New Brunswick

Kim MacPherson chastises cabinet for Atcon funding decisions

The Liberal cabinet of Shawn Graham "displayed a very troubling disregard for taxpayers' money" when issuing loan guarantees for Atcon Holdings Inc., says Auditor-General Kim MacPherson.

Auditor General says $70M lost because politicians ignored expert advice of civil servants

New Brunswick’s auditor general has issued a devastating report on the Atcon fiasco, saying the Liberal government of Shawn Graham showed "a very troubling disregard for taxpayers’ money" when it approved several large loan guarantees.

Auditor General Kim MacPherson says several of her office's 2010 recommendations on financial aid to industry have still not been implemented. (CBC)
"The substantial financial loss to taxpayers in our opinion was totally unnecessary," Kim MacPherson writes in her audit.

And she says as long as politicians can overrule civil servants’ advice on financial aid to industry, "I believe a similar situation could happen again."

She says some of the responses from the Gallant government to her Atcon recommendations, such as a promise to be "more diligent," are "not clear."

MacPherson presented the audit to a joint meeting of the Legislature’s public accounts and crown corporations committees on Tuesday morning.

The Graham government gave the Atcon group of companies a total of $63.4 million in loan guarantees in 2008 and 2009. Those decisions cost taxpayers more than $70 million following Atcon’s bankruptcy in 2010.

The cost was higher because the government opted to remove some of the security guarantees it had written into the terms of the loan guarantees, she said.

That removal allowed Atcon’s bank, Scotiabank, to become the priority creditor and recoup money first, ahead of the province, when the company collapsed.

'No rationale' for cabinet's decision

MacPherson’s audit reveals for the first time the exact wording of civil servants’ recommendations to the Liberal cabinet that it reject Atcon’s request for help.

Bureaucrats told the cabinet in 2009 that Atcon’s viability was "very questionable" and the company had "a dismal track record" at repaying government funding.

Later, when the cabinet looked at giving up its security on the loan guarantees, civil servants wrote that Atcon was "on the verge of collapse" and that the change "further erodes our security position, from bad to worse."

MacPherson wrote that she could find "no rationale" for cabinet’s decision.

"We do not understand why cabinet approved this request as it appeared to have transferred the impact of the pending loss from the bank to the taxpayer."

MacPherson says she believes cabinet violated provincial regulations by giving up its security on the loan.

But she told MLAs the executive council office disagrees with her and argues a minister has the legal power to make the change.

Liberals taking report seriously

MacPherson says with legislation to set up the new Opportunities NB agency before the legislature now, MLAs should take the opportunity to clarify the issue.

That recommendation was seized on by the opposition Progressive Conservatives, who tried to connect the Atcon audit to what they say are Liberal attempts to roll back PC transparency laws.

The Gallant government is repealing several laws that the Tories say make government more financial accountable.

And the Liberals are replacing Invest NB, a PC-created economic development agency, with Opportunities NB.

MacPherson’s report says Invest NB’s public reporting "is an example of a best practice within government" because it based its performance measurements on actual job-creation results.

I’m sure we can improve how we address some of these future investments for economic development so a situation like this is not reproduced.- Roger Melanson, finance minister

Finance Minister Roger Melanson says the Liberals are taking MacPherson’s report seriously.

"We are committed to look at her recommendations, and if we can make changes to the Opportunities New Brunswick Act, we will do so," he said.

"I’m sure we can improve how we address some of these future investments for economic development so a situation like this is not reproduced."

But Melanson, a first-term MLA, brushed off questions about whether any of the Gallant cabinet ministers who were part of the Atcon decision should apologize to New Brunswickers.

"This is a file that’s been dealt with. It happened two governments ago, and politically, certainly New Brunswickers have spoken loudly on this one in 2010," he said. "We all know the result of that election," he added, referring to the Liberals’ election defeat.

But Melanson also suggested voters had moved on: following Shawn Graham’s resignation, people in Kent elected Liberal leader Brian Gallant in a 2013 by-election, Melanson said, even though the PCs made Atcon the issue.


Jacques Poitras

Provincial Affairs reporter

Jacques Poitras has been CBC's provincial affairs reporter in New Brunswick since 2000. He grew up in Moncton and covered Parliament in Ottawa for the New Brunswick Telegraph-Journal. He has reported on every New Brunswick election since 1995 and won awards from the Radio Television Digital News Association, the National Newspaper Awards and Amnesty International. He is also the author of five non-fiction books about New Brunswick politics and history.