The Whalley Trial Part III: Three (Not So Easy) Pieces

Editor’s Note: John Whalley, the former Economic Development Manager of the Cape Breton Regional Municipality (CBRM) is suing the CBRM for constructive dismissal. The case finally came to trial from 20-24 August 2018 and the Spectator was there. We’re presenting our coverage in a series of articles because the trial touched on so many issues of interest to CBRM residents. This is Part III. (Read Part I and Part II)

 

Throughout the trial, the judge must make sure that all the evidence presented and all the questions asked are relevant to the case.— How do civil cases work? Department of Justice Canada

John Whalley took the stand in his own civil suit against his former employer, the CBRM, on Monday, August 20, the very first day of the trial.

John Whalley

John Whalley

Whalley followed Jerry Ryan, the former CBRM CAO who had hired Whalley largely because he liked his “new” approach to economic development — one that was less focused on granting money to local organizations for their various projects in the hope one might spark an economic revival in a community that had lost (or was in the process of losing) its major industrial employers.

Whalley began his testimony with a description of his own qualifications, his previous occupation and his decision to take the economic development manager’s position in 1997.

He spoke about his fears for his own job security, given the non-unionized nature of the position (he had belonged to a union when he worked for the federal government in Halifax) and his concerns about reporting to council in open, public sessions during which he could be asked “anything” about the topic at hand. It’s something he said CBRM Corporate Services Manager Jim MacCormack advised him to “think carefully” about before accepting the position.

Whalley said he did think carefully, but ultimately, he “loved the challenge” represented by the CBRM job, which was “exactly” what he was “trained to do.”

Moreover, Whalley said he received “assurances” from CBRM CAO Jerry Ryan that he would be entitled to severance in the case of dismissal without cause. Whalley told the court he believed Ryan, MacCormack, HR Director Rhona Green and Administrative Assistant (later HR Director) Angus Fleming were all present when those assurances were given. (None of these individuals was called upon to testify, a fact the CBRM’s lawyer, Tony Mozvik, would highlight in his summation.)

Whalley also stated his belief that he had signed a standalone employment contract with the CBRM, but acknowledged he’d been unable to find a copy of it.

 

Economic Development Fund

Despite his “new” ideas about economic development, Whalley said he spent much of his time in his early years at the municipality administering the CBRM’s $250,000 Economic Development Fund (now known as the Sustainability Fund).

“Dozens” of community groups, he said, applied for money and evaluating their submissions, meeting their representatives, presenting to council and conducting follow-ups took up a “disproportionate” amount of his time.

By 2000, however, he said his job was coming closer “to what he’d recommended” the economic development manager’s job should be. Responsibility for the Sustainability Fund was transferred to another department and Whalley said his role was limited to sitting on the committee administering the fund.

Mozvik, however, challenged this view of things repeatedly, both in his cross examinations of witnesses and in his summation, insisting that the Sustainability Fund was always one of Whalley’s key responsibilities and would have remained so even after he was taken off the port file.

Whalley didn’t agree. He described his job, from roughly 2000 on, as consisting of three main “pieces”: demographic analysis aimed at better understanding the municipality’s declining population problem; the development of the Port of Sydney; and municipal financing (read: equalization).

 

Equalization

Whalley used the term “municipal financing” to describe this aspect of his work but admitted that equalization was the dominant element in that category — and certainly “equalization” is the term that became associated with the CBRM’s court battle to secure what it argued was its constitutionally guaranteed share of the federal government’s transfer payments to the province of Nova Scotia.

Whalley told the court that he was deeply involved in the equalization issue, in fact, he said he was responsible for its entire development — he researched the question, wrote the Issue Papers that went to council, then watched as council decided to take legal action — suing the Province of Nova Scotia —  based on his research.

It all played out during the reign of Mayor John Morgan, a lawyer himself, who served as mayor of the CBRM from 2000 to 2012. CBRM council voted to consult a constitutional lawyer in 2003; the CBRM filed its legal action against the province with the Nova Scotia Supreme Court in 2006; the court ruled the CBRM had no cause to sue in 2008; the Nova Scotia Court of Appeal rejected the CBRM’s appeal in 2009; and in December of that same year, the Supreme Court of Canada refused to hear the municipality’s appeal of that decision.

In all, the equalization battle cost the CBRM $503,172 in legal fees.

The equalization lawsuit began under Progressive Conservative Premier John Hamm (1999-2006) and ended under Hamm’s successor, Rodney MacDonald (2006-2009). A constant in both governments was Cape Breton North MLA Cecil Clarke (2001-2011), who held the posts of Economic Development Minister, Energy Minister,  Speaker of the House, Attorney General and Justice Minister between 2003 and 2009.

In his testimony, Whalley characterized the response of the provincial government to the CBRM’s legal case as “vicious” and recounted an incident from 2000 in which the newly elected Morgan was invited to brief the Hamm government at a caucus meeting. Whalley says Morgan asked him to make a presentation on municipal financing during which the both Premier and Cecil Clarke left the room.

As you will recall, it was this equalization battle that former CAO Jerry Ryan testified Clarke cited as the reason why Ryan and Whalley might find it difficult to work with his “new administration” in 2012. But it strikes me, as I’m reviewing the case, that Morgan was re-elected in October of 2008 (with 82% of the vote) even though the Supreme Court had rejected the CBRM’s arguments in April of that year. And Morgan didn’t lose to Clarke in 2012 — he didn’t run. Moreover, the provincial government had also changed in the meantime — Darrell Dexter’s NDP had come to power in 2009 and would not lose to Stephen McNeil’s liberals until 2013.

Still, in his testimony, Ryan seemed to accept that the 2012 election marked a change in the municipal approach to provincial relations from “court to cooperation.”

In his cross examination of Whalley, Mozvik suggested that as of 2009, when the Supreme Court refused to hear the CBRM’s appeal, equalization ceased to be one of Whalley’s three chief responsibilities.

Whalley disagreed, however, saying he continued to discuss the issue with councilors “who were still very much interested” and with community groups — like Nova Scotians for Equalization Fairness (NSEF) with whom he said he spoke “at length.”

 

Port development (pre-Clarke)

The “piece” of Whalley’s job that was of most interest to me — and most germane to the constructive dismissal case — was port development.

To recount the entire history of port development from 1997 to 2018 is well beyond the scope of this article. (It was also beyond the scope of the Whalley trial — we were treated to an editor’s cut, so to speak, of events.)

Greenfield site or Novaporte, if you prefer.

The “greenfield” site.

I’m going to try to give a brief synopsis of that history to 2012, to provide context for Whalley’s exit in 2015 and to fill in a couple of pretty big blanks from the version an observer could have pieced together from trial testimony.

Basically, the developments we’re concerned with started in 1995 when the federal government decided to divest itself of hundreds of Canadian ports. The divestitures included the government wharf in Sydney and the ECBC-owned Sydport marine industrial park on the opposite side of the harbor.

The CBRM purchased the government wharf in 2002. Sydport, as I’ve documented at some length, was “sold” in 1999 to a private company — Laurentian Energy Corporation — established for the express purpose of buying Sydport. Laurentian didn’t do much of anything with Sydport for a number of years, but Laurentian itself changed form, adding a number of community shareholders, including New Dawn Enterprises and Membertou First Nation.

In 2007, the Sydney Harbor Master Plan (Volume 1 and Volume 2), commissioned by the Sydney Marine Group which included pretty much everyone with a business on Sydney harbor, identified the “greenfield” site, a portion of Sydport, as a potential location for a container terminal capable of handling “post-Panamax” container ships.

The container terminal idea had legs — at least here in the CBRM — and the the municipality secured provincial and federal funding (plus $1 million from Nova Scotia Power) to undertake a $38 million harbor dredge project (the greenfield site being the ideal location for a container terminal except that its harbor wasn’t actually deep enough to handle the ships it hoped to attract.)

In early 2011, with plans for the dredge well underway, a dispute erupted between Laurentian shareholders as both New Dawn Enterprises and Enterprise Cape Breton Corporation (ECBC, under then-CEO John Lynn) offered to buy Laurentian’s assets, including the greenfield site. To make a long story short, the sale didn’t happen, but what is significant for the Whalley case is that each side in the dispute commissioned an appraisal of the Sydport assets. Both appraisals put the value of the park at roughly $6 million, but the one by Mackey Appraisals Ltd. put dollar values on each lot in the industrial park while the one by Altus Group said the only value in the park was the greenfield site and put a $0 value on the other lots.

Remember that.

The harbor dredge was completed in January 2012. Materials removed from the harbor were added to the greenfield site to increase its size. (And as the Spectator reported in earlier this year, the site is now eroding and recently required repairs totaling $70,000.)

Sydney harbor dredging project, 2012. (Source: YouTube https://www.youtube.com/watch?v=u5m8WPL5DR0)

Sydney harbor dredging project, 2012. (Source: YouTube)

In May 2012, Laurentian announced it was entertaining an offer to sell the greenfield site to an “unnamed consortium wanting to turn the property into a coal-handling facility.” To head this off, and keep the container terminal dream alive, CBRM council decided to buy the greenfield site for $6 million.

On Whalley’s recommendation, the municipality also engaged the port consultants Edward Zimny of Paul F. Richardson and Associates, and Gordon Forsyth IV, managing partner at BSY Associates to continue the work they’d been doing for Laurentian — that is, trying to interest terminal operators and shippers in the greenfield site.

And that’s where matters stood as of October 2012 when Cecil Clarke elected mayor of the CBRM.

 

Port development: Clarke Era

As related in Part II, former CAO Jerry Ryan testified that weeks after being sworn in as mayor, Clarke came to Ryan’s office and suggested that it would be difficult for the CAO and Whalley to work for the “new administration.”

For the record, the mayor was “new,” but council — which, you may recall, holds the power in a Nova Scotian municipality — was not actually all that new. It was smaller — between the 2008 and 2012 elections the number of councilors was reduced from 16 to 12 — but in keeping with the provincial trend in 2012, which saw 80% of incumbents returned to office, it contained a lot of familiar faces:

CBRM Council 2012

District 1: Clarence Prince (incumbent)

District 2: Charlie Keagan

District 3: Mae Rowe (incumbent)

District 4: Claire Detheridge (incumbent)

District 5: Eldon MacDonald

District 6: Ray Paruch (incumbent)

District 7: Ivan Doncaster

District 8: Kevin Saccary (incumbent)

District 9: George MacDonald (incumbent)

District 10: Darren Bruchschwaiger (incumbent)

District 11: Lowell Cormier (acclaimed)

District 12: Jim MacLeod (incumbent)

So, eight of 12 councilors were incumbents and District 7 Councilor Ivan Doncaster had served previously on council.

(The other thing that struck me about this was Clarke’s certainty that the needs of the new administration were so distinct from those of the previous administration they required the replacement of two, long-term municipal employees. And yet, when Clarke says that he has a “mandate” from council to serve as point person on port development, he’s talking about the council elected in 2012 — he never asked the new council, elected in 2016, to renew that mandate. Strange, no? You’d almost suspect he was making the rules up to suit himself.)

Ryan didn’t get into detail about how he himself came to leave the CBRM — we know he transitioned from CAO to “senior administrative consultant” for his last months on the job and retired in September 2013, but how those terms were negotiated was not explained. (Tony Mozvik, the solicitor for the CBRM, was adamant there was no need to get into the details of Ryan’s departure and Justice Murray agreed with him, but boy, would l like to know more about it. Sadly, no one asked for my preference.)

However Ryan came to leave, he testified he made a “plea” to the mayor to retain Whalley because of the importance of the port file which Ryan said Whalley was overseeing. Ryan made a similar plea to Whalley to remain with the CBRM, and in the end, while Ryan left, Whalley stayed on.

Both former CAO Michael Merritt and current CAO Marie Walsh testified that despite the rocky start — when the mayor had basically tried to fire him (my words, not theirs) — Whalley and Mayor Clarke had a good working relationship.

And yet, Whalley testified that in February of 2013, while Marie Walsh was serving as interim CAO, she told the port consultants — Zimny and Forsythe — on a conference call that Whalley did not have “the mayor’s confidence.”

Sadly, Walsh was not asked about this when she testified herself, so there’s no way of knowing her side of that story. But Whalley testified that he emailed Walsh and then-HR director Angus Fleming asking for “guidance” after Walsh’s remarks on the conference call “completely undermined him.” Whalley said a meeting with the two was scheduled but nothing much came of it — he was instructed to continue doing his job. But Whalley told the court:

If people are saying they don’t trust you, it’s really hard to do your job.

 

2014

So, Whalley continued to work on the port file, and moving into 2014, he began to get assistance from the oddest places. (And here I’m going to rely less on what was said in court and more on the research I’ve been doing myself these past three years.)

For instance, the question of port governance had come to the fore: there was to be a new organization formed to take over the port (all aspects, including the greenfield site and the cruise pavilion and the marine terminal). It would replace the Sydney Ports Corporation (SPC) which had been overseeing the marine terminal (and not paying its rent to the CBRM, as Whalley noted in his testimony).

Whalley said Jim Gogan of Breton Law Group (the same firm as Mozvik) was engaged to draft the Articles of Association of the new organization although he didn’t say WHO engaged him, so I am still in the dark  as to how Gogan became so deeply embedded in port development.

 

Seconding Usher

Marlene Usher (LinkedIn)

Marlene Usher (LinkedIn)

And Gogan was getting help himself: when he presented the newly drafted Articles of Association to council, on 17 February 2015, he presented them along with Marlene Usher, and their presentation began with the phrase:

Our involvement with the establishment of a new corporate entity mandated with the broad economic development of the Sydney Harbour and surrounding municipally owned lands dates back to mid year 2014.

Usher was probably at loose ends around mid-year 2014, because another thing that happened that year was that ECBC, which she was leading in the wake of former CEO John Lynn’s firing, imploded on June 19. Luckily, she and Gogan hit on a fun thing for her to do instead of simply working for ACOA: they decided the CBRM would second her to serve as CEO of a port entity that didn’t actually exist yet and pay half of her $200,000 salary, which they also set before the board (which was supposed to hire the CEO and set her salary) had even been appointed.

 

Interim-ad-infinitum

Oh, and about that board, although the Articles of Association set out very strict rules stating no elected officials could be on it, Gogan cleverly inserted a “notwithstanding” clause allowing for the creation of an interim board made up of the mayor and four councilors and chaired by the CAO of the municipality. Better still, he placed no limit on the period of time that interim board could sit.

Port of Sydney Development Corp AGM, 15 December 2016. (l to r: Board chair Michael Merritt, CBRM Mayor Cecil Clarke, Port CEO Marlene Usher)

Port of Sydney Development Corp AGM, 15 December 2016. (l to r: Board chair Michael Merritt, CBRM Mayor Cecil Clarke, Port CEO Marlene Usher)

Whalley testified that Gogan asked for his input on the structure of the new port entity and Whalley, who had strong ideas about it, supplied it. He felt the port needed to be accountable to the CBRM in a way the old SPC had not been, and he told the court  he didn’t feel the structure of the interim board hit on by Gogan (and Usher) accomplished this, noting that it created a sub-set of councilors who ran the port in closed door meetings.

(Former CAO Michael Merritt, in his testimony, stressed the openness and accountability of this interim port board, pointing out that it published its minutes and opened its annual general meeting to the public, but this is patent nonsense: the port board published redacted versions of its minutes once a year  without alerting anyone that it had done so.

And after holding the first AGM in a large auditorium on a Saturday — albeit, without any audited financials for CBRM councilors or the public to view — it scheduled the next one for a weekday morning in a meeting room so small, it was almost entirely filled by the board and the CBRM council.)

 

Port marketers developers

Albert Barbusci (via Novaporte website)

Albert Barbusci (via Novaporte website)

Okay, what else was happening in 2014? I’ll tell you what else. A mysterious duo named Barry Sheehy and Albert Barbusci had appeared on the scene. Sheehy, a consultant and self-published historian who lives part of the year in Gabarus apparently met Mayor Clarke at a social event and they hit it off like gangbusters. The next thing you know, Sheehy and his longtime associate Albert Barbusci (oh the fun times they’ve had together) are marketing our port.

Yes, the Cape Breton Post will inform us in July 2015 that:

Barbusci and Sheehy have already been working with the CBRM for 16 months, investing $1.2 million of their own capital into port development.

That means Barbusci and Sheehy began their “work” for the CBRM in March 2014.

 

Rejection

Oh yeah, also in 2014, port consultant Neil MacNeil submitted his “port progress” report to Business Cape Breton, which was then operating as the Cape Breton Small Business Development Corporation (it’s a long story) and which had also inserted itself into the port development process.

MacNeil turned in his final report in June 2014, but he’d committed the unforgivable sin of throwing cold water on the container terminal project and so Mayor Clarke SAT ON IT FOR SEVEN MONTHS.

MacNeil apparently got so frustrated, he went to the press with his thoughts on the container terminal project in October 2014. And still, Clarke withheld the report. When it was finally released — this report for which the public had paid $100,000 — in March of 2015, and discussed  in an in camera meeting, Clarke simply denied the report had been withheld. Reported Tom Ayers:

Much of the contents of the MacNeil Management Consultants report had been shared with councillors over the course of several in camera meetings since last July, Clarke said Thursday.

The rest of it wasn’t released publicly or to councillors because it was irrelevant or conjecture and was not helpful in the municipality’s efforts to develop the port, he said.

 

Moore or less

Whalley testified that Mike Moore was also hired (I believe through BCB) in 2013.

Searching for Moore’s tracks through the port development process is not for the faint of heart, but I put on my best Elmer Fudd hat and picked up his trail:

I first found him being paid $54,748 by the CBRM between April and November 2014 for “consulting services” on port development. (See the port development update –- page 17 — presented to council at the infamous 19 December 2014 meeting during which the sale of Archibald’s Wharf was approved).

The original caption for this photo read: Mike Moore, regional manager of commercial interests for Heddle Marine Service's East Division in Sydney, stands on the deck of a barge that is being repurposed at the company's wharf in Sydport Industrial Park. The barge was used to service the oil and gas industry off Newfoundland, and will soon be used to service a mining company after the steel and lumber are taken off the deck, to be replaced with another configuration the client has requested. (TOM AYERS / Local Xpress)

The original caption for this photo read: “Mike Moore, regional manager of commercial interests for Heddle Marine Service’s East Division in Sydney, stands on the deck of a barge that is being repurposed at the company’s wharf in Sydport Industrial Park. The barge was used to service the oil and gas industry off Newfoundland, and will soon be used to service a mining company after the steel and lumber are taken off the deck, to be replaced with another configuration the client has requested. (TOM AYERS / Local Xpress)”

He then turned up in the minutes from the 23 June 2015 meeting of the Port of Sydney Development Corporation (PSDC) board being seconded to the PSDC from June to September 2015 to oversee business development.

This means he would have been directly involved in port development at the time of the McKeil deal.

So it’s perhaps no surprise that he next turns up as regional manager of commercial interests for Heddle Marine Service’s East Division in Sydney, which is leasing part of the “McKeil” docks in Sydport and of which McKeil CEO Blair McKeil is a director.

Now THAT’S what I call economic development.

 

Can you keep a secret?

And finally, about those “in camera meetings.”

All of this was going down during something I once dubbed the CBRM Council’s First Annual Festival of Secrecy. Because between January 2014 and October 2015, Mayor Clarke presided over 31 in camera council meetings (and as Tom Ayers reported at the time, many of these were not even announced to the public, in contravention of the Municipal Government Act):

In Camera Council Meetings January 2014 - October 2015

What a year.

I’m going to adjourn for now. We’ll pick up Whalley’s testimony in Part IV.

 

 

 

 

 

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