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.
This article appears in Jun 23-29, 2011.
I agree with Tim on this point. Just another example of how the upper management do not have a clue what they are doing. They want to promote Halifax as a world class city, build stadiums and convention centers yet this is how they handle themselves. It is another black eye to the integrity and reputation of this city. MacKay (PPE) as a corporate entity, like it or not should not be held responsible.
Great article. The facts will set you free … or cause you to face criminal charges.
I think Harold MacKay could run this city better than the ones that are. I know, I know, but really. As Tim points out, MacKay has no obligation to repay anything except $450, which he did. (-:
The only word that comes to mind is, Incompetency. really, really. I think HRM should be renamed to HRC, Halifax Regional Circus.
This talk of a lawsuit or the city being responsible is bullshit. HRM didn’t enter into any agreement to provide services in kind, and as a flippin taxpayer I’ve had it with the travelling MacKay circus act. If we are going to share the losses (which we have already generously done) we should share in the profits. And there won’t be. I’m all for concerts on the Commons, The Garrison grounds, Peter Kelly’s skinny little ass, but not on my nickel. Finally, I want to express my sympathy to those people who foolishly purchased tickets. They can kiss those pesos good-bye. Talk of a sellout is hype. If I go, I want to know Metallica’s doing their pre-show chant on site before I give those dudes my cash.
Not that I want to confuse the issue, but does anybody (other than Peter Kelly) really believe that they have pre-sold more than 20,000 tickets to the show, as quoted in The Herald?
Tim; I disagree with you on many fronts in the past, but you’re right on with this. The city has no right to go after a completely separate company for balances owed, regardless of whether the funds are really “owed” or just bungled by the city. Seems to me that if you could go after companies that go under and pop back up as a different corporate entity, there wouldn’t be many private contractors left in the city (among many other things). Like you said, it is an accepted part of how business works to isolate risk in that manner and his wife’s company should not be blackmailed for it.
I, for once, agree with Tim: the mayor has to resign, and fast.
Harold MacKay has our money, and we need to get it back. Apparently, he didn’t cover all his bases, because the city is under no obligation to provide services to him, or his wife, who is really Harold. Return that money, or get out of town. I like it.
True story, MacKay has no legal obligation to repay any money more than he has. What catches me as odd is no one had a problem with him until it came out that the money was “lent” to him. It then turned into a problem with Mayor Kelly getting involved as it tarnished his reputation. If this didn’t come to light then it would have been ignored and swept under the rug. All that’s going to happen now is the city will lose lots of money. All those restaurant bills, hotel bills, beer sales, etc will now suffer because the city are being a bunch of spiteful babies. Power Promotional has gone bust, bankrupt, which I thought meant that debts were cleared. That’s why companies go bankrupt. So what if his wife owns this company, he doesn’t and Power Promotional which owes the money doesn’t. This isn’t a small concert like Alan Jackson or the BEP, this is Metallica, where there will be at least two and a half times the people. Sort it out Halifax, get it together because if you cancel this one you can kiss all your concerts good bye on their way to Moncton.
He may have no legal obligation, but neither does the city to do business with his ‘wife’. 😉
That’s business ladies.
I wonder how many of you yardbirds would be so forgiving – business is business, right – when one of the major pulp mills or refineries walks away leaving people stuck with the tab. Yeah, thought so….
the concert is now, officially a go. Mayor Kelly needs to go also. I am very happy that this show will go on, as a person who is now going to see them for my eighth time, I think most of you out there underestimate the magnitude of Metallica, love em or hate em. The economic spin off and money generated from thousands of metal heads converging on this city will be outstanding. For once, Halifax will be proud to have held a real rock show, none of this BEP and country shit. And for those who dont think this will sell out, watch out, Ive heard the gospel of James Hetfield and it will sell out, it will. By the way, Kelly must go!!
Yeah Metallica!!!!!!!! Yeah!!!!!!!!!Fucking YEAHHHHHHHHHH!!!!!!!!!
http://www.youtube.com/watch?v=fS6udST6lbE
Do a proper financial impact assessment before you make dumbass claims about spinoff money. Idiots.
I put my money where I want, I see who I want if it is available, so f off harold, you need to f off yourself, Metallica rules and I can find millions of milions of fans who can back that up, lmfao!
Where does the CAO get off telling the Police Chief not meet with a the son of MacKay ?
I wish we had a police chief who would tell the CAO to piss off and mind his own business because he reports to the Board of Police Commisioners.
I’ll lay money Mrs MacKay threatened to sue HRM if they discriminated against her on the basis of who she was married to.
The look on Butts face told me he was horsewhipped by the lawyer at Boyne Clark and he just looks stupid after having to crawl back to city hall without a red cent.
Kelly and most of the administration need to go. It is obvious they can’t see losers from winners; wouldn’t a promoter coming to your door saying “if you don’t give me 400k, this concert will be cancelled” set off a bell that “Hey, maybe tickets aren’t selling, and a forgivable “grant” is not a good idea”? Further to the “grant”, is it not city policy to not give money to private businesses? The problem lies with the government and not Mackay, he simply pulled Lyle Lanley’s Monorail Scheme (Simpsons reference).
Camacp: unless I’m mistaken, Power Promotions has not filed for bankruptcy protection, Mackay simply said “I have no money, so fuck you and the money I said I’d pay you”. So the debt really isn’t cleared, he just simply walked away.
What kind of morons are you? “It’s a completely different company, it’s his wife’s not his” are you f-ing serious?? Do you really think his “wife’s company” was around before “his company” filed for bankrupcy?? Do you really think two married people would each own a competing business at the same time…ah no, no they wouldn’t. That is stupid people not thinking and that’s what got HRM into this mess in the first place. Use some common grade school sense It’s the same company, the same person and just because the guy didn’t do anything legally wrong he’s still a slimy, sneaky, snake of a business man and you’re crazy to work with him again. That is all. I’m stoked the show is still a go and it will benefit the community but seriously let’s call a spade a spade and find some other concert promoters cause I’m sure Harold Mackay oh sorry I mean “Mrs. Mackay or The Mackays” now can’t be only ones around.
@ toeachhisown – Like it or not, it is a completely separate company.
Incorporated (or limited) companies are completely, legally separate entities from each other and from their owners. Right or wrong, Harold cannot be held liable for the debts of Power Promotional Events, Inc. If he could, don’t you think his suppliers from last year would have sued him?
By the same token, MacKay Entertainment Inc. cannot be held liable for the debts of another company, whether the owners are married to each other or not.
And whether PPEI owes a debt to HRM is debatable – the contract he signed – and that the mayor signed – clearly stated that the loan was forgivable.
Didn’t take long to find out we have a chump for CAO
@joeblow; seriously your just now finding this out because of this incident. The simple fact that they hired him should have indicated he could have been a “chump”. Do you remember when the story broke, that they were looking for a new CAO, they actually were stupid enough to say, “….looking for someone who embraces our way…..” something to that effect. When i read that, i said there, nothing will change. lol
I think it’s the place, maybe not so much the man, but who knows. When Gloria McCluskey was quoted in an article yesterday, I think it was, saying, “I still have confidence in the CAO”, that’s not a good response to be giving to a reporter, meeting his leadership is already being questioned.
$285,000 per year, nice
cao_not – well, I thought I’d give him 3 months and sure enough he turned put to be a chump.
Just another win for David Coles Q.C. and he didn’t need to leave his office.
Not really a fair fight.
Butts didn’t realise he was about to be dragged into court and ordered to provide the requested services.
I suggest Butts and Kelly sit down and read :
http://www.mcclelland.com/catalog/winfit.p…
http://www.mcclelland.com/catalog/display.…
Concertgate baffles me. Not the part about politicians and/or bureaucrats breaking rules and/or making poor decisions. That’s par for the course.
What I don’t understand is why a local government would have such extensive involvement in the production of a rock concert.
How did this a key priority of the government of Halifax? What is the strategy here?
I was thinking that maybe they saw it as some sort of big draw for tourists. But most people who go to these events are from the local area. Or, in the case of Metallica, from Sackville. We can’t create wealth by doing each other’s laundry, as they say.
A friend told me that it’s about civic pride. Showing Moncton that they may be the geographic centre of Atlantic Canada, Halifax will always be the real king of the hill.
They decided to match Moncton’s triumphs concert-for-concert. Back in 2005, Moncton delivered the biggest concert ever in Atlantic Canada – 85,000 to see the Stones . Halifax, said, “Oh yeah?” They brought the Stones back the next summer and delivered, uh 55,000.
Moncton then did a series of country events: Brooks and Dunn, Alan Jackson, Faith Hill and Tim McGraw. Halifax said, “oh yeah?” and brought in, uh, Keith Urban.
Moncton did not relent – Bon Jovi and AC/DC were next. Halifax said, “Oh yeah???” and brought in Paul McCartney, KISS and then almost Kid Rock. When Moncton announced U2 for this summer, Halifax said, “Oh Yeah????” and delivered ….Metallica.
Outsiders may recognize these rivalries between cities. Often, cities battle each other for industries and infrastructure, and so on. Prizes that deliver meaningful things to taxpayers. Prizes such as jobs. Not usually for something as temporary as a row of Port A Pottys.
I remember a time when Halifax used to try to get companies to locate here too. Then, I guess our city fathers decided that our economy was so weak that the private sector couldn’t even deliver rock concerts, let alone enduring jobs.
While other mayors tackle issues like economic development, social issues, education, competitiveness, crime, poverty, sustainability, transportation and sprawl, our Mayor has anointed himself Party Planner in Chief. Writing and delivering concert riders, picking the brown M+M’s out of Sir Paul’s candy bowl, I imagine.
I was embarrassed every time the Mayor triumphantly declared that he landed some over-the-hill rock group to the city. And I’m embarrassed that council is still spending so much time and energy on this concerts. It makes appear like we’re a disconnected backwater who can’t believe that Mr. Lars Ulrich is going to visit our fair little town! I hope the Mayor wears his Sunday best when he presents Lars with the key to the city. I hear it’s going to take place right after the pie eating contest!
And, perhaps the most troubling aspect of this whole story is that Halifax surveyed the landscape, and decided that Moncton, of all places, was a worthy adversary. Way to aim for the fences, Peter!
Remember that the auditor said the contract was ‘likely’ illegal.
An illegal contract.
It’s definitely more muddled now than when they sent MacKay the letter in June but they were on solid ground. It may not be elegant and it may not be timely but, in contract law, they may be right.
They are dealing with an illegal contract and trying to determine the correct remedy. You won’t be surprised to learn that this is not the first time something like this has come up in Canadian contract law and there are plenty of precedents that are used.
An illegal Contract
In Canada, one cited case of lack of enforceability based on illegality is Royal Bank of Canada v. Newell, 147 D.L.R (4th) 268 (N.S.C.A.), in which a woman forged her husband’s signature on 40 cheques, totalling over $58,000. To protect her from prosecution, her husband signed a letter of intent prepared by the bank in which he agreed to assume “all liability and responsibility” for the forged cheques. However, the agreement was unenforceable, and struck down by the courts, because of its essential goal, which was to “stifle a criminal prosecution.” Because of the contract’s illegality, and as a result voided status, the bank was forced to return the payments made by the husband.
The outcome of this – based on my two minutes of internet search – is that once a contract has been identified as illegal, which this one has, the parties, and the courts if they are engaged, are obligated to put things back the way they were before they contemplated the illegal contract. In this case that means Mr. Mackay is obligated under Canadian contract law to repay the money just has Royal Bank was required to repay the money in the case above even though it would have seemed more fair that the party that fucked up the most should bear the debt.
Now, nothing is cut and dried but you would think that there are a lot of lawyers over there at city hall who’ve done some real research on this and some communications folks who could articulate their position and the rationale for it.
So lone businessman Harold MacKay was supposed to know that a contract he signed with the mayor, the CAO, and with the knowledge of the provincial crown corporation…was illegal? And he’s to be held accountable, but none of these high-powered gov reps aren’t?
That’s an interesting position to hold.
It may very well be a “different company” but anyone doing business with it is an idiot. Just because you change your clothes doesn’t make you a different person. Now how many of you out there who was ripped of by ABC Co Ltd owned by Joe Bloggins that went bankrupt would do business with XYZ Co Ltd (doing the same thing as ABC) that was owned by Jane Bloggins (Joe’s wife), especially when Joe is hanging around? I know I sure as hell wouldn’t.
Bro Tim – fair enough, except that “Joe Bloggins” cannot be held personally liable for the debts of “ABC Co Ltd.” Legally, it cannot be done and that’s what HRM tried to do.
To be clear, the notion that it was an illegal contract and the remedy for it is not my position. I’m just sharing what I’ve read.
The contract – apparently – turned out to be illegal. If any of the parties entered in to it knowing it was illegal that’s a whole different story.
So, as sometimes happens in the give and take of business the contract turns out to be illegal. Now what happens?
That’s the question. What are the responsibilities of contracting parties if a contract turns out to be illegal?
I think lots and lots of people around town well know the answer to that question.
I bet the contract negotiations went something like this old Marx Brothers script
http://www.youtube.com/watch?v=SzfiBMRDc5Y