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Wednesday, September 24, 2008

unanswered questions about highwood communications.

As posted yesterday, Calgary-based Highwood Communications has filed for bankruptcy protection with the Court of Queen's Bench after leaving unpaid bills totalling more than $5.3 million. Highwood, owned by long-time PC insider Barry Styles, held an exclusive government ad-buying contract between 1997 and 2007, handling $41.3 million of taxpayers' money to buy newspaper, radio, television, magazine and online ads.

Highwood's financial downfall raises some very interesting questions:

- Highwood was entrusted with millions of taxpayers' dollars to buy government ads. If Highwood didn't pay the media outlets that ran the ads, where did the money go? Highwood was being paid to place $5.3 million worth of ads and ended up with less than $2 million in assets, where did the $3.3 million go? Is there any way to get it back?

- If Highwood failed to live up to the basic terms of its contract, does the province have a legal recourse?

- Why didn’t senior Public Affairs Bureau officials properly monitor the company?

- Why did Highwood’s parent company, B.A.S. Managing and Consulting Services Ltd., also directed by Styles, receive $1.5 million from Highwood and never pay it back?

- Did the government know, or should it have known, that the company was in trouble? Highwood's Saskachewan branch was the advertising agency for several departments of the Saskatchewan government when it filed for bankruptcy in 1998, leaving liabilities of $582,000.

I agree with Paula Simons' recent article, "the government owes the people of Alberta answers." In its first Speech from the Throne in 2007, Ed Stelmach's government declared that, "Governing with integrity and transparency is the first priority of this government."

It's time that Stelmach and his 71 MLAs live up to that promise and give Albertans answers.

_____
Background: Court Documents pertaining to Highwood Communications
Court Report of Trustee on Proposal
Creditor Package
Notice of Intention-Creditors
Minutes of the First Meeting of the Creditors

7 comments:

Aaron said...

My interpretation: things have been souring for six years, with the loss of the most recent contract being the death knell. They've been a losing venture for some time, and that cash probably went to debts used to keep the sinking ship afloat. When salvation did not materialize with the last contract, they pulled the pin.

I had a look at the Creditor Package

I'll be sparse on the details, but here's what happened:

* accounts were not paid out.
* There's the $1 million transfer to the parent company
* in additon, four 50k advances.
* And the kicker: a 2 million dollar loan against Barry's 'Key Man' life insurance policy.
So, there's at least 3.2 million he's potentially bilked out of this business.

I can understand taking out a loan against an insurance policy in order to pay off all the accounts. But even those weren't paid.

Maybe he used that to cover operating expenses and keep staff on in an effort to win the next big contract. Or maybe he spent it on hookers, blow & casinos.

Seriously, if I were a betting man, I'd think there was a gambling problem involved here.

I'm re-reading the sad saga of Raymond Reshkeright now, and I can see it happening - the cash advances, loans against assets. I mean, if it ends up that he gambled it away, would it matter, if 80% that money went back to the government anyways?

Anonymous said...

Oh please. I assume that the PAB, when they hired Highwood, did their due diligence, checking to see that Highwood was bonded and insured. After that, their only responsibility is to ensure they get what they are paying for, i.e., print, radio and television ads, which they did. So, the taxpayers got what they paid for, though the money never followed (apparently) from Highwood. The PAB is not responsible to ensure that media outlets are paid, that's the responsibility of the media outlets.

Any company that can't monitor and collect its accounts receivable shouldn't expect the PAB to "carry its water." While it is regrettable that outlets such as CJSR and small town weeklies were hurt, you would think that those entities, who run on shoestring budgets, would be most vigilant to ensure they were getting paid. And surely Southam, with its legions of lawyers and accountants, should have raised a red flag when their receivables from Highwood ran into six figures.

I guess only Mr. Styles knows what happened to the money and in that vein, Paula Simons is an idiot. The government doesn't owe the people of Alberta answers. Mr. Styles owes the Government of Alberta (and by extension the people of Alberta) and his creditors answers.

Anonymous said...

Dave, even you know that this has nothing to do with the govt. If a company were hired, produced product and were paid, thats were it ends. Would be different if the product was never received, but as it stands now this is just bad management, and companies go bankrupt all the time.

And agreeing with Paula Simons is not really somewhere you want to be. She is very rarely right about anything.

justin said...

That's right Dave, you're better than that. Everyone knows Paula Simons is a communist. I hear she's friends with an artist.

If you insist on being all highbrow and reading the Journal, best to stick with Lorne Gunter.

Raymaker said...

"... and companies go bankrupt all the time."

Not when they have an exclusive advertising contract with the government. You'd have to be on crack.

Stay on this Dave. It has legs.

Simon said...

Oh please. I assume that the PAB, when they hired Highwood, did their due diligence, checking to see that Highwood was bonded and insured.

Why would you assume that? At the time the contract was signed, Gerry Bourdeau was Managing Director of the PAB. He was also simultaneously on the communications committee of the Progressive Conservative party. So was Jim Dau who was either in the Premier's press office at the time or had just returned to the PAB after a stint at that. Dau is a long-time party insider, always was, always will be.

It may be the case that the contract was properly monitored, but I would certainly not assume it given the close connections between government, party and business in this instance.

The PAB is not responsible to ensure that media outlets are paid, that's the responsibility of the media outlets.

Maybe not directly, but this is a major problem with outsourcing government functions to the private sector. You can never be sure that the private companies contracted to provide a service are actually doing it that well. Outsourcing just requires close monitoring by the bureaucracy, which undermines the logic for outsourcing it in the first place.

guess only Mr. Styles knows what happened to the money and in that vein, Paula Simons is an idiot.

True, which is why there is serious need for investigation, either by parliamentarians, a public inquiry or possibly the police. Although that would be the most drastic step.

Anonymous said...

I almost got a job there. Glad I didn't.