FOIPOP Findings: A Dundee Deal

I have now received almost all the port-related documents the Privacy Commissioner told the CBRM to release to me. All that seems to be missing are the documents the municipality has never produced, not even for the commissioner herself.

On the one hand, this is great, full stop. The CBRM has complied with the commissioner’s decision and hasn’t charged me an arm and a leg for these piles of paper.

On the other hand, waiting over five years for documents I was entitled to in 2015 is not so great. In fact, it’s right up there with the leader of the provincial opposition party having to take the government to court for information that should be public. And as noted above, while the CBRM has re-released the 28 pages it initially gave me — this time without redacting “confidential” information, like the email address of the CEO of the Port of Sydney — and produced the 862 pages it had withheld without even notifying me of their existence, it doesn’t seem to have been able to find the 41 pages (mostly email attachments) the commissioner noted as missing from the documents the municipality supplied her.

Jim Gogan of Breton Law, the lawyer hired by the CBRM to review the documents prior to their release (the same lawyer who decided to withhold 862 pages in 2015, but everyone deserves a second chance, I guess) told me that there was just one document in the final batch of papers that had been subject to redactions.

That document was a non-disclosure agreement (NDA), the only one I ran across in the entire 800+ page dump.

 

Best Before date?

“NDA” is a term that was invoked frequently during a December CBRM council discussion of my FOIPOP request. Regional solicitor Demetri Kachafanas issued dire warnings to councilors about the fate that could befall them were they to release information a previous council had sworn to keep secret. CAO Marie Walsh told councilors they were welcome to see the materials I’d requested if they signed NDAs themselves.

But the only NDA in the document dump was dated May 2014 and states, under “Terms & Termination”:

The Parties’ obligations under this agreement shall be for a period of two (2) years from the date of this Agreement.

In other words, it expired almost five years ago.

Nevertheless, Gogan, citing Section 481 of the Municipal Government Act, “Confidential Information,” redacted the name of the company with whom the CBRM had signed the agreement and details about the services the mystery company was to provide.

Weirdly, an email elsewhere in the document dump makes it pretty clear who the mystery counterparty is: on 1 May 2014 Michael Kraft at Dundee Capital Markets wrote to Albert Barbusci and Barry Sheehy, our port promoters:

Our in house legal counsel has drafted a template NDA (attached) which covers Dundee for securities regulatory requirements

NDA

 

Weirder still, Gogan, released the full text of the (draft) letter of engagement with Dundee:

Dundee_Contract_2014

 

Basically, the CBRM was going to form a company to oversee the development of the entire harbor — development that went well beyond the transshipment hub for ultra-large container vessels (ULCVs) we’re used to hearing about.

Sheehy, in one of the “narratives” it seems to have been his job to produce, says the harbor plan encompasses “container terminals, dry docks, expanded break bulk capabilities, coal gasification and other oil and gas infrastructure,” elsewhere he references a potential oil refinery and “petrochemical” infrastructure. (He also notes, repeatedly, that given “increasingly stiff environmental regulation and general hostility by coastal communities to large scale development, Sydport will likely be the last major harbor to be developed on the east coast of North America in our lifetime.”)

Dundee’s role would be to raise money for this CBRM company from a select group of investors, which is what is meant by a “private placement.”

It’s clear from the emails that Sheehy and Barbusci were hoping to raise money from pension and investment funds — the kind of “accredited” investors permitted to invest in private placements. (If you’re thinking “accredited” means investors who have passed some sort of test proving they can make smart investment decisions, think again. It means “rich,” just ask any Bernie Madoff client.)

Companies opting for private placements don’t have to produce a detailed prospectus and are exempt from compliance and disclosure obligations, which makes private placements sound like an odd fundraising choice for a municipally owned corporation. I actually reached out to the Department of Municipal Affairs and Housing to see what they had to say about the legality of such a placement and they were not very helpful, but I’ll get to that in a moment.

Whatever the rules governing municipal corporations, the fact remains that this proposed company is a very different beast from the one the CBRM eventually established to oversee harbor development — the Port of Sydney Development Corporation (PSDC) is a limited by guarantee company, meaning a form of non-profit, which has one shareholder, the CBRM, and is not permitted to issue additional shares.

 

Legality

I asked to speak with someone with the Department of Municipal Affairs and Housing about the types of companies municipalities may establish and the types of fundraising them may do.

Spokesperson Krista Higdon told me, “We will decline an interview.”

(I am a reporter seeking clarification on a point of law from a provincial government department and that department simply refused to speak to me — no wonder the CBRM feels free to be non-transparent in its dealings.)

Brad Cutsey bio

Municipal Affairs would say only:

There is authority for the creation of a body corporate in limited circumstances set out in section 60 of the Municipal Government Act.

If there are questions about the interpretation of these provisions then municipalities should seek their own independent legal advice in this regard.

Section 60 of the MGA is called “Municipality and village service agreements” and begins with:

A municipality or a village may agree with one or more municipalities, villages, service commissions, the Government of the Province or of Canada or a department or agency of either of them or a band council pursuant to the Indian Act (Canada) to provide or administer municipal or village services.

Section 60 (4) states:

Where an agreement made by a municipality or village pursuant to subsection (1) creates a body corporate:

(a) a copy of the agreement shall be filed with the Registrar of Joint Stock Companies; and

(b) the participating municipalities and villages may guarantee its borrowings.

I am not a lawyer, but I would say it would require a very broad interpretation of that section to allow for the creation of the company envisioned in that Letter of Engagement.

Michael Kraft LinkedIn banner

Which may be why it never amounted to anything, as CBRM CAO Marie Walsh — who would have been the CBRM’s chief financial officer at the time this was being discussed — confirmed for me. Walsh, who told me:

…I am not familiar with the proposal but nothing ever came of it.

John Whalley, the former economic development manager for the CBRM who was included on some of the emails with Dundee, told me he had “not been aware” of the Dundee proposal previously and did not believe it had been discussed with council. He said:

I am not certain the provincial government would allow a municipality to act in this manner. I suspect not.

Whalley said the discussions with Dundee “seemed to fade away quite quickly — by winter of 2014 or early 2015. Albert and Barry created HPDP and wanted to do the project themselves.”

Neither of Barbusci’s contacts at Dundee remained there long after the events discussed in this article — Michael Kraft, who ran the real estate group at Dundee Capital, left to join Hi-Rise Capital as CEO in 2016 before moving on to Echelon Wealth Partners where he now serves as managing director. As for Cutsey, he is now president¬†of InterRent Real Estate Investment Trust (REIT).

 

Secrets

In her decision about my FOIPOP request, the Privacy Commissioner said that companies doing business with public bodies should understand that their dealings must be transparent. Kachafanas said quite bluntly during that December discussion that he didn’t agree with this, which is unfortunate, since he’s our regional solicitor and his advice governs the municipality’s dealings. (Except, of course, when the municipality opts to hire outside council but I think I can state with confidence that Gogan doesn’t believe much in transparency either.)

The NDA I’m looking at defines “confidential information” as:

…all information of either Party, that is not generally known to the public, whether of an operations, contractual, business, financial or marketing nature…

What part of a municipality’s operations, contractual business, financial or marketing information is “not generally known to the public?” All of those things are matters of public interest and the notion that a mayor could sign an NDA with an Ontario investment company in which he promises not to tell his citizens anything about what he has planned for a public resource — the harbor — is ridiculous on its face.

But our regional solicitor saw no problem with it at the time, and as recently as December, both he and the CAO were trying to enforce an NDA that had expired five years ago.

The argument used by those who elevate the “financial or economic interests” of private companies over the public’s right to know (an argument trotted out as recently as Tuesday by the outgoing premier of this province) is that companies told their dealings with government must be conducted transparently will refuse to deal with government. But does anybody in this province actually believe that?

Government is the driving force behind so much economic development in this province — just look at the much-vaunted construction “boom” in CBRM — it is perfectly placed to demand more transparency in its dealings with the private sector.

It just doesn’t want to, because secrecy is as useful to government as it is to private corporations.