The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

Public Accounts -- Wed., Nov. 3, 1999

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HALIFAX, WEDNESDAY, NOVEMBER 3, 1999

STANDING COMMITTEE ON PUBLIC ACCOUNTS

8:00 A.M.

CHAIRMAN

Mr. Russell MacKinnon

MR. CHAIRMAN: Good morning, ladies and gentlemen. My name is Russell MacKinnon. I am Chairman of the committee and in attendance, members of the committee, we have the honourable member for Sackville-Cobequid, John Holm; his colleague, Darrell Dexter, the member for Dartmouth-Cole Harbour; filling in for our colleague, the member for Colchester-Musquodoboit Valley, we have our colleague, the member for Preston; we have our colleague, the member for Pictou East, James DeWolfe; David Morse, the member for Kings South; and we have Bill Langille, the member for Colchester North.

Our witnesses today are Mr. Francis MacKenzie, Executive Director of the Investment and Trade Division of the Department of Economic Development and also Mr. Ivan Sorensen who is former Production Manager with Mac Timber. With that, gentlemen, if you wish, you can make an opening remark or statement. If not, we will proceed directly to the members and questioning.

MR. IVAN SORENSEN: Mr. Chairman, I am open for questions.

MR. CHAIRMAN: No statement? Okay, I will open the floor to my colleague, the member for Dartmouth-Cole Harbour.

MR. DARRELL DEXTER: Mr. Chairman, the first thing I wanted to address this morning, specifically, I guess, with Mr. MacKenzie is the whole question of what documents actually arrived before this committee because in my view, the documents that have been provided to the committee border on being completely useless. There is certainly nothing in here that allows you to trace what happened in this matter. In fact, there are some documents in here where so much of it is blocked out that it is literally nothing more than titles. I just don't understand how we are expected to do our job in this committee without some cooperation.

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MR. FRANCIS MACKENZIE: The matter with respect to the documents, it has gone before the Freedom of Information folks three times I believe. The first time information was provided; the second request was made and information was provided; and then there was a ruling on the third request that as much information that the FOI folks could provide that they felt was fair with respect with the client's issues was provided. So, frankly, that is the best I can tell you, Mr. Dexter, is that as much information as they felt was pertinent and that was relevant was put forward.

I would certainly be glad to try to answer any of your questions that you may have though.

MR. DEXTER: It is a sad state of affairs, Mr. Chairman, we have a situation before us today which I think it is fair to say really rocked the confidence of people in this province in the department. I think it is fair to say, what appeared to be as almost a significant boondoggle for people and a great loss of public investment and yet, in the end, when a committee of this House decides it is going to look at it, there is very little in the way of documentation that we have to allow us to carry out a proper investigation. I am not very happy about it. I am going to think about what we can do about it.

I want to start; in the documents that we do have, there is an executive summary. It is Page 3, what would this have come out of?

MR. MACKENZIE: I believe you are referring to a report by a consulting firm, is that not correct?

MR. DEXTER: That is right. I guess the first question is who is DPS Atlantic Management Consultants?

MR. MACKENZIE: I would defer to Mr. Sorensen here to my right. Maybe he would like to respond to that one. I think that was a report that Mr. Sorensen had put forward, is that not correct?

MR. SORENSEN: I did not put the report together myself. Mr.Vinet hired a consultant who formalized and completed the document.

MR. DEXTER: Where did they come from, DPS?

MR. SORENSEN: I believe it is a person who resides in Bedford and now, if I am not mistaken, he is on contract with ACOA.

MR. DEXTER: How does the department come to rely on this kind of a report?

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MR. MACKENZIE: The report itself, Mr. Dexter, would be a part of any submission as an application from any client. In many cases they would subcontract out the business plan component to an external agency; in some cases it may be a management consultant, it could be an accounting firm but they will pull together an independent presentation or application on behalf of the client. This is not an unnormal circumstance where a client has someone bring forward and assemble their business case or presentation to make application to the government.

MR. DEXTER: Am I correct in assuming that you would have received this report?

MR. MACKENZIE: Yes, that report would have been tabled with our division at some point through the process. I believe the report was done back in 1996 at some point. That would have been part of the initial submission.

Maybe I could just spend a minute here and maybe this will give a little bit more context and help you along with where you would like to drill down a little bit. Certainly, my understanding of all of the events is what I would like to relay to you and this may give some context and hopefully help the discussion along this morning.

Approximately, in January 1997, Mr. Sorensen put forward a letter to our department indicating that they had an opportunity that they would like to present to the Government of Nova Scotia with respect to an expansion of an existing firm already in Nova Scotia. The best of my understanding is that Mac Timber had been in operation. This was not just essentially a new company coming to Nova Scotia but they were in operation prior to us receiving application for this expansion. In fact, when we did receive correspondence from Mr. Sorensen, it was my understanding that 11 people were already actively engaged with the firm.

As well, the management consultant - the report that you referred to - also made reference that they had looked at the financial operations of the firm, among other aspects, and certainly the firm had been a going concern. At some point in the report they make reference to the fact that they had been in operation for nine months and were profitable.

In January 1997, we received a letter and a request from Mr. Sorensen. I will refer to my notes here to make sure that I keep this relatively accurate. Over the course of the next 8 or 9 or 10 months, there was ongoing exchange of information, review of the process, discussions with our department as well as the Department of Natural Resources, as well as ACOA and other players that were involved in the entire deal that was put together.

I will make reference to a point because I know it was a little bit of an area, at least reported in the media, with respect to a bankruptcy issue. Mr. Vinet did declare, at some point back in July, and it was also in the package that you received through his statement of

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affairs, that this bankruptcy was before him right now. Certainly, at a minimum, we were aware of this bankruptcy issue in November 1997.

In December 1997, Mr. Sorensen had come to our department and around this same time we had sent a recommendation to our deputy minister in support of the project. Now, the recommendation had just arrived essentially at the desk of the deputy minister when Mr. Sorensen had come in, stated that there were a couple of key issues that we should be aware of. We take all allegations very seriously in our department. Mr. Sorensen, from my understanding - and I did not speak to him but certainly he did speak with our department - raised two critical issues. One was he had alleged that a lawsuit was in front of Mr. Vinet. The second one was an investigation that was under way relative to the free trade issue and origin of raw materials.

We very quickly withdrew the application based upon new information provided. This is not an unnormal occurrence in any business plan or application that goes forward. Many times you will hear innuendoes, facts, rumours, suggestions and we, as a department, take those very seriously. We try to ensure that each of these issues is investigated and reviewed.

As a result of beginning our investigation, the application was pulled from the deputy minister's file and put on hold. At that point, through the next four months, there was an investigation that went on with the Maritime Lumber Bureau and others, and I don't know all the authorities, certainly we weren't privy to that, but maybe Mr. Sorensen can comment. I don't know whether the RCMP were involved or not, but they were looking at the origin of materials. There were no written charges, there were no charges period, there were no written objections from anyone, from what I understand. Mac Timber was not the only firm, I understand, that was being investigated; apparently, there was at least one other if not more firms that were under investigation for similar types of things. So we pushed back and waited for this investigation to be exhausted.

Concurrently, we were just as concerned with the lawsuit issue. A written legal opinion was supplied to ACOA and shared with us that the lawsuit was immaterial to the application and project at hand. Now, I will say those things to you because a period of four months had gone by, Mr. Dexter, and we had withdrawn the application on two grounds. Those two grounds were satisfied and the Department of Natural Resources was certainly well aware of the investigation. We waited to hear confirmation or validation from other external parties that these allegations were dealt with.

In May 1998, again in your package, having heard that these two issues were resolved, that there was nothing to prevent the application from going forward, the application was resubmitted. Again, another three or four month period went by before final approval was given. My point being is that there was ample time for anyone to come forward with any evidence that they felt was material, any evidence that they felt would lead to

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charges. I will remind you that there were no charges, at least to my knowledge, laid by any of the authorities in this case relative to the free trade issue or certainly the lawsuit issue.

In December 1998, the application was approved by our Deputy Minister and our Minister of Economic Development of the day. At that point in time ACOA had already approved their funding. At that point in time the HongKong Bank of Canada had already approved their funding and at that point in time the Business Development Bank of Canada had already approved their funding. Essentially, we as a province were the last in.

Through the course of this event - we are talking almost now a two-year window - I believe it was in December 1998, Mr. Vinet had come forward with respect to the fact that he would like to talk about phase two, an expansion. Our money now as a province is out the door, the $200,000. It has been invested into the company. Then in January 1999 it went into voluntary receivership. This was under Mr. Vinet's own accord from what I understand.

I will back up and just explain briefly some of the issues I touched on. In January 1997, there were 11 employees already employed in this firm before any government money was put forward. Many of the creditors that had been involved had been working and doing business and conducting business with Mac Timber a year to two years in advance of the province putting any of our taxpayer money at risk or involved in the deal with respect to helping to create some jobs here.

I will tell you that part of the motivation for doing a lot of this was to create 25 new jobs in a rural part of Nova Scotia. It did work out to be an investment on that basis of $8,000 per job. As it turned out, on the day of the announcement in October 1998, we had hoped that there were going to be 36 people employed, 25 new plus the existing 11, but at that point in time, I am advised that they had 45 people, nine more than we had even hoped for.

Frankly, the discussion with respect to the province had begun in January 1997. It was fully at least 18 months thereafter before the money of the province was put into the equation. It is not a case that we just put the money in and it evaporated in four months. The timing of events would certainly suggest that, but there had been a fair amount of assessment, discussion, negotiation with Mac Timber, as well as other potential funders in the deal.

I would like to just reiterate that this was an opportunity to create jobs in rural Nova Scotia. It was an expansion of an existing firm in Nova Scotia. It was based upon value-add principles with the support of and complementary to the existing lumber industry in the Province of Nova Scotia, with a strong export content. I would just like to state that many of the creditors were in fact doing business with this firm far in advance of the province putting any money in.

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The matter, as well, has been reviewed by the Department of Economic Development's internal auditor at a very early stage when things started to go wrong. From his opinion, there was nothing that was irresponsibly done. He was very confident of the fact that every prudent effort that could be taken was taken and, as a result, moved forward. It is not a case that we try to enter in any of these equations sort of to throw away the money. We take every one of these very seriously and regrettably, and I mean that sincerely, sometimes it does not work out.

I will state that, on a more positive note, the assets of the company, which I am sure everyone in the room is well aware, were secured by a company called Julimar Lumber. They valued the assets through the receivership process and put close to $1 million forward with the conviction that they are going to continue this business and move it forward. In fact, I am told that they have 18 people currently employed there and, frankly, they should get it up to 30, if not more, in the not too distant future.

The thing that has changed is that it is unfortunate that it is not Mr. Vinet as the operator. However, no new government money has gone in. There is a new operator and, hopefully, the end objective with respect to creating more jobs for rural Nova Scotia will ultimately be achieved and I think we are well on our way there.

MR. DEXTER: Mr. MacKenzie said he was not going to make an opening statement. So he decided to . . .

MR. MACKENZIE: I am sorry about that. I was hoping to add a little bit of context to it.

MR. DEXTER: I agree, I am glad you took the time to do that. It is just when the clock starts to tick, it is all my time instead of what is allotted for you.

MR. MACKENZIE: I am sorry about that.

MR. DEXTER: Mr. MacKenzie, you would know when you are assessing these files that over and above just the financial risk that exists, and I read the executive report, the executive report talked about a $45,000 profit on $1.2 million worth of product. That is a 0.25 per cent profit margin. I mean, very thin by anybody's imagination. You look through all of this. You know about the lawsuit with, I think it is called Biel and Tworek in Poland. You know that that is going on. You have been advised about it. You know that there are problems with the Maritime Lumber Bureau. You know that there are possible, at least alleged, contraventions of that and those things are really difficult to deal with because it involves branding the wood coming out of another province and flowing it through here. The contravention is such that it puts at risk the industry in the Maritimes. So there are very significant problems here.

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Over and above the financial risk there is a moral risk and, as a person who deals with these files all the time, you must surely look at things like moral or fiduciary risk when you are assessing a file. You have the allegations. Did you bother to go and get a copy of the lawsuit with Biel and Tworek.

MR. MACKENZIE: I cannot answer that question. I do not know the answer to that one.

MR. DEXTER: What is that?

MR. MACKENZIE: I do not know the answer to that question. The officer, I would assume, had reasonable evidence to state it was reviewed. We had a legal opinion, I guess is the easiest way. We trusted the people in the know that would be able to give us . . .

MR. DEXTER: Who did you get the legal opinion from?

MR. MACKENZIE: It was from ACOA. They had done an investigation through a legal firm. They secured an opinion and in many cases I will tell you, sir, that we share the due diligence process. Yes, we take our own due diligence process very seriously, but there are certain junctures that will share information with other government agencies with respect to an opinion and, essentially what it was, it was an opinion about the materiality.

MR. DEXTER: Is it possible that the legal opinion that you got came from Neil Vinet's lawyer?

MR. MACKENZIE: No, sir.

MR. DEXTER: Because allegations have been made in that respect too that, in fact, the information you were receiving came from the same firm that serviced Mr. Vinet and Mac Timber and that they provided the advice with respect to the materiality of the Biel and Tworek lawsuit. But what I am trying to get my head around is that you have allegations that are coming forward with respect to the way in which this individual conducts business, not on one count but on two, and one of those is set out in detail in a statement of claim. All the information is there. The second one involves an area of concern not only to the department but to the province. I am just not sure how you get over these. So I am going to ask you the very obvious question which is, was there political influence exerted on the office at the time in order to see to it that this deal went through?

MR. MACKENZIE: Absolutely not. I will tell you that at one point in the process, and it has been reported in the media, the MLA for the area, Minister Lorraine, whom I do not know and I have never spoken to, I will tell you that straight off, had expressed some concern that perhaps this file may be going astray or was maybe being lost, or may be going elsewhere, but at no point - and I will say this not just about this file but, frankly, for the two

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and one-half years - I can honestly tell you I do not recall any political exertion on any file so I will say that to you very sincerely, sir, that there was no political interference. Had former Minister Lorraine spoken to the Minister of Economic Development of the day or the Minister of Natural Resources, I cannot comment on that. I do not know.

MR. DEXTER: You are dealing with this file in your office. Who were you reporting it to?

MR. MACKENZIE: We report it to the Deputy Minister of Economic Development.

MR. DEXTER: Okay, and would you meet with the Minister of Economic Development on this file as well?

MR. MACKENZIE: No, sir.

MR. DEXTER: That would always go to the deputy first?

MR. MACKENZIE: Yes, sir.

MR. DEXTER: It would probably have been useful to have the deputy here. I mean I think that is the sum total of that. You mentioned in your statement that you considered the investment to be $8,000 a job. The reality is that there are other creditors in the community who inadvertently, or certainly without their knowledge and consent, ended up being an investor in this company and an investor in those jobs to the tune of $200,000 as well. Do you know what the outcome of the receivership has been?

[8:30 a.m.]

MR. MACKENZIE: The outcome of the receivership, I would suggest, not knowing the specifics the secure creditors would have been paid, that would be obviously the HongKong Bank of Canada, Business Development Bank of Canada and certainly the receiver. I was not trying to make light of the $200,000 from the province. I am well aware that there are creditors who lost money. I guess the key issue on that is many of these creditors were doing business with Mac Timber prior to us getting involved and I would hope, as good businesspeople as I am sure they are, that they had taken the time to do their own credit checks before extending credit not only to Mac Timber but to anyone.

MR. DEXTER: The province's money wasn't secured?

MR. MACKENZIE: The province's money was a job creation contribution to the deal.

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MR. DEXTER: Are you aware that Mr. Vinet took the time to secure and encumber the property that was owned through Temma Holdings who I believe were a signatory to the contract or the application for these funds?

MR. MACKENZIE: Yes.

MR. DEXTER: Do you know if they were paid?

MR. MACKENZIE: Do I know if they were paid? No, I can't answer that. I don't know.

MR. DEXTER: Did you cease following the file once the receivership . . .

MR. MACKENZIE: Absolutely not. I think we were quite frankly involved throughout the receivership process. Our key and fundamental concern after things did go astray was to try to do everything that we could to assist finding a new operator that would come in and continue to operate this business as a going concern in the community.

MR. DEXTER: Was anything at all paid out to the unsecured creditors?

MR. MACKENZIE: I would say likely not, but I don't know that for a fact, sir.

MR. DEXTER: Mr. Sorensen, can you help us with this?

MR. SORENSEN: Strictly hearsay, I am not sure, but from my understanding not one creditor has received any funds at all, strictly the HongKong Bank and as Mr. MacKenzie had indicated, probably other financial institutions.

MR. DEXTER: Has a final statement of the receiver been issued as of this date?

MR. MACKENZIE: Not that I am aware of, but certainly that would be something we would be glad to look into.

MR. DEXTER: I wonder if I could just ask Mr. Sorensen now if he wouldn't mind providing us with a little bit of the background as he sees it in the run-up to the phone call that you made to set forward the two significant allegations that you made about the company with respect to the lawsuit and with respect to the violations of the free trade agreement?

MR. SORENSEN: Upon my resignation as of November 1, 1997, I took it upon myself, based on Neil's performance and his business ethics to identify some key problems with the initial applications that he had made both to the province and ACOA. Those key elements, I believe, were of some great concern and they should be looked at very carefully. They weren't allegations. I did have proof which I provided to the Maritime Lumber Board.

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When I left I provided full documentation to the MLB. I actually engaged a lawyer. I wrote an affidavit. That affidavit is with the MLB. They have given me absolution of any legal ramifications that would happen relative to the Softwood Treaty.

MR. DEXTER: My time is up, is it?

MR. CHAIRMAN: What I've done is extended an extra five minutes because of the lengthy answer. It was a detailed and very worthy response but we thought we would extend.

MR. DEXTER: Thank you.You say, you filed an affidavit with the Maritime Lumber Board at that time.

MR. SORENSEN: Correct.

MR. DEXTER: And you provided them with other details of what was happening.

MR. SORENSEN: I provided them with documentation as to how he conducted his business, where he was getting the product, what he was doing with it and how he was getting around the system. Based on the information that I provided to the MLB, they subsequently started an investigation.

MR. DEXTER: Over and above the legal ramifications of this, the majority of what you were telling ACOA at that time and our Department of Economic Development, was that there was a huge moral risk here, a fiduciary risk. Isn't that the real sum total of what you were setting forward, that the ethics of the individuals who were the principals in this company were not such that you should place any reliance or trust in them?

MR. SORENSEN: That's correct.

MR. CHAIRMAN: You have 20 seconds left.

MR. DEXTER: We will have time to come back, right?

MR. CHAIRMAN: Sure. We'll afford the next 25 minutes to the PC caucus.

The honourable member for Colchester-North.

MR. WILLIAM LANGILLE: Mr. Sorensen, I would like you to go back, if you would, to when you first started with Mac Timber.

MR. SORENSEN: When I first started with Mr. Vinet?

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MR. LANGILLE: Yes, and what I would like you to do, rather than jump in different places, if you could take us step by step from when you started, how long you were with the company and when you left and why you left?

MR. SORENSEN: I'll give you a brief synopsis if that is what you would like.

MR. LANGILLE: Yes, how you met Mr. Vinet?

MR. SORENSEN: Yes, I initially received a call from Mr. Vinet in June 1996 where he had a business opportunity to discuss with me. The contact there was through a mutual associate out in Edmonton, Alberta, where I had resided and done some work, as well. When I met with him at the airport, he had brought one of his clients with him, who he had not met, brought him to my residence. We went through a number of parameters and possibilities relative to the softwood industry, the lumber industry, and specifically the boards, which is a separate entity, something that is specialized. We reviewed the possibilities of the region and how effective it could be. We developed a point where it was a viable opportunity for us both to engage into. He had expressed an interest in having me with him in order to develop this association. He originally was doing some work here prior to me talking with him because he was fulfilling a contract offshore to Iceland and he ended up getting a little bit stuck so he needed somebody within the area in order to help facilitate the contracts that he had engaged there.

When I started physically with him, we didn't have a facility in Debert. We were subcontracting our work at Caradon-Lockwood up in Scoudouc. At that time we knew that eventually we would require our own facility. In November 1996, Caradon-Lockwood was closing their doors. We had expressed an interest with respect to purchasing that facility but were then denied. So I was given the task to review the area, the region, and develop a possible location. In February 1997, I found the location in Debert which is the old McCully and Soy property which used to be a mill. We reviewed the property and potential. Initially we didn't view it as a viable location but as we had further discussions with the owners of the property, there was additional property which is attached to it which made the property more advantageous and more viable.

At that time Neil discussed the purchase of the property and we took over and started using the facility as far as February 1997. Through the recourse of me working at the facility, he was not a resident here, he would come one to two times per month so we could review some of the key elements in starting up this enterprise.

There was a lot of clean-up on the site, in the interim. Because of cash flow, we purchased lumber, sideboards from local mills. What we did is we brought that material in, we sorted it and graded it, and then it was sold by Neil from his Edmonton office. I strictly ran the operation at this end. It was initially going to be a sweat-equity partnership, that is how we first engaged it. I was concerned and brought a number of issues forward that I

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wasn't sure about with respect to the Softwood Treaty. In June 1997, I further received some additional information by attending the Maritime Lumber Bureau convention in Charlottetown. After that convention, I realized that he was breaking the treaty and breaking the law.

MR. LANGILLE: Your last statement there, I missed it. Could you backtrack just to the end of your statement there, about breaking the law.

MR. SORENSEN: In June 1997, I had determined, after going to a seminar that the MLB had at the convention in Charlottetown, I realized at that point that he was breaking the law, with respect to the Softwood Treaty.

MR. LANGILLE: Would you explain how he was breaking the law?

MR. SORENSEN: The Maritime Region is exempt under the Softwood Treaty on any product that is physically grown in the Maritime Region to go to the U.S. so it is not regulated by tariffs or anything else. Other provinces, such as Quebec, Ontario, Alberta, British Columbia, they are all regulated under a quota system. If you do not have a quota for that lumber, you have to pay a tax for that lumber to cross the border.

What Neil had been doing was, over the course of working from February to June, he was purchasing lumber from Quebec and bringing that lumber in, and I was sorting it. I questioned him on it, and he had indicated under the Softwood Treaty that we are not regulated under those terms. As I said, in June I was pretty much convinced and determined that he was breaking the law.

I requested that we change that because I had sourced enough product within the Maritime Region to make it a viable entity anyway, but he was adamant about doing additional work. In August 1997, I went to Toronto to a convention and also to meet our lumber broker that was up there, that we were doing business with. At that time, he further expressed a concern with respect to how much product he wanted to come into the facility, which accounted to three trucks a day, which is a phenomenal amount, and indicated at the time, to the broker, he didn't care where it was coming from. He indicated right at the meeting that he doesn't care if it comes from Alberta or Quebec or anywhere, he still wants the product.

At that point, when I came back, I confronted him again. Mr. Vinet is very good at putting off things and circumventing any direct questions. In November, I overheard a telephone call, I don't know to whom it was, but the conversation indicated that I had been submitting the certificates of origin to the MLB when we were not. At that point, I gave my resignation and left. Upon that, I took what I was responsible for, as far as lumber that crossed the border without certificates of origin, I took the volume and I provided all those

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documents to the MLB. I did not take any more or any less. I only took what I was physically responsible for.

MR. DAVID HENDSBEE: On a point of order. Could I ask for a terminology clarification? When he mentions the word lumber, are you talking about timber, the raw stock or board feet or processed lumber? When you use the terminology lumber, my opinion and interpretation of it is cut board feet of wood, or are you referring to just the felled tree stock coming in then to be cut and processed at he mill?

MR. SORENSEN: As far as the Softwood Treaty is concerned?

MR. HENDSBEE: You were making reference to lumber being brought in from Quebec.

MR. SORENSEN: That is correct.

MR. HENDSBEE: When you say lumber, do you mean just the timber of the tree or already pre-cut into board feet.

MR. SORENSEN: Processed lumber, but the Softwood Treaty does not specify that, even cut trees cannot cross the border the way the Softwood Treaty is set up. For example, if you take a two-by-four and you actually cut a hole in that two-by-four for an electrical conduit, that circumvents the Softwood Treaty, and that can pass the border without tariffs. Unfortunately that loophole is presently probably going to be closed under the next negotiations because it is something that was never anticipated when the negotiations were happening with respect to the Softwood Treaty.

MR. LANGILLE: When you left the company, was it having financial problems then?

MR. SORENSEN: From February 1977 to November, we were doing extremely well. If you consider that we didn't have any equipment running and if you look at the documents, we were doing $2.1 million without any equipment running. That is pretty good.

MR. LANGILLE: Now I heard previously, Mr. MacKenzie, I believe, said that you had 45 employees at one point.

MR. SORENSEN: Prior to my leaving, we probably had between 10 and 20 staff working there. There was never the intent to have any more than 35 maximum within the operation. If he had more than that, I don't know where they would be working. We had analyzed every position and focused on where everybody would be working, and tried to come up with adequate and accurate numbers.

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MR. LANGILLE: Mr. Sorensen, obviously if you went from 45 employees down to 10 employees, that is a huge drop. Would that not indicate that your company was having financial problems at that time?

MR. SORENSEN: We never laid off or decreased the number of staff while I was there. It was always an increase. As I said, I have talked to a number of the employees after I left, and it is sort of - after I left the facility I figured I turned the page and I moved on with my life, but I am getting dragged into this every time. I have received calls from some of the creditors, some of the previous employees. Some of the employees weren't even working, they were standing there doing nothing.

MR. LANGILLE: It was obvious to you that the company was not being run the way it should have been?

MR. SORENSEN: Correct.

MR. LANGILLE: Okay. Would it be safe to say that at that time there were a lot of problems within the company?

MR. SORENSEN: I knew there was eventually going to be problems, based on his business ethics and the person that he brought in from Alberta to take over my position. He never, in my opinion, could really live with the possibility of people here having a proper business ethic and run an organization and just work within the parameters of the law. I worked in various places throughout the country, and it is a different attitude here than there is out West.

MR. LANGILLE: I would like to direct a question to Mr. MacKenzie. You were involved in giving the loan to Mac Timber. I believe that you said ACOA was responsible for the doing the background check. Is that correct?

MR. MACKENZIE: They did elements of the background check. We certainly did our own due diligence and assessment as well, but there were a couple of critical components that, as we normally do in a standard course of business, rely on each other's due diligence process, provided we validate the methodology of how they went about it. The one area that we did depend was on the lawsuit issue and they secured a legal opinion and the legal opinion clearly stated that it was immaterial to the application project at hand and we accepted that.

MR. LANGILLE: When you say ACOA did the background check, could you provide the name of the person that did the background check rather than just saying ACOA?

MR. MACKENZIE: We did our own background check, sir, is what I am trying to say with the exception of one component and that was the validation of the lawsuit issue. I would rather not get into the personality if that is possible and fair to the individual because

[Page 15]

it is more than just one individual, as it was in our shop, one individual does gather all the information and to state that it was solely with them is not doing justice or fairness to anyone in the process. There is more than one person involved from ACOA, there is more than one person involved from the HongKong Bank of Canada, there is more than one from the Business Development Bank of Canada, as there is in our shop too. That is why I have restricted my remarks to the entity.

MR. LANGILLE: What I am talking about now is the loan, the monies that were issued. You are talking about lawsuits?

MR. MACKENZIE: Monies that were issued? We did not . . .

MR. LANGILLE: I am talking about running a background check for the loan.

MR. MACKENZIE: We did not give a loan, a job creation grant is what we gave. Is that what you were referring to?

MR. LANGILLE: Yes, the $450,000.

MR. MACKENZIE: We, as a province, put $200,000 in the form of a job creation grant, ACOA, I believe, were in for a $340,000 loan which I believe was unsecured.

MR. LANGILLE: So that was an unsecured loan?

MR. MACKENZIE: Yes, sir.

MR. LANGILLE: That is why I was asking about the background at that time. When did you approve the loan?

MR. MACKENZIE: Our grant was approved in September 1998.

MR. LANGILLE: Now, I would like to direct my question to Mr. Sorensen. When did you leave the company, Mr. Sorensen?

MR. SORENSEN: November 1997.

MR. LANGILLE: At that time, you brought some allegations public, did you?

MR. SORENSEN: I didn't go public with the information, I approached the MLB, first, which is the regulating governing factor with respect to the lumber industry. I did contact both the province and ACOA and provided them with some information which they should have looked into.

[Page 16]

MR. LANGILLE: I would like to direct my question to Mr. MacKenzie now. You knew there were problems at Mac Timber then, is that correct to say?

MR. MACKENZIE: We knew there were some allegations brought forward which we did investigate. I think what I said in my opening remarks, Mr. Langille, is the fact that we were ready to put this forward in December 1997 with a positive recommendation. Mr. Sorensen did alert us to the fact of two key areas that should be investigated. We withdrew the application at that point in time for the $200,000 job creation grant, we withdrew it and deferred the matter to the Maritime Lumber Bureau as well as our Department of Natural Resources to allow them to conduct their investigation, which they did. I am told Mr. Vinet fully cooperated with the authorities, the MLB and others. As I said, I don't know whether the RCMP or whoever was involved but I know there was the MLB at least. He fully cooperated with their investigation. The end of the investigation stated that there were no charges laid, at least to our knowledge. We were advised that because no charges were laid we could proceed.

MR. LANGILLE: So you are actually saying that because there were no charges laid, you approved the loan on that basis.

MR. MACKENZIE: That is correct. In many cases, as I am sure you know, sir, many business people have issues, allegations, may be playing elements close to the line without going over the line, in a number of cases this is all part of the due diligence process. Sometimes people say untoward or unkind things, fact or fiction, and we had no reason to doubt Mr. Sorensen with his concerns at that point. They were investigated and no wrongdoing was proved here. Why wouldn't we advance it?

MR. LANGILLE: It is my experience, as a former police officer, that there are many investigations which we enter into and for lack of evidence or for one reason or another, that charges are never laid. But you were doing an investigation into Mr. Vinet at that time, is that correct?

MR. MACKENZIE: The Maritime Lumber Bureau investigated with respect to the trade issue. ACOA investigated the issue relative to the lawsuit. I am not denying that there was a lawsuit in front of him, it is just that the legal opinion in reviewing the material evidence and issues was immaterial to the application on the file at hand.

MR. LANGILLE: Mr. Sorensen, I would like to know, did you leave because at that time Mac Timber was in financial problems or did you leave because of the unethical situation of Mr. Vinet?

MR. SORENSEN: Unethical practices of Mr. Vinet.

MR. LANGILLE: I will pass.

[Page 17]

MR. CHAIRMAN: Any other members of the PC caucus?

The honourable member for Preston.

MR. HENDSBEE: I was glad to hear the clarification about this employment grant because one of my questions was the form of the money the province had given, was it intended for working capital or cash flow or was it to be used for capital upgrading. But you specified directly that it was for an employment grant situation, so it was more of a wage subsidy.

Could I ask in regard to in between the time that Mr. Sorensen left the employment of Mac Timber in 1997 to the time of 1998, when the province provided the money, what was the difference in employee numbers from the time of 1997, when he was there, until the time when we processed the grant?

MR. MACKENZIE: Mr. Hendsbee, the numbers that I certainly discussed in getting ready for today were that in January 1997, there were 11 employees. I think Mr. Sorensen made reference, and I don't want to put words in his mouth, that there were somewhere between 10 and 20 at approximately the time he had left, I think that would have been January 1997 to November 1997, 11 months later. In October 1998, we were advised, and I believe confirmed, sir, that there were 45 people working at that facility. So I guess the point I am saying from January 1997 to October 1998, it went from 11 to 45.

MR. HENDSBEE: Could I ask in regard to that time-frame the increase of activity at the plant, is it because of the amount of work that was being provided, was there timber coming in from across the Maritime Provinces or was there bootlegged lumber coming in from Quebec and being processed further at the plant?

MR. MACKENZIE: I don't know the full answer to that one other than the fact that I will assume that because the MLB, who monitor and regulate these things is my understanding, was satisfied that there were no improprieties with respect to sourcing material, at least as far as they were concerned.

MR. HENDSBEE: Could I ask further about the degree of this bootlegged lumber, to what degree it was processed as it came into the facility? Was it in its raw form or was it pre-cut, to pre-cut standards or was it rough lumber and had to be milled and planed further? There are different degrees of producing lumber. To what degree was this stuff coming onto the site?

MR. MACKENZIE: Mr. Hendsbee, I wasn't personally involved so I can't tell you the answer. Maybe Mr. Sorensen can provide a more accurate answer than I can on that.

[Page 18]

MR. SORENSEN: The lumber that was being brought in from out-of-province was processed lumber. It was already dried, dressed, ready for either shipping and/or regrading. It was processed lumber. All it was was boards, one-by-fours, the majority of it was 8 feet long and that lumber came in finished, dressed, packaged, it was unpacked, sorted, graded, stamped, repackaged and sent.

MR. HENDSBEE: From your knowledge then, would this lumber, I assume that we do have the requirement of kiln drying our lumber in Nova Scotia as well as the Maritimes, was this lumber being processed in Quebec and not being stamped and certified and painted according to its grade standards in Quebec or they don't have those requirements there?

MR. SORENSEN: It all depends on the mill. If you review the product that we were actually producing and/or sending out the door, it was product that is not worth a large mill's quota. In other words, there is no point in taking their valuable quota, which they have been provided as far as volume, and take boards which are of little interest to them and stamp and grade those boards and send them across. There were no certificates of origin provided with that product that went to Mac Timber.

[9:00 a.m.]

MR. HENDSBEE: My previous experience before, during my university working employment, I had the honour and ability to work in some lumber yards. I always saw the lumber coming in painted blue for economy grade or painted green at ends for high-grade quality. This stuff coming in has already been pre-painted, pre-marked, pre-stamped by the mill that originally processed it. How can this stuff . . .

MR. SORENSEN: That is incorrect. The mills would not take the time to stamp boards; maybe dimensional lumber, yes, but not boards specifically. There are very few mills east of Montreal that actually take a board and stamp it and grade it properly.

MR. HENDSBEE: So most of the lumber in bootleg lumber is in the process of boards and not in two-by-fours, two-by-threes, or . . .

MR. SORENSEN: No dimensional lumber.

MR. HENDSBEE: No dimensional lumber, okay. Bringing in the bootleg lumber from Quebec, could I ask what you think the intentions were by Mr. Vinet? Was it cheaper for him to buy it from abroad from across the border instead of processing it here in Nova Scotia?

MR. SORENSEN: It was strictly a cash-flow situation and in trying to get the quality that our customers required, there was no operation within the Maritimes that was meeting those specific specifications. The one that Neil found was located in Quebec - who were

[Page 19]

doing it properly - it is the high-grade fibre that was coming out of Quebec as well that made it also a higher-grade product so it was easily marketable.

MR. CHAIRMAN: The time for the PC caucus has elapsed. I have a couple of short snappers, if that is agreeable with the committee, and then we will move on. We will probably allot another 20 minutes to each caucus. We will allot the majority of our time equally, if that is fair enough.

My question, Mr. MacKenzie, would be in retrospect, for the $200,000, do you feel that the province has received its value for dollar on this project?

MR. MACKENZIE: That is a very difficult question.

MR. CHAIRMAN: Hindsight is always 20/20.

MR. MACKENZIE: Yes, sir, we did. I believe we did. I believe that can only be borne out as we go forward into the future with respect to the current operator. You have so many pieces of information put in front of you and you have to take a decision. I believe in this case here that it was responsibly done and I believe that all the elements of the deal strongly indicated that this was a wise choice to help create 25 jobs in rural Nova Scotia.

MR. CHAIRMAN: You made reference to the legal opinion on due diligence. Even when concerns were raised, you sought legal counsel and legal counsel came back and advised you that we have a clean bill of health here, you are okay to proceed. Is that what I am understanding?

MR. MACKENZIE: That is correct, sir.

MR. CHAIRMAN: Even amongst all the concerns that were raised, your legal advice was, you are on solid ground and this was a wise investment.

MR. MACKENZIE: The legal advice stated that the lawsuit at hand was immaterial to this project and immaterial to this application, and on that basis we accepted that and moved forward, yes.

MR. CHAIRMAN: Did it not make you fidgety in any way, that perhaps . . .

MR. MACKENZIE: Yes, certainly it did. When Mr. Sorensen alerted us to the fact, we became very concerned. We did allow the proper authorities to do their proper investigation and we awaited to see whether charges were laid or not. Yes, it always makes you a little bit concerned. Any deal you do, even with blue-chip companies and blue-chip individuals, you are always wondering in your heart and in your belly, is this going to go forward? Are they going to get a board over the head and maybe change the way that they

[Page 20]

run their operation or live their code of ethics? What we try to do, in looking at a business opportunity, is everyone has their personal beliefs, each individual has different values in the way they look at individuals and opportunities. We try to keep it is as objective and as clinical as we can with respect to the application in front of us, and try not to let personal biases override the proper decision here.

MR. CHAIRMAN: How did this so-called circumventing of the system in terms of moving ungraded lumber in, unstamped lumber, and processing it, stamping it, grading it, and shipping it out, how did this affect the operation at Mac Timber, did it take away from the initial intent, employment-wise, the financial stability, or was this an avenue to kind of keep the company financially stable in a downturn period, or what was the situation? What is the cause and effect relationship? I am trying to get my head around Mr. Sorensen's comments that we are bringing, what my colleague for Preston has referred to as bootleg lumber, how did this affect Nova Scotia?

MR. MACKENZIE: I can only answer from our perspective, sir, and that is that we referred the matter to the Department of Natural Resources who work with the Maritime Lumber Bureau. They investigated, in detail and intimately, the key issues. They came back with an opinion which we accepted and we should, that there was nothing that would result in charges, and there was nothing that they were in violation of. You would have to ask the question to them directly, what went through their mind with respect to the MLB investigation. Certainly we just accepted their opinion. We referred the entire matter to them, and for that point in time, the file was inactive with us until we had received assurances from MLB as well as the legal opinion relative to the lawsuit that these issues were immaterial. Had they come back and said charges were going to be laid against Mr. Vinet, certainly at that point, everything would have just frozen in time.

MR. CHAIRMAN: One final question. Looking at the entire situation as it is now, what you know now and in your experience from day one, would you still proceed to be a partner in this company?

MR. MACKENZIE: Yes. I think what we would do today, sir, if I may, is that the use of provincial taxpayers' money - which we take very seriously to be entrusted with trying to do some meaningful work with the money - what we have done today is that we only pay out job creation funds based upon jobs being first put in place. After we collect our tax revenue, then we share a portion of it back with the client.

I think, had the company, under the new way we try to do investment and job creation deals, had that been in place at the point in time, maybe we would not have exposed all of the $200,000 of provincial funds to this opportunity. I try to rise to where the future is. I know that doesn't make it any easier for many of the creditors that you talked about, but this operation that we did invest $200,000 of taxpayer money in is going forward, it is employing 18 people, and we can only hope that it will get up to the 30 people that they believe it can.

[Page 21]

It is just unfortunate that what has happened in between is that there has been a change of owner and a change of operator. I think from our perspective, we are worried about keeping those jobs for those people, quite frankly.

MR. CHAIRMAN: My colleague for Dartmouth-Cole Harbour.

MR. DEXTER: Mr. MacKenzie, I will give you this, you are certainly unrepentant about this. I get the sense, almost, that you have taken the position, this is my story and I am sticking to it. Frankly, I can't believe that you could describe this as a wise choice. A measured choice, maybe; an educated risk, maybe; but I can't see how on God's green earth you could say that an investment in Mac Timber was a wise choice. The department knew or ought to have known, had they taken the time to read the statement of claim in Biel and Tworek that there were significant character questions that had been raised about Mr. Vinet. You told us that you referred the matter, with respect to the allegations that were made with respect to softwood lumber to the MLB. Where is the report?

MR. MACKENZIE: Where is the what? I am sorry, I couldn't hear.

MR. DEXTER: Where is the report? You said you received an opinion, and we haven't seen it.

MR. MACKENZIE: Certainly that is something I would be pleased to take up with the Department of Natural Resources to see if they would share the MLB report with us.

MR. DEXTER: Wouldn't your department have it?

MR. MACKENZIE: I am not aware of that, if we do have it, sir.

MR. DEXTER: But you said earlier that you based . . .

MR. MACKENZIE: We have a letter from the Department of Natural Resources stating that there were no charges laid.

MR. DEXTER: But you never actually saw the opinion?

MR. MACKENZIE: From?

MR. DEXTER: From the MLB.

MR. MACKENZIE: Not me personally, sir, no.

[Page 22]

MR. DEXTER: Let me just get this right, you had an allegation, you referred it to a third party, the third party does an investigation, writes to another department, another department reads the opinion, and then writes you a letter, on which you base your decision and the investment of taxpayers' money in.

MR. MACKENZIE: That is correct.

MR. DEXTER: Doesn't that process make you uncomfortable?

MR. MACKENZIE: The process of being able to rely on opinions from other departments is something that we do and I believe in. I have no reason to question the Department of Natural Resources, why they would state that charges were not laid when in fact they were.

MR. DEXTER: I want to go at this from another perspective. Mr. Sorensen, can you tell me first of all what the corporate set-up was? There were a number of different entities here. There was CaberTek, Mac Timber, Temma Holdings. Can you briefly set out for us what the corporate relationship was?

MR. SORENSEN: CaberTek was the operating company; Mac Timber was the financial entity, it purchased, sold; and as far Temma Holdings, that was Mr. Vinet's holding company, which he chose to put the property into, it wasn't anything else other than his preference.

MR. DEXTER: What was your interest in these companies?

MR. SORENSEN: Initially it was sweat equity. We had discussed, when I first got involved back in June 1996, it was a 20 per cent sweat-equity situation that never materialized, but that wasn't an issue as to why I left.

MR. DEXTER: The idea was that you would eventually become an actual shareholder in the company but you never were. Is that what you are saying?

MR. SORENSEN: That is correct.

MR. DEXTER: That would have been with respect to CaberTek or Mac Timber?

MR. SORENSEN: Well, that he hadn't decided on.

MR. DEXTER: How did you know about the Biel and Tworek lawsuit?

[Page 23]

MR. SORENSEN: Mr. Vinet had told me about the lawsuit and expressed a number of different details pertaining to it to me. The person who had filed suit against him is also an associate of mine out West. I had talked to him after leaving the facility.

MR. DEXTER: Who was that?

MR. SORENSEN: That was Mark Biel. After the conversation I had with him, I realized that I should have done the investigation earlier myself.

MR. DEXTER: The allegations set out in that statement of claim involved the extraction of the financial resources of the company, out of the company.

MR. SORENSEN: Yes, he basically took product that was destined for England and had it re-routed and didn't tell any of his partners, and was going to take those funds once that product was sold.

MR. DEXTER: You knew that background information about him and you forwarded that, not only to the department but to ACOA?

MR. SORENSEN: That is correct.

MR. DEXTER: Did you also forward to ACOA the affidavit that you mentioned earlier?

MR. SORENSEN: No, that was to the MLB.

MR. DEXTER: You were comfortable in forwarding this information along to ACOA because you knew their operation, is that fair to say?

MR. SORENSEN: Well, I was hoping that no provincial and/or federal money would be provided to a risky company.

MR. DEXTER: Do you know that the information you provided in writing made it to ACOA and was in their possession?

MR. SORENSEN: I don't know.

MR. DEXTER: You don't know whether or not there was an actual communication with respect to the allegations you had set out?

MR. SORENSEN: No. I know I had talked to the MLB and Diana Blenkhorn, who was, I would say, the governing factor ruling the MLB, and she indicated there had been a meeting between ACOA and herself pertaining to the situation. As to the results and/or

[Page 24]

conclusions that were made during that meeting, I am unaware. I was only provided that information indicating that they had had that meeting, and that was it. That was by Diana Blenkhorn herself.

MR. DEXTER: I want to be clear about what I think my colleagues in the Progressive Conservative caucus were talking about earlier with respect to the way in which the softwood lumber originates in the Province of Quebec and then makes its way through the Maritimes. Attaching grade stamps is one thing, but does it require the actual manufacture of false documentation? Does somebody have to wilfully sit down and prepare documents in order to circumvent this process?

MR. SORENSEN: No, what he was doing, Mr. Vinet was also purchasing raw lumber and stickering it, which is taking raw material, putting small stickers between it to air dry. In receiving any lumber from any Maritime mill, you would have been provided a certificate of origin on the volume of that lumber that would have arrived. That certificate of origin was put into a file which I had control of. I used those certificates of origin when the product was destined for the U.S. Normally a trucker is required to provide a certificate of origin prior to that product crossing the border in order to meet the Softwood Treaty. As far as the lumber that goes by rail, there is no place to physically put certificates of origin so Mr. Vinet had indicated we would do a balance sheet at the end of the year and that would be provided to the Maritime Lumber Bureau.

MR. DEXTER: So, as opposed to document manufacturing, what would happen is this document would be switched or substituted with respect to product? Is that correct?

MR. SORENSEN: That is correct. We were taking the raw product certificates of origin that were provided to us and we were utilizing those certificates of origin for product that was coming from Quebec.

MR. DEXTER: Now, on your part, this isn't speculation? This is something you know. This is something you witnessed, is that fair to say?

MR. SORENSEN: I actually helped do it, yes, because I was told we weren't regulated under the present Softwood Treaty and that we were regulated under volume rather than where the product was actually coming from.

MR. DEXTER: So when you were filing these affidavits and you were presenting this information to the department, you were talking to them in the first person, you were saying I work for this company, this is what the company is doing.

MR. SORENSEN: That's correct and I provided that accurate documentation to the MLB.

[Page 25]

MR. DEXTER: What form would the documentation take?

MR. SORENSEN: It would be the pro-bills from the truckers as well as a receipt from the mill where it actually came from indicating what was on that truck.

MR. DEXTER: Mr. Sorensen, is it your opinion that throughout this operation that money and/or other resources of the company were being taken out of the company in a manner which was inappropriate?

MR. SORENSEN: I can't answer that because all the funds, the accountant, it was all being handled out of the Edmonton office. He provided me with numbers when he came down, but as to their accuracy and where the money went, I can't verify that at all.

MR. DEXTER: You said on a number of occasions that the business ethics of Mr. Vinet were different than you expected in dealing with other folks in our business culture or climate. I wonder if you could provide us with some examples of what it is you are talking about? You talked about the Maritime Lumber Board stuff which I think is serious enough, but I am just wondering if there are other specific examples?

MR. SORENSEN: I'll give you a quick example. Based on the business being operational, of course there were some local press that were adamant in trying to get a statement from us. I obviously always avoided them. I didn't want to make a statement. Mr. Vinet chose to make the statement and during that conversation the reporter had indicated that the Sable offshore gas would be great for the area. Mr. Vinet's comment to that was, well, you are going to have to import most of your expertise from the West because you people don't have it down here.

MR. DEXTER: What did that indicate to you?

MR. SORENSEN: To me, when you are talking to the press, why even make a statement like that and provide a negative atmosphere with respect to what you are trying to do.

MR. DEXTER: Surely that's just a matter of opinion as opposed to a business ethic.

MR. SORENSEN: Well, as I said, I am strictly giving a quick example relative to how he conducted himself.

MR. DEXTER: In matters with respect to the business itself that gave you concern over and above what you already pointed out to us?

[Page 26]

MR. SORENSEN: Well, when we discussed the issue with respect to the Quebec lumber and the product that I had found throughout the Maritimes, he is saying we will deal with it, but when we were physically in Toronto and he was talking to the lumber broker up there, indicated to them that he didn't care where the lumber came from, he just wanted to make sure there were three trucks a day coming into the facility.

MR. DEXTER: I guess my specific concern here, and I think the concern certainly of the other caucus and people in the province just generally is with respect to the large number of creditors out there, many of whom have said publicly that they saw an investment in this company, going in, from ACOA and from the province and that to an extent they believed they were able to rely on the work of the department in terms of checking out a company and ensuring that it is financially sound and that it operates in an ethical fashion. When you were there and at the time you were making these particular allegations, were there difficulties with existing creditors? Were there delays in payment? How was the company relating to the other people that it was doing business with?

MR. SORENSEN: According to my records, there were maybe a couple of creditors that were owed, but it was only because they were late in providing their billing. Other than that, we were meeting all our obligations relative to it, at least that is what I was told.

MR. DEXTER: But that wouldn't have been your responsibility?

MR. SORENSEN: No.

MR. DEXTER: In fact, on behalf of Mac Timber you are not actually the person who puts forward the applications, are you?

MR. SORENSEN: No, because I was not an owner of the company, I couldn't sign the applications.

MR. DEXTER: There was a corporate comptroller who put forward the applications? Are you aware of that?

MR. SORENSEN: No, I'm not.

MR. DEXTER: There was a letter in our materials that was signed on Mac Timber letterhead by a Daryl Hahn. Are you aware of this person at all?

MR. SORENSEN: No, I'm not.

MR. DEXTER: Okay. Perhaps Mr. MacKenzie can tell us if this was the person he dealt with.

[Page 27]

MR. MACKENZIE: It wouldn't be me specifically, sir, it would have been one of our officers and I believe they were dealing for the most part with Mr. Vinet directly.

MR. DEXTER: I guess I am not understanding the hierarchy of the department obviously in the way that I should, but the individual files are assigned at some point to you or to other people in your position. What control do you actually have over the file? Are you just a review? Do you just audit it and see if all the documentation is there or do you actually do some of this work yourself?

MR. MACKENZIE: We have a division of about 27 people. On the investment side, we have two functions: investment and trade. Let's deal with the investment which is where this one would fall. We would receive, on an annual basis, in excess of 300 applications and business plans. We would have a team of four people to six people that would take the files on, work through the issues, do the due diligence, do the assessment and at some point determine in their opinion if there is a viable business case here that should be put forward for serious consideration. That is how the process would work. At that point and only at that point would I likely get involved. Do I get intimately involved in all 300 files? Absolutely not.

MR. DEXTER: So I assume at some point in time the file gets handed to an individual who is . . .

MR. MACKENZIE: Usually very early in the process, yes, unless critical elements are missing and it is very obvious in the beginning at that point, then a quick decision will be taken by myself or someone that we are not going to put provincial resources into doing the assessment because of some very obvious elements that are critically missing.

MR. DEXTER: So there would be somebody down the line from you who actually has the carriage of the file, to see to it that all the documentation gets into it and then it gets to you?

MR. MACKENZIE: That is correct.

MR. DEXTER: It appears from what you have told me that in large part, much of what goes into that file is third party opinion, either from other departments or from, as you pointed out, . . .

MR. MACKENZIE: I think that is the normal course of any due diligence or assessment by any traditional banking or any other source that provides funding out there, is that you are presented with information and you validate it. I have $100 in my savings account. Do we accept it? No. We do receive some kind of confirmation that there is $100 in their savings account.

[Page 28]

MR. DEXTER: For example, I asked you earlier about DPS Management Consultants and you did not seem to know who they were. Anybody can prepare a report. You must have to have some confidence in the people who actually create the report?

MR. MACKENZIE: That is correct.

MR. DEXTER: I am a little bit at a loss that we get one page out of the executive summary of this and we are expected to ask the appropriate questions. I am sure you understand it is difficult for us to even ask the questions that ought to be asked if we do not have the information on which to base the question. Nonetheless, there must have been something about DPS Management Consultants Limited that allows you to have confidence in the report that you received?

MR. MACKENZIE: It was before my time there, but I will tell you the standard operating procedure would be that we would accept it as an opinion that there is an opportunity here and then and only then, if we felt that what they were saying was credible and they were credible, then we would begin the due diligence of validating the information that they put forward as well as looking at the application in front of us - what are you looking for, what do you require, what do you need, where are you going to do it, how are you going to do it, all of the elements, who are you going to sell it to, where are you going to source your raw material. From all of those elements and with the limited resources we have, yes, we do rely extremely heavily on other credible third parties, whether it is MLB, or whether it is the Department of Natural Resources, whether it is ACOA, whether it is traditional and conventional lenders. We do have a fair amount of dialogue. This is not done, these assessments are not done, these recommendations are not done in isolation. There is a very extensive amount of consultation that goes on.

MR. DEXTER: At the very beginning of what you just said, you said, this was before my time?

MR. MACKENZIE: Yes.

MR. DEXTER: Can you explain that to me?

MR. MACKENZIE: Yes, I started in July 1997. This opportunity was presented prior to my joining the department.

MR. DEXTER: So would there have been a note or would there have been some memo or document that talked about who, in that file, DPS was and why they had confidence in the report that was there, or do you know whether or not that was done?

[Page 29]

MR. MACKENZIE: Frankly, the DPS report, I do not want to blow this out of proportion, but it was an opinion. It was a statement that we feel that there is an opportunity here and we investigate it. The DPS report was not what we hung our opinion on as saying this is the gospel. You have to remember that the DPS report, if I recall correctly, and maybe Ivan can speak to it, I think was written in July 1996 or August 1996 and we are talking about putting money on the street in September 1998 or October 1998. There have been very significant elements that would have changed throughout the process. The DPS document is not what we underpinned all of our recommendation on by any means.

MR. DEXTER: In all of that you did not answer the question. Was there anything in the file that talked about the background of the DPS and who they are and why you should even start your application process?

MR. MACKENZIE: I do not know.

MR. CHAIRMAN: We will turn the next set of questions over to the PC caucus. The first line of questioning will be with our colleague, the honourable member for Pictou East.

MR. JAMES DEWOLFE: Thank you, Mr. Chairman. Mr. Sorensen, I guess it would be fair to say that there were a lot of things going on during this period and, in particular, the period of February to the time that you resigned in November 1997, during that 10 month period. During the course of this meeting here this morning, I get the sense that there is a whole lot more that we do not know about. I am going to ask you the question, has anything come to mind that you would like, at this point, to bring forward that would be useful for this committee?

MR. SORENSEN: Other than maybe doing a forensic audit on Mr. Vinet and determining how many holding companies he has and where the money flowed to, my opinion relative to where the funds were is strictly an opinion. Some of those funds were probably paying his lawyer in order to pay for his lawsuit. I do know I cannot validate that and, as I said, that is an opinion of mine.

[9:30 a.m.]

MR. DEWOLFE: Just an opinion and it is a very interesting point though, it is something that we should certainly look into. I am trying to understand this, Mr. Sorensen, Mac Timber was sort of the working company, was that fair to say, too?

MR. SORENSEN: Prior to my leaving, it was strictly the financial and sales entity. As far as the working entity, that was CaberTek. When I left, Neil changed that.

MR. DEWOLFE: It was changed and all of a sudden Mac Timber did, in fact, become the working company and Temma Holdings were now the holder of the assets, is that correct?

[Page 30]

MR. SORENSEN: Yes, that is correct. Therefore, all the debt was in Mac Timber and all the assets were in Temma Holdings.

MR. DEWOLFE: What are your thoughts on that?

MR. SORENSEN: He has been in business for a long time and I think he had some very solid advice relative to how to structure his organization. I do not know if a forensic audit would resolve the issue relative to how he conducted and how he hid things, I do not know. It would be interesting. I had initially asked for a forensic audit when I went to the first creditor's meeting in Truro and was turned down. I do not think Mr. Vinet would really want a forensic audit. I do not think he realized that when I attended that creditor's meeting, that everything would come forward. If I understand it properly, he was actually negotiating with the authorities to resurrect the entire enterprise again and still maintain control. So, basically, he was going to do a flush and start up again; get rid of the debt and start going at it again.

MR. DEWOLFE: I turn my thoughts now to the Department of Economic Development. When did the Department of Economic Development, Mr. MacKenzie, find out that this had happened, that the assets were now under Temma Holdings? When did you find out that that was taking place?

MR. MACKENZIE: I cannot answer that. I do not know. I do not know the answer to that question specifically.

MR. DEWOLFE: But you are aware that . . .

MR. MACKENZIE: Obviously, they would have been aware; specifically at what point in time, I cannot tell you, I do not know.

MR. DEWOLFE: Very interesting events took place during this period and it seems to me that perhaps the Department of Economic Development did not do their homework on this as well as they might have. Mr. Sorensen, did you have any knowledge or do you have any thoughts on Mr. Vinet lobbying government, any members of government, during this time?

MR. SORENSEN: I do not know if Mr. Vinet had any calls to any of the political Parties relative to . . .

MR. DEWOLFE: I am certainly talking about funding, do you think there was lobbying going on?

MR. SORENSEN: I do not know.

[Page 31]

MR. DEWOLFE: I am going to pass to my colleague, the co-chairman, because I think we are going to run out of time very shortly and I want to ensure that everyone has an opportunity to ask questions, Mr. Chairman.

MR. CHAIRMAN: Perhaps just before I turn it over, if we could receive an undertaking from Mr. MacKenzie, to complement your question, an undertaking as to the time when the transfer of the assets took place.

MR. MACKENZIE: Absolutely.

MR. CHAIRMAN: That way that would complete that part of the puzzle, if we could, for the lack of a better phrase.

MR. MACKENZIE: No problem.

MR. DAVID MORSE: Mr. Chairman, I would like to read from the Executive Summary, down under the Recommendation, "The company is well managed . . . has good net worth and the apparent ability to service the additional term debt which will result from this project.". I guess I would like to refer that to Mr. MacKenzie for his comments.

MR. MACKENZIE: Are you referring to the Economic Development document or the ACOA document, sir?

MR. MORSE: To the executive summary from DPS.

MR. MACKENZIE: And your question again?

MR. MORSE: Your comments?

MR. MACKENZIE: The comments that would have been made at that point in time would have been based upon an assessment and a validation by the officer who would have worked on the project and DPS would have been obviously trying to promote an application. We would have accepted that as that position. We would have then begun to validate other parties and opinions, as to what they thought of those comments.

I don't know if that answers your question other than the fact that someone made a statement. Okay, you made a statement, great, now we are going to go check it out.

MR. MORSE: So your are referring this back to DPS.

MR. MACKENZIE: No, DPS, in that document that you are referring to, were the ones who made the statement that it is well managed and the other comments that you made. They are entitled to their opinion about the client that they did work on behalf of. We will just

[Page 32]

acknowledge that, okay, thank you for your opinion. We will then go confirm that under our own assessment.

MR. MORSE: To be specific, these are DPS' words in the Executive Summary?

MR. MACKENZIE: That is correct. They are not our words, DPS did not work for us.

MR. MORSE: This is what I want to confirm and I make reference to the somewhat extensive questioning from my colleague, the member for Dartmouth-Cole Harbour, regarding the background checks on DPS, which is a concern to me.

MR. MACKENZIE: DPS Management Consultant Firm. It could have been Deloitte & Touche, it could have been PricewaterhouseCoopers, it could have been anyone. Traditionally, we just accept that as information being communicated. We are not negotiating, as a rule, with the management consultant. We are negotiating with the client and we will take that information and begin our own negotiation and our own assessment. We do not accept that as gospel, sir, that is just a starting point to initiate an application.

MR. MORSE: Now I direct a question to Mr. Sorensen. Mr. Sorensen, you were brought into Mac Timber because of the expertise that you would bring to this enterprise and therefore you were offered a 20 per cent sweat equity position?

MR. SORENSEN: That is correct.

MR. MORSE: So I would take it that Mr. Vinet saw you as an integral part of this business?

MR. SORENSEN: And so did DPS consultant, who was a consultant who has experience in the lumber industry.

MR. MORSE: I think this is very significant that they would offer you a 20 per cent stake in this.

MR. SORENSEN: That was also indicated in the documentation that was provided to both the province and ACOA. That was one of the issues that I brought forward when I did call them in December 1997, that I was no longer involved, therefore they may want to review that as well because according to the application that he submitted, he had indicated that I was a 20 per cent partner.

MR. MORSE: You had made my point for me much better than I am sure that I could have.

[Page 33]

I would like to go on. When you, and this is quoting from a newspaper article, walked away from, ". . . an enormously profitable business when he decided he could no longer live with Mr. Vinet's business ethics.", that is a quote attributed to you, Mr. Sorensen?

MR. SORENSEN: That is correct.

MR. MORSE: So we have a situation here, we have an Executive Summary from DPS which sings the praises of the profitability of this company. This was based on you being a key person in this company, Mr. Sorensen?

MR. SORENSEN: That is correct.

MR. MORSE: We also have a summary of projected annual income and retained earning statements for the next five years which were tabled by the honourable member for Dartmouth-Cole Harbour during Question Period, May 26, 1999. Now there is a lot of talk about this tremendously successful company and down at the bottom, this tremendously successful company is showing retained earnings as of January 31, 1998 of a deficit of $19,046. Would Mr. MacKenzie like to comment on this?

MR. MACKENZIE: It is a delicate question to ask because you are dealing with one year out of a five year projection of a financial statement. I think if we look at the next subsequent four years, that position does change. I think, quite frankly, in many cases that new companies - I think it is accepted anywhere - just don't start from day one and have cash flowing in through the door, as nice as it would be. We accept those projections and we try

to look at things in a longer period of time, and try to understand what underpins the numbers. It is nice to present numbers, but how do you validate what is going to drive it? Frankly, maybe the bank charges could have been significantly lower, for example, and it would have changed the numbers. That is all I am responding to, to pick numbers in isolation is a very delicate situation. Just for me to respond, it is a tough situation for me to put forward a very meaningful argument, sir, that is all I am saying.

MR. MORSE: Having had some experience as an entrepreneur over the years and having made a few projections to banks, sometimes with some help from people in the accounting field, I can tell you I have never submitted a projection that was not optimistic to any financial institution, and they have not always accepted my projections just verbatim. I would suggest that that is all this is, in fact, a projection. Clearly, any applicant is going to suggest that they are going to be profitable in the future in order to encourage you to entertain a loan.

My point here is, of course, that they did start off in a deficit position. This is contrary to what is said in the executive summary, which you have relied upon from DPS. We have also relied upon the existence of Mr. Sorensen as the key person in this business at the time

[Page 34]

that we advanced the loan, Mr. Sorensen, the key person in this business, was no longer with the business. This is a concern to me.

I would like to move on. Now, as I read the ACOA contract, this is signed by Mr. Vinet, I would take it from that that he is personally liable for that $340,000?

MR. MACKENZIE: With respect to ACOA, you would have to ask their opinion on that. I wouldn't want to comment.

MR. MORSE: Perhaps you could comment on this one. I note that the Department of Economic Development sent him a letter for acceptance in which he was signing only as the signing officer for a couple of companies. Therefore, there was no attempt to protect the taxpayers' monies going into this business, yet there was clause in the letter that said that it was based on $8,000 per employee, as long as they were kept for a two year period. We paid them up front, a limited company, without any personal guarantees. Could you comment on that practice?

MR. MACKENZIE: Yes. It was a job creation grant as opposed to a loan to the company. The money was committed, I wouldn't say up front, the money was committed to the company after the jobs were put in place, sir. Do you want me to go through that again?

MR. MORSE: Yes, please, Mr. MacKenzie.

MR. MACKENZIE: Our money was not put up front in the truest sense. Our money was put in after the fact, that was the arrangement we had with Mr. Vinet, after the jobs are in place, and only then will we put the money forward. That, in fact, was the case when I made reference to 45 jobs being in place before the $200,000 from the province. That was the arrangement, that was the negotiation that we had with Mr. Vinet. This was not a loan, this was a job creation grant based upon creating specific jobs.

MR. MORSE: But there was a stipulation those jobs remain in place for two years.

MR. MACKENZIE: That is correct.

MR. MORSE: And there was no security put in place to make sure that Mr. Vinet's companies were able to complete that contractual obligation?

MR. MACKENZIE: That is correct.

MR. MORSE: That is a concern to me. I am going to skip to the point. I would like to know what you could propose that these kind of situations not happen again? Pointing out that while you may have relied on ACOA, the Business Development Bank of Canada and a secured creditor, The HongKong Bank, and we do know that ACOA has a personal

[Page 35]

guarantee, and I suspect that the Business Development Bank of Canada has a personal guarantee, how can we stop this from ever happening again?

MR. MACKENZIE: I think I made reference with respect to job creation, very briefly, to the chairman, and the fact that the province, the way that we enter negotiations with any companies is based upon back-ended payroll rebate. In other words, we are paid first through our provincial taxes, we share a portion of that back. If a company, as it regrettably happened in this case here, happens to cease existence, no taxpayers' money goes out.

MR. LANGILLE: Mr. Chairman, I would like to address Mr. Sorensen. You said today that you were in the company and that you observed people standing around, not doing anything.

MR. SORENSEN: I was told that, after I left, by the employees.

MR. LANGILLE: Okay. Now would this be - the reason for them standing around not doing anything - that they had to provide so many jobs and there were actually no jobs for them, and it was just to secure monies from the government because of the number of bodies they had hired and they actually had no work to do? I would ask Mr. MacKenzie that.

MR. MACKENZIE: I certainly didn't go down and inspect the operation, sir, so I can't comment. The agreement we have with Mr. Vinet was to maintain the 11 jobs, plus add 25 more. That is 36. It was reported he had 45. If that is what he chose to do, I would be surprised, but I can't confirm that.

MR. LANGILLE: One more question. The MLB stickers that should be going with the lumber, I believe, Mr. Sorensen, you took some when you left, did you?

MR. SORENSEN: They are certificates of origin, and, basically, a mill sends those certificates of origin with the lumber they send with the truck. It validates that the lumber or tree was grown in the Maritimes.

MR. LANGILLE: Thank you very much.

MR. DEWOLFE: It is my understanding that the assets were not sold to the highest bidder, but the lowest bidder. I am just wondering if either of you gentlemen could comment on that very quickly.

MR. MACKENZIE: A receiver was put in place, PricewaterhouseCoopers. I think you would have to take that matter up with them and ask why they did what they did. At that point we were completely out of the matter.

MR. DEWOLFE: Was that, in fact, your understanding, that the lowest . . .

[Page 36]

MR. MACKENZIE: No, sir.

MR. DEWOLFE: It is not, okay.

MR. CHAIRMAN: That completes that round of questioning. I am going to allow my colleague, the member for Sackville-Cobequid - he is one of our newer members - for the next three minutes.

MR. HOLM: Mr. Chairman, excuse my greenhorn style then. Just a couple of questions, if I could. First of all, for some clarification. When the grant was made to Mac Timber, had they already offloaded to Temma Holdings their assets in terms of the land and so on?

MR. SORENSEN: I have stated that I will try to undertake to find out the exact time, Mr. Holm, and get back to you specifically when that happened. I can't answer that directly.

MR. HOLM: Would that not be a normal thing that you would try to find out before you are investing money . . .

MR. SORENSEN: Absolutely.

MR. HOLM: . . . or giving this grant, to find out whether it is just a shell company through which monies are being passed? Does it really have any assets? It strikes me as a fundamental one.

Also, I just want to go back on another point, DPS. Did you not say earlier that DPS is now a company that does the contract work for ACOA, that is what they do?

MR. MACKENZIE: I was the one who commented on that and I had indicated that DPS I believe is now a consultant with ACOA.

MR. HOLM: It is a consultant with ACOA. Okay, who are the principals? Who are DPS? They are more than three initials, who are they?

MR. MACKENZIE: It is one individual.

MR. HOLM: I would like to know who the individual is.

MR. MACKENZIE: Dave Parsons.

MR. HOLM: Okay, and he is a consultant now with ACOA?

[Page 37]

MR. MACKENZIE: That is correct.

MR. HOLM: Do you know, Mr. MacKenzie - and I have no idea, I am just firing these out - when he started being a consultant with ACOA and is there any possibility that he may have been one of those who was giving ACOA advice also on this file, advice that you were then relying upon, Mr. MacKenzie?

MR. MACKENZIE: I don't know the answer to that one, sir. I can't comment. You would have to ask ACOA. ACOA uses a pile of consultants throughout Nova Scotia.

MR. HOLM: You know certainly you have close working relationships with ACOA; you have stated that and you rely on each other. Would it not be possible for you to make those quick inquiries and to find out and to report that information back to this committee?

MR. MACKENZIE: Sure.

MR. HOLM: You make that undertaking?

MR. MACKENZIE: Yes.

MR. HOLM: The other thing is, and I am just talking about some of the figures my colleague, the member for Kings North, was talking about. Of course in January 1998 the negative $19,000. You said, well, that is to be expected quite often with a new company, and you can't just pick figures out of the air. Didn't you also say that the company had been in operation for a couple of years? They were operating in, I think it was 1996, so, in fact, they were not a new company? That would really be the end of their second or start of their third year?

MR. MACKENZIE: Okay.

MR. HOLM: Is that not correct?

MR. MACKENZIE: My understanding was certainly when we received the DPS report it makes reference to the fact of the nine month profitability so that would certainly suggest to me that they were in business for a couple of years prior to 1998.

MR. HOLM: So they were well managed and it was a company worthy of putting a few hundred thousand dollars worth of Nova Scotia money into, a well-managed company that has been in operation for at least two years, and they are still showing a negative profit in their optimistic projections that they put forward, showing a loss, really in the third year or at the end of the second year, whichever you want to cut it as, and the profit margins in the next number of months to come are by the skin of your teeth at the very most?

[Page 38]

MR. MACKENZIE: My comment to that would be, again it is an oversimplification of a number. I mean, what is driving, what is underpinning that number. Maybe they have secured new equipment, more inventory. Everything would trigger through the balance sheet . . .

MR. HOLM: But shouldn't you know that, with respect? Shouldn't you know that information? Shouldn't that information be able to be made available to this committee?

MR. MACKENZIE: Absolutely.

MR. HOLM: Will you make that undertaking that that kind of information will be brought forward to this committee and provided to us?

MR. MACKENZIE: I don't know if I can make that undertaking. I would certainly be glad to look into it for you, though.

MR. CHAIRMAN: I have two or three final ones, just to wrap up, for you, Mr. Sorensen. I notice here your title with the company was Production Manager and yet you indicated that you watched employees stand around and do nothing.

MR. SORENSEN: No, I didn't indicate that. That was after my leaving that the employees approached me and indicated to me that all they were doing was standing around.

MR. CHAIRMAN: So you could never validate the fact that employees were just there doing nothing . . .

MR. SORENSEN: Anybody who was working for me when I was running that facility was physically working. We were pushing through 80,000 FBM a week.

MR. CHAIRMAN: So you saw no evidence of inefficiency on that side of the operation?

MR. SORENSEN: No.

MR. CHAIRMAN: Mr. MacKenzie, with regard to the Department of Economic Development, you made reference to the Economic Development auditor reviewing this and giving it the clean bill of health. Is this a departmental auditor?

MR. MACKENZIE: Yes.

MR. CHAIRMAN: Did he prepare a written report?

[Page 39]

MR. MACKENZIE: The auditor stated to our deputy minister that he has reviewed the matter. I can't tell you specifically what was done in the end, but we were advised directly by him that . . .

MR. CHAIRMAN: So perhaps you could give us an undertaking to find out if, in fact, there was documentation to ensure that due diligence?

MR. MACKENZIE: Yes.

MR. CHAIRMAN: Mr. Sorensen, you made reference to the fact that you were a potential shareholder in the company to the effect of almost 20 per cent. I am rather perplexed personally why you would pack your bags and leave when you had an opportunity to become part of a process where you could make changes and still achieve the objectives that you initially went there for?

MR. SORENSEN: Mr. Vinet always had to be in control. If I was to have any say with respect to what went on within the operation and see the books, under the laws of Nova Scotia I would require more of a percentage. I don't know if he knew that information prior to offering that to me. I just know that I would have been there to take the fall and the responsibility when everything went sour.

MR. CHAIRMAN: So when you left the company, you left knowing or at least you felt that you would never get that 20 per cent share?

MR. SORENSEN: That's right.

MR. CHAIRMAN: So it was as much on the issue of disillusionment about your expectation about wanting to become a stakeholder in the company as it was ethics?

MR. SORENSEN: More ethics because if I could have put other things aside, we were looking at a situation where these numbers that were provided by Mr. Vinet, which is in the DPS report, were provided by Neil. When we initially developed them and did projections we were looking at $60 million after five years. We were specifically told to take those figures and pull them down. So, in other words, I walked away from an opportunity of making $60 million after five years. That wasn't easy. It was basically because I have to live in this community.

MR. CHAIRMAN: But it is equally so that you left knowing that you wouldn't get 20 per cent of that $60 million. So it was . . .

MR. SORENSEN: That's right.

MR. CHAIRMAN: It was as much money as it was anything else?

[Page 40]

MR. SORENSEN: But the way he represented himself . . .

MR. CHAIRMAN: The whole purpose of the company was to produce a product and sell it for a profit.

MR. SORENSEN: That is correct.

MR. CHAIRMAN: With no profit, you wouldn't be staying around. There would be less likely . . .

MR. SORENSEN: No. When he was breaking the law, I was going to end up being the fall guy. No. I believe in the rules and regulations that are in place, that we are all to follow as business entrepreneurs. Now if a person decides to break those rules and not have any ethics pertaining to running a business within those rules and regulations, I can't live with myself; I can't. How can I run or help make an enterprise be fruitful and expand? I can't, with a person who has that type of ethics. I have been in business myself before.

MR. CHAIRMAN: Thank you. One other question. You made reference to your colleague in British Columbia, a business partner who has some legal action.

MR. SORENSEN: It is actually in Alberta.

MR. CHAIRMAN: In Alberta, sorry, I thought I understood British Columbia. Could you explain the nature of the known relationship between him and Mr. Vinet?

MR. SORENSEN: When I worked out in Edmonton, I worked in the architectural field. I am an architectural technologist. Basically Mark Biel and Neil Vinet, one of his companies is an electrical consulting company. Basically we would engage them as a consulting firm to develop the drawings for buildings that we would do. I had an association, and met them through that. Subsequent to that, after leaving, I worked in Ottawa and I have also worked here.

MR. CHAIRMAN: And he has a lawsuit against Mr. Vinet?

MR. SORENSEN: That is correct.

MR. CHAIRMAN: Presently?

MR. SORENSEN: Yes. Still ongoing.

MR. CHAIRMAN: Are you aware of the nature of that lawsuit?

[Page 41]

MR. SORENSEN: I was provided that information after. Neil had initially told me what the lawsuit was, and I took it for granted that that was true rather than looking into it myself. After leaving the facility, I had talked to Mark, and he gave me pretty much his version of what had happened. If I sort of put all the elements together, I realized that what Mr. Biel was telling me was probably, in fact, true, and what Mr. Vinet was telling me was a little bit of an exaggeration to meet his needs.

MR. CHAIRMAN: I see my colleague, the member for Preston. We have really kind of vented this fairly well. As colleagues will readily agree, our Liberal caucus has yielded the vast majority of its time already. I think, for today, we will pretty well call this an issue. If that is agreeable? We would like to thank both Mr. MacKenzie and Mr. Sorensen for coming and answering our questions and doing the best they can.

We will move on to the next line of business. Are there any questions for potential outcomes from today's events?

MR. DEXTER: I have a specific matter I wanted to deal with. It has come to my attention that the MacNeil's Cove project is for some reason not on the list. My understanding, and I spoke with the PC caucus about this, at least the member for Kings South. I want to make sure that it is on the list. I am formally putting forward the motion that the MacNeil's Cove project be placed on the agenda of this committee for examination. I would like to have a vote on it.

MR. CHAIRMAN: I believe last week I asked my colleague, the member for Sackville-Cobequid, to confer with the PC caucus, just so that we would be able to get some witnesses on the list, to keep the process moving along. Was there some commonality?

MR. DEXTER: I don't want any obfuscation about this.

MR. CHAIRMAN: No. No.

MR. DEXTER: I want to clearly have a vote on this so that it is on the record that this project is going to be coming forth. Quite frankly, I understand that this is not a comfortable thing for you or your colleagues to deal with, but nonetheless it is a matter that ought to be examined by this committee, and I want it put on the list. That is my motion. I would like to have a vote on it.

MR. CHAIRMAN: I have already expressed my view on it. I will certainly support the will of the committee. Personally I think we are kind of getting off the rails here, but that is my own view.

[Page 42]

[10:00 a.m.]

MR. HOLM: In support of the motion, I have spoken with the member for Kings South and I will not speak for the Tory caucus, obviously, but our caucus is in support of this being on the list. I believe that the Progressive Conservative caucus is, but that would have to be confirmed or disputed by them.

MR. MORSE: May I speak to this, Mr. Chairman? When this subject came up, afterwards I checked the Hansard records and actually the question was called a couple of times, but there was never a vote recorded on Hansard. So in checking at my request on the videotape, it appeared that we had actually voted in the affirmative twice and it had never been recorded in Hansard. I think under the circumstances that we are duty bound to perhaps vote on this and record it in Hansard today.

MR. CHAIRMAN: That is fine. I just expressed my view on it. I just think that if it is a mission by the NDP caucus to satisfy the whim of the former member for Cape Breton The Lakes, then fine and dandy, but I think there are more pressing concerns for this committee of a greater magnitude.

MR. HOLM: I have a point of order. Are we going to have a vote now?

MR. CHAIRMAN: Question, sure. Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

What other potential witnesses do we have because it is, obviously - Yes, Mora.

MS. MORA STEVENS: What we have on so far is a committee procedural briefing next week, also going over NSRL, that is next week over in the Committees Office. (Interruption) By the Auditor General. He is going to put something together for that on information that he audited on NSRL next Wednesday. We have the question of Jim Livingstone only being available on Thursday, November 18th; if that is agreeable to everybody. You can still have a meeting on November 17th, if you wish to have it on Wednesday, or to have two meetings that week, or we can have a meeting in the morning of November 18th but that, of course, would have to be agreed upon by the House Leaders so the House does not go in that early.

MR. HOLM: Certainly subject to the House Leaders agreeing to that, I would move that the November 17th meeting be moved to November 18th.

SOME HON. MEMBERS: Agreed.

[Page 43]

MR. CHAIRMAN: The motion is carried.

MS. STEVENS: After that, the next item up is P3, that will be a briefing on P3 and then dealing with that either on December 1st or December 8th, November 24th being the briefing. The Horton land purchase, access to the school, issues such as that. (Interruption) The people involved with the purchase of the land. I have a list that one of the members of the committee has provided to me, but anyone who has any people that they would like to have placed on that list, just let me know and I will be contacting the caucuses.

MR. CHAIRMAN: Just as a point of interest, if I could, John, we had witnesses on the P3 issue once before, before the committee last year.

MS. STEVENS: Yes, we did.

MR. CHAIRMAN: I am a bit concerned about rehashing the same issue over and over again, if there were other issues, but I just brought that up as a point of interest because we may want to review Hansard to find out some of the concerns or are we just going to localize on a particular topic such as Horton, or whatever? Sure.

MR. DEWOLFE: Mr. Chairman, I would suggest that this is an important issue.

MR. CHAIRMAN: Okay.

MR. DEWOLFE: I really believe, truly believe, that we should pursue it.

MR. CHAIRMAN: Is it agreed?

SOME HON. MEMBERS: It is agreed.

MR. CHAIRMAN: The motion is carried.

MS. STEVENS: That is all we have on the agenda so far. We are probably up to December 15th. So the members might consider when they want to take the Christmas break.

MR. HOLM: I do not think too many people are going to want to meet, for example, on December 22nd, at least I would move not. However, prior to our last meeting in December, or at the last meeting, we definitely have to lay out the schedule, if not before then, as to who the witnesses we would like and the issues that we would like to deal with for the next number of months because we certainly do not want to come back in January and start off again where we had this fall.

MR. CHAIRMAN: Sure, I agree, any other comments?

[Page 44]

MR. MORSE: I think that there is perhaps some interest in getting the Department of Economic Development in here and just going over the broad view of how they approach . . .

MR. CHAIRMAN: Issues such as Mac Timber.

MR. MORSE: Such as Mac Timber. There is also some interest in, as fallout from that, the Investment and Trade Division of the Department of Economic Development. They seem to travel the world regularly and I would be rather curious as to just what the return is for the Nova Scotia taxpayers.

MR. HOLM: Not to disagree with that, but all I am thinking too is that for example after Mr. Livingstone makes his presentation, it might be appropriate to then call forward a few other witnesses. Maybe I think it was Mr. MacKay who was chairman of the board of NSRL and so on at that time, and it might be appropriate to look at some of those other people. I am just thinking in terms of timing as to where things slot in.

MR. CHAIRMAN: Okay, is it agreed that the meeting adjourn?

It is agreed.

The meeting is adjourned.

[The committee adjourned at 10:06 a.m.]