Letter's Questions: Can a thing be sold and returned, and goodwill be claimed? And if so, what are the rules of disclosing this goodwill dynamic in the paper work solicating these funds?
Note if Canadian economy is 5 trillion in net assets, then this 5.4 billion goodwill represents one, one thousands of Canada's assets, makes this a signifanct National Security economic issue. Note, Ontario Pension Fund at 106 billion is one, one fifth of Canada's assets.
(Below letter never send. BCE jurisdication in Quebec, not Ontario. Many times OSC operators have said that BCE filings not their problem. Ontario Teachers' Pension Fund assuming BCE's accounting problems, demands that OSC take the lead with BCE filings.)
Ontario Securities Commission
20 Queen Street West Suite 1903
Toronto, Ontario M5H 3S8
To the Honourable David Brown the Chair of the Ontario Securities Commission;
The Ontario Securities Commission is requested to judge whether Bell Canada Enterprises violated GAAP with their goodwill equity claim of $5.4 billion on their repurchase of 20 percent of Bell Canada. If BCE cannot claim this goodwill and resulting tax credits, then BCE must immediately remove this disputed equity claim from their balance sheet.
In June 1999, SBC Communication Inc / Ameritech bought or lent $5.1 billion to BCE to own or hold as collateral 20 percent of Bell Canada. This transaction transfer agreement included a return clause. SBC began exercising their genesis return transaction clause in June 2002. BCE had to honour SBC�s IOU, and return SBC�s money, plus an agreed 1.25 premium, all together totaling $6.3 billion. [The structure of the Bell Canada�s sales agreement, has characteristics, similar to that of a loan. Instead of interest, there are dividend payments.] BCE approached the Capital Markets to raise most of the funds needed to meet this huge obligation to SBC.
It is believed that General Accepted Accounting Principles do not allow a firm to claim goodwill, if the buying back of an asset is not clearly separated with an arms-length-transaction from the original sale arrangements of the asset. The seller cannot arrange the buy back details when selling the original asset and demand goodwill. Period. It is important to respect that BCE�s 1999 Quarterly Reports and 2000 Annual Report did not disclose the material fact that the selling agreement of 20 percent of Bell Canada included a return clause. Investors lied too inotherwords.
another OSC letter;
Ontario Securities Commission
20 Queen Street West Suite 1903
Toronto, Ontario M5H 3S8
To the Honourable Ontario Securities Commission�s Chair David Brown;
The Ontario Securities Commission is notified that there is a formal allegation of prospectus fraud registered against Bell Canada Enterprise 5,000,000,000 August 2002 prospectus. This prospectus is sadly is one of the biggest prospectuses in Canadian securities history.
Bell Canada Enterprises (BCE) was in dire need of capital to repurchase the 20 percent of Bell Canada that BCE had sold in June 1999 for $5.1 billion to SBC Communications Inc. / Ameritech. SBC Communications was promised their investment in Bell Canada could be returned. On the return, SBC would get their capital back, plus a 1.25 premium, altogether totaling $6.3 billion. Unfortunately BCE vaporized SBC�s cash in the market decline. It is alleged that after SBC demanded their IOU be honoured, BCE faced the abyss. It is alleged that Bell Canada Enterprises unable to meet internally, this extremely large cash call, issued this gigantic prospectus, censoring the basic financial material facts detailing the tangible equity consequences of this forced repurchase transaction.
The prospectus fraud allegation is based on the prima facie case that there are omissions of material facts in BCE�s prospectus. The prospectus did not disclose that the tangible value of 20 percent of Bell Canada was worth $900 million. The prospectus did not disclose that BCE would claim $5.4 billion in goodwill equity arising from the repurchase. This goodwill claim was not disclosed until the February 2003 Quarterly Report. Investors were shocked.
[In a separate complaint to Revenue Canada and the Ontario Securities Commission, it has a been alleged that because the selling and the buying back of 20 percent of Bell Canada can be termed a single transaction, BCE cannot claim goodwill equity and goodwill tax credits. An arms-length-transaction must separate the selling of an asset from the buying back of the same asset to register goodwill equity. SBC returned their stake in Bell Canada under the terms set out in the original sales agreement. BCE had no choice in accepting the return of this asset. If this orchestrated transaction can create goodwill equity and tax credits, surely then the prospectus should have documented that there would be a large goodwill claim.]
Investors were shocked that after the success of Bell Canada Enterprises� prospectus in issuing $2 billion in new shares to the public, and a half a billion in new shares to SBC -- that after the Bell Canada reacquisition transaction, BCE�s new total common shareholder tangible equity became $1.2 billion. Hiding this rudimentary equity fact constitutes securities fraud.
Bell Canada Enterprises has described the reacquiring of SBC Communications� 20 percent stake in Bell Canada as an acquisition. It can be argued that it is a misrepresentation to label this transaction as a true acquisition; rather BCE was repaying a debt and accepting back collateral.
SBC was exercising their return sales clause. BCE had no choice in the matter. It is important to note that if this transaction is termed an IOU and not a true acquisition, then BCE misrepresented their tangible equity in their prospectus balance sheet. BCE�s tangible equity in the August 2002 prospectus ignores the SBC $6.3 billion obligation and declares a shareholder tangible equity of $2.1 billion; whereas, recognizing this outstanding obligation would result in BCE acknowledging a negative shareholder tangible equity at prospectus time. [It is important to note that BCE�s 1999 Quarterly Reports and 2000 Annual Report detailing the 1999 transfer of 20 percent of Bell Canada did not disclose that SBC could demand their money back times a premium of 1.25 in the future. This material fact changes the original sales transaction�s perceived structure and should have been documented.]
The Ontario Securities Commission is also notified that there is an allegation that Canada�s media conglomerates shamefully restricted and censored the detailing of BCE�s tangible financial details in their media outlets. The media censorship allegation prima facie case is based on reviewing the microfilm for Canada�s main newspapers. On rereading the newspaper microfilm records, BCE�s tangible shareholder equity and goodwill charge are invisible. Good luck finding BCE�s goodwill cited in the press. This was and is a major news story.
The Ontario Securities Commission awareness of the alleged media censorship creates a conflict of interest for the OSC to continue to sponsor this treason of obstructing the news by keeping the OSC�s investigation into BCE�s missing prospectus disclosures and disputed goodwill claim a secret for the Canadian People. The OSC must be extremely diligent and not ignore questionable accounting disclosures when auditing media conglomerates. BCE�s influence is profound. BCE owns and controls the CTV, Canada�s largest TV network. BCE also owns and controls the Globe and Mail newspaper.
The provincial Ontario Securities Commission must honour the Canadian People and inform Canadians about the OSC�s investigation into Bell Canada Enterprises� prospectus. This shameful media cover-up must end. If securities officials believe that these missing disclosures in BCE�s prospectus are acceptable, let the Canadian People have the honour and the opportunity to judge BCE�s prospectus and goodwill tax credits. Maintiens le droit.
Unsend OSC letter cont'd; BCE 101
The following analogy helps explain the rationale why BCE�s $5.4 billion goodwill charge violates hypothetical fundamental accounting principles. Imagine a big firm with some balls. This firm sells their balls. Later on, the firm buys back their balls. Can this firm reunited with their balls claim goodwill?
The firm is returned to their original position with respect to their balls, and yet the firm demands goodwill. Note, 5 dollars was lent and on return over 5 dollars in claimed in goodwill alone. This precedent would make it easy for any firm to make their balance sheet bigger and bigger and bigger. Obviously this is an accounting taboo, BCE cannot sell something and be forced to take back the thing and register goodwill. It does not matter that Monty vaporized SBC�s cash.
If the Ontario Securities Commission concludes this book value goodwill equity claim is acceptable under General Accepted Accounting Principles, then this creates a goodwill catch twenty-two problem. Bell Canada Enterprises censored the documenting of this goodwill claim in their prospectus.
Investors were shocked that BCE�s total common shareholder tangible equity became $1.2 billion after the transaction, meant that before the propectus funds were transfered BCE tangible shareholder equity was negitive by several billion. BCE�s 5 billion 2002 August Prospectus should have disclosed the goodwill material fact that their would be a large goodwill claim attached to the Bell Canada reacquisition. What happened to expected balance sheet equity addition of the $2 billion in new shares issued to the public, and the $half billion shares transferred to SBC?
The Ontario Securities Commission will be among a select group of North American Audit Authorities commissioned to examine BCE�s goodwill equity claim. The British Columbia Auditor General, the British Columbia Securities Commission, the Auditor General of Canada, and Revenue Canada are some of the other Audit Agencies that have been summoned to pass judgment on Bell Canada Enterprises contrived goodwill equity tax credits. [The People of British Columbia have a special interest in this matter. BCE was one of the media conglomerates that violated the civil rights of British Columbians by their unbalanced news reporting constantly attacking and undermining the former Provincial Government of British Columbia.] [```BS letter, working BC Auditor General to look at an aspect of the BCE goodwill snowballing issue.```]
The provincial Ontario Securities Commission must respect and honour the free nation of Canada. It is believed that the Ontario Securities Commission must strongly consider rejecting BCE�s $5.4 billion book value goodwill equity claim.
Yours very truly,