'Groupthink' cited in concert cash audit

A "groupthink" mentality prevented Halifax officials from asking questions about a secret deal with a concert promoter that ended up costing the municipality nearly $360,000, according to a report by the city's auditor general.

Larry Munroe said several senior officials ignored warning signs because they had an "overwhelming desire" to bring concerts to the Halifax Common in the city's continued quest to compete with Moncton, N.B., in hosting outdoor concerts.

Munroe said Mayor Peter Kelly and Wayne Anstey, the city's former chief administrative officer, didn't flag concerns about continued financial support for two outdoor concerts last year that ultimately lost money.

"Given the level of experience and involvement of Mr. Anstey and Mayor Kelly in the public sector, each of these individuals should have known something out of the ordinary was occurring and should have asked more questions to determine whether what they were contemplating and or doing was appropriate," the report said.

"Continued risk assessments and monitoring as to performance of each concert opportunity appeared to be deliberately overlooked by individuals who were heavily involved with negotiations and subsequent requests for supplemental funding."

Munroe's 96-page report into the concert cash scandal was released on Tuesday.

Last year, promoter Harold MacKay was advanced $400,000 — without the knowledge or consent of Halifax regional council — just before two summer concerts on the Halifax Common. Tickets sales were poor and the municipality ended up losing $359,550.

Councillors only heard about the deal months later. The ensuing fracas led to Anstey's resignation and raised questions about Kelly's involvement.

"The report is clear. I've taken responsibility, I've apologized for the outcome. It won't happen again. We're moving forward," Kelly told reporters on Tuesday.

"With concerts, of course, one would like always to be on the top of the game when it comes to events and with the competition between P.E.I. and Nova Scotia and also Moncton, you want to do the best you can. But the fact is that we have to make sure whatever we do is in the realm of policy and procedure."

Call police?

Coun. Sue Uteck said she believes the report makes it clear that Kelly must have known what was going on and there are more questions that need answering.

"I think for me — as a councillor and also as a taxpayer — I'm looking at the recommendations but I want to know how we're going to recover the money," she told CBC News.

She suggested a police investigation might be needed.

"Why was council completely left in the dust? Why was legal sent the run around? Why was our chief financial officer not informed? Those are questions that can't be answered through an audit," Uteck said.

After heated arguments, council voted not to discuss the auditor general's report. The issue was moved to a committee that will meet in the coming weeks.

At a news conference after the executive summary of the report was released, Munroe refused to answer any specific questions about the mayor, telling reporters that it wasn't his job to investigate individuals.

Munroe's report said senior city officials acted in a "cavalier manner" throughout the controversy.

He suggested ethics training for managers and councillors as part of more than 50 recommendations contained in the report.

The report also recommends regional council seek legal advice on the necessity of paying the remaining $359,550 invoice because the transactions were likely not legal under the Halifax Regional Municipality Charter.

Trade Centre Ltd. changes

Almost half of Munroe's recommendations deal with the city's relationship with Trade Centre Ltd., the provincial Crown corporation which runs both the Metro Centre and Ticket Atlantic. It was the CEO of Trade Centre Ltd., Scott Ferguson, who wrote the cheques to the promoter after MacKay reported lagging ticket sales.

"Instruct Trade Centre Ltd. to update the banking arrangements so that cash transactions for each entity, for the Metro Centre, Trade Centre and Ticket Atlantic take place in separate bank accounts. This would be keeping in our view with normal business practices," said Munroe.

He said if Halifax Metro Centre accounts or funds are used for anything other than the operation of the centre itself, then it needs pre-approval from council.

The report is also critical of Ferguson, saying he was an active participant in what happened.

"We recognize that change is required and I take full responsibility for ensuring we make the appropriate changes to be more accountable," Ferguson said in a statement.

"A series of changes are already underway to improve our operating processes and governance practices and we will act on all of the auditor general's recommendations that impact our operations."

City as 'risk taker'

The auditor general wrote that a culture of "groupthink" eventually took over and reflected a culture that lacked "an attitude of questioning, follow-up or accountability at the highest levels."

That, he wrote, led to the city changing from a venue provider to a "promoter and risk taker" when it came to concerts held on the Halifax Common.

"People moved towards trying to ensure that there were concerts on the North Common," Munroe told reporters.

"I think we wanted to be on the map."