The mayor has suspended the city's downtown loan program after its director was charged with municipal corruption.

Mayor Fred Eisenberger said he wants an internal audit to ensure city funds haven't been misused and to restore public confidence in the program.

"Obviously this is not a pleasant experience for anyone," he said yesterday, after being briefed about the police investigation.

Gord Moodie, head of the loan program, is facing charges for allegedly accepting money from a developer in exchange for favours.

City manager Glen Peace said he's been told by Ontario Provincial Police that they don't believe the loan program has been compromised. "I have no reason to believe that it's been breached," he said.

Moodie, 47, will be reassigned to other duties pending the outcome of the charges, Peace said.

The city was planning to offer $10 million in new downtown loans next month. To date, council has approved $37 million to bring more than 1,600 new apartment and hotel units to the core.

Though celebrated for helping transform the downtown, the program has also been plagued with allegations of criminal activity. The city conducted an internal audit in 2004 that found no wrongdoing.

The OPP was later called in to investigate after Councillor Dave Mitchell and businesswoman Judy MacDonald-Musitano alleged wrongdoing based on documents received from a confidential source. Investigators said they found "insufficient evidence to warrant" charges.

The provincial police now allege developer Denis Vranich gave Moodie $5,000 in 2005 to help his father, Darko Vranich, receive city funding.

Under the Criminal Code, it's an offence to either influence a municipal official or for a municipal official to accept benefits to be influenced.

The elder Vranich, a noted Oakville developer who has built several area hotels, has been approved for at least two downtown loans. In 2004, he received $2 million to build a Staybridge Suites Hotel on Market Street. Now that the hotel is built, the loan is being paid back.

At the same time, council also approved a $4-million loan for Darko Vranich to turn the old federal building at Main and Catharine streets into condos. That loan was recently cancelled because the project is delayed.

Last night, Darko Vranich said he was not aware of the charge against his son.

"I don't know nothing about it."

Denis Vranich declined to comment last night.

Downtown Councillor Bob Bratina said he considers Moodie a friend and believes he's done nothing wrong.

"It's very troubling," he said of the charges, calling Moodie one of the "finest, most productive" public servants he's come across.

Bratina added Moodie has endured repeated character attacks and has always been cleared.

"The poor guy gets nailed."

Hamilton lawyer Dean Paquette said he was approached to represent Moodie on the charges but was not aware that Denis Vranich, whom he has represented on criminal charges in the past, was also being charged by the OPP.

"Mr. Moodie is fully intending to defend these charges vigorously and I'm frankly looking forward to representing him, or, if necessary, Mr. Vranich," Paquette said.

Vranich, 31, pleaded guilty last year to sexually assaulting a female bartender in his employ at the Elixir Lounge and Nightclub in Hess Village. He was sentenced last fall to a one-year conditional sentence of house arrest.

OPP are appealing to anyone with more information about the city loan case to call provincial police headquarters in Orillia at 705-329-6400.

bbrown@thespec.com

905-526-3494

nmacintyre@thespec.com

905-526-3299