POTENTIAL FALLOUT - AT THE START

When the fraud aspects of this case first surface (November 1992), Ontario Hydro was a major mess. The Corporation had well over Can$30 billion of debt, mostly owed to Wall Street, with a high quality debt rating. Ontario Hydro’s debt was backed by the Provincial Government, but the then-NDP government was in financial problems as well.

Besides debt, Ontario Hydro was trying to construct a vast series of new reactors to service anticipated growth in the electricity market. Unfortunately, there wasn’t any growth … the market was flat. Worse, Ontario Hydro had over-run so badly on Darlington Nuclear Generating Station construction costs (from $4B to $12B) that electricity costs were rising in a price-inelastic manner. In other words, OH Management were "out of touch" with the market. (Maurice Strong did a major service altering Ontario Hydro’s direction.)

Worst of all, once the actual fraud accusations struck, much of OH Management promptly got themselves implicated, too. Hence, a public exposure at this stage would have removed all the top officers of a very heavily indebted company which was heading down the wrong path. Going to the Globe & Mail (generally considered the "true" opposition to Ontario Hydro) did not seem like a good plan!

CASE STRATEGY, MAURICE STRONG, LARRY LEONOFF, AL KUPCIS, ONTARIO HYDRO, ONTARIO HYDRO