by Elaine Dewar
He’d mentioned in his memo that he had spoken with officials at the U of T and at M&S. I wondered if it was Bennett who had assured him that M&S would do better in association with Random House than on its own. Did you meet with Avie Bennett? I asked.
“I can’t remember,” he said. “It’s just not embedded.”
So then I told him that the University’s M&S shares had ended up in Random House’s hands for one dollar, notwithstanding that M&S owned the best backlist in the country as he’d mentioned in his opinion. What do you think of that? I asked
“I’m surprised they sold it for a dollar,” he said. “It could be looked at that the business is a liability if losing money…”
Could he think of any reason why Avie Bennett would not want the size of the tax credit receipt that he received to be disclosed?
He asked if Bennett disclosed his other gifts. He himself did not.
Yes, I said, he did.
No, he said, he couldn’t explain it.
I told him about the U of T recording this transaction in a place where the size of the tax credit receipt would not become public because Bennett had insisted on it. I asked whether Random House could have appropriated the cash that flowed to M&S from grants and tax credits.
It could have, he said, but he’d be surprised if it had. And then he asked me a question.
Is publishing still protected? He asked.
Yes, I said, it is. Sort of. The law is still in place, but deals are getting done anyway.
The marketplace is owned by international publishing companies, like the oil business, he said. He did not appear to have an opinion on whether that was a good or a bad thing. It was just a statement of fact.
One more thing, I said. Avie Bennett told me that he arranged this gift with the U of T first, and the Random House deal came after that. He told me the value of the tax credit was not based on the Random House sale.
“The Random House deal has to be in place before he does this deal with Plazas,” he said vehemently, referring to the transfer of shares for assets between First Plazas and new M&S, the first deal in the value chain. “The likelihood that Random House came out of the blue after this valuation deal is zero. There’s no way.”
He meant that Bennett had to establish what Random House was willing to pay before he transferred assets to the new M&S and asserted their value to be $22,250,000. The CRA must have agreed with him on that, otherwise they would have challenged the tax receipt. Revenue Canada, he said, clearly hadn’t seen that as necessary. “[It was] sufficiently arm’s length that [they said] we’ll buy the numbers, like I did.”
“And,” he added, looking me right in the eye, “if the CRA had challenged this, I’d have fought them tooth and nail. Because it’s defensible… It’s a warranted opinion.”
I was getting ready to leave when he asked me if M&S published Margaret Atwood. Clearly, he’d forgotten his own opinion in which he’d listed Atwood as one of the writers published by M&S who made it valuable.
Of course, I said.
I don’t read fiction, he explained. “I called her Peggy when we were at Vic [Victoria College of University of Toronto] together.”
And then he asked me this question: “Why do you care?”
This was a variant of “Who are you? What do you want?” put to me by that informant who’d turned out to be right about so many things.
The truth is I was no longer sure why I cared.
I muttered something to Scott about how it just seemed strange to me that the oldest and best Canadian publisher, owning the country’s most important backlist, had ended its days in the bosom of the biggest publisher in the world, in spite of a law devised to prevent that, in spite of a policy that says telling Canadian stories reflecting the Canadian experience is in the national interest. Our policy and our law had delivered us instead a great, big, foreign-owned publishing oligopsony.
“Oh, that argument,” he said. “It’s always the same argument. This one is culture, but it could be jobs. On the other hand [Joe] Stiglitz [winner of the Nobel prize in economics] says it does matter, that you don’t get innovation without it and Stiglitz is smart.”
And as I went to the door, he said: “We do like our big companies.”
By the time I got into my car to drive home, the sun was out. As I drove away, I replayed in my head what Scott had told me. That’s when I remembered his suggestion that I should get the M&S financial statements from the U of T. It made me blush. What kind of reporter are you? I yelled at myself. In all your careful crafting of that FIPPA application, in all your follow up emails with Howard Jones and his colleague Rafael Eskanzi, that was the one thing you failed to ask for.
As soon as I got home, I wrote up another FIPPA and took it to the U of T. I asked for all financial statements and quarterly reports of M&S for the 11 years during which U of T owned 75% of M&S’s shares, and any documents or notes regarding that registered debt. I also asked once more for any notes or memos or emails setting out why the ‘put’ had not been exercised.
I didn’t have much hope that they’d give me what I’d asked for, but I had to try.
Because: I had decided it didn’t matter why I cared. I’m a Canadian, and I’m entitled to care.
And so, the FIPPA clock began to tick once more.
14
Back to the Board
While I waited for the second FIPPA to be processed, I kept trying to think of other means to get those financial statements. I wasn’t sure the U of T would produce them. I wasn’t sure I’d get memos about the ‘put,’ either. In fact, I didn’t understand why I had been given things that the University had the right to withhold under the FIPPA and in the case of some of the contracts, the duty to keep back. I was grateful, but wary. It was as if someone high up in the administration of the U of T had decided that parts of this story needed to be aired regardless of contracts and solicitor-client privilege, perhaps as the means to settle a score. Such documents can create false confidence that everything has been shared. But a document withheld can change the meaning of those handed over.
I decided to try other board members once more. After all, in our civil system, board members are responsible for what a corporation does. At a minimum, each board member should have gotten copies of annual financial statements and should have been aware of the reasons for major decisions taken. I decided to try Arlene Perly Rae on Facebook again. Perly Rae had been on the M&S board through most of the important changes—such as the renegotiations of the Administrative Services Agreement, the extension of the ‘put,’ the registration of the M&S’s debt. I thought maybe, just maybe, she’d kept copies of the financial statements or that she would remember board discussions about the ‘put’ and the debt. This time, she answered my Facebook message. We made an arrangement to speak on the phone.
To my disappointment, she told me she had long since purged her M&S notes and documents.
She confirmed that it was Avie Bennett who had invited her to represent U of T. She had known him for years. She used to review books, children’s books, and he had asked her for advice on several projects, even on whether or not M&S should buy Tundra Books. But mainly, she knew him socially. She had been friends with his daughter-in-law, Alison Gordon, whose complaints had spurred Bennett to buy a piece of M&S in the first place. She and Alison went back a long way: they had travelled to Egypt together after Prime Minister Begin of Israel and President Sadat of Egypt had their “rapprochement.” She and Gordon had figured that might be the opportune moment for two Jewish girls to go to Egypt, in Gordon’s case, to return, because she had lived in Cairo as a little girl. (Perly Rae didn’t tell me why, but I looked up Gordon’s father, J. King Gordon, later. He had served there as a diplomat after World War II. Before that he had been a Rhodes Scholar, a co-writer of the Regina Manifesto and a co-founder of the CCF, a United Church Minister, a journalist covering t
he UN for the CBC.) Perly Rae thought she’d first met Bennett when her friend Alison married Bennett’s son, Paul. That was shortly after she married Bob Rae, in 1980.
Yet in spite of their long relationship, Perly Rae had been surprised to be asked to join the M&S board. She had no management experience. All her previous board appointments had been to non-governmental organizations, charities doing good works. She’d deferred to Rob Prichard and John Evans on budgets and other financial issues because they were so much more knowledgeable on the business side than she was. “I felt I was there for the authors, Michael Ondaatje, Margaret Atwood, Munro. I loved the group M&S [book] launches.”
She remembered discussing specific books at board meetings, for example Brian Mulroney’s memoir, should it be published as one volume or two. She remembered there was an Asian guy on the board representing U of T who didn’t say anything. She remembered that Doug Gibson took charge and then was replaced by Doug Pepper. How often did the board meet? She thought maybe every two months. She thought the board was strong. “Avie brought in staff to discuss planning and accounts,” she said. She thought it was her job to advocate to keep authors in the fold “and reassure them. Others felt that too. Avie was our saviour to keep it going as the key Canadian publisher. We spent a lot of time to make sure it stayed Canadian.”
I read her what U of T officials had said in 2001 regarding the fact that they had no control, only influence over M&S. She said she felt the U of T had a strong presence, though Random House did too. She did not remember the company reporting a profit. She remembered every year as a struggle. Grants were very important to keeping the company going.
I read to her from the correspondence of April, 2006 between U of T officials Helen Choy and Pierre Piché regarding a write down of the value of the U of T’s shares to $10.9 million. She was still on the board at that time. Did she know about that write down?
No, she couldn’t remember any discussion like that. That just wasn’t her area of interest.
What about debt? I asked. The same letter said that the net shareholder’s deficit was $3.1 million in April, 2006. Did she remember discussing that? Did she know anything about the debt rising to $16 million after that?
She couldn’t recall the company being millions of dollars in debt. “I just can’t remember,” she said.
Did you see financial statements? I asked.
Yes, she said, she did, but nothing with those kinds of millions in them.
And what about the ‘put,’ I asked. Did you understand there was a $5 million ‘put’ in favour of the University that it could call?
“Never heard the word ‘put’ before. I’m sorry.”
Well that was interesting. One of the longest serving board members had no idea what a ‘put’ is, let alone knew that the U of T could have called its ‘put’ to get value out of its M&S shares. That ‘put’ had been extended when Perly Rae was still on the board. Either the board had not discussed it, or she’d missed that meeting, or she had simply not understood what it was about when it was being discussed. The latter possibility seemed very unlikely. Arlene Perly Rae is very, very smart. If someone had raised the issue of extending the ‘put,’ she’d have asked questions until she understood what was going on. I was willing to bet that it had not been discussed by the board, but had been handled off stage somehow by Bennett and Random House and people from the U of T. On the other hand, the Unanimous Shareholder Agreement had to be amended to permit that extension, and M&S was a signatory to the Unanimous Shareholder Agreement. So she should have seen memos about that. But clearly, she had not.
Did you think that control was passing to Random House when Doug Pepper came on board? I asked. Did you see this as a kind of salami takeover, one slice at a time?
She’d never heard of a salami strategy before, either. When I explained it, she did not agree that that was what had gone on. She said it had been important in the early years to keep Doug Gibson there because he kept the big authors. But Doug wasn’t a finance guy. She thought Doug Pepper was more a business guy than Doug Gibson. “That’s why we got Doug Pepper,” she said. No, she didn’t realize Pepper had spent his career to that point as an editor for Random House, the prior decade working in the US for Crown.
“There was a feeling that Random House was taking more of a role,” she said, “storage, distribution, to save money, not to duplicate…” But it wasn’t a takeover, it felt “very positive, Random House [was there] to help, not to absorb.” In fact, she felt M&S lasted longer than it might have (because of Random House’s involvement.) As far as she was concerned, it felt as if they were all doing a good deed, keeping those authors (Ondaatje, Atwood, Mistry, Munro) in print “and it was kind of nice to have this Random House injection, though [there was] fear in the community, like, oh, oh, better to have it subtle than to lose that brand and history… [these] men of great integrity, Avie, John, Rob—the stuff you’re talking about is out of my league.”
Do you remember why you closed down Macfarlane, Walter & Ross? I asked.
“The sales were bad and there was a tough decision about letting it go,” she said.
And yet by contract among the parties in 2000, Macfarlane, Walter & Ross was to be kept intact, and to publish between eight and fifteen books a year, certainly not to be shut down only three years later for failure to make profits, profits it would have made if Avie had purchased its backlist, profits that could have alleviated M&S’s debt.
Perly Rae resigned from the board in December, 2006, because her husband, Bob Rae, had decided to run for the leadership of the federal Liberal Party. She had to get off most of the boards she served on at that time. She thought I was making something nefarious out of something that just was unfortunate, like the rise of Amazon and Costco, and then there was that woman who ran Indigo, what was her name? Whoever she is, said Perly Rae, until she came along, booksellers did not return author signed books, but she changed that. They had all been trying their best.
Well that was interesting, I thought when I hung up the phone, but not exactly definitive. Who else to try?
Wait a minute, wait a minute: I hadn’t raised the debt question or the ‘put’ question with Doug Gibson when I spoke with him because I didn’t know about either one. He had been the President of M&S. He must have read the financial statements. He must have helped Random House prepare them.
That very day I got something in the mail from the Writers’ Union saying that Gibson was going to lead a seminar on publishing for its Toronto chapter. There would be beer and conversation about the business at a pub just down the street from Indigo’s flagship store. I contacted Doug and asked if I could do a follow-up interview the day after. He said fine.
We arranged to meet in a shopping mall on the corner of St. Clair and Yonge, probably one of the corners owned by Bennett’s Principal Investments before it went bust.
It was wet and sloppy and dank, too warm for winter, not warm enough for spring. I found a place to park, walked into the mall. There were two floors, one at street level, another, below, connecting to the subway. There was a stairway, an escalator, and several other points of entry. A bevy of Canadian flags hung from the atrium overhead. I figured the best place to watch for Doug was right underneath those flags. That allowed me to monitor all entry points in case he came in and didn’t recognize me.
Because: the night before he hadn’t, though I was standing right in front of him reaching out to shake his hand. I’d sat at one end of a long table in the pub listening as he did a masterful job of explaining the finer points of the publishing business to the writers who’d gathered to hear him (and to cheer each other up). Many were older than me. One man, a doctor Doug had once published, said he was 94. Some said they were exploring self publishing. Some complained of the way they’d been treated by large publishers—their work contracted for, then rejected, followed by demands to return the advance, or, demands th
at they pay for editing. Doug seemed surprised to hear that the business had grown darker and less generous.
I was thinking he’d forgotten our appointment when he loped in late through a side entry, wearing a thin anorak and a loose scarf around his neck. He looked around and decided he didn’t want to sit in the mall, so we went up to St. Clair to a small coffee shop he likes.
By the time we got there we had had the usual conversation, the normal one now, the one about who is ill, who is dying, who passed away. He told me that when offered a choice of dates for events, he always takes the earliest, because he never knows anymore where he’ll be next month—as in above the grass or below? Up close I could see the grey in his hair, which was, as always, awry, and I’m sure he could see the same in mine.
I told him what I wanted to know, and why, and he got a certain look, a trapped look, like a man who, as a matter of principle, wants to tell the truth, but really did not want to remember let alone dwell on these particular truths. It wasn’t that he had taken a vow of omertà. It was more as if he believed this whole story did not properly reflect the way he sees himself: as a business naïf; as a man who works with artists, for artists, as a literary person.
I asked him again if he knew the size of Avie Bennett’s tax credit receipt when he gave the shares to the University of Toronto.
He said didn’t know.
But you signed those agreements, the ones that listed the full value of the new M&S, I said. See? I showed him the Asset Purchase Agreement between First Plazas Inc. and the new M&S.
“If I knew, I’ve forgotten,” he said.
Do you know what a ‘put’ is? I asked. Did you know there was a ‘put’ that gave the University the right to demand $5 million in exchange for its shares from First Plazas?
He said he knew in general what a ‘put’ is, “but not in this context.”
How is it possible that two of the first members of the M&S board had been unaware of the ‘put’? Wait, I said to myself. He must have known about the ‘put,’ it was in the Unanimous Shareholder Agreement.