Commentary: The mystery behind the mysterious Mr. Beattie deepens

 

by Dermod Travis,

 

An interesting twist to the Mysterious Mr. Beattie file, but first a quick recap on the story to date and the cast.

In the starring role, there’s Michael Wilfred Beattie, a very real person – “who really does exist” – masquerading as an imaginary president of a make-believe construction company, MBM Consulting and Construction Corp. and its subsidiaries MBM Consulting and MBM Investment Corp.

Back in February, Beattie had boasted of a BA in engineering from McGill University, a MBA from Western University and “a personal net worth of $228 million”– from business successes in the construction industry, mergers and acquisitions and project management.

His last known job was as fleet manager in Caledon, Ontario’s public works department, earning an annual salary of $128,000 in 2015.

From 2011 to 2013, Beattie appeared on Ontario’s Sunshine List as the fleet operations manager for the City of Cambridge, pulling in as much as $132,280 in 2012.

In 2014/15, Beattie also served as the president of the 250 member Municipal Equipment and Operators Association of Ontario.

oct 6 2014

After “an isolated, significant discrepancy in one business unit” was uncovered by the Town of Caledon, Beattie was charged with fraud over $5,000, laundering proceeds of crime, and possession of proceeds of property obtained by crime over $5,000.” (See update below).

He was also convicted for perjury and fraud in Quebec in 1993 and sentenced to one-year in jail and two years of probation, none of which made the final cut for his online bio. Turns out those degrees were fake too.

MBM’s legal counsel – Grant McGlaughlin, a partner at Goodmans LLP, a Bay Street, Toronto law firm – initially “denied that Beattie was the man charged in Caledon,” The Globe and Mail reported in February, however, McGlaughlin dumped his client a few days later.

Beattie had been on a mission until then: to kick up a storm over the proposed acquisition of Aecon Group by China Communications Construction Company  (CCCC) – 63 per cent owned by the Chinese government – all in the hopes the Canadian government would block the takeover, as they did last month following a national security review.

Perhaps Beattie saw himself as a spurned suitor?

On August 25 – one day after Aecon’s news release announcing its decision to engage financial advisors to explore a potential sale of the company – Beattie issued his own release using Cision Canada’s newswire service, a platform widely favoured by business and public relations firms.

The former fleet manager of Caledon “confirmed (his) interest in the sale of Aecon Group Inc.,” adding that his company – Beattie LP – was “pursuing all avenues in its interest in Aecon.”

Two months later, the make-believe construction magnate – “who has been in the construction business since 1995 and who employs highly-skilled staff in the areas of infrastructure and construction” – finally got around to registering the company’s website.

In meetings with MPs and officials at Investment Canada, the Prime Minister’s Office and Global Affairs Canada earlier this year, Beattie was accompanied by McGlaughlin and up to four paid lobbyists, including former CBC broadcaster – now with Ottawa-based government relations firm Ensight CanadaDon Newman, fellow Ensight arm-twister Andrew Balfour, arm-twister Andrew Galloro with Toronto-based public relations firm Navigator and Joseph Belan, identified in the media as “a Swiss-based Canadian businessman.”

But Belan is so much more.

Belan_Bloomberg

He’s the chairman and CEO of Novatrek Capital GmbH, “an investment company focused on multiple principal investment strategies in the metals, mining and general industrial sectors.”

He’s also a long-time client and acquaintance of McGlaughlin and his business partner in at least one venture.

Along with Elevation Sports and Entertainment Group CEO Lee Genier, Belan and McGlaughlin are owners of Saskatchewan’s proposed Canadian Premier Soccer League team, announced last summer.

Belan has another business associate.

He worked for – and is still linked to – Russian oligarch Vladimir Iorich.

No tale in 2018 is complete without at least one Russian – and if President Vladimir Putin is unavailable – an oligarch will have to do.

According to the Swiss Banking Lawyers website, “Iorich generated his wealth with his Russian (coal) company Mechel. In 2006, he fought with and left his former business partner Igor Syuzin. Iorich sold his (stake) to Sjusin for $1.3 Billion USD and started again in Zug, Switzerland.”

In July 2006, turning his attention to rare earth minerals, Iorich founded Pala Investments, “an offshore structure with 86 companies distributed all over the world.”

Vladimir Iorich

Three years later, in 2009, Vancouver-based Rockwell Diamonds found itself in a proxy battle with the reclusive oligarch.

Here’s how David Copeland then-chairman of Rockwell Diamonds put it to The Globe and Mail at the time: “There is no question they have very good legal advice and they are smart. They are very good vulture opportunists.”

Looking at some of their deals over the last 12 years, one could be forgiven for sensing that Pala may help create its own prey with a not-so-gentle shove.

Refresher on the story so far and the key players now complete, with, of course, the additional new cast member, Iorich thrown into the mix.

Back to Aecon.

One of its divisions is in the mining industry: “Whether working with new or existing mines, Aecon expertise leads the pack in bringing a broad range of services and seamless solutions to our clients. Within our fleet of modern vehicles and specialty equipment, Aecon has some 500 units exclusively dedicated to mining services.”

Another construction firm – Toronto-based Dumas Mining – is in the same business: “Dumas is a leading full-service underground mining contractor providing services to clients throughout the Americas. We specialize in mine construction, mine development, production mining, mine services and engineering.”

Dumas 2 at 80 per cent

“With an extensive fleet of high quality production equipment, Dumas can meet the demands of any project in any location. Underpinning our success is the commitment and expertise of our greatest asset – people. We pride ourselves on an ability to find the common ground in all our relationships: with our clients, partners and suppliers, employees, and government and community groups.”

Dumas Mining’s head office is on the 23rd floor of 200 Bay Street, South Tower in Toronto, just a few floors below the fictitious address for MBM Consulting and Construction Corp., Beattie’s make-believe firm.

200 Bay Street

In 2012, Dumas acquired Kamloops-based Tercon Investments Ltd. “to create a new company providing a diverse and integrated suite of specialized services to the international mining and energy sectors. The newly enlarged company will operate under the globally-recognized Dumas name.”

Dumas boasts that it “has evolved from a small French-Canadian owned boutique underground mining contractor (in 1994) to an international full-service underground mining contractor. With more than 2,000 highly qualified and safety-focused employees, Dumas continues to enjoy steady growth in high-demand markets.”

Beattie’s make-believe firm had somewhere between “more than 145 employees” and “some 200 team members” – depending upon the time of day or audience – and look at the attention he garnered. But I digress.

Dumas has had a number of mining, finance and construction heavyweights on its board of directors over the years, including Michael Barton, a former vice-president at Hatch Corporate Finance; Jan Castro, a former senior vice-president at Mechel OAO, Iorich’s former coal company; and Joseph Belan.

Who owns Dumas? Pala Investments. Barton, Castro and Belan are all Pala alumni.

Belan, who has sat on the board of directors for Norcast Castings, Coalcorp and SouthGobi Resources, was Pala’s first managing director in 2006.

In February 2017, Novatrek Capital teamed up with Los Angeles-based Sole Source Capital and Pala Investments in a failed $40 million USD bid for the assets of California’s bankrupt Mountain Pass mine, “the sole significant developed source for rare earths elements in the U.S.”

Pala Investments cites Daniel Dumas, founder and chief executive officer of Dumas Mining, in a 2018 corporate presentation, praising the private equity fund: “Pala’s commitment to the long-term future of Dumas will allow us to provide our customers an expanded offering, both in service range and geography, while maintaining the highest level of quality they have come to expect from Dumas.”

Goodmans LLP had, and may still count, Pala among its clients, either directly or indirectly. 

Looking at the firm’s clients in the mining sector, the law firm has represented at least six companies that link back to Pala and another five that have contracted with Dumas Mining.

Goodmans LLP has also represented Ivanhoe Mines Mongolia, SouthGobi Resources and mining companies that are state-controlled enterprises of the Chinese government.

The firm has also counted Aecon among its client base.

One of Beattie’s arguments against the CCCC takeover of Aecon was the risk that a construction firm backed by Beijing could under-bid Canadian competitors through direct and indirect subsidies from the Chinese government.

According to testimony by the U.S.-China Economic and Security Review Commission before Congress, “state-owned firms enjoy support ranging from favourable tax treatment to grants and preferential access to raw materials.”

The Globe and Mail reported in January that CCCC’s 2017 first-quarter report filed with the Hong Kong Stock Exchange showed that non-operating income more than doubled to $38-million in that period. The company attributed most of the rise to “government subsidies.”

Tough to imagine that same issue wouldn’t concern Dumas as well, since it was among the points used by PCL Constructors, Ledcor Group, P.W. Graham & Sons and the Canadian Construction Association in their opposition to the takeover, although they did so in their own corporate names.

The whole episode surrounding Beattie is a tale wrapped in many mysteries.

What was afoot? 

Why use a fictitious construction magnate’s fictitious construction company when you have a real one right in the room? Belan didn’t need Beattie LP, he already had Dumas Mining available in his pocket. According to Bloomberg.com, Belan is currently on the board of directors of Dumas Mining.

No shrinking violet, Iorich has tussled with Chinese industries in the past, but then there’s this nagging matter to consider, in late 2011, Dumas Mining and JCHX Mining Management, a leading Chinese mining contractor, signed “a strategic alliance agreement that covers supporting Chinese clients with projects in Dumas’ core markets of Canada and Latin America.”

In 2013, the former chief operating officer of Dumas Mining, Andy Fearn, was appointed JCHX’s vice-president of the international division, following a short stint at Turquoise Hill ResourcesOyu Tolgoi mine in Mongolia.

Odd to put that agreement and those commercial relationships at risk. The 2011 release still appears on the website of Dumas Mining.

It’s equally tough to imagine Goodmans LLP putting its significant business in China on the line for Beattie, let alone their future opportunities in that country.

In an email last February, Navigator executive chairman Jamie Watt told The Globe and Mail, “We have a robust internal process for checking potential conflicts. We do not have a conflict on this file.”

Which, in a strange way, may have some truth to it.

It’s difficult to be in a conflict of interest with an imaginary client headed up by a make-believe construction magnate.

Watt added: “We are proud of the success we have had on this matter.”

Which may also be true, because one way or another the deal was scuttled and it’s a good bet that may have made one or two of the people sitting beside Beattie at those Ottawa meetings very, very happy, if scuttling the deal was their goal.

Like Goodmans LLP, Naviagtor has also worked for Aecon in the past.

Another mystery? The approach of John M. Beck, president and CEO of Aecon, throughout the entire affair.

Beattie LP was first out of the gate with an expression of interest in acquiring Aecon the day after Aecon had confirmed that it had “engaged financial advisors to explore a potential sale of the company.”

Despite the fact there was no such company, not a public peep from Beck or the TSE-listed Aecon, nor again in October when it announced the company’s agreement to be acquired by CCCC. It was the perfect opportunity to state for the record that Beattie LP had not followed up on its August 25 news release.

Beattie and his future entourage were allowed to carry on their merry way seemingly unobstructed until February 9, 2018, when Aecon finally engaged, even then with a mild response compared to the charges Beattie had levelled against the company.

“Michael Beattie claims to be a major construction company executive and his statements opposing the transaction have been widely reported. We have been unable to find any evidence that Mr. Beattie is a “veteran construction industry executive” is part of Aecon’s less than harsh rebuke.

In an interview with The Financial Post, Beck went a bit further, describing the opposition to CCCC’S bid as a “negative campaign that’s been run by people of questionable repute and their representatives. I think it’s distorting and corrupting the process.”

It’s not entirely clear who Beck was referring to when he used the word people and representatives.

Refusing to answer questions for this column, Beattie directed inquiries to one of his lawyers, stating “he has a full authorization to speak on our behalf.”

There’s no official statement from Aecon on the links between Beattie’s entourage and Dumas Mining, nor any comments from company officials in the press.

It’s difficult to imagine that industry insiders wouldn’t know the link between Belan and Dumas, providing a bit of plausibility to the idea that the entire stunt may have simply been an intelligence gathering operation that went south.

Perhaps it was about seeing the deal collapse, so that another player could pick up part, or all, of Aecon at a cheaper price?

CCCC tried to acquire a Canadian company before Aecon.

In March 2015, the Chinese construction company signed a memorandum of understanding “to acquire a 51 per cent interest in Toronto-based Allana Potash for $156 million.”

The deal fell apart shortly after and Israel Chemicals Ltd. picked up the 83.78 per cent of Allana shares it did not already own for $137 million.

As Raymond James analyst Frederic Bastien told the Canadian Press last September, “The Canadian construction sector is for sale right now, it’s pretty cheap.”

It may have just gotten cheaper.

CCCC had agreed to acquire Aecon for $1.51 billion ($20.37 per share). At today’s share price, the company has a value of roughly $1.14 billion.

Perhaps one of Canada’s top 30 law firms was taken in by Beattie’s charm? He’s been described by a past colleague as “larger than life.”

Canadian Lawyer Magazine‘s Back Page columnist, Jim Middlemiss, weighed in on the affair (Beware of rogue clients, May 14th, 2018) pointing out that “a recent incident involving Bay Street titan Goodmans LLP has shone a light on the issue of rogue clients and the potential damage they can inflict on a law firm’s brand.

And then there’s this from The Globe and Mail in November 2017: “Lawyers and companies on both sides of large asset sales are always “intimately” involved during discussions leading up to an agreement, McGlaughlin said Monday by phone. “I’ve never seen it in 21 years where someone hasn’t had direct contact with a buyer’s counsel on a US$750 million deal.”

Beattie LP may make it twice in 22 years.

Pala means shovel in Spanish and someone sure was shovelling something with this stunt.

 

UPDATE (July 12, 2018):In July, the Superior Court of Ontario has dropped all fraud charges against Michael Beattie, former manager with the Town of Caledon.

While the criminal charges were dropped, in the Ontario Court of Justice this month Beattie pleaded guilty to an offence contrary to section 426 of Municipal Code, which covers obstruction charges. He received a $5,000 fine (which, with the mandatory victim fine surcharge amounts to $6,250) and one year of probation.

He also pleaded guilty to a fail to comply with an undertaking and received a conditional discharge with 18 months of probation.

 

 

Dermod Travis is the executive director of IntegrityBC.        www.integritybc.ca

June 19, 2018