EDC’s backing of Bombardier jet sale calls secrecy policies into question

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A Canadian deal to finance a luxury Bombardier jet for a controversial South African business family has cast a fresh spotlight on secrecy policies at the federal government's export credit agency.

Critics are asking how the $41-million (U.S.) financing deal was authorized by Export Development Canada, since the borrowers – the politically powerful Gupta family of South Africa – have been surrounded by corruption allegations and investigations for the past seven years. But EDC says it cannot explain anything about the transaction.

The Guptas have been at the heart of corruption allegations swirling around South African President Jacob Zuma and his government since 2010. But when Bombardier Inc. wanted to sell a private jet to the Guptas, the federal agency agreed to finance 80 per cent of the $52-million purchase price.

Read more: EDC backed Bombardier sale to Zuma allies

EDC is a Crown corporation that supports Canadian exports by providing financing and insurance to Canadian exporters and their foreign customers.

The agency says it conducts a careful process of due diligence for every transaction. It's unclear why the agency decided that the corruption allegations surrounding the Guptas were insufficient to halt the deal.

At the time when EDC approved the Gupta financing deal in 2014, the South African media had already published dozens of reports on corruption allegations involving the Guptas, including reports on how the family's businesses have profited from their close links to the Zuma government. Two of Mr. Zuma's children have held senior positions in Gupta companies as far back as 2007, and one of his sons is still a business partner of the Guptas.

After a scandal in 2013, a government inquiry found that the Guptas had wrongly used their political influence to gain the use of a South African military base as a VIP landing site for a private jet with hundreds of wedding guests, allowing them to bypass the normal immigration checks.

The details of the Gupta business deal with Bombardier and EDC have surfaced only because of leaked e-mails obtained by South African journalists. No official details have been released, aside from a brief mention in an EDC database that does not disclose the exact amount of the financing deal. The EDC database says only that the financing was somewhere between $50-million and $100-million (Canadian). And it describes the deal vaguely as the "sale of aircraft" to Westdawn Investments, a lesser-known Gupta company.

When The Globe and Mail inquired about the Gupta deal, an EDC spokesman said the agency's governing law, the Export Development Act, "does not allow EDC to disclose third-party information without the consent of the obligor."

Asked how long it would take to obtain consent, the spokesman said it could take many weeks, and even then the buyers might refuse to give consent.

On the EDC website, the agency paints a much more optimistic portrait of its secrecy rules. "We are committed to seeking the necessary legal consents in order to minimize the number of exceptions to this type of disclosure, and exceptions are generally limited to cases where there is a compelling reason for confidentiality," the EDC website says.

But when The Globe asked questions about the Gupta jet deal, EDC did not mention any "compelling reason for confidentiality," aside from the governing law itself.

Critics say the EDC's policies are too murky and opaque, especially at a time when the federal government's support for Bombardier has been a major public issue. Earlier this year, Ottawa announced $372.5-million in "repayable contributions" to Bombardier, without giving full details of how that loan would work. The news of the EDC support for the South African luxury-jet deal is now sparking new questions about the secrecy of federal loans.

"The Liberal government needs to provide some answers here," said a statement by Hélène Laverdière, foreign-affairs critic for the federal New Democrats. "Were proper procedures followed and were the rules respected in this case?"

Citing the $372.5-million loan, Ms. Laverdière said the government "already has a problem when it comes to transparency and Bombardier after they granted a loan, but refused to reveal the details of that deal."

Activists have tried to get details of controversial or questionable EDC financing deals in the past, without much success. "EDC refuses to provide detailed information about its review process or the steps it takes when a client is under investigation by law-enforcement authorities, citing confidentiality constraints," said Karyn Keenan, director of Above Ground, an Ottawa-based human-rights group that focuses on the overseas activities of Canadian businesses.

"It's not clear whether EDC's due diligence is faulty or its policies too lenient," she told The Globe in answer to questions about the Gupta deal. "In either case, there's a problem."

She called for Parliament and the Minister of International Trade to review EDC's confidentiality policies.

Although it is owned by the federal government, EDC describes itself as a self-financing corporation that does not rely on taxpayer funding. Critics say, however, that EDC is still supported by taxpayers because its loans are government-backed.

"EDC ignores political risks that would make private financiers nervous, if it suits the federal government," said Patricia Adams, executive director of Probe International, a Toronto-based advocacy group that monitors Canada's foreign aid and trade.

"By EDC's own rules, it should have avoided this loan to the Guptas," Ms. Adams said. "It appears that EDC calculated that the risk of bad publicity from making the loan was not as great as the political benefit to the federal government of financing an export deal for Bombardier. It is easy for EDC to bend its own rules when it isn't subject to effective public scrutiny and market discipline."