Another Canadian company goes up in smoke.

......this is becoming a bad habit





Rothmans to be swallowed by Philip Morris

42 minutes ago

TORONTO — Rothmans Inc. (TSX:ROC) has announced a deal to be taken over by Philip Morris International Inc. in a transaction that values Canada's last publicly traded cigarette company at $2 billion.

Rothmans said Thursday the offer of $30 per share in cash has been endorsed by the Toronto-headquartered company's board of directors.

The bid follows the resolution of smuggling charges against Rothmans, Benson & Hedges Inc., which is owned 60 per cent by Rothmans and 40 per cent by Philip Morris.

The offer from the maker of Marlboro cigarettes, spun off in March as a separate company from Altria Group, represents a premium of almost 15 per cent over Wednesday's closing price of $26.17 for Rothmans shares on the Toronto Stock Exchange.

Rothmans investors have also consistently reaped a hearty dividend, yielding 5.4 per cent at Wednesday's price. The company said the second-quarter dividend, normally paid in September, will be suspended while the takeover proceeds.

The transaction is conditional on acceptance by two-thirds of Rothmans stockholders, along with Competition Act and Investment Canada approval.

The deal is expected to close by the end of October, making Rothmans a wholly owned subsidiary of Philip Morris.

The Rothmans board has undertaken to pay a termination fee of $40.9 million if an outside party prevails with a better offer.

Philip Morris will pay $81.7 million to Rothmans is the offer is not completed.

Canada's other major cigarette maker, Montreal-based Imperial Tobacco, is part of the British American Tobacco conglomerate based in London.

Donate your BCE Shares to The Conservative Party of Canada..

....hey we authorized this stinking deal!


Help feed The Lies and Deception about tax leakage that made this deal possible


Do You Own BCE Inc. Shares? Then you owe us:

Did you know that Bell Canada Enterprises (BCE) will cease to be a publicly traded company sometime before December 11, 2008? Meanwhile you aren’t even getting paid dividends. The game’s over. Our Party saw to it. As Stephen Harper said on November 1, 2006: “ We can’t be a nation of coupon clippers”. He wasn’t kidding. BCE took him to heart.

BCE Inc. shareholders will not have the option to keep their shares and will be subject to a forced sale. Click here to read articles from the Financial Post on the BCE Inc. takeover and its implications.

Save By Donating Securities

Due to recent changes in Canada Revenue Agency guidelines, you can create a huge tax savings opportunity by donating your BCE Inc. shares, or any other securities, to a registered charitable non-profit like The Conservative Party of Canada. With a donation of stock to The Conservative Party of Canada you can:

Avoid paying capital gains tax;

Get a charitable tax receipt for the full value of your shares;
Help sustain Stephen Harper’s Ongoing Lies and Deception

It's a win-win situation for everyone involved. Screw the taxpayers of Canada, they will only lose $800 million a year from this LBO that we authorized. We were only thinking of the Party fundraising opportunities.

How do I save by donating BCE Inc. shares?

The privatization of BCE Inc. will have tax consequences for many shareholders. Since cash consideration is being offered by the group led by the Ontario Teachers' Pension Plan, the exchange of cash for shares will result in a taxable event unless those shares are held in a registered (tax deferred) account such as a RRIF or RRSP.

Shareholders will realize either a capital gain or loss on their shares depending on the adjusted cost base (ACB) of their shares, which will need to be calculated by every shareholder. That ACB is based on the original purchase price of the shares (cash cost or dividend reinvestment value), but may be affected by how long the shares have been owned, and whether a capital gains exemption was claimed at February 22, 1994.

The May 2, 2006 federal budget included provisions that resulted in donations of publicly traded securities to registered charities being 100% free of capital gains tax. Many charities such as The Conservative Party of Canada have set-up brokerage accounts which will allow them to receive donations of securities such as these BCE Inc. shares in exchange for charitable tax receipts for the full market value of the shares at the time of the donation. As long as the shares are donated before the privatization takes place (predicted to be during early 2008 by analysts) the donor not only saves any tax on the accumulated gains, but is allowed to claim the charitable donation for the full value of the donated shares.

If instead the shareholder waited until after the privatization, they would have to report any capital gain on their tax return and make the donation out of after-tax funds ? generally resulting in less cash to their charity of choice. Please contact your financial advisor for further information.

When to Donate

Now! Once the BCE Inc. sale takes place, its shares will be de-listed and will no longer qualify for the capital gains exemption. So don't wait ? donate your shares of BCE Inc. to the Conservative Party of Canada. One hundred percent (100%) of all donations will go towards funding The Conservative Party of Canada, our mandate of Lies and Deception on matters vital to Canadians, and to support our ongoing lawsuits.

How to Donate

It's as easy as 1, 2, 3!
To donate your BCE Inc. shares, or any other securities, simply fill out a Securities donation form, which you can download by clicking here You can also find more information on our website https://secure.conservative.ca/EN/1215/

2 Provide this form to your broker to initiate the transfer of donated shares with The Conservative Party's broker. Your broker should be instructed to call our Broker of Record of Goldman Sachs at (212) 861-1242 or (212)365-6007 (fax), and ask them to transfer your publicly traded securities to the Conservative Party of Canada

3. Or contact me, Doug Finlay. Chief Bag Man and Backroom Operative of the Conservative Party of Canada, to ensure quick processing of your gift of shares. A tax receipt for the full value of your shares will be issued.

Remember we can not receive cash donations by way of fax.

Please give generously.

Yours faithfully,

Conservative Party of Canada
1204-130 Albert Street,
Ottawa, ON
K1P 5G4

or

Fax your form to: (613)755-2001

Prentice confirms "photo op" nature of BCE meeting.

Meeting's all for show, as Prentice won't discuss 2500 laid off BCE workers or actually deal with 15 cent text messaging issue

Prentice Signals No New Text-Message Rules After BCE Meeting

By Theophilos Argitis and Greg Quinn

July 31 (Bloomberg) -- Canadian Industry Minister Jim Prentice indicated he won't impose new regulations on the cost of text messages after he met with executives from BCE Inc. to discuss new fees that he has said may hurt consumers.

Prentice said he wasn't ``hinting'' at new regulations when asked about the subject by reporters today at a meeting of Conservative Party lawmakers in Levis, Quebec.

Prentice said he has met with BCE President George Cope and plans to meet with Telus Corp. to discuss the issue. The minister said he wants the companies to consider alternatives to their plan to start charging wireless customers 15 cents for each text message they receive.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net; Theophilos Argitis in Levis, Quebec, at targitis@bloomberg.net.
Last Updated: July 31, 2008 08:51 EDT

John Manley is absolutely correct.....well, sort of.

Actually, not at all.

In its never ending quest to dredge up new (and spurious) arguments to justify Jim Flaherty’s income trust tax, the Globe and Mail sought out the views of John Manley. John Manley?

John Manley’s finely honed argument in favour of Jim Flaherty’s regressive tax measure was that: "I don't think you can run an economy where you have different kinds of business vehicles that are taxed totally differently."

This despite the fact that John Manley is employed by McCarthy Tetrault, which is a tax flow through limited partnership which following Flaherty’s taxation of publicly traded income trusts will remain unscathed as a “different kind of business vehicle that is taxed totally differently”.

Well, so much for that self contradictory, and hence hypocritical, argument of John Manley’s. Obviously John’s comments of a singular business model were intended solely for the plebes. The public market plebes.

John Manley missed his brief opportunity in the sun to be the honest elder statesman, instead he used it to promote self interests and those of McCarthy Tetrault’s corporate client base who dreaded the income trust model for personal reasons and not legitimate public policy reasons.

No, what John Manley could have easily said to the Globe and Mail, had he wanted to advance this debate and have played the role of honest elder statesman, was:

"I don't think you can run a government where you have different kinds of business vehicles that are evaluated for tax purposes totally differently."

This would have been an insightful and edifying comment from an insider on how the Department of Finance runs, in effect, two sets of books.

One set of books is based on the “budget based” approach, and the other is based on the “full life cycle” based approach.

The “budget based” approach is the means by which the green eye shades in the Department of Finance manufacture their tax leakage argument, in order to post-rationalize the income trust tax, a policy whose real purposes have never been disclosed or acknowledged. Neither has the work of the green eye shades in Ottawa been made public. Officially that is.

Their is however one individual with first hand knowledge of these two sets of books, namely Dennis Bruce of HLB Decision Economics, who worked collaboratively with the Department of Finance to create the tax leakage model during the Ralph Goodale PUBLIC CONSULTATION round of 2005.

Why does the Globe gravitate to bystanders like John Manley for their “news”, rather than report on the known facts, as can be uniquely provided by Dennis Bruce? Maybe the Globe is part of the problem? Some would say a huge part of the problem as they selectively report on this topic. Perhaps that might have something to do with the fact that the Globe is owned by three parties who benefit from the trust tax policy: BCE, Teachers’ and Torstar. Their fourth owner, Woodbridge owned by the Thomson's isn’t exactly indifferent either, as they don’t pay a cent of taxes in Canada. At least that’s my understanding given that dividends can flow free of taxes as between operating companies (Thomson Corp.) and holding compnanies (Woodbridge). Funny, we don’t hear John Manley commenting on that disparity do we? But then, Lord Thomson of Fleet is no plebe and hence is the beneficiary of bespoke tax policies assiduously safeguarded by the likes of John Manley and Jim Flaherty.

In a press release following the Public Hearings on Income Trusts issued on February 1, 2007, that was entitled “Independent Economists dispute government’s tax leakage claims” here’s what Dennis had to say:


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

Fish or cut bait, the sequel

Once again we have headlines that read: “Harper to Dion: 'Fish or cut bait’ ”.

Haven’t we been to this movie before? It didn’t work for Stephen Harper the first time, so in his great wisdom he thought it would be sure to work a second time?

Isn’t that the definition of insanity? To do something repeatedly in the exact same fashion and to expect a different result?

Why would Stephane Dion fall for the rancid bait of “fish or cut bait”?

Harper is desperate for an election of his own timing so that he can go before the electorate with three wheels on his happy wagon, as opposed to one or two, if Stephane Dion wisely decides to call an election at the time of his optimal choosing.

The other movie that we’ve also been to before , also has a sequel, that in today’s article goes by the name of “But I give you my word: As long as I will be prime minister ... there will be no new taxes."

Huh? Surely he isn’t going to try this election trick/fraud again.

Stephen Harper’s word is worthless, after all, who didn’t see the blockbuster film from Election 2006 entitled:

"When Ralph Goodale tried to tax Income Trusts ... don't forget, don't forget this ...they showed us where they stood. They showed us about their attitudes towards raiding seniors hard earned assets and a Conservative government will never allow either of these parties to get away with that"

Today, Moody's confirms Canada's largest telco is a Junk Bond Credit

Moody's has updated its guidance in light of the BCE acquisition news - they view the New BCE as having a family rating of B1, with existing senior unsecured debt (representing the majority of bonds & coupons) rated Ba1, and subordinate notes rated B3.

Moody's Debt rating categories:

Moody's long-term debt ratings are opinions of the relative credit risk of fixed-income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Such ratings reflect both the likelihood of default and the probability of a financial loss suffered in the event of default.

Investment grade
Aaa

Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.

Aa1, Aa2, Aa3

Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

A1, A2, A3

Obligations rated A are considered upper-medium grade and are subject to low credit risk.

Baa1, Baa2, Baa3

Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

Speculative grade (Also known as High Yield or 'Junk')

Ba1, Ba2, Ba3

Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.

B1, B2, B3

Obligations rated B are considered speculative and are subject to high credit risk.

Caa1, Caa2, Caa3

Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.

Ca

Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C

Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

Canadian taxpayers to fund of 10% of BCE purchase price, each and every year

Don’t be fooled. The purchase price of BCE is not $52 billion, it is $8 billion.

Ontario Teachers’ and its three US partners are acquiring BCE in a “leveraged buyout”. This means using other people’s money to acquire BCE. There are three sources of other people’s money being used in this instance, as follows:

= BCE itself
= BCE common shareholders
= Canadian Taxpayers

The whole scheme is very easy to understand. A necessary ingredient is to have a compliant board of directors who are willing to agree to allow BCE to borrow $32 billion in new debt on top of BCE’s existing $12 billion in debt. such that the company becomes a junk bond credit. This reduces the equity value of the company down to $8 billion. Which ostensibly is being funded by the Purchasers.

Roughly $1 billion of the $8 billion ends up coming from BCE shareholders themselves, as the compliant board agreed to modify the terms of the deal, such that the Purchasers’ receive the last six months of accrued and unpaid dividends, rather than BCE common shareholders. This foregone dividend has a value of $1 billion. It is “found money” for the purchasers.

Lastly, there are Canadian taxpayers. A large portion of the value of BCE in the hands of the purchasers is that the company can be structure so as to pay no Canadian taxes. This is achieved by the massive interest payments that are required to service $44 billion in debt . These interest payments are tax deductible, and therefore shelter BCE from paying taxes. This has a cost to Canadian taxpayers of $800 million a year versus alternative transactions that were presented to BCE’s board.

So ignoring the dividend heist of $1 billion, this $800 million per year in foregone taxes, means that Canadian taxpayers are paying the equivalent of 10% of the purchase price of BCE, each and every year. In ten years, the purchase price will have been fully paid for by Canadian taxpayers. The beneficiaries of this tax scheme are:

Ontario Teachers’ Pension Plan
Providence Capital of the US
Madison Dearborn Capital of the US
Merrill Lynch Capital Partners of the US

Don’t expect a thank you note.

Instead, expect more permanent layoffs ( beyond the 2.500 announced yesterday) and higher service costs (beyond the 15 cent text messaging increase announced last week).

Time for a few answers from Canada’s “leadership”.

Where is the PM on this”? The Finance Minister? The Industry Minister? The Labour Minister?

Harper makes Canada a safe haven for unwelcome private equity

Other first world cointries are wise to the unwelcome ways of private equity, England is, Canada is not. Harper's actions have been designed to favour investment by private equity and disfavour investment by average Canadians.


Buy-out firms are told that

By Martin Arnold, Private Equity Correspondent
The Financial Times Limited

Published: July 29 2008

Sir Michael Rake, the man charged with policing private equity's new transparency rules, has secured the commitment of 32 buy-out groups and 55 of their portfolio companies to comply with the industry's voluntary guidelines.

Yet, while the British Telecom chairman is encouraged by the response to the new code, he warns that last year's political firestorm over private equity could reignite quickly if a big buy-out collapsed.

Private equity faced a barrage of accusations last year - from job-cutting and asset-stripping, to tax avoidance and excessive use of debt - after bidding for several FTSE 100 companies, such as Alliance Boots and J. Sainsbury, the high-street retailers.

Sir Michael told the Financial Times that, even though the credit crunch had triggered a drop in the size and number of buy-outs, the pressure was still on buy-out firms to prove their value to the economy.

"It has gone quiet for the moment," says Sir Michael, in his first interview since being named chairman of the guidelines monitoring group for the new private equity rules in November. "But those who know understand it could easily come back.

"If there were to be a major failure in a private equity-financed vehicle, then for sure there would be political attention," he says. "This industry isn't stupid and is fully aware this is something we need to do."

With the European parliament debating measures to clamp down on private equity, he warns that some European countries are making "ill-informed assumptions" about the industry. "That is a very dangerous place from which to make policy."

He is encouraged by the enthusiastic response eight months after Sir David Walker, the City grandee, unveiled the voluntary guidelines he drew up for the British Private Equity and Venture Capital Association (BVCA).

Since then, about a dozen private equity firms - including Apax Partners, Terra Firma, Permira and Cinven - have published annual reviews, giving details of their senior managers, investors, strategies and portfolio companies.

"The reports are worth looking at," says Sir Michael. "They see the business benefits of doing it. There is nothing to fear from transparency and the story they have to tell is generally a good one; therefore why not tell it?"

In addition, large portfolio companies, such as Alliance Boots, the pharmacy chain, and Gala Coral, the betting and casinos group, have published public company-style annual reports. By the end of the year, Sir Michael plans to report back on how the rules have been adopted by relevant portfolio companies - any listed companies acquired for more than £300m or unlisted companies for £500m-plus with more than 1,000 staff and generating at least half their revenues in the UK.

By then he also expects to have held talks with a number of Middle Eastern and Asian sovereign wealth funds about complying with the guidelines.

So far only Arcapita, the Bahrain-based Islamic bank, and Dubai International Capital, the Gulf investment fund, have signed up to the guidelines after acquiring large UK companies and becoming members of the BVCA. Both DIC and Arcapita raise money from private investors, so consider themselves more private equity than sovereign wealth funds. Yet other groups with closer government links, such as the Qatar Investment Authority, have not signed up, even though the QIA owns Four Seasons, the troubled UK nursing home operator.

"I was in the Gulf a few weeks ago and the couple of people I spoke to informally indicated they were absolutely willing to go along with what everyone else does," says Sir Michael. His group has appointed PwC to advise it on monitoring the compliance of portfolio companies and Ernst & Young to collate and publish "attribution analysis" data on how private equity groups make their profits.

"To remove this from being a political and fiscal issue to more of a factual issue around where private equity sits in relation to the economy, the creation of jobs and long-term investment, the most important thing to is to get some clarity rather than noise around the facts," says Sir Michael.

His group has the power to expel any funds that do not comply with the guidelines from the BVCA. Yet, he says: "I think that is a real long backstop, but it is perhaps important to have it."

With the UK economy slowing and the financial system in difficulties, private equity's new policeman sees as many opportunities as challenges for the industry. "We do need to understand that companies do go bust from time to time," he says.

"But the ability of private equity to manage through and create more value out of these assets when companies get into difficult situations is a big part of what they do."

Copyright The Financial Times Limited 2008

Jack Mintz says Flaherty's tax leakage numbers have a "serious flaw"

From: Jack Mintz
Date: Tue, 28 Nov 2006 09:00:16 -0500
To: brent.fullard@rogers.com



"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 as zero." wrote Jack Mintz


So does Dennis Bruce, who is free of the many conflicts that prevent Jack Mintz from making the above private statement into a public declaration:

Independent economists discredit govt tax leakage claims -

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

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

Jim Flaherty: Our backyard "global phenomenon"

In every possible respect, leveraged buyouts are much worse than income trusts (could ever be accused of being).


Anyone with knowledge of capital markets would have told you that the income trust tax would lead to a rash of takeovers of Canadian companies by foreign private equity.

Diane Francis wrote about in on December 3, 2006:

"The biggest blunder of all is that this policy announcement has discounted the income trust sector by $30 billion which represents a huge whack of the economic base of Canada"

"the resulting leverage buyout of the income trust sector will cost Ottawa dearly, thus putting more pressure on taxes from ordinary Canadians"

"Why wouldn't the Department of Finance, the Minister and Prime Minister understand this?"

It took Bay Street about a nano-second to realize it. Two nano-seconds later Wall Street realizes it. They thought Canadians were idiots. They were right.

As such, on November 3, 2006 there were rumors in the marketplace that New York based leveraged buyout firm KKR was going to take a run at government policy devalued BCE. So what did BCE do? Michael Sabia called KKR on November 3, 3006 and subsequently met with Henry Kravis in New York on November 15, 2006, which began a serious of events that made the obvious happen: BCE was acquired by foreign and domestic private equity in a leveraged buyout. Teachers’ only played a role because of the Canadian ownership hurdle that had to be overcome.

BCE is the perfect case study of why leveraged buyouts are much much worse than income trusts could ever be accused of being, on every conceivable government policy level.

Tax Loss: A business creates a finite amount of earnings before tax, and after necessary capital reinvestment. These excess earnings paid to unit holders under the income trust model are free of taxation and are instead taxed immediately in the hands of the unitholders. In the case of BCE these unitholders under an income trust would have been predominantly taxable investors and would have been taxed at the average rate of 38% (according to DoF). Meanwhile US investors would have paid a 15% withholding tax plus taxes in the US. Alternatively these pre-tax earnings are used to service the various security holders under the corporate model. In the case of the BCE leveraged buyout, the following is the capital structure

Equity from Teachers’ $4 billion
Equity from 3 US investors: $4 billion
Existing Debt: $12 billion
New Junk Bond Debt: $32 billion

As you can see, 85% of BCE’s new capitalization is debt, which causes BCE’s credit rating and credit worthiness to tank, thereby dramatically raising its cost of borrowing and overall cost of capital.

Under the corporate model, the interest used to service this debt is fully tax deductible. This is an indirect way of saying that these security holders receive the pretax earnings of BCE, just as is the case with income trust distributions. There are, however two very profound differences. First, these interest payments do not attract the 15% withholding tax, as with income trust distributions. Flaherty reduced the withholding tax on interest to ZERO in Budget 2007. Second ( as with BCE) this debt is being provided in large part by foreign lenders, meaning the earnings of BCE that are required to service it are being taxed in Canada at the rate of ZERO. This represents massive tax leakage. Under the trust model these earnings would be taxed at either 38% (if paid to Canadians) or 15% (if paid to foreigners) and would flow predominantly (greater than 85%) to Canadians and taxed at the rate of 38%.

Note to Ottawa and Canadian media: Both 38% and 15% are larger numbers than 0

Foreign Takeover Risk: Ottawa knew full well about the inherent takeover risk that would ensue if an income trust tax were to be imposed and they knew damn well where that risk would emanate from, namely leveraged buyout takeovers from foreign private equity. Meanwhile Flaherty tried to mislead Canadians about this hazard by saying private equity was a “global phenomenon”. Two points. Yes, I guess it is, just like the sub-prime mess is also a global phenomenon. And second, unlike other countries he had put the honey out for the bees, with his ill-conceived trust tax. Which is also rather “phenomenal” when you think about it. As in phenomenally stupid.

An internal Department of Finance memo warned senior officials who were directly responsible for the income trust tax policy about this risk, namely Mark Carney and Bob Hamilton and others. See Globe article entitled Trust tax linked to equity buyouts at http://www.investorvillage.com/groups.asp?mb=6966&mn=12586&pt=msg&mid=5291134

Higher Cost of Capital: As perverse as this sounds, income trusts were feared by people like Dominic D’Alessandro of Manulife Financial and Paul Desmarais Jr. of Power Corporation for the very fact that they represented a lower cost form of capital. Lower cost of capital ,ergo a higher valuation. This created pressure on them to convert, in order to attain these higher valuations. Here was the Globe’s account of 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.”

Here was the central preoccupation of D’Alesssandro’s testimony at the Public Hearings:

“In June of last year, CI Financial converted to trust status”.

Why would he have cared what CI Financial did in the previous year? Because it gave CI Financial a lower cost of capital. Who provided CI Financial with a lower cost of capital? Investors or taxpayers? In order for taxpayers to be the ones providing the lower cost of capital would require that Ottawa have foregone tax revenue from CI becoming an income trust. Such is not the case, and we can prove it. Has the government proven their case that income trusts result in less taxes than as corporations? No they have not. We look forward to being proven wrong on this point, in which case we will concede defeat.

In terms of BCE’s LBO, the leveraged buyout has burdened BCE with the highest cost of capital imaginable. BCE’s cost of debt has increased by at least 240 baisis points (2.40%) and their cost of equity matches the return expectations of its new owners, which means a number north of 30%. As a trust, BCE’s all-in cost of capital would have been 10-12% overall, with a cash cost of capital of 6.00%, which would have been the yield on the trust units.

You also have to ask yourself what these corporate self interests who lobbies Flaherty meant by “misgivings about the structure”. No reason to speculate, since it was obvious. They have all successfully learned how to “game” the corporate model through stock options and share buybacks. To make that scam possible means that they have to retain earnings for stock buybacks at times of maximum personal gain, rather than paying these earnings to the owners at regular monthly intervals at no personal gain.

Note to Ottawa and Canadian Media: Even lab mice will prefer more gain over less gain.

Lessened Competitiveness: Higher cost of capital translates into lowered competitiveness. Nowhere is this truer than in a higher capital intensive and rapidly changing business like telecommunications. The LBO of BCE is totally counter to this outcome> meanwhile one of the four policy objectives of Canada’s Telecommunications Act is to promote the competitiveness of Canadian telecom. One of the other four is to promote Canadian ownership of Canadian telecom. The LBO of BCE takes us in the complete opposite direction, not supported by the remaining two policy objectives of the Telecommunications Act.


Job Layoffs: One of the common themes of leverage buyouts is job layoffs. We witnessed this yesterday with the announcement of 2500 layoff of knowledge based workers at BCE. This is being driven by the need for higher returns that are required by the new owners and that are mandated by the massive new levels of debt. This is an observable reality around the world, which is why the global labour movement had called upon governments to halt this abusive tactic

See: Union spotlight at Davos on private equity raiders: http://www.union-network.org/uniindep.nsf/f0fa5a094742095ac125680000253538/ac73e13ac91e8b90c12572910057cae3?OpenDocument
See: Union bosses want action over the 'rodeo capitalism' of private equity: http://www.independent.co.uk/news/business/analysis-and-features/union-bosses-want-action-over-the-rodeo-capitalism-of-private-equity-435689.html


Systemic Risk to Canada’s fiscal health and the Economy: There is no greater risk to a financial market than too much debt. Debt represents one of the highest forms of risk for a financial system. Simply look at the situation involving the sub prime mortgage market or the somewhat analogous Asset Backed Commercial Paper Market in Canada. Too much debt is what causes bankruptcies. Nothing else causes bankruptcies. How is capitalizing BCE with 85% debt and only 15% of equity a prudent thing when no other peer phone company in the world has this kind of balance sheet risk. Are we as Canadians to take comfort when BCE’s lead financial advisor, Goldman Sachs writes to the company on June 29, 2007 , immediately after the leveraged buyout was announced that:

“We express no opinion as to the impact of the transaction on the solvency or viability of BCE or the ability of BCE to pay its obligations when they become due.”

Meanwhile the distributions paid on income trusts are not obligatory in nature. The opponents of income trusts try to portray this in a negative light. How can something as subject to business cycles and the risk of business be obligatory? Income trust distributions are subject to change in both the upward and downward direction. That is a good thing. As an income trust, BCE could never go insolvent. Just ask Goldman Sachs. As a debt leveraged buyout, BCE could very well go bankrupt. You don’t need to ask Goldman Sachs about tha one, as they already anticipated that question and that possible outcome.


Investor Demographics: We know who the investors in income trusts are. They are predominantly taxable Canadians who wish to prudently provide for their retirement income and to save for retirement. They also include pension fund investors and foreign individual investors. It takes no more than $1,000 for an investor to participate in the income trust market. No special membership in a pension plan is required. Meanwhile who are the private equity investors who are government is favouring with tax loss inducing policies. Truth is we don’t know. These private equity firms like Providence capital who bought a chunk of BCE are black boxes. Who knows whose capital they manage. Some of it is endowment money for wealthy US universities like Harvard and Yale. Some of it is money from Canadian pension funds. Much of it is from uber wealthy US citizens. And a good deal is from all four corners of the world, including the wealth of sovereign nations. One thing is for sure. 99.9% of income trust investors are precluded from investing in private equity leveraged buyouts. It takes a minimum of $5 million to participate in any of these name brand private equity funds. As a result the income trust tax is just another way to make Canadians squatters in their own country and subservient to foreigners at the hands of their own elected government.

Bottom Line:

So why would any sane and rational country want to introduce a tax policy that induces leveraged buyouts, that results in:

(1) Net loss of taxes. $800 million a year in the case of BCE, relative to an income trust. See http://www.caiti.info/resources_it_mythbusters.php#myth3
(2) Displacement of workers. 2500 so far in the case of BCE
(3) Introduction of systemic risk into the country’s economic well being: $34 billion new debt, displacing $34 billion of equity in the case of BCR
(4) increased cost of capital and resultant lessening of competitiveness. Immeasurable in the case of BCE, although they have already moved to increase phone service costs
(5) Displacement of Canadian investors in favour of foreign investors whose actual identity is not known

Again to quote Diane Francis: “Prove the case or drop the tax”

"A few crazy ones still linger" take Derek DeCloet for example

Truly pathetic journalism. Aimed to mislead and not to inform.




Jim Flaherty, trust investors' best friend. Seriously
By: DEREK DeCLOET
Globe and Mail
July 29, 2008

Leslie Lundquist has been an Albertan since birth, a Calgarian since the age of two and a Conservative for as long as she can remember. Or at least she was until the Tories put a chokehold on income trusts. Would she ever vote for them again? "Not as long as Harper and Flaherty are there," says Ms. Lundquist, who runs the Bissett Income Fund, one of the largest mutual funds devoted to - you guessed it - Canadian income trusts.

We say "largest," but in the shrinking trust sector that isn't saying much any more. Money has been pouring out of all kinds of assets since the credit crunch began - hedge funds, emerging markets, U.S. stocks - but for trusts, it merely opened the wound a bit wider. Investors have pulled more than $2-billion out of trust-related funds since the end of 2006, and that's just what we see from the industry's public data.

In Ms. Lundquist's case, what was a $1.1-billion fund two years ago was down to $810-million by the end of March, through no fault of her own, because the returns have still been good. So, yeah, it's no wonder she's still furious. But even angry people can see the silver lining, and it's this: At a time when no politician wants to talk about them and few investors want to touch them, income trusts are - dare we say it? - due for a comeback.

Actually, while the investing public has been running from trusts, in fear of the Terrible Mr. Flaherty and his new tax, most trusts have been doing just fine all along. True, they got absolutely crushed on Nov. 1, 2006, after his shock announcement. But what if you'd invested at the close of business that day? The S&P/TSX income trust index has returned 26 per cent, including all distributions. That beat the TSX composite (up 15.3 per cent), the Dow Jones industrials (down 13 per cent in Canadian dollars) and just about any other stock index that matters.

That's right. When the grinning Finance gnome was on CBC Newsworld justifying his decision, that was the moment to buy. Of course, it's partly a matter of rising oil prices, because the trust index is even more heavily exposed to energy than the TSX composite. Leaving that aside, though, the feds' crackdown did have some useful, albeit unintended, consequences, Ms. Lundquist says. It also served to flush out some of the low-quality junk (and, as importantly, prevented investment bankers from flogging more of it).

There were about 40 takeover offers for trusts in the year after the Halloween surprise but not very many of the targets will be missed, despite all the gnashing of teeth. Is it really a tragedy that Spinrite Income Fund, a yarn factory, is no longer publicly traded? Granby Industries? Associated Brands? Osprey Media? Some of these companies were wealth-destruction machines almost from the day they went public. Now they're in private hands, where they belong.

A few crazy ones still linger - the income trust that's based on a hydroponic vegetable-growing operation comes to mind - and a few others are too toxic for even private equity to touch. But for the most part, the trust market now looks much more like it was always intended to: a place for real estate, energy, and a small number of decent businesses like Yellow Pages whose need for capital reinvestment is small.

Come 2011, the roster will shrink some more, but maybe not as much as you think. In the oil patch, there's still lots of talk about finding ways to slide around, or at least soften the impact of, the trust tax. "I wouldn't be surprised if they're the last to say die. They're the most angry and they probably feel the most betrayed," Ms. Lundquist says. (Mike Tims, chairman of Peters & Co., a Calgary investment bank, confirms this: "I think we're going to see a bunch of innovations between now and 2011.")

And here's the kicker: Many trusts are far cheaper now than when everybody loved them and Bay Street was pumping them out as fast as it could. Take Yellow Pages. Pre-2006, it was an acquisition-mad company that issued billions of dollars in new units to buy stuff, and investors just couldn't get enough, even if it traded at 13 times EBITDA (earnings before interest, taxes, depreciation and amortization). Now it doesn't make the front page any more; all it does is make money and the multiple has shrunk to 8∏ times, using Bloomberg data. Yet nobody cares.

Who'd have thunk it? By attacking income trusts, Jim Flaherty may have created a once-in-a-generation investment opportunity in ... income trusts.

MP Garth Turner gets it. When will Canada's journalists catch up?

Could it have something to do with the fact that they’re “owned” by Teachers and BCE?




From: http://www.garth.ca/weblog/2008/07/28/outrages/


On October 31, 2006, Jim Flaherty shocked a couple of million investors out of their shorts by dumping a 31% tax on income trusts. This was ten months after the Harper Conservatives won office by promising they’d never do such a thing. The reason given: If income trusts were not slapped down then giant companies like Bell would convert to trusts, and Ottawa would be out hundreds of millions in tax dollars.

As a result of that move, Bell was prevented from converting, which would have seen dividends paid to investors, who would have then paid income tax. About $800 million a year. Instead, Bell went shopping for new shareholders, leading to the takeover – about to happen – by the Ontario Teachers pension guys. To pull this off, BCE will be burdened with $32 billion in debt.

So, here’s the outrage: BCE will not be paying any corporate income tax this year or next year or the one after. Not a cent. Jim Flaherty just blew his foot off. Worse, a grossly-indebted company is now struggling, and on Monday laid off 2,500 people. There are thousands more to follow, I’m told.

This is another example of a government that has absolutely no idea of the consequences of its actions. Income trusts. Over-spending. Forty-year mortgages. Bragging the dollar up. And mighty Bell, now a mess of wires and junk bonds.

More editorial hypocrisy from the Globe

The Globe’s editorial of today is entitled “Enough with the 'surprises'” and deals with budget surpluses. It calls upon Harper to “live up to past promises”.

A little bit late don’t you think? The problem has self corrected, as there won’t be any surpluses for some time.

Meanwhile, on the question of "surprises" how cataclysmic of an issue are budget surprises? You want to talk about surprises, did someone lose $35 billion of their life savings from any budget surprise? No, but income trust investors did.

Does this practice benefit one group of Canadians at the expense of the other? No, but the income trust issue did.

And here we have the Globe calling upon Harper to honour some obscure past promise.

What about Harper's solemn promise not to raid seniors nest eggs that were invested in income trusts? Votes actually turned on that promise. This budget promise that the Globe is fixated on, played no role in the last election.

The Globe supports the income trust broken promise because it serves the interests of its owners.

The Globe has zero credibility by being 100% hypocritical in its contradictory editorial positions.

The Globe is more concerned about issues of semantics and ignores the complete abuse of our democracy arising from 18 pages of blacked out documents as “proof” of alleged tax leakage.


BUDGET SURPLUSES
Enough with the 'surprises'

July 28, 2008

Renewed criticism of the federal government's continuing practice of underestimating annual revenues, particularly where it appears to be a deliberate political strategy, should compel the Conservatives to live up to past promises.

Hmm.....maybe Jim Prentice needs to invite Jim Leech to his August photo op meeting as well?

Jim Prentice had himself all all tied up in a knot over the fact that BCE and Telus were going to start charging 15 cents for income text messages.

Jim was so tied up (in political self interest), that he demanded a meeting with the CEOs of Telus and BCE.

Just how did our Apprentice Minister of Industry exactly think that BCE was going to service the interest on $44 billion of junl bond debt? By defaulting?

Of course not, they will do it the old fashioned way: raise prices and lay off workers.

Maybe Jim Prentice needs to invite the CEO of Teachers’(Jim Leech) to his photo op meeting in August with the CEO’s of Telus and BCE.

Prentice has much bigger egg on his face for approving the LBO of BCE than text messaging fees, How about the little matter of 2500 knowledge sector jobs:


BCE to cut 2,500 management jobs

Jamie Sturgeon, Financial Post Published: Monday, July 28, 2008


A pair of Bell Canada's repair and installation vehicles are parked outside one of the company's downtown offices in Toronto, Ont. BCE Inc. announced Monday it was cutting 2,500 management jobs.Norm Betts/Bloomberg NewsA pair of Bell Canada's repair and installation vehicles are parked outside one of the company's downtown offices in Toronto, Ont. BCE Inc. announced Monday it was cutting 2,500 management jobs.

BCE Inc. said on Monday it plans to cut 2,500 management jobs at Bell Canada as part of a massive restructuring plan announced on July 11. The cuts at the telecommunication giant's main division will represent about 6% of Bell's total workforce and 15% of its management.

BCE's massive layoffs and how Jack Layton is out of touch with the global labour movement

Union bosses want action over the 'rodeo capitalism' of private equity

THE INDEPENDENT
By Susie Mesure,
February 9, 2007

"Rodeo capitalism" was the blunt verdict of the takeover frenzy gripping J Sainsbury from a global workers' movement yesterday. Trade unionists have been tripping over themselves this week to denounce a potential £10bn-plus bid for the supermarket chain by a quartet of private-equity firms.

The GMB wants MPs to "rein in" the industry, amid fears that Sainsbury's will be the next victim of a private-equity boom that the union believes is "destroying household-name companies by saddling them with massive debts".

It blames the UK's tax code, which lets the industry heap up debt to fund its deals cheaply and then claim tax relief on the interest payments on loans. This starves the Exchequer of cash, so its argument goes, although this fails to recognise the tax that does make its way back to Gordon Brown via, for example, the pay cheques of staff employed by private equity-owned firms.

Philip Jennings, general secretary of United Network International (UNI), a global union that speaks for 15 million workers in 150 countries, said yesterday: "How long does a cowboy stay on a bucking bronco? A minute and a half. It's the same deal with private-equity owners of companies. Rodeo capitalism rewards the speculators and punishes decent companies and their workers with uncertainty." He added: "The Sainsbury's sweepstake should stop right now."

Mr Jennings' great fear is the one outlined by the City's very own watchdog just weeks ago. The Financial Services Authority, which has placed the private-equity industry under its magnifying glass, warned that the collapse of a private equity-backed company was "inevitable" due to the mountains of debt their acquisitions are forced to carry on their balance sheets.

To be clear, the debt in question is not your ordinary "oh-whoops-I'm-in-the-red-this-month variety". It's barely even the equivalent of your average mortgage. Rather, to the private-equity industry, debt is the equivalent of a magician's wand. It lets the private-equity boys - those infamous Barbarians of the corporate world - buy companies for their equivalent of petty cash, borrow stacks more money from the bank, and then use the cash generated by their new purchases to pay back their loans, thus leaving them owning something that is worth vastly more than they paid in the first place.

Analysts estimate that the CVC, Kohlberg Kravis Roberts, Blackstone and Texas Pacific consortium stalking Sainsbury's would barely need to put in £3bn of equity to buy a group that is valued at £9.5bn by the stock market. The rest they would borrow from a mixture of banks and hedge funds. After a semi-decent length of time has passed - private-equity firms tend to own businesses for between three and five years - Sainsbury's private-equity owners would either sell the business on or try to refloat it on the stock market, pocketing vast sums in the process.
Or so the theory goes. And it is that theory that has so enraged trade unionists, fearful for the job security of tens of thousands of Sainsbury's staff, particularly if in practice the business ends up struggling under the weight of its new debts.
"Is this business model too short term?" Mr Jennings asked a panel of private-equity heavyweights including Blackstone's chairman and chief executive Stephen Schwarzman at the World Economic Forum in Davos last month. "'Buy it, strip it, flip it' seems to be the motto."
The UNI is worried about the potential threat to the trillions of dollars tied up in pension funds that are swelling private-equity warchests around the world in the event that one of their investments goes wrong.
It also laments the lack of regulation forcing the industry to be accountable. With the exception of private equity-owned companies that have issued bonds, the industry is not required to dish the dirt on its investments. It doesn't even have to reveal how well (or badly) its investments have performed, although some firms do indeed choose to do so.
Mr Jennings wants other national regulators as well as the FSA to investigate what he dubbed a "feeding frenzy" sparked by the $500bn (£255bn) of cash that the global private-equity industry has burning a hole in its pocket. He is hopeful that a private-equity debate will be on the agenda for the G8 at its June meeting in Berlin; the German chancellor, Angela Merkel, has already let slip that she feels little sympathy for the industry.
Closer to home, the Transport and General Workers' Union, which has 25,000 members at Sainsbury's, has said it plans to write to the Department of Trade and Industry to express growing fears on the shopfloor about the potential £10bn takeover.
And last month, the Prime Minister himself was asked by Barry Sheerman, the Labour MP for Huddersfield, whether he was worried that private-equity companies starve firms of investment and "asset-strip ... in pursuit of a quick buck and quick profit". (Tony Blair, on the whole, wasn't. Yet even this only added grist to the mill of conspiracy theorists who think the Government is tucked up so snug in bed with the industry that any tax perks are here to stay.)
The attack from trade unionists has not gone unnoticed by private-equity insiders. Many are furious at what they perceive as underhand tactics to criticise an industry that more than pulls its economic weight. The British Venture Capitalists Association, a lobbying group, has figures showing that companies backed by private-equity firms created jobs at a rate way in advance of their FTSE 250 peers.
"Trade unionists have skipped the debate. They have decided they don't like private equity and they are not even interested in discussing whether it brings any benefits to the economy," said one industry insider. Regarding the GMB's tax attack, he added: "Trade unions have not historically been concerned about the tax regime per se. They have identified this as a potential vulnerability, rightly or wrongly. Yet debt is a legitimate business expense. Pretty much every company uses it to finance its business."
A 3i spokesman concedes that the industry hasn't invested much time in letting the outside world know what it is up to. But he says investors get all the information - and more - that they require.
Perhaps the greatest defence of the tactics used by the industry came from Donald Gogel, president and chief executive of Clayton, Dubilier & Rice, a big US player, out in Davos. "We all have children. Do you think we'd go home and say: 'We flip, we dip, we strip'."
As for what this all means for Sainsbury's, well right now it's anyone's guess. Although the founding Sainsbury family no longer has a controlling stake, their views still count, and from later this month Lord Sainsbury of Turville, the former Science minister, will be able to make his known.
Mr Jennings said: "Now he is free of his political responsibilities, as a true lord he should ride to the rescue and calm speculation about what he will do with his shares. He should issue a statement saying that the Sainsbury family is happy with the situation as it is."
As a flip side, he hopes that the spotlight on Sainsbury's will thrust the darker side of private equity into the open. "People have to wake up to the reality. Maybe this is the tipping point in the public's acceptance of these deals and the public's understanding of the downside of the private-equity business model."
The darker side of private equity
The AA, Roadside Assistance Group
* Was bought from Centrica by CVC Partners;
* Was geared up with £1.9bn of debt yet has virtually no assets; has sacked 4,000 of 10,000 staff; response times have since plunged, according to 'Which?';
* Will lose the Volkswagen contract to its rival, the RAC, from April.
Hertz, Car Rental
* Was bought by a private- equity consortium in early 2006 from the ailing Ford for $14bn (£7.15bn);
* Less than 11 months later, it was "flipped" in the form of a stock market flotation;
* Clayton, Dubilier & Rice, Carlyle Group and Merrill Lynch Global Private Equity pocketed millions of dollars from the deal.
Gate Gourmet, Catering Company
* Owned by the US private-equity firm, Texas Pacific Group;
* Was embroiled in one of the worst labour disputes in recent decades
* Was accused of sacking staff to bring in cheaper seasonal - and non-unionised - workers.

http://news.independent.co.uk/business/analysis_and_features/article2251418.ece

2500 layoffs brought to you by Jack Layton.......just in time for 2 Montreal by-elections

Bell Canada to cut 2,500 jobs to lower operating costs ahead of takeover
The Canadian Press
July 28, 2008 - 10:01 a.m.

MONTREAL - Bell Canada (TSX:BCE) plans to cut 2,500 jobs, or six per cent of its workforce, as the telecom giant streamlines management to lower operating costs just ahead of its impending takeover by a private equity consortium.

Jack Layton’s pivotal complicity in these layoffs explained here

BCE/Jim Flaherty to lay off 2500 knowledge workers

Bell streamlines management structure to improve competitiveness

BCE Inc. (TSX, NYSE: BCE) today announced it will reduce the size of the Bell management team as part of an organizational realignment focused on achieving a competitive cost structure.

MONTREAL, Quebec, July 28 2008 -- BCE Inc. (TSX, NYSE: BCE) today announced it will reduce the size of the Bell management team as part of an organizational realignment focused on achieving a competitive cost structure.
The number of management departures at Bell will total approximately 2,500, representing approximately 6% of the total Bell workforce or about 15% of management. These changes include the 30% reduction in executive positions announced on July 11. Combined with other reductions undertaken earlier this year, the changes announced today are expected to provide annualized savings of approximately $300 million.

Jim’s standard answer: ”it’s not my fault”

BCE: A simple IQ test for Jim Flaherty

Jim Flaherty likes to portray himself as the all knowing, all seeing Minister of Finance.

For example, he would like us to believe that he foresaw the downturn in the US economy and that he took measures in the last budget which anticipated that event. For example he lowered the GST?

Here is a direct quote:

"We knew that there would be an economic slowdown in the United States, and we took the steps in terms of making sure we in Canada were prepared for this economic slowdown,"

It’s easy to say that you foresaw something AFTER it has occurred, quite another to foresee something BEFORE it has occurred.

Flaherty’s income trust tax provides a simple IQ test for Jim Flaherty’s capabilities as a Finance Minister and his true abilities to look into the future and predict the consequences of his actions:

Here was his rationale for the income trust tax on November 1, 2006 as quoted in the Globe:

“You have to either leave it alone or fix it,” Mr. Flaherty shrugged Wednesday. “We were going to see the two largest telecommunications companies in the country not pay corporate taxes. That's a clear and present danger to fairness in the Canadian tax system. I thought we had to act.”

Evaluating Jim Flaherty’s IQ and acumen as Canada’s Finance Minister can be easily determined by how well this statement predicted future events.

It must first be pointed out that at the time of this statement, neither BCE nor Telus was paying any corporate taxes as a corporation, as the following statements from those two companies attest to:

BCE forward looking statement of December 12, 2006: “Bell expects it will have no significant federal cash taxes through 2010,”

Telus forward looking statement of December 14, 2006: “Based on a an updated review of the company's tax loss position, TELUS now expects minimal cash tax payments in 2007, a preliminary estimate ofapproximately $100 million in 2008 with the payment of significant cash taxes largely deferred to 2009, rather than 2008 as previously anticipated.”


So the question becomes, how could the government lose taxes that it wasn’t even collecting at the time?

Perhaps Jim Flaherty was referring to a longer time frame when he made that statement to rationalize his policy.

In that case we only need to look at the events of the next six months following the date of this statement by Flaherty.

According to BCE’s takeover bid circular, we learn that the private equity leveraged buyout of BCE was precipitated by the events of Halloween.

That is revealed by the fact that BCE’s circular provides a history to their proposed transaction. The first four events recounted are:


October 11, 2006: BCE announces its intent to convert to an income trust

October 31, 2006: Jim Flaherty shuts down income trust market

November 3, 2006: KKR rumoured to be considering a takeover bid for BCE in the aftermath of its devaluation following Flaherty’s Halloween announcement. BCE CEO calls KKR that day.

November 15, 2006: BCE CEO Michael Sabia meets with Henry Kravis of KKR. Teachers’ catches wind of these discussions, which precipitates an auction of BCE to private equity firms by way of a leveraged buyout

As for Flaherty’s IQ test. How well did he do? How well did he predict the future? Did he even portray the present circumstances honestly and correctly? Did he ensure that Canada’s two largest telecommunications companies would pay taxes? Here’s the answer to that:


Flaherty's tax conundrum

BCE Privatization could cost him $800-million
Paul Vieira, Financial Post Published: Wednesday, April 18, 2007

OTTAWA - Jim Flaherty, the Minister of Finance, could face another major tax loss headache --on the scale of income trusts -- should a buyout deal be reached between BCE Inc. and a consortium of private-equity investors.

Financing experts say a buyout of BCE -- led by tax-exempt pension funds Caisse de depot et placement du Quebec and the Canadian Pension Plan Investment Board -- would produce virtually the same results, taxwise, had the Montreal-based company converted to an income trust as planned.

"It is basically income trusts revisited," said Laurence Booth, an expert in structured finance at Toronto's Rotman School of Management. "And the implications for Ottawa are pretty much the same."

Yesterday, BCE confirmed it was in talks with the Caisse and CPPIB about taking the publicly traded company private. If successful, it would result in the largest buyout in Canadian corporate history.

It has been estimated the conversions of BCE and competitor Telus Corp. would, collectively, shrink corporate tax revenue by $800-million a year. David Lambert, a telecom analyst at Canaccord Adams, said yesterday he estimates that BCE alone pays, on a per-share basis, about $1 per share from its free cash flow toward taxes.

BCE has 808 million shares outstanding, which would translate into an annual $808-million tax bill under Mr. Lambert's calculations.

Last year, BCE had announced its intentions to convert to an income trust. But those plans were killed when Mr. Flaherty slapped a tax on income trust distributions to put an end to the popular corporate structure that allowed companies to avoid tax by dishing out most of the cash flow to investors.

Mr. Flaherty said he decided to act because the investment vehicles were costing Ottawa $500-million in lost revenue annually, and warned that planned conversions would further threaten federal finances.

Under private-equity transactions, or leveraged buyouts, the investors finance the acquisition mostly with debt and a small equity component. The interest payments on that debt allow the investors to avoid, or greatly reduce, the amount of tax paid.

Further compounding possible problems for Mr. Flaherty is that pension funds can defer taxes owed. So if they own equity, dividends from those shares flow through without facing a tax hit.

"Financial markets are getting more innovative and you are getting some very low-risk businesses that can support more debt, and [investors] are finding ways of having them carry more debt in order to avoid the corporate income tax," Mr. Booth said.

He likened the Finance Minister's efforts to stem tax leakage to the title character in a Dutch legend. "[He] is a bit like the Dutch boy who has his finger in the dyke. He plugs one hole but then, bingo, another hole pops up."

Mr. Flaherty yesterday declined to comment on developments at BCE, or even mentioning the company's name. "I am not going to talk about anything that is subject to current market activity," he said.

But he dismissed suggestions that private-equity investors are, as Mr. Booth suggested, converting to a trust through the back door.

"That is nonsense," he said. "When you are talking about a company becoming an income trust under the old rules, you are talking about a company getting a preferred tax rate. When you are talking about a corporation continuing as a corporation but under different ownership, it is still taxable--at the same rate."

Mr. Flaherty has come under pressure, from corporate Canada and the Liberal party, for handicapping the business community with the trust tax and recent changes to interest deductibility of foreign financings. These moves, his critics argue, will leave Canadian firms ripe for foreign takeovers and make them less competitive on a global scale.

John McCallum, the Liberal finance critic, said Canadians are starting to see the consequences of the trust tax.

"The effect of what he is doing is exactly the opposite of what he intended, because the holders of income trusts pay lots of tax," Mr. McCallum said. "All of these trusts are now being taken over in such a way so that the new owners will pay no tax.

"So, instead of a situation where a lot of personal taxes were being paid, you are having these induced takeovers by highly leveraged private-equity companies that will pay no tax."

pvieira@nationalpost.com

Gitmo north

The issue involved in Omar Khadr’s incarceration at US military prison Gitmo, isn’t whether he is guilty or not, the issue is whether he will be given a fair trial in accordance with Canadian standards of justice.

Without due process, justice is just another word in the English language.

One need only learn that the Gitmo military version of justice, involves the accused not having the opportunity to see, and therefore challenge, the evidence that is being used against him.

It’s no wonder that Stephen Harper is in favour of this form of justice, as he has used it to good effect in the matter involving income trusts.

Harper has accused income trusts as being responsible for causing tax leakage. Jim Flaherty even tries to cast the matter into military type terms by saying that income trusts represented “ a clear and present danger to fairness in the Canadian tax system.”

On this basis he claims: “I thought we had to act.”

So where’s the proof of tax leakage and the calamitous “clear and present dange”r that it represented? After all the allegation of alleged tax leakage is an infinitely provable construct or it is not.

Again Flaherty resorts to military type language to defend the release of 18 pages of blacked documents as his “proof” of tax leakage. He claims that it was a matter of national security to have disclosed this information.

Yeah, right.

So there you have it. Law abiding tax paying Canadians have experience a $35 billion loss in their lifetime savings based and the loss of an essential investment choice, on evidence they never get to see.

Welcome to Gitmo North.

Complacent Canadians, especially those in the press, should be very careful of what they have wished upon themselves in their blind acceptance of allegations by Stephen Harper as being anything remotely similar to the truth.

Our brave new world of multiple truths..... brought to you by the Globe and Mail

As with the speed of gravity or the boiling point of water, there only is one truth. It also holds that there is only one truth insofar as one’s bank statement is concerned.

Why then is the issue of alleged tax leakage from income trusts so nebulous and vague? Why has there never been a proper accounting and reckoning of this issue?

If the local bank can go to the trouble of issuing monthly statements concerning the $321.17 that I have on deposit , then why can the Government of Canada not go to the trouble of ascertaining with some measure of precision and methodological rigor the true tax leakage that they allege arises from income trusts?

How credible is that? Perhaps more a case of being incredible, as in astonishing and not credible.

People are being asked to forego an essential investment choice that provides needed income for their retirement. People have lost $35 billion of their hard earned life savings.

What’s the big secret?

Was this policy enacted on facts or was it enacted on whim? Perhaps Ministerial naiveté. had a big role to play? That alone calls for full transparency, as who benefits from incompetents in office and possible manipulators in the bureaucracy?

The question of tax leakage has a single answer. Presently we have no answer. Those who favour this tax and who benefit commercially from it have a good reason to promote confusion and to believe in the world of multiple truths. Take for example this beliver inmultiple truths, John Stackhouse, editor of the Report on Business at the Globe and Mail. This was from November 7, 2006. All I can say is it’s a good thing this guy isn’t responsible for my $321.17 bank account, for which he would only be able to provide me with a "reasonable range of estimates", which of course "depends greatly on the assumptions":

Is it safe to assume that this individual and the commercial interests he represents are well served by the world of multiple truths?


Dear Mr. Fullard

Ira [Gluskin] forwarded your piece to me. It's interesting, but I think most of your points have actually been well covered in our pages. And as for the "tax leakage" calculations, it depends greatly on assumptions -- but there is a reasonable range of forecasts that we have, I believe, published.

That said, I am copying your piece to my deputy editor Cathryn Motherwell, who oversees -- among many other things -- our new online trusts page. She may want to post it there.

Thanks again, and regards

John Stackhouse
Editor, Report on Business


To which I responded:


Dear Mr. Stackhouse:

Thank you for your prompt reply.

Let me start off by saying that I am not an advocate of tax leakage policies. I am, however, a strong advocate of public policies being founded on fact-based analysis and public input.

This whole income trust issue turns on the question of tax leakage.

I rely exclusively on the ROB and to a lesser extent ROB TV for my Canadian business news, and yes the ROB has published a range of "reasonable"(your term) estimates. The key issue is what constitutes "reasonable".

By reasonable I assume that you mean that these estimates are based on sound methodological frameworks and are performed on a rigorous basis. I am only aware of two studies that meet this latter test....the study performed by the Department of Finance and the work undertaken by HDR/HLB Decision Economics.

These two studies do however differ fundamentally as to their methodological framework, in that the Department of Finance (incredulously) chooses to ignore the tax it receives on the distributions paid on no less than 31% of all outstanding income trusts. i.e those trusts held in RRSPs/Pension plans. As I stated in my earlier letter, the $390 billion that Canadians have saved in RRSPs as their retirement nest eggs is nothing more than a nest egg for the government, as all monies withdrawn from RRSPs are taxed, and yet Finance ignores it.

This difference in analytical approach is not some esoteric concept that is above Canadian's heads, afterall, if this were a divorce court, the judge would chastise the Department of Finance for attempting to conceal communal assets for its personal gain.

The issue of tax leakage turns on this very central point.

Unlike the Liberal Government, who under Ralph Goodale, began a formal process of public input, that was abandoned mid way through the process in the Liberal's haste to prepare for last years election (following a non -confidence vote), the Conservatives after campaigning on a pro-income trust platform, reversed their course 180 degrees and did not see fit to at least finish the consultative process that the Liberals began.

Rather than discussing this issue in a fact based way with public input, it is being dealt with through a process of political expediency. No doubt the average Canadian intuitively thinks trusts are "tax dodge" designed to avoid paying corporate taxes at the statutory rates of 21% for non-resource companies and 25% for resource companies.

Do you not think that the average Canadian would be surprised to learn that (according to Statistics Canada), corporations on average pay only 6.2% of earnings in taxes? Are Canadians aware that two-thirds of trust distributions are interest which is taxed at the full personal income tax rates, in contrast to the 72% of corporate income which is taxed at half the personal tax rates. Would Canadians be surprised to learn that even if they were to accept the Department of Finance's flawed analytical methodology, that the "tax leakage" numbers they are promulgating in the public, have only a 9% chance of occurring and that there is a 91% chance that they will actually be materially less?

Perhaps you are aware of the "Downing Street Memo Affair" in the UK where Tony Blair's government was accused of "sexing up" (not my term) the intelligence reports to justify the ill-fated invasion of IRAQ? This revelation undercovered by the British press severely diminished Tony Blair's standing, and is widely attributed as being the reason he will not seek another term.

What does this have to do with Income Trusts? Based on the observations I made above, is it not possible that Finance, if not guilty of "sexing up" the data, is at least participating in "massaging" the data to assist in making the case that happens to resonate with the average Canadians' intuition , notwithstanding the fundamentally flawed analytical framework and notwithstanding the negative economic repercussions it will induce?

There are a whole host of secondary considerations/repercussions that arise from such a change in tax policy, some of which I attempted to address in my letter, such as limiting the investment choices of Canadians as they face the difficult task of providing for their retirement and the potential "hollowing out" effect of Canadian business, just to name the ones I am most concerned about.

Unlike our elected politicians, all of whom have Government indexed pension plans (actually, three in the Flaherty household), most Canadians have no such pension plan and many of those that are privileged to have company pension plans need to concern themselves with a serious level of under funding which from time to time Ottawa voices concern about.

There is a very perplexing circularity of injustice in what is going on here. By virtue of the fact that so many Canadians do not participate in a formal pension plan, they have to participate in the difficult task of making their own investment choices...meanwhile Income Trusts emerged as a prudent and sought after investment alternative that many Canadians have chosen for inclusion in their RRSPs as they plan for retirement, and now we have the Government taking this very investment choice away from Canadians because the Governments analysis that supports the notion of tax leakage ignores the taxes on the very place where most Canadians hold these securities, namely their RRSPs. Circular logic or circular injustice?


Very little of this has been reported on in the ROB. All of my observations are fact-based. Given that the Government has not seen fit to provide a formal process of public input on this important economic issue, the press becomes the only means for doing so.

Thank you

Brent Fullard

Harper's idea of transparency

Show us the numbers, income trusts demand


STEVEN CHASE
Globe and Mail
December 7, 2006

Ottawa — The embattled income trust sector is demanding that federal Finance Minister Jim Flaherty release calculations justifying his claim that trusts are costing Ottawa half a billion dollars in lost tax revenue each year.

Private sector analysts have questioned Ottawa's figures and suggested the revenue bleed has been significantly overstated.

When he slapped a surprise tax on income trusts on Halloween, Mr. Flaherty justified it by saying the investment vehicles were costing Ottawa $500-million annually in lost tax revenue and warned this hemorrhaging could grow to threaten federal finances.

He also said that annual losses would have climbed to $800-million annually if Telus Corp. and BCE Inc. converted to trusts.

Trusts say they've yet to receive details from the Finance Department on how mandarins got the loss estimate.

"There's nothing backing up these numbers that Jim Flaherty has been throwing out," said George Kesteven, president of the Canadian Association of Income Funds.

"It's never been analytically substantiated."

The Globe and Mail has also requested the data from Finance.

Mr. Kesteven said work by some other analysts has contradicted Ottawa and concluded that income trusts are tax neutral, meaning they cost the federal government nothing in lost tax revenue.

One Calgary royalty and income trust analyst is trying to use the federal Access to Information Act to prompt Finance to release the detailed analysis it conducted to derive its tax loss estimates.

Gordon Tait of BMO Nesbitt Burns says his own work concludes that Ottawa reaped more, not less, tax revenue after firms converted to income trusts.

"We looked at 126 businesses that converted from equities to trusts between 2001 and 2005 to prove that," Mr. Tait said in a study.

"We found that on average the government stood to collect 2.2 times more in taxes by taxing the distributions of the trust than had been paid by the corporations prior to their conversion."

The Tories broke a campaign promise by slapping a levy on trusts, which pay few or no corporate taxes. They said this would apply immediately to new trusts but that existing trusts would be exempt from the levy for four years.

Separately, a move is afoot by the Bloc Québécois to try to extend the grace period for existing trusts to 10 years from four.

The Bloc has written Mr. Flaherty asking for the amendment when he introduces legislation to support the levy. The Bloc backs the trust tax, however, and say they do not plan to withdraw this support if the grace period is not extended.

The Bloc is also lobbying other parties to support the grace-period extension. The minority government situation means the Bloc and Liberals have the power to rewrite the trust bill in committee to extend the grace period to 10 years. The Liberals say they've not yet decided what they will do.

What does Stephen Jarislowsky know about corporate governance?

Buying BCE

By: Stephen Jarislowsky

Financial Post
July 26, 2008


The Board of Directors of BCE met to consider an offer from the Ontario Teachers Pension fund, and others, to make a leveraged buyout. The board was fully aware that if it sold BCE, the buyer would issue new bonds and borrow from banks, in addition to the already outstanding bonds and preferred shares issued at the time. The board also knew that these bonds and preferred shares would not rank ahead of the new debt. Old bonds issued in this situation totaled some $5-billion, plus the preferred shares. These bonds were all rated 'A' or better, which means "investment grade." The board also knew that bonds under 'BBB' (one grade lower than 'A-') would be 'junk' bonds and that most pension funds prohibited owning such bonds (many funds do not allow 'BBB' bonds, or if so, only in small amounts). The company had originally sold the bonds to investors on an 'A' or over rating.

When the board meeting ended, the board had accepted the offer from Teachers and, though its action in one meeting created a loss for the bondholders of $1-billion, i. e. it had destroyed unilaterally, without change in the company's pre-meeting risk, the value of these bonds by $1-billion, with the sole objective being to get a higher price per share. The board members had a conflict of interest as all were BCE shareholders. As fiduciaries for the company (and that was their status under Canadian law) they had betrayed the interest of the bondholders by $1-billion. Was this legal? Was it ethical? Was it good governance as fiduciaries?

The trial judge said yes it was legal, citing U. S. Delaware Law. All five judges of the Appeal Court said no. The Supreme Court, allowing the case to take precedence (why?) over all others on its docket, after a very cursory hearing, allowing only a minimum of testimony, and after only a few days of thinking and deliberation, unanimously said it was legal. It would give its reason later (?)! The haste is surprising, and so is the willingness to give preference to this case. Obviously when five Appeal Court judges are unanimous, one may wonder why seven Supreme Court judges came to the exact opposite conclusion in no time flat? The case is murky at best. Moreover, in another case, the Supreme Court had ruled that directors have an obligation to other stakeholders, not only the shareholders. A contradiction?

Few judges are experts in corporate matters of this type or in modern governance. Clearly that would seem to apply here. Why else would there be a total contradiction of the Appeal Court by the Supreme Court?

Jarislowsky Fraser Limited does not hold BCE shares or BCE bonds for its clients, nor does the writer own any. Some years ago, we decided not to invest in this company after the board did not honour a Letter of Comfort to Teleglobe bondholders. Neither the firm nor I have a conflict of interest in my writing this letter.

However, being a co-founder of the Canadian Coalition for Good Governance, the founder of the Institut sur la Gouvernance du Quebec, and after 53 years in business defending shareholders, I believe I have a fair grasp of both ethics and governance. To be allowed to legally alienate $1-billion of market value in a short board meeting does not meet my criteria.

If indeed the Supreme Court acted correctly, I am shocked that a unanimous Appeal Court ruling was so summarily overruled in insufficient time. Does it mean that Canadian laws need to change to protect against this type of alienation? Does it mean that the law is not clear? Does it raise other suspicions and questions?

I would like to go on record saying that I am very uncomfortable. Both Canadian Law and our process are flawed at best.

Stephen Jarislowsky, Chairman & Director, Jarislowsky Fraser, Montreal.

Mark Carney’s conflict of interest

Mark Carney is the Governor of the Bank of Canada. He was Jim Flaherty’s choice, not the Board’s.

Mark Carney’s pension is provided by the Public Sector Pension Plan.

The Public Sector Pension Plan is faced with a near $ 1 billion loss on Asset Backed Commercial Paper (ABCP).

Now we learn that the Bank of Canada, at Mark Carney’s request, has been granted greater freedoms by Jim Flaherty to assume riskier assets to back loans made by the Bank of Canada.

One of the reasons cited for this relaxation in the quality of collateral is to deal with credit market deterioration.

The article below cites that this will permit the Bank of Canada to extend loans against ABCP.

This creates a conflict insofar as the Public Sector Pension Plan is concerned. They should be required to sit on their ABCP and learn the errors of their ways. Lest they repeat them. The others as well.

The highly predictable and inevitable ABCP mess should not be subsidized in any way by Canadian taxpayers, either directly or indirectly. This change below, will lead to an indirect subsidy to holders of ABCP by Canadian taxpayers. It will lead to the assumption of risk by Canadian taxpayers. For what purpose and for whose purpose?

The Bank of Canada should not be made into a CONDUIT to bridge the gap between the short term nature of ABCP investors and the long term nature of the underlying assets that they acquired. This whole problem began with the formation of conduits. Why is the Bank of Canada now becoming a conduit itself?

To bail out Mark Carney’s pension plan? And that of 370,000 federal civil servants?


Central bank to take riskier assets as collateral

KEVIN CARMICHAEL
Saturday, July 26, 2008
OTTAWA — The Bank of Canada says it is prepared to accept some of the riskiest assets on the market, giving it more power to fight the credit crisis.

For the first time, the central bank will accept as collateral for emergency loans asset-backed securities of the type at the heart of the crisis of confidence that has seized financial markets for the past year.

Governor Mark Carney revealed yesterday in the Canada Gazette how he intends to use new powers granted him by Finance Minister Jim Flaherty in legislation that cleared Parliament in June. It was left up to Mr. Carney to decide which assets would be acceptable to the central bank.

The change aligns the Bank of Canada with other major central banks, including the U.S. Federal Reserve and the European Central Bank, and clears the way for Mr. Carney to more forcefully attack a problem that he says has subsided in Canada for now.

"This is a positive development as it brings the Bank of Canada's powers more in line with that of its peers, and it reduces the risk of further credit market problems in Canada," said Eric Lascalles, an economist at Toronto-Dominion Bank.

Mr. Carney indicated frustration during parliamentary testimony earlier this year as the Fed and others took extraordinary steps to inject liquidity into frozen credit markets, accepting a wide range of assets as collateral in return for billions of dollars worth of short-term loans. Canada's central bankers were left to fight the fire with what amounted to a garden hose by comparison.

That's because Canadian law forbade the central bank from accepting anything but the safest of assets in return for emergency loans. In his testimony to Parliamentary committees, Mr. Carney indicated the credit crisis was worse than it needed to be as a result of the limits on the central bank's discretion. The heads of Canada's biggest banks felt the same, and lobbied Ottawa to expand the Bank of Canada's powers.

At emergency auctions for short-term loans, the central bank said it will now accept collateral commercial paper, including asset-backed commercial paper, with a term of maturity of no more than 365 days, and other Canadian-dollar, asset-backed securities. The central bank also will accept securities issued or guaranteed by the federal government; provincial governments; the U.S. government; and any state in the Organization for Economic Co-operation and Development.

The list of assets also includes Canadian-dollar corporate and municipal bonds, Canadian-dollar bankers' acceptances with maturities of no more than 365 days and Canadian-dollar promissory notes with a term to maturity of no more than 365 days.

The Globe and Mail’s Sleight of Hand

How very grossly hypocritical of the Globe and Mail to be publishing a retrospective piece on the US subprime meltdown in an article today entitled “Balance Sheet Sleight of Hand”

When in fact, the Globe itself is guilty of sleight of hand journalism, of the worst kind

Sure, everybody can be proven to be brilliant when they criticize things in retrospect, even a newspaper as inward looking and grossly conflicted as the Globe and Mail.

What takes some journalistic ability however is, to be able to look ahead and to accurately predict things and thereby avert negative outcomes.

The Globe has proven itself grossly incapable of doing this. Just look at Eric Reguly. Dumping on income trusts for over two years and then when he observes the negative aftermath of his long advocated for position, completely reverses course and says Flaherty made a huge mistake. See for yourself


Unfortunately Eric Reguly didn’t have the balls or journalistic integrity to write an article to that effect, just pontifications in person, before he fled for Rome to report on winemaking, luxury brands and the like.

Which brings me to the story of how the Publisher of Globe and Mail (Phillip Crawley) refused to print the following Op Ed which I wrote entitled Jim Flaherty’s Sleight of Hand circa December 1, 2006 after SIX organizations asked him to, John Dielwart CEO of ARC and a Co-Chair of the Coalition of Energy Trusts, Peter Coleman, President of the National Citizens Coalition and four money managers who managed income trust portfolios for over 500,000 Canadians.

The Globe only wishes to report the news retrospectively and not introspectively. This way Canada is sure to repeat the same types of mistakes as the US. How can an intelligent nation introduce broad tax measure based on 18 pages of blacked out documents? If so, perhaps the Globe should write an Editorial on the merits of that concept(?), rather than pointing fingers at the idiots in the US.

We have plenty of idiots here in Canada. The Globe is at the head of the list.

Here was my piece. It’s as valid today as it was two years ago. If not more so:

Mr. Flaherty’s Sleight of Hand


Mr. Flaherty is not without his creative side. Creative accounting that is.

During his short time in office, our Finance Minister has had the opportunity to demonstrate his skills at dealing with two issues that profoundly touch on Canadians saving for retirement. The first involves the Canada Pension Plan and the other involves income trusts. Because 70% of Canadians are not members of a defined benefits pension plan, these issues will affect virtually all Canadians at some point in their lives.

With much fanfare, Mr. Flaherty recently announced that the Conservative government’s fiscal plan would see the federal debt paid off by 2021. What didn’t receive quite the same level of transparency, was that he was using the assets of the Canada Pension Plan to do so. Mr. Flaherty would probably argue that this is no different than using your RRSP to pay off your mortgage. This is nothing more than an accounting sleight of hand. Wrong Mr. Flaherty, this is a case of you using my RRSP to pay off my neighbour’s mortgage.

As the second act of his performance, Mr. Flaherty has again made liberal use of his accounting creativity to effectively kill an important retirement savings investment choice, namely income trusts, in the false belief that they cause tax leakage. Mr. Flaherty’s so called Tax Fairness Plan (TFP) is ostensibly intended to “ensure that taxes are not unfairly shifted onto Canadian tax payers”. If there is no tax leakage, then there would be no shifting. If there is no shifting, then there should be no need for “fairness” measures. What Mr. Flaherty has not revealed to Canadians or any Member of Parliament is that his assertion of tax leakage is simply another accounting sleight of hand.

Some 31% of Income Trusts are held in retirement accounts on which the government collects retirement taxes. In 2004, approximately $9 billion in retirement taxes were paid by seniors on $52 billion of retirement income.

In Mr. Flaherty’s good/bad analysis of the alleged tax leakage of income trusts versus companies, he has chosen to leave out 31% of the good, namely retirement taxes. If Mr. Flaherty were to simply acknowledge these retirement taxes paid by Canadian seniors, he would realize that income trusts are tax neutral. Not only does Mr. Flaherty not acknowledge retirement taxes, he uses that flawed analysis to devise policies that are regressive to Canadian seniors and the choices all Canadians have as they too make provision for retirement income. Sleight of hand, or circular injustice?

Mr. Flaherty’s creativity however has its limits. His approach to income trusts, apart from being misguided, has shown no creativity in mitigating the loss to Canadians’ hard earned savings. His approach is better described as blunt force trauma.

This is a moot point anyway, since all Canadians will at some point in their lives be vastly better off if Mr. Flaherty would simply admit his mistake and repudiate these unfounded measures.

Brent.Fullard@rogers.com

Ned Goodman comments on Flaherty's deficit (fiscal and intellectual)

How tax leakage sank Canada

Tories damaged competitiveness, Dundee chief says

Diane Francis, Financial Post Published: Friday, April 20, 2007

Ned Goodman blasted the Tories for their ignorant economic policies, and took aim at Canada's pension funds, too, while he was at it.

"Income trusts were a competitive advantage for Canadian companies in terms of lower capital cost," he said in a recent interview in his Toronto office. "Now all the income trusts are going to be taken over by pension funds or private equity, neither of which will pay any taxes."

That's what is so disappointing today.

The Tories have joined the long list of federal governments that have failed to make international competitiveness a policy priority, not 50 ways to tax our winners.

Ned sits atop the Dundee Wealth Management conglomerate, which includes Dynamic mutual funds, Dundee Real Estate Investment Trust and the first, wholly owned chartered bank in Canadian history, Dundee Bank of Canada.

Canada's Big Six chartered banks must be widely held by law, but start-ups have been allowed, like Ned's bank, which can be 100% owned by individuals or enterprises until they reach $3- billion in assets. Owners must then divest, as the financial institution grows.

His fledgling bank has $1.5- billion in assets and its customers are thousands of financial advisors across the country with many firms, not the public at large.

He made his first fortune in the 1980s, backing the right side in the huge International Corona legal tussle over ownership of Canada's last world-class gold discovery. Through his companies and family, he still owns stakes in several mining corporations. He's a geologist by training.

Like many other businesspeople in Canada, he was happy when the Tories took over government.

Then, in October, Jim Flaherty, the fledgling Finance Minister, imposed huge taxes on income trusts. More recently, he has proposed removing interest deductibility on loans used for international expansion and also announced a measure that will benefit foreigners by removing any withholding taxes on interest payments they receive from Canada.

What was needed was to level the playing field for Canadians abroad by leaving income trusts alone and eliminating double taxation of dividends.

"You can't build a global company in Canada, because you don't have the advantage of lower-cost capital available," Ned said.

Ottawa said it moved on the income-trust sector, despite a promise to leave it alone, allegedly because of tax leakage.

But a Parliamentary committee concluded there was little leakage because individuals and RRSPs pay income taxes on their income-trust distributions.

The real leakage, said Ned, was the country's huge pension plans, which pay no taxes. (The pensions argue that their distributions are eventually taxed, so that they are not a form of leakage, either.)

But in 2005, the Liberals announced they would ban pension plans from owning income trusts to stem leakage.

"When the Liberals said they would not let pensions own income trusts, the lobby went wild and won the day," he said. "The Liberals buckled."

This time, the pensions were not targeted per se, but the entire sector was hit with a 31.5% tax, which has damaged everyone involved and led to $8-billion worth of takeouts so far by pensions and foreigners.

"The government had other options if they were concerned about the leakage issue [with pensions and foreigners] other than destroying the sector," said Ned. "They could have restricted income-trust ownership to RRSPs and individuals only; lowered the RIF to 65 years of age from 69 to speed up taxation of distributions and limited income trusts to a certain market capitalization size to stop everyone from converting."

Then taxes on dividends should have been scrapped.

"Now it's totally unfair," he said. "For instance, CI [mutual funds] is an income trust for 3.5 more years. I have to compete with it and CI paper is better."

Besides income trusts, there's the "foolishness" involving interest deductibility.

"This is just disastrous and disables all businesses who wish to expand in a foreign jurisdiction, because they cannot borrow money outside and deduct interest on that money," he said. "It means everyone must rearrange their affairs and set up a U.S. subsidiary, which costs more money."

"So [Brazilian mining conglomerate] CVRD buys Inco and borrows money to do it so it can shelter its income from all taxes and goes home with the most prolific mine in the world," he said. "But Inco's not allowed to deduct interest on its foreign expansions."

dfrancis@nationalpost.com

Ottawa’s total silence on the BCE deal proves one thing

Funny how Ottawa in completely silent on the debt leveraged buyout of BCE.

Actually that’s not completely true, since Jim Flaherty actually enthusiastically supports it. This proves that the income trust issue was never about the uproven allegation that income trusts cause tax leakage. That concept is simply what Dan Miles (Flaherty’s Rasputin of Communications) calls “developing an event”......also known as manufacturing an argument.

You see, if the income trust tax had been advanced in the public on its true underpinnings and rationale, Flaherty would have been laughed at and scorned. Instead a reason that would resonate with the public had to be manufactured, namely tax leakage.

Proof of tax leakage has never been tabled by the Government for peer review. Tax leakage is a contrived outcome that is manufactured by assigning zero value to the taxes collected from pension funds and RRSPs. And yet now BCE will be owned 50% by a pension funds and 50% by three US firms. If tax leakage were the true issue behind income trusts, then the BCE LBO is the worst outcome possible.

Instead Jim Flaherty chooses to completely contradict himself and in the process lay bare the false nature of this assumptions that underpins the tax leakage argument, when he said:

"The purpose of the pension funds, ultimately, is to ensure they can honour their pension obligations. And there is taxation, of course, when pensions are paid out," the Minister said.

So why are deferred taxes ignored by Ottawa in the context where BCE was to have become an income trust, but they are included when BCE becomes an LBO?

Total contradiction in terms, which proves one thing. The income trust tax was never about tax leakage. The following quote from the 2006 CGA study captures what the trust tax’s true underpinnings were all about:

"Investors decide how best to reinvest cash flows as opposed to leaving them in the hands of the management of the [business]."

That’s right, this battle is all about who has control of the discretionary cash flow of a business. The owners or the managers.

The thing that managers find completely unattractive about the income trust model, is the very fact that to qualify as an income trust, as with any tax flow through entity, 95% of the discretionary cash flow HAS to be paid to the owners.

This is against the personal preference of the managers. This is why Dominic D’Alessandro (CEO of Manulife Financial) is so opposed to the income trust model. He testified as such, at the public hearings on income trusts. No mystery there. Do you really think he cares about the taxes Ottawa collects? If he does, he should have said so, but he did not. Wise move, because any claims of tax leakage are a total crock. Just so that you are sure about how Dominic D'Alessandro views himself in this great dichotomy between owners and management, I will quote him:

“I’m management”

So there you have it. Income trusts let the owners control the destiny of the owners’ cash flow. The corporate model lets the management control the destiny of the owners’ cash flow.

On that basis, how many Canadians would support the income trust tax that has imposed major losses on Canadians? How many Canadians would support the income trust tax if they knew that it actually causes the loss of taxes? I think this process of elimination means that we are now down to a small group of Canadians consisting of about 100 CEOs, Dominic included, whose interests are served by this trust tax.

These are people whose personal interests this trust tax serves. No one else. They are unwilling to bow to the pressure of the capital markets. They want to preserve the silent movie business, and the market wants talking movies. The government has sided with the past, and condemned the future.

Here’s John McCallum’s take on BCE:

“John McCallum, the Liberal finance critic, said Canadians are starting to see the consequences of the trust tax.

"The effect of what he is doing is exactly the opposite of what he intended, because the holders of income trusts pay lots of tax," Mr. McCallum said. "All of these trusts are now being taken over in such a way so that the new owners will pay no tax.

"So, instead of a situation where a lot of personal taxes were being paid, you are having these induced takeovers by highly leveraged private-equity companies that will pay no tax."

Adrienne Oliver tax lawyer person

"From a government revenue perspective, if we are going into a global economic slowdown they're going to be looking to preserve their revenue base. Income trusts, as they previously existed, were a real threat to that." Tax lawyer Adrienne Oliver, (July 16, 2008)

Wow, this Adrienne Oliver tax lawyer person is a real winner. I think Diane Francis should interview her. Diane could start off by asking:


How does Adrienne’s totally presumptuous logic support evidence that any taxes are being lost in the first place? Proof would be more compelling than presumption.

How does Adrienne’s lame logic “explain away” Flaherty’s exemption for REITs?

How does Adrienne’s misguided logic “explain away” Flaherty’s exemptions for public trusts that become private trusts held by pension funds and not taxed?

How does Adrienne’s empty logic “explain away” Flaherty’s removal of the 15% withholding tax on leveraged buyout loans to facilitate the total loss of the tax revenue base to foreign private equity?

And finally, what taxes are paid by her employer Ogilvy Renault Tax Flow Through Entity LLC?

No point asking that question, since it’s purely rhetorical. They pay no taxes. They are an income trust. I guess Flaherty forgot to tell the world that he exempted REITs AND law firms.

Harper announces new measures to counteract influence of Hells Angels in Ottawa

He is forming a rival biker gang........called the Black Outs.........symbolized by the 18 pages of blacked out documents used to defraud 2.5 million Canadians of $35 billion in their life savings, and eliminate investment choice for the 70% of Canadians without employer pension.

Here’s Stephen “Mom” Harper proudly displaying his gang’s new look. Harper is proudly wearing the much coveted “18”......in recognition of the 18 pages of blacked out democracy and the total absence of accountability in Ottawa.

Initiation in this biker gang requires adhering to a code of silence and loving all things blacked out. Black, it’s the new transparency.....didn’t you know?

You will be happy to know that Jack “ATM” Layton is also a proud Charter member of Harper's Black Outs. NDP Deputy Leader Thomas Mulcair as well. Thomas has become the new Judy to Jack’s Jack


Get behind Ontario? Maybe Dalton needs to Get behind Seniors first! .....or Get lost?

Re: Get behind Ontario





Premium McGuinty,

You are asking for us to get behind you in your fight for a fairer economic relationship with Ottawa.

I think this is a fair request considering the Harper government has stated that Ontario should be the last place to invest and they are trying to screw us out proportional representation in the House of Commons.

But why do you think I should take your request seriously, when you [and then Ontario Finance Minister Greg Sorbara] aided and abetted the Harper government when they lied to seniors and mutual fund investors that relied on Income Trusts for income just to make ends meet?

Seems like a double standard to me.

If you expect me to scratch your back then maybe you should start scratching mine.

How about it Sir?

Respectfully a senior citizen.

David Marshall
Cornwall, Ontario
1-613-938-0810

stephen harper’s Failed Social Engineering Experiment

One of the obvious aspects of Stephen Harper’s income trust betrayal was the “social engineering” that underlay it.

How, on the one hand, could Stephen Harper write an Op Ed in the National Post that strongly advocated for the preservation of income trusts that read:

“One couple e-mailed my party to complain that the uncertainty around income trusts caused by the Liberals' announcement trimmed $30,000 from their retirement portfolio in a single day. Another man wrote to tell us that he had lost 15% from his his portfolio.

Many seniors feel the government is putting their retirement at risk and have let Ottawa know. In a letter to the Finance Minister, the Canadian Association of Retired Persons said, "Seniors are actually enraged, frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living.” Income trusts are popular with seniors because they provide regular payments that are used by many to cover the costs of groceries, heating bills and medicine.”

And then, almost immediately upon assuming office, do the entirely opposite thing and claim that “circumstances had changed”?

Well the answer to that was actually offered up by Stephen Harper himself in his 2005 Op Ed, in which he observed quite clinically that:

"[Income trust investors] have no constituency. They don't count politically."

And goes on to say that income trusts are “an investment vehicle that can make the difference between bare survival and a dignified retirement for millions of Canadians”.

This is where the social engineering took place.

Harper was confronted with the fact that Canada has a low productivity level vis-a-vis the US. Some consider this a problem, as if to suggest that the US is the be all and end all.

One way to solve this productivity “problem” is to get idled workers back into the work force. Canada also has a skills shortage.

Recall how David Dodge of the bank of Canada and others were speaking in glowing terms about extending the maximum retirement age beyond 65 and what a wonderful thing that is?

For whom? McDonalds? Burger King? Walmart?

Meanwhile income trust investors were portrayed in the after math of Halloween as “coupon clippers”.....read: lazy non-productive members of the leisure class. As President of CAITI, you can’t believe the number of people I have heard from who have either returned to work or who must now return to work or who have postponed their retirement plans because of this unproven tax.

No doubt this played a role in the mix of reasons, if not, why the coupon clipper condemnation?

What better way to get people back into the work force and to stay longer in the work force that to take away the thing that, as Stephen told us “are popular with seniors because they provide regular payments that are used by many to cover the costs of groceries, heating bills and medicine.”?

The income trust policy is nothing more than a failed social engineering project. The alleged tax leakage that formed the basis for public support of this tax measure was a hoax. If not a hoax, why the 18 pages of blacked out “proof”?

Meanwhile the trust takeover activity has actually induced tax losses. BCE’s resultant LBO alone represents $800 million in annual “tax leakage” real tax leakage, not the phantom tax leakage you hear about from Jack Mintz. Just who the hell is Jack Mintz anyway? What are his possible conflicts of interest and commercial quid pro quo's? Where’s the peer review of his oft quoted tax leakage numbers? Better to rely on reputable sources like Deloitte......and evict from office the author of Canada’ failed social engineering experiment.....stephen harper (lower case intentional)

Sorry Jim, that's only a down payment.

So we learn today that Ontario is to get $7.8-billion for infrastructure......from Ottawa........that was sourced in Ontario. So Ontario residents got some of their money back. Big deal.

If so, the question then becomes where’s the other $12 billion that Ontario taxpayers will overpay to Ottawa this year? And $20 billion next year? And the year after that?

For Ontario taxpayers, confederation is a deficit proposition. Just ask Ontario's Premier, Dalton McGuinty.

As for Flaherty:

Why is your party still planning to shortchange Ontario for 10 seats in the House of Commons? Or was it 16 seats? I lost count. The whole thing was purely arbitrary any way. Just like all of your actions, including this one:


Ontario to get $7.8-billion for infrastructure
Ottawa to announce spending today as province signs framework agreement; subway extension not included



KAREN HOWLETT AND DANIEL LEBLANC

From Thursday's Globe and Mail

July 24, 2008 at 3:59 AM EDT

TORONTO, OTTAWA — The federal government will announce today that it is inking a deal with Ontario to spend $7.8-billion in the province on public transit, roads and bridges as part of its plan to maintain and expand the country's infrastructure systems, sources say.

The Ontario government will sign an agreement under Ottawa's infrastructure plan, called Building Canada, which will see the Harper government spend $33-billion over seven years on infrastructure projects across the country.


Okay Jim, where’s the other $12 billion that Ontario taxpayers will overpay to Ottawa this year? And $20 billion next year?



Ontario to get $7.8-billion for infrastructure
Ottawa to announce spending today as province signs framework agreement; subway extension not included



KAREN HOWLETT AND DANIEL LEBLANC

From Thursday's Globe and Mail

July 24, 2008 at 3:59 AM EDT

TORONTO, OTTAWA — The federal government will announce today that it is inking a deal with Ontario to spend $7.8-billion in the province on public transit, roads and bridges as part of its plan to maintain and expand the country's infrastructure systems, sources say.

The Ontario government will sign an agreement under Ottawa's infrastructure plan, called Building Canada, which will see the Harper government spend $33-billion over seven years on infrastructure projects across the country.

Jim Flaherty’s eviction notice

In many respects the income trust tax situation can be thought of in landlord/tenant terms, in which the income trust investors are the tenant and the government is the landlord.

Jim Flaherty can be thought of as the cranky building superintendent. Unlike most superintendents he doesn't reside in the basement apartment, he's moved himself into the penthouse, with speech writers, communications consultants, chauffeurs and no end to the self-benevolent tax perks of his own creation. He is fawned upon by all those who seek backroom favours, as he did for the insurance industry, foreign private equity and domestic pension funds in the case of the double taxation of public income trusts.

He has just shown up angrily at the door of your apartment in which he claims that you haven’t been paying the rent for the last umpteen years and you will have to move out. After you compose yourself, you ask Flaherty what he possibly means by that. You have been dutifully and willingly paying your taxes on your income trust distributions at the rate of 38% on time, each and every month. In fact you have prepaid the last 15 years rent with the money that’s held in trust at the local bank. This money was set aside to cover the rent in your retirement years. The landlord has a first claim on those monies to cover the rent.

When pressed, Superintendent Jim Flaherty, reluctantly produces his “proof” that you haven’t been keeping up with the regular payments of your rent. This takes the form of 18 pages of blacked out documents. You are rightfully outraged. Later that evening, after you have composed yourself, you start looking at these documents very closely. You realize that page 6 of the package is the rent schedule for the whole building. IT had four columns across the top. Each with their own unique way of calculating rent. The one on the left says “landlord’s version” and the one one the right says “Renters version” You then realize that line item G is entitled “Future rent payments, held in trust.”

It becomes abundantly obvious to you that this is the line that is creating the dispute. The landlord has ignored these future rent payments, when in fact they are as good as money in the bank, since after all, they are money in the bank.

You seek out allies to help you safeguard yourself against eviction. You go the press. Your first stop is the Globe and Mail. Here are some of their responses

John Stackhouse (Editor): November 7, 2006: “Ira [Gluskin] forwarded your piece to me. It's interesting, but I think most of your points have actually been well covered in our pages. And as for the "tax leakage" calculations, it depends greatly on assumptions -- but there is a reasonable range of forecasts that we have, I believe, published.”............Huh?

Andy Willis (Reporter): November 21, 2006 “To paraphrase Maggie Thatcher, we also met with Flaherty, and the gentleman is not for turning. he government isn't going to change. & judging from my e-mails and work by analysts such as your former partner Diane Urquhardt, there's a lot of retired folks who are not loving trusts these days.”..........What?

You then go to the Toronto Star and meet with the Editorial Board who then start to defend the 18 pages of documents as totally appropriate under the circumstances. They threaten to throw you out of the room unless you can come up with a good explanation for why Flaherty would do this.....What me explain? Zero transparency is appropriate?

Later in a moment of weakness, one of them (Carol Goar) admits, but does absolutely nothing about it that: “I didn't explore the possibility that [Flaherty] was lying. Perhaps I should have.” ....well, duh?

You then cross the street and visit the Financial Post and its Editor Terry Corcoran. Here’s his passionate and articulate take of the whole matter: "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. They 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."

How can someone profess to know all about exempt taxes versus deferred taxes, when they don't even know how to even spell the word? EXCEMPT? This guy's stock and trade is supposed to be words after all. It most certainly isn't numbers or financial concepts, such as the "time value of money" or "discounted cash flows" or "net present value"?

Believing that you must live in some twilight zone where journalist are the problem and not the solution, just as you are leaving the building you bump into Diane Francis who is most interested in your plight. She actually understands of what you speak. The more she hears the more intrigued she becomes. Unlike John Stackhouse of the Globe, she understands there can only be one right answer to a financial question, not three or four. Unlike Andy Willis she is not prepared to cower in the face of “authority” and just became a compliant unquestioning mouthpiece for the government of the day.

Unlike Carol Goar, Diane is actually willing to assume for the moment that Jim Flaherty COULD actually be wrong, and unlike her colleague Terry Corcoran, she knows how to conduct herself in an intellectually rigorous and professional manner. She also knows more than a thing or two about business and finances and that most basic concept called “time value of money” which seems to have completely eluded the Editor of the Financial Post, Terry Corcoran. Editor of The Financial Post? He’s better suited for the sports pages perhaps......or maybe the want ads.

Diane Francis knows full well that a dollar tomorrow is worth a dollar today, provided it is earning a sufficient return as you wait for it. She knows full well that your landlord will be paid in full for the future rent on this apartment, because the money you’ve set aside in the bank is growing at a higher rate than the monthly rent is increasing at.

She knows that it is WRONG for the government to assign ZERO value to the taxes paid on the 38% of income trusts held in RRSPs. She also knows a manufactured argument when she sees one. Unlike all of the aforementioned “journalists” above, she also has the balls and the brains to call a spade a spade. Which leaves us exactly where we were on November 1, 2006: Mr. Jim Flaherty: "Prove the case or drop the tax." to quote Diane Francis.

Just to make the inequity of it all even greater, you then realize that you are going to be evicted so that Flaherty can rent out Canada’s future to foreign private equity and domestic pension plans............rent free for crying out loud!

You are then reminded of (lower case intentional) stephen harper's Big Lie that was contained in his Opinion Editorial, almost one year ago to the day, October 26, 2005 in which he pandered to senior Canadians in his piece entitled

"Questioning income trusts puts seniors at risk" and wrote these pandering words:

"Many seniors feel the government is putting their retirement at risk and have let Ottawa know. In a letter to the Finance Minister, the Canadian Association of Retired Persons said, "Seniors are actually enraged, frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living."

Income trusts are popular with seniors because they provide regular payments that are used by many to cover the costs of groceries, heating bills and medicine. They also provide tax relief from a government that is addicted to taking too much money from their pockets and spending it without care, and very often without meaningful results.

So one must ask, why is the government clamping down on the retirement savings of seniors and investors?

But it gets worse. Instead of immediately moving to assure markets that income trusts are here to stay, the Liberals are justifying their actions in the coldest political terms. As one government member was quoted in the media as saying about income trust investors, "They have no constituency. They don't count politically."

That kind of arrogance cannot go unanswered. There is just no justification for what amounts to a Liberal government attack on investors, and especially on seniors.

The government continues to overtax Canadians and run multi-billion dollar surpluses, yet their first instinct is to attack an investment vehicle that can make the difference between bare survival and a dignified retirement for millions of Canadians.

The government claims that income trusts enjoy an unfair tax advantage over corporate dividends. If they believe this, then the answer is not to shut down a valuable investment vehicle, but to cut the double taxation of dividends. In short, level the playing field and let the market decide between income trusts and dividend-paying companies.

As my party's finance critic, Monte Solberg, says, the success of income trusts represents a rare triumph for investors over the tax man. Let's not be so naive as to assume that the Liberals will do the right thing to protect taxpayers. We'll need to fight hard to keep what we have, and even harder to gain ground.

It's time to stand up to Paul Martin and stop his attack on seniors and investors."

Insightful question for Diane Francis (from her blog)

If nothing else, maybe this frees up a quarter acre for the media (certain journalists excluded)


From Diane’s blog:


Diane,

It makes no sense for any government to willingly allow tax-paying corporations or individuals to be taken out by tax-exempt foreign investors. Is Harper stupid, or is there some other reason in play?

Under the recently amended tax treaty, foreign investors can do an LBO and not have to pay tax withholding on their interest income. The Canadian sub gets the tax deduction, and the foreign parent gets the income free of Canadian tax. The other thing this tax policy does is to handicap Canadian investors (excepting perhaps the big pension funds who are tax exempt too.)

So what's the reason. You've heard the reason from the Snoracle on Nosehill. The reason is to reduce the fiscal capacity of the federal government. Harper is reducing the federal government's taxation powers by eliminating Canadian owners (a.k.a "taxpayers") of corporations and trusts.

The real stupidity here is the NDP. Where have they gone? I think I know. I hear-tell that they've gone to hell, and taken up residence on a quarter acre. Normally they'd have gotten Hell's half-acre but the NDP has become so small-minded that a quarter-acre is big enough.

by kephalos
Jul 23 2008
12:26 AM

Dean Del Mastro's junk mail

CON MP Dean Del Mastro asks his constituents in today's junk mail flier (above): “Who do you think is on the right track on taxes?"

On the right track? .......how very Freudian.

Is Dean still pursuing that Via train to nowhere?

How is that to be funded if not by taxes? Certainly not by fares. Unless you consider a one way ticket for $396.00 from Peterborough to Whitby-Oshawa to be fair. And that’s only for Conservative class.


He goes on to ask “Will you be tricked into paying Dion’s tax on everything?”

“Tricked” into paying more taxes?........again how very Freudian

He couldn’t be thinking of “trick or treat” could he?

Conjuring up subliminal thoughts of Halloween?

More taxes? Impossible, The Conservatives are honest reliable people, Whose word is their bond.

"When Ralph Goodale tried to tax Income Trusts ... don't forget, don't forget this ...they showed us where they stood. They showed us about their attitudes towards raiding seniors hard earned assets and a Conservative government will never allow either of these parties to get away with that"


Note: Out of respect for Dean's love of all things Manulife Financial as evidenced at the Public Hearings on Income Trusts and out of respect for Manulife's Income Plus product launched immediately after (or was it immediately before?) the crack down on income trusts, that (for reasons they must consider to be clever) features some middle aged guy upside down, I have afforded Dean with similar treatment, after all, Dean was responsible for helping to turn upside down about 2.5 million Canadians' retirement plans with the breaking of the above noted....ahem.....solemn promise. Don't forget. Don't forget this blah blah blah.

Dion owes you

David:

You shouldn’t be at all shy about approaching Stephane Dion at lunch today in Cornwall, as he hopes to some day be working for you. Plus I have found that he is an infinitely approachable person by nature.

Furthermore he owes you. If I am not mistaken you participated at their request with Stephane Dion and John McCallum in their February 13, 2007 press conference on the Liberal’s 10% policy on income trusts.

Plus you were the one who organized the highly successful Halloween rally on Parliament Hill on October 31, 2007. (pictured above)

You and the others were explicitly referenced by several prominent Liberals that day in Question Period, including Stephane himself, if I am not mistaken.

You also were one of four individuals who testified before the Finance Committee on Income Trusts

Perhaps you can share with Dion your personal first hand account about how the Parliamentary Committees are an utter disgrace to our democracy or how it was that Chairthingy Brian Pallister couldn’t have cared a wit when William Barrowclough informed him that Diane Urquhart had attempted to tamper with his testimony with an unsolicited one hour phone call/rant the evening before and sought out the home phone numbers of you and the other two witnesses.

Bottom line: Dion owes you. Remind him who he works for. We don’t accept broken promises.

All the best,

Brent

On 7/23/08 9:32 AM, "David Marshall" wrote

Dion is in Cornwall today at noon.

If I get a chance I will ask him why the trust issue is being neglected.

Dave

This makes the Hells Angels look like angels by comparison

Conservatives In Quebec Illegally Shifted Ad Expenses, Elections Canada Charges

2006 Election May Have Been Won By Conservatives Through Fraudulent Means

TIM NAUMETZ

The Canadian Press

July 22, 2008 at 9:26 AM (EDIT)

OTTAWA — The Conservative Party illegally shifted thousands of dollars in advertising expenses from two of its top Quebec candidates to other Quebec candidates who had more spending room in their 2006 federal election campaigns, the lawyer for Elections Canada has charged.

A former financial officer for the Conservative party confirmed last month in a court examination that expenses incurred by Public Works Minister Christian Paradis and former Foreign Affairs Minister Maxime Bernier were inappropriately assigned to other candidates.

Elections Canada lawyer Barbara McIsaac probed Ann O'Grady over records involving claims for radio and TV advertising by Mr. Paradis and advertising claimed by Mr. Bernier.

The financial statements and invoices – filed in a Federal Court case concerning $1.3-million in questionable Conservative ad expenses – also showed that Mr. Bernier and Mr. Paradis paid a fraction of the related ad production costs compared with other Tory candidates.

Mr. Bernier and Mr. Paradis are among 67 Conservative candidates whose advertising expenditures are under investigation by the federal elections commissioner. Chief Electoral Officer Marc Mayrand has refused to reimburse the expenditures on grounds that they did not qualify as local candidate expenses.

The Commons ethics committee is also conducting an inquiry into the bookkeeping, which Elections Canada states allowed the Conservative party to exceed its national campaign spending limit by more than $1-million.

The Canada Elections Act prohibits candidates from absorbing or sharing the election expenses of other candidates.

NDP MP Pat Martin, a member of the ethics committee, said that the Conservative party also shifting expenses from Mr. Bernier and Mr. Paradis to other candidates adds an entirely new dimension to the controversy. “That's absolutely not allowed.”

In a sworn cross-examination last month, the transcript of which was subsequently entered in the Federal Court file, Ms. McIsaac pressed Ms. O'Grady about advertising and ad production costs that were transferred from Mr. Bernier and Mr. Paradis to other candidates.

“I'm going to suggest to you that Mr. Bernier was less than $2,590 from his spending limit and that he couldn't afford to put the additional amount into his return,” Ms. McIsaac said to Ms. O'Grady.

Ms. O'Grady responded, “Who knows what else would have been going on at the time? I can't comment on how Mr. Bernier ran his campaign.”

In the case of Mr. Paradis, Ms. O'Grady was forced to concede that the candidate had originally been invoiced $29,766 and subsequently received a “credit note” of $10,000 that was 'reallocated' to another candidate, Marc Nadeau.

“Now, again, the reason for this was that Mr. Paradis had reached his limit with respect to spending as well, is that correct?” Ms. McIsaac asked. “He had to allocate some of his money to Mr. Nadeau, did he not, because he was close to his limit?”

“I would not know that,” replied Ms. O'Grady, who replaced former Tory chief financial agent Susan Kehoe several months after the election.

Ms. McIsaac also questioned Ms. O'Grady over the fact that Mr. Bernier paid no production costs for his share of the advertising. Mr. Paradis paid only $233.93 for his share, even though Ms. McIsaac said other candidates paid $4,500 each for production costs.

Flaherty's spin worked wonderfully on the gullible press and the NDP.

Why not the public?

Focus groups reject Tory spin on income trusts

Flaherty's office denies it planned full PR campaign; says government just tried to gauge whether public informed

May 25, 2007
Allan Woods
Ottawa Bureau
Toronto Star

OTTAWA The Conservative government spent $18,000 testing television advertisements designed to put a positive spin on its broken election promise on income trusts, only to find out they were seen as an attempt to do political "damage control," a report obtained by the Star shows.

But Finance Minister Jim Flaherty's office denied yesterday it shelved a full-fledged public relations campaign in response to the negative feedback. Rather, the "television advertising treatments" were produced specifically for February focus groups to see if Canadians needed more information about the government's Tax Fairness plan. The key element of the plan was a decision made last October to tax income trusts contrary to the Tory pledge not to in the last election campaign.

"There were no ads. It was basically to gather some research to determine whether there was a need for any ads," said Dan Miles, a spokesperson for Flaherty. "The decision was that it wasn't necessary."

Income trusts avoid most corporate taxes by distributing profits to unit holders and they were becoming an increasingly popular business structure. They had also become a popular investment vehicle for seniors, so the government's move to end, as of 2011, the tax advantages enjoyed by income trusts compared with regular corporations has sparked protests across the country.

The Tories' campaign promise not to tax income trusts followed the announcement in November 2005 by then-finance minister Ralph Goodale that the Liberal government would not tax the trusts, as many had feared. The NDP then urged the RCMP to investigate claims that major Bay Street players were tipped in advance of the Liberal announcement.

The Mounties chose the middle of the campaign for the Jan. 23, 2006 election to announce they were conducting a criminal investigation, which the Liberals contend contributed to their election defeat. (One finance department tax official has been charged. No politicians or advisers were ever charged.)

The finance department awarded only one contract for advertising services between the Oct. 31 income trust decision and the late-February focus groups – a $21,000 contract to TMP Worldwide on Jan. 31.

Miles said the government was satisfied with the level of knowledge about the issue and its implications that the public had received through media reports "and we didn't need to add to it."

But an account from the focus groups, conducted by Ipsos-Reid, found awareness of the trust issue to be "very low."

There was also "confusion and frustration" about whether the ads were meant to correct misconceptions about the government's tax plan in general, contained in the March budget, or just about the politically sensitive decision on income trusts.

Two of the three advertisements tell viewers that, "the facts you don't know about income trusts are the facts you should know." But the report's authors noted that they encountered a common criticism: "For an ad that is framed in facts there are very few listed."

One ad featured a shattered piggy bank reassembling and seemed designed to convey the message that the government is protecting programs funded by tax dollars. But it left the focus group cold, feeling the government was defending a political decision, not a policy position.

"Many question the exactness of the information being presented," said the report. "For others, the tone is somewhat accusatory and comes across as finger-pointing, which is seen as less than appropriate for the federal government."

A second ad was seen as "scary," and the third was criticized as "damage control."
"This ad is trying too hard to attack big corporations," one person remarked.
Another participant saw the piggy bank spot as an attempt to "win votes" while another said it was to "justify the fact that they have not kept their promises."

Dan Miles speaks about "developing" a news "event". Sounds very manipulative to me?

Is Dan Miles possibly referring to BCE's faux income trust conversion announcement? To create the "perfect storm" argument. You know, the twin tower argument of BCE and Telus converting?"

Or as Dan Miles's wordsmithed for Flaherty on November 2, 2006:

“You have to either leave it alone or fix it,” Mr. Flaherty shrugged Wednesday. “We were going to see the two largest telecommunications companies in the country not pay corporate taxes. That's a clear and present danger to fairness in the Canadian tax system. I thought we had to act.”

Too bad it was Flaherty's own very actions of Halloween 2006 that served to trigger that very outcome, now that BCE is been taken private in a tax eradicating leveraged buyout.




Dan Miles is Jim Flaherty’s Director of Communications

As reported by the CBC below, the words of Dan Miles:

“ Well once you have the policy, then you have identified the components of the policy you that you think are front and centre and are important to people and what are going to resonate with people. Then you determine what it is that is going to help portray that; what is going to help paint the picture in the minds of Canadians. What will help you paint that picture?

Then you develop an event. And this depends on the gravity and importance of the policy, as there are a number of factors that determine what your event is going to be. And then if it is deemed that is to be of great significant then obviously you are going to develop and event and what is the picture of that event going to be? This is crucially important because at the end of the day it is going to be the picture that is painted that will be in the minds of Canadians.”


February 2, 2007
CBC News

Spin Cycles: Calling Dr. Spin.
Interview with Dan Miles
Director of Communications to the Minister of Finance



IB: Was there something about your experience as a TV journalist that you thought you could bring to the table when you switched over to political communications?

DM: No question about it! As a journalist you learn the system, you learn how to grab a sound bite, you look for things, you recognize what a story is! What makes a story, and what is important, the important elements of a story. And quite frankly those are elements that are quite valuable when you get to the government's side of the table. I think that the biggest thing that the communications on the government's side can bring to the table and what they try to focus on is anticipation. You have to be able to anticipate the question, and then you have to be able to anticipate the issue and then you can go from there to try to craft a message to try and get you message out… "put out the fire" so to speak.

IB: Take me through the process of what happens when you are about to roll out a major policy announcement.

DM: Clearly I mean, to me the foundation has got to be the policy and it's got to be a good policy. I've had in the time that I've worked in government I've seen the challenges posed by trying to communicate a bad policy. And it is very difficult if you have a good sound policy to work with then you know, you are ahead of the game so to speak. But that is only the beginning! You could have the greatest policy in the world but if it is not communicated properly, or not communicated at all people are not going to know about it, and it is not going to serve the purpose and the people of the province or the country and it certainly its not going to serve the government or the party well! You start with a good solid policy and then you dissect that policy and see what are important to people because that is was really resonates. What is important to folks in Ontario, or out in rural Ontario whatever your policy might be. And then you cease on those, and its not unlike a journalist, you ask yourself; what is the lede* . You know, as a journalist you never bury the lede. That is a cardinal rule. You take the opposite side and you want to lede with the lede. Basically what you are trying to do for journalist is to make it easy, and make your lede their lede. That is a crucial part of what we do.

[*Editor's note: "lede" is common shorthand for the "lead" as in "the lead or first story in the newscast." It is spelled that way to avoid confusion with the metallic element called lead.]

IB: It's interesting that you should say that because in the press release you issued at the time of the income trust announcement your lead was about tax fairness. I can see why you would want that to be the headline because it is a better headline for you, but it struck me that you had buried the lede there.

DM: Well I mean, income trust, there was a lot of focus on it as simple stand-alone issue. But I mean from our prospective this is about tax fairness! The whole idea, the whole reason minister Flaherty did what he did was to level the playing field between trusts and corporations and also to provide tax relief to some of the senior folks who have invested in income trusts and would have been affected by this announcement. To us, the whole idea, the headline of this is tax fairness that is the motive behind the policy here

IB: Well that's what you wanted the headline to be. You wanted to steer reporters in that direction.

DM: Well clearly, if I may from my perspective is to be good at what we do, we have to make it as easy as possible for journalist. They shouldn't have to be reaming through reading pages and pages and paragraphs of material to try and find what we are trying to tell them. What it is that you are trying to communicate to the people of Canada. If I can go back to tax fairness for a second, it was about the package! Ultimately, a lot of people focus on one component of the package. But tax fairness is about the package of items including income trust, including leveling the playing field, including corporate tax cuts, including pension splitting for seniors, and including a reduction in the age credit for seniors. So it was more than just one thing but obviously reporters and business reporters have focused on just one element of the package.

IB: What about preparing the Minister for the questions he is going to be asked and other preparations for the rollout?


DM: Well once you have the policy, then you have identified the components of the policy you that you think are front and centre and are important to people and what are going to resonate with people. Then you determine what it is that is going to help portray that; what is going to help paint the picture in the minds of Canadians. What will help you paint that picture? Then you develop an event. And this depends on the gravity and importance of the policy, as there are a number of factors that determine what your event is going to be. And then if it is deemed that is to be of great significant then obviously you are going to develop and event and what is the picture of that event going to be? This is crucially important because at the end of the day it is going to be the picture that is painted that will be in the minds of Canadians.



IB: And so you help the Minister craft the sound bites?

DM: Yea, there is no question! The minister and all the ministers I've worked with they were all very effective at it and they recognized what a sound bite was and quite frankly it comes back to from my perspective, the job of the journalist that much easier. That is my job, to make your job easier. And if I can make your job easier then you can look at our policy look at our event, look at what we do a little more favorably.

IB: People who do what you do are commonly called spin-doctors. How do you react when people call you that?

DM: I laugh, spin-doctor? No I don't consider myself a spin-doctor really you know the fact is that we are about communicating government policy. My job is to insure that Canadians understand and that they get the benefit what we are doing. I am a member of the government but at the end of the day it is about articulating. If we cannot got Canadians to A) learn about the policy and know about the policy then how at the end of the day are they going to measure our success as a government so we have to try to effectively communicate a policy to people so that at the end of our mandate they know that we have done something.

Hey Prentice: Don't let it burn a hole in your pocket

Wow!. $4.25 billion from the wireless spectrum auction. Yippee!

That’s almost enough to cover 5 years of foregone taxes from the LBO of BCE! Or 2 years of foregone taxes from the government induced income trust takeovers to date.

Maybe the CONs can follow the Green’s proposal. Instead of stopping the LBO of BCE to fully fund the RESP as the Greens proposed, the Cons can use these proceeds to help parents pay for their childrens’ university education for the next five years. Maybe that way, some brighter kids can start entering law school and we can stop cranking out Jim Flaherty’s and Jim Prentice’s. You know what they say about law schools: Garbage in Garbage out.




Gov't still to decide what to do with $4.25B haul from spectrum auction: Prentice

50 minutes ago
EDMONTON — Industry Minister Jim Prentice says the federal government has yet to decide what to do with a $4.25-billion windfall from the just-completed wireless spectrum auction.
He says Finance Minister Jim Flaherty has indicated that paying down the national debt and reducing taxes are Ottawa's priorities.
Prentice says the sale of 105 megahertz of wireless spectrum was a tremendous success and will change the country's cellphone industry forever.
He says the auction was conducted to create more competition in the cellphone industry so that services to Canadians will improve and costs will come down.
Companies that bought spectrum are likely to put it to use and not hoard it, says Prentice, because the licences only cover a 10-year period.

I hope Donna Kaufman is taking notes this time

.....she gives new meaning to the term Strategic Oversight Committee

Donna Kaufman seems to attract foreign private equity bids to Canadian utility companies like bees to honey. She was the Chair of BCE’s aptly named Strategic Oversight Committee. If you can believe it, she is also the Chair of today’s private equity takeover target, TransAlta.

Here’s an account of her fine work on behalf of BCE:

Bondholders say BCE finessed takeover deal to avoid bond redemption
Ross Marowits, The Canadian Press
January 28, 2008

The court was reminded that three BCE directors - Tom O'Neill, Jim Pattison and Donna Kaufman, the head of the strategic oversight committee - testified they were unaware or couldn't remember seeing all the details of the bids or how they would affect all stakeholders.

Here’s her prepared statement of today.

As we did in previous matters relating to Luminus, TransAlta's Board of Directors has reconstituted its special committee of independent directors, will carefully consider the letter and will respond in due course," said Chairman Donna Kaufman. "As always, the Board will pursue the best course of action to enhance long-term value for TransAlta shareholders. There has been no offer and shareholders need not take any action."

Note to PSP: Where's Overlord Capital when you need them?

Looks like the Public Sector Pension Plan (PSP) lost a cool billion on the Asset Backed Commercial Paper (ABCP) meltdown.

Obviously, they weren't sufficiently wise to realize that ABCP was a virtual ponzi scheme.....buying long term assets with short term paper on the presumption that the short term paper could rollover based on the greater fool theory of the ABCP secondary market. Maybe they needed Overlord Capital to hold their hands.

These guys at PSP were the first out of the gate after Halloween 2006 to buy grossly undervalued Thunder Energy Trust......with their partner Overlord Capital. Perfect name for what’s going on here.

PSP manages the retirement assets of the 370,000 federal civil servants......who were the very people who gave a special carve out from the income trust tax for pension funds....their own pension fund.....that’s called self dealing and not Tax Fairness. Maybe the Tax Fairness Plan should be renamed the Tax Self Dealing Plan. Do you suppose the NDP would have still supported it?

Meanwhile how does PSP owning Thunder Energy as a private trust and not pay Flaherty's 31.5% income trust tax deal with alleged tax leakage? It doesn’t. By definition, it can’t. Meanwhile, why no growth constraints for Thunder when held by PSP and yet growth constraints when owned by the public? Makes zero sense........to all except Canada’s Main Stream Misleadia. They seem to like to ignore these gross inequities that underlie Flaherty's so called Tax Fairness Plan


Now we know why Flaherty is so personally interested in the ABCP market.....he has a vested interest:




Sean Silcoff, Financial Post Published: Monday, July 21, 2008

MONTREAL -- One of Canada's largest public pension fund managers, PSP Investments, has taken a $920-million, or 2.3%, hit to the value of its holdings due to the global credit crunch, revealing for the first time its exposure to Canada's frozen non-bank asset-backed commercial paper (ABCP) market.

But while the writedowns dragged the overall results of PSP -- which manages pension assets on behalf of the federal public service, Canadian Forces and Royal Canadian Mounted Police -- into negative territory, the fund actually performed relatively well, a pensions expert says.

"Certainly PSP got caught out ... and that's not good," said Janet Rabovsky, practice leader, investment consulting, with Watson Wyatt. But PSP's loss of 0.3% for the year ending March 31, down from an 11.3% gain the previous year, beat the average pension fund return of -0.9% over the period. "It's not great, but it's certainly relatively not too bad," Ms. Rabovsky said, adding PSP benefited from better-than-average returns in real estate and private equity and its higher exposure than other large pension funds to well-performing Canadian equities.

In its annual report, PSP, which had $38.9-billion in assets at its year-end, revealed for the first time it held close to $2-billion worth of ABCP, making it one of the top investors in the asset class before it was frozen last August. Observers have speculated PSP was one of the largest players in the $35-billion market, as it is a key participant in a salvage effort to restructure the ABCP into long-term notes.

PSP said it has written down its ABCP by $450-million, or 23%. That is more than the 15% markdown the largest ABCP investor, the Caisse de dépôt et placement du Québec, took to its ABCP, though that might reflect the worsening state of the markets between the Caisse's Dec. 31, 2007 year end and PSP's fiscal year-end.

But PSP had another unwelcome surprise in its report: It also held $1.4-billion worth of "collateralized debt obligations," another opaque investment class that has suffered steep losses since credit markets headed south last summer. Of that, PSP has written down its holdings by 33.6%, or $470-million.

CEO Gordon Fyfe said in the report PSP "expects, over time, to recover the unrealized losses related to [the CDOs] if they are held to maturity."

Meanwhile, the writedowns will have little effect on PSP, an eight-year-old Crown Corporation, which will benefit from positive cash inflows from contributions through 2030.

The report shows Mr. Fyfe earned $1.3-million for the year, down 26% from the previous year. That was primarily affected by a $500,000 drop in the amount of his short-term incentive pay.

BCE’s reverse break fee has now become Teacher’s call option

By: Brent Fullard

By now it has probably become obvious to all, that the fate of Teachers’ $8 billion purchase of BCE, turns on the credit market’s willingness to lend $34 billion to BCE, on top of the $12 billion of BCE debt already outstanding.

To safeguard itself against the deal’s completion risk, BCE was to have been paid a $1 billion reverse break fee by the purchasers if the deal didn’t get consummated by June 30, 2008. The reverse break fee is meant to be an insurance policy of sorts. Under the revised terms of this deal, this reverse break fee has taken on the dimensions of a call option.....in fact, a re-priced “at the money” call option.

On July 4, 2008 (US Independence Day) it was announced that BCE had agreed to a new set of terms with Teachers' and the three US purchasers, consisting of:

- new outside closing date of December 11, 2008, extended by six months
- suspension of dividends on BCE common shares
- increase in reverse break fee by $200 million to $1.2 billion

This was quite the move by the purchasers and quite the unilateral capitulation by the BCE board. Implicit in the board’s actions is the acknowledgment that a reverse break fee of $1 billion was insufficient to safeguard against the original deals non-completion. Otherwise the BCE board would have simply told the purchasers to either close the deal on the terms agreed to, or pay the $1 billion reverse break fee.

Obvuiously the Board was not indifferent as between these two outcomes, both of which the board had negotiated. As such, one can only conclude that the $1 billion reverse break fee that the board had negotiated was insufficient.

Instead, the BCE board decided to fundamentally change the terms of the deal by suspending the payment of dividends on the BCE common shares and extend the closing date by six months. As such, BCE shareholders are no longer being paid to wait, as the deal drags on for almost 18 months. This dividend suspension means that there is now some $1 billion of additional cash in BCE that the Purchasers had not originally bargained for. This additional cash is equity. The Purchasers $8 billion in equity has been augmented (at no cost to them) by an additional $1 billion in free equity. In this respect, the purchasers have lowered the purchase price in such a manner as to preserve their original deal economics, even though their original deal economics had been eroded by the declining debt markets and the increased cost of borrowing, a risk that the Purchasers were intended to shoulder, but in the end, didn't.

Why did the BCE board determine that preserving the Purchasers’ original deal economics was more important than preserving the original deal economics to the vendor (ie BCE shareholders who were now being short changed the dividend)? Furthermore, why not simply demand performance from the purchasers, whose potential non performance was “insured” by the $1 billion break fee?

Instead the BCE Board gave the Purchasers a six month extension to close the deal, and a repricing of the deal? What did they get in return? A $200 million increase in the reverse break fee. The reverse break fee has now, in effect, become a call option. The Purchasers have a new 6 month option on the state of the credit markets to finance this deal on terms that are more favorable than those which BCE shareholders agreed to. The reverse break fee was supposed to have been the insurance policy. The conduct of the BCE board in renegotiating the deal would suggest that $1 billion is insufficient insurance to address non performance. And what are we to believe? That $1.2 billion is?

Keep in mind, Much of that $200 million increase is merely the "time value of money" as Teachers' has simply delayed the payment.

Furthermore, the repricing that took place in mid June that was embedded in the deal agreed to on July 4, 2008 has been largely unraveled by subsequent deterioration in the leveraged loan market. However that will not necessarily determine the fate of this deal.....after all, the Purchasers were granted a free a six month call option on the state of the credit markets, courtesy of BCE’s board, although not with the approval of shareholders.

And what “messaging” accompanied this reversal of the reverse break fee, from insurance policy to call option? For that we turn to ex-politico, and current BCE spokesman, Bill Fox:

“It speaks to the commitment of the purchase group,” Mr. Fox said.

My response: Yeah, right. In fact, quite the opposite, since this reverse break fee has become nothing more than a free, re-priced, at the money call option. What could be more non-committal than that?

The locusts are back: US Private equity makes $7.7 billion bid for TransAlta

Is there a Finance Minister in the house?

First it was BCE, as Canada's largest public telco. Then it was TransAlta Power Now it's the mother ship TransAlta Corp., as Canada's largest public electric producer. BCE's LBO will result in the loss of $800 million a year in annual taxes. What do you suppose the LBO of TransAlta Power and now TransAlta Corp. will cost?

Perhaps someone should ask Jim Flaherty.....he presumably is opposed to tax leakage. Or was that just a grand ruse, to put these companies into the hands of private equity and out of the hands of broad Canadian ownership?

LS Power, Global Infrastructure Bid for TransAlta

By Jim Polson and Ian McKinnon

July 21 (Bloomberg) -- LS Power Equity Partners and Global Infrastructure Partners offered to buy TransAlta Corp., Canada's largest publicly traded electricity producer, for about C$7.75 billion ($7.72 billion) to tap growing energy demand in Alberta.

The bid is for C$39 a share in cash, 21 percent higher than TransAlta's last closing price, LS and Global said today in a filing with the U.S. Securities and Exchange Commission. The acquisition would take TransAlta private and leave its headquarters in Calgary.

LS, the U.S. power-plant developer allied with Dynegy Inc., owns about 9 percent of TransAlta's stock, according to the filing. TransAlta has posted four straight years of free cash flow exceeding C$200 million, according to data compiled by Bloomberg, as oil-sands developments in northern Alberta and population growth stoke power use in the province.

``This is about control over free cash flow,'' said Daniel Shteyn, an analyst at Desjardins Securities Inc. in Montreal who rates TransAlta shares ``buy'' and owns none. ``Management will have to be wooed.''

TransAlta said in a statement that it will review the proposal to discuss a buyout, made in a letter received after the close of trading on July 18, and ``respond in due course.'' The company has been selling overseas assets to focus on Canada and the U.S. The suitors said they want Chief Executive Officer Steve Snyder to stay on.

Shares Rise

TransAlta rose C$4.20, or 13 percent, to C$36.45 at 10:25 a.m. in Toronto Stock Exchange trading. The stock climbed 4.6 percent on July 18, its biggest gain since April 10, after dropping to its lowest close in 16 weeks the day before.

New York-based Global is a $5.64 billion fund led by former Credit Suisse Group executives. Credit Suisse would provide $2 billion of financing, and the suitors said they would invest $6 billion in TransAlta.

``The company is in great markets and has a good portfolio of assets,'' James Bartlett, president of LS Power Equity Advisors LLC, said today in a telephone interview. ``We view this as a separate, stand-alone investment with our partners.''

TransAlta's holdings include coal-, hydroelectric and wind- driven generators in Alberta. The province's electricity demand may rise 3 percent annually, double Canada's average, according to the provincial agency that oversees Alberta's power industry.

Conflict Over Buybacks

Luminus Management LLC, a hedge-fund operator, and LS recommended in January that TransAlta sell power plants in Mexico and Australia to help fund stock buybacks. Luminus previously called for TransAlta to increase debt and buy back shares rather than invest in new generation capacity.

Luminus and LS withdrew their slate of director nominees in March, after TransAlta sold Mexican assets and increased dividends. Bartlett said that Luminus, which he called a ``related company,'' isn't party to the acquisition proposal.

Private ownership will allow CEO Snyder and other managers to concentrate on long-term strategies and operations, rather than quarterly profit reports, Bartlett said.

TransAlta spokesman Michael Lawrence said the July 18 letter was ``a non-binding and highly conditional invitation to discuss a potential transaction.'' The company appointed a special committee of independent directors to review the letter and make recommendations, he said.

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Ian McKinnon in Calgary at imckinnon1@bloomberg.net.

For the record: Dan Miles wants it both ways

As evidenced by his letter below in today’s Calgary Herald, obviously Debra Yedlin’s recent article struck a nerve with Jim Flaherty’s press secretary, Dan Miles. So much so that Dan Miles has resorted to calling for the facts. This is a most desperate move by Dan Miles to accuse someone else of ignoring the facts and to be calling for the facts.

After all, Jim Flaherty’s income trust policy was an A – Z exercise in ignoring the facts. Apart from ignoring the facts, Jim Flaherty also blindly ignored the reality of what he was doing.

Witness the 40 trust takeouts like Prime West Energy by Abu Dhab Energy or TransAlta Power by Li Ka Shing. Witness the ultimate fate of BCE. These foreseen and foreseeable adverse outcomes have caused $2 billion a year in real tax leakage, to solve an alleged tax leakage problem that never existed in the first place. Foreseen by all those in the know, except Jim Flaherty and Dan Miles......and Stephen Harper.

If Dan Miles is such a born again proponent of the facts. Then I have one question for him and his boss. Where are the facts that support tax leakage? In fact where are any of the facts that support any of the five propositions of the Ways and Means Motion?

Where are the facts to support the false invocation of seniors that read “Strengthening Canada’s social security system for pensioners and seniors”? How could an income trust tax conceivably do that? Where are the facts? Or is the simple fact that the income trust tax is one big massive fraud being perpetrated on a fact starved populous by Dan Miles et al?

Given Dan Miles' new found love for facts, he will be comforted to know that we have the facts that prove that it is a massive fraud. Which no doubt explains why these balcked out documents issued under the Access to Information Act were demanded to be returned by Jim Flaherty. That too is a fact.

Dan?

For the record
Calgary Herald
Published: Sunday, July 20, 2008
Re: "Stop-gap thinking guides Flaherty," Deborah Yedlin, Opinion, July 17.

Deborah Yedlin accuses Finance Minister Jim Flaherty of avoiding Calgary since the income trust announcement on Oct. 31, 2006.

If she had bothered to check the record, she would have found that Flaherty was in the city on Aug. 30, 2007 to address the Canada West Foundation and on Jan. 15, 2008 for pre-budget consultations. Both visits were reported in the Herald.


Yedlin suggests the government removed an "element of flexibility" by reducing the GST. By reducing the GST and other taxes, the government has injected a fiscal stimulus into the economy equivalent to 1.4 per cent of GDP, or $21 billion in incremental tax relief to Canadians and businesses this year.

Yedlin says the government's long-term economic plan, Advantage Canada, "appears not to include post-secondary education."

If she bothered to read the plan, she would have noted that it includes a "Knowledge Advantage" with a goal of creating the best educated, skilled and flexible workforce. In Budget 2008, the government unveiled a consolidated Canada Student Grant Program that will reach 245,000 undergraduate and college students per year, along with other scholarships for graduate and international students.

Yedlin made reference to the development of the new rules governing the conversion from an income trust to a corporation. She boldly suggested that "there was no dialogue between Calgary and Ottawa." The fact is tax practitioners from across the country, including Calgary, were consulted by officials in the Department of Finance. The new rules are out for public comment until Sept. 15, 2008.

It appears Yedlin was so focused on writing a negative piece that she decided to ignore the facts.

Dan Miles, Ottawa

Dan Miles is director of communications for Finance Minister Jim Flaherty.

My posting on Garth.ca concerning small businessmen

Garth:

Like you, Jim Flaherty is also a small businessman. I mean his business is small, and not his intellect or physical stature per se.

Flaherty's small business is called Flaherty Dow & Elliott. (FDE)

It's a law firm that specializes in the low end part of the legal profession....insurance litigation.....also known as ambulance chasing.

Flaherty's law firm is like every other law firm in Canada, of which there are about 60,000. You will be interested in knowing that Flaherty's law firm doesn't pay a cent in taxes. That's because FDE is an FTE.....a tax flow through entity.

Why can Flaherty's law firm benefit from the tax flow through structure and the publicly traded income trusts can not? Why can income trusts be held by pension funds and not be subject to Flaherty's draconian new 31.5% tax, and yet income trusts are subject to that tax when held inside an RRSP?

How arbitrary and unfair is that? How does any of this qualify as a Tax Fairness Plan?

If that's fairness, I want less of it. Plus I want back my portion of the $35 billion that Flaherty stole from me and 2.5 million other Canadians, returned, based on his unproven assertions of tax leakage.....as contained in 18 pages of blacked out documents.

Flaherty is a crook......assuming massive fraud is still a crime in Canada? The NDP are his criminal accomplices. I thought this government was going to tough on crime, as opposed to perpetrating crimes?

Earth to Jeffrey Simpson: Where were you on October 31, 2006?

These readers are commenting on Jeffrey Simpson’s highly revisionist and misleading account of Stephen Harper’s time in office that read ““So they got their election promises done: the overwrought Accountability Act, the family allowance cheques, various tougher criminal justice measures, money for defence.”

M. R. from Canada writes: " they got their election promises done: the overwrought Accountability Act "

HUH!

Better do more research Jeffrey.

Then there is all the BROKEN promises that you neglect to mention.

Waste of readers time.


M. R. from Canada writes: I don't disagree with everything the Cons are doing or have done and may very well have voted Con in the next election except for one thing . . . Harper broke his promise to 'never tax trusts'.

The Green Shift worries me, I don't believe in GW but will vote Lib next time regardless.

Unfortunately for Harper there are millions who will remain angry over the trust tax issue. I don't think he will ever get a majority because of this one major stab in the back to his electorate.



dominic costanzo from Canada writes: Until the income trust issue is not fixed. Harper will never get his majority. 4 millions investors have not forgotten the Halloween Massacre.



Antonio San from Canada writes: Mr Simpson is certainly not part of the solution...

As for the Income Trusts, Allan McElroy, I cannot wait until you'll lost a good chunk of your carefully ironed shirt on someone else's word...


Terry martinson from Northern Ontario, Canada writes: I voted for Harper in the last election partially based on his giving his word that he would not change the way Income Trust BUSINESSES like A&W, Jazz Air and Penn West Energy, etc., were taxed.
After he was elected I put more money into Income Trust BUSINESSES feeling it was safe to do so based on Mr. Harper giving his word he would not change the way these BUSINESSES are taxed.
9 months after being elected Mr. Harper decided to radically negatively change the way these BUSINESSES are taxed and myself, several family members and friends lost a lot of money. (yes, we were diversified) Our investments in these BUSINESSES got hammered thanks solely to an action taken by Mr. Harper having nothing to do with market forces.
I feel Mr. Harper and his crew stabbed me directly in the back and will never vote for him again because he is not to be trusted.


VERNON HOLT from Cornwall, Canada writes: Jeffrey, as a professional journalist I believe you are supposed to stick to the facts, not slant an article in someone's favour (the Cons). It's dishonest and unworthy of a true professional. You'll never get a Pullitzer that way. The "promises kept" are only a very small number of the total given by this government's leader. There's far more broken/unkept. I won't quote them all here but here's a clue:
In May 2004 Mr. Harper promised that if gasoline went beyond 85 cents a litre his government would eliminate the entire GST on gasoline. Then of courses, there's the BIG lie concerning Income Trusts. Nuff said ?

Jeffrey Simpson promulgates false impressions

Today’s Jeffrey Simpson article in the Globe is an intellectually insidious account of Harper’s two and half years in office, especially the part that read: “So they got their election promises done: the overwrought Accountability Act, the family allowance cheques, various tougher criminal justice measures, money for defence.”

Huh? Election promises done? Accountability Act? There’s no accountability to be found in the Accountability Act, and I am reminded of one election promise that Jeffrey Simpson has selectively glossed over, namely Harper’s widely touted 2006 election promise of:

"When Ralph Goodale tried to tax Income Trusts ... don't forget, don't forget this ...they showed us where they stood. They showed us about their attitudes towards raiding seniors hard earned assets and a Conservative government will never allow either of these parties to get away with that"

Turns out, Harper’s “never” has a short shelf life, meaning nine months

Meanwhile the press has stood by and allowed Harper to “get away with that". As such, the press is even more pathetic than Stephen Harper himself........Deceivin’ Stephen......The Lyin’ King.

“Don't forget, don't forget this.”

Mr. Jelly Bean Agenda steps down

Most of you probably know David Ganong as that self interested individual who at last year’s Security and Prosperity Partnership (SPP) meeting in Montebello had the brilliant idea of standardizing packaging for jelly beans as between Canada and the US as the solution to all of our economic woes.

You see, David Ganong is one of 10 CEOs handpicked by Stephen Harper to ostensibly represent the interests of Canada on the North American Competitiveness Council.

The composition of the “Canadian” representatives of this panel is quite telling of not just the SPP, but also Stephen Harper, as it includes two US born citizens, the CEO of Home Depot Canada (how’s that for Canadian?), the CEO of the worst phone company on the continent whose directors give new meaning to the words “Strategic Oversight” , the CEO’s of not just one life insurance company but two (just to make sure that they are over-represented), and a guy who makes chocolates (and jelly beans), but can’t seem to turn a profit:


Shaken by chocolate woes, Ganong goes outside for help

GORDON PITTS
From Saturday's Globe and Mail

July 18, 2008 at 9:14 PM EDT

In 1977, David Ganong, a young pup of just 34, took over the president's job at his family's chocolate company from his aging Uncle Whidden. He was woefully unprepared, and Ganong Bros. Ltd. suffered while David was learning the ropes.

Thirty-one years later, Mr. Ganong is determined not to make the same mistake with his own succession – not when upheaval in the chocolate industry is creating both hazard and opportunity for his St. Stephen, N.B., company.

On Tuesday, food industry veteran Doug Ettinger will succeed Mr. Ganong as president and CEO of the candy and chocolate company.

He will be only the fifth president in the 135-year company history and the first from outside the family.
David Ganong, pictured with daughter Bryana, steps down Tuesday as Ganong Bros. president

“We want to do it in the best interests of the business, not just because there's bloodline,” says Mr. Ganong, who has two children in the business, both deemed not ready to assume the reins of chief executive.

Mr. Ganong joins the legions of family business leaders compelled to look outside the company for transitional leadership until the next generation shows whether or not it can do the job.

In this case, the next generation consists of David's daughter Bryana, 35, who is manager of the expanding private label business, and son Nick, in his late 20s, who runs the chocolate department. (Another son, Aaron, works in the hospitality industry.)

“They need some broadening and some time,” says Mr. Ganong, who says he hopes one of them will ultimately take over. “I don't believe I have the fire and the energy to stay on long enough to act as that bridge.

“The company needs someone younger; it needs some new ideas; it needs some new energy.”

For those things, he is counting on Mr. Ettinger, a Nova Scotia native in his late 40s who has held positions with Coca-Cola Co., Nestlé, Parmalat and Saputo Inc. Recently, he has been working as a leadership consultant for Eagle's Flight, a Guelph, Ont.-based firm.

He joins a chocolate industry that has lost half its Canadian manufacturing capacity in the past 18 months, Mr. Ganong estimates. The rise of the Canadian dollar, combined with soaring commodity prices, have forced the shutdown of a number of factories.

Mr. Ganong says his own company has been forced to slash costs, including cutting management and rank-and-file jobs, and invest in better equipment. But as rivals' plants have closed, Ganong is about to emerge as the largest Canadian chocolate maker.

“The company survived the worst of the consolidation and stayed standing when the tsunami washed out,” Mr. Ganong says.

It has benefited from its ability to perform contract production for other brands, in addition to its own Ganong, Delecto, Fruitfull and other labels. Mr. Ganong says contract and private label volumes have risen to more than half of total production, giving Mr. Ettinger a base to build on.

The private company suffered a big financial loss two years ago, but came close to breaking even in the fiscal year ended in March, says Mr. Ganong, who forecasts a profit in the current year.

After two years of sales declines, largely because of a challenging U.S. market, it rebounded to double-digit growth last year and should do it again this year, he says.

The succession plan has been two years in gestation, as Mr. Ganong has worked with a board dominated by outsiders and headed by chairman Purdy Crawford. Mr. Ganong will remain a director, will advise the company in some capacity, and is still the 93-per-cent owner.

Ganong Bros. employs more than 340 people in New Brunswick, up 40 from a year ago. It does not disclose annual revenue.

In Pakistan, a $30 billion market loss prompts riots

....and in Canada, a positive Editorial from the Toronto Star?






Imagine if the investors in Pakistan had lost their $30 billion in savings as a DIRECT consequence of their government.......and based on a fraudulent lie about tax leakage? They would go ballistic. Nuclear in fact.

In Canada, we get positive editorials from the Toronto Star. National Post and Globe and Mail. Obviously Canada is not a democratic or a capitalist society......just a corrupt plutocracy.

Plunging stocks prompt riots in Pakistan

Bloomberg
July 18, 2008

Pakistani investors stormed out of the Karachi Stock Exchange yesterday, smashing windows and cursing regulators after the benchmark index fell for a 15th day, the worst losing streak in at least 18 years.

"I have lost my life savings in the last 15 days and no one in the government or regulators came to help us," said Imran Inayat, 45, a protester and a former banker who retired early and said he lost 300,000 rupees ($4,218) on the market.

Police surrounded the exchange after hundreds of investors stoned the building and shouted anti-government slogans.

The Securities and Exchange Commission of Pakistan, which imposed and then removed a 1-per-cent daily limit on price declines this week, had attempted to halt a slide that wiped out $30-billion (U.S.) of market value in three months, threatening to undo a 14-fold rally since 2001.

The Jim Flaherty Job Loss Watch: “It’s not my fault?”

With so many plant closures and job losses occurring daily, it becomes difficult to keep track. As a service to Canada’s New Government and Finance Minister Jim “it’s not my fault” Flaherty, I thought it would be good thing to keep a tally of these job losses and to determine which of these job losses are in fact Flaherty’s fault by assigning a culpability rating.

Here are the first few entries, starting with the pending layoffs of 2,000 workers at BCE, which are 100% Flaherty’s doing.

Please provide your entries and culpability ratings to: JobLossWatch@JimHadHisChance.ca
or in the comment box below

July 11, 2008: BCE Inc. 2,000 jobs eliminated (pending)......Flaherty’s culpability: 100%

July 16, 2008: Sterling Trucks: 720 jobs eliminated........Flaherty’s culpability: ?

June 16, 2008: GM Oshawa Truck Plant: 2600 jobs eliminated.....Flaherty’s culpability: ?

Jim Flaherty's sterling track record

.....or is it Sterling Truck record?

Apart from Jim Flaherty's destructive claim that Ontario is the last place to invest in Canada, his own economic policies have also ensured that Ontario is the last place to find work in Canada.

Thanks Jim, you're doing a hell of a job:


Ontario's Sterling Trucks to cut 720 jobs

Updated Thu. Jul. 17 2008 10:43 AM ET

CTV.ca News Staff

More layoffs have hit Central Canada's ailing auto industry. Sterling Trucks in St. Thomas, Ont., says it will give its workers notices Thursday announcing 720 job cuts.

That will bring the total number of layoffs at the plant to 1,300 since the fall of 2006. The union representing the workers says Sterling has been hit hard by tough economic times south of the border. U.S. companies have scaled back their orders.

"I'm deeply concerned and disturbed by it all ... (It's a) reflection of the downturn in the U.S. economy," CAW President Buzz Hargrove told CTV.ca Thursday.

Hargrove said the CAW will work with Sterling in the months ahead to help workers.

"Sterling is introducing a new model later this year. Hopefully that will turn things around," he said.

But Hargrove also noted the company's situation will likely not improve significantly until the U.S. economy bounces back.

The Sterling plant produces about 75 trucks a day and had employed about 2,000 workers only a year ago. The company, a subsidiary of Daimler Trucks North America, is based in Redford, Michigan.

The impending job cuts put another dent in Ontario's struggling manufacturing sector. Statistics Canada reported this month that 45,500 full-time Ontario workers either lost their jobs or were put on part-time work in June.

Question: Is anything sacred with Stephen Harper?

This Khadr boy’s entire future is at stake and these Con politicos are worried about whether seeking his return from Gitmo will be perceived as a policy flip-flop or not.......funny, that didn’t get in the way of Harper’s raiding of seniors nest eggs to the tune of $35 billion. With zero justification.

Question: Is anything sacred with Stephen Harper?

Just what exactly is sacred with the Harper cons, apart from Big Lifecos, the CCCE and Bush league George.

We certainly know that Harper has no love for justice.......except when it comes to his own frivolous lawsuits

Gloves come off in Khadr fight

Dallaire lashes out at Harper for not intervening in detainee's case, says Canada's reputation at stake
Jul 17, 2008 04:30 AM

Michelle shephard
national security reporter
Toronto Star

A battle over the fate of Guantanamo detainee Omar Khadr is brewing between two Ottawa heavyweights.

In one corner is Liberal Senator Roméo Dallaire, who says the Toronto captive's case has become personal, and he argues that Canada's reputation is at stake.

His opponent is Prime Minister Stephen Harper, who has vowed that his government's hands-off stance will continue until Khadr is tried for war crimes in Guantanamo. Harper has reportedly faced dissent within the party – Conservative MPs who don't feel sympathy for the Khadr case but who support intervention if it will make the issue go away.

Dallaire calls the Guantanamo trial an abuse of law. Harper regards it as the best legal option.

"I do not believe this is the Harper government. I certainly don't believe it's the Canadian government. I believe it is purely the Prime Minister – his individual perspective," Dallaire said yesterday in an interview with the Toronto Star. "He's the leader of the party and it is his imprint, not anybody else's."

Harper declined an interview request, but his director of communications accused Dallaire of grandstanding and questioned why the senator had remained quiet on the Khadr case during the years his party was in power.

"It is revisionism and hypocrisy on the part of the Liberal senator and others in the Liberal party that are saying that a different path should be taken now," Kory Teneycke told the Star.

"Now at the 11th hour, they're having second thoughts and I think there are those who would say it's a flip-flop."

Khadr's trial is set to begin in three months and his lawyers are desperately trying to avoid going before a military commission where Khadr faces five war crimes, including murder for the death of U.S. soldier Sgt. Christopher Speer.

Dallaire believes Canada's reputation will be sullied if government support for the war crimes prosecution of a minor continues. That position could affect the influence Canada has internationally in fighting future civil rights cases, he alleges.

Khadr was 15 when he was captured in 2002 by U.S. forces after a firefight in Afghanistan. The Pentagon alleges he threw a grenade that mortally wounded Speer.

If the trial goes forward, the case will be the first modern-day war crimes prosecution of someone younger than 18 at the time of his alleged crimes. Prosecutors have said that Khadr's age could be taken into account during sentencing, but not for his prosecution.

Dallaire worries that once the trial is underway, there will be little chance for Harper to intervene.

"I think that once you're in actual trial, even though it's an illegal trial, it becomes very messy for politicians to start fiddling within the judicial process ...," he said.

But Teneycke said this week's release of a videotape depicting Khadr's interrogation in 2003 by Canadian officials at Guantanamo, where the then 16-year-old is seen weeping and asking for help, does not change the government's position. Nor will any future revelations made by Khadr's lawyers, he added.

"Trying people through the court of public opinion is no way for politicians to act. (Harper) feels, as any responsible leader feels, that politicians are not judges and that due process should be followed and there shouldn't be a separate process for high-profile cases."

Canada is only energy self-sufficient on paper.....not in substance

$7 billion pipeline to go straight to Texas
TransCanada plans to extend its Keystone project to be completed by 2012

By MARKUS ERMISCH, SUN MEDIA July 17, 2008


Lured by the immense refining capacity on the Gulf Coast, TransCanda Corp. plans to extend its massive Keystone pipeline to ship Canadian crude from Alberta's oilsands straight to Port Arthur in Texas.

The expansion, to be completed by 2012, is expected to cost $7 billion and will nearly double the pipeline's capacity from 590,000 barrels a day to approximately 1.1-million, the Calgary-based company announced yesterday.

Costs for the entire pipeline are estimated at about $12.2 billion.

Currently, only Exxon Mobil's Pegasus pipeline, which has a capacity of 66,000 barrels per day, pumps western Canadian crude to Texas.

"I gather TransCanada is celebrating today," said Steven Paget, an analyst with First Energy Capital Corp.


"Keep this in mind: They are not moving a single barrel right now. And to go from where they are now to this is quite and achievement."

The expansion was made possible after several shippers, whose names are protected by confidentiality agreements, committed to ship about 300,000 barrels a day to the Gulf coast for an average term of 18 years.

Oil giant ConocoPhillips, a partner in the Keystone pipeline project, is one of the shippers, a TransCanada spokeswomen confirmed, and Paget said he suspects Royal Dutch Shell to be another, given the latter's expansion plans for its Port Arthur refinery.

Most of Alberta's crude oil is being shipped to refineries in the U.S. midwest, an area with a total refining capacity of about 3.5-million barrels a day.

Thirst for Canadian crude on the Gulf coast, which boasts North America's largest refining capacity of about eight million barrels per day, however, is expected to grow more acute as supplies from Mexico and Venezuela, the area's largest suppliers, are fickle or dwindling.

"As we look at the growth of the oilsands going forward, we certainly need to look at alternative markets," said Greg Stringham, of the Canadian Association of Petroleum Producers, an industry lobby group.

"The desire to look at (the Gulf coast) is really coming from the size of that market and the quality of refineries in the market."

Just exactly what part of the country does Flaherty "play well" in?

I guess you can scratch Calgary....

Stop-gap thinking guides Flaherty

By: Deborah Yedlin, Calgary Herald
Published: Thursday, July 17, 2008

It's taken more than two and half years since he burst the income trust bubble, but Federal Finance Minister Jim Flaherty finally showed his face in Calgary on Wednesday, speaking at a packed Chamber of Commerce event at the Westin Hotel.

His speech followed an hour-long roundtable session with various industry leaders who described the discussion as polite and cordial but not necessarily collegial.

Flaherty, of course, was responsible for whacking the income trust sector in October 2006 when he announced a plan to begin taxing the sector. It was a decision that subtracted more than $30 billion in market value and one that continues to raise the hackles of Calgary's business community -- especially the oilpatch.


It was surprising, then, that he was introduced by Jim Kinnear, the founder, president and chief executive of Pengrowth. Kinnear, in his usual tongue-in-cheek fashion, made reference in his introduction to the "differences" between Flaherty's position on the income trusts and his own.

But anyone hoping for grand insights on economic and fiscal policies in the context of today's global uncertainty -- or how the government is going to address the divergence of fortunes between East and West -- left the Westin audience disappointed.

Instead, Flaherty launched into a speech that came across as a Pollyanna pre-election pitch. There was plenty of air time on Canada's economic position relative to other countries; that we are the envy of the G-7 because of our balanced budgets and pulling out statistics on metrics such as job creation and tax cuts.

Of course, there was no acknowledgement that cutting the GST by another percentage point, to five per cent, took away an element of flexibility for the government in the event it needs to step in and introduce stimulative measures for the economy. It and the tax-free savings plan that Flaherty was quite stoked about stand as measures aimed at a certain segment of this country's population -- and it isn't the working poor.

"The government seems to be more concerned about the reaction by the general population to its policies than it is about the economic soundness of those policies," said one executive in the audience, referring to the GST cut.

Flaherty also had much to say about his government's economic plan called Advantage Canada (anyone heard of it?) which he called "the prism through which we look to see if policy fits with long-term economic policy." Too bad one of the five cornerstones of the plan appears not to include post-secondary education -- especially the post-graduate variety.

Nor did he talk about the declining productivity of the Canadian economy. It was addressed in the recently tabled competition review report submitted by Red Wilson and his committee, but Flaherty didn't go near the subject, though he referred to the report and one of its participants, Murray Edwards, at least twice during his talk.

"The speech was notable for what it didn't deal with, than what it did," said one business type.

Canada's resource wealth was also on Flaherty's laundry list, though he didn't go as far as to highlight how much of Alberta's energy exports account for the federal government's surpluses or overall economic growth. He did make reference to Canada as an energy superpower, adding that if the value of all of Canada's natural resource wealth was tallied up, it would amount of $1.5 trillion.

Still, when queried in a scrum following his speech as to why the federal government has not been quick to stand to Alberta's defence when the very resource vaulting the country into energy superpower status -- the oilsands -- is under attack as being dirty, Flaherty responded by talking about his government's climate change plan.

What seems to frustrate the business community in Calgary is that the federal government is quite happy to have the fruits of the energy sector to buoy the economy and balance the federal budget, but appears oblivious to the fact that killing the income trust structure and taking 20 months to come out with draft legislation has not been helpful for the affected companies to formulate sound strategic plans.

The only good news is that the word on the draft legislation for income trusts looking at converting back to corporate status that was tabled this week gets a passing grade, even though there was no dialogue between Calgary and Ottawa; submissions by industry, including legal firms, were invited, but that's as far as it got.

"It looks like they got it right," said one industry observer, "anyone hoping for a tax-deferred rollover got what they wanted."

That's small consolation in the scheme of things.

Finally, there was nary a mention of the elephant in the room -- the environment and the current carbon tax proposal currently being trotted across the country by Liberal Leader Stephane Dion. One industry insider made the observation that the federal government is missing a golden opportunity to transform the country into a leader on the environmental technology front; instead, the approach seems to be more about political expediency than tough decisions.

The irony is that Flaherty ended his remarks with a quote from Sir John A.

MacDonald: "look a little ahead, my friends." For a government that makes decisions based on political expediency and not sound economic policy, Flaherty would do well to heed those words, as would our own premier.

dyedlin@theherald.canwest.com


© The Calgary Herald 2008

Flaherty says he's not changing mind on income trusts

CTV NEWS

Flaherty says he's not changing mind on income trusts
Updated Wed. Jul. 16 2008 9:06 PM ET

The Canadian Press

CALGARY -- Ottawa is sticking to its plan to tax income trusts like corporations starting in 2011, Finance Minister Jim Flaherty said Wednesday in Calgary -- the energy industry home to many of the policy's most ardent critics.

"I think the boat has sailed on the government's position on income trusts and I don't see them backing down from it at this point,'' said Adrienne Oliver, a partner in the law firm Ogilvy Renault and co-chair of the firm's tax group.

Indeed it has (see above)

Flaherty finally concedes that Canada is not an island unto itself

...something we've argued for 20 months

The income trust tax was predicated on the assumption that Canada WAS an island unto itself and that Canadians saving for retirement could be dutifully made captive to the investment wares and whims of Manulife Financial and Power Corp.

Wrong. Investment capital is fluid. It can leave the country as easily as it can stay in the country. Harper’s income trust tax served to favour foreign investors like Abu Dhabi Energy and Providence Capital over Canadians saving for retirement......so much so that Harper has tax subsidized the displacement of Canadian taxable investors with foreign non taxable entities and pension funds. The LBO of BCE alone, caused by Harper’s knee jerk income trust tax, will cost Canadians taxpayers the loss of $800 million a year in tax revenues. Brilliant, Bring in the clowns

As for Flaherty, he should move to an island.......perhaps Alcatraz.......a perfect place for Canada’s Minister of Tax Leakage Fraud


Flaherty says Canada's energy resources will buffer it from global slowdown

2 hours ago

CALGARY — Finance Minister Jim Flaherty maintains that the country's "strong fundamentals" and status as an emerging energy superpower will keep it in better shape than the United States, although not immune to a global economic slowdown.

"Canada is not an island," Flaherty said to a Calgary Chamber of Commerce luncheon in Calgary Wednesday. He said that Canada is being affected by the "recession" in the U.S. housing sector, which has turned out to be longer and deeper than expected.

It will also have to deal with competition from emerging economies like China and India.

But even still, Flaherty said Canada is the "envy of the G7" with its booming resource industry.

Flaherty said Canada's financial institutions are "well capitalized and strong" and sales of autos in Canada have not declined, as they have in the United States.

Question for Ottawa: Should Canadians at large be asked to suffer hardships in order to fund the pension obligations of Ontario Teachers’?

It first needs to be acknowledged that unlike Alcan, Inco or even MacDonald Dettwiler (MDA), BCE is a federally regulated company, and is regulated by no less that four Acts of Parliament. In fact BCE came into existence as a holding company, by way of an Act of Parliament, the Bell Canada Act.

Even a strict interpretation of the policy objectives of the various acts that govern BCE would conclude that a leveraged buyout of BCE,, as presently contemplated, contravenes these stated policy objectives. The point simply being, that the political side of Ottawa has moral jurisdiction over this pending transaction and yet is doing nothing whatsoever to mitigate its negative impact on Canadians. If that “jurisdiction” weren’t enough, Ontario Teachers’ is also subject to federally sanctioned regulations concerning a pension plan’s voting ownership of a corporation that Teachers’ has gone to great lengths, albeit inordinately crude lengths, to circumvent.

So what are the alleged “hardships” that Canadians will suffer as a result of the LBO of BCE?

(1) Job Layoffs: It is clear from statements made by BCE’s new incoming CEO, George Cope, that an integral part of the Purchasers 100 day plan is to follow the standard operating practice of private equity which is to layoff employees. BCE is reported to be laying off some 2,000 middle management within BCE. These are what politicians like to call “knowledge workers”. The same “knowledge workers” that the Government of Canada referred to that it hoped would be hired by Bombardier for their C-series jet. That program hopes to hire as many as 3,000 “knowledge workers”. That was the justification for a $350 million federal loan package for Bombardier and another $200 million in government grants.

If it took $350 million of federal loans to generate the prospect of 3,000 new “knowledge worker” jobs, then what is the cost of losing 2,000 knowledge workers at BCE? You won’t like the answer, as these are jobs that Canadian tax payers are paying to lose.

Why is Ottawa prepared to lend $35o million in the hopes of securing 3,000 jobs, while at the same time it oblivious to losing $800 million per year in federal taxes (see (2) below) with the result of losing 2,000 jobs. It makes no sense whatsoever.


(2) Loss of federal tax revenue: Not only are some 2,000 jobs being lost at BCE because of the LBO and the imperative for above average investment retiurns by its new owners, there is also the significant loss of federal tax revenue, arising from the massive interest payments ( that are tax deductible) required to service the $44 billion mountain of BCE’s leveraged buyout debt. I estimate the ANNUAL loss of taxes to be $793 million. Other reports that have appeared in the Financial Post and elsewhere have pegged this annual tax loss at $1 billion. The loss of taxes by Ottawa is exacerbated by the provision in Flaherty’s Budget 2007 that ELIMINATED the withholding tax paid to Ottawa by foreign providers of debt. BCE’s leveraged buyout providers are all foreigners: Citibank. Royal Bank of Scotland and Deutsche Bank

(3) Increased cost of phone service/reduced competition: Canada is allowing its main telecom operator to go down a path that no other global telecom company of a peer nature has gone down, namely degrade itself into a junk bond issuer. This degradation is being done for strictly financial engineering purposes. It did not arise because of the funding of major new capital investment. It is simply a technique that produces leveraged returns to the new owners of the now narrow sliver of BCE’s equity.

Meanwhile telecom is a highly capital intensive business and a business with rapidly changing technology. How does turning BCE into an LBO company address that reality. By definition an LBO company has the highest conceivable cost of capital of any form of capita; structure. BCE’s cost of debt will increase by over 240 basis points vis-a-vis the Catalyst Recap. On $34 billion of new debt, this 240 basis points translates into an additional burden on the company of $816 million a year. The 2,000 job layoffs may offset $200 million of this new burden, leaving a $616 million hole to fill. Who will fill that hole? It can only come from one source: the consumer. Ottawa and Industry Canada can share the moral hazard associated with raising the cost of telecom service to Canadians by an annual amount of at least $616 million for the privilege of what? Laying off 2,000 “knowledge workers”? The privilege of losing $800 - $1 billion of tax revenue.

(4) General Motors revisited: The auto industry is in an all out recession. Oshawa has paid a price. I found it intriguing that GM Corp announced yesterday that they will be implementing a program of dividend suspension, job layoffs and possible sale of divisions to contend with their hardships. Strangely these are exactly the measures that BCE is going to or has undertaken as a result of its pending leveraged buyout: dividend suspension, job layoffs and possible sale of divisions. What is wrong with this picture? It is as if Ottawa, through its benign neglect has wished a GM upon Canada’s telecom sector? Recessionary affects by choice? Almost like masochistic economic policies.

(5) So who benefits? Many would argue that Ottawa should not impede a transaction that allows investors to attain full value for their shares. That didn’t stop MDA from being blocked by Stephen Harper last month. And MDA is not even federally regulated like BCE. meanwhile MDA did not have the luxury of performing a Catalyst recap like BCE as an alternative means to achieve full valuations. The Catalyst recap would increase BCE’s payout to shareholders by 74% and increase the stock’s value to north of $42.50 in a tax friendly manner (70% rollover versus 100% taxable)

The BCE LBO is a transaction that is a case of the wrong transaction at the wrong time. It’s time for Ottawa to assert itself and place the interests of the Canadians they are elected to represent ahead of the pension obligations of Ontario Teachers’ who are breaking the clear intent of their pension regulations in the structuring of this so called “deal”.

Globe and Mail has deleted reference to the unproven nature of Flaherty's tax leakage allegations

The Globe and Mail printed a story today provided by Reuters. See below.

It has been “sanitized” by the Globe so as to reinforce the false belief that income trusts cause tax leakage with the words “Trusts are popular investment vehicles structured to pay little or no corporate tax” and the words “ Mr. Flaherty said the sector's growth threatened government tax revenues.”

The Globe deleted the following from the original Reuters news story, in order to provide an unbalanced account of the news:

“But critics of the trust tax, who say Flaherty has not been able to prove his tax leakage argument, took little consolation from the rules.

Brent Fullard, president and chief executive of the Canadian Association of Income Trust Investors said Ottawa dragged its feet on the conversion rules because it "bought compliance from the industry" on the controversial new policy.

The initial outcry over the tax plan was massive and market losses totaled more than C$20 billion.

"Why did it take 20 months? If nothing else, it reveals how little work they did beforehand," Fullard said.”




Ottawa releases rules on trust conversions
Reuters

July 15, 2008

The Canadian government released draft rules yesterday designed to allow income trusts to convert to a corporate structure without taking a tax hit. "We are guardedly optimistic that these guidelines will provide income trusts with the clarity they so desperately need to make structural decisions going forward," said George Kestevan, chairman of the Canadian Association of Income Funds. Finance Minister Jim Flaherty stunned investors in October, 2006, with a surprise plan to begin taxing the then $200-billion income trust sector as of 2011, backtracking on a Conservative Party campaign promise. Trusts are popular investment vehicles structured to pay little or no corporate tax, allowing them to pass on a steady flow of cash to unitholders as distributions. But Mr. Flaherty said the sector's growth threatened government tax revenues. The new tax prompted most trusts to plan to restructure as corporations.

Contradictions abound: Flaherty doesn’t know REIT from wrong

Today we learn that Flaherty has relaxed the rules on REITs to expand their businesses abroad and receive tax flow through treatment. This is a complete contradiction to Flaherty’s earlier policy pronouncements and policy rationale:

(1) If income trusts cause tax leakage, which has never been proven, then why exempt REITs?

(2) If income trusts are limited by Flaherty as to their growth, which they are, then why let REITs expand? And why internationally?

How does that benefit Canadians who are tax subsidizing this activity, if Flaherty's tax leakage arguments are in fact true?

Come to think of it, where is Canada’s New Government’s transparency on alleged tax leakage?

(3) The arbitrary rationale at the outset was that REITs are “passive” entities and that royalty trusts and business trusts are “active” entities. If anything that would argue for the reverse tax treatment. However, accepting that logic to be valid, how can international acquisitions and expansions of REITs be considered “passive”.

(4) This new measure concerning REITs totally contradicts Flaherty’s earlier attempts to eliminate interest deductibility of foreign acquisition debt. Interest deductibility simple means servicing debt with pre-tax cash flows, just like distributions on income trusts and REITs are serviced by pre-tax cash flows. So whu would Flaherty loosen the REIT rules in July 2008 by allowing REITs to acquire foreign properties and preserve their REIT status, and yet in June 2007 Flaherty was trying to shut that vert thing down via non-deductibility of foreign acquisition debt.

Bottom line: Flaherty’s tax policies are the result of zero logic and total lobbying by self interested parties all behind closed doors. Canadians are policy takers.....mushrooms of the Harper government, whereby they are kept in the dark and fed Stephen Harper’s Income Trust tax.

Ottawa proposes REIT changes
Canwest News Service
Published: Tuesday, July 15, 2008

OTTAWA -- Federal Finance Minister Jim Flaherty released draft legislation yesterday that would amend federal tax laws to implement a series of previously announced initiatives, including changes that would allow REITs to expand abroad and still be exempt from the pending federal tax on income trusts.

The final legislation, to be tabled in the fall, would implement measures announced as part of the last federal budget, but other items as well, most notably dealing with real estate investment trusts, or REITs.

Under the proposal, announced Dec. 20, the federal Department of Finance said Canadian REITs would be allowed to expand abroad and still be exempt from the income-trust tax.
The federal government originally stipulated that REITs had to derive a minimum of 75 per cent of its income from Canada in order to be exempt from the income trust tax, which takes effect in 2011.

But that changed in December, and the real estate industry applauded the move.
Stakeholders have until Sept. 15 to issue comments to Finance regarding the proposed tax changes.

Is Indymac endemic?

IndyMac one of the largest bank failures in U.S. history
By Louise Story
International Herald Tribune
Published: July 13, 2008

The seizure of IndyMac Bancorp by U.S. regulators marks one of the largest bank failures in American history.

The bank, once part of Countrywide Financial, is the first major bank to shut its doors since the mortgage crisis erupted more than a year ago.

The closure Friday followed a frenzied week during which IndyMac executives tried to bolster the ailing bank. IndyMac, based in Pasadena, California, stopped making new loans and announced layoffs of more than half of its 7,200 workers. But IndyMac's customers, afraid their savings might disappear, stampeded tellers, demanding their money back. Most of Indymac's deposits are guaranteed by the Federal Deposit Insurance Corp., which will operate the bank and try to sell it.

The run on the bank came after a critical letter about it from Senator Charles Schumer, Democrat of New York. U.S. regulators said Friday that Schumer's letter had prompted the collapse by causing the run and scaring away potential acquirers.

"The senator made comments in his letter questioning the viability of the institution," John Reich, director of the U.S. Office of Thrift Supervision, said during a call with reporters. "When a member of the United States Senate makes such a statement, it frightens depositors."

In the days after Schumer's letter was released June 26, IndyMac customers withdrew an average of $100 million a day from the bank, or a total of $1.3 billion, the government said. Before Schumer's letter, the bank had been receiving net inflows of money from depositors, Reich said.

Schumer, who has been critical of bank regulators for months, released a statement criticizing Reich's agency.

"If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today," he said.

For all the write-downs and bad news on Wall Street over the past year, only five local and regional banks have shut their doors. The handful that have failed have been a small fraction of the size of IndyMac. IndyMac held $32 billion in assets as of late March, according to the government. It has been 15 years since any bank larger than $10 billion in assets collapsed. The largest bank failure on record was in 1984 when Continental Illinois National Bank & Trust in Chicago hit trouble, presaging the savings and loan crisis.

IndyMac ran into trouble late last year when it was unable to sell a portion of its Alt-A mortgage loans, which go to homeowners with credit that is better than the subprime category. It was being shopped to potential investors this summer, but their interest disappeared after Schumer's comments, said Timothy Ward, deputy director of examinations, supervision and consumer protection at the OTS.

William Isaac, chairman of the Federal Deposit Insurance Corp. in the early 1980s, cautioned against panic. Bank failures so far pale against the 3,000 failures in the 1980s, he said.

The new BCE: No taxes, higher phone costs, 2,000 fewer jobs. ......lame opposition parties take a bow

Who is minding Ottawa and Canada’s Telecommunications Act? We know it isn’t the Harper Conservatives. So where are the “opposition” parties on this matter?

Is BCE too big and influential to be taken on by the Liberals as an issue that negatively affects all Canadians and our country’s competitiveness?

Ditto the NDP and the Bloc? It would appear so, since every highly predictable negative outcome will occur: complete loss of tax revenue, loss of jobs, higher phone costs, etc., etc. I guess the Bloc doesn’t care that BCE will now be run out of Toronto. I guess the only other choice would have been New York. Certainly not Montreal. What purpose would that serve, when Teachers’ is based in Toronto and the other three owners in New York?

Meanwhile, the only party to speak out against the COMPLETE IRONY of tax leakage from the LBO of BCE is the Green Party.


BCE to cull 2,000 managers in 100 days
CEO stays in Toronto

Sean Silcoff, Financial Post Published: Saturday, July 12, 2008

MONTREAL - BCE Inc. is set to make deep cuts to its management ranks as it prepares to be taken private by a group led by Ontario Teachers' Pension Plan.

But while BCE insiders say more than 2,000 people out of a top-heavy group of roughly 15,000 managers will lose their jobs during a "100-day plan" unveiled yesterday by new chief executive George Cope, BCE's main unit, Bell Canada, is hoping to cast a different public image.

Namely, BCE intends to overcome its biggest weakness -- underperformance in the growing wireless-phone sector by its Bell Mobility business --by improving customer service and product offerings and investing heavily in its network and technology.

"Our competitors have lower cost structures than ours, and we cannot allow them to enjoy this competitive advantage any longer," Mr. Cope said in an e-mail to BCE insiders yesterday to outline his plan. "Our rivals have invested their savings in improving their networks, products, services and prices. We will do the same."

To kick off the plan, the 46year-old Mr. Cope-- who will continue to live and work in Toronto but travel regularly to BCE headquarters in Montreal -- unveiled BCE's new management team, notable for a lack of outsiders and the fact it is composed of 12 people, down from 17. Only executive vice-president David Wells is from outside Bell, although he had worked for the company for the first 25 years of his career.

Some key executives -- including Siim Vanaselja, chief financial officer, and Wade Oosterman, wireless president -- are keeping or adding to their existing jobs.

"Bell didn't go into free agency and bring in some sort of outside star," said one informed observer. "These are people who know Bell … and have had a considerable period to prepare" during the deal's lengthy closing period. "If you make changes, you need people who know where all the skeletons are and can work quickly."

But the team is dominated by relative newcomers: Twothirds have joined BCE in the past three years. That includes Mr. Cope, who was lured away by his predecessor, Michael Sabia, in 2005 from Telus Corp., where he led its mobile-phone unit, to serve as Bell president and chief operating officer. Three others, including Mr. Oosterman, worked with Mr. Cope at Telus.

Mr. Cope noted in an interview that while the team is smaller, one extra executive is dedicated to customer service. "It's an important message to all of our team members," he said. "The customer level is where we have to win this game."

Many of the initiatives step up moves that have been underway for years at BCE: For example, Bell has cut thousands of jobs and spent billions of dollars on its networks. Investments in its wireless business have led to greater coverage and fewer dropped calls. Bell has also recently invested to spruce up its shabby retail store network.

But with BCE set to take on $32-billion in new debt in a buyout set to close on Dec. 11, the focus will be on improving cash flow. Mr. Cope "has to get Bell more nimble," said the informed source. "That means you take it out at the top. The cuts won't be at the customer-facing level or the guys in the trucks."

Mr. Cope said improving Bell's position in the wireless market -- where it lags its two rivals in performance and faces new entrants -- "absolutely is core to value creation going forward."

He provided few specifics about his plan, but said he will soon announce marketing and investment initiatives, including technology and new products and services "that we really believe will be game changers." And while the new owners are expected to divest some assets, Mr. Cope said Bell's TV assets, including its ExpressVu satellite service, "will continue to be a core part of our strategy."

Mr. Cope declined to offer specifics about layoffs. But there will be plenty of movement, even among the roughly 50,000 employees remaining within the BCE fold. BCE is preparing to move its head office to a new complex near its present headquarters in Montreal. In addition, Bell is moving much of its operations to Mississauga, Ont.

Meanwhile, Mr. Cope, who is married with three teenaged children and lives in Toronto's Lawrence Park area, said he would get an apartment in Montreal as "I'm obviously going to be [there] a lot."

Stephen Harper's NDP playbook....income trusts/ATM fees/text messaging fees

I am sure that many of you have shuddered at the thought of the NDP controlling Canada’s economy......guess what?, they do.

The NDP are the brain trust behind Stephen Harper's income trust tax, Flaherty’s ATM fee to nowhere scheme and now Jim Prentice’s new found respect for cell phone costs....two weeks after he personally approved the leveraged buyout of BCE that will raise the cost of telecommunications services in this country across the board.


What's next for irrelevant interventions from the federal cabinet?
Mark Sutcliffe,
The Ottawa Citizen
Published: Saturday, July 12, 2008

First it was Finance Minister Jim Flaherty exploding at the banks about their ATM service charges. Now Industry Minister Jim Flaherty is huffing and puffing at the telecoms over text-message fees. Maybe the Harper government should start a new department to shield Canadians from inconsequential consumer costs that we could easily avoid on our own.

Call it the Ministry of Immaterial and Irrelevant Intervention.

Just a few months after Flaherty defended (to absolutely no effect) the many Canadians who were paying a dollar for the convenience of withdrawing cash from one bank while using a competitor's bank machine, Prentice has now climbed aboard his high horse to fight the big bad telecommunications giants who plan to charge customers 15 cents for an incoming text message.


What's next? A full investigation into bubble-gum machines that sometimes take your quarter without giving you a jawbreaker? A sweeping crackdown on diners that charge you 20 cents for an extra packet of jam with your toast?

"While I have no desire to interfere with the day-to-day business decisions of two private companies, I do have a duty as minister of industry, when necessary, to protect the interests of the consuming public," Prentice said in a statement.

Which is a bit like saying you have no desire to eat dessert while you have a forkful of pie in your mouth.

"I believe this was an ill-thought-out decision," Prentice continued.

Prentice actually demanded meetings with the chief executives of Bell and Telus to talk about their new charges. He said the meetings would likely result in a solution that "provides the best service to consumers at the best price."

Good thing the government is available to share its expertise on providing high-quality service at the best possible price. They excel at that.

To be fair, a charge for incoming text messages does seem a bit illogical, since the telecoms are already charging the sender. It's a bit like getting hit with a bill for all the mail you receive, even if it's junk mail (let's not give Canada Post any ideas). And 15 cents per text message could have the potential to add up to millions of dollars.

But even if it's a bad decision, is it up to the minister or the market to decide? If consumers don't like how they're being treated by a company, they can argue for changes. If the company doesn't listen, they can always switch to a competitor. Rogers says it has no plans to charge for incoming texts.

But I guess it's too much to expect from a Conservative to let market forces rule on whether corporate decisions are "ill-thought-out" or the fair price for a service is being charged.

Interestingly, when Rogers recently launched its service plan for the new iPhone, consumers objected that the prices were too high. Facing a backlash, Rogers relented and cut the fees by as much as 50 per cent. Somehow they managed to do this without Prentice putting Ted Rogers over his knee.

"We have serious concerns" about the 15-cent charges, Prentice said, particularly the fact that the charge will apply to incoming spam.



But in a radio interview the next day, Prentice acknowledged that since the cellphone companies are very good at screening out spam texts, it wouldn't apply to many messages at all.

Besides, 95 per cent of cellphone users are on a plan that gives them a package rate for text messages, for as little as a few dollars per month, so they won't pay the 15-cent fee. And if you don't send text messages, you can disable that feature from your phone and you'll never be hit with a charge.

So where's the sudden requirement for government intervention?


Prentice says his own family employs text messaging for regular communication.

"It is how we stay in touch," he told one newspaper. "I can tell you it's how I get all my family information and instructions."

Maybe one of those instructions was, "OMG, they R going 2 charge for msgs ): Dad, pls stop them 2day."

Text-messaging has become so critical to his family, Prentice pointed out, that it was useful when one of his daughters suffered a recent health scare.

"It turned out fine, but in terms of getting her to the right doctors at the right time, it was text messaging that ensured that that happened," he said.

I guess paying an extra 15 cents wouldn't have been worth it in that situation.

For a group of conservatives, the Harper government is showing a surprising tendency to intervene in the marketplace over meaningless issues. Whether it's being done out of some well-meaning but poorly informed desire to help consumers or as a cynical attempt to get media time and votes by appearing to be on the side of ordinary Canadians, it should stop.

To use Prentice's words, attacking the telecoms over tiny fees that the vast majority of consumers will never have to pay was an ill-thought-out decision.


© The Ottawa Citizen 2008

Sorry Terry, but I already wrote the Jim Prentice rides the high horse story....

Terry Corcoran has a piece in today’s Post entitled “Prentice should get off text-messaging high horse”. It’s a half decent article, however 15 cent text messaging doesn’t quite rise to the level of the $35 billion loss that Canadian investors sustained as a result of Flaherty’s fraud known as tax leakage.

Forget the capital loss, think of the income loss.

How many of you could sustain your life style with 31.5% less income? Meanwhile where is the proof of tax leakage? Transparency? Accountability” Journalist’s outrage?

Here’s the real Jim Prentice rides the high horse story of real concern:

Thursday, January 31, 2008

Jim Prentice: You look good on top of that high horse of yours, now investigate this:


By “this” I am referring to the charges contained in the full pages ads that CAITI recently ran in the Toronto Star and the Calgary Herald
that read: “To Finance Minister Jim Flaherty: YOUR TAX LEAKAGE ANALYSIS IS FRAUDULENT”

As a lawyer you should be familiar with the concept known as fraud, but just in case you aren’t, allow me to quote the Oxford Dictionary:

fraud –noun
1. deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.
2. a particular instance of such deceit or trickery: mail fraud; election frauds.
3. any deception, trickery, or humbug: That diet book is a fraud and a waste of time.
4. a person who makes deceitful pretenses; sham; poseur.

By “high horse” I an referring to the lofty statements you made in yesterday’s papers where you claimed that: "The judge spoke of misleading and disingenuous conduct and I think that all Canadians believe that warrants a response"

This statement of yours concerns the matter of the takeover of Lakeport Brewing Income Fund by Belgian based Labatt Brewing, which is only one of over 40 income trust takeovers that have occurred since your governments’ ill fated decision to betray Canadian voters and seniors by taxing income trust and raiding seniors nest eggs after promising to never do so. The $65 billion in trust tax related takeovers will cost every Canadian, because of the $1.4 billion loss in annual taxes they result in.

Concerning Lakeport Income Fund, it seems you are siding with Labatt on this matter, as you must be eager to see Lakeport being sold to foreigners, and oblivious to the lessened competition it represents from the purchase of a price leader in the beer category by a multinational premium priced brewer. You made a similar pro “hollowing out” statement this past summer about the $5 billion takeover of another trust, Prime West Energy Trust by middle eastern oil giant, Abu Dhabi Energy, when you made a speech in Vancouver stating that the $5 billion Prime West takeover was something you were willing to turn a blind eye to based on the laissez-faire logic that “Changing the rules in the middle of the game is not how this country does business.”...

Well if that’s the case, you need to acquaint yourself with reality. No one was asking you to change the rules in the middle of the game. The fact that you had allowed Abu Dhabi Energy to acquire Northrock Energy for $2 billion in May of 2007 doesn't mean that you automatically rubber stamp the $5 billion acquisition of Prime West Energy four months later, and then send Abu Dhabi a letter encouraging them to do "more of the same."

And concerning your point about "not changing the rules in the middle of the game", how does such a logic allow you to introduce a 31.5% retroactive tax after promising that you would never do so and thereby causing the loss of $35 billion in Canadian’s hard earned life savings?

Please provide us with an answer. Failing which please ask Jim Flaherty to sue us for slander, since we repeat what appeared in the Toronto Star and Calgary Herald newspapers” Jim Flaherty: Your tax leakage analysis is fraudulent”

If we don’t hear back from either of you, we will conclude that you are not worthy of riding that high horse of yours and your lofty statements will be nothing more than horse manure, or as some people call it: Stephen Harper’s Income Trust tax.

BCE will be the world’s largest leveraged buyout.....and what, that’s a good thing?

Presently BCE is Canada’s most widely held public company with 600,000 shareholders, $34 billion in equity and an investment grade credit.

Soon it will be a private company held by four private equity firms (3 of them US). $8 billion in equity and a junk bond credit rating.

News headlines would have us believe that this is a great and wonderful thing.

The pie chart above from Teachers’ website shows what's going on here. BCE is loading itself up with $34 billion in new debt (in addition to the $12 billion of existing debt), such that BCE’s equity value is reduced to $8 billion, and Teachers’ will invest $4 billion to own 50%.....of a $52 billion market cap company.

BCE also just happens to be Canada’s largest telecommunications carrier and the sector is rapidly changing and highly capital intensive in nature. The cost of capital of a phone carrier is the single most important determining factor in determining how competitive a phone carrier will be in terms of the costs of its services and its ability to roll out new services into the marketplace. As the largest phone carrier, any change in the cost competitiveness of BCE will affect how other players in the market respond.

It is inconceivable that the leveraged buyout of BCE will lead to any outcome other than (1) the partial or complete dismantling of the company as we know it and/or (2) a dramatic increase in the cost of service and/or diminution in the roll out of new technologies. Moving from an investment grade credit issuer to a junk bond issuer will add some 240 basis points (2.4%) to the cost of BCE’s debt capital, at time when interest rates are single digits. Debt will constitute 85% of BCE’s new balance sheet. Meanwhile the new equity owners of BCE have some of the highest return expectations in the investing world, and seek returns in the 30 – 35% level, adding to the overall cost of BCE’s capital.

Why is Canada the only country whose legacy telecom carrier has gone private by way of a leveraged buyout? To do so required government approval. Meanwhile filings made under the access to information act have confirmed that Industry Canada performed “no studies or net benefits test” to ascertain the likely impact on consumers and the government’s lessened tax collection from an LBO of BCE. The government has explicitly endorsed this deal, making Canada an “outlier” in terms of the global telecom industry.

How much of an outlier can easily be determined by looking at the capital structure of other telecom companies around the world, and their respective debt to equity ratios. For example Vodafone has $0.36 of debt for every $1.00 of equity.

By comparison BCE will become a complete outlier with $5.50 of debt for every $1.00 of equity, as follows:


0.36 Vodafone Group
0.43 Sprint Nextel Corporation
0.51 Turkcell Iletisim Hizmetleri A.S.
0.61 Mobile TeleSystems OJSC
0.64 Nippon Telegraph & Telephone
0.79 Telefonaktiebolaget LM Ericsson
0.81 Deutsche Telekom AG
1.10 Vimpel-Communications
1.31 TELUS Corporation
1.67 Telekom Austria AG
1.67 PT Telekomunikasi Indonesia
1.68 Telecom Italia S.p.A.
1.68 Telenor ASA
1.69 France Telecom
1.75 China Netcom Group Corp (HK) Ltd
1.77 BCE Inc. (pre-LBO)
2.01 Telstra Corporation Limited
2.03 BT Group plc
2.35 Rogers Communications Inc.
2.43 Telecom Italia S.p.A.
2.51 Swisscom AG
2.65 Hellenic Telecommunications S.A.
2.73 Telefonica S.A.
3.18 Koninklijke KPN N.V.
3.23 Portugal Telecom, SGPS
5.50 BCE (post-LBO)

Lest there be any doubt about the impact of the cost of capital to the cost to consumers, the following excerpt is from a April 2003 Report by Parliament's Standing Committee on Industry, Science and Technology:

“A higher cost of capital slows the rate of capital investment and, in turn, the roll out of competitive services

A cost of capital differential of approximately 1.18% exists between Canada’s incumbent telephone carriers and Canadian cable companies. This incremental cost equates to about $1.46 per month per cable subscriber.”


As such the debt leveraged buyout of BCE by private equity defies two policy objectives of the Telecommunications Act (see below), one pertaining to efficiency and one relating to ownership as follows, an yet this LBO of BCE was approved by Industry Minister Jim Prentice with no Industry Canada studies or net benefits tests (as acknowledged ed by Industry Canada):



Telecommunications Act: An Act respecting telecommunications 1993, c. 38

Canadian Telecommunications Policy
Objectives:

7. It is hereby affirmed that telecommunications performs an essential role in the maintenance of Canada’s identity and sovereignty and that the Canadian telecommunications policy has as its objectives

(c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;

(d) to promote the ownership and control of Canadian carriers by Canadians;

Why would the CEO of Telus want to meet the Industry Minister, when the Industry Minister refused to meet the CEO of Telus?

As we all know by now, the Industry Minister wants to meet with the CEO of Telus concerning Telus’ plans to charge their customers for incoming text messaging. That’s nice.

However what isn’t so well known is that almost a year ago to this date (actually late June 2007), the Industry Minister refused a request from the CEO of Telus to meet with him. The CEO of Telus wanted to speak with the Industry Minister about Telus’ announced intention to propose a merger with BCE. Telus had already been hamstrung by BCE in its attempts to carry forward with a firm proposal ,since BCE was placing unrealistic demands on Telus, such as the requirement that Telus sign a non-disparage clause that would preclude Telus from making any disparaging comments about the impact of a private equity LBO on BCE.....read: increased consumer costs.

Telus’ CEO simply wanted to meet with the Industry Minister to explore ways that Telus’ made in Canada could be a palatable outcome for Industry Canada. The Industry Minister refused Too busy I guess.. Meanwhile we had the Finance Minister meeting with the Chairman of Cerberus, John Snow. Flaherty denied they talked about BCE. Snow said they did. I guess that means they did.

So why does Cerberus get a meeting on short notice with the Finance Minister to discuss their pending bid for BCE and Telus does not? Double standard or what?

My advice for the CEO of Telus is to meet with Jim Prentice by teleconference. Why fly to Ottawa, when the only purpose of the meeting is purely political and for the sole benefit of Prentice? If Prentice were truly concerned about the cost of telecom services in Canada, he would never have approved the LBO of BCE.....his department never even conducted a “net benefits test” on this $52 billion deal, as confirmed below:

Conversation: ATI Request A-2007-00288/JS

Good afternoon Mr. Fullard,

I can confirm that no studies or net benefits tests were done within Industry Canada.

Regards,

Janet Sewell
Senior Advisor/ Conseillère principale
Information and Privacy Rights Administration/
Administration des droits à l'info et à la protection des renseignements personnels
Industry Canada/ Industrie Canada
235 Queen Street
5th Floor, West Tower
C.D. Howe Building
Ottawa, Ontario K1A 0H5
Telephone/ Téléphone: (613) 948-2279
Facsimile/ Télécopieur: (613) 941-3085
E-mail/ Courriel: sewell.janet@ic.gc.ca

Lower or Scrap RRIF Minimum Withdrawal Requirements: C.D. Howe Institute

This makes too much sense to be coming from the CD Howe Institute.

The CD Howe Institute is intent on destroying the life savings of Canadian at the behest of their corporate members. The CD Howe is a proponent of one set of income trust rules for RRSPs and another for pension funds. This caused average Canadians to lose $35 billion. Thanks CD Howe.

As for this policy of scrapping minimum RRIF withdrawals, it shouldn’t matter to the government, since the government would have us all believe that RRSPs RRIFs etc are “tax exempt” and never, ever pay taxes.......which is the intellectual flaw in Flawherty’s tax leakage canard and promulgated by the CD Howe Institute and by no one more so that Jack Mintz, former head of the CD Howe Institute.


Lower or Scrap RRIF Minimum Withdrawal Requirements: C.D. Howe Institute

Toronto, July 10 – Current tax policy forces seniors to make minimum withdrawals from Registered Retirement Income Funds (RRIFs) whether or not they make financial sense and these minimums should be reduced or abolished, according to a study released today by the C.D. Howe Institute. In “A Better Riff on Retirement: The Case for Lower Minimum Withdrawals from Registered Retirement Income Funds,” author William B.P. Robson notes that since 1992, when changes to the Income Tax Act last adjusted minimum withdrawals, life expectancy is up and real returns on investment are down. As a result, RRIF holders now face dramatic erosion in the purchasing power of tax-deferred savings in their later years.
Often at retirement, and no later than the end of the year they reach age 71, many savers must annuitize or put their retirement funds into a RRIF. The Income Tax Act prescribes that RRIF holders withdraw a minimum of 4 percent of the beginning-of-year balance at age 65, then an escalating minimum until, from 94 onward, holders must withdraw 20 percent of their balances each year.
Robson argues that the present-value cost to governments of tax deferral in RRIFs is not major, but for RRIF holders, being forced to run down RRIF assets poses a threat. Running tax-deferred assets down rapidly can expose withdrawals and any returns from reinvestment to income taxes and benefit clawbacks, and holders may reach advanced age with tax-deferred assets badly depleted. When the current rules were established in 1992, this threat was not major, but life expectancy is up since then, and real returns on investments are down. RRIF holders now face dramatic erosion in the purchasing power of tax-deferred savings in their later years, says Robson, who concludes that the minimum withdrawal rules should be liberalized, or abolished altogether.

The e-brief is available at http://www.cdhowe.org/pdf/ebrief_58.pdf.

For further information, contact:

William B.P. Robson,
President and CEO,
C.D. Howe Institute,
416-865-1904
Email: cdhowe@cdhowe.org

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

Jim Flaherty: The new Mr. Dithers

Mr. Dithers?

Back on Halloween 2006, Jim Flaherty claimed that his decision came after “months of study”......now we’re into years of dither.

Perhaps Jim Flaherty is fond of holding on to the "carrot and stick" known as the income trust transition rules. Can this guy dither any longer?

Les Parsneau wrote:

Flaherty has until Sunday to release the Income Trust Transition rules. Or did he lie again? It takes him almost 2 years to create the rules that effectively shut down a $200 billion industry. Makes one question how much thought, effort and research was put into the initial decision.

30 days and 30 nights

My math says 30 days from June 13 ends July 13....That would be one week from Monday as Stubby's deadline. Any bets on him making the date? He actually said within 30 days so that would be before Monday. Or, he could be conning us again. It must really annoy him to pass on the capital gains he is forcing. I suspect another slick trick based on more myths is coming our way.

Canada to Issue Income Trust Rules in 30 Days, Flaherty Says

By Theophilos Argitis

June 13 (Bloomberg) -- Canadian Finance Minister Jim Flaherty plans to announce rules governing conversions of income trusts to corporations ``within 30 days,'' so investors and trusts won't be forced to pay taxes.

``It may go over into July, that's why I'm saying within 30 days,'' Flaherty, 58, said in an interview in Vancouver late yesterday.

Flaherty announced on Oct. 31, 2006, that he planned to tax income trusts for the first time in 2011 to limit tax losses and halt companies such as BCE Inc. from adopting the structure. Income trusts avoid most corporate taxes by paying out their cash flow to investors in monthly dividends.

Sorry but wasn't it Jim Apprentice who just approved the LBO of BCE to US private equity?

What did he expect, lower costs and better service?

How did Jim Prentice think BCE's new private equity purchasers were going to pay off $44 billion of junk bond acquisition debt? A bake sale? This Prentice guy is naive inthe extreme. Dare I say Apprentice?

Canada Industry Min Slams Bell, Telus Fee Plan, Summons CEOs


OTTAWA (Dow Jones)--Canada's Industry Minister Jim Prentice Wednesday said Bell Mobility and Telus Corp.'s (TU)plan to charge for incoming text messages is "poorly thought out" and has summoned the heads of both companies to Ottawa to explain the decision.


Prentice said he has "no desire to interfere" in their daily business decisions but he has a duty to protect consumers' interests.


"I believe this was a poorly thought-out decision," Prentice said in a statement.


He said he has sent letters to the chief executives of both companies, asking them to meet him before Aug. 8 "to explain this aspect of their text messaging pricing structure with a view to finding a solution that provides the best service to consumers at the best price."

Hey Liberals, you can have this domain name for $10.45 instead of $8.5 mill.

Greenshift.ca is causing major headaches for the Liberals, in the form of a $8.5 million lawsuit.

Might I suggest the domain name of GreenIncentivePlan.ca instead, since it better captures what this policy professes to be about.

Unfortunately it will cost the Liberals $10.45 (our cost of registration) , since CAITI doesn’t make political donations.....just good suggestions.....in our minds at least:

Company seeks $8.5 million from Liberals for use of Green Shift name

53 minutes ago

OTTAWA — A Toronto firm is suing the federal Liberal party for more than $8 million and demanding it cease using the firm's name "Green Shift" for its carbon-tax plan.

Green Shift Inc. owner Jennifer Wright personally delivered a statement of claim at Liberal party headquarters today as she launched the lawsuit.

Wright told a news conference she was overwhelmed two weeks ago when a Liberal party official called to warn her it was using the term "Green Shift" for its plan to tax fossil fuels. She says the party ignored a later warning to drop the slogan.

"I suddenly just felt steamrolled," said Wright, who registered her company name in 2001 and first applied for a trademark in 2003.

The statement says Wright is seeking $8.5 million for "general and special damages" and a further $250,000 for aggravated and punitive damages.

The lawsuit seeks a court injunction to stop the party from using or displaying the words Green Shift, or any other trademark or Internet domain name that is similar to the logo used by Green Shift - which Wright says has its trademark approved, but not yet registered, with the federal government.

The Liberal party has so far ignored Wright's demands to stop using the firm's name, and a spokesman said following delivery of the legal notice, "we feel we've acted fully within the law."

Spokesman Dan Lauzon said the party simply used a common phrase in the environmental movement, and is not using the brand to sell any products or compete with Wright.

"It's the green shift," Lauzon told The Canadian Press.

"We're taking taxes out of one part of the economy and moving them to another part of the economy. Those words are used widely to describe bold environmental movements."

Wright acknowledged that at least one other company, Greenshift Corp., of the United States, also uses the phrase. She said she attempted legally to stop them but dropped her efforts because of the expense and location of the company.

Wright also has acknowledged the British government last year used the term Green Shift for the name of a task force investigation of carbon-dioxide emissions.

Yo Harper, pass the filet mignon

G8 Irony, Leaders Talk About Food Shortage, Leaders Dine on 8-Course Dinner

Posted yesterday by [Citizen Journalist] Can Tran
digitaljournal.com

While the G8 leaders talk about shortage of food worldwide and food costs, there is a sheer irony of the aspect presented in that regard.
There is a sheer irony in the paradox associated with this year’s G8 summit, which is being hosted by Japan on the northern island of Hokkaido. A wide range of topics would be discussed at the G8. Such topics included: Zimbabwe, Africa, oil prices, climate control, and everything else. One topic they went over was the international food shortages.

This is where the irony begins.

While the G8 leaders were talking about food shortages, they were eating an eight-course dinner banquet. Yes, they were eating hearty while they were discussing global food shortages. British Prime Minister Gordon Brown talked about how people shouldn't waste food. Yet, he was one of the leaders that enjoyed a very grand meal.

They already had a five-course lunch afterwards. Japan itself had spent over half a billion dollars to hold the G8 summit. It was revealed that the same amount of money could be used to help and save many people. But, the money was used to host the G8 summit. That would mean that a good chunk of that cash was spent to prepare such a scrumptious dinner enjoyed by the G8 leaders.

In short, while the G8 leaders are talking about world hunger and food shortages, they are enjoying a five-course lunch and an eight-course dinner.

Looking at the items on the lunch and dinner menus, one could say the G8 leaders were eating pretty hearty.

There is a sheer irony and paradox associated with this talk on global food shortages.

Anybody else feeling the irony?

While they talk about global hunger and international food shortages, this is what the leaders attending the G8 summit are heaving:

For lunch: a soup with white asparagus and truffles, a type of edible foam made from Kegani crab, stuffed chicken, selection of cheeses, and ice cream.

The lunch alone should cost a high six-figures.

For dinner: a type of caviar stuffed in corn, smoked salmon, onion tart, Kyoto beef, fatty tuna fish, clams, grilled eel, sweet potato, Goby (a type of fish), crab soup, some other type of seafood called thornyhead which has been salted and grilled, milk-fed lamb, roasted lamb, selection of cheeses, a special G8 fantasy dessert, and coffee.

The dinner alone should cost between the high-six figures and low seven-figures at least.

They did not skimp out on the wine either.

Reading the selections of wine, it too costs a pretty penny.

Yes, these are our world leaders. While they talk about global food shortages, these are the selections they have been eating.

While the amount of money is estimated to be used to help millions of people, it has instead been used to host the G8 summit. On top of that, a good chunk of the cash has seemed to be used to prepare that 5-course lunch and 8-course dinner.

On a personal note, anybody else besides me notice something wrong with the picture?

My condolences to Garth Turner

Garth:

Re: Your posting entitled Alberta & me

Journalists in this country are clearly agenda driven. Blatantly so. The embellishment of your printed words by the Calgary Herald, so as to change their meaning, is a shame and a professional disgrace.

I had a similar experience with Jackie McNish of the Globe and Mail recently who took it upon herself to freely and wildly speculate about the arguments that I would be raising in my recent intervention before the Supreme Court on the matter involving BCE......when she had my written intervention factum in her possession.....I guess reality didn't fit with the Globe's "world view", so she made one up that did.

As for Jackie McNish, her clear intent was to discredit me. Unfortunately for her, it backfired.

Brent Fullard

Note to Jack Layton: Expect more of the same post LBO of BCE

Jack Layton and the NDP said boo about the LBO of BCE which will see cell phone bills sky rocket and price competition plummet. How did Jack think Teachers' was planning on paying off the $44 billion in leveraged buyout debt used to acquire BCE.....a yard sale?

July 8, 2008

Subject: NDP says NO to text message cash-grab

Thank you for your previous email. I am writing you today to tell you
that we have launched an online petition calling on cell phone providers
to act in the interest of consumers and cancel the text message
cash-grab.

We are appalled at the move by the cell phone companies, Bell Mobility
and TELUS Mobility, to charge 15 cents for all incoming text messages.
For more information on this issue, please see the following article:
http://www.canada.com/topics/technology/story.html?id=be40f524-80e1-4948
-970b-80959623d4ad.

If you are against this text-message cash-grab, I encourage you to sign
our petition at: http://www.ndp.ca/page/6577, join the Facebook group
at: http://www.facebook.com/group.php?gid=42606695760, and tell your
friends!

I want you to know that you can count on the NDP to speak out for
fairness and fight for the issues that matter to you. All the best.

Sincerely,


Jack Layton, MP (Toronto-Danforth)
Leader, New Democratic Party of Canada

Jack Layton's on a roll!

Wow....is Jack ever on a roll.....ATM fees....Pay Day loans....Text messages.... Some of the most important issues of the day.

I can’t wait until Jack eliminates my gas heating bill.......maybe that will mean living on the street?



Subject: NDP says NO to text message cash-grab



Thank you for your previous email. I am writing you today to tell you
that we have launched an online petition calling on cell phone providers
to act in the interest of consumers and cancel the text message
cash-grab.

We are appalled at the move by the cell phone companies, Bell Mobility
and TELUS Mobility, to charge 15 cents for all incoming text messages.
For more information on this issue, please see the following article:
http://www.canada.com/topics/technology/story.html?id=be40f524-80e1-4948
-970b-80959623d4ad.

If you are against this text-message cash-grab, I encourage you to sign
our petition at: http://www.ndp.ca/page/6577, join the Facebook group
at: http://www.facebook.com/group.php?gid=42606695760, and tell your
friends!

I want you to know that you can count on the NDP to speak out for
fairness and fight for the issues that matter to you. All the best.

Sincerely,


Jack Layton, MP (Toronto-Danforth)
Leader, New Democratic Party of Canada

Why am I reminded of Linda Keen?

Federal biologist loses job in dispute over leaked memo

Why am I reminded of Linda Keen?......it seems the Harper government doesn't share my views on the need for public safety, in whatever form. food inspection, nuclear safety, Maxine Bernier’s dossiers.

At least we can be comforted to know that the US Air Force will be patrolling the 2010 Vancouver Winter Olympics.


Documents appear to involve a significant revamping of food inspection

Canwest News Service Published: Tuesday, July 08, 2008

Federal biologist loses job in dispute over leaked memo

Canwest News Service Published: Tuesday, July 08, 2008

OTTAWA - A federal scientist was fired after distributing classified documents he found improperly posted on the Canadian Food Inspection Agency's server outlining plans to turn over more inspections to the food industry.

Luc Pomerleau, a biologist who worked for the federal government for 20 years with an "unblemished record" was fired last week for giving the document to his union, The Professional Institute of the Public Service of Canada.

The documents appear to involve a significant revamping of food inspection that will shift more of the onus for food safety to the suppliers that manufacture and distribute food and other products. The changes are part of the government's strategic review, which requires departments to find savings worth 5% of their operating budgets that can be reallocated to the Harper government's priorities.

Union president Michele Demers said Pomerleau is a scapegoat and his firing is an over-reaction.

She argued the breach was caused by whoever improperly scanned those documents and then left them on the agency's server.

"The obvious reason for this immoderate response is undoubtedly the agency's fear that the public will react badly to the substantial changes in product labelling and food inspection methods and procedures being proposed by the CFIA. These changes will amplify risk management, and the risk will be to the health of Canadian citizens," says Demers.


PS. What became of this initiative? Or was that simply code for “we will do less food inspection”? Sort of like “we won’t raid seniors nest eggs”, whereupon the Harper CONs did just that?

How Stephen Harper stood up to Paul Martin

.......only to capitulate to the CCCE


"The government claims that income trusts enjoy an unfair tax advantage over corporate dividends. If they believe this, then the answer is not to shut down a valuable investment vehicle, but to cut the double taxation of dividends. In short, level the playing field and let the market decide between income trusts and dividend-paying companies.

As my party's finance critic, Monte Solberg, says, the success of income trusts represents a rare triumph for investors over the tax man. Let's not be so naive as to assume that the Liberals will do the right thing to protect taxpayers. We'll need to fight hard to keep what we have, and even harder to gain ground.

It's time to stand up to Paul Martin and stop his attack on seniors and investors."

Stephen Harper

Diane Ablonczy also got it completely wrong on energy trust foreign takeouts

"I've heard that argument, but I don't buy it," said Diane Ablonczy.......that was March of 2007.....5 months later Abu Dhabi bought undervalued Prime West Energy for $5 billion and Li Ka Shing bought TransAlta Power...... Is that what Diane meant by “I don’t buy it’?

Speaking of buying it, Diane Ablonzcy along with her CON party are “shorts”.

ENERGY TRUSTS
Private equity firms circling the oil patch?
Bids expected once trust law implemented
NORVAL SCOTT
March 8, 2007

CALGARY -- Private equity firms are believed to be hovering with intent over Canada's beleaguered energy trust sector, waiting to pounce on the increasing number of firms whose operations have been becalmed by the government's taxation policies, according to industry observers.
While there has been little overt takeover activity since the government's October declaration that it would make income trusts pay corporate tax from 2011 onward, analysts believe that U.S.-based private companies are just waiting for the tax ruling to become law, when they will snap up Canadian firms on the cheap.
"A growing number of trusts are currently 'exploring strategic options,' and we expect that private equity firms are taking a close look," said Justin Cook, an analyst with RBC Dominion Securities Inc. "We believe private equity investors are patiently waiting for lower unit prices before striking, which they are more likely to find if the proposed trust tax becomes law. It's a target-rich environment."
"We believe takeovers will continue, particularly because income trusts are cash-flowing entities that can be debt-financed by the purchaser," Chris Rankin, an analyst at investment brokerage Canaccord Adams, said in a recent research note. "We believe royalty trusts will be the next wave of consolidation."
Smaller trusts, which appear to have been more affected by the tax proposals than larger firms, seem particularly at risk. The tax changes put forward by the government limit trusts' growth to a maximum of 100 per cent by 2011, a ruling that some say prevents very small firms from making the growth necessary for them to gain market traction.
This week, both Quebec-based power producer Boralex Power Income Fund and Calgary-based energy firm Thunder Energy Trust effectively put themselves up for sale, while drilling firm BlackWatch Energy Services Trust parted ways with its chief executive officer, having suspended distributions to unitholders two weeks earlier.
"The taxation decision impacted us significantly," said Paul Partlo, BlackWatch's chief financial officer. "One of the key cornerstones of our business model was to grow through acquisitions, but the announcement made it extremely difficult for us to make any deals."
While some expect a fire sale of Canadian assets to the U.S., so far only one Canadian energy trust -- Calpine Power Income Fund -- has been taken over by a U.S.-based private equity firm, and the government appears unconvinced that widescale takeovers are on the horizon.
"I've heard that argument, but I don't buy it," said Diane Ablonczy, MP for Calgary Nose Hill and parliamentary secretary to Finance Minister Jim Flaherty. "I think it's an alarmist view of what will happen." Ms. Ablonczy was speaking at an open house meeting in Calgary Tuesday, in which the income trust issue was repeatedly raised by disgruntled constituents.
However, those within the industry are convinced that private firms are ready and waiting, and that talks have likely already begun in earnest.
"The private equity firms are already in town," said George Kesteven, president of the Canadian Association of Income Funds. "These firms are just waiting for a little more certainty on what's going to happen to the trusts. Once that's in place, you'll see them pounce."
http://www.theglobeandmail.com/servlet/story/LAC.20070308.RSMALLTRUSTS08/TPStory/Business

Bloomberg reports that OMERs' Nobrega will continue to exploit Harper's pension fund tax arb in 2008

How can something called the Tax Fairness Plan be the source of a tax arbitrage, whereby one investor group is not taxed (pension funds) and the other is (RRSPs), such that the one can (and will) exploit the other?

That's called an arbitrage. It's also called patently unfair. Welcome to Harper land.

Furthermore, how does that arrangement stem alleged tax leakage? If pension funds buy all the trusts, will that stop alleged tax leakage? Ditto for foreign private equity?

Surely that concept is not too difficult for Canada’s press corps to grasp? (hint: the answer is no, it won’t stem alleged tax leakage, however in the case of foreign private equity buyers it will create tax leakage where none previously existed).

Hey, maybe they aren’t the press corps after, all. More like corp’s press

Feb. 25 (Bloomberg) --

“We did look at BCE, but we told Teachers' that we have so many other projects in line,'' Nobrega said today in a telephone interview from Toronto. ``Each pension fund tends to have a specialty, and it's just not on our wheel box.''

Toronto-based Omers is Canada's sixth-biggest pension fund manager. It has an investment staff of about 200 people, including about 75 who oversee private-equity investments, Nobrega said. The fund has stayed away from telecommunications because of expected returns in the industry, he said.

``It's not an industry that we are extremely keen on,'' Nobrega said. ``We find that it is a very competitive industry.''

Instead, Nobrega said Omers is looking at acquiring more Canadian income trusts before Canada's government starts taxing their earnings in 2011. Omers last year paid about C$240 million to buy Golf Town Income Fund, Canada's biggest golf-equipment retailer. Its portfolio of private-equity assets, which includes Golf Town, is now valued at C$3.8 billion.

``As 2011 approaches, there are going to be a lot more of those investment opportunities on the income trust side,'' Nobrega said.

Blame for trust debacle rests with PM......LBO of BCE too!

From the National Post, Friday, April, 13, 2007
LETTER

Blame for trust debacle rests with PM

Do not fault senior retirees for investing in income trusts.

The primary reason for senior retirees and working citizens planning for retirement to invest in income trusts was for the income streams they produced, as opposed to inadequate fixed-income investment
returns or the risks related to buying public stocks for capital gains.

When your capital is limited and you need to supplement your income, diversification outside of income-producing investments is not an option.

Senior investors did not fail to diversify to fixed-income investments and stocks out of ignorance or greed, it was out of experience and the need to derive cash flow.

Many seniors with small pensions, invested in income trusts after years of studying the markets and building up the experience and confidence required to risk their limited investment capital. Most
retirees or seniors do not have the luxury of a "balanced" portfolio and until Mr. Harper and the Conservative government broke their promises, the best income-producing assets were income trusts.

They had the confidence to invest in income trusts for the following reasons:

The Prime Minister, Mr. Harper, and the Conservative party promised not to tax income trusts and indeed promoted the value of these investments for seniors. The Bank of Canada governor, David Dodge,
praised income trusts. The provincial governments legislated for the removal of unlimited liability to enable pension funds to invest safely into income trusts. The Toronto Stock Exchange included income trusts in their indexes. Mutual funds and pension funds
invested heavily in income trusts. Many brokers and investment analysts promoted the purchasing of income trusts.

Income trusts had been on the market for a number of years and many had a long record of paying steady distributions that were higher than money markets. Many funds of income trusts were rated with four
and five stars. institutional investors were investing in them, e.g. CPP and Teachers Union. Fixed-income rates were barely above inflation. Dividend stocks had very low payouts. Stocks did not provide cash flow and were a gamble on capital gains. With royalty trusts, investors were purchasing actual inventory in the ground.

No senior investor expected:

* That the Prime Minister would renege on a solemn promise made to senior citizens not to tax income trusts.
* That the Conservative Party would renege on a clearly defined party-platform promise not to tax income trusts.

The total blame for this $30-billion debacle rests squarely on the shoulders of the Prime Minister and the Conservative party for encouraging seniors to invest in income trusts and then breaking their solemn promises not to tax them.

Seniors were deceived as they were encouraged to invest in income trusts and were then abandoned and victimized by the very parties they had believed in and supported.

Gerry Harley, a senior citizen, Ottawa

Diane Ablonzcy on the leveraged buyout of BCE

“I thinks its an alarmist’s view of what will happen”

This note below is dated March 27, 2007 and is from a Calgary resident of Conservative MP Diane Ablonczy’s riding. Diane Ablonczy was then the parliamentary secretary to the Finance Minister Jim Flaherty. The riding meeting tool place in the immediate aftermath of Flaherty’s income trust tax and before its many “unintended consequences” had emerged:

I was in attendance at the March 6, 2007 Ablonczy riding meeting. The question of the evening and the only one she did not dodge or spin was as follows.

"What is the Canadian Government's stance on the scenario of US private money crossing the boarder and purchasing undervalued assets such as Telus.?" "How will you approach the scenario of US ownership, profit moving south and debt left in Canada?"

Ablonczy replied that she was not aware on anybody buying Telus and that the questioner was "fear mongering". "Nobody buys into that argument" she clearly stated. “I think it’s an alarmist’s view of what will happen” she concluded

Imagine my surprise when I read today that the worlds largest private equity firm, Kohlberg Kravis Roberts is attempting to launch a take over of BCE. If memory serves me BCE was one of the nasty Corps that was going to become a trust and deprive the good people of Canada of tax dollars.

Question for Terry Corcoran Re: "wireless tax"

In today’s paper Terry Corcoran is equating the wireless spectrum auction proceeds to a “wireless tax”. ...Okay?

Question for Terry Corcoran: If the recent wireless spectrum auction has so far netted proceeds of $4.2 billion, what do you suppose the embedded value of the wireless spectrum is worth that resides within BCE and was “gifted” to BCE as the wireline duopoly player at the very outset, circa 1984? $5 billion $10 billion? $20 billion?

Rather than equating the wireless spectrum auction in the context of a “tax” on consumers, as you have in today’s column, better to equate the transfer of these embedded wireless assets within BCE to the new private buyers as being a complete rip off of all Canadians. BCE is reaping value for something for which it paid nothing. Meanwhile the very LBO that results in this capture of value will result in Ottawa foregoing $800 million a year in tax revenue. That’s a situation of pay me now AND pay me later.

The Telecommunications Act, had it been adhered to, would have addressed this, since its stated policy goals are:

(c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;

(d) to promote the ownership and control of Canadian carriers by Canadians;

Even the BCE shareholders didn’t receive full value for the assets within the company they owned and controlled, since they are being shortchanged some $1 billion in accrued and unpaid dividends.

Sorry Terry, once again you are pursuing the wrong story......the real wireless tax will be the one that results in lessened competition when BCE become the world’s first junk bond legacy phone company and Canadians have the privilege of remitting their monthly cell phone bills to Wall Street to service $34 billion in junk bond debt....sorry make that $44 billion, as the existing debt of BCE has been destroyed as well.



Ottawa's wireless tax

Terence Corcoran,
Financial Post
Tuesday, July 08, 2008

As of 4:04 p. m. yesterday, Industry Canada's wireless spectrum auction had racked up total revenue of $4,196,804,287. That works out to about $210 for each cell phone user in Canada, a tax paid to Ottawa for, essentially, nothing. It also works out to less than the price of one of the eight-gigabite Apple iPhones that Rogers will begin selling across Canada on Friday. At least iPhone buyers will get something for their money......continued.

Stephen Harper: Our null state, head of state

Today we learn that Chuck Cadman's widow is disputing certain aspects of journalist Tom Zytaruk's story of the alleged attempted bribery of her husband, a sitting MP, by Stephen Harper's Conservative Party.

Keep in mind Dona Cadman is the Conservative candidate in her riding for the upcoming election, and it's not as if the Conservatives aren't known for freakishly controlling their candidates. Simply look at what happened with one time Conservative candidate Mark Warner in Toronto, as but one example.

Today's article is entitled "Cadman widow disputes journalist's story" in which various claims are made such as Dona Cadman's claiming that Zytaruk was not introduced to Harper.

Welcome to proving a case by way of proving the null state, or the absence of something.

It’s hard to ever prove the absence of something, as the null state can seldom be proven to be absolute, such as:

“Dona said Zytaruk wasn't in the house that day”

“Affidavits by Harper and two of his aides also say Zytaruk did not turn his tape recorder on and off as he interviewed Harper outside the house.”


This is no doubt an essential argument that the CONs would like to advance, since the turning on and off of Ztraruk's tape recorder is no doubt the alternative explanation for the alleged "splices" in the tape and the CONs allegation that the tape was "doctored".

How credible is it that Harper and his aides can remember or even have been cognizant of Zytaruk turning off or on his tape recorder in an interview of three years ago, when Harper's Cjief of Staff, Ian Brodie can't even remember what he said to a reporter four months ago that led to the so called NAFTAgate international incident that potentially could have affected the US Presidential election? Or Maxine Bernier not ever remembering the act of leaving confidential and classified government documents in the home of his girlfriend?

Boy, do these CONs ever have selective memories. Either that or they think Canadians are gullible fools, ready to accept any bold assertion the CONs may come up with. Like 18 pages of blacked out documents as the policy rationale for Canadians losing $35 billion of their hard earned savings. Those blacked out documents only served to conceal the fraud that was being perpetrated under the guise of the innocuously named Tax Fairness Plan. Sheesh.


It's much much Easier to prove the presence of something. as follows:

Zytaruk: "I mean, there was an insurance policy for a million dollars. Do you know anything about that?"

Harper: "I don't know the details. I know that there were discussions, uh, this is not for publication?"

Zytaruk: "This (inaudible) for the book. Not for the newspaper. This is for the book."

Harper: "Um, I don't know the details. I can tell you that I had told the individuals, I mean, they wanted to do it. But I told them they were wasting their time. I said Chuck had made up his mind, he was going to vote with the Liberals and I knew why and I respected the decision. But they were just, they were convinced there was, there were financial issues. There may or may not have been, but I said that's not, you know, I mean, I, that's not going to change."

BCE: Irrefutable evidence of Finance Minister Jim Flaherty's incompetence/complicity

By (1), shutting down the income trust marketplace, and (2), simultaneously eliminating the 15% withholding tax on corporate interest, Jim Flaherty has caused the LBO of BCE, much in the same way as water flows downhill.

In his attempts to stem phantom unproven tax leakage, Jim Flaherty has caused the real loss of $800 million in annual taxes, from BCE alone.

His response? "It’s not my fault”. How’s that for government accountability and/or personal integrity?

As per the article below, maybe Jim Flaherty is simply blaming Bob Hamilton, ADM in the DoF. Bob Hamilton’s punishment? He got promoted. Just like Mark Carney, the architect of the income trust policy fiasco. At least the policy has worked out well for Mark's former employer, Goldman Sachs. I don’t suppose Goldman would have pocketed $48 million from the income trust conversion IPO of BCE as they did from the LBO of BCE. That would have required actually having a presence in Canada and a retail client base...somewhere...anywhere.

Instead Goldman Sachs assured themselves, via Canadian government tax policy, that the playing field was "levelled" in their favour and that of their corporate/imstitutional/private equity clientele.

Retail investors matter not a wit to Jim Flaherty. That's why he was so blythe about sticking them with a $35 billion permanent impairment in their collective life savings.....with zero supporting evidence to back up his actions.

Flaherty’s double taxation of public income trusts is simply a bespoke tax policy for private equity, Canadian pension funds and corporations, like Manulfe et al, who loathe competition for what they prefer to be captive investment dollars.

Trust tax linked to private equity buyouts
STEVEN CHASE
Globe and Mail
June 13, 2007

OTTAWA -- The income trust structure was a major impediment to private equity firms buying up pieces of Corporate Canada, the Finance Department was told one day before Ottawa slapped a crippling tax on the sector.

"Private equity firms generally find it difficult to compete against the income trust alternative, said an Oct. 30, 2006, memo sent to Bob Hamilton, senior assistant deputy minister of tax policy at the Finance Department.

The memo was obtained by The Globe and Mail under access to information law.

For anyone at Finance who knew the trust tax was imminent, one conclusion that's easily drawn from the memo is that taxing trusts out of existence would likely usher in even more private equity buyouts by Canadian and foreign investors, which is what happened.

The levy, which applies to new trusts immediately, has killed the formation of new trusts and removed an option for companies that are being targeted for takeover by private equity.

That's meant a jump in private equity interest in bids for companies such as BCE Inc. that had previously considered converting to trusts.

Finance Department censors have blacked out portions of the briefing note -- which has a security classification of "protected" -- but it was sent to Mr. Hamilton because, as the author said, it contained "key highlights relevant to tax policy analysis [that] are worth mentioning."

The memo, sent by Paul Berg-Dick, a director at Finance Canada, summarized a Toronto symposium on buyouts attend