Federal Finance Minister Bill Morneau (left) and Minister of Innovation, Science and Industry Navdeep Bains arrive for a news conference in Toronto on April 1, 2020.Frank Gunn/The Canadian Press
The federal government has spent nearly $5-million on outside consultants to set up a COVID-19 emergency support program for large companies that has delivered just two loans since launching six months ago.
The leading recipient of federal consulting work related to the Large Employer Emergency Financing Facility program, or LEEFF, is Lazard Frères & Co. LLC, an international financial advisory and asset management firm. Lazard has received two contracts worth a combined $3.6-million. The government also arranged for four financial experts – including a sitting senator – to advise the government via pro bono contracts on LEEFF and other support programs related to the pandemic.
The mix of paid and unpaid advisers includes several connections to Tim Duncanson, a senior Finance Department official with private-sector experience. Mr. Duncanson, who reports directly to deputy minister Paul Rochon, is known as the Finance Department’s in-house authority on private-sector transactions. Mr. Duncanson worked in New York for Lazard in the 1990s before working as an Onex Corp. managing director and then joining the public service in 2015.
The Finance Department said the four volunteer advisory contracts were to provide advice on Canada’s COVID-19 economic response plan, but declined to provide further details. Department spokesperson Marie-France Faucher said in an e-mail that Lazard was selected after a competitive process that involved multiple candidates.
Former finance minister Bill Morneau and Innovation Minister Navdeep Bains announced LEEFF more than six months ago, promising it would protect jobs and the economy by acting as a lender of last resort.
Since then, just two companies – a casino operator and a B.C. coal company – have received loans under the program and 17 have applied.
The LEEFF program is aimed at companies with $300-million or more in annual revenue that are seeking financing of at least $60-million. When it was announced, Mr. Morneau said the program “will be very important” for companies in the energy sector and for airlines such as Air Canada and WestJet.
The federal government continues to negotiate with airlines in relation to a potential support package.
The first LEEFF loan was awarded in September, when Gateway Casinos & Entertainment Ltd. received funding worth up to $200-million. A second loan was approved in October for Conuma Resources Ltd., a B.C.-based coal company, worth up to $120-million.
The program is managed by a newly created subsidiary of Canada Development Investment Corp., or CDEV. The new subsidiary is called Canada Enterprise Emergency Funding Corp., or CEEFC.
CDEV is a Crown corporation that is responsible for managing and selling government-owned commercial assets.
The relatively small federal entity also relied heavily on external consultants in 2018, when it was involved in the purchase of the Trans Mountain Pipeline, which it now manages.
Contract spending records recently released by CDEV show it has spent more than $6-million on management consultants since March 1, of which at least $4.6-million is directly related to the LEEFF program.
The contracts include $3,445,000 to Lazard for strategic advisory services, as well as another contract worth $150,000 for advisory services. Two other advisory contracts included $472,500 to Tudor, Pickering, Holt & Co. and $380,950 to Canaccord Genuity Corp.
For accounting services, KPMG LLP received $90,000, and $85,000 went to Ernst & Young.
The agency also disclosed that it paid $22,500 to Feschuk.Reid for “communications management.” The firm is run by Scott Feschuk and Scott Reid, two former Liberal aides to prime minister Paul Martin.
A CEEFC spokesperson said the consulting firms help administer the program and that each application requires extensive analysis.
Conservative MP Michael Cooper, who obtained the documents via a written House of Commons request, said it’s concerning the program has led to more consulting contracts than business loans.
“This is just another example of taxpayer dollars going to well-connected insiders during this pandemic,” he said. “The LEEFF is a failed program with only two approved loans, yet five firms received $4.6-million taxpayer dollars in consulting fees. It’s concerning that this large a sum of money has gone to consulting fees for a program that has helped so few Canadian companies and their workers.”
The four financial experts who provided free advice to the government are Alan Hibben, a former Royal Bank of Canada executive who sits on various corporate boards; James O’Sullivan, a former Bank of Nova Scotia executive who became chief executive officer of IGM Financial in September; independent Senator Sarabjit Marwah, who is also a former Scotiabank executive; and David Mansell, a private-equity investor who was managing director at Onex from 2002 until 2019 and who then became the CEO of the new subsidiary responsible for managing the LEEFF program in May.
In an interview, Mr. Hibben said he worked with CDEV and the consulting firms on the LEEFF program. He said reviewing LEEFF applications requires specific expertise on the sectors involved, which is what the outside consultants provided.
“I find them very helpful,” he said.
Mr. Hibben said he agreed to volunteer his services at the request of Mr. Duncanson, a senior adviser in the Finance Department.
Mr. Duncanson’s background includes connections with several of the consultants involved. His time at Onex overlaps with the period when Mr. Mansell was also an Onex managing director.
Mr. Marwah, who was appointed as an independent senator in 2016 by Prime Minister Justin Trudeau, said in an interview that he provided advice to Mr. Duncanson, Mr. Morneau and others at the Finance Department in April about how the banking sector and financial markets might react to the pandemic and various potential government programs. At that time, he said the LEEFF did not have a name.
Mr. Marwah continues to serve on corporate boards, including Cineplex Inc. and George Weston Ltd., which owns the Loblaws grocery store chain and real estate assets. He said he cleared his government advisory role with the Senate Ethics Officer and the Senate law clerk. He also said he would recuse himself on votes that relate to programs that he discussed with the government. He also said his work did not conflict with his director positions because it was not focused on any specific companies.
“I was asked to advise [the government]. They figured I had some expertise. And, to me, if I’m asked by any government to really advise them, I would … as long as I got the necessary permissions,” he said. “If the [Senate Ethics Officer] had said this is not a good idea, I would have said fine.”
Records show that since March, CDEV awarded two contracts to executive search firms. Boyden received $45,000 for a “CEO search” and Ross Executive Search received $44,600 for recruitment services.
Former Parliamentary budget officer Kevin Page, who now leads the University of Ottawa’s Institute for Fiscal Studies and Democracy, said the LEEFF administrative spending to date “looks enormous relative to a few loans.”
“If the program had greater take up, the overhead costs would be examined in a different light,” he said. Mr. Page said MPs and the Auditor-General should do a comprehensive review of the LEEFF and other emergency programs.
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