Politics

Fortier's role in federal building sale questioned

The Conservative government's controversial $1.3-billion sale of federal office buildings in 2007 has once again embroiled former cabinet minister Michael Fortier over his role in the deal.

The Conservative government’s $1.3-billion sell-off of federal office buildings in 2007 has once again landed former cabinet minister Michael Fortier in controversy over his role in the real estate deal.

Michael Fortier, the then international trade minister, talks with reporters after he was sworn in to his post in 2008.

Fortier’s involvement in the program as public works minister, and his political and business ties to two of the key players, caused a stir even before the agreement was inked three years ago.

The controversy reignited this week when New Democratic MP Paul Dewar accused the former public works minister of having "apparently manipulated the request for proposals on the largest real estate government deal in decades."

Dewar raised the issue in the House of Commons after new information surfaced in an unrelated wrongful-dismissal suit against the government by one of the senior bureaucrats involved in the federal property sell-off. 

Royal Bank and the Bank of Montreal each earned about $3.75 million in commissions from the mega-sale of government offices during the first term of Prime Minister Stephen Harper’s government.

Dewar noted that key players representing the two banks had "close connections" to both the Conservative Party and Fortier. The NDP MP demanded the government conduct a forensic audit of the contract "to ensure accountability to Canadians."

The current public works minister, Rona Ambrose, dismissed Dewar’s allegations as "not based in fact," but she promised to investigate the matter anyway. 

Links were inevitable, Fortier says

In an interview with the CBC last month, Fortier said there was nothing improper about his ties to key players in the deal — in fact, the connections were inevitable.

A Montreal investment banker who left politics after being defeated in the 2008 election, Fortier said that at the time he was minister, he knew "almost every single banker" involved in bidding for the lucrative deal.

Fortier also had close political ties to two employees of the winning bidders — Rick Byers, then an expert in government privatizations for the Bank of Montreal, and Michael Norris, an equally qualified investment banker at the Royal Bank.

At the time, Byers had been a prominent Conservative fundraiser, organizer and provincial candidate with links to Fortier dating back to the 1998 Progressive Conservative leadership race.

All three investment bankers also worked on Scott Brison’s campaign for the PC leadership in 2003 — Byers and Fortier were his campaign chairmen; Norris was one of the chief fundraisers.

Brison lost the leadership, but defected to the Liberals in time for their 2004 federal election victory. He then became public works minister in Paul Martin’s government.

Almost immediately, Brison announced the new Liberal government wanted to get out of property management and would consider selling off billions of dollars of federal office buildings to private operators.

The first phase of the project was to have been a $3-million study of all federal real estate, followed by a possible sale of buildings.

Byers headed BMO’s bid for the study, but for reasons never explained publicly, all of the bids were subsequently disqualified and the project was shelved.

Norris and RBC reportedly decided not to bid at all after Brison announced that the company doing the study wouldn’t be allowed to bid on any of the later, and far more lucrative, contracts to sell the properties. 

Resurrection

The project was resurrected when the Conservatives came to power in 2006. Fortier was appointed to the Senate and named public works minister.

Six months later, Fortier’s department awarded a $250,000 contract to two winning bidders — RBC and BMO — to study which federal properties should be sold.

It also gave the two banks the right to broker the actual real estate sales for hefty additional commissions.

The final deal involved nine properties that sold for $1.35 billion and generated about $10 million in commissions: $3.75 million each to BMO and RBC, and another $2.5 million to Deutsche Bank Securities, which was brought in by Public Works to vet the final sales.

In his recent interview with CBC, Fortier said he only directed his department to select two bidders, not which ones.

"The transaction was going to be north of a billion dollars," Fortier told the CBC last month. "It was quite typical in transactions of that size to have more than one adviser."

He denied having had any role in choosing either BMO or RBC, and didn’t recall speaking to either Byers or Norris during the process.

Blow-up

The issue blew up in the Commons again this week after recent testimony in an unrelated wrongful dismissal case appeared to contradict Fortier.

A senior bureaucrat named Douglas Tipple had been chairing a committee overseeing the process leading to the federal property sale when he was abruptly fired over unrelated issues.

During subsequent testimony before the federal Labor Relations Board, Fortier’s former deputy minister, David Marshall, said Tipple’s committee had initially chosen only the Bank of Montreal to oversee the property-disposal project.

The board wrote in its decision: "Asked why the Royal Bank also became involved if the committee had selected only BMO, he [Marshall] explained that the minister had intervened and had wanted the RBC to also be involved."

The board noted the move "created a conflict" with Tipple, who "did not agree with the minister’s decision since the RBC charged significantly higher fees than the BMO."

In his recent interview with the CBC, Fortier openly admitted he took a hands-on approach to the program to sell federal buildings, but said the actual bidding process was left in the hands of the bureaucracy.

"I wasn’t going to recuse myself from leading the transaction for the department," Fortier said. "I didn’t get involved, and wouldn’t have, regardless, in selecting the banks."

Fortier said he was just putting his own skills to use. "I think when we have people in government who have certain skill sets, I think we should use those skill sets," Fortier told the CBC.

"One of my skill sets was M&A" — mergers and acquisitions — "so I did work with the department. Perhaps I was more hands-on than others would have been, but I did this, this was a common project.

"So I didn’t impose my views, but I wanted to get things done," Fortier said.

As a result, Fortier says, the $1.3-billion deal closed just before the commercial real estate market went into a deep slide.

Fortier recently joined RBC Capital Markets as its vice-chairman.