Monday, June 30, 2008

News Flash: Dion to rebrand Carbon Tax as Tax Fairness Plan: Sure to bamboozle the press and any inquisitive naysayers

Carbon Tax is too honest and direct.

Green Shift is unproven and vague.

Stephane Dion should use the tried and true name of Tax Fairness Plan. It worked marvelously for Harper and his egregiously unfair and grossly inequitable income trust tax, in which average Canadians pay a 31.5% tax on RRSP holdings of income trusts, but large pension funds do not.

Stephane could assure himself of 99% press support for his new tax plan. Even Terry Corcoran, arch denier of all things “global warming”, would sign up. All Dion needs to do (as Harper did with income trusts) is say that he is “leveling the playing field” and preventing the “unfair shifting of the tax burden on average Canadians”. The sure fire argument will be that it will “strengthen Canada’s social security system for pensioners and seniors”

Maybe the Toronto Star can write a piece in blind support entitled “Carbon Tax 2.0”

By calling it a Tax Fairness Plan, the Liberals can drop the requirement that the Auditor General audit the plan every year to ensure it is revenue neutral.......simpler just to issue 18 pages of blacked out documents.. That’s the new standard of proof for all major news organizations in Canada: CBC, CTV, BNN, Globe and Mail, National Post, La Presse, National Enquirer.

PS: The Liberals are wasting their time asking the Auditor General to annually audit their Carbon Tax, since Sheila Fraser never got off her idle butt in response to the numerous requests that she numerous request that she investigate Harper’s phony and unproven allegations. that income trust cause tax leakage. As such, Sheila Fraser is a major disgrace to her office. Her reasons for not doing so, completely political. Maybe her next posting will be the RCMP, or head of Canada’s nuclear regulatory agency.

BCE: "$42.75 and damn the torpedoes....and the dividends."

Today was supposed to be the final outside date for finalizing the sale of BCE to Teachers' and three US private equity firms. Instead we learn in the Globe and Mail that "Haggling may stall BCE deal till year-end".

The subtitle of the article is "Lenders are balking at the purchase price as buyers dig in; 'they're at $42.75, and damn the torpedoes'.

The article goes on to say that "BCE is expected to announce today whether it will pay out its $294-million quarterly dividend or retain the cash to improve its balance sheet and provide added comfort to nervous lenders. Sources say given the current uncertainty around the acquisition, there is almost no chance BCE will pay out the money.

If the deal doesn't close until year end, that could mean the company's cash position could be bolstered by an additional $900-million."

This is starting to sound more like a case of "$42.75 and damn the dividends". Each quarterly dividend amounts to $0.365 per share. Foregoing a dividend is the economic equivalent of reducing the purchase price. Foregoing the dividends until year end, would mean the $42.75 purchase price has UNILATERALLY become $41.65. Who voted in favour of that deal? Who gave the board authority to recut the deal on those terms?

Meanwhile the board of BCE is simply trying to circumvent shareholders and further shareholder approval, as the Globe article goes on to say "Two high-level sources, one at BCE and another that is participating in negotiations, insisted that the company's embattled board has little appetite for lowering the price of the offer. That would necessitate another shareholder vote, another round of court and regulatory approvals, and perhaps another year's worth of delays. It would also be a black mark on the BCE directors, who were roundly criticized last year for running a clumsy auction."

Well that is far from satisfactory given the Bid Circular upon which shareholders approved this deal and voted in favour of it was very clear that dividends would be paid. The Bid Circular is the binding contract that governs this deal. Didn't BCE just win a case before the Supreme Court that held the bondholders to their contract, namely the indenture?

Does BCE now want its cake and eat it too? Have the bondholders honour their contract, but not have BCE honour its contract with shareholders? You can't be arguing primacy of shareholders on minute and the subordination of shareholders the next. You can't be arguing "reasonable expectations" on eminute and impose unreasonable outcomes the next.

Here is what BCE's Bid Circular had to say about the payment of dividends prior to closing (PS the language about "subject to Board approval" is merely boiler plate languagem since no dividend can be declared without board approval, this langauge does not take away from the expectation that the words contained in the rest of the sentence were intended to convey):


A: Yes. Subject to Board approval, we will continue to pay dividends until the Effective Date. The Definitive Agreement allows us to pay a dividend of up to $0.365 per Common
Share per quarter in accordance with customary record and payment dates.


BCE has agreed that prior to the Effective Time (outside date of June 30 now that all regulatory approvals have been granted) it will conduct its business and cause its Subsidiaries to conduct their business in the ordinary course consistent with past practice,

Sunday, June 29, 2008

Harper on Zimbabwe: "'Perversion of democracy'

Then there’s Harper’s own perversion of democracy:


Report of the Standing Committee on

February 2007

It is imperative that a democratic government be as transparent as possible when levying a new tax so that it can be held to account by its citizens. The Committee, therefore, recommends that the federal government release the data and methodology it used to estimate the amount of federal tax revenue loss caused by the income trust sector.

Here's Harper, the tin pot dictator, calling the kettle black:
Perversion of Democracy
PM joins world leaders in slamming Zimbabwe vote

Saturday, June 28, 2008

Dufus Ed Stelmach falls for it:

Fires back at U.S. politicians over oilsands
Now we are told that the US doesn't want our oil, based on the protests of some environmentalists and a few US Mayors ans politicians.

Good grief, Americans don't want our oil?

Stelmach is a dufus....can’t he see that this is an orchestrated ploy by the US? The US are concocting something from nothing, and want to bargain that nothing for something. Although on a completely different plain, this is what Reagan did with the fantasy called Star Wars. He conjured up a bargaining chip from nothing, like alchemy, and then used it for tangible gain against Russia.

Rather than going hat-in-hand on bended knee, Stelmach’s response should simply be that Alberta will be pursuing west-east energy infrastructure projects in favour of north-south infrastructure, since eastern Canada would be better off and more secure consuming tar sands production, rather than continual reliance on middle eastern oil. In addition, such a west-east energy flow would halt the one way ratchet mechanism at its present unacceptable level under NAFTA, since incremental production from Alberta would be consumed by Canadians and not Americans......who seem to prefer designer oil by Gucci.

Failing that, Ed Stelmach should take a course in Negotiating 101

Stelmach fires back at U.S. politicians over oilsands

Updated Fri. Jun. 27 2008 8:41 PM ET News Staff

Alberta Premier Ed Stelmach fired back Friday at environmentalists and U.S. politicians who have been critical of Alberta's oilsands.

He said Canada has "protected the back" of the U.S. and politicians south of the border should think of that before rejecting oil from Alberta.

"We've been protecting each other in the Middle East and Afghanistan, watching, protecting the backs of Americans . . . we've been good trading partners... we've been together in both World Wars," Stelmach said. "We have such a geographical blessing"

The Alberta premier said that he will take that message to the annual meeting of western U.S. governors and premiers in Wyoming this weekend.

The U.S. government is currently putting together a law that could limit American agencies from using oilsands fuels because of the large emissions associated with their production.

Earlier this week, U.S. mayors voted to encourage their administrations to ban the use of dirty fuels in the vehicles.

Stelmach argues that Alberta is a stable suppler of oil to the U.S. and that oil brought to U.S refineries by pipeline leaves a smaller carbon footprint than foreign oil brought over in tankers.

Stelmach responds to Greenpeace

The premier also criticized a website set up by Greenpeace, saying that it misinformed people about Alberta.

The website,, is set against the backdrop of oilsands development and mocks Alberta's environmental record, showing kids playing on oil-covered beaches.

"We are now in the crosshairs for many of the NGO's in not only the United States, but the world and we are going to see more of it and we have to get the correct information out there," Stelmach said. "It's disgusting."

There were fears that the website may drive tourists away from Alberta but Greenpeace said the website was clearly satirical.

With files from The Canadian Press

Friday, June 27, 2008

The hypocritical Jim Stanford, Economist for the CAW

Jim Stanford had this to say today in a CAW press release on the findings of the Red Wilson panel:

"We need an investment policy that better regulates foreign takeovers and that allows Canadians to capture a larger share of the value of Canadian resources."

How very hypocritical, since it was Jim Stanford who also praised the double taxation of income trusts held by average Canadians in the only retirement vehicle broadly made available to them, namely RRSPs.

What Jim Stanford was doing wading into the arena of tax policy as it pertains to public income trusts is beyond me. Jim Stanford has demonstrated that he knows virtually nothing about how capital markets function and even less about the true level of taxes that Ottawa collects from income trusts. His blind dogmatic approach to the topic of income trusts and his support for the actions of Jim Flaherty means that he had supported the very opposite outcome that he is espousing above.

The double taxation of income trusts has INDUCED foreign takeovers. Seven of the largest 25 takeovers of the last five years can be tied to the income trust tax blunder. Has Jim Stanford heard of BCE? On the topic of the energy sector that Jim Stanford has wrapped his arms (but not his mind) around, he needs to realize that 20% of Canada’s oil and gas sector and 80% of Alberta’s energy infrastructure sector reside in public trusts. Their significant devaluation since Halloween 2006, that persists to this day, has made them sitting ducks for foreign takeovers.

Jim Stanford’s dogmatic support of the double taxation of income trusts has been the very policy that led to Prime West Energy, a $5 billion Canadian company being acquired by Abu Dhabi Energy, a middle eastern oil company. Also the trust tax has INDUCED the takeover of TransAlta Power by Hong Kong billionaire Li Ka Shing.

Canadian investors in these two companies were shunted aside in favour of foreigners because of a tax policy that favours foreign investors to domestic much for Jim Stanford's comment about the need for "Canadians to capture a larger share of the value of Canadian resources." No doubt he had manufacturing jobs in mind and not the sourcing of retirement income for the 75% of Canadians without employer pensions Do you suppose the CAW pays Jim Stanford a pension?

Perhaps Jim Stanford needs to perform a little research into the “unintended consequences” of policies that he blindly supported. He might want to start by visiting where a wealth of information from very credible sources is available. He might want to start by reading the section entitled Income Trust Mythbusters.

At the very least, Jim Stanford needs to read the Deloitte study entitled
Income trust buyouts: Lots of activity, little tax revenue

We look forward to the CAW’s revised policy position on income trusts, otherwise grand pronouncements like those in today’s CAW press release are simply pandering feel-good rhetoric, devoid of purpose and lacking in resolve.

Harper promotes another Department of Finance Tax Leakage conspiracy theorist: Bob Hamilton

First it was Mark Carney, now it’s Bob Hamilton

Bob Hamilton is the intellectually challenged bureaucrat who claimed that the existence of tax leakage was proven by the fact that the trusts fell in value after the announcement......huh? if your house wouldn’t fall in value if a new tax were imposed on it.....that proves nothing about alleged tax does however prove that to get ahead in Ottawa you have to be adept at spinning lies.


June 27, 2008

Prime Minister Stephen Harper announced today the following changes in the senior ranks of the Public Service:

Bob Hamilton, currently Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance, becomes Associate Secretary of the Treasury Board, effective August 15, 2008.

Thursday, June 26, 2008

The stagflation equivalent of Canadian ownership: BCE is the worst of both worlds

By: Brent Fullard
Catalyst Asset Mangement Inc.

Once again we have the Globe and Mail to thank for confusing theory with reality. This time it’s Andy Willis up to bat, espousing all the great things to be learned form the Red Wilson report. The following passage caught my attention:

“In what's sure to be one of the more controversial recommendations coming from Lynton (Red) Wilson and his blue-chip team, the federal Competition Policy Review Panel will recommend knocking down restrictions on foreign ownership of sectors such as air transport and telecom. The economic underpinnings of Mr. Wilson's thesis are undeniable. Increasing competition and lowering the cost of capital can only work in our favour.”

So Red Wilson and the Globe would have us believe that reducing foreign ownership restrictions will lead to a lower cost of capital. How do you suppose this will play out for Telus in a post BCE-LBO world? Or BCE itself?

Telecom is a highly capital intensive business, made more so by the fact that technology is constantly changing. BCE and Telus have had no constraints whatsoever in accessing capital here at home. Their incremental need for foreign capital investment is zero, as they both testified in 2005 before the Industry Committee. Taking these companies private will bring about the highest conceivable cost of capital, since as in the case of BCE their debt will go from investment grade credit to deep junk bond status, easily adding 300 – 400 basis points to their cost of debt, in a balance sheet comprised of some 88% debt. Meanwhile the 12% sliver of equity on which these companieS will operate will be owned by private equity whose return expectations will be in the order of 30%+.

As such, we have the worst of both worlds. Increased foreign ownership in exchange for dramatically higher cost of capital. This is the stagflation equivalent of Canadian ownership and the higher cost of capital will translate into higher cost of service for consumers and lower competitiveness and slower roll out of new services.. Meanwhile had BCE adopted the Catalyst Proposal (which it failed to disclose to shareholders) l it would have preserved the existing Canadian ownership of BCE, while simultaneously achieving the lowest conceivable cost of capital, as its debt would have been preserved as investment grade credit and its incremental cost of equity would have been 6.00%, which would be the running yield for a security that paid $2.55 per annum and which trades at $42.50.

At $1.00 for his services, perhaps Canadians got what they paid for with Red Wilson, or what Flaherty is fond of calling “value for money”.

Who needs Morgan McCague now that we have Red Wilson?

By: Brent Fullard
Catalyst Asset Management Inc.

Morgan McCague is the token shareholder that Teachers’ ham-handedly used to get around its 30% investment limit under pension regulation whilst simultaneously (?) satisfying the 50%+ control provisions of the CRTC in acquiring BCE.

As I had predicted a year ago, the Red Wilson panel would be recommending relaxed foreign ownership of regulated industries in Canada such as telecommunications. They did that very thing in today’s report.

This was an eventuality that Catalyst Asset Management addressed in its letter to BCE’s board dated June 25, 2007 where I indicated this was a very inopportune time for BCE shareholders to sell , since the pending relaxation of foreign ownership of BCE would mean higher values would be attainable in the broader auction that would occur if foreign ownership of BCE were to be relaxed.

Perhaps I was speaking over the head of the BCE board with the words in the letter that read: “no “frictional costs” or involuntary loss of a latent value to a third party, as full equity value of BCE is retained by existing shareholders”.

That was my delicate way of saying don't repeat the mistake you made by selling Yellow Pages to US private equity via an LBO at 50 cents on the dollar.

As for Morgan McCague, his services will soon no longer be needed, since US private equity firms Providence Capital Partners, Madison Dearborn and Merrill Lynch will soon be able to buy a company like BCE without the trouble and inconvenience of partnering up with a token Canadian Pension Fund like Teachers’

Whoopee. Just in time for the LBO of Telus

Wilson panel report: As with BCE, Canadians perform the destruction, foreigners renew. Repeat until bankrupt.

Cut takeover control, Wilson panel says

"We do not believe that it is desirable - or possible- to stop the natural rhythm of creative destruction and renewal, which is a key tenet of a market-based economy," the report states.

Red Wilson would know, as he did more than his share of the destruction part, while CEO of BCE.

Cut takeover control, panel says

June 26, 2008
Les Whittington
Ottawa Bureau

OTTAWA-Despite concerns about the recent wave of foreign takeovers of Canadian corporate mainstays, a blue-ribbon panel is recommending the federal government water down its foreign investment controls, with the exception of cultural industries.

The panel, which was commissioned by the Harper government, also says the existing prohibition against bank mergers should be lifted, which could open the way to consolidation among banks and other financial institutions if federal watchdogs judged them to be in the public interest.

The thrust of the recommendations in the report titled "Compete to Win" is Canada needs to reduce barriers to economic competition and embrace globalization in a bid to strengthen the economy, work smarter and enhance the country's long-term standard of living.

"The panel believes that Canada needs to be more open to competition, as competition spurs the productivity enhancements that underpin our economic performance and ultimately our quality of life," said L.R. Wilson, the well-known businessman who headed the year-long study of Canada's competition policies.

It is not clear whether the report will lead to new legislation or regulations governing investment from the Harper government or when that might happen. Industry Minister Jim Prentice, who formally accepted the report this morning, would only say he will go over it and provide comment at a later date.

The reports recommends:

– Amending the Investment Canada Act to reduce barriers to foreign buyouts by significantly raising the threshold for reviewing a transaction to $1 billion in gross assets from the current level of $295 million.

– Requiring the government--not the acquiring company--to prove whether or not a corporate takeover of a Canadian firm would be contrary to the national interest.

– However, the panel says the cultural sector should be exempted from the application of less-stringent takeover rules. The panel also recommends "a broad review" of the country's cultural policies.

– Watering down foreign investments restrictions on key sectors such as air transport, uranium mining and the telecommunications and broadcasting sector.

– The federal government should reverse a 1998 decision that effectively bans mergers between large financial institutions. That stance is no longer suitable at a time when banks are merging around the world and the Internet is opening up fresh choices for consumers, the panel said. Such consolidations in Canada should be considered if they are judged by regulatory agencies to be in the public interest, the report indicates.

– The creation of a Canadian Competitiveness Council to press the public and governments to pay more attention to making the economy function more efficiently at a time when global competition is asserting new demands on business and employees.

"Competition is global, and the pace of economic activity will continue to accelerate," Wilson said. "We must ensure that our policies and our mindset reflect global realities and the national interest."

Wilson said the panel was concerned about the recent acquisitions of Canadian corporate icons such as Alcan, Falconbridge, Inco and Hudson's Bay.

– Despite that, the study concludes that, with more Canadian companies finding success internationally, it would be a mistake to try to limit the effects of global corporate consolidation at home.

"We do not believe that it is desirable - or possible- to stop the natural rhythm of creative destruction and renewal, which is a key tenet of a market-based economy," the report states.

My meeting with the Toronto Star Editorial Board of April 12, 2007

Bob Hepburn (pictured here) has an editorial piece in today’s Toronto Star in defense of Louise Arbor and her work at the UN on human rights.

I met with Bob Hepburn and the Toronto Star Editorial Board on April 12,2007,at which time he was the Editor of the Editorial Page of the Toronto Star. If you can believe this, Hepburn and his colleagues were actually DEFENDING the 18 pages of blacked out documents used by Flaherty as ”proof” of alleged tax leakage from income trusts.

They agreed with Harper that this information should not be disclosed and agreed with Harper that it was a matter of National Security for this information not to be disclosed. I was totally dumbfounded. I thought I must have been meeting with the Editorial Board of Pravda and not the Toronto Star.

As such, Bob Hepburn is a total hypocrite. What about human rights here at home? Defending blacked out documents? Puhlease.

Hepburn demanded to know my reasons as to why Harper would have done something if it weren't to solve tax leakage?

I told him that was his job as a reporter to figure out. He then threatened to end the meeting, unless I gave my explanation.

I said that I did so reluctantly, since that was the reporters job, not mine. Half way through explaining that the many groups who benefited from this policy had lobbied the government, for example lifecos like Power Corp and Manulife, he stopped me before I could finish, and dismissed what I was saying with the comment "That's just a conspiracy theory".

At which point I told him that he was the one who wanted my answer and then he cuts me off before allowing me to finish. I told him the only conspiracy theory was the one being advanced by his paper, namely the conspiracy theory of tax leakage caused by income trusts and his ”proof” of alleged tax leakage.

The Star is owned by Torstar Inc. Torstar has two classes of shares. Voting and non-voting. The voting shares are the corporate abuse by which the Honderich and Atkinson families control the company. This control in turn assures the Star of its editorial freedom under the Atkinson Principles.

Many newspapers had converted into trusts to achieve higher valuations through appealing to income oriented investors, who pay taxes of 38% on these distributions. These income oriented investors are not interested in investing in the "crap shoot" known as the stock market to fund their retirement income needs. Nor do they want to own GICs that pay 2.00%. Income trusts emerged to fill their needs, on which they happily paid taxes, without the benefit of the tax benefits associated with dividends.

Torstar was being pressured to convert to a trust. The Board of Tortsar had a duty to maximize shareholder value, much like was argued with BCE before the Supreme Court.

Converting to a trust would have meant abandoning the Voting/Non voting share structure. This would have meant these Atkinson Principles would be in jeopardy. So too the Star's "Editorial Freedom".

Hence the Toronto Star's editorial stance on trusts is to kill them........and support the government's lies for doing the conspiracy theory known as tax leakage etc etc.

The Toronto Star is a joke. They value their so called editorial freedom, more than they do the truth. The Star needs to learn about Maslow’s Hierarchy of Needs. The Star has no business spouting off about human rights abroad if it is a willing participant in truth suppression here at home and the resultant $35 billion raiding of seniors nest eggs. In so doing the Toronto Star is helping to aid and foster an intellectually corrupt regime known as the Harper CONs

Here was my follow up email after the meeting:

From: Brent Fullard
Date: Thu, 12 Apr 2007 20:17:23 -0400
Subject: Jack Mintz Quote


Thank you for the opportunity of meeting with the Editorial Board of the Toronto Star. In our meeting today and in response to a question that you raised with me, I made reference to correspondence I received from Jack Mintz that directly contradicts what he is saying in the public and the basis upon which the tax leakage numbers he has been advancing in the public have been based. Here is what he confided to me in an e-mail dated November 28, 2006:

"I do want to point out that there is a serious flaw in some analyses especially on the taxation of pension and RRSP accounts. Finance was not right to treat the impact is [sic] zero."

As I pointed out to you, this is the very basis upon which “tax leakage” turns. Wrongly excluding these taxes results in tax leakage. Correctly including them results in tax neutrality. Below is a press release issued by Dennis Bruce of HLB Decision Economics following the testimony he gave at the Public Hearings. The operative phrase is: "While federal budgeting is done on a current basis, federal policy analysis is done on a life-cycle basis. Accounting for the life-cycle effects of tax changes, namely deferred taxes, is appropriate in the consideration of tax policy."

Brent Fullard
President and CEO
Canadian Association of Income Trust Investors

647 505-2224 (cell)

Independent economists discredit govt tax leakage claims - 10 year phase-in of tax to have minimal costs

OTTAWA, Feb. 1 /CNW Telbec/ - In remarks delivered to the House of Commons Finance Committee Thursday, Dennis Bruce, Vice President of HLB Decision Economics Inc., provided data and supporting documentation to discredit the Department of Finance's tax leakage claims.
"The department is sharply overstating tax leakage," said Mr. Bruce, who added that there would be minimal costs associated with a 10 year phase-in of the new tax on income trust distribution payments.
HLB Decision Economics, an Ottawa-based independent consulting firm that provides analytical consulting services to industry and governments worldwide, has been working on behalf of the income trust sector to develop a comparative analysis of taxes generated under the income trust structure versus the corporate structure.
Mr. Bruce told committee members that his firm worked with the Department of Finance as it prepared the federal government's 2005 consultation paper on the tax effects of income trusts. Specifically, HLB was asked by the department to develop a common methodology and assumptions for deriving tax leakage estimates.
Mr. Bruce said that HLB and the Finance Department achieved consensus on the methodology with one exception - they disagreed on whether to include deferred taxes. Deferred taxes are derived from distributions, capital gains, and dividends received in tax exempt accounts. While they are not immediately taxable, they are taxable upon withdrawal from such accounts.
"The discussions that you are hearing about deferred taxes reflect confusion about budgeting convention versus policy analysis," said Mr. Bruce."While federal budgeting is done on a current basis, federal policy analysis is done on a life-cycle basis. Accounting for the life-cycle effects of tax changes, namely deferred taxes, is appropriate in the consideration of tax policy."
Mr. Bruce went on to outline the factors that resulted in the differences between HLB's tax leakage estimates and the tax leakage figures put forward by Finance Minister Jim Flaherty. These factors include:

1) The Department's assumed effective corporate tax rate for energy
trusts fails to reflect the reductions in the tax rates for resource
corporations from 2004 through 2006, from 27.12% to 24.12%. This
results in an overstatement of tax leakage of $84 million;
2) The Department's figure for income trust units held in tax exempt
accounts is overstated. Derived from data from surveys, Statistics
Canada, interviews and Scotia Capital Markets data, the percentage of
units held in tax exempt accounts is 31 percent, less than the
Department's 38 percent estimate. This results in an overstatement of
tax leakage of $125 million;
3) The value of deferred taxes is excluded from the Department of Finance
analysis. This results in an overstatement of tax leakage of
$80 million; and,
4) The Finance Department's atypical inclusion of the impact of limited
partnerships, which reduces the tax leakage to $45 million.
5) The impact of future legislated tax changes post 2010 has not been
accounted for. Doing so reduces the ongoing federal tax leakage after
2010 by $232 million.

Mr. Bruce stressed that the discrepancies between HLB and the Finance Department led his firm to conclude that the Finance Department is "sharply overstating tax leakage."

Specifically, HLB concluded that:

- Federal tax leakage for 2006 was $164 million, not the
half billion dollars stated by the Department; and,
- Ongoing tax leakage, post 2010, after taking into account legislated
tax changes, is $32 million per year, about five percent of the
Department's figures.

For further information: Dennis Bruce, Vice President, HDR - HLB Decision Economics Inc. (613) 234-0080; Cell: (709) 632-1708

This year's boobs who showed up at Rideau Hall

Last year it was the Hells Angels' boobs who showed up at Rideau Hall. This year it's the Paradis Riders.

Fortier. Paradis and Moore. Curly Larry and Moe.

By definition, anyone who sits in a Stpehen Harper cabinet is a stooge.

Operative word: sits.

Why does Michael Fortier look like he just got away with robbing a bank? Is it because he is unelected or is it because as former Minister of Public Works he did actually rob a bank?

Let the Paradise Riders roll.

Wednesday, June 25, 2008

James Moore appointed Minister of Cadman Cover-up

Here's James Moore's reward for protecting Stephen Harper from Harper's self admitted election bribery activities and attempts to buy independent MP Chuck Cadman's vote.

Cabinet swap sees Emerson shifted, Moore promoted

Updated Wed. Jun. 25 2008 11:30 AM ET News Staff

David Emerson has been officially shifted to his new role as Canada's foreign affairs minister following the removal of Maxime Bernier, who was forced to resign over a recent scandal.

The appointment is part of a cabinet mini-shuffle. Several others were either sworn into cabinet for the first time or shuffled to new portfolios during a Wednesday morning ceremony at Ottawa's Rideau Hall.

Sen. Michael Fortier was moved to the International Trade post to replace Emerson and junior minister Christian Paradis was promoted to take over the Public Works portfolio from Fortier.

James Moore, a parliamentary secretary from B.C. who is considered a rising star in the Conservative party, was promoted to cabinet to take on the role of secretary of state for official languages, the Asia-Pacific gateway and the Vancouver Olympics.

* Watch full coverage of the swearing-in ceremony, scheduled for 11 a.m. ET at Rideau Hall in Ottawa, on or on CTV Newsnet.

Bernier resigned from the Foreign Affairs post after it was revealed that he had left classified documents at the home of Julie Couillard, his former girlfriend. It had been revealed earlier that Couillard had personal ties to people involved in Quebec biker gangs.

Emerson was considered by many to be a shoe-in for the post, and a Department of Foreign Affairs news release on Tuesday said the B.C. minister will be attending a G8 meeting in Japan this week, seeming to confirm the appointment. As a result, he was not in Ottawa for the ceremony.

"It's a very good appointment. Mr. Emerson is one of the best cabinet ministers Mr. Harper has. He chairs many cabinet committees, including the special committee on Afghanistan, the foreign affairs and defence committee of cabinet, and he's going to bring some mature leadership to foreign affairs."

Fife suggested that experience will come as a great relief to the department after the brief stint by Bernier.

Meanwhile, Bernier is scheduled to make a speech to his constituents on Wednesday evening -- one of his first public engagements since losing his job.

Fife said he expects Bernier's speech will be vetted carefully by the Prime Minister's Office, and he doesn't anticipate any new details about the scandal that saw him lose his job.

Monday, June 23, 2008

Why does Flaherty's law firm pay no taxes? Zilch? Nada?

Flaherty Dow Elliot: Your friendly neighbourhood tax flow through entity.

Perhaps Canada's Minister of Hypocrisy, Jim Flaherty can explain why his personal income trust tax flow through entity (FTE) that goes by the name of Flaherty Dow Elliott (FDE) is exempt from his 31.5% tax. I thought we had to "level the playing field"? I thought tax leakage was bad? Is Flaherty a free-loader?

Even McCarthy Tetrault lawyer John Manley claims we can’t have different kinds of businesses taxed differently.....however he too wants to make an exception for certain different kinds of businesses and not other different kinds of businesses. Make sense?

Question of the day: Should ambulance chasers get special tax breaks in recognition of the important role they play in society?

Flaherty Dow Elliot

Our experience in civil litigation focuses on representing our clients in all aspects of motor vehicle accident, personal injury and property claims in courts and tribunals throughout the Province of Ontario.

Our clients range from major insurers to individuals. Our commitment and tradition is centered on servicing our clients with practical, sound and creative advice in an efficient and cost-effective manner.

Lawyers in our Toronto, Whitby and Ottawa offices are personable and professional, and respectful of their commitment and obligations as officers of the court.

We strive to represent our clients in the true spirit of great advocacy and the proud traditions of the profession.

Saturday, June 21, 2008

New Poll Out: Which policy was designed to screw the West?

"(The carbon tax plan) is like the national energy program in the sense that the national energy program was designed to screw the West and really damage the energy sector - and this will do those things," Harper told a small crowd in Saskatoon.

Get your votes in. Which Policy was most successful in screwing the West?

(a) Ed Clark’s/ Pierre Trudeau’s National Energy Program that instituted a 12% PGRT tax on petroleum and gas revenues?

Mark Carney’s/Stephen Harper’s Tax Fairness Plan to double tax energy trusts at 31.5% and raid seniors nest eggs to the tune of $35 billion and inducing takeovers in Canada's energy sector by middle eastern oil firms like Abu Dhabi Energy and Hong Kong billionaires like Li Ka Shing?

Dion’s Carbon tax to shift $15 billion of income tax collection to carbon producing activities (or some such thing?)

Stephen Harper was very adversely affected by the NEP as his Wikipedia entry reveals, since at the time of the NEP, “Harper then enrolled at the University of Toronto but after two months he dropped out, then moved to Edmonton, Alberta, where he found work at Imperial Oil, in the mail room.[3]”

Supreme Court enforces “explicit bargain” BCE made with its security holders.

However, BCE must now uphold its bargains too.

By: Brent Fullard
Catalyst Asset Management Inc.

At various points throughout its sale process, BCE has attempted to have its cake and eat it too. For example, it went through the pretense of a “public auction process” and all the perceived benefits of doing so, only to act in a way that thwarted its two best bids, that of Telus (by the process known as frustration, in the legal sense) and that of Catalyst Asset Mangement (by the process known as deliberate non-disclosure).

Another example whereby BCE sought to have its cake and eat it too was choosing to implement the deal by opting to go the Plan of Arrangement route as opposed to the Takeover Bid route, thereby garnering all the attendant advantages to BCE (i.e. lower vote threshold for approval, ability to co-mingle preferred share vote with common vote, absolution from post deal law suits, etc. etc.), without assuming the negative trade-offs associated with a Plan of Arrangement, namely convincing a court that it conducted itself in a manner that was “fair and reasonable” to affected securityholders.

However the Supreme Court has now ruled and their ruling is what all must abide by. BCE included. It was BCE/Teachers’ lawyer Benjamin Zarnett who successfully and succinctly argued before the Supreme Court on Tuesday that the bondholders were seeking provisions that were not originally “bargained for” in the indenture. The Supreme Court’s ruling means that subsequent representations made by BCE that served to extend, in the minds of the bondholders, what was originally bargained for with bondholders obviously did not hold and did not sway the court.

Who am I to argue? Meanwhile who am I to argue with the Supreme Court that BCE made an explicit bargain with its bondholders and that the bondholders will be held to that bargain.

This is the point where BCE’s attempts to have its cake and eat it too must end, since BCE also made an explicit bargain with its common shareholders as contained in the Bid Circular dated August 7, 2007 by which common shareholders approved the deal. The explicit bargain contained therein is BCE’s unequivocal and unambiguous statement that dividends would be paid on the common shares until the deal closes. It appears that BCE, by suspending the declaration of its recent quarter’s $0.365 dividend is planning on reneging on that explicit and implicit “bargain” it made with its common shareholders when they approved this deal (assuming the deal even proceeds, which may not occur due to lack of financing).

This is too cute by half, if not too cute by quarter. Not paying the $0.365 dividend is the economic equivalent of lowering the takeover price from $42.75 to $42.385. It only adversely affects common shareholders, not employee stock option holders and not preferred shareholders who BCE co-mingled with the common for purposes of enhancing the probability of a successful vote. What’s with that? Why the disparity in treatment? Why the unilateral change in deal terms? Who’s on first?

The relevant sections of BCE’s bid circular read:


Yes. Subject to Board approval, we will continue to pay dividends until the Effective Date. The Definitive Agreement allows us to pay a dividend of up to $0.365 per Common
Share per quarter in accordance with customary record and payment dates.


BCE has agreed that prior to the Effective Time (outside date of June 30 now that all regulatory approvals have been granted) it will conduct its business and cause its Subsidiaries to conduct their business in the ordinary course consistent with past practice.

So where’s the dividend paid in a manner that's "consistent with past practice"? BCE can’t have its cake and eat it too. It can’t have the Supreme Court enforcing the “bargain” it made with bondholders in the Indenture one minute and the next minute conduct itself in a manner whereby BCE does not feel bound by the “bargain” it made with shareholders to pay the dividend as explicitly and implicitly provided for in the Bid Circular.

Bottom line: What do you suppose the “reasonable expectations” of common shareholders was with respect to the regular payment of dividends prior to closing? To forego them in order to heighten the probability that Management’s Stock Options would continue to be be fully “in the money” at $42.75? Is that what they "bargained" for? Methinks not.

Friday, June 20, 2008

Harper to run next election on promise to never tax carbon

Harper will say anything you need to hear to get elected. It worked once already and the end result was that “seniors' nest eggs” got “raided”.

This time Harpster will promise to never tax carbon. Nine months later under some false pretense, he will do that very thing. The press won’t mind, as they’ll simply roll over.

His election promise will go something like this:

“You know where the Liberals stand on a carbon tax. Whether it is death taxes or taxing carbon, a Conservative government will never let this happen.”

PM: Dion carbon tax will 'screw everybody'
Jun 20, 2008 04:25 PM
Jennifer Graham

From the duplicitous Ian Brodie, famous for penning the words "Canadians must trust"

PM's Chief of Staff says no recollection of free-trade lockup talk
Globe and Mail Update
June 19, 2008

See also: Ian Brodie on Broken Promises and Epic Betrayals

Supreme Court to rule today in case of Dumbing Down versus Business Ingenuity

By: Brent Fullard
Catalyst Asset Management Inc.

BCE's oppressed bondholders argued before the Supreme Court that they were seeking “business ingenuity” from the Board of BCE. All they got instead from BCE’s board was an exercise in “dumbing down”, that seemed to capture the fancy of at least one Supreme Court justice

The Supreme Court will render a decision today on whether dumbing down trumps business ingenuity in Canada. Why am I not optimistic, as this is Canada after all?

Unfortunately, the bondholders had little business ingenuity of their own to offer up that didn’t sound like an exercise in a zero sum game. Not mentioning the Catalyst Proposal puts them in the same camp as BCE, who failed to disclose this “elegant” solution to their ostensible goal of maximizing shareholder value. Would the fact that the Catalyst Proposal not have accelerated unvested employee stock options or resulted in the granting of a free carried interest to management of a privatized BCE have had anything to do with this non-disclosure sleight of hand?

As BCE ruling nears, stakes have never been higher

From Friday's Globe and Mail

June 20, 2008 at 4:10 AM EDT

How long do you suppose Nortel could have faked a monthly distribution and a 95% payout?

Question for David Olive of the Star:

Is there any chance that the lottery tickets known as stock options motivated this criminal behaviour at Nortel? Or the criminal backdating of options by virtually every major tech firm, including RIM, as the means to deprive the rightful owners of theirshare of the company in question.

Owning shares is not akin to owning a business. Owning income trusts IS akin to owning a business. That’s’ why Corporate Canada so desperately prefers the corporate model......they have learned how to “game” it to their personal advantage. Not so the trust model to anywhere near the same degree.

Meanwhile these same “corporate” folks control the media who gladly and dutifully spawn nonsense about alleged tax leakage from income trusts in true Pravda fashion. David Olive is at the forefront of that with his Income trusts 2.0 editorial nonsense of last fall and wholly unproven assertions of tax leakage with the words "which the entirety of Corporate Canada was threatening to exploit at a massive cost to the federal treasury."'re a reporter (ahem), where's your proof?

Maybe David Olive would be more qualified to inform his readers about how the Toronto Star opposes income trusts because Torstar's converting to an income trust would mean discarding the corporate abuse known as Torstar's voting/non-voting share structure, which is the corporate abuse whereby the editorial policy of the Star, known as the Atkinson Principles, are preserved by the founding family.....who are long on virtue, and short on cash, so they uphold their editorial virtues and corporate voting.non-voting struture form the threat of an income trust conversion by propagating government lies about tax leakage and the evils of income trusts to their unsuspecting readers. Which begs the question: What price editorial freedom?

Corporate crackdown
Fraud charges against Nortel executives confirm their spectacular failure of corporate governance

June 20, 2008
David Olive
Toronto Star

Nortel Networks Corp., Canada's former tech star and once the 12th-most valuable company in the world, is now recognized as a spectacular failure in corporate governance with few equals in any nation or industry....

The RCMP made that status official yesterday, laying fraud and other criminal charges against former Nortel chief executive Frank Dunn, erstwhile chief financial officer Douglas Beatty, and Michael Gollogly, former corporate controller. Nortel thus joins the pantheon of disgraced high-fliers that includes WorldCom, Parmalat, Enron and Tyco.

Full article here.

Thursday, June 19, 2008

Canada's double standard for securities fraud

By: Louis M.

Below is the copy of the RCMP statement against the Nortel executives. For the Globe story, see "RCMP charge former Nortel executives"

Notice that in the Nortel statement, the RCMP says so and so "...circulated or published a statement or an account whether or not it was written or oral, knowing that it was false in a material particular, with the intent to deceive or defraud..." This statement causes me great intellectual angst. On what reasonable basis can the Department of Finance September 2005 Consultation Paper or the 2007 presentations by the Department of Finance to the FINA Committee be distinguished from the Nortel case?

The claim "Income trusts cause tax leakage" was circulated and published by written and oral presentation, when the claim was known to be false, and was made with the intent to deceive. How is that different? It is not different in substance. It is different only in the fact that the Nortel executives do not have Parliamentary immunity but those who provided testimony to Parliament do. There is, of course, the issue of "Why hasn't Parliament not sought to punish the officials and intervenors who made false presentation to Parliament?" Perhaps they will some day.

As we know, the Auditor-General has granted the income trust tax decision a free pass by reason of it being a "policy decision." The proponents of the tax may have a probable case (with a probability of less than 5%) that income trusts will cause Canada to become economically inefficient. But that is not the case that was made to Parliament. The case to Parliament "was known to be false, and was made with the intent to deceive." In any case, the role of the A-G is to ensure that the information considered by Parliament is materially true and correct.

Do that in the US and cause $1 billion of losses, you'll be charged; your personal net worth will be wasted on legal fees; and you'll go to jail. Do that in Canada to Parliament and cause losses of $35 billion, you'll be named "Newsfaker of the Year."

OMERs squeals: " Ottawa may face 'crisis' over BCE challenge"

Pension funds are extremely narrow self-interests that oppose my interests and the interests of the 75% of working Canadians without employer pension plan participation.

Here we have another iteration of the “sky is falling” that led to Halloween 2006.......funny (and grossly inequitable) that Flaherty gave pension funds a special “carve out” from his draconian 31.5% tax. They pay 0% tax on income trusts held in their private portfolio. OMERs for example bought undervalued Golf Town Income Trust in 2007 and are not subject to the new tax. Buying undervalued trusts is what OMERs stated will be one of its major themes in 2008

Two questions:

(1) How does that stem alleged tax leakage?
(2) This is a Tax Fairness Plan?

Meanwhile on the topic of BCE, Teachers’ violated the spirit and intent of the federal pension regulations that govern it, by acquiring shares to which are “attached”, directly and indirectly, more than 30% of the votes of BCE.

As to the permsissibility of that maneuvre by FSCO, The CRTC Chairman stated : “I am astounded”.

On the question of bondholder oppression, hopefully the SCC will be as hard to fool as the CRTC Chairman.

See also: The self-dealing sovereign wealth funds known as OMERs, Teachers' and PSP

Ottawa may face 'crisis' over BCE challenge
Might force rules rewrite, OMERS chief cautions
National Post
June 24, 2008

BCE and the Catalyst Press Release of one year ago

By: Brent Fullard
Catalyst Asset Management Inc.

Bell Canada bondholders argued this week before the Supreme Court that they wanted “business ingenuity” to be brought to bear on this situation by the Board of BCE and to have been offered a solution that respected their “reasonable expectations”.

Perhaps the bondholders can explain what part of “the Catalyst Proposal preserves the investment grade credit of Bell Canada’s bonds” that they don’t like or felt wasn’t worthy of presenting to the court as evidence of deliberate oppression in the face of contemporaneous alternatives to the contrary?

Why did the bondholders not present these facts about the existence of the Catalyst Proposal to the trial judge? The QCA? The SCC? Didn’t they do their homework? What dynamic is at play within the larger financial institutions of which these bondholders are merely subsets, that compels them to ignore this pivotal argument at their disposal?

It’s quite difficult to be helped in this world of ours, when, as the Bell Canada bondholders have done, you go out of your way to deny the helping hand that had been offered in a contemporaneous manner and in substance far greater than some plaintiff letter sent to BCE by bondholder PH&N seeking a meeting and alluding to some non-descript so called “solution”, on which the bondholders have based much of their case.

Why are the bondholders allowing BCE to make inherently misleading statements to the Supreme Court that “Three offers were submitted at the end of the auction process..... Moreover, all of these offers would have reduced the credit ratings of the Debentures to below investment grade...”, when that doesn’t conform with reality?

The truth is the bondholders can argue this case any way they want, however there is something fundamentally wrong with our system of justice if a landmark ruling that will affect the very nature of how our capital markets operate is being decided on a subset of the facts. It’s almost as if the Supreme Court will become complicit in the denial of the true “business ingenuity” that exists in our country in what may prove to be court ordered exercise of “dumbing down”. The BCE bondholders are pursuing a narrow commercial outcome based on a narrow set of facts. Who made them the champions of anything? Not me.

The Catalyst Proposal and its non-disclosure by BCE is the smoking gun argument that definitely proves two key points. (1) BCE acted in bad faith and/or exercised poor business judgment. (2) BCE was presented with a win-win solution that it failed to publicly disclose or rationalize its reasons for not pursuing. A solution which overcame the constraints imposed by the zero sum game known as the Teachers’ LBO. A solution which maximized shareholder value AND preserved Bell Canada’s investment grade credit (see attached). This would have provided Supreme Court Justice Abella considerable comfort and insight when she asked “What ought [BCE] to have done? What would it have meant (in practical terms)?” in her attempts to better understand whether the zero sum game doctrine was at play that pits bondholder against shareholder.

The bondholders need to explain to me why their PH&N letter sent to BCE is a better argument in support of their case than the following facts that were very much in the public domain, immediately preceding and following the discussion I too had with Jim Pattison and after I, unlike they, was invited by Ed Waitzer (special advisor to BCE’s SOC) to submit the Catalyst Proposal before the public auction deadline of the morning of June 26, 2007, which I did and which was press released:

Excerpts from Catalyst June 22, 2007 press release below:
(Bell Canada refers to BCE insofar as the company had just approved its name change in June 2007 from BCE to Bell Canada)

The Canadian Solution will put all of Bell Canada's shareholders, both large and small, on a more equal economic footing. Most importantly, the Canadian Solution would permit all existing Bell Canada shareholders to achieve a full valuation for their shares by recapitalizing the resulting company in a value maximizing manner, akin to how these various private equity bidding groups will capitalize the company, or how Telus will finance its acquisition, through the efficient use of debt. However, the Canadian Solution will be done in a manner and on terms that are not oppressive to existing Bell Canada preferred shareholders and bondholders and notably will preserve Bell Canada as Canada's most widely held public company and preserve the competitive landscape in this key industry segment.

Value Maximization:

Existing shareholders would maximize the value of their current investment in three ways.

First, the Stapled Securities being offered as consideration would be received in a tax efficient fashion, preserving maximum economic value for all shareholders, individuals and pension fund investors alike.

Second, the Stapled Securities will be structured in a manner whereby the combined interest income and dividends on each Stapled Security will be greater than the existing dividend on Bell Canada common shares. It is anticipated that the Stapled Securities will have an initial payment of combined interest and dividends equal to $2.55 per Stapled Security or $2.55 per former Bell Canada common share. Bell Canada currently pays dividends at the annual rate of $1.46 per share. On the ability to service a combined payment of $2.55, Bell Canada CEO Michael Sabia previously had this to say:

"We've assessed very carefully the issue of payout ratio and the level of distributions in general in a manner that gives us a very high degree of confidence in our ability to continue to invest and grow and develop the business."

Third, Bell Canada shareholders will retain all the upside inherent in their existing Bell Canada investment and not be faced with reinvestment risk associated with the cash proceeds from any of the alternative going private transactions.

At the recent annual shareholders meeting, Bell Canada's CEO, Michael Sabia, spoke about Bell Canada being at an important "inflection point" in its business and he feels all the hard work of the past five years under his leadership is about to bear fruit in the form of a better positioned and more profitable company. Therefore, it could be argued, now is not the time to sell Bell Canada shares and be faced with the reinvestment risk of identifying a new investment with similar income and growth potential if such an alternative even exists. Furthermore, under the Canadian Solution, any new regulatory changes that are on the horizon, such as the possible relaxing foreign ownership rules or the like, will accrue to the benefit of its long standing existing Bell Canada shareholders and not its new private owners.

Excerpts from Catalyst June 25, 2007 press release:

Under the Catalyst proposal that was submitted in writing to the Special Committee of the Board of BCE this morning, it is contemplated that........

Based on current market conditions and today's level of yield requirement by investors and the EBITDA growth guidance provided by the company of 4% - 6% for 2007, Catalyst is of the opinion that the Stapled Securities will have a trading value of between $42.50 and $52.00 with a mid point valuation of $47.25. Under current market conditions, Catalyst believes that the Stapled Security would trade in the upper half of this value range over time as a result of ongoing retail demand for quality growth/yield oriented investments.

Wednesday, June 18, 2008

Mark Carney: Architect of Lie Conceal Fabricate

We tried to warn Canadians about this devious and duplicitous joker:

Why Mark Carney's honeymoon is over
Bank of Canada governor 'has got some explaining to do,' economist says
Globe and Mail
June 18, 2008

BCE and its bondholders: Missed opportunities before the Supreme Court

By: Brent Fullard
Catalyst Asset Management Inc.

Two hours of oral arguments doesn’t provide much time for either BCE or BCE’s bondholders to make and defend a complete case before the Supreme Court. Out of this process came a number of missed opportunities. Foremost of which were:

(1) Safe Harbour Rule argument was not challenged by bondholders’ lawyers:

One of the strongest arguments (of two) that the bondholders have going for them in this case is the fact that very clear representations were made to them subsequent to the creation of the indenture that governs these securities. Representations made by CEO Michael Sabia and other senior BCE executives that were quoted in the Quebec Court of Appeal ruling , as follows:

“Bell Canada assured the market from time to time and at such times, inter alia, that it was: “[...] committed to investment grade ratings: “totally focused’ on investment grade ratings; that there was “no doubt about their ability” to maintain investment grade ratings; that investment grade ratings were part of Bell’s “financial architecture”; that relationships with bondholders would be based on “fairness”, not literal interpretation of contracts; and that shareholder interests would be balanced”

Lawyers for BCE argued that all (?) of these statements were made during conference call with the investment community and were preceded by a recitation of the so called “Safe Harbour Rules” and therefore these statements could not be relied upon given the blanket “dis-ownership” language of the safe harbour rules. Lawyers for the bondholders did nothing to defuse this argument in oral arguments before the court. Doing so would have been very easy, since they need only have reviewed with the court the original purpose behind these rules ( to provide investors with protections through cautionary language and not protection to issuers per se) and whether these rules are designed to provide issuers from immunity from consequences of their own deliberate actions (surely they are not). BCE’s Safe harbour rule defense is like saying BCE and its executive and Board had no hand in the LBO outcome, as if it was an asteroid hitting the company from afar, over which they had no control. Let’s be honest The LBO of BCE and the Straegic Review that spawned it was the most highly orchestrated and choreographed “asteroid hit” ever witnessed on this planet.

In my view, the safe harbour rules do nothing to mitigate the reasonable expectations that were formed by BCE securityholders insofar as the representation made above are concerned, in the context of the matter presently before the court. This point was not made in the court yesterday.

(2) Refuting the argument of a “Zero Sum Game”:

The other main line of defense for the bondholders is that they are afforded protection beyond that contained in their bond indenture and that derived from statements like those cited above. This additional duty that is owed top bondholders derives from the duties that occur because this transaction was fashioned by BCE to be a Plan of Arrangement. Such plans have to be “blessed” by a court as meeting the test of “fair and reasonable”. Endless discussion took place yesterday around the question of whether such a proposition is workable given that apportioning the economic pie is a “zero sum game” and therefore any concessions to the bondholders would, in theory, come at the expense of the shareholders. Accepting such an argument to be true, which is not always the case, the bondholders were having a difficult time refuting such a theory. They wisely looked to the actual specifics of this case to reason their argument.

They pointed to the analogy afforded by this very deal in terms of how the Purchaser structured its bid to redeem the preferreds for cash and gave them a vote and that Cerberus’ offer was unaffected in its value to shareholders when Cerberus was informed that they would have to include the redemption of the preferreds as a feature of their bid as opposed to not redeeming the preferred. This is not a bad example, except it has one glaring error of logic. Preferred are on the shareholder side of the equation and not the bondholder side of the equation.

The much better example that the bondholders’ lawyers failed to point to was what happened when Teachers was asked to alter its bid at the last minute from one that was “bondholder friendly” to one that was “bondholder oppressive”. To understand whether any given system operates like a zero sum game, you need only witness what occurs at the “margin”. If you alter one variable at the margin and the other variable reacts in an equal and opposite fashion, then you have a zero sum game, in which bondholders’ gain becomes the shareholders’ loss. At the very final round of negotiations, Goldman Sachs, on behalf of BCE informed Teachers that their deal would have to be altered and made “bondholder unfriendly”. Presumably such a change would mean that Teachers’ would be willing to bid more. Did they bid more upon making their bid bondholder unfriendly? No.

This observed bidding conduct on the part of Teachers’ on the very issue of bondholder friendly versus bondholder unfriendly would lay waste to the argument that this aspect of the deal manifested itself as a zero sum game exercise.

Some of you may argue that this altered bid manifested itself in different ways apart from value to shareholders and instead in a lower risk of execution for the transaction insofar as backlash from the adversely affected bondholders. MY answer to that is somply look around you. We are in the Supreme Court of Canada. The deal is in potential jeopardy. Oppressing the bondholders has done nothing to mitigate deal executing risk. In fact, it has taken the deal to the very edge of ever happening

Read also: Bondholders say BCE finessed takeover deal to avoid bond redemption at

(3) Business Ingenuity argument

The bondholders made a potentially fatal decision at the very outset about how they were going to argue this case. This stems from that fact that they have defined “success” in very narrow terms. They have no interest in seeing the overall transaction NOT proceed, even though that would be a good outcome for them. Rather they appear to be seeking some form of redress that would involve an upfront cash payment, increased asset protection, higher interest rates etc. Because the bondholders define success in this narrow way and because the bondholders are subsets of the larger organizations to which they belong who have other agendas and corporate interests, they chose not to make the existence of the Catalyst Proposal to BCE that was explicitly designed to preserve the investment grade credit of Bell Canada, part of their case.

Evidently the man bailing from the downed aircraft is quite particular about the colour of his parachute.

This flawed nature of such a strategy became abundantly obvious in the courtroom yesterday. One of the lawyers for the bondholders coined a term I hadn’t heard in use before, namely “business ingenuity”. He was arguing that the bondholders were looking to the Board of BCE to exercise and demonstrate their “business ingenuity” to create a workable solution for all parties. The bondholders were complaining that no such “business ingenuity” had been forthcoming. They were saying that no one was scratching their backs. They needed their back scratched.

Time to look around boys. Business ingenuity was staring you in the face. You remain oblivious to it. Hard to help people who don’t want to be helped. Or accept the “business ingenuity” of others, borne out of good will.

The Catalyst Proposal was designed explicitly to preserve the bondholders’ credit rating. What more could they reasonably expect under the circumstances? And here ther are decrying before the Supreme Court that no “business ingenuity” had been applied by the Board to scratch their back. When asked by Justice Abella the question “What ought [BCE} to have done [in practical terms], the bondholders offered up a menu of alternatives that all had the ring of “zero sum game” about them.

If the bondholders wanted to fight the good fight, they would have raised the existence of the Catalyst Proposal from the very outset. How could the lower court have issued the ruling that it did in the presence of arguments by the bondholders about the Catalyst proposal? The case would never have made it to the Supreme Court where misleading pleadings would continue to be made by BCE that read:

BCE Factum Dated June 6, 2007:

“Three offers were submitted at the end of the auction process..... Moreover, all of these offers would have reduced the credit ratings of the Debentures to below investment grade...”

Oh yeah?


Sunday, June 15, 2008

Apology due

Apology due
Calgary Herald
Published: Sunday, June 15, 2008
Re: "'Finally, we heard Canada say sorry'," June 12.

Stephen Harper apologized for the perceived misdeeds of our forefathers. Twice. Once for the Chinese, now for the aboriginals. Great.

I trust he will pass his strong character traits to his children. I expect his children will apologize to Canada for their father's broken promise regarding income trusts. It put the livelihood of a lot of seniors and retirees in a precarious position.

Oktay Yersel, Calgary

My posting on Garth Turner's blog

This morning, I posted the following comment on Garth Turner’s blog:

Tell me this “encounter” wasn’t a pre-arranged photo-op?

Jack Layton is in bed with Harper, They had lunch on that fateful day of October 31, 2006. Everything else is history……and the fraud known as tax leakage was perpetrated by Jack Layton for the CON that he is, and as leader of the Newly Duped Party of Canada.

The man is a disgrace of democracy. He is a charter member of the flat earth society when it comes to wanting to know the hard verifiable facts (that the tax leakage claims are both unproven, unsubstantiated and totally fabricated..., if not, where’s the government’s proof?)

I know, as I have discussed this matter with Wacko Jacko in person, and as well, his two Finance critics on this file: Judy Wasylycia-Lies and Thomas Don’t care.

Yellow jerseys for the lot of them.

By Brent Fullard on 06.15.08 5:13 am

Saturday, June 14, 2008

Famous last words: "I hear one of my cabinet ministers has an ex-girlfriend"

May 8, 2008: "I hear one of my cabinet ministers has an ex-girlfriend," Harper said. "It’s none of my business. It's none of Mr. Duceppe's business. It's none of Mr. Dion's business."

Same unaccountable blasé attitude to every other scandal of Harper’s creation: Bernier organized crime scandal. Cadman election bribe scandal. PMO’s Obama smear campaign/election tampering scandal. Cadman election bribe scandal. Afghan detainee cover-up scandal. Did I mention Cadman election bribe scandal?

To think, it all started when the press was complicit in allowing Harper to get away with his tax leakage lie and raid seniors nest eggs to the tune of $35 billion. That was way back in October 2006. Look at the harvest that it has reaped given the infinite tolerance on the part of the press for Harper's patent lies about tax leakage.

The press has been the willing enabler of this morally corrupt “leader” known as Harper since the very outset.

This political cartoon pretty much sums up Harper’s true feelings on accountability.......missing however are the plethora of other Harper scandals

Hey Liberals, why not investigate Paul Desmarais Jr.? Double standard?

The Liberals want Ottawa’s lobbyist watchdog to investigate Couillard for trying to influence government officials without registering as a lobbyist. Talk about a double standard. What about the unregistered lobbying activities of Paul Desmarais?

Couillard wasn’t successful, whereas Desmarais was. Couillard didn’t inflict $35 billion in lost savings on Canadians saving for retirement, whereas Desmarais’ lobbying efforts resulted in a policy that did.

Liberals: If you are serious about cleaning up illegal lobbying in Ottawa, it is incumbent upon you to investigate the following lobbying of Paul Desmarais Jr. He is clearly not registered, since that fact is readily available on the website of the Public Registrar of Lobbyists

Income-trust crackdown: The inside story
Globe and Mail
November 2, 2006:

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.

Liberals want lobbyist watchdog to investigate Couillard

Elizabeth Thompson , Canwest News Service
Published: Friday, June 13, 2008
OTTAWA - Opposition MPs are calling for the federal government's lobbyist watchdog to launch an investigation into whether Julie Couillard violated government regulations by trying to influence government officials without registering as a lobbyist.

Liberal Bob Rae and Bloc Quebecois MP Pierre Paquette both said they think Canada's Registrar of Lobbyists should look into whether Couillard broke the rules when she reportedly tried to first influence Bernard Cote, a senior adviser to Public Works Minister Michael Fortier

Friday, June 13, 2008

More single data point journalism from the National Post.

Silcoff takes over from Corcoran

Here’s a novel thought for Sean Silcoff to ruminate in his single data point journalistic account of why income trusts are bad by citing Precision Drilling, and only Precision Drilling, as he attempts to connect a line between one about letting investors decide where they put THEIR money rather than having reporters or the users of capital do it for them through the auspices of a crooked and incompetent government and enforced through fraudulent legislation?

Sean Silcoff is arguing for a world in which the masters work for the servants. I have news for Corporate Canada and reporters. Investors are the masters. CEOs the servants.

Why can Teachers (hypothetically) own Precision Drilling as a trust and everything is honky dory and they not pay tax? Or the Public Sector Pension Plan acquire deeply discounted and devalued Thunder Energy Trust, as occurred in 2007....or Abu Dhabi Sovereign Wealth Fund acquire deeply discounted and devalued Prime West Energy Trust in 2007 and not a peep of discontent from the likes of Silcoff?

How does that solve a problem that is alleged to exist? Instead it creates a new problem, where none previously existed.

Silcoff should at least attempt to be consistent, if only consistently wrong. Or does he come from the world where what’s bad for the goose, is good for the gander.

Why do I think he ghost writes for the CCCE?

Thursday, June 12, 2008

MPs like Poilievre need to learn the value of contrition and honesty, more than they need compensation

Tory MP apologizes for 'hurtful' remarks
Canadian Press and Globe and Mail Update
June 12, 2008 at 2:45 PM EDT

OTTAWA — The Conservative MP who said native people need to learn the value of hard work more than they need residential schools compensation has apologized.

Pierre Poilievre rose in the House of Commons on Thursday to say his comments were hurtful and wrong.

"Yesterday on a day when the House and all Canadians were celebrating a new beginning, I made remarks that were hurtful and wrong," he said.

“I accept responsibility for them and I apologize.”

Mr. Poilievre questioned the value of residential schools compensation on an Ottawa radio show just hours before the prime minister apologized Wednesday for racist policies.

"Along with this apology comes another four billion dollars in compensation for those who partook in the residential schools," he said, adding dramatic emphasis to the $4-billion, during an appearance on CFRA Radio just before the apology.

"Some of us are starting to ask, are we really getting value for all of this money and is money really going to solve the problem?"

Last night, Mr. Poilievre issued a statement about his comments.

"I stated that aboriginals deserve protection under Canada's human-rights laws and that the record dollars that the government is spending on aboriginals should reach the people in need," the e-mailed statement said.

The Liberal opposition said the remarks were shocking and called for his resignation.

The Prime Minister rebuffed those calls and said Mr. Poilievre has also apologized to national aboriginal groups.

Toronto Star writes: Pension idea needs your help

James Daw
Toronto Star

You want ideas? Here are my ideas:

Let’s hold pension funds to their own federally legislated pension rules and not allow pension funds like Teachers' to control BCE when Teachers regulations limit it to 30% voting control, thereby creating a situation that causes $793 million a year in tax leakage. (I thought your paper opposes tax leakage?)

Let’s not allow pension funds to own asset classes that ordinary citizens can not, like private income trusts that are free of the 31.5% tax when RRSPs are taxed at 31.5%.

Let’s prevent pension funds from exploiting this tax arbitrage (do you know what the meaning of that term, if not call me?) and act in a predatory way to acquire devalued trusts from average Canadians for their pension plan beneficiaries. Many examples of this since Halloween 2006, starting with the purchase of undervalued Thunder Energy Trust by the federal civil servants own Public Sector Pension Plan. Let’s extend the retirement income splitting benefit to those Canadians who are not members of pension plans.

The last thing the public capital markets needs is another predatory pension plan with supra governmental type powers.

Get back to me once you’ve rectified these gross inequities, as I have lots of other ideas and , starting with disclosure rules for tax policies that wipe out $35 billion in hard earned pension savings and the raiding of seniors nest eggs. Your paper is supportive of blacked out documents in support of the media induced conspiracy called tax leakage.

Pension idea needs your help

June 12, 2008
James Daw

Millions of Canadians need to speak up if they want to maintain their current standard of living in retirement......blah blah blah....meanwhile the Toronto Star supports a policy that wiped out $35 billion in retirement savings based on the fraudulent claims of Mark Carney and Jim Flaherty.

Tuesday, June 10, 2008

Terry Corcoran: Latter day investor crusader

Is it just me, or did I miss the Terry Corcoran piece entitled "Unit owners unite"?

I’ve finally figured Terry Corcoran of the Financial Post out. Like any bad scientist he starts with the outcome that he is seeking and then he flails around indiscriminately looking for isolated facts and grand principles that when inconsistently applied along with a good dose of fear mongering will partially justify (in his mind at least) the preordained outcome in desperate need of justification and a band leader.

Take today’s exercise in post rationalization and fear mongering. You’d almost get the impression that Terry wrote this piece for the Canadian Council of Chief Executives. No doubt he in fact did. Today’s sermon is entitled “Share owners unite!”

Does this mean that Terry is going to form CAITI2? No chance of that ever happening since that would require inordinate time, effort and dedication on Terry’s part. Plus he wouldn't get paid. Funny that the person calling for “Share owners to unite” was the very person who called for the head of CAITI to be “vaporized”.

I guess that means that Shareholder can unite, but that Unitholders can not. Where’s the logic in that? Where is the consistency in that? Stop looking, as there isn’t any, apart from the fact that Terry Corcoran (a la the CCCE) wants the corporate model and all its attendant abuses to continue and the trust model to die based on some factless fear mongering argument of his concoction, best summarized by his elegant line of reasoning for ignoring the taxes Ottawa collects on income trusts:

"And when will you guys stop the bullshit about “tax exempt” status. PENSION FUNDS ARE TAX EXCEMPT. THEY DON’T PAY TAXES. STOP. END OF STORY. hey pass the money through to pensioners. Pensioners pay the tax. RRSPS ARE TAX EXCEMPT. THEY PAY NO TAX. ONLY WHEN THEY MONEY IS PAID OUT IS TAX PAID BY THE TAXABLE TAXPAYER."

Evidently that’s Terry’s rationale for why the federal government is free to assign zero value to taxes paid on RRSP withdrawals even though such taxes amount to $16 billion per annum, and taxes paid on RRSP withdrawals exceed taxes deferred on RRSP contributions. Don;t want the true facts to get in the way of the ordained outcome.

As such Terry is the last person to call for shareholders to unite. Meanwhile the BCE situation is the last deal scenario that shareholders should want to rally around, based on the unproven premise that shareholder value is maximized for BCE by the Teachers deal. It may all prove a moot point since the deal’s financing is very much an open question. How does Terry Corcoran know that BCE maximized shareholder value? There is insufficient disclosure in the bid circular to reach any such conclusion. There are far too many questions unanswered:

What did Cerberus actually bid? What was its cash value?
What did the Catalyst Proposal consist of? What risks did it avoid? What was its value?
Why did BCE discourage and frustrate Telus’ ability to bid?
Why is BCE’s dividend now being withheld?
Does maximizing value mean on a pre tax or an after tax basis? Teachers’ bid is all taxable. Was the Cerberus bid fully taxable? Catalyst? Would Telus have been fully taxable?

One thing is for sure, Terry Corcoran is neither qualified nor sufficiently motivated to ever be the rallying point for shareholders to unite. As for this BCE deal, there’s just too many open questions and conflicts of interest. Far too little disclosure. Zero oversight by the regulators who do not uphold standards of disclosure in takeover bid circulars. Why? That’s a cause that a true investor advocate would be pursuing. Not one off deals like BCE. Perhaps someone should buy Terry a subscription for the Financial Post. I’d be curious to know how he would weave these stories into his rallying call on behalf of BCE (err sorry, BCE shareholders):

Financial Post June 9 2008
BCE's Revlon glitch?
by Barry Critchley

Financial Post May 23 2008
Elegant solution given short shrift
by Barry Critchley

Financial Post May 22 2008
BCE: smackdown finally
by Diane Francis

Global Pensions April 25 2008
OTPP accused of flouting rules – faces legal action
by Heather Dale

Financial Post February 2, 2008
Roadblocks to Shabby Bell Affair
by Diane Francis

Financial Post January 30, 2008
Catalyst's Bell Bid Silenced
by Barry Critchley

Canadian Press January 28, 2007
Bondholders say BCE finessed takeover deal to avoid bond redemption

Financial Post July 1, 2007
BCE Inc. sale has company insiders poised to reap millions
Sean Silcoff

National Post June 22, 2007
Everybody wins with Catalyst plan
Diane Francis