I suppose there are lots of peoples who would have relished the scene one morning last month, when Viola MacMillan went through the same routine that every junkie, impaired driver or pederast goes through when he’s booked into Toronto’s smelly old Don Jail. Viola is a mining promoter, one of the greatest, a wiry little 62-year-old who’s made millions on the market – and there she was in a blue prison smock, getting searched by a big matron and fingerprinted by a very solicitous cop.
Viola had just been convicted of a practice that is almost as common, but just as illegal in Canada, as contraception: wash trading. If you own lots of stock in a company, you can simply buy and sell large blocs back and forth to yourself through nominee accounts that you’ve established with your obliging broker. All these non-transactions register on tape, the stock goes up and the suckers start buying. Then, when you’ve run your stack up to a suitably larcenous level, you sell. End of market.
This, it’s alleged, was what Viola did with a stock called Consolidated Golden Arrow during the Texas Gulf Sulphur madness in 1964. In two hours one morning, she ran the stock from 25 to 65 cents, then pulled out and took her profit. But for Viola and her promoter husband George, Golden Arrow was only a sort of appetizer. The main course was Windfall Oil and Mines Limited, another MacMillan-controlled company that had bought some claims near the TGS strike. Bay Street was blowing its mind over any stock within helicopter range of Texas Gulf, so Windfall climbed from 56 cents to a manic $5.60 in eighteen days. Throughout all the euphoria the MacMillans kept inscrutably silent – it took them 16 days for instance, to pass along the news that, in their geologist’s opinion, the Windfall drill core was worthless. When they finally pulled the plug on July 30, the stock dropped from $4.15 to 80 cents in the space of a few hours. The MacMillans’ reward for inscrutability, during that hectic month of July, 1964, came to $1,455,928.
Criminal charges have also arisen from that little caper, but the trial hasn’t yet taken place. Meanwhile, Viola is out on bail pending an appeal (her husband arrived with $15,000 cash after she’d been in jail for 90 minutes). And the judge who sentenced her to nine years and a $10,000 fine has a partial change of heart. He’s amended his sentence to an indeterminate jail term of not less than nine years, which means it’s technically possible to parole Viola after five weeks, or five minutes.
Bearing in mind that a former attorney-general of Ontario, among other, has begged the court for leniency, I have a strong visceral feeling that Viola MacMillan won’t end up spending very much time in jail. We have an old and honourable tradition in this country of not sending millionaires to jail for very long. It’s the sort of situation that generally inspires editorials in the Toronto Star entitled One Law for the Rich? And I suppose that, if Viola gets off easy, the point is sound enough. But even though I enjoy seeing the mighty humbled as much as the next man, I can’t imagine any aim of public policy that would be intelligently served by making a horrible example of Viola.
For one thing, the women is 62 years old – hell, it’s like locking up your own mother. For another, she was simply behaving like your average millionaire mining promoter, operating in a business which, with government acquiescence, has always been ten per cent production and ninety per cent piracy.
But more to the point, George and Viola MacMillan have actually done the investing public a great service. Until they triggered the Windfall fiasco, it was still possible for the Ontario government to maintain a stuffy silence about the activities of the Toronto Exchange. But Windfall, as a Mayfair dowager once remarked about John Profumo, was really a bit too casual. A royal commission was accordingly appointed to reconstruct the crime. Its report, in condemning the MacMillans, also revealed that the TSE’s efforts at self-regulation were almost comically inadequate.
Mr. Justice Kelly (rather deftly, I thought) compared the TSE to a “private gaming club.” His report on Windfall, along with the lovely Atlantic Acceptance scandal, crystallized all the reformist tendencies that had been running through Bay Street – and formally forced the government to do something. A new and vastly improved securities act came into force last may. The working relationship between the TSE (which is supposed to regulate the stocks it lists) and the Ontario Securities Commission (which watches those that aren’t) has been more clearly defined.
Most encouraging of all, the TSE in March chose John Kimber as its new chairman. This is truly an incredible development. Kimber is the man who practically wrote the new securities act and, until the TSE tapped him, he was chairman of the OSC. A few years ago, it would have been inconceivable for the TSE to hire a certified government snoop. Now the reformers are actually in control. The exchange is actually beginning to behave like an institution that recognizes some faint obligation to the public.
Bully for Viola.