Add up the facts that Power Corp. appears to be connected to an oil company that would benefit extensively if Saddam remained in power, with the bank appointed by the UN to help broker an Oil-for-Food program that appears to have been directly enriching Saddam, and which is being investigated for irregularities that may have abetted the wholesale corruption that eventually engulfed Oil-for-Food, and that Power's owners have a professional and personal relationship with the man hired by the UN to investigate the corruption, and it's no wonder that more and more questions are being asked about the firm.
The United Nations has refused to co-operate with the U.S. Congress investigations into the US$67-billion Oil-for-Food program and Security Council members Russia and France have refused to give Volcker the right to subpoena witnesses in the internal UN probe. But the way the scam appears to have worked is that Saddam was permitted to sell oil to customers he selected himself (he favoured French and Russian companies) at below-market prices, by allocating them oil vouchers. The customers could resell the oil at market prices and make a large profit, provided they kicked back a portion of the money to Saddam, who used the money for everything but badly needed food and medicine (the program came to be known by critics as Oil-for-Palaces). It is estimated that Saddam may have skimmed as much as US$2 billion from the aid program. And the fact that Iraqis were suffering while Saddam built up weapons and enriched his own personal wealth, obviously makes this scandal not only bigger, but more heinous than any run-of-the-mill Wall Street book-cooking. Companies implicated in what effectively amounts to crimes against humanity may never recover. And, to be clear, Power Corp. has not been linked in any direct way to the con. As for the fact that Power's name has come up several times in the investigation, Power's vice-president, general counsel and secretary Ted Johnson believes the news reports to be inaccurate and irresponsible. Says Johnson: "The stories coming out of the United States are a bunch of misinformation based on innuendo and half-truths."
There's a tale they used to tell on Parliament Hill about a president, a billionaire, an ambassador and a prime minister. The four of them got into an elevator one day at the National Gallery of Canada in Ottawa, when Jim Blanchard, the U.S. ambassador to Canada, began ribbing the billionaire, Paul Desmarais's son André, about his recent marriage to France Chrétien, the daughter of then prime minister Jean Chrétien, as then U.S. president Bill Clinton listened in. "France certainly married well," Blanchard reportedly said to the prime minister. To which Chrétien replied, smugly: "André married well."
In reality, the wedding of France and André, in 1981, had only formalized the marriage between the Canadian government to the Desmaraises. While the family, worth an estimated US$4 billion and ranked the sixth richest in Canada, has always kept a fairly low profile, they have been in the news for decades--even if most Canadians never really noticed. The fact that the family happens to be friendly with the man who once ran the U.S. federal reserve won't surprise those who know them: the Desmaraises are as well connected politically as they are corporately. And it's arguable, based on the circumstantial evidence anyway, that nothing happens on Parliament Hill that isn't, in some way, a product of the Desmarais family's design. Prime Minister Paul Martin and former PMs Jean Chrétien, Brian Mulroney and Pierre Trudeau have all been close, personal friends of Paul Desmarais Sr. The story on Parliament Hill was that Trudeau's leadership bid was cooked up in Power headquarters in Victoria Square in Montreal. In the hiatus of his political career in the 1980s, Chrétien cooled his heels sitting on the board of a Power Corp. subsidiary, Consolidated Bathurst, and Power executive John Rae ran Chrétien's leadership campaigns in 1984 and 1990, as well as the 1993 election campaign that brought Chrétien to office. Martin got his start in the business world in the early sixties, working for then Power Corp. president Maurice Strong, and was made a millionaire, thanks to an undisclosed 1981 deal in which Desmarais sold him Canada Steamship Lines. Strong continues to act as one of Martin's senior advisors.
But the connections don't end there. Ted Johnson, the Power vice-president, is a former assistant to Trudeau. Paul Desmarais Sr. has long been a mentor of former prime minister Brian Mulroney. Don Mazankowski, a former Mulroney cabinet minister, sits on Power Corp.'s board. Bill Davis, former premier of Ontario, is on Power Corp.'s international advisory council. Daniel Johnson Jr., Quebec Liberal leader and briefly premier, worked for Power from 1973 to 1981. In fact, the political connections really don't stop at all. You could spend days trying to trace the connections that Paul Desmarais Sr. has not only with Canadian politicians, but in nearly every western capital in the world. Not bad for a guy from Sudbury, Ont., who started out fixing buses to save a nearly bankrupt transport company, inherited from his father. Desmarais's friends have joked that he "collects politicians."
And he has been doing it for a long time. Thirty years ago, in his 1976 book,
The Canadian Establishment, Peter C. Newman wrote, "It seemed to those who knew him best that Desmarais sometimes treated politicians with the deference due to sleepwalkers: men who must be led, but ever so gently, lest they wake up to the fact."
If there's one government in which Power has as much interest as it does in Canada, it's the UN. Maurice Strong, president of Power from 1964 to 1966â “who went on to run Ontario Hydro and Petro-Canadaâ “is not only a member of the Privy Council for Canada and a direct adviser to Paul Martin, he's also a senior adviser to UN Secretary General Kofi Annan. Appointed by Annan in 1997, after he took over the general secretariat, Strong's specific role was "to assist planning and executing a far-reaching reform of the world body." Since Annan's son, Kojo, has been implicated in the Oil-for-Food scandal, having accepted money from a Swiss firm, Cotecna, which was in charge of overseeing the shipments of food and medicine to Iraqis, Strong's presence at Annan's side provides yet more ammunition to those looking to link Power to this terrible tale of corruption and mismanagement (no direct links have been established). In fact, Strong had been an undersecretary general of the United Nations since 1985. He once told Toronto journalist Elaine Dewar that he liked working for the UN specifically because of its undemocratic nature. "He could raise his own money from whomever he liked, appoint anyone he wanted, control the agenda," wrote Dewar in her 1995 book, Cloak of Green. "He told me he had more unfettered power than a cabinet minister in Ottawa. He was right: no voters had put him in office, he didn't have to run for re-election, yet he could profoundly affect many lives."
How close Strong is with Power Corp. these days isn't clear. But what is clear is that certain UN policies have been a boost to the value of the conglomerate. For one thing, the UN-created Kyoto Protocolâ “which was spearheaded by none other than Strong himself, born of the 1992 Rio Earth Summit, which he chairedâ “could have significant potential benefits for Power's holdings in China. Through their subsidiary, CITIC Pacific Ltd., the Desmaraises own power-generating facilities, automobile concerns and myriad other industrial interests throughout the Communist nation. The fact that Kyoto's framers deliberately created regulations that will hamstring exactly those sorts of businesses in the West by imposing limits on greenhouse gas production, but exempt China from those same limits, gives Power a competitive international advantage. Meanwhile, under the protocol, Chinese power plants will be able to sell clean air "credits," or allowances, to Western producers for cash. Some economists have predicted that Ottawa will buy credits as a way of meeting their Kyoto emissions targets.
And few companies stood to benefit from the UN's resistance to the invasion of Iraq to the same extent that Total might have, had Saddam made good on promised resource development deals with the oil giant. Since the early nineties, Total and Elf had been jointly negotiating with Hussein to develop the Majnoon oilfields north of Basra. In 2000, Total's president of Middle East exploration and production, had publicly suggested, on several occasions, that the Oil-for-Food sanctions were hurting Iraqi oil development. Shortly afterward, the two companies merged, with Power Corp. owning the biggest stake. According to Power's official history, "When . . . Totalfina proceeded to take over Elf Aquitaine, the Pargesa group emerged as the largest shareholder, with 3.4 per cent of the shares and three seats on the board of what was to become TotalFina Elf, the fourth largest integrated petroleum company in the world."
Last year, the New York Post interviewed prominent Wall Street figure Gerald Hillman, managing partner of Trireme Investments in New York, who had seen and analyzed the contract. He called the deal "highly unusual" and "very one-sided," as it permitted Total to keep 75 per cent of total production, whereas most deals with foreign partners top out at 50 per cent. It seems that the longer Saddam stayed in power, the better it was for the Total Group and its shareholders in Montreal.
The fact that sustaining Saddam directly could have potentially benefitted a family connected to so many Canadian mandarins and politiciansâ “and married into the family of the prime ministerâ “led some Canadians to raise questions about the motivations behind the Liberal party's decision to refuse to support the invasion of Iraq and Saddam's ouster. When Chrétien announced that decision in early 2003, Opposition foreign affairs critic Stockwell Day asked in the House of Commons, "I do not fault the prime minister's family ties with his nephew [Raymond Chrétien], our ambassador to France or with Paul Desmarais Sr., who is the largest individual shareholder of France's largest corporation, TotalFina Elf, which has billions of dollars of contracts with Saddam's former regime. With this valuable source of information and experience at his fingertips, has the prime minister ever discussed Iraq or France with his family or friends in the Desmarais empire?"
Chrétien responded by defending his nephew first and, with regard to Power, added: "I hope the attack against the people who have invested money in something, that he will repeat it outside and he will face the consequences." Power's general counsel, Johnson, told reporters at the time that TotalFina Elf "had no contracts in Iraq . . . Hasn't. Doesn't. Nothing with Saddam." Just a few months earlier, The New York Times reported that "The French oil giant TotalFina Elf has the largest position in Iraq, with exclusive negotiating rights to develop Majnoon, a field on the Iranian border with estimated reserves of 10 billion barrels, and Bin Umar, with an estimated production potential of 440,000 barrels a day, according to oil industry executives."John Thompson, president of the Mackenzie Institute, a Toronto-based security think-tank, says that Power Corp. directors were probably not thinking about foreign policy implications when they invested in TotalFina Elf. "They probably thoughtâ “and a lot of people thought like thisâ “there would eventually be a reopened Iraq, probably under Saddam but not necessarily, and they would like to be in position when it did," Thompson says. "Part of this whole thing was the Europeans bidding to have control of Iraqi oil and afraid that the Americans would be there instead. For the Americans, it was all about not having weapons of mass destruction coming out of the area, but for the Europeans it was all about oil."
Jason Kenney, a Conservative MP, says the questions being raised about Power's possible connection to Oil-for-Food are worth asking. But he's quick to point out that if the Liberals guided the country's foreign policy based on their connections to Power, then we should be asking questions about the Canadian government, too. "I am not the least bit critical of the Desmarais family for being rational actors in a free marketplace and pursuing their advantage," says Kenney. "I am, however, somewhat disquieted by the degree to which Power Corp.'s corporate interest seems to influence Canadian foreign policy. Obviously, every company seeks to influence government policyâ “regulatory, taxation or otherwiseâ “but Power Corp. seems to have a particularly unique influence over Canadian foreign policy."
That's something that hasn't been proven. But in addition to Power's connection to Total, there's the connection to Paribas, the bank selected to be in charge of the Oil-for-Food money. According to Power Corp.'s official history, produced in 2000, in 1981 it "made a $20-million investment in Pargesa Holding SA, a Swiss corporation that owned a major interest in Banque de Paris et des Pays-Bas (Suisse). The Swiss bank had been a subsidiary of Compagnie Financière de Paris et des Pays-Bas, the French banking organization commonly known as Paribas, with which Power had enjoyed a close association for several years."
Nadhmi Auchi, who has been identified as a cousin of Saddam Hussein, was a significant shareholder in BNP Paribas at least until 2001. Auchi, who resides in London and owns a company called General Mediterranean Holdings, was ranked by London's Sunday Times in 2003 as England's thirty-fourth richest person, with some estimates putting his net worth at US$3 billion. In its 2001 annual report, General Mediterranean Holdings described itself as the largest single shareholder in BNP Paribas.
Auchi is a former member of Saddam's Baathist party. In 1959, he was tried, along with Saddam Hussein, in an attempted assassination plot. He eventually fled Iraq and publicly distanced himself from Saddam after the dictator murdered his two brothers. Time magazine reported in 2003 that Auchi maintained deep connections to Iraq and built much of his fortune selling them armaments. He has been fingered as a key figure in the Oil-for-Food scandal, with accusations that he acted as one of Saddam's brokers. He certainly is no stranger to shady deals: in 2003, Auchi was convicted in France of bribery charges, along with a raft of Elf oil executives, in a scandal dating back to 1990 involving the sale of a Spanish oil refinery.
Power also has indirect connections to Iraq through one of its directors, Laurent Dassault, managing director of Dassault Investissements, the parent company of Dassault Aviation, a French-based weapons and aeronautics manufacturer that sells, among other things, the Mirage jet. During Iraq's eight-year war with Iran in the eighties, Dassault Aviation was a major supplier of aircraft to the Hussein regime and it has been alleged that the firm continued illegal weapon sales to Iraq during the embargo period, using intermediaries and a complex system of money laundering set up by the Hussein regime.
Meanwhile, the UN had its own reasons for wanting to keep Oil-for-Food in business. For some strange reason, the aid program had been set up so that the UN would keep a portion of all oil sold through the programâ “compensation for the costs of overseeing the aid initiativeâ “three per cent of every barrel sold. Aid programs usually use money from contributing members to finance their administration. Recipients of previous UN aid programs had not been forced to pay the overhead of the programs. And since the fee paid to the UN was variable, the longer Oil-for-Food went on and the more oil that was sold through it, the more money the world body would earn.
That was not enough, however, for Benon Sevan, the man appointed by Annan to oversee the Oil-for-Food program. An interim report issued by Volcker in February found that Sevanâ “who has since retired from the UNâ “had personally requested that Iraq allocate some of its oil vouchers (with which companies could resell Iraqi oil at a lucrative profit) to a company with which he was affiliated. Documents uncovered by investigators indicate that Sevan may have directly been the beneficiary of oil allocations. Volcker told reporters that Sevan's conduct was "ethically improper" and that he had "created a grave and continuing conflict of interest."
Now, Volcker himself is the one facing allegations of conflict. In addition to his connections to Power Corp., which he did not disclose upon being appointed head of the UN probe, Volcker has also been linked to a pro-UN lobby group, the United Nations Association of the United States (which happens to receive generous support from BNP Paribas). Critics are suggesting that the final report, expected in June, could end up being a whitewash.
Oil-for-Food has certainly put the UN's credibility at stake in a way that no other incident has before. The world body has already demonstrated an inability to deal effectively with rogue dictators, such as Hussein and North Korea's Kim Jong Il, and has proven impotent to end genocides, like Rwanda in 1994 and Darfur today. But if the world discovers that the UN cannot even run a basic aid program, then there isn't much left for it to do. "The liberals are having a harder time asserting that what the conservatives want is to get the U.S. out of the UN," says the Republican aide. "They can say that, but it's not true. We need international mediating organizations like the UN. But you know what? We need them to work. And if they are not working, we are either going to make them work or we are going to find substitutes," he says. Increasingly, he reports, both Republicans and Democrats are open to finding alternatives to the UN for handling international affairs. "Maybe that model is NATO," says the aide. "If the UN is unreformable, then it will begin to shrink in its importance. Certainly in the United States it is already shrinking. That can be good or that can be bad. It is what it is. We do need these international mediating institutions and if the UN cannot step up to the plate and do it, then you are going to see a U.S. push in the next generation to get something else to do it," the aide says.
And certainly that has broad implications for Canada, whose government invested heavily in the UN when it stood by the world body's plan to keep Oil-for-Food in place, rather than stand by the U.S. in putting an end to a containment program that wasn't really containing Saddam at all. Whether Canada's foreign policyâ “given the government's connection to Powerâ “was "all about the oil," as some have theorized, however, may never be determined. Or, it likely won't be determined here: while there are six probes being conducted into the Oil-for-Food scandal in the U.S., and one through the UN, there is no investigation underway in this country into any involvement by Canadian companies. And, with few exceptions, the Canadian mainstream media seems to have largely ignored the story linking Volcker to Power Corp. The firm itself has issued no official statement on the accusations.
One press release did come across the wires on Jan. 27 with good news about Power Corp. Not from the normally quiet Power itself, mind you, but from KPMG, an accounting firm that works for Power (and, coincidentally, did audit work on the Oil-for-Food program). The news? A survey conducted in conjunction with pollsters Ipsos-Reid and the Globe and Mail found that Power Corp. is considered the most respected business in Quebec, as ranked by its peers. Hopefully, when all the smoke clears on Oil-for-Food, that will still be the case.
