All posts by Chengcheng Shen

Inhumane transport, part of Canadian horse meat trade

Final Assignment
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Ontario man Manfred Loerzel’s livestock shipment business is still up and running after being fined twice for inhumane transport of horses.

Last year, Canadian Food Inspection Agency fined him and his company, Loerzel Farm Transport Inc., $26,000 for causing the deaths of two horses during transportation. The agency’s investigation suggests the trailer that his company used had projections that injured the horses, which violates the Health of Animals Act.

According to the agency’s prosecution records, that act brought in $297,000 through fines since 2011, the highest among other regulations. And of all the eight cases, four are about inhumane transport of horses, and Loerzel’s company are involved in two of them.

Allison Danyluk Roff, a veterinarian with the agency’s office in Regina, does road checks on livestock trailers along two local highways. “The most common noncompliance in my opinion is overcrowding,” says Danyluk Roff, “and people often mixing different classes of horses together in a trailer, they could get aggressive.”

Heather Clemenceau from the Canadian House Defence Coalition, says the group is working on an access to information request to try to identify more of the ill-treatments to horses during shipments.

She says in one such incident, a horse fell down the trailer after the driver hit the brake suddenly. However, the driver continued on to his destination knowing the female horse was down, which left the horse suffering in pain for more than six hours.

Clemenceau says in other cases, horses coming in from the U.S. are left too long without feed and water. Canadian Food Inspection Agency staff check and seal loads of horses at border checkpoints. The agency says the horses should remain on the truck overnight so their staff don’t have to cut the seal and reseal again. But this could leave the horses more than a day without food. Canadian regulations allow horses to be transported for up to 36 hours without a break.

International horsemeat supplier

Horse shipments along the Canada-U.S. border have been increasing since 2006, when the American government initially banned horse slaughter for human consumption. As a result, the number of horses slaughtered in Canada in federally and provincially inspected establishments has more than doubled from 2006 to 2008.

The Canadian Horse Defence Coalition identified four major Canadian slaughterhouses, where live horses imported from south of the border are being killed.







According to figures from Canadian Food Inspection Agency, Canada exported 13,960,034 kilograms of horsemeat last year. Canadian Meat Council says the major markets include Switzerland, Japan, France, Belgium and Kazakhstan.

Bankrupt farmer gets fresh start with livestock transport business

Former Ontario farmer Loerzel declared bankruptcy in 2005. According to his Statement of Affairs document, he owed $799,000 to 44 creditors, including a finance company, a farm equipment company, a cell phone carrier, a car dealer and a bank. However, at the time of the bankruptcy, he had only $3,601 worth of assets to pay his creditors.

Loerzel owned two farm properties together with his parents before running into debt, and he got the sole ownership after the death of his parents. However, the TD Bank seized and sold the two properties in 2003 and 2004 after he lost a business contract.

A year after filing bankruptcy, Loerzel was cleared from all the debt because his creditors recognized he had no money to pay back his debt. Loerzel also gets to keep most of his assets, including household goods and his 1994 Ford car as those items are deemed of little value. The $100 his had on hand before declaring bankruptcy was used to cover the fee to file claim with the Office of the Superintendent and Bankruptcy.

According to records kept by Ontario government services, Loerzel incorporated his livestock transport company, Loerzel Farm Transport Inc., in 2007. But two years into his business, veterinary inspectors from the Canadian Food Inspection Agency found through their routine inspections that the trailer his company used had sharp angles that caused injuries to a number of horses and death to two horses. In 2010, during similar inspections, the agency staff once again concluded Loerzel’s company did not provide an adequate mode of transportation.

However, it wasn’t until three years later, when the Ontario Court of Justice in Windsor finally registered two convictions against both of the incidents, and struck down a total fine of $72,000.

The Canadian Food Inspection Agency declined to give more details on the two cases. And the Ontario court of Justice says there’s no record of Loerzel’s company being fined.

Whether Loerzel paid the fines or not remains a question. But his company, Loerzel Farm Transport Inc., is still registered with the Ontario government with an active status.

Canada exports horses for slaughter too?

An article on the Canadian Horse Defence Coalition website, dated October 18, 2012, says draft horses from Alberta being shipped to Japan from Calgary International Airport are jammed in wooden crates to the point that they can’t stand.

The group says since 2009, it has been receiving anonymous footage showing horses being loaded into trucks with electronic prods and transported to the airport.

The article reveals draft horses from Canadian producers have been routinely shipped to Japan via airports in Calgary and Winnipeg. And they get slaughtered in Japan for horse sashimi, which is a Japanese raw meat dish, once they grow bigger and meet certain weight limits.

However, on the Canadian Food Inspection Agency’s website, horses exported to Japan are only identified as for permanent stay or racing. Among the more than 30 countries that buy live horses from Canada, only the U.S. has a category that says for “immediate slaughter.”

In the Canadian Horse Defence Coalition article, it quotes a 2008 Alberta Horse Welfare Report, saying the horses exported to Japan are worth $20,000 each.

Assignment 2
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Ontario man Manfred Loerzel’s livestock shipment business is still up and running after being fined twice for inhumane transport of horses.

Last year, Canadian Food Inspection Agency fined him and his company Loerzel Farm Transport Inc. $26,000 for causing the death of two horses during transportation. The agency’s investigation suggests the trailer that his company used had projections that injured the horses, which violates of the Health of Animals Act.

According to the agency’s prosecution records, that act brought in $297,000 through fines since 2011, the highest among other regulations. And of all the eight prosecution cases, four are about inhumane transport of horses, and Loerzel’s company are involved in two of them.

Allison Danyluk Roff, a veterinarian with the agency’s office in Regina, does road checks on livestock trailers along two local highways. “The most common noncompliance in my opinion is overcrowding,” says Danyluk Roff, “and people often mixing different classes of horses together in a trailer, they could get aggressive.”

Heather Clemenceau from the Canadian House Defence Coalition, says the group is working on an access to information request to try to identify more of ill-treatments to horses during shipments.

She says in one such incident, a horse fell down the trailer after the driver hit the brake suddenly. However, the driver continued on to his destination knowing the female horse was down, which left the horse suffering in pain for more than six hours.

Clemenceau says in other cases, horses coming in from the U.S. are left too long without feed and water. Canadian Food Inspection Agency staff check and seal loads of horses at border checkpoints. The agency says the horses should remain on the truck overnight so their staff don’t have to cut the seal and reseal again. But this could leave the horses more than a day without food. Canadian regulations allow horses to be transported for up to 36 hours without a break.

International horse meat supplier

Horse shipments along the Canada-U.S. border have been increasing since 2006, when the American government initially banned horse slaughter for human consumption. As a result, the number of horses slaughtered in Canada in federally and provincially inspected establishments has more than doubled from 2006 to 2008.

The Canadian Horse Defence Coalition identified five Canadian slaughterhouses, where live horses imported from south of the border are being killed.

 


 

According to figures from Canadian Food Inspection Agency, Canada exported 13,960,034 kilograms of horse meat last year. Canadian Meat Council says the major markets include Switzerland, Japan, France, Belgium and Kazakhstan.

Bankrupt farmer gets fresh start with livestock transport business

Former Ontario farmer Loerzel declared bankruptcy in 2005. According to his Statement of Affairs document, he owed $799,000 to 44 creditors, including a finance company, a farm equipment company, a cell phone carrier, a car dealer and a bank. However, at the time of the bankruptcy, he had only $3,601 worth of assets to pay his creditors.

Loerzel owned two farm properties together with his parents before running into debt, and he got the sole ownership after the death of his parents. However, the TD Bank seized and sold the two properties in 2003 and 2004 after he lost a business contract.

A year after filing bankruptcy, Loerzel was cleared from all the debt because his creditors recognized he had no money to pay back his debt. Loerzel also get to keep most of his assets, including household goods and his 1994 Ford car as those items are deemed of little value. The $100 his had on hand before declaring bankruptcy was used to cover the fee to file claim with the Office of Superintendent and Bankruptcy.

According to records kept by Ontario government services, Loerzel incorporated his livestock transport company, Loerzel Farm Transport Inc., in 2007. But two years into his business, veterinary inspectors from the Canadian Food Inspection Agency found through their routine inspections that the trailer his company used had sharp angles that caused injuries to a number of horses and death to two horses. In 2010, during similar inspections, the agency staff once again concluded Loerzel’s company did not provide an adequate mode of transportation.

However, it wasn’t until three years later, when the Ontario Court of Justice in Windsor finally registered two convictions against both of the incidents, and struck down a total fine of $72,000.

The Canadian Food Inspection Agency declined to give more details on the two cases. And the Ontario court of Justice says there’s no record of Loerzel’s company being fined.

Whether Loerzel paid the fines or not remains a question. But his company, Loerzel Farm Transport Inc., is still registered with the Ontario government with an active status.

Canada exports horses for slaughter too?

An article on the Canadian Horse Defence Coalition website, dated October 18, 2012, says draft horses from Alberta being shipped to Japan from Calgary International Airport are jammed in wooden crates to the point that they can’t stand.

The group says since 2009, it has been receiving anonymous footage showing horses being loaded into trucks with electronic prods and transported to the airport.

The article reveals draft horses from Canadian producers have been routinely shipped to Japan via airports in Calgary and Winnipeg. And they get slaughtered in Japan for horse sashimi, which is a Japanese raw meat dish, once they grow bigger and meet certain weight limits.

However, on the Canadian Food Inspection Agency’s website, horses exported to Japan are only identified as for permanent stay or racing. Among the more than 30 countries that buy live horses from Canada, only the U.S. has a category that says for “immediate slaughter.”

In the Canadian Horse Defence Coalition article, it quotes a 2008 Alberta Horse Welfare Report, saying the horses exported to Japan are worth $20,000 each.

 

 

 

 

 

N.S. businessman’s tax debt case may set example for future ones

Backgrounder Assignment
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Local bankruptcy lawyer Tim Hill says Canada Revenue Agency is taking a rare stand on a recent income tax debt case. And if the agency gets its way, it will make future cases difficult to resolve.

The case is built against Cape Breton construction manager Darrell Wilcox. According to information contained in the Statement of Affairs document, he owed the agency over $800,000 in tax. He also owed money on his credit card, which added up to over a million dollars of debt in total.

Wilcox, who owns the WICO Construction Management Ltd. in Sydney, chose to file a consumer proposal instead of declaring bankruptcy. It means his property didn’t get sold to pay for the debt. Instead, he paid his creditors in cash a certain percentage of the money he owed.

The proposal was accepted by his creditors, including Canada Revenue Agency, in December 2012. It was approved by the court a month later.

Tim Hill says Wilcox has paid off all the money agreed in the proposal in February. But the $450,000, which accounts for 40 per cent of his debt, hasn’t been distributed among the creditors yet because Canada Revenue Agency says the income tax liabilities weren’t filed on time, so they have to charge him interest and penalties for that.

However, the Bankruptcy and Insolvency Act doesn’t allow additional proceedings to be charged off of the proposed payment.

“But the income tax act says there can be interest. Because the case is being dealt in the bankruptcy court, the bankruptcy act should govern,” says Hill, “But the agency says the bankruptcy court doesn’t have jurisdiction over the matter of interest and penalties, and it should be settled at the tax court, which doesn’t make any sense.”

Hill expects the agency to file an appeal today. If it wins, the case will be brought to the Tax Court of Canada, and Wilcox will have to pay an additional $16,000 for late payment.

Hill says bankruptcy cases involving income tax debt is quite common in Nova Scotia, but only a few of such cases have interest and penalty issues, which makes Wilcox’s case important.

“I don’t expect the agency to win the appeal, but if they did, this case would set an example for similar cases in the future,” says Hill, “and it’s going to make it too expensive for people to go to two separate courts to sort things out – the bankruptcy part in the bankruptcy court and the tax part in the tax court.”

Bankruptcy court sees more tax debt cases

Hill says the ruling of the agency’s appeal will have an impact because more and more proposals are being filed at the bankruptcy court.

“There are new provisions in the bankruptcy act that upped the limit on the amount of money a proposal can settle,” says Hill, “so more rich business people are making these proposals, which invariably involve some income tax owed at the time.”

 

Late payment argument in Wilcox’s case

The trustee, who helped Wilcox prepare the proposal, says he submitted Wilcox’s $120,000 tax return to the agency in March 2013. And the money was sent to the agency’s office in Sydney well before the April 30th deadline. But the agency says it didn’t have records of receiving the money.

According to the Supreme Court of Nova Scotia’s documents, there’s no communication regarding the payment until six months later, when the agency called the trustee, asking for Wilcox’s 2012 tax return. At the same time, the agency decided to charge Wilcox $6,600 worth of interest and $9,600 in penalties due to the late payment.

The court bought the trustee’s testimony of filing the tax return before deadline, and ruled in Wilcox’s favor, saying the agency is not entitled to charge him any interest or penalties.

How did Wilcox’s tax debt add up?

According to Hill, Wilcox owed more than $411,000 of income tax over the course of three years before he had to file the consumer proposal. “The amount is quite large,” says Hill.

However, he says he can’t comment on how the tax debt piled up. Canada Revenue Agency’s Atlantic region office responded by email, saying according the tax act, they couldn’t discuss specific taxpayer’s information. Wilcox himself can’t be reached for comment either.

The documents from his trustee’s company, BDO Canada Limited, says he spent too much money and didn’t have the money to pay taxes.

Geoffrey Loomer, who teaches personal and corporation income taxation at Dalhousie University, says there are two scenarios. One is tax evasion – Wilcox didn’t file tax at all or filed it very late. “There are interests against late filing and it goes up everyday. So if you’re making a lot of money, the tax debt could add up quickly,” says Loomer.

He says another scenario is Wilcox unintentionally reported way less income than he should have. “The set of rules that apply to business people and employees is a lot different, and they make a huge difference on how much tax you pay,” says Loomer.

“I’ve seen cases where, a person runs a private corporation, and it owns 15 cars, and the person’s only been using them for personal use occasionally. But all of a sudden, Canada Revenue Agency says, the full value of those cars gets attributed to the person’s every year income.”

Loomer says it’s difficult for an average person to fully understand the 2,500 page tax act. And for business people, if they don’t have a good accountant to help them, they could fall into tax debt pretty easily.

“One thing that can benefit everybody is to simplify the income tax system, to harmonize different sets of rules,” says Loomer.

According to the Statement of Affairs document, Wilcox worked for two companies before he inherited the debt. The license of one of the companies has been revoked in 2013. But Wilcox is still the director of the WICO Construction Management Ltd.

“Hopefully, he has learned his lesson and pay taxes,” says Loomer.

Kimberley-Clark shifts focus on core business with spin-off

Business Assignment
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The maker of Kleenex tissues, Kimberley-Clark, has posted a three per cent decrease of its second-quarter earnings. While the company is selling more products, it is also costing it more money to produce them.

During the months of April, May and June of this year, it sold $5.3 billion worth of products, including diapers, tissues, hand sanitizers and gowns for doctors. The figure represents a 1.4 per cent increase from the same period last year.

However, costs of input also went up by 1.9 per cent, which grows at a faster rate than the rate for sales. As a result, the company’s second-quarter revenue only edged up by half a per cent.

Accroding to the latest earnings report, product costs increased $60 million over all. Seventy-five per cent of that was contributed by higher non-fiber raw material costs and the rest by higher fiber costs. The report says the price hike was in part due to the weakening of several foreign currencies against the U.S. dollar.

Peter Secord, who teaches accounting at Saint Mary’s University, says cost increase is the main reason for the three per cent revenue slip.

Over all, unfavorable foreign currency exchange rates brought up the second quarter input costs by two per cent. Kimberley-Clark is particularly vulnerable to currency exchange rate fluctuations in foreign markets because the 86-year-old business has manufacturing facilities in 38 countries, sells products in more than 175 countries.

Mark Buthman, the company’s senior vice president and chief financial officer, told reporters during a conference call that there was “significant currency headwind” during the second quarter, which brought down earnings by about $0.11 per share.

Meanwhile, Buthman says the price inflation of raw materials is likely to continue so he expects input costs for the whole year to be “towards the high end of the previously estimated range of $150-250 million.” That’s about 11 per cent of last year’s profit.

Kimberley-Clark’s second-quarter cost increase is also due to the fact that the company spent $15 million more in advertising. Tom Falk, chairman and chief executive officer of the company, says spending has helped brands, such as Poise, Depend, U by Kotex, Viva and Huggies baby wipes, to have a solid market position in North America. In its latest annual report, the company says it competes against other “well-known, branded products and low-cost or private label products” in both domestic and international markets. As a result, it has to lower product prices and spend more on advertising, both of which could adversely affect the financial results.

To stay competitive in the long term, the company announced a plan last November to spin off its health care unit. It hopes to turn the smallest division, which is not performing very well, into a separate, tax-free company so that Kimberley-Clark pays less tax.

The health care division, which offers products, including medical gloves, masks, generates about $1.7 billion annually – the lowest compared to the other three units. And it is the only business that saw a decrease in net sales in the second quarter than the same period last year.

However, things didn’t go as the company had planed. Last year, the U.S. Internal Revenue Service stopped offering tax-free arrangements for companies wanting to unload business divisions. That means Kimberley-Clark can’t avoid tax payments as it had hoped.

Instead, the company has been footing the bills since it started transition last year. During the second-quarter, it paid $68 million for the spin-off process, which amounts for 13 per cent of its quarterly revenue.

However, the company still wants to continue with plan. During the conference call, Falk says Kimberley-Clark is aiming to complete the transaction by the end of October, and it’s in the process of assessing the impact of the separation on its other business operations.

Earlier this year, the company said the new publicly traded company, Halyard Health, Inc., would be based outside of Atlanta, Georgia.

Professor Secord says a lot of the costs related to the health care unit that Kimberley-Clark is paying now wouldn’t go away after the creation of the new company. It’s called “stranded costs.” But at the same time, the company can no long collecting revenues from the new health care company to pay for those costs. So it could further reduce Kimberley-Clark’s profitability.

Falk estimates the stranded costs could amount to about two to three per cent of the company’s annual operating profit, but he says they plan to offset the cost by repurchasing more of its own shares and charge the new company with fees for the transition services it provides.

Professor Secord says, in the long run, it still makes sense for Kimberley-Clark to put forward the new company because stock markets have been on an upward stretch for a couple of years now, which means most investors are looking to buy shares. And he says, hopefully, by getting rid of the least profitable unit, the company could eventually focus on increasing the competitiveness of its traditional business, such as diapers and tissues.

Secord says three per cent decrease in last quarter’s profit isn’t significant enough to alarm investors, and it did not appear to have an impact on its stock prices.

Kimberley-Clark’s shares have reversed to an upward trend from its lowest point two weeks ago after the second-quarter earnings report came out. The company’s stocks closed at $108 per share yesterday, up from $103 a share on July 31, a week after the release of its latest earnings report.

Assignment 2
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Medical device company sells business division amid pending class-action lawsuit

Court Assignment
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A Tennessee-based global orthopaedic medical device company sold its money-losing hip and knee replacement business to a Chinese company in January.

The deal earned Wright Medical Group, Inc. $287.1 million – almost the exact same amount as its net loss in 2013.

However, a national class-action lawsuit filed in Nova Scotia three years ago against Wright’s hip implant products might cause the company more trouble with its bottom line.

Story of a failed hip implant

Ken Taylor still remembers that evening in September 2009, when he was at home sitting on the floor, trying to hook up an amplifier to his TV, and by the time he turned to get on his knee to get himself up, he heard a crunch – his hip implant fractured.

This happened two years after the Dartmouth resident got an implant on his left hip at the Queen Elizabeth II Hospital in Halifax. Ideally, a hip implant should last around 10 to 15 years.

After Taylor was rushed to the Dartmouth General hospital that night, the doctor had to keep him hospitalized because the only thing that was holding his leg on him was the skin.

The next day he was transferred to the QE II hospital and got a revision surgery to correct the broken neck of the implant. His doctor who performed the surgery told him the broken device was a faulty product.

However, the story doesn’t end there. It turns out the second surgery didn’t go well either – the device was loose, and the stem and Taylor’s femur bone didn’t adjust well so less than half a year later he had to undergo a third operation.

Taylor says the nurse told him if he was to have a fourth implant, there’s no room left in his femur bone for the stem to go down.

The surgeries have weakened Taylor’s left hip – if he sits for a while and gets up, he limps. After the third surgery, Taylor had to retire from his job.

He says if he knew the implant was going to cause him this much pain before his had the first surgery, “it would have been stupid for me to do it.”

Taylor’s doctor told him the first implant device that was put into him was defective and suggested him to see a lawyer. At first, Taylor was only filing for his own case. But two months into the legal procedure, his lawyer convinced him to switch to a class-action because the lawyer said there were other people who have similar implant fractures.

In September 13, 2011, Taylor and another Dartmouth resident Judy Rowter filed the class-action lawsuit at the Supreme Court of Nova Scotia against Wright Medical Group, Inc. and two other sub companies, Including one based in Ontario, who’s in charge of selling Wright’s products in hospitals across Canada.

Taylor says before he decided to take the legal action, he got in touch with Wright. And they offered him $30,000 to settle the case. And even the company staff, who talked to him admitted that amount was low. So Taylor turned to resolve the case in court.

But his interaction with the company provided him with the knowledge that the company knew their products were problematic, but kept selling them.

In fact, studies have being done as early as 2006, suggesting the Profemur Hip Implant System that Taylor got had a relatively high failure rate during the first few years after surgery.

Pending class-action case

The court has already certified Taylor’s case as a class-action, but the company appealed, accusing the judge of making an error and Taylor’s case doesn’t classify as a common issue, and incidents like this should be settled individually.

However, Raymond Wagner from Wagners Law Firm in Halifax, who’s Taylor’s lawyer, says this will discourage other patients like Taylor from coming forward because a lot of people couldn’t afford the $30,000 to $150,000 litigation fee.

Wagner says there are 15 to 20 people in Nova Scotia alone whose Profemur implants have fractured. And 30 others have signed up to join the class-action case too.

He says lawsuits on hip implant failures have been on the rise in recent years following medical device companies started making the metal-on-metal model, Wright’s Profemur products is one example. The medal parts rub against each other and release toxic particles in the patients’ body and the parts themselves gets fragile and become easier to break. Studies by medical journal Lancet suggest a higher failure rate of metal-on-metal models compared to metal-on-ceramic or metal-on-plastic models.

There are class-action lawsuits against the metal-on-metal products in the U.S. prompting companies, such as DePuy Orthopaedics, to withdraw their metal-on-metal models. And earlier this year, the U.S. Food and Drug Administration had asked 21 manufacturers to conduct safety studies on their metal-on-metal hip implants.

Still liable despite selling troubled business

From 2007 to 2013, Wright’s hip products have experienced growth and then decline (starting 2011). And the company’s net income had a same trend with the products success and failure because of an increase on the number of fracture complaints from its customers.

 

In January of 2014, Wright sold it’s hip and knee business to a Shanghai-based medical device company, called MicroPort Scientific Corporation. 

MicroPort is hoping the deal could help it expand its portfolio and get a presence in North America. And the company can take advantage of the growing hip implant market in Asian to sell Wright’s hip and knee products. The location of the business remains in Tennessee, U.S., only the name changed from OrthoRecon under Wright to the now MicroPort Orthopedics, Inc.

However, lawyer Wagner says the deal doesn’t free Wright from any potential liabilities from the lawsuit.

He says the court will make a decision by March on Wright’s appeal. “If Wright loses the appeal, it may encourage the company to resolve the case, which may take a couple of years,” says Wagner. Individual cases may vary, but Wagner estimates Wright will have to compensate each plaintiff who signed up to the class-action with $100,000 to $300,000.

If the court rules Wright winning the appeal, Wagner is planning to take the case to the Supreme Court of Canada, which may take over five years to resolve.

But he hopes the case can bring attention to relevant government organizations, such as Health Canada to ban the defective products from the market.

However, Wagner says Health Canada is an under-funded organization, who relies on manufacturers and physicians to provide all the information. “And with the budget they had it’s hard for them to do the policing,” says Wagner.

Eric Morrissette, Senior Media Relations Advisor with Health Canada says, “Profemur Hip System with the Long, Titanium Profemur Modular Neck component are no longer licensed for sale in Canada.”

He says in 2009, Health Canada investigated reported failures of the Profemur stems at the request of a surgeon. And the investigation concludes that “patients’ weight and activity level” are potential causes of neck fracture for the Long, Titanium Profemur Necks. “Health Canada’s findings were consistent with those of the manufacturer,” says Morrissette.

According to Ken Taylor’s class-action lawsuit, Profemur Hip Implant System first received licensing approval from Health Canada in 2011.

And so far this year, Health Canada has issued 373 new licenses to Profemur series products, the highest number since 2001. And a few of those products were the ones causing trouble to Ken Taylor and other plaintiffs.