In a bizarre and inexplicable move, this past week the city of Halifax attempted to force the promotion company for the July 14 Metallica concert on Citadel Hill to pay the $359,550 bill for the Common concerts fiasco.

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.

Harold MacKay is right: He doesn't owe the city of Halifax one cent.

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.

While a broad spectrum of citizens, columnists from competing newspapers and even the former provincial auditor are calling for mayor Peter Kelly to be held accountable for his role in the concerts scandal, Halifax council just wants the issue to fade away into the bureaucratic netherlands.

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.

I've been collecting examples of mayor Peter Kelly's evasive responses to direct questions. See here and here, for instance.

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.

How hard up is economic development minister Percy Paris for a new convention centre? So hard up that he’ll shove any impropriety on the part of Trade Centre Limited officials---financial, ethical, what have you---down the memory hole.

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...

"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."

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.

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.

In March, almost as soon as the concerts funding scandal came to light, city hall's head bureaucrat Wayne Anstey resigned. Now, with city auditor general Larry Munroe's report revealing the backstory, the question of blame needs to be raised again. Should mayor Peter Kelly resign over his involvement in the funding scheme?

Absolutely. Kelly was intimately involved in the scandal, hosting meetings to arrange the improper financing and signing legal contracts that he had to have known were against city rules. Kelly was one of the main cheerleaders for the Common concerts, urging that still more concerts should be held even though he knew actual attendance numbers for past concerts were far lower than published media reports indicated. And, as if that’s not enough, Kelly knew that millions of dollars in loans were being advanced to concert promoter Harold MacKay, and Kelly knew full well that city council has to approve any financial arrangement of this magnitude, but Kelly kept knowledge of the loans from council. In the face of these facts, there’s no question that Kelly should take responsibility and vacate his office.

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.

Much of TCL’s impropriety dates back to the term of now-retired TCL president Fred MacGillivray, who I guess gets to ride off into the sunset, basking in the glow of his $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.

Two city officials are implying there’s a simple solution to the $359,550 bill related to concerts scandal: Don’t pay it.

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.”