ORNGE – “The Jig is Up”

Update: see previous posts – December 29, 2011 There Are Some Red Faces at ORNGE, December 27, 2011 ORNGE Hires New Spin Doctor, December 26, 2011 Doctor’s Salary Quadruples In Four (4) Years to $1.4 Million, December 20, 2011 Wanted: Paramedics for Emergency Flights on ORNGE’s Air Ambulance Helicopters, December 6, 2011 Orangeh Gonna Tell The Taxpayers How Much of Their Money You’ve Spent on Yourself?

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On Jan. 11/12 the Ontario Provincial Minister of Health, Deb Matthews, announced ORNGE's board of directors, at the recommendation of the government, had appointed Ron McKerlie as the organization's new president and CEO and she says she has ordered a forensic audit of ORNGE, but will not reveal the audit's finding to the public. She also said that the organization (ORNGE) is also replacing its board of governors. Matthews said she is looking forward to working with the outgoing board “to ensure an orderly transition to a new board in the days to come.”

Before the October 6, 2011 Provincial election, Premier Dalton McGuinty spoke of a $15 Billion budget deficit that his government had to manage.  After being returned to office, now with a minority government (53 Liberal MPPs in the 107-member Legislature), McGuinty then announced his government was faced with a $16 Billion budget deficit.

His solution, eliminate 5% of Ontario’s public servants by March, 2012 and then eliminate another 2% by 2014 (reduce the workforce by 7%).  He preached belt-tightening, restraint and reform.

But McGuinty didn’t reveal to us the relationship that taxpayer money had with ORNGE or the sweetheart deal that was made in the earlier days of the Provincial Liberal government. Dr. Mazza’s rise to power at ORNGE came courtesy of former health minister George Smitherman, ( as the previous Minister of Health and Long Term Care) who eagerly embraced his vision for a privatized air ambulance service.

Amidst all of this, ORNGE is exposed.  Ontarians find out that although they have to reach deeper to make ends meet and to deal with record levels of debt, ORNGE simply waits for good ole Ontario to transfer $150 million dollars, of taxpayer money, into their companies. In 2007, the President and Chief Executive Officer of ORNGE, Dr. Chris Mazza,  made $298,000, now he is making $1.4 million a year and is now, one of the highest publicly paid official in Ontario, not bad for a former emergency doctor at the Sunnybrook Hospital.

Ontarians have 150,000,000.00 reasons to be concerned.  If McGuinty needs to hire more spin doctors, he should recruit from ORNGE and its affiliated companies.

New president of ORNGE, Ron McKerlie (left) (appointed by the Provincial government) and chief operating officer Tom Lepine. Lepine's 2010 salary was reported at $282,000 a year, but he says his true salary will be disclosed in the future. ORNGE has 119 employees who make over $100,000.00 a year. Picture and story by Kevin Donovan - Toronto Star

The Ontario Premier’s office and the health ministry were briefed a year ago on many of the controversial money-making and spending plans at ORNGE now being investigated by two government agencies.

But nobody followed up on the red flags raised by ORNGE’s briefing. The briefing clearly shows that what the people of Ontario had long been told was a non-profit public service had evolved into a web of for-profit companies with side deals, executive perks and at least one mysterious payment from an overseas supplier.

“(The briefing) was well received,” recalls ORNGE chief operating officer Tom Lepine, who was present at Queen’s Park last January.

Documents obtained by the Star show that top executives at the air ambulance service wrote a letter and attended a meeting at Queen’s Park explaining to deputy ministers and premier’s officials how they would be “leveraging” and “exploiting” the expertise of the public service, saying it would make money both for the people of Ontario and ORNGE officials.

The document explains the anticipated split from a variety of new ORNGE Global businesses that would trade on the non-profit ORNGE Ontario’s air ambulance expertise: 3 per cent of gross revenues for Ontario taxpayers, a whopping 97 per cent for companies owned by ORNGE executives and investors.

ORNGE helicopter hovering over SIck Kids Hospital in Toronto. ORNGE has an impressive number of employees making more than $100,000 (119 people, a mix of managers, a few executives and paramedics). One top executive on the list is Tom Lepine, chief operating officer. His salary was reported at $282,000 in 2010, but Lepine said his true salary will be disclosed in the future.

The plan to turn ORNGE into a money maker for private interests is controversial because taxpayers pay $150 million a year to support what was always described as a “non-profit” air medical rescue and transport service.

Also speaking for ORNGE at the briefing were chairman Rainer Beltzner and ORNGE lawyer Alfred Apps, president of the federal Liberal party (his two-year term is up this weekend) who is also well known at Queen’s Park. The investment firm Apps is chairman of, Byron Capital Markets, went on to try to raise $20 million on Bay Street for ORNGE last fall, an investment strategy described in the Queen’s Park meetings.

The ORNGE for-profit plan, which recently came crashing down, is being investigated by both the Auditor General of Ontario and a 12-member team of auditors from the provincial finance ministry.

Former president and founder Dr. Chris Mazza is on indefinite medical leave, the province has installed a deputy minister with accountability background as president and the entire board of directors is out.

A spokesperson for Premier Dalton McGuinty confirmed the January 2011 briefing and said the health ministry followed up. Health Minister Deb Matthews told the Star she was not at the meeting but did receive the letter. She said officials from her ministry were at the briefing and were assured that the plans were a win-win situation for Ontario.

“We were given clear and unequivocal assurances from ORNGE and their legal advisers on multiple occasions that no public funds were being used for their private endeavours,” Matthews said Friday, reflecting on what she said the ministry was told.

The Jig is Up for the old 150 million publicly funded ORNGE. The Province of Ontario has a budget deficit of $16 Billion dollars

“I (recently) called these assurances into question when concerns about ORNGE’s transparency and accountability for public funds and executive compensation levels were raised. This led me to call for a forensic audit to follow the public dollars and determine if public dollars were used to support outrageous salaries and private endeavours. The auditors’ work is ongoing. The Auditor General also continues his value-for-money audit.”

An ongoing Star investigation has revealed ORNGE created a web of for-profit companies; gave exorbitant salaries to top executives ($1.4 million to Mazza) along with education and other perks; and one of the for-profit companies received a $6.7 million payment from an Italian company that sold the provincial air ambulance service new helicopters.

The 34-page briefing note to top Ontario officials (political and bureaucratic) either spells out or hints at these issues and more. In the case of the $6.7 million payment, the money from the Italian helicopter company is spelled out.

In the letter to Matthews on Jan. 19, 2011, which was copied to the Premier’s office and health ministry officials, the now former ORNGE chair, Rainer Beltzner, said he is “seeking nothing from the government except to make it aware of what it has done and is intending to do.” ORNGE’s Mazza and other officials were of the belief that the province of Ontario had no ability to control ORNGE, documents show.

Health Minister Deb Matthews has moved with calculated resolve to dismantle the corporate empire and fiscal camouflage erected by ORNGE and its affiliated companies.

The letter, and ensuing briefing at Queen’s Park, details a web of companies that Beltzner said would raise much needed health-care dollars for Ontario.

Beltzner states that “ORNGE has accumulated expertise over the last 20 years in building and reorganizing transport medicine systems.” The briefing note states that this expertise can be leveraged for profit. ORNGE only came into existence in 2005. Beltzner appears to be referring to the work of the ministry of health which previously ran the well respected air ambulance service.

In what now seems pie in the sky (the for-profit companies were shuttered on order of Health Minister Matthews this week), Beltzner and Apps outlined a plan that would see such businesses as emergency health care for top international executives rake in hundreds of millions of dollars. They told provincial officials that so much money would come in that they would provide 3 per cent of gross revenues to Ontario, but that would be capped at $200 million.

Apps has recently sent a series of emails to the Star defending his actions and saying he was only there as an adviser and lawyer “to explain the structure of ORNGE Global” to provincial officials. Apps and a spokesman for his law firm, Fasken Martineau DuMoulin LLP, said he was not there to “lobby” government.

Apps’ firm describes him as a “structured financing specialist.” Several years ago, he said he set up a deal that allowed ORNGE to raise $275 million in a private bond placement to purchase new aircraft and its office headquarters.

After the Queen’s Park meetings, a Toronto firm called Byron Capital set about trying to raise $20 million more. Apps is the chair of Byron Capital and the financing plan was described at the Queen’s Park meeting. Apps said that due to a potential conflict of interest, he was not involved in the Byron Capital offering.

“Because of my involvement at Byron, ORNGE/Faskens exchanged a conflicts disclosure letter related to its retainer with Byron which precluded me from acting as counsel and from receiving any remuneration associated with Byron’s work for ORNGE,” Apps told the Star.

That financing raised zero dollars. An ORNGE Ontario spokesperson said Friday. Controversy stirred up after the Star’s stories in December shut the plans down.

The ORNGE briefings also described the “founders” of ORNGE (Mazza and other executives) and plans to provide increased compensation and shares in the for-profit companies.

The air ambulance service controversy began in December over ORNGE’s lack of public disclosure of salaries for almost all of the top executives, even though it is a publicly funded service. One salary that historically was disclosed was chief operating officer Tom Lepine, at $282,000 a year.

But the Star has learned that Lepine actually earned more than that. In an interview this week, Lepine (who is still at ORNGE as a top official) disclosed that for the “consulting” work he did around the structure of ORNGE Global leading up to the Queen’s Park briefing he received an additional $50,000 that was not disclosed. Lepine said his true salary will be disclosed in the future.

 

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