Canada defends handling of Bermuda airport proposal

Bermuda airport deal: Canadian Commercial Corporation Chair Martin Zablocki addresses Bermuda media

Canadian Commercial Corporation President Martin Zablocki addresses the media in Bermuda

Canadian Commercial Corporation, Canada’s export sales agency, has defended the handling of a $250 million proposal to redevelop Bermuda’s airport following intense local criticism and controversy.

Suspicions that the project has been tainted by collusion and backroom deals have been fuelled by the release of a cache of emails between CCC, prospective developer Aecon Concessions and Bermuda Government.

A request by Aecon to use CCC’s identity as “cover” for a site diligence visit to Bermuda was innocent, according to the agency.

CCC has also explained a reference by its legal counsel that it is not transparent, saying while it respects the principle of transparency it has to maintain commercial confidentiality.

And it has defended itself from suggestions that its due diligence on Aecon was a sham.

We sent a series of questions to CCC, from May 12 when the email dump was released to the public, to May 19. CCC chose to respond after a joint press conference with the Bermuda Government on May 20.

The request for CCC “cover” was contained in a July 3 email from Aecon president Steven Nackan to CCC legal counsel Wendy Dempsey and business development executive Don Olsen.

Mr Nackan’s email read, in part:

A bunch of us are going down to Bermuda Sunday-Tuesday to do some site diligence. Don is not able to attend which is fine and I don’t think we need CCC presence for this visit. I do however feel it is important to maintain the CCC cover for this visit i.e. we are the CCC Team etc etc. So I would like to use the CCC logo or some variation of it when we send e.g. the proposed agenda for the visit etc (see draft attached). Would you be okay with that?

We first asked the agency whether such a request was normal and acceptable business practice.

On May 19, we sent another query:

Does CCC consider it ethical for a prospective supplier to use its identity in discussions with a prospective buyer? I refer to a July 3, 2014 email sent by Steve Nackan to Wendy Dempsey and Don Olsen asking to use CCC’s logo to send an agenda to the Government of Bermuda in advance of a site diligence trip.

CCC’s response two days later:

In response to your specific question around “Aecon’s Steven Nackan asked to use CCC’s identity,” the word “cover” used by Mr. Nackan was meant as a catch-all for ensuring consistency in how the team is represented from a branding and legal perspective throughout the process. In this model, CCC is the Canadian team lead, so it is important to ensure at every interaction – even when CCC is not physically present – it is understood that it is the CCC team that is being represented.

Critics have also charged that CCC’s due diligence on Aecon was a sham, citing emails between the agency’s legal counsel Wendy Dempsey and Steven Nackan which indicate that the two were working closely in putting together due diligence documents for Bermuda’s consumption.

The discussion begins with an October 15 email from Nackan who tells Dempsey that he is working on a “‘capabilities’ document that can serve as part of the paper trail on your selection of Aecon”. Dempsey informs Nackan of a new due diligence questionnaire the agency requires all of its suppliers to complete. “I would suggest that the package that you put together in response could be forwarded to Bermuda (with exceptions as need be) to support the selection of Aecon” she tells him.

Two days later, Dempsey sends Nackan a “sample questionnaire for guidance on completion of a due diligence package that could be sent to Bermuda. She tells him:

I am not suggesting that each question needs to be responded to but merely that the ones that can help support the choice of Aecon such as the corporate entities and financial statements and safety policies and ethical practices policy etc would be helpful.

In a lengthy statement in response to our invitation to clarify their approach to its due diligence on Aecon, CCC said that it was their normal practice to provide guidance to suppliers.

As a partner to CCC in a potential transaction, CCC expects the full cooperation of Canadian suppliers when undergoing the due diligence process and will provide guidance to suppliers to ensure that they provide the required information. As a proven CCC supplier, Aecon is working with CCC on the due diligence process – a process that continues to evolve through the various phases. Aecon is very familiar with CCC’s stringent criteria for screening and qualifying its suppliers and the supplier provided all requested information to CCC. Ensuring the information was submitted in CCC process templates was an administrative requirement that the supplier needed to complete for the processing of the agreement, particularly as the questionnaire was a new form that was recently introduced into the process.

It went on to say that its due diligence processes assessed suppliers’ technical, managerial and financial capabilities and reviewed their internal controls and ethical compliance systems to prevent bribery and corruption of foreign government officials.

In an interview with Politica on May 14 (see below), Finance Minister Bob Richards said that there was nothing in the email cache that had given him cause for concern.

Another source of controversy has been over how and when Aecon got involved in discussions about the airport development with Bermuda’s Government. Government’s first public mention of the CCC option was at a media event on November 10 last year when it signed a Memorandum of Understanding with the agency. The Minister said then that CCC “will select a Canadian developer from its already pre-selected stable of Canadian firms.” Aecon was not mentioned.

But it emerged this month that Aecon initiated contact with CCC and had been in talks with the Bermuda Government since June when the Canadian Imperial Bank of Commerce set up the initial meeting between the three parties.

Richards has acknowledged that he met Aecon for the first time in June and insists that he has not misled the country.

CIBC’s role has also come under scrutiny. Richards has said that the bank introduced him to the CCC option and was hired as Government’s financial advisor over the project. Nackan describes the bank in his email correspondence to CCC as their “back channel” providing informal advice for its approach to Bermuda.

Citing client confidentiality, CIBC’s Laurie Mahon who is handling the Bermuda Government account, declined to comment when asked whether the bank had been conflicted in advising Aecon.

We asked CCC its view of the ethics of “back channel” tactics, but the agency ignored the question.

The Opposition Progressive Labour Party has harshly criticised the government for sole sourcing the developer and bypassing local procurement rules which require that the project be tendered. But the Government has said that engaging CCC as prime contractor and project guarantor eliminates risks of budget overruns inherent in an RFP process.

Nackan told Politica that Aecon has “dozens” of competitors in Canada but that none of them are in a position to deliver on a foreign public private partnership infrastructure project.

CCC did not respond when asked whether Aecon was peerless, but told us that it does not source competitively if a company identifies a foreign sales opportunity and seeks its assistance as was the case with the Bermuda airport project.

The PLP and the People’s Campaign – the civil society group which obtained the emails through an Access to Information request – were unable to comment before publication.