POLITICS

Former Ornge directors say they were kept in dark about Mazza's extra fees

04/24/2013 03:39 EDT | Updated 06/24/2013 05:12 EDT
TORONTO - Several former directors of Ornge say they were kept in the dark about extra fees ousted CEO Chris Mazza collected on top of his high salary from Ontario's troubled air ambulance service.

They also had no idea that Ornge had paid too much in a controversial $144-million deal to buy 12 helicopters from AgustaWestland — which some have alleged was part of a kickback scheme, they said Wednesday.

Barry Pickford, who served as chairman of the finance and audit committee, said he only learned of the extra payments to Mazza in late 2011, when questionable spending at Ornge made headlines.

A criminal probe was launched a month later into Ornge's "financial irregularities."

The former directors insist they were deceived by Mazza and top Ornge executives, and didn't know he was collecting about $1.4 million in compensation, on top of hefty loans.

"Some of the things we found out ... were most disturbing," Pickford told a legislative committee.

"To find out that Dr. Mazza had been taking three to four hundred thousand dollars a year in medical director fees for which I don't think anybody could show us any invoices for service that had been provided was, in my view, disastrous."

Don Lowe, another former director, said the board approved a base salary of $500,000 for Mazza, as well as a bonus of up to $500,000.

Ex-director Bethann Colle said she too had no clue that Mazza had been demanding — and received — a medical director "stipend."

Mazza got $1.2 million in loans in a single year: a $500,000 housing loan in July 2010, $250,000 from Ornge Global and another $450,000 from Ornge Global in July 2011.

Progressive Conservative Frank Klees questioned why the board would have signed off on any of the loans when they knew they were taxpayer dollars.

Colle said the board agreed to Mazza's salary package, which was determined by looking at what other private-sector executives in comparable companies were paid, even though Ornge was publicly funded.

"To me, it made sense, so I can't say that I had any objection to it," she said.

They were told that the work Mazza and other senior executives were doing for Ornge's web of for-profit companies was paid with "seed money" from AgustaWestland, not taxpayer dollars, Colle testified.

The former directors said they were also unaware of Mazza's extravagant expenses, which included luxurious trips to Brazil, Europe and New York, limo rides for Ornge executives, as well as meals and drinks in posh restaurants.

Ornge, which receives about $150 million from the province, has been under fire for more than a year over sky-high salaries, financial irregularities and corruption allegations.

Agusta paid an Ornge spinoff company $6.7 million after it reached a deal to sell the 12 helicopters, which included a $4.7-million agreement for marketing services.

Both Ontario's auditor general and Mazza's replacement, Ron McKerlie, say they found no evidence that the work performed reflected the amount of money paid. It's fuelled allegations that it was a kickback, which both Mazza and Agusta say is false.

Ornge's former chairman Rainer Beltzner told the committee that millions of dollars in extra fees were paid to Agusta, even though it appeared that they were under no obligation to pay for weight upgrades to the new helicopters.

In the fall of 2010, the board was told that Ornge had to pay $2.7 million in additional fees, including weight upgrades, and another $2.3 million for an inventory of spare parts, Pickford said.

At the same meeting, they were told about the marketing services agreement as a "separate, distinct" item.

"I think it was understood that these were not unusual contracts to enter into between an aircraft supplier and its customer," Pickford said.

When people at a corporation "collude with each other to falsify things," it's not something that can be discovered by a board or auditors, he said.

"People want to not tell you the truth and conspired to do so, then I'm not sure how a board could have determined that," Pickford said.

The directors are blaming Mazza, but they failed in their oversight responsibilities, said Klees.

"I believe there were many red flags that should have been caught if this board was vigilant," he said.

The governing Liberals have also been criticized for failing oversee Ornge, despite giving it $730 million over five years and allowing it to borrow another $300 million.