Big questions remain over sale of Watson Lake hotels

Chief Liard McMillan wants the public to take his word over his auditor's. That's an unreasonable proposition for any politician to make.

Chief Liard McMillan wants the public to take his word over his auditor’s. That’s an unreasonable proposition for any politician to make.

And it’s unlikely to resolve the controversy surrounding how Liard First Nation spent its $2.83-million share of the Northern Housing Trust.

The First Nation’s financial statements say the housing money was used to buy three hotels, with the intent of turning part of the Watson Lake Hotel into housing.

Yet, more than two years after the acquisitions, this hotel remains closed, its windows either boarded up or smashed.

McMillan insists the financial statements don’t paint an accurate picture of the transaction. No housing money was used to buy the hotels, he insists. Instead, the deal was much more complex.

According to him, the First Nation’s development corporation financed the hotel purchases with a bank mortgage.

A portion of the affordable housing money was later spent in a separate transaction, in which the development corporation sold part of the Watson Lake Hotel, called the Campbell Block, to the First Nation for housing.

Renovation plans for the Campbell Block have been hampered by the economic downturn, said McMillan.

His explanation raises as many questions as it answers.

The First Nation obtained this 10-unit building for $1.2 million in federal housing dollars. That’s a steep price, considering that McMillan says all three hotels were bought for no more than $3 million.

Two of the hotels, the Belvedere and the Gateway Motor Inn, are operating businesses. The Watson Lake Hotel, by contrast, was shuttered at the time of sale and continues to go unused.

It’s strange that one fraction of the shabbiest hotel would command more than one-third of the price of all three.

It appears an even poorer deal when you consider the $1.2 million was supposed to include payment for renovations for the Campbell Block, yet the building remains dilapidated and unoccupied today.

At least, this would be strange if it were a typical business transaction. But, of course, it isn’t.

The development corporation is the business arm of the First Nation. The transaction did little more than shift the housing dollars from one hand to the other.

And once this transaction was complete, how the money was later spent became nobody’s business but the First Nation’s.

And despite the chief’s objections, there are reasons to believe the trust money helped finance the hotel acquisitions in a roundabout way.

When the First Nation approved the Campbell Block purchase in May of 2007, the band council resolution makes no mention of the decision being based on providing affordable housing.

Instead, the building was bought to support the development corporation’s “business strategy.”

Yet the deal is structured in such a way that it ought to satisfy the territory’s bean-counters who are responsible for administering the trust money.

The First Nation faces scant reporting requirements, other than having to produce accounting to show that the money was spent on projects related to affordable housing.

There’s no requirement for the First Nation to demonstrate it received value for money in its purchase of the Campbell Block. And it appears unlikely that the territory will follow up to see whether the building is ever occupied.

There’s a lot we still don’t know. The biggest question remains how the federal housing money was actually spent.

We have McMillan’s word much of it was spent on housing. Nine houses have already been built, two more are on the way, and 35 houses have been renovated with trust money, he said.

Not everyone believes him. Disaffected band members grumble that the housing McMillan refers to was likely built with other money provided by Ottawa, and that they haven’t seen the renovations he says have been made.

There’s a simple way to clear this up. The First Nation is required to track how it spends its trust money. It should disclose this paperwork.

We’ve asked them to. They haven’t yet.

The First Nation should also disclose the original band resolution that authorized the development corporation to buy the hotels. We’ve asked them to release this, too. They haven’t yet.

Of course, many Yukoners will find the intricacies of the hotel deal less interesting than the political connections of those who benefitted from the sale. The hotels were owned by Archie Lang, minister of Community Services, and Pat Irvin, a past Yukon Party campaign organizer and a director of the Yukon Energy board.

McMillan insists he received no pressure from Lang, Irvin, or Premier Dennis Fentie to buy the hotels. Lang, Irvin and Fentie don’t want to talk about it.

McMillan points out he’s been a vocal critic of Fentie in the past, going as far as calling on his members to vote against the premier in the last election.

Fair enough. But it’s interesting to note that while the hotel sales have produced no shortage of controversy for the First Nation, the transaction appears to have helped Lang shake off a long-running controversy of his own, having to do with an outstanding loan for $246,535 he received from the territory in the mid-1980s.

Lang completed repayment of the loan shortly after the hotels were sold.

Was the loan partly repaid with federal housing money? No, says McMillan.

But he would be doing Lang a big favour by releasing more paperwork to substantiate what he says.

He’s produced some, including documents that show the First Nation’s internal transaction. But he still largely expects the public to take his word over his auditor’s.

If Yukon’s First Nations really want to be treated as equal levels of government by the territory and Ottawa, and to be seen as such in the eyes of the public, they could begin by disclosing the same information that a public government would.

In Liard First Nation’s case, that includes the band resolutions that spurred the hotel purchases, and documentation that shows how the trust money has been spent.

Contact John Thompson at

johnt@yukon-news.com.

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