British Columbia’s smelter of success: striking a $1.2-billion deal with Alcan

Abstract:

British Columbia Premier Glen Clark negotiated a tentative agreement with Alcan Aluminium Ltd to expand the Kemano smelter project in Kitimat, BC. The project had been suspended since 1991, due to environmental concerns over salmon stocks. The deal could revive the local economy.

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Sheila Reeves has seen the traffic in Kitimat, B.C., go just one way in the past few years-out. But last week, a cloud of uncertainty lifted over the northwestern B.C. community when an agreement between the province and Alcan Aluminium Ltd. renewed hope for expansion of the nearby Kemano Completion smelter project. “Now that the deal’s back on, people won’t be leaving Kitimat any more-they may actually move here,” says Reeves, 55, whose local printing and office supply shop has suffered ever since 1991 when Alcan suspended work on Kemano. In the wake of the stoppage, the result of a dispute over environ- mental approvals, the entire local economy stagnated and the population declined to 11,000 from 14,000 as people left to find work.

In 1995, then-NDP B.C. Premier Mike Harcourt killed the project because of concerns about its impact on local salmon stocks. But now, Montreal-based Alcan has reached an agreement with Glen Clark’s new NDP government to make “reasonable efforts” to undertake a $1.2-billion expansion of the existing smelter plant. The agreement with the world’s second-largest aluminum producer has boosted the standing of Clark in the investment community and also ended Alcan’s legal fight with the province to be reimbursed for the $535 million it sunk into Kemano. “Beyond the benefits to the provincial economy, this deal removes a psychological impediment for companies to invest in British Colum- bia,” says business lobbyist Jock Finlayson.

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It may be too early to break out the champagne, however. “We don’t want people to start planning shopping malls or building apartments,” says Ray Castelli, director of corporate affairs at Alcan. “That doesn’t mean the project’s not going to happen, but it’s not a done deal.” Alcan so far is committed only to a “reasonable effort” to expand the smelter by 2010, which could create up to 2,000 permanent jobs. But it has made a firm promise to bring the smelter from 90 per cent to full capacity by next year.

Instead of cash compensation for the cancelled Kemano Completion project, Alcan received a promised break in power rates. If the expansion goes ahead, the aluminum giant would buy power from the province to run the expanded smelter at a rate tied to the price of the metal on the London Metal Exchange.

Whether or not Alcan proceeds depends on everything from global economic health to the popularity of pop cans. Predicting the future of aluminum prices is as reliable as looking into a crystal ball, says Vahid Fahti, a metals analyst with ABN AMRO in Chicago. However, Fahti expects there will be a need for additional aluminum production capacity in the long run and notes that demand in some Asian markets is growing at nearly 10 per cent a year.

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Ideally, the province, Alcan and flexible hydro pricing are a perfect fit. The company buys the key components of aluminum-bauxite and alumina-from Australia, and with British Columbia’s abundant and inexpensive hydroelectric power, produces aluminum and ships it back economically to Asia. Production remains profitable if the cost of the electricity goes down as the price of the metal goes down. And on the human level, if its smelter expands, small businesswoman Reeves says Kitimat itself will expand. “It will be better to have 14,000 customers again,” she says, “rather than 11,000.”

>>> View more: Powerhouse politics: environmentalists wage a bitter battle against a B.C. megaproject

Powerhouse politics: environmentalists wage a bitter battle against a B.C. megaproject

Abstract:

Alcan Aluminum Ltd has launched a $1.3 billion expansion project that would divert water from the 170-mile Nechako River in British Columbia, reducing the river to one-tenth its original size in some areas. Environmentalists and salmon fishermen are protesting the project.

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For its time, it was a touchstone of postwar progress. Across the country, youngsters of the 1950s were taught in public school that visionary Canadian engineers had bored through mountains in British Columbia to harness wilderness rivers and produce electricity. The power would be used to make aluminum at a place called Kitimat. With the optimism characteristic of the decade, the undertaking on the B.C. coast 750 km north of Vancouver was celebrated as a triumph in the taming of the young country’s vast and undeveloped north. There was scant concern for what the wholesale rearrangement of mountain rivers would mean for wildlife, or for the Indians whose homes stood in the way.

Now, 40 years after Montreal-based Alcan Aluminum Ltd. completed its mountain dam, private powerhouse and famous Kitimat smelter, the company wants to expand those facilities. And in order to drive four new turbines in a second powerhouse, Alcan wants to divert yet more water from B.C. rivers. The diversion will reduce one river, the 170-mile-long Nechako, to one-tenth of its original level in some stretches. But times have changed dramatically. At public hearings that continue this week in Vancouver, Alcan’s $1.3-billion Kemano Completion Project (named for a river downstream from the powerhouse) has emerged as the region’s second-most-heated environmental controversy after the international furor over logging in Clayoquot Sound.

At stake, say the project’s critics, is nothing less than the survival of the West Coast salmon fishery. Alcan insists that it can satisfy its turbines’ thirst for water without devastating Pacific salmon stocks in a calamitous replay of the disappearance of Atlantic codfish. West Coast fishermen, who hauled in $449 million worth of salmon from B.C. waters last year, are among the most skeptical that Alcan can save the fish, which must return to inland rivers to reproduce. “It might work, it might not,” says Mae Burrows, environmental director of the 6,500-member United Fishermen and Allied Workers Union. “But if it doesn’t, we lose all the salmon forever.” Her answer to Alcan’s demand for additional water is blunt: “Not one more drop.”

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But critics raise other equally sharp questions about Alcan’s project. For one, how did the giant international corporation, with operations in about 20 countries, secure a highly unusual exemption from federal environmental laws in 1990? Skepticism also surrounds the firm’s apparent desire to expand its capacity at a time when a world oversupply of aluminum has forced its price to near-record low levels. The intense scrutiny has even prompted speculation that Alcan may prefer to back away from its expansion plan. But even that could have painful consequences. Alcan has already spent $620 million on its project: if the company is forced to abandon the undertaking now, it may demand hundreds of millions of dollars in compensation from federal and B.C. taxpayers.

Alcan executives dismiss such talk as premature. Instead, they insist that the company is eager to resume an expansion that, they contend, holds few risks and many benefits. The new development would exploit water that now flows east out of the Alcan reservoir into the Nechako and Fraser rivers. Diverted by the existing Kenney Dam on the Nechako, water would instead flow west, through a new tunnel to a second powerhouse next to the company’s original one. The new generating station would add 540 megawatts to Alcan’s existing capacity of just under 900 megawatts.

The benefits, for Alcan at least, are plain. Under its original agreement with British Columbia, signed in 1950, the company pays only a minimal royalty for water used to generate electricity that, in turn, is used to produce aluminum. The charge, calculated by a formula linked to world aluminum prices, is about one-tenth what the province charges its own utility, B.C. Hydro. The concession is highly valuable to Alcan: the price of energy typically accounts for about a third of the cost of producing aluminum. Under the 1950 deal, moreover, the concessionary rate will be applied in perpetuity to all the water used in whatever generating capacity Alcan has built and put into service by the year 2000 (as long as the electricity is used to make aluminum). With that deadline in view, Alcan’s vice-president for British Columbia, Bill Rich, acknowledges: “Even though we don’t need it for aluminum now, we still want to develop the rest of this energy potential by 1999.” Until the power is needed for making aluminum, he adds, Alcan plans to sell it to B.C. Hydro–at a tidy though undisclosed profit.

More critically to the project’s future, many scientists now doubt whether there is enough water in the rugged Coastal mountain range both to turn the additional turbines that Alcan plans to install and to protect the region’s fish. Indeed, experts from the federal department of fisheries and oceans who first assessed Alcan’s proposals in the early 1980s concluded that the company’s plans would not leave enough water in the Nechako River to sustain chinook and sockeye salmon, two important species that use the river either to spawn or as a route to spawning beds in other streams.

By 1987, in fact, relations between the company and the department were so strained that they were on the verge of taking their dispute to court. At that time, then-fisheries minister Thomas Siddon ordered his scientists to be more “reasonable” towards the company. The result of Siddon’s intervention was an unusual four-day private meeting in August, 1987, attended by fishery experts from both the federal and B.C. governments, as well as the company. The group emerged with an unexpected agreement: Alcan would be allowed all the water from the Nechako that it had originally asked for, and Ottawa would abandon its opposition to the company’s proposals. In return, Alcan ceded its claim under the 1950 agreement to water from another major stream in the area, the Nanika, and undertook to protect sockeye and chinook salmon in the Nechako.

It was a critical agreement. With its conclusion, says Alcan’s Rich, “both the federal and provincial governments said, `You have met every requirement.’ We relied on that, and began the project.” Ottawa reconfirmed its approval in 1990, when the cabinet of then-prime minister Brian Mulroney exempted the company from submitting its plans to a federal environmental assessment review.

Within a year of securing that exemption, however, Alcan’s momentum began to falter. New doubts began to surface about the impact of the project, as well as about Alcan’s cozy relationship with the Tory government in Ottawa. In 1990, a federal review found that the impact on Nechako salmon from Alcan’s project would be as much as seven times more severe than the company had estimated. Documents leaked from the federal fisheries department, meanwhile, showed that senior officials had put pressure on research scientists to tone down their criticisms of Alcan’s proposals. And in 1991, legal challenges forced Alcan to suspend construction.

Some of the most telling criticism came from former employees of the fisheries department. Retired research biologist Gordon Hartman, for one, charged that the 1987 settlement was “a political decision, not a scientific one,” adding that Alcan was relying on unproven measures to protect Nechako salmon. A former colleague at the federal agency, biologist Harold Mundie, concurred. Mundie’s verdict: “Kemano completion would reduce the sockeye and chinook salmon runs to mere remnants. . . . The fisheries’ verdict, therefore, is that the project should not be undertaken.” The Tory cabinet’s haste to protect Alcan from a federal environmental review also provoked debate in Ottawa. In June, 1993, a joint committee of the Senate and House of Commons determined that the exemption was “both illegal and subversive of constitutional government.”

At the same time, people living downstream from Alcan’s dam on the Nechako River found other reasons for alarm. Cheslatta Indians, forced from their ancestral lands in 1952 by rising water along an Alcan reservoir spillway, accused the company of ignoring the peril that its new plans posed to freshwater fish such as trout and sturgeon, on which the relocated band relies. Declared Chief Marvin Charlie, leader of the 150-strong Cheslatta: “A big part of the province is being written off forever to fatten the bank account of Alcan Aluminum Ltd.” Non-native residents expressed concern that the company’s demands would leave the river too low to provide water for irrigation and local industry–or even to float a canoe. “There was water put aside for Alcan and for the salmon,” said Pamela Sholty of Fort Fraser, 120 km west of Prince George. “But there was no water put aside for the people.”

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With doubts about the project growing, the B.C. government early last year instructed the province’s utilities commission (which normally regulates energy prices) to review the impact of Alcan’s proposals. Public hearings by the panel began a year ago and continue this week in Vancouver, when federal fisheries scientists will present the commission with their latest assessment of Alcan’s proposals for protecting salmon. After initially condemning Alcan’s plans and then, in 1987, endorsing them, federal officials have become more circumspect in their judgments. Contacted by Maclean’s last week, Donald Noakes, director of the fishery department’s Pacific research establishment at Nanaimo, on Vancouver Island, refused to say whether his agency remains satisfied with Alcan’s performance. He also declined to explain why the department’s official position changed during the private meetings with Alcan in 1987. Indeed, Noakes predicted that individual scientists might disagree during the hearings. “It is going to be an open process,” he said. “Scientists can tell their version of events.”

The provincial panel is expected to report its findings by September, but that is unlikely to end the controversy. For one thing, the B.C. government’s instructions to the utility commission expressly forbid it from considering impacts beyond the immediate watershed of the Nechako and Kemano rivers–or from recommending that the project be stopped. That constrained mandate leaves open the possibility that the still-new Liberal government in Ottawa may insist upon a more wide-ranging environmental review. Federal Fisheries Minister Brian Tobin, in fact, hinted at such a possibility in February. “I will not allow the habitat, and I will not allow the resources, to be squandered,” Tobin told The Vancouver Sun. David Anderson, the federal minister responsible for British Columbia, has also made it clear that the cabinet is prepared, if necessary, to kill the project.

As challenges to Alcan’s rosy view of its expansion accumulate, a few observers suggest that the company might be willing to see its troubled project shelved indefinitely. They note that Alcan has not earned a profit since 1990, and lost $140 million in 1993. Meanwhile, the company has accumulated interest charges of $70 million to date on the money that it has already borrowed for the undertaking. Rich, however, insists that his company “doesn’t have a walk-away strategy.” Adds the 55-year-old engineer: “I believe very firmly that I will go back to the upper Nechako in 15 or 20 years and there will be lots of fish.” Whether there will also be a second Alcan powerhouse is plainly something else again.

>>> View more: Billion-dollar buy

Billion-dollar buy

Abstract:

The Canadian fertilizer firm Potash Corp intends to buy the phosphate concern Texasgulf Inc for more than $1 billion. Potash, which already occupies a strong position in China, hopes to become a diversified, global supplier of agricultural products through the acquisition.

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Potash is a hot commodity in China. Transport trucks carrying the fertilizer have been hijacked, and one man was reportedly even killed in a brawl over potash a few years ago. The Canadian potash industry can take credit for creating some of that vociferous demand: it has run a grassroots marketing campaign in China for more than a decade. Among other initiatives, the industry has operated field trials in which agronomists grow crops on small test plots to demonstrate the benefits of using potash. It also sponsored what was by local standards a lively television advertising campaign, featuring Mark Rowswell, an Ottawa-born comic who is popular in China. Charles Childers, chairman and chief executive officer of the Potash Corp. of Saskatchewan, says that the marketing has been so good that even the distinctive salmon-pink color of Saskatchewan’s potash has become an advantage. “In China, red is a lucky color,” said Childers in his American Midwest drawl. “The Chinese refer to our potash as the `magic pink powder.’ ”

But Potash Corp. has much more than marketing on its mind. Last week, the company–the largest potash producer in the world–announced that it would spend $1.1 billion to acquire Texasgulf Inc. of Raleigh, N.C. Texasgulf is a low-cost producer of phosphate, which along with nitrogen and potash are the three key agricultural fertilizers. Coincidently, China already has large domestic supplies of nitrogen. Potash Corp., which produced 14 per cent of the world’s potash last year and currently estimates that it has 200 years of potash reserves under the ground in Saskatchewan, had been shopping for an acquisition. Childers, who worked for IMC Global of Northbrook, Ill., a large phosphate and potash producer before he came to Potash Corp. in 1987, says that he has “coveted” Texasgulf for years.

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Such expensive acquisitions are often detrimental to shareholders’ interests because they can divert profits away from dividend payments. But in this case, the stock market reacted favorably. Potash Corp.’s share price jumped by $8 to close the week at $58. Raymond Goldie, a mining analyst with Richardson Greenshields of Canada Ltd., says that the acquisition will broaden the company’s existing business and will increase its short-term profits.

In fact, Goldie likens the resource potential of Saskatchewan’s potash industry to that of the aluminum industry. “Around the turn of the century, a group of people realized that one of Canada’s prime assets was the hydroelectric power potential of Quebec, and they capitalized on that by building aluminum smelters,” said Goldie. By comparison, the massive potash deposit, which runs in a 200-km-wide belt across south-central Saskatchewan for 500 km–and is estimated to contain reserves of 50 billion tons–may be the most valuable single mineral deposit ever found in Canada. “I can’t think of any other ore deposit in Canada that will provide such a long-term benefit to the country,” he said. “And Potash Corp. represents the economic exploitation of that resource in the same way that Alcan exploits Quebec’s hydro potential.”

Potash Corp. began its life as a Crown corporation in 1975 with the mandate to develop the massive ore deposits. A year before the company was privatized in 1989, its operating strategy changed. “Instead of producing potash as fast as possible to maximize the number of jobs for the people of Saskatchewan, the approach they took was to restrict output to meet demand,” said Goldie. “Their mandate was to maximize profitability.” The final step in the privatization occurred on Jan. 1, when a restriction expired that limited an investor from owning more than five per cent of the corporation’s shares.

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Texasgulf, like Potash Corp., is also a low-cost fertilizer producer. Its 35,000-acre phosphate mine site at Aurora, N.C., is the largest integrated phosphate mine and chemical processing complex in the world. Texasgulf has an ore body that represents 30 per cent of the known phosphate reserves in the United States with an estimated life of 75 years.

The spurt in Potash Corp.’s share price following the Texasgulf announcement is just the latest jump. In the past 18 months, its share price had doubled to $50, largely because of the market’s expectations of a steady increase in projected offshore fertilizer sales. Although sales are forecast to grow only modestly in the traditional markets of North America and Europe, demand is expected to soar in such developing countries as China, India and Brazil. There, rising income levels and standards of living are increasing the demand for more and better food.

Asia is the single most important off-shore market for Potash Corp. China bought 20 per cent of Potash Corp.’s product last year, and Childers estimates that by the end of the century it will account for 40 per cent of the company’s sales. “China is the biggest,” said Childers, “but sales are increasing to places like Indonesia and Malyasia, too.” The industry’s direct marketing campaign is the key to its success. Canpotex, the jointly owned marketing arm of four Saskatchewan potash producers, has agronomists take part in the rural field days that occur in towns across China at the end of each harvest season. At that time, the test plots of fertilized crops are harvested and onlookers are invited to guess the yield. The winner gets a bag of potash. Said Childers: “I guess there’s not a whole lot for people to do over there so everybody comes out. I guess it would be like Saskatchewan in the 1920s or 1930s.”

But Canpotex’s marketing does not always result in sales of Canadian potash. In China, potash purchases are centralized in one government agency that negotiates bulk purchases. Despite the farmers’ preference for the “lucky” pink potash, government bureaucrats will happily buy white potash–if better prices are offered. Still, in the world of cutthroat commodity competition, even a tiny advantage–like the difference between pink and white–is a welcome one.

>>> Click here: The surging markets: small investors waver while stocks climb

The surging markets: small investors waver while stocks climb

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The surging markets

Small investors waver while stocks climb

The old saying that greed and fear motivate stock markets has rarely been more accurate. On Jan. 24, the bellwether Dow Jones industrial average regained the last of the 508 points that it lost when it crashed on Oct. 19, 1987. The Toronto Stock Exchange’s (TSE) 300 Composite Index has also rebounded, smashing through a succession of postcrash highs. And the market could go higher because many large corporate investors still have record amounts of cash on hand. Some experts say that positive economic developments–such as a cut in interest rates–could spike those billions back into the markets and send prices spiralling upward. But other analysts say that the current rally will be limited by small investors who saw their holdings collapse on Black Monday and are still apprehensively staying on the sidelines

The global rally, which has also pushed markets higher in Tokyo, Hong Kong and London, is being propelled by people using other people’s money. They are primarily major institutional investors, including managers of pension funds–who are buying blue-chip stocks and securities in firms that they expect are trading too cheaply or are takeover targets. But to date, there is little evidence that small, individual investors are re-entering the market. And their concerns may be increased by the rising number of stock market scandals spreading through Canada, the United States, Europe and Japan. Said Larry Lunn, chairman of Connor, Clark & Lunn Investment Management Ltd., a Vancouver-based pension fund management firm: “Many small investors simply feel that the stock market is a rigged game, which can only be played by the professionals.”

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The scandals began in the last months of the five-year-long bull market that ended in Black Monday’s spectacular collapse. In May, 1986, police arrested New York City arbitrager Ivan Boesky, who, in exchange for the relatively light sentence of three years in jail, gave investigators details of a vast web of insider trading. And last month, officers of New York City brokerage house Drexel Burnham Lambert Inc. pleaded guilty to six felony counts, five of them involving fraudulent transactions with Boesky, and the Securities and Exchange Commission fined the company $780 million. And Michael Milken, the firm’s leading high-interest bond salesman, is also expected to be charged. As well, last month, a sweeping U.S. Federal Bureau of Investigation operation uncovered widespread fraud on the Chicago futures exchange. At the same time, the insider trading controversy has touched one of Canada’s most famous families and has reached the top of the French and Japanese governments.

In Canada, former B.C. premier William Bennett was charged by both the Ontario and B.C. securities commissions with taking advantage of an illegal inside stock tip involving the major provincial forest products firm Doman Industries Ltd. The long list of stock market scandals may lengthen later this month, when the Ontario Securities Commission (OSC) is expected to lay criminal charges following its own two-year insider trading investigation. As a result of the scandals, some analysts say that many small investors are still apprehensive about returning to the market, despite the current surge.

But larger investors appear to be convinced that the three-month rally in stock prices is a clear indication that another full-fledged bull market is under way. U.S. investors have been purchasing large blocks of stock in blue-chip companies that appear to be undervalued in the postcrash market. And in Canada, the large professional investors have helped send TSE values higher by purchasing both securities in top firms and shares in companies that they believe will be taken over or merged. As well, they have been buying into firms including The Molson Cos. Ltd., Carling O’Keefe Breweries of Canada Ltd. and Consolidated-Bathurst Inc. Those firms have been involved in mergers and takeovers over the past three weeks and, as a result, are expected to show stronger profits in 1989.

Many experts say that the recent North American rally is an endorsement of Canadian and U.S. fiscal policy. Institutional investors in both countries evidently feel that the high interest rate policies of the Bank of Canada and the Federal Reserve Board have kept inflation under control, and, as a result, the seven-year economic expansion may slow but not collapse. Some stock portfolio managers say that large investors, who normally react negatively to interest rate increases, are taking the long-term view and have accepted tight interest rates as necessary to prolong economic expansion. Said Malvin Spooner, vice-president of Elliot and Page Ltd., a Toronto-based investment counselling firm: “Many professional investors have simply begun looking at the bright side of things rather than what could go wrong.”

Meanwhile, many small investors are clearly not buying into the latest market rally. During 1987, Canadian net sales–sales minus redemptions–of Canadian common stock mutual funds were $1.6 billion. But during 1988, investors actually sold off more equity mutual fund shares than they bought. Said Thomas Stanley, national sales manager for Deacon Morgan McEwen Easson Ltd., a Toronto stock brokerage firm: “Most retail investors are depressed and scared.”

In fact, many analysts say that the army of nervous small investors should stay on the sidelines. Most professional market-watchers predict volatility in the period ahead–at least until the long-term economic picture clears, and the investment community has had a chance to examine how President George Bush will try to deal with his country’s bulging budget and trade deficits.

Until then, says Robert Krembil, chairman of the Toronto-based Trimark group of mutual funds, individual investors who want to get back into the stock markets should put their money in equity mutual funds, which give investors greater diversification and professional management. Others, including Toronto analyst Ian McAvity, the author of the influential stock market newsletter Deliberations, say that Krembil’s relatively safe strategy is still too aggressive for today’s scandal-scarred markets. McAvity said that small investors should stick with interest-yielding investments and avoid stocks altogether. He added: “The recent rally has served to lull investors into a state of complacency. Anyone who is in the stock market today should know where the exits are.”

The rush to those exits will be hastened by a new stock market scandal that is about to further hit small-investor confidence in the TSE. The OSC plans to charge six high-ranking investment industry officials later this month following its two-year-old insider trading investigation. When contacted by Maclean’s, the individuals believed to be involved refused to comment on the allegations.

But the OSC has had as many as 12 members of its staff working on the case full time since it broke in March, 1987, after Toronto real estate developer John Micallef–now living in Boca Raton, Fla.–complained to the commission about a share purchase that involved Michael Biscotti, former vice-president of Toronto-based Dominion Securities Inc.

Micallef said that he had received tips about impending large purchases of shares by major investors and that he and Biscotti used the information to buy in advance and reap the profits after share prices rose. The relationship soured after Micallef purchased a large shareblock in Dome Petroleum Ltd., the former Calgary oil company that has merged with Calgary-based Amoco Canada Petroleum Co. Ltd. A short time later, Dome share prices plummeted and Micallef complained to the OSC.

 

But the expected OSC charges and investigation are far less extensive than the two-year FBI undercover investigation into suspected fraud by traders at the world’s two largest futures exchanges–the Chicago Board of Trade and the Chicago Mercantile Exchange. The United States department of justice has issued subpoenas to almost 250 Chicago-area futures trading firms demanding that they produce all records dating back to 1983.

The investigation is focused on various types of prearranged trading at the

Mercantile Exchange and the Board of Trade. Five FBI agents apparently worked undercover on the floor of each exchange, tape-recording conversations on the trading floor and soliciting information from other traders over lunch at Chicago’s East Side Club and at lavish parties at their apartments. John Frazier, a trader with the Chicago-based futures trading firm of Balfour Maclaine Futures Inc., told Maclean’s that “there is a great deal of depression” among traders at the Chicago board as a result of the investigation. He added, “I’m sure they’re not spending all this money for nothing; they’ve got something.”

Another insider trading scandal is also threatening to engulf French Prime Minister Francois Mitterrand’s Socialist government. Last week, the French state prosecutor’s office opened a criminal inquiry into insider trading allegations against two prominent Socialist businessmen who made large insider trading profits by buying thousands of shares in Triangle Industries Inc., a New York City-based packaging company, the week before it was taken over by Peciney SA, a large aluminum company owned by the French government, sending Triangle’s shares soaring.

At the same time, in Japan, at least 16 influential politicians have admitted that they–or their aides–benefited by buying cheap, unlisted shares in a subsidiary of Recruit Co., an information and publishing conglomerate. The shares rocketed in value soon after public trading began. But in Canada, insider revelations are just beginning. And analysts say that the outcome of pending cases could make the country’s already-nervous investors even more circumspect–regardless of how high the market soars.

PHOTO : Wall Street brokers being arrested

PHOTO : Boesky: a light sentence

JOHN DeMONT with JOHN DALY in Toronto

>>> Click here: Swann rising: a big-time talent runs for governor

Swann rising: a big-time talent runs for governor

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Pittsburgh, Pa.

LYNN SWANN is in motion, pushing a gray-haired lady in a wheelchair to her poker game. When she gets there, she asks the young man his name. He says, “I’m Lynn Swann.” She says, “No, you’re not, you’re sh**tin’ me.” I’m given to understand that this is the way grannies talk in western Pennsylvania.

We’re in Castle Shannon, a community outside Pittsburgh, at a summer festival. Swann is running for governor, on the Republican ticket. Very few people have to ask his name. He shows up–anywhere in the state, by all accounts–and they come running to him. Swann is a football hero, particularly in this area. He played for the Pittsburgh Steelers from 1974 to 1983, helping to win four Super Bowls, winding up in the Hall of Fame. (Swann was a wide receiver.) He still looks like he could suit up, too, fit as he is.

About a half-hour later, we’re at another summer festival, in South Park (not to be confused with the South Park of television notoriety). Apolka band plays on the stage. And the candidate is being showered with “Lynn love,” as his staff calls it. People receive him ecstatically, their faces all alight. Men want to jaw with him, women want to hug him. After meeting Swann, a man looks at me wonderingly and says, “I shook his hand.” Almost everyone wants a picture and an autograph. Swann will pose for any picture–and answer any question, at length–but he won’t sign an autograph. He’d never make it out of any campaign event, he explains. It would be nonstop signing.

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When he enters the bingo tent, the players cheer and squeal, like bobbysoxers at Sinatra. He is privileged to call out the next number. “S-88,” he says, to a roar of laughter. (Eighty-eight was his Steelers number, and S, of course, is his initial.) He then says he can’t read the real number without his glasses–“like a lot of you,” he adds, to more appreciative laughter. Swann is a bit of a teaser, but of a gentle, charming type.

Many athletes have run for office. These include Bill Bradley (basketball), Jim Bunning (baseball), Steve Largent (football), and Jim Ryun (the miler)–and I have named only political winners. Athletic celebrity aside, Swann is one of three black Republicans running in prominent races this year. The others are Michael Steele, the Senate candidate in Maryland, and Kenneth Blackwell, the gubernatorial candidate in Ohio.

Swann is a conservative, and a classic Reagan conservative. (So are Steele and Blackwell, incidentally.) He’s against high taxation, big spending, and heavy regulation. He is pro-life, pro-enterprise, and pro-reform. He’s pushing all sorts of reform, in welfare policy, tort law, and so on. In fact, his campaign bus is called “Reform One.” Swann talks a lot about “standing on your own two feet,” in part so you can help others, who have more difficulty standing. And he believes that political leaders should have the guts to say no.

Swann’s opponent is the incumbent governor, Ed Rendell. Before being sent to Harrisburg, he was mayor of Philadelphia and chairman of the Democratic National Committee. Rendell is a canny politician, not ostentatiously left-wing. He knows how to employ a populist touch–more bowling and beer than windsurfing and “Why can’t I have my water?”

The political pros say that Rendell will beat Swann, for a number of reasons. First, Pennsylvanians have never–never–ousted an incumbent governor, odd as that may seem. Second, the state has been trending Democratic, becoming ever “bluer.” Third, the electoral ducks are in Philadelphia and environs, Rendell territory. Fourth, this is a lousy Republican year–for one thing, President Bush is u footballnpopular.

Fifth, Swann is a novice, starry as he may be. And he’s up against a tough, bruising veteran. But Swann scoffs at any suggestion of unreadiness, certainly when it comes to governing. He mentions several politicians whose maiden office was governor: Bush, Reagan, Mitt Romney, Arnold. (Somehow he neglects to mention Jesse Ventura.) Swann does not lack for confidence. But it’s not a cocky confidence–more serene.

The morning after those festivals, in his Pittsburgh campaign office, we talk about his life and views. Swann was born in 1952, in Alcoa, Tenn. (home of the aluminum company). His father was a janitor. When Lynn was quite young, the family moved to San Mateo, Calif. They attended a Baptist church, where Lynn preached on Children’s Day, at least once. He remains a devoted Baptist, and is joined in that faith by his wife, Charena. They have two sons, ten and eight.

Lynn was elected president of his eighth-grade class (and says now that he is running for a lower office). But he had little time for politics after that; he was too busy being a sports star. It’s helpful to bear in mind that we are talking about someone who has been famous, pretty much, since he was in college. His favorite sport was basketball, and he was recruited by John Wooden, the legendary coach at UCLA. But he went to USC to play football.

As Swann tells it, he wasn’t especially talented, in relation to others. But he worked very hard, and was very, very competitive. He also had what he describes as “gamesmanship”: “I understood how to play the game–whatever game it was–and paid attention to the nuances. I learned how to position myself against an opponent. I just found a way to win.” And does that ability transfer to politics? “We’ll see,” says Swann.

After his professional football career, he engaged in a package of activities. He was a broadcaster for ABC Sports. He toured the country as a speaker, and sat on several corporate boards. He hosted a game show for a while (To Tell the Truth). He was an important player in the Big Brothers/Big Sisters organization. From 2002 to 2005, he was chairman of the President’s Council on Physical Fitness and Sports. All the while, he has been making political contacts, preparing, in a way, for the new career.

Swann was “born” a Democrat, but became a Republican in the 1970s, thinking for himself, coming into his own. He was a friend of Pennsylvania senator John Heinz, who died in a plane crash in 1991. And what did he think of the senator’s wife? “I’ve always liked Teresa,” he says.

Asked whether he has any political models, he says no. (I’ve never heard a politician give that answer to this question, by the way.) He philosophizes a bit, touching on the “Freudian” and “Jungian” aspects of the human animal. He says that people can change how they think and how they live; they need not be trapped by their (temporary) circumstances. “We have choices, we have freedoms.”

He also talks about suffering and its uses, citing Job in particular. I remark that, to the outsider, he himself seems not to have suffered much. He was a golden child, blessed with looks, smarts, charisma, and gobs of talent (no matter what he says). He has been a champ in virtually everything he has ever tried. You would think that he’d never broken a sweat. Not so?

“Not so,” says Swann, smilingly. He then reflects on race and racism. He mentions four hugely successful black Americans: the CEO of American Express, the CEO of Time Warner, the secretary of state, and her immediate predecessor. None of them whooshed his way to the top. But Swann is adamant on the need to “get away from excuses and start executing a plan.” He likes to say, “Never let anyone make you less than who you are, or what you can be.” He also says, “Don’t live in the gutter.” And, “Your greatest obstacle is the person who looks at you in the mirror”–we all have choices.

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Obviously, Swann takes some heat from his fellow blacks, for his party affiliation and his beliefs. But he doesn’t mind the heat, and says that many black Democrats are supporting him (some publicly, some quietly). And he doesn’t need the vote of every citizen: “This is not a perfect world–51 percent would be just fine.” I ask whether he ever faces open resentment from black men, in particular. He answers, simply and straightforwardly, “Yes.” And how does he deal with that? Does he try to reach such people, or does he merely slough it off? “I go case by case,” Swann says.

At this point in the campaign, he’s behind Ed Rendell in fundraising, but President Bush is coming in soon, to make up some of the difference. This year, a lot of Republicans are running away from Bush, but Swann is upfront in his admiration. He says, “I think he’s done a tremendous job,” with challenges of an extraordinary nature. History will credit him, says Swann, if written fairly.

Swann won’t contemplate life after a November loss, because he won’t contemplate a loss. He’s going all out, from early morning to late at night, executing his plan, making adjustments as necessary. The latest polls have him between 10 and 15 points down. His staff points out that Rendell has been spending his money, airing TV ads, which have been unanswered by Swann. The Republican’s own ads won’t go up until after Labor Day. And then it will be a whole new ballgame, they say.

Leaving Swann’s headquarters, I jump into a cab, driven by a man in a Steelers jersey. I tell him I’ve just been with ol’No. 88, who looks like he could still play today. The driver–a rough-talking, left-leaning political analyst–says, “Well, he might as well start running pass routes, because he sure as hell won’t be governor of this state.” That is, indeed, the conventional wisdom. I myself am not so sure. We might want to check back in, round about the end of October.