Al Rosen: On his supposed abhorrence of vacuums

Letter to the Editor, Canadian Business Magazine

Re: Al Rosen article entitled: The 'lost decade' that was too good to be true

I can’t believe it, as here it is February 2010 and you are still allowing supposed forensic accountant Al Rosen to smear the pages of your magazine with all of his false aspersions and maligning comments about income trusts.

Now he has gone to the absurd lengths of somehow inculcating the income trust model of business ownership with the abuses that occurred at Nortel, a poster child for all that is wrong with the corporate model, and none of which would have arisen had Nortel adopted the disciplines that govern income trusts.

For a supposed forensic accountant. Mr. Rosen cites not a single piece of evidence to support or justify any of his wild claims. In so doing he brings disrepute to not just himself and his profession, but to your publication as well. Your readers deserve better. Allow me to do so.

There is only one thing Mr. Rosen did say that I agree with, Mind you it is not his original thought, and that is “underwriters abhor a vacuum”. This is true insofar as underwriters are concerned, because with the death of the income trust market that ensued from the Finance Minister’s double taxation of income from trusts in RRSPs, a vacuum aptly described what happened to IPO activity in Canada. It came to a virtual standstill and has for the last three years.

The other group that abhors a vacuum is the profession that Mr. Rosen is a member of, namely the accounting profession, and yet all of his arguments, both present and past, have been vacuous in their total lack of supporting evidence and facts. Statement like “phony performance metrics” to malign income trusts are completely devoid and meaningless without supporting evidence and examples to back them up. I would have thought that the editors and standards of your publication are such that “Canadian Business Magazine abhors a vacuum”? Evidently not.

The other matter that Mr. Rosen fails to account for is that “democracy abhors a vacuum”. This explains why our association and hundreds of thousands, if not millions of Canadians who were told by the Prime Minister of Canada that he broke his 2006 election campaign promise to “never raid seniors nest eggs by taxing income trusts” by arguing that “circumstances had changed” and that magically, “income trusts cause tax leakage” have been demanding the proof of that assertion for over 3 years now.

Where is the forensic accountant Mr. Rosen on that matter? Is he so gullible and lame as to not test the governments principal policy assertion that “income trusts cause tax leakage” before accepting the argument as fact? What kind of an forensic accountant is he? Meanwhile we know definitively from the November 2005 study by HLB Decision Economics produced in conjunction with the Department of Finance during the Goodale Public Consultations entitled “The tax revenue implications of income trusts” PROVES that income trusts do not cause tax leakage. Instead the government’s faulty analysis causes tax leakage by leaving out the tax collected by Revenue Canada from the 35% of trusts held in RRSP.

In his nonsensical article Mr. Rosen speaks about the “alleged accounting frauds” that surrounded Nortel, meanwhile he is completely oblivious to the actual fraud that is taking place by Canada’s Finance Minister involving his income trust policy where he is involved in conveying a falsehood (ie tax leakage) knowing full well that the consequences of that falsehood would cause others financial harm, resulting in investors losing $35 billion of their life savings and an essential investment choice, the loss of which is of inestimable value far beyond the mere $35 billion.

The other thing that “abhors a vacuum” is the capital market itself. Taxing average Canadians who hold income trusts in their RRSPs at 31.5% on top of the average tax that they already pat of 38%, and not pension funds and foreign private equity, created the mother of all vacuums, while at the same time creating real tax leakage of $1.5 billion a year from the 51 such takeovers of trusts by those who can evade the tax, which is three times the tax leakage that Canada’s Finance Minister falsely alleged existed in the first place, but clearly did not. Unless something is done like the adoption of the Marshall Savings Plan that we are calling for adoption in Budget 2010, there is another $6 billion of annual tax revenue at significant risk of being lost.

Mr. Rosen them goes on to speak about the collapse of income generating schemes like ABCP as if to suggest his hands are clean from causing such debacles. Such is not the case, as Mr. Rosen’s actions on the income trusts matter and all the false aspersions and lack of true forensic accounting he has applied in his planned attack on income trusts had simply meant that he is playing into the hands of the purveyors of schemes like ABCP. Mr. Rosen should surely realize that it was the insurance industry who were behind the intense and false attack on income trusts, as income trusts were a vastly superior investment proposition for Canadians seeking retirement income than investments like life annuities and variable rate annuities. By joining the band wagon of those who were doing the bidding of the life insurance industry in maligning income trusts, Mr. Rosen was playing the role of dupe in allowing products like Manulife’s Income Plus, launched the very week of Mr Flaherty’s surprise income trust tax. Strange that Mr, Rosen comments in his article about the obvious failure that ABCP became, but was nowhere to be seen in warning people about that disaster in the making before it became obvious to the world?

Where was Mr. Rosen, like me, in warning people about who was behind this income trust fix and the fasle basis on which the trust tax was sold to Canadians? Where was Mr. Rosen, like me, in warning people about the inherent risks of products like Manulife’s Income Plus in questioning the credit worthiness of products like that? Where was Mr. Rosen, like me, in warning people about the fact that issuing products like Incoem Plus, that Manulife chose not to hedge, resulting in massive “tto big to fail” risks being introduced to Canada’s financial sector for the simple benefit of artificially boosting Manulife’s bottom line, an matter that is presently before the courts in a shareholder class action lawsuit.

Mr. Rosen’s continued and utterly baseless attack on income trusts is proof of only one thing, namely Canadian Business Magazine doesn’t abhor vacuums, it allows them the opportunity to malign income trusts with zero evidence to support any such claims, and fill those vacuums with nonsense from people like Al Rosen, despite an overwhelming mountain of irrefutable facts to the contrary. That can only mean that you will probably not publish this letter, although I do give your permission to do so.

Yours truly,


Brent Fullard
(Volunteer) President and CEO
Canadian Association of Income Trust Investors/Taxpayers
www.caiti.info

647 505-2224 (cell)