The Globe and Mail is back doing what it does best — holding Ontario politicians and government officials to account for the waste of millions of dollars of Ontario taxpayers’ money, pertaining to the cancellation of the Mississauga gas plant.
According to a recent Globe article, the Ontario Ministry of Energy retained the services of Rob Prichard, Metrolinx chairman and the chairman of the very well-respected Torys Bay Street law firm, to settle the lawsuits launched by EIG Management Co. (EIG), a Washington-based hedge fund, which had lent $59 million to Eastern Power and its operating company Greenfield (collectively, Eastern Power) to build the notorious Mississauga gas plant. Now cancelled.
As a result of Prichard’s brilliant negotiating tactics, the Ontario government forked over the sum of $146.5 million to EIG, to settle EIG’s highly bogus $300 million claim against the McGuinty government and the Ontario Power Authority (OPA).
For which EIG was only out of pocket for $59 million.
Yes, Virginia, you read this right.
Also according to the Globe article, Rob Prichard and his Tory colleagues were paid approximately $350,000 in fees by the McGuinty government for two weeks of work.
You can almost see those Bay Street masters of the universe, high-fiving, and doing a happy dance around the boardroom table.
But before we give Prichard the keys to our fair city, or the keys to Rob Ford’s secret stash (of Cuban cigars, what did you think I meant?) let’s think about this.
I was wondering whether Prichard, or his Torys colleagues, or the many highly-paid and very well-respected lawyers in the Ontario Ministries of Energy and Finance ever considered that the greedy U.S. hedge fund EIG may not have been legally entitled to one red cent from the Ontario government?
According to the report of Jim McCarter, the Ontario provincial auditor who investigated the Mississauga gas plant cancellation, Eastern Power (see page 18 of the Auditor’s Report) entered into a $263 million credit facility (a line of credit available as standby funding) at a very high interest rate of 14 per annum, for a term of eight years with EIG to secure financing for the construction and maintenance of the Mississauga gas plant.
According to the same auditor’s report, EIG, the lender, only actually lent about $59 million to Eastern Power, for a period of six months before the cancellation of the gas plant.
It is important to note that Eastern Power and its operating company, Greenfield were the only parties to this credit facility with EIG.
Neither the Liberal government, nor any government ministry or agency, including the Ministry of Energy or the OPA, were a party to this credit facility or a guarantor of this credit facility.
The Auditor notes that the Liberal government was never even shown a copy of this private credit facility loan agreement by either Eastern Power or EIG, prior to the OPA agreeing to pay the penalty incurred by Eastern Power for breaching the terms of the credit facility loan agreement.
This makes sense because this was a private deal between two consenting corporations, and since the Liberal government was neither a party or a guarantor, it had no right or authority to see the subject creditor facility loan agreement.
Notwithstanding that the Liberal government was neither a party to the credit facility loan agreement, nor a guarantor, EIG still sued the Ontario government and the Ontario Power Authority in Ontario for $300 million in damages, on the basis that the Liberal government had conspired to breach a loan agreement to which it was not a party.
I firmly believe the U.S. hedge fund’s $300-million claim was without merit.
I also believe that the hedge fund’s legal claim was a legal tactic to pressure McGuinty into a monetary settlement, out of court.
I also believe that the Ontario government, with its virtually unlimited resources and its high-powered legal talent, could have defended this ridiculous suit brought by EIG against the McGuinty government for many years. And ultimately, the Ontario government would have won, or settled for an amount considerably less than $50 million.
Instead, it is apparent that the McGuinty government was more concerned about its political survival than taxpayers’ money. Because in this case, it hired a hired gun, with a strict mandate to make the hedge fund go away and not embarrass the McGuinty government with an ugly and messy court battle pertaining to the gas plant cancellation.
As NDP energy critic Peter Tabuns wisely noted, “Mr. McGuinty was willing to write a blank cheque to keep this out of the public eye and out of the courts.”
To date, Premier Wynne, senior government officials and Liberal supporters have defended the expenditure of $585 million for the cancellation of the Mississauga and Oakville gas plants on the basis that both the opposition parties (NDP and Conservatives) were also opposed to the construction of the said plants. The obvious implication is that both the NDP and Conservatives, if in the shoes of the McGuinty government, would have also spent the same amount of taxpayer money to settle these matters.
The above Prichard $146.5 million payoff to American hedge fund EIG to buy its silence is evidence that considerable taxpayers’ money could have been saved if Premier McGuinty had put the taxpayers’ interests ahead of his own government, and if he had fought these greedy Americans in Ontario court.
I suspect the Ontario legislative committee will dig up more examples of such Liberal waste of taxpayers’ money pertaining to this sorry gas plant cancellation scandal.
I urge this committee to call upon Rob Prichard and all the government lawyers and outside lawyers who advised on the Mississauga gas plant cancellation.
I urge this so we can get to the bottom of the reasoning for paying off EIG and Eastern Power nearly $300 million dollars, instead of terminating their said contracts and challenging them to spend millions of their own money and years in court, resulting in them unsuccessfully trying to recover compensation from the Ontario government.
Lastly, Eastern Power was a weak and poorly-capitalized gas plant developer from day one. The McGuinty government should have terminated its contract with Eastern Power, well before cancelling the Mississauga gas plant. The McGuinty government should have brought in a more highly-capitalized gas plant player like the much more financially stronger Brookfield Power.
So for McGuinty and Wynne to justify the huge relocation costs and expenditures for Eastern Power, just does not wash with this cowboy.