Marshall Plan for trusts, by Barry Critchley

Marshall Plan for trusts

Barry Critchley,
Financial Post
Thursday, February 04, 2010

It's ironic but Brent Fullard, who officially retired from the world of investment banking a number of years back, is still doing investment banking. But there's one key difference: He now operates in a broader arena of public policy. "And the reward is not monetary but the satisfaction of doing the public good," said Fullard, whose latest example of public policy is the aptly named Marshall Savings Plan.

That plan emerged recently as a way around the mess and real income-tax leakage created by the federal government's October 2006 decision to impose taxes on income trusts starting in 2011. Fullard, who was the driving force behind CAITI, the Canadian Association for Income Trust Investors, has championed the Marshall Plan idea, created a website (http://marshallplan.ca/marshall_plan. html) that explains the elements of the plan and is urging citizens to get behind the idea that has made its way to the mandarins in Ottawa in the hope that it will form part of the March 4 federal budget. "The MSP is a savings vehicle that serves the needs of the 75% of Canadians without pensions, while restoring a more level playing field between pension funds and individuals," said a note on the website. If an MSP was implemented, individual Canadians could transfer their income trust holdings to an MSP, receive the distributions from the trusts and pay the associated tax. But capital gains inside an MSP would be sheltered -- just like an RRSP.

"The base Marshall Savings Plan will be revenue positive [$6-billion by its estimate] to the government by fully capturing the value of what was previously alleged to be tax leakage, as well as protecting the tax revenue that is at risk from the continued takeover of the remaining 169 income trusts, that (will be) averted if the base Marshall Plan is implemented in Budget 2010," added the note.

Before the Marshall Plan, Fullard formed Catalyst Asset Management. In early 2007, Catalyst offered a solution to the takeover of BCE. That solution was an exchange offer whereby BCE's common shareholders would receive a high-paying stapled security. Catalyst pressed its case though the offer and was given short shrift by BCE, which favoured an offer led by the Ontario Teachers' Pension Plan. As events materialized, BCE was not taken private.

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"Short shrift" is putting it mildly. More like BCE broke one of the most fundamental security rules by NOT DISCLOSING to its shareholders in BCE's own Bid Circular, the existence of a formal offer that achieved ALL of BCE's stated goals AND optimizing the result for ALL stakeholders and, in the end, was the only deal that would have got done, because it maximized the value of BCE ($42.50 - $52.00 versus Teachers' $42.50 that never materialized), and did so without oppressing BCE's bondholders, without requiring CRTC approval since there was no change of ownership, didn't involve going to the Supreme Court of Canada (although I did intervene against the Teachers' junk bond deal before the SCC), didn't entail firing 2,500 BCE employees, didn't involve reneging on BCE's dividend by cutting it to zero but instead increasing the dividend by 40% to $2.55 and didn't involve turning BCE into a junk bond basket case, since my proposal was self-funding and therefore did not require financing, which was the ultimate reason why the vastly inferior Teachers' deal blew up in the end.

Canada is a funny place? It's the only country I know of that goes out of its way to do the wrong thing, in the face of a clear alternative to do the right thing.

The Catalyst proposal for BCE is one such case in point. Could it have anything to do with the obvious explanation that Canada is run by the corporations for the CEOs, rather than Canada being run by the politicians for the people?

Now we have a second chance to observe who runs Canada, CEOs or Canadians, as afforded by the equally "brilliant" Marshall Savings Plan solution.

The Marshall Plan solution provides the perfect litmus teat example. Surely the Marshall Plan solution is not an IQ test, because the proposal is so easy to understand it's not funny as Barry so succinctly did in his article above. So too, is tt easy to understand the immense good that the Marshall Plan does for all Canadian taxpayers, the 75$ of Canadians who do not have pensions and the 2.5 million Canadians who were lied to by Stephen Harper and Jack Layton about that nonsense called tax leakage, something which the Marshall Plan renders into a completely irrelevant and MOOT point, as the Marshall Plan delivers to Ottawa cold hard cash in the place of whatever fanciful number that Flaherty or Jack Mintz or Eric Reguly of the Globe and Mail or Bob Hepburn or Carol Goar of the Toronto Star might want to come up today, as being their stalking horse tax leakage number?

The mere existence of the Marshall Plan on the scene, puts everybody in Ottawa into a corner in which they have to face the difficult decision concerning who did they get elected to represent? CEOs or Canadians at large?

Speaking of CEOs it is instructive to note that the only thing that was "deficient" about the Catalyst proposal was that it didn't accelerate the stock options for BCE's CEO and management and this windfall profit motive is the reason why these very people, when placed in the same intellectual corner by the Catalyst bid, decided to resort to the illegal act of not disclosing the vastly superior Catalyst proposal to BCE's unsuspectingg shareholders.

In the case of the Marshall Savings Plan, my expectation of Michael Ignatieff, as a Canadian taxpayer and voter as well as someone looking for true leadership in this country gone adrift, is that Michael Ignatieff (or maybe Gilles Duceppe?) act in the honest and ethical way that Michael Sabia did not, and who instead resorted to the crude and unethical practice of hiding the real truth about a real alternative that is good for all, namely the Catalyst Proposal. In the context however of the Marshall Plan solution the absence of such leadership and action by Ignatieff or Duceppe or whomever will, by default, simply mean acceding to the self serving sabotaging agenda of this crowd of jackals and hyenas, who don't seem to know the true meaning of FIDUCIARY DUTY to maximize value for shareholders, but rather resort to what works best for them, and the country and democratic due process be damned:

"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."