05/09/2012 10:11 EDT | Updated 07/09/2012 05:12 EDT

Ousted Ornge CEO turned down $10M discount on helicopter deal: former executive

TORONTO - Ornge turned down a $10-million discount on a $144-million helicopter deal with a firm that later paid an Ornge spinoff company $6.7 million — a deal alleged to be part of a kickback scheme, a legislative committee heard Wednesday.

Ornge's dealings with AgustaWestland — which Ontario's auditor general questioned in a scathing report on the air ambulance service — has come under intense scrutiny in the wake of a criminal probe over "financial irregularities."

AgustaWestland struck a marketing services agreement with a private subsidiary controlled by Ornge's then-CEO Chris Mazza shortly after Ornge bought 12 of its choppers with public money in 2008.

The non-profit air ambulance service receives about $150 million a year from the province.

Both the auditor general and the ousted Mazza's replacement, Ron McKerlie, say they found no evidence that the work performed reflected the amount of money it was paid.

Agusta executive Louis Bartolotta has denied any wrongdoing, telling the committee in April that the kickback allegations are "insulting."

Rick Potter, a former Ornge executive and director, told the committee that he negotiated a $10-million discount on the deal with AgustaWestland.

He explained the Italian firm was trying to charge Ornge $10 million in additional fees that they weren't entitled to under the terms of the agreement, so he convinced the company to waive them.

But when he proudly told Mazza that he'd brokered a deal to save Ornge money, Mazza's reaction was "very cool and reserved," Potter said.

The next week, Mazza — who was part of the Ornge team that negotiated the helicopter deal — indicated to him that the extra charges should be paid, Potter said.

Ornge ended up paying Agusta $7.2 million in additional charges, he said.

"What I said to Chris — and I'll paraphrase for this committee — is: 'Are you freaking crazy?'" he said.

Potter said he also told Ornge executive Maria Renzella — who was one of the leads on the helicopter purchase — and Cynthia Heinz, one of Ornge's lawyers.

"I said, 'Look, this is nuts,'" he said.

Potter said he also called Bartolotta, who works out of Agusta's office in Philadelphia, and asked him "what the heck is going on here."

"And he said, 'Well, we do this all the time,'" Potter said.

"And I said, 'Look, I can't see how the hell you're doing this' ... and that was it," he said.

"I said, 'Is your CEO aware of this? Is your CFO aware of this?' And he said 'Yes.'"

But Potter said he didn't know whether the $7.2 million paid to Agusta was then used to pay the Ornge subsidiary for the marketing services agreement.

Potter, who served as Ornge's chief operating officer, said he didn't even know about the marketing agreement until he found out that an Ornge helicopter would be needed for trade shows and sales promotions, which concerned him.

Progressive Conservative Frank Klees, who sits on the committee, said he stands by his belief that the marketing services agreement with AgustaWestland was part of a kickback scheme.

"I'm sure that time will prove this to be exactly that," he said following the committee hearing.

Potter made it clear that he was shocked that Ornge would pay the extra charges and he expressed that dismay to key people at Ornge, Klees said.

But they went ahead anyway, then negotiated a multimillion-dollar marketing agreement with Agusta, he said.

Klees noted that Agusta is also under investigation in Italy over allegations it paid millions to a Switzerland-based consultant for a deal to sell 12 helicopters to India.

"I think at the base of this is greed, that quite frankly has siphoned precious health-care dollars from our system here in Ontario," Klees said.

Potter had some kind words for Mazza, calling him "impressive," "brilliant" and a "visionary."

But Mazza was also a tyrant who would yell and scream at him, Potter said.

"I think I threatened to quit twice," he added.

Potter, a longtime Conservative who once ran for a federal seat in Thunder Bay, was stripped of his title as COO in March but is still collecting $20,000 a month to advise Ornge on a rotor wing transition project. The contract expires at the end of May.

The demotion came after the aviation specialist told the Toronto Star in February that Mazza convinced him to lie about finishing his MBA in 2009 to help woo investors to lend Ornge $275 million, money it intended to use to buy its own fleet of aircraft.

Potter told the committee Wednesday that he started the MBA program in 1997 and hasn't completed any coursework for the past four to five years.

Mazza's lawyer confirmed Wednesday that the former CEO won't be able to appear before the committee next week. Roger Yachetti said two psychiatrists have declared Mazza medically unfit to testify on May 16. It's still unclear when Mazza may appear.