CRIMINAL CAPITALI$M

TD Bank to pay US$1.2B to resolve suit tied to 

Ponzi scheme

Laurel Calkins, Bloomberg News

Toronto-Dominion Bank said Monday it agreed to pay more than US$1.2 billion to settle a lawsuit by investors claiming it aided R. Allen Stanford’s $7 billion Ponzi scheme more than a decade ago.

Settlements also were reached with HSBC Holdings Plc, which will pay another $40 million, and Independent Bank Group Inc., formerly known as Bank of Houston, which will pay $100 million, according to Ralph Janvey, the court-appointed receiver for Stanford International Bank.

The deals were disclosed the same day the suit against the three banks was set for trial in Houston, 14 years after the collapse of Stanford’s scheme to divert billions to support his lavish lifestyle. He was convicted of fraud and money laundering in 2012 and is serving a 110-year sentence. 

The banks, which denied wrongdoing, were accused of ignoring red flags for years. 

According to the lawsuit by investors, Stanford promised above-market returns on certificates of deposit the banks should have known were bogus, especially given the unusually massive wire transfers and daily shipments of bags crammed with investors’ checks that flowed from the Texas financier’s bank on the Caribbean tax haven of Antigua to his US accounts. 

Including the three settlements, Stanford investors will recoup $1.6 billion from financial institutions accused of aiding the fraud. Societe Generale Private Banking (Suisse) said Feb. 21 it will pay $157 million, and Trustmark National Bank said in December it will pay $100 million. Neither admitted wrongdoing.

The settlements are “nothing short of a monumental recovery,” Kevin Sadler, the lead attorney for the receiver and the investors in the case, said in an emailed statement. 

If the trial had gone ahead this week, investors were going to ask jurors to award damages of as much as $10 billion each against TD and HSBC, and up to $6.5 billion against Independent Bank, Sadler said.

'ROUTINE BANKING SERVICES'

In a statement Monday, TD Bank said it “denies any liability or wrongdoing with respect to the multi-year Ponzi scheme operated by Stanford.” The Canadian bank said it “elected to settle the matter to avoid the distraction and uncertainty of continuing a long legal proceeding.” 

TD Bank said it “provided primarily correspondent banking services to Stanford International Bank Limited and maintains that it acted properly at all times.” It cited an earlier trial in Canada where the court “ruled entirely in TD’s favor and found no liability.” 

Independent Bank settled “to avoid the cost, risks and distraction of continued litigation,” it said in a regulatory filing Monday. “The company believes the settlement is in the best interests of the company and its shareholders,” will be tax-deductible and won’t impact the bank’s capitalization, it said.

Toronto-Dominion shares were little changed at C$91.14 at 9:41 a.m. in Toronto trading, while Independent Bank Group rose 0.5 per cent to $60.79 in New York.

A representative of HSBC couldn’t be reached immediately for comment. In earlier court filings, all the banks claimed they simply “provided routine banking services” to Stanford “and did not know – and could not have known – about the Ponzi scheme.” 

Investors alleged the banks “had actual knowledge of the wrongdoing” by Stanford, his aides and entities and “nevertheless, aided and stood by and watched” while Stanford engaged in a systematic pattern of account activities that conflicted with the company’s stated business model, according to a summary of the claims by US District Judge Kenneth Hoyt in November.

In their lawsuit, the investors claim the banks should have seen the signs that Stanford’s operation was a sham. For one, Stanford International Bank’s CDs paid 11.5 per cent interest in 2005, allowing the financier to claim they outperformed the S&P 500 by 13 per cent from 2000 through 2005.

CD holders were also in the dark about where their money was distributed, according to the suit. Between January 2008 and February 2009, court records show Stanford deposited about $1.7 billion in CD sale proceeds into a TD bank account instead of keeping the funds in the Caribbean bank investors thought held their money. 

MOVING MONEY

In 2008, about $474 million was shifted from the TD account to SIB’s Bank of Houston account, and then mostly distributed to various Stanford entities. One was Stanford Financial Group, a broker dealer, which got at least $47.5 million to cover operating expenses and as capital for its own Trustmark account.

According to investors, email records from 2006 indicate Trustmark had expressed “concerns” with Stanford entities about its unusual pattern of “wire activity.”

At its peak in December 2008, SIB claimed to have 30,000 clients from 131 countries and $8.5 billion in assets, mostly from sales of CDs. But instead of putting the money in conservative, liquid assets as promised, Stanford and his lieutenants threw money into risky ventures, vanity projects and island resort developments, most of which never earned a dime. 

According to evidence at his criminal trial, Stanford lived large, spending as much as $2 billion of investor money on a jet-set lifestyle that included five overlapping families, yachts, private islands, and sponsorships for charity golf tourneys, professional cricket teams, celebrity golfers and tennis players. 

BRIBING REGULATORS

Stanford also plowed investors’ funds into hospitals and infrastructure on Antigua, where he bribed auditors and regulators to hide his scheme. Antigua knighted him, and he leveraged that “Sir Allen” aura to misdirect U.S. investigators and enthrall busloads of unsophisticated retirees with catered lunches and dog-and-pony shows at his Houston headquarters.

His scheme collapsed during the financial crisis in late 2008, when investors began cashing CDs at an unsustainable rate and Stanford was forced to halt redemptions. In a bid to staunch the bleeding, Stanford told nervous employees at an all-hands meeting that SIB had $5 billion in “excess liquidity,” while his controller was sending frantic texts telling him it had just $173 million on hand. In February 2009, US regulators seized Stanford’s financial empire, ending his two-decade run.

The US Securities and Exchange Commission appointed a receiver to recover assets for investors. If the five bank deals win court approval, the receiver will have collected more than $2.7 billion through settlements, claw-back litigation and the sale of Stanford assets, including more than 100 mostly money-losing companies and properties scattered across the Caribbean and Latin America. 

At least $340 million has gone to pay attorneys and the receiver, leaving just pennies on the dollar for losses by SIB’s 18,000 remaining investors.

Stanford has argued in court filings that he could’ve paid everyone back in full if the SEC hadn’t shut him down and liquidated his businesses.

The case is Rotstain et al v Trustmark National Bank et al, 4:22-800, US District Court, Southern District of Texas (Houston).

--With assistance from Madlin Mekelburg and Kevin Orland.

Young Canadians less confident in financial future than a year ago: RBC poll

The Canadian Press

A new poll by RBC has found that Canadians aged 18 to 34 are much less confident today about their financial futures than they were a year ago.

Eighteen per cent of Canadians in that age group said they are confident in their financial future, down from 31 per cent a year earlier.

More than half said they weren't prepared for the impact of inflation, according to the poll conducted in October.

More than three-quarters said they have concerns about their cash flow.

Inflation in January was 5.9 per cent, down from its mid-2022 highs, but elevated food prices and rising interest rates, among other costs, have weighed on Canadians' wallets. 

The poll found that young Canadian adults are now paying closer attention to their finances, whether that's their daily expenses, their debt or their investments. 

This report by The Canadian Press was first published Feb. 23, 2023.

U.S. auto parts supplier signs deal to buy Quebec's Uni-Select in $2.8-billion deal

Christopher Reynolds, The Canadian Press

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LKQ Corp. has signed a deal to buy Quebec-based Uni-Select Inc. in a roughly $2.8-billion deal that aims to boost the U.S. automotive equipment supplier's aftermarket business amid a thriving market.

Under the agreement, LKQ will pay $48 per Uni-Select share in cash for the aftermarket auto parts distributor. The purchase marks a 19.2 per cent premium over the $40.28 closing price of Uni-Select shares on the Toronto Stock Exchange on Friday.

The transaction, which needs shareholder approval, also requires antitrust clearances in Canada, the U.S. and the U.K. and approval under the Investment Canada Act.

LKQ chief executive Dominick Zarcone said the deal will bolster the company's vehicle parts distribution and broaden its presence in Quebec.

“Uni-Select’s North American automotive refinish paint and mechanical parts distribution operations complement LKQ’s existing footprint and will allow us to distribute a broader array of products to our customers," he said in a news release.

In connection with the deal, Chicago-based LKQ said it will look to sell GSF Car Parts U.K., Uni-Select's U.K. based mechanical parts distribution business.

Uni-Select is known for the distribution of automotive paints, industrial coatings, accessories and other vehicle products for the aftermarket, which refers to parts and services purchased after the initial sale to the consumer.

Founded in Boucherville in 1968, the company has more than 5,200 employees, 15 distribution centres and more than 400 branches. It supports over 16,000 auto repair shops and another 4,000 shops through its repair-installer and vehicle refinishing banners.

Some of its 95 company-operated stores operate under the names Bumper to Bumper, Auto Parts Plus and Finishmaster.

The aftermarket — everything from tire changes to brake repair — saw sales jump over the past two years as supply chain snarls sparked by the COVID-19 pandemic pushed up prices, while some cash not spent on vacations went toward home and car improvements.

"The automotive aftermarket remained buoyant in 2022 with a majority of retailers seeing growing sales and expecting further growth throughout 2023," Andrew King, managing partner at DesRosiers Automotive Consultants, wrote in a note this month.

"However, persistent issues surrounding parts supply and prices remain problematic across the industry."

Uni-Select CEO Brian McManus said the deal will fuel efficiencies and offer liquidity to shareholders.

"We see great opportunities to benefit our customers, employees, suppliers and brands by combining our complementary strengths within the larger, multi-disciplinary and growing LKQ team.”

This report by The Canadian Press was first published Feb. 27, 2023.

Oilpatch funds balloon for pro-Smith political group after she supports royalty break

Bob Weber, The Canadian Press

Oilpatch support for Alberta Premier Danielle Smith's agenda ballooned after she won her party's leadership and put the so-called RStar program — a plan to give tax breaks to energy companies for fulfilling cleanup work they are already obliged to do — high on the government agenda. 

Elections Alberta records and an analysis by The Canadian Press suggest donations to the Alberta First Initiative, a pro-Smith advocacy group, increased eightfold from companies associated with the energy industry after Smith became premier. While the Initiative says it does not support RStar, its founder previously worked with a group that promoted it. 

The Initiative also appears to have participated in Smith's successful campaign to win the United Conservative Party leadership, which she sought after leaving Alberta Enterprise Group, a business group that lobbied in favour of RStar. The Initiative is now funding attack ads against the New Democrat Opposition and supporting Smith as the province gears up for a spring election.

"Alberta, we can't afford the NDP," says one of the ads on the Initiative's website.

"Danielle Smith will make Alberta better for me and my family," says another.

It's an index of how close the governing party is to the province's dominant industry — a relationship that also carries risks, said University of Alberta political science professor Jared Wesley. 

"Entitlement is kind of the Conservatives' kryptonite in Alberta," he said. 

"To the extent that oil and gas gets seen as putting their finger on the scale in this election, the UCP runs the risk of losing votes." 

The founder of Alberta First said the group is exercising its rights.

"(Alberta First) has a mission to promote policies, educate activists and engage Albertans to participate in democracy," Mackenzie Lee said in an emailed response to a series of questions from The Canadian Press.

The RStar proposal, developed by an industry group, has been criticized by legal experts, energy economists and some of the province’s own internal analysts. It's been called a violation of the polluter pay principle, an incentive for companies to not fulfil their obligations and a reward for those who haven't.

For more than a year, Smith and her cabinet have been outspoken advocates of the plan, which would enable companies to use reclamation spending to gain credits against future royalty payments, despite that reclamation being a condition of their original drilling licence.

“I love it,” Smith said on a 2021 YouTube broadcast, when she was a lobbyist for the Alberta Enterprise Group. She also wrote a supportive letter that July as group president to then-energy minister Sonya Savage.

On May 19, 2022, Smith announced she would leave her job as president of the Alberta Enterprise Group and run for the UCP leadership. The Alberta First Initiative was incorporated six days later, timing Lee called "coincidental."   

Lee is also the co-founder with Kris Kinnear of Sustaining Alberta's Energy Network, which has long pushed RStar. 

Lee said he left the Network in late 2021 and hasn't spoken regularly with Kinnear since last spring. The Initiative does not promote RStar, he said.

"RStar is not a policy that Alberta First has ever or will ever advocate," he said. 

However, the Initiative supports Smith and Smith supports RStar.

Elections Alberta public reports show the Initiative received donations of $37,500 in the third quarter of 2022, which would have arrived during Smith's UCP leadership campaign. An analysis by The Canadian Press using public websites as well as corporate records searched  by the NDP suggest about two-thirds of that came from energy sector firms or firms providing services to them. 

Text messages sent by someone saying they represent the Initiative, captured by the NDP, suggest the group was active in Smith's campaign.

"Hi! This is Ann from Alberta First Initiative," reads one Aug. 12 text. "Alberta has a rare opportunity to select a premier who will put Alberta First. Only Danielle Smith has shown a willingness to stand up to Ottawa." 

"Alberta First!" was one of Smith's campaign slogans. Kinnear's LinkedIn profile also lists him as Smith's campaign co-ordinator.

Lee said the Initiative's work during that campaign was limited to general policy surveys "that had nothing to do with any candidate running at the time."

Smith became premier on Oct. 11 and soon after wrote RStar into the job description of her first energy minister. 

Oilpatch donations subsequently poured in to the Initiative. 

Compared to the $37,500 the Initiative received in July through September of last year, Elections Alberta records show the group picked up $330,000 in the last three months of 2022. Of that, $200,000 was from energy companies or those providing services to them. 

Maximum allowable donations to third-party groups such as the Initiative are almost seven times higher than limits for political parties or leadership contests. As well, corporations are allowed to donate.

Nearly one-third of the Initiative's donations were for the $30,000 maximum. No donation was smaller than $5,000. 

Smith's office did not answer a request for comment. 

Lee said no UCP officials are involved with the Initiative, nor does he meet with government staff.

The Initiative may now be the wealthiest of registered third-party groups opposing the NDP.

Elections Alberta says the next wealthiest groups at the end of 2022 were Shaping Alberta's Future, which collected just over $224,000, Alberta Proud with almost $29,000 and Take Back Alberta with $22,300.

Meanwhile, Kinnear works in Smith's office with unspecified duties. And Energy Minister Peter Guthrie has announced a pilot program based on RStar called the Liability Management Incentive Program that would distribute $100 million in royalty credits.

Smith has said the program is needed to clean up wells left by companies that no longer exist.

Scotiabank recently concluded the four companies best placed to take advantage of the program were Canadian Natural Resources, Cenovus, Paramount Resources and Whitecap Resources. Those companies reported about $5 billion in net income in the last quarter. 

"We also believe the program goes against the core capitalist principle that private companies should take full responsibility for the liabilities they willingly accept," Scotiabank said. 

Wesley said it's unprecedented to have a former lobbyist such as Smith running the provincial government and installing programs she used to advocate after a campaign assisted by those who would benefit from them. He said Smith and her industry supporters may find that's used against them in the coming election.

"These (political action committees) have to be careful of not crossing that line into being part of a narrative that there are these corporate forces at work and they're not in it for you."  

This report by The Canadian Press was first published Feb. 27, 2023.

WAGE THEFT

CIBC agrees to settle overtime class-action lawsuit, will pay $153 million

The Canadian Press 

CIBC has agreed to pay a total of $153 million to settle a class-action lawsuit filed more than a decade ago over the bank's overtime policies, lawyers for the plaintiffs say.

Dara Fresco, a former CIBC teller and class counsel, brought this case in 2007. 

The Ontario Court of Appeal dismissed last year an attempt by the bank to overturn a lower-court ruling in favour of the class-action case on behalf of about 31,000 retail bank employees.

Fresco says the settlement is a fair compromise that will bring meaningful compensation to thousands of class members.

CIBC spokesperson Tom Wallis says the settlement will avoid further legal costs and allow the bank to put the matter behind it.

The agreement must be approved by the Ontario Superior Court before it will become binding. 

DIFFERENCE IS WE WELCOME THEM

Rep. Fallon blasts Biden as thousands of migrants flock to Canada: ‘It’s a flood’

Rep. Pat Fallon, R-Texas, discusses Canadian Prime Minister Justin Trudeau and his decision to press President Biden on the New York-Quebec border as thousands of migrants flock to Canada.

Li-Cycle gets $375M Energy Department loan for New York recycling center

By Daniel J. Graeber

Feb. 27 (UPI) -- Lithium-ion developer Li-Cycle said Monday it had conditional federal support for what could be the first North American source of recycled battery-grade lithium.

The company has a $375 million conditional loan guarantee from the Department of Energy's Advanced Technology Vehicles Manufacturing program for a planned commercial materials center in Rochester, N.Y.

Sen. Chuck Schumer, D-N.Y., said the funding would go to what's expected to be the largest supplier of recycled materials for lithium-ion batteries in the region.

"That means the heart of hundreds of thousands of electric vehicles, which will soon dominate our roads, will be made with battery components from right here in Rochester," the senator said.

While the United States does contain the metals and minerals needed for the energy transition away from fossil fuels, just mining the resources is an expensive endeavor and only a handful of countries have proven success.

The Paris-based International Agency estimates that the Democratic Republic of Congo currently produces 70% of the world's cobalt, used in lithium-ion batteries, while Australia, Chile and China account for 90% of the total global production of lithium.

But developments are advancing quickly. Lithium company Ioneer secured a conditional $700 million federal loan in January to develop the Rhyolite Ridge lithium-boron mineral deposit in Nevada. The company believes the mine could support the development of enough batteries to power 400,000 electric vehicles per year.

Li-Cycle said it already has infrastructure in place to develop tens of thousands of tons of material used in batteries, but believes its hub in Rochester will help lay a foundation for a stronger domestic core.

"As a sustainable pure-play battery material recycling company, we expect the Rochester Hub will position Li-Cycle as a leading domestic producer of recycled battery-grade materials for accelerating electrification demand to address climate change and secure energy independence," Li-Cycle co-founder, president and CEO Ajay Kochhar said.

Canadian company Li-Cycle secures conditional US$375M loan for new U.S. battery facility

Daniel Johnson , BNN Bloomberg 

Toronto-based battery recycling company Li-Cycle Holdings Corp. announced it will receive a US$375 million loan from the U.S. Department of Energy to create a battery facility near Rochester, New York. 

Li-Cycle said in a news release Monday it received a conditional commitment from the U.S. governing body as part of its Advanced Technology Vehicles Manufacturing program. The facility will produce recycled battery-grade lithium and is expected to be the first of its kind in North America. 

“The Rochester Hub is a cornerstone asset for Li-Cycle and its stakeholders and will be an important contributor to the clean energy economy,” Ajay Kochhar, the president and chief executive officer of Li-Cycle, said in the release. 

When running at full capacity, the release said the facility could produce up to 8,500 tonnes of lithium carbonate, 48,000 tonnes of nickel sulphate and 7,500 tonnes of cobalt sulphate each year.

“As a sustainable pure-play battery material recycling company, we expect the Rochester Hub will position Li-Cycle as a leading domestic producer of recycled battery-grade materials for accelerating electrification demand to address climate change and secure energy independence,” Kochhar said. 

The loan will have a term of up to 12 years and certain conditions will need to be met before closing, which the release said is expected to occur in the second quarter of this year.

The facility will meet the battery needs of around 203,000 electric vehicles (EVs) each year, according to the U.S. Department of Energy. The governing body said the facility will advance electrification efforts in the U.S., while enhancing the country’s EV supply chain. 

Support provided to EVs through the facility’s output will reduce emissions by more than 716,000 tons of carbon dioxide each year, according to the U.S. Department of Energy. 

BP to expand LNG project off Mauritania and Senegal
By Daniel J. Graeber

British energy company BP said it was mulling its options for a second phase of operations for a major gas project off the coast of West Africa. Photo courtesy of BP.


Feb. 27 (UPI) -- British energy company BP said Monday it backed a development concept for a second phase of a giant liquefied natural gas project off the coast of Mauritania and Senegal.

BP and its consortium partners are considering a gravity-based structure (GBS) for the second phase of the Greater Tortue Ahmeyim project that will increase the capacity to the overall facility.

"GBS LNG developments have a static connection to the seabed with the structure providing LNG storage and a foundation for liquefication facilities," the company explained.

A floating production, storage and offloading vessel left a Chinese shipyard in late January for its 12,000-nautical-mile journey to the coast of Mauritania and Senegal for BP's project.

RELATED Italy's Eni posts decade-high profits, looks to natural gas for future growth

The eight production and processing components onboard the FPSO can process around 500 million standard cubic feet of natural gas per day. That compares with the tens of billions of cubic meters of gas coming from U.S. shale basins each day, though BP sees it as a boon for West Africa.

Already under development, the first phase of operations will send offshore gas to a floating production facility for processing and refinement before sending it back to other facilities that can turn products into liquid form.

LNG is emerging as a vital component of the pursuit of reliable supplies against a backdrop of geopolitical risk emanating from the war in Ukraine. Gas-rich energy company Shell said in a recent report that the European and British economies took in 60% more LNG than they did in 2021, which allowed the region to tolerate the shortage of piped gas from Russia.

RELATED  Flex LNG is fully booked and expects a profitable year

Gordon Birrell, BP's executive vice president for operations and production, said West Africa could emerge as the next global LNG center.

"We aim to build on our strong collaboration with our partners, and the governments of Mauritania and Senegal, to further develop a long-term, successful energy hub in West Africa," he said.

BP made its final investment decision on the Greater Tortue Ahmeyin project in 2018.

FLOATING REFINERY SHIP

U.S. announces plan to reverse rising 'scourge' of illegal child labor
By Sheri Walsh

Labor Secretary Marty Walsh, along with the Department of Health and Human Services, announced a new interagency task force Monday to end "Child Labor Exploitation," following a 69% increase in illegal child labor in the United States over the last five years. 

File photo by Bonnie Cash/UPI | License Photo

Feb. 27 (UPI) -- The Biden administration is taking new steps to end illegal child labor, following a 69% increase in the number of children employed illegally by U.S. companies over the last five years.

The Departments of Labor, Health and Human Services announced a new interagency task force on "Child Labor Exploitation" on Monday, in addition to a national enforcement initiative on child labor.

"We see everyday the scourge of child labor in this country, and we have a legal and moral obligation to take every step in our power to prevent it," said Secretary of Labor Marty Walsh.

"Too often, companies look the other way and claim that their staffing agency, or their subcontractor or supplier, is responsible," Walsh added. "Everyone has a responsibility here."

RELATEDCompany pays $1.5 million for breaking child labor laws in 8 states, Labor Department says

The Labor Department also announced plans to hold all employers accountable to ensure child labor is removed from supply chains. Many of the children are migrants from Latin America, who fled violence and poverty, and do not have a parent in the United States.

"Every child in this country, regardless of their circumstance, deserves protection and care as we would expect for our own child," said Health and Human Services Secretary Xavier Becerra.

"At HHS, we will continue to do our part to protect the safety and well-being of unaccompanied children by providing them appropriate care while they are in our custody, placing them in the custody of parents, relatives and other appropriate sponsors after vetting and conducting post-release services including safety and well-being calls," Becerra added.

Earlier this month, the Labor Department announced $1.5 million in civil penalties against Packers Sanitation Services for violating child labor laws in eight states.

The department said the company employed more than 102 children between the ages of 13 and 17 "in hazardous occupations and had them working overnight shifts at 13 meat processing facilities in eight states."

The Labor Department said it currently has more than 600 child labor investigations underway throughout the country.

In addition to the new task force and enforcement initiative, the administration also wants mandated follow-up calls for unaccompanied children who report safety concerns, expanded post-release services, increased funding and new training materials to educate unaccompanied children on their rights.

The Labor Department is also calling on Congress to increase penalties for child labor violations, which are currently $15,138 per child. The department argues the penalties are not high enough to deter large companies, while urging Congress to add protections for those who report child labor law violations.

"This is not a 19th century problem -- this is a today problem," Walsh said. "We need Congress to come to the table, we need states to come to the table. This is a problem that will take all of us to stop."