Prem Watsa’s ‘mindboggling’ explanation of forestry takeover prompts judge to award shareholders millions

Canadian investor Prem Watsa was “purposely forgetful” and offered a “mindboggling” explanation in court testimony explaining why he backed a low-ball bid for a pulp mill in a sale to Resolute Forest Products Inc., a Montreal judge concluded in the seven-year-old case.

Testimony by Watsa, chairman and chief executive officer of Fairfax Financial Holdings Inc., was so problematic it helped convince Montreal Superior Court Justice Michel Pinsonnault to award some Fibrek Inc. shareholders $13.5 million (US$10.2 million), plus interest. Fairfax “was in a blatant conflict of interest situation,” the Quebec judge said in his Sept. 26 ruling.

“Watsa’s testimony was so vague and filled with so many uncertainties, unlikelihood, unsubstantiated denials and contradictions that it is very difficult for the court to give credence to the affirmations and explanations of the witness whose memory appeared to be failing on the most crucial aspects of his testimony,” Pinsonnault said.