Introduction

In episode #18, I provided documentary evidence that the Minister of Finance (for former Premier Robert Ghiz) Wes Sheridan, lied under oath about knowing Paul Maines and CMT/FMT, just as he had earlier lied about that same thing to both the Legislative Assembly and National media. Campbell, unfortunately, accepted Sheridan’s false testimony, arguing that CMT’s lawyer, John MacDonald, had not provided any evidence disproving Sheridan’s claims. 

Those two Wes Sheridan/Brad Mix documents that I obtained in a targeted FOIP request, and dealt with in the previous episode, completely disprove Sheridan’s claims. They also invalidate the conclusions Judge Campbell derived from those false claims.

In bold defiance of the Rules of Court, Jonathan Coady withheld documents that could have resulted in a completely different ruling from Judge Campbell. Here’s the chronological sequence of those events.

• September 2: I submitted a FOIP Request for Wes Sheridan/Brad Mix Records.
• September 6: Judge Campbell informed the Parties in a Case Management Conference Call meeting that he would not accept any more documents.
• September 20: Coady sent those same two documents to CMT’s lawyer as a formal “Second Affidavit of Documents,” but did not bring them to the attention of the Court.
• September 25: Judge Campbell issued his ruling, dismissing the case with maximum costs against the Plaintiffs (CMT).

Why didn’t Coady provide those documents to Judge Campbell for his consideration?  True, Campbell had indicated on September 6th that he wouldn’t entertain any more documents prior to issuing his ruling; however, the fact that they were deliberately withheld represents a totally different situation.  Coady clearly had an ethical obligation to bring those documents to Campbell’s attention before he issued his ruling.  If he was worried about violating Campell’s decree that he’d already seen enough documents and wouldn’t accept any more, then Coady clearly had an obligation to seek guidance from the Chief Justice of the PEI Supreme Court in advance of Campbell issuing his decision. Why didn’t he?

Those documents also prove that Wes Sheridan knew about FMT, as well as the plan to have FMT become the local company delivering the CMT/Simplex Global Financial Transaction platform. And he knew all of that more than a year before the MOU was signed on July 6, 2012!  This alone constitutes more than sufficient grounds for CMT’s case to at least be allowed to go to trial and be properly adjudicated. If CMT hasn’t earned it’s day in court after all of this, it will be a sad day for our Island Justice System.

I mentioned that Coady’s “post mortem” affidavit had 4 Exhibits.  The other two records were Wes Sheridan/Keith Lapslop emails. The next episode (Part II) will deal with those two Sheridan/Lapslop documents.

This episode provides the background information needed to properly explain and understand: (1) the breach of the MOU, and (2) the coverup of the breach of the MOU.

Careful attention must be given to the chronology of dates and events during the MOU period to accurately interpret the facts. Understanding those facts in context is the only way to determine whether the legally-binding provisions of the MOU were breached.

  This episode will provide background information on the following:

1. The Origins of the MOU.
2. Was the MOU a Legally-Binding Agreement?
3. The Negative Impact on Innovation PEI from the “Exclusivity” Clause
4. The “Real” conflict of interest with Melissa McEachern
5. CMT’s Claim of an MOU Breach with Keith Laslop/Newcourt
6. Laslop/Newco” Breach of Contract” discussed in the Legislative Assembly

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1.  The Origins of the MOU

The Auditor General noted, in her Special Assignment on E-gaming, that the “idea” for the MOU did not come from CMT, but rather originated with Innovation PEI’s outside legal counsel, Billy Dow. Why would Billy Dow want Innovation PEI to sign a MOU with FMT? 

Billy Dow

Billy Dow was an investor in CMT, and when he learned from another investor that CMT was considering establishing the Financial Transaction Platform in another Atlantic Province, he wanted to provide FMT with the legal assurance that the PEI Government was fully on board with FMT establishing a financial transaction hub in PEI. That was the plan all along, to give FMT “first-mover advantage” in the financial services sector in PEI,  as stated in the recruitment package provided to FMT, something Judge Campbell never mentions in his ruling.

To keep CMT/FMT in PEI, Dow knew he would need to make some substantial concessions.  In fact, he allowed CMT’s lawyer, Gary Jessop,  to “draft” the entire agreement, then send it back to him for review.  Jessop put very carefully defined clauses in the MOU agreement that absolutely forbid any discussions or communications with other companies or individuals, and Billy Dow was apparently OK with that provision binding the PEI Government to work exclusively with FMT.

It makes sense that if CMT/FMT was going to abandon opportunities that had emerged in other provinces, it needed full legal protection ensuring the original commitment in the Recruitment Package would be honoured. The expectation at the time was that 60 days would be sufficient time to conclude a formal agreement and launch the Financial Transaction Hub. With no reason to think things wouldn’t transpire as planned, Dow didn’t apparently have a problem with that very broad legal protection afforded CMT in the form of a legally-binding “Exclusivity” clause.

The Auditor General  makes it clear that it was “Billy Dow the Investor in CMT,” who first negotiated the MOU with CMT’s lawyer Gary Jessop, and then presented it to Innovation PEI (Cheryl Paynter) for a signature:

Technically, it wasn’t “investors in CMT” (plural) who approached the Department, it was just one CMT investor, Billy Dow, Innovation PEI’s outside legal counsel. The AG actually confirmed that fact elsewhere:

Section 5.7: We noted, through interviews conducted and review of e-mail documentation, that the concept of the MOU agreement was initiated by Innovation PEI’s external legal counsel [Billy Dow] based on his discussions with a local CMT investor…

Although the MOU was signed with Innovation PEI, it wasn’t associated with anything Innovation PEI was initiating within the Agency, it was entirely the brainchild of Dow and the secret gaming committee, who were “tapping into” Innovation PEI’s resources as required, but operating secretly and outside the normal framework of government.  The AG noted anomalies with the way the MOU came about:

As an investor in CMT, Billy Dow was a “client” of sorts in the business arrangement and stood to personally benefit handsomely if the project went forward. Of course, as convenience would have it, he was also the lawyer for Innovation PEI, and close personal friend to Premier Ghiz. Dow could apparently walk into an office without an appointment, plunk a document in front of someone working at Cheryl Paynter’s paygrade, and get a signature simply by asking.

This MOU idea originated with Billy Dow, the MOU agreement was drafted by Gary Jessop,  authorized by the Deputy Minister, Melissa MacEachern, and signed by the CEO of Innovation PEI, Cheryl Paynter. No changes were made by anyone in Innovation PEI to the MOU agreement brought to them by Billy Dow.

2.  Was the MOU a Legally-Binding Agreement?

Although the MOU did not “bind” either party to sign an agreement when all was said and done, it did indicate that the purpose of the MOU was to work diligently toward signing a formal agreement. During the 2 month term of that initial MOU agreement, both parties were legally-bound by four provisions within the agreement, as noted by Judge Campbell in his Ruling:

Paragraph 153: The MOU signed July 6, 2012 between Innovation PEI and 764 is the agreement in relation to which the plaintiffs are pursuing claims of breach of contract. 764 signed the agreement “operating as” (“O/A”) Trinity Bay Technologies. The relevant portions of that MOU, with emphasis added throughout, are as follows:

4. EXCLUSIVITY
The Parties agree as follows for a period of sixty (60) days following the signing of this MOU (the “Exclusivity Period”): a) provided PEI is not in breach of its obligations hereunder, TBT nor any of its employees, officers, contractors, agents, representatives and/or professional advisors agree not to discuss with any other Canadian provincial government the opportunity and know-how for a financial services centre to be created; and: (b) provided TBT is not in breach of its obligations hereunder, PEI nor any of its employees, officers, contractors, agents, representatives and/or professional advisors agrees not to discuss with any entity its interest and/or capabilities in hosting or creating a financial services centre in the Province.

Paragraph 3: The breach of contract claims relate to a Memorandum of Understanding (MOU) which contained articles relating to maintaining confidentiality and dealing exclusively with the plaintiffs during the course of the MOU. The plaintiffs claim the defendants breached the terms of the MOU by approaching competitors, recruiting them for the same services, and otherwise dealing with them in ways contrary to the confidentiality and exclusivity articles.

The Auditor General discussed the legal status of the MOU as well.  She singled out Dow’s opinion that the MOU was “fairly benign.” She listed those 4 legally-binding clauses, then raised a number of concerns about the potential negative consequences for both Innovation PEI and the PEI Government that could arise from that MOU:

Section 5.7: …..Innovation PEI‘s external legal counsel advised that the MOU was fairly benign and outlined 4 clauses that were binding:

• • agree to meet and make reasonable efforts to conclude an agreement;
  • agree to a 60-day window to deal exclusively with TBT on the concept of a financial services center for PEI and likewise, they agreed to do the same;
  • agree that each party bears their own expenses; and
  • agree to keep the matter confidential and any information received as confidential.

Billy Dow may have characterized those “binding” exclusionary and confidential clauses in the MOU as “fairly benign”; however, the AG and others in the Department recognized that the MOU effectively forced an immediate “halt” to a significant part of the work that was underway within Innovation PEI; or I guess should say, IT SHOULD HAVE FORCED AN IMMEDIATE HALT. 

That Exclusivity clause may end up deciding the outcome of the lawsuit. Read what the AG said about “the potential repercussions of breaking the terms of the agreement,” and her remark that the MOU wasn’t approved by the appropriate authority.

Section 5.6:  We expected that prior to entering into the MOU agreement, adequate due diligence would be conducted on TBT, its owners, and affiliates. In addition, we expected an assessment of the terms and conditions in the agreement, the legal obligations of entering into such an agreement and the potential repercussions of breaking the terms of the agreement. We also expected that the MOU and subsequent extension were approved by the appropriate authority. These basic control measures are important in order to minimize the risks to government.”

As the AG noted in her somewhat obscure manner, the MOU wasn’t approved by the appropriate authority, which raises an issue in my mind as to whether the Board of Directors of Innovation PEI may not have authorized, or possibly even known about, the MOU.

3.  The Negative Impact on Innovation PEI from the “Exclusivity” Clause

The MOU only happened because a number of people within the Department of Innovation were taking their marching orders from Wes Sheridan, the Minister of Finance, (Brad Mix, Cheryl Paynter, Melissa MacEachern, and Neil Stewart) and others associated with the secret gaming committee.

Innovation PEI is a Crown Corporation that can enter into agreements.  The Innovation PEI Act states:

Section 15(2) outlines the “Powers” granted Innovation PEI, and includes 15(2)(1)(d): “develop programs, strategies and partnerships that encourage the creation, maintenance and expansion of business activity in Prince Edward Island,” and section 15(2)(1)(e): “enter into agreements for the performance, on behalf of the corporation, of research projects or the conduct of investigations and studies, as it considers advisable.”

Was the Board of Directors required to approve a decision of such magnitude? There has never been, to my knowledge, any mention of Innovation PEI’s Board of Directors, so it’s unclear whether they were involved in the MOU decision that immediately shut down a significant portion of Innovation PEI’s mandated work.

There is no mention of the MOU in Innovation PEI’s 2012-13 Annual Report, nor any reference to FMT, CMT, Simplex, or to the protracted efforts to establish a financial transaction hub in PEI during the 2012-13 fiscal year period.

This is a perplexing omission, given that “financial services” was one of the targeted sectors of special interest to Innovation PEI for 2012-13.  Yet, from July 6, 2012 until October 10, 2012 (presuming the exclusivity clause in the MOU was being honoured) FMT was the only company in the entire world involved with the PEI Government with respect to prospecting financial services companies.  Judge Campbell accepted that the PEI government honoured that agreement. We’ll see in the next episode if his conclusion holds up against the “fresh evidence” withheld by Coady.

I’m hoping to get some more information about what was discussed at Innovation PEI Board meetings back in those days, and I’m currently waiting for responsive government records to the following FOIP:

“Innovation PEI Board Minutes. All communications between the CEO of Innovation Paynter at the time, Cheryl Paynter, and the Board of Directors pertaining to Board meetings (agendas; preparatory notes; etc.) as well as all communications between board members and the CEO that make mention of the MOU signed with FMT/Trinity Bay Technologies on July 6, 2012, from June 1, 2012 to May 31, 2013.”

Regardless of whether the Board approved – or were even aware of – the MOU, it impacted Innovation PEI’s work. Once the MOU was signed on July 6, 2012, all recruiting and prospecting work by the Prospecting & Innovation Programs Division of Innovation PEI  had to stop. That was problematic since some of those financial services recruitment efforts had commenced long before the signing of the MOU.

The MOU is consistently described by everyone as an initiative of Innovation PEI.  It really wasn’t. It may have been adopted by Innovation PEI, but it was Billy Dow’s baby.

The Auditor General was aware that Innovation PEI had a mandate that made it “…responsible for growing the strategic sectors of…..financial services…” yet was suddenly legally obligated to cease all financial services recruitment efforts underway and not undertake any further activity in this sector:

Section 5.11: Further, clarification on the terms and conditions in the agreement was not obtained. This was particularly important for Innovation PEI because the wording of the exclusivity section was very broad. Financial service was a key sector identified by Innovation PEI for economic development in the province. Innovation PEI senior officials advised that they were concerned about the exclusivity clause and how it would impact their work.

Given the secrecy and unusual way the MOU came into effect, it’s unclear whether other government staff who may have been working on prospecting financial services companies to PEI were even made aware of the MOU. Were they informed that the PEI Government was to have absolutely no discussions with any other financial companies, or even mention that the Government had an interest in establishing a financial transaction hub in PEI?  Nothing about the companies, the plan to bring a financial transaction hub to PEI, or the MOU with FMT, was mentioned in Innovation PEI’s 2012-13 Annual Report.

4.  Preferential Treatment? Or Cover-up of CMT’s Recruitment to PEI?

The AG drew attention to the fact that the Deputy Minister of Innovation [Melissa MacEachern] was in a conflict of interest situation when she authorized both the MOU and Loyalty Card programs with CMT/FMT and Simplex:

Section 6.19: Section 9 of the Conflict of Interest Policy in place at the time, which applied to Deputy Heads, outlines the concept of preferential treatment. Specifically, it states that “employees must not accord preferential treatment in relation to any official matter to family members, friends, other persons or organizations in which the employee, family members or friends have a financial or other interest”. There is an appearance that the former Deputy Minister of Tourism and Culture, who was also the former Deputy Minister of Innovation and Advanced Learning, provided preferential treatment to CMT and Simplex which involved both the loyalty card program and the Memorandum of Understanding signed with TBT, a subsidiary of CMT.

There was a very big personal conflict of interest with Melissa MacEachern and the MOU. Her husband at the time, Shane MacEachern, was a broker at RBC and was handling investments in CMT/FMT via a shell company named RevTech. That is an important piece of this entire story that needs to be told and will be one of my remaining episodes.

Melissa MacEachern’s personal conflict of interest aside, the MOU essentially put into writing what was first promised to FMT by the PEI Government to establish the Global Financial Transaction platform. Again, the AG noted that the MOU showed, as she put it, “preferential” treatment.” However, if she had full access to documents revealing the dealings the PEI Government had with FMT a year earlier, with the feasibility study, and the recruitment package offering FMT an “exclusive deal”  to establish the financial transaction platform in PEI, I’m sure her assessment would have been quite different. Unfortunately, the documents (like the recruitment package and feasibility study) were withheld by the MacLauchlan Government.

What the Auditor General referred to as CMT/FMT receiving “preferential treatment” with both the MOU and the Loyalty Card Program – although a fair assessment from her perspective – was, in hindsight, simply the PEI Government honoring its promise to give FMT first advantage in the sector on a go-forward basis. Maybe that’s why Billy Dow allowed the broad legal protection for CMT in the MOU. 

5. CMT’s Claim that the MOU was Breached with Laslop/NewCo 

You may recall from Episode #9 that Maines was asked by the Securities lawyer from St. John, N.B., Jake Van Der Laan, if he would provide a Sworn Voluntary Statement, which Maines provided the day after the Motion Hearing was canceled.

Maines explained that Tracey Cutcliffe – who previously worked for Innovation PEI – who CMT had contracted to do government relations work  – was the source of his information about Newco:

Maines was only going on what Cutcliffe had told him at the time, and had no documentary evidence to support his claim. By the way, the “day it was expiring” in Maine’ s answer refers to the first 60-day MOU period.

Throughout the documentation, I’ve noticed that whenever the “expiration date” for the initial 60-day MOU was cited, it was September 6th. Most people apparently just figured two months from July 6th, the date it came into effect, was September 6th.  However, as Judge Campbell correctly noted, 60 days was actually September 4th and that’s when the MOU first expired. Keep this in mind for further episodes.  With everyone thinking the MOU expired on September 6th, that’s the day when too many coincidences happened to make them coincidental events, which will be explained in a future episode.

Mr. Van Der Laan, had expressed total “disbelief” that Paul Maine would allege a conspiracy, which he shared with CMT’s Securities Investigation lawyer, Ms. Biggar. I found out about that indirectly from a letter dated April 12, 2013 from Mary Biggar, sent in response to Van Der Laan’s previous communication, indicating that the source for Maines’ belief was actually government officials:

I wonder if a lot of pain could have been avoided if Wes Sheridan had been summoned? Maines clearly believed what Cutcliffe told him to be true, he just didn’t have any documents, so CMT did not make any specific claims about Newco in its original Statement of Claim.

It was only after new documents came to light as a result of FOIP requests by the PC Opposition Party, that Maines received some validation of the truth of what he was told by Tracey Cutcliffe, which makes for a good segue for the final section of this episode.

6.  Laslop/Newco “Breach of Contract” Discussed in the PEI Legislature

When a number of PC Cabinet members were in the official Opposition, they submitted several FOIP requests for e-gaming documents. One of them produced emails between Keith Laslop, the CEO of Newco, and various government officials, including Allen Roach. On November 21, 2017, those emails dominated Question Period, with Steven Myers leading the charge for the PCs:

Mr. Myers: “Thank you, Mr. Speaker.”

Copy of document from NewCo company: “I have here today, and I’ll table it for all the House, an email from this minister’s very [own] account, it was dated September 6th, 2012. It was from Keith Laslop and it says: Please find an attached letter with our proposal to the Government of Prince Edward Island.  It was to you, Minister. Why have you never mentioned this before, that you were sent a direct copy of a document from this NewCo scheme company?”

Some Hon. Members: “Hear, hear!”

Roach’s response attempted to create confusion, since it was known by that time that the Government had formally ended the E-gaming project in February 2012:

Mr. Roach: “Thank you, Mr. Speaker. At that time that would have been a staff
member who advised me that there was a group that were going to have discussions about a financial platform and that there was an MOU in place.
Thank you, Mr. Speaker.”

Mr. Myers: That’s it right there.’

Speaker: The hon. Member from Georgetown-St. Peters.

Mr. Myers: Thank you, Mr. Speaker. That is, in fact, what happened. I have more emails that have come to light about this insider scheme that was going on. On August 29th, Wes Sheridan had a lunch meeting with Chris LeClair and Keith Laslop from NewCo. Minister: Would you agree that this meeting broke the exclusivity contract of your MOU?

Some Hon. Members: Hear, hear!

Speaker: The hon. Minister of Finance.

Mr. Roach: Thank you, Mr. Speaker. I don’t have the dates or the MOU with me here today, but I’ll gladly go and have a look at that and try to confirm the dates of that. Thank you, Mr. Speaker.

Some Hon. Members: Hear, hear!

Speaker: The hon. Member from Georgetown-St. Peters.

Mr. Myers: Thank you, Mr. Speaker. So it very much broke the exclusivity contract of the MOU – very much.

Myers went through the same questioning with the other two meetings mentioned in the documents, concluding that they were all strong evidence of a Breach of the MOU.

….coming up in Part II:

Hopefully, you now have a little better understanding of the MOU.  A lot hinges on whether the MOU was in fact “breached” by the PEI Government.   PC Party MLAs Steven Myers; James Aylward; Brad Trivers; Matthew MacKay and Jamie Fox, when in Opposition, were absolutely convinced that what they dubbed the “Newco scheme,” was a breach of the MOU. They are now Cabinet Ministers.

If the Government was acting on the strongly-stated public views regarding a breach of the MOU previously made by these Cabinet Ministers, then an out-of-court settlement negotiations process would have been commenced; but, of course, that hasn’t happened.

The next episode will look at how Judge Campbell stick-handled around the Lapslop documents uncovered by the PCs while in Opposition. I’ll dissect how he concluded that there was no breach of the MOU. But of course, there’s more, the “bomb” before the storm you could say – those two new Sheridan/Laslop documents – or perhaps I should say, the bomb that’ll “cause” the storm.