Finance Committee on March 25th, 2010

[Diane Urquhart]

I can do so.

[The Chair, Conservative, James Rajotte]

Okay.

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

I appreciate that. Thank you very much.

Madam Urquhart, you mentioned in a comment just a few minutes ago that the increased cost of capital was minimal. I just want some clarification: were you referring to the cost for all corporations, or only for those corporations with defined plans?

[Diane Urquhart]

The estimate that I have for those corporations that have pension plans, and pension plans that have a deficit, is that the investment grade companies would experience a 0.16% increase in the cost of the credit. For those that are speculative grade--junk-bond-rated--I'm saying that the impact is a 0.79% rise in the interest rate that would have to be paid by a corporation that is raising money and is junk-bond-rated. That is the higher cost.

I'd also like to note that today there are twice as many credit default swap dollar values outstanding than there are junk bonds, so even in the junk bond market, that's for an unhedged junk bond owner who's going to experience an increase in the cost of capital. We have hedged junk bondholders who will bear no increase in the cost of capital at all. In fact, they would like to see a bankruptcy triggered so that they can collect the insurance money and have no loss whatsoever. My number of 79 basis points for the junk bond market does not take into account that we have more than twice as many credit default swaps outstanding on junk bonds as there are junk bonds in the world.

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

I appreciate that.

In your remarks early on, you referred to 40 of 53 countries, and then you continue by saying “they have preferred or better status for employee benefits or have public pension benefit guarantee insurance”. Could you elaborate on what you mean by public pension benefit guarantee insurance?

[Diane Urquhart]

Twelve countries have a public pension benefit guarantee insurance plan. This is a crown agency to which corporations that have pension funds are obliged to pay premiums. It is an insurance plan, such that if a corporation were to become bankrupt and there's a deficit in the pension plan, then those crown insurance organizations, such as the U.S. Pension Benefit Guaranty Corporation, will accept the pension fund and will continue to pay the pension income to the participants in the plan.

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

Up to what maximum?

[Diane Urquhart]

In the United States, it's to a maximum of $54,000, based on the current currency. In England, it's approximately £28,000, and in Germany there is a public insurance plan all the way up to the Canadian dollar equivalent, the last time I looked at it, at $120,000 Canadian per year.

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

A little bit later in your comments you mentioned an alleged breach of trust. Further on you commented about a court-appointed representative and the negotiations going on there. Is that breach of trust being litigated?

[Diane Urquhart]

We're waiting for Justice Morawetz's decision any day. There was a court hearing from March 3 to March 5 in which there was a dissenting group of long-term disabled employees. For the record, I was retained, as was Joel Rochon of Rochon Genova, to represent the dissenting employees. There was an opportunity to be opposed to the settlement agreement, which would be a proper form of justice, so that opposition was rendered and the allegation of breach of trust was made. We're waiting for Justice Morawetz's decision as to how he wants to handle that allegation.

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

Mr. Chair, I have just one more question before I choose to share my time with my colleague, Mr. Généreux, if there's time left.

[The Chair, Conservative, James Rajotte]

You've got two minutes.

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

You talk about a conflict of interest occurring between the court-appointed representative and the rights of the disabled. Can you elaborate on what those conflicts are?

[Diane Urquhart]

In a bankruptcy protection proceeding, which is the Companies' Creditors Arrangement Act proceeding, representative counsel may be appointed by the justice. That representative counsel is then directed by a steering committee. The steering committee represents persons who represent the constituent groups. In the Nortel case, Koskie Minsky was appointed to be the representative counsel for the disabled, for the pensioners, and for the terminated workers. I think from the numbers we saw from Don's presentation, approximately 25,000 people in total were represented by Koskie Minsky.

There were two steering committees. One was for the pensioners and the terminated workers, which was chaired by Mr. Sproule, and there was a single person steering committee for the disabled, chaired by a person named Sue Kennedy. So what happened in the negotiations.... First of all, there was one representative counsel for all, and the two steering committees joined together for the negotiation of the settlement. It was the opinion of the dissenting long-term disabled, I and Mr. Rochon as legal counsel retained by them, that the 400 people who were long-term disabled did not have their interests served as 400 people because no effort was made to establish.... Basically, in the settlement there was a denial of the right to sue the parties involved with the health and welfare trust to gain remedy for the $100 million that was missing from the trust. So it was the opinion of Joel Rochon delivered to the court that there was a conflict of interest as a result of the long-term-disability steering committee joining in the negotiation with the other 24,600 people represented.

[The Chair, Conservative, James Rajotte]

Thank you, and thank you, Mr. Hiebert.

We will go now to Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair.

I would like to indicate at the outset that I will be sharing the time given to me during this first round with my friend and colleague from Thunder Bay—Rainy River, who is the author of a bill on pensions. He will be doing all of the NDP's second intervention.

I would like to begin by thanking you all for coming here, particularly Ms. Blanchard, Mr. St-Michel and Gladys. Thank you for putting a human face on these issues. The people from Nortel presented us with a document to show the human side, and you represent it well.

Yesterday we learned that the government once again intends to hold consultations throughout Canada. What we need to do is quite clear, in my opinion. The Parliamentary Secretary, Mr. Menzies, had already done his own consultations during the last prorogation. The government was supposed to recalibrate during this prorogation and arrive ready to take action. What is missing now is the will to do something. As you said so clearly, Gladys, we have a date and it is urgent. We have to stop procrastinating.

Ms. Urquhart, it is a pleasure to see you again. Your comments are so relevant and help us so much in our work. I must tell you that you have raised an issue that has already been raised by the experts. We are deeply concerned by this issue. There are, within our current legal structure, incentives pushing companies to declare bankruptcy, which is not right. I would like to thank you especially for providing us with explanations as well as comparisons with what exists in other countries like ours and which show that we are dragging our heels. From a social perspective, this is inexcusable. We believe that we are socially advanced, and we brag about this, but we are not. So thank you for that.

Mr. Neuschwander, would you be so kind as to share your studies with us? Earlier, you said, according to the opinions we have received, this should not cost any more. Would you be so kind as to send them to us?

[Bernard Neuschwander]

They're the same studies as Ms. Urquhart's.

[Thomas Mulcair, NDP, Outremont, QC]

Tremendous then. That's great.

Despite the fact that he is from another party, I was delighted to hear my friend and colleague, John McCallum, say earlier that the Liberals would support our bill. I'm very pleased about this because the time for hemming and hawing is over.

The current round of consultations has been pushed back. We agreed to do this because there was apparently going to be a far-reaching study presented in Whitehorse. That amounted to very little. We are starting our work and they want to further consult which would push things back until May. There is no justification for not acting this spring.

These are the same Conservatives who said that they would never accept their House of Commons pension, all of whom have now accepted it. Now I think it's about time for them to start doing something for everyday Canadians' pensions.

I'd like to hand the floor over to my friend and colleague from Thunder Bay.

[The Chair, Conservative, James Rajotte]

You have about three and a half minutes.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you very much, Chair.

I'd first like to emphasize the words of Mr. Mulcair that things can happen quickly in government. If you think back to before Christmas, it only took the government four days to pass harmonized sales tax right through the House of Commons and through the Senate for Ontario and British Columbia. Imagine, it took four days.

Things can happen quickly, and things do have to happen quickly, because every weekend when I go back to my riding I talk to seniors who can't pay their electricity bills now. I'm sure you know people also who cannot pay their electricity bills or their heating bills, or whatever the case may be. We do need to act very quickly.

Let me just tell you quickly about Bill C-501, which I introduced into the House yesterday, and I do thank the Liberals for indicating their support for this bill. Essentially what this bill does is it moves pensions from unsecured to secured, and that's what I've been hearing today. It doesn't move it to the top of secured. It moves it into the secured area and into the preferred secured area.

I hope that is the first step in a number of changes that are going to be made over the years, and I certainly hope the Conservatives and the Bloc will also be supporting this. I will be working very hard to make that happen.

One of the things that is very clear that statistics and science tell us—this is really for Ms. Comeau and Ms. Blanchard—is that the best indicator for seniors' longevity is how many friends they have. Related to that is the less money you have, the fewer friends you have. So this is directly related to a health outcome and longevity.

I wonder if both of you, in the last minute or so that we have left here, would have any comments on what science tells us.

[Gladys Comeau]

In Alberta, one aunt is 93 and the other is 103. I just thought you'd like to know that. Also, in B.C. there are people still, and two in Saskatchewan, my relatives, and they're older.

Thank you.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

[Inaudible--Editor]

[Gladys Comeau]

Oh, they're wonderful. I love going back.

[Diane Contant Blanchard]

Of course, if you have to make a choice among friends who only have an interest in you for your wallet, well then I'd like my wallet to be a little more thickly padded.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Do I have any more time?