ACOA write-off $38.8 million

“There’s a fair amount of political interference into the way the loans were given. That’s not new. That’s traditional. Unfortunately, people in an agency like the Atlantic Canada Opportunities Agency are influenced almost too much by their political masters.”

To have greater success, O’Brien said ACOA should operate more at arm’s length.

He acknowledged ACOA has supported successful ventures, but quipped, “I could close my eyes and throw darts at a dart board and eventually I’d hit a bull’s eye.”

O’Brien said because the process of awarding funding is not as apolitical as it should be, “loans are given out knowing damn well they will never get them back.”

Still, he said, regional development agencies across the country are no better.

O’Brien said the only problem is that the image surrounding economic development in the Atlantic region — because of its have-not history — suffers when things go awry.

ACOA loans are unsecured and interest-free.

Straight business grants were discontinued in 1995, although smaller grants were awarded for technology and lately, for productivity and business skills.

But ACOA spokesman Doug Burgess pointed out that none of the projects ACOA helps through its business development lending arm receive 100 per cent funding.

He said on average, ACOA gives the green light to about half the proposals it receives, but the loans generally represent less than a third of a project’s total costs. ACOA’s current loan portfolio is $86 million, involving 600 projects.

“Chartered banks will often come onboard with a project after ACOA has done a business case analysis providing an element of the funding,” he said.

The agency does not always pursue court action to recover defaulted loans, which is evident since the court judgments represent only half of what’s been written off.

ACOA often files the claims to prevent future tax writeoffs when the business is sold to a profitable company.

Between April 1, 2000 and March 31 of this year, ACOA filed 54 statements of claim. Some of them are still before the courts, or did not continue.

For clients who had a statement of claim filed against them, ACOA has recouped $1.07 million, with legal costs tallying $215,599 over the decade.

It also recovered $1.29 million in defaulted or written off loans through compromise settlements with clients or though a memorandum of understanding it has with the Canada Revenue Agency to access tax refunds, Burgess said.

The court actions contrast with the glowing announcements made when the companies were initially funded.

The west coast Genesis Organic Inc., for which ACOA was awarded a judgment of nearly $1.2 million on unpaid loans in 2005, was celebrated in a 1999 ACOA news release as tapping into a growing demand for environmentally friendly gardening products.

It had been transforming soft-wood bark from Corner Brook Pulp and Paper and fish waste from local fish plants into a nutrient-rich organic compost.

The dog8it! Inc., a gourmet dog biscuit company, was heralded by both the province and ACOA back in the day.

"Thedog8it! Inc. is a fine example of the entrepreneurial spirit that exists in Newfoundland and Labrador," said George Sweeney, then parliamentary secretary to Industry, Trade and Rural Development in a 2002 news release from the then Liberal government during a trade mission to New York.

But the company is now defunct and ACOA was awarded a judgment of nearly $156,000.

Again, ACOA has not revealed the amounts that any of the companies targeted with statements of claim have paid.

Consilient Technologies, the defunct St. John’s software company, was ordered to pay almost $7.7 million plus interest and costs to ACOA.

On Nov. 18, 2008, the privately held Consilient was taken over by one of its lenders, Toronto-based Quorum Capital.

At the time, Consilient’s then-president and CEO said the company was working on a restructuring plan and expected the company would continue to be based in St. John’s. Days later, Consilient closed its doors.

Griffiths Guitars International Ltd. was taken to court for nearly $1.2 million.

The company, which was established in 1999 by Chris Griffiths, touted a patented invention known as the active bracing system — a one-piece, composite brace that resembled a guitar skeleton.

Nearly a decade later, the company was sold to Nashville-based Gibson Guitar company for just under $1 million, after having entered voluntary receivership.

A  factory producing the guitars in Mount Pearl closed last year and the instruments were sold off in the local market, according to a former employee.

The company 10619 Newfoundland Inc.-True North Springs was taken to court for $1.26 million owed to ACOA.

That bottled water brand was the subject of a legal dispute over the name which ended in victory for McCurdy Enterprises Ltd. of Gander.

McCurdy bought the assets of the defunct True North Springs Ltd. in 2004.

McCurdy owner Jerry White, once involved in an unsuccessful plan to export water in bulk from Gisbourne Lake, said the statement of claim is against the former owner of True North and he’s been able to resurrect the brand.

It is marketed in this province and New England.

White, who insists he’s never taken a dollar of government money, said True North could have been successful from the beginning and blamed its original failure on bad management, pure and simple.

“What it was was no management. It is working now, since I got a hold of it. It certainly could have worked the first time. There was the wrong people there managing it,” White said.

True North was shut down for two years after White first bought the assets, but now has 10 or 11 employees.

“I have no regrets whatsoever. It’s done well for us,” White said.

He doesn’t think much of ACOA’s collection record.

“No boy, that is still pretty heavy duty,” he said of the amount written off. 

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