by Elaine Dewar
What do you know about the M&S shares being passed over to Random House by the University for essentially nothing? I asked.
I can’t comment because I don’t know, he said.
Did you know that Bertelsmann had a Nazi past?
First I’ve heard of it, he said. But he thought that probably was the case for many German companies. They had been cleaned up so they could move forward.
The tax credit—what was the size of it? Can you tell me?
“I don’t remember the size of the tax credit,” he said. “But [I] think it’s a personal matter between an individual and the government.”
I could see he was getting tired. It was time to go. He had answered the vital question about when control changed hands, but just to be sure, for the record, I asked him one more time.
So, I said, when did effective control of M&S pass from U of T to Random House? (Effective control is simple English for the legal term de facto control.)
“[From] 2004—basically it’s Random House’s baby,” he said.
I threw my notebook and pens into my bag and thanked him for his time. But instead of saying goodbye, he said he wanted me to go to the far end of his office and pull a book bound in red leather off the shelf and read what it said on the inside cover.
I did as I was told. I found the red book. It was Pierre Trudeau’s memoir. I had been told that Avie Bennett used to have a box at the Big Owe (the stadium built for the 1976 Olympics) in Montreal and that Pierre Trudeau would sometimes watch Expo games with him there. I opened the book to the first inside page. In Trudeau’s hand were scrawled these words, “thanks for the advice.” I could see why Bennett would want me to read it. It showed that he had a warm relationship with the Prime Minister who brought Canada into the fullness of nationhood, who brought forward and passed the law that made the sale of Canadian publishers to foreign entities illegal unless certain exceptions pertained.
I walked out into the cool sunshine thinking I could use some wise advice myself. My informant had been right about many of his allegations, and now Bennett had given me one more thing to chew on—that the University had done no deep investigation of the value of M&S when they issued him a tax credit receipt for shares.
What kind of story had I been pulled into?
8
For an Exit Strategy, Call…
When I got home, I called Robert Prichard. I couldn’t just take Bennett’s word for it that the University of Toronto had put a value on the M&S shares without reference to the sale to Random House, and that the University had issued a tax credit receipt without sending in the accountants to examine M&S’s books and prospects.
I left a voice mail message on Prichard’s line, and on his assistant’s, explaining that I needed to check facts about that gift.
I did not expect Prichard to call back, though I had to try. He has been hip deep in the pool of power coagulating around Queen’s Park and Bay Street for more than a quarter of a century, a member of a charmed circle of accomplished people who have blessed Canada with their intelligence and their determination to serve. I expected his assistant to ask for an email she could forward to him: I thought I would probably have to wait for hell to freeze over before I got a response.
Consider his astonishing curriculum vitae. He was born in Britain, grew up in Toronto (his father taught law at the University of Toronto). He earned a B.A. from Swarthmore, a US Little Ivy League school that ranks higher than most real Ivies, an MBA in Finance and International Business from University of Chicago, an LLB from University of Toronto, where he graduated with the gold medal, which is no small feat. He did an LLM at Yale, became Dean of Law at University of Toronto in 1984, its President in 1990. He has, as an upper-class Brazilian scholar of my acquaintance would say, a proper formation.
And then his life got busier, though there were downs as well as ups. In 2002, Prichard was appointed President and CEO of Torstar. Under Prichard’s direction, Torstar bought its competition—20% of the conglomerate CTVglobemedia, and Black Press. By the time Prichard resigned from Torstar in 2009, the CTVglobemedia investment had been written down from $200 million to $95.7 million, and Black Press to zero. There had been layoffs, Torstar’s share price had dropped from about $20 to $6, and the dividend was cut (though do not cry for Prichard: he left with about $10 million in severance,245 bonuses, and shares).246 Torstar’s decline cannot be laid at his feet: newspapering everywhere was under assault from the relocation of ads from newspapers’ classified pages to the Internet, from the relentless bleed of major advertisers to Google and Internet platform providers, from the emergence of smart phones and tablets with an ever-expanding array of apps, from the rise of social media that have changed how most people get their information about the world.
Prichard was then appointed Chairman of the newly formed board of Penguin Canada (there’d been a sex scandal and the company had been placed under the sharp eye of Penguin US). He was also appointed President and CEO of Metrolinx by Ontario Premier Dalton McGuinty, but quickly became Chairman of its board. Metrolinx plans, builds and runs transit systems linking the municipalities forming the Greater Toronto Area and the Greater Hamilton Area. This creates serious political flack. Metrolinx decisions can make developers happy or sad, and municipal and provincial politicians happy or sad, and can drive voters to punish or reward. For example: Metrolinx opened a new station in 2015 with bright lights around its perimeter and buses rolling in and out by night. The station was placed right behind a residential neighbourhood with big backyards. The hue and cry made the papers. Prichard went to check it out himself and changes were made. Similarly, Metrolinx miscalculated the fare to be charged for the trip between Pearson Airport and Union Station on its new, dedicated UP Express line, which is supposed to be like the fast, cheap transport systems offered to air travellers in London and Paris, etc. But the fare was set so high that hardly anybody used it, which meant it could never pay for itself. Eventually, the fare dropped and its CEO was replaced. In other words, Prichard presided over the problems and the solutions.
During his tenure at Torstar, Prichard added new corporate directorships to a list that already included Four Seasons, Onex, and Imasco. Prichard had joined the Imasco board in 1993, while he was President of U of T, the year before he joined the Onex board. Imasco’s Pension Fund had been one of the earliest investors in Onex. Imasco was an investment vehicle for the cash flowing from its ownership of Imperial Tobacco of Montreal. As President of U of T, Prichard apparently accepted so many gifts to the University from Imasco that those who disapproved referred to it as the University of Tobacco. (That’s a nicer name than Prichard’s Palace, Seymour Schulich’s epithet for U of T after Prichard accepted Joseph Rotman’s donation to the management school, not Schulich’s.247 Schulich had to settle for York, according to Peter Newman in Titans.) Prichard also served on the boards of Brascan (now called Brookfield Asset Management), Moore Corporation and George Weston (Loblaw). These days he is on the board of Peter Munk’s Barrick Gold and is Chairman of the board of the Bank of Montreal (the BMO Financial Group). But what you really need to know about Robert Prichard is that soon after he left Torstar, he became the non-executive Chairman of Torys LLP, which was once called Tory, Tory, Deslauriers and Binnington.
Torys is a corporate lawyer’s idea of heaven. Not only do its partners include some of the great lawyers in this country, but it promotes the role of women in the profession, advocates about righting the wrongs done to First Nations, and about the roles lawyers play in safeguarding democratic institutions. Former Ontario Premier William Davis was Counsel to the firm for many years after he left public office. Frank Iacobucci became Counsel to Torys after retiring from the Supreme Court of Canada.248 Lawyers who have “matters” with Torys lawyers rarely have bad words to say about them.249
Torys’ major client has been the Thomson Corporation. John Tory (the father of the Mayor of
Toronto who is also named John Tory) along with his twin brother James, led the expansion of the firm founded by their father from the 1950s onward. In 1973, John Tory left the firm to work with Thomson Corporation’s founder Roy Thomson, 1st Baron Thomson of Fleet, who had become a Fleet Street mogul by buying newspapers and media outlets in the UK (including the prestigious Times and Sunday Times). Tory maintained this consiglieri relationship with Thomson’s son Kenneth, and for a time with Kenneth’s son David. Together, they built Thomson from a smallish newspaper chain (Thomson bought his first paper in Timmins, Ontario, for about $200)250 into a globe-spanning information giant with a little oil business on the side. Meanwhile, the law firm remained in the hands251 of John’s twin brother James and partners. The name change occurred when the firm merged with a New York law group. It has also set up branches across Canada.
That Prichard presides over Torys speaks of the high regard in which he is held by his peers, but also of the rain he can make. Prichard is an economic advisor to the governments of Ontario and Canada. He has served on too many boards and commissions to mention. He has been recognized for his service by being named a Member of the Order of Ontario and an Officer of the Order of Canada.252 (But not a Companion: Avie Bennett is a Companion. If Prichard wants to be a Companion, he might consider buying what’s left of M&S from Penguin Random House.)
The only time I have seen Prichard in the flesh, as opposed to the pages of my newspapers, was one hot summer night at a restaurant in my neighbourhood—a very ordinary restaurant—eating dinner by himself. He was dressed the way most of us dress when we’re by ourselves on hot summer nights, in slacks and a shirt of no importance. He wore a frown too, the same one that usually appears in the newspaper photos under his tousled crop of fair hair. The frown is like a long divot dug between his eyes, eyes that angle sadly down at their outer edges. Why does he frown? Is he considering so many things at once that he forgets to tell his face to take it easy? He told one magazine interviewer that he has a farm outside of town where he relaxes over a book on weekends. I believe he has a farm. But I doubt he relaxes anywhere.253
I offer as proof, this: I got a call back from Rob Prichard the same day I called him, at about 5:30 in the afternoon. I was astonished, and at first thought this boded well, that he would say yes when I asked if I could please come down to his office and speak with him about Avie Bennett’s gift of M&S to U of T.
No, he said.
Why not?
“[It’s] not a great idea to meet with you. There’s a cardinal rule at University of Toronto. Former presidents should be seen and not heard.”
Yes, I’m sure, I said, but my questions are about what you did as President and no one else can explain that but you. (And besides, I should have said, here you are being heard though not seen. But that only occurred to me later.)
“Well if it’s something prior to 2000…,” he said.
It happened in the spring of 2000, I said, in your last couple of months as President.
I was pretty sure he would still say no, so I told myself I should just treat this phone call as a face-to-face interview because it was probably as close to Prichard as I was going to get—unless I stalked him at a public meeting. I once tried that on Marshall (known as Mickey) Cohen, former Deputy Minister of Energy, Mines and Resources and former Deputy Minister of Finance, who was at that point working for the Reichmanns’ at Olympia & York Enterprises254 as they acquired companies—such as Gulf Resources.255 Canadian investors had been encouraged by the federal government’s National Energy Programme and certain interesting tax provisions to buy the Canadian subsidiaries of foreign oil companies. Cohen had helped form these policies, along with Ed Clark, and while working at Enterprises, he was executing them. Cohen had refused to be interviewed. So I went to an annual meeting he had to attend and tried to corner him. He’d walked backwards very fast and got away from me. I thought Prichard would probably do the same if I stalked him. Besides, a face-to-face interview was not essential. Physical context and personal attributes are the main reasons why journalists ask for meetings, though listening to a person on the phone is sometimes more revealing: important signals may be missed when you are sitting with your head down over your notes on the other side of someone’s desk. Besides, I already knew what Prichard looked like and I had spent time inside Torys. I had endured mediation there during the end game of the ‘Robertson 1’ electronic rights class action, so the setting was still fresh in my mind. So was the Torys lunch, delivered by pushcart loaded with a charming array of soups and wraps and other treats set out on white swoops of china, surmounted by edible flower accompaniments. The art in the conference room had seemed so appropriate to Torys: an actual wasp’s nest displayed under glass on a white plinth.
So, as Prichard pondered whether he would speak to me at all, I simply remembered entering the south tower of the Toronto Dominion Centre, one of six black, sleek, featureless totems to commerce whose placement and style were designed by Ludwig Mies van der Rohe at the suggestion of architectural maven Phyllis Lambert (daughter of Sam Bronfman). They were built by Fairview, forerunner of Cadillac Fairview, which controls them.256 I remembered the slippery granite floor in the entry hall, the express elevator that zoomed up to Torys’ 33rd floor reception. I remembered the reception area’s vertiginous views of water and sky. Tory’s ten floors are interconnected by a floating staircase, the whole space redesigned by KPMB in 2008 in a carefully conservative version of the modernist style.257 I remembered my way down a wide hall with beautiful planked flooring, past glass-walled meeting rooms with wood-panelled sliding doors, past a series of Ed Burtynsky’s arresting images, hung on white walls, of the devastation wreaked upon the earth by corporate hands.
I imagined Prichard sitting in a big, light-washed room, one lanky leg flopped over the other (did I mention he is tall?) with the lake behind him as moving wallpaper.
As he did not hang up on me, I began to quickly explain what I’d learned from Gibson, from U of T, and from Avie Bennett, which was why I’d called.
I told him that I had just been to see Mr. Bennett and we had talked about his gift of 75% of M&S to U of T. (Prichard interrupted to say he still considered it to be a magnificent philanthropic gesture.) I told Prichard that I had asked Bennett about the valuation of the shares for the tax credit receipt issued by U of T, and Bennett had said that, contrary to what I had been told about how other universities deal with the gift of shares of private companies, U of T had done no independent valuation of the M&S shares, and that the sale to Random House had not been used to establish their value.
There was a brief silence and then an intake of breath followed by a strong statement delivered in a wrap of pure sarcasm. Prichard said that he was sure that in my fairly busy life it wouldn’t surprise me to learn that such a thing—issuing a tax credit receipt for a gift without independent evaluation—would be “beyond the competence of the president” of a university.
In my business, that is what is called a non-denial denial.
Well, I said to him, I’d thought, thanks to clever husband, that the tax credit value must have been based on the sale of 25% of the shares to Random House of Canada, but Mr. Bennett had assured me that was not correct, and yet, he had also said there had been no combing through the business of M&S by the University either.
“My recollection is Mr. Bennett sold 25% of M&S at the same time, or before the gift to us, I forget… They paid a fair market value.” And that was the basis of the valuation, he said, “a contemporaneous market transaction. That is my recollection.”
So how would you suggest that I determine what actually happened, I asked, as the two of you disagree? How do I know whose recollection is correct?
“[If I were you] I’d go back and get the files,” he said. “It would show the basis of the receipt.”
“Which files?”
“The Development Department’s. The Pr
esident of the University can’t do that,” he reiterated. By which he meant, the president of a university is not in charge of issuing tax credit receipts for gifts. People working in development departments do that.
I asked him if he could just try and walk me through how the gift had happened, how the proposal had come to him in the first place.
“Avie told me that he wanted the company in different hands. He proposed to sell 25% to Random House, for the benefit of [its] back offices, distribution, early [adoption of] digital, and to put 75% of the shares in the University to maintain Canadian ownership in U of T’s hands.”
Okay, I said. So you had no problem with that idea.
“He was a friend and a prominent man for many years. He made the proposal. We did the gift. We made the agreement public at the time. The terms under which he gave the shares may not be public.”
He was certainly right about that: I’d been searching for those terms for some time with no success. They had been well and truly buried. I told Prichard that Bennett said he had spoken to people in Ottawa. I told Prichard I didn’t get that. It wasn’t as if Bennett was trying to sell control of the company to a foreigner. So why talk to Ottawa at all? I asked.
“We had to get Ottawa’s support,” he said.
But why? I asked, and from whom? The law requires that Canadians control Canadian publishing companies, there’s nothing in it prohibiting the sale of a minority share to a foreign owner.