Episode #13: Why did Brad Mix go to  Osaka, Japan?

This episode deals with a very important part of the e-gaming story and CMT lawsuit  that I’m pretty sure you’ve never heard anything about before. And I’ll confess, I’ve struggled to figure out how to present the complexities of this particular issue in a way that can get to the really important core insights – understandings that reveal how Judge Campbell’s interpretation of these events is fundamentally mistaken.

So why did Brad Mix go to Japan in 2012?  Why is that event important to understand the CMT lawsuit and Judge Campbell’s ruling to dismiss that lawsuit?

CMT dedicated 11 consecutive paragraphs to this issue in its Statement of Claim (paras 151-161) so it is obviously important to CMT’s case.  Here is the first of those paragraphs:

I won’t provide all the details of those 11 paragraphs, but the crux of the allegation and core claim against Mix was expressed succinctly in paragraph 156:CMT alleged in its claim that Brad Mix was having discussions with other financial transaction processing companies at the SIBOS conference in violation of the Memorandum of Understanding (MOU) between Innovation PEI and CMT/FMT. The documentation does show he attended, and had between 6-10 formal meetings set up.

Before we take a look at what Judge Campbell said about CMT’s allegations concerning Mix attending SIBOS, we first need to review a little background information about the global financial transactions sector to make sense out of things.

Do we really need to know About “SWIFT” and “SIBOS”?

I’m afraid so.

The world of  “global financial transactions” is a very specialized one, comprising the most powerful financial institutions and banks in the world.  That world is governed by SWIFT.

SWIFT: The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.

To establish a “financial transaction hub” of any merit in PEI, it would be necessary for that Hub to be “SWIFT-accredited” so it can provide clients access to the global SWIFT network.

In 2011, there were apparently only three SWIFT-accredited companies in the U.K., – CMT/Simplex being one of them – and there were none in North America. It was CMT/Simplex’s intention to establish a SWIFT-accredited financial and data transactions Hub in North America.  The PEI Government recruited CMT/FMT in early 2011 – then signed an MOU for CMT/FMT in 2012 on the way to a formal agreement –  for CMT/FMT and Simplex to do exactly that.

SIBOS: Sibos is an annual conference, exhibition and networking event organised by SWIFT for the financial industry. It is known as the “premier business forum” for the global financial community to debate and collaborate in the areas of payments, securities, cash management and trade. It is not a “recruitment” event or Job Fair.

SIBOS is also the place and time when companies announce new projects, innovations and endeavours. In 2008, CMT/Simplex’s financial transaction platform was highlighted in a major announcement by the Royal Bank of Scotland (read at least the last paragraph):

Take note that “Gary Wright” was at that time the head of International Cash Management and Product Development, Global Transaction Services, for the Royal Bank of Scotland. He subsequently joined CMT/Simplex as the Head of Market Industry Strategy. Wright was also very involved with the PEI financial transaction project.  In fact, he was at the “Roundtable” meeting in the Premier’s office about eight months prior to the SIBOS Conference. Here’s the list of non-government people who attended that meeting:

Slight Digression: This is another good example of how Judge Campbell mistakenly fails to see how key technology partners of CMT/FMT are “representative” of CMT/FMT’s interest in the initiative.  Paul Maines didn’t attend the meetings – that was left for the technology experts and market strategists like Gary Wright.

Paragraph 345: [Alan] Campbell confirmed that he did attend a meeting with MacLean, Evans, Jessop, and Sameet Kinade on October 17, 2012. Gary Wright participated in that meeting by telephone. Each of Evans, Jessop, Kinade, and Wright, stated they were representatives on behalf of TBT. None stated they were representatives of CMT or Maines.

Judge Campbell’s relentless campaign to create the impression that Paul Maines and CMT had nothing to do with the e-gaming and financial transaction platform initiative is truly baffling! Maines – in his capacity as V-P of Business Development – probably arranged to have Wright participate in that Roundtable meeting.  And TBT (Trinity Bay Technologies) was – at that time – just a Trade Name being used for the 100%-owned subsidiary of CMT (764/FMT).

Just two SIBOS Conferences after the RBS announcement in 2008, the largest bank in the world  (HSBC) made a big announcement at the SIBOS 2010 Conference that it too was now using Simplex/Sterci’s Platform (at the time, CMT owned 100% of the shares of Simplex):

The 2012 SIBOS conference was when CMT/FMT and Simplex were hoping to announce the launch of a North American Swift-accredited financial transaction platform located in Prince Edward Island, but of course that never happened.

That’s probably enough to know to realize that Brad Mix had absolutely no business being at SIBOS 2012 in Osaka, Japan. But that’s not the way Judge Campbell saw things.

What did Judge Campbell say about Brad Mix going to SIBOS?

Not just anyone can “register at SIBOS” – you need to have “expertise in the field” of financial transactions and have a “referral” from a SWIFT-accredited company, neither of which Brad Mix had.  So why did he go?

Just when the PEI Government seemed on the cusp of a great deal with the leading SWIFT-certified financial transaction company in the world, the PEI Government sends a “recruiter” to the same Conference? Keep in mind that many of the SIBOS attendees would have been very familiar with CMT/Simplex given their global prominence in the field – along with their patented technology solution “Claimatrix” – and they would have been made aware that CMT/Simplex were nearing a deal to launch a North American Swift-accredited Financial Transaction Platform. What were they to think with a PEI Government recruiter milling about trying to “prospect” other financial services companies?

Mix was only allowed to register at SIBOS because he used “Philip Walsh” as a referral. When he first tried to register, he received the following reply:

Mix swore in his cross-examination that he got permission from Walsh to use his name as a “SWIFT contact” to register for SIBOS, and Judge Campbell accepted that, concluding there was no evidence to refute Mix’s sworn testimony:

Paragraph 280: With respect to attendance at the SIBOS conference, Mix testified on cross-examination that he was invited to attend the SIBOS conference by Philip Walsh, CEO of Simplex. He stated that in a previous meeting with Walsh regarding Mix’s role in attracting outside businesses to PEI, Walsh told him if he wished to go to the next SIBOS conference, he could feel free to use Walsh’s name as a reference. The exhibits attached to his affidavit included an email exchange in May, 2012, with the organizers of the SIBOS conference in which they asked Mix for the name of his SWIFT contact person in order to gain approval from SWIFT for his registration to be processed. (SWIFT is the Society for Worldwide Interbank Financial Telecommunications). As offered by Walsh, he provided them with Walsh’s name and telephone number, following which Mix’s registration was approved.

The other main point Campbell made several times about Mix attending the SIBOS Conference was the Conference happened after the MOU extension expired:

Paragraph 290: On October 15, 2012, Mix was advised by their matchmaking consultant that they had arranged a meeting between Mix and Kaflon of Sterci. Mix advised Paynter and asked if he should decline the meeting. I note again that the email respecting a future meeting was sent 5 days after the final expiration of the MOU. Mix did meet with Kaflon at the SIBOS conference and expressed in his travel summary that he felt Sterci had no interest in following up on his invitation to invest in PEI.

That initial extension of 30-days happened because at the time 30 days was deemed to be more than enough time to conclude the agreement. Then the Securities Investigation happened which led to a temporary suspension of talks on finalizing an agreement, and then the MOU extension expired.

However, documentation in subsequent weeks and months clearly shows that the PEI Government’s intention was to continue negotiations with CMT/FMT toward a launch of the financial hub once the  Security Investigation mess was cleaned up.  However, the degree of sincerity with those stated indications in documents after the Securities Investigation was launched is very suspect and is difficult to determine.

After Maines discovered (from Tracey Cutcliffe) that the PEI Government had been in discussions with other financial institutions and the Securities Investigation was launched, the Government was no longer making comments in documents that they needed to “wait for the MOU to expire” to proceed with other companies, and consciously avoided making any statements that might support the claim that Innovation PEI had breached the MOU.

Although the documentation clearly shows  a “good faith” intention with the PEI Government to carry on negotiations with CMT/FMT, at the very  same time,  Mix is paying a UK “head hunter” (likely in the $10,000 price range) to schedule meetings at SIBOS for Mix to “prospect” other financial companies. And those meetings were set up during the time when the MOU was in force, and are clearly in violation of the MOU.

As future episodes in this series will discuss in much more detail – during the same time period that the PEI Government was keeping CMT/FMT on the “hook” as a possible option for a financial transactions Hub (with a signed MOU) the PEI Government was also secretly engaging in discussions with other financial companies which were CMT/FMT and Simplex’s competition in the field. Brad Mix’s maverick efforts at Osaka were by no means an isolated instance of a violation of the MOU, just another piece in the puzzle, as will be seen in subsequent episodes.

The Truth?

Consider the following email sent form Cheryl Paynter to Clerk of Executive Council at the time, Steve MacLean:How does this make any sense? “…to set up prospect meetings…’  Why would the PEI Government be “prospecting” companies that could establish a financial transaction centre in PEI when they already had one – FMT/Simplex?

And why would the PEI Government make a conscious decision to avoid even meeting with Simplex at the Conference, going so far as to “cancel” a meeting that the owner (sic – CEO) of Simplex (Philip Walsh) had agreed to have after being asked by the “match-maker” hired to set up meetings?

For Brad Mix to have used Walsh’s name to get into the Conference without even letting him know – in conjunction with the decision to decline a meeting that was already set up with Simplex by Mix’s consultant –  is evidence that Walsh did not tell Mix he could use his name to go to SIBOS in Japan on his own, as you’ll see from Walsh’s shocked response after finding out about Brad Mix attending SIBOS.

On the other hand, the PEI Government knew that “Sterci” had already divested itself of its shares in Simplex – you may recall that Wes Sheridan had given his support for the PEI Government buying those shares, then selling them back to CMT/FMT after 2 years, however that deal never materialized (see Episode #11).

Now all of a sudden, shortly after Sterci becomes unhinged from Simplex, and shortly after CMT/FMT becomes embroiled in a bogus Securities Investigation thanks to Steven Dowling, with its international reputation on the line – not to mention malicious and completely untrue rumours circulating around town that Maines had defrauded a little old lady with cancer – Mix suddenly has a meeting arranged with Sterci at an elite financial services conference on the other side of the world.

The really puzzling thing about Mix’s attendance at SIBOS in Osaka is that no one within Government told CMT/FMT or Simplex anything about it. Why not? That’s CMT/Simplex’s “wheelhouse” – not the PEI government’s.

Mix openly admits he met with and attempted to recruit Sterci to invest in PEI, also indicating that Sterci showed no interest.  Campbell acknowledges all of that in his decision, saying, “Mix did meet with Kaflon at the SIBOS conference and expressed in his travel summary that he felt Sterci had no interest in following up on his invitation to invest in PEI. “

It’s little surprise Sterci showed no interest in PEI.  As already noted, SIBOS is not a “recruitment” conference – companies don’t go there to be recruited. Recruitment officers from governments from around the world are known for having one thing in common: they never go to SIBOS, except for that one legendary year, when Brad Mix went from PEI. 

Sterci’s CEO, Simon Kaflon, learned about Mix’s plan to attend SIBOS from that matchmaking consultant in the U.K., and immediately sent the following email to his long-time business partners Philip Walsh and Gary Jessop (CMT’s lawyer):

“Senior Director at Canadian Development Agency/Canada,” sounds prestigious enough for SIBOS, but Brad Mix does not hold that position – in fact no such position exists,  because no such organization exists.

The first thing to note from Philip Walsh’s very next communication after receiving this news is his obvious surprise and shock that Brad Mix was planning to attend SIBOS on his own. It’s clear that he knew absolutely nothing about Mix attending before Kaflon told him, despite Mix using his name to get into SIBOS and swearing that Walsh said he could do so – with Campbell accepting that as true.

Walsh sent the following email within an hour of being notified by Kaflon that Mix was attending SIBOS. Note that Gary Wright is also cc’d on the email. This is not the tone of someone who had given Mix permission to use his name to get into SIBOS!

—–Original Message—–
From: Philip Walsh <pwalsh@simplexgtp.com>
To: Gary Jessop <GARY.JESSOP@blakes.com>, Paul Maines <
paulmaines75@telus.blackberry.net>, Paul Maines < pmaines@hurricanecapital.com>
Cc: Gary Wright < gwright@simplexgtp.com>
Date: Mon, 15 Oct 2012 12:48:24 -0500
Subject: Re: SIBOS meeting
Guys, this is ridiculous. PEI randomly targeting companies at Sibos destroys our credibility. This is extremely embarrassing. We’ve asked for a united approach to the market in targeting players in this sector. I think we should walk away from any relationship with PEI. We can’t afford people using our name to get meetings at events like Sibos. Let’s move on. There’s no point to this and I’m extremely uncomfortable.  Brad Mix is registered as a specialist in the focus area of payments. He’ll undoubtedly use all our engagements to support that position.

Once it was determined that Mix was indeed going to be attending the conference – despite the shock and obvious displeasure and concern from everyone with CMT/FMT/Simplex – a “damage control” strategy was nonetheless employed in a bid to keep the “financial transaction hub in PEI” train on the tracks and reputations intact.

Any message other than that the PEI Government was continuing to work in collaboration with CMT/Simplex to establish a financial transaction platform could be potentially disastrous for CMT/Simplex. Walsh wanted to make sure the only message Mix was giving at the SIBOS conference was aligned with what he had already shared with his colleagues, one about the anticipated launch of the FMT/Simplex “Hub” in PEI.

Walsh’s email reads like a nervously-polite, semi-panicked attempt to make sure Brad Mix didn’t blow things up completely while flopping around the halls of SIBOS like a fish out of water, prospecting for financial companies where he knew exactly nobody and even less about the business of global financial payments and transaction systems.

The “optics” were terrible.  That subsequent contact from Walsh to Mix was clearly and solely to “align messages” with Mix and to inform him that many of the people he might be talking with at SIBOS were already aware of the PEI initiative. As Walsh put it: “We’ve mentioned PEI and the prospect of it establishing a FSC (Financial Services Centre) to a number of organisations including large banks….”    There is absolutely no indication that Walsh was in any way approving of Mix attending SIBOS in his email, as Campbell suggests in his ruling:

Campbell made a big deal that there was no hard evidence that Mix disclosed any confidential information while at SIBOS. What Judge Campbell never mentions is another important and legally-binding exclusively clause in the MOU that doesn’t deal with breach of “confidentiality” strictly speaking, but a promise to not even discuss “with any entity” that PEI is interested in establishing a financial transactions platform:“..not to discuss with any entity its interest and/or capabilities in hosting or creating a financial services centre in the Province.”  That’s exactly what Brad Mix was doing at SIBOS – how else could he “prospect” financial services companies?

The 30-day extension began on September 10, 2012.  On that same day, Brad Mix sent an email to Cheryl Paynter with the following information:

And he was already lining up meetings in mid-August, when the initial 60-day MOU was in force:

Yes, the SIBOS Conference happened a few days after the MOU expired, but if you’re a “recruiter” like Brad Mix, you only go to SIBOS for one reason: to recruit a financial transaction company.  And that plan was hatched and put into play during the period of time the MOU was in force.

Not-Fun Fact:  Registration alone for SIBOS is about $7,000. Probably another $10,000 for the U.K.. headhunter. Flights to Osaka, Japan, hotels and food for a week…all told, Mix’s trip to Osaka, Japan probably cost Island taxpayers upwards of $30,000, give or take.

The Consequences?

None.