Tuesday, December 02, 2008


He is a little bit greyer than he was before the beginning of his biblical seven lean years, and a little bit balder, and slightly more wrinkled, but wiser, too. He has learned. He has discarded one of his own personal commandments, a rule he rarely breached in 20 years: Thou Shalt Not Give Interviews to the Press. He has opened his mind and his mouth to journalists, analysts, skeptics and enemies. He has a PR agent now. He does conference calls and takes questions. He has done all this because he had to--because his life's work was attacked, and because it became clear to him that the world had changed, and it wasn't good enough any longer to stay cloistered in his comfortable circle of friends and admirers and confidants and fellow travellers.

But that doesn't mean he likes it. And it doesn't mean he wants the attention any more than he did a decade ago, before all the trouble started, when he was still labelled a "recluse" and Bay Street loved him and his peculiar creation, insurance and investment company Fairfax Financial Holdings Ltd. Over the decades, The Globe and Mail has named dozens of CEOs of the Year. Prem Watsa is the first, as far as anyone can recall, who tried to reject the honour. Vehemently.

It's Fairfax policy to reject all awards to individuals. In 1999, Watsa even turned down a business leader award from his alma mater, the Richard Ivey School of Business; other Fairfax executives have rejected similar nominations. Watsa would not pose for photographs or grant an interview for this story (though he has given several interviews to The Globe this year, most recently in early October, when he spoke at length about the financial crisis and predicted a long, deep and painful recession). Through the company's chief legal officer, Paul Rivett, Watsa asked us to rename the title "Company of the Year" and grant it to Fairfax instead of him. He even offered to try to find us a more willing candidate. These efforts were not an act of false modesty. In Rivett's Toronto office, there is a limestone plaque that reads: "There's no limit to what a man can do or where he can go if he doesn't mind who gets the credit" --a quotation often attributed to Ronald Reagan. Watsa gave one to all senior Fairfax executives.

Well, tough luck, fella. Sometimes you have to suck it up and accept the credit. And this year--the most extraordinary year in financial markets since the Depression--is unquestionably Prem Watsa's time. His critics, the so-called cadre of hedge funds and their hired hatchet men whom Watsa alleges tried to destroy Fairfax in 2005 and 2006, are in retreat. The very practice of short-selling, while hardly discredited, is under scrutiny now, as are the practices of the brokers and traders who serve short-sellers. An analyst who helped touch off panic selling in Fairfax shares--by writing a report that essentially claimed the company was on the road to bankruptcy because it had failed to set aside a necessary $5 billion (all currency in U.S. dollars) for insurance claims--has been fired for leaking that document to some clients before its release. Fairfax seems financially healthy for the first time since Monica Lewinsky was on everyone's lips. In the summer, Moody's Investors Service raised Fairfax's credit rating, which it hadn't done since 1998; DBRS Ltd. moved the company's bonds to investment grade, where they hadn't been since 2002.

But these are mere details. The real reason Watsa is the (reluctant) recipient of the title is that, in three words, he called it. He didn't know that the greatest financial disaster in decades would unfold in the autumn of 2008, of course, and he didn't predict that it would sink such leviathans as Lehman Brothers and American International Group, his biggest rival in insurance. But he did spot the source of the trouble long before most everyone else. And he has $2 billion to prove it.

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