Finance Committee on March 25th, 2010

[The Chair, Conservative, James Rajotte]

Very briefly.

[Diane Urquhart]

Nortel is junk bond, Atlas--

[John McKay, Liberal, Scarborough—Guildwood, ON]

It is now, but what was it when the investments were made?

[Diane Urquhart]

Nortel has been junk bond since 2002, so all those who currently own the Nortel bonds would not be investment-grade owners. They were long gone at the end of the tech wreck. Therefore, in terms of the cost of capital, there's no question.... If you have a car accident and there's damage to the car, there is damage to the car, but only a certain percentage of society gets into car accidents. So this is the phenomenon we're dealing with.

[The Chair, Conservative, James Rajotte]

Thank you.

I'm trying to get time for all members here. Thank you, Mr. McKay.

Monsieur Paillé.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you for your testimony.

It is sometimes said that of all of the systems, capitalism is the lesser evil, but here we have an example of its worst effects. These testimonies are extremely compelling. I would like to make a few comments.

Someone said that the pension system was like an insurance system providing income, but I do not believe that that is the case. It is simply a salary that you agreed to set aside, along with the employer's contribution. Waiving these contributions for a certain length of time is as if you were not being paid your salaries, in practical terms. Obliging a company to take back these contributions or no longer pay contributions when solvency is over 125% is crazy, as you know. I think that we should go even further and say "Why not?", if the solvency is over 125%, so that these people get the picture.

The purpose of this 110% or 125% was to avoid tax loopholes. By attempting to resolve a tax problem, I believe that we created this gigantic pit in which you find yourselves. Yes, your claims are quite valid, but I think that we should be going even further. Not paying contributions is precisely comparable to what the federal government did, for instance, when it put its hands on the employment insurance fund. It is more or less the same type of theft.

Going back to what you said about bankruptcy, unpaid salaries are generally paid at the start. We talked about preferred creditors, and I believe that pensioners should be deemed to be this type of creditor, as they have not been paid earned salary, and should be treated just like the employees who were there working during the last two weeks. These people are given first consideration, at the same time as the revenue departments.

As far as the financing aspect is concerned, I agree with Ms. Urquhart. Let us not have any illusions. I worked in finance for nearly my entire life, and I can tell you that financiers basically have one responsibility and that is risk assessment. A company on the verge of bankruptcy obviously cannot find any financing. Let us take the example of Nortel. At one point a share cost $1,260, and that was when the shares were split into 10. Today, these shares are worth nothing. However, I am sure that all of the bankers in the world would have loaned Nortel money without adding one red cent to the interest rate because of the pension plan.

Having pensioners deemed to be preferred creditors would no doubt encourage financiers and shareholders to study the pension plans more closely and to make provisions should the managers—which you weren't—do something crazy.

You have come to us, but we are not the government. In fact, the only one here representing the government is the Parliamentary Secretary to the Minister of Finance. I hope that this situation will encourage him to stop doing analyses and studies, to stop travelling around Canada. I believe that your request is clear. On page 9 of your document, you state that these changes will not cost the taxpayers any money. This is what we need to retain.

I would like to ask Mr. Fréchette, Mr. Langlois, Ms. Blanchard and Mr. St-Michel a question. What happened to the other programs that you were entitled to, such as the health insurance program?

[Gaston Fréchette]

We lost $55 million in pension money and $35 million in benefits, namely life insurance, health insurance, immunization insurance. Nothing is left. We lost $100 million.

[Daniel Paillé, Bloc, Hochelaga, QC]

This was not a 20% or 30% cutback?

[Gaston Fréchette]

No, we lost 100% of the benefits.

[Daniel Paillé, Bloc, Hochelaga, QC]

It is very important that this be said. What happened as far as Atlas was concerned?

[Pierre St-Michel]

We experienced the same thing. We have absolutely nothing left with respect to benefits. We no longer have group insurance. At one point we had death benefit insurance, but we no longer do. We have absolutely nothing.

[Daniel Paillé, Bloc, Hochelaga, QC]

I would like to go back to the Jeffrey Mine issue. The equipment has been modernized a great deal and this product is still an excellent product. However, you must have a lot of pensioners who were exposed to unhealthy situations early in their career. You did not necessarily take all of the precautions you should have health-wise.

[Gaston Fréchette]

It was the same for all of us. When the pension fund was shut down, it was purchased by Desjardins. According to their calculations, we lost 38%. They had difficulties giving this to us because we were going to live a long time. The opposite occurred when we bought life insurance. Both insurance plans came from Desjardins.

There has been a lot of talk about asbestos. We would have been dead a long time ago if asbestos was as dangerous as it is claimed to be. Personally, I do not suffer from any physical illnesses, but my morale is bad. Asbestos has made my morale very sick.

[Daniel Paillé, Bloc, Hochelaga, QC]

I would now like to ask Ms. Diane Urquhart a question.

One of the proposed solutions was to have the Régie des rentes du Québec take over the administration of pension funds for bankrupt companies so that the funds would be properly managed.

Do you think that, in Canada, the Canada Pension Plan could do the same thing?

[The Chair, Conservative, James Rajotte]

Okay.

Go ahead, Madam Urquhart. Please be very brief.

[Diane Urquhart]

I would like to see the BIA amended so that the bondholders at the time of the liquidation make up for the deficit that's in the pension plan and the long-term disability plan. The extension of the plan puts all the risk onto the shoulders of the employees. Given the volatility we've seen in the stock market and even in the credit markets in the last financial crisis, I believe it's a burden that's placed too high on the shoulders of the employees.

I could imagine that it would be possible to have a compromise, in which case the estate would provide money up front. If in five years there is a surplus and the capital markets recover, we could then give the money back to the bondholders at that time, but they would bear the risk, or some sharing formula would occur, over the five-year period.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Hiebert, please.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you, Mr. Chair.

Thank you all for being here today. I certainly very much enjoyed the information that you provided. Some of you are facing very difficult circumstances, and it was very informative to hear what you had to say about what you're facing.

I have a couple of questions, the first one being for Mr. Sproule. On page 9 of your report you mention an independent study that showed the impact on the cost of capital. Could you provide that to the members of the committee at some point? Are you referring to Madam Urquhart's--

[Donald Sproule]

Madam Urquhart did it, so I'm sure she would.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Is it your study that's referred to in this report?

[Diane Urquhart]

That's correct, yes.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Okay. Do we have a copy of that report, Mr. Chair?

[The Chair, Conservative, James Rajotte]

Which study is this?

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

The independent study done by Ms. Urquhart.

[The Chair, Conservative, James Rajotte]

Have you submitted that to the clerk, Ms. Urquhart?