Silent partners

P.E.I.’s now-defunct immigrant partner program supposedly saw immigrants invest up to $200,000 in businesses in which they then played an active management role. University of King’s College students investigated and found partnerships that existed mostly on paper.

Rita Zhao's restaurant (photo by King's Investigative Workshop)

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By King’s Investigative Workshop

The Beijing Restaurant on University Avenue in Charlottetown is a bright, open building filled with red and black calligraphy.
While cars speed by on Charlottetown’s busiest thoroughfare, Rita Zhao, her husband and their two children serve up dumplings, egg pancakes and shredded pork, just as any family restaurant in Beijing would.
Zhao runs the place on her own during the day. She rushes back and forth from the kitchen to the neat dining area out front — both cook and waiter. Her English is halting, but her smile is broad. In the evening, her two children come back from university and her husband from language class, and they help out.
Zhao’s family came to Canada, and Prince Edward Island, in 2010. They had made their business investment in P.E.I. before leaving China, and looked forward to a life in Canada.
Their ticket to Canada was the provincial nominee program, under which provinces can nominate foreign nationals for entry to Canada so they can fill labour market needs.
Their story stands as a perfect example of the kind of immigration envisaged by the program: immigrants settled successfully into the community, involved in a business, contributing to the Island’s future.
But there’s a problem with this picture.

No contact

The Beijing Restaurant isn’t the business her family invested in as part of the immigrant partner program. In fact, she has had no contact with that business at all. Her family was left to fend for itself in a small, unfamiliar place, far from home. Starting the Beijing was a way of making some money, and staving off the purposelessness that so many immigrants here feel.
The P.E.I. government has always maintained that despite charges of conflict of interest and political favouritism toward those who received money, and the threat of a renewed RCMP investigation into the program, its provincial nominee program was fundamentally sound, brought much-needed capital to the Island and helped increase P.E.I.’s population by establishing new immigrant communities.
But an investigation by journalism students at the University of King’s College has found that a decade after it started, the now-defunct program has an uncertain legacy.
For some, it became a way for foreign nationals to purchase entry into Canada, by making “investments” they would never recoup, in companies they might not even know the name of. Most who came are now long gone from P.E.I. For businesses, it was an easy source of capital. But the partnerships between the businesses and immigrants that were supposedly at the heart of the program, and gave it its name, often existed on paper only.
Among the findings of the eight-week probe:

The P.E.I. government interpreted Ottawa’s immigration rules in such a way that immigrants could be considered actively involved in businesses they knew little or nothing about.

  • The program brought thousands of immigrants to Canada, mostly from China and the Middle East. But with no tangible connection to P.E.I., many immigrants either never came or moved on quickly rather than settle on the Island as Ottawa intended.
  • Organizations that would otherwise have been ineligible were able to access immigrant money by creating new corporations structured to meet the program’s rules.
  • If the program had operated as advertised, it would have pumped more than $660 million into strategic sectors of the P.E.I. economy, twice the annual value of the Island’s agricultural sector. The real amounts were far less, and more than half of the money was made by middlemen.

Cracking down

At first, it was a quiet, bureaucratic struggle, but by 2008, the gloves came off as Ottawa forced an end to P.E.I.’s Immigrant Partner program.

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By King’s Investigative Workshop

Province House in Charlottetown, Prince Edward Island (photo by King's Investigative Workshop)

The Prince Edward Island government resisted years of efforts by Ottawa to have it change an immigration program that federal officials increasingly saw as a threat to the integrity of the country’s immigration program.
The plan allowed foreign nationals to obtain expedited entry to Canada by making a payment, some of which went to a business in Prince Edward Island.
Federal officials eventually took the unprecedented step of using its regulatory power to force a shutdown. This led to a showdown in the spring of 2008 as P.E.I. raced to nominate as many immigrants as it could before the new regulations took effect, while federal officials became increasingly alarmed at what the sudden surge would mean for processing times and due diligence in selecting applicants.
By the time Ottawa forced the shutdown, P.E.I. was nominating so many immigrants from China that Island nominees accounted for 88 per cent of all provincial nominees applying though Canada’s mission in Hong Kong.
Much of what went on between the two levels of government was largely kept confidential, but journalism students at the University of King’s College in Halifax pieced together a picture by reviewing public records, reading legislative transcripts and speaking to officials who were involved.

Co-operation

The immigrant partner program was born out of an agreement signed between P.E.I.’s Progressive Conservative government and Jean Chretien’s federal Liberal counterpart in 2001.
Similar to agreements with other provinces, it gave P.E.I. new rights to nominate foreign nationals for entry into Canada. These “nominees” were to be selected to meet specific labour market needs and to contribute to economic and industrial development.
Ottawa retained responsibility for ensuring nominees were otherwise admissible to Canada but promised to expedite the processing of their applications.
But when Lt.-Gov. Leonce Bernard rose in the P.E.I. legislature to read the 2002 speech from the throne, the part about meeting labour market needs wasn’t even mentioned. Instead, the focus was on money.
“The Ministry of Development and Technology will aggressively market a new provincial nominee program to potential immigrants,” Bernard read. “The objective of this program will be to make available investment capital to new and existing Island businesses.”

The Confederation Centre of the Arts in Charlottetown created two companies to receive immigrant money (photo by King's Investigative Workshop)


Responsibility for running the program was given to a Crown corporation called Island Investment Development Inc., which was already responsible for approving investment of P.E.I.’s share of money from the federal immigrant investor program.
But Ottawa didn’t want P.E.I. to create a provincial carbon copy of that program, partly because it felt those who simply invested money in hope of a return would have little incentive to remain in the province that nominated them, and partly because it would undermine the federal program, which makes immigrants wait much longer for approval and requires a larger investment.
Officials didn’t want a provincial nominee program, with its promise of speedy entry into Canada, to be a way for immigrants to bypass the normal channels for general immigration to Canada. But P.E.I.’s program became exactly that, and offered a cut-rate price of as little as $105,000.
Federal officials began tightening the provincial nominee program rules almost from the day P.E.I.’s program started up.
New immigration regulations, introduced in 2002, following the implementation of the new federal Immigration and Refugee Protection Act, added restrictions that were intended to preclude what are called “passive” investments by requiring that immigrants be actively involved in the companies in which they invested and disallowing any program that allowed an immigrant to get his or her money back after a period of time (as P.E.I.’s did, at least in theory).
But relying on a federal Justice Department memorandum, P.E.I. took the view that being a member of the board of directors of a company was sufficient to make the immigrant active in the affairs of the business.
“Basically, we had a legal opinion to say that this is not passive investment because the immigrant is taking a risk; they’re on the board of directors,” said Beverly McQuillan, one of the architects of P.E.I.’s program and its first program officer.
P.E.I. had found a loophole that it would take federal officials five long years to close.

Corporations and more corporations

Immigrants were put on the boards of directors of companies, giving them legal liabilities, but according to one expert, no requirement to play a management role.

By King’s Investigative Workshop

College of Piping and Celtic Performing Arts of Canada in Summerside, Prince Edward Island (photo by King's Investigative Workshop)

The heart of immigrant involvement in P.E.I. businesses under the Immigrant Partner program was being placed on the board of directors of the company that received money.
“The requirement was the investor had an active position in the company and director most certainly qualifies under that category,” said Stephen McKnight, a Summerside lawyer who helped businesses with their applications under the program.
But just how involved one could actually be in many of the companies, is an open question. Most were small, often family, firms, and some were created to qualify.
The boards of small, private firms bear little resemblance to the boards of large, publicly traded companies, according to Sujit Sur, assistant professor in the School of Business Administration at Dalhousie University in Halifax.
While, formally, under the P.E.I. Companies Act, directors have key roles in the governance of a company, the reality is that the director doesn’t, in practice, have to be involved at all. “The reality is if it’s a family firm, essentially to distribute the salary so you minimize your tax liability, people put everybody including their uncles, and aunts and grandfather as a director,” Sur said.
“Because then you don’t have to show any work because if you have a managerial position you have to actually do something to get a salary, but if you are a director, you are on the company’s book but you don’t have to show up ever.”
In fact, Sur says even with larger companies, it`s better that directors not be involved in the everyday affairs of a company, because they are supposed to bring a different, outside viewpoint to the board table.
Sur agrees that being a board member does expose a director to liabilities for such things as the company`s debts, but how involved a director decides to be beyond that is completely his or her prerogative.

Two businesses, two immigrants

The Immigrant Partner program was supposed to pair up immigrants with the business they invested in. For Ellie Yue, working in a flower shop would be ideal. 

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By King’s Investigative Workshop

Holland College offers language classes for immigrants (photo by King's Investigative Workshop)

When Ellie Yue couldn’t do her son’s math homework, she decided to move to Canada.
Yue was a chartered accountant and ran her own firm in Shanghai. Math is what she did all day. But when her son asked for help with his Grade 6 math homework, she couldn’t do it.
The next day, Yue spoke with her son’s math teacher.
“I’m an accountant, and even I can’t do this homework,” she said to him.
The teacher told her gently that this wasn’t surprising. After all, he said, Yue was an accountant, not a mathematician.
“It takes a mathematician to understand my son’s Grade 6 math homework,” she thought. “That’s it. I’m leaving this country.”
So she applied for Prince Edward Island’s provincial nominee program.
Yue is one of more than 3,000 immigrants who were accepted under the program from 2006 to 2011.
She first breathed P.E.I.’s fresh air in 2008 when she came for a nominee interview. Yue did not know the details of the program or how the investment worked. All she knew is that she had to sign some papers and pay $150,000.
She was told if she met provincial and federal requirements, she would be granted permanent residency in Canada. If Yue stayed on the Island for one year and passed her English tests, she could get $45,000 of her money back.
Seeing the Island with her own eyes confirmed what she had read on the Internet about P.E.I.’s clean air and friendly people. Yue decided this would be her new home, at least for a little while.
A representative of an intermediary firm on P.E.I. gave her a pile of documents to sign in English — she didn’t understand them very well. Yue didn’t even know the name of the business she was investing in. She doesn’t have copies of any documents she signed. All Yue has for a record of this visit is the representative’s gold, laminated business card.

Alan's Hearts and Flowers in Downtown Charlottetown (photo by King's Investigative Workshop)

Alan Preston owns a small flower shop in downtown Charlottetown called Hearts and Flowers.
Preston was looking to improve his business but didn’t really have the funds. Then he heard about P.E.I.’s nominee program.
Preston said the application process was a breeze. He dealt with Canadian International Capital Inc., one of the intermediaries in the immigrant partner program. Officials there told him he was eligible to receive one investment unit for $30,000.
“They took a look at my financial statements and we did, together, a letter of intent of what the money was going to be used for.”
Preston said he didn’t know who his immigrant investor was. He was told she wouldn’t actually play an active role in his company. Preston got a notice saying she had been accepted for immigration, but he never knew if she ever arrived in P.E.I.
Preston never expected to hear from her and he wasn’t interested in having another investor become personally involved with the shop.
“It was just a supply of capital,” Preston said. “They’re just on the board of directors to be an investor to protect them. Once they were accepted for immigration to Canada, their need to be associated with any company was gone.”
Two months after Yue landed in P.E.I. with her son in 2010, her son’s asthma cleared up. He loved his new school and bragged to his classmates back home in Shanghai that he didn’t have hours of homework.
Yue and her son bought an airy house in the Charlottetown suburb of Cornwall, with hardwood floors, a big yard and a well-groomed front lawn. Yue enrolled in a program to learn English at HollandCollege. They planned to stay in P.E.I. for only a year. But they have now been there for four.
Yue is glad her son is thriving. But the question always haunting her is, will she find work? While her son’s English improved rapidly, she had more trouble.

Nominee programs that worked

Calgary Skyline (photo by Robert Walker courtesy of Wikimedia Commons)

While P.E.I.’s Immigrant Partner program  floundered amid allegations of misuse, western-Canadian nominee programs flourished as they focused on attracting workers.

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By King’s Investigative Workshop

Prince Edward Island was not the first province to develop a provincial nominee program. Similar programs had been developed around the country since the 1990s. Quebec, with its own separate accord with Ottawa, is a special case. But other provinces also wanted to try to redirect immigrants from the usual destinations such as Toronto, Calgary and Vancouver, to parts of the country that haven’t received proportionate shares of newcomers.
As well, the provinces wanted to attract workers who didn’t qualify under the normal federal programs, which traditionally focused on those with higher education and skill levels, said Robert Vineberg, former Director General of Citizenship and Immigration Canada’s Prairie Provinces and Northern Territories Region. “It’s difficult for blue collar workers, either apprentice trades or people in semi-skill trades, sheet metal workers, welders and people like that to qualify.”
Under the Constitution Act, the provinces have the right to be involved with immigration, as long as their programs don’t conflict with federal programs. No province had taken advantage of this before and so it was new territory for everyone. The new programs started relatively small and each province negotiated its program directly with the federal government on a case-by-case basis.
Manitoba’s program, focused on very specific labour shortages, was the first to develop outside of Quebec. Seeing its success encouraged other provinces, many of whom began to model their programs after Manitoba’s, Vineberg said. P.E.I was one of the first, but created a program that allowed immigrants to invest in businesses without being actively involved in them, other than sitting on the boards of directors, bringing in a lot of immigrants who ultimately left for other parts of Canada.
Many other provinces are running successful programs. The overall nominee program has grown quickly, Vineberg said. In its early days there were maybe 1,000 applicants each year and this year the federal government is planning to accept about 40,000 nationally.
Gordon Maynard, an immigration lawyer in Vancouver, said the nominee program works well in British Columbia, allowing “…individual regions to attract the best immigrants that they needed instead of trying to find cookie-cutter programs that would somehow spread the flow across Canada.”
In reference to the nominee programs in the Atlantic provinces, several of which were shut down or revamped, he said, “… it does seem to me that the problems that have arisen have arisen in investor type of applications where people were being asked to invest money in either business opportunities or business funds or business employment funds and as a result acquire a status, a visa based on the investment.”
“It’s wrong to think that that represents the PN programs at large.”

Retention rates

One of the measures of success for the provincial nominee program is the retention rate of each province. This refers to the number of people who stay in the province in which they were initially nominated.
In the 2011 Citizenship and Immigration Canada evaluation of nominee programs, the Atlantic region had the lowest percentage of people staying in the province that nominated them, at 56 per cent overall (P.E.I.,37 per cent) The highest provinces were British Columbia and Alberta with more than 95 per cent of their nominees staying in their province of nomination.
The programs that are most successful, according to Maynard, concentrate on bringing in people who have needed job skills. Vineberg agreed. “The program in many areas is employer driven in that the employers hire foreign workers and brings them in with temporary status,” he said. “And then if there’s a good match, the worker wants to stay in Canada and the employer is willing to offer a fulltime job they apply under the provincial nominee program.”
Alberta’s sole focus from the beginning has been on bringing in workers. Often these workers enter Canada through the province’s temporary foreign worker program. Once in the province and working they then apply with the provincial nominee program.
“Alberta to this day is strictly behind our program, and it’s for addressing labour shortages in the provinces. Not for attracting investment. Not for getting entrepreneurs. We are about solving labour issues,” said Brad Trefan, Senior Director, Alberta Provincial Nominee Program, Industry and Regional Development Division.
Trefan credits the program’s success with Alberta’s high standards in the selection criteria. The province works very closely with government departments such as agriculture to assess their needs. They are also in constant communication with employers to understand what is needed in the labour market. “We’re looking more at ensuring that the candidates fit the job. And when I say fit the job, I mean with have to the background to do the job or the credentials to do the job. … So he’s got to have some type of familiarity with the job.”

The face of Island life

Despite an influx of immigrants into Prince Edward Island, a traditional culture is resistant to change.

By King’s Investigative Workshop

Prince Edward Island's Confederation Bridge (photo by King's Investigative Workshop)

“Immigrants never came to P.E.I.,” says Brenda VanGaal, a substitute school bus driver from Websters Corner and a true Islander, born and raised.
“The only immigrants we ever got were a few people who worked at the (agricultural) research station or refugees that churches would sponsor,” said VanGaal. “(Aside from them) you didn’t see anyone that wasn’t white.”
VanGaal runs a family farm and lives in the same house she grew up in, about 20 kilometres east of Charlottetown. For 65 years she’s seen the ebbs and flows of Island life, and if she says immigrants rarely came to the island, it’s a safe bet they didn’t.
But that all changed with the huge influx brought in by the provincial nominee program, which officially brought 8,000 newcomers to P.E.I. from 2006 to 2011 alone, with some yet to come. As reported elsewhere in this package, most of the immigrants leave, but a noticeable minority has stayed on to make a life on the Island. They’ve joined other newcomers, such as refugees and entrepreneurs, and migrants from the rest of Canada, in making a new life in Canada’s smallest province.
Islanders and newcomers share a common view: the Island is changing, even if the place is a bit slow to warm up to people “from away.” But beyond Charlottetown and Stratford, across the Hillsborough River from the capital, residents say they don`t see a lot of people who don`t fit the old norm of white skin and British, Irish or French ancestry.
“It hasn’t changed a whole lot. There are the odd Asian and African American people around, other races as well, but it’s very scarce,” said Jessica Gallant, a 21-year-old nursing student born and raised in Miscouche, P.E.I.. “I consider myself to have been extremely sheltered from the real world (living in P.E.I.),” she said. “Besides two Asian girls in my high school, and perhaps one African person, I hadn’t really seen many people who weren’t white.”
When Sandra Denny first visited the island 22 years ago, she noticed the same thing. “There was a very noticeable lack of minorities,”Denny said. But that has started to change. “The programs that they’ve had to introduce immigrants from other countries have definitely made an impact,” said Denny. “We have several Thai restaurants, some sushi restaurants, and some authentic Chinese restaurants, which we would’ve never seen 20 years ago.”
Seigi Hara, 27, moved to Charlottetown from Mexico. He worked as a software developer for a video game company for two years. His experience in P.E.I. was nothing but pleasant.

Wu Jian and his wife run Lily's Convenience near Charlottetown (photo by King's Investigative Workshop)

Kindness

“I was very surprised with the kindness of the people I was acquainted with since day one,” he says. “People (are) very calm and friendly, they greet each other and make remarks about the weather very frequently even if you do not know them. Everyone was very helpful and generous … In general I could only say good things about the people in P.E.I.”

His experience doesn’t ring as familiar with other people interviewed — even some native Islanders. “We’re known as the friendliest province, but I wouldn’t even call this place friendly,” said nursing student, Jessica Gallant. “People are extremely closed-minded about every aspect of life.”
VanGaal thinks islanders are very friendly to tourists, but as she puts it, “they don’t go out of their way for people who move here.”

For an immigrant, it can be extremely difficult becoming accustomed to your new home.
Such was the case for Sander Morales when he arrived in Kensington at the age of 15.
“It was difficult meeting people, making friends. The culture was completely different” Morales said.
While cultural barriers might be a tough hurdle to cross, language barriers can seem like more of a challenge. “It has to be much more difficult when there’s a language barrier and realistically I have seen (that) some Islanders are not necessarily very tolerant of them,” said Denny. “You can sort of see it at the stores and stuff sometimes. You see the odd one that you can just tell they sort of wish they weren’t here.”
Madan Giri, 37, moved to P.E.I. with his family after receiving sponsorship as a refugee immigrant. “Some of my own family members used to speak very little English,” Giri said. “When we used to start speaking, some of the Islanders used to laugh at us.”

How we did it

PEI legislature (photo by King's Investigative Workshop)

The P.E.I. government has refused to release a list of businesses that participated in the Immigrant Partner program, so King’s students got creative.

By King’s Investigative Workshop

No definitive list of who received money under P.E.I.’s provincial nominee program has ever been released. But there is a window on the program: P.E.I.’s corporate regsistry. That`s because to get money, a firm had to be a profit-making corporation.
King’s students built a database of P.E.I. corporations by manually downloading thousands of corporate records from the government website, and mining data in the official government gazette.
The students identified companies using a variety of strategies including whether they had filed to change their capital structures, something that some had to do to qualify for immigrant money, and whether the businesses had individuals on their boards of directors having names that are not traditionally found on P.E.I., in combination with `home`addresses either care of immigration companies, or in foreign countries. This strategy was effective because most non-immigrant directors list actual home addresses, while most of the immigrant directors either have an address care of an immigration firm, an address in another country, or no address listed at all.
Once identified, the students contacted both businesses and likely immigrant investors to confirm details. They conducted dozens of interviews.
Not all companies that received money can be identified from the corporate registry. But it does show about 300 companies that have members of their boards of directors whose “home” addresses are care of immigration firms, or are in other countries, principally China. These companies represent almost every type of business, included hotels, bed and breakfasts, cottage rental operations, retail stores, land developers, video game and film production companies, bakeries, electricians, a company that repairs wharfs, a car dealer, farms, a bus company, holding companies, real estate firms, a meat packer, and on and on.
A number of individuals have requested the actual list of businesses from the Island Investment Development Corporation under P.E.I’s freedom of information law, but IIDI refused to release it. P.E.I.`s information and privacy commissioner agreed, and the list has remained secret.
At the end of March, the P.E.I. Supreme Court heard arguments in a CBC case seeking to overturn the commissioner`s ruling, but there has been no ruling as yet.

Update: On Nov. 2, 2012 the P.E.I. government lost the appeal by the CBC and on Nov. 6, 2012 it published a static list of recipient companies, online. King’s Investigations extracted the list and has made it available online on this site.