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WestJet board committee studies espionage suit

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WestJet board committee studies espionage suit


From Friday's Globe and Mail

A committee of WestJet Airlines Ltd.'s independent directors, headed by oil patch veteran Ronald Greene, is examining the impact of Air Canada's $220-million espionage lawsuit against the airline.

Mr. Greene, the former chairman of Calgary-based Renaissance Energy Ltd., is the lead director on the special committee, which consists of all six independent directors on WestJet's nine-member board.

WestJet struck the committee in April when Air Canada launched its lawsuit alleging that the discount carrier engaged in corporate spying, WestJet spokeswoman Siobhan Vinish said.

“It has had ongoing meetings since the very beginning of this. That's appropriate in these types of circumstances,” Ms. Vinish said in an interview. “We believe that it's something that a good organization does — appropriate governance.”

The move frees up Clive Beddoe, WestJet's chairman and chief executive officer, to concentrate on running the airline, Ms. Vinish said.

Mr. Beddoe, who was named last week as a defendant in Air Canada's lawsuit, is one of three “internal” directors being excluded from WestJet board discussions about Air Canada's lawsuit.

The other two excluded are WestJet's senior vice-president of operations, Tim Morgan, and aircraft maintenance engineer James Homeniuk, who is the nominee of the airline's employee association, called the Pro-Active Communications Team, or PACT.

“The lawsuit would not be discussed with the internal members of the board present and in the room,” Ms. Vinish said.

Mr. Beddoe, WestJet co-founder Mark Hill, four WestJet employees and one former vice-president are among the defendants listed by Air Canada. Mr. Morgan and Mr. Homeniuk are not defendants.

Montreal-based Air Canada's lawsuit alleges Calgary-based WestJet hacked into a special reservations website for Air Canada employees and retirees, stealing confidential data to gain an unfair edge in the battle for passengers. WestJet denies any wrongdoing, saying Air Canada, which emerged from bankruptcy protection on Sept. 30, mismanaged its own business.

None of the allegations has been proved in court.

According to WestJet's April information circular, Mr. Greene owned nearly 3.6 million WestJet shares. He was chairman of Renaissance until Calgary-based Husky Energy Inc. acquired the oil and gas producer in 2000. She said Mr. Greene, who has served as the general lead director of independent WestJet board members since 1995, has held lawsuit-related discussions with Calgary law firm Burnet Duckworth & Palmer LLP, which is defending WestJet against Air Canada.Besides Mr. Greene, other independent WestJet directors are: Wilmot Matthews, a Toronto businessman who heads Marjad Inc., a private investment firm; Murph Hannon, president of Calgary private investment firm Murcon Development Ltd.; Donald MacDonald, who is president of Sanjel Corp., a private oil field services firm; Allan Jackson, CEO of private real estate firm Arci Ltd. of Calgary; and, Larry Pollock, CEO of Canadian Western Bank. None of them returned phone calls Thursday seeking comment.

In Montreal on Wednesday, Mr. Beddoe confirmed that he offered to resign as head of WestJet soon after Air Canada filed its lawsuit in April. Ms. Vinish said later that Mr. Beddoe “felt that was appropriate to do, given that we're a public company,” but “the board certainly and quickly declined” the resignation offer. Mr. Beddoe owns four million WestJet shares.

Ontario Teachers Pension Plan owns 15 per cent of WestJet, while FMR Corp. of Boston, the umbrella for the Fidelity family of funds, recently had a 14.6-per-cent stake.

Teachers had a nominee on the WestJet board for six years, but Teachers senior-vice president of active equities, Brian Gibson, left the board in September, 2003.

Officials from Teachers and Fidelity declined comment.

“Mr. Gibson's departure from the board is in compliance with Teachers' limit on the length of time an employee may serve on a public company's board of directors,” WestJet said in a share-offering prospectus in October, 2003.

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I would imagine that they are looking at the whole picture and will take whatever actions are in the best interests of the shareholders, the employee's and for the long term benefit of Westjet. It could mean continuing on in defending the lawsuit, it could mean trying to come to some arrangement with AC, it could mean finding a replacement for Beddoe. Think of them as your guardians, as they have no connection to the events that brought on the lawsuit and will work to do what's best for Westjet. I personnally think it was a good idea to set up such a committee.

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Ultimately this committee was created to protect shareholder interests. It is hard to protect the shareholders when some of your board members are affiliated with the daily running of the airline, hence the independent committee.

They may choose to recommend settling the lawsuit before anymore shareholder equity is evaporated.

They may choose to recommend a change in leadership.

Or they may choose to show that an independent voice that represents the shareholders stands behind the current leadership.

It is important to show independence in order to protect the board against any type of potential shareholder lawsuits because of the more than $1.3 billion in shareholder equity that has been squandered.

This may be foreshadowing for the inevitable. Clive's mouthing off at the Canadian Club gathering in Montreal may have been the last straw. I'm sure Teachers and Fidelity, who combined own close to 30% of the company, wish they each had a representative on the board. If so, this may have been rectified before the lost $400 million in combined shareholder equity.

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My read on this that the board stands behind Clive and the management team on this matter.

The article states that the committee has been meeting since April. I presume they have unlimited access to the WestJet legal team, and the evidence that has been presented.

Capital has no freinds. If there was a valid reason to settle with Air Canada, it would have been done. If it was an open and shut case, as some AC people here claim, steps would have been taken to mitigate the damage to shareholder value.

This BOD is no bunch of hacks. These people have a substantial investment in WJ, and know how to run a business (Sanjel is huge in the oilfield service arena here).

That's my opinion, FWIW

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During the last meeting of the old AC board at the end of September, the board received a call from Clive Beddoe.  They would not take the call.

This is a fact.

Facts have links. How about supplying one...

By the way, since when do boards take phone calls. They may phone for lunch, but you don't phone in to board meetings. Individual board members could have been contacted. And it also begs the question why competent legal counsel seeking a solution would not endeavor to make back-channel contacts with AC's legal counsel - that's how most lawsuits are settled; the principals don't make contact, their lawyers do - rather than phone a lame-duck board. Even if Clive did try to call the AC board, which I doubt, why didn't he wait a few weeks to speak to the new board.

Why would a lameduck board feel empowered to take any action aside from posing for one last group hub?

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Can't answer any of your questions, but I can assure you that it did in fact happen.

If you can't back any of this up, or answer any of my questions, you will perhaps understand my reluctance to accept what you say as anything more than gossip. Even if Clive told you personally... You have no proof or confirmation that he actually made a call...

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There is no link because there is nothing to link to. Gossip is only gossip if it doesn't originate at source. I don't care if you believe me or not, but implausible as it sounds, it did in fact happen.

Whatever, unless you were personally involved in that phone call as either the person who spoke on one end or took the call on the other, you will have to excuse me if I (and others) don't believe you. Okay? It's not personal.

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hey dagger,

How come you're lambasting this guy over his statement? Is it because it really means nothing out of context? Such as a statement in the media about the AC lawsuit about Clive recieving some numbers from Hill? Why is it only you can come to conclusions based on limited facts and parts of information and no-noe else is allowed to?


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