The Atcon group of companies was poorly managed and used questionable accounting when the Liberal government of Shawn Graham gave it $63.4 million in loan guarantees, says New Brunswick's auditor general.
Kim MacPherson says in a new audit, her second on the Miramichi-based construction company, that the money was "largely used for business-related activities," as it was intended.
But Atcon was so bad at managing money that Atcon's bank, Scotiabank, was "the primary beneficiary of government financial assistance" after the company went bankrupt in 2010.
Things were so bad at the company that the provincial loan guarantees were "never going to have been enough to 'save' Atcon," MacPherson writes.
Even though civil servants warned the Graham cabinet that helping Atcon was a risk, she says, the cabinet was not told the assistance was too small to save the company.
Atcon collapsed in 2010 despite $63.4 million in loan guarantees approved by the Liberals, one of the most controversial political decisions of their 2006-10 term in office.
The audit is MacPherson's second investigation into the fiasco.
'In my view, public expectation justifiably remains for these elected officials to be transparent and give rationale for this inexplicable multi-million dollar decision.' - Kim MacPherson, auditor general
Seven former ministers who were part of the Atcon decisions are still in the legislature: current cabinet ministers Rick Doucet, Denis Landry and Brian Kenney, and former ministers Victor Boudreau, Ed Doherty and Donald Arseneault.
None of those MLAs attended the committee hearing Tuesday where MacPherson presented her report.
MacPherson's first audit, in 2015, examined the government decision-making process on the loan guarantees.
But after releasing that report, the auditor general said she wanted to investigate further because many members of the public were asking where the money had gone once it was handed over.
In the new audit, MacPherson says $13.4 million went to the government of the Northwest Territories for work on the Deh Cho Bridge, because New Brunswick had also guaranteed that work.
The rest of the money was used as follows:
MacPherson said despite those findings, she was unable to see all the Atcon records she had hoped to examine in the second audit.
Still, she identified some of the company's poor spending practices, including salaries paid to "some family of key senior management," despite little evidence they worked for the company.
A company account also paid $700,000 of "personal expenses of a shareholder," including a luxury car lease, jewelry, and payments on a vacation property in Aruba.
MacPherson also questioned Atcon's decision to lease a corporate jet for $124,000 month, a lease the province knew about in March 2009 before it approved the $50 million in loan guarantees.
The company paid a total of $8 million for the jet before sub-leasing it to a Quebec company in September 2009.
MacPhersons says only four of the 19 recommendations from her first audit in 2015 have been implemented, despite claims by Opportunities New Brunswick that implemented 15 of them.
The recommendations included requiring companies looking for money to provide more documentation of their financial status, and having Opportunities New Brunswick investigate whether it is valid.
That first audit said Premier Shawn Graham's Liberal cabinet had rejected advice by civil servants to reject Atcon's request for help.
She said at the time that showed "a very troubling disregard for taxpayers' money."
The Liberal cabinet approved $50 million in loan guarantees, despite warnings from officials that Atcon's profitability was "marginal," that its ability to pay its debt was "very questionable," and that its track record of repaying government was "dismal."
A key moment later in 2009 was the decision to remove the province's position as primary creditor, which would have given it the first right to collect money owed if the company went bankrupt.
Despite warnings that the change "could result in a large loss to the province" if Atcon went bankrupt, then-Business New Brunswick minister Victor Boudreau signed off on the removal of security in October 2009.
MacPherson said if not for that decision, the province might have recouped $12 million to $19 million of the Atcon loan guarantees, not the $2.8 million it has recovered.
"In my view, public expectation justifiably remains for these elected officials to be transparent and give rationale for this inexplicable multi-million dollar decision," MacPherson said.
A separate investigation by New Brunswick's conflict-of-interest commissioner ruled Graham was in a conflict when he took part in the decisions, because his father Allan was a director of an Atcon subsidiary.
MacPherson catalogued provincial assistance to Atcon companies dating back to the 1993-94 fiscal year. As of April 2014, the province had lost $69.6 million, of which $63.4 million was a result of decisions by the Graham Liberals.