St. Joe’s CEO chairs mortgage firm that got bailout
Kevin Smith disclosed his relationship with HOOPP; didn’t vote on cash infusion
St. Joseph’s Health System CEO Kevin Smith is a key figure in a major mortgage company that received a massive bailout from a health-care pension fund.
Smith is chair of the board of Home Capital Group, which was grappling with a series of problems including the collapse of its stock price and a sudden withdrawal of hundreds of millions of dollars from subsidiary Home Trust’s high-interest savings accounts.
He was also a director of the board of the Healthcare of Ontario Pension Plan (HOOPP) when it gave the struggling company a $2-billion line of credit.
Smith disclosed his relationship with HOOPP and didn’t vote on the cash infusion, Home Capital spokesperson Boyd Erman wrote in an email to The Spectator Friday.
The pension fund’s CEO said its board was not involved in the investment decision announced Thursday and Smith has since resigned from HOOPP.
“Kevin played no role on the HOOPP side,” Jim Keohane, CEO of the pension plan, told The Spectator. “There is no conflict … He’s a very by-the-rules guy.”
Keohane himself had been a director of Home Capital since last year.
“I just recused myself,” he said Friday. “I essentially left the board on Tuesday before we got involved in this deal and once we signed the deal, I resigned from the board.”
Home Capital announced Keohane would no longer be a director due to potential conflicts of interest. “Conflicts do arise in business situations, you just have to handle it appropriately,” said Keohane. “In this case, it
was handled appropriately.”
HOOPP manages more than $70 billion of retirement funds and will receive a $100-million non-refundable fee plus 10 per cent interest on money provided to Home Trust through the agreement.
“It’s a very attractive deal for HOOPP,” said Keohane.
“We’re lending money against a pool of mortgages. For every dollar we lend to Home Capital, they give us $2 of mortgages to cover that. In other words, if they don’t pay us, we can then sell those mortgages to recover our capital. It’s very low risk … The odds of us taking a loss are remote.”
Smith was unavailable for comment Friday.
He would have had to get permission to be on the HOOPP and Home Capital boards from the hospital systems he leads — St. Joseph’s and the Niagara Health System, said Marvin Ryder, assistant professor at McMaster University’s DeGroote School of Business.
The province reported Smith made $726,315 in pay and taxable benefits in 2016 as CEO of the hospitals.
“I would have said, ‘Do the break before you do the deal as opposed to simultaneously with it,” said Ryder.
“But technically,” he added, “there’s no violation here. Part of the reason why is that for this to be a true conflict of interest, both men would have to be getting something out of this … I don’t think either of the two gentlemen are personally benefitting.”
On Wednesday, Home Capital’s share prices plunged 65 per cent on news that it was negotiating with an unidentified lender. The stock regained about half its losses on Thursday, after the deal was finalized.
“It’s a wonderful investment opportunity for a pension fund with very little risk,” said Ryder.
The president of the Ontario Nurses’ Association, Linda Haslam-Stroud, sits on the HOOPP board and says she has no concerns about the deal.
“There’s no conflict of interest,” Haslam-Stroud said.
“Everything has been in accordance with all conflict of interest guidelines.”
•with files from The Canadian Press jfrketich@thespec.com 905-526-3349 | @Jfrketich