OK, I thought this was all over with the AG’s report.  But on Monday the very last shoe dropped, so here I am again.  

What happened?  Well, you may recall that in the initial affidavit submitted by Laurentian to the Companies Creditor Protection Act (CCAA) proceedings, two exhibits – labelled “EEE” and “FFF” – were kept sealed from the public.  The former was a letter from the Minister of Colleges and Universities, Ross Romano, to Laurentian University, dated 21 January 2021 and the latter was Laurentian’s response, dated 25 January.   They were sealed at the time because they were said to have contained information prejudicial to Laurentian during the CCAA process that Laurentian entered five days later on January 30th.

Well, Laurentian came out of CCAA on Monday, meaning those documents were suddenly unsealed and Boy Howdy, “prejudicial” might be the understatement of the decade.  Anybody interested in the governance of higher education in Canada needs to read them in toto.  Document EEE – the Government’s letter – is here.  FFF – Laurentian’s altogether horrifying response – is here. 

The letter from the province is – I think – reasonable.  At some point in the previous weeks (December 10^th seems to have been the likeliest date), Laurentian had walked in the door asking for $100 million, stat.  Romano basically said no, don’t be ridiculous, we’re not handing you a nine-figure cheque without a better understanding of your true financial position and your options to regain solvency.  We might give you that money if we get some independent advice telling us there is no other way, but right now we are giving you is $12 million, strings free, over the next nine weeks on condition you don’t do something so monumentally stupid as to invoke the (full name) CCAA. 

The letter in return from then-Laurentian President Robert Haché is just astonishing in the detail it provides about the way he prepared for the CCAA. It emerges in these pages that the Ministry was advised of the possibility of a CCAA filing in August of 2020 (which is two months even before Ernst and Young was officially brought on board to “advise” the university on its financial position).  It emerges that by late January, Haché had already decided on the need for layoffs of over 100 academic staff and the closure of a few dozen program closures.  Given that none of the Deans had been brought into the CCAA secret at that point (it is not clear who in the senior administration was told what and when, but it seems quite possible that only the Provost and VP Finance were in on the secret until minutes before the public announcement) these plans can only have come from Ernst & Young directly.  On what evidentiary basis?  We may never know.

But it is the letter’s extensive justifications for going the CCAA route – more detailed than anything Haché or anyone else at Laurentian has ever given in public – that more than anything exposes what was actually going on.  Mainly because it is utterly ridiculous.  The immanent reason Haché claimed for the CCAA solution was that the university was running out of cash, lenders were aware of the university’s situation, and the apocalypse was coming, $12 million clearly wouldn’t be enough, etc.  Except that this wasn’t true.  In fact, a $25 million line of credit was still available to the university through Desjardins, and that the university had quite recently repaid $14 million to Desjardins, thus in part provoking the cash crisis.  These facts are not mentioned in the section regarding the university’s lending position on page 6-7.  And indeed, a careful examination of the university’s cash position after CCAA shows that in fact it never would have gone to zero: although a $25 million loan was negotiated with Firm Capital Mortgage Fund, the money was never actually touched, suggesting that the university’s actual cash position was never as dire as it made out in the initial affidavit

The university goes on to say that it was facing two other threats, neither of which could be delayed indefinitely.  The first was, having maneuvered itself into what it claimed was insolvency by unnecessarily repaying the $14 million line of credit, it could no longer sign the bit of researchers’ tri-council applications saying the university was solvent, and could not “honourably” solicit donations from benefactors which could conceivably be seized by creditors.  This is wild.  Not only was “insolvency” self-inflicted by the repayment of the Desjardins credit line, but man alive it takes some almighty chutzpah for a President talk about honour as a justification for breaking a collective agreement.

The second reason was more relevant.  The letter suggests that the Faculty Union was about to go to court to force the release of documents “that put our financial position, including the historical practice of not setting aside restricted funds, into the public domain”.  This, it turns out, is the crux of the matter.  The university’s decision, sometime around 2015 probably, to raid the restricted funds for the purposes of funding various renovations and construction (a practice euphemistically referred to as “internal lending” in Laurentian’s Financial Statements – this stuff was hiding in plain sight all along) was simply too embarrassing and a potential cause for litigation against the University and the Board.  Entering CCAA and all the chaos that entailed was a preferable alternative to Haché.  Indeed, if you read the letter’s schedule B – which sets out the pros and cons of an MCU partial bail-out versus CCAA – one of the main arguments against accepting the Ministry’s offer is that eventually the key details would come out and once the banks and the tri-councils found out about the problem, everything would come crashing down. 

This is very weird thinking.  Without in any way condoning secrecy, it doesn’t seem like the restricted funds thing would have been the toughest thing to keep quiet (hell, they’d been doing so for five or six years at this point).  Even the bail-out itself need not have attracted attention – Nova Scotia’s bail out of Acadia in the early 10s never really came to the public’s attention until much later.  And, weirdly, the most obvious compromise position – that the province could have issued a loan to replenish the restricted funds and clawed back part of the provincial grant for a few years to effect repayment (cost to the public = $0) seems never to have been raised by the institution.  It was a $100 million grant (half for paying staff severance, half to replenish the restricted funds), no strings attached, or nothing.  This was not a serious negotiating position. 

Now, some speculation here: Laurentian had a Board meeting scheduled for the 22^nd of January, which was pushed back until January 25^th.  My guess is that Haché was worried that the Board might accept the province’s offer of $12 million (because let’s face it, they can’t all have been happy about the prospect of CCAA, especially the student and faculty members) and needed some time to marshal arguments against it.  In which case the letter to the Government – or at least schedule B – is actually better understood as a letter to the Board reminding them of their legal jeopardy under the paranoid everybody’s-going-to-sue-us-all-at-once scenario outlined above.  Once the Board was cowed into submission on the 25th, Haché could hit send on the same letter to government.  I think that’s what happened, anyway.

The only question I still have outstanding is why?  What did Haché have to gain by spurning less radical solutions instead of taking the accelerationist approach?  Was he under the impression that there were personal plaudits to be gained (and if so, how on earth)?  That when all was said and done, he would be seen as a saviour, or at least someone to be respected for having taken tough but necessary decisions (again: really)?  And if so, was this just personal naivete or did he get rolled by Ernst & Young and some expensive lawyers eager to feast off this naivete (to the tune of about $30 million)? 

Either way, a guy like that should never have been in charge of a university.