JOHN DOYLE'S GAMBLE WITH MILLIONS: HEADS HE WINGS-TAILS YOU LOSE
BEFORE I MET John Christopher Doyle, the controversial mining promoter and close friend of Newfoundland Premier Joseph Smallwood, I thought of financial wizards as rather dull types, surrounded by computers and walnut-paneled boardrooms and lynx-eyed assistants and fussy accountants; stodgy people, really, for all their wealth, who lived in a world of ticker tape and dividends and stock warrants and other inscrutable phenomena. But all that, as I say, was before I met John Doyle, before I perched in the gilded opulence of his Ottawa penthouse, and found myself fixed by the wag of a manicured Doyle finger, startled by the bite of a normally soft Doyle voice, which rasped: “Whatever you write about me, goddam it, don’t call me a goddam fugitive from justice.”
Very well, John Doyle is not a fugitive from justice. He is, however, a genuine financial wizard, a skilled organist and a native of the U.S. who may not return to that country because, as John Diefenbaker once inelegantly put it, “he will end up in the coop for three years if he does.” He is also Chairman of the Executive Committee of Canadian Javelin Limited, a Newfoundland corporation described to me by a U.S. government lawyer who has studied it for years as “the most mysterious company known to man.” Canadian Javelin, through a network of subsidiaries, controls huge quantities of iron ore and timber in Labrador, oil and potash in Saskatchewan, silver in El Salvador, and other minerals from northern Quebec to Arizona.
Finally, Doyle is president of Melville Pulp and Paper Limited, a subsidiary of a subsidiary of Canadian Javelin, which hopes to receive generous government aid toward a chip-mill in Labrador and a linerboard mill in Newfoundland. The federal government has already announced conditional approval of $20.1 million in loans and grants to Melville, and Smallwood — whose portrait, in oils, broods over the affairs of Canadian Javelin in a suite of offices that shares Doyle’s 12th-floor penthouse — has already turned the ceremonial first sod for the linerboard plant. But recently the project has struck a snag. After a closer look at the scheme than they gave it when preliminary approval was announced, some government members have turned against it, for a number of reasons.
First, the critics argue, while resource development always requires some help from the taxpayer, in this case Melville is not shouldering enough of the load. The project will cost $143.6 million, of which Doyle’s companies have so far spent $12 million and promised $16.8 million, a total of about 20 percent of the cost. Normally, the promoter is expected to put up at least 40 percent.
Second, if Melville is being asked to do too little, governments are being asked to do too much. The Canadian treasury is expected to pick up $20.1 million in grants and loans, the Newfoundland government will guarantee $54 million in loans and the U.K. government will back another $41 million, as well as making an outright grant of five million dollars toward two British-built transport ships. If the scheme fails, it will hurt Melville and Canadian Javelin, but it will hurt the three governments even more; if it succeeds, Melville will wind up with an asset worth at least $143.6 million, obtained largely on government credit.
Third, while it may have to share in the losses, no government will be asked to share in any profits, except indirectly, through taxes. The deal has been so arranged that even Newfoundland, which owns a majority of Canadian Javelin shares, cannot make a profit on them. ^
Finally, at least some government figures are disturbed by the controversial reputation of Doyle himself. They wonder if he is the kind of man the Canadian taxpayer should help. For one thing, he allegedly owes the National Revenue Department more than two million dollars.
It was to discuss these points that I went to see Doyle, and the moment I stepped into his apartment my vision of a businessman’s brusque austerity broke and fled. I stepped across broadloom thick and soft and golden; I ran an appreciative eye over antique furniture from the reigns of Louis XV and Louis XVI; I admired the gilded harp Doyle plays for relaxation, the marble tables, the expensive oil paintings along his living-room walls — one is a portrait by Fragonard, another is “Le Petit Alchemist,” painted by François
Boucher for Madame Pompadour, Louis XV’s mistress. And I thought of the grudging admiration in the voice of one of Doyle’s ex-aides earlier when he told me, “He’s a tycoon and a tyrant, but he’s got taste.”
I was mulling this remark when Doyle bustled up in a cloud of energy, good humor and cologne. He is a handsome man of medium height, with regular features and a head of becoming steel-grey hair, but his looks are marred somewhat by the great jowls, tremendous, jiggling corporations that frame his face, and by a bodily corpulence that thrusts out before him like a porch. He has the reputation of a gourmet, but the outline of a gourmand. He speaks well, swears mightily, smiles mightily and exudes an easy charm that lends credence to a story told by a former investigator for the Securities and Exchange Commission in Washington, a story that when two FBI agents called on Doyle to charge him with 11 counts of violating U.S. securities laws, he sold them stock in Canadian Javelin. Doyle has been a mining promoter for nearly 20 years, and his methods in one instance were described with brutal directness by a court referee appointed to settle a battle between Doyle and some disgruntled stockholders in 1961.
“Doyle’s development of Labrador,” the referee wrote, “affords an epic tableau of economic pioneering in the Canadian wilderness, accompanied by all the usual features of pioneering; swashbuckling, lawlessness, disdain for convention, crude improvisation, even commercial piracy . . . and by the applications of normal United States standards of corporate morality, appears at best devious and doubtful, and at worst, corrupt and venal.” Doyle himself, the referee wrote, “emerges from the tableau less like Cecil Rhodes and more like Errol Flynn portraying that role.”
The subject of this unflattering portrait was born in Chicago in 1915, came to Canada as a $125-a-week coal salesman and, before long, owned his own thriving coal business. In 1949, Doyle bought Javelin Foundry and Machine Works in Joliette, Quebec, and reorganized it two years later as Canadian Javelin Limited, a public company that has served ever since as a holding company for his ventures.
Those ventures began on a grand scale by accident. On a 1952 trip to Newfoundland to collect an $18,000 debt owed to his coal company, Doyle occupied an airplane seat next to a Newfoundland geologist who spoke enthusiastically of the mineral wealth of Labrador, and of the provincial government’s generous attitude toward resource developers. Doyle collected his $18,000, then spent a week poring over mining maps, and soon forgot all about the coal business. He offered to exchange shares in Canadian Javelin for control of the Newfoundland and Labrador Corporation (NALCO), a provincial Crown company that owned rich mineral rights in Labrador. The deal fell through when Canadian Javelin was de-listed from stock exchanges in Montreal and Toronto for “failure to comply with a request for information deemed to be in the public interest.” However, another scheme was worked out in which Javelin acquired rights to mineral deposits near Wabush Lake, Labrador. During 1954, geologists confirmed the existence of up to two billion tons of iron ore in these deposits. (Doyle later bought NALCO, sold it, then bought it back again. Today it is 96.4 percent owned by Canadian Javelin.)
Doyle set to work to develop that ore body. Despite the fierce opposition of Canadian, American and European steel companies not anxious for new competition, he brought it off. He was eventually bought out by a consortium of his competitors, whose $235-million Wabush Iron works came into production in 1965.
Premier Smallwood was grateful for Doyle’s role in launching the Wabush development, which prob-
ably would not have taken place without him, and has remained staunchly loyal to the promoter ever since. Smallwood’s attitude toward resource ventures has always been that they involve high risks and deserve high rewards. Once, when provincial Conservative leader Malcolm Hollett attacked Doyle for having made a fortune in Newfoundland, Smallwood retorted, “Let us hope he makes 10, provided also that he gives us fast development.” Smallwood went on, “The promoter becomes respectable after he has made his fortune. Whoever became a millionaire in this world today by teaching Sunday school?”
Certainly there is no visible similarity between John Doyle and the average Sunday-school teacher. He lives with a rich, exuberant zest. He likes to jet for the weekend to London or Paris or Panama; he has Newfoundland salmon flown to England to be properly smoked, then flown back again for his table. He loves music, and owns at least three organs — one in his Ottawa apartment, one in the colonial mansion that is his real home in Nassau, and one, a giant of 2,500 pipes, in the bar of his hotel in Panama. He loves rich food, good wine, pretty women. He has married three times, and a portrait of his third wife, Maria, a beautiful blonde from Saskatchewan, dominates the library in his Ottawa penthouse. (His second wife, Germaine, obtained a New York divorce in 1958. As part of the settlement, Doyle was to set up an $850,000 trust fund for his three children. The trust fund was never established and Germaine recently brought suit in Ottawa to hurry it along. “The whole matter has been looked after,” Doyle explained. “It was a lot of nonsense.” The trust will be set up “soon,” he said, and asked, “Haven’t I always taken care of my children?”)
Until recently, Doyle followed his fancies in his own four-engine DC-6 airplane, provided by the thoughtful stockholders of Canadian Javelin. It featured an interior fitted with mahogany panels, purpleand-grey plush seats and a crystal chandelier' as well as a bar, a kitchen and a bathroom complete with shower. However, the plane’s luxury drew too much attention, and Doyle sold it to a Mexican bank, which uses it to transport money. The area once occupied by his luxurious bathroom is now the home of a steel vault, and Doyle has been reduced to traveling by commercial aircraft, mostly chartered. At home in Nassau he has, of course, his own yacht and a white Lincoln Continental.
Among his ornaments is an honorary LL.D. from Memorial University in St. John’s, conferred in 1962 after Canadian Javelin promised $500,000 toward a university residence. The residence was built and the degree bestowed, but the money was somewhat slow in coming although, Doyle assured me, “Everything is arranged now.”
Canadian tax collectors are still pressing Doyle for claims that go back nearly two decades. Originally, the Revenue Department sought $3.4 million in taxes and interest from Doyle, but a Tax Appeal Board cut the amount to $2.6 million, and Doyle has launched a further appeal with the Exchequer Court. In 1967 tax authorities instructed Canadian Javelin to pay over “any moneys due or becoming due to Mr. John C. Doyle” to the Registrar General, but came away emptyhanded. Doyle is no longer paid by Canadian Javelin; he is engaged as a “consultant” for $50,000 (U.S.) a year, through Javelin Export Limited, a subsidiary in Nassau, beyond the reach of Canadian law.
Doyle’s business life is at least as interesting as his private one. Because of his commercial ventures, he has been sued more than a score of times, once spent a night in a Montreal jail on theft, conspiracy and fraud charges — subsequently dismissed — and has been involved in an almost continuous running battle with rivals attempting to wrest control of Canadian Javelin from his hands. He attributes most of his troubles with the law and various securities commissions to these rivals; in his version of his life story, they have astonishing powers, incite tax agents, arouse security investigators and even influence courts against him. Describing a judge who had a minor role in one of the civil suits against him, Doyle said flatly, “[He] was owned by the goddam lawyers.”
That suit was based on a claim by some stockholders that Doyle had mishandled shares of Canadian Javelin for his own benefit. He eventually agreed to pay $3,350,000 into the company treasury, not because he felt he had done any wrong, but “only to protect my own interests.
“Look, I owned over one million shares. Three dollars on the stock is my money back; that’s the ball game [i.e., if the stock dropped more than three dollars as a result of the lawsuit, the loss would be greater than the agreed settlement]. Besides, I get 24 percent of the return because I own 24 percent of the company. What would you do?”
I suggested that the referee appointed to oversee the settlement did not see him as an aggrieved innocent, and I began to recite the referee’s description of Doyle’s business ethics, already quoted earlier in this article, but he waved me to silence. “Ah,” he said, “he had to put that in to make it look as if the settlement was a meritorious settlement.”
Doyle hints there were also forces mysterious, if not sinister, behind the criminal charges that have made him a fugitive from . . . sorry, a person who would be wiser not to visit the land of his birth. Those charges rose out of a complex investigation conducted by the Securities and Exchange Commission in Washington. The SEC became involved because Canadian Javelin stocks were trading vigorously in the U.S., and their price was subject to what one SEC lawyer called “a spring wiggle and a winter
wiggle” although Javelin was not an operating company. SEC investigator Edward C. Jaegerman eventually leveled 11 charges at Doyle and two other men, ranging from fraud and stock manipulation to such technical violations as causing unregistered shares to be mailed to an investor. The point of this charge, which is not an offense in Canada, is that, to register the stock with the SEC, the vendor must provide a good deal of financial information about the company; without registration, there is no check on any claims he might make. Jaegerman, who is now in private business in New York, told me his concern had been that Javelin, which has more American than Canadian stockholders, should become a U.S. company and subject itself to SEC regulations.
In June 1959, Jaegerman flew to St. John’s, where he cited these conditions to members of the Newfoundland cabinet. He says he told the cabinet, “if these things were done ... it was unlikely that there would be a criminal prosecution” against Doyle.
Canadian Javelin did subject itself to SEC regulations, but it did not become an American company and, after a long delay, Doyle was indicted in August 1963 at Hartford, Connecticut. Premier Smallwood, whose recollection does not match Jaegerman’s, insisted his cabinet had been given a commitment that Doyle would not be prosecuted. The Premier flew to Washington to ask the then Attorney-General Robert Kennedy to halt the court proceedings, but Kennedy refused. Eventually, Doyle pleaded guilty to the least of the charges against him, that of causing 50 unregistered shares to be mailed for sale. The other charges were dropped. On May 3, 1965, Doyle was fined $5,000 and sentenced to three years in prison, with a suspension after three months.
In leveling so severe a sentence, Judge Emmett Clair noted: “Failure to register permitted the sale . . . of several millions of shares ... It is not a question of 50 shares alone that the Court has considered.”
Doyle’s explanation of this finding: “The SEC
went in and filled him full of stuff and he didn’t even understand what it was all about.” He was astonished at the severity of the sentence. “I pleaded guilty to try and get it over with,” he told me. “If I thought for one goddam minute I was going to jail, I never would have pleaded guilty.”
He launched an appeal, which failed, then, on July 15, 1965, skipped out on his $10,000 bail and fled to Canada (security offenses are non-extraditable). He gives a curious reason for this course of action. “You had a government in Newfoundland that had said there was an agreement [not to prosecute] and here you would have Doyle sitting in jail going to prove them to be liars ... It would be pretty goddam embarrassing for those people.”
The chief of “those people,” Premier Smallwood, never wavered in his loyalty to Doyle. A week after the judgment against his friend, Smallwood flew to a federal-provincial conference in Ottawa aboard Doyle’s DC-6. But if Smallwood’s confidence was unshaken, the same could not be said for Canadian Javelin stockholders, who were growing restless under the barrage of headlines generated by Doyle’s activities. Their discomfiture was increased when Doyle’s name was linked, indirectly, to the Gerda Munsinger inquiry and to “L’Affaire des Six,” when some Creditiste MPs were accused of accepting bribes to support the minority Liberal government. No evidence was ever produced to connect Doyle to either of these matters. However, the effect was to add thrust to a shareholders’ revolt that culminated in 1966 in the formation of a Stockholders’ Protective Committee, with the avowed aim of ridding Canadian Javelin of “its greatest liability — John C. Doyle.”
"Doyle's develoPment of Labrador affords an epic tableau of Pioneering in the wilderness...He emerues from the tableau less like Cecil Rhodes and more like Errol Flynn Portravinu that role"
The stockholders complained that Doyle had never paid any of the $3,350,000 he had promised as a result of the earlier stockholders’ suits against him, although the company had been forced to cover $1,692,500 in legal expenses for the case. Doyle had agreed to make three equal yearly payments of $750,000, beginning in 1963, and a final payment of $1,100,000 in 1966, but no new cash had ever entered the company treasury. The first payment was met by offsetting it against salary and expenses claimed by Doyle, but no further payments were forthcoming, and a forgiving board of directors did not move to enforce the default provisions of the contract.
Doyle finally cleared his debt in 1968 by borrowing against shares in his Panama hotel, but long before that he beat back the dissident stockholders with a weapon more potent than money — the Newfoundland government. In November 1967, a special class of preferred shares in Canadian Javelin was created and turned over to the province. These 5,300,000 shares were given one vote each, enough to ensure control of the company (there are 5,828,850 common shares outstanding, and Doyle, by far the largest stockholder, owns 1,251,112 of these, which he agreed to vote with the government bloc). Newfoundland’s stated reason for acquiring control was to secure its guarantee of loans for the Melville linerboard project, but the result was to whisk Doyle safely beyond the reach of a proxy fight. In case the dissident stockholders failed to get the message, they were told bluntly they were “not acceptable” to the government.
“What they did,” claims Laurence Levine, the New York lawyer who acted for the rebels, “was to disfranchise the stockholders and leave Doyle sitting pretty.”
A three-man committee was named to vote the province’s — and Doyle’s — stock, but that committee does not control Canadian Javelin; Doyle does. As he told me, “The three trustees have nothing to do with the policy of the company, except that they have the right to vote the shares for or against the management” at an annual meeting. When I wanted to discuss the Melville project with trustee William Wismer, Javelin’s president, he told me, “Oh, you’d have to see Mr. Doyle about that. I don’t know a damn thing about it.”
The outline of the project is simple enough; it is a scheme to harvest black-spruce trees near Lake Melville in Labrador, turn them into wood chips in a factory at Happy Valley, near the end of the lake, and transport those wood chips 605 miles across the water to Stephenville, Nfld. There, the chips will be fed into a 500-foot-long machine capable of turning out 1,200 tons of linerboard a day for the manufacture of cardboard boxes. The project will employ 1,125 workers and, presumably, add to Canadian exports, since Europe is the intended market.
The scheme is based on timber rights covering 21,325 square miles of Labrador (an area roughly twice the size of Belgium) divided into two blocks. About 11,000 square miles is held by NALCO, the Javelin subsidiary, which in turn owns Melville Pulp and Paper. The second block, 10,325 square miles, has been purchased from a curious company called Société Transshipping owned in Liechtenstein, a tiny principality on the upper Rhine River. Javelin will pay Société Transshipping about four million dollars for its timber rights, but Doyle doesn’t seem to know much about the company. “They are controlled by some goddam bank or something, and I don’t know who they are except that they are in the paper business in the European area and frankly I don’t want anybody to ever come near me on it.” (Doyle was once accused of spiriting $4.8 million worth of Javelin stocks out of Canada into Liechtenstein and, although the case was thrown out of court, he is touchy about that nation.)
If the linerboard project succeeds, the profit will go to Melville Pulp and Paper and its owners in Canadian Javelin, but not to the majority Javelin shareholder, the government of Newfoundland. This is because the preferred shares the province holds pay no dividend and are redeemable at 10 cents each — for a total of $530,000 — no matter how much Javelin common stock becomes worth. (At present, it is listed at about $14.50 a share, up from $9.50 last February 29, for a paper gain to Doyle of $6,255,560 on his holdings.)
This brings us back to the point made by critics within the government of the Melville scheme: too much of the cost is to be backed by taxpayers in Canada and the U.K., too little by the company itself.
“The question is not what’s it going to cost,” Doyle told me, “but what’s it going to cost whom?”
And that is a very good question.
The Stephenville mill will cost $68 million; the
Happy Valley mill, $13.5 million; two 80,000-ton tankers to haul the wood chips will come to $25 million and harbor improvement and other facilities another $13.6 million. In addition, Doyle claims Melville has already spent $12 million and will need $11.5million in working capital, for a total price of $ 143.6million.
The most expensive single item, machinery for the Stephenville plant, will be bought for $41 million, which will be loaned by British banks, guaranteed by the U.K. government and, in turn, by the government of Newfoundland. As a condition, all the machinery must be built in Britain; no Canadian firm may bid on it. The two ships will also be built in the U.K., and financed by a grant of five million dollars from the U.K. government to the shipbuilders and a loan of $20 million secured by mortgages on the ships. The Happy Valley mill will be financed by a loan from an American financial house and the Canadian government will provide $20.1 million for dredging and harbor improvement, waterworks, and incentive grants. Some of this will be in the form of a repayable loan, but at least $10.75 million will be an outright gift.
Against all this outside money for assets that will belong to his company, Doyle’s original intention was to put up only $5.3 million in new money, and this was borrowed by Canadian Javelin from the Central States, Southeast and Southwest Areas Pension Fund in the U.S. — the pension fund controlled by Jimmy Hoffa’s Teamsters Union. When the Canadian government balked at such a tiny commitment from Javelin, the company agreed to raise the $11.5 million working capital by selling Javelin shares on the market.
Even with this additional commitment, the federal cabinet has not been able to agree, at this writing, on the Melville project. Federal backing means more than $20.1 million in loans and grants; it implies Ottawa is satisfied with the financial setup of the company. In addition, as one senior civil servant told me, “A lot of people are going to assume that the federal government would have to step in if anything went wrong.”
Cabinet ministers realize that resource development normally entails high risks and requires generous support, but at least some government members feel that the risks this time are increased by the looming presence of John C. Doyle, the man who sparked the deal. I tried to convey some sense of this unease to Doyle as we stood in his ornate dining room and peered through swirling snow toward Parliament Hill, a quarter of a mile away.
“I think you make some people up there nervous,” I said.
“Me?” he asked, and his arms went back, his hands went out, his eyebrows shot up in an agony of innocent surprise. “Why should I make anyone nervous?” □