Nfld. & Labrador·In Depth

Pay packets and privacy: Why Nalcor says contractor compensation at Muskrat Falls is off limits

Premier Dwight Ball says the lack of disclosure does not pass his “smell test,” while Nalcor Energy CEO Stan Marshall says the hiring practice is “not unusual” and he is restricted by law on what information he can release.

CEO says he is 'bound by the legislation'; premier won't rule out reviewing that law

Hundreds of 'embedded contractors' have worked on the megaproject. Nalcor says the details of their compensation are off limits to the public, citing provincial laws dealing with commercially sensitive information. (Courtesy Nalcor Energy)

Premier Dwight Ball says the lack of disclosure does not pass his "smell test," but Nalcor Energy CEO Stan Marshall says the hiring practice at Muskrat Falls is "not unusual" and he is restricted by law on what information he can release.

At issue is the number of contractors on the payroll for the Lower Churchill project, and how much taxpayers — who are footing the bill for the $12.7-billion endeavour — are allowed to know about their remuneration.

Last month, the St. John's Telegram reported there are almost 500 contractors currently working on Muskrat Falls — workers who are hired through external companies, and are not Nalcor employees.

Nalcor says that arrangement means their compensation is deemed commercially sensitive, and off limits under the provincial law that helped set up the energy corporation nearly a decade ago.

The information would be on the public record if they were hired as employees of the Crown corporation.

Nalcor CEO Stan Marshall says such contract arrangements are common for projects like this one, with many of those workers in specialized fields like engineering or construction and project management.

Nalcor CEO Stan Marshall says if it was up to him, he would release the information, but he is bound by law. (Sherry Vivian/CBC)

Marshall stresses that the law, as currently written, leaves him with no choice on what can and cannot be disclosed.

"It's not that I don't want to release some of this information," he told CBC News in an interview.

"If it was up to me, I'd release it. But I'm bound by the legislation."

He said there is a simple solution.

The government has the ultimate power to decide what is and is not covered by provincial transparency laws.

"If they change the legislation, I'll go along and disclose it," Marshall said.

The premier, meanwhile, is not ruling anything out at this point, but indicated he is still waiting to hear back from Nalcor about concerns he raised last month.

"Our government will review any legislative change that may be necessary to encourage openness and transparency at Nalcor," Ball said in an emailed statement to CBC News.

'A lot of professionals incorporate themselves'

While the Telegram first raised the issue last month, CBC News has now uncovered new details on the companies that employ at least eight top managers and directors working on the Lower Churchill project.

Both media outlets had separate access-to-information requests working their way through the system.

CBC has discovered that companies employing people near the top of the Lower Churchill organization chart are not recruitment agencies or multi-national giants.

Instead, they are personal or family companies housed at what appear to be the residential addresses of those top managers and directors.

Crown-owned Nalcor Energy is working to develop the Muskrat Falls hydro megaproject. (CBC)

"A lot of professionals incorporate themselves," Marshall said. "That is not unusual."

He acknowledged that hiring people that way provides no particular benefit to Nalcor. But there are potential tax and other advantages to those on the other side of such arrangements.

And in this case, it also means that rules regarding commercially sensitive information apply to their pay packets.

'Their rates for example may be sensitive' 

In a nutshell, here is how it works.

If Nalcor hires John Doe as an employee, Doe's compensation will be publicly disclosed — assuming he makes more than $100,000 per year.

However, in many cases related to the Lower Churchill, Nalcor isn't hiring John Doe. It is paying a company on a contract basis to hire John Doe for them.

So in some of those circumstances, John Doe is setting up a company — for example, John Doe Inc. — with a sole director, John Doe, or family directors — John Doe and Jane Doe.

That company invoices Nalcor for John Doe's work. But Nalcor says it can't reveal what it is paying John Doe the person, because it would breach the commercial sensitivity of the company John Doe Inc.

Nalcor CEO addresses contractor compensation

6 years ago
Duration 2:03
Nalcor CEO Stan Marshall explains why some Muskrat Falls salary details can't be made public

So how does that make any sense?

"It may not make much sense to you, but if you're looking at it from the standpoint of the person doing the contract, their rates, for example, may be sensitive," Marshall said.

"Because they're competing with other people — they've given us a rate, which may be higher or lower than they're giving another person — so I can understand why they would want it protected. And that's what drives it. If this is information that the contractor would normally keep confidential, then under the legislation we are required to keep it confidential as well."

And how do taxpayers know they are getting the best bang for their buck?

"There are a lot of checks and balances here," Marshall said.

"At the end of the day, the big picture comes out. For example, how much is this costing — the management of the project, compared to the overall costs? So there are a lot of parameters you can use. And all the parameters will be there. And at the end of the day, it will show that we're within reasonable bounds."

He added, "We do have some of our own people in there." Among them are three full-time auditors who have been focusing on compensation issues since last year.

'I have to abide by the legislation'

But it's not only the compensation of those top-level managers that is secret — In this case, so are the names of their companies.

Nalcor says it generally releases the names of the companies with whom it contracts. But for this request, because the identities of those senior managers and directors are already known, Nalcor says it would breach privacy laws to reveal their employment status with a private company.

I have to abide by the legislation that's in place.- Stan Marshall

Marshall acknowledged that similar information about the work histories of others — including himself — is posted on Nalcor's own website.

He stressed that he is following legal advice in this instance.

"There's always this debate, as to what's to be protected, and what's to be disclosed," Marshall said.

"That's a debate in principle, but it also is covered in the legislation. So I have to abide by the legislation that's in place."

Work at Muskrat Falls is behind schedule and over budget. (Nalcor Energy)

While Nalcor has classified that information about managers' companies as secret, CBC News found some of it posted online, on the business networking website LinkedIn.

A search of public databases and corporate registries turned up more information linking those eight executives and managers to their companies — either as sole directors, or jointly with family members.

CBC News confirmed that those personal or family firms are the same ones contracted by Nalcor by matching HST numbers on invoices obtained through access-to-information with company names in a federal tax database.

'Open their guts to the world'

The issue of commercially sensitive information at Nalcor was debated in the House of Assembly nearly a decade ago.

At the time, the government of the day gave a more narrow definition of what it would protect from public purview.

Then-premier Danny Williams explained to the legislature there needed to be restrictions on the release of commercially sensitive information provided to the then-fledgling energy corporation.

These are commercially competitive proprietary pieces of technology that are not allowed to be disclosed.- Premier Danny Williams, May 28, 2008

Those restrictions override freedom of information laws, and even aspects of the auditor general's act.

"For example, if ExxonMobil have some new technology that allows them to drill 300 miles below the ocean that is proprietary and no other company has it, if that was disclosed in a partnership with us and the auditor general is aware of it, he is not allowed to disclose that type of information," Williams told the House of Assembly on May 28, 2008.

"These are commercially competitive proprietary pieces of technology that are not allowed to be disclosed."

Under questioning from the then-Opposition Liberals, Williams stressed the law would allow the energy corporation "to enter into partnerships with major corporations around the world who would not enter into these partnerships if not for these provisions."

He added: "I can tell you quite clearly that if these provisions are not there then the Hebron deal would go down, because the equity provision that is in the Hebron deal would not take place if corporations like ExxonMobil and Chevron and Petro Canada and Norsk Hydro had to open their guts to the world."

That same section of the law is what Nalcor is now citing to block the release of what it is paying contractors to work on the Lower Churchill.

Premier has written to Nalcor board

Days after the initial Telegram report last month, Premier Dwight Ball expressed skepticism about Nalcor's stand.

"It doesn't pass my smell test that this is commercially sensitive," the premier told reporters.

"Once we put money out there, taxpayers' money, simply saying that it's commercially sensitive doesn't pass the smell test for me. I'll be reaching out to the board of directors to get to the bottom of this."

By law, the board must certify Nalcor's decision to withhold the information.

Newfoundland and Labrador Premier Dwight Ball told reporters last month that Nalcor Energy's refusal to disclose the rates it pays contractors for the Muskrat Falls hydroelectric project doesn't pass his 'smell test.' (Todd O'Brien/CBC)

In a statement issued Friday, the premier indicated that he is still waiting for the board to meet.

"Of course we must allow the board a reasonable amount of time required to review my concerns," Ball said.

The premier also noted that the information and privacy commissioner is looking into the matter, and he "would like to see the results of that process."

He did not rule out potential legislative changes.