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Ontario taxpayers paid part of ORNGE spending spree

Jan. 20, 2012, Toronto - Ontario taxpayers did fund much of ORNGE air ambulance’s wild spending spree, the Toronto Star has learned.


January 20, 2012
By The Toronto Star

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For close to a year, ORNGE officials have maintained that all of their
big expenses — buying helicopters, airplanes, a new office building —
were paid by private dollars raised on the open markets.

The Star has confirmed that even though money was raised from private
investors, the interest and principal payments to those investors comes
out of the $150 million Ontario taxpayers give ORNGE each year. Private
investors contributed $275 million to ORNGE in 2008, with a return of
5.7 per cent interest per year. The public is paying them back.

The confirmation first came from documents obtained by the Star and then
in an interview with ORNGE chief operating officer Tom Lepine and new
ORNGE president Ron McKerlie.

“Yes, the money comes from performance agreement dollars,” Lepine said.
The performance agreement is between the Ontario ministry of health and
the non-profit ORNGE and provides $150 million a year in public funds in
return for the air ambulance service.

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Forensic auditors from the provincial ministry of finance are at ORNGE’s
headquarters digging into the records. With an order to “follow the
money” the auditors are faced with a tough task: In the byzantine mix of
non-profit and for-profit firms created by ORNGE in a flurry since
2008, plus many high salaries and perks, what did public money pay for
and what purchases were privately funded. Also, auditors are trying to
find out if publicly funded assets were used for private gain.

As auditors move in and out of the ORNGE building they pass a beautiful
orange motorcycle, one of two “ORNGE choppers” custom built by Orange
County Choppers for the US television show, American Chopper. The
motorcycle on display cost $50,000 and the original, now in storage in
the New York State, cost $100,000, ORNGE spokesman Gannon Loftus said.

Both were paid for by Agusta Westland, the Italian helicopter company
that sold 12 helicopters to ORNGE in 2008 for an estimated $144 million.

According to ORNGE, Agusta gave the motorcycles as a gift to ORNGE. The
Star has reported that Agusta also agreed to pay $6.7 million to Ornge’s
for-profit companies for “marketing services.” That deal is being
investigated.

The Star has asked for documents showing what top ORNGE executives did
for that money and ORNGE is looking for the paperwork. New ORNGE
president Ron McKerlie said “I would like to see a copy of that, too.”

Several years ago, former ORNGE president and founder Dr. Chris Mazza
and other ORNGE executives decided they needed to buy new aircraft and
phase out the way air ambulance was previously delivered. Until 2008, a
group of private air carriers fitted out as air ambulances were hired on
“standing agreements.” With ORNGE now owning aircraft, six of those
carriers have gone out of business.

The purchase of the 12 helicopters and 10 Pilatus airplanes (all for air
ambulance purposes) was funded by investors who kicked in $275 million
to buy bonds. ORNGE also used the money to buy its $15 million head
office and to renovate the structure and outfit it with fine furniture.

How are those investors being repaid? From the $150 million taxpayers pay each year to the Ontario air ambulance service.

As Mazza expanded the air medical service, decisions were made very quickly and there were missteps along the way.

For example, the Star recently went looking for the 12 helicopters, each
purchased for about $12 million (with additional expenses to outfit
them as flying medical units). We could find only 10. It turns out that
ORNGE needed only 10 — the others are in a warehouse in Philadelphia,
for sale.

A helicopter source told the Star that the Agusta helicopters, called
the AW139, will likely be sold to an offshore oil rig company. Who gets
the funds for that is unknown because of the complicated structure of
the company that actually owns Ontario’s fleet of air ambulances.

The company that obtained the $275 million is called ORNGE Issuer Trust.
The Star has asked ORNGE for a list of the investors, but spokesperson
Gannon Loftus said the businesses that contributed money are
“institutional investors” and he cannot disclose their identity without
their permission.

ORNGE Issuer Trust is the owner of all of the aircraft and leases the
helicopters and airplanes back to another company called ORNGE Air,
which provides air ambulance service.

A new attempt by ORNGE to raise up to $20 million on the public markets
collapsed in the last month. According to ORNGE documents, the money
would help fund the creation of air ambulance services in Brazil and
Saudi Arabia for governments that want Ontario’s expertise. The new
funds were also earmarked for a business that would provide “executive
risk” insurance for top corporate performers internationally.


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