Monday, 26 May 2014

DISTURBING QUESTIONS RAISED BY FRANK COLEMAN'S DISCLOSURE

When the story unfolded that the Provincial Government had released Humber Valley Paving (HVP) from a $19 million Contract and returned two Bonds for the same amount, two statements were uttered that add confusion to the recent comments of Frank Coleman.

The first was by Transportation and Works Minister Nick McGrath who justified the decision (this Blogger maintains it wasn’t his alone) by stating had he not released HVP from the contract, the Company might have gone bankrupt.

The second is Frank Coleman’s assertion that he did not benefit personally having left the Company, he said, three days before HVP’s request was made to the Government. 

The latter contention was raised in a May Post, by this scribe, entitled: HVP BOND ISSUE: THE MAKINGS OF A SCANDAL.  I suggested an independent arbiter might be  expected to confirm whether the assets pledged, upon issuance of the Bonds, constituted the same security when the contract was cancelled.

Why should anyone be interested in that question?  
Well, the public should know if the sale of Coleman's shares had been executed cleanly, leaving him no vested interest at the point the decision to cancel the Contract was made. Besides, it was highly unlikely that the Bond Underwriter had released Frank Coleman's security.  That's tougher to get done than most people might believe, especially given the circumstances of HVP.

Another critical point is that no business person sells his shares in a Company leaving himself liable for such a large sum of money. The limited information initially released by Coleman left open that possibility. Having sold his shares, it would mean the buyer possessed financial control over him in a way that could be potentially ruinous if the Bonds were called.  I can't say it is never done. But, it is certainly rarely done.


Of course, conversely if Coleman agreed to sell his shares while retaining his liabilities, as he has now confessed to doing, he might have gained advantage with respect to the value of his shares upon disposition, especially if he knew in advance that the Contract was about to be cancelled and the Bonds released.  

Hence, all the questions that have been raised are legitimate in any political context; given that we are discussing matters which relate to the incoming Premier, they are elevated accordingly. 

Coleman has now answered the question under discussion.  The CBC reported him saying: “if the province had decided to call in bonds from Humber Valley Paving after a contract was cancelled he, along with the other shareholders, could have ended up paying up to $20 million.”


CBC On Point confirms Coleman, as CEO, “personally backed the bonds required for the company to get the government contract for paving in Labrador.”  It stated “after Coleman stepped down from the position, his name was still attached to those guarantees.”

Mr. Coleman not only stood to gain personally; based upon the CBC interview, Mr. Coleman did benefit personally. 

While it is peculiar he did not make the disclosure in the first instance, the revelation poses more questions about the so-called sale.  If they were sold, did the transaction have strings attached? Who held those strings? 

Did Coleman know, in advance of the share disposition, whether the political solution offered by Nick McGrath was already in the offing?  The possibility has far more credence now that we know Coleman was on still on the hook for the liability when the shares were sold.

Coleman's attachment to the guarantees sheds a far different light on this affair; there is no question that the incoming Premier ought not to have avoided releasing that information in the first place. 

To go from "no personal benefit" to a potentially multi-million dollar benefit is a game changer in the business of politics where conflict or even a potential conflict are paramount issues for one about to be charged with the public trust.

What else is Frank Coleman not telling us? 

Wittingly or otherwise, he has allowed us a peek.  Coleman told On Point Host Peter Cowan: "The option that the company would have had its bond pulled is not necessarily the right conclusion to reach. The company would have had other options, either to complete the work or to sell the work…."

The statement don’t square with the comments of Minister Nick McGrath.  The Minister justified the decision stating “Humber Valley Paving didn't want to follow through with the contract because it would lose money…”  He added: "We don't want to put a company out of business…”  

Presumably, completing the work was not a viable option; the HVP affair would not have made this page had the Company proceeded with the road work in Labrador and fulfilled it contractual obligations. As Nick McGrath asserted, the Company couldn’t afford to finish the work.

As for selling the work, one would have to draw the inference that its sale, to a competitor, could only have occurred at a big discount.  That option would have cost the Company dearly.  It was a cost which, unless Nick McGrath got his lines mixed up, the Company could not afford or did not wish to incur.
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                                  BEGINNING OF THE END? TORY GOVERNMENT IN CRISES
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The Government’s decision to cancel the contract, at zero cost to HVP, suggests that Frank Coleman, in modern parlance, is just blowing more smoke.

How much did the HVP decision cost the public purse? 

We may never know.

Minister Nick McGrath set out to obscure that figure by hiding the unfinished HVP work inside a new and enlarged Tender. If the public interest or merely a desire for transparency had played any role in McGrath’s decision the precise unfinished Tender would have been re-bid so that the public could compare the amount cancelled with the new cost (confirmed by the lowest Bidder) to complete the work.   

This decision by McGrath served even further to make more murky a very cloudy issue.

We need to know the truth about why the Government returned the two Bonds and how many rules and precedents were broken in the process; we need to know whether the decision constituted high level corruption. 

Indeed, we need to know why, in these circumstances Frank Coleman should be Premier. 

This is one heck of an auspicious start for one about to take a position where regard for matters of conflict of interest ought to be flawless.  

Coleman's recent Speech to Rotary heard him complain that politics represents a steep learning curve.  He spoke of what he has learned from hanging out at a hockey game with his friends (including Nick McGrath) and colleagues.  Your family is open season, he said.

Maybe I missed something in his complaint.  Is Coleman suggesting we shouldn’t ask questions as to the propriety of Nick McGrath’s decision when he (Coleman) had been off the HVP Board a mere three days before the $19 million phone call was made by his son, Gene!  

Why would any of us be suspicious knowing, as plainly as Nick McGrath knew then, that Frank Coleman would be his next Boss? 

The HVP affair grows increasingly disturbing.  The public needs to know more, a lot more. Frank Coleman needs to be definitive about his knowledge of and involvement in the matter. His late disclosure to CBC suggests he is just trying to stay one step ahead of the Auditor General. 

Tom Marshall should suspend Nick McGrath until the matter is permanently settled.  That he has not already raises other disturbing questions. 

The Opposition Parties need to return, full-time, to what is undoubtedly the most critical issue that has faced the Province in the post-Smallwood era.  

The HVP affair is a test of their leadership, too.

10 comments:

  1. It is time that this file is sent to the RCMP for investigation. Anything less is not acceptable.

    The issue is that the PC's and the business elite in this province, believe that this is how the system should work.

    We need to understand if the Minister over-ruled the recommendation of his staff.

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  2. The more we learn about this matter, the more it appears to be a blatant example of just how out of touch this government is with residents of this province. For anyone to think or suggest that Frank Coleman did not have direct involvement in this entire affair or didn't benefit in some way, has their head so deep within the sand you can barely see their toes.

    As for who knew about this matter and who played a part in letting Frank Coleman's company off the hook, well I don't think you have to be very astute to add the numbers up. First of all you have a party that has been doing very poorly in the political poles, they just turfed the previous premier, they are in hot water with the entire Nalcor issue, they have members crossing the floor and they know full well that any decision that affects their star candidate for premier had to have the full endorsement of PC leadership. To even hint that McGrath acted independently is an insult to everyone's intelligence.

    Perhaps they think the recent announcement to turf Ross Reid along with numerous other members of the backroom staff is going to make things look good, as in we are making big changes. Then again, perhaps Ross Reid and other can't take the smell in the room at the top floor of confederation bldg. and they too want to distance themselves from this crew of drunken sailors who are running the province.

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  3. This is incredibly damning. A great summary. I expect the auditor general to blow this wide open.

    If Frank Coleman did give a personal guarantee too get the bonds and they are within the scope of the Auditor Generals review then he and McGrath are done in my mind.

    This stinks.

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  4. Given that the auditor general was appointed by this government I expect he will find nothing wrong. Yes, that is cynicism in the extreme but I have seen nothing that leads me to believe that the political system of this province is NOT stacked towards lining the pockets of the political, finacial, and professional elite. I happliy await to be proven wrong.

    John D Pippy

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  5. Mr. Sullivan. Hard hitting but excellent commentary, as usual.

    I can't help but relate all of this….the lack of total disclosure, the implications of this action to the benefit of Mr. Coleman and his family/friends….to the way that the current Tories have obfuscated and twisted their arguments in support of Muskrat Falls in on themselves. Yet, the general populace…and other political parties….seem to have resigned themselves to pushing it on to completion…no matter what it costs. This is sheer madness, Mr. Sullivan, and it is not yet too late to change course. Not an easy decision, to be sure, and it will be a costly lesson…but the alternative is far worse, in my opinion.

    Where are the people of the province....that they allow themselves to acquiesce so easily to this skulduggery?

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  6. Add to all of this the fact that the Minister of Transportation is claiming the first he heard of the possibility that Coleman could have still been on the hook if the bonds were called is when he heard it on On Point this weekend. This also raises a troubling question - how is it that the Minister of Transportation either doesn't know enough about bonds, or chose not to find out if Coleman was still liable for the bonds when he runs the department that probably spends the most in bonded contracts? Shouldn't he know how bonds work? He's either incredibly incompetent, or incredibly naive - and in either case does he really deserve to be a minister of the crown? If he's not incompetent or naive that means he lied about not knowing, and I don't have to draw you a picture of what that means, do I?

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  7. The question in this mess is "How was letting HVP off the hook in the best interest of NL taxpayers?". I agree with the earlier comment. Call in the RCMP.

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  8. This corrupt government needs to be stopped in its tracks before it begins. Coleman is up to his eyeballs in it and Mcgrath is willing to put his name and reputation on the line for this incoming crook! There's got to be something in it for him too. If not, he's a bigger fool than he looks! This party is so desperate to cling on to power, they will go to any lengths to do it! Next election. ....Please. ....save them from themselves, and not just from us! It's gone beyond pathetic at this point!

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  9. This whole affair makes a sad mockery of democracy. What is the future of this province if after 500 years of settlement and 65 years of union with Canada this is what we have to show for it? Right now we look like a fledgling democracy trying to cast off the vestiges of kleptocractic politics, not like anything in the Western world. Please, somebody with power and influence get an injunction of some sort and stop Coleman, and Muskrat Falls, and all of the other nonsense that is lining the pockets of this province's elite and improverishing future generations beyond our darkest imagination. I have children in university trying to make decisions about the future, what do i tell them? This whole system has more in common with eastern Europe than the Newfoundland of 1933, is that where we want go? of course not.

    john. D pippy

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