February 25, 1957

MOTION TO APPOINT SELECT COMMITTEE


On the order: The Prime Minister-the following proposed motion:-That a select committee to be designated be appointed to consider such of the estimates as may be referred to it and to report from time to time its findings and recommendations to the house, and that the provisions of standing order 67(1) limiting the number of members on special committees be suspended in relation thereto. [Mr. Pickersgill.l


?

Charles Eugène Parent

Mr. SI. Laurent (Quebec Easl):

Stand.

Topic:   COMMITTEE ON ESTIMATES
Subtopic:   MOTION TO APPOINT SELECT COMMITTEE
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LIB

Louis-René Beaudoin (Speaker of the House of Commons)

Liberal

Mr. Speaker:

May I perhaps state that this order under "government notices of motions", which is a motion in the name of the Prime Minister, should under our new rules be simply transferred to government orders.

Do I understand that this notice is to be transferred to government orders?

Topic:   COMMITTEE ON ESTIMATES
Subtopic:   MOTION TO APPOINT SELECT COMMITTEE
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LIB

Louis Stephen St-Laurent (Prime Minister; President of the Privy Council)

Liberal

Mr. St. Laurent (Quebec East):

There is no objection to it being transferred to government orders. Since this is private members' day, we did not want to take up the time reserved for private members in discussing the motion at this moment.

Topic:   COMMITTEE ON ESTIMATES
Subtopic:   MOTION TO APPOINT SELECT COMMITTEE
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LIB

Louis-René Beaudoin (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Order. According to the rules, the motion appearing in the name of the Prime Minister under "government notices of motions" will be transferred to government orders.

Topic:   COMMITTEE ON ESTIMATES
Subtopic:   MOTION TO APPOINT SELECT COMMITTEE
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TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26

CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Stanley Knowles (Winnipeg North Centre):

Mr. Speaker, I rise to ask leave to move the adjournment of the house under standing order 26. When I send to you, as I will in a moment, a copy of my motion Your Honour will notice that I have crossed out certain lines of the motion as I had drafted it before the house convened today. These lines have been crossed out in view of the apology the Minister of Trade and Commerce made to the house a few minutes ago. My amended motion reads as follows:

Mr. Speaker, I ask leave, seconded by the hon. member for Assiniboia (Mr. Argue), to move the adjournment of the house under standing order 26, for the purpose of discussing a definite matter of urgent public importance, namely, the fact that the Minister of Trade and Commerce, on behalf of Her Majesty in right of Canada, signed an agreement dated May 8, 1956, which was also signed by Mr. N. E. Tanner and Mr. C. S. Coates, who along with Mr. R. J. Wallace declared that they were all the persons who at that time held options to purchase shares in Trans-Canada and made certain pledges to Her Majesty in right of Canada with reference to their options, making it clear that the minister must have been aware of such options, and hence the need for this house to give consideration to the way in which parliament and the country have been misled by not being informed as to the extent to which there would be private gain as a result of the financial support made available to Trans-Canada Pipe Lines Limited from the public treasury.

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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LIB

Louis-René Beaudoin (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Has the hon. gentleman leave to move the adjournment of the house for the purpose set out in his motion?

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

No.

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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LIB

Louis-René Beaudoin (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Those who support the motion will please rise.

And more than 20 members having risen.

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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LIB

Louis-René Beaudoin (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Since more than 20 members have risen, the motion will be allowed for debate.

Mr. Knov/les: Mr. Speaker, I wish at the outset to say, as I implied in my introductory remarks a few moments ago, that we accept the apology of the Minister of Trade and Commerce for his misstatement which he now finds he made to the house last Tuesday afternoon. Perhaps he will not mind if even as one who accepts that apology I put on the record the facts which underlie the need in our view for having this matter discussed at this time.

Last Tuesday, February 19, as reported at pages 1417 and 1418 of Hansard, questions were asked relating to news reports to the effect that two gentlemen, Mr. N. E. Tanner and Mr. C. S. Coates, had made rather substantial gains from exercising their options to purchase shares of Trans-Canada Pipe Lines stock. My colleague the hon. member for Nanaimo (Mr. Cameron) asked this question:

Was the government aware that these gentlemen had options on blocks of stock at the time the government undertook the agreements to help to finance the company?

The reply made on that occasion by the Minister of Trade and Commerce (Mr. Howe), which he now admits was in error, was in these words:

No, Mr. Speaker, I was not aware of it and I doubt if the options were outstanding at that time.

There may be some connection between the minister's statement to the house today and the fact that for several days following that statement of his on February 19 I endeavoured to get to the bottom of this matter and to find out what the facts really were. I consulted sessional paper No. 174-P which was tabled by the minister's parliamentary assistant last year during the course of the pipe line debate and I ascertained that at the time the agreements were made between the government and Trans-Canada Pipe Lines Limited with respect to financial assistance to that company there were certain undertakings both ways. The government undertook to make a certain sum of money available to the company as a loan toward the building of the western leg of the pipe line. The company undertook to build that western leg by December 31, 1956, and it also undertook to repay the loan by April 2, 1957. In addition to those undertakings there was a five party agreement relating to the shares of Trans-Canada Pipe Lines Limited and

Trans-Canada Pipe Lines also relating to the options to purchase shares which were then outstanding.

I do not need to argue the point that they were then outstanding because despite the statement made by the Minister of Trade and Commerce last Tuesday he has now admitted that they were outstanding. Nevertheless I think the record should be made complete in this regard. The five party agreement that was signed at the same time as the agreement providing for the $80 million loan had to do with certain pledges regarding the shares and the options which the shareholders and the optionees made to the government. The shareholders agreed, by the terms of the agreement of May 8, 1956, to place all the shares which they then held

they appear to add up to 1,928,183- in escrow with the deputy minister of finance. The deputy minister of finance was given the authority by this agreement to hold those shares as security for the loan made by the government. Incidentally the agreement respecting the placing of those shares in escrow was signed by all the shareholders. Those signatures, so I understand through channels that are appropriately open to a member of parliament, in some instances were made by the shareholders themselves and in some instances they were made by attorneys signing on behalf of the shareholders.

We were all aware of that last year; we were all aware of the fact that all the shares then outstanding were placed in escrow. But something else was done at the same time and despite my further search through the record of the pipe line debate which we had in this house last year I cannot find any reference to that other fact.

The other fact is that in addition to the pledging of the shares, in addition to the shares being placed in escrow with Mr. K. W. Taylor, deputy minister of finance, all of the persons who then held options signed an agreement to the effect that if they exercised any of these options while the loan was still outstanding the shares they bought on the basis of those options would also be placed in escrow with the deputy minister of finance. According to this agreement there were at that time only three persons who held such options and those three persons signed to that effect under or over these words:

Being all the persons who hold options to purchase shares of Trans-Canada.

Those three persons were Mr. R. J. Wallace, who gave his address as Houston, Texas; Mr. N. E. Tanner, who gave his address as Calgary, Alberta; Mr. C. S. Coates, formerly of Texas but who gave his address as Toronto,

Trans-Canada Pipe Lines Ontario. I understand that Mr. Wallace signed through an attorney but that Mr. Tanner and Mr. Coates both signed this agreement in their own hands. The Minister of Trade and Commerce, acting on behalf of Her Majesty in the right of Canada, also signed in his own hand.

A point which I think needs to be crystal clear is that on the occasion of the agreement of May 8, 1956, there was down in black and white over the signatures of Mr. Tanner and Mr. Coates the fact that they then held options to purchase shares in Trans-Canada Pipe Lines Limited. Those two gentlemen, Mr. Tanner and Mr. Coates, along with Mr. Wallace, declared that at that time they were the only persons who held options to purchase shares in Trans-Canada Pipe Lines Limited.

In respect to the shares we were told in an appendix to the agreement how many there were, namely, 1,928,183, but we were not told in this agreement and I cannot find any place in the Hansard record of the debate where we were told in the house how many shares Mr. Wallace, Mr. Tanner and Mr. Coates held options to purchase or what were the terms of those options. However, we do know now, ten months after we were involved in that debate. I have been able to borrow from a friend of mine a copy of the prospectus.

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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LIB

Clarence Decatur Howe (Minister of Defence Production; Minister of Trade and Commerce)

Liberal

Mr. Howe (Port Arthur):

From the man

who bought the shares?

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

This friend of mine happens to be in the press gallery and I doubt if he was able to buy any shares. As I say, I obtained this copy from a friend of mine in the press gallery acting in his individual capacity. On page 31 of the prospectus we are told that the company did issue to Mr. N. E. Tanner, president of the company, an option exercisable on or before March 8, 1959, to purchase 60,000 common shares of the capital stock of the company at a price of $8 per share. I still do not have precise evidence as to when those options were given to Mr. Tanner. However, the fact that they were exercisable until March 8, 1959, suggests that they were probably issued on March 8 in some earlier year.

Obviously it could not have been March 8, 1957, because we have not yet reached that date. They must, therefore, have been given to him on March 8, 1956, or, perhaps, on March 8, 1955, or even earlier. At any rate, the prospectus of Trans-Canada Pipe Lines Limited issued just a few weeks ago confirms the fact that Mr. Tanner had options and also establishes the fact that the number of options he had was 60,000.

The same prospectus indicates that Mr. C. S. Coates, executive vice president and general manager of the company, had an option exercisable on or before July 31, 1959, to purchase 50,000 common shares at the price of $8 per share, or for the market value of such shares at the date the option was exercised, whichever was the lesser.

In the paragraph to which I am referring, on pages 31 and 32 of the prospectus, there is also a reference to Mr. R. J. Wallace, the third of the trio of May 8, 1956, who at that time had been given by the company options on 5,000 shares. This same paragraph indicates certain other persons who have been given options since that time. Obviously these options were not outstanding when the agreement was drawn up on May 8, 1956, but have been issued since that time. The same paragraph contains this sentence.

In February, 1957, Mr. Tanner exercised the option granted to him to the extent of 55,000 shares, and Mr. Coates exercised the option granted to him for 50,000 common shares.

It is that latter information which came out in the press a week ago today which was the basis of the questioning that took place in the House of Commons last Tuesday afternoon. We now know that these two gentlemen, Mr. Tanner and Mr. Coates, have exercised, to the extent of 55,000 shares in the case of Mr. Tanner and 50,000 shares in the case of Mr. Coates, the options which they held a year ago to purchase shares in this company.

My motion, as Your Honour knows because you have in your hand a copy as I drafted it earlier today-some lines I have crossed out-originally made reference to the fact that last week the Minister of Trade and Commerce made a statement at variance with the facts.

It is now clear that the minister had forgotten. It is now clear that so far as any misleading of the house last Tuesday is concerned, that has been straightened out. But, Mr. Speaker, what still remains is the fact that all through that tumultuous pipe line debate of 1956 this house was never told how many options to purchase shares had been given to Mr. Tanner and Mr. Coates, nor was this house ever told what the terms of those options were. We were told by the Minister of Trade and Commerce on Friday, June 1 of last year-a day not soon to be forgotten-something that relates to what I am now raising as a matter of urgent public importance when he said: "This idea that the insiders are making a 'killing' is absolutely wrong."

Mr. Speaker, what a statement! The minister, when he made that statement on June 1 last year, knew, on his admission today- an admission which he did not make last

Tuesday but which he has made to the house today-that Mr. Tanner and Mr. Coates had these pieces of paper, these options, entitling them to purchase 60,000 and 50,000 shares respectively-options which at that time were only pieces of paper but which could become of great value. What was it that would make these pieces of paper assume great value? First of all, the passing of the bill which was put through this house last year to provide the loan to Trans-Canada Pipe Lines Limited, and also the loan for building the line through northern Ontario.

Subsequently, there were other developments which might take place to give greater value to these options, for example, the gaining of contracts to supply gas, and obtaining the necessary permission of the board of transport commissioners.

Lo and behold, now after these conditions have been met; after the money had been lent to the company and the building of the line is under way; after many contracts have been secured, more than the company thought they could get for the supplying of gas in Canada; after they have obtained permission from the board of transport commissioners,-in other words, when the point is reached where there is no risk whatever in exercising these options,-Mr. Tanner and Mr. Coates exercise those options which the minister, all during the debate last year, knew that they had. What is the result? They do exactly what on June 1 last year the minister told us could not be done; they make a killing as the result of support from the public treasury made available to Trans-Canada Pipe Lines Limited.

I submit that not only did the Minister of Trade and Commerce know this last year during that debate, as he now admits he did, but that those on the government side in the cabinet must have known it. Surely the Prime Minister did not sit there and allow a matter like this to go through without looking at an agreement like this and finding out, as a corporation lawyer, just what the fine print meant. Surely the Minister of Finance, whose deputy minister signed this agreement, receiving in escrow the shares and receiving the pledges that any shares purchased on the basis of these options would also be put in escrow, was not unaware of the existence of these options.

Yet, Mr. Speaker, we never had it brought out that these gentlemen, Mr. Tanner and Mr. Coates, on the basis of these pieces of paper which they had last year and about which the minister said in this house what he did, would make what by any definition is a real killing. They are permitted, by virtue of the options they had last year-by virtue

Trans-Canada Pipe Lines of the options about which the minister knew -to purchase these shares at $8 at a time when they are selling for $10. Incidentally I may say that, from the prospectus which I have before me, I understand that ordinary individuals who wish to buy shares in this company must buy them in package lots. They are obliged to take a debenture of $100 in order to get five of these shares at $10 each. Yet Mr. Tanner and Mr. Coates are able to buy in February, 1957, in the one case 55,000 shares and in the other case 50,000 shares at $8 each at a time when they are being sold at $10 a share which is to them immediately a profit of $110,000 in one case and $100,000 in the other. If that is not making a killing, I do not know the meaning of the word. Why are they able to make a killing? Because of the aid made available to Trans-Canada Pipe Lines Limited out of the public treasury because of a bill that was forced through this House of Commons last year.

Mr. Speaker, I doubt whether I have properly described the killing that these gentlemen are making because the press reports are to the effect that these shares, once they are being traded on the market, will be sold at even higher prices. Some press reports suggest $15 a share. One press report which I have on my desk says that a few days ago they were being bid at $19, with the asked price being $21. Therefore, Mr. Speaker, if one conjectures that the value of these shares may be as high as $18 or $20, you have each of these gentlemen, Mr. Tanner and Mr. Coates, in the position to make a profit of half a million dollars. Yet on June 1 of last year we were told that this was not a proposition in connection with which the insiders would make a killing. Here were these two insiders in a position then-on the basis of pieces of paper of which the minister was fully aware-to make the very kind of killing which the minister on June 1, 1956, said could not be made.

May I point out, Mr. Speaker, that one of the many efforts that we made to get proper discussion and a proper consideration of the pipe line bill last year related to these particular agreements which I have cited and to which the minister himself referred in his earlier remarks. You will recall, Mr. Speaker, that I contended that the bill was imperfect because it made reference to these agreements but did not include them as a schedule to the bill. I argued that they should have been included as a schedule to the bill so that parliament would be involved in whatever was contained in those agreements and so that we would have a chance to discuss them and question them, page by page and line by line. We were denied the right to have

Trans-Canada Pipe Lines those agreements as a schedule to the bill, both by a decision of the chair and by a refusal on the part of the minister to agree to our request. We continued to press for the agreements to be made a schedule to the bill right to the very end. That to which I am now going to refer cannot be proven from the record but I may say that on the night last year when the clauses of the bill were being put through in committee, under closure, without any debate whatsoever, there were a number of us who raised points of order at various stages. The last point of order I raised that night or that morning at 2 o'clock or 3 o'clock, whatever it was, or which I attempted to raise but which the chairman of the committee would not allow me to raise, was to the effect that Mr. Speaker had said that the place to do something about getting these agreements made a schedule to the bill was not while the Speaker was in the chair but when we were in committee on the bill. So when the battle was at its very end I was still trying to get these agreements included as a schedule to the bill. If we could have won that point we might have had a chance to ask questions about these options. We might have had a chance to find out-as we should have been told-that Mr. Tanner and Mr. Coates held options on 60,000 and 50,000 shares, respectively.

Mr. Speaker, we in this group view this matter extremely seriously. We feel that for a responsible minister of the crown to keep this one item of information to himself during the whole of last year's debate is not the part of responsibility. I say to him that in another parliament like unto ours action such as that would immediately be followed by the resignation of the minister. We were refused all the opportunities that we sought to get information and to ask questions. Here was a crucial point and we were given no opportunity to get the appropriate information nor did the minister offer to tell us on his own initiative that these men held these options. Hut-

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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LIB

Clarence Decatur Howe (Minister of Defence Production; Minister of Trade and Commerce)

Liberal

Mr. Howe (Pori Arthur):

I assume that my hori. friend reads the documents that are tabled. You certainly had notice there that those options were outstanding. If he did not read the notice, it is not my fault. I gave it to parliament for that purpose.

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

Mr. Speaker, I thank the minister for his interruption. Yes; I read those documents from stem to gudgeon, inside and out. But may I point out that while the document in question revealed the fact that these three men held options, it did not reveal how many options they held.

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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LIB

Clarence Decatur Howe (Minister of Defence Production; Minister of Trade and Commerce)

Liberal

Mr. Howe (Port Arthur):

You could have asked that question.

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

Could have asked? Mr. Speaker, listen to my Liberal friends saying we could have asked. Were they here? What chance did we have?

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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LIB

John Whitney Pickersgill (Minister of Citizenship and Immigration)

Liberal

Mr. Pickersgill:

You had 16 days to do it.

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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PC

Douglas Scott Harkness

Progressive Conservative

Mr. Harkness:

No questions were answered.

Topic:   TRANS-CANADA PIPE LINES ALLEGED MISLEADING OF PARLIAMENT MOTION FOR ADJOURNMENT UNDER STANDING ORDER 26
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February 25, 1957