Se­cret Agency

Ex­port De­vel­op­ment Canada lends for­eign buy­ers bil­lions of tax­payer dol­lars. Crit­ics say it’s fi­nanc­ing some of the world’s worst regimes

The Walrus - - CONTENTS - By Richard Po­plak

In May 2017, a trove of hun­dreds of thou­sands of emails was leaked to the press from an or­ga­ni­za­tion be­long­ing to the Gupta fam­ily. Orig­i­nally from In­dia, the Gup­tas — three broth­ers named Atul, Ajay, and Ra­jesh — ar­rived in South Africa in the 1990s, shortly after the fall of the apartheid regime. Busi­ness­men with an in­ter­est in ev­ery sec­tor of the econ­omy, the broth­ers be­gan ar­ro­gat­ing them­selves into the homes and of­fices of the new rul­ing class. Their luck tracked closely with that of Ja­cob Zuma, who, be­fore be­com­ing pres­i­dent in 2009, weath­ered a dis­missal from gov­ern­ment, a rape trial, and 783 cor­rup­tion charges. For years, jour­nal­ists re­ported that the Gup­tas, along with mem­bers of Zuma’s fam­ily, ran a syn­di­cate that si­phoned hun­dreds of mil­lions of dol­lars from gov­ern­ment in­sti­tu­tions into off­shore shells. An op­po­si­tion leader de­vised the word “Zupta” to de­scribe the union be­tween the two clans.

Like the Panama and Par­adise Pa­pers, the leaked emails of­fered a kalei­do­scopic view of the uni­verse in­hab­ited by the su­per rich, who live by a be­spoke set of fi­nan­cial rules all but unimag­in­able to the rest of us. Cor­rup­tion had been a fea­ture of governance in South Africa since colo­nial times, but the loot­ing and in­flu­ence ped­dling on dis­play were none­the­less im­pres­sive. Ac­cord­ing to the emails, the broth­ers paid for a lav­ish wed­ding for their niece in 2013 with $8 mil­lion taken from a state­backed dairy scheme meant for im­pov­er­ished farm­ers. KPMG, an au­dit­ing firm based in the United King­dom, helped the fam­ily write off the party as a busi­ness ex­pense and has ad­mit­ted to ig­nor­ing red flags about the source of the wed­ding funds. Last Septem­ber, KPMG an­nounced the res­ig­na­tions of eight top ex­ec­u­tives in its South Africa of­fice. Sev­eral other multi­na­tion­als fi­nan­cially linked to the Gup­tas have been ei­ther badly tainted or de­stroyed by the fallout of the leaks. In Oc­to­ber, in the Bri­tish House of Lords, peer Peter Hain con­demned mega­banks, in­clud­ing HSBC and Stan­dard Char­tered, for over­look­ing their own sus­pi­cious transactions re­lated to Gupta-owned busi­nesses.

But long be­fore the emails leaked, the broth­ers were al­ready in­fa­mous for their out­sized in­flu­ence over Zuma — a process now re­ferred to as “state cap­ture.” Their niece’s op­u­lent nup­tials gen­er­ated head­lines across the world, mostly be­cause the Gup­tas man­aged to get per­mis­sion to use a mil­i­tary base as a land­ing site for hun­dreds of wed­ding guests, by­pass­ing the usual im­mi­gra­tion con­trols. The me­dia at­ten­tion had im­me­di­ate and im­por­tant le­gal im­pli­ca­tions: it ren­dered the Gup­tas “po­lit­i­cally ex­posed,” a term used to de­scribe en­ti­ties with a po­ten­tially cor­rupt­ing in­flu­ence over gov­ern­ment of­fi­cials. Po­lit­i­cal ex­po­sure typ­i­cally sets off alarm bells in banks, au­dit­ing firms, and other fi­nan­cial in­sti­tu­tions — it should have ren­dered the Gup­tas toxic. Yet that never hap­pened.

In­deed, their money was es­pe­cially wel­come in two Cana­dian cor­po­rate head­quar­ters, one in Mon­treal, the other in Ot­tawa. In a lengthy email thread strung out over the course of 2014, it was re­vealed that Bom­bardier had ne­go­ti­ated the sale of a lux­ury jet to a sub­sidiary of the Gup­tas’ um­brella firm, Oak­bay In­vest­ments. The new air­craft came out­fit­ted with dark wood pan­elling, a gold swoosh along the fuse­lage,

and a $52 mil­lion price tag. For any­one with even a cur­sory in­ter­est in cor­po­rate news, Bom­bardier’s in­volve­ment with the Gup­tas would not have come as a sur­prise. In re­cent years, the strug­gling Mon­tre­al­based plane and train com­pany has been accused of sac­ri­fic­ing due dili­gence in the haste to make a sale. What might have been sur­pris­ing was this: $41 mil­lion of the jet’s fi­nanc­ing was pro­vided di­rectly to the Gup­tas by Ex­port De­vel­op­ment Canada, a Crown cor­po­ra­tion owned by, well, you.

EDC’S man­date is sim­ple and os­ten­si­bly un­ob­jec­tion­able. Since its es­tab­lish­ment in 1944, it has served as an ex­port credit agency that uses fed­eral money to fa­cil­i­tate trade deals abroad deemed in the na­tional in­ter­est. (It re­cently opened an of­fice in Lon­don, Eng­land, to help Cana­dian com­pa­nies shore up ex­ports ahead of the UK brex­it­ing the Euro­pean Union.) In other words, it is a pub­lic in­sti­tu­tion that pro­vides fi­nanc­ing to the pri­vate sec­tor and plays match­maker for Cana­dian man­u­fac­tur­ers look­ing for busi­ness re­la­tion­ships in other coun­tries. Of­ten, this means loan­ing for­eign cus­tomers money to buy Cana­dian goods, hence the Gupta deal. Around 7,100 com­pa­nies ben­e­fited from EDC’S largesse in 2016. In the­ory, there is noth­ing un­usual about EDC — al­most ev­ery coun­try with a func­tion­ing econ­omy has an equiv­a­lent.

But EDC is hardly or­di­nary. For one thing, the agency is mas­sive — its transactions in 2016 amounted to more than $100 bil­lion, al­most twenty times as much as its Amer­i­can coun­ter­part, the Ex­port– Im­port Bank. De­pend­ing on the year, it ranks as the sec­ond or third largest such in­sti­tu­tion in the world, some dis­tance be­hind China’s ex­port credit agency but neck in neck with Ja­pan’s. Ac­cord­ing to its own es­ti­mates, EDC — tra­di­tion­ally a ma­jor backer of the min­ing and oil-and-gas in­dus­tries — helps gen­er­ate about 5 per­cent of Canada’s gross do­mes­tic prod­uct, mak­ing it a sig­nif­i­cant, if not an in­dis­pens­able, player in the na­tional econ­omy.

The jet deal, how­ever, serves as an ex­am­ple of how EDC can in­habit a grey zone be­tween fa­cil­i­tat­ing Cana­dian busi­nesses and fi­nanc­ing cor­rup­tion. Be­fore the Gup­tas be­gan ne­go­ti­at­ing with EDC, they had been turned down for loans from two big multi­na­tional lenders. EDC was far more ea­ger to help the Gup­tas, but it still planned on send­ing one or two in­ves­ti­ga­tors to South Africa prior to lock­ing in the loan. Whether or not it dis­patched a team re­mains un­clear, but it seems im­pos­si­ble that any in­ves­ti­ga­tors would have missed signs of the Gup­tas’ po­lit­i­cal ex­po­sure, ei­ther on the ground in Jo­han­nes­burg or on Google in Ot­tawa. Ac­cord­ing to its pub­lished list of reg­u­la­tions, EDC must as­sess pro­files of com­pa­nies or in­di­vid­u­als who present risks for rea­sons in­clud­ing “be­ing named on of­fi­cial lists, such as ter­ror­ism, cor­rup­tion, or sanc­tions lists, be­ing iden­ti­fied as po­lit­i­cally ex­posed, be­ing in­ves­ti­gated, charged or con­victed for il­le­gal ac­tiv­i­ties, be­ing sub­ject to al­le­ga­tions of wrong­do­ing or be­ing sub­ject to ad­verse me­dia.” In late 2014, the Gup­tas qual­i­fied on at least three counts.

EDC has never taken an of­fi­cial po­si­tion re­gard­ing the Gupta rev­e­la­tions in the leaks, other than to say that all transactions un­dergo a rig­or­ous vet­ting process. But the agency’s si­lence and in­ac­tion were not shared by the global bank­ing sec­tor. As of this writ­ing, South Africa’s big four banks have dumped the Gup­tas as clients, Stan­dard Char­tered stopped deal­ing with them in Dubai, and HSBC shut down ac­counts held by front com­pa­nies associated with the broth­ers. In­dia’s Bank of Bar­oda is at­tempt­ing to shut­ter their ac­counts, while the Jo­han­nes­burg Stock Ex­change suc­cess­fully pushed Oak­bay to delist it­self.

But the Gup­tas are not EDC’S only con­tro­ver­sial clients. The agency’s client list is stud­ded with some of the most scan­dal­rid­den multi­na­tion­als on the planet, in­clud­ing Kin­ross Gold — its West African min­ing op­er­a­tions were, as of 2016, un­der in­ves­ti­ga­tion by the United States Se­cu­ri­ties and Ex­change Com­mis­sion for bribery and cor­rup­tion. De­spite be­ing back­stopped by the gov­ern­ment, EDC has con­sis­tently re­buffed any re­quests to re­veal de­tails on its lend­ing prac­tices. And while the Gupta deal sug­gests there is al­most no en­tity that EDC won’t bank, its ac­tiv­i­ties are pro­tected by dis­clo­sure pro­to­cols that are en­tirely opaque. EDC is ef­fec­tively a black box, with the re­sult that few in Canada — in­clud­ing the min­is­ter pre­sid­ing over it — seem to know the full de­tails about what the agency does, who it fi­nances, and why. With EDC’S man­date up for re­view in 2018, it seems like a good time to ex­am­ine the con­sid­er­able rep­u­ta­tional risks the agency of­ten takes. Do Cana­di­ans want to be share­hold­ers in a gov­ern­ment agency that puts profit ahead of ac­count­abil­ity?

Ex­port Devel­opme nt Canada in­hab­its an eigh­teen-storey build­ing in the heart of down­town Ot­tawa. The head­quar­ters is an amal­gam of mar­ble and glass, a de­sign best de­scribed as os­ten­ta­tiously in­con­spic­u­ous. Dur­ing a re­cent stroll through the atrium, a sa­lon of flat screens played cor­po­rate videos pro­fil­ing an ar­ray of EDC clients: high- end bi­cy­cle man­u­fac­turer Ar­gon 18, Cirque du Soleil–style eques­trian troop Cavalia.

One late sum­mer day this past Au­gust, I met with an EDC spokesper­son named Phil Tay­lor at a Star­bucks a few paces from com­pany head­quar­ters. Still on hol­i­day, Tay­lor ar­rived in a T-shirt, board shorts, and san­dals. Sev­eral weeks be­fore our meet­ing, I’d con­tacted the agency to un­der­stand how their due dili­gence pro­ce­dures failed to red flag the Gupta loan. “I ap­pre­ci­ate that you would have pre­ferred that we be able to make com­ment about the spe­cific trans­ac­tion,” Tay­lor had writ­ten, “and that you were frus­trated that the law does not al­low EDC to dis­close third party in­for­ma­tion with­out the con­sent of the obligor.”

Put plainly, with­out the Gup­tas con­sent­ing to the dis­clo­sure, EDC was legally pro­hib­ited from dis­cussing the trans­ac­tion. While EDC has been sub­ject to the Ac­cess to In­for­ma­tion Act since 2007, there is an ex­emp­tion in the Ex­port De­vel­op­ment Act — the piece of leg­is­la­tion un­der which the agency is man­dated — that ba­si­cally treats any in­for­ma­tion per­tain­ing to a client, and any doc­u­men­ta­tion that may have been filed dur­ing or after the due dili­gence process, as con­fi­den­tial. The rea­son for this is sim­ple: it’s good for busi­ness. In 2006, Rob Wright, at the time pres­i­dent and CEO of EDC, spoke to a leg­isla­tive com­mit­tee about the agency’s need for con­fi­den­tial­ity. “It’s es­sen­tial,” he said, that EDC “pro­tect com­mer­cially con­fi­den­tial client in­for­ma­tion from re­lease.” Wright ar­gued that EDC’S part­ner­ships abroad would be en­dan­gered if the agency couldn’t guar­an­tee that sen­si­tive fi­nan­cial in­for­ma­tion would be kept un­der wraps. “In fact,” he con­tin­ued, “we are reg­u­larly asked to sign non-dis­clo­sure agree­ments and to con­firm that the in­for­ma­tion is not sub­ject to the Ac­cess to In­for­ma­tion Act.” The loop­hole in the law that to­day ex­empts EDC and its clients from mean­ing­ful out­side scru­tiny was now pro­tect­ing one of the most po­lit­i­cally ex­posed fam­i­lies on earth.

This Möbius strip logic is what ac­tivists have long com­plained about when it comes to EDC. “Their trans­parency pol­icy is just eigh­teen pages that spends more time ex­plain­ing what they can’t dis­close than what they can,” Claire Wood­side, the di­rec­tor of the NGO Pub­lish What You Pay, told me. Wood­side’s or­ga­ni­za­tion is the Cana­dian branch of an in­ter­na­tional network that has been try­ing to in­crease the rate of cor­po­rate dis­clo­sure, which is why they’ve been drawn into EDC’S or­bit. In 2009, EDC used loop­holes in the Ac­cess to In­for­ma­tion Act to hide de­tails about its pos­si­ble role in a con­tro­ver­sial mega- dam scheme in Chile. In 2006, a con­sor­tium of Cana­dian in­vestors pur­chased Trans­e­lec, Chile’s ma­jor trans­mis­sion util­ity. Their plan was to con­nect five re­mote dams to thou­sands of high-volt­age tow­ers that would cut across a vast swath of en­vi­ron­men­tally frag­ile land, in­clud­ing na­tional parks and pro­tected re­serves. When Probe In­ter­na­tional, a Cana­dian en­vi­ron­men­tal ad­vo­cacy group, re­quested de­tails about EDC’S in­volve­ment in Trans­e­lec—ac­cord­ing to the agency’s doc­u­ments, they fi­nanced the util­ity com­pany at least twice in 2007— only thirty-four out of 2,500 pages were re­leased by EDC. Those doc­u­ments were so heav­ily redacted that, ac­cord­ing to Probe In­ter­na­tional ex­ec­u­tive di­rec­tor Pa­tri­cia Adams, they left “noth­ing use­ful to in­form the pub­lic about EDC’S use of the Crown’s credit card in ways that could harm Chile’s en­vi­ron­ment.” (Be­cause of dwin­dling pub­lic sup­port, Chile de­cided to re­scind the project’s per­mits in 2014.)

Shouldn’t full trans­parency be the price of cheap, abun­dant cap­i­tal from a gov­ern­ment­man­dated lender? The con­sor­tium that EDC helped fi­nance, for in­stance, in­cluded the Canada Pen­sion Plan In­vest­ment Board, which meant that nearly ev­ery work­ing Cana­dian was linked to a ven­ture a Chilean en­vi­ron­men­tal­ist called “an aberration.” At a time when Cana­di­ans are increasingly de­mand­ing eth­i­cal mu­tual funds and other re­spon­si­ble in­vest­ment ve­hi­cles, how should they re­act to news that a gov­ern­ment agency could be sup­port­ing the very com­pa­nies and sec­tors they may have ex­com­mu­ni­cated from their port­fo­lios?

No one I spoke with at EDC or in the Cana­dian gov­ern­ment was will­ing to con­front this ques­tion. In ex­plain­ing how a credit agency that han­dles $100 bil­lion a year in transactions de­cides whether to sup­port a deal, Tay­lor’s email to me amounted to eight bul­let points com­posed of 212 words. Face to face, Tay­lor found it more press­ing to set the record straight on what EDC isn’t rather than what it is or does. “One thing that up­sets me,” he said, “and up­sets our CEO, is when we’re called tax­payer funded. We’re not.”

EDC de­scribes it­self as “a self-fi­nanc­ing, Crown cor­po­ra­tion that op­er­ates at arm’s length from the Gov­ern­ment.” This, as the agency is care­ful to point out, is a crit­i­cal dis­tinc­tion — tax­payer money does not flow into EDC cof­fers, in no small part be­cause it doesn’t need to. At the present mo­ment, EDC is sit­ting on nearly $10 bil­lion worth of cap­i­tal, gen­er­ates a net in­come of more than a bil­lion a year, and has a sterling AA credit rat­ing. Per­haps on ac­count of this suc­cess, the agency has fallen prey to mission creep. In 2014, it mus­cled out a num­ber of pri­vate in­sur­ers and loaned $500 mil­lion of fed­eral money to In­dia’s largest pub­licly traded com­pany, Re­liance In­dus­tries. At that point, it was EDC’S big­gest deal in Asia and one that had no di­rect cor­re­la­tion with boost­ing Cana­dian ex­porters. The rea­son for the loan is ob­vi­ous: rev­enue. If noth­ing else, EDC is ag­gres­sive about its bot­tom line, and this al­lows it no small mea­sure of po­lit­i­cal lever­age. “As it hap­pens, we pay div­i­dends,” Tay­lor said. “The Cana­dian gov­ern­ment ac­tu­ally makes money off us.” In 2016, the coun­try reaped $786 mil­lion from this ar­range­ment.

The agency falls un­der the am­bit of the min­is­ter of in­ter­na­tional trade, cur­rently FrançoisPhi l ippe Cham­pagne. Long-time bank­ing ex­ec­u­tive Benoit Daig­nault has served as CEO and pres­i­dent of EDC since 2014, and he re­ports to a chair and board of di­rec­tors drawn largely from the pri­vate sec­tor. But be that as it may, EDC re­mains a gov­ern­ment agency, a des­ig­na­tion which comes with a num­ber of im­pli­ca­tions, the most im­por­tant be­ing that Cana­di­ans in­sure EDC’S cor­po­rate be­hav­ior. Ev­ery dol­lar it loans is im­plic­itly tax­payer guar­an­teed. While EDC is cur­rently un­crash­able, so was Lehman Broth­ers be­fore it cratered, bring­ing the global econ­omy down with it. That is an ex­treme ex­am­ple, but it il­lus­trates the po­ten­tial knock-on ef­fects of an EDC fail­ure: bailouts to the agency and its in­sur­ers, per­haps in the tens of bil­lions. It’s some­thing Cana­di­ans should be aware of, con­sid­er­ing they’d be stuck with the tab.

Un­til re­cently, EDC’S fo­cus has been on Canada’s ex­trac­tive sec­tor — in 2014 alone, it ex­tended $28 bil­lion in fi­nan­cial ser­vices

to min­ing and oil-and-gas ven­tures. The em­pha­sis has changed over the past sev­eral years. “Right now, trans­porta­tion is prob­a­bly one of our big­gest sec­tors,” said Tay­lor. In EDC’S case, trans­porta­tion tends to trans­late as Bom­bardier.

Founded in 1942, Bom­bardier Inc. has a global work­force of 66,000, with about 16,500 of those em­ploy­ees based in Que­bec. It’s im­pos­si­ble to imag­ine the com­pany ex­ist­ing with­out cor­po­rate wel­fare. Since 1966, it has re­ceived nearly $4 bil­lion in bailout money from both pro­vin­cial and fed­eral govern­ments. This in­cludes the $1 bil­lion that the Que­bec gov­ern­ment re­cently paid for 49.5 per­cent stake in the com­pany’s C Se­ries sin­gleaisle pas­sen­ger jet pro­gram and the $372.5 mil­lion the fed­eral gov­ern­ment ex­tended it in early 2017. (In Oc­to­ber, Bom­bardier handed over half of the flail­ing C Se­ries pro­gram to Air­bus for free, mas­sively di­lut­ing the worth of the Que­bec gov­ern­ment’s in­vest­ment.) More sig­nif­i­cantly, since the be­gin­ning of the decade, the com­pany has be­come em­broiled in cor­rup­tion scandals in South Korea, Swe­den, Azer­bai­jan, and Rus­sia. The malfea­sance ap­pears so sys­temic that when Thomas Fors­berg, the se­nior prose­cu­tor at Swe­den’s Na­tional Anti-cor­rup­tion Unit, was asked why he had not named those who had co-con­spired in a bribery case with the main de­fen­dant, a Bom­bardier em­ployee, he replied, “Be­cause there are so many of them.”

One of Bom­bardier’s big­gest back­ers is EDC. In 2014 — the year the Gupta let­ter of of­fer was is­sued by EDC — Bom­bardier re­ceived as much as $5 bil­lion in agency sup­port. In its busi­ness re­la­tion­ship with Bom­bardier, EDC ap­pears will­ing to ig­nore quite a lot. Take, for ex­am­ple, the flap con­cern­ing the Gau­train, a high-speed com­muter project con­structed in the lead-up to the 2010 FIFA World Cup in South Africa. In or­der to se­cure the con­tract, Bom­bardier paid out be­tween $35 mil­lion and $54 mil­lion in “fa­cil­i­ta­tion fees” to a Tu­nisian fixer named Youssef Zar­rouk. The story broke in 2012. That alone might have served as a red flag re­gard­ing EDC’S con­tin­ued sup­port of Bom­bardier.

Ap­par­ently not. In March 2014, Bom­bardier’s trans­porta­tion di­vi­sion in South Africa se­cured a lo­co­mo­tive deal worth about $1.2 bil­lion with Transnet, the sta­te­owned freight en­ter­prise. With its well-doc­u­mented his­tory of al­leged kick­back pay­ments, Transnet has per­haps the worst rep­u­ta­tion of any state-owned en­tity in South Africa. EDC was un­de­terred and pro­vided $450 mil­lion in fi­nanc­ing to nail down the deal.

Was the con­tract worth the risk, es­pe­cially for a credit agency that re­ports di­rectly to the min­is­ter of in­ter­na­tional trade and has a logo proudly em­bla­zoned with a red maple leaf? More to the point, didn’t Bom­bardier flirt­ing so de­ter­minedly with sus­pect for­eign en­ti­ties come dan­ger­ously close to flout­ing the Cor­rup­tion of For­eign Pub­lic Of­fi­cials Act and thus Canada’s legally bind­ing obli­ga­tions un­der the United Na­tions Con­ven­tion against Cor­rup­tion? I reached out to Global Af­fairs Canada, which speaks for the min­is­ter of in­ter­na­tional trade, and asked whether it was time to ramp up scru­tiny of EDC’S lend­ing pol­icy and to con­sider ter­mi­nat­ing its ex­emp­tion to the Ac­cess to In­for­ma­tion Act. A spokesper­son replied that “EDC con­ducts its own as­sess­ments and due dili­gence on each trans­ac­tion in­de­pen­dently of the Gov­ern­ment, and makes its own de­ci­sion on each pro­posed trans­ac­tion. It would there­fore not be ap­pro­pri­ate for the gov­ern­ment of Canada to com­ment on the ser­vices it pro­vides to spe­cific busi­nesses.”

Tay­lor re­mained calm through­out our con­ver­sa­tion. “Noth­ing ever fits into a box tidily,” he said of EDC’S con­tin­ued in­volve­ment with Bom­bardier and the Gup­tas. “We rely on third-party ex­perts spe­cific to ei­ther a sec­tor or a place. Dif­fer­ent coun­tries treat dif­fer­ent things in dif­fer­ent ways, and when it comes to Bom­bardier and these ac­cu­sa­tions, you re­ally need to look for proof. If you get to the point where there is a lot of noise but the con­tract was se­cure, well...” he shrugged. I asked Tay­lor how de­spite the steady stream of Gupta scandals re­ported since 2010, EDC ap­peared to have found ev­ery­thing in or­der. “EDC has to do the work it­self,” he said. “You have to rely on peo­ple who are un­bi­ased, and we’re un­bi­ased. It can’t just be me­dia re­ports. It’s not enough.”

As for the EDC loan to the Gup­tas, it turned out the money was just as peri­patetic as the air­craft it­self. Ac­cord­ing to leaked emails, after EDC fi­nanced the Gup­tas’ pur­chase of the Bom­bardier jet, the fam­ily im­me­di­ately flipped the plane to an Ir­ish shell com­pany — thereby avoid­ing du­ties and tar­iffs — and be­gan leas­ing it to them­selves in or­der to gen­er­ate ex­penses they could write off against their prof­its. The jet be­come known by its tail reg­is­tra­tion — ZS-OA K — and the leaks dis­closed how it fer­ried the Gup­tas and local politi­cians on mys­tery trips to Switzer­land, Ja­pan, In­dia, and other far-flung destinations.

Aday after my visit to EDC, I meet with an ac­tivist named Karyn Keenan. A lawyer who be­gan her ca­reer by work­ing on so­cial-jus­tice is­sues with South Amer­i­can Indige­nous com­mu­ni­ties af­fected by min­ing, Keenan is now the di­rec­tor at a small NGO called Above Ground. Its baili­wick is to en­sure that Cana­dian com­pa­nies re­ceiv­ing pub­lic fi­nanc­ing meet their le­gal duty to re­spect hu­man and en­vi­ron­men­tal rights both at home and abroad. Along the way, and not coin­ci­den­tally, they have be­come ex­perts on EDC.

Keenan first heard of the agency in the late nineties when, as a law stu­dent in­ves­ti­gat­ing a mas­sive cyanide spill into Guyana’s main wa­ter­way fol­low­ing a dam fail­ure, she learned EDC had fi­nanced the Cana­dian-run com­pany, Omai Gold Mines, that was re­spon­si­ble for the rup­ture. “There is a ten­dency for the min­ing and oil sec­tors to be­come associated with hu­man rights and en­vi­ron­men­tal prob­lems,” Keenan says. “That’s cer­tainly the case with EDC clients. We’ve seen com­pa­nies qual­ify for fi­nance, some­times re­peat loans, when their op­er­a­tions are be­ing se­ri­ously ques­tioned by ac­tivists.” Even after the dis­as­ter caused by Omai Gold Mines, EDC con­tin­ued to in­sure Cam­bior Inc., a Que­bec com­pany and ma­jor­ity owner of the mine.

“Cana­dian val­ues” are not legally de­fined con­cepts, but rather ab­strac­tions that can mean dif­fer­ent things to dif­fer­ent CEOS.

Above Ground also mon­i­tors EDC’S sup­port for transna­tion­als im­pli­cated in cor­rup­tion on a scale the Gup­tas could only as­pire to. Keenan di­rected my at­ten­tion to the Brazil­ian state-owned oil-and-gas cor­po­ra­tion Petro­bras. In 2013, EDC gave Petro­bras be­tween $250 and $500 mil­lion to pro­cure Cana­dian goods and ser­vices. The fol­low­ing year, Petro­bras be­came mired in what has been de­scribed as the big­gest cor­rup­tion scan­dal in mod­ern his­tory. The in­ves­ti­ga­tion, still on­go­ing, co­de­named Lavo Jato, or Car Wash, un­cov­ered a multi-bil­lion dol­lar scam that in­volved high-rank­ing Brazil­ian politi­cians who took bribes in ex­change for in­flated con­tracts, and street-level money deal­ers who laun­dered the pay­off money out of a gas sta­tion. The scheme, which brought down then-pres­i­dent Dilma Rouss­eff, po­lit­i­cally wounded her sup­pos­edly in­cor­rupt­ible pre­de­ces­sor, Luiz Iná­cio Lula da Silva, and has left the cur­rent pres­i­dent, Michel Te­mer, fac­ing charges of cor­rup­tion, rack­e­teer­ing, and ob­struc­tion of jus­tice. Mil­lions of peo­ple have taken to the streets; the econ­omy has all but tanked; Brazil­ian democ­racy is in cri­sis.

As Petrobas’ mar­ket value plunged, in­vestors al­most im­me­di­ately tried to re­coup their losses. In 2015, a 173-page class ac­tion suit was filed against Petrobas for its al­leged com­plic­ity in the cor­rup­tion scheme. And what did EDC — a cor­po­ra­tion that in­sists it doesn’t do busi­ness with clients who demon­strate “le­gal, reg­u­la­tory and rep­u­ta­tional risks” — do when it dis­cov­ered that it had ex­tended a mas­sive sum to a com­pany that was now blow­ing up an en­tire coun­try? On May 11, 2015, the day be­fore Rouss­eff’s sus­pen­sion and with Brazil in chaos, Keenan sent CEO Benoit Daig­nault a se­ries of ques­tions re­gard­ing the agency’s transactions with Petro­bras. What meth­ods did EDC use to eval­u­ate anti-bribery pro­ce­dures prior to the ap­proval of fi­nanc­ing? And did EDC ever in­ves­ti­gate if the com­pany used the fi­nanc­ing for crim­i­nal pur­poses? Keenan re­ceived a let­ter from Signi Sch­nei­der, then EDC’S vice-pres­i­dent of cor­po­rate so­cial re­spon­si­bil­ity. The law, she re­minded Keenan, pro­hib­ited her from com­ment­ing.

EDC de votes four floors of its head­quar­ters to its cor­po­rate so­cial re­spon­si­bil­ity (CSR) depart­ment. This is where ev­ery en­tity that re­ceives a fi­nan­cial in­stru­ment from the EDC must be cleared.

Like any Cana­dian cor­po­ra­tion with a cs r di­vi­sion, EDC takes many of its cues from a set of gov­ern­ment guide­lines pro­mul­gated in the 2014 doc­u­ment “Do­ing Busi­ness the Cana­dian Way: A Strat­egy to Ad­vance Cor­po­rate So­cial Re­spon­si­bil­ity in Canada’s Ex­trac­tive Sec­tor Abroad.” For com­pa­nies op­er­at­ing in reg­u­la­tory or le­gal quag­mires abroad, “the Gov­ern­ment of Canada en­cour­ages them to find ways to re­flect Cana­dian val­ues.” If that isn’t pos­si­ble, “com­pa­nies may wish to re­con­sider their in­vest­ment.”

As crit­ics of Canada’s CSR strat­egy have long com­plained, there is a snag with its guide­lines: “Cana­dian val­ues” are not legally de­fined con­cepts, but ab­strac­tions that can mean dif­fer­ent things to dif­fer­ent CEOS. Ab­sent ac­tual leg­is­la­tion, fol­low­ing CSR rules be­comes a free-as­so­cia­tive per­for­mance of re­spon­si­bil­ity. What is the out­come for cor­po­ra­tions, Crown or other­wise, that flout these guide­lines? Not much. The of­fice of the CSR coun­sel­lor — whose man­date is to “ad­vise” Cana­dian cor­po­ra­tions on best prac­tices — will de­liver a light hec­tor­ing, gen­tly re­mind­ing com­pa­nies “of the im­por­tance of re­spon­si­ble busi­ness prac­tices and hu­man rights.”

How EDC squares with “Cana­dian val­ues” is more than a con­cep­tual ques­tion. The Ex­port De­vel­op­ment Act clearly iden­ti­fies EDC as an agent of the gov­ern­ment, which means that if EDC is some­how held ac­count­able for any breach of in­ter­na­tional hu­man rights law, Canada is on the hook. In a highly con­nected global fi­nan­cial sys­tem, this be­comes much big­ger than a Cana­dian prob­lem. All states are re­spon­si­ble un­der in­ter­na­tional law for the be­hav­iour of their ex­port credit agen­cies. But be­cause no states ap­pear to be in­ter­ested in cen­sur­ing the be­hav­iour of their ex­port de­vel­op­ment agen­cies and by virtue of the fact that no govern­ments reign in their own or other ex­port de­vel­op­ment agen­cies, noth­ing is ever done to cur­tail the reach and in­flu­ence of these in­sti­tu­tions.

This vast, geopo­lit­i­cal Mex­i­can stand­off, in which agen­cies such as EDC op­er­ate with de facto im­punity, is what Cephas Lu­mina, a UN ex­pert on the ef­fects of for­eign debt on hu­man rights, was re­fer­ring to in his 2011 an­nual re­port to the United Na­tions Gen­eral As­sem­bly. “A sig­nif­i­cant num­ber of the projects sup­ported by ex­port credit agen­cies,” he wrote, “par­tic­u­larly large dams, oil pipe­lines, green­house gas-emit­ting coal and nu­clear power plants, chem­i­cal fa­cil­i­ties, min­ing projects and forestry and plan­ta­tion schemes, have se­vere en­vi­ron­men­tal, so­cial and hu­man rights im­pacts.” With­out more polic­ing and trans­parency, in­sisted Lu­mina, ex­port credit agen­cies will con­tinue to spirit bil­lions of untraceable, un­ac­count­able dol­lars through the global econ­omy ev­ery year.

That im­punity is ac­tu­ally en­coded into our par­lia­men­tary over­sight. The Au­di­tor Gen­eral looks at EDC at least once ev­ery ten years, but the au­dit­ing process is largely com­par­a­tive: Is EDC op­er­at­ing the same way as other ex­port credit agen­cies around the world? “So it’s a rel­a­tive as­sess­ment,” says Keenan, “not an ab­so­lute as­sess­ment.” EDC’S en­vi­ron­men­tal and so­cial im­pact and hu­man rights poli­cies are com­pared to other credit agen­cies also fi­nanc­ing com­pa­nies cred­i­bly associated with sim­i­lar abuse and harm. Ev­ery ten years, EDC is de­clared 100 per­cent kosher, and par­lia­men­tar­i­ans are none the wiser.

Far from be­ing reigned in, EDC is about to take a bold leap for­ward. In May, Prime Min­is­ter Justin Trudeau an­nounced the gov­ern­ment’s in­ten­tion to es­tab­lish a new de­vel­op­ment fi­nance in­sti­tu­tion. Roughly as wide­spread as ex­port credit agen­cies, DFIS have be­come the first for­ays into other­wise in­hos­pitable in­vest­ment zones. They pro­vide tar­geted fi­nanc­ing for lo­ca­tions that have trouble at­tract­ing cap­i­tal, such as Afghanistan, or the most poverty-stricken re­gions of coun­tries in­clud­ing Brazil and China. DFI loans tend to be smaller than those ex­tended by ex­port credit agen­cies, but if the gam­ble is suc­cess­ful, larger in­vest­ment usu­ally fol­lows. In 2013, de­vel­op­ing economies ab­sorbed nearly $1 tril­lion in DFI money.

It doesn’t take much imag­i­na­tion to con­ceive of how such in­sti­tu­tions can serve as highly honed tools of cor­rup­tion — smaller loans, dis­pensed with lit­tle due dili­gence, tracked with slack over­sight. None­the­less, the Cana­dian gov­ern­ment was bullish. “Ac­cord­ing to some es­ti­mates, $1 in­vested by a DFI can lever­age an ad­di­tional $12 in pri­vate sec­tor in­vest­ments,” read the ini­tial state­ment. Canada’s ver­sion would be a brand new Crown cor­po­ra­tion housed within EDC and func­tion­ing as a sub­sidiary — not un­like the art-film wing of a Hol­ly­wood stu­dio. The gov­ern­ment wants it op­er­a­tional by Jan­uary 2018 and has fielded re­peated warn­ings by hu­man rights ad­vo­cates that ef­fec­tive trans­parency and ac­count­abil­ity rules need to be built into the heart of the pro­gram.

Keenan, how­ever, isn’t op­ti­mistic. “It’s go­ing to be housed at an in­sti­tu­tion that has no real track record for as­sess­ing de­vel­op­ment, hu­man rights, and so­cial im­pacts?” she asked. There is, of course, room for a DFI that is part of a trans­par­ent ex­port credit agency that dis­penses fi­nanc­ing for clean Cana­dian com­pa­nies — EDC has thou­sands on its ros­ter — and one that with­draws sup­port at the mer­est whiff of im­pro­pri­ety. But, for Keenan, un­til EDC be­comes a known and dis­cussed en­tity, and be­comes en­tirely trans­par­ent about its deal­ings, that re­al­ity is im­pos­si­ble. “Few know that it ex­ists,” she re­minded me. “And if you do know it ex­ists, you don’t nec­es­sar­ily un­der­stand the in­tri­ca­cies of how it works.”

To­ward the end of my meet­ing with Tay­lor, I asked him what “cor­rup­tion” meant in the lex­i­con of the or­ga­ni­za­tion he spoke for. He barely hes­i­tated: “any­thing that dis­torts the mar­ket,” he said. But EDC and its con­tem­po­raries do more than dis­tort. The con­cern is not that they ac­ci­den­tally sup­port cor­rup­tion, it is that they end up serv­ing as its pri­mary fun­ders — first-stop lenders for the most trou­bling cor­po­rate en­ti­ties on earth. Morally, to say noth­ing of fi­nan­cially, Cana­di­ans are on the hook for EDC’S be­hav­iour. The Gup­tas may be a South African scourge, but thanks to EDC, they are Cana­dian ben­e­fi­cia­ries.

As for the jet we paid for, ac­cord­ing to the track­ing site Flightaware, ZS-OA K cur­rently sits on the tar­mac in Dubai. What the Gupta broth­ers are do­ing in the desert is any­one’s guess.

Such in­sti­tu­tions can serve as tools of cor­rup­tion— smaller loans, dis­pensed with lit­tle due dili­gence, tracked with slack over­sight.

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