Toronto Port Authority releases Forensic Review Report

Allegation and/or Issue:

Summary of Certain PwC Findings (in each case based on the procedures performed and subject to the limitations of the Report)and

Other background information

1. In 2009, former TPA directors raised concerns of an alleged conflict of interest between a TPA Board member, Colin Watson, and the CEO of Porter Airlines that affected the Board member’s vote regarding the purchase of a new larger passenger ferry at the January 21, 2009 TPA Board meeting. That Mr. Watson should not have done so as he was a “friend” of Porter Airlines CEO Robert Deluce. That this vote was cast against the formal legal advice of law firm Davies Ward Phillips and Vineberg, dated January 21, 2009 (the “Davies Opinion”).

The federal Conflict of Interest Commissioner, Ms. Mary Dawson, investigated the concerns.

The Forensic Review considered whether the Conflict of Interest Commissioner appropriately addressed this matter.

• On June 25, 2009, the Federal Conflict of Interest Commissioner ruled that Mr. Watson was not in a conflict of interest when he voted in favour of the ferry acquisition and the related bank financing.

• PwC did not identify any anomalies with regard to the Federal Conflict of Interest Commissioner’s enquiry into the ferry acquisition vote and related financing.

• PwC, through its review of the applicable Board minutes, and interviews with available Board members, found no evidence of any complaints in relation to the TPA Board member’s alleged conflict when such matter was discussed at various times during 2008, including the August 11, 2008 Audit Committee meeting, the September 11, 2008, board meeting, the November 4, 2008 board meeting or the December 23, 2008 board meeting.

• PwC also noted that it reviewed a letter from Michael Disney of Davies Ward Phillips and Vineberg dated June 8, 2009, which stated that the Davies Opinion of January 21, 2009 did not specifically address whether Mr. Watson had a conflict in relation to the Board of Directors’ decision as to whether they should commission a new ferry, nor were they requested to do so by Mr. Henley.

• On December 23, 2008, the TPA Board voted unanimously in favour of executing a bank financing proposal to finance the acquisition of the new ferry, and also voted unanimously in favour of the concept of acquiring a new, larger ferry (Mr. Henley chaired the Board meeting in question and voted in favour).

2. The signatories to the March 2009 letter to Minister Baird raised concerns relating to payments made on the TPA’s account by TPA management at Harbour 60.

The Forensic Review considered the issue of whether management’s expenses and external hospitality at the Harbour 60 restaurant were contrary to the TPA’s purchasing policy for the period of January 1, 2007 until September 30, 2008.

• PwC found that TPA management’s expenses and external hospitality at the Harbour 60 restaurant were in accordance with the TPA’s Purchasing Policy.

• PwC also found that certain management travel and hospitality expenses, unrelated to Harbour 60 expenses, did not, however, technically comply with the TPA’s Expense Reimbursement Policy in one or more of four different categories: a) that they were submitted after the TPA’s 30 day expense submission deadline; b) were not submitted on the proper expense form; c) that they did not receive sign-off of appropriate supervisor; d) were claimed without the actual underlying physical receipt.

• In aggregate, the quantum of expenses found to not be in compliance with one or more of these four categories amounted to approximately $81,500 over a two year period (certain expenses fell into more than one category and were doubled-counted in the aggregate total as a result).

• Certain of these hospitality expenses received public attention and media comment in January 2009 and thereafter.

3. That London trip was not pre-approved and she [Ms. Raitt] signed off on it when I would not.”[1] That former TPA Chair Michele McCarthy “discussed” with management that the [2008] United Kingdom insurance mission “could have been accomplished by fewer people in less time?”[2] That then-Chair Ms. McCarthy asked for “justification” of this travel expense after it was incurred by TPA staff?[3] That Ms. McCarthy advised management that she would not sign Ms. Raitt’s expense UK business trip expense claim after the trip had been completed.[4]

• PwC found that the TPA Board of Directors specifically pre-approved the budget and the TPA management involved for the January 2008 U.K. Insurance Mission at its Dec. 10, 2007 board meeting. Ms. McCarthy was noted as the Chair of the meeting where the budget and travel manifest was pre-approved.

• PwC found no evidence that Ms. McCarthy discussed with TPA management how to save on the cost of the U.K. insurance trip.

• PwC found no evidence to support Ms. McCarthy’s statement that she advised Mr. Raitt that she wouldn’t sign her expense claim without additional justification.

• Ms. McCarthy refused to be interviewed by PwC’s forensic auditors to provide any support or back-up for these accusations.

• PwC also found that the $10,000 budget pre-approved by the TPA Board of Directors for the U.K. Insurance Mission was exceeded by approximately $600. This $600 sum did not exceed the former CEO’s approval authorities.

4. The former TPA directors, in their letter of March 2009 to Minister Baird, raised concerns about TPA management’s decision to engage Goodmans LPP (“Goodmans”) to obtain certain legal advice between May and November 2008. The Forensic Review considered the issue of whether management followed the TPA purchasing policy with the engagement of Goodmans and the expenditure of approximately $65,000 for legal advice during the relevant time period.

• PwC found that TPA management followed the TPA Purchasing Policy regarding payment of Goodmans LLP invoices for legal advice in 2008.

5. The Forensic Review considered the question of whether there was any impact or importance because of the existence of two sets of Board minutes. An article published by the Toronto Star in November, 2009 commented on the impact and importance of alleged differences between two sets of TPA Board minutes that exist in the corporate record for the TPA’s Board during the period of January 25 to December 10, 2008.

• PwC found with regard to the two versions of Board minutes that the resolutions raised and outcomes of motions carried did not differ.

• PwC concluded that the impact or importance of the differences noted in these two sets of minutes is “negligible”. PwC also noted that both sets of minutes have been preserved as part of the corporate record.

• For the majority of 2008, the TPA Board of Directors was split and, as a result, could not agree on the approval of TPA board minutes. David Gurin’s appointment by the City of Toronto to the TPA Board in the Fall of 2008 broke the vote stalemate and one version of board minutes was approved and filed on December 10, 2008; these were signed by Chris Henley. On June 4. 2009, a new majority of TPA board members approved a second set of board minutes, which were also filed with the previously-approved version.

6. In their letter of March 2009 to Minister Baird, the former TPA directors raised concerns about the termination of Davies Ward Phillips and Vineberg LLP’s (“Davies”) relationship as the TPA Board’s legal counsel at a January 21, 2009 Board meeting. The Forensic Review considered the question of whether there was anything in appropriate in the termination of the Davies role as either Board Secretary or counsel to the TPA.

• PwC reported that it did not find anything inappropriate with the termination of Davies.

• Carol Hansel, of Davies Ward Phillips & Vineberg LLP, advised PwC that the firm served the TPA at pleasure and that she did not find anything unusual or inappropriate with the manner that the TPA ended their relationship with Davies LLP.

• One of the issues Davies’ was involved with at the time of its January 2009 termination was Mr. Henley’s legal pursuit of 2008-era legal advice provided to TPA management by Goodmans LLP (see point #4 above).

7. In their letter of March 2009, the former TPA directors also raised concerns that they had “encountered significant difficulty in arranging a meeting with the auditor without management present...” The Forensic Review considered the question of whether the staff of the auditor, Deloitte & Touche LLP (“Deloitte”), made themselves available to members of the TPA Audit Committee and/or Board of Directors to answer questions regarding the financial affairs of the TPA during the fiscal year ending December, 2008.

• PwC found that Deloitte LLP did make itself available in 2009 to all members of the Audit Committee and Board of Directors to answer their questions and concerns regarding the financial statements.

• Deloitte provided PwC with copies of 2009-vintage notes, emails and memos taken by Deloitte LLP at the time reflecting dialogue with Mr. Gurin, Mr. Henley, Ms. McCarthy and Mr. Reid regarding their questions relating to the financial affairs and governance of the TPA. PwC was also provided with a Deloitte LLP memo dated June 23, 2009 that was prepared for all TPA Directors to answer their specific questions and concerns regarding the financial affairs and governance of the TPA.