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Wednesday, June 8, 2011

Concert report slams Peter Kelly, Wayne Anstey, Fred MacGillivray and Scott Ferguson

City should sue Trade Centre Limited, says auditor general Larry Munroe.

Posted By on Wed, Jun 8, 2011 at 6:59 AM

click to enlarge gigtrouble.jpg
Halifax auditor general Larry Munroe released his report on the concert loan scandal Tuesday. Mayor Peter Kelly, the city’s former chief bureaucrat Wayne Anstey and former and current Trade Centre Limited presidents Fred MacGillivray and Scott Ferguson are particularly implicated.

The report names names, assigns blame and provides explosive new details about how city and provincial officials exposed city taxpayers to millions of dollars of risk by improperly giving $5.6 million in loans to concert promoter Harold MacKay’s company, Power Promotional Events.

The loans violated the city charter, city financial controls and accepted bookkeeping practices, says Munroe.

Ultimately, the city lost $359,550 through the loans, but Munroe shows that at one point the city’s risk approached $8 million, and the city additionally spent almost $800,000 in “in kind“ support for the concerts, far beyond the amount approved by city council.

“It is our thought,” writes Munroe, “given the level of experience and involvement of Mr. Anstey and Mayor Kelly in the public sector, each of these individuals should have known something out of the ordinary was occurring and should have asked more questions to determine if what they were contemplating and/or doing was appropriate, especially given the method of arranging for payments to be made to Power Promotional Events.”

Munroe’s report makes clear that Kelly was directly involved in all aspects of the Common concerts, including the financial impropriety. “The Mayor’s Office initiated and participated in numerous meetings regarding potential and acquired concerts and responded to and was copied on many emails pertaining to the relationship with Power Promotional Events, HRM and Trade Centre Limited,” he writes.

But perhaps the most damning condemnation in the report is directed towards past and present officials at the provincial crown corporation Trade Centre Limited, including former president Fred MacGillivray, who retired in 2009, and current president Scott Ferguson.

“Had Trade Centre Limited not been an active participant in the process of providing cash advances through the Halifax Metro Centre bank account, this activity would not have been able to take place in this manner, much less continue for three years,” writes Munroe.

“Mr. Ferguson has agreed given his experience in the public sector, he should have known these transactions were out of the ordinary and should have asked more questions,” Munroe says in a later chapter. “Documentation suggests Mr. Ferguson was an active participant in the process of issuing the advances on ticket sales for the concerts on the North Common, and the advances in question were, in fact, made with his full knowledge and at least two advance payments were made by Mr. Ferguson without the written approval of Mr. Anstey. In addition, Mr. Ferguson personally signed a number of the cheques.”

Even though the loans to MacKay were made through a city bank account, Ferguson approved $650,000 in loans to MacKay without any approval from city officials, writes Munroe.

Munroe also calls out MacGillivray for Trade Centre Limited’s 2006 takeover of the city-owned Metro Box Office in order to create TCL’s Ticket Atlantic. “There is no documentation available showing the change---with respect to Ticket Atlantic---was officially approved by HRM, Regional Council or the TCL Board,” writes Munroe. “In addition, HRM staff were not advised of this change until after it had occurred.”

Even though TCL unilaterally lifted the ticket sales operation, it kept Ticket Atlantic using the same Metro Centre bank account MBO had used. The result is that TCL and city funds were hopelessly co-mingled; Munroe did not attempt to discover how much the takeover of MBO cost the city, but very likely on-going losses are in the millions of dollars.

And even though TCL claimed the bank account as its own, the loans to MacKay issued through the account were understood to be *city* money, not TCL money. The city was the ultimate chump player in this game---when the province agreed to loan $3.5 million for Paul McCartney’s upfront fee, for example, the money actually came from the Metro Centre bank account, through which the city had also loaned MacKay $350,000. The account was therefore down $3.85 million; had the show been cancelled, the city would have lost double that (both the costs of refunding ticket sales and of backfilling the account), or $7.7 million.

Munroe places ultimate responsibility for the improper loans right back on TCL. “If the available cash relates to advance ticket sales, it must belong to Ticket Atlantic and therefore should only have been released based on the approval of TCL officials,” he writes.

As such, Munroe recommends that the city undertake a legal challenge, presumably against TCL, to recover the lost $395,550.

Even after MacKay failed to pay back the $395,550, he hoped to produce another show on the Common this year. Early in 2011, writes Munroe, "Mr. MacKay wrote to Mr. Anstey and advised he had secured another artist. Mr. MacKay wrote, 'I do have a financing problem which I would appreciate discussing with you.'"

This is a long and detailed story. See the entire report and more analysis at thecoast.ca/bites.

For The Coast's complete coverage of the Common concert financing scandal, click here.

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The Supreme Court says no prayers before municipal meetings. What should Halifax's Regional Council replace it with?

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