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February 15, 2006 Report – Part 2 of 6
(Continued from Part #1 that ended with "Communications" Item 5.9 " Petition submitted by Governors Green Tenants Association requesting a reduction in the ratio between multi-residential and residential tax rates ")
5. Communications Items Cont'd .
(McHattie / McCarthy - CARRIED as Amended)
(Please note: Communications Items are listed in this transcription in the order Council dealt with them at the meeting.)
REQUEST TO AMEND - "5.2 Correspondence from the Honourable
Ralph Goodale, Minister of Finance respecting taxation system.
Recommendation: Be received"
Amendment to Recommendation : "to resubmit to the new Federal Finance Minister"
(Kelly / McHattie - CARRIED as Amended)
Kelly : "Mr. Chairman, if I could just draw Council's attention, then, to 5.2. I understand the recommendation here is that the letter from Mr. Goodale be Received. The letter, of course, talked about the financial imbalance that municipalities are trying to endure, right now."
"And, notwithstanding the fact that I appreciate the letter from Mr. Goodale, clearly, he doesn't have a whole lot of sway with the current Government, right now. And, I would suggest, that as well as receiving this, that possibly we re-submit that letter to the new finance minister so that they're aware of our concerns, too. And, perhaps we can get some sort of a response from them."
Mayor DiIanni : "Do we have a Seconder for that? Councillor McHattie. All in favour?" (hear councillors say carried) "That's carried. Thank you."
"Deputy Mayor Merulla, would you please take the chair, now."
(Mayor DiIanni leaves the Council Chambers and Councillor Merulla assumes the role at the podium as Deputy Mayor and Acting Chair for the next portion of the meeting while Council discusses Communications Item 5.10, 5.11 and 5.13)
Merulla as Deputy Mayor and Acting Chair : "All right, then. We're moving onto - Members of Council, you have before you, Item 5.10, which is the Addendum to the Report for the City of Hamilton , by Ken Froese."
5.10 Addendum to the Report for the City of Hamilton by Ken Froese, LECG Canada Ltd. respecting Municipal Election Compliance Audit on Campaign Finances of Candidates, Larry DiIanni, Marvin Caplan, John Best, February 6,2006
Recommendation: For the consideration of Council
Consideration put for Recommendation : That this item be received and referred to a Special Committee of the Whole meeting
(Braden / Bratina - CARRIED )
Merulla as Deputy Mayor and Acting Chair : "Now, are there any questions on this particular item? Councillor Jackson."
Jackson : "Thanks Mr. Deputy Mayor. Is this the appropriate time, then, to ask Mr. Froese - Ken Froese, the Auditor who conducted the report. Is this the appropriate time, then, Mr. Deputy Mayor - "
Merulla as Deputy Mayor and Acting Chair : " - Now's good - "
Jackson : " - to ask any questions - "
Merulla as Deputy Mayor and Acting Chair : " - yes - "
Jackson : " - okay."
"Thank you, Mr. Froese. Just a few questions, I need answered, please. When you last reported to us, Mr. Froese, you felt that maybe it was a misinterpretation. But, you felt that your - Some of us thought that your audit was complete. But, you had said it wasn't. And now - so, can I ask you: Is your audit complete this time? And, could you just possibly give an explanation of that, Mr. Deputy Mayor, through you."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "Yes, it is completed."
Jackson : "Okay."
"During the course of your audit, Mr. Froese, was there any evidence, at all, with the 3 candidates, that there was any intentional deliberate contravention of the Municipal Elections Act
(http://www.e-laws.gov.on.ca/DBLaws/Statutes/English/96m32_e.htm), to your knowledge, Mr. Deputy Mayor, through you to Mr. Froese."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "Well the Act requires us to prepare a report that outlines any apparent contraventions of the Act. So, our reports deal with apparent contraventions of the Act versus intentionality."
"But, in the first report, we reported that the candidates and the Mayor all stated that their apparent contraventions were unintentional. And, we found nothing inconsistent with that."
Jackson : "Okay. Thirdly, on that - dove-tailing on that last comment, Mr. Froese. There's some segment of our community that have questioned your, if you will, opinion - editorial comments - on the inadvertence of the 3 candidates, and what they did, or didn't do."
"Can we get a clear - for public consumption, is an auditor to not only report findings, but to: make comment; provide opinion; make recommendations. Or - because, to hear a certain segment of the community, that was an area that you really didn't have authority to delve into. Could I have that clarified, Mr. Deputy Mayor, through you, please, to Mr. Froese."
Merulla as Deputy Mayor and Acting Chair : "Mr. Froese."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "That's a tough question, because there are so many different kinds of audits. Some audits you do just report on whether something presents fairly, or not."
"In this case, if you look at public-enquiry-type reports, they will often include recommendations and comments. If you look, for example, the Bellamy Commission Report
(http://www2.torontoinquiry.ca/TCLI_TECI_Report_Executive_Summary.pdf), it includes a ." (tape stopped, sorry)
Jackson : " . final phase of the audit, can you possibly explain to us, the Mayor had an appointed auditor, Taylor Leibow. (http://www.taylorleibow.com/about_tl.html) Can you explain why Taylor Leibow may not have found some of the other findings that you found in your last phase of your report, Mr. Froese, through you Mr. Deputy Mayor."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "I'm not sure all of the reasons. But, one would be, we had the powers under the Public Inquiries Act (http://www.e-laws.gov.on.ca/DBLaws/Statutes/English/90p41_e.htm) to require companies to respond."
"So, we received responses from some corporations and individuals that had not responded to Taylor Leibow."
Jackson : "Okay."
"And, maybe this is a question for Mr. Rinaldo. Joe, can you just tell us, what the total cost of Mr. Froese's reports have been, up to this time. And, I guess this would be in finality. He has said this is the end. And, his audits are now complete. So, what has the total cost of this exercise been, Mr. Deputy Mayor, through you to Mr. Rinaldo."
Joe Rinaldo - General Manager, Finance and Corporate Services : "Through you, Mr. Deputy Mayor. The estimated cost now, is now up to $60,000 - including GST." [Goods and Services Tax]
Jackson : "Is that beyond what was originally budgeted, Joe. Or, can you give us some handle as to how the amount has increased, please."
Joe Rinaldo - General Manager, Finance and Corporate Services : "Just to remind Council, that when we initiated the audit, there was a proposal call for about $25,000."
"Council, at the last process, authorized the expansio - extension of the audit. And, directed me to reimburse the auditor for the additional work. And, based on the additional work, and the estimated time that's been provided to me, the cost has now escalated to approximately $60,000."
Jackson : "Okay."
"Thank you Mr. Rinaldo; thank you, Mr. Froese, for your responses."
"Thanks, Mr. Deputy Mayor."
Merulla as Deputy Mayor and Acting Chair : "Thank you, Councillor Jackson. Further speakers? Councillor Bratina."
Bratina : "Thanks, Mr. Deputy Mayor."
"Mr. Froese, did you examine the March 31 st , 2004 statement - the original document submitted by the Mayor in your review of this?"
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "We had that available to us. But, our audit focused on the final report."
Bratina : "So, you did not review the March 31 st , 2004 report."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "We reviewed it. There were a number of refunds after the fact, over the summer of 2004 and later on. And, we looked at the final report."
Bratina : "There are a number of - through you, Mr. Chair - there are a number of issues that still remain unclear. And, one of them is, the disposition of the Ferrari donation. What was your conclusion on the Ferrari donation matter?"
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "We have, we've done what we can, as far as interviewing people; getting what documentation we could get - which was very scant. And, we've received consistent explanations from the company president; from Italo Ferrari, directly. And, to the best of our understanding, there are no documents that will show an actual $750 reimbursement of the company by Mr. - by Italo. But, the conclusion is - our conclusion, is there's nothing to say that it's an apparent contravention."
"We would like better information, but it's not there."
Bratina : "All right."
"In Mayor DiIanni's statement - the one that we were able to examine - it shows a figure of $18,000 for signs. And, the competing candidate - Mr. Christopherson - had listed an amount of $41,000 for signs."
"Did you look at the numbers that came through in the documents to try to understand if they were reasonable in their amounts, through you, Mr. Chair."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "We did do that. I can't recall, though, on the sign issue."
"We did go through all the expenses. We looked at invoices; we looked at cheques; we looked at the reasonableness of the amounts. But, we didn't do an extensive comparison to the other candidates."
Bratina : "Well, I have my financial statement, here, Mr. Froese. And, I - my document shows about $8,000 on signs for the Ward 2 campaign. And, it - it's not a comfortable number for me to understand how that campaign could have only spent $18,000 on signs."
"But, I'm sure there may be a reason. And, I'm just wondering, through you, Mr. Chair, whether you examined any receipts, or any transactions with regard to signs."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "We did examine receipts and invoices and cheques for signs, yes."
Bratina : "Right."
"Mr. Froese, the election of 2003 was quite a controversial one, and really - 100s of millions of dollars in development issues were hinging on the outcome of that election. And, the, the fine - the penalty for exceeding election spending, as I understand it, is the nullification of the election."
"Are you aware of the rules as they regard over-spending, exceeding - "
Merulla as Deputy Mayor and Acting Chair : " - Councillor Bratina -
Bratina : "election spending - "
Merulla as Deputy Mayor and Acting Chair : " - Councillor Bratina, can we stick to the audit before us. "
Bratina : "Well, I'm getting to the point - "
Merulla as Deputy Mayor and Acting Chair : "If you can get to the point sooner, - "
Bratina : " - ya - "
Merulla as Deputy Mayor and Acting Chair : " - rather than later -
Bratina : " - ya - "
Merulla as Deputy Mayor and Acting Chair : " - it would be helpful."
Bratina : " - ya - ya."
Merulla as Deputy Mayor and Acting Chair : " - Thank you. "
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "Is that a question?"
Bratina : "Ye - well, just let me say that the election spending number - I believe for the City, it's $265,000. Is that right? Is that - can someone help me on that? Is it $265,000 the amount that's - one is entitled to spend in a mayoralty election campaign in Hamilton , through you, Mr. Chair."
Merulla as Deputy Mayor and Acting Chair : "I think the Clerk could probably answer that question."
Kevin Christenson - City Clerk : "I could probably get that information for you. But, I wouldn't have it right now."
Bratina : "The number - I believe it's that - I just want to be accurate. And, the number in the Mayor's document, was $253,000."
"So, that's getting very close to the limit. And, when people look at these numbers and they see that a document was submitted in March - 31 st , of 2004 - and then, another one after that and another - with these continuing issues, it's not comfortable. That's why many of us have not been comfortable with this whole process."
"So, that's fine. And, on the $140,000 in advertising, that the Mayor submitted in his document, through you, Mr. Chair, was there a break down - or, did you see a breakdown on how that advertising was - money was spent?"
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "Yes we did. We saw a breakdown of what made up the item in the financial statement, as well as all of the invoices and cheques to pay the amounts, which made up the total."
Bratina : "Right. So, once again, just to conclude, Mr. Chair, it was a difficult election. And, there were concerns raised by people. And, we're concerned as a Council. And, we want to move on and get beyond this."
"The final question I have through you to staff is that, if there are contentious donors in the Mayor's audit, who are also reflected in the Council's campaign donation lists, would that preclude those councillors from taking part in any vote that we may have regarding this matter - through you, Mr. Chair."
Peter Barkwell - City Solicitor : "Through you, Mr. Deputy Mayor. The individual Members of Council are personally responsible for compliance with the Municipal Conflict of Interest Act."
(http://www.e-laws.gov.on.ca/DBLaws/Statutes/English/90m50_e.htm)
"Each Member of Council has to make their own decision, as to whether they have a pecuniary interest within the meaning of that act. And, if they do, they have to declare the conflict and remove themselves from the process."
Merulla as Deputy Mayor and Acting Chair : "Do you want to declare a conflict, Councillor Bratina?"
Bratina : "No."
Merulla as Deputy Mayor and Acting Chair : "Okay, then - "
Bratina : "And finally - final question. The fundraising expenses, Mr. Froese, were listed at $68,000. And, the receipts for the fundraising were $76,000 - roughly. So they're - well, $68,000 spent to raise about $8,000. Do those numbers - did you - were you concerned at all when you saw that number. Or, did you examine that number."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "We went through the fundraising events, as far as the revenues and expenses go. And, if you looked at the amount raised for some of the events, they raised initial questions. But, we dealt with them and were satisfied at the end of - end of the audit, in relation to those expenses."
Bratina : "Thanks, very much, Mr. Deputy Mayor."
Merulla as Deputy Mayor and Acting Chair : "Thank you, Councillor Bratina. Any further questions? We have Councillor Braden - Councillor Braden."
Braden : "Thank you, Mr. Deputy Mayor. Through you, to Mr. Froese."
"Mr. Froese, when I go through the report - that's your report - I find: one, two, three, four, five - I think six things where you say there is an apparent contravention. Whether it's a contravention of a limit or of a reporting. I mean, I think that's - and I have the page numbers 5, 8, 9, 12, 15 and 17."
"Is your response that if you find them, and then, somebody can rectify it - either pay money back, that that's all right? Or, are you not placing yourself in the position of the judge?"
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "My responsibility is to report apparent contraventions and we've done that. And, it becomes someone else's issue, if that's what you're asking."
Braden : "Yup."
"And, with regard to the rental, and the campaign space. And, I can see that it's pretty hard to find out if a guy's paid stub is deducted, right, as it was claimed. But, is $1,500 for renting that space for the appropriate time - "
Merulla as Deputy Mayor and Acting Chair : " - If I can just remind everyone, we're related to the audit and the over-contribution issue with respect to what's before us. If we're going to go into more detail, surrounding the filing, that'll be up to the will of Council. But, we can scrutinize the entire audit, the entire night, if you'd like to. And, I'm more open to do that - "
Braden : " - But, then let's do it - "
Merulla as Deputy Mayor and Acting Chair : " - But, what's before us at present, is the issue of contributions. And, - "
Braden : " - Mr. Chairman, in fact, if you listened, that's exactly what I'm talking about."
Merulla as Deputy Mayor and Acting Chair : "Okay."
Braden : "What's on the table is, there's two apparent contributions for $750 dollars each. One of them, we can't find the background information - I'm laying that aside. What I'm - what the question is, is there, in fact, inherently, a third contribution for that space. Because, does it make sense that you - and you, sir, may know this, because you probably rent space in a campaign, I don't - does it make at all sense to rent that space for that part of time for $1,500."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "There was another payment of a $1,000 for rent in addition to the contributed rental. So, you have to look at an extra $1,000 on that - "
Braden : " - okay. And, does that make sense? I mean, you'd know what the rental rates were, because you could just phone up and find out, right."
Merulla as Deputy Mayor and Acting Chair : "Mr. Froese."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "Well, we didn't raise a concern about that in our report."
Braden : "It means, that you didn't deal with it."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "We looked at it, but not in depth. We didn't do an in depth rep - it's tough when it's empty, when it's empty space, as to what the fair value is. And, there is judgement involved in that. And, we weren't qualified to say what the value is. We would have had to hire someone to tell us that."
Braden : "Secondary, Mr. Chairman. The idea of a - fundraising. Maybe Mr. Froese - presumably he looked into definitions. And, I think when we're on the campaign trail, we don't worry too much about definitions because we're so busy. But, if I hire somebody to work for me. And, I hire him to work to raise money - usually those are fundraising events. But, I don't want to put any parameters around it."
"I had two fundraising events in my campaign, over 3 months. But, the person worked for me full time. Would you prorate that activity? Would you take 2 days over the 3 months and say, 2 days out of 90 is fundraising. Or, could I chose to say, all the other days he worked for free. But, I paid him a $1,000 for those 2 days to do the fundraising. How do you do that, as an auditor?"
"You've got to make some assumptions and what are the assumptions?"
Merulla as Deputy Mayor and Acting Chair : "Mr. Froese."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "I don't know if that one's a clearly right or wrong. If you're paying him - my assumption would be - if you're paying someone a salary, and they're working generally on your campaign, but they're spending half their time on fundraising, it's reasonable to allocate their salary: 50% to fundraising; and half to salary."
"You're example of 2 days versus everything else. You'd have to look at - as long as you've got it expensed in your statement and you've made a good attempt to match that expense to what's someone's doing, I think that's appropriate."
"I don't think there's necessarily a right or a wrong in that one."
Merulla as Deputy Mayor and Acting Chair : "Councillor Braden."
Braden : "I'm not, I'm not assuming it's black and white. But, everything's hidden in the grey."
"But, $5,000 for fundraising, it says in here - was for fundraising. Presumably you looked at - and I'll use non-auditor's statements, 'some sort of justification.' "
"That $5,000 was towards a small number of events. Did you try to match that number with activity, or did you just go by the chits."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "In that case, we went by the chits - mainly because, fundraising can go beyond just events. You can have individual phone calls; you can have a lot of other ways to raise funds, other than a fundraising event. It's very hard to match it to a specific process."
Braden : "Does the concept of fundraising have a definition, do you know? Right, every time I go to a door, I could be passing out something that says, you know, if you really love me, you can give me $5. But, when I go to the door, I'm not fundraising."
"So, what I want to know is, is fundraising 'events' or is fundraising 'whatever we want it to be' ? "
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "I'm probably the wrong person to answer that one."
Braden : "Okay."
"Mr. - when the debate's over, will you tell us, please, where you want to go with this, in terms of what the options are - "
Merulla as Deputy Mayor and Acting Chair : " - yes, - "
Braden : " - in terms of this debate."
Merulla as Deputy Mayor and Acting Chair : " - absolutely."
Braden : "Thank you."
Merulla as Deputy Mayor and Acting Chair : "Okay, we have Councillor Collins, Bruckler and McCarthy. Any other individuals want to be on the list - and Jackson, for a second time."
"Councillor Collins."
Collins : "Mr. Chairman, very briefly the beginning of the report states that the second phase of the audit was to look at 16 additional matters. And then, with those 16, I think there were other issues from some of those 16 items that were looked at in more depth than we had discussed at our last committee meeting downstairs where we had given direction on the audit."
"And, I guess what I'm looking to get at is, of the 16 or 22 issues - if you want to use that number - a number of them seem to fall into a clerical realm, or into a category, as - I'm trying to get at the difference between 'reporting contraventions' and 'contraventions of the Act'. "
"And so, are those 'reporting contraventions' which seem to represent the largest portion of the 16 or 22 issues - where we find that they may have been mistakenly reported in the return, are they considered 'contraventions of the Act'? Or, do they fall into a different category, altogether?"
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "I think they would likely fall as 'contraventions of the Act' where they don't - where the reporting doesn't match what was received."
"But, in our view, leaving an ink off the name of a contributor, as an example, isn't at the same level as receiving money from associated companies, that sort of thing. So, one involved finances; the other, just how something is reported."
"So, we thought there was a different level. If you look at the Act, there is - there's no section related to who ca - to the accuracy of how you list each item. But, there are sections related to who you can receive contributions from."
Collins : "So, a spelling mistake would be, technically, a 'contravention of the Act' - is that correct? I think there was one where there was a spelling mistake from another candidate - not the Mayor's - but - "
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "I sure wouldn't want to lump it in, in the same category. And, that's why we try to separate them out."
Collins : "Then, other issues related to either reporting the number of the numbered company, or, the actual name of the corporation or the company - again, that falls into a different category than, maybe, some of the other issues you looked at. They would be considered more clerical in nature, then."
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : " Basically, technicalities. That's right."
Collins : "Okay."
"The other question that I have - and I'm not sure whether this is one for Mr. Froese, or legal counsel. But, there's this back and forth debate in the community and here at Council as to who the judge and jury is, in regards to interpreting the Act."
"And, we have correspondence, tonight, that says - and clearly states - that only a judge can determine guilt or innocence. And yet, we're being told something different. So, I need some clarification on that - "
Merulla as Deputy Mayor and Acting Chair : " - Mr. Barkwell - "
Collins : " - because that seems to be the crux of the matter, here."
"And so, who is judge and jury, in this regard. Is it the courts? And, does Council have the option or opportunity to send this back to the court to make a decision. Or in fact, is this Council faced with the task of determining whether or not the Act was, in fact, contravened?" (hear a glass clink)
Merulla as Deputy Mayor and Acting Chair : "Mr. Barkwell."
Peter Barkwell - City Solicitor : "Council is faced with the decision of whether or not to lay charges against one or more of the candidates."
"If charges are laid, then it would be up to the court to make a determination of guilt or - guilty or not guilty - on the charge. And, to assess any penalty on the finding of guilt."
"There are some technical issues with respect to Council determining whether it's appropriate to lay charges. And, our intention is to come back with some opinions for Council - hopefully, at a meeting in the first week of March, before the 30 days expires, for the Council to make an informed decision."
Merulla as Deputy Mayor and Acting Chair : "Councillor Collins."
Collins : "Those are all the questions I have. Thank you."
Merulla as Deputy Mayor and Acting Chair : "We have Councillor Bruckler. Councillor Bruckler."
Bruckler : "Thank you, Mr. Deputy Mayor. At - I guess at various points in time, when there was, I guess, an over-contribution detected, those funds were returned."
"And, I believe, Mr. Froese, that at the last meeting that we had on this, you informed us that, that - again, that, that was, obviously, a requirement of the Act. Is there a time frame within which that can and should occur?"
Ken Froese, CA-IFA, CFI - Director, LECG Canada Limited : "I think the only term is with, I think, the courts with Justice Culver, who has said: within a reasonable time."
"So, there's no set 2 weeks; 4 weeks; a month - it's within a reasonable time."
Merulla as Deputy Mayor and Acting Chair : "Thank you, Councillor Bruckler."
(Please note: Communications Items are listed in this transcription in the order Council dealt with them at the meeting.)
See Part #3
Continuing with "Communications" Item 5.10 - " Addendum to the Report for the City of Hamilton by Ken Froese, LECG Canada Ltd. respecting Municipal Election Compliance Audit on Campaign Finances of Candidates, Larry DiIanni, Marvin Caplan, John Best, February 6, 2006 "
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