Public Accounts Committee on Jan. 31st, 2007

[Tim McGrath]

There's usually a reasoning for whatever decision they've made.

Elections Canada, for example, was going to move to a certain building. Then, in their terms, an event came up that made it impossible for them to move within the timeframe that we'd stipulated. As a result, they stayed in—

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

In this case, though, from what you know, there was no radical change of operations, was there?

[Tim McGrath]

There was a change in requirement expressed by the client that they'd made a decision that they weren't going to amalgamate their regional office with their headquarters, and that they had projected some growth, as it was described to us, thinking they were going to get Treasury Board approval for that growth, and that never came about during that timeframe.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

In your opinion, though, would that legitimize the amount of liability that the Crown was exposed to? If I'm not mistaken, the crown would have to sign a ten-year lease with Place Bonaventure, as well as the lease with Place Victoria. Is that correct?

[Tim McGrath]

We didn't have to sign the lease with Place Victoria. If we hadn't been able to strike what we felt was a reasonable rate with Place Victoria, we would not have entered into the lease agreement, and they would have had to move.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

However, we would have been subject to legal action, their having won a tender fair and square.

[Tim McGrath]

No, because part of the strategy was looking at a number of backfill clients that we had in the Quebec region at that time—Veterans Affairs, the crime prevention centre.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

What I'm saying is that to mitigate an extreme case of liability, because we did not give the person who won the tender.... We needed to lease that property--that or subject the crown to legal action.

[Tim McGrath]

That is correct.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

And in doing that, we brought about $17 million of liability. However, I understand you were hopeful about backfilling it—and fortunately we did—but the fact is that was the difference in having to lease that whole space, am I correct?

[Tim McGrath]

I'm not sure if it would be $17 million, because a lot of that goes to the various operating costs of the asset, which they would have incurred. But certainly there would have been a profit element in there that—

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Do you know what the percentage of occupancy is in Place Bonaventure right now?

[Tim McGrath]

I know all the space that we lease in that building is occupied, and I think we have around 15,000 metres of space in total in that building.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Okay, but you're not aware of what the historical occupancy rate was or what it is today?

[Tim McGrath]

No, I don't. The building was a convention centre before, and they were in the process of converting it into office accommodation, so I'm not sure what the history of the building was prior to that.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Mr. Arès, I just need you to answer, and please just be direct.

Mr. Fitzpatrick was asking you about a memo from May 3. At the end of the memo it says, “This partly explains why it is preferable that I not write a memorandum to the minister on this matter because it would not say what certain interest groups would want it to say.”

Could you please identify very specifically who those interest groups, in this case, would be?

[Mario Arès]

Which paragraph are you referring to?

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

This is the last sentence in that memo, May 3.

[Mario Arès]

As I said earlier, I had answered that request. On May 3rd, 2002, we had not yet obtained the new rent of 308 $ per square meter that had been renegotiated with Place Victoria. The information I had at the time to renew the lease at Place Victoria was based on the rent of the fourth bidder which was 430 $ per square meter. Obviously, a rent of 430 $ per square meter was not advantageous for the Crown. It was clearly higher than —

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Mr. Chairman, I have a point of order.

[The Chair, Liberal, Shawn Murphy]

Mr. Arès, I thought the question was pretty clear. You were talking about certain interest groups in the last sentence of the last paragraph, which you signed. I think the questioner wants to know which interest groups you were talking about.

Am I correct there, David?

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

That's correct. Who were they?

[Mario Arès]

I had nobody in mind when I wrote that. At that time, it was quite clear to me — and I said it — that if the decision to sign a lease at 430 $ per square meter was maintained, but without knowing who would be the beneficiary...

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

That's okay. There are no specifics.

Ms. Beal, you were the ADM at the time, and there have been three ministers identified—Minister Gagliano, Minister Boudria, and Minister Goodale. Who did you receive direction from to cancel this lease, and in what form did it come? Did it come in written form or verbally?

[Carol Beal]

I believe I have already indicated that I did not receive any direction directly from the minister's office in this regard. My instructions to hold the activity would have presumably come via either the associate or the deputy minister.

You would understand that there is a lot of non-written communication between the office of the deputy and the associate. There is also communication at meetings that I would have attended with the minister's office. But at no time on this file do I recall direction being received from the minister's office on this. It's five years ago, so my recollection is a little vague, but I believe it would have come from the associate deputy minister of the day to hold and to look up analysis and options with respect to this file.