Public servant who promoted $225M baby formula plant now sits on Chinese investor's board

The former head of the Canadian Dairy Commission who facilitated a $225-million investment by a Chinese dairy processor to build an infant formula plant in Kingston, Ont., is now serving on that same Chinese corporation's board.

Jacques Laforge 'opened up the doors' for Feihe as CEO of Canadian Dairy Commission

New Brunswick dairy farmer Jacques Laforge served as CEO of the Canadian Dairy Commission from 2012-18 and helped facilitate a $225 million foreign direct investment by China Feihe Limited to build an infant formula plant in Kingston, Ont. (Submitted)

The former head of the Canadian Dairy Commission who facilitated a $225-million investment by a Chinese dairy processor to build an infant formula plant in Kingston, Ont., is now serving on that same Chinese corporation's board.

In keeping with the "cooling-off" period required by federal law, Jacques Laforge waited a year before accepting this paid role. But he was not required to notify the federal ethics commissioner in order to evaluate whether the move was appropriate — something that troubles critics of Canada's current conflict of interest rules.

Laforge, a New Brunswick dairy farmer and a former president of the Dairy Farmers of Canada, was appointed CEO of the commission by then-agriculture minister Gerry Ritz in 2012.

The director of corporate services for the Canadian Dairy Commission (CDC), Chantal Paul, confirmed to CBC News that Laforge's mandate ended in May 2018 and he left the Crown corporation at that time.

The corporate website for China Feihe Limited says Laforge was appointed as one of its three independent non-executive directors in June 2019. His appointment took effect in October, just over a month before the Canary Islands-registered corporation was listed on the Hong Kong stock exchange.

Under Laforge's leadership, the CDC signed agreements in 2016 with Feihe to build a new manufacturing facility in Canada, where no other dairy processor makes infant formula.

Now incorporated in Canada under the name Canada Royal Milk, the factory took its first deliveries of Ontario milk in December and currently is testing its processing line. Once production ramps up, most of the formula will be exported to China.

Documents obtained by CBC News under the Access to Information Act show that during Laforge's final two years as CEO, the CDC set up meetings for Feihe executives with other levels of government and federal regulators. Laforge also travelled to China multiple times, meeting with Feihe's chairman Leng Youbin and Chinese government officials.

Leng Youbin, chairman of China Feihe Limited, at an event marking Feihe's initial public offering in Hong Kong in October. Laforge met with Feihe's chairman multiple times while serving as CEO of the Canadian Dairy Commission. (Zhang Wei/China News Service/VCG/Getty Images)

"I definitely was involved in bringing them to Canada," he told CBC News. "We spent a lot of energy ... We opened up the doors for them."

Laforge said he does not believe his role as one of three rotating independent board members amounts to a conflict with his former role at a Crown corporation because it's "99 per cent international" and won't deal directly with the Canadian factory.

No disclosure required

Despite his direct dealings with Feihe as a public official, Laforge told CBC he did not clear his new job with the federal ethics commissioner.

When asked what post-employment rules apply for Laforge, the CDC's Paul suggested the CBC examine Section 33 of the Conflict of Interest Act.

It says: "No former public office holder shall act in such a manner as to take improper advantage of his or her previous public office."

A spokesperson for Conflict of Interest and Ethics Commissioner Mario Dion said his office can't answer questions about individuals because of confidentiality rules, but confirmed that Laforge's one-year "cooling-off period" is over, so his board appointment is no longer prohibited.

The Canada Royal Milk baby formula plant in Kingston, Ont.'s Cataraqui Estates Business Park was the result of a $225 million foreign direct investment in Canada's dairy processing industry. (Feihe International Inc.)

Guy Giorno, a former chief of staff to Stephen Harper who now advises clients on ethics and accountability in his legal practice, said not requiring a former senior civil servant like Laforge to disclose offers of employment and submit to an ethics review amounts to a "hole" in the law.

"It ought to be mandatory, and it stands to reason that the commissioner can't do a very good job policing people who have left when he's not under the statute required to be told about everybody who is seeking a new position," Giorno said.

'Fuzzy' rules

Nevertheless, several federal ethics rules apply for life, Giorno said.

Laforge can't give advice based on confidential information he knew as head of the CDC, and he can't "switch sides" and start working for Feihe on any financial transactions or legal proceedings he handled at the Crown corporation.

But Section 33, the rule against "taking improper advantage of a previous office," hasn't been interpreted very often. Giorno called it "very fuzzy."

"That doesn't mean it's unimportant as a general rule ... In fact, it's the first listed in the statute," he said.

Government service brings with it a network of contacts, goodwill and other "intangible things" which taxpayers paid Laforge to acquire, Giorno said.

"My own personal view is that Parliament intended to police the profiting from the monetization of those things," he said.

"Nothing happens for nothing. A former public servant must always be asking, 'Why are they paying me?'"

Protecting shareholders from 'boo-boos'

Laforge said he received a number of requests after he left the CDC. He followed its internal policy and waited a year before saying yes to anything, including Feihe's offer last summer.

"It's my first time doing this. I didn't know too much about independent directors," he said. "Common sense was telling me, stay away for a year, and when you start taking things make sure that it's not in conflict of interest with some files."

Kingston, Ont. Mayor Bryan Paterson, seen here on a visit to a Feihe facility in China, was one of several officials the Canadian Dairy Commission helped to connect with Chinese executives in order to bring the plant to Canada. (Office of Mayor Bryan Paterson)

"They might have a Chinese name but ... they want to source and do things internationally," he added. "I'm there to observe that they don't make any boo-boos affecting the shareholders."

He said he hasn't been paid yet, but expects his compensation to follow the guidelines of the Hong Kong exchange, which provide for a "basic fee of at least $400,000 HK ($67,000 Cdn) per year, coupled with additional payments for membership or chairing of board committees." Laforge sits on two committees, including Feihe's audit committee.

"It might look lucrative," he said, adding it's not clear how much time it will require.

He also admits he's nervous about the potential consequences of taking on this role.

"I know Feihe's a good company, but companies are companies. They go sideways once in a while," he said.

Normalizing China

David Mulroney, Canada's ambassador to China from 2009-12, said it's not necessarily bad for a company that wants to build a high-quality reputation to have a Canadian aboard.

During China's 2008 tainted baby formula scandal, which involved Feihe's competitor, directors on that company's board from New Zealand helped bring the facts to light.

While Laforge said his role with the company is largely international, Mulroney said the rationale for his appointment still needs to be explored and explained.

In the aftermath of the 2008 tainted milk scandal that made thousands sick and killed six children, many Chinese parents now buy imported baby formula. Feihe is using Canadian milk to boost the reputation of its brand. (Ng Han Guan/Associated Press)

And although Laforge's appointment respects the "cooling-off" period in the law, Mulroney said that year-long period is too short — and Canadians should expect public servants to do more than tick the box on the minimum post-employment requirements.

"There's something wrong with the speed with which elected officials and senior officials are taking jobs that do suggest they're trading on their past experience," the ex-ambassador said.

"The Chinese may be on the lookout for guanxi opportunities in Canada," Mulroney said, using a term that means "connectedness" to refer to the Chinese approach to networking through seeking out personal connections.

Without singling out Feihe, Mulroney said that China's corporate sector writ large is widely seen as too closely linked to the Chinese government.

"It's ... increasingly unclear in Xi Jinping's China that there are companies at all separate from the Chinese Communist Party," he said.

"It's difficult to understand why so many high-profile Canadians are allowing themselves to be associated with Chinese firms. It normalizes China at a time when China is anything but normal."

Feihe representatives have not responded to multiple interview requests in recent months.

CBC News asked Laforge about his decision to accept this work at a delicate time in Canada–Chinese relations.

"Believe me ... don't think that's not crossing my mind," he said. "It's too late now."


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