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A security guard stands watch at the McGill University Health Centre offices (MUHC) in Montreal, Tuesday, September 18, 2012, where members of Quebec's anti-corruption squad conducted a raid at the premises.

Graham Hughes/The Canadian Press

At the McGill University Health Centre, the directors always had difficulty understanding why the purchase of the vacant apartment building next to the Montreal General Hospital had to be so complicated.

Rather than just buy the land through the hospital network, the directors say they were told in 2010 by the MUHC's then chief executive, Arthur Porter, that the building was acquired as the site of a new outpatient clinic by two obscure non-profit entities, Syscor and Syscor II – companies set up to procure equipment for the hospitals' IT systems.

"We always seemed to be discovering after the fact that something had happened with respect to real estate," one former director told The Globe and Mail. Another director explained: "Did we know much about that at the board? Not a lot."

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On Tuesday, a report from a provincially appointed committee suggests the directors were right to be skeptical – and perhaps should have been more so.

The report, written by committee head Michel Baron, a former dean at the University of Sherbrooke's medical school, is an indictment of the hospital's previous administration, which the committee accused of entering into strange and "hazardous" land transactions to avoid public scrutiny. Health Minister Réjean Hébert considers the transactions so out of the ordinary that he has referred them to Quebec's special anti-corruption task force, known as Operation Hammer. (A spokesperson for the task force said it could not confirm or deny it was investigating that specific real estate deal.)

The report was ordered by Quebec's new Parti Québécois government because of concerns about escalating costs at MUHC.

Now Montreal's English-speaking health-care network, which is comprised of six hospitals and is undergoing one of Canada's largest infrastructure facelifts in the form of a new $1.3-billion site, faces a possible deficit of $115-million, thanks to about 900,000 hours of unaccounted for overtime spending and financial mismanagement, the report concluded.

"This is a major loss of control," said Michel Fontaine, a deputy minister at the Health and Social Services department. The province also announced that it was appointing a special overseer, Michel Bureau, to monitor the health network's spending, which the government considers one step short of trusteeship.

From the beginning, the deal to acquire the apartment building at 1750 Cedar Ave. was shrouded in secrecy; it wasn't until nearly a year after the transaction that The Montreal Gazette revealed it.

In 2010, Syscor, a company that was incorporated to buy mainframe equipment for the hospital network, became a shareholder in a numbered company registered to Montreal developer Vincent Chiara that owned the building. Later that year, Syscor II was created, and it entered into complicated lease agreements with Syscor and another numbered company that effectively gave the MUHC control of the property.

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But the deal was never approved by provincial or city officials, and it fell apart when bureaucrats refused to approve a zoning change. Dr. Porter had earlier promised then Montreal mayor Gérald Tremblay not to expand the footprint of the Montreal General Hospital.

The committee estimated MUHC will lose about $40-million on the transaction.

In an interview, Mr. Hébert addressed Dr. Porter's role specifically, saying: "Mr. Porter does not have a management style that we would like to see elsewhere in the health network. ... There was a laxity in management and the former board has a share of the responsibility."

Mr. Chiara could not be reached for comment late Tuesday. Efforts over the past several months to reach Dr. Porter, who stepped down from his position at the MUHC in late 2011 after the media reported that he had entered into a commercial relationship with a Montreal businessman once accused, and acquitted, of illegal arms dealing, have also been unsuccessful.

Tuesday's report did not examine the hospital network's $1.3-billion facility, which is relocating all of the MUHC's hospitals except Montreal General to a site known as the Glen Yards. That project has become the focus of a police investigation and criminal charges. In November, investigators with Operation Hammer charged two former SNC-Lavalin executives with defrauding the MUHC in relation the construction contract that the company was awarded in 2010.

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