National Post

O’Leary’s business myths and realities

POLITICS Detractors have questioned claims of ‘success’

- Claire Brownell

Kevin O’Leary’s sales pitch for himself as Conservati­ve Party leader revolves around one main argument: He understand­s business and the economy better than the Prime Minister, Justin Trudeau.

“You can’t fool me with numbers. I can read a balance sheet. I can read an income statement,” the reality TV star turned mutual fund pitchman said in a Facebook video announcing he was officially joining the leadership race Wednesday. “I will look at every economic policy and assess whether it’s good for us or not. I’m going to stop him from doing any more damage until I get there to fix this country.”

But while O’Leary has built a career touting his business acumen, his entry into the political sphere is likely to invite renewed scrutiny of a business record that some suggest is more myth than reality.

Mark McQueen, the chief executive of Wellington Financial LP, is one of the doubters. He has researched and criticized O’Leary’s former mutual fund company, and said he doesn’t think his pitch will work with Canadian voters.

“Canadians will soon see through his bombast when they find out he’s actually failed in business time and time and time again,” McQueen said i n an email. “Kevin O’Leary is ‘all hat, no cattle’. Canadians deserve better.”

The controvers­ial lines on O’Leary’s résumé started with SoftKey, a software startup he founded in the early ’ 80s after graduating from the University of Western Ontario’s MBA program and launching a film production company. SoftKey grew quickly and acquired The Learning Company ( TLC) for US$ 606 million in 1995 before being purchased by Mattel Inc. three years later for US$4 billion.

The Mattel takeover would go on to be seen as one of the most disastrous mergers ever. TLC lost hundreds of millions of dollars a year following the acquisitio­n and wiped out more than US$ 3 billion of Mattel’s market capitaliza­tion, with the toy company selling it at a loss in 2000. Mattel eventually settled a class- action lawsuit with shareholde­rs over the deal.

There are two ways to look at the SoftKey saga: O’Leary may have built a company that turned out to be a lemon, but McGill University management professor Karl Moore pointed out he came out on top.

“If Mattel paid too much, Mattel made a mistake, not Kevin,” Moore said. “I would blame Mattel for a poor offer.”

After a couple of other ventures, including a self-storage company and a position on the board of a waste management firm, O’Leary launched his television career. He joined Amanda Lang on the Business News Network show Squeeze- Play in the early ’00s, drawing on lessons learned from working with Don Cherry during his time in film production to craft his persona.

O’Leary got his big break when he was cast on CBC’s Dragons’ Den in 2006, playing the part of the villain with his sharp criticism of wouldbe entreprene­urs. Stuart Coxe, who launched Dragons’ Den and cast O’Leary, said it wasn’t easy to find big-name Canadian businesspe­ople willing to take the job.

A couple of years later, O’Leary parlayed his newfound celebrity i nto the mutual fund business. He launched O’Leary Funds, using his public platform to promote them on television with promises of robust monthly yield that wouldn’t eat into investors’ capital.

McQueen, the Wellington Financial CEO, started looking into the fund’s financial statements and discovered that wasn’t always the case. He found periods of time where distributi­ons were greater than the fund’s increase in assets, which would appear to show the fund dipped into the principal to pay investors contrary to O’Leary’s statements.

McQueen said O’Leary didn’t take kindly to his blog posts on the subject. “He once sent a lawyer to my house at suppertime to try to scare me off,” he said.

O’Leary, who could not be reached for comment, didn’t manage the fund himself, hiring others to handle the money directly while he acted as the face of the company. “Grinding” capital, or dipping into the principal to pay investors, isn’t illegal or particular­ly unusual, but McQueen felt O’Leary was being misleading.

Coxe, who cast O’Leary on Dragons’ Den, said his team researched his business background extensivel­y and came away confident he could put his money where his mouth was. People have strong opinions about him, but no one who knows him well doubts his integrity, Coxe said: “I’ve never heard anyone who’s questioned his ethics.”

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