Report of the Mississauga Judicial Inquiry Updating the Ethical Infrastructure

report of the mississauga judicial inquiry Updating the Ethical Infrastructure

The Honourable J. Douglas Cunningham Commissioner

Updating the Ethical Infrastructure

report of the mississauga judicial inquiry Updating the Ethical Infrastructure

The Honourable J. Douglas Cunningham Commissioner Copyright © 2011 City of Mississauga library and archives canada cataloguing in publication Mississauga Judicial Inquiry (Ont.) Updating the ethical infrastructure. J. Douglas Cunningham, commissioner. Report of the Mississauga Judicial Inquiry. Available also on the Internet. Includes bibliographical references. isbn 978-0-9878012-0-3 1. Mississauga Judicial Injury (Ont.). 2. Conflict of interests – Ontario – Mississauga. 3. Governmental investigations – Ontario – Mississauga. 4. Municipal government – Ontario –Mississauga. I. Cunningham, J. Douglas II. Title. jl269.5 c6 m57 2011 353.4'6309713 c2011-909052-x

Copies of this publication are available at the Office of the City Clerk City of Mississauga 300 City Centre Drive Mississauga, on l5b 3c1 and online at www.mississaugainquiry.ca CONTENTS

Abbreviations and Acronyms / xv

INTRODUCTION

Overview / 1 The Principles of the Inquiry Process / 3 Setting Up the Inquiry / 3 Public Inquiries / 4 Background to This Inquiry / 4 The Inquiry Process / 5 Appointment of Commission Counsel / 5 Communications and Media Relations Officer / 5 Document Management / 6 Document Management Software / 6 Signature / 6 Signature Court / 7 Transcend / 8 Confidentiality Undertakings / 8 Infrastructure / 8 viii Contents

Hearing Room / 8 Offices / 9 Mississauga Judicial Inquiry Website / 9 Terms of Reference and Rules of Procedure / 9 Standing and Funding / 10 Applications for Standing and Funding / 10 Decisions on Standing and Funding / 10 Investigation / 11 Document Production / 11 Witness Interviews / 11 Notices of Alleged Misconduct / 12 Hearings / 13 Documentary Evidence / 13 Oral Evidence / 13 Expert Panel / 14 Cross-Examination / 15 Mayor Hazel McCallion’s Evidence / 15 Questions from the Commissioner / 15 Submissions / 16 Addendum / 16

PHASE I – THE ENERSOURCE TRANSACTION

1 Change to Energy Structure in Mississauga / 17 Energy Structure in Ontario / 17 Electricity Act, 1998 / 19 Request for Proposals / 20 Key Participants for the City / 20 Procedure / 20 Proposals Received and Considered / 20 Recommendation to Accept the Borealis Proposal / 22

2 Negotiation with Borealis / 23 Pre–March 29, 2000, Negotiations / 24 Contents ix

The “Put” / 24 Corporate Governance / 27 Post–March 29, 2000, Negotiations and Authority to Instruct Solicitors / 29 Strategic Alliance Agreement / 30 April Press Release / 30 Strategic Alliance Amending Agreement / 31 Further Change to Energy Structure / 32 Final Negotiations / 33 David O’Brien Appointed President of Enersource / 33 Council Approval, November 29, 2000 / 34 Instructions from omers, December 3, 2000 / 35 Communication Changes, December 4, 2000 / 37 Reasons for the Borealis Veto and Its Importance to omers / 38 Should Council Have Been Advised of the Change? / 40 Could Council Have Been Advised of the Change? / 41 Was Council Advised of the Borealis Veto? / 42 Execution of Deal, December 6, 2000 / 44 Post–December 6, 2000 / 45

3 Problem, Investigation, and Proposed Changes / 46 The Penny Drops: Borealis’s Veto Discovered by Council / 46 City Council’s Investigation / 47 Contact with Mr. Houston / 47 Contact with Mr. Lever / 49 Council Meeting, October 24, 2007 / 50 The Jeffrey Singer Investigation / 51 Correspondence in December 2008 / 51 Proposed Changes to the Shareholders’ Agreement / 52

4 Governance Issues Raised by the Enersource Transaction / 54 Analysis / 54 Duty to Advise Council / 54 Mr. O’Brien’s Two Roles / 56 Summary of Key Findings / 56 x Contents

Recommendations for Phase I / 57 Informal Meetings of Council / 57 Minutes of In Camera Meetings / 57 Importance of Involvement of City Solicitor / 59 Certification of Personal Familiarity / 59

PHASE II – CITY CENTRE LAND AND WORLD CLASS DEVELOPMENTS

5 Factual Background / 61 City Council’s Goal of a Five-Star Hotel / 62 The Mayor’s Vision / 63 Complementary Use Important to City Centre Land Owners / 64 World Class Developments / 66 Corporate History of wcd / 67 Peter McCallion’s Interest in wcd / 68 Leo Couprie’s Role / 74 Declaration of Trust / 76 omers’ and aim’s Understanding of Peter McCallion’s Interest in wcd / 78

6 The Mayor’s Role in the wcd Project / 82 Introduction / 82 Steps Taken, October 2005 Onward / 83 Steps Taken to Secure the Land / 83 Impact of the Mayor’s Intervention on the Relationship between the Co-owners / 85 The Mayor’s Knowledge of Peter McCallion’s Interest in wcd / 90 Witnessing the Signing of the Declaration of Trust and the Loan Agreement / 92 Understanding of the Nature and Extent of Peter McCallion’s Interest / 94

7 Development of a Four- or Five-Star Hotel / 96 Agreement of Purchase and Sale / 96 Contents xi Hotel Conditions in the aps / 96 Amending Agreement – Extension Rights / 99 Planning Approvals and the City / 103 Site Plan Approval / 103 Dealings of City Staff withwcd / 105 Increase in Development Charges / 105 wcd and Application Fees / 106 Actions of City Staff / 107 Failure to Lift the H Designation / 107 The Mayor nda City Staff / 108 wcd’s Financial and Other Difficulties / 108 Tony DeCicco and wcd / 109 Meeting the Hotel Conditions / 109

8 The Mayor’s Involvement in Negotiations between wcd and the Vendors / 113 The Mayor and the Conditional Period in the Agreement of Purchase and Sale / 114 The Amending Agreement / 114 The Mayor’s Involvement in the Extensions / 119 The Practical Effect of the Mayor’s Role / 129

9 The Optics of Peter McCallion’s Interest in wcd / 132 Senior Managers of omers / Oxford / 132 Actions of omers / Oxford in Response to Pressure from the Mayor / 133 omers’ / Oxford’s Knowledge of Peter McCallion’s Role in wcd / 134 aim’s Knowledge of Peter McCallion’s Role in wcd / 134

10 Other Matters / 134 Declaration of Conflict of Interest at Council / 134 City Council Meeting, April 23, 2008 / 135 City Council Meeting, May 21, 2008 / 135 The Mayor’s Involvement in wcd’s Internal Affairs / 136 xii Contents

11 Termination of the Agreement of Purchase and Sale / 138 Sheridan College’s Interest in the City Centre Land / 139 Peter McCallion’s Interest in wcd Revealed / 140 The Settlement / 142 David O’Brien as Emissary of the Mayor / 142 David O’Brien as Emissary of omers / 143

Phase II – Analysis 12 Conflict of Interest / 146 The Common Law Framework / 146 Did the Mayor Face a Conflict of Interest? / 149 The Mayor’s Knowledge of Peter McCallion’s Interest in wcd / 149 The Mayor’s Approach to a Conflict of Interest / 150

13 Appropriate Action Given Conflict of Interest / 151 The Mayor and Due Diligence / 151 The Mayor and Council / 152 The Mayor and the Vendors / 153 The Mayor and World Class Developments / 154

14 David O’Brien, City Officials, and Conflict of Interest / 154 David O’Brien’s Many Hats / 154 Appropriate Action in the Circumstances / 155 City Staff and Conflict of Interest / 155 Appropriate Action for City Officials / 156 Impact of the Conflicts of Interest / 156 Impact on the Vendors / 156 Necessity for the Inquiry / 157

Recommendations for Phase II / 157 Existing Framework of Accountability / 158 The Municipal Act, 2001 / 158 The Municipal Conflict of Interest Act / 158 Municipal Codes of Conduct / 159 Contents xiii

The Mississauga Code of Conduct / 160 Integrity Commissioner / 162 Lobbyist Registry / 164

Recommended Amendments to the Municipal Act, 2001 / 165

Recommended Amendments to the Municipal Conflict of Interest Act / 166 Create a Preamble / 166 Clarify Scope of Act / 167 Remoteness / 167 Knowledge of the Elected Officials / 169 Clarify Who Is Captured by the mcia / 169 Beyond Pecuniary Interests / 170 Clarify Types of Meetings Captured by the mcia / 171 The Need for Lesser Sanctions / 171 Standing to Pursue Claims / 172 Themcia and the Integrity Commissioner / 173 Coordination with Municipal Codes of Conduct / 173

The Mississauga Code of Conduct / 174 Preamble / 174 Changes to the Conflict Rules / 174 Integrity Commissioner / 176 Improper Use of Influence, Gifts, and Benefits / 177 Lobbyists / 178 Procedural Fairness / 178 Sanctions / 179

Office of the Integrity Commissioner / 179

Lobbyists / 182

Additional Considerations / 182 Publication of All Known Conflicts of Interest / 182 Comfort Letters / 183 The Municipal Councillor’s Guide / 183 xiv Contents

Effect of Such Reforms in This Case / 184 On the Mayor / 184 On David O’Brien / 184 On City Staff / 185 On City Council / 185 On the Vendors / 185

CONCLUSION / 187

Endnotes / 189

ADDENDUM – THE MAYOR’S BENEVOLENT ACTIVITIES / 215 Agreed Statement of Facts / 216 The Mayor’s Gala / 216 The Hazel McCallion Fund for Arts, Culture and Heritage / 217 The Hazel McCallion Foundation for the Arts, Culture and Heritage / 220 The Hazel McCallion Charitable Fund / 220 Appendix 1 / 222 Appendix 2 / 230

APPENDICES A Terms of Reference / 233 B Rules of Procedure / 237 C Commissioner’s Ruling on Standing, December 14, 2009 / 243 D List of Exhibits / 247 E Commissioner’s Opening Remarks, December 14, 2009 / 307 F Witnesses and Other Key Individuals and Organizations / 311 G Enersource Shareholders’ Agreement (Exhibit 50) / 317 H Oxford’s Mississauga City Centre Land Holdings (Exhibit 96) / 340 I Agreement of Purchase and Sale, Blocks 9 and 29 (Exhibit 97) / 341 J Ruling on Conflict of Interest, July 8, 2010 / 372

Acknowledgements / 383 ABBREVIATIONS AND ACRONYMS

aim Alberta Investment Management Corporation aps agreement of purchase and sale h designation term used to signify a holding on land hmc Hydro Mississauga Corporation isf infrastructure stimulus fund mcia Municipal Conflict of Interest Act meus municipal electric utilities obca Ontario Business Corporations Act oeb Ontario Energy Board omb Ontario Municipal Board omers Ontario Municipal Employees Retirement System rfp request for proposal wcd World Class Developments

INTRODUCTION

Overview On November 11, 2009, Mississauga City Council adopted a resolution requesting that the Chief Justice of the Superior Court of Justice appoint a judge to conduct an inquiry pursuant to section 274 of the Municipal Act, 2001. Chief Justice Heather Forster Smith named me to assume the role of Commissioner. The Inquiry was asked to look into two broad areas: the first concerned issues in connection with the December 2000 Enersource Hydro Mississauga (Enersource) shareholders’ agreement to which the city was a party. In 2000, Hydro Mississauga was newly incorporated and commercially restructured to become Enersource Hydro Mississauga, the second largest electricity supplier in Ontario. The second area involved the acquisition by the City of Mississauga of approximately 8.5 acres of land in the city centre (the City Centre Land). Commission counsel and I determined that, for efficiency, we would examine the Enersource questions in Phase I of the Inquiry, and the City Centre Land questions in Phase II. In the course of their work, Commission counsel and our investigators interviewed nearly 100 people and collected about 35,000 documents. In the end 35 witnesses testified over 38 days of evidence. I have found that errors were made in relation to the Enersource transaction. The city manager, David O’Brien, for example, failed to discharge his duty to communicate a significant change in the terms of the city’s transaction

1 2 Updating the Ethical Infrastructure with Borealis Energy Corporation to Mayor Hazel McCallion and members of city council. I believe some limited changes to the city’s practices need to be made, but I do not find it necessary to make extensive recommendations in relation to the good governance of Mississauga. The actions of the mayor in relation to the City Centre Land and the proposed hotel and convention centre project raise significant concerns and require substantial recommendations. I have made these findings with a measure of regret. I acknowledge the mayor’s unique history of public service to Mississauga and indeed to Canada. I believe that, to some extent, these issues have their beginnings in Mississauga’s rapid growth from its origins as an amalgamation of several small towns led since 1978 by the same dynamic mayor. From what I have seen, the city’s amenities and certainly its public service are first-rate. What might be referred to as Mississauga’s ethical infrastructure requires modernizing. The city and the mayor had for some time identified the construction of an upscale hotel and convention centre as an important public project for Mississauga. To achieve this end, Mayor McCallion caused negotiations to begin between the co-owners of the City Centre Land and her “preferred group” of purchasers, the corporation World Class Developments (wcd), in the fall of 2005. She was instrumental in attracting an experienced developer to join wcd. After the co-owners had closed their deal with wcd and economic conditions had softened, she exerted pressure on the co-owners to relax certain conditions. When a new investor became involved in wcd, she vouched for him and advanced positions on his behalf. The mayor’s son, Peter McCallion, was a participant in thewcd transaction from the outset. On any view of the evidence, he stood to gain substantially (with a potential upside of tens of millions of dollars) on the successful completion of the hotel and condominium project. The mayor knew at the very least that he was the real estate agent for the purchaser, a role that would, in one fell swoop, have earned her son more money than he would otherwise have earned over the course of many years. I have found that the mayor knew her son had a financial role which extended beyond acting as the purchaser’s agent. Notwithstanding Ms. McCallion’s knowledge of her son’s involvement, she promoted wcd at every step of the transaction. At one point she contacted the chief executive officer of one of the co-owners to orchestrate a meeting that she Introduction 3 attended with a senior officer of the co-owner and Mr. McCallion. When the co-owners terminated the wcd transaction and litigation ensued, the mayor became involved once again. She dispatched David O’Brien, a former city manager, to seek a resolution of the litigation, notwithstanding that doing so placed him in an intractable conflict of interest. Mr. O’Brien was also acting as an emissary of one of the co-owners. For reasons that remain opaque to me, the ceo of one of the co-owners then settled the litigation without the knowledge of the other on terms that were quite advantageous to wcd. None of the mayor’s private actions on behalf of wcd was known to members of council, to municipal officials, or to the public at the material time. Given her son’s pecuniary interest in the transaction, it was improper for the mayor to repeatedly use her public office on behalf of wcd, from the perspective both of the common law and of common sense. The mayor ought to have given the wcd project a wide berth. A member of council cannot promote the financial interests of family members and must avoid any appearance of impropriety. Citizens have a right to expect that a mayor will act impartially and without favour, as the oath of office requires. It is no answer to say that a public office holder may advantage a relative to the extent that it is in the fur- therance of the greater good. To sanction this principle could, over time, lead only to the erosion of public trust in municipal government. I have found that substantive legislative reforms are necessary at the provincial level. I have also proposed changes to the Mississauga Code of Conduct and attempted to define a role for an integrity commissioner in Mississauga.

The Principles of the Inquiry Process Setting Up the Inquiry The design and operation of the inquiry process pose several unique challenges. The Terms of Reference, which define issues to be investigated and reported on, cannot be expected to advise on how to begin. I was fortunate in that I could look to my colleagues who have spearheaded other public inquiries for guidance. To assist me in designing our approach, I considered the processes established in other inquiries. I am especially grateful for the clear and concise procedures outlined by Justice Stephen Goudge in his 2008 Inquiry into Pediatric 4 Updating the Ethical Infrastructure

Forensic Pathology in Ontario Report. Justice Goudge recognized the importance of designing a process that best achieved “a fair, efficient, and transparent inquiry.”1 He detailed his process in the anticipation that many of his ideas might be useful to subsequent public inquiries. For that I am most apprecia- tive. I received considerable guidance, as well, from the inquiries conducted pursuant to the Municipal Act by my former colleagues the Honourable Ron Sills (Waterloo Judicial Inquiry – rim Park Financing Agreements) and the Honourable Denise Bellamy (Toronto Computer Leasing Inquiry / Toronto External Contracts Inquiry).

Public Inquiries A public inquiry in Canada is an official review ordered by government of specific events or actions. Its dual purpose is to establish the facts and the causes of the subject matter of the inquiry and to make recommendations that might prevent a recurrence of unfavourable features. A public inquiry is not a civil or criminal court of law, and the role of a commissioner is not to reach conclusions regarding the civil or criminal liability of any person involved in the subject matter of the inquiry. By its very nature, a public inquiry is investigative in its approach. It encourages an open and public process. Every public inquiry is unique, shaped by its mandate, and while prior inquiries do provide guidance, each commissioner must design his or her own rules and procedures. That is a daunting task. Most commissioners of recent public inquiries have looked to three fundamental principles to guide the inquiry process: fairness, efficiency, and transparency. Commission counsel and I adopted these same principles and applied them at each stage of the Mississauga Judicial Inquiry process.

Background to This Inquiry This Inquiry was conducted in two phases. Phase I focused on the Enersource transaction, and Phase II on the City Centre Land deal. My Report follows the same structure, and my analysis and findings for each phase of the Inquiry are reflected within the body of the Report. Introduction 5 The Inquiry Process Appointment of Commission Counsel One of the most important decisions I undertook at the outset of the Inquiry was to appoint capable and qualified Commission counsel to work closely with me through every stage of the process. As noted by Associate Chief Justice Dennis O’Connor, “[t]he commissioner appoints his or her counsel and it is often said, aptly I think, that a commission counsel becomes the alter ego of the commissioner.”2 I am privileged to have been able to appoint William McDowell of Lenczner Slaght Royce Smith Griffin llp (Lenczner Slaght) as lead Commission counsel to represent the public’s interest at this Inquiry. Mr. McDowell’s considerable experience as a senior public servant in the design as well as the conduct of public inquiries made him a superior choice as Commission counsel. I am grateful for his advice and candour, as well as his insights, professionalism, and sensitivity. His marvellous sense of humour made our days in Mississauga a delight. I was also fortunate to have two talented and dedicated counsel assisting Mr. McDowell. Naomi Loewith, also of Lenczner Slaght, acted as associate Commission counsel, ably assisting Mr. McDowell in leading evidence at the Inquiry. Yashoda Ranganathan, also of Lenczner Slaght, acted as associate Commission counsel. I am most grateful to them both.

Communications and Media Relations Officer Peter Rehak was retained as the Commission’s communications and media relations officer. His wealth of experience with public inquiries and excellent media contacts made him an exceptional choice. His duties included drafting press releases, coordinating with the media regarding their attendance during the Inquiry, and responding to the media regarding the inquiry process. In addition, Mr. Rehak was responsible for overseeing the design and operation of the Inquiry’s media room and for designing and maintaining the Inquiry’s website. He also provided assistance to citizen journalists who sought partici- patory rights in the Inquiry. 6 Updating the Ethical Infrastructure Document Management The Commission retained the services of Potter Farrelly & Associates (Potter Farrelly). Kearren Bailey acted as consultant and project manager for Potter Farrelly. Together with the it team from Lenzner Slaght, Ms. Bailey and Potter Farrelly provided invaluable assistance to the Inquiry from its incep- tion, through the public hearing phase, and afterwards during my preparation of this Report. The Mississauga Judicial Inquiry is the first fully electronic public inquiry in Canada.* Ninety-eight per cent of all documents used during this Inquiry were created, stored, and exchanged electronically. At the hearing phase, evidence management was conducted in real time. The benefits of this process were evident in the speed and efficiency with which documents were found and presented electronically – a maximum of five seconds to display a requested document to the entire hearing room. In addition, the public gallery and the press were able to view the documents put to witnesses and tendered into evidence. This presentation was facilitated by Elizabeth Miller and Alex Parkes, who acted as e-court directors for the Inquiry, and by Jovana Velimirovic, e-court operator. Parties granted standing were required to produce all relevant documents in their possession, as well as those having a semblance of relevance to the subject matter of this Inquiry. As a result, the Commission received a considerable volume of materials almost from the outset. In total, 6,373 records formed the Court Book, selected from approximately 35,000 documents submitted by the parties. Document Management Software Three applications were used for this Inquiry: Systematics Signature, Signature Court, and Transcend.

Signature Signature is a case management and document review application. All documents delivered to the Commission by the parties with standing were entered into the Signature system and formed the Inquiry database. Members of the Commission team and the forensic consultants were provided with secure

* Other public inquiries have run electronically in the preparation stage but used paper for the hearing phase. Introduction 7 access to the database. This access allowed them to review, tag, and highlight relevant portions of the evidence and to collect documents used in the interviewing of witnesses and preparation of final witness statements. Signature was used to review all documents delivered to the Commission and to determine their relevance. Audit and statistical reporting was provided to show the review team’s progress (the number of documents reviewed versus the number unreviewed or found irrelevant), as well as to indicate why documents had been coded by the review team in a particular fashion. The Signature system was also used to create a detailed chronology of events, including the evolution of the Enersource agreement for Phase I of the Inquiry. Once the Inquiry database was established, the Commission team identified and tagged all documents for import into the Court Book for the oral hearings for Phases I and II of the Inquiry. All transcripts, witness statements, and closing submission briefs were imported into the Court Book as well. Signature’s reporting feature allowed full statistical reporting regarding the documents delivered by each party, the number of records included in the Court Book, and the number of records tendered as exhibits during the hearing.

Signature Court Signature Court is the title given to the court presentation and evidence management module of Signature. Fully secure and private access to the Court Book was provided to counsel for all parties with standing. Signature Court has a number of useful features. It allowed for the display of evidence to the Commissioner, witnesses, all participating counsel, the public gallery, and the press room. An audit report of the displayed documents, noting the witness, time, and date, was generated. Full and contemporaneous evidence management allowed for exhibit numbers to be added to documents, as well as the witness, tendering counsel, and date. In addition, Signature Court became a repository for cited cases, Inquiry Rules and Procedures, participant details, the Inquiry calendar, and the Inquiry’s email address. The system also allowed for the integrated import of additional hardcopy evidence as presented in the hearing room for immediate upload and display. This facility provided Commission counsel and me with great assistance during the hearing phase. 8 Updating the Ethical Infrastructure

Transcend Transcend is a transcript management application. Secure and private access was provided to counsel for all participating parties. Transcend was also used by the Commission team in reviewing all transcripts and in importing references for inclusion in the final Report. Transcend allowed members of the Inquiry team to see annotations made by other team members. It also allowed for annotations and coding of the evidence by issue. Through Transcend, the transcript of evidence provided hyperlinks to the exhibits.

Confidentiality Undertakings All documents received by the Commission were treated as confidential, unless and until they became part of the public record as exhibits. All summaries of the witnesses’ anticipated evidence prepared for the Commission were also subject to confidentiality undertakings. The parties with standing were required to sign undertakings that they would use each witness summary for the purposes of the Inquiry only.

Infrastructure Hearing Room Hearings were conducted at 950 Burnhamthorpe Road West in the City of Mississauga (Burnhamthorpe site). The hearing room provided a large public gallery. There was also a separate media room adjacent to the hearing room, where those from the media were able to listen to the testimony and view the proceedings and documents via live video feed. As a result, they were able to observe the proceedings while speaking with each other or their offices, without disturbing the hearings. The hearing room was able to accommodate approximately 18 counsel. Each counsel table had three electronic monitors that displayed the documents which were before a witness. I wish to reiterate my appreciation to the document managers for their assistance in this regard. Transcripts were prepared daily by Wendy Warnock of TScript. The court reporter was Sue Kranz. The transcripts were posted on the Inquiry’s website within an hour or two of each hearing date. I am indebted to them both. The proceedings were televised live by Rogers Television. A live-stream feed was available on the Internet through the Inquiry’s website. I would also like to Introduction 9 extend my appreciation to Rogers and its manager Jake Dheer for setting up a process by which interested members of the public who were unable to attend the Inquiry in person were able to watch on their televisions or computers. Rogers Television covered the entire Inquiry at virtually no cost to taxpayers. This availability in my view truly reflected Rogers’ desire to serve as a community television network.

Offices The Commission’s working offices were located within the offices of Lenczner Slaght at 130 Adelaide Street West, Suite 2600, Toronto, Ontario. Contact information regarding the Commission’s offices was posted on the Inquiry website. The Commissioner and Commission counsel also had dedicated offices at the Burnamthorpe site, together with a large meeting room. These rooms provided an excellent working space for meetings among counsel and for witness preparation.

Mississauga Judicial Inquiry Website It is my hope that the Mississauga Judicial Inquiry website will remain live for five years from the release date of the Report. Although my Report is intended to be comprehensive, the intrepid reader wishing to understand the breadth of matters under discussion, see everything a witness said on a subject, or read the technical wording of a particular document under discussion will find it all on the website that was created, maintained, and hosted by Djordje Sredojevic of Autcon. Provision was made for those interested to watch the proceedings live on Rogers Television through the Commission’s website. In addition, video of the proceedings was archived on the Rogers website and transcripts were posted on the Inquiry’s website.

Terms of Reference and Rules of Procedure On November 11, 2009, the Mississauga City Council adopted specific terms of reference as set out in Resolution 0271-2009. Following my appointment as Commissioner of this Inquiry, and following my appointment of Commission counsel, we established Rules of Procedure to guide this Inquiry’s process. In the main, many of our rules were collected from other inquiries. 10 Updating the Ethical Infrastructure The Terms of Reference are reproduced at Appendix A, and the Rules of Procedure at Appendix B to this Report. They can also be found on the Inquiry’s website.

Standing and Funding Those persons, groups, corporations, or organizations who wished to participate in this Inquiry were encouraged to seek standing before the Inquiry. Requests for funding were made before me at the hearing on standing.

Applications for Standing and Funding Our Rules of Procedure (Rules) required those wishing to apply for standing and funding to provide written submissions explaining the reasons for their request and to present their submissions to Commission counsel by Thursday, December 10, 2009. The Rules also ensured that I was able to exercise my discretion in considering subsequent applications. Each application was reviewed for confidentiality issues, following which it was posted on the Commission’s website. In addition to written submissions, all who applied for standing and funding were provided with an opportunity to appear in person before me to explain the reasons for their request. Oral submissions on the applications for standing and funding* were heard on December 14, 2009, at the Burnhamthorpe site.

Decisions on Standing and Funding I delivered my Ruling on Standing on December 14, 2009, and it is attached as Appendix C to this Report. I granted standing to six of the nine parties who applied on the basis that those six had a substantial and direct interest in the subject matter of the Inquiry. Pursuant to the Terms of Reference, I did not have the jurisdiction to order the City of Mississauga to provide funding for legal counsel. However, I felt it was my duty to make recommendations to the city regarding the issue of funding for certain individuals whose participation at this Inquiry was integral to my mandate. The issue of funding in relation to one party, first requested on March 2, 2010, was raised again in a subsequent application on December 1, 2010. My

* Requests for funding were made before me at the hearing on standing. Introduction 11 rulings on both applications, delivered March 4 and December 3, 2010, respectively, were released and posted on the Inquiry’s website.

Investigation Document Production Commission counsel strove to provide to both witnesses and parties with standing all documents that were likely to be referred to during examination of a witness at least five days in advance of that witness’s testimony. In addition, with the assistance of the document managers, the documents were displayed via monitors at the counsel tables. Before receiving any documents to be used during the Inquiry, witnesses and parties with standing were required to sign undertakings that they would use the documents for the purposes of the Inquiry only. All exhibits filed at the Inquiry were posted on the Inquiry’s website to provide the public with access to all aspects of the proceedings.

Witness Interviews Commission counsel, as well as staff lawyers designated by Commission counsel, undertook to interview all persons appearing to have information or documents bearing on the subject matter of this Inquiry. Legal counsel for those interviewed were entitled, but not required, to be present during the interview process. To make the process more efficient and to remove any room for disagreement about what was said, interviews were transcribed with the consent of the witness. Almost all the witnesses consented. Copies of transcripts were maintained in confidence by the Commission, with a copy going to the witness and his or her counsel. I found this process to be an effective way of marshalling evidence about complicated matters in preparation of live testimony. Following each interview, Commission counsel, or the staff lawyer to whom the task was delegated, prepared a summary of the witness’s anticipated evidence. The witness (or counsel, where the witness was represented) received a copy of the summary for review and comment, following which it was shared with the other parties with standing at least five days before the witness’s testimony. A great number of people were interviewed by the Commission’s investigators but were ultimately not interviewed by Commission counsel. In some 12 Updating the Ethical Infrastructure instances the matters of concern to those involved lay outside the Terms of Reference. In others, Commission counsel, after meeting with investigative staff, determined that the information did not advance the purposes of the Inquiry. I met with Commission counsel regularly during the investigative phase.

Notices of Alleged Misconduct The Terms of Reference and the Canadian jurisprudence about inquiries do not allow me to make any findings of misconduct on the part of any person unless that person had received reasonable notice of the substance of the alleged misconduct and had been provided with an opportunity during the Inquiry to be heard in person or through counsel. My counsel issued a number of notices on a confidential basis. ThePublic Inquiries Act3 was amended in 2009 to provide the following:

34(6) No finding of misconduct on the part of any person shall be made against the person in any report of a person or body conducting the inquiry after the inquiry unless that person had reasonable notice of the substance of the alleged misconduct and was allowed full opportunity during the inquiry to be heard in person or by counsel.4

This provision, as well as the balance of the Public Inquiries Act, has been in force only since June 1, 2011. The Commission, nevertheless, followed this principle, given that such notices are issued by commissions of inquiry in order to conform to the common law principles of natural justice.5 These principles were incorporated into Rules 40 and 41 of the Inquiry and stipulated that notices would be issued on a confidential basis. During the course of the Inquiry, I directed that a number of notices be issued to witnesses coming before the Inquiry. Each notice was accompanied by a letter explaining the basis on which the notice was being issued. The recipient was assured that the delivery of the notice in no way signalled that any finding would be made against the witness. The witness was invited to respond by retaining counsel (most witnesses in any event had appeared with counsel). The notice recipient was also entitled to call further evidence or make submissions. Commission counsel made every effort to issue notices of alleged misconduct Introduction 13 well before the recipient testified. I believe the process of providing notices worked well in this Inquiry.

Hearings Documentary Evidence The Inquiry collected approximately 35,000 documents and relied on a large number of them during the hearings. The document managers were present in the hearing room every day and were able to upload documents in a way that immediately enabled counsel to view them. In the course of the Inquiry, 726 documents were filed as exhibits. A List of Exhibits is attached as Appendix D to this Report.

Oral Evidence All hearings were open to the public. I retained the discretion to hold hearings in the absence of the public where there were matters that might involve public security issues, intimate financial or personal details, or other matters where the desirability of avoiding public disclosure outweighed the desirability of an open hearing.* However, we did not encounter any situations where we felt it necessary to hold any portion of the hearings in the absence of the public. I directed in the standing and funding portion of the Inquiry that Peter McCallion be permitted to file a confidential affidavit concerning his resources and that he be cross-examined in private on this evidence. At the same time, Commission counsel was permitted to file any of this evidence that was relevant to the matters set out in the Terms of Reference. As previously noted, the hearings were held at the Burnhamthorpe site. My opening remarks are attached as Appendix E to this Report. Scheduled hearing dates were set Monday through Thursday from 10 a.m. to 4:30 p.m. I would like to thank all participants for their commitment to our schedule. Those testifying provided their evidence under oath or affirmation. Each witness was entitled to have his or her own counsel present while testifying, and this counsel was granted standing for the purpose of that witness’s testimony. Given that this Inquiry was conducted in two different phases, some witnesses were required to testify more than once.

* As per the Rules of Procedure, any party with standing requesting that any part of the hearing be held in the absence of the public was required to make the request in writing at the earliest opportunity. 14 Updating the Ethical Infrastructure Generally, the process involved Commission counsel calling and question- ing the witnesses who testified at the Inquiry. The following order of examination was, in the main, followed by all parties:

1 Commission counsel led the evidence of each witness and was entitled to ask both leading and non-leading questions. 2 Parties with standing then had an opportunity to cross-examine the witness. The order of cross-examination was determined on the basis of the examining party’s interest in the particular witness’s testimony. In other words, the examining party with the greatest interest was permitted to question the witness later than other less-interested examining parties. 3 Counsel for a witness examined the witness last, unless he or she questioned the witness in chief, in which case there was a right to re-examine. 4 Commission counsel retained the right to re-examine last.

Counsel for a witness was entitled to apply to lead his or her client’s evidence-in-chief. I granted the right to lead their evidence-in-chief to Mayor McCallion’s counsel and to Peter McCallion’s counsel. Michael Nobrega, ceo of omers, was examined in chief by omers’ counsel, and Tony DeCicco was examined in chief by counsel to wcd. In these instances Commission counsel cross-examined with a view to challenging but also clarifying the evidence of the witness in important areas. The expert witnesses provided their evidence as a panel, as discussed below. In total, 35 witnesses were called and provided oral evidence at this Inquiry. Some witnesses testified during both Phase I and Phase II. Specifically, 10 witnesses were called during Phase I, and 25 during Phase II. All efforts were made to ensure that the transcripts and evidence were made available as soon as possible for public viewing and were posted on the website accordingly. A list of witnesses is found in Appendix F to this Report.

Expert Panel The Commission was fortunate to have the assistance of three experts in ethics, municipal governance, and administrative law. Commission counsel recommended that we call our expert witnesses as a panel. Although not sworn, they provided their evidence together at the conclusion of the oral hearings. Having the experts provide their evidence in this way enabled us to Introduction 15 focus and elicit opinions on the main issues that needed to be addressed for the City of Mississauga. Much of their evidence provided important insight for my recommendations. The panel was composed of Professor David Mullan, Dean Lorne Sossin, and Dr. Greg Levine. They testified on December 15 and 16, 2010. All three gentlemen are scholars with extensive experience in municipal government, notably as integrity commissioners. Commission counsel questioned the panel as a whole, asking each witness in turn to comment on specific issues. Each party’s counsel then had the opportunity to pose questions to the panel in general or to individual panellists. All counsel posed thoughtful questions in a non-partisan exploration of the issues. Pursuant to the Rules of Procedure, a copy of any expert witness report was required to be served on all parties at least 14 days before the appearance of the expert at the public hearings. Professor David Mullan prepared a report, which was served on all parties in accordance with the Rules, was marked as Exhibit A in the Inquiry, and was made available on the Inquiry website. I am deeply grateful to our three experts for their insight, resourcefulness, and guidance.

Cross-Examination Where documents were to be used in cross-examination (or otherwise), parties were advised in advance. The documents were then provided to Commission counsel, the witness, and parties with standing.

Mayor Hazel McCallion’s Evidence We recognized at the outset that Mayor McCallion’s evidence had to be presented fairly and with as little inconvenience to her as a hands-on sitting mayor in a busy metropolis. We were able to accommodate the mayor’s schedule, and her evidence was heard toward the end of each phase of the Inquiry.

Questions from the Commissioner I did not hesitate to ask questions of witnesses and counsel to help clarify the testimony or submissions. I believed that seeking clarification, where needed, would help to focus the parties and counsel on the issues in which I was particularly interested. 16 Updating the Ethical Infrastructure

Submissions The parties with standing delivered written submissions based on a list of questions provided by Commission counsel, and a total of five days of the hearings were devoted to oral submissions, which were delivered at the end of Phase I and again at the end of Phase II. I sought further submissions from all parties concerning the mayor’s gala and related events. That was done in the spring of 2011 through the production of further documents from the city and the development of an agreed statement of facts.

Addendum The release of this Report was to some extent delayed in order to enable the Commission to consider an issue relating to the mayor’s gala. As a result of concerns first raised by the media, it became evident to the Commission that evidence given at the Inquiry regarding the mayor’s gala might have been inaccurate or incomplete. I therefore felt obliged to comment. Ultimately, an agreed statement of facts was entered into among the parties. That statement is attached as an Addendum to this Report. PHASE I The Enersource Transaction

1 Change to Energy Structure in Mississauga Energy Structure in Ontario In 1906 the Ontario government created Ontario Hydro as a provincial institution to deliver power at cost. After almost a century of doing so, in late 1995 the Ontario government authorized the appointment of an advisory committee to study the province’s energy structure and to assess options for phasing competition into Ontario’s electricity system. At the time the committee was struck, municipal utilities were publicly owned, not-for-profit organizations established by the local governments. There were 307 municipal electric utilities (meus) in 1995, differing in compo- sition, size, customer mix, geographic profile, and commercial sophistication.1 The committee, chaired by the Honourable Donald S. Macdonald, released its conclusions in May 1996 in a report entitled A Framework for Competition: The Report of the Advisory Committee on Competition in Ontario’s Electricity System (Macdonald Report).2 The committee noted that, although electricity transmission is a natural monopoly, electricity generation is not. In the committee’s view, economic and technological changes since 1906 meant it was possible to have competition among electrical suppliers. The committee further advised that most customers supported increased choice and flexibility in products and services. The right to choose the company or supplier with

17 18 Updating the Ethical Infrastructure whom to do business was becoming a more frequent demand. As a result, the committee contemplated a system in which transmission of electricity would remain a monopoly, but its generation would become competitive. This concept was particularly timely, since Ontario’s rates seemed out of step. Lower-cost electricity was available in the United States and also, under certain circumstances, from Quebec.3 The Macdonald Committee therefore concluded that a new approach, one that adopted new institutions, regulations, and behaviours, was required. In particular, a more competitive electricity-generating sector would allow electricity suppliers in Ontario to compete in an open, integrated power market. To accomplish the goals set out in the Macdonald Report, the committee recommended that the generating assets be separated and established as dis- tinct, competing, operating entities under the Ontario Business Corporations Act (obca).4 Each municipality would decide if it wished to keep its assets or sell shares to investors. Municipalities could also seek out partners in the private sector. As Ontario Hydro was dismantled, there would be a complementary restructuring of the distribution system, and meus would be given all the powers of corporate bodies under the obca. The Ontario Energy Board (oeb) would be responsible for regulating the electrical industry. In the committee’s view, these changes would generate commercial pressure, which would in turn reduce the rates paid to electricity generators and, ultimately, the rates paid by consumers. As well, private ownership would prevent political factors from determining prices and investment decisions, since managers would make better decisions when accountable to shareholders.5 The committee hoped the 307meu s would consolidate to allow for the benefits of economies of scale and scope, as well as related operational efficien- cies and cost savings.6 The committee recognized that some meus would do well, while others would fail, but it felt this consolidation would yield benefits for the Ontario public. The correct number of utilities was estimated to be between seven and ten.7 The Macdonald Report ultimately recommended restructuring the energy distribution sector along the following three principles:

1 Ontario Hydro retail should be absorbed into the local distribution system. 2 There should be fewer distribution utilities. Phase I – The Enersource Transaction 19 3 Each distribution utility was to keep separate its monopolistic wire business from its competitive electricity sale and service business.8

The Macdonald Report was widely reviewed and accepted, and it set out the road map for the restructuring of Ontario’s energy sector.

Electricity Act, 1998 In light of the changing energy structure and the Macdonald Report’s recommendations, Ontario passed the Electricity Act, 1998. This legislation required municipalities to transfer their municipal electrical utilities to obca corporations. At the time, the City of Mississauga operated a model utility. Although it was not the largest in Ontario, it “was considered probably the most efficiently run and preeminent utility in all of Ontario.”9 Mississauga, as with all other Ontario municipalities, began considering its options in accordance with the mandate to restructure. To do so, it undertook a public request for proposals (rfp) process to solicit bids from those interested in acquiring, leasing, or partnering with Hydro Mississauga. Ultimately, Mississauga decided to enter into a sophisticated partnership transaction with Borealis Energy Corporation (Borealis), a subsidiary of the Ontario Municipal Employees Retirement System (omers). Mississauga and omers / Borealis would together form a merged company (ultimately named Enersource), with Mississauga holding the majority of shares. This portion of the Report examines the means by which the omers / Borealis veto emerged late in the process of negotiations of the shareholder approval provisions in the agreement negotiated between solicitors acting on behalf of omers / Borealis and the City of Mississauga, respectively. As I will review, the precise terms of the shareholder approval provisions, and the veto itself, evolved over time. Unfortunately, the city was unaware that the veto existed until many years after the Enersource transaction had been concluded. 20 Updating the Ethical Infrastructure Request for Proposals Key Participants for the City The rfp process was a significant endeavour requiring the efforts of a wide range of principals and experts. David O’Brien was the city manager for Mississauga at the time. The city manager is essentially the chief administrator for the municipality. Mr. O’Brien had occupied the position since 1995, having previously served as city manager for Sudbury, Gloucester, and Ottawa.10 td Securities was retained, through a competitive process, to bring the financial sophistication to the rfp process that the city would not otherwise have had. Jonathan Toll, managing director of mergers and acquisitions for td Securities, was responsible for managing the rfp procedure. In conducting this process, td recommended that Hydro Mississauga be recapitalized and corporatized. Recapitalizing would change the way the city invested in Hydro Mississauga, since the city could then be permitted to convert to 60 per cent debt and 40 per cent equity. Corporatizing Hydro Mississauga would make it (or its new entity) an Ontario business corporation. Also through a competitive process, the city retained the law firm of Fraser Milner llp (Fraser Milner).* Completing the transaction required numerous ancillary agreements. William Houston of Fraser Milner oversaw this legal work, and other Fraser Milner lawyers were involved.

Procedure The rfp procedure followed two steps. The first was to reach out to a world- wide group of approximately 50 companies with information about Hydro Mississauga, and invite those companies to review specific information and submit a proposal. The second step was to take some of the preliminary bids to a further round, where the submitting companies would be given additional confidential information and asked to make a binding proposal. td Securities was responsible for reviewing each proposal in detail, liaising with each proponent to obtain clarifications and answers, and reporting to city council.

Proposals Received and Considered As part of step one, confidentiality agreements and “teaser” letters were sent to fifteen potential Canadian bidders, twenty-five in the us, and nine potential

* The name was later changed to Fraser Milner Casgrainllp . Phase I – The Enersource Transaction 21 international bidders. Of these, nine Canadian bidders, twelve us bidders, and four international bidders requested detailed information to enable them to submit bids.11 Ultimately, td narrowed the proposals received down to four which, in its view, required detailed consideration by city council. Bidder 1 proposed purchasing Hydro Mississauga outright, such that the city would leave the electricity business and could invest in other opportunities.* Bidder 1 proposed two options: (1) a straight sale of the business for $560 million; or (2) a 22-year lease, with an estimated value of $560 million.12 Bidder 2, as well, offered to purchase Hydro Mississauga outright, although it was also willing to consider a lease, a minority purchase with a put (the option to purchase the balance of shares), and the sale of a share interest in Bidder 2 equal to the cash proceeds of the sale. The total value of Bidder 2’s proposal was $475 million.13 Bidder 2’s proposal also included a guaranteed price freeze on electricity rates for three years, which Bidder 2 valued at $110 million. Bidder 3 suggested merging with Hydro Mississauga. The city would receive a 23 per cent share of the new company and a proportionate share on the new board of directors. omers / Borealis† submitted the fourth bid.14 At the time bids were sought, omers was looking for opportunities to become more involved in private equity, real estate, and infrastructure investments. Borealis was created for the purpose of infrastructure investments in particular, and at the time it submitted its proposal to the City of Mississauga it had made three previous attempts to become involved in this field. Borealis wanted to invest in large, regulated businesses that were able to generate stable long-term cash flows to fund the ongoing obligations of the funds.15 A team from the legal firm McCarthy Tétrault llp (McCarthy Tétrault), led by David Lever, provided Borealis with legal advice regarding the preparation of this bid.16 Borealis’s proposal was to create a strategic alliance with the City of Mississauga which would bring together other municipal electric utilities in the 905 region‡ and ultimately create a large utility owned by a number of municipalities.17 Michael Nobrega, the ceo of Borealis at the time, testified that, on its own, Hydro Mississauga was not large enough to be seen as

* For confidentiality purposes, the identities of the three unsuccessful bidders have been redacted in the relevant exhibits, and they will be referred to in this Report as Bidder 1, Bidder 2, and Bidder 3. † The termsomers and Borealis have been used interchangeably in relation to the transaction. ‡ For the purposes of this Report, the “905 region” refers to a municipality within the 905 telephone area code in southern Ontario. 22 Updating the Ethical Infrastructure a viable investment for Borealis. However, when combined with other 905 utilities from Burlington to Clarington, a merged utility would have between 600,000 and 700,000 customers, which was an appropriate scale for a Borealis investment.18 Borealis proposed to purchase a 10 per cent interest in Hydro Mississauga and to refinance Hydro Mississauga’s debt.19 As consideration for the 10 per cent stake in Hydro Mississauga Borealis would receive, it would provide the city with $18 million. Mr. Nobrega explained that Borealis did not intend to own more than 10 per cent of Hydro Mississauga, because municipalities are exempt under the Income Tax Act as long as they retain at least 90 per cent ownership of the entity.20 The Borealis bid further contemplated merging Hydro Mississauga with other 905 meus. Each utility merged would receive its proportionate share in the new company based on the oeb-calculated book value. As new municipalities joined, Borealis would continue to make equity contributions such that it would always maintain a 10 per cent stake. The total value of this bid, including the put (or sell) option described in detail below, was $545 million.21 At the time it submitted its proposal, Borealis delivered a cheque to the city in the amount of $430 million. Jonathan Toll of td Securities had never seen a proponent make this gesture before, but believed it was done to show the proposal was being made in good faith.22 Mr. Lever described the cheque as an attempt by Borealis to show its bona fides and to demonstrate that it had the wherewithal and strength to take on such a transaction. Since Borealis was a relatively new entity and omers had not previously been active in the infrastructure area, the cheque was intended to present Borealis as a serious proponent.23

Recommendation to Accept the Borealis Proposal David O’Brien prepared a report for city council setting out the details of each proposal and the analysis of td Securities and city staff with respect to the bids received.24 In addition, td Securities made a presentation to council about the four principal bids.25 Mr. O’Brien and Mr. Toll then presented their views at an in camera session of council on March 29, 2000. After analyzing each bid, Mr. O’Brien and Mr. Toll recommended the accep- tance of Borealis’s proposal.26 This opinion reflected the views of all staff -mem bers who had participated in the process, and it was presented by Mr. O’Brien as the senior public servant of Mississauga.27 In their view, Borealis provided Phase I – The Enersource Transaction 23 a strategic partner with financial strength and offered significant potential to both the city and the entire 905 region. It opened the door for 905 utilities to work together and grow as a business while retaining public accountability for energy. In addition, they believed the new entity would have the size, stability, name recognition, and public support to compete effectively in the retail market. Mr. O’Brien and Mr. Toll therefore concluded that the Borealis proposal provided the highest ongoing value to the city.28 One of the attractions of this proposal was that the City of Mississauga would retain ownership of the utility. During the bidding process, the city held a public meeting regarding the future of Hydro Mississauga, at which residents expressed an overwhelming public preference in favour of Mississauga’s retaining ownership.29 Mr. O’Brien told the Inquiry that he believed the public favoured retaining ownership for two reasons.30 First, electricity is considered a “sacred service,” and thus the public is reluctant to have a private ownership. Second, the public preferred to keep the utility as a long-term source of income, rather than receive a one-time cash payment. The Borealis proposal, according to the mayor, was also attractive from a practical perspective because it would help reduce the number of utilities in Ontario and thus reduce costs through saved administrative fees and other expenses. She was glad to have the backing of one of the largest pension plans in Canada when going to the bond market.31 At the March 29, 2000, meeting, Mr. O’Brien recommended that the mayor and clerk be authorized to enter into a strategic alliance with Borealis and that staff be authorized to work with Borealis to achieve a merger. Staff would negotiate the form of the city’s equity participation in the new company and report back to council.32 City council passed Resolution 0091-2000, which authorized staff to proceed as recommended. The city moved forward with a deal with Borealis.

2 Negotiation with Borealis The city entered into comprehensive negotiations with Borealis, the salient elements of which are addressed below. To appreciate the significance of some of the highlighted negotiations, however, it is important to understand the 24 Updating the Ethical Infrastructure steps leading to the form of the proposal reviewed and accepted by city council on March 29, 2000.

Pre–March 29, 2000, Negotiations The “Put” When Borealis submitted its proposal on February 25, 2000, to create a strategic partnership with the City of Mississauga, it expected the proposal would form a starting point for further discussions with the city.33 The company’s intention was to acquire up to a 10 per cent equity interest in Hydro Mississauga. As noted above, the Borealis proposal offered a structured refinancing plan for Hydro Mississauga that brought with it a number of attractive benefits to the city, including the maintenance of public ownership, the continued moni- toring of the quality of services by the city, and the reduction of the financial exposure of the city to the business risks of energy deregulation.34 The proposed capital restructuring would be effected by Hydro Mississauga repurchasing some of the shares in the capital of Hydro Mississauga held by the city.35 Hydro Mississauga in turn was to pay for these shares by issuing to the city $257,499,000 in senior debt and $85,833,000 in subordinated debt.36 On recapitalization, the following transactions were to occur:

• omers would purchase from the city the Subordinated Debt issued by Hydro Mississauga, and omers would pay one dollar for each dollar of indebtedness it purchased. • Within 30 business days after completion of recapitalization, Hydro Mississauga would sell long-term debt in the public long-term debt markets. • omers would subscribe (by December 31, 2000) for such number of common shares of Hydro Mississauga as would result in omers having up to 10 per cent interest in Hydro Mississauga. The subscription price was to be based on a multiple of the deemed book equity to be negotiated and determined on the subscription date.

As noted, omers / Borealis submitted its cheque in the sum of $430 million together with this proposal. As one might expect, before the submission of Borealis’s proposal to city council on March 29, 2000, td and Borealis exchanged correspondence regarding certain details in the proposal. Phase I – The Enersource Transaction 25 One of these issues was the possibility of a “put.” A put is a right to sell an asset at a fixed price for a fixed period. Although Borealis proposed purchasing only 10 per cent of Hydro Mississauga, a put would have entitled the city to require Borealis to purchase the remaining 90 per cent of shares before a set deadline, if the city so desired. This arrangement would protect the city against a declining market for municipal utilities, without raising any immediate political issues by selling.37 Borealis’s February 25, 2000, proposal had not included a put.38 Mr. Lever testified that, at some point shortly thereafter, td indicated it would like Borealis to provide the city with a put. Mr. Lever understood other proponents had offered to purchase all of Hydro Mississauga from the city, and the city wanted to keep that door open. Mr. Lever also believed the city was looking for a potential way out of the strategic alliance if it did not work out.39 On February 29, 2000, Michael Nobrega wrote to Mr. Toll with respect to the idea of a put.40 Mr. Nobrega informed him that the senior officers at omers believed a put would be contrary to what Borealis was trying to achieve by way of consolidation with Hydro Mississauga. As Mr. Lever explained, the strategy was to work with other municipalities to create a large amalgamation of their utilities, and, if one municipality had a put, it would change the dynamic of the group.41 Accordingly, if Mississauga were granted a put, Mr. Nobrega believed omers / Borealis would have to treat the owners of other meus equally and provide a similar option to them. In Mr. Nobrega’s estima- tion, omers / Borealis would be required to set aside more than $1.2 billion for this contingency. On March 3, 2000, Mr. Nobrega wrote again to Mr. Toll, telling him that omers / Borealis had carefully considered the idea of granting the City of Mississauga a put.42 He said that omers / Borealis was now willing to provide the city with a put option whereby the city could put all (or a portion) of its shares in the new corporation to omers during a six-month period beginning July 1, 2004. If the city exercised this option, omers would pay a price equal to two times Hydro Mississauga’s deemed book equity as at December 31, 1999. Mr. Nobrega noted that he expected other 905 meus joining the new corporation to request similar rights.43 To keep a level playing field,omers / Borealis adjusted the recapitalization structure it had originally proposed so that it would be able to finance the exit strategies for other 905meu s wishing to pursue that option. Apparently, $750 million was taken out of the 26 Updating the Ethical Infrastructure recapitalization money and dedicated to the puts. Under this proposal, the city, Hydro Mississauga, and omers / Borealis would form an “alliance” that would act as the catalyst for the consolidation of the 905 meus. The city and omers / Borealis would together incorporate a new corporation (known as “Mergeco”) to effect the consolidation. On March 27, 2000, omers / Borealis provided the city with its final proposal to create a strategic alliance with the City of Mississauga.44 The proposed arrangements were quite complex. It will suffice for these purposes to observe the following:

1 Hydro Mississauga would reorganize and recapitalize its shares to Mergeco by means of the city incorporating a new wholly owned subsidiary (Mississauga Holdco). 2 Mississauga Holdco would acquire all the Hydro Mississauga shares held by the city for consideration of 40 common shares in Mississauga Holdco. 3 Mississauga Holdco and Hydro Mississauga Corporation (hmc) were to amalgamate into Mississauga Wiresco, at which time shares in Hydro Mississauga were to be cancelled. 4 Once Mississauga Wiresco became a subsidiary of Mergeco, omers / Borealis would contribute to Mergeco a contribution to capital equal to 10 per cent of the sum of the regulated base equity in Hydro Mississauga. 5 Within 30 business days of closing, Mergeco was to repay the promissory note referred to above out of funds raised in the long-term public debt markets, or by drawing on the senior secured bridge debt facility omers / Borealis agreed to provide. 6 omers / Borealis was to enter into a put agreement with the city where the city might put its shares in Mergeco to omers / Borealis at any time from July 1, 2004, to December 31, 2004, at a price of two dollars per Class A share and one dollar per Class B share (in the aggregate, the value of the put option was $360 million). 7 The city, omers / Borealis, and Mergeco were to enter into a shareholders’ agreement.

This offer was to provide the city with approximately $725 million in financial benefits. Mr. Lever told the Inquiry he believed Mr. Toll was very convincing in his Phase I – The Enersource Transaction 27 discussions with Mr. Nobrega regarding the put.45 Mr. Nobrega testified that Borealis changed its mind and agreed to offer a put as part of the “poker game” of the negotiations with the city. He regarded the city as “sophisticated” and a “formidable foe” during the negotiations. He also speculated that, by virtue of having presented the cheque for $430 million, omers / Borealis sent the message that it had the wherewithal and could therefore offer a put. In addition, Mississauga was playing the different bids against each other, andomers / Borealis wanted to remain in the running.46 The proposal considered by council on March 29, 2000, therefore included the option to enter into a put agreement.47

Corporate Governance Mr. Toll also requested further information from Borealis about certain governance issues for the new corporation, even though the decision of whether to accept governance suggestions was up to the city, and not td Securities. Mr. Toll noted that he does not usually get involved in governance questions, since most of the transactions he handles involve a complete change of ownership.48 On March 7, 2000, Gerard McGrath, the chief financial officer and secretary of Borealis, responded to Mr. Toll’s request for additional information about some of the governance issues.49 Mr. McGrath explained that the board of directors would initially consist of six representatives from the City of Mississauga and two representatives from omers / Borealis. A quorum of the board would consist of seven members, two of whom were required to be omers / Borealis representatives. All major operating decisions would require the approval of more than 75 per cent of the board members present at a duly constituted meeting. These included, among other things, major capital investments, dividend payments, and debt issuances.50 By requiring five city representatives and twoomers / Borealis representatives to satisfy quorum, neither the City of Mississauga nor omers / Borealis could make a major decision on its own without the consent of the other.* Both the city and omers / Borealis would have a veto.51

* If all eight directors attended a meeting, “more than 75 per cent” would require the vote of at least seven members. If only seven directors were in attendance, the “more than 75 per cent” rule would require the vote of at least six directors – and because a quorum required both omers representatives to be present, at least one omers representative would be voting in favour of the decision. If, however, the board were expanded to its maximum of twelve directors, omers’ power would depend on how many directors attended each meeting. Under all configurations, the city would have had a veto over all major operating decisions. 28 Updating the Ethical Infrastructure Going forward, if and when other 905 meus joined the corporation, any other 905 municipality holding at least 10 per cent of the Class A shares would be entitled to appoint one representative to the board for each 10 per cent interest it held. The number of directors would be increased to accommodate those representatives, but in no event could the total number of directors exceed twelve. Mr. McGrath explained that all major operating decisions would continue to require the approval of more than 75 per cent of the board and a quorum would remain at seven members, two of whom had to be omers / Borealis representatives.52 Once other 905 utilities joined the strategic alliance (by contributing at least 10 per cent to the value of the company, giving them seats on the board), the city would have a veto, but omers / Borealis would not. Mr. Lever explained that, by then, the deal would no longer be a bilateral arrangement, and the existence of a third party at the table would help ensure that only appropriate risks were being taken.53 Mr. Nobrega told the Inquiry that, at the time of the March 7 letter from Mr. McGrath, Borealis still envisaged the deal as multilateral.54 He expected there would be no more than one day before the initial bilateral board became multilateral. At the time, Borealis did not consider even the possibility that no other meu would join the strategic alliance.55 Thus, in its formal proposal considered by city council on March 29, omers / Borealis confirmed that the board would initially consist of eight directors, six of whom would be nominated by the city and two by omers / Borealis. As other 905 meus joined the corporation, the board would be expanded to a maximum of twelve directors.56 That number was consistent with the correspondence previously noted.57 However, the omers / Borealis proposal also stated that “all material decisions of Mergeco will require the approval of 75 per cent of the board which will effectively provide the city with a veto over Mergeco’s major decisions.”58 In other words, the requirement that there be two omers / Borealis members in a quorum was dropped. Accordingly, the city would have a veto, but omers / Borealis would not. Mr. Toll did not have an explanation as to why this term was changed from the letter of March 7, 2000.59 Mr. Nobrega testified the change did not worry him, since he did not expect the board to have eight people for long, as it was always intended to be a multilateral deal with twelve Phase I – The Enersource Transaction 29 directors.60 As a multilateral deal, Mississauga councillors could not force a change on their own.

Post–March 29, 2000, Negotiations and Authority to Instruct Solicitors On March 29, 2000, city council instructed negotiations to proceed to finalize a strategic alliance agreement with Borealis in accordance with its proposal.61 I find the chain of command in the negotiations that followed, and in the process of closing the deal, to be somewhat unclear. Once the city decided to enter into an agreement with Borealis, City Manager David O’Brien was to be the “point person” who would provide instructions to develop the strategic alliance agreement that would be the foundation for the new corporation.62 Mr. O’Brien testified that the discussions to bring the deal to fruition were basically between him and Mr. Nobrega.63 In effect, Mr. O’Brien was both the city manager and the project manager for the development of the strategic alliance agreement. Mr. Toll explained that, once the financial terms of an agreement have been structured, the lawyers then deal with “papering” the transaction. Mr. Toll would become involved only if a financial matter arose requiring his guidance.64 Mr. Houston acted for the city in the negotiation of the strategic alliance agreement. He negotiated principally with Borealis’s solicitors, McCarthy Tétrault, as to the form of agreements. Neither he nor anyone else from his firm ever attended a meeting with Borealis’s ceo, Mr. Nobrega, to directly negotiate the terms of the agreement.* Mr. Houston testified that for high-level matters he received instructions from Mr. O’Brien. Instructions on other matters would come from other individuals within the city. Mr. Houston did not report directly to the mayor, but met with her and Mr. O’Brien on some occasions regarding “big picture” issues.65 Throughout the process, Mr. O’Brien explained, he kept the mayor and council apprised of developments in two ways. First, there would be formal in camera meetings. Second, there would be “briefing sessions,” which Mr. O’Brien described as “gatherings of Council to just talk about issues as they move[d] forward.” Mr. O’Brien stated that these briefing sessions were very common in the municipal world at the time, although they are less common now. Often these meetings would take place “at the edges of a council meeting”;

* It was McCarthy Tétrault that was drafting the various versions of the agreement between omers / Bor- ealis and the city, based on the negotiations. Testimony of W. Houston, Transcript, May 26, 2010, pp. 228–29. 30 Updating the Ethical Infrastructure that is, Mr. O’Brien would brief the councillors before or after a formal council meeting. If and when it was necessary to advise council on an urgent matter, Mr. O’Brien would ask his assistant or the city clerk to arrange for the councillors to attend at a convenient time, often 9:00 a.m. or 4:00 p.m.66

Strategic Alliance Agreement On April 12, 2000, city council instructed the mayor and clerk to execute the strategic alliance agreement on behalf of the city and to execute a shareholder resolution directing Hydro Mississauga to sign the strategic alliance agreement.67 The strategic alliance agreement set out the parameters of the new corporation and the principal agreement. Further details were still to be negotiated. McCarthy Tétrault had prepared the agreement on behalf of omers / Borealis. Mr. Lever explained that the strategic alliance agreement was made up of three principal elements. First, the City of Mississauga and Borealis would work together to facilitate the consolidation of municipal electric utilities. Second, they would recapitalize and reorganize Hydro Mississauga to create indebtedness between Hydro Mississauga and the city so that the city could take some of its equity out of the company. Third, Borealis would make a number of financial commitments: (1) a $1.25 billion senior loan facility so that, as municipalities joined the alliance, they would have their utilities refinanced and omers would stand behind that financing; (2) a $750 million equity acquisition facility, with respect to the put; and (3) a $200 million equity contribution facility directed to the consolidated municipal electric utility.68 With respect to the governance of the new corporation, the shareholders’ agreement attached to the strategic alliance agreement provided that a quorum required 75 per cent of the total directors, provided at least two of those present were appointees of Borealis. Major decisions required the approval of at least 75 per cent of the directors at a properly constituted meeting.69

April Press Release At some point in the month of April 2000, the city issued a press release setting out the key features of the deal. With respect to control, the press release stated: “Major corporate decisions will require a vote by at least 75 per cent of the members, providing Mississauga with a veto and control over the company’s decisionmaking.”70 This press release was sent to Mississauga residents to keep them updated about Hydro Mississauga developments. Phase I – The Enersource Transaction 31

Strategic Alliance Amending Agreement After the execution of the strategic alliance agreement, negotiations continued in an effort to finalize the details of the agreement. In addition, Borealis held meetings with other 905 utilities to discuss a merged 905 utility. Mr. O’Brien had sole authority from the city to negotiate the deal with omers / Borealis, and he continued to be assisted by Fraser Milner. Fraser Milner provided legal and structural advice, but not business advice.71 On October 31, 2000, the city and omers / Borealis entered into a strategic alliance amending agreement, which set out the parties’ agreement about a number of issues negotiated over the preceding months. The closing date was extended to December 6, 2000, “or such earlier or later date as may be agreed upon by the parties.”72 The strategic alliance agreement had to be closed, however, by December 31, 2000. This date was set both because the relevant parties operated on a December 31 year end, and because the deal had to be completed by that date to avoid transfer tax.73 In light of the anticipated difficulty of obtaining signatures from eight directors at closing,74 the following amendment was made with respect to the structure of the board:

The Articles of the Corporation shall provide for the Board to have a minimum of three (3) directors and a maximum of twelve (12) directors. Initially the Board shall consist of three (3) directors. The City of Mississauga shall be entitled to nominate two (2) persons and Borealis shall be entitled to nominate one (1) person. The first Board shall be as follows: (i) Hazel McCallion and David O’Brien as nominees of the City of Mississauga; and (ii) Michael Nobrega, as nominee of Borealis.75

Under the amending agreement, at a time to be determined by the city, the board of directors, while initially consisting of three directors, would be increased to eight people, six of whom would be nominated by the city and two by omers / Borealis. As noted, the board would be further increased when another 905 municipality joined to become a wholly owned subsidiary of the corporation. That 905 municipality would then be entitled to nominate one person for each $125 million of regulated rate base, and the number of such nominees would be limited to four directors from all such 905 meus.76 32 Updating the Ethical Infrastructure A further amendment to the agreement modified the definition of quorum and, in doing so, gave more control to omers / Borealis. Article 2.13(iv) of the amending agreement stipulated:

Prior to such time as the City of Mississauga has determined … that the Board of Directors be increased to (8) persons, a quorum for a meeting of the Board shall consist of two directors, provided at least one director must be a nominee of the City of Mississauga and the other a nominee of Borealis. Thereafter, a quorum for a meeting of the Board shall consist of such number of directors as is 75% of the total number of directors … provided at least two (2) of which must be appointees of Borealis.77

Consequently, although the amendment modified the definition of quorum, the requirement that at least 75 per cent of those present approve a major decision did not change. The result was when the board consisted of three directors, Borealis held a veto over all major decisions.78 When the board expanded to eight directors or more, the city retained a veto, but Borealis did not. In his evidence, Mr. Houston testified that the overriding strategic objective – in reviewing the drafts and the standing instruction given to Fraser Milner – was to ensure the city had a veto over all major decisions. However, Mr. Houston did not think city councillors ever turned their minds to the question of whether Borealis would have a veto as well.79

Further Change to Energy Structure During the course of the negotiations, significant developments took place in the energy sector in Ontario. On June 7, 2000, the minister of energy, science and technology issued a directive to the Ontario Energy Board, which was responsible for setting rates. Under the Ontario Energy Board Act the Energy Board is to set “just and reasonable rates,” and the minister’s directive advised that the first thing to be considered in determining just and reasonable rates was the price effect on the consumer. Mr. Lever explained that this directive was in response to rate applications submitted by municipalities in the spring of 2000, all requesting increases. This development was clearly of concern to the government.80 A subsequent and important development occurred on June 20, 2000, when the government introduced Bill 100 in the legislature. Bill 100 had two Phase I – The Enersource Transaction 33 principal features: first, if a municipality withheld some assets rather than transferring them all into the obca corporation, the municipality could not apply for the rate increase that might otherwise have been available.81 Second, and most importantly, Bill 100 stated that, in setting distribution rates, the municipality could not pass on costs arising out of interest payments or dividend payments on the capital structure, through to the ratepayer. Because a fundamental aspect of the strategic alliance agreement had been a recapitalization of Hydro Mississauga, this restriction significantly undermined the vision of the strategic alliance between Borealis and the city.82 Mississauga would not be able to pass any transitional costs on to consumers. The introduction of Bill 100 had a chilling effect throughout the industry. No longer was it attractive for the other 905 municipalities to join the strategic alliance. Mayor McCallion told the Inquiry that, as a result of Bill 100, the city was also worried the strategic alliance with Borealis would not close.83 Ultimately, Bill 100 languished in the legislature and eventually disap- peared, but the changes introduced through the minister’s directive were sufficient to have the impact the government sought. In particular, theoeb had to put primacy on consumers’ costs, and the restrictions on rate increases over time significantly reduced the earning potential under the strategic alliance.

Final Negotiations The transaction was scheduled to close on December 6, 2000. As is common before a large transaction closes, significant activity took place in the final days. Unfortunately, during these final stages, there was no city solicitor in Mississauga to provide direction. The city solicitor had left her position in November 2000, and a replacement had not yet been appointed. As a result, no lawyer at the city had overall responsibility for this matter.84

David O’Brien Appointed President of Enersource On November 27, 2000, Mr. O’Brien was appointed president of Enersource. Angus MacDonald took over as acting city manager, but Mr. O’Brien continued to provide instructions to Mr. Houston with respect to the closing of the transaction. Mr. O’Brien also continued to be involved with other issues, among them the 905 amalgamation and the creation of the Greater Toronto Services Board.85 34 Updating the Ethical Infrastructure Neither Mr. O’Brien nor Mr. Houston believed Mr. O’Brien’s new role should preclude him from giving instructions about the closing of the strategic alliance. In this regard, Mr. Houston testified that “it would have been very, very difficult to get anybody else up to speed in the last week before closing” and “it would have been unfair to such a person to impose an obligation to give instructions with respect to closing of this transaction without them having lived the transaction for the previous year.” Mr. Houston also believed there was no legal impediment to receiving instructions from Mr. O’Brien because, at the time Mr. O’Brien was providing instructions, Enersource was still a 100 per cent–owned subsidiary of the city.86

Council Approval, November 29, 2000 The last city council meeting before the Enersource transaction closed was held on November 29, 2000. At this meeting, Mr. Houston reviewed drafts of the agreements with city council. He told the Inquiry that his review was fairly substantial, and he recalled having “a huge pile of documents in front of me.” Mr. Houston did not, however, recall any discussion about the shareholder approval provision at this meeting. He did not think there would have been any reason for such a discussion because, at that point, there had not been any change made to the provision.87 Mr. Houston also testified that members of council should have been aware that further changes were to be made to the agreements since, as he stated, “they had no basis to assume that the documents were all execution-ready.”88 In particular, there were a number of unsatisfied conditions precedent as of November 29, 2000.89 The mayor, however, testified that she understood the agreements before council on November 29 were the final versions, and if there were to be changes they would come back to council.90 At the November 29, 2000, meeting, city council passed By-law 0600-2000, which authorized the mayor and clerk to execute all documents necessary to effect the closing of the strategic alliance agreement. This by-law did not give the mayor any specific authority or management responsibility to negotiate the transaction, but simply authorized her to affix the city’s seal to close the transaction.91 Mr. Houston told the Inquiry the wording of the November 29 closing by-law was broad enough to include non-fundamental changes that might be made after November 29 and that might be necessary to close the transaction Phase I – The Enersource Transaction 35 in accordance with the overriding direction from city council.92 It would have been fully apparent to city council that the closing documents had not been finalized and that additional changes might be made before closing. In his view, it would have been absurd to give the closing by-law a narrow interpretation such that the mayor could only sign the documents if they remained identical to those presented to council on November 29.93 Mr. Houston agreed, during cross-examination, that it is usual for boards of directors to approve a transaction in principle and then delegate the details of changes to management to settle in the final days of a transaction.94

Instructions from omers, December 3, 2000 David Lever testified that, on December 2, 2000, he and Mr. Nobrega agreed they would take some time to review carefully each draft agreement, and they set aside time on December 3 to share their thoughts. Mr. Lever made hand- written notes on the shareholders’ agreement which reflected his thoughts, and he added to those notes when he and Mr. Nobrega spoke on December 3. As a result of their review, Mr. Lever recorded three changes to the shareholders’ agreement.95 First, to achieve a quorum, rather than both Borealis nominees being present, only one Borealis nominee would be required.96 His notes in the margin suggest he and Mr. Nobrega agreed in this.97 The second change involved article 2.12, which was changed to reduce the chair’s annual remuneration from $50,000 to $20,000.98 Mr. Lever’s note suggests that Mr. Nobrega believed $50,000 was too high, since the chair would no longer have to manage the integration of different municipalities.99 Mr. Lever’s note also confirms that Mr. Nobrega said he would speak to Mr. O’Brien about this point. Mr. O’Brien had no recollection of speaking with Mr. Nobrega about this issue.100 The third and most important change related to the approval for major changes – that is, the veto. Mr. Lever’s notes state that the 75 per cent approval must include one of the Borealis directors.101 Mr. Lever explained that the less onerous requirement of “at least 75 per cent” approval allowed the city to make major decisions on its own without Borealis’s approval. As no other municipalities would be joining the corporation, and since omers had significant exposure pursuant to the put agreement, both Mr. Lever and Mr. Nobrega felt omers bore all the risk of owning Hydro Mississauga. The amountomers would be 36 Updating the Ethical Infrastructure required to pay if the put were exercised would far exceed the value of the business at the time in light of the minister’s directive.102 As a result, omers wanted the protection of the veto to prevent harmful decisions from being made. According to Michael Nobrega, the requirement for the approval of at least one Borealis director resulted from what he had learned about municipal politics over the course of the negotiations. Since it was not clear where the transaction might go, and whether the deal would ever become multilateral, Mr. Nobrega felt Borealis needed some say in the major decisions of the merged corporation. Under the circumstances, he did not think it was “a big ask.” Mr. Nobrega told the Inquiry that, although the idea of a Borealis veto over major changes had existed as of March 7, 2000, and had subsequently been removed, there was no tactical plan to bring the requirement back a few days before the closing. Instead, he said it was “a genuine attempt by omers” to protect its members.103 Mr. Nobrega had a specific recollection of his December 3 conversation with Mr. O’Brien. Mr. Nobrega said he told Mr. O’Brien he had discussed the changes with his superiors and that they were important changes. This conversation lasted about half an hour. Mr. Nobrega explained the changes to Mr. O’Brien very carefully. Mr. Nobrega had no opinion about whether city council was involved. In his view, it was up to Mr. O’Brien to “manage his stakeholders.”104 Mr. Nobrega said Mr. O’Brien told him to have Mr. Lever put the changes into the agreement and have it sent over to Fraser Milner. Mr. O’Brien said he would handle it from there.105 A copy of the shareholders’ agreement that reflects these changes is attached to this Report as Appendix G. Mr. O’Brien, in his evidence, recalled that Mr. Nobrega discussed this change with him, although he could not recall if the discussion was in person or over the phone. Mr. O’Brien did not recall the precise sequence of events, but he believed he would have discussed the changes with Mr. Nobrega and then have told Mr. Houston the proposal had been received from omers and asked if Mr. Houston saw anything wrong from a legal perspective.106 Mr. Lever told the Inquiry that he believes Mr. Nobrega and Mr. O’Brien spoke about these changes on the evening of December 3. He said Mr. Nobrega called him back later in the evening of December 3 and instructed him to make the three changes set out in the agreement and to provide a blacklined copy of the agreement to Fraser Milner.107 Mr. Nobrega had the same recollection of this phone call.108 Phase I – The Enersource Transaction 37 Mr. Lever said that, after speaking with Mr. Nobrega that evening, he brought the marked-up version of the agreement to Iain Morton of McCarthy Tétrault, walked through the changes with him, and asked him to circulate a revised and blacklined draft to the other lawyers at McCarthy Tétrault involved and to Borealis and Fraser Milner.109 Mr. Lever did not recall thinking about the Borealis veto as a “deal breaker,” although he conceded it was an important change omers required to protect its interests. Mr. Lever testified that, because Mr. Nobrega and Mr. O’Brien were able to reach agreement on these points, no one had to use the term “deal breaker.”110

Communication Changes, December 4, 2000 On the morning of December 4, 2000, Iain Morton of McCarthy Tétrault sent an email to John Rhude at Fraser Milner which noted the changed composi- tion of the board to three members and the reduced annual remuneration for the chair to $20,000.111 Later that day, Mr. Morton sent a letter to Mr. Houston, Jill Leonard, and John Rhude at Fraser Milner.112 The letter attached blacklined copies of the put agreement, the financing agreement, and the shareholders’ agreement, all of which were schedules to the strategic alliance agreement. The changes reflected in the blacklining to the shareholders’ agreement were those made by Mr. Lever on December 3.* Mr. Houston also recalled discussing the changes with Mr. Lever before he received the letter. He said Mr. Lever told him Mr. Nobrega and Mr. O’Brien had negotiated some changes, which were reflected in the blacklining. Although Mr. Houston did not recall the exact words of his discussion with Mr. Lever, he said he believed Mr. Lever had told him about the substantive changes he could expect to find in the blacklined agreement.113 Mr. Lever recalled substantially the same conversation.114 On receiving the blacklined copies, Mr. Houston said he spoke with Mr. O’Brien, who confirmed he had reached an agreement with Mr. Nobrega about the changes contained in the shareholders’ agreement. Mr. Houston told

* Blacklining is a common commercial practice whereby lawyers highlight proposed changes to an agreement. Mr. Houston candidly confirmed that he would not have expected the cover letter to detail the changes because he would be expected to review the documents and highlighted changes. Testimony of W. Houston, Transcript, May 26, 2010, pp. 212–13. 38 Updating the Ethical Infrastructure the Inquiry he did not believe there was any bad faith on the part of Borealis in raising this point (the requirement of the approval of at least one Borealis director for major changes) at such a late stage.115 Also on December 4, 2000, city council held its inaugural meeting for the new council. The new councillors were sworn in, but no business was conducted. This was principally a ceremonial, formal evening for the family and friends of the new council members.116

Reasons for the Borealis Veto and Its Importance to omers Both Mr. Houston and Mr. O’Brien told the Inquiry there were sound business reasons for the Borealis veto. First, given the value of the put and the ease with which the city could have required Borealis to purchase the remaining shares for $360 million, it was reasonable to ensure that the city could not make decisions without the approval of at least one Borealis director. For example, without the veto the city could sell off Enersource’s assets or property before triggering Borealis’s put commitment – and Borealis would not be able to prevent the sale. In addition, Borealis was committing to purchase all of Hydro Mississauga’s debt, while the city was benefiting substantially from the money Borealis was investing.117 Mr. Toll testified that it was unusual for a 10 per cent owner to have effective control over major decisions, but “everything is specific to the circumstances surrounding the particular deal.” omers was making a significant financial contribution to the new company, and the put constituted a significant economic risk. Mr. Toll testified that, in his professional opinion, when a company takes on the type of risk that omers did, it is not unreasonable to want a fair degree of control.118 I accept that the inclusion of the Borealis veto made good sense once it became clear the deal would only involve two parties. All the lawyers who testified, and in particular Mr. Houston and Mr. Lever, provided great assistance to the Inquiry in relation to these complex commercial matters. But even if the veto made commercial sense, I am required to reach a conclusion as to how such a fundamental change came to form part of the deal without being drawn to the attention of council, as it should have been. As I will elaborate, these were hard-nosed and complex commercial negotiations. I find, however, that Mr. O’Brien failed in his obligation to draw the veto to the attention of the mayor and council. Phase I – The Enersource Transaction 39 Mr. O’Brien testified that the Borealis veto should have expired when the put expired. In his view, the failure of the veto and the put to expire at the same time was an oversight and indeed, as he was city manager, it was his oversight.119 According to Mr. Houston, although the put was part of the justification for the veto, omers also had liability with respect to the financing agreement and its obligation to arrange for the placement of the bonds.120 With respect to the expiry of the veto, Mr. Nobrega told the Inquiry that omers fully expected the put to be exercised, and thus he did not think about limiting the veto to the timing of the put.121 Because he fully expected the city to act on the put, there would have been no post-put time during which corporate governance would be relevant. Mr. Houston understood the Borealis veto to be “a dealbreaking matter from the Borealis side.” He also thought Mr. O’Brien believed the veto was a deal breaker, although he did not think the term was used when they spoke on December 4.122 Mr. O’Brien testified that he did not recall Mr. Nobrega ever using the term “deal breaker,” although he had the impression from Mr. Nobrega that this matter was urgent and that he was under some pressure from his board to make the change. Regardless of what term was used, Mr. O’Brien was left with the impression that the veto was indeed a deal breaker for Mr. Nobrega and omers.123 Mr. Nobrega confirmed to the Inquiry that, although he would not have used the words “deal breaker,” he would not have closed the transaction without the protection of the Borealis veto.124 Although Mr. Nobrega believed the veto was essential to the deal, my impression is that he very much wanted to close the transaction. It was a good deal from the omers / Borealis perspective. Mr. Nobrega impressed me as a sophisticated businessman who was, and is, assiduous in protecting the interests of his pension plan members. I have no doubt about his skills as a negotiator. I find that Mr. Nobrega raised the veto late in the negotiations because strategically it was more likely to be accepted by Mississauga at that time, when agreement had been reached on virtually all other points. So that I am not misunderstood, let me emphasize this – I do not believe that proceeding in this way was an unfair move in commercial negotiations between sophisticated parties. As Mr. Nobrega said, both he and Mr. O’Brien were “big boys.”125 Even Mr. Houston said it was not unusual to have important matters raised late in 40 Updating the Ethical Infrastructure negotiations. As he said, in an ideal world all changes to an agreement would be debated by a panel of lawyers on each side, “but in the real world that is not how transactions close. The expression ‘if it weren’t for the last minute a lot of things would never be done,’ is [as] true in commercial law as [it is] in life.”126

Should Council Have Been Advised of the Change? I find city council should have been advised of the Borealis veto and I accept Mayor McCallion’s characterization of the veto as a major change that should have been discussed with the assistance of the solicitors acting for Mississauga at a special meeting called for that purpose. Mr. Houston and Mr. O’Brien both recognized the Borealis veto as being important to omers. At the same time, Mr. Houston testified, Mr. O’Brien felt it was important to get the deal done and did not ask for his advice on the business terms affected by the blacklining. Instead, he asked Mr. Houston to do a normal legal review. Mr. Houston explained that the message he received from Mr. O’Brien was that unless his legal review found something objection- able, the blacklining reflected the deal he had negotiated in order to get the transaction done.127 Mr. Houston told the Inquiry there were no discussions with Mr. O’Brien about going back to council to address these changes. Moreover, Mr. Houston had never advised Mr. O’Brien about when to communicate with city council and had no reason to believe Mr. O’Brien was not communicating with the mayor and council. In his view, Mr. O’Brien had always kept council and the mayor well informed.128 Mr. Houston further explained that he had never gone directly to city councillors, and to do so without Mr. O’Brien’s instructions would have been “a breach of the chain of command.” The only time he attended city council meetings was when Mr. O’Brien invited him to answer specific questions. Moreover, and perhaps more importantly, Mr. Houston did not believe a further council meeting was legally necessary to close the transaction. In Mr. Houston’s view, the necessary municipal corporate authority was contained within the closing by-law. He told the Inquiry the November 29, 2000, by-law was broadly drafted and the change effected by the Borealis veto did not displace that authority.129 As Mr. Houston explained: Phase I – The Enersource Transaction 41

I made the decision to accept Mr. O’Brien’s instructions. To have rejected them would have risked disaster and huge economic loss for the City, and perhaps serious legal trouble for myself and the firm as a result of having given advice not to accept what is – what I viewed as the normal give and take in the circumstances of this matter of negotiations just prior to closing.130

Although there would not have been sufficient time for city council to pass a resolution regarding the veto, this did not mean city council could not have been informed, Mr. Houston testified. Subject to the exigencies of the situation, the mayor and any councillors who could have been reached easily should have been made aware of the changes.131 Mr. O’Brien also testified that the mayor and council should have been made aware of these changes. He was not, however, able to say it was “more likely than not” that he advised any councillors of the change. His practice was to speak with the mayor much more frequently than with the other councillors.132 In her evidence, the mayor said she would have trusted Mr. O’Brien to recognize the importance of the Borealis veto and to bring it to council’s attention.133 Similarly, Mary Ellen Bench, the city solicitor, told the Inquiry the changes reflected in the December 4, 2000, blacklined agreement should have come back to council for approval.134 In her view, these were substantive changes that only council could authorize.

Could Council Have Been Advised of the Change? Council could have been advised of the change, but it seems that the negotiations had reached a certain momentum. Some thought the December 6 deadline could not be extended. Although the change giving Borealis a veto was “important,” Mr. Houston testified his overriding instructions were to get the deal done. This change was received with one business day left before closing. In his view, there wasn’t time for council to consider the new veto provision in a meeting and approve it by resolution. As a result, if he had insisted that a special council meeting be called to discuss the change, it would have jeopardized the closing since there was no possibility of convening a council meeting before the December 6 deadline. The city did not have the right to extend the closing, he said. In addition, the city did not have the ability to compel closing since there were still several 42 Updating the Ethical Infrastructure closing conditions and city covenants outstanding. To conclude the transaction, it needed a willing buyer.135 I accept that Mr. Houston felt a sense of urgency acting for the city at the time, which was reinforced by the instructions he had received from Mr. O’Brien. At the same time, a number of witnesses cast doubt on this evidence, no doubt with the benefit of hindsight. Ms. Bench told the Inquiry it would have been possible to add the changes to the agenda of the December 6 meeting, the sole purpose of which was to pass the city’s interim tax levy by-law. A special meeting of council could also have been scheduled on 48 hours’ notice.136 In addition, Mr. Lever testified that if, on reading the changes set out in the blacklined agreement sent over on December 4, Mr. Houston had called back and said he needed more time to consult with city council, there would have been no reason why the December 6 deadline could not have been extended.137 Mr. Lever would have had to discuss that request with Borealis, but he told the Inquiry he did not see why that request would not have been granted. Similarly, Mr. Nobrega testified that it is common for closing dates to be extended as new matters arose. When he is completing a transaction which “looks out” over 50 or 60 years, Mr. Nobrega said, an extension of a few days or a week would not matter. The goal is to provide flexibility to allow the transaction to be properly structured and completed. From omers’ perspective, there was no particular reason why the deal had to be closed by December 6.138 It seems to me that this might be easy for Mr. Nobrega to say at the time of the Inquiry, but I am not convinced he felt the same way leading up to the December 6 closing date.

Was Council Advised of the Borealis Veto? I find that no member of council, including the mayor, was advised of the Borealis veto. The weight of the evidence precludes any other finding. The mayor testified she was never advised of the veto, and that she was not at any meeting where council was told of this change.139 Although she may have spoken with Mr. O’Brien about the closing of the deal in general terms during those final days, the mayor said Mr. O’Brien did not advise her of the Borealis veto. Ms. Bench told the Inquiry that the mayor has consistently said she had no knowledge of the veto.140 The mayor further testified that, had she been told about the veto, she Phase I – The Enersource Transaction 43 would have insisted council be informed of it, since it was a major change. She said she would have asked Mr. Houston to take council through the pros and cons of the amendment. Had the reasons for the veto been explained to council, she said, “I really believe council would have gone for it.”141 I accept from this evidence that the mayor was not advised of the veto insertion. She gave her evidence about what she would have done had she been advised with the assurance of many years’ experience. As to Mr. O’Brien, he had no specific recollection of when he spoke with council, although he told the Inquiry it was “very probable” he spoke with the mayor about the changes. He also believed he made council aware of them at some point on December 6.142 Mr. Houston provided no evidence to the Inquiry as to whether council was or was not advised of the December 4, 2000, change. Although he had a vague recollection of an in camera meeting just before the December 6, 2000, meeting, Ms. Bench told him that such a meeting did not take place, and Mr. Houston accepted that.143 Ms. Bench also explained to the Inquiry that a city by-law prohibits council from meeting to transact business or make decisions without following the appropriate procedures for calling meetings.144 Councillors George Carlson, Carmen Corbasson, Nando Iannicca, Patricia Mullin, and Maya Prentice swore affidavits in which they stated they did not recall any meeting or briefing on or around December 6, 2000, at which the shareholders’ agreement was discussed.145 Councillor Iannicca, however, stated in his affidavit that he did recall a meeting with Mr. O’Brien and council members, in the caucus room, where the put option and veto clause were discussed. Councillor Iannicca said he was certain this meeting did not occur before the shareholders’ agreement was signed on December 6, 2000.146 Councillor Katie Mahoney recalled a meeting in the caucus room where Mr. O’Brien outlined the veto and explained to the councillors that there was “one addition to the agreement we’ve agreed to.” A short discussion followed Mr. O’Brien’s statement. Mr. O’Brien did not refer to any documents and did not give a formal presentation. Councillors asked a few clarification questions, but there were no objections. Councillor Mahoney told the Inquiry that Mr. O’Brien sat in the chair traditionally used by the mayor, which suggests the mayor was not in attendance. Although she believes this meeting was held before the December 6 closing of the deal, Councillor Mahoney could not assist the Inquiry in determining exactly when the meeting was held.147 44 Updating the Ethical Infrastructure The evidence before me is overwhelming that council was not advised of the Borealis veto before the execution of the agreement. The mayor and Councillors Carlson, Corbasson, Iannicca, Mullin, and Prentice were certain they were never advised. Mr. O’Brien said he believed he informed council, but in answer to my question, could not say that it was “more likely than not” he did so. Councillor Mahoney was alone in her recollection that council was told of the veto in advance of the deal closing. I am grateful to her for her genuine efforts to assist the Inquiry in reconstructing events from nearly 10 years in the past. Ultimately, Mr. O’Brien and the mayor both recognize that the Borealis veto was an important change which should have been brought to council for approval. Mr. Houston, however, believed he was not obliged to draw the changes to council’s attention, and that there was not enough time to do so. Ms. Bench told the Inquiry that an emergency meeting could have been scheduled. Mr. Lever and Mr. Nobrega both testified that they would have allowed an extension of the December 6 closing, if requested.

Execution of Deal, December 6, 2000 Early on December 6, a very short city council meeting was held.148 The meeting began at 9:08 a.m. and was adjourned at 9:11 a.m. The sole issue discussed, as already noted, was the interim tax levy for 2001. There was no record of any meeting of councillors before or after the tax levy meeting. Neither Mr. O’Brien nor Mr. Houston is listed as being present at the December 6, 2000, meeting. Mr. O’Brien confirmed that, after he was seconded to Enersource, he would not have attended meetings. The closing documents were executed later on December 6, 2000. Mr. Lever believed the closing was scheduled for later in the day in order to give Mr. Houston time to meet with his clients.149 The mayor and city clerk signed the agreements closing the Enersource transaction. Under the Municipal Act, the mayor has the same authority as other members of council. She cannot bind the city without a proper by-law or resolution of council.150 As the mayor explained to the Inquiry, she does not read every clause of every agreement she signs. Given the significant number of complex agreements she is tasked with signing, she relies on qualified staff, including the city manager, outside consultants, the legal department, and outside legal counsel to vet agreements to ensure they accord with council’s direction.151 The mayor Phase I – The Enersource Transaction 45 also executed a certificate wherein she stated she was familiar with the provisions of the strategic alliance agreement of April 12, 2000, and the amending agreement of October 31, 2000.152 This was the only time she could recall having signed such a document. According to Mr. Houston, in executing the documents on December 6, Mayor McCallion was exercising her authority to sign the documents and was entitled to assume they were in order.153 He assumed that “whatever communication with the mayor and council was necessary had been done … consistent with all prior experience.”154

Post–December 6, 2000 A number of agreements were not settled by December 6, and were concluded in the weeks following the closing. Although they were technically precondi- tions to the closing, the parties agreed to waive those conditions and give extra time to resolve them.155 These agreements included the pole attachment agreement and the street-lighting agreement. On December 19, 2000, approximately two weeks after the Enersource deal closed, Mr. Houston briefed the directors of the new corporation, distributing a document entitled “Brief for Directors.”156 In this document, the overview of the shareholders’ agreement noted that fundamental changes would require the approval of 75 per cent of the directors at a properly constituted meeting (or the consent in writing of all directors).157 The document did not mention that the 75 per cent had to include at least one Borealis nominee (the Borealis veto). The purpose of this document, Mr. Houston stated, was to provide an overview of the details of the various agreements. It was not intended to explain every provision. Mr. Houston acknowledged his summary of the governance structure was incomplete. However, he said the full texts of the agreements were attached, and that the directors included Mr. O’Brien and Mr. Nobrega, both of whom had detailed knowledge of the agreements. There are no notes or records from the December 19, 2000, meeting, and Mr. Houston could not recall if anyone raised an issue about the Borealis veto at that meeting.158 I am left with some lingering concerns about the briefing and materials provided to new directors. Both Mr. O’Brien and Mr. Houston were well aware by December 19, 2000, that Borealis enjoyed a veto. One or both of them should have drawn this change to the attention of the board members. Whether Mr. 46 Updating the Ethical Infrastructure O’Brien or Mr. Houston intended to keep council or the Enersource board in the dark about the changed provision, I cannot say. It certainly is suspicious. Mr. Houston believed he would have followed his usual practice of going through the terms of the agreement and the material provisions during his briefing for the directors.159 The Enersource deal progressed well in the following months and years. Enersource has developed into a very efficient and productive utility, and the board has operated smoothly.

3 Problem, Investigation, and Proposed Changes The Penny Drops: Borealis’s Veto Discovered by Council In the spring of 2007, an issue arose with respect to the remuneration of the directors of Enersource. City council did some research into remuneration for boards in other municipalities and raised concerns that the payments for Enersource were too high.160 At the time, it was the practice of omers’ representatives to remit their compensation to omers.161 For their part, city councillors kept their payments.162 Before the spring of 2007, the Enersource board itself had engaged an outside expert consultant to give an opinion about appropriate and competitive compensation. The board would then have to decide whether to amend or accept the recommendation. If the recommendation was approved by the board, it would then go to the shareholders (the City of Mississauga and omers) for approval.163 On the basis of the information it obtained through its research, city council passed a resolution to cut the remuneration paid to Enersource directors. Borealis was not consulted before the passage of this resolution.164 Borealis subsequently advised the city it could not take this step unilaterally, since it required the approval of at least one Borealis board appointee.165 This, according to the mayor, was the first time that the city learned Borealis’s approval was required for major decisions.166 In the summer of 2007, City Solicitor Mary Ellen Bench contacted Jeffrey Singer, a lawyer at Stikeman Elliott llp, who was acting as outside counsel to the City of Mississauga. Ms. Bench advised Mr. Singer that the city and Borealis were unable to reach an agreement on director remuneration, and Phase I – The Enersource Transaction 47 asked what the shareholders’ agreement provided as a process to resolve this sort of dispute.167 By then, Ms. Bench believed omers and the city had reached an impasse.168 Mr. Singer and his team reviewed the shareholders’ agreement and advised Ms. Bench that, pursuant to the agreement, compensation must be approved by the board, either unanimously in writing or at a properly constituted meeting where at least 75 per cent of the board, including at least one of the Borealis nominees, voted in favour of the proposition. In addition, at least 50.1 per cent of the shareholders would have to approve the compensation. Mr. Singer also explained there was no protocol for dealing with a stalemate – for example, an arbitration clause or other dispute resolution mechanism.169 Janice Baker, the city manager, told Mr. Singer she had always believed, and advised council, that the members of council had the final say in board compensation.170 Mr. Singer’s information alerted the city that this was not the case. As a result, Ms. Bench contacted Mr. Houston to ask for assistance in understanding how the provision, which gave Borealis a veto over major issues including board compensation, came to be. In particular, she wanted to know how the shareholders’ agreement had been changed between the one presented to council in April 2000 and the one ultimately signed on December 6, 2000.171

City Council’s Investigation Contact with Mr. Houston On October 3, 2007, Ms. Bench sent an email to Mr. Houston outlining the question that had arisen. She left him a voicemail message as well.172 Mr. Houston received Ms. Bench’s phone message on October 4 and returned the call immediately, before reading her October 3, 2007, email.173 Close to seven years had passed between the conclusion of the Enersource transaction and Ms. Bench’s telephone conversation with Mr. Houston. By that time, Mr. Houston was no longer practising at Fraser Milner. Perhaps unwisely, he attempted to answer Ms. Bench’s questions about the origins of the Borealis veto as soon as they spoke and without the benefit of his files from Fraser Milner. I have no doubt he was eager to assist Ms. Bench, just as his candid and expert testimony has been of great assistance to the Inquiry. Regrettably, Mr. Houston’s haste in his dealings with Ms. Bench led the city solicitor down something of a rabbit hole. At the time of their October 4, 2007, conversation, Mr. Houston believed 48 Updating the Ethical Infrastructure Ms. Bench was talking about an amendment made to the shareholders’ agreement after it was executed. Such a change would indeed have been extraor- dinary. Mr. Houston did not appreciate that Ms. Bench was talking about a drafting change contained in the final agreement as executed on December 6, 2000. Accordingly, Mr. Houston advised Ms. Bench it would be a question of law as to whether the subsequent amendment would be effective.174 Similarly, believing that Ms. Bench was talking about a subsequent agreement, Mr. Houston told Ms. Bench he did not “even know if he saw” the Borealis veto clause as it could have “possibly [been] a last minute deal between David [O’Brien] and Michael [Nobrega].”175 Mr. Houston told Ms. Bench that “if he had seen this he would have objected” because this “minor amendment tends to savage the entire agreement.”176 Mr. Houston told the Inquiry that, in retrospect, it would have been better to ask for time to collect his files from Fraser Milner and to review the documents before responding so quickly to Ms. Bench’s questions. However, he understood from Ms. Bench that she had reviewed her own files and needed a response on an urgent basis.177 On October 12, 2007, Mr. Houston sent Ms. Bench a follow-up email.178 He advised her he had looked in Fraser Milner’s record book and could not find a shareholders’ agreement amendment. Mr. Houston asked Ms. Bench to provide him with a copy of the amendment so he could respond more fully to her questions. At this time, Mr. Houston was still under the impression that Ms. Bench was asking about a separate agreement, executed after December 6, 2000. Ms. Bench asked Mr. Houston to attend the next city council meeting in order to provide background information and answer questions regarding the veto.179 Mr. Houston agreed to do so. Before the meeting, Mr. Houston obtained a copy of the shareholders’ agreement from Ms. Bench and sent clarification with respect to his earlier misunderstanding. In an email to Ms. Bench dated October 17, 2007, Mr. Houston explained that he now understood council was concerned about the content of section 2.15 (the provision which added the Borealis veto) as it was included in the signed shareholders’ agreement, and not any subsequent agreement.180 Mr. Houston acknowledged that he still did not have access to all the relevant files, but suggested where further information could be obtained. Mr. Houston also provided Ms. Bench with context for the Borealis veto. Phase I – The Enersource Transaction 49 He emphasized that, because omers had given the city a put, it was important that the assets it was committing to buy did not deteriorate in value before the put expired. Thus, although a veto in favour of a 10 per cent minority shareholder might have been unusual at first impression, Borealis had exposure well beyond that of a typical minority shareholder. In other words, Mr. Houston agreed omers’ risk was higher than that of a regular 10 per cent owner because there was a contingent risk of owning the entire business if the city chose to exercise the put, as well as actual risk as a lender and financier of the business.181 For that reason, Mr. Houston regarded the veto provision as reasonable. Mr. Houston also noted that the oeb’s directive had significantly reduced the potential rate of return available to Enersource, thereby devaluing Enersource’s main asset. Mr. Houston pointed out that Borealis did not attempt to use this development against the city or to renegotiate the terms of the put, or indeed to withdraw from the transaction. Ms. Bench responded to Mr. Houston’s email of October 17, 2007, and expressed gratitude for his assistance. She confirmed that Mr. Houston could contact anyone involved in the matter to reacquaint himself with the issues, and also invited him to review the city files before attending the October 24, 2007, meeting.182

Contact with Mr. Lever At approximately the same time as she initially contacted Mr. Houston, Ms. Bench also sent an email to David Lever requesting information. Unfortunately, the email was addressed to [email protected] and should have been sent to [email protected] In any event, Mr. Lever did not receive it. On October 22, 2007, Mr. Nobrega advised Mr. Lever that Ms. Bench had been trying to get in touch with him and they spoke soon thereafter.184 On the basis of their conversation, Mr. Lever understood an issue had arisen regarding section 2.15 and that Ms. Bench was interested in knowing how the Borealis veto had been inserted. Mr. Lever reviewed the McCarthy Tétrault files in relation to this matter, and in doing so found a copy of the December 4, 2000, cover letter enclosing a blacklined copy of the shareholders’ agreement.185 It was included in a number of separate McCarthy Tétrault files because various lawyers had received copies of the blacklined agreement.186 50 Updating the Ethical Infrastructure

Council Meeting, October 24, 2007 On October 24, 2007, before Mr. Lever found the December 4, 2000, letter, Mr. Houston attended an in camera session of Mississauga City Council regarding the Enersource shareholders’ agreement. Mr. Houston attended on his own behalf, and not on behalf of Fraser Milner.187 Minutes of that meeting were not kept, but Ms. Bench took detailed notes,188 as did Aaron Platt, who was assisting outside counsel, Jeffrey Singer.189 At this meeting, Mr. Houston clarified his earlier misunderstanding; the Borealis veto was not an amendment to the shareholders’ agreement but rather had been included in the agreement before closing. Mr. Houston hypothesized that the change arose in the last two weeks before the closing, at a time when hundreds of changes were being made to the seven or eight agreements under active negotiation. Mr. Houston told council he believed the change would have been reflected in one of the documents presented to council on November 29, 2000. Mr. Houston also pointed out that the April 17, 2001, prospectus listed the Borealis veto in the shareholders’ agreement “as an important part of protection to bond buyers.”190 Mr. Houston explained to city council his understanding that without the Borealis veto, bonds would have been harder to sell or would have demanded a higher rate owing to the risk of political interference. At this meeting, Mr. Houston told city council the change was not significant since the city still benefited as the 90 per cent owner and had received the money as part of this transaction. Accordingly, the city and Enersource were not adverse parties.191 Finally, Mr. Houston explained that it was important to close the transaction by the end of December 2000, since the exemption for transfer taxes for municipal electric utilities expired on December 31.192 During this council meeting, the mayor expressed concern that, although Mr. Houston outlined why the Borealis veto was justified, he was not able to explain how it came to be inserted into the shareholders’ agreement. Thus, although there was consensus that there had been a valid reason for including it, council was not satisfied it had received an answer as to how it became part of the agreement.193 At the conclusion of the meeting, council asked its outside lawyer, Jeffrey Singer, to conduct a further investigation into how the veto became part of the shareholders’ agreement.194 This made sense, since by then Mr. Singer was dealing with a number of Enersource issues for Mississauga. Phase I – The Enersource Transaction 51 The Jeffrey Singer Investigation Later on October 24, 2007, Mr. Singer contacted Mr. Lever and explained that the city had retained him to investigate the Borealis veto.195 That evening, Mr. Lever found the December 4, 2000, letter enclosing the blacklined shareholders’ agreement, and confirmed with Mr. Nobrega that he could send the letter to Mr. Singer.196 On October 25, 2007, Mr. Lever called Mr. Singer and told him about the December 4 letter and sent him a copy. Mr. Lever also sent an email to Ms. Bench, letting her know he had found the documents and that he had provided them to Mr. Singer. Mr. Singer then forwarded the December 4 letter to Ms. Bench and summarized the information he had learned from Mr. Lever.197 Mr. Singer reported his findings to Ms. Bench in a November 13, 2007, memorandum. The veto, he explained, had been proposed during the course of negotiations, and Mr. Lever was instructed to add the changes by Mr. Nobrega, who advised that the addition had been “cleared” with Mr. O’Brien. The letter had then been sent with the blacklined agreement by McCarthy Tétrault, counsel to Borealis, to Fraser Milner, counsel to the city.198 Mr. Singer confirmed with Chris Pennington of Fraser Milner that Fraser Milner had indeed received the December 4 letter attaching the agreement.199 Mr. Singer concluded and so advised Ms. Bench that “it would appear that there was no impropriety as to process in connection with the matter.”200 Mr. Singer did not express any opinion about what steps should then have been taken to advise council of the changes to the shareholders’ agreement. During his testimony before the Inquiry, however, Mr. Singer said the changes reflected in the blacklined agreement were the type counsel should have discussed with the client.201 I agree with Mr. Singer’s conclusion.

Correspondence in December 2008 There was little further discussion about the veto after Mr. Singer submitted his findings. However, Ms. Bench and Mr. Houston exchanged correspondence about this subject again in December 2008. By email dated December 22, 2008, Mr. Houston told Ms. Bench he believed he had attended an in camera meeting of council with Mr. O’Brien on December 5, 2000, and that he had all draft closing documents with him at the time. These documents would have included 52 Updating the Ethical Infrastructure the final version of the shareholders’ agreement with the Borealis veto. He did not recollect that provision being controversial.202 In response to Mr. Houston, Ms. Bench clarified that there was no council meeting on December 5, 2000.203 Although his memory about the date was not precise, Mr. Houston said he “definitely remember[ed] attending an in camera meeting, not in the main council chambers.”204 I believe that Mr. Houston, like other witnesses, was doing his best to recall past events. However, in spite of the seriously conflicting evidence, I reiterate my earlier finding. The evidence before me is not persuasive that such a meeting occurred.

Proposed Changes to the Shareholders’ Agreement On December 10, 2008, city council resolved to purchase omers’ interest in Enersource.205 In fact, the city did not have any right to purchase omers’ shares at its demand. At the time the resolution was passed, the put was still operative, since it had been extended from December 31, 2004, to December 31, 2005, and subsequently to December 31, 2008.206 After the put expired at the end of 2008, Mr. Nobrega wrote to the city outlining Borealis’s position with respect to the city’s desire to purchase its share in Enersource.207 Mr. Nobrega confirmed that omers was under no contractual obligation to sell its equity interest. He did state, however, that, since omers’ obligations under the financing agreement – including the put – had now expired, omers was open to discussing revisions to the shareholders’ agreement with the city.208 In particular, omers was willing to drop the Borealis veto. City council organized a public meeting to discuss Enersource. At that meeting, there was a strong public preference for keeping Borealis as a 10 per cent shareholder of Enersource.209 On learning this information, on January 28, 2009, the city created a committee to negotiate amendments to the shareholders’ agreement.210 The committee retained Mr. Singer to negotiate changes on behalf of the city with Mr. Lever. At the same time, Mr. O’Brien was asked to reconstruct from memory the sequence of events regarding the origin of the Borealis veto. In a January 2009 email, Mr. O’Brien advised Carol Horvat, executive assistant to Mayor McCallion, that he was “certain that there would have been an ‘in camera’ meeting on [November 29, 2000] where the final details of all agreements would have been discussed, including the changes to the original draft agreements.”211 Phase I – The Enersource Transaction 53 Mr. O’Brien recognized that the actual changes to the shareholders’ agreement were made after November 29, but he believed that council was briefed on those changes at the November 29 meeting. During his testimony at the Inquiry, however, Mr. O’Brien clarified that the changes to the shareholders’ agreement were raised only in December; thus, they could not have been discussed at the November 29 meeting. Mr. O’Brien also told the Inquiry there was likely an in camera informal meeting of council on December 6, when council was meeting to pass the tax levy by-law. Mr. O’Brien could not recall the meeting, but stated “my standard practice, my normal way of doing business with city council was to keep them fully apprised. And I have every confidence I would have briefed them on this.”212 In his January 2009 email, Mr. O’Brien also stated it was the job of the legal department and outside counsel to ensure that what was being signed was consistent with what council had approved.213 In his testimony, however, Mr. O’Brien stated he had drafted the email in haste. He testified that it was his responsibility as “the person in charge on behalf of the city” to ensure that the agreements were consistent with what council had approved. As the senior public servant for the city, he was the one in charge and it was his responsibility.214 I am grateful to Mr. O’Brien for his candour. On April 15, 2009, Mr. Nobrega attended an in camera city council meeting with Mr. Lever. Because the put had expired and omers no longer had a $360 million exposure, he told council it was prepared to change the governance structure of Enersource to eliminate the veto.215 Mr. Nobrega’s presentation stated:

Borealis will have no veto rights. This change is appropriate, given thatomers has reduced its exposure to Enersource from $2.2 billion to its 10% equity investment in Enersource.216

Mr. Nobrega gave a detailed presentation to city council, including a proposal about a new way of appointing directors to the Enersource board.217 By early October 2009, omers and the negotiating committee were close to agreement about a document they were prepared to recommend.218 The new agreement would have eliminated the Borealis veto, changed the procedure for appointing directors, and established a formula for setting director compensation. However, in its wisdom, city council passed a resolution calling 54 Updating the Ethical Infrastructure for a judicial inquiry before any approval of the newly negotiated agreement. Mr. Nobrega explained he did not think it would be appropriate to sign the new agreement until the Inquiry was completed.219 Accordingly, no new deal has been reached. At least this portion of the Inquiry could have been avoided, had council chosen to agree with the negotiating committee’s recommendation.

4 Governance Issues Raised by the Enersource Transaction Analysis The Terms of Reference require me to inquire into the issue of the Borealis veto becoming part of the shareholders’ agreement as it relates to the good government of the City of Mississauga and to make any recommendations I deem appropriate and in the public interest as a result of that investigation. Having found that council was not advised of the change to the shareholders’ agreement before the strategic alliance agreement was executed, I interpret the Terms of Reference as requiring me to make findings on the following issues in relation to Phase I:

1 Should council have been advised of changes to the shareholders’ agreement between November 29 and December 6, 2009? If so, whose responsibility was it to inform council? 2 Should Mr. O’Brien have continued to instruct Mr. Houston and to make decisions for the city after being seconded to Enersource?

Duty to Advise Council Should council have been advised of changes to the shareholders’ agreement between November 29 and December 6, 2009? If so, whose responsibility was it to inform council? I concur with Mr. O’Brien’s concession that it was his duty as city manager with carriage of the negotiations to ensure that he understood the full import of major changes to the deal. He made this admission in his evidence during a discussion about the duration of the put. Given the fact that Mr. O’Brien had carriage of the negotiations on behalf of the city, I conclude it was his duty to ensure that council and the mayor were fully Phase I – The Enersource Transaction 55 briefed about the major change after November 29. I find this duty existed even though Mr. O’Brien was by then acting as the ceo of Enersource. It is clear to me that the difficulties associated with communications and approvals were exacerbated both by Mr. O’Brien’s dual responsibilities while Enersource started operations, and by the failure of the city to appoint a city solicitor to oversee the legal work in relation to what was the largest transaction ever entered into by the city. Mr. Houston agreed that the change from a provision requiring 75 per cent approval to a change requiring 75 per cent approval including the approval of a Borealis director was an important change. However, Mr. Houston stated that, if he had been dealing with a corporation and this type of change came about, he would not have brought the change back to the directors of the corporation. Mr. O’Brien was managing this project on behalf of the city, and he had advised Mr. Houston he had reached an agreement on this term with Mr. Nobrega.220 Mr. Houston believed Mr. O’Brien had authority to comply with the overriding directions from council, which were “to get this deal done and bring in a huge amount of money to the City coffers.” Accordingly, Mr. Houston believed Mr. O’Brien’s authority included the governance provision. Mr. Houston testified that Mr. O’Brien must also have believed he had this authority; otherwise, he would not have negotiated the change without returning to city council.221 Mr. Houston agreed that the change was negotiated to get the deal done, and his understanding at the time was that, if the change had not been negotiated, “there was a substantial risk that the deal would not close and the city would be out a very, very large amount of money.” Mr. Houston also testified that, once Bill 100 died, the province found a different way to achieve the same result. The province issued a directive to the Ontario Energy Board limiting the return on equity of municipally owned electric utilities. This change made the deal with Mississauga far less attractive to Borealis. From the city’s perspective at that point, he said, Mississauga was lucky to “get this deal done.”222 Ms. Bench testified that city council now has a procedure in place whereby the legal department stamps agreements “approved as to form” before the mayor and clerk sign them, so that the mayor and clerk know the documents have been vetted through the appropriate channels. Ms. Bench told the Inquiry that the current procedure would have ensured that the version of the agreement with the blacklined changes would not have been signed without council’s approval.223 56 Updating the Ethical Infrastructure Mr. Houston also pointed out that it would have been easier to assist city council when Ms. Bench contacted him with questions, and to respond, if minutes had been kept of in camera sessions of council. I note that the mayor also agreed that it would “solve a lot of problems” if minutes were kept of in camera meetings.224

Mr. O’Brien’s Two Roles Should Mr. O’Brien have continued to instruct Mr. Houston and to make decisions after being seconded to Enersource? Mr. O’Brien ought not to have occupied the Enersource ceo position by secondment until he had completed the Borealis transaction. Occupying these two roles caused no impropriety; however, it placed significant strain on Mr. O’Brien and can only have made it more difficult for him to focus on his duties in relation to the closing. It also placed Mr. O’Brien in a position where he was instructing lawyers on behalf of the city when in his new role he had to be mindful of the interests of Borealis.

Summary of Key Findings The evidence throughout the Inquiry was consistent that the alliance between the City of Mississauga and Borealis was helpful to both and has been productive for the city. Indeed, as Mr. O’Brien pointed out, the city got a bond issue at good rates, was able to take some cash and property out of the company, and has received healthy dividends. The utility is regarded as a model of efficiency according to Mr. O’Brien, who offered the view that Enersource continues to be “spotlighted as an extraordinarily well run utility, an extraordinarily successful utility.” In his view, Enersource has benefited from the relationship with Borealis and omers, particularly because it exposed Enersource to business opportunities, consulting work, and advice, making it a top-notch leader in the field.225 I find that council should have been advised that the Borealis veto had been inserted into the agreement before it was signed by the mayor. I find that no member of council, including the mayor, was so advised. The veto was a major change that should have been explained to council by the solicitors acting for the city, at a special meeting called for that purpose. I find that Mr. Nobrega raised the veto late in the negotiations because strategically it was by then more likely to be accepted by the city. However, this tactic was not unusual or in any way untoward in a transaction involving Phase I – The Enersource Transaction 57 commercially sophisticated parties, as was the case here. I accept that Mr. Houston felt there was urgency in getting the deal done and this urgency was driven by Mr. O’Brien’s instructions. However, I find that informing council was sufficiently important and that some step should have been taken to do so, even if that meant negotiating an extension of the closing date or calling an emergency meeting of council.

Recommendations for Phase I Informal Meetings of Council I recognize that in any legislative body there will always be informal meetings among smaller groups of legislators. In his evidence, Mr. O’Brien described scenarios in which councillors might receive briefings on substantial and confidential matters outside the council chamber and its protections. This practice should be discouraged. This kind of informality can only lead to difficulty, and it is evident that in this instance it led to confusion surrounding who (if anyone) was advised of the Borealis veto, and in what setting. I note that informal meetings are not permitted under the Municipal Act, 2001. recommendation 1 I recommend that no informal meetings of city council be allowed. For clarity, I do not think it appropriate for city business, including briefings from officials that would otherwise be discussed at a council meeting, to be discussed in an informal setting.

Minutes of In Camera Meetings I recognize there are practical issues with the keeping of in camera minutes, and that from the standpoint of confidentiality it may be preferable that no minutes survive. Federal cabinet departments keep detailed minutes and mem- oranda of their confidential discussions. The reason for such documentation, of course, is not just to permit historical examination many years later, but to ensure that positions taken by various participants are clearly recorded, and that the substance and rationale for decisions are understood. 58 Updating the Ethical Infrastructure In the evidence before me, intelligent and well-meaning witnesses could not agree as to what had been discussed at in camera meetings. I cannot help but feel that much of the cost of this part of the Inquiry could have been saved, had minutes been kept. Although minutes should be kept, distribution of the minutes should be controlled to protect confidentiality. recommendation 2 I recommend that minutes be kept of any in camera meetings. Distribution of those minutes should be controlled to protect confidentiality. The minutes should be kept in paper form only. Distribution of in camera minutes should be controlled through bar coding or numbered copies to protect confidentiality.

Importance of Involvement of City Solicitor In my view, it is imperative for a large municipality to have a city solicitor involved in major transactions on an ongoing basis. The city solicitor should have sufficient information to brief the mayor and city manager at regular intervals and when there are major developments in a transaction. Although the city manager may well be the point of contact with outside counsel in such transactions, it is important that the city solicitor be kept informed of these discussions to ensure that members of council, including the mayor, are able to receive timely internal legal advice about the transaction. I have considerable sympathy for William Houston’s predicament in this instance. As he testified, he was uncomfortable with the notion that he might somehow have been expected to have alerted council to the change in the agreement. I agree with him. This was not his job as the city’s outside counsel, and a proper chain of command would likely have ensured that the information was properly shared with city council. In executing the documents on December 6, 2000, the mayor was required to certify she was familiar with all its terms.226 The mayor advised the Inquiry that this was the only time in her tenure as mayor she was asked to sign such a document.227 Requiring the mayor to certify personal familiarity when she, quite understandably, relied on her staff to review the provisions of the agreement in detail, was not reasonable. Phase I – The Enersource Transaction 59 Quite simply, the mayor’s certification must be taken to mean something. I would not expect her to review the shareholders’ agreement dealing with the shareholdings, governance, and all their complexities. At the same time, I would expect her to decline to certify her familiarity unless she had taken the time to conduct such a review. recommendation 3 I recommend that the city solicitor be involved in negotiations between the city and third parties from the outset, and that he or she be kept informed at all stages.

Certification of Personal Familiarity recommendation 4 I recommend that public officials not certify personal familiarity with any document unless that statement is true in all respects.

PHASE II City Centre Land and World Class Developments

5 Factual Background Mississauga is one of Canada’s great urban success stories. The city is an amalgamation of several smaller villages and municipalities: Port Credit, Streetsville, Lakeview, Cooksville, Lorne Park, Clarkson, Erindale, Sheridan, Summerville, Dixie, Meadowvale Village, and Malton, as well as the Township of Toronto Gore and Trafalgar. The modern City of Mississauga was created by provincial statute in 1974. Mississauga has grown at a rapid rate compared with most Canadian municipalities, from a population of 250,017 in 1976 to 734,000 in 2010. Mississauga hosts a thriving economy. More than 60 Fortune 500 companies have a significant presence in the city. Its tax rates have been kept stable, and it has worked hard with the development industry to allow efficient deployment of industrial spaces. The city is also home to Pearson International Airport, which provides it with an important advantage. The City of Mississauga grew out of farmers’ fields. As a merger of smaller towns, Mississauga has had something of a void at its present core and has seemed to lack a centre or a soul. It now has a striking city centre building, featuring a soaring atrium, which was completed in 1987. I take judicial notice that,

61 62 Updating the Ethical Infrastructure in the summer of 2011, Mayor Hazel McCallion formally opened Celebration Square, which will allow thousands of members of the public to listen to con- certs, watch films, and skate during the winter season. But for much of its history, an enormous shopping mall, Square One, has, by default, provided Mississauga with its city centre. The location and importance of Square One provide context for this phase of the Inquiry. First, the mayor emphasized in her evidence that Mississauga required more than a shopping mall for its city core. Businesspeople who travel to Mississauga should be able to hold meetings and stay at first-class hotels in the city rather than spend their nights in Toronto. Groups of all kinds should be able to hold annual general meetings and conventions in Mississauga. Equally important, citizens of Mississauga should not have to drive to downtown Toronto for an evening of entertainment. Second, Square One and its associated landholdings have been a significant constraint on Mississauga’s ability to carry out long-term land-use planning. Quite simply, Mississauga City Council and public servants must have an excellent working relationship with the owners of Square One as development continues in the city centre. The opposite is also true. For the owners of Square One to maximize its value, they must cultivate relationships throughout the city and understand its processes. The successive owners of Square One have had the benefit of stability in the leadership of Mississauga. Mayor McCallion has been in office since 1978. She is a hands-on, sophisticated politician who understands business.

City Council’s Goal of a Five-Star Hotel In 1977, the first City Hall was built by a private developer on land next to Square One. Since then, there have been many plans to develop the city core. To effect that change, the City of Mississauga must either purchase land or convince private owners to develop the land in accordance with the city’s vision.1 Like many other postwar North American cities, Mississauga was planned and built with the car in mind. It remained an automobile-oriented environment until 2001, when the city looked to transform the nature of the core and identified the land around Square One as suitable for a more traditional downtown.2 Phase II – City Centre Land and World Class Developments 63 The city’s current Official Plan* envisages a robust, traditional downtown with mixed-use development consisting of offices, retail development, and housing for a vibrant, pedestrian-friendly city core.3 To achieve this vision, City Hall, the central library, the central ymca, the Civic Centre, and the Living Arts Centre are all located in the city core.4 Edward (Ed) Sajecki, the commissioner of planning and development for the City of Mississauga, testified that, since the early 1990s, the city had hoped for a hotel and convention centre connected to the Living Arts Centre,† which would support the city’s long-term vision of a mixed-use, active downtown.5 It would bring tourists to the core, meet the needs of the business community, make the city an attractive locale for conferences and conventions, and generate substantial property tax revenue for the city.6 The Official Plan recognizes a hotel and convention centre as an approved use in the downtown core, a goal that the city has not yet been able to achieve.7 In June 2005, the city’s Economic Development Office solicited more than 30 developers and hoteliers to build an upscale hotel and convention centre adjacent to the Living Arts Centre, to no avail.8 The World Class Developments (wcd) project on city centre land, the subject of this phase of the Inquiry, was the only proposal for development of a four- or five-star hotel in the city core in keeping with the city’s vision.9

The Mayor’s Vision The mayor’s interest in a four- or five-star hotel was, and is, integral to her vision of enriching the city with a convention centre in the core. Although she would welcome a four- or five-star hotel anywhere in the city core, she envisaged a high-quality hotel connected to the multifaceted Living Arts Centre. The hotel and the Living Arts Centre, connected either underground or overhead and combined with the facilities of the Civic Centre and the central library, could create a medium-sized convention centre in the downtown core to attract conventions to Mississauga.10 In the mayor’s opinion, the quality of the hotel was important if the city hoped to attract foreign investment and corporate headquarters to the core.

* The Official Plan is a document prepared under Ontario’s Planning Act, rso 1990, c P.13, which determines land-use planning matters for the whole city. Mississauga’s present Official Plan came into force in 2003. Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1410, 1419, 1422. † It appears that the Living Arts Centre was designed originally to have a hotel connected to it by a pedestrian bridge. 64 Updating the Ethical Infrastructure Although Mississauga is home to hundreds of companies, including many Fortune 500 companies, their executives are often accommodated in four- or five-star hotels located elsewhere when they arrive in the city for business.11 The mayor has, for a long time, tried to encourage hoteliers to build in the city core, and has attempted to encourage investors from abroad to support this initiative. The mayor informed the Commission that no one ever told her that a four- or five-star hotel was not economically viable in the city centre, but the lack of response to the city’s and her efforts indicated that the concept was not readily viable.12 Despite this fact, she maintained her view that such a development was feasible because Mississauga has continued to grow even during the post-2007 economic downturn.*13

Complementary Use Important to City Centre Land Owners A significant amount of land in the city centre, including the lands adjacent to Square One and the Living Arts Centre (the City Centre Land), is owned jointly by two Canadian pension giants: Ontario Municipal Employees Retirement System (omers),† and Alberta Investment Management Corporation (aim).‡ omers and aim were equal partners and co-tenants of the City Centre Land. Oxford Properties (Oxford), the real estate investment division of omers, was responsible for the day-to-day property and development management of this land for both omers and aim. A map of Oxford’s Mississauga City Centre Land Holdings was marked as Exhibit 96 in the Inquiry and is attached to this Report as Appendix H. aim is a Crown corporation that manages pension and endowment assets for the Province of Alberta.14 Similarly, omers is a large pension plan that deals with investment activities and provides pension services to plan members and employees.15 Both corporations seek to make prudent commercial investments to benefit their capital pools.16 Together, omers and aim manage approximately $120 billion in assets. omers manages approximately $50

* The mayor testified that the city continued to issue building permits for office and commercial use during the period of economic downturn. Testimony of H. McCallion, Transcript, September 20, 2010, p. 4824. † omers has four major investment divisions: Borealis Infrastructure, omers Capital Markets, omers Capital Partners, and Oxford Properties. ‡ 156 Square One Limited is an Ontario numbered corporation that is a subsidiary company of aim and is managed by private investment managers in Ontario (Hawthorne and Stonecap). For ease of reference in this Report, “aim” is used to refer to the representatives of aim: 156 Square One Ltd., Hawthorne, and Stonecap. Testimony of A. Costin, Transcript, July 8, 2010, pp. 1428, 1430; Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2341; Testimony of L. de Bever, Transcript, September 13, 2010, p. 4307. Phase II – City Centre Land and World Class Developments 65 billion in assets and must make approximately $4 billion annually to cover its pension obligations,17 while aim manages approximately $70 billion in assets.18 omers and aim (the co-owners) were aware that the city wanted to develop a traditional downtown core, as opposed to a suburban environment, and knew that the City Centre Land was integral to that development.19 They understood that it was in their interests to foster and maintain good relations with the mayor and city staff, given the amount of property and assets they owned in Mississauga. They regarded it as “good business” to assist the mayor and the city to achieve their development goals.20 Not surprisingly, however, they acted primarily to pursue their own commercial interest at all times.21 The city knew it had to work closely with the co-owners to achieve its vision for the downtown core.22 To this end, the mayor had been actively involved in discussions with the co-owners over the years regarding the development of the city core, and the city had formed numerous committees to consider problems and issues associated with its development.* In 2005, Peter McCallion, Mayor Hazel McCallion’s son, approached omers as a real estate agent about the possibility of purchasing three parcels of the City Centre Land. The proposal contemplated the development of an upscale hotel and condominiums on the land. The co-owners were aware that a hotel of this kind, next to the Living Arts Centre, was an important goal for the mayor and the city.† For example, the present ceo of omers, Michael Nobrega, testified that he had been aware since 2001 that building a hotel in the downtown core was important to the mayor and part of the city’s vision for the city centre.23 According to the co-owners, the primary consideration regarding the potential sale of the City Centre Land involved the “use” to be made of these lands, with sale price being of secondary importance. The co-owners were only prepared to consider “complementary use” projects with the potential to enhance the long-term value of Square One.24 For that reason, the co-owners considered it to be in their commercial interests to develop the City Centre Land, rather than leave that land vacant – but only to enhance the value of Square One.25

* Two main problems associated with the city core included cost of the land and road patterns. Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4814, 4815, 4817. † Testimony of H. McCallion, Transcript, September 20, 2010, p. 4851; Testimony of A. Costin, Transcript, July 8, 2010, pp. 1503–4; Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2277. Exhibit 591, p. 1, references the fact that the mayor told Paul Haggis of omers it was her “dream” for a good hotel to be built there. 66 Updating the Ethical Infrastructure Michael Latimer, the ceo of Oxford, testified that, in his opinion, a proposal for a hotel combined with condominiums would provide an excellent use of the City Centre Land owing to the increased value if hotel guests and condominium residents shopped at Square One.* The offer presented by wcd was attractive because it meant someone else was taking the capital risk for a complementary use to their investment.26 The co-owners considered the concept of a hotel / convention centre as a stand-alone project to be an uneconomic, high-risk endeavour. To render it economically feasible, they understood the need to have condominiums to subsidize or offset the cost of the hotel.† Condominiums are much easier to finance through presales, generating cash flow immediately as they are sold.27 The co-owners were willing to sell the land towcd as long as the use, price, and other terms were right. The co-owners were aware that no other developers had expressed interest in the land, and they were not pursuing potential buyers.28 Thewcd project was a complementary use, but it also met one of the city’s major development goals. Participation in the development would assist the co-owners in dealing with the city on other outstanding and future projects.29 There was value in the good will that would be earned by assisting the city to realize its planning objectives for the downtown core.30 There is no question that, for good reasons, both co-owners wanted to pursue good relations with the mayor. Nevertheless, I find that the overriding consideration of both co-owners regarding the sale of the land was, not surprisingly, to enhance their primary investment, Square One.

World Class Developments Peter McCallion testified that he has been an active registered real estate agent in the Mississauga area since the mid-1980s and that in recent years he has focused on commercial real estate.‡ Mr. McCallion had no prior experience in

* Testimony of M. Latimer, Transcript, July 28, 2010, p. 2201. Mr. Latimer is currently the executive vice- president and chief investment officer of omers, but at the relevant time was the president and ceo of Oxford; see also Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1705–7, and Testimony of L. de Bever, Transcript, September 13, 2010, p. 4305. † The property owners appreciated that establishing a four-star hotel without condominiums in this location would have been difficult economically for a number of reasons, including the fact that hotels have a matura- tion period during which the initial return on investment would have been nominal. Testimony of A. Costin, Transcript, July 8, 2010, pp. 1518–19. ‡ Mr. McCallion acknowledged that his real estate licence has been suspended on two occasions since that date: in 2007, for not having completed the necessary continuing education; and in 2009, for non-payment of Phase II – City Centre Land and World Class Developments 67 putting together a development project. His experience was strictly as a real estate agent, and he therefore needed to bring other individuals with development experience into the project.31 Mr. McCallion’s interest in developing a hotel / condominium project in the city core dated back to an unsuccessful attempt to secure financing from investors from China for such a deal in 2002.*32 He testified that approximately two to three years later he was approached by someone who knew investors from Korea who were looking to invest in Canada. Mr. McCallion took his idea to a couple of developers, and one of them put together a package for the potential investors. The Korean investors were not impressed with the package but told Mr. McCallion that they would finance a development team, should he assemble one.33 In late 2004, Mr. McCallion approached developer and family friend Murray Cook about the possibility of becoming involved in his hotel / condominium project in the Mississauga city centre.34 Mr. McCallion knew that Mr. Cook was experienced in development projects, including hotels, and that he had many contacts in the business. Mr. McCallion wanted to bring in Mr. Cook to lend credibility to the project and to negotiate the agreement of purchase and sale (aps) of the City Centre Land with the co-owners. He felt that Mr. Cook would be the ideal person to deal with the co-owners.35 At some point in 2005, Mr. Cook made an initial presentation to Oxford representatives regarding the proposal, following which he attended a number of meetings and presented the proposed project to the city. In Mr. Cook’s opinion, the hotel was a key factor for everyone throughout the entire process.36

Corporate History of wcd On February 22, 2005, Peter McCallion instructed solicitors to form World Class Developments Incorporated.37 D. Jared Brown, the incorporating solicitor, and his colleague Joseph Caprara were named as the president and vice- president of World Class Developments Incorporated, respectively, and both were named as directors and officers.38 Messrs. Brown and Caprara are solicitors with the firm Caprara Brown llp (Caprara Brown). By 2006, Mr. McCallion was aware that his potential investors were not insurance. Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1793–94. * Mr. McCallion testified that, before 2002, he had no interest in developing land in the city centre for a hotel. Testimony of P. McCallion, Transcript, July 27, 2010, p. 1798. 68 Updating the Ethical Infrastructure prepared to invest in this project until he could confirm he had secured the City Centre Land. Mr. McCallion approached his friend Leo Couprie, an experienced businessman operating a food import / export business, about the project and explained that he was looking for an investor to provide the deposit money for the purchase of the land. Mr. Couprie’s understanding was that once the land was secured, Mr. McCallion would find a large developer to take over the project.39 Mr. McCallion testified that, by July 2006, it was clear that Mr. Couprie would be investing in World Class Developments Incorporated and, as a result, would replace the solicitors as the sole officer and director of the company. On Mr. McCallion’s instruction, Mr. Couprie directed Caprara Brown by email on August 3, 2006, stating that, until World Class Developments Incorporated firmed up a deal with omers, the corporation was to remain in his name only, because he was providing the deposit money. He also requested that the corporate address be changed to the one he provided. By email the following day, Mr. Brown confirmed receipt of Mr. Couprie’s instructions and assured him that “all existing directors and shareholders (Caprara and myself ) will be scrubbed and replaced with you.”40 On August 9, 2006, to address a printing error on letterhead and business cards, the lawyers changed the name from “World Class Developments Incorporated” to “World Class Developments Limited” and incorporated the changes referred to above.41 Although it is odd that the printing error led to the reorganization of the company, Messrs. McCallion and Couprie formally created World Class Developments Limited (wcd) in November 2006. In a letter to Mr. Couprie dated November 20, 2006, Mr. Brown confirmed that, based on Mr. Couprie’s and Mr. McCallion’s instructions, the corporation had been reorganized through the filing of articles of amendment.42 Mr. McCallion told his lawyers that the company was Mr. Couprie’s company since Mr. Couprie was the person with the money. He and Mr. Couprie instructed the lawyers to change the directors, officers, and shareholders ofwcd to reflect Mr. Couprie as the principal of the corporation, a fact confirmed by letter.43

Peter McCallion’s Interest in wcd The Terms of Reference require me to make findings as to the relationship among the mayor and various participants in the wcd transaction. I must con- Phase II – City Centre Land and World Class Developments 69 sequently review in some detail the evidence relating to the nature and extent of Peter McCallion’s involvement in wcd. Mr. McCallion held himself out as simply a real estate agent through most of the time period 2005–2009. For the reasons that follow, I find that he was, and knew that he was, a principal of wcd. According to Mr. McCallion, when he began to promote his proposal for the hotel / condominium development, he was aware he needed both financing and someone to negotiate the agreement.44 For his efforts, he hoped to receive a commission on the sale of the land.* He also expected to be the listing agent for the sale of approximately 2,500 condominium units on which he anticipated his gross commission to be approximately $10 or $12 million.45 Despite having incorporated wcd and having assembled the initial management “team” (Murray Cook, Leo Couprie, and himself ), Mr. McCallion maintained that his involvement with wcd was “strictly [as] a real estate agent.”46 He testified that he was never an officer or director wcdof . He did acknowledge to the Commission, however, that, by the time he gave his testimony, he understood that he owned 16 per cent of the equity in wcd.47 I do not accept Peter McCallion’s testimony. I believe that Mr. McCallion understood at all material times that he had a significant ownership interest in wcd but may not, at all times, have had a precise understanding of the nature of that interest. In his testimony, Mr. McCallion minimized his role. However, a review of Mr. McCallion’s association with and conduct on behalf of wcd reveals that he was responsible for a number of important decisions made on behalf of wcd and that he took a number of active steps to further the wcd project. The following facts provide insight into Mr. McCallion’s role inwcd . As noted, Mr. McCallion incorporated wcd. Acting as an agent on behalf of wcd, he presented an offer toomers dated March 21, 2005, to purchase the City Centre Land for the development of a hotel.48 Mr. McCallion acknowledged he was aware of the contents of the offer and had provided instructions with respect to the purchase price offered. The offer was signed by Mr. Brown, the lawyer who had incorporated wcd.49 When the potential offshore investors with whom Mr. McCallion had been in contact about this project suggested to him that he put together a team for

* Mr. McCallion testified that he had expected to be paid the usual agent’s fee if the transaction proceeded to closing; however, it became apparent that the co-owners were not willing to pay him a commission on the sale of the land. Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1806–7, 1876, 1919–22. 70 Updating the Ethical Infrastructure the project, he turned to Murray Cook, a family friend. Mr. Cook was given responsibility for dealing with the co-owners, the approval process, and the process of hiring and working with experts. Mr. McCallion understood that Mr. Cook brought credibility and experience to the project.50 For his part, Mr. Cook understood that his role was to “run the deal” according to the shareholders’ agreement, which gave him control of wcd even though he was a minority shareholder.51 Mr. Cook testified that when Mr. McCallion approached him about the project he (Mr. McCallion) informed him that he represented a group of offshore investors who were willing to invest the total equity required for the project. According to Mr. Cook, having an investor group was a huge starting point, especially for hotel projects. Once they started working together, he advised Mr. McCallion regularly on the status of the negotiations with the c0-owners so that Mr. McCallion could, in turn, advise his investor group. Mr. Cook testified that his understanding throughout was that Mr. McCallion would receive a fee from the investor group he represented; he always assumed that Mr. McCallion did not have a financial stake in the deal. He learned much later on that Mr. McCallion expected to become the agent for the eventual condominium sales. However, he also clarified that it would have been difficult to bring in other investors if Mr. McCallion was already the predetermined real estate agent for the condominium sales and that it would be unrealistic for such a listing agent to expect more than approximately half a per cent commission on each condominium sale.52 Once consultants on land-use issues were hired, Mr. McCallion made a request (unique in Mr. Cook’s experience) to attend the consultants’ meetings because he wanted to understand how big projects were put together.53 For that reason, Mr. McCallion attended virtually all the meetings of the various consultants and was even involved in the selection of the architectural team.* Mr. Cook made it clear to everybody, including the co-owners, that Mr. McCallion was present merely as an agent representing the financial backers and that he would be compensated by them.54 Mr. McCallion testified that he spoke with Mr. Cook on a regular basis,

* According to Mr. McCallion, he attended consultants’ meetings to represent Leo Couprie’s interest once Mr. Couprie became an investor in wcd. He would pass on information pertaining to wcd to Mr. Couprie. Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1818–19; Testimony of M. Cook, Transcript, Sep- tember 15, 2010, p. 4447. Phase II – City Centre Land and World Class Developments 71 but was not involved in any of the negotiations regarding the aps. Mr. Cook provided him with a copy of the aps, executed on January 31, 2007, in early February 2007.55 In 2006, Mr. McCallion encouraged Mr. Couprie to invest in the project. He explained to Mr. Couprie that he had an investor in Korea who would develop the project once the land was secured. Mr. McCallion asked Mr. Couprie to lend him $750,000, and offered Mr. Couprie an additional $750,000 as a return on his investment.56 A loan agreement between wcd and Leo Couprie, guaranteed by Peter McCallion, was executed on January 29, 2007.57 A shareholders’ agreement signed February 28, 2007, among wcd, Murray Cook, and Leo Couprie, reflected the fact that Mr. Couprie held 80 per cent of the shares of the corporation and Mr. Cook the remaining 20 per cent of the shares.58 Mr. McCallion explained that Mr. Cook received a 20 per cent stake in wcd as compensation for his role in negotiating the deal and lending his credibility to the project, and Mr. Couprie held the remaining shares because he had put up the money for the project.59 As I shall discuss, the 80 per cent interest in wcd held by Mr. Couprie was held for the benefit of Peter McCallion pursuant to a declaration of trust.60 Certainly by the time that Mr. McCallion signed the declaration of trust on January 29, 2007, he understood that he had a significant interest inwcd and that his interest was disguised, as it was held in trust by Mr. Couprie. Mr. McCallion testified that he had no involvement in the negotiation of the shareholders’ agreement between Mr. Couprie and Mr. Cook.61 Mr. McCallion effectively decided who would controlwcd , by replacing Mr. Cook with an investor, Tony DeCicco, who assumed day-to-day control over the company. By the summer of 2007, Mr. McCallion believed that Mr. Cook was trying to squeeze Mr. Couprie out of wcd. Mr. McCallion was worried that, if Mr. Cook was successful, he would no longer be the selling agent for the condominiums because Mr. Cook’s potential partners would bring their own in-house salespeople. Put another way, Mr. McCallion felt that his ability to earn the commissions he anticipated receiving on the sale of the condominiums would be adversely affected if Mr. Cook brought in new investors.62 From Mr. Cook’s perspective, it became apparent that Mr. McCallion’s original investors were unable or unwilling to invest in the project, and he asked Mr. McCallion to allow him to put together a group of investors. When he learned that Mr. McCallion intended to become the selling agent for the 72 Updating the Ethical Infrastructure condominiums, he advised Mr. McCallion that it would be difficult to find an investor if the selling agent had been predetermined, because most investors and developers had teams in place with whom they preferred to work. These firms proposed sophisticated sales strategies. Mr. Cook made it plain to Mr. McCallion that making a project work with a predetermined real estate agent was a non-starter. Mr. Cook testified that he and Mr. McCallion disagreed on this point and that, in the summer of 2007, Mr. McCallion brought his friend Tony DeCicco into wcd.63 Tony DeCicco is a businessman experienced in residential subdivision and condominium development. He had no prior experience with a project of this sort or highrise development. I find that the question of who would sell the condominium units became a source of disagreement between Mr. McCallion and Mr. Cook, leading ultimately to Mr. McCallion’s decision to replace Mr. Cook with Mr. DeCicco. Mr. McCallion testified that he had kept Mr. DeCicco informed about what was happening with the wcd project because Mr. DeCicco had considerable means and might ultimately invest in wcd. wcd was not meeting its financial obligations in the hands of Mr. Cook. Mr. McCallion believed that Mr. DeCicco had both the resources to finance the project and the experience to bring it to fruition. Therefore, Mr. McCallion asked Mr. DeCicco to take over the lead and manage wcd – to deal with the co-owners, the consultants, and the city. He testified that he never read the agreement between Landplex (Mr. DeCicco’s company) and Mr. Couprie; however, he understood that Mr. Couprie remained a part of wcd. Mr. Couprie’s involvement was important to Mr. McCallion because he believed Mr. Couprie would make sure he became the real estate agent for the entire condominium project.64 Mr. McCallion demonstrated financial commitment to the project as well. He acknowledged that he lent money to wcd to meet its financial obligations to keep the deal alive, and, on occasion, he received money from wcd for his personal living expenses. wcd’s financial records demonstrate a number of occasions when Mr. McCallion put money into, and received money from, the company.*65 As he admitted, these were unusual steps for a real estate agent to take. Mr. McCallion borrowed $50,000 from tacc Group Inc., a construction

* Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1807–8, 1839, 1844; Mr. McCallion testified that he had previously loaned money for a deposit in a real estate transaction. Phase II – City Centre Land and World Class Developments 73 company, which he deposited into wcd to cover the site plan application fee by the July 31, 2007, deadline. He personally guaranteed this loan on behalf of wcd by signing a promissory note “aso” (“as signing officer”) on July 27, 2007, and testified that he was aware he had signed the document as such.* He admitted that he did not have the authority to sign on behalf of wcd; however, he signed the promissory note in this fashion because wcd needed 66 the money. He knew he did not have the financial means to personally guarantee wcd’s debt,67 but he thought that, by the time the note came due on 68 November 1, 2007, the wcd group would have a financial partner, given his knowledge that Mr. DeCicco was involved in discussions with Mr. Couprie about investing in wcd.69 Mr. McCallion testified that, although he remained confidentwcd would be able to complete the hotel component of the development project once Mr. DeCicco came on board, he and Mr. DeCicco had concerns about the economy and the timing of construction and knew the hotel could not be completed by the dates specified in theaps . Mr. DeCicco was trying to extend the timing for the construction of the hotel. Mr. McCallion added that he personally approached Michael Kitt of Oxford to request additional time to meet the condition dates imposed under the aps, although he maintained that he was not involved in negotiating the terms of the amending agreement.70 In June 2008, a document prepared by Ernst & Young was circulated to market an investment opportunity in wcd’s hotel / condominium project.71 Emilio Bisceglia, a lawyer who had been retained by Mr. DeCicco to act on behalf of wcd (and whom Mr. DeCicco described in testimony as his “partner” in the project),72 gave direction to Ernst & Young with respect to the circular. The document specifically advertised that three individuals – Tony DeCicco, Peter McCallion, and Murray Cook – were the owners of wcd.73 Mr. Bisceglia said that Mr. McCallion was described as an owner because, to his knowledge, that was the truth.74 Mr. McCallion testified that he had not seen this document prior to the Inquiry.75 I do not accept that. In sum, Peter McCallion’s own actions confirm his ownership interest in wcd and his exercise of influence over the company consistent with that interest.

* Exhibit 196. He signed as co-signer as well. 74 Updating the Ethical Infrastructure

Leo Couprie’s Role Leo Couprie’s role in these events is significant. In testimony he described the precise nature of the relationship among wcd, Mr. McCallion, and Mr. DeCicco. His evidence reinforces that Mr. McCallion had an ownership interest in wcd. Importantly for the Commission, Mr. Couprie also provided it with an executed declaration of trust, which was witnessed by the mayor and which I will review below. Leo Couprie first met the mayor and Mr. McCallion on a business trip to China in 2002. Mr. Couprie was there for his own business purposes, while Mr. McCallion was meeting with prospective Chinese investors about building a hotel in the Mississauga city centre.76 Mr. McCallion had incorporated wcd before Mr. Couprie became involved in the company. Mr. McCallion approached him about investing in wcd in the summer of 2006 on the basis that an investor group in Korea was prepared to develop the project if Mr. McCallion could assure the investors they would gain title to the property. He understood that Mr. McCallion was looking to him only for deposit money for the property. As noted, Mr. McCallion asked Mr. Couprie to “invest” $750,000, and offered a return of an additional $750,000 on his original investment.77 Mr. Couprie was prepared to put up the money as long as it was secured and fully refundable. After receiving verbal legal advice, he gave Mr. McCallion $600,000 of his own money and borrowed an additional $150,000 from friends, for the requested total of $750,000.78 The deal was attractive to Mr. Couprie in that it permitted him to double his money, although he knew it would take some time to receive the $1.5 million he was due.79 The successful completion of the project depended on: (1) closing the deal with omers; (2) the developer then building the condominiums and engaging Peter McCallion as the listing agent; and, finally, (3) actually selling the condominiums.80 Mr. Couprie explained that he came into the project as a lender, not as a shareholder, and he requested that he be entitled to hold shares as collateral for his money.81 As already noted, on August 3, 2006, Mr. Couprie instructed the lawyers at Caprara Brown to change the corporate documents to reflect Mr. Couprie as the principal and sole shareholder / director of wcd.82 Mr. Couprie testified that he had no experience in land development and did not get involved in the day-to-day business of wcd.83 He understood that Phase II – City Centre Land and World Class Developments 75 Mr. McCallion’s role was to be his representative in putting the deal together. He further understood that, if the deal came together, Mr. McCallion would try to be appointed the agent for the condominium sales.84 On January 29, 2007, a loan agreement between wcd and Leo Couprie was executed wherein Mr. Couprie agreed to lend wcd $750,000 to be used as a down payment, on the provision that he would double his money once a financial partner was found. The loan agreement bore Peter McCallion’s signature as guarantor, promising “prompt and full payment of all amounts” to Mr. Couprie.85 Mr. Couprie knew that Mr. McCallion did not have $1.5 million at the time he guaranteed the loan.86 The purpose of obtaining the guarantee from Mr. McCallion was to ensure that someone would ultimately pay Mr. Couprie. If the future developer refused to pay Mr. Couprie, Mr. McCallion would pay him from his anticipated commission from the sale of the condominiums. According to Mr. Couprie’s understanding of the loan agreement, he was entitled to the total repayment once the company found a financial partner to develop the land.87 Mr. McCallion explained that, at the time the loan agreement was signed, Mr. Couprie was given 100 per cent of the shares in wcd because no one other than Mr. Couprie had invested in wcd. For this reason, Mr. Couprie had control of wcd’s bank account from January until August 2007, when Landplex (a company controlled by Mr. DeCicco) took it over.88 On August 1, 2007, Leo Couprie and Tony DeCicco signed a “Declaration of Trust and Shareholders’ Agreement” (the Landplex agreement).89 The Landplex agreement reflected the fact that Mr. Couprie was the beneficial owner of 80 common shares. He was, however, holding 80 per cent of those shares (64 shares) in trust for Landplex. He held the remaining 20 per cent (16 shares) himself.90 As I will explain, he held these shares in trust for Peter McCallion. Murray Cook remained a shareholder with 20 per cent of the shares in wcd.91 According to Mr. Couprie, the Landplex agreement reflected Mr. DeCicco’s involvement and investment in wcd. He testified that Mr. DeCicco was to be an interim partner who would fund the corporation until the wcd group found a developer.92 According to Mr. McCallion, Mr. Couprie’s interest in the project after signing the agreement was limited to ensuring that he was repaid for his 76 Updating the Ethical Infrastructure investment.* He testified that he was not involved in Mr. Couprie’s decision to enter into the Landplex agreement; however, he agreed it was best for the corporation.93 According to Mr. Couprie, Mr. McCallion consented to Mr. Couprie’s transfer of 80 per cent of his interest to Landplex.94 Mr. Couprie understood that Mr. McCallion’s objective in putting the whole deal together was to be the listing agent for the sale of the 2,500 condominium units. It was to be the “crowning glory” of Mr. McCallion’s real estate career. Mr. Couprie acknowledged in his testimony that he believed he continued to hold 16 shares in wcd for the benefit of Peter McCallion, and he was prepared to continue to do so until he received his $1.5 million. Oddly, Mr. Couprie testified that he did not hold these shares “in trust” for Peter McCallion but rather held them for him,95 a difference that is not apparent to the Commission.

Declaration of Trust On January 29, 2007, Mayor Hazel McCallion, Peter McCallion, and Leo Couprie dined together at Pier 4 Storehouse Restaurant in Toronto. At Mr. McCallion’s request, the mayor witnessed the signing of two documents by Mr. Couprie and Mr. McCallion: the loan agreement (referred to above), and a declaration of trust.96 Mr. McCallion signed the declaration of trust as the beneficiary, and Mr. Couprie signed it as the trustee.97 The purpose of executing the declaration of trust was to ensure that the financial arrangement involving Mr. Couprie’s holding of shares in wcd in trust for Mr. McCallion was documented and understood. As I will elaborate upon, I do not accept the evidence of Mr. Couprie or Mr. McCallion in which they sought to persuade me otherwise. In the final analysis, Mr. McCallion had a beneficial interest in the shares ofwcd . It is clear from the very title of the loan agreement that Leo Couprie was lending money to Mr. McCallion – it was Mr. McCallion who was the real investor in wcd. No other conclusion is available on the evidence. Mr. Couprie understood the declaration of trust to indicate that he was the trustee and that he held 80 per cent of the shares of wcd for the benefit of Mr. McCallion.98 As trustee, he promised the following:

* Mr. Couprie’s deposit money, $750,000, was repaid. Testimony of P. McCallion, Transcript, July 27, 2010, p. 1917; Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3436–37. Phase II – City Centre Land and World Class Developments 77 1 that he would not deal with the property in any way except to transfer it to Peter McCallion; 2 that he would account to Peter McCallion for any money he received in connection with holding the property; and 3 that Peter McCallion was to pay him double the amount he had advanced.99

Mr. Couprie testified that the declaration of trust represented an accurate statement of this business relationship, although both he and Mr. McCallion took the improbable position that it was prepared for estate purposes should one or both perish on a planned trip to Asia. Mr. Couprie said that when he returned from this trip he simply forgot about the agreement.100 Mr. McCallion discarded his copy of the agreement.101 I accept Mr. Couprie’s evidence with respect to his understanding of the content of the document and the fact that it reflected the state of their relationship. I do not accept Mr. Couprie’s testimony that the document existed simply for the time frame of the Couprie / McCallion trip to Asia in January– February 2007. If that had been the case, he would not have forgotten about its existence on his return. Mr. Couprie is a reasonably sophisticated businessman who operates a successful company in Canada and abroad. If the trust relationship no longer existed, Mr. Couprie would have taken steps to document and protect his interest in some way. I find that it was always contemplated and understood by Peter McCallion that he was the beneficial owner of shares in wcd. It is clear from reading the document that Mr. Couprie was holding his shares of wcd in trust and had agreed that he would not dispose of the shares except to transfer them to Mr. McCallion.102 Mr. McCallion explained that, by the time of the Inquiry, he understood the document created a relationship between him and wcd that went beyond his being a real estate agent, a fact he claimed he did not appreciate at the time. Similarly, Mr. McCallion testified that, until this Inquiry, he did not understand he had guaranteed $1.5 million and had become the beneficial shareholder of most of wcd’s shares.103 This is very difficult to accept. Mr. Couprie’s testimony does not support the conclusion that Mr. McCallion was unaware of his interest in wcd. Mr. Couprie testified that he believed the declaration of trust, which reflected the arrangement wherein he held 80 per cent of the shares for the benefit of Mr. McCallion, was replaced with the new 78 Updating the Ethical Infrastructure agreement he signed with Landplex on August 1, 2007. No mention was made of the previous declaration of trust at the time the Landplex agreement was signed, and Mr. Couprie was not aware of any other document that revoked the declaration of trust. Although the Landplex agreement said nothing about an interest being held for Mr. McCallion, Mr. Couprie testified that he and Mr. McCallion had an understanding that Mr. Couprie would give Mr. McCallion his shares once he received his $1.5 million.104 omers’ and aim’s Understanding of Peter McCallion’s Interest in wcd It is clear that those involved in this deal on behalf of omers / Oxford* and aim were aware from the outset that Peter McCallion was connected to wcd. However, a review of the evidence suggests that, during the negotiations and before the signing of the aps, the co-owners believed Mr. McCallion was merely an agent acting on behalf of wcd, based on the materials and information provided to them. Mr. McCallion knew Michael Nobrega and approached him in early 2005 with his concept of the hotel and convention centre.105 At that time, Mr. Nobrega was the president and ceo of Borealis Infrastructure, omers’ infrastructure investing arm. Mr. Nobrega testified that Mr. McCallion was known around town as an agent, and he referred him to Oxford (omers’ real estate development group).106 Shortly thereafter, Mr. McCallion, acting as an agent for wcd, presented an offer to omers signed by Mr. Brown to purchase three parcels of land adjacent to Square One dated March 21, 2005.† World Class Developments Incorporated was a private corporation and unknown to the co-owners.107 That offer was not accepted. It appears that on October 3, 2005, the issue of the potential sale of the City Centre Land came to the attention of Paul Haggis, then president and ceo of omers, when Mayor McCallion called to express her displeasure to him that omers was not selling the land to her “preferred group.”108 Mr. Haggis suggested that Michael Latimer of Oxford “arrange further meetings with Hazel and her developer.”109 Mr. Latimer responded on October 4, 2005, by reporting that he was attempting to contact Murray Cook.110 There was no reference to Mr. McCallion as part of the “preferred group” or as developer, although, as

* “omers / Oxford” is used to refer collectively to representatives of both omers and Oxford. † Exhibit 148. D. Jared Brown was the lawyer who had incorporated World Class Developments Incorpo- rated the month before. Phase II – City Centre Land and World Class Developments 79 I have found, Mr. McCallion was involved by that time as a principal of the company. Mr. Latimer testified that he first learned Mr. McCallion was involved with wcd as its real estate agent in late 2005 or early 2006. He was not concerned about Mr. McCallion having that role. He stated that he received this information primarily from the senior vice-president of Oxford, Ron Peddicord.111 Mr. Latimer explained that part of the process at omers / Oxford involved a review of potential projects by its executive committee. In this case, it reviewed the entire agreement of purchase and sale, including Mr. McCallion’s role and whether any commission was payable to Mr. McCallion.* Mr. Latimer testified that omers / Oxford was not aware that Mr. McCallion was a shareholder. He said that, if those involved at omers / Oxford had appreciated the fact that Mr. McCallion was a shareholder, they would have taken a different view of his involvement.† On January 18, 2006, Ken Lusk was informed by Oxford that the proposed purchaser was Murray Cook, an individual known to him. At that time, Mr. Lusk was an officer and director of Hawthorne Realty Advisors Inc. (Hawthorne), a Toronto-based asset management firm responsible for managingaim ’s real estate interests in the Greater Toronto Area.‡ Mr. Lusk testified that Mr. Cook told him Mr. McCallion was involved in the project as a real estate agent. Mr. Lusk had no particular concern about Mr. McCallion’s involvement in this deal as an agent and therefore did not seek any further information about his involvement. He was aware that Mr. McCallion would receive a fee on the successful completion of the transaction, and this fact did not cause him to hesitate in his dealings with the mayor regarding the deal.112 He was unaware of Mr. McCallion’s financial arrangements. In any event, the co-owners were not responsible for any commission to be paid to Mr. McCallion. Ken Lusk passed on the information that Mr. McCallion had presented the original offer toomers in an email to Michael Dal Bello, senior vice-president

* Testimony of M. Latimer, Transcript, July 28, 2010, pp. 2196, 2237–38. He testified that the result in this case was that the aps made specific reference to the fact that the property owners would not pay out any commission. † Testimony of M. Latimer, Transcript, July 28, 2010, pp. 2196–97, 2238–40. Mr. Latimer agreed that the fact that Mr. McCallion had an interest in wcd would not have prevented omers / Oxford from entering into the transaction, but said they would have wanted absolute clarity on his role. ‡ Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1657, 1662–64. Mr. Coleman took over Mr. Lusk’s role at Hawthorne in May 2007, and from May to December 2007 Mr. Lusk continued as a consultant for Hawthorne. 80 Updating the Ethical Infrastructure of real estate at aim, in March 2006.113 According to what he had been told, Mr. McCallion’s interest in the wcd project was limited to acting as an agent for wcd; he was not made aware of any other interests that Mr. McCallion 114 had in the project. In 2008, Mr. Lusk’s successor, Craig Coleman, required information about the due diligence performed on wcd at the time the original agreement was signed (January 2007). Mr. Lusk responded in an email as follows:

Oxford did most of the due diligence because they did not know Murray Cook. I met with Murray and he told me that he owned wcd. He also told me that he would be putting up his own funds for the planning work, legals and the deposits but he would need an investor to pull the deal off. He told me who the possible investors were. Michael was aware of these discussions. I spoke to the Mayor about whether Murray could pull this deal off and she said she thought he could.115

Leo de Bever, the chief executive officer of aim, testified that at the time of the transaction between the co-owners and wcd, he knew of Mr. McCallion’s involvement as a real estate agent only. Part of aim’s due diligence was to make inquiries about the shareholders in a given transaction.* Mr. de Bever believed that inquiries were made prior to January 2007 about the specific involvement of the mayor’s son in wcd, and aim was told he was not involved as an owner.116 Mr. Dal Bello understood Mr. McCallion was an agent and that he was to be compensated by the purchaser. Had he known that Mr. McCallion was a shareholder in wcd, it was likely the deal would have been a “non-starter” because the “potential perception of conflicts and issues would have been pretty apparent to [them].”117 Murray Cook testified that, from early on in his negotiations with the co- owners, he consistently made it clear that Peter McCallion was the agent for the purchasers, was to be compensated by the purchasers, and was present at meetings in this capacity.118 Michael Kitt testified that, when he joined Oxford on November 1, 2007, the aps had already been signed.119 From the outset of his involvement with

* Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4282, 4297, 4300. Mr. de Bever testified that aim first learns who the shareholders are in a given deal, and then makes a judgment call as to what connec- tions they may have to related parties or related institutions. Phase II – City Centre Land and World Class Developments 81 this file, he quickly understood there was “some fuzziness” associated with it – he was informed that the mayor was a strong supporter of the hotel development and that her son was “around the file.”120 He never understood Mr. McCallion’s actual role in this transaction. Mr. Kitt testified that he spoke to others at Oxford seeking clarification. Although no one confirmed Mr. McCallion’s role as an agent in the transaction, they all agreed that they were not paying him a commission. He pointed out that there would have been inquiries into the people behind the scenes at wcd at the time of the original transaction because, in a deal as complicated as this one, the nature and identity of the purchaser were very important considerations.121 Michael Nobrega was appointed ceo of omers on March 12, 2007.*122 As of March 2008, he was not aware of Mr. McCallion’s true role in the hotel project and he did not know the identity of the principals behind wcd.123 It appears that Mr. McCallion was described to the co-owners as an agent in the transaction. Both co-owners accepted that Mr. McCallion was the real estate agent representing wcd in the transaction, and it appears that discussions about his role in wcd at this stage touched only on the fact that his fees would not be the vendors’ responsibility.† In the eyes of the co-owners, Mr. McCallion was not a person of influence, and he was not involved in dictating or negotiating the aps.124 I find that the only information disclosed to the co-owners about Peter McCallion’s role in wcd was that he was its real estate agent. I find that the co-owners understood from Mr. Cook that he (Murray Cook) was the only principal of wcd before the execution of the aps. Mr. Cook was known to aim. Given that Mr. Lusk gave assurances to omers / Oxford about Mr. Cook, the co-owners did not see the need to look further. The co-owners did not seek clarification or question Mr. McCallion’s involvement inwcd leading up to the signing of the aps.

* Prior to this date, Mr. Nobrega was president and ceo of Borealis, and therefore was not involved with this transaction at its outset. Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3102. † Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4014–15; Exhibit 97, aps article 6.6(a), specifically states that the vendors will not pay any commission fees. 82 Updating the Ethical Infrastructure 6 The Mayor’s Role in thewcd Project Introduction According to Mayor McCallion, she understood from the outset that her son Peter was to receive a commission for his work on the wcd project if the vendors agreed to sell the land to wcd.125 Both her son and Murray Cook, she testified, knew from the outset that, ifwcd ’s site plan application came before city council, she would have to declare a conflict of interest. She made it clear to them she would not get involved in anything to do with the city or in any discussions with city staff with respect to thewcd project.126 The mayor testified that she took this position based on her understanding of the Municipal Conflict of Interest Act (mcia).127 If an application for which a member of a councillor’s family is involved “comes before a committee of council or a council meeting … you must declare a conflict and indicate what your conflict is … [and] once it comes to council, you must not influence in any way.”128 The mayor acknowledged that her son’s pecuniary interest in the transaction put her in a position of conflict with thewcd project.129 In her opinion, the mcia was “very straightforward” – it did not preclude her from advocating for the wcd project but required only that she declare a conflict when the matter came before a committee of council or a council meeting. The mayor testified she understood the only constraints on her behaviour were those con- 130 tained in the mcia. As a result, the mayor believed she was entitled to intervene on behalf of wcd on the basis that the project was in the city’s interests and that she was fulfilling her role as mayor by promoting the desire of city staff. She was reluctant to accept that her son’s interest in wcd put her in a real, or even perceived, position of conflict when intervening on behalf ofwcd to lend credibility to, to promote, and to support the project.131 The following section reviews the mayor’s involvement in the negotiations that led up to the execution of the aps on January 31, 2007. A review of the mayor’s involvement and her influence over the vendors regarding amendments to the aps and extensions of the condition dates is set out below, in section 8 of this Report. Phase II – City Centre Land and World Class Developments 83 Steps Taken, October 2005 Onward The mayor acknowledged that she became involved in the negotiations between wcd and the co-owners first to secure the land, then to reach a final agreement, and finally with respect to extensions to allowwcd more time to try to find an acceptable hotel for the city centre site. She explained that her ambition was to achieve her goal of a vibrant city core, and to that end she involved herself in the negotiations on behalf of the city in order to advance the public interest. The mayor made her concern very clear in her testimony – if the investor was unable to purchase the land and secure it with conditions, the hotel project could not move forward and succeed.132

Steps Taken to Secure the Land The mayor was “excited” when she learned an investor was prepared to purchase the land and start the project, although she knew it would be up to “the efforts they would make” and the “contacts they had” if they were to deliver a hotel next to the Living Arts Centre.133 Given her passion for the project, she intervened on behalf of the purchaser wcd with each of the co-owners, but principally with omers / Oxford, during the negotiations leading up to the signing of the aps.134 From the outset, the mayor was aware her son was spearheading the project and that he stood to gain financially from its successful completion. The mayor had met with her son and Murray Cook aboutwcd at least as early as May 18, 2005, at which time she was aware that Mr. Cook was going to head up wcd.135 The mayor understood that her son had hired Mr. Cook as a qualified individual who could handle this project.136 She made it very clear to Mr. McCallion and Mr. Cook that, when the wcd site plan application came before either a committee of council or a council meeting, she would declare a conflict of interest and would not involve herself in any discussions with staff regarding the application. According to the mayor, if wcd was unable to enter into a purchase agreement with omers / Oxford, the hotel would not be built.137 When she was advised by either Mr. Cook or Mr. McCallion that there was a “delay” – omers / Oxford had not responded to the wcd offer – the mayor contactedomers to follow up on this issue.138 On October 3, 2005, the mayor spoke with Paul Haggis, then president and ceo of omers, to discuss selling the Square One lands to wcd for the hotel project.139 In an email written by Mr. Haggis the day after his conversation with 84 Updating the Ethical Infrastructure the mayor, he described her displeasure that omers was not selling the land to “her preferred group.” Mr. Haggis did not testify, but his email records that the mayor yelled and threatened that she was “going to the media unless [omers] did what she wanted.”140 When asked about this email from Mr. Haggis, the mayor acknowledged the “spirited conversation” but observed that wcd was the only group which had come forward and that development of the city core had been a challenge over the years.141 The mayor’s intervention resulted in Mr. Haggis encouraging Mr. Latimer of Oxford to meet with the mayor and “her developer.”142 Mr. Latimer immediately responded that he was attempting to contact Mr. Cook and would follow up with the mayor after he had done so.143 On March 9, 2006, Ken Lusk of Hawthorne updated Mr. Dal Bello of aim by email after he learned that Paul Brundage (omers) was pressuring Mr. Dal Bello to agree to sell the City Centre Land. Mr. Lusk informed Mr. Dal Bello that the mayor had been interested in an upscale hotel and convention centre next to the Living Arts Centre for some time, and that an offer to purchase the hotel site plus two adjacent parcels of land from an unidentified purchaser had been presented by the mayor’s son, a real estate agent.144 In this email Mr. Lusk stated that, as early as January 2006, the mayor had “stepped up the pressure on omers to sell the land” and had met with Mr. Haggis, following which Mr. Haggis “undoubtedly put pressure on Oxford.” Shortly thereafter, Mr. Lusk was asked to meet with Ron Peddicord and other representatives of Oxford to discuss the situation.145 At that meeting, Mr. Lusk informed the Oxford people that aim might consider selling a portion but not all the City Centre Land for an upscale hotel. In his opinion, an upscale hotel was not viable in that location and would need to be supported by more profitable residential developments on the adjacent land. He knew that Mr. Cook was “representing the purchaser on this deal and [that he was] very close to the mayor.”146 Mr. Lusk advised Mr. Dal Bello that he had asked Oxford to obtain from Mr. Cook the purchaser’s identity, a letter of interest from the hotel company, and a concept drawing of the proposed hotel development. He added that he intended to meet with Mr. Cook, whom he knew, and that he needed this information before making any recommendations to Mr. Dal Bello. He commented that he thought Oxford, too, would be interested in receiving this information before deciding on the sale of the land.147 Phase II – City Centre Land and World Class Developments 85 In March 2006, the mayor had lunch with Mr. Lusk. He and the mayor discussed “who aim was” – namely, the pension arm of the Alberta government. They also discussed the mayor’s desire for development around Square One and her concern about the lack of progress. It appeared to Mr. Lusk that the mayor was aware aim had an interest in the City Centre Land. Mr. Lusk testified that he asked the mayor whether she thought Mr. Cook could pull off the hotel project. The mayor endorsed Mr. Cook. She responded that she believed he had the capability to complete the project.*148 The mayor testified that she did not know the details of the negotiations between wcd and Oxford, other than that the deal was not moving as expe- ditiously as it should and that time was running out. She recalled that Mr. Cook was frustrated and that he suggested she meet with Mr. Lusk to express concern over the delay in concluding the land deal.149 Some months later, on October 20, 2006, the mayor called Mr. Lusk. She was upset the transaction was taking so long to complete. She told Mr. Lusk another developer had approached the city about building a hotel in the vicinity, and she was concerned that this possibility could jeopardize the future of a hotel adjacent to the Living Arts Centre.150 The mayor testified that she impressed upon Mr. Lusk that the sale of the land was taking too long and was delaying the efforts to acquire a hotel. For her part, the mayor did not recall another developer approaching the city about building a hotel in the vicinity, but did recall indicating to both omers and Mr. Lusk that development was starting to slow down in Mississauga because of the economic downturn.151 Negotiations regarding the aps occurred between May 1, 2006, and the end of January 2007.152 Theaps was signed on January 31, 2007.153

Impact of the Mayor’s Intervention on the Relationship between the Co-owners The mayor acknowledged throughout her testimony that she intervened in this transaction to enable the sale of the City Centre Land to wcd. Counsel on behalf of the mayor fairly noted that her interventions were directed to sophisticated institutional investors and involved attempts to persuade them to sell the land in a way which would have assisted the development of the city. The mayor acknowledged that from time to time she has “worked over”

* He added that his opinion of Mr. Cook was not based simply on the fact that the mayor had vouched for Mr. Cook. Testimony of K. Lusk, Transcript, July 26, 2010, p. 1720. 86 Updating the Ethical Infrastructure companies doing business in Mississauga to advance the city’s interests.154 This tenacity is part of what has made her an exceptional mayor. The mayor was familiar with some senior officials at omers, most notably ceo Michael Nobrega, and she sought out those she knew to assist with the deal.155 When she learned of aim’s ownership interest, she sought out Ken Lusk and others at aim to communicate her concerns.156 The evidence estab- lishes that the mayor convinced the co-owners to negotiate with wcd regarding the sale of their land despite their concerns regarding the viability of the proposed transaction. Once the deal was in place and the aps had been signed, the mayor continued to involve herself by advancing wcd’s requests that the hotel conditions be relaxed and that wcd be given more time to meet its obligations under the aps. Both co-owners wished to accommodate the mayor by granting the concessions she sought. However, the length of the negotiations and the “back and forth” regarding the terms to secure the hotel became, as described by one counsel, sources of irritation between the co-owners. The mayor had a much closer relationship with those atomers / Oxford than she did with those at aim.157 It appears that aim’s representatives were not initially in favour of selling the City Centre Land. However, they were convinced by Oxford, and by May 2006 had agreed to sell, albeit reluctantly, with appropriate conditions in place.158 From that point on, the mayor was not only in contact with those at omers in relation to the wcd project but also initiated her contact with Ken Lusk.159 Protracted negotiations regarding the sale extended into January 2007 when the aps was executed. According to an email sent by Mr. Lusk to Ron Peddicord of Oxford on October 12, 2006, aim representatives had become frustrated with the fact that the negotiations were being held up by the executives at Oxford. He wrote:

We are now prepared to proceed with the deal but Oxford is not. You should know that, since we are prepared to proceed with the sale on the basis that Murray has agreed to, if the Mayor calls we have no intention of taking a bullet for Oxford. If Oxford is prepared to build the hotel which you suggest as being a possibility in your October 2nd email, we would be prepared to listen to your proposal in this regard.160 Phase II – City Centre Land and World Class Developments 87 In March 2008, the mayor reported to omers / Oxford executives that Tony DeCicco had taken over the project from Murray Cook. Just as she had previously vouched for Murray Cook as someone she believed could pull off the project,161 she now vouched for Mr. DeCicco as having the resources to pull it off.162 From that time on, wcd attempted to have the hotel conditions in the aps relaxed, if not removed entirely. Removing the hotel conditions was not acceptable to the co-owners, who believed the hotel was critical to the sale of the land. However, they agreed to amend the aps to assist wcd regarding its concerns over the hotel component, given the worsening economic conditions at the time. On July 9, 2008, during discussions about the amending agreement, aim representatives requested that Oxford write a letter to the city and to wcd to make it clear they were “very firm on the 4-star hotel requirement” and would not proceed with the transaction without it. John Filipetti, a senior executive at Oxford, understood they wanted this “to be on record to mitigate the mayor / council / press blow-back if [the co-owners] have to terminate the deal.”163 It was apparent that aim representatives anticipated the project might not come to fruition and were concerned about the mayor’s perception of them as a result. Craig Coleman took over from Ken Lusk at Hawthorne in April 2007.* He testified that, in October 2008, he learned from John Filipetti of Oxford that Mr. McCallion twice proposed a straight sale of the land.164 On the second occasion, Mr. McCallion presented a wcd business card identifying him as a principal of wcd165 and said he had spoken to “key people” at the city who were comfortable with a clean sale.166 Those at aim inferred from Mr. McCallion’s statement that the “key people” meant the mayor, and they decided to wait for confirmation of her position on this issue. Grant Charles of Hawthorne stated in an email to Oxford executives: “[W]e’ll wait until you’ve spoken to ‘the key people / person / mom’ at the city.”† aim’s consultants had become exasper- ated by the somewhat opaque nature of the dealings with wcd and the mayor. Mr. Coleman testified that, up to this point, he had not been aware of Peter McCallion’s involvement in the wcd project.167

* Testimony of C. Coleman, Transcript, August 11, 2010, p. 2819. Mr. Lusk remained involved as a consultant until the end of 2007. † Exhibit 247. Peter McCallion testified that the “key people” did not mean his mother, but Ed Sajecki. Testi- mony of P. McCallion, Transcript, July 27, 2010, p. 1945. 88 Updating the Ethical Infrastructure Mr. Coleman had two concerns. First, he learned that “Peter McCallion had a wcd business card and purported to be a principal of wcd,”168 which troubled him given that the mayor was applying ongoing pressure. Second, he understood that Oxford might have been willing to consider Mr. McCallion’s proposal for a straight sale of the land. According to Mr. Coleman, this proposal was a “non-starter” for aim – the hotel requirement was the critical component of the deal from his perspective.169 aim representatives wished to maintain a positive relationship with the mayor and had no issue with her promoting the city’s vision “as long as that [did] not require [them] to make economic concessions.”170 The deal proposed bywcd at this stage was an economic concession that aim was not prepared to make. However, Mr. Coleman did not register his concerns with the people at omers / Oxford at that time. By November–December 2008, it was fairly evident to the co-owners that wcd would not be able to satisfy the aps conditions. It is clear from the evidence that those at Oxford, notably Mr. Kitt and Mr. Filipetti,* felt pressured to satisfy the mayor, who had become increasingly involved. By then she had gone over their heads to request concessions for wcd directly from Mr. Nobrega. He stated that he had been “the one on the forefront of receiving all the calls from the Mayor … on these issues,” and indicated that by this time he was prepared to involve Leo de Bever, the ceo of aim, directly to understand the “ambience of the environment.”171 According to internal correspondence at omers / Oxford, the mayor called and said she would like the co-owners to “co-operate” with wcd in these difficult economic times. Consequently, omers / Oxford began to consider wcd’s requests regarding a straight sale of the land absent the hotel conditions.172 The mayor testified that, although she did encourage omers / Oxford to assist wcd, she was not aware that wcd was seeking waiver of the hotel conditions.173 When the mayor sensed that her contacts at omers / Oxford either were not agreeing to the concessions she sought or were unable to persuade the co- owner to agree, she had no hesitation in calling aim directly.174 Mr. Kitt believed the mayor inferred a division in opinion between those at omers / Oxford and those at aim by October–November 2008. The mayor had been asking him “very direct” questions regarding his and Mr. Nobrega’s personal positions,

* John Filipetti did not testify at the Inquiry; however, his emails between October and December 2008 attest to this fact. Phase II – City Centre Land and World Class Developments 89 Oxford’s corporate position, and its co-owner’s position. Mr. Kitt believed that because he did not answer these questions the mayor went directly to the co- owners. This appears to have been unhelpful. Mr. Kitt recalled that he did not like the divide and conquer approach and anticipated that the mayor probably picked up that aim was more concerned about a straight sale. Mr. Coleman testified that, by December 2, 2008, the mayor had become increasingly involved on behalf of wcd at the same time as Peter McCallion was advancing positions on behalf of the company. This juxtaposition of events made him uncomfortable. He realized that he and those at aim were not clear about Mr. McCallion’s role and they “didn’t like the way things were shaping up.”175 He clarified his thoughts on the issue: “[I]f we’re getting calls or – indirect pressure from the mayor to relax certain requirements in our agreement with – when her son’s on the other side of the table, the optics are not very good.”176 On December 11, 2008, Mr. Filipetti informed Mr. Coleman of yet another request for an extension. Mr. Coleman’s position was that “a deal is a deal,” and he did not want to extend it any further.177 According to Mr. Filipetti’s email update to Mr. Kitt, he understood from Mr. Coleman that those at aim “might” extend for one week, “but [they] think this will just provide one more week for the mayor to pressure [aim].”178 Mr. Coleman’s clients at aim shared his concern over the optics of the deal once they appreciated that Mr. McCallion was a principal in wcd and not just an agent. For Mr. Dal Bello, the possibility that Mr. McCallion might have had a different role in the company made him uncomfortable. He knew there was a difference between being paid a fee and having an equity position in the project, and at that point he believed “[they] were starting to get into a conflict of interest situation.”179 Mr. de Bever believed the nature of the interest, not the receipt of a financial benefit alone, raised the issue of a potential conflict. Mr. de Bever maintained that, had he known Peter McCallion had an equity interest in wcd, he would not have been prepared to consider the mayor’s requests for concessions because of the apparent conflict created by those circumstances. In his opinion, the fact that Mr. McCallion’s interest was not disclosed was a serious omission of fact that made it difficult for him to assess the involvement of various players in this transaction.180 Those involved on behalf of Oxford felt direct pressure from the mayor, 90 Updating the Ethical Infrastructure and they in turn pressured those at aim to consider a sale of the land without the hotel conditions. aim representatives were not prepared to accommodate either wcd or its co-owner in this regard, given their position that the hotel provision in the aps was integral to the sale of the land. They understood that the mayor had stepped up the pressure on the co-owners to “co-operate” with wcd, a company in which the mayor’s son Peter had recently represented himself as a principal. They were aware that Peter McCallion had (1) suggested a straight sale of the land; (2) presented Tony DeCicco’s letter requesting a straight sale; and (3) indicated approval from “key people” at the city for the straight sale. I concur with Mr. Coleman’s view that the optics were not good. As I will discuss in this Report, poor optics can be destructive of public trust in municipal institutions. Indeed, the mayor herself acknowledged there may have been a perception she was attempting to influence the co-owners for the wrong reasons.181

The Mayor’s Knowledge of Peter McCallion’s Interest inwcd I find, for the reasons that follow, that Mayor McCallion knew Peter McCallion had an interest in the wcd project beyond acting as a mere real estate agent. Peter McCallion has a close relationship with his mother. He lives a few minutes’ walk from her residence, sees her approximately five to six times a week, and drives her to many functions. He told the Inquiry that his relationship with her was such that they spoke regularly, albeit in a general way, about his work projects. Mr. McCallion testified that his mother knew he was involved in the wcd project in some way, but that she did not consider him as anything other than a real estate agent until the Inquiry.182 Although his recollection was imprecise, Mr. McCallion believed he would have informed his mother about the potential hotel project at the time he trav- elled with her to China in 2002. The mayor introduced Peter to potential investors in China during that trip. He admitted that he would have mentioned it to her again when he was in touch with potential investors from Korea a few years later.183 The mayor knew that Murray Cook was going to head up the project by mid-May 2005, when the three of them met in relation to wcd.184 Mr. McCallion also acknowledged that he may have discussed the wcd project with the mayor five or six times in 2006, leading up to the signing of the aps.185 The mayor could not recall exactly when she learned her son was involved Phase II – City Centre Land and World Class Developments 91 in the project,186 but very early on she understood he had formed wcd.187 She contended that he, along with everyone else in Mississauga, was aware of her desire to see a hotel and convention centre built next to the Living Arts Centre and she thought that he might have felt he could help fulfill her wish, given his involvement in Mississauga real estate.188 The mayor testified that, at some point before bringing in Mr. Cook to manage the project, Mr. McCallion told her he had presented an offer to purchase the lands on behalf of an investor, whom she understood to be Leo Couprie.189 She acknowledged that Mr. McCallion had a financial interest, given his involvement as a real estate agent, and she knew from the outset that he would benefit financially if the land deal was consummated.190 She testified she was aware that he had brought Mr. Cook in to manage the project. She acknowledged that between May 2005 and September 2006 she attended meetings with her son and Mr. Cook about the wcd project.191 The mayor testified she knew from the outset that Mr. Couprie was the investor who put up the money for the project.192 As she recalled, “finally [Peter] said that he had convinced an investor, Leo Couprie, to invest the money in purchasing the land to proceed with the development of a hotel next to the Living Arts Centre.”193 Based on the information Peter had given her, the mayor understood him to be a real estate agent representing the investor. She testified she was aware of his role in the project in the following way: she was aware it was his idea to involve Mr. Couprie in the project, although she did not know whether it was Mr. Couprie alone or together with a group of investors. Peter had also told her that he and Mr. Couprie had engaged Mr. Cook to handle the project, which was a good choice in her opinion.* Mayor McCallion was firm in saying that this was the limit of her knowledge of the matter. She testified that she was never advised by Mr. McCallion or anyone else that he had an equity interest in wcd at any time.194 He never spoke to her about the specific financial arrangements within wcd, or about wcd’s ownership structure.†195 She made the assumption, given that he was a

* Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4828–29, 4831–32, 4837; September 23, 2010, pp. 5274, 5440–41. The mayor testified that she knew Mr. Couprie as a friend of Peter’s who socialized with him. † Testimony of H. McCallion, Transcript, September 23, 2010, p. 5441. Murray Cook testified that he never discussed with the mayor the financial arrangements he had with Peter McCallion regardingwcd or how Peter was to be compensated. Testimony of M. Cook, Transcript, September 15, 2010, pp. 4493–94. 92 Updating the Ethical Infrastructure real estate agent, that he was acting for Mr. Couprie on the deal. She apparently did not ask him anything further about his role. She testified that her understanding of his role did not change between 2006 and 2008. She simply assumed that Mr. McCallion would be entitled to a commission for his efforts when the deal closed.196 Leo Couprie agreed that he never had a discussion with the mayor about his role in wcd, nor did he inform her that he was holding shares in trust for her son Peter or that he expected a total return of $1.5 million from his $750,000 loan. He believed the mayor knew he was involved with the project when, at Pier 4 Restaurant, she witnessed their signatures on the declaration of trust and loan agreement. He reiterated that he had not discussed this fact with her. He presumed that Mr. McCallion had informed his mother of the nature of his involvement.197 Peter McCallion testified that he did not discuss the aps negotiations with the mayor, and, if he mentioned anything about them to her, it would have been in relation to how long it was taking to negotiate the agreement.*198 He testified that he was not aware of her involvement in any discussions with omers about the project.199 I do not accept this. In my view, Peter McCallion leaned on his mother whenever he needed assistance.

Witnessing the Signing of the Declaration of Trust and the Loan Agreement According to Peter McCallion’s recollection, the mayor agreed to witness his and Leo Couprie’s signatures on two documents, the loan agreement200 and the declaration of trust,201 on January 29, 2007, while they were dining together in Toronto.† Mr. McCallion testified that he did not review those documents with the mayor and she did not appear to read them before she signed them as a witness in his presence.202 Mr. McCallion acknowledged that had his mother read the documents, she would have understood he was potentially making a substantial financial commitment to the company and that he was effectively a shareholder of wcd.203

* Mayor McCallion testified that she never saw or read theaps , although she had been advised it was finalized on January 31, 2007, probably by Murray Cook; she could not recall whether she had discussions with Peter about it. Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4885–86. † Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1910–11; Testimony of L. Couprie, Transcript, Au- gust 17, 2010, pp. 3411–12, 3412–13. According to Mr. Couprie, the occasion was a delayed Christmas dinner. According to Mr. McCallion, the restaurant tended to be dark. Mr. McCallion also testified that Leo Coup- rie’s wife was present, but neither Mr. Couprie nor the mayor recalled Mr. Couprie’s wife being at this dinner. Phase II – City Centre Land and World Class Developments 93 According to the mayor, Mr. McCallion and Mr. Couprie invited her to this dinner because they were leaving for Asia and were interested in any suggestions she might have regarding potential investors and what hotels they should see. She testified she was asked to witness their signatures on two documents and that she did not look at the contents or read the documents, but rather looked at the bottom line and simply witnessed their signatures.204 The mayor understood that Mr. McCallion and Mr. Couprie had entered into the trust declaration to protect their interests in the event something happened to them while they were travelling together.205 She acknowledged, however, that had she read the documents she would have questioned Peter’s claim to be Mr. Couprie’s agent.206 She accepted that, had she read even the first two lines of the document entitled “declaration of trust,” she would have seen that Mr. Couprie was a trustee and Peter was a beneficiary. She testified, however, that she did not even read the document to that minimal extent.207 She testified that neither Mr. McCallion nor Mr. Couprie spoke to her about the declaration of trust after it was signed in January 2007.208 Mr. Couprie recalled that Mr. McCallion presented the documents to the mayor by explaining they were prepared for estate purposes, since they were travelling together the following day and that they wanted to document “an understanding of the transactions” in case something happened to the air- plane. Mr. McCallion did not have any further discussion with his mother about the documents. He simply informed her that they had been prepared for the protection of each of their estates. Mr. Couprie recalled that the mayor paused briefly and either asked him or looked at him to see if it was okay for her to sign the documents, and Mr. Couprie responded that he thought it was fine. He stated that there was no discussion with the mayor about the contents of the documents and he did not know what she knew about them.209 Mr. Couprie testified that the mayor signed the two documents within about 30 seconds of each other.210 By his account the mayor neither looked at nor read the documents prior to signing them, but simply signed them “like an autograph.”211 He testified that he signed as the trustee, Peter McCallion signed as the beneficiary, and the mayor as the witness. Mr. Couprie added that he wrote her name in block capitals below her signature on the trust declaration to make the identity of the witness clear. The mayor did not take copies of the documents with her.212 94 Updating the Ethical Infrastructure

Understanding of the Nature and Extent of Peter McCallion’s Interest The mayor testified that she did not understandhow the nature of her son’s involvement in wcd – whether as principal and shareholder or as agent for wcd – made any difference to the co-owners because either way he would benefit financially. The mayor always assumed that he would receive a commission for his efforts to which he would be entitled when the deal closed. She had declared a conflict of interest at council, given his financial interest. Having said that, she testified that Mr. McCallion did not advise her of the arrangement he made with Mr. Couprie, nor did he advise her that neither the vendor nor the purchaser had agreed to pay him a commission. Peter did not advise her, nor was she otherwise aware, that he hoped to be the listing agent on the subsequent sales of the condominiums.213 Peter McCallion testified he told the mayor he was the agent and representative of Mr. Couprie.214 He did not tell her details such as:

1 the fact that wcd was having difficulty meeting its payment obligations either to the city or to omers and that he had made a loan to wcd of $103,500 in the spring of 2007;215 2 that he arranged a $50,000 loan through the tacc Group in July 2007 and signed a promissory note to secure the loan;216 and 3 that he was receiving money from wcd for his living expenses.217

Mr. McCallion was content to let the mayor believe Mr. Couprie was the investor throughout and he did not advise her otherwise. He did not tell her how Mr. Cook was going to be compensated or that Mr. Couprie had agreed to transfer 20 per cent of his shares to Mr. Cook. He did not discuss with her the financial arrangements between Mr. DeCicco and wcd.218 In her testimony, the mayor told the Inquiry that her son “certainly mis- informed” her about his role in wcd, but she did not believe he had done so intentionally.219 She was never advised by anyone that her son had an equity interest in wcd, and she added that he always told her Mr. Couprie owned 100 per cent of the shares.220 I appreciate the mayor’s forthrightness in saying that she would have intervened for wcd even if she had known of her son’s equity interest in the wcd project. I am nevertheless troubled by the evidence of all parties concerning the meeting at Pier 4 Restaurant, where the mayor witnessed signatures on Phase II – City Centre Land and World Class Developments 95 the documents setting out the nature of the ownership interests of Peter McCallion and Leo Couprie. At the time of this meeting on January 29, 2007, wcd and its principals had access to lawyers and accountants. Any number of people could have witnessed the signatures on these documents. In my view, it is unfortunate that the mayor was instead chosen to perform this function. I do not accept that the mayor simply signed the documents “like an autograph.” Her hesitation while she was looking at the documents and her request of assurance from Mr. Couprie suggest otherwise. I find that, however brief her review of the documents may have been, Mayor McCallion must have known that her son was involved in the wcd transaction in some substantial way. She had to know he was acting as more than a real estate agent. She knew that the documents she was being asked to sign were business documents (one, Exhibit 190/274, was headed “declaration of trust”) and that they bore the signature of her son and Mr. Couprie.* She also knew that Mr. McCallion had formed wcd, and been involved in the wcd transaction for some time, and that Mr. Couprie was an investor in wcd. Given her intention to advocate for the wcd project, she ought to have asked more questions before, or even after, witnessing these signatures. At the same time, I accept that the mayor was not aware of the precise business arrangement between Peter McCallion and Leo Couprie. She has impressed me as an experienced businesswoman. As she said in her evidence, it was clear Peter did not have the resources to promise Mr. Couprie he would double his money given the amounts at stake. Had she analyzed the contents of the wcd documents closely, I have no doubt the mayor would have voiced concern. The mayor explained her sheer ignorance of the contents of the trust and corporate documents by saying that people frequently ask her to witness signatures and it is her habit to oblige, given that she had once been a commissioner of oaths.221 It would not have been a good use of the Commission’s time to explore this issue further, but if the mayor routinely follows this practice, it is unwise. Public office holders can be drawn into mischief by placing their signatures on documents without being aware of their contents.

* In fact, the typed reference under Peter McCallion’s signature reads: “Peter McCallion ‘the beneficiary.’” 96 Updating the Ethical Infrastructure 7 Development of a Four- or Five-Star Hotel Agreement of Purchase and Sale As I have noted, the mayor advocated for wcd after it initially signed its agreement with the co-owners. The contractual relationship between the parties was fairly complex, and it is necessary to have an understanding of it in order to place the mayor’s interventions in their proper context. The co-owners were not interested initially in selling the land. They were influenced in their decision to sell the land, in part, because they wanted to satisfy the city’s desire for an upscale hotel in the city centre. As I have found, the co-owners viewed a hotel as a complementary use for the City Centre Land in relation to Square One. Given that the hotel was the reason for the transaction from their perspective, they needed assurances that it would be built. This resulted in specific conditions in theaps to address their concerns.222 The negotiations regarding the aps were protracted. Although there were discussions with respect to extensions of the condition dates and changes to the site plan over time, the sticking points revolved around the conditions required for the transaction to close – assurances that the hotel would be built and that various zoning approvals would be granted.223 Ultimately, the co- owners’ concerns were addressed in the aps by a number of conditions intended to ensure that an appropriate four-star hotel was built which would enhance Square One.

Hotel Conditions in the aps Abraham (Bram) Costin of McCarthy Tétrault llp* was responsible for drafting the aps. Mr. Costin assisted the Inquiry greatly by explaining the purpose of the various conditions in the aps from the co-owners’ perspective. He drafted a number of specific conditions in theaps to ensure that the right type of hotel would be built, and he included specific terms regarding the ultimate use of the property. Theaps was marked as Exhibit 97 in the Inquiry and a copy is attached to this Report as Appendix I. wcd as purchaser had to meet a number of conditions by specific dates in order to keep the deal alive. The definition of “deposit” referred collectively to the first, second, and any additional deposit to be paid at various times

* Abraham (Bram) Costin is a partner at McCarthy Tétrault llp in the Real Property and Planning Group. Testimony of A. Costin, Transcript, July 8, 2010, p. 1427. Phase II – City Centre Land and World Class Developments 97 associated with certain dates. The first deposit was to be paid one business day after execution of the agreement, and the due date of the second deposit was the due diligence date, which was 60 days after the date of the agreement. The first condition date was to be the 120th day after the due diligence date, and by that time there was to be a formal application for site plan approval for the lands, among other things. The second condition date referred to the 180th day after satisfaction of the conditions required on the first condition date.224 Article 4.2(e) specified the conditions required by the second condition date:

1 site plan approval; 2 lifting of the H designation;* 3 evidence that the purchaser had entered into a management agreement for the hotel with a four-star or better operator; and 4 severance obtained.225

Under article 4.3, the agreement would be terminated and of no further effect whatever if the conditions were not satisfied. Article 4.3 also allowed for extensions of time to satisfy the conditions relating to site plan approval and the H designation, for unavoidable delays including delays caused by referrals to the Ontario Municipal Board (omb), and for any related court applications. The condition requiring evidence of a hotel management agreement was not subject to an extension.†226 Mr. Costin explained that a number of the conditions for the purchaser and the vendor mirrored each other so that, if these conditions were not met, either party could walk away from the agreement. For example, articles 5.1 and 5.2 referred to the vendor’s and the purchaser’s closing documents and contained a number of reciprocal documents to be delivered by both on closing.227 Article 6.6(a) required the purchaser to be responsible for any commissions owing to any third party.‡228 Article 6.6(b) stipulated that the purchaser agreed to enter

* The “H” designation is a term used to signify a holding on land. The holding is to ensure that certain requirements are met before the land is developed, and it must be “lifted” before development takes place. † There was no extension to the condition regarding evidence of a hotel management agreement because an omb appeal or other court action was irrelevant to whether wcd had obtained the required agreement. Either wcd could demonstrate that it had such an agreement or it could not. ‡ This condition spells out what Mr. McCallion already knew – that omers was not going to pay him any commission regarding this transaction. Testimony of P. McCallion, Transcript, July 27, 2010, p. 1921. 98 Updating the Ethical Infrastructure into a binding agreement, on closing, that prohibited various retail uses of the land. Mr. Costin explained that the purpose of this last clause was to ensure generally that the lands would not be used to compete with Square One. The agreement offered protection for the co-owners after closing.229 The conditions regarding hotel specifications and the hotel’s construction were found in articles 4 and 6. Article 4.1(e)(iii) stipulated that the purchaser was to provide evidence to the vendors that “the Purchaser has entered into a management agreement for the Hotel with a four-star or better operator.”230 Mr. Costin explained that the purpose of this condition was to satisfy the vendors by the second condition date that the purchaser had actually entered into a hotel agreement and, therefore, that the necessary initial step toward developing a hotel on the site had been completed.231 Article 6.6(b)(iv) incorporated the vendors’ description of the type of hotel they wanted on the land:232

a four star hotel having convention facilities and having no fewer than 200 rooms and to be operated by an international hotel brand and having full service guest amenities including a full service restaurant, a fitness facility and room service on the Hotel Site (the “Hotel”) of a type and in a manner to satisfy the conceptual requirements of the City of Mississauga for the city centre area.233

Before drafting this clause, Mr. Costin consulted with colleagues at McCarthy Tétrault about the requirements that brand a four-star hotel.234 He learned there was some subjectivity in the definition. However, it appeared that certain features, such as room service, distinguished four-star from lower-level hotels.* It was necessary to stipulate an international hotel brand to ensure that the hotel would be well known and recognized as a four-star hotel.235 The vendors wanted the building of the hotel to be under way before construction began on the condominiums (article 6.6(b)(iv)).236 Residential condominium construction on Block 29 could not begin until 90 days after the bona fide start of the hotel construction, and it could not begin on Block 9 prior to substantial performance of the hotel construction.237 Construction of the

* Murray Cook testified that star ratings for hotels do not really apply in North America, as the star rating system refers to the Michelin Guide in Europe. However, there are general guidelines for better-rated hotels, such as 24-hour service or the size of the rooms. Testimony of M. Cook, Transcript, September 15, 2010, pp. 4447–48; Testimony of A. Costin, Transcript, July 8, 2010, pp. 1434–35, 1436. Phase II – City Centre Land and World Class Developments 99 hotel was to begin within 18 months of closing, and the hotel was to be completed no later than 30 months after the commencement of construction.238 If hotel construction did not begin within 18 months of closing, the vendors could buy back both blocks of land at the purchase price plus 2 per cent per annum.239 If the hotel had not been substantially constructed within 30 months from the commencement of its construction, the co-owners had the right to cash a letter of credit;240 and if the hotel was not substantially constructed within 48 months of closing, the co-owners had the right to buy back the hotel site from wcd for $10.241 Mr. Costin explained that the rationale for these terms was that a half-built building often is worth much less than the cost of its construction because of the need to find a purchaser prepared to complete construction in the face of numerous construction liens. A vacant site or completed building, he said, is much more attractive than a half-built project shell.242 Following the execution of the aps on January 31, 2007, Mr. Costin believed that wcd was working to satisfy the conditions in the ordinary course. The co- owners obtained board approval for the transaction, and, following some title requisitions and other discussions with the purchaser, the due diligence condition was satisfied. The purchaser submitted a site plan to the city, satisfying another condition. Mr. Costin testified that he was not involved in the site plan approval process, but understood the purchaser was working with the vendors to finalize the site plan and other required municipal approvals.243

Amending Agreement – Extension Rights Article 4.5 of the original aps set out the extension rights, some of which wcd had to pay for in order to exercise.*244 The purchaser was entitled, on two separate occasions, to extend the first condition date for 30 days with notice and a $50,000 extension fee, on each occasion. The extension fees would not be applied to the purchase price on closing. In addition to the above, the purchaser was entitled to one extension of the second condition date by 120 days for a fee of $300,000.245 Following the retention of new solicitors in January 2008, wcd exercised its contractual right to the 120-day extension of the first condition date. Shortly thereafter, in February 2008, wcd approached the co-owners, stating that it

* Mr. Costin testified that extension provisions for which the purchaser has to pay are not uncommon. 100 Updating the Ethical Infrastructure found the hotel provisions in the aps too onerous.246 This objection resulted in further extensive negotiations between the vendors and wcd between March and July 31, 2008, over possible amendments to the aps, following which the parties executed an amending agreement.247 The negotiations were triggered by a memorandum prepared bywcd ’s solicitor (and investor) Emilio Bisceglia. Mr. Nobrega of omers received the memorandum dated February 28, 2008. It set out wcd’s proposed changes to the aps. In the Bisceglia memorandum, wcd requested the following changes:

1 the opportunity to build on Block 29 prior to commencing construction on the hotel; 2 the opportunity to build on the balance of Block 9 prior to completion of the hotel on Block 9; 3 deletion of the time frame to commence construction of the hotel within 18 months of closing and completion of the hotel within 30 months of commencing construction; 4 deletion of the vendors’ option to repurchase the property for the purchase price plus interest if the hotel was not commenced within 18 months of closing; 5 deletion of the right of first refusal that gave the vendors the right to buy back the lands if the purchaser attempted to sell them before commencing the hotel; and 6 deletion of the $10 buy-back of the hotel site.248

In essence, wcd wanted to remove all conditions relating to the hotel, including the remedies in favour of the vendors ensuring that either the hotel would be built or that they would receive their land back in the event of non-compliance.249 By April 2008, global economic conditions had begun to deteriorate, and they continued to decline into the summer. The parties were aware it was more difficult to finance hotels than other types of real estate, and the prevailing economic conditions made it difficult to secure financing for any type of project at that time. It was against this backdrop that Oxford entered into negotiations with wcd to modify the aps. Mr. Costin was instructed by his clients to prepare a draft amending agreement based on correspondence between the parties.250 The following is a summary of the correspondence: Phase II – City Centre Land and World Class Developments 101 1 On April 1, 2008, wcd proposed that both the hotel site and the residential component of Block 9 proceed together, which was not an issue for the property owners.251 2 On April 23, 2008, Oxford responded by proposing the removal of one of the blocks of land from the deal, concurrent construction of the hotel and condominiums on Block 9, delivery of the letter of credit in the amount of $2.5 million on closing (instead of when hotel construction began) to be held until substantial performance of the hotel, and removal of the $10 repurchase.252 3 wcd responded on April 29, 2008, requesting that the time frames relating to the commencement and completion of the hotel be replaced with a positive restrictive covenant; and that all other timing requirements, the delivery of a hotel management agreement, and the rights of first refusal and the buy-back provisions be deleted.253 These requests were not acceptable to the vendors since a restrictive covenant could not ensure that the hotel was built. A restrictive covenant must be negative (restricting potential use) rather than positive (requiring that the land be devoted to a particular use).254 4 On May 8, 2008, Oxford responded to wcd with proposed amendments to section 6.6(b) of the aps dealing with the retail uses and hotel conditions.*

On July 14, 2008, Mr. Costin sent wcd’s lawyers a revised amending agreement. He informed them that the vendors were prepared to give the purchaser further extensions if the purchaser agreed with the proposed changes and was prepared to provide the vendors with “written evidence of the hotel investigations and efforts” to secure a four-star hotel operator satisfactory to the vendors.255 The vendors proposed amending section 4.5 to add three 60-day extensions for $125,000 each. Each extension required proof of progress in obtaining an operator for the hotel. Therefore, at the time of the amending agreement, the vendors still contemplated that the hotel operator condition would be met by the second condition date.256 The parties signed the amending agreement on July 31, 2008, which provided for extensions regarding the commencement and completion of hotel

* Testimony of A. Costin, Transcript, July 8, 2010, pp. 1453–55; Exhibit 103. One condition not addressed in the aps was a “no change of control” clause to offer protection to the co-owners should there be a change in control on the purchaser’s side. Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2345. 102 Updating the Ethical Infrastructure construction, as well as extensions for wcd to complete the H designation removal process.257 The amended aps now imposed the following requirements on wcd:

1 The time frame for starting construction of the hotel was extended from 18 months to 24 months from the closing date. 2 The vendors were entitled to buy back Block 29 at the purchase price plus 2 per cent, instead of buying back all the land, if hotel construction did not commence within 24 months of the closing date. 3 Construction could not begin on Block 29 until the hotel was completed in all material respects. 4 The restrictions on the start of construction on the non-hotel portion of Block 9 were removed. 5 The building of the hotel and condominiums could proceed in tandem. 6 The $2.5 million letter of credit, originally due at the start of the hotel construction, was now due on closing. 7 The $2.5 million would be forfeited if the hotel was not substantially completed within 55 months, instead of within 30 months, after construction began. 8 The buy-back of the non-hotel portion of Block 9 for $10 was deleted. 9 The purchaser was given, as of July 31, 2008, three additional extensions of 60 days each to the second condition date, each with a payment of $125,000. wcd exercised the first extension on signing the amending agreement on July 31, 2008, paid the $125,000, and delivered a cursory note purporting to be a “hotel update.”258 On September 24, 2008, Mr. Costin received a letter from wcd’s lawyers informing the co-owners that wcd wished to exercise its right to extend the second condition date in accordance with the amending agreement.259 On September 29, 2008, Mr. Costin responded to wcd’s lawyers that the vendors were concerned with the materials submitted regarding the quality of hotel. They were, however, prepared to proceed with the latest extension request and sought confirmation that wcd would keep them informed and would pursue the quality of hotel specified in theaps .260 By letter dated October 17, 2008, wcd sought further amendments to the aps owing to what they described as the “economic chaos” and requested that Phase II – City Centre Land and World Class Developments 103 the co-owners waive the condition requiring evidence of a management agreement with a hotel operator, as well as relief from the purchaser’s other covenants including the requirement to provide a $2.5 million letter of credit.261 On December 2, 2008, wcd contacted Mr. Kitt of Oxford to inform him that it was unlikely wcd could meet the condition to deliver the hotel and requested the vendors waive the hotel conditions entirely and simply sell the land to wcd.262 On November 28, 2008, Mr. Costin informed wcd’s lawyers that the vendors were prepared to extend the second condition date to December 12, 2008, on the basis that there was some confusion on wcd’s part over which extensions had been granted by the vendors. Mr. Costin added that the vendors were not prepared to extend the time for exercising the final 60-day extension of the second condition date beyond December 12, 2008, and expected a more complete report regarding the hotel.263 By letter dated January 9, 2009, the vendors advised the purchaser that the aps had been terminated.264 In total, nine extensions had been granted to wcd, two of which were allowed on the basis of a payment of a $125,000 extension fee each.265

Planning Approvals and the City Site Plan Approval By the end of January 2008, wcd’s plans for the City Centre Land were being scaled back significantly. Mr. DeCicco contacted the city’s Planning and Building Department (planning department) to advise that, owing to costs, the anticipated above-ground pedestrian bridge connecting the hotel to the Living Arts Centre was being scrapped and that the size of the convention centre was being changed from 19,000 to 6,000 square feet.266 It was clear from wcd’s site plan resubmission dated February 26, 2008, that wcd had greatly reduced the scope of its plans for the City Centre Land. Staff in the planning department were concerned about the reduced scope of the project. The city had anticipated a development that would create synergy with the Living Arts Centre. The planning department questioned whether that was possible with a smaller, unconnected facility.267 On February 28, 2008, Marilyn Ball, director of the development and design division in the city’s planning department, set out the department’s concerns regarding the resubmission in a letter to Barry Lyon (of the 104 Updating the Ethical Infrastructure consulting company heading the land approvals efforts on behalf of wcd).268 Specifically, Ms. Ball pointed out that the convention centre was a key component of the proposal and any removal or reduction in size of that component would cause serious concerns for the city. The letter closed with a reminder that the site plan application fee would have to be paid before the site plan was recirculated.269 Site plan application fees are intended to cover the operating costs the city incurs in dealing with the site plan application.270 They are set out on an annual basis through a very broad fees and charges by-law that covers many sets of fees across the city. The amount of the fee is dependent on whether the development is residential or non-residential and on the size of the property in question.271 The site plan for the City Centre Land began as a master site plan, a general plan providing a context for evaluating the more-detailed site plans or phases of development that follow. A detailed site plan is required for the city building official to issue a conditional building permit.272 The wcd project was a complex one involving eight or nine buildings. A hotel was to be constructed initially, followed by eight condominiums. The project covered a large portion of downtown Mississauga,273 and therefore a master site plan was initially perceived to be appropriate. Application fees were not typically charged on master site plan applications.274 Although there was no formal mechanism to recoup money for the efforts invested by city staff before the approval of the detailed site plans, it was thought, given the scale of the wcd project, that some initial fees should be charged. Commissioner of Planning and Development Ed Sajecki, Marilyn Ball, and Ben Phillips, a development planner, discussed what would be appropriate in the circumstances. They decided that 10 per cent of the overall application fee would be reasonable. Accordingly, when wcd submitted its master site plan application on July 31, 2007, it paid $52,000 toward the site plan application fee and $3,250 for the lifting of the H designation.275 As discussed below, this initial fee was the only payment wcd made toward the site plan application fee, notwithstanding the considerable work undertaken by city staff to make thewcd project ready to meet various deadlines. Phase II – City Centre Land and World Class Developments 105

Dealings of City Staff withwcd Increase in Development Charges Regional development charges are fees levied by municipal governments to support infrastructure (such as water supply facilities, water treatment plants, regional roads, and police services). Under the Development Charges Act, 1997, development charges by-laws expire every five years, at which point they must be reviewed.276 In 2007, a review of the development charges for the Region of Peel resulted in an increase.277 On September 14, 2007, Mr. Sajecki received a letter from the Region of Peel advising that new regional development charges were being instituted and asking for a list of all site plan applications in progress at the time.278 Regional development charges are due at the time the building permit is issued. In the past, the new development charges by-laws would have immediate application to any site plan applications for which development charges were due after the passing of the new by-law. However, in 2007, the Region of Peel was considering the cost of adding transition provisions to the development charges by-laws. The transition provisions would allow existing applications to be grandfathered into the old regime so that the lower development charges would apply.279 In a letter to the Region of Peel dated September 19, 2007, Mr. Sajecki advised that, under the Official Plan, the City of Mississauga included an urban growth centre. On that basis, development projects in that centre should be eligible for grandfathering. The wcd project was specifically referred to in Mr. Sajecki’s letter as one of the site plan applications for the urban growth centre.280 For an application to be grandfathered into the old regime:

1 the site plan application had to have been submitted before October 4, 2007; 2 the building permit application had to have been submitted by February 1, 2008; and 3 the building permit had to have been issued under the application by May 1, 2008.

The Region of Peel inquired whether thewcd site plan application would likely qualify to be grandfathered into the old regime. Ms. Ball responded that, 106 Updating the Ethical Infrastructure since wcd would not be submitting a detailed site plan until the spring of 2008, the master site plan submitted by wcd would not be sufficient for a building permit to be issued. It was, therefore, unlikely to fulfill the conditions.281 A question then arose as to whether wcd’s site plan application was eligible for the transition provisions of the development charges by-law. If so, wcd would be eligible for the earlier development charges at a savings of roughly $9 million.282 In January 2008, John Zingaro, who was at the time an assistant city solicitor for the City of Mississauga, was asked to advise whether wcd’s site plan application qualified for the transition provisions. At that time, only the October 4, 2007, deadline had passed. Mr. Zingaro concluded that wcd’s application would qualify, provided it could be considered a site plan application under the Planning Act,283 since it had been submitted before October 4, 2007. After meeting with staff and lawyers in the planning department, Mr. Zingaro concluded that wcd’s site plan application was detailed enough to qualify as a site plan under the Planning Act. Consequently, wcd’s site plan application was eligible for the transition provisions of the development charges by-law.284 wcd and Application Fees Mr. Zingaro’s conclusion meant that wcd was entitled to pay the lesser Peel development charges, but it also meant that wcd’s site plan application fee was due and payable.285 As noted above, by February 28, 2008, wcd had not made any payment on the application fee other than the 10 per cent payment made at the time it submitted its initial site plan application. In a letter dated March 25, 2008, Barry Lyon advised city staff that a “first installment” of the site plan application fee (in the amount of $220,335.42) would be provided to the city “in the near future.”286 Scott Walker, of N. Barry Lyon Consultants Ltd., testified that this letter would have been approved by wcd before being sent. Although Mr. Walker testified this letter was sent to provide comfort to the city that the fee would be paid, to his knowledge the site plan application fee was never paid. He never received a response from wcd as to why it had not been paid.287 Mr. DeCicco admitted that he had no intention of paying the fee. He did not convey this to wcd’s consultants.288 Phase II – City Centre Land and World Class Developments 107

Actions of City Staff One of the subsidiary issues in this Inquiry is why and how it came about that city staff continued to work on the wcd project, notwithstanding the fact that wcd’s site plan application fee was never paid. For the reasons that follow, I find that the decision to continue work on thewcd project was an independent decision of the city staff and was not the result of influence by Peter McCallion or the mayor, nor was it taken because staff felt influenced by Mr. McCallion’s relationship with wcd. Ed Sajecki testified that there were three reasons why the city continued to work on the wcd project despite the fact that the application fee had not been paid. First, the city had been given assurances by wcd’s well-regarded consultants, N. Barry Lyon Consultants Ltd., that the fees would be paid. Second, the city was under a tight timeline to meet the April city council date for lifting of the H designation. Third, because the Region of Peel development charges were increasing so significantly, the city expected that a great volume of applications would try to make it under the deadline to be grandfathered into the old regime.289 Ms. Ball testified that she made the decision in consultation with Mr. Sajecki and Mr. Phillips to recirculate wcd’s site plan application despite the fact that the application fee had not been paid.290 She testified, as did Mr. Sajecki, that her reason for doing so was to ensure that city staff were not scrambling at the eleventh hour to prepare the application for the lifting of the H designation that was scheduled to be before council on April 23, 2008.291 The testimony of Ms. Ball and Mr. Sajecki has persuaded me that the decision to continue work on the wcd project was not the result of the exercise of influence by the mayor or Mr. McCallion. It was a decision made out of concern for the interests of the city.292 However, the fact that wcd did not pay the application fee put city staff in a difficult position, given the mayor’s promotion of the project. It is obvious that Mr. DeCicco took advantage of the good faith of city staff. I find it was most unfortunate that he relied on the excellent reputation of Mr. Lyon and the trust of city staff to avoid paying fees.

Failure to Lift the H Designation The H designation, a term used to signify a holding on land, must be “lifted” before development takes place. For the H to be lifted, a development agreement and servicing agreement with the city must be executed. The matter then 108 Updating the Ethical Infrastructure proceeds to the Planning and Development Committee of council and, finally, to city council for the actual lifting of the H designation. Council must approve the development and servicing agreement and must authorize the lifting of the H before development may proceed on the site.293 The wcd project was put on the council agenda for lifting of the H designation on April 23 and again on April 30, 2008. It was removed from the agenda at the last minute on both occasions owing to wcd’s failure to pay various outstanding fees, which included the site plan application fees. As well, 294 wcd had failed to execute the necessary agreements. On April 29, when it became evident that wcd was not going to meet the requirements for lifting the H for the second time, Mary Ellen Bench, the city solicitor, wrote a letter to wcd’s then solicitors setting out the city’s position and identifying the various outstanding issues that would likely prevent the 295 lifting of the H the next day. After the end of April 2008, the wcd project remained dormant. wcd never succeeded in having the H designation lifted.

The Mayor and City Staff I find there is no evidence that the mayor interacted with city staff about the wcd project before the termination of the agreement of purchase and sale. Ms. Ball contacted the mayor’s office in the early days of the project to propose a briefing, but the mayor declined the offer without providing any reason.296 There was no evidence before me that the mayor had any involvement with city staff with respect to wcd’s site plan application fees, or with the planning department’s decision to process the application notwithstanding the non- payment of fees. As noted, this decision was made by Mr. Sajecki and Ms. Ball to avoid having city staff rush to prepare the application to lift the H designation in April 2008. wcd’s Financial and Other Difficulties Throughout the project,wcd struggled to meet its financial obligations. By the time the deal unravelled, wcd was indebted to various lawyers, consultants, and contractors. Many invoices remained outstanding at the time of the Inquiry. Phase II – City Centre Land and World Class Developments 109

Tony DeCicco and wcd Approximately 10 years before the events relevant to this Inquiry, Tony DeCicco met Peter McCallion through Mr. McCallion’s involvement as a real estate agent and the two men had become friends. Mr. DeCicco became acquainted with the mayor independently through his generous contributions to charity galas and his participation in golf tournaments.* In the spring of 2007, Mr. McCallion called Mr. DeCicco and told him he was looking for investors for a building project in the city centre of Mississauga. Mr. McCallion told Mr. DeCicco that Murray Cook was involved. Mr. DeCicco subsequently attended a lunch with Mr. McCallion and Mr. Cook in Woodbridge, along with Emilio Bisceglia. He was told wcd was looking for investors who would not be involved in the day-to-day operation of the project. Mr. DeCicco said he would consider the proposition and get back to them, but ultimately decided that he did not want to invest in the wcd project unless he could have a hand in its management.297 In late July 2007, Mr. DeCicco met with Mr. McCallion at Mr. DeCicco’s driving range. Mr. McCallion told him that there were problems with funding for the wcd project. In these circumstances, he would accept Mr. DeCicco’s involvement in the day-to-day management if Mr. Cook was content with that arrangement. Mr. DeCicco asked to review the paperwork and to meet with Murray Cook.298 The decision to bring Mr. DeCicco into the wcd project came as a total surprise to Mr. Cook. The project was going well at the time in Mr. Cook’s view. Mr. Cook had completed successful highrise developments and he had access to potential investors. From the day that Mr. DeCicco joined the project, Mr. Cook felt he was no longer the one making the decisions. Mr. DeCicco immediately began making changes to the project.299 Mr. Cook did not feel comfortable with Mr. DeCicco.300

Meeting the Hotel Conditions As I have found, the co-owners and the mayor shared the goal of having a hotel and convention centre at the city core. For the mayor, it represented a major step toward a cohesive downtown.301 For the co-owners, it was a complementary use to Square One.302 I accept that the mayor thought the wcd project

* Not all these events were organized by charitable organizations. 110 Updating the Ethical Infrastructure was in the public interest. She was steadfast in her desire to see the project proceed. She intervened repeatedly with the co-owners to seek relief from the requirements of the aps, including suspension of the hotel requirement in circumstances when her son also stood to benefit. The aps was drafted with specific conditions involving the building of the hotel to ensure that wcd could not buy the land without building a hotel. It will be recalled that article 6.6(b)(iv) of the aps defined “hotel” as a four-star hotel having convention facilities and having no fewer than 200 rooms operated by an international hotel brand with full-service guest amenities, a full- service restaurant, a fitness facility, and room service.303 Meeting the hotel requirement was not so easy. As Mr. Cook testified, hotel deals are inherently difficult and require long-term investors. A hotel study conducted at the beginning of the wcd project revealed that a five-star hotel was not tenable at the site, but that a four-star hotel might be possible.304 However, Mr. DeCicco learned through his many meetings with various individuals in the hotel industry that no one was interested in running even a four- star hotel on the Mississauga City Centre Land.305 Mr. DeCicco’s testimony regarding the difficulty of building a four-star hotel at the city centre site was corroborated by the testimony of Suresh (Steve) Gupta.306 Mr. Gupta is ceo of Easton’s Group of Hotels, a company that develops and manages hotels. He has been in the hotel management business for 22 years.307 Mr. DeCicco approached Mr. Gupta in January 2008 about developing a four-star hotel on the Mississauga city centre site.308 However, Mr. Gupta did not believe a four-star hotel was viable in that location.309 In Mr. Gupta’s view, a four-star hotel required 24-hour room and concierge service, as well as a large lobby. Mr. Gupta testified that the $270–$300 per night room rates required to sustain such a facility could not, in his opinion, be achieved, given the less expensive hotels in the vicinity and the proxim- ity of other four-star hotels both near the airport and in downtown Toronto. However, Mr. Gupta suggested to Mr. DeCicco that a hotel which offered most of the four-star amenities, but did not include breakfast room service and 24-hour concierge service, might be viable at the city centre site. Mr. Gupta proposed this option to Mr. DeCicco as one that was “second best” or “three- and-a-half stars.”310 Mr. DeCicco approached Mr. Gupta twice to determine whether Easton’s might purchase and develop the land for the hotel. Mr. Gupta believed the Phase II – City Centre Land and World Class Developments 111 purchase price proposed by Mr. DeCicco for the severed land was too high and declined both offers.311 Nevertheless, Mr. DeCicco and Mr. Gupta continued to discuss the possibility of Mr. Gupta managing a hotel built by Mr. DeCicco on the site.312 Mr. DeCicco arranged a tour of one of Mr. Gupta’s hotels, which took place on March 19, 2008.313 Peter McCallion, Ed Sajecki, Marilyn Ball, and the mayor toured the Marriott Residence Inn on Wellington Street West in downtown Toronto. Mr. Gupta believed this hotel represented a good example of the level of hotel which would be viable on the City Centre Land.314 Although the mayor seemed happy with the hotel at the conclusion of the tour, Mr. Gupta learned from Mr. DeCicco a few days later that she had hoped for something more elegant and upscale for the city centre.315 The mayor confirmed that the hotel showcased by Mr. Gupta on March 19, 2008 “in no way met what [she] had envisioned for a hotel in the city core.”316 Mr. DeCicco’s efforts to get a hotel on the City Centre Land were at a standstill and he sought to have the hotel conditions waived. The vendors were, understandably, not keen to do so. Nevertheless, John Filipetti of Oxford consulted with Mr. Sajecki regarding what the city’s reaction would be if the hotel conditions were removed. Mr. Sajecki advised that, if the hotel conditions were removed, the city would seek an amendment to the Official Plan to require a hotel at the site.317 Although the vendors provided wcd a number of extensions with respect to the hotel conditions, they ultimately required some written evidence of wcd’s efforts to secure a four-star or better hotel operator for the site before any further extensions would be granted.318 It was in this context that Mr. DeCicco asked Mr. Gupta for a letter confirming that he had been involved in negotiations to manage a hotel for wcd. Mr. Gupta and Mr. DeCicco ultimately signed three documents on December 15, 2008. First, they signed a letter confirming negotiations betweenwcd and Easton’s Group as follows:

We confirm that our companies have entered a Management Agreement for a four star hotel having convention facilities and having no fewer than 200 rooms and to be operated by an international hotel brand and having full service guest amenities including a full service restaurant, a fitness facility and room service on the Hotel Site (the “Hotel”).319 112 Updating the Ethical Infrastructure Second, Mr. Gupta and Mr. DeCicco executed a management agreement which Mr. Gupta described as containing the usual industry terms.320 However, given that there was no assurance of when or if the hotel would be built, Mr. Gupta asked that a provision be added to allow for termination of the agreement on seven days’ notice.321 A third document (the “side letter”) was therefore drafted by wcd’s lawyer, Mr. Bisceglia, which read as follows:

Further to our discussions and negotiation over the last year, we confirm the following: 1. The parties are not obligated to take any steps with respect to the terms and conditions of the Management Agreement executed between ourselves dated December 15, 2008 until the transaction between World Class Developments Limited and Omers Realty Management Corp. closes, or such further and other date as the parties may agree in writing. 2. Either party shall have the option to terminate the Management Agreement by providing one week’s written notice. Upon delivery of the Notice of Termination, both parties will be released of all of their obligations under the Management Agreement.322

The first letter, confirming negotiations between wcd and Easton’s Group, was provided to the vendors, but the management agreement and side letter were not. The vendors understandably regarded the letter confirming negotiations between wcd and Easton’s Group as amounting to weak evidence and asked for better written evidence by January 9, 2009, as to the international hotel brand. They also sought evidence that the operator was a four-star or better operator. Finally, the vendors requested a signed management agreement.323 In response to this request, wcd obtained a further letter from Mr. Gupta advising that he had spoken with Marriott and that the company had agreed to allow Easton’s Group to apply for a franchise to carry a Marriott flag at the city centre site.324 wcd, through its solicitors, advised that there was no requirement in the aps that it provide a signed management agreement. The vendors were not satisfied with this response and ultimately terminated the aps on January 9, 2009.325 It is of note that the side letter was never produced to the vendors, and its existence was not known to anyone other than Mr. Gupta and wcd until Phase II – City Centre Land and World Class Developments 113 considerable evidence had been given in this Inquiry. As I will review below, there was litigation between wcd and omers after the aps was terminated in January 2009. Although the management agreement was produced as part of each of Mr. DeCicco’s and Mr. Gupta’s affidavits in wcd’s counter-application against the vendors, the side letter was not attached to either affidavit. Mr. DeCicco and Mr. Bisceglia testified that the failure to include the side letter as part of Mr. Gupta’s and Mr. DeCicco’s affidavits was simply an oversight. The side letter ought to have been produced in the previous litigation. It clearly undermined the strength of the management agreement, which effectively became meaningless. Had the vendors been made aware of the side letter it is likely that the aps would have been terminated on December 15, 2008. Furthermore, had the side letter formed a part of Mr. DeCicco’s or Mr. Gupta’s affidavits, the litigation settlement would likely have been quite different.

8 The Mayor’s Involvement in Negotiations betweenwcd and the Vendors The evidence relating to the mayor’s direct involvement in encouraging the co- owners to sell the land to wcd has been covered above, in section 6. This section considers the mayor’s involvement on behalf of wcd in the negotiations that led first to amendments to the aps, followed by additional extensions regarding the condition dates, up to January 9, 2009, when she acknowledged and accepted the fact that the deal had terminated. It is clear from the evidence that the mayor played an active role in requesting and securing extensions on behalf of wcd regarding the hotel conditions set out in the aps. In fact, the evidence reveals that it was the mayor, and not wcd, who almost single-handedly promoted the project and kept the deal alive through 2008. As the evidence indicates, the vendors were prepared to acquiesce to her requests until it became apparent that wcd was unable, or unwilling, to fulfill the hotel conditions. 114 Updating the Ethical Infrastructure The Mayor and the Conditional Period in the Agreement of Purchase and Sale The Amending Agreement The mayor acknowledged that, up to the signing of the amending agreement in 2008, she intervened several times on wcd’s behalf to request extensions to allow wcd more time to secure a hotel. She testified that these interventions were always at the request of Mr. Cook or Mr. DeCicco, and never at her son Peter’s request.326 As I have observed, this evidence is difficult to accept. On March 27, 2008, the mayor met with Michael Nobrega, John Filipetti, and Michael Kitt at omers’ offices to discuss the wcd project. From Mr. Nobrega’s perspective, the purpose of the meeting was to introduce the mayor to the “team,” especially to Mr. Kitt, who was new to Oxford and the file.* Mr. Nobrega testified that, given his position as ceo of omers, he was too busy to deal with the wcd transaction. Mr. Kitt became primarily responsible for it in the spring of 2008.327 Mr. Nobrega testified that whenever the mayor contacted him about the wcd transaction he directed the question to Mr. Kitt and asked him to follow up with the mayor.328 Among other things discussed at the March 27, 2008, meeting, the mayor conveyed the message that she believed a four- or five-star hotel, along with the amenities of a convention centre, were fundamental key assets to the city centre, and she wanted to see the development happen.329 Mr. Filipetti attended the meeting, and, in an email to his colleague Ron Peddicord, he reported that the mayor informed them that Tony DeCicco was now part of wcd. Mr. Filipetti wrote that they had not heard from Mr. DeCicco directly, “[o]nly through the Mayor,” and the mayor indicated that she believed Mr. DeCicco had significant financial resources.330 Mr. Filipetti stated that he explained to the mayor “the importance of the clauses relative to the city’s goal of a hotel,” and confirmed to Mr. Peddicord that omers “did not give on any of [the hotel provisions].”331 Mr. Kitt understood from the mayor’s comments at the March 27, 2008, meeting that she “vouched” for Mr. DeCicco. He was new to the file and questioned the others about how there could be a new principal 14 months into the transaction. He testified that there was “embarrassment and concern” among the co-owners because the aps, as originally executed, did not have a clause

* Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3101. This was Mr. Kitt’s first meeting with Mayor McCallion. Testimony of M. Kitt, Transcript, August 19, 2010, p. 4002. Phase II – City Centre Land and World Class Developments 115 requiring consent when a new owner took control of wcd as purchaser. wcd remained the purchasing company throughout, but the introduction of Tony DeCicco represented a change of control.*332 In Mr. Kitt’s opinion, the people at wcd took advantage of this fact and maintained throughout that they were not required to divulge the identity of the principals of wcd. Mr. Kitt testified that he found it odd to deal with a purchaser in this way and characterized the negotiations as “very distant,” with wcd materializing more as a corporate entity, almost a shell, rather than as a group of individuals. He would have expected regular meetings, face-to-face interaction, and direct negotiations with a principal on a deal this complicated. In fact, he met with Mr. DeCicco only twice over the course of the year.333 Mr. Kitt received a copy of the February 28, 2008, Bisceglia memo, and he and Mr. Filipetti compared it with the original aps.334 As noted, the memo described proposed amendments to the aps which contemplated the removal of many, if not all, of the conditions relating to the purchaser’s obligations to satisfy the hotel conditions.335 Mr. Kitt spoke with Mr. DeCicco on March 31, 2008. Mr. DeCicco reiterated his concerns regarding timing and the structure of the aps.†336 Mr. Kitt was uncomfortable with the nature of their meeting because he had just come from a meeting with the mayor, who had stressed the importance of the hotel. Mr. DeCicco, a new principal of wcd not known to anyone at omers / Oxford, was now asking for significant changes to theaps . Mr. Kitt knew that the mayor wanted a hotel and had vouched for Mr. DeCicco’s ability to bring the hotel project to fruition. Mr. DeCicco, however, was now expressing a desire to remove the conditions relating to the hotel entirely.‡337 In his email to Craig Coleman of Hawthorne on April 1, 2008, Mr. Filipetti provided an update following the March 27, 2008, meeting with the mayor. He informed Mr. Coleman that Mr. Cook’s role had been taken over by Mr. DeCicco, who was “apparently” known to the mayor. The mayor believed he had the resources to complete the project. Mr. Filipetti wrote that their first contact with the new principal came “indirectly via the City” in the form

* Mr. Kitt testified that a change in the key person was unusual and went beyond a corporate change in control. † This meeting was the first time Mr. Kitt met with Mr. DeCicco. Their second meeting occurred in Decem- ber 2008, when Mr. Kitt advised Mr. DeCicco that the deal had terminated. ‡ See Exhibit 99 (Mr. DeCicco’s follow-up letter to Mr. Kitt regarding his proposed changes to the aps). 116 Updating the Ethical Infrastructure of a memo stating that virtually all the aps conditions regarding the hotel were making the project difficult to finance.338 He indicated that Oxford had responded to wcd, also “via the City,” that the conditions represented the essence of the deal and that they would not be changed. He went on to say that, after this meeting, Mr. Kitt spoke with Mr. DeCicco, following which Mr. DeCicco sent a letter proposing more modest amendments to the (aps). Mr. Filipetti reported that legal counsel were reviewing the proposed amendments, and he hoped to discuss the proposal with Mr. Coleman before responding to Mr. DeCicco.339 The mayor acted as the conduit to deliver information regarding the change of key personnel. It is also apparent from the references in Mr. Filipetti’s emails that the mayor had requested concessions regarding the hotel conditions on behalf of wcd at this meeting.340 Mr. Filipetti’s references to receiving the memo “via the City” and to not giving in on any of the hotel provisions lead me to the conclusion that the negotiating demands within the Bisceglia memo were advanced by the mayor at the meeting on March 27, 2008. I find that the mayor sought to negotiate amendments to the aps on behalf of wcd at this meeting and subsequently. Mr. Kitt reported to Mr. Nobrega in an email dated April 29, 2008, that he had informed the mayor of their “compromise position.” The vendors would allow the hotel and condominiums to be developed at the same time on the south site and would keep the north site in the deal. The mayor seemed pleased with this position.*341 Mr. Kitt testified that he did not usually report to Mr. Nobrega; however, in this situation he informed Mr. Nobrega of his exchange with the mayor for the following reasons: (1) the process leading to the vendors’ compromise position had been initiated in Mr. Nobrega’s office at the March 27, 2008, meeting; (2) Mr. Nobrega and the mayor enjoyed a very good relationship; and (3) Mr. Nobrega had asked Mr. Kitt to keep him apprised of the situation.342 On April 30, 2008, Mr. Nobrega thanked Mr. Kitt, as the mayor had informed him that Mr. Kitt had been very helpful the previous day. Mr. Kitt responded by informing Mr. Nobrega that he too had spoken with the mayor again and agreed to meet with Peter McCallion at her request.343 Mr. Kitt testified that the mayor set up the meeting and advised Mr. Kitt where and

* Some of the changes contemplated by the vendor came out of Mr. DeCicco’s April 1, 2008, letter (Exhibit 99). Phase II – City Centre Land and World Class Developments 117 when to attend.*344 Her involvement made some sense because Mr. Kitt had no existing relationship with Mr. McCallion. On May 13, 2008, he met with the mayor. They were joined by Mr. McCallion halfway through the meeting.345 Although his email on the subject (discussed below) suggests otherwise, Mr. Kitt testified that he did not regard the May 13, 2008, meeting as a negotiating session. He informed the mayor, and Mr. McCallion once he arrived, of the terms that had been offered to the purchaser previously, which included a six-month extension regarding the hotel. The mayor reiterated her position on the importance of a hotel. Nevertheless, when Mr. McCallion arrived he requested, and was denied, even more time to complete the conditions in the aps. It is significant that Mr. McCallion made his request in the presence of his mother.346 Following this meeting, Mr. Kitt reported in an email to Mr. Filipetti that they had reached an agreement: “[b]asically, our letter plus an additional six months to start and finish the hotel.”347 It is also significant that Mr. Kitt described the meeting as coming to a resolution, rather than one that simply allowed for information sharing. Indeed, if that was all that was required, a meeting would not have been necessary. On May 20, 2008, Mr. Kitt reported to Mr. Nobrega that they were in good shape with respect to the hotel project. He had met with the mayor the previous week “and resolved the final issues.” Mr. Nobrega responded that he had seen the mayor recently, and she reiterated how “very pleased she was with how you [Mr. Kitt] were handling things with her.”348 Mr. Kitt testified that, on July 4, 2008, the mayor spoke to him and requested six additional months for wcd to satisfy the various conditions in the aps. This concession extended the time for satisfaction of the hotel conditions, the site plan approval, and the lifting of the H designation.349 In an email dated July 9, 2008, to Michael Latimer, the ceo of Oxford, Mr. Kitt noted that the call from the mayor had come “via Michael Nobrega.”350 By this he meant that “Michael [Nobrega] had the mayor on the line” and had transferred the call to him. This elevated the priority of the discussion in Mr. Kitt’s mind.351 Mr. Kitt informed Mr. Latimer that the co-owners were onside with the extension, and he proposed to offerwcd three 60-day extensions at a $125,000 non-refundable fee per extension, subject to satisfactory evidence

* Mr. Kitt testified that he had no prior contact with Peter McCallion. 118 Updating the Ethical Infrastructure of hotel investigations to date. He concluded that he would recommend the extension, and would like to inform the mayor “today.”352 Mr. Kitt commented in his email that “the actual developer did not call.”353 He testified that, although it was unusual to receive a request from the mayor instead of from Mr. DeCicco or Mr. McCallion, he was not surprised in this case. It was consistent with what had been occurring since March 27, 2008. He concluded that “Tony DeCicco and wcd were using the mayor as an effective communication tool to … advance negotiation positions.”354 In an email dated July 8, 2008, Mr. Nobrega thanked Mr. Kitt for following up with the mayor:

[T]hanks for responding to Hazel while on your vacation; she appreciates it and I suspect that she will add you to her very small group of people whom she would turn to for advice …355

The mayor acknowledged that Mr. DeCicco and wcd had asked for her involvement to get this extension, which was no small concession. She testified she went to Mr. Nobrega to request the extension because he was the head of omers. As well, they sat together on the Enersource board.*356 The mayor contended that her purpose in intervening on behalf of wcd was to pursue the city’s interests and that, because of economic conditions, her focus was to provide wcd with a little more time to secure a hotel deal. She acknowledged she pushed the co-owners to give wcd the extension, while at the same time she made it clear to Mr. DeCicco that, if he were to receive the extension, he needed to supply “real evidence” that there was hope of securing a hotel.357 Mr. Kitt was scheduled to speak with the mayor again on July 11, 2008. In preparation for their conversation, Mr. Kitt asked Mr. Filipetti when they had last heard anything regarding the hotel, to which Mr. Filipetti reported there had been “zero communication.”358 He reported that city staff had not heard from wcd or their consultants for months, and that wcd had not paid the substantial municipal charges and fees relating to the site plan.359 In his evidence, Mr. Kitt noted that the credibility of the purchaser was of serious concern to the co-owners at this point. They were concerned about the

* She testified, however, that there was no connection between the fact that they both sat on the same board and her decision to approach him in relation to the extensions. Phase II – City Centre Land and World Class Developments 119 lack of communication on a number of fronts, about the city process slowing down, and about the purchaser’s ability to satisfy the hotel conditions in the aps.360 After many internal discussions at omers / Oxford, and discussions with aim, the co-owners agreed to give wcd three additional 60-day extensions that would cost wcd a non-refundable extension fee of $125,000 for each one, with the extensions subject to satisfactory evidence of hotel investigations performed to date.*361 Although the extension fees were substantial, Mr. Kitt explained this was necessary to convey to wcd that it had to present a viable project. When Mr. Kitt spoke with the mayor on July 11, 2008, he defended the co-owners’ position and pointed out their concerns regarding the lack of communication and the persistent questions surrounding the ability of wcd to deliver a hotel. Nevertheless, he conceded that the economy was in turmoil.362 Negotiations between the co-owners and wcd resulted in an amending agreement to the aps, signed on July 31, 2008.363

The Mayor’s Involvement in the Extensions The mayor agreed that she “definitely” intervened with the co-owners on behalf of wcd in the fall of 2008 to request that the agreement be extended to allow wcd more time to find a hotel operator.364 Mr. DeCicco acknowledged that he spoke to the mayor 17 times during November 2008 because he thought she could help him gain more time to fulfill the aps conditions.365 Mr. Kitt confirmed that the mayor involved herself “numerous times” to request that the co-owners be fair and reasonable, and to impress on them that, although it was a difficult economy, the vision for the hotel remained sound and she wanted it to happen.366 On October 17, 2008, Mr. DeCicco wrote to Mr. Kitt at Oxford to request further amendments. Mr. DeCicco requested that the co-owners waive the hotel conditions in the aps, including evidence of a hotel management agreement and any restrictive covenants regarding the use of the land.367 The mayor testified that Mr. DeCicco never informed her of this request, and she was not aware that wcd had proposed a straight sale of the land.†368 On October 24, 2008, Mr. Filipetti of omers / Oxford wrote to Grant

* Mr. Kitt explained that, because of their concerns, they focused on three extensions of 60 days each as referred to above, instead of one six-month extension period. † She testified that she was not aware of this letter. Mr. DeCicco testified that he never discussed his proposal of a clean sale with the mayor because her agenda was the achievement of the hotel, and he acknowledged that he may have misled her by the lack of information he provided to her. 120 Updating the Ethical Infrastructure Charles and Craig Coleman of Hawthorne confirming that he and others from Oxford had met with Mr. McCallion the previous day and that Mr. McCallion had provided them with a letter from Mr. DeCicco outlining wcd’s request to drop the hotel conditions from the aps.*369 Mr. Filipetti advised that Mr. McCallion told them he had spoken to “key people” at the city who were “apparently ok” with the restrictions being removed. Mr. Filipetti indicated that omers / Oxford would pursue a straight sale if the co-owners agreed on the change of position.370 As I have noted, this entreaty was not well received on the aim side of the table.371 That same day, Mr. Filipetti emailed Mr. Kitt to report on his discussion with Mr. Charles regarding aim’s perspective on wcd’s request to drop the hotel conditions. Given that aim wanted Oxford to talk to the city to understand the city’s view, Mr. Filipetti enquired whether he should contact Mr. Sajecki or whether Mr. Kitt would prefer to speak with the mayor.372 Mr. Kitt replied that Mr. Filipetti should inform wcd of aim’s position, as well as call Mr. Sajecki. Mr. Kitt intended to follow up with the mayor the following week.†373 On October 27, 2008, Mr. Charles of Hawthorne wrote to colleague Dean Hansen about this issue, stating that “[n]o one at Oxford has yet spoken to the city to take the pulse of the mayor or the planning staff.”374 Mr. Nobrega wrote to Mr. Kitt on November 16, 2008, to confirm that he had spoken to the mayor approximately two weeks earlier and that she had mentioned a “land transaction with the City” that required the co-owners to sign off, but that aim was raising objections. According to Mr. Nobrega, the mayor informed him she was prepared to speak to the chair of aim. She intended to “pressure aim” to take a “second but considered look at the City’s request” to relax the hotel conditions temporarily.375 Mr. Nobrega advised the mayor that he wished to speak with Mr. Kitt before she called the chair of aim. On November 17, 2008, Mr. Kitt responded by informing Mr. Nobrega that he had “just finished a nice conversation” with the mayor and that she and Mr. Kitt agreed to let the land deal run its course through to January 2009. He reminded Mr. Nobrega that the land deal referred to was the revised wcd deal.

* This was Mr. McCallion’s second request directly to Mr. Kitt and others at omers / Oxford. On Oc- tober 9, 2008, Mr. McCallion came into Oxford’s offices and asked Mr. Kitt and Mr. Filipetti to consider a straight sale of the land, removing all the hotel conditions. Testimony of M. Kitt, Transcript, August 19, 2010, p. 4032. † Mr. Kitt testified that he could not recall whether he called the mayor as he suggested. Testimony of M. Kitt, Transcript, August 19, 2010, p. 4040. Phase II – City Centre Land and World Class Developments 121 He explained that, if necessary, they would revisit the transaction in January 2009.376 On November 20, 2008, at approximately 10:30 p.m., Mr. Nobrega informed Mr. Kitt that the mayor had made a plea to “give Tony (?) some slack on some deposit due [that day]. Could you provide a week until you and I get a chance to talk.” Mr. Kitt responded at approximately 1:15 a.m. on November 21, 2008: “We are good on our side. We’ll need to talk to our co-owner. Consider it done.”377 Mr. Nobrega left a message for the mayor first thing that morning indicating he had received her message from the previous evening, and that she was to “consider it done … Not a problem.”378 wcd decided not to exercise the extension on November 21, 2008. From Mr. Kitt’s perspective, instead of paying for the extension, wcd was trying to plead that times were tough. The company could not find a hotel, and it wanted to change the deal to a straight sale of the land in any event.379 omers / Oxford granted wcd an additional three weeks’ extension from the original exercise date of November 21, 2008, to December 12, 2008, without any further extension fee. At that time the aps would expire if wcd had not fulfilled the conditions required by the aps.380 On November 28, 2008, Bram Costin of McCarthy Tétrault wrote to wcd’s lawyer and advised that the vendors had agreed to the extension of the second condition date to December 12, 2008.381 Mr. Filipetti, who was copied on Mr. Costin’s email, wrote to Mr. Kitt to say he had not been made aware they had agreed to a further one-week extension, and he requested that Mr. Kitt inform him of “any further contact between wcd / the mayor / Nobrega” of which he was aware. Mr. Kitt responded that he was not aware of the extension, but was aware that the mayor and Mr. Nobrega had spoken over the weekend.382 It appeared to those at aim that Mr. Filipetti had agreed to a further one- week extension without their approval.* Grant Charles advised that the aim representatives should have been consulted, and he questioned wcd’s rationale.383 According to Mr. Coleman, the deal was coming to an end because wcd could not live up to the hotel requirements, and aim did not want to see it dragged out. Therefore,aim executives were concerned when the lawyers acting for the co-owners granted the extension without informing them.384 I have heard the testimony of the mayor and Mr. Nobrega, each of whom

* Exhibit 364. This appears to be an extension agreed to between the mayor and Michael Nobrega. See Exhibit 470. 122 Updating the Ethical Infrastructure described the mayor’s role simply as a conduit for information between the parties. I do not accept that her role was so limited. The mayor engaged in negotiations on behalf of wcd with Mr. Nobrega. It appears that she turned to Mr. Nobrega first when she wanted concessions on behalf of wcd. The contemporaneous evidence from the emails and phone calls alone supports this. Mr. Nobrega requested that he be kept informed about the project, and throughout 2008 he attempted to appease the mayor, who was advocating for wcd. According to his evidence, he had been at the forefront of receiving all the calls from the mayor on these issues to the extent that, by early December 2008, he was prepared to involve Leo de Bever of aim to understand the “ambi- ance of the environment.”385 Although he had delegated the day-to-day details of the transaction to Mr. Kitt and others at Oxford, I find that Mr. Nobrega was directly involved with important decisions made in this transaction. In his update email to Mr. Nobrega on December 2, 2008, Mr. Kitt advised Mr. Nobrega that the purchasers had contacted him and advised that “[t]hey do not feel they can meet a key condition of the sale, that being the delivery of a hotel. They would like us to waive this condition and simply sell them the land. Hazel would like us to co-operate.”386 He forwarded the email to Mr. Filipetti, who responded that the mayor had spoken to him to express her fear that they would terminate the deal in “difficult economic conditions that make it impossible to live up to the hotel timelines.”387 He reported that the mayor said she was aware she could not obtain a quality hotel at this time, but that she wanted a deal in place to enable the hotel development to go forward when conditions improved. She queried whether aim was holding things up, to which Mr. Filipetti replied that the co-owners made decisions on a consensus basis. He advised the mayor that they “had Tony’s request and were having urgent discussions with [their] co-owners.”388 He concluded his update by reporting that the mayor wanted a meeting with Mr. Nobrega, Mr. Kitt, and Mr. DeCicco “as soon as possible,” and, if not possible, she wanted them to extend the hotel condition date again.389 Mr. Kitt suggested that the co-owners provide another week’s extension to Mr. DeCicco, which would give the co-owners time to determine their position. He asked Mr. Filipetti to let the mayor know they were doing their best under the circumstances, and advised that he would call the mayor himself as well.390 Mr. Filipetti responded that he had sent aim an update about his call with the mayor wherein he proposed the one-week extension. He stated that Phase II – City Centre Land and World Class Developments 123 he was “pushing the clean sale with [aim].”391 Mr. Kitt told Mr. Filipetti that he had updated Mr. Nobrega by telephone earlier that afternoon.392 Later on December 2, 2008, Mr. Filipetti reported in an email to Mr. Charles and Mr. Coleman at Hawthorne that the mayor would be calling and that she would be looking for the co-owners to relax the aps conditions owing to “economic conditions.”393 He suggested that the mayor “may try to ‘divide and conquer’ and she surely [knew] people on both [their] boards.”394 Mr. Filipetti added that Mr. Kitt supported selling the land outright for the original purchase price plus an additional $2.5 million, and asked aim to consider this proposal.395 The mayor called again on the afternoon of December 2, 2008, to reiterate her position that the hotel conditions be relaxed temporarily.396 I find that Mr. Filipetti felt pressured to acquiesce to the mayor’s requests to relax the conditions in the aps, and felt compelled to persuade aim to agree to do the same. The following morning, December 3, 2008, Mr. Filipetti informed Mr. Kitt that aim had agreed to the one-week extension.397 When Mr. Filipetti suggested a meeting with the mayor to discuss the request for temporary relax- ation of the hotel conditions, Mr. Kitt responded that it wasn’t necessary to meet with her until they heard from aim. If aim agreed to the straight sale of the land being proposed, the sale process would begin, and, if not, the mayor would “get involved.”398 Following this exchange with Mr. Filipetti, Mr. Kitt returned the mayor’s call and left a message stating that the one-week extension had been granted.399 Mr. Coleman responded to Mr. Filipetti’s update by seeking clarification of the nature of Mr. McCallion’s interest in the transaction.400 He testified that his clients were not clear about Mr. McCallion’s role. They heard that Mr. McCallion had “[popped] up as a principal in the project” around the end of October, and now that the mayor was involved they did not like the way things were shaping up.401 Mr. Coleman was clearly concerned. If Mr. McCallion was a principal and not an agent, and the mayor was, at the same time, applying pressure on them to relax certain requirements in the agreement, “the optics [were] not very good.”402 Michael Dal Bello testified that he and Mr. Coleman spoke about Mr. McCallion’s interest in the project, given the fact that Mr. McCallion appeared to be increasingly involved in discussions. He testified that Mr. Coleman was 124 Updating the Ethical Infrastructure uncomfortable about what Mr. McCallion’s role might be, and he asked Mr. Coleman to seek clarification.403 On December 11, 2008, John Filipetti informed Mr. Kitt that Mr. DeCicco had called, and when Mr. Filipetti reiterated the position of the co-owners, Mr. DeCicco stated he did not understand why they wanted him to fail. He said he had $2–$3 million invested and could not walk away.404 Mr. Filipetti replied that Mr. DeCicco could exercise the extension on December 12, 2008, if the three conditions required by that date were met.*405 Mr. Kitt set up a meeting with the mayor for the following week because it was important to him, and in the best interest of the co-owners, that they tell the mayor they were not moving forward with the transaction.406 Mr. Filipetti prepared an “update memo” for Mr. Kitt, Mr. Nobrega, and Mr. Latimer on December 11, 2008, regarding the sale of the City Centre Land and the current positions of the parties. The memo reviewed the facts to date:

1 December 12, 2008, was the conditional date by which wcd was to have fulfilled three specific conditions as per theaps . 2 This date had been extended from the November 21, 2008, conditional date by three weeks with no fee, and could be extended by another 60 days with payment of a $125,000 non-refundable extension fee and report detailing wcd’s negotiations to secure a hotel. 3 Theaps would expire on December 12, 2008, without payment and a report by wcd at that time. 4 As of December 11, 2008, it appeared that wcd had not fulfilled any of the three required conditions. 5 There were discussions withwcd about a possible further no-fee extension; however, co-owner aim did not agree and no further extension had been granted. 6 The 60-day extension period referred to above was the third 60-day extension period added to the aps via the amending agreement on July 31, 2008, which also extended the deadline to commence hotel construction following closing by six months.407

* Mr. DeCicco did not reply to Mr. Filipetti’s suggestion, and wcd did not exercise its final extension. Phase II – City Centre Land and World Class Developments 125 Mr. Filipetti went on to say: “At the request of the mayor and wcd as represented by Mr. DeCicco, we undertook to persuade our co-owner, aim, that a ‘clean sale’ could be orchestrated to Square One’s advantage.”408 When questioned at the Inquiry about this statement, the mayor testified that it was “incorrect” and “absolutely false.” She “did not at any time to anybody” request the owners waive the hotel conditions.409 The mayor testified that, had she known of the proposal for a clean sale of the land, she would have been very upset because her condition for the sale of the land was a four- or five-star hotel, a fact known from the outset byomers , Tony DeCicco, Murray Cook, and her son Peter. At the same time, the mayor wanted at all costs to ensure that the land was preserved for a hotel.410 I conclude that the mayor might have supported a clean sale provided the requirement to build a hotel on the land in the future was preserved. As I have noted, this could not be achieved by a restrictive covenant, or, as the mayor acknowledged in her evidence, by an Official Plan amendment. Mr. DeCicco testified that he may have misled the mayor by not informing her that he was seeking a straight sale on behalf of wcd.411 Mr. Coleman testified that the mayor’s position on the straight sale was “a bit grey” – there were emails in which she acknowledged that she couldn’t get the hotel, but others suggested that she was prepared to wait for the hotel to be built – “it was a bit of both but it wasn’t very clear.”412 Mr. Kitt understood from the mayor after speaking with her on December 11, 2008, that she intended to contact Mr. Dal Bello of aim directly to explain why she wanted the deal to proceed.413 Mr. Filipetti emailed Mr. Coleman of Hawthorne later that day to inform him that “[the mayor] [was] calling everyone” and that Mr. Coleman might want to advise Mr. Dal Bello.414 Mr. Coleman responded that calling Mr. Dal Bello would not be a great idea, to which Mr. Filipetti replied, “[T]here’s no telling what she will do.”415 Mr. Coleman alerted Mr. Dal Bello that the mayor might call. Thereafter, the mayor left four telephone messages.416 On December 12, 2008, Mr. Kitt acknowledged in an email to Mr. Nobrega and Mr. Latimer that the deal to sell the City Centre Land to wcd would likely “lapse” by the following week and said that he did not agree with this outcome.417 In Mr. Kitt’s opinion, the only way to save the deal was to waive certain conditions. The co-owners were not agreeable to this position. For his part, Mr. Kitt was not convinced the purchaser had the funds to close the deal.418 126 Updating the Ethical Infrastructure Although Mr. Kitt had reservations about the purchasers, he wrote in an email that he had nevertheless hoped to extend the current deal to January 31, 2009. He had hoped, he said, to achieve a resolution which, although a straight sale, would lead to future hotel construction.419 However, aim was not onside.420 I note that Mr. Kitt appears to have been unaware of the limitations on the city’s ability to require the building of a hotel. Mr. Kitt kept Mr. Nobrega apprised of the issues relating to the deal at this stage because he wanted him to be aware that the deal had reached a critical phase, and that, although this fact would not come as a surprise to the mayor, she would not be happy with the outcome.421 He agreed that the general message he attempted to convey to Mr. Nobrega concerned “damage control.” He wanted Mr. Nobrega to know that he was working on this issue as it related to the mayor.422 In his response to Mr. Kitt, on December 14, 2008, Mr. Nobrega offered to call Leo de Bever, ceo of aim, to request another 60 days to continue negotiations with wcd and the city.423 I regard Mr. Kitt’s email reply to Mr. Nobrega as significant. In my view it reflectsomers’ / Oxford’s recognition of the need to “play ball” with the mayor. Mr. Kitt noted that he was having lunch with the mayor the next day and added the following in his email:

The important thing is to maintain our relationship with the City and we have done this to date. I don’t trust the buyer, and there is no doubt they are using Hazel in this process, but it is difficult to tell her that, especially with her son involved.424

Mr. Kitt testified that the reference to his lack of trust regarding the buyer was based on “a series of decisions and behaviours” by the purchaser over the course of the entire year that caused him to lose faith in the principals of wcd.425 Ultimately, he did not believe that wcd was going to close.426 At the Inquiry he testified that his reference to “using” the mayor was based on his perception that the purchaser was using the mayor as a “negotiating tool” to put pressure on the vendors to accommodate wcd’s negotiating position.427 In Mr. Kitt’s view, the mayor’s involvement in the transaction went beyond making it clear that she wanted a hotel. It went “more directly to wcd being the people that could pull this off.”428 I understand Mr. Kitt’s email in its ordinary sense: Mr. DeCicco and wcd had used the mayor and her office for their own Phase II – City Centre Land and World Class Developments 127 personal ends. As Mr. DeCicco conceded, this put the mayor in an awkward position. Mr. Dal Bello spoke with the mayor on December 15, 2008. She expressed her frustration that aim’s representatives were not prepared to allow the deal to move forward.429 He testified that the mayor referred toaim ’s representatives as “not being good corporate citizens, not working to build the City.” He reminded her that aim had agreed to sell the land on the basis that a hotel would be built. They were not now looking to make changes to the agreement.430 The mayor wanted to meet the people fromaim , and a meeting was arranged for early January.431 Later on that day, December 15, 2008, Mr. Kitt met with the mayor and Mr. DeCicco at the Old Barber House Restaurant in Mississauga for what he characterized as a “good faith meeting” to inform them both that the deal was going to end, despite the fact that wcd had until December 19, 2008, to fulfill the conditions.432 When Mr. DeCicco asked why the vendors were not prepared to proceed with the deal, Mr. Kitt explained that the principal reason was that wcd was not moving along with the hotel conditions.433 Mr. Kitt did not expect wcd to meet the hotel conditions, among other conditions, and he interpreted wcd’s decision not to exercise the final extension as support for this conclusion.*434 Mr. Kitt testified, however, that early in the meeting Mr. DeCicco produced a letter dated December 15, 2008. He presented it as proof that wcd had entered into a hotel management agreement with Easton’s Management Group.435 Mr. Kitt testified that the letter did not reassure him. He questioned why Mr. DeCicco had not shared the letter with the co-owners, and he found the date to be somewhat “convenient.”436 Mr. Kitt had promised aim he would ask the mayor to ensure that her son was no longer involved in this transaction. He testified that, at this point, the nature of Peter McCallion’s involvement was aim’s concern, not his concern, because he was focused on the termination of the transaction. As far as he was aware, Mr. McCallion had not been involved after October 23, 2008.437 He could not remember precisely what he asked the mayor, but recalled her “animated” response that Peter was “off the file,” a fact which he relayed to aim the following day.438 Mr. DeCicco maintained that this issue was discussed with him when the mayor was out of the room.439 However, Mr. Kitt reiterated that

* Mr. Kitt testified that he understood why they would not want to put up another $125,000 if they knew they were unable to satisfy the condition. 128 Updating the Ethical Infrastructure he tried to express to the mayor that it would be best if Mr. McCallion was not involved in this deal anymore, a comment that led the mayor to provide her assurance that Peter was “off the file.”440 The mayor testified that she remembered attending this meeting with Mr. DeCicco at the request of Mr. Kitt. Mr. Kitt made it clear to Mr. DeCicco that the deal was going to die because Mr. DeCicco had not provided any concrete evidence that he had been able to secure a hotel.441 However, she had no recollection of any discussion regarding her son’s involvement in wcd.442 She testified that Michael Kitt never raised this issue with her, and he was emphatic she never told him Peter was “off the file,” an expression she claimed not to understand.443 The mayor testified that she did not recall Peter’s name coming up during this discussion, nor did she recall any expression of concern from Mr. Kitt at any time with respect to Mr. McCallion’s involvement.444 She testified that had the issue of Peter’s involvement been raised at this juncture, it would have been “kind of late” given that the vendors were aware he was involved from the outset.445 I accept Mr. Kitt’s recollection of his conversation with the mayor regarding Peter McCallion’s involvement and her reply that Peter was “off the file,” as it was recorded in the notes of Dean Hansen of aim.446 These notes recorded what was said in a conference call almost immediately after Mr. Kitt’s meeting with the mayor, and they persuade me that his version of the conversation should be preferred. Mr. Kitt testified that the mayor wanted an opportunity to discuss the co- owners’ decision with aim directly. For that reason, the co-owners agreed to one further extension to January 9, 2009, to get through the holiday period. However, this further extension did not reflect a change in the co-owners’ position.447 The mayor asked for a meeting with the co-owners because she could see the deal was going to die. She had learned that omers / Oxford needed aim’s approval for any transaction in relation to the City Centre Land.448 The mayor testified that at the meeting, which occurred on January 12, 2009, after the deal with wcd had terminated, she expressed her desire that the co-owners preserve that land for a hotel regardless of who the developer might be.449 Phase II – City Centre Land and World Class Developments 129 The Practical Effect of the Mayor’s Role I conclude that, but for the mayor’s involvement, the co-owners would never have granted as many extensions to the conditions in the aps as they did. These extensions were significant commercial concessions. Mr. Kitt testified that he tried to minimize his conversations with the mayor because he was uncomfortable with the “overall dynamic” of the negotiations. He explained that he “prefer[red] the arena of a purchaser / vendor direct discussion versus different dynamics that [he] didn’t quite understand” when dealing with the specific terms of an agreement, without “having different points of ... entry into the discussions.”450 Mr. Kitt acknowledged that by October 2008, when Peter McCallion appeared at Oxford’s offices to request that the co-owners consider a straight sale and forgo all the hotel conditions, he was not surprised since “at this stage nothing was surprising about this transaction, everything was curious.”451 He testified that, in his view, regardless of the precise role Mr. McCallion played, as an agent or as a principal, his involvement made Mr. Kitt uncomfortable.452 Mr. Kitt was candid about the pressure he felt regarding a one-week extension he recommended to the co-owners on November 21, 2008. The recommendation was made at the request of the mayor through Mr. Nobrega.* He testified that “at that point” he “was in trying-to-keep-the-peace mode.” The deadline for wcd to put up additional money to extend the deal was approaching, and he “could feel the ... pressure directly and indirectly increasing on the mayor’s side.” She was becoming more involved again through Mr. Nobrega, who had, in an email dated November 20, 2008, sought a concession in favour of “ Tony.” 453 It was clear to Mr. Kitt that Mr. DeCicco again used the mayor as an advocate to buy him some time, with the result that both the mayor and Mr. Nobrega became involved.454 At this juncture there were “significant external people to deal with.” He had as well to be mindful of the co-owners’ interests and needed to make the right decision.455 By December 2008, the mayor’s interventions had become a real irritant for aim. When wcd sought yet another extension, Mr. Filipetti wrote in an email that aim might agree to extend for one week, “but they think this will just provide one more week for the mayor to pressure us.”456 Mr. Filipetti wrote a memo dated December 11, 2008, regarding the status of the sale of the land. He

* The mayor’s request concerned the deposit money due on November 21, 2008. 130 Updating the Ethical Infrastructure summarized aim’s decision not to proceed with a clean sale of the land saying, “aim [does] not want to tie any concessions from the City to this deals [sic] because of the potential unfavorable optics in their view. They are also uncomfortable with the involvement of Peter McCallion as an apparent principal of wcd.”457 Mr. Coleman explained aim had first become concerned about the nature of Mr. McCallion’s interest on October 8, 2008. He learned at that time that Mr. McCallion had requested a meeting with Mr. Filipetti the following day.458 Up to that point Mr. Coleman had not been aware of Mr. McCallion’s involvement in the wcd project.459 He was advised on October 24, 2008, that Mr. McCallion had met with Mr. Filipetti a second time. At that meeting, Mr. McCallion suggested that wcd might agree to an increased purchase price for the land if the hotel conditions were dropped entirely. For Mr. Coleman, these meetings raised two concerns: (1) he had been advised by Mr. Filipetti “that Peter McCallion had a wcd business card and purported to be a principal of wcd”;460 and (2) he understood that Oxford was willing to consider a straight sale, which was in his view a “non-starter” because the hotel requirement was the critical component of the deal.461 This situation made Mr. Coleman uncomfortable. He realized that he and his colleagues at aim did not understand Mr. McCallion’s role and they did “not like the way things were shaping up.”462 He clarified his thoughts on the issue: “[I]f we’re getting calls or – indirect pressure from the mayor to relax certain requirements in our agreement with – when her son’s on the other side of the table, the optics are not very good.”463 It is likely that the wcd transaction would not have seen the light of day had Mr. McCallion been transparent about his ownership interest from the outset. At the Inquiry, Mr. McCallion admitted that he was a principal of wcd. Leo de Bever, the ceo of aim, stated that had he known that the mayor was promoting wcd and seeking concessions from the co-owners when her son was an owner of the company, he would have been concerned.464 At the very least, “conflicting objectives” might be at play. He added it was a matter of “good corporate governance that when there are overlapping interests that you start digging a little deeper and start making sure that there is no conflict.”465 Mr. de Bever explained that Mr. McCallion’s involvement might not have precluded aim from entering into the aps. It would, however, have prompted those at aim to take a much harder look at the project and his involvement to Phase II – City Centre Land and World Class Developments 131 determine whether the city’s interests were aligned with wcd’s interests to the extent that the project could stand on its own.*466 Mr. de Bever maintained that had he known Peter McCallion had an equity interest, he would not have been prepared to consider the mayor’s requests for concessions because of the apparent conflict created. The fact that Mr. McCallion’s interest was not disclosed from the outset was a serious omission that made it difficult for him to assess the involvement of various players in this transaction.467 The mayor involved herself in thewcd transaction throughout. She encouraged the co-owners to enter the deal with wcd. She provided assurances regarding Tony DeCicco’s capabilities. She negotiated extensions. She worked with Michael Kitt of Oxford to achieve the extensions she required, and, when she wanted something to be done immediately, she went directly to Michael Nobrega, ceo of omers, with her request. When it became apparent to all parties that Mr. DeCicco could not fulfill the conditions in the aps concerning a four-star hotel, the mayor applied pressure on the co-owners to provide extensions, to relax or waive conditions, and ultimately to close the transaction in the absence of those requirements. Based on the testimony and exhibits consisting of emails, telephone calls, and notes, it is clear that, when the mayor requested a concession in the agreement, omers and Oxford representatives were prepared to grant it. Understandably, they did not share with aim each and every contact they had with the mayor. However, I find that omers and Oxford representatives acceded to the pressure the mayor put on them by virtue of her constant communication regarding wcd, and they went out of their way to acquiesce to her requests. aim was not subject to direct pressure from the mayor to the same extent and therefore was, at times, at a loss to understand omers’ / Oxford’s recommendations regarding concessions. I find that the mayor knowingly used her relationship withomers and her public office to influence the co-owners to agree to concessions throughout this period. She knew that her son Peter stood to gain financially if the deal succeeded, and, although his interests alone may not have prompted her intervention with the co-owners, the exercise of this influence put her in a position of conflict, both real and apparent.

* He testified that he had interpreted “a lot of the pressure that was coming [their] way” to be the result of the mayor’s long-standing desire for an upscale hotel near the Living Arts Centre. Testimony of L. de Bever, Transcript, September 13, 2010, p. 4305. 132 Updating the Ethical Infrastructure The co-owners were aware at the outset that the mayor’s son stood to gain financially, but understood him to be acting as agent. Both co-owners were content that Peter McCallion act as agent, to be compensated by the purchaser. I have taken note of the business reality that the co-owners needed to have an excellent relationship with the mayor given the extent of their other interests in Mississauga. The evidence reveals that no one from omers / Oxford or aim wanted to confront the mayor directly about issues surrounding Peter McCallion’s role in wcd. It is clear, from the documented exchanges between the co-owners, that the fact the mayor was advocating for concessions was a significant factor influenc- ing their consideration of each concession. It also became a source of tension between the co-owners.

9 The Optics of Peter McCallion’s Interest inwcd Senior Managers of omers / Oxford As I have noted earlier in this Report, the mayor intervened repeatedly throughout the wcd project.468 Indeed, as I will review, she indirectly exerted pressure on omers to settle the outstanding litigation with wcd in 2009.469 The mayor expected major pension funds such asomers to have business policies governing their interactions with elected officials, and she did “not think a call from any mayor or any member of council or from anybody would deter them from fulfilling a business transaction based on their policy.”470 She assumed “the pension fund would not make a bad decision on [its own] behalf.”471 This contention ignores the strength of the mayor’s personality and the extent of her influence. The mayor’s intervention on behalf of wcd placed senior managers at omers / Oxford and aim in an uncomfortable position472 where they could not easily discuss Peter McCallion’s involvement in wcd directly with her.473 As I have noted, Mr. DeCicco freely admitted in his evidence that his own repeated interventions with the mayor had put her in an awkward position.474 I was struck by the unwillingness of Mr. Nobrega to make any similar concessions in his evidence. Neither of the vendors ever advised the mayor that they were uncomfortable with her involvement in negotiations concerning wcd,475 and the mayor Phase II – City Centre Land and World Class Developments 133 expected they would have done so if such a concern existed.476 However, it would have been difficult for these senior managers to voice their uneasiness with the mayor directly.477 It is also unclear what effect, if any, an expression of concern would have had. It would appear that the mayor is unshakable in her pursuit of the public good as she perceives it. Unfortunately, there was no effective alternative mechanism by which the senior managers could have raised their concerns. Ideally, senior omers / Oxford managers might have advised the mayor of their discomfort about her requests for concessions for wcd. However, the mayor is a powerful personality, and these would not have been easy conversations. Raising the issue with the mayor would not, in any event, have ameliorated her conflict of interest.

Actions of omers / Oxford in Response to Pressure from the Mayor In her testimony, the mayor acknowledged that she was involved in negotiations between wcd and the co-owners regarding the final aps and then in obtaining concessions to allow more time for wcd to find an acceptable hotel for the site.478 The mayor stated that she “encouragedomers to extend the agreement to give … wcd the opportunity to seek a hotel …”479 I find that the mayor should not have requested a meeting between her son and Oxford in May 2008. Doing so was inconsistent with the requirements of her public office. The fact that the mayor injected herself into negotiations by attending the meeting in person and discussing the terms of a concession in favour of wcd only made the situation worse. Under the circumstances, Oxford felt compelled to negotiate with Mr. McCallion to maintain good relations with the mayor. Significant concessions were given towcd as a result of the mayor’s actions. There was nothing unlawful about an executive attending a meeting con- vened by the mayor for her son. However, as discussed previously, the ceo of omers facilitated the May 2008 meeting with the mayor and Mr. McCallion when he knew that the latter had a pecuniary interest in the wcd transaction. With the benefit of hindsight, it might have been better had Mr. Nobrega declined to orchestrate this meeting. 134 Updating the Ethical Infrastructure omers’ / Oxford’s Knowledge of Peter McCallion’s Role in wcd Information sharing between the co-owners left much to be desired, and aim was often unaware of the activities of omers / Oxford. In particular, there was a notable delay before omers / Oxford notified aim of wcd’s original offer to buy the City Centre Land, and later aim was not told that omers had settled the litigation with wcd in 2009.480 Nor, as I will review, was aim consulted on the final amount of the litigation settlement in 2009. Although the Terms of Reference do not require me to do so, I find that those at omers / Oxford did not intentionally obscure Mr. McCallion’s true role in wcd. They were unaware of his true role until very late in the piece. In the circumstances, it is unlikely aim would have learned much earlier of Mr. McCallion’s role in wcd even if information had been shared in a timely fashion by those at omers / Oxford. aim’s Knowledge of Peter McCallion’s Role in wcd aim initially believed that Peter McCallion was an agent working for wcd.481 The evidence reveals that, when it seemed apparent that Mr. McCallion was more than an agent, in October 2008,482 aim representatives began to discuss their unease over the wcd transaction among themselves. Given their consistent position, originally shared by their co-owner – that a quality hotel was a necessary condition of the aps – they began to question why their co- owner was repeatedly pressing them to agree to remove the hotel requirement. It appears that they felt pressured to consent to wcd’s requests to appease the mayor, and their discomfort grew once their perception of Mr. McCallion’s involvement changed.483

10 Other Matters There are two subsidiary matters which I find it convenient to address at this point in the Report.

Declaration of Conflict of Interest at Council Prior to this Inquiry, it came to light that the minutes of the May 21, 2008, city council meeting reflected that Mayor McCallion had declared a conflict Phase II – City Centre Land and World Class Developments 135 that day with respect to wcd, when in fact a review of the video footage of the meeting revealed that no such declaration was made.484 The reason for this discrepancy became an issue in this Inquiry.

City Council Meeting, April 23, 2008 On April 23, 2008, wcd’s application for the removal of the H designation over the City Centre Land was scheduled to be addressed by city council.485 wcd’s application was listed as Corporate Report R-7. The April 23, 2008, minutes state that “Mayor Hazel McCallion declared Conflict of Interest with respect to Corporate Report R-7 by virtue of her son being involved with the World Class Developments application.”486 wcd’s application at the April 23, 2008, meeting was deferred to a subsequent council meeting, scheduled for May 21, 2008, because the company did not have all the agreements in place to support its application.487

City Council Meeting, May 21, 2008 On May 21, 2008, wcd’s application for the removal of the H designation was scheduled to be addressed by city council once again. The minutes from the May 21, 2008, council meeting state that “Mayor Hazel McCallion declared Conflict of Interest with respect to the above Corporate Report by virtue of her son being involved with the World Class Developments application.”488 The matter was not addressed by council that day. Mr. Sajecki advised council that wcd was still working on its application and requested that it again be deferred to a later date.489 The video recording of the May 21, 2008, council meeting showed that Mayor McCallion did not in fact declare a conflict with respect towcd ’s application for the removal of the H designation.490 Shalini Alleluia, who was the city’s legislative coordinator at the time, did not recall why the May 21, 2008, meeting minutes recorded that the mayor had declared a conflict regarding the wcd matter when in fact she did not. Ms. Alleluia provided a number of possible explanations for the error in the minutes:

1 the mayor’s written comments in her agenda may have been copied into the minutes; 2 Ms. Alleluia may have copied the declaration from her own notes; 136 Updating the Ethical Infrastructure 3 the mayor may have mentioned it to Ms. Alleluia before the council meeting; or 4 Ms. Alleluia may have simply recorded the declaration because she expected the mayor to make it.491

In September 2009, Ms. Alleluia was approached by her supervisors, including the city clerk, Crystal Greer, when it was discovered that the mayor had not declared a conflict as recorded in the May 21, 2008, minutes.492 The city clerk’s office conducted an investigation into the matter. On September 28, 2009, Brenda Breault, the city commissioner of corporate services and treasurer, issued a corporate report recommending that council amend the minutes by removing the reference to the mayor’s declaration of conflict of interest.493 In the wake of this discovery, a new procedure was established requiring the city clerk or deputy clerk to review the draft minutes to ensure that declarations of conflict of interest had been properly recorded, and that declarations of conflict of interest were recorded at the point in the minutes where they were declared in addition to the beginning of the minutes. It is not clear whether the city clerk or deputy clerk now reviews the video recordings of council meetings to verify that declarations of conflict of interest are recorded correctly in the minutes.494 That corporate report also advised that the Office of the City Clerk would conduct a comprehensive review of its minute-taking practices.495 I accept the evidence of Ms. Alleluia that she was never asked by the mayor or any councillor to either insert or delete anything from council minutes.496 The mayor had declared a conflict of interest on a prior occasion, and I accept that she simply forgot to do so on May 21, 2008, when the matter was deferred and was only briefly before council.

The Mayor’s Involvement inwcd ’s Internal Affairs It was common ground in the evidence before me that, in addition to her interactions with the co-owners regarding the wcd project, the mayor met at various times with Murray Cook and Tony DeCicco. At the outset of the wcd project, the mayor met with Mr. Cook on two occasions to express to him the importance of the hotel to the city and her frustration at the slow rate at which the co-owners were proceeding with a land purchase agreement.497 Her involvement continued throughout the life of the wcd project. Phase II – City Centre Land and World Class Developments 137 Numerous documents entered as exhibits reflect the mayor’s involvement in resolving matters between Mr. DeCicco and Mr. Cook after Mr. DeCicco joined the wcd project. Mr. DeCicco was concerned that Mr. Cook had the ability, through the put and call agreement, to exit wcd at any time. Mr. DeCicco wanted the put and call agreement terminated, and the following evidence suggests that he used the mayor to assist him in negotiating with Mr. Cook:

1 On October 26, 2007, Mr. DeCicco left a voicemail message for the mayor advising that “Emilio [Bisceglia] will fax that agreement to your home today by 3:00 p.m.” and asking the mayor to set up a meeting with Murray Cook.498 Mr. DeCicco and Mr. Cook testified that a meeting did take place at which the mayor attempted to mediate the dispute.499 2 Subsequent to the meeting, Mr. DeCicco left the mayor a further message asking whether she had “considered getting Murray to sign …”500 (refer- ring to the termination of the put and call).501 Mr. DeCicco testified that he believed the mayor had some moral suasion with Mr. Cook and could therefore get him to sign the agreement.502

Mr. DeCicco maintained that he involved the mayor because of her effectiveness as a negotiator and not because of her son’s involvement in the deal.503 Although Mr. DeCicco testified that the mayor’s involvement did not go beyond the one meeting she arranged at which she attempted to mediate between them, numerous other telephone messages from Mr. DeCicco suggest he kept the mayor apprised of every development in regard to the dispute with Mr. Cook. On December 21, 2007, Mr. DeCicco left a message for the mayor, asking her to call him at her earliest convenience:

I’d like to speak with you regarding Murray Cook. We received a letter from his lawyer stating that we haven’t got the authority to do things. I suggested to Peter that it would be good if we meet tomorrow.504

On May 22, 2008, Mr. DeCicco appeared to be returning a call from the mayor:

I’m sorry I didn’t get back to you sooner. I was in a meeting all morning and we just finished. I’m going into a 1:30 meeting now. I got your message. I think we 138 Updating the Ethical Infrastructure

should get together. There’s a lot happening with Murray that we need to speak about. We can get together tonight anytime at your convenience. I’ll be busy over the next few days, but I’ll obviously make time for you. Let me know if you’re available tonight. I’m giving Peter a call to see what his schedule is like.505

At one point Mr. DeCicco requested that the mayor arrange a meeting to resolve the differences between him and Mr. Cook. The purpose of the meeting, which occurred at the mayor’s house, was, according to him, to try to find a way forward.506 Ultimately, Mr. Cook was not comfortable working with Mr. DeCicco and he suspected that Mr. DeCicco was equally uncomfortable with him.507 Mr. DeCicco thought that Mr. Cook had not contributed financially. However, Mr. Cook had secured the put and call agreement,508 an arrangement that was quite advantageous to him.509

11 Termination of the Agreement of Purchase and Sale On July 9, 2009, the co-owners commenced an application in the Ontario Superior Court of Justice (Commercial List) to confirm that the agreement of purchase and sale (aps) with wcd had been terminated on January 9, 2009, and that wcd had no further rights pursuant to that agreement.510 On August 28, 2009, wcd filed a counter-application against the vendors seeking, among other things, a declaration that the aps between the vendors and wcd remained in effect.511 In its counter-application, wcd sought only monetary relief and did not seek anything that would tie up the City Centre Land, such as an injunction to prevent title from being transferred or a certificate of pending litigation. In support of the counter-application, Tony DeCicco, Steve Gupta, and Peter McCallion swore affidavits.512 As discussed below, the litigation was ultimately settled for a payment of $4 million by the vendors in September 2009.513 aim was not consulted by the omers group before the latter agreed to settle the litigation with wcd for $4 million.514 On September 11, 2009, aim learned through its consultants that Mr. McCallion was in fact still involved in wcd at the time of the settlement.515 I find thataim ’s earlier suspicions about Mr. McCallion’s actual role in wcd were not confirmed until after a settlement was concluded in litigation between wcd and omers and aim. Phase II – City Centre Land and World Class Developments 139 Sheridan College’s Interest in the City Centre Land The mayor had advocated for some time for another post-secondary institution in the city.516 Sheridan College (Sheridan) had proposed a Mississauga campus a few years earlier, and nothing had come of it.517 In 2009 Sheridan requested significant financial support from the city in exchange for a Mississauga campus. Instead of providing the requested funds, the city decided to purchase the now-vacant City Centre Land and lease it to Sheridan at a nominal rate.518 On July 20, 2009, an agreement of purchase and sale was signed between the co-owners as vendors and the city as purchaser.519 The terms of the agreement of purchase and sale provided for the city to pay a sum of roughly $14 million in exchange for the City Centre Land, with a closing date of September 17, 2009. The agreement of purchase and sale between the vendors and the city was conditional on the city being satisfied by September 17, 2009, that wcd had no claim for title to the land.520 Out of concern for potential claims arising from the terminated agreement with wcd, the city and Sheridan College entered into an indemnification and hold harmless agreement (the indemnification agreement) with the co-owners.521 The indemnification agreement provided that the co-owners would assume all responsibility for defending any action brought by wcd, and, in the event that the city or Sheridan chose to retain independent counsel in that regard, the co-owners would reimburse the city or Sheridan, or both, for all reasonable legal costs incurred up to a maximum aggregate amount of $500,000.522 As further protection, the city entered into a release agreement with Sheridan whereby Sheridan acknowledged the potential of a claim by wcd and released the city, including elected officials and staff, from any and all claims including damages, losses, costs, fees, disbursements, loss of revenue or profits, and loss of infrastructure stimulus fund isf( ) monies as a result.523 On September 8, 2009, City Solicitor Mary Ellen Bench recommended to city council that the city proceed to close the transaction with the co-owners on September 17, 2009.524 Ms. Bench testified that her recommendation was based on the “sufficiently strong indemnity” combined with the fact that, in her opinion, wcd “was after cash; they weren’t after the property.”*525

* Exhibit 327, p. 4, sets out in greater detail why Ms. Bench recommended proceeding with the transaction 140 Updating the Ethical Infrastructure In her Report to Council of September 8, 2009, recommending that the city proceed with the aps with the co-owners, the city solicitor referred to the outstanding litigation between the co-owners and wcd in relation to the same land and noted that, in support of its counter-application, wcd relied on the following:

evidence provided through affidavits of two of its principals, namely Peter McCallion and Tony DeCicco, as well as an affidavit from Steve Gupta, of the Easton’s Group of Hotels Inc. These affidavits reference meetings with City staff and Mayor McCallion to discuss the hotel. Again, there are no allegations or suggestions of impropriety on the part of the City, its staff or elected officials, in the materials filed bywcd .526

This report was likely the first time that most members of city council became aware of Peter McCallion’s interest in wcd. Indeed, the city solicitor became aware of Mr. McCallion’s interest only when she personally reviewed his affidavit on the counter-application.527

Peter McCallion’s Interest in wcd Revealed The affidavit of Peter McCallion sworn August 24, 2009 (the August 24 affidavit) is, in many ways, the seed that sprouted this Inquiry.528 In paragraph 1, Mr. McCallion states: “I am one of the principals of World Class Developments.” The August 24 affidavit was initially drafted by the legal firm of Paliare Roland Rosenberg Rothstein llp (Paliare Roland) on Mr. McCallion’s behalf.529 However, Emilio Bisceglia reviewed the draft with Mr. McCallion and made changes at his request.530 I find that Mr. McCallion was chosen as an affiant because his evidence would put pressure on the co-owners (or at least omers) to resolve the litigation, particularly given the inclusion of paragraphs in other affidavits describing meetings with the mayor. Mr. McCallion requested several revisions to the first draft of the August 24 affidavit, none of which dealt with the statement that he was a principal 531 of wcd. When Mr. Bisceglia asked Mr. McCallion to come to his office to swear the affidavit, Mr. McCallion advised by email:

to purchase the land from the co-owners. Phase II – City Centre Land and World Class Developments 141

I will be in Monday after Tony and My Mother have a chance to discuss it.532

In his evidence, Mr. McCallion testified that he mentioned to the mayor that he was swearing an affidavit, but did not discuss the contents of the affidavit with her before swearing it.533 In the context of negotiations between the city and the co-owners with respect to the Sheridan deal, the materials underlying the counter-application – including Mr. McCallion’s affidavit – came to the attention of the city solicitor. Ms. Bench was surprised that Mr. McCallion had an ownership interest in wcd and thought it her duty to bring this information to the attention of council.534 In her Report to Council, dated September 8, 2009, Ms. Bench revealed Mr. McCallion’s interest in wcd.535 Peter McCallion told the Inquiry that, sometime after the September 8, 2009, Report to Council, the mayor called him to ask why he had referred to himself as a “principal.”536 Mr. McCallion claimed he did not believe he was a principal of wcd and had simply overlooked this statement in his affidavit.537 Mr. McCallion advised Mr. Bisceglia’s office that the statement in the affidavit needed to be changed.538 Mr. Bisceglia was concerned about the requested change. He instructed his staff not to commission the affidavit because he knew that Mr. McCallion was indeed a principal of wcd.539 It will be recalled that Mr. Bisceglia was not only the company lawyer, but also an investor in wcd. It appears the second affidavit, which purported to “delete” the statement in Mr. McCallion’s previous affidavit that he was a principal of wcd, was drafted by Mr. Bisceglia’s staff prior to his instructions that such an affidavit should not be commissioned.540 Mr. McCallion ultimately took the second affidavit to the mayor’s personal solicitors, the firm of Danson Schwarz Rechtllp . It was to be sworn on September 11, 2009.541 Sometime thereafter, Ms. Bench received Mr. McCallion’s second affidavit, which deleted the statement that he was a principal of wcd. The affidavit was sent to her by fax, without a covering letter or any explanation.542 A third affidavit was sworn on September 15, 2009.543 This affidavit stated that Peter McCallion was not a principal of wcd. Mr. McCallion testified that he swore the third affidavit on the advice of his mother, who felt the second 544 affidavit was not sufficiently clear. By contrast, Mayor McCallion testified she had never seen or heard about the third affidavit.545 I have found that Peter McCallion was a principal in wcd. I have also found 142 Updating the Ethical Infrastructure that he knew he was a principal in wcd. I further find that he ought not to have sworn his second and third affidavits, which suggested otherwise. I accept Mr. McCallion’s evidence that he swore the third affidavit at the instance of his mother. Although I do not believe that Mayor McCallion knew of the precise interest Mr. McCallion held in wcd, it is unfortunate that she urged him to change his sworn testimony without ensuring that all the facts were available.

The Settlement David O’Brien as Emissary of the Mayor Theaps was terminated on January 9, 2009. On April 30, 2009, Michael Kitt, on behalf of omers / Oxford, sent a letter to Mr. DeCicco indicating that the co-owners were in negotiation with another potential purchaser for the City Centre Land.546 In July 2009, Mr. DeCicco received a call from Mr. McCallion indicating that David O’Brien wanted to meet with him to discuss the possibility of a settlement.547 Peter McCallion made this telephone call after the tacc (Developments) golf tournament in July 2009. At the tournament dinner, the mayor raised with 548 Mr. O’Brien her concerns about difficulties in closing the Sheridan deal. Her main concern, according to Mr. O’Brien, related to contamination that had been found on the City Centre Land. She also was worried that the outstanding litigation between wcd and the co-owners might have an impact on the deal.549 The mayor suggested that Mr. O’Brien become familiar with the issues.550 Later that same evening, Mr. O’Brien suggested to Mr. McCallion that they meet so that Mr. McCallion could explain “the issues that were going on vis-à-vis wcd and Oxford.”551 Mr. O’Brien insisted in his testimony that the mayor had not explicitly asked him to become involved in the resolution of the wcd litigation.552 Not much turns on this position. The mayor and Mr. O’Brien had worked closely together over a number of years. I find that whatever the mayor said at the golf tournament dinner, Mr. O’Brien understood that he was to do what he could to resolve the litigation, and thereafter began to do so.553 Mayor McCallion denied asking Mr. O’Brien to negotiate a settlement with wcd.554 For his part, Mr. DeCicco testified that he was advised by the mayor in July that it was important the wcd matter be settled so that the Sheridan deal 555 could move forward. In any event, on July 16, 2009, Mr. O’Brien met with Mr. DeCicco and Mr. McCallion at a Sunset Grill in Mississauga to discuss Phase II – City Centre Land and World Class Developments 143 settlement of wcd’s litigation with omers.*556 Mr. O’Brien told Mr. DeCicco that wcd had no case, but Mr. DeCicco was adamant that wcd held a legiti- mate interest in the land and declined to discuss settlement.557 Mr. O’Brien later told Mary Ellen Bench, the city solicitor, that this meeting was at the mayor’s request.558

David O’Brien as Emissary of omers On September 7, 2009, Michael Nobrega met with Mr. O’Brien before a meeting of the omers investment committee.559 Mr. Nobrega asked Mr. O’Brien to explore with Mr. DeCicco a range for possible settlement with wcd.560 Mr. Nobrega testified that he had concerns regarding omers’ liability pursuant to the indemnification agreement with the city.561 Although it is not central to the task of the Inquiry, I have difficulty accepting that this concern was the reason for Mr. Nobrega’s intervention in the wcd litigation. Mr. Nobrega explained his intention in the following way. He said he thought the Sheridan / wcd issue had the potential to harm omers’ reputation, and for that reason he had to become involved.562 He elaborated that omers had ongoing relationships with the principal infrastructure players (namely, the federal and provincial governments) and that in these circumstances he “had a duty of care” to report that, by terminating the wcd deal, the co-owners had “double-sold” the land – namely, to wcd and to the city.563 On his review of the agreements, he concluded that the indemnification agreement which the co-owners had executed in favour of the city resulted in open-ended liability for the co-owners in favour of the city and Sheridan.564 I appreciate that Mr. Nobrega is not legally trained. He is a chartered accountant.565 On my review of the agreements, I conclude that the indemnity exposed the co-owners to no such liability beyond the damages being sought by wcd. It is significant that Michael Kitt accepted this interpretation when asked about it during his testimony.566 Mr. Nobrega went on to explain that, if there was litigation that prompted a claim under the indemnification agreement, the public servants involved in infrastructure funding – if advised of the “double sale” issue – might cut off funding.567 In those circumstances, as envisaged by Mr. Nobrega, omers could be liable. It appears that none of the lawyers involved in the situation (Borden Ladner

* According to Mr. DeCicco, Mr. O’Brien informed him that he sat on the omers board and he wanted to talk about the possibility of settling the litigation. 144 Updating the Ethical Infrastructure Gervais llp acting on behalf of Sheridan; Thornton Grout Finniganllp on behalf of omers; or City Solicitor Ms. Bench) thought there was any legal risk arising from the indemnification agreement.568 One assumes any lawyer consulted by Infrastructure Ontario would have reached a similar conclusion. Mr. Nobrega believed there was, nevertheless, a business risk which was apparently completely divorced from any notion of legal risk.569 I find that Mr. Nobrega was quite aware of the political dimensions of the wcd counterclaim. On August 27, 2009, Mr. O’Brien emailed Michael Nobrega the following message:

Can we talk sometime today. Hazel called me concerning the Oxford issue with Mississauga. She is quite concerned. Could be political issues.570

By this point, Mr. O’Brien had seen the affidavit sworn by Mr. McCallion where he described himself as a principal of wcd.571 Mr. Nobrega contended that the “political issues” Mr. O’Brien was refer- ring to centred on the ability to preserve the Sheridan deal in light of the contamination issue.572 I am satisfied, based on my review of Mr. O’Brien’s evidence, that his email related to the wcd litigation. Mr. O’Brien quite accurately anticipated that the exposure of Peter McCallion as a principal of wcd would raise political issues. In my view, Mr. Nobrega also recognized that, whatever legal risks there might have been, the wcd litigation had the potential of becoming much messier once Mr. McCallion’s interest in wcd had been disclosed. Mr. Nobrega testified that, based on prior experience, he was “not a great friend of litigation,”573 and I can well understand that he would have wanted to extract the co-owners from a prospectively messy piece of commercial litigation. Of course, by resolving the wcd litigation quickly, there was also a good chance that the mayor’s position would be protected, and that she would not be criticized. Although I do not accept his evidence in every respect, Mr. O’Brien did impress me as having a deft ability to resolve complex and difficult issues. Mayor McCallion deployed him to sort out the wcd litigation. Mr. Nobrega employed him for the same reason, and it seems likely he was aware of Mr. O’Brien’s retainer on behalf of the mayor. I do not accept Mr. Nobrega’s evidence that he was unaware Mr. O’Brien had previously acted as an emissary of the mayor in relation to wcd,574 although I appreciate that Mr. Nobrega Phase II – City Centre Land and World Class Developments 145 was not focused on this aspect of the matter. In any event, a second meeting took place involving Mr. O’Brien, Mr. DeCicco, and Mr. McCallion on September 10, 2009, at the Delta Meadowvale Hotel in Mississauga.575 According to Mr. O’Brien, Mr. DeCicco’s first offer to settle at this meeting was $10 million, at which point Mr. O’Brien feigned leaving the meeting since it appeared to him that Mr. DeCicco would not present a “serious” position.576 Mr. DeCicco periodically left the meeting to consult with a partner, whom I am satisfied was Emilio Bisceglia.577 By all accounts, Mr. McCallion was silent throughout the meeting.578 After a couple of hours’ negotiation, the meeting ended without resolution.*579 About half an hour later, Mr. DeCicco called Mr. O’Brien to suggest that an offer of $5 million would be acceptable.580 Mr. O’Brien said he had $3 million in his mind, the amount originally expended by wcd for the project. 581 After brief further negotiations they agreed on $4 million. Mr. O’Brien then advised Mr. Nobrega that $4 million was the best he could do.582 Although Mr. DeCicco’s testimony differed as to how the negotiations proceeded, both sides agree the ultimate settlement was $4 million. Mr. Bisceglia served a formal offer to settle on behalf of wcd on September 11, 2009, for $4 million.583 The evidence was clear that Peter McCallion did not receive any of the 584 $4 million settlement. He was not, however, the only investor who was not repaid. John Di Poce, a prominent businessman and at the time a friend of Tony DeCicco, invested $992,753 in wcd,585 which included a payment of $392,753.71 for wcd’s outstanding bills when he exited the deal at the end of April 2008.586 Apparently, Mr. Di Poce has received nothing for this investment.587 It is indeed curious that Mr. Di Poce was required to pay such a substantial sum, in addition to his initial investment, in order to withdraw from wcd as an investor, and unfortunate that he did not receive any of the $4 million settlement from Mr. DeCicco. In fact, all the equity partners except Mr. McCallion and Mr. Di Poce were repaid.588 Mr. Bisceglia received his and his family’s entire investment ($61,000).589 Mr. DeCicco and his companies received approximately $2.2 million.590 Mr. Couprie was repaid his initial $750,000 investment in three install- ments.591 Mr. Couprie did not receive the additional $750,000 he was to receive when wcd found a developer.592

* According to Mr. DeCicco, they agreed on $4 million at this settlement meeting, contingent on Mr. O’Brien receiving final approval. Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3913–14. 146 Updating the Ethical Infrastructure Phase II – Analysis 12 Conflict of Interest The Common Law Framework As I found in my July 8, 2010, ruling on the meaning of “conflict of interest” (see Appendix J), the Municipal Conflict of Interest Act (mcia)593 does not con- stitute a complete codification of the law governing conflicts of interest for members of municipal councils. The common law also applies. The mcia is restricted to the pecuniary interests of members of council in the deliberative and legislative contexts, but the common law is much broader and recognizes conflicts of interest involving non-pecuniary interests. The mcia provides members of municipal council only with the following guidance for avoiding conflicts of interest:

5(1) Where a member, either on his or her own behalf or while acting for, by, with or through another, has any pecuniary interest, direct or indirect, in any matter and is present at a meeting of the council or local board at which the matter is the subject of consideration, the member, a) shall, prior to any consideration of the matter at the meeting, disclose the interest and the general nature thereof; b) shall not take part in the discussion of, or vote on any question in respect of the matter; and c) shall not attempt in any way whether before, during or after the meeting to influence the voting on any such question.594

The Inquiry heard from a panel of experts in the field of municipal conflict of interest, composed of Professor David Mullan, Dr. Greg Levine, and Dean Lorne Sossin. Their discussion and commentary proved helpful to my consideration of the issues. Conflicts of interest at common law are not restricted to the personal interests of members of council, and may even extend beyond to the interests of close family members. Professor Mullan provided the following useful overview of the common law of conflict of interest in his expert report prepared for this Inquiry:595

596 In Watson, Shaw J. of the British Columbia Supreme Court had reached back to a 1904 Ontario judgment to support the proposition that, at common law, Phase II – City Centre Land and World Class Developments 147

conflict of interest was not confined to pecuniary interests:L’Abbé v Blind River (Village):

There may be a direct monetary interest, or an interest capable of being measured pecuniarily, and in such case that a bias exists is presumed. But there may be also substantial interest other than pecuniary, and then the question arises, on all the circumstances, as to whether there is a real likelihood of bias – a reasonable probability that the interested person is likely to be biased with regard to the matter at hand.597

Writing also in the context of bias, Sopinka J., in Old St. Boniface Residents’ Assn. v Winnipeg (City), recognized the existence of a common law conception of conflict of interest ranging beyond pecuniary interests:

It is not part of the job description that municipal councillors be personally interested in matters that come before them beyond the interest they have in common with other citizens in the municipality. Where such an interest is found, both at common law and by statute, a member of Council is disqualified if the interest is so related to the exercise of public duty that a reasonably well-informed person would conclude that the interest might influence the exercise of that duty. This is commonly referred to as conflict of interest [emphasis added].598

Optics are important. It is essential to consider how a reasonable person would view the actions of the municipal councillor. As Commissioner Jeffrey Oliphant put it so well in his 2010 Report:

Public office holders ultimately owe their position to the public, whose business they are conducting. Ensuring they do not prefer their private interests at the expense of their public duties is a fundamental objective of ethics standards.599

As far back as 1904, in L’Abbé v Blind River (Village), [1904], Boyd J, writing for the Divisional Court, stated:

The High Court of Parliament was not only a legislative but a judicial body. It combined legislative capacity and judicial power, and it would seem that the anal- 148 Updating the Ethical Infrastructure

ogy of cases as to Judges and magistrates strongly applies to the fiduciary conduct of municipal councillors. The member of a council stands as trustee for the local community, and he is not so to vote or deal as to gain or appear to gain private advantage out of matters over which he, as one of the council, has supervision for the benefit of the public. The councillor should not be able to invoke the political or legislative character of his act to secure immunity from control, if the taint of personal interest sufficiently appears therein [emphasis added].600

As I explained in my July 8, 2010, Ruling on Conflict of Interest, the most important words in the above paragraph are “deal,” “gain,” and “or appear to gain,” and I stressed the importance of optics.601 This broader approach to conflict of interest has also been recognized as the prevailing standard by previous commissions of inquiry, including those conducted by Commissioners Denise Bellamy and W.D. Parker.602 As identified in the Parker Commission, there are various manifestations of conflict of interest. A conflict of interest may be real or apparent.603

A real conflict of interest has three prerequisites: (1) the existence of a private interest (2) that is known to the public office holder; and (3) that has a nexus with his or her public duties and responsibilities that is sufficient to influence the exercise of those duties and responsibilities.604

An apparent conflict of interest arises when a reasonably well-informed person could reasonably conclude, as a result of the surrounding circumstances, that the public official must have known about the connection of his or her involvement with a matter of private interest.605 I accept Professor Mullan’s view that

the common law of conflict of interest certainly provides a basis for an examination of whether the specific facts of the Mayor of Mississauga’s engagement with third parties and officials within the City in relation to a potential contract in which her son had a pecuniary interest amounted to legally inappropriate behaviour or involvement.*606

* As Professor Mullan notes, however, there is no free-standing cause of action for violating the common law conflict of interest standards. The common law deals only with conflicts of interest on the part of elected officials within the framework of specific causes of action. Phase II – City Centre Land and World Class Developments 149 The expert panel agreed that it is not the existence of a conflict of interest which is the issue but, rather, what the official in a position of conflict of interest does in the face of the conflict.607 The following analysis considers whether Mayor McCallion had a conflict of interest having regard to common law principles of conflict of interest and, if so, whether her conduct in the face of that conflict of interest was appropriate.

Did the Mayor Face a Conflict of Interest? I find that Hazel McCallion had a real conflict of interest. Her son Peter McCallion stood to gain financially from his involvement with wcd. The mayor knew her son had a financial interest in wcd. In the face of that conflict, the mayor used her influence as mayor to further the interests of wcd. Regardless of her motivation for doing so, I find that her behaviour was inappropriate.

The Mayor’s Knowledge of Peter McCallion’s Interest inwcd In 2005, Peter McCallion first told his mother he had established World Class Developments. He informed her he was acting for an investor to purchase lands in the Mississauga city centre on which a hotel would be built.608 He told her he had submitted a purchase offer toomers .609 Based on the information provided by Mr. McCallion, the mayor believed her son was acting as a real estate agent for wcd610 and that he was responsible for bringing Murray Cook into the project.611 In 2006, the mayor learned from Mr. McCallion that Leo Couprie had invested in wcd.612 At that point she believed Mr. Couprie owned all the shares of wcd.613 The mayor testified she was not aware then whether Peter was simply the listing agent for the land deal, the agent for the condominiums to be developed by wcd, or both.614 On January 29, 2007, at Pier 4 Storehouse Restaurant in Toronto, the mayor witnessed the signatures of Mr. McCallion and Mr. Couprie on the declaration of trust and the loan agreement.615 In her testimony at the Inquiry, the mayor insisted she did not read either document and that they were described to her as agreements to protect her son’s and Mr. Couprie’s interests in the event that something happened to them while they were travelling abroad.616 As I have previously found, even a cursory glance at these documents would have made 150 Updating the Ethical Infrastructure it clear to the mayor that Mr. McCallion had a beneficial interest inwcd .* It is of no moment whether it was only Murray Cook and Tony DeCicco, rather than Mr. McCallion himself, who asked the mayor to intervene on behalf of wcd to obtain concessions from the vendors,617 or that Mr. McCallion did not personally ask the mayor to assist in settling the dispute between wcd and the co-owners.618 The mayor well knew that, if the wcd deal were concluded, Mr. McCallion would benefit, even if only as a real estate agent.619 I find that a real conflict of interest existed as a result of Peter McCallion’s pecuniary interest in wcd, which was known to the mayor from the outset. I find that Peter McCallion never fully disclosed his equity interest inwcd to Mayor McCallion.620 However, in her testimony the mayor acknowledged that she asked the vendors to give special consideration to wcd, a company in which I have found she knew her son had a pecuniary interest of some kind.621

The Mayor’s Approach to a Conflict of Interest In Mayor McCallion’s view, she was required to declare a conflict only if wcd’s development application ever went before a committee of council or a council meeting. She also believed she should not discuss the matter with city staff.622 In her testimony, the mayor explained that, in her opinion, the mcia “clearly states that you should not get involved after you’ve declared a conflict in trying to influence staff or councillors.”623 However, the mayor did not believe that she was precluded from advocating for the wcd project outside city council because, in doing so, she was simply fulfilling her role as mayor.624 The project was for the good of the city.625 Accordingly, it caused her no concern that her son was involved when she sought concessions from the vendors.626 The mayor simply accepted that Peter McCallion had a pecuniary interest in relation to wcd,627 whether he was wcd’s real estate agent or a principal.628 To her, the only difference lay in the content of her declaration of conflict at council.629 Had she been aware of Mr. McCallion’s ownership interest in wcd, the mayor would simply have specified that fact at city council as the reason for her declared conflict.630

* Mayor McCallion agreed in her testimony that had she read the documents she would have understood the extent of her son’s position in the company. Testimony of H. McCallion, Transcript, September 21, 2010, p. 5121. Phase II – City Centre Land and World Class Developments 151 The mayor believed she needed to be concerned about the conflict of interest only to the extent that the wcd transaction came before city council.631 She did not believe she was at all restricted in her actions before the matter was reviewed by council.632 However, she did concede there may have been a perception that she was attempting to influence the vendors for the wrong reasons.633 Commission counsel tested the mayor’s opinion by offering a hypothetical situation in which the mayor herself held an equity interest, asking whether the mayor could promote her own project.634 In the mayor’s view, as long as she declared a conflict of interest at city council and did not influence the municipal legislative process with respect to the development, nothing would have prevented her from personally investing in a development project and then using her status as an elected official to promote the development and obtain concessions from other parties.635 Although the mayor testified that she would never put herself in such a situation, I confess that I find her initial response revealing. I find Mayor McCallion’s narrow view of her duties in the face of a conflict of interest troubling. The mayor’s position throughout the Inquiry was that her conduct in the face of the conflict of interest posed by her son’s pecuniary interest in wcd should be assessed only with regard to the provisions of the Municipal Conflict of Interest Act.636 I find the mayor was mistaken in this belief. Specifically, I find that whether the mayor’s conduct was appropriate in the face of the real conflict of interest must be assessed with regard not only to the mcia, but also to the common law of conflict of interest.637

13 Appropriate Action Given Conflict of Interest The Mayor and Due Diligence Should the mayor have conducted some due diligence concerning wcd? A mayor or other elected official cannot be expected to know of every pecuniary interest held by relatives that might create a conflict of interest.* That said, a mayor

* The City of TorontoCode of Conduct for Members of Council, p. 7, and the City of Mississauga Code of Conduct, p. 9, draw attention to the fact that there may be circumstances in which a friend’s pecuniary interest may be relevant in determining a conflict. 152 Updating the Ethical Infrastructure has an obligation to make reasonable inquiries when there is reason to believe a relative’s involvement may place the mayor in a real or apparent conflict of interest. Even accepting Mayor McCallion’s testimony that she did not know of Peter McCallion’s beneficial interest after witnessing the declaration of trust and the loan agreement (evidence which I do not accept), she was certainly put on notice that her son might have an interest in wcd when, in the summer of 2009, she read his sworn affidavit in which he stated that he was a principal of wcd.638 Sworn evidence must be treated seriously not only in our courts but also in our other public institutions and in broader society. From that point forward, a reasonable person would have expected the mayor to have conducted due diligence to determine the exact nature of her son’s interest in wcd. In her testimony, the mayor admitted it would not be appropriate for her to get involved in a business transaction when she did not have a sufficient understanding of the details of the transaction.639 The mayor was adamant that her actions were motivated by a desire to advance the city’s interests.640 As the mayor said, she has “worked over” many developers through the years without asking for personal favours.641 I take note of the mayor’s important concession that it might have appeared she was seeking concessions on behalf of her son’s company and not for the City of Mississauga.642 Theappearance that the mayor was acting in the interests of her relative is one of my real concerns in this Inquiry. I have already found that the mayor knew her son had an interest in wcd. Even if Mayor McCallion was misled by her son as to the degree of that interest, she knew he stood to benefit financially if thewcd transaction was suc- cessfully completed and she should have made further inquiries of her son to learn the real nature of his interest before advocating on wcd’s behalf.

The Mayor and Council Should the mayor have advised council of the steps that she was taking? The development of a hotel and convention centre was a public goal of Mississauga. In these circumstances I find that the mayor should have been more transparent about her intervention on behalf of World Class Developments. City council does not appear to have been aware of the mayor’s private interventions on wcd’s behalf. The mayor did not believe thatwcd ’s negotiations for the purchase of the land had anything to do with city council.643 I appreciate that Phase II – City Centre Land and World Class Developments 153 there was no formal mechanism in place for the mayor to advise city council of her conflict of interest in the exercise of her executive decisions at the time. Nevertheless, I find that the mayor should have identified and disclosed to council the nature and extent of her son’s interest in wcd. As discussed below, given her knowledge of her son’s interest, the mayor should not have intervened as she did on wcd’s behalf. However, having already intervened on wcd’s behalf, she should, at the very least, have disclosed the extent of her intervention.

The Mayor and the Vendors Would the vendors have entered into the agreement of purchase and sale without the mayor’s intervention? There is considerable evidence that the mayor frequently intervened with the vendors in relation to wcd. It is unlikely that the co-owners would have considered selling the land to wcd at the outset of these events had it not been for the mayor’s involvement. The mayor intervened as early as October 2005 to encourage omers / Oxford to meet with Mr. Cook regarding the sale of the city centre site to wcd.644 This was little more than a shell company whose principals were unknown to the vendors. The mayor pressed for omers to consider wcd’s offer to purchase the lands before the involvement of its first significant investor, Leo Couprie. As a first step in its development project, wcd needed to secure the land “to be able to go out and attract a hotel next to the Living Arts Centre.”645 The mayor made first contact withomers and introduced Murray Cook on behalf of wcd – before Mr. Cook had even contacted omers. In the initial days, Mr. Cook kept the mayor apprised of the project.646 The mayor acknowledged in her testimony that she “stepped up the pressure on omers to sell” to wcd in 2006, when the momentum for the deal was lagging.647 Although the mayor testified that it was Mr. McCallion who recruited Mr. DeCicco to wcd, contemporaneous correspondence between the vendors suggests that the mayor assured the vendors of Mr. DeCicco’s financial resources and ability to follow through on the deal.648 I accept that the mayor’s interest in the wcd project was driven principally by her desire for a four- or five-star hotel in Mississauga and not simply by a desire to assist her son. However, the fact that the mayor may not have acted primarily to further her son’s pecuniary interests does not end the conflict of interest analysis, nor does it take into account questions surrounding apparent 154 Updating the Ethical Infrastructure conflicts of interest. The mayor should have been more wary of using her influence where her son stood to gain financially from the transaction.

The Mayor and World Class Developments Should the mayor have declined to be involved in the wcd matter altogether (aside from declaring a conflict of interest)?In this case, the mayor actively promoted wcd’s interests at many different stages of the transaction when she knew that her son had a pecuniary interest in wcd. In pushing for the interests of wcd, and by extension Peter McCallion, the mayor acted in the face of a clear conflict of interest and used the influence of her office, albeit outside her legislative role. It is no answer for the mayor to say this was done for the benefit of the City of Mississauga when her son stood to make millions of dollars if the deal were concluded. I find that, once Mayor McCallion learned her son had a pecuniary interest in wcd (which she knew from the outset), she should have refused any involvement in the project. Given the options available to her, the mayor’s only actions in relation to wcd should have been:

1 to identify and disclose the nature and extent of her son’s interest in wcd; 2 to declare a conflict of interest before any consideration of the wcd matter by city council, a committee of council, or a local board; and 3 to take no further role in promoting the wcd project.

14 David O’Brien, City Officials, and Conflict of Interest David O’Brien’s Many Hats The Terms of Reference require me to “inquire into whether any existing orfor - mer elected or administrative representatives of … the City of Mississauga had a direct or indirect personal economic interest, or other conflict of interest.”649 David O’Brien was a former administrative representative of the city during his involvement in events considered in Phase II of the Inquiry. I find that he faced a conflict of interest while making inquiries on behalf of the mayor and by negotiating with World Class Developments. Mr. O’Brien was a former Mississauga city manager and a trustee of the mayor’s family trust.650 He was Phase II – City Centre Land and World Class Developments 155 also a former member of the board of Sheridan College as well as a current member of the omers board of directors.651 Mr. O’Brien owed a fiduciary duty to omers, and also owed fiduciary duties to the mayor’s children, including Peter McCallion. He had owed a fiduciary duty to the city in the past as its most senior public servant. Because of her relationship with Mr. O’Brien and the fact that he was on the omers board, the mayor expected him to resolve any problems she brought to his attention without him ever reporting back to her.652 When Mr. O’Brien sought to resolve the outstanding litigation between wcd and the vendors at the mayor’s instance,653 the city had an indemnity agreement with the vendors so that it would not be responsible for the payment of any settlement funds to wcd.654 On the one hand, omers wanted to settle the litigation for as little money as possible. On the other hand, the mayor and the city wanted the litigation resolved and had no concern about the amount of money paid to wcd.655 The mayor testified that her desire to put an end to the litigation was motivated by her concern that the litigation might have an impact on the Sheridan College deal.656 I find Mayor McCallion was undoubtedly also concerned about the “political issues”657 that could arise from litigation involving a company in which her son was a principal. All these competing factors put Mr. O’Brien in an impossible position.

Appropriate Action in the Circumstances What should Mr. O’Brien have done in the face of this conflict? Quite simply, he should have declined to assist the mayor with the wcd matter when she first raised the issue with him in discussions on July 7, 2009, at thetacc (Developments) golf tournament.658 It was not appropriate for Mr. O’Brien to meet with Tony DeCicco and Peter McCallion659 after the mayor requested that he inform himself of wcd’s concerns660 and the problems the city solicitor, Mary Ellen Bench, was facing in getting clear title to the land for the Sheridan College deal.661 Further, Mr. O’Brien should not have participated in the negotiation of the litigation settlement involving wcd.

City Staff and Conflict of Interest Did city staff face a conflict of interest in dealing with World Class Developments? Members of city staff had extensive involvement withwcd in determining the 156 Updating the Ethical Infrastructure appropriate development charges and site plan application fees. In all of this, staff exercised a fair degree of discretion. City staff did not act in the presence of a conflict of interest in any of these matters. City staff did not stand to benefit financially and provided no preferential treatment towcd . The decision qualifying wcd’s site plan application for the transition provisions of the development charges by-law and the decision that work should continue on the wcd project despite its non-payment of the site plan application fee were both reached independently for good reasons articulated in evidence before me. Staff made these decisions free from the mayor’s influence. Similarly, the lifting of the H designation occurred within the legislative arena, where the mayor quite properly had refused to get involved. The conflict of interest faced by the mayor cannot be imputed to city staff. City staff were unaware of the mayor’s advocacy on behalf of wcd with the co-owners. Indeed, there was no adequate mechanism in place to alert city staff that a councillor faced a conflict of interest.

Appropriate Action for City Officials What should city officials have done in the face of the mayor’s conflict of interest? The city should establish a standard procedure to follow when a member of council has a conflict of interest. In the circumstances being examined in this Inquiry, however, I have found that the members of city staff were not influenced by the mayor or by Peter McCallion in their conduct. Once city officials were aware of the mayor’s conflict of interest, whether as a result of the mayor’s declaration of the conflict at council or otherwise, they should have taken steps to insulate the mayor from any involvement in the administrative decision-making process relating to wcd. Ms. Bench’s notes of her call with Mr. O’Brien on September 5, 2009 reflect that she in fact took steps to achieve this result.662

Impact of the Conflicts of Interest Impact on the Vendors I find that Mayor McCallion’s involvement in thewcd project created risk and uncertainty for the vendors which ultimately led to unnecessary costs. But for the mayor’s involvement, the agreement of purchase and sale between the vendors and wcd likely would not have been executed, and the numerous Phase II – City Centre Land and World Class Developments 157 extensions of time requirements in the aps would not have been provided. I find it was the mayor’s continued involvement that led to the settlement of the litigation. Without the mayor’s intervention, on a balance of probabilities, it is unlikely Mr. Nobrega would have become involved, and, ultimately, the settlement payment would not have been made to wcd. Going forward, large institutional investors like the co-owners may well approach development projects promoted by municipalities more cautiously. They likely will cause increased transaction costs through greater due diligence. Should this outcome occur it would be, on balance, positive.

Necessity for the Inquiry Given the limited options available to address serious concerns about conflicts of interest at the municipal level, calling this Inquiry was the only effective option to examine the facts, short of an individual Mississauga elector bringing an application under the mcia. The cost of this Inquiry to residents of Mississauga is significant and should not be discounted.

Recommendations for Phase II An effective municipal accountability regime requires a culture of accountability that pervades municipal government. That culture of accountability cannot simply be imposed top-down through legislation; it requires strong leadership from various municipal stakeholders. A balance must be struck that provides consistency, predictability, coherence, fairness, and transparency, as well as sufficient flexibility. In this section I consider the existing framework of accountability for conflict of interest in Mississauga and Ontario and make recommendations regarding amendments to the Municipal Conflict of Interest Act and the Mississauga Code of Conduct. I also make recommendations in regard to strengthening the office of the integrity commissioner. Finally, I suggest other measures that may prevent circumstances such as those arising in this Inquiry. I suggest a practice of providing comfort letters to aid third parties in negotiating with the city, the introduction of a lobbyist code of conduct, and amendments to the Municipal Councillor’s Guide. 158 Updating the Ethical Infrastructure Existing Framework of Accountability The Municipal Act, 2001 The current statutory framework under Part V.1 of the Municipal Act, 2001, so 2001, c 25, allows municipalities to create an accountability regime responsive to the needs of the community. To meet their needs, municipalities may choose from a range of options available in Part V.1 of the Municipal Act, 2001. At one end of the spectrum, municipalities may implement an extensive accountability regime including a municipal code of conduct, an integrity commissioner, a lobbyist registry, an ombudsman, an auditor general, and an open meetings commissioner. At the other end of the spectrum, municipalities may prefer a less complex and less expensive approach to accountability and transparency that does not include any of these options. Although the flexibility permitted under Part V.1 of the Municipal Act, 2001, recognizes the diversity of needs in municipalities across the province, it has the potential of establishing highly divergent standards of accountability and transparency.

TheMunicipal Conflict of Interest Act The activities of those in public office should be animated by public purposes. The municipal accountability regime should take into account all the different hats that can be worn by municipal politicians. TheMunicipal Conflict of Interest Act is an integral part of that regime. It is aimed at fostering accountability, transparency, and public confidence in Ontario’s elected municipal officials. However, the municipal accountability regime, which includes the mcia, has not kept pace with the evolution of the Municipal Act, 2001.663 The mcia, as it currently exists, is inadequate regarding the kinds of mischief it addresses and the range of available sanctions. The recommended amendments to the mcia set out below are aimed at advancing the public interest and the demo- cratic foundations of municipal government. The mcia has a number of shortcomings. First, it is enforced by a formal application to the Ontario Superior Court of Justice, which requires a complaint by an “elector.” The costs of such an application can be prohibitive for a citizen of ordinary means. Second, the sanctions available under the mcia are severe – loss of office, disqualification from standing for office, and restitution where the member of council has profited financially from the Phase II – City Centre Land and World Class Developments 159 conflict. Broadly speaking, the quasi-penal nature of the mcia is outdated and out of step with the modern municipal accountability regime.664 The mcia lacks more nuanced remedies. Third, the mcia is limited in its reach to deliberative and legislative work where a direct or indirect pecuniary interest exists. Section 5 of the mcia requires members of council to disclose any direct or indirect pecuniary interest and its general nature. Their obligations are to recuse themselves from any discussion of or vote in respect of the matter, and to refrain from any attempt to influence the vote on the matter or any aspect of it.665 However, the mcia is silent with respect to the executive and administrative functions of members of council, which consume far more of the time of mayors and members of executive committees. As the mayor acknowledged in her testimony, the mcia is a “blunt instru- ment” that can be used for “all kinds of motives.”666 However, it can also be an important tool that prevents municipal politicians from using their public office inappropriately to promote their private economic interests and those of their close relatives. The expense required for an elector to bring an application in court pursuant to the mcia is unfortunate, but court procedures also allow for greater procedural safeguards for the member of municipal council. Judges of the Superior Court of Justice should continue to have responsibility for removing municipal politicians from office under themcia .667 Recommended amendments to the mcia are provided below.

Municipal Codes of Conduct Municipal codes of conduct can help to regulate the conflicts of interest of members of municipal council in a more targeted and flexible manner than can provincial statutes such as the mcia. This specificity and flexibility are -par ticularly important given the evolution of municipalities such as Mississauga. Clear overarching principles should be combined with as many targeted rules as may be appropriate in the municipality. The statutory authority for municipalities to adopt codes of conduct for members of council is found in section 223.2(1) of the Municipal Act, 2001. That section states that the municipality has the authority to “establish codes of conduct for members of the council of the municipality and of local boards of the municipality.” Part V.1 of the Municipal Act, 2001, does not explicitly address the relationship between a municipality’s code of conduct and the provisions 160 Updating the Ethical Infrastructure of the mcia. However, the mcia does not occupy the entire legislative field of conflict of interest, or even that concerning pecuniary interests. Thus, there is no legal impediment to the inclusion of conflict of interest provisions in a municipal code of conduct.668 Municipal codes of conduct can allow for enforcement outside the court system and without the associated costs.669 The sanctions available under municipal codes of conduct can also be more varied and less severe than under the mcia.670 Ontario municipalities can adopt codes of conduct covering the same pecuniary conflicts of interest of members of council and local boards as themcia , while allowing for more flexible enforcement mechanisms and sanctions. Municipal codes of conduct can go significantly further than the mcia and be tailored to the types of relationships and circumstances that reflect the needs of the municipality. I find that the Court of Appeal for Ontario’s recent statement at paragraph 14 of Ruffolo v Jackson, [2010] oj No. 2840, 267 oac 381 (ca) – that “[t]he mcia provides a complete code for dealing with the possibility of conflict of interest by municipal politicians, including providing full procedural rights” – should be read as applying only to the remedies available under the mcia. The Court of Appeal for Ontario did not intend to make a blanket statement precluding municipal codes of conduct from considering conflicts of interest as a subject area.671 Regardless of the existence of municipal codes of conduct, however, the mcia’s complaint process remains, and an integrity commissioner should not take jurisdiction in a matter already before the court under the mcia.672 An application to court should not proceed concurrently with an investigation by the integrity commissioner.

The Mississauga Code of Conduct On September 20, 2010, Mississauga adopted a draft Code of Conduct (the Mississauga Code)673 that applies to the mayor and all members of council and which is aimed at improving the accountability of elected municipal officials. The Mississauga Code’s effective date is December 1, 2010, and it was reviewed by council on April 6, 2011, at a General Committee meeting. Ms. Bench, the city solicitor, advised at the meeting that a further review of the Mississauga Code would take place after the release of this Report.674 Phase II – City Centre Land and World Class Developments 161

On its face, the Mississauga Code recognizes conflicts of interest which extend beyond pecuniary interests and the formal legislative arena. The preamble of the Mississauga Code provides:

And whereas ethics and integrity are at the core of public confidence in government and in the political process, and elected officials are expected to perform their duties in office and arrange their private affairs in a manner that promotes public confidence, avoids the improper use of influence of their office and- con flicts of interests,both apparent and real and the need to uphold both the letter and the spirit of the law including policies adopted by Council [emphasis added].

Rule No. 1 of the Mississauga Code provides several more detailed prohibi- tions. Notably, Rule No. 1(b) of the Mississauga Code prohibits both apparent and real conflicts of interest:

Members of Council should be committed to performing their functions with integrity and to avoiding the improper use of the influence of their office, and conflicts of interest, both apparent and real. Members of Council shall not extend in the discharge of their official duties, preferential treatment to Family Members, organizations or groups in which they or their Family Members have a direct or indirect pecuniary interest [emphasis added].

This ban on apparent conflicts of interest with respect to preferential treatment given to family members is commendable and highly relevant to the issues in this Inquiry. The clear prohibition of both apparent and real conflicts of interest provides an important mechanism for increasing accountability and enhancing public perception and confidence in elected officials. The Mississauga Code clearly applies to members of city council in their day-to-day official activities, and it explicitly prohibits preferential treatment being given to family members (Rule No. 1(b)), the improper use of influence (Rule No. 7), and having an interest in a contract with the city (Rule No. 1(d)).675 Rule No. 1 provides a general prohibition on conflicts of interest, followed by specific examples. I adopt the interpretation of Professor Mullan that 162 Updating the Ethical Infrastructure

the inclusion of a general prohibition on conflicts of interest as a prelude to the specific examples is not to be read as limited by the more specific provisions that follow. In other words, if the common law would regard certain activities, involvements or relationships as giving rise to conflict of interest, the general provision would cover that, even if the later provisions in the Code do not specifically refer to such a conflict.676

As discussed below, I also adopt Professor Mullan’s recommendation that the Mississauga Code be amended to clarify this point. He writes:

Indeed, there is one reason in particular why it is important to establish that the general provision with respect to conflict of interest is not limited by the specific instances that follow in Rule 1. They do not cover the entire spectrum of conduct and involvements that amounts to problematic conflicts of interest. Thus, for example, the provision on preferential treatment in para. (b) is restricted to family members or organizations or groups in which family members have a direct or indirect pecuniary interest. This is potentially under-inclusive in at least two ways. Giving preferential treatment to close personal friends or business partners may well be equally indefensible, as may giving preferential treatment to not for profit organizations to which family members, friends and business partners have a substantial commitment.677

The Mississauga Code covers a wider array of circumstances than the mcia or the City of Toronto’s Code of Conduct for Members of Council.678 In my view, the Mississauga Code is a welcome development that helps to clarify matters through examples of prohibited conduct for municipally elected officials. There are, however, aspects of the Mississauga Code that could be more clearly drafted. Specific recommendations for the improvement of the Mississauga Code are provided in Recommendations 15, 16, and 17.

Integrity Commissioner The integrity commissioner falls into a specialty ombudsman system as envisaged in the Municipal Act, 2001.679 The main function of the office of the integrity commissioner is to bring transparency and consistency to the municipal accountability regime.680 A municipal integrity commis- Phase II – City Centre Land and World Class Developments 163 sioner is responsible for receiving, investigating, and reporting to council on formal and informal complaints about members of council, and for determining whether there has been a violation of a municipality’s code of conduct.681 An integrity commissioner can also advise members of council and local boards to help maintain a high standard of ethical behaviour in municipal government and even help teach both the public and municipal officials about the accountability regime.682 An integrity commissioner may also be required to provide a regular report to city council or to report on discrete issues as they arise and provide a buffer between third parties and municipal officials, so that complaints do not need to be made directly to elected officials. Overall, an integrity commissioner can provide important oversight of and direction to municipal officials, particularly when a well-drafted municipal code of conduct is in force. The statutory authority for municipalities to appoint an integrity commissioner is found in section 223.3(1) of the Municipal Act, 2001. That section provides that the integrity commissioner is

responsible for performing in an independent manner the functions assigned by the municipality with respect to, (a) the application of the code of conduct for members of council and the code of conduct for members of local boards or of either of them; (b) the application of any procedures, rules and policies of the municipality and local boards governing the ethical behaviour of members of council and of local boards or of either of them.

Section 223.4 of the Municipal Act, 2001, also allows the integrity commissioner to convert an investigation into an inquiry, which is an important middle ground between a regular investigation by the integrity commissioner and a full judicial inquiry. By converting an investigation into an inquiry, the integrity commissioner can exercise powers under the Public Inquiries Act to obtain information. If an inquiry is conducted and the integrity commissioner finds that a member of council has contravened the municipal code of conduct, then council may issue a reprimand or suspend the salary of the member for up to 90 days, although the availability of a wider range of sanctions remains unclear. However, there is no clear source of funding for such an inquiry, so funding likely would have to be voted on by council or otherwise provided.683 It is 164 Updating the Ethical Infrastructure unfortunate that the Ontario legislature did not identify a source of funding for inquiries conducted pursuant to section 223.4 of the Municipal Act, 2001. Section 223.5 of the Municipal Act, 2001, provides a statutory duty of confidentiality for the integrity commissioner. Notably, subsection 223.5(3) also provides a statutory exemption from the application of the Municipal Freedom of Information and Protection of Privacy Act, rso 1990, c M.56. The integrity commissioner’s reporting function is codified in section 223.6 of the Municipal Act, 2001, which allows the integrity commissioner to summa- rize advice provided, but prevents the disclosure of confidential information that could identify the person concerned. Since it would frustrate the purpose of integrity commissioners if municipal councils could completely disregard the reports they table, subsection 223.6(3) of the Municipal Act, 2001, requires all reports tabled by an integrity commissioner to be made public.684 Section 223.8 of the Municipal Act, 2001, provides that where, during the course of an investigation, the integrity commissioner determines there are grounds for believing a contravention of another Act has occurred, the integrity commissioner must “immediately refer the matter to the appropriate authorities and suspend the inquiry until any resulting police investigation and charges have been finally disposed of.” The suspension of the integrity commissioner’s investigation must be reported to municipal council. The effect of this provision should be to prevent an integrity commissioner from dealing with a conflict of interest complaint that is the subject of court proceedings under the mcia. However, the lack of an “appropriate authority” causes confusion; section 223.8 does not create an immediate statutory obligation to suspend proceedings and does not otherwise regulate the course of any integrity commissioner investigation.685 In 2004, the City of Toronto became the first municipality in Canada to create the office of integrity commissioner.686 The recent appointment of an interim integrity commissioner in Mississauga was a useful development, and one that gives practical effect to the rules contained in the Mississauga Code.

Lobbyist Registry As with all governance regimes, the dissemination of information plays a critical role in municipalities. The BellamyReport describes “lobbying as a potentially helpful practice that should be carefully controlled.”687 Municipalities have the power to establish and maintain a lobbyist registry pursuant to sec- Phase II – City Centre Land and World Class Developments 165 tion 223.9 of the Municipal Act, 2001. Section 223.11 of the Municipal Act, 2001, also allows a municipality to appoint a registrar for the lobbyist registry. To date, no municipality in Ontario has created a lobbyist registry under section 223.9 of the Municipal Act, 2001.* Given the size of the City of Mississauga and the existence of other measures that can be taken to improve accountability and transparency, the city should not establish a lobbyist registry at this time. In my opinion, it would be premature for the city to create a lobbyist registry. My concern is that it would be a disproportionate response to the issues of accountability and transparency in the circumstances, particularly given the significant costs involved. The financial cost to the City of Toronto for its lobbyist registry has been significant, with the 2009 budget for the office being just under $1 million.688 The effectiveness of the City of Toronto’s lobbyist registry is still unclear.

My specific recommendations arising out of Phase II of the Inquiry follow below.

Recommended Amendments to the Municipal Act, 2001 The wording of section 223.3 of theMunicipal Act, 2001, appears to place responsibility for maintaining his or her own impartiality entirely on the integrity commissioner. This assignment of responsibility is wholly unsatisfactory.689 recommendation 5 I recommend that additional statutory safeguards be added to the office of the integrity commissioner in the Municipal Act, 2001, including (a) a minimum term of appointment to provide security of tenure; and (b) a requirement that municipalities indemnify the integrity commissioner.

* The City of Toronto established a lobbyist registry; however, it was done pursuant to a statutory requirement found in section 165 of the City of Toronto Act, so 2006, c 11 Sched. A. 166 Updating the Ethical Infrastructure

Section 223.8 of the Municipal Act, 2001, should also be amended to prevent conflict between an investigation by an integrity commissioner and a court. recommendation 6 I recommend that section 223.8 of the Municipal Act, 2001, be amended to require explicitly that an integrity commissioner suspend his or her investigation or proceedings relating to a matter which is the subject of proceedings before a court of competent jurisdiction. This recommendation mirrors my advice relating to the content of the Mississauga Code of Conduct.

Recommended Amendments to the Municipal Conflict of Interest Act The Municipal Conflict of Interest Act (mcia) should be amended to resemble the Members’ Integrity Act, 1994.690 The amended Act should not displace the ability of municipalities to create codes of conduct that are flexible and tailored to their individual needs. Further, it may also be useful to integrate the mcia with the Municipal Elections Act, 1996.691 The following are my recommendations as to how the mcia could be improved through amendment.

Create a Preamble Adding a preamble to the Municipal Conflict of Interest Act setting out broad overarching principles would assist members of council to understand their role in promoting public confidence in municipal government. Phase II – City Centre Land and World Class Developments 167 recommendation 7 I recommend that a preamble be added to the Municipal Conflict of Interest Act setting out broad overarching principles. It would be appropriate to include a preamble similar to the one found in the Members’ Integrity Act, 1994, which provides as follows:

It is desirable to provide greater certainty in the reconciliation of the private interests and public duties of members of the Legislative Assembly, recognizing the following principles:

1. The Assembly as a whole can represent the people of Ontario most effectively if its members have experience and knowledge in relation to many aspects of life in Ontario and if they can continue to be active in their own communities, whether in business, in the practice of a profession or otherwise. 2. Members’ duty to represent their constituents includes broadly representing their constituents’ interests in the Assembly and to the Government of Ontario. 3. Members are expected to perform their duties of office and arrange their private affairs in a manner that promotes public confidence in the integrity of each member, maintains the Assembly’s dignity and justifies the respect in which society holds the Assembly and its members. 4. Members are expected to act with integrity and impartiality that will bear the closest scrutiny.

Clarify Scope of Act Remoteness I agree with Mayor McCallion that the Municipal Conflict of Interest Act should not go so far as to prevent the relatives of municipal politicians from being involved in business developments or providing municipal services within the same municipality.692 That restriction would be a significant disincentive for individuals to run for municipal office, and it could hinder valuable economic activity. Amendments to the mcia should not effectively bar the relatives of municipal politicians from living in, working with, or conducting business in the same municipality. I hasten to add that I do not regard any of my proposed 168 Updating the Ethical Infrastructure recommendations or findings as likely to bring about that result. Subsection 4(k) of the mcia already recognizes that the pecuniary interests covered under the Act are subject to a remoteness limitation. It provides that section 5 of the mcia does not apply to a pecuniary interest “which is so remote or insignificant in its nature that it cannot reasonably be regarded as likely to influence the member.” The “de minimis” provision was tested inLastman v Ontario, [2000] oj No. 269, 47 or (3d) 177 (scj) [Lastman], where, as a result of a city council decision in which Toronto Mayor Mel Lastman participated, legal proceedings were initiated against the Toronto Police Association in relation to the association’s True Blue Campaign.* The Toronto Police Association retained Goodman Philips and Vineberg llp, the law firm in which the mayor’s son Dale Lastman was a partner. By virtue of section 5 of the mcia, the mayor had a deemed pecuniary interest as a result of this fact. Winkler J (as he then was) applied the test set out by MacKenzie J in Whiteley v Schurr,693 with respect to subsection 4(k) of the mcia:

Would a reasonable elector, being apprised of all the circumstances, be more likely than not to regard the interest of the councillor as likely to influence that councillor’s action and decision on the question? In answering the question set out in such test, such elector might consider whether there was any present or prospective financial benefit or detriment financial or otherwise, that could result depending on the manner in which the member disposed of the subject matter before him or her.694

Winkler J concluded that the presumptive pecuniary interest deemed to exist in section 3 of the mcia was “so remote or insignificant in its nature that it cannot reasonably be regarded as likely to [have] influence[d] Mel Lastman.”695 Thus, the mcia explicitly recognizes that a conflict will not be found where the benefit to the member’s relative is too remote. For this reason, there is no rational concern about the ability of close relatives of municipal politicians to earn a living in the same municipality.

* Mayor Lastman was also a member of the Toronto Police Services Board and participated in the delibera- tions that resulted in instructions to commence legal proceedings against the association. Phase II – City Centre Land and World Class Developments 169

Knowledge of the Elected Officials In her testimony, the mayor suggested it was unfair for the Municipal Conflict of Interest Act to apply in situations where the elected official has no knowledge of the situation underlying the conflict of interest.696 However, pursuant to section 3 of the mcia, “the pecuniary interest, direct or indirect, of a parent or the spouse or any child of the member shall, if known to the member, be deemed to be also the pecuniary interest of the member” [emphasis added]. Section 3 of the mcia already provides a clear defence for elected municipal officials where they do not have knowledge of the underlying conflict. The knowledge aspect of section 3 of the mcia provides fairness, given the severity of the sanctions required under the mcia, and should remain a fundamental aspect of the mcia unless the provisions regarding sanctions are significantly amended.

Clarify Who Is Captured by the mcia Section 5 of the Municipal Conflict of Interest Act requires a member present at a council or board meeting where a matter in which the member has any pecuniary interest is considered, to disclose any direct or indirect pecuniary interest and its general nature. Accordingly, the member must recuse himself or herself from any discussion of or vote on the matter and refrain from any attempt to influence the vote on the matter or any aspect of it. The current wording of themcia may be interpreted to mean that only members and some of their relatives are caught. This interpretation is undesir- able because it results in arbitrary line-drawing exercises that do not address the mischief targeted by the mcia. recommendation 8 I recommend that a statement be added within the Municipal Conflict of Interest Act (mcia) to the effect that the interests of spouses, parents, children, siblings, and other relatives are deemed also to be the interests of the member. This addition would strengthen themcia .

v 170 Updating the Ethical Infrastructure Beyond Pecuniary Interests Situations may arise where factors other than a financial interest inappropriately influence an elected official’s participation in a matter. Much of the problem with respect to conflicts of interest is the appearance of impropriety. However, the apparent conflict of interest standard would go too far in the context of the mcia given the serious sanctions that can be imposed by a judge under that statute. Fairness requires that the member have knowledge of the interest for the mcia to be engaged. In an ideal conflict of interest regime, apparent conflicts of interest would be caught and dealt with under other, more flexible processes (such as members’ codes of conduct or the functioning of an integrity commissioner). If lesser sanctions, as discussed below, are introduced into the mcia, adoption of an apparent standard (which would engage some of the lesser sanctions) should be reconsidered. recommendation 9 I recommend that the Municipal Conflict of Interest Act (mcia) be extended to include private interests more broadly. Themcia currently applies only to a “pecuniary interest.” (a) Depending on the scope of amendments to the mcia, the wording “pecuniary interest” should be replaced with “private interest,” although such a change would likely require an explicit materiality threshold, so that insignificant private interests are not caught. (b) This extension of what constitutes a conflict of interest should be accom- plished through the inclusion of a provision similar to section 5 of the Members’ Integrity Act, 1994. Section 5 of the Members’ Integrity Act, 1994, provides that:

This Act does not prohibit the activities in which members of the Assembly normally engage on behalf of constituents in accordance with Ontario parlia- mentary convention.

v Phase II – City Centre Land and World Class Developments 171 Clarify Types of Meetings Captured by the mcia The mcia should apply to matters beyond the deliberative and legislative functions of municipal council. Subsection 5(1) of the mcia, which requires a member of council with a pecuniary interest in a matter raised at a meeting or for a vote to declare a conflict, should be clarified and amended in this regard. Clear guidelines are essential in deciding what meetings are caught by the sweep of the mcia. Also, the mcia should be read as requiring the member not only to declare a conflict of interest, but to specify the nature and extent of the interest. recommendation 10 Although some courts have already found that section 5 of the Municipal Conflict of Interest Act applies to committee meetings,* the statute should be amended so that it clearly applies to all meetings attended by members of council in their official capacities. These would include meetings to promote developments said to be in the city’s interest.

The Need for Lesser Sanctions Remedies occupying a middle ground between disqualification and a formal reprimand are needed in the mcia.697 To balance the recommended extension of conflicts covered by the mcia and municipal codes of conduct, a broader range of sanctions should be made available. As it currently stands, the sanctions available under the mcia are draco- nian. If a judge determines that a member of council has not followed the proper protocol with respect to a conflict of interest, subsection 10(1) of the mcia requires that the judge (a) shall declare the seat of the member of council vacant; (b) may disqualify the member from municipal office for several years; and (c) may require restitution if there has been personal financial gain. Subsection 10(3) prevents the judge from imposing the less severe penalty of suspension. The usefulness of the statutory restitutionary remedies available under the mcia should also be considered.698 Civil actions cover most situations where municipal politicians receive improper financial benefits. The

* Jaffary v Greaves, [2008] oj No 2300 (scj); Sims v Fratesi, [1996] oj No 4488 (Gen Div). 172 Updating the Ethical Infrastructure mcia should not be construed as precluding civil actions for restitutionary recovery. recommendation 11 I recommend that the existing sanctions in the Municipal Conflict of Interest Act (mcia) remain in place. However, none should be mandatory, and lesser sanctions should be made available. More specifically, I recommend that: (a) Subsection 10(3) be repealed, and the following lesser sanctions be made available where a judge finds contravention of themcia : • suspension of the member for a period of up to 120 days; • a form of probation of the member, with oversight by the integrity commissioner or auditor; • removal from membership of a committee of council; • removal as chair of a committee of council; • a reprimand publicly administered by the judge; and • a formal apology by the member. (b) Section 13 of the mcia dealing with remedies be amended to provide only for declaring a seat vacant.

I observe that should the available sanctions under the Municipal Conflict of Interest Act be broadened, section 15, which provides that the mcia prevails over other conflicting statutory provisions, might be repealed.

Standing to Pursue Claims It would be helpful to simplify the procedure for pursuing a claim under the mcia. However, it is not advisable to lessen any of the procedural protections that currently exist under the mcia, such as a hearing in front of an impartial and independent judge.699 recommendation 12 I recommend that electors continue to be able to bring applications under the Municipal Conflict of Interest Act (mcia), and that individuals or organizations demonstrably acting in the public interest be able to bring such applications. Phase II – City Centre Land and World Class Developments 173 The mischief addressed by themcia is of such gravity that section 9 should be amended to allow the Attorney General to bring applications as well.

Themcia and the Integrity Commissioner The powers of integrity commissioners are already recognized in theMunicipal Act, 2001, but not in the Municipal Conflict of Interest Act. recommendation 13 I recommend that the Municipal Conflict of Interest Act (mcia) be amended to recognize the role of the integrity commissioner to investigate and to report on matters covered by the mcia.

Coordination with Municipal Codes of Conduct It is quite apparent to me that careful consideration must be given to how the Municipal Conflict of Interest Act and any given municipal code of conduct are going to mesh. I believe it necessary that the mcia be given clear primacy but that the limits of the Act be specified. recommendation 14 I recommend that the Municipal Conflict of Interest Act be amended to include a provision stating explicitly that nothing in the Act prevents a member of council from making submissions regarding a finding in a report by the integrity commissioner or regarding the imposition of a penalty under a municipal code of conduct. It is important that members of council be afforded procedural fairness under municipal codes of conduct.

v 174 Updating the Ethical Infrastructure The Mississauga Code of Conduct The circumstances at issue in this Inquiry highlight some of the ways in which the draft Mississauga Code of Conduct could be strengthened. As it currently exists, the Mississauga Code is useful for many reasons, not the least of which is that the vast majority of electors cannot afford to bring an application pursuant to the mcia. The Mississauga Code of Conduct also provides a relatively flexible common framework for all members of council to follow. They can turn to the Mississauga Code of Conduct and to the integrity commissioner for guidance before placing themselves into situations where a real or apparent conflict of interest arises. These recommendations in regard to the Mississauga Code of Conduct may have application as a model for other municipalities.

Preamble The focus of the Mississauga Code should be on the spirit, principles, and goals underlying its creation, and it is not intended to be strictly interpreted.700 recommendation 15 I recommend that the preamble to the Mississauga Code be revised to clearly identify the values which underlie it and the mischief the scheme is set up to address. It may be counterproductive for the city to adopt a strict rules-based approach to the Code. Instead, the Mississauga Code should set out strong value statements, followed by a small number of general rules and more detailed commentary about those rules.

Changes to the Conflict Rules The inclusion of the apparent conflict standard in the Mississauga Code is laudable. I am in favour of including a definition of an “apparent conflict of interest” and recommend below, with necessary minor revisions, the inclusion of the following definition found in subsection 2(2) of the British Columbia Members’ Conflict of Interest Act, rsbc 1996, c 287:701

For the purposes of this Act, a member has an apparent conflict of interest if there is a reasonable perception, which a reasonably well informed person could Phase II – City Centre Land and World Class Developments 175

properly have, that the member’s ability to exercise an official power or perform an official duty or function must have been affected by his or her private interest.

For clarity, under the heading “Framework and Interpretation,” the Mississauga Code should state that Rule No. 1 is to be treated as a stand-alone rule under which complaints can be made.702 At present, Rule No. 1(b) of the draft code states that

The wording of Rule No. 1(b) should be strengthened. As it stands, the prohibition against real and apparent conflicts of interest in Rule No. 1(b) might be construed narrowly as having application only with respect to preferential treatment given to family members in relation to pecuniary interests. City council should amend the Mississauga Code to clarify the status of the ban against both real and apparent conflicts of interest in a separate stand-alone prohibition and should also extend the ban beyond pecuniary interests and family members.703

recommendation 16 I recommend that the Mississauga Code be amended by replacing Rule No. 1(b) with the two following stand-alone rules:

Members of Council should be committed to performing their functions with integrity. Members shall avoid the improper use of the influence of their office and shall avoid conflicts of interest, both apparent and real [emphasis added].

Members of Council shall not extend in the discharge of their official duties preferential treatment to any individual or organization if a reasonably well- informed person would conclude that the preferential treatment was advancing a private interest [emphasis added].

v 176 Updating the Ethical Infrastructure recommendation 17 I recommend that Mississauga City Council include a commentary following these two stand-alone rules:

For greater clarity, this Code does not prohibit members of Council from properly using their influence on behalf of constituents.

I adopt the recommendation of Professor David Mullan that, instead of taking the form of stand-alone rules, Rules No. 1(d), (e), (f ), and (g) of the Mississauga Code should form a commentary following the new Rule No. 1(b). That way, they will clearly fall under the statement in the “Framework and Interpretation” section of the Mississauga Code, which provides that “[c]ommentary and examples used in this Code of Conduct are illustrative and not exhaustive.”

Integrity Commissioner The Mississauga Code currently provides in the commentary to Rule No. 1(b) that

Members of Council are governed by the Municipal Conflict of Interest Act and the provisions of that statute take precedence over any authority given to the Integrity Commissioner to receive or investigate complaints regarding alleged contraventions under the Municipal Conflict of Interest Act. recommendation 18 I recommend that the Mississauga Code clarify further that the Municipal Conflict of Interest Act (mcia) takes precedence over the Mississauga Code only when an actual complaint is made under the mcia involving the very same matter.

v Phase II – City Centre Land and World Class Developments 177 recommendation 19 I recommend that the Mississauga Code contain a provision requiring the integrity commissioner to suspend his or her own investigation or proceedings when a proceeding under the Municipal Conflict of Interest Act (mcia) has been commenced with respect to the same matter, until the process under the mcia has been completed. v

Improper Use of Influence, Gifts, and Benefits Rule No. 7 of the Mississauga Code is clear and concise. This prohibition on improper use of influence is particularly important because it goes beyond the existence of a conflict of interest and it captures what is done in the face of the conflict. It specifically targets improper actions. However, Rule No. 2 of the Mississauga Code, which addresses gifts and benefits, is less clear. recommendation 20 Rule No. 2 of the Mississauga Code, which addresses the permissibility of a councillor accepting gifts and benefits, contains a fairly detailed list of excep- tions. I recommend that, instead of setting out such a list, an overarching principle be articulated in the Mississauga Code: No inappropriate gifts are allowed “that would to a reasonable member of the public appear to be in gratitude for influence, to induce influence, or otherwise to go beyond the necessary and appropriate public functions involved.” The simplicity of such a rule is attractive, and it could be supplemented with a detailed commentary, as well as future “cases” decided by the integrity commissioner. v recommendation 21 I recommend that the commentary to Rule No. 7 of the Mississauga Code be expanded to say that members of council cannot make submissions to a municipal adjudicative body, such as a licensing tribunal, on behalf of a member of their ward.* v

* Lorne Sossin aptly pointed out that the current wording of the rule is not clear on this point; Transcript of Expert Panel, December 15, 2010, pp. 5711–12. 178 Updating the Ethical Infrastructure Lobbyists The Mississauga Code, should clearly address lobbying. Although I do not recommend that Mississauga create a lobbyist registry because of the expense involved,* the Mississauga Code could be amended to provide guidelines for how municipal politicians should deal with lobbyists, particularly in the context of development issues. I note that Surrey, British Columbia, has adopted such an approach.704 This approach would provide a relatively low-cost measure to address concerns about lobbying and commercial development in the municipality. recommendation 22 I recommend that the Mississauga Code be amended to include clear guidelines setting out how municipal politicians may deal with lobbyists.

Procedural Fairness As noted in Recommendation 14, the mcia should include a provision which explicitly states that nothing in the mcia prevents a member of council from making submissions regarding a finding in a report of the integrity commissioner or regarding the imposition of a penalty under a municipal code of conduct. Members of council should be afforded procedural fairness, particularly where they are concerned that a report critical of them may be adopted or that a penalty may be imposed as a matter of political expediency. Specifically, a member of a municipal council should have the opportunity to respond at council to a damning report or to a recommendation that a penalty be imposed under a municipal code of conduct.

* D. Mullan, Transcript of Expert Panel, December 16, 2010, p. 5950. The associated compliance costs for the municipality and the lobbyists should be limited. Phase II – City Centre Land and World Class Developments 179 recommendation 23 To improve transparency and procedural fairness, I recommend: (a) that the procedure for making a complaint be set out in the Mississauga Code. In the interest of independence, complaints made under the Mississauga Code should be submitted directly to the integrity commissioner instead of through the civic administration; and (b) that the current Rule No. 18 of the Mississauga Code be revised to recognize explicitly the need to hear from a member before a critical report is adopted or a penalty is imposed by city council.

Sanctions Municipal codes of conduct primarily enhance accountability through greater transparency. The inclusion of a range of sanctions in the Mississauga Code may be appropriate so long as they are used responsibly and only in appropriate cases.705 However, in light of concerns about the adequacy of procedural fairness safeguards and the use of sanctions for an improper purpose, it may be preferable to remove severe sanctions such as suspension from the Mississauga Code altogether, and incorporate into the Mississauga Code some of the lesser sanctions discussed in Recommendation 11 which might be found in an amended Municipal Conflict of Interest Act.706

Office of the Integrity Commissioner Even the most well-intentioned municipal code of conduct and legislative enactments governing elected municipal officials will not be effective without a proper enforcement regime. An integrity commissioner can play a vital role in this regard. The creation of a permanent office of integrity commissioner in Mississauga, responsible for receiving, investigating, and reporting on formal and informal complaints, would be of great assistance. The potential for a conflict of interest is inherent in the office of an integrity commissioner. A conflict of interest may develop as a result of the overlapping roles of the integrity commissioner in giving advice to councillors, investigating councillors, and recommending sanctions when councillors violate the 180 Updating the Ethical Infrastructure municipal code of conduct.707 However, concerns about this potential for a conflict of interest should not be overstated. To enhance impartiality, the integrity commissioner should not be an employee of the municipality. An integrity commissioner should not only be independent from municipal council but also be seen to be independent. The appointment process for the integrity commissioner should be fair and transparent. The integrity commissioner’s tenure should also be fixed in length, non- renewable, and reasonably long.708 A term of five to seven years – arranged on a part-time or half-time basis, depending on the size of the municipality – would be appropriate. The remuneration of the integrity commissioner should also be fixed at a reasonable level to avoid concerns about undue influence. The office of the integrity commissioner can also direct outreach, provide education, and perform an important advisory function. One of the most important roles for a municipal integrity commissioner is to provide advice to and conduct outreach seminars with elected officials and municipal staff. In many ways, such advisory and educational functions are more effective than its complaints function is at shaping commercial practices and the private sector’s interactions with municipal politicians. Resources permitting, the integrity commissioner should also conduct educational outreach work with the public and, in particular, the development industry so that it understands the municipal accountability regime.709 It has been suggested that the integrity commissioner’s advisory role should be extended to third parties, for example those involved in municipal procure- ment processes. In my view, it would not be advisable for the integrity commissioner to provide formal advice to third parties because of the heightened risk of a conflict of interest developing. In addition, third-party commercial developers might try to download their due diligence onto municipal integrity commis- sioners710 or might seek legal advice from integrity commissioners rather than city solicitors.711 The provision of advice to third parties could quickly become very expensive and effectively set up circumstances for complaints. Third parties should engage lawyers and other professionals to provide them with advice. The integrity commissioner should report publicly on complaints received, as well as advice provided. In the interest of encouraging members of council and municipal staff to seek advice from the integrity commissioner, the names of those requesting advice from the integrity commissioner should be removed from the published version of any such report.712 Phase II – City Centre Land and World Class Developments 181 Mississauga is large enough to have its own integrity commissioner.713 However, as an alternative to the appointment of a separate integrity commissioner in each municipality, it would be helpful, particularly to smaller municipalities, for there to be a roster of integrity commissioners who can deal with issues in a region of the province or across the entire province. Mayor McCallion sensibly suggested that a roster of integrity commissioners should be engaged by the Association of Municipalities of Ontario and made available to any municipality in Ontario, as needed.714 I am attracted to the conclusion that, had there been an integrity commissioner acting in Mississauga in this particular case, his or her services might have been accessed in such a way as to have avoided the necessity for this Inquiry. First, education and outreach might have made it clear to Mayor McCallion and others involved that there was a real conflict of interest relating to the mayor’s involvement on behalf of wcd, and, in the face of that conflict, she ought not to have acted to further wcd’s interests. Second, the ability of an integrity commissioner to investigate and report on the conduct of a municipal official in the face of a conflict of interest, and to advise city staff and the mayor, might have avoided the need for an Inquiry altogether. Should Mississauga decide to create the office of integrity commissioner, it would be incumbent on the mayor and members of council to avail themselves of its services. recommendation 24 I recommend that the City of Mississauga create a permanent office of integrity commissioner responsible for receiving, investigating, and reporting on formal and informal complaints.

v recommendation 25 I recommend that the Ontario legislature require that, where a municipality has created the office of integrity commissioner, the municipality be required to identify a source for funding in the event an inquiry is called by the integrity commissioner.

v 182 Updating the Ethical Infrastructure recommendation 26 I recommend that a roster of potential integrity commissioners be created and funded through the Association of Municipalities of Ontario. These individuals would be available to provide assistance, on an on-call basis, to municipalities not having an integrity commissioner.

Lobbyists As noted, I do not recommend that Mississauga create a lobbyist registry because of the expense involved.* However, the creation of a clear and straightforward lobbyist code of conduct could help increase transparency for commercial developers and other third parties that deal with the municipality.715 recommendation 27 I recommend that Mississauga create a concise lobbyist code of conduct, and that the integrity commissioner be given responsibility for overseeing the lobbyist code and educating third parties about it.

Additional Considerations In addition to the above recommendations, I make the following observations about other steps that might be taken to prevent the circumstances giving rise to this Inquiry.

Publication of All Known Conflicts of Interest I invite the city clerk’s office to consider the feasibility of creating a search- able database containing a list of all declared or known conflicts of interest, which could be posted on the city’s website.716 Capturing all declared conflicts of interest so that they are readily accessible by third parties could be an

* D. Mullan, Transcript of Expert Panel, December 16, 2010, p. 5950. The associated compliance costs for the municipality and the lobbyists should be limited. Phase II – City Centre Land and World Class Developments 183 extremely useful endeavour so long as it is done in a cost-effective manner. It would increase transparency and accountability at a relatively minimal cost to taxpayers. Should this proposal be found to be feasible in Mississauga, it might be adopted by other municipalities.

Comfort Letters Third parties should have an efficient mechanism to determine whether a known conflict of interest exists. Municipalities could issue “comfort letters”* to third parties in a commercial transaction to enhance municipal accountability and transparency.717 In this scenario, third parties could write to the municipality and ask if there were any known or declared conflicts of interest or findings of improper influence made in relation to a transaction. Providing comfort letters could be implemented as a best practice when the municipality is a party to a transaction and when there are particular concerns about commercial transactions between private parties. In the case of Mississauga, comfort letters could be provided by the city solicitor or the city clerk, and would in some cases involve input from the integrity commissioner. There might be a concern that, by issuing comfort letters, the city could expose itself to liability,718 but that should be tempered by the level of investigation undertaken by the municipality and the inclusion of plain language limitation of liability clauses. Providing comfort letters to private entities would not be an onerous process since it would not require rigor- ous investigation or due diligence – and it may very well prevent circumstances such as those which have led to this Inquiry.

TheMunicipal Councillor’s Guide TheMunicipal Councillor’s Guide, published by Ontario’s Ministry of Municipal Affairs and Housing, contains an unduly restricted view of conflicts of interest affecting municipal politicians.719 As previously discussed, the mcia is not a complete code in respect of the conflicts of interest of municipal politicians. The Municipal Councillor’s Guide should be amended to reflect a broader view of conflicts of interest, such as that described in this Report.

* A comfort letter in this context refers to a letter written by the city to give assurance to the party involved in business dealings with it that there are no known conflicts of interest which could call into question the integrity of the transaction. 184 Updating the Ethical Infrastructure Effect of Such Reforms in This Case The following is a brief analysis of the effects of the suggested reforms in the circumstances of this case.

On the Mayor A broader view of conflict of interest and improper use of influence would have had a great impact. An awareness that conflicts of interest might arise outside the legislative arena might have led the mayor to be much more cau- tious in her dealings with wcd and the co-owners. The mayor’s ability to obtain advice from an integrity commissioner about her situation and what actions she could take would have been extremely helpful to her. She might have taken her concerns about Peter McCallion’s involvement in wcd to an integrity commissioner at the outset – long before the matter came before municipal council – and thereby defused any criticism of her involvement in the wcd project or its aftermath. Receiving binding advice from the integrity commissioner can be an effective protection for municipal councillors, since they can respond to criticism by saying they have already addressed a real or apparent conflict of interest with the integrity commissioner.720 It is preferable that conflicts and potential conflicts be identified and considered early. However, that desire does not mean municipal politicians must immediately declare every potential conflict. The timing of such declarations will turn on the facts and circumstances at issue, and will require members of council to exercise their best judgment. The implementation of an enhanced municipal accountability regime in Mississauga will require an adjustment period. Strong leadership from Mayor McCallion and other elected officials will be necessary to ensure its success.

On David O’Brien As with the mayor, a broader view of conflict of interest and improper use of influence might have had a significant impact on Mr. O’Brien’s actions. For instance, if the mcia had deemed Mr. O’Brien’s interest also to be that of the mayor, considering their close relationship, I expect it would have given him pause and might have prevented altogether his taking action on behalf of the mayor in July–October 2009. Phase II – City Centre Land and World Class Developments 185 On City Staff The creation of a public database of known conflicts of interest would have enabled all city staff to determine easily whether their actions were somehow exacerbating the mayor’s conflict of interest. A comprehensive municipal code of conduct would also have helped them to understand the proper boundaries of the mayor’s involvement with the wcd project.

On City Council The availability of a comprehensive municipal code of conduct and an integrity commissioner would have provided all members of city council with much needed guidance about their roles and responsibilities.

On the Vendors The vendors, particularlyaim , certainly had concerns at various points regarding the involvement of the mayor and Peter McCallion in the wcd project.721 The existence of an integrity commissioner would have provided the vendors with an effective mechanism to register their concerns confidentially about the involvement of Mayor McCallion and her son in the wcd project. The provision of a comfort letter from the city would also have assisted the vendors in gaining a better understanding of the wcd transaction, as long as the mayor’s knowledge of the conflict had been passed on to others at the city.

CONCLUSION

In this Report I have answered the questions identified for consideration by the Terms of Reference. As I said at the outset, the issues related to the 2000 Enersource Hydro Mississauga shareholders’ agreement discussed in Phase I give rise to fewer concerns than the issues surrounding the City Centre Land transaction which I reviewed in Phase II. Mississauga was fortunate that the errors in relation to Enersource and the instances of conflict of interest in relation to the City Centre Land did not injure the city in a material way. omers / Borealis never exercised its power of veto. Although the World Class Developments hotel / convention centre transaction failed to materialize on the City Centre Land, another opportunity emerged. The city will now enjoy the benefits of a thriving campus of Sheridan College at the city core. Whether public confidence in city institutions was damaged is more difficult to measure. A review of the interaction between the mayor and various players in relation to the wcd deal suggests that those who are fortunate enough to enjoy friendships with the mayor have derived benefits from those relationships. Although in some communities this situation would garner con- troversy, this appears not to have been the case in Mississauga. The business community has had the benefit of many years of stable leadership and a mayor who understands business. Mayor Hazel McCallion enjoys a considerable measure of public trust, as demonstrated by her history of electoral success.

187 188 Updating the Ethical Infrastructure Nevertheless, it is clear that Mississauga, and indeed all Ontario municipalities, requires a better ethical infrastructure. Members of the public have the expectation that mayors, other members of council, and public officials will conform to ethical standards. Amending the Municipal Act, 2001, the Municipal Conflict of Interest Act, and the Mississauga Code of Conduct will promote clarity in those standards. It is fundamental that members of the public do not have to depend only on the personal ethical standards of elected officials. I have laid out the framework for the changes I believe are required. I believe as well that adoption of my recommendations will serve to create greater transparency as to the nature of the public and private interests which may influence official decisions. Economic transparency will promote public trust. This transparency will also serve to protect the public interest by removing possibilities for members of council to discharge their public offices in their pursuit of private interests. ENDNOTES

Introduction 1 Ontario, Inquiry into Pediatric Forensic Pathology Report, Volume 4: Inquiry Process (Ontario: Ministry of the Attorney General, 2008) (Commissioner Stephen T. Goudge). 2 Justice Dennis O’Connor, “The Role of Commission Counsel in a Public Inquiry” (summer 2003) 22(1) Advocates’ Society Journal 9–11. 3 Public Inquiries Act, 2009, so 2009, c 33, Sched. 6. 4 Public Inquiries Act, 2009, so 2009, c 33, Sched. 6, s 34(6). 5 Consortium Developments (Clearwater) Ltd v Sarnia (City), [1998] 3 scr 3 at para 26.

Phase I 1 Ontario, A Framework for Competition: The Report of the Advisory Committee on Competition in Ontario’s Electricity System (Toronto: Queen’s Printer for Ontario, 1996) (Chair Donald S. Macdonald), Exhibit 5, pp. 14–15 [pp. 34–45 of 186]. 2 Ibid. 3 Testimony of D.S. Macdonald, Transcript, May 25, 2010, p. 23. 4 Testimony of D.S. Macdonald, Transcript, May 25, 2010, pp. 25–26. 5 Exhibit 5, pp. 65, 111 [p. 85, 131 of 186]. 6 Exhibit 5, p. 74 [p. 94 of 186]. 7 Evidence of David Lever, May 31, 2010, p. 535. 8 Exhibit 5, p. 76 [p. 96 of 186]. 9 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 432–33. 10 Testimony of D. O’Brien, Transcript, May 27, 2010, p. 411. 11 Exhibit 7, p. 1.

189 190 Updating the Ethical Infrastructure

12 Exhibit 6, p. 5. 13 Exhibit 6, p. 6. 14 Exhibit 13, Proposal from Borealis, March 27, 2000. 15 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 640, 642, 646. 16 Testimony of D. Lever, Transcript, May 31, 2010, p. 535. 17 Testimony of D. Lever, Transcript, May 31, 2010, p. 537. 18 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 648–49. 19 Exhibit 6, p. 8; Exhibit 8, p. 12 [p. 14 of 71]. 20 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 652. 21 Exhibit 6, p. 8. 22 Testimony of J. Toll, Transcript, May 25, 2010, p. 74. 23 Testimony of D. Lever, Transcript, May 31, 2010, pp. 538–39. 24 Exhibit 6. 25 Exhibit 9. 26 Exhibit 6, pp. 9–10. 27 Testimony of D. O’Brien, Transcript, May 27, 2010, p. 435. 28 Exhibit 6, pp. 9–10. 29 Testimony of J. Toll, Transcript, May 25, 2010, p. 76; Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 419–20. 30 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 420–21. 31 Testimony of H. McCallion, Transcript, June 2, 2010, p. 988. 32 Exhibit 6, p. 12. 33 Exhibit 8; Testimony of D. Lever, Transcript, May 31, 2010, p. 537. 34 Exhibit 8, p. 2 [p. 4 of 71]. 35 Exhibit 8, p. 12 [p. 14 of 71]. 36 Exhibit 8, p. 12 [p. 14 of 71]. 37 Testimony of W. Houston, Transcript, May 26, 2010, pp. 287–88. 38 Exhibit 8. 39 Testimony of D. Lever, Transcript, May 31, 2010, p. 541. 40 Exhibit 10. 41 Testimony of D. Lever, Transcript, May 31, 2010, p. 542. 42 Exhibit 11. 43 Testimony of D. Lever, Transcript, May 31, 2010, pp. 543–44. 44 Exhibit 13. 45 Testimony of D. Lever, Transcript, May 31, 2010, p. 543. 46 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 672–73. 47 Exhibit 13, p. 4 [p. 8 of 143]. 48 Testimony of J. Toll, Transcript, May 25, 2010, pp. 107, 142. 49 Testimony of J. Toll, Transcript, May 25, 2010, p. 106; Exhibit 12. 50 Testimony of J. Toll, Transcript, May 25, 2010, p. 131; Exhibit 12. 51 Testimony of D. Lever, Transcript, May 31, 2010, p. 546. 52 Exhibit 12, p. 1. 53 Testimony of D. Lever, Transcript, May 31, 2010, p. 547. 54 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 675. 55 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 676. 56 Exhibit 13, p. 5 [p. 9 of 143]. Notes to Phase I 191

57 Exhibit 12. 58 Exhibit 13, p. 5 [p. 9 of 143]. 59 Testimony of J. Toll, Transcript, May 25, 2010, p. 100. 60 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 686. 61 Exhibit 69. 62 Testimony of W. Houston, Transcript, May 26, 2010, p. 162. 63 Testimony of D. O’Brien, Transcript, May 27, 2010, p. 442. 64 Testimony of J. Toll, Transcript, May 25, 2010, pp. 109–10. 65 Testimony of W. Houston, Transcript, May 26, 2010, p. 167. 66 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 445–46. 67 Exhibit 25. 68 Testimony of D. Lever, Transcript, May 31, 2010, pp. 560–61. 69 Exhibit 49, clause 2.15, p. 12 [p. 49 of 176]. 70 Exhibit 39, p. 2 [p. 5 of 7]. 71 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 440, 517, 518. 72 Exhibit 15, article 2.01(i). 73 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 704. 74 Testimony of D. Lever, Transcript, May 31, 2010, p. 571. 75 Exhibit 15, article 2.13, p. 5 [p. 6 of 26]. 76 Exhibit 15, article 2.13(ii), p. 6 [p. 7 of 26]. 77 Exhibit 15, article 2.13(iv), p. 6 [p. 7 of 26]. 78 Testimony of W. Houston, Transcript, May 26, 2010, pp. 185–86. 79 Testimony of W. Houston, Transcript, May 26, 2010, p. 186. 80 Testimony of D. Lever, Transcript, May 31, 2010, pp. 564–65. 81 Testimony of D. Lever, Transcript, May 31, 2010, p. 565. 82 Testimony of D. Lever, Transcript, May 31, 2010, pp. 566–67. 83 Testimony of H. McCallion, Transcript, June 2, 2010, pp. 1026–27. 84 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 831. 85 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 451, 457, 484. 86 Testimony of W. Houston, Transcript, May 26, 2010, pp. 338–39. 87 Testimony of W. Houston, Transcript, May 26, 2010, pp. 198–99, 356. 88 Testimony of W. Houston, Transcript, May 26, 2010, p. 199. 89 Testimony of W. Houston, Transcript, May 26, 2010, p. 199. 90 Testimony of H. McCallion, Transcript, June 2, 2010, p. 996. 91 Exhibit 23; Testimony of W. Houston, Transcript, May 26, 2010, p. 333; Testimony of M.E. Bench, Transcript, June 1, 2010, p. 867. 92 Testimony of W. Houston, Transcript, May 26, 2010, p. 240. 93 Testimony of W. Houston, Transcript, May 26, 2010, p. 353. 94 Testimony of W. Houston, Transcript, May 26, 2010, p. 321, during cross-examination by Mr. Barrack (omers). 95 Exhibit 27, Testimony of D. Lever, Transcript, May 31, 2010, pp. 576–83. 96 Exhibit 27, article 2.10, p. 10. 97 Testimony of D. Lever, Transcript, May 31, 2010, pp. 579–80. 98 Exhibit 27, article 2.12, p. 11. 99 Testimony of D. Lever, Transcript, May 31, 2010, pp. 580–81. 100 Testimony of D. O’Brien, Transcript, May 27, 2010, p. 457. 192 Updating the Ethical Infrastructure

101 Exhibit 27, p. 13. 102 Testimony of D. Lever, Transcript, May 31, 2010, p. 583. 103 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 709–11. 104 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 712, 745, 750. 105 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 712. 106 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 458–59, 460, 500–2. 107 Testimony of D. Lever, Transcript, May 31, 2010, p. 582. 108 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 707. 109 Testimony of D. Lever, Transcript, May 31, 2010, pp. 585–86. 110 Testimony of D. Lever, Transcript, May 31, 2010, p. 585. 111 Exhibit 32. 112 Exhibit 35. 113 Testimony of W. Houston, Transcript, May 26, 2010, pp. 208–9, 363–64. 114 Testimony of D. Lever, Transcript, May 31, 2010, p. 588. 115 Testimony of W. Houston, Transcript, May 26, 2010, p. 234. 116 Testimony of D. O’Brien, Transcript, May 27, 2010, p. 465. 117 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 472–73. 118 Testimony of J. Toll, Transcript, May 25, 2010, pp. 86, 138–41. 119 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 473–74. 120 Testimony of W. Houston, Transcript, May 26, 2010, pp. 385–88. 121 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 747–48. 122 Testimony of W. Houston, Transcript, May 26, 2010, p. 216. 123 Testimony of D. O’Brien, Transcript, May 27, 2010, p. 489. 124 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 713. 125 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 741. 126 Testimony of W. Houston, Transcript, May 26, 2010, p. 216. 127 Testimony of W. Houston, Transcript, May 26, 2010, pp. 214–15. 128 Testimony of W. Houston, Transcript, May 26, 2010, pp. 213–14, 240. 129 Testimony of W. Houston, Transcript, May 26, 2010, pp. 234, 238, 239, 336. 130 Testimony of W. Houston, Transcript, May 26, 2010, p. 225. 131 Testimony of W. Houston, Transcript, May 26, 2010, pp. 235, 241. 132 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 520–21. 133 Testimony of H. McCallion, Transcript, June 2, 2010, pp. 1053–54. 134 Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 871, 900–1. 135 Testimony of W. Houston, Transcript, May 26, 2010, pp. 224–225. 136 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 868; Testimony of H. McCallion, Transcript, June 2, 2010, p. 1000; Exhibit 68, p. 2. 137 Testimony of D. Lever, Transcript, May 31, 2010, pp. 588–89. 138 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 705–6. 139 Testimony of H. McCallion, Transcript, June 2, 2010, pp. 997–98. 140 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 901. 141 Testimony of H. McCallion, Transcript, June 2, 2010, pp. 999, 1001–2. 142 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 477, 504–5. 143 Testimony of W. Houston, Transcript, May 26, 2010, pp. 197, 243, 246. 144 Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 865–67. 145 Exhibits 75, 76, 77, 78, 79. Notes to Phase I 193

146 Exhibit 77. 147 Testimony of K. Mahoney, Transcript, June 15, 2010, pp. 1095–96, 1110–11, 1132. 148 Exhibit 36. 149 Testimony of D. Lever, Transcript, May 31, 2010, p. 617. 150 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 893. 151 Testimony of H. McCallion, Transcript, June 2, 2010, pp. 984–85. 152 Exhibit 24. 153 Testimony of W. Houston, Transcript, May 26, 2010, p. 375. 154 Testimony of W. Houston, Transcript, May 26, 2010, p. 375. 155 Testimony of D. Lever, Transcript, May 31, 2010, p. 592. 156 Exhibit 16. 157 Exhibit 16, tab 2, p. 2 [p. 58 of 144]. 158 Testimony of W. Houston, Transcript, May 26, 2010, pp. 193, 195. 159 Testimony of W. Houston, Transcript, May 26, 2010, p. 380. 160 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 905. 161 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 746. 162 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 833. 163 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 718–20. 164 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 720. 165 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 906. 166 Testimony of H. McCallion, Transcript, June 2, 2010, pp. 1003–5. 167 Exhibit 61, p. 8. 168 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 834. 169 Testimony of J. Singer, Transcript, June 1, 2010, pp. 768–70. 170 Exhibit 61, p. 1; Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 837–38. 171 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 843. 172 Exhibit 19. 173 Testimony of W. Houston, Transcript, May 26, 2010, p. 251. 174 Testimony of W. Houston, Transcript, May 26, 2010, p. 255. 175 Testimony of W. Houston, Transcript, May 26, 2010, pp. 256–57; Exhibit 20, p. 76. 176 Exhibit 20 [p. 77 of 133]. 177 Testimony of W. Houston, Transcript, May 26, 2010, pp. 261–62. 178 Exhibit 21. 179 Exhibit 33. 180 Exhibit 33, p. 1. 181 Testimony of W. Houston, Transcript, May 26, 2010, pp. 312–13. 182 Exhibit 34. 183 Exhibit 53. 184 Testimony of D. Lever, Transcript, May 31, 2010, p. 594. 185 Exhibit 35. 186 Testimony of D. Lever, Transcript, May 31, 2010, pp. 594–95. 187 Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 851–52. 188 Exhibit 20, p. 80. 189 Exhibit 62. 190 Exhibit 20, p. 80; Testimony of W. Houston, Transcript, May 26, 2010, p. 284. 191 Testimony of W. Houston, Transcript, May 26, 2010, p. 289. 194 Updating the Ethical Infrastructure

192 Testimony of W. Houston, Transcript, May 26, 2010, p. 291. 193 Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 854–56; Exhibit 20, p. 81. 194 Testimony of J. Singer, Transcript, June 1, 2010, p. 777. 195 Testimony of J. Singer, Transcript, June 1, 2010, p. 778. 196 Exhibit 54; Testimony of D. Lever, Transcript, May 31, 2010, pp. 595–96. 197 Exhibit 55. 198 Exhibit 64. 199 Exhibit 63; Testimony of J. Singer, Transcript, June 1, 2010, p. 780. 200 Exhibit 64. 201 Testimony of J. Singer, Transcript, June 1, 2010, pp. 802–3. 202 Exhibit 18, p. 3. 203 Exhibit 18, p. 2. 204 Exhibit 18, p. 1. 205 Exhibit 56. 206 Testimony of D. Lever, Transcript, May 31, 2010, p. 600. 207 Exhibit 57. 208 Testimony of D. Lever, Transcript, May 31, 2010, p. 602. 209 Testimony of H. McCallion, Transcript, June 2, 2010, p. 1022. 210 Testimony of D. Lever, Transcript, May 31, 2010, pp. 603–4. 211 Exhibit 17. 212 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 464, 465, 466–67. 213 Exhibit 17. 214 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 477–78. 215 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 727, 730. 216 Exhibit 60, p. 11. 217 Exhibit 60. 218 Testimony of M.E. Bench, Transcript, June 1, 2010, p. 889. 219 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 732–33. 220 Testimony of W. Houston, Transcript, May 26, 2010, pp. 200–1. 221 Testimony of W. Houston, Transcript, May 26, 2010, pp. 201–2. 222 Testimony of W. Houston, Transcript, May 26, 2010, pp. 202–4. 223 Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 870–71. 224 Testimony of H. McCallion, Transcript, June 2, 2010, p. 1072. 225 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 479, 510–11. 226 Exhibit 24. 227 Testimony of H. McCallion, Transcript, June 2, 2010, p. 1064.

Phase II 1 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4807–9, 4812–13. 2 Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1385–86; Testimony of H. McCallion, Transcript, September 20, 2010, p. 4870. 3 Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1386, 1390. 4 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4811–12. 5 Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2795; Testimony of M. Cook, Notes to Phase II 195

Transcript, September 15, 2010, p. 4449; Testimony of M. Ball, Transcript, August 19, 2010, pp. 4214–15; Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4813, 4819. 6 Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2800; July 8, 2010, pp. 1423–24; Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4818, 4831. 7 Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1386–87; August 10, 2010, p. 2795. 8 Exhibit 182; Testimony of E. Sajecki, Transcript, August 10, 2010, pp. 2795–96; Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4822–23. 9 Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2796. 10 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4813, 4818–20, 4828; Exhibit 180. 11 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4821–22. 12 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4823–24. 13 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4817, 4878–79. 14 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2269–70. 15 Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 632–34. 16 Exhibit 258; Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2302–3, 2339–41; Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3199, 3351–52; Testimony of M. Latimer, Transcript, July 28, 2010, p. 2195; Testimony of L. de Bever, Transcript, September 13, 2010, p. 4342. 17 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3176, 3226. 18 Testimony of L. de Bever, Transcript, September 13, 2010, p. 4274. 19 Testimony of M. Latimer, Transcript, July 28, 2010, p. 2223. 20 Exhibit 258; Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3199, 3351–53; Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2301–2, 2303, 2317, 2339–40, 2341–42; Testimony of L. de Bever, Transcript, September 13, 2010, p. 4305. 21 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3199, 3350–51, 3352; Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4305, 4342. 22 Testimony of M. Latimer, Transcript, July 28, 2010, p. 2223. 23 Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3351. 24 Testimony of M. Latimer, Transcript, July 28, 2010, p. 2201; Testimony of K. Lusk, Transcript, July 26, 2010, p. 1752; Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2820–21. 25 Testimony of M. Latimer, Transcript, July 28, 2010, p. 2243; Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1750–51, 1756–57. 26 Testimony of M. Latimer, Transcript, July 28, 2010, p. 2201; Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3352. 27 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1518–19; Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1715–17. 28 Testimony of M. Latimer, Transcript, July 28, 2010, pp. 2227, 2229–30. 29 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1722–23. 30 Exhibit 258; Testimony of K. Lusk, Transcript, July 26, 2010, p. 1747; Testimony of L. de Bever, September 13, 2010, p. 4342. 31 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1806. 32 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1801. 33 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1803–4. 196 Updating the Ethical Infrastructure

34 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4439–40. 35 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1819–20, 1822. 36 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4454–56. 37 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1805; July 28, 2010, p. 2024; Exhibit 187. 38 Exhibit 187, p. 1; Testimony of P. McCallion, Transcript, July 28, 2010, p. 2053; July 27, 2010, p. 1906. 39 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3405–6; Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1808–9. 40 Exhibit 187, p. 1 [p. 2 of 4]; Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2058–59. 41 Exhibit 187, p. 1 [p. 2 of 4]; Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1805–6. 42 Exhibit 291; Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2053–55. 43 Exhibit 291, p. 1; Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2053–55. 44 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1901. 45 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1806–7, 1917–19. 46 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1804–6. 47 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1810, 1977. 48 Exhibit 146; Exhibit 148. 49 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1904–5. 50 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1819, 1821, 1823, 1922–23. 51 Testimony of M. Cook, Transcript, September 15, 2010, p. 4442; Exhibit 193. 52 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4443–47, 4599–600. 53 Testimony of M. Cook, Transcript, September 15, 2010, p. 4447. 54 Testimony of M. Cook, Transcript, September 15, 2010, p. 4480. 55 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1826. 56 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3404–7. 57 Exhibit 189. 58 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1822; Exhibit 193, p. 1. 59 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1810, 1821, 1822. 60 Exhibit 190. 61 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1822. 62 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1832, 1923–24. 63 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4444–45, 4462, 4463, 4465–66. 64 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1831–34, 1839, 1927, 1933. 65 Exhibit 195. 66 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1847. 67 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1994. 68 Testimony of P. McCallion, Transcript, July 28, 2010, p. 2071. 69 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1847. 70 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1849–53. 71 Exhibit 269. 72 Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3809. 73 Exhibit 269, p. 3. Notes to Phase II 197

74 Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5513–14, 5568–69. 75 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1951–52. 76 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3402–4. 77 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3404–8. 78 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3407, 3475–76. 79 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3421–22. 80 Testimony of L. Couprie, Transcript, August 17, 2010, p. 3507. 81 Testimony of L. Couprie, Transcript, August 17, 2010, p. 3407. 82 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3408–9; Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2057–58; Exhibit 187, p. 1 [p. 2 of 4]; Exhibit 291. 83 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3474, 3486; Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1818–19; Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2075–76. 84 Testimony of L. Couprie, Transcript, August 17, 2010, p. 3478. 85 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3409–11; Exhibit 189. 86 Testimony of L. Couprie, Transcript, August 17, 2010, p. 3411. 87 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3411, 3482–83. 88 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1810, 1817, 1916; Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3487, 3488. 89 Exhibit 197. 90 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3422–23, 3487–88. 91 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1818. 92 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3422–23, 3483. 93 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1817–18. 94 Testimony of L. Couprie, Transcript, August 17, 2010, p. 3505; Exhibit 197. 95 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3427–28, 3437–38. 96 Exhibits 189 and 190, respectively; Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3411–12, 3414. 97 Exhibit 190. 98 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3417, 3419. 99 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3417–18. 100 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3418, 3420–21, 3485. 101 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1816. 102 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1912; Exhibit 190. 103 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1912–13. 104 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3420, 3424–27, 3487–88, 3506. 105 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1898–99; Exhibit 212, pp. 2–3. 106 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3245–47, 3385. 107 Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4297–98, 4299. 108 Exhibit 258, p. 2. 109 Exhibit 258, p. 2. 110 Exhibit 258, p. 1. 111 Testimony of M. Latimer, Transcript, July 28, 2010, pp. 2195–97, 2238. 112 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1669, 1707–8, 1720, 1746–47. 198 Updating the Ethical Infrastructure

113 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1708–9; Exhibit 146. 114 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1669–70. 115 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1666–67; Exhibit 149. 116 Testimony of L. de Bever, Transcript, September 13, 2010, p. 4295. 117 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2277–78. 118 Testimony of M. Cook, Transcript, September 15, 2010, p. 4480. 119 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 3994, 3996. 120 Testimony of M. Kitt, Transcript, August 19, 2010, p. 3999. 121 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 3999, 4014–15, 4059–60. 122 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3097–98. 123 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3102–3. 124 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4052. 125 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4829, 4843. 126 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4844, 4859. 127 Municipal Conflict of Interest Act, rso 1990, c M.50 128 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4855. 129 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5447; September 21, 2010, pp. 5059–60. 130 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4863–64. 131 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4863–64. 132 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4861–62, 4866–67. 133 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4850–51. 134 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5447. 135 Testimony of P. McCallion, Transcript, July 28, 2010, p. 2043; Exhibit 228, p. 13. 136 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4878; September 23, 2010, p. 5269. 137 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4844, 4875. 138 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4861–62; September 23, 2010, pp. 5271–72. 139 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4868–69. 140 Exhibit 258, p. 2. 141 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4869–70. 142 Exhibit 258, p. 1 [p. 2 of 3]. 143 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4869; Exhibit 591, p. 2. 144 Exhibit 146. 145 Exhibit 146. 146 Exhibit 146. 147 Exhibit 146. 148 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1667–68. 149 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4877–78, 4884. 150 Exhibit 162, p. 1. 151 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4883–85. 152 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2344–45. 153 Exhibit 97. 154 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4862; September 23, 2010, pp. 5371–72, 5374. Notes to Phase II 199

155 Testimony of M. Latimer, Transcript, July 28, 2010, p. 2206. 156 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4883–84. 157 Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2273; Testimony of M. Latimer, Transcript, July 28, 2010, p. 2249; Testimony of C. Coleman, Transcript, August 11, 2010, p. 2832. 158 Exhibit 162; Exhibit 258. 159 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4884–85. 160 Exhibit 162. 161 Testimony of K. Lusk, Transcript, July 26, 2010, p. 1668. 162 Exhibit 292. 163 Exhibit 432, p. 2. 164 Exhibit 262; Exhibit 402; Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4032– 35; Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2829, 2834. 165 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2829–30. 166 Exhibit 262; Exhibit 306. 167 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2828–29. 168 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2829–30. 169 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2830–31. 170 Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4306–7. 171 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3110–11. 172 Exhibit 438; Exhibit 628, p. 4. 173 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4929–30. 174 Testimony of C. Coleman, Transcript, August 11, 2010, p. 2832. 175 Testimony of C. Coleman, Transcript, August 11, 2010, p. 2834. 176 Testimony of C. Coleman, Transcript, August 11, 2010, p. 2835. 177 Exhibit 139. 178 Exhibit 139. 179 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2310–11, 2376, 2380. 180 Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4285–86, 4292–93. 181 Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5052–53. 182 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1829–30, 1890, 1904. 183 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1897–98. 184 Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2042–43; Exhibit 228, p. 13. 185 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1830. 186 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4826–27. 187 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5270–72, 5440. 188 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4827–28. 189 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5270–72, 5440–41. 190 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5446. 191 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5269, 5274–75. 192 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5269, 5275. 193 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4827–28. 194 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4843. 195 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5441. 196 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4829–30; September 23, 2010, pp. 5441–42. 200 Updating the Ethical Infrastructure

197 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3447–48. 198 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1827–28. 199 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1854. 200 Exhibit 189. 201 Exhibit 190. 202 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1813–14; July 28, 2010, p. 2157. 203 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1913–14. 204 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4887–89; September 21, 2010, pp. 5114–15, 5119–20. 205 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5444–45. 206 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4892. 207 Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5119, 5121. 208 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5445. 209 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3414–15, 3419, 3480–81, 3509. 210 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3415–16. 211 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3420, 3508–9. 212 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3415–16, 3509. 213 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4829–30, 4958–59. 214 Testimony of P. McCallion, Transcript, July 28, 2010, p. 2148. 215 Testimony of P. McCallion, Transcript, July 28, 2010, p. 2149. 216 Testimony of P. McCallion, Transcript, July 28, 2010, p. 2150. 217 Testimony of P. McCallion, Transcript, July 28, 2010, p. 2151. 218 Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2151–53. 219 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5443. 220 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4843, 4892–93. 221 Testimony of H. McCallion, September 20, 2010, pp. 4889–90. 222 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1431–32. 223 Testimony of A. Costin, Transcript, July 8, 2010, p. 1431. 224 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1575–78; Exhibit 97, p. 4 [p. 5 of 31], article 1.1. 225 Testimony of A. Costin, Transcript, July 8, 2010, p. 1578; Exhibit 97, p. 10 [p. 11 of 31], article 4.2(e). 226 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1578–80. 227 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1520–21, 1577–78, 1583–84. 228 Exhibit 97, p. 16 [p. 17 of 31], article 6.6(a). 229 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1508, 1584. 230 Exhibit 97, p. 9 [p. 10 of 31], article 4.1(e)(iii). 231 Testimony of A. Costin, Transcript, July 8, 2010, p. 1433. 232 Testimony of A. Costin, Transcript, July 8, 2010, p. 1434. 233 Exhibit 97, p. 18 [p. 19 of 31], article 6.6(b)(iv)(A). 234 Testimony of A. Costin, Transcript, July 8, 2010, p. 1435. 235 Testimony of A. Costin, Transcript, July 8, 2010, p. 1436. 236 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1437–38. 237 Exhibit 97, p. 18 [p. 19 of 31], article 6.6(iv)(A) and (B). 238 Exhibit 97, p. 18, [p. 19 of 31], article 6.6(v). Notes to Phase II 201

239 Exhibit 97, p. 19 [p. 20 of 31], article 6.6(vii); Testimony of A. Costin, Transcript, July 8, 2010, p. 1509. 240 Exhibit 97, pp. 18–19 [pp. 19–20 of 31], article 6.6(vi); Testimony of A. Costin, Transcript, July 8, 2010, p. 1438. 241 Exhibit 97, p. 19 [p. 21 of 31], article 6.6(ix); Testimony of A. Costin, Transcript, July 8, 2010, pp. 1438–39. 242 Testimony of A. Costin, Transcript, July 8, 2010, p. 1439. 243 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1439–40. 244 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1442–43; Exhibit 97, p. 11 [p. 12 of 31], article 4.5. 245 Exhibit 97, p. 11 [p. 12 of 31], article 4.5 (a) and (b); Testimony of A. Costin, Transcript, July 8, 2010, p. 1583. 246 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1440–43; Exhibit 98. 247 Exhibit 105. 248 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1445–46; Exhibit 98. 249 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1443–46. 250 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1452, 1455. 251 Testimony of A. Costin, Transcript, July 8, 2010, p. 1447; Exhibit 99. 252 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1448–49; Exhibit 100. 253 Testimony of A. Costin, Transcript, July 8, 2010, p. 1450; Exhibit 101; Exhibit 102. 254 Testimony of A. Costin, Transcript, July 8, 2010, p. 1450. 255 Testimony of A. Costin, Transcript, July 8, 2010, p. 1458; Exhibit 106. 256 Testimony of A. Costin, Transcript, July 8, 2010, p. 1583. 257 Exhibit 105. 258 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4031. 259 Testimony of A. Costin, Transcript, July 8, 2010, p. 1459; Exhibit 107. 260 Exhibit 110; Exhibit 111. 261 Exhibit 245. 262 Exhibit 310, pp. 2–3. 263 Exhibit 470; Exhibit 112. 264 Exhibit 117. 265 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1480–81. 266 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4211–15; Exhibit 506. 267 Testimony of M. Ball, Transcript, August 19, 2010, p. 4212. 268 Exhibit 311. 269 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4212–16; Exhibit 311, p. 3. 270 Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2763. 271 Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1406–7. 272 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4201–2. 273 Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2753. 274 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4202–4. 275 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4203–5. 276 Development Charges Act, 1997, so 1997, c 27, s 9. 277 Testimony of J. Zingaro, Transcript, July 26, 2010, pp. 1761–63. 278 Exhibit 174. 279 Testimony of J. Zingaro, Transcript, July 26, 2010, p. 1764. 202 Updating the Ethical Infrastructure

280 Testimony of J. Zingaro, Transcript, July 26, 2010, pp. 1764–65; Exhibit 175, p. 5. 281 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4206–7; Exhibit 176. 282 Exhibit 169, pp. 3–4. 283 Planning Act, rso 1990, c P.13. 284 Testimony of J. Zingaro, Transcript, July 26, 2010, pp. 1767–74. 285 Testimony of J. Zingaro, Transcript, July 26, 2010, p. 1773. 286 Exhibit 341, p. 3. 287 Testimony of S. Walker, Transcript, August 9, 2010, pp. 2515–16. 288 Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3756–57. 289 Testimony of E. Sajecki, Transcript, August 10, 2010, pp. 2768–74. 290 Exhibit 203. 291 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4219–21. 292 Testimony of E. Sajecki, Transcript, August 10, 2010, pp. 2781–83. 293 Exhibit 317; Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2671–72. 294 Exhibit 317; Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2581, 2590, 2671–72. 295 Exhibit 317; Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2581–83. 296 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4218–19. 297 Testimony of T. DeCicco, Transcript, August 17, 2010, pp. 3552–54. 298 Testimony of T. DeCicco, Transcript, August 17, 2010, pp. 3554–56. 299 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4466–67. 300 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4462–4463, 4466–70. 301 Testimony of A. Costin, Transcript, July 8, 2010, p. 1430. 302 Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1385–86. 303 Exhibit 97, p. 18 [p. 19 of 31], article 6.6(b)(iv)A. 304 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4440–42, 4447–50. 305 Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3703. 306 Testimony of S. Gupta, Transcript, September 16, 2010, p. 4710. 307 Testimony of S. Gupta, Transcript, September 16, 2010, p. 4707. 308 Testimony of S. Gupta, Transcript, September 16, 2010, pp. 4709–10. 309 Testimony of S. Gupta, Transcript, September 16, 2010, p. 4740. 310 Testimony of S. Gupta, Transcript, September 16, 2010, pp. 4712–16. 311 Exhibit 626; Exhibit 592; Testimony of S. Gupta, Transcript, September 16, 2010, pp. 4718, 4720. 312 Exhibit 109; Testimony of S. Gupta, Transcript, September 16, 2010, pp. 4718–21. 313 Testimony of T. DeCicco, Transcript, August 17, 2010, p. 3606. 314 Testimony of S. Gupta, Transcript, September 16, 2010, pp. 4721–22. 315 Testimony of S. Gupta, Transcript, September 16, 2010, p. 4722. 316 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4910–11. 317 Testimony of E. Sajecki, Transcript, August 10, 2010, pp. 2774–76; Exhibit 312. 318 Exhibit 106. 319 Exhibit 547. 320 Exhibit 109; Testimony of S. Gupta, Transcript, September 16, 2010, p. 4718. 321 Exhibit 401. 322 Exhibit 401; Testimony of E. Bisceglia, Transcript, December 14, 2010, p. 5562; Testimony of S. Gupta, Transcript, September 16, 2010, pp. 4723–27. Notes to Phase II 203

323 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1466–67; Exhibit 114. 324 Exhibit 115. 325 Exhibit 117. 326 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5447–49. 327 Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3103. 328 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3103–5. 329 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4000, 4002. 330 Exhibit 429, p. 1. 331 Exhibit 429, p. 2. 332 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4002, 4006, 4060; Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2279–80. 333 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4060–61. 334 Exhibit 98; Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4003–4. 335 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4004–5. 336 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4007–10. 337 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4005, 4006. 338 Exhibit 292. 339 Exhibit 292. 340 Exhibit 429. 341 Exhibit 264. 342 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4010–11. 343 Exhibit 271, p. 1. 344 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4020–4021. 345 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4015, 4019. 346 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4018–19. 347 Exhibit 246. 348 Exhibit 421. 349 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4021–23; Exhibit 284. 350 Exhibit 285. 351 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4022. 352 Exhibit 285, p. 1. 353 Exhibit 285. 354 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4023–24; Exhibit 285. 355 Exhibit 487, p. 2. 356 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4924–25, 4927–28. 357 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4923–26. 358 Exhibit 432, p. 1. 359 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4028–29; Exhibit 432. 360 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4028, 4029; Exhibit 432. 361 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4023; Exhibit 285, p. 1. 362 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4029–30. 363 Exhibit 105. 364 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5449. 365 Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3732. 366 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4055. 367 Exhibit 245. 204 Updating the Ethical Infrastructure

368 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4929–30, 4946–47; Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3955–58. 369 Exhibit 306; Exhibit 245. 370 Exhibit 306. 371 Exhibit 247, p. 1. 372 Exhibit 490. 373 Exhibit 434. 374 Exhibit 306. 375 Exhibit 422, p. 1. 376 Exhibit 422, p. 1. 377 Exhibit 423, p. 1. 378 Exhibit 464. 379 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4055. 380 Exhibit 143. 381 Exhibit 470. 382 Exhibit 470, p. 1. 383 Exhibit 364. 384 Testimony of C. Coleman, Transcript, August 11, 2010, p. 2831. 385 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3110–11. 386 Exhibit 438; Exhibit 628. 387 Exhibit 628, p. 3. 388 Exhibit 628, p. 3. 389 Exhibit 628, p. 3. 390 Exhibit 628, p. 2. 391 Exhibit 628, p. 2. 392 Exhibit 628, p. 2. 393 Exhibit 252, p. 1. 394 Exhibit 252, p. 1. 395 Exhibit 252, p. 1. 396 Exhibit 310, p. 1. 397 Exhibit 628, p. 1. 398 Exhibit 628, p. 1. 399 Exhibit 627. 400 Exhibit 252, p. 1. 401 Testimony of C. Coleman, Transcript, August 11, 2010, p. 2834. 402 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2834–35. 403 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2286–87. 404 Exhibit 493, p. 2. 405 Exhibit 493. 406 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4054. 407 Exhibit 143. 408 Exhibit 143, p. 2. 409 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4947–48. 410 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4948–49. 411 Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3955–58. 412 Testimony of C. Coleman, Transcript, August 11, 2010, p. 2833. Notes to Phase II 205

413 Exhibit 144. 414 Exhibit 301, p. 1. 415 Exhibit 301, p. 1. 416 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2283–84; Exhibit 300. 417 Exhibit 144. 418 Exhibit 144. 419 Exhibit 144. 420 Exhibit 144. 421 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4055. 422 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4056. 423 Exhibit 144. 424 Exhibit 144. 425 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4056–57. 426 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4057. 427 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4057. 428 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4058. 429 Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2287. 430 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2287–88. 431 Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2288. 432 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4062. 433 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4062. 434 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4062–63. 435 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4063–64. 436 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4063–64. 437 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4065. 438 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4062, 4065; Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2291, 2414. 439 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4064–65. 440 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4065. 441 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4951–52. 442 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4953–54. 443 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4954. 444 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4955. 445 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4955. 446 Exhibit 141; Exhibit 142. 447 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4066; Exhibit 425. 448 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4950. 449 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4951. 450 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4012–13. 451 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4033. 452 Testimony of M. Kitt, Transcript, August 19, 2010, p. 4015. 453 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4044–45; Exhibit 423. 454 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4044–45. 455 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4044–45. 456 Exhibit 139. 457 Exhibit 143. 206 Updating the Ethical Infrastructure

458 Exhibit 361. 459 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2828–29. 460 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2829–30. 461 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2830–31. 462 Testimony of C. Coleman, Transcript, August 11, 2010, p. 2834. 463 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2834–35. 464 Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4282–83, 4296, 4309. 465 Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4308–9. 466 Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4308–9. 467 Testimony of L. de Bever, Transcript, September 13, 2010, p. 4285–86. 468 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4881–82, 4883–84; Exhibit 285; Exhibit 420; Exhibit 422; Exhibit 644; Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4922–26, 4927–28, 4936–41. 469 Exhibit 296; Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2881–82; Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 3007–8, 3030–31, 3079–81. 470 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4941–42. 471 Testimony of H. McCallion, Transcript, September 21, 2010, p. 5172. 472 Exhibit 143. 473 Exhibit 144; Testimony of H. McCallion, Transcript, September 20, 2010, p. 4956. 474 Testimony of T. DeCicco, Transcript, August 17, 2010, pp. 3658–59. 475 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4949. 476 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4959. 477 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5409–10. 478 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4866–67. 479 Testimony of H. McCallion, Transcript, September 21, 2010, p. 5156. 480 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2295–97; Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4275–76. 481 Exhibit 141; Exhibit 142; Exhibit 295; Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2291; Testimony of D. Hansen, Transcript, July 29, 2010, p. 2414. 482 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4031–35; Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2829–30. 483 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2286–87; Testimony of L. de Bever, Transcript, September 13, 2010, p. 4285. 484 Exhibit 290; Exhibit 281. 485 Exhibit 278, pp. 12–13 [pp. 13–14 of 55]; Testimony of S. Walker, Transcript, August 9, 2010, pp. 2523–24. 486 Exhibit 278, p. 13 [p. 14 of 55]. 487 Testimony of S. Walker, Transcript, August 9, 2010, p. 2524. 488 Exhibit 290, p. 25 [p. 26 of 47]. 489 Exhibit 290, p. 25 [p. 26 of 47]. 490 Exhibit 281. 491 Testimony of S. Alleluia, Transcript, August 9, 2010, pp. 2545, 2557, 2559–61. 492 Testimony of S. Alleluia, Transcript, August 9, 2010, pp. 2562–63. 493 Exhibit 281. 494 Testimony of S. Alleluia, Transcript, August 9, 2010, pp. 2564–65. 495 Exhibit 281, p. 3. Notes to Phase II 207

496 Testimony of S. Alleluia, Transcript, August 9, 2010, p. 2566. 497 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4460–62. 498 Exhibit 272. 499 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4573–74; Testimony of T. DeCicco, Transcript, August 17, 2010, pp. 3586–87. 500 Exhibit 236. 501 Exhibit 194. 502 Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3746. 503 Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3746–48. 504 Exhibit 238. 505 Exhibit 239. 506 Testimony of T. DeCicco, Transcript, August 17, 2010, pp. 3585–86. 507 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4467–71. 508 Exhibit 194. 509 Testimony of T. DeCicco, August 17, 2010, p. 3580. 510 Exhibit 127. 511 Exhibit 379. 512 Exhibit 448 (DeCicco Affidavit), Exhibit 134 (Gupta Affidavit), and Exhibits 212, 206, 207 (McCallion Affidavits). 513 Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3694; Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3371; Exhibit 619. 514 Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4274–75; Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2296–98, 2393. 515 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2860, 2879; Testimony of D. Hansen, July 29, 2010, 2417–18; Exhibit 296. 516 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4968–69; September 21, 2010, p. 4988. 517 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4069–71. 518 Testimony of M.E. Bench, Transcript, August 10, 2010, p. 2592. 519 Exhibit 128. 520 Exhibit 128, section 6.1(b), p. 3. 521 Exhibit 129. 522 Exhibit 129, section 6, p. 2. 523 Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2633–34, 2636–37; Exhibit 327, p. 2. 524 Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2611, 2617; Exhibit 327, p. 1. 525 Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2636–37. 526 Exhibit 327, pp. 3–4. 527 Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2660–61. 528 Exhibit 212. 529 Testimony of E. Bisceglia, Transcript, December 14, 2010, p. 5521; Exhibit 212, p. 1, para 1. 530 Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5550–51. 531 Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5524–5525, 5550–51. 532 Exhibit 700. 533 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1862–63. 534 Testimony of M.E. Bench, Transcript, August 10, 2010, p. 2611. 208 Updating the Ethical Infrastructure

535 Exhibit 327, p. 3. 536 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1862–63. 537 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1863–65. 538 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1865. 539 Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5521–22, 5527. 540 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1865–66. 541 Exhibit 206; Testimony of P. McCallion, Transcript, July 27, 2010, p. 1866; July 28, 2010, p. 2185. 542 Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2618–19. 543 Exhibit 207. 544 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1868–69. 545 Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5023–24. 546 Exhibit 120; Testimony of T. DeCicco, Transcript, August 17, 2010, p. 3666. 547 Testimony of T. DeCicco, Transcript, August 17, 2010, pp. 3667–68. 548 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2921–24. 549 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2923–24. 550 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2922. 551 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2924–25; Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1870–71. 552 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2928–29, 2957. 553 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2928–29, 2957, 3065–66. 554 Testimony of H. McCallion, Transcript, September 21, 2010, p. 4994. 555 Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3696. 556 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2924–27; Testimony of T. DeCicco, Transcript, August 17, 2010, pp. 3667–68. 557 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2929–30; Testimony of T. DeCicco, Transcript, August 17, 2010, pp. 3668–69. 558 Exhibit 215, p. 1; Testimony of M.E. Bench, Transcript, August 10, 2010, p. 2603. 559 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3168–69. 560 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3168–70; Testimony of D. O’Brien, Transcript, August 11, 2010, p. 3051. 561 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3154–56, 3165–73. 562 Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3149. 563 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3145–48, 3166–67. 564 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3223–24, 3156, 3165. 565 Testimony of M. Nobrega, Transcript, May 31, 2010, p. 631. 566 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4082–83. 567 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3166–67. 568 Exhibit 315, pp. 10–12. 569 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3166, 3221–22. 570 Exhibit 404. 571 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2931, 2985. 572 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3142–44, 3305–6. See also Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2983–87; Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5014–15; Testimony of H. McCallion, September 23, 2010, pp. 5237–38. Notes to Phase II 209

573 Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3334. 574 Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3172. 575 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2936–37, 3073; Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3913. 576 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2948. 577 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2948–49. 578 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2947; Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3692; Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1871–72. 579 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2948. 580 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2949. 581 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2949–50. 582 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2950. 583 Exhibit 619. 584 Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3696, 3830; Testimony of E. Bisceglia, Transcript, December 14, 2010, p. 5560. 585 Testimony of J. Di Poce, Transcript, September 13, 2010, p. 4403. 586 Testimony of J. Di Poce, Transcript, September 13, 2010, pp. 4402–3; Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3976–77, 3833; Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5541–43. 587 Testimony of J. Di Poce, September 13, 2010, p. 4404; Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5541–43; Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3718. 588 Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3821. 589 Testimony of E. Bisceglia, Transcript, December 14, 2010, p. 5560; Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3827–28. 590 Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3826–27, 3829. 591 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3436–37, 3456. 592 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3456–57. 593 Municipal Conflict of Interest Act, rso 1990, c M.50. 594 Municipal Conflict of Interest Act, rso 1990, c M.50, s 5(1). 595 Exhibit A, D. Mullan, “Report to Judicial Inquiry into Matters Involving Mayor of City of Mississauga Appointed under Section 274 of the Municipal Act, 2001,” p. 6 [hereafter Exhibit A, Mullan Report]. 596 Watson v Burnaby (City) (1994), 22 mplr (2d) 136. 597 L’Abbé v Blind River (Village), [1904] oj No 130, 7 olr 230 (Div Ct) (ql), at para 17. 598 Old St. Boniface Residents’ Assn. v Winnipeg (City), [1990] 3 scr 1170, at para 55 (Sopinka J). 599 Canada, Commission of Inquiry into Certain Allegations Respecting Business and Financial Dealings Between Karlheinz Schreiber and the Right Honourable Brian Mulroney, Report (3 vols., Ottawa: Minister of Public Works and Government Services Canada, 2010) (Commissioner Jeffrey J. Oliphant), vol. 3: 515. 600 Re L’Abbé and Corp. of Blind River (Village), [1904] oj No 130, 7 olr 230 (Div Ct) (ql), at para 16. 601 Appendix J, Ruling on Conflict of Interest, July 8, 2010, p. 9. 602 Exhibit 717, Toronto Computer Leasing Inquiry / Toronto External Contracts Inquiry Report, 210 Updating the Ethical Infrastructure

Volume 2: Good Government (4 vols., Toronto, 2005), 38–43 (Commissioner Denise Bellamy); Canada, Commission of Inquiry into the Facts of Allegations of Conflict of Interest Concerning the Honourable Sinclair Stevens, Report (Ottawa: Ministry of Supply and Services, 1987) (Commissioner W.D. Parker), referred to in Exhibit A, Mullan Report, pp. 8–9. 603 Exhibit A, Mullan Report, p. 8. 604 Exhibit A, Mullan Report, p. 8. 605 Exhibit A, Mullan Report, p. 8. 606 Exhibit A, Mullan Report, p. 9. 607 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5629–30. 608 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4827–28; September 23, 2010, pp. 5321, 5440–42. 609 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5271. 610 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4828–30. 611 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4836–37; September 23, 2010, p. 5441. 612 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4827–28. 613 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5321. 614 Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5078–79; September 20, 2010, pp. 4829–30. 615 Exhibit 189; Exhibit 190; Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4886–89; September 21, 2010, pp. 5113–17. 616 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4889; September 23, 2010, pp. 5444–45. 617 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5449–50. 618 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5458–60. 619 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5277, 5309, 5457–59. 620 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5343. 621 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5277, 5309. 622 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4844, 4854–56, 4859. 623 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4859. 624 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4863–64. 625 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4867–68; September 23, 2010, pp. 5332–33. 626 Testimony of H. McCallion, Transcript, September 21, 2010, p. 5060. 627 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4958–59; September 23, 2010, pp. 5479–80. 628 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4865; September 21, 2010, pp. 5060–61; September 23, 2010, pp. 5344, 5447. 629 Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5022–23. 630 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4866; September 20, 2010, pp. 4893–94; September 23, 2010, p. 5458. 631 Testimony of H. McCallion, Transcript, September 21, 2010, p. 5031. 632 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5296–97. 633 Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5052–53. 634 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5479–80. Notes to Phase II 211

635 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5480. 636 Submissions on conflict of interest, Transcript, July 6, 2010, pp. 1309–10 (on behalf of Mayor Hazel McCallion), pp. 1276–77 (by Commission counsel); Closing Submissions of Mayor H. McCallion, Transcript, February 8, 2011, pp. 6473–74. 637 Appendix J, Ruling on Conflict of Interest, July 8, 2010; D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5589–90; Exhibit A, Mullan Report, pp. 1, 3–7. 638 Exhibit 212; Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5451–53. 639 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5313. 640 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5332–34. 641 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5372. 642 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5332–33. 643 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5345. 644 Exhibit 261; Exhibit 258; Exhibit 591; Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4875–76. 645 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5294. 646 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4877–78. 647 Exhibit 146; Exhibit 162; Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4881–82. 648 Exhibit 546. 649 Appendix A, Terms of Reference, p. 4. 650 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5220–22. 651 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2919–21, 3060. 652 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5429–31. 653 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2923. 654 Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2595–96. 655 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5255. 656 Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5027–28. 657 Exhibit 404, p. 1. 658 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2923. 659 Exhibit 215. 660 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5233–34, 5350; Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 3079–80. 661 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5428, 5431. 662 Exhibit 315, p. 31. 662 L. Sossin, Transcript of Expert Panel, December 15, 2010, p. 5689. 664 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5689–90. 665 mcia, s 5(1). 666 Testimony of H. McCallion, Transcript, September 21, 2010, p. 5068. 667 D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5691–92. 668 Exhibit A, Mullan Report, p. 12. 669 D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5613–14. 670 Exhibit A, Mullan Report, p. 14. 671 D. Mullan, Transcript of Expert Panel, December 16, 2010, pp. 5924–27; L. Sossin, Transcript of Expert Panel, December 16, 2010, p. 5944. 672 Exhibit A, Mullan Report, pp. 12–13. 673 Exhibit 93; Exhibit 708. 212 Updating the Ethical Infrastructure

674 Minutes of General Committee Meeting of the Corporation of the City of Mississauga held on April 6, 2011, p. 11. 675 Exhibit A, Mullan Report, p. 16; Exhibit 708. 676 Exhibit A, Mullan Report, p. 16. 677 Exhibit A, Mullan Report, p. 16. 678 Exhibit A, Mullan Report, p. 16. 679 G. Levine, Transcript of Expert Panel, December 15, 2010, p. 5664. 680 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5653–54. 681 Municipal Act, 2001, ss 223.3, 223.4, 223.6. 682 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5633–35; G. Levine, Transcript of Expert Panel, December 15, 2010, p. 5729. 683 L. Sossin, Transcript of Expert Panel, December 15, 2010, p. 5676. 684 G. Levine, Transcript of Expert Panel, December 16, 2010, pp. 5915–17. 685 Exhibit A, Mullan Report, p. 14. 686 http://www.toronto.ca/integrity. 687 Bellamy Report, Volume 4: Executive Summary, 94, Recommendation 97. 688 Exhibit A, Mullan Report, p. 18. 689 G. Levine, Transcript of Expert Panel, December 16, 2010, pp. 5908–9; D. Mullan, Transcript of Expert Panel, December 16, 2010, pp. 5910–11. 690 Members’ Integrity Act, 1994, so 1994, c 38. 691 Municipal Elections Act, 1996, so 1996, c 32. 692 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5460–61. 693 Whiteley v Schurr, [1999] oj No 2575 at para 10. 694 Lastman v Ontario, [2000] oj No 269, 47 or (3d) 177 (scj) [Lastman], at para 14. 695 Lastman, at para 18. 696 Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5070–71. 697 L. Sossin, Transcript of Expert Panel, December 16, 2010, pp. 6063–65. 698 D. Mullan, Transcript of Expert Panel, December 16, 2010, pp. 6067–68. 699 mcia, s 8; L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5659–60. 700 Transcript of Expert Panel, December 16, 2010, pp. 6054–57. 701 Exhibit A, Mullan Report, p. 17; D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5780–81. 702 D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5647–48. 703 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5700–1. 704 G. Levine, Transcript of Expert Panel, December 15, 2010, p. 5641. 705 D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5665–66. 706 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5660–63. 707 D. Mullan, Transcript of Expert Panel, December 16, 2010, pp. 6059–60. 708 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5667–68. 709 D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5728–29; G. Levine, Transcript of Expert Panel, December 15, 2010, p. 5729. 710 D. Mullan, Transcript of Expert Panel, December 16, 2010, pp. 6004–5. 711 D. Mullan, Transcript of Expert Panel, December 16, 2010, pp. 6005–6. 712 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5645–46. 713 D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5671–72. 714 Testimony of H. McCallion, Transcript, September 21, 2010, pp. 5074–75. Notes to Phase II 213

715 L. Sossin, Transcript of Expert Panel, December 16, 2010, pp. 5954–55; G. Levine, Transcript of Expert Panel, December 16, 2010, p. 5955. 716 L. Sossin, Transcript of Expert Panel, December 16, 2010, pp. 6123–24. 717 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5718–24. 718 L. Sossin, Transcript of Expert Panel, December 15, 2010, p. 5722. 719 Exhibit 722. 720 L. Sossin, Transcript of Expert Panel, December 16, 2010, pp. 5971–73. 721 Testimony of A. Costin , Transcript, July 8, 2010, pp. 1569–71; Testimony of L. de Bever, Transcript, September 13, 2010, p. 4284; Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2308–9, 2310–11, 2373–74, 2376, 2380; Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4106–7; Exhibit 144.

ADDENDUM The Mayor’s Benevolent Activities

The Terms of Reference directed me to make findings as to the relationship among the named parties, including the mayor and World Class Developments (wcd). Accordingly, Commission counsel led evidence about the extent to which wcd, as well as other parties, had contributed to the mayor’s gala and other benevolent activities to which the mayor had lent her name. I had understood (or perhaps assumed) that events such as the mayor’s gala garnered proceeds which were then administered by registered charities. Some months after the close of evidence and final submissions, it became apparent from media reports that my understanding was not correct. I believed it to be important that the record be complete and accurate and directed Commission counsel to conduct some further inquiries and seek production of documents concerning the way in which the mayor and the city organized and administered the mayor’s gala and related events. The mayor and city provided an extensive volume of materials, and I am grateful to them for their assistance. Commission counsel interviewed a number of witnesses, including the mayor. The mayor and city agreed that the record might be supplemented by the following agreed statement of facts. I believe this statement provides an important clarification of the record. I have not made recommendations about the participation of the mayor and city in charitable events. To do so would have required that I reopen hearings to allow for contextual and expert evidence concerning an area that is far from central to the

215 216 Updating the Ethical Infrastructure work of the Inquiry. Given the importance of these issues, however, city council may wish to examine them in its process, perhaps with the involvement of the integrity commissioner.

Agreed Statement of Facts The Mayor’s Gala A group of citizens approached the Mayor in 1987 about organizing an annual evening event to promote Mississauga and allow citizens to enjoy themselves at a fine dinner featuring excellent entertainment. The event was expected to promote community spirit, and would raise funds for the Living Arts Centre. The Mayor agreed to lend her name to the event which became known as the Mayor’s Gala. The Mississauga business community supported the Gala generously in the years since 1987, both in the purchase of tables and in the donation of auction items. It was understood by all those involved that the purpose of the Gala was the promotion of arts in Mississauga through the holding of a premier event and through the distribution of profits to the arts community. The City was heavily involved in the organization and administration of the Mayor’s Gala until 2008. At the Mayor’s insistence, the City always recov- ered any cost associated with municipal resources or staff time employed in the Gala. Each year the Gala had an organizing committee which sought out sponsors and donations, selling tickets and arranging for entertainment at the event. The Organizing Committee consulted with the Mayor on many of the details. City staff were involved in the administration of the Mayor’s Gala including the handling of all proceeds and distribution of funds. The City was reim- bursed, on a cost-recovery basis, from the proceeds of such Gala for the time spent by City staff. The Gala has been consistently profitable. During the time that the Gala Fund was administered by the City, the Mayor exercised sole authority over grants from the Gala Fund. Grants were provided to a number of local arts groups as sustaining funding. Members of Council were aware and accepted that the Mayor made the final decision on the distribution of funds. Over and above the funds which had been initially contributed to building the Living Addendum – The Mayor’s Benevolent Activities 217 Arts Centre, the City administered fund distributed approximately $750,000 to the arts community. By 2007, the fund had accumulated a surplus of some $2.8 million which was held by the City in an interest-bearing account (“the Gala Fund”). From 1987 to 2006, donors to the Gala were given tax receipts by the City, upon request. Tax receipts for donations to the Gala were not provided by the City after 2006. The Mayor had no involvement in the issuance of tax receipts. In 2011, it was determined by the City that the tax receipts provided to donors to the Gala between 1997 and 2006 did not comply with the Income Tax Act, rsc 1985 c.1; however, there do not appear to have been any adverse consequences to donors.

The Hazel McCallion Fund for Arts, Culture and Heritage In 2005, Mayor McCallion created a Mississauga Arts Review Task Force, which was to consider ways to improve arts funding in Mississauga. On December 14, 2005, the Mississauga Arts Review Task Force reported to the Mayor and City Council. It recommended in part that,

“The Mayor’s Gala Fund be named ‘The Hazel McCallion Endowment for the Arts’ and investment responsibility be transferred to the Community Foundation of Mississauga and the interest be allocated annually by the Office of the Arts based on input by the Mayor.”

On May 24, 2006, the City Manager was directed by City Council to work with the Mayor to implement this and other recommendations on the terms and conditions set out in the Task Force report. Following negotiations between the City and the Community Foundation of Mississauga, the Community Foundation of Mississauga Donor Advised Fund Agreement (“the Agreement”) between the Mayor and the Community Foundation of Mississauga was signed on March 1, 2007. The Agreement has been designated Exhibit 724.* Under the terms of the Agreement, Mayor McCallion was described as having “made a gift of $2,340,000 to the Foundation to establish a donor-advised fund” which was to be known as The Hazel McCallion Fund for Arts, Culture

* See Appendix 1 at the end of this Addendum. 218 Updating the Ethical Infrastructure and Heritage (“the Fund”). Given that the Gala Fund had been created by public and corporate ticket purchases from 1987 to 2007, the Mayor acted as a trustee in making this donation. The gift was made in perpetuity. The Mayor did not receive a tax receipt for this donation. The Mayor and the City Manager of Mississauga were named advisors of the Fund. The advisors were and are to remain in office until either of them dies or becomes incapable of managing her affairs, or resigns. Under the terms of the Agreement Mayor McCallion has ongoing rights regarding the naming of advisors. (Paragraph 2):

Mayor McCallion shall be entitled to appoint additional individuals as Advisors of the Fund and replace resigning Advisors and name substituted Advisors in the event an Advisor ceases to qualify as an Advisor hereunder during her lifetime. Mayor McCallion shall notify the Foundation in writing of all appointments of Advisors. In the event Mayor McCallion is unable or unwilling to appoint an Advisor to fill a vacancy … the then City Manager for the Corporation of the City of Mississauga shall be entitled to appoint Advisors to the Fund. (Exhibit 724, paragraph 2)

On the face of the document, the advisors, currently the City Manager and the Mayor, also retained advisory powers over distributions from the Fund: At paragraph 7 of Exhibit 724, the Agreement, provides that:

Notwithstanding that the Directors of the Foundation retain absolute discretion in making grants from the Fund, the intention shall be for the Foundation to make grants, at least annually, in accordance with the Foundation’s policy in effect from time to time, based on recommendations and direction to the Foundation from the Advisor(s). All such recommendations shall be in writing to the Foundation for approval by the Board of Directors. [emphasis added]

When distributions are required by the Foundation and when no such recommendations are received by the Foundation, or if made are not acceptable to the Board of Directors of the Foundation, distributions will be made at the discretion of the Board of Directors of the Foundation but shall be in keeping with the arts, culture and heritage purposes for which the Fund was established. Addendum – The Mayor’s Benevolent Activities 219 The Policies of the Community Foundation referred to in this language and appended to the agreement require that:

Grants from a Fund may be issued to Canadian registered charities; a Canada Revenue Agency approved University, a municipality, etc. Granting may only occur when the major portion of the donated Funds has been received. The Foundation is subject to disbursement quota requirements made under the Income Tax Act (Canada) and the Foundation retains the right at all times to grant in accordance with these requirements.

The language must also be read in conjunction with the Community Foundation’s own governing documents (below).

Decisions as to grants from the Fund will ultimately fall to be made by the Community Foundation of Mississauga. The Community Foundation has certi- fied to the Community Foundations of Canada (its national affiliate body) that:

2. Our Community Foundation acts independently of governments, families/ donors, corporations, associations and other groups. [See Exhibit 725, Criteria for continuing membership in Community Foundations of Canada (cfc) (2011)].

The relevant portion of the agreement between the Community Foundation of Mississauga and the Community Foundation of Canada is attached as Exhibit 725.* Given this certification, the Community Foundation takes the view, as it must, that it has absolute independent authority to make granting decisions. The Mayor does not disagree with this view. To the date of this Report, questions about authority to make grants have been moot. The Hazel McCallion Endowment for the Arts, Culture and Heritage may make distributions only from investment income, and the Endowment has had no investment income from which to make grants, given market conditions, in 2008 and 2009.

* See Appendix 2 at the end of this Addendum. 220 Updating the Ethical Infrastructure The Hazel McCallion Foundation for the Arts, Culture and Heritage Each year the Mayor’s Gala continues to have an organizing committee which is responsible for seeking out sponsors and donations, selling tickets and arranging for entertainment at the event. The organizing committee continues to consult with the Mayor on many of these details. However, since 2008, the Mayor’s Gala has been administered by the Hazel McCallion Foundation for the Arts, Culture and Heritage (“the hmfach”) and has incorporated Gala profits into its accounts. As well, the hmfach received approximately $325,000 held back from the Mayor’s “donation” of $2.3-million to the Community Foundation of Mississauga. This amount has been supplemented by donations and proceeds from the Mayor’s Gala in 2009 and 2010, so that in its August 31, 2010 financial statement the hmfach showed operating funds of $982,417. The hmfach is operated by a volunteer Board of Directors led by its President, Jim Murray. The secretary-treasurer is Douglas Fowles. Mr. Murray and Mr. Fowles have long been involved on the organizing committee for the Mayor’s Gala. The board also includes Duncan Hobbs, David O’Brien, Peter Smith and Joe Watson. Peter McCallion was a member of the Board of the hmfach until early 2011, when he tendered his resignation. The hmfach was incorporated by Letters Patent on June 13, 2008. The Board had established a grants program for “projects that will raise the pulse of arts culture and heritage in the City of Mississauga, or that showcases the art and ingenuity of Mississauga citizens to the rest of the world” (website). Mayor McCallion is not involved in decisions as to grants from the hmfach.

The Hazel McCallion Charitable Fund Since 1992, Mayor McCallion has agreed to associate her name with a charity golf tournament. More than $2,000,000 has been distributed by the golf tournament’s Charitable Fund to more than 300 charities in Mississauga with an emphasis on charities which benefit children and youth in Mississauga. The Mayor Hazel McCallion Charitable Fund is a registered charity pursuant to the Income Tax Act, rsc 1985 c.1. The Charity Golf Tournament is organized annually by the Mayor’s Charity Golf Committee which includes Ron Lenyk (chair), former City employee Shalini Alleluia, Doug Fowles (who is also a member of the hmfach), Peter McCallion, Jim Murray, Michael Parsons, John Rogers, Ron Starr and Gerry Addendum – The Mayor’s Benevolent Activities 221

Townsend. The Mayor isex officio a member of the Charity Golf Committee. The Golf Tournament is administered by a volunteer Board of Directors which makes the decisions regarding the distribution of funds based on a pub- licized grant application process which gives priority to charities with a youth orientation. The Board includes John Rogers (President), Ron Lenyk (Vice- President), Shalini Alleluia (Secretary), Gerry Townsend (Treasurer), Peter McCallion, Michael Parsons and Ron Starr. The Mayor isex officio a member of the Board of Directors. The Mayor has the authority to distribute up to $1,000 to applicants in cases of emergencies. She is also consulted by the Board on grant applications. The City has no role in the administration or distribution of the funds. ADDENDUM APPENDIX 1

222 Addendum – The Mayor’s Benevolent Activities 223 224 Updating the Ethical Infrastructure Addendum – The Mayor’s Benevolent Activities 225 226 Updating the Ethical Infrastructure Addendum – The Mayor’s Benevolent Activities 227 228 Updating the Ethical Infrastructure Addendum – The Mayor’s Benevolent Activities 229 ADDENDUM APPENDIX 2

230 APPENDICES

APPENDIX A Terms of Reference

                                                                                                                                      234 Updating the Ethical Infrastructure

                                                                                                                                                                                                  Appendix A – Terms of Reference 235

                                                                                                                                                                                                                  236 Updating the Ethical Infrastructure

                                                                                                                                                         APPENDIX B

CITY OF MISSISSAUGA JUDICIAL INQUIRY THE HONOURABLE MR. JUSTICE DOUGLAS CUNNINGHAM, COMMISSIONER RULES OF PROCEDURE

Purpose 1. The Mississauga Judicial Inquiry is an independent Commission established pursuant to s. 274(1) of the Act pursuant to a majority vote of Council of the Corporation of the City of Mississauga (“Mississauga City Council”) with specific terms of reference to inquire into to the matters set out in Resolution 0271-2009 adopted by Mississauga City Council on November 11, 2009. Following the conclusion of the hearings, the Commissioner will make any recommendations he deems appropriate and in the public interest.

General

2. Throughout these Rules, the words “Commission” and “Inquiry” are used interchangeably, and both refer to the City of Mississauga Judicial Inquiry.

3. Public hearings will be held at 950 Burnhamthorpe Road West in Mississauga. The Commissioner will set the dates for the hearings. Hearings will take place on Monday through Thursday from 10:00 a.m. to 4:30 p.m. each week, unless otherwise directed by the Commissioner.

4. The Commission is committed to a process of fairness, including public hearings and public access to evidence and documents used at the hearings.

5. The Commissioner encourages anyone who may have information that may be helpful to the Inquiry, including documents and the names of witnesses, to provide this information to the Office of Commission Counsel at Lenczner Slaght Royce Smith Griffin LLP, 130 Adelaide Street West, Suite 2600, Toronto, ON, M5H 3P5.

6. People are advised that the law offers protection to witnesses to encourage them to come forward and give full and forthright evidence to an inquiry.

Standing

7. Persons, groups of persons, organizations or corporations (“people”) who wish to participate may seek standing before the Inquiry. 238 Updating the Ethical Infrastructure

8. The Commissioner may grant standing to people who satisfy him that they have a substantial and direct interest in the subject matter of the Inquiry or whose participation may be helpful to the Commission in fulfilling its mandate. The Commissioner will determine on what terms standing may be granted.

9. People who are granted standing are deemed to undertake to follow the Rules of Procedure.

10. People who apply for standing will first be required to provide written submissions explaining why they wish standing. Written submissions are to be received at the Office of Commission Counsel no later than noon on Thursday, December 10, 2009.

11. People who apply for standing will also be given an opportunity to appear in person before the Commissioner to explain their reasons for requesting standing. Applications for standing will be heard starting at 10:00 a.m. on Monday, December 14, 2009 at 950 Burnhamthorpe Road West in Mississauga.

12. The Commissioner has appointed Commission Counsel to represent his and the public interest. Commission Counsel will ensure that all matters which bear on the public interest are brought to the attention of the Commissioner. Commission Counsel will have standing throughout the Inquiry.

Preparation of Documentary Evidence

13. As soon as possible following the granting of standing, people with standing will produce to the Commission all documents in their possession, power or control that have a semblance of relevance to the subject matter of the inquiry. People are encouraged to advise Commission Counsel of the names, addresses and telephone numbers of all witnesses they feel should be heard and, if possible, provide summaries of the information the witnesses may have.

14. Within 15 days after the granting of standing, people with standing will provide to the Commission a plan setting out how they will identify, locate and produce all documents that have a semblance of relevance to the subject matter of the inquiry.

15. All documents received by the Commission will be treated by the Commission as confidential, unless and until they are made part of the public record or the Commissioner otherwise directs. However, Commission Counsel are permitted to produce such documents to potential witnesses.

16. Where possible, Commission Counsel will make best efforts to provide, both to witnesses and people with standing, those documents that will likely be referred to during a witness’ testimony at least five days before the witness commences his or her testimony, unless the Commissioner directs otherwise. Before being provided with such documents, witnesses and people with standing will be required to sign an undertaking that they will use the documents only for the purposes of the Inquiry.

17. No document will be used in cross-examination or otherwise unless Commission Counsel and the parties have been advised in advance and the document has been provided to Appendix B – Rules of Procedure 239

Commission Counsel, the witness, and people with standing, unless the Commissioner directs otherwise.

Expert Witnesses

18. A copy of an expert witness’ report shall, at least 14 days before the expert witness’ appearance, be served on the parties.

Witness Interviews

19. Commission Counsel or others designated by Commission Counsel for that purpose will interview people who have information or documents which have bearing on the subject matter of the Inquiry and may be helpful in fulfilling the Commission’s mandate. People who are interviewed are welcome, but not required, to have legal counsel present.

20. Witnesses are advised that the Public Inquiries Act provides that no adverse employment action shall be taken against any employee who, acting in good faith, has given information to an Inquiry.

21. Following the interview, Commission Counsel or the person acting as his agent for the purpose of the interview will prepare a summary of the witness’ anticipated evidence. Before the witness testifies before the Commission, Commission Counsel will provide a copy of the summary to the witness for his or her review.

22. The witness summary, after being provided to the witness, will be shared with people with standing at least five days before the witness commences his or her testimony, unless the Commissioner directs otherwise. Before being given a copy of the witness summary, people with standing will be required to sign an undertaking that they will use the witness summary only for the purposes of the Inquiry.

23. Commission Counsel and the witness may prepare a sworn affidavit of the witness’ evidence. At the Commissioner’s discretion, this sworn affidavit can be admitted into evidence in lieu of part or all of that individual’s viva voce testimony.

Evidence

24. The Commissioner may receive any evidence that he considers to be helpful in fulfilling the mandate of the Inquiry. The Commissioner is entitled to receive evidence which might otherwise be inadmissible in a court of law.

25. Subject to the Commissioner’s discretion, the Commissioner may, as much as practicable and appropriate for a fair hearing, refer to and rely upon:

(a) any existing records or reports relevant to the subject matter of the inquiry;

(b) any agreed statement of facts prepared by Commission Counsel;

(c) the testimony of a representative witness of a participant in a public inquiry; 240 Updating the Ethical Infrastructure

(d) any summary of background facts prepared by Commission counsel.

26. Commission counsel may prepare summaries of background facts and documents relevant to the subject matter of the inquiry. Commission counsel shall provide each party an opportunity to review a summary before it is introduced as evidence. A party may submit written comments and propose witnesses to Commission Counsel for the purpose of supporting, challenging, commenting upon or supplementing a summary.

27. Witnesses who testify will give their evidence under oath or upon affirmation. Witnesses may be called upon to testify in panels.

28. The Commissioner may set time allocations for the conduct of examinations and cross- examinations. It will be the practice of Commission Counsel to issue and serve a subpoena (summons to witness) upon every witness before he or she testifies.

29. Witnesses are entitled to have their own counsel present while they testify. Counsel for a witness will have standing for the purpose of that witness’ testimony.

30. Witnesses may be called more than once.

31. In the ordinary course, Commission Counsel will call and question witnesses who testify at the Inquiry. Counsel for a witness may apply to the Commissioner to lead a particular witness’ evidence-in-chief. If counsel is granted the right to do so, examination shall be confined to the normal rules governing the examination of one’s own witness in court proceedings, unless otherwise directed by the Commissioner.

32. The order of examination will be as follows:

(a) Commission Counsel will lead evidence from each witness. Except as otherwise directed by the Commissioner, Commission Counsel is entitled to ask both leading and non-leading questions;

(b) People with standing will then have an opportunity to cross-examine the witness the extent of their interest. The order of cross-examination of each witness will be determined by the people with standing and, if they are unable to reach agreement, by the Commissioner;

(c) Counsel for a witness will examine last, unless he or she has questioned the witness-in- chief, in which case there will be a right to re-examine the witness; and

(d) Commission Counsel will have the right to re-examine last.

33. If Commission Counsel elects not to call a witness or to file a document, anyone with standing may apply to the Commissioner to do so or to direct Commission Counsel to do so. Appendix B – Rules of Procedure 241

34. All hearings are open to the public. However, where the Commissioner is of the opinion that:

(a) matters involving public security may be disclosed at the hearing; or

(b) intimate financial or personal matters, or any other matters may be disclosed at the hearing that are of such a nature, having regard to the circumstances, that the desirability of avoiding disclosure in the interest of any person affected or in the public interest outweighs the desirability of adhering to the principle that hearing be open to the public,

the Commissioner may hold the hearings concerning any such matters in the absence of the public on such terms as he may direct

35. Applications from witnesses or people with standing to hold any part of the hearing in the absence of the public should be made in writing to the Commissioner at the earliest possible opportunity.

36. The transcripts and evidence from the hearing will be made available as soon as possible for public viewing. If any part of the hearing is held in the absence of the public, the transcripts and exhibits from that part of the hearing will only be made available for public viewing on such terms as the Commissioner may direct.

37. The proceedings are open to the pubic. The use of television cameras or other recording electronic or photographic equipment in the hearing room will be permitted at the direction of the Commissioner.

Right to Counsel

38. Witnesses and people with standing are entitled, but not required, to have counsel present while Commission Counsel interview them and while they testify.

39. Counsel will be retained at the expense of the witness and people with standing. The Terms of Reference do not grant the Commissioner jurisdiction to order the City of Mississauga to provide funding for legal counsel. However, requests for funding may be made to the Commissioner at the hearing on standing, and the Commissioner may make recommendations to the City of Mississauga.

Notices Regarding Misconduct

40. The Commissioner will not make a finding of misconduct on the part of any person unless that person has had reasonable notice of the substance of the alleged misconduct and was allowed full opportunity during the Inquiry to be heard in person or by counsel.

41. All notices of alleged misconduct will be delivered on a confidential basis to the person to whom the allegations of misconduct refer. 242 Updating the Ethical Infrastructure

42. If a notice of alleged misconduct is delivered, the recipient may apply to the Commissioner for leave to call evidence which he or she believes may be helpful to respond to the alleged misconduct.

Amendment to the Rules

43. These Rules may be amended and new Rules may be added if the Commissioner finds it is helpful to do so to fulfill the Commission’s mandate and to ensure that the process is thorough and fair. APPENDIX C Commissioner’s Ruling on Standing

[Facsimile] December 14, 2009

In terms of standing, I am prepared to grant standing to the following:

Mayor Hazel McCallion, Peter McCallion, OMERS, 156 Square One

Limited, Enersource and the City of Mississauga. I'll speak to the other three applicants momentarily.

As to the matter of funding, what I would like to see happen is for counsel who are seeking funding to prepare and submit a detailed funding proposal, including rates, including proposed preparation and attendance time, to Commission Counsel within a week of today's date.

It may be that counsel for the City will be able to agree to some or all of what is being proposed, but I will leave that to counsel for the City,

Commission Counsel and others to formulate. In the absence of any

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2 agreement, then I will formulate my recommendation to the City with respect to the matter of funding as quickly as possible.

As to the three (3) individuals who spoke to us this morning, standing at this stage will not be granted. However, I am instructing Commission

Counsel to meet with each of the three (3) applicants, Mr. Sookraj, Mr.

Abdelmessih, and Ms. Bennett, and then have our investigators interview each of you with a view to determining how you may be of assistance to me in carrying out my responsibilities as Commissioner.

It may be that at some later date, depending on how matters develop, I will reconsider the issue of the request for partial standing, but at the present time what I'm most interested in receiving from each of you is information, either in the form of statements or in the form of documentary evidence that will be of assistance to my conduct of this

Inquiry.

Appendix C – Commissioner’s Ruling on Standing 245

Unless there's anything else, I thank you all for participating this morning. And, as I indicated in my earlier remarks, it is my hope that we can commence this Inquiry no later than March 1st and if we can do it at an earlier date, we will make every effort to do so.

I want you all to understand, those of you who may wonder why it will take that long, it's important at the front end of any inquiry to do your homework and get everything ready for the evidentiary portion of the

Inquiry. So we have, as Mr. McDowell has indicated, engaged investigators who will be interviewing witnesses, compiling documents, working with all counsel who've been granted standing, with a view to collecting the information that will be necessary for us to proceed with dispatch once we start the evidentiary portion of this Inquiry. It's my hope that, having done all of that preliminary spade work, that we'll be able to carry on with this Inquiry in a way that will not waste time, that will not involve a lot of investigation during the course of the Inquiry,

246 Updating the Ethical Infrastructure

4 and that we can get right to the evidence and right to the heart of the matters at issue in a precise and expeditious way.

So I look forward to seeing you all again and thank you very much.

APPENDIX D – List of Exhibits 248 Updating the Ethical Infrastructure Appendix D – List of Exhibits 249 250 Updating the Ethical Infrastructure Appendix D – List of Exhibits 251 252 Updating the Ethical Infrastructure Appendix D – List of Exhibits 253 254 Updating the Ethical Infrastructure Appendix D – List of Exhibits 255 256 Updating the Ethical Infrastructure Appendix D – List of Exhibits 257 258 Updating the Ethical Infrastructure Appendix D – List of Exhibits 259 260 Updating the Ethical Infrastructure Appendix D – List of Exhibits 261 262 Updating the Ethical Infrastructure Appendix D – List of Exhibits 263 264 Updating the Ethical Infrastructure Appendix D – List of Exhibits 265 266 Updating the Ethical Infrastructure Appendix D – List of Exhibits 267 268 Updating the Ethical Infrastructure Appendix D – List of Exhibits 269                                                                      270 Updating the Ethical Infrastructure Appendix D – List of Exhibits 271 272 Updating the Ethical Infrastructure Appendix D – List of Exhibits 273 274 Updating the Ethical Infrastructure Appendix D – List of Exhibits 275 276 Updating the Ethical Infrastructure Appendix D – List of Exhibits 277 278 Updating the Ethical Infrastructure Appendix D – List of Exhibits 279 280 Updating the Ethical Infrastructure Appendix D – List of Exhibits 281 282 Updating the Ethical Infrastructure Appendix D – List of Exhibits 283 284 Updating the Ethical Infrastructure Appendix D – List of Exhibits 285 286 Updating the Ethical Infrastructure Appendix D – List of Exhibits 287 288 Updating the Ethical Infrastructure Appendix D – List of Exhibits 289 290 Updating the Ethical Infrastructure Appendix D – List of Exhibits 291 292 Updating the Ethical Infrastructure Appendix D – List of Exhibits 293 294 Updating the Ethical Infrastructure Appendix D – List of Exhibits 295 296 Updating the Ethical Infrastructure Appendix D – List of Exhibits 297 298 Updating the Ethical Infrastructure Appendix D – List of Exhibits 299 300 Updating the Ethical Infrastructure Appendix D – List of Exhibits 301 302 Updating the Ethical Infrastructure Appendix D – List of Exhibits 303 304 Updating the Ethical Infrastructure Appendix D – List of Exhibits 305 306 Updating the Ethical Infrastructure                                                   APPENDIX E Commissioner’s Opening Remarks

Speaking Notes for Opening of Mississauga Judicial Inquiry The Honourable J. Douglas Cunningham, Commissioner December 14, 2009

Good morning, ladies and gentlemen. I am pleased to welcome you to the first public session of the Mississauga Judicial Inquiry. My name is Doug Cunningham, and I am the Associate Chief Justice of the Ontario Superior Court of Justice. I have been appointed by the Chief Justice of that Court to be the Commissioner for this Judicial Inquiry pursuant to the provisions of the Municipal Act.

Before we begin hearing from counsel who are here today, I would like to take a few minutes to discuss the Inquiry. In particular, I’d like to briefly explain the purpose of this Inquiry, how it will operate, and then address what I consider the criteria to be for decisions about standing and funding.

Please note that everything I say during the course of the Inquiry, as well as the submissions of all counsel, will be available on the Inquiry website: www.mississaugainquiry.ca. This website provides the public with access to all of the information about the Inquiry, and any announcements about Inquiry matters will be posted on that website. Once the hearings begin, you will also be able to access each day’s transcripts, hopefully by 9:00 pm or so every night, and review the schedule for upcoming testimony. The website also includes contact information for the people who can answer any questions about any aspect of the Inquiry.

Purpose of an Inquiry

Turning then to the purpose of an Inquiry. A judicial inquiry is not a trial. No-one is facing criminal charges, nor is anyone being sued civilly. A Commission’s goal is to inquire into and report on matters of public interest surrounding the conduct of business in and by the City of Mississauga, and to make recommendations for the future, where appropriate. As has been said, good government depends in part upon good information. I, as Commissioner, and my Commission Counsel are impartial; our mandate is to conduct an investigation and present evidence to determine the facts. I then have a duty to report to the public about those facts and to express my opinion with respect to those facts.

I should point out that this inquiry is quite different than many others that you may have heard about in recent years. For example, in the inquiries into the Walkerton water system and the Air India bombing, part of the goal was to determine what caused these tragedies and how those errors could have been prevented. In each instance there had been horrific events involving loss of life. In this case, on the other hand, we set out to examine certain transactions and relationships. These may well be important matters, and they are certainly matters of contention. I want to emphasize that we do not begin with the presumption that there is established wrongdoing or negligence.

I have taken note of the fact that City Council believes it appropriate that there be a judicial inquiry into certain transactions of City business, and the surrounding circumstances. It may

1185408.1 308 Updating the Ethical Infrastructure

interest you to know that Ontario municipalities have been entitled to conduct inquiries such as this since before Confederation. I hope that our efforts will help Council members and the public to get that information.

This Inquiry was created by a vote of Mississauga City Council, and the Terms of Reference were finalized by vote on November 11, 2009. The Terms of Reference can be found on the Inquiry website. I take my factual summary from those Terms. In particular, we are going to inquire into:

1. First, the terms of the December 2000 Enersource Shareholders Agreement. The City was a party to that Agreement and is a 90% owner of Enersource, and City Council has expressed concern about terms that gave certain powers to the 10% owner. We will have evidence as to how the terms came to be, who approved them, and what Council knew about the versions of the Agreement as they were proposed. We will look at the surrounding circumstances of the Agreement. As an example, we will consider the changing energy market and the different regulatory regimes which were in place as the Agreement was negotiated.

2. The second topic is the agreement that the City entered into to purchase 8.5 acres of land in the City Centre and lease it to the Sheridan Institute of Technology and Advanced Learning for a new college campus. Another company, World Class Developments, had previously agreed to purchase this land, and there was a court application about whether that earlier Agreement of Purchase and Sale remained valid. Peter McCallion, Mayor McCallion’s son, was involved in the transaction and the subsequent Court action on behalf of World Class Developments. We will inquire into the context of the deals, the history of these deals and the conduct of City business with respect to them. We will examine the settlement of the litigation.

3. An issue has also been raised surrounding whether Mayor McCallion declared a conflict of interest in the meeting which considered the WCD transaction to which I have referred above, whether it was properly recorded in the Minutes and so on. I expect that this issue will not take as long to resolve as the issues which I have covered in my brief review.

This is the inquiry framed by City Council. I am bound by law to follow the Terms of Reference as I understand them.

How the Inquiry Will Operate

In fulfilling Council’s mandate, we will conduct the hearings with civility and courtesy to all participants, witnesses and members of the public. The Inquiry is not bound by the rules of evidence that apply in a court, but they will serve as a guideline. I have developed Rules of Procedure for this Inquiry, and these draft Rules are available on the Inquiry webpage now.

Commission Counsel have been working hard since appointed to collect documents, identify relevant people, and acquire the information we need to move forward with the Inquiry. After today’s hearing, we will know who the parties seeking standing are, and will receive documents from people with knowledge about the matters to be investigated. This information will

1185408.1 Appendix E – Commissioner’s Opening Remarks 309

3 determine when we can start the Inquiry. Our goal is to start in the first quarter of 2010, and we will update the public as soon as we set an official start date.

Standing and Funding

In a moment, we will hear from individuals and organizations who would like standing for this hearing. Parties granted full standing have the opportunity to examine witnesses and make closing submissions. They will also receive copies of all documents that will be made exhibits, and copies of witness statements as they are prepared.

I am also prepared to consider granting limited standing to parties who may wish simply to make written submissions at the conclusion of the evidence.

Parties with standing are obligated to provide Commission Counsel with all documents have any bearing on the subject matter of the inquiry, and the names, addresses and telephone numbers of all witnesses they feel should be heard and, if possible, provide summaries of the information the witnesses may have. Parties must also provide Commission Counsel with a plan setting out how they will identify, locate and produce all documents that have any bearing on the subject matter of the inquiry.

Please note that the people requesting standing today are not the only ones with relevant information. If you have information that would be helpful to the Commission, or if you know someone who may have helpful information, please contact Commission Counsel. We must consider all relevant information out there, and are dependent upon the public to assist us in obtaining that information.

In deciding whether or not to grant standing to those requesting it today, I must consider whether the individual or corporation has a substantial and direct interest in the subject matter of the Inquiry, and whether their participation may be helpful to the Commission in fulfilling its mandate.

Parties can also request funding in order to engage counsel and otherwise participate in the Inquiry. I do not have the jurisdiction to order that the City assist any party with funding. I can, however, recommend that the City consider assisting parties with the costs they may incur in participating in the hearing. I hope and expect that the City will consider my recommendations as to funding carefully. In making that recommendation, I will bear in mind the following considerations:

• What is the nature of the party’s interest and proposed involvement in the hearing? • Is the applicant able to participate in the Inquiry without funding? • Does the applicant for have a satisfactory proposal as to the use of the funds?

1185408.1 310 Updating the Ethical Infrastructure

If the City elects to provide funding to certain parties, Commission Counsel can appoint a third party to assess the way that the money is being spent, in order to ensure that it is consistent with the principles that led the City to provide funding to a party in the first place.

Having made these introductory remarks, I thank you for being here today, and turn the hearing over to Will McDowell, Commission Counsel.

1185408.1 APPENDIX F

Witnesses and Other Key Individuals and Organizations

Date of Witness Name Testimony Role The Honourable May 25, 2010 Expert witness regarding Donald S. Macdonald the changes to the regula- tion of the energy industry in the late 1990s Jonathan Toll May 25, 2010 Managing director of mergers & acquisitions, td Securities; retained by the City of Mississauga to conduct bid process regarding Hydro Mississauga William Houston May 26, 2010 Outside counsel to the City of Mississauga during Hydro Mississauga / Enersource negotiations David O’Brien May 27, 2010 Former city manager and August 11, 2010 first president &ceo of Enersource David Lever May 31, 2010 Outside counsel to Borealis during Hydro Mississauga / Enersource negotiations 312 Updating the Ethical Infrastructure

Date of Witness Name Testimony Role Michael Nobrega May 31, 2010 President of Borealis dur- August 16, 2010 ing Hydro Mississauga / Enersource negotiations; president & ceo of omers, 2007–present Jeffrey Singer June 1, 2010 Outside counsel to the City of Mississauga Mary Ellen Bench June 1, 2010 Solicitor for the City June 2, 2010 of Mississauga August 10, 2010 Mayor Hazel June 2, 2010 Mayor of the City of McCallion September 20, 2010 Mississauga September 21, 2010 September 23, 2010 Katie Mahoney June 15, 2010 Mississauga city councillor Edward (Ed) Sajecki July 8, 2010 City commissioner of August 10, 2010 planning and building Abraham (Bram) July 8, 2010 Outside counsel to Costin Oxford / 156 Square One Ltd. Ken Lusk July 26, 2010 Former owner of 50 per cent of Hawthorne Realty Advisors John Zingaro July 26, 2010 Former assistant city solicitor Peter McCallion July 27, 2010 Principal and/or agent of July 28, 2010 wcd; son of Mayor Hazel McCallion Michael Latimer July 28, 2010 President & ceo of Oxford Appendix F – Witnesses and Other Key Individuals 313

Date of Witness Name Testimony Role Michael Dal Bello July 29, 2010 Senior vice-president, real estate, aim Dean Hansen July 29, 2010 Portfolio manager, real estate, aim Barry Lyon August 9, 2010 Principal of N. Barry Lyon Consulting Ltd., development consultants to wcd Scott Walker August 9, 2010 Associate at N. Barry Lyon Consulting Ltd., development consultants to wcd Shalini Alleluia August 9, 2010 Retired city employee Craig Coleman August 11, 2010 President, officer, and director of 156 Square One Ltd.; owner of Hawthorne Realty Advisors and Stonecap Realty Leo Couprie August 17, 2010 Principal of wcd Tony DeCicco August 17, 2010 Principal of wcd August 18, 2010 beginning in 2007 Michael Kitt August 19, 2010 Executive vice-president, development, Oxford Marilyn Ball August 19, 2010 Director of development & design division, City Planning & Building Department Leo de Bever September 13, 2010 ceo of aim John Di Poce September 13, 2010 Investor in wcd Murray Cook September 15, 2010 Initial principal of wcd 314 Updating the Ethical Infrastructure

Date of Witness Name Testimony Role Janice Baker September 15, 2010 City manager Suresh (Steve) Gupta September 16, 2010 President & ceo of Easton’s Group of Hotels Inc. Emilio Bisceglia December 14, 2010 Counsel to wcd David Mullan December 15, 2010 A leading Canadian expert December 16, 2010 on administrative law and a former integrity commissioner for the City of Toronto Greg Levine December 15, 2010 An authority and author December 16, 2010 on municipal ethics Lorne Sossin December 15, 2010 Dean of Osgoode Hall December 16, 2010 Law School and expert on administrative law and public administration

Other Key Individuals and Organizations

Name Role 156 Square One Ltd. Subsidiary of aim, co-owner of the City Centre Land Alberta Investment Management Crown corporation that provides Corporation (aim) investment management services to pension and endowment funds Monica Bianchini Counsel to wcd during the negotiations to extend condition deadlines Appendix F – Witnesses and Other Key Individuals 315

Name Role D. Jared Brown Counsel to wcd for the incorpora- tion of the company Grant Charles President, officer, & director of 156 Square One Ltd.; owner of Hawthorne Realty Advisors and Stonecap Realty Carmen Corbasson Mississauga city councillor; resigned from Enersource board on November 7, 2007 John Filipetti Vice-president of development, Oxford Properties Group Crystal Greer City clerk Paul Haggis President & ceo of omers until 2007 Hawthorne Realty Advisors Investment management company for 156 Square One Ltd. Carol Horvat Executive assistant to the mayor Nando Iannicca Mississauga city councillor; resigned from Enersource board on November 7, 2007 Angus MacDonald Acting city manager after David O’Brien Gerard G. McGrath Chief financial officer & secretary of Borealis Michal Minkowski Solicitor for the City of Mississauga Iain Morton Counsel to Borealis during the Enersource negotiations 316 Updating the Ethical Infrastructure

Name Role Ontario Municipal Employees Pension fund and one of the largest Retirement System (omers) institutional investors in Canada; owner of Square One Shopping Centre and co-owner of City Centre Land Oxford Properties (Oxford) Real estate investment, management, and development corporation; wholly owned subsidiary of omers Ron Peddicord Former senior vice-president, development, Oxford Ben Phillips Development planner, City Planning & Building Department Shelley Pohjola Solicitor for the City of Mississauga at the beginning of the Enersource negotiations; left city before conclusion of the Enersource deal Wayne Rosenman Counsel to wcd during the drafting of agreement of purchase and sale for the City Centre Land Susan Rosenthal Counsel to wcd during the application process to the city for the removal of the “H” designation Gawain Smart Vice-president, legal, Oxford (May 2008 to present) John Rhude Outside counsel to city during the Enersource negotiations World Class Developments, Ltd. Property development company (wcd) APPENDIX G Enersource Shareholders’ Agreement (Exhibit 50) 318 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 319 320 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 321 322 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 323 324 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 325 326 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 327 328 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 329 330 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 331 332 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 333 334 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 335 336 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 337 338 Updating the Ethical Infrastructure Appendix G – Enersource Shareholders’ Agreement 339 APPENDIX H Oxford’s Mississauga City Centre Land Holdings (Exhibit 96) APPENDIX I Agreement of Purchase and Sale, Blocks 9 and 29 (Exhibit 97) 342 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 343 344 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 345 346 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 347 348 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 349 350 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 351 352 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 353 354 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 355 356 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 357 358 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 359 360 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 361 362 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 363 364 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 365 366 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 367 368 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 369 370 Updating the Ethical Infrastructure Appendix I – Agreement of Purchase and Sale 371 APPENDIX J Ruling on Conflict of Interest July 8, 2010

Pursuant to a resolution dated November 11, 2009, Mississauga City Council, having earlier voted to request a Judicial Inquiry under the Municipal Act, amended earlier Terms of Reference in order to clarify its request for the Inquiry.

As a result, as Commissioner, I have been given a mandate as follows:

1. To investigate and inquire into all relevant circumstances pertaining to the various transactions and matters referred to in the recitals to this resolution, including the relevant facts pertaining to the various transactions at the relevant time, the basis of and reasons for making the recommendations for entering into the subject transactions and the basis of the decisions taken in respect of the subject transactions;

2. To investigate and inquire into the relationships, if any, between the existing and former elected and administrative representatives of the City of Mississauga and the existing and former principals and representations of WCD, OMERS and its affiliate companies at all relevant times in the context of the Appendix J – Ruling on Conflict of Interest 373

transactions and matters described in the recitals to this resolution; and,

3. To investigate and inquire into whether any existing or former elected or administrative representatives of the Corporation of the City of Mississauga had a direct or indirect personal economic interest, or other conflict of interest or misconduct that might have influenced their actions in any of the subject transactions or matters described in the recitals to this resolution.

Counsel for Mayor McCallion, supported by counsel for Peter McCallion, on the eve of having witnesses called on the second phase of the Inquiry, has raised the issue of what standard I am to apply when considering the conduct of the Mayor and as well her son.

In other words, asking that procedural fairness be maintained, counsel for the Mayor submits that any reference to the term “conflict of interest” must be gauged in accordance with the only standard in place at the time, namely the Municipal Conflict of Interest Act (MCIA). To do 374 Updating the Ethical Infrastructure

otherwise, counsel submits, would be to move the goal posts and apply a standard not in place when the matters at issue occurred. Simply put, she would have to face new rules that would be applied to past conduct.

In her very thoughtful submissions, Ms McIntyre says that procedural fairness requires advance notice of the standard of conduct to be applied by me in any consideration of the evidence, and points to a number of authorities in support of her position, including the report of Justice Jeffrey Oliphant in the Mulroney‐Schreiber Inquiry, as well as the comments of O’Keefe J. in Stevens v. Canada (Attorney General) where Commissioner Parker was chastised for drafting and utilizing his own definitions of real and apparent conflict of interest.

Ms McIntyre argues that my mandate is much more restrictive than that which governed Justice Oliphant, pointing to the third branch of the Resolution which calls upon me to determine, as she puts it, whether there was a conflict of interest or misconduct. I fully recognize that I have no authority or jurisdiction to make findings of criminal or Appendix J – Ruling on Conflict of Interest 375

civil liability. That is not the purpose of this Inquiry, nor, I am persuaded, was it ever the intention of Council.

The overarching purpose of this Inquiry is to look not only to the past, but to the future in a broad consideration of the good government of the Municipality. It may be that, after hearing all of the evidence, I will make recommendations having to do with the future conduct of the public business of the Municipality. I may not. That will entirely depend upon how the evidence unfolds.

It should be noted, at this point, that the Council, prior to voting to request a judicial inquiry, had the benefit of two legal opinions from two outside law firms. Both opinions, for the most part, found no conflict of interest with respect to either of the transactions at the issue by staff, Council or the Mayor, using the MCIA as the test of a conflict of interest. Ms McIntyre suggests that all this Inquiry is about is to provide a third opinion. I disagree. Not only would this be a terribly expensive way of obtaining yet another opinion, it is not what Council requires of me in carrying out the mandate I have been given. I am not constrained in my considerations of conflict of interest to that which is 376 Updating the Ethical Infrastructure

set out in the MCIA. Rather, the Terms of Reference I have been given to conduct this investigation were made deliberately broad, not only to permit me to investigate specifically all relevant circumstances pertaining to the two transactions at issue, but also to investigate and inquire into whether any elected official or staff representative had a direct or personal economic interest, or other conflict of interest or misconduct that might have influenced their actions in the two transactions at issue. Clearly, in my view, very broad Terms of Reference.

Needless to say, I am not entitled to draw my own Terms of Reference, nor do I intend to. Much like the Sarnia Inquiry, which was considered by the Supreme Court of Canada in Consortium Developments (Clearwater) Ltd. V. Sarnia (City), [1998] 3 S.C.R. 3, I am to consider, in part, relationships between the existing and former elected and administrative representatives of the City and existing and former principals and representatives of WCD, OMERS and any affiliated companies. In doing so, I intend to fulfill the third prong of the mandate provided to me. If, as I say, at the end of the day, after making my findings of fact, I deem it necessary or helpful, I will make recommendations to the Municipality as to how the good government Appendix J – Ruling on Conflict of Interest 377

of the City could be better achieved. If Council had intended that I only measure any issue of conflict of interest against the MCIA, it would have so requested. It did not.

What then of conflict of interest and the standard to be applied. Counsel for the City, Mr. Lax, argues that no definition is required, while Commission Counsel suggests I can employ commonly held definitions of conflict of interest. Clearly, there is much in the common law that is of assistance. Old St. Boniface Residents Assn. Inc. v. Winnipeg (City), [1990] 3 S.C.R. 1170 is instructive. While Sopinka J. writing for the majority, was alive to the fact that elections may be fought on issues ultimately coming before Council, he distinguishes between partiality by reasons of pre‐judgment on the one hand and by reason of personal interest on the other. As he writes in paragraph 55:

It is apparent from the facts of this case, for example, that some degree of pre‐judgment is inherent in the role of a councillor. That is not the case in respect of interest. There is nothing inherent in the hybrid functions, political, legislative or otherwise, of municipal councillors that would make it mandatory or desirable to excuse them from the requirement that they refrain 378 Updating the Ethical Infrastructure

from dealing with matters in respect of which they have a personal or other interest. It is not part of the job description that municipal councillors be personally interested in matters that come before them beyond the interest that they have in common with the other citizens in the municipality. Where such an interest is found, both at common law and by statute, a reasonably well‐informed person would conclude that the interest might influence the exercise of that duty. This is commonly referred to as a conflict of interest. [page 197] See Re Blustein and Borough of North York, [1967] 1 O.R. 604 (H.C.); Re Moll and Fisher (1979), 23 O.R. (2d) 609 (Div. Ct.); Committee for Justice and Liberty v. National Energy Board, supra; and Valente v. The Queen, [1985] 2 S.C.R. 673.

In Moll v. Fisher et al., [1979] O.J. No. 4113, Robins J. wrote at paragraph 10:

This enactment, like all conflict‐of‐interest rules, is based on the moral principle, long embodied by our jurisprudence, that no man can serve two masters. It recognizes the fact that the judgment of even the most well‐meaning men and women may be impaired when their personal financial interests are affected. Public office is a trust conferred by public authority for public purpose. And Appendix J – Ruling on Conflict of Interest 379

the Act, by its broad proscription, enjoins holders of public offices within its ambit from any participation in matters in which their economic self‐interest may be in conflict with their public duty. The public’s confidence in its elected representatives demands no less.

As long ago as 1904, in L’Abbe v. Blind River (Village) 1904 CarswellOnt. 87, 3 O.W.R. 162 (Div. Ct.), Boyd J., writing for the Divisional Court, stated at paragraph 11:

The High Court of Parliament was not only a legislative but a judicial body. It combined legislative capacity and judicial power; and it would seem that the analogy of cases as to judges and magistrates strongly applies to the fiduciary conduct of municipal councillors. The member of a council stands as trustee for the local community, and he is not so to vote or deal as to gain or appear to gain private advantage out of matters over which he, as one of the council, has supervision for the benefit of the public. The councillor should not be able to invoke the political or legislative character of his act to secure immunity from control, if the taint of personal interest sufficiently appears therein. 380 Updating the Ethical Infrastructure

The important words I take from that paragraph are “deal”, “gain” and “or “appear to gain”. Members of City Council are entrusted by those who elect them to act in the public interest. Optics are important. In other words, members of a municipal council must conduct themselves in such a way as to avoid any reasonable apprehension that their personal interest could in any way influence their elected responsibility. Suffice it to say that members of Council (and staff) are not to use their office to promote private interests, whether their own or those of relatives or friends. They must be unbiased in the exercise of their duties. That is not only the common law, but the common sense standard by which the conduct of municipal representatives ought to be judged.

So for these reasons, I see no need to more precisely define conflict of interest before embarking upon the evidentiary stage. No one at the end of the Inquiry should feel as though a standard any different than that which existed at the relevant times was being imposed. I agree with Ms McIntyre that it would be unfair to use the proposed Mississauga conduct or any other municipal guidelines. There is no reason to do so. As Commissioner Oliphant put it so well: Appendix J – Ruling on Conflict of Interest 381

Public office holders ultimately owe their position to the public, whose business they are conducting. Ensuring that they do not prefer their private interests at the expense of their public duties is a fundamental objective of ethics standards.

It must always be an objective test: what should a reasonable person have done in similar circumstances?

One final note, When Mayor McCallion swore her oath or declaration of office yet again on December 4, 2006, she agreed inter alia to “…truly, faithfully and impartially exercise this office…” She did not simply say she would abide by the Municipal Conflict of Interest Act.

ACKNOWLEDGEMENTS

While I had initially hoped this Inquiry would begin much sooner than it did, I very quickly came to realize the scope of the pre-inquiry investigative work and the complexity of reviewing, prioritizing, and circulating the evidence as it came to light. As with any inquiry of this sort, especially one with political overtones, many leads were forthcoming, some of which bore fruit; others did not. Nevertheless, in fulfilling my mandate, it was necessary for Commission counsel to thoroughly investigate, assess, cull, and prepare the evidence before presentation at the public portion of the Inquiry. All this work allowed the Inquiry to run smoothly. Once we got under way, on May 25, 2010, the proceedings moved very efficiently. For that I am deeply grateful to all counsel who appeared. Their civility and professionalism were remarkable. Needless to say, this co-operation made my task much easier. The following counsel appeared before the Inquiry:

Commission Counsel Will McDowell and Naomi Loewith – Lenczner Slaght Royce Smith Griffin llp

383 384 Updating the Ethical Infrastructure

Counsel to the City of Mississauga Clifford Lax, Tracy Wynne, Daniel Schwartz, and James Renihan – Lax O’Sullivan Scott Lisus llp

Counsel to Mayor McCallion Elizabeth McIntyre, Freya Kristjanson, and Adrienne Telford – Cavalluzzo Hayes Shilton McIntyre & Cornish llp

Counsel to Peter McCallion Brian Gover and Luisa Ritacca – Stockwoods llp

Counsel to wcd Linda Rothstein and Jean-Claude Killey – Paliare Roland Rosenberg Rothstein llp

Counsel to omers Michael Barrack, John Finnigan, and Deborah Palter – Thornton Grout Finnigan llp

Counsel to aim Don Jack and Adam Goodman – Heenan Blaikie llp

Counsel to Enersource Alan Mark and Kelly Friedman – Ogilvy Renault llp

Counsel to William Houston Peter Cavanagh – Fraser Milner Casgrain llp

Counsel to Suresh (Steve) Gupta Bruce Thomas – Thomas Gold Pettingillllp

Counsel to John Di Poce John Brunner – Brunner and Lundy

Counsel to Emilio Bisceglia Paul Schabas – Blakes llp Acknowledgements 385

I am greatly indebted to everyone who assisted in bringing this Report to fruition. Let me immediately say how grateful I am to the Commission’s lead counsel, Will McDowell, and his wonderful team: Naomi Loewith, Yashoda Ranganathan, and Ian MacLeod. I am indebted as well to George Crossman, the Commission’s commercial law advisor, and Ava Arbuck, staff lawyer to the Inquiry. Their ongoing advice greatly assisted me throughout. May I also express my sincere thanks to the Honourable Donald Macdonald, Professor David Mullan, Dean Lorne Sossin, and Dr. Greg Levine. These emi- nent members of the Ontario legal community gave their time to testify before the Inquiry regarding significant legal issues and legislative background. Their evidence was of great assistance to the Inquiry and especially to the formula- tion of the recommendations. The Commission also benefited from the submissions of Peter Downard and Ryder Gilliland concerning the openness and transparency of the proceedings. I am also most grateful to Mary Ellen Bench, Mississauga’s city solicitor, and her colleagues, all of whom were of enormous assistance at the beginning of the Inquiry. Public inquiries are highly complex proceedings that require a diverse team of dedicated administrators to operate openly and efficiently. The Inquiry staff worked vigorously and diligently each day, and I am very grateful for all their efforts. I would like to thank Anne Bruzuchalski, Wendy Warnock, Sue Kranz, and Jovana Velimirovic for their thorough command of the courtroom. In the area of document management, I am similarly grateful to the talented staff at Potter Farrelly & Associates – Kearren Bailey, Elizabeth Miller, and Alexander Parkes – for their invaluable experience with public inquiries and their magnificent contribution to this one. Many thanks to Peter Rehak, the Inquiry’s media relations consultant, who handled a challenging role with poise and grace. The editorial team of Shipton McDougall Maude have considerable experience with public inquiries. I am grateful to Dan Liebman, Mary McDougall Maude, and Rosemary Shipton for their thoughtful work. Deborah Marshall did a careful job as proofreader. Laura Brady was responsible for the design and typesetting of the Report, and I thank her for her fine contribution. 386 Updating the Ethical Infrastructure I would also like to extend a warm thank you to the staff and students at Lenczner Slaght Royce Smith Griffin llp for their tremendous assistance to Commission counsel and the Inquiry in general: Bahi Thiyagarajah, Ken Bell, Jason Yetman, and Tracy Fadlalallah (it staff ); Esther Saint Clair, Kimberley Bowyer, Nafilia Malik, and Erin Judges (legal assistants); and Brianne Bovell, Susanne Coles, Tim Hudek, Ryan Liss, Brendan Morrison, Sean O’Donnell, and Andrew Porter (law students). As well, I wish to thank the members of Rogers Television for their broad- casting coverage of the Inquiry: Jake Dheer, Qaiser Abbas, Gordon Mony- Penny, and Frank Bosnjak. The Inquiry would not have been the accessible proceeding that it was without the help of Djordje Sredojevic, who maintained the website and kept it open and running at all times. The professionals at Froese Forensic were of great assistance in the investigative stage of the Inquiry. For their excellent work, I extend my sincere thanks to Jeffrey Filliter, Ken Froese, Kevin Lo, Ainsley Vaculik, and Brian Verheul. I am also deeply indebted to my assistant, Inez Conti, who is always a delight to work with and was very dedicated to the work of the Inquiry. It was a great honour and wonderful challenge to act as Commissioner of this Inquiry, and I am very grateful to have had so many talented and dedicated people to work with.