Niagara Region’s Audit Committee lambastes Mayor Augustyn about reportedly undisclosed audit that revealed $17 million in missing debt
At an emergency meeting on Tuesday morning, the Niagara Region Audit Committee called on the Town of Pelham to release the audit reportedly conducted by KPMG this summer into Town finances. The audit, which is said to have shown an additional $17 million in hidden debt, was first disclosed by former Councillor Marvin Junkin, who resigned in protest from Pelham Town Council last week.
Committee Chair Tony Quirk began by explaining his rationale for calling the meeting.
“Allegations were made in the local paper,” said Quirk, “and at that time I reached out to the [Region’s] CAO and asked a series of questions covering the impact of the allegations on the Region.”
CAO Carmen D’Angelo’s responses concerned Quirk enough that he called the meeting to consider these impacts.
Members of the Committee began by questioning Regional staff about the implications of the allegations made by Junkin.
“My name is on that document,” said Regional Chair Alan Caslin, referring to a financing agreement between the Region, Pelham, and Infrastructure Ontario.
“I want to know what I signed for. Does staff require any further information?”
The Region’s Acting Commissioner, Jason Burgess, responded. “We rely on the certificate from a Town’s Treasurer. If there is an audit—if more information is coming—we would review that.” Caslin asked whether he could withdraw his support for the debt authorization. Burgess replied that the document had already been committed to.
“Given the information before us today,” said Caslin, “I’m feeling deceived. I’m sorry for authorizing [the agreement] on behalf of Council. I wish I hadn’t.”
Niagara Falls Regional Councillor Bob Gale asked Regional staff similar questions, before indirectly asking a question of Mayor Augustyn, who is also a member of the Audit Committee and was present.
“Has the Mayor or Town misrepresented—deliberately or by accident—the thirty-six million dollar debenture?” he asked.
“I think that there’s a lot of people who are responding to the newspaper article,” answered Augustyn, “where there is not enough information. The former councillor has made allegations based on his understanding of an in camera meeting, dealing with a personnel issue, or solicitor-client privilege,” Augustyn said. “The [financial] statements from 2016 have not been misrepresented, and the documents from the Town are correct.”
Augustyn added that “other items that the community wanted to hear” are coming on November 29, when a special meeting of Town Council has been scheduled receive the results of a different audit, this one into a 3.3 acre real estate transaction in East Fonthill.
Gale asked Augustyn whether the Town’s scheduled special meetings were all a result of the allegations made by Junkin. Augustyn explained that the November 29 meeting had already been planned, but that the meeting scheduled for Wednesday evening, November 15, was prompted by Junkin’s revelations. “The meeting tomorrow night will cover the alleged breach of confidentiality,” said Augustyn. “We will hear from Town lawyers, who will lay out a way forward.”
Gale was displeased with the response.
“I would love to start a fund to support Councillor Junkin,” said Gale. “I hate the intimidation.”
The crowd of about 40, which was made up almost entirely of Pelham residents, applauded Gale’s offer, before Quirk reminded them that such displays were not permitted.
“There’s just one question that’s been in my mind in going through all of this,” said Councillor Selina Volpatti. “Since when is the financial position of a municipality a confidential matter? When did that happen? How does that work?”
“The financial statements of a municipality are not confidential information,” said Burgess.
“Exactly,” said Volpatti. “So how can [Junkin], whom I certainly credit with courage in doing this, be blamed for revealing information that should be public anyway? It just doesn’t make sense to me now, and it never will…. Surely seventeen million dollars in debt cannot be confidential. I really look forward to this being tested in court, because if that’s the law now, then maybe it should be changed.”
Councillor Bart Maves said that he wanted to address the matter in several ways. Maves first recalled the initial discussion about Pelham’s finances that occurred in 2016. Maves outlined the concerns that he and other councillors had then, objections that were apparently overruled by Regional staff, who, according to Maves, said that the Region wasn’t in a position to reject Pelham’s requested debenture.
“I just want to remind everyone that concerns were expressed, and attempts were made,” said Maves.
“The second thing I want to say is that I’m really tired of dealing with the Town of ‘Penn and Teller’—instead of the Town of Pelham,” referring to the famous pair of Las Vegas magicians.
“Because there’s so much misdirection that’s gone on around this.”
Augustyn raised his hand on a point of order and asked that Maves apologize.
“No, I won’t apologize for that,” said Maves. “I don’t find that out of order, and I’m sure you’ll file a compla…” he trailed off.
Quirk broke in.
“Councillor Augustyn, we’re all prone to hyperbole during political discussions, and I don’t find that a disparaging remark.”
“I’ll explain that statement,” said Maves. “The secret of a magician is to misdirect you. They’ll do a trick over here,” he said, gesturing with his hands on one side, “And then make you look over here,” he continued, moving his arms to the other side of his body.
“Great magicians are great at this. The first piece of misdirection was that it was all about the NPCA. I didn’t know that Mayor Augustyn had a part of Ed Smith’s attacks on the NPCA. But I got accused of it. Mr. Hummel got accused of it, other councillors got accused of it. I’m pretty sure that Marvin Junkin doesn’t care about the NPCA. I’m pretty that the people in the audience don’t care about the NPCA. I’m pretty sure the people that showed up at a meeting a month ago and offered to pay for the audit so that it would be truly independent and exhaustive don’t care about the NPCA. Hopefully now that misdirection is done with.”
“Now, apparently, there’s been an in camera meeting—don’t know why it was in camera—where it was learned that the new Treasurer was concerned after just a few weeks.”
Maves lamented the fact that, apparently, the Town had decided not to advise the Region and the public of a material change in the Town’s finances and instead decided to make efforts to cover up the situation.
“Instead of just dealing with the situation, they start to talk about a breach of confidentiality. It’s again this, ‘Look over here. Look over here.’ No. [Pelham residents] don’t want to look over here. They want to know what’s going on. Someone’s just got to deal with the financial situation of the Town,” he said.
“I don’t know if it’s the Ontario government, I don’t know if it’s Infrastructure Ontario, I don’t know if a commissioner comes in. But I know from the number of emails that I’m now getting from people in Pelham—I’ve got people from Pelham quoting parts of the Municipal Act in emails to me. I’ve never had anyone from a town send me emails quoting from the Municipal Act. It tells me the depth of their concern.”
Maves ended by listing a series of questions that he said needed answering, including when Town Treasurer Teresa Quinlin contacted KPMG to commission an audit, why Town Council was not informed of this audit and who was informed of it, and when Quinlin or others learned of the audit’s results.
“Let’s just get to the bottom of it so these people” — meaning the Pelham residents in the gallery—“can sleep at night.”
Councillor David Barrick directed the committee’s attention to a clause in the Financing Agreement that would allow Infrastructure Ontario to annul the agreement with the Town should certain financial circumstances change. Barrick suggested that this could occur “if the Town has not met the requirements in place when we approved thirty-six million in debenture for the arena.”
“Community centre,” said Augustyn under his breath.
Barrick later asked Augustyn, indirectly, if the Town had borrowed from its own reserves, to which Augustyn replied that information would be released on November 29. “At least that’s what I understand,” he said.
Barrick also asked Augustyn about the proposed sale of Town-owned land in East Fonthill, asking whether a public consultation meeting is planned.
“Part of the plan for funding the community centre is to sell off part of the land purchased in 2005,” said Augustyn. “Will we hold off? I’d have to talk to Council. I don’t know why we would.”
Barrick asked about the Town’s response to Junkin’s allegations. “I see that with Councillor Junkin there have been threats of criminal or quasi-criminal action. The laws that the Mayor has referred to are both concerning fraud. Is that what he’s accusing Councillor Junkin of?”
“We’re not accusing anyone of fraud,” said Augustyn. “The sections point to breach of trust. This is why I’ve called a special meet for tomorrow evening, when legal counsel will outline this publicly to Council.”
Before ceding the floor, Barrick addressed Junkin, who was sitting in the front row of the gallery.
“I see former Councillor Junkin in the room,” said Barrick. “I applaud him. Don’t be intimidated. You have a lot of support here.” Later, Gale addressed Junkin and asked where in the crowd he was. When Junkin raised his hand, the gallery broke into applause.
“If you have the facts, I’m proud of you,” said Gale to him.
Pelham Regional Councillor Brian Baty, who is not a member of the Audit Committee, sat in on the meeting, and rose to give comment.
“I find significant irony in the fact that I was severely chastised [by Pelham Council] in July for recommending a full audit, when Council didn’t even know that an audit was already ongoing,” he said.
Baty also expressed his dismay that, according to Junkin’s account, wrongdoing was not investigated during the reported summer audit.
Barrick tabled a motion that called for the Region to inform relevant lenders of a potential material change in Pelham’s financial position, for the Town to provide the summer 2017 KPMG audit to the Region, and for the Region to defer consideration of future Pelham debt until after the summer audit and other material had been shared with the Region.
The motion also asked Pelham to hold a public meeting on any potential sale of the East Fonthill lands presently on the auction block.
Barrick’s motion received unanimous support from the rest of the committee—aside from Augustyn, who said that the Audit Committee should not be making decisions based on “hearsay and rumours” published in a newspaper.
“I think that by expressing concern and notifying lenders, the Audit Committee would not be doing this based on facts but on rumour and hearsay. This is not what people expect of an audit committee,” he said. He was alone in voting against these elements of the motion.
On the parts of the motion that called on Pelham to release the KPMG summer audit and other relevant documents, Augustyn abstained from voting, saying that he wasn’t sure where his voting upon those clauses would be legal.
Regional Council will consider the Audit Committee’s recommendations Thursday evening, during its regularly scheduled meeting.
“I want to highlight that Councillor Augustyn said this was based on hearsay,” said Barrick, “but we haven’t heard anything to the contrary from the Town. It’s not fair to say that it’s based on hearsay, considering the history, and the things included from former Councillor Junkin.”
Before the meeting adjourned, Quirk pointed similarly to the absence of a denial from the Town.
After the meeting ended, Quirk commented, “If the Town is pursuing this as a breach of confidentiality, then it’s an acknowledgement that the allegations are true. If they weren’t true, the response wouldn’t be that it was a breach of confidentiality—the response would be that they’re false.”