THE LIFE AND TIMES OF A WHEELER-DEALER

Ralph Farris promotes deals nobody else has thought of — like Northern Ontario Natural Gas, a dazzling stock market coup for Farris, an unfinished scandal for Ontario’s government, and yet a solid industrial advance for Ontario’s north-land. Here’s how he does it

ALEXANDER ROSS September 7 1963

THE LIFE AND TIMES OF A WHEELER-DEALER

Ralph Farris promotes deals nobody else has thought of — like Northern Ontario Natural Gas, a dazzling stock market coup for Farris, an unfinished scandal for Ontario’s government, and yet a solid industrial advance for Ontario’s north-land. Here’s how he does it

ALEXANDER ROSS September 7 1963

THE LIFE AND TIMES OF A WHEELER-DEALER

Ralph Farris promotes deals nobody else has thought of — like Northern Ontario Natural Gas, a dazzling stock market coup for Farris, an unfinished scandal for Ontario’s government, and yet a solid industrial advance for Ontario’s north-land. Here’s how he does it

ALEXANDER ROSS

THE CORPORATE ACTIVITIES of Ralph Keirstead Farris, the Vancouver pipeline promoter, have made him the chief beneficiary of one of the most notable stock-market coups in the recent history of Canadian capitalism and have established him as a businessman who can take an attorney-general’s investigation, a public scandal, and the resignation of three provincial cabinet ministers calmly in his stride. It should come as no surprise, therefore, that he holds fairly advanced views on the subject of making money.

For one thing, Farris goes farther than most businessmen in defending the proposition that large profits should accrue to those who take risks. Thus, when his initial investment of three hundred dollars in Northern Ontario Natural Gas Company Limited netted him a profit of two hundred thousand percent, he observed that this was "not excessive” — in fact, he felt it might be insufficient, considering the risks involved. For another, Farris takes a highly

sophisticated view of competition, the alleged cornerstone of the free enterprise system. Farris concedes its usefulness in certain fields, but he feels that most competition is wasteful, and no fun. He is repelled, for instance, by situations where rival companies peddle very similar products, like soap or cigarettes. "That kind

of competition." Farris says, "breeds ulcers and creates old men very fast.”

Despite the difficulties he has lived through in recent years, Farris is not ulcer-prone and, at fifty-three, he is youthful. This may be because he prefers to circumvent competition by specializing in the promotion of ideas which no one else happens to be selling at the time. He has profitably employed this approach all his working life, but its most spectacular application was the promotion of Northern Ontario Natural Cías, which is now one of the country's largest utilities and Ontario's most controversial corporation.

Today NONG is an aggressive, rapidly expanding firm which buys Alberta gas from Trans-Canada Pipe Lines Limited and resells it to householders and industries in forty communities across northern Ontario. But in 1954, when Trans-Canada was planning its threehundred - million - dollar pipeline across the country. Northern Ontario Natural Gas was a

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LIFE OF A WHEELERDEALER

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Farris idea that most oilmen considered futile. “Everybody thought we were wasting our time," says Farris. He preferred it that way: it meant he hail less competition.

Farris’s idea was that a single company, distributing natural gas over an area roughly half the size of France, could offer its product at prices low enough to compete effectively with rival fuels like oil and coal. But there was a major hitch: Trans-C’anada at that time planned to build its line southward along the shore of Lake Superior, bypassing most of the communities in NONG’s proposed franchise area in the large clay belt to the cast of the Lakehead.

By 1955, using methods that are still the object of intense curiosity among officials of the Ontario attorney-general’s department, Farris succeeded in persuading Trans-Canada to alter its proposed route and go due east from the Lakehead to take in northern communities like Hearst and Timmins. At the same time Farris persuaded the city councils of the On-

tario north that NONG should supply them with gas. This collection of decisions made Farris a rich man.

By the time NONG made its first public stock offering, in June, 1957, his original three-hundred-dollar holding was conservatively valued at $650,000. But Farris was not the only one who profited from that deal. Gordon Kelly McLean, the nephew of Ontario Mines Minister P. T. Kelly, had bought 105,750 shares at a little over a nickel each. He split them with his Uncle Phil, sold most of his own share (for $377,000), and still held about $150,000 worth. Phil Kelly, the mines minister, sold NONG shares for $358,000 and still owned about a quarter of a million dollars’ worth. Among the others who bought the stock at very low prices, before it was offered to the public, were Ontario Lands and Forests Minister Clare Mapledoram, and Public Works Minister William Griesinger.

Public life: front-page story

The scandal this produced led to the resignation of all three cabinet ministers, and to an attorney-general’s investigation that put NONG on the front pages of the Toronto newspapers for months but found no evidence that public officials had improperly profited from NONG stock. Farris suffered little from the investigation. The attorney-general’s department eventually filed technical charges under the Ontario Securities Act; NONG was fined a hundred and fifty dollars and Farris and his executive vice-president, C. Spencer Clark, were each assessed a fine of five hundred dollars.

That ended the affair, or seemed to. But this year, after a series of secret investigations in

B. C. and Ontario, Farris faces difficulty with the law again. The new unpleasantness arose when officials of the B. C. attorney-general's department and the RCMP began looking into the affairs of Stewart Smith, who resigned last year as B. C.’s superintendent of brokers and moved to New Zealand. The Ontario attorney-general, Fred Cass, has told Ontario’s legislature that the B. C. officials, in the course of their investigations (which included a weeklong visit to Smith in New Zealand), turned up evidence which was at variance with testimony given in the 1958 Ontario investigation. Accordingly, Ontario's investigation was reopened; and Cass hinted that bribery and perjury charges might result.

As this is written, no charges have been laid. But Ralph Farris, one of the main objects of all this attention, has lately grown accustomed to having RCMP investigators drop around to his office for an afternoon of thumbing through old records. Though he’s not under subpoena in B. C., he treats the Mounties politely, even to the point of clearing off a table for them in a corner of his office. This summer he seemed unworried at the prospect of bribery or perjury charges against anyone, and he dismissed the apparently endless investigations as a waste of time.

Background: B.C. establishment

This may be because Farris’s background has given him the assurance to accept criticism with easy indifference. He is the son of Senator John Wallace de Beque Farris, a snowyhaired patriarch of eighty-four, who has such a majestic presence that judges and attorneysgeneral all but tug their forelocks when they confront him. Senator Farris came to B. C. from New Brunswick in 1903 and served as attorney-general and labor minister in Liberal provincial governments from 1917 to 1922. Later, he ran the provincial Liberal Party as a kind of personal fief. In 1937 he was named to the senate by Mackenzie King.

The crowning irony of the senator’s long life is that, though he's been a consistent defender of civil liberties for around fifty years, he lives in the public memory as the author of an incautious observation he made on the floor of the Senate in connection with the race of a member of parliament. The senator was referring to a remark attributed in the newspapers to Douglas Jung, a Chinese Canadian who was then an MP. “What right,” asked the senator, “has this Chinaman got to represent the Canadian people?” The reaction was predictable. Editorial writers across the country pointed out that Jung, as an elected MP, had a stronger claim to represent the people than the senator himself. But it was the word “Chinaman” that really bothered people. It was a tasteless and outmoded epithet dating from Senator Farris’s youth, when Chinese Canadians really were alien, scurrying figures in pigtails, fighting tong wars on Pender Street. Senator Farris’s friends pointed out, in his defense, that long ago the senator defended Chinese Canadians skillfully against gambling charges that amounted, he claimed, to legal persecution.

Upbringing: the Kennedy touch

Like another North American patriarch, Joseph Kennedy, the senator raised his three sons on a diet of hard work and sibling rivalry, gave them good allowances, taught them to play for keeps — and sent them to Harvard. Ralph, after graduating from the University of British Columbia in 1929, attended Harvard business school. His brother John, who is now a partner in the senator’s law firm and B. C. vice-president of the Canadian Bar Association, graduated from Harvard law school in 1934.

Their brother Donald, who is now a mining and real estate promoter, emerged from Harvard business school in 1930.

After Harvard, Ralph Farris worked for a few years in New York, married a Northwestern University co-ed, and returned to Vancouver in 1934. He set up as a stockbroker and in 1939 bought a seat on the Vancouver exchange. He spent the war years as a reserve captain in the Irish Fusiliers, meanwhile running a family construction firm in Prince Rupert.

When the postwar oil boom erupted in Alberta, Farris started commuting to Calgary. He helped promote various oil and natural gas companies which made him prosperous, though

not fabulously wealthy. He. his brothers and his father also worked closely together. Ralph was president of Charter Oil Company until its recent sale to Swiss interests, and his father was chairman of the board. Donald is president of B. C. Estates Limited, the holding company for a string of Vancouver apartment houses, and Ralph is a director. John is a director of Ralph's NONG. The family law firm naturally acts for the majority of these companies.

Private life: no flamboyance

His various activities have given Farris a certain swashbuckling reputation among the members of the Vancouver establishment, but

his private life at home is not flamboyant. His house in the Shaughnessv district is large and comfortable, but modest compared with the mansions of local merchant princes who have winding driveways, swimming pools, and gatehouses. Farris has no gatehouse and his lot is too small for a pool. The driveway, however. hints at his main occupation: it has two ornate lamps that constantly burn Alberta natural gas.

Farris's chief recreation is his black, fortyeight-foot racing sloop. Hawk, which he bought after his 1957 market conquest with NONG. Though he dislikes ordinary competition in business, he indulges his competitive instinct lavishly around the Royal Vancouver continued on page 64

GAS LINE Lands and Forests Minister Clare Mapledoram Resigned

PROFITS IN Public Works Minister William G i ie sin g e i ‘ Resigned

THE CABINET Mines I lVlinister Philip Kelly Resigned

LIFE OF A WHEELER-DEALER

continued from page 19

He commutes between his Vancouver home and Toronto office

Yacht Club. Until the gun signals the start of a race, Farris is a genial shipboard companion. But that instant transforms him into a fanatic marti-

net, a savage tongue-lasher of his crew. “The nicest thing he called me all weekend was a horse's behind,” one young crewman reported after two days aboard. Farris defends his manner: ‘‘When a race is on, you want to win it. I guess it’s the same way in any competitive situation. When I’m fighting at a franchise hearing, I hate my opponent just as hard as I can hate him.”

Vancouver, Farris says, is a city where “there’s more fun per dollar”

than most places. It has never struck him as odd that he should continue to live there, though most of his business is thousands of miles away. He is a jet-age executive who commutes between his Vancouver headquarters and the money markets of the east as casually as Toronto businessmen commute between Adelaide Street and Don Mills. His money-making world is an endless succession of long-distance telephone calls, transcontinental flights, and late-night conferences in

half a dozen cities. In most months he spends two weeks out of town.

Life on the road is comfortable. He drives his Jaguar or his Corvette to Vancouver airport, climbs aboard a first-class flight for Toronto, and alights at Malton five hours later. He taxis to the Lord Simcoe Hotel, where a suite is kept in permanent readiness, and then walks across University Avenue to NONG’s headquarters. He has no regular office there. Instead, he sits down at one end of a long, boatshaped table in the boardroom and immediately resumes the telephoning he had to cut short on the west coast so he could catch the plane to Toronto. As he talks, he gestures expansively with his free hand, broadcasting cigarette ashes in a gentle arc around his swivel chair and gazing out the window on the north wall, from which he can see, at the far end of University Avenue, the grey-green dome of the Ontario Legislature. Up there, likely as not, they’re talking about him.

What they talk about is the method by which Farris and NONG obtained the exclusive rights to sell natural gas in northern Ontario. It was the Ontario NDP leader, Donald MacDonald, who said that the NONG stock deal was “one of the most flagrant pieces of profiteering in the history of Canada.” Other politicians have been more restrained in their remarks, but almost everyone who has commented on NONG’s history has been struck by the speed and efficiency with which Farris worked and by his ability to overcome the objections of anyone who opposed him.

“Where’s northern Ontario?”

Farris first became interested in the project when Gordon Kelly McLean, the mines minister’s nephew, walked into Farris’s office in 1954. McLean had heard his Uncle Phil complaining about the Lake Superior route then planned for the TransCanada pipeline. This route, the mines minister had complained, bypassed most major communities of northern Ontario, including Timmins, Kapuskasing, and Kirkland Lake, to say nothing of Kelly’s home town of Smooth Rock Falls. Furthermore, to lay a pipeline beside the lake TransCanada would have to blast a trench through the world’s oldest and hardest rock, the Pre-Cambrian shield. But if the pipeline went further east before dipping southward, Trans-Canada would be digging through soft clay most of the way and at the same time would avoid the necessity of building costly access roads. Kelly wanted someone to confirm his hunch with engineering surveys and surveys of the northern markets for natural gas. He had asked his nephew to find such a man, and McLean went to Farris. They were slight business acquaintances.

“When McLean came and told me he’d more or less promised on my behalf to survey this thing,” Farris recalls, “I didn't even know where northern Ontario was. I had to send my girl out for a road map to find out what he was talking about.”

But Farris and his friend Spencer Clark took on the assignment together. “We had no thought of a promotion

a; that time," he says. "We had to carry out this obligation. But naturally, 1 wasn't unimpressed by the fact that McLean's uncle was the mines minister.” Within two months, with the help of an experienced gas man from Seattle, Farris and Clark had grasped the vast money-making potential in changing the Trans-Canada route and supplying gas to northern Ontaiio.

The economics were simple. A single distributor of gas. operating in one town, would sell a lot of gas for heating houses in the winter, but practically none during the summer. The pipeline, his main investment, would lie idle half the year, and paying for it would put the rates so high that gas would have no price advantage over oil. To level out these winter peaks and summer valleys in sales, a distributor would have to operate throughout the Ontario north. He would buy his gas from Trans-Canada at uniform rates all year, then resell it to large industrial users — including ¡hirteen pulp-and-paper mills in the area — at low, bulk rates in the summer. In the winter he would sell it to home owners and cut off the industrial customers, who would be giver especially low' rates to compensate them for accepting interruptible service. The result would be a system that would operate at something close to peak capacity all year.

This was the proposition which Farns and Clark urged on TransCanada, the Ontario government, and the various cities and towns lining NONG’s proposed route. After incorporating the company in May, 1954, they began converting the Ontario northerners to their point of view. The natives were ripe for conversion, partly because they felt neglected. Municipal officials throughout the north were keenly aware that too often the good things of life, from television stations to sixty-cycle electricity, reach Toronto first, then filter northwards,slowly. If the Farris plan worked, northern Ontario communities would be using cheap gas before Toronto.

At the same time, cheap gas promised to stimulate industry. Northern Ontario was full of chambers of commerce looking for a cause, and NONG gave it to them. Less than three months after NONG's incorporation, Timmins Mayor Will' Spooner agreed to support the company's campaign to change the Trans-Canada route. After seven more months of argument, representatives of sixteen municipalities, from Hearst to North Bay, met in Kirkland Lake and recommended the NONG plan.

At this moment, as enthusiasm was mounting across the north, something curious was happening to NONG: it was starting to look vaguely like what President Dwight Eisenhower called "the military-industrial complex" — the cosy club of generals who buy defense equipment from other ex-generals, who now work for defense firms. As the NONG promotion developed. the line between people who worked for NONG and people closely connected with Ontario politics began to blur. A Toronto lawyer, A. D. McKenzie. the president of the Ontario Progressive Conservative Association, was retained as counsel and became

one of the original twenty-nine shareholders who received stock directly from the company's treasury. He later turned over the brief to a firm headed by Beverly Matthews, who was one of the Ontario Tories' leading fund-raisers. Ralph Howard, a commissioner of the Ontario Fuel Board — the agency that regulates Ontario gas companies — left the board and joined NONG as company secretary in 1958. Phil Kelly's confidential secretary ended up working for NONG. So did the

brother of a mayor of Timmins. Don O'Hearn, an Ontario legislature reporter whose column was syndicated in several Ontario newspapers, did public relations work for Farris during the early stages.

In January, 1955. Trans-Canada indicated that its line would go where Farris wanted it. Reaction in the north was ecstatic. "It is to us the answer to a prayer," said the head of the New Liskeard chamber of commerce. Farris was equally euphoric. He was sil-

ling on a gold mine. The sixteen municipalities which formed the nucleus of the company's service area signed franchises and others signed up in succeeding months. By the time NONG became an operating company in 1958 it was licensed to serve thirty-two communities along eleven hundred miles of the Trans-Canada route, from Kenora to Orillia.

There were a few hitches, however. At the Lakehcad, a new company called Twin City Gas Company Lim-

ited won out over Farris in the contest for the key franchises in Fort William and Port Arthur, as well as in Nipigon, Geraldton, and Dryden. Fort William’s mayor, Hubert Badanai, who wanted a local company to distribute gas locally, was visibly upset when he later read in the papers that NONG had simply bought a controlling interest in Twin City, without asking anybody. The ill feeling that followed caused NONG to act as if the merger weren’t really a merger, an elaborate fiction which the company still maintains. Twin City is still called Twin City, though NONG owns more than ninety-eight percent of its stock.

At Sudbury the problems were more troublesome, and their solution far more mysterious. Sudbury, in fact, seems likely to be a central issue in the latest chapter of the NONG scandal.

The mysterious missing shares

Of all the northern cities, only Sudbury at first refused to grant a charter either to NONG or to a local gas distributor. In 1955, Sudbury city council refused to sign up until International Nickel had signed a gas contract, while lnco, for its part, would not sign until the city did. But then Mayor Leo A. Landreville, who had first opposed Farris, became a strong supporter of NONG. Council members of those days recall that at council meetings Landreville used to bring up the question of the NONG franchise even when it wasn’t on the agenda. He held a party at his home, and talked up the benefits of NONG. In general, the councilors agree that Landreville wore down the opposition. In the summer of 1956, NONG got its Sudbury franchise. Two months later, Mayor Landreville was appointed by the St. Laurent government to the Ontario Supreme Court, and became Mr. Justice Landreville.

When the current Ontario investigation into NONG began, Landreville’s name turned up. Subpoenas to witnesses were issued “in the matter of Northern Ontario Natural Gas Company, Continental Investment Corporation Limited, Convesto and Company, John McGraw, Ralph K. Farris, the Honorable Leo Albert Landreville, G. Kelly McLean ...”

What these names had in common, it turned out, was a suspected connection with a mysterious block of fourteen thousand NONG shares which had been issued from NONG’s treasury to Continental Investments, and held in that firm’s nominee account, called Convesto. John McGraw, a member of the board of governors of the Vancouver Stock Exchange and a good friend of Farris, heads Continental. During the original 1958 investigation, McGraw and his company turned over their records on the fourteen thousand shares. They showed that Convesto got the stock, that shortly after that a somewhat larger block went into McGraw’s own account; and that some time later the same amount went back to Convesto. But what actually happened to the original fourteen thousand shares, the records did not say.

When the investigation was reopened, Ontario newspapers began to speculate about what it might disclose.

The Toronto Telegram's prediction was typical: “A prominent Ontario figure is almost certain to be named in the report on the reopened inquiry ...” Kelso Roberts, then the Ontario attorney-general, said that a politician in a municipality doing business with NONG got the “major part” of the fourteen thousand shares, but he wouldn't name him. Finally Donald MacDonald, the NDP leader, said that the man everyone was talking about was Mr. Justice Landreville. He said it, of course, under the privilege of the legislature; even if he was slanderously wrong, Mr. Justice Landreville couldn't sue.

Landreville did, however, tell a Toronto Star reporter that he had indeed held some NONG stock. But he said: “I got my shares later, and for cash. It was known to the whole (Sudbury) council. It’s not a secret.” Landreville had talked to several people about his holdings, but at the 1958 investigation both Farris and Clark swore that Landreville held no NONG stock, so far as they knew. And certainly NONG’s records show that, whatever name was on the judge's stock, it wasn't his own.

Across the Ontario north, NONG stock found its way into the hands of mayors and councilors. In June, 1957, NONG made its first stock offering of four hundred thousand units, each consisting of a twenty-doliar debenture and one share of stock, at thirty dollars per unit. Since the stock was already trading in head-and-head dealings as high as fourteen dollars, this was a notable bargain. Farris had promised that local residents in northern communities would have a chance to buy this stock. Sudbury’s new mayor, Joe Fabbro, felt that a large part of it should go to Sudbury, since the city and lnco were to buy a very large part of NONG's gas. Fabbro made up, for Farris, a list of people in the community who deserved to get it. The stock was then offered to these people in the form of options mailed to them. Each alderman was offered a hundred units, each controller a hundred and fifty (about half accepted the offer). Fabbro himself formed a syndicate of relatives and friends and bought sixtyfive thousand dollars' worth. Similar lists were apparently formed in other

towns NONG served. At least seven northern mayors ended up with NONG stock. As Fabbro says, it was legal. They were buying the stock at the price at which it was offered to the public (or that part of the public which acted quickly enough to buy the issue), not at the bargain prices paid by Farris, Kelly, and other insiders.

"Once the franchise had been given, we were not dealing with NONG, but with contractors,” Fabbro says. “There was no conflict of interest." In the end perhaps three hundred thousand dollars’ worth of NONG went to mayors, councilors, and cabinet ministers, aside from Mines Minister Kelly.

It was the resignation cf' Kelly, in 1957, and his colleagues Mapledoram and Griesinger, in 1958. which caused the sensation in Farris's life. At that time Premier Leslie Frost, in accepting their resignations, was careful to explain that though his ministers had ignored a cabinet directive to steer clear of gas stocks, they had never been in a position to influence NONG’s fortunes directly. Kelly, for his part, assured reporters he was innocent, though indiscreet — his priest, he said, had absolved him of all blame at confession, and he felt no pangs of conscience for supplying his fellow cabinet members with stock.

The hottest deal on Wall Street

Not surprisingly, Farris concurs in this view'. As he sees it. the ministers were just plain stockholders, like everybody else. If they bought NONG shares against their premier’s orders, it w'as their own indiscretion and no affair of his. The technical infractions of which he was found guilty were the result, he says, of a mistake. Stock had been sold over the counter to provide working cash for the company, and by the time NONG applied to the U. S. Securities and Exchange Commission there w'ere more than a thousand shareholders and the over-thecounter price was being quoted on the financial pages. This state of affairs w'as illegal: under Ontario law', NONG should have filed a prospectus before the stock started trading. Farris says he failed to do so because his lawyers thought it wasn’t necessary.

Since gas arrived in 1958, the desert has not bloomed in northern Ontario as dramatically as some people predicted during the company’s empirebuilding phase. But the industrial climate has improved. The arrival of gas apparently influenced one of the Lakehead’s larger industries, Canada Malting Company Limited, to launch a big expansion program at the Lakehead instead of in Winnipeg. Gas also contributed to Jones & Laughlin Steel Corporation’s decision to locate a thirty-million-dollar iron-ore pelletizing plant near Kirkland Lake, in Cochrane, NONG’s industrial promotion department helped coax a new' plywood plant to the town: the plant employs a hundred people.

NONG itself now employs nearly three hundred, and has spent fortythree million dollars on its distribution system, it sold thirty-four billion cubic feet of gas last year, and earned almost a dollar per share in 1962. By any standards it is a great North

American success story, though it does not follow precisely the lines laid down by Horatio Alger.

Ralph Farris enjoyed making all that money, and enjoys spending it. He takes an almost schoolboyish pride in contemplating the astonishing growth of his brain child. He is fond of recalling the magic day. June 4. 1957. the day NONG made its first public stock offering on exchanges in New York, Toronto, and Vancouver. Canadian gas stocks were

the hottest issue trading anywhere, and the NONG shares were trading frantically.

Farris was in New York that day. awaiting the market’s verdict in the election-night atmosphere of his underwriter's office on the seventeenth floor of 1 Wall Street.

Phones rang constantly. Brokers all over the country screamed over the telephone for higher allotments of NONG's brand - new thirty - dollar units. In the midst of it all. one of

Wall Street’s biggest investment bankers — one of those shadowy financiers who control the American money that is often said to control Canada — came up to Farris and said: “Well, Ralph, how does it feel to have the hottest deal this street's seen in years?” To Ralph Farris, it felt just fine. “It was an incredible, exciting experience,'' he says now. “That kind of experience could happen only once in a lifetime, and no amount of criticism can take it away from me.” ★