The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Reporter Naomi Powell
published in
the April 17, 2006 edition
By Naomi Powell
The Hamilton Spectator
(Apr 17, 2006)
SPECTATOR EXCLUSIVE
A superior court judge is standing at a gas station phone
booth in Naples, Florida, his hand poised to dial.
On the first day of this long-awaited vacation, he has
already picked up the phone every hour to check on his problem child in Canada.
The child, of course, is Stelco.
The judge is Justice James Farley, the razor-tongued icon of
corporate insolvency cases who held the fate of Stelco in his hands for two
years and who -- as he hangs up his judicial robes after 17 years on the bench
-- says he came frighteningly close to liquidating the Hamilton institution.
"It came close a lot of times," Farley said in an
interview. "If Stelco did crater, it would have a devastating effect on a
lot of people. The employees, customers, suppliers, the community of Hamilton
and surrounding area and it would be a shame to waste not only valuable
physical and financial capital, but the human capital."
Preventing that devastation often meant dragging the players
kicking and screaming to the bargaining table.
"Every time they resolved an issue they came up with
another issue or another two issues," he said.
Farley had hardly stepped off the plane in December 2005
when he learned Stelco had once again gone off the rails, its creditors
refusing to vote for a deal that would see the company emerge from creditor
protection.
So despite the lovely evening near the Gulf of Mexico,
despite having to trek to the gas station from a nearby restaurant where his
family was waiting to celebrate a birthday, Farley spent an hour on the phone.
He wheedled, he pressured, he cajoled.
And as he had done countless times before, he pushed the
process forward.
"He used every trick in the book to get people to
yes," said former Stelco CEO and current board chair Courtney Pratt.
"I'm not sure we ever would have had a successful outcome without Judge
Farley."
Farley, who is now 65, won't say what he will do once he
moves out of his judicial chambers at Toronto's Osgoode Hall.
Ask him to pick the lowest point in the Stelco saga and he
frowns.
"There were too many, I kid you not. It was
scary."
It is a sobering statement, particularly coming from the man
who presided over some of the most desperate restructurings in Canadian
corporate history: Algoma, Eatons, Air Canada.
But none were quite like Stelco. It was, as one lawyer
called it, the Alice in Wonderland of insolvency cases, and the fall down the
rabbit hole began the minute Farley granted Stelco protection under the
Companies' Creditors Arrangement Act. What made Stelco unique is that it
entered protection not as a bankrupt company but as one that argued its
mounting debts would drive it into bankruptcy in a matter of months if the
court didn't intervene.
Farley agreed, ruling that, "CCAA should not be the
last gasp of a dying company, it should be implemented ... at a stage prior to
the death throe."
The decision changed the very definition of insolvency and
will likely be the most lasting effect Stelco has on CCAA law, Farley says. It
drew outrage from Stelco's union leaders, who launched an unsuccessful battle
to have it overturned by the Ontario Court of Appeal and Supreme Court of
Canada.
But it also set the Stelco story up for an unprecedented twist
-- only weeks later, steel prices soared and the company posted record profits.
"It's difficult to get people to appreciate that they
need a remedy if the immediate future looks rosy," Farley said.
"That's the nature of the beast and you've got to deal with it."
Deal with it, he did. With the players hardened in their
positions, Farley used his famously unorthodox courtroom style to get them
talking.
The man who once threatened to castrate a lawyer who went
against his wishes warned Stelco it was standing "on the edge of a
precipice" and it could easily stumble off. When talks stalled, Farley
labelled the black-robed lawyers crowded in his Toronto courtroom "a bunch
of penguins." And when one Toronto lawyer refused to reveal the names of
certain clients, Farley ordered him to sit down and rethink his answer. When
the lawyer repeated his refusal later on, Farley ordered him to sit down and
think again.
Not all lawyers appreciated the approach or felt the
restructuring required such a heavy hand.
"He bullies, no question about it," says one
lawyer. "He can be very intimidating and he will humiliate people. These
are the tools he likes to use. He doesn't like to use gentle persuasion."
In Stelco, Farley pushed, he prodded and he painted
disastrous visions of what would happen if a deal wasn't forged, often
reminding the warring lawyers that they were all in a lifeboat together and the
lifeboat was going down.
"He has a strange sense of humour," said Warren
Winkler, regional senior judge for the Toronto region and a friend of Farley's
for 15 years. "I think it serves a number of purposes. Sometimes it
relaxes people in tense situations. Sometimes it does the exact opposite.
Sometimes it's intended to make everybody laugh and sometimes it's intended to
make everybody laugh but at somebody else's expense. It's always very much by
design."
And, given that time was always of the essence in Farley's
court, the humour was usually meant to keep things moving. One of the original
judges of the Commercial List, the court dealing with restructurings and
liquidations, Farley liked to issue his judgments in "real time,"
often writing them out by hand while the lawyers waited in silence. He
distributed his rulings in the same illegible handwritten scrawl, leaving puzzled
lawyers squinting at the words. His love of opera and literature often crept
into these pages -- he has been known to throw a little Dickens into his
judgments, maybe a sprinkle of Quixote.
"Just recently he made some reference to burning on the
stake," said one Toronto lawyer. "I had no idea what he was talking
about. I think it was a biblical reference."
He demanded total dedication from every player in the Stelco
case and as a result, executives, union leaders and lawyers found themselves
working weekends, holidays, whatever it took to keep things moving. A coffee
mug in Farley's Osgoode Hall chambers drives the point home. "Keep it
brief," it reads.
"With Stelco it just never stopped," says Andrew
Hatnay, a lawyer who represents the steelmaker's salaried retirees.
"Weekends, BlackBerrys, conference calls ... Whatever we had to do, we
always had to match the pace. He doesn't tolerate any type of slowness. Zero.
It has to be done immediately."
That pace took its toll, even on the man driving it.
"The wearing part is that everywhere you went people
would be talking to you about Stelco," said Farley. "When was it
going to be over, what was the problem, what was happening there. And I must
say that there were times when I'd prefer to think of other things, discuss other
things."
Farley could never tell them when it was going to end, but
says he was always aware of the stakes.
"I worried, yes," he says.
Only Farley knows just how close Stelco came to liquidation.
He was, after all, the one controlling the deadlines.
Some say he was bluffing, that Stelco, with it's endless
bickering and countless extensions on creditor protection, was the case that
revealed the limits of his power.
"He would bluster and huff and puff and then grant an
extension," says a lawyer who was involved in the case. "He didn't
want to be the one that tanked Stelco."
He once mused on the bench about driving over the Skyway
Bridge at night, looking down at the blast furnaces of Hilton Works.
"It was a particularly beautiful sight," he
recalled in the interview. "It would not have been a beautiful sight if it
were dark. It just impressed me how awful it would be if a viable company did
not survive."
npowell@thespec.com
905-526-4620
Memorable quotes
March 2006
"What is it they say? Victory has 1,000 parents, but
defeat is an orphan. Well, I'd like to see 1,000 parents, but I can assure you
if no solution is found it will be very obvious to everyone who the parents of
that defeat are."
-- Farley, May 2005
"Everybody is in this lifeboat together and it would be
a good idea if they used their fingers to plug holes. Because if you don't plug
the holes, the boat will go down and you'll all drown."
-- August 2005
"The difficulty I have is that this company and all
people involved in this company think that they have all the time in the world
and that they can continue to dance. The music is stopping."
-- September 2005
"I certainly thought that with all the wrangling,
information and horse-trading going on, that surely to God you would have been
able to come up with a consensual plan by this week. I can't make the words
'real and functional deadline' any bigger, any more blinking red neon than I am
now."
-- September 2005
"I am directing and ordering that there be no
jiggery-pokery. This is far too important for all the stakeholders."
-- December 2005
"Politely put, balderdash."
-- Farley's response when asked to extend Stelco's
bankruptcy protection for accounting purposes in February 2006
"I can't imagine how it could take so long for people
to inspect their navels for nits."
-- March 2006
"People have warned that the glaciers are melting, but
we know glaciers are alive and well at Stelco."