My parting question for Michael Sabia....on his final day as CEO of BCE

Today is Michael Sabia’s last day as CEO of BCE. He stands to be $31 million richer for the experience, assuming the leveraged buyout of BCE is more successful in coming to fruition than BCE’s frustrated attempt of two years ago to convert to an income trust.

Which leads me to my parting question for Michael Sabia:

This question has been nagging me for some time. Did BCE truly wish to become a value maximizing income trust, or was that just some elaborate ruse that Michael Sabia undertook on behalf of Jim Flaherty to give the Conservative government the “perfect storm” argument it needed to renege on its election promise, and thereby serve the wishes of Corporate Canada who, for strictly self interested reasons, were loathe on income trusts.

This question is brought into even sharper focus in light of the fact that BCE will, through its leveraged buyout, become an income trust equivalent, with one notable exception....all its new owners are either tax deferred pension funds or foreign investors who pay no taxes in Canada, as distinct form the vast number of BCE’s current shareholders that do.

The hypothesis that BCE’s announce conversion of October 2006 was nothing but a grand ruse is supported by the following:

(1) Why was it reported in the press on November 2, 2006 that upon learning about the government’s move to double tax income trusts that:

“At Telus headquarters in Vancouver, where it was still midafternoon, the reaction [to Flaherty’s announcement] was disbelief.

In Montreal, the mood was decidedly more upbeat. Sources said BCE's Mr. Sabia was a reluctant convert to the trust model, and “there was dancing in hallways at Bell” after Ottawa's announcement.”

This according to the Globe and Mail article of November 2, 2006 entitled Income-trust crackdown: The inside story

(2) One must understand that Michael Sabia came to BCE from the federal government bureaucracy where he was Director General of Tax Policy and an Assistant to the Clerk of the Privy Council. These aren’t just everyday jobs. They are at the top of Canada’s civil service. Whilst the CEO of BCE, Michael Sabia was also appointed by Prime Minister Stephen Harper to the much coveted role as one of only 10 Canadians to serve on the North American Competitiveness Council which is the working body of the Security and Prosperity Partnership between Canada, United States and Mexico.

As such, it is safe to assume that Michael Sabia is as plugged in as one could be to Canada’s reigning government and its bureaucracy. This together with the fact that the assertion upon which BCE was prevented from becoming an income trust, namely alleged tax leakage, is a completely false and fraudulent notion being advanced by Jim Flaherty, would suggest that Michael Sabia either:

(a) feigned interest in having BCE become an income trusts, or
(b) is one hell of a poor government lobbyist

Which is it? Logic would dictate (a) feigned interest in BCE becoming an income trust, thereby providing the “perfect storm” for Canada’s imperfect Finance Minister. However that is one person’s opinion.

In fact the answer to that question pales in importance to the realization by Canadian tax payers that the outcome of BCE becoming a leveraged buyout held by private equity will result in the loss of $800 million a year in taxes relative to BCE’s conversion income trust is all that matters.......the government’s actions caused the very outcome that they ostensibly were designed to avoid.

It truly doesn’t get dumber than that. Bravo Jim Flaherty, Minister of Unintended Consequences and Fiscal Mismanagement