Contrecoeur trial hears of privatization shock
Contrecoeur trial hears about merger of Montreal’s real estate agencies
The city of Montreal’s legal department learned “by accident” in 2006 that the administration of former Montreal mayor Gérald Tremblay had gone behind its back to privatize the city’s real estate agencies, the former director of the department testified on Thursday at the Contrecoeur fraud trial.
Line Charest, who became director of the city legal department in 2004, told the court that the privatization — and not just the way the administration went about it — raised concerns for the municipal lawyers in her department.
“It wasn’t the first time our opinion was not retained, particularly with this administration,” said Charest, who is now a judge at Montreal municipal court.
It was the newly privatized entity, the Société d’habitation et de développement de Montréal (SHDM), that sold the city-owned Contrecoeur land on the city’s behalf for a fraction of its municipal assessment to Construction Frank Catania et Associés Inc. in 2007 following a call for proposals.
Former city executive committee chairman Frank Zampino, who was Tremblay’s right-hand man, and five former executives of the Catania firm are on trial for fraud and conspiracy in connection with the land deal. One of the accused is the former head of the firm, Paolo Catania.
The merger of SHDM and a second paramunicipal agency, the Société de développement de Montréal (SDM), occurred during the time that studies were carried out by the pre-merger SHDM on the development potential of the vacant Contrecoeur land in eastend Montreal for 1,800 units of housing.
Charest testified that the administration asked her department for a legal opinion on whether the city’s paramunicipal agencies had jurisdiction on the territory of the new city that had been created with the 2002 municipal mergers on the island of Montreal.
Her department was informed of a plan to merge the SHDM and SDM into one entity, she said, adding that legally it was possible to merge two paramunicipal agencies into one with the approval of the province.
However, Charest said she discovered later that there was another “dimension” to the administration’s plans — and that was to transform the new entity into a private, non-profit corporation that would be arm’s length from the city instead of a paramunicipal agency.
It began when a lawyer from the Quebec Municipal Affairs Department called her one day to obtain a letter from Montreal’s top mandarin at the time, city manager Claude Léger, to confirm the direction the city wanted to go in with its agencies, she said.
She later received a copy of the city manager’s draft letter, Charest said, and that’s where she read that the administration was planning to transform the merged entity into a private company.
Her boss, Robert Cassius de Linval, who was director of corporate affairs at the city, had gone outside the city to obtain a legal opinion from a private law firm that said the privatization process was legal.
The lawyers in her department were “very surprised” by the administration’s manoeuvre, Charest said.
“It raised difficulties for us,” she said. “We were never consulted. It was never said in a transparent manner.”
Charest disagreed with the privatization and expressed her concerns in a letter to Cassius de Linval.
“I became very worried,” she told the court.
Among other things, her letter pointed out that unlike a paramunicipal agency, a private corporation is not subject to a Quebec law governing the contact-awarding process as are public bodies. As well, the city would not be able to dissolve the new company because the latter would be independent of the city.
The trial also heard testimony on Thursday from an SHDM manager.
Carl Bond, who has been director of property management for the SHDM since 2007 and previously worked for the SDM, told the court that the executive director of the newly created SHDM — Martial Fillion — was “a political man” who executed orders and was evidently not a career administrator.
Everyone knew that Fillion, who was arrested in the Contrecoeur case in 2012 and died in 2013, had served as chief of staff to Tremblay early in his first term as mayor, Bond testified.
Fillion, he added, appeared to be close to Zampino because he would often mention speaking with him and would refer to Zampino by his first name.
As an example, Bond described Fillion’s scared reaction when he discovered a clause in the approved sales contract for the Contrecoeur land that would require the SHDM to buy any unsold condos at a value that would be indexed by seven per cent a year.
Fillion said he would speak to Zampino to convince the Catania firm to renegotiate, Bond said. However, Bond said he didn’t know how the matter was resolved.
Bond was asked under crossexamination by Catania’s lawyer, Pierre L’Écuyer, whether he thought Fillion had the competence to head the SHDM. “No,” Bond said.
Bond also testified that the financial arrangement in the Contrecoeur deal concerning the land’s decontamination was something he’s never seen before.
Normally, a seller will subtract the cost of decontamination from the sale price, he said. Or, ideally, the seller will decontaminate the land itself so it can sell the land for as much as possible, he said.
In the case of Faubourg Contrecoeur, the city agreed to a financial contribution to the buyer to cover the cost of decontamination.