From Nova Scotia with love | The Coast Halifax

From Nova Scotia with love

Canadian taxpayers spent millions of dollars to help grow two companies that make some of the best spy-tech gear in the world. But a multinational firm bought the locals, and is now sending those good Dartmouth jobs to the United States.

High Arctic, 2002: A team of researchers from the United States and Greenland studies the movements of narwhals through Baffin Bay and the maze of straits and bays of northern Canada. The researchers attach Seimac SSC3 transmitters to the whales. Manufactured in Dartmouth, Nova Scotia, the transmitters send signals to satellites orbiting high above, and that information is processed by National Oceanic and Atmospheric Administration computers in Virginia to produce "fractal paths" of the narwals. The researchers learn how the whales' movements are dependent upon sea ice conditions.

Glacier National Park, Montana, 2003: NOAA installs a variety of monitoring and sampling gear---including devices that measure solar radiation, temperature, wind, rain and snow---on and around glaciers. Seimac GOES transmitters are placed in the ice and used to track retreating glaciers for the next nine years.

California, 2004: After the bodies of a fetus and a dismembered woman wash up on the shores of the San Francisco Bay, Scott Peterson is charged with the murder of his wife Laci Peterson and their unborn child, Conner. Among the chief evidence presented by prosecutors are the travel logs of Scott Peterson's whereabouts after his wife's disappearance, as gathered by a GPS tracking device the Modesto police had installed on Peterson's truck. The device was manufactured by Orion, a Windsor, Nova Scotia firm, and Orion founder Hugh Roddis is called to testify. Peterson is found guilty. He now sits on death row in San Quentin State Prison.

New Mexico, 2007: For about a decade, police departments across North America have been using "bait cars." The cars are equipped with GPS tracking systems and kill switches, then placed in positions where car-theft gangs operate. After a car is stolen, the police follow it, disabling the car when it becomes safe to arrest the thieves. The US department of justice hires Sandia National Laboratories in New Mexico to study best practices for the bait car programs, and the lab recommends two GPS devices: the most popular is the Windsor, Nova Scotia-made ST200 Sentry, manufactured under the Orion brand name.

NASA/Dryden Flight Research Center, California, 2009: NASA orders more than two dozen Dartmouth-made SLB-2000 locator beacons for use in "F-15, F-16, F-22 and other aircraft" operated by the US space agency. By this time, the SLB-2000 is used extensively by the US military, and the NASA order is seen as a prestigious affirmation of the device's status. The SLB-2000 is carried by jet pilots and is activated automatically when they eject.

California, 2010: Santa Clara resident Yasir Afifi, a US-born citizen of Egyptian descent who studies business marketing at the local college, takes his car to a garage for an oil change. A mechanic raises the car on a hydraulic lift, and discovers a wire sticking out of a wheel well. The wire is attached to what appears to be a battery pack and transmitter. Afifi's friend puts pictures of the device on, where readers quickly identify it as the Orion Guardian ST820 tracking device, manufactured in Dartmouth. Two days later, the FBI knocks on Afifi's apartment door and asks him to return it. He does, but the incident raises issues about the profiling of Arab Americans and the police use of tracking devices without a warrant. In January 2012, the US Supreme Court restricts the use of such tracking in a related case.

Seimac and Orion were the sort of companies Nova Scotia could build its future on. Developing and producing high-tech tracking devices, the companies created well-paying local jobs, world-class technology and spinoff benefits for other local companies.

It made sense that the federal government would invest in these companies, but their success made them all the more attractive on the world market. In 2005, Orion was bought up by a giant British firm called Cobham PLC, which has about $3 billion in sales annually. Cobham bought Seimac in 2007, then that same year combined the two Nova Scotia companies into a new subsidiary called Cobham Tracking and Locating, which has offices in Burnside.

Over the years, the Canadian federal government has given Cobham Tracking and Locating and its predecessor companies millions of dollars in loans and grants through ACOA and the National Research Council. And company insiders say that Cobham has received at least a million dollars through Revenue Canada's Scientific Research and Experimental Development tax rebate program.

Such government support is typically made in the name of job creation. But on December 31, 2011, Cobham moved production and customer support operations for two of the company's most successful products---the emergency locator beacons used by jet pilots---to Fort Lauderdale, Florida.

A few days later---on Friday, January 6---company insiders say a new half-million-dollar ACOA loan to Cobham Tracking and Locating was announced with great fanfare in the company's Burnside office. And three days after that, Monday, January 9, Cobham laid off 11 of its Dartmouth employees, including two employees who had worked with ACOA to develop the loan application.

"The layoffs were implemented at 9:15am," writes one of the insiders in an email. "No advance warning was given. About 10 or 11 employees were rounded up and brought to the conference room where they were told they were terminated for lack of work (which was pretty funny, given the ACOA announcement we'd just heard). Each person was escorted back to their desk where they were allowed to collect their personal effects and then escorted to the front door. The whole thing was over by 9:30.

"About half of those laid off were electrical and mechanical engineers," continues the insider. "These people did the actual design work on the tracking and surveillance products. The engineers are in the $50,000-$100,000/yr range. One of the engineers had been with us 18 yrs. With the ACOA announcement, no one saw this coming, not just then, and not just right after Christmas holidays either."

An important technology was developed by inventive Nova Scotians with the help of millions of dollars in Canadian taxpayer support, and now the well-paying jobs for manufacturing and support of that technology are in the United States, not Canada. And no one saw this coming.

Nova Scotia-created technology
Cobham PLC, explains its website, sells a "range of distinctive subsystem capabilities" that have been "developed through a combination of strategic acquisitions and Company funded R&D."

Two of those strategic acquisitions were the Nova Scotian tracking companies. Orion Electronics was started in 1975 by Hugh Roddis, an engineer who worked at defence contractor Martin Marrietta. Orion was always secretive, and concentrated on surveillance gear used by police and military.

There's not much in the public record about Orion. In 1998, ACOA loaned Orion $317,500 to "construct building extension, acquire equipment." In 2002, ACOA loaned Orion another $470,000 to "acquire new production equipment to improve plant efficiency." In 2005, ACOA gave an outright grant of $78,750 to "acquire new key skills to support design of new products."

The other Nova Scotian firm acquired by Cobham was Dartmouth's Seimac Ltd., founded in 1978 by Joseph Seiler and Hugh MacPherson, who had been Navy engineers.

"Nova Scotia seemed like a good place to do stuff in the ocean," says MacPherson. "Our biggest customers in those early days were the federal government, and then the research community and Bedford Institute of Oceanography. The tracking stuff started with the tracking of weather buoys, for weather or oceanographic conditions---for instance, one of them was for use in the High Arctic, and they wanted the buoy to float along the ice so they could track ice movement."

Seiler, now a life coach in British Columbia, remembers travelling to the Arctic to install a Seimac device on a buoy. "We made them one at a time," he says. "It was about six feet long, and maybe a foot around, weighing about 160 pounds."

These devices used the ARGOS satellite system. The device emits a periodic signal, which is captured when a satellite happens to be overhead; after multiple satellite passings, a track can be determined.

Seiler and MacPherson left for other pursuits, but the same basic technology continued to be used by the company, even as equipment became ever smaller---six inches or so long, small enough to be attached to narwals, for instance. Seimac was less dependent on taxpayer assistance than was Orion, but in 1995 Seimac received a "provisionally repayable contribution" of $130,934 from ACOA to "further develop ARGOS Platform Transmitter Terminal."

In the 1990s, the global positioning system revolutionized the field. That technology basically works in reverse of ARGOS: with GPS devices, three or more satellites emit signals the device uses to calculate a position, and that position can be recorded continuously. The device can either hold the record of its movement, to be downloaded later---as with the device on Scott Peterson's truck---or it can broadcast the position back to a cell tower---as presumably was the case with the device attached to Yasir Afifi's car.

Seimac kept up with the technology shift. A big success for the company was the SLB-1000, an emergency locator transmitter carried by US air combat crews to locate downed pilots. About six inches square, these devices are stored in a pilot's flight vest, and are triggered by cables attached to the ejector seat.

Seimac was bought by Cobham PLC in 2007. Using many of the same Seimac engineers who had developed the SLB-1000, the new company built a successor to the device, the SLB-2000, which is one of the most celebrated military tracking devices in the world. Sales figures---and even prices--- are confidential, but it's safe to say these beacons are a significant revenue generator for Cobham.

Otherwise, however, no notable technology has been developed by the new company, say insiders. "Two dynamic, fun-to-work-for companies turned from results-oriented scrappers into a procedures-oriented institution called Cobham Tracking & Locating," explains a company insider. "Profitability at any cost became the sole purpose for existing---yet, paradoxically, layers and layers of management were added. Innovation was strangled, morale dropped. Resignations increased. Most of the ex-Orion facility in Windsor was closed, most of the staff terminated. Production was outsourced."

Federal tax rebates for research and development were "supposed to support innovation," explains another insider. "But after Seimac was bought out by Cobham PLC, that never happened at our workplace anymore. Every product ever developed there in the last several years was based on published information like application notes and data sheets from manufacturers. I mean, stuff that someone else had done and was out there in the public domain already. We just tweaked it. Our feisty little company has become just a really good cut-and-paster, heavily micromanaged by the UK and Washington offices."

The new British management of the company also took products that Semiac and Orion had developed and moved the assets to other Cobham PLC subsidiaries. The International Cospas-Sarsat Programme, which serves as a clearing house for technical data for emergency beacons, documents two of these transfers on its website: "Production, technical and post-production authority" of the SLB-1000 and the SLB-2000 was transferred from Dartmouth to ACR Electronics, a Fort Lauderdale subsidiary of Cobham PLC, on December 31, 2011.

Cospas-Sarsat noted the change specifically, says technical officer Andryey Zhitenev, because of a "formal request" made by ACR Electronics.

Nine days later, the 11 Dartmouth employees were laid off. In the months since, several other employees, including a project manager and the facility's general manager, have been laid off, say the insiders, who fear that Cobham is preparing to close the Dartmouth operation completely. They expect that order could come any day.

Accessing taxpayer money
While insiders say the creation of Cobham Tracking and Locating quashed the employees' creativity related to developing new products, the company was apparently very creative when it came to getting assistance from Canadian taxpayers.

There's some mystery concerning the $500,000 ACOA loan that insiders say was announced in the company's Burnside office this January. The Coast began trying to verify the existence of the January ACOA loan a few weeks later. ACOA will not say one way or the other whether it loaned or intends to loan Cobham money this year.

"ACOA cannot speculate about projects that may or may not be under evaluation, until a final decision is made and a contribution is publicly announced," ACOA spokesperson Chris Brooks says. ACOA does not make such loans part of the public record until 60 days after the loan is finalized.

And this Tuesday, Cobham spokesperson Monica Hallman told The Coast that indeed Cobham "looked into ACOA funding several months ago," but "we have not received any funding, and are not currently pursuing any funding from this agency."

The company insiders, however, insist that an announcement of an approved ACOA loan was made January 6. It's unclear what happened with regards to ACOA and Cobham in January. Perhaps the insiders have the story wrong. Or maybe The Coast's questioning somehow derailed a pending loan. Or it could be that Cobham pursued a loan but then rejected the idea for business reasons that have nothing to do with ACOA.

Regardless, the company definitely did receive an ACOA loan, also for $500,000, in 2008. According to ACOA documents, that loan was intended to "acquire new equipment to commercialize new product line." ACOA won't say, precisely, what the equipment was or if the product line came to fruition. That loan, says ACOA spokesperson Alex Smith, "is being repaid by the company." Smith will not say how much of it has been repaid and how much is outstanding.

But besides ACOA assistance, Cobham Tracking and Locating has also received outright grants from National Research Council Canada. The company was given $213,500 on January 16, 2009, and another $94,700 on April 12, 2010. According to NRC's website, both grants were to "support a firm in the Research and Development in the Physical, Engineering and Life Sciences with a research and development project."

Asked for details about the grants to Cobham, NRC spokesperson Jonathan Ward says the organization cannot release further information until Cobham approves.

But Cobham isn't approving. "We can't talk about [the NRC funding] because of the nature of our business---we can't divulge what type of research that's being applied to," says Cobham spokesperson Monica Hallman.

A third pot of federal assistance comes through Revenue Canada's Scientific Research and Experimental Development Tax Incentive Program, but those tax rebates are not public record. "Confidentiality provisions of the Acts administered by the Canada Revenue Agency prevent me from discussing the details of specific cases," says spokesperson Roy Jamieson.

The SR&ED program has come under intense criticism in recent months for, as the Globe and Mail says, "widespread dubious claims, a diversion of tax credits to consultants working on contingency fees, plus inconsistent and unpredictable rulings on what qualifies as R&D." The program was the subject of a scathing report by Tom Jenkins, chair of Open Text Corp, who led a federal review of SR&ED.

"SR&ED was supposed to be money for innovation," says one Cobham insider. "But over the past few years it was really just for standard product development, not even to build a better mousetrap. Cobham would bring in an accounting firm to rewrite its SR&ED submissions to make sure they got through."

Cobham's engineers, continues the insider, "would go nuts about it, being asked to say what they'd been doing was innovative when it was, in fact, embarrassing. But SR&ED is Swiss cheese, you can get anything through it, and so far as I know Cobham always got its money."

Why move to the US?
Hallman, the Cobham spokesperson, doesn't say what Cobham's long-range plans are for Dartmouth, but she does say that consolidation of Cobham's tracking operations in the United States is a company business decision.

"Several years ago Cobham moved some of the search and rescue business to Cobham Commercial Systems (Beacon Solutions) in Florida," she writes. "This was part of the alignment to merge like capability areas together. The SAR business that moved to Florida was 100 percent internally funded developments, and did not receive any external funding."

The US market for Cobham products is much larger than the Canadian market, and the company is spending millions of dollars to influence US politicians and bureaucrats. The Center for Responsive Politics tracks the expenditures of firms registered to lobby US governments and agencies. According to its website,, since 2006 Cobham and its associated lobbying subsidiaries and hired lobbyists have spent $5,520,000US to influence lawmakers. Cobham lobbied the Department of Defense, the Senate and the House of Representatives on a number of defense and military authorization bills, and also on labour bills.

Cobham also has a lobbyist in Ottawa. One. Chris MacInnes, a Halifax lawyer who was recently elected vice-president of the national executive of the Liberal Party of Canada, is registered to lobby on Cobham's behalf. Lobbying expenses and the legislation targeted by lobbyists are not public record in Canada, so we don't know to what lengths MacInnes goes to influence policy, but it without question pales in comparison to Cobham's US lobbying efforts.

Clearly, Cobham is entirely within its rights to move its assets and operations anywhere. It found value in a taxpayer-supported Nova Scotia tech industry, then leveraged that value by moving some of the operation to the US, where the hyper-militarized and hyper-surveillance society will pay top dollar for Cobham's products.

But there's some irony that while Canadian taxpayers were funding the development of tracking technology, no one much was tracking where the jobs related to that technology were going.

Tim Bousquet is The Coast's news editor.