APTN National News
Two First Nation chiefs say they were offered money as enticement to sign their communities up for Bank of Montreal loan agreements arranged by a Winnipeg-based financial firm that an internal document shows used “kickbacks” as a tool to secure clients.
The chiefs, from Manitoba and Saskatchewan, said they were offered money by senior officials with The Usand Group, which bills itself as a firm dedicated to helping First Nation communities participate in the “global economy,” according to its website.
They said Usand would arrange the loan agreements with the First Nation and then approach the Bank of Montreal to secure the loan. The loan total would include fees owed to Usand resulting from the firm arranging the agreement.
An internal Usand document obtained by APTN National News shows the company used “kickbacks” as a potential tool for securing First Nation clients. The document also outlined ways to keep the use of kickbacks from leaking publicly and suggested a mitigation strategy should the issue ever break out into the open.
APTN National News has also obtained a recording of a Usand official offering to arrange a meeting with a First Nation chief to hand over “a finder’s fee” upon completion of a loan agreement.
There is no player at http://bcove.me/gysfmr1w.
Usand was founded in 2012 by Sean McCoshen, a “securities lawyer turned investment banker,” according to the profile found on the firm’s website.
During an appearance as a witness before the Senate’s Aboriginal Affairs committee in Ottawa on April 22, 2015, McCoshen said the firm was formed out of a holding company incorporated in 2007, but only officially began operations “about two years ago.” He said the firm was “borne out of discussions” with former Assembly of First Nations national chief Ovide Mercredi.
“Who was looking for ways to bring what he called proper financing to First Nation communities across Canada,” said McCoshen, according to a transcript of the testimony.
McCoshen testified that Usand had so far arranged about $113 million worth of financing for First Nation communities through “private markets or through bank debt financing.” He said Usand was, at the time, about to close $180 million worth of financing agreements with communities and was aiming for a total of $300 million “across the board, across Canada with First Nations.”
Mercredi could not be reached for comment.
Mercredi is listed as an adviser on the company’s website.
The Bank of Montreal, which has provided loans to First Nations arranged by Usand, issued a statement saying it does not “pay referral fees” to companies like Usand.
“BMO is proud of its longstanding relationship with the Aboriginal community. We hold ourselves to high standards of ethics and integrity and are committed to following fair business practices,” said the bank’s statement. “From time to time, our Aboriginal banking group may receive referrals from companies such as Usand who act as representatives for their clients; however, our banking relationships are directly with our customers.”
Despite repeated requests, McCoshen would not make himself available for interviews.
Erinn Mah, chief operating officer for Usand, told APTN on Tuesday that the company wanted to consult with a public relations firm and lawyers before responding to allegations company officials, including McCoshen, offered money to chiefs so they’d sign up for Usand’s arranged loans.
One Wednesday, Mah delivered a statement over the telephone to APTN thanking the network for bringing the allegations to the firm’s attention.
“We take this very seriously. We don’t support or condone these types of activities. Our record shows this is not how we do business. It is very difficult to comment specifically on these allegations as you haven’t been providing the transcript of the recording or the statement. I want to say thank you for bringing this matter to our attention,” said Mah. “I am not aware of any of our employees or contractors representing our firm in this way. If evidence does come forward to the contrary…we can say without a doubt to do everything to address the matter in the most appropriate and swift way possible.”
Mah, however, specifically denied an allegation that McCoshen offered $100,000 to the chief of Rolling River First Nation to sign on the dotted line.
“It is one person saying one thing. Quite simply, those allegations, it’s not something we engage in,” said Mah. “I can unequivocally deny that. Sean has not been in any activities like this.”
Usand risk management document
However, an internal Usand document obtained by APTN National News shows that the firm listed the use of “kickbacks” as a potential tool for use in securing deals with prospective First Nation clients.
The document, a 2014 risk management plan, analyzed the potential risks associated with the use of “kickbacks.” The document outlined possible “preventive actions” to mitigate those risks along with “contingency plans” to counter any negative fallout from the use of the tactic.
The main risk associated with the use of kickbacks was the possibility “any ‘favours’ become publicized,’” said the document. The document rated the likelihood of this happening as “medium” and the potential impact as “very high.”
The document suggested that “no written record of dealings” be made of any kickback arrangements which should be shrouded in “vague langue, ie: offer to ‘give money back to community to be used at their discretion.’”
In the event a kickback deal became public, the document suggested Usand employ a “positive PR strategy with (a) communications firm.”
The document also warned that “reliance on this mechanism to get deal approved” was a “slippery slope.” The document suggested there should “discussions prior to approval for any kickbacks” and to use the tactic “as a last resort.”
The risk assessment document recommended “a review and discussion of this strategy” and that “head office may choose to put a moratorium on this technique.”
Rolling River First Nation Chief Morris Shannacappo says McCoshen offered him $100,000 if his Manitoba community signed on to a USAND-arranged, multi-million dollar loan agreement from the Bank of Montreal.
Shannacappo said the offer was floated to him during talks held about two years ago between Usand and his community, which was looking for an about $4 million loan financing deal to get out of a debt hole caused by band-owned business failures under the previous administration.
“The boys, they called me out of the meeting after the lunchbreak when everything was good and presumed to go ahead with this company, Usand. And Sean, he offered me $100,000,” said Shannacappo. “If you sign on we are going to reward you $100,000.”
Shannacappo said some of the elders were initially intrigued by Usand’s proposed arrangement and suggested the community sign on, but the council decided to take a pass and go a different route by working with the federal Indigenous Affairs department.
Shannacappo said the fees and structure of the deal worried him.
“It looks legit, but the cost of legit on their side is pretty high and if you know economics or studied economics you are able to figure that out right quick,” he said.
Shannacappo said he also told his community about the McCoshen’s offer.
“I knew I would go down and lose an election over it. It wasn’t fair to the people,” said Shannacappo. “I said, my government doesn’t work that way.”
Carry the Kettle Chief Barry Kennedy said he was offered $25,000 by John Miswagon, Usand’s vice-president for Aboriginal Services, if he signed on to $12.6 million financing deal for his Saskatchewan community. That loan would also come from the Bank of Montreal.
Kennedy had been trying to stop the deal which had been agreed to by band councillors behind his back. Kennedy is currently in a dispute with his council and the proposed arrangement with Usand has been put on hold until after the March band election.
According to a document provided by Kennedy, the band would obtain a $12.6 million loan from the Bank of Montreal. Of the total, $600,000 would go to USAND for fees and the rest would be used for various economic development projects and as a debt consolidation loan.
Kennedy provided APTN with a text message from Miswagon stating “we share finder’s fees up to 1 per cent of total loan we get FN’s!(sic).”
Kennedy also recorded part of his October 2015 conversation with Miswagon when the $25,000 “finder’s fee” was discussed.
According to the recording Miswagon offered to hand-deliver the money to Kennedy.
“It’s like a finder’s fee thing, it’s not different than anything else we do and we have to reward people that bring us business and this is basically all it is,” said Miswagon, according to the recording. “It’s nothing crazy, I know it’s not much, but there are more loans we do, we do that on every loan we do going forward…I handle it myself and I will take it over to you, that first bit of money, within 10 days after signing, after everything is done, I will make a trip over there and we’ll hook up somewhere….”
Kennedy said he discussed the recording with a federal Indigenous Affairs official who suggested he take the issue to the RCMP. Kennedy said he is planning on approaching the Mounties.
The department issued a statement saying they began an investigation into Kennedy’s allegations against Usand in 2015.
“INAC opened a file in 2015 and a contract has been initiated with a professional firm to investigate the alleged financial irregularities reported to the department by Chief Kennedy and other First Nations elected officials,” said the statement. “The investigation is currently ongoing and as such it would be inappropriate to comment further at this time.”
APTN phoned Miswagon repeatedly over the past two days, but his cell phone rings and rings before going to voicemail.
None of the companies or individuals named in this story have been accused of committing any crime.