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October 25, 2005

A call for integrity and fairness, Tues., Oct. 25, 2005, 11:15 AM

This has been on my mind all morning. I'd like to ask the Prime Minister of Canada if he is truly not a fraud artist. I'd like to ask the Premier of Ontario the same question.

You see, with everything that is apparent about Canada's national treasure, the Steel Company of Canada, I believe the public is being defrauded, and there are links directly to those two gentlemen. I think it is time for the RCMP to pay them a visit.

This morning, Stelco (TSX: STE.A) is trading with a market cap of about C$15 million (under $13 million USD). The company was put into bankruptcy protection" by a management that is being protected from the Company shareholders and bondholders and bankers, who would like to see them fired, but can't because they have managed to use the law for their protection.

You see, nobody registered a claim, or petitioned this company, Stelco, into bankruptcy. The rogue management of this company did this act themselves two years ago. Subsequent court filings have proven it.

In the interim, this massive steel company, with the best operating location in Canada, and a superb workforce, has managed to achieve historical record profits. That's in spite of all the backroom games and political nonsense swirling about.

We're talking about one of the biggest steel companies in North America " the producer of 5.8 million tonnes of steel every year. There are proven, sustainable markets for that steel. This is not a concept, hi-tech flim-flam we're talking about here.

We're also talking about a company (Stelco) that is one of the major customers of the Prime Minister's personally owned shipping company.

The entire case against Stelco seems to be made within the under-funded pension fund liability to its workforce and retirees.

Pensions happen to be a provincial matter in this country. The Ontario government has stepped into the fray and deemed Stelco management to be operating in bad faith, and they want the matter cleared up. So, in the most extreme of ironies, they intend to help management and its restructuring officer eliminate all the fully paid and rightfully earned shareholder equity in order that they " the people's government -- can invest well over a hundred million dollars into this supposedly bad deal.

And at the end of the day, they (the government) and management (the ones the government found to be scoundrels for not keeping pension plan assets up to level) and a small Bay Street player (friends???) intend to take Stelco for their own.

The problem with that is that there is no precedent for the government to use taxpayer money to remove unfunded pension liabilities of shareholder-owned corporations. And management has no pot to piss in.

In addition, the shareholders themselves have not even been allowed their right to recapitalize this company if it could be shown to be in need. And the bondholders are screaming to the courts that the government together with the holders of unsecured debt plan to remove their fully paid rights. And both groups are asking the courts why independent auditors cannot value this company on a going concern basis when the blast furnaces are still pouring steel at a record pace.

What is going on here that the Ontario Securities Commission, which has a mandate to serve and protect the public, has never made a public statement? What is going on in the head of judge who thinks he alone is the solution to this problem?

I am irked because Stelco produces annually the total of 5.8 million tonnes of the best quality steel in North America, and makes a lot of money doing that. Another steel company, Mittal Steel (NYSE: MT), which is the world's biggest, and no more profitable relatively speaking than Stelco, produces 59 million tonnes of steel, but is valued at US$17.7 billion.

Mittal Steel recently (2004) bought an Ohio-based steel maker for $4.5 billion. This week Mittal bought the national treasure" steel company of Ukraine (7 million tonnes/year) for $4.8 billion. There is a market demand for steel companies, and steel companies like Mittal and Russia's Severstal dearly want to acquire control of Stelco, and the Stelco shareholders and bondholders dearly want that to happen.

But life has its way of getting in between.

Occasionally the impediment happens to be one of fraud. That is what I strongly believe is happening here.

And if anybody questions the legitimacy of the Ontario Government's concern over Stelco's unfunded pension fund liability, just ask why government is ignoring a much worse problem going on today at Sudbury's Inco and Falconbridge operations, the ones they are so pleased to support.

Yes, this is a fraud. And I am pissed.

And if nobody cares, or thinks nothing can be done about this travesty, then I believe that capital markets in this country are headed for destruction, and society could go through a period of anarchy like we had in 1970.

I have some 30,000 unique web addresses accessing this blog. Many of the readers are regulators, politicians, lawyers, and whatever. If you think I'm pissed now, you cannot imagine what is going to happen next year when I will probably have 250,000 unique web addresses accessing my blog.

You see, that +30 to 50-pct Month over Month exponential growth is what happens when The Little People happen to see there is someone like me prepared to stand up to the bullcrap that we get fed every day by bullies who for too long have enjoyed shovelling it down our throats.

I have one other thing going for me, which is that I have no financial interest in Stelco. I care only about the integrity of capital markets and in social equity.

And I'm not going to be stopped by a Prime Minister or a Premier who couldn't carry my lunch pail if they didn't hold the office we the people have given them for a short time.

And as to web stats, which are my polls, Messrs. PM and Premier ought have a look at the following (data taken early today).

With still a week to go this month, I know there will be 4 times the blog pages that were read in July, twice the pages from September, and double the visits of August. I already have over 100,000 hits every day.

Moreover I didn't ask for any of this. And I didn't buy my way in, as both the Prime Minister and Premier did. That's the power of blogging.

Yes, I'm pissed all right, but you haven't yet heard more than just the start of this.

One of my very capable friends sent me a note to say he is starting to work up a proposal for an investor protection agency (not-for-profit) from funds he has identified. He happens to be someone who will quickly get the attention of people like Prime Ministers and Premiers. I look forward to this development, and will participate.

There are times in our lives when we just have to say to ourselves: if nobody else intends to stop the bullcrap, I just have to take the bull by the horns.

Posted by Posted by Bill Cara on October 25, 2005 11:15:11 AM | Category: Canada