Thank you.
My name is Michelle Travis, and I am the research director of Unite Here Local 40, which represents hospitality workers across B.C. and is affiliated with our national union, which represents workers across Canada and the U.S.
Thank you for giving me the opportunity to speak to you today about the ICA.
In the context of COVID, the committee is studying the adequacy of the current ICA evaluation thresholds and whether to place a temporary moratorium on certain state-owned enterprises. In April, the minister announced that certain foreign direct investments in Canadian businesses will receive enhanced scrutiny. These measures will be in place until the economy recovers from the pandemic. We think enhanced scrutiny is needed; however, the real concern to us is the broader ICA review process.
There should be greater scrutiny of all deals reviewed by Ottawa, and that should not stop once we are on the other side of the pandemic. The valuation threshold for non-state-owned enterprises jumped significantly to $1 billion in 2017 and is now adjusted annually. That was a huge increase, and the higher threshold suggests that fewer transactions involving foreign direct investment will be reviewed for their impact on Canadians.
While a temporary moratorium may be worth consideration for state-owned enterprises of authoritarian countries, we also ask if this will apply to companies that are not officially state owned, but may have deep ties with authoritarian governments. We urge the committee to focus more broadly on the rigour of the ICA review process itself.
We ask the committee to consider these questions: How rigorously does the government assess the net economic benefit of certain transactions, and how can the review be made more transparent? What due diligence review is conducted on the ultimate beneficial owners seeking to invest in Canadian businesses? What heightened privacy protocols are foreign buyers expected to adopt when undergoing ICA review? What would trigger a new security review for transactions already approved under the ICA? What recourse is there to publicly review the undertakings and commitments made by foreign investors?
The average Canadian hotel worker may appear to be far removed from these issues, yet some of them work for companies acquired by opaque corporate entities in transactions approved under the ICA. In 2016, B.C.'s public pension fund, BCI, sold its hotel management company, SilverBirch, and a portfolio of 26 hotels to Leadon Investment for over a billion dollars.
The ultimate ownership of Leadon remains opaque. The Vancouver Sun tried to learn more about Leadon at the time and found only a downtown Vancouver-based law firm's mailing address and one director who listed his address in suburban New York. The Hong Kong connection was not obvious.
That same year, in 2016, Beijing-based Anbang initiated negotiations to acquire InnVest Real Estate Investment Trust, one of Canada's largest hotel owners, but backed out suddenly. The Financial Post reported that Anbang did not want to be named as the buyer and when that was met with objections, their representative, Lydia Chen, said she was representing a new pool of capital based in Hong Kong called Bluesky, which acquired InnVest for over $2 billion approved under the ICA review process.
Anbang was reportedly also under examination by China's insurance regulator at the time. They have denied any connection to Bluesky, but Anbang's former representative, Ms. Chen, is now the CEO of Bluesky and InnVest. Their ultimate beneficial ownership is unclear. Records from Hong Kong's corporate registry trace Bluesky to a shell company in the British Virgin Islands.
Questions about Bluesky's ownership bring us to Anbang, which underwent ICA review when it acquired Retirement Concepts for approximately $1 billion in 2017. Retirement Concepts is British Columbia's largest private senior care chain with 21 facilities and others in Alberta and Quebec. The facilities continue to be operated by an affiliate of Retirement Concepts. We don't represent workers at these facilities, but do represent workers in U.S. hotels owned by Anbang, as well as those who work in a hotel owned by an affiliate of Retirement Concepts.
Critics of the takeover raised concerns about Anbang's murky ownership and its CEO's ties to the Chinese state. Others questioned whether Anbang would adequately maintain staffing levels and quality of care. One year after Anbang received approval under the ICA, it was seized by Chinese authorities; its CEO was sentenced to 18 years in prison for fraud and embezzlement, and the Chinese government took a 98% stake in Anbang. Notably, the B.C. government has since taken temporary control of four of its seniors homes that were reportedly failing to provide proper care to residents.
Despite murky ownership and other concerns, the Leadon, Bluesky and Anbang transactions appear to have moved relatively quickly through the ICA review process. We wonder what criteria was used to determine the net benefit of these transactions.
Then there's the larger political context to consider, at least in the case of Anbang. Prior to our heightened tensions with China, there were already concerns about China's efforts to obtain sensitive information through economic espionage and direct investments. This has not been limited to so-called strategic sectors.
In 2018, the Marriott hotel chain revealed that it was the target of a massive cyber-attack that compromised the personal information of over 300 million Starwood guests over a four-year period. The attack was reportedly traced to hackers working for China's Ministry of State Security.
In conclusion, if the point of the ICA review process is to ensure that foreign investments benefit all Canadians, we think that a more rigorous and transparent net benefit analysis and security review should demand more of foreign investors, regardless of their countries of origin.
Thank you.