STANDING COMMITTEE ON PUBLIC ACCOUNTS
Mr. John Holm
MR. CHAIRMAN: Good morning, everybody. I think that maybe we can get started. There are a couple of matters that need to be dealt with at the end of the meeting so should we try to, with the agreement of the committee members, reserve about 10 minutes at the end?
SOME HON. MEMBERS: Agreed.
MR. CHAIRMAN: Okay. This morning our witness is Mr. Jim Spurr who is the Deputy Minister responsible for Sysco and, of course, the Auditor General is again with us as an observer and also to provide any additional information if so requested. Last meeting we started with the Liberal caucus in terms of the questioning and today maybe we will start with the New Democratic Party, if ready, Mr. Dexter. (Interruption)
Oh, excuse me, I apologize. You can tell I don't have the experience, I am just a rookie in the Chair. I apologize and obviously, yes, Mr. Spurr, we will give you the opportunity to make an opening statement and I do apologize for getting ahead of myself.
MR. JAMES SPURR: I don't have a prepared text for an opening statement. I just wanted to provide you with a couple of sentences as a backdrop to what we are, I believe, going to discuss this morning. Just to let members know, some of whom have not been around public life or the Public Service as long as I have, I have been involved in one way or another with the Sydney Steel file since about 1985. However, since August 1999, when the current government came to office, I have had responsibility for the file as the deputy head responsible for it but my experience, which hopefully will be helpful, goes back to approximately 1985. So based on what I know about Sysco, historically and most recently, I will try to be as helpful as I can this morning. Thank you, Mr. Chairman.
MR. CHAIRMAN: Thank you very much, Mr. Spurr.
MR. BROOKE TAYLOR: On a point of order, Mr. Chairman, how many MLAs are representing the New Democrats here this morning?
MR. CHAIRMAN: There are two. One is myself, but acting as Chairman, and Mr. Dexter; the member for Cape Breton Centre is just sitting in as an observer.
MR. CHAIRMAN: The honourable member for Dartmouth-Cole Harbour.
MR. DARRELL DEXTER: Mr. Chairman, I see Mr. Taylor is quite concerned that the balance not be upset on the committee and I can understand his concern. My colleague is a formidable opponent in these matters and we wouldn't want to intimidate the government caucus.
Mr. Spurr, I have some preliminary questions that I wanted to run through. Can you tell us who, if anyone, did you meet with in preparation for your testimony before this committee this morning?
MR. SPURR: I physically met with one individual who is a communications advisor to me on the Sydney Steel file for the purpose of attempting to anticipate some of the questions which might interest you and to test me to see if I had the background knowledge up to date without having to do further research in order to adequately answer them.
MR. DEXTER: Who was that?
MR. SPURR: That was Ms. Jennifer MacIsaac.
MR. DEXTER: What other preparation did you undertake for today's testimony?
MR. SPURR: I reviewed the binder which was circulated to members of the committee. I reviewed my own materials which are voluminous, going back many years, but concentrated on the materials I have that relate to the most recent information that relates to efforts to sell Sydney Steel Corporation.
MR. DEXTER: You mentioned that your involvement in this file goes back, I think you said to 1985, and then you specifically referred to August of last year as the date that you took over carriage of this file as the deputy responsible.
MR. SPURR: Yes, that is correct.
MR. DEXTER: I wonder if you could tell me who else would be involved in the file and what their roles would be?
MR. SPURR: At this time, if you are speaking about individuals in the Public Service, I try to keep that to a minimum for this reason. The matter of Sydney Steel at the moment is really in the hands of Ernst & Young as all of you will be aware. I have, on a regular basis, a direct reporting relationship to my minister, Minister Balser. From time to time, I do have occasion to discuss Sysco in a general way with the Premier. There are really no staff persons in the Public Service responsible for Sysco who report to me but I do have regular dealings with individuals at Ernst & Young who are involved in the file. I do take legal advice regularly from counsel at Stuart McKelvey Stirling Scales and, as I mentioned earlier, I do discuss this file regularly with my communications advisor, Ms. MacIsaac.
MR. DEXTER: That is now. I guess I would like to go back to August 1999 when you took over the file. Just, by way of example, perhaps you could tell us, what was the first meeting you held on the Sydney Steel file after you took over carriage of that matter and who was it with?
MR. SPURR: After I took over responsibility for the file, I believe one of my initial meetings was with representatives of ABN Amro which is the investment banking firm which, at the time I took over the file, were operating under the terms of an agreement they had with the province to attempt to sell Sysco. That meeting would have been probably in the third week of August and was in Halifax when I was given responsibility for the file. Representatives of that company travelled to Halifax to meet with me. It was a mutual briefing; they briefed me on their progress to date and I briefed them on my view of how our efforts should be undertaken to sell Sysco.
MR. DEXTER: At that time was there a short list of candidates for the purchase of Sydney Steel or had the matter progressed to that point when you picked up the file?
MR. SPURR: At that time the matter had not progressed to that point. My notes indicate that over the summer of 1999, including August when I initially met with ABN, that they where still in the process of making initial contact with a fairly broad range of potential purchasers worldwide.
MR. DEXTER: Were you receiving any kind of technical advice with respect to the operation of the mill itself and its value?
MR. SPURR: In this context, as you will be aware, at that time Hoogovens was on site at Sysco providing technical advice in respect of management of the operation and with respect to analysis of the operation and the efficiencies that could be brought to it in order to improve it as a series of assets that could be sold to a private sector purchaser. I was also receiving advice from people at ABN Amro as to what the value of the plant as a going concern might be to a potential purchaser and what we might expect to receive as an offer in the form of a purchase price.
MR. DEXTER: You mentioned that one of the things you did and I guess still do is receive advice from counsel, and I believe you mentioned the firm of Stewart McKelvey. When did you decide to seek outside legal counsel for the Sydney Steel file?
MR. SPURR: I retained Stewart McKelvey Stirling Scales in what would have been late 1993 or early 1994, and the purpose in retaining counsel at that particular time was because we were just entering negotiations with Minmetals of China to put together the legal documentation for what we were anticipating would be a sale at that time and of course needed counsel to represent us in that regard.
MR. DEXTER: For the record, so far as you are concerned solicitor-client issues insofar as they arise with respect to this file would be between the province and their counsel at Stewart McKelvey?
MR. SPURR: That is correct.
MR. DEXTER: I don't think it is a secret to anyone that during the last election campaign one of the now government's election platform planks was an artificial deadline for the closure or sale of Sydney Steel. Can you tell us when it is that you would have been advised by the government that they intended to have December 31st as a drop-dead date, and what action you took as a result of that information?
MR. SPURR: Actually that is a popular misconception, if I can describe it that way, for this reason that both of the agreements that were in place with Hoogovens to manage Sydney Steel Corporation for us and the agreement with ABN Amro to try to broker a deal to sell the plant for us had terms that expired December 31, 1999. We were operating well
before the general election of July 1999 on a plan that we had to sell the plant by the end of December 1999. I don't have any personal insight into why the Progressive Conservative Party at the time in campaigning used December 31, 1999, as a date, but it really didn't mean anything to me because I was already operating under that timeline because of the two agreements we were operating under.
MR. CHAIRMAN: Just a little under 10 minutes left in the first 20 minutes.
MR. DEXTER: Are you telling us that the December 31st deadline was never communicated to you by the minister or by anyone in the Premier's office?
MR. SPURR: No, I am not. I will say, obviously it had to be a matter of discussion because as part of our briefings to the new minister and the members of the government as to what legal relationships were in place, what legal obligations we had, the date of December 31, 1999, of course had to be communicated to the new government as a date that we were operating under as part of the agreements that were in place, so for that reason yes, we did discuss it. It just happened and I will use the term "coincidentally" that it was convenient for
them as well because it was a date that they had put out there when they were campaigning for office that they wanted the plant sold or closed by December 31st. It actually was a pretty interesting fit.
MR. DEXTER: There doesn't appear to be any question that Hoogovens or Corus were going to continue on with the management of the plant post December 31, 1999, and in fact, in the letter of intent that you signed in the end with Rail Associates, it specifically provides for them to continue on with the management of Sydney Steel, does it not?
MR. SPURR: We did not have any intention of retaining Hoogovens beyond December 31, 1999, for a couple of reasons. Firstly, although they are very skilled at what they do, they hadn't really hit a lot of their targets in what they had undertaken at Sysco for reasons, many of which are no fault of theirs, but for that reason we didn't plan on continuing with them. The other reason was they are quite expensive. You are quite right that it does make mention in the letter of intent that they would continue on, but if you read the agreement it is very clear, and we made it clear in our negotiations with Rail Associates that if they wanted Hoogovens to continue on at Sysco in that management-advisory role that that was for their account and not for ours. That is very clear in the agreement.
MR. DEXTER: But you knew at the time that you entered into the negotiations with Rail Associates that Corus was part of the consortium?
MR. SPURR: Yes.
MR. DEXTER: Before I get to that, I think there is a number of questions that revolve around the letter of intent. It was widely reported at the time that there were concerns by Corus and by others that the imposition of this deadline for the sale or closure, and you have to remember this is somewhat different than a management agreement expiring, you are talking about the closure or sale of the plant, a final determination of the file, there were suggestions that this deadline had dissuaded people from making bids, it had caused the potential purchasers of product from Sydney Steel to back off the order books. Was this communicated to you by ABN Amro or others?
MR. SPURR: No. In fact ABN Amro was well aware, in my view, when they entered into the brokerage agreement with us that the window of opportunity or the agreed to term during which the plant would be sold would be a term ending December 31, 1999. They were quite prepared to sign an agreement with us on that basis and, in fact, in discussions I had with them did not see why a deal could not be concluded in about six months.
MR. DEXTER: That is a wholly different answer to a question I didn't ask.
MR. SPURR: Sorry.
MR. DEXTER: I understand what you are saying with respect to the agreements coming to a conclusion on December 31st. The former government appeared and was on the record of not closing Sydney Steel. They had put in place lines of credit to continue the operation and they were going to do that apparently until such time as a buyer could be found. Yet a wholly new situation now where there was a deadline of December 31st for sale or closure. That was well known, publicly known, bragged about, you know, I would suggest part of what fuelled their election campaign.
It seems to me obvious that people knew, it was widely known to the public that this was the case and that it only makes sense that it affected the ability of that company to be able to do business with its potential customers. Is that not a fair assessment of the situation?
MR. SPURR: No, it isn't because it is contrary to the facts. I have been asked this question before by others and I have confirmed in conversations with the management at Sysco and I have reconfirmed with Ernst & Young since they have been in there that the sale process that was in place irrespective of the deadline, so-called, had virtually no material effect on Sysco's business.
MR. DEXTER: Can you tell us in the end how many bids you actually received?
MR. SPURR: Yes, one.
MR. DEXTER: And that was from Rail Associates?
MR. SPURR: Correct.
MR. DEXTER: Which included the Reserve Group as part of their consortium? Is that correct?
MR. SPURR: In the final analysis it did although they were in a very minor role which was a role that had changed over time since we had originally begun to deal with Rail Associates.
MR. DEXTER: Did you get an expression of interest from a company called WCI?
MR. SPURR: I am going to answer that by saying no, but that is a very technical answer.
MR. DEXTER: Then perhaps you can explain to us why it is that you are giving us that answer and when you say it is a technical answer, why that is?
MR. SPURR: We had interest from a number of companies which for legal reasons, based on confidentiality agreements that still apply, I cannot disclose the names of.
MR. DEXTER: Let me ask you this. Is it true that there was a tender or alternatively an expression of interest from a group that included Stelco?
MR. SPURR: I am not aware that there was.
MR. DEXTER: Can you tell us when you did finally receive the bid from Rail Associates?
MR. SPURR: December 10, 1999.
MR. DEXTER: Was there an original short list and were they on it at the time?
MR. SPURR: I don't know what you mean by a short list.
MR. DEXTER: Did ABN Amro come up with a list of potential purchasers having reviewed what they received in terms of expressions of interest?
MR. SPURR: Let me answer that this way. ABN contacted I believe 123 companies worldwide. Through the elimination process, if we can call it that, eight companies worldwide expressed enough interest that they were prepared to sign a confidentiality agreement with ABN and take receipt of the confidential information memorandum which gave them a fuller picture of what Sysco was all about and would allow them to make the decision of whether or not they wished to proceed to the next stage of site visits to Sysco, to spend some time in the data room, and decide whether or not they wanted to put together an offer. So there were eight of those.
MR. CHAIRMAN: The time for this initial round has expired.
MR. DEXTER: He just did not say whether or not Rail Associates was among . . .
MR. SPURR: If I could complete my answer, . . .
MR. CHAIRMAN: I am sorry.
MR. SPURR: There were two parties who decided that they had enough interest that they would conduct site visits at Sysco. One of those, Rail Associates, was prepared based on that process to provide us with an offer.
MR. CHAIRMAN: The honourable member for Cape Breton West.
MR. RUSSELL MACKINNON: Thank you, Mr. Chairman. Mr. Spurr, first of all, I would like to congratulate you for coming here today and taking it on the chin for the government that seems to want hide for failing to meet its artificial deadline for whatever
reason. That being said, do you have any knowledge with any conclusive evidence as to when this plant will be sold?
MR. SPURR: Not conclusive. I guess any answer I would give you would be probably best described as speculation, but I would be prepared to say with some confidence, based on the knowledge I have from my involvement in the file that it will be sold sometime this year.
MR. MACKINNON: How does that measure up to your various degrees of confidence since 1985 when you became involved with the file?
MR. SPURR: My confidence that it will be sold this time is on a par with my confidence at the time we were negotiating with Mexican interests in 1997. We had gotten to the point, as you will be aware from having been in government at that time, that we signed a letter of intent with Grupo Acerero del Norte, known by their acronym GAN, but that for reasons unrelated to our negotiations and related to their financial setbacks due to the Asian crisis at that time, they were not able to complete the deal with us. They forfeited their deposit and withdrew to try and consolidate their operations, but I was very confident at that time that the Mexican interest would buy Sysco. I would say this time my optimism is on a par with that.
MR. MACKINNON: So in other words you are no further ahead than you were when you first took over the file?
MR. SPURR: I am not sure I would be prepared to admit to that based on . . .
MR. MACKINNON: Based on the evidence?
MR. SPURR: Based on the evidence I have from Ernst & Young, I think at this time, although we are not at the stage where we have signed a letter of intent or anything like that with a potential purchaser, I have a lot more confidence right now that we will be able to complete the deal this time.
MR. MACKINNON: Do you feel that the artificial deadline of December 31, 1999, hurt the prospects of a sale of Sydney Steel?
MR. SPURR: No I don't, for this reason. I have been involved in a lot of deals over the years, many of them not related to steel plants thankfully, and deadlines, whether you want to call them artificial or not, are a way of life in doing deals. I am more uncomfortable trying to get a deal in an open-ended environment than I am in trying to close a deal within a specific time period. I guess to use the age-old analogy, whatever time is allotted to do a deal usually the work will expand to fill that time period, but I am more uncomfortable working in an open-ended environment.
MR. MACKINNON: So, given your level of discomfort, Mr. Spurr, is it safe to assume that you are making strong recommendation to the government to bring closure to this file a.s.a.p. or shall we be looking at a potential sale for Sydney Steel this time next year? Is there any type of mechanism or policy position in place, or any type of a government decision made that - look, either we fish or cut bait?
The confidence level, certainly, in Cape Breton, and I am sure across Nova Scotia, has been shaken somewhat by this artificial deadline. You are saying that, the artificial deadline didn't hurt but, yet, experts like Rick Lawlor, of course, contradict that position. So we have governmental or political positions taking one stance and experts in the industry taking another stance. Where is this going? When are we going to have closure on this?
MR. SPURR: Well, as you will have noted from the advertisement that Ernst & Young placed, domestically and internationally, on February 15th, anybody who wants to respond to that advertisement and deal with Ernst & Young, as an interested party, has until April 7th to do so. Post-April 7th, Ernst & Young will be assessing whatever interests they have in the plant and will be making recommendations to me and to the government. At that time, the government, I presume, will be in a position to take a decision based on Ernst & Young's advice.
MR. MACKINNON: So, obviously, the government has put a lot of confidence in Ernst & Young to conclude the sale of Sydney Steel. Am I interpreting that correctly?
MR. SPURR: The government has and I have and I can assure you that that confidence is justified based on the work I have done with Ernst & Young since they began work on the file back mid-January.
MR. MACKINNON: That being the case, going back to Rail Associates, why wouldn't Ernst & Young have been involved instead of ABN Amro?
MR. SPURR: Primarily because the approach we were taking with ABN Amro - which is representative of the historical approach government had taken in attempting to sell Sydney Steel - was what I will describe as the investment banking approach to selling the plant; that is, that you retain the services of an investment bank that has operations worldwide and that through their worldwide network, they seek out potential purchasers who might be interested in buying the plant as a going concern, and look for strategic alliances that may make a fit. Ernst & Young, in their current role, is not an investment bank. They are taking - and we hired them for that purpose - a liquidator's approach to selling the plant which is a lot different.
MR. MACKINNON: Okay. So then we get to the crux of the matter. The artificial deadline - first of all, the government goes with Rail Associates through ABN Amro. Rail Associates have a contradictory position to the government in terms of this deposit, this $1 million or $1.5 million, which, obviously, was deposited with the Bank of Nova Scotia.
MR. SPURR: No, it has not.
MR. MACKINNON: Well, my understanding is that it was deposited the day after the agreement was supposed to be concluded and there was disagreement over some business matter the operations, I presume - which is why Rail Associates would not conclude the agreement with the government, although that is not the position of the government.
That having been said, whether we agree or disagree on that, the minister of the day, the Honourable Gordon Balser, stated that it was the government's intent to sue ABN Amro for allowing Rail Associates to make the final screening process, in other words raising the spectre that it wasn't able to put the financial resources in place and didn't meet the criteria of a qualified buyer. What is the status of that potential lawsuit?
MR. SPURR: We have taken no decision on our analysis of what transpired under the ABN Amro agreement. That is about all I can tell you.
MR. MACKINNON: Are you indicating that the minister and the government has backed off on that because perhaps there is no basis for such a position?
MR. SPURR: No, I am not telling you that at all. I am telling you that if the minister made that statement it has not been acted on, it is as simple as that.
MR. MACKINNON: Have you seen any correspondence between the minister and/or the department responsible for Sysco and ABN Amro with regard to this particular issue?
MR. SPURR: No.
MR. MACKINNON: None whatsoever?
MR. SPURR: On the issue of potential legal action?
MR. MACKINNON: Yes.
MR. SPURR: Correspondence that the minister would have signed, I don't recall having seen anything that Minister Balser would have . . .
MR. MACKINNON: Anyone else within the department or legal counsel?
MR. SPURR: Not that I recall seeing. My memory is not infallible but I don't recall seeing anything in writing on that subject matter.
MR. MACKINNON: Wouldn't you agree, Mr. Spurr, that that is a rather bravado position to take in public? It affects the lives of many people and in particular the interest of all Nova Scotians, for a minister to make such a statement and then absolutely no correspondence or dialogue, advice, anything documented that would deal with this matter, and yourself having been involved with the file since 1985.
MR. SPURR: I don't consider it unusual at all.
MR. MACKINNON: Perhaps not with the way this government is operating, I would agree. I would like to refer you, Mr. Spurr, to another particular issue, that of a letter dated February 17, 2000, it was a letter that you sent to Mr. Bill McNeil, President of Local 1064, United Steel Workers of America, with regards to the issue of Ernst & Young taking the responsibility for that particular file, i.e. Sydney Steel. In the final paragraph you state, "The opportunity to achieve the best outcome of the Ernst & Young process for the employees of Sydney Steel will be maximized if you and the Sydney Steel employees you represent actively demonstrate your full support of and cooperation with the process, and we expect to see that support and cooperation consistently throughout. Yours sincerely, James G. Spurr, Clerk of the Executive Council."
It has been suggested, Mr. Spurr, that that is more of a threat to the employees to toe the line or suffer the consequences. How would you respond to that?
MR. CHAIRMAN: That document should be tabled of course.
MR. MACKINNON: Yes, absolutely.
MR. SPURR: First of all, I do recall writing that letter and sending it to Bill. For the record here, it is in no way intended to be construed as a threat. After Bill received the letter and responded somewhat negatively to it, he and I talked on the telephone and clarified, to his satisfaction I believe, what I was saying in that letter and that was simply this, that to the United Steel Workers of America, we can't do this without you. If you, the United Steel Workers want to be disruptive and give us all sorts of flak when we are trying to sell the mill then it probably won't be sold. We can't get through this without you. We need you. I told that to Bill. I believe, despite the words that you read, that Bill and I understand each other, and quite frankly with some exceptions Mr. McNeil has made public statements that he has confidence in the Ernst & Young process to get the mill sold. The purpose of the letter was to tell him and his executive and his membership that we can't accomplish our objective without their cooperation.
MR. MACKINNON: Mr. Chairman, I would suggest that if anyone had shown some leadership on this particular issue it would certainly be the steelworkers at Sydney Steel. I believe they have demonstrated some understanding and support because they, like anyone involved in this process, want to see Sydney Steel as a viable entity. Certainly I don't take any comfort in having an issue like this constantly kicked about in the public eye day in and day out, year after year after year for as long as we have been able to think about Black Friday as a Cape Bretoner being perceived as some type of a social dependent. I think most would agree.
We can go back to the issue in the general election - you talk about drawing lines in the sand - when you have a senior minister in the government, who during the election campaign says if you close Sydney Steel we will open hospital beds, that is the ad that has propagated a lot of double standards here in Nova Scotia. I think that is very unfortunate and it goes to the very heart of where this government is going on this issue. Are they going to sell it? Are they going to close it? I think they owe it to the employees of Sydney Steel, they owe it to the people of Cape Breton, they owe it to the people of Nova Scotia to stop finding excuses for errors and omissions. I think if one wants to look at the file from day one, from the time the government became involved in this, I think we can all accept a little responsibility. I as a Nova Scotian and a Cape Bretoner would certainly stand to that issue.
Mr. Spurr, the government and yourself as being the active participant in this file, still have not stated when Sydney Steel will be sold or closed. People's lives are just hanging in the balance. As late as two days ago, the meeting with Sydney Steel workers with regards to potential bridging packages or pension packages should the Sydney Steel sale fail, was cancelled, and there seemed to be a lot of backroom dealings going on without involving, as you say, some of the most important stakeholders, the steelworkers.
My question would be, how much information has the government given the steelworkers in terms of the real position? Obviously the government must know by now whether the plant will or will not be closed.
MR. SPURR: Are you asking me to impose an artificial deadline?
MR. MACKINNON: No.
MR. SPURR: It seems to me that is where you are going.
MR. MACKINNON: No, we have already determined that artificial deadlines from this government are not dependable, although they are contradictory . . .
MR. SPURR: Let me tell you what is dependable.
MR. CHAIRMAN: Talking about deadlines, you have less than one minute left.
MR. MACKINNON: . . . and they are counter-productive, let's put it that way.
MR. SPURR: Let me tell you what is dependable and that is that the current government will be successful in selling the plant where the Governments of Russell MacLellan and John Savage failed. Let me put that on the record.
MR. MACKINNON: We will see it on round two.
MR. CHAIRMAN: You have about 15 seconds left.
MR. MACKINNON: I will forfeit my 15 seconds.
MR. CHAIRMAN: All right, I will turn it over the government caucus.
The honourable member for Colchester-Musquodoboit Valley.
MR. BROOKE TAYLOR: Mr. Chairman, I would like to, of course, ask Mr. Spurr a few questions here. I don't think anybody would disagree or dispute that an awful lot of taxpayer dollars, both Canadian and Nova Scotian, have been directed to Sydney Steel. Mr. Spurr, one of things I have been trying to find out for a long time is exactly how much taxpayers have shelled out to Hoogovens and ABN Amro. Do you have the grand total of what this has cost the Province of Nova Scotia over the past year and one-half?
MR. SPURR: I believe I can give you some global numbers that are reasonably accurate. I believe, with respect to Hoogovens, we have probably paid them about $9 million. I say about $9 million because their final payment, which was due in December 1999, I had instructed Sydney Steel not to pay the final $800,000 because I wasn't satisfied, for a couple of reasons, that we had to pay it.
With respect to ABN Amro, under the brokerage agreement we had with them, I believe we paid them just over $1 million and obviously because the deal with Rail Associates was not completed, they did not earn the success fee that was available to them under that agreement. So they simply earned their management fee or fee for service during the course of the brokerage agreement and that was about $1 million.
MR. TAYLOR: I guess based on what you have just disclosed then, the taxpayers of Nova Scotia, over the past year and one-half, have paid Hoogovens and ABN Amro approximately $10 million.
MR. SPURR: That is fair.
MR. TAYLOR: Now you are saying that money to ABN Amro does not include charges for their latest venture with Rail Associates. I would certainly be quite upset, frankly, if, in fact, the province did pay ABN Amro for I guess what we will call that spectacular failure.
MR. SPURR: Correct. We did not pay the success fee.
MR. TAYLOR: Can you tell me, Mr. Spurr, is that being contested?
MR. SPURR: No, it is not.
MR. TAYLOR: I guess I am looking for the rate that ABN Amro was due to make more or less depending on how much we sold the mill for. Was there some time-frame? What sort of conditions were attached to the sale process?
MR. SPURR: In terms of the payments they were to receive, we structured the fee schedule to provide an incentive to them to sell the mill early as opposed to later. On that basis, having come on board, really for practical purposes early summer 1999, they would have optimized their payments if they had sold the mill in October. After October, the way we structured the fees, it became less profitable if they sold the mill in November or December and, as you know, as it turned out, we ended up not getting a letter of intent signed until the very last moment on December 31st. At that time, their profitability on the file, if you will, was decreasing.
MR. TAYLOR: So, Mr. Spurr, am I correct then in understanding that ABN Amro was offered by the previous administration a motivation or an incentive package to sell Sydney Steel before the end of October? I think I heard you correctly. Can you tell us the amount that they were offered over and above their engagement and brokerage fees?
MR. SPURR: It works this way, if I can describe it this way, over the course of the approximately eight months that they were actively engaged in selling, their fee structure was such that if they had sold the mill in the first two or three months they would actually have received more money on a monthly basis than if it had dragged out to November or December. Let me give you an example and I will use figures that are not figures from the file because I feel an obligation to ABN not to disclose that because of the competitive nature of the business they are in and I guess to protect them from the competitors knowing what their fee structures are. But let me do it by way of example for illustration.
Let us say that in the first three months that they were on the file, we agreed to pay them $100,000 a month to try to sell the mill. If they didn't sell it in the first three months and they go beyond that, then their fee would become $50,000 a month. If they didn't sell it in those two months and they were still trying to sell it in the last two months of their contract, we would only agree to pay them $25,000 a month. At some point on that scale of decreasing
monthly payments, you come to a point where you begin to lose money. Even though you are still entitled to be paid, you reach a point where you actually begin to lose money and on the same basis, their success fee, if they actually sold the plant, decreases as well. Let's say we agreed to pay them a $1 million success fee if they sold it in the first two months and if they didn't, then if you sell the plant in the fourth or fifth month, your success fee is $0.5 million. If you sell it in the last two months, maybe it is only $0.25 million or $100,000. So it is designed to provide an incentive to the broker to sell, not necessarily as early as possible, but early on in the process as opposed to later.
MR. TAYLOR: So, in fact, in spite of MacLellan and MacDonald protests, the previous contract between the government and ABN Amro actually had built-in deadlines with stimulus packages or incentive packages?
MR. SPURR: Yes.
MR. TAYLOR: Mr. Chairman, I find it quite hypocritical then, quite frankly, and very deceiving for Mr. MacLellan and Mr. MacDonald to accuse this government of having an artificial deadline when in fact Mr. Spurr just disclosed that the previous government had deadlines . . .
MR. CHAIRMAN: We are making statements here rather than asking questions.
MR. TAYLOR: They didn't go shouting it all around the province but, Mr. Chairman . . .
MR. MACKINNON: Mr. Chairman, on a point of order. I think the honourable member and yourself, Mr. Chairman, will find the use of some of the terminology by this honourable member is clearly out of order with the Rules of the House.
MR. CHAIRMAN: I would suggest that what the Public Accounts Committee's responsibility is, is to be examining facts and financial information and past facts, not future developments or getting into the kind of things that we are right now. So maybe the member would like to go back to actually asking questions.
MR. TAYLOR: Thank you, Mr. Chairman, but I would comment that sometimes during question and answer, a number of explanations are received and sometimes it might happen to be that members may feel that we do learn that people are perhaps a little bit two-faced or something like that.
MR. CHAIRMAN: There are plenty of opportunities for these kind of discussions. I think that at this point in time, really what we are trying to do, I think you have made your
point. It may be out of order, but you have made your point that you were trying to get at and maybe we could get on to the question.
MR. TAYLOR: Thank you, Mr. Chairman. So we were able to establish that the previous administration actually did have deadlines built into the contract with ABN Ambro. (Interruption) I am receiving a lot of helpful advice from my colleagues to the left. Then I guess a logical extension would be where this information at least wasn't made public, as far as I know the mainstream media obviously did not have the type of information, can Mr. Spurr tell us if there was a conscious effort made by the previous government to keep this information, the details of this contract secret or hugger-mugger, whatever you want to call it?
MR. SPURR: I think the answer is generally yes, but I would add for reasons that relate to parts of it that due to the impact on the competitive nature of the business that ABN Amro is in that there are parts of it we would not disclose. I can tell the committee for its information that the agreement with ABN Amro was recently provided by me to Robert Chisholm in response to a freedom of information application, but I did sever from it the particulars of the remuneration for the reasons I just gave that I believe that is a confidence that I am required to keep for the protection of the competitive position of ABN Amro.
MR. TAYLOR: Mr. Spurr, what you are telling me, and what you are telling Nova Scotians is, in fact, and you are telling Nova Scotians, there were deadlines built into that contract. Can you tell us how many deadlines were built into the contract?
MR. SPURR: Three.
MR. TAYLOR: Three deadlines. Are you going to table that particular document?
MR. SPURR: I had not planned on it.
MR. TAYLOR: You had not planned on it. Mr. Chairman, if I may, through you, could I ask Mr. Spurr to table that document?
MR. SPURR: That was not intended to be a facetious comment. I have no objection to providing a clean copy. This one is marked up with all my notes on it. I have no objection to providing a clean copy, Mr. Chairman, but it would also be my intention to sever the financial information from it if I do that. If that is not agreeable to you, then I would want to take legal advice on the matter before I did table it.
MR. CHAIRMAN: Is that agreeable with the committee?
MR. TAYLOR: Mr. Chairman, if I could, quite frankly, I think the fee structure in terms of incentives and bonuses should be disclosed. We do not have to repeat the mandate of this committee, but we are talking about the Public Accounts of the Province of Nova Scotia. I appreciate Mr. Spurr seeking legal counsel on it, but I would request that those numbers be made public, quite frankly, if that is okay, Mr. Chairman.
MR. CHAIRMAN: It is up to the committee. The committee can say what it wishes, but I think that there are some questions, even though I might like to see certain information as well, Mr. Spurr has made the suggestion and offered to provide the document as described and also beyond that point to seek legal advice. I guess the question is, are you suggesting that we should be instructing Mr. Spurr to provide something that could leave the province possibly in a legal situation where maybe the province could be in breach of some secrecy and be held libel?
MR. TAYLOR: Mr. Chairman, I cannot see how we would be compromising the position of the province. I think Mr. Spurr disclosed here this morning that the previous government had offered in their contract through ABN Amro bonuses and incentives that were clearly predicated on deadlines. Again, perhaps through you, Mr. Chairman, I just wonder if Mr. Spurr could explain again why he feels he perhaps should seek legal counsel and cannot disclose that information this morning?
MR. SPURR: Particularly with respect to the financial parts of the agreement, the balance of it I really have no difficulty with. It is not to underestimate it, but it is a fairly standard brokerage agreement, but I guess out of a courtesy to ABN and perhaps a legal obligation - that is what I am not sure of at the moment - I would prefer to protect ABN's competitive position in the market place by severing the financial information. The committee can give me whatever direction it wishes and I will attempt to follow it.
MR. CHAIRMAN: We can, of course, deal with that kind of matter as well in camera if that were the wish. What is the wish of the committee?
MR. DAVID MORSE: I think we should deal with it, Mr. Chairman, at the in camera meeting. Initially we would take Mr. Spurr's initial offer and perhaps we can ponder the financial matters afterwards in camera.
MR. CHAIRMAN: Is that agreeable with the members of the committee? Okay. You have about three minutes left.
MR. TAYLOR: Mr. Spurr, just for my own edification, we had the engagement fees, success fees and incentives relative to ABN Amro and the previous MacLellan-MacDonald Government on this matter. Am I clear in understanding that the bonuses that were being offered were in addition to monies that were paid to ABN Amro? They obviously had a monthly fee?
MR. SPURR: Yes, they did have a monthly fee and separate and apart from that there was what we called a success fee, that if they actually sold the plant and a deal was closed, that is something more than a letter of intent, that the deal was actually closed and title to the plant passed, they were entitled to an additional success fee.
MR. TAYLOR: Mr. Spurr, if I could, not to put you on the spot, but a good number of times our government which is bargaining in good faith and has been very upfront with the union and the steelworkers, can you tell me from your vantage point whether or not the steelworkers - and I don't mean the union and its executive, what I am talking about is the steelworkers, the foot soldiers, the workers, the rank and file down in Sydney at the plant - were aware that the previous government, in spite of what they are saying now were, in fact, imposing deadlines and had an incentive package for ABN Amro to sell Sydney Steel?
MR. SPURR: I think I can safely say they would not have been aware of that from me.
MR. TAYLOR: Shame, shame.
MR. CHAIRMAN: Any other questions?
MR. TAYLOR: How much time, Mr. Chairman, do . . .
MR. CHAIRMAN: You have a little over a minute.
MR. TAYLOR: Perhaps my final question then to Mr. Spurr would be the brokerage agreement and the success fees to the end of October 1999, you feel that those amounts should be kept confidential?
MR. SPURR: I do at this time, but I would like the opportunity, as I say, to review that. I would like to be as helpful as I can, but I would also prefer not to get sued.
MR. TAYLOR: Yes. We can discuss that later then, Mr. Chairman.
MR. CHAIRMAN: This round will go about 10 minutes each and then if there is time, we will come back for another five minutes.
The honourable member for Dartmouth-Cole Harbour.
MR. DARRELL DEXTER: Mr. Chairman, a few minutes ago you referred to the letter to Mr. McNeil under your signature. You said that you subsequently had discussions with him in which you assured him that it could not be done without the USWA and their membership and they were an integral part of the sale. Having said that, what was their involvement in the analysis of the Rail Associates' bid?
MR. SPURR: In the analysis of the bid?
MR. DEXTER: Yes, and the negotiations?
MR. SPURR: I am not aware that they had any.
MR. DEXTER: And why not? I mean the USWA has substantial technical knowledge with respect to the operation of the plant?
MR. SPURR: Yes.
MR. DEXTER: They were involved in the turnaround of a plant in Kapuskasing. They have international experience in steel mills. Why not involve . . .
MR. SPURR: I am sorry, I did not hear that part of it. Well, primarily because, and this is not intended to be a negative comment, but primarily because they are not the owners of the mill. They work there. They are a valuable asset and I have had a good ongoing relationship with Bill McNeil and his executive, but the responsibility for selling the mill and putting a deal together is the responsibility of the owner.
MR. DEXTER: Don't you think that that position is contrary to the idea that you cannot do a deal without them? I assume that what you are saying is that they are going to be a partner in any eventual sale, if they are going to be a partner, I mean they are going to be the workforce?
MR. SPURR: No, I am saying that they are the employment force at the mill and that if they want to continue to have a mill to work in, they should and need to, in my view, cooperate with us in selling the mill and in that context we cannot do a deal without them.
MR. DEXTER: I hate to put words in your mouth, but that amounts to treating them like a commodity and what you are telling them in effect is that you have to know your place.
MR. SPURR: It is treating them like employees.
MR. DEXTER: I want to move on to the negotiations around the letter of intent. Can you just tell me who exactly was involved in the negotiations with Rail Associates?
MR. SPURR: Yes. I tried to keep the group as small as possible and I believe in the final analysis it involved five people. On behalf of Rail Associates, Myles Paisley who is the president of that consortium; his counsel, Michael Kennedy who is a lawyer practising law in Halifax; I, on behalf of the province; Mr. Blois Colpitts at Stewart McKelvey Stirling Scales as my counsel; and as liaison broker go-between, Mr. Scott Pearson from ABN Amro.
It was really the four of us plus Mr. Pearson negotiating to put the letter of intent together in a form that the parties would sign it.
MR. DEXTER: Is it fair to say that you briefed the minister as negotiations were going on?
MR. SPURR: Yes, it is.
MR. DEXTER: Did you brief Sysco's board?
MR. SPURR: Yes, I did.
MR. DEXTER: How often would you brief them? Did they receive daily briefings as the negotiations were nearing a conclusion?
MR. SPURR: It is probably fair to say, and we are talking now about a period in late December 1999, that I had daily contact with Minister Balser. I am not as confident in saying that I had daily contact with Teresa MacNeil, the Chairman of the Board, or other members of the board. I do recall during that week we had either, in person or by telephone conference, board meetings every other day or every third day.
MR. DEXTER: In the end, what you ended up with with Rail Associates was a letter of intent signed by the parties.
MR. SPURR: Yes.
MR. DEXTER: Would you agree with me that what you didn't have was a binding agreement to sell Sysco?
MR. SPURR: Well, that is what a letter of intent is. It is the framework to move to detailed negotiations, to put together an agreement of purchase and sale.
MR. DEXTER: In fact, a letter of intent specifically contains clauses which says that it is not a binding agreement for the sale and that the only thing that it binds the parties to are the further investigations necessary to see if they will move on to the negotiation of a share purchase agreement. Isn't that correct?
MR. SPURR: That it is a pretty fair definition of a letter of intent, yes.
MR. DEXTER: So what you have, in effect, is an agreement to agree?
MR. SPURR: Well, as you will know from being a lawyer, a letter of intent is a framework of principles on which the parties are prepared to move forward to negotiate a detailed agreement.
MR. DEXTER: But it is not an agreement for the purchase and sale of the plant. That is what it is not.
MR. SPURR: That is correct.
MR. DEXTER: So when the minister issues a statement to the press on December 31st, saying that he has an agreement for the sale of the plant, that is wrong in fact and in law.
MR. SPURR: Really? I don't have available to me here today what he actually said but I don't agree with you that it would incorrect for him or any member of the government to say, we have an agreement to sell the plant.
MR. DEXTER: As a lawyer, Mr. Spurr, you know that any agreement that has uncertain terms is void for uncertainty. One of the fundamental principles of contract law is that you have to have terms certain, do you not?
MR. SPURR: Sure.
MR. DEXTER: In this context, the letter of intent had no certain terms at all.
MR. SPURR: I understand what you are saying and I understand where you are trying to go but we also have to acknowledge that we had a series of terms in a letter of intent that the parties to that letter of intent had signed-off on. If we are entitled to assume that they didn't sign it in bad faith, that we would immediately move to the detailed negotiations to put together that agreement of purchase and sale.
MR. DEXTER: Well, you know, the amazing thing about that is, that what happens over the next 14 days is the winnowing away of anything that looked like a framework of agreement because, in fact, what happens is, the matter fails and fails quickly, in fact, fails before, as I understand it, January 12th. Isn't that right?
MR. SPURR: Because one of the parties to the agreement defaulted at the earliest opportunity.
MR. DEXTER: One of the things about an agreement for purchase and sale is that in order to have an agreement you have to have a party who agrees to sell and a party with the ability to purchase. In this case, it appears that you never had an agreement to sell.
MR. SPURR: When you have a party that signs on the dotted line undertaking to pay $1 million by a certain date and doesn't do that, that is a default.
MR. DEXTER: Well, (Interruptions) Mr. Spurr, as I understand it, the reason why the deposit was not forthcoming was over the dispute on a term that was uncertain.
MR. SPURR: Well, you're wrong.
MR. DEXTER: Am I?
MR. SPURR: You're dead wrong.
MR. DEXTER: Okay. Let me put this question to you. Is it not the case that one of the areas of dispute, if not the area of dispute, was around the payment of the Corus consultant management fee?
MR. SPURR: That was an issue, yes.
MR. DEXTER: The reason was that the Corus consultant fees, formerly Hoogovens, was supposed to be paid by Rail Associates?
MR. SPURR: That is correct.
MR. DEXTER: The reality is that the government would not agree to having those management fees paid out of the revenues of the company.
MR. SPURR: Not correct.
MR. DEXTER: You must have been quite surprised to find out that S & K Steel and Myles Paisley didn't consider themselves to be part of the consortium, Rail Associates.
MR. SPURR: I was concerned about that at the end because it was a material change in the representations that had been made to us at the time they made their offer.
MR. DEXTER: Sure, and in fact you have just said that Myles Paisley was the person you carried out negotiations with as spokesman for Rail Associates.
MR. SPURR: That is right. He negotiated directly on behalf of the consortium as its president.
MR. CHAIRMAN: Time has expired. The Liberal caucus.
The honourable member for Dartmouth East.
DR. JAMES SMITH: Mr. Chairman, I will be brief and I will pass to my colleague. We have spoken of deadlines here this morning, and I just want to point out to the committee that the deadlines of the previous government were not publicized and that I think has made a great deal of difference. Why we are here, in my understanding, basically was the matter that the honourable member has just been discussing, the failed sale. I know it is difficult to come here as a civil servant, but I am pleased to hear that, at least my indication was, life is much better now under such a progressive government as opposed to the previous governments that were failing all over the place.
Then again I must point out that the whole publicizing of this deadline, I must say that most people in Nova Scotia that I have spoken with believe that setting that deadline so publicly really impacted on the function of the steel mill and did impact on Nova Scotia taxpayers' dollars. The witness this morning said that he doesn't believe that to be so. I must say that I think he is one of the few people in Nova Scotia who would believe that.
There are two points I want to deal with. You talk about the uncertainties in the intent of the agreement. Does the witness understand that the consortium, whoever they were - Rail Associates or whoever they turned out to be and that was an unfolding mystery as it was - was there a clear indication to that group that they would be responsible for the projected $11 million to run the plant before April 15th? Was that clear? Was that one of the uncertainties that the honourable member here was speaking of? Was that, in fact, true? Was that perfectly clear, and was that one of the reasons why Rail Associates withdrew and did not meet the deadline, although they did table a bond, I think, with the Bank of Nova Scotia the day after the agreement expired?
MR. SPURR: I am not clear on your reference to $11 million.
DR. SMITH: I am referring particularly to an article in the media on March 21st with information relative to the province expecting Rail Associates to begin paying to operate the mill eight weeks before it took possession. There are projected costs that that might be upwards of $11 million. Was that understood during the times of the negotiations leading up to the agreement at the time of sale, and was that in fact part of the reason why this whole failed deal might have unravelled at that time?
MR. SPURR: I obviously can't speak for Rail Associates, but speaking on my own behalf I can say with confidence that when we began to discuss a sale with Rail Associates based on their offer, which quite frankly was an offer better than I expected to receive, my view is they were very clear on what their responsibilities were and that there were going to be some costs associated with running the plant. They wanted to get in there as soon as possible, their objective was to get in, operate the plant, immediately lay off about 225 people and bring the operating efficiencies to the operation that they saw necessary to make it a viable operation, and they wanted to do that right away. As I said, I can't speak for them but
I am prepared to presume that someone would not make that commitment unless they had a pretty fair idea of the costs associated with operations.
DR. SMITH: The issue relative to the environment, I just wanted to ask, can I have a snapshot view of what you may think is the true state of the environmental liability at this juncture? The province has booked $378.5 million on the deficit figure this year for Sysco, only part of that figure represents the environmental liability. It is certainly low but at least there is the booking and when that would be used. Can you give us a snapshot of the true state of the liability? About a year ago today John Hamm said it was the consensus, his caucus endorsed the shutdown of Sysco and that immediate clean up of the site would take place, and that was a year ago today, I think March 23, 1999.
MR. SPURR: I think the figure you are referring to that appears in the province's third quarter forecast, when you take out the pension liability, provides for an amount of $318.5 million for environmental. That figure, according to my understanding, is a figure that was arrived at by way of mutual agreement between officials at the Department of Finance and the Auditor General based upon the Auditor General's view expressed to Finance that given where we are on the Sysco file that it would be appropriate for the province to reflect a contingency in its financial statements for environmental clean-up.
I was not directly involved in arriving at that figure. I am only able to assume that it was a figure that was mutually agreeable to Finance and the Auditor General as being a fair representation of what the liabilities might be. To answer your question directly at this time, I am not able to provide you with an accurate figure on what those eventual costs might be.
DR. SMITH: Mr. Chairman, I know this is very detailed and we will probably come back to this another day. I think it is important. I will just leave with the statement to the committee that the $318.5 million at this juncture seems to be very minimal. With that statement, I will pass that over to my colleague.
MR. CHAIRMAN: Your colleague will have two minutes.
MR. MACKINNON: Mr. Spurr, after Rick Lawlor of Corus criticized the deadline on this sale deal did you send any correspondence to Mr. Lawlor?
MR. SPURR: I did not.
MR. MACKINNON: Did anyone, to your knowledge, on behalf of the government send correspondence to Mr. Lawlor?
MR. SPURR: I believe he may have received correspondence from our counsel.
MR. MACKINNON: Legal counsel?
MR. SPURR: Correct.
MR. MACKINNON: Advising him of the possibility of a lawsuit?
MR. SPURR: Advising him that he had breached a confidentiality agreement his company had signed with the province.
MR. MACKINNON: You mentioned the failure of Premier MacLellan and Premier Savage on the sale of Sydney Steel, but there is one common denominator here; when Mr. Cameron tried to sell the plant I believe you indicated that you became active in the file in 1985, so you would have been involved then.
MR. SPURR: That is right.
MR. MACKINNON: You would have been involved with Premier Savage and Premier MacLellan. Now we have another failed situation here, some would suggest, the poison pill.
My suggestion is the common denominator is yourself, Mr. Spurr. Whatever actions you are taking or whatever advice that is permeating out of your direction seems to be contributing to this problem, rather than resolving it. Now, I don't know if that is because, given the circumstances, they are looking for political hacks. I have never seen a public servant come in with such a perspective before.
I guess my question is . . .
MR. BROOKE TAYLOR: Mr. Chairman, a point of order.
MR. CHAIRMAN: His question is coming right now.
MR. MACKINNON: Yes, my question is, would you not see that your participation in this file has actually been contradictory rather than positive in resolving the problem here in selling Sydney Steel?
MR. CHAIRMAN: After the answer, your time has expired.
MR. MACKINNON: I don't want you to be too self-critical.
MR. SPURR: The answer to your question would be, no. As I said in my opening remarks, I have been involved in the Sydney Steel file since 1985 in a number of ways. I also made it clear that I have only been involved as the person who has primary conduct of the file since August 1999. You are alluding to previous attempts to sell Sysco. Yes, I was involved but I was involved as legal counsel, not as the deputy head responsible for the file.
I did have responsibility in that regard through the Rail Associates deal and I take full responsibility for that.
MR. CHAIRMAN: The honourable member for Pictou East.
MR. JAMES DEWOLFE: Good morning, Mr. Spurr. I would like to follow up for a few minutes, if I might, on the timing of these contracts. Who was the minister of the day? Was it Manning MacDonald?
MR. SPURR: Yes, that's correct.
MR. DEWOLFE: When was it that Mr. MacDonald brought Hoogovens and ABN Amro into the picture? Just when did they start managing and trying to sell Sysco?
MR. SPURR: I just want to refer to some documents here, if I might. We have talked previously this morning about ABN Amro and Hoogovens. According to my records, the applicable agreement with Hoogovens to manage the mill is dated June 18, 1999 and the ABN Amro agreement is dated a few days prior to that on June 14, 1999.
MR. DEWOLFE: Well, it strikes me that those dates are very convenient. Now, correct me if I am wrong, but both those dates are the week the House was due to vote on a budget, a very important budget.
I guess there are two questions. What exactly is the significance of June 18, 1999, other than the fact that Mr. MacDonald signed off on the Hoogovens deal and at any point in time, were you asked to speed up the process in getting that deal signed?
MR. SPURR: Well, two parts to the answer, I guess. I think June 18, 1999, if I am not mistaken, was the day that we dissolved the General Assembly for the general election and, of course, June 14th would have been a few days before that.
Although I had knowledge of these agreements and we were working on them at the time, I wasn't the deputy head at the time, so I think in telling you that, I am telling you that I wasn't as close to Minister MacDonald as, perhaps, his deputy of the day was. I certainly take your point that the agreements were apparently signed in the last days of the last General Assembly.
MR. DEWOLFE: Who were you dealing directly with on these issues, was it Manning MacDonald, Premier MacLellan?
MR. SPURR: The people who would have been involved in this at the time were Minister MacDonald, whose signature is on both agreements; Bob MacKay, who was his deputy at that time; myself, as someone who had been involved in the file historically; and our counsel at Stewart McKelvey Stirling Scales, that would be the core group of the people who were involved.
MR. DEWOLFE: Were you under any pressure to speed up the process in getting the deal signed?
MR. SPURR: I can't say that I was personally. I don't recall any particular instruction to get this done before such and such happened. I can't honestly say that I recall that.
MR. DEWOLFE: Basically, Mr. Spurr, what took place during that week in June was that the government of the day, the MacLellan Liberals, were effectively able to see the writing on the wall, and I say to you, only when it became clear that both the budget and the government were on their last legs, a government which to that point had done little in the way of creating a legacy that they could be proud of, then and only then did that government decide, whether good or bad, they were at least going to leave a legacy that would last. By finalizing the two eleventh hour deals, the ABN Amro and the Hoogovens, that is essentially what they did. By doing so, they handcuffed this government and left us no choice in dealing with those two companies because we were contractually bound to do so.
Mr. Chairman, it is the height of hypocrisy for these Liberals to criticize our government in the handling and the sale of Sysco because they left us no choice. We were contractually bound to live with these agreements and contractually bound to live out this sad Liberal legacy. Mr. Spurr, would you agree that we were contractually bound to live with these agreements? You are a lawyer so you know the legal implications of that.
MR. SPURR: I think that is the part of your question that I can answer. I have to be a little bit careful in how I answer because . . .
[9:33 a.m. Mr. David Morse took the Chair.]
MR. DEWOLFE: I understand that.
MR. SPURR: As you are aware, I sat in Cabinet with that government as I do with this one and there are certain confidences I have to keep. Let me give you a technical answer as a lawyer. Certainly any Minister of the Crown signing a contract on behalf of the province binds the Crown in the name of the government of that day and any successor government. To answer your question, yes, for whatever purpose, Mr. MacDonald did bind the successor government that came to office in August.
MR. DEWOLFE: Mr. Spurr, if these contracts hadn't been signed, we might have saved a whole lot of money and we might not have put the poor steelworkers through so much stress and anxiety.
MR. SPURR: We certainly would have had more options available to us, or the current government would have had more options available to it when it came to office.
MR. DEWOLFE: Exactly. We could have found someone who perhaps could have done a better deal for us. Mr. Chairman, I am going to pass to my colleague to my left.
MR. CHAIRMAN: The honourable member for the beautiful Colchester-Musquodoboit Valley.
MR. TAYLOR: Mr. Chairman, I think it was very clearly pointed out here this morning that the previous administration, in spite of what they say, were trying to sell Sydney Steel and they were trying to sell it out from underneath the feet of the rank and file, the steelworkers, without their knowledge. It was clearly disclosed that the contract and I guess I would ask Mr. Spurr, I will put it in this context, it has been speculated that the previous government, through the terms of the brokerage agreement by way of engagement fees, would have to ante up $900,000 to ABN Amro and I believe it was in a publication that through success fees if the previous government had sold the mill ABN Amro would have received, in addition to the $900,000, $3.5 million. I know you are a bit reluctant to speak about those figures, but would you say that that speculation is very far off?
MR. SPURR: I would say your sources are reasonably accurate.
MR. TAYLOR: Thank you, Mr. Spurr.
MR. CHAIRMAN: You have 45 seconds.
MR. TAYLOR: Mr. Spurr, the situation with Rail Associates has been discussed here this morning in some detail, you disclosed or declared this morning that the province has no intention of paying ABN Amro one red cent regarding that fiasco and it has not been contested. Would you reaffirm that?
MR. SPURR: Yes I will. In fact I can confirm with you that I discussed the matter with the managing director at ABN Amro, that they acknowledge their disappointment that the Rail Associates deal failed, and that they make no claim on their success fee.
MR. CHAIRMAN: Your time has expired. A quick five minutes each.
The honourable member for Dartmouth-Cole Harbour.
MR. DEXTER: Mr. Chairman, my first question is actually for the Auditor General. I just wanted to ask with respect to the figure of $318 million on the environmental liability, whether or not he was consulted, and if he was, whether or not he agrees with that estimate of the environmental liability at Sysco?
MR. SALMON: We were consulted as to whether or not it would be appropriate to account for the estimated costs in this year's financial statements.
MR. DEXTER: And what advice did you give?
MR. SALMON: We advised that there were certain criteria that had to be met under Generally Accepted Accounting Principles to account for it. We have not done any audit work to determine whether or not those criteria have been met. We will do that audit as part of the audit of the financial statements for the year ended March 31, 2000. If the criteria are met and the estimated costs can be substantiated, then we will give an unqualified audit opinion, but we have not done that audit work. We have not been consulted as to whether or not the estimate is reasonable.
MR. DEXTER: That was my question for the Auditor General. Mr. Spurr, one of the aspects of the letter of intent with Rail Associates revolved around the outstanding line of credit. At that time, it was foreseen that $9 million of the line of credit would be expended over the period between the signing of the letter of intent and the proposed closing date. Is that correct?
MR. SPURR: That is an assumption that people are prepared to make, but . . .
MR. DEXTER: It was specified in the agreement, wasn't it?
MR. SPURR: Well, it was specified in the agreement that at the time we were negotiating and signing off that there was about $9 million left on the lines of credit, yes.
MR. DEXTER: Just so I am clear, there is about $9 million left on the line of credit, which was put in place back in March 1999 by the MacLellan Government, is that correct?
MR. SPURR: Those lines of credit have been in place since 1994.
MR. DEXTER: There was an announcement in March 1999 that said there was an extension of that line of credit by $44 million?
MR. SPURR: Yes, over that period of five or six years there had been increases in the limits and I know the amount that you are referring to was an increase of $44 million at some point. I cannot even remember when it was but, yes, I acknowledge what you are saying.
MR. DEXTER: At the time what was left on that line of credit was approximately $9 million?
MR. SPURR: That is correct.
MR. DEXTER: Is it also fair to assume that that $9 million would be exhausted by April 1, 2000? It was projected to be exhausted by that time?
MR. SPURR: No.
MR. DEXTER: Do you know today how much is left on the line of credit?
MR. SPURR: Let me answer that this way if I might. When Ernst & Young went into Sysco and took over its operations, one of the things I wanted them to do was to get the operation in shape so that we did not have to draw on those lines of credit and we put them in there as a business operator for that purpose. What they have been able to do is turn the cash flows from negative to positive so that the company's operations do not have to draw on those lines. They did that, of course, by laying off a few people, about 55 or 60 people, you know, collecting receivables, bringing some efficiencies to the operation so that they now have positive cash flows at Sysco and they are projecting positive cash flows out to late May, early June.
So with respect to the lines of credit, at this time we do not really need them because we have enough money at Sysco through the efficiencies that E & Y have brought to the operation that we can fund our cash flows out of operations.
MR. DEXTER: Including the payment of Ernst & Young?
MR. CHAIRMAN: You can answer that, but if you can do it quickly.
MR. SPURR: Yes. I have asked that Ernst & Young be paid their fees from time to time out of the cash flows at Sysco.
MR. CHAIRMAN: The honourable member for Cape Breton West.
MR. MACKINNON: Mr. Spurr, you indicated that legal counsel had sent a letter to Mr. Lawlor. Did you see that letter? Did you have an opportunity to review that letter?
MR. SPURR: I believe I did see a copy of it.
MR. MACKINNON: Would you be prepared to table it for the committee?
MR. SPURR: It may be protected by privilege, but I am prepared to take advice on that.
MR. MACKINNON: I am somewhat perplexed because the government holds itself out as being open and accountable and yet the only thing I have seen so far coming out of this particular deal is anyone who criticizes, is advised to cooperate or else, or in lawyers' letters trying to issue some type of a gag order. So I would leave that thought with you as you ponder whether you should be able to release that.
MR. SPURR: Well, it may form the basis of a legal action. That is what I am telling you, it could very well. I do not know that at the moment, but it could and for that reason, obviously, I do not want it out there floating around in the public domain.
MR. MACKINNON: With regard to Sydney Steel and involving the steelworkers, I find it rather perplexing you have made reference to the positive cash flow going into May and June which would suggest to me that you are not going to have a sale before then?
MR. SPURR: Not at all.
MR. MACKINNON: And you are not going to have a closure before then?
MR. SPURR: No, you should not assume that.
MR. MACKINNON: But, obviously, it shows some lack of definity on the government's position as opposed to its announced December 31, 1999, deadline which, after it is publicly stated it would not put any more money into Sydney Steel, it is now advising that it has contributed $35 million more into Sydney Steel.
MR. SPURR: What?
MR. MACKINNON: Well, from the line of credit you have drawn down - if you follow your own figures through the tangled web of comments that have been put forth, it is obvious that the government really is not clear on what it is going to do unless it is prepared to just delay things until after the by-election in Cape Breton East where it is reported that upwards of some 200 steelworkers live in the Glace Bay area and the government certainly does not want to offend them before April 4th. So I am just wondering does that have anything to do with the timing of this process?
MR. SPURR: No, it does not. As I told you before, the close on the call for proposals is not until April 7th.
MR. MACKINNON: That is a coincidental date.
MR. SPURR: It was chosen before the by-election was chosen.
MR. MACKINNON: The letter that you sent to Mr. MacNeil, did you get advice on whether you should send that letter or not, from the government?
MR. SPURR: From the government, no.
MR. MACKINNON: You just took it upon yourself to do that?
MR. SPURR: Indeed, I did.
MR. MACKINNON: So you would not have consulted with the deputy minister or the minister on this issue?
MR. SPURR: I am the deputy minister.
MR. MACKINNON: I mean senior staff within the deputy ministry, you know, you have the minister, deputy minister and all the senior policy advisers there, are you just doing all this on your own?
MR. SPURR: Which department?
MR. MACKINNON: Economic Development.
MR. SPURR: I do not have any connection with Economic Development.
MR. MACKINNON: The file responsible for Sydney Steel?
MR. SPURR: Is my file.
MR. MACKINNON: So you are doing all this on your own then? It is your judgment call as to whether you advise the minister on certain actions like sending out letters, as you have done with Mr. McNeil or anyone else for that matter?
MR. SPURR: I think I can make a judgement on whether I want to write a letter to Bill.
MR. MACKINNON: On behalf of the government? You are stating in the letter you are representing the government?
MR. SPURR: That is correct.
MR. MACKINNON: And when did you get the authorization to represent the government without notifying the Executive Council?
MR. SPURR: Well, as you know, I signed it as Clerk of the Executive Council.
MR. MACKINNON: Without the Cabinet's knowledge?
MR. SPURR: I keep my minister informed as I am responsible to do and I keep the Cabinet informed as I am responsible for.
MR. MACKINNON: Was he aware that you had sent this letter out prior to your sending it?
MR. SPURR: Of course he is.
MR. MACKINNON: And did he agree with that?
MR. SPURR: He did not tell me not to send it.
MR. CHAIRMAN: Your time has expired.
The honourable member for Kings South.
MR. DAVID MORSE: Good morning, Mr. Spurr, and thank you for coming in today. It certainly has been an enlightening morning. First of all, I want to give you a chance to respond to the inference by the member for Cape Breton West about the extra $35 million put into Sysco. Would you like to have the chance to comment on that?
MR. SPURR: Yes, thank you very much. The lines of credit at Sydney Steel Corporation which existed and were in place when the current government came to office in August were obviously the subject of some discussion as part of our briefings on transition to the government. It was my advice to the Premier and his transition team that they were not, in my view, violating their undertaking to Nova Scotians not to put any new money into Sysco by allowing Sysco, through its continued operations, to draw on those lines of credit because they were authorized and made available by a previous government.
MR. MORSE: Certainly.
MR. SPURR: My advice to them was if you were to approve a further increase in the limit to the lines of credit, then I think you would have to make the judgement that you would be in violation of your undertaking to Nova Scotians.
MR. MORSE: But, of course, that was not the case?
MR. SPURR: That is correct.
MR. MORSE: You have indicated that there was about $9 million worth of fees paid to Hoogovens in 1999 and about $1 million paid to ABN Amro. That is a fair chunk of change for fees, and this does lead to a question I think that is apparent, just what was the process for picking ABN Amro? How did we end up with this company?
MR. SPURR: Those were contracts that were entered into by Minister MacDonald during his tenure in office. I think I understand what you are asking, to get directly to the point, they were sole-sourced contracts under the exception in the province's procurement policy that if a minister can persuade the Priorities & Planning Committee that he doesn't need to tender and that there are valid reasons for sole-sourcing that he may do so. In that case, it was his decision.
MR. MORSE: He picked them?
MR. SPURR: Effectively, yes.
MR. MORSE: Is that a normal way of tendering out or choosing consultants that are going to be earning million dollar-plus fees.
MR. SPURR: It wasn't how I chose Ernst &Young.
MR. MORSE: That is a very interesting comment. I guess that maybe implicit in your comment you would suggest that maybe that was not the best way to have chosen ABN Amro.
MR. SPURR: I had expressed some concerns at the time.
MR. MORSE: You are being very diplomatic, Mr. Spurr, in protecting the former minister.
MR. SPURR: I am not trying to protect him, I am trying not to betray the confidence that I historically have to a former minister.
MR. MORSE: It is interesting that you are in here today and we are talking about the same minister because indeed it was only last week we were in here and we were talking about that minister again, and there seems to be some sort of public record for a fetish for handing out multimillion dollar untendered contracts. I would like to give the last minute to the member for Colchester North.
MR. CHAIRMAN: Actually 35 seconds.
MR. WILLIAM LANGILLE: I will skip the first question. I would just like to ask you this, Mr. Spurr, based on your knowledge and the commitment of John Hamm, will the Government of Nova Scotia be out of the steelmaking business this year?
MR. SPURR: Based on my knowledge of the file and my knowledge of our prospects for a successful conclusion to the Ernst & Young process, I would be prepared to say on the record here today that yes, we will be out of the steel business by the end of the year.
MR. CHAIRMAN: The time has expired. As agreed to earlier, we have a number of other pieces of business to deal with before we go in camera. I would like to thank Mr. Spurr for his initial comments, and if he doesn't mind waiting for just a couple of minutes while we deal with a couple of other matters before we go in camera for the discussion.
At our last meeting, for example, we had voted as a committee to issue some subpoenas for witnesses who would be appearing in the MacNeil's Cove project. Following that meeting I sought some legal advice to find out if, in fact, we had followed the proper procedures. As it turned out, we had not. I have copies and Mora is now delivering to you copies of the legal opinion that was prepared by Mr. Hebb. The requirements before subpoenas can be issued is that a certificate be drafted and presented to this committee by a committee member. The certificate has been prepared at my request for Mr. Spicer, who as I understand it, his supervisor had requested, had expressed a willingness to appear but had requested that a subpoena be prepared.
I have asked that a certificate be prepared and the member from Kings South has agreed to introduce that. He has signed the certificate and that has been tabled, and a subpoena has been prepared. That is the only one that I, as Chairman, took the liberty to get done, but I did contact the caucus chairman of each of the other two committees to advise them of what I was doing. Is there a motion, first of all, to support the certificate that has been introduced by the member for Kings South authorizing the issuing of a subpoena for Mr. Spicer to appear.
MR. DEWOLFE: I so, Mr. Chairman.
MR. CHAIRMAN: I have a motion of support from the member for Pictou East.
The honourable member for Cape Breton West.
MR. MACKINNON: Mr. Chairman, on the question, I fully support the motion but I am going to kind of couple it with the issue - obviously this is with regard to MacNeil's Cove and I understand there is another potential witness who may not be here on that particular date. I am wondering if it would be in the interest of the committee to have that group appear when the other individual can appear, otherwise we are not going to bring
closure to this when the key person who is actually giving the legal advice will not be attending on April 5th.
MR. CHAIRMAN: You are referring of course to Mr. David Muise.
MR. MACKINNON: Yes.
MR. CHAIRMAN: It is my understanding that he is going to be out of the country on that particular date. I guess the question for the committee to decide and I am at the . . .
MR. MACKINNON: On the question, yes.
MR. CHAIRMAN: I guess the question is does the committee wish to reschedule all the other witnesses or do we want to proceed with the date selected and then if it is deemed necessary, the committee of course could invite Mr. Muise on another occasion. That is the question for the committee to decide. I am at your pleasure.
MR. MORSE: Mr. Chairman, somehow or other we have managed to get an inordinate number of witnesses lined up for April 5th. I think in view of the numbers, somebody is always going to be inconvenienced by this. Surely there is a successor legal counsel for the Cape Breton Regional Municipality that could come and perhaps handle those questions. I would urge the committee to consider proceeding with April 5th in view of all the inconvenience it would cause the other witnesses who have been lined up and have agreed to come on that date.
MR. CHAIRMAN: Are we prepared for the question first of all on the initial motion that was put forward by the member for Pictou East on the certificate? Would all those in favour of the motion please say Aye. Contrary minded, Nay.
The motion is carried.
I will sign that subpoena. On the second matter raised by the member for Cape Breton West, no motion was actually put forward so there is no vote required, unless you are prepared to put forward a motion. I am looking at the time. There are a few other issues.
MR. MACKINNON: Mr. Chairman, I can live with it either way. I thought it would be important if you have one of the central figures to the question at hand be available, because that was before the regional municipality became a reality and Mr. Muise was in his capacity as legal counsel advising the councillors on what was . . .
MR. CHAIRMAN: Thank you and possibly after that next meeting if there seems to be a need then you might wish to make another request to have him appear at a future meeting. The second thing, still dealing with MacNeil's Cove, we have five or possibly six,
if the replacement or the solicitor who has assumed those responsibilities after Mr. Muise has left is able to come, but we have five or six groups of witnesses, so my question to the committee is, do we wish to restrict the amount of time that each can make in the way of an opening statement, let's say to about five minutes each.
MR. MACKINNON: Mr. Chairman, I think that is important because I think we are getting a little off the topic here, the issue being value for dollar and in particular the provincial government's contribution to this process which I believe has been addressed by the first group of witnesses in terms of securing our value for dollar. We seem to be kind of going off onto other aspects of this.
MR. CHAIRMAN: Is it the agreement of the committee that Mora in future communications would ask that if they are to make opening remarks that they be restricted to five minutes each.
MR. MACKINNON: Yes.
MR. CHAIRMAN: Thank you. Next thing, next week will be a briefing session. We will be looking at scheduling, as part of talking about other topics that we may wish to bring forward. So if any caucus has ideas, if they haven't already provided or don't have anything today, please try to bring forward ideas next week.
The Auditor General has agreed to do a briefing again on what is the appropriate method of accounting and what are appropriate accounting practices, where there seem to be some questions or concerns. I don't know if the Auditor General wants to add anything to that.
MR. SALMON: We are prepared to do a briefing and we will call it Accounting 101. (Laughter)
MR. CHAIRMAN: Thank you. Some of us may wish to have it even more remedial than that. The other item that I have on my notes to bring forward before we go in camera is, I understand that the public session that we had intended on emergency health care, there is a difficulty on the date. The suggestion has been made that since the committee has already approved the P3, and since that report from KPMG has now been released, that we may wish - and I just found this out yesterday, I think it was - to substitute the P3 into the slot that we had for the emergency health care. Is that agreeable? Okay.
MR. MORSE: With the one qualification, that I think this will soon be a moot point, that Cabinet has had a chance to meet and issue some sort of statement. Maybe they have done that in the last couple of days. I have been out of circulation.
MR. CHAIRMAN: They have. There have been comments about the P3 school, is that what you're talking about?
MR. MORSE: Yes.
MR. CHAIRMAN: There have been public statements made about that.
MR. TAYLOR: Even by NDP Leadership hopefuls. (Laughter)
MR. CHAIRMAN: Well, even by - I'm in the Chair so I won't say anything else. (Laughter) I guess, unless there is anything else, Mora?
MS. MORA STEVENS (Legislative Committee Coordinator): I received one new item for the agenda from Russell MacKinnon, to add on a Cape Breton economic development group to be put onto the agenda and he might like to speak further on that as a further agenda item.
MR. MACKINNON: I will be really quick. I sent that memo last week just so all three caucuses would have a chance to review it in advance.
MR. CHAIRMAN: I haven't seen it yet.
MR. MACKINNON: I guess you didn't get a chance. There is no rush on it. It is just that I thought it would be an excellent opportunity, given the economic circumstances in Cape Breton and it now being a body that is funded at all three levels, municipal, provincial and federal. It is a good opportunity to see what value for dollar we are receiving. It covers everything in terms of all the economic and social dynamics in Cape Breton. I thought it would be a timely issue. Potential witnesses, Mr. Ray Cavanaugh, Chairman, and Eileen Lannon-Oldford, the Executive Director. I sent it to Mora last week so that all three caucuses would have a chance to review it. We can deal with it next week.
MR. CHAIRMAN: Okay. I haven't seen it yet. Anything else before we go in camera?
MR. TAYLOR: Yes, just relative to the in camera, upon further consideration, I certainly can live with Mr. Spurr seeking legal advice on disclosing those terms. If the rest of the committee can, I don't think we need to discuss it. We are fine with that, if that is okay with you, Mr. Chairman.
MR. CHAIRMAN: So the request is to cancel the in camera session? Is the committee in agreement with that?
SOME HON. MEMBERS: Agreed.
MR. CHAIRMAN: Okay, then, in that case, we stand adjourned and we meet again next week at 8:00 a.m. in the Committees Office. Thank you.
[The committee adjourned at 10:04 a.m.]