The Beauharnois Scandal: A Story of Canadian Entrepreneurship and Politics 9781487580520

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THE BEAUHARNOIS SCANDAL

T.D. REGEHR

The Beauharnois Scandal: A Story of Canadian Entrepreneurship and Politics

UNIVERSITY OF TORONTO PRESS

Toronto Buffalo London

© University of Toronto Press 1990

Toronto Buffalo London Printed in Canada Reprinted in 2018 ISBN 0-8020-2629-X ISBN 978-1-4875-8136-7 (paper)

Printed on acid-free paper

Canadian Cataloguing in Publication Data

Regehr, T.D. The Beauharnois scandal Bibliography : p. Includes index. ISBN 0-8020-2629-X

r. Beauharnois Scandal, 1931. • 2. Beauharnois Power Corporation. 3. Canada - Politics and government - 1930-1935. • 4. Campaign funds Canada. 5. Corruption (in politics) - Canada . I. Title. FC573.B4R43 1990 Fl034.R43 1990

This book has been published with the help of a grant from the Canadian Federation for the Humanities, using funds provided by the Social Sciences and Humanities Research Council of Canada.

Contents

vii Viii

ACKNOWLEDGMENTS PICTURE CREDITS

BEAUHARNOIS CHRONOLOGY

ix

Introduction 3 1

A spectacular beginning,

2

Success in Quebec 25

12

October

3 Political intrigue in Ottawa

1929 6

41

4 Bewildered bureaucrats and a divided cabinet 53 5 Sir Herbert Holt insinuates himself 68

6 Ontario Tories make a deal 78 7 A 'poison pill' and collateral trust bonds 88 8 Realizing the dream 95 9 Helping political friends 105 10

The revenge of a thwarted rival

11

The scandal revealed

124

116

vi Contents 12 Cleansing the corporation 146 13 Protecting workers and investors 162 14 Postscript and conclusion 179

NOTES

195

BIBLIOGRAPHY INDEX

223

215

Acknowledgments

The writing of this history would have been impossible without the assistance and guidance of archivists who have responded willingly to my many requests for information and materials. Those at the Hydro-Quebec Archives, the National Archives of Canada, the Manuscript Department of the William R. Perkins Library at Duke University, the Ontario Hydro Archives, the Ontario Archives, the Archive Nationale du Quebec, and Queen's University were particularly helpful. Financial assistance to undertake the necessary research was received from the Social Sciences and Humanities Research Council of Canada through a Sabbatical Leave Fellowship and a research grant. The research at Duke University in North Carolina was made possible through a small research grant from the College of Arts and Science, University of Saskatchewan. Many colleagues have provided relevant information and advice, but the assistance of Professor J. Michael Hayden, who read the entire manuscript and made many useful suggestions, was particularly helpful, as were the comments from the several anonymous assessors. My wife, Sylvia, exhibited much patience and later proofread the entire manuscript, while my daughter Sonya assisted with the research. A final word of thanks is due to the editorial and production staff at the University of Toronto Press. Gerald Hallowell and Catherine Frost helped to improve the manuscript and transform it into a book.

Picture credits

Unless otherwise stated, illustrations are from the Williams States Lee Papers, Duke University, including the map of the Beauharnois project from Physical Facts and Financial Fi9ures on Beauharnois and the profile of the new canal from Down the Canal: A Pictorial Presentation of the Beauharnois Power and Navi9ation Development, both published in Montreal by the Beauharnois Power Corporation, 1930 and 1931, respectively. Queen's University Archives R.O. Sweezey; Who's Who in Canada, 1932-33 (Toronto: International Press 1933) W.L. McDougald; National Archives of Canada Raymond PA48899, Henry c6713, Haydon c6716; Visites des installations d'Hydro-Quebec (Montreal: Hydro-Quebec 1981.) powerhouse in 1961.

Beauharnois chronology

1845 1899 1902 1913 1914

4 April Nov. 31 Dec. 3 Feb. Summer 27 Sept. Sept. 29 Dec. 17 Jan.

1921 1921 1925 1926 1926 1927 1927 1927 1927 1927 1928

4 April 13 June 23June October 11 Dec. 13 Dec. 18 Dec. 15 Jan. 5 Feb.

1928 1928 1928 1928 1928 1928 1928 1929 1929

First Beauharnois Canal is completed. Soulanges Canal is completed. Beauharnois Light, Heat & Power Co. is incorporated R.O. Sweezey investigates Beauharnois site. N. Cantin incorporates Great Lakes and Atlantic .. . Co. Robert family grant option to N. Cantin. Newman, Sweezey & Co. is incorporated. Sweezey begins work for N. Cantin. Joint Board of Engineers files its report. Sweezey resigns position with Cantin. Sweezey signs deal with Robert family. The first Beauharnois syndicate is organized. F.P. Jones is named president, Beauharnois. Winfield Sifton begins work for Beauharnois. McDougald contributes $10,000 to L.H. Trust fund Beauharnois application to the federal government is filed. Second Beauharnois syndicate is organized. Winfield Sifton dies. Quebec amends Beauharnois charter and lease. McDougald contributes $15,000 to L.H. Trust fund King meets with Haydon, Mclachlan, and Henry. Deputy minister of railways and canals dies. Beauharnois and Sterling Industrial Corp. are merged. Public Hearings in J.C. Elliott's office. Supreme Court rules on federal powers in streams.

x Beauharnois chronology 14 Feb. 1929 8 March 30 March 10 June July 26July 26July 12 Oct. 13 Oct. 28 Oct. 29 Oct. 30 Oct. 31 Oct. 30 Nov. March 7 April

1929 1929 1929 1929 1929 1929 1929 1929 1929 1929 1929 1929 1929 1930 1930

22 May 1930 19June 1930 28July 1930 15 Jan. 1931 22 May 1931 19 May 1931 10 June 1931 15 June 1 July 28 July 1 Aug. 1 Aug. Sept.

1931 1931 1931 1931 1931 1931

16 Nov. 1931 19 Nov. 1931 Jan. 1932

Henry becomes deputy minister of railways and canals. Federal cabinet approves PC 422. R.A.C. Henry resigns as deputy minister. Tentative agreement with Ontario Hydro Beauharnois attempts to file detailed plans. F.P. Jones resigns as president of Beauharnois. Corporate reorganization with Montreal Power Official beginning of Beauharnois construction Banks threaten to stop advances to Beauharnois. Contract with Ontario Hydro is signed. Worst day of the Wall Street stock market crash Ontario general election Beauharnois Power Corporation is organized. Final contract with Ontario Hydro is signed. Sweezey is forced to give evidence in Cantin suit. Garland asks for Beauharnois documents in House of Commons. Gardiner motion re Beauharnois is introduced. Frank Regan contacts Ontario Attorney-General W.H. Price. Canadian federal election Beauharnois first mortgage bonds are authorized. Gardiner and Garland ask questions in House of Commons. First major attack in the House of Commons Special Select Committee, House of Commons, is appointed. Special Select Committee begins its work. Special Select Committee visits Beauharnois. Official report of parliamentary committee is filed . Federal legislation to assist project completion Banks refuse further loans to Beauharnois. Bennett rejects proposed Montreal Power offer and agrees to guarantee Beauharnois bank loans. King returns trust money to McDougald. Sweezey, McDougald, and Henry resign. Bennett suggests arrangements be made with some other power company or Beauharnois be liquidated.

xi Beauharnois chronology 11 Feb. 1 April 22 April 28 April 10 June

11 June 31 Oct. 1 Oct. 10 Nov. 16 March

1932 1932 1932 1932 1932 1932 1932 1932 1932 1933

10 July 1934 14 Oct. 1935 25 Nov. 1935 6 Dec. 17 Aug. 16 Feb. 21 April

1935 1936 1937 1938

May 1941 14 May 1944 17 March 1961

Special Senate Committee is appointed. Beauharnois defaults on bond interest payments. Temporary committee of bondholders is organized. Montreal Power proposes scheme ofreorganization. Disputed bondholders meeting in Montreal Toronto bondholders' committee is organized. Ontario royal commission report is presented. Beauharnois begins power deliveries. Andrew Haydon dies. New Montreal Power scheme of reorganization is accepted. Mitch Hepburn is elected premier of Ontario. Mackenzie King wins federal election. Quebec provincial election reduces Taschereau to minority government. Ontario Hydro's Beauharnois contract is repudiated. Liberals are defeated in Quebec election. Modified contract with Ontario Hydro is ratified. New Montreal Power scheme of reorganization is accepted. Quebec legislature authorizes nationalization of Montreal Power and subsidiaries. Quebec Hydro Electric Commission is created and takes over Beauharnois and Montreal Power works. Construction of last Beauharnois phase is completed.

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