Alberta Venture November 2011 Sampler

COST OF CONTROVERSY: MAKING WAVES CAN HURT YOUR BRAND

CAN RETAIL SURVIVE THE AMERICAN ONSLAUGHT?

GIVING AND GETTING: SPECIAL REPORT ON PHILANTHROPYwww.albertaventure.com

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ALBERTA AT

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Could population growth help the economy, clean up the environment, cut taxes and increase our influence in Ottawa? * Step aside, Ontario: Were coming through

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ContentsNoVEmBER 2011 | VoL 15 ISSUE 11

The Luxury Issue

34

34

To Each his own

meet three Albertans who take collecting things to the next level. Step inside the worlds of their indulgencesBy STEVE mACLEoD

When I chase cars, I take them the way they come. Whether its rubble or perfect, the thrill is in the chase. Fred Phillips, car collector

41ThE 25 bEsT Things in albErTaThey say you cant buy happiness, but we beg to differ. Presenting the 25 best things money can buy

48ThE luxE lifEBy LISA RICCIoTTI

CoVER PHoTo: Work Above/Rick Boden CoNTENTS ImAGES: Colin Way, Shaun Robinson, michael Byers, Jason Everitt Publication mail Agreement #40020055. Return undeliverable mail to Circulation Department 10259-105 Street, Edmonton, AB, T5J 1E3 or email [email protected]

Pampering the pamperers: Discover what four luxury dealers do on their time off

www.albertaventure.com ALBERTA VENTURE/NoVEmBER 2011 3

ContentsNoVEmBER 2011 | VoL 15 ISSUE 11

59

WeB eXCLUsIVesProject: trAnSforM AlbertA Learn more about our first game-changing idea for Project: Tranform Alberta with a podcast at albertaventure.com/10million luxury liSt want to splurge on something in our luxury list? get more details at albertaventure.com/luxe nAMe gAMe want your name on a hospital wing/park bench/theatre? See what it costs at albertaventure.com/namegame

departments6 editorS note contributorSBuckle up with Kulu motorcar; Food fight among Albertas cupcake boutiques; Aboriginal entrepreneurs

7676retAil therAPy

85The Internet is fast becoming the scourge of retailers, but these ones have found the strategies to surviveBy LEwIS KELLy

8

11 out front

15 winnerS circle 17 legAl eAgleSSpam: what you dont know might cost you

81runAwAy SucceSSone Alberta all-star retailers journey from single storefront to cultural centrepiece

19 executiVe SPeAK

Penn wests murray Nunns tells us what has him so fracking excited

26Feature

By chERyL mAhAFFy

22 the SMArt inVeStor

26AlbertA At 10 MillionAudacious? Definitely. Achievable? maybeBy mAx FAwcETT

specIal report on phIlanthropy

Fortress Paper has a licence to print money, but thats not the only reason you should invest in it get out of business the right way

54three of A KindBy RoBIN SchRoFFEL

24 riSK MAnAgeMent

Not all philanthropists are created equal. meet three that broke the mould

85 growing concern

micah Slavens prepares his company for liftoff Video didnt kill this radio star

69 71

Industry report: retaIlVitAl StAtS

59MAKe eVery dollAr countIf you run a charity, there are better ways to raise money than bake sales and car washesBy LAUREN DEN hARTog

87 next uP

90 MArKeting intel

courting controversy isnt necessarily a bad thing but it can be The four challenges future leaders will have to face

73

tArget PrActice

62

92 the green diVdend

American mega-retailers are pouring across the border. Are Albertas shopkeepers ready to respond?By ANNALISE KLINgBEIL

your nAMe here

The price of getting your name on everything from a park bench to a wetland to a hospital wingBy gEoFF moRgAN

94 inSide/out

Left behind: Koreas gift to Alberta stays as RAm moves

4 ALBERTA VENTURE/NoVEmBER 2011 www.albertaventure.com

EDITORS NOTE

Project: Transform Albertan this issue of Alberta Venture, we launch a series of game-changing-idea stories that we hope will stimulate dialogue on the future of Alberta. Titled Project: Transform Alberta, our plan is, over the next year, to pose six thought-provoking questions and then try to answer them. Questions such as, What if Alberta drew on its competitive advantages to develop an auto manufacturing industry? or What if we used our excellence in agriculture and biotech to try and feed the world? How would we go about these projects, and what would be the challenges and what the potential rewards? We begin in this issue by asking, What if Alberta decided to target a population of 10 million? What would that do for our economy, the environment and our influence in Ottawa? Managing editor Max Fawcett went on a search for answers, and you can read his story starting on page 26. To illustrate Alberta at 10 Million, art director Kim Larson took a recognizable photo of the Calgary skyline and projected it into the future. Take a careful look at the cover of this issue to see if you can distinguish the real from the fake. The remainder of the stories in the series will come out approximately every other month. We hope youll find them stimulating and decent fodder for discussion both around the water cooler and in the Twittersphere. We also invite you to contribute to the debate, and make suggestions of your own for a future game-changing-idea story, at albertaventure.com/10million. One possible story idea occurred to me recently while listening to Bill Currie, managing director of the Americas at Deloitte, talk about the challenges Canada faces from international competitors and our own waning productivity. We in Canada have had a number of things working in our favour over the last couple of decades that have allowed us to grow comparatively underproductive: We have had unprecedented access to the worlds

I

We have had a number of things working in our favour that have allowed us to grow relatively unproductive.

largest economy since the NAFTA deal was signed in 1994; the global marketplace was for a long time dominated by mature economies with similar labour costs to our own; and a Canadian dollar at 65 cents U.S. allowed us to paper over many of our shortcomings. Our GDP per person is now about $10,000 lower than in the U.S. But with increasing competition from around the world, the dollar hovering around par and demographics working against us, its time to pull up our socks. Currie suggested a number of steps we need to take to redress the problem. We need to foster entrepreneurship, re-tool the immigration system to attract and use skilled immigrants, develop hubs of specialized commerce, bring business, academia and government together, invest in machinery and equipment and reduce trade barriers in pursuit of new markets. Currie identified a couple of other problems that need to be addressed. Business leaders need to take more risks. There needs to be more support for innovation and greater access to start-up capital. But we also have a couple of things working in our favour, including a well-educated workforce that puts in long hours. Perhaps making Alberta the most productive jurisdiction in North America is fodder for a future Project: Transform Alberta story.

michael Ganley editor twitter: @MikeatVenture

IN THE dEcEmbEr ISSUEJoin Michael online at BizBeat, where he blogs on major news, including new developments on stories Alberta Venture has covered in the past. albertaventure.com/bizbeatc ur ti s trent

bUSINESS PErSoN of THE YEar: Meet the new titleholder ToP 10 bUSINESS STorIES: The biggest stories of the year Erratum: In our September issue, we identified ATCo Power as Albertas leader in energy transmission and distribution. In fact, ATCo Electric is the company holding that honour.

6 ALBERTA VENTURE/NoVEMBER 2011 www.albertaventure.com

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CONTRIBUTORS

48Ewan nicholson

54Robin schRoffEl

76shaun Robinson

81chERyl Mahaffy

Ewan Nicholson gets to do a job he loves photography and enjoy the Prada, Herms and Banff Springs Hotel thing. For this issue, Nicholson shot luxury dealers at Holt Renfrew and in Banff. Hes based in Calgary and specializes in people photography, mainly environmental portraiture, for commercial, editorial and advertising clients.

Robin Schroffels first assignment as a writer was to attract the 18to-30 set through a weekly local music column for the Edmonton Sun. Since then, her work mainly focusing on the arts and travel has appeared in places like Beat Route, Unlimited, See Magazine and TripAtlas. Along with writing, Schroffels adventures have included owning a record shop in Toronto, editing subtitles on feature films, shooting Santa Claus photos in the mall, touring North America as bass player in a punk band and interning at Alberta Venture.

Born in northern Alberta, Shaun Robinson is a photographer now located in Calgary. After he was finished studying at the School of the Photographic Arts: Ottawa, he returned home and began working for a variety of publications and shooting behind-thescene stills on large budget commercials. He continuesto explore his craft, which included a trip to The Inner Sleeve record store for this issue.

Cheryl Mahaffy lives and works in Edmontons Highlands district, less than three blocks from the North Saskatchewan River. Youll find her on riverside trails a few times each week, working up a sweat while battling the latest bout of writers block. You might call her a prime candidate for the clinics offered by the Running Room, the focus of her article this issue. Mahaffys most recent book, Its Amazing: The Sport Central Story, launched in September as part of the 20th-anniversary celebrations for Sport Central, a charity that distributes sporting equipment.

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Volume 15 Issue 11

Ruth Kelly ([email protected]) Joyce ByRne ([email protected]) michael ganley ([email protected]) max fawcett ([email protected]) geoff moRgan ([email protected]) Steve macleod ([email protected]) lewiS Kelly ([email protected]) duncan Kinney ([email protected]) KaRen SheRlocK ([email protected]) Kim laRSon ([email protected]) lindSay maclachlan ([email protected]) Ryan giRaRd ([email protected]) andRew foRBeS ([email protected]) vanlee RoBBlee ([email protected]) Betty-lou Smith ([email protected]) gunnaR Blodgett ([email protected]) andRea cRuicKShanK ([email protected]) JennifeR King ([email protected]) andRew williamS ([email protected]) amanda pieteRS ([email protected]) ally SpeRle ([email protected]) glenna gRavel ([email protected]) moniKa andeRlic ([email protected]) anita mcgilliS ([email protected]) denniS mccoRmacK ([email protected]) matt cooK ([email protected]) taRa gieBelhauS ([email protected]) Jacqueline cReeK ([email protected]) liz dennehey ([email protected]) Julia ehli ([email protected]) KaRen cRane ([email protected]) marzena czarnecka, lauren den hartog, alix Kemp, annalise Klingbeil, cheryl mahaffy, preston manning, lisa Ricciotti, Robin Schroffel, fabrice taylor, Ray turchansky, Steve williams 3ten, michael Byers, Jason everitt, Jessica fern facette, Buffy goodman, darren greenwood, greg halinda, ewan nicholson, Shaun Robinson, colin way, wilkosz & wayAlbertA Venture Is PuBlIsHeD 12 TImes A yeAR By VeNTuRe PuBlIsHINg INC. CoNTRIBuTINg PHoTogRAPHeRs AND IllusTRAToRs CoNTRIBuTINg WRITeRs sAles AND mARkeTINg AssIsTANTs ADVeRTIsINg RePReseNTATIVes (AlBeRTA) CAlgARy mANAgeR VICe-PResIDeNT, sAles ADmINIsTRATIVe AssIsTANT ACCouNTINg AssIsTANT CoNTRolleR eVeNT Co-oRDINAToR AssIsTANT PuBlIsHeR CIRCulATIoN Co-oRDINAToR CIRCulATIoN oPeRATIoNs WeB AND sysTems ARCHITeCT PRoDuCTIoN Co-oRDINAToR PRoDuCTIoN mANAgeR AssIsTANT ART DIReCToR AssoCIATe ART DIReCToRs ART DIReCToR CoPy eDIToR WeB eDIToR eDIToRIAl INTeRN AssIsTANT eDIToRs mANAgINg eDIToR eDIToR AssoCIATe PuBlIsHeR

PuBlIsHeR AND eDIToR-IN-CHIeF

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telephone: 780-990-0839 | facsimile: 780-425-4921 | email: [email protected] telephone: 403-228-4337 | facsimile: 403-217-6588 | email: [email protected] copyright 2011 by Venture Publishing Inc. Content may not be reprinted or reproduced on websites without permission. IssN #1207-2591CAlgARy sAles oFFICe: #4, 2526 BATTleFoRD AVeNue sW CAlgARy, AlBeRTA T3e 7J4

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Building tomorrows

leadersencourage others to reach their full potential.

Giving your time to help nurture a young entrepreneur is one of the most gratifying volunteer activities you can participate in. Mentors inspire young minds, help spark innovation, and

I am deeply indebted to all of the mentors who helped me throughout my career. The best way I can think of repaying them is to share my knowledge with entrepreneurs who are getting their start right now.

If you feel the same way, and are looking for a personally and professionally rewarding way to give back, I highly encourage you to become a mentor with CYBF.Wayne Chiu Founder, Trico Homes

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outnovember2011i n n o v at o r s ideasEdiTEd By gEoff moRgAN

inquiry

oddities

T:10.75

B:11.25

S:10.25 wiLko s z & way

kulu Punia

the Fast & LuxuriousBy geoff morgan

From the outside, Kulu motorcar looKs liKe any other

How a little-known supercar dealer in Calgary is changing the look of the citys streets

southeast Calgary warehouse. There is no storefront sign on the buildings exterior announcing the companys existence. A bit of small print on the front door reads, By Appointment Only. Inside, Kulu Punia sells some of the most expensive and hard-to-find cars in the province. His showroom is filled with Ferraris, Porsches, Bentleys and Aston Martins. I sell roughly 200 cars a year, Punia, 37, says, but that translates to about $20 million. Its just me and one other employee here. Its really simple, and on a busy month, well sell 20 cars. The front door is locked for a reason: Punia doesnt want a dozen people kicking tires when hes trying to sell a Ferrari Enzo to a moneyed Albertan. Other than my website and some advertising on Autotrader.ca, we dont do much marketing or promotion, he says. If the door was unlocked, Punia says he would need to hire additional staff to deal with shoppers visiting his showroom. Instead, Kulu Motorcar is set up for targeted searches of rare and expensive cars. A high-net-worth guy phones me and says, I want this car, Punia says. Thats how Kulu Motorcar operates. >www.albertaventure.com ALBERTA VENTURE/NoVEmBER 2011 11

out

THE MEANS TO AN ENZO: I would buy a $100,000 car and flip it just to make $500, says Kulu Punia

I talk to these dealers every day on the phone and we do a few million dollars worth of business every year.a Mercedes-Benz as a trade-in for a new car sale, Punia bids on the car and finds a buyer in another market. Between 1997 and 2004, Kulu Motorcar acted as a wholesaler between dealers until Punia started picking cars he could retail on his own, in his own space. Since Punia bought and renovated the warehouse in 2004 giving the interior of the shop a big makeover Kulu Motorcar has also become a luxury car retailer. But six years after renovating the interior of the warehouse, Punia says there are still no plans to update the front of the building. Not even with a sign.

Punia first incorporated his company in 1997, when he was in his early 20s. Since his high-school days, he had been flipping cars starting with Volkswagens to make money. Eventually, he found himself wanting to trade in the luxury car market, but dealers and wholesalers wouldnt give him the time of day. Punia says, At the beginning, a lot of these dealers would say, Who are you? Youre just a young kid. But that didnt deter him. Punia went on a cross-Canada trip to meet with luxury car dealers and wholesalers to establish a network. Thats when he realized it would take drastic measures

to get their attention. I would buy a $100,000 car and flip it just to make $500 and to get the dealers attention and form a relationship, Punia says, adding that was the case for many of his first car deals. Now, I talk to these dealers every day on the phone and we do a few million dollars worth of business every year. In fact, before Punia bought the warehouse in 2004, all of his business was done between dealers. Punia built Kulu Motorcar buying and selling excess inventory and trade-ins among dealerships across the country. When a Bentley dealer in Toronto accepts

Survey Says

Aboriginal Entrepreneurs

theres a lack of InformatIon

on aboriginal business owners in the country, according to the Canadian Council for Aboriginal Business, which set about changing that with its first national survey of aboriginal entrepreneurs since 2002. The 2011 Aboriginal Business Survey showed that Alberta ranked third in the country, with 18 per cent of its aboriginal population self-employed. Only Ontario (23 per cent) and B.C. (22 per cent) outpaced Alberta. The survey also found aboriginals were most likely to be self-employed in the professional services and construction sectors. Heres a breakdown of the proportion of aboriginal entrepreneurs compared to other Canadians by industry sector.

IndustryPRimARy CoNsTRUCTioN mANUfACTURiNg, TRANsPoRTATioN, wAREhoUsiNg whoLEsALE, RETAiL TRAdE PRofEssioNAL, sCiENTifiC ANd TEChNiCAL sERViCEs, EdUCATioN, hEALTh ANd soCiAL ARTs, ENTERTAiNmENT, ACCommodATioN, food ANd CULTURAL oThER sERViCEs ToTAL PoPULATioN 15 yEARs ANd oVER

#

aborIgInal entrepreneurs% 13 18 10 9 27

non-aborIgInal entrepreneurs# % 240,865 253,110 196,095 219,825 724,270 12 13 10 11 36

5,005 6,855 3,595 3,325 10,205

4,515 3,935 37,445

12 11 100

178,240 176,535 1,993,710

9 9 100


Market Share

Bakeries

CUPCAKES, IT SEEMS, ARE EVERYWHERE.

A New York City bakery is credited with starting the trend, which arrived in Alberta in 2004. Since then, the number of shops has grown considerably to more than 25 storefronts across the province. Does the number of shops and business owners in Alberta suggest the fad is becoming a fixture? Cailynn Klingbeil

Flirt Cupcakes Bliss & Co. Cupcakes and DessertsSylvia Kathol and Justina Wong opened their nut-free Calgary bakery in 2009 and now run two locations with 30 employees. Bliss offers 16 varieties of cupcakes. Their most popular avour is the Red Velvet, topped with cream cheese buttercream. We had been baking cupcakes for friends and just thought lets take a chance Sylvia and Justina The sisters are opening another downtown location. Michelle LeMoignan opened Flirt with business partner Rick Krupa in 2009 and the pair now runs two Edmonton locations with 14 employees. Flirt offers 14 varieties of cupcakes. Their most popular avour is the Heartbreaker, a red velvet cake with cream cheese icing. We saw the cupcake bakeries in [Vancouver and Los Angeles] and decided to try it here. Michelle LeMoignan

Buttercream Bake ShoppeIn 2010, current owner Toni Morberg bought the business, which rst opened at the Calgary Farmers Market in 2005. She now oversees three Calgary locations and 13 employees. The bakery makes 34 varieties of cupcakes, with 12 available daily. Their most popular avour is the Chocolate Cheesecake, a chocolate cupcake baked with cheesecake lling. I did some research and I felt like it was a good t so thats why I bought the business. Toni Morberg

Crave Cookies and CupcakesSisters Carolyne McIntyre Jackson and Jodi Willoughby opened Crave in 2004 in Calgary. The shop now has ve Calgary locations, one Edmonton location and 90 employees. Crave offers 14 varieties of cupcakes. Their most popular avour is the Crave-OLicious, a chocolate cake with blue vanilla buttercream. We knew we had a good recipe. Carolyne McIntyre Jackson A new Crave location opens in Saskatoon this month.

Fuss CupcakesCo-owner Dale Temple opened Fuss in Edmonton in 2006 with two business partners. The chain now has two locations in the city and employs 15 people. Fuss offers 20 varieties of cupcakes. The most popular avour is the Scarlett OHara, a red velvet cake with cream cheese frosting. [My partner] was in New York and had seen a bakery there that was just cupcakes and she thought it would work here. Dale Temple

DARREN GREENWOOD

www.albertaventure.com ALBERTA VENTURE/NOVEMBER 2011 13

TO THE LETTER Each issue, Alberta Venture will use this space to publish your thoughts. The author of a letter that has caught our interest will receive a book from our business library. Send your comments to [email protected]. Alberta Venture reserves the right to edit lettersThe Albertan Mindset Re: Almost Famoso, about Famoso founder Christian Bullock August 2011 What an inspiring story! Its great to hear how people in Edmonton and Alberta continue to believe in this community. As an entrepreneur coming from the East Coast, I have become an ardent and vocal supporter of Alberta and the Albertan mindset. We are open, honest, creative and daring, and it is these talents that keep us moving forward. Great work, Alberta Venture.Idris Fashan via albertaventure.com

Second That Motion Re: Give That You May Receive, by W. Brett Wilson August 2011 I encourage other corporate folks to try out Wilsons vision of corporate philanthropy. There are so many people who are in great need. There is the misconception that there isnt much to support; there will always be nancial need for medical issues, research and innovation, and, of course, the need of the poor in Canada (yes, we do have poverty). The greater public respects corporations that have an interest in humanity and contribute to the betterment of those around them and that is what philanthropy really is. Help those around you, and what goes around comes around tenfold.Sophie Zaworski via albertaventure.com

Another Name for a Blimp Re: Up, Up and Away, about the rise of airships September 2011 The key to a viable airship industry with immense growth potential lies in creating the proper design and, more importantly, its attendant manufacturing process. The so called hybrid airships have several detrimental design features, and the materials and method of their manufacture severely limits their ability to be elded in large numbers. Any meaningful development of cargo airships must plan to eld large numbers of airships. Even though they do employ new materials, shapes and ground handling systems, the hybrids have not yet managed to move far enough past the traditional blimp.Darrell Campbell via albertaventure.com

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WINNERS CIRCLE Alberta Venture salutes those individuals and companies that have been singled out for recognition of their accomplishments. Send your notices of awards or appointments to [email protected] The Coal Association of Canada announced a new president in September.

Ann Marie Hann, who previously led the Propane Gas Association of Canada, will now head the CAC. Enbridge Inc. garnered a national

/ Awards/ Events

award this fall for its support of the arts. At the Business For the Arts Awards Gala, Enbridge won in the Most Effective Corporate Program category. Shoreline Energy Corp. announced three executive appointments. Kevin Stromquist is the companys new president and chief operating officer. The two other appointments were to vice-president roles: David Richard Bell is the companys new vice-president operations and Brian Robert Cumming is the new vice-president engineering. Calgarybased Macleod Dixon LLP has a new partner. Mark Eade joined the firms securities group. E-T Energy Ltd. appointed Trevor Roberts to the role of president and CEO. Roberts is also a board member of the company. Bruce McGee, who was president and CEO, becomes the companys new executive chairman of the board. Colin Steyn is the new chairman of Coalspur Mines Ltd. The company also appointed Peter Breese to the role of non-executive director. Sparta Capital Ltd. added a new chairman to its board of directors in September. Carmine Falcone joins the companys board of directors as chairman, having spent his career with Shell. Robert Jennings joined TransGlobe Energy Corp.s board of directors as an independent director. Jennings is retired from Jennings Capital Inc., a company he established in 1993. Ridgeline Energy Services Inc. found a new chief financial officer in James Yeager, who was senior vice-president and CFO at Global Entertainment Corp. Tim Taylor is the new vice-president of investor relations at Mosaic Capital Corp. Before joining Mosaic, Taylor was vice-president of sales at First Asset Management. PetroDorado Energy Ltd., a Venture-exchangelisted Calgary company, named Krishna Vathyam as its interim CFO. The previous CFO, Sean Bovingdon, is the new CFO of Argent Energy Trust. PetroDorado also appointed Chris Reid as the controller for the company. Stantec announced that Doug Ammerman and Delores Etter have been appointed to the companys board of directors.

Dr. Peter Smith (left) and Dr. Bradley Kerr

Two researchers from the University of Alberta received a funding boost in September that will help them continue their research on neuropathic pain.

Pfizer Canada awarded $150,000 each, to be used over two years, to five researchers in Canada. Dr. Peter Smith, a researcher at the U of As pharmacology department, and Dr. Bradley Kerr, who researches in the departments of pharmacology and anesthesiology and pain medicine, each won Pfizer Neuropathic Pain Research Awards.

Phone the PodiumTech giant Nokia is giving Calgary-based Poynt Corp. $1 million in free marketing after Poynt placed high in its annual competition for global innovators. Poynt was one of 800 entrants competing in 17 different categories in Nokias Calling All Innovators 2011 competition. Nokia designed a contest that rigorously tested each application, and we are honoured to be considered one of the top apps, says Andrew Osis, president and CEO of Poynt. Poynt was the runner-up but will still be featured in Nokias $1-million marketing campaign. Poynt also won $150,000 for coming out on top in the competitions productivity and app tools category.

YOUR INNOVATION IS OUR MOST VALUED RESOURCESTRATEGICAthrivingcommunity withover7,000 businesses Strongregionalmarket ofoveronemillion people Rapidgrowthinthe professional,scientific, andtechnicalsector

EFFICIENTSolidinfrastructure: accesstoCPandCN rail,Trans-Canada Highway,Anthony HendayDrive,and extensivepublictransit Within30-minutesof EdmontonInternational Airport(YEG)

PROACTIVEDistinguishedlocal ChamberofCommerce (over1,000members) Foundingmember oftheAlbertas IndustrialHeartland Association(AIHA) Expandingretail environment

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BY mARzENA CzARNECkA

Anti-spammer in the WorksYou probably hate spam. You might hate the new anti-spam legislation even moreThE TopiC

As of January 1, 2012, Canada will have some of the most rigid spam legislation in the world, courtesy of the federal Anti-spam and online Fraud Act. What does that mean for business?oN ThE hoT sEAT

LuAnne Morrow from the Calgary office of Borden Ladner Gervais LLp

Robert White from the Edmonton office of Davis LLp

ont ask Robert White what he thinks of Canadas new antispamming legislation, lauded by some as the most rigorous in the world, because itll scare you. This Edmonton business litigator is, simply, appalled. I think this is one of the worst pieces of legislation I have ever seen or could conceive of in a free and democratic society, White says. Whats wrong with it? As White might say, what isnt? Whoever drafted this bill did not pay much attention to either the Telecommunications Act or the Charter of Rights and Freedoms, he says. Under the guise of protecting people from unwanted advertising, it vests a commissioner with the power to control how Canadians primary means of communication can be used. The power given to the commissioner is horrendous.Ouch. Intended tO prOhIbIt unsOlIcIted

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and misleading electronic communication as well as online fraud (made possible by the not-so-brave new world of e-communications and social media), the act introduces into Canadian law several new offences. It also authorizes whopping penalties for off-side behavior of up to $1 million for individuals and $10 million for organizations. If youve ever sent a customer an email, youd better be paying attention. The intention behind the legislation is to stop what is now seen as spam and other negative things that are possible

with the use of email, voicemail, text messaging, instant messaging and so on, says Borden Ladner Gervaiss LuAnn Morrow. The Calgary intellectual property lawyer does not share her Edmonton colleagues visceral reaction to the act. But she does see its scope as being broader and not by a short stroke than its authors may have intended. The reality of the legislation is that because its quite broad, it does capture commercial communication that many legitimate indeed, most legitimate business owners do engage in with their current customers, past customers and potential customers. Legitimate Canadian businesses (and even international businesses communicating with Canadian customers) are most vulnerable to the rules pertaining to commercial electronic messages, which these days constitute the bulk of business-tocustomer communications. And the rules are stringent. Essentially, you cant send a client or prospect a communication unless she has agreed to get it. Once you have consent, youre still not out of the woods, as each message has to comply with certain formalities, notably your detailed contact information and opt-out/unsubscribe options. Need we add that the message cant be misleading? You knew that already.FOr the mOst part, thIs dOesnt sOund

with most of the new rules. But youre probably not all the way there yet, and the one that youre most likely tripping up on is the question of consent, even if youve put your email list together yourself. Morrow suggests that businesspeople treat the new rules as an opportunity to really get to know their business communication program or, at the very least, the email part of it. You can call it an audit or an informal review, but whatever you call it, you need to make sure that you do it. Understand what your program is, where it is that youre getting your email lists from and what it is that youre doing with that information, she says. If youre getting your list from an outside provider, review that relationship and your contract and ensure your provider is going to be in compliance with the legislation. If youre compiling the list yourself, you need to ask how youre doing it. Is explicit consent part of the process? Are you keeping the document trail that establishes consent, just in case? Um, document trail? You just have customers scribble their email addresses on stacks of scrap paper on the counter, and then toss the paper into the garbage er, recycling as soon as you add their information to the database. Morrow suggests you have a look at that database, and add a field or two to your records that clarifies how youre collecting that email address, when you collected it and what the relationship is between your business and that individual (past customer, current customer, potential customer and so on). And while youre at it, clean up your historical records.theres nO need tO hyperventIlate IF

that bad, right? Morrow doesnt think you should be scared. Odds are, she says, youre already well on your way to complying

youre behind on some of this. After all, youve got a three-year grace period to become compliant. Businesses are not going to be suddenly afoul of the law the minute it is in force, Morrow says. For his part, White has doubts whether the act will survive the legal challenges that he sees as almost inevitable. It has >


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commercial and constitutional issues galore, he says. Im not even sure it isnt unconstitutional. If youre a furnace-cleaning company, he says, that as a matter of business practice sends out an email to all your customers and prospects to remind them its furnace-cleaning time again, I would tell them go and do it. You may be prosecuted ... but you will successfully defend it. And if youre a vendor who really likes to advertise using the Internet, and perhaps push the envelope a bit on whats allowed? I would look for loopholes in this legislation, White says. And he sees plenty of potential for finding loopholes. This is the kind of legislation only a lawyer will love, he says. The act is full of ultra-specific definitions and particularities. The implication, says White, is that if its not mentioned, its not covered. And if its not invented yet were you tweeting five years ago? its definitely not covered. If youre a telecommunications provider, Whites advice is even more direct. I would tell them that in my opinion, the bill is unconstitutional and unworkable, he says. And Id say to them, At the earliest opportunity,

Whoever drafted this bill did not pay much attention to either the Telecommunications Act or the Charter of Rights and Freedoms. Robert White, Davis LLP, Edmonton

Find ouT by reading The

money i$$ueThis monTh aT

you need to challenge this legislation. He sees certain provisions of the act as being at odds with the Telecommunications Act and the national telecommunication policy it articulates. One of the elements of this policy is to facilitate and strengthen the conduct of business and the maintenance of the social fabric in Canada, he says. In his opinion, the spam legislation, in the name of keeping buy Viagra cheap ads out of our inboxes, endangers that. The tone of the legislation is meant to prevent and decrease what are already illegal activities, says Morrow. Spam is a real problem, and an expensive one. It takes up time and resources, she says. But business owners who simply want to market to their clients dont need to be scared. They just need to take some proactive steps to comply. Next MoNth Adam Pekarsky, founding partner of Pekarsky Stein, James Pasieka, managing partner of the Calgary office of national law firm Heenan Blaikie LLP and several Alberta-based in-house counsel discuss how big you have to be before you need your own in-house lawyer. AVMarzena Czarnecka is a Calgary-based business and legal affairs writer. She can be reached at [email protected]

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ExEcutivE SpEak

Back in the SaddleSix years ago, murray Nunns thought he was done with the oil and gas business. Heres why he came back, and what has him excited againWhen it comes to AlbertAs oil And gAs

ja son s tang

industry, Murray Nunns has seen it all, from the heady days of the 1970s energy boom and the carnage caused by Pierre Trudeaus National Energy Program to the rise and fall of the energy trust structure. Its the industrys latest development the introduction of horizontal fracturing techniques and the ensuing restoration of old oil and gas plays that convinced him to come out of a self-imposed semi-retirement and return to the boardroom at Penn West Exploration in 2008. After serving as the companys COO, Nunns officially replaced outgoing CEO Bill Andrew in August. Heres what he has to say about the oil and gas business, the new technologies that brought him back to it and the challenges associated with changing a corporate culture. >


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AV: In an interview with Alberta Oil this past January, you said you found yourself tiring of the game by 2005. How come? MN: I was tiring of the game because we were operating, on the conventional side of the business, in a sunset basin. The whole advent of the [energy] trusts was really an acknowledgement that there was an inability to find hydrocarbons at economic levels. There was no rate of return to be had, and so you were better off putting the money in shareholders hands. In my mind, that marked the sunset. The surprise sunrise was the evolution of multi-frac technology. That changed everything, and thats what refreshed me. AV: How much further can companies like Penn West push the envelope when it comes to horizontal drilling techniques and other technological advances? MN: Once youve cut out 75 per cent of the costs, theres not a lot of room to move that way. Where the game is now is finding new rocks to apply it to. Some of those are old, existing reservoirs that we thought were sub-economic but really werent. Some of those are rocks we never even tried it out on before. Its like expanding the playing field from a pool table to a football field you have to look at everything again, and as a geologist, thats as good as it gets. AV: Its been said that Penn West has some of the best land positions in all of Western Canada. What are you doing to unlock that value? MN: Since mid-2009, we started appraising the applications to the land. In the trust world, you could only do that at a certain pace. Because of the conversion in 2011 [from an energy trust to a corporation] and the subsequent cut of the distribution now dividend it freed up more dollars to accelerate that process. As we move forward through the balance of 2011 and 2012, were really starting to go into development mode and push harder and faster on some of the better parts of the inventory.

AV: Would Penn West consider entering into another partnership like the $2.6-billion deal it signed with China Investment Corp. in 2010 to develop some of that inventory? MN: I dont want to say that our plate is full, but you have to ask how many operations your company can effectively manage at a time. Weve got the depth of inventory to do more, but right now were focused on getting our existing ones up and in running order. Well look at other opportunities, but theres no rush to take advantage of them. AV: Penn West is a major player in the Cardium region. Can it be as productive and profitable as the Bakken? MN: In the fullness of time there is absolutely no reason that it wont match, if not outstrip, the Bakken. I think the Cardium has proven itself in the past, even just with

driven to the lowest possible denominator in terms of risk. Thats not the case in the E&P [exploration and production] world. You have to take chances, especially when youre learning with a new technology, and you have to push the envelope in a reasonable manner. Part of it is teaching your workforce, which had become very risk-averse, that its OK to push the envelope a little bit. Its OK to come out and play. AV: In August, you replaced Bill Andrew as the CEO of Penn West. What did you learn from him? MN: With Bill, first and foremost, it started and ended with people. You take care of your people first, and then you take care of the business. Number two, trust your judgment. He had good intuitive judgment, and as he said, You havent practiced for

Its like expanding the playing field from a pool table to a football field you have to look at everything again, and as a geologist, thats as good as it gets.vertical technologies. In the late 1960s to early 70s, it was producing over 200,000 barrels a day all the Cardium has to do is return to anywhere near those levels. Our typical spacing out there is 80 acres, and if you look at a similar field in West Texas, theyve drilled it down to about five-acre spacing. Their recoveries would be pushing 25 to 30 per cent, and ours are at 10 to 15 per cent. Theres ample, ample running room for the Cardium to return to the kinds of levels it has been at in the past. AV: You recently finished converting back from an income trust to a corporation. What was the biggest challenge? MN: The fundamental aspect of the trust model was to take very limited risk. All your technical work and economic activities were 32 years for nothing, Murray. Use that. The third thing is that he absolutely embraced an idea. He was a very curious person. AV: When someone comes along in 10 or 15 years to replace you as CEO, what are they going to say they learned from you? MN: Thats a damn fine question, and Im not certain I have a really good answer for it. I guess I would say the ability to balance the technical knowledge of the assets with the strategic knowledge of the balance sheet in order to drive growth forward. And from the human side of the equation, that I never forgot how to have fun. AVRead a profile of murray Nunns written earlier this year in our sister magazine, Alberta Oil, at Albertaoilmagazine.com/nunns


THE SMART INVESTOR

BY FABRICE TAYLOR

Paper Gains

Fortress Paper makes money literally. Heres why it can make some for you

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ike so many stocks in recent months, Fortress Paper Ltd.s stock has fallen out of favour. Yet the companys story is intact, the impressive growth prospects havent disappeared and management has an excellent track record of acquiring assets on the cheap. Fortress makes money both literally and guratively. Its Landqart mill in Switzerland is the sole provider of bank note paper for that countrys franc, and its also one of only nine suppliers for the euro, which it produces for 10 countries. The mill also produces currencies for other countries in Europe and Africa, as well as a variety of security papers, such as those used in passports. Thats not all. Fortress Optical Features, the assets of which were acquired in January, produces security threads used in banknotes. The companys Dresden mill in Germany is one of the biggest producers of non-woven wallpaper base in the world. Finally, and most important to the investment thesis, is the companys pulp mill in Thurso, Quebec. Pulp may seem an unlikely source of growing income but, in this case, it is.

FORTRESS PAPER LTD.

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There is a lot of excess capacity in this business. The strong Swiss franc has been a problem, although the peg instigated by the Swiss central bank will help. Delays in launching anticipated new currencies have also hurt, as have high material costs. The outlook for this segment of the business isnt exactly brilliant, although the company clearly sees it as attractive, since it continues to invest in innovation and research. Meanwhile, the wallpaper base business is performing well, with healthy prot margins and growing market share. Management anticipates that share to reach almost 60 per cent, more than twice what it was in 2006. Demand for wallpaper is growing

A stock with both a short-term catalyst and long-term upside is a rare combination.Acquired early last year for all of $3 million, the Thurso mill currently makes northern bleached hardwood kraft pulp (NBHK) a sunset industry. But the mill is being converted to make dissolving pulp (DP), which is used primarily in rayon, a cotton substitute (and at the higher end of the spectrum, a source material for cigarette lters and even bombs). Prices for dissolving pulp are very high, thanks in part to a cotton crop failure that drove up the price of cotton and hence the demand for rayon. The specialty papers and banknote business has been hampered somewhat by the inefciency of the Landqart mill. There are two lines, one of which has recently been refurbished for more throughput. It will operate as needed while the other will essentially be shut down. thanks to changing fashions and some customer-friendly innovations, such as papers that can be more easily removed and an increase in their insulating characteristics. The outlook for dissolving pulp is also good, although it can be easy to overlook the risks. Cotton is cheaper, and while its vulnerable to crop failures it grows in just two years, so it doesnt take long to increase supply. High prices resulting from a shortage are an excellent incentive. Thats not to say Fortress wont benet from current high spot prices, which are near US$1,500 per tonne. And given that the Thurso plant will have top-notch equipment, it will be a relatively low-cost producer. Unfortunately, Fortress recently announced a three-week delay to the transition of the plant from NBHK to dissolving

pulp, which took the wind out of the stock. I should stress that CEO Chad Wasilenkoff has put together a very experienced team to manage this transition, which is by no means a simple process. I spoke to him recently and he reports that everything is going rather well. Also, the pulp that the plant currently produces is a specialized variety, which sells for better prices than standard NBHK pulp, so the lost opportunity will be somewhat offset. Longer term, the supply of cotton will likely fall, as it requires a lot of land to grow, land that will probably be directed towards the production of food and other higheryield agricultural products in the future. Another valuable asset in the Fortress stable is its top-notch management. Fortress went public in 2006. That it paid only $3 million for the Thurso plant, which was subsequently written up by $45 million, testies to Wasilenkoffs abilities. This also bodes well for the long-term investor. But I think theres also a short-term opportunity in the stock given the depressed valuation. Fortresss value is highly leveraged to DP. The three-week delay reduces fourth quarter prots by between 30 and 40 per cent. But I think the transition will go relatively smoothly. Assuming it does, and that DP prices stay healthy, Fortress has lots of upside. A stock with both a short-term catalyst and long-term upside is rare. From where I sit, this one looks like a solid investment. AVFabrice Taylor, CFA, is an award-winning nancial journalist and analyst. He is also the author of the market-beating Presidents Club Newsletter. He can be reached at [email protected] DISCLOSUREFortress Paper Ltd. (TSX:FTP)

STOCK HOLDING

Author Position

22 ALBERTA VENTURE/NOVEMBER 2011 www.albertaventure.com

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Risk ManageMent

BY RAY TURCHANSKY

The Allure of the FraudsterIt always pays to ask questions and educate yourself

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ne unintended consequence of the financial crisis that started in 2008 has been the exposure of a plethora of fraud schemes across North America. Activity has ranged from inheritance scams to phishing ploys to gain the account information of clients of financial institutions to age-old Ponzi schemes. I think Warren Buffett said, When the tide goes out, you finally realize whos been swimming naked, says Larry Elford, a former financial adviser who left the business in 2004 and turned to investor protection. He specializes in financial investment malpractice and has directed a television documentary, Breach of Trust, about white-collar crime. Elford joins a growing movement of Canadian investor protection pioneers such as Diane Urquhart, Joe Killoran and Ken Kivenko in trying to educate people to recognize attempts to access their money and their identity. The RCMPs Commercial Crime Branch estimates there are between $10 billion and $30 billion in fraud offences committed each year, which makes them as profitable as drug-related offences. Last year, the federal governments Canadian Anti-Fraud Centre received more

Many fraudsters migrate to hot economies, which offer a plethora of potential victims. But when good times turn into recession, many bad investments fall apart and the perpetrators are exposed. Were learning that real estate doesnt always go up, Elford says. He adds that, in these tough economic times, people in a variety of investments they suspect might be risky are starting to ask for their money back, which they previously didnt do with quite the same frequency. There have been a handful of popular plots in past years. Pyramid schemes are the old chestnut, led by the likes of Bernie Madoff and Earl Jones, who have preyed on family and friends. The alleged schemes of Calgary businessmen Milowe Brost and Gary Sorenson, who may not go to trial until 2013, are said to involve billions of dollars. Among the favourites are hotel ballroom investment pitches, companies offering fake scholarships, newspaper ads selling real estate, and presenters advertising that theyll teach you how to make $100,000 a year working from home. Elford has attended seminars where presenters offered gold and silver with the buyers identification on it to be held in a

There are three types of schemes in vogue: the prize pitch, the grandparent scam and low-interest loans and warranties.than 51,000 complaints of mass-marketing fraud costing $56.7 million, as well as 953 complaints of identity theft and fraud costing $8.7 million. The anti-fraud agency says three types of scams are currently in vogue. One involves the false and misleading promotion of low interest rates for loans, extended warranties and insurance. A second scheme is the prize pitch for things such as coin collections and pen sets, the rub being that you have to make another purchase up front. A third ruse is the grandparent scam, where a con artist phones claiming to be a grandchild who has had an accident and needs emergency money. Swiss bank. One person being recruited as a salesman was told to guarantee, in writing, 12 per cent annual returns on an investment only because the Andex Chart for Investors showed 12 per cent returns for an unrelated stock market index in previous years. There are offers to buy real estate in Costa Rica or make oodles through inflated donations to charity in South Africa. Sometimes pressure is applied on people to phone their credit card companies during a break in the investing presentation and demand a higher credit limit so they can put more into the investment. Seminars making the rounds in Alberta hotel ballrooms recently sold title deeds on distressed property in Texas.

If only I had a dime for every real estate goofball Ive seen come down the road with the pitch, How I made a million dollars with nothing down, Elford laments. Given stock market volatility and extended low rates for fixed-income returns, he says, people have been so hungry for something. There are a number of ways to manage the risk of getting involved in such ploys. You should check out offers with a financial adviser, accountant, lawyer, the Better Business Bureau or a securities commission. People should educate themselves, become really aware of how finance works, Elford says. Become financially literate. Go to courses; go to seminars not sales seminars but real educational things. Get yourself a notch up above the lowest level of the economic food chain, the fish-food level, where all youre given is publicity and sales information. Avoid presentations that sell products. Ask whos doing the selling, what fees are involved and what exactly is being sold. Conversely, there are legitimate seminars that teach you how to invest. Theyre delivered by people whose business is to teach, not sell. You can also learn from Canadian AntiFraud Centre and Canada Revenue Agency websites. The latter warns about recent frauds such as tax shelters that inflate donation values of artwork and medical supplies. Alas, the Canada Revenue Agency itself has been the victim of scam artists who write taxpayers on fake CRA letterhead and, in the guise of warning about tax evasion, corporate profits and identity theft, ask for personal information. Legitimate groups and companies seldom ask for personal information online. If you receive such a request, you should ask the organization about it. RBC, for instance, has a link for clients to redirect recent email phishing requests for account information, so the bank can investigate the requests. I think the public awareness is definitely improving, says Elford. The younger people are no longer simple believers in anything theyre told; they really do a good job of getting on the Internet and doing their own investigating. This economic decline in the United States and elsewhere is educating people painfully, but fast. AVRay Turchansky is a veteran business writer and tax preparer. He can be reached at [email protected]


Alberta Venture November 2011 Sampler

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