime Minister's policy office to political staffers for Tory ministers and has also been made verbally. It comes as cabinet ministers and senior advisers believe the government has exhausted its agenda after a controversial spring in the House of Commons.
“We are looking for some ideas from you,” said the e-mail, the contents of which were read to The Globe and Mail. “These ideas will be considered as part of a larger policy recommendation that will go forth later on.”
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Of course, we want the PM to be open to good ideas—especially this PM whose ideology dims his vision of how democracy and free markets really work.
At any rate, the Globe story suggests an PM who tank of ideas is empty. It could just be that the PM and the Finance Minister have been manipulated into promulgating tax nonsense.
It is strange that while the American Congress is investigating these private equity firms for how they operate and how much tax they pay, here in Canada the private equity guys are among the finance Minister’s closest friends and advisers. Do recall that when Nadeau was charged Flaherty chortled that he only consulted with a small number of ‘political’ advisers. ‘Consulted?’ Or, ‘Was told?’ Yesterday, a Canadian associate of The Carlyle Group, a Washington, D.C. based global private equity investment firm with more than $58.5 billion of equity capital under management, was appointed to head Flaherty’s advisory panel on foreign take-overs. Google for “The Carlyle Group.”
One thing that is different between the US and Canada is that in Canada the ownership of the media is so highly concentrated. We’re not getting the reporting that you’d expect of a open and democratic society. But there’s hope. We have the Internet, McCallum and Turner and CAITI. And we’re having this conversation, aren’t we?
Hey Katie,
Some great research here--a lot of eye opening material.
This whole matter seems to become more complex everyday.
I notice that former BCE head Lynton Wilson has been placed in charge of the competition policy review--like putting the fox in charge of the henhouse--between the chair appointment & the other appointees , this thing appears stacked with the same sort that helped Flaherty determine his tax policy all along.
Flaherty`s statements in response to John McCallums town hall in Orillia show as well that noithing at all in his thinking has changed--blame the Liberals for their inaction on this file while making hay of his fierce decisive nature--people forget about how he was influenced by outside forces while Finance Minister of Ontario --but he was decisive--the deficit that he not so deftly tried to cover-up as he left provincial politics has been left barely mentioned in the press.
You are absolutely right in your assessment of the media & it`s very narrow ownership--this has been our achiles heel--the press in the US would have at least pursued this to a far greater extend--they do love their scandals in that country!!!
The next question , is where do we go from here--we will rely greatly on all those things that you mentioned--but , I think our greatest strength will come from each other & our ability to talk to one another & any of those we can influence--the trick is to stay on top of things & do all the research so that when an opportunity arises we can talk about this subject with authority.
I know this does mork--even my Cons MP admitted that I knew substantially more about trusts than he did--the big question was why did he not let me vote in his place--I would have gladly accommodated him!!!!
Katie, you are undoubtably on the right track --I have talked to others in CAITI & it appears that we are becoming more unified amonst ourselves--we cannot totally rely on the organization itself, or Brent , Garth Or John to do the small things we can on our own to put the word out locally.--a grassroots effort is where this thing will be turned around--we will rely on the heavyweights to take on the government in Ottawa.
Have a great day & keep the faith--we will prevail!!!!!
Mike.
Hey Ian
I love your analysis of the NDP especially of Jack and Judy. Perfect fit. Rosen and Urquhart are a totally different story. I wonder who pissed in the corn flakes of these self anointed experts. Seems they take their marching orders from the likes of some higher order. Manulife maybe. Plausible?
What does one expect from a politcal mouthpiece? But don't worry, they will all get their comeuppance in a few months!
In the news, eh?
==================================
The Conrad Black verdict: A victory for capitalism
DEREK DeCLOET
From Saturday's Globe and Mail
July 14, 2007 at 10:37 AM EDT
Sometimes it's not the crime that gets you, but the cover-up.
==================================
DEREK DeCLOET makes an interesting point. If telling a known falsehood to some thirty-two million people doesn’t get you, will a cover-up of the data that proves your case false get you? In the US, very likely. In Canada, not a chance, eh?
Too bad. What we need in Canada is a victory for a capital market that is free from bogus government intervention. Some competent, independent and objective financial reporting would be A-ok too. What say you, DEREK?
"Sometimes it's not the crime that gets you, but the cover-up."--Derek DeCloet.
In Mr Flaherty`s case , it appears that he is immune to any prosecutuion for his crime perpetrated against the Canadian people when he creamed income trusts & also for his subsequent poor handling of the privatization of corporate Canada--he has succresfully ( so far!! ) side-stepped the issue almost completely--the media , other than a few with the balls like Diane Francis , have been complicit with the propoganda arm of this near dictatorship.
To be totally fair to the media members such as DeCloet , they have been surgically manipulated by this government & by their own corporate Canada bosses--the writers must live in fear of reprisal for any article condemning the government or their own owners--this is afteral how they feed their families.
The government is supposedly the highest authority in this country--if we cannot hold them accountable for the crime , then like Mr Black , let`s hold them to account for the coverup.
IF , I could only get my hands on the real 18 pages.............
Mike.
Hello there,
If, the SUE Harper in New York District Court (just to grab the headlines again) tactic doesn’t sound as a good idea to CAITI-s leadership and /or to the blog moderators, how about collecting the necessary signatures to unseat/recall these three morons ( Harper / Flaherty / McKay ) from their MP seats in their own riding? What would it take? I would love to see these morons gone and pay for their actions?
There are thousands of individuals and organizations who signed up with CAITI. How about an attempt to organize CAITI in chapters per local electoral ridings?
http://www.sfu.ca/~aheard/elections/ridings.html
Let’s start something, we all in here agree with what’s being discussed in this blog, the issue becomes identify a goal (unseat the morons) organize, material support, direct action.
What do you think CAITI fellows ??????
Anonymous,
Can you explain the Sue Harper reference--I could not locate it.
Your comment about localizing CAITI groups is spot on--I have found that in South Western Ontario it seems that I am almost the only trust investor in existence--there is no organization at all--any ideas on a way to do this??
I have put my email out there to try to develop some contacts but all it has attracted are a few Tories who are bombarding me with their party line rhetoric--they did prove to be a good sounding board for our position--lost them all when I requested their proof of tax leakage.
Any thoughts would be appreciated.
Mike.
I feel somewhat isolated in the Victoria BC area and I'm sure there are other CAITI members out here feeling the same. We don't have the town halls to attend and we don't have a forum other than this blog and the stockhouse block that I know of. I just don't know who the memebers are or how we can organize locally. CAITI should have all the info if someone can figure out a way to organize the membership into chapters. Then send out e-mails to ask members if they are interested in starting up or joining a chapter in their area...can all be done in coffee shops though I'd avoid Tim Horton's where Flaherty and his gang hang out.
We should try to mobilize by the fall when Tubby and Stubby leave the BBQ circuit, dump the cowboy hats and get back to work.
Ian,
I talked with Brent Fullard yesterday & he is going to help a few of us organize local chapters--it is a matter of picking someone to be interim president & decide on a geographical area you want to cover for now--contact Brent once you have decided these matters & he will email the members in your area & let them know your contact info--then see what gives & go from there.
Will be great to find others in your area & at least have someone to talk to in person whom is like-minded on this subject--if you are like me , the battle has been a lonely one.
The Conservatives will crap their drawers when they get wind of this--they are counting on the summer to make this go away--if you are like me , you won`t forget, ever!!!!!!!!!!!
If there is any way I can be of help my email is as follows michaelagolf@sympatico.ca
mike.
To find others in your area:
If you are a CAITI member .. log in and go to Membership then Contact Lookup .. you can get member names by postal code .. hope this helps .. if you are not a member .. join at:
http://caiti.info/
Dr. Mike:
Well I was at it again. I was out with a client and his wife having dinner. He got to talking about when he left a large company and took his pension dollars with him to self invest. Being as it was a large sum, he got "professional" help. Some 7 or so years later, he has less money now in his pension savings as a result of huge losses (hundreds of thousands) on the diversified portfolio set up by his "professional" financial manager.
(I had a similar experience a long time ago but that's the subject of another post.)
I asked him if this was because of the income trust debacle. He said that he never owned any trusts. This got us to talking about ITs. He said that his financial planner and his accountant told him that Flaherty was right to tax the trusts. When I explained to him how wrong these people were and much tax was he was going to pay as a direct result of this debacle, he and his wife were shocked. They asked why their financial managers didn't know about any of these things.
My theory that I gave them was this. His planers know very well what the facts are but they are protecting their revenue stream. Despite losing hundreds of thousands of my client's money, my client still feels compelled by the prevailing wisdom to have "professional" help. If ITs were left alone, more and more people would have left the "professionals" to make their own way in an excellent diversified financial product. This was going to eat into the "professionals" revenue stream. What better way to protect that stream than to spread falsehoods about ITs and to support and encourage the government to kill ITs.
In any case, we have one more convert. This is how we have to do it. One person at a time.
A little off topic but I thought you might enjoy a great but simple article on how private equities will rape and pillage the companies they take over.
http://www.prudentbear.com/articles/show/2000
RANDY--quite an article--I never knew that was how they managed to pay themselves such large dividends--no wonder they need to revert them to public hands.
Your story about professional financial advice is typical I fear--My wife & I had the same experience over a 20 year period--we invested with a large brokerage house under the care of an investment "professional"--we made very little return on our capital with his so-called professional advice.
We ventured off on our own about 4 years ago & were averaging about 7.2% return per year investing in income funds with varios banks--a fairly safe investment with a great return .
About January 2006 we started to look into income trusts because of their great returns--I even contacted my Cons MP concerning the government policy & he assured me that their intent was to never tax trusts.
So we jumped in & were thrilled with the result--paying the tax on these returns was a small price to pay for the income stream.
The rest is history.
There certainly are a lot of folks who benefited from the trust demise--the professional financial advisors were one group only--the long list of corporations, financial institutions , etc who came out on top with such a decision had no concern at all for the little guy investor on the street.
Mr Flaherty should have been there to protect us in such a case--he instead was there leading the lynch mob.
As you say , one convert at a time--I know I shall not rest until these guys are gone & some civility is returned to government in Canada.
MIke.
Dr. Mike,
Amazing isn't it? BCE is a textbook example of how to maximize the RFP. Watch if BCE isn't taken back public in a of couple years.
What is truly amazing is how these so called "professionals" either are unaware of these things or are simply lying to the public and their clients.
The worst “professionals” are the so called "financial" and "editorial" writers in newspapers. The National Post, with the exception of Diane Francis, is the poster child for inept financial and editorial writers. I would say they qualify for “writer's malpractice”.
These people actually lend credence to guys like Brodie, Flaherty and Harper. This is what makes them way more dangerous than the CONservative government. It’s because they can and do perpetuate the lies and/or ineptitude of the government.
Why aren’t they raising hell about the lost billions of tax dollars as a result of the income trust debacle? Are they inept, stupid, corrupt? I puzzle over it all the time. So far, I’ve settled on inept.
In the meantime, we need to keep writing our MPs, letters to the editors and informing the public one person at a time.
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