Episode # 11: Judge Campbell’s Unfortunate Confusion Over “Claimatrix”

Eisode 11 .jpg

Preamble

This one’s MUCH shorter than the last!

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Episode #11: Judge Campbell’s Unfortunate Confusion Over “Claimatrix”

In the last very long and complicated episode, it was explained how CMT was in the process of becoming “FMT” by acquiring a “shell company” (RevTech) to become listed on the stock exchange.

What’s important to understand with all this corporate stuff is that CMT had 100%-ownership in FMT, and was soon to move all its assets into FMT to transition from being a company registered in the United States to being a Canadian company residing in PEI with a Board of Directors that included local PEI residents.

This is what the PEI government had requested from CMT, it made good sense, and CMT was actively engaged in bringing it about as early as the fall of 2010.

I also want you to recall how Wes Sheridan stood in the Legislative Assembly and pronounced that CMT had absolutely no connection to Simplex, and Simplex was only doing business with the Mi’Kmaq confederacy, not the PEI Government.

Now recall that “Amended” deal with the PEI Government that Brad Mix told Philip Walsh (CEO of Simplex) that the PEI government had endorsed. That was a deal Wes Sheridan gave the go-ahead for to have the “Financial Transaction Hub” acquire additional assets (Sterci).

What Philip Walsh told Mix clarifies that it was CMT/FMT (not Simplex) that would be the “local company” for the entire project and that “Simplex and FMT have the right of first refusal for the disposal of Sterci’s 51% stake.” Why did he say this? Because he knew that FMT was CMT, and CMT had a major shareholder stake in Simplex.

Simplex and CMT may have been two separate corporate entities, but with respect to the plan to establish a financial transaction platform in PEI – although Simplex was a core technology partner with CMT, and essential for CMT to be able to deliver the financial transaction platform – the PEI Government deal was always with CMT/FMT (not Simplex), which is why the MOU was also signed with FMT (not Simplex).

So where does “Claimatrix” fit into the picture?

What Judge Campbell said about Claimatrix

I also mentioned in the last episode that Paul Maines would respond to inquiries by Paul Jenkins and others requesting company overviews or information describing the nature of the financial transactions “hub” that CMT/FMT would be delivering in PEI. The following closing paragraph in one of those “overview” documents mentions Claimatrix:

Paul Maines on Claimatrix

This was a document that Jeff Trainor had acquired.

The mention of “Claimatrix” by Campbell appears incidental to his main concern, Dowling’s sworn testimony about the investment Jeff Trainor made in CMT (Target-Co). Campbell’s one mention of Claimatrix in his 172 page ruling was in conjunction with this paragraph about Jeff Trainor:

Paragraph 486: “Dowling also described the contents of an email and attachments originally sent by Maines to Jeff Trainor which included the same investment information Hashmi had received from Maines. The information included a 2011 slide presentation referring to CMT as the company which “delivers” Claimatrix (reference to another tech company and its services) in the UK. Dowling’s affidavit does not state that Maines solicited the Trainors to invest. However, there is no denial an investment was made.

With all due respect to Judge Campbell, “Dowling’s Affidavit does indeed state that Maines solicited the Trainors to invest.” In paragraph 5(d) Dowling states:

“Upon transferring her investment account, Ms. Trainor informed Mr. Curran that, on the recommendation of Mr. MacEachern, she and her husband Jeff Trainor had, during 2011, made a $30,000 investment after having been solicited to do so by Mr. Maines.”

Judge Campbell obtained his information about “Claimatrix” from a paragraph in Dowling’s 2013 Securities Commission Affidavit, even copying the quotation marks around the word “delivers”:

Dowing 5f

However, it appears Campbell “misread” what Dowling said, at least to some degree. Dowling only said that CMT “delivers” Claimatrix in the UK, nothing about Claimatrix being a company in the UK. Campbell obviously didn’t review the actual 2010 slide presentation regarding, as Dowling put it: “Simplex and Claimatrix making several claims about their operations” – which was a document he had in front of him – or he would have known that Claimatrix was not a UK company.

Campbell likely wouldn’t have mentioned Claimatrix at all if it hadn’t been for the fact that the 2010 slide show on Claimatrix was one of the documents in the package sent to Jeff Trainor. Why would it be there? You’d think it would be worth at least scanning!

Campbell denies Dowling’s false testimony that Maines “solicited” Jeff Trainor, which he most certainly claimed (Episode #4); and that is immediately followed by an admission that he thinks Claimatrix is a company in the UK, revealing that Campbell knows absolutely nothing about a critically-important part of the story and case.

The Truth?

Claimatrix is a “collaborative claims platform” that can integrate with Simplex’s financial transaction platform to offer the following services to customers. Specifically, Claimatrix is able to:

  • Automate in real-time the numerous types of claims normally communicated via letter, email, faxes and telephones;
  • Produce enterprise wide counterparty payables/receivables exposures; and,
  • Consolidate claims control across business entities and offer claims aggregation and net settlement opportunities.

Claimatrix is provided as a Secure Web-based SaaS service which requires no software installation and comes with data collection templates, process and working practices standards for manual and automated input.

Claimatrix was developed by a company in the UK, but has been 100%-owned by CMT/FMT since 2010. From the very outset, CMT and its ownership of Claimatrix has been a core value component with the Financial Services Platform “hub” project with the PEI government.

Part of the reason Claimatrix is so valuable was its global recognition as having ISITC Certification, European Best Practice Guidelines recognized and accepted worldwide:

“The claimatrix collaborative claims platform was recently presented to the ISITC Europe leadership team and was shown to conform to the Industry Standardization for Institution Trade Communications Committee (ISITC) Europe best practice guidelines for Claims management.” [ See: “Claimatrix conforms to ISITC Europe “Claims – best practice guidelines“].

Claimatrix was also noted as a major asset in the CMT/Target-Co fundraise in the plan to establish a local company (FMT) with a stock listing, and then have CMT transition into becoming FMT.

When Garth Jenkins first introduced Paul Maines to his cousin Paul Jenkins, and then Paul Jenkins introduced Paul Maines to numerous government people – including Wes Sheridan and the members of the secretive e-gaming committee. CMT/Simplex was then “recruited” to PEI to establish a local company to deliver the Financial Transaction Platform “Hub”,

Garth Jenkins was initially involved with setting up the investment and CMT corporate transition strategy. In an email with Raymond James (managing the “targetCo” investment plan to raise money for CMT) what the corporate “ownership” breakdown would look like after all the corporate transactions were all complete was presented:

Garth Jenkins post transaction

What’s key here is the last sentence: “So at the close of the transaction TargetCo will own 48.5% of Simplex and 100% of Claimatrix.”

Remember, “Target-Co” intended to purchase “RevTech” (a stock-listed “shell company” with no other assets, although having a “listing” is incredibly valuable because it saves $1/2 million or so getting on to the stock market through the regular IPO process which I know nothing about other than it’s very expensive). Once that happened, “RevTech” would become FMT, and CMT would then become FMT (layman’s version).

If Judge Campbell had understood what Claimatrix really was, he would have also understood how CMT/FMT was the company behind the entire “Financial Transaction Hub” initiative, and that initiative most definitely included “e-gaming,” because Wes Sheridan and Chris LeClair’s main interest was to use that “hub” for e-gaming.

Wes understood e-gaming and the financial transactions platform initiatives to be essentially “one project.”  Read what Neil Stewart wrote to Brad Mix and Michael Mayne on June 3, 2011:

“Wes Sheridan is heading this way with the gaming…..based on my last discussion with him they are viewing gaming and financial services as one thing. Minister Sheridan had checked with me when he heard we were in discussion with Virgin Gaming.”

And that the two were essentially the same thing was also confirmed by the Auditor General:

Section 6.15: “In May 2011, the former Chief of Staff (LeClair) and these individuals presented the opportunity of marrying the two projects (E-gaming and the financial services platform) to the E-gaming working group. Simplex, CMT’s Technology Partner, was then engaged by local law firm to prepare a report on how the platform would work for E-gaming and the technical requirements it would need to operate.”

Yet Judge Campbell felt justified in proclaiming:

Not involved in Claim

In just one paragraph – the one cited above (# 486) there are the following two significant errors: (1) He said Dowling didn’t swear that Maines solicited Trainor – he did; and (2) Claimatrix is a UK company – it isn’t.

If Campbell had understood what Claimatrix is as a CMT/FMT asset with a central place in the financial transaction platform initiative married to e-gaming, then he would not likely have drawn such a patently ridiculous conclusion that neither CMT nor 764 (FMT) had anything to do with the “…so-called e-gaming project.”

Campbell relied on Dowling’s Affidavit and references it frequently throughout his ruling. However, the Affidavit is chalked-full of hearsay; or worse still, false claims attributed to people he interviewed that had to be corrected in sworn Affidavits from those people.

Had Campbell simply read the Exhibits that accompanied Dowling’s Affidavit he would have seen the following in an official News Release from Europe:

Europe

Two MAJOR errors in one paragraph, actually, in a consecutive string of just 26 words (what’s highlighted in red above).

There are 686 paragraphs in Campbell’s ruling.

Do the math.

The Consequences?

None.

Posted in Provincial Politics | 1 Comment

Episode #10: The Securities Investigation Against Maines and CMT – Part III

Episode #10
Episode #10: The Securities Commission “Agreement” with CMT and Paul Maines

Preamble

This is the final part of my three-part “mini-series” on the Securities Commission within my 25-part “Truth and No Consequences” series. The next episode will return to the initial format with shorter pieces on targeted parts of Judge Campbell’s decision.

It’s been an incredible education for me to put this last episode together. It involved having to learn about things like “shell companies and ” convertible debentures.” Stuff I have no background in – and to be honest – not much interest in either. But it was the only way to sort out “what’s what?” in order to understand”who’s who?” in this entire affair.

Learning about the actual investments and how they were structured with the different corporate entities in the transitioning of CMT to become a “local company” is necessary knowledge. That corporate transition process – including raising funds – was all to achieve a certain objective that intimately connected to the business plan CMT/FMT had with the PEI Government. Making sense out of all that also revealed who was (or was not) telling the truth when they publicly denied that they knew Paul Maines or CMT/FMT, or scoffed at the notion that either Maines or CMT had anything to do with the PEI Government.

Since those days, hundreds of PEI Supreme Court documents and official government records have come to light through Access to Information Requests which now expose a number of pretty serious lies and double-standards with the application of Securities laws that support the claim that CMT and Paul were indeed “targeted” for purposes that constitute “malfeasance”.

This episode is the final “plank”in the backstory laying the foundation needed to understand elements of Judge Campbell’s ruling that will be discussed in subsequent episodes. I see it as the “keel” – the longest plank in the boat – upon which everything else is attached and rests.

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Setting the Stage for the Settlement Agreement Signing

I mentioned in the last episode that CMT’s lawyer, Mary L. Biggar, had initiated a legal action after the Hearing against Paul Maines and CMT was cancelled. That prompted the PEI Securities Commission to cancel the second scheduled Hearing set for April 22, 2013.
The Superintendent, Katherine Tummons, noted that the reason for the Adjournment was the “Notice of Constitutional Question,” which Maines and CMT had filed with Hon. Janice Sherry, then Attorney General under Robert Ghiz:

Reason for Adjournment of Hearing

Not long after that transpired, the PEI Securities Commission sent a draft “Settlement Agreement” offer with the absolute minimum fines and restrictions, giving CMT and Maines a clear way out of the quagmire in which they had been embroiled with the Securities Commission investigation.

The Settlement Agreement also effectively “excised” Dowling and the PEI Securities Commissioner from the much bigger story that was fast-emerging – a tale of insider designs, corporate sabotage and cover-up; the kinds of issues Van Der Laan and the PEI Securities Commission made abundantly clear they had absolutely no intention of entertaining.

I don’t have the particular document containing the comment that Mr. Van Der Laan made about his “disbelief” of Paul Maine’s sworn Affidavit testimony which he sent to Ms. Biggar; however, I do have a letter dated April 12, 2013 that Biggar sent to Van Der Laan in response, indicating it was government officials that he had refused to allow to be questioned who were the source of the information Maine’s swore :

Biggar on Newco

Signing the Settlement Agreement was a “No Brainer”

I suspect Maines jumped at the chance to settle for three key reasons, and probably many more:

1. CMT and Maines were suffering severe losses that would continue and worsen as long as this dark cloud of suspicion and allegation was hanging over their heads with an active file at the Commission.

The totally-unreasonable blocks erected by the Securities Commission and Dowling denying due legal process; the denial of documents and “sealing” of documentary information and evidence; and the refusal to allow witness testimony from government officials or even cross-examination of Affidavits…all this made it clear there would be a long and costly battle ahead for Maines and CMT to have a full defence against a “cease-trade” order heard fairly at the Securities Commission.

On top of that, Maines and CMT received no cooperation (or even replies) from Wes Sheridan; Kevin Kiley; Gary Scales; Chris LeClair; Mike O’Brien; Cheryl Paynter; and others when they were sent formal requests by Biggar. Furthermore, the issues needing to be addressed were really not “securities” issues from CMT’s and Maine’s perspective.

2. CMT and Maines were presented an incredibly easy way out of a very big mess without having to “admit” any wrongdoing whatsoever. The “statement of facts” and “penalties” noted in agreement all had to do with either an issue of (a) “late filing” of a document with the PEI Securities Commission, which Jessop argued wasn’t necessary under the corporate set-up and national “exemption” granted to CMT for the Debenture Investments Program they set up; (b) an unsettled difference of legal opinion about whether CMT investments were “loans” or “securities,” and (c) an admission that a “prospectus” (apparently a very costly venture) which had not been required with a virtually identical investment (RevTech) was a “violation of the PEI Securities Act.”

Again, although Maines and CMT agreed to these conditions, Jessop made it very clear that it was purely a “business decision” by CMT’s Board of Directors so they could move past a very bad state of affairs for their company created by the investigation. As Robin Dolittle reported in her Globe and Mail article:

CMT’s litigation lawyer, Mary Biggar, said it was a “relatively minor infraction in the context.” Added lawyer Gary Mr. Jessop: “It was a business decision, made at the time, to settle it and move on.”

3. CMT and Maines immediately realized that the draft “Settlement Agreement” unbelievably did not contain a “waiver” preventing either Maines or CMT from initiating a civil litigation case in the PEI Supreme Court. I suspect Dowling would have known that Maines and CMT would not have waived such rights if they were asked, so he didn’t bother putting that in the agreement.

I imagine by May, 2013, Dowling et al. were becoming increasingly aware and concerned that CMT and Paul Maines were not going away, and when they realized they had come to do battle, and given all the alleged skullduggery that was afoot, I suspect they were anxious to cut ties with that litigious ship sailing out to sea: a vessel that already had a school of PEI government officials and agents in the dragnet, one of which was Dowling.

The more that Tummons (the Superintendent) and other staff at the PEI Securities Commission learned about the “big picture” lurking beneath and behind Dowling’s investigation, the more I’m sure they were looking for a way out of any involvement to mitigate backlash on, or damage to the Commission.

At any rate, the Settlement Agreement was the illusive “key” Maines and CMT needed to unlock the millstone hanging around their necks which had caused them such damage during the previous 8 months. Maines and CMT could finally get on with the PEI Supreme Court litigation, in which Dowling and his Securities Investigation against Maines and CMT play a big part.

It’s good to recall at this juncture that no one ever came forward with a complaint against Paul Maines or CMT alleging that investments were solicited except Dowling. No evidence substantiating such allegations were ever provided. Dowling’s Affidavit (the only evidence “relied on” by the Securities Commission) offered sworn testimony alleging solicitation by Maines without any direct knowledge, which Dowling claimed he received from several CMT/Target-Co investors. And those claims were completely refuted by those very same investors in Affidavits sworn solely for the purpose of correcting Dowling’s inaccurate claims about them.

All 36 investors were happy with their investments. Many are still investors, quite upset about what happened to CMT and Paul Maines. They were all fully-aware of what they were doing according to the documentation. They were mostly either sophisticated Island investors, or family and friends of sophisticated investors. The lengthy Subscription Agreement mapped out the exact nature of the investment and the risks involved in great detail, as well as confirmation of the reporting exception granted CMT to raise the money under authority of the National Instrument 45-106.

It’s also clear no investor made a claim against Maines or CMT, because Dowling wouldn’t have had to ask Jessop for a copy of the “Subscription Agreement” if any investors had complained – he’d have their copy. In the spirit of cooperation (no doubt hoping Dowling would reciprocate and finally tell him what was going on, and give him a chance to clear things up) he provided a copy as a ‘courtesy;’ however, stressing that the document was being shared voluntarily and on a strictly “confidential” basis:

Confidential Subscription Agreement.JPG

How did Dowling respond to this gesture of goodwill and cooperation from a corporate lawyer and director of an international company (CMT)? A company that Dowling had so recklessly put under siege? He never responded to Jessop. To add insult to injury, Dowling filed the Securities Agreement in his Affidavit as an “Exhibit” for the whole world to see.

“No Admission of Wrongdoing” With CMT’s Investment

Maines may have been elated at the opportunity to get out from under the Security Commission’s thumb, but his lawyer, Mary L. Biggar made sure the Commissioner knew there would be no admission of having done anything wrong…just legal questions that remained unsettled, a couple of ‘concessions’ with reservations, and some fines/costs.

Accepting the offer was exclusively “for the purposes of settlement,” and her clients were only prepared to admit that the “loan” might fall within the broad definition of a “security” under the PEI Securities Act. In a letter dated April 12, 2013, Biggar wrote to Van Der Laan saying:

Biggar to Van Der Laan

Earlier, in a response to a “production request” from the PEI Securities Commission dated March 21, 2013 (before the second scheduled-hearing was cancelled) Biggar forwarded documentation to Van Der Laan (cc’d to Dowling) making the same important distinction between “lenders” and “shareholders” in her letter:

Investors.JPG

Target-Co……RevTech……What the Heck?

You may recall that the Auditor General raised a concern about an “investment” that then-chief-of-staff to Ghiz, Chris LeClair, had made in “RevTech” in the summer of 2011. Robin Doolittle’s exposé on e-gaming, “Big Bet Small island: How PEI lost its online gambling gamble,” published in the Globe and Mail in early 2015, mentions LeClair’s investment. What he said is worth revisiting.

LeClair told Doolittle that he and his wife made the investment “…because we heard it [CMT] was a company that could be used for a variety of purposes, including financial services,” adding that: “It was a small sum of money that we invested into a debenture, perhaps mistakenly on our part, without a lot of due diligence. … However, in the event that any investment in any company ever posed a potential conflict of interest to me, we would have forfeited any potential benefit.

The issue with LeClair isn’t just his “conflict of interest” when he made the investment, but also that he engaged in “insider trading.” LeClair was not only “involved” with the gaming file, he was leading that file with Wes Sheridan. When LeClair left government, he kept working on the file. By the Fall of 2012 when the Securities Commission investigation was launched by Dowling, LeClair had already secretly “presented” a new company (which Maines had heard about from Tracey Cutcliffe).

When the main players involved discovered Paul Maines was asking questions about “Newco” they clearly got spooked. It was then decided that Innovation PEI would need to extend the MOU as a sign of good faith with the heat on from Maines. In fact, they were “ready to go with NewCo” when the first 60-day MOU expired, and submitted their plan to Government the very same day. The email chains show they were clearly “waiting” for the MOU to expire, something that was explicitly stated in emails during the time the MOU was still in force.

As LeClair and Sheridan and others looked into the future: the initiative their secret initiative they were all ready to launch was suddenly never going to happen because the 30-day extension provided ample time to conclude the deal with FMT and sign the agreement, and there was no tangible or legitimate reason for Innovation PEI to stop the two-year process and say “no deal” at the 11th hour.

Enter the Securities Investigation initiated by Dowling about a week after the MOU extension was signed. The MOU was subsequently suspended. No Agreement was ever signed.

A lot more of this will be unpacked in future episodes. What is important to understand now is that the investments that Chris LeClair (and lawyer Billy Dow, etc.) made in RevTech were exactly the same kind of investments made by the 36 investors to CMT with Target-Co. RevTech was a “shell company” with no assets other than a stock market listing, so the plan was for CMT to acquire RevTech and use that shell to provide a stock market listing for FMT – the “local presence” for the CMT/Simplex financial transaction hub in PEI.

Why weren’t Chris LeClair and Billy Dow and all the other investors in RevTech investigated by Dowling? If it wasn’t really a “security” (share) but a “debenture” (loan) – as LeClair told Robin Doolittle, why were Maines and CMT dragged before the Commission in an investigation since those investments were exactly the same as those of RevTech investors?

To this day it is not known who invested in RevTech beyond a few people. The Auditor General mentioned RevTech in conjunction with LeClair and Dow’s investments, but there’s never been any annual reportings, or no one knows how much was lost in the venture.

LeClair – one of the people who Biggar wanted to call as a witness at the Securities Hearing – and Billy Dow, did exactly the same thing that the 36 other investors did with “Target-Co”: they invested in a venture by loaning money on the hope that the venture would prosper, so at some point down the road, those “debentures” could be “converted” into shares in the company and everyone would make a ton of money, having come in on the ground floor of a very promising venture at a very low share price.

All 36 Island investors happily invested their money in the “Target-Co” with full knowledge of the risks – which they had to read and acknowledge with their signature in pages of documentation. The vast majority were sophisticated investors, many of whom you’ll probably recognize as prominent PEI business people: see the following list of investors.

Again, why has the PEI Securities Commission never investigated RevTech? Why hasn’t Dow or LeClair or other investors who invested in CMT before RevTech started being called “Target-co”? Some would call it a double-standard, others would call it being “targeted” for very deliberate and unsavoury reasons.

I want to take a look at exactly what was in the Settlement Agreement a little later, as well as what Judge Campbell said about what was in the Agreement. But there’s a far more important “bigger-picture” story to tell first about how the PEI Supreme Court would be the only possible place the issues which Maines and CMT/FMT needed to have addressed could be addressed, and the “settlement agreement” was what made that possible, and this seems like a good place to do it.

The “Big Picture” Story Behind the Settlement Agreement

I’m now convinced there was indeed a very deliberate plan to sabotage Maines and CMT to make room for LeClair and Newco, or possibly other potential clients the PEI government were also in negotiations with at the time, in violation of the MOU (a future episode).

Wes Sheridan could have taken a few minutes to drop by the PEI Securities Commission Office to clear everything up – but he chose not to – and that says a lot about his (and other government agent’s) willingness to deliberately hurt Maines and CMT. This is a pretty serious accusation, so I want to provide the documentary evidence that has led me to draw that conclusion.

How might Sheridan have cleared up any misunderstanding with the Securities Commission’s investigation concerning the money that was being raised for CMT/FMT? He could have told the truth and confirmed what Jessop swore in his Affidavit was indeed true:

CMT Incorporation by Jessop.JPG

Take special note of the words “…for the purpose of having a Canadian entity resident in Prince Edward Island with local management.”

In the last episode I drew attention to how CMT/Simplex and especially Paul Maines had already been working with Innovation PEI to move things forward for nearly two years by the time the investigation was initiated by Dowling in mid-September, 2012. When that investigation commenced not a single person involve with the project, Paul Maines and CMT/FMT/Simplex, including PEI government officials such as Wes Sheridan, would cooperate or even reply to Maines, Jessop or Biggar to vouch for what CMT was doing with the plan to raise funds for a legitimate “government-endorsed” and recommended project. Why not? Why didn’t Sheridan tell the truth and go to bat for CMT/FMT and Paul Maines?

Wes Sheridan definitely could have made the problem disappear for Maines and CMT because what those “Target-co” CMT investors in PEI were doing is exactly what the PEI Government asked CMT/Simplex to do!
In a October 24, 2011 email from Philip Walsh to Brad Mix (copied to Wes Sheridan, Paul Jenkins, Chris LeClair and Neil Stewart) Walsh begins by saying how it was “great to connect on Friday” and went immediately into the need to move quickly to “executive this transaction”. Any such transaction would have been executed with FMT. Besides being Technology Partners with Simplex, CMT also owned 33% of Simplex at that time and had “veto” voting power on the Board.

Walsh 44

Efforts to establish a financial transaction hub in PEI were already well underway on a number of fronts, including the RevTech/Target-co investments aiming to raise funds and establish a “local company” for the CMT/Simplex transaction hub, and the recruitment of “gaming companies” or other clients to PEI by CMT/FMT to support and build the transaction Hub .

Mix reiterated to Walsh that there would need to a “local company” presence. This was first mentioned in a “recruiting package” provided to FMT from Mix in early 2011. That’s another crucial part of the story we’ll get to in a future episode – but for now what’s important to know is that Campbell completely ignored entire sections of CMT/FMT’s Statement of Claim dealing with core issues in the “pre-Mou” period. One of those issues was the recruiting package that guaranteed “first mover advantage” and promised that CMT/Simplex “would thrive” if they came to PEI to establish a financial transaction hub. But as Mix spelled out in a his letter to Walsh concerning “next steps”:

Brad Mix to Philip Walsh - populated locally.JPG

Locally-populated”, “the simpler the better” – that’s exactly what happened with CMT: the newly incorporated company was first called 764 then FMT. The RevTech/Target-Co investments were all raised to help CMT establish FMT in PEI, have FMT listed on the stock exchange, then have CMT’s assets moved into FMT. Dowling and Campbell were both well-informed of this entire strategy from various sources, including from Jessop’s 2013 Affidavit:

CMT Incorporation by JessopIf Mix believed “simpler was better” you can’t get anything less complicated than what CMT did – “Paul Jenkins” became the sole director of FMT in the interim, start-up period, in advance of a permanent Board being established when the corporate transition process was complete.

Jenkins also became the “face of the company” so to speak. Paul Jenkin’s name appears on dozens of documents both to and from Wes Sheridan, Brad Mix, Chris LeClair and many other – everyone knew at the time that Jenkins represented FMT – wholly-owned by CMT, and they were working with Government to lay the groundwork for the transaction hub.

CMT and FMT have always effectively been one and the same in terms of ownership and control, although Campbell doesn’t see it that way in his ruling and treats them as completely separate corporate entities i.e., the MOU was with FMT, which Campbell says has absolutely nothing to do with CMT. Well, he may be technically correct, but who cares if he is? Both companies are named in the lawsuit.

What’s really important to understand is how FMT was part of the CMT/PEI plan to establish this new financial hub, but from the minute the securities investigation started against Maines and CMT – then extending into the future from the time the Settlement Agreement was signed til now – no one in the PEI government apparently knew Paul Maines or CMT.

Despite a long-term, heavily-involved relationship with CMT/FMT & Simplex, Wes Sheridan stood up in the Legislative Assembly on November 21, 2014 and presented Simplex as only having a relationship with the Mi’Kmaq Confederacy. In fact, the contract with Simplex identified “the PEI Government” as the “client. Sheridan also unbelievably denied that there was any connection between CMT and Simplex:

Two of them not mixed.JPG

Robin Dolittle got the same line from him in early 2015:

“In a December interview with The Globe, the finance minister said he had no idea CMT and Simplex were connected. “I to this day do not know that Paul Maines and Philip Walsh had a business relationship. And he wasn’t part of any of our work,” Mr. Sheridan said.”

Sheridan resigned days after the Globe article was published.

I should also point out that the Ontario Securities Commission action was simply a reciprocal Order accepting PEI’s Order, and not a different investigation or matter.

It might be a good time to mention that part of the multi-pronged plan was for CMT/FMT to bring new gaming companies to PEI. Paul Jenkins noted in his Affidavit that Paul Maines had a lot of contacts on Bay Street to help do deals, find shell companies to acquire etc. Maines did in fact secure an agreement with Virgin Gaming to establish in PEI. You may remember that event – there was a big announcement from the PEI Government at the time.

Paul Jenkins, as the “face of FMT in PEI” and sole director had all the connections FMT needed with both business and government, so it was Jenkins who delivered the news to Mix that FMT had secured a tentative agreement from Virgin Gaming to set up in PEI. Jenkins made plans with Brad Mix to have the Virgin Gaming people meet with Ministers Wes Sheridan and Allen Campbell:

Virgin

Look at the date. June 8, 2011. Notice that Wes Sheridan is being copied on the email from Brad Mix. Paul Maines isn’t mentioned here for good reason – he didn’t involve himself or participate in communications or meetings other than to set them up and put the right people around the table or on the file to keep things moving forward – his work as Business Development V-P was already over with Virgin Gaming, and Jenkins – the local guy with all the government connections – was taking it from there, so to speak.

Sheridan fully understood all of that and much more. Read what Paul Jenkins said in a Voluntary Statement he gave during that period of time between the first Cancelled Hearing and the second Scheduled hearing,

“So from there, we [Garth Jenkins and Paul Jenkins] invested in,the first of September and, you know, we continued on to work with, with Big Paul [Maines] and their group, Philip Walsh and, and Simplex, to introduce the Island opportunity. And that, that resulted in a whole bunch of different things. One was, you know, did, you know, is there, was there an opportunity to recruit businesses to P.E.I.using the P.E.I., kind of, advantages on, you know, innovation and such like that; labour force; et cetera. Another arm of it really was the CMT, the transactions piece, in creating a transaction hub. So I would introduce Big Paul and the group to, you know, various people that I knew inside the community and try to move that business forward. The same as you would move any business that you were invested in, at that point, forward.”

When asked how he came to be in Ottawa with “Big Paul” [Maines] registering FMT as a new company with him as the sole director, “little Paul” (that’s how he said people referred to him in the transcript) provided the following information:

“A. Well, to do business on Prince Edward Island, you need to be local. You need to have a local address. You need to have a local flavour. That’s just the way this community works. So, you know, they – you know, we would invest in, it needed a local address of which I used my address. And since I was the only local person there, that’s how, I was subsequently placed on the Board of Directors, I guess.”

“I guess?” I would think that’s something an experienced businessman wouldn’t have to guess about.

Now here’s what Walsh proposed to the PEI Government on October 24, 2011: Note the reference to FMT (FMT was by this time understood by all the players to be the “local company,” and CMT would effectively become FMT once that corporate transition process was complete, so FMT rather than CMT is used in the correspondence):

Sterci.JPG

What Judge Campbell doesn’t seem to fully appreciate is that at all material times, CMT had 100% ownership and control of FMT, and 764/FMT (the very same incorporated company) was part of the plan to establish a PEI-based, Canadian-registered and “stock exchange-listed” company in PEI.

Thirty-six (36) people wanted in on the ground-floor action of the “hub” project and spin-offs trusting that if things went as expected and their debentures (loans, e.g., unsecured investment) were eventually “converted” into Shares in FMT, they would likely make a killing.

The evidence shows that Maines was never personally involved with this endeavor, other than providing some background information on CMT and Simplex and the workings of the financial transactions platform services they offered together, including other potential ways it could be used once established (e.g., “loyalty Card”), activities falling within the scope of his capacity as CMT’s V-P of Business Development.

No investor lost a cent investing in CMT. All were offered their money back with interest (interest wasn’t required in the Settlement Agreement). Many decided to remain investors to this day.

On the other hand, all of the Investors [there is only evidence in Court Records and other government documents of Billy Dow, Chris LeClair, Paul Jenkins and some of the staff at Lawton’s pharmacy (Jenkins owns Lawton’s) bought debentures in RevTech] and they all lost 100% of their money.

I was having a hard time sorting out the connection between “RevTech” and “Target-Co” until I read in the Debenture Subscription Agreement that CMT had submitted a “letter of intent” to buy RevTech – the shell company that CMT was going to acquire to then be able to “list” on the Stock Exchange, and then have CMT fold into FMT.

The plan would likely see CMT takeover RevTech by giving them some percentage of CMT shares. That plan fell through once the Securities Investigation commenced, and all those RevTech investors (it wasn’t managed through CMT/Jessop, but by Jenkins and/or others locally who were adept in such undertakings.

The “Modified” Plan Proposed by Walsh and Adopted by PEI

That letter to Philip Walsh at Simplex indicated that the PEI Government was supportive of the proposal that Walsh had presented. An opportunity came up for the purchase of “Sterci” (you don’t need to know details) which would greatly increase the value of the entire transaction hub endeavour, creating a “win-win” for both PEI and CMT/Simplex.

Without getting bogged down in details, Walsh was proposing that the PEI Government would become a temporary “Partner” to effect the purchase of Sterci, and then FMT would buy out the PEI government after 2 years. The deal was “time sensitive” and Simplex had “first right of refusal” on the deal, but that was expiring in a few months.

Summary Observations

If you were to read what Judge Campbell said about the Securities Commission without the background provided in this episode and the last three, you would have no real understanding of what transpired. You’d assume that some really serious “illegal” activity was identified, intercepted and halted by an astute and fair Securities Commission Order delivering swift justice. It was a parking ticket. It was a parking ticket that caused an international corporation to miss its flight leaving it stranded.

I underlined the conditions/restrictions to make the analysis short and sweet:

Paragraph 21: Dowling undertook an investigation of the activities of Maines, CMT, and 764. Dowling concluded that in excess of $700,000 had been raised for CMT from some 36 investors on Prince Edward Island in contravention of the Securities Act, R.S.P.E.I. 1988, Cap. S-3.1, and in contravention of National Instrument 45-106. Each of CMT, 764 and Maines, who at all material times was an officer of CMT, signed a Settlement Agreement acknowledging the facts surrounding the illegal distribution of securities and confirming they had each received full and proper independent legal advice prior to executing the Settlement Agreement. The Order issued by the Superintendent of Securities [1] imposed restrictions on CMT’s ability to market its securities for a period of five years and required CMT to [2] pay a fine (administrative penalty) in the sum of $10,000, together with a further sum of [3] $5000 to cover the costs of the investigation.

Here’s the bottom-line on each of those three “conditions and/or restrictions” in the Settlement Agreement:

[1] Imposed restrictions on CMT Maines and CMT: Do you honestly think Maines, Walsh or any other business person they talk to for the rest of their lives would ever, ever do business in PEI again? I’m thinking maybe Maines insisted that go in the agreement.

[2] Pay a fine (administrative penalty): That unsettled dispute about whether CMT – who never did business in PEI before and relied on well-established exemption criteria under federal law never got resolved and Jessop provided copious evidence that everything was above board and legal, and that his clients had done absolutely nothing wrong. Paying a fine rather than turning down a “get out of PEI Securities Commission Free” card was quite frankly a no-brainer.

[3] $5,000 to cover the costs of the investigation. Wrong. That low figure was no where near what that investigation cost PEI taxpayers. The BC Securities Commission Charges $300 bucks an hour, so do the math. And that’s another  shocking part of the hidden story for PEI taxpayers – I don’t know what the total costs might have been but likely a couple of hundred thousand at least. Dowling even subcontracted outside legal help from a colleague at Cox and Palmer, and that alone was $37,000, so $5,000 was definitely not going to cover the costs of the investigation. That information was obtained in an Access to Information Request

37000.JPG

The next much, much shorter episode will talk a bit about one of CMT’s greatest assets and how Judge Campbell thought what they had 100%-owned was a completely different UK company.

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Episode #9: The Securities Investigation Against Maines & CMT – Part II

Episode 9.jpg

Episode #9: The Securities Investigation Hearing that Never Happened!

Episode #8 set the stage for the Securities Investigation Hearing scheduled to take place against Paul Maines and CMT on March 7, 2013. This episode deals with the period of time from when the Hearing Notice was served (February 14th) to just after the scheduled Hearing on March 7, 2013.

This episode relies heavily on screen captures from documents or quotations because it is of such central importance in this entire story: it is long and not something you can skim through on a commercial break – so be forewarned.

A Brief Recap Leading up to Hearing Preparations by Maines & CMT

The last episode left off with CMT’s corporate lawyer, Gary Jessop, desperately trying to get information from Steven Dowling – the Department of Justice lawyer working for the PEI Securities Commission – after hearing rumours that Dowling had apparently launched an investigation against Maines and CMT.

Jessop was in Charlottetown at the time concluding negotiations with Innovation PEI on a Financial Transactions Platform “hub” initiative they’d been working on with the province for nearly two years. He tried a number of times to meet or speak with Dowling with no success.

As the days passed, although Dowling wouldn’t talk with either Jessop or Maines, it seemed he was talking to other people, and the word on the street was that Maines and CMT were the “target” of Dowling’s Securities Investigation because Maines had bilked some elderly woman with cancer out of her life savings – a claim that was later thoroughly confirmed to be fictitious by an ex-RCMP officer hired by CMT to investigate the claim. That such a thing never happened was also reported by Robin Doolittle in her 2015 Globe and Mail article on e-gaming.

As Jessop noted in an email letter to Billy Dow dated October 8th, although Dowling never communicated with him directly, he did receive one communication which put his mind at ease that Maines and CMT/FMT were not the targets, and it was all apparently just rumours run wild:

“I did receive a call from Dowling’s office {not Dowling) on Thursday October 18, 2012 and was told that he is aware that we are available to talk and that he had no need to talk with us and if there becomes a need to contact us he will. The only conclusion that I can glean from this is that Trinity Bay and Capital Markets are not the targets of the investigation.”

What Securities Investigator would initiate an investigation against an international company doing business with the PEI government and have “no need” to speak with the person(s)/companies being investigated, especially knowing the potential harm and financial losses the investigation would cause….especially when the person/company under investigation are both forthcoming and anxious to address any and all concerns to remedy the situation? No one. Ever. That is, before the inaugural PEI investigation launched by Dowling – still the only one listed on the PEI Securities Commission Website.

Although Jessop’s conclusion that Maines and CMT were not targets was completely reasonable, it was unfortunately also dead wrong. Maines continued to hear from others – including people Dowling had interviewed – that the investigation was indeed targeting him and CMT.

After nearly five months without getting any response from Dowling, Jessop finally wrote to the Deputy Minister of Justice at the time, Shauna Sullivan-Curley on January 21, 2013. The urgency of the situation coupled with the ongoing harm being caused to CMT and Maines is palpable throughout Jessop’s letter to the Deputy Minister. He was seeking urgent intervention because, as he put it, his clients “…have done nothing wrong”:

Clients did nothing wrong

Sullivan-Curly informed Jessop 8 days later that she had forwarded his letter to Dowling!

Of course Jessop’s promise that his clients will defend themselves “against any claims made against them” was founded on the presumption that his clients wouldn’t be denied their constitutional rights to a fair hearing in accordance with the principles of natural justice. Again, a perfectly reasonable assumption, but unfortunately, Jessop was dead wrong about that as well.

Preparations for the Hearing

After receiving the Notice about a Securities Hearing to be held on March 7 – with all responding materials having to be filed by March 2 – Maines immediately drove to Toronto to work with Mary L. Biggar, a Securities Lawyer with a Baystreet firm retained by CMT – to put together a defence.

The best way to explain what happened during the short time since Biggar was hired to the Hearing date is to break things up chronologically and let the documents speak for themselves.

February 14, 2013

Paul Maines and CMT are served a “Notice of Preliminary Motion” by the PEI Securities Commission with a scheduled Hearing date of March 7, 2013. The Notice indicates that the Commission will be seeking a “Cease-Trade Order” against Paul Maines and CMT on grounds that it is in the “public interest.” The Notice states that the evidence relied upon will be as follows:

Dowling evidence

If they planned to attend, Maines and CMT were required to file all “responding materials” not later than 5 days before the date of the Hearing (March 2, 2013).
February 15, 2013

The PEI Department of Justice issues a Press Release to every news outlet in Atlantic Canada announcing the Hearing on March 7th, asking Islanders to essentially be on the look out for fraudulent activity by Paul Maines and to report anything they deem to be suspicious if such contact occurs to the PEI Securities Commission. Ouch!

February 25, 2013

Biggar sends emails to the Superintendent announcing that in addition to a number of sworn affidavits, Maines and CMT will be calling witnesses. A request to schedule a cross-examination of Dowling’s Affidavit was also submitted.

February 26, 2013

Maines and CMT received a “Procedural Direction” from the PEI Securities Commission on February 26 informing them that the recently announced “Public” hearing Notice announced throughout Atlantic Canada just days earlier, was now to be rendered “secret,” and all documents were to be “sealed” and completely kept from any public scrutiny:

No longer public.JPG

No explanation was provided as to why something so widely announced as a public hearing suddenly became “prejudicial to the public interest” and totally secretive.

February 26, 2013

Biggar receives an email from the Superintendent’s Office with the following information:

Ms. Biggar:

This is in response to your emails dated February 25, 2013 requesting cross-examination and witness evidence in this matter. We have noted the position of staff in accordance with the email of Mr. Vanderlaan of today’s date. Your request for cross examination and witness evidence is denied.”

February 27, 2013

Not willing to accept that decision, Biggar pursued the matter on grounds that it was a violation of natural justice to deny the opportunity to address the issues that had precipitated the investigation – her clients had a right to defend themselves. She was subsequently informed on February 27 that she would have to make a Motion to allow cross-examination and witnesses:

Make a Motion
February 28, 2013

Biggar also sent individual letters dated February 28 to each member of the secret “gaming committee” (Gary Scales; Wes Sheridan; Chris LeClair; Kevin Kiley; Don MacKenzie) requesting records materially relevant to the Hearing:

Biggar letter to gaming committee members
February 28, 2013

Biggar also wrote to Cheryl Paynter on February 28 concerning information that Maines and CMT were alleging about how Chris LeClair and Wes Sheridan were advancing a different proposal from different companies in violation of the MOU:

Biggar to Cheryl on Plan

Biggar never received any reply from any member of the gaming committee, nor did she receive a reply from Cheryl Paynter. Knowing that she did not have the power to “compel” responses, documents or attendance of witnesses, Biggar was left to rely on the decision of the Superintendent.

A key part of the “malfeasance” claim against a number of the dependents in the current CMT/764 lawsuit is that an attempt was underway in August/September 2012 to “undermine” the MOU in place for CMT/FMT complete negotiations toward an agreement with the PEI government to establish a “financial transaction hub” in PEI.

Maines alleges that the Securities Commission investigation suspending the almost-completed negotiations between CMT/FMT and the province, damaging CMT/FMT’s Global reputation and hurting business, was totally groundless (and it is the case that neither the name of the person “complaining” nor any document signifying a “complaint” has ever been produced).

Maines further contends that the investigation was deliberately orchestrated and launched to sabotage the deal that was about to be signed between the PEI government and CMT/FMT. The plan was to confirm through witness testimony and cross examination what Maines and CMT were certain had happened. That never happened with the Securities Commission. What Campbell had to say about those claims will be dealt with in a future episode. But it was a key issue during the Securities Investigation as you’ll see from the documentary evidence below.
March 4, 2019

As the Hearing date fast-approached, Biggar was still awaiting a response to her Motion to find out about cross-examination and witnesses. Three days before the Hearing date she received a “Submission Regarding Respondent’s Motion,” from the PEI Securities Commission saying they had concluded there was no need for Maines or CMT to cross-examine Dowling or call witnesses:

Denial of Witnesses
March 5, 2013

Chris LeClair – Robert Ghiz’s former Chief of Staff, whose records were all destroyed by Ghiz – had continued to work on the gaming file with McInnes Cooper – and is incidentally the chief “architect” behind the “Newco” company attempting to undermine the CMT/FMT/Simplex MOU agreement with the province [to be explained in a future episode].

Chris LeClair had also invested in the CMT/FMT initiative (while still Chief-of-Staff) and was a friend of Mark Rodd’s, and was on contract as a consultant with Rodd’s. LeClair sent the following email to Mark Rodd on March 5, 2013:

LeClair to Rodd

Why would LeClair refer to the “Maine’s affair” as a “shitstorm” that he expected would do enormous damage to him and his family?

I suspect that when LeClair learned that Maines and CMT had miraculously managed to mount a legitimate legal defence to the Motion Hearing, and had submitted sworn affidavits from a number of investors “correcting” false claims made in Steven Dowling’s Affidavit, and that they were pushing to be allowed to cross-examine Dowling and possibly call him as a witness, he must have realized that the sordid truth of what was really going on behind the scenes was about to be exposed. No doubt he would have been correct if the Hearing had proceeded as scheduled, but that wasn’t in the cards. The very same day – LeClair may not have sent that email if he had known – the Hearing was “Adjourned.”
March 5, 2013

After spending a gruelling two weeks preparing all the legal materials: a responding motion, a “factum”, preparing numerous sworn Affidavits, etc – Maines and his lawyer received a Notice on March 5 informing him the Hearing had been cancelled.

March 6, 2013

Not having heard from Paynter, Biggar sent another plea for cooperation:

March 6 letter from Mary Biggar to Paynter.JPG

She never got a response.

March 8, 2013

In something of a surprise twist to the story (to me at least) Maines was asked by the Securities Lawyer if he would provide a “voluntary statement” which he agreed to do on the day after the Hearing that never happened.

That 137-page transcript is a fascinating read. In particular, what Paul Maines explained about Tracey Cutcliffe – who used to work for Innovation PEI, but was contracted by CMT to work with government on CMT’s behalf. That’s all he had to go on at the time – what he was told by Ms. Cutcliffe – but what he said then can now be substantiated with new government documents (a future episode) so I want to draw your attention to what he told that Securities Lawyer from St. John (Jake Van Der Laan):

Cutcliffe Newco.JPG

Maines was only going on what Cutcliffe had told him at the time, and had no documentary evidence to back up his claims. The “day it was expiring” refers to the MOU.

Not only was Maines happy to answer all the lawyer’s questions, Biggar and Maines (throughout the transcript) continually emphasized that they would provide Jessop (he was in Charlottetown at the time) or anyone else requested immediately to answer any and all questions as expeditiously as possible. They were clearly anxious to clear up the mess.

Maines and CMT were convinced the entire investigation and hearing was a ploy to derail CMT to make room for a new business venture with new people and new companies. They just didn’t have any real details or documents at the time to prove it, and were looking forward to getting to the bottom of things at the Hearing.

Van der Laan took Maines through the list of all 36 investors one-by-one. From the responses and discussions contained in the transcript in response to that line of questioning, it is clear that Maines did not “solicit” any investments. In fact, he only knew or ever met a handful of those 36 people, and that was for other reasons, including the business relationship with the province having nothing to do with soliciting investments (Paul Jenkins; Mark Rodd; and Chris LeClair for example).

No investor ever complained about their investment, nor did any of the investors claim that Maines “solicited” the investments they made. In addition, the false claims made by Dowling in his Affidavit that several investors had indicated to him that Maines solicited an investment from them were “corrected” by sworn Affidavits submitted by Biggar to the Securities Commission for the Hearing that never happened (Jeff Trainor Episode #4; Mark Rodd Episode #5; and Paul Jenkins Episode # 6.

April 9, 2013

The Securities Commission issued a Notice of Hearing to take place on April 22, 2013. Having been denied the right to call witnesses and cross-examine Dowling, Maines and CMT decided to go another route.

April 17, 2013

After the second hearing was scheduled, Maines and CMT launched a legal action challenging the Commission’s refusal to allow cross-examination and witnesses. That action would have “broke the seal” of secrecy and made all the documents public again. Perhaps not surprisingly, the Commission immediately wanted to “settle” the matter. On April 17, 2013 the Securities Commission issued a Notice that the Hearing scheduled for April 22 was adjourned to be “scheduled for a future date”. No new Hearing date was ever set.

Summary Observations

What Judge Campbell had to say about how Dowling conducted the Securities Investigation of Paul Maines and CMT will be dealt with in future episodes. However, you will get a general sense of what to expect on this matter from the following paragraph in his ruling:

Paragraph 483: I note that, even though Jessop was anxious to meet with Dowling as early as possible during the investigation, there was no obligation on Dowling to meet with Jessop, or Maines, or any other particular individual at any point in time. How he conducted his investigation was for him to decide, within the limits of the law.

How did this securities matter finally get resolved? That critically-important part of the story will be explained in the next episode.

Posted in Provincial Politics | 1 Comment

Why I Keep Researching and Writing about E-gaming & the CMT Lawsuit

Investigate

I receive a lot of private facebook messages and emails about the research I’m doing on  e-gaming and the CMT lawsuit, and I really appreciate all the comments and  feedback. A frequent question I get is: “Why are you still beating a dead horse?”

I’ve pondered how to respond to that question a lot, and I have given different answers to different people –  there are many reasons. Bottom line: I don’t believe the horse is dead.

Before proceeding any further with my 25-part investigative series “Truth and No Consequences,” I thought I’d publish an essay with some of the information I’ve given to various people.  I’ll discuss just two reasons here, which should be enough to explain why I feel compelled to keep punishing myself with this work.

Reason #1: E-gaming is not “Old News”

It’s easy to think of e-gaming as “old news”. Who doesn’t want it all to just go away? For example, CBC did a “yeah!….it’s over” news story on all platforms when Campbell issued his ruling dismissing the CMT law suit, but never reported when CMT filed a Notice of Appeal.

Islanders have been hearing about e-gaming for years now without getting much insight. It’s complicated and confusing, and Islanders are left not knowing who or what to believe so it’s easier to just forget about it – it’s “old news” – that point of view is valid and totally understandable.  But here’s the thing: although what is going on today does indeed involve the past, the events and issues of real interest are happening in “real time” as the entire e-gaming scandal starts to unravel. As it does, the revelations will be more than “newsworthy.”

When was the last time a PEI resident had to get four Court Orders to force a new PEI Minority Government to release public documents being withheld for no legitimate legal reason? Never. Those Orders went into effect a couple of weeks ago. Paul Maines submitted several Access Requests because he knew there were documents in government files (or should be – many were destroyed) that should have been produced in Court by government’s Counsel, Jonathan Coady, and were not.

If the full truth doesn’t come out about what happened, and for some reason CMT is denied the Appeal and goes away; then no one will understandably ever want to think or speak of e-gaming again outside of a lecture in a PEI history course at UPEI. Things will carry on as usual; and therein lies the problem.

The many wrongdoings with this ongoing scandal and coverup need to be fully understood, and there has to be some consequences for those wrongdoings, some repair of the damage done to those wronged, and some changes to ensure this kind of thing can never happen in PEI again.

I don’t have the full story yet, but I have most of it, and it is shocking from start to finish. Keep in mind I have 17 more episodes.  There’s also more Access documents that will be released soon.

It’s not that I’m obsessed with e-gaming and don’t have things I’d rather do with my time; but quite honestly, I don’t think there’s anyone else in a position to tell this story at the depth needed to expose the lies and reveal the truth – that is, as far as it can be revealed with well-organized facts from sworn documents or official government records – so I believe I have a moral obligation to keep doing this research and writing regardless of whether it ends up doing any good.

I put no importance on how many people read or like or share what I write, although I’d love to see as many Islanders as possible come to know what really happened . For that to eventually happen, it’s really only important that a core group of people with a legitimate interest (ethical lawyers, for example) or those with direct involvement (Islanders who chose to remain CMT Investors, for example) get to see a version of the facts in my investigative series other than the completely skewed one presented by Judge Campbell dismissing the case. 

Reason # 2: Allowing the Destruction of Gov’t Records Subverts Democracy

In Ontario, the Chief-of Staff destroyed records and was sentenced to six months in jail – it’s a criminal offence, not just in Ontario, in Canada.

In PEI, the Premier destroys all his Chief-of-Staff’s records in a “scorched earth” approach and Judge Campbell calls it “standard practice”. Well it’s not standard practice, it’s criminal.

To get to that conclusion Campbell had to totally ignore every law, regulation, and policy within government that clearly and consistently declares that no one can destroy government records “legally” but the Provincial Archivist.

Procedures demand that electronic records are copied in accordance with the Archives and Records Act and Treasury Board Directives before ordering ITSS to delete all electronic records, which Ghiz did. I know this well because I charged Ghiz with a criminal offence last year (“mischief to data”) and prepared an extensive 60 page legal brief, which Judge Nancy Orr unfortunately – but not surprisingly – refused to allow to proceed.

Ghiz said in cross-examination that he didn’t read what he signed when he directed ITSS to destroy all those records, and that he had no idea what happened at ITSS after the form was sent from his office. Such sworn statements from a Premier are ridiculous and not believable.

Ghiz ordered his  Chief-of-Staff’s email accounts and electronic files destroyed without first copying them having no idea what he was doing?  Well, that sworn testimony was good enough for Judge Campbell.  He referred to what Ghiz did as “Standard Practice,” cherry-picking a quotation from the Auditor General’s report and misinterpreting what she intended by the word “remove” (i.e., Access can be removed when accounts are “disabled,” but the emails and documents remain intact; whereas ordering an account to be “deleted” – what Ghiz did – before ensuring the records are first copied was most definitely illegal.

In contrast to Campbell’s opinion on destroying government records, read what Judge Lipson said in his ruling regarding how public officials destroying  government records subverts democracy, which was, in his mind, “the most serious aggravating factor in the case” leading to his 6-month jail sentence:

LivingstoneIt can’t be allowed that such enmasse destruction of government records by a Premier is dismissed as insignificant and accepted as “standard practice” with government record-management and carries no consequences. As Lipson states so eloquently, the public have a right to expect the “court’s protection” to establish confidence that our government and judicial institutions are operating independently and democratically. That’s another reason I continue the work.

Like I said at the outset, there are many reasons to continue with this research, but my essay is already getting too long.  But know this: the e-gaming story is really only beginning to be told.  Things are unravelling.  More and more of the truth is coming out.  And the story is not pretty. Like a cancer diagnosis, it’s not easy or fun to hear, but if things are ever to change, Islanders need to step up and swallow that pill.

Regarding the seemingly perennial problem of secret deals and insider circles abusing power for personal gain in PEI, I’m convinced that if this e-gaming scandal is allowed to somehow just “go away,” then the hope that PEI will ever put an end to this embarrassing legacy of corruption and cover-up will die on the same hill as e-gaming.

Let’s be clear, there’s proven false sworn claims in affidavits; insider trading; countless lies in cross-examination transcripts; and an ongoing investigation into the missing e-gaming records of Brad Mix by the Information Commissioner; not to mention an imminent filing at the PEI Court of Appeal by CMT that will include all of the new “Court-Ordered” documents not made public before.

No, I am most definitely not beating a dead horse – the most explosive information is yet to come out. What was Government hiding? Who ordered the “code red”?

Trust me, we will find out soon!

Posted in Provincial Politics | 4 Comments

Episode #8: The Securities Investigation against Maines & CMT – Part I

Episode 8

Preamble

It’s not possible to understand Judge Campbell’s ruling, or the ongoing cover-up of this multi-pronged and continuing scandal, without knowing why Steven Dowling’s six-year old affidavit features so prominently in the Motion to Dismiss ruling by Judge Campbell. The answer lies in what happened with the Securities Investigation and Scheduled Hearing against Paul Maines and CMT that Dowling initiated and commandeered.

That story can’t be told in a few paragraphs. I’m therefore breaking the information up into three separate “parts” and episodes as follows:

  • Part 1: The announcement of a Securities Hearing against Maines & CMT
  • Part 2: Preparations by CMT for the Securities Hearing
  • Part 3: The Settlement Agreement

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Episode #8 (Part 1): Announcing a Securities Hearing against Maines & CMT

When Steven Dowling initiated the Securities Investigation against Paul Maines and CMT on September 18, 2012, Gary Jessop – CMT’s lawyer – happened to be in PEI, as was stated in Jessop’s sworn Affidavit:

Philip Walsh and I were in Charlottetown for the purpose of negotiating the agreement between 7645686 and Innovation PEI contemplated by the MOU…”

You would expect that Dowling would be anxious to talk to Jessop. He wasn’t.

Despite numerous attempts by Jessop to meet or talk with Dowling to learn what basis there was for the allegations which had frozen the company’s activity, and why an investigation had been commenced, Dowling would not communicate with him. That refusal to communicate goes to CMT’s claim of malfeasance.

Campbell recognizes that one of the claims for malfeasance by CMT/764 was, as he puts it in paragraph 4, ” initiating a securities investigation against the plaintiffs for ulterior motives,” then further notes in paragraph 61 of his ruling that “He [Jessop] made various efforts to contact Dowling during the course of the securities investigation,” and then elsewhere states in paragraph 479:

Para 479: According to Jessop’s affidavit, on September 20, 2012, Jessop emailed Dowling stating he was counsel for “Capital Markets/Trinity Bay” and that he would like to meet with Dowling to get further information on what he understands might be a complaint against Trinity Bay. Dowling responded on September 21, 2012 indicating he was not aware of a complaint referencing Trinity Bay. Jessop then suggested the claim might reference FMT and asked Dowling to let him know if he would like to meet Jessop to discuss it. Dowling thanked him for his email and advised he would let him know. Jessop made other efforts to arrange a meeting with Dowling, but Dowling did not accept the invitations to meet until later in the process.

The Truth?

Dowling didn’t respond to Jessop on September 21, 2012 as Campbell states in para. 479; but his Administrative Assistant left a voicemail message, which Campbell would know from Jessop’s affidavit, In paragraph 30 Jessop says:

Won't Meet.JPG

Dowling’s refusal to provide any information to Jessop or Maines over a four-month period (September 18 – January 18) finally prompted Jessop to go over Dowling’s head and write to the Department of Justice seeking information about the investigation. As Jessop states:

Jessop to Shauna

Ms. Curley responded eight days later on January 29 to inform Jessop that she had forwarded his letter to – of all people – Mr. Dowling.

Gary Jessop and Paul Maines were then kept completely in the dark for the next two weeks. On February 13, 2013, at roughly 4pm, Dowling’s Affidavit and Hearing notice were served on Paul Maines and CMT.
The very next morning, the senior communications officer with the Department of Justice issued the following Press Release to every news outlet in Atlantic Canada (Note: I highlighted the words and phrases I think we all would like to see associated with our name in a government press release):

news release final

After desperately trying to find out “who” was making “what” complaint about “what” issue – and being told absolute nothing – Maines and CMT were blind-sided with roughly ten working days to file a defense, with no information to go on other than what was in Dowling’s Affidavit.

The alternative was to accept whatever ruling the Securities Commission deemed proper, a point that was “double-emphasized” in the Hearing Notice:

must attend

With so little time and information to mount a proper defence against the allegations in his Affidavit, Dowling probably assumed that Maines and CMT would be forced to accept whatever decision the Commission ended-up making and just go away. I suspect he never imagined what was coming next – (the next episode) – but here’s a ‘spoiler alert’ – CMT and Paul Maines did not go away.

CMT’s lawyer noted in a subsequent court filing, that the preparation for that Securities Hearing cost was in excess of $150,000. A Bay Street law firm specializing in securities law was immediately retained, and the lawyer taking the case – Mary Biggar – filed a Response Motion on March 1, 2013.

Biggar also began reaching out for documents and information from a number of key players. including the entire membership of the notoriously “secret” “gaming committee” (Wes Sheridan; Gary Scales; Kevin Kiley; Don MacKenzie; and Mike O’Brien). Biggar was also seeking to “cross examine” Steven Dowling regarding the allegations in his Affidavit…..but now I’m getting ahead of myself. Stay tuned.

The Consequences?

None.

Posted in Provincial Politics | 2 Comments

Episode #7: Who Filed the Securities Complaint Against CMT & Paul Maines?

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Episode #7: Who Filed the Securities Complaint against CMT & Paul Maines?

My last three episodes were a tad tedious, and perhaps not riveting story-telling; but unfortunately, if you want to understand the riveting stuff when we get there, you’ll have to first understand exactly who Steven Dowling is, and why he is so important to the CMT lawsuit.

Judge Campbell’s flawed ruling dismissing the CMT/764’s lawsuit relies heavily on what Dowling swore in his 2013 Securities Commission Affidavit, and there are countless false sworn claims in that document that are proven false by other documents Campbell chose to ignore.

Steven Dowling was a lawyer working in the Department of Justice under Robert Ghiz during the 2010-12 timeframe when the e-gaming and financial transactions projects were open files. One of his assigned clients was the PEI Securities Commission.

In September, 2012, Dowling initiated a Securities Investigation with the PEI Securities Commission against CMT and Maines. What prompted him to do that? Let’s see what Judge Campbell says about it:

Para 20: In early September, 2012, Steven Dowling (Dowling), in his role as counsel for the Prince Edward Island Superintendent of Securities, was contacted by Edward Curran, a registered representative and branch manager of the Charlottetown office of ScotiaMcLeod regarding what Curran perceived to be suspicious trading activity being undertaken by Paul Maines (Maines), who was alleged to be illegally soliciting investment in Financial Markets Technologies (FMT).

Dowling formally initiated the Securities Investigation on September 18, 2012. The very next day, Gary Jessop, CMT’s lawyer in Toronto, emailed Tracey Cutcliffe about the allegations (Cutcliffe had left government by that time, and was working as a consultant for CMT), repeating in his email what he had heard. Campbell cited what Jessop said in that email in his ruling:

Para 416: Again on September 19, 2012, Jessop emailed Cutcliffe: “I have just arrived. I have just been briefed on a few issues regarding unfounded allegations. I will need to deal with this this afternoon. I am trying to meet with the branch manager at Scotia Mcleod – the source of the allegations.

Here Campbell attempts to “confirm” the conclusion he draws from what Dowling said in his 2013 Affidavit with words from CMT’s own lawyer, who is seemingly agreeing that Scotia McLeod was the “source of the allegations,” which Jessop declares are “unfounded”.

Elsewhere in his ruling Campbell reiterated that point, and then took it a step further by accusing the plaintiffs (CMT/764) of making unsupported allegations:

Para 524: When that statement and other statements like it were made, the plaintiffs had no evidence whatsoever to support the allegation. In fact, their own information identified Curran as the source. Yet, that did not stop them from making their unsupported allegations in the statement of claim.

The Truth?

Scotia McLeod never instigated a complaint against CMT and Paul Maines with the PEI Securities Commission, despite what Dowling said about his conversation with Edward Curran, and despite the conclusion Judge Campbell drew from Dowling’s unsupported claim – remember, Dowling filed NO SUPPORTING DOCUMENTS with the Motion to Dismiss, so all Campbell relied on was his sworn affidavit.

Dowling may have had a conversation with Edward Curran about Paul Maines and CMT, but securities investigations that can ruin international companies like CMT/Simplex are not initiated on hearsay, rumours or tips from a local “registered representative” at Scotia McLeod. Security Investigations are very serious matters that can easily result in significant harm to the party being investigated. Securities matters are highly regulated. A decision by Scotia McLeod to file a complaint would involve a thorough investigation of allegations by competent legal compliance experts and senior officials within the financial institution, usually in “head office” off-Island.

The truth may never have been discovered on this important point if it had not been for a series of emails between Mark Rodd – a CMT investor – and Scotia McLeod personnel that Rodd filed in January, 2013 as “exhibits” with his Securities Commission Affidavit.

Rodd was contacted by Dowling sometime after Dowling initiated the Securities Investigation on September 18, 2012, and learned from Dowling that Scotia MacLeod had “…released information with respect to my portfolio without my knowledge or consent” (Rodd Affidavit, para 1).

Rodd then wrote a formal complaint dated January 4, 2013 to his Registered Representative at Scotia McLeod, Yousef Hashmi. Four days later, Rodd received an email from John De Pompa, Director of Compliance with Scotia McLeod in Toronto, informing him that the request for his information came from the PEI Securities Commission and Scotia McLeod was obligated to provide the documentation.

Rodd received a final email from De Pompa on January 31, 2012 wherein De Pompa confirmed that the securities complaint against CMT/Maines had not been initiated by Scotia McLeod, information which Rodd provided in his affidavit:

Scotia

De Pompa’s exact words in the email were: “As previously stated, a complaint was not initiated by our office as it related to the September 18, 2012 Order.”

Capital Markets Technology (CMT) was “recruited” to PEI to establish a financial transaction “hub”. Just days before finalizing a formal agreement – after a 60 day period of negotiations and work (the MOU period) which was then extended for another 30 days to allow for that work to be completed in anticipation of a signed agreement – that entire deal with the PEI government was torpedoed by a totally-groundless Securities Investigation initiated by Steven Dowling without anyone ever having filed a complaint!

Why didn’t Campbell say anything about what Mark Rodd swore in his 2013 Securities Commission Affidavit WITH SUPPORTING DOCUMENTS which Rodd said he filed to “correct” Dowling’s false claims? The answer will become clearer in coming episodes when other events happening during this same time period are discussed.

The Consequences?

None.

Posted in E-gaming, Provincial Politics | Leave a comment

Episode #6: Did Paul Maines Solicit an Investment from Paul Jenkins?

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Episode #6: Did Paul Maines Solicit an Investment from Paul Jenkins? 

The real story behind the CMT/764 lawsuit will only be fully known when the truth about what happened during a few fateful days in September, 2012 is revealed – when the first and only Securities Investigation (file #001) to EVER have been conducted in PEI was launched. There’s an incredibly-important story to be told about how the Securities Investigation against Paul Maines and CMT was shut-down immediately before Maine’s lawyer – flown in from Toronto – was about to cross-examine Dowling and other witnesses, but I’ll leave that for another day. This episode (and the previous two) are intimately tied to those events.

This final episode deals with additional false allegations made by Dowling alleging Paul Maines solicited investments for CMT/FMT.  In Episode #5, I mentioned I would deal with Dowling’s allegation that Maines solicited Paul Jenkins to invest in CMT/FMT, so let’s start there.

Dowling’s Claims about Paul Jenkin’s Investment in CMT/FMT

Dowling interviewed Paul Jenkins in the course of his 2012/13 Securities Investigation and made sworn statements in his affidavit about that encounter:

Para 25.  ​In September and October 2012 I [Dowling] met with Paul Jenkins. During this meeting he advised me and I believe that  A. In July 2010, a cousin of his, Garth Jenkins, introduced him to Mr. Maines.

That much is true. But in 25(a) Dowling says: “This introduction occurred at Mr. Maine’s Home, 140 Plug Street, Malpeque, Prince Edward Island.”

That’s not true – that introductory meeting happened in late July at Smitty’s in Charlottetown. As Jenkins clarifies in his Voluntary Sworn Statement given in 2013:

“He [his cousin Garth Jenkins] introduced me to Paul Maines in July of that year — I think it was late July – at Smitty’s one morning. And Paul Maines, you know, gave us a rough outlook of what transactions, you know, financial transactions are and, and would look like, and some opportunities of which, you know, it was totally foreign to me.”

Maines was discussing his business – not soliciting an investment – and Jenkins made that clear.  Yet Dowling goes on in the next subparagraph of #25 of his affidavit to say that when Garth introduced Paul Jenkins to Paul Maines in July, 2010, Maines approached him about investing:

“25(d) While at 140 Plug Street, he [Paul Jenkins] was approached by Mr. Maines about investing in a business venture.”

Again, that never happened.  That discussion happened exclusively between Garth and Paul Jenkins before Paul Jenkins had even heard of Paul Maines.

What Really Happened

CMT’s Factum provided two quotes from  “Exhibit 11”.  The first was from a July 14, 2010 email to Peter Marshall – the person handling the CMT/FMT investment account – wherein Garth Jenkins mentions his cousin Paul Jenkins to Marshall as another interested investor:

“Also, I have another interested investor in the round (my cousin) who would like to see the material. He actually may have a few targetco shells at his fingertips.”

Two days later, (July 16, 2010) Garth Jenkins emailed Paul Jenkins to inform him that Raymond James Ltd. (brokerage firm) was handling the CMT/FMT investments:

“See responses from Peter Marshall, VP at Raymond James.  Peter is Handling the financial raise for CMT.  Paul Maines is the VP of Bus Dev.  He is my future wife’s  cousin and he lives in PEI in Malpeque.  You can meet him next week if you  wish.”

Paul Jenkins not only became aware of the investment opportunity from Garth Jenkins, it was his faith in Garth Jenkin’s business smarts that made him decide to invest in the same venture in which Garth had to decided to invest – something he speaks about in a number of places throughout his sworn Statement and explicitly confirmed in response to a leading question he was asked about what motivated him to invest in CMT/FMT:

Q. Okay. And it would have been your discussions with Mr. Maines that would have motivated you to invest. Is that a fair statement? Or was it other things?

A. Well, it would have been my faith in, in my cousin

The Truth?

According to the documentation submitted to Judge Campbell, all communications and administration concerning CMT/FMT’s investment opportunity were handled by Peter Marshall, (V-P of Raymond James Ltd.) and CMT/FMT’s corporate lawyer (Gary Jessop, CMT lawyer at Blake’s & Cassels).

Despite providing no credible supporting evidence, Dowling swore numerous serious and false statements alleging activity (e.g., Paul Maines soliciting investors) of which Dowling had no direct personal knowledge but attributed to others – and repeatedly misrepresented what he allegedly was told by other individuals who actually had direct knowledge of those activities and events. 

Campbell relies on Dowlings false claims; however, as was pointed out in the previous post, Dowling did not file any documents in the Motion Hearing supporting the “hearsay” claims he made in his 2013 affidavit.

On the other hand, the sworn evidence I have provided in these last three episodes provided by those individuals with direct knowledge of the events and activities which Dowling discusses – especially his claims that Maines solicited investors – was before Campbell and was clearly ignored, otherwise Campbell would not have drawn the following conclusion in his decision:

” 484 Through the course of the investigation, Dowling obtained various emails and other documentation confirming that Maines was soliciting investments.”

The Consequences?

None.

Posted in Provincial Politics | 2 Comments

Episode #5: Did Paul Maines Solicit an Investment from Mark Rodd?

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Episode #5: Did Paul Maines Solicit an Investment from Mark Rodd?

In episode #4,  false  statements made in a sworn affidavit filed by Steven Dowling during the 2013 Securities Investigation claimed that Maines engaged in unauthorized investment activity by soliciting Jeff Trainor to invest in CMT/FMT.  Dowling did the very same thing with another investor, Mark Rodd::solicited

When Mark Rodd read Dowling’s sworn affidavit, out of frustration, he filed his own sworn affidavit to correct Dowling. As he put it in his opening paragraph:

Rodd

In Paragraph 10, Rodd refutes Dowling’s allegation that Maines solicited Mark Rodd’s investment in CMT/FMT:Rodd not solicited.JPG

One other paragraph in Rodd’s affidavit is of special interest. Dowling interviewed Rodd in the course of his Securities Investigation which Rodd discussed in several paragraphs of his Affidavit:

“Para 17:  At the outset, I advised Mr. Dowling that I was and continue to be happy with my investment. Nevertheless, Dowling seemed intent on making any number of statements that appeared to have the goal of discrediting CMT and Mr. Maines. He made few concrete statements in support of his allegations.”

What Judge Campbell Said about Rodd and Dowling’s “Evidence”?

There is only one direct reference to Mark Rodd in Campbell’s 172 page ruling, and that’s where he lays out the various claims of “malfeasance” made by CMT, including CMT’s allegations that Dowling made false statements  involving a number of people found in his sworn affidavit in Paragraph 177 (g): 

“….included information about CMT in his [Dowling’s] affidavit of February 14, 2013, that he either knew to be false or was reckless as to its validity with respect information obtained from Curran, Hashmi, Maines, John [sic] Trainor, Kellie Trainor, Mark Roddand Kevin Murphy, knowing the submission of the affidavit would cause substantial reputational damage to CMT…”

Judge Campbell does not address Dowling’s claim that Paul Maines “solicited” an investment from Mark Rodd. However,he does mention in para 485 that two other CMT investors informed Dowling that they were “not solicited by Maines,” but he doesn’t give names. Despite this information, in the preceding paragraph Campbell makes the following claim which is not supported with any credible evidence:

” 484 Through the course of the investigation, Dowling obtained various emails and other documentation confirming that Maines was soliciting investments.”

The full significance of these false claims against Maines and CMT will become clearer in subsequent episodes.

The Truth?

Steven Dowling swore that Paul Maines solicited investments from a number of people who became investors in CMT/FMT. Those baseless allegations led to the securities investigation and a decision by the PEI government to put negotiations with CMT/FMT on establishing a financial transaction hub in PEI on hold.  No documentary evidence “confirming that Maines was soliciting investments”  was ever presented by Dowling.  In fact, Dowling provided no supporting documents for the Motion to Dismiss whatsoever, nor did he swear a new Affidavit which would have allowed CMT’s lawyer to cross-examine him.

My next episode will explain how the 36 investors actually “invested” in CMT/FMT – including Paul Jenkins who was mentioned specifically by Dowling in his Affidavit – as well as Garth Jenkins, Paul Jenkins cousin.  It will explain how Paul Maines had no role in the investment side of the business: he was V-P of Business Development for CMT, and was working with numerous players focused on advancing the financial transaction hub. The documents Dowling (and Judge Campbell) reference are documents that explain CMT’s background, capacity, and the business model proposed for PEI –  they were not financial documents, and make no mention of how individuals can “invest” in CMT/FMT.

The Consequences

None.

Posted in E-gaming | 1 Comment

Episode #4: Did Paul Maines Solicit an Investment from Jeff Trainor?

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Episode #3: Did Paul Maines Solicit an Investment from Jeff Trainor?

Judge Campbell states, “Dowling’s affidavit does not state that Maines solicited the Trainors to invest. However, there is no denial an investment was made.”

In fact, notwithstanding Judge Campbell’s claim, Dowling’s affidavit does indeed state that Maines solicited the Trainors to invest. In paragraph 5(d) Dowling states:

“Upon transferring her investment account, Ms. Trainor informed Mr. Curran that, on the recommendation of Mr. MacEachern, she and her husband Jeff Trainor had, during 2011, made a $30,000 investment after having been solicited to do so by Mr. Maines.”

Jeff Trainor’s Affidavit completely refutes Dowling sworn testimony:

“With respect to paragraph 5(d) of the affidavit of Steven Dowling…in connection with my investment in Capital Markets Technologies, I confirm that I was not “solicited” by Mr. Paul Maines.” 

Judge Campbell goes on to state in paragraph 486 of his ruling that:

“Dowling also described the contents of an email and attachments originally sent by Maines to Jeff Trainor which included the same investment information Hashmi had received from Maines.”

Again, Jeff Trainor completely denies Dowling’s claim that Paul Maines sent an email and attachments to him, as is clear in paragraph 6:

dowling false claim

There are a number of other “corrections” to Dowling’s affidavit by Trainor, including that his wife never invested in CMT, that she never worked for RBC Securities, and that the amount of $30,000 cited by Dowling was inaccurate.  His affidavit essentially portrays Dowling as having harassed him – and especially his wife – and he provides the following reason why he decided to swear an affidavit in this matter:

“11.  I agreed to make this affidavit in large part by what I perceive to be unprofessional conduct of Mr. Dowling as a lawyer and as a representative of the Superintendent of Securities.”

Read the entire affidavit (5 pages) to get a sense of how Dowling inappropriately involved Jeff Trainor and his wife in this matter and misrepresented the facts in his sworn affidavit.

The Truth?

Despite unequivocal refutation by Jeff Trainor in his sworn affidavit refuting claims made by Steven Dowling that Trainor: (a) was solicited by Paul Maines to invest in CMT, and (b) received “an email and attachments” from Paul Maines with investment information; Campbell excuses the false information sworn by Dowling as insignificant saying: “There was no evidence presented to show any intentional misstatement by Dowling, and if the statements were incorrect through inadvertence, negligent conduct does not constitute misfeasance.” 

The Consequences?

None.

Posted in E-gaming | 1 Comment

Episode #3: Was Chris LeClair an “Agent” of Government?

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Episode #3: Was Chris LeClair an “Agent of Government”?

CMT made a number of “claims” involving Chris LeClair, who was Robert Ghiz’s Chief-of-Staff from June 12, 2007 until October 17, 2011.   In episode #2, I dealt with Chris LeClair’s investment in a CMT-related business venture and noted that Judge Campbell made no mention of that conflict of interest and insider trading issue with Chris LeClair in his decision.

The more important allegation in CMT’s Statement of Claim involving Chris LeClair had to do with his involvement in recruiting CMT/Simplex to PEI to establish a Financial Transaction Hub.   That information related directly to the promises made  to CMT/Simplex in the government’s “recruitment package” which sought to establish a financial transaction platform hub in PEI, giving CMT a number of preferential benefits, including “first mover advantage” on future business.

CMT provided Campbell all of this documented information in its Statement of Claim and supporting documents:

Recruiting Package

This happened in 2010, long before the MOU was negotiated and signed in 2012.

CMT’s allegations that LeClair was intimately involved with the recruitment of CMT and Simplex in the Fall of 2010 – along with  the documents submitted to substantiate that claim – including a copy of the recruiting package – were never mentioned or addressed in Campbell’s 172 page ruling.

I draw your attention to this because there appears to be a strategy on the part of the PEI government and judicial system to avoid putting anything “on the record” about CMT’s involvement with the PEI government prior to the period of the “Memorandum of Understanding” signed in the late summer and early fall of 2012.

The very same thing happened with my complaint to the PEI Law Society against Billy Dow (See: Disappointing Response….).  Despite my best efforts to direct attention to my complaint being exclusively tied to events in the Pre-MOU period – within which I was arguing the evidence was that Billy Dow was contracted as outside legal counsel on the e-gaming file in early 2010 – my actual evidence was totally ignored, and absolutely no mention or written reference was made to anything prior to the 2012 MOU agreement period of the e-gaming story in the Law Society ruling.

Two-thirds of the  “alleged claims” of CMT (which they’ll have to prove in court with hard evidence) relate to the “pre-MOU” period. However, like the PEI Law Society’s response to my Billy Dow complaint, it appears Judge Campbell decided to ignore those “pre-Mou” claims entirely, focusing exclusively on the MOU part of CMT’s claim against Chris LeClair – and others – in an attempt to make those issues disappear.

Campbell’s View on Whether LeClair was an “agent” of government

Campbell states in his decision (a number of times) that Chris LeClair left government on October 11, 2011 and concludes:

“Para 209: “…I also find LeClair, at times material to this action, not to have been an officer or agent of Government and not to have been performing any public function.”

He went even further, completely removing LeClair as a person relevant to the legal action, in paragraph 268:

268 I find LeClair was not a public officer, Government employee, or agent of the Government, and was not performing any public function, at any time material to this action. Therefore, he cannot be liable for misfeasance in public office.

On the face of it, this claim seems totally bizarre, since a “Chief-of-Staff” to the Premier is clearly an “agent of government,”  and LeClair was most definitely Chief-of-Staff when he recruited CMT/Simplex in 2010, which happened  “at times material to this action.”  Campbell’s statement only make sense if you accept his unstated view that Chris LeClair has nothing to do with this case until the MOU was negotiated in 2012, which is not true.

The Truth?

Chris LeClair was intimately involved with the e-gaming and financial transaction platform file from early 2010 as an “agent” of government (chief-of-staff to the Premier) yet his key role in the recruitment of CMT/Simplex to PEI in 2010 outlined in CMT’s claim was never once mentioned or addressed by Campbell in his decision.

The Consequences?

None.

Posted in Provincial Politics | Leave a comment

EPISODE #2: CHRIS LECLAIR’S “INSIDER TRADING”

Question #2: Did Chris LeClair commit “Insider Trading” with the egaming file?

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BetterBackground

After the Auditor General made public her report Special Assignment on E-gaming, the media jumped all over her finding that two senior government officials had an appearance of “conflict of interest” in the e-gaming file: Billy Dow and Chris LeClair.

Chris LeClair was Premier Ghiz’s Chief-of-Staff from June 12, 2007 until October 17, 2011.  Following his departure from Government, LeClair formed his own private consulting company (Policy Intel); however, he continued to work on e-gaming as a private consultant with McInnes Cooper law firm.

LeClair’s involvement as a private consultant on the e-gaming file in the summer and fall of 2012 is key to understanding the full e-gaming affair, but that’s a story for another day

Meanwhile back at the Premier’s office – just days after LeClair’s departure – Ghiz ordered that all of LeClair’s emails and documents be destroyed without first copying them for the Provincial Archives (as is the law). I’ve already noted Campbell’s view on that issue in my article: “Judge Campbell’s Flawed E-gaming Ruling Throws Auditor General under the Bus  Campbell considered Ghiz’s action “standard procedure.”

It wasn’t the AG’s mandate to do anything more than draw the government’s attention to the matter of perceived “conflicts of interest”.  It was government’s duty to take the next step. The AG’s concerns didn’t go unnoticed by the media or opposition, but numerous opposition MLAs calls for disciplinary action and further legal investigation at the time were ignored by government.

The AG was aware of Chris LeClair’s relationship with Paul Jenkins who is the “local business owner” – in the following quotation from the AG – who introduced LeClair to CMT’s Vice President of Business Development at the time (Paul Maines) and the CEO of Simplex (Philip Walsh):

Chris LeClair.JPG

It was obviously this “personal” involvement that concerned the AG and offered grounds to believe LeClair relied upon insider knowledge for an investment opportunity made by his wife.

Chris LeClair was actually involved in the egaming file at least a year earlier than “early 2011.”  Consider what Gary Scales said in his sworn affidavit concerning both Chris LeClair’s and Billy Dow’s involvement in egaming  (Note: Billy Dow is with Carr, Stevenson and MacKay law firm):Gary Scales Affidavit

It was because of LeClair’s intimate involvement in the egaming/financial services platform project that the AG raised a concern about a potential “conflict of interest” and offered two paragraphs to explain the factual basis for that concern:

Chris Leclair Investment in AG report

CMT’s Claim Against LeClair and LeClair’s Response

(a) From the First CMT Statement of Claim (2015-04-09)

101. Unbeknownst to CMT, Maines or Jessop, the wife of LeClair, Christine Daprat, also purchased securities of RevTech.

(b) From the First Government Defence: (2015-04-09)

Does not respond to para 101 and is silent on the issue

(c) From the Amended Statement of Claim

86. On or about June 5, 2011, unbeknownst to Maines or Walsh, on information provided by Jenkins, LeClair used his wife’s maiden name to invest in the public company that was being targeted by CMT.

(D) From the Government Defence: (2018-04-14)

24. As to the allegations made in paragraph 86, LeClair states and the fact is, that the wife of LeClair purchased a convertible debenture in Revolution Technologies Inc. for $1,500.00, the debenture was never converted, and no financial benefit was ever received from the debenture.  LeClair otherwise denies the remainder of the allegations.

LeClair here admits to the fact that his wife purchased a convertible debenture – this was already confirmed and made public by the Auditor General –  but DENIES CMT’s claim that he obtained information about that investment opportunity from Paul Jenkins – a connection that would clearly show that LeClair did indeed obtain information about the investment opportunity as “insider” information on a file he was working on for the PEI government.

You can say pretty much anything in a Statement of Claim or Statement of Defence, but when it comes time to file affidavits you need to swear an oath that you’re telling the truth, and there are potential consequences for not telling the truth. LeClair admitted a bit more of the truth in his sworn affidavit – namely that he did obtain the information about the investment opportunity from an insider, Paul Jenkins:

LeClairs Affidavit

When LeClair was cross-examined under oath last January, he admitted a bit more of the truth when he casually stated that “we had invested” which grabbed CMT’s lawyer’s attention. The following exchange between MacDonald and LeClair then took place:

Chris Leclair cross

Judge Campbell’s Decision

Judge Campbell never mentions anything at all about the matter of Chris LeClair’s conflict of interest and insider trading. The evidence before him is the same evidence you are reading.  Nor does he mention (a) the false defence from LeClair denying knowledge that Paul Jenkins was the source of the information on the investment, (b) LeClair’s subsequent admission of that fact in his sworn affidavit, nor (c) LeClair’s admission in his sworn testimony at Cross examination that he was personally involved in the investment, not simply his wife.

Campbell does make a few comments about “conflict of interest” and quotes the Auditor General, but remains silent on the matter he was actually called upon to consider:

117    Other matters addressed by the Auditor General included the need for improved conflict of interest guidelines at the time in question. [Campbell’s Ruling].

The Truth?

Chris LeClair not only had a “conflict of interest” but committed “insider trading” while serving as Chief-of=Staff for Robert Ghiz when he obtained information from Paul Jenkins about an e-gaming investment opportunity with which he was personally involved on behalf of the PEI government.

The Consequences?

None.

Posted in Provincial Politics | Leave a comment

Truth & No Consequences: The Justice Campbell E-gaming Quiz Show

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Remember that pioneering TV game show “Truth or Consequences?” On the show, contestants received roughly two seconds to answer a trivia question correctly before a buzzer sounded. If the contestant could not complete the “truth” portion, well…there’d be “consequences.”

In coming days and weeks, I plan to post not less than 25 separate e-gaming questions/issues of significance to the e-gaming story and Judge Campbell’s recent decision to dismiss the CMT lawsuit.

I’ll ask you how you would decide based on the evidence I provide, then see what Judge Campbell decided and wrote in his decision about that issue. You  will hopefully get the truth, but unfortunately with PEI’s version of this time-tested quiz game there are no consequences.

If you’d like to receive email notifications of new episodes in the series enter your email address and click the “Follow” button found on the right-hand side above the “Search”

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Question/Issue #1:  Did Lawyer Billy Dow know about the extension of the Memorandum of Understanding (MOU) with Capital Markets Technology?

Judge Campbell acknowledged that at the time discussions on extending the MOU were happening between CMT and the Provincial government, CMT’s lawyer  (Gary Jessop) met with Billy Dow on September 20, 2012.

In Paragraph 417 of his decision, Judge Campbell presents the communication as relating exclusively to a securities matter, and makes no mention of the MOU or financial transaction platform issue:Paragraph 417Why would Judge Campbell mention anything about Dow’s knowledge of the MOU extension when Dow swore in his Cross-examination testimony  – which was in front of Campbell –  that he had absolutely no knowledge of the MOU extension:

Dow Cross.JPG

“To this day, I don’t know” leaves no doubt that Dow testified under oath that he knew nothing about the MOU extension.  But don’t answer the question just yet!

Two days before Jessop (who lives in Ottawa) was to be in Charlottetown to meet with Dow on September 20, 2012 “...to discuss the [MOU] extension and other transaction issues,”  he informed Dow that the MOU had been extended “…by an exchange of emails” and suggested that “…it makes sense to properly paper the extension.”   

Jessop

The Truth?

Billy Dow swore he knew nothing whatsoever about the MOU extension in his Cross-Examination. Irrefutable evidence that Dow knew about the MOU extension was before Judge Campbell’s eyes but he never mentions that document, nor points out Dow’s false sworn testimony and completely misrepresents  the purpose of the meeting between Jessop and Dow on September 20, 2012, which was spelled out clearly in Jessop’s email which is inserted above.

The Consequences?

None.

Posted in E-gaming | 1 Comment

The PEI Law Society’s Disappointing “Response” to my Billy Dow Complaint

billdowI posted a blog article on April 2, 2019 titled, “Complaint Letter to the Law Society against Billy Dow,”   That followed another article in my e-gaming funding series which documented Dow’s involvement in that fiasco: “A Conspiracy to Commit Fraud: The Full Story on the E-gaming Loan.”

I’ve since received a decision letter from the Law Society Secretary-Treasurer, Susan Robinson.

When I filed my complaint, I expected I would receive a response from Dow. That’s the process mapped out on the PEI Law Society website :

“The lawyer involved will be sent your complaint and asked for a response within 2 weeks (or longer in appropriate circumstances). Once the lawyer’s response is received, a copy will be sent to you. Along with the lawyer’s response, you will be given an opportunity to make additional comments. At this point, you may be satisfied with the lawyer’s response. “

Well none of that happened.  Dow likely received a copy of my material and complaint letter, but I heard nothing from anyone until I received the decision letter in the mail.

My initial complaint letter explained how there were two separate issues I wanted addressed:

“As described in my articles, the nature of my complaint against Mr. Dow is two-fold: (1) that Billy Dow had a conflict of interest while representing the government on the e-gaming file; and, (2) that Billy Dow both acted and failed to act in ways that did not properly serve and protect his client, the PEI government, especially regarding his handling of the $950,000 e-gaming loan issued to the Mi’Kmaq Confederacy of PEI from the PEI Century Fund.”

Regarding my documented incidents in support of my #2 complaint that Billy Dow “acted and failed to act” in ways to protect his client regarding his handling of the $950,000 e-gaming loan, the Secretary-Treasurer for the PEI Law Society simple stated: “This office does not deal with a lawyer’s negligence or errors made.”  

Of course, the PEI Law Society could have chosen to investigate the mishandling of the e-gaming loan by Dow not from the perspective of “negligence” but how so many of the ethical provisions of the Law Society’s Code were violated by Dow which were well-documented in the material I supplied. However, the Law Society apparently had no interest in looking into those events and activity any further.

I expected as much regarding that part of my complaint.  But what I received in response to Part #1 of my complaint was totally unacceptable, and it’s the reason I’m writing this article to make this disgraceful “lack of response” to my complaint public information.

As I explained clearly in my complaint letter, my allegation that Billy Dow was in a “conflict of interest” had nothing to do with a previous complaint which Michael Redmond (when he was leader of the NDP) filed with the PEI Law Society against Dow. That complaint had to do with Dow’s involvement representing Innovation PEI in the Memorandum of Understanding (MOU) with “764” – a 100% owned subsidiary of Capital Markets Technology (CMT).  I wanted to be absolutely sure there was no confusion on this pont, so I wrote the following in my complaint letter:

“I am aware that a previous complaint alleging that Mr. Dow had a conflict of interest with his involvement in the e-gaming file was previously filed with the PEI Law Society by the former Leader of the PEI New Democratic Party (Michael Redmond), and resulted in a disciplinary committee ruling that Mr. Dow was not in a conflict of interest.

Redmond’s complaint related specifically to Mr. Dow’s involvement in the signing of a Memorandum of Understanding (MOU) in the late summer/fall of 2012 between the PEI government and Trinity Bay Technologies (TBT) [a wholly-owned subsidiary of Capital Markets Technologies (CMT)]. This issue is not the basis of my complaint.

New documents have recently come to light, as a result of filings with the PEI Supreme Court, revealing that Mr. Dow’s involvement in the e-gaming file did not begin with his involvement with the MOU in 2012, but that he was retained by the PEI government to act as outside counsel on the entire e-gaming project much earlier, in February, 2010. Mr. Dow continued to act in that capacity up to and beyond the date the PEI government ended the e-gaming project on February 24, 2012.

Despite my efforts to ensure clarity on this key issue, there was ABSOLUTELY NO REFERENCE WHATSOEVER to my complaint, which was treated as if it had been the same complaint made by Redmond. Unbelievable!  Read what Ms.  Robinson wrote, keeping in mind what I wrote in my letter and cited above:

“The allegation of conflict of interest has already been dealt with by this office and confirmed by a Discipline Committee in August, 2017. I repeat the findings here.”

And that’s what she did, but why?  Why “repeat the findings here” when they had  NOTHING whatsoever to do with my allegation of conflict of interest against Dow? My complaint alleged a conflict of interest more than a year earlier “before” he invested in the company.

I thought about pursuing this matter further with the PEI Law Society but decided against it. What would be the point given the blatant refusal to even acknowledge the complaint I made in writing?

The facts supporting the legitimacy of my complaint will eventually be known by all I’m sure.   I believe the evidence will show that Billy Dow purchased shares in a company involved with the e-gaming/financial transaction platform initiative while acting in his capacity as a lawyer for the PEI government on that same file.   

The simplest of checks which lawyers are required to make to eliminate potential conflict of interest situations with investments would have revealed exactly the connections between the company Dow invested in and CMT/FMT.  Was such a search not undertaken by Dow when he made the investment?

I believe Dow had personal “insider” knowledge of the company’s involvement with e-gaming.  Dow was legal council for the province on the secretive e-gaming file and was attending the clandestine e-gaming working group meetings at the time.  It was fully-known by members of that group that CMT had exclusive rights to deliver the financial services platform in North America owned by Simplex in the UK (CMT also owned 30% of the shares in Simplex).  

Look at the date and subject lines on the following email.  And don’t forget – Billy Dow was the e-gaming lawyer at this time and this was before he purchased shares in a venture of FMT (Financial Markets Technology – which was 100% owned by CMT)  and was set up on advice from the PEI government.   

IMG_4314

[Note to John Eden: It’s probably not wise to refer to a “secret” gaming file as a “secret gaming file” in an email available to the public through Access to Information].

It was John eden who was listed as the contact person in the recruiting package which the PEI government put together to entice CMT/FMT to set up in PEI, making the following claim that CMT/FMT would have “first mover advantage”:

first mover.JPGJudge Campbell says the MOU has nothing to do with CMT. FMT (764) was only set up as a 100%-owned subsidiary because CMT knew that was an expectation of the PEI government, as John Eden expressed on page 12 of the recruiting package:subsidaryYet Judge Campbell says CMT/FMT (764) had nothing whatsoever to do with e-gaming: “Neither CMT nor 764 were ever involved in any way with the so-called e-gaming project.”  

Baffling!

I can’t wait to read CMT’s appeal documents which I expect will be filed before too long with the PEI Supreme Court of Appeal.

Posted in Provincial Politics | 4 Comments

Judge Campbell’s Flawed E-gaming Ruling throws Auditor General Under the Bus

Judge Campbell

“A former provincial Liberal Party president and chairman of several election campaigns, Judge Campbell said that some critics cling to a ‘ridiculous’ belief that politically active lawyers always keep one eye trained on a judgeship. ‘I was involved in politics because I loved it,’ said Judge Campbell, who was appointed in 2001 by former prime minister Jean Chrétien’s Liberal government. ‘In PEI, politics is in your blood. It’s the provincial sport. Nobody is looking at whether they will get this or that reward.’ “

[Globe & Mail, “Appointment of Judges too Political, Critics Say,” May 16, 2005]

++++++++++++++++++++++++

Campbell’s Liberal connections certainly didn’t hurt his chances of getting appointed to the bench, especially given that he had just a few years earlier – as a practicing lawyer – pleaded guilty to assault after punching a CBC producer in the face, a crime for which he was granted an “absolute discharge.”

In an award-winning article Paul MacNeil published in “Grassroots Editor” by the International Society of Weekly Newspaper Editors titled, “Are Gordon Campbell’s Robes Tainted?” he begins with some pretty strong words:

“The Appointment of Gordon Campbell to the PEI Supreme Court is a mockery to the justice system he now serves.”

You should read the entire article, but here’s an excerpt to give you the guts of the story:

MacNeil Article on Gordon Campell

What really makes a mockery of the justice system is Judge Campbell’s 172 page ruling last week against Capital Markets Technology (CMT) dismissing their lawsuit. I was shocked to see how blatantly obvious Campbell’s bias against CMT was in his reasons for dismissing CMT’s action. Campbell’s decision appears to have been written with one aim in mind: to protect the named defendants in the lawsuit, especially the former Liberal Premier Robert Ghiz.

I’ll provide just a couple of examples of Campbell’s flawed reasoning in this article:

  1. GHIZ’S ORDERED DESTRUCTION OF GOVERNMENT RECORDS:

Campbell’s total acceptance of Ghiz’s “sworn testimony” about authorizing the deletion of all his chief-of-staff’s records without first copying them as required by law is laughable.

The normal policy after people leave government is to copy or somehow “back up” all government records before asking ITSS to delete the electronic files and accounts.  The head of ITSS told members of the Public Accounts Committee that if the person doing the work had known the records had not been backed-up as required by the Public Archives and Records Act, ITSS would not have deleted them. The law completely forbids the wholesale deletion of important government records, but Campbell falsely declares that Ghiz followed standard procedure.

If you want a full explanation for why Ghiz shouldn’t be excused for ordering the destruction of government records read the Brief I submitted to Judge Orr in 2018, and you’ll see how wrong Judge Campbell is to say that what Ghiz did was done in the course of “normal business”.

2.  CMT’s INVOLVEMENT IN E-GAMING AND THE LOYALTY CARD PROGRAM

Note: This is a pretty long story in itself, but it ends with Judge Campbell throwing the Auditor General under the bus by discrediting the findings of her E-gaming report, so bare with me.

In CMT’s Statement of Claim, Paragraph 127 we read:

127.  In October of 2011, the Loyalty/VIP Program was given approval by the Department of Tourism and Culture and representatives of CMT created a survey to determine what local business operators would be looking for in such a program.

The government’s lawyer, Jonathan Coady responded in paragraph 32 of his Statement of Defence claiming government had “no knowledge” of any Loyalty Card Program.

I published an October 20, 2018 article titled “Government Amnesia and the Loyalty Card Program” after receiving Loyalty Card documents through an Access to information request, proving Coady’s claim false. Those documents were subsequently made public and entered into the CMT court record.  Judge Campbell nowhere mentions that those records prove that Coady’s claim that government had “no knowledge” of the Loyalty Card Program is completely false.

Campbell then mistakenly dismisses the entire issue of CMT’s involvement in the Loyalty Card Program by concluding that CMT had nothing to do with the Loyalty Card Program, only Simplex. Yet, the Auditor General confirmed CMT’s involvement in the Loyalty Card Program in many sections of her report, including section 4.3:

4.3 In May 2011, the former Deputy Minister of Tourism [Melissa MacEachern] contacted the Vice President of Business Development [Paul Maines] regarding the establishment of a loyalty card program for PEI. The work on the loyalty card overlapped the E-gaming initiative and involved both Capital Markets Technologies and Simplex.

And in section 4.6 the AG further states that: “These two companies [CMT and Simplex] worked together to assist government in the development of the Loyalty Card Program.” 

And in section 4.4 she provides additional details about CMT’s lead role in the project: TestThat local consultant mentioned was Eddie Francis, who was hired by CMT and took direction from Paul Maines. All the communication from the PEI government was with CMT in those 207 pages before Judge Campbell, and an email from the Deputy Minister (Melissa MacEachern) to CMT employee Eddie Francis confirming that the Loyalty Card Project “was a go” was also in front of Judge Campbell. If CMT wasn’t involved in the Loyalty Card Program, then how does Campbell explain that email? Eddie Francis worked for CMT, not Simplex.

Campbell completely fails to acknowledge the fact that CMT had exclusive North American rights to the Simplex Financial Transaction Platform and Simplex was CMT’s “technology partner,” as the Auditor General confirms in section 6.15 of her report.

Attempts to establish Simplex’s financial transaction platform in PEI were for both the e-gaming and loyalty card programs – and “overlapped” as the AG puts it – because both those initiatives would be with CMT if either were to go forward. That’s why the government negotiated the MOU for the establishment of the Financial Transaction Platform with CMT, not Simplex.

So, despite overwhelming evidence to the contrary from both the documentation and the Auditor General’s report, Campbell nonetheless makes the following outrageous claim [764 was a 100%-owned subsidiary of CMT]:

Not involved in Claim

Here’s how the AG describes CMT’s ongoing business relationship with the PEI government:cmt

Throwing the Auditor General under the bus probably wasn’t the smartest strategy for Judge Campbell: her fact-finding mission uncovered 10,000 e-gaming documents, even though she was denied access to many more, and many others were destroyed.

But here’s the thing: only a small portion of the 10,000 records were produced for Court, to say nothing of the thousands more the AG couldn’t access – and they continue to be withheld from CMT’s lawyer.

Perhaps if all those documents were produced – notwithstanding the thousands more that have been destroyed or have mysteriously “gone missing” – we might finally begin to see a more complete and truer story about what happened with the secretive and corrupt e-gaming fiasco.

A Two-fold Cover-up

The PEI government and its legal counsel (Stewart-McKelvey) have worked diligently over the past year to keep the most important documentation about what really happened with e-gaming from being entered into the court record for consideration by Judge Campbell in his decision.

Brad Mix – who was then (and still is) the Director of Business Attraction with Innovation PEI, and was heavily involved with CMT – had two years of his records mysteriously go missing (Mix believes a phone upgrade somehow wiped select years of files off the government server) during the key e-gaming period (2010-2012), and government was aware that they were missing even before the court case began.  That information was not disclosed, in violation of the Rules of Court.

When I asked for Brad Mix records in October, 2018 I wasn’t told they were missing, I was led to believe there never were any records after months of waiting. It was only much later (July, 2019) that it was discovered by the Information Commissioner that the government knew since 2015 that two years of Brad Mix’s records (during the period when Mix was heavily involved in e-gaming) were gone, and government knew that fact since at least early 2015.

In addition, hundreds of new e-gaming records identified through Access to Information requests continue to be illegally withheld by the government.

A cover-up has so far been achieved to some extent at least in two ways: (a) government failed to disclose relevant and material e-gaming documents and information about documents to the court; and, (b) government refused to release e-gaming records in compliance with the FOIPP Act in time to be considered in the lawsuit. 

The government is currently refusing to release Access records in accordance with the FOIPP Act with a number of e-gaming Access Requests, and there are at least four reviews of such requests with the Information Commissioner on the never-before used grounds in section 9(2) of the FOIPP Act, which amount to an unjustified refusal to release records: e.g., there are no legal grounds to withhold the documents – and the government isn’t arguing there are any grounds – government just won’t release the records.

But how does this government cover-up involve Judge Campbell?

Judge Campbell was repeatedly alerted to the fact that the Defendants to the initial action were refusing to produce thousands of e-gaming records by CMT’s counsel, John McDonald.  I sat through 3 of the 4 days of the Motion Hearing in April and heard first-hand how frustrated CMT’s counsel was that Jonathan Coady wouldn’t produce the government documents which MacDonald had identified as likely being material and relevant to the case.

MacDonald asked the Judge to accept some records that had come from Access Requests, explaining that his plan “B” was to get access to at least some of those undisclosed e-gaming records through a number of targeted Access Requests which had already been submitted many months earlier by Maines, but government was not releasing those documents despite a legal requirement to do so, so MacDonald was left to argue that to put his “best foot forward” he needed access to the records. Campbell wasn’t swayed.

In response, Campbell ruled that he would not receive or consider any new evidence or documentation. Ironically, just days after releasing his ruling, a number of those key Access documents were released by government, and over a thousand more are yet to be released.

I expect the Notice of Appeal which CMT has promised to file soon will contain a very long list of inaccurate claims, biased and selected reasoning, cherry-picking facts, and countless instances where important information relevant to the issues and arguments in Campbell’s ruling is completely ignored.

Campbell was a “case management” judge charged with moving the action along to some conclusion. Instead, he has failed to ensure a just hearing for CMT which indeed makes a mockery of our justice system.

If the Appeal Court doesn’t overturn Campbell’s decision and allow this matter to go to trial, then I’ll be satisfied that our judicial system in PEI is corrupt from top to bottom, inside and out.

 

Posted in E-gaming | Tagged , , | 5 Comments

Is another corrupt PNP scandal now operating in PEI?

PEI

Last week, I received a call from a person I consider “reliable,” informing me that a recent immigrant to PEI told him that he was able to get his federal Permanent Canadian Residency status thanks to the PEI government, through a quite elaborate scheme orchestrated by some PEI Immigration consultants and their companies.  What my source heard shocked him, and although skeptical, was able to verify it was true after speaking with an Island Immigration Intermediary.  Here’s how the scheme works.

An Island business (I wasn’t informed which one) was paid $30,000 by an Island Immigration Agent (I wasn’t informed which Island Intermediary) to simply offer him a job and pretend he was working for his company if ever questioned. Then the immigrant provided the Intermediary with $170,000 to cover the costs of the job, including his own salary, his employee contributions and taxes, as well as all the employer’s deductions and costs.

I thought this was pretty-far out there to be honest, but I trusted my source enough to pass this information on to a reputable local journalist.

Then on Sunday, (September 16, 2019) I received an email from my initial source with a link to a CBC article and a note saying: “This is what I’m talking about.”

After reading that investigative report, there is now absolutely no doubt in my mind that what I was told about another corrupt PNP scam operating in PEI is sadly true.

CBC Reporter Geoff Leo broke the story on Saturday (September 15, 2019) titled: “Toronto immigration firm charges $170K for fake Canadian job,” Geoff Leorevealing shocking details about how immigration consultants are using exactly the same approach as was explained to me last week to scam PR status out of the government.  I trust you will take the time to read this important article in its entirety, but for the purpose of this blog article, I want to highlight a few details that connect directly to Atlantic Canada and PEI.

Geoff Leo’s Investigation of PNP Immigration Fraud

Posing as a wealthy foreign national seeking permanent residency in Canada – and with the help of a translator – Mr. Leo established a relationship with a Toronto-based immigration consulting company, WonHonTa Consulting Inc., and eventually received a job offer proposal costing $170,000 for a bogus job, an amount explained as needed to cover the “Canadian employer’s fee, the paper trail, and their own wage.”

The owner of WonHonTa suggested either Saskatchewan or Atlantic provinces for the provincial nominee application:

Song recommended the undercover journalist consider either Saskatchewan or Atlantic Canada because the qualification requirements are low and the wait times are short. He said it’s $180,000 for a job in Saskatchewan or $170,000 for the Atlantic provinces.

The reporter was told that WonHonTa had placed more thanIf you don't work a dozen people in Atlantic Canada in the previous year, saying his company had a “…national network of head hunters who help recruit willing employers,” some of which he claimed were government immigration officials.

The following information in the CBC article grabbed my attention:

Erica Stanley, an immigration consultant in Charlottetown, told CBC she’s been flooded with calls from foreign nationals looking for an employment offer. “So, just the volume of phone calls is ridiculous. And my inbox is full of website inquiries,” Stanley said. “They’re like, ‘Well, we’re willing to pay.’ I said, ‘Oh I’m sure you are but it’s illegal to do that.’ ‘Oh, but everybody’s doing it.’ I said, ‘Well, that’s nice, then you can find someone else who can do it.'”

I know Erica very well. When I was the Executive Director of the PEI Association for Newcomers to Canada from 2000-2010, Erica was the Coordinator of our Community Outreach Program for most of that time, before she left to work with international students at UPEI.  She later moved into the immigration consultant business (Mazu Consortium Ltd) and is currently one of the 12 intermediaries authorized to submit PNP nominations to the PEI government.

Below is a list of the twelve (12) immigration companies or “intermediaries,” but first a bit of background – up until recently, there were only seven (7) intermediaries:

Seven Intermediaries

On June 28/17, under the former Liberal government, Executive Council authorized Island Investment Development Inc. (IIDI) to issue a Request for Proposals (RFP) to expand and designate up to 10 Island agents for a five-year term. In the end, 12 companies were granted “intermediary” status.

For reasons I’m not privy to, HP Consultants was dropped from the initial seven (Henry Philips currently has a lawsuit against the PEI government regarding this matter) and six new companies were added to the original list. The current intermediaries are as follows:

12 companies

I have full confidence that Ms. Stanley would never be involved in such an unethical and illegal scam, and her quick assessment that what she is continually being solicited to do by would-be immigrants is “illegal,” – and her candid discussion with Geoff Leo about that solicitation – bears that out.

However, there are eleven other companies feeding PNP nominations to the PEI government, and it would appear one or more of them are involved in this PNP corruption.  I was told by my source that there is such a shortage of skilled construction workers that the Intermediaries are choosing occupations in this sector to expedite processing times and avoid scrutiny.

Little is apparently being done to follow-up on worker applicants by Canadian Immigration officials – both federal and provincial – but the statistics with those audits and reviews that have occurred should definitely have raised enough red flags for government to take action to put an end to this corrupt practice, at both federal and provincial levels:

“21 of the 33 files chosen for review found the applicants were not working for the employer or had never worked for the employer.” 

It is important to understand that there are actually several different PNP programs or “streams” under which workers can come to PEI and become Permanent Canadian Residents:  the one that allows this particular scheme to operate in PEI is called the “Atlantic Immigration Pilot”.

The Atlantic Immigration Pilot

This federal program was launched in March 2017 in all four Atlantic provinces, and has just recently been extended for another 2 years, so it’s really no longer a “pilot” project. It is an employer-driven program that facilitates the hiring of foreign workers. All principal applicants arriving in Canada under the pilot program must have a job offer from a designated employer.

How many designated businesses for the Atlantic Immigration Pilot exist in PEI?

A CBC article published October, 2018 stated that: “More than 200 companies on P.E.I. are now designated to apply to hire foreign nationals under the Atlantic Immigration Pilot Program (AIPP).”  The PEI government needs to make public an updated list of those designated companies, and I suspect there will now be many more companies on the list.

It would be interesting  to see exactly how many of the total number of designated businesses are “newly registered companies”and bona fide businesses, and how many are doing little or no business beyond offering bogus jobs to wealthy foreigners so they can become Permanent Residents of Canada, and receiving extremely lucrative sums for doing essentially no work. 

Immediate PEI Government Action Required

As you can see from the most recent Annual Report of Island Investment Development Inc., there are really only about 4-5 hundred Atlantic Immigration Pilot files that would need to be investigated.

Immigration stats PEI

And by “investigate,” I mean sending someone to the workplace (multiple times if necessary) to discover whether the person is actually working for the company as stated on the paperwork –  which we can assume will all be in perfect order, and “technically” meeting all the terms and conditions stipulated for the program.  As the Immigration consultant told Geoff Leo:

“For Immigration Canada, they are understaffed,” Liu said. “The massive size of the country makes it impossible to pull resources for site visits just to find out if you are actually working at this company.” However, in the unlikely event that an immigration official makes an unexpected site visit to see if the foreign national is at work, Liu said the employer would say the worker was out of the office on business.

A less comprehensive and extensive investigation requiring fewer resources and time would look at just those files in the Atlantic Pilot Program processed since the PNP-Investor Program was shut down in September, 2018, as a result of fraud concerns (See: “Citing concerns, P.E.I. shutting down PNP’s immigrant entrepreneur program“).

I suspect that it was at the time that the PNP Investor stream ended that creative thinking caps were dawned to come up with a new way to keep already lined-up Investor clients happy and the big bucks flowing.

The Atlantic Immigration Pilot allotment for PEI in 2018 was 220 people – a provincial annual allotment which Jamie Aiken, the executive director of P.E.I.’s Office of Immigration reported would easily be filled – so an initial investigation should focus on Atlantic Immigration Pilot files processed in the last quarter of 2018, and the first three quarters of 2019 (likely a couple of hundred people). A thorough examination of those cases would tell the tale on whether the people receiving immediate Permanent Resident status thanks to the PEI government’s nominations are actually “at the job”.

If the statistics cited in the CBC Investigation article by Geoff Leo are accurate, Atlantic Canada – and PEI – are clearly infected with this latest PNP malignancy.

The King government needs to immediately reassure Islanders that this matter will be properly dealt with by announcing some form of investigation or inquiry by an objective agent with a credible degree of independence (perhaps the RCMP) to determine the extent to which this egregious and fraudulent scheme reported by Mr. Leo is operating in PEI.

Posted in PNP | 7 Comments

PEI’s NEW “BUSINESS CORPORATION ACT” MUST BE AMENDED IMMEDIATELY

corporate secrets

Island Farmer reporter, Andy Walker, recently wrote an excellent synopsis of the recent Irving land grab of 2,200 acres titled, “The Line has been Drawn.”  Please take the time to read it before continuing.

Walker agrees with me that there is no “loophole” in the Lands Protection Act that allowed this Irving land deal.  The claim that the deal was “legal” apparently relies on provisions found somewhere in the new Business Corporation Act or Regulations; however, no one has yet explained how exactly that happened, or what specific provisions were relied on.

Whatever made the Brendel Farms deal with the Irving family “technically legal” in the mind of Geoffrey Connolly – Irving’s lawyer who both advised his client on the matter and effected the deal – must be precisely identified and immediately changed.

Andy Walker is absolutely correct to say that if the new Business Corporations Act – brought into law by the previous Liberal government – which apparently “legally” allows corporation-to-corporation transfers of land without first receiving approval from government (or even requiring corporations to notify government of the deals), then the Lands Protection Act is completely worthless.

One has to wonder how a law governing the dealings of corporations can be allowed to “exempt” itself somehow from another widely-supported piece of legislation in force: the Lands Protection Act.

As well, the new Business Corporation Act does not require the disclosure of the names of the corporation’s shareholders; so Islanders – or even members of the government for that matter – will no longer be able to calculate the total land holdings of individuals belonging to interlocking corporations.

I first discovered the MacLauchlan plan to render corporate shareholders “invisible” to Islanders with a new Business Corporation Act nearly two years ago, and raised concerns in various blog articles, Guest Opinions in Island newspapers, and in direct communication with both PC and Green MLAs when the Bill came to the House for debate.

In the end, the Bill received unanimous support from all MLAs on the final day of the House sitting (June 12, 2018). The Bill also received Royal Assent that same day.

I honestly don’t believe opposition MLAs realized at the time they said “yeah” that this new Bill could completely gut the Lands Protection Act, or render the shareholders of all corporations operating in PEI completely invisible to Islanders.

As you may be aware, I have repeatedly been calling for a “name search” to be added to the Corporate/Business Registry empowering Islanders to easily see all the corporations that individuals are involved with so they can then discover the land holdings of all those corporations to arrive at an accurate calculation of the total owned acreage.

Although a name search field on the Corporate Registry still wouldn’t reveal the total amount of land that an individual corporation would be required to count toward the 3,000 acre limit (which includes “leased” land) it would nonetheless provide a good start to getting a clearer picture of the amount of land individuals in corporations – and interlocking corporations within the same family (which is defined as “one corporation” as per the legal definition of “corporation” in the Lands Protection Act) – own.

Premier King is on record as being strongly supportive of doing this – adding a “name search” field to the corporate registry – as you can see from his response to question #4  at the all-leader debate on the land:

 

But what possible use would a new “name search” in the Business/Corporate registry be if the new Business Corporations Act doesn’t require the names of corporate shareholders to be inputted into the registry? None!

Clearly, amendments to the Business Corporations Act (or “regulations” – depending on where the authorization to withhold shareholder names is granted) should be the SECOND order of business when the House reconvenes this Fall. The FIRST order of business should be to amend that same legislation to ensure that no secret, corporate-to-corporate land transfers are ever allowed again in PEI, and the Irving family be forced to sell the 2,200 acres to the local farmers who were willing to pay $6,200 per acre for it. The THIRD order of business would be to put a name search on the Corporate/Business registry.

For the government to do anything less would make a complete mockery of the PC commitment to provide Islanders with a truly open and transparent government.

Posted in Provincial Politics | 4 Comments

Breaking News: Brendel Farms had a “done deal” with local farmers; then sold to Irving

Yesterday I posted an article with  information on the market price of prime farmland in Prince County at rates as high as $6,500 per acre, pointing out that the Irving family was somehow able to acquire the 2,200 acres for a little more than a third of the market value for the land, roughly $2,300 per acre ($5.1 million). 

After posting that blog article, I was contacted by a person privy to what actually happened with the Brendel/Irving land transfer scheme.  I agreed to protect that person’s anonymity, but I’m absolutely certain what I’m about to report is true.

Six separate farmers in the Bedeque area had learned that the Gardiner family (Brendel farms Ltd.) was selling roughly 32 parcels of land, totalling approximately 2,200 acres.

Negotiations between the Gardiner family (Brendel Farms Ltd.) and the six local farmers  culminated in what was described to me as a “done deal.”  And here comes the real shocker:  The price the local farmers offered was $6,200 per acre ($13,640,000). 

The group of six farmers was then shortly-thereafter informed that the land was “unfortunately already sold.”

The price the media reported Irving paid for the 2,200 acres ($5.1 million) was approximately $8.5 million less than the group of local farmers offered!

It would appear the Gardiner family was in some way indebted to the Irvings, and was forced to sell to settle that indebtedness, despite receiving a much better offer from the six local farmers.

The provincial government should force the Irving family to divest themselves of the complete 2,200; and that land should go to the local farmers at the same price Irving reportedly paid for it: $2,300 per acre!

Posted in Provincial Politics | 5 Comments

How did the Irving family get such a good deal on the Brendel Farms Ltd. land?

Talking with farmers in the Bedeque area, I’m hearing that the 2,200 acres of farmland the Irving family acquired from the Gardiner family was “prime” farmland. Prime farmland in the area has been selling for as high as $5,500 per Acre;; one farmer told me a woodlot that had to be cleared recently sold for $4,000 per acre.  I found confirmation that $5,500 was indeed paid for some prime farmland in Prince county in the most recent Farm Credit Corporation (FCC)  Farmland Values Report, covering the period from January 1 to December 31, 2018 (published on April 29, 2019) noting that:

“All regions of Prince Edward Island saw farmland values rise for an average increase of 4.2 per cent in 2018, following a 5.6 per cent increase in 2017.”

The 2018 annual increase for Prince county was much higher than the average for all three counties at 6.7%, with existing pressures likely to drive prices even higher. As the FCC report notes:

“Prince Edward Island’s farmland values were influenced by a number of factors in 2018: consistently strong demand from potato processors that led producers to expand, an influx of new families seeking land in rural areas and a high volume of farmland transactions.”

If a cursory review of a few current offerings of agricultural land in Prince county is any indication, the price-per-acre for prime farmland in Prince County is indeed continuing to rise. A Kijiji ad for a 45 acre parcel is asking for  $292,500.

Prime Farmland in Central PEI

$292,500 divided by 45 is exactly $6,500 per acre.

So here’s the question: with such demand for Prime farmland in Prince county, how is it that the Irving family – and I’m hearing (but have been yet unable to independently confirm) that the Brendel Farm deal also included buildings as well as land – so; how is it that Irving was able to acquire the 2,200 acres for $2,300 per acre?

 

Posted in Provincial Politics | 1 Comment

Why is Rebecca Irving Dissolving her New Corporation?

QuickScreencapture_20190824-113338

 

This is the public announcement from Stewart-McKelvey lawyer Geoffrey Connolley in today’s Guardian (August 24, 2019 – you can find it on the bottom right-hand corner of page B9). It gives notice that Galloway Farms Ltd., will be asking the office of the Attorney General to “surrender the Charter of the said company”.

Few Islanders likely read this notice, and fewer still would know that Rebecca Irving is the sole Director and Shareholder of Galloway Farms Ltd.  The corporation was registered by Rebecca Irving on February 5, 2019, as part of an Irving-family strategy to acquire the 2,200 acres of land in Bedeque (Brendel Farms).

So it’s puzzling why Rebecca decided she needed to set up another corporation (Red Fox Acres Ltd.) in June, after just setting up Galloway Farms Ltd. a few months earlier.  And now she’s dissolving Galloway after a mere six (6) months. Why?  

Rebecca Irving was involved with her mother (Mary-Jean) and sister (Elizabeth) and two other Irving-owned companies [Indian River Farms & Long River Farms] in a previous bid to acquire that same 2,200 acres in bedeque. The third company that was part of that application process was Galloway Farms Ltd. Rebecca registered Galloway just two days prior to submitting applications to IRAC to purchase those 2,200 acres in Bedeque (February 7, 2019). 

IRAC recommended to Executive Council that the Irving-family application not be approved, and the Liberal government did not approve it.

Clearly unwilling to take “no” for an answer, a new plan was hatched to buy the land without involving government.  That scheme required some kind of “corporation-to-corporation” transfer or acquisition of assets, and in this case, the principal asset was the 2,200 acres.

The full details of the deal have yet to be provided; however, the result was that $5.1 million was paid to Brendel Farms by the Irving family for 2,200 acres of farmland, with no government involvement whatsoever, nor any consideration as to whether the acquisition put the Irving family over the 3,000 acres of arable land limit. 

Rebecca Irving could easily have used Galloway Farms to do this deal with Brendel Farms, but she chose to set up a brand new corporation instead.  I suspect she was advised to dissolve Galloway Farms Ltd. and set up a new corporation because it was “Galloway” that was the company name on all the official government documentation with the previous failed IRAC application to buy the land – documents wherein government unequivocally said: “no, you can’t have that land.”

As a result of the news coverage of the Liberal government’s rejection of Irving’s bid to acquire the Brendel Farm, Galloway Farms Ltd. became known to the public as an Irving company. However, without a searchable “name field” in the government’s business/corporate registry, no one would be able to easily discover that Red Fox Acres Ltd. was a new Irving company: Optics are important with schemes like this. 

On June 17, 2019, Rebecca Irving and Brendel Farms both set up new companies: Brendel Farms registered Haslemere Farms; and Rebecca Irving incorporated, Red Fox Acres Ltd.

I’m still trying to figure out how Red Fox Acres Ltd. (listed as a “land holding company,” not a farm) can put down that Haslemere Farms Ltd. was its “former name”  on the registration form despite the fact that both companies were registered on the same day!

Regardless, Galloway Farms will soon be no more, but I suspect no one got a lay-off notice.  Galloway Farms was clearly set up for one purpose and one purpose only: to acquire 2,200 acres of Farmland in Bedeque.  That’s now been accomplished  – for the time-being at least – by Rebecca’s new corporation, Red Fox Acres Ltd.

Let me end with a Motion I can only hope members of our Legislative Assembly will advance and adopt in some form during the next sitting of the House:

Moved…..
…that the Attorney General’s office immediately implement measures to ensure that the registration of new corporations in PEI must not happen until such time as the said party (or parties) wishing to incorporate said corporation provide at least a smidgeon of evidence that the said corporation will engage in legitimate business activity in PEI, and not simply use said corporation as a shell company to circumvent the intention, letter and spirit of the Lands Protection Act.
Do I have a seconder?
Posted in Provincial Politics | 3 Comments

Premier King on “Interlocking Corporations within families” & the 3,000 Acre Corporate Limit

 

Following my recent Facebook post of a quote from Premier King saying interlocking corporations within the same family are “one corporation” and subject to the Lands Protection Act’s limit of 3000 acres of arable land, I received a number of requests for the “source” of that quotation, so I’m providing a link to the video clip.

I really don’t envy Premier King. He has some historically-difficult decisions to make in coming days. Islanders will need to show strong support to make it a little easier for him to make the right decisions on a number of critical issues.

I’m certain Denny truly wants to see PEI return to what was originally intended with the Lands Protection Act, but standing up to the Irvings and forcing them (and probably others) to divest land holdings will not be an easy thing for him to do. But his day of reckoning is fast approaching, and land isn’t the only issue demanding a courageous response from him.

For example, what’s King going to do about the whistleblower lawsuit? Is he going to fight those three women in court or settle? By my reckoning, the PEI government has already failed to meet the deadline for filing a defense.

And what’s Premier King going to do about the e-gaming lawsuit? Stewart McKelvey lawyers are still representing the PEI government on the case, yet it is now known that the lead lawyer – Jonathan Coady – failed to comply with Supreme Court rules to disclose  all relevant documents: thousands of key e-gaming documents (some of which are currently being acquired through Access to Information requests) have been withheld.

It is also now known that Coady misled the court (and plaintiffs) by failing to disclose that many other key e-gaming documents once in the possession of the PEI government are now “missing” (e.g., Brad Mix’s emails from 2010-12).

Premier King has been attending lots of events and public functions during old home week – when news about the Irving purchase of Brendel land broke – and he has been doing a good job of representing PEI during the busiest part of our tourist season.

But Old home week is over now, so a public statement from the Premier responding to this land issue would seem prudent.

This issue isn’t going away, so nothing is to be gained by delaying a response; it only increases suspicion that the passion, sincerity and ethical integrity evident in the statement given during the election campaign may have since evaporated.

Posted in Provincial Politics | 3 Comments

The Irving Family Apparently Broke the Law – and Government’s Main Legal Counsel (Stewart McKelvey) Apparently Helped

Loophole GamesThe public revelation earlier this week that 2,200 acres of farmland in the Bedeque area was acquired by Rebecca Irving – one of Mary-Jean Irving’s two daughters – came as a shock to many Islanders.

Using a secretive corporation acquisition and/or transfer scheme to avoid submitting a second application to IRAC to purchase the land may seem like a shrewd legal maneuver to exploit a “loophole” in the Lands Protection Act; however – and notwithstanding a growing consensus that the problem is a “loophole” in the Lands Protection Act that needs to be plugged [today’s Guardian editorial was titled “Close the Loop”] – it seems to me that this errant line of thinking is only diverting attention away from what actually happened. It appears to me that the Irving family brazenly broke the law, and the PEI government’s main legal counsel (Stewart McKelvey) helped.

If there’s a loophole in the Lands Protection Act, why hasn’t someone pointed out what it is?

Consider the outcome of Irving’s first bid to acquire the 2,200 acres following established rules, regulations and legislation, along with the rationale provided by government for not approving the application.

On February 5, 2019, Rebecca Irving incorporated a new company (Galloway Farms) then submitted an  application to IRAC two days later to purchase the 2200 acres in conjunction with two other Irving-owned companies (Indian River Farms & Long River Farms).

IRAC recommended to the previous Liberal government’s Executive Council that the Irving application not be approved. Executive Council followed that advice and declined approval.

On the same day the election was called (April 2nd) the Minister then responsible for IRAC and the Lands Protection Act, Hon. Richard Brown, stated clearly what the rationale for the rejection was:

“It was not political,” Brown said. “The decisions and the recommendations come out of IRAC. That’s an independent body.”

Brown said the purchase was denied because the size of the land holdings was substantial.

“We applied the rules of the Lands Protection Act,” Brown said. “The beneficial owners are one family, basically.” [Guardian, April 3, 2019].

And “one family” translates into “one corporation” under the Act, no matter how many companies may have been involved.

A very precise definition of “corporation” can be found under section 1(d) of the Lands Protection Act that should remove any confusion on this key point, regardless of how many corporations are established, or how assets may be shuffled around between the individuals in the same group,  it must still be deemed to be just one corporation:

1 (d)  “corporation” includes a partnership, cooperative association or body corporate whether formed or incorporated under the law of this province or any other province or of Canada or outside of Canada, and for the purposes of this Act a corporation and other corporations directly or indirectly controlled by the same person, group or organization shall be deemed to be one corporation.

By saying “…a corporation and other corporations directly or indirectly….controlled by the same…group….” the Lands Protection Act is clarifying that it doesn’t matter how many independent corporate entities are involved in determining whether the applicant seeking to purchase or lease land is still within the 3,000 acre limit of arable land specified in the Act for corporations; but rather, the particular individuals involved in the transaction and their relationship to one another. More precisely, the issue is whether the land in question is, or will be, controlled by “…the same person, group or organization.” 

The fact that three Irving-owned companies first sought these 2,200 acres of land helps to see how the interconnected nature of the family business constitutes a “group”.  The fact that this more recent second strategy to acquire the land only involved one Irving family member [Rebecca] from the original three applicants [Rebecca; Elizabeth and Mary-Jean] changes nothing, especially considering the purchase price was over 5 million.  Just think about it for a minute: how does a person in their mid-twenties amass that kind of capital?

How much clearer can the letter of the law be? It says that a group of companies with the same people controlling them shall be deemed to be one corporation.  One corporation means a 3,000 acre limit of arable land.  That’s exactly what we have in play in this case: one “corporation” controlled by the same group – the Irving family.     

This is the reasoning provided by former Liberal Minister (Richard Brown) to explain why IRAC and Executive Council turned down the three-company Irving application for this same 2200 acres in April, 2019. Despite the fact that three corporations were involved in the purchase, in consideration of the legal definition of “corporation” found in the Act, IRAC determined that – as Brown put it – “The beneficial owners are one family, basically.

The Irving spokesperson on the matter, Geoffrey Connolly, totally ignores this line of reasoning rooted in both the spirit and letter of the Lands Protection Act, and is quick to subscribe to the vague “loophole explanation” theory for Irving’s purchase; but again, Connolly doesn’t say what that loophole is.

In a Guardian article with the title “‘Loophole’ in Act allowed sale of P.E.I. land to Irving-affiliated company,” we read:

“Geoffrey Connolly, a Haslemere Farms representative, did not dispute that the transaction was allowed due to a “loophole” in the Lands Protection Act.

Keep in mind that Connolly is not only a partner in the Stewart McKelvey law firm, he is also a shareholder in Irving-owned Indian River Farms, and an corporate officer with Irving-owned Long River Farms.

I’m sure that Connolly and select members of the Irving family would much prefer  a loophole in the Lands Protection Act that can be exploited to their advantage: that way, although perhaps still not very savoury or ethical in the eyes of most Islanders, at least the purchase would be”technically” legal.

But what if there is no loophole in the Lands Protection Act to explain Irving’s purchase without government approval? What if the law was broken?   That’s a whole lot more serious for both the Irvings and Connolly.

So I’m throwing out a challenge to Geoffrey Connolly or any member of the Irving family, or perhaps a senior member of the government (e.g., Minister or Premier): If Irving acquired the 2,200 acres as a result of an existing “loophole” in the Lands Protection Act, can you please point out exactly what that loophole is, and where it can be found in the Act?

From where I’m looking, it appears you didn’t exploit a loophole in the Lands Protection Act for your client Mr. Connolly, you helped your client break the law.

Posted in Provincial Politics | 2 Comments

Kudos to Deputy Minister Erin McGrath-Gaudet!

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I have not posted on e-gaming for quite some time, due to delays by the former Premier and Liberal government (RIP) frustrating my efforts to get access to information on e-gaming records from government.

In the spirit of giving credit where credit is due, I’m publishing this short article as a genuine, heartfelt expression of appreciation to the new Deputy Minister of Economic Growth, Tourism and Culture, Erin McGrath-Gaudet, for her honest answers provided in her most recent letter to the Information Commissioner in a key e-gaming Access to Information review which I initiated in January, 2019, and is still ongoing. I expect a written Order from the Commissioner within a few months.

I’ll need to provide you with just a bit of background, but I’ll avoid making a deep-dive into a fascinating story of how a simple request for documents (that the Liberal government knew at the time I submitted my request had been deleted, and could have told me in a second) turned into an 8-month make-work project generating a 2-inch file.

Why I asked for Brad Mix E-gaming Records

After reviewing all the affidavits in the e-gaming lawsuit in late 2018, I decided to file several targeted Access to Information requests.  One  issue that struck me as particularly important was that the CMT lawyer was making reference after reference in his oral argument and Affidavit Exhibits to missing emails from Brad Mix.

All relevant documents should have been disclosed to CMT’s lawyer by the government – and CMT had been told that they had been – but given evidence of e-gaming meetings in which Brad Mix participated, it didn’t make sense there were no documents from him.  So I decided to ask government myself with an Access request.

Unlike the email accounts of  Melissa MacEachern, Rory Beck and Chris LeClair who vacated their positions (which the Auditor General reported in her 2016 e-gaming report had all been deleted) Brad Mix has held the same position at Innovation PEI for over a decade.  How could his emails be missing unless some unauthorized person decided to delete them?

Why I Asked the Information Commissioner to Review the File

I received a few calendar entries from Brad Mix’s GroupWise Account with my Access request, but no emails, email attachments, or hard-copy files for that matter; so I wrote to the Information Commissioner in January, 2019 asking if she would review the file.

I know the Commissioner has already put in many, many hours on this file; and since last October, I’ve personally put in at least 100 hours researching and preparing documentation, etc., which has mostly been responses to written materials submitted to the Commissioner by the Department.

With multiple requests for time extensions to undertake more thorough searches, I would never have dreamed in a million years that during the entire past six months the Department (and Brad Mix) knew from the get-go that all the records for the time period in my Access request had been deleted, and that was known by them since 2015. 

I’ve wasted countless hours of my time over this, and was completely frustrated in my e-gaming investigative work, all on account of the former Liberal government’s stonewalling and lies. 

The July 10, 2019 letter from Ms. McGrath-Gaudent provided answers to seven (7) hard questions from the Commissioner, and the Deputy Minister managed to accomplish something which the Liberals promised but were unable to do during their entire 4-year tenure: tell Islanders the truth. 

Ms. McGrath-Gaudet somehow compelled Mr. Mix to answer the questions directed at and about him honestly, no matter what the consequences might be; and given the nature of the revelations, I expect there will no doubt be some consequences. 

In particular, read the response Ms. McGrath-Gaudet provided to question six from the Commissioner:

#6.    Did you interview Brad Mix relating to these missing records?  If so, did he provide an explanation for the missing emails?  E.g Did these time periods correspond with a change of position for Mr. Mix, or a period of   absence from work?

Answer:

          “Mr. Mix reports that in 2015 he was looking through his archive for emails.  It   was at this time he discovered that emails in his archive for periods of time  appeared to be missing.  Mr. Mix states that he did not understand what  had happened as he could not locate emails for many files and contacts throughout  2011 and 2012.  Although Mr. Mix advises that he does delete some transitory emails that he won’t use again (as he is permitted), he unequivocally states that  he has not and does not intentionally delete other emails.  He states that he was distressed by the discovery of missing emails.” (My emphasis).

Mix mentions that he had a phone upgrade around that time and thinks that may have caused the records to go missing. One wonders how archived files on a server could possibly be affected by a phone upgrade, and even more puzzling is that it was only during that critical e-gaming period. How is it that files from 2013 on were left intact?

These are disclosures that are at one and the same time very refreshing and very disturbing.  Had the Liberal party simply been honest with me when I submitted my request last October (and with the Information Commissioner) and disclosed that there was no point searching for the records I had requested because they had all been deleted, then there would most certainly have been significant consequences for both the Liberal government and the Motion Hearing that happened over four days  in the PEI Supreme Court back in April, commencing on election day.  That’s disturbing.

What’s refreshing is that this truthful and insightful information has finally come to light by a new Deputy Minister under a new PC government which has taken charge of the file.

Brad Mix’s answer to question six may also pose a legal problem for Stewart McKelvey, the law firm representing the provincial government in the CMT lawsuit. Lead lawyer, Jonathan Coady, has been saying for years that he has disclosed all relevant information in accordance with Supreme Court of Prince Edward Island procedural rules and requirements.  He clearly hasn’t.  Nor has he disclosed the fact that Brad Mix’s e-gaming records had been deleted.

I wonder how many other people involved in e-gaming had their records destroyed?

So a very sincere kudos to you Ms. McGrath-Gaudet!  The King government is clearly following through on promises made to Islanders that a PC government will trust Islanders with information and be truly open and transparent. Keep it up!

I have provided a link to the July 10, 2019 response letter from the Deputy Minister (Letter to Information Commissioner from Erin McGrath-Gaudet).

I will be doing a follow-up, more in-depth report at some point down-the-road, possibly after the Commissioner issues her Order.

It’s good to be back.

 

Posted in E-gaming | 3 Comments

The Anti-Corruption Policies of the PC Party: Why hasn’t the Mainstream Media Informed Islanders about them?

It’s perhaps not surprising that Dennis King has not made a big deal about the key anti-corruption policies embedded within the PC Policy Platform.  Granted, there was never a question about government corruption; the need for systemic government reform; or for that matter “e-gaming”; in any of the leader debates, so there weren’t any easy access points for him to bring them up. However, you could argue that if they were really that important to him he could have  brought them up at some point. 

However, from the very outset – of both the PC Leadership race and the election campaign – King indicated that he intended to take the high road, avoid mud-slinging of any kind, and to focus on finding solutions rather than criticizing others for creating or worsening problems.

And he has demonstrated that, focussing on fostering a spirit of cooperation and collaboration among his leadership colleagues, even clapping enthusiastically for them whenever they put forth good ideas in the debates. That’s entirely understandable as a prudent campaign strategy, especially given the looming possibility that he’ll have to work closely with the other leaders if he becomes Premier and forms government.

Let’s face it: It’s really hard to talk about the importance of “anti-corruption” policies without first pointing out the corruption that happened under successive Liberal governments, making the introduction of those policies necessary.

And I suppose it’s also not surprising that the mainstream media outlets have said virtually nothing about the strong policies in the NDP, Green Party and PC Party platforms aimed at increasing the degree of integrity, true openness, and accountability within government – drunk as they are on the potent and conscience-numbing brew of massive Liberal government election advertising revenues.

CBC created what is purported to be a comprehensive overview of each Parties’ stand on policy issues, yet mentions nothing about what the Parties have put forward as policies to bring about government reforms aimed at increasing the degree of integrity in government, or decreasing the power of the 5th floor (Premier and Cabinet).

That’s really unfortunate, because the NDP, Green Party and PC Party are all offering substantive policy initiatives to improve how government will function more ethically, with increased integrity.

For example, CBC’s most recent version of its “Promise Tracker” (April 17, 2019) says nothing about government integrity policies or promises of reform, and why would it? The CBC has shown absolutely no interest in reporting government corruption, scandals, destruction of documents, or cover-ups. 

In fairness, Kerry Campbell did put up an article on CBC’s website after the PC Platform was made public that drew some attention to these policies, “P.E.I. PC Party pledges updates to legislative assembly,” but this information did not – to my knowledge – get the same play on CBC radio or Television, which they most definitely deserved, and I suspect that no more than a handful of Islanders even know about them.

The Guardian overview of the PC Party Platform completely skipped over the page dedicated to government reform and integrity/anti-corruption policies: (See: “P.E.I. PC platform leans heavily on tax cuts, but silent on carbon tax“).

Peter Bevan-Baker just released a detailed and very commendable summary of what the Green Party will do to increase government integrity: “Greens commit to implementing meaningful accountability measure for government“.  And although these are bold and important policy measures – most of which are also included in the PC Policy Platform, and all of which would likely be supported by Dennis King –  it is only the PC Party that has committed to systemic and transformational measures directly aimed at taking away power from the ruling government,  measures that have been blatantly used by the Liberal government during their last two terms to block efforts to get information about government malfeasance, and prevent actions from being taken by the Attorney General to launch legal investigations and/or proceedings to address that malfeasance.

I’ve taken the page from the PC Policy Platform document and highlighted two unique and incredibly powerful policies which not only encourage more openness, transparency and accountability – e.g., more “integrity and ethics” within government – but also take away the two most important powers employed by the MacLauchlan government over the past four years to (1) render the Attorney General’s Office impotent to do anything but assist in the cover-up of e-gaming corruption; and (2) block access to having key witnesses come before Legislative Standing Committees.

Read the two policies highlighted in red – keeping in mind that it is only the PC Party that has committed to implementing these historic and urgently-needed measures:

How is it that these incredibly forward-thinking, systemic policies have not been headline news stories after decades of government corruption and abuse, made possible only because these policies have not been in place?

Just imagine – taking the power invested in the Office of the Attorney General away from the Premier and Cabinet and giving it to the entire Legislative Assembly.  Wow!

Just imagine – allowing a MAJORITY of opposition member on Legislative Standing Committees to be able to call any key witness they want, and the government would be unable to say “no”.  Wow!

If Dennis King and the PCs do form government and implement these policies – which I am confident King will do – our provincial government will never again be able to quash Motions brought forward by Opposition MLAs to bring key witnesses before Legislative Committees – something the MacLauchlan government did over and over and over again, with neither apology nor apparently any shame.

To me, the most disgusting aspect of this entire election campaign has been the way the mainstream media – and by mainstream media I mean the CBC, Guardian and Eastern Graphic – have seemingly done everything within their power to avoid mentioning the rampant corruption of the past two Ghiz and MacLauchlan Liberal governments. Shame.

Avoiding mention of the past sins and crimes of the Liberals is one thing; but to deliberately refuse to fully inform Islanders that one political party – the Progressive Conservative Party of Prince Edward Island – intends to remove the tools that allowed that corruption, thereby ensuring it never happens again, is not only really sad, it’s irresponsible journalism and, quite frankly, totally despicable. 

Posted in Provincial Politics | Tagged , , , , , , , | 3 Comments

A Conspiracy to Commit Fraud: Part 4 – A Fictitious and Fraudulent Project Grant

Players in Final Grant..jpg

From the PEI CPA Code of Professional Conduct:

False or Misleading Statements

NOTE: Registrant = Chartered Professional Accountant

_________________________________________________________________________________________

A FOUR-PART SERIES EXPOSING E-GAMING AS AN ELABORATE CONSPIRACY TO COMMIT FRAUD

+++++++++++++

Introduction to Part 4 and Series Summary

My four-part e-gaming investigative series presents documentary evidence showing how $1,210,000 of public dollars was first fraudulently acquired by key players in the PEI government, then funnelled through the Mi’Kmaq Confederacy of PEI to McInnes Cooper law firm.

It’s important to point out that this amount was not the total government funding that went into the e-gaming initiative. In fact, the Auditor General, Jane MacAdam, was not able to determine what the full cost of the e-gaming project was to Island taxpayers. She was refused access to many government documents by the MacLauchlan government, and got no documents from McInnes Cooper law firm. In the end, she was forced to qualify what she did discover by saying: “At a minimum, government incurred costs of $1.5 million on the e-gaming initiative,” [Section 1.7, p. 2]. 

Most of the difference between the amount I’ve been using in this series ($1,210,000), and the $1.5 million identified by the AG, results from my exclusion of the earlier grant of $232,000 provided to the Mi’Kmaq Confederacy of PEI before McInnes Cooper was brought onboard by the PEI government to manage the e-gaming project in February, 2010 [Grant #1 in the following chart]:

Chart with total known e-gaming funding

The four key financial components comprising the $1,210,000 amount (as presented in the above chart) are: (a) Grant 2; (b) Loan; (c) (Grant 3) and (d) Payment.

The details explaining how each of these components was acquired fraudulently are presented separately in each of the following segments of this investigative series:

(1) [Grant 2] – $100,000 grant [Source: Innovation PEI, December, 2010] – see: A Conspiracy to Commit Fraud: Party I – Background & the First McInnes Cooper Grant;

(2) [Loan\ = $950,000 E-gaming loan [Source: Island Investment Development Inc.] – see: A Conspiracy to Commit Fraud: Part 2 – The Full Story on the E-gaming Loan;

(3) [Payment] $60,000 [Source: PEI Lottery Corporation, March 2013]; see – A Conspiracy to Commit Fraud: Part 3 – The Illicit Sale of an Obsolete E-gaming Legal Opinion; and,

(4) [Grant] – $100,000 grant [Source: Island Investment Development Inc., January 2013].

This article deals with what the AG refers to as [Grant 3] – the final $100,000 grant from Island Investment Development Inc. (IIDI). 

I’ve already filed a formal complaint with the PEI Law Society against Carr, Stevenson and MacKay lawyer William F. Dow (“Billy” Dow) related principally to his involvement in the E-gaming & Financial Transaction Platform initiatives, especially the e-gaming loan for $950,000 (See: A CONSPIRACY TO COMMIT FRAUD: “PREAMBLE” TO PART 2 (Complaint to the PEI Law Society Against Billy Dow) and Complaint Letter to the PEI Law Society Against Billy Dow).

Similarly – given the blatant violations of key provisions of the CPA Code of Professional Conduct and  Chartered Professional Accountants and Public Accounting Act –  I will be filing a complaint with the Chartered Professional Accountants of Prince Edward Island against three registrants or CPA members  – David Arsenault, Neil Stewart, and Cheryl Paynter – for their respective roles in jointly conspiring to conceive, prepare and execute a fictitious project grant to pay the final $100,000 McInnes Cooper law firm demanded from the PEI government for the e-gaming project, in clear violation of Rule 205 of the Code of Conduct cited at the outset of this article.

The Fraudulent Manner in which the Final Grant was Acquired

It’s impossible to overstate the degree of premeditated, calculated planning that was employed to acquire the final grant needed to “make McInnes Cooper law firm whole” – as Kevin Kiley put it to AG staff – which was the remaining $100,000 needed to acquire the full $1,210,000 amount promised by Wes Sheridan. 

Recall that the e-gaming project was formally terminated on February 24, 2012, after the Deputy Minister of Justice at that time – Shauna Sullivan-Curley – obtained a legal opinion that concluded that for the provincial government to proceed any further with the scheme would be “criminal”. That created a huge problem for Sheridan – and McInnes Cooper – how was he going to honour his promise to provide all the funds?

To start with, as I’ve already outlined in Part 2 dealing with the e-gaming loan, no more advances were supposed to be legally issued on the loan after February 24, 2012; in fact, since there was no longer any hope of repayment (repayment of the loan was contingent on the project being successful), the only moral and legal option was to call in the loan immediately, since it was effectively “in default” the minute the project ended. But of course, that didn’t happen.

As well, as I explained in Part 3 of this series, there was no possibility that an e-gaming initiative could be successful or should proceed without government’s involvement after February 24, 2012.  Legislation would be required to establish a financial transaction platform, upon which internet gaming depended, and could only come from the PEI government, and the PEI government had already decided it was not going to provide that legislation.

Yet, as previously noted, McInnes Cooper law firm continued to generate invoices to use up the final amount of the $1,210,000, which it hadn’t already acquired by the time the project formally ended.  It remains a real head-scratcher for me that additional invoices for roughly $100,000 were generated and submitted by McInnes Cooper in the two months following the project’s termination, as was noted by the Auditor General in Section 3.33 of her e-gaming report:

3.32 Grant #3 Work Continued

Not only were those subsequent e-gaming invoices completely fraudulent in nature – in that no legitimate e-gaming work could be justified after February 24, 2012, the money used to pay those fraudulent invoices, came from a “third grant” which was itself phoney, and completely fraudulent.  In fact, when McInnes Cooper submitted a final e-gaming invoice to IIDI for $390,000 in the fall of 2012, no amount of that final bill should have been regarded as a bona fide “outstanding” bill and paid, but that’s exactly what happened. As the AG noted:

Section 3.52 Payment with Grant #3

Read the above clip from the AG report slowly and carefully:

IIDI would “release the balance of the loan funds committed to the project” – this was effected by Billy Dow, the lawyer handling the e-gaming loan, despite the legal provisions within the loan agreement stipulating that no further loan funds were to be advanced after the project ended:

“Atlantic Lottery Corporation (ALC) would buy from MCPEI a legal analysis relating to internet gaming for $60,000” – Sheridan fraudulently obtained this $60,000 by using taxpayer’s money to have the PEI Lotteries Commission (of which he was the “head”) pay for a report he already had access to for free; and,

“Innovation PEI would provide a grant to MCPEI for $100,000 – a totally fraudulent grant drawn up to fund a totally fictitious project, as will be explained in more detail below.

But also note that the AG stated that: “The Deputy Minister of Finance met with the local Law Firm at that time and reached an agreement whereby government would pay all outstanding bills, except for approximately $30,000.”

When Kevin Kiley, a McInnes Cooper lawyer, was asked about the “settling of the McInnes Cooper account,” that incomprehensible $390,000 bill, he said he had no recollection of any meeting with Deputy Minister David Arsenault, nor any recollection of discussions with the Mi’Kmaq Confederacy for that matter,  the ‘client’ ultimately on the hook for the law firm’s outstanding bill. In fact, the only thing Kiley could recall was that McInnes Cooper “wrote off some of the bills”. 

Consider the notes from the draft report of the interview that Kevin Kiley had with staff from the Auditor General’s office in 2017:

No specific recollections

But a meeting with the Deputy Minister of Finance, David Arsenault, did in fact happen, as the AG confirmed, and sometime after that meeting, Arsenault contacted Neil Stewart to share his plan for coming up with the money that emerged from his “agreement” with McInnes Cooper. 

Part of that plan was to have IIDI “take the hit” for the loan, so Arsenault asked Neil Stewart not to go to Treasury Board (despite the “security agreement” that Wes Sheridan had provided on the e-gaming loan), and to also put together a final grant application for MCPEI in the form of a phoney project application for $100,000 that would pay that final portion of McInnes Cooper’s $360,000  bill, that mysterious $100,000 generated after the project ended. 

I obtained a copy of an email from Neil Stewart discussing this scheme after it was  filed with the PEI Supreme Court in the Capital Markets Technology (CMT) lawsuit:

Neil Stewart Email to Meliss and Cheryl First

This letter is proof positive of a “conspiracy” to fraudulently acquire money under false pretences.  And four senior government personnel did the conspiring: David Arsenault, Neil Stewart, Melissa MacEachern and Cheryl Paynter – three Chartered accountants (Arsenault, Stewart and Paynter) and a Ph.D in economics (MacEachern): they all need to take responsibility for betraying the public trust on this important matter and somehow be held accountable, notwithstanding the passage of time:

Final Grant Team

It Was All About Keeping E-gaming “Secret” – Right up to the Bitter End

When David Arsenault asked Neil Stewart to have IIDI provide “provision” (e.g., assume the “loss”) for the $950,000 e-gaming loan, what he was really asking is for IIDI officials to help him and Wes Sheridan keep Treasury Board, the Official Opposition, and the general public completely in the dark about the e-gaming loan – a defaulted loan that should have been reported -and “written-off” by Executive Council as a complete loss, as soon as the project ended on February 24, 2012. 

The email chain associated with the above email from Stewart shows that it was not only Neil Stewart who was in on this strategy, but also the Deputy Minister of Innovation and Advanced Learning at the time, Melissa MacEachern.  Six minutes after receiving Stewart’s email about Arsenault’s plan to come up with the money to pay off McInnes Cooper (above) Melissa MacEachern, responded with the following concern:

Melissa email to Neil

Stewart responded just four minutes later to put her mind at ease about how he could accommodate the loss:

Neil Stewart Email to Melissa and Cheryl

The key admission here is Stewart’s conclusion that: “There is no way to collect this debt unless treasury pays for it;” and of course, that was never going to happen, despite that being the only “security” provided for the loan – e.g., Wes Sheridan’s written promise that if the loan goes into default, the PEI government would pay it off. That never was loan “security” – but a convoluted deception, that didn’t escape the Auditor General’s attention:No hope of repayment

Enough about secrecy, deception and unsecured loans…let’s get back to that final grant for $100,000.

The Final $100,000: A Textbook Case of Fraud

Going back to Neil Stewart’s initial letter to Melissa MacEachern, notice that he matter-of-factly stated that the Deputy Minister of Finance (David Arsenault) – working under the Minister of Finance at the time, Wes Sheridan – is “asking that IPEI provide a grant to Mi’Kmaq Confederacy of $100K, with the funds going to the Bill [McInnes Cooper].”  This is an important detail – “with the funds going to the bill” – because when they proceeded to write up that grant application, they didn’t mention anything about that bill, but indicated that the grant was for future project work to be undertaken by the Mi’Kmaq Confederacy.

Was Don MacKenzie – the Executive Director and legal counsel for the Mi’Kmaq Confederacy at the time, and who was subsequently appointed as the head of the PEI Law Society [not to mention a member of the e-gaming working group] – ever even consulted about this scheme, or in anyway involved in this fraudulent endeavour? Not in any substantive way. He wasn’t copied on the correspondence; however, he most definitely came to know about it at some point since he had to sign over that $100,000 grant cheque to McInnes Cooper after it was issued.

Did MacKenzie come to IIDI asking for a grant for a Mi’kmaq project he had in mind? Definitely not. Yet, consider carefully what the AG said about how the grant was drawn up for a future Mi’Kmaq Confederacy project:

further opportunities

Can you imagine applying for a $100,000 PEI government grant and being told “just send us a short email…that’ll suffice for an application”?  Not likely! 

What was the “economic growth opportunity” that would allow MCPEI to “explore further opportunities in economic development?” The AG didn’t indicate  that in her report, but she did mention that the “approval sheet” and “grant agreement” indicated what the funds were slated to be used for; and although she didn’t specify what that would be exactly, she did state that the project “was indicative of events yet to occur.”  She then concluded that to put it that way was “misleading,” but let’s be frank – it wasn’t just misleading, it was entirely fraudulent.  

Months ago, when I first conceived this four-part series, I decided to submit an Access to Information request to find out exactly what those “events yet to occur” were on the grant application, knowing full-well that whatever they might be, they were completely made up and were “never-going-to-happen” events.  Here is what I asked for:

Access Request on Final Grant

I planned my research and writing to ensure that I would get that information in time to complete the four-part series before the provincial election. What I sadly didn’t properly factor into my planning was how this Liberal government feels no obligation to respect citizen’s rights, nor legal deadlines prescribed in the law pertaining to the release of access documents.

I also submitted a request for documents on that initial grant discussed in Part 1, which again was used to pay past bills but likely also presented some ‘future’ project since grants are not supposed to be issued to pay bills, but to engage in new work of some kind.  I’ll not be getting those documents by the prescribed date under the law.

Let’s Just Get Past the Election!

In the same way that I’m now being denied access to the substantial documentation filed with the e-gaming Motion Hearing on election day by Judge Gordon Campbell (See: Are Liberal Politics at Play in the PEI Supreme Court E-gaming Case?) I’ve just been told not to expect a response to my Access request for those final e-gaming grant documents until after the election. I received this disappointing news last Friday (April 12, 2019):

Further delay

When I was candidly informed by the Access worker that: “I know that these decision letters will not be issued by the due dates,” I couldn’t help but wonder whether she also knew WHY these decision letters will not be issued to me by the due dates, and if she does, why I wasn’t given that information as well. 

I’m guessing the decision-making thought process went something like this: “ummm…. we know Kevi’s going to write an article that informs Islanders how crooked the Liberal government really is, which could cost us a few votes, so we’re gonna hang unto them until after the election.”   As my two daughters used to say when they were teenagers and it was the fad: “Whatever!”

It’s frustrating, because I carefully planned my research and writing so I’d be able to see just how “detailed” the bogus project for the final $100,000 grant really was and share that information with the general public.  I’m now kicking myself a bit for relying on the legal requirement within the Freedom of Information and Protection of Privacy Act that obliges the Head of government departments to provide access within a prescribed amount of time (30 days). When I eventually get the documents I’ll share them in a blog post. It should be interesting to see what the person actually writing up the grant documents (Cheryl Paynter I believe) came up with when she most likely asked her boss (Melissa MacEachern): “What the heck am I supposed to say the project will be about?” and likely received the following response: “Just use your imagination!”   

Well, there you have it!  A complete overview and breakdown of how $1,210,000 promised to McInnes Cooper by Wes Sheridan was successfully delivered against all odds, for work that was never done, on a scheme determined to be criminal. Impressive!

One has to marvel at the sheer audacity – not to mention tenacity – that a dozen or so key senior players in government and law firms together diligently employed to achieve this unlikely goal over a tumultuous 2 1/2 year period of time, all the while keeping their efforts almost completely secret from everyone else, within government, the Official Opposition, and the general public.

Now that we know how McInnes Cooper acquired the $1,210,000, I wonder if the government we’re about to elect will (1) take the next logical step to rectify this sorry saga and get to the bottom of where all that money went after it was deposited in McInnes Cooper’s bank account; (2) hold the scoundrels accountable for their respective roles in the elaborate fraudulent scheme; and (3) demand that the money stolen from Islanders is returned to government?

I don’t recommend a “hold your breath” strategy: I suggest we all just keep breathing normally as we collectively embark on a more ethical road with the resolve to ensure that this kind of skullduggery never happens again!

 

 

Posted in E-gaming, Provincial Politics | Tagged , , , , , , , , , , , , , , | 6 Comments

CBC’s Weekly “Political Pablum”

Every Friday I watch CBC’s weekly political panel hoping to hear some insightful commentary on the most important political issues and events of the previous week.  And every Friday I’m left massively disappointed, shaking my head in disbelief at what I hear from Paul MacNeil and Rick MacLean . 

CBC’s weekly political panel offers such an important opportunity for our public broadcaster to inform Islanders about truly significant social and political developments, yet MacNeil and MacLean now seem incapable of offering more than off-the-cuff personal opinions, petty observations on style, and superficial comments focussed on political personalities and how they “perform”.

Islanders are hungry for meat and potatoes,…but these guys just keep spoon-feeding us pablum!

When asked about the debates that took place this past week, you’d think MacLean was asked to comment on a ringside boxing match. He appeared genuinely disappointed that no one delivered a “knock-out” punch, or a ‘gotcha’ zinger soundbite;  seemingly lamenting the political-pundit-killing prospect that the good-old days of confrontational “one-up-em” conflictual political discussion and debate might be over in PEI. See for yourself:

MacNeil, on the other hand, dismissed the debates as largely irrelevant, said nothing about their substance, and characterized them as a “test run” for the upcoming CBC debate next week. Wow!

I’m convinced he didn’t attend or watch the debates at all; or, if he did, has contracted “early-onset political-pundit alzheimers” and has lost the ability to detect what’s truly significant in a political forum or debate. Either way, perhaps he should no longer be pretending that he’s the person best qualified to inform Islanders about what;s politically-significant at the end of each week.

I attended the first two debates, and watched the other two online. They were hugely significant, even historic. And yes, there was a tremendous amount of substance that could – and should – have been discussed by MacLean and MacNeil.

At the first three debates on Environment, Land and Agriculture, there was an unprecedented discussion about the crises currently facing our environment, land, water, farm families and rural communities; along with a brutally-honest critique of industrial agriculture with a consensus agreement (among the NDP, Green and PC leaders) on the need for a new direction for Agriculture. That’s something I’ve never before witnessed in a leader’s debate or forum leading up to a general provincial election.  What did MacNeil and MacLean have to say about all that? Nothing. Absolutely nothing!

There were also significant commitments made by all Parties at the debates – other than the Liberals, that is – to take decisive and immediate action to confront the problem of the depletion of soil quality and erosion, with an honest discussion of the rapid depletion of Soil Organic Matter from industrial agricultural methods; as well as a promise to establish a Land Banking system, with discussion on how that might happen; commitments to enforce the three-year crop rotation legislation, something that has not happened under the Liberals;  and so much more. 

Nor was Premier MacLauchlan’s conspicuous empty chair at the Leader’s debate on the Land mentioned, not to mention the unprecedented civility and cooperative spirit displayed by the other three leaders who did attend – something that warmed the hearts of so many Islanders, and was commented on extensively by many who attended or watched the Land debate, both at the debate itself, and for days following on social media. Again, unprecedented. Again, not mentioned by MacLean or MacNeil.

But most disappointing of all was the failure by both political pundits to mention policies put forth by the PC Party yesterday aimed at preventing government corruption and restoring integrity and ethics in government; policies including:

(1) Separating the Attorney General from the Minister of Justice  – something I proposed during the PC leadership debate, and has since been proposed as a “integrity” policy option for the federal government, following the SNC-Lavalin affair;

(2) Establishing a truly “arms-length” ethics Commissioner reporting to the Legislative Assembly, not the Premier and Executive Council;

(3) Establishing an independent and “arms-length” Ombudsman; and the one I especially appreciate, after watching the Liberal government defeat motion after motion after motion from opposition MLAs to call witnesses to various standing committees to get to the bottom of critically-important issues like e-gaming and the land during the past four years;

(4) Structuring Legislative Committees so they have a MAJORITY of opposition members.

These land-breaking policy commitments were apparently not worthy of mention by MacLean and MacNeil, as they took a largely dismissive tone with their largely empty comments on the PC Platform:

Do these two political commentators not realize how incredibly significant and forward-thinking these policies are? Especially the simple, cost-free change to the structure of Legislative Standing Committees that will ensure that a governing party will no longer be able to prevent Legislative Committees from getting the information they need to truly “get to the bottom” of the issues of importance being explored by these committees? Something that didn’t happen under the Liberals with both the e-gaming investigation by the Standing Committee on Public Accounts, and the land issue by the Standing Committee on Communities, Land and Environment given that almost every Motion which opposition MLAs brought forward to bring key witnesses before the respective Committees was defeated by the Liberal members on the Committee holding a majority?

MacLean and MacNeil led Islanders to believe that the PC platform was just  “the same ole, same ole,” and then after giving that false impression, they rattled on with the same old tired lines that every ill-informed political “talking head” has at the ready in his tool box – and relies on when they don’t have anything else to say that’s actually insightful –  such as: “they have a shopping list longer than my kid’s wish list for Santa,” or  “but how will they pay for their promises?” Yawn.

Most disappointing of all is the fact that neither MacLean nor MacNeil have even once mentioned since the election was called the “Words that Must Not be Named” – E-gaming Scandal .  It’s like they’re oblivious to the fact that the upcoming election – including the selection of the early April 23rd election date – is entirely hinged on a panicked last-ditch effort by the Liberal government to get re-elected before the full, explosive truth about the e-gaming scandal comes out in the upcoming Court Hearing; which, coincidentally (NOT), begins the same day we vote. 

Come to think of it,  neither MacLean nor MacNeil bothered to mention the research I uncovered this week about how the Ghiz and MacLauchlan governments have allowed Robert Irving to acquire more than 7,500 acres of farmland during their successive Liberal tenures. Why is that not a significant revelation worthy of political comment?

MacNeil keeps saying how the Liberals are on point, how they haven’t made any missteps, or how they have the best coordinated delivery of advertising and policy/promise announcements so far. Who cares? Why is any of that important?

We don’t want to hear praise for an effective political strategy of cover-up – made possible only because the Liberal Party is wealthy and powerful and can afford ads in newspapers like the Eastern Graphic – we expect our weekly political commentators to shed some light on what’s being hidden from Islanders, and by so doing, contribute to a truly informed electorate. 

I’d say it’s time to do some real homework and step up to the plate Mr. MacNeil and Mr. MacLean! Or maybe CBC should ask someone else for their political opinion from time to time.

 

Posted in Provincial Politics | Tagged , , , , | 6 Comments

Robert Ghiz’s E-Gaming Documents Confirmed “Missing”

“There has to be a record that people can go back to, and I might say future historians can go back to…..This is something that we take to heart, recognizing the importance of it, and will indeed be implementing.”

– Wade MacLauchlan

[“E-gaming emails deleted, text messages not provided to AG” CBC,October 5, 2016]

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For those of you following my blog, you’ll recall that on January 5, 2019, I published an article titled: “Breaking: New Court Document Confirms all Ghiz’s Electronic Records & Emails were Destroyed”

I had just obtained copies of some new documents that had been filed in the PEI Supreme Court, including the following Employee Record Removal Form for former Liberal Premier of PEI, Robert Ghiz:

What’s important to note about this form is that a premeditated and deliberate choice was made to “delete” all Ghiz’s network files and emails. When that option is selected, it’s against the law to do so without first copying and storing all the  government records in the accounts.

It’s also important to note that there’s absolutely no possibility that Robert Ghiz didn’t have documents or emails that referenced the e-gaming project….I won’t go into explaining why in this article.

So the key question I wanted answered is whether MacLauchlan made sure Ghiz’s e-gaming records were copied and stored before the destruction order was issued.  He most certainly knew that he had both the duty and legal obligation to ensure those records were retained. But were they?

When Wade MacLauchlan assumed the position of Premier after Robert Ghiz formally stepped down in early February, 2015 – months before he was elected Premier in the May, 2015 provincial election – MacLauchlan had a meeting with the provincial Archivist, Jill MacMicken-Wilson, along with staff from the Freedom of Information and Privacy Office (FOIPP), where he was made fully aware of the laws and procedures governing record management and retention. We know this because he shared that information in the Legislative Assembly on November 30, 2016, as recorded in Hansard, p. 1933:

Premier acknowledges knowledge fo record management briefing

Normally, the practice for senior government officials leaving office is to keep all electronic network documents and emails, and have Information Technology Shared Services (ITSS) simply disable the accounts to ensure they can no longer be accessed by the person no longer in that position. A “proxy” account is then set up to allow whoever might be replacing that individual access to the government records so he or she can carry on with the work, ongoing files, or unfinished projects.  No where would this access be more important than with the position of a new and inexperienced Premier.

We all know how much easier it is to find documents – and especially, “information” within documents – using electronic keyword searches than by sorting through thousands of pages of hardcopy files; but for some unexplained reason, getting rid of Ghiz’s electronic files was a priority for Premier MacLauchlan, and they were ordered destroyed just a couple of weeks after he was elected Premier.

It was Brian Douglas who signed the destruction order (you may recall from Part 2 of my “Conspiracy to Commit Fraud” e-gaming series that Mr. Douglas was one of the Island Investment Development Inc. (IIDI) Board members who approved the $950,000 e-gaming loan back in the Fall of 2011), but he clearly would not have had the authority to make that call on his own. 

In my previous January article reporting the destruction of Ghiz’s electronic documents and emails, I stopped short of making the claim that all Ghiz’s e-gaming FILES were destroyed, knowing that MacLauchlan had received  instructions on the legal requirement to retain them. If electronic files are deleted, they must first be copied and archived in hard-copy form. To find out whether this had happened with Robert Ghis’s government records, I decided to submit an Access to Information Request asking for those records.

In both email and telephone discussions with the Access person handling my request, I was informed that she had discovered that – as a result of another Access request – 14 boxes of documents from Robert Ghiz had been retained, and that they had been organized in folders by “subject”. To ensure that I would be able to definitively answer whether Ghiz’s e-gaming documents had either been kept or destroyed, I asked for all documents using three key subjects: E-gaming; Capital Markets Technology (CMT); and Bruce MacDonald.

At this juncture, it’s important to recall that PEI’s first and only “Securities” investigation [File # 001] was launched against Capital Markets Technology on a phoney allegation that the owner of CMT had defrauded a “woman with cancer” of her life savings. The claim was completely bogus, and to prove that, CMT hired a former RCMP officer turned private investigator, Bruce MacDonald, [RB Mac Investigations]who produced a substantive report exposing that no formal complaint nor evidence backing up such a complaint was ever submitted to government.

An advanced copy of that report was sent to Ghiz’s close friend and lawyer, Billy Dow, just before Ghiz announced he was stepping down as Premier on November 13, 2014. That same report was actually released to the general public and media the day after Ghiz’s resignation announcement, and was subsequently tabled in the Legislative Assembly. It was that bogus allegation and Securities Investigation that derailed CMT’s business plans in PEI, and eventually spurred the law suit. There is no possible way that Ghiz would not have had documents relating to, or mentioning, Bruce MacDonald.

I filed my Access to Information request on January 28, 2019 and received a decision letter yesterday (April 11, 2019). The relevant paragraph is as follows:

The electronic search shouldn’t have taken 20 minutes. In fact, it shouldn’t have taken any time at all: Ghiz’s electronic documents and emails – his e-gaming files included – were ALL deleted back in May, 2015.  Perhaps the folks in Premier MacLauchlan’s office working on my request didn’t realize I already knew that, and wanted me to believe they were still intact.

At at any rate, what I really wanted to find out with my access request for Ghiz’s e-gaming documents I’ve now discovered: someone, somehow, at some time, for some unknown reason, abducted Ghiz’s e-gaming records and an Amber Alert has now been issued declaring them officially “missing”. 

I’ll be filing a “missing records report” with the Information and Privacy Commissioner asking her to investigate this matter. Maybe she can find out where they went….she’s really good at her job.

Posted in E-gaming, Provincial Politics | Tagged , , , , , | 1 Comment

Thanks to Premier MacLauchlan, It appears Robert Irving has Acquired over 7,5OO Acres of PEI Land!

In a recent CBC article reporting on Executive Council’s decision denying three Irving-owned corporations applications to purchase roughly 2,200 acres of farmland in Bedeque, the Minister of Communities, Land and Environment, Hon. Richard Brown stated:

“What we’re doing is applying the law of the Lands Protection Act here and we’re going behind the corporate veil and seeing who are the owners of these corporations,” said Land, Communities and Environment Minister Richard Brown. 

The Guardian’s coverage of the same story noted that Minister Brown’s stated reason for Executive Council’s decision to deny each of the 32 separate applications for parcels comprising the total 2,200 acres had absolutely nothing to do with politics or the election, but was entirely based on the recommendation Executive Council received from IRAC, which was based on the law:

“But Richard Brown, who is the minister of communities, land and environment, said executive council made the decision based on the recommendations of IRAC. “It was not political,” Brown said. “The decisions and the recommendations come out of IRAC. That’s an independent body…..We applied the rules of the Lands Protection Act,” Brown said. “The beneficial owners are one family, basically.”

The beneficial owners are one family basically!  Finally, an official acknowledgement from the Liberal government that the Lands Protection Act never intended “one family” – regardless of the number of corporations those family members form – to accumulate more than 3,000 acres of arable land.

In the case of the Brendel Farms applications, there were three such corporations: Indian River Farms, Long River Farms, and Galloway Farms (a new Irving-family owned corporation created 2 days before the applications to purchase Brendel Farms were submitted). The owners of those three corporations are Mary-Jean Irving and her two daughters, Rebecca and Elizabeth. But of course there are other well-known members of the Irving family, and other corporations.

Given the fact that none of the 32 parcels were approved, it’s likely safe to assume that the “one family” [Irving] – with all their interlocking corporations – has already reached its land-holding limit of 3,000 arable acres.  What wasn’t covered in the mainstream media regarding recent land applications by the Irving family is the decision Executive Council made on another Irving-owned corporation application for Land purchase decided on March 26, 2019…the same day the Premier called the election.

Minister Brown didn’t mention in his interviews with either the CBC or Guardian that on the very same day that Executive Council denied the Brendel Farms land purchase, it APPROVED an application for roughly one hundred acres, submitted to IRAC by Island Holdings Ltd.. another Irving-owned corporation with just two directors – Robert K. Irving and James K. Irving.  Why not? Here’s the info on Island Holding Ltd. from the PEI Business/Corporate Registry:

Of course, Robert K. Irving also owns Cavendish Farms, which as a processing plant is apparently subject to the land holding limit stipulated in section 3 (5) of the Lands Protection Act,  which places a five (5) acre aggregate land holding limit on industrial processing corporations. And Robert Irving – President of Cavendish Farms – a corporation which also operates through other Trade Named companies (e.g., Green Acres Produce and Poole’s Corner Potato Storage) – is also a co-owner of Island Holdings Ltd.

I took a few hours today to see exactly how much land Island Holdings Ltd. has been allowed to acquire  – research which was only made possible just a few months ago, when Scott MacKenzie, CEO of IRAC agreed to add a “name search” field, and a “current owner” field, on IRAC’s databank of land purchase & Lease applications –  and I was shocked with what I discovered.

First of all, since 1997, Island Holdings Ltd. made 198 applications to IRAC to acquire various-sized parcels of land, either by purchase or lease, and EVERY SINGLE ONE OF THOSE APPLICATIONS WERE APPROVED!

I also did a search using “Island Holdings Ltd.” in the “current owner” field, to see if any  parcels were ever sold to another corporation or non-resident [something that would have produced an IRAC record in the same databank], and NOT A SINGLE PARCEL OF LAND OWNED BY ISLAND HOLDINGS LTD. SHOWED UP IN THE SEARCH.

There is the possibility that Island Holdings Ltd. sold land to an Island resident – such transactions would not have to be approved by Executive Council, and would not show up in the IRAC databank. However, I highly doubt any land purchased by Island Holdings Ltd. was ever sold: the clear objective of Irving-owned companies, including Island Holdings Ltd., has consistently been to accumulate more land, not sell it.

As well, it is not clear what percentage of Island Holdings Ltd. land holdings are arable or non-arable. However, again, the intention would clearly have been to acquire farmland for potato production for the french-fry plant, so one can assume that the lion’s share of the parcels were arable farmland. If there were any purchases of non-arable land (such as woodlots) it’s likely they have long-since been cleared and transformed into potato land. 

So exactly how much land did the 198 parcels acquired by Island Holdings Inc. add up to?  

7,553.15 Acres

Can someone within the Liberal government – preferably the Premier or Richard Brown – explain how a man owning a processing plant that’s supposed to be limited to 5 acres has somehow been allowed to amass this land simply by forming another company? Is Robert Irving not part of the Irving family?  If Mary-Jean Irving and her two daughters were denied purchase of the Brendal Farm acreage because it was not in accordance with the Lands Protection Act, why was Robert Irving approved to purchase another 100 acres of land the very same day?  And what’s the total now owned by all the Irving-owned corporations? 

Premier MacLauchlan – enough already with the deflection and subterfuge on this critically-important issue.  And Minister Brown – you had absolutely no problem telling Islanders that the decision to turn down the Brendel Farms applications was not “politically-motivated,” but based on the recommendation of IRAC – so you disclosed what IRAC’s recommendation was in that case…..so can you also tell us what IRAC’s recommendation was on Robert Irving’s application to buy another 100 acres (via Island Holdings Ltd) which Executive Council approved the very same day?

And while you’re at it – since Island Holdings Ltd. now appears to be 4,553.15 acres over the 3,000 corporate limit – can you also tell us how many of IRAC’s previous recommendations on Island Holdings Ltd. applications were overturned by Executive Council after they hit the 3,000 limit?

It appears to be a blatant and shameless violation of the Lands Protection Act which the Liberal government has been keeping secret from Islanders and lying about for a very long time. I really hope I’ve made some grave miscalculation, or there’s some additional information I’ve overlooked on this one.

I’d happily eat crow, and apologize for publicizing this information if it’s inaccurate. To be honest, I’d much rather have been in error than to have exposed such corruption and deceit by our own government!  Can someone else reading this please take the time to double-check the database and recheck the math? Just type “Island Holdings Ltd.” in the search field of IRAC’s Land Application databank and you should get the same list I got.

I’ve put the data I found in that databank into a chart, with columns for (a) the application date, and (b) the number of acres for each of the 198 parcels approved, in chronological order. I’ve also colour-coded the parcels in blocks to show which individual parcels had the same application date.  You’ll have to enlarge the following chart to see the data more clearly. 

Posted in Agriculture, Provincial Politics | Tagged , , , , , , , , , , | 5 Comments

A Conspiracy to Commit Fraud: Part 3 – The Illicit Sale of an Obsolete E-gaming Legal Opinion

A FOUR-PART SERIES EXPOSING E-GAMING AS AN ELABORATE CONSPIRACY TO COMMIT FRAUD

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They say that if you want to find out the truth about a secret scandal: “Follow the Money.” 

Well, that’s the approach I’ve adopted with this four-part series on the PEI E-gaming story, and my investigation has indeed uncovered documentary evidence that $1,210,000 was first acquired by key players in the provincial government using various convoluted strategies, and was then funnelled through the Mi’Kmaq Confederacy of PEI to McInnes Cooper law firm, where almost all of it evaporated without explanation.

There was never any accounting of exactly where the money ended up – other than McInnes Cooper’s bank account –  nor was there ever any attempt by the MacLauchlan government to get that information, despite clear reporting obligations within the loan and grant contracts requiring the recipient of these government funds to provide “Paid invoices” and give a full account of who ended up receiving the money.

To recap: there were four key financial components comprising the $1,210,000 amount:

(1) $100,000 grant [Source: Innovation PEI, December, 2010] – see: A CONSPIRACY TO COMMIT FRAUD: PART 1 – Background & the First McInnes Cooper Grant;

(2) $950,000 E-gaming loan [Source: Island Investment Development Inc.] – see: A Conspiracy to Commit Fraud: Part 2 – The Full Story on the E-gaming Loan;

(3) $60,000 Payment [Source: PEI Lottery Corporation, March 2013]; and

(4) $100,000 grant [Source: Innovation PEI, January 2013].

This article deals with #3, the $60,000 payment to McInnes Cooper originating from the Atlantic Lottery Corporation (ALC). It’s a much simpler story to tell than the e-gaming loan, but how it was acquired is no less disturbing nor less fraudulent.

Finding More Money for the Defunct E-gaming Project

When the PEI government decided to end the e-gaming project on February 24, 2012, McInnes Cooper law firm had not yet “spent” all the  $1,210,000 Wes Sheridan had committed to the e-gaming project.  That fateful decision didn’t stop McInnes Cooper from creating further invoices which they submitted to the Mi’Kmaq to receive the full amount promised. As the Auditor General pointed out in her e-gaming report:

In fact, work continued until the remaining $100,000 was used up – on what exactly, we have no idea.  Might it have been for work other than e-gaming? No. Kevin Kiley told staff at the AG office that: “their work was at the direction of MCPEI” and exclusively on the e-gaming project.  But what could MCPEI possibly have directed them to do with e-gaming after the PEI government ended the project? 

Might that post-project e-gaming work have been to explore the possibility of establishing an e-gaming hub in PEI without the province’s involvement? No. For two reasons.

Reason #1:  The province ended the e-gaming initiative after receiving a legal opinion that to proceed with the project would be “illegal” – in fact, it would be a calculated attempt to deliberately circumvent provisions within the criminal code.

It was Shauna Sullivan-Curley (then Deputy Minister of Justice) who was apparently uneasy with the e-gaming project and solicited a legal opinion from an off-Island lawyer with expertise in aboriginal law, Tom Isaac.  He declared the e-gaming project would be both illegal and criminal.

After receiving his legal opinion, Sullivan-Curey wrote an email to Matt McGuire (then Deputy Minister of Intergovernmental and Public Affairs) at 7:53 pm on February 14, 2012 – also copied to Steve MacLean (then Clerk of Executive Council) – saying: 

“He [Tom Isaac] says that we would be getting involved in something that without our acknowledgement would clearly be criminal, and our acknowledgement would not be sound in law (he said it would be based on a “legal falsity”).”

Steve MacLean responded exactly 41 minutes later saying: “That’s the most clear legal opinion I’ve seen in a good while.” To which Ms. Sullivan-Curley promptly responded: “Yes, he [Tom Isaac] was flabbergasted that the province was considering doing this.”

Reason #2:  Any continued work on the e-gaming project by McInnes Cooper and the Mi’Kmaq Confederacy made absolutely no sense, and would have been useless, because an e-gaming project could not happen without provincial government participation. Why?  Because only the provincial government could enact the required legislation needed to establish the regulatory framework that was essential for internet gaming, and the provincial government had absolutely no intention of doing that. As the Auditor General explained:

Time to Pay Up!

Despite creating fictitious invoices for work that was never done on a project that had already ended and could never be revived, McInnes Cooper law firm lawyer Kevin Kiley had no scruples about demanding payment for those invoices just a few months later.

In October, 2012, Kiley contacted Neil Stewart at IIDI to – as staff with the AG office stated in the transcript of her interview with Kevin Kiley on May 18, 2017 –  “collect on the account” (para. 25), submitting a final invoice for $390,000, $100,000 of which, according to the AG, was for work undertaken on e-gaming after the project formally ended on February 24, 2012.

In early September, Premier Ghiz appointed Chartered Accountant David Arsenault Deputy Minister of Finance. One of the first items on Arsenault’s agenda was to sit down with Wes Sheridan (then Minister of Finance) and come up with a way to honour Sheridan’s ill-fated promise to provide $1,120,000 to the Mi’Kmaq Confederacy for the e-gaming project. That Sheridan made this promise was confirmed by Kevin Kiley during his interview with staff from the Auditor General’s office: 

“12(b) Who provided you with assurance that you would receive payment for your work? Were these assurances provided in writing? Why or why not? 

Mr. Kiley wasn’t concerned because government gave MCPEI assurances that they (government) will make them whole. There was nothing in writing.”

By the time David Arsenault got involved with trying to figure out how the government could come up with the outstanding bill from McInnes Cooper to honour Sheridan’s promise to “make them whole,” Sheridan had already hatched an idea that would get him $60,000 for that bill from the ALC. 

Sheridan wasn’t only the Minister of Finance, he was also the head of the PEI Lottery Commission, so with his ALC connections he decided to sell an obsolete legal opinion, that the Mi’Kmaq had received years earlier, to the Atlantic Lottery Commission – that they never asked for nor wanted – a document he already had free access to, all so he could create what can only be described as phoney paper trail for money that he never intended to put into the PEI government’s general revenue.

Sheridan had apparently met with Kiley in June, 2012 to discuss this plan; however, Kiley couldn’t recall that meeting when he was asked about it by AG staff. But he did indicate that he had some recollection that Wes was planning to bring the ALC on board the derailed e-gaming train around that time:

“Exploring a mechanism where ALC could play a role in this”?  What possible role could the Atlantic Lottery Corporation play in a government e-gaming scheme that had already been deemed criminal? A project that had already been totally scrapped months earlier? Well, we now know exactly what role Sheridan had in mind for the ALC. 

Sheridan’s plan to get the ALC to buy a legal opinion provided to the MCPEI years earlier  – an opinion that was worthless didn’t exactly impress the Auditor General: here’s what she said about the sale of that legal analysis:

Although the AG did a great job uncovering and reporting this scheme in her report, her description of it as “problematic” was massively underwhelming – it was completely fraudulent.

Let’s unpack that claim a bit: PEI was exactly $60,000 poorer and McInnes Cooper was exactly $60,000 richer because Wes Sheridan created a paper trail showing he purchased something for the government which the government already had on file and was useless. Senior staff at the ALC told the AG they never requested the report, and why would they have? The entire hair-brained e-gaming hub scheme was an illegal pipe-dream that, at that time, was totally dead in the water.

The acquisition of this $60,000 portion of McInnes Cooper’s outstanding bill was entirely acquired  by fraudulent means.  And as for the money belonging to the Mi’Kmaq? Not really. When it was finally processed, Wes informed Kevin Kiley that there wasn’t any need to have the cheque go through the Mi’Kmaq, but that the ALC would send it directly to McInnes Cooper:

So where are we at with this four-part series and the reconciliation of McInnes Cooper’s fraudulent claim/bill for $1,210,000? They got that initial $100,000 grant back in 2011; they got all of the $950,000 e-gaming loan by January, 2013; they got $60,000 from Wes Sheridan’s clever idea to have the ALC purchase the legal opinion;  bringing the total received to $1,110,000. They then generously offered to reduce their final bill by $30,000. 

That left just another $100,000 for the PEI government to somehow come up with and justify as a legitimate expenditure of PEI tax dollars. As you’ll see in Part four of this series, there was no legitimate way to come up with that $100,000, so they did what they had been doing all along: they again committed fraud.

…to be continued

 

Posted in E-gaming | Tagged , , , , , , , , , | 3 Comments

Why is our Local Media Ignoring E-gaming?

Ten days before the provincial election was called (March 15, 2019), I predicted that Wade MacLauchlan would set the election for Tuesday, April 23rd, despite the PEI Election Act stipulating that elections are normally held on a Monday. 

A lot of people have since asked me how I was able to guess the election date. It wasn’t hard: there really wasn’t any other way the Premier could avoid having very damaging information against the former Ghiz government – and his cover-up of the e-gaming scandal – become public on a grand scale before Islanders go to the polls.

Local media and political reporters such as Stu Neatby and Kerry Campbell are pretty much obligated to do stories on actual court proceedings like the CMT lawsuit once “court is in session,” and I’m certain a number of revelations will become public during the four days of hearings on the original defendant’s “Motions to Dismiss” –  scheduled to be heard April 23-27, 2019. But what have we heard from the media on e-gaming since the writ was dropped? Nothing.

I was especially surprised that on the impromptu CBC political panel segment on Compass the day after the election was called, neither Rick MacLean nor Paul MacNeil so much as mentioned the upcoming e-gaming court dates when asked why the Premier would set such an early election date.  Both stated they expected him to wait until the scheduled opening of the house on April 2nd, so he could present a budget and gain a significant advantage and head-start in the election campaign for his Party.  Both agreed that the April 23rd date for an election made no political sense, but they just couldn’t bring themselves to utter the words “e-gaming scandal.”

But here’s the thing: the lion’s share of the new information and arguments that will be presented to the judge on election day and the following three days – after we’ve already chosen a new government will be available to the public before the actual court hearing takes place. The problem is, without the local media reporting on that information, Islanders won’t know what that information will be.

In my article, PEI Election April 23rd as I predicted: I Would Have Preferred to have been Wrong! I noted the following:  

I will be checking daily for the cross-examination transcripts and factums likely to be filed with the court in advance of the court hearing in early April – making them public documents and giving me (and hopefully all media political reporters) a couple of weeks to report on what those documents contain.

What I have since discovered is that all factums and related material were due to be filed yesterday (Friday, April 5, 2019) and will be available to the public early next week.  

Given the amount of Liberal ads presently flowing into local media outlets on a daily basis, I suppose it was predictable that Liberal scandals like e-gaming would take a back seat, with the torrent of advertising revenue that comes only once every four years. And there’s certainly no shortage of other election and campaign news to report. But not reporting on e-gaming at this critical juncture represents a significant journalistic failure in my opinion, and can only be characterized as a massive disservice to Islanders.

I will be publishing the remaining two segments of my four-part e-gaming series “A Conspiracy to Commit Fraud,” before election day, as well as additional articles from new information contained in the Factums and Cross-examination transcripts (when they’re finally filed and available). But to be honest, what I publish on my blog is unlikely to reach more than a few thousand Islanders, and all voting Islanders should have access to important information and news about the past actions of the Ghiz and MacLauchlan Liberal governments that may affect how they vote on election day. 

Hopefully, revelations contained in my articles will finally break the spell that’s keeping reporters with local media from publicly uttering the words “e-gaming scandal” during the election campaign. 

The full truth about e-gaming is destined to eventually come out and become a national media story…of that I’m certain: it would only be fitting that Islanders heard it first from our local media.

To sum up:  These upcoming court dates are not the “trial”: they are dealing with several motions which aim to throw out the CMT lawsuit as a “slanderous, frivolous and vexatious” legal action. Such a claim is ludicrous, and to me these motions were filed nearly a year ago for one and only one reason: to delay the real case – the trial – from happening until the Liberal government could take another shot at getting re-elected and securing another four years of governance.

If you want to hear a different opinion about the PEI e-gaming story than the dismissive one the Liberals have been telling, listen to the following award-winning podcast out of Ottawa from a few months ago, featuring Canada’s top investigative reporter, Robyn Doolittle, and the Guardian’s own Stu Neatby. It’s especially fascinating to hear Neatby speak candidly about e-gaming corruption and fraud in this podcast; comments I have yet to read in Guardian articles.

[Head’s up: There are a couple of annoying advertisements in this podcast, so be patient – the rest of the material is worth it! If you move the cursor to start at 3:05 you’ll skip the biggest ad at the beginning]

Posted in E-gaming, Provincial Politics | Tagged , , , , , , , , | 1 Comment

Complaint Letter to the PEI Law Society Against Billy Dow

The Latin motto for the PEI Law Society was adopted from the provincial Coat of Arms and reads: “Parva Sub Ingenti” which translates: “The small under the protection of the great.” This official declaration that, like the provincial government, lawyers rule over the rest of us, should give us pause. That they also rule over themselves – in that they are self-regulated – should give us even greater pause.

With their understanding of the law – and access to the legal system – lawyers can indeed protect the small if they so choose; however, without proper oversight and trustworthy disciplinary procedures and processes to address wrongdoing, they can also easily act out of self-interest to ingratiate themselves or serve those who are not at all small and weak, but large, wealthy and powerful.

The evidence I am providing should convince any reasonable person that inappropriate and illicit actions by Mr. Dow, warranting significant disciplinary action, did in fact happen. I trust that the PEI Law Society will therefore find merit in my formal complaint against William F. Dow (aka “Billy” Dow).

I’m filing this complaint (see letter below) with two supporting documents: Appendix “A” – previously posted as “A Conspiracy to Commit Fraud – Preamble to Part 2: The E-gaming Loan” ; and Appendix “B” posted as “A Conspiracy to Commit Fraud -Part 2: The E-gaming Loan.”

I look for the day when the PEI Law Society’s motto will be changed to: “Magna Dominata est in multa” – “The great ruled by the many”.

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Law Society of PEI

49 Water Street,
Charlottetown, PE
C1A 1A3

April 3, 2019

Re: Complaint against William F. Dow

Attention: Secretary-Treasurer

By this letter and accompanying documents (Appendices “A” & “B”), I am formally filing a complaint with the PEI Law Society against William F. Dow (Carr, Stevenson and MacKay).

The page on the PEI Law Society’s website providing information on the complaint process states that there is no time limit for filing a complaint, noting that complaints should name the lawyer, indicate what he/she did or failed to do, as well as the time of the alleged complaint(s).

My complaint relates to a number of actions (or failures to act when actions were warranted) covering the period February, 2010 to January 2013, during which time Mr. Dow was retained by the PEI government as outside counsel on the E-gaming and Financial Transaction Platform projects (subsequently referred to in this letter as the “e-gaming project”).

In particular, I believe that Mr. Dow violated numerous provisions of the PEI Law Society’sApproved Code of Conduct,” throughout the nearly three-year period he acted as legal counsel for the PEI government on the e-gaming project, by failing to protect the interests of his client (PEI government & PEI residents).

Although the nature and style of my supporting documents are somewhat unconventional for a complaint to the PEI Law Society, I trust that you will nonetheless take the time to review the material contained in both appendices. The information in both articles is presented in a narrative style to make it more understandable and contextualized: both documents have already been published on my blog: “Ethical and Social Commentary on Life in PEI,” [https://Kevinjarsenault.com].

These two documents are part of a series of articles on e-gaming (“A Conspiracy to Commit Fraud”) and present the findings of a two-year investigation into this matter. A considerable number of source documents supporting the claims made in these articles – and this letter initiating a complaint – are too voluminous to provide in hard copy form. However, they can be easily accessed and downloaded from links contained in these two documents from my website.

As described in my articles, the nature of my complaint against Mr. Dow is two-fold: (1) that Billy Dow had a conflict of interest while representing the government on the e-gaming file; and, (2) that Billy Dow both acted and failed to act in ways that did not properly serve and protect his client, the PEI government, especially regarding his handling of the $950,000 e-gaming loan issued to the Mi’Kmaq Confederacy of PEI from the PEI Century Fund.

I identify some of these actions (and failures to act) with more precision below; however, the more substantive information and contextual details supporting these allegations will not be restated here; again, they can be found in the supporting documents (and the sources provided therein).

Previous Complaint Against Billy Dow

I am aware that a previous complaint alleging that Mr. Dow had a conflict of interest with his involvement in the e-gaming file was previously filed with the PEI Law Society by the former Leader of the PEI New Democratic Party (Michael Redmond), and resulted in a disciplinary committee ruling that Mr. Dow was not in a conflict of interest.

Redmond’s complaint related specifically to Mr. Dow’s involvement in the signing of a Memorandum of Understanding (MOU) in the late summer/fall of 2012 between the PEI government and Trinity Bay Technologies (TBT) [a wholly-owned subsidiary of Capital Markets Technologies (CMT)]. This issue is not the basis of my complaint.

New documents have recently come to light, as a result of filings with the PEI Supreme Court, revealing that Mr. Dow’s involvement in the e-gaming file did not begin with his involvement with the MOU in 2012, but that he was retained by the PEI government to act as outside counsel on the entire e-gaming project much earlier, in February, 2010. Mr. Dow continued to act in that capacity up to and beyond the date the PEI government ended the e-gaming project on February 24, 2012.

Conflict of Interest

My allegation that Mr. Dow was in a conflict of interest stems from the fact that while acting as the PEI government’s legal counsel on the e-gaming file, Mr. Dow purchased shares in Capital Markets Technologies (CMT) in July, 2011 when CMT was in discussions with the PEI government on possible involvement with e-gaming; in particular, discussions pertaining to the establishment of a financial transaction platform in PEI and the recruitment of gaming companies to PEI. The details pertaining to this matter are contained in Appendix “A”.

The Law Society of Prince Edward Island’sApproved Code of Professional Conduct” defines a conflict of interest as follow:

A ‘conflict of interest’ means the existence of a substantial risk that a lawyer’s loyalty to or representation of a client would be materially and adversely affected by the lawyer’s own interest or the lawyer’s duties to another client, a former client, or a third person.” (p. 9)

On page 3 of the Code of Professional Conduct, section 3.4-1 it further states:

A lawyer must not act or continue to act for a client where there is a conflict of interest, except as permitted under this Code.”

Section 3.4-1, para. 1 goes on to say that:

The risk must be more than a mere possibility; there must be a genuine, serious risk to the duty of loyalty or to client representation arising from the retainer. A client’s interests may be seriously prejudiced unless the lawyer’s judgment and freedom of action on the client’s behalf are as free as possible from conflicts of interest.” (my emphasis).

It is my contention that having invested in Capital Markets Technologies, a company which the PEI government and the “E-gaming Working Group” (Mr. Dow attended meetings of this Group as the PEI government’s legal counsel on the file) were in discussions with to be the company that would provide gaming company recruitment services – as well as to establish a financial transaction platform owned by Simplex (CMT had exclusive North American rights to Simplex’s technology) providing the technical infrastructure required for e-gaming and other financial services – Mr. Dow had a conflict of interest, and he should not have been acting as legal counsel for the PEI government on this matter.

Section 3.2-2 of the Code of Conduct states:

When advising a client, a lawyer must be honest and candid and must inform the client of all information known to the lawyer that may affect the interests of the client in the matter.”

Having purchased shares in CMT, Billy Dow clearly had a conflict of interest with the e-gaming file, yet he failed to inform his client, the PEI government, of his investment in CMT until September, 2012, which was long after his legal work on the e-gaming loan (as well as other matters related to the e-gaming file) was undertaken. I believe that Mr. Dow had both an ethical and legal obligation to disclose this information from the date he made the investment (July, 2011) and to also remove himself and his law firm as legal counsel on this file.

Dow’s legal work on the E-gaming Loan

In addition to a complaint that Mr. Dow was knowingly acting as legal counsel for the PEI government on an ongoing project file in which he had a conflict of interest, there are also specific actions (and failures to act) which Mr. Dow undertook (or didn’t undertake) which failed to protect his client’s best interests; actions which were, in fact, contrary to, and in violation of, various established government procedures, protocols and laws. The full details and sources for these actions (or failures to act) are contained in Appendix “B”and include:

  • Authorizing the advancement of $50,000 to another Law Firm (McInnes Cooper) prior to the signing of a “Letter of Offer” for the loan – with no security agreement in place, which was required by Treasury Board policy and the Financial Administration Act;
  • Authorizing the advancement of an additional $700,000 to McInnis Cooper law firm prior to the e-gaming loan general security agreement being in place in contravention of PEI policy and laws;
  • Failing to ensure that the Borrower (Mi’Kmaq Confederacy of PEI) – and the agent acting on behalf of both the Mi’Kmaq Confederacy and PEI government as the e-gaming/Financial Transaction Platform “project manager” [McInnes Cooper] – complied with section 1.1 of the Loan Agreement stipulating that the proceeds of the loan “…will be used by the borrower to finance the continued development and establishment of an interactive gaming regulatory and taxation model for the province of Prince Edward Island.” Mr. Dow knew – or should have known – that when he advanced the initial transfers of $50,000 and $700,000 they were not for “continued development,” but for past expenses incurred by McInnis Cooper law firm unrelated to the budget deliverables presented in the Loan Agreement (Appendix “A” of the Agreement);
  • Failing to ensure that the Borrower (Mi’Kmaq Confederacy of PEI) – and the agent acting on behalf of both the Mi’Kmaq Confederacy and PEI government as the e-gaming/Financial Transaction Platform “project manager” [McInnes Cooper] – were in compliance with section 1.2 of the Loan Agreement stipulating that “Disbursements will be based on 100% of actual invoiced costs as summarized in Schedule ‘A’ ” [Schedule “A” being the budget amounts for the specified deliverables].
  • Failing to act on section 2.5 of the Loan Agreement to protect his client (the PEI government) when the e-gaming project was terminated by the PEI government on February 24, 2012; specifically, insisting that the $750,000 advanced on the loan – but not yet “released” for use, since the necessary security agreement had not yet been registered – be returned by the borrower, as stipulated in section 2.5 where it states: “…all previous advances to date shall be refundable by the Borrower to the Lender;” in the event the e-gaming project ended.
  • Registering the security for the e-gaming loan on February 28, 2012, after his client (the PEI government) had terminated the project, thereby releasing the $750,000 previously advanced to McInnes Cooper law firm in contravention of section 2.5 of the Loan Agreement; and,
  • Authorizing subsequent advances for the remaining balance of the $950,000 e-gaming loan months after the project ended ($100,000 in December, 2012, and the final $100,000 in January, 2013) in contravention of section 2.5 of the Loan Agreement.

It is my belief that the client’s (PEI government’s) interests were seriously prejudiced as a result of Mr. Dow’s personal financial interest in the e-gaming project [his purchase of shares in Capital Markets Technologies], especially, but not necessarily limited to, his handling of the e-gaming loan which the PEI government issued to the Mi’Kmaq Confederacy of PEI (MCPEI) in a Letter of Offer dated December 12, 2011 – which was legal work on the e-gaming file that Mr. Dow undertook for his client after purchasing shares in CMT.

I also believe the evidence shows that Mr. Dow assisted in, and possibly encouraged, dishonest and illegal acts associated with his handling of the e-gaming loan in that many of these actions were in direct contravention of Treasury Board policy and provisions of the Financial Administration Act, as was verified by the Auditor General in her final report on the E-gaming, Financial Transactions Platform, and Loyalty Card initiatives. Again, the details of her allegations of inappropriate and illegal activities are contained in both attached appendices.

The Law Society of Prince Edward Island’s Code of Professional Conduct states in section 3.2-7:

“When acting for a client, a lawyer must never knowingly assist in or encourage any dishonesty, fraud, crime or other unlawful conduct, or instruct the client on how to violate the law and avoid punishment.”

Initiation of a Business Plan with TBT/Simplex

Another matter that may warrant disciplinary action against Mr. Dow is his initiation of a Business Plan (MOU) with Trinity Bay Technologies Inc. (TBT), which he apparently undertook without direction to do so from his client.

Although Mr. Dow has stated that he was unaware at the time that Trinity Bay Technologies Inc. was a wholly-owned subsidiary of CMT – the company he had an investment in at the time he initiated the Business Plan – his taking this action would suggest otherwise. That he did in fact undertake this action was verified by the Auditor General. She referred to this action only as “unusual”; however, it would seem that it was entirely inappropriate, and likely violated one or more provisions of the PEI Approved Code of Conduct.

Dishonesty, Fraud when the Client is an Organization

Section 3.2-8 of the Code states:

A lawyer who is employed or retained by an organization to act in a matter in which the lawyer knows that the organization has acted, is acting or intends to act dishonestly, fraudulently, criminally, or unlawfully, must do the following, in addition to his or her obligations under rule 3.2-7: [my emphasis]

(a) advise the person from whom the lawyer takes instructions and the chief legal officer, or both the chief legal office and the chief executive officer, that the proposed conduct is, was or would be dishonest, fraudulent, criminal or unlawful and should be stopped;

(b) if necessary because the person from whom the lawyer takes instructions, the chief legal officer or the chief executive officer refuses to cause the proposed conduct to be stopped, advise progressively the next highest persons or groups, including ultimately, the board of directors, the board of trustees, or the appropriate committee of the board, that the proposed conduct was, is or would be dishonest, fraudulent, criminal, or unlawful and should be stopped; and,

(c) if the organization, despite the lawyer’s advice, continues with or intends to pursue the proposed wrongful conduct, withdraw from acting in the matter in accordance with the rules in section 3.7. [My emphasis].

I have no knowledge concerning whether Mr. Dow acted on provisions (a) & (b) of section 3.2-7; however, the documentation clearly shows that he failed to withdraw from acting as the PEI government’s counsel on the matter in accordance with the rules in section 3.7.

Regardless of whether Mr. Dow was acting on instructions from provincial government officers and agents – including the Minister of Finance at the time, Wes Sheridan – he nonetheless had a legal duty – and ethical obligation – to ignore such instructions (and report them to the appropriate authorities) if they contravened established government policy and law, and withdraw from the file: he did neither.

Mr. Dow was not acting on behalf of these officers and agents, but the provincial government (PEI residents), and as the PEI Approved Code of Conduct states in section 3.2-3:

Although a lawyer may receive instructions from an officer, employee, agent or representative, when a lawyer is employed or retained by an organization, including a corporation, the lawyer must act for the organization in exercising his or her duties and in providing professional services.” [My emphasis].

It further states in section 3.2-3, para. 1:

While the organization or corporation acts and gives instructions through its officers, directors, employees, members, agents or representatives, the lawyer should be satisfied that it is the interests of the organization that are served and protected.” [My emphasis].

Appropriate resolution or remedy

The PEI Law Society’s website page providing information and instructions on filing complaints states that a complaint should answer the following question: “What do you see as an appropriate resolution or remedy?”

Mr. Dow had a duty to his client to protect the funds in the e-gaming loan, yet he failed to ensure that key provisions of the Loan Agreement were met prior to disbursing those funds to the borrower. This was especially the case with sections 1.1 and 1.2 of the Loan agreement that stipulate that only invoices for future work indicated in the Loan Agreement budget deliverables would be reimbursed (1.1), and that claims would be exclusively based on paid invoices (1.2), yet neither of these conditions were met prior to Dow advancing the loan funds.

Equally as concerning is Dow’s failure to call in the loan when the project ended on February 24, 2012 since it was already in default at that time, given the repayment terms stipulated in the Loan Agreement. Rather than securing the previous transfers ($750,000) that had not yet been released to the borrower, which was required under section 2.5 of the Loan Agreement, he proceeded to register the security agreement four days after the project ended, thereby allowing the release of the money to the borrower.

Especially concerning was his authorization of the transfer of the final $200,000 almost a year later on a defaulted loan without paid invoices.

The obvious remedy for this part of my complaint is to have Mr. Dow restore all funds ($950,000) that were paid out in contravention of provisions in the Loan Agreement so as to reimburse the PEI government (taxpayers) of these unnecessary financial losses.

In terms of additional disciplinary action against Mr. Dow relating to my complaint that Mr. Dow failed to disclose a significant and persistent conflict of interest in this matter, I would leave that to the judgment and discretion of the PEI Law Society; however, I would hope it would be more substantial than reminding him of his duty with a recommendation that he do better in the future.

Sincerely,

Kevin J Arsenault, Ph.D

Posted in E-gaming | Tagged , , , , , , , , , , , | 2 Comments

A Conspiracy to Commit Fraud: Part 2 – The Full Story on the E-gaming Loan

 

“I realize that the Leader of the Opposition [James Aylward] has suggested that there be particular discipline against leading or senior public servants. Those public servants have not done anything wrong, notwithstanding allegations to the contrary.”

— Premier MacLauchlan, [Hansard, November 15, 2016].

A FOUR-PART SERIES EXPOSING E-GAMING AS AN ELABORATE CONSPIRACY TO COMMIT FRAUD

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Part Two: The E-gaming Loan

Chapter 1: The E-gaming Loan

In the Auditor General’s Special Report on E-gaming, it was noted that the main funding provided by the PEI Government for the e-gaming project was a loan issued to the Mi’kmaq Confederacy of PEI (MCPEI) by Island Investment Development Inc. (IIDI) for $950,000.

There was absolutely nothing typical about this loan. It wasn’t really even a loan, other than in appearance and name, but a contrived grant presented as a loan, as the Auditor General, Jane MacAdam noted in her report, There was never any hope of repayment. 

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The revenue-sharing agreement between the PEI government and the Mi’Kmaq shows the extent to which the e-gaming project was principally a PEI government project, despite McInnes Cooper’s protestations to the contrary. Initially the idea was to obtain the entire e-gaming project funding as a grant, but that total amount was subsequently cobbled together from four separate sources for one and only one purpose: to keep the e-gaming project arms-length from government and secret, and completely hidden from the public.

Chapter 2: Keeping the E-gaming Loan Secret

Although the e-gaming project hadn’t really gotten off the ground in any substantive way by the summer of 2011, by early fall 2011, McInnes Cooper had somehow generated invoices totalling $750,000. What they did to earn this money remains a mystery, and from the Auditor General’s report it appears that the invoices from McInnes Cooper law firm mostly comprised over 100 meetings with Wes Sheridan. 

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In Section 3.35 of her report, the Auditor General notes that in early fall, 2011, McInnes Cooper – on behalf of the Mi’Kmaq Confederacy – put together a Treasury Board submission requesting a “non-repayable contribution from government” of $1.2 million to fund the costs of the e-gaming initiative.  

“Innovation PEI did not have sufficient funds in its budget to issue a grant, and could only do so if a special warrant was approved. This would require an order-in-council which is a public document. The grant request was never submitted. Subsequently, the local law firm prepared documentation to request a loan through IIDI rather than a grant.” P. 20.

Innovation PEI did not have sufficient funds in its budget to issue such a grant, and would have needed a special warrant from Executive Council for the grant submission, so as the AG noted, the e-gaming working group opted for a more elaborate way to get the “grant” – by processing it as a loan application to IIDI – but significantly amended the terms of the normal IIDI loan agreement to ensure it would never have to be repaid. In fact, it was an 11th-hour play by the Minister of Finance, Wes Sheridan, to access funds on the eve of an election.

According to a December 2, 2015 CBC news article, PC Leader James Aylward revealed during Question Period that the Ghiz government put the e-gaming loan  into the system on Saturday, October 1, 2011, the last possible moment before the Monday provincial election:

“Government’s own documentation shows this loan was placed in their system on Oct. 1, 2011,” said Aylward during question period.  “This timeline becomes hard to follow, because Oct. 1 was a Saturday … right on the eve of our provincial election,” Aylward continued.

Chapter 3: Getting IIDI Board Approval

Island Investment Development Inc. (IIDI) is a crown corporation reporting to the Minister of Economic Development and Tourism [Innovation and Advanced Learning at the time], so the e-gaming loan required IIDI board approval. The board members of IIDI who approved the loan were as follows:

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In what appears to be an attempt to pin the entire e-gaming scandal on Wes Sheridan (and protect pubic servants still working in government) the current Minister of Finance, Hon. Heath MacDonald, told the legislative assembly on November 16, 2016 that IIDI did not approve the e-gaming loan saying:

“The IIDI board is a very important board. We’ve seen the economic growth right across the province. From my recollection the IIDI did not approve this loan.” [Hansard, November 16, p. 1465]

This was not true: the IIDI most definitely approved the e-gaming loan.

On October 6, McInnes Cooper submitted a Business Plan (Loan application) to the Board of IIDI on behalf of the MCPEI.  IIDI board members initially raised concerns about the request with various government officials, including Neil Stewart – CEO of Innovation PEI and a member of the IIDI board – who communicated his concerns to the Deputy Minister of Finance, Doug Clow (copied to Michael Mayne), pointing out what would be required to get approval from IIDI, highlighting that the IIDI Board could not approve the loan without any security. 

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Notice from the last sentence of the first paragraph in Stewart’s letter that he already viewed the entire e-gaming project as a “consulting” project saying: “IPEI doesn’t have the budget to absorb $1M in consulting fees.”

Neil Stewart’s concern about not having security was on target, and IIDI formally deferred the request for the $950,000 loan as a result of MCPEI not providing security.

Eight days later (October 27, 2011) the IIDI Board approved the loan based on a “letter of guarantee” provided by then Minister of Finance, Wes Sheridan. 

Chapter 4: The Fraudulent Reduction of the Loan Request 

Avoiding making the e-gaming project funding public by seeking a loan from IIDI created another challenge for Wes Sheridan and McInnes Cooper law firm.  IIDI was not legally-authorized to approve loans of more than $1 million, so it became necessary to reduce the amount of the original treasury board submission to bring it under the IIDI approval threshold. By adopting this strategy, McInnes Cooper and Wes Sheridan were able to keep the e-gaming project secret.

But the IIDI loan application created another problem for the IIDI Board: both the Financial Administration Act and Treasury Board Policy also required that “letters of guarantee” must be approved by Executive Council which – like the original plan to make a funding submission to Treasury Board for the entire $1.210,000 – would have been recorded in an Order in Council making the e-gaming project public knowledge.  The solution to this problem was simple: circumvent the law and proceed without bringing the loan guarantee to Executive Council for approval. This deliberate, illegal maneuver was noted by the AG in her report:

“The [e-gaming] loan was approved by the Board of Directors of IIDI and was secured by a guarantee letter from the former Minister of Finance [Wes Sheridan]. This guarantee letter was provided without executive Council approval required in Treasury Board policy and the Financial Administration Act and impacted the transparency on the file.” [Section 3.27, p.18].

What the AG really meant to say when she said this illegal act “impacted the transparency on the file,” was that it effected an illegal cover-up!

Not only does the Financial Administration Act require Executive Council approval of loan guarantees, Treasury Board policy also stipulated that the loan should have been reported to Treasury Board in the quarterly reports once it was determined to have a “specific provision for loss” (e.g., would need to written-off); however, there was never any mention of the e-gaming loan in those quarterly reports, right up until the time the Auditor General appeared before the Standing Committee on Public Accounts on November 2, 2016, p. 135: where she said the following to committee members:

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Chapter 5: The E-gaming Loan Application

The first thing to note about the e-gaming loan application is that the law firm that would eventually receive the money from the loan was the same law firm that prepared the loan application: McInnes Cooper.

The most authoritative source of information about the e-gaming loan application genesis and process comes from McInnes Cooper documents, only recently  made public (September 24, 2018) when they were filed in the PEI Supreme Court in conjunction with the Capital Markets Technologies (CMT) lawsuit.

One such document is a memo from McInnes Cooper lawyer Kevin Kiley to chartered accountant Mike O’Brien – contracted by McInnes Cooper and one of five members on the E-gaming Working Group. In that memo, Kiley explained the motivation for the change in plans regarding the strategy to access funding for the e-gaming project noted earlier:

“The change from $1,195,000 to $950,000 did not reflect any change in the scope or anticipated costs of the project. but rather was changed to allow the Confederacy to meet the funding thresholds of Innovation PEI.” (p. 2)

In other words, McInnes Cooper arbitrarily reduced the numbers of three of the budget lines in the initial funding request with the idea that they’d make that money up using other strategies. The intention was to hold Wes Sheridan to his initial commitment so the law firm would receive the full $1,195,000 amount stipulated in the original business plan.

A copy of that original proposed budget  – drawn up for the Treasury Board submission that was never submitted – was included in Kevin Kiley’s September 25, 2012 Memo to Mike O’Brien:

E-gaming Proposed Budget #1

This original budget was subsequently amended to bring it under the $1,000,000 IIDI threshold when submitted to IIDI as a loan application.

Chapter 6: The E-gaming Loan Agreement

Normally, loans issued by IIDI contain specific provisions which protect the funds and ensure loans are either (a) repaid as per the terms of the loan agreement, or (b) recouped from securities. The purpose of these loan agreement provisions re: securities is to ensure that the funds are recovered if the borrower is unable to repay the loan. Such was not the case with the e-gaming loan.

And not only were at least some of the IIDI board members kept in the dark about the deliverables in the budget being largely fictitious, with the lion’s share of the $950,000 intended to cover past bills at McInnes Cooper, the loan agreement included a specific provision legally designating the money be used for future activity!

The Letter of Offer issued to the Mi’Kmaq Confederacy on December 12, 2011 stipulated under Section 1 that the proceeds “…will be used by the borrower to finance the continued development and establishment of an interactive gaming regulatory and taxation model for the province of Prince Edward Island,” however, $750,000 was in fact used not for “continued” anything, but to cover past bills submitted by McInnes Cooper. 

The AG noted this as well, pointing out that the loan agreement did not inform IIDI board members that $750,000 of the requested $950,000 had nothing to do with the “deliverables” in the submitted budget, but would be used to pay-off McInnes Cooper law firm’s prior expenses.

Loan Agreements are legal documents designed to protect the interests of the lender, but this wasn’t the case with the e-gaming loan. The e-gaming loan agreement was significantly amended to essentially transfer all the risks from the borrower to the lender (e.g., the PEI government aka “taxpayers”). As the AG explained:

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As well,  IIDI loan agreements contain both a “general security agreement clause” and a “priority agreement clause” – as did the e-gaming loan, stated as follows in section 4.2:

However, with the obsession to keep the e-gaming project secret and once-removed from government, the Executive Director of IIDI chose to override the IIDI board – along with this specific provision within the loan agreement – and “waive” the priority agreement. The AG also noted this in her e-gaming report:

In addition, a clause was added to the loan agreement that essentially turned the loan into a “grant” by making repayment contingent on the project being successful. More precisely, loan payments would come exclusively from e-gaming revenues, and 95% of all revenues belonged to the province, so in effect, the loan to the Mi’Kmaq wasn’t really a loan at all, but an elaborate scheme to keep the e-gaming project secret while accessing nearly a million dollars of taxpayer’s money and having it transferred to McInnes Cooper law firm via the Mi’Kmaq Confederacy. 

Chapter 7: Hiding “Third Party” Contracts

When McInnes Cooper reduced the initial budget from $1,195,000 to bring it under the $1 million IIDI threshold ($950,000) it didn’t remove the third Party contract deliverables contained in the original budget [items #14 (Simplex); #15 (Patrick Orr}; and #16 (Edleman Canada)], but arbitrarily reduced other line items in the budget, as indicated in red:

According to a December 12, 2011 Letter Kevin Kiley sent to Neil Stewart and Steve MacLean [then clerk of Executive Council], this was the version of the budget submitted to IIDI, and was the final budget approved by IIDI.  Kiley’s letter was written the same day the e-gaming loan agreement was signed, so we can trust that what he said was accurate, since it was he and his law firm that prepared and submitted the budget to IIDI.

But this is not the version the PEI government provided to the Guardian, after the Information & Privacy Commissioner ordered the Head of the Department to provide the e-gaming loan budget  – which was redacted from the loan agreement provided to the Guardian in response to an Access to Information request – after the Guardian sought a review by the Commissioner.  The MacLauchlan government  removed all references to the three contractors in the version presented to the Guardian, by arbitrarily increasing three budget lines by exactly the same amounts designated for the three third-party contracts (see items in green)!

Might a decision have been made to pay the third party contractors from other sources, and that the version of the e-gaming budget approved on December 12, 2011 was at a later date amended? No. 

Kevin Kiley confirmed in the above-noted letter that Simplex was paid $30,000 from the e-gaming loan budget, and also stated amounts for both of the other two third-party consultants were included as part of the budget deliverables with the e-gaming loan, yet there was no mention of them in the version of the budget released to the Guardian.

Chapter 8: Dow’s Premature Advancement of Loan Funds

Dow’s mishandling of the e-gaming loan started before there was even a formal loan agreement in place, when he advanced $50,000 to McInnes Cooper on November 29, 2011, contrary to the standard operating procedures in place at IIDI which stipulate that no advances on loans were to be made to the borrower prior to the signing of a Letter of Offer, which in the case of the e-gaming loan, only happened on December 12, 2011.

As the AG pointed out in her e-gaming report, that $50,000 should not have been advanced to McInnes Cooper by Billy Dow before a letter of offer was signed and loan security was in place:

Registration of the Security

Dow then advanced an additional $700,000 to McInnes Cooper ten days after the Letter of Offer was signed – but prior to the registration of the security. He did, however,  stipulate in a December 22, 2011 Letter concerning that sizable transfer that:

“These funds are forwarded to you on the express condition that they not be released until we receive the duly executed promissory note and general security agreement as set out [in] sections 4.1 and 4.2 of the said offer to finance.”

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Sections 4.1 and 4.2 of the said offer to finance read as follows:

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How much clearer could the legal provision in the loan agreement be?

It is unclear why Dow transferred $750,000 of the e-gaming loan (coincidentally, the same amount of the prior expenses McInnes Cooper had amassed even before submitting the loan agreement) knowing the funds could not be legally accessed by the law firm. 

It is likely that the intention was to provide the security agreement shortly thereafter; however it was not provided or registered until after the project formally ended, and herein lies the most grievous and unethical action taken by Dow with the e-gaming loan.

Chapter 9: Dow&#