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With the advice and encouragement of Scott Ferguson, president of provincial crown corporation Trade Centre Limited, Halifax mayor Peter Kelly and top city bureaucrat Wayne Anstey had from 2008 through 2010 signed contracts guaranteeing loans of $5.6 million in TCL money to concert promoter Harold MacKay’s company, Power Promotional Events.
Kelly signed the contracts even though they violated city financial rules and the city charter, and even though they were not properly vetted by the city legal staff; after signing the contracts, Kelly did not deposit the contracts with the city clerk, as is required. Ferguson, for his part, had been explicitly warned by an auditor that loans from ticket sales brought unacceptable risk, but he OKed the loans anyway.
Under the terms of the contracts, the last two loans, for $200,000 each, were to be forgiven if certain ticket sale levels were not met. Those levels weren’t met, and so MacKay was under no obligation to pay the money back.
But that didn’t prevent the city from threatening MacKay’s wife’s company, MacKay Entertainment, which is producing the Metallica show, with a cut off of city services unless it paid the money lost through Kelly, Anstey and Ferguson’s bungling. Without city services, the Metallica show would have been cancelled.
The whole episode was a poor attempt at bluster on the city’s part, and most observers saw right through it. City council argued about the issue in secret for four hours Tuesday, then did nothing. But after MacKay called a press conference at his lawyer’s office for Tuesday evening, city CAO Richard Butts quickly backed down, announcing a “settlement." But the city will provide all services for Metallica and MacKay won't pay any of the money lost by the bureaucrats.
About 200 people gathered in Halifax Tuesday night to learn about a new economic agreement that could give European corporations the power to take over local services including the provision of drinking water, public transit, health care, education and even hospital food. It could also grant such companies guaranteed access to Canadian resources, according to the Canadian Union of Public Employees and the Council of Canadians. The two organizations are campaigning against the Comprehensive Economic and Trade Agreement (CETA). The federal government and the European Union have spent the last few years negotiating the agreement and are hoping to sign it by January 1st, yet Canadians have heard little about it.
“Why has this gone under the radar screen for so long?” asked Maude Barlow, national chair of the Council of Canadians. “The Harper government does not want us doing what we’re doing tonight,” she said. “They don’t want us talking to each other and putting out fact sheets because they know when we find out what’s in these agreements, we’re not going to like them.”
Barlow says CETA could give multinational corporations the right to sue local and provincial governments that refuse to let them bid on local projects, effectively privatizing public services. It could also extend patent protection for brand-name prescription drugs — a move that would boost drug prices in Canada by an estimated $2.8 billion a year. There are other objections too.
“CETA is a grab for resources,” Barlow says. “The European Union is in a race with China to get at the remaining raw materials of the world and, as you know, we’re running out of absolutely everything from fish in the sea to old-growth forests, to minerals — you name it.”
The Council of Canadians and CUPE, led by national president Paul Moist, have been holding town hall meetings across Canada to organize opposition to the new trade agreement. CUPE has also produced an online comic book explaining the “top ten reasons CETA is bad for Canada.”
But city administrators are demanding $359,550 from his wife's company, MacKay Entertainment, before agreeing to provide city services to the July 14 Metallica show on Citadel Hill. The city oversees and regulates police, fire, licensing and other aspects of the concert; without city cooperation the concert will be cancelled.
From 2008 to 2010, Halifax mayor Peter Kelly and former top bureaucrat Wayne Anstey agreed, in writing, to guarantee loans totalling $5.6 million to MacKay's previous company, Power Promotional Events. The loans were used as working capital for a series of concerts on the Halifax Common; the money ostensibly came from advanced ticket sales to those shows, but a review by Halifax auditor general Larry Munroe shows that much of the money was loaned before tickets even went on sale for the concerts. The money came from a bank account owned by the city, but consisted mostly of money claimed by Trade Centre Limited, the provincial crown corporation that manages the Metro Centre on the city's behalf.
Last summer, on July 21, 2010, Kelly and Anstey agreed to a contract backing two last loans to MacKay, for $200,000 each---one for the Black Eyed Peas show, one for the Alan Jackson show. Unlike previous loans, MacKay was to only start repaying these two loans when ticket sales reached certain levels: 9,000 for Black Eyed Peas and 10,000 for Alan Jackson. If those levels weren't reached, "the grant shall be forgiven," reads the contract. Just 8,362 tickets were sold for Black Eyed Peas, and 10,009 for Alan Jackson; MacKay paid back just $450 for the Jackson show, and $40,000 for rental of the Common, leaving $359,550 unpaid. (Arguably, the Common rental fee shouldn't be applied to the loans---I've yet to see any justification for it--- but that issue has never been investigated.)
The copy of the contract made public does not have any stamp from the city's legal department, suggesting this is one of the contracts flagged as problematic by Munroe. It's clear that Peter Kelly knew these contracts wouldn't pass legal muster, and he wasn't depositing them with the city's clerk, as is required. And it's also clear that neither Kelly nor Anstey had the authority to make the loans; expenditures of this sort are required by the city charter to be vetted by city financial staff and city council, and these loans were not.
But I don't see how MacKay can be held responsible for the impropriety. Say what you will about MacKay---he has a knack for not making money on even mega rock stars like Paul McCartney---but he covers all his bases as a businessman. Like it or not, limited liability corporations are an established vehicle for isolating risk behind a fire wall; there's no conceivable argument for holding MacKay's wife's LLC, MacKay Entertainment, responsible for debts owed by Harold MacKay's LLC, Power Promotional Events. And as far as I can see, Power Promotional Events doesn't owe the city any money in any event---MacKay met the terms of the contract.
The city could, however, go after Trade Centre Limited for the money. TCL is culpable on a number of fronts: The $400,000 was loaned from advanced ticket sales from which TCL, not the city, would profit; the money was TCL's to lend, not the city's. As manager of the Metro Centre bank account, TCL had a fiduciary responsibility for the account, and to vet loans made from it. And, most importantly,TCL president Scott Ferguson had been explicitly notified by TCL's auditor that loans from advanced ticket sales brought irresponsible risk, but Ferguson OKed such advances anyway, with the understanding that the city was backing them; having fiduciary responsibility for the account, he made what he knew was improper payments.
So why is the city going after MacKay, who is legally blameless, instead of Trade Centre Limited, which is up to its elbows in legal culpability? Answer that question, and you understand much of what is wrong with Nova Scotia governance.
The issue is straight-forward: children, of all ethnicities, are attending or interacting with (via sports teams, for example) a school named in honour of a person who promoted racially based genocide. This is simply wrong. It’s wrong to subject Mi’kmaq children to this---honouring the murderer of their forebears is necessarily an emotional and, yes, oppressive act; it undermines their self-worth and expectations that they can fairly and fully lead successful lives in a society dominated by Europeans. But it’s also unfair to subject children of European extraction to attending/visiting a school named in honour of a mass murderer; white kids implicitly learning to celebrate the genocide of natives will not likely be agents of fairness and democratic values---and their own lives are lesser for it.
It was reasonable and right for the Mi’kmaq community to bring this issue forward. They are a large community, who have suffered a series of historic wrongs, arguably right into the present, and they asked for a small act, not of redress, but of simple acknowledgement of past wrongs done onto them. It really comes down to this: why not change the name? Are we willing to acknowledge that a community says with good cause it is negatively impacted and we can readily address their concern, or not? Are we kind, or not?
But while the largest public works project in Halifax history stayed on budget---total costs came it at $330 million, compared to a projected $333 million---Harbour Solutions is by no means an unblemished success story.
The project will be forever marred by the PR and environmental disaster of the January 14, 2009 malfunction of the main Halifax sewage plant, causing about 100 million litres of raw sewage to flow into the harbour each day. The plant is now working as designed, but the fix took about a year and cost $10.9 million; most of that cost was covered by insurance, but ratepayers are on the hook for $500,000. And while Yates celebrates “total completion,” he still refuses to make public the $100,000 forensic audit of the plant malfunction, saying there is “a small lawsuit” related to the failure that has yet to be resolved. Without that audit, the public still has no way to know who was at fault for the plant failure.
The lawsuit related to the plant failure is not the only legal action related to Harbour Solutions: there remains an active lawsuit with regard to the Pier A Pumping Station, the structure at the corner of Barrington and Inglis Streets that has repeatedly spewed raw sewage into surrounding apartment buildings. Yates also refuses to release documents related to that malfunction.
The Freshwater Brook sewer line flows into the pumping station; Yates has always maintained that the replacement of that line, which saw south end streets dug up for the last two years, was unrelated to the pumping station failure, but councillors Tuesday suggested that it was. The conversation was cryptic, as council discusses the lawsuit in secret, but the line was replaced specifically to divert rain water away from the pumping station, which tends to overflow during storms.
Whether it is considered a design success or not, Harbour Solutions was built to “primary” treatment standards, and so fails to meet newly announced “secondary” standards set by the federal government.
As councillor Linda Mosher points out, council had directed that Harbour Solutions meet much higher environmental standards, but due to cost cutting and diversion of funds, some to the Freshwater Brook project, those standards were not met.
Last week, council declined to ask the RCMP to investigate the scandal, and council Tuesday refused to slap Kelly with a one-week suspension. Councillor Sue Uteck had given notice that she wanted the suspension debated next week, but a council majority rushed the motion so it could be dispensed with quickly; the motion failed on a 17-3 vote, with only Darren Fisher and Jim Smith joining Uteck. Collectively, council seems to want to deal only with the rather obscure bureaucratic changes recommended by auditor general Larry Munroe, by shuffling them off to council’s audit committee, and otherwise letting bygones be bygones.
Councillors express a range of opinions as to why they voted against the motion. Some fully support Kelly, while others think the motion was inappropriately rushed and needed more study. But whatever their reasons, the bottom line is the political leadership has decided there will be no accountability whatsoever for wrongdoing on the part of the mayor.
“That’s it,” says Uteck. “You know what, if [Kelly] blows a million dollars, whatever, it’s not my issue. Council won’t do anything about it, there’s no accountability, why should I try?”
Still, the scandal won’t go away. A group of citizens is planning a protest before next week’s council meeting; see the “Peter Kelly -- Resign Now” Facebook page for details.
And new revelations about the scandal will continue to come out. Munroe has promised a follow-up to his initial report, looking specifically at the management of the Metro Centre, and a bevy of reporters is continuing to investigate the scandal. Council’s audit committee will take up the issue as soon as next Monday.
But so far, only one person has suffered any consequences whatsoever for the concerts scandal. After a specially called closed-door council meeting in March, top bureaucrat Wayne Anstey announced his immediate retirement, but Anstey was planning to retire in the summer anyway, and he will receive full benefits. The other people in City Hall named in Munroe’s report---Peter Kelly and retired CAO Dan English---have paid no price for their involvement.
Munroe also named two people at Trade Centre Limited. But former president Fred MacGillivray appears to be untouchable, happily collecting his hefty $1.2 million pension, and current president Scott Ferguson has not only suffered no consequences for what was clearly wrong-doing on his part, but has even been praised by Percy Paris, the minister overseeing Trade Centre.
Democratic accountability? Not in Nova Scotia.
Still, let's run a thought experiment. We already have, in effect, a prime example of what could go wrong with a fewer-councillors scheme: Peter Kelly.
The mayoral seat in Halifax is the furthest extreme of reducing the number of councillors. For the mayoral position, there are not 23 districts, not 20 districts, not 15 districts, but just one district. Question: does this small number of seats for mayoral (one) give us the best possible mayor? I think not.
And if reducing the number of council seats from 23 to 15 or whatever reduces "parochialism," then reducing the number of seats all the way down to one should reduce it even further, right? So, is Peter Kelly the best possible representative of the municipality as a whole, or do his policies (such as they are) reflect a sensibility of a narrow niche of the population that exclude broad concerns for many people who are essentially unrepresented? I think you know the answer to that.
There's also the absurd argument that our prime concern should be to reduce "bickering" on council--- as if council isn't supposed to be about airing political differences and fighting for constituents. Imagine a situation where we only had one councillor--- Peter Kelly. No doubt the "bickering" would be non-existent; Kelly would simply do whatever he wanted, without any other councilor raising a stink, or asking for a motion of reconsideration, or going to the press to air dirty laundry. Bickering solved! But would it be the best possible government?
Of course, no one is arguing that council size should be reduced to just one seat. But the thought experiment raises the same concerns I have about reducing council size, even to 20 or 15: larger districts exclude marginal, less-connected populations; a reduced number of councillors means a less-broad political spectrum sitting at council, and certainly less room for dissent, and the "bickering" that is so needed to check abuses of power.
Peter Kelly's continued re-election should give us pause: collectively, the electorate as a whole of HRM has proven itself to be pretty stupid. When we break that electorate down into smaller chunks, however, we find that we get here and there better representatives elected, and some responsible voices come to council.
Before Brad Marchand became the latest Halifax hockey hero to win Lord Stanley's beer bong, he was a member of a promising Halifax Mooseheads squad. Marchand and two of his friends from Hammonds Plains, Andrew Bodnarchuk and Ryan Hiller, were the local connection that anchored the Mooseheads' strong shot at Canadian junior hockey supremacy in 2008. The trio were profiled by Stephen Kimber in a Coast cover story that March. Kimber wrote:
And one of the reasons the Mooseheads traded for Marchand, of course, is that he has a history of winning when it counts. ...
“What I love,” Marchand tells me, “is when one of us scores a goal and we’re skating back by the bench and you see the other guys sitting there smiling at you. It’s special.”
More special would be winning it all. “It’d be incredible...like being back in Bantam,” Marchand laughs. “Only better.”
The Mooseheads didn't end up getting the Memorial Cup, but with two goals and an assist in Boston's game 7 win over the Vancouver Canucks, it's safe to say Marchand's history of winning when it counts hasn't been lost.
Speaking of a winning history, Stephen Kimber is up for his latest award this weekend. Another of Kimber's Coast cover stories, "Is Corey Wright the wrong man?" is a finalist in the Professional Writers Association of Canada's national awards, handed out Saturday June 18. That story also won an Atlantic Journalism Award earlier this year, and our money's on it taking the PWAC prize too.
The following is a transcript of mayor Peter Kelly’s appearance on CBC Radio One’s Mainstreet last week. I’m indebted to Waye Mason, who slogged through the recording and produced the text below.
My only comment is that this is another example of Kelly’s verbal diarrhea---he simply spews out nonsensical responses that have no relation to the questions being asked, and hopes that we’re dim-witted enough to not get the schtick. I mean to soon to collect all of these on one place, just to more fully illustrate the point.
Monday, I detailed how Scott Ferguson, president of TCL, had been warned by the TCL auditor to stop loaning money to promoters from advance ticket sales. There’s a good reason for the auditor’s concern---should the ticketed event be cancelled, TCL would have to refund the ticket price to people who had bought tickets; but if TCL had loaned the money out, then the money would have to come from other funds---that is, from the taxpayer. The hit to the taxpayer could actually be double the loan amount: it’d be the lost loan, and then on top of that the amount needed to backfill the bank account.
We’re not talking small potatoes here. The loans in question were often approaching, and sometimes exceeding, a half million dollars. At one point---on July 19, 2009---the potential loss totalled $7.7 million.
The auditor’s warning came after Ferguson had loaned some unknown (to us) amount of money from advance ticket sales for the 2008 IIHF Hockey Championship. Luckily, that event went on without problem, and the money was repaid. Ferguson, however, was under strict orders from the auditor to never again make such loans.
But auditor, schmauditor. When Harold MacKay came knocking on government’s door looking for some financing assistance for the concerts on the Common, Ferguson OKed still more loans from advance ticket sales, and thought he was covering his butt by getting the city to guarantee the loans. Ferguson hoodwinked mayor Peter Kelly and top bureaucrat Wayne Anstey into signing six contracts with MacKay, with the city guaranteeing the advances. Those documents in hand, Ferguson advanced TCL money to MacKay, exactly contrary to the auditor’s warning.
But the concerts flopped and MacKay’s business went belly up without repaying the last of the loans. Now the city is contemplating refusing to make good on the loans, for $395,550. If the city doesn’t pay, TCL will be out the money. Or, rather, provincial taxpayers will be out the money.
If you or I cost our employer $359,550, we can imagine the consequences. But here’s how Ferguson’s boss, Percy Paris, reacts to the news:
"I’ve got great confidence in Scott Ferguson," the minister said. "I think he’s been doing a wonderful job for the province and the World Trade Centre...This is utter nonsense. There’s plenty of blame to go around for the concert loan scandal, but Ferguson knew the loans were improper, and worked to make them happen anyway by suckering the city into accepting responsibility.
"Scott Ferguson thought that he was acting appropriately. He thought that he was being prudent. He was directed by somebody that he thought had jurisdiction over this money, and he did what he was asked."
There’s only one conceivable reason for Paris to gloss over Ferguson’s impropriety: Paris has drunk the Kool Aid on the convention centre, which is a Trade Centre Limited project. TCL will oversee construction of the convention centre, and then manage it. Paris very much wants the convention centre, but if TCL is understood to be an unaccountable, out of control bureaucracy with a chief executive, Ferguson, who ignores auditors, overrides financial controls and puts taxpayers at risk for millions of dollars...well, maybe taxpayers will demand a rethinking of the convention centre proposal. Maybe taxpayers will begin to think, “Hey, all those people who were criticizing Trade Centre for using bogus numbers for the convention centre might've been onto something.” So: TCL’s involvement in the concert loan scandal goes down the memory hole.
In Nova Scotia, there is no bureaucratic accountability whatsoever. Slap an “economic development” label on something, and you can do anything you want---break any financial control, snub auditors, put taxpayer money at risk without authority---and it doesn’t matter; the minister will merrily cover your back.
Let’s not, however, over-simplify the scandal as a “Kelly screwed up” and leave it at that. Yes, Kelly should resign, but others, too, should be held to account.
In terms of culpability, the biggest player in the scandal is not Kelly but Trade Centre Limited---which I’ve detailed here.
A proper response to TCL’s repeated impropriety is for Halifax city council to refuse to pay TCL’s $359,550 invoice and to initiate legal proceedings against TCL for recovery of all funds related to the unauthorized takeover of Metro Box Office. Additionally, provincial auditor Jacques Lapointe should put TCL under his microscope.
$1.2 million pension. But current TCL president Scott Ferguson is likewise at fault to a stunning degree: Ferguson knew that advances from ticket sales were improper---TCL’s auditor reprimanded Ferguson for making advances from ticket sales for the 2008 IIHF Hockey Championships---but Ferguson continued the practice for the Common concerts anyway, by arranging for the city to back the loans.
Put simply, the improper loans would not have been made without both Kelly and Ferguson. Yes, Peter Kelly should resign. And Scott Ferguson should resign as well.
That course of action, suggested by both city auditor Larry Munroe and city councillor Gloria McCluskey, threatens to create an epic legal battle between the city and Trade Centre Limited, a provincial crown corporation. But it isn’t just the $359,550 at stake; potentially, millions of dollars are at play, as well as the professional reputations of some of the most powerful people in Nova Scotia.
At issue is the biggest revelation in Munroe’s report on the concerts scandal: that in 2006, Trade Centre Limited’s then-president, Fred MacGillivray, shifted ownership of the Metro Centre’s ticket sales agency, called Metro Box Office, to TCL. MacGillivray had no authority to make the change; it was not approved by the TCL board of directors or by the city council. In fact, then-city CAO Dan English only learned of the shift when it showed up as an obscure line item in a budget report, long after the fact. English never notified city council of the change.
The shift of ownership of the multi-million dollar Metro Box Office operation led to the confusing commingling of city and TCL funds that made the concerts scandal possible, Munroe explains in his report on the scandal.
“When I read that, I couldn’t believe it,” says McCluskey. “They took [MBO] over, without even telling Dan English---that’s the kind of power Fred MacGillivray had---and nobody forced him to put it back. Let me tell you something: Fred MacGillivery did whatever he damn well wanted to do. That’s how much power he had.”
“I’m concerned about it,” says Munroe of the transfer of Metro Box Office away from the city. “We have an open file on that. I’d like to understand that transaction. We’re having a look at it---it’s including in phase two [of the concerts investigation]. The city should seek legal advice as to what its course of action is.”
The Atlantic chapter of the Sierra Club and the Halifax-based Ecology Action Centre are calling on the provincial government to consider alternatives to the $6.2 billion Lower Churchill hydro project.
“It’s really hard to accept at face value that this is the best option on the table,” says Brennan Vogel of the EAC. “We need to see more clarity provided by government.” He adds that instead of the multi-billion-dollar Lower Churchill project, Nova Scotia should be looking at importing potentially cheaper hydro-electricity from Quebec while financing more community-based wind and solar projects here.
He says the provincial government and Nova Scotia Power seem intent on bringing in Lower Churchill power via expensive undersea transmission cables and exporting part of it to the US—a move that would boost power company profits.
“We know Nova Scotia has a monopoly electrical utility so, in the absence of competition to result in fairer prices for Nova Scotian ratepayers, we’re perhaps being left in the dark...as to what the best options on the table are for providing stable, secure, renewable electricity,” Vogel says.
The company had earned the ire of the local surf community by failing to engage with the Surfing Association of Nova Scotia, Instead, the company went directly to the city of Halifax, and city council happily gave the company a grant of $145,000---the largest ever given through normal granting processes, far more than any local non-profit organization has ever received. The grant for the Cold Water Classic nominally went through something called the Canadian Surfing Association, a "group" that has no legal standing, and which local surfers say consists of one person.
Local surfers also raised concerns about the possible failure of the event---the six days chosen for the competition were in September, when local surf conditions are at their worst, and when water temperatures are far from cold---surf temp is often above 20 degrees that time of year.
O'Neill appears to have wanted to move the competition to Halifax after the city of Tofino, British Columbia declined to increase its financial support of the event. Local controversy, however, has resulted in nothing but bad press for the company.
O'Neill has not responded to Coast requests for comments or interviews. But the company issued the following statement today:
O’Neill regrets to announce the cancellation of the O’Neill CWC Canada for 2011. Extensive consultation and discussion with key event stakeholders, along with a short period to properly prepare for the event, has led to this decision. During preliminary planning it became clear a shorter than usual planning window jeopardized the success of a 2011 CWC in Nova Scotia.
After establishing the Cold Water Classic series and professional surfing the last two years in Tofino, British Columbia, O’Neill explored the idea of bringing the 2011 CWC to Halifax, Nova Scotia. The beautiful and unique location would serve as an exciting new chapter to the CWC series. O’Neill intends to review Nova Scotia as a possible CWC location for 2012.
O’Neill would like to thank the Halifax Regional Municipality, all local agencies, and the community for their support and input.
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