While Canada's shipbuilding industry foundered, Canada Steamship Lines under Paul Martin turned to shipyards in China and Japan to build its new vessels. ADVERTISEMENT

When Paul Martin finally claims the prime minister's office some time in the new year, perhaps sooner, Canada will have its first true corporate titan at the head of government.

Past prime ministers, R.B. Bennett and Pierre Trudeau among them, have enjoyed substantial personal holdings, but none has entered the job with business bona fides as impressive as the former finance minister.

The legend is already well trod: The former deck hand who bought the company -- Canada Steamship Lines -- and transformed it from a dusty domestic into a multinational shipping powerhouse with assets of nearly $700 million.

But now, with Mr. Martin about to take the highest job, his political opponents are putting his business interests under a heightened level of scrutiny. They envision a Martin government beset by conflict-of-interest allegations, with the unwieldy family shipping company regularly colliding with government policy.

To Martin supporters, his creation of a successful multinational is a jewel on his résumé. If he can run the company, they say, he can run the country.

Paul Martin's entry into the business world came not long after he graduated from law school, at a time when he was considering devoting his life to work in developing countries. Working in Europe, Mr. Martin met Maurice Strong, then the president of the Desmarais family's Power Corporation.

The two men had crossed paths in 1956, when Mr. Martin worked as truck driver for a gas company Mr. Strong owned in Alberta, according to Passage to the Sea, Edgar Andrew Collard's history of Canada Steamship Lines.

Mr. Strong took a shine to the ambitious young man and hired him as an assistant. Mr. Martin soon proved an effective corporate trouble-shooter and was charged with turning around two failing businesses in the Power Corp. stable, Mr. Collard wrote. Paul Desmarais, patriarch of the dynasty, was impressed enough that he appointed Mr. Martin president of its subsidiary, Canada Steamship Lines, in 1973 and then handed him the CEO title two years later.

In 1981, Power Corp.'s changing priorities allowed Mr. Martin to make the leap from company climber to stand-alone magnate. Power wanted to unload CSL to free up capital to buy Canadian Pacific Railways. Mr. Desmarais told Mr. Martin to find a buyer and suggested he consider it himself.

Mr. Martin linked up with Laurence Pathy, president of a Great Lakes shipping company called Fednav Ltd., and orchestrated financing with the Royal Bank, Mr. Collard wrote. They entered negotiations with John Rae, a Power Corp. executive who would later become a key aide to Prime Minister Jean Chrétien, and finally agreed to buy CSL for $180 million, with Mr. Martin and Mr. Pathy each owning half the company.

"Martin borrowed every cent of what he needed from the Royal Bank, putting up the company itself as security," Mr. Collard wrote.

When Mr. Martin took over the company, it was apparent that the domestic market for bulk shipping -- iron ore, coal and gypsum accounted for most of the traffic -- was saturated. The company's self-unloader technology, which eliminated the need for stevedores and dockside cranes, made it a natural for expanding in the developing world, where such facilities often do not exist.

The fleet grew rapidly during the Martin years, buying new ships and inking partnerships with foreign companies, such as U.S.-based Marbulk Shipping and Germany's Egon Oldendorf. Offices opened in Massachusetts, Australia and Singapore.

The transformation to multinational was not without controversy -- and political implications. While Canada's shipbuilding industry foundered, CSL turned to shipyards in China and Japan to build its new vessels. And the company began flagging its ships in offshore tax havens such as Vanuatu and Liberia. It hired cheaper, non-unionized foreign crews to work the international routes -- "sweatships," some critics called them. Taxes that would have been paid to Canada were instead funnelled to Bermuda and Barbados.

One particularly acrimonious case saw CSL dragged before the High Court of Australia after it acquired an Australian vessel, fired its unionized domestic crew, reflagged the ship in Barbados, and hired a crew of lower-paid Ukrainians. Throughout, the company defended the practice of foreign flagging as necessary to remaining competitive in the international industry.

One question never answered about CSL's transformation was the source of its money during its capital-intensive expansion in the 1990s. The building of new ships would have required tens of millions of dollars. At the same time, Mr. Martin was finance minister and pondering the contentious issue of bank mergers, and was also responsible for the approvals of foreign banks in Canada.

At least some of the cash was lent by foreign banks, according to journalist Marci McDonald, who reported in The Walrus magazine this fall that CSL vessels were encumbered by heavy mortgages -- more than $500 million worth -- to lenders such as Citicorp and the Hong Kong Bank of Canada.

"Might Martin remember that generosity when it comes time to decide whether foreign financial interests rate a bigger piece of the Canadian action?" the article suggested.

Not according to ethics counsellor Howard Wilson. As finance minister, Mr. Martin was supposed to be insulated from possible conflicts of interest that his company's activities might create for him by a special agreement forged by Mr. Wilson.

The arrangement appeared to work well. In nine years in Finance, conflict allegations were heard only rarely, usually from the Bloc Québécois, and often over a relatively arcane section of new taxation legislation that could have had a bearing on the shipping industry. When Mr. Martin left cabinet in the summer of 2002, nothing in his business holdings had caused him any meaningful political grief.

Only this year, with Mr. Martin's political fortunes ascending, were the details of the agreement with Mr. Wilson scrutinized more closely. In fact, through his term as finance minister, Mr. Martin had regular meetings with CSL officials to discuss the company's major new undertakings. The meetings were chaperoned by Mr. Wilson, and usually held in his Ottawa office.

Mr. Wilson insisted that the private meetings with CSL were necessary and never put the former finance minister in a conflict. Critics didn't buy it and howls of protest dominated the spring sitting of Parliament. For the first time, opposition parties saw a chink in Mr. Martin's seemingly impenetrable political armour.

But before they could capitalize, Mr. Martin announced in March that he would transfer all his business assets to his three sons to ensure there would be no questions of conflict once he became prime minister.

It was a move that split conflict-of-interest experts. Some, Mr. Wilson among them, agreed that the transfer removed Mr. Martin from any possible conflicts; others said the ownership by his sons of CSL and its related companies would continue to tangle his family interests in countless issues that come before cabinet. Taxation of foreign companies, seaway and shipping policy, the Kyoto Accord and its effects on the coal industry, and foreign relations with any country with which CSL does business were cited as possible areas where Mr. Martin could be accused of putting his sons' interest ahead of the country's.

Undeterred, Conservative leader Peter MacKay and party strategists held teleconference meetings during the parliamentary recess this past summer to plan a new wave of conflict-of-interest attacks for when Mr. Martin becomes prime minister. Curiously, one of the men invited to participate was Sinclair Stevens, the former Mulroney-era industry minister whose name became synonymous with the ethics scandals that palsied the Conservative government. Mr. Stevens, through his ongoing litigation against the government over his case, has become something of an expert on the topic.

The Canadian Alliance was also preparing a new siege on Mr. Martin over possible conflicts with his family holdings.

Another avenue the opposition may choose to explore is the links between the new prime minister and his legions of political donors, who have contributed an astounding $11 million to fund Mr. Martin's leadership campaign. The donor list reads like Who's Who of Canada's corporate elite, with Bay Street entrepreneurs such as Gerry Schwartz and Miles Nadal, and blue chippers such as Joe Rotman. There are loyal Liberal backers like Toronto developer Elvio Del Zotto and Senator Leo Kolber, and craven right-wingers, like Hal Jackman and the Stronach family of Magna Corp. Vancouver billionaire Jim Pattison gave from the west coast and the Irving family from the east.

The donors' list shows that Mr. Martin's support from the business world is transnational, with Chinese billionaire Li Ka Shing and Hong Kong airline operate David TK Ho donors to the Martin leadership campaign, through Canadian companies.

Now, on the eve of Mr. Martin's ascension to the prime minister's job, is the unanswered question: Will his business experience and connections be seen as desirable qualities of someone who wants to run the government? Or will his administration be hamstrung by conflict-of-interest allegations that will inevitably and regularly accompany government decisions that could have even the slightest bearing on his family's business interests?

The following is the declaration of assets made by Paul Martin to the federal ethics counsellor.

Public Declaration of Declarable Assets

I, the undersigned, declare:

I own:

A farm operation named Valleystream Farms located near Cowansville, Quebec, managed by a third party, which raises livestock;

Membership share in the Knowlton Golf Club and in the Mount Bruno Golf and Country Club;

529 Preference Class B shares (92.66 per cent vote) and 26,833 Preference Class C shares (4.70 per cent) of SHEILAMART ENTERPRISES INC., an Ontario incorporated holding company which owns 438,210 preferred shares (10.94 per cent) of PASSAGE HOLDINGS INC., Canada Treasury Bills and shares of Big Splash Water Slides Inc. (ceased operations - no assets);

15,028 Preference Class A shares (99.6861 per cent vote) and 47 Preference Class B shares (0.3118 per cent vote) of NELLMART HOLDINGS INC., a federally incorporated holding company which owns Canada Treasury Bills and 201 common shares (50.25 per cent vote) of Nellmart Limited, a private Alberta incorporated investment holding company which in turn owns the Plaza Building, the Dunbar and the Varsity Theatres in Vancouver, a building on Hastings Street in Vancouver, rented to the Royal Bank, opened-ended mutual funds, Government Bonds and Canada Treasury Bills;

1,155 Preference Class A (no vote), 1,508 Preference Class B (37.63 per cent vote), 1,226 Preference Class C (0.03 per cent vote) and 20 Preference Class D shares (49.90 per cent vote) of PASSAGE HOLDINGS INC., a federally incorporated investment holding company administered blindly from me under a Supervisory Agreement (copy attached), which owns directly or indirectly, shares in the following other companies:

The CSL Group Inc. (Montreal, Canada) -- 100 per cent owned.

Canada Steamship Lines Inc. (Montreal, Canada) -- 100 per cent owned.

CSL operates a fleet of self-unloading bulk carriers on the Great Lakes, St. Lawrence River and in the Canadian East Coast. Commodities carried include iron ore, coal, clinker, wheat, stone, gypsum, etc. CSL owns and operates the following Canadian-flagged vessels: Atlantic Erie, Atlantic Huron, CSL Niagara, Ferbec, Frontenac, Halifax, Rt. Hon. Paul J. Martin (formerly H.M. Griffith), Jean Parisien, CSL Laurentian (formerly Louis R. Desmarais), Manitoulin, Nanticoke, Tadoussac, Mapleglen, Oakglen and English River (managed for a third party).

CSL International Inc. (Barbados) -- 100 Per Cent Owned.

CSL International performs the commercial management of a fleet of self-unloading bulk vessels in the U.S. East and West Coast, Caribbean, Mexican Coast and South America. Commodities carried include gypsum, coal, stone and iron ore. The fleet is composed of vessels owned by independent shipowners and of the following six vessels owned by affiliated companies: CSL Atlas, CSL Cabo, CSL Trailblazer, M.H. Baker III, the Sheila Ann and the CSL Spirit.

Companies Owned Directly or Indirectly by Canada Steamship Lines Inc.:

Atlasco Shipping Ltd. (Barbados) owns one vessel which is leased to CSL International -- 100 per cent owned.

CSL Cabo Shipping Inc. (Barbados) owns two vessels which are leased to CSL International -- 100 per cent owned.

Tangshan Jinshan Marine Company (China) -- 35 per cent owned.

SBS Projects Inc. (design and procurement of self-unloading systems) (British Columbia) -- 100 per cent owned.

CSL Self-Unloader Investments Limited (holding company) (Bermuda) -- 100 per cent owned.

CSL Asia Investments Limited (Bermuda) -- 100 per cent owned.

Marbulk Canada Inc. -- 50 per cent owned.

Marbulk Shipping Inc. (Barbados) ? 100 per cent owned by Marbulk Canada Inc.

Two Star Shipping Limited (Cyprus) -- 50 per cent owned by Marbulk Shipping Inc. (Barbados).

Paiton Shipping Inc. (Barbados) -- 50 per cent owned.

PSI Bulk Shipping Pte. Lt. (Singapore) -- 50 per cent owned.

Semisub Transshippers Inc. (Barbados) -- 48.74 per cent owned.

Lati Transshippers Inc. (Barbados) -- 48.74 per cent owned.

Hull 2227 Shipping Inc. (Barbados) (owns the Sheila Ann vessel) -- 100 per cent owned.

Hull 2229 Shipping Inc. (Barbados) (owns the CSL Spirit vessel) -- 100 per cent owned.

Canada Steamship Lines Holding B.V. (Netherlands) -- 51 per cent owned.

Auscan Holding Pty Limited (Australia) -- 100 per cent owned.

CSL Australia Pty Ltd (Australia) -- 100 per cent owned.

CSL Asia shipping Pte. Ltd. (Singapore) -- 100 per cent owned.

Cordex Petroleums Inc. (oil and gas exploration and production) (Alberta) - 4.6 per cent owned by The CSL Group Inc.

CSL Equity Investments Limited -- 50 Per Cent Owned.

CSL Equity is a holding company which holds investments in real estate, ship repair and shipbuilding, cable business, as well as in other economic sectors.

Companies Owned Directly or Indirectly by CSL Equity Investments Limited (Canada)

16091 Canada Inc. (Canada) (trustee of Ontario real estate properties) -- 100 per cent owned.

16092 Canada Inc. (Canada) (trustee of Quebec real estate properties) -- 100 per cent owned.

CSL Investments (Alberta) Limited (Canada) -- 100 per cent owned -- Owns an interest in a real property in Alberta.

CSL Investments (Ontario) Limited (Canada) -- 100 per cent owned -- Owns an interest in a real property in a building in Toronto.

2599970 Canada Inc. (formerly Voyageur Colonial Limited) (Canada) -- 100 per cent owned.

Ocean Lines Limited (Holding) (Bermuda) -- 100 per cent owned.

Canadian Shipbuilding and Engineering Ltd. (Canada) -- 50 per cent owned.

CSE Marine Services Inc. -- 100 per cent owned by Canadian Shipbuilding and Engineering Ltd.

CSL Properties Limited (owns real estate interest in properties in the U.S.) (Delaware) -- 100 per cent owned.

Properties Two Inc. (Colorado) -- 100 per cent owned by CSL Properties Limited.

CSL and A, Inc. (real estate limited partnership) (Arizona) - 50 per cent owned by CSL Properties Limited

Inactive Companies Owned Directly or Indirectly by the CSL Group Inc.:

Canadian Marine Compensation Management (C.M.C.M.) Inc. (management of workers compensation claims) -- 25 per cent owned.

Canada Steamship Lines Limited (England) - 100 per cent owned.

Inactive Companies Owned Directly or Indirectly by Canada Steamship Lines Inc.:

Superior Shipping Company (1993) Inc. (Canada) -- 100 per cent owned.

CSL Marine Services Inc. (Canada) (formerly Intercan Marine Services Inc.) -- 100 per cent owned.

The Commercial Coal and Coke Company (Ohio) -- 100 per cent owned.

GLBC Inc. -- 50.196 per cent and Great Lakes Bulk Carriers Limited Partnership (Ontario) (bulk vessels) -- 49.249 per cent owned.

CSL Pacific Shipping Inc. (Barbados) (formerly CSL Ocean Services Inc.) -- 100 per cent owned.

Innovatorco Shipping Inc. (Liberia) -- 100 per cent owned.

Marbulk Shipping (2000) Inc. (Barbados) -- 100 per cent owned by Marbulk Canada Inc.

Marbulk Shipping Inc. (Liberia) -- 100 per cent owned by Marbulk Shipping Inc. (Barbados).

Eastern Power Shipping Limited (Barbados) -- 100 per cent owned by Marbulk Shipping Inc. (Barbados).

Inactive Companies Owned Directly or Indirectly by CSL Equity Investments Limited:

Oceanex Management Inc. (Canada) (formerly Oceanex Holdings Inc.) -- 25 per cent owned.

Guadeloupe Cable International Inc. (Barbados) -- 30.03 per cent owned.

Ran with fact box "The following is the declaration of assets made by Paul Martin to the federal ethics counsellor.", which has been appended to the story.