The Macquarie Connection

 **** Updated January 12th,2011

While not evident in researching this post, it has been brought to my attention that Macquaries interest in the Casino was reduced in a debt reduction transaction that took place in August of last year, which received very little press. The majority ownership now belongs to Catalyst Capital, a toronto based investment firm, which was , in layman’s terms,an exchange of  payment of debt for shares. Macquaries investment was reduced to approximately 2%.I do research my stories to the best of my ability,and had confirmed the below information with not one, but two source’s. However, since New World Gaming is still listed as an owner, the minimal portion of that nature was not widely known. The fact remains that Macquarie did own the casinos until just a few months ago, and one wonders why, if there is so much debt accumulation in these casinos- this transaction was a cash injection, Catalyst was a major creditor and this was a debt paydown- why the casinos are still operating ? Why keep a money pit open? 

Those of you who have been readers for a while may have picked up on a couple of emerging themes over the last year.  One surrounds the  indepth features on some of BC’s P3 projects, and the other swirls around the Macquarie group of companies. You will know by now that Macquarie has had a big interest in British Columbia for several years now, seemingly since the Liberals came into power and began the process of really pushing P3’s as the best model of building new infrastructure province wide.

To be certain, Macquarie, through a number of its fund and subsidiaries, has a hand in a number of projects, and until later last year had been quietly making money off of another venture that has most recently attracted attention of the press, yet again, for money laundering and organized crime – gaming, specifically casinos.

In 2007, Macquarie Group Ltd. entered into a joint venture partnership with Crown Ltd. to buy out Gateway Casinos, through the new company named New World Gaming Partners Ltd.  The acquisition meant that they now owned the Grand Villa Casino in Burnaby,the Starlight Casino in New Westminster, Cascades Casino in Langely, Lake City casinos in the Okanogan, and two casinos in Edmonton.

It is interesting to note that even though Macquarie is not a majority shareholder, that when I went to the Gateway casinos main website, there is a lot of nothing to read. Want to know about the company, its history ? Nope, under construction. Want to know about past press? Nothing, again under construction.

Some of the suspected money laundering incidents reported occurred at one of this companies properties, the Starlight Casino in New Westminster. To be certain, in the media reports it is always BCLC that is mentioned, but I find it interesting that none of the former or current casino owners  appear to have been interviewed, since this excerpt from the CBC story shows it is hard to get the casinos to operate within regulations:

According to Ed Rampone, who was B.C.’s manager of casino investigations until 2009, gangsters can use casinos using so-called loan sharks — people who make high-interest, short-term private loans and will resort to violence to collect debts.

Rampone says gangsters lend large amounts of cash, mostly in $20 bills, to loan sharks. The loan sharks then act as middlemen, lending to high-stakes gamblers.

The gamblers typically repay the loans in the form of casino chips.

The gangsters cash them in and the money then appears to come from casino winnings, not illegal activities.

The practice is becoming more prevalent, said Rampone, who added that it was “an uphill battle” getting casinos to co-operate with regulations.

“I would agree that things have gotten worse,” he told CBC News. “There definitely has to be a willingness to stop it and much, much more participation from all the stakeholders in the industry.”

Read more: http://www.cbc.ca/canada/british-columbia/story/2011/01/06/bc-casinos-money-laundering-edgewater.html#ixzz1ANQ8NfLg

 

Since Maquarie seems to be divesting itself of investments on a global scale, I am hoping we may be soon to see the last of Macquarie in this province, with their recent sale of the 100% stake they had in the Sea to Sky highway. Business has been bad for them overseas, as their model of financing has proven worldwide to be inadequate and risky at best. Enron style number manipulations and skewed calculations leave projects and governments at risk when things  appear to be better than they actually are.

No one knows why Macquarie sold that stake in the Sea to Sky, but I find it interesting to note that entire transaction fed a lot of money into BC from Macquarie investments and holdings… and they just made a tidy little profit and left.

I’m far from being the first to question this companies methods and holdings. Macquarie’s worldwide holdings include many, many offshore companies. Blog Borg Collective posted a list of their holdings worldwide, and it is substantial, although it is likely to read differently now.

Who’s afraid of Macquarie Bank? – The story of the Millionaires Factory” is an eye-opening article into the company that has taken such an interest in BC while the Liberals have been in power.

Macquarie developed a taste for and an aptitude in handling big infrastructure assets, while its executive director, Nicholas Moore, also identified a secular shift. Governments were not just stinting on infrastructure but exiting what they had: there was money to be made in the shift of public-sector assets into private hands, and in the provision of amenities and facilities on behalf of the state. Over the last decade, this initial jeu d’esprit has evolved into the ‘Macquarie Model’: the closest thing in Australian finance to a perpetual-motion machine.

The ‘Macquarie Model’ is begun when the bank buys all or part of a business, whether it be road or bridge, airport or utility. After a period of ingestion, the investment is passed on to one or more of its specialist funds, crystallising a profit, usually modest. But these funds not only pay Macquarie for management; they also pay fees for advice, underwriting and refinancing, as well as bonuses for outperformance of market indicators. In conjunction with rapid growth, Macquarie’s fee structure sometimes produces bizarre excesses: in the three years from June 2002, for example, the rake-off from the Macquarie Infrastructure Group was 54% of cash flow.

In theory, it would be possible for investors to find a cheaper manager. In practice, to unseat Macquarie from one of its funds is almost as inconceivable as Westfield Holdings being booted out of Westfield Trust. So it goes – and when you are clipping per cents off $131 billion of infrastructure assets, there is soon plenty to go round. As Scoop Jackson observed, “A billion here, a billion there, and pretty soon you’re talking about real money.”

Of course, we – and that includes the premier, and the auditor general – know now that the Macquarie Model of financing is the worst thing a government can get into, via P3’s or IPP’s. My colleague Erik Anderson and I have chatted about this, and the best thing you can read to understand how bad this companies methods are , is to read this article, titles Macquarie model blowtorched.

 New York- based corporate governance service RiskMetrics Group has delivered a stinging rebuke to Australia’s infrastructure sector , and in particular the “Macquarie Model” which has been mimicked by Babcock & Brown, and has spawned a generation of toll-roads, airports, telecommunications and power generation stocks.”

“In the most detailed independent research of Macquarie’s Group and Babcock satellites to be published, RiskMetrics critiques the financially engineered infrastructure model for its high debt levels, high fees, paying distributions out of capital rather than cashflow, overpaying for assets, related-part transactions, booking profits from revaluations, poor disclosure, myriad conflicts of interest, auditor conflicts and other poor corporate governance.”

“Although the report has not put a figure on it, fees in the billions above normal public-private partnership (PPP) rates of return have gone to the investment banks.”

But back to the Millionaires Factory…. Another excerpt to make you wonder why our government likes to do so much business with companies like these…

The risks attached to Macquarie aren’t only financial. It is not just another big company making a tonne of money; it is a company increasingly standing in for the state, and not just in Australia. Two of its biggest recent purchases have been British assets of the most public kind: the venerable utility Thames Water, acquired by a Macquarie-led syndicate last October for £8 billion, and the emergency-services communications network Airwave, for which £1.9 billion was paid in April. Thames looks like the bank’s gamest bet yet: massively profitable, but with pipes so decrepit that almost a third of the water that flows through them seeps into the ground. London’s mayor, Ken Livingstone, has derided it as “the unacceptable, unsustainable and irresponsible face of privatisation”.

In the public eye, Macquarie can look squeamish. Stan Correy from Background Briefing describes attending a financial industry conference to hear Nicholas Moore speak. When Moore heard that the ABC was present, he demanded that recording equipment be switched off. “I was just reading that Macquarie is investing in regional newspapers in the US,” Correy says. “Which has got to be ironic, considering they absolutely hate journalists writing anything about them.”

Its reputation, moreover, is for being prickly, even hostile, when criticised. When Business Review Weekly was preparing a cover story on Macquarie three years ago, the bank started issuing complaints to the magazine’s proprietor, John Fairfax Group, even before publication. Two years ago, transport academic Dr John Goldberg published a paper casting doubt on the viability of the M2 Motorway and the Lane Cove and Cross City tunnels; the bank not only complained to the University of Sydney, where he was an honorary associate, but demanded the university disassociate itself from his comments. Whatever the rights and wrongs of Goldberg’s critique, it seemed needlessly heavy-handed. Likewise the response to the Wilson HTM analyst Brett Le Mesurier, who was told recently that he was being denied access to management because he had the temerity to write a note to clients comparing Macquarie to its smaller rival Babcock & Brown. “Of course,” says the puckish Le Mesurier, “that just encourages me.”

An investment bank undertaking roles previously performed by  government is anything but a like-for-like swap. A government is elected on the basis of what it may giveth; an investment bank is chiefly interested in what it can taketh away.

Considering that last statement, there is no doubt our government’s ideologies are badly skewed, when they continually encourage and promote business investments that will ultimately not only bankrupt our province, but our citizens of faith and trust in the process.

Question the Macquarie connections when you see them, past or present, not only for what they represent, but for what that connection means for the future of our province.

27 thoughts on “The Macquarie Connection

  1. This story is the perfect illustration of why we need to change the laws governing what constitutes personhood in this country. Corporations have already decimated any soveriegnty we had. Sharpening pitchfork (and adjusting tinfoil hat to a rakish angle).

    Like

  2. In addition to changing the personhood definition to exclude corps, we also need to get some leg in place to prevent Governments from disposing of public assets in the absence of extremely compelling evidence and a thorough public vetting process. While I’m dreaming, some leg that prohibits corporate campaign donors and prevents Governments from using our money to advertise to us what a great job they’re doing would also be fantastic.

    As always, great job Laila!

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  3. AJ

    1. The description of MacQuarrie’s practice as “paying distributions out of capital rather than cashflow” seems to be the definition of a Ponzi scheme.

    2. Simultaneously acting as vendor and finacial advisor (assessing value and projecting return) is right out of the disasterous Wall Street model (Arthur Anderson / AIG etc).

    3. By selling off the asset to other investors, the keystone rational for the P3 model crumbles (pun intended): there is no motivation to build a high quality product if you are not going to be responsible for maintenance in the long term. Will we see failing infrastructure default to the crown when infrastruction investment funds go bankrupt?

    5. As I have said publicly before, so long as the province benefits from gaming revenue, provincial regulation of gaming is in a conflict of interest, I think that there are likely some explosive details that could show politicians colluding with organized crime.

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  4. ron wilton

    Good tip on the Macquarie loan sharking Laila.
    As big as the Northern Gateway, S2S and Bennett bridge are, I think they are small potatoes compared to the big prize they are prepping for.
    My guess is they will be well positioned to swoop down on BC Hydro when it is writhing in the throes of forced bankruptcy.
    What a nice package they would have for bait when they control the electric and water supply.
    These guys must have played Monopoly a lot when they were kids.
    You are right when you suggest we keep an eye on them, regardless of what brand name they try to slither under the public radar with.

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  5. Lynn

    As I understand it the casinos require renovations if they wish to remain “competitive”.
    My answer: you run it, you build it, you pay for it.
    If those basterds are crooked enough to knowingly accept laundered money then they can take a little bit off the top and pay for renos themselves.

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  6. mike

    Great comments here on this story.

    Laundering money from organized crime with Casinos bought with profits from the secret shadow toll deal on the Sea to Sky Highway. How nice!
    The BC public is oblivious to all of this, thanks to Global TV, CTV, CBC, and our oh so quiet on this topic NDP.
    Once again, great work on this Laila.

    The CBC ‘coverage’ of this reads much more like damage control than anything else. Their stories on the casino money laundering steer people in the wrong direction.
    I am pretty sure the CBC word filter is killing all comments that contain ‘Macquarie’. Or maybe those comments only end up in the hands of their ‘moderators’ who then censor them based on content? Those moderators, BTW are NOT employees of the CBC, but a private contractor called ICUC. The ever growing field of censorship and control of internet comments is their forte, but they also provide perception management, damage control and ‘troll services for hire’ for a who’s who of corporate clients. Intel, Scotiabank, Chevron, CTV to name just a few. Of their 200 professional trolls, 150 are not Canadian.

    The great work being done here by Laila and the keen interest of her growing readers all are being undermined by our corporate media. We all have much work to do to counter this massive propaganda effort.

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  7. Gloria

    Wonderful work Laila.

    I poo poohed, what I read about the Bilderberg group as, the stories were impossibly silly. But, the information coming out, of all the dirty corrupt business going on in this world. I am now wondering, if there is merit. I also was, uneasy about P.M. Harper’s constant talk of, global governance. It does seem, huge business calls the shots, and our politicians are mere figureheads, to enforce these large corporations demands. We people of BC, knew for a fact, the HST was designed for big business. BC is not a province of factories. We are a province of natural resources, the HST does nothing for the BC citizens. We don’t even get to keep our HST, in our own province. We people are forced to pay the HST. For what? Campbell and Hansen blatantly lied to us. Where are the hundreds of dollars, we were to save, by the HST? It is costing me hundreds more, and everyone else too. We have businesses close their doors because, of the HST. Campbell thieved and sold our assets and natural resources. We have gained nothing, other than our hydro going up to 55% more. We tax payers were also forced to pay the costs, for the two patsies that took the fall, for Campbell’s corrupt sale of the BCR. Campbell and the BC Liberals thieve, and we pay them, for their thieving. Go figure. Another thing I read. The U.S.A. has passed a bill S-510. This stops back yard vegetable gardens, and prohibits the saving of seeds. What is this? Control the food, to control the masses? I hope someone out there, can explain some logic to all of this.

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  8. AJ

    Kash Heed (then Solicitor Genera) was blindsided by Rich Coleman (then Minister responsible for gaming) discontinuing the Integrated Ilegal Gambling Enforcement Team. Heed also clashed with Coleman (ex mountie) over renewal of the RCMP contract. Approximately concurrently Heed was removed from office by the Election Act investigation (leaked to media) regarding spending and advertising materials. Interesting timing of the investigation considering how long before that the election had been.

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  9. erik andersen

    Thanks Laila for the terrific job of connecting the dots.
    Folks might care to know that Macquarie Group is also a commercial partner with the Canada Pension Plan Investment Fund. The most recent transaction of note was the CPP IB takeover of Macquarie Infrastucture Fund (an investment mostly made up of intangible assets). The final public submission of the financials by this company showed it to be bankrupt (copy available upon request) but the CPP IB paid over $2 billion for it. To finish off, the CPP IB retained the Macquarie Group as the asset manager. Makes one wonder about the longevity of the CPP Fund. Minister Flaherty has known of this expample from the first time the takeover was anounced but has remained silent (about a year and a half now).

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    1. Laila

      Hi all, I will reply to everyone much later, right now I am working on a HOT HOT tip that came in last night. One that will leave you with goosebumps like I had when it hit me like a ton of bricks. It wount be out today, likely tomorrow am.

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  10. mike

    erik, wow! The stink of corruption at the highest levels is hard to comprehend. Globalists are truly raping and raiding every democracy on the planet, financially, environmentally and with the complete support of governments. Corrupt media are a key to keeping people in the dark.
    The facts about Macquarie should have every Canadian in the streets peacefully protesting our criminal governments.

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  11. Double wow! CPP? It sounds like the feds are trying to bankrupt CPP to justify privatising it. Laila, bated breath. I will be stalking the website for your new story, as will so many others! Thanks girl, you are my hero.

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  12. Curt

    And now Gord’s buddies get the new red light camera deal.
    Not mentioned in the following article, but add Canada, in particular BC, to their l.ist.

    SPEED SMILES
    Is the nation’s leading homegrown investment bank mobilising its own police force? Macquarie Group has rediverted its attention away from gouging road tolls from motorists towards the lucrative area of road infringement detection.

    Four months after setting up the new subsidiary Macquarie Radar Holdings, the silver doughnut has finally pounced by launching a $275 million bid for the speed and red-light camera operator Redflex Holdings. Redflex, whose motto is ”Making a Safer World”, has contracts to help snap speeding drivers in the US, Australia, South Africa, Ireland and Saudi Arabia.

    And this was back a couple of years
    http://camerafraud.wordpress.com/2010/12/15/ats-to-borrow-from-goldman-sachs-buy-redflex/

    Boy it sure is paying off for MacQuarrie to have government in your pocket.

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  13. erik andersen

    Curt has brought a new degree of comprehension that helps characterize the process underway in our society.
    It seems clear to me that inch by inch our governments (yes the feds too) are seeking to have the private interests assume every greater involvement in the provision of services we have traditionaly thought of as being provided by salaried and impartial public employees. With the transferance of this work to the private sector it is not unreasonable to think that profit potential will dominate the agenda. In circumstances where a monopoly is contracted to private interests there is only one reasonable expectation. Unbriddled greed dominating decisions as to quantity and quality of services provided and managed.
    Personal financial soverignty is on the line.

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  14. North Van's Grumps

    You’ve shown here Laila that Macquarie owns a Casino, a gambling establishment. Have you, or do your readers know, that the BC Liberal Party has a “thing” about political parties that accept monies, donations, from Casino Operators/owners?

    http://www.bcliberals.com/bc_liberal_record/teachers/

    The above link comes with the title “Public Safety”

    Just do a search of the document with this phrase:

    “The BC Liberal party constitution stipulates that we do not accept donations from gaming corporations, unlike the NDP. ”

    The BC Liberal Party CONSTITUTION stipulates!!!!!

    So what will come first, the Leadership race or a rewrite of their Constitution to make the donations of $20,550.00 from Macquarie, legal.

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    1. Laila

      Well, this is an interesting conundrum, isn’t it? I guess what they should have written was that the don’t accept donations from the front line operater names…. only the behind the scenes owners. Might be interesting to find out what Rich Coleman thinks of this. AND… see if they are going to return the donations!

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  15. Linda

    How does anyone ever win against corruption? If your premier is corrupt. The judicial system, corrupt, the RCMP, corrupt and your media is all pro Campbell. The BCR was thieved and sold. That doesn’t matter, the judicial system backs Campbell. The RCMP flatly refused to further investigate, the corrupt sale of the BCR. Where is the media? Why they, see nothing, hear nothing, and do nothing. Then we have outfits such as, Hochstein, the C.O.C. who work against the citizens, for pure, total greed. We are constantly up against, Campbell’s dirty tactics. We have no idea, how much dirty money, went into his pockets, and his business friends pockets. He destroyed the central and northern parts of BC’s economy. Our mills were sent to China, along with our raw logs. He cost us, 36,000 lost mill jobs. Who knows how much he pocketed from that? He thieved and sold our rivers, that made him a pretty penny, as did his corrupt sale of the BCR. Everyday more of Campbell’s corruption surfaces, but that doesn’t matter. All that matter is, Campbell stuffs his pockets and keeps it. He doesn’t care he is a criminal, and we all despise him, and his dirty BC Liberal party. He gets to keep his thieved money. Campbell has been pretty close to treason. That doesn’t matter either. He is your typical sociopath, he has no conscious. You have to be a very cruel, sadistic monster, to not care about our 121.000 children, living in poverty. All that matters to him, is to stay out out prison, and get to keep all of that lovely money he thieved. All are co-operating with Campbell on that. The BCR documents, will be shredded, perhaps by “mistake” however, something is sure to happen to destroy them. The e-mails, regarding the corrupt sale of the BCR, were ordered, to be wiped out, by “mistake” ? BC is in the most evil times, in the history of this entire country. And, a P.M. who had the gall, to chastise the BC people, for kicking his butt kissing boy out, and, blamed us for causing that s.o.b. to resign. Crime doesn’t pay? The hell it doesn’t, in this province.

    Like

  16. Laila

    Hello everyone, an update is posted to this story at the top. It seems there was a little known debt reduction transaction a few months ago, and there are new majority owners now, Macquaries ownership was reduced significantly. See this and the questions this brings at the top of this post!

    Like

  17. mike

    I love that last question in your update. Why keep a money pit open?
    To launder dirty money with loses of legit money from that money pit.
    A small time drugs gang might operate a tanning salon, movie rental store etc in order to wash their cash. This is the same, only with government and bankers involved.

    As for the new player, Catalyst Capital?
    Their close ties with Goldman Sachs and the Asper family and any role they played in attempting to acquire Canwest broadcast rights are nothing to worry about I’m sure. Their fist move as a startup back in 2002 was a takeover of most of Hollinger’s (Conrad Black’s) vast media empire. Impressive.

    More info on their secretive, loves to avoid the limelight, Newton Glassman….
    http://www.globeinvestor.com/servlet/ArticleNews/story/RTGAM/20050409/webrnewton0409

    Glassman was Managing Director at Cerberus before he started Catalyst Capital.

    Cerberus named after the three headed dog who guards the gates of Hell, is up to its eyeballs in scandals, directly linked to the CIA and is the subject of three Congressional investigations.
    http://www.dailykos.com/story/2007/3/10/21556/5045
    Dick Cheney, KBR, World Com, the Walter Reid VA scandal, MCI, LeumiBank, and Donald Rumsfeld are all people or scandals with direct links to Cerberus.

    The ‘Canadian’ kid who got to be a Managing director at Cerberus, Newton Glassman, head of Catalyst Capital………..now owns a bunch of money laundering BC Casinos.
    I’m going to phone crime stoppers.

    Like

    1. Laila

      My god, I’m not sure if I am going to stop laughing anytime soon…. : ) Just when you think it gets better eh?

      Hmm. Might explain why the Central Intelligence Agency was recently visiting here, unabashedly reading several posts… I won’t say which.I seem to get a lot of readers in the DC and Arlington Virginia area. Ex-pats?

      Like

  18. Pingback: The War Against the Millionaire Machines | surely not.

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