Unsealed documents: Here is what LU didn’t want you to see

Unsealed documents are shedding new light on the discussions between the province and the school leading up to Feb. 1, 2021, insolvency declaration by Laurentian University.

The documents are being released now that Laurentian has emerged from the institutional form of bankruptcy.

In particular, the documents show determined efforts by former LU president Robert Haché to convince the Ministry of Colleges and Universities (MCU) that a declaration under the Companies’ Creditors Arrangement Act was clearly the best option.

Among the arguments was the “risk” the university faced if it became public that $38 million in bursary and other donations was missing, swallowed up in a general revenue account to help fund operating deficits.

In a letter dated Jan. 25, 2021, Haché said they realized those funds weren’t in a separate account in December 2020 and they took immediate action.

They took steps “to ensure that funds received for a specific purpose are held in segregated accounts and only available to be used for the stated purpose,” he wrote.

When combined with the fact LU could not take on any new debt, the university faced a fiscal squeeze, Haché said.

“The combined effect of those two facts, while necessary, has created an immediate liquidity crisis,” he wrote in the letter.

At the time, MCU was offering Laurentian $12 million to keep operating while it considered Haché’s request for a $100 million bailout. But Haché said that wouldn’t work, because the $12 million estimate already assumed LU was declaring insolvency.

“That cash flow forecast was expressly prepared on the assumption of, and in contemplation of a proceeding being commenced by Laurentian University under the Companies’ Creditor Arrangement Act,” he wrote.

“It was prepared on the basis that a court-ordered stay of proceedings is in place which authorizes Laurentian University to make no payments in respect of existing indebtedness and avoids certain costs that might be incurred as a result of other issues facing Laurentian University.”

Haché also argued that delaying the CCAA declaration for two months would give LU’s faculty union enough time to mess up his plans – and alert the public that bursary funds had been misspent.

“They intend to go to the Labour Board next week asserting that Laurentian University is not bargaining in good faith, and has asserted financial distress but has not triggered the financial exigency process under the collective agreement,” he wrote.

“LUFA will also seek production of documents that put our financial position, including the historical practice of not setting aside restricted funds, into the public domain. This will occur without the protection of the stay of proceedings that is available through a CCAA proceeding.”

COULD CREATE 'IRREPARABLE HARM'

Should LUFA begin the financial exigency process, Haché wrote that “those events are incapable of being reversed at a later date by a CCAA court.”

“A delay of two months could therefore create irreparable harm for Laurentian University’s efforts to effect a restructuring.”

LU needed to cut 120 full-time jobs and dozens of programs, Haché said, and quickly.

“We see no scenario in which these reductions would be voluntarily agreed to by LUFA (or by Senate, which is controlled by faculty who are members of LUFA) or could be achieved in the near term outside of the type of setting created by a CCAA proceeding,” he wrote.

“Even if it could be achieved outside of a CCAA proceeding, it would require years of attrition from voluntary departures (which may not ultimately be the same people who would be deemed most appropriate), and substantial severance obligations.”

The estimated severance pay would be about $48 million, he said, something Laurentian could not afford.

Haché opposed Auditor General Bonnie Lysyk’s attempts to access these and other confidential documents but was eventually ordered to turn them over by the Ontario legislature.

He resigned last July.

Read the full documents here.