The Friends of the Canadian Wheat Board (FCWB) allege $720 million owed to farmers in 2011-12 went instead to help the board transition to an open market.
“On the face of it, it contravenes the existing legislation,” FCWB chair Stewart Wells said in an interview July 14.
According to Wells, the wheat board act says farmers are to get all the money earned by the board from grain sales after expenses related to those sales are paid.
The allegations are part of a class-action lawsuit launched by four farmers supported by the FCWB in 2013. The farmers — Andrew Dennis of Brookdale, Man., Nathan Macklin of DeBolt, Alta., Harold Bell of Fort St. John, B.C. and Ian McCreary of Bladworth, Sask., — were asking for $17 billion in compensation on behalf of western Canadian farmers for the loss of the board’s single-desk power, board assets and the misallocation of farmer funds.
In 2013, Federal Court Justice Danielle Tremblay-Lamer struck most of the plaintiffs’ case, except the alleged misallocation of farmers’ money, Wells said. She ruled the plaintiffs could pursue that part if they amended their Statement of Claim, which they did. It was served July 10.
The Federal Court of Appeal later upheld Justice Tremblay-Lamer’s ruling and the Supreme Court of Canada declined to hear the case ending the farmers’ $17-billion claim.
Now the Federal Court will decide whether the plaintiffs class-action suit should be certified, which could happen by fall. If certified, the discovery process begins and the plaintiffs and federal government can seek information about the other’s case.
Since 1998, when changes to the wheat board act gave farmers majority control of board operations, the board returned 93 per cent of grain sale revenues to farmers after operating expenses, Wells said.
In 2011-12 — the last year the board had a monopoly — only 83 per cent of the revenue was returned, even though revenues were the third highest since 1998.
That’s because expenses were higher than usual. The board did have new, one-time costs related to the switch to an open market, including severances for fired employees and pension liability. However, the government allocated $349 million to cover those costs. The wheat board’s financial report for 2011-12 — the last publicly available — shows the government spent $177 million of that $349 million. A footnote says the rest of the money would be available for subsequent years.
However, since no other financial reports have been made public because Agriculture Minister Gerry Ritz deemed them to be commercially sensitive, there’s no way to know if the money was spent, Wells said.
“But in those same books in 2011-12 it shows at least some money being taken out of the pooling accounts to directly offset some restructuring expenses, which does not seem appropriate… ” he said.
Money was also taken from the board’s contingency fund.
It’s spelled out in the board’s 2011-12 annual report on page 27. The report says $183.2 million was spent on restructuring, but was offset by $177.3 million from the government leaving the board “a net restructuring expense of $5.9 million.”
The report says in part: “In addition to the net $5.9 million in restructuring expenses recognized in earnings and charged to pool accounts for the year ended July 31, 2102, $22 million in pension expenses incurred in prior years were recognized as a charge to the contingency fund.”
The contingency fund came from fees farmers paid to use the board’s Producer Payment Options and was supposed to break even over time.
“It’s not a stretch to maybe think too much money was being charged in fees for farmers using those programs,” Wells said.
“It could be they were using the contingency fund to build up a nest egg for the new company.
The legal costs are adding up. The FCWB continues to seek donations, Wells said.
The government’s decision to, “give away” CWB assets paid for by farmers to the Saudi Arabian government and Bunge, has sparked donations, he said.
The government says G3, (Global Grain Group), a joint venture of Bunge and Saudi Agricultural and Livestock Investment Co. (SALIC), is purchasing a 50.1 per cent stake in CWB for $250 million, but the money will remain in CWB to make it stronger. The other 49.9 per cent will be held in trust for farmers who have delivered grain to CWB or who deliver in the future.