POLITICS

Mac Harb Senate Scandal: Lawyer Says Senator Did Nothing Wrong By Borrowing Money

08/08/2013 03:46 EDT | Updated 10/08/2013 05:12 EDT
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OTTAWA - Sen. Mac Harb is defending his decision to borrow $230,000 from an Ottawa businessman by mortgaging several of his properties — including the house outside of Ottawa that's tied to the Senate ethics scandal.

The land record documents show Harb used mortgages against four properties in and outside the city to get loans from a numbered company owned by Brian Karam, a businessman and lawyer who has for years done business with the government.

In a letter sent Thursday to several media outlets, Harb's attorney Paul Champ insisted the senator — formerly a member of the Liberal caucus — did nothing wrong when he borrowed money from Karam's company.

"Sen. Harb's loans with Mr. Karam's corporation were completely transparent, were promptly reported to the Senate in accordance with Senate rules, and were on reasonable commercial terms that are set out in the publicly registered mortgage documents," Champ wrote.

"There was no advantage or benefit of any kind associated with the loans, and they are being re-paid with interest."

The Criminal Code says government officials cannot accept an "advantage or benefit" of money from someone who deals with the federal government without first getting written permission from the relevant department or branch.

Champ calls that interpretation of the law "twisted," arguing the senator is neither an employee nor a member of the Harper government.

That part of the Criminal Code is one of the reasons why the RCMP is investigating Harb's Senate colleague Mike Duffy, who accepted $90,000 from Prime Minister Stephen Harper's former chief of staff, Nigel Wright, to cover his own improper housing claims.

The Senate has so far refused to say whether Harb sought or was granted permission before accepting the loan.

Harb is disputing an order from the Senate that he repay $231,649 in disallowed housing allowance claims and other expenses dating back several years. Champ said Harb is using the loan to cover both his legal costs and the repayment.

"I can confirm that Sen. Harb has borrowed a total of $230,000 from Mr Karam's corporation since May 2013, sums which are all secured through publicly registered mortgages, and all of which were reported to the Senate in accordance with Senate rules."

The senator's lawyer also said it was "irresponsible and grossly unfair to suggest or impute criminality" on Harb for accepting the loans.

The property records indicate Harb secured mortgages on his home in Westmeath, Ont., and three condos in Ottawa to get loans from Karam's numbered company, 1202864 Ontario Ltd.

All four transactions took place on the same day, May 17.

The documents also indicate Harb sold his Westmeath house on Thursday for $335,000.

The senator filed an updated disclosure statement to the Senate ethics officer on June 12 indicating he owed an unspecified amount of money to 1202864 Ontario Ltd.

Ontario corporate documents show Karam is the president and a director of another numbered company, 595799 Ontario Ltd. That company operates as The Business Inn, a hotel in downtown Ottawa that caters to long-term stays.

Public records show the federal government has awarded The Business Inn more than $9 million in contracts since 2009. The most recent contract, worth $1.87 million, runs until the end of this year.

Karam defended his decision to loan Harb the money.

"The terms of such loan to Mac Harb are fully set out in the registered mortgages," he said in an email. "Such terms involve no benefit or advantage to Mac Harb and are very similar to terms I have provided to others during the past year."

Karam also reiterated his support for the embattled senator.

"To my knowledge, Mac Harb as complied with all legal requirements, particularly those of the Senate, in relation to such loan," Karam wrote.

"Let me be clear; I have known Mac Harb for over 25 years and he continues to have my support and respect."

Harb is just one of several senators at the centre of an ongoing controversy surrounding dubious expense claims — primarily housing allowances that are designed to compensate out-of-towners who maintain a secondary residence in Ottawa in order to conduct Senate business.

The RCMP filed a fresh stack of documents Thursday in its investigation into Duffy, seeking credit card and bank statements as it looks into the former broadcaster's expenses.

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