Friday, May 8, 2009

Richard Currie shuffles off to Jurassic Park

Yesterday witnessed the retirement of two dinosaurs of Canadian business, Dominic D’Alessandro of Manulife and Richard Currie of BCE, whose business acumen and whose business ethics were put through an interesting “stress test” over the past 12 months. I am sorry to say that both of them failed those stress tests quite miserably. True to form neither of them are very apologetic for the gross errors made on their watch. One can only take solace in knowing that they have moved off to Jurassic Park, but before doing so felt compelled to engage in some revisionist history, such as the Canadian Press article on Richard Currie below.

I feel compelled to critique the claims being made by Richard Currie in this article, as follows:

Claim: "Michael Sabia saved BCE,"
Response: Saved BCE? From whom, himself?

Claim: "And he made it secure”
Response: Is this a joke? Sabia’s desired outcome for BCE was to make it insolvent and not secure. How less secure could a company be than to inflict insolvency on it? Just ask the bondholders who Sabia went to the Supreme Court of Canada to secure the right to oppress, what they think about this fallacious claim. Sabia only succeeded in making BCE secure, by having failed in his attempt at making BCE insolvent.

Claim: “Sabia turned it over to (successor CEO) George Cope with the means to fund new investment and future growth."
Response: Yes, only insofar as Sabia’s desired outcome of an insolvent junk bond leveraged buyout of BCE failed. Sheeesh!

Claim: "As you know, the dividend was maintained; in fact, it has been raised three times in those years,”
Response: Oh really, what about the $1 billion in accrued and unpaid dividends that were contractually promised to BCE shareholders in the bid circular, that the BCE Board reneged on in order to cut a new deal with Teachers’ in an underhanded way of circumventing a shareholder vote?

Claim: “BCE is an enterprise with "strong cash flow and a solid balance sheet including over $3 billion in cash."
Response: Yes, only because you failed to destroy BCE via your preferred outcome of an LBO

But Currie said his "vindication, if one is needed,"( for selling Yellow Pages to KKR) can be seen in recent media reports expressing worry that the directory business faces extinction.
Response: That does nothing to vindicate selling Yellow Pages to KKR for 50 cents on the dollar and not IPO’ing Yellow Pages as you were advised to, only to see KKR do that very thing. Meanwhile, if Yellow Pages faces distinction, how about the print newspaper business. Why did you merge CTV with the Globe, if you are so prescient about the demise of the print media world?

Claim: “The sale of Yellow Pages relieved much of the cash pressure on the business and allowed those other dispositions to be made at top prices."
Response: So you are saying that Yellow Pages was a “loss leader”? That makes no sense whatsoever. You must still think you are running a grocery store?

“Then came what he called the "sideshow" of income trusts and the failed $52-billion Ontario Teachers' Pension Plan buyout of the company.”
Response: Thanks Dick. Your use of the term ”sideshow” is further evidence (not that we need any more) that BCE’s conversion announcement to a trust was part of an orchestrated “faux crisis” that was hoisted on Canadians to give the Harper government the “faux excuse” to shut down income trusts, on the totally false premise of tax leakage and your allowing Flaherty to infer that BCE was actually paying taxes as a corporation, which you were not, and that would be lost upon conversion to a trust.

"We signed the Teachers’ LBO deal at the highest point of the LBO boom, in June 2007, just prior to the rapid deterioration of the credit markets," he noted.
Response: This is completely false. My letter to the BCE Board of June 27 ,2007 spoke about the huge risks inherent in financing BCE via an LBO in light of the market conditions that were deteriorating all around them, and for Currie’s claim to be true, then he must be suffering amnesia, since what are we to make of this account in the Globe about the fact that the BCE LBO was coming at the tail end of the LBO boom and distant from the “high point”:

The directors of BCE Inc. had a decision to make in late June as they neared the deadline to select a winner in the frenzied auction for Canada's largest telecommunications player.

They gathered at a board meeting on June 28 to consider pleas from suitors who wanted more time to negotiate bank financing. The directors were given lots of advice that day, but the argument that prevailed came from Frank Connor, a managing director and telecommunications specialist with Wall Street's Goldman Sachs Group Inc.

“You are never going to get financing like this again. If you wait, the money may not be there,” Mr. Connor warned, according to people attending the meeting.

Two days later, Canada's largest takeover and the world's biggest leveraged buyout was born when a group led by the Ontario Teachers' Pension Plan unveiled a $35-billion ($46.8-billion including debt) agreement to buy BCE. The company's board would learn weeks later how close the blockbuster deal came to never happening as a global credit panic in August shut off takeover financing taps.

“Frank was 100 per cent right, it was absolutely the right call,” said Bill Ainley, a lawyer who advised BCE during negotiations. [Except however Frank wasn’t right]

Claim: “"The final decision was not ours to make, and so the saga ended, collapsed in a global market meltdown."
Response: This is a very telling and a very condemning comment on the part of the Chairman of BCE, Canada’s most widely held company with many holders who are :widows and orphans”. For Currie to say that “the final decision was not ours to make,”, suggests that the decision was at some point “ours to make”. Ours,, as in the Board and management, and not “ours”, as in shareholders.

Conclusion: This attitude is what is killing Canadian business, where Boards and management think they are the final arbiter of what the owners are going to get or receive. This fortress mentality and “all knowing” attitude of companies like BCE is why they are so unsuccessful and have left behind a litany of failed transactions, one after the other. This attitude is what caused the BCE shareholders to be deprived of knowing about the enormous benefits of the only deal that was offered to the company (formally no less) that would have been completed and which would have fulfilled all of BCE’s stated goals without any adverse consequences to other stakeholders, namely the Catalyst Proposal submitted by me and available at

That is Richard Currie’s real legacy at BCE. He denied shareholders knowledge of the ONE deal that would have made him the hero he is attempting to falsely portray himself as, in this sad account of revisionist history. Our only hope is that your vacancy won’t be filled by yet another dinosaur whose philosophy is like yours, which is governed by concepts like “President’s Choice” and the “Insiders’ Report”. Goodbye to you and your kind. Maybe you should write an entire book in an attempt to vindicate yourself? Just make sure the author doesn't know about me or the Catalyst Proposal that you deep-sixed, as that might affect the conclusion of the your detriment.

BCE 'has changed fundamentally,' is set for prosperous future, Currie declares

May 7, 2009
Gary Norris,

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