Winnipeg Free Press - PRINT EDITION

Shareholders demand answers

'We have met all our... financial disclosures as required by corporate law,' TCIG boss says

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It didn't take too long for Tribal Councils Investment Group (TCIG) to make a name for itself as a rising star and model for First Nations wealth generation when it was formed in the early 1990s.

Founded with investments of $25,000 each from the seven Manitoba tribal councils, it parlayed that modest investment into a group of operating companies, joint ventures and equity investments that generate about $100 million in annual revenue.

But complaints about lack of accountability to shareholders and recent losses have now soured TCIG's reputation.

The corporation, led by CEO Allan McLeod, has racked up total losses of $4.7 million for the years 2010 and 2011 combined and in September was on pace for another $3.3 million in losses this year.

Irrespective of the bottom line performance of the holdings, one of its shareholders, Dakota Ojibway Tribal Council, through its business entity Dakota Ojibway Investments Ltd. feels it has exhausted all avenues in getting questions answered and has now turned to the courts.

On Tuesday it filed a notice of application with the provincial court seeking court assistance to compel TCIG to provide certain information to shareholders, declare that TCIG has breached obligations to the shareholders and, depending on the results of an investigation, appoint a receiver-manager.

Prior to the court filing McLeod said in an interview, "We have met all our legal shareholder disclosure agreement, including financial disclosures, as required by corporate law."

In correspondence prior to Tuesday, lawyers for TCIG responded to DOI's lawyers in a letter saying among other things, "TCIG follows all of its appropriate and required governance obligations," and "Your client is in breach of its obligations as a shareholder and will be held accountable for same."

TCIG's initial investment back in the early '90s -- the purchase of Arctic Beverages, the Pepsi bottler and product distributor in northern Canada -- was an immediate boon and has been a cash cow ever since.

Other heady investments in companies such as Exchange Income Corp. and Big Freight and Precambrian Wholesale Ltd. generated solid returns.

But its forays into operating restaurants, such as the Wok Box, have proven to be a cash drain. It is losing money on a trucking business and rising costs are dragging down profits.

Challenging financial conditions may have exacerbated conflicts with management that have been brewing for some time.

Philip Dorion, the founding chairman who had been on the board for almost 20 years, resigned last year over disagreements with management, including that he did not agree with the manner in which the company was dealing with the First Nations communities who are the shareholders.

TCIG had been making dividend payments of $100,000 per year to its seven tribal council shareholders (although that has been disrupted with the recent losses) and regularly contributes to community events such as powwows and golf tournament fundraisers.

But questions are being raised about the actual benefits First Nations receive. In a recent internal staff presentation, the company's marching orders stated, "Our focus on First Nation business has taken us away from our core business areas that make money. (We need to) shift from community benefits model to good profitable business model."

David Meeches, the chief of Long Plain First Nation and chairman of the Dakota Ojibway Tribal Council, said, "When First Nations and tribal councils were created they were geared toward service delivery. They were not necessarily created for economic development purposes."

He said the idea for TCIG was for the tribal councils to invest $25,000 each and create an investment group and see if it could spur economic development.

"Today the opposite is happening," Meeches said. "So little is provided to the creators, so little benefit, if any, to individual First Nations that the original intent is lost."

But it is management's refusal to disclose key information and a perceived lack of accountability to shareholders that may eventually get TCIG into hot water. Last year, an attempt by the Assembly of Manitoba Chiefs to have management disclose certain details of company activities was put down by a counterattack by TCIG.

Meeches has been seeking disclosure on a number of issues for some time. Those requests were formalized recently culminating in this week's legal action by DOI.

In most cases it would be the shareholders' representative to the TCIG board who might traditionally access the kind of information that DOI is seeking. But DOTC's current representative, Irvin McIvor, lost his position as chief of Sandy Bay Ojibway First Nation in a recent election. Meeches said there have been complications in being able to install DOTC's newly nominated representative to TCIG's board and hence a disruption in what otherwise would be the appropriate chain of the information flow.

DOI is seeking information on issues such as salary and bonuses for senior management, details on the operation of TCIG's corporate jet and disclosures on revenues and expenses related to an American division of TCIG. Management's refusal to provide the information that DOI says is their right under The Corporations Act is now at the crux of a potential legal action against TCIG.

"It's not about getting people fired, it is about accountability for our investments," Meeches said.

Confidential internal documents obtained by the Free Press reveal that TCIG has been losing money on some of its companies, including the Wok Box restaurants, and is losing $600,000 per year on the operation of the corporate jet it acquired two years ago.

Those documents also indicate a round of head-office layoffs and a staff Powerpoint presentation that called for "austerity" measures.

The information also indicated McLeod has a salary and bonus package worth $1.18 million per year and a contract that ensures his employment until 2025.

That would put McLeod's remuneration among the top CEOs of Winnipeg public companies and just below the $1.3 million Edward Kennedy made last year as the CEO of the North West Company -- a billion-dollar company.

But what's causing the latest shareholder activism is the company's determination to keep much of the key management and governance data away from prying eyes -- even if they are the eyes of one of the founding shareholders.

Meeches and four other chiefs from DOTC have had enough. Meeches said that he is determined to take whatever legal measures at his disposal to obtain some clarity.

"How can it be that the investors in the enterprise are not allowed to know anything that is going on," Meeches said.

Although Meeches and McLeod have butted heads in the past, Meeches said his motivation is his responsibility to his community.

In a telephone interview on Friday afternoon, McLeod was confident there would be no legal challenge to his authority, saying, "There will be no filing... Their letter is highly inaccurate."

But Meeches said he has learned a few things from his own experience in business and he is bringing that to bear in his questioning of TCIG's affairs.

"It is easy for me to stand up and say to whomever that I have increased our asset base and revenues... but anyone with common sense will say that is only part of the financial equation," Meeches said. "We are asking for the other side, the expense side. Standing up and saying we make $100 million per year without telling you where the money is going leaves you to wonder."

martin.cash @freepress.mb.ca

Republished from the Winnipeg Free Press print edition November 28, 2012 B5

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