Council settles with MFP for $9.65M

Toronto councillors have accepted legal advice to pay $ 9.65 million to MFP Financial Services Ltd. to settle a lawsuit stemming from a controversial computer lease, according to one councillor.

Councillor Doug Holyday ( Ward 3, Etobicoke Centre) said city council had adopted a confidential report on the settlement in a closed session.

While Holyday wouldn’t disclose the details, the Toronto Star learned earlier that the proposed settlement involves the city paying $ 9.65 million to MFP, which is now known as Clearlink Capital Corp.

Councillors amended the report, but Holyday said the amendment — not made public — doesn’t affect the basic terms of the settlement proposal.

“ No, it doesn’t screw up the settlement, but it adds another twist to the matter that doesn’t need to be there,” he said. The lawsuit arose after the city leased thousands of desktop computers and software from MFP in a three- year council- approved deal that was supposed to cost $43 million. The lease was then extended to five years and the cost more than doubled without councillors’ knowledge. The city sued MFP, which countersued, demanding the city make payments it claims are due.

Justice Denise Bellamy, who conducted an inquiry into how the cost of the lease doubled without council’s knowledge, released a scathing report last month criticizing politicians and senior civil servants, saying they had failed to carry out due diligence or protect the city’s interest. The city’s legal opinion said Bellamy’s report severely damaged its case. The opinion said the city has an 80 per cent chance of losing in court, and losing would likely cost the city more than $20 million. Mayor David Miller told reporters on Friday he had resisted trying to settle the suit earlier, though some councillors had argued for it.

“ I felt very strongly several years ago that we needed the inquiry to go through its course,” he said. “The evidence in the inquiry was damning. Unfortunately it was much more damning about city staff’s actions and some elected officials than it was about MFP,” Miller said.

“ But we couldn’t know that until it was done, and we have to accept that the results of the inquiry have an impact on the litigation.”

Miller argued that the proposed settlement still has positive aspects.

“ We will have saved about $ 10 million based on what they claimed in their lawsuit.” But the mayor said he was unhappy that the settlement proposal had become public.

“ Leaking that sort of information is totally, totally inappropriate, and we’re going to take some steps to prevent it because the city’s interest gets compromised,’’ the mayor said.

‘‘ It could cost the city a lot of money.”