One year after the income trust announcement, a person simply needs to connect the dots:
Dot #1: December 3, 2007 as reported in the Globe and Mail:
CI Financial Income Fund has all but thrown in the towel in the bidding war for DundeeWealth Inc. because of some obstacles that appear insurmountable, leaving Power Financial Inc. and Bank of Nova Scotia neck and neck as duelling contenders for the coveted wealth management firm, sources say.
DundeeWealth's controlling shareholder, Ned Goodman, is reluctant to accept cash in exchange for his stock because that would trigger capital gains tax, sources suggested. However, he is also said to be reluctant to accept units of CI Financial as payment for his company, because the securities have an uncertain future.
Dot #2: November 2, 2006
Income-trust crackdown: The inside story
When the telephone rang, Flaherty knew he had to act
SINCLAIR STEWART AND ANDREW WILLIS
Globe and Mail
High-profile directors and CEOs, meanwhile, had approached Mr. Flaherty personally to express their concerns: Many felt they were being pressed into trusts because of their duty to maximize shareholder value, despite their misgivings about the structure.
Paul Desmarais Jr., the well-connected chairman of Power Corp. of Canada, even railed against trusts in a conversation with Prime Minister Stephen Harper during a trip to Mexico, and told him he should act quickly to stop the raft of conversions, according to sources.
Dot #3: Thursday, February 1, 2007
Standing Committee on Finance
Mr. Dominic D'Alessandro (President and Chief Executive Officer, Manulife Financial):
"I will be very brief. It's my opinion that the income trust sector in Canada is increasingly populated by businesses other than those whose principal activity is the operation of real estate or royalty producing assets. In June of last year, CI Financial converted to trust status.
I don't know why we would want a tax regime that would discourage the accumulation of an appropriate level of retained earnings by the corporate sector.
I think underlying some of this is a theory that somehow corporate management can't be trusted to properly employ the capital and therefore they should distribute it out, and then go back to shareholders or unit holders and ask for a reinjection whenever the need arises.
The notion and the implication that somehow the government on this file is responding to initiatives that originated with corporations is not based on reality."
We believe you Dominic. However reality and the actions of Power Financial betray you. The tax fairness plan was never about taxes in the first instance. If it was, then the analysis by the government would have been released as opposed to being disguised.
This issue was only ever about the cost of capital advantage that income trusts, specifically CI Financial, had over your company, Manulife and Power Financial. As an income trust, CI Financial was worth more in the eyes of the marketplace. This is because investors prefer the discipline of management paying out its excess earnings. That model didn’t suit either you or Paul Desmarais for reasons specifically related to your personal goals and the form of your personal compensation. You have placed your personal goals ahead of your shareholders interests. You then enjoined the easily coerced Stephen Harper government to do your exclusive bidding. The government’s actions at your behest have done untold damage to millions of Canadians and has placed Canada in a disadvantaged position in the global economy.
This tax fairness plan has resulted in $65 billion of takeovers in the first 12 months and the loss of $2 billion in tax revenue to the government. This will soon grow to the annual loss of $7.5 billion in lost taxes. Your actions and those of Paul Desmarais Jr. were selfish and destructive. Meanwhile your fellow Co-chairman of the CCCE and fellow member of the NACC, Paul Desmarais Jr., has lobbied the government and is not a registered lobbyist. Who does he think he is, Brian Mulroney?
See the Public Registry of Lobbyists
Monday, December 3, 2007
Posted by Fillibluster at 2:03 PM