Caisse de Depot et Placement president Charles Emond at the legislature in Quebec City on Aug. 17, 2020. Mr. Emond appeared at the Quebec legislature’s committee on public finance on March 2 to face questions about investments by Caisse in a private security company at the centre of several incidents that raise ethical questions for the pension.Jacques Boissinot/The Canadian Press
The Caisse de dépôt et placement du Québec is facing questions from lawmakers about its stake in private security company Allied Universal, as the pension giant’s decision to invest in the company four years ago continues to generate ethical trouble spots.
During an appearance late Tuesday before the Quebec legislature’s committee on public finance, Caisse chief executive Charles Emond was asked about the pension fund manager’s 2019 investment in U.S.-based Allied, the world’s biggest provider of security guards. He was challenged to explain the fact that the Caisse now owns a piece of Israeli company Policity Ltd., held through Allied’s British subsidiary G4S PLC.
Allied has a 25-per-cent stake in Policity, which runs the Israeli National Police Academy. The investment is one of several Caisse assets now coming under scrutiny.
Incidents of torture against Palestinian political prisoners in Israel, including children, have been “widely documented by human rights organizations,” Haroun Bouazzi of the left-leaning Québec Solidaire party told Mr. Emond. “How does the Caisse de dépôt justify still being linked financially to this company?”
The Caisse CEO said he agreed “entirely” with Mr. Bouazzi. “This is not the kind of activity that we endorse at all,” he said. He added that Allied had pledged, when it took over G4S in 2021, to sell some of the new subsidiary’s assets, including the stake in Policity. Mr. Emond told the committee the Caisse is confident Allied will make good on that promise.
“We’re pushing the company to do what it said it would do,” Mr. Emond said, adding that the Caisse has two directors on Allied’s 11-member board. “We don’t have any concerns that eventually that’s what’s going to happen.”
The Caisse’s investment in Allied and G4S gained international attention because of a scandal in South Africa, centred on a convicted murderer and rapist named Thabo Bester. Corrupt guards at the Mangaung Correctional Centre, operated by G4S, allowed Mr. Bester to run fraudulent schemes online for years while he was locked up. Later they allegedly helped him fake his death and escape. He was caught in Tanzania just three weeks ago.
The Bester saga has become the biggest story in South Africa this year, casting a spotlight on G4S and its parent. Allied bought G4S in 2021 for £3.8-billion. The Caisse, which has a stake in Allied of about 28 per cent, is one of the company’s biggest shareholders, along with a group of funds controlled by New York-based private-equity firm Warburg Pincus LLC.
Warburg Pincus did not respond to a request for comment.
Even before the Bester controversy, questions were being raised about why a Canadian corporate pillar such as the Caisse would make a private-equity investment in the security industry and, later, associate itself with G4S, which has a checkered recent history.
London-based G4S has worked for years to tighten its operations after a series of allegations and crises. In one case, British government inspectors found that a G4S prison in Birmingham had allowed violence and drug abuse by prisoners, with its staff locking themselves in offices for fear of arson and other kinds of attacks.
Critics say the Caisse, which administers retirement funds for thousands of public-sector employees, has no business being in the security sector. Others say it should use its muscle to push Allied harder on cleaning up G4S – and be fully transparent about its concerns.
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Mr. Emond told the committee the Caisse is doing just that. Whenever there are concerns about investments “we put that on the agenda and we put pressure on the company,” he said.
When it bid to acquire G4S, Allied said it would evaluate the possibility of divesting all or a significant part of G4S’s prison and detention business, then known as Care & Justice Services. British media reported at the time that Allied was determined to sell the business. Two years later, it still has it, but Mr. Emond’s comments on Tuesday suggest a sale is being considered.
Mr. Emond said such divestitures are complicated by the fact that they sometimes involve government contracts that are up for expiration or renewal. A willing buyer also has to be found, he said.
The South African government announced Tuesday that it was terminating a 25-year contract under which G4S had been operating the private prison from which Mr. Bester escaped. The contract had been scheduled to expire in 2026, but the country’s correctional services department said it had obtained a legal opinion that a G4S-affiliated local company was “neither competent nor suitable” to continue.
On Wednesday, South African prosecutors alleged that five employees or contract staff at the prison had accepted bribes or been promised payments to allow Mr. Bester’s escape. The employees, who made a joint court appearance on Wednesday after their arrests, are accused of allowing an accomplice to bring a dead body into Mr. Bester’s prison cell. The body was allegedly set on fire to give the impression that it was Mr. Bester’s. His disappearance was not reported for months.