by Elaine Dewar
In this letter, Riggall, then one of U of T’s representatives on the board of M&S, offered that word stewardship again when describing the University’s role in M&S. However, she said, the time for stewardship was over as it no longer served the interests of the University. The letter asserted that the only means available to the University to promote its own interests was either to have M&S cancel its shares ( leaving Random House with control of the company), or to sell its shares to Random House “for a nominal amount.” In that way, the University could accomplish its own objective while “providing the infrastructure and support needed to engender the future success of M&S.”
Riggall then touched on one of the hidden terms of the agreements between the parties. She wrote:
…if M&S generated a profit, after all outstanding debt obligations were met, that profit would be divided between U of T and RHC in proportion to their ownership interests. Over the past eleven years, M&S has accrued significant debts and has earned a small profit in only two years. As a result, U of T’s ownership interest in M&S has not resulted in any financial benefits to the University. In fact, U of T concluded some years ago that there was no hope of making a return on the shares it held in the company and wrote off the value of its holdings. [Italics mine].265
She asserted that the U of T had looked for buyers for its shares for some years, but no one had come forward with an offer. The U of T therefore wished to “exit the investment while also ensuring that M&S continues with an owner which is experienced in the Canadian publishing industry and committed to the ongoing development of the M&S business.”
I read the letter over and over again. On first glance it appeared to convey facts, but on closer inspection, it was basically fact free. How big was the debt? Not stated. When was the value of M&S written down to zero? Not stated. Who was offered a chance to buy U of T’s shares and when? Not stated. How could the value of the shares be written down to zero considering the value of the backlist? Not stated. The backlist was not mentioned, and the phrase Canadian control did not appear in the letter either. In fact, the letter slid very close to describing Random House as Canadian. But the biggest problem I had with this letter was that Avie Bennett, the chairman of the same board upon which Ms. Riggall served, had said he had no inkling that the transfer to Random House was going to happen—until it did. Was it possible Ms. Riggall had written this letter without conferring with Bennett and the rest of the M&S board?
I searched the Governing Council’s minutes again to see if I could find any reference to the write-down of the value of M&S shares, or to a Governing Council decision to authorize the transfer of the shares to Random House. No and no.
I wrote more emails to the University’s communications people asking in which financial statement issued by the University of Toronto this write-down had been noted.
While I waited for their answers, I also followed some of Rob Prichard’s advice.
Prichard had recommended writing to Meric Gertler, U of T’s current president. I did that. No response. I tried again to speak to Dr. David Naylor, the President of the U of T at the time of the transfer of its M&S shares to Random House. He had just produced a report for the federal government. I spoke to the federal media people charged with answering press questions about that report. I asked for contact information for Naylor. I was told that Naylor had instructed them not to give out his email address to anyone. They said they would pass on an email from me to him, but that was the best they could do. I sent them an email. No response. I tried to reach Naylor by email through the U of T where he has tenure. It did not bounce back, but I got no response. I asked for interviews through the U of T’s communications people. Much later I was told no on Gertler, no on Naylor.
Prichard had said the development department would have been responsible for the tax credit receipt. Donations are utterly vital to a university’s stature. That is why the man in charge of development at U of T when Prichard was President and this gift was received, Dr. Jon Dellandrea, earned significantly more than Prichard. The Sunshine List disclosed that in 2000, President Prichard made $250,000 plus $15,337.20 in taxable benefits, while Vice- President Dellandrea made $283,999.96 plus $11,780.04 in taxable benefits. Dellandrea is also a member of the Order of Canada, an honour awarded to him for his fundraising efforts at U of T.266
I tried Dellandrea again at Sunnybrook. This time, I spoke to his assistant. I was told he’d been away but he could spare fifteen minutes on the telephone.
When I got him on the line he asked: are you that Elaine Dewar?
I confessed.
He confessed that he had worked for Mount Sinai Hospital Foundation between 1989 and 1994, prior to joining U of T, and that Albert Reichmann had been on its board “at the time of the meltdown,” by which he meant the bankruptcy of Olympia & York Developments. Apparently, the lawsuit against me, my colleagues, and Toronto Life had been discussed in his circle. We then traded “do you knows” back and forth. As he waxed on about the lunches he had every quarter with the father of one of my friends, I figured he was trying to run the clock.
Can we talk about the gift of M&S shares to U of T, I asked. You were Vice-President of Development at the time of the gift I believe.
He said he could share what he could remember, but not things he was not engaged with.
I explained that Robert Prichard said the development department would have handled the details of the gift and the tax credit receipt.
He quibbled about his title, which had changed at a certain point from Vice-President of Development to include the term Advancement. He said he was one of three vice-presidents at the University at the time and stayed there from 1994 until June 30, 2005. Yes, he was in charge of the department that handled these matters, but it employed about two hundred staff, some of whom were lawyers who handled gift agreements and dealt with the CRA.
And they reported to you?
They reported to him, yes, but there was some shared responsibility with the Vice-President of Business Affairs who was Robert White for a part of the period. Or it might have been Felix Chee, possibly later, he corrected.
Do you remember the value of the M&S shares, the value of the tax credit receipt issued, and how that value was estimated? I asked. Were the financials of M&S reviewed? Was it unusual to accept the gift of shares of a private company?
“I remember nothing on this question of review of financials,” he said. “I had no direct involvement at all. We had routinely gifts of private real estate, or a major book collections, [there were] well-established protocols [to evaluate] private holdings,” he said. Among them, he said, was a clear requirement for independent evaluation.
I asked if he had any discussions with Avie Bennett about the gift, or with Robert Prichard.
He couldn’t recall speaking with Prichard about it, but “was I aware of discussions with Dr. Bennett? Yes. The high points,” he said. These discussions were in regard to a “drive on Bennett’s part regarding succession and the future of a Canadian icon and would U of T be the appropriate custodian.”
But that was all he could offer. He said I should speak to whoever was directly involved with the file: he was not. He was not involved with the value of the tax credit receipt issued either. What he could say with regard to the Canada Revenue Agency and its requirements was that there is a “high degree of rigour of what it will and will not accept on valuation.”
Did he remember the size of the tax credit receipt issued or not?
He replied that he did not know the details of “the certificate.”
Who was left to try?
Hah! The other side of the deal of course: Brad Martin, CEO of Penguin Random House Canada. I asked for an interview by email. I informed Martin in that letter that I had been told by Bennett and Gibson that control of M&S had passed to Random House by 2004–2005, and that when the shares were transferred from the Univ
ersity to Random House in 2011, nothing had been paid for them. Could I please come and see him to find out how that occurred?
Martin’s assistant informed me that same day that Mr. Martin would offer an appointment upon his return from his travels. A time frame was mentioned. I asked the assistant for a particular date, but was told that I would have to wait. The time frame passed without an appointment being offered. A phone call to get one produced no response. Martin never said he wouldn’t speak to me. He just never did.
Okay, I thought. Try all the other M&S directors you can find. By then, I had compiled a complete list of those who represented University of Toronto on the M&S board. I got their names from the minutes of the Governing Council which recorded the appointment resolutions for every year from 2000 to 2011.
John Evans was dead, so I couldn’t call him.
I’d spoken with Prichard.
I’d spoken with Bennett.
I’d spoken with Doug Gibson.
I tried to get a hold of Felix Chee. He had worked as Vice-President, Business Affairs of the University, but had long since left. I found his name on a list of the directors of a Toronto rehabilitation hospital: when I called, I was told he was no longer associated with it. The board secretary refused to give me his business address or business phone number. I soon found he’d also served on the board of Teck Resources. No one from Teck offered a forwarding email or address either. Chee had also recently led the Toronto office of the state-owned China Investment Corporation, which had made a huge bet on Teck. But Chee no longer worked there either.267 The person I spoke to promised to send an email to him if I would send it to her. So I had done that. No response.
I thought finding Catherine Riggall would be easy. She became Vice-President of Business Affairs at the U of T after Chee left, and she stayed on the M&S board until the transfer of the University’s shares to Random House. She had retired, but an online search showed she had been on the board of the YWCA in Toronto. I phoned and asked how to contact her. I was told the Y would forward a message. If they did, I got no response. I heard she had something to do with the Stratford Festival and lived in Stratford. There was no Stratford phone number for her so I called the Festival. She had a membership. I asked the membership people for her address or a phone number. They refused to give it to me. I asked if they could get in touch with her and ask her to get in touch with me. I told them to tell her why. They said they’d try. No response.
I decided not to call Doug Pepper because he works for Brad Martin. A call from me would put Pepper in the unfair position of having to say no if I told him I’d tried to speak to his boss first with no luck, which would make him out to be a coward. Worse, if he said yes, it might put his job in jeopardy as Martin had chosen to ignore me. I decided that since Doug been kind to me when he was young, he deserved kindness from me now. I resolved to try everyone else I could think of before trying to reach him.
I found Trina McQueen at the Schulich School of Business at York University where she has become Visiting CTV Professor in Broadcast Management (when I contacted her she was still an adjunct professor in the Arts and Media Department). She would soon also be appointed Vice-Chairman of TVO. She had started as an on-air journalist, rose to head CBC News, became the first president of Discovery Channel, President and COO of CTV Inc., and had been appointed to several highly political boards, such as the CBC’s, Telefilm’s, and the NFB’s advisory group. She also served on other cultural boards, including Historica with Avie Bennett. She is an Officer of the Order of Canada. Her Schulich bio made mention of all these things, but not of her five years of service on the M&S Board representing U of T.268
The departmental secretary gave me her email addresses and McQueen got back to me quickly. I asked for an interview, but she preferred to take questions by email. So I sent her a long list. The ones she answered were helpful. The ones she ignored were interesting. The one she answered that I never asked was more interesting still.
I asked her when she was appointed, by whom, how often the board met, whether control transferred to Random House long before the University’s shares did, as Doug Gibson and Avie Bennett had asserted. I asked about Doug Pepper’s position, whether M&S was in debt when she was appointed to the board in 2006, whether she voted on instructions from the University, whether there had been an offer to purchase the U of T’s shares from Random House that precipitated the transfer of the University’s shares. Was she aware of the University having tried to find Canadian buyers for its shares? I wanted to know how she heard about the U of T transferring its shares to Random House: was it a surprise, as Bennett had said? What sort of net benefit undertakings had been given to the government?
She replied that she had been put on the board as a representative of U of T which she thought had four directors, but maybe five, when Arlene Perly Rae stepped down. It was Avie Bennett who proposed her as Perly Rae’s replacement.
The U of T agreed and I met with the incumbent Random House president [sic] John? (I can probably find his last name) who also approved, and I was duly elected. Early in my tenure John took retirement as planned and Brad Martin replaced him as President of Random house [sic] and on the M and S board.
In fact, John Neale, to whom she referred, was the retiring Chairman of Random House. It seemed strange that he would have been asked to approve a University of Toronto nominee.
In answer to my question about whether there were instructions given to her by U of T she wrote:
My understanding of board membership is that one has a duty to the company, not to be a representative of other groups, and that is the way I acted. I did not consult with the U of T about any vote, and I was not asked by the university to vote in any particular way. I remained on the board through the sale, after which all board members resigned. The two U of T people on the Board were Judith Wolfson and Cathy Riggall (sp?) Judith is still at U of T, but Cathy retired…
She thought Doug Pepper was on the board ex officio. In fact, he was a full-fledged director representing U of T, just like her. She thought the board met every quarter, but she wasn’t sure. She refused to discuss any questions relating to the financial circumstance of M&S or the sale. She wrote:
However I agree 100% with the press release issued at the time of the sale which said there were financial challenges. The intensity of these challenges worsened gravely during my time on the board. Given the changing models of publishing and bookselling, and the structures and needs of the two ownership groups, I personally saw no path to an outcome any different from the one which took place. I voted for it. We all did. But no one cheered. It was the least worst outcome.
As to how she heard about the sale of the University’s shares to Random House, she said that Avie Bennett phoned her and told her. There was a board meeting and a vote. On the question of undertakings given to the government, she said she was so pleased that one of them involved M&S continuing to publish poetry. “I have little doubt that our prime minister [Stephen Harper] personally insisted on this,” she wrote, “and I thank him. If I am wrong, I thank the anonymous bureaucrat who did it…”
Then she added something about someone I had not asked about at all: Brad Martin.
Over the years, I developed a respect and affection for Brad Martin. He is a tough businessman, but never a mean one. And he is a reader. He always seemed happiest when he was discussing books, books, books, writers, writers, writers Canadian ones a lot of the time. One of my recollections is running into him, long after the sale, at Allen’s restaurant on the Danforth. It was afternoon. He was at the bar, alone, except for a Scotch. And he was really down because his fight to publish that year’s Massey Lectures was not going well. A very admirable and Canadian case of the blues…
I wrote her back and repeated my unanswered questions: this time I also told her that a tax credit receipt had been issued for the gift, but that the University had apparently got nothing
in the way of a dividend on its shares because no profits had been earned, and I had been told the shares were transferred to Random House for essentially zero. Could she confirm or deny? And though there may have been financial issues [I did not tell her that neither Avie Bennett nor Doug Gibson agreed with that] apparently a hugely valuable backlist had been handed over for nothing.
She responded by saying that even if she remembered more than a vague idea of the sequence of events, “it would be wrong of me to disclose financial details learned in my capacity as a board member…” She asked for my phone number in case she thought of something else and offered hers.
I sent a message to Arlene Perly Rae via Facebook. No response.
I tried Judith Wolfson, who was still employed by the University. I told her secretary what I was calling about, but Ms. Wolfson did not return the call. I tried again by phone. Ms. Wolfson was not available. And she never did become available.
I tried to find an address for Douglas Foot who had served for Random House on the M&S board after John Neale’s retirement: no success. I asked Penguin Random House for John Neale’s address and was told he was retired, so no forwarding address would be forthcoming. When I finally found a phone number for him, his wife—a journalist—told me to write him an email because he was in Florida. She gave me his email address. She said she was sure he’d respond.
I wrote to him.
He didn’t respond.
But by then, I had long since decided there was only one way to find out how Bennett sliced the salami.
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If Still in Doubt, FIPPA
