The caisse’s bold but silent conquests

David Thomas February 1 1982

The caisse’s bold but silent conquests

David Thomas February 1 1982

The caisse’s bold but silent conquests


David Thomas

When the province of Quebec’s public pension and insurance funds were tinkled into a common chest 17 years ago and buried securely beneath the province’s financial floorboards, the only concern was quiet security. There, under cautious grandfatherly management, the storehouse-called the Caisse de dépôt et placement du Québec—was meant to accumulate assets and earn interest as well as public trust.

Recently, however, the floorboards have begun to buckle from the caisse’s burgeoning $14 billion in assets as well the aggressive,


even rebellious, con trol of its new fiduciary heir, Jean Campeau.

At first, Campeau’s actions as guardian of the family trust endeared

him to the Parti -

Québécois government. Now the intimacy is being strained by a public spat which has even involved the neighbors, the Ontario Securities Commission (OSC). The issue, as Campeau turns the caisse (which is 55 per cent larger than the Alberta Heritage Savings Trust Fund) into an activist deal-maker, is how much longer its affairs can stay secret. OSC hearings scheduled for this week were postponed at the last minute, but it only means . that the fight, already public, is about to become more bitter.

Traditionally, the caisse has been held beyond the grasp of often cash-short governments. Change was heralded when, in March,

1980, Campeau, then assis tant deputy minister of fi nance, was named chair man and general manager of the caisse. His predeces sor, Marcel Cazavan, had apparently resigned in ob jection to Finance Minister Jacques Parizeau's insis tence that the caisse lend

money to the government at preferred (below commercial) rates and in amounts determined by the minister. The new man was closer to the political powers and went so far as to telephone Domtar Inc. Chairman A.D. Hamilton to chastise him for stating in the papermaker’s 1979 annual report that it was in Domtar’s best interest that Quebec

remain part of Canada. This, said Campeau, was an affront to the company’s biggest shareholder, the caisse, and through it Quebec’s government.

Campeau began to move in other directions as well, even while becoming one of Quebec’s most secretive powers. Although he began to put financial muscle behind government policy, he began to alienate himself from the gov-

ernment as their operating views diverged. With about $2 billion in company shares, the caisse controls the biggest stock portfolio in Canada yet refuses to divulge major transactions as other investors are required to do. Even Parizeau has called it “totally unacceptable” for the caisse to refuse to comply with OSC insider trading rules.

Nor has the Quebec Securities Commission succeeded in convincing the caisse to comply with similar rules. Even an announcement earlier this month by the minister that the law would be changed, thus forcing the caisse to bend, did not achieve the expected gracious consent. Instead, Campeau issued a statement last Thursday that he would continue to ignore inQsider trading rules until the law is forimally changed. And, he sniffed, the caisse will do its business

on the Montreal Stock Exchange as long as the OSC maintains its temporary ban of the caisse in Ontario. In January, Ontario authorities suspended the caisse’s right to trade. Not only that, the caisse was summoned to face allegations that it took over Domtar illegally last summer when the caisse and another Quebec agency increased their joint Domtar holdings to 42 per cent without re-

Ontario also alleges that the caisse has not complied with “insider” rules by failing to disclose trades in the shares of Dominion Textile Inc., Provigo Inc. and Domtar—companies in which it owns more than 10 per cent. Caisse lawyers, led by ex-Air Canada chairman

porting the purchases or offering other Domtar shareholders an equal price. Campeau has refused to comment, and caisse communications director Gérard Blondeau will not explain how or when the Domtar shares were acquired.

and former Supreme Court of Canada justice Yves Pratte, have been instructed to argue when the hearings are held that the caisse, as a Crown corporation, is exempt from commission regulations.

The controversy has been building for two years. One of the caisse’s original political parents is Eric Kierans, minister of revenue in the Liberal government of Jean Lesage, who, with René Lévesque as his social welfare minister, created the caisse in 1965 after Quebec opted out of the Canada Pension Plan and established its own provincial oldage security scheme.

Kierans remains a defender of the caisse but is a harsh critic of its general manager, who, he says, “is a living example of why you shouldn’t give bureaucrats 10-year appointments.” Kierans resigned from the caisse board of directors in May, 1980, angered by Parizeau’s budget speech statement that the caisse would be required to lend $1.1 billion to the treasury and another $400 million to HydroQuébec. It was, Kierans argued, a usurpation of the board’s authority.

The resignation, two weeks before Quebec’s referendum on sovereignty-association, was, Kierans now admits, timed to shake public confidence in the government. “René was especially mad and hasn’t forgiven me since,” he says. “I knew that it was an appropriate time to do it if I didn’t want a ‘Yes’ vote in the referendum.” But his quitting, if not its timing, Kierans insists, was motivated by concern for the caisse. Says he: “Campeau is going full speed ahead and damning the consequences. He’s an extreme nationalist.”

Certainly, some of the big investment decisions made by Campeau appear to be motivated as much by old Quebec grievances as by the promise of profit. Domtar, for example, had long been decried for maintaining a predominantly English-speaking head office in Montreal while permitting its mills in Quebec to deteriorate. Now the company is under firm government control, with 42 per cent of its stock held jointly by the caisse and the Société générale de financement.

Some of the stock will be retained by the caisse, with the rest in the hands of an as yet unnamed holding company which will also have majority ownership of papermaker Donohue Inc. The caisse has thus managed the effective nationalization of Domtar and merged it with Donohue without anyone noticing until the game was over.

Another caisse move with apparent political considerations was the takeover last year of natural gas distributor Gaz Métropolitain. Under its former owner, Northern and Central Gas Corp. Ltd. of Toronto, Gaz Métropolitain had been harshly rebuked by successive Quebec governments for its reluctance to expand Quebec’s natural gas delivery network. Since the caisse takeover,

Montreal streets seem to be under armored attack as power shovels rip apart the pavement to lay new gas conduits. Meanwhile, the caisse is gradually transferring its Gaz Métropolitain holdings to the Quebec government’s SOQUIP petroleum companyemdash;another quiet nationalization.

The deal making accelerated in July, when the caisse patriated to Quebec ownership much of the province’s mining industry. It joined with Brascan Ltd. to form Brascade Resources Inc. which took over Noranda Mines Ltd. In August, the caisse helped lever Power Corp. Chairman Paul Desmarais into a position as the major shareholder and board member of Canadian Pacific Ltd., bringing the conglomerate under local, and French-speaking, influence.

And all of this has been accomplished on the quiet. As the caisse’s Blondeau says: “Insofar as Domtar or any other dealings in any other shares are concerned, we have not been requested in the past to publish them, and our annual report does not show what we hold. There is no obligation for us to be more precise than that.” The floorboards are about to be pried up. lt;£gt;