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Canadian Integrity Commission investigation intensifies

Details of secretive "Maid of the Mist" leases emerging

February 03, 2009

By Frank Parlato Jr.

The Integrity Commission of Ontario last week sent a letter to Ontario Parks Commissioner Bob Gale concerning new information in the investigation into the Maid of the Mist lease renewal on the Canadian side of the Niagara River.

Release of the IC report, which was due on Feb. 1, could determine the future of the Maid of the Mist Steamboat Co. in Canada. On Jan. 26 -- the day the Niagara Falls Reporter published online a blistering expose on seeming irregularities in the lease renewal -- Parks Commissioner Lynn Morrison contacted IC attorney Valerie Jepson with an urgent request for additional information.

The Ontario Parks Commission voted last year to renew a lease to use docks on public land in the park for the Maid of the Mist Steamboat Co. The present Maid of the Mist dock lease expires in November.

The renewal requires approval from the Ontario Cabinet and will be partly based on the impending results of the IC investigation. The investigation focuses on Niagara Ontario Parks commissioners, who by law conduct their meetings secretly.

Last April, two commissioners -- Chairman Jim Williams and Vice Chairman Archie Katzman -- apparently failed to disclose to the other board members that Ripley Entertainment Inc. had made a competing offer for the lease held by the Maid of the Mist.

Williams and Katzman worked behind the scenes to ensure James Glynn, owner of the Maid of the Mist Steamboat Co., renewed his lease at advantageous terms. Other commissioners, without being fully informed, voted on April 18, 2008, to renew Glynn's lease for a whopping 25 years.

But Gale discovered the furtive efforts of Williams and Katzman, and blew the whistle by making a disclosure to the IC.

During winter and spring of 2008, Ripley Entertainment, through their Niagara Falls manager, Tim Parker, attempted to be included in the bidding process for the dock lease, which the Maid of the Mist presently holds. Williams and Katzman withheld that information from the other commissioners, simultaneously working to speed up Glynn's lease renewal.

It is not known why Williams and Katzman -- commissioners appointed to represent the interests of the public -- would seemingly work in effect to help Lewiston businessman Glynn. Commissioners sign a confidentiality agreement that forbids them from telling the public anything that transpires during meetings.

The secrecy and lack of competition may have allowed Glynn to negotiate a lease at terms substantially better than what he would have had to pay if Ripley Entertainment and others had competed.

A second company, Alcatraz Media, has since made a written offer that promises to pay substantially higher lease payments than Glynn's. Alcatraz's original expression of interest predated Ripley Entertainment's and was likewise not made known to the commissioners who were voting on the Glynn lease.

Estimates that the Parks Commission could get $2 million more in rent annually than what Glynn is paying have surfaced. That would mean the park could realize $50 million more in revenue during the term of the unusually long 25-year lease approved for Glynn.

Commission officials frequently talk about the need to increase revenue to help support the parks system and historic sites. Since the investigation, Glynn-friendly commissioners have used three arguments to justify rejecting everyone but Glynn.

1. Glynn is a franchise holder who owns the right morally and legally to forever lease the Niagara for his boat tours.

Legally, however, there is nothing in the lease that guarantees Glynn a perpetual monopoly. In fact, in 1971, Glynn merely bought two steamboats and the rights to two leases. He did not create the attraction, which has been around since 1848.

The leases have expiration dates.

"Glynn should have known from day one, if you rent or lease anything, that when the lease is up, you have a chance to lose it," said Ripley's Parker. "Now if this is private land and the landlord wants to renew a lease without hearing other offers -- fine. But this is public land. The commissioners represent not themselves personally, but the people of Ontario."

2. Glynn's Maid of the Mist lease is so complicated that no one other than Glynn could fulfill the tenuous terms and meet the tremendous needs of the parks.

The actual lease, however, is a standard 34-page operations and land lease. Far from complicated, it is one of the simplest of leases and can be purchased at many stationery stores.

The rent is a flat 20 percent of gross sales. It grants to Glynn, as the "sole commercial entity," exclusive rights to dock his boats on the Canadian side of the gorge beneath the falls.

There is not one complicated or unusual provision in the lease, except that it requires Glynn, as the sole boat owner, to recover dead bodies in the waters below the falls. When told of this condition, Parker said, "Why, I can fish out dead bodies as good as Glynn can."

3. Negotiations had already begun with Glynn before Ripley's asked to bid. If the Parks Commission considered anyone else, Glynn might sue the park for bad faith negotiations.

But until a lease is signed, it is not bad faith to negotiate for better terms or hear other offers. It is not bad faith to take the best offer.

Leases become enforceable after, not before, they are signed.

The Maid of the Mist attraction is presently a 15-minute boat ride in the gorge below Niagara Falls. According to published figures, the Maid delivered 2.5 million rides last season at $12.50 U.S. per adult and $7.50 U.S. per child.

Simple math reveals the lease generates annual revenues of tens of millions of dollars for Glynn.

For 38 years, Glynn has held two leases -- one in Canada and the other in the United States -- giving him total control of the lower river on both sides of the border. One of the prime water attractions in the entire world has been given to one man on public land for 38 years. He has never had to compete for the rights to keep the leases.

Commissioners have zealously worked to keep the terms of his deal secret. If not for the fact that media giant Ripley Entertainment attempted to bid, this latest lease renewal would probably have remained a secret.

To dispel the notion promulgated by some commission members that Ripley Entertainment did not really have a bid, consider that Parker met with and later wrote multiple letters to Jim Williams, chairman of the Niagara Parks Commission, expressing interest in bidding months before the Maid lease was put on the agenda for a vote last April.

Parker told the Reporter, "After meeting with Williams, I suspected he wanted to make sure Ripley's did not get a chance. He would not even tell me when the lease expired. So I filed a Freedom of Information request and followed it up with letters expressing Ripley Entertainment's interest and qualifications."

Ripley's is a worldwide entertainment company that has operated attractions in Niagara Falls since 1962 and recently opened the $130 million Great Wolf Lodge on Victoria Avenue. Among their holdings, Ripley's owns the Guinness Book of World Records.

Although Ripley's expressed interest, Williams would not give them a copy of the lease -- which is necessary for Ripley's to know what they are bidding on.

To get those, Parker had to file two more Freedom of Information requests. Meanwhile, Parker wrote Williams asking that "commissioners defer making any decisions on renewing the said lease with any parties until we have the opportunity to receive the copy of the lease and respond to the Niagara Parks."

While Ripley's was waiting for a response, Williams, Katzman and the general manager for the commission, John Kernahan, rushed to draft and then schedule for a vote the new Glynn lease, without the commissioners having seen the new lease and without telling them about Ripley Entertainment's offer.

Gale became suspicious. Williams seemed to be "prematurely pushing" the renewal of Glynn's lease, he thought.

"The lease was good for another year and a half, and suddenly there was a rush to get Glynn renewed," Gale said. "Something's going on here."

Williams' plan to renew Glynn's lease probably would have worked, except Parker happened to call Gale, ironically, one day before the vote was scheduled on the Glynn lease.

Parker asked Gale if he was aware of his letters to the board.

"I had a sick feeling deep in the pit of my stomach," said Gale of Parker's call and its effect. "Jim Williams hadn't told me about Ripley Entertainment's offer."

Immediately after learning of Ripley Entertainment's interest, Gale e-mailed every commissioner. But now it was only hours before the scheduled vote.

Outside the meeting, Gale made an intelligent and honest suggestion: "Postpone the vote. Give Ripley's 30 days to allow them to compete. The Glynn lease still has a year and a half to go. What's the rush?" Williams refused, and the commission voted to renew Glynn's lease.

"It was a dirty vote and it made the commission seem dirty," Gale said. Shortly afterward, he disclosed the process to the IC.

The IC assigned the investigation to a team under the direction of Richard Kennedy, a chief internal auditor for the Ministry of Finance. Kennedy's team provided a summary report to Commissioner Lynn Morrison on Dec. 15.

Besides Ripley Entertainment, it turned out, another company had tried to bid on the boat lease -- another fact that was not disclosed to members of the Niagara Parks Commission.

Alcatraz Media, which sells more than 800 boat tours of various types around the world, asked to be considered for a chance to bid as far back as 2005.

Alcatraz spokesperson Bill Windsor told the Reporter he was ignored.

After the story broke of the investigation, Commission manager John Kernahan told the Niagara Falls Review that Windsor's proposal was nothing but "hot air."

"I was surprised to find Kernahan accusing me of "hot air," Windsor told the Reporter. "To the best of my knowledge, I have never spoken with John Kernahan in my life. For him to come to that conclusion he must have gotten that from someone, and my guess is he was parroting words told to him by James Glynn." Windsor also suspected murky dealings and bluntly asked the 12 commissioners by letter, "Have (any of) you received any form of gifts or compensation in exchange for any votes from any lessee?"

Other companies that might be qualified and interested are Hornblower Cruises, the operator of the ferry boat service to Alcatraz and the Statue of Liberty; Circle Line Cruises, which operates cruises around Manhattan; and Red & White Fleet, which offers boat tours in San Francisco Bay. The Disney Co. and the Seneca Gaming Corp. have been mentioned as potential bidders.

The U.S. National Park Service never lets any company have secret or perpetual leases. Any qualified bidder may compete in conformity with published terms. The lease is generally for 10 years.

The ball is in Morrison's court. She can recommend the Ontario government not sign the new Glynn lease and send it back to the commissioners for open bidding, or do nothing and in effect allow the lease to have her imprimatur.

But if it turns out later there was collusion or a conspiracy to deprive the public of the best option for the leading attraction for the tourist town of Niagara Falls, which resulted in an inferior service being offered, the onus of the mistake will fall upon the IC.

The investigation into the murky secretive process that led to the renewal of Glynn's Maid of the Mist lease has given impetus to Ontario Provincial Parliament member Kim Craitor -- who represents the district or "riding" that encompasses Niagara Falls, Ont. -- to further push his Transparency in Public Matters Act. Craitor told the Reporter that the lack of accountability not only with the Parks Commission but many Ontario agencies prompted him to sponsor the bill.

If passed this session of Parliament, secret leases such as those made by commissioners with the public's assets, like the Glynn lease, would be a thing of the past.

"I would open (commission) meetings to the public. After all, this is taxpayers' money," said Craitor. "This bill would allow meetings to be attended by the public and filmed for cable television."

So what happened behind closed doors at the Niagara Parks Commission that enabled commissioners to make what might be described as a rather ham-handed attempt to preserve for Glynn his Maid of the Mist lease on public land without allowing competition?

The days when a businessman can have a secret lease on public land for 30, 40 -- or, in Glynn's case, 62 years -- without bidding or public awareness, seems part of an archaic past, although it might survive in New York State Parks, because, unlike Ontario, New York state has no Integrity Commission.

In a deal that makes the Ontario Parks deal seem almost aromatic, New York State Parks in 2002, without competitive bidding, secretly renewed Glynn's lease there at an extremely low rent -- in fact, half what he pays on the Canadian side.

On the New York side, Glynn pays only 10 percent of gross revenues (an estimated $700,000 a year). But on the Canadian side, Glynn pays 20 percent (around $5 million) for his monopoly there. Ontario will likely receive even more than 20 percent if it is open to competitive bidding.

Ironically, Gale might have had every reason to secretly support the Glynn deal like other commissioners did. Gale supplies diesel to the Maid of the Mist.

Gale said he has since been threatened by Glynn employees who said he will lose the contract for providing diesel.

"Sure, I do not want to lose the business," Gale said, "but I was appointed to this board to do the right thing. It is not that I am against Glynn, I am against the process, the secret way the commissioners voted to renew his lease."

 

 

 
 
 
  Copyright © 2008 Frank Parlato Jr.