From No to Show: Trade talk holdout says it will come to the table

Newfoundland and Labrador has announced it will join trade talks between Canada and the European Union, two years after the province nearly scuttled the process altogether.

It is another sign of the détente between the government of Premier Kathy Dunderdale and Ottawa — especially compared to her predecessor, Danny Williams.

The U-turn was announced in a March 17 news release. “The provincial government chose to monitor Canada-European Union trade negotiations to get a sense of the willingness of the federal government to fairly represent the interests of Newfoundland and Labrador,” said Susan Sullivan, the province’s minister of innovation, trade and rural development. “After closely monitoring the proceedings to date, I believe that to continue to meaningfully shape the outcomes we now have to participate as more than observers.”

The move comes two years after Williams told the provincial legislature that Newfoundland and Labrador would “absolutely not” sign on. “We will not be joining the federal government in these negotiations,” Williams said in May 2009, noting that the days of “kowtowing to the federal government” were over.

Much of that talk may have been for show. In the fall of 2009, Newfoundland and Labrador acknowledged that it had senior officials at the ongoing Canada-EU discussions. However, the province insisted it was only monitoring the talks, not actually participating in them. That was news to the feds, who stressed at the time that provincial officials were part of the Canadian delegation. And sources close to the talks characterized the province’s officials as “aggressively observing” the negotiations.

According to the feds, a 2008 study concluded that a stronger economic partnership could boost Canada’s economy by $12 billion annually and increase two-way trade with Europe by 20 percent. The seventh round of Canada-EU talks was scheduled to take place in Ottawa in April. – Rob Antle

Notes on a scandal: Civil lawsuits to recoup cash from politicians now net less than zero, but that should change

Scandals that rocked two Atlantic legislatures in recent years sparked promises to go after the bank balances of politicians who improperly spent their taxpayer-funded expense accounts.

In Nova Scotia, where four current or former politicians are facing a total of 52 charges, Premier Darrell Dexter has vowed to recoup cash paid to MLAs who are ultimately convicted.

“We want the money back and you know we’re going to protect the interests of the people of the province,” Dexter said in February. “If there is a finding of guilt and an order of restitution, you know my expectation is that we will take every possible measure to recover.”

The experience in Newfoundland and Labrador shows that can be a costly proposition. Four former politicians in that province were convicted on similar corruption charges in recent years (photo this page from court in 2009). A former legislature employee and a local businessman were also found guilty of fraud and other related offences.

Three years ago, the provincial government filed civil actions against the four MHAs, and one who was never charged, to get back roughly $1.3 million. The province also sued the former bureaucrat, for an amount yet to be determined, and won a default judgment of $2.3 million earlier this year against the businessman.

As of Feb. 28, 2011, the province had recovered $667,182. However, the government had spent $679,722, not including HST, on accounting and legal fees. That’s a net loss of more than $12,000. Accounting fees – the province ordered a forensic audit of spending – added up to $396,400. Legal fees were another $283,321. (Atlantic Business obtained the numbers under access-to-information laws.)

But the government soon expects those numbers to go from red to black. Most of the expenses were incurred early in the process, and Justice Minister Felix Collins said the province only expects to fork out another $10,000 or so.

And of the $1.3 million overpaid to politicians, Collins said, “we anticipate getting most, if not all, of that.” Eventually, that could see the government coming out hundreds of thousands ahead. Collins said he is happy with efforts to recoup the cash. “We’re confident we’re on track.” – Rob Antle

Young Guns: BDC celebrates community-minded young entrepreneurs

At a gala event in Saskatoon on May 3, the Business Development Bank of Canada (BDC) distributed this year’s Young Entrepreneur Awards. Among the 10 YEA recipients, all aged between 19 and 35, were four enterprising Atlantic Canadians. Though they represent a diverse range of business sectors, they were united by their business success and community involvement.

To be eligible for a Young Entrepreneur Award, you must: be a Canadian citizen; be between 19 and 35 years of age as of Dec 31, 2011; be a manager and have been actively involved in the company’s daily management for a minimum of two years; and, hold at least 20 per cent of the company’s capital stock.

Candidates from previous years may re-enter provided they still meet the eligibility criteria and aren’t previous YEA winners. You can either nominate yourself or be nominated by someone else; you do not have to be a BDC client to apply. Complete nomination information is available online at bdc.ca/en/yea2011/pages/home.html

Atlantic Canada’s Young Entrepreneur Award recipients

(P.E.I.) Rachelle Wood, Rachelle Wood Nutrition
Wood, 29, is a registered holistic nutritionist, blogger, educator and motivational speaker who often volunteers her time in an effort to get Canadians to change their eating habits and become healthier.

(N.S.) Anaïs Guimond, Atlantic Cirque Agency and School
Guimond, 32, says her school of circus arts helps improve self-esteem. “Some who have never excelled at anything are discovering for the first time that they have unique talents and abilities.”

(N.L.) Greg Hanley, Hanley Construction & Renovation
Hanley, 31, is an award-winning renovator and new home builder. He incorporates green building materials and techniques, including ultra-efficient insulation free of harmful chemicals, low-flow plumbing and eco-friendly paint.

(N.B.) Pierre Martell, Martell Home Builders
Martell, 29, offers a web-enabled customer experience that provides real-time access to the work-in-progress. “In more than 125 constructions, we’ve never missed a closing date, never gone over budget and every customer has been extremely happy.”

A Very Big Deal: Salesforce.com buying N.B.’s Radian6 for $340 million

It began in 2006, springing from the idea that companies need to monitor the social web in order to effectively join conversations with customers and prospects.

Now, five years later, New Brunswick-based Radian6 has been gobbled up in a nine-figure deal.

Salesforce.com of San Francisco will pay approximately $276 million in cash and $50 million in stock, net of cash acquired. In addition, approximately $10 million in stock and $4 million in cash will be issued to the founders, and will be subject to vesting conditions over two years. The transaction is expected to be completed by July 31.

Radian6’s technology captures hundreds of millions of conversations every day across Facebook, Twitter, YouTube, LinkedIn, blogs and online communities. The goal is to provide intelligence to companies, helping them to better market and sell to prospects, service their customers and understand what’s being said about their brand, products, competitors and services.

“With Radian6, Salesforce.com is gaining the technology and market leader in social media monitoring,” said Marc Benioff, chairman and CEO of Salesforce.com. “We see this as a huge opportunity. Not only will this acquisition accelerate our growth, it will extend the value of all of our offerings.”

Radian6 is used by more than half of the Fortune 100, and companies like AAA, Dell, GE, Kodak, Molson Coors, Pepsico, and UPS.

“Social media has made every business recognize the value of paying attention to the voice of the customer,” said Marcel LeBrun, CEO of Radian6.

Living on the Edge: Fifteen years, billion-dollar boon

A 15-year-old business-attraction program has provided nearly a billion pieces of good news for Newfoundland and Labrador, according to an analysis by the province’s Department of Finance. Atlantic Business Magazine obtained the report under access-to-information laws.

The analysis found that the province’s so-called EDGE program provided a net benefit to the Newfoundland and Labrador economy of $978.6 million from 1995 to 2009. Last year, the Newfoundland and Labrador government commissioned a review of EDGE, its one-time marquee business-attraction program that has been largely out of the spotlight in recent years.

Finance department officials crunched the numbers as part of that process. Independent consultant Grant Thornton is currently reviewing EDGE. (The acronym stands for Economic Diversification and Growth Enterprises.) That document is expected to be in the government’s hands this spring.

Last year, the province’s then-innovation minister, Shawn Skinner, said EDGE would be looked at to see if it should be modified, or even put on the chopping block. “My gut tells me today I don’t think it’s something that we would get rid of,” Skinner said in 2010. He said the program would be analysed to see how it interacts with other business-attraction efforts. “Maybe its focus needs to change,” Skinner noted at the time. “Maybe the benefits that are being given under EDGE might need to be looked at.”

EDGE came into effect in 1995 under the Liberal administration of then-premier Clyde Wells. In 2001, benefits were beefed up for companies that chose to locate in rural areas. The program provides tax incentives to qualifying companies for a period of 10 or 15 years, followed by a five-year period of partial rebates. Those eligible include new businesses and existing ones seeking to expand their operations. To qualify, they must create and maintain 10 new permanent jobs in Newfoundland and Labrador and make a minimum capital investment of $300,000 or have incremental annual sales of $500,000.

There are currently 71 EDGE firms. Another 71 achieved the status but were dropped from the list over the years. The program’s heyday was in the late 1990s, under the then-Liberal government. EDGE announcements under the current Tory administration, which came to power in 2003, have been few and far between. Just 18 companies have received EDGE designation in the past seven years. And only two of those approvals took place since 2007.

According to the government’s analysis, EDGE companies incurred nearly $2.2 billion in expenditures between 1995 and 2009. All told, the direct, indirect and induced impact on the province’s labour market saw the creation of more than 32,000 person years of employment. That’s an average of more than 2,100 jobs per year.

EDGE firms paid total taxes of $185 million over that 15-year period, the analysis found, but the province lost $137 million in equalization benefits as a result. Government rebates and grants cost another $16.5 million. That put the net impact of the program to the province’s treasury at just $31.5 million.

The province’s minister currently in charge of the program, Susan Sullivan, declined comment until the completion of the Grant Thornton report. – Rob Antle

Sole Survivor: New terms cobbled together for $8-million loan to shoe firm

The Newfoundland and Labrador government has reworked an agreement with a shoe company that slashed its workforce less than two years after receiving an $8-million interest-free loan from taxpayers to expand its operations.

Terra Nova Shoes got the cash in the fall of 2008 for adding a 30,000 square-foot extension to its existing 70,000 square-foot facility in Harbour Grace, about an hour from St. John’s. The company was expected to add 50 employees to its existing staff of 170 at the time.

Instead, Terra Nova went on to launch a series of cutbacks. A year ago, the company announced the layoffs of 59 workers, dropping the total number of employees in Harbour Grace near 100.

Those layoffs sparked the provincial Department of Business, which handed out the loan, to review the situation. In December, the government and Terra Nova’s parent companies (Kodiak Group Holdings Co. and Williamson-Dickie Holding Co.) inked a revised agreement. Atlantic Business Magazine obtained that document under provincial access-to-information laws.

Business Minister Derrick Dalley stressed that the original deal allowed Terra Nova’s manufacturing operations to be consolidated in Newfoundland instead of Ontario, where he said a plant was shuttered by the shoe firm. “We felt they had a solid business plan at the time (in 2008), the economy was strong and robust,” Dalley said in an interview. “But as we all know, we went through a period of recession, tough economic times globally. And basically, their business is based on manufacturing and exporting of their products. And with the downturn in the economy, and the downturn in industrial demand, they went through some significant challenges.”

Terra Nova’s workforce rose as high as 205 before the economy took a turn for the worse, Dalley noted. He said that 109 people are currently employed at the Harbour Grace facility, according to the most recent quarterly update provided to the government by the company.

The revised deal requires Terra Nova Shoes to maintain annual minimum employment of 85 to 110 full-time permanent positions. If the company does not meet those targets, the government can declare the loan in default and demand payment. The loan is secured by the property, building and equipment at Harbour Grace, and guarantees by both parent companies.

The new agreement also saw Terra Nova repay $1 million of the original $8 million loan. On the remaining $7 million, the company is slated to repay 10 per cent of profits this year, and 20 per cent of profits in each of the next two years. Over the subsequent five years, repayments will be made through equal instalments or 20 per cent of profits, whichever is greater.

Dalley said the reworked deal will help protect an important industry in a rural part of the province. “We felt we could work with the company and keep them viable and competitive and to stay in the region, and certainly maintain a significant impact in the region,” he noted.

The Terra Nova Shoes facility in Newfoundland manufactures high-quality work boots. The company has won contracts to supply Canada’s Department of National Defence. Terra Nova Shoes was first established in Harbour Grace four decades ago. Kodiak acquired the company in 2005. Three years later, Kodiak was gobbled up by Texas-based Williamson-Dickie. – Rob Antle