Untendered EDC contract may violate free-trade deal

The Ottawa Citizen
May 10, 2000

Pettigrew denies critics’ charges that deal is unfair

The secretive Export Development Corporation may have contravened the free trade agreement by quietly awarding lucrative insurance business to a Liberal-connected Canadian company without a call to tenders, critics say.

Canadian Alliance MP Deepak Obhrai said the EDC’s exclusive deal with London Guarantee could lead to retribution against Canadian insurance companies in other countries such as the United States.

“This could lead to a NAFTA challenge. If it had simply gone under an open tender procedure, it wouldn’t reek so much as a backroom, patronage deal,” Mr. Obhrai said yesterday.

The deal for London Guarantee, which is owned by Liberal-connected Power Corp., was approved by a Liberal-dominated EDC board. Andre Desmarais, the president of Power Corp., is Prime Minister Jean Chretien’s son-in-law and executive John Rae is his election campaign manager.

The EDC is turning over its domestic credit insurance line, worth more than $10 million in annual premiums, to London Guarantee after establishing criteria that restricted the business to Canadian companies.

International Trade Minister Pierre Pettigrew defended the deal yesterday, saying “London Guarantee was by far the best candidate for this strategic alliance.”

He said the firm KPMG, an independent third party, had provided a positive assessment of the EDC’s 10 criteria in selecting the Canadian insurance company.

However, Terry Cowen, an insurance agent for the CNA company, said he believes the deal contravenes NAFTA since London Guarantee will now enjoy an unfair advantage.

“As a Canadian and credit insurance agent, I see this as unfair competition since their accounts are government subsidized. I should have the right to expect the same support from the Canadian government,” said Mr. Cowen.

He said the word on the street among insurers for the past months has been that the “sweetheart deal” was cooked for London Guarantee because “it would throw some business to the prime minister’s son-in-law.”

During question period, Canadian Alliance House leader Chuck Strahl said that the Liberal government had been hit by “the love bug,” which sees them give untendered contracts to “friends.”

He said it is no surprise London Guarantee was selected following the EDC’s set criteria since no one else was allowed to compete. Mr. Strahl quoted an EDC official who said London Guarantee had a “compatible culture” with the Crown corporation.

“What kind of compatible culture is this spokesperson talking about? Is it the culture of ‘you scratch my back, I’ll scratch yours?’ Is it the culture ‘give early, give often and the cheque is in the mail?’ Is it merely the culture that says ‘hey friend, have I got a deal for you,’ ” Mr. Strahl said.

Mr. Pettigrew said the EDC first announced the deal March 29 and he is glad the opposition is finally reacting to the news. He also suggested that the Canadian Alliance was now a mouthpiece for Conrad Black, who owns the Citizen, which first exposed the deal yesterday.

Bob Labelle, senior vice-president of Euler American Credit Indemnity in Montreal, said the EDC’s lack of transparency in striking the deal has left a bad taste in the industry.

Categories: EDC, Export Credit, News

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