Rocky Simpson debt ‘may create cabinet conflict’

As newly elected territorial politicians meet for the first time this week, they must decide what collective response is appropriate to the news that one of their number owes nearly $2 million to the government they now lead.

Rocky Simpson, the MLA-elect for Hay River South, owes the money to the territory’s Business Development and Investment Corporation (BDIC) through his modular housing and energy industry support company, Concept Energy Services.

NNSL first reported Concept’s debt on Friday night. Cabin Radio subsequently revealed Concept owes a total of at least $4 million to various institutions, including the Canada Revenue Agency, Métis-Dene Development Fund, and Town of Hay River.

The timing of the revelation – after the election – has been criticized in some quarters as a failure of the territory’s news media to catch an important aspect of Simpson’s candidacy that he may not choose to reveal himself. (Reporters have not ordinarily asked candidates to reveal debts of this nature while on the campaign trail.)

Others, including Simpson himself, have suggested the debt was well-known in his district. Simpson says his company’s debt should have no bearing on his ability to conduct himself as an individual and a politician.

However, Yellowknife Centre MLA-elect Julie Green called the debt “a political liability.” It is likely to be top of mind for many politicians arriving at the legislature for their three-week orientation, which begins on Tuesday.

The 19 new MLAs are to be formally sworn in on Friday. A premier and cabinet (and speaker) are expected to be chosen on October 24.

In private conversations among senior bureaucrats, speculation has ranged from Simpson’s potential resignation to garnishing his salary as an MLA – the fate an ordinary territorial government staffer might expect if indebted to their employer.

One senior figure in a former NWT government said pointedly on Sunday: “If that happens, we’ll probably get more money out of him in the next four years than we did in the last 10.”

Big hole for BDIC

Simpson’s debt to BDIC dates back to a loan first issued in 2011. In the ensuing seven years, his company missed more than half of its scheduled repayments. In June, a judge ordered the company to pay just under $1.9 million.

That sum of money represents an extraordinary amount for BDIC to lose, if Simpson is unable to repay it. (Simpson has said he is unsure how repayment will happen, claiming his company’s fortunes were badly damaged by the Alberta oil slump. He has suggested bankruptcy may turn out to be his only option.)

Concept’s $1.9-million debt is roughly equivalent to all the money BDIC invested in North Slave and Sahtu businesses in 2017-18, the latest year for which its financial statements are available.

In that same financial year, BDIC’s directors wrote off $3.3 million in debt from a total of eight businesses – the largest being Chef Pierre Catering, which went under some time ago with $1.9 million owed to the NWT government.

Writing off debt means the debt can still be collected, but will appear as zero in BDIC’s financial statements. It is, in effect, an admission BDIC does not expect to ever see the money.

Written-off debt is not the same as forgiven debt. If the NWT government forgives a debt, that debt is formally extinguished and no longer exists.

In the words of the Financial Administration Act, which gives the NWT government authority to forgive debt, this should only take place if the government feels “collection of the debt or enforcement of the obligation is unreasonable or unjust or that it is otherwise in the public interest to forgive the debt or obligation.”

Forgiveness and conflict

Only one authority can forgive significant sums of NWT government debt: the Financial Management Board, a committee of ministers chaired by the finance minister.

This creates circumstances in which there could be a perception of conflict should Rocky Simpson and his son, the Hay River North MLA-elect RJ Simpson, vote for MLAs to join the cabinet – or stand for cabinet positions themselves – on October 24.

The days following an NWT election are notorious for vote-trading behind the scenes as MLAs figure out who should and should not sit in cabinet, or become the next premier.

Rocky Simpson is pictured in a photograph uploaded to his campaign Facebook page.

RJ Simpson himself, reached on Saturday, said he was having to reassure newly elected colleagues he “wasn’t calling with an agenda” as he phoned to congratulate them.

The younger Simpson intends to put his name forward to become the next premier, he confirmed.

A senior bureaucrat and senior industry executive both well-acquainted with the law, speaking to Cabin Radio on condition of anonymity to discuss a sensitive political matter, said these circumstances created a clear perception of conflict.

While there is no suggestion that any impropriety has taken place, the two figures said there exists the possibility for conflict if Rocky Simpson or RJ, whose Hay River home is believed to be on Concept Energy Services’ land, seek to elect cabinet members (themselves included) who may look kindly on debt forgiveness for Concept.

By law, any such debt forgiveness would have to be made public, but only in an annual report once the forgiveness had already taken place.

Questioning the impact this perceived conflict could have on RJ Simpson’s bid to become premier, the industry executive queried why Rocky Simpson had decided to stand, given his financial situation. “Why would you damage your son’s political career?” they asked.

Simpson’s current rivals for the premiership are Caroline Cochrane and Jackson Lafferty, both with ministerial experience, and Frieda Martselos, the Thebacha MLA-elect, who was formerly Chief of the Salt River First Nation. Simpson has just completed his first term as an MLA and was acclaimed last week after nobody opposed him.