COVER

A PROPERTY IN QUESTION

BRUCE WALLACE February 2 1987
COVER

A PROPERTY IN QUESTION

BRUCE WALLACE February 2 1987

A PROPERTY IN QUESTION

COVER

The contract brought a breath of Switzerland and a hint of prosperity to an old railway town along the banks of Quebec’s Richelieu River. Last January, when Swiss-owned Oerlikon Aerospace Inc. officially selected St-Jean-sur-Richelieu, 40 km southeast of Montreal, as the production site for its sophisticated low-level air defence system (LLAD), the town’s 38,800 residents hailed the decision as a major step toward economic revival. Since then, 80 Oerlikon executives and technicians have bought homes in St-Jean. And Oerlikon has worked hard to integrate itself into the community. It bought shares in the Castors, St-Jean’s financially troubled junior hockey team, and the company’s Swiss parent has plans to build a hotel on the river. Said St-Jean Mayor Delbert Deschambault: “Oerlikon has put St-Jean on the map.” Notoriety: Perhaps. But last week’s firing of junior transport minister André Bissonnette for his role in the Oerlikon affair also brought the town— and its most prominent corporate citizen-some unwanted national notoriety. St-Jean became the focus of a widening scandal that may have involved the use of confidential government information to make illegal profits. It also raised questions about the involvement of several of Prime Minister Brian Mulroney’s oldest friends, notably soon-to-be-appointed senator Jean Bazin, in securing the LLAD contract for the company. The controversy erupted after it was revealed that the oddly shaped 100-acre parcel of wooded land on the outskirts of St-Jean where Oerlikon is building its $45-million facility had changed hands twice just days before the Ziirich-based company purchased it in January, 1986. Those quick-flip sales drove the price of the land from $800,000 to $2.97 million in a matter of 11 days.

Last week Oerlikon charged that friends and business associates of Bissonnette, St-Jean’s member of Parliament, had profited from the sales. And on orders of the Prime Minister, RCMP officers began investigating the transactions, trying to determine whether Bissonnette or his family also received money. Said Deschambault: “People here are waiting to hear Bissonnette’s explanation before they condemn him.”

But as the political scandal flared in Parliament, opposition MPs charged

that senior officials in Mulroney’s office had deliberately leaked information about the Oerlikon affair to the news media, compromising the RCMP investigation and damaging Bisson-

nette’s reputation. Several news organizations—the CBC, The Canadian Press and The Toronto Star— reported that when Mulroney asked for Bissonnette’s resignation on Jan. 18, he had information that the minister and his wife, Anita Laflamme, personally profited from the land sales. According to unconfirmed press accounts, Laflamme received $400,000 from the deal, while

Bissonnette also made a substantial— though unspecified—amount. Outside the Commons, opposition leaders noted that the Prime Minister had not denied selectively leaking information to the

media. Charged NDP Leader Ed Broadbent: “It is a classic case of manipulating the media to serve his own purpose.” MPs also wanted to know why five former members of the department of national defence team that worked on the LLAD project, as well as Peter Ohrt, the Prime Minister’s former executive director, have worked for Oerlikon. Oerlikon’s $637-million bid was chosen

by the government over several competitors last April to supply the Canadian Forces with a defence system for its frontline troops and equipment to defend against low-lowel air attack. Oerlikon’s machine tool works division, which has staked its commercial future on a new sophisticated laserguided missile system, desperately needed to win the fiercely contested Canadian contract.

(In fact, Oerlikon’s parent company, Oerlikon-Bührle Holding AG, announced after markets closed on Friday that it lost $32.5 million in 1986, with sales falling to $4.1 billion.

It was a disturbing performance for a company often referred to by analysts as “rock-solid.” Company senior manager Fritz Strohmeier said that the holding company will meet this week to discuss its future strategy in handling the Canadian defence contract.)

Friends: In 1985, Marco Genoni, Oerlikon’s 40-yearold Canadian president, hired Montreal public relations consultant Roger Nantel as a consultant. Nantel worked for Mulroney during his campaigns for the federal Conservative leadership in 1976 and 1983, and is a leading Tory strategist in Quebec. Then, in February,

1986, Oerlikon hired Bazin, a Montreal lawyer who had been co-chairman of the Tories’ 1984 campaign, as a legal counsellor and appointed him to the board of directors. Bazin is one of Mulroney’s oldest friends. Both men graduated from Laval University law school, and Bazin remains a close confidant of the Prime Minister. Earlier this month Mulroney named Bazin to the Senate to fill a Quebec vacancy.

It was Bazin and Nantel, apparently, who last month alerted Bernard Roy, the Prime Minister’s principal secretary, to the impending revelations about the Oerlikon affair in the press. According to stillunconfirmed reports, Mulroney asked Roy for a complete report, then confronted Bissonnette. When the minister asked for a judicial inquiry to clear his name, Mulroney refused, demanding Bissonnette’s resignation. A friend who spoke with the Prime Minister late last week said that Mulroney had rarely sounded so depressed.

The revelation of the land flips— and the unanswered questions about

Bissonnette’s involvement—sparked a procession of lawyers, journalists and RCMP officers to the local land registry, where legal records of the transactions are stored. The Oerlikon site, scattered across six lots bordering the posh StJean-Richelieu Golf Club, was initially purchased for $415,000 in March, 1985, from the Trust General du Canada by a group of Quebec investors headed by lawyer Michel Lassonde and including Jacques Francoeur, a wealthy newspaper and magazine publisher. In Sep-

tember, 1985, Lassonde and his associates sold an option to buy the land for $800,000 to Gérard Lebreux, a Repentigny, Que., developer who expressed an interest in building houses on the lots.

Cash: But Lebreux was forced to bring in other partners to help finance the construction. Instead of Lebreux purchasing the land directly from Lassonde and his partners, the property was first sold on Jan. 13, 1986, to 23204456 Quebec Inc., a holding company that lists president Philippe Guyon, a real estate developer, as its only em-

ployee. Guyon’s company paid $100,000 of the $800,000 purchase price in cash; two days later he sold it to Lebreux for $1,494,392.

Meanwhile, Oerlikon was seeking a production site to build on if it won the LLAD contract. Genoni had scouted five prospective sites in three Canadian cities, including St-Jean. In order to mask its interest from land speculators, Oerlikon conducted its search under the guise of a shell company—Gestion Farillon Ltd. —of which Bazin was later made a director. A year ago Bissonnette met Genoni on a skiing vacation in Austria. Whether the meeting was planned or accidental is unclear, but Bissonnette lobbied Genoni to locate in St-Jean. Even before that meeting, however—in October, 1985—Bissonnette took the crucial step of convincing St-Jean’s municipal council to drop a plan to declare the city a nuclear-free zone. Although the LLAD contract did not call for the manufacture of nuclear weapons, Bissonnette warned the council that such a bylaw, if passed, would cost St-Jean an unspecified military contract.

Cheaper: When Genoni

conducted his site inspection on Jan. 9, 1986, he ruled out St-Jean’s industrial park, even though it had land available at a price considerably cheaper than what the firm eventually paid. Oerlikon’s sophisticated technology required a site free from dust and excessive vibration. Instead, Genoni was impressed by the flat, heavily treed land by the golf course. Oerlikon alleges that it informed several people, including Bissonnette and then-St-Jean mayor Ronald Beauregard, on Jan. 15 of its decision to build its plant on the site.

At almost the same time, Michel Thibodeau, an independent St-Jean real estate agent, convinced Lebreux— by then the owner of the property—to list the land with his company. Oerlikon alleges that two days before the formal announcement, Thibodeau phoned Genoni on Lebreux’s behalf to offer the land for sale. In an interview with Maclean's on Jan. 16, before the first published story on the land deal, Thibodeau refused to say how he knew that Oerlikon was interested in the property. Said Thibodeau: “This was the biggest deal I ever did. But I do not

rely on political connections to do business.”

On Jan. 27, Oerlikon made a $60,000 deposit on the land, which it agreed to buy for $2,988,785—if it won the federal contract. But in a $2.1-million lawsuit filed last week in Quebec Superior Court, the company claimed that $970,000 of that amount went to Normand Ouellette, then president of the local Tory riding association.

A longtime Bissonnette friend, Ouellette was also, according to news accounts, the MP’s business associate and a trustee of his blind trust.

In its suit, Oerlikon also alleged that Bissonnette had assured the company that the price was fair.

But shortly after the sale, Oerlikon began to have doubts about the price. In April, Oerlikon’s lawyers advised company executives that the land had been sold and resold in January at rapidly rising prices. Still, Oerlikon proceeded with the final sale on June 20.

Complained: Then, in August, original owner Lassonde wrote to John Lemieux, a partner with Bazin in the Montreal law firm of Byers Casgrain. Lemieux complained that profits from the land sale had been earned by someone benefiting from inside information. Said Lassonde: “Lemieux finally met with me in the fall and told me there was no way I was going to get anything from Oerlikon.” Meanwhile, in St-Jean, the land sale was generating a lot of gossip. Said Mayor Deschambault: “We have known since last October that somebody made a hell of a lot of money, but we did not know who.”

In its lawsuit, Oerlikon claimed that it recently learned that Ouellette held a secret option on the land. The greying, curly-haired Ouellette, who resigned as president of the riding association last week, citing personal reasons, was Bissonnette’s chief organizer during the 1984 federal election. He and Bissonnette were business associates in two St-Jean-area companies: 89673 Canada ltée, a real estate investment company, and Les Services du Vieux St-Jean Inc., a holding company which manages bars and a restaurant. Like Oerlikon, Ouellette also owns an interest in the local hockey team. He once ran for mayor of St-Jean, but pulled out a month before the election. The RCMP is trying to determine whether any of the money Ouellette is alleged to have received

went to either Bissonnette or to a numbered company owned by his wife.

Chicken: For the 41-year-old Bissonnette, the firing from cabinet was an ugly scar on a career marked by glittering business success. Bissonnette built Capital Packing Ltd., a food-distribution

and chicken-processing firm based in Iberville, across the Richelieu River from St-Jean, into the cornerstone of a $10-million empire. The firm controls one-third of all the chicken produced in Quebec. With a reputation as a prosperous entrepreneur and running on the theme of economic development for StJean, Bissonnette swept the 1984 election with a majority of 15,946 votes. Said Renel Bouchard, editor of the weeky* ly Le Canada Français'.

“He was a businessman, not a politician, and people believed him when he talked about creating jobs.”

Tight: Bissonnette’s associates said that the new MP, who was soon appointed minister of state for small business, set a demanding pace. A trained pilot, Bissonnette commuted weekly between Ottawa and St-Jean in one of his two Cessna aircraft, often taking off from the wharf of his riverside home and touching down an hour later in the Hull marina, just a five-minute drive from his Ottawa office. Said Serge Poirier, Bissonnette’s former pilot and driver: “He set a tight schedule, and the

staff had a hard time following him.” But Bissonnette was hampered by health problems in early 1985. That January he had surgery in Ottawa to repair inflamed intestines, and he underwent minor surgery for the same problem again in June. Bissonnette,

who spoke little English when he first arrived in Ottawa, also had trouble in the House of Commons. Said a senior member of the Quebec Tory caucus: “In caucus or small groups, André had a great touch. But he was lost in the House.”

Shuffled out of the small-business portfolio last June, Bissonnette used his new job as minister of state for transport to push for an extension to the runway at St-Jean’s airport. The $3.6-million project is scheduled to proceed this summer. Bissonnette’s efforts on behalf of his constituents have not gone unapz preciated. In a poll cong ducted by Le Canada $ Français in November, g 1985, Bissonnette re| ceived a 58.4-per-cent approval rating, ahead of the 43-per-cent rating given to the Tories as a whole. Said Mayor Deschambault: “We need Bissonnette’s

wallop. He was really helping us out.” In the clouds of last week’s scandal, it seemed clear that St-Jean has lost a great deal of its political influence.

BRUCE WALLACE in St-Jean