A former official who for decades played a key role in Ottawa’s wireless strategy accepted a “million-dollar” consulting role with BCE Inc. while still employed by the federal government.
Last week, a judge ruled that Peter Hill, a former director-general of spectrum management at the department of Innovation, cannot testify as a government witness in a $1.2-billion lawsuit that former investors in failed wireless startup Mobilicity launched against Ottawa. Mr. Hill, who worked in the department for 34 years, helped make government decisions about spectrum access, giving carriers access to cellular signals.
The ruling comes only weeks after the federal government announced a new push for more competition and lower prices in the sector, which is dominated by the Big Three carriers.
In his written reasons, Justice Glenn Hainey of the Ontario Superior Court of Justice said Mr. Hill retired from the federal civil service in May, 2017, but had a contract to consult for one of Canada’s three national carriers, (which are BCE, Rogers Communications Inc. and Telus Corp.) dated April 12, 2017.
The court did not disclose the name of his employer, but sources with knowledge of the matter who were not permitted to comment publicly confirmed to The Globe and Mail that the carrier is BCE. Mr. Hill did not respond to e-mails requesting comment.
Marc Choma, a spokesman for the company, said in response on Friday that the contract did not take effect until June 1 after Mr. Hill had retired. “We contract with various outside experts like Mr. Hill to advise on complex issues like spectrum consultations. In the case of former government employees, we require that they abide by all applicable government rules and regulations."
Ottawa’s conflict-of-interest rules for public servants require employees to disclose any plans for postemployment work that might “pose a risk of real, apparent or potential conflict of interest" before leaving a government job.
Mr. Hill’s former employer, the department of Innovation, Science and Economic Development, would not answer questions about whether he disclosed his new consulting role before leaving his job. The department also did not respond to questions about what specific postemployment conflict-of-interest rules applied to Mr. Hill, saying it could not comment as a case is before the courts.
Access to the airwaves used to carry cellular signals underpins the government’s competition policy for the wireless sector, and Mr. Hill advised the government on a number of key files, including the eventual sale of Mobilicity - and most of its spectrum - to Rogers in 2015. According to documents obtained in an access-to-information request filed by The Globe, he also signed a February, 2017, letter approving a transfer involved in BCE’s takeover of Manitoba Telecom Services Inc.
The Mobilicity lawsuit dates back to 2014, when the plaintiffs – Canadian businessman John Bitove’s company Obelysk Media Inc. and New York-based private equity firm Quadrangle Group LLC – filed a claim alleging the federal government broke promises it made to entice them to invest in Canada’s wireless industry. The government tried to stop the case, but the Divisional Court of Ontario ruled in 2015 it should proceed.
The government put Mr. Hill forth as a witness in the lawsuit, and during an in-person questioning in April, 2018, a lawyer for the plaintiffs asked if the former bureaucrat had “any kind of engagements for any of the wireless companies.”
Mr. Hill refused to answer directly, saying only that he had respected the government’s postemployment conflict-of-interest guidelines. The lawyer asked again whether Mr. Hill had any economic relationship with any of the large wireless carriers, to which he replied, “It’s not relevant,” and later said, “That’s the answer you’re getting.”
The questioning was cut short at that point, and Mr. Hill later told government lawyers he did have a contract with one of the companies, but refused to provide a copy. In May, 2018, Justice Hainey instructed government lawyers to obtain a copy of the consulting contract from Mr. Hill and share it with the plaintiffs. That took a further four weeks, and the plaintiffs then filed a motion to disqualify Mr. Hill as a witness.
In written reasons published on Monday, Justice Hainey stated that Mr. Hill was paid approximately $700,000 over the first year and a half of his contract, and was guaranteed a further $250,000 to be paid in the first six months of this year.
“Mr. Hill has a million-dollar contract to advise one of the three incumbents whose conduct is at issue. He is contractually bound to act in the incumbent’s best interests and avoid any prejudicial conduct toward it.
“In my view, Mr. Hill’s conduct on the defendant’s examination for discovery demonstrates that he prefers the contracting incumbent’s interests over his obligations as a witness,” the judge said, concluding that the government must put forth a different witness.
“The situation with Peter Hill has made us realize there’s probably more here than we thought,” Michael Huber, managing principal of Quadrangle, said in an interview on Thursday. “The nexus between the incumbents and the government appears deeper than we thought.”
“What we’ve been dealing with for the last four and a half years is the government saying anything that it does is beyond reproach and it can do anything it wants,” Mr. Huber said.
Matthew Law, a lawyer for Quadrangle, said courts are often asked to disqualify witnesses who lack sufficient knowledge, but that was not the case this time. “What makes this case unique is Mr. Hill’s significant and undisclosed contractual relationship, which placed him in a clear conflict of interest. We’re not aware of another case in which the government has insisted on continuing with a witness in these circumstances.”
The plaintiffs allege the government offered assurances in return for their investment, including that the investors would be able to sell to one of the national carriers after five years if necessary. Mobilicity launched a cellular business after buying spectrum licences in 2008, but it faltered and eventually sought court protection from creditors.
Ottawa blocked multiple attempts to sell to Telus, but eventually permitted a sale to Rogers for $465-million in 2015 as part of a deal that included the transfer of airwaves to fellow new entrant carrier Wind Mobile Corp. (later sold to Shaw Communications Inc. and now known as Freedom Mobile).
In its statement of defence, the government denies that officials made promises to the plaintiffs to induce them to invest, and states, “The commercial failure of Mobilicity was caused by factors beyond the control of Industry Canada and other regulators, including commercial decisions and relationships, poor management, undesirable or inappropriate devices and handsets and consumer preference.”