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Mississauga mayor McCallion had 'real and apparent' conflict of interest in land deal, inquiry finds

Mississauga mayor Hazel McCallion studies an executive summary on Oct. 3 2011, after the findings of a judicial inquiry were made public.

Fred Lum/The Globe and Mail/Fred Lum/The Globe and Mail

Long-time Mississauga Mayor Hazel McCallion had a "real and apparent" conflict of interest arising from her role in an ultimately failed hotel-convention centre development deal by a company in which her son, Peter, was an investor, a judicial inquiry has concluded.

But during a news conference in Mississauga's neo-classical council chamber, Ms. McCallion struck a characteristically unrepentant note, steadfastly denying, as she did throughout the inquiry, that she had done anything wrong. In her only concession, she said, "I should not have gotten involved in helping to secure land," but added that she did so because she was "obsessed" with securing a convention centre for Mississauga as a symbol of the city's economic clout.

Both Ms. McCallion's allies and foes turned out for the Monday morning release of the 386-page report. A few noisily heckled the inquiry's counsel over the legal costs associated with the review – evidence that the move to investigate the mayor remains controversial.

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Former councillor Carolyn Parrish, a long-standing political rival, declared that she was "as satisfied as you can be" with the findings, but refused to call for Ms. McCallion's resignation. "That would be her decision."

After months of hearings, Justice Douglas Cunningham concluded that Ms. McCallion, who has presided over the growth of the suburban municipality since 1978, actively promoted the ambitious project while failing to closely scrutinize key legal documents and fully disclose her own family connection to the venture to council and the public, as required under Ontario law.

The report also found that former Mississauga city manager David O'Brien – a long-time bureaucratic and political adviser to the mayor, as well as a trustee of the mayor's family trust – was put in "an impossible position" when he agreed to Ms. McCallion's suggestion that he negotiate a $4-million legal settlement between World Class Developments, Mr. McCallion's company, and the property owners, which included the OMERS pension fund on whose board he sits.

Her behind-the-scenes involvement in the deal dates back to 2005, well before she disclosed a conflict of interest at council in 2008. "[Ms. McCallion]went to great lengths to keep the deal alive as economic conditions worsened," said Justice Cunningham, adding that he made the findings "with a measure of regret" because of Ms. McCallion's long history of public service.

He took pains to stress that Ms. McCallion's conduct could not be excused by the fact that she was trying to advance a long-standing policy goal of the city. "It is no answer to say that a public office holder may promote the financial interests of a relative where to do so also promotes the greater good," he told reporters. "To accept this proposition would in my view lead over time to the erosion of public trust in municipal government."

As was the case with the Bellamy report on a municipal purchasing scandal at the City of Toronto in the late 1990s, the impact of the $7-million inquiry will reverberate far beyond Mississauga's borders. Justice Cunningham's report urges hard-hitting reforms to the province's municipal laws, noting that "Mississauga, and indeed all Ontario municipalities, require[s]a better ethical infrastructure."

Among the report's 27 recommendations:

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• additional safeguards in the Municipal Act to protect the impartiality of integrity commissioners;

• wide-ranging reforms to Ontario's Municipal Conflict of Interest Act that would articulate "broad overarching principles," include politicians' family members in the scope of the act, and expand the definition of conflict beyond mere financial relationships;

• provisions allowing individuals or organizations acting in the public interest to initiate claims against elected officials arising from concerns over breaches of the conflict rules – something that is not possible under current legislation.

The report also recommends a range of further changes to Mississauga's code of conflict, which was updated after the scandal broke. Justice Cunningham stops short of calling for the creation of a formal lobbyist registry, citing cost.

Ms. McCallion said she supported the proposed reforms.

The inquiry was established in 2009 after Mississauga's city solicitor revealed to council that Mr. McCallion's son, a realtor, had an equity stake in a company that had tried to develop a five-star hotel and convention centre on a 8.5-acre parcel of vacant land near Mississauga City Hall. The land was co-owned by OMERS and the Alberta Investment Management Company (AIMCo).

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After WCD failed to secure a hotel deal for the land, the owners decided to pull out of the transaction, prompting WCD to launch a lawsuit for damages. The landowners ultimately paid $4-million to settle the suit, but the inquiry found that Mr. McCallion, who stood to earn $10-million on the deal, did not receive any of the payout. WCD still owes the city unpaid processing fees related to the application.

In a second strand of the inquiry, looking at Mississauga's complicated 2000 bid to offload the city's electrical utility to Enersource, a consortium comprised of the City of Mississauga and OMERS' infrastructure subsidiary Borealis, Justice Cunningham slammed Mr. O'Brien for failing to properly explain to council a key legal detail of the transaction.

Evidence presented at the inquiry indicated that the city has changed its legal vetting procedure since that deal took place. But the inquiry also urged the city to ban informal council meetings, improve minutes keeping procedures and ensure the involvement of the city solicitor in all deals involving the city and third parties.

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