Michael Sullivan filed a small claims civil suit for a burned-out hot water tank against his tiny central Newfoundland hometown and got countersued for back taxes.
The case led him on a paper trail that includes a forensic accounting report indicating the town filed a claim on a $50,000 insurance policy to recover alleged misappropriated funds.
No one has been charged with any wrongdoing.
The RCMP is conducting an investigation into the town’s finances.
All of it is fuelling Michael Sullivan’s drive to not give in on his civil fight.
“I am not giving money to no one for nothing, especially when I paid (my taxes). It’s going to be a good fight, I will tell ya,” he said.
The town’s mayor — Terry Sullivan, a cousin of Michael’s — won’t discuss the forensic accounting report or town taxes. He said he can’t discuss the matter before the court case wraps up — the trial is set for June 12, 2017.
And the mayor said nobody besides Michael Sullivan has come to him with concerns about their tax bills.
He referred questions on the forensic report to the new town clerk. (The town office is closed until Dec. 5 and The Telegram has attempted to reach the clerk.)
But Michael Sullivan has plenty to say — he said he’s been to Municipal Affairs, the citizen’s representative and even the human rights commission trying to get his concerns looked into.
Michael lives in St. John’s, but also has a home in Brent’s Cove, once occupied by his mother, who’s now in a nursing home. Family members use it from time to time, he said.
In May 2015, when he was opening the house for the summer, he said he discovered the town had shut off his water, but the town clerk of some 23 years — who is no longer employed with the town — told him it was a water pressure issue and it was rectified.
The Telegram has left messages for the former town clerk.
Michael’s habit was to disable the element in the hot water tank when the home was unoccupied, but a relative who had used the house didn’t think to take that precaution, designed to prevent the element from burning out.
When his spouse, Brenda Haas’ mother died that November, the couple discovered their water had been shut off sometime in October, apparently due to his alleged unpaid taxes.
The couple say they discovered later only a few people had their water cut off, mainly those with primary residences out of the town of about 90 homes.
“We had to call out and pretty well plead and beg to open the house — ‘We have to go out. My mother died. We got family coming. We need the house open,’” Haas said of the town office. “They acted like they were doing us a big favour by turning on the water.”
The water was turned on for a few days to accommodate the grieving family. But the couple said the water didn’t get hot, only lukewarm, which they say was due to the element being burned out.
This ultimately led to Michael Sullivan filing his small claim suit against the town for the ruined hot water tank and some loss of use of the home as a result.
Meanwhile, the town’s countersuit says he owes back taxes — dating back roughly a decade. At one point the contested bill was as much as $4,700, Michael Sullivan said.
But that’s been whittled down now to $3,000 based on some receipts he’s since found.
The couple said on a trip out to Brent’s Cove, Michael would take money out of the bank and bring it into the town hall and pay his taxes. He didn’t keep track of his receipts and expected the town hall would keep copies.
The town only recently started taking debit payments, Haas noted.
The couple said he’s been double billed by the town, as he paid his taxes in full each year and was given no indication he was in arrears until the town hired a new clerk.
Michael Sullivan isn't the only resident claiming his water was cut off without cause.
Sandra Sullivan, who moved to Fort McMurray after her middle-aged husband died in 2012, also keeps her home in Brent’s Cove for summer visits.
She said she received a back tax bill for $2,200 in 2015 when she went home for a visit.
“I said, ‘No way in hell I owe this money,’” she said.
“I had to pay it. I had no other choice.”
She said she paid the bill to get her water turned back on but insists she and her husband, a fisherman, had always kept up with their bills. They paid the $750 yearly in cash installments, paying larger sums in good fishing months. Sandra said installment payments were routine for a lot of people in town, especially seniors.
“(The former clerk) used to say to me she can’t give me the balance — they got the books, the crowd in Gander,” she said, referring to a Municipal Affairs regional office.
She, Michael Sullivan and Haas say the former town clerk was a trusted member of the community and no one thought twice about paying in cash. Nor, said Michael Sullivan, did anyone worry about saving receipts for years on end.
Baie Verte-Green Bay MHA Brian Warr has talked to Michael Sullivan about the issue several times. He said he knows Michael as a customer at Warr’s family store in Springdale and describes him as someone who’s known to pay his bills.
Warr discussed the water cutoff issue with a town councillor and went to Municipal Affairs in Gander but ultimately was told the situation was a civil matter between Michael Sullivan and the town that’s before the courts.
He said he’s received another resident’s complaint similar to Michael Sullivan’s and has offered to mediate a public meeting for the town.
“There’s a lot of unrest in that community. It’s unfortunate that there is,” Warr said.
“They are hard-working, industrious people and it’s unfortunate they are all stuck on this situation now that it has raised its ugly head in the community.”
Hubert Burden, a retired municipal auditor who’s helped Michael Sullivan, said in his view, the town records are not reliable.
“The thing is, there is a responsibility on the town to retain proper records,” he said.
Michael Sullivan said he was offered a 25 per cent discount on taxes owing at one point but turned it down.
“If I owed the money, why would I be offered a discount? If I owed the money, I owed it,” he said.
He said he paid his taxes for 2016 to get the water turned back on but he won’t back down on the $3,000 bill he insists he doesn’t owe. Between days he and Haas have taken off work for court dates, paralegal fees and other costs, he said he’s paid almost as much to fight the bill as the town claims he owes.
Michael said after he received the forensic accounting documents he went to the RCMP, though the mayor said it was the town that referred the file to the RCMP.
Haas maintains other residents are telling the couple they’re upset about the tax situation, too, but they’re not weighing in publicly because they want to see what happens with his court case.
“If he did indeed owe back taxes, where are the reminders?” Haas said. “Where were the bills? Where are the threats to collection? Where was the action? There was none until … last year.”
“It’s not going to go away and I am going to make sure I’m not going to go away,” Michael Sullivan said.
“I am going to be at the court date 12th of June. I will be there with bells on.”
Town files insurance claim on missing funds: forensic accounting report
According to a forensic accountant’s report dated April 13, 2016, the Town of Brent’s Cove filed a claim on an insurance policy for economic loss due to “alleged employee dishonesty.”
No charges have been laid against anyone.
The town used no accounting software, but appears to have relied on manual entries in ledgers for bookkeeping.
The report by MDD Ltd. was commissioned by Cunningham Lindsey Canada Ltd., which cannot discuss it or even confirm its existence due to privacy laws, according to a official reached by The Telegram.
Michael Sullivan, a resident taking the town to small claims court, accessed it through a paralegal filing an access request. The town is countersuing Sullivan for back taxes.
According to the report, the town of about 180 residents used no formal account software system.
When the town clerk was replaced in July 2015, the new town clerk sent out invoices to residents with outstanding tax balances.
“Within hours, residents started to call and visit the municipality office claiming that they had previously made payments on their account and the invoices they received did not reflect their previous payments made, and were, therefore, overstated,” the report states. “A portion of the residents validated their claim by providing receipts and confirming their payment.”
The town claimed a loss of $57,479 over a 10-year period to its insurer, according to the report.
Forensic accountants calculated the loss at $49,429 to $50,000 (the policy limit) for the time period 2009 and 2012-15.
In letters copied to The Telegram, the Department of Municipal Affairs acknowledged a ministerial exemption was granted to the town in 2012 waiving the audited financial statements for the years 2005-’09 after the clerk requested it, saying the town could not afford yearly audits.
The letter noted the town is trying to collect back taxes and pay off the Newfoundland Municipal Financing Corp.
The department has received audited financial statements from the town for the year 2010 and onwards.
Retired municipal auditor Hubert Burden told The Telegram if towns legitimately can’t afford annual audits — required by the Municipalities Act — then the province should step in to subsidize them.