08/01/2012 10:55 EDT | Updated 10/01/2012 05:12 EDT

Ornge Scandal: Ron Sapsford, Ex-Bureaucrat, Says Non Unusual For Non-Profits To Set Up For-Profits

CP/The Globe and Mail
TORONTO - Top executives of Ontario's publicly funded air ambulance service appear to have paid millions in extra fees to an Italian helicopter firm, Ornge's former chairman testified Wednesday.

Rainer Beltzner left a legislative committee stunned when he said he saw documents in January that appeared to show that Ornge was under no obligation to pay for weight upgrades for its new helicopters, but did so anyway.

As soon as he saw the documents, he walked out of the room and immediately informed auditors at the Ministry of Finance that were examining Ornge's books, he said.

"I told him, 'I don't know what's true, not true in this business, but this is getting crazy,'" said Beltzner, who resigned from the board in January amid controversy.

He said the signatures on the transaction documents appear to be those of ousted CEO Chris Mazza and Maria Renzella, former chief operating officer of Ornge Global, one of Ornge's for-profit spinoffs.

Even though the board made it clear that they were to approve any major amendments to the deal with Italian helicopter firm AgustaWestland, they were completely unaware of the $6.7-million payment, he said.

"It didn't slip through the board," he said. "It was never presented to the board. The board never approved it."

The deal with Agusta was reached after Ornge paid $144 million for 12 helicopters in 2008. Agusta has vehemently denied any wrongdoing.

Mazza also denied that the extra fees were part of a kickback scheme.

"I have never, nor would I ever, receive such a thing," he testified two weeks ago.

Ornge's dealings with Agusta — which the auditor general questioned in a scathing report — have come under intense scrutiny in the wake of the police probe of financial irregularities at Ornge, which receives $150 million a year from the province.

The committee has heard that Agusta paid an Ornge spinoff company $6.7 million after it reached a deal on the helicopters, which included the $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, which has fuelled allegations that it was a kickback.

Former Ornge executive Rick Potter said he had convinced Agusta to waive the extra fees — about $10 million in total — but Mazza insisted that they be paid, which Potter called "nuts."

Renzella testified that Mazza struck a deal to pay Agusta for weight upgrades. In return, he wanted a $4.8-million donation from Agusta to be used to help with Ornge's "revenue-generating opportunities," she said.

She said she was advised by Ornge's lawyers that it couldn't use the money in the way Mazza wanted unless Ornge could demonstrate that there was a value for the service being given. So she suggested and Mazza agreed to provide marketing services.

Beltzner said he doesn't know who signed the cheque for the extra fees or which Ornge entity received the money from Agusta.

"From the board's perspective, there was no relationship of any payment to Agusta to any marketing services agreement," he said.

Members of the committee were bowled over by the explosive testimony.

"Absolutely astounding, very shocking, very surprising," said Liberal Liz Sandals.

"Most witnesses, you kind of have an idea what they're probably going to say. I don't think any of us expected him to say...'Well, maybe it was a kickback,' which is what he said in so many words."

Beltzner also testified that Mazza had a hand in his $1.4-million compensation package, contrary to what he told a legislative committee.

The board approved Mazza's salary of about $500,000, but he also demanded and received payments for services there's no record he provided, Beltzner said.

He said he signed off on a separate contract in 2008 for Mazza's services as a medical director, which were above and beyond his duties as CEO. He was told that he would be renewing a contract that had existed for years and he didn't see anything wrong with it.

The contract wasn't brought to the board and "disappeared off the radar track" until 2011, when he was "disturbed" to find out that Mazza didn't appear to have provided those services, Beltzner said.

"The payments were demanded by Dr. Mazza and made," he said.

Mazza testified two weeks ago that he had no input in what he was being paid at Ornge and was handed raises by the board of directors.

On top of his salary, benefits, bonus and the "stipend" he received as a medical director, Mazza also received loans, including an interest-bearing $400,000 housing loan and a $250,000 advance on his bonus, Beltzner said.

Mazza told him that he'd convinced investors to kick in about $20 million to $30 million to Ornge and felt he deserved a bonus for his hard work, Beltzner said. But Mazza wanted it in advance of closing the deal.

The housing loan was secured against insurance policies and Mazza's shares in one of Ornge's for-profit entities, which were valued at $100 million, even though it has no revenue or assets, Beltzner acknowledged.

Ornge Global Management Inc. did have a licence to Ornge's intellectual property, he said. Beltzner couldn't recall how many shares were issued, but said Mazza held the majority.

Beltzner said he felt pressured to give Mazza more money after being told by a compensation consultant in 2010 that Mazza was "looking to greener pastures" and may leave Ornge.

"There was a risk, we evaluated the risk and we said, well fine, if we can lock him down with a long-term cash incentive plan, that wasn't such a bad idea," he said.

He defended the board's actions, echoing Mazza's testimony that the government was fully appraised of what they were doing at Ornge and never pushed back.

Two former senior bureaucrats in the health ministry testified earlier than they had no idea what went wrong at Ornge, adding their voices to a chorus of government officials hard-pressed to pinpoint how the organization went off the rails.

For years, whistleblowers, opposition parties and even bureaucrats raised red flags that trouble was brewing at Ornge, the committee heard.

But no one seems to know why no action was taken until late last year, when Auditor General Jim McCarter told Health Minister Deb Matthews he was being stonewalled by Ornge.

McCarter has criticized the governing Liberals for failing to oversee Ornge, despite giving it $730 million over five years and allowing it to borrow another $300 million.

The storm swirling around Ornge has even drawn in individuals with connections to Canada's most powerful political players.

Prime Minister Stephen Harper's former chief of staff Guy Giorno, former Liberal party president Alfred Apps and Lynne Golding, who is married to cabinet minister Tony Clement, were among the team of lawyers who provided advice to Ornge.

The work included advising Ornge on setting up a web of for-profit subsidiaries, compensation for its executives and whether the organization needed to disclose Mazza's exorbitant compensation package — all of which have come under fire by the auditor.

Fasken Martineau DuMoulin LLP billed Ornge for 22,000 hours from 2003 until 2012, collecting almost $11 million.

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