John C. Doyle
J.R. Smallwood was always on the lookout for entrepreneurs and advisors who could help bring about his dream of economic diversification and prosperity. Perhaps the most colourful was John C. Doyle. Born in Chicago in 1915, Doyle went to western Canada as a coal salesman, moving east in 1949. He purchased Canadian Javelin Foundries and Machine Works, a Joliette, Québec, stove-making operation. The business was reorganized in 1951 as Canadian Javelin Limited, which Doyle used as a holding company for his subsequent ventures.
Industrial Development Opportunity: Iron Ore Around Wabush Lake
Doyle first became interested in Newfoundland’s resources in 1952. On his way to the province to collect a large coal debt, he met the provincial geologist. The latter told Doyle that a strip of iron-ore rich land around Wabush Lake in Labrador was about to revert to the government – or more accurately, to the Newfoundland and Labrador Corporation (NALCO), a development company created by the provincial government (and Alfred Valdmanis) in 1951. The area originally belonged to the Labrador Mining and Exploration Company, which shed it under an agreement that stipulated that 10 percent of the company’s concessions had to be relinquished every year.
In July 1953, NALCO granted concessions to Doyle and Javelin, which included the rights to a large area of western Labrador containing iron-ore rich deposits. From this point on the story is confused, but it appears that in September 1953, Doyle and Javelin acquired a controlling interest in NALCO, with six seats on the board. Valdmanis did his best to block Javelin taking over NALCO completely, but failed – even though Doyle was in financial difficulties and Javelin shares had been de-listed from the Montreal stock exchange. In the end, Smallwood sided with Doyle against Valdmanis, and in March 1954 the former received 2,400 square miles of prime NALCO holdings in central Labrador. NALCO was reorganized in such a way that most directors were to be provincial government nominees.
Doyle spent approximately $15 million surveying and drilling the area around Lake Wabush. He also commissioned American engineering expertise to improve the ore benefaction process, and brought about the consortium of international mining interests known as Wabush Mines. Before the opening of the mines The Sunday Times Supplement optimistically gushed, “After Javelin, neither Newfoundland nor the international steel industry will be quite the same again” (Ore: 25). In the mid 1950s Doyle also built a railway connecting Wabush to the Québec North Shore and the Labrador Railway, but not without the Newfoundland government guaranteeing a $16.5 million bond issue enabling him to do so. The bond was never called in, but it was an issue that raised some strenuous objections in the House of Assembly.
Smallwood was clearly impressed by Doyle’s ability to promote industrial development, and overlooked his shady financial manoeuvres – indeed, the government continued to put money into Javelin projects, and Memorial University awarded him an honorary doctorate in 1962 – linked, no doubt, to his donation of $500,000 for a student residence.
Newfoundland and Labrador's Greatest White Collar Criminal
Doyle faced income tax investigations in the early 1950s, and Canadian Javelin continued to be de-listed from the stock exchanges for securities violations throughout the mid 1950s and into the 60s. In 1959 the United States Securities and Exchange Commission (SEC) became involved because Canadian Javelin stocks were trading vigorously in the United States. The stocks were not registered in the United States and in order to do so the vendor (Doyle) needed to provide detailed financial information about the company. Doyle was never forthcoming with financial information about his companies. In 1960 he was arraigned in Montréal on charges of theft, conspiracy and fraud involving $4,800,000 in mining stock, though the charges ware ultimately dismissed.
By 1963 the SEC caught up with him again and the lead investigator laid eleven charges against Doyle involving fraud and stock manipulation, as well as a technical violation resulting from sending unregistered stock through the mail to an investor. He was fined $5,000 for this offence and sentenced to serve a reduced term of three months. Doyle jumped bail and skipped the country on July 15, 1965. He later claimed that he plead guilty in an effort to get the ordeal over with, a move he would never have made if he had suspected jail time was imminent. By the end of the 1960s, Canadian tax collectors also began to hound Doyle for claims going back two decades. He managed to have the amounts reduced through appeals from $3.4 million in back taxes to $2.6 million.
Doyle had a sketchy financial past long before he came to Newfoundland, but his disastrous foray into the paper business is what he is mainly remembered for. Smallwood always had aspirations for a third pulp and paper mill in the province and some of the literature claims Doyle did too. However, in an interview in The Evening Telegram in 1972 Doyle claimed he never wanted anything to do with the paper business. “We only got into it [the linerboard project] because Smallwood insisted he couldn’t find anyone else…We wanted to develop our ore body. We made no bones about the fact that we weren’t paper people.” (The Evening Telegram, April 28, 1972) Eventually, Smallwood and Doyle did agree on a joint venture for a linerboard mill in Stephenville utilizing wood from Labrador. In 1969 a subsidiary of Javelin, the Melville Pulp and Paper Company, began cutting pulpwood in Goose Bay for the Stephenville mill.
The linerboard mill proved to be a disastrous project. The estimated cost of the entire project including the wood-cutting facilities in Labrador, the transportation costs involved, and the linerboard mill was approximately $143.6 million. The federal government committed $20.1 million toward harbour improvements, waterworks, and incentive grants for the project. Other capital was guaranteed through some British banks, the British government, and an American financial house. Doyle’s initial investment was only $5.3 million, borrowed from a pension fund controlled by Jimmy Hoffa’s Teamsters Union. He eventually came up with $11.5 million working capital of his own, but only after the Canadian government expressed concern about Doyle’s meagre financial commitment.
The provincial government initially committed $53 million to the project, but made a fatal error in judgement by including an “open-ended” clause in the 1967 Melville Pulp and Paper Ltd. Authorization of Agreement Act, or Bill 44. This allowed the government to exceed initial funding projections and provide whatever monies were necessary for the completion of the project. In 1969 the government guaranteed an additional $13,260,000. As associated costs continued to rise the provincial government continued to rescue the project. In November 1970 when a consulting firm warned of the suspension of construction due to lack of finances, the Newfoundland government infused $9 million on June 25, 1971 and another $6 million four months later. By 1972 the linerboard venture had cost the Newfoundland government approximately $122 million and the mill had not yet opened its doors. Frank Moores’ Progressive Conservative government moved in, purchased the mill from Doyle, and turned the business into a Crown Corporation.
The scandal caused by John Doyle and the Stephenville linerboard mill may have been the biggest white-collar crime in Newfoundland and Labrador’s history. Doyle manipulated Javelin stocks so that the bulk of the profit would go to the Melville Pulp and Paper Company and Canadian Javelin, but not to the Newfoundland government, the majority Javelin shareholder. The “privileged” stocks he created for the government paid no dividends and were redeemable at 10 cents each totalling $530,000 – independent of how much Javelin common stock became worth. This ultimately gave Doyle power over the company stockholders seeking to get rid of him, while providing no financial benefit for the government.
It was reported that Doyle paid his lawyers $4 million yearly to keep him out of trouble. Nevertheless, he was charged in the Newfoundland Supreme Court in 1973 by the RCMP with 400 counts of fraud and breach of trust stemming from the linerboard scheme, and he was brought forcibly to St. John's. The mill had been built on the former site of the United States Air Force base, which included two buildings valued by the provincial government at $8.2 million. It was alleged that Doyle purchased them for a mere $250,000 through Oliver Vardy, the Deputy Minister of Economic Development, who was rumoured to be heavily involved in Doyle’s schemes.
Doyle was also investigated for a suspicious land purchase. Product for the linerboard mill was to be harvested within two blocks of land totalling 21,325 square miles in Labrador. Around 11,000 square miles belonged to NALCO (then a Canadian Javelin subsidiary) and the other 10,325 square miles had been purchased by Doyle for $4 million from a “…curious company called Société Transshipping owned in Liechtenstein…” (MacLeans: 36). Doyle had been previously accused of funnelling $4.8 million dollars worth of Canadian Javelin stock to Liechtenstein. It was thrown out of court, but suspicions were aroused and the RCMP became interested in the authenticity of Doyle’s purchase of timber rights. According to the province’s then Conservative Finance Minister, John Crosbie, Société Transshipping had received the timber rights free of charge, based on a March 1965 letter from then Liberal Premier, Joseph Smallwood. The whole deal was more than a little dubious. By the mid-1960s Doyle’s name was also linked to the “L’affaire des Six” bribery scandal in Québec. No evidence was ever found. Meanwhile, Smallwood was enamoured with Doyle even after his 1973 arrest. Time magazine quipped, “Joey Smallwood once boasted that he wished the province had 1,000 John C. Doyles. If so, Newfoundland would have been hard put for courtrooms to accommodate them” (Time: 7).
A Master Manipulator
How was Doyle able to get away with so much for so long? Smallwood’s obsession with job creation was one of the biggest reasons, which essentially made Newfoundland an easy target to exploit. Crosbie nicknamed Doyle an “evil genius,” a “seductive slug,” and characterized the relationship between the American and Premier Smallwood as “one of the most tawdry stories in twentieth-century politics” (Globe and Mail: 16). But besides Smallwood's complicity, Doyle himself was a master manipulator. When two FBI agents came to question him concerning violations of American securities laws, Doyle turned on his “easy charm” and sold them stock in Canadian Javelin. Doyle left a legacy of convoluted government loans and international transactions tainting the Newfoundland government and the Stephenville Linerboard Mill that have never been entirely unravelled. His history with the law is one of skilful escapes and evasions. Doyle became active in South America through Canadian Javelin and made news headlines well into the eighties. The Federal Corporations Branch of the Ministry of Corporate and Consumer Affairs filed a claim to nullify his 14.9% holding in Javelin in 1982, but he continued to draw a salary from Javelin up to 1985. Doyle died in his Panama home (a fugitive from justice) at the age of eighty-five on May 31, 2000.