An inflated land deal negotiated by the Toronto Parking Authority involving a seasoned lobbyist, a sign consultant and a city councillor should be investigated by police, the city’s audit committee heard Tuesday.

“We have a situation here that just smells. It really smells,” Councillor Josh Matlow, a member of the committee said following the release of a 76-page investigative report from Toronto’s auditor general into a pending land transaction in North York.

“I think it’s reasonable to ask, did anything untoward happen and should the police be engaged?”

Auditor general Beverly Romeo-Beehler’s nearly 10-month investigation into an otherwise mundane-sounding land deal questioned both the process and the $12.2-million price that has been on hold since she intervened. Her report outlines obfuscation by parking authority executives, prodding by the local councillor looking to push the deal forward, and potential conflicts among hired lobbyists and consultants with prior connections to the land.

Until now, the pending deal has been discussed in secret, behind closed doors.

The auditor’s investigation was sparked late last year after Councillor John Filion, a member of the Toronto Parking Authority board, repeatedly asked to see due diligence on the deal.

The Star has also traced the origins of the transaction, the history of the land and the people who have an interest in it.

The site in question is a five-acre (two-hectare) grassy strip that runs along the south side of Finch Ave. W. between Arrow Rd. and an on-ramp for Hwy. 400.

The proposed deal was connected to future plans for a Finch West light-rail line. In March 2016, as part of a much larger report, council approved the parking authority’s acquisition of the property at fair market value, to be used for city parking and bike-share programs.

That report also allowed for the possibility of creating public space — a long-held dream of erecting North America’s largest flagpole, pushed by local Councillor Giorgio Mammoliti (Ward 7, York West). The auditor’s report outlined that Mammoliti was involved in the land sale deliberations.

Romeo-Beehler concluded that the “(Toronto Parking Authority)’s actions created unnecessary risk of overpaying an additional $2.63 million” and that executives failed to obtain the independent evaluation required to determine fair market value.

“There was significant risk to the city and TPA’s reputation because of the lack of independence, transparency and judgment expected of the Toronto public service,” she wrote. “The lack of judgment in disclosing information to the lobbyist, not checking for conflicts of interest and not obtaining an independent sign valuation is concerning.”

Those involved in the deal have been key players connected to the Arrow Rd. plot since at least 2009, when an application for a large digital billboard on the Finch-facing land was made by Allvision Canada on behalf of Frank De Luca, a real estate broker who had come to own the land years earlier.

Public records show the land has been held by the company Katpa Holdings Inc. since 2000 and corporate records name De Luca as the president and sole director of that company.

Much of the land south of Finch Ave. in that area is owned by the Prayer Palace, a controversial church.

A 2007 Star investigation into the Prayer Palace’s business practices found Katpa Holdings appeared to be connected to the church, but De Luca said then that they were no longer involved in the land. De Luca could not immediately be reached for comment for this story.

De Luca’s digital sign application on the property was pushed through against staff recommendations by Mammoliti at a meeting of the Etobicoke York community council in 2009, according to a recording of that meeting reviewed by the Star.

At the same time, Mammoliti asked for city staff to assess the land for the feasibility of a proposal he was working on: a “monumental flagpole.”

The 125-metre flagpole idea was also being advanced by the Emery Village Business Improvement Area (BIA), of which Mammoliti is a board member.

In 2010, council directed city staff to negotiate the purchase of the land (council voted that the city should not be responsible for any costs related to the land acquisition).

That plan fell apart after staff in the real estate services division determined the landowner’s asking price was “not realistic,” according to internal staff emails obtained by the Star through a freedom of information request.

The auditor general’s report outlines what happened next.

Starting in 2014, the BIA, through a hired lobbyist — who the Star confirmed is former North York city councillor Paul Sutherland — and Mammoliti approached the parking authority about the site and the possibility of reviving the flagpole project.

While an independent appraisal ordered by the TPA valued the land at $7.5 million, De Luca, the landowner, said it was worth $17 million, the auditor found.

The TPA told the auditor general it was Sutherland who returned with a deal for $12.2 million.

The auditor detailed how the TPA asked a sign consultant who had done work for the agency to help determine the value of the digital sign already on the site and its impact on the land value.

The Star has confirmed that the consultant was Blair Murdoch, former president of the advertising firm Allvision, who the auditor noted put together the original sign deal on the site for De Luca.

Murdoch was never paid for his TPA work and told the auditor he did it as a “service.”

The TPA and Murdoch also discussed the potential for a second sign to be built on the site — which the auditor wrote was unlikely to be approved but helped raise the TPA’s assessment of the deal’s value to the already agreed-upon $12.2-million price.

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When the auditor questioned how the TPA determined the value for the signs, she learned that vice-president of real estate and development Marie Casista prepared a spreadsheet and sent it to Murdoch, who then returned the same spreadsheet as though it was his own.

Asked how she prepared the calculations, Casista told Romeo-Beehler she “did it on the back of an envelope.”

“When asked for the envelope, she said that she did not keep the envelope,” the auditor wrote.

The auditor general found the deal overall was worth $9.5 million. She wrote that had Filion not brought the purchase plan to her attention, the parking authority would have overpaid.

Casista and parking authority president Lorne Persiko told the Star on Tuesday they would never have paid $12.2 million and that they had always planned to carry out the due diligence to obtain a fair market value on the deal, but they were “interrupted” by Filion and the auditor.

The auditor general said there was no evidence that Toronto Parking Authority staff or their sign consultant were directly benefiting from the land deal.

Murdoch told the Star he did not stand to gain financially from the deal and was not in a conflict.

“The assignment with TPA had nothing to do with the property owner and I simply provided an opinion to TPA as part of my role as their sign consultant,” Murdoch wrote in an email.

Sutherland told the Star by phone that he “did not ask” for the $12-million proposal. “It was sent to me,” he said, but he did not clarify by whom.

The auditor general said Tuesday her findings would be appropriately referred to the city’s integrity commissioner as they relate to Mammoliti.

Mammoliti, in an email to the Star, said even though he has vehemently disagreed with the light-rail plan, it is likely to go ahead and it is his duty as a councillor to secure public benefits.

“Let me be clear: I would not have supported the acquisition of the property at a price that was not reflective of fair market value,” he wrote.

He also challenged councillors Matlow and Filion to accuse him directly of something illegal so he could “sue their sorry asses for slander.”

Speaking to reporters ahead of the audit committee meeting Tuesday, Mayor John Tory said he is “very concerned” by the contents of the report.

Filion questioned why those involved seemed to go to “great trouble” to have the valuation match the purchase price desired by De Luca.

“I have no explanation for why that would happen, but it’s very disturbing and I hope in time we do get to the bottom of that,” Filion said at the committee meeting.

Jennifer Pagliaro can be reached at 416-869-4556 or jpagliaro@thestar.ca . Jayme Poisson can be reached at 416-814-2725 or jpoisson@thestar.ca .

With files from David Rider