Scandal in Power

A breathless question was asked and left unanswered last week in sweltering official Ottawa: "Can the Sergeant-at-Arms of the House of Commons arrest a Senator of the Dominion and lock him up in the Tower of Parliament?"* Reason such an arrest seemed likely was that Senator Wilfred Laurier McDougald of Montreal had refused to appear before a Committee of the House and was considered in contempt of Parliament.

Beauharnois. The Committee had been investigating charges made last May by Alberta's M. P. Robert Gardiner regarding the relations of the Government to Beauharnois Power Co., of which Senator McDougald is board-chairman. In 1927 this company obtained permission from the Government to dredge a wide, 15 mi. canal, ostensibly as part of the proposed St. Lawrence Waterway, between Lake St. Francis and Lake St. Louis on the St. Lawrence River, the immediate purpose being to utilize the flow between the lakes for hydroelectric power. Projected cost of the power installations alone: $65,000,000. Projected horsepower on completion: 2,000,000. Initial developments provided for 500,000 h.p., contracts for the greater part of which have long been signed by Montreal Light, Heat & Power Co. and the Ontario Hydro Commission.*

Mr. Gardiner charged that: 1) the canal would "deprive the people of Canada of a vast part of the national domain" by diverting the whole flow of the St. Lawrence; 2) the Government's permission had been illegally obtained; 3) Beauharnois officials had sought to corrupt the Government since then; 4) Senator McDougald, with no other than a promoter's interest in the concern, had, while a Senator of Canada, received from it large quantities of stock, worth some $30,000,000. Investigation had proved that Beauharnois had spent nearly $1,000,000 on the campaign funds of both Liberal and Conservative candidates who might be friendly to the project. Names involved: Senators Andrew Haydon and Donat Raymond.

"No Crime." The imprisonment question remained unanswered because suddenly Senator McDougald decided to appear and testify. The interest the question had aroused packed the humid committee-room. Handsome, natty and spry, Senator McDougald took the chair, barked answers at his inquisitors (among whom was M. P. Gardiner), sometimes confusing them.

No tyro at power and waterway questions is Senator McDougald, onetime medical student who made a fortune in gold and married rich Miss Mary Hannan. He was chairman of the Montreal Harbor Board from 1922 until late in 1930. His experience in such matters caused his appointment to the Canadian National Committee, an advisory body to investigate the benefits and disadvantages that might result to Canada if the Canadian-U. S. St. Lawrence Waterway project were carried out. Known as the best-dressed Senator and one of the best looking men in Ottawa, he has a commanding presence, is a good talker. He talked well last week, showed the committee that he had purchased most of his enormous holdings of Beauharnois stock outright. But he had difficulty in explaining a block of 80,000 shares received, with some cash, in a deal involving Sterling Industrial Corp. Ltd.

In 1923, while Chairman of the Montreal Harbor Board, Senator McDougald had conferred privately with Robert Alexander Cecil Henry, later Deputy Minister of Railways & Canals, regarding a power development in Beauharnois County. Privately he offered Mr. Henry $10,000 for the formation of a power company. In 1924 Mr. Henry incorporated Sterling Industrial Corp. In that year, about two months after Mr. McDougald was appointed to the St. Lawrence Advisory Committee, the Sterling Company applied for power rights between Lakes St. Louis and St. Francis. After Mr. McDougald became Senator, the Beauharnois Power Co., supposedly because of this prior claim ("nuisance value"), bought out the $10,000 Sterling Company for a block of stock which brought them $600,000, plus an additional interest of 80,000 shares which McDougald and Henry divided. Senator McDougald testified he was unaware that other "nuisance value" claims had been filed before his but were not bought out by Beauharnois. The investigators sought to prove that the Sterling-Beauharnois deal was consummated only because the Senator was a Senator.

During his testimony, this conversation took place:

Senator McD.: I was . . . helping to work out what I considered something of national importance to Canada.

Committeeman: And of considerable importance to Senator McDougald?

Senator McD.: No one ever does much of anything without taking some consideration. There is no crime, I think, in making money.

King. That he could spend money freely, too, was indicated by Senator McDougald's casual reference to a time when he had helped out the Beauharnois company by signing two $500,000 checks in a single day. More startling to Canadians was news that Senator McDougald and William Lyon Mackenzie King had gone to Bermuda, not together but simultaneously, while Mr. King was Dominion Prime Minister. Mr. King arose in the House of Commons last week to explain. He had not traveled with Senator McDougald, he said. He had gone to Bermuda "to get a reciprocal tariff on fruit and vegetables." Senator McDougald had gone for his health and left Bermuda first. When the Prime Minister was ready to leave, he said, he found his hotel bill already, inexplicably paid by Senator McDougald.

House of Commons ferrets had discovered that both hotel bills were charged against the expense account of Beauharnois Power Co. When this was announced last week, Canada shuddered. Independent paper headlines flared: MR. KING'S HOLIDAY BILLS PAID BY BEAUHARNOIS! The Senator explained: it was all a mistake; his secretary had erred in billing Beauharnois for what he had spent because he thought "the Prime Minister of Canada should have a better suite of rooms" than those the hotel had reserved for him.

*OnIy Canadian ever confined to the Tower was R. C. Miller, no Government official but onetime president of Diamond Light & Heating Co. Ltd. He was condemned for contempt of Parliament Feb. 14, 1913.

*Famed example of a public power distributor, much publicized by New York's Governor Franklin Delano Roosevelt, who wants New York to emulate it.

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