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17 juin 1998
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Public Accounts Committee -- Wed., June 17, 1998

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8:00 A.M.


Mr. Howard Epstein


Mr. Hyland Fraser

MR. CHAIRMAN: Ladies and gentlemen, good morning. I am going to call the meeting of the Public Accounts Committee to order, even though we are still missing one member of the committee. I hope he will be able to join us in due course and isn't unduly delayed.

You will be aware that we have on the agenda for today's meeting, essentially one piece of business. This is a meeting in which we are going to hear from a witness. We have invited to be with us today Mr. Ralph Fiske. I would like to welcome Mr. Fiske. Accompanying him is his legal counsel, Bruce MacIntosh. I would like to welcome both of you to your appearance before this committee. As I understand it, Mr. Fiske, you intend to give us an introductory statement with respect to the matters we have asked you to speak to.

Before we do that, I would like to ask the members of the committee to introduce themselves to you so that you will know who we are dealing with here today. My name is Howard Epstein. I am a member of the Legislature from the district of Halifax Chebucto and I chair the Public Accounts Committee.

[The members introduced themselves.]

MR. CHAIRMAN: As I said, we are missing Mr. Wayne Gaudet, who I hope will be able to join us. I would ask if you would please start with your introductory statement.


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MR. RALPH FISKE: Mr. Chairman, members of the committee, as requested, I appear before you this morning to account for my tenure as Chairman of the Board and Acting Chief Executive Officer of the Nova Scotia Gaming Corporation. I had initially advised the Chairman that I did not wish to make an opening statement but would simply be responsive to the committee's inquiries. Upon reflection, I have decided it would be more helpful to the committee if I were to provide some context to the issues that surround my public service. I will provide a copy of my remarks when I have finished to assist you in your questioning.

I am not unaware of the political curiosity that surrounds my testimony nor of the differing agendas that will be at play today. Those are matters beyond my control. There is no good time to say what I am going to say. I can only tell you that, as best as I can, I will endeavour to answer your questions honestly or not at all. I am here out of respect for the authority of the House and I realize that all of you are too young to remember that I once sat in this House. I am also here to speak for the future integrity of the Gaming Corporation for reasons that will become clear later in my remarks.

Many of you know that I have always considered myself a Liberal. That has not changed today. That does not mean there are not some bumps along that road. That I would take the drastic step I did is hopefully indicative of how serious an issue I believe is at stake. The fact that I surrendered a much-needed and well-paid job without other prospects of employment is further evidence of the seriousness of my predicament. Regrettably, this was not an issue that allowed me to follow the tradition of going silently into the night. I am a Liberal who has always believed in public accountability.

I know few people and even fewer political leaders who make 10 out of 10 right choices every time. There are times when even good friends must agree to disagree. The relationship between our Gaming Corporation and the Metropolitan Entertainment Group - which I shall refer to as the Sheraton Group or the casino operators - is one such issue that I believe my good friends in the MacLellan Government misjudged. I am here today to explain why I think, despite its other accomplishments, the government of the day was fundamentally wrong in its handling of the casino contract issue.

A very brief history on gaming may be helpful. I hope it will be helpful. Regulation of the gaming industry is a relatively new phenomenon for Nova Scotians. I dare say there are today less than a handful of Nova Scotians who truly understand the complexities and risks that are the inevitable by-product of an internationally-based industry that is so hugely powerful, profitable and cash rich.

You all will have heard some of the horror stories that became synonymous with Nevada, commencing in the 1930's or even before. Those stories were real. The harsh lessons to be learned from those experiences remain equally applicable today. Huge sums of cash and a high risk, winner-take-all mentality, if left unregulated, can wreak havoc on a province that

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opens its borders to gambling without the appropriate checks and balances. Conversely, a professionally regulated gaming industry should provide no cause for such concerns.

To its credit, the Liberal Government of Nova Scotia foresaw those dangers back in 1994-95. Under the leadership of the Honourable Bernard Boudreau, proposals from gaming experts around the world were considered as part of the scheme to design a fail-safe system of gaming for Nova Scotia. Through extensive networking, Nova Scotia eventually designed a statutory regime that was specifically tailored to protect Nova Scotians from the more obvious temptations that can accompany a gaming industry.

Our Gaming Control Act says it all. Its mandate is to conduct, manage, control and regulate casinos in a socially responsible manner so as to increase economic activity and revenues to the province in a way that serves the best interests of Nova Scotians. Any decision made by the Gaming Corporation or the government must be scrutinized in that context. If a decision cannot meet those standards, it should not be made.

While other provinces selected other models, we, in Nova Scotia, chose to operate our casinos through a management contract with an applicant who we thought had world-wide gaming experience and resources. Through a competitive bidding process, we selected the Nevada-based Sheraton Group to run our casinos in conjunction with our Gaming Corporation.

Almost from day one, the relationship between the Gaming Corporation and the Sheraton Group was a strained one for reasons that I will explain. Their unique offer of a guaranteed minimum of $25 million per year for the first four years was a big selling point that set apart their bid from others. It was an extraordinary offer to a province that was very cash-strapped. The offer proved irresistible. In hindsight, I believe it was deliberately intended to distract us from an unannounced strategy that would later unfold.

The Sheraton Group proposal was distinctive in another respect. Rather than commencing immediately with a brand new permanent casino, the Sheraton Group requested that it be allowed to operate an interim casino at the existing Sheraton Hotel in Halifax for a limited time period, until a new, permanent casino could be designed, approved and constructed. At the time, some of us wondered why they did not simply commence immediately with construction of a permanent casino as other bidders had proposed. However, the province was shrewd enough to insist on a very stiff penalty clause of $10,000 - growing to $15,000 - per day for every day the completion date of the permanent casino was delayed. We thought at the time that would be sufficient financial penalty to avoid any bait and switch strategy.

Construction of a free-standing, independent casino is essential to the long-term profitability of any casino in Nova Scotia. Despite what the Sheraton Group would have us believe, everyone knowledgeable in the industry has recommended that we stay clear of any

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attempt to turn the present Sheraton Hotel into a permanent casino. What we did not know at the time, and later learned from Sheraton officials, was that the beautiful and strategically located Sheraton Hotel had been a significant financial drain on Sheraton Head Office, almost from the day it opened, until the day it converted to an interim casino when suddenly it became a lucrative operation. It is also significant that current-day profits from the hotel are retained entirely by the Sheraton Hotel and are not cost-shared with the province as profits from the casino. In that context, the allocation of income and expenses between the integrated casino operations and the hotel operations became a key area of potential controversy. Our auditors called those items related transactions.

That, in my opinion, was the genesis of the problems that were to develop between the Gaming Corporation and the Sheraton Group. In my personal opinion, that is how the bait and switch game began. Within several months of inking the contract for a permanent casino, the Sheraton Group was seeking extensions for construction of the permanent casino and suggesting that perhaps the province would be better served by a revised casino proposal within the existing hotel complex. As with any new partner, one always tries to start out with a trusting working relationship. We soon learned that trust and good faith were no substitutes for vigilance. We met delay after delay after delay followed by failure to disclose after failure to disclose and overlain by more than a few purported clerical errors.

We gradually came to realize that we were playing in the big leagues with some very heavy-handed players who openly professed to taking advantage of every unchallenged opportunity. If I had a nickel for every time I was told "Well, it was worth a try . . .", and it seemed that every time we tried to make a reasonable accommodation, their appetite simply increased for more. It is sometimes suggested that the best defence is a good offence. If that is so, then the casino operators are masters of that game. It was not long before there were behind-the-scenes rumours and innuendos that were designed to undermine the credibility of the corporation and myself as chair.

We were accused of delaying approvals and unnecessarily holding up the project. Given our desire to get the permanent casino in place as quickly as possible, that allegation was ironic. It simply was not true. We were also accused of micro-managing. That as well was a fabrication designed to discourage us from examining books and records that would disclose inappropriate allocation of revenue and expenses not authorized by the original operating agreement. Purported mistakes, ranging from $4.00 to $450,000 to $5.1 million are just a few examples, caught only through our vigilance, and when we uncovered such concerns, the Sheraton general manager had the audacity to suggest that I fire extraordinarily competent and inquisitive Sheila Butler. The allegation of micro-managing is a story unto itself, suffice it to say that we retained highly regarded lawyers, accountants, and gaming consultants to review our practises and assure us that our oversight of the casino operations was appropriate and as required by law.

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When we were accused by Mr. Mel Thomas of being more intrusive than even the Nevada Regulatory Authorities, we consulted an internationally renowned gaming consultant in the person of Mr. Ron Sheppherd, who was asked to specifically compare our practices with Nevada. Mr. Sheppherd is a retired RCMP officer. He was the senior officer in charge of gaming crime in Canada. He has both consulted for and set up casinos in other jurisdictions. His knowledge and expertise are sought by governments around the world. Following a detailed comparison of Nova Scotia and Nevada practices, he advised that our management practices were not nearly as intrusive as that of Nevada.

When that allegation fizzled, new whisper campaigns were begun and I believe that was when the Sheraton Group tried the oldest trick in the gaming industry - if you cannot beat the regulator, go around it. To my personal disappointment, some members of the Nova Scotia Government fell for that ploy for reasons that, to this day, remain inexplicable to me.

Under the Gaming Control Act, there is a clearly identified role for the Cabinet and the Minister of Finance to give directions to the Gaming Corporation on gaming issues. Although the Gaming Corporation was assured operational independence when it was first created, I always made a point of keeping the Minister of Finance fully informed of our general progress and intentions. Bernie Boudreau was particularly supportive in that respect. Although the Province of Nova Scotia was our single shareholder, Minister Boudreau continuously assured me that our board of directors should deal with the casino operators independently as we thought in the best interests of Nova Scotians without government interference. The honourable Bill Gillis, when he was appointed Minister of Finance, was similarly supportive - I am sure many of you who know Bill Gillis will understand when I say - although perhaps less interested than his predecessor in the intricacies of the gaming industry.

In the spring of 1997, people's positions began to change for reasons I still do not understand. By that time, our differences with the Sheraton Group had reached the point of impasse. By mid-April, we were in the midst of binding arbitration hearings to resolve our differences as required by the regional contract. I was confident that arbitration was the proper course of action. It was normal and it was low-risk. It was what business partners do when they disagree and wish to solve problems by means other than litigation. There were a significant number of unresolved disputes where we believe the taxpayers of Nova Scotia were not getting their fair share of gaming profits. At the centre of the controversy was the casino operators' ongoing procrastination in commencing construction of the permanent casino. Although their contrived legal argument was that the Gaming Corporation had no authority to approve anything other than an artist's conceptual drawings of the $97 million facility, I believe to this day that it was no more than a subterfuge to stall and wear down our resistance to the revised proposal of a hotel-based casino. As a back-up position, I believe they were, at a minimum, seeking an extension with waiver of the penalty, with sufficient time delay that would have a significant negative impact on our guaranteed four year cumulative payment of $100 million.

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On April 23, 1997, the parties were in the midst of a hearing before the arbitrator. Just prior to the commencement of the proceedings, Mr. Robbie MacKeigan arrived unannounced and uninvited. He advised that he had been retained as legal counsel for the Premier's Office. He asked for a brief adjournment and an opportunity to negotiate directly with the casino operators in our absence. The arbitrator granted a temporary adjournment, leaving legal counsel for the Gaming Corporation twiddling their thumbs with myself. While we were being sidelined, the lawyer from the Premier's Office was negotiating directly with the Sheraton Group on matters which he had never reviewed, and never discussed with us. That was the beginning of the end and what I later called, the neutering of the Gaming Corporation.

It got worse. For reasons that to this day remain inexplicable to me, our legal counsel, Mr. John Merrick, was later advised by Mr. Bob MacKay, Deputy Minister to Premier Savage, that the province wanted our board to accept a lopsided deal that had already been negotiated by Mr. MacKay and Mr. MacKeigan the preceding week, without our direct involvement. At our subsequent board meeting, our legal counsel gave his legal opinion that our board must ultimately accede to the wish of the province. The direct and indirect pressure that was exerted on our board of directors was palpable. In the end, because of Mr. MacKay's forceful persuasion on behalf of the Premier's Office, our board of directors begrudgingly passed a resolution approving the terms of settlement negotiated by lawyers acting under the direction of the Premier's Office. I was of the opinion that the net effect of those compromises cost the taxpayers of Nova Scotia a sum of money which I would conservatively estimate in the low $20 million, and that was May 20, 1997.

I confess it took some time to finalize those details and get the paperwork in place to forward to Cabinet. We bit our tongues, were disturbed by the erosion of our credibility with the casino operators, but said nothing publicly. We recognized that the Act allowed Cabinet to tell us what to do. But Section 24(1)(a) of the Act also requires any such Cabinet directive to be consistent with the purpose and intent of the Act. Although it was suggested by legal counsel that we had little choice, I now recognize that we did. We could have required a formal directive from Cabinet, but we succumbed.

What was most troublesome to members of the board was the total absence of any bona fide explanation for caving in to the pressure tactics from the Nevada-based Sheraton Group. We did not know who we were battling, or why. No reasons were given us, other than that Cabinet wanted the construction issue to go away and peace restored between the parties. When all the subtleties and nuances were stripped away, we were simply being told to do as we were told. To our discredit, we did so, despite the absence of any grounds known to us that would place such decision within the public interest parameters we were to follow under the Act.

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It is important to highlight at this juncture that I make no suggestion of impropriety or an absence of such bona fide reasons. It is simply that we were cut out of the loop and provided no explanation that would have permitted us to comply with such directives with integrity, and in a manner we knew to be compatible with the Act.

Time passed without the matter being brought before the outgoing Cabinet. A new Premier was appointed and a new Cabinet formed. To make a long story shorter, at his swearing-in ceremony to which I had been invited, I was thanked by the new Premier for my reluctance to support what had by then become known as the Boudreau deal. At an introductory meeting approximately a week later, with Dr. Gillis and the Premier, I was again assured operational independence by the Premier and asked simply to keep the Minister of Finance informed of our actions on behalf of the people of Nova Scotia. I thanked the Premier for that confidence and assured him we would do our best. That was the last conversation I had with Premier MacLellan on this matter.

I thought we were back on track again. However, we were advised by our legal counsel that it was still necessary for the May 20th terms of settlement that had been so reluctantly approved by our board, to be formally forwarded to Cabinet for its consideration. My views on those terms of settlement were already well known. Staff from Planning and Priorities committee advised me that they were opposed to the deal. The Minister of Finance, Bill Gillis, told me he would not be taking a positive recommendation to Cabinet. I was also advised that David Thompson, the new Deputy Minister and right-hand of Premier MacLellan, was opposed to the Boudreau deal. By then, I had every reason to believe that the new Government of Premier MacLellan was restoring the credibility and authority of the Gaming Corporation, and that Cabinet would reject the May 20th terms of settlement.

You cannot begin to imagine my reaction when I received a call from the Premier's Office later in September 1997, advising me that Cabinet had, in fact, approved the May 20th terms of settlement. This was completely contrary to all discussions with my minister, Bill Gillis. I was told by Mr. Thompson not only to sign the deal and put it to bed, but to give the Sheraton anything else that it required, if that is what it took to put the matter to rest.

Once again, the alleged Cabinet decision was inexplicable to me. No explanation was provided. I was that same day told by the Minister of Finance that Cabinet solidarity prevented him from informing me of the reasons for this decision by Cabinet. That reticence was not typical of my working relationship with Minister Gillis. I knew of no one within Cabinet who has been supporting the Boudreau deal. Certainly, no one in Cabinet, other than the Minister of Finance, had consulted with me or my staff on any of the details of the deal. The history of the May 20th terms of settlement was well known to Minister Gillis, and I was assured that the prior approval of our board would not be misunderstood by Cabinet. Yet, once again, inexplicably, forces were at work that I did not understand and that were not being explained to me. Subsequent conversations with other Cabinet Ministers proved no more enlightening.

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That is the essence of my saga of public service on the Gaming Corporation. To this day, it remains inexplicable to me how the casino operators could so successfully do an end run around the regulatory body to which they were accountable, both by Statute and by legally binding contracts.

[8:30 a.m.]

I would be less than honest if I did not admit my disappointment in the way that certain senior officials of the Government of Nova Scotia allowed themselves to be used in this manner. But I believe them to be good people, and I attribute no motive to them. Perhaps like me, they learned the hard way that naivety and generosity are not attributes that serve one well in dealing with the gaming industry.

Although there are undoubtedly some in this House who will try to make political hay of that misjudgement, in my opinion that is not the real issue. Governments are forced to make hundreds of decisions every week, and not all of them will be good, and that is a fact of life. Instead, the real issue is the operational independence of the Gaming Corporation and the apparent reluctance of the casino operators to deal directly and openly with the Gaming Corporation in accordance with its legal and contractual obligations.

The Gaming Corporation is in its infancy. If this example is to become the established pattern for making gaming decisions in Nova Scotia, history tells me we have a very rocky road ahead of us. Mark my words, the Nevada-based casino operators play hard and play fast, as is their right. As they said to me so many times when our investigations disclosed questionable accounting practices with respect to allocation of revenues and expenses, anything is worth a try.

The purpose of my remarks is to look forward and not back. What is done, is done. The experience of other jurisdictions tells us that we must insulate and protect the gaming industry and the Gaming Corporation. My disappointment with good friends and those with judgement I generally respect will pass. My battle is not with those who got caught in a power play, but with the casino operators who deliberately thumbed their nose at the Gaming Corporation created by this Legislature.

Think about it. Despite the clear provisions of Section 33 of the Act, the Sheraton Group had the audacity to issue a gag order directing all its Nova Scotia employees to refrain from any communication with the Gaming Corporation. Despite the mandatory provisions of both the Criminal Code of Canada and the Gaming Control Act of Nova Scotia, they froze us out and refused to provide the accountability required by the laws passed by this Legislature. To add insult to the gag order injury, the May 20th terms of settlement required that, "the parties will agree to a joint press release concerning settlement of all outstanding issues . . . and there will be no discussions with the media which will contradict the agreed

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press release, and every effort will be made to avoid discussions in the media concerning the Settlement."

That, Mr. Chairman, and members of the committee, is not how I do public service. I could not continue to serve and protect the interests of Nova Scotians, as required by law, under those types of circumstances. So I resigned, and gave my reasons for resigning. I have attached a copy of my resignation letter to this statement which reasons, by the way, did not include enjoying my golden years, as one government spokesperson had the gall to suggest.

In closing, I want to issue a challenge to this committee and its House of Assembly. I am here because I believe the people of Nova Scotia need and deserve a Gaming Corporation that is completely transparent, autonomous, and accountable. There are at least two things that this House can do that will further that goal. Firstly, as a symbolic gesture, get rid of the Oath of Confidentiality referred to in the Act. I can tell you from personal observation that there is no more need for an oath in the Gaming Corporation than there is on a school board, a hospital board, a Provincial Court bench or a government bench. Responsibility, not secrecy, should be the test of such service. An Oath of Office, not an Oath of Confidentiality, will convey the subtle distinction that fresh air and light, not shrouds of secrecy, are the best protections in the gaming industry.

My other suggestion is to amend the Gaming Control Act to better define and restrict the circumstances under which the Cabinet of the day can intervene and overturn the operational decisions of the Gaming Corporation. As the democratically elected representatives of the people, I believe that such override power must ultimately reside with members of this House. But any exercise of such power should be open, transparent, and justified in the context of the Act's purpose and intent. There is nothing wrong with Cabinet overruling a decision of the Gaming Corporation, if it is done openly by Cabinet, without behind-the-scenes pressure on the board or individual board members.

Simply as a starting point for discussion, there is at least one existing model you might wish to examine. The mechanism created by this House which allows the Minister of Justice to publicly overrule what is otherwise the independence of the Director of Public Prosecutions, is a possible model. As I understand it, while the Director of Public Prosecutions remains operationally independent, the minister can formally intervene so long as such intervention is direct, transparent, and accountable to this House.

Finally, I urge this committee and this House to encourage the immediate appointment of a new Chairman of the Gaming Corporation, someone who would demand the standards of independence and accountability that should be expected of such position. The appointment of non-government employees as board members is a further requirement, if that independence is to be achieved. And in making that suggestion, I cast no aspersions on the very competent and dedicated young public servants who serve on our board under the guidance and direction of their minister.

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I finish where I started. Regulation of the gaming industry should not be a political playground. It is a very complex and challenging chess game. It calls for the very best business leadership and political acumen that Nova Scotia can provide, someone who has sufficient trust of the House to be granted operational independence, someone who has the shrewdness to do successful battle with every experienced big business.

Mr. Chairman, one of my biggest regrets is that I was unable to meet that challenge personally. I hope this House will make that task easier for my successor. And I thank you Mr. Chairman and members of the committee, I will attempt to answer any questions you may have.

MR. CHAIRMAN: Mr. Fiske, I would like to thank you for your introductory statement. The procedure now will be to turn to questions from members of the committee. It is my intention to offer the opportunity to all members of the committee to ask any questions that they might have. I will start with Mr. Dexter.

MR. DARRELL DEXTER: Thank you very much Mr. Chairman. Your appearance here before the committee, Mr. Fiske, is one that, as you mentioned, sparked great interest for any number of reasons, not the least of which was that many of the questions surrounding why you left took on the character of a riddle shrouded in a mystery. We are very pleased to have you here to address some of those questions.

It's tough to know where to begin, but I think I'm going to begin where you ended, which was calling for a new chairman of the corporation, is it the case that you believe that there is not now operational independence of the corporation?

MR. FISKE: Mr. Dexter, I think I'm making my judgement in main based on what I have seen in the media, and press releases, that sort of thing. The comments made by the chair leads me to believe that she's not independent in any way, shape or form, because those comments are totally foreign, to me, because I know Miss Gordon, having worked with her for two and a half years. Those comments, as I say, are foreign, insofar as our relationship was concerned. She did not have those views with me, in two and one-half years and so they come as a great surprise to me. She fought for independence with me for two and one-half years and was quite annoyed at the results of that. I had hoped that she would become chairman and replace me and that she would be able to change the ways. Obviously, that hasn't happened. She at one stage had a board meeting, probably in September, and in discussing this whole matter, she disagreed with the direction that we were going and rather than give all of this to the Sheraton, we should be going to war with them. Those were her words. So, her comments since she has become chairman just don't seem to fit.

MR. DEXTER: Going to war with the Sheraton is a complex process because there appears to be so many ways in which this deal was structured to allow Sheraton to bring money out of the casino operation and into their hotel operation. Certainly one that has been

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talked about a great deal is the whole question of just the cost of rental space within the Sheraton Hotel, which I believe was somewhere in the vicinity of $65 or $70 a square foot compared to what was a market rate which would be one-sixth of that.

Was it part of your responsibility to investigate that kind of detail and say, no, this is essentially a way in which the province is being cheated out of its revenues by the corporation siphoning the money out of the casino profits?

MR. FISKE: Mr. Dexter, you are speaking of the lease, which was between the casino and the hotel. Under the terms of the agreement, the corporation had to approve that lease. We sought a copy of the lease for some time. We were told that the lease would be in the value of $1.2 million per annum. We believed it to be absolutely excessive when rates in that area at that time, as we were advised by a local consultant who is knowledgeable with such matters, that maybe the rate should have been $10 or $12 a square foot and as you say, the deal that had been made was much higher than that. We eventually got the lease and the lease was already signed, which actually didn't mean very much but nevertheless it was one of the items that we had disagreements with. At one point, the Sheraton had agreed to reduce it from $1.1 million to $760,000, if my memory serves me correct. The actual settlement that our lawyer arranged was $900,000, so there is $140,000 or $120,000, whatever the difference is, that was given away. But we took that item to arbitration, I mean, that was our only alternative along with many other items. So that is the best response I can give.

MR. DEXTER: Just for better clarity, could you point out other examples of where this money was siphoned out of the casino and into the hotel side of the operations?

MR. FISKE: I think that I have to say that I have been off work now for several months. I would not want to get into detailed items like that because I don't have the list of those items. There are long lists on file within the organization. I am sure if Sheila Butler were permitted that the information is there and you would have those details.

MR. DEXTER: You mentioned discrepancies and you talked about them being as low as $4.00 but as high, in a couple of examples, as $450,000 and then you said $5.1 million. Those are pretty big numbers, what were they in regard to?

MR. FISKE: Well, again, it was the figures that had stuck in my mind and therefore I related to them. Again, I would encourage you to obtain that information from Sheila Butler. The information is well recorded within the corporation files and I think that it should come from that source.

MR. DEXTER: The arrival of Mr. MacKeigan, which you talked about, that was the arbitration process that we have talked about with respect to the lease?

MR. FISKE: Yes, that would have been, if memory serves me, April 23rd, I believe.

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MR. DEXTER: At that time, what justification was given to you for his arrival and taking over of the negotiations or of the arbitration procedure?

MR. FISKE: Mr. Dexter, he didn't take over the arbitration procedure. Justice Stevenson was very much in charge of the arbitration procedure. He simply arrived and requested that he be permitted to speak to the Sheraton solicitor and in that regard the solicitors asked Justice Stevenson if he would agree to a delay in the procedure to permit the solicitors to discuss a possible solution to the items under arbitration.

What actually happened is that Mr. MacKeigan and the Sheraton solicitor, Larry Hayes and the Sheraton solicitor from Las Vegas, Mr. Roberto DeSoto went down the corridor and spent the next hour, hour and one-half or so and attempted to find solutions. They didn't totally at that time and so we got back into arbitration and we continued for maybe a couple of hours then adjourned. At that point, it was agreed that we would take a period of maybe one month to attempt to discuss other possible solutions to these many items which would take us up to the famous May 20th. Of course, it was between the April and the May period that solicitors attempted to find solutions but were unable to. Maybe a week prior to the May 20th planned arbitration meetings, we were directed to simply approve the deal and cancel arbitration.

The government did not want arbitration proceedings to continue, even though at that stage our solicitor felt that we had a good chance of winning. But the business of winning wasn't everything. We simply wanted the decision to be made by the arbitrator and settle all of these items that were under discussion and were not agreeing with.

MR. DEXTER: I just want to make sure I am clear on this. After April, the solicitors go away, they begin the negotiations and are reporting back to you . . .

MR. FISKE: No, no, not to me, to Mr. MacKay of the Premier's Office.

MR. CHAIRMAN: I am sorry, before you proceed with your next question or the answer, I am sorry if I have unduly cut you off - George Archibald, did you have a point that you wanted to raise with me?

MR. GEORGE ARCHIBALD: I am not quite familiar with how you are doing the questioning in here. How much time does each Party have during the questioning and when do we get a turn?

MR. CHAIRMAN: Everyone, I think I said, would be afforded an opportunity to ask questions. Normally I wouldn't have expected individual questioning to go on quite this long. It is only the nature of the density of the material that was presented in the opening statement that is tempting me to allow it to go on a little bit longer. We are here until 10:00 a.m. and it is my intention to . . .

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MR. ARCHIBALD: I thought you would be a little more organized and say, you have 20 minutes and your Party has 20 minutes and you have 30 seconds.

MR. CHAIRMAN: In fact, 20 minutes is exactly the number of minutes I had in mind. You are a mind-reader.

MR. ARCHIBALD: I doubt it.

MR. CHAIRMAN: Back to Mr. Dexter's question.

MR. DEXTER: Realizing that time is short, do you feel that the activities that the Sheraton took in going around the Gaming Corporation have so violated the contract agreement that the province would now be in a position to repudiate the contract?

MR. FISKE: I am sorry, Mr. Dexter, the last part?

MR. DEXTER: The activities that have taken place by the Sheraton in all of these, over the time that you were in the capacity you were in, do you believe that the result of those actions would allow the province to repudiate the contract?

MR. FISKE: Allow the province to repudiate the contract, do you mean to get out of it?


MR. FISKE: No, I don't. Considering where the direction came from, they must have felt they were happy with the contract. Why would they now want to get out of this? It is totally contrary . . .

MR. DEXTER: Well, you have talked about things like the delay by Sheraton to put forward the designs, the number of discrepancies and violations, the gag order on their employees. I suppose you can't blame them for the fact that they haven't paid the penalty, that was a decision that was made by the government, but there is a series of things that appear to either be violations of the Act or violations of the agreement that seem to be fundamental breaches of the contract.

MR. FISKE: Yes, that is correct.

MR. DEXTER: So, if that is the case, in your opinion, could the province simply say, that contract is at an end and proceed from that basis?

MR. FISKE: Well, I am not a lawyer; that is a question that you perhaps should put to your legal friends. I would give you poor advice maybe.

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MR. DEXTER: Is that the end of my turn?

MR. CHAIRMAN: For now. Certainly we might get the opportunity to come back. Was it Mr. Archibald or Mr. LeBlanc who wished to take it up?

MR. ARCHIBALD: Prior to the ITT Sheraton arriving in Halifax with a casino, did they have a lot of casino experience elsewhere in North America?

MR. FISKE: No, they did not. Their promotional activity will show that they had a number of casinos, but they were very small casinos generally called in the industry parlour casinos. They would be a small room in a casino in Cairo or some such exotic place; some of the islands in the south would have a small casino. But they were very small, maybe 8 or 10 tables sort of thing. It was only a day or two prior to the announcement of the awarding of the Nova Scotia casinos to Sheraton that ITT Sheraton purchased Caesar's World operations, which are very highly-regarded and highly-respected operations in North America. But prior to that, they had very minimal experience.

MR. ARCHIBALD: So this was their first real adventure in the casino business. You indicated that trust and good faith were out in dealing with the casino people and there were behind-the-scenes problems. One of the things that has been puzzling me for a long time is, who the dickens is looking after the interests of the consumer who is going into that casino? In Nevada, there is a very independent gaming commission that watches the rules and watches the odds of the games and watches the odds of the blackjack tables, but it is my understanding - and I have never been in the place - that the odds in favour of the casino in Nova Scotia are different than the odds in Las Vegas; the lottery terminals they have in there have different odds in favour of the casino.

I am wondering, who is looking after the interests of Nova Scotians? When they sit down at the table, is there anybody on their side, or is it strictly up to the ITT Sheraton, if they want to play fair?

MR. FISKE: If you could deal with the slot machines first, Mr. Archibald, the slot machines are set to make certain rewards.

MR. ARCHIBALD: Which is lower than it is in Las Vegas?

MR. FISKE: Yes, it is. They will tell you that the reason it is lower is because there is not the competition here. Indeed, there are no casinos across the street from them and, therefore, they can retain higher percentages of the wager here than they can in Las Vegas. We had great discussions about that on many occasions. I would just advise you that we do have a regulatory body, now called the Alcohol and Gaming Authority, and they test those machines to ensure that they are paying out the set rewards because there is a minimum

[Page 15]

amount. So I would have to say that it was the Gaming Commission that would tend to regulate that sort of thing.

MR. ARCHIBALD: They probably do not have any more luck than you did dealing with government and the casino?

MR. FISKE: I would have to leave that to them to respond.

MR. ARCHIBALD: You indicated that Bernie Boudreau, who I watched in this Legislature and, you know, this was Bernie's baby from the start. Bernie wanted a casino. You indicated that you did not notice any political interference from Bernie, but if there was not any political interference from Bernie, then why, when the casino continually missed their opportunity to build, why were they not fined? They were supposed to pay a penalty and they never paid a cent. They seemed to sort of thumb their nose at you and say I do not need to pay attention to the commission because we have friends in Cabinet.

MR. FISKE: I will resist comment on the last couple of your words. There is no question that we had great difficulty, as I have said, in bringing them to the decision to get on with their construction. I have related to that in my comments. That is why we eventually were able to force them to arbitration and it was only when we, like a day before the arbitration was to proceed, I was called to the Premier's Office and told that they wanted us to stop the arbitration procedure and they eventually succeeded in killing that arbitration procedure.

During a period of several months, you are quite correct, that the construction was delayed and delayed and delayed. They kept providing us with alternative plans, two as a matter of fact, and pleading for more time until we eventually said, look, this is the end. We are going to go for arbitration. Even after we submitted everything to arbitration, they delayed the arbitration process for a number of weeks because they would not agree with anybody that we suggested as an arbitrator. So it was delay, delay, delay. That was their modus operandi.

MR. ARCHIBALD: The casino the way it is set up, their relationship with the hotel, and they have shifted a lot of the operating expense of the hotel onto the casino, is there any way that the ITT Sheraton could lose money running this casino?

MR. FISKE: No, I do not think so, no. You are asking whether they can lose money?


MR. FISKE: No, I do not believe so.

[Page 16]

MR. ARCHIBALD: But if the rules were strictly adhered to and this was simply a casino, free-standing, the way they said they were going to build it in the first place, with thousands of tourists arriving from around the world. You see, they did not build what they said they were going to and there is no penalty and I do not understand, your corporation did not like it much, but there seemed to be no political will on behalf of the Government of Nova Scotia to enforce it. The proposal they put forward is not what we have and not what they are building now. The only people who are smiling are the Sheraton people. If there was not political influence on the part of the former Minister of Finance, then I do not know, I cannot figure any other explanation for ITT Sheraton being able to do exactly what they wished and disregard the wants and the needs of Nova Scotians.

[9:00 a.m.]

MR. FISKE: I cannot add much to what you are suggesting other than what I have already said in that regard. There is no question that when we finally reached a point where a decision was going to be had on this whole matter, yea or nay through arbitration, the government interfered and gave direction. The Sheraton went around the corporation and they were not turned back, as I have said.


MR. ERNEST FAGE: As a member not in the Legislature and a Nova Scotian through the process the last couple of years, Mr. Fiske, the whole episode as it unfolded in the media certainly made one wonder as a member of the public because what seemed to be facing Nova Scotians was a toothless Act or regulation and questionable judgement at times by elected political officials. I would like to return to the first delay and the announcement of it. The delay, was it issued by the Nova Scotia Gaming Corporation, the Nova Scotia Government, or the Sheraton Corporation?

MR. FISKE: The first delay was given in October 1995, of six months. As it happens, that delay was announced by Minister Boudreau, not by the corporation. As I understand, it happened in a scrum, if you will, coming from a Cabinet meeting and he made the announcement and that is how it happened.

MR. FAGE: So the Gaming Corporation did not announce the delay or decide on the delay? They heard it from the minister, from a Cabinet scrum?

MR. FISKE: They heard the final decision from the minister, yes, but I have to tell you, we regretted that we had not had a chance to make the final decision. Everyone on the board regretted that event, but it is a fact that we had had lots of discussions with the Sheraton people. We were, quite frankly, leaning toward an extension, but only if an extension fee was put in place.

[Page 17]

MR. FAGE: I think that highlights the point on the delay and the penalty and coming back to the Act and the authority of the Gaming Corporation when Cabinet approved and announced that rather than the Gaming Corporation. What was the significance of that delay with no penalty? Was it to Sheraton's financial advantage to have those delays, not only the monetary but when it comes to construction of the free-standing casino, if Sheraton was able to pay no penalty to that agreement point in time where it would be built, was there a financial advantage for them for that to occur?

MR. FISKE: There is no question that each day's delay, each month's delay, is very meaningful to the Sheraton; so, no question that each delay they got and each delay they sought was in their interests, not in the interests of Nova Scotia.

MR. FAGE: So as that delay went on and eventually you came to the arbitration agreement and that fateful day when the Premier's assistant and legal counsel came to negotiate on the Gaming Corporation's behalf, was that ever discussed, before or after, with you or the Gaming Corporation by those elected officials, being the minister, Bernie, or Premier Savage?

MR. FISKE: Mr. Fage, I missed that.

MR. FAGE: Premier Savage or Bernie Boudreau at that point, when arbitration hearings were going, before they began and after they began, were there any instructions directly from those two officials of Cabinet to you with regard to that arbitration process?

MR. FISKE: There were instructions from the Premier as to his and the Cabinet's wishes which was to cancel the arbitration and provide all of these items to the Sheraton.

MR. FAGE: In the interests of Nova Scotia taxpayers, and certainly watching that, myself, unfold in the papers at that time, that seemed highly irregular that a deal at any cost in favour of the Sheraton promoted by Cabinet, rather than an arm's-length body which was the Nova Scotia Gaming Corporation, has certainly pulled into question the integrity of the system. What would your comments be in that regard that you were not charged to fulfil that obligation with regard to arbitration?

MR. FISKE: I think I made it pretty clear in my statement here as to what I think of that. I would just come back to you and say that, hopefully, you and your colleagues will consider a possible solution to that because if you don't, then the future is pretty bleak and gaming in Nova Scotia for our people, there will never be a benefit. Some people think there never will be anyway but I can assure you, there never will be if this is allowed to go on and we are hung out there in the way we have just experienced. Halifax, Nova Scotia is very important to all of us and we mustn't allow this to become another community in the State of Nevada, be it Vegas or many others. That is what it will become if this is permitted to go on. If we go into the future on this basis, then it is over.

[Page 18]

MR. FAGE: There was one other official during that process, and obviously there was change in leadership bids and other things going on in the political realm at that time, but I believe one of the individuals, Mr. Hayes, was connected with Bernie Boudreau's failed attempt to become Leader of the Liberal Party and he was a fund-raiser, or in some capacity with that campaign, and was involved in the negotiations with Sheraton. Whether it is perception or not, that certainly is of concern to, I think, many Nova Scotians and the integrity of the process.

MR. FISKE: I would only say that Mr. Hayes was a solicitor for the Sheraton. I wouldn't go beyond that in any way.

MR. FAGE: Thank you.

MR. CHAIRMAN: The Conservatives have four more minutes, if Mr. LeBlanc would like to speak, and then 20 minutes will be available to your Party.

MR. NEIL LEBLANC: I will make a few comments, one of which is I agree with your comments that the Gaming Act itself has to be reviewed. It is obvious from your comments that the system has failed and through interventions of people, obviously, this is going to unfold and perhaps some pointed questions will be asked as to who interfered and perhaps what their rationale was. I can appreciate your concerns, as chairman, trying to understand why decisions were made and you were not part of the loop.

I want to go back to you mentioning Mr. Hayes. You said Mr. Hayes was a solicitor for the Sheraton?


MR. LEBLANC: This is the same Mr. Hayes that we think he was a heavy backer of Bernie Boudreau during his leadership campaign and so forth, so this is the individual that was representing the Sheraton?

MR. FISKE: Mr. Hayes was a solicitor for the Sheraton.

MR. LEBLANC: That seems very interesting when you consider the close relationship with Bernie Boudreau. Bernie was dealing for the government in ensuring that the government was handling dealings with the Sheraton at arm's length, and we have a close confidant to Bernie. Obviously, the Sheraton knew who they were hiring in order to get people to get the Sheraton's point across. This is all supposition but I guess the Sheraton, like you mentioned before, are very well placed people, they know how to play hard ball and they didn't hire the first guy that they came across in the Yellow Pages when they came to Nova Scotia to hire a lawyer, and that is pretty obvious. What concerns me even more is that the regulations are not tight enough to prevent this type of thing from happening.

[Page 19]

I go back to the original deal and when you came in, was the basic structure of the deal already negotiated before you became chairman of the board?

MR. FISKE: For all intents and purposes it was. The new board was given, in February 1995, a copy of the letter of understanding or whatever the appropriate title was and asked to be a party and represent the corporation, the province, in preparing the eventual documents, the eventual contracts that we signed on May 31, 1995.

MR. LEBLANC: The reason I am asking that question is that it is obvious from the concerns that you have mentioned about the accounting practices of Sheraton and the fact that they have the casino in-house leads to unbelievable complications of trying to bring about control. If I heard your comments, you were saying that the corporation was trying to insert expenses into the casino operation and when you brought it to light, they said, well, it was worth a try. If I remember your comments, is that correct?


MR. LEBLANC: So, I am sure if you go and compare Nova Scotia to other jurisdictions, the control that they would have on the physical financial operations of casinos must be extremely tight compared to Nova Scotia because of the fact that they get a percentage of the tax revenue, a sharing of the profits or whatever in those casinos. Is that right or wrong? I know I am running out of time and I will finish on that question.

MR. FISKE: The procedures in place in Nova Scotia were established as a result of discussions with the gentleman sitting in back of me. I would just like to say that it was a very, very pleasant experience in working with that gentleman. He was very helpful.

MR. CHAIRMAN: For purposes of the transcript, he is referring to the Auditor General.

MR. FISKE: Our procedures here, as it happened, after discussion with other jurisdictions were somewhat similar. I can tell you that in some jurisdictions there exists similar difficulties that Nova Scotia experienced but different; similar but different. So, this is a constant ever-flowing situation and we have to be alert at all times. For them to say, no, we are not going to give you that information and this would go on and off for periods of time, you can't function in that business with that attitude. So the coming of the arbitration was under the terms of the agreements and that was the alternative that we went to, to find a solution to this attitude and this approach. We had all kinds of opinions from accountants, lawyers, each and every one saying that under the terms of our Act, under the terms of the Criminal Code and so on and so forth, we were doing what was appropriate for us to do.

MR. LEBLANC: You lost that at the arbitration?

[Page 20]

MR. FISKE: Who is to say? I don't know. If I listened to what is being said by the present chairman, then everything is lovely, it is all warm and fuzzy. I hope it is. But after this substantial giveaway, one has to wonder.

MR. CHAIRMAN: Let me move now to the next Party and ask if any members there have questions.

I see a signal from Mr. MacKinnon.

HON. RUSSELL MACKINNON: Mr. Fiske, in your opening statement you made reference to a number of issues. You have also qualified that for the most part it was hearsay, nothing substantive, nothing conclusive. I want to be quite specific in terms of your relationship with the government. The Act as I understand it, essentially states that this corporation is an agent of the government, and is responsible to report to the Minister of Finance and according to the respective sections, do such things in respect to lottery schemes as the Minister or the Governor in Council may from time to time require. So, essentially, you are not a regulatory agency, per se, at arm's length from the government, are you? Just a simple yes or no.

MR. FISKE: No, we cannot be considered a regulatory body.

MR. MACKINNON: Thank you.

MR. FISKE: But we are part of the whole regulatory body in the sense that . . .

MR. MACKINNON: I realize that. I want to be quite specific though.

MR. FISKE: Sure, you are right.

MR. MACKINNON: Have you advocated gambling yourself, gambling casinos in Nova Scotia prior to?

MR. FISKE: Have I? Yes.

MR. MACKINNON: Have you ever sought to, or solicited, or made any effort to secure a casino for any of your hotel or motel establishments?

MR. FISKE: No, I did not. I did consider, when the proposals were called I considered responding, but didn't.

MR. MACKINNON: Is there any particular reason?

[Page 21]

MR. FISKE: Yes, very personal, very private and it has nothing to do with this in any way, shape or form.

MR. MACKINNON: Would it be related to business? Was it a business decision?

MR. FISKE: Well, it was related to a place of operation in which I had a commitment for space and it was cancelled.

MR. MACKINNON: I guess in fairness to all members of the committee, I raise that because of your observation that the Sheraton, as I interpret from your comments, was trying to find some way of subsidizing a drain from head office. So, what is good for the goose is good for the gander, but I am going to move on to the next set of questions.

You have taken trips to Las Vegas?


MR. MACKINNON: Have you ever travelled with any Cabinet Ministers?



MR. MACKINNON: Bernie Boudreau.

MR. MACKINNON: I see. Have you ever taken any trips without Cabinet Ministers?


MR. MACKINNON: Have you ever invited any other Cabinet Ministers other than Mr. Boudreau?

MR. FISKE: No, I have not.

MR. MACKINNON: You haven't?

MR. FISKE: No, I have not.

MR. MACKINNON: You are sure on that?

MR. FISKE: Absolutely sure.

[Page 22]

MR. MACKINNON: Have you ever received a letter from the former Minister of Finance, the honourable William Gillis, directing the Gaming Corporation to be open and accountable and to disregard the gag order that you so referred to?

MR. FISKE: No, I had no such letter.

MR. MACKINNON: You don't recall having such a letter?

MR. FISKE: No. By the way, Dr. Gillis, during that period, up to the time of the new MacLellan Government, was not in the loop in any way, shape or form. He had no knowledge . . .

MR. MACKINNON: Was he a member of Cabinet?

MR. FISKE: He was a member of Cabinet. It was never discussed in Cabinet as far as Dr. Gillis was concerned.

MR. MACKINNON: How would you know what was discussed in Cabinet?

MR. FISKE: Dr. Gillis told me. I am just telling you what Dr. Gillis told me. He was not in the loop, and I can tell you that it was a very difficult time for Dr. Gillis to be functioning in that fashion.

MR. MACKINNON: So, again, we are led to believe, or expected to accept the fact that a Minister of the Crown, a senior Minister of the Crown, the Minister of Finance, is discussing things with a non-member of the Cabinet on such a sensitive matter. You were a member of Cabinet yourself at one time. Is that correct?

MR. FISKE: That is right, yes, decades ago.

MR. MACKINNON: So, you know the certain conventions and responsibilities adhered to that oath of office? Correct?


MR. MACKINNON: So, why would you purport to think that other members of Cabinet would be any less honourable?

MR. FISKE: I am not implying that any minister is any less honourable in any way, shape or form, and in particular Dr. Gillis.

[Page 23]

MR. MACKINNON: With all due respect through you, Mr. Chairman. When we are dealing with innuendo and hearsay, I have discussed with some of the other members on this particular board, I mean are they less honourable than you are?

MR. CHAIRMAN: I am having a little trouble understanding the question.

MR. MACKINNON: I guess where I am coming from, he is . . .

MR. CHAIRMAN: I have to follow this. I do not understand the question.

MR. MACKINNON: It goes right to the essence of accountability and his whole preamble was to the question of integrity and doing what is in the best interests of all Nova Scotians.

Has there been any disagreements at the board level in terms of what the government has been doing? Are there any records of any meetings where the board has openly stated that the government is doing things wrong in terms of the Sheraton Casino deal? They should be public records if you are talking about . . .

MR. FISKE: Well, sure, and you should seek those records.

MR. MACKINNON: You were chairman at the time, is there any evidence to support that?

MR. FISKE: Well, you should seek those records.

MR. MACKINNON: No, I'm asking you, you were chairman, and you volunteered to come before the committee.

MR. FISKE: I think that your question would be well answered if you sought those records and had discussions with others who were involved.

MR. CHAIRMAN: I think the question, Mr. Fiske, might be can you remember anything that the commission might have done at the time, is that it?

MR. FISKE: Well, I can remember many instances where members of the board, and in particular the May 20th meeting where, and I mentioned that even Dara Gordon, now chairman of the organization, said this is something we should not be doing. We should be going to war rather than doing this with this organization.

MR. MACKINNON: Would you agree that other members of the board - or the corporation as you so refer - were good, honourable, diligent, capable members of that board?

[Page 24]

MR. FISKE: Yes. I have to tell you this, Mr. MacKinnon, . . .

MR. MACKINNON: I guess my question then is why would they not do as you have suggested.

MR. FISKE: That's entirely up to them, that's not . . .

MR. CHAIRMAN: We have to hear the full answer to the question.

MR. MACKINNON: I apologize.

MR. FISKE: I didn't rule each and every individual on that board, they voted as they wished to vote.

MR. MACKINNON: They weren't coerced?

MR. FISKE: Well, no they weren't coerced, certainly not by me, obviously. Whether they were coerced by someone else, I have no idea.

MR. MACKINNON: But you have no evidence to support any coercion.

MR. FISKE: No. I can tell you this, and it is indicative of the comments that I made in my statement, that the two members of the board who were employees of the Department of Finance, both very able and capable individuals, came there and voted very quickly, and how else could they do otherwise?

MR. MACKINNON: In response to your own comments, stand up and be counted.

MR. FISKE: I am not giving you the vote of that particular motion to accept the direction of the Cabinet, but . . .


MR. FISKE: I am telling you that it was passed, because we were being directed, and under the terms of the Act, the decision was made to approve it.

MR. MACKINNON: So you followed the Act then, is what you are telling me?

MR. FISKE: That is what I am telling you.

MR. MACKINNON: So you did exactly what you were hired to do.

[Page 25]

MR. FISKE: I am telling you that we approved the direction of the government, and I am telling you that I believe, as I have gone to some pains to show, that it was the wrong decision.

HON. WAYNE GAUDET: Mr. Chairman, I want to focus on the role of the Nova Scotia Gaming Corporation here, because I want to lead on to the deal that was struck with ITT Sheraton. I guess my first question would be, in regard to the Gaming Corporation, does the corporation play a regulatory role in regulating casinos in Nova Scotia?

MR. FISKE: It does to the extent that the Alcohol and Gaming Authority depends on the corporation to ensure that certain procedures are done by the corporation, and they rely on certain of our audit procedures, and otherwise, to ensure that the regulations that they enforce are being kept. Indeed the commission, for all intents and purposes, regulates the Gaming Corporation. But if you were to ask Mr. MacNeil, I am sure he would tell you that our system here in Nova Scotia will not work if this sort of thing is allowed to happen.

MR. GAUDET: Did the corporation play a role in negotiations with ITT Sheraton? Did you guys play a role in negotiating?


MR. GAUDET: Looking at the deal that was struck with ITT Sheraton, could you explain specifically the benefits for Nova Scotians that came out of this deal? What were the benefits?

MR. FISKE: What were the benefits to Nova Scotians?

MR. GAUDET: Yes, for Nova Scotians, that came out of this deal.

MR. FISKE: By cancelling the arbitration?

MR. GAUDET: No, overall, by allowing casinos in Nova Scotia?

MR. FISKE: Well I think there are some obvious benefits to Nova Scotia, employment being a major one, substantial investment here, the guarantee, supposedly on the surface was a very significant benefit to Nova Scotia, and those are certainly the major ones. I mean, again as I've said in my opening statement.

MR. GAUDET: So, was maximizing profits your main objective?

MR. FISKE: That's one of the objectives, certainly.

[Page 26]

MR. GAUDET: I'm just wondering, as far as the control or regulating of casinos in the province, how do we fare with other states or other provinces with casinos? How would you rate Nova Scotia's control over their casinos?

MR. FISKE: Well, Nova Scotia established the corporation, the commission and so on. It comes about as a result of our rather unique Criminal Code that we have in Canada, as I understand it, and this is coming from a non-lawyer. But, only governments are permitted to operate certain gaming activities in the provinces, and it is the responsibility of the provinces, but under the Criminal Code. Most of our laws were copied from Ontario. Ontario, at the time, being the only province in Canada that had gone this route. Quebec had gone previously, they were operating their own casinos. So, much of our Act was copied from Ontario. Since that time Manitoba has similar organizations in place, B.C. is moving in that direction.

I can tell you that, not only in Canada, but farther afield, in my discussions with gaming people in various jurisdictions, some of the problems that exist in other jurisdictions are the result of the same thing that's happening in Nova Scotia. Some are long-standing and have really developed into very severe problems, and they're experiencing the same sort of thing. So it demonstrates the need for changes.

MR. GAUDET: Okay, thank you.

MR. CHAIRMAN: Mr. Fraser.

MR. HYLAND FRASER: I'm just going to go back to the deal, the deal that was signed, I guess. Is it true that you and the board agreed in May 1997 to drop arbitration and to settle the issues with the Sheraton?

MR. FISKE: That is correct.

MR. FRASER: And did that include setting a new date for the completion of the casino?

MR. FISKE: That's correct. We did so at the behest of Bob MacKay, who claimed to be representing the Premier and Cabinet.

MR. FRASER: Is it true, that on September 29th, the board, under your chairmanship unanimously passed a resolution that directed your lawyer to secure a settlement with the Sheraton based on the July agreement?

MR. FISKE: That's correct.

[Page 27]

MR. FRASER: You indicated a little earlier the exorbitant rents that were being charged. Why would that make any difference, since there was already a guarantee of a certain amount of monies to be paid to the province?

MR. FISKE: Well, that's a good point, and it's a point that others have raised, that while the $25 million guarantee is in place, let them do anything they want. Surely, Mr. Fraser there's a dead end to that direction, that policy. If it's wrong, it's wrong. If it's right, it's right. That policy was wrong. I mean, why have the corporation, if you're going to take that attitude, at least for four years.

MR. FRASER: One other question I have Mr. Chairman, the minutes of the settlement you agreed to in July include recommendations for 24 hour operations, free alcohol, credit for out-of-province players. Is that all true?

MR. FISKE: That was part of the direction of Cabinet that we would do that. Bear in mind, Mr. Fraser that the corporation does not attend to regulations, and we indicated that we could not make those changes, and that it was the responsibility of the Gaming Commission to make those changes. But, yes, that is part of the total package, as directed by government.

[9:30 a.m.]

MR. FRASER: And you supported those?

MR. FISKE: No, we didn't support them.

MR. FRASER: You didn't. That is all.

MR. CHAIRMAN: Mr. MacKinnon, you had another question?

MR. MACKINNON: Yes, just a follow-up through you, Mr. Chairman. Mr. Fiske, did you ever seek legal advice as to whether you were a regulatory body as opposed to an agent of the government?

MR. FISKE: We had various legal opinions as to what our duties were and, in particular, what sort of audit procedures and what information we were entitled to and all of that sort of thing.

MR. MACKINNON: What was the advice?

MR. FISKE: The advice was that the procedure we had in place, the information we were seeking was absolutely appropriate and we should continue to do so.

[Page 28]

MR. MACKINNON: As an agent of the Crown?

MR. FISKE: That is correct.

MR. MACKINNON: I am a little perplexed when you keep referring to the term, we. In your initial statement you said, we found there was no trust, but I don't see any evidence of that from other members of the board. I am just curious as to who you refer to when you say we. Are you saying, we, as the board in totality or are you saying just we, yourself, I, or what?

MR. FISKE: I am using we in speaking of the board.

MR. MACKINNON: So you are speaking for the board?

MR. FISKE: I am speaking for the board, exactly.

MR. MACKINNON: So the board would certainly support . . .

MR. FISKE: Whether each and every one would agree with me today is another story.

MR. MACKINNON: So it would be a question of . . .

MR. FISKE: Again, if you want evidence.

MR. MACKINNON: So you are saying it is a question of motive.

MR. FISKE: No, I am not questioning motive in any way. I am simply saying that if you want evidence of how the board members felt, you should seek evidence that exists within the corporation.

MR. MACKINNON: Well, I did and I just don't seem to find a lot to substantiate what you are saying. That is why I am asking.

MR. FISKE: No, well you obviously haven't asked the right person.

MR. CHAIRMAN: Perhaps we can go back and do a second round. We have something less than half an hour. I will take about seven minutes or eight minutes from each of the Parties again. If there are any follow-up questions, I will start again. Ms. Godin.

MS. ROSEMARY GODIN: Just for clarification, Mr. Chairman, how many minutes do I have?

MR. CHAIRMAN: Eight minutes.

[Page 29]

MS. GODIN: Mr. Fiske, I appreciate how difficult this must be for you to be here today and I want to say I appreciate you being here.

Last year, this same committee wanted to bring you before this committee to answer questions. There were members of the committee who blocked that. Why, in your opinion, did members of the committee block your appearance last year? What is it that they, perhaps, didn't want people to hear? Do you know?

MR. FISKE: Ms. Godin, I am not going to get into that realm. I think you should ask them why they didn't wish me to attend.

MS. GODIN: Okay. You would have no indication that there was anything . . .

MR. FISKE: I am not prepared to speculate, no.

MS. GODIN: In your 20 minute preamble, some of the words that you used were, heavy-handed, heavy-handed tactics, untrue accusations. I wasn't clear from whom that was coming. Was it the Sheraton Group?


MS. GODIN: Were you ever threatened?


MS. GODIN: Did you feel threatened?


MS. GODIN: Mr. Fiske, I think you will agree that there are different management styles. You were a chairman and there is another chairman now. You said earlier, also in your preamble, that your suggestion would be that we should appoint a new chairman of the Gaming Corporation. If I can put that in different words, are you saying that Ms. Gordon should leave and you feel that there is political interference there? Is she feeling the pressure that you felt?

MR. FISKE: May I say that Dara Gordon and I worked very closely for two and one-half years and I think I am accurate in saying that on no occasion did the Gaming Corporation go in any direction in which Dara Gordon and I had any disagreement for two and one-half years. I had the greatest respect for Dara Gordon. She is a very bright, intelligent lady. Before leaving, I chatted with Dara Gordon and encouraged her to accept the position. It was very difficult for Dara Gordon to accept the direction that we had been given but she decided to try and live through it and she did. But I have to tell you, I have not talked with Dara Gordon

[Page 30]

since maybe two days before I resigned so I have no idea what is going through her mind these days. I said initially that as I read reports in the media, press releases and that sort of thing, I have to believe that well, everything that she has said is absolutely foreign to me when you consider the relationship and her views when I was chairman and we worked so closely together. I hope I have been helpful.

MS. GODIN: You also spoke about stories coming out of Nevada and you mentioned that there were horror stories and that this province did not want that to happen and that we had hoped, and I am sure you personally had hoped, for a socially responsible way of conducting gambling in this province. But at the same time you speak of senior officials being misused, questionable accounting practices, gag orders. Are we headed toward serious problems with gambling in Nova Scotia?

MR. FISKE: Unless you and your colleagues, and I am being repetitive here, unless you and your colleagues are prepared to make some difficult changes, but be leaders in this area, then we are heading for massive problems.

MS. GODIN: What kind of problems are you talking about?

MR. FISKE: I am saying that Halifax can become a mini-Las Vegas, it can become some other community of Las Vegas that exists, smaller than Las Vegas and the activities that used to go on there in the years past, it is all well recorded. It will happen here unless you give the ability to the corporation and to other such institutions to regulate and to insist on the flow of information freely, then the same thing will happen as has happened in years gone by in other jurisdictions.

MS. GODIN: Are you talking about criminal and corruption problems?

MR. FISKE: I am.

MR. CHAIRMAN: One more question.

MS. GODIN: One more question, okay. In retrospect, Mr. Fiske, do you think that the Sheraton company had entered into agreements with the Province of Nova Scotia agreeing to everything but perhaps had the intention of changing things once everything was signed and not playing by the rules that we had set up for them?

MR. FISKE: I think, regrettably, that is the way I am leaning, yes.

MR. CHAIRMAN: Thank you. Back to Mr. LeBlanc.

[Page 31]

MR. LEBLANC: Mr. Fiske, I was going back to your comments that you mentioned that the arbitration process had begun and I think your comments said that you had actually showed up for the arbitration when a Mr. MacKeigan had shown up.


MR. LEBLANC: Now he was representing the Cabinet?

MR. FISKE: The Premier's Office, as was indicated to us.

MR. LEBLANC: So you said there was a delay granted. How long was that delay for?

MR. FISKE: It was probably for an hour and one-half, or thereabouts, plus or minus.

MR. LEBLANC: You said that Mr. MacKeigan had some negotiations, is that right?


MR. LEBLANC: Who did he negotiate with?

MR. FISKE: With Larry Hayes and the Sheraton lawyer from Las Vegas, Roberto Rivera-Soto.

MR. LEBLANC: So MacKeigan, who was representing the Cabinet and the Premier and, in essence, basically this is Bernie Boudreau's deal, or whatever, his baby, however you want to term it, Mr. MacKeigan came to the hearing representing Cabinet, or Premier, or Mr. Boudreau, and then there was a delay and he had a private meeting with negotiations with Mr. Hayes - who was also very close to Mr. Boudreau on the other side - and the lawyer from Sheraton. An hour and one-half later they came back and they had agreed that the arbitration was not going to go ahead? Is that my understanding of it?

MR. FISKE: No, they came back and Justice Stevenson proceeded with the arbitration and we would have functioned for maybe another hour and one-half when it was indicated that the particular witness, who was Mr. Steelman, the architect for the property, was being cross-examined by our John Merrick, and about 12:30 p.m. he indicated he had to be in Toronto at 3:30 p.m. or 4:00 p.m. and, therefore, he had to get to an airplane, and could we wrap this up. Our solicitor indicated no, that he had substantially more questions, and because we had just learned at that moment, at that magic moment, that they indicated for the first time ever that they could not complete the construction of the permanent casino on time.

So the whole complexion of this changed drastically and it was decided at that point, because everyone was very excited, that Justice Stevenson made the decision that there needed to be a cooling off period here, and he slated further hearings for May 20th. It was

[Page 32]

suggested that discussions should take place during this time to see if some compromise could be made and so we broke up on that basis.

I do not know what happened over the next, at least probably three weeks, because there was a gag order in place. I was not getting any information from Mr. MacKeigan or anybody else and, as I said, my minister was not informed on any aspect of it. I guess it was maybe a week prior to the May 20th situation that I had a meeting with our solicitors and it was decided that we had better attempt to take some initiative. So we decided that we would attempt to have a meeting with more senior officers of the Sheraton and that maybe we could arrange a meeting with even the Premier, who could bring his stature to bear on this situation. So I called Bob MacKay and made this suggestion. He agreed but rather than the Premier, he would do it and that someone senior from the Sheraton and myself would be assembled in his presence and he would lay down the law that, look, you, gentlemen, you come back to me within seven days and have a solution, or you are all going to be in trouble, that sort of message.

Well, rather than that taking place, he called Larry Hayes and Robbie MacKeigan and told them, we want a solution and we are prepared to give whatever they want in order to get it, in the presence of their solicitor. So as I say, that was the basis on which we proceeded into May 20th.

MR. LEBLANC: This was done at any cost to the Province of Nova Scotia just to get rid of this deal?

MR. FISKE: Yes. I think my letter of resignation does refer to that for your information.

MR. LEBLANC: I am asking you to surmise, and that is a very difficult thing to do, as to why Mr. MacKay would give such a directive? It is unbelievable to anyone when you are negotiating something of such long-term significance to the province that you would basically agree to a deal no matter what it takes. I can't believe it. Do you have any reasoning that you feel could have contributed to this decision?

MR. FISKE: No, and that is one of the great difficulties of this whole matter. It is still inexplicable for me.

MR. LEBLANC: Thank you.

MR. FAGE: The revelations in your opening statement and the questioning here today, I find it astounding and at some points almost to the point that it begs the question, why did this government ever establish a Gaming Corporation to oversee the casino if negotiation decisions appear to have been made - when you look at the delay, the first one, as you said, the announcement was made by Cabinet - without your approval or consent at

[Page 33]

that point? Why do we need a Gaming Corporation in Nova Scotia when the Cabinet appeared to be, through all of these years, directly negotiating with Sheraton anyway?

MR. FISKE: Well, the answer to your question is probably easy, we don't have a corporation if they are going to do this. That discussion took place on a couple of occasions, just have a couple of people in the Department of Finance do all this. Why bother? Why go through the charade? I guess I can only add what I have already said, to encourage you and your colleagues to take the opportunity to remedy this situation.

MR. FAGE: I find it astounding, also on the point of the $25 million guarantee and as other interveners mentioned here today and pointed it out, it is a free-for-all. Why not let them have whatever they want because you have a $25 million guarantee? I look at the citizen of Nova Scotia who is the primary person that the Sheraton would have as a client or prey on, as some people would say, as clientele. I look at the public interest which was supposed to be the Gaming Corporation which was arm's length, protecting the interests and integrity of Nova Scotians and the integrity of this very House and the institution.

Again, we see officials from Sheraton gag-ordering - as you have said earlier - their own employees to a legitimate arm's-length body, yourself not allowed to talk to them but they are allowed to talk to government. Government appears clearly to have been doing direct negotiations and those negotiations, when you look at the $25 million, talk about political expediency rather than the just and proper due process and protection of Nova Scotians. Coming back again, as you said, it is this House's responsibility to correct that. Where should this House be going to correct that, Mr. Fiske?

MR. FISKE: I guess my response would be that I provide you with just a couple of ideas of things that you might look at. Maybe that is not the exact solution but I am sure that if you were all to give some thought to a remedy to this situation to look ahead and protect the future, then you will find ways that legislation could be brought forward to ensure this doesn't happen again, if you believe that you want to ensure that.

MR. CHAIRMAN: I think we have to move back, in fairness to the Liberal members. Mr. MacKinnon.

MR. MACKINNON: Mr. Fiske, you indicated about the arbitration issue there. Did your own lawyers ever advise against arbitration?

MR. FISKE: Did they advise? No.

MR. MACKINNON: They did not?


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MR. MACKINNON: I see. Did your lawyers ever indicate to you what the odds of winning would be at that arbitration?

MR. FISKE: The projections for the odds of our winning was 90 per cent; up until the moment that they attended a meeting with me, with Premier Savage, and from that moment on the odds dropped to 50/50. Now, do not ask me why? I never got the answer.

MR. MACKINNON: But ultimately wasn't the decision to end arbitration a unanimous decision of the board?

MR. FISKE: Absolutely.

MR. MACKINNON: So you supported it?

MR. FISKE: We tried to bring arbitration about, you know, weeks, months prior to the actual event.

MR. MACKINNON: Did you ever call Bob MacKay to assist?


MR. MACKINNON: You have never ever called him?

MR. FISKE: No. I had on various occasions attended P&P and Cabinet . . .

MR. MACKINNON: Well, let us fast-forward a bit if I could. I appreciate where you are coming from there. That final decision to sign on on the Sheraton deal, was that a unanimous decision of the board?

MR. FISKE: No, it was not.

MR. MACKINNON: There were dissenters?


MR. MACKINNON: How many?

MR. FISKE: I am not going to tell you. You find out yourself.

MR. MACKINNON: It is public information though, is it? Well, you are talking about open and transparent and accountability. I mean you are wanting everybody else to hear information. I think this is important. This is paramount.

[Page 35]

MR. FISKE: Then bring them here and get it from them. I am no longer the chairman.

MR. MACKINNON: Well, you were chairman of the board at the time?

MR FISKE: I am not the chairman now.

MR. MACKINNON: But you were at the time that decision was made?

MR. FISKE: That is right.

MR. MACKINNON: So you do not want to answer that?


MR. MACKINNON: I see. I am just going to fast-forward a bit too. Your trip to Las Vegas with the then Minister of Finance, Bernie Boudreau, what was the purpose of that trip?

MR. FISKE: The trip was made in October 1995. As you are aware or will recall, we came into being in February 1995. The Sheraton shortly after starting began an effort to encourage us to extend the agreement by six months. In my briefing sessions with Minister Boudreau, I indicated I would be attending the World Gaming Congress, which is an annual affair in Las Vegas of some 25,000 people from around the world in this business, and that I had intended to go. I asked if he would like to accompany me.

MR. MACKINNON: You asked Mr. Boudreau?

MR. FISKE: I did.

MR. MACKINNON: Despite the thought that you felt it should be at arm's length from the government?

MR. FISKE: No, I had no qualms at that stage at all in inviting Mr. Boudreau, and he said, I think I would like to and, indeed, determined that he would. I arranged for a meeting with the executive vice-president of ITT Sheraton. We had a meeting. We had a full discussion on the extension and when we left Las Vegas, Mr. Boudreau and I felt that we should give them an extension and that was the way our board was leaning after much discussion.

MR. MACKINNON: So it was a mutual decision then?

MR. FISKE: Yes, yes, of course.

MR. MACKINNON: So you supported giving the extension to Sheraton?

[Page 36]

MR. FISKE: I, absolutely, or he supported us. It was vice versa.

MR. MACKINNON: Thank you.

MR. FISKE: When we came back, I said we have to have this approved by the board. He agreed and he felt very badly having made that announcement. He was caught in a scrum, if you will, if that is what you still call it.

MR. MACKINNON: Do you recall at a later date, after the Sheraton deal was signed, inviting the present Honourable Manning MacDonald, the Minister of Economic Development, to go to Las Vegas with you?

MR FISKE: Did I invite him?


MR FISKE: Oh, yes. I invited Manning MacDonald to attend a meeting, not with ITT Sheraton, but with a casino equipment supplier.

MR. MACKINNON: Why would you ask a minister of the Crown that you wanted to be at arm's length from your corporation to go and study supply situations?

MR. FISKE: Because they were interested in establishing a new industry in Nova Scotia, that is why.

MR. MACKINNON: So, you really didn't see yourself as a regulatory body then either?

MR. FISKE: I have no conflict whatever, part of my job . . .

MR. MACKINNON: You don't see that as a conflict?

MR. FISKE: No, part of my job - look at the Act. Part of the Act was to encourage that sort of thing in the Province of Nova Scotia.

MR. MACKINNON: So you encouraged the government to become involved?

MR. FISKE: No, no, to encourage related industry to establish here. I was simply doing my job and I asked Manning MacDonald if he would care to participate. He said, no, I would like to but I can't get away. He told me who to talk to in his department to arrange it and I did.

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MR. MACKINNON: Mr. Chairman, I have one final question. Do you recall or have you every lobbied, either personally or through his official position, the Honourable Donald Cameron, Premier of Nova Scotia or any member of his government for a casino?

MR. FISKE: No, I never did. I had various discussions with Premier Cameron concerning casinos, no question about that. I have no qualms at admitting that.

MR. MACKINNON: Supporting casinos?

MR. FISKE: Supporting casinos? I told you that I supported the coming of casinos.

MR. MACKINNON: But not in any particular lobby for your own . . .


MR. MACKINNON: Okay, thank you.

MR. CHAIRMAN: Mr. Fraser, go ahead.

MR. FRASER: Mr. Chairman, just a couple of short questions. We know that the Sheraton had proposed building a smaller casino than originally planned. Did you support that or did you not?

MR. FISKE: Did I support a smaller casino?


MR. FISKE: No, I did not.

MR. FRASER: Were you concerned that perhaps Sheraton would never build a casino?


MR. FRASER: Are you surprised to see the one being built now?

MR. FISKE: It is not built yet.

MR. FRASER: That is all.

MR. CHAIRMAN: Thank you. I don't know if any other members have questions. Mr. Dexter?

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MR. DEXTER: We dwelled on this just a little bit for a second and I am not sure that we explored it completely but you referred to wanting to avoid what was essentially a bait and switch kind of attempt by Sheraton. At this point, would you say that that is exactly what has happened?


MR. DEXTER: It has happened in a number of different areas in the contract?

MR. FISKE: Well, I suppose one could say that, yes.

MR. DEXTER: Just so I have this straight, you have enumerated a number of different things. You have said that there needs to be legislative changes. You have said that there needs to be public policy changes in order to ensure that the worst kinds of socio-economic impacts are avoided. Is that correct?

MR. FISKE: Public policy changes?

MR. DEXTER: Well, you talked a little bit about the worst kinds of things that can happen around casinos, whether criminal activity or corruption or . . .

MR. FISKE: I think what I am saying is that you and your colleagues, and I am being repetitive here, is that I think you should look at changes to the Gaming Act which would enable those vehicles on behalf of government to ensure that Mafia, criminals, don't get the tension here in Nova Scotia.

MR. DEXTER: Just one step further beyond that, during your tenure at the corporation did you feel that as part of the kind of public interest part of your mandate that other kind of socio-economic difficulties, gambling difficulties and related difficulties were also part of what you were concerned with and dealing with?

MR. FISKE: We were attempting to deal with it but I don't think we had been very successful up to the point when I departed. There is so much work to be done there, much research. We didn't deal well with it.

MR. DEXTER: Any recommendations made in that . . .

[10:00 a.m.]

MR. CHAIRMAN: Sorry, even though we did start a couple of minutes late, we actually are under time constraints here. So let me just make a couple of quick announcements. One is, we will reconvene next week at 8:00 a.m., the agenda will be continuation of discussion of the Auditor General's Report at that time.

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Let me thank our witness for having appeared here today. I think all of us regret that we didn't have more time to pursue the matters that you raised. Your presentation was thoughtful, it was informative, it was very frank and it was very helpful. Thank you very much.

We stand adjourned.

[The committee adjourned at 10:01 a.m.]