Skip to main content

The Globe and Mail

Quebec Inc. stalwart needs to clean up act

The Fonds de solidarité FTQ established a record on Monday when it unveiled its new share price of $29.21 after assessing its $9.7-billion portfolio.

But the Fonds' annual return of 7.4 per cent can't eclipse a horrendous year for Canada's largest labour-sponsored venture fund.

Last fall, the powerful Quebec union behind the Fonds, the Fédération des Travailleurs du Québec or FTQ, took centre stage at the Charbonneau inquiry that is investigating the ties between the province's construction industry and organized crime. The commission heard testimony and wiretap conversations alleging the FTQ's construction union and its venture fund were influenced and infiltrated by biker gang associates and mobsters. Entrepreneurs who wanted to fast-track their application to the Fonds' real estate arm were reportedly asked for kickbacks by a businessman close to the Hells Angels, for instance.

Story continues below advertisement

While the FTQ and the Fonds now argue they cleaned up their construction and real estate affiliates in 2009 – but only after a reporter uncovered a bribing affair – the news shocked Quebeckers. Many investors in the Fonds, one of the most popular investment vehicles in the province because of the fund's 30-per-cent tax credit, said they would have redeemed their shares had they been able to.

Barring exceptional circumstances (if you become invalid or you die, if you leave the country or need the money to launch a business), the close to 616,000 Fonds investors can't cash in their shares before they reach 65.

The revelations on an almost sacrosanct Quebec Inc. institution have highlighted the incestuous relationship between the province's largest union and its rich venture fund. While the Fonds insists its investment decisions are now carried out independently of the union, by investment experts who can kill projects before they are considered by the board, the FTQ still exerts a far-reaching control over the Fonds. Eleven of its 17 board members are FTQ executives, including its chairman. Only four board members are considered independent.

Little surprise that the Fonds' board acted complacently. The former president of the FTQ, Michel Arsenault, who doubled as chairman of the fund, had been aware of suspicious dealings in the FTQ's construction union and the Fonds' real estate arm. Also made public were Mr. Arsenault's close ties to construction mogul Tony Accurso, who invited him to sojourn on his yacht The Touch. Mr. Accurso is accused of fraud and bribery as well as having conspired to bribe Canada Revenue Agency employees in two unrelated affairs. Two of his companies were found guilty of tax evasion in 2010 after they failed to pay $4.1-million in federal taxes.

Financial institutions rely on trust, and it is doubtful that any fund, let alone a $10-billion fund, would have tolerated such damning appearances. Mr. Arsenault stepped down voluntarily in November, blaming the media for the "tumult" that stained his presidency. Mr. Arsenault has never been accused of any wrongdoing.

The controversy could not come at a worse time for the Fonds, which is attempting to persuade Finance Minister Jim Flaherty to reverse his decision to withdraw the 15-per-cent federal tax credit on investments in labour sponsored venture funds. Without the federal tax credit, investors in the Fonds would only receive the 15-per-cent provincial tax credit. And that might not be enough for the Fonds to retain its attractiveness at a time when redemptions will surge as baby-boomers retire.

The Fonds was established to boost the Quebec economy and create jobs. It can only invest in the province, and at least 60 per cent of its funds must go into companies that offer no financial guarantees. While the Fonds has invested into 2,400 companies (SME's mostly) that are said to have created or maintained 171,000 jobs as of May 31, it offered only a 3.3-per-cent annual return to its shareholders in the past 10 years.

Story continues below advertisement

The Fonds has many backers in the business community such as the Board of Trade of Metropolitan Montreal, which came out in defence of labour sponsored funds. But if the Fonds truly wants to re-establish its credibility, it must make a break with its troubled past and adopt the best oversight practices.

The labour fund started just that, with a governance task force that will report its findings in March. "Everything is on the table," said its spokesperson Patrick McQuilken. That may mean that the union's new president, Daniel Boyer, Mr. Arsenault's former lieutenant, would no longer be the de facto chairman of the Fonds.

Such a move would speak louder than all the words of a fresh start. It has been 30 years since the late Louis Laberge created the Fonds de Solidarité. It is time to cut the umbilical cord.

Report an error Licensing Options
About the Author
Chief Quebec correspondent

Sophie Cousineau is The Globe and Mail’s chief Quebec correspondent. She has been working as a journalist for more than 20 years, and was La Presse’s business columnist prior to joining the Globe in 2012. Ms. Cousineau earned a master’s degree in journalism from the University of Illinois and a bachelor’s degree in economics and political science from McGill University. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨