Pigeon King fiasco unlikely to fly away

By: Art Sinclair September 1, 2008 12:00 AM - In 2006, University of Waterloo President David Johnston outlined his 10 goals to make Waterloo Region the knowledge capital of Canada by 2010.  
Two years later, due to the questionable practices of a local company, we may now be more known as the pigeon capital of Canada, if not North America. Perhaps the world.
In June, Pigeon King International, a Waterloo-based company that has been surrounded by controversy in its brief seven year existence, filed for bankruptcy from liabilities of $40 million. Projections indicate the debt could escalate further. The filing did not strike the economy like Enron or WorldCom, however, the effects may be felt across our community, rural Ontario, and farming areas of the United States for a considerable time.
More significantly, events preceding the bankruptcy have raised serious issues and concerns regarding consumer and business protection laws in Ontario. While many American jurisdictions saw a train wreck in the distance and acted accordingly, the province where the questionable business practices originated did nothing until the proverbial horse  – or in this case birds – left the barn.  
Pigeon King International, or PKI, is the creation of Arlan Galbraith, an individual with a rather unremarkable past. A report in the Waterloo Region Record from last February indicated that Galbraith farmed in Grey County and operated a butcher shop which eventually went bankrupt. He subsequently worked on a number of swine operations across Perth County prior to starting Pigeon King in 2001.     
Galbraith had a vision – and he certainly considers himself a visionary – of the poultry industry being decimated by avian flu. Following the devastation, the world would turn to pigeon meat, or squab, as a replacement. Alternatively, for a variety of other reasons, consumers would give up on poultry and start eating pigeon. To prepare for this massive demand, a relatively simple yet highly controversial scheme was devised. Galbraith recruited approximately 1,000 farmers (the real numbers are not accurately documented) across Canada and the United States to raise pigeons and subsequently sell the offspring back to him at higher prices.
Eventually a large processing plant would be established and Galbraith reasoned he needed a readily available supply of birds when that facility became operational.  The strategy was apparently to grow a food empire larger than Mac Cuddy’s poultry operation at Strathroy and Schneiders on Courtland Avenue in Kitchener combined – in one-tenth the amount of time.
Or perhaps the plan was something far less credible.
Pigeon King soon began attracting attention from some rather prominent authorities across the United States. In November of last year, the Attorney General for the State of Iowa warned potential investors that PKI’s business practices were potentially violating state law, primarily in relation to misleading consumers on the viability of establishing several large processing plants. Concern was specifically expressed regarding the operation of a “ponzi” type investment scheme where birds were being returned to Galbraith and subsequently sold to new investors again and again and…again.     
The Iowa actions were followed by two other American jurisdictions. The State of Washington issued a notice in March that they would order Pigeon King to “cease and desist” from operating if no evidence of a viable business was presented. In June, immediately prior to the PKI bankruptcy, the State of Maryland issued a formal cease and desist order, citing failure to register with the state, failing to provide prospective buyers with disclosure details, and making false statements.  
A cursory review of the above allegations against Pigeon King indicates actions of a relatively serious nature. The terms “cease” and “desist” carry some rather strong connotations in a legal and non-legal context.
However Galbraith dismissed all allegations as “fear mongering” and when confronted with formal legal actions from concerned American jurisdictions, he responded that authorities were simply misled by jealous critics of his significant success and wealth, or that he had no interest in doing business within those states anyway. Conspiracies appear to be quite popular in the pigeon business.    
In late July, as creditors met with bankruptcy officials to determine what can be recovered, opposition critics at Queen’s Park questioned the provincial government’s failure to warn Ontario investors in an approach similar to Iowa, Washington or Maryland.  Partisan politics aside, the Pigeon King fiasco does raise some serious regulatory issues.
The total value of agricultural production across Iowa in 2006 was US $15.1 billion, compared to CAN $9.2 billion in Ontario during 2007. Obviously, the State of Iowa is highly dependent upon primary agriculture to fuel and sustain economic growth. It is an industry that legislators and regulators take very seriously. Based on their responsibility to support and defend farmers across the state, they acted as they could against Pigeon King.
Unfortunately, in Ontario recent media reports indicate the usual response from provincial authorities in a crisis – the federal government should have acted. If Iowa, Maryland, and Washington had the ability to respond in this situation, was Ontario negligent or did the authority not exist? No real answers have been provided.
Waterloo Region has an exemplary legacy of innovative, hard-working, and responsible entrepreneurs who have built our community and by extension this province. Pigeon King has left a path of destruction and financial devastation that may take years to calculate. This act played far too long – the curtain should have been pulled sooner.