Monday, 23 May 2016

PREMIER NOT TELLING TRUTH ABOUT SEVERANCE DEAL WITH ED MARTIN

 In this Blog Post:

-  inappropriate severance paid out by Government to former Nalcor CEO
-  inappropriate bonuses awarded Ed Martin, too.
-  Ed Martin’s employment contract offers no legal basis for either severance or bonus
-  Premier Ball has obscured the reason for Ed Martin’s departure and failed in his 
   obligation to tell the public the truth.

Introduction

The assertion by Premier Ball that he was contractually obligated to pay severance to former CEO Ed Martin who resigned from Nalcor on April 20th, 2016 is neither based in law, nor in fact, at least not as it applies to his employment contract.

The Premier stressed, according to CBC, that Martin's resignation was a "personal one". Ball said it “was first discussed at a meeting between the two on Sunday, and later confirmed on Tuesday evening". The timeline is just one important detail.

Ed Martin also made the following public statement: "I’ve thought about the work that has been done, and when would be the natural time for me to move on to the next stage of my life. Today, I have come to that time and I will be stepping down as President and CEO of Nalcor Energy."

Ed Martin made it clear he was stepping down due to family considerations.   

A Nalcor statement said: “Mr. Martin's contract entitled him to severance of two times his salary, bonus and vehicle allowance which is a total of $1,387,815.74.”

The Telegram reported on May 5, 2016 the Premier stating: “The government had no control over the $1.38 million paid in severance to outgoing Nalcor CEO Ed Martin”. 

The statements of the Premier, Nalcor, and Ed Martin are important. Each one reinforces and illuminates the other. None state that Martin was dismissed, either by the Nalcor Board of Directors or by the Government. Indeed, both Nalcor and the Premier assert that Martin was awarded severance in accordance with Nalcor’s contractual obligations.

In short, both Ed Martin's and the Premier’s claims are consistent; that his departure was entirely voluntary, and that the decision to step down was a "personal one".
                                      
There is a problem here. It has to do with the fact that Mr. Martin had an employment contract which makes no provision for severance to be paid in a case where he voluntarily retires from Nalcor. 

The Premier has seriously misled the public as to Martin’s entitlements.

The contract is quite specific and describes the circumstances under which Martin is entitled to severance. When you quit, you get no severance.

Mr. Martin has been given a large amount of public money to which he is not entitled. That, alone, is a big problem.

But it is also a problem because either:

1)        one or both of them is not telling the truth; or
2)        Nalcor has breached its obligations under the law governing access to Information, if it   failed to disclose, in its entirety, the former CEO’s employment contract.

The public needs to know, deserves to know, the truth.

Politicians and public servants, however senior, cannot be permitted to bamboozle the public with either their own incompetence or misinformation. We have had enough of that already.

Martin’s Employment Contract

Uncle Gnarley Blog has a copy of the "EXECUTIVE EMPLOYMENT AGREEMENT FIRST RENEWAL BETWEEN NALCOR ENERGY AND EDMUND MARTIN-EXECUTED November 2-2009. The Contract’s public release was sought in a formal written request made by David Vardy, under ATIPPA. Nalcor complied on May 19, 2016 and the document is available via the Link.

The employment contract is very straightforward, even to a lay person, though I have had the benefit of the advice of two senior lawyers who confirm the analysis described here.

The larger question right now, given the amount of public money involved, is why Martin was awarded such severance? Did the Premier mislead the public?

Tying the Premier to Ed Martin’s contract

Before dealing with the details of the contract, it is important to consider exactly what the Premier said in his attempt to justify the monetary award to Martin.

"Ed Martin's severance was part of a contract that was approved by the previous administration in 2005, renewed again in 2009 by the previous administration and executed upon by the previous board," said Nancy O'Connor, a spokesperson for Premier Dwight Ball, in an email on Friday, stated a CBC story. 

The Premier reinforced his Communication Director’s assertion. According to The Telegram the Premier stated: “What you work with is language that are in contracts, you know, signed initially in 2005 by the PC government, or under their mandate, and then again in 2009”. 

It is important to add that if Mr. Martin's contract was altered by the Nalcor Board of Directors any such change also required, under the Energy Act, approval of the Lieutenant Government in Council (the Cabinet), in which case the Premier would be aware of the amendment.  

The Tories are responsible for much irresponsible behaviour. On this occasion Premier Ball is the one playing fast and loose with the truth.

The Contract 

The contract is specific and does not leave much room for interpretation; a view confirmed by the two senior lawyers who offered their consultation. The terms and conditions as to when severance is available is covered under Article 16. Retirement from Nalcor is not one of those conditions

For the purpose of brevity I have given an analysis of Article 16 following the conclusion of this piece.

The contract makes provision termination benefits to be provided for several reasons but, again, not on the basis asserted by the Premier.

So where does that leave us?

Had the Nalcor Board of Directors arbitrarily awarded the $1.39 million to him under article 16(c) which permits an award of termination benefits “at its sole discretion…”?

If that is the case, why did the Premier and Ed Martin engage in a charade over his immediate retirement?

Had the Premier engaged in a “cover-up” anticipating that Martin’s contract might not receive public scrutiny?

Ed Martin’s retirement story just seems not to work given an ordinary reading of the contract language; that is, unless there exists an Addendum or other Agreement between Nalcor and Ed Martin that Nalcor failed to disclose to David Vardy under ATIPPA.

Besides the mess at Muskrat Falls, there is also the issue of Ed Martin’s performance overseeing NL Hydro. Ed Martin left Nalcor under a very large cloud.

The $1.39 million severance is not the only award over which we must be concerned.

A BIG BONUS, DOUBLED!

In addition to the severance pay of $1.39 million (2 times salary, bonus, and vehicle allowance) Martin also received bonus of $156,000 shortly before he quit ($103,641 for 2015 plus “$52,636, which is the 2016 prorated amount” for 2016) according to Nalcor. 

The reader will note, again, the Muskrat Falls project is seriously over budget and so far behind schedule that Ed Martin was unwilling to reveal a new one. The project cost overruns threaten the province’s finances.

In addition, the Liberty Group, an independent consultancy, reported to the PUB that NL Hydro was poorly managed and based upon its damning 88 page Report denied NL Hydro many of the capital costs it had claimed. It blamed management for the #DarkNL winter blackouts and for delaying essential maintenance.

Bonuses are typically awarded in line with performance. There is no tie, in the contract, to such remuneration or to any specific set of Key Performance Indicators (KPI) which are quantifiable measures for determining performance.  There is only reference to "an annual bonus of up to thirty percent (30%) of the current salary as determined by the Board through an incentive plan” (article 6, page 5).

Even if the standards of the bonus award were wobbly, as seems to be the case, how could Martin be considered to have achieved “performance” on any reasonable level?

In addition, Martin was given bonus “pro rata” 2016 only four months into the year, when bonuses are commonly assessed at the end of the annual period; the year in full rear view. In this case, the Board of Directors awarded Martin the bonus before he had actually quit. That is peculiar to say the least.

The May 19 Edition of the Telegram  reported the Premier making this comment “there was a legal opinion that if Nalcor didn’t pay bonuses, they could be in breach of contract”.

That is nonsense. The Premier should be required to produce the legal opinion (and get rid of the lawyer who provided it), unless, of course, we have not been told the whole story.

Bonuses are inherently discretionary. They are commonly assessed by the Board based upon pre-set criteria, and in accordance with job performance. If bonuses are a legal obligation, as one of the lawyers advised, they are not discretionary. They are salary. On this basis, too, Mr. Martin can claim no such entitlement.

Evidence that the Premier cannot be trusted on this issue simply mounts. What a state of affairs for a new Liberal Government only six months into its term of Office!

Conclusion

The conversation around Ed Martin’s departure is not one of award for a job well-done or of concern he has been fairly treated.

On the contrary, this is one of those GOOD RIDDANCE events in which the public is aghast that Martin is permitted not just a huge gift of public money, he is allowed to walk away with his dignity.

This is no longer Ed Martin’s battle. He is gone and, yes, good riddance.

But the Premier is the culprit in this narrative. He has either received terrible legal advice OR he has not told the truth. It looks like it is both.

In short, there is no contractual basis for either the severance or bonus awards to the former Nalcor CEO.  We need to know why a total of $1.39 million severance plus $156,000 bonus was awarded to this man.

The Premier stated that the new Liberal Government would “open the books on Nalcor”. He has done nothing of the kind. Indeed, his foot dragging on virtually any follow-through compels us to ask: was this severance affair just another deception?  

On this matter of openness and honesty, the Premier needs to give the public a new resolve.

He should begin by coming clean on any deal with Ed Martin because the content of Martin’s employment contract, obtained by David Vardy, just doesn’t cut it.

The Premier must also produce the full agreement, now. 

*******************************************************************************************************
UNCLE GNARLEY BLOG ANALYSIS OF ED MARTIN’S EMPLOYMENT CONTRACT WITH NALCOR REGARDING THE ISSUE OF SEVERANCE

Article 16 provides that the employment of the Executive (Ed Martin) may be terminated:

(a)        upon death in which case various benefits are accessible;
(b)        for just cause, upon written notice by Nalcor, in which case Martin is entitled                           to receive the SERP (Special Executive Retirement Pension) benefits payable in                   accordance with paragraph 14(b); and
(c)        at the sole discretion of Nalcor including the absence from duties for medical 
            reasons for more than six months, Ed Martin is entitled to: 

(i)         Salary and benefits for the equivalent period of two (2) years in lieu of notice plus                 the equivalent of the highest annual bonus he had received in each prior year of the             two year pay period;
(ii)        Any other benefits to which he was entitled had he continued working;
(iii)       SERP benefits;
(iv)       Outplacement services up to $25,000

Let’s stop there for a moment for review:

1.         We know Ed Martin did not die, he having represented himself at a press conference             announcing his retirement.

2.         If Ed Martin was dismissed for “just cause” he would not have been entitled to                       receive any benefits other than SERP (Special Executive Retirement Pension        
            benefits pursuant to Article 16(b).

3.         The Premier and Ed Martin made it clear the resignation was for personal reasons.

4.         Therefore, he was not terminated at the discretion of the Nalcor Board of Directors.

So, the question is: under which condition of the employment contract did he received $1.39 million termination benefits plus a bonus?

There is one other possibility under the contract.

Under clause 16(d) Ed Martin had the legal right to terminate the contract if a particular set of circumstances occurred. Those include:

(i)         A material reduction in the mandate of Nalcor;
(ii)        A material erosion or reduction in the role and responsibilities of his position as  
            outlined in the contract;
(iii)       A transfer or sale of Nalcor, or a merger with, or an acquisition by, a private 
            company;
(iv)       After a leave of absence of six (6) months due to medical leave during which Martin 
            qualified for Long Term Disability, and there is no imminent return to work;

Had either of those conditions existed, at Ed Martin’s “sole discretion” the clause states he “…may give notice of termination amounting to not less than thirty (30) days….” in which case he would become entitled to the termination benefits already described above, under clause 16 (c).
  
Again a brief review is necessary.

Ed Martin, we are told gave the Board no notice of termination of his contract under this section 16 (c).  In fact, you are reminded Premier Ball said his retirement “was first discussed at a meeting between the two on Sunday, and later confirmed on Tuesday evening". That was April 19th. His decision to step down was announced the following day, Wednesday April 20th. So, implicitly, no thirty day notice was given anyone.

Besides:
 
-           No material reduction in the mandate of Nalcor was ever announced by the Ball                     Government.
-           No erosion in Ed Martin’s responsibilities as CEO occurred. The Government did                   not cancel the Muskrat Falls project; nor did it close down any major or minor roles               the previous Government had mandated Nalcor to perform;
-           There was no sale, acquisition or merger;
-           Ed Martin did not take a leave of absence, not even for a day let alone six months.


Even if Ed Martin had invoked clause 16 (e) wherein he had the right to cancel the contract or retire “at/or a upon six (6) months written notice after age 60” he would only have been entitled to benefits, like extended health coverage, drugs, life insurance and to SERP. Under this section, he would still not have been entitled to termination benefits or a bonus. 

37 comments:

  1. There is no small irony in fact ed martin negotiated a better contract for himself than the poor agreememt with emera. Good work des and dave

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    1. Excellent analysis Des. When a Premier is dumb enough to mislead the public for what appears to be no rational reason, he should not just resign for the 'misleading' offense, he should resign just for being this dumb.

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    2. Was not Cathy Bennett sitting on the Board when this contract was crafted??

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  2. So, if there was no notice (30 days) given by Mr. Martin does this mean he was in fact in breach of the contract?

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    1. Of course he isn't in breach of contract. In making the payment, Nalcor demonstrated by conduct that it had acquiesced (and ultimately agreed) to the change in the obligations set out in the contract.

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    2. It was that easy huh? :(

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  3. This government or any government is not going to change the previous government's template of enriching themselves and their appointed friends, if they do they won't be able to enrich themselves. We, the electorate, have to demand that this "corrupt" system be changed for the betterment of all of us. Most of our revenue from our natural resources and remitted tax dollars are siphoned off for the pockets of the politicians and their appointed friends. Politicians and their friends should no be siphoning off monies that are seriously needed to run our below adequate institutions and the infrastructure that is badly needed in our province. We need to have our voices heard in unison to stop the one per centers from controlling our natural resources and drawing up contracts on what they think they are worth for their services! Where is the Auditor General, does he not have auditing control over what is going? If he doesn't somebody needs to be appointed immediately to stop the bleeding of ou government's revenue into the bank accounts of those who hold the reigns of power and their business friends?

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    1. You of course correct, how do the people take back the power?

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    2. Let us try and find out how to take back the power! ATTENTION: Is there anyone out there in the Electorate or in the Political Science Department of MUN, who can advise us on how to take back power from the ruling government, who really shouldn't be ruling at all, since they went back on all their promises they made to get elected and shafted us with an onerous burden of added taxes and an exorbitant levy.

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    3. And , to think that This Dishonest Bunch have the damn nerve to hit the poorest of us with taxes and increases to line the pockets of the heartless , crooked , 1% .
      It's time this system of government gets revolutionized. ...and i'm not implying violence.
      We have had so much resources in our great province yet we are in such a mess!! What are our politicians doing for us??
      They 've been selling us out for years but damn well looking after themselves all the way. I am so sick of this.
      We are still at the mercy of the merchants!!

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  4. It appears that Uncle Gnarley has far superior investigative skills than any of the three rags we in this province call professional news organizations. Makes a fellow wonder, with the billions & billions spent at Nalcor, how many hands have been greased & pockets filled by the overlords.

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    1. No doubt, Mr. Wangersky has some backtracking to do. It seems he jumped the gun in his May 7th column. One really does expect better from the 4th estate. I'll be looking for the 'mea culpa' this week.

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  5. It is time for Nalcor to be 51% publically owned through an IPO. Proceeds could go to help pay off their own debt.

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    1. Who in their right mind would buy shares in nalcor?

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    2. Everybody. It's a public utility which would have guaranteed regulated profit. Look at any public utility in the country (or the western world) that is a public entity. The only way you can lose is by being a rate payer without being a shareholder.

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    3. Only part of Nalcor is a public utility. The rest is a bloated hydra. Time to start chopping heads.

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    4. Someone doesn't know the first thing about investing... if you think all regulated utilities are great investments I've got a bridge to sell you. Look at Enron for an example of a utility gone mad. Nalcor isn't that bad, but perhaps only because we tax payers foot the bill.

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  6. How does this Definition from Wikipedia not apply?

    Kleptocracy, alternatively cleptocracy or kleptarchy, (from Greek: κλέπτης - kleptēs, "thief"[1] and κράτος - kratos, "power, rule",[2] hence "rule by thieves") is a term applied to a government seen as having a particularly severe and systemic problem with officials or a ruling class (collectively, kleptocrats) taking advantage of corruption to extend their personal wealth and political power. Typically this system involves the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service.

    John D Pippy

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    1. To be a kleptocrat one actually has to have some smarts. Clearly, our Premier cannot be such a person.

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  7. The payment of the severance, from a legal standpoint, nullifies the language of the contract. By paying it out, the government has, in essence, agreed to different terms than those over signature on the contract. The horses are out of the barn. Too late to close the gate now.

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  8. Why didn't this make the cbc or ntv news ?????

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    1. None of these Media Networks want to discuss this! They are Big Businesses, as well, they have control over the knowledge that they want to disperse to the populace regarding the lucrative economic template that is in place that not only enhances the economics of the politicians, but also the politicians' business acquaintances.
      As long as the Media is profiting their lips are sealed. For the Media to discuss this in the manner it should be discussed, the secret of what the politicians are and have been doing in confiscating the people's natural resources and awarding them to whoever is up to putting the most money in their pockets and then siphoning off the tax revenue through different means, would mean the people are in the know and politicians' jig would be up with regards to becoming the multi-millionaires so many of these KNAVES have been accustomed in becoming over the past 30 years. The Corruption we, the electorate, have been subjected to over the past 30 plus years has to STOP and, we, the electorate, have to make sure it does end.
      Sent from my iPad

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    2. Hi, Agnesnonymous!

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  9. When the government leaders are acting as the overseers for its electorate's business and any money derived from the sale of their natural resources and remitted taxes, which should be held securely in a safe Bank Account of the Government audited by government appointed accountants and auditors, then how can an already negotiated contract be altered for the desire of one of its appointees? If contracts can be changed so easily, every Accountant and Auditor connected to our government should get involved and get this frightening scenario amended right away. Is it any wonder our province has been stagnant with regard to equality with the rest of the country for 68 years despite our province's great natural resource base and its excellent strategic geographic location in Canada?

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    1. Hi again, Agnesnonymous!

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  10. Des,
    I offer my condolences on the death of your brother.

    Tom Careen
    Placentia, NL

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    1. Thanks Tom. I appreciate that very much.

      DES

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  11. Don't expect Ball to stand up & explain this travesty. He doesn't have the intellect to explain how to tie his shoes. Never a more incoherent and weak Premier have I witnessed. I expect he is squirreled away with his communication "experts" frantically rehearsing some glib non-answer. It is blatantly obvious that he lied about the whole affair, which is unforgivable. His credibility is in tatters which renders him ineffective. If he had any honor he would resign, for the good of the people.

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  12. Can this story get any more ridiculous? The CBC (very late to the story, Uncle Gnarley) has just announced that after Ed Martin resigned, the Board of Nalcor fired him and therefore, Nalcor had to pay him severance. If there is any logic to support this, please inform us. As dumb as Ed Martin was as CEO of Nalcor, by all accounts he appears to be the smartest person in the room. And Premier Ball continues to demonstrate to the people of NL that surely isn't the smart one.is there anyone with a brain in the NL Govt or Nalcor?

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    1. This severance money has to be reclaimed by our government, since obviously there was no legal reasoning or basis for it to have been paid.

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    2. I wish there was a like button :)

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  13. Anonymous who commented on 25 May 2016 01:01, You are correct? I will add the 1 percenters (politicians and business elite) who now have control over the reigns of Government and Crown Corporations have the nerve to hit the poorest of us, they are not only displaying kleptomaniac behaviour they are displaying psychopathic behaviour, as well when they have no concern for the under privilege amongst us, those of us who make less than $40,000 per year per family. The problematic type of governance, that I am speaking about, when it occurs in countries like Russia has been labelled as being Kleptrocracy. It was only this past week I heard the National News referring to Russia as being ruled by a Kleptomaniac group. I, personally, see resemblance of Kleptomaniac Rule right here in our own province. I am forever asking the question of why Newfoundland and Labrador's natural resources all ended up in other places of Canada growing economies and population bases when we needed to grow our own economics and population base. The shipping out of our natural and human resources started the minute we became a Province of Canada. How would you categorize that type of governance? Obviously there was pressure on our politicians from the CENTRE to send our natural resources westward and they knew our human resource would have to follow to find jobs. Somehow our politicians foolishly were coerced into fulfilling that desire by the centre of Canada to enable them to grow industries and population bases so that Canada could compete In 1949 with the new upcoming World economies, of which 21 Great economies were built in our sphere of the World and Canada became the G7. Whether our politicians were bribed or not with brown paper bags filled with filthy lucre is up to others to identify? But I do know from the information that has been leaked in recent years through access to information, some of the leaders of our governments and Crown Corporations are becoming excessively rich in our province.

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    1. Hi, Agnesnonymous!

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  14. Government is organized crime in it's glory. When such under-handedness is brought to light of those in public trust positions, criminal action should indeed be sought after. Whether it's a golden handshake or the awarding of lucrative contracts for personal gain, when it becomes at the electorates expense, it's stealing. When officials and appointees are linked to rogue behaviour, they are in essence, ROGUES. And NL is full of them. As more comes out on MF mismanagement, I'm sure the ROGUE-LIST will contain quite a few prominent names.

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    1. ROUGES, indeed! Over the past 68 years of governance since Newfoundland and Labrador became a province of Canada, politicians and their business friends have reduced a place with a more than a well endowed natural resource base and a superb strategic location and put it in the direct path of economic bankruptcy. We cannot let our disgust subside now, we need to keep this force going and stop these Kleptomaniacs in their tracks. The pilfering of the taxpayers' remitted tax monies and their natural resources has to stop. Our civil revolution, through dialogue, must not be stifled, it must go on until there is NOT one ROGUE left in our province who is pilfering the NL Treasury of its revenue! Would the CBC, NTV, The Telegram, VOCM or any other Medium do a poll on what Newfoundlanders and Labradorians should do to STOP the bleeding by ROUGES.

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  15. My condolences for your loss Des.
    I have read your last post by Brendan twice, and then went back to 2012 to see the original, and noticed only 3 comments, and I seem to see my comment as the first one, agreeing as to why the demand for power would not materialize. Didn`t realize he was your brother, but obvious he understood the economics flaws of this project, and the unethical behaviour of those responsible.
    Listened to Patty Daley this morning, who twice cited Vardy`s and your work on Ed Martins contract exposure. Patty is finally speaking about Nalcors blunders.... too bad he gave them a pass for so long. Good to see you and Dave Vardy keep up the tremendous effort on this scandal.
    Winston Adams, Logy Bay

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