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Fishing legends Bob and Wayne Izumi hooked something pretty remarkable at Bark Lake.

And it wasn't a prize pickerel.

The television sportsmen reeled in something far grander: A sweet deal on one of the provincial government's crown jewels.

Nestled beside a pristine lake in the Haliburton Highlands, the Bark Lake Leadership Centre had delighted generations of children in government-run education and leadership programs.

Investigations continue Deal stunk, says Hodgson

The facility was so prized that Queen's Park spent almost $10 million renovating it in the early 1990s alone.

But then the government's Ontario Realty Corp. sold it in 1996 to the Izumi brothers and their partners for just $2.8 million, with no money down, and took back a mortgage for more than the selling price.

Now the fishing duo has put the place up for sale again. Asking price: $8 million.

Chris Hodgson, the Ontario cabinet minister responsible for selling public lands, has confirmed Bark Lake is one of the land deals that forensic auditors are investigating.

``It stinks,'' he said in an interview with The Star this week.

Wayne Izumi, who with his brother controls a 30-per-cent stake in the company that bought Bark Lake, had big plans for the place. He wanted to expand Bark Lake beyond its student past by making it a luxurious leadership training retreat for corporate customers.

But Izumi said in an interview that it wasn't such a hot deal and the company has lost more than $1 million a year on Bark Lake.

`The transaction was extremely favourable to the purchaser on terms that I have not normally seen in other commercial transactions' - Leor Margulies Real estate lawyer

``It's clear we grossly overpaid,'' he said. ``We never got any praise for the risk involved in taking it on.''

Revelations about Bark Lake come at a time when the government is already trying to quell a political firestorm over land sales and contracts involving private companies and Ontario Realty Corp.

The agency sold Bark Lake, a sprawling outdoor education and leadership centre about 300 kilometres northeast of Toronto, to Burlington-based Century Lane Developments Inc. for $2,850,000 on May 31, 1996.

Land title records show Century Lane - whose other main partner, Ancaster businessman Clement Chan, owns 40 per cent - didn't pay any money up front for Bark Lake.

The records show Century Lane had originally planned a downpayment of $130,000, but that provision was struck out of the contract at the last moment.

The agency made the deal even sweeter by taking back a five-year mortgage from Century for $2,870,000.

That's $20,000 more than the Izumi brothers, Chan and other smaller partners needed to buy their new fishing haven and leadership camp. It effectively meant that Ontario taxpayers were giving Century Lane money to buy government property.

Furthermore, land records reveal that the mortgage would be discharged entirely if Century Lane, through a set series of payments, paid a total of $2,120,000 off the principal amount by April 30, 1997. That would have saved Century Lane $730,000 off the original selling price.

If Century Lane didn't take up the option, it had to start making payments on March 31, 1997. The interest rate on the mortgage was 7 per cent, at least 1 per cent lower than the rate generally available to commercial real estate borrowers then, according to bank officials.

One industry expert, Leor Margulies, examined the deal for The Star and said he has never seen a seller finance a real estate transaction for more than the purchase price.

``It meant the vendor would have had to pay the purchaser cash to close the deal,'' said Margulies.

Margulies, a prominent real estate lawyer, university lecturer and director of the Greater Toronto Home Builders Association, described the deal's terms as ``peculiar.''

He said sellers of income-producing properties normally demand that the buyer make a downpayment of more than 25 per cent, not zero.

``The transaction was extremely favourable to the purchaser on terms that I have not normally seen in other commercial transactions,'' he said.

The centre, which sits on about 500 acres of Crown land, features a luxury lodge with big stone fireplaces and cathedral ceilings, ahuge dining hall, kitchen, a conference facility, about two dozen cabins, accommodation for 280, administrative building, beaches, hiking trails and a high ropes course.

From 1991-1996, the government invested almost $10 million in improvements including a sewage treatment and water filtration system and lodge upgrades, Hodgson said.

Hodgson, then the opposition member for Haliburton-Victoria-Brock, opposed the NDP's plan for a sale.

``I didn't think there was a market for it,'' he said.

But the government moved ahead and two bidders emerged after the Tories came to power in 1995.

The Friends of Bark Lake, a group of supporters, employees and former students, offered to buy the property for $1 and run it as a non-profit corporation without any more government financial support.

They told the government that Bark Lake would continue to uphold its traditional mandate as a leadership camp for youth.

But Rudy Massimo, who worked on the bid for Friends of the Earth, said Vince Catalfo, the government manager handling the sale, didn't take their bid seriously since there was no significant payment.

Catalfo, then manager of institutional and environmental services for Ontario Realty, could not be reached for comment on the deal.

He left Ontario Realty last year and forensic auditors have named him as one of 23 defendants in sweeping allegations of bid-rigging, fraudulent invoicing and kickbacks.

None of the allegations, which have not been proved in court, relate to the Bark Lake sale.

While Friends of Bark Lake had no upfront cash, it looked like the Izumi brothers and their partners would be a much more suitable buyer since they had money.

But Wayne Izumi, a Century Lane director, said the firm did not have much money at the time, which prompted it to negotiate more favorable terms. He also said the lack of cash prevented Century from making the payments in the first year that would have triggered the big discount.

``We're now making payments of $15,000 to $16,000 every month.'' Izumi, a top contender with his brother in many fishing tournaments, said business has improved but the investment in programs and high operating costs continues to mean losses.

``It has been an incredible struggle,'' Izumi said.

``We've had seven figure losses every year but things are getting better and we hope to break even soon.''

Century Lane recently put Bark Lake upfor sale again.

The realtor calls it ``an incomparable property and a true gem in Ontario's Crown.''