Blind Trust

On the third floor of a faceless commercial tower in Vienna, Virginia, a bedroom suburb of Washington, D.C., the directory prompts a double-take. Here, in this landlocked stretch of shopping malls, sits the unlikely nerve centre of the Liberian International Ship and Corporate Registry, one of the offshore conveniences that allows the world’s maritime moguls to fudge their ownership, hide their profits, and keep their fleets afloat with discount maintenance standards and cut-rate Third World crews. The fifty-five-year-old registry sells a ship’s rights to fly the Liberian flag—an eye-catching riff on the U.S. Stars and Stripes with a single white star on blue in the upper left corner, befitting a country founded by freed American slaves. All that’s required is a basic ten-cents-a-tonne fee and an annual flat rate of $3,800 per ship, plus an inspection with assorted costs. No need to visit Virginia, let alone bloodied, benighted Monrovia, in ruins from a decade-long civil war. Once the paperwork is complete, a fleet owner can stroll into any port and buy the flag at a store.

In the shadowy world of international shipping, Liberia is just one of more than two dozen countries that offer their national colours for sale. But, for the outcast regime of Charles Taylor, the Liberian registry proved a particular boon. With a roster of 1,900 ships, it is second in size only to Panama’s, funneling $18 million a year into Monrovia’s coffers—more than a quarter of the total foreign revenues of a nation isolated by United Nations sanctions.

Two years ago, a UN report traced some of Liberia’s revenues from the registry to offshore accounts used to buy arms for Taylor-backed rebels in Sierra Leone, in flagrant defiance of those sanctions. Around the world, members of the International Transport Workers’ Federation and the human-rights group Global Witness exhorted fleet proprietors to stop subsidizing the bloodshed and abandon the Liberian flag. No less than Lloyd’s List, the bulletin of the British maritime insurers, observed, “Never has the proposition that shipowners bear no moral responsibility for what flag states get up to looked so flimsy.” Which is why it seems noteworthy that Canada’s most celebrated shipowner, Paul Martin—until late August the official proprietor of Canada Steamship Lines—continued to list five ships on the Web site of his company’s international division that were flagged to Liberia.

At Canada Steamship Lines’ Montreal headquarters, where senior vice-president Pierre Préfontaine rhymes off the vessels in Martin’s international fleet, he doesn’t mention those Liberian-flagged ships or seven others sailing under the flag of Vanuatu, a tiny South Pacific tax haven first made trendy by the money-laundering set. One reason for that lapse may be the dissonance between the company’s iconic national image and its somewhat less patriotic reality. On the masts of all twenty cargo carriers owned or operated by csl International, as part of partnership agreements, there is nary a Canadian maple leaf in sight––nor, on board, a Canadian crew.

As it turns out, for tax-paying purposes, csl International isn’t a Canadian corporation at all. Unlike its sister company, Canada Steamship Lines, Inc., a historic presence on the Great Lakes since 1913, csl’s international division is based in a cinderblock low-rise in Beverly, Massachusetts, on the outskirts of Boston, but registered as an International Business Corporation (ibc) in the Caribbean tax shelter of Barbados. The Barbadian corporation, in turn, is owned by a holding company in Bermuda, another offshore fiscal paradise. Over the past seven years, that labyrinthine set-up has managed to save csl International and its Montreal-based parent, the csl Group, millions in Canadian taxes.

In some industries, such offshore fiscal chutzpah might raise eyebrows, but not in the rough-and-tumble waters of what’s known as the ocean trade. “You can’t operate with Canadian ownership and Canadian crews—it’s too competitive,” says Jack Leitch, the majority owner of the Toronto-based Upper Lakes Group. “Even God couldn’t make a go of it under those conditions.”

But Paul Martin’s company, which dove into the ocean trade in 1982, has never looked back. A year after Martin bought Canada Steamship Lines, he made a defining decision—to expand, not on the venerable Great Lakes routes, but out on the high-risk high seas. Ten years later, he gave the nod to set up a separate international division, officially registered in Liberia. That abrupt change in direction has been hailed as having refitted the company for the global economy. It has also given Martin his unique leadership mystique—his credentials as a multi-millionaire captain of industry who has survived the riptides of world commerce. But, at a time when only an act of God seems likely to block his coronation as Prime Minister Jean Chrétien’s successor, that provokes the question: Does Martin’s corporate experience fit him to helm the ship of state?

In All the King’s Horses, author Ron Graham notes that Martin threw himself into politics in 1988 “hoping to do for Canada what he had done for csl Group.” But understanding what he accomplished at csl is no easy matter. Martin himself won’t talk about a subject that blew up such a storm of conflict-of-interest allegations last spring that he finally bowed to the polls and promised to hand over the company to his three grown sons; he announced the official transfer on August 27th. Even some supporters seem unwilling to incur the wrath of a man known for his Vesuvius-like temper, who may soon have federal policies, and contracts, to dispense. “We don’t want to make pronouncements that will be linked to Paul Martin,” says Shane Foreman of the Canadian Shipowners Association. “It’ll backfire on us.”

At csl headquarters near Montreal’s Vieux-Port, the hatches are battened down. Pierre Préfontaine, the company’s official spokesman, declares all queries on what Martin knew about the company’s dealings, and when he knew it, either off-limits, or the domain of the federal ethics counsellor, Howard Wilson, who in turn deems them subject to the Privacy Act. As for csl’s corporate record, Martin ensured it would never be scrutinized. In the course of buying out the company, he took it private, putting its books beyond the reach of prying eyes.

All last winter, controversy dogged Paul Martin almost daily in the headlines. Conflict-of-interest allegations, both past and potential, were being hurled at him across the House of Commons floor. But, for nearly three months, he clung fiercely to his Canada Steamship Lines empire as if to a life raft. In one indignant outburst to journalist Susan Delacourt, then writing in the National Post, he declared that he’d never have entered politics if he thought it would mean he’d have to sell his beloved boats. “I’ve had this love affair with ships since I was five years old,” he told her. “I just love ships. I love harbours. I love ports. When I was in the business, I’d go down to the ships and crawl through the engine rooms.”