Monday, October 31, 2005

Star Digging Into Sorbara/Royal Group

The Toronto Star has been doing some digging into the Sorbara/Royal Group affair, the result being several stories in the Saturday Star. On page A8, Kevin Donovan – who usually works on big investigative stories – reports that Sorbara increased his holdings in Royal Group Technologies shares over his 10 years as an independent director. (N.B. I cannot link to these stories; you have to go to the Star’s website and search for “Sorbara”)

This fact casts doubt on Sorbara’s most recent spin on his years at Royal, which was that he had serious concerns “from Day 1” over the freedom Royal Group’s management had from board oversight. As I noted on October 17, Sorbara’s original spin in March, 2004 – when the RCMP, OSC and Canada Customs investigations into Royal first became public – was that he “wasn’t aware of any problems” when he was being vetted for cabinet in the fall of 2003.

Saturday’s Star has two more stories on Royal Group in the business section, one of which notes that Scotiabank, banker for Royal Group and the St. Kitts resort being built by Royal founder Vic De Zen, conducted an internal review to ensure the bank wasn’t being used for money laundering. A Scotiabank memo seen by the Star notes that the accounts for the resort and a Royal subsidiary were frozen in September and October 2003. Sorbara was a Royal Group director until October 2003. Was he ignorant of the frozen accounts, or did he know and simply choose not to tell McGuinty’s cabinet vetting team?

The article ends with a bizarre quote from the contractor for the St. Kitts resort, saying he never saw anyone putting cash into any of the containers of Royal Group building products that were shipped to St. Kitts. Even if there weren’t actual bags of money leaving Royal, that doesn’t mean something improper didn’t happen. If Royal was selling its products to De Zen’s resort below cost or at an unjustified discount, then that might constitute a fraud on its shareholders.

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