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Haché denies AG report finding that Laurentian strategized to go insolvent

Laurentian pres says ‘at no time’ was insolvency the preferred option for the university, despite the Auditor General Bonnie Lysyk saying that that appears to be exactly what the administration had in mind
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Dr. Robert Haché is the president and vice-chancellor of Laurentian University. (Keira Ferguson/Sudbury.com)

Laurentian University president Robert Haché is sticking to his guns, saying the university did what it could to advocate to government for financial support, and only turned to filing for creditor protection as a last resort.

This in the wake of the release of a scathing preliminary report examining Laurentian’s financial crisis, which was released by Ontario Auditor General Bonnie Lysyk on April 13. 

Lysyk said she believes the data shows Laurentian University did not have to file for creditor protection under the Companies Creditors’ Arrangement Act (CCAA).

This action was “strategically planned” and Laurentian “chose to take steps to file for creditor protection in the Ontario Superior Court of Justice on February 1, 2021,” said her report.

“In our view, there were many people hired by Laurentian who were more focused on laying the track that guided the train toward the CCAA process, and less on working co-operatively and with full transparency with the Ministry of Colleges and Universities and faculty and staff labour unions,” Lysyk said.

Laurentian University continues to undergo court-supervised restructuring after declaring insolvency more than a year ago.

The restructuring has included extensive program and employee cuts, and the termination of ties with the federated universities operating on campus. Yet to come is a “plan of arrangement” in which Laurentian makes a plan to pay off its creditors, and finally exit the CCAA.

Haché was sharply questioned about the auditor general’s report at the April 19 meeting of Laurentian’s senate. Many senators actually changed their background image during the Zoom call to the cover of Lysyk’s report.

“I do want to stress in my president's report that at no time was the CCAA a preferred option for the university,” Haché said.

“It was always a last resort, and the decision to enter was only taken on the 31st of January (of 2021). It was not something that we wanted, it was something that we actively were working to avoid. 

“It does seem the auditor general does suggest some opportunities that we might not have taken as much advantage of as we might have. All I know is in all of the conversations that we had, as far as the problems unfolded, we did everything we could to provide information to government and to the ministry to avoid this and at the end of the day, it was not avoidable.”

Haché said meetings between Laurentian and the auditor general’s office are still ongoing, and “we’re doing everything we can to co-operate as fully as possible with the auditor general, and we look forward to her detailed report, that we expect to have sometime in the summer.”

Senate member Albrecht Schulte-Hostedde said he was actually surprised to see Haché and other members of senior administration at the senate meeting, given the contents of the auditor general’s report — “it’s damning,” he added.

“What you've just told us implies that you don't believe what she's written here,” he said.

“You’ve just said that there was no other option yet again, with respect to the CCAA. And it's pretty clear based on the report from the auditor general that that's not the case, at least from her perspective, and she's the one who holds much of the correspondence and so on that the university had not handed over initially.”

Hostedde also asked why Laurentian would hire insolvency counsel in March 2020 (nearly a year before its CCAA filing), if not a “strategic decision to enter into insolvency as a way to reengineer the university and do an end run around the collective agreements” of unions representing LU faculty and staff.

He also asked Haché why Laurentian would not have pursued the “same pathway that Nipissing (University) pursued back in 2014,” referring to Nipissing’s successful restructuring with the involvement of the province (also referenced by the auditor general).

“In the first instance, I want to state unequivocally I am not denying the auditor general's report,” Haché said.

He said he thinks what the auditor general “has expressed is that she sees that there may have been alternatives that we may not have seen at the time. And I look forward to understanding what that is.”

Haché explained that Laurentian did engage legal counsel in March 2020, “and yes, they do have a focus on insolvency,” but “the motivation there was to understand how we could avoid insolvency, not how we could prepare for it.”

He said throughout that time, the university was looking at cutting costs and getting assistance from the government, “including through the mechanism that you talked about in terms of what happened with Nipissing.

“At the end of the day, you also had to prepare for the eventuality that there might not be an alternative,” Haché said.

“And had we not prepared, on Jan. 31, 2021, the university’s doors would have closed because there would not have been an alternative. 

“But there was never — and I stress this, and I'm sure all the documents and communications will show this — the desired outcome was always to avoid, but if everything else failed, we did have to be prepared.”

Senate member Ernst Gerhardt said he has noticed a shift in phrasing and tone from Haché, compared to previous statements, and provided some examples.

“There’s been a shift from the CCAA being the ‘only option’ to being ‘not the preferred option,’” Gerhardt said. 

He said there’s also been a shift from fighting the auditor general in court over access to certain documents to “doing everything we can to co-operate with the auditor general.” 

“These shifts in phrasing and tone are problematic,” Gerhardt said. “They cause us to doubt. They cause us to wonder what was happening when those first phrases were being used. And what is happening now when the second phrases are being used. They cause me, specifically, and I think I speak for others, they cause my trust to fail.”

Gerhardt said the university is probably still in a financial deficit, but the other thing that’s facing Laurentian now is a “trust deficit.”

Haché denied that his tone has changed, and he’s been saying the CCAA was an option of last resort all along. 

As for the trust issues Gerhardt referenced, Haché said “I appreciate what you say about trust,” but added that the focus right now needs to be on coming to a plan of arrangement in which Laurentian will pay out its creditors. 

“And I think from there things will take care of themselves in the sense that the university will have an opportunity to go forward,” he said.

Gerhardt was not the only senate member who brought up trust issues during the meeting.

Comparing the CCAA process to a destructive tornado — and adding it’s a process not meant for a university — senate member Josée Turcotte wondered how Laurentian can move forward.

“How can I trust you?” she asked Haché.

“I cannot trust you. Because you don't believe in the quality of education. You don't. You believe in giving the money to lawyers, rather than keeping the money for faculty. That's what makes the university. It’s professors. It's not lawyers … Everything is destroyed, and I don't see a way forward.”