Civil servants advised against Atcon loan guarantees

CBC News has learned a board of senior civil servants rejected a proposal to offer Miramichi-based Atcon Holdings Inc. $50 million in loan guarantees.

Provincial government ignored advice and provided $50 million in guarantees for Atcon

Senior civil servants in New Brunswick rejected a proposal to offer $50-million in loan guarantees to Miramichi-based Atcon Holdings Inc. in 2009, a few months before the provincial government pushed forward with the bailout package.

CBC News has obtained the minutes of three meetings of the New Brunswick Industrial Development Board from early in 2009.

The board is comprised of five deputy ministers in the provincial government, who are responsible for reviewing submissions for economic development assistance. Those senior bureaucrats provide advice to the province’s economic development minister on whether to grant financial help to a company.

The board reviewed three requests from Atcon Holdings in January, February and March 2009, seeking $50 million in loan guarantees.

Former premier Shawn Graham and Robbie Tozer, the president and chief executive officer of Atcon, appear at a news conference together. (CBC)

On Jan. 19, 2009, the board reviewed an application for $10 million to complete the expansion of Atcon Industrial Services, $20 million to retire existing debt and $20 million to boost the company’s line of credit.

The departmental recommendation was to reject the request and the board deferred a final decision.

On Feb. 9, 2009, the same request came back to the board of senior civil servants. The department recommended a final decision be deferred, which the board agreed with at the meeting.

Brian Dick, the deputy minister of Business New Brunswick at the time, signed each of those recommendations as chairperson of the board.

The five-person board met again on March 16, 2009, where the same request from Atcon Holdings was again reviewed.

Dick Burgess was the acting chairperson for the third meeting. In that session, the departmental recommendation was again to reject the request from Atcon.

"The Members of the Board concurred with the Departmental Recommendation," according to the document obtained by CBC News.

Three months later, in June, acting Business New Brunswick Minister Jack Keir said the provincial government was carefully considering Atcon's request for financial assistance.

"Look, we want to make sure that we do the due diligence on this, that the business case works."

A few days later, the provincial government approved the $50-million financial assistance package for the Miramichi-based company.

The Progressive Conservatives, then in opposition, accused the Liberals of ignoring advice from the civil service. But any advice provided by the civil servants was never revealed in public even after the Progressive Conservatives won the 2010 election.

In March 2011, Bill Levesque, the deputy minister of Business New Brunswick and who was at the March 2009 meeting, refused to answer a Progressive Conservative MLA’s question twice about what advice he gave the former Liberal government on whether the loan was too risky.

Levesque said it would be inappropriate to reveal confidential advice.

The documents now show that civil servants, including Levesque, recommended against approving the loan guarantees for Atcon.

Cabinet 'has the final say'

Liberal MLA Victor Boudreau, a former Business New Brunswick minister, said in an interview on Tuesday the Liberal government did make a decision against the recommendation of the civil service.

Graham said recently the Liberal government did its best to help companies during the recession. (Daniel McHardie/CBC)

"The civil service is there to provide advice to cabinet, but at the end of the day, it's cabinet that has the final say, and many other factors are taken into consideration," he said.

Boudreau said Premier David Alward’s government has ignored civil service advice too. Boudreau said the civil service was recommending against taking over the Harbour Bridge in Saint John before the Liberals left office.

Boudreau said the big factor in approving the assistance package for Atcon was the hundreds of jobs in Miramichi, a region that was struggling economically.

Atcon went bankrupt eight months after it received the financial help and the provincial government had to pay its bank the $50 million.

After Atcon fell into financial problems, Boudreau said the provincial government had properly evaluated the company.

"Look, we always look at the business case, but I said earlier and I'll say it again, we're not going to shy away from assisting the hundreds of families we've assisted in the last year or so since these guarantees have been put in place," he said at the time.

So far, the New Brunswick government has recouped $341,000 through bankruptcy court.

Boudreau said on Tuesday, other Liberal decisions made during the recession, such as a package that helped the Fraser mill in Edmundston restructure as Twin Rivers, were successful.

Former premier Shawn Graham was still defending the decision to offer Atcon the $50 million in loan guarantees last week. Graham said on Oct. 26, the recession was making it hard for companies to get bank loans.

"I take solace in seeing the companies that succeeded, but definitely I regret that this one failed," he said.

Conflict-of-interest complaint

Justice Patrick Ryan is expected to release his report into conflict-of-interest allegations against Graham in November. (CBC)

Graham is still at the centre of a conflict-of-interest complaint, which was instigated by a complaint from the Progressive Conservatives.

Justice Patrick Ryan, the province’s conflict-of-interest commissioner, began the investigation after the Tories alleged Graham was in a conflict because his father sat on the board of an Atcon subsidiary.

Graham said he heard Ryan’s two-year investigation has finished.

"I understand it's under translation, but it should be timely soon that we can hopefully sit down and meet," Graham said.

"So I'm hoping when this report is released that it will reflect that the intention of our government was to save those jobs and that's why we made the decisions we did."

Ryan’s office has indicated the report will likely be released in November.