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