ORNGE spinoff lands exclusive deal
December 20, 2011 By The Toronto Star
Dec. 20, 2011, Toronto - First, Ontario’s ORNGE air ambulance service paid $120 million for 10 new helicopters, purchasing them from an Italian aircraft giant in 2008.
Dec. 20, 2011, Toronto – First, Ontario’s ORNGE air ambulance service
paid $120 million for 10 new helicopters, purchasing them from an
Italian aircraft giant in 2008.
Then the Italian company’s American office struck a $6.7 million deal to hire a Toronto firm made up of ORNGE executives to provide it with “sales and marketing services.”
ORNGE will not discuss the deal. The Star has obtained a copy of the contract and related documents.
“With respect to your inquiry regarding the marketing services agreement, we do not wish to engage in public discussion of commercial agreements of Ornge Global, which is a private company,” ORNGE spokesman James MacDonald said in an email.
ORNGE, a non-profit agency that is paid $150 million annually in taxpayer money by the province to deliver air ambulance service, is under fire because it has created a web of for-profit consulting companies for which salaries are secret.
Virtually all the top executives who oversee the non-profit air ambulance service now work for the primary consulting company, according to documents obtained by the Star.
The provincial auditor general is investigating.
One of the for-profit companies was formerly called ORNGE PEEL. (The name was recently changed to ORNGE Global.) Its president is Dr. Chris Mazza, who is also president and founder of the non-profit, publicly funded ORNGE.
According to a recent “offering memorandum” to raise $15 million from investors to start a new business, Mazza owns a “majority” of the for-profit ORNGE company’s voting shares. The company plans to offer high-end emergency travel insurance coverage to wealthy executives and also provide air ambulance consulting service to corporations and to governments outside Ontario. Other ORNGE managers and board members own shares as well.
The new company wants to “leverage” its connection to the publicly funded ORNGE and will pay 3 per cent of gross revenues back to the public company, starting in 2014.
The genesis of the $6.7 million that Italian helicopter manufacturer AugustaWestland is paying the for-profit ORNGE for “sales and marketing” traces back three years. (Sources say this is seed money for Mazza’s for-profit company.)
In 2008, ORNGE purchased 10 brand new helicopters called the AW139 from Augusta to place at Ontario’s air ambulance bases. ORNGE has stated that the $120 million purchase price was paid for by selling a bond issue on the public markets.
ORNGE, which relies almost entirely on public funding, has not said how it will make interest payments to investors but the company insists that no taxpayers’ money was used for the purchase.
In June 2010, according to contract documents, Augusta’s U.S. arm in Delaware entered into an agreement with Mazza and ORNGE PEEL (now ORNGE Global) to hire the fledgling Toronto firm to help market the international aircraft giant.
The deal covered three phases spaced over 18 months, which are now complete. The initial payout for the three phases, according to the contract, was $4.7 million. Augusta recently signed an extension that will pay the ORNGE for-profit company an additional $2 million over two years, for a total payout of $6.7 million.
What did Mazza and his fellow executives do for this money?
In the first phase, they were to produce a marketing report for Augusta that would “identify international target market segments.”
In the second phase, the Toronto firm was to develop a global marketing program for medical helicopters and to help Augusta “mine opportunities.” In the third and final phase, ORNGE PEEL was to continue to develop “leads” and attend “events and tradeshows.”
ORNGE executives attended a trade show in Saudi Arabia with Ontario politicians and staff this past year.
The extension phase, for which their firm is to receive $2 million, requires them to provide more marketing assistance to Augusta.
The new company’s startup expenses include the leasing of a Hawker 800XP jet (to fly sick or injured executives home) and the establishing of a call centre.
Both the for-profit and non-profit ORNGE are housed in the same building near Pearson International Airport, where the non-profit call centre is based.
According to corporate information, ORNGE PEEL (now ORNGE Global) includes Mazza and ORNGE vice-presidents Maria Renzella and Rhoda Beecher. It also includes the chair of the non-profits board, Rainer Beltzner.
The contract between ORNGE PEEL and Augusta was signed by Mazza and Renzella and Augusta executive vice-president Louis Bartolotta.
The Star called and emailed Bartolotta, a company lawyer and the public relations official at head office in Italy. It has not yet received a response.
According to the offering memorandum, the publicly funded ORNGE is an “essential Ontario-wide service” that will serve as a model internationally for the profit-driven firm.
The for-profit company will “leverage ORNGE’s intellectual property and core competencies” in transport medicine, the offering memorandum states.
The non-profit ORNGE, publicly funded by taxpayers, will receive 3 per cent of the for-profits gross revenues beginning in 2014, the documents show.