Saturday, March 28, 2009

Derek: You forget to mention how Dominic lied before Parliament

Derek: In your piece today entitled “Manulife, the millions and moral hazard”, you neglected to mention how Dominic D’Alessandro lobbied the government to kill income trusts and how he basically lied to Parliament to defend those measures. That story would have been titled: “Manulife, the Billions and moral sinkhole”, since Dominic’s actions caused innocent income trust investors to lose $35 billion of their retirement savings in order to permit Manulife to shovel more of their variable annuity product down the throats of now-captive Canadians seeking retirement income, and in the process almost destroy Manulife’s balance sheet. But that’s a separate story about Dominic’s managerial incompetence and river boat gambling.

The moral sinkhole part arises from the fact that Dominic D’Alessandro, who you have correctly labeled as the conscience of Bay Street (since Bay Street has no conscience), went before Parliament and basically lied. This has been my beef with Dominic D’Alessandro from the outset. I expect people in his position to do everything they can to feather their own nests by extracting bespoke tax policies from compliant and incompetent governments like Stephen Harper’s that favour Manulife and screw the average investor saving for retirement, but to succumb to lying before Parliament is beyond the pale. That lie occurred when Dominic testified the following.(in response to a set-up question from CON MP Rick Dykstra):

“The notion and the implication that somehow the government on this [income trust tax] file is responding to initiatives that originated with corporations is not based on reality.”

We all know, even you Derek, that this is absolute BS and that Dominic was simply trying to mislead Parliament and all Canadians about the fact that this income trust tax was the sole result of “initiatives that originated with corporations”, or your paper would not have written the following account about what the origins of this tax were, in a piece entitled: “Income-trust crackdown: The inside story” , on 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.”

That sure sounds like "the government responding to initiatives that originated with corporations" that are "based on reality" to me?

Manulife, the millions and moral hazard
Globe and Mail
March 28, 2009


Anonymous said...

Derek: You forget to mention how Dominic lied before Parliament

Why in hell would Dominic D’Alessandro testify at all and deny in a set up question that the income trust tax did not occur due to initiatives that originated with corporations, which to be sure isn't true.  It is quite certain that there was supposed to be a payoff for Dominic's false testimony.  Parliament should arrest Dominic like Karlheinz Schreiber to explain this.


CAITI said...


The only other explanation is that the CEO of Manulife, who is also the Vice Chairman of the Canadian Council of Chief Executives and one of 10 CEO appointees to hapless Harper’s North American Competitive Council is simply just a country bumpkin and didn’t know any better? I think “premeditated liar” is the more plausible explanation, whose goal was to match Flaherty’s lies about tax leakage with equally implausible lies of his own, about how the trust tax initiative must have fallen from the skies?

Dr Mike said...

Those same Finance Committee hearings were a joke from the beginning as they were padded with self-serving people like the "D" man & compliant witnesses for the government side.

The few witnesses called on our behalf were given short shrift or not heard at all.

The trust investors were represented by a few brave souls , some of whom were harassed prior to the hearings in order to coerce a changed testimony--this same coercing was carried-out by those close to the gov`t side of the issue--not only was this move unethical but it should be held-up as an indicator of the quality of the gov`t argument.

The 18 blacked-out pages & their subsequent recall should have blown the media away for it`s audacity--other than a few journalists , these people were content to lie in bed with the government side on this issue.

This whole thing from start to finish has been an exercise in futility , a David vs Goliath study of the largest proportion without the David outcome.

I am still hopeful we can just find the right stone.

Dr Mike.

Anonymous said...

How quickly the media forgets. I remember very clearly an interview on BNN last year when Dominic was questioned as to why Manulife hadn't hedged and he all knowingly and arrogantly scoffed at the interviewer and said it wasn't necessary - their cash reserves and portfolio could easily cover their situation them being such good money managers. Not such a smart ass now.

But he is walking away with a sinful amount and yesterday, when asked about giving it up again got all huffy and refused, said he deserved it and it wasn't what it seemed. Scumbag.


Anonymous said...

Dom D'Allesandro, CEO of Manulife - how will he survive on a mere $15 million?

OK to be fair, Dom certainly did not get caught with his hand in the cookie jar - so far as I am aware, he does not have a $35000 toilet in his office. Not sure about the corporate jet.

By all appearances, a decent guy (even though he was a behind the scenes player against income trusts, despite the fact his own company was involved in one, and still is!) and a recipient of CEO of the year.

So no he didn't get caught with his paws in the jar but he is being given the whole cookie jar as he walks out the door leaving behind a very messy kitchen. I guess he is a big believer in the old adage coined by Harry Truman, the buck stops here. Right at his desk, right in his hands, right in his pockets as he heads out the door, $15 million in tow.


CAITI said...

(This comment is reposted from the Globe's website)

You're too kind.

Manulife stands out as the only large VA player that did not hedge its VA guarantees.

Actuarial reserving practices permit Manulife not to record the fair or market value of the VA guarantees. If they were, the equity they just raised would be wiped out and they would be downgraded immediately. This is why they CONTINUE not to hedge those liabilities.

In the meantime, the question is not whether more bad news is coming to Manulife but when. As corporate bankruptcies emerge this spring, Manulife will need massive write downs. The reason DD'A doesn't deserve any compensation is that results since 2004 were fake as they relied on an unhedged position on the equity bull-run. It masked years of unprofitable growth. Unfortunately, for him the market has turned before he retired and now he expects the shareholder to turn a blind eye. When and how did he disclose that he was running such a high leverage equity bet? Why was he paid for such a bet? Is he a trader?

To the business reporting types at this paper and elsewhere, there is only one question to ask next: what is the fair value of the guarantees on VA contracts at the end of the this quarter (how much higher than the reported liabilities)?

Manulife, by its own admission, is crippled unless equities go up, a remote possibility in my view, which should give everyone pause.

Hello? Anyone in here?

Bill Hughues

Dr Mike said...

Unfortunately for uncle Dominic , his statement to the fact that the CEOs had nothing to do with the trust tax is nothing but a mere fabrication.

He is expecting us to believe that Flaherty & his department of dunderheads came up with this little about face all on their own.

My God , that is rich.

Who had the most to gain here , sure as hell was not the gov`t.

The CEOs did not want to lose control of their no-need for accountability clause built into every "head juicers" contract.

How do you manipulate those stock options into the promised windfall if you have to actually answer to the real owners.

Have the opposition killed-off by the easiest way possible by getting the tax guys to do the work for you & call it "Tax Fairness".

Take the easy route , to hell with actually working to be the best.

So Dominic , give us a freaking break as no-one had more to gain than you & your company who launched Manulife Income Plus within hours of the trust tax announcement.

We are not as stooooopid as we look.

Dr Mike Popovich

Anonymous said...

Thanks for the reminder about Demarais Jr. Looks like him and a lot of his friends all sit on the Great West Life board of directors. Shareholder Voting season for that company ... Thanks CAITI. You saved me a lot of time with my proxy.