Proceedings of the Special Senate Committee on
Pearson Airport Agreements
Evidence
Ottawa, Wednesday, September 13, 1995
[English]
The Special Senate Committee on the Pearson Airport Agreements met this day at 9:00 a.m to examine and report upon all matters concerning the policies and negotiations leading up to, and including, the agreements respecting the redevelopment and operation of Terminals 1 and 2 at Lester B. Pearson International Airport and the circumstances relating to the cancellation thereof.
Senator Finlay MacDonald (Chairman) in the Chair.
The Chairman: Good morning, colleagues. Yesterday, we heard from one very important witness and today we have another. Yesterday, we heard from the Bronfman/Claridge Group, and today we have the Matthews/PAXPORT Group.
Good morning, Mr. Matthews.
Mr. Donald Matthews, Chairman, Matthews Construction Canada Inc.: Good morning, Mr. Chairman.
The Chairman: Mr. Baker.
Mr. Gordon R. Baker, Q.C., Weir & Foulds, and General Counsel to Matthews Group: Good morning, Mr. Chairman.
The Chairman: Without any further ado, Mr. Nelligan will introduce our witnesses.
Mr. John Nelligan, Q.C., Counsel to the Committee: Senators, our witnesses are well known: Mr. Don Matthews, who is Chairman of Matthews Group; Mr. Gordon Baker is a partner of the firm of Weir & Foulds in Toronto and is general counsel to the Matthews Group.
I understand that Mr. Matthews has an opening statement, but I believe there are no copies at this moment available.
Mr. Baker: Mr. Chairman, I am going to open with an opening statement first and then Mr. Matthews. When are we going to be sworn, sir?
The Chairman: Right now.
(Mr. Donald Matthews: sworn:)
(Mr. Gordon R. Baker: sworn)
The Chairman: Mr. Baker, would you care to proceed, then?
Mr. Baker: Yes, I can.
My introduction is rather lengthy, Mr. Chairman. I have been involved in this process for some time and so I hope you can bear with me.
Mr. Chairman, we are delighted to be here and we are grateful for the Senate for this opportunity. Given the government's utter disregard for the rights of Canadian citizens, as evidenced by the introduction of Bill C-22, this is an opportunity we never thought we would have.
As you know, Bill C-22 was intended to deny Canadian individuals and companies the right of access to the courts to defend their names, reputations and assets. At the same time, Bill C-22 provided immunity to all those involved in the cancellation of the Pearson Airport contracts.
Bill C-22 is entitled the Pearson Airports Agreements Act. This legislation is truly Draconian and unprecedented. Bill C-22 is an attempt to legitimize the breach and repudiation of the airport contracts by the Liberal government which cancelled them without any lawful justification and to provide immunity to those involved.
Bill C-22 denies fair compensation because the public would be outraged at a wilful political decision to cancel the contracts at a known estimated cost to the taxpayer of $500 million to $2 billion, as reported by Mr. Rowat to Mr. Nixon and in his briefing to the minister, Mr. Young. Such legislation was suggested in the Nixon report, but it was actually originally proposed by Jean Chrétien during the election campaign.
The testimony before you to date overwhelmingly repudiates the Nixon report.
I have listened to the sworn testimony of 49 witnesses, such as Messrs. Rowat and Desmarais, which contradicts every negative aspect of the Nixon report. We also have the court granting PAXPORT summary judgment for the unjustified repudiation of the airport contract and the Court of Appeal of Ontario rejecting the government's subsequent appeal.
Mr. Matthews called for an inquiry; the Conservative senators as well. The government refused to hold an independent judicial inquiry. So we are grateful to the Senate for allowing us to participate in what Senator John Lynch-Staunton said, the leader of the Conservatives in the Senate, as the second-best alternative, this Senate inquiry.
The reason it is the second-best alternative is, as we have seen here, is the production of documents with regard to witnesses produced late, produced with omissions and without adequate opportunity for the witnesses to prepare with regards to the documentation. It is, in some cases, testimony under ambush.
Notwithstanding that, we believe that the facts are coming out here at the inquiry and they substantiate the position of our consortium that on the closing on October 7th, 1993 a great deal for the Government of Canada, the travelling public and the airlines was consummated with a fair return, albeit with no cash coming out for nine to ten years, for the investors, but a return that they were prepared to accept.
I am here as a witness because I am the sole trustee of the Matthews/PAXPORT Trust whose four companies invested just over $21 million on October 7, 1993 to acquire a 14.4 per cent interest in the T1T2 Limited Partnership and the Terminal 3 Limited Partnership. I have also acted as counsel to the Matthews Group Limited on many matters, including this one, since 1986, although my role in this particular transaction was rather minimal relating to structuring and some advice on financing up until the winning bid was -- winning proposal was announced.
I think it might also be relevant to provide you with some of my background. I have an undergraduate degree in economics from McMaster University, an MA in econometrics and mathematical economics from the University of Western Ontario; and I graduated from law in Queen's in 1970. My practice has been concentrated in tax and business law, generally structuring and negotiating transactions. I was the chairman of the tax subsection of the Ontario Branch of the Canadian Bar Association for several years, and a member of the joint committee of the CBA and the Ontario Institute of Chartered Accountants with regards to taxation for a number of years, as well as a member of the Ontario branch of the bar association's committee on taxation. I have acted for a number of Canadian, U.S. and international companies in the course of my practice.
I first became acquainted with the Matthews Group Limited, which I refer to as the Matthews Group, as a lawyer for the consortium that developed the Vista Cargo Terminals at Pearson Airport. I acted for Matthews and its related entities with respect to the unsuccessful Terminal 3 bid. I gave some general advice to the Matthews Group with respect to their bid for Terminals 1 and 2, although any work done by PAXPORT Management Inc. and PAXPORT Inc. with regards to the unsolicited proposals of September 25, 1989 and the proposal of July 13, 1992 was done first by Lang Michner and then Blake, Cassels & Graydon.
After the announcement on December 7th, 1992 of the selection of PAXPORT Inc. as the best overall acceptable proposal, I acted as counsel on the merger negotiations with the Claridge Group and I acted for PAXPORT in its negotiations with the Government of Canada.
It might also be useful to give you a bit of my legal background. Some of the comments and opinions which I will express today are based on my experience as a lawyer involved in the structuring and negotiating of a multitude of transactions over 23 years. I am sorry Senator Grafstein is not with us today because I have negotiated transactions with him, and I would have been interested in discussing this transaction with him.
I first participated in a transaction involving a ground lease, which actually Peter Coughlin referred to yesterday in his testimony. The ground lease was stage development and stage financing in the early 1970s, and that was the First Canadian Place project in Toronto which even today in its magnitude would be on a par with the airport transaction.
With respect to the airport, I have acted in regard to the ground lease, as I said, on the Vista Cargo Terminals, and with Terminal 3. I have also acted on another ground lease based transaction, although it was really airplanes, and that was the de Havilland bid where, incidentally, the lands occupied by de Havilland were a ground lease from the Crown. Consequently, the nature of the documentation and issues involved in the Pearson privatization had already been considerably canvassed, considered and documented in many facets.
So, when the negotiators faced with the negotiations for Terminals 1 and 2, met, the government negotiators and ourselves had the benefit of experience and know-how, particularly in regard to the privatization at Pearson and the local airport documentation.
There have been issues about the parties, and contrary to the statement on page 11 of Mr. Nixon's report, and I will quote: "Failure to make public the full identity of the participants in this agreement raises public suspicion".
The merger of the PAXPORT and Claridge Groups was announced on March 1, 1993. A copy of one of the press clippings is attached hereto as Appendix 1. I think, gentlemen, if you look in your package you will see that. All the proposed parties were described, including Claridge, Lockheed, Matthews Group Limited, Allders International, Bracknell Corporation, Agra Industries, NORR Partnerships Limited, Sunquest Vacations, CIBC, Wood Gundy and Ellis Don.
On closing, the only two parties no longer involved as disclosed in the press clipping in March were CIBC/Wood Gundy Capital and Ellis-Don Inc. The Sunquest Vacations interest was held by the principal shareholders of Sunquest's family trust, Mr. Pat Brigham. Part of the Matthews Group interests were held through a trust for the benefit of the shareholders of the Matthews Group. The fact that the entities used subsidiaries to hold their interests would not have been of any relevance, nor meant anything, to the public. Meaningful disclosure, i.e. the names of the entities that the public could identify with were much more relevant than, say, 1046498 Ontario Limited, which is one of the holding companies that has an interest.
To me, the public disclosure is relevant as it has meaning to the public. Accordingly, I am not going to discuss the multitude of subsidiary companies which were involved in the activities as parties. You can see them laid out in Appendix 2 in the summary there. Rather, I am going to talk about the relevant parent principals which would have had meaning to the public. Appendix 2 identifies the names of the parties in the Claridge Group and the PAXPORT Group, and the respective interests in the respective groups and the respective partnerships as at the time of the March 1989 announcement, but also as at October 7, 1993.
The charts, there is a schedule which sets out the groups and the interests in the various groups. You have the Claridge Group and their breakdown, and the PAXPORT Group, and then you have the interest in the partnership, which was ultimately after the merger, to reflect the fact that at that point in time it was 50/50. These interests then evolved down to the interests that you then have in the next chart, which lay out the PAXPORT interests in detail. The Claridge Group interests are split between Lockheed and Claridge Holdings. You see the 34.21 per cent interest for the PAXPORT Group in T1T2 Limited Partnership in the chart at the bottom and you will see the 65.79 per cent Claridge interest.
Yesterday, you heard from Peter Coughlin of the Claridge Group of companies, and you also heard that Lockheed was involved with their Claridge Group. The Claridge Group is principally represented by the Bronfman family of Montreal, a well-known Canadian established family.
As to who the members of the PAXPORT Group are, that information was provided in the PAXPORT proposal of July 17, 1992, and disclosed in the March press release. It was also disclosed later. There were press releases during the course -- the minister gave a press release on August 30th, 1993, and there was disclosure at the time again of the closing. Peter Coughlin referred to that yesterday.
However, for the record here, I would give you a brief outline of the principal parent companies of the PAXPORT Group as follows: The Matthews Group -- the Matthews Group was a Canadian development and construction group that carried on work in Canada, the United States and internationally. Development work was principally in London, Ontario and Metropolitan Toronto and in the United States. Revenue from construction, both domestic and international, was approximately $400 million per annum in the 1980s. The chairman of the Matthews Group since 1967 is Donald Matthews, who is sitting here with me.
On December 7, 1993, Matthews Group and its related companies employed approximately 700 people and, in addition, retained a number of consultants, engineers, architects accountants, lawyers, real estate brokers and financial consultants. On October 7, 1993 Matthews Group employed approximately 800 people and looked forward to participation in its related entities -- and looked forward to participation in the redevelopment of Terminals 1 and 2.
Matthews Group was also an original participant in what turned out to be the successful bid for the Highway 407 toll road project, and was pursuing other domestic and international infrastructure work. As a result of the actions of the Government of Canada cancelling the airport contracts, those opportunities were destroyed for the Matthews Group and there are no longer any employees of the Matthews Group. Mr. Matthews is the chairman, but there are no other employees.
Two, Agra Industries, which is listed on the Toronto Stock Exchange and reputed to be Canada's second largest engineering company was one of the proponent's investors and investor and the closing.
Three, Bracknell Corporation, which was listed on the Toronto Stock Exchange, has a leadership position in the construction, maintenance and specialty services provided to industrial, commercial, institutional and government clients.
Four, Allders International is part of the second largest duty-free operation in the world. It brought an international retail expertise to the consortium.
NORR Group Consultants was part of Canada's pre-eminent airport architectural and design group.
Patrick Brigham, whose family trusts holds indirectly an interest in the partnership itself, may not be a household name, but certainly most Canadians would recognize his principal business, Sunquest Vacations, which is a household name in travel charter.
The PAXPORT proposal included two other members, CIBC/Wood Gundy Capital, which was an economic joint venture of Wood Gundy and Canadian Imperial Bank of Commerce and Ellis Don Inc., a well known Canadian private construction company. These entities decided to withdraw, these latter two entities, from any future participation during the negotiations with the Government of Canada.
These are the corporate entities involved. However, the foregoing does not reflect the thousands of faceless and nameless individuals who, as beneficiaries of pension funds, which in turn are investors in some of these companies, or more directly as shareholders and employees were affected by the privatization and cancellation. They number in the thousands.
I told you earlier that I am a trustee of a trust. That trust includes as its beneficiaries all of the shareholders of Matthews Group, and I am going to read you excerpts from a copy of a letter I received in that capacity. I am not going to read out the name of the author for privacy reasons. This letter was sent to me with another covering letter, and it goes: "Dear Don", referring to Donald Matthews.
As a former employee of Matthews Contracting, as you know, I had a lot of faith and trust in the management of Matthews Group. The result was that I invested my life and retirement savings in Matthews Group by purchasing as many shares as offered.
Don, being the sole income producer for my family, with my wife, providing 24-hour care for Jennifer, I cannot but be concerned with the outcome of the Pearson Development Corporation settlement with the federal government.
At a shareholders meeting earlier this year, Gordon Baker explained...
And I will quit there.
This is one of the many faceless individuals who were affected by this cancellation; people who lost their livelihoods, their savings, and had to carry on with their responsibilities. These are the people that are looking to find out what happened here. We have heard these witnesses. We are still trying to find out what happened. Where did Nixon get the information that, obviously, the witnesses here didn't provide to come to the conclusions in his report? That, senators, is what I think a lot of people would like you to come forward and give some answers with at the end of this hearing and, hopefully, you will be able to do so.
Why are we here? I will go to the allegations. The allegations commenced with statements made in the House of Commons in March of 1992 by the then Leader of the Opposition, Jean Chrétien, with the theme of a rushing to issue an RFP, and "taking care are your contracting friends and giving away a hundred million dollars a year asset for nothing". All of these allegations were untrue then, at time of the RFP, as they are now. But follow that theme as we go forward in time to the election, the Nixon report, and subsequently.
First, consider the rhetoric of Jean Chrétien during his election campaign. The Financial Post, Wednesday, October 6:
I challenge the Prime Minister to stop that deal right now. People have a right to know what is in the deal.
The Toronto Star, Wednesday, October 6:
You don't make a deal like that three weeks before an election when hundreds of millions of dollars are at stake. The Liberal leader, Jean Chrétien, says the deal is "immoral".
Chrétien said if he forms a government after the election, he will order a full-scale inquiry to investigate the deal. He said "You can't make a deal like that without all the facts. The people have a right to know all the facts before they are stuck with the deal."
The Globe and Mail, Thursday, October 7:
Mr. Chrétien said signing a 57-year deal with Tory-connected firms in the "dying days of the regime" is profoundly cynical. He promised an independent review of the Pearson redevelopment project, going much further than his previous calls to delay the privatization. "I'm warning everyone involved: if we become the government, it will be reviewed, and if legislation is needed (to overturn the deal), we will pass the legislation."
The Globe and Mail, Friday, October 8:
It's indecent after the (election) writ has been issued to make any major decisions.
The Ottawa Citizen, Friday October 29:
Jean Chrétien has turned to one of the most experienced hands in the Liberal party to help them through the first political mine field of his incoming government. Chrétien said Nixon will review, "all factors related to the complicated deal, including why it was rushed through in the dying days of the Campbell government."
Nixon is a veteran liberal and loyal Chrétien supporter. He headed the Ontario Liberal party in the 1960s and 1970s and in the late 1980s was treasurer in David Peterson's provincial government.
The Toronto Star, Friday, October 29:
Nixon says "What he wants is a person --
And he is referring to Mr. Chrétien.
-- what he wants is a person he knows to look at it and see if it is a good deal for all concerned, and one aspect would be why the contract was pushed forward so rapidly in the election campaign" Nixon said in an interview yesterday.
The Ottawa Citizen, Tuesday, November 30, 1993:
Prime Minister Jean Chrétien on Monday received the results of a 30-day review of the contract, conducted behind closed doors by former Ontario treasurer Bob Nixon.
Nixon's report landed on Chrétien's desk amid veiled threats of the Liberal caucus revolt if the contract does not cancel.
The Ottawa Citizen, Friday, December 3, 1993, Sources:
The decision was taken by cabinet Thursday and was to be announced today. In the last two weeks, Prime Minister Jean Chrétien has been under increasing pressure from his own MPs to cancel the deal, which was finalized during the dying days of the election campaign by the previous Tory government.
After the election, we got the Nixon report dated November 29, 1993, 14 pages with one conclusion:
To leave in place an inadequate contract, arrived at with such a flawed process under the shadow of possible political manipulation, is unacceptable. I recommend to you that the contract be cancelled.
Another Nixon report -- I assume it is a draft -- dated November 30, 1993 stated:
In summary, to leave an inadequate contract arrived at with such a flawed process under the shadow of apparent gross political manipulation is seen by the citizens and taxpayers as unacceptable.
We will have to wait to see what the conclusion was on the Nixon report alluded to by Mr. Stehelin, and particularly whether it rendered a different conclusion. Certainly, when you contrast the statements made in the two reports revealed to date, the drafting style and content, you have to wonder, particularly now that the facts are in with 51 witnesses counting today.
I would just comment that in contrast to what I just read the first page of the second report produced by the government, under -- when it finally -- Mr. Stehelin referred to the possibility of another report -- in paragraph -- page 1 at the first full paragraph under number one -- point number one, and I will quote: "The privatization deal clearly increases the net revenue to the Government of Canada compared to what is presently taken out of Pearson by Transport Canada." That is in complete contradiction to the statement made in the Nixon report that was released.
The next paragraph: "A further significant advantage to privatization is the requirement that the lessor must find and invest $700 million in capital over the next 10 years for the development and expansion of Terminals 1 and 2. This means that the capital cost is not added to the Canadian deficit, particularly at a time when government policy is to restrict borrowing."
It is hard to reconcile the front page to the last page.
I suggest that you contrast all of this rhetoric with the evidence of the 49 witnesses that have appeared under oath, and let's go over the highlights once more, doing so remembering the Nixon report -- the "dying days", the "rush", the "legislation, "immoral" -- those seem to have been recurring themes that didn't necessarily originate with Mr. Nixon.
There is another quote in the appendix of Mr. Young who continued the rhetoric after the election, if I can find it. March 1, 1995, the Honourable Doug Young in an interview with CBC Newsworld: "One of the most dastardly deals ever put together in the history of the country, but that is another story. We are not going down that road of trying to line our friends' pockets with money which the Conservative majority in the Senate is trying to protect now." The rhetoric really never stopped, but the facts don't support it.
I would ask you to contrast this rhetoric to the government's position taken in the court action. As stated by counsel to the Crown: "The Crown is raising no defence as to the adequacy of the contracts or offering any basis, contractual or otherwise, for repudiating the contracts."
We know that the Liberal government never expected to ever have to appear in court and defend its actions. Bill C-22 was to accomplish that. When they got to court, the government had no defence. We know that the government never expected to have a judicial inquiry because it had control over that process.
The government delayed in responding to our requests for access to information. We know about what the government calls cabinet privilege and document cleansing, where relevant information is deleted or whited out before the government provides the documents to this inquiry. We know that the government never expected that there would be any real examination whatsoever with regards to the privatization and its cancellation. No witness would ever be called under oath because that was the objective of Bill C-22. The Liberal government was only forced into this inquiry because of people of principle who refused to allow the constitutional rights of Canadians to be trampled on, who forced an extremely reluctant government to give us, and the public, the second-best alternative, not a judicial inquiry but a Senate inquiry where they might attempt to manipulate the evidence and therefore manipulate the inquiry. So much for Jean Chrétien's promise: "The people have the right to know all the facts." I will repeat that: "The people have the right to know all the facts."
Contrast what eventually appears in the Nixon report with the testimony of the 49 witnesses to date in the 16 days of testimony -- I think I have the number of days correct -- I may have missed yesterday. The documentation produced the evidence of the information given to Mr. Nixon and his advisors, Mr. Crosbie and Mr. Goudge. Contrast the integrity of the process leading up to the RFP, during the RFP and thereafter, to the lack of integrity of the Nixon review process with its secret meetings, untold political involvement -- remember the quotes and the list of those whom Mr. Nixon talked to -- no sworn witnesses, scant or no records of Mr. Nixon's discussions with his witnesses -- Desmarais on cross-examination testified to that -- no opportunity to cross-examine, no opportunity to rebut, failure to talk to key witnesses while being fully knowledgeable of their existence.
Mr. Stehelin of Deloitte & Touche had one telephone call which lasted a few minutes with Mr. Crosbie. Mr. Simke had no discussion. Richardson Greenshields apparently had no contact. Donald Matthews had no contact. Otto Jelinek had no contact. Lobbyists had no contact. Treasury Board officials, I believe, testified they had no contact. I think Finance officials have said they had no contact; I could stand to be corrected on that but I believe that was the testimony on the latter two. All of these people had relevant information which would not have supported his perceptions and conclusions.
Of the 51 witnesses to date, including us, who have testified, all of whom were relevant to the process, Mr. Nixon made contact with only a few of them, and many of them said their meeting was a question of minutes, not hours. Mr. Coughlin, I believe, said yesterday that their meeting was one hour, and subsequent to that meeting they anticipated that they would spend a significant amount of time with Mr. Nixon and his advisors going through the transaction and explaining it in detail, and that never happened. Most important, the overwhelming testimony of those people contradicts and repudiates the Nixon report.
To date, you have been unable to identify, nor we, through all of these witnesses the source of the allegations made in Mr. Nixon's report, except, perhaps, the Edland record which can be rebutted. I am not even sure he had it. I don't believe, and I stand to be corrected, that it was ever testified that that report was given to Mr. Nixon. The Deloitte & Touche report was given to him.
As you know, the witnesses, under oath, provided substantially more information to Mr. Nixon than Mr. Nixon revealed in his report. In fact, all material information provided by the witnesses appears to have been marginalized or otherwise omitted from the Nixon report. It is not a question of Mr. Nixon and his advisors not being provided all the relevant information or being denied access to relevant people; it appears to be an issue of the wilful omission of material information and use of information in a manner which would lead one to be deceived.
After reviewing all of the evidence, it is hard to come to any other conclusion than that of John Geddes of the Financial Post when he said in an article entitled, "Project's outcome had little to do with Merit" on July 9, 1994, that: "Even if the plan itself made sense, the Liberals were determined to use their newly won power to banish old rivals."
That leads me to the next issue: What responsibility did Mr. Nixon and his advisors have to the Prime Minister, to whom the report was delivered, to the parties involved in the privatization, including the members of the T1T2 Limited Partnership, to third party contractors and to the public, to whom the report was released? Also, what duty did the government have to consider the accuracy, validity and integrity of the Nixon report before its release?
We have not been able to ascertain what the mandate or terms of reference were for Mr. Nixon in collecting evidence and preparing his report. This was not in his contract. In a November 29, 1993 letter to Prime Minister Chrétien, Mr. Nixon sheds some light on the issue by confirming that, "You asked me to carry out a review of the matters pertaining to the privatization of T1 and T2 at Pearson Airport in Toronto and to report my findings, opinions and recommendations to you by November 30th". So at least we know it was the Prime Minister who instructed him.
As the government's agent, aware his conclusions would be ultimately adopted by the government, has indicated in the press statements and statements made by the Prime Minister, now Prime Minister, Mr. Nixon had a duty to be fair and honest, that is, to fairly and honestly assess the situation and the evidence provided to him. As a matter of common sense, surely the public and we were entitled to a review without bias, to seek out all the evidence that was relevant pertaining to the privatization of T1 and T2, and a report of all the facts without material omission which would otherwise misrepresent the circumstances.
More importantly, in accepting and acting upon Mr. Nixon's conclusions, the government also had a duty to be fair with the Canadian people and ensure that whatever decisions were made accurately reflect the true facts and circumstances behind the Pearson privatization.
I can't remember the date, but in Hansard, Minister Young confirmed the briefing of November 4th, 1993 prepared by Messrs. Rowat, Desmarais and Powers was given to him. That is the unexpurgated version and the updated version of the briefing of October 29, 1993 given to Mr. Nixon, and that briefing sets out the transactions and the nature of the transaction. It revealed the process and the reports; and it revealed the fact that contrary to the suggestion there was patronage that the PAXPORT deal represented twice the amount of compensation to the Government of Canada. I didn't get that under access to information; I got the chart showing how much Claridge bid versus the PAXPORT bid sometime later in the court process. What I got was a blank piece of paper listing the two bids and the comparison with all the numbers whited out.
Senator LeBreton: Welcome to the club.
Mr. Baker: That, I understand, is exactly what this inquiry got initially, and Mr. Nelligan called me and I offered -- and told me that they were getting whited-out documents, and I offered to provide the committee with whatever documentation I could provide; and, in fact, I had the November 4th version without the deletions and that committee received them and actually had been received by another committee of this Senate, the legal and constitutional committee before in a two-volume report dated March 28, 1995 which included, I have got it here, the documents that were given to Mr. Nixon and the reports which he never referred to -- really, the relevant information related to this transaction.
At the very least, we would have expected Mr. Nixon to meet the standard set by Mr. Chrétien on Wednesday, October 6, 1993, reported by Patrick Doyle and Bruce Campion Smith in the Toronto Star. Chrétien said that if he forms a government after the election he will order a "full-scale inquiry to investigate the deal". The Liberal leader also said, "You can't make a deal like that without all the facts. The people had a right to know all the facts before they are stuck with the deal."
I believe, Mr. Chairman, that the people had a right to have all the facts before the deal was cancelled. The facts were available to Mr. Nixon, and they are not in his report.
It is up to you, Mr. Chairman, and the members of your committee, and I would suggest also the Canadian people, to judge whether Mr. Chrétien and Mr. Nixon fulfilled their commitments to the Canadian people. Was there a full-scale inquiry? Did the Nixon report reveal all the facts? Did the public get to know all the facts on December 3, 1993? Was the Nixon process and report a fair and honest assessment of all the information he was provided? Anybody who has listened to the testimony here to date knows that the answer is a resounding "No" to each of those questions.
Where in Mr. Nixon's report did he reveal the evidence provided to him as testified to by Messrs. Rowat, Desmarais, Powers and Jolliffe? Where does the Nixon report discuss the reports of Price Waterhouse, Deloitte & Touche, Raymond Chabot and the October 29 briefing notes? Not only is there no weighing of them and their relevance to the privatization, there is no mention of them. Their absence is startling. Each one of those documents provided independent verification that the privatization of T1 and T2 was a good deal for Canadians and that the process was a clean process; or, as quoted in the newspapers by one of the members of the selection committee, independent members, it was "squeaky clean".
Nixon not only ignored all this evidence, but failed to even acknowledge that it existed. At the back of his report you get a list of who he met with no names. Is that the transparent process that the public was entitled to expect or we were entitled to expect? Peter Coughlin said yesterday that they expected a fair and equitable treatment. They expected a fair and equitable review after his -- when he had discussions with Mr. Rowat. Where is the evidence of a fair and equitable review? Where is there evidence of a transparent review? The meetings were in secret.
This leads me to other issues which I wish to raise here and that relate to the onus and burden of proof which are matters that have not been addressed here and are relevant in coming to any conclusions because there have been allegations not just of civil wrongdoing but also of criminal wrongdoing. Without those allegations, how could the government justify Bill C-22 in a democratic society?
With regard to onus, by Senate resolution the Senate established this committee's terms of reference and required it "to examine and report upon all matters concerning the policies and negotiations leading up to, and including, the agreements respecting the redevelopment and operation of Terminals 1 and 2 at Lester B. Pearson International Airport and the circumstances relating to the cancellation thereof."
You have, in effect, become a tribunal with duties and responsibilities commensurate with your mandate. Specifically, you have an obligation to examine and report your findings unaffected by political bias and based upon a careful weighing of the evidence submitted to you.
In discharging this responsibility, I would respectfully suggest that the words of Mr. Justice Cartwright in the Supreme Court of Canada guide you. Mr. Justice Cartwright stated:
It is necessary that the quality and quantity of evidence must be such as leads the Tribunal...be it judge or jury...acting with care and caution, to reach the reasonable conclusions the act was committed.
Before discussing the evidence itself and the onerous burden of proof placed upon the government to prove what have been unsubstantiated allegations, I would make a few preliminary remarks as to the order of witnesses giving evidence before this inquiry. In the order of appearance, the accuser should appear before the accused. As far as I am aware, the only accuser who will testify under oath will be Mr. Nixon, and he will testify at some point in the future. As a result, the accused in this case are in the unusual position of testifying before the accuser testifies. In both civil and criminal proceedings, it is usually the other way around. This issue is important.
The 1982 Canadian Charter of Rights and Freedoms granted constitutional status to the presumption of innocence under section 11(d). Should any one wish to argue that there is somehow a reverse onus on Mr. Matthews and others to prove their innocence, I would point out that there would have to be a statutory reverse onus, that, in turn, would have to meet certain Charter requirements. There is no statutory reverse onus in these circumstances and, even if there were, as Mr. Justice Dickson stated in R versus Oakes:
A statutory reverse onus placing the accused in the position of having to discharge the onus on the balance of probabilities is invalid, where the statute established a presumed fact which cannot reasonably be inferred from the proven facts as it is a denial of the presumption of innocence.
However, as I said before, we are pleased to have an opportunity to clear names and the names of others. I would like the chairman to grant us the right to reappear -- and the chairman is out of the room -- as the final and concluding witnesses in this inquiry. Mr. Matthews has been one of the most maligned and damaged by what has gone on and it would seem appropriate to have the final rebuttal or word.
Moving on to the principle of burden of proof placed upon any accuser, there are underlying principles which define such onus for both criminal and civil allegations. The first basic principle is that, generally speaking, the party that introduces a particular issue or allegation bears the burden of supporting their contention, that is, whoever makes the allegation must be prepared to support it.
The second principle is the duty of going forward in argument and producing evidence. As the Federal Court stated in the civil action of CNCP Telecommunications versus CACAW:
For the party with the onus of proof to succeed, the scale must tip in his favour. As well, it usually follows that the party with the ultimate burden of proof proceeds first in presenting its evidence and presenting its argument...
In allocating the burden of proof, the general principle is that the onus of proof in all cases rests primarily on him who asserts a claim to establish and prove it and not on the other side to disprove the claim.
Mr. Chairman, the onus lies on the government and Mr. Nixon to prove the allegations which they have raised. They did not prove them in the courtroom before Mr. Justice Borins, nor did they prove them in the Court of Appeal. In fact, the government did not make any allegations in court, presumably because it lacked any evidence which would support such allegations. In short, the allegations which have been made in the Nixon report and the press were not pursued in the sanctity of the court process where the accuser would be required to support its claims with concrete evidence.
What is the burden of proof to be placed upon the accuser in this case? I respectfully submit that the degree of probability required in order to discharge the burden of proof before this inquiry is defined by Mr. Justice Denning before he became Lord Denning, in the case of Miller versus Minister of Pensions as follows:
That degree is well settled. It must carry a reasonable degree of probability, but not so high as required in a criminal case. If the evidence is such that the tribunal can say: "We think it more probable than not", the burden is discharged, but if the probabilities are equal, it is not.
As a general proposition, it can then be said that anything that a party asserts must be proved by a preponderance of the evidence. More simply stated in Continental Insurance Company by the Supreme Court of Canada when it accepted the position that the degree of proof required depends on the gravity of the things alleged, and that the balance of probabilities means that the trier of fact must believe that the allegations are, and I quote, "more true than not" -- and I will repeat, "more true than not".
Mr. Chairman, you were out of the room, I believe, when I requested that we have the opportunity to return in the proper order of witnesses and to rebut after Mr. Nixon appears. In the normal course of proceedings, the accused has the last say, as I have been -- you have been out of the room and I have read and you can talk to your counsel, Mr. Nelligan and --
The Chairman: Mr. Nelligan will give you the committee's decision on that.
Mr. Baker: Thank you, Mr. Chairman.
I will go back, the Supreme Court of Canada also made an important point that the degree of proof required of the accuser increases depending upon the seriousness of the issues at stake. And we certainly have serious issues of reputation and property at stake here. In quoting Lord Denning, Chief Justice Laskin stated:
It is true that by our law there is a higher standard of proof in criminal cases than in civil cases, but this is subject to the qualification that there is no absolute standard in either case. In criminal cases, the charge must be proved beyond a reasonable doubt, but there may be degrees of proof within that standard. Many great judges have said that, in proportion as a crime is enormous, so ought the proof to be clear. So also in civil cases. The case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends upon that subject matter. A civil court, when considering a charge of fraud, will naturally require a higher degree of probability than that which it would require if considering whether negligence was established. It does not adopt so high a degree as a criminal court, even when it is considering a charge of a criminal nature, but it does require a degree of probability which is commensurate with the occasion.
The words of Chief Justice Laskin have been echoed in the administrative setting as well in Canada Packers Inc.:
There is a general consensus among arbitrators that, where criminal conduct is alleged, the onus of proof is only met if the proof is "clear and convincing". This does not connote a change in the standard of proof from the civil standard of a preponderance of evidence to the criminal standard of proof beyond a reasonable doubt, but rather relies upon the generally accepted view that, the more serious the conduct which is alleged, the more important it is that the conduct be demonstrated by "proof commensurate with the gravity of the allegations", to use the language of the Supreme Court of Canada in Continental Insurance...
Under these guidelines, consider the seriousness and unsubstantiated nature of the conduct alleged by the government and the Nixon report and the enormous importance of the subject matter and the consequences to the parties involved. In particular, consider the serious and prejudicial nature of the allegations raised by politicians in their attempts to try this issue in the media.
Consider the enormity of the allegations in Mr. Nixon's report and the consequences thereof, cancellation of a $700 million mega infrastructure project, and the consequential damages to a multitude of Canadian companies and thousands of employees and potential employees.
Consider the legislation threatened by Mr. Chrétien and recommended by Mr. Nixon, which ultimately became Bill C-22 and which denied the right of access to the courts and granted immunity to those involved.
All the allegations raised in the government's efforts through Bill C-22 are consistent with treating the parties as if they were criminals by taking their property away and denying them any rights. By any standards, these allegations and actions require a high standard of proof, certainly the high end of the scale of the preponderance of evidence in civil proceedings.
In fact Mr. Chairman, I would go so far as to state that the burden of proof placed on the government in these proceedings comes very close to being equal to the criminal standard, particularly in light of the allegations of criminal conspiracy raised publicly by Senator Bryden. Former Chief Justice Dickson of the Supreme Court of Canada explained the rationale for requiring the Crown to prove guilt beyond a reasonable doubt in the criminal context, and I submit that a similar standard be applied here. Justice Dickson stated:
The presumption of innocence is a hallowed principle lying at the very heart of the criminal law...The presumption of innocence protects the fundamental liberty and human dignity of any and every person accused by the State of criminal conduct. An individual charged with criminal offence faces grave social and personal consequences, including a loss of personal liberty, subjection to social stigma and ostracism from the community as well as other social, psychological and economical harm. In the light of the gravity of these consequences, the presumption of innocence is crucial and ensures that until the State proves an accused's guilt beyond all reasonable doubt, he or she is innocent. This is essential in a society committed to fairness and social justice. The presumption of this confirms our faith in human kind; it reflects our belief that individuals are decent and law-abiding members of the community until proven otherwise.
I should like once again to emphasize the consequences of the allegations made with respect to Mr. Matthews and others involved in this transaction, and certainly suggest that these allegations have had great social and personal consequences resulting in social stigma and ostracization as well as economic harm.
The actions of the government in this case without proof of any wrongdoing victimize and is continuing to victimize Canadian citizens and Canadian companies and thousands of their shareholders and employees for political gain. I have dealt with the victimization and consequences of the government's action in my report to the Senate Committee on Legal and Constitutional Affairs of March 28th, 1993 which is enclosed here in the Appendix 5.
Frankly, Mr. Chairman it was difficult to decide how to structure the balance of this statement given all the testimony of the witnesses to date. I tried to set out above a way to focus the framework of the context in which the issues should be judged. The duty of care and onus of proof. Having listened to the witness, one might have rightly come to the conclusion there is no reason for us to appear whatsoever. Mr. Matthews and I have already appeared before the Liberal dominated House of Commons Committee on Transportation and testified on May 31st, 1994. I have made various submissions to the Senate Committee on Legal and Constitutional Affairs, particularly my two volume report which I held up earlier which contained an analysis on most of the significant written documentation which we had been able to obtain under access to information and through court proceedings and which Mr. Nixon had failed to acknowledge or refer to in his report. You have had the authors of much of that information here with their reports.
Paul Stehelin, President of Deloitte Touche, whose nine month analysis of the transaction resulted in the conclusions of the project, was fair market consideration for the Government of Canada, provided a reasonable return to the investor, and was financeable. John Simke of Price Waterhouse who also testified as to the integrity of the RFP process, Raymond L'Abee of Raymond, Chabot who also testified as to the integrity of the process, the memorandum by Transport Canada of October 29th, 1993 and revised November 4, 1993 plus additional memorandum of November 8, 1993 which was supported by testimony by then Associate Deputy Minister of Transport William Rowat, John Desmarais, Keith Joliff and, on another occasion, Wayne Power.
My analysis is 35 pages and is of some significance, Mr. Chairman, in rebutting the Nixon report of November 29th, 1993 and in setting out our position on a number of those issues. It does not address the November 30, 1993 draft Nixon report which was produced here at the inquiry.
I am prepared to read the analysis into the record unless, Mr. Chairman, the committee would prefer to take it as having been read and report it verbatim in the transcript.
The Chairman: We will put it in the transcript.
Mr. Baker: Thank you, Mr. Chairman.
The Chairman: As an appendix.
(For text of report, see Appendix p. )
Mr. Baker: I stated in that report, it is time for the public to have full, true and plain disclosure of all facts without material omission or material errors.
I will move on now to the Pearson Airport saga, as I call it, and deal with a number of issues that were raised in a chronological way, even though they may have already been effectively dealt with by many of the witnesses who have preceded us.
First, we would like to deal with the unsolicited bids. First, because Nixon refers to only one unsolicited bid although he was advised there were more. Second, because Minister Doug Young attacked the integrity of Mr. Matthews with regards to the unsolicited bid when he reintroduced Bill C-22 in the House of Commons. There were five unsolicited bids. First was the Airport Development Corporation Huang and Danczkay submitted March 10, 1989 to Shirley Martin, the Minister of State, Transport, and presented to Transport Canada officials on March 29th, 1989 subsequently submitted to the Honourable Benoit Bouchard April 19th, 1989.
There was a reiteration of the Airport Development proposal to the Honourable Doug Lewis after I believe Claridge had taken control on June 17th, 1990. You see that in your documentation as document 001181.
The second proposal was the Paxport proposal of September 25th, 1989 which was enclosed with a letter to the Honourable Benoit Bouchard, document 00386 and resubmitted to Lewis on February 26, 1990. Transportation document 00383.
The third proposal was the Canadian Airports Limited British Airports Authority related proposal which was submitted to Mr. Doug Young by J.J. Robinette, one of Canada's leading litigation lawyers, I am sure you may have all have heard of him. That is document 00425.
The fourth one was an Air Canada proposal with an 80 year lease including options. It was submitted by Pierre J. Jenniot, President and Chief Executive Officer for Air Canada to the Honourable Doug Lewis, document 00484.
The fifth proposal was the Air Canada submission by Pierre Jenniot of Air Canada to the Honourable Doug Lewis which included a Paxport plan that Air Canada endorsed. Document 00263. When you are trying to read the document, it is difficult to determine which exactly is that number.
As to the public nature of the bids, the British Airport Authority announced public in Britain it was going to make a bid. Paxport proposal was also made public and a model displayed was referred to by Mr. Chrétien actually in the house when the RFP proposal -- the RFP was announced. Apparently he had seen it.
The relevance to all of these unsolicited bids is they demonstrate significant interest in the redevelopment of Terminals 1 and 2 before the RFP was issued. In addition, as you have heard in previous testimony by Mr. Simke of Price Waterhouse and Mr. Hession, it was widely known that T1, T2 would be privatized and an RFP would be issued, therefore serious parties interested in such developments had an opportunity to prepare for the RFP. Paxport had no significant advantage or advantage over these other interested parties.
All of these proposals also dispel the myth that Mr. Matthews or Paxport made the only unsolicited bid. You should note that that bid also related to Terminals 2, not Terminals 1 and 2.
A big deal was made of the supposed great advantage that this unsolicited proposal gave to Paxport group in subsequent RFP process. To quote Mr. Nixon:
The RFP, having as it did only a single stage and requiring proponents to engage in project definition as well as a proposal submission and, all within a 90 day time frame, created in my view, an enormous advantage to a proponent that had previously submitted a proposal for privatization and development of T1 and T2. Other management construction firms not having been involved in the manoeuvring preceding the RFP had no chance to come up to speed and submit a bid in the short time permitted. With little construction and development occurring, others should have been sought out and given reasonable time to participate.
We know this statement to be factually and inferentially false. To repeat, it was widely known by all interested parties that an RFP would be issued giving these parties a fair opportunity to prepare their proposal. Prior to the RFP being issued, no less than five unsolicited bids were submitted to the government.
And I guess more importantly, there was a significant difference between the unsolicited bid and the Paxport proposal. Here is the unsolicited bid. It is not that many pages. In fact, I do not think it is any thicker than the summary of Vaughan's that were included with the Paxport proposal. But here is the actual proposal, seven volumes, 2,000 pages and approximately 80 pounds.
Now, there is no comparison. There is no great advantage. There is no enormous advantage. They are completely different. I thought I would bring them along so we could simply contrast what the contents of one to the other is.
Finally, it must be noted that the testimony shows that Transport Canada sought out several proponents and interviewed those proponents. There were meetings with Airport Development Corporation controlled by Claridge and the Canadian Airports Limited allied with the British Airport Authority as well as with Paxport people. The evidence before this inquiry therefore demonstrates Mr. Nixon's statement to be false and misleading.
The next major event was the actual calling of the RFP on March 11, 1992, and I didn't change this. It leads me to the allegation of conspiracy. I have actually dealt with it a little later. I am going to deal with what the RFP really addressed. It was raised last night, that is the difference between expansion and modernization.
There seems to be a misconception as to what the RFP was for. The RFP was for the redevelopment of T1 and T2, but you have to look at expansion versus modernization. There has been criticism by some people saying that the expansion of the terminals of Pearson was not required due to the surplus capacity that apparently existed in 1993, and therefore the terminal redevelopment project was not required. If the people are correct, and of course assuming that there is no lead time in bringing on incremental capacity when it is required, which is an assumption that was completely rebutted by Air Canada when they were here in testimony, they are overlooking a major component of the one of the objectives of the project and that is quote "the early modernization and timely expansion of the terminals."
There are currently 53 gates at T1 and T2. Under the Paxport plan, after spending $687 million, the combined T1 and T2 would have had 55 gates. Clearly, from a gate count standpoint, not a lot of expansion was taking place. Three gates -- two gates, sorry. So where was Paxport going to spend the money? Simply put, on modernization.
Among other things the Paxport plan called for, one, increasing the life safety aspects of the facilities by bringing life safety systems up to current standards. Two, reconfiguring the layout of the traffic sectors to better suit the operational needs of the air carriers. Three, providing a more complete range of services and amenities to meet the changing demands of the travelling public. Four, improving the operational efficiency and thereby increasing the gate throughput. Five, providing flexible hold rooms and bridges to suit the air carriers' changing schedules and fleet mix. Six, installing modern and efficient building systems.
This really wasn't an expansion, but a modernization. The only modern part of Terminals 1 and 2 is the domestic portion that was modernized by Air Canada at a cost of $125 million and part of the guiding principles which became the "Air Canada sandwich" as we have heard many times here. The bulk of this money was to bring the terminals to an international, world class standard, not to provide increased capacity.
On project financing, project financing usually refers to debt capital raised to finance a specific project. Lenders evaluate the credit risk based on the merits of the project itself, and not necessarily on the financial capability of the project sponsors. Lenders consider the following sources of repayment: First, primary sources, the cash flow generated from ongoing operations of the project. Second, secondary source, the liquidation of the prosect assets; and third, a tertiary source guaranteed from project sponsors. Because there is usually no outside source of repayment, lenders establish strict financial covenants that need to be met. These covenants include, maximum debt to equity ratio, minimum debt to service ratio, minimum cash balances restriction on distribution to sponsors.
In the case of the airport redevelopment project, the financial model prepared by KPMG assumed airport industry norms for the above covenants and in each case the pro forma financials met or exceeded the respective requirements.
Paxport intended to finance the redevelopment project in phases and had by December 3rd, 1993 been issued a draft term sheet by the project financier required for phase 1A and phase 1B. This loan, together with the partners equity and retained earnings, would have been sufficient to finance the first three and a half years construction which Mr. Coughlin testified last night was $350 million prior to the completion, $350 million of construction.
Prior to the completion of phases 1B, Pearson Development Corporation would have begun negotiations for the project financing required for phases 2 and 3. Long term take out financing would have been arranged along the lines of the long term financing currently in place at Terminal 3, and in fact discussions between Mergeco and Terminal 3 bond holders had already begun. However, at that early stage, no financing commitments were being sought as the long term financing was not required for at least three and a half years.
The merger. In considering the issue of the merger I should like to add some background. Matthews already had an interest in Vista Cargo terminals at Pearson and had been unsuccessful for the bid at Terminal 3. Matthews interest in the airport was no secret.
We are all aware that Paxport and Claridge agreed to merge their ownership and continue with the Paxport proposal as set out in the January 14th, 1993 letter agreement.
Some of the significant benefits of merging the management operation and redevelopment under one umbrella were as follows: One, risk management; two, cost savings in the redevelopment; three, safety and reduction of inconvenience to the travelling public; four, flexibility in dealing with airlines; five, cost savings to the airlines; six, management savings; seven, other considerations.
That included was it legal for the parties to meet and discuss these issues at that time? The answer is yes. Would the merger constitute a new proposal under the RFP? The answer is no. Would the merger entity satisfy the requirements with respect to the competition law in the RFP and competition law generally? The answer is yes.
Some of these issues seem to have taken on a life of their own at the inquiry other than in the Nixon report, and I think they should be addressed in a systematic way. With regards to risk management, as evidenced here at the inquiry, Transport Canada finally owned up to the fact that financeability issue related to the financial health of the airline industry, and in particular Air Canada's financial situation.
Peter Coughlin testified last night that they were concerned about Canadian Airlines' financial situation, so it was an overriding cloud over the airport or any airport development. That of course led to a subsidiary question. If Air Canada was not able to pay its rent, what impact would that have on the redevelopment over the short and long terms? What resources must the proponent have in order to absorb that impact?
First, let's put the Air Canada in perspective. Air Canada is Canada's leading airline passenger carrier. Air Canada is the dominant tenant of Terminal 2, therefore any redevelopment would substantially be for the advantage of and to meet the requirements of Air Canada. The experience in the United States with respect to Eastern, Reliance, Branff and Pan-Am was that based on airports dominated by them, that very simply and quickly there was a restructuring pursuant to bankruptcy laws and other airlines took their places and to a large extent their spaces when those airlines got into financial difficulty.
We did not believe that it was credible that Air Canada would instantaneously cease flying and that passengers carried by them would have no airline alternative. Passengers, to a large extent, could continue to fly, first because we considered it improbable for Air Canada to shut down without going through a restructuring or bankruptcy proposal. There would have been a CCAA restructuring or a bankruptcy restructuring. No major corporation closes its doors and slams them shut these days. There is always restructuring.
We could not conceive that the Canadian government would permit such a devastating effect on the Canadian economy without taking mitigating steps. In our view, there would be short term impact. The real risk was unpaid rent, the accounts receivable. The industry would step up with a solution because the passengers were there. The resources were there. It would be the shareholders and lenders and some employees of the airline that would bear the brunt of such a disaster. Yes, there may be some reductions in space use and gate use and there might be some lost rent, but the significant portion of the business would never disappear. Toronto is the economic hub of Ontario. Pearson is the gateway into Toronto and southern Ontario.
So if another carrier came in or if Air Canada was taken over, it would still be using Terminal 2. Another risk would be the Canadian Airlines would obtain some of the lines and would want to put the traffic through Terminal 3. That risk would be reduced on a merger if the overall entity would still have passenger traffic, that is our entity.
Furthermore, Paxport intended to introduce the T3 model of compensatory lease so that the risk of Air Canada would be picked up by the other airlines at T2 just as in Terminal 3.
Paxport in its proposal had provided sufficiently and was aware of this potential risk. As in many circumstances, more is better. More equity would reduce the risks with regards to Air Canada and with regards to absorption of any cost overruns because airlines do not pay for cost overruns. Cost overruns are the risk of the owner, something that did not seem to be fully appreciated. They come out of the equity that is invested, unless you happen to be a local airport authority and you have no equity and therefore your passenger facility charge would go up and the travelling public would be absorbing it.
A merger would result in the equity base of Terminal 3 and Paxport group being combined. The final equity base was approximately $250 million. In addition, in the recession at all times there was a positive cash flow on Terminal 3, and that positive cash flow would be available to the merged entity.
In summary, Mergeco's financeability was really not an issue. As Peter Coughlin stated last night, they assumed and expected that Paxport would raise the equity. In fact, during our negotiations for the Mergeco, the issue of financeability or any of the Paxport partners not putting up its equity was not discussed. There were formulas for future delusion on future cash being put in, but the fact is nobody really raised seriously the issue of financeability of any members of the consortium.
What it really boils down to is there were a couple of companies which withdrew for their own reasons and their equity contributions were replaced. The other entities advanced their cash commitment as set forth in the July 13th, 1992 proposal. This resulted in Mergeco having not only the $61 million cash equity as put forth in the proposal, but also approximately $32 million was spent in predevelopment work in order to meet the objective of beginning construction one month after closing. That had not been anticipated, and in January of 1993 it was only anticipated that $6 million would be spent to close it.
The partners investment of $150 million in Terminal 3 was also available through a guarantee and cross default provisions which I believe Mr. Desmarais testified that was one of the significant benefits that the government saw because if there was a default, the equity of the investment would have been spent on development of the terminals and then the government would have got all the terminals, the three terminals back. That is a pretty significant benefit to the people of Canada and the government in the event there was a default.
In effect, there was almost a quarter of a billion of equity to support the project. The issue of the financeability insofar as Air Canada and Paxport group was in large part a tempest in a tea pot used by the government negotiators effectively to enhance the equity base. Air Canada is growing and has great demands and has not defaulted in its rent payments and is still in place, and they were here and testified. They wanted the facilities in the Paxport proposal and it was designed to meet Air Canada's needs. And in fact, when the "Air Canada sandwich" issue became an issue on June 16th, 1993, by July 21st, Air Canada had agreed to enter into a long term lease to have the redevelopment done. They got what they wanted and we were moved forward.
Paxport knew what they wanted. Approximately $78 million is still sitting in the partnership's treasury in cash or near cash today.
With regards to the synergies or efficiencies at the time of the merger, we anticipated significant savings in redevelopment. Demolition and replacement of Terminal 1 in a single stage, $16 million in the capital cost saved in the elimination of temporary facilities such as tunnels and platforms to separate the public from the construction, and thereby increase the safety factors and the cost of new temporary electrical, air conditioners and other systems. In addition, $23 million in capital costs would be saved on staging of Terminal 2 redevelopment by the ability to complete the new Terminal 1 in a single stage and temporarily move certain airlines to Terminal 3. A total of $13 million in capital costs would be saved in construction of the new Terminal 1 in a single stage rather than in two stages over an extended period of time.
The consequences of this approximately $50 million in capital cost savings would also result in a saving of $4 million in capitalized financial costs and $6 million annually in reduced interest in airline facility charges to the airlines, whereas also an additional direct savings to the airlines operating from the Pearson Airport estimated between $10 to $14 million.
Third, there were annual savings on operations work which were estimated to be in the order of $4.3 million and they were mentioned by Mr. Coughlin last night.
Another major factor was the safety and passenger safety. It was considered that the merger with Terminal 3 and the ability to move traffic to Terminal 3 and the redevelopment of T1,T2 reduced the inconvenience, safety concerns and risk of injury which would otherwise have been faced by the travelling public. Some of you may recall when the Ottawa Airport was under construction, the hoardings and walkways that you had to go through. Any construction, immense precautions have to be taken to protect the public, particularly given the volume of traffic that goes through an airport.
While significant safety precautions would have been taken, travelling public, safety, security and comfort would be increased by removing the public completely from the construction area.
The airlines also benefit with more efficient movement of airlines between terminals, the developer's interest in all three terminals would lead to waive compliance of the terms that the Terminal 3 airline leases which would prevent airlines from moving between terminals. Absent this common interest, airlines would be inhibited by the terms of leases from cleanly moving between Terminal 3 and Terminals 1 and 2 and would likely be inhibited by the high transition costs associated with renegotiating all these leases. Of course, each terminal operator would have the disincentive to permit the reallocation or relocation of an airline to another terminal since such relocation would also displace the revenue from parking and retail sales associated with the airline passengers.
Absent the joint venture, this factor would prevent the formation of efficiency promoting strategic alliances or reservation sharing arrangements amongst the airlines serving Pearson Airport. This could adversely effect the competitiveness of Pearson Airport and the airlines, especially the Canadian carriers serving it. It also results in a more efficient use of gates and bridges and apron space and ground handling equipment.
Another major benefit was the international development. The redevelopment would provide the developer and the Canadian companies which participate in the redevelopment with a unique opportunity to develop expertise which would allow them to participate to a greater extent in the world market for airport development and management. In 1993, forecast for world airport development market for the next 10 years ranged for $90 billion to $166 billion. United States figures indicated that $77 billion was needed for United States airports alone in those 10 years.
The former Warsaw Pact countries had extraordinary needs for the redevelopment of their airports. Throughout the world, government investment had lagged behind the growing need for airport infrastructure to the point where most governments could no longer afford the capital expenditures required. Paxport and its affiliates was currently pursuing opportunities in Vancouver, Austin, Chicago, Detroit, Punte del Este, Berlin, Sofia, Prague, Hong Kong, China, Kuala Lumpur, Surabaya, and Bangkok. Paxport and its affiliates by April 1993 had spent nearly $2 million in their international market development program. Credibility however was essential for success in the world airport development market. Once redeveloped, Pearson Airport would provide all the companies which participated in the development of Terminals 1 and 2 and their related companies with a show case which demonstrates their ability to design, construct and operate a world class international facility.
With regards to competition, much has been made of the few pages in the proposal, and I think actually it was only one. Mr. Hession was questioned and responded to this issue. "Business rivalry" is a term also used by George Addy, Director of the Competition Bureau. The real question here is not just businessmen's perception of competition. Yes, there could be competition to some degree amongst the terminals, but what are the real economic and legal realities of a competitive environment? Is there an effective and efficient competition and at what level? I will try to put this in perspective succinctly, and you probably don't believe that. The emphasis on succinctly, Michael.
The products and services provided at the airport are one, airline facilities; two, retail concession; and three, parking and transportation services. When you look at these three categories, you must conclude as we in the Competition Bureau did, that the airline facilities of T1 and T2 are different relevant markets than at T3. The redevelopment, including the creation of the joint venture, would not therefore cause any increase in market share or market power or bring any lessening of competition between these terminals.
The airlines at T1 and T2 enjoyed significant bargaining power. The developer would not be able to finance the development until it is settled to the satisfaction of the airlines the terms of the Air Canada leases.
The co-operation and agreement of airlines was essential if the redevelopment was to be implemented. You have heard lots of testimony here about the impact of the "Air Canada sandwich" so you know that the essential ingredient for any development is the airlines. Once the terms of the air carrier leases are established, their mandatory, non-discriminatory and dispute resolution provisions will ensure that all airlines enjoy the benefits of the terms negotiated by the most powerful airline or airlines in negotiating that.
I would also note that the Air Canada lease terms were established with Air Canada on July 21, 1993. Those lease terms were the fundamental basis to the financing and the redevelopment. The government retained full authority to determine which airlines will serve Pearson Airport and ultimately the terminal to which they will be assigned. Further, if the developer and the airline were unable to agree on the terms of the air carrier lease, Transport Canada would not permit the disagreement to effect the air traffic at Pearson and would exercise its authority to resolve the agreement. And I think Peter Coughlin referred to the operation maintenance agreement -- operation management agreement yesterday and the conditions in there on operating.
It is also an overriding condition is the IATA conditions which are intergovernmental. The prices charged by the developer for airline facilities at Pearson would be increasingly constrained by competition from other airports. The developers view connecting passengers as an important source of increasing volume and revenues.
Prices for airline facilities at T1 and T2 would be competitive in order for the developer to retain existing and attract addition hubbing operations.
The terms of the air carrier lease would provide that airline facility charges would be based upon a compensatory lease structure that would align the economic interest of developers with those of the airlines. Since the revenues in respect of the airline facilities are limited under the cost recovery reform, a developer has an incentive to increase the total passenger volume in order to increase the retail and parking revenues.
With regards to retail concessions, T1 and T2 and T3 form separate relevant markets for airline space and retail products and services. One might ask why there are separate markets. Reality is that if you are flying out of Terminal 3, you would not go to eat or shop at either T1 or T2.
With regard to the parking and transportation facilities, passengers flying from Pearson Airport use a number of different means of transportation to come to Pearson Airport. On sight parking facilities at Pearson compete with taxis, limousines, airport buses and off airport parking facilities and most significantly with well-wishers who drive passengers to Pearson Airport. The government would continue to directly regulate and licence access by taxis, limousines, out-of-town buses, commuter services and inter-terminal buses. Passengers, using these forms of ground transportation, those dropped off or picked up at the curb by well-wishers or greeters and those who return a rental car at Pearson Airport, would have no opportunity to use the parking facilities operated by the developer. The alternatives for someone parking at T1 and T2 on a daily basis at Terminal 3.
Off sight parking operations offer more parking capacity than T3 and were in some cases closer to T1 and T2 than T3 and provide more convenient frequent shuttle service to T1 and T2 than does T3. They were also up to 43 per cent less expensive for daily self-parking than T3. Therefore, the merger would not result in an increase in market power or any reduction in competitiveness with regards to parking and transportation facilities.
Most of this information was taken from a submission made on April 26, 1993 to the Bureau of Competition Policy of 116 pages and the almost equivalent sized submission on May 14th in response to a request for additional information, and there was an additional about 4 inches of exhibits that went with it. The competition bureau accepted those submissions.
Was there a new proposal? There have been suggestions that the merger between Paxport and Claridge group constitutes a new proposal which in effect violated the integrity of the RFP process and required the government either to cancel the transaction or to issue a new RFP and let other parties have an opportunity to bid.
In analyzing that issue, one must have reference to the RFP, the proposal, the criteria established for selection, the rating and weighting of the various criteria of relevant importance to the partnership, the equity components, i.e., the financeability of the project, the December 7th, 1992 letter of Victor Barbeau announcing the selection of Paxport bid as the best overall acceptable proposal and matters not satisfactory to the government, in particular, the financeability which was an airline issue.
The January 14th merger letter agreement which resulted in the final structure of the transaction as reflected in October 7th, 1993. The testimony of the parties; Mr. Broadbent, that it continued to be the Paxport proposal, Mr. Cappe, that they considered this issue, and Mr. Rowat and that it was always the Paxport proposal that they were dealing with. The memorandum from Rowat to Shortliffe referring to the Paxport proposal on May 25th, 1993. Broadbent's memorandum testimony re the Paxport proposal and other Treasury Board officials.
I would suggest Mr. Chairman, common sense and the law tells you that adding investors or shareholders does not eliminate or change the rights of the parties just as in a stock offering, sale of shares, or amalgamation unless expressly otherwise provided, and in this case there was no express other provision.
When did the deal become binding upon the Government of Canada? That is an issue that seems to have been raised yesterday and raised previously. The Nixon Report gives the impression that the Government of Canada only became bound when Prime Minister Kim Campbell authorized Bill Rowat, the Associate Deputy Minister of Transport, to release the escrow documents. That was on October 7th, 1993. This is really a timing issue because there is nothing improper.
The testimony before the Senate Committee on Legal and Constitutional Affairs indicated the execution of the documentation during the election is within the power of the government. Both of the issues, timing and Kim Campbell's authorization, are red herrings. The Government of Canada was already bound to the deal at a point in time prior to the election being called in accordance with proper procedures and legal precedence.
The general principle as to whether there is a contract or not is whether the parties agreed to the principle terms of the transaction and has any required approval been obtained?
There may be a legally binding agreement with conditions precedent yet to be satisfied which, if satisfied, binds the parties. That is exactly what happened closing on escrow. The relevant documentation or the RFP in the proposal, the December 7th, 1992 acceptance of the Paxport proposal, the June 18th, 1993 letter of understanding, which although it states it is not binding does set forth the framework for establishing binding agreements including the settlement of the terms and agreements of the principle documents which were prepared for presentation to the Treasury Board on August 18th, 1993 addendum to the Rowat briefing of October 23rd, 1993 and November 4th, 1993 and the Treasury Board approval and Cabinet approval.
Also relevant is the testimony of Mr. Rowat and Mr. Desmarais that the principle terms of the agreements still to be completed for closing and had been settled by the date of the Cabinet approval. That was August 26 or 27. And that the proposed closing date which had been set in July of '93 as October 7th, 1993 was reconfirmed immediately after Cabinet approval.
The letter of June 18th included in that framework the appropriate government approvals. So, the consequence of the documented evidence is that on October 26th, 1993 all the principle terms of all the documents had been settled. Treasury Board approval had been obtained. Cabinet approval had been obtained. The closing date was set. Binding, legally enforceable agreements existed between the Crown and the parties on August 26th, 1993. They may have existed earlier, but argument to that effect is not necessary here. I do not think there is any question that on October 26th, 1993 there were binding agreements with some conditions precedent to be then satisfied.
As testified by Mr. Rowat, all the conditions were satisfied and the Government of Canada was obligated to close the transaction. Any agreements that had to be completed after August 26th, as testified by Mr. Rowat, the principle terms had already been settled by August 26th.
The issue was dealt with by the Ontario Court of Appeal in Battico Investments Inc. and Colonel Popcorn's Ltd.
When they agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement should thereupon become binding, they will have fulfilled all the requisites of the formation of a contract. The fact that a formal written document to the effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.
On October 7th, it is testified all the conditions were satisfied and the Government of Canada was obligated to close the transaction on October 7th, 1992, a partnership could have sued for breach of contract as a result of the government failing to do so. Mr. Coughlin testified about closing, that the government wanted to close and we closed.
Note that in the court proceedings respecting the breach and repudiation of the contracts, the government entered no defence and acknowledged breach and repudiation. The Court found against the Crown and its decision was upheld by the Court of Appeal within 10 minutes of closing of argument.
The Crown was in no better position on October 7th, 1993 nor in fact at any time after October 26th, 1993 if they had repudiated the contracts or failed to negotiate in good faith.
We unfortunately had at this committee after its adjournment some unfortunate allegations made, in the heat of battle granted, by Senator Bryden with regards to a sham transaction or collusion. I was going to read those allegations in but I do not think it is necessary. Senator Lynch-Staunton referred to them yesterday.
For myself, from my knowledge of the transaction, an allegation of conspiracy or sham transaction is completely and utterly false. Mr. Matthews, I believe you can reinforce that statement, is that correct?
Mr. Matthews: Yes, it is.
Mr. Baker: That is correct. The next issue that I will raise is patronage. There is no evidence whatsoever of patronage in the Nixon Report or at this inquiry. Robert Nixon's allegation of patronage must be based on more than mere suspicion.
As I have discussed earlier with respect to onus and burden of proof, common sense would tell you that patronage is not selecting the winning proposal by Paxport of $604 million more or almost twice as much as the losing proposal.
The final deal, after adjustments for Air Canada and the quick start proposed by Transport Canada, had a net present value of $843 million, still 30 per cent better than Claridge's proposal and even greater if Claridge's proposal was adjusted to accommodate the "Air Canada sandwich". It could be in the neighbourhood of as high as three or four times higher.
Our proposal changed from $1.24 billion I believe it was to about $843 million, a difference of about $400 million during the course of the negotiations. If you took that $400 million off approximately $640 million of the Claridge bid, you would be down to $240 million. Compare that to $843 million. The Paxport proposal was substantially better for the Government of Canada and that certainly is not patronage.
With regards to the protection of the public interest, question has been raised as to how the public interest was effected in the process and the actual transaction. And I think you have to look at the process which I find one of the most stringent processes I have ever seen, and the testimony, the deal, the financial terms, the default terms the government had. Something that was left out and I do not think has been brought to the attention of this committee was the brief by Gordon Dickson for Cassel Brock, the lawyers for Transport Canada in the negotiations, which was provided to Stephen Goudge on how the public interest was protected, unless Mr. Nelligan you can correct me, I do not believe I have heard any reference to that.
It is not referred to in Mr. Nixon's report, nor Robert Vineberg's memorandum that was given to Mr. Nixon which was mentioned yesterday. That was another report to Mr. Goudge and Mr. Nixon with regards to how the public interest was protected and the detailed analysis.
Much has been made of the cost to the taxpayer's. The cost to the taxpayers -- the premise here is to comply with the law after wilful and wrongful breach by the Liberal government of the contracts is costly, the cost of which was estimated before that wilful statement was taken at $500 million to $2 billion. This is the justification for abrogating the rights of Canadians. It is going to be costly for Canadians. This is something out of "Alice in Wonderland" or more appropriately the "Guleg Archipelago". It is tantamount to saying that the victim should pay. Canadians should dismiss this political slight of hand for what it is. How can you justify this in light of the facts relating to the deal, the testimony here, the position of the government in the courts, the unconstitutionality of Bill C-22, the Nixon reports, with wilful omission of relevant information which would have brought a reasonable and prudent man to another conclusion? Rowat's and Desmarais' briefing of Nixon on the costs of cancellation; Minister Young was also briefed. I can only presume he briefed his colleagues in Cabinet.
Nowhere, I would note, in the briefing by Rowat was there any suggestion that the actions of the government was legal. It seems implicit in that briefing that in fact the actions were not legal because retroactive legislation was proposed and the option of expropriation discarded.
The only conclusion I can suggest that you can come to is that the Liberal government -- knowing with full knowledge of the costs involved and without any legal justification, based on a report, the Nixon report which any reasonable person based on the information available to the government and to Nixon would have known was unsupportable -- contemplated legislation and took knowingly the risk of the cost of cancellation.
This is the political justification of an unsustainable position regardless of cost. The government jeopardized the taxpayers' money, the developers did nothing wrong, people lost their jobs. We have a true issue of lack of government integrity here.
What course is next? We now see and examined in detail the process, the deal and to a large extent the Nixon report. What is left? A few witnesses and Mr. Nixon himself. We are getting to the last part of the committee's mandate and examination of the cancellation. There are many as yet unanswered questions. Why was the transaction cancelled based on the evidence which was available to the government and to Mr. Nixon? Was it only political revenge on an old enemy?
There is certainly no evidence to support any other conclusion. Who was involved and who was responsible for this outrageous trampling of civil rights for political purposes what has been done here is worse than Roncarelli and Duplessis, the wrongful oppression of a Jehovah's Witness in Quebec. Premier Duplessis' conduct, however, pales by comparison to what has gone on here. Who took the risk of a $.5 billion to $2 billion of taxpayers money to justify campaign rhetoric?
What went on from the date of the election on October 25, 1993 to December 3, 1993 is yet unanswered. We know that there was no basis in the laws of Canada for what was done. The government has admitted so in court. We know that the government was prepared to and did violated the legal and is attempting to violate the constitutional rights of the parties involved. There has been an oppressive campaign of defamation in the attempt to pass the legislation which would provide immunity for all those involved.
For a government that campaigned on integrity, where is that integrity now? Where was it on December 3, 1993?
My conclusion today is not substantially different from my conclusion of my testimony before the House of Commons committee on March 31st, '93, except that we have overwhelming new evidence to support those conclusions and go further. The wilful omission of material and relevant evidence by Mr. Nixon and all of the testimony of the witnesses to date provides no evidence, let alone a preponderance of evidence, that would support any of the conclusions or allegations made in the Nixon report or by the government. It does not, I suggest to you, pass a test of fairness or honesty. I therefore recommend, Mr. Chairman, that this committee, in its report, recommend the immediate withdrawal of Bill C-22 so that there is no denial of the legal rights of Canadians and that they will have at least the same rights with respect to their property as Mexicans and Americans have in Canada under NAFTA, something that Mr. Chrétien agreed to on the same day as he announced the cancellation of this project.
Make a finding of fact that, on the basis of the sworn preponderance of evidence and documents produced before the inquiry, there was no evidence to support the allegation of patronage, flawed process or a bad deal.
Thank you, Mr. Chairman. Thank you for your patience.
The Chairman: Thank you, Mr. Baker.
Mr. Matthews, is your submission going to be as succinct as Mr. Baker's? If you'll give me some idea of time, I'll ask the committee if they'd prefer to hear yours so that the questioning can begin to both witnesses.
Mr. Matthews: I don't really what have as much to say as my friend, and I should take about 20 minutes.
The Chairman: Would the committee like to hear Mr. Matthews before --
Hon. Senators: Yes.
The Chairman: All right. Go ahead, please, Mr. Matthews.
Mr. Matthews: I come to you today as an enthusiastic and committed Canadian, an entrepreneur, a Second World War veteran, a builder, an engineer, an employer, and as a father and as a grandfather. I also sit before you as a person who has dedicated much of his life to trying to make Canada a better place to live and to raise a family.
I have over the years created thousands of jobs, been active in politics -- as I expect some of you have been -- chaired a CMHC task force -- which incidentally I gave the entire remuneration to charity after I finished -- worked as the Ontario organizing chairman on the Robarts-Pepin Task Force on National Unity -- again, with no material benefit. You will remember that I was appointed to that position when the government was Liberal.
I also was Ontario Chairman of the Council for Canadian Unity for about eight years.
Among the things that I am most proud of is the company that I founded in 1953 with a loan of $4,000 from my father, who had ten children. He mortgaged his house to lend me the $4,000. The company went on to build thousands of houses, office towers, hotels, industrial buildings, dams, roads, bridges, railroads and airports in Canada and around the world. We earned a track record of integrity, hard work, timely completions and profitability. We went 40 years without a loss. We took risks; we won, we lost, we flourished in the competitive environment, and that's what private enterprise is all about. There is no magic, just hard work by dedicated, competent, well trained, skilful people.
I come to you as a person who wanted to be involved in building the most modern, efficient, user-friendly terminal in the world at Pearson and use it as a model to demonstrate the skills and expertise of Canadian professionals to every jurisdiction in the world that required modern terminal facilities. And I come to you as a person who wants to set the record straight. My reputation has been tarnished, all because I happen to be a businessman who has chosen to be active in the political system.
After weeks of hearing, not one witness has substantiated any of the allegations and innuendoes contained in the Nixon report or uttered by politicians. This scoring of political points has not only cost me this deal, but it has destroyed my livelihood and forced me, at the age of 69, to start all over again, and that I am doing. Of even more concern to me has been the toll that this has taken on the employees of Matthews Group and our subcontractors.
To those who could only see inappropriate political involvement, I say you are dead wrong. You have not only hurt me and my associates, you have hurt Canada and the tens of thousands of Canadian professionals and entrepreneurs who would have been involved in building airports in Canada and around the world. Those who caused the cancellation will ultimately feel the wrath of history.
You have also hurt the hundreds of men and women and their families who attach their careers and livelihood to Matthews Group Limited. And Gordon read you one letter that we have received in that connection.
This committee was struck because the Liberal Government of Canada chose to cancel the Pearson contracts and defame those who were party to the contract or would oppose the government's will. The Liberal government proposed legislation that would see them set aside the contractual obligations that might be assessed by the court and prevent Canadians from demanding satisfaction from those individuals whose intemperate remarks have been offensive, derogatory and totally unacceptable in a law abiding society. If they feel justified in their remarks, let the courts decide the claims at law.
I started in business in 1953, built an organization with employees numbering in the thousands and doing more than $400 million worth of business per year. The group consisted of approximately 130 companies with a net worth upwards of $200 million. It was family and employee owned. Our growth was careful and continuous and we were proud to tell all concerned that we made a profit every year.
Our involvement in airport development has a long history. In 1985, we built Vista Air Cargo facility at Pearson. This terminal was considered state of the art and has attracted international interest.
In 1986, the Department of Transportation asked for expressions of interest for the design, construction and management of Terminal 3. We put together a consortium and prepared a proposal. The proposal was not accepted. The exercise cost $2 million, which is an example of the risk in this business.
In 1989, we joined together with Air Canada to submit a proposal to design and reconstruct Terminal 2. Our proposal again was not accepted. While the risks in airport developments were high, the worldwide opportunities, as Gordon has indicated, estimated at between $90 billion and $166 billion in the next ten years, were attractive. There was clearly a niche to allow entry internationally. Canadians had the 200-odd skills required to design, build and operate passenger terminals and we had the ability to put them together.
Our plan, as described in the proposal that we submitted, was to establish a well-financed consortium, which we called Paxport International, and to invest funds in the operation of Pearson. This company was up and running after December 7th, '92 and would have seen Canadians at the forefront of airport development around the world today if the development of Pearson had not been cancelled by the Liberal Government of Canada. I repeat, this is a huge loss for Canada and for Canadians.
We set up Paxport under the leadership of Ray Hession. He did an outstanding job, bringing together his business, organizational and technical skills to build a team of dedicated professionals that could clearly establish Paxport International as a preeminent designer, builder and operator of airports in the world. I repeat, when Pearson was cancelled, this opportunity for us and for thousands of Canadians and for Canada, of necessity, was terminated.
As part of his responsibilities, Ray Hession visited with opinion leaders; political, corporate and labour. Almost all of those contacted supported the privatization of Pearson. It was recommended to me that someone should call on Mr. Jean Chrétien. Paul LaBarge, who was acting for us in Ottawa, subsequently arranged a meeting between Mr. Chrétien, Jack Matthews and himself. Mr. Jean Chrétien, like almost everyone else, supported the privatization of Pearson.
During 1990, '91 and '92 we built Paxport by expanding the consortium and equity base and putting together a source of equity funds that would secure the financing required of the successful bidder in response to the announced privatization of Terminals 1 and 2.
To this end, we arranged to borrow $20 million from Allders as part of the Matthews Group Limited contribution. In March of 1992, the government issued the request for proposal. We prepared our position carefully and diligently and submitted the response on July 13, '92. This operation required input from a very large body of very carefully selected professionals and was costly. We were in a heavy duty fight, we knew it, and we wanted to win.
On December 7th, '92 the Minister of Transport announced that Paxport had submitted the best overall acceptable proposal. We were elated. Within days -- I believe it was December 9th -- I put in a call for Charles Bronfman, the principal behind the Claridge bid, and reached him at his residence in Florida. I called him because over the period of the proposal preparation and assessment much had been said by both parties that had to be set aside in the interests of harmony between the operators of Terminal 3 and Terminals 1 and 2.
On reaching Mr. Bronfman, I did congratulate him and his group for their submission. His response was to say that ours must have been better since Paxport had won, to which I responded, "Well, the two proposals must have been close because it took the government five months to decide who had won."
After casual talk, Mr. Bronfman indicated that he would like to meet me, and that was very mutual. Mr. Bronfman also indicated that he and his family were leaving for Africa for one month on the following Thursday, December 17th. I suggested that there was no hurry and that we could get together on his return. His response was, "No, you have been very kind to call me, and I want to meet with you before I leave for Africa."
On December 16, we met at the Swiss Hotel at Terminal 3. In attendance; Charles Bronfman, Senator Leo Kolber, Peter Coughlin, Jack Matthews and of course myself. After discussing possible cooperation during the upcoming reconstruction of Terminals 1 and 2, it was agreed that Peter Coughlin and Jack Matthews would continue the discussion and report to Senator Leo Kolber and myself from time to time.
Within days I was advised that the synergy of working closely with Claridge was attractive and that the discussions should be extended to include the possibility of a merger. I agreed, but with no commitment.
The rest is well documented in the short letter of agreement dated January 14, '93, which set out the principles of the deal.
This new corporate entity was approved by the government negotiating team who were pleased to have the book equity of Terminal 3 of approximately $150 million added to the $66 million in cash to be invested by Paxport. Paxport and Claridge were equal partners.
By late February it was indicated to me that the Deputy Minister, Madam Huguette Labelle, was questioning the new corporate structure and this was delaying negotiations. A meeting was organized in Ottawa with Charles Bronfman, Peter Coughlin, Jack Matthews and myself to meet with Madam Labelle and David Broadbent, the chief negotiator.
It soon became apparent that Madam Labelle was not fully appreciative of the transaction -- that is the merger transaction. I wrote a note to her explaining that we were partners. Indeed, I said in the note that we were married, and I was told not to use that word because it was not appropriate. You might understand why, senator.
I signed it and passed it to Charles Bronfman who signed it and passed the note to Madam Labelle. She understood the reality after studying the note. This was the only time that I communicated with Madam Labelle.
About August of '93, Wood Gundy -- or it may have been earlier -- Wood Gundy advised me that because of the changes required by Transport Canada to the Paxport bid and the resulting decrease in return on investment, they were no longer interested in continuing as part of the consortium. Ellis-Don also withdraw and we were left with the need to replace their investment. Claridge agreed to provide the capital required. The capital was very much available otherwise, but we accepted it from Claridge.
Let me state the following: One, we worked in good faith with the Government of Canada and our partners. Two, we submitted the best proposal, and this has been clearly established by all of the public servants who have appeared before you.
It has been well documented that the process which saw the selection of Paxport was fair and impartial. Our contract saw the Government of Canada receiving a total of $7.54 billion of ground rent, which has a current value of $850 million or something, plus $3.43 billion in corporate taxes. If you compare this with what Canada expects to receive, or has calculated they will receive from the local airport authority, which is about $2 billion. Quite a difference.
In four years prior to January 14, '93, we spent a total of $212,268 on government relations consultants; approximately $50,000 per year. Our competition spent much more. The Nixon report criticizes the extent of lobbying and names me, but does not name Huang and Danczky, Charles Bronfman, Robert Bandeen, the two local airport authorities, Claude Taylor of Air Canada, the British airport authority through Canadian Airports Limited, other airlines, the Air Transport Association, the boards of trade, et cetera. All of these employed lobbyists, not just me.
Mr. Nixon has offered no objective standards or guidelines for his subjective assessment nor any facts for his claim of inappropriate lobbying. Mr. Chairman, had he done so, I am certain that his assertion would have been found to be baseless. Listening to the evidence here, one might have thought that lobbying for us, our lobbying, as well as everyone else's lobbying, was singularly ineffective.
Contrary to the Nixon report, Otto Jelinek was never a director of any Paxport company. He provided us with no advice with regard to Pearson.
The Liberal Government of Canada had the opportunity to make their case in court and they publicly acknowledged that they had no defence. They made no allegation of impropriety or wrongdoing or fraud or collusion in court when they had the opportunity, and that's because there was none.
Mr. Chairman, given the Liberal's election campaign undertaking to review the contract and our consent to delay the turnover of the terminals to let the new government proceed with that review, we had expected an impartial, non-political analysis of the legal and financial soundness of the project with proper justification for any findings on an objective basis. We expected more than unfounded, sweeping allegations and negative characterization without factual basis. We expected a fair, unbiased and honest assessment. We got the opposite.
I strongly urge the government to withdraw Bill C-22. Canada is becoming the laughing-stock of the international financial community. Who would want to do business with a country that makes political decisions as to who and when they will pay? This kind of arbitrary and confiscatory legislation is unwarranted in our democratic society unless there is lawful justification.
The Chrétien government, at the same time as it cancelled the airport contracts and threatened confiscation and denial of access to the courts, enshrined these very rights; that is due process, fair compensation, and timely payment, in the North American Free Trade Agreement. Mr. Chairman, Mexicans and Americans have rights that the Liberal government is attempting to deprive Canadians of. This is a mockery of Canadian citizenship.
We want fair treatment before the law. I repeat, the Nixon report made no suggestion of any unlawful or improper activity and offered no lawful reason for cancelling the Pearson contracts.
Mr. Chairman, before I conclude, there are three things about the Pearson Airport project that you and your colleagues in this committee and those members of Parliament and the media who have an interest in the subject have thus far failed to address. They are; one, the damage done by those who make a sport out of disparaging a businessman's character and motives by the cynical use of partisan labels. What business leaders in Canada will want to jeopardize their reputations and their economic futures if, by supporting this or that political party, they are not so subtly characterized by the media and opposing politicians as ethically or morally bankrupt?
In my case, notwithstanding the powerful arguments favouring the public interest in the Pearson example, my name is almost never mentioned in connection with the project without reference to my political preferences. I am better known in the Pearson context as the former president of the Progressive Conservative Party of Canada, which happened to have been over 20 years ago as the chairman knows, or as a former fund raiser or as a father-in-law of the former Liberal Premier of Ontario, than as the man who put his business, his personal wealth and, to some extent, his family life at considerable risk to offer to build the most modern airport facilities in the world at no expense to the public purse and, indeed, to quote Mr. Nixon's November 30 report, "The privatization deal clearly increases the net revenue to the Government of Canada compared to what is taken out of Pearson by Transport Canada." And later on Mr. Nixon reports, "A further significant advantage to privatization is the requirement that the lessor must spend and invest $700 million in the capital, and that that capital is not added to the Canadian debt."
Why, Mr. Chairman, would any Canadian businessman want to support the legitimate political process in this country if this kind of treatment is the result? Some say that the greatest challenge to democracy is apathy. No wonder.
The second issue that needs to be addressed is that the credibility and international prestige of the Canadian government are, I believe, permanently scarred when high profile infrastructure development contracts are spuriously cancelled; cancelled, Mr. Chairman, not for cause or default, but whimsically to make political points for partisan gain by portraying the process or the behaviour of the private sector parties in the contract as unsavoury or unethical. This at a time when a new government seeks to portray itself as a paragon of virtue while sacrificing along the way the necessary integrity of good faith business dealings.
How can such arbitrary and unpredictable behaviour benefit Canada? Governments, Mr. Chairman, ought to be trustworthy in the conduct of their business, not arbitrary.
Thirdly, and most importantly, are the employees and their families of the companies that were forced into bankruptcy or reorganization as a result of the cancellation. Some of these people lost their life savings, their careers, and many of them are still unemployed. A conservative estimate of the number of people who lost their job is 750, but there are also 14,000 potential jobs lost. These are the real victims of the government's action. The victims that have been continuously overlooked by the government and the press.
We all worked in good faith with the Government of Canada with the object of building the finest airport in the world, something Canada and Canadians could be proud of. I and some of my companies were put out of business, victims of spurious partisanship. Seven hundred and fifty people out of work, 750 families without income from the Matthews Group.
What I am looking for is simple. I want, I demand, justice. Let the courts decide the damages and stop the rhetoric.
Thank you very much, Mr. Chairman.
The Chairman: Thank you, Mr. Matthews. As you might expect, the questioning will probably be similar to --
Senator Bryden: Mr. Chairman, I raise a point in that during the course of his evidence Mr. Matthews has stated that Mr. LaBarge arranged a meeting between Jack Matthews and Jean Chrétien and that at that meeting Mr. Chrétien supported the privatization of Pearson. As you know, that's been categorically denied by the Prime Minister. There is one person, Paul LaBarge, who is prepared to appear and give evidence before this hearing as to his recollection of when that meeting occurred and what the meeting's purpose was.
Senator Lynch-Staunton: More than one person; two people.
Senator Bryden: He can only do that --
Senator Jessiman: Three persons; get them all here.
Senator Bryden: He can only do that if Mr. Matthews is prepared to waive solicitor-client privilege in relation to this matter.
Are you prepared to do that, Mr. Matthews?
Mr. Matthews: I'm sorry, I couldn't hear you when you were talking to the chairman.
Senator Bryden: You didn't have your plug in your ear.
Mr. Matthews: You're right. I'll put the plug in my ear.
Senator Bryden: I'll say exactly, as close as I can, what I just said to the chairman, that is that you stated that Mr. LaBarge arranged a meeting between Jack Matthews and Jean Chrétien, at which time Jean Chrétien supported the privatization of Pearson.
Mr. Matthews: That's correct.
Senator Bryden: My question to the chairman was, Mr. LaBarge is prepared to appear before this committee as a lawyer and officer of the court and under oath give evidence as to when the meeting occurred and what his knowledge and recollection of the purpose of the meeting and what perhaps transpired at that meeting to the best of his knowledge. He can only do that if you are prepared to waive solicitor-client privilege in relation to this matter.
Are you prepared to do that?
Mr. Nelligan: May I just interject, senator? In my view, there is no solicitor-client privilege relating to evidence of what went on with a meeting with a third party, so that I don't think it's necessary to waive solicitor-client privilege. It's a matter of law, and if this is simply as a witness to a conversation with a third party, there can be no solicitor-client confidence because it was done with a third party, so that I don't think you're inhibited that way.
Senator Bryden: For clarification, it's my understanding that Mr. LaBarge at that time was the solicitor for the Matthews Group of Companies, for want of a better word, or one of the solicitors, and therefore he has a relationship with the Matthews Group of Companies. My question again is -- I'm not sure that I agree with counsel --
Mr. Matthews: I heard your question, senator, and my answer to you is yes.
Senator Bryden: You are? Terrific.
Could I ask counsel then to approach Mr. LaBarge --
Senator Lynch-Staunton: Just a moment, I think if we're going to add on witnesses, we're not going to do it here. We're not here to select witnesses. We can do that after the break.
Senator Bryden: Okay. All I'm asking --
Senator Tkachuk: When did you guys get religion about third party meetings? You've been doing that through the whole bloody three months.
Senator Bryden: Would you then, Mr. Chairman and counsel, consider inviting Mr. LaBarge, when it is convenient to him, to appear before us and give evidence?
Senator Jessiman: And Mr. Jack Matthews.
Senator Tkachuk: And Mr. Matthews then.
Senator LeBreton: And maybe all the other partners of Lang Michener.
Senator Jessiman: Do you agree to that; all three parties?
Senator Bryden: I asked for one thing. I have a hard enough job looking after my own --
Senator Tkachuk: Once you open it, then you've got to open it full bore and then we've got to discuss other issues that went on in that meeting that haven't been made public.
The Chairman: Order.
Senator Tkachuk: I'm asking, Mr. Chairman --
The Chairman: I was quite prepared --
Senator Tkachuk: He brought it up.
The Chairman: -- if Mr. Matthews had made any statement which has been widely reported over the last number of months, et cetera, with respect to things which took place at this so-called meeting, I was prepared to rule not to accept that statement and to rule it out of order. I did not think that Mr. Matthews had gone beyond the pale. I had the gavel ready had he done so.
However, senator, you've put the cat among the pigeons.
Senator LeBreton: Exactly. Good for you.
The Chairman: We'll consult -- do you want to adjourn now?
Senator Bryden: Sure, but before we adjourn --
Senator Tkachuk: I want to ask a question.
Senator Bryden: -- I want to make one thing very clear, that what I'm saying is that it was my understanding that the solicitor involved was prepared to appear before the committee and give evidence under oath as to his recollection of the meeting, and that is up to the chairman and counsel and I suppose ultimately to the entire committee. But what I am now asking is that you as chair and counsel, having heard my request, consider whether it's appropriate and who it is appropriate to bring before the committee. But I'm not asking that that be done today.
Senator Tkachuk: Once Mr. LaBarge gets here, there are no restrictions, I want to make that clear, to the questioning. It will not just deal with the meeting. We'll ask Mr. LaBarge any question we want to ask him as it relates to his activities as a fund raiser for the Liberal Party and who he may have gotten money from during this whole process. And I want that very clear that that's exactly what's going do happen.
The Chairman: This committee can only consider those matters which have been committed to it by the Senate, and they are listed -- do you want to be refreshed as to what they are?
Senator Tkachuk: I know exactly what they are, Chairman.
The Chairman: That is my problem. I'm going to seek some advice before I make a ruling on this.
Mr. Nelligan: May I just ask a question of Mr. Matthews so that we can use it in our decision.
What was the date of this meeting, sir, approximately?
Mr. Baker: Mr. Chairman, and counsel, I think that's an issue not for Mr. Donald Matthews, but that's an issue for Mr. LaBarge and Mr. Jack Matthews. If you recall, Mr. Jack Matthews wrote both the House of Commons and the Senate committee and said this was an issue of credibility that could only be determined under oath. And Mr. Jack Matthews, I understand, is quite prepared to come and address that issue under oath.
Mr. Nelligan: I'm just trying to determine with relevance to these hearings, and that's why I was asking the date.
Mr. Baker: The statement, as far as relevance, is that Mr. Chrétien was consulted with regards to Pearson.
Mr. Nelligan: What date?
Mr. Baker: With regard to the unsolicited proposal. I'm not totally privy to that date. I do understand from the materials that I've seen that it was some time just prior to his announcement that he was running for the leadership.
Senator Bryden: Chairman, he said he's not privy to that information. Surely if we're having the two people here --
Mr. Baker: They can testify as to it.
Senator Bryden: -- then they can tell us the exact date and, as best they can, what they recall of the meeting. There's no holds barred, no problem.
Mr. Nelligan: My difficulty is that any conversation or meeting cannot relate to the agreement which was cancelled because it was apparently before the RFP was out, and therefore I simply raise that for the senators to consider as to its relevance with respect to the issues that it's dealing with here.
Mr. Baker: I think, counsel, this issue was raised by Mr. Nixon and it's the unsolicited proposal that was raised by Mr. Nixon, and I understand that's the relevant time frame.
Senator Tkachuk: Counsel, relevance is relevance. I mean we've had documents in here written by authors unknown, by bureaucrats unknown, pieces of paper with hen scratching on it. I mean, all kind of scraps of information have been fed into this committee, all have been considered relevant.
Now, if a person who becomes leader of the Liberal Party at one time supported the idea of privatization of Pearson Airport, and there was a lawyer there present, then perhaps this discussion will be just a little more than just asking him what happened in that conversation. We may ask Mr. LaBarge other questions about his involvement in this deal. I know he was a fund raiser and he worked with Senator Kolber, who was a fund raiser in Montreal, and they were all tied in together with other companies that are involved in this whole process. And Mr. Nixon opened that can of worms when he brought up Mr. Matthews' name as the fund raiser for the Conservative Party and said that was a reason to cancel the contract.
So I say if you bring him in, he better answer all of the questions put to him under oath.
The Chairman: I simply want to repeat, I'm trying to chair a committee that's going to do some kind of credit to the Senate with a report that is based upon the evidence we've received. A committee is bound by and is not at liberty to depart from the order of reference which we received from the Senate on Thursday, May the 4th, which says that a special committee of the Senate be appointed to examine and report on all matters concerning the policies and negotiations leading up to, and including, the agreements respecting the redevelopment and operations of Terminals 1 and 2 at Lester B. Pearson International Airport and the circumstances relating to the cancellation thereof.
Now, if the committee can make the case or appeal any ruling which I may give on it, I'm in your hands.
Senator Tkachuk: But Mr. Chrétien is -- I mean Mr. Mulroney is brought up because he was the Prime Minister when this contract took place and when the process took place Kim Campbell, whose name has been brought up, when the contract was signed. Mr. Chrétien was there when the contract was cancelled. I mean, we can talk about Mr. Chrétien, there's nothing wrong with that, I don't see any problem with that, and we can talk about all the people involved with him and how they dealt with this contract, and I'd like to do that. I'd like to talk about the people in his office who used to be partners in that law firm that are now in the Prime Minister's office, and what was their role in all of this.
Senator LeBreton: Exactly.
Senator Tkachuk: And what was their role in the closing? And I'd like to know what their role was.
Senator Bryden: Mr. Chairman, I'm perfectly prepared to have you and counsel provide us with a ruling on what you think is fair, and I'll abide by it, as I always do.
Senator Tkachuk: Me too, Senator Bryden.
The Chairman: I think we'll need a little more time. We were going to adjourn at 12 o'clock. I think now is the time for adjournment. We'll start again at 1:30.
Senator Lynch-Staunton: May I just ask Senator Bryden, if he just singles out the interpretation of Mr. Chrétien's support of privatization, does that mean he accepts the fact that all the other people that Hession saw that Mr. Matthews mentioned who supported privatization he takes his word for it? It's just the interpretation he gives to Mr. Chrétien that he challenges? Mr. Matthews told us that Mr. Hession, I think, and others, did a sort of -- met with provincial, municipal, metro officials in the Toronto area, all parties, and whoever went came away with a feeling there was general support with few exemptions,
Mr. Matthews: That's correct.
Senator Lynch-Staunton: That's correct. And included in that support was -- Mr. Chrétien was then in private practice --
Mr. Matthews: That's certainly the report I got.
Senator Lynch-Staunton: And the report you got, right. And that interpretation is being challenged by Senator Bryden, is that correct?
Senator Bryden: No, it's been denied by the Prime Minister, and what my position is -- and I don't have to answer -- one of the nice things about being a senator, Senator Lynch-Staunton, is that we are immune to your questions.
Senator Lynch-Staunton: I just want to clarify the purpose. I have no objection to having whoever here. I just want to make sure we know where we're going once we get them.
Senator Bryden: It was my understanding that this, what could be considered an irrelevant matter, was really not going to be raised. It was raised. The chairman said he didn't think it went beyond the pale because it didn't mention donations and things of that nature, but it did say something that the Prime Minister of Canada has categorically denied, and I could not let that stand without at least saying, if we've got an independent witness, and I don't know --
Senator Tkachuk: He's not independent.
Senator Bryden: I don't know. I've never met Mr. LaBarge.
Senator Tkachuk: Neither have I, but I know he's not an independent witness. He's a partner of Mr. Chrétien.
Senator Bryden: Anyway, I'm sorry, I don't want to be argumentative.
Senator Tkachuk: Was Mr. Chrétien a lobbyist at this time or a lawyer, when he had the meeting?
Senator Bryden: I don't know.
The Chairman: The question is as to whether they had a meeting. Apparently that's the point you're making.
Senator Jessiman: But Mr. Chairman, it's been reported that at one part of that meeting of the three people, that the person that you're speaking of, the lawyer that you want to come and give evidence, went out of the room and Mr. Jack Matthews and Mr. Chrétien were by themselves. Is that not true?
Senator Bryden: I have no idea. That's why I say if we bring one person, we should bring both.
The Chairman: Okay, we'll adjourn till 1:30.
The committee recessed until 1:30 p.m.
Ottawa, Wednesday, September 13, 1995
The Special Senate Committee on the Pearson Airport Agreements met this day at 1:30 p.m. to examine and report upon all matters concerning the policies and negotiations leading up to, and including, the agreements respecting the redevelopment and operation of Terminals 1 and 2 at Lester B. Pearson International Airport and the circumstances relating to the cancellation thereof.
Senator Finlay MacDonald (Chairman) in the Chair.
The Chairman: Come to order, please.
The steering committee of this committee is comprised of Senator Kirby and myself. Over the noon hour, we have had a meeting with our committee counsel, Mr. Nelligan, and our committee clerk, Mr. O'Brien. I have taken the matter raised by Senator Bryden under advisement and will, after further study this evening, render my ruling shortly.
I think this afternoon our first questioner is Senator Jessiman, followed by Senator Bryden and Senator LeBreton.
Senator Tkachuk: Mr. Chairman, I have a couple of questions that might help you in your ruling. I wasn't quite sure what happened here this morning, but my understanding was that Senator Bryden had said that he wanted the other witness to appear. He wanted the other witness to appear because of contradictions in what Mr. Matthews said and what the Prime Minister had said. I just want to know what those contradictions were.
The Chairman: I think, senator, with all due respect, this matter now is off the table until -- you can come back to it.
Senator Tkachuk: I will come back to it, Mr. Chairman, but as a result of what he asked and some statements made, I have a -- while you are considering that, counsel can consider a couple of questions I have, outside of the one that I wanted to ask Mr. Bryden. I would be willing to put that off.
What I want to know is -- perhaps counsel can help me -- that when a government is defeated on election day, October 25th, 'til the time the government is sworn in, the government that was previously in power, my understanding is, remains in power 'til the new government -- legally, 'til the new government is sworn in. I don't know that for sure, but in the meantime, certain decisions are made by the government in waiting. In this particular case, decisions were made. Mr. Nixon was appointed. Mr. Nixon produced a document and received government documents, which I would imagine would have been received on behalf of the transition team which would have been running the affairs of the incoming government. We do know that government was sworn in on November the 4th, and yesterday in testimony, November the 3rd was the day that Mr. Coughlin met with Mr. Nixon. So I want to know whether those documents are available of the transition team and whether they are protected under ministerial advice or are they unprotected documents.
We have a mandate, my understanding is. I'll just read the last sentence of the first paragraph -- "...and the circumstances relating to the cancellation thereof." All these events took place during that time period.
Then, further to that, I want more information. My understanding is that the contract has not yet been cancelled, because to cancel the contract requires an act of Parliament. So, therefore, I am asking for documentation and may extend my request to witnesses as to the drawing up of the legislation called Bill C-22 and all of the documents thereof.
Since the contract has not been cancelled, that would take us from the time period of the election of 1993, the swearing in of the government, to today, because, as of yet, Bill C-22 has not yet been cancelled --
Senator Jessiman: Passed.
Senator Tkachuk: Has not been passed. Therefore, the contract still has not been cancelled.
So those points of clarification I need your advice on, counsel, as to how we can proceed on these matters, because I think they are all relevant.
Now, I didn't raise the issue this morning. It was raised by my friend, Senator Bryden. He raised the issue of a witness coming in, which I think should come, and he raised the issue of a contradiction. But I have examined the Prime Minister's answers to questions in the House of Commons, and there was no contradiction, because the Prime Minister never did deny that he did not support privatization. So, therefore, there can't be a contradiction unless he's whispering in the meantime to somebody else and not telling anybody publicly, but publicly he hasn't said, or at least in the House of Commons in response to questions.
Now there were other questions that he also answered that there are contradictions to. So I know in your consideration tonight and this evening that you will take what I have to say as part of your consideration in bringing Mr. Labarge in and maybe all other witnesses that may have been contradicted by third parties, because this isn't the first time it's happened. It's happened all through the hearings, and it was never brought up until just now.
So I'm done, I think, on this matter. I would like to know whether I'm correct in my assumptions. You can tell me right now, or will you need some time to deliberate on it?
Mr. John Nelligan, Q.C., Counsel to the Committee: Well, I'm just a little unclear as to which type of documents it is you're suggesting would be helpful to the committee.
Senator Tkachuk: Well, it seems to me that Justice is pulling out documents that they think are relevant to the process itself and relevant to the decision made by the government and the contract signing up to that time. Then there's a blank wall, sort of a wall built up.
My view is that there were decisions being made not by any government, but by a transition team, which was an incoming government, which had taken effect and had an effect on this process, because Nixon was appointed when the government was still a Conservative government. Nixon obviously wasn't appointed by Prime Minister Campbell and therefore was appointed by the transition team and the incoming Prime Minister. They would have had to have -- they must have had some documentation as to some terms of reference that maybe Mr. Nixon had as to what the Prime Minister or the transition team wanted out of this report. There had to be at least, I would say, a little bit of an internal investigation to see whether the rhetoric of the campaign matched some of the feelings that they had. I think that documentation is relevant, and then also because the contract has not yet been cancelled, we are to talk about the "...circumstances relating to the cancellation thereof." There's a heck of a lot of circumstances relating to the cancellation of this contract. All of them take place after the swearing in of the government on November the 4th. So all relevant documents from Justice, from Transport, from the PMO, from the PCO, the same places that they were able to pull the documents previous to this time, I think they should pull forward to this time.
Mr. Nelligan: It's my understanding that that either has been done or is being done.
I may say that in my discussions with Mr. Hunter, he volunteered to me that, as a tentative cutoff date in their first search, they had only been looking for documents through to the end of 1993. There was no suggestion that it was cut off at the change of government.
Senator Tkachuk: Well, they are not reading the same paragraph here. It says, "...and the circumstances relating to the cancellation thereof".
Mr. Nelligan: If I may just go on, I pointed out to him that the cancellation involved the preparation of Bill C-22 and so on. I asked him to ensure that his search for documents carried on into 1994 to cover the same kind of memoranda to the minister or the Prime Minister for information purposes that was released prior to the change of government and anything relating to the Nixon report and its subsequent embodying in the legislation. He's assured me that they are making such a search. I haven't got anything to show for it yet, but the inquiries are going on.
Senator Tkachuk: Okay. As long as the Department of Justice -- because I can only go with precedent with the Department of Justice and their officials. By precedent, a witness arrives a little while before the documents arrive, you see? So when Nixon arrives, then all those other documents after Nixon's report are going to arrive, and we won't have anybody to interview. So it's really important that all that stuff, like, comes in -- like, they have had lots of time, you know. I don't like the excuses. There shouldn't be one document that isn't here already, because they have had June, July, August, September, plus they knew this thing was coming up. They had to be ready. Plus they had prepared these documents for their legal -- for their case before court, and they had prepared it obviously -- well, maybe not -- but they say for Mr. Nixon. So the stuff can't -- you know, we can only be told so many times that oh, they are busy, and oh, it's difficult, but like there's thousands of people there. There's seven of us and counsel and some of our assistants to try to get through this stuff. So I don't think, counsel -- you should send a demand to them that we want it by a particular date for us to prepare ourselves.
Mr. Nelligan: We had discussions yesterday on that subject, and I'm assured that we should be getting material today. There's some question about privileged documents in the litigation that was to be cleared up today, and we're supposed to get those. There are other documents which were not in the possession of the government, but which were in the possession of some of Mr. Nixon's assistants that we're now getting as well, which normally wouldn't have been available to us, but they are getting those. I'm hoping that we will have all of those by the end of the week. But, we're aware of your concerns, and we're getting what we can.
Senator Tkachuk: And the transition team. They may have forgotten about that, but I think they should be reminded.
Mr. Nelligan: Well, these are documents relating to the appointment of Mr. Nixon, and we were very specific about all matters of instruction to Mr. Nixon, and so on, that we wanted all of those documents made available to us.
Senator Tkachuk: Okay, that's good. Thank you, counsel.
The Chairman: I'm sure, Senator Tkachuk, you would not want to leave the impression that this contract was not cancelled. The contract was cancelled. An incoming government has the right to cancel anything of a previous government.
Senator Tkachuk: Yes.
The Chairman: C-22 -- and to bear the consequences for that cancellation.
Senator Tkachuk: Yes.
The Chairman: Bill C-22, which was passed by the House of Commons, sought to limit the amount of damages which would be paid as a result of that decision. That particular bill, C-22, has been delayed, but we're not putting things back to where they were. I don't want that impression to be left. The contract has been cancelled. This is an examination of the public policy leading to, among other things, the cancellation of that.
Senator Tkachuk: Yes, but it does say, "...the circumstances relating to the cancellation thereof," and my point was that if we're going to set a cutoff date, I don't know what it is right now, because we don't live in a society where an edict cancels the contract. There's a democratic process to go through, and unfortunately in a democratic society, that takes time. That process has not yet been complete. That's not my fault. That's where we live, and that's the way it is. So perhaps we, as a committee, can decide when that cancellation took effect, or maybe the steering committee can have a discussion to that effect so that we would know when there's a cutoff so that the Department of Justice isn't making that decision, but we're making that decision. That's all -- that's my point. I didn't maybe make it very clear, but I'll try it again.
Senator Lynch-Staunton: I'd like to pick up on Senator Tkachuk's point, which is one that all of us have brought up, at least on this side, and that is, we're not getting the documentation we want. We're getting the documentation that the government thinks we should have. There is a filtration here going on, either directly or through the gum shoes they have hired at the other law firm. I think -- I'll bring this up on another occasion when the appropriate time comes, but I think that we're being manipulated in the availability of the documentation which comes to us. If the documentation that Senator Tkachuk feels is necessary for a better assessment of the mandate and the ones that I have asked for is not available within a certain period of time, if this committee is unable through its own jurisdiction or powers to find them, then I will see to it that once the Senate reconvenes on the 26th of September, that a motion be put that the Government of Canada or whoever, depending on the wording, be ordered to provide these documents.
It is unheard of that a committee of the Parliament of Canada be so inhibited, so delayed, so discouraged in the pursuit of respectable objectives by the government, which has a responsibility to all its citizens. It's unheard of. No House of Commons committee has been treated this way, and the Senate of Canada is being treated as a poor cousin. Mr. Nixon was allowed all the documentation he wanted, privileged, confidential --
Senator LeBreton: Not that he read it.
Senator Lynch-Staunton: -- so much so that we're not even told what kind of documentation he was allowed. We've been asking for months for the same treatment as one individual hired by the opposition leader of the time, and here we are, a house of Parliament, on both sides, agreeable to this investigation, suddenly being stonewalled and discouraged in our pursuit of --
Senator Stewart: Don't say you weren't warned.
Senator Lynch-Staunton: By whom?
Senator Stewart: By myself in the Senate.
Senator Lynch-Staunton: Well, were you speaking for the government?
Senator Stewart: No. No. I --
Senator Lynch-Staunton: Senator Fairbairn, the Leader of the Government in the Senate, said "We'll give this committee full cooperation." I'm sure she meant it, but some of her colleagues are going against her commitment. You should be ashamed of that.
Senator Stewart: What I raised was the whole question of the competence of a parliamentary committee, whether you are talking about the Senate or the House of Commons, to impose an oath which overruled certain other obligations. You know, the record shows that my -- I have to avoid certain language that Senator MacDonald objects to -- concerns were brushed aside by the people on your side.
Senator Lynch-Staunton: I don't want to get into a discussion.
Senator Stewart: This is not an unanticipated problem, senator.
Senator Lynch-Staunton: Both sides have agreed to this investigation. Both sides committed themselves to a full investigation, no matter what the result. Now we're finding that the government side is refusing to cooperate and is leaking documents and is producing documents which are irreceivable (sic). I'll come up to that if Senator Kirby produces another document. I will make that point at that time.
You have all the advantages, but you are overdoing them. We have all disadvantages, and we're trying to overcome them. We're trying to make a level playing field here.
Senator Tkachuk would like some basic documents to understand. So do we. What did Mr. Nixon use to come up with his one, two, or God knows how many reports? We have two so far. Okay? That's all we want. We can't get them. He got them within a few days. He got them within a few days! The government is elected at the end of October. He's named a few days later, and a few days after that, he gets all the information necessary to do in 30 days what we are practically unable to do in three months. So what is it that he had, this magic wand that was given to him to come to his conclusions that we don't have to even come to any decision? That's all we want. We want to have an advantage of what was given to him, and the government refuses that. That's why I'm going to say -- I want to repeat this because I've thought this out. We can't put up with this much longer. If we need a resolution from the Senate or a motion from the Senate to instruct whoever it is to produce whatever we're missing, we will certainly initiate that resolution or motion at the appropriate time.
Senator Stewart: You should have done your thinking some months ago.
Senator Lynch-Staunton: Well, we thought that Senator Fairbairn's word was enough.
Senator LeBreton: Mr. Chairman, could I just ask a point of clarification?
When we got into this whole committee structure in the first instance way back in May or June and when we had our organizational meeting, we, as a committee, decided that you and the vice-chair, Senator Kirby, would act as a steering committee. You have reported at the beginning of this meeting that you will take the matters that we discussed earlier under advisement and decide tonight.
We also agreed, I believe -- I know -- that, you know, if there was disagreement or if there was some contentious issue to be resolved, the Committee of the Whole would in fact meet and discuss the issue at hand.
I'm simply saying, Mr. Chairman, that I hope that when you and Senator Kirby get together on this very important issue, that we'll be consulted, and that, in effect, if we are not able to come to an agreement, the whole committee be called together to discuss this issue.
The Chairman: I'm afraid, Senator LeBreton, I can't give you that assurance.
The purpose of setting up a steering committee in the first instance composed of only Senator Kirby and myself was to ensure that the committee would not be overloaded with Conservatives, that Senator Kirby and I would agree on all matters relating to the business of the committee, witnesses, et cetera, which, incidentally, we have agreed unanimously on.
When it comes to a ruling from the chair, your only redress is to appeal that ruling.
Senator LeBreton: Well, then, I intend to do that.
The Chairman: But you're presupposing what that ruling might be.
Senator LeBreton: Well, I'm afraid that I'm not very confident, Mr. Chair, that an issue raised by the other side all of a sudden, you know, is going to be decided by two people and that the other members of the committee are not going to a) be informed, or b) have a say.
Senator Lynch-Staunton: Mr. Chairman, let's be clear what we're talking about.
Senator Bryden, before the luncheon break, made a suggestion that a lawyer come before this committee to testify to something. Then it was suggested that he and his client come. That's where we left it. Now, he made that recommendation in front of the whole committee. I would hope that the decision to accept them or not would not be made unilaterally when the recommendation was made in front of all of us. At least we would be consulted or those who are concerned be consulted about additional witnesses, if need be.
I mean, you know, what kind of a game are you going to play here? We throw things out, get the political capital out of it. You know, "Chrétien didn't say that; let's bring the lawyer in." Then suddenly we decide, no, we don't bring the lawyer in. But, Chrétien didn't say it.
No, let's not play those games. Either the gentleman comes at the recommendation of Senator Bryden with or without his client, or for whatever reason, stated in front of this committee, he and his client are not invited in. But you can't do it both ways, Mr. Chairman. You can't throw out the suggestion publicly and take the decision privately.
The Chairman: I gather it's the wish of the committee to ask Mr. Matthews and Mr. Baker if they will be available tomorrow morning because I don't want to --
Senator Lynch-Staunton: Or tonight.
Mr. Donald Matthews, Chairman, Matthews Construction Canada Inc.: Mr. Chairman, can I remind you, in my remarks, I advised you that I was in the process of building a new business, and time is not terribly plentiful. But, of course, I'll be here at the will of this group.
I'm so pleased that you and all of the senators decided to proceed on this investigation. It's very important to Canada and to me. So I'll be here, but if we could get it over today, that would just be wonderful.
The Chairman: Well, we'll see, but that's just -- thank you very much.
Now, the questioning this afternoon will begin with Senator Jessiman, followed by Senator Bryden and Senator LeBreton.
Can we try to stay, on the first round, to 30 minutes?
Senator Jessiman: Yes, I certainly can. I hope to be shorter than that.
Senator Bryden: I'm prepared to try and come as close as I can in relation to allowing me the opportunity to stop a particular line of questioning at an appropriate place. There are a lot of questions that I have, Mr. Chairman. As we've mentioned before here, I can control the length of my questions, but I can't control the length of the answers. I could not control the fact that we had a two-hour monologue this morning and then a further almost hour that has taken up basically the morning part of the session.
I will try to be as cooperative as I can as far as making sure everyone gets their opportunity, but I have a line of questions. They're extensive, and I would hope to be permitted to pursue those unless the committee votes to cut me off.
Senator Tkachuk: But he can come back at that point, can he not, Mr. Chairman? That's what we've done.
Senator Bryden: That's what I'm saying, David. I would stop at an hour or even 25 or 35 or 40 minutes if I can get to the end of a particular line of questioning, and then I would come back.
Senator Jessiman: Absolutely. Fine.
Senator Bryden: But I just would like to be able to complete my questions.
The Chairman: That's fair enough.
Senator Jessiman.
Senator Jessiman: Thanks, Mr. Chairman.
Mr. Matthews and Mr. Baker, you both know that financeability has been a great subject about your particular bid. It's not just -- there's financeability of the bid, and then there's the viable finances -- rather than financeability -- of Paxport Inc. and its various players, including the Matthews Group Limited, Allders International, CIBC Wood Gundy Capital, Ellis-Don, Bracknell Corp., Agra Industries Limited, NORR Partnership Limited, and Sunquest Vacations Limited. So what I want to deal with first, though, there's two dates, two times. There is a time between December 7th, 1992, when you were told that you had the best overall acceptable proposal, and March 15th when we had the first report from Deloitte, and then there's the other date between August and September 1993 when we have a second report from Deloitte.
I'd like you first, either one of you, to address the issue of the financial viability of Paxport as opposed to the project. I'm not talking about your bid and how that's financeable, but the actual finances of the group made up of Paxport Inc. Either one of you, if you would, just review that for us, because there's a lot of talk here that says that the Matthews Group Limited, in particular, had real difficulties.
Mr. Gordon R. Baker, Q.C., Weir & Foulds, and General Counsel to Matthews Group: Senator, I'll take the easy one first, Matthews Group Limited.
Mr. Matthews: You go ahead.
Mr. Baker: Matthews Group Limited, in the proposal, made a commitment. It was committed to put up 20 million plus $2 million towards the developing costs in respect of which it would then have a 35.67 per cent equity interest in Paxport. That 2 million, I think, was approximately 2 million -- actually, 2,850,000, and that was part of the 5.5 million spent on being the successful proponent. That 2,850,000 was funded in 1992. The 20 million was to be funded on closing the transaction. Arrangements had been made by Matthews Group to provide that 20 million, and it was provided on closing.
In addition, on January 4th, 1993, Paxport budgeted 5,970,000 as the total cost of completing negotiations to ground lease at that date, and those negotiations -- but, on that date, Matthews had already advanced 583,000 towards that cost in respect of its share. I guess at one point in the spring of '93, Matthews had advanced -- overadvanced over $1 million in respect of its share as the Paxport consortium moved along.
Matthews met or exceeded its commitments to this project during the course of the project and on closing. On closing, it committed to fund 20 million. It funded 21 million -- just over 21 million -- and it also funded the balance of its liability with regards to what turned out to be 30 some million dollars expended in pre-development costs and funded $5,103,507 of that during the course to that point.
So Matthews Group fully funded its obligations towards the Paxport consortium throughout the process and on closing.
Senator Jessiman: But the 20 million of the amount that you've said, which is two million eight five more, was received from a loan from Allders.
Mr. Baker: That's right, and Allders -- this was a commercial transaction involving Allders, and the money was borrowed from Allders. Allders put the money up. It also put an additional 10 million itself invested into the equity of the closing.
It was not -- Allders was not a financial risk partner during the course of the proposal and up to the closing. It only put in -- it's agreement was it would put money at risk on closing, and it did put that money at risk on closing.
Senator Jessiman: And it was done on a commercial basis.
Mr. Baker: Yes, it was.
Senator Jessiman: A commercial term.
Mr. Baker: Yes.
Senator Jessiman: And whatever they requested --
Mr. Baker: And that loan is still outstanding and is in good standing.
Senator Jessiman: So any interest --
Mr. Baker: The interest has been paid.
Senator Jessiman: What about the other parties to the -- we were told that -- were all the others, what about their viability?
Mr. Baker: Agra paid its share. Sunquest paid its share, and --
Senator Jessiman: Bracknell?
Mr. Matthews: All the partners involved, they all paid their share.
Mr. Baker: All except for Ellis-Don and CIBC, who withdrew, and they were replaced.
Senator Jessiman: But as at the time --
Mr. Baker: As at the time --
Senator Jessiman: -- which would be December 7th --
Mr. Baker: That's right.
Senator Jessiman: -- were they all on board?
Mr. Baker: They were all on board.
Senator Jessiman: And they later decided after the negotiations.
Mr. Baker: M'hmm.
Senator Jessiman: And was it true that CIBC Wood Gundy, when they withdrew, it was because of the negotiation to reduce the return to the investors?
Mr. Matthews: Ed King, who is the chairman of Wood Gundy, CIBC Wood Gundy, phoned me and told me that because the return had diminished considerably, they did not view it to be an appropriate investment for them to make.
Mr. Baker: Wood Gundy on April 26th or 29th -- 26th, I think it was -- actually made a presentation with us on Mergeco and the financeability of the project. So at that time, we understood that they considered the project financeable. We had actually, on another occasion, gone to see Wood Gundy before we merged on January 14th, I and Jack, to meet Ed King at Wood Gundy to discuss the merger and have their views on whether or not it enhanced the financeability of the project, and the answer was "yes".
Senator Jessiman: Is Allders considered to be a Canadian corporation?
Mr. Baker: Yes, it is. You will see in the chart that I distributed this morning, which is the chart on closing -- it was always the chart we had -- Allders is 51 per cent owned by Agra Industries Limited, and we've always understood that it was 51 per cent owned by Agra Industries. Agra Industries, as Senator Tkachuk often reminds this committee, started out in Saskatchewan and ended up in Calgary.
Senator Jessiman: So that there wouldn't have been a concern, in the event that there was default of the $20 million loan, that a foreign corporation would control Paxport?
Mr. Baker: No, we didn't have that concern.
Senator Jessiman: I think you're both aware of the Edlund report, Ms Edlund --
Mr. Baker: Yes.
Senator Jessiman: -- done for Industry Canada at the request of Minister Michael Wilson. In that report, she said that the management fees of Paxport were in excess of 40 per cent. Could you explain that, please.
Mr. Baker: Well, I think Mr. Stehelin actually explained that when he said that you weren't comparing apples -- I'm trying to remember how he phrased it. You weren't comparing apples and oranges. You are picking out a line item on a chart without any understanding, because she never contacted Paxport. She never contacted Matthews. Any understanding of what the numbers meant or what the management fees compromised (sic) and how many employees might be involved in the management companies, including Schipol, which was under the management company, and whether Lockheed was in there -- so I don't think she understood the line item. Ray Hession testified that the management fee was a 3 and 6 per cent calculation. Three per cent of gross and six per cent of net profit, I believe, was the number. That was established by looking at industry standards, and so that is the number.
Senator Jessiman: Can you also deal with the conclusion that was reached by Senator Kirby, after hearing Edlund's evidence, that this was a bid put together by people who didn't care about how much they gouged the airlines or the travelling public, as long as they got a good rate of return for themselves and for the government? Could you just comment on that?
Mr. Baker: Would you repeat that for me?
Senator Jessiman: Sure, I will. Senator Kirby said this was a bid put together by people -- yourselves -- who didn't care about how much they gouged the airlines or the travelling public, as long as they got a good rate of return for themselves and for the government.
Mr. Baker: Well, I would disagree with that. First of all, our bid alone was the best overall bid. My understanding was that the rate of return on the Claridge proposal was higher. The government had consulted Richardson Greenshields, I believe, who thought that the rate of return at that level was an acceptable rate of return, and I believe that was accepted by Finance. The final deal ended up being somewhat different with a 13.5 per cent, approximately, rate of return. Again, quite acceptable in utility standards.
Mr. Coughlin testified that in BAA, for a project of this nature, the rate of return acceptable in Britain is 18 per cent. We were seeking 18 and a half. Somebody has to pay for $700 million worth of improvements.
Senator Jessiman: And the 18.5 was negotiated downward to 14.
Mr. Baker: The 18 and a half was negotiated down. Somebody has to pay for it. There is no free ride. The Government of Canada had decided that they were no longer going to fund, out of revenues, improvements. Somebody is going to have to pay for them today as we go on. So that concept that we're gouging the airlines -- in fact, we had much less ability. We certainly had no real ability to gouge the airlines.
As Mr. Coughlin testified yesterday, the underlying principle of the Paxport proposal is that we would enter into negotiations with Air Canada who would be, in effect, a countervailing force in negotiating. They would negotiate what they wanted. They did buy into this proposal, and they did sign an agreement to lease in July of 1993. That agreement to lease, actually in the course of the negotiations, resulted in a transaction where, because of the rent deferral and because of the quickstart and the government's own -- and our rebates to the airlines for concessions, et cetera, in a per passenger rental, that's extremely -- quite a bit lower -- is actually quite favourable in the front end and rises.
I have a chart, actually. The chart compares T3, T1T2, and it has a sort of an estimated -- Mr. Coughlin referred to something like a $15 passenger facility charge. This one has been prepared on the basis of an 8-and-a-half per passenger facility charge starting in 1997, assuming an LAA took over.
I may as well give you copies, because you can see more dramatically what the effect is, Mr. Chairman.
Mr. Matthews: I think, senator, that the bottom line response to the position posed by Senator Kirby is that in Terminal 3 today, the cost per passenger, charged to the airline -- which, of course, they must pass on to the passenger -- is about $7 and some odd cents per passenger. In Terminal 2, the amount charged Air Canada today for their passengers is, I believe, around $2.50, about a third -- not quite a third. So, in the course of the next few years, in accordance with the agreement that was entered into with Air Canada, their charges go up to something in the order of $6 or $6.50, as I remember it.
Senator Jessiman: And it's staged. Was it staged?
Mr. Matthews: I think there's some escalation, but I can't just tell you how much, but it's considerably less.
Now, I was in Vancouver last week, for example. I wanted to go to Victoria. To leave the airport, I had to pay $5 towards the operations of the Vancouver airport. I came back, flew back to Vancouver and subsequently returned to Toronto.
Senator Jessiman: Ten dollars.
Mr. Matthews: Ten dollars. So they got me for $15 towards the cost of running the airport.
Now if I'd have been flying out of Toronto -- now, over and above those charges, those $15, are the airline charges.
Senator Jessiman: Yes, I understand that.
Mr. Matthews: That isn't all the charges that the passenger pays. That's a surcharge.
Mr. Baker: It also is a rent the airlines pay.
Mr. Matthews: Which has to be passed on to the passengers.
Now, the result is that in flying in and out of Toronto today, it's much cheaper than it is flying in and out of Vancouver.
Now, what Peter Coughlin was indicating last night is for the Local Airport Authority to finance the construction that is desperately required if Toronto is going to be anything like an international airport. To do that, he estimated that the passenger surcharge will have to be around 15 or $20. I think that's what he said last night to you people.
We had no surcharge. There was no surcharge contemplated in our proposal, and in the contract that was entered into with the government, the understanding was that if the government decided to require certain things, they had the right to put that in and we would levy it, but it wasn't for our benefit. It was for the benefit of the Government of Canada.
Mr. Baker: It was for the benefit of doing a project which would not otherwise be financeable from airline revenues.
Senator Jessiman: Let me deal with another matter. Part of this will deal with Mr. Matthews personally, but maybe the first part could be dealt with by either one.
On March 1992, Deloitte Touche gave a report that certainly said that the whole project was not financeable. You didn't necessarily say the part that you were trying to finance, the first part of it, but it wasn't clear. It wasn't quite as -- it certainly wasn't a go-ahead, green light in March as it was in August.
Mr. Matthews: Was that March of '93, or --
Senator Jessiman: '92. I'm sorry, March of '93.
Mr. Baker: Is that the report where he doesn't say it's not financeable? He says that he needs further information.
Senator Jessiman: No, he said actually in testimony -- I read it yesterday again -- the whole project. But the Request for Proposals doesn't contemplate, as Mr. Stehelin told us, that someone was going to come and write a cheque for $850 million. This whole Request for Proposals anticipated and contemplated that you were going to do this in stages.
Mr. Matthews: That's correct.
Senator Jessiman: And you were going to spend whatever it was to start with. Originally, when we ended up, you were going to have a quickstart of $100 million. Then you were committed to another $250 million at the end.
In some of the memorandum that passed, that we saw, that was written between Mr. Stehelin and yourself, Mr. Matthews, he was concerned about that $20 million as to whether or not you really had it. You knew, because you said so now, that you were going to get that from Allders, but you didn't tell him that at that time. My question is why did you not come right out and tell him that you had that arrangement with him?
Mr. Matthews: I have to tell you that I know that I was quoted as having refused to give him the documents, but I don't know that I've ever talked to Mr. Stehelin.
Senator Jessiman: Really.
Mr. Baker: I suspect that it was Jack Matthews.
Senator Jessiman: I see. All right. So you think it was Jack?
Mr. Matthews: I might add at this time, Mr. Chairman, my role here was very peripheral. As chairman, I was the leader of the band, but I had a lot of good soldiers. I certainly let them go ahead and do their thing.
By the way, I was busy doing a lot of other things, including really pushing on the whole matter of getting Paxport International up and running.
Senator Jessiman: So when Mr. Stehelin was talking about Mr. Matthews, he was talking about Mr. Jack Matthews?
Mr. Matthews: I would think so.
Senator LeBreton: We'll have to ask him.
Senator Jessiman: I'm pretty close to the end of this, but a lot of talk has been had that said if you couldn't get Claridge, if you couldn't get the Bronfman money, you were dead. You were out of the water. You couldn't have done it.
Let's assume you hadn't made that phone call, or not having made it, he hadn't brought up this suggestion of you getting together, because they gave in evidence yesterday that it was to their advantage, and they were concerned that you might go out and find somebody else. Tell us what you, at that time -- and we're now talking December of '92, sometime around December 9th was I think the date you said you made the call -- were you confident that if you hadn't, that you were going to be able to get the financing for the project?
Mr. Matthews: Okay, December 1992.
Senator Jessiman: Yes.
Mr. Matthews: The reality is that we had commitments for the 61 or $62 million, and from people who put up the money, with the exception of the two who --
Senator Jessiman: Later went out, but at that point, they were still in.
Mr. Matthews: They were still in, and Wood Gundy -- CIBC Wood Gundy were the people who had told us, and they had set up the model of financing. I personally have great confidence in their ability in that area. Yes, they didn't expect it was going to be a cake walk, but they had said this would be financed.
Senator Jessiman: And you were satisfied with that.
Mr. Matthews: I was very satisfied. So at that time, that wasn't the number one concern in my mind.
Senator Jessiman: I see. I guess there was an advantage when you did get this opportunity; you got a piece of Terminal 3 at the same time.
Mr. Matthews: You got it.
Senator Jessiman: Okay. Is it not true that even today you have a piece of Terminal 3?
Mr. Matthews: That's true.
Senator Jessiman: Thank you.
I have no further questions.
The Chairman: That's pretty good. That was only 25 minutes.
Senator Bryden: That's an extra five for me.
The Chairman: Yes.
Senator Bryden: Mr. Matthews, you are the chairman and CEO of Paxport.
Mr. Matthews: I don't think I was CEO. I was chairman.
Senator Bryden: Who was the CEO?
Mr. Matthews: I would guess Ray Hession and then Jack Matthews.
Senator Bryden: I think I asked the same question of Mr. Hession, and he didn't claim to be CEO either. Did you have a CEO?
Mr. Matthews: I don't know. They had specific jobs, and the guy you are looking at isn't really hung up on titles. They have specific jobs to do. They are expected to perform.
Senator Bryden: I understand that. Believe me, that was not meant to be a trick question. I thought it was an easy lead, but I believe there is, on the record, a press release -- I did not bring it. If I had known we didn't know, I would have brought it -- that I believe, at the time, that Jack Matthews was named as president.
Mr. Matthews: Yes.
Senator Bryden: The press release also, I believe, said that you would remain as CEO, chairman and CEO.
Mr. Matthews: I was chairman. I don't know about the rest, but I certainly didn't act as chief executive officer.
Senator Bryden: Okay. Who acted as the chief executive officer?
Mr. Matthews: Well, Ray Hession did until he was moved into other areas, and then Jack took over.
Senator Bryden: Are you the principal shareholder of a number of companies known as the Matthews Group?
Mr. Matthews: Yes.
Senator Bryden: It's my understanding that you're here in response to a letter -- or I don't know if it was a letter. Was it an invitation from counsel to appear?
Mr. Matthews: I certainly received a letter.
Senator Bryden: I have a letter, and this is the only thing that I do have. It's from the Clerk of the Committee. It's addressed to Mr. Baker and says "Dear Mr. Baker". It's dated August 23rd, 1995.
As you are aware, representatives of the Matthews Group are scheduled to appear before the Special Committee of the Senate on the Pearson Airport Agreements on Wednesday...
It is critical to their mandate that the Committee have all pertinent documents in the possession of the Matthews Group representative relating to the redevelopment of Terminals 1 and 2 at Pearson Airport.
And then it goes on to say ,"since there's time, can you get them in as early as possible."
I had assumed when I saw that the Matthews Group were scheduled to be the witnesses today that the persons representing the Matthews Group would be persons who, as happened yesterday with the Claridge Group, could speak from first-hand knowledge and personally and in detail, as Mr. Coughlin did yesterday, about all of the things that we have been mandated to look at, including "...agreements respecting the redevelopment and operation of Terminals 1 and 2... all matters concerning the policies and negotiations..."
Now, you have just said, in answer to Senator Jessiman, that your role is pretty peripheral.
Mr. Matthews: Yeah.
Senator Bryden: Well, I have to raise the question: Is there somebody that could appear on behalf of the Matthews Group who could address the issues of the Matthews Group and Paxport's role in this with the same comprehensiveness, if that was possible yesterday, from the Claridge Group?
Mr. Matthews: Yes, I understand your problem. It's unfortunate that you weren't aware of my position in the Matthews Group, but Gordon Baker has been acting for us ever since, I guess, shortly after the 7th day of December, 1992. So he's quite familiar with the negotiating period. He is not familiar nor is anybody from the Matthews Group familiar with what happened after Mr. Nixon commenced his review. We're not privy to any of that.
Senator Bryden: No, and we can get to that. Mr. Nixon is going to appear, and I'm sure he --
Mr. Matthews: But he can't speak for the Matthews Group either.
Senator Bryden: Pardon me?
Mr. Matthews: Mr. Nixon can't speak to the Matthews Group. He never talked to me.
Senator Bryden: Could I just ask you -- I do not mean to interrupt, but I only have a half an hour here.
Mr. Matthews: I see. Okay.
Senator Bryden: In what capacity has Mr. Baker acted for the Matthews Group?
Mr. Matthews: For the Matthews Group, he's acted as our principal attorney.
Senator Bryden: I'm sorry?
Mr. Matthews: He's the leading light of our legal people.
Mr. Baker: I acted, as I said earlier, senator, on the merger transaction, and I acted for Paxport Inc. on the negotiations with the Government of Canada.
Senator Bryden: Mr. Matthews, it still is peculiar. I would think that Claridge had a battery of lawyers, including lead lawyers.
Mr. Matthews: Yeah.
Senator Bryden: I would assume that virtually everyone else who participated in this very complex deal was represented by -- probably the lawyers made more money out of this than anyone else.
Mr. Matthews: You got it.
Senator Bryden: I know of what I speak. I was one, although I never made any money at it.
None of them who appeared before us, no other significant player, no other significant party who brought their best ability to answer the questions of this committee, had to be done by their lawyer.
Mr. Matthews: I understand, but if I could say this, that Ray Hession was here before you for a full day, I believe.
Senator Bryden: Yes.
Mr. Matthews: Ray Hession was the president and acted as the chief executive officer, if he wasn't. I think he was, but I don't know that. So he took the company right up until the 7th of December, 1992, and then Jack Matthews, who proposes to come here subsequently, took it from there on. So you will have lots of opportunity to talk to him, and I presume you exploited your opportunity with Mr. Hession in this connection.
Senator Bryden: I don't think I would say "exploited", but in many --
Mr. Matthews: I meant it not in a pejorative sense, but in the most complimentary sense to you.
Senator Bryden: But if I were to go back through the transcript, Mr. Matthews --
Mr. Matthews: I'm sorry?
Senator Bryden: -- the transcript of Mr. Hession's evidence --
Mr. Matthews: Yes.
Senator Bryden: -- there were a number of occasions in which he made it very clear that he was an employee --
Mr. Matthews: Yeah.
Senator Bryden: -- albeit an important employee, but if the answers to certain questions were going to be given, they would have to be addressed to the principals.
Mr. Matthews: Well, if you have those questions, I would be happy to try to take a shot at them, because Ray would not delegate to me the answer of a question if he thought that it wasn't appropriate.
Senator Bryden: Mr. Matthews, in his testimony -- I'm getting ahead of myself. There are a large number of memorandum, memoranda, to you and to Jack Matthews, and also to others. Those others change from time to time.
Mr. Matthews: Sure.
Senator Bryden: To the best of my knowledge, none of those others were ever Mr. Baker, for example. And if you look at those exhibits from Mr. Hession, he continuously and regularly reported to you.
Mr. Matthews: I don't know how you interpret those words "continuously" and "regularly", but Ray Hession and I -- I don't know how often we spoke. Ray does write out memos to tell you that he's gone to Venezuela to talk to them about an airport in Caracas or he's gone to Florida to talk to somebody down there about an airport. He was -- you know, he was a pretty busy guy. And he would write me memos to tell me that's where he was going, but I certainly didn't try to keep track of him.
Senator Bryden: The memos that I'm referring to or that were referred to him were not dealing with visits to Venezuela. They were dealing with meetings with cabinet ministers and that sort of thing being reported. I do not want to go --
Mr. Matthews: Wait a minute now. When you say cabinet ministers, I don't know that that's an accurate expression. I think he may have met with the Minister of Transport, but it was not my wish that he go around the city talking to the political -- to the government.
Senator Bryden: So when Ray Hession told the Transport committee of the House of Commons that he was hired for the purpose of getting this contract for Paxport -- that's an abbreviation, but I've quoted it a number of times -- and when he was asked how were you going to do that, his answer was by lobbying the Minister of Finance, the Minister of Transportation, the minister of -- the Prime Minister, the chiefs of staff, the bureaucrats, and so on.
Mr. Matthews: I have to see that.
Senator Bryden: Are you telling --
Mr. Matthews: Have you got the transcript, senator?
Senator Lynch-Staunton: Have you got the same things I've got?
The Chairman: Order, please.
Senator Jessiman: You can't take that and --
Senator Bryden: Yes, I can, because it's on the record.
Mr. Matthews: Could I have a copy, please? I would like to see a copy.
Senator Bryden: I'll provide you with a copy tomorrow.
Senator Lynch-Staunton: No, today. The witness is here today.
Senator Bryden: The witness is here tomorrow also.
Senator Lynch-Staunton: He's not on our list. He's here today. You are facing him with a document you don't even have. That's wrong. That is wrong. You can't do that. You can't tell him you read something somewhere. He said, "Could you show me the document to refresh my memory?" "Sorry, I don't have it; I'll give it to you tomorrow." You can't do that. You should not do that. That's called innuendo, insinuation. That's a Nixonianism. Shocking.
Senator Bryden: What I was referring to was the transcript of the proceedings before the Transport committee in the House of Commons, which is also contained -- and I'll find it -- in the reports of this committee, which was quoted in this committee, as those who attend regularly know, and I will certainly supply that. But I don't want to chase that.
My concern is that I expected today to be able to ask a series of questions relating to all of the matters that involved the Matthews Group, the Paxport Group, from the beginning right through, as it says in our mandate, the negotiations, the development of the agreement, right up to and including the cancellation.
Mr. Matthews: You have to understand that nobody from the Matthews Group knows what happened between when the new government was elected and when the cancellation took place.
Senator Bryden: I promise I will not ask you a single question about that. What I am interested in --
Mr. Matthews: I think this committee should be concerned about that.
Senator Bryden: Let me try this another way. Because if I read the letter from the clerk, which I just read, one of the things that is requested is that you produce before the committee relevant documents. You referred to --
Mr. Matthews: There they are.
Senator Bryden: You referred to Mr. Ray Hession earlier. And I had asked him -- and the transcript, by the way, of this is the August 2 transcript of proceedings, 1995, page 0945-23-24. Anyway, I was asking him about the documents that he had.
Mr. Matthews: I see.
Senator Bryden: Senator Bryden said:
Up until December 1992, as I went through your documents, there is a pretty clear coverage of what transpired in the documents. But from December 1992, until March, 1993, which -- and you continued in some capacity in 1993, there are none.
So after 1992, he had no documents. He filed no documents with this committee.
Mr. Hession: None?
Senator Bryden: There aren't any documents covering that period --
Mr. Hession: Senator, there are documents that would fill half this room between that period.
And the proceedings is once again the same time.
Senator Jessiman: What page?
Senator Bryden: August 2, 1995, page 0945.
Senator Lynch-Staunton: He's got the blues, and you've got the finished product.
Senator Jessiman: I've got the real thing.
Senator Bryden: Don't tell me I've got the wrong document again. I've got the blues. You've got that right. It's 23-24.
Senator LeBreton: He's not got the blues, he's got the reds.
Senator Bryden: You have brought, according to your solicitor, 80 pounds of documents that went into making up the contract. Does Paxport or the Matthews Group have no documents of the period that you were engaged in pursuing this project from 1989 until 1993 -- let's say October of 1993 -- that would be relevant to this committee other than those?
Mr. Baker: I think, senator, I'll answer that. There is lots of documents that are relevant to that. There is the ground lease, the development agreement, et cetera. Would you like to review those in detail? I'll get them out of the box over here if you would like to go through them page by page. I'll read each one of the pages to you, if you would like, senator. I don't know which documents you would like. The government says it has 80 to 100,000 documents. We have all the documents that I think are relevant that so far I have been able to see that have been produced. I mean, the government produced what it thought was relevant to give to Mr. Matthews. There have been other documents produced throughout this exercise by the government, some of them whited out, and fortunately I was able to provide Mr. Nelligan with the non-whited out versions of those documents. But can you refer to the exact document or documents that you think that are relevant that are missing?
Senator Bryden: Mr. Matthews, the people who have appeared before this committee, it's my understanding, in response to the request from Mr. O'Brien, provided documents, and Mr. Hession did, some, at least, that they believed were relevant to this committee. They did not ask members of this committee to go and select which ones were relevant. I would like to just --
Senator Lynch-Staunton: The government should treat us as well. They make us select.
Senator Bryden: Senator, you're very selective. The committee have -- this is the powers of this committee. I didn't draft them.
Mr. Matthews: Who is this letter that you're reading from addressed to, the invitation? Who was the invitation addressed to?
Senator Bryden: The letter is addressed to Gordon Baker.
Mr. Baker: And I'm here.
Mr. Matthews: And he's here.
Senator Bryden: You chose not to provide any documents other than that 80 pounds.
Mr. Baker: What documents would you like to read? I have a box here. Two volumes. We have the ground lease.
Senator Tkachuk: I can't recall any witness coming here with more documents.
Mr. Baker: Senator Bryden, I think I brought more documents, I think, than I've seen any witness bring, and I would be pleased to answer your questions.
Senator Bryden: How many volumes of documents are on file with the clerk now?
Senator Lynch-Staunton: Which file? The official file or your files?
Senator Bryden: Do we know, Mr. Nelligan?
Mr. Nelligan: We have innumerable binders provided by the Department of Justice, which I wouldn't call them in volumes because sometimes we put four volumes into one binder, but we have a great number of them. We asked the government to provide us with those relevant documents, having accepted that we didn't need the whole 180,000. We accepted so far the government's definition of what they thought were relevant.
With regard to independent witnesses, we have had on occasion one or two documents brought in which the witness thought was relevant.
And I believe the letter says "pertinent", senator, rather than "relevant", for what that's worth. At least the one letter I looked at.
Senator Bryden: You're probably right. It does say "pertinent". I don't know the difference between the two.
Mr. Nelligan: With regard to Mr. Vineberg, when he got the letter, he expressed some concern to me again that they had whole rooms of documents. I reassured him that we had to rely on his definition of what he thought was pertinent. It was a judgment call.
I believe that Mr. Baker brought the same mind bend to it. All I understand is that Mr. Baker, not knowing what other questions you might ask, has with him a number of documents, but of course he has not produced it in 20 copies for the committee because I assume he didn't consider them relevant, but he's got them here in case you wanted him to pull them out.
It's very difficult in a case of this kind to have full productions, but I know that they did have productions in the litigation process that sort of defined it. I think the government already has most of the documents which it considers pertinent from the Matthews Group and has made them available to us before Mr. Baker ever got on the stand.
Senator LeBreton: Point of clarification on that, counsel. Am I correct that those two volumes were provided to all members in the appearance before the Justice and Legal Affairs? That those two volumes were provided to all senators? The two volumes that you have sitting in front of you, you had before Justice.
Mr. Baker: I think at the committee, they were. And I'm not sure whether an abridged version --
Senator Bryden: I'm sure that they were, but --
Senator Lynch-Staunton: What do you want? What are you missing?
Senator Tkachuk: Chairman, here we're doing an inquiry. I'm sure Mr. Matthews, who would be in the equivalent position of Mr. Bronfman --
Senator LeBreton: He's not here.
Senator Tkachuk: He's not here. But Mr. Matthews is here as the owner of the companies. He had executive officers, as did Mr. Bronfman. Mr. Coughlin was here. We've already had one executive officer, Mr. Hession. We expect Tuesday or next week or soon to have Mr. Matthews where you can ask all those questions.
I mean, I haven't talked to Mr. Matthews today about why he's here. I assume he's here because Mr. Nixon saw fit to run his name through the whole report, and he's here to defend his good name. So let's get on with the questions and not talk about wisps of documents that may or may not be there.
Senator Bryden: I would hope --
Mr. Baker: Mr. Chairman, am I correct that Mr. Matthews I believe was sent a letter asking him to come as a witness?
The Chairman: Mr. Jack Matthews?
Mr. Baker: Mr. Donald Matthews.
The Chairman: Yes.
Senator Jessiman: Why wasn't Bronfman?
Mr. Baker: And I was asked.
Senator LeBreton: Mr. Bronfman wasn't asked?
Mr. Baker: I'm not sure what problem Senator Bryden has. I mean, the committee decides who the witnesses are.
Senator Lynch-Staunton: If I may be allowed, Mr. Chairman, the problem is that Mr. Matthews and Mr. Jelinek are the only two people mentioned in the Nixon record in a most disparaging fashion, to say the least. And if Mr. Matthews has come here only to defend himself, then he is more than welcome. Whether he defends himself well or not, that is for us to judge.
Mr. Nixon, in his official report, after giving a description of Mr. Matthews' role, says this together with a flawed process may leave one with a suspicion that patronage had a role. Mr. Matthews and Mr. Jelinek and others have been accused of using patronage to get a contract.
In the other report, the draft report, which by the way is dated -- which is dated a day later after the official report, but then we'll leave that up to Mr. Nixon to try and explain this Humpty Dumpty sort of approach. It says Donald Matthews, the principal of Paxport Inc., was chairman of the Mulroney leadership campaign in '83, chairman of the PC, and the chief fundraiser, Otto Jelinek, et cetera. This inevitably leaves the appearance of patronage.
So what Mr. Nixon is saying, that because you are identified with the Progressive Conservative Party of Canada, this inevitably leaves the appearance of patronage. Mr. Matthews' name, reputation and family, and he gave us I think a very thoughtful and even emotional expression this morning of his concern about the impact of what had been said here and elsewhere, here meaning the Nixon reports, and elsewhere, in the House of Commons by Ministers and elsewhere, regarding the impact on himself, his family, and his former employees. And for that reason alone, he is welcome here, and he is welcome here to defend his name.
And Senator Bryden, instead of nitpicking about how many pounds of documentation you have, Mr. Baker, should take the Nixon report, if he believes in it, and say to Mr. Matthews, "You Mr. Matthews, I believe what Nixon says. If you don't believe what Nixon says, Mr. Matthews, thank you for coming, for denouncing the falsehoods in this report, or these reports." But stop beating around the bush and saying, "You only got 50 pounds or 14 volumes or whatever." That's completely irrelevant.
Mr. Matthews has been maligned in a Nixon report which has been spread across the country over and over again for the last year and a half, and thank God the Senate of Canada has given him the opportunity and others to come and defend themselves.
Senator Bryden: Mr. Chairman, may I continue?
The Chairman: Yes.
Senator Bryden: Mr. Chairman, I could like to refer this committee to the terms of reference of our committee that says that a Special Committee of the Senate be appointed to examine and report upon all matters concerning the policies and negotiations leading up to, and including, the agreements respecting the development and operation of Terminals 1 and 2 at Lester B. Pearson International Airport and the circumstances relating to the cancellation thereof.
I understood that it was my responsibility as a member of this committee to pursue those directions.
Senator Lynch-Staunton: Hear, hear!
Senator Bryden: I read nowhere in these terms of reference any reference whatsoever to the so-called Nixon report.
Senator Lynch-Staunton: That is the cancellation, the events leading up to the cancellation.
Senator Bryden: Sure.
Senator Lynch-Staunton: You're really stretching it, John.
Senator Bryden: I'm also losing a lot of my time by interruption.
Senator Lynch-Staunton: I'll give you all of mine. If you're going to be that bad, I can't do better than you. You take up my time.
The Chairman: Order. Order.
Senator Bryden: I would like just to, because fortuitously, when photocopying the Orders of the Day from the Senate Debates that has the Pearson International terms of reference, is Senator Lynch-Staunton's comments on the establishment, and I'll only quote one sentence.
We must all be aware, however, that we will be agreeing to engage here in a totally different committee activity than we are used to; namely, one that can be compared to the duties of a judicial inquiry or even a royal commission.
And I tend to agree with that. And given that at the Transport committee, somebody for the Matthews Group expressed a preference for a judicial inquiry or royal commission to investigate into this --
Senator Jessiman: As did we.
Senator Bryden: Exactly. And that in such a situation, those persons appearing before that type of an inquiry, and this one, as Senator Staunton has indicated, is somewhat similar to that, would be expected to appear before the inquiry with as much information as possible. And if indeed we do not have access -- you were mentioning subpoena of documents. We don't have access to a subpoena. We cannot do what a commission of inquiry would do, and that is, if we didn't believe all the relevant documents are there, we can't ask for a subpoena or warrant and send somebody to search your offices or your home or anything of that nature. So it is not that I am trying to just beat a dead horse here. What I'm really trying to do is to use the time that I have available to get as much factual information as possible.
Mr. Matthews: Senator, if I may interrupt you just a minute. I don't want you to think that I just came here to bemoan my personal circumstances. I thought I was giving you some pretty interesting information in connection with some of the activities that took place that this committee has spent a great deal of time talking to people who didn't know what was up about, and I'm talking particularly about the discussion with Charles Bronfman et al to put together the Mergeco.
I have told you the way it was as far as I'm concerned today. The only people that you have had, you've talked to who were familiar with it prior to today, was yesterday, and they gave it to you from their perspective. Now you've got it from two perspective. They're fairly compatible. And so that should set to rest any concerns that people have there.
The matter of financability, I think --
I just wanted to explain that we have dealt with some interesting things today that might be useful to those who are seeking a solution to what happened. Somehow or another, the public service believe and are satisfied that they went through a good process and they selected and negotiated a good contract, and then somehow or another it ran into difficulties. Now, it's very important to the future of our country that we know why.
Senator Bryden: Mr. Matthews, I do not disagree with you. You dealt with some interesting things this morning, and I've listened very attentively to you. I was asked by one of you what documents I should like to have. Well, Mr. Hession was asked if he kept a diary during this period, a day book. And he said yes. And he submitted that diary for the periods of 1990, 1991, 1992, and 1993. Albeit there is quite a lot of things whited out, and but nevertheless, those are here. And he was your employee.
Mr. Matthews: That's correct.
Senator Bryden: Before I ask you about --
The Chairman: When you say whited out, just explain why they were whited out.
Senator Bryden: Once again, I'm in trouble. The question that was asked of Mr. Hession was, whatever your capacity -- I can give you the reference here somewhere. Okay. It's August 1, 1995, 0945-45. And once again, whether these are white or blue, I'm not sure, but it's one or the other. What I had asked him for was I asked if he kept diaries.
And if you did, would you be prepared to supply copies of those diaries and appointment books to this committee and -- just let me finish. You could vet those in strict confidence with the committee counsel so that any personal references or irrelevant references would be deleted.
And just in passing, Mr. Nelligan --
Mr. Nelligan: That was done. I was provided with the originals untouched. I had them all reviewed by my clerk, and we were satisfied that no reference was deleted except of a purely personal nature and that all of the business entries in the diaries were made available in the Xerox copies that I sent over to the clerk.
Senator Bryden: I just wanted to be sure, because I'm going to -- can I ask this: If you have personal diaries, and if Jack Matthews was the president or the operative person, if he has personal diaries, would you -- for this period, would you be prepared on the same basis to supply them to the committee?
Mr. Matthews: Well, I don't know. I can't speak for Jack Matthews. He has to obviously speak for himself in this regard. I don't keep that type of diary.
Senator Bryden: Okay.
Senator Lynch-Staunton: I wonder if Mr. Nixon does.
Senator Bryden: I don't know.
Senator Lynch-Staunton: We should find out. Good idea. Maybe there are two versions of it.
Senator LeBreton: Or three.
Senator Lynch-Staunton: Leap year and non-leap year.
Senator Bryden: Mr. Matthews, you made some references this morning -- I'm prefacing this because in some ways we're not that dissimilar in that we're both fathers and grandfathers and we've won some and lost some. We made some money and lost some money, and so on. So but one of the things that we are not totally dissimilar in is that we also, no matter what it is we do, one of the things that people remember us for is whatever our political connections are. And so the questions I'm going to ask you now --
Mr. Matthews: Really, I have a different perspective, you see. I don't really care what political perspective a person has, but I am concerned that they have a political perspective.
Senator Bryden: Me too.
Mr. Matthews: I respect everyone, including you guys, even though we're not always in the same ball game.
Senator Bryden: Can I just go through some of that? You were president of the Progressive Conservative Party in the 1970s?
Mr. Matthews: Yes.
Senator Bryden: Some of this you may have had in your statement, but I just didn't get it down quickly enough.
Senator Tkachuk: What year?
Mr. Matthews: I was elected in the fall or something of 1971, and I was defeated in the spring of 1974.
Senator LeBreton: And a fine president you were too.
Mr. Matthews: Thank you very much.
Senator Bryden: Were you also deputy chairman of the PC Canada Fund?
Mr. Matthews: That is correct.
Senator Bryden: When was that?
Mr. Matthews: The Prime Minister asked me to do that in 1983, and I held that job until 1989.
Senator Bryden: And in that capacity, you would have raised funds for the Progressive Conservative Party?
Mr. Matthews: Yes.
Senator Lynch-Staunton: Isn't that shocking. You did that? You raised funds for a political party and helped the democratic process? Shame on you. For the Tories, on top of that. That's awful.
Senator Bryden: Doesn't it strike you --
Senator Lynch-Staunton: No wonder Mr. Nixon named him in his report.
Senator Jessiman: We'll ask Mr. Nixon the same questions.
Senator Bryden: Doesn't this strike you as very similar to a judicial inquiry?
Senator Lynch-Staunton: Oh, my gosh. That is shocking. I'm glad we're revealing all of this now.
The Chairman: Colleagues, I'm adding time to Senator Bryden each time there are interruptions.
Senator Lynch-Staunton: Give him all my time, please. He's helping us.
Senator Bryden: Just to complete, you ran unsuccessfully for the Progressive Conservatives in 1968 and 1972.
Mr. Matthews: Yeah.
Senator Bryden: I shouldn't say you "knew" because it's not past tense. You know Brian Mulroney personally?
Mr. Matthews: Yes.
Senator Bryden: When did you first meet Brian Mulroney?
Senator Lynch-Staunton: Mr. Chairman, what's this got to do with it?
Mr. Matthews: He was a pretty young guy.
Senator Lynch-Staunton: This is out of order.
Mr. Matthews: Back in the '60s.
Senator Bryden: In the '60s.
Senator Tkachuk: Was it like at a dance or something?
Mr. Matthews: It was a PC convention.
Mr. Matthews: I want you to know, while you're asking personal questions, there is a couple things. Number one, I would like to congratulate you on your success in New Brunswick.
Senator Bryden: Thank you. I can't do one of these, but I can run an election campaign.
Mr. Matthews: The second thing I'd like you to know is that I was president of the CCF Club at Queen's University for two years.
Senator Lynch-Staunton: Senator Stewart.
Senator Stewart: Shocking all the way.
The Chairman: I don't know what you all had for lunch today.
Senator Kirby: A lot better than what we had for breakfast, Mr. Chairman.
Senator Bryden: Would you see him regularly socially?
Mr. Matthews: No.
Senator Bryden: Once a year, twice a year?
Mr. Matthews: No.
Senator Bryden: Did you ever see him socially when he was Prime Minister?
Mr. Matthews: Only socially in the sense of being -- he invited to me to 24 Sussex from time to time. The smallest group there -- like, I never had a personal lunch with him, but I was there, and there may have been 20 people there. That was the smallest. And then of course it went from there to a cast of thousands.
Senator Bryden: Did you ever discuss Paxport with Mr. Mulroney?
Mr. Matthews: I never discussed anything to do with Pearson Airport with the Prime Minister, nor did he ever discuss it with me.
Senator Bryden: Okay. Did you introduce Mr. Hession to Mr. Mulroney?
Mr. Matthews: Wow. I can't tell you that.
Senator Bryden: Okay.
Senator LeBreton: Mr. Hession was a public servant here.
Mr. Matthews: I would think not, but I don't know.
Senator Bryden: Do you recall on April 22, 1992 there was a fundraiser at a Mississauga hotel that you attended where you were roasted?
Mr. Matthews: That wasn't a fundraiser for the PC party. That was a fundraiser for some charity in Mississauga.
Senator Bryden: Do you recall, Mr. Matthews, was Prime Minister Mulroney there?
Mr. Matthews: Oh, no, he wasn't. He wasn't there. No. I don't think so.
Senator Lynch-Staunton: What has this got to do with Pearson, by the way? Did I miss something here?
Mr. Matthews: To the best of my recollection now, but I don't know.
Senator Bryden: I think I'm being reasonably pertinent. There is evidence that in fact Mr. Mulroney's hand in some manner or other was on the direction of this deal as it went through.
Senator Lynch-Staunton: Oh, yes? Fine.
Senator Bryden: And if indeed, to go back, without being able to quote it, to the --
Senator Lynch-Staunton: Exactly.
Senator Bryden: To the Nixon report --
Senator Lynch-Staunton: Hearsay, hearsay, hearsay.
Senator Bryden: If in fact you're being charged somehow -- I think that was Lynch-Staunton's expression -- with getting some sort of favouritism through your connection with the Prime Minister, it must be somewhat relevant if there is in fact a connection. You've indicated that yes, you're friends.
Mr. Baker: Before Mr. Matthews answers that question, senator, would you mind providing me and Mr. Matthews with a copy of that evidence?
Senator Bryden: Which evidence?
Mr. Baker: The evidence of Mr. Mulroney's hand, whatever you expressed just now. The statement you made. Could you provide us with that evidence so we can review it before we respond? I would like to see it, senator, please. That's very important.
Senator Bryden: The evidence was introduced. Some evidence was introduced yesterday.
Mr. Baker: Where is the evidence? I would like to see it, senator.
Senator Bryden: I will provide it. We can defer the question. The reason I say that is because it is included in the carefully put-together list of documents that I have here, so that I can provide copies to everybody as I refer to them. And if I get out of sync, then I don't know that I can find them again. But that evidence is there, and it will be provided. You don't have to answer the question until I get to it, which may not be till next week at the rate we're going.
Do you know Don Edwards, who was the candidate for the leadership? Do you know Jim Edwards, who was the candidate for --
Mr. Matthews: Oh, Jim Edwards, yes. Yes, I know him.
Senator Lynch-Staunton: Fine fellow.
Senator Bryden: You supported him during the leadership campaign?
Senator Lynch-Staunton: Point of order, Mr. Chairman. I don't mind these, you know, interrogations, whom do you know, whom do you not know. What has this got to do with the inquiry, whether we know Mr. Edwards or know Mr. Mulroney or know Mr. Hession? What has that got to do with our mandate? Could Senator Bryden explain to us what the friendship of Mr. Matthews and anyone else has to do with this?
The Chairman: Maybe I can, on behalf of Senator Bryden, at the risk of making myself totally unpopular with my colleagues. There has been suggestions in the Nixon report of political manipulation and patronage, and Senator Bryden is following along this course of action with his questions just to determine what the degree of patronage was.
Senator LeBreton: But he does not accept the answer.
The Chairman: Go ahead, Senator Bryden.
Senator Lynch-Staunton: Give him the benefit of the doubt. Go ahead. My time you've got.
Senator Bryden: At the risk of saying something that I should not, I was really trying to lay the foundation for being able to refer to the best documentation that I have available, which is the documentation provided by the agenda planning diaries that your employee Ray Hession made available to the committee in order to indicate the type of political activity and lobbying and so on that was being done on Paxport's behalf during this period of time.
Mr. Chairman, having gotten to the point of hopefully having the right to use these, and they will be made available, my half hour is up, and I would stop now because once I launch into this I should like to have a continuous period of at least a half an hour.
Senator LeBreton: Thank you, Mr. Chairman, and thank you for appearing, Mr. Matthews and Mr. Baker. And I meant it when I said you were a fine president indeed.
I want to raise again the specific questions dealing with the merger with Claridge, just as I did yesterday with the Claridge people. It has been raised in this committee, and now in the media, that somehow or other the deal might have arisen through collusion between the parties.
The chronology is important here. We know how long the time period was between the government announcement, 17 months later the request for proposal. We know that the proposals were turned over to an independent arms-length evaluation team. We know the evaluation team met in the summer of 1992, and we have documents here that show that all participants, including, I might add, Mr. Chern Heed, who turned out to be one of the detractors later on, but all participants in the evaluation team signed off on the evaluation on August 28, 1992. The auditors reported to the deputy minister, then Hugette Labelle, on December 18, 1992, and a letter to the minister on October 26.
All this to say, while it was not officially announced publicly until December 7, 1992, Transport Canada had the recommendations of the evaluation committee that Paxport's proposal was the best overall proposal, and we indeed have had testimony, and Mr. Baker was asked about the Edlund report. We had testimony that industry were into it. So there was obviously a lot of discussion about this going on in circles of government.
I refer to a question by Senator Bryden on August 2, 1995. And of course I'm dealing with the now regular transcript, Senator Bryden. You, being away politicking in New Brunswick, wouldn't obviously have had a chance to look at them.
Senator Bryden: Successfully politicking.
Senator Bryden: That's right. Well, we got 31 per cent of the vote. That's pretty good.
I refer to a question in Issue Number 9, page 49, where Senator Bryden said:
The question that comes to my mind is, when you look at the result ... where you have the two competitors together, negotiating and making the final agreement that was called Mergeco ... I would say it was a sole-source contract.
And then he went on:
that the "efficient competitive process" ... may simply have been a sham to allow this to happen?
So Mr. Matthews or Mr. Baker, prior to December 7, 1992, did you or anyone working for your organization have any discussions with any of the Claridge principles about a merger?
Mr. Matthews: Not at all. We weren't talking.
Senator LeBreton: That's sort of what I gathered when I listened to some of the -- okay.
My second question: Prior to December 7, 1992, did anyone from the Prime Minister's office or the Privy Council Office bring pressure to bear to bring you together with Claridge?
Mr. Matthews: No.
Senator LeBreton: You've already answered what happened. I was going to ask after December 7, what happened. You've already said about the phone call to Charles Bronfman and who initiated the discussions.
What were the determining factors, and I think you've already mentioned this in your answer, but I'll ask you again, which caused you to throw your lot in with Claridge, because Claridge, and yesterday Mr. Coughlin did acknowledge on several occasions that you could you have -- you know, it was quite obvious that you would have been in a position to go it alone. What caused you to throw your lot in with Claridge?
Mr. Matthews: Well, initially, my objective in getting together with them, or at least to phone him, was to stop the -- we had been going like this for a long time. Over a year. And you get a lot of hard feelings within a large corporate entity. That had to be -- you just couldn't have that and hope to operate Terminals 1 and 2 together with 3 in any sense of harmony or cooperation. So that was my initial reaction.
Well, then, when Jack and Peter Coughlin and others got together, and by the way, it was very closely -- it was held. We didn't tell a lot of people what was going on, including Ray Hession. Now, that isn't because I didn't want to tell Ray. It was because he didn't need to be in the loop. And Gordon Baker knew, Jack knew, and Peter Kozicz knew, from our side. It was very close, very close until we finally made the decision that we should work together. And that was in January, I would guess.
But the reality is that they had Terminal 3. Terminal 3, if we could use it intelligently during the reconstruction program, there were synergies that were worth something like $75 million, plus there were synergies from an operational standpoint of about $4 million a year, so that you just cannot look at that sort of thing and ignore it. And so we looked at it. Of course it was attractive to us to own a part of Terminal 3, and that had -- so there were some attractions to us. So we -- that's what caused us to proceed.
Senator LeBreton: Mr. Coughlin testified --
Mr. Matthews: Indeed, we would end up, because of the synergies, making a little bit more money owning half of it than we would have owning all of 1 and 2.
Senator LeBreton: Mr. Coughlin testified yesterday that -- you just testified, you know, what happened on your side -- that he brought in his government relations people, and there seems to be a lot of speculation around in Transport Canada, but obviously, knowing this city the way I do, once a few people know that, a lot of people know it. And --
Mr. Matthews: You know, it's probably the first time I've heard evidence that it's a good idea to hire these people. We didn't spend a lot of money on what we would call lobbyists, I guess. We did not spend, contrary to the Nixon report. We didn't. And so that was the -- our situation. We did not hear -- I did not hear anything until the day that it was announced, and when he said it, I must tell you that I felt pretty good. That is when the minister.
Senator LeBreton: Yeah. Yeah. Although there were, as Mr. Coughlin testified yesterday, there was rumours around in the newspaper just the weekend before, and there was a lot of speculation, and of course this city is speculation city. We all know that. Could you briefly describe, although you've -- Mr. Baker, perhaps, you went through this at great length in your presentation this morning, but could you just briefly describe just the framework of the merger, just once you got into January and the letter, just sort of what brought the whole thing to the table initially? Just the outside framework of it?
Mr. Baker: Well, the framework was really there was the Terminal 3 Limited Partnership which had Terminal 3, and we were going to have a separate limited partnership for Terminals 1 and 2. And really, the parties merged by owning an equal interest in them and having an umbrella agreement that covered them. That's the simple framework.
There were certain tax and business reasons for having that framework and structure: the synergies I talked about this morning, the benefits, the risk analysis, the hedging, so on, the advantage of using Terminal 3 and passenger safety, cost savings that would pass through to the airlines. Are those the sort of things?
Senator LeBreton: Mm hm.
Mr. Baker: It made a lot of sense. And the parties, it made a lot of sense to cooperate and to have that kind of cooperation by having the common ownership as between moving airlines back and forth, passengers back and forth, savings in maintenance and operations and maintenance contracts, savings in management personnel, and in competing internationally instead of having two marketing budgets, two marketing teams, out trying to market internationally.
When they did find an airline that wanted to come, you first had to get bilateral arrangements between the two countries through IATA, and they hold meetings every six months. You then also have to persuade Transport Canada that that tenant was going to go to your terminal and that they would balance the traffic. So you had to also -- you didn't have control over the final decision of where the airline would go. So from an international competitive standpoint, looking at Toronto as the gateway and selling Toronto as the gateway into North America, it seemed to make more sense to have one marketing organization.
Senator LeBreton: Your answer just prompted this next question. Did you get the sense that Transport Canada actually found this to be a better situation where they had the three terminals operated by one from their perspective in terms of just dealing with them as a government entity or later on if it's under an LAA, or was it --
Mr. Baker: I think that they did, and for such reasons as, in event of default, they got the whole airport, three terminals, back. From the benefits of the fact that we could accommodate the travelling public with less inconvenience and the redevelopment. From the ability to move airlines from one terminal to another without, you know, having the problems. Air France was moved over to Terminal 1 and 2. The income is over there. We lost. It's been lost in 3, which we own now.
And those kind of benefits are operational benefits that benefit the airlines and the travelling public, and I suspect and I think that the feeling was, as we went through the negotiations, that that was a significant benefit of having the merger.
Senator LeBreton: I think that Mr. Rowat testified to that effect, that they had the Paxport model and that, in fact, it was an easier situation for Transport Canada to deal with. So this was a 50/50 proposition.
Mr. Baker: Yes, it was.
Senator LeBreton: It was 50/50 up until the point that Ellis-Don, given -- you know, I'm not exactly sure why they withdrew, but the real estate market was not the greatest at that time, and Wood Gundy CIBC. Was it a 50/50 until that point?
Mr. Baker: Yes.
Senator LeBreton: Did they withdraw sort of at the same time, Ellis-Don --
Mr. Baker: No, no, they withdrew at different times. Ellis-Don went out early, and I can't remember exactly when. And then Wood Gundy finally confirmed in August that they would not go forward.
Senator LeBreton: So the present structure was 50/50, and then it was whatever.
Mr. Baker: Then it moved eventually to 65/34 or 35, 34.21/65.79.
Senator LeBreton: There was never any question that once the merger took place, that the bid or the proposal stayed the same? Just the ownership changed? It was always negotiated on the Paxport bid?
Mr. Baker: Always on the basis of the Paxport bid. The Paxport bid was so much more financially beneficial to the government. There was no reason they would ever want a bid to go to a proposal that generated half the money and start negotiating on that. It would obviously make no sense. And also the design development, and out of the four or five, four of the five categories, Paxport was considered better. The only one was the employee benefits package, so obviously it made no sense to consider another proposal, and it was always dealt with as the Paxport proposal, as Mr. Broadbent's memorandum, Mr. Rowat's memorandum, Mr. Cappe said, refers. So there was no change. It was really just a change in the investor make-up.
Senator LeBreton: This is a question of Senator Tkachuk and I have kind of singularly singled out Terminal 1 as a bit of a disaster, and we even got into rats one day. But what would have happened to Terminal 1 again? I just need to have -- under the new proposal, would they have fixed it or torn it down? It's still not clear to me.
Mr. Baker: It's preferable to tear it down. It would have been torn down in pieces and a new Terminal 1 built. But it's not -- it was not desirable to keep it open. And if I recall, there is actually correspondence between -- the structure is deteriorating.
Senator LeBreton: I know. I was actually in it when a piece fell down near my head.
Mr. Baker: I believe there is correspondence in your files. It's Mr. Desmarais to Mr. Mulder, warning about the risks and perhaps the imminent necessity to close the parking garage, and about the safety and other aspects. I believe that was last year. Summer of last year.
Senator LeBreton: Actually, I happen to have that document. July 21, 1994, and it's --
Mr. Baker: I think that's it.
Senator LeBreton: It's Document 00820436. Not that we'll get into the document, but it's just -- I usually don't have this many documents, but I keep this one because of my own concerns about Terminal 1, where Mr. Desmarais says to Mr. Mulder that if the minister wishes to continue to apply pressure to gain acceptance, he would suggest that a larger project of new runways and terminal restoration expansion with the large economic impacts are more amenable to this, and then he goes on to say that the government, there were going to have to do some serious repairs or be subject to some liability.
Because you had the more -- you had the proposal that ultimately the evaluation committee found to be more attractive, other than Terminal 3, and of course the financial, what else did you believe that Claridge brought to the table if anything more than you've already testified?
Mr. Matthews: Well, it brought a lot. They brought, you know, experience with Terminal 3, and Terminal 3.
Senator LeBreton: Yes. Just for the record as well, you testified -- I think it was you, Mr. Matthews -- that you in fact -- Matthews bid or put in a proposal for Terminal 3 and lost to Huang and Danczkzay.
Mr. Matthews: That is correct.
Senator LeBreton: That's all the question I have.
Senator Lynch-Staunton: Mr. Matthews, while we're waiting for Mr. Baker, because some of my questions are addressed to him, I want you to react again to the allegations, the insinuation, the unfounded innuendoes, if any innuendoes can be founded, in both of the Nixon reports that we have before us regarding your being justification for patronage having played a role in the whole process leading up to the contracts that were cancelled.
First of all, you must have been very hurt by this. I could tell by your statement earlier that you have great pride in the work that you've done, starting with the loan from your father and building up a multi-million dollar business, and until two years ago showing a profit, and the devastation you must have felt as a result of this and laying off employees. But taking away that side, as much as you can, what is your reaction to this sort of -- how can you fight back? Do you think appearing before this committee gives you some chance to fight back and at least have your version heard by those who would not listen to it before they found you guilty? I just want your evaluation of your feelings then and today and whether you're a forgiving man.
Mr. Matthews: I'm not a bitter person. That isn't part of me. I fight hard, but I'm not a bitter person. And right now, I'm working very hard to put things back together again, and I can report to you and to the other members of the committee that things are starting to get back together again. So I'm kind of happy about that and proud of that.
I think a much more serious thing is that a report was issued without consulting anyone that I'm aware of, that is, without consulting them as to the evidence they had received. Most people, when they receive evidence, if it's negative, they go to the person whom it's all about and they say, "What is this? Explain this to me." And if they cannot explain it, fine. If they can explain it, well, then that particular thing is set aside.
Mr. Nixon did not do that. Now, obviously he didn't. It would be his responsibility to consult with anyone. Had he talked to me about patronage or had he talked to me about lobbying, I could have demonstrated in both cases that it wasn't a problem. Indeed, from the lobbying standpoint, we were probably the lowest cost lobbyers around. We didn't spend a lot of money on lobbying, and it wasn't my intention to spend a lot of money on lobbying. I had an excellent guy in Bill Neville, whom I have the highest regard for, and he reported to Ray Hession, and it worked out very well.
Senator Lynch-Staunton: Well, I just think it's horrendous. Hopefully it's not a precedent to have such a report say so many things, unsigned, and so many versions with so many people being hurt. But enough of that for now.
Mr. Baker, despite Senator Bryden's social gossiping to try and deflect from your what he calls monologue this morning, I think that your presentation is extremely impressive. No one reading it with an open mind cannot be struck by the argumentation which you present. It will be up to those who have to analyze it to decide on what conclusions they may draw. But I don't want to get into all of it, though I'm tempted to, but since I've given so much of my time to Senator Bryden, I don't want to borrow it back from him, so I'll be as quick as I can.
On page 11, you quote the Crown. You say:
'The Crown is raising no defence as to the adequacy of the contracts or offering any basis, contractual or otherwise, for reputing the contracts.'
This was a statement made during the hearings in Toronto; is that correct?
Mr. Baker: Yes.
Senator Lynch-Staunton: Yes. Now, can that be interpreted as including the allegations that there was collusion between the two parties, that the whole thing was a fix, that if the government had any inkling that the two parties were really just engaged in a sham and the whole thing was cooked up ahead of time, the government would not have invoked that in its defence?
Mr. Baker: I would assume they certainly would have, senator, because that would be a legal basis to argue that the contracts should be cancelled. I would assume that the Crown would have argued any legal basis that they had for cancellation. Since they argued no legal basis, I can only presume they had no evidence of any such kind of allegations.
Senator Lynch-Staunton: So in its defence, before the -- and I said before the court, it may be another body -- but before the court by my definition, the Crown brought up no argument, no evidence, no indication of any impropriety, any -- yes, any impropriety, from the moment the whole process started till the conclusion which led to the signing of the agreements?
Mr. Baker: That is correct, senator. In the current proceedings that are under way, having read the testimony, the Crown has also taken the position that patronage and lobbying are not issues.
Senator Lynch-Staunton: In effect, what the Crown is doing in front of a court in Toronto is denying the Nixon report.
Mr. Baker: Effectively, I believe that's so.
Senator Lynch-Staunton: Yes. Mr. Nixon has not been asked to go in front of the court to act as a witness on behalf of the Crown to support the allegations which have led to this.
Mr. Baker: They never made the allegations, so there has been no reason for Mr. Nixon to appear. If the allegations had been made, then there would have been a reason for him to appear under oath.
Senator Lynch-Staunton: So none of the allegations in the Nixon report or reports -- we have two of them so far -- none of them have been used by the Crown as evidence or as argument in support of any stand it may have in front of the courts in Toronto?
Mr. Baker: That's correct, senator.
Senator Lynch-Staunton: Well, that certainly is very revealing. I would like to -- and it's become a fixation, I admit it. But I think it is so essential to understanding and to demystifying some of the things that were said during the election campaign, which can be understood because, in the heat of a campaign, rhetoric can get out of hand, but which has been repeated since. And that is the significance of the October 7 date, October 7, 1993.
Now, Mr. Nixon, in the official report, says that, prior to the conclusion of a legal agreement -- prior to the conclusion of the legal agreement, the Leader of the Opposition, now Prime Minister, indicated clearly that parties proceeding to conclude this transaction -- is it fair to say that the transaction had already been concluded long before October 7?
Mr. Baker: In my opinion, senator, there was a firm binding deal with all the principles established on August 26 when Treasury Board, cabinet approval were given. We were just carrying out the final aspects.
Senator Lynch-Staunton: I'm just going to quote to you the Nixon report -- official report number one, the day before draft number one. He also says the chief negotiator for the Government of Canada sought written instructions about whether to complete the transaction.
Can it be said that the transaction had already been completed?
Mr. Baker: The written instructions related to releasing the documents from escrow that had already been signed, and the conditions had all been met. And, therefore, the government would have breached its obligations and would have been subject to being sued if it had not done so.
Senator Lynch-Staunton: Because he goes on to say, this is Nixon in his report, official report, says:
On October 7, 1993, he --
Meaning the chief negotiator.
-- received his written direction indicating that it was the explicit instruction of the Prime Minister that the transaction be concluded on October 7...
Now, my question to you is, was the transaction concluded on October 7, or had it not been concluded August 27, as you suggest, or by -- whatever?
I know you are looking at it in legal terms and want to give an answer as a lawyer. My suggestion is that -- well, I won't suggest anything except what is the significance of the October 7th date, in effect?
Mr. Baker: It just released the documents from escrow. All the conditions and obligations of the parties had been met.
Senator Lynch-Staunton: So let's go back a bit then. In June, there was a non-binding letter of agreement by Madam Labelle?
Mr. Baker: Yes.
Senator Lynch-Staunton: And that sort of triggered things off, saying we reached a certain stage -- and stop me if my interpretation is wrong, because I went through this yesterday with Mr. Coughlin and his associates, and I apologize for sort of putting the answer in my question, and I will try and resist that again today.
But there is a letter in June, a non-binding letter of agreement signed by the deputy minister. That triggers off more discussions leading to, at the end of August, an agreement or an authorization by Treasury Board and cabinet, through an Order in Council, to the Minister of Transport, to sign certain agreements?
Mr. Baker: Those agreements were completed at that point in time.
Senator Lynch-Staunton: Those agreements were completed.
Mr. Baker: They were informed, and I believe, as Mr. Brooks said and Mr. Desmarais, they didn't believe that there were any changes of any substance made to those agreements. We were told that we could not change the agreements once they were submitted to the Treasury Board, and I believe they were submitted on the -- I may be wrong, but I think it's the 18th. It was some time before that time. They were all settled.
And also, at that point in time, all the principal terms of the agreements that were yet to be completed for the closing had been settled, and that -- with us, and Mr. Rowat testified to that as well. So everything was virtually complete.
As I've read -- I read the Court of Appeal's decision this morning into the testimony, talking about when you have an agreement. And in my view, given that the authorizations usually required by major transactions by the Government of Canada, and I've been involved in them before, the Treasury Board approval, cabinet approval, was -- once obtained, you had a deal.
You had a binding deal.
Senator Lynch-Staunton: So I think that that confirms what we heard yesterday and what we heard from other witnesses on the government side. The authorization and confirmation, call it what you want, the decision on August 27 was a binding agreement.
Mr. Baker: Yes, the decision was the effective decision of the government --
Senator Lynch-Staunton: And any turning back by one or the other partner could have led to some most unpleasant --
Mr. Baker: If either party failed to finish off the transaction in good faith or carry out the terms, they would have been in default.
Senator Lynch-Staunton: Now, we were also told -- and I'd like you to confirm or give your version. We were also told that the October 7 date to clean up the whole thing, by using my kind of language, was decided on as early as June or July? That the principals --
Mr. Baker: I believe it was July --
Senator Lynch-Staunton: -- got together and said, we've come so far, we've got a few more steps to pass or to go through, yes. What's a good time for us all to put to bed, and somebody said October 3rd, and somebody else said, no, that's not very good. So it was decided October 7 would be a convenient date to all.
Mr. Baker: That's right.
Senator Lynch-Staunton: Is that correct?
Mr. Baker: That's right.
Senator Lynch-Staunton: That was decided when?
Mr. Baker: I believe that was early July.
Senator Lynch-Staunton: Early July.
Mr. Baker: Early July, I believe it was early July, yes, and reconfirmed after the Treasury Board approval.
Senator Lynch-Staunton: Did anybody say, whoa, wait a minute, hold it, we've got a hot potato on our hands here. Mulroney or Ms Campbell has to call an election before the end of the year. October 7 may well be right in the middle of the action. This may cause a negative reaction. Maybe we should hold off or back it up or forward it?
Mr. Baker: Not that I recall.
Senator Lynch-Staunton: Because the whole thing was an ongoing business proposition between two parties who had finally come to an agreement, and it was convenient to both sides that the 7th October would be the final date, and then Pearson Development would be allowed, as of the 1st of November, to carry through.
So if I am correct then, the authorizations are given to the Minister of Transport on the 27th of October or thereabouts, and that is a date --
Mr. Baker: Sorry, August.
Senator Lynch-Staunton: I'm sorry? What did I say, October? No, 27th of August, thank you. And that is a date that the -- both parties bound themselves to a common agreement to accomplish certain things. And the ratification took place in early October.
And then, as Mr. Coughlin confirmed yesterday, and I won't go through it again, the 7th of October is simply the release of the documents because the final conditions had been met.
Mr. Baker: That's correct.
Senator Lynch-Staunton: Now, Madam Bourgon will be here tomorrow, and we will certainly find out why she felt it necessary to consult before getting -- why she felt it necessary to get prime ministerial authorization to do what appears to be, cannot be undone. Once the conditions were met, whatever the date, did the government have any choice but to release the documents?
Mr. Baker: Yes, they could default.
Senator Lynch-Staunton: Yes. They could default. But they could not -- yes, they could default. They could refuse a release and be in default?
Mr. Baker: That's correct.
Senator Lynch-Staunton: So they really had no choice if they were to honour the agreement that they had agreed to at the end of August?
Mr. Baker: That's correct.
Senator Lynch-Staunton: So the Prime Minister didn't really have to be consulted in legal terms?
Mr. Baker: No.
Senator Lynch-Staunton: No.
Mr. Baker: Not the -- not --
Senator Lynch-Staunton: And the Prime Minister really had no choice, even if she were consulted -- because she was consulted. I mean, she couldn't say no unless she wanted the Government of Canada to be in default and liable to god-knows-what legal action which was obviously to follow.
Mr. Baker: I can't put myself in the shoes of those that advise the Prime Minister, but the only reason would be if there was lawful reason for not closing, which would be the failure on our part to have met a condition precedent.
Senator Bryden: Mr. Chairman, just for clarification --
Senator Lynch-Staunton: No, no --
Senator Bryden: Just one point of clarification. I just want it understood that what is being expressed here is the opinion of the witness, a lawyer, a competent lawyer, but it is not necessarily conclusive evidence that if the documents had not been reported out on the 7th, that there would have been default, or on what basis, the documents -- they could have refused to report them. Only a court could decide whether that in fact would have been a breach of contract.
Mr. Baker: The court -- and as I said earlier, Senator Bryden, this morning, in the court action to date, after the government decided to cancel the contracts, there has been no evidence and no argument put forward that there was any basis to cancel the contracts, legal basis to cancel the contracts.
So I can only assume that, on October 7, that there was no legal basis to cancel the contracts. And, therefore, we would be in the same position now, the Court of Appeal having already overturned the appeal on summary judgment with a quick 10-minute decision.
Senator Jessiman: Not overturn. It didn't overturn it, witness. The Court of Appeal held up the --
Mr. Baker: I'm sorry, upheld Mr. Justice -- sorry. Overturned their appeal, the Crown's appeal.
Senator Lynch-Staunton: What I think I have succeeded in doing is to give the -- is to lessen the impact of the decision taken on the 7th of October. Mr. Nixon, in report number two, says "a contract signed on October 7". There was no contract signed on October 7, was there?
Mr. Baker: No.
Senator Lynch-Staunton: There was no contract signed on October 7. You don't need a court to tell us that. There was no contract signed on October 7.
In report number one, on October 7, the legal agreement to privatize and redevelop Terminal 1 and 2 was made. There was no legal agreement to privatize on October 7. No.
Mr. Baker: I would say the agreement was made on the August 26th or 27th.
Senator Lynch-Staunton: Whatever, end of August.
Mr. Baker: Twenty-seventh.
Senator Lynch-Staunton: And this is why we are here, is the perpetuation of a myth, not to say a lie, a misinterpretation of what happened on October 7.
Now, it may have won a lot of votes at the time, but that's in the past. The tragedy is that, what the Liberal Party was successful on, they are trying to perpetuate as the Government of Canada, with all the negative, tragic fall-out that we have seen, maligning of individuals, maligning of the intentions of the Government of Canada at the time.
I just -- if anything comes out of this, I hope that lessons will be learned by future governments, to at least keep your political rhetoric to election campaigns and stop spilling it over at the expense of thousands of innocent Canadians just to score a few points as the government of Canada.
And I will asks Mrs. Bourgon again that tomorrow, and every other witness I can and that we can, until it is challenged that what happened on October 7 had to happen, had to happen, whether the Prime Minister agreed or not, or whether the Minister of Transport agreed or not, or whether Mr. whoever or Mrs. whoever agreed or not, the deal, the arrangement had been made as early as July, that everything proceeded at a certain pace. On October 7, the inevitable would happen. If conditions were met, the documents would be released. No one's authorization was needed, but if somebody refused, then one legal interpretation is that the Government of Canada would be in default.
But the fact is that the Government of Canada honours its word, at least had until then, and said, no, the commitments have been met, therefore release the documents.
Mr. Baker: That's correct, senator.
Senator Lynch-Staunton: And I think it is just incomprehensible that such distortions of the truth would be perpetuated in an official document of the Government of Canada called the Nixon report, suddenly seconded by another report, repeating the same thing in different words, and leading to C-22 which is a most heinous, unprecedented, mean-spirited legislation, all based on falsehoods. And I just hope that Mr. Nixon, who no doubt is following these proceedings, and who is hearing what he is hearing and reading what he's going to read, can justify the terrible damage that he has done to those who are before us today, and so many others who have come before us and others.
Thank you, Mr. Chairman.
The Chairman: Thank you very much, senator. That was only 20 minutes. Okay, Senator Bryden?
Senator Bryden: Just one final comment, and I'm not, believe me, going to enter into a legal exchange or legal argument with the witness or with Senator Lynch-Staunton, but the question of whether, on October 7, the contract was signed is there. It was done.
The question as to what the legal ramifications would have been had those documents not been executed on October 7th, at the moment, is the subject of legal opinion and, until at some point it is determined by someone, it depends on which side of the issue you are on, which legal opinion seems to be favourable. I just wanted to make that clear.
Senator Lynch-Staunton: I agree with you.
Senator Bryden: I mean we're not in a -- okay.
Now, I said I would try to find -- actually, someone found for me the reference that I made to Mr. Hession's -- I had called it his mission statement. He said, well, it wasn't that; it was the expectations of him by Paxport.
And it's in the transport committee hearing, and for those who need the reference, it's 7:6, and it is about half way -- 0936.
You can tell I'm not used to referring to this.
Anyway, in reply to a question from the Chairman, he said: Almost five years ago, I was appointed as president of Paxport, having spent half of my 32 years of working life in private sector and half in the public sector. The shareholders of Paxport believed I could help them be successful in acquiring the rights to develop and manage Terminals 1 and 2 at the international airport.
So that was his definition of what his -- the expectations were of him.
Then in reply to, without going through it all, of how he was going to do that, he said that, during the period -- and if you remember, Mr. Matthews, there was a long period when there was almost a hiatus, when the environmental assessment period and nothing was really happening -- and this is at 7:8: While the environmental assessment review process ran its course, in my role as head of Paxport, I continued to advocate the private sector alternative for Pearson terminal development. Through face-to-face meetings with officials of the department of Transport, Finance, Justice, Industry and International Trade, the Treasury Board and the Privy Council Office. I also met political staff at the Departments of Transport, Industry, and Finance, the Treasury Board, the Deputy Prime Minister's office, and the Prime Minister's office. As well, I met the ministers of the Crown including the ministers of Transport, Finance, and Industry, the Treasury Board, Opposition Transport and Finance critic and members of Parliament.
That's what he saw as at least his job during that period of time.
Now, what I'd like to do is, since the only documents that I have to work from are Mr. Hession's agenda books, that I would like to have distributed to members of the committee and to the witnesses --
Senator Lynch-Staunton: On a point of order, Mr. Chairman, before the documents are distributed -- I am sorry the Chairman is not here.
Senator Bryden: Well, I told him I wouldn't do anything controversial while he went to the washroom.
Senator Lynch-Staunton: Well, yesterday, we were given a document which was a confidential communication between the Clerk of the Privy Council and the Prime Minister of Canada which was an unprecedented release of a document which is considered amongst those in traditions of our parliamentary system to be confidential and privileged.
Now, the reason I bring this up is that Senator Murray was given the responsibility by Mr. Mulroney to go over all the documentation which carried his name and to release all those that would be helpful to the committee, except those which fell under the traditional confidentiality agreement or -- yes, the tradition of confidentiality.
Yesterday's document, which was released by Senator Kirby, was not authorized to be released by Senator Murray on behalf of the Prime Minister. How it got in here, I'm not questioning. I'm not questioning the content of the document. Whether it was embarrassing to the Prime Minister or not is irrelevant.
The point is that, yesterday, for the first time -- now, I haven't done much research on this --
Senator Kirby: It is not the first time.
Senator Lynch-Staunton: -- without the authority, without the approval of the Prime Minister in question, a confidential cabinet document was released.
Senator Kirby: Sorry, what was the cabinet document?
Senator Lynch-Staunton: The memo from Shortliffe to --
Senator Kirby: To the Prime Minister.
Senator Lynch-Staunton: This is advice to the Prime Minister. This is a form of documentation which is considered privileged and confidential. It is in the tradition of the parliamentary system. And Mr. Mulroney agreed that "everything else but" could be released, but he would not break tradition.
Somehow this document got out, and Mr. Counsel, Mr. Vice-Chairman then, I ask, I urge, I instruct -- no, I don't instruct. I ask that any documents which are suddenly said, "By the way, Mr. Witness, I have a document for you to see", be approved by you first to make sure that it meets the standards of documents which can be released and so we can --
Senator LeBreton: Relevant.
Senator Lynch-Staunton: Relevant, yes. But certainly do not break the traditions that were broken yesterday.
Senator Kirby: Mr. Chairman, just let me direct my questions directly to John.
Two things. Number one, the document that was used yesterday was a document that, like all the other documents, had come over from the justice department and was in the books, as indeed the counsel himself verified. That's the first point I want to establish.
So in a sense, there was nothing mysterious as you semi-alluded as to how I got the document.
Second, I think -- I have to go back and check but my memory is usually pretty good on these things, I think that, in fact, there have been other memoranda to both ministers and the Prime Minister that have been introduced previously in this committee through exactly the same process.
So your comment -- and I think, for Senator Lynch-Staunton, the problem is that he hasn't been here continuously. Not a criticism, just a statement of fact. And so you would not necessarily be aware of that, but the fact is that other documents of that type, in the sense that they are memorandum to a member of the cabinet, have been introduced as evidence.
Mr. Nelligan: I think the difficulty here is that we had already received several memoranda directed to the Prime Minister from the PCO. And it was agreed that they were appropriately before the committee because they were only reporting on facts, and they were neither advice to the Prime Minister or discussions of cabinet ministers.
When this one came to my attention, I contacted Mr. Shortliffe and he expressed his concern to me that, in this particular case, it wasn't simply a factual report but the handwritten report would appear to be part of advice to the Prime Minister and, on that ground, he took serious objection to it. At that point, it was felt it had been released for whatever reason, for whatever accident, and that he, of course, would then have to deal with that when he appeared before here.
But I do know that it was his opinion, and I've spoken to no one else on it, that this did in fact violate the rules as to -- that have been applied by the Department of Justice.
Senator Lynch-Staunton: It is a violation of the rules. It is clear cut. It is clear cut a violation of the rules --
Senator Kirby: -- the statements of Senator Lynch-Staunton --
Senator Lynch-Staunton: No, no. Let me finish.
Senator Kirby: It doesn't seem to me, Mr. Chairman, that that's not an issue that we --
Senator Lynch-Staunton: The issue is that, Senator Kirby, and you, as a former member of the PCO, should have the greatest of respect for the confidentiality of --
Senator Kirby: I do.
Senator Lynch-Staunton: -- documents, having seen it with a notation --
Senator Kirby: I happen to agree that --
Senator Lynch-Staunton: How many notations have you made on documents which are meant for personal and confidential files? I mean, is everything going to be wide open now and no one is going to be able to write anything down?
Senator Kirby: Mr. Chairman, I don't know the relevance of this discussion --
Senator Lynch-Staunton: The relevance is that a document was released yesterday -- and I'm not pointing the finger at you. The fact that you carried it in, doesn't mean it wasn't already available --
Senator Kirby: It was --
Senator Lynch-Staunton: It should not have been available in the first place.
Senator Kirby: That's a debateable --
Senator Lynch-Staunton: It is not debateable.
Senator Kirby: I believe it is. It is obviously a debateable subject. Reasonable people can differ on that question, and, you know, you can't just make ex cathedra statements that dogmatically assume your position is always right, like you always do. I'm sorry, that's exactly what he's doing.
Senator Lynch-Staunton: I'm asking that documentation which is considered in the tradition of confidentiality regarding advice to ministers and the Prime Minister be kept and be respected as confidential.
It has got nothing to do with the content of the document, whether it is embarrassing to the Prime Minister or to the author is irrelevant. This has never happened before. And let me remind you, Senator Kirby, how hard Prime Minister Mulroney fought not to release documentation on Petro-Canada and Petrofina. He was sued by the Auditor General, and it went to court, and he had a lot of respect for exactly that tradition.
So it's got nothing to do with Mulroney in this case. It's got something to do with one Prime Minister respecting his predecessor's -- the confidentiality of his predecessor's advice and responses. And this was violated yesterday.
Senator Kirby: The debate is over whether or not the memorandum constituted advice as opposed to a factual analysis. That's the debate. That's exactly what the debate is. He and I would disagree on that. All I am saying is, it is not as dogmatically clear as he says it is. That's all I said.
Senator LeBreton: And, as counsel has pointed out, Mr. Shortliffe is of the view that it was and that he will, when he appears, address it. To have it floated around, as Senator Lynch-Staunton said, in relation to Peter Coughlin, a witness who had no knowledge of it, is not relevant to the witness. And that's the point.
Senator Lynch-Staunton: And incomplete.
Senator LeBreton: And incomplete.
Senator Lynch-Staunton: That's secondary. The point -- well, I made my point, whether you agree with it or not. I would like to urge, Mr. Chairman, that before documents are pulled out of the thin air, no matter where they come from, and handed to a witness, they be shown to our counsel to make sure that they don't violate that tradition and custom of non-revelation of advice between two ministers. That's all I ask.
Mr. Nelligan: If I may express an --
Senator Lynch-Staunton: And I think it is essential that --
Mr. Nelligan: -- an administrative concern, we have been given heavy volumes of documents. It is not always possible for everyone to have reviewed them all before they are actually discussed in the committee. But certainly, in cases of that kind, where there is some serious concern that it might have inadvertently slipped through the confidentiality barriers, I would be grateful if senators could bring them to my attention before they are referred to in the hearing.
Senator Kirby: Happy to do that.
Mr. Nelligan: My difficulty was that I felt it was a breach, but it had already been disclosed, and once it was disclosed, if there was any harm, technical or otherwise, it was done we would have to deal with it. You can't ignore facts when they come out.
But, certainly, I think where a document doesn't relate to the witness concerned, and there is some doubt about its admissibility in a proper sense, perhaps it should be discussed between me and the senator before we do anything.
Dealing with the specific document that Senator Bryden has referred to now, I have, of course, looked over the document. It is not a government document at all, and I don't think there are any objections to its production or reference.
Senator Kirby: And the witness offered to provide it to us when he was here.
Mr. Nelligan: That's right. So it doesn't come within any strictures of any kind.
Senator Lynch-Staunton: But I am using this occasion to make a point which I think is essential. You know, the government is engaged in selective presentation documentation. I think they have gone a bit far.
Mr. Nelligan: I may say that I spoke to the justice officers at the time and they were suitably repentant, and I am hoping that it won't happen again.
Senator Lynch-Staunton: Are these the gumshoes that are being paid such a high price?
Mr. Nelligan: All of my contacts have rubber soles on their shoes.
The Chairman: Senator Bryden?
Senator Bryden: It is always very entertaining just to listen to the rhetoric.
Senator LeBreton: Don't think we need any lessons in rhetoric from the Grits. Good Lord.
Senator Lynch-Staunton: Let's find out about the roast in Mississauga then.
Senator LeBreton: Boy, I tell you, there's a tea kettle calling the pot black. Wow.
Senator Lynch-Staunton: That's more pertinent to our committee hearing than respecting tradition.
Senator Bryden: I guess I'll wait until the witness returns.
Senator Kirby: Mr. Chairman, is it hotter in here today than it has been? Have they done something with the lights, or is there a Public Works rule that, after September 1, the furnace comes on? Do I really understand the problem? Or the air conditioning goes off.
Just as a serious comment, is there something -- we can't do anything today, but can we complain to somebody to get something done? It really is uncomfortable.
The Chairman: I can't substantiate it but I think that somebody from Lindquist, Avey snuck in last night.
Senator Bryden: Anyway, I hope you all have as good a supper as you obviously had a lunch.
What I am providing now is that Mr. Hession, who was employed by the Matthews -- by Paxport, provided to the committee copies of his diaries for years 1991, 1992 and 1993. And the reason for looking at these diaries is that it gives some specifics throughout this of the indications of who the people were that Mr. Hession met with and at what times.
And, Mr. Matthews, in some instances, not all, there are reports that he had written to you reporting on those meetings. And in some of those, I assume, he may very well have called you or you participated in the meeting. So if you --
Mr. Matthews: I preferred verbal communications than written communications. It took less time.
Senator Bryden: Yes, I can understand the phone is quite quick. But that is really why perhaps you can shed light on some of these, and I know that some of this is quite some time ago.
Mr. Matthews: If I can, I will.
Senator Bryden: Okay. If you look at the 1991 -- I think that's the one that I had given you. If you would look at Thursday, the 11th of January, you will see there, at 12 o'clock noon, there was either -- there was a meeting with Mr. Shortliffe and, at 12:30, a lunch with -- it looks like Gerard Veilleux?
Mr. Matthews: Where are you?
Mr. Baker: January 17th, I'm sorry. My staple is over the -- it is January 17th.
And you see the reference to, at 12 o'clock, Shortliffe, and lunch with Gerard Veilleux, if that's the way you pronounce that. Do you know what the purpose of the meeting was or the purpose of that particular lunch? It is V-E-I-L-L-E-U-X.
Mr. Matthews: I don't know what the meeting at 12:00 is about, and I don't know a Gerard.
Senator Bryden: You don't know who he was?
Senator LeBreton: President of CBC.
Senator Bryden: At that time?
Senator LeBreton: Treasury Board, at the time.
Mr. Matthews: Don't know him.
Senator Tkachuk: Can you tell me, is Mr. Matthews going to be at any of these meetings?
Senator Bryden: Well, as he said -- we know that there are memos reporting some of these meetings, the results of these meeting from Mr. Hession to Mr. Matthews.
Mr. Matthews: I want to know that he certainly didn't report to me all of the meetings he went to. Ray Hession is a very hard-working guy and a very organized person and he covers a lot of territory. And I had absolute confidence in him. He had a fundamental objective, well stated, and he worked to that end.
Senator Bryden: Believe me, Mr. Matthews, I would far rather be going through your day book, rather than his, but you don't keep one.
Mr. Matthews: I don't keep one.
Senator Bryden: So I am just trying to determine --
Mr. Baker: Do you have a memo relating to that meeting?
Senator Bryden: I don't have a memo relating to that meeting?
Mr. Baker: You do?
Senator Bryden: I do not. When I -- every one that I do have, I certainly will make available to you. There's only a few that I do. And I just want to -- I just initially want to establish with you a pattern, and then I would try to refer to the ones that I think you might be able to be helpful with --
Senator LeBreton: Just as a point of clarification, senator, Mr. Shortliffe, in January of 991 -- I'm just looking through my chronology -- was he then the deputy Minister of Transport. Is that --
Mr. Nelligan: Yes.
Senator Stewart: Are you sure of that?
Mr. Matthews: I'm not sure. I don't think so.
Senator Stewart: Or was he not associate secretary of the cabinet?
Mr. Matthews: I have no idea. I don't know what his job was.
Senator LeBreton: I don't know. I was just asking.
Senator Bryden: The information I have -- and if you ask me to swear that this is absolutely correct, I can't -- but the information I have is that he was deputy clerk of the Privy Council.
Mr. Nelligan: I am looking for that chart that we had. Maybe I don't have it in my book anymore.
Sorry, he retired from the department in 1990.
Senator Bryden: And became?
Mr. Nelligan: I think he then went to PCO.
Senator Stewart: In what office? Was he not Deputy Clerk of the Privy Council and associate secretary to the cabinet?
Mr. Nelligan: Yeah, that isn't in our chart, because it didn't show it, but he could well be.
Senator Bryden: Okay. The next one that I would like to refer to is, on Monday, April 15th -- there are others in between, but when it was apparent he was doing --
Mr. Matthews: You mean, he doesn't mention me until April 15th?
Senator Bryden: There you go.
Mr. Matthews: And he doesn't mention me there.
Senator Bryden: On April 15, there was a meeting with Gerry -- is it Berigan? Yeah, department. And Wayne Power. Andy Pascoe represented the minister's office.
Now, I do have a document for that one. It's a memo. I better dig it out so I get the reference correct.
Mr. Matthews: I don't see Andy -- you are Monday, April 15?
Senator Bryden: Yeah.
Mr. Matthews: I don't see Andy Pascoe there.
Senator Bryden: Let's just see. There is a memo which is Tab C for those who are finding it in my documents. And it is dated April 16, 1991, to Don Matthews, Jack Matthews, Lorne Sinclair, Trevor Carnahoff, from Ray Hession, the subject of Pearson international airport.
Mr. Baker: Senator, is this -- can you refresh my memory? Is this the sequence of meetings that Transport Canada had with each of the proponents, the Canadian Airports Authority and with -- Transport Canada invited each of the proponents to meet and give input into the RFP process?
Senator Bryden: When was the RFP process -- this is April 16, 1991.
Mr. Baker: That's correct. And I believe there was a series of meetings at that time that Transport Canada held with -- yes, it was with the Huang and Danczkay -- ADDG organization, and with Canadian Airports Authority, which was the British Airports Authority.
Mr. Nelligan: The last paragraph makes that clear.
Mr. Baker: I just wanted to get the context, senator, thank you.
Senator Bryden: One of the purposes of referring to it is that the people who were there -- because they show up at different roles at other times. Representing the department was Gerry Berigan, Wayne Power. Andy Pascoe represented the minister's office, and Andy Pascoe, as we know later, was hired by Mr. Hession as a consultant, for want of a better word, to work on the project. And then someone from Coopers & Lybrand.
There were a number of issues that were argued at that meeting, as you go through this memo. And the conclusion, I think, is that the meeting went well. But in -- the purpose of this is to at least establish, Mr. Matthews, that he did communicate with you about these meetings, at least from time to time?
Mr. Matthews: He would send me a copy, but the important person there that he would be reporting to, would be Jack Matthews.
Senator Bryden: And I'll just go through -- I have a series of tabs, as we go through this, but I will skip through to a meeting -- to a memo of June 21, 1991.
Mr. Matthews: Do you have a copy of that?
Senator Bryden: Yes, I do.
Mr. Baker: June 1st, senator?
Senator Bryden: June 21st. And it is not -- the identification is 642, at the top of the document, and it is F in my tabulation. It is a memo to Don Matthews, Jack Matthews, Ray Hession. From Ray Hession. Dated June 21, 1991. I believe the reporters are getting copies of these.
Would you, Mr. Matthews, read this one into the record? It is quite brief. It is addressed to you.
Mr. Matthews: Can the Chairman not just have it put in the record? If you are asking me if I remember receiving this, I don't.
Senator Bryden: You don't remember receiving this.
Mr. Matthews: Of course not.
Senator Bryden: Okay. I will draw your attention to another document that's dated July 11, 1991.
Mr. Matthews: There is nothing in Thursday, June 20th --
Mr. Baker: In the diaries, was there something, or are we on the wrong day?
Senator Bryden: No, I'm trying not to do this twice, so I am trying to do the documents in chronological order, as well as -- if one reports a meeting, I refer to the meeting as well.
Mr. Matthews: But that indicates he didn't show it in his diary. He apparently spoke to Madam Labelle on Thursday, the 20th of June, according to this document, but it is not in this diary.
Mr. Nelligan: He was in Florida.
Mr. Matthews: I don't know how he spoke to her. He said yesterday.
Mr. Nelligan: It notes that he is back from Florida on Saturday, so I'm assuming he must have made a phone call and dictated a memo over the phone. Because his meeting with Corbeil is in his diary for Monday.
Senator Stewart: You refer to the meeting with the Minister of Transport on Monday, June 24?
Mr. Nelligan: That's right. That's in his diary. But apparently, he must have dictated this memo from Florida, because he didn't get back until Saturday afternoon.
Senator Bryden: And, once again, referring to a memorandum, and it's item G, and it's directed to Don Matthews and Jack Matthews, from Ray Hession. And it's the Pearson proposal call. And in that, he reports on meeting with deputy minister Huguette Labelle on Tuesday, July 9th, and she confirms that the call will likely be on the minister's desk soon. The minister will recommend an early proposal call if he is supported by the other key ministers.
And goes on to identify them as Wilson, McDougall, Mazankowski, McDermid, and André. Those, I take it, are the key ministers, at least in Mr. Hession's opinion.
Mr. Baker: That's July 11. I think our volume was mis-stapled. I don't have an 11th, and it's backwards.
Senator Bryden: The meeting that he reports in the memo, it appears that the meeting occurred on July 9.
Mr. Matthews: I guess they didn't approve of it, because they didn't get it.
Mr. Baker: It didn't happen.
Senator Bryden: He could -- I said a meeting. He says, "I spoke this morning", which could have been by phone as per results of a meeting on the 9th. So you have no recollection of receiving this?
Mr. Matthews: No, that doesn't stand out in my mind.
Mr. Baker: Is there more to the memo than one page, senator?
Senator Bryden: There should be. It appears as though it ends abruptly, doesn't it? All that I have is the one page.
Mr. Baker: There is no period, that's all. I'm just wondering what advice Mr. Barbeau was giving at the bottom.
Senator Bryden: Anyway, I -- it is more to try and determine the lines of authority and whether there is anything that the present witnesses for Paxport and the Matthews Group can assist us here. The next one --
Mr. Matthews: I'm sorry, I missed what you just said.
Senator Bryden: I'm trying to find an area that you might be aware of that could be of help to the committee as we go through this.
Mr. Matthews: You know, I'm aware generally that we went through quite a period when we thought there was going to be an RFP, but there never was an RFP, and, frankly, I started to wonder whether there ever would be an RFP.
Senator Bryden: Yes. I assumed that I would be -- that's why I put in the hours, I guess. If you put in the hours -- that's why we get paid the big bucks is to be able to go through all this stuff.
Senator LeBreton: I don't know what you got paid for being the campaign chairman, but I don't make big bucks.
Senator Bryden: But I also really wanted the opportunity to get these books, which we requested, on the record. That is, actually presented to the committee, so that in our preparation of our report, or in whatever fashion, that we have these documents -- that's why I asked for them in the first place -- to refer to. And rather than calling Mr. Hession back, he gave them in, I just need to get them in on the record and try and find if there are areas in which -- now, just, you might be able to help me here because I'm not clear on who -- in the agenda, on Tuesday, the 20th of August, at 4 o'clock, is marked in the -- well, at 10 o'clock is marked a meeting with Fred Doucette, and we all know who he is.
But at 4 o'clock, there is a meeting with Jim Good. And under that, it says, "Sam Wakeham's contact". Can you tell me, do you know either one of those people?
Mr. Matthews: Yes, I know both of them.
Senator Bryden: Have you known them -- what does Sam Wakeham do?
Mr. Matthews: Sam Wakeham is a partner of Gordon Baker.
Senator Bryden: Okay. And Jim Good?
Mr. Matthews: Jim Good works with Robert Foster in Canada Capital, and he worked for -- in Ottawa here, for John Crosbie.
Senator Bryden: Have you known Sam Wakeham for quite some time?
Mr. Matthews: Oh, I've known Sam for -- I don't know, 20 or 25 years.
Senator Bryden: Do you know if Sam Wakeham was also a friend of Mr. Mulroney's?
Mr. Matthews: Oh, yeah, he is, yeah.
Senator Bryden: Do you know what his involvement in this matter would be with Mr. Hession?
Mr. Matthews: At that meeting?
Senator Bryden: Yeah, that Mr. Hession would be meeting with him?
Mr. Matthews: I have no idea.
Senator Bryden: Because I am assuming throughout that he's a full-time employee of yours that's being paid very well -- not Wakeham. I'm talking about Mr. Hession.
Mr. Matthews: Wait a minute. He had -- yeah, Hession had lots of personal operations going on. You just can't go through his diary and say that everybody that is mentioned here was involved in his endeavour.
Senator Bryden: No, and that may be the case. But, of course, he went through with counsel and took out all of the personal and irrelevant stuff -- or had the right to take out all the personal and irrelevant stuff?
Mr. Matthews: Did he go through with counsel, is that the idea? Did Ray --
Mr. Nelligan: He took out some of the personal family stuff. I don't think he took anything else out. He did take out some references to some business contacts that he had at the very beginning, before he started with Matthews, because they predated the Matthews connection.
Mr. Matthews: And he had the right to continue that relationship.
Senator Stewart: Mr. Chairman, may I ask a supplementary question? I've asked Senator Bryden and he is agreeable.
Did I understand you to say that Mr. Sam Wakeham was a long-time partner of Mr. Baker?
Mr. Nelligan: No, he didn't say that.
Mr. Baker: He is a -- well, an associate of the firm for -- I don't know, I guess about 10 years.
Mr. Matthews: Quite a while.
Senator LeBreton: In the same law firm?
Mr. Baker: M-hmm.
Senator Stewart: And that was the beginning of his employment as a lawyer, or did he come to you from another firm?
Mr. Baker: No, I think that was the beginning of his practice. He had practised previously with the Ontario Securities Commission, but --
Senator Stewart: So you are saying that he came to you about 1985, is that right?
Mr. Baker: I can't say for sure, senator. I'm just trying to remember.
Senator Stewart: Roughly.
Senator Lynch-Staunton: Are we talking about Pearson here or members of the Ontario bar?
Mr. Baker: I don't recall exactly when --
Senator Stewart: Whether it is five years, eight years, ten years?
Mr. Baker: I think it's ten years.
Senator Stewart: I'm sorry, I can't hear you.
Mr. Baker: I think it must be ten years or so. I can't remember over the Conservatives --
Senator Lynch-Staunton: -- fresh air up here.
Mr. Baker: It's about ten years.
Senator Stewart: I suppose it's a matter of record somewhere.
Mr. Baker: It's a matter of record somewhere, but I just can't recall.
Senator Bryden: On Monday, the 9th of September, just to note that, at 11:30 on that day, in pursuing his endeavours presumably, Mr. Hession was playing golf at the Lachute Golf Club with Jean Corbeil.
Mr. Baker: What date?
Senator Bryden: It was on Monday, the 9th of September. The heading says Lachute, and at 11:30 it says tee-off, shotgun, Bud Taylor, Stan Kerr, Brian Olford and Jean Corbeil.
Mr. Baker: What's -- Bud Taylor -- what's M-E -- I don't know what the word is above Jean Corbeil.
Senator Lynch-Staunton: Probably a bad shot that he identified.
Mr. Baker: I can't tell, because if it is tee-off and it's a foursome, there's five people. Well, I don't know. What is that? If it is another one, it is six, but I can't figure out what it is.
Senator Bryden: Now, and as I indicated, I could go through each one. What I'm trying to do --
Mr. Baker: Fine.
Senator Bryden: -- is to try and find some things to which the witnesses we have can give some evidence, I guess.
Mr. Matthews: They didn't invite me to play golf.
Senator Bryden: He didn't? That's funny, he invited an awful lot of people.
The rest of that week is pretty well whited out. Then the next one that I just draw your attention to luncheon on Tuesday, September 17, in Ottawa, at the Rideau Club with Phil Evershed who I believe was chief of staff, at that time, to finance minister Don Mazankowski. No?
Mr. Matthews: I don't know.
Senator Bryden: Chief of staff for the transport minister?
Mr. Baker: What date was that? These are out of order.
Senator Bryden: Tuesday, the 17th of September.
Mr. Baker: I am working backwards. They have stapled them backwards.
Senator Bryden: That's what happens when they get done at 6 o'clock in the morning, unfortunately. There might be a better copy.
Mr. Baker: We are working our way through now, backwards.
Senator Lynch-Staunton: What was the point of the lunch, senator? You asked about a lunch with a certain individual, and then you let it hang in the air. Who is he?
Senator Bryden: No, as I indicated --
Senator Lynch-Staunton: What was the point of asking who Mr. Evershed is? You said he was chief of staff of the minister of finance? There is some uncertainty about that?
Senator Bryden: I am assume it is either finance or transport.
Senator Lynch-Staunton: But what is the relevancy of whoever it is you are talking about having lunch with somebody who is the chief of staff of a minister?
Senator Bryden: The relevancy is this. We are trying to establish that Mr. Hession --
Senator LeBreton: Did his job.
Senator Bryden: -- was doing his job, I am asking, that he was hired for by lobbying all of these people.
Senator Lynch-Staunton: Right. No, he was president of Paxport at the time. He wasn't a lobbyist.
Senator Bryden: Did he report -- --
Mr. Baker: Sorry, under the Lobbyist Act, he is not a lobbyist, if I understand the terms.
Senator Bryden: We had this discussion. He was lobbying, he admitted, but he was not a lobbyist, at least not at that time. He is now.
Mr. Baker: I surrender.
Senator Bryden: On November 28, he attended a PM's dinner, and that is, if you -- no, I'm sorry, I have it here. PM's dinner, Harbour Castle.
Senator Lynch-Staunton: I was there. That was a good dinner, too, $500, we had 3,000 people. Excellent.
Senator Bryden: Were you there, Mr. Matthews?
Mr. Matthews: Oh, I'm sure I was. I'm not mentioned here, though. I'm disappointed.
Mr. Baker: Wood Gundy would be Gundy, and AGRA would be AGRA, being one of the members of the consortium.
Senator Lynch-Staunton: All those who go to the Liberal fundraising dinners were there that day.
Senator Bryden: Do you recall, did you talk to Mr. Mulroney that night?
Mr. Matthews: I don't know. I would be surprised, because he has other things to do that day, as kind of a busy thing. But, you know, we used to have a special meeting of the 500 Club before the dinner, and the Prime Minister would usually come to that for 15 minutes or something, but he really didn't have a lot of time. I don't specifically remember this one.
Senator Bryden: Well, you saw him regularly and that's when --
Senator Lynch-Staunton: Careful.
Mr. Matthews: Now, wait a minute. I told you I did not see him regularly. I told you that. Please do not do that to me. I can speak for myself.
Senator Bryden: Okay. But did you say that you, from time to time, attended 24 Sussex Drive?
Mr. Matthews: Not from time to time. Occasionally.
Senator Bryden: Occasionally. What is the difference?
Mr. Matthews: Probably 10 times in eight years.
Senator Bryden: Ten times in eight years in the Prime Minister's residence. Not bad.
Mr. Matthews: Well, I don't know.
Senator Lynch-Staunton: Wait a minute. If you want to insinuate, Senator Bryden, you are very successful at it. I've been to these gatherings, too. I have known Prime Minister Mulroney as well as anybody around this table. In eight years, I've been to Sussex Drive four times. And out of those, three times, there were about 800 people there. Okay? It was a quick shake of the hands, and that was the end of it.
I suspect that Mr. Matthews' visit was along the same line.
Mr. Matthews: Absolutely.
Senator Lynch-Staunton: Thank you. And Mr. Chrétien, by the way, is also entertaining supporters and fundraisers and members of the Laurier Club along the same lines, and we don't raise that as an issue ask whether Mr. Bronfman was there or Senator Kolber was there? And did you speak to Mr. Chrétien? Why don't we stick to the issue of the Pearson agreements.
Senator Bryden: Mr. Chairman, I would also like to continue, if I may.
Senator Lynch-Staunton: I am trying to give you a chance. Just stick to the issue.
Senator Bryden: I am trying to work with the best evidence I have available.
Senator Jessiman: It's not much, is it?
Senator Bryden: I wish there were more.
Senator Jessiman: I'm sure you were.
Senator Lynch-Staunton: You have a presentation from Mr. Baker which you call a "monologue of two hours", which is a complete repudiation of everything the government's done since the Nixon report.
Senator Jessiman: Why don't you examine him on that?
Senator Lynch-Staunton: So challenge him on that.
Senator Jessiman: That's right.
Senator Bryden: People will make their own conclusions as to the summation that Mr. Baker made today and to the opinions he's expressed.
Senator Lynch-Staunton: So we'll read other people's diaries.
Senator Tkachuk: I just want to get on the record, Mr. Chairman, that I was away but I wanted to make sure that...I mean, I've been to a couple of them too, you know, at the Prime Minister's residence. I just felt bad that I wasn't here to be able to say that I was.
Senator Kirby: In the last year or so?
Senator Tkachuk: No, not in the last year or so.
Senator Lynch-Staunton: Not for a while.
Senator Kirby: Just thought I'd ask.
Senator Tkachuk: I'm sure you have, though.
Senator Kirby: As a matter of fact, I haven't -- for what it's worth -- not for a decade.
The Chairman: Well, where did I go wrong? I was only there once.
Senator Kirby: Well, nine months is a short time.
Senator Tkachuk: Did you get past the tent, though, Mr. Chairman? You have to get past the tent.
Mr. Matthews: I probably over stated that, then. I want to get in sink with the senators here. I do not want to say that I've done it more than they have.
Senator Bryden: No, but it's rather remarkable that with a conservative number you were still higher than anybody else in the room, though, isn't it?
If you look at the 1992 diary, December the seventh, I will just go to that.
Mr. Matthews: December.
Senator Bryden: The seventh.
Mr. Matthews: Of '92?
Senator Bryden: Yes.
Mr. Matthews: So we're jumping a year?
Senator Bryden: Yes. Did you get all three years?
Mr. Matthews: Yes.
Senator Bryden: You have all three years? Now, I refer you to that only to point out that at 11 o'clock on the 7th of December there's a reference to "Press Conference". I presume that would be the press conference announcing---
Mr. Matthews: I assume so.
Senator Bryden: -- that you'd been selected as the best overall proposal.
Now, just prior to that, Mr. Matthews, I believe that according to Mr. Hession -- Well, let me ask it this way. There was a contract of employment between Paxport and the Matthews group that awarded him a certain bonus if the contract was completed and a pension or life if it was actually signed. Was that not entered into some time around this period of time? I'm asking you the question on it.
Mr. Matthews: Gordon was intimately involved in that discussion, so I'd ask him to respond.
Mr. Baker: I can't recall exactly. You may be right, senator; it may have been December. He had an ongoing contract and ongoing negotiations on his contract. But I can't say for sure when that---
Mr. Matthews: You may have it; I don't know.
Senator Bryden: I don't have it in front of me, but I could have it tomorrow because I can find it. I believe there was a specific date in his --
Mr. Baker: There was a contract with Mr. Hession.
Senator Bryden: And then on or about then he was replaced as president by your son, Jack Matthews?
Mr. Matthews: That is correct.
Senator Kirby: Now, when I asked Mr. Hession if he was fired he said, "No", and I'm sure this is correct -- and I can get the quote: "I was constructively terminated."
Senator Lynch-Staunton: So what? So what?
Senator Bryden: Why was he offered this contract a few days before and then "constructively terminated" from his position on or about the time the best overall proposal was awarded?
Mr. Baker: Senator, he had just before. First of all, his contract had started earlier and, as I said, he had been negotiating it over a period of time. I don't recall when exactly that particular contract was signed but Mr. Hession has said he was constructively dismissed and the matter is a subject of litigation. So I just want to make sure now but if you'd repeat your question, we may or may not want to answer that because of the litigation.
Senator Bryden: Well, I know we have all kinds of privileges, and so on, by which we don't answer questions but my question really is: Why did this occur and why not -- presumably there must have been a reason that he thought it was wrongful or he wouldn't be suing you. And why this timing?
Mr. Matthews: Senator, there is a legitimate explanation but my solicitor advises me that, because we're in litigation, I shouldn't give it to you now. But as soon as the litigation is finished---
Mr. Baker: I'm concerned about having Mr. Matthews comment on litigation that's currently in progress relating to Mr. Hession's contract. And you're asking "Why?" And, of course, you might say that might be something that might be involved in the litigation, senator. As you've said, I think, many times here, you're a lawyer yourself, or did practice law perhaps -- I don't know if you're still practising.
Mr. Matthews: If you revisit my comments about Mr. Hession in the outline that I gave this morning you will understand my appreciation of him.
Senator Bryden: So there's, well, one other question that is probably not involved in the litigation. Mr. Hession said that two or three days after the award, on the 7th of December, a department official, who he couldn't say who it was, told him that basically that there would be a move to try and get the parties together.
Mr. Baker: No, I do not think that's what he said.
Senator Bryden: Well, once again---
Mr. Baker: Have you got the transcript? I believe he said---
Senator Lynch-Staunton: Yeah, where's the quotation? More hearsay!
Mr. Baker: No, it was for the possibilities of synergies. I believe that's the quote, or explore the synergies. He did not say "merger".
Mr. Matthews: Anyhow, let me tell you that I didn't know anything about that. I learned about that when you learned about it.
Senator Bryden: Okay. To the best of your recollection.
Senator Lynch-Staunton: A supplementary, then, Mr. Chairman, if I may. Whatever the anonymous transport official said to Mr. Hession was not passed on to you at the time?
Mr. Matthews: Well, if it was, I don't remember it. And you have to bear in mind the circumstances. Ray Hession at that time really believed that the terminals should be operated independently. He felt very strongly about that and I respected that and I, indeed, supported him in that position until it was expressed to me in very clear circumstances that that was not good business on our part. But, you know, that was Ray's position. So that, even though somebody may have said that, they -- I do not have any recollection of a conversation in this regard with Ray Hession.
Senator Bryden: Mr. Baker, you're cautioning Mr. Matthews because you're concerned with the litigation, or--
Mr. Baker: Yes.
Senator Bryden: I see. When did you learn that there was a possibility, or that discussions about a merger were possible, Mr. Matthews?
Mr. Matthews: Did you not listen to what I said this morning?
Senator Bryden: Well, I thought I did.
Senator Lynch-Staunton: He laid it out for you.
Mr. Matthews: Well, I laid it out very clearly. If you get the---
Senator Bryden: As sometimes happens even in court, would you mind, for clarity, just repeating?
Mr. Matthews: Well I'm sure that they're going to print it up for you tonight and you can have it first thing in the morning.
Senator Bryden: Would you mind, though, just answering the question? When did you first hear of it?
Mr. Matthews: Well, I made the phone call. You will remember me going through the phone call.
Senator Bryden: Yes.
Mr. Matthews: And then we subsequently met and then after that meeting Jack Matthews and Peter Coughlin, together with two others, got together and explored how they would work together and out of that I was advised subsequently that there was a good synergy and that we should expand the discussions to include the possibility of merging.
Senator Bryden: Can I ask you -- I don't think you've covered this morning: Was Ray Hession involved in those discussions?
Mr. Matthews: No, I've just told you that he was not in that loop.
Senator Bryden: Okay.
Senator Stewart: When was he dropped from the loop?
Mr. Matthews: He was never in that particular loop.
Senator Stewart: No, but when was he employed and active on behalf of you or your companies?
Mr. Matthews: He was at that time.
Senator Stewart: Up until when?
Mr. Matthews: No, he was at that time employed and active in the company.
Senator Stewart: And he did not report to you what he said an officer of the Department of Transport---
Mr. Matthews: I don't recall any discussion along those lines.
Senator Stewart: But does that imply that you imply that he might have and that you might have forgotten it, which is possible?
Mr. Matthews: I'm just telling you that I don't recollect it.
Senator Stewart: You don't remember it?
Mr. Baker: To finish your -- You asked how long he was, and it was until October of '93. Yes, he was an employee and then there were negotiations and he went on a consulting arrangement.
Senator Stewart: Can I ask another question?
Senator Bryden: Certainly; everybody else is.
Senator Stewart: I didn't quite understand what Mr. Matthews said earlier about Mr. Hession's views on how the Pearson airport should be operated. I gathered that there was a disagreement between you and Mr. Hession. Do you know what I'm referring to -- just about?
Mr. Matthews: No, I think I should -- There were some very sensitive discussions commenced with the Claridge group. I decided, unilaterally and arbitrarily, that the people that would be involved in that discussion from our side would be Gordon Baker, Jack Matthews and Peter Kozicz and no one else. So that that meant that for that period of time -- relatively short but that period of time -- Ray Hession was not part of that loop. But Ray was a very valued employee.
Senator Stewart: But earlier you said something -- of course, the record will show what you said but I don't know the exact words and I'm trying to undertaken this -- that he had views on the operation of---
Mr. Matthews: Indeed, he did; indeed, he did.
Senator Stewart: And were these the same as yours?
Mr. Matthews: I supported his position until it became apparent that the synergies between making a merger and not making a merger were overwhelming.
Senator Stewart: And that would be about December 10 of 199--
Mr. Matthews: No, no. That would be about the middle of January. No?
Mr. Baker: I was involved in those discussions.
Mr. Matthews: Gordon was very much involved.
Mr. Baker: I was involved in those discussions, so.
Senator Stewart: I'm sorry?
Mr. Baker: It would have been very shortly.
Mr. Matthews: The end of December?
Mr. Baker: It would have been end of December. It didn't take long to decide that there were synergies but I think it was probably the week between Christmas and New Years that there were synergies that would be advantageous. I think Mr. Hession testified that in his view he thought that the competitive position that he argued for on the RFP was his view and the day that I set out the view that -- you'd have to say my view and also the view that was presented by the competition bureau and accepted by the Competition Bureau was an extensive analysis. In fact, the Competition Bureau has 74 documents and reports, et cetera, relating to Terminals 1, 2 and 3 on the competition issues that are privileged and confidential documents that have not been produced in the litigation relating to their determination of this issue.
Senator Stewart: Thanks.
Senator Bryden: Without referring to the agenda item because its there, on December the 21st, Mr. Hession met with transport minister Jean Corbeil. At that time, Mr. Matthews, do you know whether Minister Corbeil knew about the possibility of a merger?
Senator Lynch-Staunton: Ask Corbeil.
Senator Jessiman: Ask Corbeil.
Senator Lynch-Staunton: He doesn't ask the witness about anything.
Mr. Matthews: I just don't know.
Senator Bryden: You don't know.
Mr. Matthews: That was a time when---
Senator Bryden: Your role was pretty peripheral at that time.
Mr. Baker: Well, senator, I did not go to that meeting but I was in Montreal at the time and I can't recall whether I was advised that Mr. Corbeil was told or not. So, I suspect -- I don't think he was but I can't answer that question. Even I can't answer it and I was in Montreal at the time, so.
Senator Bryden: Well, Montreal is quite a big city -- at least it's big for us.
Mr. Baker: Yes. I can't recall what he was told and he's coming, so he should be able to tell you.
Senator Bryden: I'm referring to the 19933 agenda and on Tuesday the 20 this of July at 2:30 Mr. Hession appears to have had a meeting with a Jodi White at the Langevin Block.
Senator Lynch-Staunton: A fine person.
Mr. Baker: Which date?
Senator Bryden: Tuesday, the 20th of July.
Senator Jessiman: What year?
Senator Bryden: 1993.
Mr. Matthews: 1993.
Senator Bryden: While the negotiations were going on. At that time was Miss White the chief of staff for Prime Minister Kim Campbell?
Senator Lynch-Staunton: Yes she was. A very fine one, too.
Senator Bryden: And I noticed that there's a further reference on the same day. Did Mr. Hession have occasion to -- we're getting awfully close to when this deal was concluded. Did he have any occasion to communicate the results of this meeting or whether it involved his job at this stage?
Mr. Matthews: I don't remember.
Senator Bryden: You don't know.
Senator Tkachuk: Well, was he president of Paxport at this time?
Senator Bryden: Well he still carries a president's card, as you remember.
Senator Tkachuk: Yes, but was he president of Paxport at this time, July 1993?
Mr. Baker: He was a consultant. His job at that time -- that's in the middle of the negotiations.
Senator Lynch-Staunton: Why didn't you ask all these questions of Hession when he was here?
Mr. Baker: Yes. You should have.
Senator Bryden: One of the reasons was--- Well, I did ask a good number from the documents that he had.
Senator Stewart: He was the employer.
Mr. Baker: He was in charge of industrial benefits negotiations and employee transfer negotiations.
Senator Lynch-Staunton: Boy, you're reduced to reading diaries!
Senator Bryden: It would have been nice, actually, if we had had these in advance but they were not at last---
Senator Jessiman: We get gouges, Nixons, Crosbies.
Senator LeBreton: Maybe we can get Mr. Bronfman's, too and look at---
Senator Bryden: Even with that, it's interesting the amount of whiting out that is there.
Senator Lynch-Staunton: Yeah. You're lucky to even have them.
Senator Bryden: Mr. Chairman,---
Senator LeBreton: Remind them that they have to keep a diary.
Senator Bryden: Mr. Chairman, I have not completed but I have more than enough to do that would take me approximately an hour tomorrow and if other people want turns -- and I would suggest, that being the case, I would be centring in on an entirely different area, the issue of financeability, part of what Senator Jessiman raised about the financial strength of the Matthews group, as well as the financeability of the project and I know of no other way to go through this than to go through the documents that are on file and ask the witness to answer what he can on it.
Mr. Baker: Senator, you expect to be an hour? That would take us to five.
Senator Jessiman: Six.
Mr. Baker: It is almost five now, six. What is the normal?
The Chairman: We adjourn at 5 o'clock. Now for the assistance of the committee, because there was some interesting testimony there, on page -- these are in the blues, so-called -- on August 2 on page 1130-6 I am questioning Mr. Hession about his conversion on the road to Damascus, which clearly would indicate to a reader that he was all in favour of competition. He was making the case for competition all the way through and he was fighting for the RFP for Paxport. Then he switches. Now he's making the case for synergy after the marriage is consummated, or whatever you call it, which would appear to me to indicate that Mr. Matthews is of the same mind. He says that the case for synergy has been made. But quite clearly there's competition between these two parties because Hession is making the case for competition all the way through and then switches after the Mergeco is formed to be in favour of the synergy argument. Anyway, that's on that page, 1130-60, if you want to question him tomorrow, too.
Senator Bryden: Maybe tomorrow. I don't think I've ever questioned Mr. Hession's flexibility.
Senator Tkachuk: I think I was on the list, but it's almost 5 o'clock now. I would like to start in the morning and carry through my half hour and then I'll basically be done unless something else comes up. And then it can go back to Mr. Bryden, or Mr. Bryden can start. It doesn't really matter.
The Chairman: We have six minutes.
Senator Jessiman: I'd just like to know. I know you're going to make a decision but I'd like to ask Mr. Bryden through you: Are you still asking to have the chairman to have this other gentlemen come, this lawyer that you spoke of come and give evidence? Are you still asking for that?
Senator Bryden: No. What I said was he was prepared to appear. I'll have to read the transcript but I believe what I said was that he was prepared to appear to give evidence.
Senator LeBreton: And we accept.
Senator Bryden: And then someone suggested that if that were the case, that Mr. Matthews would appear. And I believe -- I'll look at the transcript; I may have said something different -- it was left in the hands of the chairman and counsel to determine whether it was relevant and appropriate that these people appear and I said I would be governed by their decision.
Senator LeBreton: Well, I don't think Mr. Matthews was discussed in that context. He's going to be here in any event. You've already said he's coming.
Senator Lynch-Staunton: Senator Bryden, I believe, Mr. Chairman, made it quite clear that after hearing what Mr. Matthews had said regarding a meeting with Mr. Chrétien that it was only proper, since Mr. Chrétien denied what Mr. Matthews, according to Mr. Bryden, had said, that the lawyer be given the opportunity to come and give his version of the events. And I took that to mean that he was urging the committee, through you, Mr. Chairman, to have Mr.---
Senator LeBreton: Lebarge.
Senator Lynch-Staunton: -- Lebarge come here. And so, Senator Jessiman now would like to know whether that is still the position.
Senator Bryden: Well, I've given you the best answer I can but I believe the blues from this morning would likely be available by the time---
Senator Jessiman: So you're saying now whatever you said this morning you're going to say right now, you're going to agree with that.
Senator Bryden: Well, if I said it this morning, yes.
Senator Jessiman: Okay.
Senator Lynch-Staunton: But do you want him? You opened the subject, Senator Bryden.
Senator Jessiman: Do you want him here?
Senator Lynch-Staunton: Do you feel that the statement made by Mr. Matthews is such that it deserves a rebuttal by the person that you mentioned; and, if so, are you asking the steering committee to have that person appear before this committee in order to support or deny Mr. Chrétien's supposed support of the privatization process?
Senator Bryden: Mr. Chairman and counsel, I made a statement this morning.
Senator Lynch-Staunton: No, I'm asking a question, Senator Bryden. I'm just asking because this morning the clear -- I apologize for interrupting but the clear impression you left is that you --- The first thing you said after the testimony was that it was essential. The impression you left was it was essential that this matter of Mr. Chrétien's appreciation of privatization be cleared up by one of the individuals walls who was there at the time of the discussion.
Senator Bryden: Well, Mr. Chairman, I guess I've been in the legal business too long to deal in impressions. I would prefer to have whatever words I said speak for themselves.
Senator Lynch-Staunton: Well, then, let's start all over again. Would you like Mr. Lebarge to come before this committee and discuss Mr. Matthews' comment regarding Mr. Chrétien's impressions as ---
Senator Bryden: Mr. Chairman, I've already dealt with that. We normally direct our attention to---
Senator Lynch-Staunton: Well, no, you just said you didn't know what you said this morning.
Senator Bryden: Our questions are normally directed to witnesses and witnesses normally answer those questions.
Senator Tkachuk: I just want to let you know, senator, I'm with you all the way. I support you in getting Mr. Lebarge here.
Senator LeBreton: So do I, and we've got a majority.
Senator Bryden: Am I getting caught in some conflict on the majority side here? I get in enough trouble on my own, thank you very much.
Senator LeBreton: We'll support you all the way.
Senator Lynch-Staunton: Ask me what your wishes are? We're cooperative here.
Senator LeBreton: We want to ask about the other law partners too.
Senator Bryden: That's why we have a chairman, is to sort these things out.
Mr. Baker: Mr. Chairman, if I may, I understand that Senator Bryden has a number of questions that he's going to ask tomorrow and perhaps in order to speed up the response time, if he has the documents that he wanted us to review at that time if he could give them to us now and that might increase the -- and anybody else who has documents that they would like us to deal with tomorrow morning if they could give them to us now and then we could try to review them and save some time for the committee tomorrow.
Senator Bryden: Well, the answer to that is basically "no". Not because I'm being stubborn or recalcitrant, but the game -- the rules of this hearing--
Senator LeBreton: The "game"; that's the right word.
Senator Bryden: -- seem to change from time to time. We finally settled on a procedure that would apply in the examination. The documents that I have are available in the library and have been available to everyone. As I understand it, the ruling of the chair with counsel was that if a questioner was going to refer to a document out of that binder, then that person -- just as you would do in court -- is shown the document so that that person is there. And that procedure is the one that I'm prepared to follow. Hopefully, with any luck, as I go through tonight I may be able to shorten the number of documents.
Mr. Baker: Senator, as you know, in court there is a production of documents in advance and usually an opportunity to examine on the documents. Of course, we don't have that opportunity here so I was trying to facilitate this process.
Senator Bryden: I understand that.
The Chairman: Well, Mr. Baker, you can have access to--
Mr. Baker: The whole room, thank you.
Senator Jessiman: No.
The Chairman: I know your problem, but you know that you have access to all the documents that bear any relationship to your testimony or your appearance here.
Mr. Baker: Yes. Thank you.
Senator Kirby: Nine o'clock tomorrow morning, Mr. Chairman?
The Chairman: Yes, 9:00 o'clock tomorrow morning, thank you.
(The committee adjourned until Thursday, September 14, 1995.)