A slap on the Royal wrist

Clearly, it smells as if crimes have been committed here. But Bay Street, with its own in-house cop, the OSC, keeps things cozy and under wraps.

Maclean’s magazine
August 7, 2000

A slap on the Royal wrist
Allan Fotheringham

This is what happens in real life. Somebody, probably named Charlie, owns a car dealership in Edmonton or Hamilton or New Westminster.

He has 10 salesmen and three of them are his real hotshots. They top his sales charts each week. It is quite simple why they do so. Every Friday night, an hour or so before closing, they fiddle with the sticker price on their cars. Just goose it 300 bucks or 500 bucks for the last customers.

They are so cocky that a police wiretap later reveals they boast that George, the faithful security man at the car firm, is so dumb he will never catch them.

Somebody squeals, Charlie finds out, goes ballistic and fires all three. The cops are called, charges are laid and somebody goes to the slammer. It's called fraud.

That's what happens in real life. In Fantasyland, otherwise known as the Toronto Stock Exchange, this is what happens.

The Royal Bank, the largest bank in Canada, has a pension arm called RT Capital Management. Nine of its finest, who work in one of the highest business towers in Toronto and not on a Hamilton car lot, are caught juicing the value of stocks.

Insiders say a tape recording actually catches one of them boasting that a chap called Winchester, RT's faithful security man for 30 years, is too dumb ever to catch them. Guess what? Winchester catches them.

One week goes by. Two weeks go by. There is complete silence from the No. 1 office of the gold-encrusted tower on Front Street. Royal boss John Cleghorn, Bay Street's poster boy of integrity, says nothing.

Finally, as the world quivers, Moses comes down from the Mount. Cleghorn "apologizes" to all the faithful who had stuck their shekels in the Royal's vaults all these years rather than burying them in a jam jar in the back 40. The Toronto Star, no usual fan of galloping capitalism, announces breathlessly that this is an "unprecedented" action by a Canadian bank chairman.

And the nine? They go behind closed doors of the Ontario Securities Commission. No reporters there. No representatives of the public. They emerge, before the waiting cameras, looking for all the world like Mafia dons, heads down, one of them in dark shades, hoping they can hit the elevator or their waiting limos before the photogs.

Six of the nine, most all millionaires, from Rosedale-Forest Hill turf, are allowed to "resign" or "retire." The only one who will utter a word, as they race the cameramen to the elevators, is handsome Timothy Griffin, president and chief executive officer of RT Capital Management, who says, "RT can get back to business, which it did pretty well for a long time." Well, I guess so, and now we know why.

Would the public be far from the mark if it thought it smelled a fraud? But no cops are called. No criminal charges are laid. No one goes to the slammer. That's the way things work in Fantasyland.

The penalties? One excited headline reads: "Royal Bank unit to pay millions in OSC penalties." It is to laugh. The mighty Royal is fined all of $3 million. The mighty Royal just happened to have paid John Cleghorn $6.7 million last year. That's how seriously Bay Street takes Bay Street shenanigans.

Another headline: "Shock waves ripple through Bay Street." Why should they? According to the OSC, the 53 high-closing juicing incidents in the RT case zoomed the market value of stocks by a total of $412 million.

Business columnist Mathew Ingram writes, "A $3-million penalty for a company of RT Capital's size is a joke, and not a very funny one. The Royal Bank probably spends more than that every month on tickets to sporting events for its top-tier clients."

We want more humour? The nine were fined up to a grand total of $8,000 each, which is the equivalent of what top Bay Street executives spill over lunch every month. More? RT chairman Michael Edwards — former member of the TSE board of governors, past chairman of the Canadian Investor Protection Fund and member of the Dey Commission on Corporate Governance — gets off with a reprimand, a one-month suspension and the massive $8,000 fine. An industry insider described the fine as no worse than some people's annual payout for parking tickets. After his short suspension, Edwards will return to RT Capital as a director. Some wrist-slap.

Clearly, it smells as if crimes have been committed here. But Bay Street, with its own in-house cop, the OSC, keeps things cozy and under wraps.

In a statement, Seven-Million-Dollar Man Cleghorn states: "The settlement clearly indicates that all of the parties have taken the matter seriously." The settlement, as any moron can detect, clearly indicates the opposite.


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Risks: Royal Bank of Canada, RBC, Insider trading, Slap on the wrist for white-collar crime, Fraud, Public perception of sleaze and greed, Ontario Securities Commission, National press coverage, Canada, 20000807 A slap

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