The strong case against the Caisse

The recent resignation of the chief of the Quebec pension plan, Caisse de dépôt et placement du Québec, is another good sign that the secessionists are going down to defeat provincially.

That's what the polls are saying.

But now we have more evidence. One of the rats is abandoning the Good Ship Parti Québécois. Last week, Jean-Claude Scraire announced he would leave his posting and crusade to make the Caisse more independent. In other words, this means Mr. Scraire will be campaigning to save the Caisse from the type of management that he, and his Parti Québécois masters, have delivered and perpetuated since secessionists took power in 1976. Mr. Scraire has been around since then and was first appointed to a posting at the fund by former premier Jacques Parizeau. He has been its chief for seven years.

Of course, the secessionists are not the only ones to blame.

The Quebec Liberals, between PQ stints in office, also used the fund to punish enemies and reward friends. And greed exists everywhere whenever there aren't checks and balances.

What's most unfortunate about all of this is that there are laws to protect pension fund stakeholders when it comes to the private sector. Laws protect funds from politicization and bad practices. Boards are independent from stakeholders, or their employers, and must adhere to certain investment rules. They cannot invest too much in any single entity, are restricted in terms of foreign currency holdings and cannot put money into high-risk instruments.

However, the Caisse is a law unto itself because it has been indistinguishable from the government of Quebec. And the fanatical Bernard Landry has tightened the political reins.

But such political control is nothing new. The Caisse, and the provinces other Crown corporations, have often been used as slush funds and economic weapons instead of institutions for economic development devoted to maximizing the investment return for all Quebecers.

This has been damaging economically to Quebec and, indirectly, to Canada. That is because gigantic pools of capital should operate in the public interest, regardless of political agendas, and act like gatekeepers rewarding good enterprises with investment dollars so that everyone wins.

In Quebec, these economic entities have been used to reward favorite-son francophones who preach the party line, make political contributions or are willing to buy a business from an anglophone or immigrant. Steinbergs and Groupe Vidéotron are cases in point.

I have no time for Mr. Scraire or his new-found capitalism. He should have read a provocative and well-documented book written in Montreal 10 years ago by an acquaintance of mine, Pierre Arbour who is a former Caisse analyst and entrepreneur. Mr. Arbour published his book to expose to Quebecers the politicization of the fund and its serious underperformance.

Mr. Arbour was pilloried for that, by Mr. Scraire and others.

But the unpopularity of Premier Landry, plus the embarrassment of the $1-billion writedown of Quebecor Media, has brought the matter to public attention again. That transaction was a thoroughly inappropriate financing done using Quebecers' savings to overpay for a cable company, and against the wishes of its francophone owners, merely to give it to francophone friendlies instead of having Toronto's Rogers Media own it.

That transaction may be only the tip of a very nasty iceberg. Here are other worrisome facts:

- Thanks to a bad stock market, the Caisse last year had a negative return of 5%. The Ontario Teachers' Pension Plan Board had half as bad a result, or a negative return of 2.3%.

- The 10-year return for the Caisse has been an average gain of 9.3%; for Teachers', 11.6%.

- The Caisse lost billions on Nortel Networks Corp.

- The Caisse's performance is the lowest among large pension funds.

- The Caisse's real estate subsidiaries last year had 12 offices around the world and administrative costs were out of sight.

- The Caisse's real estate portfolio is 35% of total assets, double that of other funds. Most worrisome is whether the Caisse's heavy investment in Quebec properties is as the buyer of last resort.

Those are just the issues that have become public. What about the private wheeling and dealing within this politicized pension fund?

If management has been so unaccountable and prone to politics, then are its auditors too? Do we really have the straight goods on writedowns, performances and evaluations? Do we really know the numbers?

Surely Quebecers must demand a probe into the fund's transactions, the players, its true performance and its auditors. Quebecers deserve new legislation that would protect their collective nest egg in future from political interference, by the Liberals or anyone else, as exists in the private sector.