Toronto Port Authority releases Forensic Review Report

Toronto Port Authority releases Forensic Review Report

Toronto – The Toronto Port Authority (“TPA”) today released a detailed forensic review of certain of its financial and governance activities from September 2002 until present, which absolved the TPA of 14 of 15 complaints brought by former Board members, TPA Board of Directors Chairman Mark McQueen advised today.

The independent forensic review (the “Forensic Review”), conducted by the Investigations & Forensic Services division of PricewaterhouseCoopers LLP (“PwC”) was undertaken at the TPA’s request to investigate, among other things, specific allegations made by certain former members of the TPA Board of Directors in March and November of 2009.

The special review was launched by the TPA in November 2009, after Auditor General Sheila Fraser declined the TPA’s written invitations of August 21, 2009 and November 11, 2009 to review the TPA to address the March 30, 2009 complaints of the aforementioned former TPA directors.

Following a resolution of the Audit Committee of the TPA Board on February 26, 2010, the TPA directed legal counsel Lang Michener LLP to engage PwC to conduct a Forensic Review of the TPA. The engagement was arranged via Lang Michener LLP as recommended by PwC as part of their standard process for forensic engagements. The questions considered in the Forensic Review were forwarded to PwC by the current TPA Board. The report released today has been made public in its entirety. PwC is the sole author of the Report, is responsible for its contents (subject to the limitations outlined in the report), and had sole authority to determine the findings that appeared in the Report.

“Based on our review of the findings in PwC’s Forensic Review, all but one of the 15 complaints lodged by the former Directors were groundless,” McQueen said. “As the TPA Board of Directors advised last Fall, we have nothing to hide and are committed to full transparency on the issues raised last year. This is why we initiated this exhaustive forensic review of all of these individuals’ complaints against the agency, its board and management.”

In a January 28, 2009 press release, following an initial internal review, the TPA announced that clarifications had been made to management policies governing hospitality expenses in order to tighten up existing guidelines.

McQueen noted that three former directors who had lodged the complaints on which the review was based, refused to meet with PwC, or provide any material to PwC, to support their claims about the agency and its management.

“With the completion of PwC’s Forensic Review, the TPA can now move on and continue our focus on meeting the increasing demands of Toronto residents and businesses to provide important services in an environmentally sustainable way,”

“Based on our review of the findings in PwC’s Report, it appears that staff’s one failure relates to breaches of the TPA’s Travel and Third-Party Hospitality Policies, a theme that was already reported on by various media outlets in January 2009. Between the recent Deloitte and Touche LLP 5 year Special Examination and the PwC Forensic Review with regard to the issues addressed in the Report, key elements of the TPA have been combed over by two different ‘Big 4’ accounting firms in the space of 10 months, which should satisfy any fair-minded person about the ethics and business practices of the organization,” said Mr. McQueen.

The TPA has forwarded a copy of the PwC Forensic Review to the Auditor General of Canada, as it undertook to do in its November 11, 2009 correspondence. It has also provided the report to the Minister of Transport, Infrastructure and Communities, the Hon. Chuck Strahl, P.C., M.P.

Further information about the TPA is available on the TPA website at


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Media contact:

Jeremy Adams, Director, Toronto Port Authority

c/o Janet Macdonald, Toronto Port Authority, 416-863-2003



In 2009, the Auditor General advised that she had no legal mandate to review the TPA, despite the current TPA Board’s invitation. As such, the TPA undertook to engage one of the ‘Big 4’ independent audit firms (other than its existing auditor Deloitte) and to provide the report to federal Auditor General Sheila Fraser upon its completion.

The TPA’s Request For Proposals for a forensic audit was approved on January 8, 2010 by the Audit Committee of the TPA Board of Directors. PwC’s billings to review the aforementioned complaints and prepare the Forensic Review amounted to approximately $500,000 over a 6 month period.

A summary of 7 findings of the 21 different issues considered during the PwC Forensic Review are set out in the table below, along with additional background information provided by the TPA as set out in italics (15 of these 21 issues were raised in the March 30, 2009 letter to Minister John Baird, with the remaining 6 being posed to PwC by the TPA itself):

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.


Other Highlights of the PwC Forensic Review and additional background information:

According to PwC’s report, Former TPA Chair Ms. McCarthy’s business development trip to London, England and Hamburg,Germany in 2005 did not comply with the TPA Travel Policy. Ms. McCarthy breached the TPA’s Expense Policy in two areas regarding this trip: no expense claim form was submitted, and no airfare receipt was provided for her $6,287 flight. Ms. McCarthy was first appointed to the TPA Board by the Province of Ontario in 2004, and was re-appointed in 2007.

Although Ms. McCarthy and her fellow former directors complained in 2009 about the ~$9,000 cost of the TPA’s annual Quarter Century Club luncheon at the Harbour 60 Restaurant in 2007 and 2008, which was held in honour of retired 25 year-plus TPA employees, PwC was provided with material suggesting that Ms. McCarthy actually attended this event herself as then-Chair of the TPA Board of Directors. In January 2010, the TPA Board of Directors terminated this longstanding event. Also in 2010, the TPA was unable to secure Ms. McCarthy’s agreement to sign the TPA Code of Conduct, as is required of all TPA Directors by March 15th of each calendar year under the Canada Marine Act, and as she had done in prior years. Although her second 3 year term expired on July 13, 2010, Ms. McCarthy remained a Director of the TPA until August 30, 2010, when her replacement was appointed by the Province of Ontario.

Other than Director David Gurin, the three other signatories to the original March 30, 2009 complaint letter refused to meet with PwC to back-up their accusations. In Mr. Gurin’s case, although he was interviewed by PwC, he had no new information to provide regarding the accusations, and the PwC report notes that although Mr. Gurin signed the March 30, 2009 correspondence to Minister John Baird, Mr. Gurin had no firsthand knowledge of most of the complaints cited in the letter as they predated his arrival as a Director of the TPA.

The Toronto Port Authority was incorporated on June 8, 1999, as a government business enterprise under the Canada Marine Act as the successor to the Toronto Harbour Commissioners. It is a federal public authority providing transportation, distribution, storage and container services to businesses. The TPA owns and operates the Billy Bishop Toronto City Airport, Marine Terminals 51 and 52, and the Outer Harbour Marina. The TPA also provides regulatory controls and public works services to enhance the safety and efficiency of marine navigation and aviation in the port and harbour of Toronto.


[1]Nov. 5, 2009 quote from Toronto Star article

[2]As per March 30, 2009 letter to the Hon. John Baird

[3]Nov. 5, 2009 quote from Toronto Star article

[4]Nov. 5, 2009 quote from Toronto Star article