SASKATOON — It can finally be reported what is behind the recent turmoil at the very top of The Lighthouse Supported Living Inc. in Saskatoon.
A publication ban has been lifted by the Saskatchewan Court of Appeal regarding a court order made by Queen’s Bench Justice David Gerecke on Dec. 6, 2021, in which the court removed Lighthouse Executive Director Don Windels from his roles as executive director and as board member at The Lighthouse and Blue Mountain Adventure Park Inc. over questionable loan transactions.
According to the court order, Windels is also barred from holding any office at either organization until Dec. 1, 2023.
The lifting of the publication ban comes in the wake of recent turmoil this year at the Lighthouse. In January, Windels had taken leave of his role of executive director of the Lighthouse and was replaced by Jerome Hepfner and Twila Reddekopp, both members of the Lighthouse board.
It can be reported the removal of Windels and replacement by Hepfner and Reddekopp had been prompted by an application to Queen’s Bench court by Hepfner, Reddekopp and a third director, Ian Hamilton, who is also former mayor of North Battleford. They sought to permanently remove Windels from the board over two transactions while he was in office as executive director.
One was over an alleged $60,000 "loan" in 2017 received by the executive director himself, for the purchase of a residence for his daughter. The Court eventually determined in its Dec. 2021 ruling that the house was actually purchased by the Lighthouse for $60,000, with Windels maintaining personal and exclusive use of the residence rent-free between 2017 and 2020 before buying the property in 2020.
The other transaction was a $30,000 loan during Windels’ tenure as executive which was made to a member of The Lighthouse board, Pierre Trudel, for his business, Mech-El Services Inc., which was seeking to develop a patent. Trudel was president of The Lighthouse board from 2007 to 2016.
In his Dec. 6, 2021 ruling, Justice Gerecke stated the following:
“Don Windels must be removed from his offices with the Lighthouse and Blue Mountain. That is necessary for the organization to begin to rebuild trust with the public and stakeholders. This may be offensive or distressing to some. I do not doubt that over the years the majority of his efforts have been to advance The Lighthouse’s mission of providing assistance and housing to the vulnerable. Nonetheless, for The Lighthouse to recover from the major blows it will suffer in the eyes of the public and key stakeholders, I consider it necessary for him to be removed from his existing rules and barred from holding the role for at least two years.”
Justice Gerecke also stated amendments to The Lighthouse bylaws were needed. He called for elimination of the dual role of the executive director being a member of the board, remove the “unusual impediments that exist” concerning the executive director, and establish a maximum term limit for board members.
“That has been a cause of the problems experienced by the Lighthouse. Limited grandfathering would be appropriate.”
The Queen’s Bench ruling also directed The Lighthouse board to hold a members’ meeting, with the court further ordering that Twila Reddekopp and Ian Hamilton are to remain on the board for a period of two years and Jerome Hepfner for a period of one year.
Also according to the ruling, all board members and most senior managers are required to attend governance training within 90 days of the members’ meeting, and the board is to report back to the court within six months on actions taken to improve the organization’s governance.
While the publication ban has been lifted, the Queen’s Bench ruling is still under appeal.
Reaction
In a statement issued Monday, Hepfner said the ruling on the publication ban now allows the Lighthouse organization to begin the healing process.
“We have been working for more than a year to address serious governance, administrative and financial issues at The Lighthouse,” said Hepfner. “That process was very painful and was made even more difficult because we were unable to communicate freely with our staff and supporters in the community due to the publication ban.
“Today’s ruling allows us to begin healing the organization and will help us to fully restore the confidence of our stakeholders, clients and the broader community.”
Background
Previously, a Sept. 10, 2021, fiat issued by Justice Gerecke had ordered an investigation into the $60,000 loan to Windels, the $30,000 loan to Mech-El Services Inc. and whether any additional irregular or potentially irregular non-arms-length transactions have been engaged on by The Lighthouse and Blue Mountain.
According to Queen’s Bench documents that have now been made available to the media, the accounting firm MNP LLP (Meyers Norris Penny) was appointed by Queen’s Bench court to carry out the investigation.
In ordering that investigation, Justice Gerecke had been critical of what had seemingly transpired at The Lighthouse.
“The Lighthouse should never have been asked to extend a $60,000 loan to Mr. Windels so his daughter could buy a house. The Lighthouse should never have been asked to extend a $30,000 loan to Mr. Trudel or his company to develop a patent. Nor should those transactions have been approved by the board members at the relevant time. It was a breach of their fiduciary duties to The Lighthouse to have done so.”
Justice Gerecke had also noted Windels “failed for several years to ensure the Windels loan was properly recorded in The Lighthouse’s financial statements,” that the Windels loan was “concealed from The Lighthouse’s members for at least two years,” and that Windels, as executive director “also failed to ensure that The Lighthouse’s interests were protected with respect to obtaining repayment of the Mech loan.”
The initial investigation by MNP LLP has been completed. Reports were issued by MNP LLP on Oct. 15 and then on Oct. 25, 2021.
MNP LLP’s Oct. 15 report confirmed there was a loan of $60,000 from The Lighthouse to Windels and that in Dec. 2020 he repaid the loan, plus interest and expenses such as utilities and property taxes.
The investigation also confirmed the $30,000 loan to Mech-El. While the loan was recorded in accounting records in 2010, and disclosed in the financial statements since 2013, it was not properly identified as a related party transaction until 2019, according to MNP’s report.
Ultimately, it was Windels himself who ended up living in the house in question.
In his Dec. 6 Queen's Bench ruling, Gerecke made the determination that the proper characterization of the $60,000 transaction in 2017, which "Mr. Windels views as a loan," was as a purchase of a house at 716 Walmer Road in Saskatoon by the Lighthouse. According to the Queen's Bench Dec. 6 document, Windels maintained personal and exclusive use of the property between 2017 and 2020, with the Lighthouse holding title to the property.
in 2020 Windels had repaid the purchase price, interest and related costs and had purchased the house from the Lighthouse for less than $82,000. According to the court document, the market value of the house was $230,000.
All the court documents, which were subject to the publication ban, have exposed turmoil at the top of The Lighthouse organization.
Not only were there allegations directed at Windels over the Walmer Road house, but the documents revealed a sharply divided board that had fallen into two factions: one in support of Windels and the other seeking his removal. Among the allegations in the court documents is that the pro-Windels faction tried to remove the anti-Windels faction of directors from the board.
The turmoil spilled over in public earlier this year, as Windels officially went on leave and Hepfner and Reddekopp officially took over the running of the Lighthouse. On Feb. 1, 2022, five senior managers from the Lighthouse were let go and, according to reports, escorted off The Lighthouse property in Saskatoon.
Allegations Against Windels
The Queen’s Bench court documents, obtained by the Battlefords News-Optimist/SASKTODAY.ca, outline in detail the allegations made against Windels. They also illustrate the complexity of the transaction in 2017 involving the house. It was initially viewed by the Court as a $60,000 loan from The Lighthouse to Windels, but the Court later determined the house was purchased by the Lighthouse organization itself, with Windels ultimately paying back the $60,000 plus interest and additional costs later to gain title to the property.
According to facts that were outlined in the Sept. 10, 2021, fiat issued from Queen’s Bench court, Windels received a loan of $60,000 from The Lighthouse, which Windels had said was for the purchase of a residence for his daughter.
The Court found this to be known and approved by board members. However, no minutes or resolution or agreement documenting the Windels loan were brought to the court’s attention and it appeared none existed. Also, the board had directed The Lighthouse to take title to the property being purchased, but no record exists of that either.
There was also no evidence Windels recused himself from the meeting where a loan was approved. According to the Queen’s Bench account, Windels attested he repaid the loan of his own accord, but the loan has never been disclosed in financial statements for The Lighthouse.
Later, in the court's Dec. 6 ruling, Gerecke determined the "loan" was properly characterized as a purchase of the property by the Lighthouse, which was offered as an explanation for why there were no records about a loan being approved. It was noted no loan was entered into the Lighthouse's books, and instead the house transaction was treated as acquisition of a capital asset for the purpose of the Lighthouse's internal books and audited financial statements until the 2020 draft audit statements.
It was also noted that during the period when Windels was in possession of the house, no rent was paid nor was an accounting done. Also, at the time of the transfer of ownership to Don and Bonnie Windels, the Court stated the board was not advised and no approval was obtained.
A separate loan was also made to Trudel. Trudel’s company Mech-El Services Ltd. had borrowed $30,000 from The Lighthouse in March 2010, to enable Mech-El to pursue a business opportunity for patenting a device.
That business opportunity now looks unlikely to bear fruit, according to the Queen’s Bench court documents. No agreement or resolutions documenting the granting of this loan were in evidence, according to the court in Sept. 2021.
The Sept. 10 court document indicates the loan had originally been intended to be repaid within a year, but it is still unpaid.
There were multiple extensions granted in 2011, 2013 and 2014 signed by Windels and Hepfner. Then on April 15, 2020, the board passed resolutions extending the Mech loan to Sept. 30, 2020, “at which time all principle (sic) and accrued interest is due and payable.” Trudel was among those signing the resolution.
According to the Queen’s Bench document: “The court was provided with no explanation as to why the Mech loan was not shown as a related party transaction in financial statements for the various years. Nor was any explanation offered as to why Mr. Trudel considered it appropriate to take the loan, allow it to continue to remain unpaid for over 11 years, nor why he did not recuse himself from the resolution passed on April 15, 2020, to further extend the loan.”
Hepfner, Reddekopp and Hamilton also raised concerns in their application about transactions between Blue Mountain and Windels’ personal foundation, the Kowach Foundation for Advancing Education Inc., a charitable non-profit. Windels said he previously reported to the board about the relationship.
But according to the court, in a reply affidavit Reddekopp alleged the extent of the relationship between Blue Mountain and Kowach was not known.
Infighting on a divided Lighthouse board
The court also outlined the sequence of events that unfolded involving the board in 2021, events that highlighted the divisions and the infighting that took place on the board itself throughout the year.
According to the timeline outlined by Queen’s Bench, in April 2021, The Lighthouse board created an audit and finance committee, with no explanation provided for why the committee did not exist before that.
Also at that meeting, Trudel had said the three applicants (referring to Hepfner, Reddekopp and Hamilton) as well as another board director, Adeel Salman, made comments critical of Windels’ work as executive director, according to the court document.
On May 12, 2021, Hepfner inquired by email to Windels as to matters including the status of the financial statements for the 2020 year-end for The Lighthouse.
Windels’ response, according to the court, included reference to health issues and staffing issues without actually addressing the questions raised by Hepfner.
On May 18, 2021, Reddekopp and Hepfner met with Windels and offered him two alternatives: take an immediate medical leave or take an immediate administrative leave. Two letters were presented to Windels for each option, each one referencing serious concerns about the management and finances of The Lighthouse and Blue Mountain.
Windels signed the medical leave letter that day. According to the court facts, he was essentially escorted by Reddekopp and Hepfner from the premises. Reddekopp and Hepfner then advised The Lighthouse that Windels had agreed to go on medical leave and that they would serve as acting co-executive directors, assuming his duties.
According to the court, at no board meeting had the permanent or temporary removal of Windels as executive director been raised or discussed, nor was the self-appointment of Reddekopp and Hefner as acting co-executive directors.
On May 30, 2021, Windels declared himself fit to work and provided medical notes. This did not satisfy either Reddekopp or Hepfner of his fitness to perform the job, but Windels did return to work June 1.
Just prior to that, on May 31, 2021, another board member, Tyrone McKenzie, sent an email to the applicants and other individuals where he purported to call a special meeting of The Lighthouse members for June 17.
On June 1, 2021, Hepfner attempted to call a board meeting for June 2 to “address issues concerning the work and conduct of Don Windels,” with Windels to be excluded from the meeting.
On June 3, McKenzie, with several other members in support, formally requested a special members' meeting, with a special resolution to be placed before members that specifically called for the removal of Hepfner, Reddekopp, Hamilton and Salman as directors and members of The Lighthouse and as directors of Blue Mountain.
McKenzie also demanded, on behalf of his co-signatories, that no board meetings be held or resolutions passed until after the special meeting.
The notice calling for the special meeting for Aug. 5, 2021, was sent to Lighthouse members June 20.
On July 3, 2021, Windels then purported to call an annual general meeting of the members for July 19, but no board approval was obtained.
On July 5, 2021, Hepfner, Reddekopp and Hamilton presented to Windels a set of charges to initiate a process under The Lighthouse bylaws, with a stated intent of removing Windels from office as a board member and as executive director.
The dispute goes to court
Hepfner, Reddekopp and Hamilton then brought forward an Application Without Notice to Queen’s Bench court in Saskatoon on July 16, 2021.
That application went before Queen’s Bench court with counsel for the applicants, for Windels and for The Lighthouse Supported Living Inc. present.
On Sept. 10, 2021, Justice Gerecke made his ruling in which he ordered an investigation into The Lighthouse. The court has made the following statements in that court decision:
“The Windels loan and the Mech Loan, both of which are admitted by Mr. Windels and Mr. Trudel, are deeply problematic. They never should have occurred. They may not rise to the level of fraud or dishonesty, but I need not determine that.
“The Windels loan and Mech loan were in no way consistent with the charitable object or activities of The Lighthouse. The Lighthouse is not in the business of being a lender. If legal advice has been obtained at either time, as should have occurred, it undoubtedly would have been that The Lighthouse should not make those loans."
Later, Gerecke went on to state that “in any meetings concerning the loans that they received, Mr. Trudel and Mr. Windels should have fully recused themselves. Whether they did so is unclear. The evidence is unclear as to whether Mr. Windels was in the meeting where the Windels loan was approved, but in his two affidavits he did not deny participating in that meeting. Mr. Trudell signed unanimous resolutions in 2021 that extended the term for repayment of the Mech loan, so he failed to refuse himself from that decision as his fiduciary duties, the act and the bylaws required him to do.”
The court determined the conduct made out a prima facie case that “the activities or affairs of The Lighthouse have been carried on or conducted, and the powers of the directors of an exercise, in a manner that is oppressive and is unfairly prejudicial” and “unfairly disregarded the interest of specific members (the applicants) and the members as a whole.”
The court also determined the conduct of the Windels faction may also have been oppressive or unfairly prejudicial. The court cites that the AGM was called without board approval, and requisitioned the special meeting in an attempt to remove the audit and finance committee members, as well as director Salmon.
The court found a prima facie case was made that the calling of such meetings “was an attempt to stifle investigations into whether there were more improper transactions.”
Justice Gerecke then made the order for the investigation to proceed, and stated that upon receipt of the report he would consider what, if any, further relief was appropriate.
MNP LLP was then appointed to conduct the investigation and issued their first report of the inspector on Oct. 15, 2021, and a second report on Oct. 25, 2021. Both reports have been filed with the court.
Stays were also issued on any action concerning the special meeting or the calling or holding of an annual general meeting by The Lighthouse, pending further order of the court. No board members were to be elected or removed, and the court also did not allow The Lighthouse to admit any new members or remove any members in the meantime, to ensure a faction does not attempt to “stack” a future members’ meeting.
Court decision somewhat critical of directors
The Dec. 6, 2021, ruling to remove Windels came as a result of an application on behalf of Hepfner, Reddekopp and Hamilton for an oppression remedy, under s.225 of The Non-profit Corporations Act.
In his ruling, Justice Gerecke was also somewhat critical of the conduct of the directors for their actions in May 2021. He stated it would have been preferable for them to have ensured they had board approval before acting, but noted it would have been difficult to obtain more than a bare majority.
“They were desperate to make something happen. They had no personal financial interests at stake. Rather, they were trying to act in the best interests of the Lighthouse, even if they did not do so following proper procedure.”
He stated that he did not find the actions of Hamilton or Reddekopp sufficiently egregious — “not even close” — to warrant the removal of the two directors. “Indeed, they are the directors who have shown the greatest commitment to acting in the Lighthouse’s best interests,” he stated.
Regarding Hepfner, Gerecke said he was a “tougher case.”
“There is good reason to find that he should not remain on the board.
“On the other hand, the organization will need continuity, and Mr. Hepfner played what I view as a valuable role as an applicant in these proceedings. He has been in the courtroom for all or most of the applications heard in this matter, continuing to be present in the face of substantial criticism concerning the roles he has played. It is evident that he is contrite, and I view him as currently acting in the best interest of The Lighthouse.”
Justice Gerecke ruled that Hepfner’s position on the board be protected for at least a year, and Reddekopp and Hamilton’s Board memberships until Dec. 1, 2023.
As well, effective Dec. 20, 2021 at 12:01 a.m. the order restraining The Lighthouse members from meeting was to end and have no further force or effect.
In his concluding remarks Justice Gerecke said the following:
“In at least some of his actions, going back many years, Don Windels lost sight of what really matters – that The Lighthouse be able to sustainably serve ‘the needs of the distressed, vulnerable, mentally-ill, those suffering from substance abuse, the homeless and destitute people in our communities on a 24-hour-day/seven-days-a-week, year-in and year-out basis.’… Those are Mr. Windels’ own words.
“Mr. Windels damaged that mission and The Lighthouse’s ability to carry it out by repeatedly commingling his personal interest with those of The Lighthouse, by failing to ensure that all transactions were recorded properly in The Lighthouse’s financial records, and by failing to ensure that The Lighthouse’s audit reports were complete and accurate. Those are breaches of the reasonable expectations of the applicants, The Lighthouse’s stakeholders and of the public that cannot go without remedy.
“The orders I make are not to punish Mr. Windels. He loses his job and that will be severe for him. But punishment is not my objective. My orders are intended to ensure accountability and to be remedial – to make The Lighthouse as whole as possible and to help right the ship.”
Further developments
The Queen’s Bench decision is now under appeal. Since the ruling, there have been further developments involving the Lighthouse.
It was reported the Saskatoon Fire Department had issued fines to The Lighthouse for multiple fire code and property maintenance violations, in response to fire inspections of the property in 2021 and 2022. They included 42 violations of the Fire Safety Act related to failing to maintain life safety systems and building systems.
On Jan. 20, 2022, it was reported Windels was placed on leave and that Hepfner and Reddekopp had been appointed as interim managing directors of The Lighthouse by the board.
“We are committed to The Lighthouse and the people who depend on it,” said Hepfner. “Our focus has always been and will continue to be on ensuring it is a healthy organization that serves its clients effectively, respects people and is worthy of community support.”
