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BLACK ROD EXCLUSIVE: Seven Oaks Land Scheme Swimming in Red Ink

The provincial government's report on O'Learygate is packed with bombshells, blackguards and bamboozlers.

The Seven Oaks School Division lost in the range of $200-300,000 on the Swinford Park land development, according to the report tabled by the Education Minister. Like true gamblers, the board is doubling up, hoping to recoup the loss and make some profit on the third and final phase of the project.

But the Division's numbers have been so far off the mark that the Public Schools Finance Board, which oversees school board spending, is having coniptions, and is hinting that the public should brace itself for a sea of red ink when all the accounting is done.

The report containing these details was released late last Thursday and reads like a reprise of the Crocus Fund audit: a runaway administration, unlawful activities, a total failure of oversight, inflated valuations, and a whistleblower dismised by a Cabinet Minister.

And then, there is the shadowy NDP connections to the principles of O'Learygate - - Brian O'Leary (SOSD), the former NDP campaign manager; Ben Zaidman (PSFB), an NDP campaign contributor; and even the development planner, who opposition members have called "certainly a very good friend of the NDP".

These connections bring down accusations of favoritism and tolerating an absurd level of skirting the rules.

There is even a cover-up, which has it's beginning in the Minister's office, and which, after a circuitous route, returns there.

And the news media, which has been accusing the NDP all week of missing the red flags of the Crocus scandal, had a mass attack of colour blindness and hasn't yet recognized what is right under it's collective schnozz.

The story starts in 2001 when the SOSD bought land north of the sewage treatment plant on Main Street. They got a deal on the land which they figured on using to build a new high school to replace the aging West Kildonan Collegiate.

But in January 2002, the PSFB refused permission to build that new school. They said they planned to expand WKC instead. Seven Oaks decided to keep a parcel of land for a new K-5 or K-8 school, and sell the rest. ( Here, to assist the non-conspiratorial, we will identify and highlight the RED FLAGS of O'Learygate.)

In April 2003, the trustees of Seven Oaks notified PSFB they would sell the residential lots on their land through public tender. But they wanted to shorten the public tender to 30 days or less (RF). The PSFB approved this unusual request the very next day. (RF)

Barely 3 weeks after the close of the public tender, SOSD was submitting plans to the City for a new subdivision. Not being in the business of land development, this seems to us to be a rather short time to prepare and evaluate a plan. (RF)

At the time SOSD indicated they expected to sell the lots for $1.8 million and spend $670,000 providing services, for a profit of $1.2 million. Sweet.

The school board continued to acquire parcels of land throughout 2003, to add to their holdings. Then on Thursday April 29, 2004, their lawyer wrote to PSFB asking for approval of lot sale agreements that had already been submitted to the Winnipeg Land Titles Office. The legal terminology for that, we believe, is "fait accompli, sign here." (RF)

Three days later, on Sunday May 2, O'Learygate began to unravel.

A concerned citizen sent an email to the Minister, Peter Bjornson, pointing out that the school division was spending large sums of money to install roads sewers and other services and was acting as a land developer. He asked what mandate they had to do this.

The email would have been read the next day, on Monday, after which 2 things happened.

First, there was a flurry of panicky activity on the parts of SOSD and PSFB (RF), while Education Department officials doddled and dragged their feet on addressing the complaint.

Then, the report states, everyone developed collective amnesia. (RF)

The report says standard operating procedure was not followed at any step, and the entire handling of the matter was "highly unusual". (RF)

Let's rewind and watch the events in slow motion to appreciate the cover-up at work.

* The email was, we believe, read on the Monday. That very day, SOSD sent signed lot sale agreements to PSFB by courier. The PSFB had directed the board to return proposed unsigned lot sale agreements. (RF)
* On Wednesday, the documents were approved by PSFB after they 'showed up' at a regular meeting. They were not listed as an agenda item but were, to quote the report, "walked in at the very end of the meeting". (RF)
* No one recalls who brought the documents to the board meeting or how the issue was presented. (RF)
* Standard practice called for the PSFB to get a written analysis of the documents with recommendations, but their staff (which had the documents for 2 days) had done no analysis. (RF)
* In fact, the PSFB Project Leader says he never saw the documents (RF) nor did he read them after the meeting. (RF)
* Normally matters requiring some kind of analysis are deferred to the next meeting but not in this case. (RF)
* Policy requires a meeting between PSFB and a school division before surplus land is sold. There was no meeting with SOSD. (RF)
* The PSFB didn't wait until the next board meeting to ratify the sales as is normally done. They called SOSD with the news the very next day.

A reasonable person looking at this evidence could conclude that there was a leak from the Minister's office about the whistle being blown, prompting the School Board and the Finance Board to rush around to dot the i's, cross the t's, and rubber stamp everything in sight - regardless of how many rules were bent or broken, rules which were designed to act as checks and balances on improper behavior.

The report mentions 2 explanations for how this happened.

The PSFB says they were never explicitely told SOSD was developing the lots. The trustees maintained it was "sufficiently clear" what they were planning and doing.

So you have a choice.

If you believe PSFB, then the School Division was pulling a fast one on everybody; if you believe the School Division, there was a conspiracy by both public bodies, to sidestep the law preventing school divisions from becoming land developers.

But what about that complaint?
It was received Sunday May 2, but only ten days later was it forwarded to the PSFB Executive Director for a response. And it took another 2 weeks before the Minister wrote to the citizen that nothing was wrong, and that he should take his concerns about community development to the school division !

The report finds the footprints of the cover-up lead the complaint away from his office and bring it right back to Bjornson's desk.
* the PSFB Project Leader says he didn't read the complaint (RF)
* the PSFB Executive Director spoke with the SOSD Secretary-Treasurer about how to respond to the complaint but did not ask if the division was acting as a land developer. (RF)
* Seven Oaks, faced with the question in the complaint, did not offer any explanation of it's activities. (RF)
* There was no investigation of the complaint by examining existing documents (RF)
* the PSFB Executive Director says his response was reviewed by the Chairman, Ben Zaidman, who does not recall seeing a draft response. (RF)

The new motto of the Seven Oaks School Division appears to be "nobody knows nuttin', see? nyaah."

The official report determined that the Minister's letter to the whistleblower was "INCORRECT AND INAPPROPRIATE".

In black and white, the cover-up was exposed. Not that you'd know by relying on the news media in this town.

Even more inappropriate, was the June 30th, 2004 audited financial statement produced by the School Division. They overstated it's revenue from the sale of the lots, by almost ONE MILLION DOLLARS. The report doesn't say who is responsible for this misleading information.

However the report notes that subsequently the SOSD auditor advised the division that the financial statement should have said they would make $1.8 million and not $2.8 million.
Keep in mind that O'Leary told the media, that they would make a profit of $700,000 and have a fully serviced site for a new school to show for their efforts as well.

The Black Rod notes that the corrected revenue, means that the Seven Oaks School Division has actually lost $196,859 on the illicit venture.

And that's not all.

SOSD says they sold 54 lots. But they only owned 51 lots. That means at least 3 of those lots were held in trust for other owners and so, the money from the sales goes not to the division but to the private landholders.

That decreases the revenue to SOSD by an estimated $102,000, bringing the total loss to about $300,000.

The Department of Education report notes great concern about the School Division's accounting, and has directed the preparation of new financial statements to be "in accordance with generally accepted accounting principles (GAPP)." They have also ordered a special audit when the Swinford Park project is complete, "that provides a full and transparent accounting of all revenues and expenses." The Department also found that SOSD tied up almost $900,00 of their operating funds when they expected to only use $400,000.

The Department is very worried about the possibility of a deficit and states in the report "this situation need to be carefully monitored."

Lost in all these details, is the fact that the Department of Education has scrapped the plan to refurbish the West Kildonan Collegiate and instead plans to build an entirely new high school.

Now O'Leary has shown up at community meetings urging the construction of the school in River Ridge along with a new housing development. He says if the housing is not built taxpayers will be on the hook for another $2 million, to service the new school site.

This is New Democonomics at its' best: the school board will spend $2 million dollars, twice over, for the same school.

In our next look at O'Learygate, we tell of our visit to the scene of yet another land development project, in search of the answer to the question: was the whistle blown before Seven Oaks could pull off their master plan?

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