Budget Fixing

I was taken back, like everyone else this week, when our local PC gang announced the projected deficit for 2013-14 had dropped from $1.6 billion to around $500 million. Just how was that possible in two months? Sure, they terminated 100's of civil servants, actually about 1200 in elimination of positions and layoffs of actual workers, but that would represent a mere drop in a large bucket when it came to a $1.6 billion deficit. So I had a good look.

And when I looked I was astonished. Going back to 2010, and moving forward each year til the present 2013 budget, I discovered fixing - budget fixing. I have attached copies of my analysis below so you can see year-by-year budget-to-actual comparisons. You can see where the government came in high on projections and where they came in low (the low has a negative sign in red). Going through this process a definite pattern evolved. A cynical pattern. One the government has not admitted to publicly, but would rather take a heap of abuse for. Another pattern for these folks. The more abuse they are willing to take publicly over something they could easily explain the more you should be concerned - such is the case here.

Below are the Budget vs Actual spread sheets for you to see, 2010 - 2013. Pay attention to the patterns you see, then move to my analysis below them.

So there you have it. The obvious, deliberate tool used is overstating ministerial budget, and then not using them fully. A good example is the $645 million that was scheduled to be transferred to the Department of Natural Resources, but ended up being $404 million dollars light. You will notice that revenue is almost never overestimated, while government budgets are almost always overestimated - especially in 2011, 2012, and looks to be the same for 2013.

As you can see, "austerity" started early as in 2012 $790 million that was budgeted to be spent by departments was not.In the same year total revenue was only $148 million over. Add the two together and expenditures were actually under budget by about $650 million. In that year every single government entity other than Executive Council came in under budget.

Then there was 2011. That was the year when we got the big oil return we weren't expecting - $531 million to be exact. However, the untold story is that every government entity also came in under budget except Government Services and Human Resources, Labour, and Employment. See the trend. The obvious trend is overstate transfers from the consolidated fund (the government's bank account) to government department's and agencies; understate revenues from all sources; and combine the two to keep "miracle" surpluses happening - which brings me to another point. A strategy such as this, keeping in mind how the government is not advertising the fact it is not spending the money it has allocated to programs like roads etc, is being used by the government to achieve several goals. The first and most important is it allows them to skim from departmental budgets to add increasing dollars to their cash and investment portfolio - more on this in a minute. The second is it allows them to seem like economic miracle makers, and fine "stewards" of the economy and public purse. And of course, it keeps the public away from demanding money for those programs that always seem to get big announcements, but few things change. The obvious reason for that being of course the full budgeted money is not spent on the programs, so relatively few things do change. As many people, especially outside the overpass say, "where has all the money gone?"

Well, here is what the government is doing with it. They are building a war chest of sorts. It's called CASH ON HAND/TEMPORARY INVESTMENTS. It means money they have put away by clawing it from programs it was originally budgeted to meet the needs of. Here is how that fund has grown:
2002 - $ 509,520,000
2003 - $ 185,404,000
2004 - $ 688,960,000
2005 - $ 833,802,000
2006 - $ 600,264,000
2007 - $ 1,316,660,000
2008 - $ 2,267,497,000
2009 - $ 1,921,837,000
2010 - $ 2,212,774,000
2011 - $ 2,442,963,000
2012 - estimated $2.6 - 2.7 billion.

So, the government has a huge bank account that they've been skimming money from department/program budgets for. They've invested it in mostly very low interest bearing accounts, but it's there. The infuriating part of this, beyond the lies and manipulation of this government to their own people is the damage we are now seeing inflicted for absolutely no reason on the civil service of the province. The people who make up 25% of the entire work force of the province. You can argue that it's overdue. You can argue that government is too big, etc. That is all ideological whether it be from a pure economic or political point of view. The reality is 1200 people, representing 1200 families will now lose that security that allowed them to buy that over priced home, buy that new car, etc. It is a double betrayal - one of the facts, and two of the duty to be responsible not just with money, but also with people's lives. It is the ugliest of politics. It is very much like the poll fixing fiasco - government orchestrated manipulation of opinion to suit their own ends. This one involves budgets and people's lives. This one is budget fixing.

The Benefit of the Doubt - Penashue

So the inevitable finally happened and Peter Penashue fell on his sword - resigning last week as both Minister and Member of Parliament. His faithful campaign manager, dutifully appointed to a plum post as director on the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB), followed suit and resigned his plum appointment. It appears to be an attempt to pre-empt the release by Elections Canada of its report into electoral fraud involving the Penashue's election as member for Labrador. Of course, we have all heard him blame the fiasco on a well-meaning, but inexperienced campaign manager. However, do the facts really back that claim?

To start with there is the story from Aboriginal Peoples Television Network(ATPN). They broke the story of the many inter-linked business interests of Peter Penashue's family surrounding Muskrat Falls, and senior executives of Pennecon Limited http://aptn.ca/pages/news/2012/11/29/penashue-faces-questions-over-family-business-ties-to-labrador-hydro-project/ . A sort of "common-law" marriage if you will.

Then there is Mr. Reginald Bowers - the "inexperienced but well meaning" campaign manager/business manager of Mr. Penashue's electoral endeavour. Bower may be many things, but inexperienced is not one of them. His CV includes a Bachelor of Commerce degree, a senior accountant for David G Curtis and Co., a comptroller for Woodward Group of Companies, and VP of Finance and Administration for Fahey Group of Companies. Not exactly someone with no ability when it comes to finances if you get my drift. When it comes to connections the Masonic Order is the place to be for many, and Bowers founded the Masonic Lodge #17 in Happy Valley Goose Bay. He was big when it came to the provincial PC's as well. According to his official bio, Bowers has been a director of the Lake Melville area PC Association since the early 1990's. He even pulled off a double term as a director on the Board of the College of the North Atlantic (a plum provincial political appointment), along with Gilbert Bennett of Nalcor Energy.

A quick look at the PC donors to the last provincial campaign in Lake Melville district reveals an almost completely corporate dependent campaign. A number of those donors are people that Bowers would have been involved with in one way or another - including Provincial Airlines. It would seem that the provincial PC machine in Lake Melville decided to get behind Penashue for his bid to go to Ottawa, and everyone fell into line.

Then in October, 2012 the CBC broke the story that Penashue's flights throughout the election had been illegally subsidized by Provincial Airlines. Then, the CBC wrote a story that:

" Six executives of Pennecon made donations to Penashue's 2011 campaign in the riding of Labrador, with the donations arriving just after he had been elected, according to Elections Canada records.

Chairman Ches Penney made a donation of $1,100, the same amount donated by several others at the company. Two donated $550 each. The limit for a personal donation during the 2011 campaign was $1,100."

Remember those late arriving donations.

The Innu Development Limited Corporation, run by Penashue's brother-in-law Paul Rich, chipped in a $25,000.00 interest free loan - which is illegal. In addition, CBC News calculated Penashue had overspent his campaign limit by about 21 per cent. Now Elections Canada has said there were a total of 28 unlawful donations. I use the words unlawful, and illegal, because the donations were in violation of the law - the Elections Act. Now Penashue is blaming Bowers, and Bowers is claiming ignorance. But are these excuses credible? No, they are not.

EXHIBIT ONE:

From the Huffington Post, July 24, 2012:
" Bowers wrote that he checked all expenses with Conservative Party advisers and Elections Canada "and somewhere I got the understanding that all travel within the riding was considered personal expense and not governed by the cap on expenses."

EXHIBIT TWO:

From the CBC, November 29, 2012:
" In a statement, Penashue's office said that his campaign staff had a full understanding of the rules.

"The minister was very clear during his campaign that no corporate donations would be accepted, and that donations to his campaign were to be personal donations made by individuals," the statement said.

Although the story is changing now to one of ignorance of the rules, it is clear from Bower's and Penashue's earlier statements to the press, when the story first broke, that they were both fully aware of the rules, and that corporate donations were not to be accepted. Given that, it is impossible for both to have signed the return not being aware that corporate gifts in kind were illegal and corporate donations were illegal.

It is also apparent that a cover up of those expenses was attempted. In particular, it is now known that a deposit slip from Pennecon was recorded by the campaign in the same amount that its executives were retroactively given receipts for. In other words, it appears the campaign attempted to whitewash the donation by Pennecon by issuing receipts to its executives. It is also worth questioning why Pennecon or its executives did not question receiving receipts for donations they did not make, or made and did not get a receipt for making.

The waters are murky with questions, but one that isn't in doubt is that everybody knew the rules, and some made deliberate attempts to circumvent them. No doubt the effort to get Penashue elected was of paramount concern to some people/corporations, but why? That will come out in the wash as they say, but here is an interesting nugget for you to chew on in the meantime.

IT STARTS LIKE THIS:

INNU/SNC-Lavalin Partnership

In February of 2008, SNC-Lavalin Inc. (SLI) entered into an agreement with Innu Development Limited Partnership (IDLP) to establish Innu/SLI Partnership, the purpose of which is to pursue engineering and project management opportunities for projects taking place on Innu lands and other areas of Labrador. Other business ventures jointly pursued include procurement, construction management services, power generation/transmission, industrial process, environmental services and architectural design. The intent of the relationship is to maximize benefits to the Innu People resulting from these projects. The partnership maintains and operates an office and related support infrastructure in Goose Bay.

IT GOES ON LIKE THIS:

Innu SNC Lavalin Inc.

Map data ©2013 Google - Terms of Use

Box 119
Sheshatshiu
NL
A0P 1M0
Contact(s): Brian Corbin
Mobile: 709-897-7601
Email: brian.corbin@snclavalin.com
Albert Williams
Email: albertwilliams@snclavalin.com
General partner:

BAE .Newplan Group Ltd.
1133 Topsoil Road,
Mount Pearl, NL A1N-5G2
Phone: 709-368-0118
Fax: 709-368-5410

Contact: Albert Williams
Email: albertwilliams@snclavalin.com

Innu partner: INNU DEVELOPMENT LTD. PARTNERSHIP
P/O Box 449,
Sheshatshiu, NL A0P 1M0
Phone: 709-497-3670
Fax: 709-497-3677
Core business:

1. Project management
2. Engineering Services

IT INVOLVES THIS:

Exhibit Title Prepared by Dat

CE-15 Rev.1 (Public)

Muskrat Falls Hydroelectric Project, MF 1010 – Review of

Variants SNC Lavalin March 2008

CE-16 Rev.1 (Public)

Muskrat Falls Hydroelectric Project, MF 1050 – Spillway

Design Review SNC Lavalin December 2007

CE-18 (Public)

Muskrat Falls Hydroelectric Project, MF 1250 – Numerical

Modeling of Muskrat Falls Structures SNC Lavalin May 2008

CE-19 (Public)

MF 1300 – Muskrat Falls 2010 Site Investigation, Volume

1 SNC Lavalin June 2011

CE-20 Rev.1 (Public)
MF 1310 – Muskrat Falls Site Access Review SNC Lavalin February 2011

IT CAUSES A CONFLICT OF INTEREST WITH THIS:

http://www.releases.gov.nl.ca/releases/2008/exec/0926n07agreement.pdf

In other words, while Penashue was busy negotiating the New Dawn Agreement on "behalf of the Innu people of Labrador" his organization already negotiated a side deal with SNC Lavalin who, at the time, were primary contractors in the development of the Lower Churchill, and had a business relationship with the Government of Newfoundland and Labrador. In fact, Penashue was in so many conflicts of interest it's hard to keep track of them all. Given SNC Lavalin's current international, and national disgrace over corporate corruption, and given the many links between it and the Innu, there are reasons for serious questions to be asked. However, the bottom line is Penashue negotiated and signed an agreement (the New Dawn Agreement) that cleared the way for members of his family, if not himself, to be greatly enriched - especially including the Impacts and Benefits Agreement.

Is Penashue an innocent victim of an incompetant manager? Does an innocent person place themselves in these types of conflicts? Do they try and cover them up when exposed by the media? Are they innocent if they admit they knew the rules and then broke them for their obvious benefit? There is nothing innocent about this story. It's an all too familiar politics. Should there be further investigations into the role of the Innu Nation, and its subsidiaries? Without a doubt. Were the Innu people of Labrador betrayed by the interests of their elite? That question could be answered in a full, and over due RCMP investigation of the operations of the Innu Nation, and most certainly its subsidiaries. For now it's just a question. Does Peter Penashue deserve the benefit of the doubt? Absolutely not. 

 

 

UPDATE

 Here is the complete list of original donors to Penashue's campaign. Thank you to those that provided it.

 

First List Submitted

 

 

 

Modified List (the scratched out are names ruled to be illegal and for which Penashue's campaign reimbursed the feds)

 

 

 

 

 

 

Newfoundland and Labrador's Waterloo - The Lower Churchill

You may have noticed in the last month or so my posts have been few, and far between, as I have been embroiled in a constitutional challenge of the Lower Churchill/Muskrat Falls hydroelectric development. This challenge is ongoing, albeit sporadic at the moment. Like every battle, there are long periods of boredom interspersed with sheer moments of terror (although that is overstating it on my part, but likely not on some people's part). And in a moment of quiet I take this time to share a few thoughts.

Often in life, as is the case here, it is not what people say, but rather what they don't say that should peek our curiosity. Lies of omission rather than outright lies. The grey area between the lines. Most of us, in our day-to-day lives, simply don't have the time or inclination to truly examine the lines fed to us by  our politicians. We take comfort in the fact that they are restrained by the law, and even though we see them as self-interested at best, we believe that interest is restrained and we are safe.

In the case of the Lower Churchill project, to borrow a line from former premier Williams, " nothing could be further from the truth". The fact is Williams proceeded, like the Abitibi expropriation, with an "I'll do what I want, take me to court",  which was typical of his ego centered policy decision-making process as premier, and in some ways in his business dealings as well.His determination to reach an objective, with apparent lack of care for the inevitable consequences was admired when it came to such things as the Atlantic Accord. However, as Napoleon found out in Russia, over-reaching ambition with little or no regard to the factors limiting your goal can, and likely will, result in failure. In Napoleon's case, as in the case of every other empire in world history, the stubborn refusal to acknowledge the limitations of his power, and to become over extended, resulted in the collapse of his empire and country. The people of France paid a price the country never really recovered from. This is about to be the case for Newfoundland and Labrador.

Since Williams came to office, and with the creation of his "Energy Plan", his focus was to use every aspect of the provinces resources to their maximum. Nothing wrong with that on its face. However, in his determination, some say ego, he refused to acknowledge that through historical mistakes the Upper Churchill was captured by Quebec. In a business decision, between Brinco (a private corporation owned by people like Winston Churchill, the Rothchilds, etc...including Joey Smallwood) and Hydro-Quebec in 1969, the power created from the Upper Churchill was sold for a seventy year pitance. This province has witnessed government after government attempt to undo the damage that one private monopoly visited upon it with the blessing of the government of the day. They have all failed.

Williams decided he would not follow that sorry record. In 2007 he ammended the Electrical Power Control Act to force water management agreements upon power producers sharing the same river. Then in 2009 Nalcor got such an order against its own subsidiary CFLCo, and thereby Hydro-Quebec, forcing in a sense an amalgamation of the Upper Churchill dam into a new Nalcor dominated operation.

The water management agreement stripped Hydro-Quebec of the operational control of the dam and gave that power instead to a water management committee. The new water management committee consists of four people - two appointed by Nalcor and two appointed by CFLCo (which is dominated by government of Newfoundland and Labrador appointees). In other words, the water management committee is now controlled by the government and it in turn controls the Upper and Lower Churchill. With this power it intends to redistribute power generated at the Upper Churchill, and take between 1500 to 2000 MW a year from Hydro-Quebec for its own use. The two power lines being built from the Upper Churchill to Muskrat Falls are capable of transmitting 2000 MW, and the sub sea link between Labrador and Newfoundland is capable of being upgraded to 1900 MW with minor alterations. Most Newfoundlanders would argue this is a great thing, and how could anyone who loved the province argue against it let alone fight it.

Here's the thing, its not legal. It's unconstitutional. Back in 1984, when Brian Peckford attempted the Water Rights Reversion Act, the Supreme Court of Canada ruled it ultra vires (outside the province's constitutional power). Bottom line, the Power Contract of 1969 was governed by the laws of Quebec, and therefore any law infringing on Hydro-Quebec's right to operate the dam and sell its power was unconstitutional, and therefore illegal. This is the great Russian winter that our modern day Napolean (tongue firmly planted in cheek) chose to ignore. In fact, way back in 1984, the Supreme Court of Canada had this to say about Newfoundland's position:

"It was argued by the Attorney General of Newfoundland that control over the power generated at Churchill Falls is essential for the effective management by Newfoundland of its water resources and to meet the energy needs of the Province. However, it is not for this Court to consider the desirability of legislation from a social or economic perspective where a constitutional issue is raised...Where governments in good faith, as in this case, invoke authority to realize desirable economic policies, they must know that they have no open-ended means of achieving their goals when there are constitutional limitations on the legislative power under which they purport to act. They are entitled to expect that the Courts, and especially this Court, will approach the task of appraisal of the constitutionality of social and economic programs with sympathy and regard for the serious consequences of holding them ultra vires. Yet, if the appraisal results in a clash with the Constitution, it is the latter which must govern. That is the situation here...and it follows that the Reversion Act is ultra vires."

And so it goes here. Putting lipstick on a pig, Williams and company charged ahead with the Lower Churchill. Hydro-Quebec, as strategic as ever, sit back and wait for the prey. They know what Williams did was illegal. They know that all they need to do is let this province build that dam, using all its resources to do so, and then the moment the government tries to apply the restrictions of the water management agreement upon them they go to court, win, and CFLCo is bankrupt. They also have first right to the shares of CFLCo and they have the right to operate the dam when CFLCo goes bankrupt. Set, game, and match.

This province's gross debt at the end of 2012 was $13.3 billion. Building Muskrat Falls, the transmission system, and the link to the Island will add another $10 billion or so. By 2016, the same year the Power Contract renews for another 25 years, we will have a gross debt in the range of $25 billion. When Hydro-Quebec springs its court case, around the same time, and wins, we will be unable to continue paying for Muskrat Falls, the link, and the transmission system. The federal loan guarantee says if any one of these parts goes into default they all go into default. It also states the federal government alone is entitled to these assets in the case of default. The end result is Newfoundland and Labrador loses the Upper Churchill to Hydro-Quebec permanently, it loses the Muskrat Falls project to the federal government who can sell it to whomever (likely Hydro-Quebec), and the people of this province are left with a massive debt that, with a declining population, will permanently cripple the economy and people. This is the natural consequence of Williams actions. And this is why I fight.

A billion dollars has already been wasted. A political scandal for the ages. But, even at that, its a better scenario than continuing the madness. If only Napolean had pulled his troops back before
the onslaught of the Russian winter he may have saved his entire empire.  Yet, ego drove him forward, and in the end he left his troops to freeze to death in Russia while he escaped back to France. Today we have the tools to stop our modern day Napoleans from delivering us into a similar fate. It is incumbent on us to use them.