Close ties between a failed organic flour mill and top executives of two Saskatchewan government agencies that invested millions of taxpayer dollars in the project have elicited
allegations of improper conduct.
Much of the controversy centres on Frank Hart, a former partner of KPMG Consulting and the current chief executive officer of Crown Investments Corp. of Saskatchewan.
While working at KPMG, Hart signed FarmGro Organic Foods Inc. as a client. Later, when Hart was in his new job with the CIC, the government agency invested millions of dollars in FarmGro.
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Hart brought the FarmGro account to KPMG in 1996. The Regina consulting firm developed a business plan for the flour mill and later helped arrange financing to build the $12 million plant.
Part of that financing, $4.4 million, came from CIC. Announcement of the provincial funding was made on March 18, 1999, two days after Hart left KPMG and was appointed president and CEO of the government agency.
Saskatchewan Party leader Elwin Hermanson said the link between Hart and FarmGro is unacceptable.
“That’s obviously conflict of interest and I think it would be very difficult for Mr. Hart to claim other-wise.”
Hart, who was contacted for this story while on vacation, said he has nothing to hide about the government’s investment in FarmGro, a company that has since been placed in receivership, risking the return of the taxpayer money.
“The decision to (invest) was made long before I was employed at CIC or, I think, probably even talking to CIC about employment.”
The government didn’t delay his appointment until after the FarmGro funding announcement had been made, “because the two had no connection to each other and because they were anxious to get me started there,” Hart said.
He isn’t the only government connection to FarmGro. There is also a link between the organic mill and the Saskatchewan Government Growth Fund, an agency that loaned $2.5 million to the organic plant.
Gerry Liski, who was involved in the FarmGro project since 1996 and became its first CEO in January 1999, sat on the growth fund’s board of directors in 1998.
“Obviously you would smell the same kind of arrangement there,” said Hermanson. And he said he doubts Hart’s claim that the funding agreement and his job negotiation were separate and distinct events.
Financial documents obtained by The Western Producer show that the offer of credit to FarmGro from CIC was dated Feb. 26, 1999. The agency announced Hart’s appointment as CEO on March 1, saying he would take over on March 16.
Hart said his courtship period with CIC was “maybe the matter of a couple of weeks,” which means he may have been negotiating with CIC about his new job when the financing arrangement was signed.
FarmGro founder and former board member Bob Balfour said Hart played a big role in arranging the CIC funding.
“When we were doing the financing, a bank pulled out at the last minute and the only alternative we had was to go to government to see whether or not they would do it and they did. Hart was able to convince them that they should,” said Balfour.
Former FarmGro chair Keith Brown agrees that Hart played a role in getting government money injected into the project, but he did so while working at KPMG and not CIC.
“I can guarantee you that the decision had been made long before that and that the letters of intent had been signed. I was on the board at that time so there is absolutely no question about that.”
Hermanson said no matter what the exact dates were, the timing of Hart’s appointment is too close for comfort.
“If people in the negotiations are involved on both sides of the equation, as it appears Mr. Hart may have been, it becomes more difficult to have a clear and pragmatic viewpoint of whether or not the deal is a good deal.”
