Marv Junkin cites “unethical and dishonest” path taken by Council in alleged cover-up of $17 million dollars in unaccounted debt; speaking hours before Junkin’s exit, Mayor Augustyn insists that Town finances are healthy
On Monday evening, Ward 1 Councillor Marvin Junkin resigned his seat on Pelham Town Council. In a move that took the rest of Council and the gallery by surprise, Junkin stood up shortly after the meeting began to deliver a short statement.
“As Council continues down a path that I feel is increasingly unethical and dishonest, I have no choice but to resign my position effective immediately,” he said, before walking over to Town Clerk Nancy Bozzato and handing her his letter of resignation. Junkin immediately left Council chambers, leaving a visibly incredulous Mayor Augustyn and five remaining councillors in silence.
Junkin’s resignation did not come as a surprise to the Voice.
Last week, the soon-to-be-former councillor spoke to the paper in a interview that covered a range of issues, most notably an in camera council meeting held on September 5, the day after Labour Day. It was this meeting—and council’s reaction to information received in it—that proved the trigger for Junkin’s departure.
Last Thursday, Junkin filed a complaint with the Office of the Ombudsman of Ontario, asserting that Pelham Council’s decision to hold its September 5 meeting in camera violated open governance laws.
Linda Williamson, Director of Communications for the Ombudsman’s office, would neither confirm nor deny that an investigation into the September 5 meeting was underway, citing Ontario privacy regulations. She said that in general a “closed meeting team” is assigned to each case, with the authority to interview those present at in camera meetings to determine their legality.
Broadly speaking, only personnel matters, real estate transactions, and litigation may be discussed behind closed doors. Junkin asserts that none of the above applied on September 5.
Instead, says Junkin, during the meeting the Town’s Treasurer, Teresa Quinlin, hired this summer following the termination of former Treasurer Cari Pupo, informed council that the Town was approximately $17 million dollars deeper in debt than was previously disclosed, and that this amount did not appear in Town financial statements.
Present in the room, says Junkin, were all six councillors, Mayor Augustyn, CAO Darren Ottaway, Town Clerk Nancy Bozzato, Town legal representatives, and a forensic auditor from the accounting firm KPMG.
(The Voice reached out to Quinlin repeatedly last week for comment, to be told that she was out of the office until November 10. After initially offering to reach Quinlin at home, the Town’s Public Relations and Marketing Specialist, Marc MacDonald, responded on Friday that he was unable to do so after receiving the Voice’s specific questions.)
Quinlin was the first to speak, says Junkin.
“She said the good news is that we can finish the Community Centre, but after that, ‘the news you’re going to hear next is not very good.’”
Quinlin gave way to the KPMG auditor, recalls Junkin, who proceeded methodically to outline a forensic audit that the firm had conducted over the summer. The auditors examined financial documents dating back nearly a decade, to 2008. Council was not made aware that this audit was underway, says Junkin.
The conclusion: since 2008, a cumulative $17 million in debt has gone missing from the Town’s publicly disclosed financial statements.
“[The Treasurer] said that if Infrastructure Ontario had known about this debt, we would never have gotten the money for the Community Centre,” says Junkin.
In 2016, the Town sought and received a debenture—a loan from the province, administered through Niagara Region—for over half of the new Community Centre’s $36 million dollar construction cost. Released in installments called tranches, the Town has already received two of the three debenture tranches from Niagara Region.
Reaction in the room varied, says Junkin. “All of the councillors seemed surprised, shocked, yeah.”
However, neither the Mayor, nor CAO Darren Ottaway, seemed taken aback.
“I mean, everybody else at the end of her presentation was, ‘Wow, what the hell is all this about?’ But [the Mayor] seemed very in control of himself, and so was Darren.”
Junkin raised his hands, palms forward.
“I remember him doing that, Ottaway, putting up his hands and saying, ‘I didn’t know any of this.’”
Another individual present in the room, whom the Voice has chosen not to identify, corroborates Junkin’s recollection of council’s reaction.
Junkin says that he started to jot on a handout that the KPMG auditor had distributed to the councillors before she began speaking.
“They saw me taking notes,” he says, “and they stopped the presentation. The Mayor said, ‘The clerk has advised me that anyone—because of the sensitivity of this meeting—any notes taken here have to be handed in at the end of the meeting.’”
Asked if councillors were permitted to leave with the KPMG handout, Junkin shook his head.
“No, no. Not at all. You went in with nothing, you came out with nothing.”
KPMG has not responded to multiple requests for comment.
After the auditor’s presentation, councillors began asking questions, chief among them how such a situation could have arisen, and whether any criminality was potentially involved.
Junkin says that another councillor asked the auditor whether she had noted any fraud.
“And she answered quite deliberately that she was not told to look for fraud, that was not in her terms of reference. A cynic might think, son of a bitch, if we’re going to all the trouble of doing a forensic, maybe we better include whether fraud was committed. But no, she made it quite clear that these weren’t her terms of reference.”
Junkin says that Treasurer Teresa Quinlin told the group that she become concerned about the Town’s financial state after being on the job for just two or three weeks.
“She realized that what the Town should have had in reserves and what they really had in reserves were two different figures. And that’s what prompted—she wanted to see just how much money we did have. There were some accounts that should have had hundreds of thousands of dollars in them that had virtually zero.”
Notes to the Town’s consolidated financial statements posted on the Town’s website, dated December 31, 2016, show some $5,800,000 in claimed reserves. The financials also state a total net debt at the end of 2016 of just under $14 million dollars.
Asked whether Council should have detected a problem, given that it receives quarterly financial statements from the Treasurer, Junkin says that the reserve figures routinely presented over the years were not out of the ordinary.
For much of the past two months, Junkin says he has wrestled with his conscience.
On September 9, the Saturday following the in camera meeting, he says he sent to Council and the Mayor an email requesting a Council-only meeting to discuss the situation, specifically whether Council continued to have faith in senior staff, and solicited their comments.
“Not a single councillor replied, but about four minutes later the Mayor replies, and says, basically, ‘Marv, I’m disappointed that you would put such a sensitive discussion into email, rather than calling me directly.’”
Junkin says he brought up the issue repeatedly in subsequent encounters with councillors, including at informal gatherings at a Fonthill restaurant and bar, The Mouse Trap—known informally as “The Trap”—held after almost every Council meeting. (The Voice is investigating whether these discussions, at which a quorum of Council is often said to be present, violate provincial acts pertaining to open meetings.)
At their October 2 regular meeting, Junkin also tabled an amendment to Council’s proposal to engage KPMG in yet another audit, this one pertaining to Town real estate transactions in East Fonthill. Junkin called for a “full review of the so-called questionable land deal, including full and complete access to the Town’s financial records of the past three years.”
His amendment directed auditors to evaluate the total debt of the Town, and full disclosure of all development charges and how they were used. As Junkin proposed the amendment, Mayor Augustyn stared at him and shook his head slowly.
However, no councillor seconded the motion, meaning it was not even brought up for debate. Later, Augustyn asserted that the audit as proposed would cover all of the things that Junkin had suggested in his amendment. Junkin was a lone dissenting vote in Council’s decision to engage KPMG under the restrictive terms of reference.
From the first, Junkin says, staff and Council decided not to inform the public of the auditor’s findings. Instead, it was decided that the Town would seek an immediate $8 million dollar bank loan to cover urgent budget shortfalls. Junkin asserts that the Treasurer also recommended delaying the release of the Town’s 2017 financial statements.
“She suggested that the Town doesn’t hand out the statements in February, like we usually do, but put it off till June, to get the books looking as good as possible.”
Junkin says he queried Quinlin on what the Town’s new, revised debt total actually amounted to. He says the answer was $59 million dollars.
“The Region was all upset because our per-household debt was at $2000,” he says. “But this. Divide $59 million by 6500 taxpayers, and we’re at $9100 per household.”
Junkin says that his efforts to convene a special meeting to discuss the issue from a personnel standpoint failed to attract support among other councillors, who, as the weeks passed, seemed to acquiesce to staying silent.
At a sit-down meeting with two Voice writers on Monday afternoon, Mayor Augustyn repeatedly stated that he had received no information in recent weeks that would cast any doubt on the accuracy of the Town’s 2016 financial statements, on the accuracy of the total stated reserve amount of $5.8 million dollars, or on the 2016 total debt figure of some $14 million dollars.
The Mayor also said that he was not aware of any ad hoc bank loan recently sought by the Town, nor was he aware of any significant change in the Town’s financial situation in recent months.
Junkin’s choice to resign was not one he took lightly. This was the 63-year-old retired dairy farmer’s first term on Council.
After speaking to family, close advisors, and legal counsel, he decided that resignation was his best option. His eyes reddened as he recalled the moment in late October when he made up his mind.
“Oh, it’s just a heavy decision to make, a heavy decision. I just don’t think the people of Ward One voted for me to lie to them, to keep things, especially Town finances, hidden from them like this. So, yeah. It just goes against everything I know. When you have to shave in the dark—when you can’t look at yourself in the mirror—you know you’re going down the wrong road.”
On Sunday evening, Junkin emailed the Voice an additional short statement. It concluded: “I would like to say that though I’m disappointed my term ended like this, it was an honour to serve the residents of Pelham. I hope that in the future, Pelham Council will do the right thing and be open and transparent with the people who live here.”