Thursday, March 31, 2011

What will Gray’s lawyers reveal and try to hide?

Bill Gray’s lawyers have some tough decisions as they sort through about 60,000 documents in the hands of a supervising lawyer appointed by Durham Regional Court in Oshawa. So far only a sampling of about 250 have been included in court files in courthouses in Durham and London.

The judge for the case has given the lawyers until next week to come to him with a list of documents they want returned from the files turned over by whistleblower Norman Bourdeau. Donald Good, lawyer for Svante Lind, wants Bourdeau’s documents for the lawsuits he has filed against L.H. Gray and Son Ltd., Burnbrae Farms Ltd. and the Egg Farmers of Ontario marketing board.

The dilemma for Gray’s lawyers is that if they ask for the return of documents, they run the risk that they will be accused of hiding evidence.  Bourdeau is an intervenor in the case and might have some helpful information for the judge. If Gray’s lawyers are, indeed, hiding pertinent evidence, they risk discipline by the Law Society.

On the other hand, if they allow all of the pertinent documents into the court case, their client’s dirty laundry will be exposed for all to see, and Gray, Burnbrae and the egg board will be hard-pressed to explain themselves.

If all of the pertinent documents are allowed into court, Gray and Burnbrae and the egg board better hustle to strike an out-of-court settlement with Lind,  else big-city media that have so far ignored this case will have a hey-day besmirching the reputation of the two egg graders, the egg board and supply management.

Meanwhile, Gray and Burnbrae face additional challenges. The federal competition bureau is pondering what to do with evidence that:

-       Gray and Hudson exchanged e-mails about keeping secret the degree of discounts Hudson’s Burnbrae Farms offered Shopper’s Drug Mart. In one e-mail from Gray to a Burnbrae executive, he worried that Loblaws would find out and would demand similar deep discounts and that might trigger discount demands by other clients across Eastern Canada.

-       The two companies have made huge payments to big supermarket chains to achieve exclusive supplier status. The deals prevent competitors from getting a foot in the door.

-       The two, whose companies grade more than 90 per cent of Ontario’s eggs, discussed pricing.

Gray is spending a small fortune in legal fees to try to shut down Bourdeau, including:
-       an injunction gained in Superior Court in London to keep Bourdeau from sharing his documents with anybody. That would include several police forces, the Competition Bureau, the Ontario Farm Products Marketing Commission and the Farm Products Council of Canada.

-       threats of civil litigation and criminal sanctions.

-       a lawsuit claiming $15 million.

-       efforts to quash Bourdeau’s counterclaims for damages.

-       several attempts to have Bourdeau cited for contempt of court.

Last October, Gray re-organized his company, transferring at least $5.4 million worth of assets from L.H. Gray and Son Ltd. to Gray Ridge Inc. It might be construed as an attempt to protect assets from court actions. It’s not clear whether the transfer of assets includes about $150 million worth of egg quota.

Wednesday, March 30, 2011

Egg farmers need to speak up

Ontario egg farmers need to speak up

While attending the annual meeting of the Egg Farmers of Ontario marketing board this week (March 29 and 30, 2011), it was clear that a lot of farmers have concerns about information coming out of court records about some situations in their industry.

Their main concern is the allegations that Bill Gray of L.H. Gray & Sons Ltd. has been cheating by putting up to five per cent cracks into packs of retail-ready Grade A eggs. Court records in Oshawa indicate that lawyer Don Good, acting for Sweda Farms Ltd., believes that what Gray was doing was also being done by Joe Hudson and his Burnbrae Farms Ltd. operations. Together the two handle more than 90 per cent of Ontario’s egg gradings.

It makes no sense for farmers to spend considerable time and effort complying with new on-farm food-safety protocols if grading stations are allowing cracks to go to market as Grade A eggs. There are considerable food-safety and quality issues to selling cracks as fresh eggs because harmful bacteria in wash water could seep into eggs through the cracks.

At the very least, the Egg Farmers of Ontario ought to be demanding that the Canadian Food Inspection Agency thoroughly investigate these allegations. Ideally, the egg board would hire professionals to conduct its own investigation.

One thing that might be done relatively easily is to check the percentage of nest-run eggs from Alberta and British Columbia that meet Grade A standard, and compare that with the averages at Gray and Hudson’s grading stations.

Egg farmers ought to also ask why the board of directors and staff rejected an offer from Good to exempt their general manager, Harry Pelissero, from the lawsuits that have been filed against the egg board, Gray and Burnbrae.  Instead of picking up on that offer, the board has decided to “vigorously defend” itself and staff in the lawsuits. Why are egg farmers allowing their levies to be used to pay high-priced lawyers to pursue a defence that seems unnecessary?

Egg farmers ought also to ask whether staff has provided favouratism to Gray and Burnbrae, or a standard of service that differs substantially from Sweda Farms Ltd. To find out, the directors could exercise its governance responsibilities to hire outside consultants to examine the situation.

In similar fashion, the board could turn to outside consultants to check personnel management and issues within the staff, including several who have left since Pelissero became general manager, and could hire auditors to check the integrity of the eggs-for-processing and surplus-declared eggs.

These kinds of independent checks by outsiders are standard procedure for governance-style boards of directors, but to my knowledge have never been pursued by any supply-management marketing board in Ontario. Then again, no board has faced the nature and degree of scandals as the Ontario egg board faces in connection with documents the courts have in hand from Norman Bourdeau, a former employee who is blowing the whistle on Bill Gray.

And, finally, where is the Ontario Farm Products Marketing Commission in all of this? How can it reasonably refuse to conduct an inquiry along the lines requested by Good and Bourdeau? Hiding behind the smokescreen of court action is a lame excuse. There are more than enough issues that lie outside of the aims of the lawsuits that should alarm and engage the commission.

But, then again, maybe the commission is not really a supervisor or marketing boards, but an apologist and cheerleader for them.  And maybe the politicians who appoint members for the commission are simply lacking courage when it comes to tangling with marketing boards.

Former egg board staffers confirm shenanigans

In the wake of an Ontario Farmer story about egg grading, people are coming forward with concerns they have with operations at the Egg Farmers of Ontario marketing board.

Mark Beaven, head of enforcement for the board until he quit two and a half years ago, said “my concern has always been the producer.”

He would not comment on his reasons for quitting.

Jackie Pierce, head of industrial procurement, left at the end of October, 2010, uncomfortable about some of the things she saw happening at the board.

She said it appeared that general manager Harry Pelissero was being unfair to Sweda Farms Ltd., and its Best Choice Eggs operations.

For example, when she was handling the file, whenever a Sweda Farms shipment of supplementary-egg-permit eggs from the United States arrived at the border, she would provide authorization to let it come in.
Harry Pelissero

Pelissero intervened last year to personally handle all Sweda matters and then its shipments would sit at the border for two or three days, awaiting Pelissero’s response.

Pierce said that Sweda often complained about the poor quality of eggs shipped from other Ontario egg graders. Her job was to find eggs if and when an application for a supplementary import permit was filed with the federal Department of Foreign Affairs and International Trade (DFAIT).

DFAIT would, in turn, ask Egg Farmers of Canada (the Canadian Egg Marketing Agency) whether eggs could be found in Canada to fill the demand and the national agency would pass that down from to the Ontario board where it would become Pierce’s challenge to find eggs to fill the demand.

Pierce said Sweda’s complaints were often justified by federal inspectors called in to verify the grade and wholesomeness of the eggs supplied by other grading stations. In Ontario, that usually means either L.H. Gray and Son Ltd. or Burnbrae Farms Ltd. because they together account for more than 90 per cent of the Ontario market.

She said she recalls one Sweda Farms Ltd. order for Grade A Small eggs. The eggs they got were Mediums. Pierce confirmed that the egg board paid L.H. Gray and Son Ltd. the going price differential at the time between Grade A Small and Grade A Medium.

“I saw invoices for fibre packaging,” she said. There are allegations that the egg board paid Gray for plywood for a shipment of eggs to Sweda Farms.

Lind did notify the egg board that he noticed U.S. plywood in one shipment and questioned how it could be re-used, given Canadian Food Inspection Agency regulations against re-use, and questioned whether the eggs in that shipment came from the U.S.  And he said in subsequent requests that were to be filled by Canadian eggs that he get the grade and quality of eggs specified, not a different size or quality.

That Lind correspondence is in court files in Oshawa.

Sweda and its owner Svante Lind, have filed lawsuits against Gray, Burnbrae and the Ontario egg board, essentially charging that they have conspired to drive Sweda out of the Ontario egg-grading business.

Dianne Benedetti objected to orders from Pelissero to change numbers in a report to the national agency.  The effect of the change would have reduced, or eliminated, over-marketing penalties (liquidated damages) the national agency would have required from Ontario.   When Benedetti refused, Pelissero ordered her supervisor to fire her. He didn’t. However, in 2007,  Benedetti voluntarily left the board.

“I really miss the producers,” she said, “but I’m glad all this stuff is finally coming out.”

Monday, March 28, 2011

Blame the OFA for failed farm policies

It’s the fault of the Ontario Federation of Agriculture that Canada’s agriculture policies have been a unmitigated disaster for the last 20 years.

Neither the Conservatives nor the Liberals have the courage to fashion their own agriculture policies. For years they have simply rubber-stamped what the Canadian Federation of Agriculture has asked and it, in turn, develops its policies from the research and political clout of the Ontario Federation of Agriculture.

The result has been record-high subsidies and trade barriers, declining research and declining regulatory vigilance. It’s therefore not surprising that Canada’s position as a world exporter of food and agriculture products has steadily declined, nor that imports steadily take a larger share of the Canadian market.

Farmers have lobbied loud and hard for subsidies and federal and provincial politicians have answered their every plea – sometimes later than farmers hoped, sometimes with less money than they sought, but always with substantial subsidies.

And then, when the finance minister and treasury board minister demand cuts to reduce deficits, the agriculture department has cut research, manpower and therefore knowledgeable, experienced officials to enforce regulations.

There has never been radical reform of meat inspection despite decades of scandals and problems. The basic problem is that the dregs of the veterinary profession runs that shop and successive agriculture ministers have lacked the wisdom and courage to call for expert outside opinion, such as inviting the Danes or the Japanese to examine our Canadian Food Inspection Agency and offer advice.

The state of inspection and discipline for the feed industry is abysmal, even though feed is the single largest cost of producing meat, milk and eggs.

There is no attempt to really inspect or discipline fertilizer blenders and retailers. What exists is a joke because only those who want to have the government check their products submit samples. And more than half of those samples routinely flunk the standard of value for money.

As recently as 1970, the federal agriculture department ran the largest and oldest research establishment in Canada. Universities, such as the University of Guelph, added their prowess, especially in basic research and getting messages out to farmers.

Those were the days when Canadian agriculture was recognized as a world leader. No more. Today China has many more agricultural researchers than Canada and they have already surpassed some of the best research Canadians have to offer.

While Canada’s federal bureaucrats twiddle their thumbs over advances such as transgenics (eg. the environmentally-friendly Enviropig) and cloning for livestock productivity and health, the Chinese have a more realistic approach to the balance of risks vs. opportunities and are forging ahead.

Various prime ministers have waxed eloquent about the gains to be realized from research, innovation and free trade. Under their leadership, Canadian agriculture has declined in all three categories.

Our highest trade barriers have been deliberately designed to coddle dairy and poultry farmers. They used to have protection via import quotas. Now they have even greater protection via sky-high tariffs. As a result, dairy and poultry farmers are richer today than ever in the history of North American agriculture. Almost all of them are millionaires; some of them, such as Ontario’s two largest egg companies, count the value of their quota holdings alone at more than $100 million.

Yet no agriculture minister, neither federal nor provincial, dares criticize the excesses and abuses of the farmer-run marketing boards. They appoint supervisory commissions, then stack the directorships with farmers whose passion is defending supply management.

So, farmers who want farm policy changes don’t need to bother voting in the upcoming federal and Ontario elections. Save your energies for radical reforms at the Ontario Federation of Agriculture. That’s where Canada’s farm policies, disastrous as they have been, are fashioned.

Competition Bureau mum about egg investigation

The Competition Bureau is not saying whether it is investigating collusion between Ontario’s dominant egg-grading companies, L.H. Gray and Son Ltd. and Burnbrae Farms Ltd.
The Competition Bureau has been made aware of a treasure trove of e-mails between the two companies, including ones involving how they will deal with the move by Shoppers Drug Markets chain to begin selling eggs.
The e-mail indicates that Gray anticipates there might be trouble with Loblaws over which company gets the Shoppers account, that there could be “major problems for supply in Eastern Canada. We have been talking about this for the last four weeks at least.”
Another e-mail from Bill Gray, owner of L.H. Gray and Son Ltd., to Aaron Kwinter says “Joe H (Hudson of Burnbrae?) called last night requesting support for the following” and the list begins with a price hike of half a cent a dozen.
Kwinter runs Global Egg and Egg Solutions in Etobicoke; Gray is one of the owners of those businesses.
In response to an Access to Information request, Industry Canada says “we regret to inform you that we can neither confirm nor deny the existence of any records” about an investigation into improprieties by the two egg-grading companies.

Even if the records do exist, Kimberly Eadie, the director of information and privacy rights administration for Industry Canada writes “they would be exempt from disclosure.”
It is Competition Bureau policy to keep its investigations secret unless and until charges are laid.
The treasure trove of information about how the two companies share information is sealed in court in London, Ont., and is under protection of a court-appointed lawyer in Oshawa. There are, however, a number of e-mails from and to Gray that are open to public scrutiny in the court files of Superior Court for Durham Region is Oshawa.
Gray’s lawyer, Allison Webster, succeeded in getting a court order to seal similar information in the Superior Court at London.

More than Oda’s “not” is wrong at CIDA

The Canadian International Development Agency is bungling the job of international relief and development.

To start on a long list of problems, consider that long-term relationships have been broken because Prime Minister Stephen Harper decided to drop a number of countries, among them some of the poorest in the world, from the list worthy of Canadian help.

Second, although Harper can boast that he has increased spending on international aid, toomuch of it has gone to the wrong people and places. The greatest corruption is involved in country-to-country projects and in multi-national agencies’, such as the World Bank, projects.
Third, agriculture keeps falling off of the Canadian International Development Agency’s (CIDA) list of priorities.
Fourth, CIDA recently began requiring aid agencies, such as the Mennonite Central Committee, the Christian Reformed World Relief Committee, The Presbyterian World Service and Development., etc., to competitively bid for projects.  This approach scraps decades of relationships and experience by these agencies and their partners overseas and replaces it with the political whims of people in Ottawa, including members of Harper’s Prime Minister’s Office.
Dr. Jeffrey Sachs, an economist who has been working for the United Nations on aid issues and knows far more about the issues that Harper and his political advisors ever will, says we’re missing the boat by failing to help farmers boost food production, especially in needy countries.
Sachs says that money spent on research and development to boost food production would do far more than military might to quell unrest in the Middle East and North Africa.
Sachs says focusing on smallhold farmers helped lift China and India out of hunger.

What a novel idea: support for family farmers and rural communities.

This is precisely the kind of community-development work that Christian organizations have been doing for decades, and some of them have recently lost their CIDA funding. There has been lots of media attention to the “not” that CIDA Minister Bev Oda had her staff insert to reverse a staff recommendation on renewing funding for KAIROS, but the media have missed similar funding reversals for the Christian Reformed World Relief Committee, the Presbyterians and others.
Millions of Canadians faithfully support these Christian organizations. CIDA used to, often somewhat reluctantly, chip in some taxpayers’ money to supplement the donations.
But CIDA bureaucrats never seemed happy with this situation.  It was certainly never one of their top priorities. They seemed to prefer hob-nobbing with the powerful and rich in Geneva, so their
priorities have always been making big deals with governments and the likes of the World Bank.
The track record there is abysmal, featuring corruption and failures. Dambiso Moyo in her book, Dead Aid, details the reasons why billions of dollars of this type of aid has not only failed, but also been counter-productive.
I have often written to cabinet ministers in charge of CIDA to urge them to reduce the percentage spent on this type of aid and to increase the percentage devoted to support for Canadian organizations such as the Mennonite Central Committee and Doctors Without Borders.                                                Bev Odo, Min. Resp. for CIDA
They have consistently ignored the advice.
Whoever wins this election needs to recognize that Canada’s spending on international relief and development needs radical reform. It should start with increased support for the agencies with proven track records for honest, integrity and effectiveness.
Besides, this would be politically astute. After all, millions of constituents are donating to these agencies. They might be easily swayed by candidates who promise to support these wonderful organizations and their compassionate work.

Egg inquiry may never happen

The Ontario Farm Products Marketing Commission is refusing to say what it will do, if anything, about complaints of widespread problems in the egg industry.

Chairman Geri Kamenz declined to answer a list of e-mailed questions, saying it  would be “inappropriate to make any comments about this matter right now.”

Harry Pelissero, general manager for the Egg Farmers of Ontario marketing board, said “I am aware of the allegations” made by Norman Bourdeau, a former employee of L.H. Gray and Sons Ltd. and, noting that there are lawsuits underway involving Bourdeau, the egg board, Sweda Farms Ltd., Gray and Burnbrae Farms Ltd. said “I am limited in what I can say.”

“We take the allegations seriously,” he says of a 170-page report Bourdeau filed with the commission in which he calls for an inquiry. Donald Good, lawyer for Sweda Farms, has also called for an inquiry.

Pelissero said the egg board is “co-operating fully” with the commission. He said Bourdeau’s allegations “are without merit and foundation.”

Kamenz would not say whether the commission will conduct an inquiry or whether it has ordered audits at the egg board and grading stations, also citing the lawsuits as his reason for not commenting.

Among the e-mailed list of questions he declined to answer was one seeking to know whether there are regulations to forbid those who are importing eggs from declaring surplus eggs that are removed from the “table egg” market and sold at a lower price for processing. Farmers fund the price gap.

In 1975, Joe Hudson, the owner of Burnbrae Farms Ltd. of Lyn, Ont., was removed as a director of the Ontario Egg Producers Marketing Board by former agriculture minister William Newman because he was both importing eggs from the U.S. and declaring surplus eggs to the marketing board.

A person who has worked for the egg board on import permits and surplus declarations said the operating approach has been a requirement of a two to three-week gap between seeking a supplementary import permit and declaring a surplus.

It has, however, been a practice at the national agency level to deal with shortages and surpluses on a specific-market basis such as a shortage of organic eggs while there’s a surplus of Grade A Large eggs.

Bernadette Cox, who speaks for the national agency, refused to divulge whether there is a specific regulation at that level dealing with near-simultaneous importation of eggs and declarations of surplus eggs. She would only say that the national agency is charged with the responsibility of balancing supply and demand.

Friday, March 25, 2011

Egg Troubles "Get Cracking" in Ontario

OSHAWA – Thousands of pages of court documents here outline allegations of conspiracies to make business life difficult for Sweda Farms Ltd., a business owned by Svante Lind who is trying to break into Ontario’s egg-grading and distribution business.

The lawsuits against L.H. Gray and Son Ltd., Burnbrae Farms Ltd. and the Egg Farmers of Ontario marketing board originated several years ago, but have taken on a more sinister tone on the basis of information provided by Norman Bourdeau who took copies of thousands of e-mails and more than one million other electronic documents from L.H. Gray and Son Ltd. where he was head of information technology from 2006 to 2009.

Many of those same e-mails and some of the documents also appear in court files in London, Ont., that were sealed Feb. 22 at the request of lawyer Allison Webster, acting on behalf of Gray. She said the files contain sensitive commercial information.

The documents also indicate that Gray denies wrongdoing and accuse Bourdeau of trying to harm the company.

Justice J.C.Corkery appointed Darrel N. Hawreliak to be the supervising solicitor to protect the electronic files Bourdeau turned over. They are now in the hands of Kay Professional Corp.

Webster has asked the court to give them back to Gray, but lawyer Don Good, acting for Sweda Farms, told the judge he fears Gray would destroy the files.

Webster argues that the Bourdeau information is not related to the Sweda lawsuit against the egg board; Good counters that the Gray, Burnbrae and egg board actions are inter-connected.

Bourdeau says in the court documents that Gray did order him to delete the e-mails and Gray also says in the documents that it is normal company practice to destroy files once cheques have been cut to pay farmers.

The court in Oshawa will be asked on March 10 to combine the lawsuits Lind has filed against the egg board, Burnbrae and Gray. Each action seeks millions of dollars in damages.

One part of Sweda’s complaints is that when it could not get enough eggs to satisfy its customers and applied to the federal government for supplementary import permits, the egg board found Ontario-produced eggs to fill those orders and therefore result in denial of import permits.

But Sweda says the eggs furnished by Gray and Burnbrae were of inferior quality or not what was requested. There is e-mail evidence that Harry Pelissero of the egg board and Bill Gray of L.H. Gray and Son Ltd. arranged to include Mediums in a shipment that was supposed to be Grade A Small eggs.

For example, in e-mail exchanges in September 2009, between Pelissero and Scott Brookshaw of Gray, with carbon copies to Bill Gray, Pelissero writes “whether there are some Mediums in the lot they are being sold as Small.”

In another set of e-mails that September, Brookshaw writes “there would be some downgraded Mediums to make the order.”

On Sept. 17, Lind sent an e-mail outlining specifications for what he sought – 300 cases (of 15 dozen each) of Grade A small brown eggs with no downgrades from Medium, no upgrades from Cracks and Dirties and graded under Canadian Food Inspection Agency supervision.

Lind reminds them that upgrading Cracks and Dirties “is deemed an adulterated grading practice” and is a food safety issue.

Brookshaw, in an e-mail to Pelissero, writes that “the regulations allow downgrading” from Mediums to Smalls. He does not cite the regulation wording or number.

A Sept. 9 e-mail from Brookshaw to Burnbrae, carbon-copied to Bill Gray, says that the eggs from Gray’s plants are to go to Burnbrae so Sweda Farms will be misled about their origin. “Harry (Pelissero, general manager of the egg board) wants them to look like they came from Burnbrae so they have to be delivered together,” he wrote.

In another e-mail dated Sept. 24, Lind wrote Gray that the “eggs came on U.S. material that also asks the question are t these eggs U.S.?”

He goes on to write that “the use of material more than once to transport eggs is illegal.” and to tell Gray that he needs “documentation that these U.S. skids are approved to be imported to Canada.”

On May 4, 2009, Bill Gray e-mailed Pelissero to say that he heard that there has been an application for a supplementary import permit for organic eggs and writes “this is a dangerous play as now they can request a specialty product and receive and import. We must develop a plan and make formal submissions to the people in control.”

Earlier, on Oct. 10, 2008, Brookshaw e-mailed Bill Gray that Lind had applied for a supplementary import permit for organic and free-range eggs” and that Lind is lobbying politicians to grant producers the right to produce “3,000 units of specialty product per producer.”

In November, 2009, there are e-mails between Brookshaw and Ron Hasnoot about placing cracks in Grade A egg cartons. Brookshaw wrote “the more that can go into the pack the better. Good revenue.”

On Sept. 30, 2009, Bill Gray and Ted Hudson of Burnbrae exchanged e-mails about how they will handle supplying eggs to Shoppers Drug Mart.

“What will happen if Shoppers triggers Loblaws, etc. Major problems for supply in Eastern Canada. We have been talking about this for the last four weeks at least,” Gray wrote Hudson.

On Nov. 27, 2009, Gray e-mailed Aaron Kwinter to say “Joe H. (Hudson?) called last night requesting support for the following” and then has a list that includes increasing prices “1/2 cent on all eggs” and increased import quotas for breaker eggs.

Lind claims that one of his employees, John Klei, was lured away by Gray who therefore gained information about his clients and suppliers. There is an e-mail Dec. 15, 2009, from John Leitch, head of finance for L.H. Gray and Son Ltd., to staff members Joan Jewell and Sharon Morgan, instructing them to prepare a cheque for $5,000 for Klei.

Ted Hudson e-mailed Bill Gray on April 22, 2008, to say that he has been negotiating to buy out Lind, that he offered to “split the difference” at $2.47 million and that if Lind rejects that offer, he will revert to his original offer of $2.2 million.

He says that Lind’s business is not worth the price, but buying him out would avert the possibility that Nutri Oeuf of Quebec might buy out Lind and then become a competitor for the Toronto market.

Burnbrae made another attempt a few years earlier to buy out Lind.

There are also documents in the court files outlining how Joe Hudson and Bill Gray decided to split the purchase of competitor Aaron Metzger Ltd. of Wallenstein. Hudson seemed to be concerned that if Burnbrae bought Metzger alone, some of the major supermarket-chain clients would object.

There are indications that Burnbrae also invited Gray to participate in purchasing Lind’s business.