Bad loans costing Albertans millions
Several pages in the 2014- 15 Treasury Board and Finance annual report serve as a grim reminder to government of investments gone bad and the perils of economic diversification and boom- and- bust cycles.
With goals of economic diversification, rural development and preserving the jobs of Alberta workers during a plunge in the boom- andbust cycle, the government loaned millions to prop up companies in the turbulent 1980s.
Nearly three decades after the Alberta government loaned millions to Peter Pocklington’s Edmontonbased meat- packing company, Gainers, the province is still paying for that mistake, with little hope of ever recouping its losses.
“The Province holds an unsatisfied judgment against Mr. Pocklington in the amount of approximately $ 13 million,” Alberta Finance spokesman Gerald Kastendieck said Wednesday. “Efforts over many years to enforce that judgment have been unsuccessful.”
Gainers defaulted on a $ 6- million loan in 1989, prompting the government to immediately withdraw its commitment to provide a second $ 6- million cash infusion and to call in all other loans and guarantees — a total of $ 67 million.
It wound up seizing control of the company.
Gainers ceased operations in 1993, but last year, as its accumulated debt hit $ 204.5 million, the province was still forking out more than $ 11,000 in legal and accounting fees for the stagnant operation.
“It’s expected that further costs and expenses will be incurred in the future as a result of the continuing default,” says the recently released annual report. “Management doesn’t expect any recovery of this claim.”
The picture on payment of Gainers’ unpaid income taxes is just as gloomy.
“The company won’t be able to settle this liability for income taxes and interest as the amount owing to Alberta exceeds the amount which is reasonably expected to be recovered from the remaining assets of the company,” says the report.
The annual report notes Pocklington filed for bankruptcy in California and the province has registered its claim with the state.
Earlier this month the former Edmonton Oilers owner, now 73 and residing in Palm Desert, Calif., avoided being sent to prison for alleged breach of probation after being sentenced in 2010 to house arrest and probation for perjury related to his bankruptcy claim.
But Gainers isn’t the only story of heartbreak listed in the financial document.
The annual report also includes a few pages on N. A Properties ( 1994) Ltd., a company established by the province to dispose of the assets of failed companies, banks, credit unions and trust companies it attempted to bail out during the 1980s bust.
N. A. Properties has no employees and has ceased operations, but remains on the books because one of its remaining assets is a $ 91,000 non- interest bearing note receivable that doesn’t mature until 2027, Kastendieck said.
The government is also on the hook until 2017 for a $ 120,000 liability related to the principal and interest on mortgages the company sold to a bank, he added.
Wildrose finance critic Derek Fildebrandt said the liabilities that taxpayers continue to carry “are ghosts of governments past that continue to haunt us.”
“The experiments of the 1980s and early ’ 90s of government intervention in the economy and corporate welfare are stark lessons for us today,” he said. “No matter what politicians tell themselves, they are never smarter than the market and they never spend other people’s money better than those people can spend it themselves.
“It’s a powerful lesson that government should not be in the business of being in business.”
Canadian Taxpayers Federation Alberta director Paige MacPherson noted the Alberta government lost more than $ 2 billion through investments in private businesses during the Don Getty era.
“That’s a massive amount of money that obviously could have been used in better ways,” she said. “It just shows the government just shouldn’t be in the business of corporate welfare.”
PC Leader Ric McIver declined to comment.