Judicial Inquiry Into 2012 Hydro Sale

The Town of Collingwood has voted in favour of moving forward with a judicial inquiry to investigate events surrounding the initial sale of 50 per cent of Collus to PowerStream.

Collingwood Council held an in-camera session at the beginning of its regular meeting on Monday February 26th. Immediately following the session, Council listened to a presentation by William. C. McDowell – Lenczner Slaght. The topic was a Hydro Share Sale Update.

Mr. McDowell stated that he has not reached any firm conclusions about any of the factual matters that the presentation refers to.

“What I have concluded is there are matters that are probably ones that warrant further inquiry.“

Mr. McDowell’s report touched on several concerns including asking why the utility was sold in the first place, and why 50 percent was sold instead of one hundred percent. He asked how the terms of the RFP were arrived at and stated Collus (the company being sold) had its own review of the commercial deal while PowerStream had its own lawyers reviewing and the Town itself had limited legal advice – re: how to authorize in municipal law terms and who benefitted from the transaction.

McDowell talked about possible conflicting roles, including the fact that the CEO of Collus was also the acting CAO of the Town of Collingwood.

“You look at this as the possibility of a structural conflict of interest, let me put it that way, in that there is an unusual situation that you have the Collus group and you have the CEO of one of the Collus companies who was involved, naturally, in the deal but that same person is also the Chief Administrative Officer on an “acting” basis of the Town. So that is an interesting question because how do you decide who’s interest that person is protecting in the situation because the person is wearing two hats.”

Mr. McDowell’s told council that his report questions the events surrounding final approval for the sale.

“It means that at the critical point it appears that the Town and the Clerk didn’t have to have this matter approved by the Town Solicitor. That seems to have meant that at a critical point there is not the final passing of judgement by the Town’s outside lawyers on the merits and demerits of the share purchase agreement. I’m not a commercial lawyer but the advice that I’ve seen by the Town’s commercial lawyers after the fact suggest that it did matter, that there were significant issues with the share purchase agreement, one of them having to do with a shotgun clause or a buy/sell provision which was advantageous for PowerStream and disadvantageous for the Town. In a sense that is moot because the asset has now been sold again but that was one aspect that was thought to be problematic.”

CLICK HERE to view Mr. McDowell’s Presentation to Council

CLICK HERE to read about the story on CBC.ca

Here is the official release from the Town of Collingwood:

Collingwood, ON [26 February 2018] – This evening, the Council of the Town of Collingwood passed a resolution to request a judicial inquiry be conducted, into the process undertaken in 2012 which resulted in the sale of 50% of Collus, the Town’s electric utility.

Pursuant to Section 274(1) of the Municipal Act, 2001, Council has the authority to request the Chief Justice of the Superior Court of Justice appoint a judge to look into the process and other matters surrounding the transaction. Council believes that a judicial inquiry is the most effective, objective way to provide answers to a number of questions raised regarding the transaction, and to provide much needed transparency on the sale of one of the municipality’s biggest assets.

A Commission of Inquiry can be requested to look into any matter connected with the good government of the municipality, the conduct of any part of the public business of the municipality, or the conduct of individuals involved in the transaction.

The Town of Collingwood hopes that this process will provide necessary answers and strengthen the Town’s accountability and transparency provisions.

The Motion
– moved by Deputy Mayor Brian Saunderson and seconded by Councillor Bob Madigan –

WHEREAS, under s. 274 of the Municipal Act, 2001 S.O. 2001, c. 25, the Council of a Municipality may, by resolution, request a judge of the Superior Court of Justice to inquire into or concerning any matter connected with the good government of the municipality, or the conduct of any part of its public business;

AND WHEREAS any judge so requested shall make inquiry and shall report the results of the investigation or inquiry to the Council as soon as practicable;

AND WHEREAS the Town of Collingwood concluded a Share Purchase Agreement on March 6, 2012 in which it sold 50% of Collingwood Utility Services Corporation to PowerStream Inc. (“the Transaction”; “PowerStream”);

AND WHEREAS concerns have been raised about the wisdom and reasons for the Transaction;

NOW THEREFORE the Council of the Town of Collingwood does hereby resolve that:

An inquiry is hereby requested to be conducted pursuant to s. 274 of the Municipal Act which authorizes the Commissioner to inquire into, or concerning, any matter related to a supposed malfeasance, breach of trust, or other misconduct on the part of a member of Council, or an officer or employee of the Town or of any person having a contract with it, in regards to the duties or obligations of the member, officer, or other person to the corporation, or to any matter connected with the good government of the municipality, or the conduct of any part of its public business; and

The Honourable Chief Justice Smith, Chief Justice of the Superior Court of Ontario, be requested to designate a judge of the Superior Court of Ontario as Commissioner for the inquiry and the judge so designated as Commissioner hereby authorized to conduct the inquiry in two stages:

To obtain, bearing in mind cost and the principles of proportionality, all documents necessary to understand the following:

the sequence of events leading to the Transaction, including the Request for Proposal process commissioned by the Town of Collingwood;

the nature and extent of the delegation of authority by Council to those who negotiated on behalf of the Town of Collingwood in relation to the RFP process and Transaction;

any subsequent contracts entered between or among the Town of Collingwood and PowerStream, Collus PowerStream and any other Collus company;

Any fee or benefit of any kind paid, or conferred, by or on behalf of PowerStream to any person in relation to the transaction;

The commercial relationship between PowerStream, Collus PowerStream and any other Collus entity and the Town of Collingwood prior to 2017 and in particular, any agreement entered into between or among any of these parties;

The salaries, benefits and emoluments of any kind paid to any employee of Collus PowerStream and any other Collus company;

The allocation of the proceeds of the transaction to the construction of the recreational facility at Central Park and Heritage Park.

The payment of any fee or benefit of any kind on behalf of any person of the entity involved in the creation or construction of the recreational facility.

Having conducted the documentary review to determine what, if any, public hearings ought to be held into the matters designated for the inquiry herein;

AND IT IS FURTHER RESOLVED THAT the Terms of Reference of the Inquiry shall be: to inquire into all aspects of the above matters, their history and their impact on the ratepayers of the Town of Collingwood as they relate to the good government of the municipality, or the conduct of its public business, and to make any recommendations which the Commissioner may deem appropriate and in the public interest as a result of the inquiry.

AND IT IS FURTHER RESOLVED THAT the Commissioner, in conduct the inquiry into the transactions in question to which the Town of Collingwood is a party, is empowered to ask any questions which he or she may consider as necessarily incidental or ancillary to a complete understanding of these transactions, and for the purpose of providing fair notice to those individuals who may be required to attend and give evidence, without infringing on the Commissioner’s discretion in conducting the inquiry in accordance with the Terms of Reference stated herein, it is anticipated that the inquiry may include the following:

Was there adequate Council oversight of the transactions listed above?

Was Council’s delegation of authority in relation to the transaction appropriate?

Did council receive sufficient independent professional advice prior to delegating its authority to conduct the RFP negotiate or finalize the Transaction?

Where the criteria developed to assess the proposals received during the RFP process appropriate and did the criteria serve the interests of the ratepayers of Collingwood?

Mr. McDowell told council that he felt the inquiry could cost at least one million dollars. He said he didn’t say a way that it could cost anything less.

Council voted 5-1 to pass the motion

Councillors Kevin Lloyd and Mike Edwards were absent.

Councillor Tim Fryer declared a conflict and had removed himself from the council chambers for Mr. McDowell’s presentation.

Deputy Mayor Brian Saunderson and councilors Kathy Jeffery, Bob Madigan, Cam Ecclestone and Deb Doherty voted in favour.

Councillor Jeffery said the first thing that came to her mind was something Mr. McDowell had said in his presentation, that being “we don’t know what we don’t know.”

“The questions are too significant to ignore, and I think not to support this going forward , we become part of the potential problem rather than part of the potential solution. I see the cost as an important investment in the town’s very foundation of trust and confidence that the public is entitled to and expect, and the only way to get forward to some best practices that I think we need.”

Jeffery said as a councillor, she doesn’t get to pick and choose when open and transparency is important.

“I think it is significantly important to proceed with this and to get the information we need to make sound decisions.”

Councillor Deb Doherty said that going through the process of a judicial inquiry will set the record straight and provide council with an understanding of what actually happened.

“This obviously is a very serious decision for this council to make but it has become clear to me that we cannot proceed with a grounding of good governance, best practices going forward, without clearly understanding what happened and why it happened and how we can avoid it happening again.”

Councillor Bob Madigan said council has been asking questions for the past 36 months.

“So I feel unfortunately this is our last resort, our only way left to go on a fact finding mission which depresses me. I echo councilor Jeffery’s concerns and comments about the financial status of this but this gives us the opportunity to find out if and how mistakes were made. To quote a very good friend of mine, he said it is never the wrong time to do the right thing so I believe this is the right time to do this.”

Madigan asked Mr. McDowell if a closing book was provided to the Town following the 2012 sale.

“There was no closing book provided to the Town as I understand it. That would be a norm, yes.”

Madigan said that Collingwood has never received a business plan as fifty percent owners. McDowell responded by saying he thought this was unusual.

“I think it’s unusual if the share/purchase agreement says it’s going to be done. It’s unusual for one of the parties not to do it, or for the parties together not to do it.”

Deputy Mayor Brian Saunderson had Mr. McDowell confirm that he was hired to look at the documentation that the Town does have and advise council on whether or not the process in terms of the 2012 share sale was done in a manner that satisfies all of the transparency and proper processes requires for a municipal government.

“What you have told us here today is that based on your review of the documentation you’ve got, you have received, and I think you are aware that this town has worked quite aggressively over the course of our term to get the documentation on this transaction. The documentation you have reviewed to date you identified very significant gaps that raise very large red flags in your opinion.”

McDowell responded by saying he feels there are questions to be answered.

“Yes, I think that’s fair, whether you call them red flags or whether you say there are serious questions, yes there are serious questions.”

Saunderson said that as he understands the situation, the primary reason, as he put it, to go down this road in striking a public inquiry, is to have a commissioner/judge, who has the ability to subpoena and compel the production of information and testimony as necessary.

He asked Mr. McDowell if council didn’t move forward with an inquiry, would there be the possibility of answering the questions that are identifying the gaps as outlined in his presentation.

McDowell said he didn’t think so.

“No, because we know that we may get, once the transaction is completed, there may be further documents assembled there that would be relevant to this. But we don’t know what we don’t know, to borrow a phrase. So the only way that you get to the bottom of these things unfortunately is if you have somebody with the power of subpoena and the only way in the municipal context you get that is through this provision of the municipal act.”

Mayor Sandra Cooper voted against the motion.
“We’ve made the changes”

“We’re in 2018. We’re still talking 2012. Six years later. I cannot support tax payers on the hook with a blank cheque. Toronto computer sales, seventeen million dollars, Waterloo – three million dollars, just to name a couple. And I have to say this council continues to hammer on transparency, procurement bylaws, procedural bylaws, and they are ever-living documents, ever changing, but I have to say we’re ahead of many municipalities in the county of Simcoe and I’m quite proud of that. It’s a lot of work at this council with the assistance of staff, the clerk’s department, and moving ahead and making those changes. This inquiry, that’s what it is, judicial inquiry, will become a black cloud for future councils and for municipal staff. Growth could become stagnant as staff will have spent their time on this one matter in 2018. Costs could be covered of course by airport sale, grain elevator, rail line rather than other opportunities. Council had directed Collus PowerStream going through with a hundred percent share. That is moving forward and we’re hoping to have completion of that this year. Again, we’re in 2018, we’re no longer in 2012. We’ve made some significant changes and certainly the costs … I’m hearing a million, I’m hearing two million dollars, I’m hearing, some municipalities, three million. Toronto was 17 million dollars and it’s what the commission orders, what their needs are and it could be any amount. We don’t know that and I cannot support taxpayers dollars on the hook for that. We’ve made the changes.”

Next Steps

Mr. McDowell said upon the passage of the motion, the first step required would be to send a letter from Mayor Sandra Cooper as the head of council to the Chief Justice, attaching a resolution formally requesting that a judge be appointed to conduct the inquiry.
“It will take the Chief Justice a little bit of time to pick the judge. The judge will take some time to pick his or her Chief Counsel and other lawyers and then there would be a meeting if I had to guess probably in 30 or 45 days between the Town of Collingwood’s lawyers and the lawyers to the commission to discuss the steps thereafter. There would be a hearing to decide who is formally going to be granted party status in the inquiry. There would be a call for the production of documents and the delivery of summonses or subpoenas as they are often known, and I would anticipate that if the judge proceeds in the way that he or she is requested to proceed and that is to do a documentary review and then focused hearings, I wouldn’t think those hearings would begin until 2019.”

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