The Hand-over

by Elaine Dewar

  I told him that just looking at these lists made me feel as if we had come full circle, back to when Canadian meant lesser. Yet as I said these things, I wondered why I was making such a fuss. In my Maclean’s days, no one pooh-poohed Canadian so-called literature more loudly than I did (only to be shocked to find that Alice Munro really is as great as everyone said). I read the books I sent out for review, and most of them did not appeal. Hadn’t I gone to the trouble of getting a magazine job offer in Los Angeles as soon as my husband found television work there? We were thinking that L.A. is where we should be, because Canadian journalism, and Canadian film and TV, were patently inferior to what was produced down South. Hadn’t I hunted up a New York literary agent? Would I have done that if I believed in the value of Canadian stories told to Canadians? And yet it was also true that when I wrote for a foreign audience, I found myself at sea. My touchstones were Canadian: my metaphors were Canadian; my context was Canadian. It was Canadian stories I wanted to tell.

  All of this just poured out. As I listened to myself explain and contradict and explain again, I realized that the reason this M&S handover story would not let go of me was because it was personal. I didn’t want to say that to him: reporters should avoid inquiry into that which is personal. So, I fell back on saying that I was troubled that the Investment Canada Act, though still on the books, seemed to be ignored, that the deals permitted were getting bigger and bigger. How come? A law is supposed to mean something, isn’t it?

  “You’re right,” he said. “I need to get my glasses so I can look at you. I see why you were sent to me.”

  He rose from his chair to go find them. He turned and wagged his finger.

  “But be careful, be very, very careful,” he said. Then he disappeared into the hall.

  What in hell did he mean by that, I wondered.

  He came back with his glasses perched on his nose. “You are treading where angels fear to tread,” he said, wagging that finger again, lips pursed as he sank into his chair.

  Never tell a reporter don’t go there, because of course she will. Never tell a reporter that the people she is interested in are very dangerous, because she will have to throw herself at them to find out why.

  He proceeded to tell me that the definition of a Canadian publisher had been adjusted after the gift/sale of M&S so that M&S, in spite of being bankrolled, administered, and marketed by Random House, could still qualify for membership in the Association of Canadian Publishers which represents Canadian independents. The requirement for membership had been 80% Canadian owned until 2001, he insisted, but then someone changed it to keep M&S on board. And, he added, there were friends of M&S in official places who had made sure that M&S got public money it wasn’t entitled to. He’d tell me all about that later, he said. But first, he offered an anecdote.

  In the summer of 2000, someone he knew at Quill & Quire, the book trade publication, told him that M&S was being given to U of T, and that Random House was to take over marketing and administration. There was going to be a press conference. He’d called up people at the University of Toronto Press, assuming they’d know more, only to discover that they knew nothing about it. They had “scrambled to attend” the press conference because they hadn’t even gotten the press release. My informant went to the press conference too, with his boss.

  He’d listened to what was said about Random House taking on the management of M&S’s marketing and sales, while M&S’s independence would be guaranteed by the creation of a new M&S board. “I said to colleagues at University of Toronto Press, it’s a fucking lie,” he said. Then someone, he couldn’t remember who, asked Avie Bennett how this deal fit within the rules about Canadian ownership of publishing companies. Bennett, my informant said, replied that “he’d offered the company to Jack Stoddart and Anna Porter, and they had declined.”148 My informant knew Jack Stoddart pretty well. He’d heard nothing from Stoddart about any such offer.

  He stopped. He looked at me, his eyes narrowed. You know Avie got a huge tax credit, he asked?

  How much? I asked.

  It was $15 million or in that realm.

  Is that known, or rumour?

  That’s what he’d heard, he said. And from that, he’d figured that M&S must have been valued at a total of $45 million in order to justify such a huge tax credit. As I wrote down his claim, I did my own calculation. Since Random House had bought 25% of the shares, and U of T got 75%, if the $15 million tax credit figure was correct, then the value of the company must have been more like $20 million, not $45 million. I began to listen to him a little more skeptically.

  So, he said, after the press conference he went back to his office and called up Jack Stoddart at his cottage. He’d asked him flat out if Avie Bennett had tried to sell M&S to him. “‘You know better,’” Stoddart had replied. And then he’d called Anna Porter. “Anna said something along the lines of, ‘Trust me, if I had been offered it, I would have found the money to buy it.’”

  “Now flash forward to 2004,” he continued. He was at the Canadian Booksellers Association convention. He was in a booth across the way from McClelland & Stewart’s where there was a display of a book on ways to cook with pork fat. This outraged him.

  How many Jews died so you could publish this? He’d hissed at an M&S colleague. His colleague told him to play fair, he said, with a sniff. “I thought I was,” he said.

  “What are you talking about?” I asked.

  So he explained, and when he’d finished explaining, I checked. Not long after the 1998 purchase by Bertelsmann of the then-­American-owned Random House (which had long since acquired Knopf and Doubleday and Dell, plus various other famous American publishing companies), ugly accusations about what Bertelsmann did under the Nazis during World War II were aired in the press. The general allegation was that Bertelsmann had greatly benefited from the Nazi State: specifically, the charges were that it had run printing plants with slave labour, and it had published millions of propaganda tracts and books for the Hitler Youth and the German army. An Austrian journalist named Hersch Fischler and American journalist John S. Friedman published these claims in The Nation—Fischler had published them first in a Swiss newspaper called Die Weltwoche.149 Bertelsmann’s official history said something quite different. It had been written by a man who had helped publish the fraudulent Hitler diaries in Stern magazine (owned by Bertelsmann). The official corporate history claimed that the company had been shut down by the Nazis in 1944 because it was a political thorn in the side of the Nazi state.150

  In response to these claims, Bertelsmann decided to open its company archive to a group of independent historians, led by a history scholar at University of California Berkeley, Saul Friedlander.151

  In 2002, the independent scholars published their 800-page report.152 They had determined that Bertelsmann’s war-time controlling shareholder, Heinrich Mohn, the father of Reinhard Mohn who by 2002 ran the foundation controlling Bertelsmann, had indeed printed millions of tracts and books for the Hitler Youth and the German army. Its contractors had made use of slave labour in Lithuania. In fact, the company, which had got its start in the 19th Century publishing religious materials, had thrived in Nazi Germany by publishing its propaganda. Heinrich Mohn had also been a donor to the SS. After the Allies invaded Germany, Bertelsmann had got back on its feet quickly because British officials were told that the Nazis had shut the company down in 1944 for political reasons. Bertelsmann was therefore given a license to get back in business. The Commission found the Nazis had indeed shut Bertelsmann down, but not because it was politically unacceptable. It was due to the suspicion that it was illegally stockpiling scarce paper.153

  Ohmigod, I said. I had no idea.

  Now my informant veered back to what he really wanted me to think about.

  “Meanwhile, M&S collected millions from the Canada Book Fund, the Ontario Media Development Corporation, the Canada Council, the Ontario
Arts Council.”

  What are you saying? I asked. Are you saying they didn’t qualify for grants but got them anyway?

  Yes, that’s what he was saying. “And they got millions,” he said again.

  But the granting agencies only give money to Canadian publishing companies that are owned and controlled by Canadians, I said. The qualifying level of ownership for some of the programs in Ontario is 75% and M&S was 75% owned by a Canadian institution. Why wouldn’t they qualify?

  But was it Canadian controlled, or was it controlled by Random House? He asked.

  In addition, he asserted, M&S had been, in his belief, over-funded by officials at the Canada Council who misapplied certain formulas in its favour. My informant had pointed out to officials that certain books published by M&S had been funded as if they were new, when they were in fact being reissued (new works earn a higher grant than reissues of books from a backlist), and that certain books had been funded as works of fiction (which earn a higher grant than non-fiction) when they were not, books such as Canada: A Peoples’ History, he said. My informant had been irritated enough to file access to information requests about this which had produced documented evidence from the Canada Council that books that should have been treated one way had been treated another. When he pointed this out to officials by reference to the database recording the matter, an official “corrected” that database. And he was warned to back off or be cut off.154

  Just go back to what you said before, I said, your allegation that M&S got grants it wasn’t qualified to apply for. Explain that.

  From the moment Random House bought 25% of M&S, he explained, it was well known that the company no longer had “its own bank account” and that Random House issued cheques on behalf of M&S. This, in his view, spoke directly to the issue of control. M&S’s distribution was also moved to Maryland though books sold in Ontario must be distributed by Canadian companies. Canada, he said, had done a bad job of building institutions, which was a legacy of being a colony: only the Crown matters, he said.

  He was suggesting that rules don’t matter as much as they should in government agencies: friends matter more.

  I asked him about the net benefit undertakings given to the Minister of Canadian Heritage when Random House bought U of T’s shares of M&S in 2011. And I asked about the undertakings made when Random House was allowed to merge with Penguin Canada in 2013.

  “The undertakings are basically ‘while you screw us, wear a condom,’” he said dismissively.

  As far as he could tell, the whole publishing system, including enforcement of the national publishing policy and the Investment Canada Act had begun to go wrong after the Free Trade Agreement. “When the air is poisoned, so is the sealed room,” he said. The government policy encouraged foreign-owned publishers already active in Canada to start publishing Canadian authors, and from that point, Canadian independents could not compete for those Canadian authors who found an audience. “Coach House [authors] were getting poached,” is how he put it. His company’s authors were getting poached too. He had tried to keep up and to compete. At one point, he made an offer on a new project written by a suddenly famous novelist who had begun his career with small Canadian independents. The most he could muster was $6,000. The advance offered by a foreign-owned publisher was $120,000. If the provincial governments bought Canadian novels for the schools, he said, instead of more famous American books such as Harper Lee’s To Kill a Mockingbird, “I wouldn’t need grants.”

  The more he talked, and complained, the more it seemed to me that the most dangerous thing he’d told me was that after the gift/sale of M&S, it got grants it no longer qualified for because Random House controlled it. I asked again for clarification.

  Not just a few, he said, but more grants than any other Canadian publishing company. He wagged his finger in time with each word.

  Surely he didn’t mean that, I thought. So I asked him again. Did he mean it?

  He didn’t answer directly. Instead he said the Chapters-Indigo merger should never have been allowed. Beware this person and beware that one, he said, tossing names around like petals, well-known names, names with many honours attached. A certain institution in town accepted gifts that were fakes, producing questionable tax credit receipts, he alleged. Even though there had been great difficulty getting a favourable opinion on the authenticity of one such gift, nevertheless, a gigantic tax credit receipt had been issued. He had information from the inside, he knew what he was talking about and he had voiced his opinion loudly at a dinner party. The person sitting next to him had taken umbrage, said he knew the man being defamed very well, who would be told, and my informant would be sued. No lawsuit ensued.

  Are you saying that there’s a practice among certain charitable institutions of letting big donors get away with things? I asked.

  I was trying to get him to say something that I could check, a number, a date, something substantial, not just these hints and allegations. But whenever I pressed for details, he just offered another allegation.

  Where can I check on these grants to M&S? I asked.

  He said I should look up the annual grant reports published by the federal and provincial governments and I should ask the bureaucrats to help me get the facts and figures. “If you put it that you’re writing a success story, they’ll be all over you,” he advised, bitterly.

  How much money are you saying M&S got that it wasn’t entitled to? I asked.

  “It’s millions,” he said.155

  3

  Dragged In

  I sat in my car scratching down phrases, words, descriptions. I was shaken: these allegations, these names he had thrown around—were these just rumours taken too far, or actual facts? Was this man trustworthy, or not?

  The character question bedevils reporters whenever a stranger hands over a ticking bomb in the guise of a story. Does the person saying ‘dangerous, beware’ actually know something? Is his judgment good, is he legitimately pointing to matters of public interest or is he trying to suck the world, via the reporter, into his personal quagmire? My informant was clearly smart, and knowledgeable, and committed to his work and his country, but he was also angry. Was his anger a character flaw or was it legitimate fury at the private manipulation of the public system? He’d declared himself to be a Liberal so there was no anti-State ideology at work. He approved of the rules enacted to protect Canadian publishing and publishers, and he approved of the grants and tax credits that keep them in business. He was no libertarian fixated on the evils of government, convinced that all who apply for help are fraudsters. Yet I found it very hard to believe that M&S had illegitimately gathered millions from government programs, and that civil servants had conspired to help.

  You’re supposed to be a reporter, I said to myself. So get down to it. Find out if he’s full of crap or not.

  He’d said I should read the government’s own reports. Well that was easy. But I decided I should also check everything else about this story from the beginning, starting with the gift of M&S shares to the U of T. I decided to check when it was accepted, by whom, whether there was any record of any tax credit receipt issued to the tune of $15 million, the lot.

  I called University of Toronto Press to ask whether they’d been involved with the gift of M&S. The executive I spoke to confirmed that his colleagues at the Press had known nothing about the gift until it was made in 2000, and they still knew nothing of the details because the shares had been given to the Governing Council of the University, not to the Press. He said that records of Governing Council meetings are available. Perhaps I could learn more by reading them.

  The good thing about my alma mater, University of Toronto, is that it puts up a good show of being transparent. The bad thing about University of Toronto is that when you dig beneath the surface, transparency can disappear.

  The Governing Council’s meeting minutes, and the minutes of certain o
f its committees, such as the Business Board, are available online, as are the University’s annual financial statements.

  I found the minutes of the Governing Council meeting when the resolution to accept the gift was passed. The date was June 29, 2000, only two days before the agreements surrounding the gift were set to take effect and three days after the University had issued a press release announcing it, which seemed odd. Why bother to hold a vote at all? I could see from the resolution that the gift had involved an agreement between four parties, the Governing Council of U of T; Random House of Canada; First Plazas Inc; and McClelland & Stewart Ltd. It was clear Avie Bennett must control First Plazas Inc., and that First Plazas Inc. owned the publishing assets of M&S. As part of the transaction, First Plazas had transferred ownership of some (but not all) of the assets of McClelland & Stewart Ltd. to a new company also called McClelland & Stewart Ltd. The University got 75% of the shares of this new entity. The 25% sold to Random House of Canada was not mentioned in the resolution, but it did refer to an agreement between McClelland & Stewart and Random House of Canada regarding “administrative services and financial support.” I later confirmed that First Plazas Inc. retained the agency business by which the old M&S had acquired rights to sell books in Canada on behalf of foreign publishers. A few hours of Googling showed me that a few months after the gift/sale, First Plazas Inc. sold this agency business to a former executive of M&S,156 Kenneth Thomson. Thomson renamed this business Stewart House Publishing Inc. and Stewart House Distribution Services which rented a large warehouse in Markham owned by the publishers Douglas & McIntyre. Stewart House also set up a US operation. But within two years, all facets of this agency business had gone bankrupt.157