Bombardier execs arested

[clunckdriver]

CBC News just announced the arrest of three Bombardier executives charged with bribery involving aircraft sales, this should be entertaining!

[Jet Jockey A4]

For what type of aircraft... Business or airline?

[clunckdriver]

Actually it looks like the locomotive division are the offenders this time, I guess this problem company wide.

[Jet Jockey A4]

LOL... Tell me which company in this world does not propose bribes to get a contract?

[Trim Stab]

LOL... Tell me which company in this world does not propose bribes to get a contract?

Contract kickbacks are a disease that has to be eliminated and it is absolutely correct that the more enlightened western countries are taking a zero-tolerance policy towards this cancer.

I work in Nigeria where no contract is ever signed by state governors unless they receive a massive kickback to their personal bank accounts - the result is disgraceful. Whole airports get built just so the state governor can get a kickback (e.g. Jalingo airport) and are never used by any aircraft except the state governors personal jets.

I hope those Bombardier execs get jail sentences (and their Rolls Royce homologues - and anybody else who pays bribes to win contracts).

[ZFT]

Like these Canadians?

(http://mt.sohu.com/20170114/n478710256.shtml)http://mt.sohu.com/20170114/n478710256.shtml


and the google translation

January 13, Southern Airlines Co., Ltd. former deputy general manager Liu Fen in Shenzhen Intermediate People's Court trial. Liu Fei is a pilot origin, has received a number of commercial flight license, is also the highest in recent years, the highest salary of Southern executives. The prosecution charged him with a total of RMB208,000 and A $ 100,000 for bribes from subordinates, as well as $ 700,000 (equivalent to $ 4.83 million) from CAE.
Liu Fei in court pleaded guilty, but the amount involved in the objection. In response to the "700,000 US dollars" bribery plot, he said it was under the threat of investigators who invented the guilty confession.
Liu bribery occurred mainly in the early 2006 to 2015, he served as Zhuhai Xiangyi Aviation Technology Co., Ltd. (hereinafter referred to as "Zhuhai Xiang Yi") during the board. Zhuhai Cheung Wing was established in 2002, by the Southern Airlines and the world's largest aircraft simulation machine manufacturer CAE International Holdings Limited joint venture set up aircraft training institutions.
Zhuhai Cheung Wing is Asia's largest simulation flight training base, every new entry into China Southern Airlines flight attendants, joined the fleet in the implementation of the mission before the first step is to complete the Zhuhai Xiangyi eight weeks of training tasks, assessment Qualified will be approved by the Chinese Civil Aviation Authority training certificate.
To Liu fiber bribery is the joint venture company director Lin Qingtong and foreign CAE China sales representative Hu Wei. The prosecution said: Lin Qingtong in the pursuit of Zhuhai Xiangyi Aviation Technology Co., Ltd. assistant general manager of the job process, has been Liu fiber help. Lin Qingtong after playing with its golf, the first time to Liu fiber a cowhide envelope. Liu fiber at first turned down, after Lin Qingtong insisted under the received 30,000 yuan. Then in 2010 to 2015, Lin Qingtong many times in the Spring Festival, Mid-Autumn Festival, the other birthday during the grant to Liu Yi Li Jin, totaling about 20.8 million yuan. In addition Liu Fen went to Australia in 2013, when Lin Qingtong helped exchange 10,000 Australian dollars (equivalent to about 60,000 yuan). (See "the annual salary of the first row of the first deputy charge of China Southern subordinate bribery") Liu admitted to accept Lin Qingtong bribery.
The biggest controversy in the case appears on another bribery charge.
Prosecutors allegations, 2009 to 2015 Canada CAE China sales representative Hu Wei has five times through Lin Qingtong invited Liu fiber to eat, after dinner will be packed into a gift for the gift of money to Liu fiber, the total amount of 700,000 US dollars.
During the period from 2011 to 2013, CAE negotiated directly to the Zhuhai Xiangyi 13 simulators at a price close to the initial offer. The prosecution issued a witness testimony that in 2010, Zhuhai Xiangyi is trying to implement the tender, but in the Hu Wei and others to prevent the next trip. The implementation of the work of the staff had to Liu said that a single price procurement model there are drawbacks, China Southern Airlines almost no bargaining space. Liu fiber did not stand.
Prosecutors issued a witness testimony said, CAE Zhuhai wing to get the simulation machine orders and Liu fiber has a great relationship, Hu Wei bribery Liu fiber, is the amount of hope in the simulator, the number of Liu fiber support. Hu Wei because of the agreement with the CAE, you can extract 5% of the performance income, from which to earn millions of dollars. In the testimony of witnesses, Hu Wei said that the bribes of $ 700,000 came from this, he was still in the investigation, the succession of the bribery process.
Liu fiber argued that he did not involve the purchase amount and the number of negotiations and other links, he did not intervene in a single price procurement model, the biggest reason is that China Southern Airlines General Manager Division Xianmin has greeted. Liu said that Si Xianmin had spoken, Zhuhai Xiang wing of the "foreign tube well." Secretary Xianmin use of office to facilitate bribery of about 7.893 million yuan, has been handled separately. (See "China Southern Airlines General Manager Division Xian Min admitted to accepting bribes 7.89 million")
Liu said, "700,000 US dollars in five times the collection" is its faction come from. During the investigation, he was commissioned by the Commission for Discipline Inspection. In its original statement, 700,000 US dollars in the 400,000 US dollars to the Secretary for the people, the remaining 300,000 yuan in foreign play slot machine spent. During the trial, no bribes came to court to accept the court investigation, and with Liu fiber confrontation.
Liu fiber case did not sentence in court.

[wiggy]

Contract kickbacks are a disease that has to be eliminated and it is absolutely correct that the more enlightened western countries are taking a zero-tolerance policy towards this cancer.

As Rolls Royce in the Uk recently found out to it's cost:



Rolls-Royce apologises after £671m bribery settlement - BBC News (http://www.bbc.com/news/business-38644114)

[Willie Everlearn]

Wot? Isn't a bribe like a commission in reverse?
One being more legitimate than the other, I suppose.
One's an illness whilst the other a disease. (I don't like commissions myself)
If one plays too much by the rules in this life, one will never achieve success in this world.
I have no doubt competitors for this contract all had backhanders tucked away for a competitive edge in the bidding.
Well done Bombardier. Good game.

Willie :ok:

[J.O.]

It's just like NASCAR folks - if ya ain't cheatin', ya ain't tryin'!

[er340790]

I was just about to suggest that Willie would be along shortly to blather on about how wonderful Bombardier is, how lucky we are to have such a shining national icon and how we Canadians should all be grateful that we can continue to allow them to continually throw our money away....

But he beat me to it!!! :} :E


(BTW It was always a source a great amusement within the Transportation Division (Rail) that pricing could only ever be discussed with clients by a select clique down in Montreal..... 'Buyer Commissions' dontchaknow. :yuk:)

[Willie Everlearn]

er340790

Thanks for the shout out.
Willie :ok:

[Dan Winterland]

In some parts of the world, it's a way of life. If you don't do it, you don't do business.

[Grizzz]

Historically Quebec based business is far more likely to bribe to obtain contracts. SNC for example.

[India Four Two]

Radio interview with more information here:

CBC Listen | As It Happens | Bombardier investigation, small Waldo (Part 2) (http://www.cbc.ca/listen/shows/as-it-happens/episode/11954379)

[Willie Everlearn]

Seriously, it's one thing to charge someone for a crime but it's an entirely different process getting a conviction. There's a simple matter of 'innocent until proven guilty' here. Even in Sweden.

Something else is odd here. Bombardier was awarded this contract in 2013. An arrest was just made now? That seems like a heckuva long time to determine the charge and who to charge.

Willie :confused:

[peekay4]

Something else is odd here. Bombardier was awarded this contract in 2013. An arrest was just made now? That seems like a heckuva long time to determine the charge and who to charge.

No, that's actually fairly fast for a white collar crime. These crimes are hidden by nature (not visible like a street mugging) and even when uncovered the complexity of a financial crime may take years to untangle and investigate.

This bribery allegation is only the latest connected with Bombardier Transportation in recent years.

Two years ago South Korean prosecutors alleged that Bombardier execs participated in corrupt practices involving a $3.5 billion contract to build an elevated train system. According to prosecutors, Bombardier execs bribed city officials to severely inflate the projected number of riders, apparently to boost the value of the contract. However, the statute of limitations had expired by the time the bribery came to light.

Bombardier is also linked to a bribery investigation in South Africa. According to CBC and South African media, Bombardier execs paid a Tunisian-based middleman $35 million in "success fees", and at least $5 million was to be further transferred to a political operative. The scandal came to light because apparently the political operative was shortchanged ("no honor among thieves") and began to threaten Bombardier.

In the Netherlands, Bombardier's chief country executive was caught in a corruption scandal after he allegedly bribed a consultant to hand him confidential information regarding the Dutch railway NS Groep N.V. The bribery was only uncovered because the wife of the consultant gossiped about the payment to her friend, who was married to an NS Groep employee.

And now we have the latest allegations from Swedish prosecutors. The authorities raided Bombardier's Swedish offices last fall and apparently found enough evidence in seized emails to implicate several Bombardier employees.

[Sam Asama]

I guess I shouldn't be surprised that there are Canadians who believe business practices in Quebec are the same as the rest of the country. From local governments to police forces to Quebec based companies, the culture and business ethics are vastly different than the rest of Canada (I've lived in five provinces including Quebec and worked in all provinces and territories).

A New York based entrepreneur and friend who does business all over North America and Asia once said to me, "Doing business in Quebec is like doing business in Indonesia. Doing business in Montreal is like doing business in Chicago in the 1930s."

[Willie Everlearn]

Good grief, we all know Quebec is run by corrupt politicians, mafioso, biker gangs, and greedy unions.
If you aren't cheating, you're not trying. If you aren't breaking the rules, you're going to lose out to those who are.
All's fair in love and war.

:ugh::ugh::ugh::ugh:

Willie Everlearn :eek:

P.S. ... you think it's only Quebec? That's hilarious.

[J.O.]

P.S. ... you think it's only Quebec? That's hilarious.

Precisely. The genesis of ORNGE comes immediately to mind.

[Mostly Harmless]

https://ca.finance.yahoo.com/news/compensation-bombardier-senior-executives-rose-160028660.html

[peekay4]

Total compensation for the Montreal-based company's top five executives and board chairman Pierre Beaudoin was US$32.6 million in 2016

That means over 10% of the recent CAD $372 million Federal government loan was just to cover 5 Bombardier exec salaries last year. :rolleyes:

In fact if we freeze compensation for these 5 people at last year's levels, over the loan period of 15 years the total compensation amount will be (15*32.6) = $489 million (NPV) -- exceeding the loan amount.

So now you know where your tax money is going... :}

[Willie Everlearn]

I don't presume every dollar in Bombardier's wallet are necessarily tax dollars' but that aside, these compensation adjustments for the executives are definitely in poor taste, poorly timed, and seriously lacking in better judgement. Yesterday, the union's at Bombardier started to voice their objections. Today, M. Beaudoin rolled his compensation back to 2015 levels.
Will others in the Bombardier executive offices come to their senses?

Willie :eek:

[Sam Asama]

Willie, Willie, Willie....

Re your comment to me that I think it's only in Quebec .

That's NOT what I said. What I said is the culture and business ethics are vastly different than the rest of Canada If you don't believe that, or perhaps don't want to believe it, fine. In that case debate and discuss the issue of cultural differences and business practices throughout Canada, rather than take the all too common internet action of a quick insult and a mocking imoji.

[Willie Everlearn]

pk

I'm neither an economist nor financial analyst. So, bear with me.

If I we're a corporate executive by profession, headhunted by a company like Bombardier, having negotiated an agreed to salary plus performance bonuses for steering it out of the ditch, that when both parties shook hands and signed on the dotted line in agreement, I'd expect them to come good on that agreement and pay me my salary plus the bonuses as agreed. Which is exactly what Bombardier has done. These executives are on a salary (be it larger, much larger than I'll ever get) and that salary is paid each year over the term of their contracts and likely includes an annual pay rise.
Bellemare's salary has been reported as something like $1.04m plus stock options and performance bonuses to get that $9m, which he hasn't apparently hit yet, resulting in zero dollars earned from those options and performance goals.
You'd think that alone would be incentive enough to get this imperilled company turned around. Which he is doing, whether you believe it or not.
Aren't you simply spitting out numbers that haven't been paid? Numbers published by the press. Who, by the way, have nothing to gain by publishing the complete story because it wouldn't generate much interest. You aren't completing the picture by not accounting for Bombardier's income predictions after 2020. Which repeatedly is the year Bellemare thinks it will truly begin to show more positive results from the turnaround. Like completely pay off the Caisse de depot loan and start showing a ROI for the Qc government.
So, to recap. He gets $9m, if he does.
He got $1.04m, because he didn't.
Big difference.

As for Mr. Beaudoin, he's another issue entirely. He shouldn't be paid a salary, full stop. Bombardier is still owned by 'the family', whether we like it or not. What can we do about it? Call out the politicians? Like the CAQ leader, Legault? How much was he paid as Air Transat CEO?

By the way, what's your salary?

Willie

[peekay4]

It doesn't work as you describe, Willie.

First, of Mr. Bellemare's $9.4M compensation, only $2.6M was in the form of stock options. The rest are mainly cash and stock grants (not options). And they would have been fully paid this year, if not for the recent public outcry.

Second (and more fundamentally), executive compensations at larger corporations are industry "benchmarked" to form a baseline. All the other numbers (base pay, short term incentives, long term incentives, etc.) are derived from the benchmark.

But as we will see the benchmark Bombardier has selected highly skews executive pay.

For 2016, Bombardier's board has decided to benchmark compensation primarily against large US aerospace-related companies including Boeing, Honeywell, GE, Lockheed Martin, Northrop, Raytheon, UTC and some others. Bombardier sets compensation at the average (50%) rate compared to the benchmark group.

Yet with almost no exceptions, the benchmark companies are much larger than Bombardier. Bombardier's current market cap is $4.7 Billion. Compare to Boeing: $108 B. Honeywell: $95 B. GE: $260 B. Lockheed Martin: $78 B. Northrop: $41 B. Raytheon: $41 B. UTC: $91 B.

Should Bombardier execs really be paid similar compensation to execs at these much larger companies?

Let's look at it another way. For 2016, Bombardier's total compensation for Chairman + CEO is ($5.2 M + $9.5 M) = USD $ 14.7M. Boeing's total compensation for Chairman + CEO = USD $ 15M. How can that be? Boeing's market cap is 22 times (!) greater than Bombardier and Boeing delivered some record breaking numbers in 2016.

Should compensation at Bombardier during lean years of mass layoffs, restructuring and government handouts really equal to Boeing's compensation during their record breaking times? No.

We can see that Bombardier's compensation policies are completely out of line compared to the company's size and financial position. Maybe the Bombardier family was accustomed to paying themselves large compensation amounts in the past, I don't know. This is where corporate governance should have stepped in, but as we all know the family controls the board.

The rise in Bombardier's exec compensation far exceeds market value

Here's a graph from Bombardier, plotting executive compensation vs. shareholder value:

http://i.imgur.com/MhLEUiI.png

We can see that compared to 2011 baseline, exec compensation is now up about 25% while market cap remains down ~ 45%.

From 2014 to 2015, when the performance of the Class B stock tanked, Bombardier executive pay actually increased!

And even looking at the last year (2015 to 2016), the slope in exec compensation increase is far higher than the slope of market cap increase, which only largely tracks S&P/TSX.

[Willie Everlearn]

PK
You're awesome. Thanks for that.

I don't think getting rid of the family is on the table, as long as they are majority owners, like it or not, they own the company and can do as they wish. Despite the questionable business ethics. Like it or not those class A and class B shares are here to stay.

Looking back over the tenures of Beaudoin, Tellier, and Brown, this company has succeeded despite their respective incompetencies and individual abilities as witnessed by the present state of the company. I believe the present management team is doing what is necessary to turn things around. At the very least, things are starting to turn but may have yet to achieve the desired heading and speed. It remains to be seen. For what they've achieved, so far, they may or may not deserve whatever compensation that was agreed to. But, it is what was agreed to. We can argue and/or debate as long as we want the amounts that were agreed to but it's still after the fact.

I invest in this company. So does the Caisse de depot. As far as I know, as investors, we don't have a say how our investment dollars are spent by the company. Even if it's used to pay salaries. We both expect a return. I'm an investor as is the caisse yet, the caisse investment is constantly referred to as corporate welfare for Bombardier. Can you explain where this notion comes from?

Willie :confused:

[peekay4]

I invest in this company. So does the Caisse de depot. As far as I know, as investors, we don't have a say how our investment dollars are spent by the company. Even if it's used to pay salaries.

Investors normally do have a say in executive compensation. Most large public companies these days have executive compensation as an agenda at the Annual General Meeting (AGM). A board committee will propose a compensation structure, and investors get to vote on it. Depending on the company, this vote can be binding or (more typically) non-binding (advisory). But even an advisory "no" vote will send a powerful message to the board, since after all the board has a fiduciary duty to the shareholders.

However, in Bombardier's case, the family's Class A shares get 10 times the voting rights as regular Class B shares. Hence even though the Bombardier / Beaudoin families may actually own a minority of the total shares, they still control a clear majority of the voting power.

The next Bombardier AGM will be in mid-May. As a Bombardier investor, you should have received a proxy voting form from either Bombardier or from your investment bank. You can register your displeasure on Mr. Beaudoin's proposed executive compensation by voting no on the relevant question, if you wish.

I'm an investor as is the caisse yet, the caisse investment is constantly referred to as corporate welfare for Bombardier. Can you explain where this notion comes from?

I don't know if the Caisse investment specifically is an example of "corporate welfare". I suspect many people confuse the Caisse investment with the separate investment made by the Quebec government.

Recall that the Caisse did not invest in Bombardier, Inc. and they specifically declined to invest in the CSeries. Instead, the Caisse only invested in Bombardier's rail business (Bombardier Transportation.)

As a crown corporation, a Caisse investment could be considered "corporate welfare" if the terms & conditions of that investment were "out of line" compared to an arms-length commercial investment, e.g., if they gave Bombardier a sweetheart deal due to some non-commercial concern (politics, relationships, etc.)

However, as far as I know, the Caisse investment was broadly in line with commercial terms. The same cannot be said of the Quebec government's investment in the CSeries program.

[flash8]

Contract kickbacks are a disease that has to be eliminated and it is absolutely correct that the more enlightened western countries are taking a zero-tolerance policy towards this cancer.

You mean like the BAE scandal where nobody was prosecuted despite HUGE kickbacks and significant incontrovertible evidence? :)

Makes one proud to be British!