The ties that bind the Liberals and the Bronfmans - Macleans.ca

The ties that bind the Liberals and the Bronfmans

The opposition is questioning the Bronfman family’s connections to the Liberal Party. It’s been happening for 100 years.

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Liberal leader Justin Trudeau, right, chats with Stephen Bronfman, the party’s chief fundraiser, at a barn party in St. Peters Bay, P.E.I. on Wednesday, Aug. 28, 2013. (THE CANADIAN PRESS/Andrew Vaughan)

“Stephen Bronfman and his family have always conducted themselves in accordance with the highest legal and ethical standards. Stephen Bronfman will not make any further comment.”

—Stephen Bronfman, Nov. 6. 2017

The last time the Bronfman name was uttered in Parliament was last week, when NDP MP Pierre-Luc Dusseault stood in the House to ask whether Justin Trudeau had access to Revenue Canada files when he recently said that he was satisfied with the explanations of his friend, Liberal fundraiser Stephen Bronfman, about a business connection to an offshore trust.

“I can assure my colleague that no one is interfering with agency audits,” replied Diane Lebouthillier. “As long as I am the Minister of National Revenue, that will never happen.”

The question was one in a string of similar queries, all similarly answered, since Nov. 5, when leaked documents in the so-called Paradise Papers raised questions about the Bronfman’s business dealings.

READ MORE: Justin Trudeau, the Paradise Papers and his ‘super rich friends’

It was just the latest, though, of hundreds of such questions over the decades.

The first time the Bronfman name was uttered in Parliament was June 22, 1922, when senators were debating the Canada Temperance Bill, which would have banned the export of liquor to the United States.

Conservative Nova Scotia Senator Nathaniel Curry stood in the Senate to read a telegram from Abe Bronfman, asking that any such measure be delayed for nine months to give his family time to liquidate its “very large stocks” of alcohol.

“Who is he?” asked Conservative Alberta Senator James Lougheed.

“Abe,” said Curry.

“Champion bootlegger of Saskatchewan,” said Conservative Sen. George Fowler of New Brunswick.

For almost 100 years, the Conservatives—and other opposition politicians—have periodically been standing in Parliament to attack the Bronfman family, accusing them of violating tax laws while the Liberals cover for them and quietly take their money.

It’s a story of antisemitism, politics and rotgut whiskey, but mostly it’s a story about money, huge amounts of money.

The story begins in 1889, when Yechiel and Mindel Bronfman fled pogroms in Moldova for a homestead in the flat land near Wapella, Sask., about 200 kilometres north of the American border.

The Bronfmans had been prosperous tobacco farmers in the old country. They brought their family, including sons Abe, Harry and Sam, a servant and a rabbi.

They built a sod hut and tried to grow tobacco. But life was hard on the frozen prairie. Their crops failed and they were reduced to living on potatoes. Yechiel had to take work as a laborer. The family moved to Manitoba, where Yechiel peddled wood and frozen whitefish from a horse-drawn cart.

The Bronfmans eventually got a bit of money together working as cowboys. They rounded up wild horses in Montana, brought them back across the border, broke them and sold them as “green broke” cart horses, then went into the hotel business, which led them to the more lucrative liquor trade.

When the American government outlawed alcohol in 1920, the Bronfmans were happy to provide liquor to parched Yanks.

According to Peter C. Newman’s best-selling 1978 book, Bronfman Dynasty, at their distillery in Yorkton, Sask., the Bronfmans mixed industrial alcohol with water and caramel, added a dash of sulphuric acid, aged it in casks for two days to let the acid work on the wood, then bottled it with fake labels—Johnny Walker instead of Johnnie Walker, for example—and sold it at a huge profit.

Moredecai Richler, whose novel Solomon Gursky Was Here was inspired by the family’s story, described their business this way: “In Prohibition’s whoopee days, American bootleggers loaded up at one or another of Sam’s export houses and then took to dirt roads in their Hudson Sixes, trailing thirty-foot chains to throw dust in the face of pursuers.”

Many other Canadian distillers were selling to the Americans—and Joseph Kennedy got rich in the business—but the Bronfmans were either more aggressive or they were victims of antisemitism, because they attracted unwelcome scrutiny.

It didn’t help when Paul Matoff, Sam’s brother-in-law, was gunned down at a family liquor warehouse in Bienfait, Sask., in 1922. Neither did reports of corruption in the Customs department, which seemed to be stopping investigations into the Bronfmans’ liquor business.

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Conservative MP Henry Stevens assembled volumes of evidence and in 1926, stood in the House and spoke for hours, accusing the King government of allowing “grossest violations of the customs laws,” of standing by while millions were stolen from the treasury, some of which was funnelled to a Liberal election fund in Quebec.

Stevens accused Jacques Bureau, the Customs Minister, of destroying nine filing cabinets full of incriminating documents.

Under intense pressure, King called a public inquiry, which in 1927 found that many of Stevens’ allegations were true. The Bronfmans were found to have gone years without paying income taxes, which was odd, given that they were selling millions of dollars worth of liquor every year. They had made a belated $200,000 payment to the treasury, which the commission found to be an “arbitrary assessment,” made “without any statutory authority.”

The inquiry heard that a customs agent who busted a Bronfman liquor warehouse was called on the carpet by Bureau, who disciplined him for going after the family.

The inquiry was told that Harry Bronfman tried to bribe the same customs agent. After the incident was brought to light, Bronfman was charged, and there was a spectacular trial. Bronfman was briefly jailed, but the case ended after Bronfman’s crack legal team lured a key witness to a hotel room, where he asked for money to change his testimony while a court reporter took notes in a closet. With the key witness discredited, the case collapsed.

It all looked bad, though. When King bowed to pressure and shut down the border liquor warehouses, the Bronfmans bought a fleet of schooners to ship Canadian liquor to U.S. East Coast ports, offloading cases of rotgut into small boats just outside the three-mile limit, in what was known as Rum Row.

American historians report that Sam Bronfman had a partnership with American gangster Meyer Lansky. There are rumours, never proven, that the family did business with Al Capone. When Capone was asked if he had travelled to bootlegging operations in Canada, he delivered one of his most famous lines: “I don’t even know what street Canada is on.”

To export all that liquor, the Bronfmans needed to show that it was landing in ports where alcohol was legal, like Havana. Newman wrote that they paid off officials overseas to provide fake stamps.

In 1930, the Conservatives defeated the Bronfmans’ Liberal friends and had the Mounties launch a bootlegging investigation. In 1934, Sam Bronfman and his three brothers were charged with evading duties on more than $5 million, but the case sputtered out when the Mounties couldn’t get hold of the Bronfman’s account books.

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After that, it was smooth sailing for the Bronfmans. They bought mansions in Montreal and moved into the American market when prohibition ended, making Seagrams a global brand in the golden age of cocktails. The family built one of the world’s great fortunes on whiskies like Crown Royal and Chivas Regal.

Mr. Sam, as he was known, Harry’s brother and Yechiel’s son—a hard-driving, vulgar, big-hearted force of nature—became a respected leader of the Jewish community, speaking out forcefully against the rise of Adolph Hitler, and unsuccessfully pressing antisemitic Canadian governments to open the doors to Jewish refugees.

The Bronfmans established a complicated ownership structure with family trusts at its heart. They eventually built the TD Centre in Toronto, owned the Montreal Canadiens and the Expos, funded worthy causes in Canada and Israel and took their place among the world’s super rich.

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Sam was thwarted, though, in the prize he sought: a Senate seat. In a vain attempt to make it happen, he donated $120,000 a year to the Liberals.

“As the treasurer of Seagram’s, it was my lot to disburse the party funds,” Maxwell Henderson told Newman. “And thereby hangs many a tale, because when you’re donating the kind of money Mr. Sam was giving away, you expect something in return, and what he expected was to end up as a senator. That was his great goal.”

Because of antisemitism, or the family’s controversial past, the Liberals balked at the appointment.

That prize eventually went to Leo Kolber, who Pierre Trudeau appointed in 1983. Kolber, a key Bronfman executive, godfather to Stephen, was a self-described bagman for the Liberals, founder of the Laurier Club, selling access to Liberal Leader John Turner for $1,000 a year.

Kolber wrote in his memoir: “When the Liberals were in office, under both Trudeau and Jean Chretien, I would tell a prospective donor: ‘I can guarantee you access in most cases to a cabinet minister, but once you get in the door, you’re on your own.’”

Kolber was also a friend to Pierre Trudeau, inviting him to dinner in his opulent Westmount home, where he also entertained Rene Levesque, Frank Sinatra, Danny Kaye, Harry Belafonte and members of the powerful Desmarais family.

After Trudeau retired, he took annual trips with Kolber and his family to far flung corners of the world, being wined and dined by potentates and enjoying privileged access to places that most people can’t visit.

In the Senate, Kolber served as the chairman of the banking committee. He successfully blocked an increase to the capital gains tax, and his committee stopped, for four years, a bill from the House that would have cracked down on offshore trusts that rich families use to shield their wealth from the taxman.

While a senator, Kolber helped put together a deal for the Bronfmans at Pearson International Airport, which ended in tears for the taxpayers, when Chretien’s government paid $60 million to a Bronfman consortium after cancelling a Brian Mulroney privatization scheme.

Kolber was a bagman for John Turner, until he was alienated by Turner’s erratic leadership style. He subsequently helped Brian Mulroney, raising money for his Progressive Conservative leadership.

Mulroney was prime minister when, on Christmas Eve, 1991, Revenue Canada approved a ruling allowing the Bronfmans to move $2.2 billion in tax-sheltered trusts out of the country without paying an estimated $700 million in taxes.

The decision didn’t come to light until the auditor general uncovered it in 1996. The auditors were surprised to learn that there were no minutes for the meetings that led to the huge loss of taxes.

The opposition howled. A Liberal-dominated committee studied the matter and concluded that nothing improper had happened. A taxpayer activist from Winnipeg took the government to court and lost, but by then the money in the trust was safely beyond the reach of the taxman. It remains a costly mystery and the Bronfmans have never been officially acknowledged as the beneficiaries.

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The most recent tax controversy involving the Bronfmans and the Liberals started on  Sunday, Nov. 5, the day an international consortium of journalists revealed links between Stephen Bronfman, Yechiel’s great grandson, and a tax shelter in the Cayman Islands.

When the story broke, a Liberal Party spokesman distanced Justin Trudeau from his old friend, the party’s fundraising chair.

Braeden Caley described Bronfman as a “volunteer” and pointed out had had no policy role.

On Monday morning, Bronfman issued a statement denying using offshore trusts and asserting that his family has always “conducted themselves in accordance with the highest legal and ethical standards.”

The stories, based on leaked documents from the Paradise Papers, show Bronfman doing business with an offshore trust belonging to Kolber, which is perfectly legal. The transactions raise questions for Revenue Canada, but they show no wrongdoing.

You wouldn’t know that if you listened to the opposition.

Conservative Leader Andrew Scheer, shielded from libel law by parliamentary privilege, portrayed the respected businessman as a crook. He led off Question Period the next day by saying that Bronfman had “been caught red-handed.”

Bronfman was “caught red-headed” making commercial loans, something thousands of Canadian business people do every day, but Scheer must have been caught up in the excitement of the moment.

“The papers show evidence of bogus records to hide payments, false invoicing, and six-figure gifts to avoid paying tax attributed to Bronfman,” he said, trying and failing to look outraged.

On that Wednesday, in Hanoi, while Scheer continued to accuse Bronfman of wrongdoing in the House, Trudeau finally told reporters that he was “satisfied” that Bronfman had paid his taxes.

“We have received assurances that all rules were followed, indeed the same assurances made in the public statement released by the family, and we are satisfied with those assurances,” he said.

It was a rare example of a prime minister speaking up for someone who may be the subject of Revenue Canada inquiries. It was, no doubt, a comfort to Bronfman, who could not have enjoyed the scrutiny on business arrangements that were only revealed publicly because of leaked documents.

Bronfman is the only prominent member of his family to still live in Canada.

His father, Charles, who crusaded against the Parti Quebecois and later came up with the idea and seed money for the Heritage Minute TV ads, now spends most of his time in the United States.

Charles and his brother, Edgar Sr., had a painful public rift after Edgar Jr. led the family business out of liquor and into the movie business, a disastrous blunder that cost the family billions.

Stephen lives in Montreal, where he runs his businesses and a philanthropic foundation. In 2016, CRA shows, his foundation gave away $3.5 million.

Bronfman and Trudeau are friends. Stephen attended Trudeau’s wedding, and the Trudeaus have been Bronfman’s guest at the family’s farmhouse near Mont Tremblant, but they have never vacationed together, and the Trudeaus have not stayed at the family’s Westmount home, or at the farmhouse, since Trudeau became leader.

Bronfman is not part of Trudeau’s close-knit group of long-time friends, which includes Seamus O’Regan, Thomas Pitfield, Gerald Butts, and Montreal MP Marc Miller, who helped convince Bronfman to sign on as chief fundraiser for Trudeau’s Liberal leadership bid.

When Bronfman agreed, it not only helped Trudeau pay for his leadership, it sent a powerful message to the Jewish community, which at that time had been wooed successfully by the Conservatives for a decade.

When Trudeau became prime minister, and Barack Obama held a state dinner in the White House for Trudeau, he brought Bronfman.

But it is a relationship that poses political challenges for the prime minister.

Ever since Canadians learned that Trudeau spent last Christmas on the private Caribbean island of the Aga Khan, the Conservatives have been portraying him as more concerned with his rich friends than middle class Canadians. Bill Morneau’s secret holding company for his French villa helped add to the narrative.

The Conservatives have repeatedly asked questions about Bronfman, wanting to know why Trudeau has said he was satisfied with Bronfman’s answers. “Who is the Prime Minister speaking for?” Scheer asked on Nov. 20. “Was he speaking for the Canada Revenue Agency? Was he speaking for the Government of Canada?”

Trudeau responded, as prime ministers always do, by blandly pointing to his government’s record on pursuing tax cheats. He said nothing about Bronfman.

“Mr. Speaker, this government takes very seriously the responsibility of going after tax avoidance and tax evasion. That is why we have invested close to a billion dollars over the past two years to ensure that people are paying their fair share of taxes. That has resulted in significant actions and we are in the process of recovering $25 billion of monies avoided and evaded.”

Trudeau’s answer, which is more or less identical to answers from the previous government, does not stand up to close scrutiny. The government, like the previous one, will not even produce an estimate of the tax gap—the amount lost to tax havens—which may be as high as $47 billion a year.

Polling shows that Canadians want corporations to pay their share but successive federal governments have not acted to toughen the laws that allow Canadians to shield their money in tax shelters. Alain Deneault, a Université du Quebec professor who has written several books on tax havens, thinks he knows why they don’t.

“People ask why does the government allow that? Why does the government give loopholes to big corporations that don’t pay their fair share of tax? Why? Well, we have the answer, because it is a conflict of interest. The people who allow the parties to have money to win elections have interests themselves in tax havens.”

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If you listen to the opposition, you might conclude that the Liberal-Bronfman pattern is continuing. But things have changed. All money contributed to political parties must now be publicly reported, and nobody, not even Stephen Bronfman, can contribute more than $1,500 a year, hardly enough to get the attention of a local campaign manager.

Under pressure from so-called cash-for-access fundraisers, the Liberals have unilaterally started reporting details about all fundraisers. Those rules came in after Bronfman held big fundraisers at the Westmount mansion—the most expensive house in Montreal—where Mr. Sam used to live.

In spite of that, and their friendship, the prime minister’s office says that there is no conflict-of-interest screen to prevent Trudeau from dealing with files involving Bronfman interests.

Still, it’s not clear that Bronfman wields the same kind of influence that his godfather did on Liberal policy.

If he did, and was interested in his own finances, he would likely have discouraged the Liberals from taking many of the tax measure they have adopted that have placed more of the tax burden on people like him.

For his part, he says he is motivated by a desire to contribute to his society.

“I believe in giving back to the community and building a future for the next generation of Canadians,” he said in a statement. “I have been fortunate to contribute to our society through business and philanthropy. For me, giving back to the community includes engaging in our country’s democratic process. I began volunteering for the Liberal Party of Canada because I believe in its values, in its leadership, and in its vision for a fair and progressive Canadian society.”