From fracking to SNC-Lavalin: The truth about corporate kingpin Gwyn Morgan

| April 17, 2013
From fracking to SNC-Lavalin: The truth about corporate kingpin Gwyn Morgan

One of the champions of Canada's right-wing corporate elite is finally calling it quits.

Gwyn Morgan, 66, is stepping down in May as Board Chairman of SNC-Lavalin, the troubled, giant engineering and construction firm trying to survive a series of scandals, a lack of public confidence, and fluctuating share values.

Morgan, one of the country's most prolific advocates of extreme neoliberalsm, has been in the hot seat during the greatest series of scandals ever at a Canadian company.

 SNC-Lavalin, a monster corporation with more than 30,000 employees in over 100 countries, is embroiled in bribery scandals stretching from Libya, to Algeria, to Bangladesh, to Quebec and Alberta, and who knows where else.

 Morgan's handling of the crisis at SNC-Lavalin -- and his apparent retirement from big business -- provides an excellent opportunity to review the 45-year career of a high-profile, powerful man, born dirt-poor on an Alberta farm to an energy industry multi-millionaire and a strong voice for the radical right.

A highly-decorated member of Canada's corporate elite, Morgan is a former Canadian CEO of the Year (2005), the recipient of six university honorary degrees, and a member of the Order of Canada (2010). He is a trustee of the far-right lobby group, the Fraser Institute, and is connected to 62 board members in two different organizations across seven different industries. He also writes right-wing columns for The Globe and Mail's Report on Business and other papers.

Considering Morgan's prominence on the right, how does his performance in business and politics over the years compare to his stated principles, and is he leaving a legacy that will be of value to Canadians?

Questions about Morgan's effectiveness during SNC-Lavalin crisis

Within hours of the announcement that Morgan would be resigning from SNC-Lavalin next month, the man's influence with corporate media became evident. One of the corporate community’s propaganda machines, The Financial Times, quickly reported that -- according to "his defenders" -- Morgan was not pushed out:

"... the past 14 months have certainly been a tough blow for Mr. Morgan,” wrote Times’ reporter Nicholas van Praet. “But his defenders would say he bucked up — moving quickly to uncover and disclose the ethical transgressions of former senior employees and report them to law enforcement authorities ..."

But the evidence raises questions about how well Morgan has performed.

In addition to being Board Chairman, Morgan has been Chair of the company's Governance Committee, which monitors ethics, business conduct, and assesses the effectiveness of the Board.

The question is: How could Morgan and the other board members be so centrally involved in controlling SNC-Lavalin but not know that senior offices were paying millions of dollars in bribes to win contracts for the company?

Corporations should be set up in a way that allows Board members to have full oversight of how large amounts of money are handled. This is not the way things have been done at SNC-Lavalin.

The multi-million-dollar division from where the largest alleged bribes appear to have come "was not required to break out individual projects in its financial accounting to the Board."

With all the knowledge accountants and lawyers have concerning setting up corporate structures, it is no less than shocking that the SNC-Lavalin structure is so seriously flawed.

Given his stated concern for business ethics, why would Morgan head a SNC-Lavalin Board that had a structure that appears to have practically welcomed illegal payments?

The company's largest shareholder is raising similar questions. "We have a board that didn't keep its eye on things," said Stephen Jarislowsky, whose firm holds about 14 per cent of the company's stock, told Bloomberg News. "And the executive more or less operated on its own."

Ethics professor Chris MacDonald of the Ted Rogers School of Management was a little more direct: "The company needs to get past its apparent belief that bribery is just part of doing business."

At SNC-Lavalin, as at other businesses, self-regulation is the preferred mechanism for policing corruption and wrong-doing. Had there been full government oversight of SNC-Lavalin's financial dealings, the payments might not have occurred.

While the massive collapse and corruption inside SNC-Lavalin is a significant international story, no one in the mainstream corporate media has published an investigative story of what happened behind the scenes.

In a twist that says a lot about the credibility of business awards, less than a week before the SNC-Lavalin's former CEO was arrested, the company received an award for excellence in corporate governance from the Canadian Institute of Chartered Accountants -- the seventh time it won the award in recent years.

Tough upbringing, but wealth came quickly and easily

In sermon-like speeches, Morgan likes to talk about how he overcame a difficult upbringing in rural Alberta. He receives standing ovations after explaining how he and his father dug a ditch to their home in the early 1960s so they could lay a pipe to get running water.

Now he kneels at the throne of Big Business. "Free enterprise business is the world's greatest force in advancing human progress," Morgan told a hand-selected roomful of Canadian elites. "Almost all the great technological progress which has transformed the way we live has been created or harnessed and made available to people by private enterprise."

The multi-millionaire feels that everyone should have to work for what they get and that nothing should be free.

However, what he fails to mention is that, while he no doubt worked very hard he was handed much of his own great wealth by his life-long ideological nemesis -- government.

In 1975, Alberta Premier Peter Lougheed created the Alberta Energy Company (AEC), a hybrid company half-owned by the government. Morgan began working with the new company after graduating with a degree in petroleum engineering. 

Lougheed gave AEC "some of the best natural gas and oil resources in the province," writes energy journalist Andrew Nikiforuk.

As AEC flourished, Morgan worked his way up the chain of command. In 1993, a year before Morgan became CEO, Premier Ralph Klein decided to more or less give AEC to the private sector to cover Alberta's deficit.

"Without so much as a public evaluation of the company's true net value," writes Nikiforuk, "Klein gave away the province's remaining shares for less than $500-million ... Just five years later the company was earning $2-billion a year and was worth more than $6-billion in the market place."

In 2002, Morgan led the campaign to bring together AEC and other energy companies into one giant one -- Encana. Then in 2004, Morgan got another huge gift, this time from the U.S. government. When the company bought a large U.S. gas firm, it was given $14-billion in tax relief by the oil-friendly Bush administration. 

With the added bonuses of the Lougheed and Klein "gifts," and the huge U.S. tax deduction, Morgan was able to "earn" a whopping $36.5-million between 2002 and 2006.

It seems that this "self-made man" wasn't all self-made after all.

Encana's billions in fracking profits has a downside for the public

It's well known within the energy industry, but not by the general public, that Gwyn Morgan was a pioneer of fracking.

"As a young engineer in 1975," Morgan wrote in a Vancouver Sun column. "I directed the fracking of the very first well drilled by the company that eventually grew to become Encana Corporation. Since then, Encana has safely fractured tens of thousands of wells on its way to becoming North America's largest natural gas producer."

Millions of people throughout the Canadian and the U.S. west disagreed with him. While the company and Morgan made millions of dollars from fracking, the profits came at the cost of water contamination, air pollution, and hundreds-of-thousands of nauseated and unhealthy families.

Encana broke the law and violated regulations hundreds of times when Morgan was at the helm. In 2004, in just one Colorado county, the company violated laws in connection with 17 wells and was fined $454,200. It was found guilty of drilling a well without a permit and recompleting seven wells without permits. (Elsewhere in the state, gas bubbled to the surface of a stream after Encana fracking.)

Morgan, it seems, is incapable of acknowledging that any environmental damage occurred during his years at Encana. In 2004, when the company was getting ready to build a pipeline through an ecologically sensitive slice of the rain forest, Morgan boasted that the company would "leave the environment in Ecuador in better shape than we found it."

However, a much different situation developed. The project came under fire from Greenpeace and the David Suzuki Foundation, as well as groups in Ecuador, which documented the destruction and the damage inflicted on native peoples. 

Morgan has often been a target of environmentalists. A decade ago he said there needs to be more debate about whether greenhouse gas emissions are causing global warming, or if it is a part of a natural cycle of the earth's warming and cooling. He strongly opposed Canada's signing of the Kyoto accord on the environment. During the 2008 election campaign he donated $20,000 to the National Citizen's Coalition to help purchase attacks ads aimed at Liberal Leader Stephane Dion, who wanted to bring in environmental protection laws. 

A Board member of HSBC? What gives?

Morgan likes to brag about the values that he says helped him become an astute businessman.

"Perhaps the most important business trait that my value system gave me was an instinctive wish to work with quality people," a pompous Morgan boasted to the 2008 Governor General’s Canadian Leadership Conference. 

In view of his comment, Morgan's most puzzling adventure has been his involvement with one of the most corrupt and immoral banks in the world -- and that's saying something.

The Hong Kong and Shanghai Banking Corporation (HSBC) has admitted to laundering billions of dollars for Colombian and Mexican drug cartels, and moving tainted money for Saudi banks tied to terrorist groups. 

Morgan served as a Director on the Board of the HSBC Bank Canada from 1996 to 2006, and as its Lead Director. Then, from 2006 until last May, he was as an Independent Non-Executive Director of London-based HSBC Holdings.

While there is no indication that Morgan himself did anything wrong, it is surprising that a person who so strongly claims he guards his reputation and the character of those he works with, would have his name associated with HSBC in any way.

Bad adventures in the political world

Morgan is friends with many of Canada's right-wing politicians, including Stephen Harper. Both times Morgan ventured close to the centre of political power, he was burned.

One of his most embarrassing moments occurred in a House of Commons Committee room in 2006.

Prime Minister Stephen Harper personally selected the then-Calgary businessman to take on the powerful position of chairing a new review board for federal government public appointments. Morgan would have a huge say in naming the heads of many major government posts across the country.

However, committee members objected to Morgan's earlier negative comments about immigrants and multiculturalism. A motion by NDP member Peggy Nash denied Morgan the plum job, which he had, not surprisingly, offered to hold for the sum of $1 a year.

Morgan didn't understand how strongly people objected to his opinions. He said it was painful to see "a couple of sentences taken out of context from one of my speeches and leave such an untrue impression of my beliefs." 

In a lengthy Macleans interview with Linda Frum, who would later become a Conservative Senator, Morgan quipped, "Well ... I'm going to have a lot more time to spend on my boat this summer..."

In his other venture into politics, Morgan crossed the line, violating his personal principles.

Morgan was close to Christy Clark, who won the B.C. Liberal leadership in 2011, becoming Premier. He donated money to her campaign, helped her win the leadership, and became her special "transition" advisor. 

However, neither Clark nor Morgan seemed concerned about the apparent conflict of interest: Morgan had a large financial stake in SNC-Lavalin and the company was benefiting from millions-of-dollars in projects in B.C., with hopes of obtaining many more.

Despite the conflict, Morgan served out his time and continued to occasionally advise Clark.

Quipped Province columnist Ethan Baron: "If I were the chair of a corporation that was making a mint off B.C., there's no place I'd rather be than by the premier's side, steering her along."

And was it Morgan, the individual, or Morgan, the head of SNC-Lavalin, who donated $50,000 to the B.C. Liberals in 2012?

In January 2013, SNC-Lavalin announced it was heading a consortium that would receive $889-million from the B.C. government for the design and construction of the Evergreen Line rapid transit project in Metro Vancouver. 

Too many of Canada's corporate elites have a dossier similar to that of Gwyn Morgan. They are heralded as heroes, when in actual fact, they are wreaking havoc on the rest of us. These powerful men are running our economic and political agenda. Only when we are ready to address the disproportionate amount of power they hold will we will be able to return to economic policies and life that works for most Canadians.

 

Nick Fillmore is a Toronto-based freelance journalist and social activist. He served in various capacities with the CBC for more than 25 years, including a time as an award-winning investigative journalist. He also is a former member of the editorial board of THIS magazine.

 

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