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SINS OF THE FATHER

He's a former Catholic priest from a remote village in Eastern Canada who, with a little
help from a union pension fund, became a real estate tycoon virtually overnight. Industry
observers have called his meteoric rise in the real estate biz one of the great business
success stories of the 1990's. He has lectured at investment seminars and been quoted as
an industry expert in the media. At the height of his success, his home was a mansion
north of Toronto that once belonged to Magna International Chairman Frank Stronach.
He wined, dined and rubbed elbows with the elite of Canadian society - prominent
business leaders, artists and politicians. Douglas Bassett, chairman and CEO of Baton
Broadcasting and CFTO-TV referred to him in the Toronto media as " a fabulous,
fabulous person". Others called him "giving" and "charismatic". He was one of the
principal backers of Newfoundland Premier Brian Tobin's bid for the federal Liberal
Party leadership. Ontario Premier Bob Rae cut the ribbon at the grand opening of one of
his hotels. A couple of years later, he would be in the audience at a "unity" address by
Ontario's new neo-conservative Premier Mike Harris. In an interview he gave in 1997, he
attributed his success in business to luck. Luck and the Canadian Commercial Workers
Industry Pension Plan (CCWIPP, pronounced quip) and its plethora of investment
corporations, would probably have been more accurate.

Within a few months of his quiet departure from the priesthood in 1990, Ronald Hubert
Kelly got a his first big break when a company he'd set up, called Kelloryn, purchased a
bankrupt Toronto hotel. Fifteen million dollars of the financing he needed to buy what
was then the Skyline Triumph Hotel, was provided by the CCWIPP through two
corporations that it "beneficially owned" - I.F. Propco Holdings 14 Inc. and I.F. Propco
Holdings 16 Inc. The UFCW's end of the bargain was voluntary recognition for the
workers at the hotel. [For a more detailed account of the UFCW's involvement with
Kelloyrn see another of our featured articles]. Kelly would go on to purchase six other
bankrupt or financially troubled Canadian hotels. By 1997 he had built an empire worth
$500 million. His interests included hotels in Canada, Jamaica and the Bahamas,
shopping malls in London and Ottawa Ontario, various other commercial and residential
holdings across Toronto, London, Ottawa, Hamilton and Peterborough and a fish
processing plant in his native Newfoundland.

UFCW Pension Plan Trustees Put Their Hands Together for Father Kelly

Although the extent of the CCWIPP's involvement with Kelly and his companies is not
known, from what we can tell, Kelly has received more than $100 million from the
pension plan over the past decade and his relationship with UFCW and CCWIPP officials
has been especially close.

Cliff Evans, former UFCW Canadian Director and Chairman of the CCWIPP Investment
Committee, Howard Garner Preston, a management representative on the CCWIPP Board
of Directors and Alexander Ahee, a lawyer connected to the CCWIPP all became
Directors of Kelloryn in 1992. In addition, Evans was a Director of I.F. Propco Holdings
16 which loaned Kelloryn $8 million towards the financing for the bankrupt Toronto
hotel. Howard Garner Preston was a Director of I.F. Propco 14, which loaned Kelloyrn $7
million to finance his purchase of that same hotel. Evans was also a director in Kelloryn
Hotels (Hamilton) Inc., a company that purchased the historic Royal Connaught Hotel in
1994. Evans was also a Director in Kelloryn Holdings Inc. Then there was Kelly's
relationship with AFM Hospitality Corporation; a hotel franchising and management firm
in which the UFCW pension plan is a major shareholder. Over the years, seven of
Kelloryn's hotels appear to have ended up in AFM's hands, and Kelloryn was at one
point, a hotel ownership division of AFM. More recently, evidence has surfaced of a
relationship between the CCWIPP, its I.F. Propco investment companies and RHK
Capital, another Kelly enterprise.

Ron Kelly's Vulgar Displays of Power

But behind Kelly's business successes there was another story. In 1997, he discussed it
publicly with a Toronto newspaper.

Kelly has never spoken publicly about the past or present and reluctantly agreed to an
interview, saying: "I guess it's better to talk than let you take a shot in the dark."

In 1979, Kelly pleaded guilty to 10 sexual assaults on five boys, ages 13 to 18, in the
remote Newfoundland community where he'd been parish priest for six years. Court
transcripts show the assaults mostly involved Kelly's fondling of teens while he was in a
drunken haze. In the most serious case, a sober Kelly had a boy perform fellatio and
afterwards gave him $5. The Toronto Sun, July 20, 1997

Despite the serious nature of his offences, Kelly never did any jail time. Four days after
his arrest, he entered a guilty plea and for his transgressions and received a suspended
sentence of two years less a day. A condition of this exceptionally lenient sentence was
that he took treatment through a church-run facility for wayward priests in a small
community outside of Toronto. After completing his stint in the treatment facility, he was
transferred to a parish in Mississauga, another community outside of Toronto. In 1985, he
was granted a full pardon of all 10 convictions, effectively clearing him of a criminal
record.

Kelly did well for himself in the big city. By 1984 he was acting rector of historic St.
Michael's Cathedral and was part of the welcoming committee for the papal visit to
Toronto. By 1990, he was vice-chancellor of temporal affairs in the Archdiocese of
Toronto and a key aide to Cardinal G. Emmett Carter. That year his name was raised at
the Hughes Inquiry, a commission of inquiry into widespread sexual abuse of young boys
at the Mount Cashel Orphanage in Newfoundland in the 1970's. Although he would claim
that he had no idea why his name had come up in the course of the Inquiry, Kelly almost
immediately took a leave of absence and never returned to the church. He would run from
the rectory and dive right into the UFCW's enormous pension fund.

The UFCW was, at the time, pursuing a strategy of investing money from its pension
fund in businesses for purposes of job creation or - for those who are more cynical -
member creation. The concept was described enthusiastically by UFCW's Canadian
Director, Tom Kukovica, in a 1993 interview with labour magazine, Our Times.

Besides putting money directly back into the pockets of the membership, the joint
trusteeship of pension plans between the UFCW and its various employers has permitted
the union to control the investment destiny of millions of dollars. "With the pension funds
we've been mainly concentrating in real estate, such as affordable housing projects," says
Kukovica. This month the UFCW, with an equity stake of over 50 per cent, helped to re-
open the Triumph Hotel in suburban Toronto, "It was in receivership. Now the hotel will
be unionized, so we've created (union) jobs at the same time.

[For all of Kukovica's enthusiasm, the CCWIPP's investment of $15 million in the
Triumph Hotel created a total of 150 jobs. The UFCW lost its bargaining rights for those
workers to HERE, which was found to have successor rights for the hotel. A "raid" on the
HERE unit in 1996 failed when the OLRB ruled that the relationship between the
management of the hotel and the UFCW was too close.]

More Questions

Were all or some CCWIPP's Investment Committee members aware of Kelly's


scandalous past when they rushed head long into multi-million-dollar business
partnerships with him? It's reasonable to assume that at least some of them were. Kelly's
legal problems on the east coast had been the subject of comment in the local press as
early as 1990. In March of that year popular Toronto Sun columnist Christie Blatchford
wrote a scathing commentary entitled Power Links the Two Father Rons where she
discussed in some detail Kelly's transgressions as well as his MO:

When Kelly was appointed parish priest in Our Lady of the Cape, Nfld., in 1973 the
Roman Catholic church still ran the villages - they have names like De Gras, Piccadilly -
like company towns. In Kelly's parish, for instance, the church ran the schools, the clinic,
even the ambulance.

Young, good-looking, and "able to talk to anyone", Kelly was a local hero.

As Const. Murray Urquhart, the RCMP officer who investigated Kelly's case, says, "The
people are devout. It was a very special thing when the priest came to visit."

And visit Kelly did. His modus operandi was to pay an unexpected call to a parishioner's
- he was usually drunk - and have a few more drinks, whereupon he would suggest he
sleep over.

In one of the cases to which Kelly later pleaded guilty - in May 1979, he was convicted
on 10 counts of indecent assault on five boys - two boys refused to open their bedroom
door to him, but their outraged mother insisted they do so.
Did the UFCW's CCWIPP Trustees care? What about then- UFCW Canadian Director,
Tom Kukovica? Did he know or care about the history of the man whose company would
be the "investment destiny" of millions of dollars worth of union members' pension
funds? Granted, by the time the CCWIPP Trustees began their association with Kelly he
had already been pardoned, but it did not mean that he did not commit the offences to
which he had pleaded guilty. It just meant he no longer had a criminal record. Did they
consider what the pension plan members might think about their association with him if
the members ever became aware of his disturbing past? Given the range of investment
options available to a large pension plan, they could easily have passed Kelly over in
favour of other entrepreneurs seeking capital. Presumably they knew about Kelly's past
and didn't care for they went ahead and dished out millions to him anyway and continued
their association with him even after stories about him appeared on the front page of the
Toronto Sun in 1997.

Not only did they lend Kelly money to finance his various enterprises, they even bought
some back from him. In 1999, CCWIPP's Propco Holdings bought the financially
troubled Holland Cross retail and office complex in Ottawa from RHK Capital for $28
million. In 2000, CCWIPP's I.F. Propco 31 purchased the financially troubled London
Galleria Mall from RHK for $42 million. The Propco had previously loaned RHK $18.9
million. Why, the UFCW is even a tenant of Kelly's. UFCW Local 351 (the current
incarnation of the old Textile Processors' Local 351) is located in a building that at one
time belonged to RHK.

Our Father who art in - Panama?

Where is Ron Kelly now? All of the Kelloryn Hotels that he acquired in the 1990's ended
up with AFM Hospitality and have been sold off. The last of these, the former Skyline
Triumph, into which the CCWIPP put $15 million in 1992, was sold last year for $12
million. Kelly unloaded two large financially troubled shopping malls to the CCWIPP's
Propco companies in 1999 and 2000. Other developments suggest that, by the late 1990's,
all was not fabulous in Ron Kelly's world. A deal with Westin Hotels in London Ontario
went sour in 1998. The same appears to have happened with the fish plant in
Newfoundland. In Peterborough, a community group was successful in stopping RHK
from converting a historic municipal building into a bingo hall. Then there is the
luxurious British Colonial Hotel in Nassau, Bahamas. It is another RHK venture which
recently opened with a reported huge overrun on renovation costs. Earlier reports pegged
the cost of the renovation at $55 million CAD, however, the final tally shows a $107
million CAD renovation. Recent reports indicate that RHK is no longer located at its
prestigious offices on Lombard Street in downtown Toronto. Its' phone number is now
registered to a high-rise apartment building in a troubled neighborhood in the city's
northwest end. An unconfirmed report has Ron Kelly in the tax haven of Panama.

How did the CCWIPP do with its' investments in Kelly's businesses? What did the
CCWIPP members get out of their multi-million dollar investment? Did they get a
reasonable return or - given the risks involved in the accommodation industry - a good
return? What became of all the loans and mortgages once the hotels were sold off? Why
did the CCWIPP's Propco Company buy back RHK's failing shopping malls? During a
time when UFCW members were being urged to accept wage concessions and get used to
reduced hours of work and job insecurity, this man made a fortune thanks, to some
degree, to their retirement fund. It seems only fair to ask - what was in it for them? Most
importantly, however, we return to the question we posed at the beginning of this article:

Is it right, morally and ethically, for a union to invest the pension funds of some of
society's most vulnerable workers in companies operated by persons who have engaged
in egregious breaches of trust against some of society's most vulnerable members?

We're interested in hearing from UFCW and CCWIPP officials in response to this
question but we're even more interested in hearing from the members.

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