Alfred Apps defends Ornge's use of private companies

TORONTO - Former Liberal party president Alfred Apps insists Ontario's troubled air ambulance service did "nothing wrong" in setting up a web of spinoff companies that are now under a criminal probe.

Apps, a lawyer who acted as a legal adviser to Ornge, lashed out at the media and the province's auditor general Wednesday for "totally misunderstanding and misconstruing" Ornge's corporate structure, which he helped set up.

"The structure was not in any sense a private empire or conglomerate or web of companies designed to reward private interests of Ornge management," he told a legislative committee that's investigating Ornge.

In his March report, auditor Jim McCarter found that Ornge set up "mini-conglomerate" of spinoff companies owned by its senior officers, which used public money to make "questionable" business deals.

Among them was last year's $15-million purchase of a building to serve as Ornge's headquarters by one of its for-profit subsidiaries. The company then leased it back to Ornge at a rate that was 40 per cent higher than fair-market rent, McCarter found.

That allowed the subsidiary to obtain $24 million in financing for the building, $9 million of which was intended to flow back to a related for-profit company that was owned by a senior Ornge manager.

Apps, who started working for Ornge in 2007, vehemently denied McCarter's findings, saying his report is "misleading, "incomplete" and "riddled with errors."

The building deal was a credit lease transaction, a "common practice" among corporations and governments that was designed to benefit taxpayers, Apps said.

PricewaterhouseCoopers even vetted the deal, said Apps, who has strong ties to Ontario's governing Liberals.

"From a layman's perspective, it wasn't much different than increasing your mortgage to finance sending your kids to college," he said.

But McCarter is standing by his report, noting that both Ornge and government agreed with his recommendations and admitted there wasn't enough oversight.

"I clearly think our report is bang on," he said.

Apps said neither Ornge nor its lawyers misled the government, which was fully informed about its structure and plans for a $275-million bond offering in 2009, and raised no objections.

Finance Minister Dwight Duncan insists Ontario taxpayers aren't on the hook for the $275-million debt that's still being paid off, even though it's part of the provincial debt and the government still provides all of Ornge's funding -- about $150 million annually.

The only "issue" at Ornge was the $1.4 million salary of ousted CEO Chris Mazza, which he knew nothing about, Apps said.

Mazza's pay was also not disclosed in the province's annual list of top-paid public sector workers.

Guy Giorno, past chief of staff to Prime Minister Stephen Harper and former Ontario premier Mike Harris, was the lawyer who advised Ornge about matters of salary disclosure and regulatory compliance, Apps said.

The scandal that's engulfed Ornge isn't rooted in a lack of transparency or governance by the company or a lack of oversight by the government, but a complete misunderstanding by civil servants of how public-private partnerships work, he said.

He had no knowledge of any wrongdoing -- criminal or otherwise -- by anyone associated with Ornge, he said.

If Apps is to be believed, Ornge's controversial corporate model -- which left millions of public dollars unaccounted for -- should be emulated elsewhere, said NDP health critic France Gelinas.

"I have never been in such a spectacle where somebody can turn a story of corruption, of wrongdoing and put it back at our feet as something that we should be proud of and we should try to replicate," she said. "It takes some big cojones."

Apps said he never benefited financially from the spinoff companies and the only money he received for his work for Ornge was his salary from legal firm Fasken Martineau, which he left in January to join Wildeboer Dellece LLP.

Apps said he had always planned to leave Fasken once he stepped down as party president and join Wildeboer, where his brother works.

However, the Opposition Conservatives say Apps' dealings with the Ontario government raise questions about whether he was acting as an unregistered lobbyist for Ornge.

The Tories circulated an undated letter from Apps to Mazza outlining Mazza's "talking points" for a lunch with then-health minister George Smitherman.

"My advice: Downplay meeting with the premier, perhaps not even mention it at all -- you happened casually to meet him at a reception last month and had a general chat about successful transition," the note advised Mazza.

"I will call you separately this morning to report on contact with the minister."

Apps, who earlier denied that he met with elected officials about Ornge, said he didn't personally contact the minister. But he couldn't elaborate further, saying he'd have to check his records to clarify what he was referring to in the letter.

Apps said he did contact Don Guy, Premier Dalton McGuinty's election campaign director and former chief of staff, twice to "make sure we were anticipating and thinking about the issues from the government's perspective appropriately."

"Don had a very broad overview of the thinking of government and he was very helpful in providing us the benefit of his judgment and his advice," Apps said.

Guy, who had his own consulting firm, billed Fasken Martineau for his work, he said.

The committee has asked Speaker Dave Levac to issue a warrant for Mazza, who was replaced in January along with Ornge's entire board of directors, to appear on May 16.