Moreover, debt can be valued less than $1.00 for $1.00 only if it can be proven in court that no tangible book equity remains in a corporation. And did you know that a dollar of debt acquired for a penny can be counted as a full dollar (or anything up to that) in CCAA? That shows you the games that can be played by people who know CCAA law.

Part of the legal process in the Stelco case has been to brow-beat the legitimate creditors and bondholders into receiving less than 100 pct of their claims. That is the only way the proposed buyers (who are holding inexpensively acquired debt) are able to require the judge to issue a sanction order that eliminates all current equity positions, and why they are trying to bring about such a result.

Same thing goes for the workers pensions. Management struck a fair deal in the past to fund their obligations, but if they can prove to a court that there is no equity remaining, then, and only then, they can walk away from their contractual obligations to employees, former employees, bondholders, bankers, and creditors.

That's why this Stelco case is so important to everybody. Private equity interests are working with management to take as much of the value of Stelco for themselves as they can, and the only way they can start the process is to prove in court that the shareholders' equity is worthless. So they started a game of divide and conquer.

But, without the protection of CCAA and the full-court press by the lawyers in this case, this game would be over quickly. Left to its own, the equity market would resolve this matter both quickly and fairly. The only losers would be executive management, the rogue Board of Directors and the acquiring private interest groups.

What is unique in the Stelco matter is that the holders of equity elected what they were led to believe was an honest Board, which in turn hired management, both of which broke their fiduciary obligation to first protect the rights and interests of shareholders who installed them. The shareholders are the true risk-takers and they had their rights taken from them for no good reason.

The gang seeking control fabricated a case of insolvency as was subsequently proven by events in the capital markets and by the evidence presented to the judge. But under CCAA, those fiduciary obligations now seem to be academic.

Recent media attention given Dofasco Steel has suggested that the high valuations in that situation were due to DFS having self-sufficiency in iron ore. You should know that Stelco is also in this enviable position.

The petition for CCAA by Stelco's Restructuring Officer 24 months ago was focused on then current weak market demand and wrong assumptions of hot idle or cold steel-making operations and the subsequent worthlessness of these assets. It was never proposed that the royalty flows from Stelco's share of iron ore mine assets (net sales totaling $834 million providing $185 million in 2004 royalty revenue " see 2004 Annual Report, page 8) be "commuted" through a financing deal (if necessary) to provide a large cash amount to deal with any temporary financial problems or make pension payments to reduce the under-funded position in order to restore the confidence of the unions moving forward. Current high iron ore prices alone suggest that the 2006 ownership share of net ore sales would be close to $250 -300 million. There is also a huge value of coke assets, which are in high demand, and in the extensive Hamilton acreage, that was never considered.

As you can see, there are valuable assets that this court has not looked at because management neglected to present this evidence. Management has been able to cook the books to suit their purpose.

You should also be informed that, unburdened by CCAA, a new buyer would be quick to strike a deal with shareholders of the "old" Stelco, anticipating a much better deal than possible or likely from the "new" Stelco owners who would be there to maximize gains on under-valued assets they are presently seeking to acquire through a stacked legal process.

I have never been alone in making such claims. On Monday afternoon this week, the award-winning business journalist Eric Reguly stated on ROBTV that this Stelco matter is flat-out "a billion dollar theft."

So, taking the big picture, which is my interest in this case, I see Stelco as a major fight over capital market integrity. Are we going to allow engineered fraud abuse, facilitated by bankruptcy courts and rogue management, carry the day for well-organized private equity gangs, or are we going to demand from legislators and regulators real protection of public capital markets for the true risktaker?

I say that new legislation is urgently required in Canada for both CCAA and the management of pension funds. There needs to be checks and balances in the system. Without it, there will be a continuing series of shareholder complaints in companies like Stelco, Algoma Steel, Eatons, Air Canada, and so on " that is, until there happens to be no more shareholders willing to take significant risk in such public corporations.

And that means there will no longer be an equity market worth trading.

Nobody can afford that. And that is why I have taken such an interest in Stelco. I see it as a line in the sand.

And through this blog, that Canadian sand is being thrown by Stelco management and private interests directly into the faces of the key traders in global equity markets.