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Thursday, December 26, 2013

Modified cattle prods and the media

News stories just don't appear — dropped by the news gods into a reporter's lap. Stories are created: structured, modeled, fashioned and polished . The best new stories have both a protagonist and an antagonist and they unfold, inverted pyramid style, to a satisfying climax. With the climax told, the conclusion can be cut wherever a page editor must in order to fit the story onto the page.

News folk will tell you their report, their story, is true. The reply to this is, "So?" True is not necessarily balanced. Nor is true necessarily compete.

Today the local paper, where I worked for more than three decades, ran a story reporting that the Province of Ontario has agreed to a $32.7 million settlement in a class-action lawsuit filed by residents of two now closed institutions for people with developmental handicaps: the Southwestern Regional Centre near Cedar Springs and the Rideau Regional Centre in Smith Falls.

The article rekindles memories of a long forgotten story in reporting:

Southwestern Regional Centre made headlines in the 1980s when it was revealed cattle prods were used on some patients, which advocates termed a form of "torture."

Torture at Cedar Springs: Now there is a good news story and sitting right on the door step of The London Free Press. Cedar Springs is on the distant southwestern edge of the newspaper's circulation area. With an important bureau office in Chatham and thus a reporter stationed in the immediate area, the revelations of claimed mistreatment at the mental health facility was big news.

This is the kind of story that sells papers, but was it true? Yes, it was true. Modified cattle prods were being used on residents. Was the story complete? No, I don't believe so. I know for a fact that some staff at the Cedar Springs facility would say, "Yes. The story, as reported, was true." But others would say, "No," and argue the story, as reported, was incomplete. In the past, I've heard institute staff go so far as to call the news reports inflammatory and inaccurate.

I recall stories from that period that never made it into the paper. These stories did not mesh with the thrust of the cattle prod hell-hole stories. Let me relate a couple of the stories editors ignored.

Living in an institute like Cedar Springs was not life-enriching for many of those living there. At one point it was decided to hold a food adventure party. Foods that many of the occupants rarely, if ever, sampled would be served. Some of these foods, were kept off the menu for good reason. They posed a choking danger to those residents for whom even eating was a struggle. These residents missed out on the pleasure of enjoying many foods of various flavours, temperatures and textures. And because some residents were denied these foods, other residents on the floor were often also denied access.

For the party extra staff were assigned to monitor the residents and watch for any problems. The staff, trained to handle choking situations, found the party stressful but it was a delight for residents. The alert staff prevented residents from stuffing filling their mouths with food. Thanks to the staff's watchfulness, there were no choking incidents at the party.

Another story involved a young boy afflicted with Down syndrome. His parents had decided it would be best if their young son was institutionalized. They brought the boy to Cedar Springs for evaluation.

After running a number of tests on the child the parents were told that, as difficult as it would be, the best thing for their little boy would be to remain at home. The professionals at Cedar Springs determined that the little boy was actually quite bright. Certainly as bright as a healthy five or six year old child. This little boy was bright enough to learn from his surroundings. Put him in a facility with severely developmentally challenged individuals and the little boy would learn how to fit in at the institute. He would grow up to act like the severely developmentally challenged individuals with whom he lived.

Kept him at home, in a healthy, loving atmosphere, surrounded and supported by family, he would learn social graces. He would grow up to be a functioning individual. He would function at the level of a bright child but he would function. The little boy was not institutionalized. His parents took him home.

As for the stories about cattle prods and torture, I don't want to say too much as the closing chapter for that story is still to be written. The newspaper story reports that the announced deal still requires court approval.

I don't know all the stories and I am sure there are some horror stories. But I do know there is another side to this story. I was told that most of the workers authorized to deliver shocks were themselves shocked. It was felt that those delivering shocks should have a full understanding of the pain involved. I talked with one young woman who worked at the facility who told me she had been given a shock, a painful jolt, and she never wanted to be touched with a prod again. Never.

Yet, she delivered shocks. Why? The residents she touched with the modified cattle prod were injuring themselves by pounding their heads on the hard floor. The options for protecting these residents were to physically restrain them, to lock them away in essentially a fully padded cell, to drug them into an almost comatose state or to try and modify their behaviour through the controlled application of a short but painful jolt of electricity.

Despite the news reports of cattle prods and torture in the regional centre near Chatham, the centre had not gone rogue. A surgeon does not stab or assault a patient with a deadly weapon, despite the use of  sharp blades. Mental health professionals are not engaged in torture despite the use of modified cattle prods.

Matthew Israel, the inventor of the Graduated Electronic Decelerator (DEG) used at the Judge Rotenberg Center (JRC) in Canton, Massachusetts — and only at the JRC — defended his use of painful electrical jolts to control behaviour:

Some individuals who are developmentally disabled or psychiatrically challenged display severe behavior problems such as eye-gouging to the point of blindness, skin gouging to the point of fatal blood and bone infection, biting off the tips of one’s fingers, pulling out one’s own teeth, etc. These problems require rapid and effective treatment.

Boston Magazine in an article, The Shocking Truth, looked at the use of the DEG at the JRC in Massachusetts. The reporter wrote: "Spend enough time around the machine and it will test everything you know about right and wrong." In 2008, at the time the article was written, the writer wrote: "Some Massachusetts legislators who’ve filed bills this year to limit the use of the machine call it "barbaric" and the school "like Abu Ghraib"."

If you've got the time, read the Boston Magazine article by Paul Kix. The first four pages can be tough. You will believe you are reading about sanctioned torture and you might partially be right. But on page five you will encounter P. J. Biscardi.

At age three, P.J. was diagnosed with autism. One summer, while Peter [P.J.'s dad] drove the family to Cape Cod, P.J. grabbed his father’s hair and pulled it out, blood smearing the upholstery. Peter and his wife, Maureen, had to lock everything in their house in Burlington — drawers, file cabinets, anything that could be opened — so P.J., then maybe all of 10, wouldn’t destroy the place. Or kill himself. But it didn’t matter: P.J. was violent.

P.J. was violent, and P.J. was curious. One year, at a holiday meal with the extended family, P.J. sneaked into the bathroom and sipped Drano. Drano. Maureen had never yelled louder in her life. They rushed him to the hospital, where doctors announced, mercifully, that P.J. had only suffered chemical burns.

Another time, P.J. took one of Peter’s razor blades to his arms. "Hurt, hurt," he said, when Maureen saw the blood-soaked towel. P.J. was known to ram his body into the walls; you’ve never see a linebacker hit a wall with such force, Peter says. He tipped out dresser drawers, knocked over shelves of books. P.J. bit himself so much that a giant callus formed on the skin between his thumb and wrist, growing larger every time he drew fresh blood.

The Biscardis’ other children, an older sister and younger brother, never wanted their friends over. . . . The school district didn’t want P.J. The Biscardis couldn’t keep him at home. So they tried four treatment centers. At the last place, the drugs temporarily stunted P.J.’s growth. He was 12. Peter wasn’t comfortable with the level of medication, especially since the drugs didn’t seem to do much to keep the kid calm. The school’s doctor told Peter, "If you don’t increase the dose, we’re not going to keep him here."

Today, after three decades living at JRC, P. J. Biscardi's callus on his hand has long ago disappeared. After P.J. makes a visit to the family home, the house is in the same shape it was when he arrived. And no locked cabinets.

To be fair, DEG is not modified cattle prod therapy but only a cousin of the Ontario approach. In learning more about the history of what was done in Ontario, one will encounter the late O. Ivar Lovaas. This is the man often credited with being the father of cattle prod therapy.

Early in his career, Lovaas used modified cattle prods to deliver electric shocks to autistic children in an attempt to modify their behaviour. He later renounced the method and adopted the positive approaches in keeping with B.F. Skinner's theories on how to modify and reinforce behavior. Lovaas took advantage of food treats and activity rewards and ceased the application of painful punishment.

About 20 years after Lovaas distanced himself from his own modified cattle prod therapy, Anderson Cooper of CNN reported on a family who supported the jolting of their autistic son with 4500 volts. Cooper wrote about this on his blog: Parents seek shock treatment for son.

The CNN reporter told viewers that in 2006 the state of Illinois outlawed the use of electric shock treatment in group homes and community facilities. The parents of one child who could no longer be shocked sued the group home where their son lived. They hoped to force the home to bring back the modified cattle prod. Their son's life had deteriorated without the prod. The courts tossed the case out because the treatment was now illegal.

No matter where you stand on the electric shock treatment delivered in the closed Ontario centres, I believe you would have a difficult time proving the treatment was torture. You might be able to find examples of residents who were not helped by the therapy but then experts only claim success in about half the cases. And this, of course, is where it gets sticky. Shocking people who are not helped may very well injure them instead, leave them greatly distressed. I am not surprised that some former residents launched legal actions.

The big story here might NOT be the almost $33 million settlement. Nor is the big story the occasional use of modified cattle prods to modify behavior. The story might be that the Province of Ontario has closed about 16 costly facilities and yet is short of cash to assist families now forced to cope with mentally challenged sons and daughters.

I've read that each residential spot in an institute cost the government at least $100,000 a year and there were thousands and thousands of residents. As a society we seem to have shifted much of the burden of caring for these former residents from the province to the affected families. In many cases the province has foisted day to day responsibilities onto the mentally challenged themselves. Again, this isn't all bad, but it isn't all good either. Although some of the former residents have fared very poorly outside the centres, others have not only survived outside the centres but flourished. As I said, it is no big surprise that some former residents took legal action.

The practice of openly excluding the mentally challenged from society has ended, to be replaced all too often with the insidious act of quietly socially excluding this group. What some of these challenged individuals and their families face today is but another form of, forgive the word, torture.

Saturday, December 21, 2013


For some of us there is nothing like a little heart problem to add spice to life. Note, it is important that the problem be little. If it is too big, it is all consuming. That's not good. The goal is NOT to be worried about dying but to feel driven to live, to savour the linked moments we call life.

If you have followed my blog, you will know that my granddaughter, an anglaise, is enrolled in a French public school. This is not a French immersion school, a school for English children whose parents want them to speak French. This is a French school for French children.

My granddaughter seems to be getting by. The school has had no complaints about her work. I believe the school is being very supportive of her efforts. Still, I worry. I feel driven to learn a little French, to chat with my granddaughter in the language she uses at school. I want the French fabric that is her school life to be frayed a little and for threads of French to find their way into her homelife, too.

To this end I have been watching French television (mostly TV5) and reading French news stories. A new world has enveloped me. The fabric of French culture is a rich weave with lots of threads loose along its edges.

Which bring me to Joe le Taxi — a song that is among the top one hundred best-selling singles of all time in France. It is also claimed to have been number one in Canada. Are you surprised? I am. Clearly, it was a big hit in Quebec. And clearly I have not been aware of the French threads that reach into Canada but get cleanly cut at the Quebec border.

Joe le Taxi is about a black taxi driver in Paris who knows the City of Lights very well. If it's a great little bar you seek, Joe's your man. A rum drinking, saxaphone playing dude, Joe is cool on the outside with a hot passion for Latin music on the inside.

How did I find the thread that led to the discovery of this song? TV5 and a story about Vanessa Paradis. This French singer-model-actress had a fourteen year relationship with American actor Johnny Depp. This connection makes her fodder for a news machine pumping out stories for an anglais audience.

Paradis was only fourteen when she recorded Joe. Today, in her forties, she has a fourteen year old daughter of her own, Lily-Rose, who is now evolving into an artist. Her daughter already shares a writing credit with mom and another woman, a close family friend. Lily-Rose co-wrote Love Songs with them after coming up with the melody eight years earlier when she was only six.

Paradis is attempting to foster creativity in her children, she also has young son. Paradis is surrounding the two with creative people who will lead by inspired example. Paradis is filling her children's lives with threads — creative threads.

Life is made up of threads, billions of threads. We all follow threads. It is the way life works. These threads, an uncountable number, are interwoven into the fabric we call culture. I'm hoping this learning of French will encourage my granddaughter to follow threads which lead deep into the cultural tangle that is Canada than I have ever gone. I hope taking French will be inspirational for my developing granddaughter.

Too many Americans and Canadians wear large, thick cultural blinders. Many Yanks cannot get past the "greatest country in the world" hollow boast. Talk of anything outside the United States makes their eyes glaze over. I do not want my granddaughter to be trapped in a cultural straight jacket.

If a young Vanessa Paradis, barely a teen, singing a charming, little piece of pop music seems a fragile thread on which to anchor an interest in French culture, you'd be right. It is very fine thread. And yet, if you follow it, if you allow it to gently pique your interest, you will find your self travelling deeper and deeper into French pop culture.

You may find yourself immersed in French techno pop music experiencing songs like Vive la fete, Bananasplit, or Laurent Garnier, Flashback. I have followed those threads in the past thanks to a woman who was not a small thread but a large swath of wonderfully patterned cloth in my life: My mother.

In her eighties, cruising from channel to channel one evening, searching for something of interest on television, my mother chanced upon an open-air concert by Jean Michel Jarre recorded in Paris. She loved the concert, the music and the light show accompanying it. We followed the JMJ thread and found it led us to Charlotte Rampling, an English actress and his second wife. This new thread connected us with The Night Porter, a difficult movie from the '70s with Dirk Bogarde. Bogarde was one of my mother's favourite actors. The movie was not.

Threads: Life is composed of threads. The threads we follow lead us deep into the fabric we call life. Threads hold never ending interest. We pass threads from the old to the young, from the young to the old, and from the dying to the newborn. Look about, find a thread, follow it. Live!

Friday, December 20, 2013

Ablation for heart flutter in the U.S. and Canada

Health care is expensive. That is a given. How a society covers the cost of health care is the big question facing both Canada and the United States. The Americans, prior to Obama, essentially relied on insurance companies to solve the problem. The solution wasn't perfect but for many Americans it worked.

Unfortunately, if you were dropped by your insurance company and you were unable to replace your coverage, you were in deep trouble. If you had a preexisting condition, the very health issue for which you needed covered, you might not be able to get that coverage. And if you could not afford the insurance premiums, you went without. The result was that in the States something between 35 and 40 percent of all Americans took a pass on health care; They didn't go to the doctor, to the dentist, or the hospital and if they did go they didn't get their prescriptions filled afterwards.

Canada has taken a different tack. It is called the single payer system, I believe. It isn't socialized medicine but Yanks see it that way. Because so many more Canadians as a proportion of society have health care coverage, the demand for health care in Canada is swamping the health care system. The U.S. system isn't swamped but then almost 40 percent of Americans are being kept on the sidelines. Comparing the Canadian system to the American one is a complex problem. The results of an indepth examination of the two systems really depends upon how you approach the issue.

My take on Canadian health care is from the angle of an aging heart patient. Treating my heart disease is time consuming and expensive. Suffering from a genetic-based heart disease (ARVC), my heart muscle is being slowly converted into fibrous tissue and fat. Neither materials are found to any great extent in strong, healthy heart tissue. As the muscle breaksdown, the weakened heart expands and fails.

I have given up jogging. Asking the heart to pump a lot of blood in a short period of time stresses the heart. It expands with resulting small tears. The small tears heal with fibrous tissue and fat filling the space.

Keeping my heart rate down and keeping a lid on my blood pressure are both important. I'm losing weight to easy the burden on my heart. I'm down to 195 pounds. I take a powerful drug to depress my heart rate. I take Lipitor to keep my cholesterol in check. And I take a blood thinner, Pradaxa, to prevent blood clots forming in my poorly functioning heart.

With my condition, heart arrhythmias are common. I suffer from a heart arrhythmia known as flutter. Arrhythmias cause the blood to swirl and stagnate in the heart. In about five percent of the time, this swirling results in the formation of blood clots which then move to the brain causing a serious stroke. Blood thinner slashes the chance of this occurring.

Sometimes, my heart can runaway. When this happens my heart must be hit with a brief but intense electric shock. In California a defibrillator was used in the Sonoma Hospital emergency room to force my heart back into sinus rhythm. If my heart is not returned to sinus rhythm within about ten minutes I can suffer irreparable brain damage and, within a few more minutes, death.

To prevent this, the doctors in Canada installed an ICD in my chest. ICD stands for
implantable cardioverter defibrillator. My personal defibrillator has stopped my heart from racing and has returned it to sinus rhythm at least three times. The ICD has also acted early to correct potential runaway heart problems, stopping the events from continuing into the life threatening stage.

Oddly enough, when my heart isn't racing, it is hardly beating at all. My heart rate can drop into the thirties! This isn't good. My ICD is programed to notice this problem and at these times it acts like a pacemaker. In one three month period it was found that my ICD paced my heart 98 percent of the time.

Last Friday, a week ago, the cardiac specialists at the London Health Sciences Centre gave me a reprieve from my constant heart flutter. They performed a catheter ablation procedure on my heart. Opening a small hole in a major vein in my groin, the cardiac team threaded fine wires through the vein up into my heart. They found the bad electrical pathway in the heart and burned a path across it. Scar tissue will form and this barrier should prevent my heart from returning to flutter for sometime. Eventually the heart may find another route or another path may form as my heart continues to expand. A second procedure may be necessary.

Today, I feel much better. My heart is out of flutter. My chest feels, for the most part, relaxed. But, more to the point, I am relaxed. Living in Canada, I had to be patient as the doctors went about the task of extending my life but, in the end, I was not saddled with an impossible to pay bill. Nor did I face the possibility of being dropped by my insurance company or seeing my premiums climb into the stratosphere.

What a contrast to the situation resulting from my medical treatment received in California. There the doctors were also excellent, the hospital first rate, the equipment state of the art but the bill was unbelievable. And I do mean unbelievable. When I told my Canadian doctors that I was able to run up a bill closing in on $30,000 in less than 48 hours, they were totally amazed.

After dumping almost $30,000 in California and finding no reason for my V-tach event, my health insurer was exceedingly unhappy. I believe, if I were American, I would have been at risk of having my insurance coverage revoked. On my own, I could never have afforded the wealth of tests that eventually were needed to discover the genetic cause of my problem. I certainly could not have afforded the ICD that has saved my life a number of times. And I could not have paid for the ablation therapy I had last week.

Health care is a complex issue. The stories in the media are more entertaining than informative. I cannot speak for all areas of health care in Canada. But, I can tell you that in London, Ontario, the cardiac doctors at the LHCS are first-rate, the treatment excellent and the options offered very compete.

The LHSC will be mentioned in my will and today I make do by making annual donations to both the hospital and to the Robarts Research Institute which is connected to both the hospital and to the nearby university.

Thursday, December 19, 2013

My little artist has discovered depth

It is a small step for a budding artist of four but it is still a major milestone. My granddaughter has discovered depth. Or should I say stumbled upon depth? She clearly liked the effect of the yellow heart sitting on top of the red shape. In fact, she liked the result so much that she overlapped a couple more shapes, creating a little row descending down the page.

I wonder if it is time to teach her about perspective lines?

I know she didn't intend it but I rather like the way the hearts morph into an almost butterfly shape by the time she reaches the top right corner of this piece. I say almost as my wife sees a dove as the final shape morphing out of a grouping of butterflies.

Whatever . . . in the end I like to leave abstract art abstract.

Wednesday, December 18, 2013


In retirement, architecture has attracted a lot of my attention. At some point I was placed on the e-mail list of a firm specializing in soil stabilization. The firm sends me links to interesting sites, from an architectural standpoint, and ones that posed unique soil stabilization problems. The firm sent me pictures of the Sheraton “Huzhhou Hot Spring Spring” Hotel. Amazing. I went in search of more. Now, I want to share a link with my readers.

Lo Sheraton “Huzhhou Hot Spring Spring” Hotel.

Considering the quality of the place, the cost of a stay seems rather reasonable. I picked a couple of dates in February and found I could book a room for my wife and me for a little more than $400 a night. We won't be going anytime soon but if I'm ever in China and want to pretend that I'm a one percenter . . .

Tuesday, December 17, 2013

Rebuttal to Sun Media column on company closures and layoffs

Last week Larry Cornies examined the rash of plant closures that have battered the economy of Southwestern Ontario. The London Free Press columnist slipped in one of his core business beliefs when he made the following claim: Companies — whether it’s Libby’s, Ford, Heinz, Kellogg or U.S. Steel — all act in the strategic interests of their shareholders or investors — It's their imperative, he tells us.

Mr. Cornies may be wrong, as any long-time investor in the stock market knows all too well. My guess is Mr. Cornies is well aware his position here is questionable. That is why he tries to slip his claim quickly by his readers. He makes no mention of the growing number of experts who believe the "shareholder value imperative" is a myth — a common one, an oft repeated one, especially in the media, but a myth just the same.

An entire book has been written addressing this very subject — The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations and the Public by Lynn Stout, a Distinguished Professor of Corporate & Business Law at Cornell University Law School in Itaca, NY.

Ms Stout wrote in an article published by the Utne Reader and posted online:

If we stop to examine the reality of who "the shareholder" really is — not an abstract creature obsessed with the single goal of raising the share price of a single firm today, but real human beings with the capacity to think for the future and to make binding commitments, with a wide range of investments and interests beyond the shares they happen to hold in any single firm, and with consciences that make most of them concerned, at least a bit, about the fates of others, future generations, and the planet — it soon becomes apparent that conventional shareholder primacy harms not only stakeholders and the public, but most shareholders as well.

Ms Stout points out that between 1997 and 2008, the number of companies listed on U.S. exchanges declined from 8,823 to only 5,401. The Heinz Co. has now joined the growing list of public companies taken private. This a disaster for investors in the market. Retiree shareholders, like me, are especially hard hit. The cream of the investment world is being siphoned away.

Heinz was a cash cow for its shareholders. Those who bought shares in early January 2010 saw a gain of almost 39 percent in three years, and that is just share value growth. Heinz also paid an annual dividend of $2.06 at the time it was taken private .

Admittedly, Heinz shareholders saw an immediate pop in the value of their shares with the purchase of the food giant by Berkshire Hathaway and 3G Capital but it was a one time event. To a great extent, Heinz is now a private cash cow.

Nebraska-based Berkshire Hathaway holds $8 billion in preferred shares paying a 9 percent dividend, or $720 million a year. Compare this payout to the old common-stock dividend. It only cost the Heinz Co. about $665 million.

Larry Cornies assures us that a multinational like Heinz is forced to make some hard decisions. True but Heinz was not facing any immediate hard decisions. The company was awash in $325 million free cash flow.

The hard decisions materialized when Heinz became a private multinational saddled with a lot of new and growing expenses. Heinz faced some 2000 hard decisions. That's the number of jobs cut since the company was taken private.

One big driver of the recent closures, and left unmentioned by Mr. Cornies, is greed — and greed is not good despite what Kevin O'Leary, of Dragons' Den fame, proclaims oh-so-loudly. To understand the damage caused by unbridled greed one needs to look no farther than Mr. O'leary himself.

In his memoir, Cold Hard Truth, O'Leary called The Learning Company, his patched-together business, a money-making machine. The Tuck School of Business at Dartmouth University begs to differ. According to the business school TLC had "questionable profitability" and "two of Learning Co.’s deals . . . rank among the 10 worst U.S. acquisitions during 1994-1996 as measured by shareholder value two years after the deal." According to The Globe and Mail, an SEC filing shows that TLC suffered net losses of $376 million in 1996, $495 million in 1997 and $105 million in 1998.

Erik Gustafson, manager of the Stein Roe Growth Stock Fund, a major shareholder in Mattel at the time of the TLC acquisition, is widely quoted as saying, "The present management team [at Mattel] has vaporized two thirds of the value of the company." While shareholder value was tanking, long-time Mattel workers were also suffering. 3000 lost their jobs.

So, who benefited from the Mattel financial meltdown? Kevin O'Leary for one. Bain Capital for another. When Mattel handed O'Leary his walking papers, after just months with the company, his TLC division was killing the company. O'Leary's pain of being, what some have called, fired was eased by a $5.2 million golden parachute.

Landing on his feet, O'Leary appears regularly on CBC as their business go-to-man. The Ivey Business School at Western University thinks so highly of his philosophy of greed that they have placed him on their advisory board. Does this tell you something is wrong in our accepted business model?

One can learn more about why the Southwestern Ontario region is experiencing so many mergers and subsequent closures from reading the news reports of Norm DeBono in The London Free Press and staying clear of the opinion pieces by journalism professor Larry Cornies.

According to DeBono:
A U.S. investment firm has bought and closed three London businesses in four years, shortchanging workers on severance in at least two of those businesses — and might do it again. Apparently, there are no federal or provincial restrictions in Canada that a company has to respect the law in how it treats its former workers before it can buy another business in the country. . . .
"There are laws that protect employees when there is successor-ship (another company taking over). But if a company is winding down a business, their obligations to fund may disappear," said Tim Gleason, a Toronto labour lawyer.
  • Sun Capital Partners in Boca Raton Fla in 2007 bought McCormicks in London, laying off 275 workers, refusing them severance and vacation pay and their pensions. Workers won vacation pay after a two-year legal fight.
  • In 2008 H.J. Jones Packaging in London was sold to Knight Packaging of Chicago, a Sun Capital firm. H.J. Jones was closed, cutting 45 jobs. Workers were also refused severance, but finally won a deal that gave them half of what they were owed.
  • In 2011 the year-end closure of Specialized Packaging Group in London was announced, cutting 189 jobs. It's owned by PaperWorks of Philadelphia, another Sun Capital company.

It is one thing to watch American interests close their long-time Canadian branch plants but it is quite another when an American company buys a successful Canadian business, folds it into the U.S. firm, and then closes the Canadian operation — often moving the production Stateside.

For an example of this think of Bick's. This Canadian company made pickles in Dunnville, Ontario, until the giant American company J.M. Smucker bought the operation, closed it, and moved production to Ohio.

Wednesday, December 11, 2013

Deals from Hell

London, Ontario, has been hard hit by company closures, as has all of Southwestern, Ontario. With thousands of Canadians losing their jobs, Sun Media columnist Larry Cornies has come out in print as an apologist for the companies. The companies are only acting in the strategic interests of their investors, he tells his readers. Corporations must seek to maximize value for shareholders, he claims.

The problem with Cornies' argument is that the executives running companies do not always put the shareholders' interests first. They might but then they might not. In many cases, the executives are looking out for Number One, themselves.

Mennonite Mutual Aid
Mennonite Mutual Aid
The title of this post was inspired by a book of the same name by Robert F. Bruner, professor of business administration at the Darden School of Business at the University of Virginia. An article in The New York Times examining business mergers and whether or not they make good financial sense reported:

"Bruner is critical of this process [business mergers], which he calls financial cosmetics. 'It invites the creation of growth for appearance rather than growth that creates wealth for investors and society,' he says."

Another good name for this post would have been Pay Without Performance after the book by Harvard professor Lucien Bebchuk with Jesse Fried. Why? Because so many of the recent closures did not benefit shareholders to anywhere near the extent that the closures benefited the deal makers

Consider Heinz. If your grandparents had bought just 100 shares for $2500 when the company went public in 1946, you would have owned, after stock splits, 16,200 shares, which would have been worth almost $1 million at the time Berkshire Hathaway and 3G made their offer. Those shares were yielding $33,372 annually in dividends. (Admittedly, Heinz shares did enjoy a $12 pop thanks to the buyout.)

Over the years, Heinz, the-public-company, was a cash cow for its shareholders. Now Heinz, the-private-company, will be a cash cow for Berkshire Hathaway Inc. and 3G Capital. It will not be a continuing cash cow for its buy-and-hold shareholders.

To argue that Heinz, an American company, would not have closed its large, Canadian plant is impossible. I have no crystal ball. But I can tell you this: Bloomberg Personal Finance reports that annual interest expense at Heinz probably doubled to $560 million since the takeover. Plus, Nebraska-based Berkshire Hathaway now holds $8 billion in preferred shares paying a 9 percent dividend, or $720 million a year.

If $720 million sounds like a lot, it is. Going private may have eliminated the common-stock dividend but that dividend only cost Heinz about $665 million.

Larry Cornies tells us: "For a multinational like Heinz, the comparative costs of labour, raw materials, power, land, machinery and other inputs in some other part of the world forced hard decisions here."

He's right. But what Cornies doesn't mention is that Heinz posted $2.01 billion in ebitda last year on $11.5 billion in revenue. Ebitda stands for earnings before interest, taxes, depreciation, and amortization. After deducting those expenses, the company was awash in $325 million free cash flow. Heinz wasn't facing any immediate hard decisions.

The hard decisions materialized when Heinz became a private multinational saddled with a lot of expenses associated with going private. Heinz faced something in the neighbourhood of 2000 hard decisions. That's the number of jobs Heinz has cut since being taken private.


One last thought. One that I couldn't fit into the post above. All shareholders are not as shallow as Cornies apparently believes or as amoral. Cornies is a Mennonite and proud to be a Mennonite. Yet, I believe, there are Mennonites who would take a different tack that he does in his Free Press piece.

The following is from Crossroads, Eastern Mennonite University:

"No business that wants to last can afford to ignore in its financial statements the depletion of its productive assets, yet that is precisely what the global economy is doing. . . . Disaster looms precisely because the current economic model has no built-in limits – no stopping point short of a crisis generated by environmental or social collapse."

James M. Harder and Karen Klassen Harder, Bluffton University

I'd like to see Cornies tackle the closure of so many Canadian plants, many successful. These Canadian businesses were bought by American interests, sometimes private equity firms, the work moved to the States and the Canadian operations closed.

Possibly Cornies should read David Steward's Doing Business by the Good Book. Steward writes: "The investment community can apply tremendous pressure to produce quarterly profits. This outside persuasion sometimes tempts management to think short-term, reduce expenditures, and forgo quality. . . . the demand put on management for three-month gains isn’t necessarily good for a company’s [or its shareholders] long-term interests.”

Monday, December 9, 2013

Civilizations don't die, they commit suicide

London, Ontario, the city I call home, has problems. These problems are common and challenge cities everywhere. London the town grew into London the city but it did so without a vision, without a plan. Like so many places, London sprawls out over the precious farmland of Southwestern Ontario, like ink leaking from a faulty pen destroying the shirt. Most cities on the planet leak people.

Sprawl has been going on for as long as there have been cities. It is not a new problem. It is the scale and global nature of today's sprawl that is new. As I write this my memory flashes back to the early '70s and my days at university in Toronto and I recall a book that I had to read for one of my classes: The Limits to Growth, a report on a Club of Rome project.

Selling more than 30 million copies, that book had a big effect on a lot of people, young and idealistic at that time four decades distant. Unable to find my copy, I found the following linked article online: Revisiting The Limits to Growth: Could The Club of Rome Have Been Correct, After All? (Part One) by Matthew Simmons.

Simmons' article was interesting in that it didn't find fault with The Limits to Growth but instead found fault with many of the criticisms that have flooded the popular press in the intervening decades. Simmons tells us:

Nowhere in the book was there any mention about running out of anything by 2000. . . .
The book postulated a continuation of the exponential growth of the seventies . . . would result in severe constraints on all known global resources by 2050 to 2070.

The task was to examine the complex problems troubling "men of all nations; poverty in the midst of plenty, degradation of the environment, loss of faith in institutions, uncontrolled urban spread, etc."

While many readers concocted various 'imaginary' assumptions, the book's conclusions were quite simple. . . . a limit to the growth that our planet has enjoyed would be reached sometime within the next 100 years.

The Limits to Growth is not the only book with a tone that reflects my gut concerns about the massive loss of  Southwestern Ontario farmland. For a more on-point discussion of the problem (without actually confronting it head-on) read Collapse: How Societies Choose to Fail or Succeed by Malcolm Gladwell and published originally in the New Yorker.

This is a review of the book Collapse: How Societies Choose to Fail or Succeed by Jared Diamond. According to Gladwell, Collapse is a book about the most prosaic elements of the earth’s ecosystem — soil, trees, and water — because societies fail, in Diamond’s view, when they mismanage those environmental factors. . . . The lesson of Collapse is that societies, as often as not, aren’t murdered. They commit suicide . . .

Wednesday, December 4, 2013

Quebecor_Mindless twits runnng Canada's newspapers

Sun Media, owned by Quebecor, announced yet another Christmas layoff. I understand about 200 jobs are being cut with about 50 of those being editorial positions.

The Quebecor/Sun Media execs are twits. My guess is they know little or nothing about newspapers. They seem to have but one response when asked to improve profits and that is to cut costs and one of the simplest ways to cut costs is to cut staff.

If these twits were running a car factory, they would leave the back seat out of the cars produced. It would save money. Maybe they would eliminate the paint booths. Now that would really cut costs. Of course, these moves would also cut quality and that would cut sales.

Cutting editorial staff is cutting quality and cutting quality is cutting circulation. And what is the answer to falling circulation and the monetary loss that follows? Why more layoffs. Like I said, these folk are twits.

I understand Google may make in excess of  $55 billion annually. Wow! Makes one wonder what would have happened if years ago newspapers had worked with Google at figuring out how to market news with linked ads.

Instead of the newspapers across Canada and across the continent working together to deliver the best and the latest information to their readers, newspapers cut their links to each other, unless the other papers were part of the same chain. Newspapers cut links and slashed the quality of the print product. Circulation collapsed. No surprise.

Google seems to be a very inventive company, very creative. It may not be too late to approach Google, hat in hand, seeking some much needed help. Maybe the folk at Google would be willing to put on a thinking cap while examining the problem wearing Google Glass.

I sold an antique car this summer. I sold it without placing even one car ad. Why bother? It was a special car, a heritage vehicle. It was valuable — read expensive. An ad running just in The London Free Press would simply not reach enough potential buyers. So I didn't buy an ad. But let's say that newspapers across Canada were linked, at least their electronic editions.

Place and ad in the paper in London and find a buyer in Vancouver. Ah, now that is the way an automobile ad should work. But, they don't and so I didn't. Like I said, the folks running newspapers, the ones behind the multiple layoffs and buyouts, are twits — unimaginative twits.

Before writing this I found an ad in The London Free Press, copied some specific information, and did a search of the Toronto Sun website using the pasted information. I found the two newspaper sites poorly designed and the Toronto Sun site did not find the The London Free Press ad. Yes, the folks at the helm of the newspaper chains are certified twits.

My heartfelt sympathies to those newspaper folk losing their jobs. Knowing the folk at the top are heartless twits doesn't make it any easier.

Can Leamington Heinz plant jobs be saved?

Recently, the Letter to Editor column in The London Free Press has carried a number of submissions discussing the closing of the 104-year-old Heinz plant in Leamington. Despite what is being said, the truth may be that the plant was headed for closure. No amount of wage cutting and/or benefit trimming would have saved the plant.

Reportedly Rob Crawford, president of the union representing Leamington Heinz workers, offered to open the collective agreement. The new Heinz owners, Berkshire Hathaway and the giant Brazilian private-equity group 3G Capital, were not interested.

Possibly the folk in Leamington should take inspiration from events unfolding in Girgarre, Australia, where Heinz closed a tomato processing plant in 2011. A coalition of workers, growers and community leaders created the Goulburn Valley Food Co-op. Their first goal is to build a factory replacing Heinz while continuing the local tradition of turning local ingredients into quality foods.

The reason the Aussies are looking to build a new factory is simple. Heinz practised a scorched earth policy when it came to the plant. Before being put onto the marke, the place was hollowed out, stripped of all equipment necessary to operate the plant. Even the rat barriers were removed.

The claim is made that the co-op in Girgarre, Australia, was inspired by the actions taken by Argentinian workers a little more than a decade ago. You may recall that in 2001 the large South American country suffered a financial and political collapse with thousands of companies declaring bankruptcy. The Argentinian owners walked away from these concerns to escape the burden of debt these companies had accumulated.

In some cases, the workers occupied the plants and kept them running despite of abandonment by the owners. More than a decade later, many of these worker-run factories, these co-operatives, are still operating.

According to AlterNet:

As a result of the severe 2002-2003 economic crisis, worker-run companies began to mushroom in a broad range of areas, including the food industry, steel, textile, footwear and plastic factories, meat-packing plants, ceramic, glass and rubber manufacturers, graphic design companies, transport firms, restaurants, health businesses and even a five-star hotel.

The companies were reclaimed by their workers after the owners disappeared overnight, leaving behind jobless employees, piles of debt, factories stripped of everything not bolted down -- and, often, charges of tax evasion or fraud.

Many of the companies are producing and even exporting again after they were taken over by the workers, who were owed months and sometimes years of back wages.

What AlterNet doesn't mention is that many of the abandoned companies claimed by workers have been hit with legal actions by the owners wanting to reclaim their former businesses.

For instance, the sons of Marcelo Iurcovich, once the clear owner of the then five-star hotel Hotel Bauen in Buenos Aires, were in court in 2012 battling to regain control of the building. Previously, an attempt had been made to evict the workers but without success.

The hotel was built in 1978 for the FIFA World Cup and financed with public money provided by the military dictatorship then ruling the country. The loan was never repaid. The ownership of the building will now be decided by the courts.

The hotel may be open but it is just limping along, it is no longer a five-star destination. Once the ownership question is settled, possibly there will be an influx of capital to refurbish the aging place.

All this Google searching made me aware of Robert Owen, an owner of the New Lanark Mills in Scotland in 1799. Thanks to his visionary management policies, Owen inspired the co-operative movement and was an early force in trade unionism and the garden city movement. Today New Lanark is a World Heritage Site.

The co-operative movement still has followers in Scotland. The Co-operative Party, the political arm of the movement, is the fourth largest party in the Scottish parliament. Globally, the United Nations calculates nearly 1 billion people own shares in cooperatives. The top 300 cooperatives around the world — known as the '300 List' — are said to be worth an estimated $1.6 trillion.
According to the U.N., cooperatives — member-driven business enterprises that put people front and centre — offer an alternative economic model.

When I consider the long list of business closures that have rippled through Southwestern Ontario in recent years, I cannot help but wonder if it is not time to give the co-operative movement serious consideration.