CANADA

The Paramount connection

Paul Martin’s dealings with the U.S. giant raise questions

MARCI MCDONALD April 25 1994
CANADA

The Paramount connection

Paul Martin’s dealings with the U.S. giant raise questions

MARCI MCDONALD April 25 1994

The Paramount connection

CANADA

Paul Martin’s dealings with the U.S. giant raise questions

MARCI MCDONALD

It has unfolded with all the intrigue of a Hollywood whodunit—complete with shadowy secret agreements and bitter accusations of betrayal of national honor and identity. But as plots go, the tangled, twomonth-old tale of why the federal government agreed to sell back a Toronto textbook firm, Ginn Publishing Canada Inc., to its former American parent, powerful media conglomerate Paramount Communications Inc., has left more questions than happy endings. Chief among them: why did the Liberals feel obliged to honor a secret oral buy-back agreement that Heritage Minister Michel Dupuy claims their former Conservative foes had made with New York City-based Paramount?

To Canadian publishers, who protested that they were shut out of the $10.3-million sale, that obligation seemed all the more perplexing since the government had shown no such compunction about scrapping written Tory contracts for a fleet of defence helicopters or upgrading Toronto’s Pearson International Airport. And over recent weeks, critics have queried the government’s refusal to hold a public inquiry into the case, which they say shows a fundamental change in a 25-year-old policy of protecting cultural industries from foreign takeovers. They also have questioned Heritage committee chairman John Godfrey’s explanation that such an exercise would “amount to Pin-the-tail-on-a-Tory.” In fact, Maclean’s has learned that some powerful Liberals—including Finance Minister Paul

company, Nellmart Ltd., he owns three prime Vancouver movie houses—the Dunbar, the Varsity and the Plaza— which he leases directly to Famous Players Inc., a wholly owned Canadian subsidiary of Paramount Communications.

Martin’s press attaché, Nathalie Gauthier, told Maclean’s last week that he “did not take part in the decision-making process” before the Ginn sale. She said he left the responsibility to Douglas Peters, secretary of state for international financial institutions, who reports to him. But Bill Milliken, spokesman for Industry Minister John Manley, said Martin participated in a meeting over the Ginn deal between Manley and Dupuy. According to Howard Wilson, deputy assistant registrar general in charge of administering the conflict-of-interest code— who called Maclean’s on Saturday at Martin’s request—if the finance minister did discuss the Ginn case, “it would have been perfectly proper for him to do so. He’s in a landlord relationship with Famous Players, not an investment relationship.” Martin’s office did not respond to a written request by Maclean’s to provide further answers to detailed questions about his company’s dealings with Paramount Martin is not the only influential Liberal with ties to Paramount. On March 15, less than a month after the Ginn deal was announced—but at the height of the bitter Commons debate—Paramount’s New York headquarters hired as its newest Ottawa lobbyist Edmond Chiasson, a former Halifax lawyer and longtime Chrétien supporter. Chiasson’s wife, Heather, now works as the Prime Minister’s liaison in the office of Deputy Prime Minister Sheila Copps. She ran Chrétien’s 1990 leadership campaign in Nova Scotia, and the godfather of one of the Chiassons’ three toddlers is Eddie Goldenberg, Chrétien’s senior adviser.

The 10-year leases between Martin’s company and Famous Players began on Jan. 31, 1988—four months before Martin entered politics by winning the Liberal nomination in Montreal’s working-class riding of LaSalleEmard. And they do not expire for another four years. Although their rents vary, some people associated with the properties, as well as a knowledgeable Vancouver real estate broker, estimate that, as landlord, Nellmart collects an annual average of $70,000 to $100,000 per theatre—or at least $210,000 a year from Famous Players.

On top of that, all three leases have

Martin’s department is responsible for the Canada Development Investment Corp. (CDIC), the Crown corporation that has held the controlling interest in Ginn for the past four years—and which negotiated its resale to minority shareholder Paramount on Feb. 18. In Martin’s official financial disclosure statements, the finance minister revealed that, through his private Alberta holding

clauses by which the landlord gets a reported additional 10 per cent of each cinema’s net box-office take above the rent or some other fixed deductible figure. Theatre revenue is notoriously difficult to estimate. But according to a former owner of the cinemas, the 10-per-cent share could bring a landlord an estimated $100,000 more each year for every movie house. Still, Michael Scher, who is in charge of Famous Players’ leases at the company’s Toronto head office, said that none of Martin’s three Vancouver cinemas makes enough money to trigger any windfalls from that box-office clause.

Famous Players sublets two of the theatres, the Varsity and the Plaza, to independent operators. But in both cases, Famous Players remains the primary company dealing with Martin’s Nellmart. Still, when Khamraj Daulat, one of a group of projectionists who now run the Plaza, was negotiating his fouryear sublease with the chain last November, just after the election, he discovered that his ultimate landlord would be the country’s newly appointed finance minister. “I was sort of surprised,” he said. In fact, apparently in anticipation of the conflict code for ministers, Martin— through Famous Players—asked for a letter declaring that the tenants had no outstanding loans, grants or debts with the federal government.

Certainly, whatever Martin’s income from the theatres, it is but a drop in the bucket to a man whose personal wealth is estimated at $30 million—and whose corporate holdings, centred on his 100-per-cent control of giant Canada Steamship Lines Inc., far outstrip that. Reportedly the richest member of Chrétien’s cabinet, he has been scrupulous in detailing his vast financial and transport empire, going well beyond federal conflict-ofinterest requirements to list a wide range of treasury bills, bonds and real estate investments in a 52-page appendix to his declaration. To conform with the guidelines, Martin placed all of his Canada Steamship and other transport assets—held through his private Passage Holdings Inc.—under a blind management agreement beyond his control, run by Canada Trust and Montreal lawyer Stuart Hyndman. And he also declared that he would not take part in any government discussions on shipping, shipbuilding, Via Rail, Voyageur bus lines or any of his other transportation interests.

Martin had no obligation to do the same with Nellmart, and he took no similar steps to distance himself from his movie houses. That left his company in direct dealings with Famous Players and therefore with its controversial owner, Paramount, without the buffer of an arm’s-length administrator.

Over the four months that Martin was preparing to file his voluminous financial declaration, Paramount Communications

was engaged in the final throes of its fiveyear struggle to regain control of textbook publisher Ginn from the CDIC, which fell under his new portfolio. And the media conglomerate was also wrapping up negotiations to buy Maxwell Macmillan Canada, a subsidiary left from the wreckage of former British media tycoon Robert Maxwell’s global publishing web—another sale which required the approval of Investment Canada.

Nor is it likely that Martin was unaware of either deal. The chairman of Maxwell Macmillan Canada was a prominent fellow Quebec Liberal, André Bisson, who sits on the board of Power Financial Corp. with André Desmarais, Chrétien’s son-in-law. And Power Financial is part of the complex empire of Montreal-based Power Corp.,

where Martin spent his entire business career before buying out its Canada Steamship Lines subsidiary in 1981.

Indeed, on Feb. 11, a week before the Liberal government announced both sales, the president of the Association of Canadian Publishers, Karl Siegler of Talon Books in British Columbia, wrote Chrétien expressing concern at reported rumors of a deal over Ginn—and sent a copy of that letter to Martin. Then, according to Milliken, after the Liberal caucus meeting on Feb. 16, Martin sat in on a meeting over the Ginn sale between Manley and Dupuy, the two ministers who issued a joint press release announcing the sale with his department two days later. But that statement made no mention of the finance minister’s name. Instead, Peters, who reports to Martin, was quoted on his behalf acknowledging that the government had a hitherto-unknown “legal obligation” to return Ginn to Paramount.

The three theatres have been in Martin’s family since 1957, when they were acquired by his father, the late Paul Martin Sr., a for-

mer minister in the governments of Mackenzie King and Lester Pearson. Martin Sr. was a lifelong friend of Paul Nathanson, the reclusive millionaire heir to the Famous Players and Odeon fortunes known as the Howard Hughes of Canada. Martin leased the theatres to Odeon through a private family holding company named Nellmart, after himself and his wife, Eleanor, known as Nell. By 1982, he appears to have transferred them to a new amalgamated Alberta company of the same name. Its directors were his son and his former Windsor, Ont., law partner, William A Cowan, whose daughter Sheila is married to Paul Martin Jr. Today, Martin and his father-in-law remain joint shareholders in Nellmart.

Paramount’s bitter battle over the owner-

ship of Ginn shows the detennination of U.S. cultural conglomerates to resist any attempts to restrict their reach into foreign markets— above all in Canada, the largest buyer of American books and films. But the controversial outcome of the case has also raised questions about the future of the cultural industries’ exemption in the North American Free Trade Agreement (NAFTA). In fact, during the two-week transition period after the Oct. 25 election, before the Chrétien government took power, Washington was already testing the Liberals’ resolve by trying to reopen the cultural exemption clause through a legalistic phrase slipped into the U.S. NAFTA implementing legislation. “They did try to reopen the cultural exemption,” said Chrétien’s spokesman, Peter Donolo. “So the Prime Minister called [U.S. Ambassador James] Blanchard and said, *You do this and it’s no-go for NAFTA.’ ” But in light of the handling of the Ginn sale, the Canadian cultural community may need its own proof of the Liberals’ resolve to protect the nation’s cultural identity. □