Companies connected with Nova Scotia Business, Inc board member James Kehoe to receive $585,688 in rebates approved by NSBI. | The Coast Halifax

Companies connected with Nova Scotia Business, Inc board member James Kehoe to receive $585,688 in rebates approved by NSBI.

In March, while James Kehoe was a board member at Nova Scotia Business, Inc., the province's business development agency, that board approved over a half million dollars in payroll rebates for companies associated with Kehoe. Those payroll rebates were approved by the Dexter government on July 27.

James Kehoe's four-year term as a NSBI board member expired in April. On July 28, the Dexter government announced that Kehoe was being replaced by Dan Christmas, who has been involved with the Membertou band.

The day before, July 27, the Dexter cabinet issued several orders in council, approving a series of payroll tax rebates that had been approved by NSBI's board of directors on March 31. One payroll rebate, in the amount of $332,188, was awarded to Polysteel Atlantic Limited; a second, for $253,500, went to North-Air Window & Door Limited.

The agreement with Polysteel states the company will spend $1 million for an expansion project, and will hire an additional 26 employees with an average salary of $36,538. North-Air is to spend $600,000 on its expansion, and hire 20 employees with an average salary of $30,000.

The Joint Registry of Stocks lists James Kehoe as president of both companies.

“I completed my term in April 2010,” says Kehoe. “I did not wish to service another four years due to other commitments. At no time would I ever consider playing a part if any of my companies would be looking for any kind of assistance.”

Kehoe recused himself from voting on the payroll rebates, says Sarah Levy, a NSBI spokesperson.

“It’s not unusual for the companies we support to have some sort of representation on our board of directors,” says Levy. “In particular because the board is made up of business leaders and community leaders in the province. It’s kind of hard to avoid that. But we do have a conflict-of-interest policy in place, and if something comes up, as it would have in this case, where companies like North-Air or Polysteel were considered for funding, then Mr. Kehoe would have excused himself from negotiations, both at the NSBI table and at the table of the companies he represents.”

NSBI’s policies avoid impropriety, says Levy. “There have been a couple of cases in the past---I’m not saying this happens all the time, but there have been a couple of cases in the past. What typically happens is that [a board member with potential conflicts] would leave the room.”

“I’ve sat on a number of for-profit and not-for-profit boards,” says Ian Thompson, the deputy minister for the provincial department of Economic and Rural Development. Thompson also sits on the NSBI board. “Most sophisticated boards have good processes around things like conflict-of-interest. And I think these processes become especially relevant in a province like Nova Scotia, where it’s a relatively small province and, in this case, where the ambition is to have a board that includes people who are active in their communities and engaged in their businesses. These sorts of things are not unusual, and my observation is that they’re dealt with honourably. The potential conflict is identified, and the circumstance is created so there is in the end no conflict---people excuse themselves, do not participate in matters where they may have some personal stake.”

An insider’s game?

But is it really possible for a board composed of the province’s business elite to be truly objective when it comes to assessing a potential grant to one of its own? Even if a board member recuses himself, can the other board members vote against a half-million dollar subsidy and then afterwards socialize together as if nothing happened?

Thompson leaves that question unanswered.

In recognition of his business work, Kehoe received the Order of Nova Scotia in 2002. “A carpenter by trade, he is the owner and operator of one of the most successful construction companies in the province,” explained a government press release at the time. “He uses business methods to develop sustainable long-term social institutions and is a driving force behind the BCA investment co-operative, the Grow Cape Breton Partnership, and New Dawn Enterprises, one of the largest community economic development agencies in the Atlantic region.”

Polysteel has been a small but consistent contributor to Progressive Conservative politicians. In 2009, for example, the company gave a total of $1,000 to the campaigns of four PC MLAs--- $500 to Cecil Clarke, $100 to Stephin Tobin, $250 to Alfie MacLeod and $150 to Tom MacPherson. Such small donations to PC politicians date back every year to at least 2005, the first year for which contributions records were put on the internet; Cecil Clarke, who served as the PC’s minister for economic development, is a regular recipient.

Thompson too has been active in the PC party, and has been involved in questionable business relations with the province. As Stephen Kimber reported in The Coast, in the mid-1980s a “company owned by a group of well-connected Tories---including Ian Thompson, the province’s recently appointed ‘ambassador’ to Ottawa---landed a lucrative, risk-free deal to build the Nova Scotia Liquor Commission’s new warehouse and head office in the Bayer’s Lake Industrial Park, even though the company wasn’t the low bidder for the job. The Tory-appointed liquor commission went ahead with the deal despite the objections of its own consultants, who pointed out it would cost $1.3 million less for the government to build the building itself—and the province would own the asset too.”

In December 2008, Thompson left the $140,000/year Ottawa position and was appointed deputy minister of Economic and Rural Development by then-premier Rodney MacDonald. As deputy minister, Thompson was paid $166,849 last year.

Economic development secrecy

“In a business community as small as Nova Scotia’s, you’re going to have the potential for conflict on an agency board that requires the participation of businesses,” says Andrew Younger, a Liberal MLA who is a former member of the legislature's Economic Development Committee. “But because of that, you have to take steps to preserve the public trust, and those steps have to include very clear conflict-of-interest guidelines, trying to minimize the appearance of conflict, and you have to be public about as much of your dealings as possible---and one of the biggest failings of NSBI is that they have a very strong culture of secrecy. In terms of finding out value for money on a lot of these investments, we don’t know the answers. And because we don’t know the answers, that automatically leads people to a natural assumption that somebody is getting a good deal by their association with the board or their association with the party in power.

“If it’s impossible to get rid of the conflicts,” continues Younger, “then you have to be a completely open agency, and NSBI isn’t a completely open agency.

The press releases issued by NSBI to announce the payroll rebates made no mention of Kehoe, nor of his position at the companies or on the NSBI board.

“If you have somebody on the board, even if they weren’t involved in the decision, it should be made public right off the top, because otherwise it looks like you’re hiding something,” says Younger.

The auditor-general recently criticized the culture of secrecy with the province’s industrial expansion board, says Younger, “and the same thing seems to be happening at NSBI.”

Younger says tried to get a variety of document of NSBI documents through the freedom of information act, but was unsuccessful. “By hiding all this information, the public has no idea whether the economic development investments are paying dividends.”

As other provinces and US states give economic development grants, Nova Scotia has to be in the game. “But the public deserves to know which ones paid off and which ones didn’t, and what was used to make the decision.”