KRW Awards Gold Book 2013 by MagAwards

59th Annual/59e Ă&#x2030;dition

Kenneth R. Wilson Awards

The Gold Book

Les Prix Kenneth R. Wilson

This project was made possible with the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage.

Best editorial Meilleur ĂŠditorial Sponsored by/CommanditĂŠ par CDS Global

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Yves Bonneau Point de vue Conseiller

point de vue

Le grand défi de l’épargne transgénérationnelle À mesure que la génération omniprésente des baby-boomers se transforme en cohorte de rentiers, le poids de tous les malheurs semble s’abattre sur les autres générations. Elle aura probablement d’énormes responsabilités à combler pour ramener l’équilibre social entre les générations.

ncore une année de plus au compteur ! Les années se suivent si vite qu’elles semblent ne plus se démarquer l’une de l’autre. On a l’impression que les événements d’hier continuent de marquer profondément ceux d’aujourd’hui et ceux qui s’en viennent. L’expression populaire voulant qu’« on reprend tout en neuf avec l’année nouvelle ! » ne s’applique plus vraiment... Je relisais mon billet de janvier 2011 et j’aurais pu le republier à quelques détails près, en changeant la date... et les noms des pays européens qui menacent la planète d’une récession imminente. Au lieu de la Grèce et de l’Irlande, l’Italie et la France ? Et pour 2012, que voient les devins ? Beaucoup... d’inquiétudes, et peu... de croissance. La fameuse récession qui nous pend toujours au nez; la zone euro sera-telle mise à mal par le Portugal, l’Espagne, la Slovaquie ? Même les titres de dette allemands, jadis prisés pour leur qualité, n’ont pas trouvé les preneurs escomptés. Les pays de la zone euro sont inquiets. Les agences de notation sifflent sur leurs têtes depuis des mois. Et, justement, comme le début de l’année coïncide normalement avec un court moment d’introspection et de réflexion, j’en profite pour porter à votre attention cette étude américaine qui a eu très peu d’attention dans les médias, mais qui risque de vous donner une idée plus ou moins réjouissante de l’avenir de la profession si rien ne change au cours des prochaines années. L’institut américain Pew Research Center, spécialisé en études socioéconomiques et sociodémographiques, a publié en novembre dernier une analyse très exhaustive de l’état de la richesse chez nos voisins du Sud. Pour la plupart des Américains, comme pour les Canadiens et les Québécois d’ailleurs, la propriété est la composante qui pèse le plus dans la balance des actifs. En www.conseiller.ca

2009, la valeur de leur maison représentait 39 % de leur actif total moyen, à laquelle on ajoutait la seconde plus importante composante de leur actif, soit les placements (fonds et titres), qui représentaient 16 % de leur actif total moyen. « Évidemment, comme la maison est l’actif le plus important des ménages américains, tout changement de direction du marché immobilier a des conséquences considérables sur la valeur de l’actif des ménages », écrit le Pew Center. Lorsque la crise immobilière a débuté vers 2006, elle a tiré vers le bas la valeur de l’actif des ménages pendant la reste de la décennie. Une véritable hécatombe. Toujours selon l’institut de recherche, en 1984, les ménages d’adultes de 65 ans et plus avaient un actif net de 10 fois supérieur aux ménages de la plus jeune génération des 35 ans et moins. En 2009, cette même comparaison donnait une différence de 47 fois supérieure. En dollars de 2010, la valeur nette moyenne des retraités américains de 65 ans et plus était de 170 494 $US, comparées à un mince 3 662 $US pour les ménages de ceux qui avaient 35 ans et moins. Faites le calcul, c’est 47 fois plus en faveur des plus vieux ! La disparité de la richesse entre les plus âgés et les jeunes s’est bien sûr intensifiée au cours de la récente crise économique. Mais elle n’explique pas complètement l’ampleur du gouffre que constatent aujourd’hui les chercheurs. La faible augmentation des salaires et le chômage sont aussi des facteurs à considérer. Malgré le fait que la valeur moyenne des avoirs des ménages ait augmenté de 10 % entre 1984 et 2009, la portion des ménages n’ayant aucun actif, ou une valeur négative, a aussi augmenté. Elle était de 11 % en 1984; elle est maintenant de 20 %. Finalement, on apprend que l’avoir des janvier 2012

Américains de 65 ans et plus a crû de 42 % depuis 1984, alors que celui des jeunes de 35 ans et moins a été amputé de 65 %. Ces chiffres qui décrivent la réalité financière des Américains peuvent facilement être transposés dans la plupart des pays occidentaux, avec quelques variantes près. Au Canada, selon l’Institut Vanier de la famille, la dette moyenne des ménages canadiens atteignait plus de 100 000 $ en 2010, et on réussissait à épargner en moyenne 2 500 $. En 1990, on épargnait 8 000 $ par ménage. Au Québec, selon Ipsos Reid, les dettes des ménages sont passées de 40 000 $ en 2000, à plus de 65 000 $ en 2010. La progression la plus importante de l’endettement a toutefois été constatée chez les 35 à 44 ans. Or, même si la valeur des avoirs des ménages canadiens a aussi progressé de façon spectaculaire en raison de l’immobilier, rien ne garantit que ce marché ne fléchira pas lui non plus comme aux États-Unis. Au rythme où vont les choses, une grande partie de la richesse se retrouvera néanmoins entre les mains d’une génération qui vivra plus longtemps que toutes les autres générations de l’Histoire, et qui devra en plus prendre soin de ses parents âgés tout autant que d’aider ses enfants. Sans vouloir être alarmiste, le portrait d’avenir de l’épargne devra changer radicalement au cours des prochaines années si l’on veut que l’industrie financière continue de prospérer. Comment, en effet, pourra-t-on soutenir une saine croissance des affaires et un avenir enviable dans la profession si demain les jeunes générations n’ont pas de revenus disponibles pour l’épargne ?

Yves Bonneau, rédacteur en chef yves.bonneau@objectifconseiller.rogers.com 5

point de vue

Des caisses de retraite de Ponzi ?

Les caisses de retraite des entreprises privées comme celles des employés de l’État croulent littéralement sous une énorme pression résultant des rendements anémiques des marchés depuis une décennie.

uébec a mis sur pied récemment un comité d’experts sur notre système de retraite, présidé par l’ex-numéro un de Desjardins Alban D’Amours. En 2010, 1,23 million de Québécois souscrivaient à un des 893 régimes à prestations déterminées (PD) surveillés par la Régie des rentes du Québec. De ces derniers, 572 000 sont des cotisants qui représentent 15 % des 3,9 millions de travailleurs employés au Québec. Selon Alban D’Amours, ils étaient 25 % dans les années 90. Les régimes PD sont en sérieuse perte de vitesse à mesure que les rendements boursiers ne sont pas à la hauteur des prévisions et que l’on se rend compte que la retraite coûte beaucoup plus cher que prévu à tout le monde étant donné, entre autres, le rehaussement généralisé de l’espérance de vie des retraités. Le comité veut donc voir comment améliorer le système de retraite québécois pour le rendre « viable et performant » : grosse commande. Le comité D’Amours étudiera l’offre des régimes complémentaires, les impacts sur la situation financière à la retraite et déterminera quels sont les éléments-clés des problèmes actuels afin de réviser les paramètres du système. Faire des prévisions de rendement pour des régimes de retraite est loin d’être une science exacte. Parlez-en aux nombreux actuaires qui se cassent les dents sur la question depuis 50 ans ! À tel point qu’on pourrait caricaturer aujourd’hui les caisses de retraite de sortes de chaînes de Ponzi où l’on paie les prestations des rentiers à partir des contributions des cotisants à un rythme qui ne cesse de s’épuiser... Pourquoi ? Le gouvernement et son comité d’experts vont tenter d’établir les bases de ce qui pourrait devenir un nouveau contrat de société. Tout ce qui touche aux régimes de retraite sera analysé : leur financement, le ratio des cotisations et même l’idée de Claude Castonguay d’obliger les Québécois www.conseiller.ca

à participer à un régime de retraite. Il faut noter que 30 % des travailleurs, soit 1,2 million de Québécois, ne détiennent aucune épargne-retraite. Mais tout ça, c’est demain et aprèsdemain. Pour l’heure, l’urgence pointe du côté des caisses de retraite qui se retrouvent quasiment en défaut de paiement pour toutes sortes de raisons, et souvent parce que les gestionnaires ne sont pas surveillés et eux-mêmes contraints par nos bons gouvernements à une certaine rigueur par rapport à leur obligation fiduciaire. La baisse récente des taux d’intérêt obligataires a gonflé la valeur du passif des régimes, effritant du coup leur solvabilité. Comme cataplasme, Québec a adopté l’automne dernier le projet de loi no 42 pour alléger les obligations des promoteurs en 2012 et 2013. Pendant ce temps, le taux médian de solvabilité des régimes PD au Canada n’était plus que de 68 %. Ce qui veut dire évidemment qu’en cas de faillite, fermeture ou fuite vers l’Asie des dirigeants, un régime moyen ne pourrait remplir que 68 % de ses engagements. La rente des retraités ainsi touchée peut être conséquemment amputée d’un pourcentage équivalant au taux de solvabilité du régime, ou carrément réduite à néant dans les scénarios du pire. Les retraités de la mine Jeffrey en Asbestos, ceux d’Abitibi Bowater de Dolbeau et de Donnacona, ceux de Papiers White Birch à Québec vivent présentement les contrecoups du laxisme des gouvernements qui ont permis aux dirigeants d’entreprise de prendre congé de cotisations à leur régime de retraite pendant les belles années productives des marchés boursiers et obligataires. Personne ne s’est soucié du risque fiduciaire qu’on a fait subir (et qu’on fait toujours subir) à des millions de travailleurs. Et, devant la catastrophe appréhendée, on nous offre un comité d’experts. Au lendemain de l’éclatement de la bulle techno, le spécialiste torontois des mars 2012

régimes de retraite Keith Ambachtsheer a calculé que les régimes de retraite canadiens avaient perdu 200 milliards dans la débâcle. Le crash de 2007 en aurait fait disparaître le double. À ce rythme, oubliez les préretraites, les retraites dorées, oubliez le transfert de richesse à la prochaine génération. Il est toujours désolant de voir à quel point nos gouvernements s’empressent de subventionner avec nos taxes des entreprises dont on ne se soucie que trop peu de la viabilité ou de l’intérêt des dirigeants de s’impliquer dans le développement durable de l’entreprise et des ressources qu’elle consomme. De sérieuses questions se posent. Quand arrêtera-t-on de permettre aux entreprises de piger dans les fonds de retraite afin de sauver leur peau ? Pourquoi aucune garantie n’existe pour protéger les régimes des travailleurs ? Comment se fait-il que la caisse de retraite ne soit pas le créancier prioritaire lorsque survient une faillite ? Entretemps, les contribuables paient des subventions à ces entreprises sans éthique et les mêmes contribuables devront allonger encore plus pour couvrir en partie les besoin de base des travailleurs et retraités sans le sou. Beau contrat social ! En tant que spécialiste de la retraite et conseiller de milliers d’épargnants qui risquent de vivre des moments beaucoup moins prospères au cours des prochaines années, votre responsabilité est de prendre en compte tout ce contexte incertain et insécurisant pour une bonne proportion de vos clients. Dorénavant, il faudra peut-être calculer que le rentier typique de l’entreprise XYZ ne touchera que la moitié de sa rente. Disons que ça change drôlement une planification !

Yves Bonneau, rédacteur en chef yves.bonneau@objectifconseiller.rogers.com 5

point de vue

L’équilibre du pouvoir financier aux mains des femmes

Pour ceux qui s’intéressent à la démographie – ce que vous devriez faire – et ceux qui seront encore en affaires en 2025 ou qui transféreront leur bloc d’affaires à leur fils ou... à leur fille, vous devriez savoir que le profil de votre clientèle pourrait être radicalement différent de ce qu’il est aujourd’hui. Vous n’y avez peut-être pas pensé, mais un changement lent, inexorable, profond et durable a été amorcé.

es femmes, qui constituaient la minorité de votre clientèle il y a quelques années, formeront la majorité avant longtemps. Pourquoi ? Parce que de tous les segments de la population, la cohorte féminine est celle qui a le plus progressé dans nos sociétés industrialisées et, a fortiori, au Québec. Vous en avez eu un avant-goût dès 1996 avec la Loi sur l’équité salariale qui a permis à de nombreuses femmes d’améliorer leur salaire, et par le fait même, leur niveau d’épargne disponible au cours des dernières années. Ce changement s’est traduit dans la fonction publique en 2006 lorsque le gouvernement du Québec a accordé l’équité salariale à 300 000 de ses employés, pour la plupart des femmes, en leur attribuant des ajustements salariaux. Au début du XXe siècle, les femmes composaient 20 % de la main-d’œuvre active. Ce pourcentage est passé à plus de 50 % au cours de la dernière décennie. Étonnamment, les femmes recevaient, au tournant de la Première Guerre mondiale, 66 % du salaire moyen versé aux hommes. Dans les années 1990, les femmes travaillant à temps complet recevaient en moyenne 70 % du salaire moyen versé aux hommes. Les choses qui avaient très peu évoluées avant l’arrivée de l’équité salariale semblent maintenant débouler. En 1986, année où j’ai terminé mes études à l’université, on comptait exactement 50 % de finissants pour 50 % de finissantes dans tout le réseau des universités québécoises. Depuis cette année charnière, le nombre de finissantes universitaires n’a cessé d’augmenter pour atteindre aujourd’hui plus de 65 %. Dans des domaines comme le droit, c’est près de 70 %, et dans les sciences de la santé, ce taux atteint 80 %! Rien de moins. En fait, il n’y a qu’en www.conseiller.ca

génie, en informatique, en architecture et en mathématiques que le ratio est encore inversé en faveur des garçons, mais ce n’est pas suffisant pour influencer la moyenne globale qui continue de grimper en faveur des filles. Certains observateurs croient que cette moyenne pourrait atteindre 70 % au profit des femmes dès 2018. En 2001, les gains salariaux moyens des diplômés universitaires équivalaient à 1,6 fois ceux des détenteurs d’un diplôme d’études col-

Une étude américaine a démontré que 95 % des femmes sont responsables des décisions financières de la famille. légiales, et ils étaient deux fois supérieurs à ceux des détenteurs d’un diplôme d’études secondaires. Dans les universités québécoises, le poids des professeures est passé de 20 % en 1995 à 30 % en 2005. A contrario, 30 % des Québécois de 26 à 28 ans n’ont pas terminé leur cycle secondaire, contre seulement 15 % des Québécoises. C’est dire que même parmi les décrocheurs, les femmes font meilleure figure. Dans la décennie 2020-2030, il y a fort à parier que les femmes détiendront davantage d’actifs que les hommes dans la population active, reflétant ainsi ce qui se dessine présentement dans les écoles et les universités. Il faudra nécessairement y voir un changement marqué de la façon d’épargner et d’investir de la clientèle. Même si les femmes ont toujours été historiquement en charge des finances de la famille type, elles n’étaient pas, jusqu’à récemment, les principales contributrices octobre 2012

en matière de revenus. Et cela est évidemment en train de changer. Une étude américaine publiée en 2010 par la Prudential a montré que 95 % des femmes sont les décideurs financiers de leur famille, et que 84 % des femmes en couple sont soit exclusivement soit conjointement responsables des décisions financières du ménage. Dans les faits, elles sont souvent la personne clé responsable des finances familiales. Et les décisions qu’elles prennent déterminent directement leur sécurité financière à long terme, ainsi que celle de leur famille. Cette étude a aussi montré que beaucoup de femmes n’ont toujours pas de plans financiers pour atteindre leurs objectifs. En général, les femmes sont davantage méthodiques que les hommes; la planification financière intégrée possède tous les ingrédients pour les séduire. Pendant longtemps, les femmes croyaient ce genre de services inaccessibles en raison de la faiblesse toute relative de leur revenu. Il faudra revoir comment aborder les femmes en matière de services conseils, sachant que celles-ci exigent plus de prudence et de contrôle sur leurs finances que les hommes. Le secteur des services financiers devra continuer à évoluer pour répondre aux besoins changeants des femmes et soutenir leur éducation financière. Les conseillers et les conseillères devront de leur côté adapter leur pratique afin de bien comprendre ce marché en pleine mutation. Et ceux et celles qui auront été à l’avant-garde s’assureront de la pérennité de leur entreprise.

Yves Bonneau, rédacteur en chef yves.bonneau@objectifconseiller.rogers.com 5

Best photograph Meilleure photographie

Winner/gagner

Ian McCausland From Fired to Inspired Foodservice & Hospitality

CHEF’S CORNER

FROM FIRED TO INSPIRED Scott Bagshaw is making his own rules at Winnipeg’s Deseo Bistro // BY JACKIE SLOAT-SPENCER

FOODSERVICE AND HOSPITALITY MARCH 2012

soup master, Mr. Ma, taught him to make the perfect soup stock. “He beat me over the head with a ladle whenever I wasn’t listening and taught me how to make the basis for incredible soups,” Bagshaw says. “I can make pho like nobody’s business.” But, with his visa running out, Bagshaw returned home to Winnipeg to work as a line cook at Amici, before moving to the position of executive chef at Sydney’s at the Forks. Trouble ensued when he landed the executive chef position at Pizzeria Gusto and was fired after giving a revealing interview about what really goes on in kitchens, including racy comments made about customers. “Obviously there was a lot of negative [press],” he says, while discussing the aftermath of his termination. But it ultimately led to his next big step — opening a restaurant. “Nobody really cares who owns TRICKS OF THE TRADE Favourite ingredient? Black garlic. “It’s basically fermented garlic that turns black … so it takes on a sort of sweet, smoky caramel taste.” ● Where do you eat in Winnipeg? “Segovia, which is a Spanish tapas bar, Bistro 7 ¼ and Peasant Cookery.” ● Influential Cookbook: “Susur: A Culinary Life is pretty neat.”

the restaurant, it’s who’s the chef, what’s he doing, what’s he bringing to the table?,” Bagshaw says. “It was getting to a point where I was making OK money, but it was never my own money, working 70 to 80 hours a week for someone else, and there comes a point where you say, thank you for your support, thank you for all you’ve done for me, but I need to try this on my own now.” Bagshaw bounced back in a big way, partnering with Alejandro Mora to open Deseo Bistro, a 81-seat resto attracting attention for its South American-influenced food, prepared using French cooking techniques. “A lot of Spanish food is really simple, like using only two ingredients, which I love,” he says. Menu highlights include Spanish mac ‘n’ cheese with Manchego, smoked paprika and chorizo ($14) and roast lamb loin with eggplant caviar, smoked yogurt, chili jam and arugula ($22). Bagshaw is determined to show the world he’s more than just a bad-boy chef. “At the end of the day, I’m a pretty down-to-earth soul. And my mom loves me,” he adds with a chuckle. ● FOODSERVICEWORLD.COM

PHOTOGRAPHY BY IAN MCCAUSLAND/KLIXPIX

cott Bagshaw, executive chef at Winnipeg’s Deseo Bistro, studied to be a teacher before realizing his true calling. It was leading a kitchen — the 14-hour days and kitchen commaderie — that appealed more to the Montreal-born chef. And, it’s turned out for the best, with Deseo making Where magazine’s Best New Restaurants list in 2011, propelling the “bad-boy” chef to local stardom and elevating the Winnipeg culinary scene. Teaching was a blip on the toque’s life path, after growing up fascinated by cooking, especially watching his father prepare meals. “My mother was a horrible cook,” he recalls, laughing. “My dad didn’t really have much choice in the matter.” After abandoning teaching, while living in Australia, Bagshaw worked in chain restaurants to pay the bills. Before long, he was recruited by the Vietnamese restaurant owner of Monsoon in New South Wales, Australia, who also happened to be a customer. The restaurateur fired his back-ofhouse staff and put Bagshaw in charge. And, although the young chef was in command, he still had a lot to learn. The restaurant’s

Celebrating Excellence CDS Global congratulates this year’s Kenneth R. Wilson Award nominees and recipients for your achievements in Canada’s business publishing arena. With distinction, you drive us all to greater heights and a brilliant future.

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59th Annual Kenneth R. Wilson Awards/59e édition des prix kenneth r. wilson

Best professional article Meilleur article dans le secteur professionel Sponsored by/CommanditĂŠ par Alliance for Audited Media

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Mark Anderson

The Changing Face of Risk Management Listed

John Lorinc Waste Watchers CAmagazine

30 Listed //Fall 2012

www.listedmag.com

THE CHANGING FACE OF RISK MANAGEMENT That suit at the last executive meeting throwing around terms like “impact pathways?” Meet your company’s CRO. As Canadian issuers wake up to the harsh realities of today’s commercial and regulatory workspace, a new breed of senior risk executive is emerging to steer them straight By Mark Anderson

Bruce Schouten, senior vice-president, enterprise risk management, TD Bank www.listedmag.com

Fall 2012\\Listed

isk management, once the redheaded stepchild of corporate governance, is coming in from the cold—and coming with it is a newly empowered executive class of chief risk officers (CROs), vicepresidents of risk and other assorted risk-related personnel. Who better to attest to this shift than the international search firms whose job it is to find people to fill these roles? “We’re absolutely seeing an uptick in the number of companies looking to fill risk management positions,” says Toronto-based Mark Letourneau, senior client partner with the Canadian division of Korn/Ferry International, the world’s largest executive search firm. “Organizations feel they need a broader and deeper understanding of the new types of risk they’re facing, and they’re looking for people with specific risk-related skill sets.” Business is brisk enough, in fact, that Korn/Ferry is in the process of creating a specialized division dedicated exclusively to staffing risk management positions. And you know they’re not alone. Why the sudden interest in risk, and especially so-called enterprise risk management, or ERM, which consolidates risk from throughout an organization and manages it as a single, dynamic portfolio? Many factors—competitive, legal, environmental, social—are at play, but Mark Aiello, risk strategies consultant with Marsh Canada Ltd., singles out economic uncertainty and fallout from the global banking meltdown of 2008 for having caused companies—as well as regulators and shareholders —to become most aware of risk and the need for risk mitigation and management strategies. “If the best risk management plans are invisible, the failures are anything but,” says Aiello. “Over the last few years we’ve seen countless examples of what happens when effective risk management isn’t in place. You just have to open the newspaper.” No surprise, then, that the financial services industry in particular has turned to ERM as a way of dealing not only with regulatory fallout from the banking crisis, but also to ensure it’s sufficiently prepared and protected should such an event repeat itself. Toronto-Dominion Bank (TSX:TD), for one, only created its ERM group two-and-a-half years ago, lead by 18-year TD veteran Bruce Schouten. “The activities my group is responsible for used to be distributed across the organization, and it made sense to bring them all under one umbrella,” says Schouten, 50, who now carries the title of senior vice-president, ERM. “It’s my role to make sure we’re in compliance with regulatory regimes, to annually review risk appetite with the most senior management committees at the bank, and to ensure our technology is robust enough to monitor, model and manage risk.” 32 Listed //Fall 2012

It’s not just compliance driving the ERM train, though. Aiello acknowledges that shareholders and boards are also becoming more attuned to risk and the potential pitfalls of not having effective risk management strategies in place. “From a governance perspective, it’s the board’s responsibility to oversee risk. The board shouldn’t be doing the plan, but should have an understanding of what the top risks are and make sure they’re being adequately addressed.” Perhaps most profoundly, ways of thinking about risk are changing. Whereas at one time risk management was viewed only from a downside perspective—a cost silo primarily focussed on regulatory compliance and preserving assets—ERM is increasingly being seen as an integral part of good corporate governance and strategic planning, supporting management decision-making and growing shareholder value. It’s also being applied proactively, building risk resiliency into organizations, instead of merely reactively in terms of risk mitigation and recovery. “Organizations are now looking at risk not simply in terms of fixing the mess they just made, but preventing it in the first place,” says Aiello. Finally, ERM helps companies identify and quantify what Aiello calls “impact pathways,” not just the immediate consequences of a risk event taking place, but the full range of delayed, follow-on and long-term consequences. The well-documented travails of Calgary-based energy giant Enbridge Inc. (TSX:ENB) serve to illustrate. Two years ago, in July of 2010, one of Enbridge’s pipelines ruptured, spilling 20,000 barrels of oil into Michigan’s Kalamazoo River. The resulting $800-million clean-up bill made Kalamazoo the most costly on-shore oil spill in U.S. history. That, needless to say, came as unwelcome news to Enbridge shareholders, who could reasonably have expected the company to be prepared for such an eventuality: after all, in its disclosure filings the company specifically identifies pipeline leaks as “an inherent risk of operations.” Moreover, Enbridge had a well-articulated risk management plan in place for dealing with leaks, including “predictive and detective in-line inspection tools,” scheduled maintenance to ensure compromised pipe was replaced or repaired in a timely manner, and procedures that shut down pipelines within minutes once a leak was detected. As a recently concluded investigation by the U.S. National Transportation Safety Board makes clear, however, Enbridge’s risk management plan failed at multiple levels: pipeline corrosion cracks were indeed detected, and yet years went by without the affected pipe being repaired or replaced; and when the rupture did occur, the pipeline was allowed to continue spilling oil for a whopping 17 hours before being shut down. If this were the end of the story, it could be put down to a valuable, albeit costly, learning experience, a wake-up call for Enbridge to re-evaluate its risk management policies and practices. But the impact pathways were just getting started. Environmental and financial risk quickly morphed into political and opportunity risk, as negative publicity generated by the Michigan spill began to impinge upon Enbridge’s plans to build a multibillion-dollar pipeline from the tar sands to British Columbia—the so-called Northern Gateway pipeline. Within days of the U.S. National Transportation Safety Board’s scathing indictment of the handling of the Kalamazoo spill, Enbridge announced it would invest another $500 million to thicken pipeline walls at Northern Gateway river crossings and to hire more inspectors. Thus, the direct and indirect costs of the risk management failure at Kalamazoo escalated from $800 million to $1.3 billion, not counting additional lobbying and PR expenses necessary to counter negative press. And if the $6-billion project is ultimately scuttled due to public www.listedmag.com

Photograph Evan Dion

Special Report on Risk

Special Report on Risk and political opposition over perceived environmental risk, the opportunity cost to Enbridge will have been massive. At Vancouver-based telecommunications giant Telus Corp. (TSX:T), meanwhile, Kasey Reese, the company’s vice-president of risk management and chief internal auditor, knows all about impact pathways. That’s because any risk that could cause even a temporary service interruption carries two inherent costs: the immediate cost of fixing the problem, and the long-term cost of having to replace lost business, as customers invariably flee to competitors when their smart phones, satellite TVs or Internet connections go black. “Ice, snow, sabotage, labour disputes, the seventh game of the Stanley Cup in Vancouver, we look at anything and everything that could impact our business continuity,” says Reese, who was hired by Telus a little over a decade ago, shortly after the company was formed through the merger of Telus (Alberta) and BC Tel. “And you don’t always get the event you plan for,” he continues. “In 2002-2003 we were preparing for a potential work stoppage, but instead of a strike we got the Sapphire computer virus, the outbreak of SARS in [Toronto], which is where our wireless division is headquartered, forest fires in Kamloops, another computer virus, and the largest cable cut in B.C. history.” Because of that volatility, Telus reviews its risk profile annually, quarterly and granularly in real-time. “The execs who own the risk do the granular risk assessment in their particular domains,” says Reese. “They model very specific what-if scenarios, with the result that we’ll typically post updates to our risk assessment five or six times a year, as the temperature of various risks change over time.”

In order to help quantify and rank different risks, Reese helped devise an extensive electronic survey that captures perceptions of risk from both Telus’s executive ranks and frontline managers. “The survey is delivered to 850 executive VPs and VPs, and then there’s another 1,200 Telus managers who participate, selected at random,” Reese explains. “We then go through the results, synthesize them, identify the high and medium-high risks facing the company and devise plans to make sure we’re adequately prepared to tackle them.” Two years ago, Telus expanded its risk survey to include board members for the first time. “We want to see if the views of the board are aligned with those of the executive suite. The acid test is, does the board know what the top five risks are?” says Reese. “It’s all about enhancing risk governance, and linking it to good corporate governance.” Perhaps no industry is fraught with more potential risk than mining, and no mining sector more risky than uranium mining. In its corporate filings, Saskatoon-based Cameco Corp. (TSX:CCO), one of the world’s largest uranium producers, lists supply risks (the company being unable to locate additional mineral reserves), political and regulatory risks (failure to win permits and approvals from domestic or foreign governments), market risks (price of uranium falls, making new development uneconomical), social risks (blockades or other acts of protest by environmentalists or indigenous peoples) and health and safety risks (mine-related accidents, flooding, radiation contamination). This last risk played out in dramatic fashion in April 2003, when the company’s McArthur River mine in northern Saskatchewan caved in and flooded with radioactive water, causing the world’s largest uranium mine to cease production for three months. As with the Enbridge oil

Katharine Palmer, vice-president risk and internal audit, Cameco Corp.

34 Listed //Fall 2012

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Photograph David Stobbe

“Risks have to be continuously monitored and evaluated. The highest-ranked are raised with senior management and the board.”

Special Report on Risk leak, a subsequent review—this time by the Canadian Nuclear Safety Commission—determined that Cameco’s risk management processes were seriously flawed. Despite previous consultant reports warning of the possibility of a cave-in and a major “inflow” of contaminated water, the mine’s pumping capacity was grossly inadequate and there was no contingency plan in place: steel emergency doors that had been previously fabricated and could have sealed off the mine were left in storage and never installed. Since then, however, the company’s operating record—especially with regard to worker safety and satisfaction—has seen a marked improvement, to the extent that Cameco was last year named one of the Top 10 Best Companies to Work For in Canada by the Financial Post. In October 2011, the company turned to Katharine Palmer, formerly of Atomic Energy of Canada Ltd., to fill its new vice-president, risk and internal audit position—an inspired choice given AECL’s expertise in nuclear safety and regulatory compliance, and Palmer’s 20-plus years of experience in internal audit and related risk management activities. Part of her duties include running the company’s ERM group. “It provides me with the opportunity to ensure everyone has a good understanding of our risk profile and risk treatment plans,” says Palmer. “Risk management has to be aligned with, and support, the overall corporate strategy, and I help the organization see the relationship between our growth strategy and risk management.” As with Kasey Reese at Telus, Palmer oversees a formal collection and analysis of information, after which risks are identified and ranked. “It’s not a one-time exercise,” she says. “Scores can shift over time, so risks have to be continuously monitored and evaluated. The highest-ranked are raised with the senior management team and the board on a regular basis.” One of the keys to a successful risk management regime, she says, is creating an environment where employees are comfortable reporting risks and potential problems, instead of ignoring them or, worse, covering them up. “If people are afraid to report problems, it goes back to the corporate culture. At Cameco, we think about risk every day, company-wide. It’s what we do. It’s very much part of our corporate culture.” When a strong, top-down risk management culture is absent, or has been corrupted, bad things can follow. In an unusually frank videotape interview with the Conference Board of Canada, Siemens Canada’s regional compliance officer, Hentie Dirker, explained what happened back in 2006 when the German industrial titan was found to have engaged in a variety of illegal and unethical business practices, including the use of bribes and unauthorized payouts to win business in developing countries. During the ensuing review—which included interviews with almost 2,000 employees and the examination of millions of internal documents and bank records—Siemens discovered that while it had corruption risk management rules in place designed to enforce ethical behaviour, they were all too frequently being ignored or subverted. “There were no clear disciplinary consequences for employees who violated policies and procedures,” Dirker explained. “A kind of wink and nod culture had developed, where it was easy for people to hide bribery and corruption.” The fix involved nothing short of a wholesale housecleaning and reboot of the company’s corporate culture. “We changed the CEO, general counsel, chief audit officer and chief compliance officer. None of the 11 members of the Siemens management board as it was

constituted in 2006 remained in December of 2008.” A corruption risk assessment process was established along with a corporate disciplinary committee, the compliance regime was tripled to 600 officers worldwide, and within a year 180,000 employees had been trained on the company’s new “zero tolerance” policies and procedures regarding corruption. As to whether Siemens’ new “no more bribes” policy won’t end up costing the company billions in lost—if sketchy—business, Dirker was optimistic. “I think it’s more of an opportunity for us. We at Siemens can now use compliance and ethical business as a competitive advantage. If [customers] use Siemens anywhere in the world they’ve got one less supplier to worry about in terms of ethics and compliance to law.” Back at TD Bank, Bruce Schouten at least doesn’t have to worry about corporate culture: chief executive Ed Clark is notoriously risk averse, once famously stating that the bank wouldn’t sell to customers financial products that were too complicated or abstruse to sell to his motherin-law. “That’s a pretty easy concept for everyone at TD to grasp,” says Schouten. It’s also a concept that likely saved the bank billions, as TD was the only Canadian chartered bank to avoid write-downs related to thirdparty asset-backed paper—aka repackaged sub-prime mortgages—during the mortgage crisis of 2008 or the subsequent banking crisis. As head of the ERM group, however, Schouten does have to deal with the regulatory fallout from all those financial institutions that did end up on the wrong side of the risk/reward equation. The most challenging of those regulations is what’s known as the Volcker Rule, a section of the DoddFrank Wall Street Reform and Consumer Protection Act that prohibits banks from engaging in proprietary trading—in other words using deposits to trade on the bank’s own accounts. “We support the principles that underlie that rule, but the challenge is to get the implementation part right,” says Schouten. “How do you interpret the guidelines and rules correctly?” Well, you start by creating yet another group, a regulatory relationship management unit that liaises between the bank and the regulator, interpreting, simplifying and communicating the rule to TD’s DoddFrank implementation steering committee. The steering committee, meanwhile, is comprised of managers from every area of the bank that might be impacted by the regulations, including certain funds the bank sponsors and advises in its asset management business, as well as private equity investment and TD Securities. Sitting at the centre of all this is Schouten and the ERM group. “I participate in all those committees as a member, and work to make sure the right person is chairing the right committee, and the right people are participating to ensure we have full coverage. That’s one of the things I enjoy about risk management, you get that enterprise view of what’s going on. It’s a lot of communication, a lot of influencing, a lot of partnering with other control functions to ensure the bank is well situated.” So what makes someone good at risk management and ERM? It comes down to common sense and communications, says Schouten. “It’s great to have a technical background in terms of understanding credit risk, market risk or operational risk, but you need to be able to figure out the impact of those risks on the organization, and then be able to explain to others why they’re important, and why the organization needs to respond to them.”

“With risk management you get that enterprise view. It’s a lot of influencing and partnering with other control functions.”

36 Listed //Fall 2012

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auditors these CAs have ForAsthese CAs,general, being in the xxx is not a seen their roles grow dramatically as they patrol

bad thing at all. Joining the xxxxxxxxx

the effectiveness of our government programs was for them a childhood dream come true

By John Lorinc

Waste

watchers

In early 2005, Ontario’s Liberal government embarked on a hard-nosed negotiation with Bruce Power, an energy consortium, over a proposed deal to refurbish an aging nuclear plant on the shores of Lake Huron. The consortium had pitched an ambitious and largely unprecedented quid pro quo: it would spend $4.25 billion to fix the reactors and Ontario’s energy authority, in exchange, would pledge to buy power from the facility for 6.3¢ per kilowatt hour. “The government said they got a great deal and the opposition said they were taken to the cleaners,” muses Ontario’s long-serving auditor p h o t o g r a p h b y ly n n e f o x / k l i x p i x

In the process of safe 22 CA magazine May 2012

guarding against corruption, Ontario AG JIM McCarter has become a recognizable figure CA magazine May 2012 23

general Jim McCarter with a worldly chuckle. With the con- chief, says some critics, including politicians, grumble that the troversy burning brightly in the legislature, energy minister AGs now venture too far into the realm of policy-making. “The Dwight Duncan asked McCarter to review the contract. further they go in terms of talking about value-for-money, the While McCarter’s office has handled all manner of audits more they tread on political turf.” Some politicians, however, specifically seek out this kind of in the past nine years, including politically contentious ones focusing on ehealth Ontario and the Liberals’ vaunted renew- feedback. Former Ontario cabinet minister Dianne Cunningham able energy strategy, this request was unusual, he recounts. recalls that when she took over the education and training portDuncan hadn’t asked McCarter, who once worked as the audi- folio, she solicited the input of then Ontario AG Erik Peters before tor general in St. Kitts on a CIDA contract, to merely fact-check proceeding with reforms to the province’s antiquated apprenticethe numbers or even conduct a value-for-money (VFM) audit on ship program. “Many of my colleagues said, ‘Meet the AG. You’ll a deal that had already been vetted by the bureaucrats and ap- learn something.’ ” proved by the cabinet. Rather, he wanted McCarter “to opine on Indeed, as many current and former AGs stress, the process the contract” and report back with the results of what was essentially reduces waste and helps a review engagement. McCarter retained a retired nufortify public institutions, even if their findings do clear engineer and an investment banker and set to work taking the send shockwaves through the bureaucratic establishment contract apart clause by clause to determine the sources of hidden risk. “We did a fair amount of research,” he says. “It was a more techni- they oversee not only reduces waste, but also helps fortify public cally complex area than one we normally look at.” The upshot of institutions, even if their findings do occasionally send shockthe AG’s 32-page report, released in 2007: that the government’s waves through the bureaucratic establishment. energy authority was going to end up paying 7.1¢ per kWh, almost As with most of its parliamentary institutions, Canada inher13% more than initially estimated. ited the auditor general’s role from Britain. But as historian C.E.S. Such episodes certainly explain the steadily growing public (Ned) Franks, professor emeritus at Queen’s University, notes, the profile of many of Canada’s auditors general, who are, as a group, first federal AGs shared responsibility for managing finances some of Canada’s most prominent and influential CAs. In an era with federal officials, and distributed funds to far-flung govwhen private sector auditors have seen their role grow dramati- ernment workers including letter carriers. In the decades after cally, these legislative officers have come to wield tremendous confederation, in fact, the federal bureaucracy faced formidable clout as they funnel more resources to VFM audits (also known challenges in paying its bills and monitoring spending across as performance audits) designed to patrol the effectiveness of such a vast country, Franks says. “As they say, there were many government programs. In fact, as the public service becomes a slip between cup and lip.” increasingly complex, AGs and their audit teams have pushed The federal system of financial control became more formalto expand the scope of their duties while recruiting from a range ized in the 1930s, as then prime minister R.B. Bennett demandof professions, besides accounting, to round out their in-house ed better information on the government’s financial position. expertise. Nor is the trend limited to Ottawa and the provinces: During that period, Franks says, the government gave the Treasince the early 2000s, several large Canadian municipalities, in- sury Board clear responsibility for the issue of funds, while line cluding Toronto, Halifax and Montreal, have also moved to estab- ministries had the task of dispersing the money. Increasingly, lish their own AGs as a safeguard against corruption and waste- the AG’s role was to serve as an external auditor, even though provincial auditors continued to issue cheques. ful spending. In the process, some AGs — notably McCarter and former In the early 1950s, however, those Depression-era reforms were federal auditor general Sheila Fraser — have also turned into eclipsed by a sensational spending scandal, which broke after highly recognizable figures. Indeed, it’s not an overstatement to federal auditors reported that the government’s payroll included suggest that the famously plain-spoken Fraser, a former senior several horses stationed at Canadian Forces Base Petawawa, near partner at Ernst & Young, became Ottawa’s most visible public Ottawa. As Franks says, “It’s been a pretty lively office ever since.” official after she blew the whistle on the sponsorship scandal, The governments of the day did not always react favourably which involved bureaucrats kicking back millions to Liberal ad to this kind of embarrassment and sometimes even fought back. firms hired to promote the federal government in the wake of the Pierre Trudeau’s Liberal cabinet attempted to limit the powers 1995 referendum in Quebec. Her findings and evident personal of the federal auditor general in the mid-1970s, but backed down outrage — “Senior servants,” she said when she outlined the in the face of widespread public protest. findings to the media, “broke just about every rule in the book” The AG appointed in 1974, J.J. Macdonell, upped the ante, warn— felled Paul Martin’s Liberals and set the stage for a sea-change ing Parliament in 1976 that the Trudeau government was “close to losing control of the public purse.” Not long afterwards, the in both the bureaucracy and the House of Commons. The AGs’ growing influence has not gone unnoticed. Carleton Liberals ceded even more political turf to the AG, passing a new University journalism and communication director and profes- act that allowed Macdonell to conduct VFM audits — a much sor Christopher Waddell, a former Globe and Mail Ottawa bureau more muscular form of review more akin to a management con-

The process AGs oversee

24 CA magazine May 2012

Daniel St. Louis/KlixPix

NB’s KIM MacPherson taps into the network of legislative auditors and the OAG when she runs into a wall sultant’s assessment than a traditional attest audit of a department’s books. He was also invited by the House of Commons to perform an audit that found, in Franks’ description, “severe problems” with the institution responsible for administering the legislative branch. (Sheila Fraser got a less friendly response from the Harper government when she tried to audit the House of Commons towards the end of her tenure.) When Denis Desautels stepped into the job in 1991, succeeding Kenneth Dye, he found an office with a firm sense of its mandate. But he oversaw a number of critical changes. In 1993 the Liberals had pledged to establish a federal environmental commissioner and they eventually decided to situate that position in the Office of the Auditor General of Canada (OAG). Desautels also began reporting to Parliament several times a year, as opposed to annually — a change that Waddell says has diluted the media’s interest in the OAG’s findings. And he established a system for tracking how ministries respond to audit reports. But when then finance minister Paul Martin embarked on his historic campaign to eliminate the federal deficit, Desautels, who served until 2001 and now serves on several corporate and institutional boards, felt it was necessary to signal the government that his department, with about 600 employees, didn’t

want to be treated differently from other branches of the public service. “I felt we needed to be able to say we’d done our share,” he says. But it was a tough call. “You could argue that when the government cuts back, the risk of error goes up and therefore you could put more into auditing. But we chose not to make that case.” When New Brunswick’s auditor general Kim MacPherson, a CA and career public servant, runs into a wall, she taps the extended network of Canada’s legislative auditors and the federal OAG for help in assessing programs and policies that crop up in multiple jurisdictions. After the federal OAG shifted to focus on VFM auditing in the 1970s, its provincial counterparts gradually followed suit. MacPherson, who has held the position since late 2010, observes that VFM audits require far more professional judgment and new skill sets than standardized attest audits. “You have to learn as much as you can about the organization,” she says. “You have to decide where you’re going to zero in.” The biggest challenge, MacPherson adds, “is not being able to do what I want to do” because the New Brunswick government, particularly at this point in time, is short of funds. Other provinces have experimented with variations on the CA magazine May 2012 25

theme and also grapple with the problem of stretching available audit budgets as far as possible. Bonnie Lysyk, Saskatchewan’s provincial auditor, says her 62-person team dedicates 90% of its resources to annual “integrated audits” that combine traditional attest reviews with internal control opinions about whether programs and departments are complying with government policy and legislation; VFM audits account for the other 10%. “That is unique in Canada, including at the federal level,” says Lysyk, a CA and MBA whose career includes stints in Crown corporations in Manitoba’s public sector as well as a post as vice-president, internal audit at the giant Ontario Municipal Employees Retirement System. The integrated audits, Lysyk says, not only allow her team to readily identify programs that require more scrutiny, but also to complete those reviews quickly: 300 to 500 hours, compared with 1,000 to 5,000 hours required for more typical VFMs. “The majority of our recommendations are based on that 10%,” she says. “We’re picking areas with more risk.” Risk is the obvious analytical focus for auditors general. But given scarce resources, how to determine what should be audited is part of the art of running a strong and independent office. 26 CA magazine May 2012

After eight years on the job, McCarter is acutely aware of the minefield that awaits an audit work plan. “I try to pick audits that will be of interest to the guy on the street,” McCarter says, echoing Fraser’s famous edict that her reports must be comprehensible to “Harry in Saskatchewan.” He makes a point of talking to MPPs and various stakeholders about how programs are functioning, or not, at the local level. Sometimes, brown envelopes come over the transom and go into a “possible VFM” file. But McCarter knows that opposition parties love to use a spending scandal revealed by the AG to bludgeon the government, so he doesn’t proceed with a fullscale VFM unless he’s got majority support at the legislature’s public accounts committee, to which he reports, or if requested by a minister of the Crown. McCarter’s nose and his even-handedness have served him well. In his boardroom, located in a downtown office building strategically situated several subway stops away from Queen’s Park, he has hung dry-mounted posters of his past nine annual reports, which represent a range of the provincial government’s activities. His office has conducted VFM audits on everything from commuter-rail service to the control of C. difficile in hos-

Greg Huszar/KlixPix

Saskatchewan’s Bonnie LYSYK sees her office as something of a training ground for the civil service

pitals and long-term care homes and the scandal involving the province’s quasi-public air ambulance service, Ornge. Despite the diversity and complexity of the policy areas that cross McCarter’s radar, he runs a shop largely dominated by CAs whose analytical skills, he notes, “are pretty transferable.” When the Ontario AG’s office needs to draw on the more specialized skills of experts, it hires outside consultants, often from outside Ontario to mitigate the risk of conflicts of interest. In Saskatchewan, Lysyk sees her office — which is also comprised of people with nonaccounting designations — as something of a training ground for the civil service and runs a large articling program for young accountants and audit professionals whose graduates can now be found in senior positions in the province’s Crown corporations and ministries. But other AGs have adopted a different approach to the in-house staffing resources. Ottawa’s deputy auditor general Ray Kostuch, who is a CA as well as a civil engineer, says his team includes other engineers who have helped analyze why the city was dumping untreated sewage into the Ottawa River. Jeff Griffiths, a CA who has served as the City of Toronto’s auditor general since 2002, prefers to populate his office with other professionals, public health nurses and even lawyers. “I think it gives my department a better diversity of skills,” says Griffiths, whose claim to fame is unearthing evidence in 2001 of a multimillion-dollar computer leasing scandal that involved senior city officials, lobbyists and politicians. “There’s more to what we do than just numbers.” After the number crunchers, policy analysts and expert consultants have applied their collective insight to a VFM audit, there’s one more crucial step in the due-diligence process before the AGs take their findings out to the public: passing draft reports by senior officials with the organization audited. For McCarter, this kind of vetting represents the most demanding form of peer review and factchecking. “They’re pretty vociferous if they feel any of our facts are wrong,” he says. “They don’t hesitate to go through on a sentence-by-sentence basis.” In May 2010, the City of Montreal’s auditor general Jacques Bergeron publicly accused senior civil servants of committing a serious transgression by revealing a confidential report on an $87-million contract to Telus. As the scandal unfolded, it transpired that city officials had also intercepted Bergeron’s emails. That deal

wasn’t his only radioactive file: his office had vetted some of Montreal’s notorious construction contracts, and so perhaps it wasn’t a surprise that the city received anonymous allegations accusing him of hiring family members. Bergeron survived even as the city manager left amidst controversy. Most AGs eventually end up with such battle scars; and, if they don’t, they’re probably not doing their jobs properly. Griffiths, who served as the auditor for Metro Toronto and the postamalgamation city, recalls battling one notorious city councillor and a few senior officials who pressured him not to look into certain types of transactions — a suspicion-inducing dynamic

CA magazine May 2012 27

that eventually prompted him to ask council to provide him the sort of bulletproof independence senior AGs enjoy. In other cases, the response from officialdom is more forthright, and comes in the form of phone calls from the prime minister’s office, premiers’ offices or their proxies (e.g., clerk of the privy council, cabinet secretary). “Yes, it happens,” Desautels says. “It’s part of the game. People know your phone number. You will get reactions.” McCarter agrees: “I will get a call saying, ‘Jim, have you thought this through?’ ” But, he adds, the feedback is important. “I want to know their concerns. The benefit I have is that I can’t be fired. I can call it the way I see it.” The attention comes, in large measure, because the AGs are highly visible public figures whose findings generate not only news but political controversy, regardless of the size of the jurisdiction. For newcomers, that revelation can come as something of a shock: “I am surprised at the media attention that takes place following a report,” says MacPherson. So, indeed, was Fraser, who became a media star very soon after taking office and eventually received media training, according to Waddell. In fact, Desautels, a cool, buttoned-down figure, says he found the sudden celebrity to be “the toughest part of the job. As accountants, it’s not something we do a lot of.” He adds, “You learn that what you say to the media can find its way back to you pretty quickly.” McCarter, for his part, has learned to deal with reporters and makes a point of returning calls promptly and giving good quotes. But he understands the temptations and is keenly aware of the

need to dial down any kind of publicity that suggests attentionseeking as opposed to dispassionate analysis. He recalls how he was once watching a debate in the legislature over a study his office did on the GO Transit commuter service. As the politicians argued, a pair of Toronto Star reporters approached McCarter and asked him to pose for a photo in front of a locomotive at Union Station, with a pledge of page 1 coverage. “I said to them,‘I’m not going to do it.’ That, to me, would have been going too far.” For those AGs who don’t fly too close to the sun, the reward comes from watching public-accounts committees and senior officials act on their advice. Increasingly, AGs say, bureaucrats view their recommendations as constructive criticism. “We’re not out to get anybody,” says Lysyk. “We’re here to do a job.” Kostuch says the crispest measure of buy-in from the municipality’s civil service is that 95% of the AG’s recommendations to date have been implemented, with identified savings exceeding $40 million between 2004 and 2009. “I think the fundamental role of the auditor general is to help our democratic system function better by providing information to elected officials and to hold the government accountable,” adds Desautels. “It’s an essential part of the government we’ve put in place and if done properly, it can make quite a contribution to the quality of our institutions. Ultimately, you end up with a better country.” John lorinc is a freelance writer based in toronto

CA magazine May 2012 29

Best industrial/ manufacturing article Meilleur article industriel ou manufacturier Winner/gagner

Jason Contant Death by Design OHS Canada

hazardous gases

By Jason contant On the morning of September 5, 2008, a plumber was called to A-1 Mushroom Substratum Ltd. in Langley, British Columbia for the second time in as many days. There, he found an intake pipe at the bottom of a pump shed completely blocked and informed a supervisor at the mushroom composting facility that a company with expertise in sewer pump-out would be needed. Instead, two workers, under the direction of the supervisor, tried to clear a blockage at a butterfly valve in the pipe. Within seconds of prying open a flange, one worker dropped face down into water at the bottom of the shed, believed to have been felled by a sudden release of hydrogen sulphide (H2S) gas in the oxygen-deficient environment. He would die. In the minutes that followed, two would-be rescuers at the multiple-employer mushroom growing and processing operation would meet similar fates. Another two workers — the lucky ones — would suffer near fatal, irreversible brain damage. In its investigation report, released in late November, WorkSafeBC would point to a litany of failures in the design, construction and operation of the facility. Calling the investigation probably “the most complex in WorkSafeBC’s history,” a board statement notes “it took months to access key areas of the work site; many more months to fully understand the industrial process involved and the chronology of events and decisions over a five-year period that played a role in the incident.”

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ohs canada

Image: Thinkstock

Puzzling possibilities That September day, two workers were attempting to clear a blocked pipe inside a recessed pump shed while their supervisor watched from the structure’s entrance, about three metres above. Standing in about 40 centimetres of process water and sludge that had accumulated at the bottom of the shed, the workers removed eight corroded bolts from the valve’s flanges and loosely installed four new bolts to keep the valve in place. At about 5 pm, one of the workers pried the top flange from the valve using one screwdriver and used another to free straw, sludge and other material stuck in the valve. “A small amount of liquid started to flow out,” notes the investigation report by WorkSafeBC, based in Richmond, British Columbia. As the worker removed the straw, he complained to the supervisor that there was a strange smell, prompting the supervisor to tell the workers to exit the shed. The worker at the valve took a step and then collapsed face-first into the water and sludge. The supervisor climbed down and helped the second worker prop the unresponsive employee into a sitting position against the shed wall. The supervisor then called the property owner to obtain emergency assistance. When paramedics arrived at about 5:20 pm, they found the supervisor outside the shed disoriented and in respiratory distress. “The ambulance crew noticed the foul smell, suspected a hazardous atmosphere, and decided to pull back from the shed area,” WorkSafeBC reports, preventing other workers who had arrived with a ladder from entering the shed. In all, five workers from the three businesses that make up the processing facility — A-1 Mushroom Substratum, H.V. Truong Ltd., a mushroom-growing business, and Farmers’ Fresh Mushrooms Inc., a packing and marketing firm — were removed from the shed. Ut Van Tran, 35, Chi Wai Chan, 55, and Han Duc Pham, 47, died; Tchen Phan remains in a wheelchair, and Michael Phan is in a coma. The WorkSafeBC report points to numerous deficiencies: complete absence of an oh&s system at the site; failure to correct anaerobic (without oxygen) conditions that had developed in the process water tank that pumped water through the pipes, leading to a build-up of H2S in the intake pipe; lack of engineering controls to prevent solids from entering the pipes; lack of regulatory compliance; and flaws in the design, construction and operation of the facility dating back to 2004. “We recognize that the families have had to wait a long time to know more about what happened to their loved ones, and we hope this investigation provides them with some understanding of what led to this tragedy,” Jeff Dolan, director of investigations for WorkSafeBC, says in a release. In August of 2010, 29 occupational health and safety charges were laid against A-1 Mushroom Substratum, H.V. Truong and four individuals. The following May, the two companies and three individuals pleaded guilty to 10 counts revolving around the general failures to ensure worker health and safety; provide workers with information, instruction, training and supervision; and ensure confined space hazards were eliminated or minimized and associated work was performed in a safe manner. Sentencing last November ended with fines of $200,000 for A-1 Mushroom Substratum (which has since gone bankrupt), $120,000 for H.V. Truong and $15,000, $10,000 and $5,000 for the three individuals. Raj Chouhan, labour critic for the New Democratic Party in British Columbia, was among a choir of voices demanding tougher sentences. Characterizing the final penalties as slaps on the wrist, Chouhan reports

that “the families were really hoping something would come out of this that would help other families and other workers.” In a bid to explain the circumstances that allowed the deadly events to unfold, one need consider the process for composting mushrooms at the facility. In a 3-D animation mock-up, WorkSafeBC notes that the pipe system was built to supply both fresh and process water from separate large tanks within a walled containment area. The water mix is then pumped through a series of pipes; first into the composting barns and then sprayed onto composting piles that contain straw, chicken manure and agricultural gypsum. Operational problems and reduced compost production, however, caused the process water tank and containment area to fill with process water, straw and sludge. To protect the pumps and pipes from freezing in winter, the shed was constructed against the containment wall in 2007. Also relevant is the design and construction of the process water recycling system, which drew process water from the bottom of the tank into the intake pipe. The WorkSafeBC report notes that this contributed to blockages forming and anaerobic conditions developing in the pipe system. “Because straw and sludge had settled to the bottom of the tank, it was inevitable that these materials would enter the pipe and impede the flow of water, or form blockages,” the report concludes. Add the reduced demand for process water — the Township of Langley had shut down one composting barn in late 2007 for breach of by-laws — and this meant water entering the system stayed longer and flowed through the pipes less frequently, increasing the chances of process water growing stagnant and supporting anaerobic activity. “Exacerbating the problem was the absence of a means of promoting the circulation and uniform mixing of any oxygenated water entering the [process] water tank with the stagnant water, sludge and solids that had accumulated at the bottom of the tank,” the report explains. PIECE BY PIECE Les Mackoff, who served as defence counsel for the accused, says that the property owners “worked with these folks everyday and they feel horrible that this happened.” Prior to the deadly incident, the owners had hired experts and sought engineering advice on how to install biofilters

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to help minimize the potential for smell, Mackoff reports. However, he points out, “the construction was flawed. There was a serious breakdown of the facility.” Neil McManus, a certified industrial hygienist at NorthWest Occupational Health & Safety in Vancouver, says his view is that engineers control occupational safety because “their designs create the conditions of work that affect other people.” In his experience, McManus says that most composting operations have submersible and removable pumps. Without these, people have to go down inside the “chamber to service the pump or stuff that blocks it,” he adds. David Nguyen, an agricultural health and safety specialist with the Farm and Ranch Safety and Health Association (FARSHA) in Langley, British Columbia, says the incident “was a pretty big eye-opener for that particular industry, everyone in agriculture.” Nguyen reports that he has visited the workplace and, since the incident, has been working with employers to improve work-related health and safety. Engineering problems were an issue, he says, but adds he believes other things — such as precautions revolving around confined space risk assessment, hazard identification and exposure control — could have helped prevent the incident. Prevention may also have been advanced by reading the signs. About two months before that deadly day, on July 15, 2008, the British Columbia Farm Industry Review Board received a complaint from township councillor Charlie Fox and his wife regarding odour and wastewater discharges from the composting operation. The township had commenced legal action to shut down the facility for a second time. In fact, a court hearing on the second complaint was set for three days after the accident. “The tragedy happened in exactly the spot we know the odour was emanating from because it was basically an uncovered cesspool,” Fox contends. “In my opinion,” he says, “it was this sludge that came out afterwards and sat in these massive open settling ponds that was the problem.” McManus reports that less than a year after the Langley incident, he visited another mushroom farm in British Columbia where he saw the same “mechanism in action” and found “astoundingly high levels” of H2S at a pump station. “We had to get out of there immediately,” he recalls. “There was zero odour until something changed. My nose is telling me there was H2S here and I looked around and could not see any change to account for what happened. It was the pump. We could see froth at the bottom,” McManus says. He speculates “the froth floating above the liquid can trap at least one atmosphere of gas pressure,” some of which may be H2S. “This is a highly constrained system, highly unstable. So if you have H2S molecules trapped in bubbles in that thickened up fluid and some sheer force applies to it and loosens up the fluid, there’s a way for the bubbles to get out,” he says. “The culprit is gone rapidly… When the investigators go looking for what caused the deaths, they can’t find anything.”

PICTURE IMPERFECT The WorkSafeBC report notes that when the township’s fire captain measured the air inside the shed at about 5:30 pm, H2S levels were at 36 parts per million (ppm) with 15 per cent oxygen — too high and too low, respectively. Just 22 minutes later, gas levels had dropped to 6 ppm, with a normal oxygen level of 20.9 per cent. The concentrations contrast sharply with WorkSafeBC counts from January 29, 2009 — five months later — when the valve was removed and air inside the intake pipe below the valve measured. “H2S was present at levels exceeding 500 ppm (the maximum reading on the monitor), indicating that anaerobic conditions in the pipe could result in levels of H2S high enough to cause unconsciousness and rapid death,” the investigation report states. Why did one worker inside the shed become unresponsive within seconds of the H2S release and later die, while the other survived? “When you look at occupational hygiene, not everybody is affected the same way by the same substance,” explains Shelley Gray, an occupational hygienist with Nova Scotia’s Department of Labour and Advanced Education in Halifax. “There are a lot of smokers out there. Not all of them develop lung cancer,” Gray notes by way of example. Factors that could influence response to exposure include ventilation, proximity to the point of release and rate of respiration, she says. “One [worker] could have been doing more work and actively taking in more of the environment than the other person beside them,” she notes. Gray reports that all gases will displace oxygen, but the concentrations have to be very high to do so. “To displace one per cent of oxygen, you would have to have really high, high

concentrations,” she says, although another possibility may be an oxygen scavenger, “which actually binds the oxygen and takes it out of the atmosphere.” At 15 per cent oxygen, “you’re not going to have a serious impact on people’s survivability,” McManus says. “That’s why in all likelihood it was the H2S that did it,” he speculates. The deaths spurred repeated calls for a coroner’s inquest by the provincial New Democrats and the British Columbia Federation of Labour (BCFL) in Vancouver. Chief coroner Lisa Lapointe answered that call in December. “After reviewing all the information available in the case, including the WorkSafeBC report, [Lapointe] concluded that there is benefit to holding an inquest to examine some of the broader circumstances of the incident in an attempt to prevent future deaths from happening in similar circumstances,” notes a statement from the Vancouver-based BC Coroners Service. During the inquest, scheduled to begin May 7, presiding coroner Norm Liebel and a jury will hear evidence from numerous witnesses. The NDP’s Raj Chouhan says he is hopeful there will be recommendations “that would help us to prevent these kinds of tragedies in the future.” BCFL president Jim Sinclair also welcomes the provincial inquest, noting in a statement that it “gives hope of a legacy of greater safety on British Columbia farms.” IMAGE FORMING Before the incident, “no one appears to have focused on the potential development of anaerobic conditions in the pipes forming part of the process water recycling system, even where other parts of that system are kept aerobic,” states the WorkSafeBC report. “While there is industry and regulatory recognition of the production of gases as a by-product of these operations, the focus in industry literature is more on environmental protec-

Exposure Effects WorkSafeBC’s bulletin, “Hydrogen Sulphide in Industry,” notes that workers are exposed to unsafe levels of H2S every year. Called sour gas, sewer gas, stink damp and hydrosulphuric acid, H2S in high enough concentrations can kill in seconds. Concentration Observations/Health Effects Parts per million Less than 1 Most people smell “rotten egg” odour. 3 to 5 Odour is strong. 20 to 150 Nose and throat feel dry and irritated; eyes itch or water. Prolonged exposure may cause coughing, hoarseness, shortness of breath and runny nose. 150 to 200 Sense of smell is blocked. 200 to 250 Major nose, throat and lung irritation occurs, along with headache, nausea, vomiting and dizziness. Prolonged exposure can cause fluid build-up in the lungs (pulmonary edema), which can be fatal. 300 to 500 Symptoms as above, but more severe. Death can occur within one to four hours. Above 500 Immediate loss of consciousness. Death is rapid, sometimes immediate.

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Lack of Air

In its guidance document, “Selection, Use and Care of Respirators,” the Canadian Standards Association’s Z94.4-02 standard outlines the effects of oxygen deficiency. Below are some examples: of Oxygen in Air % Effects 20.9 No symptoms. 16 Increased heart and breathing rates, some impairment in thinking and co-ordination. 14 Fatigue, emotional upset, impaired judgement and faulty co-ordination. 12 Very poor judgement and co-ordination, nausea, vomiting and impaired respiration. Less than 10 Nausea and vomiting, loss of all movement, unconsciousness, convulsions and death.

tion and odour abatement rather than the potential hazards arising from the production of these gases,” the report adds. Scott Fraser, director of programs at FARSHA, agrees the level of awareness of hazards in mushroom composting operations was limited before the accident. “When it first happened, I don’t think anyone knew what was really going on or the amount of hydrogen sulphide that could come off this stuff,” Fraser says. Since the incident, written information has been distributed to similar operations and exposure controls plans for mushroom composting have been put in place, he reports. Nguyen says workers at the Langley facility spoke Vietnamese, which he speaks as a second language. “The folks that are employed in [agriculture] tend to be first-generation immigrants, so English is not always their first language.” This could give rise to confusion over a provincial safety requirement or directive, he says. “If there’s situations like that out there, make sure they do understand and understand in their own language,” Nguyen adds. FARSHA supplies some information in Vietnamese, Punjabi and Spanish, among other languages. The WorkSafeBC report notes a language barrier likely contributed to poor communication between the plumber and A-1 Mushroom Substratum’s operations manager, both of whom spoke only English, and among the property owner, supervisor and workers, who spoke Vietnamese and/or Cantonese, but little or no English. “The pump shed was never identified as a confined space and no plan was in place for workers to enter the shed and work safely,” notes the report. “None of the workers who attempted rescue had any knowledge of confined spaces or the hazardous atmosphere that they would encounter.” To make matters worse, the “most significant features of a confined space that applied to the pump shed were that the shed was enclosed and that it had

restricted means for entry and exit that could complicate evacuation and rescue in an emergency,” WorkSafeBC notes. For example, although the shed could be accessed through a door at the top of the structure, to get to the bottom, workers either had to climb down the framework or walk on the pump motors and framework to access a short aluminum ladder resting against the framework. “The restricted means of entry and exit also meant that workers could not quickly escape the hazardous atmosphere in the shed,” the report states. It is likely oxygen deficiency would not only have affected the workers’ judgement and coordination, but also their “ability to rescue themselves and exit the shed.” Nguyen says his understanding is that WorkSafeBC has stepped up enforcement at farms and mushroom processing facilities in the province. Megan Johnston, a communications officer at WorkSafeBC, says that board officials anticipate participating in the inquest and declined further comment until that time. As councillor Charlie Fox sees it, there did not seem to be a co-ordinated plan among various agencies with jurisdiction over the facility — including WorkSafeBC, the township and British Columbia’s agriculture and environment ministries — to provide oversight at the workplace. “I’m not saying any one agency is responsible, but this is one example of bureaucracy falling through the cracks,” Fox contends. The WorkSafeBC report notes that neighbours and the Township of Langley logged four complaints about the facility — such as workers without personal protective equipment and chemicals to which they might be exposed — before the incident. A prevention officer discussed the matter with the township inspector, but decided not to conduct a site visit, notes the WorkSafeBC report. Board officers responded to complaints in 2007. However, the officers “did not return to the facility after that time in response to a specific complaint and missed an opportunity to inspect the facility to determine compliance with occupational health and safety legislation,” the report adds. Hindsight may be 20/20. But starting May 7, the hope is that airing all available facts offers a clear view of how to ensure that safer working conditions exist at other mushroom composting operations across the land. Follow us on Twitter @OHSCanada

Jason Contant is editor of health & safety news.

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David Tal

Learning Super Skills Jobpostings Magazine

Learning super skills Focus harder. Memorize better. Read it faster. Google stronger. by David Tal

We’ve all seen them: those classmates who seem to make essays and exams feel effortless, those co-workers who regularly complete projects both early and under budget. “Good for them,” we say aloud. But in the back of our minds, a part of us thinks, “How do they do that? What makes them better than me?” The answer? Nothing. Very few are born with superhuman abilities. But those few who we perceive as superhuman are just people who’ve made the extra effort to learn special skills that allow them to accomplish things more productively and efficiently

than those around them. Specifically, they learn skills that allow them to reach their full potential, a potential that exists in all of us. In the end, everyone wants that edge. And we plan to help you get it. In school (and in your future career), there are a couple of basic skill sets we can all supercharge to make us super productive. They include: memorization, reading, researching, multitasking, and focusing. The following mini tutorials will teach you everything you need to learn to make these basic skills your super skills. Enjoy!

March 2012 | jobpostings.ca

lesson one

read faster Ah, the ability to speed read. It’s a skill

you after graduation. Elizabeth Allen,

that offers a variety of benefits. In

author and founder of Super Fast

particular, Abby Marks Beale, founder

Guides, says, “In the workplace, people

of Rev It Up Reading, says, “(Speed

are bombarded with written informa-

reading) provides the reading confi-

tion, such as emails, reports, memos,

dence and competence to get through

etc. The quicker people can read and

your academic reading workload.

digest the information, the quicker

Through increased speed, students

they can act on it, and perform their

increase concentration, which in turn

job effectively.”

supports increased comprehension, and ultimately better and longer retention. Reading becomes less of a chore and takes less time.” Speed reading is also a skill that will support

Overall, speed reading is a skill that students across the nation pay good money to learn, and here you’ll learn it within just a few minutes. Get ready!

the finger

Your eyes jump left to right as you read through a sentence (a motion called saccades). This is natural, but as you increase your reading speed, this can cause reading missteps which force you to reread sections of text. To help control this eye movement, use your finger (or a pen) to trace under each line as you read. Try doing this while you read as fast as possible.

the small skip

snapshots

Once you’re comfortable skipping three words in and out of a sentence, start stretching yourself and read four words in and out, then five. Advanced speed readers only need to take two snapshots of an average sentence to read it fully.

intense practice

As you get better at using your peripheral vision to breeze through your sentences, continue to push yourself. This will heighten your perception of your future reading potential, and it will show you how much faster you can read with enough practice. In all, the more actively you practice the steps above, the quicker you’ll see the results in your reading speed.

Image: © iStockphoto.com/Yogy Ikhwanto

As you get used to reading faster with your finger to guide you, begin skipping the first and last few words of each sentence. Everyone has peripheral vision, and this ability works wonders while reading. So when you start a new sentence, skip to the third word and let your peripheral vision automatically read the first two words for you. Do the same at the end of the sentence, where you end on the third word from the last word. Start reading this way, faster and faster, until the process gets easier and easier.

lesson two



What one piece of advice helped you the most in getting through school? “My father shared this advice with me: Try to study subjects that you enjoy, the rest will come naturally.”

Thomas Reed

22 years old, president of P.S. Warren Geological Society at the University of Alberta & 4th year ‘Geology’ student

“There is ALWAYS more work/ studying that can be done — time is your critical resource. So spend the most time on the things worth the most. Spending four hours on a report worth one percent equals a time management fail.”

memorize better Memory is a tricky thing. Science has yet to reveal how it fully works. And there are many factors that can affect it. In general, a memory is information that the brain can recall, and this ability has a variety of applications. “Memorization techniques can obviously help students recall information quickly and effectively for exams,” says Patrick C. Brown, founder of Occam Education, “but it also forces students to become more disciplined. Techniques, such as spaced repetition, require

Getting up off the couch once in a while can help improve your memory

students to revisit material at increasingly longer intervals, and structure their academic/ personal calendars accordingly.” Meanwhile, in your post-grad life, effective recall can really help your career. Chris Tobias, author and founder of SchoolSkills.net, explains, “Remembering the names, history, and life details of your co-workers and business associates will greatly help you succeed in your post-grad professional life. How many kids does your boss have? Where did your coworker go for their last vacation? These facts will help you connect with people in conversation, build trust, and create great working relationships. Remembering business facts — such as how many units you need to sell this month — will help you handle the ‘hallway conversations’ with expertise and professionalism. This also builds trust and makes you a valuable member of the team, and to clients.”

Greg Overholt

26 years old, executive director for Students Offering Support. Graduated in 2009 with a degree in BBA & Com Sci from Wilfrid Laurier University.

“‘Take hand written notes,’ I was told by a group of students who were volunteering their time at a ‘head start’ program for first year students. It helps you formulate your own thoughts, keeps away distractions, and is good practice since exams are hand written.”

Mehria Karimzadah

21 years old, Co-Founder and Chief of Operations for DEM Society at the University of Toronto Mississauga & 4th Year ‘Digital Enterprise Management’ student

Lifestyle habits to improve memory what

why

how

Food

Brain foods include complex carbohydrates, fibre, and lean protein.

Matcha (green tea), coffee, grass-fed beef, wild salmon, blueberries & acai berries, cacao beans, greek yogurt, quinoa, eggs

Activities By keeping your mind engaged with new

Listen to music, mental exercises (e.g. anagrams), puzzle games, learning new skills or hobbies, stimulate five senses

Breaks

Rest, exercise, walk breaks

experiences, you train it to remain more open to and absorb new information

Your mind needs regular breaks in order to properly absorb new information.

Images: Jupiterimages/ Polka Dot/Thinkstock, © iStockphoto.com/Justin Ray

“My mother told me that: in life, you prepare for the worst and work for the best. If a bad thing happens, do everything to prevent it from getting worse. After that, take the mistake as a lesson learned.”

Angela Chen

21 years old, president of the York Marketing Association at York University. Graduating in 2012 with a major in ‘Marketing and Strategy.’

March 2012 | jobpostings.ca

lesson two

MORE MEMORIZATION TOOLS Depending on your learning style (visual, verbal, kinaesthetic, or auditory), one of more of these strategies might help you: Focus: The better you are able to focus on the info you want to memorize, the more effective you’ll be at doing so. More about this later!

 “I would like to have a zombie-on-brains-like fixation on dry academic readings. My brain disagrees.”

Karl Gutowski

25 years old, president of the National Finance Students Association at York University. Graduating in 2013 with a major in ‘Finance.’

“Picking brilliant, dedicated people out of a crowd. Working with amazing people is the best thing you can do in school.”

Derek Bennewies 21 years old, chair of CUTC – Canadian Undergraduate Technology Conference at the University of Waterloo. Graduating in 2013 with a major in ‘Nanotech Engineering.’

“I’m open to improvement when it comes to speed reading. It’s important to be able to pick up and transfer information quickly. Efficiency is vital!”

Tien Nguyen

19 years old, vice president communications for the Engineering Science Student Society at Simon Fraser University & 2nd year ‘Systems Engineering’ student.

Chunking: Break things down into their smallest elements to make them easier to remember.

Practice & Repetition: Repetition encourages the brain to form stronger and faster neural pathways to the information you want to recall. Environment: Adjust your environment to allow you to learn more effectively, e.g. some people learn better in silence, others work better with music blasting.

Association: Attach images to words to assist in recall by linking to familiar things.

What skill would you most like to learn to do better in school?

Acronyms: Take a list of items that you need to memorize, summarize each item in one word. Then take the first letter of each word and form them into a single word that can be easily remembered.

Method of Loci One of the little known but wildly effective memory techniques is the Method of Loci. Used all the way back in ancient Rome, this is a mnemonic device that’s based on building relationships between spatial memories and the items to be memorized. How does it work? Basically, scientific research has shown that you can improve memory by associating something you need to remember with a place you’re familiar

with. Because of the way your brain works (especially your hippocampus), associating something with a place, supercharges your ability to recall info. This is fairly easy when memorizing a single factoid. But this process is awesome when you’re trying to memorize a list of related facts and info.

need proof? try this exercise: Grab a deck of cards and pull out one random card for each room in your house or apartment (bathrooms and kitchens included). Place the cards in any order you like, then assign each card to one room. Write down the order on a piece of paper. In your mind, imagine yourself walking through your home, and placing each card inside an assigned room (preferably on a flat surface, e.g. a table, chair, bed, etc.) in the order you assigned to those cards. Repeat this step a couple of times, walking through your home in your mind, setting the cards as planned out in step two. Open your eyes, shuffle the cards, then turn them over so you can’t see their faces. Now walk through your home (in your mind), and see how many of the cards you can remember in the order you originally set out. Match your answers to the order you wrote down in step three. Chances are you’ll be surprised by how many cards you remember correctly (and in the right order)! And as always, the more you practice, the better you’ll become.

you can use those cards for something other than taking your friends’ money.

“Wait, hold on a second,” you say. “I don’t have enough rooms in my place to match the number of things I need to remember?” Well, if that’s the case, you can always “place your cards” in different parts of a single room (e.g. try placing one card on your desk, another on your dresser, one inside your closet, etc.). You can also try walking down your local street, and “placing your cards” in each of the different stores along said street. Images: © iStockphoto.com/brett lamb, John Howard/ Lifesize/Thinkstock

lesson three

google stronger

most students have no clue how to research it properly. Yes, we, the technologically literate generation, can barely enter a proper Google query. In fact, a well known project conducted by researchers at Ethnographic Research in Illinois Academic libraries found that only about a quarter of students studied were able to conduct “what a librarian might consider a reasonably well-executed search.” Well, that ends now. The following tips will have you doing online research like a pro. This means better information for your next project, better grades, and after graduation, more positive attention from your boss. let’s start!

Unfortunately, with all this abundance of info out there,

How to search online In Google, there are things called operators: they are search terms that can help you get more specific and useful search results from your Google query. For example:

You wanna find: An article from The Oatmeal that explains how to use an apostrophe, but not a comma, written between the year 2009 and 2011.

site:theoatmeal.com “how” ~use “apostrophe” –comma 2009..2011 Only searches the pages of that site Excludes this term from the search

Searches for the exact word or phrase within the quotation, not each word separately Shows all results from the selected time range

Will also search related words

To become a Google power user, visit: googleguide.com/advanced_operators.html

You wanna find: A PDF report on globalization and its effect on various kinds of communities.

ext:pdf intitle:globalization and its effect “on * communities” Google calls this “the wildcard.” It fills in the blanks or replaces a missing or unknown word or words (in this case, the options can include: on local/indigenous/minority communities) Searches only results of the file type you select, e.g. pdf, doc, xls, jpeg, etc.

jobpostings.ca | March 2012

Shows only results with that word in the article’s title (in this case: globalization)

Where to research Researching online isn’t just about how to search for information, but knowing where to search for information. When it comes to finding quality secondary research, keep these key tips in mind: Use Google Scholar: This service is a free, online, searchable database of academic and scholarly work — the stuff you can cite on your papers. Your library: Most libraries, especially those found in post-secondary institutions, don’t just carry books. Their online resources may offer access to a huge number of databases that contain academic and scholarly reports and journals (those that aren’t searchable online without a credit card), and free online subscriptions to newspapers and magazines. Bibliographies: You know those long lists of academic reports, journals, and books found at the end of most academic reports, journals, and books? It’s probably a good idea to start checking out those lists more carefully. They are an awesome source of information that will tell you where to find more relevant research sources for your project! Wikipedia: Counter to what your profs might say, this is a great source of information when you want to read up on the basics of almost any topic. That said, because the information on Wikipedia is produced through online crowd sourcing, you can’t trust the accuracy of everything you read there. So use Wikipedia to learn the basics about your subject, and where to find more accurate sources of information about it. And obviously, NEVER cite Wikipedia.

iMage: © istockphoto.coM/YogY ikhwanto

learning how to research effectively is a vital skill you learn and use throughout your school and professional career. In our modern, tech-savvy world, however, much of our basic research takes place online. Sure primary research is important — interviewing people, conducting surveys, experimenting in the lab or field, etc. — but it’s through your secondary research that you usually form the basis for your thesis, your methodology, your topic’s supporting context. And much of that secondary research is now done online thanks to the world’s ever growing penchant for transferring the sum of human knowledge to the web.

lesson four

focus harder Okay, so we know we said we’d talk about multitasking right now, but we have a confession to make: multitasking actually doesn’t work. “The brain wasn’t designed to multitask,” says Margaret Moore, founder and CEO of WellCoaches. com, and co-author of Organize Your Mind, Organize Your Life. “We can only focus our attention well on one thing at a time.” Sure, we can all breath and walk at the same time, but if you try to write a couple of work emails while in deep conversation with your significant other on the phone, your significant other may grow ever louder and more annoyed. That’s why instead of trying to multitask, we’ll give you tips and tricks on how to focus more effectively. To be clear, focusing is about prioritization and sticking to a single objective. The better you’re able to focus, the better (and faster) you’ll be able to complete projects, big and small. Unfortunately, focus has a pesky enemy: it’s called procrastination. Luckily, we’ve come up with some tips to both combat procrastination, and improve your focus.

Block Facebook (and other addictive sites). If you need to hunker down and focus on a project, consider giving your social media passwords to a trusted friend or family member, and have them change the passwords to lock you out until after you score your A+. Block the internet. For some of us, social media is not the only thing online that sucks up our time. For everything else, consider installing a browser plugin called LeechBlock. This ultra customizable plugin allows you to set the amount of time you allow yourself to visit a specific list of sites. Once you pass the allotted time you’ve set, LeechBlock will automatically disable your access to that site.

We live in one of the most mentally stimulating periods of human history. With so much access to ... well, everything (thank you Internet), can people really be blamed for being distracted? No, but we can put in place measures to limit distractions. They can include:

The time saving opportunities are endless. By finding those tasks in your life that can be batched, you replace a regular distraction with a single, focused period of time to accomplish the tasks.

80%

Control your environment. Sometimes our homes offer too many distractions. If this is the case, consider working outside at a library, coffee shop, or park. Push in your earplugs (or earphones if you like music while you work) and let your fingers rip across your laptop keyboard.

Taking a vacation from your friends. For the outgoing types out there, your usual vice is people and connecting with them. But if you need to complete a project that’s worth 60 percent of your grade, politely ask your friends to not contact you until after you’re done.

Batching (the secret of efficiency)

Eliminate distractors

having to re-familiarize yourself with the previous day’s research progress. Instead of checking and answering your emails every five minutes, aim to do it only three times per day. At work, instead of spreading your calls throughout the week, batch them all into one day to free the rest of your week for more pressing matters.

Batching is the process of compiling all your most repetitive and tedious tasks and doing them all in one go, thereby minimizing the set up cost and time involved, and avoiding constant interruptions to your focus. This is a technique used throughout industry, but can be used in your personal life. For example, instead of doing your laundry or dishes everyday, wait for them to pile up and do them all in one go (once or twice a week). Instead of spreading your research out over the course of a week, batch it down to a day or two to avoid

80/20

Vilfredo Pareto, a little known economist who was recently popularized in Timothy Ferriss’ bestselling book, The 4-Hour Workweek, developed a theory called Pareto’s Law — today it’s commonly referred to at the 80/20 principle. Originally, this law demonstrated the predictable distribution of wealth in society — that 80 percent of the wealth and income was produced and possessed by 20 percent of the population. The trick is that this principle not only holds true in economics, but in every aspect of life. Take a look at your life and ask yourself, “Which 20 percent of sources are causing 80 percent of my workload or taking up 80 percent of my time?” Be thorough. It can be a toxic relationship with a friend/colleague/significant other; a hostile business client; a commute, a style of work; a membership (maybe you are a part of too many clubs or associations); an activity, etc. Find those sources that are eating up too much of your time and focus, figure out whether they are really essential to keep in your life, then focus on better managing, minimizing, or eliminating those sources from your life.

Goal setting “Set realistic daily and weekly goals (not your activities) that specifically include the quantity, quality and the pace of the goal,” advises Dr. Kevin D. Gazzara, senior partner at Magna Leadership Solutions LLC. “(This way) you get positive and timely reinforcement of your accomplishments.” Too many people try to accomplish ten or twenty things in a single day, then (surprisingly) they get discouraged when they only complete a handful of the items on their list. Sounds familiar? It should. It’s called trying to multitask. Again, it doesn’t work! Instead, focus on accomplishing one to three big goals per day. You’ll be amazed at the difference this makes.

Artificial stress The essence of procrastination is putting things off until a “more convenient” time, or to the last minute before they’re due. Steve Levinson, a clinical psychologist and co-author of the book, Following Through: A Revolutionary New Model for Finishing Whatever You Start, has some insight into this experience. “Procrastinators and non-procrastinators alike only do what they’ve decided they should when they actually feel like they must do it. The only difference between procrastinators and nonprocrastinators is that it takes procrastinators a lot longer to feel like they must do it. In other words, they wait until ‘the last minute.’ That’s why I believe that a key to overcoming procrastination is to learn how to deliberately make ‘the last minute’ come sooner.” To conquer procrastination, Levinson suggests creating artificial deadlines that force you to take action now, instead of an hour before the actual deadline. “Don’t wait for the last minute to come on its own because it will come too late. Deliberately put yourself in situations that create pressure and urgency sooner.” 

March 2012 | jobpostings.ca

Art direction of an opening spread/complete feature Direction artistique de la double-page dâ&#x20AC;&#x2122;ouverature ou dâ&#x20AC;&#x2122;un article Winner/gagner

Underline Studio In Praise of Literature University Affairs

24 / www.universityaffairs.ca / December 2012

Personal essay by

Albert Braz

In praise of literature A literary scholar looks back, and ahead, to diagnose the problems facing his ield

Photography by

Cara Barer

the beginning

“ Personally, I would sooner have written Alice in Wonderland than the whole Encyclopædia Britannica.” Stephen Leacock (1912)

numerous explanations are usually offered for the seemingly permanent crisis in literary studies, from the domination of science and technology, through the businessication of academia, to the rise of the factual paradigm in which the imaginative is acceptable only when disguised as real. However, one crucial element that hasn’t received much attention is that many literary scholars and teachers no longer believe in literature. The loss of faith in literature by its purported guardians, professors of literature, is obviously linked to the other factors that have culminated in literature’s waning prestige since the mid-20th century. Yet it’s both the most perplexing and, in the long run, likely the most harmful. After all, if teachers of literature don’t believe in it, why should anyone else? Even more critical, the rejection of literature by so many literary scholars calls into question our ability to determine what is most signiicant about our discipline, and thus our authority to assess texts. It is hard for anyone actively involved in the life of an English department in the last few decades not to notice the way English professors have become ambivalent about our ostensible raison d’être. Whenever one discusses the future of the discipline, it soon becomes apparent that most people feel that if it can be saved at all it will be by embracing some related ield, such as ilm studies, cultural studies or that academic catch-all that goes by the name of theory – anything but literature. In fact, no other term appears to cause more anxiety at departmental meetings than literature itself. Instead of being a source of disciplinary pride, or at least of disciplinary identity, it has become an embarrassment, an anachronism, and we handle it as if it were an explosive device. Some colleagues would love to discard the word literature altogether, openly advocating that it be removed from course titles and replaced with supposedly less elitist descriptors like texts. Similarly, they make little attempt to camoulage their excitement about teaching almost any subject except traditional literature such as poetry, drama or non-iction. For instance, in a recent essay on the relation between stories and collective identity, Neil ten Kortenaar, a professor of English and com26 / www.universityaffairs.ca / December 2012

parative literature at the University of Toronto, casually notes that “[m]ost literary scholars – it can hardly be a secret – do not love literature.” He claims that much of the appeal of theory is that it provides literature professors with “a sense of mastery (I know better) and virtue (I am on the side of the right thinkers).” This explains the pervasiveness of “the scholastic appeal to authority – ‘as [Michel] Foucault says’ or ‘as Homi Bhabha says’ – ” in contemporary criticism, as well as the move away from literature. Likewise, the curmudgeon but polymath literary critic Harold Bloom states that his polemical book The Western Canon is “not directed to academics, because only a small remnant of them still read for the love of reading.” While the verdicts by Kortenaar and Bloom may sound rash, it’s incontestable that a considerable number of literary scholars have lost their faith in the power, to say nothing of the magic, of literature. Even those who love literature have developed serious doubts about its cultural capital in the 21st century and therefore its authority and that of the people who teach it or write about it. In some ways, it could be argued that literary studies has been pluralized to distraction. The idea of what constitutes literature has become so amorphous that it can cover anything from ideology and philosophy to the material, such as airplanes or the faces of pop stars. In particular, literature is now largely under the aegis of theory, leading someone like the late feminist scholar (and murder-mystery writer) Carolyn Heilbrun to confess that “it has always seemed to me that one of the chief advantages of retiring was that I would never have to think about catechresis again.” For Shakespeare specialist Paul A. Cantor, the author has been displaced by the critic and “literature has been theorized” to such a degree that the endless debates about its epistemological, sociological, moral and political dimensions threaten “to overwhelm literature itself.” Cantor adds, “We all know graduate students who are more familiar with, say, the critical debates about Renaissance drama than with the great works of Renaissance drama themselves.” But it’s clearly not only students who appear more interested in critical matters than in strictly literary ones; the same is true of many professors. In fact, the most striking aspect of what Cantor terms “the Age of the Critic” is its antagonism toward the literary imagination. Many literary scholars seem to be engaged in an oedipal battle, not only against the author but against literature itself. Faced with the marked institutional decline of their discipline, instead of attempting to preserve it by helping

to identify its tenets, they turn against it. In his ominously titled The Death of Literature, Alvin Kernan gives the example of the profession’s response during the famous obscenity trials of novels like Ulysses by James Joyce and Lady Chatterley’s Lover by D.H. Lawrence. When asked by the courts to deine literature, literary scholars either refused outright or provided innocuous answers. The result was that the judges did it for them, and in the process demystiied the very notion of authorship. Literary scholars actually appear less comfortable defending literature than attacking it, seeing it as the repository of just about every sin in the particular society in which it is produced. In Kernan’s words, we live in “a strange time,” but there are “few things stranger than the violence and even hatred with which the old literature [is] deconstructed by those who earn their living teaching and writing about it.” Indeed, for many literary scholars, literature appears to have become the enemy. The extent to which English professors have come to devalue literature is conspicuously evident when foreign writers visit campus, no matter how celebrated they may be. A few years after he was awarded the Nobel Prize for Literature, the novelist José Saramago came to my university to receive an honorary degree, and I was asked to chair his meet-and-greet session. Given that Saramago was the sort of writer who arouses strong passions in readers, both positive and negative, the hall was overlowing. People came from across the university and the wider community, many of them carrying several dog-eared books for the author to autograph. It was extremely gratifying for me to witness the enthusiasm with which Saramago was greeted by philosophers, political scientists and even business professors, to say nothing of the public at large. However, one group that was largely missing was literary scholars, something that I have noticed at other readings. It’s as if Stephen Hawking gave a lecture on campus and most of the physicists didn’t show up. The lack of engagement by English professors with writers and with writing from other literary traditions is usually attributed to a reluctance to read works in translation, a line of reasoning I’ve always found unconvincing. To begin with, one of the classics in the language, the King James Version of the Bible, is not only a product of translation but also of translation by committee. Even more signiicant, those same individuals who are reluctant to read literature in translation tend to have remarkably few qualms about teaching works of critical theory in translation. Most English departments continue to require that their students be conversant

with the ideas of theoreticians like Mikhail Bakhtin, Jacques Derrida and Friedrich Nietzsche, ideas that the vast majority of professors are unable to adequately establish whether they belong to the authors or to their translators. In other words, translation cannot be the true reason so many literary scholars show such little enthusiasm for literature. Moreover, this disconnection with literature transcends foreign writing. In many institutions, literature professors are also seldom seen at readings by either local or other English-language writers, unless they involve celebrity authors such as Margaret Atwood or Michael Ondaatje. Thus one is led to deduce that the real explanation for the lack of commitment to literature by professors of English is more likely to be that we, like many of our colleagues across the humanities, have been profoundly affected by what U.S. scholar Louis Menand terms the “crisis of legitimation” that has befallen our ield. More speciically, we have become uncertain almost to the point of paralysis about what is knowledge in the humanities. This uncertainty has compelled many of us to search for new ways to make the discipline relevant, which we often do by moving away from what historically has been its core, literature. The irony, of course, is that literature remains the most fruitful aspect of literary studies; it is the one element that is likely to infuse the discipline with vitality, not least because it has the broadest appeal to both intellectuals and the general populace. As recently as the end of the 19th century, it was widely accepted that a crucial difference between literary and scientiic discourses was that the former was addressed to society at large. In what is considered the irst book on comparative literature in English, Hutcheson Macaulay Posnett writes that “Unlike the man of science, the man of literature cannot coin words for a currency of new ideas; for his verse or prose, unlike the discoveries of the man of science, must reach average, not specialized, intelligence.” Because of the science-envy that has dominated literary studies since the 1930s, when prominent scholars like the New Critics could dismiss over 2,000 years of literary scholarship as being largely the work of “amateurs,” a major rift developed between criticism and literature. Troubled by the spectre of amateurism, literary scholars have passionately embraced the scientiic model, at least when it comes to linguistic hermeticism. We thus often equate obtuseness with wisdom. The Canadian-U.S.-French novelist Nancy Huston, in her book Losing North: Musings on Land, Tongue and Self, gives a fair indication of what has been lost with the marginalization of literature. A former student of the www.affairesuniversitaires.ca / décembre 2012 / 27

the end

celebrated French semiotician Roland Barthes, Huston relates that soon after she arrived in Paris in the 1970s, she unconditionally accepted the common view that independent thinkers should strive to “achieve a sort of ‘degree zero’” and, instead of “blindly putting their trust in the intrinsic wealth of [. . .] language” they were using, they ought to make it “their job to mistrust it because of the coded concepts for which it was the vehicle.” However, she gradually became disenchanted with this development, and turned against it. As she describes her ideological transformation: The important thing at the time, for us Barthésiens, was to prove that we were clever, lucid and theory savvy. We were so well trained at spotting the “myths” and political assumptions hidden behind every statement, and so blithely convinced of the absence of any connection between language and the world – that the credulousness required of novelists was beyond our reach. Barthes himself had dreams of writing a novel, but was brought up short by the irst obstacle he encountered – namely, the dificulty of inventing proper names for his characters and then believing in them. Could anyone be so gullible as to fool himself that way? Like the proverbial centipede, who can’t igure out which leg to start with, Barthes was paralyzed by his own need to understand how novels worked; therefore he had no choice but to renounce novel writing. Yes, whatever we say, writing requires – no, is – an act of faith. For Huston, theoreticians like Barthes have had an extremely negative impact on literature, not only because they question that there’s any link between texts and the world, but also because they don’t appreciate the literary imagination, in particular that literary texts still try to speak to the general citizenry in a manner that self-consciously critical texts do not. The power of literature is evident in its ability to enable us to imagine other worlds by transporting us there. More than any other discursive medium, literature also has the power to give life to the forgotten or erased, as a play and a biography of the 18th-century slave Marie-Joseph Angélique illustrate. Angélique was a Portuguese-born captive who in 1734 was charged with, tortured and hanged for the burning of Montreal. Her story is politically signiicant, among other reasons, because Angélique tried to escape captivity by leeing to New England, reversing one of the dominant narratives in Canadian culture. When it comes to the discourse on African slavery, Canada is typically portrayed as the terminus of the Underground Railroad, a sanctuary for U.S. slaves who follow the North 28 / www.universityaffairs.ca / December 2012

Star into freedom. But instead of following the North Star, Angélique lees it. She thus forces us to consider whether Canada is really a Canaan for enslaved people of African descent, or whether the word white in the Great White North refers to more than the colour of snow. Perhaps not surprisingly, in the last few decades Angélique has emerged as one of the most popular igures in African-Canadian culture. Among the writers who have tried to unravel her story are Lorena Gale, who in 1998 produced a play called Angélique, and Afua Cooper, the author of the 2006 biography The Hanging of Angélique: The Untold Story of Canadian Slavery and the Burning of Old Montréal. Both authors make little secret of their identiication with their subject, whom they clearly champion, yet there’s a critical difference between the two texts in the way they present their protagonist. In her play, Gale is able to place Angélique at the centre of her narrative. In particular, she gives Angélique a voice that the character uses to let the audience know why she is so determined to escape Montreal for New England: so that she can return home to her native island of Madeira. This is not quite what happens in The Hanging of Angélique, though. As a historian, Cooper simply cannot avoid the fact that she’s dealing with an individual about whom remarkably little is known, starting with her name. Since she’s unable to determine how Angélique felt about her condition, Cooper has to concentrate on the milieu in which she lived, often giving us the context without the text, or rather without its main subject. Comparing the strategies employed by Gale and Cooper to convey the story of Angélique underscores this: if we are to recover marginalized igures from the past, we usually can do so only through imaginative literature since, by deinition, the unsung lack archival records. Admittedly, literature no longer has the cultural capital it once possessed, which partly explains the crisis in literary studies. Writing early in the 20th century, the humorist (and political economist) Stephen Leacock does not hesitate stating that he “would sooner have written Alice in Wonderland than the whole Encyclopædia Britannica.” Although many people may continue to share Leacock’s love of literature, it’s rather apparent that this is far from being a universally held sentiment in the age of both science and the factual, not the least among literature teachers. Indeed, when one ponders why literary studies has become so peripheral in academia, part of the answer would seem to lie in our loss of faith in what used to deine our ield, literature. Albert Braz holds a joint appointment in English and comparative literature at the University of Alberta. He is the author of The False Traitor: Louis Riel in Canadian Culture.

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Tom Gierasimczuk Vice Age Marketing

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Vice L

ike all revolutions, the one raging in media and marketing today has been smoldering long before most people knew anything was afoot. Most of the drama, big talk and pitched battles flaring across the industry are the result of resistant incumbents refusing to acknowledge the need for fundamental changes for years. Dead men walking may enjoy, say, record profits for a while, but things will never be the same again. And from such revolutions victors always emerge— those who see the patterns, assemble an army, build the allegiances and are in the president’s palace before anyone even knows that the old guard is begging for their life. Vice Media, the serpentine global youth company drunkenly launched as a black and white culture rag in 1996 Montreal so a founder could get an extra $100 in welfare cheques by working in publishing, is the insurgent from whom we’ll all soon look to for direction. 32 february 6, 2012

How an irreverent group of Montreal raconteurs played by their own rules, figured out what the young folks want and became worth $1 billion in the process. Also: they’re just getting started By Tom Gierasimczuk Photos by Brad Bunyea

That’s right. Vice. As in just Vice “magazine” less than a decade ago. The hipster bible, stuffed with raw, obscure but impossible-to-ignore stories about life inside a maximumsecurity prison and gun markets packaged side by side with high-end fashion shoots and porn reviews. And what reader will ever forget an entire issue handed over to writers with special needs and Down syndrome and presented as “The Special Issue”? Given its raunchy pedigree, last April’s investment of up to $100 million by giant advertising holding company WPP, MTV founder and ex-Viacom CEO Tom Freston and private equity firm The Raine Group, surprised those not familiar with the creative, world-wide arms race the erstwhile one-time publisher was waging. An anonymous poster on a Canadian news site summarized the industry’s ignorance towards a media company that has grown exponentially, almost unbelievably, during the worst media economic landscape that anyone can remember. “WPP investing in what has deteriorated into an American Apparel wank mag for adolescent boys. Interesting.” Marketingmag.ca

“ If Google is the next Viacom, we want to be their MTV” —Vice co-founder and CEO Shane Smith

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february 6, 2012 33

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t’s mid-afternoon on a sunny, mild December Monday in the Williamsburg neighbourhood of Brooklyn, New York, and co-founder and CEO Shane Smith is recounting his company’s surreal history. The district, long hailed as the coolest piece of real estate in America if the yard stick is youthful creativity and collaboration (and the businesses that fuel such endeavours), has been Vice Media HQ for a decade. The company limped here after a late-’90s U.S. expansion almost killed it off. They left Montreal when in typical and oft-repeated fashion, Smith let his baritone and persuasion chart the course for where his company needed to go next. While still in Montreal, he started yapping to whoever would listen that his magazine was on the block and everyone from Larry Flint to Rupert Murdoch was interested. He also strategically dropped the name of Richard Szalwinski, a moneyed magazine player at the time who’d helped Shift take on the U.S. market. If Szalwinski didn’t have Vice on his mind before, he certainly did when he heard Smith’s fake rumours. Szalwinski bought the company based on a fabricated, arbitrary value of $4 million, moved the Vice team in with Shift magazine in Manhattan and did a stock swap that ballooned the company valuation. As the tech bubble burst, the operation quickly started running out of money and Szalwinski stopped returning phone calls. He then sold the company back to Smith and co-founders Suroosh Alvi and Gavin McInnes (who left the company in 2008 and is now creative director at New York shop Rooster). “That was a long time ago, man,” says Smith, seated on a chocolate brown leather recliner in the company’s boardroom on the first floor of a white-brick converted warehouse two blocks from the East River waterfront with jaw-dropping views of the New York skyline. The boardroom’s esthetic is 19th-century man cave that, say, Ernest Shackleton would have commissioned if he had the means of the Vice Media executives. A crystal chandelier hangs high above a paisley wall-to-wall carpet and dark wood panelling squares off the turn-of-the-century opulence. But Vice being Vice, no office décor is complete without some sort of insane souvenir linked to a story that captivated its rabid audience at some point over the past 15 years. In this case, it’s a stuffed grizzly that Smith says charged a Vice camera crew when they were shooting Far Out in Alaska a few years back, a documentary about an Inuit family living in the middle of an Arctic refuge. “The magazine is less than 5% of our total revenue,” growls Smith, bleary eyed from the previous day’s flight from Los Angeles where he and creative director Eddy Moretti shopped their new independent film and photo project. The plan is for it to live as an online branded content community, joining an expansive network that Vice already curates and sells to complementary brands. They also met with the super-connected Ari Emanuel, their new talent agent, to talk about the new Bill Maher-hosted Vice HBO show launching this fall that Smith has been pitching as “60 Minutes for young people.” The subsequent Vice party at the Chateau Marmont in West Hollywood also resulted in plenty of earned media after guests started heaving bottles off the rooftop patio on to Sunset Boulevard. Smith is fond of saying that he handed the magazine over to the interns years ago. It’s a typically effective anecdote to demonstrate that these days, he and Toronto-raised Alvi and Moretti, are busy 34 february 6, 2012

following the money to where brands are spending it on Vice’s verticals and platforms. Last month’s billion-dollar valuation by Forbes magazine had to do with the verified statement by Smith that “if we don’t answer our phones in 2012, we’ll double—likely triple—in size.” Content is king. Platforms are paupers The jaunt to L.A. was indicative of where the revenue is today and where it’s coming from tomorrow: a fast, aggressive buildout of high-quality, Vice-produced web video placed on branded websites that are part of Vice’s global content network that spans art, technology, music and soon travel, food and whatever other interests the 16 – 34 demo identifies. Smith isn’t surprised by the recent froth among marketers that every brand should be a media brand. Recent industry reports by ad spend tracker PQ Media peg branded entertainment growth at 15%-plus over the next two years. He says there is little that ad agencies can do to innovate and win market share if they keep doing what they’re doing. The proof, he adds, is in WPP’s investment last year. “WPP is trying to get out of the wage-earning ghetto that is marketing, and getting into IP ownership and IP creation,” says Smith in the piercing eloquence of an industry vet who appreciates the media game’s chess-like strategy and its propensity for cage-match bluster. Intellectual property for Vice comes naturally, says Smith, because the company produces for online consumption exclusively without the awkward conversion from TV products to online convenience. There are also none of the rights issues for proprietary video. “So what happens is Ari [Emanuel] can take our content and say ‘this is a TV show. Put that here, put this there’ and every time we do that we get more money. He can put us on AT&T in mobile or he can put us in HBO on linear. He can package movie deals for us. We deal with a lot of great young directors and great talent and he can use his muscle to get them a good deal because they usually get screwed.” Given that Emanuel, CEO of William Morris Endeavor (WME), rarely represents specific clients anymore, the fact that he’s directly handling Vice properties is a big statement on their perceived value in Hollywood. But if traditional silver screens get him off, Smith is not showing it, preferring instead to discuss the broadcast networks of the future: Apple, Google and whoever else secures a beach head in the coming smart TV market. “Google wants to be the next Viacom. They make no bones about it. If they’re the next Viacom, we want to be their MTV.” The relationship is already well underway. “[Google] is giving us money to make channels,” he says, referring to the Noisey music lifestyle channel on YouTube launched earlier this year. “And the scale we need… the hundreds of millions of eyeballs that we need to really get people excited.” Perhaps the most amazing, if not unique, thing about Vice is how prescient the company has been about its sole focus on content as a gateway to the end game: audience delivery to the right kind of brands. “One thing we saw coming was that everyone was investing in platforms,” Smith continues. “We were like ‘You have to fill it with something and exclusivity is going to be your big differentiator because those [platforms] are all commodities and will be worth 99 bucks soon,’” he says. “But the reason you pay three Marketingmag.ca

“ We never aspired for objectivity. We leave things in that other media takes out” —Vice co-founder Suroosh Alvi

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february 6, 2012 35

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The Vice Guide to Time Early 1994 Suroosh Alvi and Shane Smith meet

Late 1994 The two help launch The Voice of Montreal as a non-profit project for Haitian immigrants. Both co-founders are on welfare 1996 Alvi, Smith and friend Gavin McInnes take over the magazine after being owed money and relaunch it as Vice 1998 Richard Szalwinski invests $4 million in the magazine which “wasn’t worth anything,” according to Smith 1999 Vice launches in the United States 2001 The magazine is bought back by the co-founders 2002 Everyone moves to Brooklyn Record label launched (Vice Music) Vice Books division released 2006 The Vice Guide to Travel released Spike Jonze joins Vice Media as creative director for film/video division Virtue ad agency launched 2007 VBS.TV launched for online video content Heavy Metal in Baghdad released to critical acclaim 2008 Co-founder McInnes leaves the company over “creative differences.” He eventually becomes CD at NYC agency Rooster ADVice launches 2010 CNN partnership launched The Creators Project partnership with Intel deployed 2010 – 11 The Vice Guide To Everything airs on MTV 2011 Online music vertical Noisey.com launched at South By Southwest Vice.com launches September 15, 2011, consolidating digital properties Viceland.com and VBS.TV into one online destination 2012 Forbes values Vice Media at a billion dollars Vice HBO show scheduled for release in the fall 36 february 6, 2012

grand for Apple versus $99 for an Acer is because of all the shit you can put in there.” The future then, as far as Vice is concerned, is audience. Thing is, platforms don’t build audience—content does. “So that’s what we saw: Just start making content. Make piles of content. Make shitloads of content. Music, fashion, food, fucking booze, news, do whatever the fuck you can because all of it is going to be worth money.” The CEO is excited when he hits this part of the sermon: the revelation that Vice’s predilection for “making shit” has become his company’s main revenue source. Vice’s tenure as a cross-platform storyteller means they’ve juiced the content ecosystem so that, as Smith puts it, “We get paid by everybody now.” “Everything we do has a core fundamental editorial reason to exist,” says executive creative director Eddy Moretti, explaining the shelf life and magnetism of his company’s storytelling. “And when you have a bundle of good stories, you start expanding what’s possible.” Vice’s diverse proprietary distribution channels only help. He gives the example of recording artist Karen O who is part of the three-year-old Creators Project, a massive global workshop underwritten by Intel that spotlights how art intersects with technology, and pitched by Smith as a “Paris in the ’20s” concept where artists work together and create unique properties as a result. “Her ‘Stop the Virgens’ project is her first solo record, a crazy psycho opera with costume changes. We produced the show,” Moretti says, referring to the Brooklyn waterfront event attended by 200,000 people in October. “All these sketches and props from the show can be a book,” Moretti continues. “It will be a record, a recreated live performance, a movie, and a making-of web video maybe.” Moretti, although not a founder, has been with Vice since 2000 after completing a film degree at the University of Toronto and another from NYU Film School. Smith rarely attends a meeting without his ECD at his side. If Smith and Alvi cut the deals and chart Vice’s global direction for content plays, Moretti is the one who makes it resonate with clients and audience by choosing the right channels and partners for each project. He counts film director and creative dynamo Spike Jonze among his closest advisors. Alvi calls Moretti a creative genius who’s “scary-good at closing deals. I’ve never seen anything like it.” The day Intel killed it with the kids These days, Moretti’s tending to Intel, Vice Media’s most lucrative client, which is gearing up to significantly build on the coproduced Creators Project. Given that Vice’s 2011 earnings were $110 million with three branded verticals making up the majority of revenue, it’s easy to see how much Intel—the largest of the online verticals by far—spends to stay part of the conversation. Late last year Intel chief marketing officer Deborah Conrad told Forbes that her company will spend “tens of millions of dollars over many years” with Vice. “We weren’t connecting with young people,” says Dave Haroldsen, who works for Intel’s global partner marketing team and serves as creative director on the Creators Project. “We needed a partner that could tell our story in a unique way.” Six years ago he was trying to figure out a branded content play for Intel when its agency, McCann Erickson, “brought it these young dudes.” Marketingmag.ca

“ Everything we do has a core fundamental editorial reason to exist” —Vice executive creative director Eddy Moretti

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february 6, 2012 37

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“We pitched it to our CMO at the time and nobody got it. [Vice] seemed too crazy, too dramatic.” With Conrad in the CMO chair, Haroldsen floated the idea again. “We instantly got each other. It was a rare moment,” he says. Another rarity in their relationship is that no one else is involved—not another ad agency, no media buyers. “It’s us two. Which is the only way this thing can work. As soon as you bring in other people it changes.” Vice has fundamentally changed Intel’s approach to working with marketing partners; partnerships are more streamlined now and vendors are expected to offer integrated, cradle-to-grave solutions that benefit them as much as Intel. “This was completely rare and has never happened at Intel, but is now the blueprint of success that everyone wants,” Haroldsen says. “I’ve done enough projects with enough agencies where the effort equals the dollar amount. With Vice, you don’t stop fighting to make it work until it does.” Another first for Intel: the Creators Project is one of their longest-running campaigns ever, as well as its most involved in terms of platforms, ranging from live shows, web streams, books, record deals and online communities (for starters). Agency collaboration Is not punk rock The DIY approach of working directly with marketers is perhaps Vice’s least-promoted ability, if only because it’s the way things have always been done. When asked how Moretti deals with client requests to collaborate with agencies on projects, he seems surprised. “We’re a media company but we have content production capabilities around the world so why wouldn’t we just have a single conversation? We didn’t believe that parsing off the work to different departments was the way to go. Things tend to die a death by a million meetings.” Smith echoes the sentiment. “People fuck up by running their company through focus groups. It’s a deeply, fundamentally flawed system,” he says. “If you look at some movies, you ask, ‘How did this get made?’ It got made by 1,000 people pissing on it.” Suroosh Alvi, who handles the editorial and news reporting side of Vice content, says that his stories are valuable for their authenticity and honesty. And you don’t mess with that.

“We never aspired for objectivity. It was always ‘express your opinion and substantiation is good...’ We leave things in that other media takes out.” He gives the example of how, in Vice’s news documentaries, the hosts dive right into the action. “In Iraq, for example, American mainstream media outlets send their local stringers out into the field and just do stand-ups behind the walls of a safe compound,” he says, his eyes drooping in disappointment. “I mean, why even go?” Equally curious is how Vice executives worth tens of millions of dollars are walking minefields and binge-drinking in radioactive zones for the sake of a story. “It’s what makes Vice, Vice,” Alvi shrugs. “[Shane and I] always wanted to travel and now have the means to go so we’ll go.” And pressure from investors to, you know, not die? “[Ex-Viacom chief ] Tom Freston always talks travel and adventure with us. He’s like: ‘Tell me about Afghanistan. You have to go to Congo.’ He knows our need to get the story and it’s why we’re partners.” It’s an esthetic and curiosity that has percolated throughout Vice’s global operations—currently sitting at 850 full-time employees in 34 countries. The underplayed global reach is also a massive jet engine strapped to the media company’s back. The tastemakers and contributors that Vice hired and indoctrinated over the years as a magazine publisher can today create global content without so much as an extra zero or two on the client contract. The company’s largest office is opening in China as you read this, complete with almost twice the video production capability of the Brooklyn office. And it just so happens that a recent eMarketer report claimed that online video viewing in that country surpassed TV audiences last year. India, with the fastest-growing mobile market on the planet with more than 800 million people with cellphones and more than 10 million signing up each month, will be Vice’s mobile lab. Given that the company only has an ordinary Do’s & Don’ts photo app in the App Store, this is virgin and wildly lucrative territory. And, like all effective insurgents, its international conquest is calculated and with lots of backup. “As we bring the Creators Project into China and Korea, we’re the cool company there,” says Intel’s Haroldsen. “Vice is just taking off there, so we were able to lend them our name brand to help them grow. It feels good to be cooler than Vice for once.”

WTF? The numbers behind Vice Media’s billion-dollar valuation GROSS REVENUE

2011 2012 (projected)

Forbes’ valuation

PROFIT

$110 mil ion x 17%–23% = $19–25 mil ion $200 mil ion x 20%-plus = $40 mil ion

is based on numbers typical in the digital media sector, which tend to be aggressive. Vice Media’s valuation is approximately 5x its projected 2012 revenues and 9x its confirmed 2011 revenue. By comparison, Facebook’s reported multiple being sought for its IPO of $100 billion is 20x its 2011 revenues, Forbes contributor Jeff Bercovici told Marketing.

38 february 6, 2012

Margins

“Ultimately, it comes down to what a buyer will pay or a public market will support. Considerations such as a high growth rate and a consistent trajectory of profitability, both of which Vice can demonstrate, factor in,” he says. “So does the extremely strong demand right now for premium video content, Vice’s specialty. In the end, if Vice does indeed do $200 million of business in 2012, a $1-billion valuation will be quite attainable.”

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Sara Tyson

Personal Financial Planning CAmagazine

Personal Financial planning

By Mark Yamada

Confronting a perfect pension storm There’s no doubt some things need to change in our pension system. Are pooled retirement pension plans the answer?

have been known to rearrange deck chairs as ships

take on water. Bill C-25 (41-1), An Act relating to pooled registered pension plans (PRPP), recognizes

that Canadians aren’t saving enough for retirement and targets expanded pension plan participation. The evidence suggests if something is not done soon, regardless of one’s definition of crisis, we may have to break out the lifeboats. Demographics are channelling more tax revenues to health care, already 38% of provincial spending according to the Canadian Institute for Health Information. But if an already burdened social-welfare system must also support successive and increasing waves of retirees with inadequate pensions, fiscal spending flexibility will be severe40 CA magazine October 2012

ly restricted. A perfect pension storm may be brewing. How will PRPP legislation impact coverage adequacy and what must happen to make pension systems work better? Dark demographic clouds When the Canada Pension Plan (CPP) and the Quebec Pension Plan were established in 1966, Canadians could expect to live to 72 with seven-and-a-half workers supporting them over seven years of retirement. Today, with life expectancy at 80-plus, there are only five workers to support each retiree over 15 years of retirement, double its original funding intention. By 2036, only two-and- half workers will support one pensioner. Sustainable? (For example, the Nova Scotia Teachers Pension Plan has 13,525 active members supporting 12,014 retirees and employee/ employer contributions of $132.7 million a year compared

sara tyson

s it too late to avert a pension crisis? Governments

Best new journalist Meilleur nouveau journaliste

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Katie Keir

When Good Partners go Bad Advisorâ&#x20AC;&#x2122;s Edge

WHEN GOOD PARTNERS GO BAD

THREE TYPES of PARTNERS FINDER The partner who locates prospects and brings in clients. He’ll also meet with industry connections and attend events to keep tabs on trends.

MINDER The main client-facing partner who works directly with major customers and develops their portfolios.

GRINDER The partner who processes paperwork, and deals with the accounting and operational side of the business.

DISCUSSING EXIT STRATEGIES EARLY WILL HELP YOU MANAGE A SPLIT * Not their real names

14 AE 1 2 2 0 1 2

Standard agreements map out how to deal with the impacts of death, disability and bankruptcy. They’re essential, but you’re fooling yourself if you think they cover true worst-case scenarios. Michael Vaughn*, a Vancouver-based advisor, found out the hard way. Early in his career, he joined a senior colleague’s new, independent business.

Vaughn, who was brought on for his investment expertise, thought they had a solid partnership agreement. But the document only covered common exit scenarios and didn’t protect him when things went sour. Worse, some portions of the agreement were verbal— a major oversight. Though he and his partner were compatible the first few

years—both worked on “revolutionizing and growing the business,” he concedes—their connection deteriorated. We exited “the honeymoon phase and entered a nightmare scenario,” he says. “My partner underwent a major personality shift. Whether that was due to greed, jealousy of my client relationships and expertise, or his natural disposition

THE GRANGER COLLECTION, NEW YORK

IF YOU AND YOUR PARTNER HAVE A STANDARD BUSINESS AGREEMENT, GREAT—BUT IT WON’T PROTECT YOU IF THE PARTNERSHIP FALLS APART.

www.advisor.ca

coming out, the relationship turned hostile.” The older partner started exploiting holes in their agreement by bending compensation rules, adding clauses and altering how Vaughn could access equity. Realizing it was impossible to save the marred partnership, he cut his losses. And, in the aftermath, Vaughn’s former partner used industry connections to attempt to ruin his career, forcing him to do damage control while getting back on his feet. While a more detailed partnership agreement would have better protected his interests, it couldn’t account for a vindictive partner. www.advisor.ca

The lesson? Properly evaluate your partner’s personality, and then enact a complex, detailed agreement that protects your clients and your share of the business. Test your compatibility One major indicator of a prospective partner’s value is her work history and reputation, says David Shlagbaum, partner at law firm Robins Appleby & Taub in Toronto. “Look at the existing liabilities and assets of your target partner, as you would an investment in a business,” he says. Find out her preferred compensation and fee structure, approach to risk,

You need to replace partners Not necessarily. Running a

business alone means you’ll keep all profits and maintain control. If you can’t offer lost services, you can always refer clients to peers.

balance-sheet strength, and the content of her client reviews over the past five years. Look for red flags like high turnover rates and pending lawsuits. If your prospective partner won’t cooperate with the discovery process, walk away. And, it’s not enough to have similar backgrounds

and investing styles. You need to know whether your partner will be able to handle unanticipated challenges as your business evolves. Vaughn recently started fresh with new partners; and, chastened by his breakup, proceeded with caution. Before sealing the deal, the new group met two-to-three 16 ▼

B Y K ATIE K E IR , A SSI STANT E DI TOR OF ADV I S OR GROUP

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WHEN GOOD PARTNERS GO BAD

THREE TYPES of PARTNERS FINDER The partner who locates prospects and brings in clients. He’ll also meet with industry connections and attend events to keep tabs on trends.

MINDER The main client-facing partner who works directly with major customers and develops their portfolios.

GRINDER The partner who processes paperwork, and deals with the accounting and operational side of the business.

DISCUSSING EXIT STRATEGIES EARLY WILL HELP YOU MANAGE A SPLIT * Not their real names

14 AE 1 2 2 0 1 2

THE GRANGER COLLECTION, NEW YORK

IF YOU AND YOUR PARTNER HAVE A STANDARD BUSINESS AGREEMENT, GREAT—BUT IT WON’T PROTECT YOU IF THE PARTNERSHIP FALLS APART.

www.advisor.ca

You need to replace partners Not necessarily. Running a

business alone means you’ll keep all profits and maintain control. If you can’t offer lost services, you can always refer clients to peers.

B Y K ATIE K E IR , A SSI STANT E DI TOR OF ADV I S OR GROUP

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“ THE INITIATOR will have plans ready long before the other party realizes what’s going on.” Gregory Keele*, a Manitoba-based advisor

John O'Connell

HIDDEN CHALLENGES

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15 times per week for six months to discuss operational details and business planning, as well as each of their working styles, outlooks and experiences (see “Three types of partners,” page 15). Bryan Gelman, bankruptcy trustee and co-founder of Al-

16 AE 1 2 2 0 1 2

bert Gelman Inc. in Toronto, suggests asking how your partner would cover major personal debts, such as mortgages, if the practice has lean years. This will ensure you’re not stuck with a disproportionate amount of operational costs or liabilities.

“Partners need to discuss their goals, as well as their projected revenues and expenses for at least the next five years,” says Shlagbaum. “If any financing will be involved to get the business off the ground, each partner has to decide where it will come

Making it official But partnership agreements don’t cover all relevant areas. To fill in the blanks, draft a separate partnership charter that outlines each partner’s goals, expectations, responsibilities, and views on money and investing. Though the charter takes considerable effort to create, he says, you’ll reference it repeatedly to resolve conflicts and reaffirm business goals and expectations.

JAIME HOGGE, PUBLICDOMAIN.ARCHIVE.ORG

Partnerships most often dissolve in the face of changing priorities. Take John O’Connell, CEO of Davis Rea in Toronto, who worked as an RBC portfolio manager for 25 years. Despite his success, he says he refined his goals, prompting him to leave in 2010. He’d always wanted to own a money management company, so he decided to acquire one. The bank had clear guidelines to deal with his departure—the key to keeping the breakup harmonious. O’Connell didn’t have to hold difficult negotiations with his partners, which left their friendships intact and let him make a clean break. To this day, he keeps contact with his former team. “Though we’re not in a formal business partnership, they’re great guys and I wouldn’t hesitate sending clients to them,” he says. Peter Taylor*, a Halifax-based advisor, agrees breakups don’t have to be difficult. He and his two former partners had a strong working relationship and discussed their concerns regularly. When he announced he was leaving, they were disappointed, but understood his motivations. He gave three months’ notice and continued to work there until the day his new business opened. More importantly, they divided their business without needing legal help. His former colleagues have since hired a marketing specialist rather than a new partner, and Taylor has built the business he envisioned. His biggest success? Like O’Connell, he also preserved his connections, which is crucial in such a close-knit industry. As O’Connell says, “Protecting your reputation should be your main focus in the midst of a business breakup.” You should act professionally during and after all negotiations, since people in the industry will find out about your split and how it played out. And, if a client were to call your former partners for a reference, you’d want them to speak highly of you—they’re one of your best referral sources.

from—from another partner or a bank, for example.” Figure out who will be bringing in business and meeting with clients versus who’ll manage the finances. Further, if one partner develops tax or insurance expertise along the way, all partners must discuss how this affects branding, workload division, and compensation. For instance, even if only one partner can give tax advice, others can process tax returns or take on the firm’s smaller clients. Most importantly, those new divisions of labour must be codified in a revised partnership agreement and supporting documents.

www.advisor.ca

Formally review the agreement and charter quarterly, says John O’Connell, CEO of Davis Rea in Toronto, and address shifting priorities, unmet expectations and the last three months’ successes and challenges. “It doesn’t have to be a negative experience, and all members should be open about their feedback. Setting regular reviews in advance helps each partner consider any crucial business issues prior to the meeting,” he says (Read his successful breakup story on page 16). Re-examine the documents sooner if a partner’s situation changes. This will prevent having to make modifications during stressful times (see “Hidden challenges,” this page). Each year, determine a fair market value for the company, “which can be used in the event of breakdown between partners,” says Gelman. Then, address compensation and insurance requirements based on that valuation. Standard agreements make business division seem cut and dried, but breakups are always difficult even if they’re amicable. www.advisor.ca

Take Halifax advisor Peter Taylor*. When he realized he and his two partners didn’t see eye-to-eye on marketing strategies, he left to start his own firm. Though the split was harmonious, he had to start over. Plus his former partners lost significant revenue, and almost half their clients due to his departure. But since they’d discussed expectations at the outset, they minimized their stress and financial loss. What’s more, they’re on good terms and still share one client. No agreement? If you don’t have an agreement before your breakup, you’re in for a major challenge. Whether you plan to keep, leave or close the business, you’ll need to value and divide it. Doing this from scratch will eat time and money—and reduce your eventual payout. “The initiator [or someone who has prepared well for a breakup] has the upper hand, especially if she has thought about moving on and covering costs. She’ll have plans ready long before the other party realizes what’s going on,” says Gregory Keele*,

a Manitoba-based advisor who’s suffered through a few business breakups. He didn’t initiate his most recent split. And though they had an agreement, he wasn’t aware of his partner’s discontent, and was caught off guard. That kind of pressure can compromise the negotiation process; more so if partners had been scraping to meet their bottom lines. When businesses are profitable, partners focus on shared successes, not compensation disparities. But when revenue’s low, “partners become more selfish. [Financial strain] also changes people’s perceptions of the rules,” says Shlagbaum. This leads to partners renegotiating their agreements. Though you may have informally discussed how to divide property and split profits, greed may warp each partner’s expectations. Partners buying each other out will often offer less for assets they want, demand more for items they’re forced to sell, and withhold crucial data out of spite. So, people should seek advice separately, and move to arbitration if they 18 ▼

ALL’S WELL THAT ENDS WELL

Aside from obvious stress points like divorce, death and illness, consider these potential issues when striking a business deal or evaluating your current partnership:

DISABLED PARTNER STAYS INVOLVED A disabled partner is usually compensated for a set period of time until his disability coverage commences, says insolvency specialist Bryan Gelman. But what if he wants to remain active in the business? Build a solution to this scenario into your agreement.

WORKLOAD FLUCTUATES Say your partner brings in a major client, or you make a connection that boosts your practice’s reputation. Is a raise in order? Assign a value to such improvements. And remember, compensation and salary drive behaviour, so track each partner’s goals and expectations.

LIFE INSURANCE ON A PARTNER This protects your business if a partner dies, because it may take a while to find someone to make up the lost income. 18 ▼

CEO of Davis Rea

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“ THE INITIATOR will have plans ready long before the other party realizes what’s going on.” Gregory Keele*, a Manitoba-based advisor

John O'Connell

HIDDEN CHALLENGES

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16 AE 1 2 2 0 1 2

JAIME HOGGE, PUBLICDOMAIN.ARCHIVE.ORG

www.advisor.ca

ALL’S WELL THAT ENDS WELL

Aside from obvious stress points like divorce, death and illness, consider these potential issues when striking a business deal or evaluating your current partnership:

LIFE INSURANCE ON A PARTNER This protects your business if a partner dies, because it may take a while to find someone to make up the lost income. 18 ▼

CEO of Davis Rea

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ADDING

NEW

PARTNERS

▼

ING N R WA

In Keele’s new multi-firm partnership, the ages of the parties range from 35-to-60. Their agreement accounts for the differing retirement horizons and financial goals, and the possibility of a partner’s death. It’s designed to prevent surprise departures. Breaking the news Write into the partnership charter how you’ll tell and handle clients in the event of breakup. After all, bitter splits can cause advisors to fight over each file. Keele says, “In my case, the books of business were always kept separate, and that’s much simpler. It’s ultimately the client’s decision, though, and most want to stay with the person they’re currently dealing with.” Larger firms sometimes use a third party to break the news, says Gelman. But personal meetings are preferable, and you’ll have a better chance of retaining clients if they feel well informed. Shlagbaum says to assure them they’ll receive the same level of service by staying with you. If you’re merging

IF YOU HANDLE THE BREAKUP BADLY, NEWS WILL SPREAD FAST IN THIS INDUSTRY. 18 AE 1 2 2 0 1 2

with another partner or firm, highlight the new services they’ll receive. He notes they’ll also be concerned about fees and rates. Don’t deliver the news until you’ve confirmed the breakup and all the partners have agreed on what to tell clients. Everyone should receive the same information at once. Taylor gave his clients a month to decide whether to come with him or stay with his former colleagues. Though most stuck with him, a few re-interviewed him and his partners to assess which was the better option. But if you’re part of a large firm, you won’t have rights to client files. In O’Connell’s case, RBC was legally entitled to all client data. These institutions will also have noncompete and non-solicitation agreements that determine if and when departing partners can start a new business. These often include geographical limitations, and will severely limit your options once you make an exit. And if an old client approaches, you may have to decline. Or, if you decide to work with him, retain documentation that proves he initiated contact. AE KEIR

▼

17 can’t negotiate the split themselves. Each advisor would then value the business independently, and a judge would decide on an appropriate amount. He warns pendulumstyle arbitration, when the judge chooses one partner’s valuation over the other, is becoming more common. “Partners are pushed toward a more accurate, fair assessment since they know only one value will be chosen,” says Gelman. If a death sparks the business division, surviving partners could find themselves dealing with an insurance rep or spouse instead. They’ll often demand payout for their full share of the business immediately. If the survivors don’t have enough cash, they’ll either pay out their share over a few years, or get a loan. By stipulating payout terms to family members or taking out life insurance on your partner, you can avoid this hassle.

When bringing in a new partner, lawyer David Shlagbaum suggests collaborating on a trial basis for at least six months. Create a cost-and fee-sharing structure until you’re ready to formalize the relationship. “Offering conditional employment is unfair,” adds advisor Peter Taylor*. “It’s important to maintain the identity and structure of your firm, so perform due diligence and discuss how a partner plans to do business.” He says another option is to hire the person as an employee and evaluate your working relationship. And if you decide to name her a partner, Shlagbaum says it’s usually a good idea to create a new agreement.

“If the business pays for premiums and deducts them for tax purposes, any payouts under the policy may be treated as taxable income,” says Gelman. So consider having partners pay out of pocket. But premiums will inevitably differ among partners—one partner’s policy may cost more because she smokes, for instance—and this can cause resentment.

YOU HIRE FORMER EMPLOYEES Consult labour laws when rehiring or terminating former employees. By law, you could be responsible for severance payments and other benefits dating back to the employee’s start date at the predecessor company. www.advisor.ca

Best merchandising/ marketing article Meilleur article dans le domaine de la mise en marchĂŠ et du marketing Winner/gagner

Kristin Laird

Everybody Loves Target Marketing

EVERYBODY LOVES TARGET

As America’s hippest discount retailer prepares to set up shop here, KRISTIN LAIRD explores why Canadians are counting down the days until opening day next spring and how incumbent retailers are bracing for the battle of their lives 44 May 7, 2012

Marketingmag.ca

price-conscious but also fashion-forward trend seekers. At Target, the two aren’t mutually exclusive. This is why shoppers stand outside in the cold for five hours. And it’s one of the reasons Canadian retailers are already bracing for Target’s arrival. Sears, for instance, has slashed prices on more than 5,000 items and has an increased focus on private-label fashions. Walmart is spending $750 million to open, relocate and remodel dozens of its stores. But large retail chains aren’t the only ones that should prepare for Target. Niche boutiques selling housewares or clothes also have targets on their backs, says David Gray, retail consultant and founder of Dig360 in Vancouver. In general, consumers will come to expect a higher quality product at a more reasonable price point, which will “affect all players” in the retail landscape, he says. “Target’s leadership in retail exclusivity is what’s really driving a lot of people into their doors,” says Jason Dubroy, VP shopper marketing, DDB Canada. Because Target matches its competitors on price, the retailer’s focus on designers, and more specifically, collaborations with designers like Wu, Missoni, Anna Sui and the late Alexander McQueen is what really sets it apart. “We realized years ago that it’s not enough to compete on price alone,” says Morioka. “We knew our guests expected more so we decided to offer unique, welldesigned products while still allowing our guests to pay less.” Target pioneered sophisticated design at a mass-market price nearly 13 years ago when it first partnered with American architect Michael Graves to bring pop-art flair to teapots and toasters. Since then, Graves and Target have brought more than 1,800 consumer products to market in nearly every consumer product category except apparel. The Michael Graves Design Collection for Target helped bring to life the brand notion that good design should be accessible to all and launched the retailer into cheap-chic territory. Today, one of Graves’ earliest and most popular designs, the Spinner Whistle Teakettle, can be found on Amazon.ca for over $175, which is $50 more than what it originally sold for at Target. Tony Chapman, CEO of Toronto agency Capital C, says Target has established a reputation for being the retailer that provides shoppers with an inexpensive way to dial up the home. “I could get a 19-cent dishrag at Walmart but for only three cents more you could come home excited from your shopping trip because this one has a pattern from a well-known designer,” he says. Designer/retail partnerships are lucrative for both sides. Target can drive traffic and attract new customers to its stores and earn publicity, while high-fashion designers gain a new kind of mass recognition. “When we talk to some of these designers, they really like the idea of a limited time-only collection and certainly the power of the Target brand is an important part of elevating themselves as well,” says Morioka. Rival retailers have tried to follow in Target’s shadow, launching similar, limited-time only collaborations May 7, 2012 45

Trevor Keen

t’s a brisk morning in February and the sun has just started to peek between the office towers of downtown Toronto. It offers little relief against the wind that serves as a harsh and constant reminder that winter is still here. The city is barely awake but already a group of people sits on the cold pavement outside a temporary Target store on King Street West. While it isn’t set to open to the public until noon, the first man in line has been braving the chilly temperatures since 5:30 a.m. for his wife who is out of town. The pop-up store features a one time-only collection from famed designer Jason Wu, who is on hand for the event. The fashion line was so well-received in the U.S. that it sold out just hours after it went on sale on Super Bowl Sunday. Waiting in line is a small price to pay for a limitededition Wu design that few others will own. It’s like being part of an exclusive club and items from Wu’s line are badges of honour. The man wasn’t alone for long. The woman beside him arrived at 7 a.m. Despite the early morning, both are bright-eyed and ready to shop when the doors finally open. The excitement of what awaits them on the other side of the building’s large glass doors is enough to keep them warm. Cups of hot chocolate served by Target ambassadors don’t hurt either. The retail space fits perfectly with the cheap and cheerful Target brand and Wu’s ultra-feminine designs. One section of the store is a sea of navy and red and pops nicely against the white shabby-chic facades holding the garments. This is the Minneapolis-based retailer’s killer app: selling high-fashion, quality goods at a reasonable price. While a Wu-designed cocktail dress can sell for as much as $5,000 at the Bay, the Target event allows his fans to purchase more affordable designs. Prices for the collection, which include T-shirts, dresses, skirts, raincoats and blouses, range from $10 to $45. “To bring such a great collaboration here and to just be a part of the legacy of Target collaborations is really special,” Wu tells the crowd. The store sells out within five hours, with all proceeds benefiting the United Way of Toronto. Days before the pop-up, John Morioka, senior vicepresident of merchandising for Target Canada told Marketing that the idea behind it was to give “guests” (what Target calls its customers) a good idea of what to expect when the retailer first opens its doors in Canada next year. It’s also a good indication of what retailers can expect: customers defecting to the new competition in droves. While U.S. retailers such as Victoria’s Secret, J. Crew and Marshall’s have recently set up shop north of the border, Target is the one causing the biggest stir. Each of the aforementioned retailers cater to a specific consumer group. J. Crew for instance, with its high price points and stylish staples, attracts a preppier, more affluent shopper. Target, on the other hand, appeals to the

EVERYBODY LOVES TARGET

Marketingmag.ca

Trevor Keen

with some of today’s most recognized designers. Sears recently added the Kardashian Kollection to attract younger, hipper buyers, and global retailer H&M recently carried a collection from Versace that was available at select locations throughout Canada. Walmart Canada also made attempts to serve a more fashion conscious consumers with its private clothing label George (named after English designer George Davies) that it acquired in 2004 from U.K.-based food retailer Asda. In 2010, the retailer made improvements to the quality and style of the line. But it’s one thing to “objectively have really good

design, it’s another to convince customers that it is good quality,” says Gray. “Walmart’s persistent brand promise is that you’re going to get everyday things for less, which doesn’t really coincide with the idea that you’re going to get something really cool and fashion-forward.” “If anyone wants to buy a product that is completely driven by price, they need to go to Walmart,” says Corinne Sandler, founder of Fresh Intelligence, the Toronto agency hired by Target to conduct research around Canadian consumers. “Not all consumers actually go to a store when the only thing they’re being sold on is price,” she says. “That’s the big criticism of Walmart and I think Walmart has that distinct image whereas Target doesn’t.” At the root of it, Target is an organization that allows “creative thinking to emerge,” says Gray. Competitors have learned from Target’s example and cashed in on the retailer’s success. And yet Target still benefits from leading the charge, says Gray. “It almost gives a bigger halo effect to Target, the more people try to emulate it,” he says. “And the thing is, Target isn’t just about good design and good fashion—they’re doing it at an amazing price.” The pop-up store event generated a great deal of buzz that day and only added to the mounting excitement around Target’s entry into Canada. Canadians have been anxiously awaiting Target since the retailer announced in January 2011 that it would spend $1.83 billion to take over the leases for the majority of Zellers stores from its owner, the Hudson’s Bay Company. For those already familiar with Target, the event embodied what they love about the retailer—and the reason so many shoppers cross the border to spend a day at “Tar-zhay.”

it touches every section of the store. From swimsuits to spatulas and bags to bowls, Target helps shoppers keep on trend with its constant focus and dedication to design—and without breaking the bank. I’ve been on the hunt for a pair of royal blue slim-fit pants ever since I spotted a pair in Style Watch magazine. After a few trips to Toronto malls and price comparisons online, I wonder if it’s worth paying $45-plus for a pair of pants I might only wear for one season. I find a pair at Target for $24.99. The retailer’s attention to detail extends beyond fashion to every touch point in the store. Target locations are designed to be more attractive than other bigbox department chains by having bright lights, wider aisles, a more attractive presentation of merchandise and generally cleaner fixtures. Super-sized graphics depicting common household items decorate the walls like works of modern art. The red in-store signage pops and the sales floor is well organized. It’s simply a better shopping experience and a far cry from the likes of Walmart, which is an obstacle course of bargain bins and cardboard displays flagged by discount “Rollback” signs. “There’s special attention given to the store environment—everything from the graphics, how they reinforce the brand imagery, the red from top to bottom, the way the shelves are aligned and all the in-store material

either communicating value or fun and irreverence, which is their brand experience,” says DDB’s Dubroy. “Their focus on design is not just as a tool but how they use it as an operating philosophy both in and out of store,” he adds. “Even in Canada they’re not going to allow drop palettes because they want a cleaner look and feel to their store.” Target also claims to have the fastest checkout experience in U.S. retail, which they plan to bring to Canada, says Dubroy. “The checkout system is a huge point of difference for them.” Target has the entire shopping experience mapped out, even down to the “specially designed, custom injected molded [shopping] carts,” says Dubroy, which are lightweight and easy to steer. Rather than markdown signs, the retailer uses images of its canine mascot Bullseye to indicate sale items. This is a store that makes shoppers feel clever, not broke. Morioka says Target has spent an enormous amount of time and resources listening to guest feedback to determine what they’re looking for. According to the company’s research, Target guests tend to be well-educated, earn above-average incomes and lead active lifestyles, says Morioka. “In the United States our median guest is 40, younger than any other major American discount retailer, more than half are university graduates and nearly half have children at home.” Morioka expects

The Target pop-up store in Toronto featured limitededition Jason Wu fashions (above) that sold out fast.

Spider Marketing asked Canadians moms to share their first thoughts/feelings about Target coming to Canada. Here’s what came to mind…

ast-forward a month to an unseasonably warm day in March and the start of a sunny spell that hits most areas of Southern Ontario. At this time of year, it isn’t uncommon to go to bed with spring and wake up with winter—a day like this should be used wisely. So I spend this particular Sunday in a suburb of Western New York walking the aisles of Target. With a quick scan of the parking lot I spot at least a dozen Ontario licence plates. It seems we’re all on the same page. Bright, fluorescent colours are in this season and 46 May 7, 2012

Marketingmag.ca

May 7, 2012 47

The Target pop-up store in Toronto featured limitededition Jason Wu fashions (above) that sold out fast.

Spider Marketing asked Canadians moms to share their first thoughts/feelings about Target coming to Canada. Here’s what came to mind…

Marketingmag.ca

May 7, 2012 47

Canadian guests will look much the same. Dubroy says the Target shopper is part of a “super-coveted demographic. They’re smart, savvy, and they have money to spend.” Not only this, but according to the retailer, nearly 70% of Canadians are already familiar with the Target brand, 11% have shopped its stores in the past year, and more than 30,000 are currently members of its Redcard discount program. “Target doesn’t have much of a job to do with respect to equity building when they arrive,” says Rico DiGiovanni, president and partner at Spider Marketing Solutions. “They can step right into driving traffic by way of their standard practice, as opposed to saying who Target is. We know exactly who Target is.”

t’s the end of March and Target has drawn yet another crowd in downtown Toronto. This time it’s for Morioka, who is giving a talk at the Ted Rogers School of Retail Management. In the hallway, students line up as two recruiters hand out pamphlets explaining the opportunities working at Target provides. Fresh-faced students who were recently selected to participate in the retailer’s intern program fill the first two rows of the nearly full auditorium. Morioka is called

to the stage where he opens with a short video montage of Target’s television commercials and other branded material. During his speech, Morioka speaks of Target’s fun and innovative spirit and how excited the company is to finally share this with Canada. He’s worked with the retailer in the U.S. for more than 17 years and moved to Toronto last August to join the Canadian operation, which is headquartered in Mississauga, Ont. “The size and speed of our expansion here is simply unprecedented,” he says. “When we open our doors next year it will be one of the biggest retail launches in Canadian history both in terms of the number of stores we’ll operate as well as the sales they expect to generate.” By early 2014 Target will have about 130 stores from coast-to-coast. Currently, Sears has 185 corporate stores nationwide, Walmart has over 330 and The Bay has 92. But right now the retailer is in the midst of hiring “hundreds of Canadians and developing the appropriate systems and infrastructure to make sure everything goes smoothly when we open our doors,” says Morioka. While Target has identified many cultural similarities between American and Canadian shoppers, Morioka says the retailer understands that the country’s provinces and communities are unique.

“That’s why we’ll constantly evaluate our product assortment and marketing just like we do with the U.S. to ensure that Target continues to anticipate our Canadian guest’s every want and need,” he says. For instance, Target stocks its shelves with merchandise relevant to individual markets based on climate, culture, and demographics. “Simply put, we’re dedicated to getting the right items in the right stores at the right time,” says Morioka. When asked if Target would work with distributors to bring the consumer packaged goods that Canadians love to north of the border, Morioka answers: “It’s too early to tell... We don’t have a supply chain [yet in Canada] and we are actively building that.” Morioka says he’s often told by Canadian shoppers to make sure Target Canada isn’t a “light version” of what they’ve come to expect from the retailer’s U.S. locations. “Canadians have to understand the Target brand they see when it comes to Canada will be very much the same when they cross the border.” Audience members flock to the stage once Morioka wraps up his speech. A lucky few exchange words with him before his handler escorts him to a cocktail reception down the hall. The crowd in the hallway parts like the Red Sea as he passes. Everyone whispers and stares. Tonight, Moroika has rock star status. Right now, he’s the frontman of a $70-billion marketing and merchandising machine and these are his groupies. The scene continues as faculty, students and other attendees wait to shake Morioka’s hand. He greets every-

one with a smile. One man hands Morioka a business card for what looks like an impromtu product pitch. He, like everyone else, wants a piece of Target as it prepares to mark its territory in Canada.

Target: Moms

Shortly after Target officially announced it was setting up shop in Canada, Spider Marketing Solutions conducted a survey of Canadian moms’ attitudes and behaviour towards the retailer. Here’s what it found: On Mom’s Radar

26%

have already shopped there

Worth The Drive The majority of moms say they will take the extra time and effort to visit a Target store as soon as it opens here

Tapped In

77%

of Canadians moms will visit Target’s website versus 68% of women without children 48 May 7, 2012

88% 60%

brand awareness among Canadian moms

are aware that Target is on its way

95%

say they are at least ‘somewhat likely’ to shop at Target

56%

62%

will drive 15 minutes or longer to get there

34%

will join Target Canada’s Facebook page compared to 21% of women without children

will go as early as the first week it opens

19%

of Canadian moms will sign up for Target’s mobile app compared to 9% of women without children Marketingmag.ca

Marketingmag.ca

May 7, 2012 49

MarketingMag.ca

one with a smile. One man hands Morioka a business card for what looks like an impromtu product pitch. He, like everyone else, wants a piece of Target as it prepares to mark its territory in Canada.

MAy 7, 2012 49

Best website editorial package Meilleur dossier thﾃｩmatique窶馬umﾃｩrique

Winner/gagner

Brandon Tenebaum, Brett Ruffell Brandon Tenebaum Blog Canadian Healthcare Network

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David Malamed Fraud CAmagazine

fraud

sentinels

By David Malamed

Whistle where you work? Although there is protection in place for the brave souls who

hen US film and TV star Cliff Robertson died at age 88 in September 2011, not only

did an Academy Award- and Emmy-winning actor pass away but also a courageous whistleblower. Robertson is primarily known for his many film roles, especially the mentally disabled lead character in Charly, for which he won the 1968 Academy Award as best actor. He also played US Navy lieutenant John F. Kennedy in the 1963 film PT 109 about the future president’s heroic efforts to save the crew of the patrol boat he captained after it was sunk during the Second World War (Robertson was chosen for the part by Kennedy). More recently, he had a recurring role in the Spider-Man movies. Robertson also gained a measure of both fame and infamy, however, as a whistleblower who exposed a chequeforging and expense-account scheme perpetrated by David

34 CA magazine January/February 2012

Begelman, then studio head at Columbia Pictures. Under Begelman’s watch hit films such as Close Encounters of the Third Kind, The Way We Were and Shampoo had come out, making him a powerful film czar. The scandal that became known as Hollywoodgate began in February 1977 when Robertson received an IRS 1099 form from Columbia asking why he hadn’t declared $10,000 in royalties paid to him by the studio the previous year. Robertson knew no such payment had been made. “I hadn’t even worked for Columbia. This old Scot’s not going to pay taxes on money he didn’t earn,” he said and asked his secretary to find out what might have caused the mistake. She called the accounts payable department at Columbia and spoke with a supervisor, who located the cancelled cheque, which had been cashed at a Beverly Hills, Calif., bank. The supervisor keenly noticed that the handwriting on Robertson’s supposed signature endorsing the cheque looked very much like that of Begelman. This troubling

gary clement

expose corruption, too often they pay for their courage

information was given to Alan Hirschfield, Columbia’s presiballed and didn’t work for three-and-a-half years,” he said. “They dent and CEO, who confronted Begelman with the superviwere trying to send a message to other would-be Don Quixotes.” sor’s suspicions. Begelman told him some kid in New York was Although he was able to make a few small films, major roles the forger and that he had been fired as a result of his actions. didn’t come his way. The actor who had once turned down the Hirschfield bought this flimsy lie and subsequently suggested chance to play Dirty Harry was no longer an A-list star. “Even with that outcome, Robertson said he was proud of to Robertson that the matter was closed and should be dropped. The actor did not agree. what he did,” McClintick wrote in Indecent Exposure. “ ‘They wrote “It was a well-known piece of wisdom,” Robertson later said, me up in that congressional record. I was given a lot of citations. “that in Hollywood the unadmitted but widely recognized covAll the writers and creative people were delighted. Within two years, several other actors began confronting corporate corrupenant was, ‘Thou shalt never confront major moguls on any kind tion and creative bookkeeping.’ ” of corruption or thou shalt not work.’ ” Despite knowing what Things finally changed for the better when a courageous could happen to his career if he pursued the investigation, the director, Doug Trumbull, cast Robertson in Brainstorm in 1983, highly principled Robertson could not comply with Hirschfield’s which featured Natalie Wood in what would be her final film. suggestion. He found it difficult to understand how a “kid from “He said he wouldn’t listen to those bastards,” Robertson told New York” could fraudulently issue a cheque, forge his signature McClintick. “He said, ‘He’s right for this role and I’m going to on the back and cash it in Los Angeles. hire him.’ As soon as he did, it broke the cycle.” Robertson contacted the LAPD and FBI with his concerns. An ensuing investigation easily confirmed that his signature Most members of the public likely forgot or had no knowledge had indeed been forged and that Begelman was the culprit. The of Robertson’s courageous decision as the years passed. In 2003, studio head was first charged with grand theft but it was barhowever, the Association of Certified Fraud Examiners (ACFE) gained down to a misdemeanor and the mogul was sentenced changed that when it decided to present an annual award to honour whistleblowers who expose fraud and corruption. It to community service. Columbia suspended Begelman and put him on a “paid vacaafter going public about the affair, Robertson suffered tion.” The studio launched its own secret investigation and subsequently discovered at least three similar cases where Begel- the fate of too many whistleblowers. “I was blackballed man had forged cheques in the amounts and didn’t work for three-and-a-half years” of US$5,000, US$25,000 and US$35,000. Despite growing evidence of Begelman’s corruption — “A psychiatrist hired by the studio later attributed named it the Cliff Robertson Sentinel Award and made the actor [it] to a penchant for self-destruction based on an underlying its first recipient. “Cliff Robertson didn’t come forward to get rich; he was sense of guilt about his very success,” The New York Times reportalready rich. And he certainly didn’t tell the truth to become ed — Columbia reinstated Begelman following a two-month suspension. Not long after, however, he was quietly fired. The famous; Cliff was already famous. He did the right thing for one studio said he left due to emotional problems. and only one reason: because it was the right thing.” That was Columbia’s board of directors wanted to keep what had how Joseph Wells, the founder and then chairman of the ACFE, become an embarrassing mess as quiet as possible and again began his speech before presenting Robertson with the award at entreated Robertson to stay mum. He refused, as did his then the association’s annual conference in Chicago. The award bears wife, actress and socialite Dina Merrill. They both talked to the inscription, “For Choosing Truth Over Self.” the media and, perhaps as a result, Wall Street Journal reporter “If we are ever to turn the corner on fraud,” Wells continued, David McClintick wrote about it in his newspaper and in 1982 “we must have the help of those people society has tarred forpublished Indecent Exposure, detailing the forgeries and other ever with being ‘whistleblowers.’ And we certainly need to call types of similar wrongdoings in Hollywood. these heroes by a different name. They are actually corporate Not long after leaving Columbia, Begelman was hired as sentinels — our front line of defence against wrongdoing. We the president of MGM. When it acquired United Artists he was must remember their heroic sacrifices.” named its chairman, a position he held until 1982. He was able Historically, many whistleblowers have experienced sacrito obtain other executive roles in Hollywood after leaving UA. fices, such as losing their jobs, being persecuted by employers and “Begelman is very much Hollywood royalty,” McClintick said suffering health problems resulting from the harassment they around the time his book was published. “Over the years he’s endured after coming forward about a perceived wrongdoing. A famous case involved Jeffrey Wigand, a former vice-prescultivated a strong network of friends and alliances that’s like a ident of research and development at Brown & Williamson safety net. [Being hired repeatedly after the scandal] is Hollywood being true to form.” (In 1995, at age 73, again facing charges of Tobacco Corp. As portrayed in the 1999 film The Insider (starring fraud, Begelman killed himself in a hotel room he shared with Russell Crowe as Wigand), Wigand’s life became a nightmare singer Tony Bennet’s ex-wife.) after his former employer (he had been laid off in the mid-1990s) After going public about the affair in the late 1970s, Robertson found out he was assisting the investigative program 60 Minutes suffered the fate of far too many whistleblowers. “I was blackin a segment it was doing about some of the company’s practices. CA magazine January/February 2012 35

Wigand told the program Brown & Williamson, the third-largest tobacco company in the US, deliberately misled consumers about the addictive power of nicotine, how it knew and ignored research indicating some of its ingredients caused cancer and its efforts to conceal documents that might be used against it in lawsuits by customers who had become ill due to smoking. During the time Wigand cooperated with 60 Minutes, he and his family faced death threats. They were sued. And Brown & Williamson retained a public relations firm to dig up dirt on the PhD in biochemistry, which was detailed in a 500-page report that smeared Wigand’s name and reputation. The nasty report, however, was ultimately discredited. And Wigand won a major victory in November 1995 when he delivered a “damning deposition in a Mississippi courtroom that eventually led to the tobacco industry’s US$246-billion litigation settlement,” as Fast Company magazine reported. But not without a terrible cost. The stress caused by the endless attacks by Brown & Williamson ultimately led to the end of his marriage. When his wife left him she took their children with her. His career was over and he had to begin anew, becoming an award-winning high school teacher. A renowned speaker on matters such as smoking, he also created the foundation Smoke-Free Kids. Like Wells, Wigand does not like the term “whistleblower.” “[It] suggests you’re a tattletale or that you’re somehow disloyal,”

36 CA magazine January/February 2012

he says. “But I wasn’t disloyal in the least bit. People were dying. I was loyal to a higher order of ethical responsibility.” In recent decades, many countries around the world have introduced or toughened legislation to protect whistleblowers/ sentinels. In Canada, the federal government introduced the Public Servants Disclosure Protection Act (PSDPA) in 2006 and passed it in 2007. It claimed the act would afford “ironclad” protection for federal employees and touted the PSDPA as the Mount Everest of whistleblower protection around the world. According to website www.fairwhistleblower.ca, the reality has been very different. “When [Federal Accountability Initiative for Reform] testified to Parliament, we predicted that the legislation would fail, but we could not have imagined how badly. A combination of flawed legislation and improper administration created a system that in three years uncovered not a single finding of wrongdoing and protected not a single whistleblower from reprisals. The commissioner appointed to protect government whistleblowers resigned in disgrace following a report by the Auditor General condemning her behaviour. The credibility of the entire system is currently in tatters: it needs a complete overhaul.” A recent Canadian example of a whistleblower paying the price involves career diplomat Brian McAdam. From 1989 to 1993, McAdam was an immigration control officer in Hong Kong, whose area of responsibility included southern China. His job

was to protect Canada from international people-smuggling rings, murderers and drug-smuggling, organized criminals from China, Japan, Korea, Taiwan, Macau and Hong Kong, according to a 2008 Ottawa Citizen report. “He discovered and painstakingly documented in more than 100 separate reports to his bosses in the Department of External Affairs infiltration and corruption at the Canadian consulate,” the paper said. “And he investigated individual members of the Triads — China’s powerful, Communist Party-connected organized crime gangs — [trying] to buy visas and smuggle its members and spies into Canada.” At first his work was a huge success. His reports, which were used by the RCMP, kept out 5,000 organized criminals, according to Immigration Canada’s assessments, he says. “In addition, I stopped 2,000 illegal immigrants from getting to Canada, saving Canadian taxpayers at least $25,000 for each refugee claim — or $50 million,” the Citizen said. Then he started to get death threats and other forms of intimidation. Things became worse when he reported the common practice of Canadian immigration officials accepting bribes in Hong Kong. “He and RCMP Sgt. Clement kept writing reports on infiltration and corruption,” the Citizen reported. “By the end of McAdam’s four-year posting, he says, ‘maybe three or four people among the Canadian staff would speak to me.’ The 32 reports he sent Foreign Affairs in Canada, entitled Triads Entering Canada, ‘were received in Ottawa by total silence.’ ” One day without notice, an External Affairs Department personnel director invited him to return to Canada to start an organized crime unit. Upon his return a colleague told him his career was toast. He was soon urged by the personnel department to take a retirement package because no one wanted to work with him. McAdam took a job in Immigration where he was assigned to a project already completed. He knew then his career was over. A serious bout of depression ensued, made worse by something he had learned. “One day, my contact in the Hong Kong police department phoned me. He’d intercepted a phone call from Mr. X [a Triad kingpin] talking to someone in the Immigration Department in Ottawa,” he told the Citizen. “That person said to Mr. X: ‘Don’t worry about McAdam and what he’s doing. We’ll take care of him.’ ” It’s great that some official form of

protection exists for people who have the guts to come forth and expose fraud and corruption. But if the few people who do take that dramatic step continue to see that they will often severely pay for their courage, they will think many times before acting the way people such as Cliff Robertson, Jeffrey Wigand and Brian McAdam did, whether we call them whistleblowers or sentinels. David malamed, ca · IFa, cPa, cFF, cFe, cFI, is a partner in forensic accounting at grant thornton llP in toronto. He is also CAmagazine’s technical editor for Fraud

CA magazine January/February 2012 37

fraud

suspects

By David Malamed

Truth or lie? When sussing out psychopaths in fraud cases, investigators must remember they are master manipulators

ntario Court Justice Lesley Baldwin was scathingly blunt when she sentenced Roman

Kaziuk to 10 years in prison for fraud, three times the length the Crown had requested. “[He] would

susanna denti

rip off the wings of all the angels in heaven and sell them to the devil for his own gain if he could,” she said in January as she admonished the 57-year-old Hamilton native. Kaziuk, she declared, was “an out-and-out psychopath,” a character assessment the facts seemed to justify. A career fraudster with 69 previous convictions, Kaziuk was in court for having cruelly swindled his 88-year-old mother, Feliksa. A Type-2 diabetic, Feliksa Kaziuk and her now dead husband had adopted Kaziuk when he was four. They were a hardworking couple who had come to Canada

from Poland not long after the Second World War; he was their only child. His repayment? He robbed her of a bountiful nest egg worth more than $1 million, which included the loss of two condominiums she had owned free and clear of debt. It was a heartless crime that resulted in his mother ending up in a Salvation Army homeless shelter. “Police report that when they visited her, they had to buy her batteries for her hearing aid so they could communicate with her,” Sympatico.ca reported. “She has a hard time eating the right foods to deal with her diabetes. [Kaziuk’s] ability to dupe others even extended to his own lawyer. Peter McPhie reportedly loaned Kaziuk $20,000 to bury his [supposedly] dead mother and later found out that was a lie. There’s no indication where the money went.” Kaziuk, who had power of attorney over his moth-

42 CA magazine November 2012

In handing down what is likely the longest sentence in Caner, was found guilty of fraud over $5,000 and theft over $5,000. adian history for fraud and theft over $5,000, Justice Baldwin Those charges don’t do justice to the havoc he caused. The court heard that the son “put unauthorized mortgages wryly remarked, “In jail, this offender will be better off physion her property for his own use,” the Oakville Beaver reported. cally than his own mother. He will be sheltered, fed regularly, “At the sentencing hearing, Kaziuk agreed that he frauduand kept warm.” lently…put a $98,000 mortgage on her property…in April 2007. Similar to Justice Baldwin’s situation, fraud investigators rareHe also agreed that in September 2008, he used the power of ly, if ever, have access to psychiatric reports about the suspects attorney to place a $65,000 mortgage against her property.” and perpetrators they deal with. But many have encountered The consequences for Feliksa were devastating. individuals who seem to warrant being categorized as psycho“According to the statement she provided to the police on Sept. paths or sociopaths. Because such individuals often operate 17, 2009, she had significant monies in her bank account [over $1 million]; she had a car and credit cards,” Justice Baldwin said in her judgment. “Due to the actions of the offender, she no longer has a car because he took it. She has no money in her bank account because he took it. She has no credit cards because he took them. As of Sept. 12, 2011, Mrs. Kaziuk was evicted from her Oakville, Ont., condo because of the fraudulent mortgages put on her properties without her consent or knowledge. The banks have seized her condominium units. She has lost everything.” To add insult to injury, Feliksa lost even more after she went into the shelter — some of her clothing was stolen. “She has nothing anymore,” said Det. Const. Jeff Springstead, who investigated the case. “[Roman] was directly responsible for driving his mother to being literally penniless.” In her ruling, the Oakville Beaver reported, Justice Baldwin noted Kaziuk had previously served jail time in several US states. She found his actions to be worse than those of infamous corporate Our new Focus on Practice Areas section, at the redesigned cica.ca, fraudsters. is comprehensive, unbiased and equipped with the information you “Not even the notorious fraudster need to help you succeed at: Bernie Madoff was guilty of destroying his own mother as Mr. Kaziuk has repeat• Audit and Assurance • Governance, Strategy and Risk edly done,” she wrote in her report. “I do • Corporate Finance • Reporting and Capital Markets not need a psychiatric report to conclude • Finance and Management • Small and Medium Practices that this offender has the characteristics • Financial Literacy • Sustainability of a psychopath. [He] is incapable of feel• Forensic Accounting • Taxation ing empathy and has no conscience. He has devastated everyone around him.” Relevant, reliable and very handy. The accuracy of this nonclinical asVisit cica.ca/focus-on-practice-areas today. sessment seems apparent in Kaziuk’s response to his crimes. “Kaziuk said he is not responsible for the situation his mother is now in and had enjoyed a great relationship with his adoptive parents who, he said, treated him as though he were their own,” the Oakville Beaver reported.

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CA magazine November 2012 43

so far outside the boundaries most others take for granted — decision-makers of their unique talents and abilities — albeit callously destroying their mother’s life, for example — a fraud based upon lies and distortion. Executives are always looking investigator needs to understand the signs of psychopathy. If for the best and brightest … but there are not that many from investigators can’t fathom the kind of behaviour displayed by which to choose. As times goes on, the psychopath will continue Kaziuk and others like him, they might focus on other suspects. to manage this positive reputation for as long as it is useful to “We can rule out the son because no child would ever do that him or her. Executives view themselves as good judges of people, to his mother,” the thinking might be. If only that were true. and few want to be told that they were wrong about something Fraud investigators, of course, are not trained clinicians. as basic as honesty and integrity. This aspect of human nature Therefore, any amateur assessment of a person’s psychological works in favor of the psychopath.” state should be done with caution and used only as a potentially Because fraud investigators are not experts on psychopathy, helpful indicator. Perhaps the greatest advantages of knowing they need to rely on gut instincts when interviewing a suspect such types of people exist are that it might broaden a list of suswho could have a psychopathic personality disorder. Like detecpects and help explain behaviour that otherwise might defy tive Goren, they should not just review the facts of a case but explanation. the emotional responses, or lack thereof, of a person of interest. Generally speaking, psychopaths and sociopaths have some“The emotional life of psychopaths lacks the range and depth what similar traits. There is disagreement as to just how similar found in most individuals,” Hare told Fraud. “It often is described they actually are. But for a fraud investigator’s purposes both as shallow and barren, consisting mostly of ‘proto-emotions,’ types of individuals seem to lack a conscience or feelings of guilt somewhat primitive responses associated with their own needs or remorse about their negative actions. and experiences. Their displays of anger, hostility, envy and response to frustration are likely to be much more intense and Robert D. Hare, coauthor of Snakes In Suits: When Psychopaths Go To Work, is an expert on psychopathic characteristics. An genuine than their feelings of empathy, love, shame and sorrow. emeritus professor of psychology at the University of British ColumPsychopaths and sociopaths have somewhat similar traits. bia, he is also the president of Darkstone Research Group Ltd., a forenFor a fraud investigator’s purposes both seem to lack sic research and consulting firm. He lists 20 traits of psychopaths, a conscience or guilt or remorse about their actions which include: callousness and lack of empathy; glib and superficial charm; pathological lying; cunning and manipulativeness; While at times they may appear cold and unemotional, they are shallow affect (a favourite term of detective Bobby Goren in prone to dramatic, shallow, and short-lived displays of feeling. Law and Order: Criminal Intent, it means superficial emotional They are able to mimic emotions rather convincingly, but an astute observer may be left with the impression that they are responsiveness, such as not being upset in situations where most playacting and that little is going on below the surface.” others would be); sexual promiscuity; juvenile delinquency and failure to accept responsibility for actions. This information can be helpful during an interview. If invesSociopathy, Hare says, is not a formal psychiatric condition. tigators wonder if the person across the desk could potentially be “It refers to patterns of attitudes and behaviors that are consida psychopath then it might influence some of their questions. In ered antisocial and criminal by society at large, but are seen as addition to asking factual-based questions, they might include normal or necessary by the subculture or social environment some to elicit emotional responses, to assess whether they seem in which they developed,” he writes. “Sociopaths may have a genuine. Questions such as, what did you feel when you heard well-developed conscience and a normal capacity for empathy, the company had been defrauded? What kind of a person do you guilt and loyalty, but their sense of right and wrong is based on think could defraud his or her company? What do you think the norms and expectations of their subculture or group. Many should be done to the fraudster when caught? criminals might be described as sociopaths.” During an interview it’s important to pay attention to how Psychopaths, on the other hand, suffer from a personality a person is communicating, not just his or her words. “Tradisorder, he says. “They are without conscience and incapable ditionally, experts tend to agree that nonverbal communication of empathy, guilt or loyalty to anyone but themselves.” itself carries the impact of a message,” writes Roy Berko in his Or, as one joke tackles the difference between the two: a 2007 book, Communicating: A Social and Career Focus. “The figure psychopath thinks 2+2=5 rather than 2+2=4. A sociopath knows most cited to support this claim is the estimate that 93% of all meaning in a social situation comes from nonverbal informa2+2=4, but hates to admit it. tion, while only 7% comes from verbal information. The figure Obviously, not all fraudsters are psychopaths. Those who is deceiving, however. It is based on two 1976 studies that comare, however, can be difficult to detect, especially when being pared vocal cues with facial cues. While other studies have not considered for employment. “Psychopaths invest energy in creating and maintaining a façade that facilitates their careers,” Hare supported the 93%, it is agreed that both children and adults rely told Fraud Magazine, a publication of the Association of Certified more on nonverbal cues than on verbal cues in interpreting the Fraud Examiners. “During the hiring process they convince messages of others.” 44 CA magazine November 2012

This means that a person’s affect probably tells you a lot more than his or her words. If, for example, someone says “I was really upset” in a monotone voice that displays no genuine emotion, it should catch your attention. It’s critical, however, to emphasize that there could be reasons for the tone of the response that have nothing to do with the question or the matter at hand. The person could be distracted by personal issues that dwarf the importance of the fraud investigation. A red flag? Yes. Evidence he or she is possibly a psychopath? That’s a big leap. Justice Baldwin found Kaziuk more contemptible than Madoff, who ran a US$50-billion Ponzi scheme. Madoff, too, has been psychologically assessed, including by Gregg McCrary, a former special agent with the FBI who spent years constructing criminal behavioural profiles. “Mr. McCrary cautions that he has never met Mr. Madoff, so he can’t make a diagnosis,” the New York Times reported, “but he says Mr. Madoff appears to share many of the destructive traits typically seen in a psychopath. That is why, he says, so many who came into contact with Mr. Madoff have been left reeling and in confusion about his motives. ‘People like him become sort of like chameleons. They are very good at impression management,’ Mr. McCrary says. ‘They manage the impression you receive of them. They know what people want, and they give it to them.’ ”

Although it can be helpful to try to suss out psychopaths in a fraud investigation, it’s important to keep in mind that many of these individuals are incredibly adept at manipulation. Paul Babiak, coauthor of Snakes in Suits, cautions against putting too much emphasis on the diagnosis. “If the client is highly psychopathic, the odds are that some form of corporate misbehavior, perhaps fraud, is underway, but hidden from view,” he told Fraud. “If inconsistencies and improprieties begin to surface, it is important that the examiner’s focus remain on the facts of each case, as the psychopath will try to distract him or her through flattery, misdirection, questioning the examiner’s competence or authority to investigate, and so forth.” Like magicians, most psychopaths have learned the art of distraction. That’s another trait to add to the list. If you enter an interview convinced the person is guilty and leave wanting to take the person out to dinner, maybe that’s another red flag to consider. Are psychopathic liars that good? Just ask Seinfeld’s George Costanza: “It’s not a lie if you believe it.” david Malamed, Ca·iFa, CPa, CFF, CFe, CFi, is a partner in forensic accounting at Grant thornton LLP in toronto. He is also CAmagazine’s technical editor for Fraud

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CA CA magazine November 2012 45

fraud

women

By David Malamed

Women can con

n March 2006, Canadian singer-songwriterpoet Leonard Cohen was awarded US$9 mil-

lion by a Los Angeles County Superior Court in a lawsuit he had launched the previous year

against Kelley Lynch, his former long-term business manager. The then 71-year-old member of the Rock and Roll Hall of Fame and the Canadian Songwriters Hall of Fame had sued Lynch for fraud, negligence, breach of contract and breach of fiduciary duty. Cohen had accused Lynch of taking more than US$5 million from his savings during the 16 years she served as his manager. It was noted that the two had been lovers in 1990. 38 CA magazine August 2012

The story first emerged in 2004 when Cohen discovered his savings, which he had assumed were many millions of dollars, had dwindled to US$150,000. The news garnered worldwide attention. Cohen claimed the amounts taken were far in excess of the 15% management compensation Lynch was entitled to receive. As a result of his losses, Cohen embarked on a new recording and performing schedule at a time when he was approaching his mid-70s and had not been on the music circuit for some time. Cohen had originally alleged that Lynch had conspired with his former tax lawyer, Richard Westin, to sell his music-publishing company and royalties for US$12 million under false pretenses. Cohen said he was told the

maurice vellecoop

While a considerable majority of fraudsters are men, donâ&#x20AC;&#x2122;t get taken in â&#x20AC;&#x201D; women too can hang you out to dry

proceeds were going into a company owned by his children. nomic needs and occurs as part of their domestic responsibilities In fact, he said, the money went to a company owned almost for their children.” entirely by Lynch. Prior to the lawsuit in LA, Cohen and Westin Perhaps that is sometimes the case, but veteran fraud invesreached an out-of-court settlement. tigators would surely add that in other instances the wrong“The fraud allegedly started while Cohen was taking time doing occurs for the same reasons that motivate male fraudaway from his career to focus on his spiritual life at the Mount sters: greed and the perceived opportunity to get away with the Baldy Zen Center in Los Angeles,” CTV reported. “While Cohen malfeasance. Need obviously plays a role in some fraud cases, no matter was not recording or touring, Lynch allegedly started to pay the gender of the perpetrator. But certainly not in all of them. herself a greater portion of the artist’s royalties. She also allegTherefore, when embarking on a new file a fraud investigator edly introduced Cohen to Westin, who is accused of helping needs to enter the process without a conscious or subconscious Lynch to orchestrate the sale of Cohen’s music publishing and belief that the bad guy will, in fact, be a guy. artist royalties.” Cohen’s lawsuit stated that he “believed he had hired Westin Despite numerous examples of female fraudsters, it still seems and [his firm] to protect his retirement savings, but, in fact, they to catch many by surprise when a woman is exposed as the masburdened the sale with transaction costs in excess of US$4 miltermind behind a financial wrongdoing. lion and they devised unnecessarily complex corporate strucIn 2011, Australian investigative TV program A Current Affair tures that allowed Lynch to steal over US$5 million for her own ran a segment on female fraudsters. It felt it necessary to promote benefit without Cohen’s knowledge or consent.” the episode by noting that “some of Australia’s most successAlthough Cohen won in court, his chances of recovering ful criminals are not the Rolex-sporting suits we imagine, but his lost savings were slim. CTV reported at the time of the everyday women.” judgment that “Lynch has ignored the civil suit, neither reThe segment focused on several women, including 48-yearsponding to it nor filing any claims of her own and ignoring a subpoeDespite numerous examples of female fraudsters, it still na issued for her financial records. And, recently, Lynch claimed her seems to catch many by surprise when a woman is phone had been disconnected because she was unable to pay the bill.” exposed as the mastermind behind a financial wrongdoing Although a sad set of circumstances, especially because Cohen old Jackie Dimitrovski, who took more than $500,000 from the had believed Lynch was a friend, the case in and of itself was Sydney office of her employer, Jones Day, a large US-based law not particularly noteworthy — except for one aspect: the fraudster was female. firm. An accounts clerk, Dimitrovski doctored company cheques While there’s no question that women commit fraud, a considand transferred them to a business owned by her husband (he was not implicated in the fraud). She then moved the money erable majority of fraudsters are male. This was confirmed by the over the Internet to her personal account. 2010 “Report to the Nations on Occupational Fraud and Abuse,” Dimitrovski conducted her scheme six times over a fourconducted by the Association of Certified Fraud Examiners. month period in 2011. After a year at Jones Day, she resigned The report, based on 1,843 cases of occupational fraud reported and embarked on an extravagant international holiday. She by the CFEs who investigated them, found that “two-thirds of was sipping chocolate martinis in Texas (information posted the frauds in our study were committed by males … consistent on her Facebook account) just prior to returning home. When with the overall trend noted in prior reports that most occushe arrived in Sydney she was arrested, thanks to her perceppational frauds are committed by men.” The cases occurred in tive replacement who had noticed that something in the firm’s more than 100 countries on six continents. “More than 43% took books didn’t look right. place outside the United States,” the ACFE said. “What is perhaps Coverage of the case (she pled guilty and was given nine most striking about the data we gathered is how consistent months in jail) almost always mentioned two points: she had a the patterns of fraud are around the globe.” previous conviction, in 2002, of three credit-card fraud charges, Fraud investigators, of course, are well aware that females for which she was given a three-year good behaviour bond; and commit fraud. But some might be inclined to look for a male perpetrator first because of the statistical data such as that by that she was the mother of two teenage children. In fact, the lead the ACFE and by a general belief in society that men are far more typically included her status as a mother. The Daily Telegraph, for likely to break the law. example, wrote, “The 48-year-old mother of two teenage daughIn 2008 the magazine Psychology Today, for example, ran a ters was sentenced to nine months jail.” It’s hard to imagine that a convicted male fraudster would be described in the lead series entitled “Why are almost all criminals men?” The author, as “a father of.” psychologist Satoshi Kanazawa, wrote: “While an overwhelmThe number of women committing fraud, however, was ing majority of criminals in every human society are men, there not a surprise to Sam Macedone, principal of the Sydney firm are some exceptions; some women do commit crimes.” He cites Macedone Legal and a defence lawyer with more than 40 years’ research that concludes, “Theft by women is usually tied to ecoCA magazine August 2012 39

experience. He told A Current Affair, “There seems to be more only diamonds can cure,” she joked. Was it an addiction? “I just cases [of fraud] that involved women as opposed to men.” wanted to spend,” she told the paper. “I’m not going to lie and In 2002, Sandy Haantz, a research assistant at the National say spending that amount wasn’t fun, because it was, OK? I’m human. What’s really nice is being able to phone Cartier and White Collar Crime Center in Virginia, released a report entitled say, ‘I want that!’ and just put it on your debit card and know “Women and White Collar Crime.” After pointing out that politiit’s going to go through. That bit was fun.” cal, social, economic and technological changes of the previous Similar examples are easily found. In December 2011 two few decades had impacted the role of women in the home and California roommates, one a paralegal and the other a schoolworkplace, he said the changes had “brought about increased teacher, were accused of forging a US$285,000 cheque from the participation among women in certain types of criminal behavlaw firm where the paralegal worked. iour. Nowhere are they more pronounced than in the arena of How did they use the money? A cross-country flight on a white collar criminality.” Haantz cited several statistics that, although more than 10 private jet, five rooms in a New York hotel and a shopping spree years old, are interesting: “The Bureau of Justice Statistics’ special at Tiffany & Co. in New York. They also allegedly used some of the money for a down payment on a US$3.7-million manreport on women offenders in the United States found that from sion. “This money wasn’t used to pay off debt. It was used for 1990 to 1996 there was a 55% increase in the number of women luxury items and personal enjoyment,” said Farrah Emani, a convicted of fraud felonies in state courts. The report also indicated that in 1996, women defendants in state courts ‘accounted spokeswoman for the Orange County District Attorney’s Office. for 41% of all felons convicted of forgery, fraud, and embezzleThe accused, Alexa Polar and Antonella Pabello, have each ment.’ Among the 1,016 federal prisoners incarcerated for white been charged with two felony counts of forgery, one felony count collar crime in 2000, 230, or nearly one in four, were women.” of grand theft and one felony count of grand theft by embezzleThis does not mean to suggest that men are no longer most ment. They have pleaded not guilty. likely to commit fraud. The typical fraudster is still a male, in his An Australian program on female fraudsters noted that mid-30s or older, who holds a senior position at a company where he has “some of Australia’s most successful criminals are not the been a trusted employee for a number of years. One reason why males Rolex-sporting suits we imagine, but everyday women” dominate this category, however, may be rooted in the unfortunate realities of the business world: the majority of people holding It’s understandable some investigators on the hunt for a sussenior positions are still male. In fact, one global study offered pect might assume a fraudster to be male, especially with such that the “gender gap in fraud perpetration may reflect women’s high-profile ones as Bernie Madoff and Earl Jones garnering under-representation in senior management positions and, as a so much news. And there’s also the influence of the outdated consequence, fewer opportunities to commit fraud.” term “con man” and the fact that a Ponzi scheme is named after This is a critical point for fraud investigators to keep in mind a male. But as Cohen and other victims will attest, fraudsters come when considering possible suspects. Rather than focusing on male perpetrators, as some investigators might be inclined to in both genders. Although Cohen may have not recovered much do, look instead with gender-neutral eyes. of his stolen money, he did exact a certain amount of satisfaction It’s also essential to consider the normal motives that are in April this year. applied to male fraudsters. There’s far too much evidence of Lynch, 55, was sentenced to 18 months in jail by Los Angeles women who have committed fraud for base reasons. County Superior Court Judge Robert C. Vanderet after a jury Take Joyti De-Laurey. Touted as Britain’s biggest female found her guilty of having breached several restraining orders fraudster by the Daily Mail, she was sentenced to seven years in against her contacting Cohen and harassing him with countless prison in 2004 for having stolen £4.3 million ($7 million) from threatening phone calls and emails. Many of the latter were more three senior members of the London branch of investment bank than 50 pages long, he told the court. “My sense of alarm has Goldman Sachs. A secretary at the time, De-Laurey, now in her increased over the years as the volume of emails has increased.” early 40s, forged the victims’ signatures on cheques made out to Fraud is committed for a variety of reasons and by a wide array herself (it was apparently common practice for secretaries at the of people. It was once thought to be primarily a male-dominated bank to sign personal cheques for their busy bosses). offence. Times have changed, however, and old ways of thinking, if they still exist, need to be put to rest. Women are leading De-Laurey, whose parents were successful professionals, used the way in all aspects of society, including the arts — the con some of the money to buy an expensive apartment and other arts included. properties, as well as luxury items such as cars, a speedboat, designer clothing, holidays and Cartier diamonds. In 2008, after having been released halfway through her David Malamed, CA·IFA, CPA, CFF, CFE, CFI, is a partner in forensic accounting at Grant Thornton LLP in Toronto. sentence, she gave an exclusive interview to the Daily Mail. How He is also CAmagazine’s technical editor for Fraud did she justify her fraudulent behaviour? “I’ve got an illness 40 CA magazine August 2012

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Guy Quenneville Devolution for Dummies Up Here Business

n o i t u l Devo FOR

S E I M DuM By Guy Quenneville

Chances are, the average NWT resident doesn’t have a clue what devolution is. I know I didn’t – that is until I launched myself into an obsessive quest to define, in the most digestible terms possible, what devolution will mean for the NWT and why you should care. much money is at stake when it comes to resource •How revenues from Imperial Oil’s Norman Wells production field? are the the GNWT’s new land, water and resource manage•How ment duties going to simplify the regulatory process for miners?

•Who thinks the GNWT is getting a raw financial deal - and why? The answers to these questions – and more! – are but a flip of the page... 24

UP HERE BUSINESS • AUGUST 2012

AUGUST 2012 • UP HERE BUSINESS 25

Chapter 1

Let’s start with some numbers, shall we? $65.3 million: If devolution takes hold two fiscal years from now, $26.5 million: The amount the GNWT is receiving to help it make the as hoped, this is how much the feds will give the GNWT to deliver the programs and services it will inherit from AANDC – everything from issuing prospecting permits to dealing with squatters. This amount, to be increased each year, will come in addition to the hefty federal transfer payment ($1.1 billion this fiscal year) that accounts for so much of the GNWT’s revenue. Our transfer payments aren’t going anywhere.

$28 million: Besides creating a pile of new work for the GNWT, devolution will also generate $28 million in annual spin-off business opportunities. Got a business that creates or prints government fact sheets and letterheads? Then this is the time to dust off your design templates.

post-devolution transition. The cash is essentially earmarked until the signing of the final agreement, which is expected to occur this fall. This is the federal government’s way of saying, “Here’s some money to help with the move, son.”

$65 million: With devolution in place, this is what the GNWT estimates it would have kept in royalties from the 2011-2012 fiscal year. To put it in perspective, the figure is about on par with this year’s operating budget for the territory’s Department of Environment and Natural Resources. The GNWT predicts this amount will increase to $100 million by 2020. See Chapter 3 for more on resource revenues.

Terms that will come up often it for Read elf s your

AIP: The devolution agreement-in-principle, inked in early 2011. D-Day: Devolution Day: April 1, 2014. That’s the day the territorial government expects the final devolution agreement will take hold. AANDC (pronounced “and-see”): The federal department of Aboriginal Affairs and Northern

Development Canada – the department the GNWT will inherit its new powers from. Formerly known as INAC (Indian and Northern Affairs Canada) and, before that, DIAND (Department of Indian Affairs and Northern Development). Net fiscal benefit: Stripped to its essence, this simply refers the direct financial benefit the GNWT will see from devolution every year.

Gross expenditure base: An estimate of the GNWT’s annual spending requirements. It plays a big role in determining the GNWT’s net fiscal benefit. (See Chapter 3 for more info on both.)

Government responsiveness will be quicker, she adds. “You can talk to an MLA in the grocery store on Saturday and it can become an issue in the legislative assembly on Tuesday.” And because the GNWT will have a direct financial stake in seeing development happen, it will have every reason to make sure the process runs smoothly. “…[We] feel very strongly a one-month delay will put huge pressure on the minister here and staff here,” Woodward says. “A one-month delay probably does not exert a great deal of pressure on a federal minister.”

The NWT is not about to become a province. Not yet, anyway.

The NWT has its powers delegated to it by the Parliament of Canada, through the NWT Act. The provinces, on the other hand, have their own constitutional authority. That’s what makes them provinces. But it will be a while – McLeod figures another 15 to 20 years – until the NWT makes it to the big kids’ table. Adds Goldney: “Provincehood is a long-term objective, but we have to recognize that there are differences. There’s a vast geography and a small population base, which limits the territory’s ability to raise revenue in the same way that the provinces can.” Becoming a province at this stage would be bad, really. The NWT would go from getting transfer payments, which account for as much as 80 per cent of its revenue, to getting what the other provinces get, equalization payments, which account for as little as nine per cent of revenue in Alberta to 33 per cent in PEI and New Brunswick. It would be much, much less than what the NWT gets now. Devolution, then, is “the best of both worlds,” as Petra White, the GNWT’s senior communications officer for devolution,

UP HERE BUSINESS • AUGUST 2012

Photo

Michael Ericsson

Before I tackle specific topics, there are a few overarching things you should keep in mind about devolution.

those needs with the needs of industry – which wants infrastructure to help exploit the territory’s resources – is something the GNWT will have to be strategic about, McLeod says. “There’s only so much that you can expect a government of 43,000 people to pay for,” he says. In the nearer-term, devolution will bring relief on the regulatory front. When it comes to issuing land and water permits, or the approval of environmental assessments, the final authority will rest with the GNWT, not some delay-prone federal minister buried in the enclave of Ottawa. The way it works now, “If AANDC has a process that requires ministerial approval … it has to go up the AANDC–NWT food chain and the AANDC–Ottawa food chain. Then finally it gets to the minister’s office,” says Shaleen Woodward, who heads the implementation branch of the Yellowknife-based devolution office. “[After devolution], there’s just going to be one food chain.”

Northwest Territories was becoming a province, then, yeah, maybe. Once a region fights for provincial status, it’s essentially admitting it can take care of itself financially, and the feds can, in good political conscience, withdraw fiscal support. But the NWT is only getting provincelike powers. Even with provincehood, the complete pulling of the purse strings is unlikely to happen anyway. If the feds believe the country as a whole can benefit from a project, they’ll decide to chip in, as they did recently, to the tune of $1 billion, for a new bridge linking Ontario to its neighbour to the south, Detroit, Michigan. Still, for added security, the GNWT made sure the agreement in principle included a chapter committing Canada to holding ongoing discussions with the GNWT in the post-devolution age about areas of strategic investment (hint, the Mackenzie Gas Project). “We recognized … that we’re not going to have the same deep pockets that Canada would have,” Goldney says. “We didn’t want to be in a situation where we’re unable to pursue some economic objectives as a result of devolution.” The feds have already displayed their willingness to chip in, their $150-million pledge towards the Tuktoyaktuk-to-Inuvik highway being the latest example.

Or as he calls himself, the NWT’s “devolution geek”

The big picture several times since 1967, when Yellowknife became the capital. Sometimes this has happened through formal agreements with the feds, sometimes not. Between 1987 and 1995, six agreements transferred authority over hospitals, highways and forestry to the GNWT. So why is this latest round such a big deal? “It’s the last big jurisdiction,” says Martin Goldney, the GNWT’s chief negotiator for devolution. In addition to managing its own land, the GNWT will finally get a share of resource revenues, most notably, royalties. With $3 billion in infrastructure needed in the next five years, the territory needs every penny it can get. “Every community I go to has a big shopping list of (needs). Everybody wants more programs, more infrastructure,” says Premier Bob McLeod. People want money for early childhood development. Schools want to be able to offer phys-ed classes, or shop. Balancing

Will the federal government be done supporting the NWT financially, once devolution happens? Not by a long shot. If the

The Negotiator

Feds: Federal government. This is not meant as a slur; I just didn’t want to have to repeat the words “federal government” every time, the better to cram this piece with as much info as possible.

Chapter 2

This ain’t the first time. The GNWT has been through devolution

puts it. “[You] remain a territory and keep getting the transfer payments, but then also have the province-like powers, which is the situation the Yukon is in.”

Martin Goldney looks a lot younger than you’d expect the GNWT’s chief negotiator of devolution to be. But Goldney, 41, knows his stuff – more than anyone would ever want to know about devolution, actually. And he’s got the work hours and an instantaneous recall of every section of the AIP to prove it. “This is nowhere near a 40-hour job,” he chuckles. “We don’t like to think about all the hours. But it’s a labour of love. This kind of work doesn’t come along often in one’s career. This is nation building.” A lifelong Northerner whose mother also worked for the GNWT and whose father operated heavy equipment at Giant Mine, Goldney has been on the devolution file since 2002, when the latest series of talks formally began. For more than a year now, however, he’s the guy who’s headed the GNWT’s main table negotiations with the federal government, and debriefed the premier. The GNWT has made a lot of progress in the last 10 years, he says, especially when it comes to how much it will receive in resource

royalties. At one point, a figure of no less than $30 million was floated – “which didn’t hold a lot of appeal to us as negotiators, or provide a lot of comfort,” Goldney says, “because you set a floor and it soon becomes a ceiling.” By contrast, the current arrangement would have put $65 million

in the GNWT’s pocket last fiscal year. A similar victory was won when the GNWT convinced the feds that it needs at least $65 million (as a base) to deliver AANDC’s programming ever year – considerably more than the $42 million it costs Canada to do the same. “It was difficult negotiations,” Goldney says. The NWT has also benefitted from the Yukon being the first territory to go through devolution. The Yukon didn’t leave much time for contemplating how devolution would actually be implemented. But the GNWT has built in an 18-month implementation period to get itself ready for D-Day. It’s realized the benefit of “starting early rather than waiting until you’re finished negotiations and then turning your mind to it,” Goldney says. Not that the Yukon hasn’t done well for itself, he hastens to add. “I don’t think anybody could suggest things haven’t gone well for the Yukon if you look at the state of their resource economy and the confidence industry has in them to deliver its services.” GQ

AUGUST 2012 • UP HERE BUSINESS 27

Chapter 1

Terms that will come up often it for Read elf s your

Gross expenditure base: An estimate of the GNWT’s annual spending requirements. It plays a big role in determining the GNWT’s net fiscal benefit. (See Chapter 3 for more info on both.)

The NWT is not about to become a province. Not yet, anyway.

UP HERE BUSINESS • AUGUST 2012

Photo

Michael Ericsson

Before I tackle specific topics, there are a few overarching things you should keep in mind about devolution.

Or as he calls himself, the NWT’s “devolution geek”

Will the federal government be done supporting the NWT financially, once devolution happens? Not by a long shot. If the

The Negotiator

Chapter 2

This ain’t the first time. The GNWT has been through devolution

puts it. “[You] remain a territory and keep getting the transfer payments, but then also have the province-like powers, which is the situation the Yukon is in.”

AUGUST 2012 • UP HERE BUSINESS 27

Chapter 3

“You may have noticed some changes around here...” For the average NWT resident, the most noticeable difference post-devolution will be the increased size of the NWT government.

ployees will, as it’s required to offer ex-federal employees a job that is “reasonably comparable,” salary-wise, with their former posts, Goldney says. These people will also stay where they are, whether it’s in Inuvik (six positions), Hay River (four), Norman Wells (three), Fort Smith (two), Fort Simpson (three) or Yellowknife, so anyone who doesn’t want to budge from the community they currently call home can rest easy. And proponents of decentralization who fear devolution will take these jobs away from smaller communities need not fear, either. Besides not having to put their houses up for sale, prospective GNWT

Spreading the love. Beyond inheriting approximately 175 AANDC positions, the GNWT will be creating another set of jobs. How many is hard to say. The GNWT is currently knee-deep in the process of figuring out how many new people (in addition to the 175 already mentioned) it will ultimately need. As Woodward explains, “Part of our challenge is going to be identifying where [AANDC] gets outside support from other federal departments (like legal advice from the federal Department of Justice, for example), and then understanding how we’re going to replicate that support.” As to whether those jobs will be decentralized, McLeod says, “We’re looking for opportunities to decentralize not only through devolution but also by reviewing existing GNWT programs.” As it stands now, three quarters of the territorial government’s workforce works outside Yellowknife. To attract new residents to come North in general, McLeod says the GNWT will push for continued increases to the Northern residency tax deduction. Let’s keep the Xerox flowing, people. AANDC’s operations in the NWT generate a lot of contract work: IT services, the supply of everything from paper to water coolers, etc... Will the GNWT inherit all applicable contracts from the feds? That’s currently being assessed, says Woodward, but the primary goal is to ensure “a smooth transition.” While some national IT contracts may not be transferrable to the GNWT, the majority of AANDC–NWT’s contracts are already serviced locally.

What about Nunavut? Canada’s youngest territory is in a hurry to evolve, too In May, Nunavut’s own bid for province-like powers got a kickstart when it announced the appointment of a chief GN negotiator – its very own deputy minister of environment, David Akeeagok. With negotiations with the Crown set to begin, Nunavut premier Eva Aariak recently shared with me what the territory hopes to get out of devolution – and why industry should care. How will devolution benefit the business community of Nunavut? It will create more certainty. Much as our land claim agreement clarified title over Inuit Owned Land, devolution will clarify, once

UP HERE BUSINESS • AUGUST 2012

and for all, who has control and administration of the Crown Lands, which make up 80 per cent of our land. It will … eliminate a layer of government project approval. A closer connection between resource companies and the territory will result in the needs of communities being better reflected in the development of projects. The spinoff benefit from a more vibrant business sector is that private businesses in Nunavut can build secondary industries in support of resource development Nunavut Tunngavik Inc. (NTI) – the Inuit organization that makes sure the land claim is

adhered to – has received its first royalty from the owner of the Meadowbank gold mine near Baker Lake – $2.2 million. How much of the land that Meadowbank sits on is Inuit-owned? It’s 100% Inuit-owned. NTI owns all subsurface rights, and Kivalliq Inuit Association owns all surface rights. Devolution will not affect any negotiations between Inuit organizations and resource companies and, in particular, it will not diminish any existing rights under the Nunavut Land Claims Agreement, including those rights regarding resource royalty arrangements.

water and resources. AANDC minister John Duncan, just over a year ago, said the territory wasn’t ready. There was the 2007 report commissioned by the federal government, which said the territory didn’t have the staff or the skills needed to do the work. What, in your view, has changed between 2007 and 2012 to make Nunavut ready? Nunavut was ready in 2007 to begin negotiations and we are still ready today. Devolution is not a “winner takes all” style of negotiation. It’s about building a better regulatory system and repatriating our decision-making authority.

Do you think Nunavut’s having one land claim will make its negotiation process easier compared to the NWT? The fact that there is one land claim agreement with Nunavut Tunngavik Inc. (NTI) will certainly facilitate negotiations. We’re very fortunate to have such a strong and supportive party to the negotiations. That being said, Nunavut is distinct and we’ll have our own unique challenges. We have a historic infrastructure deficit that will require creative solutions as we work towards transferring responsibility for land management from the federal government to the territory. What will you use the money you get from royalties for? The needs of tomorrow are difficult to anticipate, but today our most pressing need is to invest in housing and infrastructure… We’re seeking the right to make the decisions and collect the royalties on Crown land. Once we get these rights, we can talk about what we’ll do with them.

$6 billion: Thats the estimated value of the basic infrastructure needed in Nunavut over the next 20 years

– responses edited by GQ

Chapter 4

Show us the money Now we get to the sexy stuff: resource revenues. But the process won’t be as simple as saying, “Gimme that cheque!”

The net fiscal benefit. You may have heard this phrase. Basically, 50-per-cent-share, but not, ultimately, what it made over and above the it refers to what, in the post-devolution age, will be the GNWT’s financial cap. It’s only if the value of the GNWT’s share of resource revenues is less takeaway from resource revenues (the royalties collected from companies than the cap that its transfer payment will go untouched. Confused? Think of it this way: If you’re on welfare (transfer payproducing oil, gas or mineral resources on NWT public land being the chief example). I say “takeaway” because it’s not like the GNWT is going to sud- ments) but you have a part-time job (resource revenues), your takehome pay from that job will be limited, denly inherit a giant treasure chest and be because you’re already getting financial able to hog it. It’s going to have to play nice. support courtesy of welfare. You can’t get Here’s how it will work: The duty to too greedy, is the idea. collect all resource revenues will fall to the Factoring in the cap, how much in resource royalties does As far as royalties are concerned, the GNWT, but it will only keep 50 per cent, the GNWT expect to keep down the line? (in millions) GNWT’s share would have exceeded that cap as it will have to give the other half to the $163.6 only three times since 1999. (See Table A, on feds. If the GNWT’s share goes over a ne$134.6 the next page.) But will the cap be breached gotiated cap – which is five per cent of the $105.5 in the post-devolution age? The GNWT territorial government’s annual spending $82.6 $64.7 doesn’t think so. Not often, anyway. The GEB requirements, or what’s known as the gross will be increased by four per cent a year. So expenditure base (GEB) – then the amount 2011-12 2016-17 2021-22 2026-27 2030-31 as the GEB grows, so will the cap. In 2020, it’s it earns over the cap will be subtracted from expected the cap will reach $100 million. its transfer payment. The GNWT will keep its

Maximum benefit

Source: GNWT

But will they take it? The GNWT is confident most AANDC em-

employees will enjoy other perks, Woodward says. “In our system, you get more time off,” she says. Non-management GNWT employees who’ve worked for eight to 15 years and are part of the Union of Northern Workers receive 25 days of vacation. Federal employees who’ve worked the same period, generally speaking, get 20 days. Says Woodward, “We have those lovely winter bonus days where, for every five days of annual leave you take in the winter, you get a day off.”

Sean Kilpatrick/CP Images

have a lot more workers on its payroll. Exactly how many, in total? It’s tough for the GNWT to know at this stage. But here’s what the GNWT can say: There will be up to 175 new GNWT jobs specifically reserved for former AANDC workers who were already based in the NWT prior to D-Day. This infusion alone will increase the territorial government’s workforce by about 3.5 per cent – and that’s not taking into account a further crop of new jobs that devolution will create within the GNWT. I’ll get to that. To be clear, no AANDC workers from Ottawa or elsewhere in the south will be initially offered jobs. Meanwhile, permanent AANDC– NWT workers affected by devolution will be offered jobs by the territorial government no later than six months before D-Day. If they accept, they – along with those who decide not to switch over to the GNWT – will be laid off by the feds on D-Day, freeing them up for the territorial government. If anyone who’s not from the NWT ultimately lands one of those jobs, it will be because a Northern federal employee already declined it. Long story short: NWT residents will get first pick. “We don’t want to make the AANDC folks antsy,” Woodward says. “They’re reading the tea leaves and saying, ‘Well, are they going to take me or not?’ The answer is: Every single affected employee in the AANDC–NWT office that they identify will be given a job offer by us.”

Photo

Same territory, new boss. Come April 2014, the GNWT is going to

There are a number of other projects being developed as future mines. Which of these do you expect will be in production over the course of the next 10 years? It’s difficult to predict with any certainty. Mining is based on a commodities market, which influences whether development companies wish to pursue their projects. As well, all projects have to be scrutinized under the regulatory process. How closely are you watching the NWT devolution negotiation process? Very closely. We’re encouraged that they’re making progress and there are many lessons to be learned from the experiences of both the Yukon and NWT. One of those lessons is that a devolution agreement must strengthen and improve the current regulatory regime, to create more certainty for all stakeholders – from community members to resource companies. Some have raised doubts about Nunavut’s readiness to take on the management of land,

AUGUST 2012 • UP HERE BUSINESS 29

Chapter 3

“You may have noticed some changes around here...” For the average NWT resident, the most noticeable difference post-devolution will be the increased size of the NWT government.

UP HERE BUSINESS • AUGUST 2012

$6 billion: Thats the estimated value of the basic infrastructure needed in Nunavut over the next 20 years

– responses edited by GQ

Chapter 4

Show us the money Now we get to the sexy stuff: resource revenues. But the process won’t be as simple as saying, “Gimme that cheque!”

Maximum benefit

Source: GNWT

But will they take it? The GNWT is confident most AANDC em-

Sean Kilpatrick/CP Images

Photo

Same territory, new boss. Come April 2014, the GNWT is going to

AUGUST 2012 • UP HERE BUSINESS 29

16% Here’s who owns what land in the NWT right now:

Source: GNWT

82%

Federal Crown land

84%

(as of July 23, 2012)

Signed on

Public land owned by the GNWT

Aboriginal groups

The respective shares for

GNWT

(collective share)

the fiscal year 2011-2012

If three aboriginal groups sign on

89.29%

10.71%

$58/$7

If four aboriginal groups sign on

85.72%

14.28%

$56/$9

If five aboriginal groups sign on

82.15%

17.85%

$53/$12

If six aboriginal groups sign on

78.58%

21.42%

$51/$14

If all seven groups sign on

75.01%

24.99%

$49/$16

The Northwest Territory Metis Nation The Inuvialuit Regional Corporation The Sahtu Secretariat Inc.

* NOTE: The proportion of GNWT-owned public land will shrink as future land claims are settled.

$23.7 million

$11.85 million

$36.1 million

$11.85 million

2000-2001

$27.3 million

$13.65 million

$37.1 million

$13.65 million

2001-2002

$33.8 million

$16.9 million

$38.6 million

$16.9 million

2002-2003

$39.9 million

$19.95 million

$40.6 million

$19.95 million

2003-2004

$74.7 million

$37.35 million

$42.9 million

$37.35 million

2004-2005

$159.8 million

$79.9 million

$45.3 million

Yes

$45.3 million

2005-2006

$92.5 million

$46.25 million

$48.1 million

$46.25 million

2006-2007

$34.3 million

$17.15 million

$50.5 million

$17.15 million

2007-2008

$87.9 million

$43.95 million

$53.3 million

$43.95 million

2008-2009

$140.4 million

$70.2 million

$55.9 million

Yes

$55.9 million

2009-2010

$112.7 million

$56.35 million

$58.7 million

$56.35 million

$124.2 million

$62.1 million

$61.7 million

Yes

* Does not include royalties paid out to aboriginal groups with settled land claims, nor does it cover the federal government’s one-third interest in the Norman Wells production field. ** Keep in mind, the GNWT will be giving part of its share to aboriginal groups.

UP HERE BUSINESS • AUGUST 2012

$61.7 million

p by Over the ca n io ill m .6 34 $

Over the cap by $14.3 million

Over the cap by $400,000

The total lost due to the cap: $49.3 million

Don’t some aboriginal groups already get royalties? Few realize this, but yes. Since 2001, the federal government has shared $35 million in Crown royalties with three aboriginal groups with settled land claims: $10.8 million has gone to the Sahtu Secretariat Inc., $11 million to the Gwich’in Tribal Council and $12.8 million to the Tlicho Government. That figure covers mining in the Mackenzie Valley, plus a share of the Crown royalty from the Norman Wells production field. “There’s a

Here a mine, there a mine, everywhere a mine Royalties don’t really mean much if you don’t have a lot of mines in production. Even then, the royalties will heavily depend on the financial strength of each mine, which will depend on the price of commodities, and so on. Which begs a question: What new mines will the NWT have in its arsenal starting in 2014? I checked in with the owners of six promising projects currently sitting on Crown land and asked them when they believe they’ll start commercial production. Canadian Zinc’s Prairie Creek base metals

Fortune Minerals’ NICO base metals

Tamerlane Ventures’ Pine Point base

project / Mine life: 20 years

project/ Mine life: 18 years

metals project / Mine life: 15 years

Tyhee Gold Corp.’s Yellowknife gold project

Avalon Rare Metals’ Nechalacho rare

Mine life: 10 years minimum

earths project / Mine life: 20 years minimum

2016

1999-2000

that sign on to the final devolution agreement could collectively receive up to 25 per cent of the GNWT’s share of resource revenues. For the fiscal year 2011-12, that would have amounted to $16.3 million. But that “up to 25 per cent” share is predicated on all seven aboriginal groups signing on to devolution. If not all seven NWT aboriginal groups are on board, “then that pie gets a little smaller,” Goldney says. There are currently only three aboriginal co-signers to the AIP. If they prove the only aboriginal groups signed on to the final agreement, they will collectively receive only 10.71 per cent of the GNWT’s share, not 25 per cent. (See Table B, at the top of this page.) As for how that collective share gets divvied up between the groups: That’s currently under negotiation, though the GNWT has suggested some models. For example, it could be a base amount with adjustments made for the number of communities and the cost of living. But, Goldney adds, “No formula is perfect.”

De Beers Canada’s Gahcho Kue diamond

2018

share of royalties

The Akaitcho Territory Government

BHP Billiton’s Ekati diamond mine could

2024

The GNWT’s resulting

have been hit?

The Dehcho First Nation

What is the proposed sharing arrangement? Aboriginal groups

2015

Would the cap

have been set then

The Tlicho Government

bit of devolution going on already,” says Tom Hoefer, executive director of the NWT & Nunavut Chamber of Mines. The Sahtu, Gwich’in and Tlicho will continue to collect these royalties from the federal government even after they start getting their share of the GNWT’s royalties.

2016

The cap as it would

share would have been

2014

What the GNWT’s

went to the feds)

2014

Total royalties (which Fiscal year

What does the report commissioned by the Gwich’in Tribal Council propose, then? That the net fiscal benefit should include 100 per cent of NWT resource revenues – including royalties from the feds’ one-third interest in Imperial Oil’s Norman Wells production field. (More on that in Chapter 5.) Plus, they say, the cap should be raised to 15 per cent. If those parameters were in place and plugged into the same “high case” scenario previously mentioned, the GNWT would see an average potential surplus of $11.6 million between 2011 and 2040. Under the terms of the current AIP, it says, the surplus would only amount to $4.6 million. To view the Gwich’in’s complete assessment of the agreement in principle, scan this QR code.

What would have happened if devolution was in place?

Not currently signed on

The Gwich’in Tribal Council

2014

A TA BL E

forecasts – a “high case” scenario that doesn’t include offshore development but does include the Mackenzie Gas Project – the GNWT could see as much as 72 per cent of its resources revenues clawed back by the federal government. The report also says the NWT’s share of resource revenues should not be limited to 50 per cent, the same condition imposed upon provinces under the equalization payment scheme. That condition, the report says, “is simply a pragmatic resolution to the issue of sharing between provinces when Alberta has much larger energy resources than any other province.”

After D-Day, the GNWT will keep 50 per cent of the royalties it collects in the NWT – subject to a cap. As this table shows, the territorial government would have only breached that cap three times between the fiscal years 1999-2000 and 2010-2011.

2010-2011 Source: GNWT

And after devolution:

GNWT-owned land, otherwise known as Commissioner’s Land. But the GNWT only owns surface rights. Mineral rights belong to the feds

Aboriginal co-signers to the devolution AIP

How the pie could be shared

The GNWT will keep half of all resource revenues it collects in the NWT. Of that, it will give up to 25 per cent to the territory’s aboriginal groups. But that’s only if all seven groups sign the final agreement, as per the current resource revenue sharing AIP. That agreement may change between now and D-Day, but using the current terms, this is how things could, potentially, play out.

Land owned by aboriginal groups with settled land claims

Somebody thinks the GNWT is getting a raw deal. Last year, the Gwich’in Tribal Council, which represents about 2,500 aboriginal residents in Inuvik, Fort McPherson, Tsiigehtchic and Aklavik, released a report criticizing the financial terms of the AIP. The Gwich’in, it should be mentioned, have not signed the AIP; as of press time, the council was suing the GNWT for allegedly failing to consult it prior to the signing of the AIP. The report – co-authored by Lew Voytilla, the one-time head of the GNWT’s Financial Management Board – states that the five-per-cent GEB cap is too low. According to one of the report’s resource revenue

TA BL E

Who will hold the Crown (land)?

Rio Tinto’s Diavik diamond mine could

project / Mine life: 11 years

potentially cease production

AUGUST 2012 • UP HERE BUSINESS 31

16% Here’s who owns what land in the NWT right now:

Source: GNWT

82%

Federal Crown land

84%

(as of July 23, 2012)

Signed on

Public land owned by the GNWT

Aboriginal groups

The respective shares for

GNWT

(collective share)

the fiscal year 2011-2012

If three aboriginal groups sign on

89.29%

10.71%

$58/$7

If four aboriginal groups sign on

85.72%

14.28%

$56/$9

If five aboriginal groups sign on

82.15%

17.85%

$53/$12

If six aboriginal groups sign on

78.58%

21.42%

$51/$14

If all seven groups sign on

75.01%

24.99%

$49/$16

The Northwest Territory Metis Nation The Inuvialuit Regional Corporation The Sahtu Secretariat Inc.

* NOTE: The proportion of GNWT-owned public land will shrink as future land claims are settled.

$23.7 million

$11.85 million

$36.1 million

$11.85 million

2000-2001

$27.3 million

$13.65 million

$37.1 million

$13.65 million

2001-2002

$33.8 million

$16.9 million

$38.6 million

$16.9 million

2002-2003

$39.9 million

$19.95 million

$40.6 million

$19.95 million

2003-2004

$74.7 million

$37.35 million

$42.9 million

$37.35 million

2004-2005

$159.8 million

$79.9 million

$45.3 million

Yes

$45.3 million

2005-2006

$92.5 million

$46.25 million

$48.1 million

$46.25 million

2006-2007

$34.3 million

$17.15 million

$50.5 million

$17.15 million

2007-2008

$87.9 million

$43.95 million

$53.3 million

$43.95 million

2008-2009

$140.4 million

$70.2 million

$55.9 million

Yes

$55.9 million

2009-2010

$112.7 million

$56.35 million

$58.7 million

$56.35 million

$124.2 million

$62.1 million

$61.7 million

Yes

UP HERE BUSINESS • AUGUST 2012

$61.7 million

p by Over the ca n io ill m .6 34 $

Over the cap by $14.3 million

Over the cap by $400,000

The total lost due to the cap: $49.3 million

Fortune Minerals’ NICO base metals

Tamerlane Ventures’ Pine Point base

project / Mine life: 20 years

project/ Mine life: 18 years

metals project / Mine life: 15 years

Tyhee Gold Corp.’s Yellowknife gold project

Avalon Rare Metals’ Nechalacho rare

Mine life: 10 years minimum

earths project / Mine life: 20 years minimum

2016

1999-2000

De Beers Canada’s Gahcho Kue diamond

2018

share of royalties

The Akaitcho Territory Government

BHP Billiton’s Ekati diamond mine could

2024

The GNWT’s resulting

have been hit?

The Dehcho First Nation

What is the proposed sharing arrangement? Aboriginal groups

2015

Would the cap

have been set then

The Tlicho Government

2016

The cap as it would

share would have been

2014

What the GNWT’s

went to the feds)

2014

Total royalties (which Fiscal year

What would have happened if devolution was in place?

Not currently signed on

The Gwich’in Tribal Council

2014

A TA BL E

2010-2011 Source: GNWT

And after devolution:

GNWT-owned land, otherwise known as Commissioner’s Land. But the GNWT only owns surface rights. Mineral rights belong to the feds

Aboriginal co-signers to the devolution AIP

How the pie could be shared

Land owned by aboriginal groups with settled land claims

TA BL E

Who will hold the Crown (land)?

Rio Tinto’s Diavik diamond mine could

project / Mine life: 11 years

potentially cease production

AUGUST 2012 • UP HERE BUSINESS 31

Chapter 5

Chapter 6

Oil and water

How the regulatory revamp fits in

Where do oil and gas fit into the resource revenue equation? It depends what area of the NWT you’re talking about.

Nova Scotia and Newfoundland,” McLeod says. The onshore is a much simpler matter. “As of effective date, the GNWT will collect royalties for those onshore portions,” Goldney says. The dividing line between offshore and onshore, which will be contained in the final agreement, still needs to be hammered out, but it is likely to be the low water mark, according to Goldney. Since the low water mark is farther offshore, the process of determining the final onshore/offshore boundary will be of especial interest to the Yukon government, as it expects a role in, and revenues from, the offshore, too.

TA BL E

I drink your milkshake! Or, the Norman Wells situation. Since devolution talks began 20 years ago, few topics have generated as much heated discussion as Canada’s ownership stake in Imperial Oil’s Norman Wells production field. Indeed, it’s this very topic that resulted in a “logjam” during negotiations of the AIP until the matter was set aside for later discussion, McLeod says, because the feds are standing firm to the belief that their interest should not be transferred to the GNWT. So whether the territorial government will receive any resource revenues from that interest remains unclear at this point. The federal government’s one-third ownership dates back to a pact it signed with Imperial Oil in 1943 called the Norman Wells Proven Area Agreement. The feds also collect a five-per-cent gross royalty on the remaining two-thirds owned by Imperial Oil, even though they don’t have anything to do with how the field is run and they haven’t made any investments in it. Basically, they just get a cheque from Calgary every year. And what a cheque. The field is by far the most lucrative source of NWT resource revenues. During the 2010-2011 fiscal year, the field generated $102 million in revenues for the feds – or “profits,” as they’re referred to in the Public Accounts of Canada. (See Table C.) Small wonder the feds appear to want to hold on to it for dear life.

The wells that keep on giving

Production levels at the Norman Wells oil field may be in decline, as the from numbers AANDC indicate, but no matter: The high price of oil has ensured the federal government keeps making a tidy “profit” – or whatever you want to call it – from the field. According to the Public Accounts of Canada, the feds’ profit rose by 10 per cent during the previous decade, and averaged $107 million between the fiscal years 2001-2002 and 2010-2011. Here’s a complete breakdown.

Wax on, wax off. Since 2007, energy companies like BP and Imperial Oil have bid a collective $1.9 billion for the rights to explore on parcels in the Beaufort Sea; another six parcels were up for bids this summer – the results should be out soon. One company, Chevron, has said it could start drilling in 2017 at the earliest. The agreement in principle doesn’t prevent the GNWT from collecting resource royalties from the offshore. All it says is that the feds and the GNWT, in partnership with the Inuvialuit Regional Corporation (IRC), will negotiate that framework after D-Day. “It’s a matter of negotiating a joint management arrangement similar to what they’re doing in 32

UP HERE BUSINESS • AUGUST 2012

Here are the two choices: •

What did the AIP ultimately say about Norman Wells? It was left very open-ended so that work on the AIP could wrap up and the push toward a final agreement could begin. On the one hand, the AIP says the feds’ one-third interest will not be transferred to the GNWT under the final agreement. Bummer, right? But then it also commits the parties to further discussing – during negotiations of the final agreement that are taking place right now – whether the GNWT will see any resource revenue from that interest. When asked about the Norman Wells ownership stake in June, Goldney said the GNWT would be sticking to its guns. “… [W]e would suggest that it’s a resource revenue no matter what you call it. It’s not unlike any other resource revenue that government derives from public lands and resources of the NWT, and should be included in the total amount of resource revenue discussions.” Even if the GNWT doesn’t get a taste of that revenue, it will definitely inherit the federal government’s five-per-cent gross royalty on Imperial Oil’s share. That hasn’t been a sticking point during negotiations, says Goldney. For the 2010-2011 fiscal year, that would have amounted to five per cent of $102 million, which is $5.1 million. Not quite $51 million – one half of the feds’ “profit” in 2010-2011– but it’s better than nothing.

One big question raised by devolution is what it means for the federal government’s initiative to streamline the NWT’s heavily criticized regulatory system. AANDC is currently drafting several proposed changes to the Mackenzie Valley Resource Management Act (MVRMA), the federal act that effectively put in place the NWT’s regional land and water panels. One of AANDC’s proposed changes to the system – the consolidation of those panels into one all-encompassing board – has generated a lot of heat among NWT aboriginal groups. The regional panels, they say, are enshrined in land claims. They like them just the way they are. The federal government, meanwhile, says the current system results in too many cooks in the kitchen. (Check out this sidebar to see what, exactly, AANDC is proposing to change.) Let’s put aside the whole issue of whether the federal government can change anything set out in the land claims; that’s a whole other can of worms. After devolution, the GNWT will largely be in charge of the NWT’s regulatory system. But it has two different operating models to choose from, and which model it chooses could prove important when the GNWT eventually decides how to tackle aboriginal concerns with the MVRMA changes.

Year

Production volume

The federal government’s “profit”

(in 1000s of cubic metres)

(the GNWT says it’s a royalty)*

• 2001

1,432.2

$93 million

2002

1,375.4

$90 million

2003

1,254.6

$99 million

2004

1,186.7

$115 million

2005

1,042.6

$132 million

2006

1,012.4

$123 million

2007

964.3

$116 million

2008

893.6

$125 million

2009

869.0

$74 million

2010

840.7

$102 million

2011

588.2

Not available

* This figure does not include the five-per-cent gross royalty the Crown collects on Imperial Oil’s two-thirds interest. ** In the case of the profit column, the years are fiscal years, so for instance 2010 represents the feds’ 2010-2011 fiscal year.

Under one model, the MVRMA would remain an act of Parliament – a federal piece of legislation. The GNWT will operate under the act with authority delegated to it by the feds. Any amendments would have to go through Parliament. Under the second model, the MVRMA would become a piece of territorial legislation. The ability to amend the act would rest with the legislative assembly, though the GNWT would still have to consult the feds and aboriginal groups.

Here’s where devolution could dovetail with the regulatory revamp. Let’s say AANDC successfully amends the MVRMA before D-Day, despite lingering concerns on behalf of aboriginal groups: The GNWT will then be inheriting a piece of legislation that is very unpopular among aboriginal groups. “There’s little question that the changes that are being made right now, if a devolution agreement goes forward, [the GNWT] will inherit the system that’s in place at that time,” says John Pollard, the federal government’s negotiator for the proposed board shuffle. Which raises the question: Will the GNWT – which has stated it does not support any extensive restructuring of the boards* – tweak the MVRMA to appease aboriginal groups after D-Day? If that is indeed what the GNWT intends to do, then the second model – wherein the MVRMA becomes territorial law – would probably give the GNWT more leeway to change the act. On the other hand, drafting and implementing new legislation would take time, and industry has already waited long enough for the regulatory regime to be simplified. McLeod says the GNWT is carefully weighing both models, though he points out that the first model (the MVRMA staying within the domain of Parliament) wouldn’t preclude the act from later being mirrored under territorial legislation (the * Check out the GNWT’s response second model). That’s what to the McCrank report (specifically, page 2) by scanning this QR code the Yukon did, he adds.

One board to rule them all: The AANDC proposal Currently, there are four bodies that grant land and water permits to companies seeking to plumb the NWT’s natural resources. They all essentially fall under one board, the Mackenzie Valley Land and Water Board (MVLWB), but – and here’s where it gets a little confusing – this board also gives out permits of its own, too. Here, in a shutshell, is how the much-talked-about system currently works: The Gwich’in Land and Water Board handles permits in the Gwich’in region. The Sahtu Land and Water Board handles permits in the Sahtu region. The Wek’eezhii Land and Water Board handles permits in the Tlicho region. The Mackenzie Valley Land and Water Board handles permits not only in the unsettled Dehcho and Akaitcho regions, but for projects that straddle more than one jurisdiction. Each of these bodies is made up of five members: a chair, two people from the region, a GNWT rep and a federal rep. The MVLWB is slightly different; it has a chair, a GNWT rep, a federal rep, and one rep apiece from the Dehcho First Nations and the Akaitcho region – one for each unsettled region. When the MVLWB gets together to assess permits for areas that straddle more than one jurisdiction, it gathers a cross section of members from each board/ panel. Ultimately, about five people meet to assess cross-boundary projects. Then, once a year, every member of every board and panel – 20 people in all – gather to ensure consistency reigns (not to review projects, it should be stressed.) What AANDC is proposing is one board consisting of 11 members: one member from each region (so five), plus another five members total from the GNWT and the feds – and a chair on top of that. Not all 11 would weigh in on each application, Pollard says. “The chairperson would have the power to say to three people, ‘Go and hear this application in that region.’ That’s the way the National Energy Board does it. That’s the way the MVLWB does it right now (for cross-boundary projects)… That way, you could have a panel hearing (for) at least three applications at the same time because you’ve got the ability to split the board into three.” The ultimate idea is to reduce the number of cooks in the kitchen. But while well-intentioned, the feds’ proposal prompts a serious concern. As it stands now, the panels sometimes have a hard enough time making quorum with five members. What will happen with three-member bodies? Pollard says the feds would like to see negotiations with aboriginal groups wrap up by the end of 2012. “There’s little doubt they’re concerned about a potential one-board system,” Pollard says. “Is that changing the way that we’re approaching things? No. We’re still available to them, to consult with them, to sit down with them and say, ‘Look, let’s talk about the details of what we want to do. And if we can accommodate you, we will. If we can’t accommodate you, we’ll tell you why we can’t accommodate you.’ We’re certainly not going to get anywhere just saying ‘No.’” GQ

AUGUST 2012 • UP HERE BUSINESS 33

Chapter 5

Chapter 6

Oil and water

How the regulatory revamp fits in

Where do oil and gas fit into the resource revenue equation? It depends what area of the NWT you’re talking about.

TA BL E

The wells that keep on giving

UP HERE BUSINESS • AUGUST 2012

Here are the two choices: •

Year

Production volume

The federal government’s “profit”

(in 1000s of cubic metres)

(the GNWT says it’s a royalty)*

• 2001

1,432.2

$93 million

2002

1,375.4

$90 million

2003

1,254.6

$99 million

2004

1,186.7

$115 million

2005

1,042.6

$132 million

2006

1,012.4

$123 million

2007

964.3

$116 million

2008

893.6

$125 million

2009

869.0

$74 million

2010

840.7

$102 million

2011

588.2

Not available

AUGUST 2012 • UP HERE BUSINESS 33

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Jeff Lewis The Nordic Way Alberta Oil

Clean SWEEP

The

NORDIC

WAY

A novel industrial lab could help alleviate doubts – and validate investment – in carbon capture and storage Written and Photographed by Jeff Lewis

O The Mongstad refinery north of Bergen in Norway, owned jointly by Statoil ASA and Royal Dutch Shell PLC

www.albertaoilMAGAZINE.com

lav Falk-Pedersen is in his element.

Never mind the slashing rain. Ignore the driving wind. High above Europe’s second-largest oil port, on a rocky outcrop north of Bergen on Norway’s west coast, the technology manager is talking carbon. Specifically, he’s shouting – about how to get rid of it. “Down there I had removed all the CO2,” he says, pointing with a gloved hand 60 meters to the base of a concrete tower. The next few words are garbled in the wind. I hear “amines” and “exhaust” but am certain of neither. This, it turns out, is what capturing carbon looks like. Bereft of its political symbolism, atop a labyrinth of pipes, heat exchangers, valves, nozzles and pressure gauges, the process of stripping the unwanted byproduct of fossil fuel production from power plant exhaust bears only a passing

APRIL 2012

Clean SWEEP

The

NORDIC

WAY

A novel industrial lab could help alleviate doubts – and validate investment – in carbon capture and storage Written and Photographed by Jeff Lewis

O The Mongstad refinery north of Bergen in Norway, owned jointly by Statoil ASA and Royal Dutch Shell PLC

www.albertaoilMAGAZINE.com

lav Falk-Pedersen is in his element.

APRIL 2012

Clean SWEEP

Technology manager Olav Falk-Pedersen gestures at an amine plant, one of two technologies designed to strip carbon dioxide from power plant exhaust. Long-term plans call for building a fullscale carbon capture facility at the site. At right, the technology center’s aspirational slogan

resemblance to the industrial Rubik’s cube that has so far stumped the technology’s commercial evolution. “It’s not that tricky,” Falk-Pedersen says. His appraisal seems warranted from this vantage. For here, in the shadow of the Mongstad refinery jointly owned by Statoil ASA and Royal Dutch Shell PLC, workers in hard hats and steel-toed boots are busy putting the final touches on a facility many hope will help alleviate stubborn doubts – and validate public investment – in a technology derided by Alberta’s Wild Rose Party as “government waste.”

n june Norwegian officials will mark

the opening of a NOK$6-billion (about C$1.05-billion) carbon capture test center. Falk-Pedersen, the facility’s technology manager, calls it a “very expensive sandbox” designed for an explicit purpose. “We would like to be more educated buyers and users of CO2 capture units,” he says, from the shelter of a low-slung office building, “so, of course, we are learning a lot from the construction and operation of this.” The lessons, in turn, will help plug a knowledge gap at a critical juncture. Researchers from Statoil, Shell and South African chemicals manufacturer Sasol Ltd. – whom together share 25 per cent ownership of the facility – hope to get a better sense of which technologies are best-suited to snaring carbon dioxide from power plant exhaust. Gassnova SF, the government arm in charge of carbon capture and storage (CCS), hopes to use that knowledge to build a full-scale, NOK$20 billion (about C$3.5 billion) capture facility at the refinery by 2020. “The idea is to try to make it a hub and a business opportunity, for the owners and for Norway,” says Anne

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Strømmen Lycke, vice-president of asset management at Gassnova. The Oslo-based agency owns and has paid for 75 per cent of the carbon test center, officially called Technology Centre Mongstad, or TCM for short. “It’s quite the plant, actually,” Lycke says in an interview. It is also the product of government fiat. In 2006, Statoil was awarded a permit to build a natural gas-fired power plant at its Mongstad refinery. The license was contingent on building a CCS component to offset emissions released by the gas-fired turbines. “I think Norway must be one of the few countries in the world, if not the only one, who thinks that gas-fired power is a dirty fuel,” Lycke says. Technology trials are underway. Early participants in a qualification program include French giant Alstom SA and a division of oil-platform maker Aker Solutions. No carbon will be stored during tests, but long-term plans call for a commercial facility big enough to stash 100,000 tonnes of the waste gas annually below the North Sea. “There will be an export pipeline to take the clean carbon out and store it forever and a day, hopefully,” Lycke says. Such caution is well founded. Although broadly endorsed as a critical tool for slowing growth in fossil fuel-related greenhouse gas emissions – the technology secured an important designation as a so-called Clean Development Mechanism under the Kyoto Protocol at last year’s climate talks in Durban, South Africa – carbon sequestration has not been spared from government austerity measures. Two months before I visited Oslo as a guest of the Norwegian government last December, a pilot project at Europe’s third-largest coal-fired power plant, in Scotland, collapsed amid disagreements between government and

“ I think Norway must be one of the few countries in the world, if not the only one, who thinks that gas-fired power is a dirty fuel.” industry over who should foot the bill. Aker Clean Carbon, the same firm participating in trials at TCM, was slated to provide proponent ScottishPower with its proprietary capture technology before the deal fell apart. Its shares were subsequently written down to zero from NOK$147 million (about C$33 million). “The financial situation for CCS vendors is, of course, shaky,” Lycke says. “The market for large-scale CCS plants is not quite there.” Closer to home, even Alberta has shaved $400 million from its $2-billion commitment to the technology, made by former premier Ed Stelmach during the 2008 bull-run in oil prices. In Oslo, the doubts reach to the highest levels of Parliament. “Because of financial unrest, because of a very stressed U.S. and European economy, a lot of projects have been delayed or cancelled already,” Ola Borten Moe, the Norwegian minister of petroleum and energy, told me. “It’s not only a notion but a fact that we are globally moving forward more slowly than we hoped to just a few years ago.”

o get a sense of why norway is

stubbornly pressing ahead, it helps to look west of Mongstad, 65 kilometers offshore to the Troll natural gas field. It was discovered in dribs and drabs in the late 1970s and early 1980s. Today it ranks among the biggest of Norway’s offshore treasure troves. How big? In the temporary offices occupied by the Ministry of Petroleum and Energy in downtown Oslo, Lars Erik Aamot glances up from an unfurled map that

shows the continental shelf subdivided into colored exploration blocks. His finger lands on a red smudge. Troll produced just shy of 30 billion cubic meters in 2011, he says. That’s roughly a third of the country’s total annual gas exports to continental Europe. Yet its prominence as a monster gas field belies an engineering feat, and a Norwegian brand of ingenuity that comes from decades spent poking holes in what can be an unforgiving offshore environment. “I think the story of the Norwegian continental shelf is technology,” the director general of the oil and gas department says. Troll stands out as a case study in innovation. Not long after it was discovered, the formation served as a testing ground for horizontal drilling in an offshore environment. Norway’s Petroleum Directorate (the equivalent to Alberta’s Energy Resources Conservation Board) and industry together pioneered the technology in order to tap a thin but inaccessible layer of oil discovered beneath the gas zone. “That was a hard, hard fight to commercialize that technology,” Aamot recalls. But it worked. Production started in the late 1980s and early ’90s. “That was the first [horizontal well] ever offshore,” Aamot says, “and it became the biggest oilfield in Norway for many, many years.” Stick with carbon capture, the thinking goes, and it could yield a similar – but by no means lucrative – payoff. In fact, at least one aspect of the capture scheme at Mongstad mirrors the rate at which new technologies find their way to commercial well sites. “It’s been a long, long process,” Aamot says.

nside an unfurnished office at

Mongstad, Falk-Pedersen, the technology manager, is flying through a virtual tour of the carbon test center on a wall-mounted LCD screen. The entire industrial setup – including twin capture plants, a water intake system and the refinery – has been rendered in stunning detail on a 3-D simulation. The technology boss burns through the tour as though he’s played this particular video game a thousand times. Now and then he pauses to quibble with the placement of a nozzle or wayward pipe. “This is actually not quite correct,” he tells his team. Small imperfections notwithstanding, the digital display figures prominently at trade shows and international conferences – most recently in Durban, and again at the World Future Energy Summit in Abu Dhabi – but >>

April 2012

Clean SWEEP

n june Norwegian officials will mark

www.albertaoilMAGAZINE.com

o get a sense of why norway is

nside an unfurnished office at

April 2012

out of reach. Statoil’s CCS projects are “more than pilots,” he notes. “It can definitely be done. We’ve shown that we can understand the process.”

An absorption tower stands 60 meters above the facility, left. at right, The view overlooking Mongstad, Europe’s second-largest oil port after Rotterdam

it hardly captures the scale of TCM. Outside, the virtual world springs to life. Contractors crawl atop scaffolding, fitting the final few pieces of a chilled ammonia plant together. Pipes and valves jut out at every turn. Gauges and manual sampling points number in the thousands. “It’s industrial, there’s no doubt,” Falk-Pedersen says at one point on a guided tour, “but it’s instrumented almost like you would do in a lab or a pilot unit.” Pipe racks are laid out overhead to carry flue gas from the refinery’s catalytic cracker and the natural gas-fired power plant. The exhaust is treated in one of two facilities by carbon-absorbing solvents; one uses liquid amines, the other will run trials using a chilled ammonia solution.

200%

how much the cost of building the Mongstad carbon test center has increased before construction began

In each case, the flue gas can be made “dirtier” by increasing the concentration of CO2, from 3.5 up to 14 per cent, essentially mimicking emissions at a host of industrial sites, including coal-fired power plants. The objective is to determine average capture rates, mirroring operations at a live power plant, whether it’s a baseload or peaking unit. “The trick here is to get the simulations to fit,” FalkPedersen says. “If you look at a conventional full-scale unit, and you take the whole chain including transport, compression and storage, at least here in Norway on the

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coast for a gas-fired power plant, you will find that the capture rate should be between 85 to 90 per cent.”

n some ways, the work is a natural

progression from gas-processing CCS schemes already in operation on the continental shelf. Roughly 12 million tonnes of carbon has been stored 800 meters beneath a portion of the Sleipner gas field offshore Norway since 1996. Statoil has also injected at least 3.8 million tonnes of the industrial byproduct deep below the Sahara Desert in Algeria at its In Salah venture with BP and Sonatrach. Another effort at the Snøhvit liquefied natural gas project in the Barents Sea transports captured CO2 153 kilometers by pipeline and buries it 2,600 meters below a gas reservoir. “It’s a valuable blend of experience for us,” says Philip Ringrose, project leader of carbon storage at Statoil. At Sleipner, for instance, the underground carbon “plume” is mapped using 4-D seismic surveys. Wellhead pressure and flow-rates are watched continuously. The flagship project is known internationally. “It continues to be of enormous interest around the world, despite the fact that it’s been running for 15 years,” Ringrose says. Monitoring technology continues to evolve. In Algeria, for example, the In Salah property serves as a model for long-term onshore storage, Ringrose says. Long-reach horizontal wells began injecting CO2 in 2004. Sophisticated satellites are used to monitor subtle shifts in surface elevation, and have proven “incredibly valuable” for keeping tabs on pressure changes below 900 meters of shale and another 80 meters of sandstone. “We’re not trying to say this is a piece of cake,” Ringrose says. But nor are commercial ventures entirely

nowledge alone won’t

accelerate the commercial development of CCS, however. The full-scale carbon capture facility planned for Mongstad couldn’t survive without public funds. “It’s heavily subsidized by the Norwegian government,” says Borten Moe, the energy minister Still, he believes the money is well spent. Long-term plans call for exporting technology to countries with similar emission profiles. Some, including Mads Greaker, a research director at Statistics Norway, have suggested the government will have a difficult time selling its knowhow in what remains a shaky market. Cost inflation is a particular risk. The price tag at Mongstad ballooned by more than 200 per cent before shovels even hit the ground, Greaker noted in a 2009 report. “Our results suggest that capture technologies that are intended as end-ofpipe technologies have a small market potential unless such solutions become cheap,” Greaker wrote. The lesson is not lost on ministry officials. “It’s a big danger,” Borten Moe says. “Norway is not going to be able to lift this by ourselves.” But it will try. As a lengthy interview draws to a close, the minister rushes to a press conference. The Petroleum Directorate is presenting a storage “atlas” of the continental shelf, which could hold an estimated 70 billion tonnes of carbon dioxide. “This is what we’ve been doing for 15 years,” the minister says. “This is possible. It’s not science fiction.” AO

Discover how liability concerns are affecting the pace of commercializing carbon capture and storage schemes at www.albertaoilmagazine.com/CCSliabilities

out of reach. Statoil’s CCS projects are “more than pilots,” he notes. “It can definitely be done. We’ve shown that we can understand the process.”

NowLedGe ALoNe woN’t

Discover how liability concerns are affecting the pace of commercializing carbon capture and storage schemes at www.albertaoilmagazine.com/CCSliabilities

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Chris Powell Hot Potato Marketing

40 february 6, 2012

Marketingmag.ca

Hot Potato Ex-ad man Ryan Smolkin has cultivated a devoted (and hungry) customer base that loves its poutine sodium bombs with a side of audience engagement BY CHRIS POWELL

Mike Ford

n a neglected section of Toronto’s Dundas Street East, just across the street from the strip club Filmore’s and surrounded by independent businesses bearing names like Tasty Foods and Mary’s Friends Bar & Grill, Ryan Smolkin is hatching his plans for world domination. His weapon: the artery-clogging combination of french fries, gravy and cheese curds known as poutine. In a narrow office at the back of one of his Smoke’s Poutinerie locations, the 38-year-old former marketing executive is recounting the rapid growth of his restaurant chain from a long-gestating idea, to a single Toronto store in 2008, to 17 outlets nationwide (and growing). As he speaks, Smoke’s employees are busily loading 50-pound bags of hand-picked, yellow flesh potatoes into a 25-ft.-long food truck that travels to sporting and cultural events, weddings and charity gigs throughout the city. Wearing a bright red T-shirt bearing an image of the chain’s mythical (we think... more on that later) namesake, Smolkin bears about as much resemblance to a stereotypical CEO as poutine does to haute cuisine. His shedding of the buttoned-down executive image is completed when he suddenly springs to his feet and

Marketingmag.ca

begins playing air guitar—accompanied by the sort of rock star grimaces that in any other situation would suggest an urgent need to find the nearest bathroom—to “Nothin’ but a Good Time,” a guitar rock anthem by ’80s hair metal band Poison that provides the soundtrack to a franchisee recruitment video he’s showing on his computer. “You’re not going to see Ryan behind a desk in a bank anytime soon,” says John Sacke, founder of PR firm Sacke & Associates, which completed a small PR initiative for Smoke’s in 2010. “He’s got the personality and he’s got the boyish looks, but he works hard.” Indeed, Smolkin’s irreverence may make for great copy, but when it comes to his future plans for Smoke’s, he’s as serious as an excess carbohydrate-induced heart attack. This year will see new locations in several Canadian markets including Vancouver, Montreal and St. John’s, and with investor groups already lined up in numerous U.S. states including California, Florida and Illinois, the Quebecois snack food could be sopping up excess booze with the after-hours crowd and providing lunches for highschool students in the U.S. by as early as next year. Smolkin, though, isn’t content to spread the gospel of poutine solely to the North American masses; with an active database of more than 4,000 potential franchisees— collected, he says proudly, with “next to zero” focused franchise marketing—he is contemplating expansion into the U.K., Australia and Asia. Smoke’s is the third business launched by Smolkin, following stints as a self-described “slumlord” (actually,

february 6, 2012 41

WHAT’S WITH THe FACE?

A conversation with Smoke’s Poutinerie founder Ryan Smolkin includes multiple references to “the power of brand.” It’s no doubt a holdover from his days of running AmoebaCorp, a graphic design and visual communications shop that he founded and headed from 1996 until selling to Toronto agency John St. in 2007. A self-described ideas guy, it was during his time running Amoeba—working with numerous blue-chip clients including YTV, Molson, Nike and Maple Leaf Sports Entertainment—that Smolkin slowly came to understand the immense power of brand. “What I didn’t have was branding and brand knowledge, and that’s what grew over the years I had Ameoba Corp,” he says. Today, his firm belief in brand is best evidenced by Smoke’s namesake—a tusslehaired Canadian everyman with oversized glasses and a fondness for plaid. With the zeal of a true marketer, Smolkin has created an elaborate backstory about Smoke that he has woven into the Smoke’s brand story. He claims to have first encountered the enigmatic figure after a skydiving accident over Northern Ontario in which he drifted 100 kilometres away from the landing zone and crashed into the woods, breaking a leg in the process. Starving, and with only a tattered parachute to keep him warm, Smolkin says he was finally rescued by Smoke on his third morning in the wilderness. “He picked me up and carried me back to his cabin and nursed me back to health,” says Smolkin. Over the next few days, spent playing Donkey Kong and watching ’80s TV hits like The A-Team and Air Wolf, Smoke is said to have passed along his vision for a restaurant chain that would elevate the humble foodstuff into a meal, and incorporate his fondness for ’80s pop culture, while remaining firmly rooted in its Quebecois roots. Smoke is probably as real as Mr. Clean, but Smolkin is adamant that he exists. “Careful man, he’s got microphones,” he says with a nervous glance to the ceiling when asked about the chain’s “mascot.” Smoke, he says, was a member of the 1973 Canadian men’s Olympic hockey team and the fourth man to walk on the moon. Smoke’s customers, too, have an abiding fondness for the chain’s namesake, buying T-shirts adorned with his face and plastering stickers bearing his likeness all over the world. The Smoke stickers have turned up as far afield as Boston’s Fenway Park and even a bar in Seoul. Just last month, Smolkin says proudly, he ordered another one million stickers. Many will subsequently find their way onto everything from transit shelter ads for specialty TV channel Showcase to wild posters promoting local yoga studios.

42 february 6, 2012

it was creating housing for university students) and head of the design and branding agency AmoebaCorp. The latter started as a small three-person operation while Smolkin was studying business at Wilfred Laurier University in Waterloo, Ont., in the mid-1990s. It went on to produce work for blue-chip clients including YTV, Molson and Maple Leaf Sports & Entertainment before it was finally sold to John St. for an undisclosed amount in 2007. For Smolkin, it simply felt like the right time to get out of the marketing industry. Design and branding was a hot discipline at the time, but

pretend I’m the inventor of poutine… but I’m taking it to the rest of the world.” If Smoke’s sales are any indication, Canadians are united (or should that be congealed?) in their love of poutine. A Kingston store holds the record for most orders in an hour with 167, while a store in London once served up 550 orders in a four-hour span between 11 p.m. and 3 a.m. Its Winnipeg location racked up $700,000 in sales in the six months after its June 2011 opening. It’s been that way ever since the chain’s very first day in November 2008, when the inaugural Adelaide Street location ran out of

“ I don’t pretend I’m the inventor of poutine… but I’m taking it to the rest of the world.” —Ryan Smolkin transforming the small independent company into a mid-sized shop would require significant investment. At the same time, he says, they were being courted by “tons” of agencies. “They were calling me all the time,” he says. “We slept around, we weren’t going to marry anybody, but we had a real good fit with John St. and that’s when the opportunity came.” John St. had all of the infrastructure in place to handle Smolkin’s day-to-day roles (sales and marketing, business development, HR, etc.) and so, following a six-month transition period—during which he felt what he calls the “entrepreneurial itch”—he departed, telling colleagues that he might be in touch for some branding expertise on an as-yetundetermined business venture. Smolkin’s fondness for poutine—pronounced “pout-sin” by its most ardent consumers in Quebec—developed during his childhood in Smiths Falls, Ont., a town of nearly 9,000 located close to the Quebec border. “It’s a Canadian classic that’s been around forever and nobody’s changed it, so why not put our own little twist on it?” he says. “I don’t

bacon and Smolkin was forced to buy up more than $450 worth at a downtown Loblaws. This seemingly insatiable appetite for glorified fries and gravy has been created with almost no traditional marketing. Instead, Smoke’s relies on a mixture of social media— there’s a dedicated Twitter feed, @poutinerie, and a Facebook page with more than 6,100 followers—and, more recently, events such as its World Poutine Eating Championships. Last year’s contest, held outside Toronto’s Rogers Centre, was won by a professional eater from Chicago named Pat “Deep Dish” Bertoletti, who devoured a stomach-churning 13 pounds of poutine in just 10 minutes. The social media approach was validated about a year-and-a-half ago, when PR man Sacke—an active Twitter user—spotted a tweet from an office worker in downtown Toronto lamenting that she had forgotten her lunch at home and was hungry. Sensing an opportunity, Sacke tweeted back “hold tight” and got the go-ahead from Smolkin to have an order of poutine delivered to her office. The young woman tweeted a thank you

Marketingmag.ca

to Smoke’s for the gesture, which was retweeted nearly 45,000 times in the next hour or so—a ton of free publicity generated for the cost of an order of poutine. “The power of social media for marketers is meteorically huge,” says Sacke. Smoke’s has also benefited from what Smolkin characterizes as an “insane” amount of earned media. It has been featured in multiple articles in The Globe and Mail and other publications including Maclean’s, La Presse and the Winnipeg Free Press, as well as received coverage from broadcast outlets including MuchMusic, Global Television and CTV. Whenever a new location opens, says Smolkin, Smoke’s is virtually assured extensive press coverage since it is often the first restaurant of its kind in that market. “We think it’s awesome because we’ve spent zero dollars,” says Smolkin, gesturing towards an office wall filled with laminated copies of the various newspaper and magazine articles. That’s about to change this year, however, as Smoke’s will collect 2% of sales from franchisees to put toward a dedicated marketing fund (see sidebar, below). The money won’t go towards a TV campaign

The marketing plan of a reluctant advertiser

Smoke’s Poutinerie has relied on a combination of earned and social media for its marketing since its 2008 launch.

This year, franchisees will divert 2% of sales towards an advertising fund, although that doesn’t mean a big-budget TV or print campaign. According to founder Ryan Smolkin, the fund will enable Smoke’s to enhance its social media marketing—creating what he characterizes as more targeted marketing—as well as further refine its event marketing (embodied by the twoyear-old World Poutine Eating Championships).

Marketingmag.ca

but will be used for “tightly targeted” social media outreach. Smoke’s has also thrived because of a deep understanding of its core customer, primarily young adults 18 – 25. Its stores are typically situated in the vicinity of university campuses and/or downtown club districts, and when bar patrons pour into the street after last call, Smoke’s—which stays open until 4 a.m. on weekends—is there to satisfy their craving for simple, greasy food. “Club guys and club chicks are not afraid to guzzle down 800 milligrams of sodium and 1,300 calories at three o’clock in the morning,” says Sacke. “When you’re wasted, you just want all the carbs and salt you can get. Ryan knows and even identifies with that demographic.” Smoke’s success has come not only in a depressed economy, but in a notoriously difficult business segment. According to Statistics Canada, only 60% of new firms in the accommodation, food and beverage industry survive beyond their second year. “Smoke’s is an exceptional example of a franchise done right,” says Lorraine McLachlan, president and CEO of the Canadian Smoke’s will continue to utilize platforms that resonate most strongly with its core customer, such as Facebook and Twitter. Among the possible ideas is a contest inviting consumers to post their most interesting sighting of the chain’s namesake, Smoke, for a chance to win a gift certificate. While these social media services are free to use, Smolkin says the funds will go towards hiring people to create the Twitter/Facebook posts and managing contests, etc. “There are third-party [providers] that you have to pay to create, manage and track,” says Smolkin. “It’s not just a matter of putting a tweet out there asking people to e-mail us.” This year will also see Smoke’s significantly expand its World Poutine Eating Championships into a coast-to-coast event,

Franchise Association in Toronto. “Fundamentally you have to have a great product to be a successful business... Ryan took the time to really understand what is required of a franchisor and put in the effort to make sure that as a business, they were doing things right.” Smoke’s may still be small potatoes when compared with fast-food giants like McDonald’s and Burger King, but Smolkin relishes the chance to go potato-to-potato in a category he claims to have created. While poutine’s origins date back to the 1950s, Smoke’s is the first chain to feature nothing but poutine on its menu. It further distinguishes itself from its competitors by “overloading” the dish with multiple ingredients and toppings. The menu currently features 23 types of poutine, ranging from traditional to its biggest seller, Pulled Pork Poutine, to Montreal Poutine featuring smoked meat, dill pickle and a squeeze of mustard. “I’ve taken the traditional fries, curds and gravy to the next level by putting anything and everything you can think of on top of it,” says Smolkin. His success hasn’t gone unnoticed by established players, who Smolkin says have put significant marketing resources behind new poutine products such as Burger King’s Angry Poutine. “They’re all jumping on the bandwagon after somebody took the risk and made a success out of it,” he says. “They’ve got way more marketing and advertising dollars than I do, and if they want to build a market for poutine, I’ll let them do that and then I’ll put my own twist on it and kick their butts all over the place.”

with regional qualifying events in major markets in which Smoke’s has a presence. Additional funds will go towards line items such as prizing and on-site signage.

february 6, 2012 43

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Nicolas Mesly

La vie après la Commission canadienne du blé Le Coopérateur agricole

La vie après

Dossier Commission canadienne du blé

la Commission canadienne du blé Texte et photos de Nicolas Mesly

La machine

à remonter le temps Pour éviter les frais de manutention prélevés par les sociétés propriétaires de silos, des groupes de producteurs chargent eux-mêmes leurs grains le long des voies ferrées à bord de « wagons de producteurs ». Certains craignent que ce service de commercialisation, mis en place il y a 100 ans, ne disparaisse avec l’abolition du monopole de la CCB. Cela au moment où ces producteurs achètent des tronçons de voies du CN ou du CP pour rester en affaires.

orestburg, Alberta. « Pour demeurer en affaires, il a fallu nous convertir d’agriculteurs en propriétaires et exploitants d’une ligne de chemin de fer », explique Ken Eshpeter, président de la coopérative de nouvelle génération Battle River Railway New Generation Co-operative. Ce sympathique céréaliculteur a laissé sa moissonneuse-batteuse dans un champ. Et en cette matinée de fin août, il surveille une dizaine d’ouvriers qui travaillent à l’entretien des rails, à une trentaine de kilomètres de sa ferme. La voie ferrée passe au cœur de Forestburg, village situé à deux heures de route au sud Ken Eshpeter, président de Battle d’Edmonton. River Railway, une coopérative nouvelle Cet entretien est crucial au génération. Pour rentabiliser sa ligne ferroviaire, la coopérative songe à signer bon fonctionnement de la cooune entente avec une entreprise pétrolière pérative. Au lieu de transférer pour le transport d’hydrocarbures. Les leurs récoltes dans les silos à producteurs envisagent aussi un projet grains attenants à la voie ferrée touristique. Ils comptent acquérir et rénover un wagon de passagers de première classe. et appartenant à de grandes

PHOTO : ISTOCKPHOTO

Fort de sa majorité parlementaire, le gouvernement Harper a aboli, en décembre 2011, le monopole de vente de blé et d’orge pour consommation humaine détenu depuis plus de 70 ans par la Commission canadienne du blé (CCB). Depuis le 1er août 2012, les céréaliculteurs de l’Ouest ont le « libre choix » de vendre leurs grains soit par l’entremise de sociétés privées, soit par la Commission canadienne du blé facultative (CCBf). Non seulement cette décision politique va transformer de façon dramatique le visage des Prairies, mais elle a des répercussions au Québec et jusqu’au Japon.

Le Coopérateur agricole | NOVEMBRE-DÉCEMBRE 2012

sociétés, Eshpeter et ses voisins chargent euxmêmes leur blé ou leur orge à bord de « wagons de producteurs ». Ces wagons partent, sans que le grain transite dans des silos primaires ou secondaires, vers les ports d’exportation de Vancouver, Fort Rupert, Thunder Bay ou Churchill. Le grain y est entreposé brièvement dans de gigantesques silos portuaires, appelés silos terminaux, pour être ensuite chargé à bord de bateaux qui mettent le cap sur les quatre coins de la planète. Ce système permet aux producteurs de la région de Forestburg d’économiser entre 1000 et 1500 $ par wagon en frais de manutention des grains. Depuis 2003, ces producteurs ont chargé près de 5000 wagons, ce qui représente une coquette économie de 5 à 7,5 millions $. Mais lorsque le CN a menacé de fermer la petite ligne ferroviaire d’une centaine de kilomètres reliant les cinq villages voisins de Forestburg, Eshpeter et 150 autres producteurs ont décidé de l’acquérir. Ils ont formé une coopérative dite « de nouvelle génération », parce qu’elle permet une plus importante levée de capitaux. Ses membres ont acheté des actions d’une valeur totale de 3,5 millions $. Et ils ont obtenu un prêt de 1,5 million $ du gouvernement albertain. Cinq millions de dollars plus tard, les voici propriétaires depuis 2010 non seulement d’une ligne de chemin de fer, mais aussi de deux locomotives d’occasion. « La réparation mécanique, ça ne nous fait pas peur! » explique le producteur en caressant le flanc d’un des deux monstres d’acier. Les engins, immobilisés sur les rails en attendant la fin des récoltes, ont 3000 chevaux chacun dans le ventre. Et il faut toute cette puissance pour tirer de 50 à 100 wagons chargés de grains jusqu’à une voie ferrée principale. Toutefois, l’entreprise coopérative risque de dérailler. Pourquoi? Parce que la Commission canadienne du blé (CCB) vendait 98 % du grain des producteurs-utilisateurs des « wagons NOVEMBRE-DÉCEMBRE 2012 | Le Coopérateur agricole

La vie après

Dossier Commission canadienne du blé

la Commission canadienne du blé Texte et photos de Nicolas Mesly

La machine

PHOTO : ISTOCKPHOTO

Le Coopérateur agricole | NOVEMBRE-DÉCEMBRE 2012

Volume de grains et nombre de wagons de producteurs (1999 à 2011)

Source : Commission canadienne des grains ou quorum.net

1200 000

12 000

1000 000

10 000

800 000

8 000

600 000

6 000

400 000

4 000

200 000

2 000 0

99 20 00 00 20 01 01 20 02 02 20 03 03 20 -04 04 20 05 05 20 06 06 20 07 07 20 08 08 -0 20 9 09 20 10 10 -1 1

Wagons

Tonnes 14 000

Tonnes

Dossier Commission canadienne du blé

Wagons 1400 000

Il faut le contenu de 700 wagons pour charger un cargo Panamax. La CCB affrétait 200 navires par année. 2 www.grainscanada.gc.ca/ legislation-legislation/ act-loi/cga-lgc-eng.htm 3 Alberta Wheat Pool, Saskatchewan Wheat Pool et Manitoba Pool Elevators.

Pour en savoir plus sur le sort de ces grandes coopératives, lire : « Agricore-United, dans la poche de la multinationale ADM », Le Coopérateur agricole, décembre 2002; « Saskatchewan Wheat Pool, la reine déchue », Le Coopérateur agricole, mai-juin 2002.

de producteurs ». Or, depuis le 1er août 2012, les céréaliculteurs des Prairies doivent assurer euxmêmes leur mise en marché. « Notre problème, c’est que maintenant il faut aller cogner à la porte de plusieurs sociétés pour offrir notre grain. On va devoir recruter quelqu’un pour le vendre », souligne Ken Eshpeter. Pour améliorer son offre de service, la coopérative a mis sur pied un service d’inspection de la qualité et de mélange du grain de ses membres. « Le client sait exactement la qualité qu’il achète », ajoute l’agriculteur. Ce dernier compte aussi doubler rapidement, de 800 à 1600, le nombre de wagons de producteurs offerts par la coopérative1. Le droit des producteurs à charger euxmêmes leurs wagons pour éviter de payer des frais de manutention subsiste depuis 100 ans2. Et il existe aujourd’hui dans les Prairies 15 projets de lignes ferroviaires courtes semblables à celle de la Battle River Railway New Generation Co-operative. Les céréaliculteurs chargent euxmêmes environ 13 000 wagons par année sur les quelque 200 000 qui étaient affrétés par la CCB. Inquiet, Ken Eshpeter croit que les entreprises seront plus ou moins désireuses de vendre le blé et l’orge acheminés dans les wagons de producteurs, parce qu’« elles n’aiment pas se faire court-circuiter », dit-il. Toutefois, le président et chef de la direction de la nouvelle CCB, Ian White, se veut rassurant. « Nous allons continuer de vendre le grain des wagons de producteurs et nous avons déjà signé des ententes pour l’année 2012-2013 », explique White en entrevue à Winnipeg. Ce dernier gère la privatisation de la CCB imposée par Ottawa d’ici 2017. Et il croit que les grandes sociétés propriétaires de silos terminaux seront intéressées par le volume de grain offert par la Battle River Railway New Generation Co-operative, ainsi que par les autres exploitants de lignes ferroviaires courtes. « C’est avec le volume de grains transitant

Le Coopérateur agricole | NOVEMBRE-DÉCEMBRE 2012

dans leurs silos primaires et portuaires que ces entreprises font leur profit », ajoute-t-il. Seul le temps dira si l’inquiétude de Ken Eshpeter est fondée. Ironie de la chose, c’est pour faire face aux abus de frais de manutention des grains chargés par les entreprises que les trois grands défunts pools coopératifs de l’Ouest 3 ont poussé le long des voies ferrées des Prairies, dans les années 1930. Et pour commercialiser leurs grains, les producteurs avaient aussi appuyé sans réserve la création de la CCB… par un gouvernement conservateur! « En abolissant la CCB, le gouvernement Harper a inventé la machine à remonter le temps. On est retourné à la case départ », lance Ken Eshpeter en grimpant à bord de sa locomotive. u Production mondiale du blé 2 % 3%

4% 21 %

61 %

Australie Argentine Canada Union européenne États-Unis Autres

Troisième exportateur de blé au monde 7% 10 % 33 %

14 %

Australie Argentine Canada Union européenne États-Unis Autres

15 % 21 %

Premier exportateur de blé dur au monde 20 %

14 %

47 %

Canada Union européenne États-Unis Autres

19 %

Le Canada, premier exportateur de blé dur de la planète, détient 50 % des parts de ce marché. Le blé dur sert à la confection de pâtes alimentaires et de couscous.

Ken Eshpeter montant à bord d’une des deux locomotives d’occasion SB40, payées 100 000 $ chacune. L’entretien mécanique ne pose pas de problème aux producteurs. Les locomotives sont conduites par un ancien chauffeur du CN à la retraite. À droite, en marge de la voie ferrée, on peut apercevoir les silos blancs où est entreposé le grain avant d’être chargé à bord de « wagons de producteurs ».

La nouvelle CCBf

deviendra-t-elle une coopérative? Fondée en 1935, la Commission canadienne du blé (CCB) était une société d’État à gestion partagée. Depuis 1998, un conseil d’administration composé de 10 producteurs élus par leurs pairs et de cinq administrateurs nommés par Ottawa veillait au destin d’une entreprise dont le chiffre d’affaires oscillait entre 4 G$ et 8 G$. En décembre 2011, le gouvernement Harper a renvoyé les producteurs dans leurs terres. Et il a confié au président et chef de la direction, Ian White, le soin de privatiser la CCB. Celui-ci a cinq ans, à partir du 1er août 2012, pour réaliser son mandat. Le Coopérateur l’a rencontré dans son bureau, au siège social de l’entreprise, à Winnipeg.

Le Coopérateur agricole La CCB est-elle morte et enterrée? Ian White La CCB existe toujours. Mais elle n’a plus le monopole de vente de blé et d’orge pour la consommation humaine. Les producteurs peuvent vendre leurs grains collectivement, mais de façon volontaire. CA La CCB bénéficiait de certaines garanties gouvernementales pour pouvoir exercer ses activités. Quelles sont-elles dans le nouveau contexte? IW La CCB avait une garantie annuelle d’emprunt de 2 milliards $ par année, approuvée par le gouvernement fédéral. Cet argent permettait par exemple de verser des paiements préliminaires aux producteurs en attendant le paiement final de nos clients. Mais nos besoins vont passablement diminuer, parce que nous allons vendre beaucoup moins de grains et à moins de clients. CA Pouvez-vous nous donner une idée de cette diminution? IW 2012-2013 sera notre première année d’exploitation sur une base volontaire. Nous possédons 30 à 40 % du volume des grains par rapport à l’année dernière, où nous exercions sous guichet unique. CA Comment faites-vous pour rassurer les marchés? IW Les Japonais, par exemple, savent que nous pouvons leur fournir 50 % de leurs besoins en blé. Le reste proviendra d’entreprises privées. CA De quel budget ou fonds publics disposez-vous pour privatiser la CCB? IW 350 millions $. Cette somme est surtout utilisée pour combler les fonds de pension. Nous avons réduit le personnel de 420 personnes à une centaine environ. Nous nous débarrassons aussi d’un tout nouveau système informatique trop puissant pour nos nouveaux besoins. CA Pourquoi les producteurs devraient-ils faire affaire avec la nouvelle CCB, alors qu’ils n’y ont plus de représentants élus? IW Parce que nous sommes les seuls à offrir un système de vente collective dans le marché actuel. Et que nous avons signé des ententes avec les sociétés pour faire transiter le grain de nos pools dans leurs silos primaires et portuaires. La plupart des producteurs n’ont connu que la vente par les pools dans leur carrière. Nous représentons une certaine stabilité et nous offrons une solution de rechange au prix au comptant offert par les entreprises. CA Qu’allez-vous faire si un jour Cargill, par exemple, décide de monter ses propres pools de grains? IW Il n’est pas impossible que Cargill offre un jour ses propres pools. Mais pour le moment, les sociétés ont laissé ce rôle à la CCBf. u NOVEMBRE-DÉCEMBRE 2012 | Le Coopérateur agricole

Volume de grains et nombre de wagons de producteurs (1999 à 2011)

Source : Commission canadienne des grains ou quorum.net

1200 000

12 000

1000 000

10 000

800 000

8 000

600 000

6 000

400 000

4 000

200 000

2 000 0

99 20 00 00 20 01 01 20 02 02 20 03 03 20 -04 04 20 05 05 20 06 06 20 07 07 20 08 08 -0 20 9 09 20 10 10 -1 1

Wagons

Tonnes 14 000

Tonnes

Dossier Commission canadienne du blé

Wagons 1400 000

Le Coopérateur agricole | NOVEMBRE-DÉCEMBRE 2012

4% 21 %

61 %

Australie Argentine Canada Union européenne États-Unis Autres

Troisième exportateur de blé au monde 7% 10 % 33 %

14 %

Australie Argentine Canada Union européenne États-Unis Autres

15 % 21 %

Premier exportateur de blé dur au monde 20 %

14 %

47 %

Canada Union européenne États-Unis Autres

19 %

Le Canada, premier exportateur de blé dur de la planète, détient 50 % des parts de ce marché. Le blé dur sert à la confection de pâtes alimentaires et de couscous.

La nouvelle CCBf

Dossier Commission canadienne du blé

CA Les sociétés privées peuvent refuser que le grain qui ne leur appartient pas transite dans leurs installations. Cela ne met-il pas la CCBf dans une position vulnérable, puisqu’elle ne possède aucune infrastructure? IW Les sociétés sont intéressées par le volume des pools de la CCBf, parce qu’elles doivent rentabiliser leurs silos. CA Ottawa devrait-il légiférer sur un accès minimal, 10 % par exemple, pour le grain de la CCBf dans les installations portuaires de son choix, en cas de mésententes avec les sociétés? IW Cela n’a pas été envisagé par le gouvernement fédéral pour le moment.

Ian White, président et chef de la direction de la CCBf, envisage la possibilité d’acheter des silos et de commercialiser d’autres grains que le blé et l’orge. Pour la première fois de son histoire, à la demande des producteurs, dit-il, la CCBf offre cette année des pools pour commercialiser du canola.

CA Lorsque le gouvernement australien a privatisé l’Australian Wheat Board (AWB), celle-ci a rapidement été vendue à deux sociétés privées, Agrium puis Cargill. Est-ce le sort qui attend la CCBf? IW Le ministre Ritz a indiqué que la CCBf n’était pas à vendre pour le moment. Notez que le cas de l’AWB est différent de celui de la CCBf. L’AWB avait été transformée en société à capital-actions avant que les producteurs ne vendent leur part. Nous sommes tout au début du processus de privatisation. Mais nous envisageons une participation des producteurs, peut-être même sous une formule coopérative. CA Une formule coopérative? IW Oui, ou ce qui s’apparenterait à une formule coopérative. Nous devons en discuter avec les producteurs, examiner les besoins en capitaux et déterminer comment réunir ce capital. Il ne faut pas présumer que nous resterons statiques. Il n’est pas exclu que nous acquérions des silos, par exemple. Nous avons jusqu’en 2017 pour soumettre un plan de privatisation au gouvernement.

Les inquiétudes de Gilbert Ferré « La commercialisation du blé est beaucoup plus complexe que celle du canola! » explique Gilbert Ferré en entrevue téléphonique. Ce producteur francophone d’origine bretonne cultive une ferme de 1000 hectares avec son fils à Zenon Park, au nord de Regina, en Saskatchewan. Le Canada compte neuf classes et 25 variétés de blé de l’Ouest, avec différents taux de protéines, qui servent à fabriquer les pâtes, le couscous, les pâtisseries ou le pain des nations. (Tandis que le canola, une plante industrielle, ne compte que trois catégories, classées selon leur taux d’impureté : présence de terre, etc.) « La CCB était comme une grande ferme de sept millions d’hectares. Cela lui permettait de faire des mélanges de blé afin de mieux répondre aux exigences des clients », poursuit M. Ferré. En même temps, la CCB était l’équivalent d’une immense coopérative, ajoute-t-il. L’entreprise de mise en marché redistribuait chaque année environ 500 millions $ de ristournes, résultat de primes négociées avec les chemins de fer, les commerçants de grains et les clients internationaux dans 70 pays. M. Ferré entend continuer de vendre son blé et son orge par l’entremise des pools de la CCBf, une société « émasculée » par la perte de son monopole, croit-il. Le producteur dit ne pas faire confiance aux courtiers de Chicago après le scandale de MF Global. La maison de courtage a déclaré faillite aux États-Unis en novembre 2011 après une fraude de 1,2 G$ auprès de 38 000 clients, principalement de petits agriculteurs. « C’est la première fois de notre histoire qu’une telle chose se produit », explique David Lehman, responsable de la recherche sur les produits et du développement des outils boursiers du Chicago Mercantile Exchange (CME). En mars dernier, le CME a créé un fonds de 100 millions $ US pour rembourser les petits producteurs si une telle situation se reproduisait. M. Ferré croit que l’abolition du monopole de la CCB va favoriser la concentration des fermes en grandes entreprises de 4000 à 12 000 hectares et plus. « Ça se produit dans ma région », dit-il. Et il pense que les terres de ces grandes fermes passeront aux mains d’investisseurs étrangers, comme pour le pétrole et la potasse. « J’ai soulevé cette question auprès des politiciens à Ottawa, mais ils sont restés muets », dit le producteur. Ce dernier a témoigné devant le Comité sénatorial permanent sur l’agriculture et les forêts, dans la capitale nationale, en décembre 2011. Ce comité était chargé de soupeser les conséquences de l’adoption par le Parlement de la loi C-18, qui a permis le démantèlement du monopole de la CCB.

Le Coopérateur agricole | NOVEMBRE-DÉCEMBRE 2012

Kevin Bender,

apôtre du libre marché Le président de la Western Canadian Wheat Growers Association (WCWGA), Kevin Bender, applaudit haut et fort la fin du monopole de la CCB. Même s’il pouvait réaliser des ventes privées par l’entremise de la CCB, il préfère traiter directement avec les grands commerçants de grains. « Avec la CCB, je devais attendre parfois 16 mois avant de toucher mon paiement final. Là, je fais mes ventes cash et je suis payé sur-le-champ. Ça contribue au fonds de roulement de notre entreprise », dit-il.

ender cultive 1740 hectares à la ferme familiale, avec son frère et son père, à quelques kilomètres de Red Deer, au centre de l’Alberta. Il compte vendre une partie de ses 2721 tonnes de blé par l’entremise des pools de la CCBf. Mais il juge obtenir de meilleurs prix en magasinant auprès des sociétés Viterra, Richardson, Cargill et Dreyfus, qui ont toutes des silos dans un rayon de moins de 100 km de l’entreprise. « On vend déjà notre canola, nos lentilles et nos pois sur le marché libre. Pourquoi on ne serait pas capables de vendre notre blé? » dit-il. Bender, tout comme une partie des 600 membres de la WCWGA, reluque aussi du côté des ÉtatsUnis pour vendre son grain. Les prix au comptant offerts par les meuniers américains, « parfois plus élevés que ceux des pools la CCB », ont encouragé les céréaliculteurs à traverser la frontière. La CCB réalisait environ 10 % de ses ventes aux États-Unis. Et à 14 reprises, elle a dû se défendre contre des plaintes de concurrence déloyale provenant des producteurs américains, tant à l’OMC qu’à l’ALENA. Les tribunaux de ces deux instances ont chaque fois exonéré l’entreprise canadienne.

Kevin Bender applaudit la fin du monopole de la CCB. Il se dit agréablement surpris que les producteurs de blé québécois aient aussi voté contre la mise en marché collective obligatoire. La CCB prélevait plus de 6 M$ sur ses ventes annuelles pour financer la R-D ainsi que le service aprèsvente auprès de ses clients. Dorénavant, ce seront les producteurs de blé du pays, chapeautés par une association nationale incluant les céréaliculteurs québécois, qui devront assumer la note, soutient M. Bender. [NDLR : Au moment d’écrire cet article, les modalités des prélèvements prévues pour la R-D n’étaient pas encore déterminées précisément.]

« L’abolition de la CCB va permettre une plus grande liberté de commerce des deux côtés de la frontière », soutient M. Denver. Ce dernier ne croit pas que les producteurs américains feront pression pour fermer la frontière, comme ce fut le cas pour le bœuf lors de la crise de la vache folle ou celle – récurrente – du secteur du bois d’œuvre. La CCB n’étant plus là pour défendre les intérêts des céréaliculteurs de l’Ouest, le producteur compte sur le ministre de l’Agriculture du Canada, Gerry Ritz, pour régler les différends commerciaux avec les voisins du Sud. Par ailleurs, le président et chef de la direction de la CCBf, Ian White, croit que, dans le nouveau contexte commercial, « le prix du boisseau de blé sera le même des deux côtés de la frontière ». Selon lui, cette situation désamorce la possibilité d’un conflit frontalier. u

NOVEMBRE-DÉCEMBRE 2012 | Le Coopérateur agricole

Dossier Commission canadienne du blé

Le Coopérateur agricole | NOVEMBRE-DÉCEMBRE 2012

Kevin Bender,

NOVEMBRE-DÉCEMBRE 2012 | Le Coopérateur agricole

Dossier Commission canadienne du blé

L’ex-président de la CCB Allen Oberg au milieu de son champ d’or des Prairies : du blé roux de printemps de l’Ouest canadien titrant 13,5 % de protéines et destiné au lucratif marché japonais.

« Le gouvernement Harper a remis les clés du grenier canadien aux multinationales. »

– Allen Oberg

Le Coopérateur a rencontré l’ex-président du conseil d’administration de la CCB, Allen Oberg, à sa ferme, près du village de Forestburg, en Alberta. Selon lui, les grands gagnants de l’abolition de la CCB sont les multinationales de grains. Et il ne croit pas qu’une Commission canadienne du blé facultative (CCBf) puisse survivre sans son monopole.

La CCB n’était pas en affaires pour produire du volume de denrées agricoles, mais elle visait plutôt de lucratifs marchés de niche. « On passe d’un système basé sur ce que les consommateurs étaient prêts à payer à un système basé sur ce que les producteurs sont prêts à vendre », dit-il.

Le Coopérateur agricole Selon vous, pourquoi une CCBf est-elle vouée à l’échec? Allen Oberg Pour la simple raison que la CCBf ne possède aucun silo primaire et, plus important encore, aucun silo dans les ports d’exportation. C’est son talon d’Achille. Dans le nouveau système de mise en marché libre, la CCBf est en opposition directe avec ses concurrents. C’est comme demander à Ford de vendre ses autos par l’intermédiaire de concessionnaires Toyota. CA Le monopole de vente de la CCB était donc essentiel? AO Oui. Ce monopole représentait un rapport de force dans un monde commercial dominé par des géants. La CCB, grâce au volume de grains mis en marché, était en mesure de négocier de meilleurs prix avec les clients internationaux, avec les deux chemins de fer, le CN et le CP, et avec les trois grandes sociétés propriétaires des silos. Ces dernières devaient aussi soumissionner les unes contre les autres pour obtenir une partie de notre grain. CA Pouvez-vous chiffrer ce pouvoir de négociations? AO 500 millions $ par année. CA Qui dorénavant va engranger ces « primes »? AO Les actionnaires de ces sociétés. Ce ne seront plus les producteurs. Et cela va avoir des conséquences sur la viabilité des collectivités rurales. Cet argent ne percolera plus par les producteurs pour être dépensé au garage, à l’épicerie ou chez le concessionnaire du coin. CA Cela va-t-il avoir une incidence sur les fermes? AO Pour rester dans la course, les fermes devront grossir. Et elles vont devoir faire leur propre mise en marché, ce qui est un métier en soi. Elles devront engager des experts, ce que les plus petites fermes ne pourront pas faire. Mais même les plus gros producteurs ne seront que des nains dans ce paysage commercial.

Le Coopérateur agricole | NOVEMBRE-DÉCEMBRE 2012

CA Croyez-vous que cette concentration de la propriété va favoriser l’accaparement des terres par de grandes sociétés? AO C’est en toute logique la prochaine étape. L’Amérique du Nord reste un des seuls endroits au monde où les producteurs indépendants cultivent encore leurs propres terres. Mais cela change rapidement. Dans la production de bœuf, de porcs ou de pommes de terre au Canada, les grandes sociétés mènent le bal, sous intégration verticale. Les producteurs ne deviennent que des exploitants. Certains possèdent encore une partie de leurs terres, mais pas les animaux ni la génétique. Ce sera la même chose dans le secteur des grains. CA Le Canada avait la réputation de produire la « Cadillac » du blé sur le marché international. Cela va-t-il continuer? AO Non. Nous avions plusieurs variétés de blé et un système de classification ciblé entre autres pour des marchés à très haute valeur ajoutée. Je crois que le système canadien sera harmonisé avec le système américain. Le Canada va devenir un producteur de « Chevrolet », un blé de consommation courante. Les producteurs comme les consommateurs vont y perdre au change. Faits marquants de la CCB Créée en 1935. La CCB commercialisait entre 18 et 24 millions de tonnes de blé, de blé dur et d’orge pour la consommation humaine, et gérait les ventes internationales d’orge destinée à l’alimentation animale. Le montant de ses ventes effectuées dans 70 pays oscillait entre 4 G$ et 8 G$. Ces revenus, moins les frais de commercialisation, étaient remis aux producteurs. Nombre de producteurs : 75 000. Réputation internationale comme fournisseur de blé de première qualité servant à la fabrication de pâtes, de couscous et du pain des nations. Gouvernance : 10 producteurs élus et 5 dirigeants nommés par Ottawa. Abolie le 1er août 2012 avec l’adoption par Ottawa de la Loi sur le libre choix pour les producteurs de grains en matière de commercialisation (loi C-18).

CA La CCB s’est toujours opposée à l’introduction de blé OGM dans les Prairies. Cela va-t-il changer? AO Oui. Les sondages effectués auprès de nos clients indiquaient qu’ils ne voulaient pas de blé OGM. Mais dès que celui-ci sera homologué aux États-Unis, il le sera au Canada. Une fois introduit dans le système, le blé OGM sera très difficile à ségréguer. CA Dans un tout autre ordre d’idées, auriez-vous un conseil à donner aux producteurs qui fonctionnent sous gestion de l’offre (GO)? AO Comment le gouvernement actuel peut-il être contre la CCB tout en appuyant la GO? C’est de la pure hypocrisie. Les deux systèmes sont semblables. Et s’il y a une chose, c’est que la GO est beaucoup plus restrictive, puisqu’elle contrôle la production. Si j’étais un producteur sous GO, je serais très préoccupé. Ils sont les prochains dans la ligne de mire. [NDLR : La CCB et la GO sont des dossiers dont les enjeux sont substantiellement différents et difficilement comparables, notamment en raison du fait que la CCB était contestée par une part importante de producteurs, ce qui n’est pas le cas pour la GO, ainsi que par la présence des quotas dans la GO, qui représentent une valeur totale de plus de 30 G$ pour l’ensemble du Canada.]

CA Que faire alors? AO Chérissez vos organisations agricoles telles l’UPA, vos coopératives, La Coop fédérée ou autres. Elles ne sont pas parfaites, mais si elles disparaissent, elles seront très difficiles à recréer. Et communiquez mieux les enjeux, non seulement aux producteurs, mais aussi au grand public.

Une bataille juridique sur deux fronts Allen Oberg n’en démord pas. L’ex-président du conseil d’administration de la CCB se serait plié à la volonté des producteurs s’ils avaient voulu éliminer son monopole. Selon lui, le gouvernement Harper a violé la Loi sur la Commission canadienne du blé en faisant fi de l’article 47.1. Celui-ci obligeait Ottawa à tenir un référendum sur le désir ou non de maintenir ce monopole. Un plébiscite mené par une société indépendante à la demande de 8 des 10 producteurs siégeant au conseil d’administration indiquait, en septembre 2012, que 62 % des 37 000 répondants étaient en faveur du maintien d’un guichet unique de vente de blé pour consommation humaine. Les producteurs poursuivent Ottawa sur deux fronts : — Le gouvernement Harper a-t-il agi illégalement en faisant adopter sa loi sur la libre mise en marché (loi C-18) sans faire de référendum? En décembre 2011, le juge Douglas Campbell, de la Cour fédérale, a donné raison aux huit producteurs élus de la CCB. Mais ce jugement a été cassé en juin 2012. L’affaire est devant la Cour suprême du Canada. Un verdict final est attendu en décembre 2012 ou au début 2013. — Un groupe de producteurs, The Friends of the Canadian Wheat Board, a entrepris un recours collectif contre le gouvernement Harper. Les producteurs estiment à 17 G$ les pertes occasionnées par la disparition du monopole de vente de la CCB. Cette affaire devrait aussi connaître son dénouement avant la fin de l’année 2012 ou au début 2013.

NOVEMBRE-DÉCEMBRE 2012 | Le Coopérateur agricole

Dossier Commission canadienne du blé

« Le gouvernement Harper a remis les clés du grenier canadien aux multinationales. »

– Allen Oberg

Le Coopérateur agricole | NOVEMBRE-DÉCEMBRE 2012

NOVEMBRE-DÉCEMBRE 2012 | Le Coopérateur agricole

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Sophie Stival

Liquidateur : un rôle crucial et délicat Conseiller

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Liquidateur un rôle crucial et délicat

oucher sur papier ses dernières volontés n’est pas une mince tâche. La plupart de vos clients connaissent l’importance du testament. Mais qu’en est-il du choix de leur liquidateur testamentaire ? Lorsqu’on possède des actifs financiers et immobiliers, le règlement de sa succession peut vite se révéler complexe. C’est sans parler des entrepreneurs, de ceux qui vivent une deuxième union, qui ont des enfants en bas âge ou dispersés à travers le monde.

Sophie Stival On sous-estime souvent l’ampleur du travail accompli par le liquidateur et les problèmes qui peuvent surgir à la suite d’un décès. Plusieurs règlements de succession s’enlisent dans des chicanes de famille qui nécessitent parfois l’intervention de la cour. Certains dossiers s’éternisent pendant de longues années. Pour éviter le pire, mieux vaut agir en conséquence et choisir de son vivant la ou les bonnes personnes. Le pouvoir du liquidateur

Le pouvoir que confère la loi au liquidateur est très important, affirment d’emblée Julie Loranger et Natasha Girouard, notaires au Cabinet BCF. « C’est lui qui a les mains sur le volant. Il peut décider combien sera dépensé pour les funérailles ou combien sera vendu tel immeuble », explique Mme Loranger. Cette dernière exerce sa profession depuis 23 ans. La planification testamentaire et le droit successoral font partie de ses domaines de spécialité. Natasha Girouard, associée, est en plus fiscaliste. « Le liquidateur se comporte parfois en propriétaire bien que ça n’en soit pas un », remarque Mme Loranger. Cela peut vite créer beaucoup de frustration, particulièrement dans le cas où plusieurs héritiers affrontent un seul liquidateur. Dès qu’il y a plus d’un légataire, le liquidateur doit comprendre qu’il est avant tout un administrateur du bien d’autrui. Le Code civil impose une série d’obligations à respecter telles que le devoir d’agir dans le meilleur intérêt des héritiers, de faire fructifier les actifs, de ne pas acheter les biens de la succession, etc. www.conseiller.ca

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liquidateur : un rôle crucial et délicat PLusieurs fois durant ma carrière, j’ai dû raPPeLer au Liquidateur que ses Pouvoirs Lui avaient été confiés Par Le testateur, non Pas Pour régLer des comPtes, mais bien La succession, et ce, au meiLLeur avantage des héritiers et dans Le resPect des voLontés du défunt ! - marc-andré Lamontagne

Le liquidateur a également le droit de « saisine », c’est-à-dire qu’il prend la possession et le contrôle des biens des héritiers. Il ne peut toutefois mélanger les biens du défunt avec les siens. Il doit tenir une comptabilité distincte. Dans le cas d’un immeuble locatif, ce dernier aura la responsabilité en vertu de ce droit de réclamer les loyers. S’il y a plusieurs liquidateurs, les gens vont se déléguer des pouvoirs, mais ça n’empêche pas que tout un chacun doit rendre des comptes. Marc-André Lamontagne est notaire et planificateur financier au Trust Banque Nationale. En plus de 30 ans, il a conseillé de nombreux testateurs et liquidateurs. De l’abus de pouvoir, il en a observé souvent. « Plusieurs fois durant ma carrière, j’ai dû rappeler au liquidateur que ses pouvoirs lui avaient été confiés par le testateur, non pas pour régler des comptes, mais bien la succession, et ce, au meilleur avantage des héritiers et dans le respect des volontés du défunt ! » Rappelons qu’en l’absence de testament la loi prévoit que les héritiers seront les liquidateurs. M. Lamontagne constate encore aujourd’hui que plusieurs clients, même fortunés, n’ont pas de testament. Pourtant, sans ce document, on ne peut octroyer la pleine administration d’une succession et les pouvoirs du liquidateur seront alors bien plus restreints. Par exemple, on ne pourra disposer d’aucun actif sans l’accord de tous les héritiers

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légaux, nommés d’office liquidateurs. S’il y a quatre enfants, on aura quatre liquidateurs. « Les clients ne font donc pas seulement un testament pour choisir leurs héritiers, mais également pour déterminer quelle personne les représentera après leur décès », explique M. Lamontagne. La dynamique familiale

« Quand vient le temps de choisir son liquidateur, il n’y a pas de recette magique », rappelle Julie Loranger. On doit d’abord déterminer la complexité de la tâche à exécuter. Est-ce un entrepreneur ? Quelles sont les contraintes familiales ? Y a-t-il plusieurs conjoints, les héritiers sont-ils tous majeurs et aptes à être des liquidateurs ? Selon elle, dans toute cette démarche, bien Julie Loranger comprendre la dynamique familiale est cruciale. On évitera généralement de nommer deux liquidateurs, à moins qu’ils s’entendent très bien. Pourquoi ? « Dans un tel cas, on risque d’aboutir dans une impasse lors de la prise de décisions, et ce, parce que la loi exige l’unanimité », dit Mme Girouard. Lorsqu’il y a trois liquidateurs ou plus, le testateur peut décider s’il souhaite une simple majorité des voix ou l’unanimité. « Idéalement, on ne nommerait pas plus de trois personnes, car l’administration de Natasha Girouard la succession peut vite se révéler chaotique », ajoute-t-elle. « On ne doit pas sous-estimer le pouvoir et le rôle des conjoints des enfants dans les prises de décisions », note Mme Girouard. Cette dynamique familiale peut changer la tournure des événements. Par exemple, un testateur qui ne veut pas nommer sa fille liquidatrice parce qu’il ne peut blairer son époux. Le conflit de loyauté de l’enfant, coincé entre son conjoint et ses parents, peut justifier en lui-même une telle décision, surtout si l’on craint que Marc-André Lamontagne ce dernier ne soit manipulé. Le cas le plus simple se résume généralement à une personne qui laisse tout à son compagnon et le nomme ensuite liquidateur. Inversement, la situation sera plus délicate lorsqu’on désigne des www.conseiller.ca

gens qui ne sont pas d’accord avec le testament. « A contrario, on ne fait jamais ça », affirme Mme Loranger. Par exemple, un entrepreneur peut décider d’avantager sa deuxième conjointe en lui transférant des actions dans une fiducie exclusive. Les enfants de la première union, nommés liquidateurs, ne seront pas nécessairement contents. Ils peuvent faire tout en leur pouvoir pour ne lui verser aucun dividende... « Les liens du sang sont en général très forts. On ne demandera pas à un enfant de détruire sa relation avec sa famille pour protéger quelqu’un d’autre », ajoute-t-elle. Les qualités du liquidateur

Un liquidateur doit posséder plus d’une qualité pour bien faire son travail. « Le jugement, l’honnêteté et la transparence seront souvent plus importants que sa compétence », croit M. Lamontagne. Il doit aussi être capable d’agir, de prendre des décisions quand il le faut. « On évitera de choisir quelqu’un qui croit tout savoir, car ça pourrait se révéler dangereux », affirme Mme Loranger. On préférera un individu qui est conscient de ses limites et qui ne poursuivra pas une vendetta personnelle. « J’ai déjà vu des haines tellement grandes que le liquidateur était presque prêt à mourir en réglant la succession plutôt que de distribuer l’argent », dit-elle. Cette personne doit également être disponible pour accomplir ses tâches. « On ne peut le nier, être liquidateur, ça prend du temps », témoigne M. Lamontagne. Luimême a dû régler, il y a quelques années, la succession de ses parents. « Il faut aller à la banque, à l’assureur, au registre des testaments, au cimetière, à la SAAQ... », se rappelle le notaire. En plus de surmonter son chagrin, pendant cette période, on a parfois l’impression de cumuler deux emplois. La perte d’un être cher

Souvent, le liquidateur désigné sera un enfant ou un conjoint. Cette personne doit donc faire à la fois son deuil et régler la succession. Dans certains cas, la tristesse se transforme en dépression. Le dossier peut alors s’étirer en longueur.

mars 2012

Liquidateur : un rôle crucial et délicat « Personne ne peut prévoir sa réaction émotive à la perte d’un être cher. Certains seront contents d’être occupés à régler la succession. D’autres perdront carrément leurs repères », constatent les deux notaires au Cabinet BCF. « On ne doit pas pour autant renoncer à nommer son conjoint liquidateur », note Julie Loranger. L’idée, c’est de laisser le choix au liquidateur d’accepter ou non la tâche. Si la personne ne s’en sent pas capable, elle pourra alors se faire aider ou déléguer son rôle. « J’ai déjà vu un cas où la conjointe a dit à son partenaire : “Ne me nomme pas liquidatrice. J’aurais trop de peine et je serais incapable de faire quoi que ce soit.” Ce dernier a donc choisi un ami. La dame est aujourd’hui très en colère, car le liquidateur traîne de la patte. D’un point de vue fiscal, le liquidateur Elle aurait été 100 fois plus efficace que doit s’assurer avant de distribuer lui, dit-elle. Elle regrette aujourd’hui sa l’argent de la succession que le défunt décision », raconte Julie Loranger.

n’avait pas des dettes fiscales.

– Natasha Girouard

Nommer un professionnel

Avant de choisir un liquidateur étranger, on doit se demander si ceux qui héritent peuvent faire le travail. S’il y a plusieurs légataires et que ces derniers sont aptes à la tâche et qu’il existe une bonne entente entre eux, il sera plus simple de les nommer coliquidateurs, s’accordent les trois notaires. Dans les cas plus complexes, on a toujours l’option de nommer un agent d’affaires externe ou un professionnel. Les sociétés de fiducie, comme les trusts de banques, peuvent jouer ce rôle. Par exemple, si l’unique héritier a une dépendance, qu’il demeure à l’étranger ou si les légataires sont en mauvais termes, on peut envisager cette solution. Ce ne sont toutefois pas toutes les successions, même compliquées, qui peuvent se permettre de désigner un trust comme liquidateur. « Certaines de ces sociétés exigent des montants minimaux d’actifs sous gestion qui peuvent s’élever à plus de 500 000 $ et parfois un million », explique Mme Loranger. La rémunération sera généralement en fonction d’un pourcentage de la valeur de la succession (entre 2 % et 5 %). Au moment de signer le testament, on doit négocier cette entente qui sera ensuite jointe au document. Une société de fiducie peut agir seule ou assumer le rôle de coliquidateur. « Dans ce dernier cas, il sera important de définir quelles seront les tâches de chacune des parties », explique Natasha Girouard. Certains liquidateurs vont simplement déléguer à un fiduciaire quelques tâches précises. « Dans un tel cas, on proposera au client un contrat de service », dit M. Lamontagne. On peut difficilement nommer son conseiller en placement liquidateur puisque ce dernier gère déjà le portefeuille financier du testateur. Il ne peut donc assumer à la fois le rôle de conseiller et défendre les intérêts des héritiers. Plusieurs ordres 10

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professionnels ne permettent pas à leurs membres d’être liquidateur. Dans le cas des avocats et des notaires, par exemple, c’est aussi délicat, car ils ne sont pas couverts par leur assurance responsabilité professionnelle dans l’exercice de cette charge. Dans ces conditions, ils accepteront rarement cette fonction. Ces experts préféreront généralement donner des conseils. « On s’occupera des questions plus pointues. Les gens vont, par exemple, dresser l’inventaire et ils nous consultent ensuite », précise Natasha Girouard. « Le liquidateur joue un rôle essentiellement décisionnel, explique Mme Loranger. Si l’ampleur et la complexité de la tâche le rebutent, il peut s’adjoindre les services d’un comptable, d’un avocat, d’un fiscaliste. » Généralement, il paiera chacun d’eux à la pièce, selon une grille horaire spécifique. Qui prévenir ?

Vaut-il mieux prévenir le liquidateur qu’on souhaite le nommer ? Faut-il être transparent avec ses héritiers ? « Ça dépend des familles, mais j’aurais tendance à dire oui », affirme Mme Girouard. Sa collègue renchérit : « Quand il y a beaucoup de secrets, quand on pense que nos enfants vont sauter sur leur chaise lorsqu’ils liront notre testament et connaîtront notre liquidateur, ça risque d’allonger la durée de la succession en plus de générer des litiges. » « En informant son liquidateur qu’on souhaite le nommer, on s’assure que la personne sera d’accord ou, du moins, intéressée », explique M. Lamontagne. Cette dernière pourra évidemment renoncer le moment venu, c’est pourquoi il est également une bonne idée de penser à un substitut. « Souvent, on demandera au testateur de s’imaginer comment ça se passerait si ses enfants devaient régler la succession et que telle ou telle décision devait être prise. Par souci de transparence, on recommandera même à notre client, quand c’est possible, de discuter de la succession avec les futurs liquidateurs et les légataires », dit Julie Loranger. Le Cabinet BCF offre à ses clients qui le souhaitent d’organiser une rencontre avec leurs héritiers. Ceci permet d’atténuer certaines appréhensions. Parfois, le testateur constate pendant cette réunion de famille que la situation est plus simple qu’elle n’y paraît. Par exemple, le cas du legs d’un chalet familial que personne ne veut garder alors que les parents craignent une dispute… Quand on ne sait pas qui aura droit à quoi, le partage des biens ne se fait pas toujours sans heurts. « J’ai déjà vu des chicanes de famille mémorables à propos de bijoux et de tableaux », se rappelle M. Lamontagne. Rémunérer le liquidateur

La première année qui suit le décès du testateur s’accompagne généralement d’une longue série de tâches administratives souvent fastidieuses. Dans certains cas, l’obligation est si pesante que le liquidateur craint de devoir laisser son travail. « On ne doit pas négliger cet aspect lorsqu’on nomme son liquidateur », remarquent les notaires. « Il est important de dédommager financièrement le liquidateur, dit Marc-André Lamontagne. Offrir un montant forfaitaire, par exemple 5000 $, ou un taux horaire, l’encouragera à accepter www.conseiller.ca

ce rôle souvent difficile émotionnellement. On oublie que cette personne devra souvent trancher malgré le désaccord des frères et sœurs. » On peut ainsi ajouter, dans le testament, une clause pour rémunérer son liquidateur. Par exemple, on écrira que le liquidateur, dans l’exécution de ses tâches, aura droit à des gages raisonnables. Dans le cas d’un professionnel, ce dernier pourra suggérer qu’on lui paie son tarif horaire. « L’idée, c’est d’éviter les abus de pouvoir et de favoriser la transparence », dit Mme Loranger. Responsabilités du liquidateur

Une succession s’étend généralement sur une période variant entre 12 et 36 mois. Dès qu’un cas est plus complexe quand il y a des querelles et des poursuites, ce délai peut vite s’allonger de quelques années, parfois une décennie peut passer, disent les notaires au Cabinet BCF. Pendant ce temps, les actifs de la succession vont générer des revenus de placement, de loyer, du gain en capital qui seront imposés au fédéral et au provincial. Le Code civil du Québec, dans le cas des règlements de succession, liste des étapes à respecter. Pour ne rien oublier, Mme Loranger suggère de consulter le dépliant très complet du gouvernement du Québec, Que faire lors d’un décès? En bref, on doit obtenir le certificat de décès, identifier le dernier testament, rassembler les biens, les transférer au nom de la succession, payer les dettes, accomplir les formalités de la loi et, ensuite seulement, distribuer les biens aux héritiers selon les dispositions du testament. « D’un point de vue fiscal, le liquidateur doit s’assurer avant de distribuer l’argent de la succession que le défunt n’avait pas de dettes fiscales », rappelle Mme Girouard. C’est à cette étape que l’obligation de dresser l’inventaire prend toute son importance. Le liquidateur a, selon la loi, un délai maximal de six mois pour le faire. « Dresser l’inventaire signifie qu’il faut retracer où sont les biens en fouillant les papiers personnels du défunt, son courrier, sa maison, son coffre-fort », explique Marc-André Lamontagne. On cherchera par exemple les déclarations de revenus, relevés de placements et bancaires, titres de propriété, contrat de mariage, etc. « On ne doit jamais oublier, même s’il n’y a qu’un seul héritier, que le légataire est responsable, au-delà de ce qu’il reçoit, des dettes du testateur s’il ne fait pas l’inventaire dans le délai prévu par la loi », rappelle Mme Loranger. « Un confrère m’a raconté le cas d’une dame qui a reçu 1 million de dollars après le règlement d’une succession. Ayant eu omission de dresser l’inventaire des biens, il y a eu des poursuites pour des impayés d’une valeur de 1,5 million. Pour régler le litige, on a pigé le million dans la succession et la dame a même dû verser 500 000 $ de sa poche. Pour éviter une telle situation, cette personne aurait dû faire l’inventaire ainsi que publier un avis dans les journaux indiquant qu’un tel inventaire était en cours. Les créanciers auraient alors dû se manifester pendant cette période. Elle aurait probablement perdu son million d’héritage, mais on n’aurait pas pu piger dans son compte au-delà de ce montant », raconte la notaire.

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Liquidateur : un rôle crucial et délicat Incidences fiscales

Les responsabilités fiscales du liquidateur sont donc nombreuses. On devra penser, par exemple, à produire pour le défunt une déclaration de revenus afin de couvrir les mois précédant le décès (T1). Après, la succession devra faire ses impôts. Pendant cette période, il sera souvent profitable de consulter un comptable fiscaliste qui connaît les règlements de succession puisqu’il y a plusieurs délais à respecter pour bénéficier d’avantages fiscaux importants, rappelle Mme Girouard. Il peut s’agir de reports de pertes où l’on réalise des pertes l’année du décès pour ensuite amender des déclarations de revenus antérieures et recevoir des remboursements d’impôts.

Souvent, on demandera au testateur de s’imaginer comment ça se passerait si ses enfants devaient régler la succession et que telle ou telle décision devait être prise. Par souci de transparence, on recommandera même à notre client, quand c’est possible, de discuter de la succession avec les futurs liquidateurs et les légataires. - Julie loranger

La planification post-mortem est en elle-même une spécialité. Les entrepreneurs et les personnes ayant des situations plus complexes doivent se renseigner. Ceci inclut notamment les clients qui lèguent des biens immobiliers situés à l’étranger. Par exemple, un condo en Floride, un appartement à Paris ou même du temps partagé à Hawaï. « Dès qu’il y a des biens à l’étranger, il faut consulter un juriste qui connaît les règles dans les juridictions respectives », dit Mme Loranger. Ces règles varient d’un pays à l’autre et d’une province à l’autre. Aussi longtemps que la succession est ouverte, elle a une déclaration de revenus à produire. À la fin, avant de partager les biens, on demandera aux autorités fiscales (provinciale et fédérale) des certificats de décharge et le permis de disposer. Parfois, les gens distribueront des actifs sans avoir encore obtenu ces approbations et c’est risqué, affirment les deux notaires au Cabinet BCF, car le liquidateur peut être tenu personnellement responsable des dettes fiscales de la succession. Mieux vaut s’assurer auprès des autorités fiscales que le défunt n’a plus de dettes d’impôts avant de dénouer les cordons de la succession… En dernier lieu, le liquidateur devra, avant de verser aux légataires des montants, demander une quittance qui le protégera de recours ultérieurs. C’est ce qu’on appelle une reddition de comptes. Celle-ci a lieu à l’amiable ou, à défaut de l’approbation de tous les héritiers, judiciairement, explique M. Lamontagne. La résidence de la succession

Le testament de la plupart des Québécois suit une planification fiscale qui tient compte des règles de la province. « Si l’un des héritiers ou le liquidateur ne réside pas au Québec, ça peut drôlement changer les choses », rappelle Julie Loranger. Si le liquidateur réside aux États-Unis, par exemple, la succession sera considérée comme une fiducie non résidente aux fins fiscales, ce qui peut entraîner un traitement fiscal désavantageux. « Dans un tel cas, mieux vaut prévoir dans son testament que le liquidateur consulte un fiscaliste pour mesurer l’impact fiscal de sa non-résidence avant d’accepter le mandat », conseille Mme Loranger. Il existe plusieurs formules possibles. On peut aussi exiger dans le testament que le liquidateur soit un résident du Québec, s’il souhaite accepter ce rôle. « Malgré cet inconvénient d’ordre fiscal, certains testateurs vont maintenir le choix du liquidateur en question, car c’est une personne qu’ils aiment et en qui ils ont confiance », constate Mme Loranger. Le dicton dit qu’on ne choisit pas ses parents ni sa famille. Mais on peut certainement choisir son liquidateur testamentaire. Et, qui sait, un client bien informé en vaudra peut-être deux…

Lien Dépliant du gouvernement du Québec Que faire lors d’un décès ?

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secondary trauma

Lingering Shadows By jason contant For Bruce Kruger, the difficulties began shortly after he was forced to shoot and kill an escaped convict who was about to fire a shot at his partner, a young rookie police officer. With a double-barrelled sawed-off shotgun pointed at him, the trapped officer was desperately trying to hide under the dash of his police cruiser when Kruger had to act. Now a retired detective inspector with the Ontario Provincial Police (OPP), the Bracebridge, Ontario resident does not want to talk about that fatal shooting on June 28, 1977 â&#x20AC;&#x201D; one of many serious incidents he responded to during his 30-year career on the force that affected him psychologically and contributed to the development of post-traumatic stress disorder (PTSD).

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image: illustration source - paul schulenburg

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Relatively little is known about secondary traumatic stress or compassion fatigue.

lowly and in a very insidious way, I developed all the signs and symptoms of PTSD including severe depression, alcohol abuse, horrendous nightmares, relationship problems, night sweats and extreme anger,” Kruger wrote in his 2010 article PTSD — The Loneliest Injury in Policing!, posted on the website of Tema Conter Memorial Trust, a charitable organization in King City, Ontario. “My mental state created severe difficulties for me. Imagine sitting in a house and going into extreme fear at the sight of a silhouette of a gunman entering the residence with a raised weapon — only to discover it was your elevenyear-old grandson carrying a hockey stick back from the rink.” By the time he retired in 2000, Kruger had never spoken to anybody about his symptoms, which he says had become severe by then. He had thought that his situation would improve after he retired. “I was going to hide this and hopefully beat it on my own,” he adds. For former paramedic Vince Savoia, the breaking point came after responding to the call of Tema Conter, who was brutally murdered on January 27, 1988 by a convicted serial killer placed in a halfway house near her midtown Toronto neighbourhood. “That call pretty well, looking back, psychologically broke me as an individual,” says Savoia, founder and director of the charity he started in Conter’s name. Both Kruger and Savoia know first-hand the struggles associated with their own personal trauma. By contrast, relatively little is known about secondary traumatic stress or compassion fatigue, terms which have only appeared in literature since the mid-1990s. Even experts in the field disagree on their distinct definitions and how the terms differ, although most describe them as similar to Venn diagrams with overlapping circles. “There is a need for all of us in the field to actually get together and agree on a working definition,” opines Françoise Mathieu, director of Compassion Fatigue Solutions in Kingston, Ontario and a mental health and crisis counsellor. SHADES OF GREY For Mathieu, compassion fatigue refers to the gradual but profound emotional and physical exhaustion experienced by some caregivers and professionals who help, assist or counsel people. However, it is a common misunderstanding that this condition affects only medical professionals, says Patricia Smith,

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founder of the Compassion Fatigue Awareness Project in the San Francisco Bay area of California. The list of affected occupations is wideranging and includes social workers, journalists, lawyers, nurses, doctors, teachers, dentists, funeral directors, chaplains, psychologists, family caregivers and child advocates. Dr. Anna Baranowsky, executive director of the Traumatology Institute in Toronto, describes compassion fatigue as a “secondary wound.” By way of example, Smith says she used to do animal welfare work and was asked to put together a shelter-wide compassion fatigue project, including a self-test. It turned out that many of the workers who were not dealing with animals on the front lines, such as the executive director, administrative assistant, public relations representative and special events officer, had higher levels of compassion fatigue than the euthanasia technicians tasked with putting down the animals. “You just have to be in a caregiving environment to be at risk for compassion fatigue,” Smith says. A job that exposes a worker to people in need and requesting assistance that is sometimes beyond the means of the worker, creates a real challenge, Mathieu suggests. “What we see is this shift in our view of the world and our ability to feel compassion and empathy for others,” she notes, adding that this numbing effect spills into the workers’ personal lives. red flags The warning signs that a worker may be suffering from compassion fatigue vary widely from individual to individual, but are similar to symptoms of chronic stress and overload, Mathieu notes. For instance, a worker may suffer from insomnia and physical ailments, such as gastrointestinal problems, recurrent colds, migraines and heartburn. They may also self-medicate, suffer from depression, and feel irritable or have problems concentrating. “People talk about a real loss of innocence,” Mathieu relates, citing her personal experience of hearing about events in Rwanda and feeling alienated from her family. “You go home and you had a barbeque or something and people are talking about stuff and you’re thinking to yourself, ‘You have no idea what I just saw today.’ Your view of the world is permanently changed. Anyone who has worked with child abuse is never the same again.” As the work scenarios faced by each individual are different, so too are the symptoms. Consider nurses, who could encounter critical incidents almost daily, notes Vicki McKenna, first vice-president of the Ontario Nurses’ Associ-

School of Hard Knocks

ation in Toronto. “What does that do to your psyche?” questions McKenna, who concedes that compassion fatigue is difficult to quantify. “I know that’s not very tangible, but you can see it and feel it in some units or areas or organizations when you start interacting with people that work there.” The result is that some recent nursing graduates do not stay in the health care system very long due to the overwhelming demands, she contends. Mathieu agrees the health care sector in particular is facing a real issue of retention, attrition and attracting new blood into the field. However, she notes that there has been an “explosion of openness” towards the topic of compassion fatigue in the last decade.

Patricia Smith, the founder of the Compassion Fatigue Awareness Project in the San Francisco Bay area of California, believes in “post-traumatic growth.” The term refers to positive psychological change experienced as a result of struggling with highly challenging life circumstances. It also means that developing self-knowledge and insight, a sense of hope, healthy coping skills, strong relationships and personal perspective, can help build resilience and return a person to a healthy, functioning level. “I don’t suffer from that traumatic experience in talking to others about their experiences, because I know that what AGREE TO DISAGREE I am providing is making a difference,” says Smith, who cites Unlike PTSD, which is listed in the the following tips for building resilience: Diagnostic and Statistical Manual • explore personal motivations for working with trauma of Mental Disorders, Fourth Edivictims and identify personal strengths and challenges; tion, there is currently no diag• change or expand job descriptions; nostic criterion for compassion • learn to identify physical stress reactions and defatigue, Dr. Baranowsky notes. velop relaxation techniques; and, She reports that a committee is • use technology and resources wisely, looking at whether or not there should keeping to essentials and refraining be diagnostic criterion for secondary from engaging in unnecessary traumatic stress types like compassion faphone or text messages). tigue, as opposed to primary stress condi-

tions, such as PTSD. “It is a set of symptoms, it is not a disease,” Smith says of compassion fatigue. Dr. Baranowsky observes that there is a “latent vulnerability” in many of the caregivers. “In other words, they have had their own primary stress sometime in their past, something traumatic has impacted them and that latent vulnerability has made them more susceptible to these kinds of events in their career,” she explains. “This is not the case in every single caregiver, but certainly we do see that as a pattern.” This often holds true for child welfare workers, notes Dr. Leslie Anne Ross, vice-president of the Leadership Center of the Children’s Institute Inc. in Los Angeles, which offers programs and services for children traumatized by violence, among other things. “These students, as they learn about how to do child trauma work, they also learn about the impact of vicarious trauma,” a process in which a person is transformed by constantly listening to or responding to traumatic events. Dr. Ross says many of these students come into this field “because they have their own trauma history.” Although experts in the field generally agree that compassion fatigue, vicarious trauma and secondary traumatic stress are interwoven, there is disagreement on the exact distinction between the terms. In fact, there is even debate

on whether or not a person can work in a caregiving environment without being impacted by it or developing some form of vicarious trauma. “People who are truly caring individuals cannot do this work day in and day out and not be profoundly affected by it,” Mathieu argues, although he notes that compassion fatigue can be caught early and addressed. “Some people are more resilient than others and have more tools, but the idea that we can eradicate compassion fatigue, I think, is crazy,” he says. “It is a normal consequence of doing a good job.” Dr. Ross is of the mind that a compassionate and empathetic person can be emotionally affected by the work without necessarily being adversely impaired by it. And not everybody is affected in the same way. For Savoia, it all boils down to a worker’s perception of the job and the types of critical incidents they respond to. “I have known many doctors and nurses and paramedics and firefighters who have had very successful careers and not experienced PTSD or vicarious trauma,” he offers. Savoia estimates the prevalence of PTSD in

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Morbid Numbers

For instance, a worker who deals with victims of sexual assault, incest and abuse may have intrusive images of that, Mathieu suggests. Researchers at the University Symptoms could include hyper-arousal, of Kentucky in Lexington are innightmares and flashbacks of the event, social vestigating the incidence of suicide withdrawal and emotional numbing, Dr. Ross exposure and consequences of suicide notes. “If you have had trauma exposure, it inbereavement on veterans and military famcreases your risk because you are going to be ilies in the United States. re-exposed by doing some work that might Julie Cerel, principal investigator and associate be a reminder of your own trauma hisprofessor at the university’s College of Social Work, tory,” she adds. said in a statement on August 21 that there is limited Smith says she is discovering evidence to indicate that individuals exposed to suicide are that some people who work at risk for poor health outcomes, social and economic problems on the frontlines of particand suicidal thinking and behaviours. ular professions do not The Department of Veterans Affairs estimates that a veteran have time to heal commits suicide about once every 80 minutes on average, acfrom what they counting for some 6,500 suicides per year or nearly 20 per en co u n ter cent of all suicides in the United States. In June, the Pentagon revealed that more active duty service members took their own lives in the first half of 2012 than those who died in combat.

the general population is about eight per cent, although research indicates that this percentage is two to three times higher — somewhere between 16 and 24 per cent — for workers in Canada’s emergency services sector. Others, like himself, have a tendency to personalize incidents and may be adversely affected, he says, citing the Tema Conter call he attended more than two decades ago. “My partner is still on the job and he is enjoying every day of it. Same call, two different people, two different reactions,” Savoia observes. “I’m not saying he doesn’t care; he knows how to compartmentalize his job and personal life and he does that very effectively.” CHIPPING AWAY To better understand the difference between compassion fatigue and secondary trauma, Mathieu cites a caregiver for someone at a very advanced stage of Parkinson’s disease. The caregiver is depleted and has grown tired and impatient — in other words, demonstrating classic signs of compassion fatigue. On the other hand, a hearing officer at the Parole Board of Canada whose job is to read files before a hearing may not necessarily have compassion fatigue, but could have trauma from “repeatedly being exposed to stories and photos of abuse. But a nurse working at a long-term care facility, she may not have secondary trauma at all,” Mathieu illustrates. The symptoms of secondary traumatic stress can overlap with those of compassion fatigue, but there can be some common distinctions.

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on a daily basis. Consider a coroner, who not only witnesses death, but must also review files and images of a variety of fatalities. “Can you imagine every day looking at pictures from a coroner’s office of a traumatic death, such as a shooting or a gang-related thing?” Smith asks. “You never heal from that.” getting personal Sometimes, professionals can also encounter a work scenario where the victim reminds them of someone they intimately know, such as an emergency room nurse caring for a severely injured child reminiscent of the caregiver’s own flesh and blood. Dr. Baranowsky says that type of secondary wound can be very traumatizing to the worker. Wayne Chacun, a paramedic who responds to incidents in Virden, Manitoba, knows all about providing treatment to people he personally knows in the town of about 3,000 people. Chacun, who is also a member of the Manitoba Government and General Employees’ Union, says staying detached to some degree has helped him deal with the stresses of his job. “You go to work on somebody and they may not survive, but you see their family members all the time or you may have known them, they may be your neighbour,” he says. Chacun used to be part of a critical incident stress debriefing team, but he says he “went off that because one of the things I found was when I went and heard how they felt on calls all the time, it started to negatively impact me.” What has helped, Chacun says, is being able

to access a psychologist through his employee assistance plan. “There is always this stereotype of showing weakness and not wanting people to think you are not able to handle the job, when in actuality, this is one of the ways to handle the job and help you deal with it and stay in the career longer,” he argues. COPING MEASURES With regards to compassion fatigue, Dr. Baranowsky says there is something about it that is “softer” than diagnosing an individual with PTSD. “We want to always give the professional their sense of empowerment and not take that away, give them the sense that they are always in a position where they can make sense of his, make good sense of the work they do because we don’t really want to lose these very valuable people in our field,” she says. Fortunately, there are various coping strategies and organizational changes that can be implemented to help minimize the effects of secondary traumatic stress or compassion fatigue. For compassion fatigue particularly, Mathieu says working part-time, job sharing or combining two jobs so that a person is not doing frontline work all the time can help. Giving staff flexibility over their schedule, such as allowing them to choose shifts or stop in the middle of a work day to drop off a child before coming back to work can also benefit. Social support, regardless of whether that is offered through an employee assistance plan, colleagues or family members and friends, is key. Mathieu acknowledges that compassion fatigue does affect morale, which can result in coworkers turning on each other. “That creates a toxic work environment,” she cautions, noting the irony of social support in this context. “How can you support each other if you are all backbiting each other all the time?” For secondary trauma, Dr. Ross recommends that employees who may be at risk conduct a self-assessment and keep a look out for training opportunities. They should also consult someone who is trained in the field of secondary trauma to identify risk factors, symptoms and triggers to help establish an individual strategy. Savoia adds that workers can also adopt preventive coping strategies — such as ensuring that they remain physically and psychologically healthy, eating the right foods, learning about signs and symptoms — before that bad call comes their way. “A lot of the emergency service responders react to this as a reaction to an event as opposed to pre-planning for it,” Savoia says. He advises that workers should try to do some physical activity within 24 hours of an incident to help

burn off the extra adrenaline in their system. Other strategies include avoiding alcohol and drugs, including stimulants like caffeine; having access to a timely and thorough debriefing when there has been a critical event; praying, meditating or yoga; getting back into a normal routine; and considering the option of using prescribed medications to aid sleep if experiencing symptoms, such as flashbacks. BABY STEPS For Kruger, things have come a long way since he shot and killed the escapee in 1977. At that time, “my counselling consisted of a supervisor telling me not to brag about it,” he recounts. Progress, however, has been painstakingly slow. By 1984, the OPP had started a peer support program for stress. Kruger recalls contacting a peer counsellor, but was warned that the process was not confidential. “I didn’t want to be humiliated, embarrassed, I didn’t want to lose my opportunities at promotion, I didn’t want to be stigmatized with a mental illness,” he says. It was only a few years ago that Kruger received treatment at the Homewood Health Centre, a well-known treatment facility in Guelph, Ontario. Mathieu points out that when she became interested in the issue of compassion fatigue 12 years ago, there were only three books and one workshop on the topic. In the last decade, more and more people have become receptive to the condition, although she concedes that in law enforcement, “we are just barely started.” That slow progress is now being addressed by the Ontario ombudsman. In March of 2011, the ombudsman reported that an investigation will be conducted into the OPP’s handling of operational stress after Kruger filed a complaint with the support of 29 officers. The ombudsman’s report was expected to be released in mid-October. “We have got to bring this out of the closet and into the open, and that is why I insisted I go ahead with this complaint,” Kruger says. “They have ignored the total devastation this is doing to so many officers and many officers have committed suicide due to PTSD,” he charges. The release of the ombudsman’s report has gotten the ball rolling for PTSD compensation, but what will happen with compassion fatigue and secondary traumatic stress remains to be seen, as both have only just appeared as a blip on the radar.

“He knows how to compartmentalize his job and personal life."

Jason Contant is managing editor of ohs canada.

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