Execs at failing firm Atcon spent big on luxuries while seeking public funding: report
New Brunswick's auditor general says up to $70 million was loaned to failing construction and manufacturing company Atcon while its executives bought vacation properties and leased a corporate jet
FREDERICTON—Taxpayers were left on the hook for close to $70 million while top executives of the failing Atcon group of companies were spending money on luxury items including vacation property in Aruba, New Brunswick’s auditor general says.
“A company that is in such severe financial crisis, coming to the province looking for funding, you just wouldn’t expect to see such extravagance,” Kim MacPherson said Tuesday.
She says a $50-million loan given to Atcon in 2010 by the former Liberal government of Shawn Graham was never going to be enough to save the Miramichi-based construction and manufacturing company from eventual failure.
MacPherson released her second report into the failure Tuesday, with an attempt to answer where the money went.
She said that while most of the nearly $70 million the province had given the company starting in 1993 went to business-related activities, more than $700,000 of personal expenses went through company accounts.
MacPherson said those purchases included a vacation property in Aruba, jewelry, luxury car leases, RRSP contributions and personal income tax payments.
She said the company was also leasing a corporate jet with operational costs of $8.2 million from 2008 to 2010.
“Overall, our analysis showed the company had a growing amount of debt, insufficient working capital, and a severe cash shortage,” she said.
Atcon declared bankruptcy in 2010, just nine months after receiving $50 million in new loans.
In a report released in 2015, MacPherson said the government provided the loans to Atcon despite advice to the contrary from senior government staff.
She said the government also gave up its security on the loan.
“We consider cabinet’s decision to release the province’s security as the critical failure in the Atcon file. Cabinet ministers interviewed, in our view, offered no clear explanation for their decision,” MacPherson said.
She said the province was only able to recover $2.8 million of $63.4 million it was owed by Atcon, but would have gotten up to $19 million more if it had not given up its security.
In comparison, the Bank of Nova Scotia recovered $77.2 million of the $99.2 million it was owned by Atcon.
MacPherson said she interviewed six members of the current Liberal government who were cabinet ministers in 2010 and none had an adequate explanation for giving up the security.
MacPherson is critical of Opportunities New Brunswick _ a provincial Crown corporation intended to attract companies to the province and help existing ones grow.
She said ONB said it had implemented most of the 19 recommendations from her first report on Atcon, but in reality has only implemented four.
Progressive Conservative Leader Blaine Higgs said Tuesday that ONB’s CEO, Stephen Lund, should be fired as a result.
“The premier should take accountability for this and Stephen Lund should lose his job over this. He should be fired,” Higgs said.
Lund side-stepped the firing suggestion at a news conference Tuesday afternoon.
“Two and a half years in we’ve got a great track record. We’ve done great things. We’ve attracted companies and have worked with hundreds of companies across the province. We’ve done a lot of work internally. We have the best team I believe in the country today. We have strong policies and procedures in place and we will continue to be better at what we do,” he said.
Roger Melanson, president of the Treasury Board, said Tuesday the government has full confidence in Opportunities New Brunswick.
Melanson said with all the knowledge the government has now, and two volumes from the auditor general, the previous government’s decision to give money to Atcon was a mistake.
“We’ve learned from this. We’ve absolutely learned from this,” Melanson said.
Higgs said he thinks the government was just trying to delay the collapse of Atcon so that it didn’t become an election issue in the fall of 2010. The Liberals still lost that vote.
In February 2013, the conflict of interest commissioner concluded that Graham was in a conflict at the time the loan guarantees were provided because his father was a director of Vanerply, a Swedish subsidiary of Atcon.
Graham was fined $3,500.
He later resigned his seat in the legislature.