Last December, Senator Jacob Austin told a Commons standing committee that the government’s two wholly owned aircraft companies— Canadair Ltd. and de Havilland Aircraft of Canada Ltd.—faced severe financial problems. Still, as the minister responsible for a new multibillion-dollar holding company that embraces Canadair and de Havilland, Austin defended the federal decision to pump $200 million into each firm. He estimated that it would take at least an additional $100 million for each to survive the next fiscal year. Austin conceded that extra funding might prove unnecessary but he added, “I am a worst-case worrier when it comes to business activities.”
The worst-case scenario did surface for Canadair last week (page 42). Prime Minister Pierre Trudeau dodged angry calls for a public inquiry into the company’s finances by blandly assuring the Commons that its newest Crown corporation, the Canada Development Investment Corp. (CDIC) had control of the situation. While that did little to assuage the critics—the Canadair storm is still blowing—it highlighted once more the mysterious, nascent CDIC. Formed initially to get the government out of Vancouver-based Canada Development Corp. (CDC), CDIC has since been handed responsibility for Ottawa’s interest in half a dozen firms. Apparently, it has a mandate to do more, much more. For now, CDIC exists only by virtue of 17 cabinet orders-incouncil. It does not even have parliamentary approval to rent a desk, let alone collect management consulting fees—which company President Joel Bell insists must remain confidential— from both Canadair and de Havilland.
The clearest indication of CDIC’s direction is its personnel. The chairman is Maurice Strong, world-travelled entrepreneur, part-time United Nations undersecretary, longtime Liberal and friend of the prime minister. The president is Bell, former executive vice-president of Petro-Canada and the principal architect of the controversial Gray report on economic nationalism. The company reports to Austin, formerly Trudeau’s principal secretary before his Senate appointment. All three men were instrumental in the creation of Petro-Canada, the Foreign Investment Review Agency and the Canada Devel-
opment Corp. Considering the track record of interventionism, it does not appear likely that CDIC is in business just to sell off Crown corporations.
Although Austin told Maclean ’s that legislation is pending within the next few weeks, Parliament has yet to examine any aspect of CDIC operations. The cast at the top also troubles the opposition. Conservative MP Donald Blenkarn bridles at what he sees as a
“perfect example of Liberal patronage in the extreme” and warns that a Tory government would quickly oust both Strong and Bell. Conservative Sinclair Stevens, former president of the Treasury Board, says that by creating an unaccountable corporate structure over an existing layer of Crown corporations, Ottawa is building “its own little Argus or Power Corp.” And, for his part, New Democratic finance critic Nelson Riis fears that, “while public attention is quite rightly focused on the
unemployment crisis, a very intricate vehicle for the Liberal party is quietly being slipped into place.”
If so, the move culminated last fall in a series of cabinet decrees that transferred CDIC authority to a cabinet committee headed by Austin and empowered it to manage the wide federal holdings. Since the CDIC had no operating funds, cabinet authorized a $500,000 interest-free loan from the finance ministry, to be repaid within a year. Austin told a Commons committee that the money was earmarked to “assist the work of the CDIC in its study of the business of Canadair, de Havilland and other assets which are the property of the CDIC.” As well, he pointed out, it would pay the confidential salaries of Bell and those of other recently hired managers.
Although Austin initially described the manoeuvrings as a “small reorganization,” the signals about the CDIC’s goals are becoming increasingly crossed. Conservative MP Marcel Lambert is concerned about the potential for “a great deal of flimflam,” since Austin has said, on the one hand, that there are no plans for “additional acquisitions” and, on the other, that “we may require some additional Crown assets.” And industrialists worry that the CDIC may try to use the assets of a company like Teleglobe, which earned a $47-million profit last year, to support some of its other financially strapped operations.
Teleglobe President Jean-Claude Delorme said that, while general negotiations are continuing with the CDIC, he is still not “precisely sure of its objectives.” In separate interviews, Austin and Bell provided some clues. The senator called the CDIC an “absolutely vital tool for the government to control its commercial exposure.” Bell mused about the possibility of international joint ventures giving the CDIC access to foreign markets and technology. But, he cautioned, “clearly, any international notion the CDIC would have would be played from the point of view of its contribution to the Canadian industrial economy.” In past speeches, Strong has said that CDIC would become “the key instrument of the government’s industrial strategy” and speculated on its potential to “reshape and redesign Canada’s economic future.”
Auditor General Kenneth Dye, in contrast, expressed severe apprehensions. In his last report, Dye said that Ottawa was dragging its feet on mea-
sures to “regain control” of Crown corporations—entities he described as enormous icebergs “floating lazily in the foggy Atlantic.” He cited the CDIC as a recent example of a Crown corporation “without adequate parliamentary review.” Since then, Dye has negotiated with both Austin and Bell for the right to examine the CDlC’s books—a right he believes should be automatic, given the taxpayers’ involvement. Said Dye: “The CDIC opens up a whole new way of governing through the use of a holding company for Crown corporations.” Austin does not disagree. But he is not sure he wants the CDIC to face the kind of “comprehensive, subjective” audit that Dye has in mind. Ironically, Austin supported last year’s decision by Eldorado Nuclear Ltd. to switch from Dye to a private firm, on the grounds that it required various services not provided by the auditor general. Austin notes that private firms offer day-today advice from their network of corporate knowledge. As he puts it, “I am not sure the auditor general is plugged into that commercial network.”
Stevens is convinced that the CDIC was created only because the “government had to do indirectly by going upstream what it could not do directly through the CDC.” What Stevens had in mind was the emergence of CDIC from the political ashes of former Liberal finance minister Walter Gordon’s brainchild, the Canada Development Corp. By 1980, the CDC had built itself into a $3.4-billion concern with interests spanning oil and gas, petrochemicals and mining. Despite the fact that the Trudeau government had never delivered a comprehensive economic strate-
gy, the prime minister promised during the 1980 election campaign that in the future the CDC would be “a more direct instrument of [the] national economy.” It would, he said, “take into account the broad policy objectives” of his government.
But Ottawa faced a major hurdle in its attempt to shape the CDC in its own image. A number of share sales had reduced federal ownership of the company to less than 50 per cent, and board
members felt more responsible to the corporation than to their political masters. As former finance minister Donald Macdonald describes the conflict: “Once you have the public in as a shareholder, then you can no longer use it as an instrument of public policy. That has always seemed perfectly clear to me.”
Not to official Ottawa. CDIC spokesman David Crane said that the federal government had become concerned about the CDC’s priorities. “It did not think the government should be able to tell it what to do,” he said. “There was a question of rebuilding an industrial base, and some people wanted the CDC to do that.” According to insiders, the crunch came when CDC President Anthony Hampson balked at Ottawa’s insistence that his company bail out troubled Massey-Ferguson Ltd. The federal government made a clumsy, highly publicized attempt to install Strong as the new CDC chairman at a May, 1981, board meeting. With then Deputy Finance Minister Ian Stewart, also an ex-officio CDC board member, acting as middleman, there was also pressure to appoint last-minute board members, including Bell. The board resisted the pressure, electing Strong as a board member but not as chairman.
The wide criticism of the federal government over its methods and the resulting plunge in value of CDC shares forced Ottawa to try a different route. By January, 1982, Trudeau transferred authority over thè CDC to Austin. Following a series of negotiations with Hampson, in May the federal government moved to sell its 30 million common CDC shares “when financial markets are more favorable” and announced the formation of the CDIC.
Said Bienkarn: “I think the CDIC is very much based on ideology. There is more and more state intervention in the business world, and the CDIC is a beautiful vehicle for entry on the industrial side, along the lines of the National Energy Program.”
Throughout the debate, the CDIC has continued to set up shop. There are branch offices in Toronto and Ottawa. The headquarters is in Vancouver, where Strong has purchased a home and the CDIC rents space from Jack Poole’s real estate consortium, Daon Development Corp. To assist him, Strong brought his British personal secretary, Ann Simpson, from his London, England, offices to work for the CDIC—a gesture the NDP’s Riis called “arrogant, insensitive and surprising considering high unemployment in Canada.” Like Simpson, who admits she is just beginning to learn about the CDIC, Canadians will have to wait to learn what its architects have in store for the country.
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