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National Post - May 28, 2010 - By Megan O'Toole - firstname.lastname@example.org
Mississauga’s former city manager says it is “very probable” he discussed a key change to the city’s Enersource agreement with Mayor Hazel McCallion in the days before the deal was officially signed.
Whether he alerted the rest of council, however, is not so clear.
“I believe I would have briefed council … I can’t recall the meeting itself,” David O’Brien, who was city manager before he became the first president of Enersource in late 2000, testified yesterday at a judicial inquiry into allegedly suspect business dealings involving the city of Mississauga.
As for the Mayor: “Our offices were beside each other [and] we spoke many, many times a day on many issues … It’s very probable I did talk to her about it.”
The change in question gave Borealis, a subsidiary of pension giant OMERS, veto power over major operational decisions by the Enersource board. When the deal was signed a decade ago, Borealis acquired a 10% stake in the hydro utility.
The veto became controversial years later, when councillors discovered it prevented them from cutting board stipends. They say the clause was inserted without their knowledge; Ms. McCallion has said she, too, was unaware of the veto when she signed the agreement.
The inquiry has heard that when council initially approved the deal on Nov. 29, 2000, the veto was not included. The change came through the office of Bill Houston, a lawyer acting for the city, on Dec. 4, and was ultimately included in the final version of the deal signed by Ms. McCallion on Dec. 6.
Asked if he saw the amended deal that came through Mr. Houston’s office, Mr. O’Brien said it was possible he only discussed it over the phone.
“You’d agree that it’s an important change,” commission counsel William McDowell said.
“Oh, yes,” Mr. O’Brien agreed, noting his “normal” procedure would have been to seek Mr. Houston’s legal advice on the matter, though he could not recall the specifics of how he handled it at the time.
Testifying a day earlier, Mr. Houston told the inquiry it would have been Mr. O’Brien’s responsibility to inform council of such a change; yet because of the rapidly approaching closing date, calling a council meeting to discuss the matter would have “jeopardized” a deal in which the city stood to reap major financial rewards.
Mr. O’Brien, who says he frequently briefed council on the Enersource negotiation process, could not recall a specific meeting in which he told councillors of the last-minute veto change, but speculated he would have done so around the time of the council meeting on Dec. 6, 2000.
“It would have been hard to get council together otherwise,” he said.
Calling the amended deal a “sea change” that shifted the power balance on the Enersource board to Borealis, Mr. McDowell asked whether it would have been sufficient to broach this topic with council on the day the deal closed.
“I think probably yes,” Mr. O’Brien said, noting the rationale for the change evolved over a few months. (Essentially, Borealis wanted the veto included as protection because of a “put” agreement in the deal that could have forced Borealis to buy out the city’s share of Enersource within four years. Without the veto, in theory, the city could have stripped Enersource of key assets and then still forced Borealis to buy out the other 90%.)
“My sense was that council was very comfortable with the way negotiations were going,” Mr. O’Brien said, noting they “could have said no” to the veto up to the last minute – though that would have threatened to kill a lucrative deal.
The inquiry resumes next week, with Ms. McCallion expected to take the stand on Wednesday.
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