13 March 2006

Bennett off base on Fishery Products International

Provincial Liberal leader Jim Bennett today called on the government to investigate Fishery Products International Limited (FPI) because:
"One of the provisions of the FPI Act -– the 15 per cent rule -– was that control shouldn't leave this province," said Bennett.

"Clearly control has left this province because certain shareholders have gotten together and ousted the board and replaced the former president."
In a news release, Bennett claimed that restriction that no single shareholder could own more than 15% of the company's publicly traded shares "was supposed to ensure that interests of the company remained in Newfoundland and Labrador, and in the best interests of our people."

Bennett alleges that a group of shareholders may have colluded to weaken FPI. "I want an independent investigation to determine if the new board is trying to dismantle the company so that their interests will be served by eliminating a competitor, while picking up the pieces of a valuable company at a fraction of their value."

There are a couple of problems with Bennett's claims.

First, while it is politically popular to allege that FPI is in financial trouble because of under-handed dealings, there simply is no evidence to support the claim. Problems with the income trust proposal have as much to do with the inordinate delay the provincial government took in approving the proposal than anything else. The other financial difficulties have to do with the state of the international fish business and some admittedly questionable decisions made by FPI management. However, there is no evidence of a plot to destroy the company and sell off its assets as Bennett alleges.

Second, there is nothing in the Fishery Products International Act that links the 15% ownership restriction with control of the company remaining within Newfoundland and Labrador. It is highly doubtful that any stock exchange would accept trade in FPI shares if ownership of those shares was restricted such such that shareholders had to reside within Newfoundland and Labrador.

Look at it this way: if there were only 100 shares, the FPI Act allows that no person can own more than 15 of the shares. It says nothing about the person owning those shares being resident in the province. For Bennett to have his way, there would have to be a further restriction in the FPI Act stating that shareholders not resident in Newfoundland and Labrador constitute less than 49% of the total number of shareholders. Good luck trying to find that provision in the FPI Act.

So with this second foray into the FPI business, Bennett is batting zero for two. His first call for the nationalization of FPI was a nonsense. His second call seems to be based on public rumour and misperception as well as a complete misreading of a simple statute.

But hey, if Bennett has any evidence to back up his outlandish claims, let him put it in public. Otherwise his interpretation about this law is likely to get the same simple dismissal his recent constitutional arguments got.