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’s Registration of Security after Project ended

As the lawyer handling the legal transactions associated with the e-gaming loan [See: “Preamble to Part 2: (Complaint to the PEI Law Society against Billy Dow)“].  the decisions Dow made were supposed to represent the interests of government (and the people of PEI) not McInnes Cooper law firm. 

The evidence clearly shows that Dow failed to enforce the provisions of the loan agreement to protect the PEI government’s (and taxpayer’s) interest. His actions were not only unethical and a clear betrayal of public trust, but a blatant violation of several provisions of the PEI Law Society’s Code of Conduct.

Dow’s actions as legal counsel for the government on the e-gaming loan constitute the second part of the two-fold complaint I’m filing with the PEI Law Society against Billy Dow, and this article is being filed with that complaint as a supporting document (Appendix “B”). 

Section 2.5 of the loan agreement expressly stated that further loan disbursements were NOT to occur if the project ended:

Clause in Loan Agreement

This key legal clause stipulating that “all previous advances to date shall be refundable by the Borrower to the Lender,” unless such advances were already incurred by the Borrower in good faith “…in keeping with the terms of the Loan” was completely ignored by Dow.  Rather than calling in the loan, Dow took it upon himself to register the loan security four days after the project had ENDED on February 24, 2012! 

Which brings us to what Billy Dow, as legal counsel for the government handling the $950,000 loan agreement, did to ensure McInnes Cooper received the full amount of the loan, contrary to the legal provisions of the loan agreement designed to protect the public’s interest (and money). As Dow stated in his December 22, 2011 letter – the funds could not legally be released until the security was in place. So rather than acting on section 2.5 of the loan agreement after the government ended the e-gaming project on February 24, just four days later (February 28, 2012) Billy Dow registered the security for the loan, thereby authorizing McInnes Cooper to access and appropriate the $750,000 which had been previously advanced from the e-gaming loan funds.

Perhaps even more shocking is the fact that the remaining $200,000 which had not been transferred to McInnes Cooper was given to the law firm months later: $100,000 in December, 2012, and the remaining $100,000 in January, 2013.

To me, this is an even more egregious act than his failure to report his investment in Capital Markets Technology (CMT) which he made a few months earlier (July, 2011), a conflict of interest which may explain, in part, why he failed to act on the provisions within the e-gaming loan agreement to protect the PEI government (and taxpayers). The e-gaming loan was at that time viewed as a key driver for the e-gaming project, and as I explained in some detail in my previous article (Preamble to Part 2) CMT was the principal company the e-gaming working group were (literally) banking on to establish a financial transaction platform in PEI.

Read section 2.5 of the loan agreement once more and note in particular the following words “unless such advances have already been incurred by the Borrower in good faith and in keeping with the terms of the loan“:

Clause in Loan Agreement

What “in good faith” means in the context of a project which was formally ended by government meant is that legitimate expenses had already been incurred in line with the actual deliverables presented in the budget, the work had been done, and invoices had been submitted to IIDI for payment of those amounts.  We know that most of it went to unrelated expenses from the documents, but we also know that the proposed work was not – and could not have been – done.

Using the $950,000 e-gaming loan budget made public by the MacLauchlan government – however reluctantly – we can see that nearly 90% of that work simply could not have happened, given that the project essentially ended before it got off the ground:

Once the project ended, Billy Dow should have immediately acted on section 2.5 to secure the funds that had already transferred, but not yet released to McInnes Cooper. Especially given the fact that the budget deliverables in the loan – the “work” – was not completed, and in most instances, not even initiated.

The budget submitted to and approved by IIDI listed 16 budget lines and included the three “third-party contracts” that were left out of the budget version provided to the Guardian. We know that Simplex finally did receive payment of $60,000, $30,000 of which came from the e-gaming loan funds, and Kevin Kiley mentioned in his letter to Neil Stewart and Steve MacLean on December 22, 2011 that: “Edleman Canada has provided us with three invoices totaling $27,920 (saving of $22,078.40 on budget)” which he indicated would be paid from the e-gaming loan. What work did Edleman do, if any?

And in an Interview Transcript  that took place between the AG office staff and Kevin Kiley dated October 3, 2017, Kiley confirmed that nothing was produced by Edleman Canada:ongoing adviceThere is no information provided by the AG – or any other information or explanation that I’ve been able to find – that accounts for the $100,000 provided to the Mi’kmaq Confederacy, although Don MacKenzie, Executive Director of the Mi’Kmaq Confederacy of PEI at the time, did attend some meetings with Wes Sheridan and McInnes Cooper, sign documents, authorize drawdowns on the trust fund at McInnes Cooper, etc.; however, it’s hard to imagine that work was substantial or worth $100,000.

At a minimum,  nearly 90% of the “deliverables” in the $950,000 e-gaming loan simply could not  have happened. As for the rest of what was “possibly” done, most appears to be significantly inflated, especially charging $50,000 for non-disclosure agreements which should have cost next to nothing [I allowed $5,000 for this item in the above chart]. 

Keep in mind that the e-gaming project literally “never got off the ground,” so work with nearly all the “deliverables” in the project could not have been undertaken by virtue of that fact.  Even the Auditor General made note of this in her report; however, she didn’t really provide a sense of just how significant this was:

AG deliverablesThe AG says there were “significant cost overruns” at the time the loan was disbursed, but how is this even possible? Other than approximately 100 meetings with Wes Sheridan, Don MacKenzie, McInnes Cooper lawyers and Mike O’Brien – and a few communications with a handful of third parties – no substantial amount of work was ever completed with the e-gaming project.

The AG states in the above section that the version of the budget she received “contained thirteen deliverables, each with a corresponding timeline and estimated cost”…..the budget released to the Guardian had 13 budget lines (whereas the budget McInnes Cooper prepared for MCPEI and submitted to IIDI had 16 budget lines) so was the document the AG received from the department the same one as the one given to the Guardian?  It doesn’t appear so.

The Auditor General  stated that each of the budget line items in the version she received had a “corresponding timeline,” but none of that information was present with the version given to the Guardian.  Were there actually two separate “alterations” of the actual budget submitted to IIDI? One for the AG and one for the Information Commissioner and Guardian? This clearly needs further investigation.

Chapter 10: Honouring Fraudulent Claims and Invoices

But let’s get back to figuring out how McInnes Cooper ended up receiving all that money for work they never did. It should never have happened, because the (2011-12-12) Innovation PEI E-gaming Loan Agreement clearly stipulated under section  1.1.1.2 that:

“Disbursements will be based on 100% of actual invoiced costs” (p. 1)

…and the Auditor General both noted this fact and reported that claims were completed by IIDI without first receiving “paid invoices” as required:

Paid Invoices Required in Letter of Offer

Just think about that for a minute: “unpaid invoices were provided to IIDI staff and IIDI completed the claims to support drawdown of loan funds.” As a result of this breach of this specific provision of the loan agreement, the AG was unable to even verify that the funds were used to pay legitimate e-gaming costs:

“IIDI did not reconcile the disbursements on the loan with the actual payments made by the local law firm. Therefore we could not determine whether the loan funds were used to pay the invoices as indicated on the claim.” (Section 3.50, p. 23-24).”

What’s even more shocking to learn – although not that surprising given the breadth of fraudulent activity with the e-gaming loan – is that there were both discrepancies between the claims submitted to IIDI and the payment details that emerged in other correspondence, including information showing that some of the e-gaming loan funds provided to McInnes Cooper were used to pay invoices that had absolutely nothing to do with the e-gaming project, as the AG also noted:

“In fact, we noted three instances where there were discrepancies between the claims prepared by IIDI and the payment details in other correspondence from the local law firm.” [Section 3.50, p. 24]

If the AG just happened upon discrepancies in the course of her reviewing other  memos or emails, one can only  imagine the full extent of those discrepancies with invoices that had absolutely no connection to the approved budget; or, for that matter, either MCPEI or e-gaming:

“In addition, we noted instances on the invoices where the local law firm was billing MCPEI for providing legal and investment advice to the former Minister of Finance [Wes Sheridan] on an investment decision for the PEI Lotteries Commission, a provincial Crown Corporation.”[Section 3.23, p. 17].

Chapter 11: E-gaming Loan Cover-up  by the MacLauchlan Government

Once the government withdrew support for the e-gaming initiative on February 10, 2012, any hope of recovering the money that Dow allowed McInnes Cooper to appropriate by finalizing the registration on February 28, 2012 was gone.  The loan was totally unrecoverable given that the amended loan agreement stipulated that “repayment” would come exclusively from e-gaming revenues:Repayment from Project Revenues Screen Capture.JPGIn fact, IIDI  had already reported the entire $950,000 loss on the loan in it’s fiscal year ending March 31, 2013, as noted in the Consolidated Financial Statements in their Annual Report (see p. 13). However, this was reported “anonymously” as an entry in the Notes Receivable under “Impaired long-term small business loan” with no “explanatory notes,”  so with that obscurity, along with the general secrecy surrounding the entire e-gaming project at the time, apparently no one – including opposition MLAs – made the connection.

Ironically, despite all Wes Sheridan’s assurances of loan security, the entire $950,000 amount was reported by IIDI as a “total loss” in the very same fiscal year it was disbursed!

Notwithstanding Wes Sheridan’s “guarantee” letter assuring that the loan was secure and would be repaid to IIDI, as the Auditor General noted in section 3.6.2 of her report, IIDI failed to mention that the loan had “security” in it’s Audited Financial Statements prepared by Arsenault, Cameron & Best Chartered Accountants….the “Arsenault” being the Deputy Minister of Finance at the time, David Arsenault, who was heavily involved in assuring that McInnes Cooper had all their “outstanding” bills paid later in the Fall of 2012, as will be explained in detail in Part 4 of this e-gaming series.

So, despite the fact that the $950,000 loan was a complete write-off from February 10, 2012, when pressed by the opposition in the Legislative Assembly about the status of the e-gaming loan 2 1/2 years later, then Minister of Economic Development and Tourism, Allen Roach emphatically stated:

“Again, as I’ve stated I think about four or five times already, it’s a confidential deal agreement between Finance PEI and the Mi’kmaq Confederacy.  What I can say is that loan is not in default.” [Hansard, November 26, 2014, p.468].

Roach was wrong on both counts: the money was gone for good, which eventually became public knowledge. The MacLauchlan government refused to release the loan agreement, or any honest information about its status, but when the Guardian submitted an access to Information request, and the MacLauchlan government still refused to release the e-gaming loan budget, as noted earlier, the Guardian appealed to the Information Commissioner, Karen Rose, and she ordered the government to release it, ruling that the document was not a “confidential deal agreement between Finance PEI and the Mi’kmaq Confederacy.”

A key part of the ongoing cover-up of the e-gaming loan relates to the failure of both the Ghiz and MacLauchlan governments to demand an accounting of the loan from the Mi’Kmaq Confederacy and McInnes Cooper, as per the terms and conditions of the loan agreement. Specifically, section 9, “Reporting Covenants”:

To my knowledge, financial statements have never been provided to the PEI government from the Mi’kmaq Confederacy of PEI, nor has MacLauchlan demanded they be provided.  We know the $950,000 was funnelled through the Mi’Kmaq to McInnes Cooper – we have no clue where it ended up after that!

Chapter 12: The MacLauchlan Government Cover-up of E-gaming

From the very beginning of his tenure as Premier, Wade MacLauchlan has made a valiant attempt to convince Islanders that he was serious about getting to the bottom of the e-gaming scandal. It was only days after the election back in 2015 that he asked the Auditor General to investigate the matter; however, in retrospect, that was clearly a strategic ploy to keep the real story about the e-gaming corruption secret.

Passing the file to the AG not only allowed him and his ministers to repeatedly refuse to answer questions from opposition PC MLAs during Question Period in the House, it gave him a way of creating the illusion of a thorough investigation while at the same time preventing the Auditor General from accessing the documents and information she needed to do a proper audit. So much so that she had to include a separate section in her report to explain the “Scope limitations” of her audit. And more to the point, MacLauchlan refused to provide her with government records:

“We requested from government all relevant texts including instant messages and PINS. There were none provided by government even though we were advised, and have evidence that some government business relevant to these files was conducted through these forms of communication.”

And thousands of e-gaming documents were destroyed by the Liberal government, including all the e-gaming files of Robert Ghiz’s chief of staff, Chris LeClair; Melissa MacEachern and Rory Beck.  The AG said the e-gaming records of other staff may have also been destroyed, but investigating that issue further wasn’t part of her mandate – she discovered the deleted files of those three senior bureaucrats heavily involved in e-gaming only by chance.

The information Commissioner is currently undertaking an investigation into missing e-gaming records of Brad Mix as a result of a review I initiated after I didn’t receive e-gaming records that I know for a fact exist, in an Access to Information request. I expect her final ruling will verify that his e-gaming records have mysteriously gone missing; however, that ruling won’t be completed and made public until May, well after the April 23rd election.

Premier MacLauchlan was most likely aware that most of the e-gaming project files were kept secret at McInnes Cooper law firm when he asked the AG to  do her investigation into e-gaming, yet he did nothing as Auditor General and Minister of Justice at the time to help her access them, after the law firm refused to turn them over to her. She contemplated taking court action herself, but declined saying it would only delay the final report by years, expecting her legal action to be challenged every step of the way.

Despite being hampered and stonewalled, the AG was still able to uncover a tremendous amount of information that considered in its entirety makes the e-gaming project clearly the most corrupt initiative of any government on record.  And despite a dedicated effort to limit and frustrate the AG in her investigation, the Premier had the audacity to make the following statement on the first day of the opening of the Fall sitting of the Legislative Assembly, just after the AG report on e-gaming was made public that:

“The Auditor General had full access through interviews and documents to everything that went on around that, around the egaming proposition, I’ll call it.” [Hansard, November 15, 2016]

Despite Wade’s promise that he intended to “do things differently” from what his predecessor Robert Ghiz did, he has been the most secretive and evasive leader this province has ever had, and no where has that been more true than with e-gaming.

I’ll conclude this article with a few comments on the quote at the top of the article:

“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].

Not only was Premier MacLauchlan unwilling to discipline senior civil servants who broke laws, refused to report what they were doing as required by Treasury Board policy, etc, as outlined in detail in this article, he rewarded the five individuals who approved the e-gaming loan and kept it secret as follows: 

  1. He promoted Neil Stewart to be the keeper of the public purse by making him Deputy Minister of Finance.
  2. He promoted Doug Clow to his current position of Vice-Chair of the Island Regulatory Appeals Commission.
  3. He appointed Michael Mayne the Head of Health PEI.
  4. He promoted Brian Douglas Clerk of Executive Council.
  5. He made Richard Gallant the Executive Director. Workforce and Advanced Learning SkillsPEI.

When Premier MacLauchlan told the Legislative Assembly on that opening day after the AG report was filed that: “It is not the practice of our government, nor
my practice as Premier, to throw public servants under the bus,” he wasn’t kidding!

 

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