Corporate rule

Here's a question; why has our government worked so hard to make a "deferred prosecution agreement" (DPA) available to SNC-Lavalin?

Here's another one; why has no mainstream media outlet ever investigated how hedge fund sharpie Gerald Schwartz was able to more than double the value of Husky Injection Molding in less than four years?

And another; why was Hunter Harrison universally lauded as a hero in our mainstream Canadian media for eliminating over 5,000 excellent working class jobs at CPR?

Here are some tentative answers.

The purpose of a DPA is to allow corporate entities that engage in bribery, bid-rigging, and other nefarious business practices to get off by paying a fine instead of being charged with a crime. Corporations love it! Paying the fine becomes just another cost of doing business, just like the original bribe. The Trudeau government's rationale for having slipped a DPA provision into law last year, in the back pages of an omnibus budget bill, is that Canada needs to have a level playing field vis-a-vis our competitors. Ergo, if the UK and US go easy on corporate crooks, we must too, or we won't be competitive.

Husky was the life's passion of Robert Schad, a German immigrant who started out with a little machine shop in the mid 50's. He famously made Husky one of the most desirable workplaces in Canada by providing not only good wages, but unprecedented employee perks, from free meals to free day-care to on site gyms. Getting on in years, he sold his baby to Gerald Schwartz's Onex in 2007 for just under a billion dollars.

Less than four years later, Schwartz sold Husky on to another hedge fund for two billion. How did Schwartz add a billion dollars in value to the company that Robert Schad had spent a lifetime building up? He ripped out all that feel-good stuff that detracts from the bottom line, that's how. That's what "building value" looks like in the world of hedge fund operators. 

That's appalling, disgusting, scandalous... but Gerald Schwartz is a Very Big Deal who just donated $100,000,000 to the University of Toronto. No newspaper publisher, let alone reporter, is going to touch that story with a fifty foot pole, because it would be their last story.

Canadian news media lapped up every drop of mendacious idiocy that dripped from Hunter Harrison's lips as Harrison and his hedge fund boss Bill Ackman destroyed more than 5,000 working class jobs at the iconic railroad. Harrison was "the new sheriff in town," don't you know. He was going to "change the culture" at CPR.

And he did. He replaced a culture of collegiality with a culture of fear, and he and Ackman walked away with a cool two billion for their troubles. For that, they are regarded as business geniuses by our business press.

That's what corporate rule looks like. There are innumerable case studies to choose from. Eddie Lampert looted Sears Canada to the tune of billions, leaving 16,000 pensioners in the lurch, but our media claim the company failed because of changing consumer tastes and inept management. The same corporate media still proclaim NAFTA a resounding success, even as all evidence shows it decimated Canada's manufacturing sector.

Which brings us to our current Prime Minister. He serves as an invaluable cover for the greedbags who call the shots behind the scenes. All the talk about feminism and diversity and human rights is designed to take our eye off the fact that he's 100% committed to corporate rule.

Here's a bold prediction. SNC-Lavalin will yet get their DPA. Our media, both corporate and the state broadcaster, will keep hammering away at the credibility of JWR and the (completely bogus) claim that 9,000 jobs are at risk.


Corporate rule will prevail.

Will Puffy Duffy take down Big Steve?

The news that the RCMP have charged Canadian Senator Mike Duffy with 31 counts of fiscal hanky-panky has raised eyebrows across the land.

Are the RCMP out to get Duffy, or are they after Big Steve?

After all, these 31 counts should be before the courts and all over the front pages during the run-up to the 2015 federal election.

Teflon Steve might have a few awkward moments if he is called as a witness, as he inevitably will be. After all, he's the guy who made the Puffster a Senator, and he's the guy who so ruthlessly cut him loose when the so-called "expense scandal" hit the fan.

Which I thought was rude, because by all accounts Duffy was a loyal foot-soldier in the Harper legion, and a damned effective fund-raiser.

As for the expense scandal itself, that seems to be a case of changing times. What Senators have traditionally got away with they can't anymore.

Yesterday's norms are today's no-no's.

What everybody is looking forward to is the court grappling with the question of how that $90,000 cheque from Nigel Wright was not a bribe when Nigel handed it to Mike, but became one when Mike trousered it.

How does that work?

Maybe it's because Nigel is a Big Money guy, an insider at Onex, whereas Duffy is, underneath it all, a regular schmuck who made good.

It's gonna be a good show!

Arianna Huffington joins Canada's biggest hedge fund

Right-again left-again golden girl Arianna has made a bit of a right turn again. She's joined the Board of Directors at Onex.

Onex is Canada's biggest hedge fund, or "private equity firm" as they like to style themselves these days. Sounds more responsible and dignified.

Maybe Arianna was motivated to hang out with high end hedgies after pocketing that $300 million for selling the left-slanting Huffpost brand.

Oh, life can be rich with irony...

More hedge fund hijinx

Seems those hedge fund guys can't keep away from the short arm of the law.

Just in the last few months we've seen Alberto Micallizzi get stuck with a 3million pound fine over there in England.

On this side of the slough we've seen Clay Capital take a 2 million dollar hit; Black Rock 15 million, and Pentagon 100 million in fines just from the non-regulating regulatory authorities.

Meanwhile, just in the last few months, Sun Capital and Cerberus have settled a claim for 166 million that came out of their screw-over of Mervyn's.

What does this tell us?

It tells us that paying fines and settling lawsuits is just part of the cost of doing business. What's a few million in fines when you walked away with 100 million in some sketchy take-over screw-over?

This is the business in which Mitt Romney excelled.

Buy a viable company. Since companies are people too, that company may very well have a perky credit rating. Load it up with debt, pay yourself multiple special dividends, and then let the entrails twitch their way into bankruptcy court.

What does this pillaging of the economy add to the common good? Absolutely nothing.

That's why we need a 100% tax on non-productive economic activity.

The hedge fund boys do what they do because the law permits them to do it.

We can change that.

Hostess Brands latest victim of vulture capitalism

Hostess Brands, the maker of a whole lot of stuff that's nearly as iconically American as apple pie, filed for bankruptcy protection today.

The news stories offer the usual sad tale of this poor corporation being unable to cope with the oppressive demands of their unionized workforce, who demand the usual twentieth century dog-and-pony carnival of pensions and a living wage.

Welcome to the twenty-first century, union ingrates! Corporations are people too! Every penny of pension that goes into your pocket after a lifetime of Twinky making is a penny straight out of the pockets of that corporation.

Not only that, but it's a penny out of the pockets of the flesh-and-blood hedge-funders who have had a lock on this company since it last emerged from bankruptcy in 2009.

The prime owner of Hostess since then has been an outfit called Ripplewood Holdings. That's an outfit whose biggest shareholder is a guy named Tim Collins. Tim Collins learned his craft running the New York office of a hedge fund called Onex, whose motto is "adding value by screwing workers".

And it works! It made Onex chief Gerry Schwartz a billionaire!

Collins has a couple of other hedge fund players in on the action now. They've all lent each other money at exhorbitant interest rates to "invest" in Hostess. Once all the Twinky profits have paid off the hedge funds there's nothing left to meet the company's pension obligations. Then of course it's big headlines in the business pages about how rich pensions and plush union agreements have driven an iconic American brand into bankruptcy.

Rarely will the business pages mention that the unions took major concessions to get Hostess out of bankruptcy the last time around. But there's still a bit of meat on those bones. The hedge fund vultures will pick the carcass clean this time.

There's too much good stuff at Hostess to let it fade quietly into the sunset. These hedge fund guys know the value of a brand. Look for the union contracts to be stripped, the pension obligations shed, and the vultures to walk away with billions.

What I want to be when I grow up

Robert Schad was one of that generation of Europeans who came across in the years after the war. He started a little machine shop in Toronto in 1953. Mr. Schad worked his ass off for over fifty years. His little machine shop became Husky Injection Molding, the global leader in building the machines that mass produce all the plastic crap you buy. For many years the biggest market for injection molding machinery has been China. They buy our machines and then sell us back the crap.

Schad was a forward looking guy. He wasn't the sort of entrepreneur to maximize profits on the back of the workers. His company became almost as famous for their generous employee benefits as for their machinery. Subsidized meals in the company cafeteria. Subsidized on-site daycare. Doctors, chiropractors, and massage therapists, all right there at the worksite, and either free or heavily subsidized by the company.

Getting on in years, and not having anyone in the family interested in carrying on the business, Schad sold his company late in 2007 to a hedge fund. The price was just under a billion dollars, and Schad's share of the loot   was about 400 million. A princely sum, to be sure, but perhaps a justifiable reward for a lifetime of hard work, creating thousands of jobs, supporting many worthy causes, and so on. I suppose lots of people work hard all their lives and don't fare out nearly so well, but I'm prepared to give the system the benefit of the doubt.

I say, good for Mr. Schad.

But apparently Mr. Schad had been more a machinist and not that sharp of a businessman. The pointy pencil guys at the hedge fund were miraculously able to double the company's net operating revenue in a mere three years. Then they sold the company for over two billion dollars. Reuters reported that they had "reduced waste and shed non-core and non-performing assets". That's biz-speak for stripping out anything that isn't going to contribute to the bottom line in the next quarter. I'm wondering how many of Mr. Schad's beloved employee benefits were non-core or non performing?

If you are a young person considering a career path, this is an instructive example. You can see that there are opportunities to start a business, to grow a business, to contribute to your community. A good work ethic, an engineering degree, maybe an apprenticeship in something useful would be the tools you need to get on your way. With a bit of luck, fifty years later you can cash out with princely riches.

Or, you could do an MBA, start a hedge fund, never build anything, never create a single job, never give anything back to your community, and make twice as much money in three years as Robert Schad made in his lifetime.