Proceedings of the Special Senate Committee on the
Pearson Airport Agreements
Evidence
Ottawa, Wednesday, September 27, 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: Welcome back, gentlemen. Mr. Nixon, you were -
Senator Lynch-Staunton: Mr. Chairman, before proceeding, I would like to raise a point of order before we proceed with the witnesses.
The Chairman: Go ahead then.
Senator Lynch-Staunton: It's an extension of the one I raised yesterday and one which I can now elaborate on with a little more intelligence, since I've had a chance to read the transcript of what was said yesterday. You will recall that in discussing the Morrison Hershfield Group, Mr. Nixon said, and I quote from the transcript:
It was their opinion expressed to me that there was every appearance that Paxport was in line to win the RFP and they felt that they were not going to proceed. The phrase "the fix is in" was used.
Following that there were some, I raised a point of order and the discussion went on and Mr. Nixon replied, quoted from a brief from the Province of Ontario, and the part of the brief which he quoted is as follows:
The province is aware of possible irregularities associated with this federal initiative. The province acknowledges that some of those involved in this agreement may have behaved in ways that were not good business practice. There was also some considerable belief in the business, aviation and government communities that the federal government either blatantly broke its own contracting rules or demonstrated a degree of unfair consideration of one terminal development bid.
This is a brief from the Government of Ontario to Mr. Nixon. And the discussion then around the validity of these allegations continued, and Mr. Goudge told us that, and I quote from his reply that:
As a substantiation for the conclusion that this transaction was concluded under the shadow of possible political manipulation, I considered the views of Morrison Hershfield to be substantiation of that conclusion.
Now, the basic purpose of this inquiry is to look into the conclusions of the Nixon report and be convinced that they are accurate or otherwise. Here we have evidence given that an allegation by an unhappy bidder formed an important part of an important conclusion, i.e. that the transaction was concluded under the shadow of possible political manipulation. I think, Mr. Chairman, unless witnesses have evidence to that effect, they should either retract, if they insist that these so-called honestly held views without substantiation at least before this committee were enough to come to the conclusion Mr. Nixon did, then we have an obligation to bring in witnesses who were party to these allegations and have them testify as to why they thought, or how they could conclude, that there was political manipulation in the bidding process, particularly as so far we have only heard the contrary and it's important to us to hear all views. And if there are views out there somewhere challenging the bidding process and alleging that it was irregular and that the fix was in, this borders on criminality. These are very very serious allegations, and they are not made without any shred of evidence before this committee. So, Mr. Chairman, through you, I ask the witnesses to present the evidence or to you, I urge that we bring in those witnesses who could support these allegations, and I end there for now, Mr. Chairman.
The Chairman: You're directing the question to Mr.?
Senator Lynch-Staunton: Well, I'm directing it to you, but I - I'm raising the point of order to you, sir.
Mr. Robert Nixon, Chairman of the Board, Atomic Energy of Canada Ltd: As far as I know it's a point of order and I would like to speak to the point if I may.
Senator Lynch-Staunton: Can witnesses speak to the point of order?
The Chairman: Well, it's...
Mr. Nixon: I have only this to say, Mr. Chairman, that my comments and, I believe, the comments of Mr. Goudge were in response to questions made by Senator LeBreton, who asked us what was said to us on the occasions of certain meetings. I think it's our duty to report to her and to the other senators what was said on those occasions, particularly in these instances where the impact is considerable and significant, that I felt it important at the time yesterday to read to the senators the paragraph from the brief from the Province of Ontario that has been a part of the material provided to the senators because in fact at another level of substantiation, if that word may be used, it has its own significance. I have nothing further to say about those matters at this time other than to respond to the questions of the honourable senators.
The Chairman: There is a difference between the two. I think you threw in the testimony of the Government of Ontario to show that you were also using hearsay.
Mr. Nixon: That's correct, sir.
The Chairman: But was the expression used, Senator Lynch-Staunton, I didn't quite get that, was the expression used "the bid was fixed"?
Senator Lynch-Staunton: Yes.
Mr. Nixon: The phrase was "the fix was in" according to the people who had spoken to us from that company.
Senator LeBreton: And was that Mr. Dale Patterson?
Mr. Nixon: It was used in the meeting where Mr. Dale Patterson was present. I can't tell you who used the words.
Senator LeBreton: And is Mr. Dale Patterson a staffer or a vice-president of the company?
Mr. Nixon: He was present as a participant in the activities of company. I don't know what his position is at this time.
Senator LeBreton: Because Mr. Goudge yesterday said he was a staffer. And did Mr. Patterson, has he been with this company for a long time or did he work someplace else before that you know of?
Mr. Nixon: I don't know how long he's been with the company but he used to work at the Government of Ontario.
Senator LeBreton: For who?
Mr. Nixon: I don't know. He worked for some people around there and I knew him at that time.
Senator LeBreton: When you were on the Ontario cabinet?
Mr. Nixon: That's correct.
Senator LeBreton: For Monte Kwinter perhaps?
Mr. Nixon: He might have been because there were 31 people and he was a staff member for one of them.
Senator LeBreton: So when you interviewed him with this new company was he a staffer or was he an officer of the company?
Mr. Nixon: I really don't know.
Senator Lynch-Staunton: Mr. Nixon, do you remember when you got the Ontario government's brief which was submitted by the Ministry of Transportation?
Mr. Nixon: Senator, I don't see a date on the copy that I have in my files.
Senator Lynch-Staunton: I'll help you out then, sir, because in our files we have the covering letter from George Davies, Deputy Minister, dated November 17, 1993; covering letter saying "I appreciate the opportunity to give this submission," et cetera. Now so you got this brief on the seventeenth and the conclusion of political manipulation arises from this brief mainly, does it not?
Mr. Nixon: I would say mainly, yes.
Senator Lynch-Staunton: Right. Now, the plot thickens, Mr. Nixon, because -
Mr. Nixon: If I might say just for the benefit of the senator, Mr. Chairman, that this is perhaps a fine point, but the conclusion that I drew was that the agreements were left with a suspicion that patronage may have had a role in the selection of Paxport.
Senator Lynch-Staunton: I'm not talking about patronage, we're talking about gross political manipulation. That's much more grave than patronage. Because we're all, including yourself, sir, beneficiaries of patronage, so I don't think we want to argue that one today.
Mr. Stephen Goudge, Legal Counsel, Gowling, Strathy and Henderson: But Senator, if I could just draw your attention to the precise conclusion in the Nixon Report.
Senator Lynch-Staunton: No, sir, I'm asking the witness a question on when he received the brief from the Ontario department.
Mr. Goudge: But what I think is important is -
Senator Lynch-Staunton: No, sir, I want to know when he received the brief. It's dated November -
Mr. Nixon: Well, I appreciate the fact, Mr. Chairman, the honourable senator has told me when I received the brief.
Senator Lynch-Staunton: No, I said the covering letter is dated November 17.
Mr. Nixon: That's when I received it.
Senator Lynch-Staunton: You received it on the seventeenth of November, fine. When did you meet with the Morrison Hershfield Group? On whose testimony you also based your conclusion about gross political manipulation.
Mr. Nixon: We discussed this yesterday, Mr. Chairman, and as I recall we could not pin down a specific date but we expect it was in about the third week of our review.
Senator Lynch-Staunton: Third week of your review, all right.
Mr. Goudge: I'm going to ask to be allowed to comment on the senator's misstatement of the conclusion. The conclusion he refers to is precise and is on the top of page 13 in the Nixon Report, and it is that this inadequate contract arrived at with such a flawed process and under the shadow of possible political manipulation. That's the conclusion -
Senator Lynch-Staunton: You call that a conclusion? You call that a conclusion? It's a vile suggestion which you can't even prove. That's what we are trying to get at here, the whole report is based on hearsay. And hearsay by the way is not a legal term, I've got the dictionary here, it's rumour. And it's unfounded hearsay, unfounded rumour. And what I'm trying to get from Mr. Nixon, what I want him to understand, if we are challenging his report and raising these points of order, he receives a brief dated November 17 making grave allegations. He hears from Morrison Hershfield in the third week of his report grave allegations. And these grave, unfounded allegations, so far unfounded, are used to suggest flawed political manipulation. How is it then that even before he receives these briefs and these allegations he's already drafted the report dated November 11, in which he has a conclusion which says:
To leave a new government with a contract arrived at with such a flawed process and under the shadow of apparent gross political manipulation is seen by the citizens and taxpayers as unacceptable.
Our question is how is it, without any evidence to support this and the evidence only coming, whatever you call this evidence, these allegations coming after, in the third week, he's already able to write the conclusion which is pretty well word for word in the final report?
Senator LeBreton: So he shopped around for people to support his conclusion.
Senator Lynch-Staunton: That's what we want to find out. That's why the whole - we talk about a flawed process we're getting at today.
Senator Bryden: Mr. Chairman, these -
Senator Lynch-Staunton: And that's why I raise a point of order.
Senator Bryden: Well, if it's a point of order. The question really is is this all of the evidence or the only evidence? We have another day, 2 days, 5 days, 15 days of evidence to hear and what we have heard in response to a question that was asked by a senator are the views that have been given, and it was quite clear that what was being reported as far as the meeting with the company was concerned was that these were views that were expressed by the company. Mr. Goudge, I believe, said that he believed they were sincerely held.
Senator Lynch-Staunton: And no doubt they were.
Senator Bryden: And he reported them. Now that is, that is legitimate evidence even in a court.
Senator Jessiman: Never made any enquiry.
Senator Lynch-Staunton: But may not form part of the decision of the judge.
Senator Bryden: You can give it whatever weight you wish, whether it is true or it is not, but if we're not - whether it is true or it is not -
Senator Lynch-Staunton: I don't believe this.
Senator Bryden: - it was sincerely being held by the person who said it. And it was reported. And if you're going to ask a question you better be prepared for whatever answer you're going to get and they gave exactly the answer to the question that was asked and now the fact that you don't like the answer somehow, it becomes a point of order.
Senator Lynch-Staunton: Mr. Chairman, if I may repeat the question. Do the witnesses have evidence to support these allegations? I'm not denying the allegations were made. I'm not denying that they were honestly held. I'm not denying that they may have been sincerely believed. But they were made, they form part of a report which led to the cancellation of contracts and we know what ensued after that.
Senator Bryden: Are you saying that we should not be made aware of it?
Senator Lynch-Staunton: Yes, we are made aware of the allegations, we want to be made aware of the evidence to support the allegations so that we can take our responsibilities here arising out of the terms of reference given to us by the Senate.
Senator Bryden: And it may very well be, Senator Lynch-Staunton, if that is the point that we may have to call these people as witnesses.
Senator Lynch-Staunton: Well, we're asking these witnesses -
Senator Bryden: They can only give evidence on what they know.
Senator Lynch-Staunton: Well, if that's the kind of evidence we're getting from them their report is already discredited.
The Chairman: Order, please. I guess there are two points involved here. The term "bid rigging" is an exceedingly serious one and one which of course will occupy the future attention of this committee, and it would be very very helpful to us if you could assist us in any way of the finding out who made the statement and whether you gentlemen plumbed that - asked that witness for support of his or her allegations. That's one matter. The other matter which rather puzzles me is that a provincial government would make allegations of this kind in secret without providing any factual basis for it. And your point of order will be taken under consideration.
Senator Lynch-Staunton: Thank you, Chairman.
Mr. Nixon: Mr. Chairman, may I respond to your comments at this time?
The Chairman: Yes, by all means.
Mr. Nixon: Right. I think the honourable senators are aware that I was not operating a royal commission and had no powers to administer an oath or to compel presence of witnesses, that I was asked to search for information associated with these contracts to form an opinion about them and convey it to the Prime Minister. There may be a tendency, particularly of people learned in the law, to equate my efforts with a judicial review and of course it was not a judicial review or anything close to an inquiry under legislation; that I was asked to review these matters, form an opinion and convey them to the Prime Minister, which I did.
It was also important that I respond to the views expressed publicly during the election campaign. We're politicians, most of us around here. Though I did not participate in that campaign I was very very much aware that the populous at large were concerned about the process of the award of the contract, and not the least of the concern was the fact that the principals were closely associated with the Progressive Conservative Party and people other than myself were saying -
Senator Lynch-Staunton: Unbelievable.
The Chairman: Order please, let the witness answer the question without interruption.
Mr. Nixon: People other than myself, and I was not saying that, that there was undue influence in the award of the contract. In responding to the requirements of the Prime Minister to look into these matters, it was natural for me to pursue, at least to receive the information from people who held strongly to the view that it was unfairly arrived at. The fact that one of those was the Government of Ontario I found remarkable, but the words are as I have put them to you, I didn't write the words, they were presented to us in the brief that is in the hands of the senators. On the basis of that and other information you've got to understand that this was a general area of discussion among the interested and informed electorate certainly in the Toronto region about the disposition of the contracts associated with Pearson. Whether you like it or not, it was probably the matter that was foremost in the minds of people who were discussing it at the feed mills and in the barber shops of southwestern Ontario. So it was necessary for me to report this to the Prime Minister, because he had lived through that campaign and had undertaken a certain success in that not a single Progressive Conservative was elected in that whole area. I thought perhaps it would be worthwhile mentioning it because it definitely was a significant issue. Now, what the honourable senators want to do by way of calling future witnesses is entirely in your hands, but I'm telling the senators in response to their questions who we met, and what they said to us, to me.
Senator Lynch-Staunton: And who you did not meet. Because they had views opposite to yours.
Senator Tkachuk: He said something that I think, Mr. Nixon, you mentioned the proponents were associated. Who is the president of AGRA Industries? This is important because these -
The Chairman: We're dealing with Senator Lynch-Staunton's point of order and I know where you're going.
Senator Tkachuk: Well, if he's going to say the proponents he better say who they are, I want to know who they are.
The Chairman: Well, you will have an opportunity at some later time to bring the matter up, senator.
Senator Tkachuk: Okay, I'll do it.
The Chairman: Now, Mr. Nixon, you were kind enough to give us some idea, to prioritize the considerations that you thought were paramount in order of, well, prioritize is the word, as you prepared your report. Could you give us some assistance, then, in that regard?
Mr. Nixon: Yes, Mr. Chairman. Yesterday, you mentioned to me privately, and then from the Chair, that you would ask me to consider the priorities that I placed in the various aspects of the contract review that I had undertaken, and I've given this some consideration overnight. I should tell you that I have been able to categorize the salient issues into three groups, although this is strictly a matter of opinion as I've considered them. I would have to say the leading issue of my concern was the fact that the decision was undertaken by the government during the election campaign, when the issue itself was a significant one in that campaign. More than anything else, this is a matter that has concerned me and of course, the facts associated with that decision are clearly discernible without calling any witnesses, and that is that the decision was made on October 7, it was made at the express instruction and approval of the then Prime Minister, after having had a special request from the deputy and the associate deputy for that approval.
Without going into that, I would say, at a secondary level of general importance, are the following; the process to privatize is inconsistent with the major thrust of the policy of the Government of Canada. This can be argued and will be, but I understood it at the time that the government, having undertaken LAAs in most other urban centres, that it would be reasonable that it should be considered for Toronto and was not. Second, the request for proposal, having as it did only a single stage and having to be completed within three months, was in my opinion not fair, it was not extensive enough to deal with the public good.
The next one is that there was no financial pre-qualification required in this competition and, while the evidence is broad and varied in this regard, it was clear that the company that received the successful RFP approval could then not guarantee financeability and discussions on that went on for many days and weeks and it was not accomplished until the second bidder was brought in with sufficient funds to make the program acceptable.
And the next one is in view of the economic importance of Pearson: it was difficult for me to agree with the usefulness of a 57-year lease to hand this over to private interests who indicated that they would be profiting from this at 23.6 per cent before taxes when there was an alternative involving the public which I thought was a reasonable one. For that reason, I thought it was contrary to the public good.
The next one is the revenue stream provided to the government by the agreements was inadequate, that we will get to discussion of that, because I had as my adviser in this matter, Mr. Crosbie, who has attended these meetings yesterday and is of course beside me at the present time. Associated with this that the rate of return to the company itself was deemed by him and his advice to me as excessive.
The next point was the agreements contained a development constraint on airports within 75 kilometre radius of Pearson. We've discussed this at some length and I will not go over it again, but the impact on Hamilton, Buttonville, other airports in the area, was of some substantial significance.
Now, Mr. Chairman, at another level of significance, and I would tell you a tertiary level of significance, is the matter that opened our discussions today, the matter of political patronage and lobbying. While I did not draw a definitive conclusion, I observed that in my opinion, one was left with a suspicion that patronage may have had a role in the selection of Paxport Incorporated as the preferred proponent. I simply direct you again to the fact that this was a major issue in the election and that I was asked by the Prime Minister Elect to look into matters pertaining to the contracts. To think that that should be excluded in my view is unreasonable. I did include this matter and I received the views not only of, by reading it in the press but also in talking to a number of individuals and groups about it or they raised it with me and it left me with the conclusion that forms a part of my report. Lobbying efforts is in this category as well, and by saying they are tertiary, I don't mean that they are not important, but you asked me to prioritize and that is what I've done.
The government's disposition in favour of privatization as opposed to an evolution of a local airport authority I've already referred to, but I want to be sure that you understand that that was a matter of significance to me, and while there are other areas that could be included, those are the ones that came to my attention as I considered the chairman's request. None of these issues depended on a specific statement made in an individual meeting. The essential facts associated with them were well within the range of public discussion at the time of my review, and many of them were focused and in fact heated by the election campaign that had just been completed at the time that I received the request from the Prime Minister.
The Chairman: Thank you very much, Mr. Nixon. That's of course on the record. Are those handwritten notes?
Mr. Nixon: They are handwritten, yes.
The Chairman: I wonder if the clerk might have a copy.
Mr. Nixon: I can give him what I used as a basis of my comments, yes.
The Chairman: That's fine. The reason, of course, is that I wouldn't want the committee to vent their spleen on matters of lesser importance unless we're going to be here for several weeks, you know, that we could zero in on the more important matters which you took into consideration. That's very helpful to us.
Senator LeBreton: It's nice to know we have some notes, for a change.
The Chairman: Yesterday, we had a kind of unusual situation because my colleagues over here really didn't want to ask any questions, and so that Senator LeBreton was given four or five hours in questioning. Now, could I have an idea, I know that Senator Bryden is going to go first, if I could have an idea how much time each witness wanted, I wouldn't have to - each questioner wanted, I'm sorry, I wouldn't have to impose time limits, if you could say, "I need a half an hour" and try to stick to it, that would be helpful to me. I don't want to bring the gavel down in the middle of a train of thought. I know that you're going to go, Senator Bryden. How much time would you like?
Senator Bryden: I have at this time, depending on what comes out, I have at this time two lines of questioning; one that arises out of basically what happened yesterday and another line. I would anticipate that both of them, depending on the lengths of the answers, should be able to be done, each of them should be able to be done within a half hour. So I would propose -
Senator Jessiman: Total half hour?
Senator Bryden: Yes, but I would propose to do a half hour or 40 minutes, whatever it takes to do my first part then -
The Chairman: Come back.
Senator Bryden: Yes, and then be allowed to come back.
The Chairman: First round.
Senator Bryden: And that would get back to our normal flow.
The Chairman: Yes. Anybody else here, now? Okay.
Senator Jessiman: Mr. Chairman, I expect, again, depending on the answers that we receive from the questions, and there are, we will certainly cover the nine points that the witness has given us today, not necessarily in that order, but I would estimate that it would be at least two hours in total. It could be longer. But I'm prepared to break that up to go for an hour, and then break it off. If that's satisfactory to the Chair.
The Chairman: Well it helps just to organize the day.
Senator Jessiman: I can't promise two hours but that's my best estimate.
Senator Stewart: Could I ask Senator Jessiman, would breaking off, as is now being discussed, violate the unity, the flow of the questioning?
Senator Jessiman: Well, let me say that what I -
Senator Stewart: Well let me put it this way, Chairman, if Senator Jessiman feels that it would then I think we would be prepared to let him carry on as we let senators carry on yesterday. I think that, for the benefit of the committee.
Senator Jessiman: Fine.
Senator Tkachuk: I only have about a half hour, Chairman.
Senator Kirby: Well then it comes back to our side so it will come back to Senator Bryden for a second.
The Chairman: Yes, all right, Senator Bryden.
Senator Jessiman: And is there anyone else going to speak on your side?
Senator Stewart: Well, I have a few questions.
Senator Jessiman: Yes, all right. I would like to also say that even though I might go through the information that I've prepared, and take two or three hours, I don't want to be stopped from in the event that I find things that have come up after I have spoken to limit myself to, you know, I've had my day in court, I want to have the opportunity if I find -
The Chairman: No, we're only talking about a first round here and Senator Stewart -
Senator Jessiman: But I don't want to be cut off.
The Chairman: No, no.
Senator Kirby: We've never done that.
Senator Jessiman: That's fine.
The Chairman: Senator Stewart's suggestion has been generous.
Senator Jessiman: And I appreciate it.
Senator Kirby: We have never done that and won't do it.
The Chairman: So that we're talking about a first round, Senator Bryden, which approximately is half an hour, that's the first round, he'll come back.
Senator Bryden: Give or take a little bit.
The Chairman: Yeah. And then you would be given two hours, and then who would follow that? Senator Bryden again. Yes.
Senator Jessiman: And I may not take the two hours.
The Chairman: That's enough to prime the pump.
Senator Bryden: And just one other comment. As Maggie Muggins used to say, I don't know what will happen tomorrow, I may have to ask to speak depending on what comes out later.
The Chairman: Well, of course, yeah. All right then, Senator Bryden, please.
Senator Bryden: Yesterday there was discussion about a number of meetings and the meetings that were discussed, at least the ones that my research showed, in some of those instances notes were taken and it's my understanding that if notes were taken they would have been taken by, normally by Mr. Goudge. Is that correct?
Mr. Nixon: Yes, sir.
Senator Bryden: And one of the meetings was a meeting on November 3 with Huguette Labelle, and I would like to introduce those notes, since they are on file with the committee, and it's document number, my tab D, and it's document number 002424. And I do this because I think it may help us to better understand what transpired at the meeting, Mr. Goudge, and the first thing you can help me to better understand is your handwriting. I didn't realize anyone could have more illegible handwriting than myself, but now I'm not sure. Do you have the notes of that meeting before you?
Mr. Goudge: I do, sir, I apologize for their illegibility. I'll try to interpret them for you if I can.
Senator Bryden: Would you just take us through, I'll try to help in order to save some time. At the top it says "questions for H. Labelle". Were those questions that you had prepared in advance of the meeting?
Mr. Goudge: Yes, those are thoughts, senator, that I had in advance that I wanted to take into the meeting with Madam Labelle.
Senator Bryden: Could you just go over briefly, using this as an aid memoir, what those were?
Mr. Goudge: Sure. "Selection of privatization process; when, why." I just propose to read them, senator, if that's satisfactory.
Senator Bryden: Yes.
Mr. Goudge: "In no way preclude LAA, what the meaning of that was. Time frame selected, the 90 days, selection process to December 7, 1992, the use of lobbyists, the result, the financial test met, competition between terminals, the introduction of Claridge and where negotiations were at her point of departure in June of '93." Those were all things that had occurred to me going into the meeting would be germane to enquire of her.
Senator Bryden: It looks as though it was an attempt chronologically from the time of her involvement or the beginning to just identify issues right up until she left. Is that fair?
Mr. Goudge: I think that's fair, senator.
Senator Bryden: The meeting took place on the third, November 3. Who was at the meeting?
Mr. Goudge: My recollection is that it was Mr. Nixon, Madam Labelle, myself and I think Mr. Wilson was there too.
Senator Bryden: Now the notes that appear after the date, are those notes made at the time of the meeting, before the meeting or after the meeting?
Mr. Goudge: They were made during the meeting.
Senator Bryden: During the meeting?
Mr. Goudge: Yes, sir.
Senator Bryden: Would you go through those notes and explain them as you - expand on them as you can.
Mr. Goudge: Well, she indicated, as the first entry suggests, that she arrived at Transport Canada October of 1990. She indicated that there were three key decisions that had to be made; the privatization of T3, the LAA policy and the delinking of T1T2 and the runways.
Senator Jessiman: Excuse me, could you just read the word just before T1T2 and runway; what does that say?
Mr. Goudge: Delink, senator, sorry.
Senator Jessiman: Oh thank you. No, it's okay.
Mr. Goudge: Then July 1990 unsolicited proposals for T1T2, she gave us information about that.
Senator Bryden: That was when they came in?
Mr. Goudge: Yes. She indicated that the decision to go forward with the runways or not was the key decision. She indicated that Mr. Corbeil arrived as the minister in -
Senator Bryden: Just a minute, I have to stop you there. You're reading from your original notes?
Mr. Goudge: I'm going to stop at the next line.
Senator Bryden: I'm just - believe me, I don't like to talk about documents and white-outs, but -
Senator Lynch-Staunton: How can you white out private notes?
Senator Bryden: Well, that's exactly, I was going to ask counsel is this because it's advice to a minister or from - well, it's an answer from -
Senator Jessiman: What's 69(1)(g)? That's what we want to know.
Mr. Nelligan: Well it's a Cabinet confidence, that's what 69 is. I didn't know that this witness was in the confidence of the cabinet.
Mr. Goudge: This is not my determination, Mr. Nelligan.
Mr. Nelligan: I appreciate that.
Mr. Goudge: As you know as a -
Senator Bryden: Presumably the witness has whatever Corbeil answer was and I'm looking to you, Counsel, as to whether he can give it.
Mr. Nelligan: Well, I'm not his legal adviser but I think it's a fair question for you to ask, he made some notes, we want to know what Ms Labelle told him. We've asked Ms Labelle what she told him. Now I think it's fair to ask him what he understood she said and he can now answer the question. It's just he doesn't have any notes to refresh his memory because somebody whited them out.
Mr. Goudge: Let me say this senator: I am bound and I think I've got to elaborate on this a little bit, I am bound by the confidence undertaking that this whole operation began with that Mr. Nixon referred to yesterday. My understanding is that the white-out was done at the behest of legal advisers to the government and that I am not released from any confidence constraint that I have surrounding my notes of the next two lines. It sounds to me a little odd but that's what I'm told.
Senator Jessiman: Is it not true you were engaged not by the government, by Mr. Nixon in the evidence yesterday?
Mr. Goudge: That's correct.
Senator Jessiman: I now ask Mr. Nixon; would you release your solicitor from this confidence so that we can find out what's whited out?
Mr. Goudge: I don't think it matters -
Senator Jessiman: Please, just to have him answer the question.
Mr. Goudge: Sure.
Senator Jessiman: Would you release him? Just a yes or no.
Mr. Nixon: The undertaking of confidentiality was signed by myself.
Senator Jessiman: Yes.
Mr. Nixon: On behalf of the three of us and I'm not in a position to -
Senator Jessiman: So your answer is no? Just yes or no, you know, we want to get on with this.
Mr. Nixon: Oh, okay.
Senator Jessiman: No?
Mr. Nixon: No.
Senator Jessiman: Thank you.
Senator Bryden: Just to be clear, can I ask counsel, please, I know you've done this many many times, but would you please ask the justice people to reconsider so that we're, or have you already?
Mr. Nelligan: Well I asked them for a release of them all but it's my opinion at the moment, subject to what justice said, is that their confidentiality agreement, which they have obviously respected throughout, is subject to questions asked by this committee. Now they may have a different opinion but I say that you are entitled to ask the question and if they refuse to answer you can then consider what you want to do about it later on.
Senator Bryden: Well, I'm considering now. They're saying they can't answer because they feel and were indicated by justice that they should not answer the whited-out areas. What I'm now considering later on is to ask you as counsel to this committee do go to the justice people or ask them or phone them and say is it essential that that be deleted.
Mr. Nelligan: I will make that request. What concerns me is that these witnesses, and this is no fault of theirs, have nothing to do with cabinet confidences. It was expressly said they were not to receive cabinet confidences, therefore, my assumption is they didn't receive any cabinet confidences. And on that basis all they have is their oath of confidentiality and they've had to, they've all the time they've been talking here they have been informing us of the things they received in a confidential manner and that's quite proper and they're doing that. And I just don't understand quite frankly why they should be inhibited because somebody in justice decided at the last moment it was a cabinet confidence. However, I will ask the Department of Justice again why that was deleted.
Senator Bryden: Okay.
Mr. Nelligan: If I may just try to put a question so that we don't have to come to a confrontation and perhaps Mr. Goudge then can put it that way. All we are interested in, sir, is trying to find out the facts you received which assisted you in coming to the final conclusions in the report. In the deleted memo was there any fact disassociated from cabinet confidences that you felt relevant to this inquiry that might assist us in determining how you came to those conclusions?
Mr. Goudge: I'd like to review the matter with justice, Mr. Nelligan, just because I don't want to be unfair to them, that is they have taken the position that they will not release Mr. Nixon and therefore will not release me from the confidentiality arrangement under which this was conducted for the two lines that are whited out. I think to be fair I ought to review with them whether I can answer your question because I wouldn't want to kind of go round behind what is their obvious position at the moment that I cannot within the bounds of my confidentiality undertaking tell you what those two lines represent.
Mr. Nelligan: All right now, in order to avoid a confrontation over the trivial, and I must say that a great number of these items have been trivial, simply answer this question. Whatever that information was in that deleted passage did you consider it significant at the time?
Mr. Goudge: Yes.
Senator Bryden: That's probably why it's marked with an asterisk.
Mr. Goudge: Yes, sir.
Senator Bryden: Now, the next, and to go on, the next asterisk says what?
Mr. Goudge: "LAA was not considered." And my note-taking habit, senator, is that I would asterisk or do asterisk information that seemed to me at the time to be significant, so that I would put an asterisk on it at the time. Those asterisks would have been on when Ms Labelle gave us that thought.
Senator Bryden: So you're saying that at that meeting the deputy minister told you that the LAA was not considered, not considered for what?
Mr. Goudge: Not considered as a possibility for T1T2.
Senator Bryden: Then please, Mr. Nixon, so I don't have to go back through this with you, if you have additional comments would you please put them in. So the LAA was not considered as a possible participant in the process I think is what you said?
Mr. Goudge: Yes, sir.
Senator Bryden: And next, what does that say?
Mr. Goudge: "Fast track for the RFP gives Paxport an enormous advantage." And that was the information she communicated to us which I asterisked because it seemed to me at the moment of the interview that that was a very important assertion by a senior civil servant.
Senator Bryden: And the next one?
Mr. Goudge: That Claridge did not want T1T2 privatized, nor did Air Canada.
Senator Bryden: Now that I think is pretty significant for me because I missed some of these hearings and I haven't read all the transcript, but I believe that that's the first time evidence has been brought before us that Claridge did not want T1T2 privatized, and I would ask both of you if that is your recollection of the deputy minister's position on November 3?
Mr. Goudge: Absolutely, senator, absolutely.
Mr. Nixon: Yes, senator.
Senator Lynch-Staunton: What did they want done with the terminals? What was their suggestion?
Mr. Goudge: I don't know that she suggested that. The clear reference I drew from the meeting was that Claridge's preference was to leave T1T2 where it was.
Senator Jessiman: Are you saying that was her view as at that date, the date you talked to her?
Mr. Goudge: Yes.
Senator Lynch-Staunton: The third of November.
Senator Jessiman: It's impossible.
Senator Lynch-Staunton: After they bid.
Senator Jessiman: Impossible. But go ahead.
The Chairman: Now let's try to understand one another here. These were fair, these were supplementary questions.
Senator Bryden: Everything seems to be impossible that doesn't seem to jibe with your way -
The Chairman: No, let's just understand. Those questions were supplementary questions but let's understand the difference between a supplementary question which bears on something for clarification purposes and an intervention which is just a refutation of what Senator Bryden might have said and finally, of course, a point of order which I'd have to recognize immediately. But if we can just let the questioner ask the witness the questions and stay away from the interventions or refutations. Supplementary questions fine.
Senator Bryden: In fairness, I would like just to go back a little to the purpose of the meeting. You were tracing, as I understand it, the history of the development of the project.
Mr. Goudge: Yes, sir.
Senator Bryden: And so that as I would understand it Madam Labelle was not saying that Claridge at no point ever wanted to participate in T1 and T2, I take from this that at the beginning Claridge did not want T1T2 privatized.
Mr. Goudge: Absolutely.
Senator Lynch-Staunton: At the beginning of what? I'm sorry.
Mr. Goudge: Beginning of the process.
Senator Jessiman: What process?
Mr. Goudge: The process to privatize T1T2.
Senator Lynch-Staunton: And when did that process start? When did that process start in your mind?
Mr. Goudge: In her mind?
Senator Lynch-Staunton: No.
Senator Jessiman: Well, whatever you're telling us.
Senator Lynch-Staunton: Yes.
Mr. Goudge: Well, I -
Senator Lynch-Staunton: We'd like to get a time frame on this.
Mr. Goudge: What did I infer that she was talking about?
Senator Lynch-Staunton: Yes.
Mr. Goudge: Back at the time the RFP was being conjured with?
Senator Jessiman: Was being what?
Mr. Goudge: Was being conjured with, that is as the government ran up to the RFP.
Senator Jessiman: Prior to the actual RFPs being released or the 17 months between the time they announced that they were going to go -
Mr. Goudge: I don't know, senator, that I would have ever inferred a precise date, it was clear to me that Madam Labelle was saying in the beginning.
Senator Jessiman: In the beginning. That's fine. That could be 1985. But that's okay.
Mr. Goudge: I didn't infer 1985, senator.
Senator Jessiman: Well, or 1987.
Senator LeBreton: Why did they bid?
Senator Lynch-Staunton: We'll get to that. We'll bring them back.
Mr. Goudge: You'd have to ask them, senator.
Senator Bryden: Deep pockets, that's why.
Mr. Goudge: What seemed significant to me was her clear recitation that Claridge and Air Canada would have preferred that T1T2 not be privatized.
Senator LeBreton: That's certainly not their testimony.
Senator Bryden: Okay, if we can go to the next page of your notes. The first one, is that, refers to the RFP I think?
Mr. Goudge: Yes. "The RFP, government could decide not to go ahead."
Senator Bryden: Now, can either one of you expand on that? That's pretty cryptic.
Mr. Goudge: What she was indicating as far as my understanding went was that the RFP permitted the government to receive proposals but decide ultimately that it would not proceed.
Senator Bryden: It had that option?
Mr. Goudge: It had that option, yes, sir.
Senator Bryden: Then the next note.
Mr. Goudge: "Paxport pressed hard for privatization and short time for RFP." And, again, that was the information she imparted to us.
Senator Bryden: Well, we have, that's on the record from other sources as well. Next?
Mr. Goudge: "Air Canada's consent was necessary. It did not come about until midsummer 1993."
Senator Bryden: I think -
Mr. Goudge: I think that's self-evident.
Senator Bryden: We all understand that. Next one.
Mr. Goudge: "Get the Transport Canada letter to Paxport when the award was made." And I presume that's the letter of intent.
Senator Bryden: I'm sorry, what's the first word?
Mr. Goudge: Get.
Senator Bryden: Oh, you wanted to get that letter?
Mr. Goudge: Yes.
Senator Bryden: And the next line?
Mr. Goudge: "Paxport put in an unsolicited bid, Claridge did not."
Senator Bryden: And the next line.
Mr. Goudge: The next line is note, and my note-taking habit is to put "note" where it is my thought as opposed to something articulated by Madam Labelle. As a result of this meeting we were a little misled by PDC.
Senator Bryden: PDC being?
Mr. Goudge: The people who had come to see us representing PDC who in fact were the Claridge people we had already -
Senator Bryden: Pearson Development Corp.
Mr. Goudge: Yes, PDC is Pearson Development, but you will recall from the discussion yesterday that the senior executives who came to us for PDC were in fact the Claridge senior executives.
Senator Bryden: Yes.
The Chairman: Pearson Development Corporation is the managing partner of the T1T2 Partnership.
Mr. Goudge: That's correct, senator. The only point I make is that they were there, they had been, prior to the joint venture they had been Claridge and the note that I made to myself was that Claridge may not feel it was beaten fair and square although they had given us that indication or I felt they had given us that indication when they met with us.
Senator Jessiman: Mr. Chairman, I didn't appreciate there was something on the other side and I wasn't following. Now I turn it over and I find there is something. Could you just read up to where you are now. It looks like RFP, government could decide?
Mr. Goudge: Yes.
Senator Bryden: You're a lawyer too, senator, you should be able to read that stuff.
The Chairman: Could decide what, not to?
Mr. Goudge: "Not to go ahead."
Senator Jessiman: Not to go ahead. Thank you. And the next line?
Mr. Goudge: "Paxport pressed hard for privatization and short time for RFP."
Senator Jessiman: Right. And now you've got the asterisk or whatever. Air Canada -
Mr. Goudge: "Air Canada's consent was necessary. It did not come about until midsummer 1993."
Senator LeBreton: Thanks to her.
Mr. Goudge: "Get Transport Canada letter to Paxport when award made."
Senator Jessiman: Sorry?
Mr. Goudge: "Get Transport Canada -
Senator Jessiman: Get. Oh, sorry.
Mr. Goudge: - letter to Paxport when award made. Paxport put in unsolicited bid, Claridge did not."
Senator LeBreton: Just on a supplementary there, Mr. Chairman. Why would the Deputy Minister of Transport, was that her that said that, that Claridge did not put in an unsolicited bid?
Mr. Goudge: That's what my note indicates.
Senator LeBreton: Amazing.
Senator Jessiman: That she gave you that information?
Senator LeBreton: Amazing.
Mr. Goudge: That's what my note indicates.
Senator LeBreton: Amazing. She's got a lot to answer for.
The Chairman: All right, okay, senator, look, let's stay away from editorial opinions and let's just carry the, put -
Senator Stewart: - the other side be allowed to intervene in this way, Chairman, you've been allowing it for weeks.
The Chairman: Well maybe I'm mending my ways. Senator Bryden.
Senator Bryden: I didn't get your note, and you made it very clear that these are your thoughts under the word "note".
Mr. Goudge: Yes, sir.
Senator Bryden: Would you just, the last one, it says "Claridge did not..."?
Mr. Goudge: "Did not tell us they did not want T1T2 to go to RFP." Which I think is self-evident.
Senator Bryden: Mr. Nixon, do you, does that somewhat reconstruct what occurred at the meeting?
Mr. Nixon: Yes, senator.
Senator Bryden: Do you have anything to add?
Mr. Nixon: No, senator.
Senator Bryden: Mr. Goudge, do you have anything to add?
Mr. Goudge: I don't think I can be helpful beyond what I've already said, senator.
Senator Bryden: You also, in reply to questions yesterday, referred to a meeting with a Mr. Gardner Church, and I believe - and it was on October 31, 1993. No. Yes.
Mr. Nixon: Yes.
Senator Bryden: And, Mr. Nixon, you were present at that meeting.
Mr. Nixon: It was in the living room of my home.
Senator Bryden: Yes. Was there anyone else besides you and Mr. Goudge and Mr. Church?
Mr. Nixon: I believe Brad Wilson was there.
Senator Bryden: I would like to now refer to document number 002415. It's my tab A. And like the last one, these purport to be the notes of that meeting. Would you just look at them and compare them, Mr. Goudge, and see if that's an accurate copy?
Mr. Goudge: I think that's correct, sir, yes.
Senator Bryden: I wonder if you would do the same thing, and this one is much more lengthy, if you would just lead us through it and stop where you want to expand, and the same for you, Mr. Nixon, and I will ask questions if there are things that are not clear to me.
Mr. Goudge: These again, senator, are notes that I took at the time, that is through the afternoon of our meeting with Mr. Church. I think it's fair to say that they are probably more elaborate near the beginning of the meeting and confessing my human failing I probably started to record less precisely and less completely as we got through to the end of it but let me read the notes as they exist. 1987, the Ministry of Transport study, he referred to a Ministry of Transport study by Jerry Johnson. The next note is "Airport as strategic facility." That would have been the focus of the study, at least that's my recollection.
Senator Bryden: I think we've had either the study on file or at least referred to that one. Go ahead.
Mr. Goudge: Then in 1988 Mr. Church referred to the joint federal, provincial, municipal study signed off early to mid-1989, with the key in Mr. Church's view being coordination of the facilities and the assertion that an airport authority was needed. He made reference to Mr. Heed, the airport manager. That's my next line. And the next line is I presume a reference to Minister Lewis in 1988 firmed up the Transport Canada operation.
Senator Jessiman: Is that Lewis, the first word?
Mr. Goudge: Yes, senator.
Senator Jessiman: Thank you.
Mr. Goudge: And I presume that so I, I must say I can't precisely recall but I would infer that that's a reference to Minister Lewis. The contrary view to the Transport Canada operation was driven by the network issue, money and the need for a strategic approach, and I take it Mr. Church was telling us his contrary view or the contrary view to Transport Canada operation driven by the factors I recorded. Mr. Church would have compared the Terminal 3 deal to this one. I must say I cannot recall in detail, senator, what he would have said in that context.
Senator Bryden: Can you, Mr. Nixon, remember any of the discussion around the comparison of the two deals?
Mr. Nixon: I recall that Gardner Church was very knowledgeable about the process that led to the building of Terminal 3. He referred to the contest at Huang & Danczkay as successful and referred to the circumstances by which Claridge assumed control of Terminal 3. I think he was interested in seeing that Claridge had moved into the contest for success, for success under the RFP for Terminals 1 and 2. I simply say again that I think on behalf of the Government of Ontario he had had the carriage of the development of the policy as far as that government is concerned around the Pearson privatization.
Senator Bryden: Next, Mr. Goudge?
Mr. Goudge: The next is my note that Mr. Church would have brought to our attention an issue that we've since come to learn a lot more about, that is access for advisers by Clerk of the Privy Council for advice to a subsequent government. That's an issue I know this committee has had to wrestle with and has to do with our access, that is Mr. Nixon's access, to information.
Senator Bryden: Okay, Terminal 3 on the next page.
Mr. Goudge: Terminal 3, he told us about Terminal 3 and what he viewed to be its major flaws and they are listed there and I will read them as I recorded them. "It is a bad deal." He referred to over design, loss guarantee and overall control of, for example, gates. Then he discussed new proposals, I think for T1T2, with be BAA withdrawing. Finding the risks too high. The split equity with Terminals 1 and 2 and Terminal 3, I'm not quite sure what that's a reference to. Then he gave us information about others who might have information that would be helpful to us in the information-gathering exercise. Mr. Somerville, Mr. Guscott. He indicated that Mr. Guscott, who was an assistant deputy minister in the Ministry of Transportation provincially was doing a brief and I presume that that was the brief that is part of your record. Then he discussed the January, February 1992 time frame. He made reference to the quick RFP. That's a reference to the time frame that has been discussed by a number of people with you I know. The federal bureaucracy is -
Senator Jessiman: Resisting?
Mr. Goudge: I think it may be resisting. I can't even read my own writing.
Senator Jessiman: Makes sense.
Mr. Goudge: I confess I don't know what that word is.
Senator Bryden: And the next line.
Mr. Goudge: "Segal was key. John Tory worked for Matthews."
Senator Bryden: What was the reference to Segal?
Mr. Goudge: Mr. Church's view was that Mr. Segal had been very interested in this file, had been very active in expressing that interest and was key in having the matter come to the conclusion that was ultimately reached.
Senator Bryden: And the reference to John Tory worked for Matthews?
Mr. Goudge: That was Mr. Church's information that he imparted to us.
Senator Bryden: Okay. And would you continue then?
Mr. Goudge: That the provincial response could have been to generate a bid or to generate an authority and underwrite the debt thereof. He then, and you'll see that I, he would have said we hired the BAA team, Peats and Bullock, and I put in Ontario. That's what he meant when he said we. Then he indicated that Claridge agreed to join after success and be managed as an authority.
Senator Bryden: Can either of you or both expand on that, that Ontario was considering?
Mr. Goudge: Ontario, he was very clear that Ontario's preference for development was through a local authority, and one consideration that had been engaged in by the province in his view was that a response to the privatization initiative was for the province to generate an authority.
Senator Bryden: And they were going to engage the BAA team?
Mr. Goudge: That's the information he imparted, the BAA team, Peats and Bullock.
Senator Bryden: Those must be - are those persons?
Mr. Goudge: Professional advisers.
Senator Bryden: Can you expand at all on "Claridge agreed to join after success and be managed as an authority"? Oh, well maybe I think I understand now myself.
Mr. Goudge: To be honest, senator, I can't recall precisely what the thought was that was conveyed. I think it probably was that Claridge would have been prepared to take this on and once having got it have an authority take over whatever was left of the airport.
Senator Bryden: Or could it - and I just ask because this is the thought that came to me - could it have been that because Claridge was prepared because it owned 3 to have an LAA manage the airport?
Mr. Goudge: Yes.
Senator Bryden: And finally, the last line.
Mr. Goudge: His concern that there was no due diligence clause in the RFP and I think that was a reference particularly to the no requirement of financeability.
Senator Bryden: Can you just tell us what a due diligence clause is?
Mr. Goudge: Well - I'm not sure I can with any definition that would pass muster about a commercial lawyer. The essence of the thought Mr. Church engaged in was there was no requirement in the RFP for the kind of certainty about ongoing financeability that ought to be in the RFP.
Senator Bryden: Okay, could you go through page 3, and is that Hazel?
Mr. Goudge: Yes, that would be the mayor of Mississauga, in his view had a good deal. There was no - there was no authority, the present circumstance and the -
Senator LeBreton: Excuse me. What does she mean "no authority"?
Mr. Goudge: No LAA I think.
Senator LeBreton: So it was a good deal not to have an LAA?
Mr. Goudge: From his perspective for -
Senator LeBreton: For her?
Mr. Goudge: - Mississauga.
Senator LeBreton: All right.
Mr. Goudge: A good tax deal for Mississauga. The taxi problem would be solved and there was a guarantee for contractors. Then he indicated he made -
Mr. Nixon: She.
Mr. Goudge: She - no, Mr. Church indicated -
Mr. Nixon: Oh, sorry.
Mr. Goudge: - that we ought to ask the premier for full cooperation from Messrs. Church and Guscott.
Senator LeBreton: So can I ask a supplementary? Did Mr. Church participate in the writing of this document that's appeared after the fact on November 17?
Mr. Goudge: I don't know. I mean I doubt it. That's my, that's my - that's my inference, senator, I mean he was up at York University I know.
Senator LeBreton: Well he, but he said, "Ask Rae for full cooperation from Church and Guscott."
Mr. Goudge: Yes.
Senator LeBreton: And so - did you?
Mr. Goudge: No.
Senator LeBreton: And just as another supplementary, what expertise is Gardner Church that you would pay such attention to what he had to say about this?
Mr. Nixon: Mr. Chairman, Mr. Church is a well experienced senior official in the Government of Ontario, having served governments of all political stripes. At this time he was just coming to an end of a special assignment dealing with the Province of Ontario's involvement, association with the redevelopment and privatization of Pearson, that he had spent all of his time as far as I know in working for the development of an LAA and dealing with the Government of Ontario, the government of the municipalities and to some extent the federal minister in that regard. My own view is that he probably knew about as much about it as anyone did.
Senator LeBreton: Would you say that he had a very biased opinion on the LAA side? That's a supplementary.
The Chairman: No, it wasn't.
Senator LeBreton: Oh, sorry, I'll come back.
The Chairman: Your first one was a supplementary, your second two were not.
Senator LeBreton: Okay, I'll come back to that question, because I think I'm going to put Gardner Church in the same category as Mr. Bandeen.
Senator Bryden: Go ahead Mr. Goudge.
Mr. Goudge: The next entry, senator, is "South Central Ontario Airport Authority: Hamilton to Oshawa." This takes in the, or gets the Mississauga operation, I think that's the authority that Mr. Nixon discussed with you yesterday. "The alternative," an alternative, my notes say "the alternative was Mississauga and little guys." I presume that means the little airports. That could have been a separate authority. And the third authority possible was the GTRAA. Then there's three words, "Hazel has to", and I don't know what that thought was. I simply was running out of gas at this point I think.
Senator Bryden: Right.
Mr. Goudge: He indicated there had been a review of the deal that was made on October 7 by the province and he indicated that the document that the province had, had had three sections of it deleted. When I discussed it with the lawyers for the province, as I had made arrangements to do, should watch for that. He indicated that the deal would very substantially obviously constrain the role in the future of an authority. Then he engaged in a discussion with us of lobbyists that he knew to have been heavily involved in this project and I have a list of, he mentioned Capital Hill Group with Mr. Metcalfe. I was running out of gas at this point. Over the top of the page there is a whited out piece of information.
Senator Bryden: This one I just have to stop at. I really do have to stop at because I didn't do it, but the devil is tempting me to do it, is to phone that phone number that's underneath there which I assume is the phone number of the person whose name - no, maybe it's not.
Senator LeBreton: It's got a fax number too.
Mr. Goudge: Just to anticipate Mr. Nelligan's question, Mr. Chairman, I can absolutely guarantee that what was whited out has absolutely nothing to do with what went on after this meeting.
Mr. Nelligan: Maybe we should ask, is it actually a Toronto phone number that they deleted?
Mr. Goudge: Yes, sir.
Mr. Nelligan: 416, home.
Senator Jessiman: Do you know the number?
Mr. Goudge: Do I know whose number is it?
Senator Jessiman: Yes. What's deleted out?
Mr. Goudge: I wrote it down as Mr. Church's home phone number and it's been deleted and -
Senator Jessiman: So it's Church's. Okay.
Mr. Goudge: I mean he gave us his home phone number.
Mr. Nelligan: This is significant. Fax numbers are not deletable but home numbers are.
Mr. Goudge: Well, home numbers are -
Mr. Nelligan: This is a new refinement of the -
Mr. Goudge: Business numbers are not -
Mr. Nelligan: - policy.
Mr. Goudge: There you go.
Senator Bryden: And then there is the final reference to Toronto Life.
Mr. Goudge: And my best recollection of that, senator, is that he indicated to us that Patricia Best had been doing some research as a journalist for Toronto Life into the Pearson transaction and was somebody that perhaps would have some information.
Senator LeBreton: Just a supplementary on the lobbyists, this Capital Hill Group, Herb Metcalfe. Was that the only lobbyist Mr. Gardner Church mentioned?
Mr. Goudge: That's the only one I had a note of, senator, yes.
Senator LeBreton: And do you recall in what capacity he was mentioning Mr. Metcalfe?
Mr. Goudge: As a lobbyist who was involved in this project.
Senator LeBreton: Not that he was putting any pressure on or anything like that?
Mr. Goudge: I don't recall any discussion of - with Mr. Church of the degree to which pressure was engaged in by lobbyists.
Senator LeBreton: I stuck to the supplementary.
Senator Bryden: Can I proceed?
Senator LeBreton: Yes. No, I just, I stuck to the -
Senator Bryden: I'm trying to be as quick as I can and finish my line and I'm doing not too badly, thank you to everybody. Next I would refer to what's my tab C, and it's document 002427, which are the notes of the meeting referred to yesterday that you had with Jack Matthews, Mr. Vineberg and a Peter, and I think you said it was Peter Kozicz.
Mr. Goudge: Yes, sir.
Senator Bryden: Have you seen the copy and have you, you have your original?
Mr. Goudge: I have my originals, I'm just trying to turn them up here.
Senator Bryden: It's November - looks like November 5 maybe.
Mr. Goudge: That's right, I was - it is indeed November 5. It looks like a 1 on the photocopy but it is in fact a 5.
Senator Bryden: Oh, just before, I forgot to ask something that came out of the last one, and that is a review of the deal by the province was discussed at the meeting with Church?
Mr. Goudge: Yes.
Senator Bryden: Third page. Did he indicate, was a report prepared?
Mr. Goudge: What he indicated, senator, was that the province had done a review of the agreements. And that that would be part of the material that he assumed the province would be imparting to us and he was alerting me to the fact that the documents that the province had obtained in order to review the agreements had three clauses which had been deleted.
Senator Bryden: Okay. The only point of going back is the date of this meeting was October 31, '93.
Mr. Goudge: Yes, sir.
Senator Bryden: And he has indicated at this date that the province has reviewed the deal.
Mr. Goudge: Yes, sir.
Senator Bryden: Thank you. Okay, you've reported here the people who were, the Paxport people who were at the meeting. Who was at the meeting with you?
Mr. Goudge: Mr. Nixon, myself, and I would be virtually certain Mr. Wilson was there as well.
Senator Jessiman: November 5?
Senator Bryden: The November 5 one.
Senator Jessiman: Thank you.
Senator Tkachuk: Did Wilson keep notes of these meetings?
Mr. Goudge: We made enquiries about this and he has no notes that he's released.
Senator Tkachuk: Did he keep notes was the question, not whether he has notes. Did he keep notes of these meetings?
Mr. Nixon: I'm not aware that he kept notes, in fact I'm sure that he did not. In the meetings of the type that are being described here Mr. Goudge was responsible for the notes. You have to understand that we felt that we were moving toward establishing a policy and writing a report within three weeks and that we were, I was prepared to move forward from some of these meetings without notes, I felt they were unnecessary, and certainly we weren't contemplating having to refresh our memories 20 months hence.
Senator Bryden: Can I ask you, Mr. Goudge, are these the notes that you took at the meeting? These are not notes in preparation for the meeting?
Mr. Goudge: That's correct, senator. These are the notes I actually took while the meeting was in progress.
Senator Bryden: Okay. And the copy that I have distributed is an accurate copy to the best of your knowledge?
Mr. Goudge: Absolutely. I should make it clear that the date at the top is November 5. When you see the original it's clear. The photocopying makes it look like November the first. It was not November the first. I apologize for my handwriting.
Senator Bryden: You could have made a blanket apology at the beginning, it would have been okay. Anyway, could you proceed?
Mr. Goudge: I perhaps should have. Shall I just go through the notes, senator? I think you have the participants, senator.
Senator LeBreton: What's the first, what are you saying there?
Senator Jessiman: Is it Peter Coughlin?
Mr. Goudge: Yes.
Senator Jessiman: You say Peter.
Mr. Goudge: Yes.
Senator LeBreton: Is it Peter Coughlin or Peter Kozicz?
Mr. Goudge: The second, senator.
Senator LeBreton: So it wasn't Coughlin?
Mr. Goudge: It was not Coughlin. Mr. Coughlin was there in the meeting we had with PDC.
Senator LeBreton: And Mr. Vineberg, is that - this is Mr. Vineberg from, actually from Claridge, but was he in this meeting?
Mr. Goudge: Absolutely.
Senator LeBreton: So we have Jack Matthews, Mr. Vineberg and Peter Kozicz. And what's the first word at the top there? Does that say Paxport?
Mr. Goudge: Yes.
Senator LeBreton: Well, Mr. Vineberg isn't with Paxport, but that's another - well, PDC but not Paxport.
Mr. Goudge: My sense of what happened, senator, is that the Paxport people were to come in to see us, Mr. Matthews came as their representative, as their president, and he had with him Mr. Vineberg. I certainly didn't know that Mr. Vineberg was coming prior to the meeting but he attended and was helpful.
Senator Bryden: Can you go - just go through the same as you did before?
Mr. Goudge: Sure. There was a description of the first, I mean I will go through it in detail if you like, senator, but really the first part of it was a description by the Paxport representatives of the Paxport structure and then the way in which that worked itself out in the PDC venture.
Senator Bryden: Yes.
Mr. Goudge: And those are my attempts to follow the mathematics. If you'd like me to I'll read them but I think they're fairly self-evident unless some of the -
Senator Jessiman: I don't understand what the 12 and a half per cent is; what's that? Overhead?
Senator Bryden: Maybe you should go through. If you start T1T2 and I can ask your supplementaries for you.
Mr. Goudge: GP I'm certain I wrote to mean general partner, and LP limited partner, and the percentages would be the ownership percentages.
Senator Jessiman: After T1T2, below that, GP, which is general partner. What's below that? It looks like a "C".
Mr. Goudge: I think it's LP.
Senator Jessiman: That's LP, limited partner.
Mr. Goudge: Yes.
Senator Jessiman: Yes. And the one below that?
Mr. Goudge: GP.
Senator Jessiman: GP again?
Mr. Goudge: Yes.
Senator Bryden: So if I under - I'm interrupting your interrupting.
Senator Jessiman: Well I'm just trying to get so we can all be clear. Beside Matthews Group, you're saying, is GP?
Senator LeBreton: LP.
Senator Jessiman: Well LP is above, but I want to know - oh, I see what that is, that's Lockheed.
Mr. Goudge: Yes.
Senator Jessiman: Okay. What's - you're saying general partner is the Matthews Group? Is that what you've got? I would -
Mr. Goudge: What I have here is that the general partner was made up of the interests that are listed thereunder.
Senator Jessiman: So the Matthews Group is an LP, too. I think that's a fact.
Mr. Goudge: It may be a fact.
Senator Jessiman: But you think you put GP?
Mr. Goudge: Sorry?
Senator Jessiman: You think that writing is GP, not LP?
Mr. Goudge: If you're talking about the third entry, the first is GP, two lines down is LP, the line below that says GP.
Senator Jessiman: Okay.
Senator Bryden: So as I understand this, the make-up of the T1T2 Corporation limited partnership, there was 53 per cent of general partner - was who?
Mr. Goudge: T3LPCO Investment Inc.
Senator Bryden: And was that a short term for Claridge?
Mr. Goudge: If you say to me what is it in fact, senator, I can't answer that, I assume it's Claridge, yes.
Senator Bryden: And then the LP is 12 and a half per cent, and that's Lockheed?
Mr. Goudge: Yes.
Senator Bryden: And then the other general partner appears from what's here to be made up of the Matthews Group, Bracknell, Allders and the others listed there. Is that correct?
Mr. Goudge: Yes.
Senator Bryden: And then what do you say?
Mr. Goudge: The next line is a reference to the Paxport unsolicited bid in the summer of 1990. Mr. Matthews discussed that with us. The next line references BAA leaving at the end of 1991.
Senator Bryden: What does that mean, the BAA, do you recall? Leaving the process or -
Mr. Goudge: Leaving the arena, if I can put it that way.
Senator Bryden: No longer playing?
Mr. Goudge: Yes.
Senator LeBreton: A supplementary? Because yesterday Mr. Nixon left the impression that BAA left shortly before and I think he used the term within days - I'll check the testimony - before the LAA was issued and the LAA was issued in March and he left the impression it was very close to them leaving and it left it up in the air why they left and in fact here on your own note it confirms that they left at the end of 1991.
The Chairman: Senator LeBreton, I don't want to appear to be picking on you, but I mean that's not a supplementary question, you're correcting the witness I think correctly of testimony yesterday. That wasn't a supplementary question with regard to clarification.
Senator LeBreton: Okay, I'll get back at it then, Mr. Chairman.
Senator Bryden: Would someone wish to reply at this stage?
Mr. Goudge: Give me the question again, senator.
Senator LeBreton: Well, yesterday Mr. Nixon indicated that BAA left and gave up in putting a request for proposal shortly before, and I think he said within days before the RFP being culled, and here in your own notes there's confirmation that they left at the end of 1991, in fact a good two months and a week or two before the RFP was culled. So I just, you've got it in your own notes, why would Mr. Nixon yesterday try to leave the impression, or not leave the impression, I'll check the records, but I think he said within days of the RFP being culled.
Mr. Nixon: Mr. Chairman, if I may, I was in error, and the senator was good enough to correct me quite directly yesterday and now she is reinforcing that, which is appropriate since we were in possession of the facts but I was not aware of them.
Mr. Goudge: I think it's also useful to say, senator, that this level of factual detail is the kind of thing that seems to me to take us on a little bit of a wild goose chase. I think as was made clear by Mr. Nixon this morning, the kinds of things that are at the root of his conclusion don't depend on whether BAA left at the end of 1991 or two or three days before the RFP.
Senator LeBreton: I think the wild goose chase describes something else, not this, but anyhow.
Mr. Goudge: I just want you to understand, senator, that the choice between those two possible facts is not something on which anything that Mr. Nixon ultimately did turned.
Senator LeBreton: But you were the lawyer and you were taking notes, certainly you should have kept them -
The Chairman: Senator Bryden.
Senator Bryden: This is the last note of the meeting at this time and I would like to complete it if we may. Could you just refer to what is your note at the bottom of that page?
Mr. Goudge: "Note BAA, thought fix was in, so did LAA."
Senator Jessiman: Where is this now?
Senator Bryden: Bottom of the March 5, first page of the March 5 memo.
Senator LeBreton: And is that something Mr. Matthews said? Whose note is that? As a supplementary, Mr. Chairman, because he's got that -
Senator Bryden: Well, if you'd just wait.
Mr. Goudge: That, senator, is my note to myself. That is the practice of my taking notes that when I'm recording my own thought I put "note".
Senator Bryden: Okay, can we go to the next page?
Mr. Goudge: "Deloitte's reviews bid post December 1992." And Mr. Matthews indicated that we ought to get the Deloitte's report. That the proposal was tailored to meet Air Canada's needs. That Claridge paid less in ground rents, substantially less in the first few years than the Paxport bid. That PDC says there is a ceiling to the rate of return but no floor. And then the last note is that Paxport was to send us the invoices they had received from their lobbyists.
Senator Bryden: And did they do that?
Mr. Goudge: Yes, they did, sir.
Senator Bryden: And you I assume filed them here?
Mr. Goudge: You have them, as I understand.
Senator Bryden: And they're available. Mr. Chairman, I have just, and although this looks like a big file it's only two documents, two or three documents.
The Chairman: You're just about on the, in five minutes you will be on the hour mark.
Senator Bryden: Yes, well everybody is supplementing me here. To death. Get your stopwatch. Anyway, you're being kind and I -
Yesterday there was referred to a number of meetings with regional municipalities and also submissions from municipalities, and I would like to submit a document which is my tab K, which is document 002323, and it's from the Regional Municipality of Hamilton-Wentworth. There's a letter to the Honourable Robert Nixon and it's signed by Whynott. Attached to it is the submission - did you get it yet, the Hamilton-Wentworth? It's document K.
Just quickly, Mr. Nixon, is this the submission that you received from Hamilton-Wentworth that you referred to yesterday? I think you referred to it yesterday.
Mr. Nixon: Yes, we did refer to it, Mr. Chairman, and whether or not there was a larger submission associated with that letter, I don't recall. I do recall the meeting because the Hamilton-Wentworth officials were so deeply concerned that the aspects of the contract was going to proscribe, was going to inhibit, development of Hamilton until the passage throughput at Pearson was 33 million a year.
Senator Bryden: That's the reference in the first paragraph, I take it, that that ceiling, or whatever it was called, that guarantee, really inhibited the expansion of their airport and the airports in the surrounding area for some period of time to come.
Mr. Nixon: That's correct.
Senator Bryden: And just in number 3 on that, paragraph 3, I just will read it quickly:
If the T1/T2 formula for privatization is followed for Pearson's runways the effect on Hamilton Airport will be even more damning.
Do you know what they're referring to there?
Mr. Nixon: He was concerned that building a new north-south runway and perhaps twinning some of the standard runways at Pearson would increase their competitive position to the extent that the facilities in Hamilton would become irrelevant; I would almost say more irrelevant, because even as the competition stood at that time there was a tendency for most of the traffic to use the convenience of Pearson since most of it came out of the Metropolitan Toronto area. To drive an extra 40 miles or whatever it was, was often rejected by the shippers and particularly charter passengers. He was hoping that it would be seen as an economic advantage and maybe an advantage of convenience that Hamilton itself would become a fuller partner in the array of facilities for air transit and air shipping.
Senator Bryden: I refer now to my tab "J". It's document 002312.
Mr. Nixon: Got it.
Senator Bryden: This is the presentation to Robert Nixon concerning the city of Brampton's position on the Lester B. Pearson International Airport privatization. If you just look at that, does this look like the submission that was sent to you?
Mr. Nixon: Yes it does. It is the submission.
Senator Bryden: If I could just draw your attention quickly, because I know I'm testing the chairman's patience, on page 2, the first paragraph under "Points for Consideration", I'll just read the last sentence:
Although we agree that an LAA would certainly require additional time, we believe that this recession will continue for an extended period and that there is still a "window of opportunity" to emplace an LAA and garner the maximum infrastructure and improvement benefits for the long term, prior to renewed demand and supply pressures being placed on the existing airport facilities.
You had met with these people. Had they also expressed that to you in person?
Mr. Nixon: Yes, very strongly.
Senator Bryden: And the top of page 3, the last part of the sentence - well, I better read it all:
As you are well aware, the Federal LAA initiative which was announced by then Minister of Transport John Crosbie in April 1987, clearly stipulated that all profits derived by an LAA must be reinvested back into the infrastructure of the airport.
That was not the case in relation to the privatized deal, was it?
Mr. Nixon: No, it was understood, based on the investments of about $61 million, that the profit associated with that would be the basis before tax at 23.6 per cent.
Senator Bryden: And there's some others that I should bring, but I go to page 4. They raise something that perhaps we haven't been as aware of; the last sentence of the fourth paragraph:
Although this "Community Sensitive" mandate is a clear expectation of any Local Airport Authority, it is not an expectation of a private consortium.
And that's after having referred to that a private consortium's first obligation is to its shareholders. Do you agree with that?
Mr. Nixon: I do.
Senator Bryden: And finally, well I won't read it but I would draw the committee's attention to the concluding paragraph on page 5 where they summarize their position.
Now, Mr. Chairman, I have one more that was referred to yesterday that I would like to introduce, and that's document I, and that's the "Provincial Submission to Robert Nixon".
We have available to us, and I have here, it's document 002318, two copies of the full submission. Because we're overburdened with paper, I did not reproduce the whole thing. I think you have the whole thing there.
Mr. Nixon: I do.
Senator Bryden: What I did reproduce was their summary position. If I could just quickly refer, in their introduction, the second sentence of the first paragraph:
Reports on the character of the agreements, and the process by which they were developed, have concerned many of Ontario's airport users, including the business community at large and the people of south-central Ontario (defined by the federal government as the communities located within 100 km of Toronto).
In your own investigation did you find the same concerns within those parameters?
Mr. Nixon: I did.
Senator Jessiman: That's the one dated November 17? It's not dated, but is that the one that went in on November 17, 1993?
Senator Bryden: I think we've also just established that it was being prepared prior to October 31.
Senator LeBreton: I have a document, 002317, dated November 17, a letter from the Ministry of Transportation to Mr. Nixon, and then a very detailed - obviously it's a detailed document that's produced as a summary, the same number, 002317, and it's dated November 17.
Senator Jessiman: When did Mr. Nixon get it? That's what we asked. He said before he got the letter November 17. It's important. Can he tell us?
Senator Bryden: You have something that's dated the 17th?
Senator LeBreton: Actually, Senator Bryden, when you quoted 002318 I already had a document 002317.
Senator Bryden: Where did you get that; at The Bay?
Senator LeBreton: No, I didn't. It's a document here. Actually I don't shop there either.
Senator Bryden: I should not be facetious.
Senator LeBreton: It's a document we have here. All I'm doing is to establish the date. It's a letter from George Davies to Mr. Robert Nixon. It's dated November 17, 1993, and it's in delivering this provincial submission to your review, so and so. And then it's the full report and it's dated November 17th. The one you've circulated obviously is a summary of this full report and coincidentally it's the next number on our numbering system, 002318. So all I'm saying is that this document here establishes that the date of this document isn't November 17th.
Senator Bryden: Whatever.
Senator LeBreton: Is that right Mr. Nixon?
Senator Jessiman: I'd like you to ask the witness -
Senator Bryden: Senator Jessiman, you're going to get your turn. Why don't you ask your questions when you have your turn. I tried very, very hard not to get you mad at me again.
Senator LeBreton: Senator Bryden, you seem to indicate that this document was prepared at the end of October, and all I was doing was trying to put a date on it based on the letter that was sent to Mr. Nixon and the full document of which this is obviously a summary.
Mr. Nelligan: May I help? At paragraph 4.0, the document states:
At an earlier meeting, Mr. Nixon was provided with a copy of the province's preliminary analysis of the PDC agreement.
So I would assume that this document is subsequent to the original meeting with Mr. Nixon, and that's on the record. You can go ahead.
Senator LeBreton: So you think the date is the date we have, Counsel?
Mr. Nelligan: It's after the meeting.
Senator LeBreton: Yeah.
Senator Bryden: If I could go to page 9 of the summary, and I hope that I'm still dealing with the same document, 2318, and it's headed, 4.0, "Summary of the Province of Ontario's Review of the Agreements". Do you have that? I would draw your attention to, under "Restrictions on Future Development", go down to the second paragraph, and I would like to read that and get your comment.
The province sees this passenger threshold provision as a measure which will constrain the ability of the federal government to support airport development outside of the Terminal 1 and 2 complex. Before Pearson reaches the 33 million threshold there will be a need for more air terminal capacity in the south-central Ontario airports system, because of general population growth in the area, as well as the increase in Pearson's capacity which flows from the introduction of new runways. This provision effectively allows PDC to expand into Area 4 without any competitive process; in other words, PDC has found a way to circumvent the terms of the 1992 terminal redevelopment proposal which specifically excluded Area 4.
Now, can you comment on that? Was that discussed with you?
Mr. Nixon: Yes it was, senator, and the formula by which PDC would be given access to area 4 is a bit intricate. It may be that Mr. Goudge recalls it in more detail, but as I recall it, it was based on the Government of Canada finding, some time subsequent to the deal having been made, that they wished to expand facilities outside of Pearson at other airports, that is, before the 33 million cutoff was reached, and that if that were to occur, one of the penalties was that PDC would be given access to area 4 which, under the original concept of the redevelopment of the whole airport, was not to be handed over to a privatizing agent.
Senator Bryden: Can I go now to page 10, and once again the middle paragraphs beginning under "Apparent Concessions", beginning under the bullets:
it should also be noted that, though the PDC's investors are not listed in the terminal development agreements, the province is advised that some companies are both providing airport services and serving as PDC equity partners. This form of "double-dipping" - earning revenue from airport services as well as gaining a net return on the terminal operations - could increase costs unnecessarily.
Now, perhaps either you, Mr. Nixon, or Mr. Goudge who would have had a look at the agreements, can comment if in fact there were non-arm's length agreements that would allow this, what they refer to as, double dipping.
Mr. Nixon: If I may, and I would certainly ask Mr. Goudge to assist me in this, but one of the outstanding possibilities for double dipping, as the brief designates it, would be in the management contract that Paxport had awarded to Matthews Development.
Senator Jessiman: Paxport or Pearson?
Mr. Nixon: It was not Pearson. It would have been the winners overall of the privatization, and that was one of the internal contracts that had been part of the completion deal on October 7th which had not been made public at the time of that completion. A second one dealt with Allders, which was a significant investor in the limited partnership, or I guess was rolled into the general partnership. They were given, by way of a contract, the right to operate the duty free facility during the term of the lease.
Certainly this monopoly of duty free business at Terminals 1 and 2 was considered by other companies that operate duty free facilities in Canada as an unacceptable restriction, as far as they were concerned, and led some business people associated, not with Allders but with their competitors, to express strong objection to me.
Senator Bryden: Can I just go, and once again, either one of you - Mr. Crosbie, I'm not leaving you out, it's just that I think we're dealing with contract stuff. If you feel like jumping in here at any time -
Mr. Allan Crosbie, Managing Partner, Crosbie & Company Inc.: Thank you very much.
Senator Bryden: I thought you were falling asleep.
I would like to refer you to the last two sections, the one is "Unusual Clauses". The province of Ontario drew your attention to:
A number of unusual clauses are contained in the agreement. Some of these clauses result in:
only partial disclosure of the key players in the PDC deal;
Any comment on that?
Mr. Nixon: There's been some discussion just this morning about the time relative to the signing of the deal and the timing of my review that this report was prepared. There was some certainly intense interest and criticism of the government of the day when they undertook to reveal the details of the deal, let's say about the second week in October, I would think, 1993. And there were two areas where there was criticism. One was that some of the non-arm's length contracts which we were referring to a moment ago under the heading of double dipping, to use the term that the brief uses - for some reason I don't use that term myself often.
I've lost my train of thought.
The government did not reveal those non-arm's length contracts and also, when it came to the beneficial ownership, they indicated that that had not been fully revealed although it had been revealed to the government. The officials of the government had all that information. That's become largely irrelevant since all of the people associated with it have surfaced and are clearly known.
Senator Bryden: The next bullet:
a 57 year lease regardless of whether all the development stages of the agreement are met.
Mr. Nixon: That's true. Of course it depends on the passenger throughput and the passenger growth pressure, but the lease for 57 years certainly was a matter of concern to me and was difficult for many citizens to comprehend. We have heard the justification from the people in Transport Canada on the basis that this is sort of a standard period of time for these long leases. But in my report and in my comments yesterday, I couldn't help but mention that air transport is strongly driven by changing technology, and you only have to consider what the little airport at Malton was in 1935 and wonder whether this particular long-term deal deals effectively with the needs of the Canadian community 57 years from now. My feeling is strongly that it does not and that the government makes an unwise decision in leasing these facilities privately for that period of time.
Senator LeBreton: A supplementary, Mr. Chairman, and a point of clarification.
Therefore a 60-year lease to the Vancouver LAA obviously, in the year 2045, you can imagine what the Vancouver airport - is it not true that all the LAAs that are presently - do they not have 60-year leases?
Mr. Nixon: Yes, that's correct, but if I may say, the raison d'être of an LAA is not only to operate the airport as required by the community at the time, but it is also to operate it for the benefit of the broader community, whereas a privatized airport has, as its primary responsibility, its report to its shareholders.
Senator LeBreton: And not the benefit of the community?
Mr. Nixon: I would think that it exists so that the investment made in that particular free enterprise is going to return the sort of profit that in this instance would amount to 23.6 per cent before taxes.
Senator LeBreton: Just a point of clarification, Senator Bryden. It's only to assist you. The summary document -
Senator Bryden: I need all the help I can get.
Senator LeBreton: Yes. The summary document that you have given, undated, 002318, in fact are pages - because you can tell by the numbering of the pages - 2, 9, 10, 11, 20 - are in fact simply pages pulled out and stapled together from the full document of November 17th, and I emphasize the date November 17th, 1993.
Senator Bryden: Mr. Chairman, I indicated at the beginning I have the full document here. I have two copies.
Senator LeBreton: You said October. You said late October when you were talking about this document.
Senator Bryden: May I continue?
Senator LeBreton: Yeah.
Senator Bryden: I'm trying to finish as quickly as I can and this is my last little piece here.
The 57-year lease, the interesting part to me is that that lease would continue whether all the development stages of the agreement are met. That meant that for approximately a $100 million investment, this consortium had 57 years of revenue stream from Pearson international airport, for 57 years, if they never spent another nickel. Isn't that correct?
Mr. Goudge: That's correct, senator. Let me just elaborate a little bit. What you see there is an extract from what is attached to the provincial brief which is a rather more elaborate analysis of the contractual provisions that Fraser and Beatty did for the province and that I reviewed with their solicitors. And I can tell you that their solicitors treated the 57-year lease, regardless of whether any development proceeded or not, to be highly unusual from their perspective. Most transactions of this kind that had at their core redevelopment would have provided for the return of the leasehold right if the development didn't proceed. The solicitors -
Senator Bryden: Did this require that?
Mr. Goudge: No. You will see that when Mr. Nixon came to author his report this term is recited. I think it's fair to say that my own view was that it was unusual, but we did not make the point in the report as forcefully as it was made to Mr. Nixon in the provincial brief.
Senator Bryden: And we have that brief?
Mr. Goudge: You have that brief, sir.
Senator Bryden: Complete. Next bullet:
very little federal government control over PDC's right to enter into any leasehold mortgage with a lending institution.
Mr. Goudge, I take it that is unusual, to have an owner provide for that; is that correct?
Mr. Goudge: Yes, sir.
Senator Bryden:
the ability of PDC to sublet without consent of the federal government;
I've seen many leases in my time. Don't they almost always require the consent of the owner and then go on to say "which consent shall not be unreasonably withheld"?
Mr. Goudge: That would be the normal provision. That was certainly the view of the solicitors to the province and it was a view which, after consultation with a number of solicitors, I came to share.
Senator Bryden: And that consent is not required in this agreement?
Mr. Goudge: No, sir.
Senator Bryden: Last bullet:
the fact that all disputes between PDC and the federal government may be referred to an arbitration tribunal.
What's unusual about that?
Mr. Goudge: That didn't strike me, frankly, as a major issue.
Senator Bryden: Finally, and just refer to the last thing, "Short Bidding Process":
The province also has some concerns about the process which led to the PDC agreement.
And this was the subject of debate and is already on the record, but it's part of that.
Do you have anything to add for clarification from my questions, Mr. Nixon or Mr. Goudge?
Mr. Nixon: I would just say that from my point of view the bullet points that you raised were significant, but it was the general attitude expressed in this brief, which actually I referenced for the first time late yesterday afternoon. There are three or four lines just at the end of those bullet points which certainly had an impact on me as well, and I quote:
The province is concerned about the numbers of unusual clauses in such a crucial agreement. Individually they appear to fetter the federal government from the usual rights of a lessor; collectively they suggest a hastily and poorly prepared agreement.
You can understand that that would have a significant impact on me with the responsibilities that I'd been given.
Senator Bryden: I want to make one small disclaimer, and that is the purpose and the mission that you were charged with is different than the one that this committee is charged with, and therefore that's why there was perhaps a little more attention by me to facts of a significant and relevant nature but not necessarily of a global nature. We have found so far that as long as you talk in generalities at this committee, then it doesn't look so bad. It's when you get down to the details, that's where you find that the clauses aren't standard, the non-arm's length transactions are unusual, the payments that get made for no work - just one last question. Were you aware of the contract between Matthews Investment and PDC?
Mr. Goudge: The non-arm's length contract?
Senator Bryden: Yes, it was a contract - I have a copy of it here somewhere - but it's a contract for $350,000 a year for ten years, non-cancellable.
Mr. Goudge: What we knew, senator - what I knew, let me just speak to that - was that in the closing documents there is a list of pre-October 7 non-arm's length contracts. There was a list of some ten. The concern that I developed was that the only right the government had under the contract was to look at those non-arm's length contracts. They had no right to assure fair market value nor a right to veto.
Mr. Nixon: I would just say that I was not aware of that at the time of my report, but I believe it was brought to my attention because it became a document here and naturally I was interested in reading it in your deliberations.
Mr. Goudge: Did I know about that? No, sir.
Senator Bryden: You didn't know about this one?
Mr. Goudge: No.
Senator Bryden: But you know about ten others.
Mr. Goudge: I know about the list of ten others. There was a controversy that developed as to whether in fact all of those ten did exist as they were alleged to exist in the closing documents. My concern was that the government's right, the only right the government had preserved in the contract, was simply to look at these. They had not preserved the right, which I would have considered to be prudent, to either veto, if the non-arm's length pre-October 7 contracts were offside, or, a lesser right, but more adequate than they reserved, and that would be to ensure that they were at fair market value.
They had not done either of those things in the contract. In fact, they had not even exercised the right they had, which was to go and look at the alleged contracts, so that left me with some concern.
Senator Bryden: Thank you very much, Mr. Chairman. I apologize for being so long.
The Chairman: That was the first round questions?
Senator Bryden: Yes, and my period of time actually was just about 40 minutes if you take out the interruptions.
The Chairman: The total elapsed time was an hour and 20 something.
Senator Stewart: That's your responsibility, Chairman.
The Chairman: What is?
Senator Stewart: That is your responsibility. I'm not criticizing you, but don't blame Senator Bryden.
The Chairman: Before we take a short break, there's just one question I want you to help me with. If you had been with us the last few months you'd know the frustrations we're having with documents and with whiteouts and with the relationship with the Department of Finance. I wanted to ask you, you know Mr. George Hunter, who is a partner with a Aylen Scott.
Mr. Nixon: I know him.
The Chairman: And you know him, Mr. Goudge?
Mr. Goudge: Yes I do, Mr. Chairman.
The Chairman: Mr. Hunter is a partner with Scott & Aylen. Scott & Aylen are retained by the Department of Justice. You know that as well?
Mr. Nixon: I wasn't sure which department had retained them. I knew that they were acting on behalf of the government.
The Chairman: All right. Now, have you met with Mr. Hunter over the last period of time?
Mr. Goudge: To discuss the whiteouts and the documents?
The Chairman: To discuss anything.
Mr. Goudge: Yes, we've met with Mr. Hunter.
The Chairman: How many times did you meet with him?
Mr. Nixon: I've met him probably three times.
The Chairman: Three times. He went to Toronto and met with you?
Mr. Nixon: Twice in Toronto and once here.
The Chairman: What was the nature of your discussions with Mr. Hunter?
Mr. Nixon: He had questions of me that are not similar to the ones that are asked here. I think I was a source of information for him.
The Chairman: Nothing else?
Mr. Nixon: Well, we have spent a number of hours discussing the report and how it came into being. We looked at all the material that had been put before the committee here to see how it related with the findings of the report that I had prepared.
The Chairman: He was coaching you on your testimony before this committee?
Mr. Nixon: I wouldn't use that word.
The Chairman: How else could you characterize it?
Mr. Nixon: I don't know. I found him to be a useful sounding board so I could say, what was this material before the committee? He also took the hearings and extracted from them any direct references to myself, which sometimes I didn't read with a good deal of comfort but which I was made aware of directly. And he asked me to consider what sort of responses would be made to that sort of an approach.
The Chairman: Did he give you any indication of his intention to recommend certain white-outs in your documents?
Mr. Nixon: These matters were discussed, but I think that Mr. Goudge should refer to it. While I signed the undertaking of confidentiality - and of course we are going to live up to that. Even when it is inconvenient for ourselves let alone for the committee, we certainly will live up to that. We find some of the proscriptions a bit difficult to understand and we have discussed those with Mr. Hunter and he in turn -
Mr. Goudge: He has relayed - perhaps I could respond, senator. Mr. Hunter has been helpful in the meetings in kind of bringing the work of this committee back to us. One of the difficulties that is perhaps all too obvious in the evidence we have been given is that you people are now steeped in detail because you have been doing this since July the 11th. I think all three of us have been doing other things since July 11th. We might have been able to keep up with you on November 30, 1993, but it has been useful to have Mr. Hunter tell us what you have been doing so it helps us to get backup to speed to where we were.
Secondly, I would simply want to disabuse the committee of any notion that Mr. Hunter either has or has attempted to coach us. He has not done so . Thirdly, he has served as kind of the relayer of the justice position on white-outs, exclusions, and in effect what we are allowed to do without circumventing our confidentiality undertaking to the government. What position he has taken in discussions with the Department of Justice on that confidentiality debate I simply am not privy to. But he has been the one - he is the one that said this is what they are going to white-out.
The Chairman: Has he provided you with any advice?
Mr. Goudge: About?
The Chairman: On any matter relating to the matter before us?
Mr. Goudge: No.
The Chairman: He is just a friendly chap that comes to Toronto - does he provide you with any documents?
Mr. Nixon: He provided to me a compendium of every reference in the committee to Nixon. So it is a fairly thick document.
The Chairman: Good friend to have. As you know, the Department of Justice told us that they are spending something like $1,300,000 just on the law firm of Aylen, Scott and the Lindquist, Avey people.
Senator Kirby: The $1 million was their number that the Justice Department is spending. The $300 thousand is our budget. That is how you got that total.
The Chairman: A million was estimated at that. Our budget is $297,000. We will spend considerably less than that. They spent three times as much as we did. That is all.
Senator Bryden: The difference between the price of a politician and the price of a lawyer.
Senator LeBreton: Can I ask a supplementary, Mr. Chairman? Were there any representatives of the firm Lindquist, Avey in any of the meetings that you had with Mr. Hunter?
Mr. Nixon: Yes, there were.
Senator LeBreton: Who?
Mr. Nixon: Robert MacDonald.
Senator LeBreton: Anyone else?
Mr. Nixon: No.
Senator LeBreton: Mr. MacDonald, what did he contribute to the meeting?
Mr. Nixon: The same thing. He had gone over and followed the testimony here quite carefully and was bringing to my attention areas which he felt would be directed at me and that that should be brought to my attention before I presented myself to the committee.
The Chairman: Okay. Break for 10 minutes please.
The committee recessed.
The committee resumed at 11:30.
The Chairman: Come to order please. Senator Jessiman, you will carry on until our break at 12 o'clock. We will come back at 2:00 and you will continue on then.
Senator Tkachuk: I have a couple follow ups on your point, Chairman, if I could. We never asked Mr. Crosbie, did you meet with Mr. Hunter as well?
Mr. Crosbie: Yes, I did.
Senator Tkachuk: And what was the purpose of your meeting with him?
Mr. Crosbie: Well, all the meetings that I have been in with Mr. Hunter were with - in the group when Mr. Goudge was present, so I do not think I have anything more to add than Mr. Goudge has already said.
Senator Tkachuk: What about Mr. MacDonald?
Mr. Crosbie: Well the same - I would give the same answer in terms of Mr. MacDonald.
Senator Tkachuk: Mr. MacDonald is a member of Lindquist, Avey. He says in his brochure, "We are investigators. Most of our work really isn't accounting. You need to understand accounting. You need the fundamental background."
Senator Bryden: Where are we going with this?
The Chairman: Supplementary question.
Senator Tkachuk: What was his purpose? What was his role?
Mr. Crosbie: We had one meeting actually with Mr. Hunter and Mr. MacDonald. I can't remember whether Mr. MacDonald was there or not, but someone from Lindquist, Avey was there at the offices of our firm, very early on in this process when we were - when it was suggested that we might be called to be a witness and they met with us in our offices to just help us and give us advice in terms of preparing or getting the documents organized within our firm to send up to you because we had, as part of our work, accumulated a lot of documents, and they had to be organized and labelled and all that sort of thing for your committee. They managed that process.
Senator Tkachuk: How many times did you meet with him?
Mr. Crosbie: Well, I remember that one meeting.
Senator Tkachuk: Did you meet three times, twice?
Mr. Crosbie: I am just trying to work it through in my mind. The one meeting was in our office where they spoke with us about organizing ourselves in terms of all the documents and so forth to get them for your committee, and then I believe all the other meetings -
Senator Tkachuk: This was when?
Mr. Crosbie: I would have to go back in my diary.
Senator Tkachuk: June, July, August, September?
Mr. Crosbie: Sort of September when we started to try to prepare to get the documents ready for you.
Senator Tkachuk: Okay.
Mr. Crosbie: It would be - I am going to take a guess - I am just going to guess late August. You know, I would have to go back and - when we started to prepare and get the documents ready for this committee is -
Senator Tkachuk: That is one meeting.
Mr. Crosbie: That was one meeting, and then the other meeting - any other meetings I have had -
Senator Tkachuk: All the other meetings? How many were there?
Mr. Crosbie: There was one - Steve, there was one that you asked me which we joined in Toronto?
Mr. Nixon: If I may just - there were three meetings that I recall.
Senator Tkachuk: That is the one you had, Mr. Nixon?
Mr. Nixon: Mr. Crosbie was at two, the second and third meeting with me and Mr. Goudge I think was at those two, not at the first one I think that I attended with them.
Senator Tkachuk: I just want to know how many meetings, Mr. Crosbie? How many meetings, Mr. Nixon? And how many meetings, Mr. Goudge, that you had whether you were together or not?
Mr. Crosbie: Other than the first meeting that they had at our office to help us get going on the process here, the other meeting or meetings that we have had with them, Mr. Goudge has always been present, so how many meetings would that be, is it two?
Mr. Goudge: I think there were two.
Senator Tkachuk: So you were at three meetings?
Mr. Crosbie: Yes.
Senator Tkachuk: Did you take notes at these meetings?
Mr. Crosbie: I do not have notes.
Senator Tkachuk: You had three meetings, you had two?
Mr. Goudge: I only had the two where Mr. Crosbie was present. He came into one in the middle.
Senator Tkachuk: You had two with Mr. Crosbie but you had a separate meeting before he arrived?
Mr. Goudge: Mr. Nixon and I met with Mr. Hunter and Mr. MacDonald.
Senator Tkachuk: Mr. Nixon?
Mr. Nixon: I told you I had three meetings. Mr. Crosbie was at the second two.
Senator Tkachuk: Were you shown documents other than the ones you had on your own file?
Mr. Nixon: We had prepared - all the documents I had were in the possession of Mr. Goudge and he relaid all of those documents to the Privy Council Office early on.
Senator Tkachuk: I want to ask that question again. Were you shown documents other than the ones you had in your own file?
Mr. Goudge: I do not recall any senator, no.
Senator Tkachuk: Cannot say yes or no?
Mr. Goudge: I would be virtually certain we weren't. That is my recollection is that we were using the opportunity to kind of refresh our memories.
Mr. Nixon: The new documents were the - I would call them Hansards but the verbatim business transactions of this committee, and it was his responsibility I gathered on behalf of whatever department he works for but in general the Government of Canada to be sure that I and others were aware of the impact of the material that had been presented to this committee on me and us as individuals and directly.
Senator Tkachuk: You were not shown any other documents other than the ones from your own file?
Mr. Nixon: No.
Senator Tkachuk: What about you, Mr. Crosbie?
Mr. Crosbie: No, I was not shown any documents. I am certain we were not.
The Chairman: Senator Jessiman?
Senator Jessiman: Just to follow a little bit on that, that was one of the questions I was going to ask second, but now that Senator Tkachuk has brought it up, you said you had 16 people in your firm Mr. Nixon. How many were involved with this report back in 1993?
Mr. Crosbie: Well, we had three others in addition to myself from our Toronto office who were involved in this report.
Senator Jessiman: Are they professionals like yourself?
Mr. Crosbie: Yes, they are all professionals. They have slightly different backgrounds, but they are at the professional level.
And then, we had a couple of people involved from our Los Angeles office, and I don't know how many there would have been but I am going to say one or two. I personally did not have contact with those people. Other people in our office here in Toronto did. Then we also had some involvement at the professional level from our New York office.
Senator Jessiman: But you were responsible for the file?
Mr. Crosbie: Yes.
Senator Jessiman: You yourself personally?
Mr. Crosbie: I personally was intimately involved in the file.
Senator Jessiman: You were the one on behalf of your firm that entered into a contract with the government?
Mr. Crosbie: Well, our firm entered into a contract with the government.
Senator Jessiman: Yes. At that time, what was that for that particular time then 30 days that you were - what was the contract - what was the amount?
Mr. Crosbie: What was the amount of the agreement with the government?
Senator Jessiman: Yes.
Mr. Crosbie: My recollection was that the amount was $100 thousand and that included the GST. Out of that we also had to pay our out-of-pockets, so that the net amount payable for professional services would have been somewhat less than that.
Senator Jessiman: When you met twice and Mr. Nixon three times and Mr. Goudge twice, were you -
Mr. Crosbie: Sorry, that was with Mr. - you were talking about the meetings?
Senator Jessiman: I have finished with 1993. You were telling me it was about $100,000 that your firm received for the work you did.
Mr. Crosbie: A little less.
Senator Jessiman: But now I am speaking of the meetings that you now had. You say you have gone to two and Mr. Nixon went to three and Mr. Goudge I understand has gone to two. You first, you are there in your professional capacity?
Mr. Crosbie: Yes.
Senator Jessiman: And you are acting for the government?
Mr. Crosbie: We were acting for Mr. Nixon.
Senator Jessiman: Now, I am asking you now. You are here and also your attendance yesterday and today. You are here on behalf of the government or are you not?
Mr. Goudge: Can I give you my answer to that senator? We are here at the request of the committee.
Senator Jessiman: You are here at the request of the committee, though, but are you here in your professional capacity? Are you going to charge?
Mr. Goudge: Am I going to charge?
Senator Jessiman: Yes.
Mr. Goudge: I would think I wouldn't be paid for giving evidence. On the other hand, I have spent a good deal of time trying to get my head back in this -
Senator Jessiman: I am not against -
Mr. Goudge: - and that is a subject I am going to want to discuss.
Senator Jessiman: And the same for you, Mr. Crosbie?
Mr. Nixon: Perhaps I should say that we have no contractual arrangements with the government at this time. Our contractual arrangements were at an end in - at the end of 1993.
Senator Jessiman: But you are not expecting Mr. Goudge to work for nothing, are you; or are you?
Mr. Nixon: My experience is - he is in charge of Legal Aid, but he can -
Mr. Goudge: So I am all too familiar -
Mr. Nixon: He will look after himself one way or another.
Senator Kirby: On the other hand, we could be viewed as a Legal Aid case, I suppose.
Mr. Goudge: I don't think I should answer that, senator.
Senator Jessiman: Mr. Crosbie, is that not right, you would expect to charge for the time you spent at these various meetings and here?
Mr. Crosbie: We would like there to be some consideration of that.
Mr. Nixon: But there is no arrangement at the present time. We are appearing at the behest of the chairman and counsel and the clerk of this committee and we are glad to do so.
As a matter of fact, I read your discussions on the opening day in which you indicated that certainly no expenses would be paid and that everybody would be expected to attend as long as was necessary and as long as the senators wanted to question us; and I believe that is quite appropriate. I may send you my hotel bill and my Air Canada bill, but that is for you to dispose of as you see fit.
Senator Jessiman: But you are not speaking on behalf of Mr. Goudge and Mr. Crosbie, are you?
Mr. Nixon: But I am telling you as far as I know that there are no arrangements for them to be paid. If they send a bill to somebody, well, that's their business, but we are not retained by a government department or by myself or by the PCO or anybody that I know.
Senator LeBreton: Supplementary, Mr. Chairman. Just going back to your role here today, and of course you have been summoned by this committee, but the firm - Mr. Hunter is a lawyer hired by the government from the firm of Scott & Aylen and Lindquist Avey is a forensic accountant firm hired by the government or by Scott & Aylen, it is still not clear, and the intent apparently, because we got a long letter of explanation from Mr. Hunter when we got into this whole document issue, was to - or put papers in order, make sure that we had documents in sequence with witnesses - although we can attest on this side - I would have loved to have had some documents on Bandeen when he was here - but in any event, why - and to assist government witnesses - why would Mr. Hunter and Mr. MacDonald from the firm of Lindquist Avey spend time with you gentlemen, obviously going over testimony, if in fact they didn't show documents, they are going over testimony that was - took place at this committee - did they explain to you why they were doing that?
Mr. Goudge: I can't answer as to their motivation, senator. I can give you my sense of why it was useful. You know the events of November 1993 are some months in the past for us. By the end of that intense 30 days where we worked flat out - I mean literally I dropped my practice and did nothing else for 30 days except do the various things we have recited. It was a very intense period of time. By the end of that we had a lot of information in our heads.
As a litigator, and Senator Jessiman will recognize this, it tends to go out of your head the next day, and so I found it very helpful to have people who had been involved with this process, your detailed process, kind of tell us where you had got to, some of the information that you'd had in terms of things that were relevant for us and help us get our heads back in where we were in November of 1993.
Speaking personally, I found that very helpful.
Senator LeBreton: Excuse me, but you say "your detailed process" as if you are talking to the committee as a whole. We, as a committee, did not hire a firm that puts itself out as - here is a detective with a magnifying glass and a calculator and a garbage can going over details. We as a committee did not - this was not our committee.
Mr. Goudge: You have heard 60 witnesses, I understood.
Senator LeBreton: That is right.
Mr. Goudge: Many of whom have talked about what we did, and bringing that to our attention, from my perspective, was quite helpful.
Senator LeBreton: But what I am saying is why, why would the government, who hired Scott & Aylen, and who - and they subsequently, either the government or Scott & Aylen, hired the so-called - the forensic accountant firm Lindquist Avey, although they call themselves "white collar crime detectives", why would they, then - and we have had this explanation which we don't fully appreciate or understand or even - you know, we don't understand exactly what they're doing on this whiteout issue - why would Mr. MacDonald, who works out of Toronto and a key person in this firm, and Mr. Hunter of the firm Scott & Aylen spend time with you as witnesses?
Mr. Nixon: Let me say this, Mr. Chairman. We had no responsibility whatsoever for the retaining of either firm. The responsibility and the answer to why that was done would lie somewhere else.
But I agree with Mr. Goudge, we have found both gentlemen helpful. And I would suggest to you that what we have been able to provide the committee, however inadequate in the view of the honourable senator, was assisted to a high degree by the fact that they tracked what was happening on this committee and brought the areas that would have impact and validity to us to our attention.
Senator LeBreton: So they were working for the government?
Mr. Nixon: The people who retained them, yes.
Senator LeBreton: Well, it is a point that we have made from the very beginning of what we have been up against as senators on the committee.
Senator Stewart: Chairman, am I correct in believing that the arrangements with regard to the payment of witnesses for this committee are the standard Senate arrangements?
The Chairman: Yes.
Senator Stewart: The answer is "Yes"?
The Chairman: Yes. And since I brought the subject up before the break, I think the witnesses answered the questions.
Senator Jessiman.
Senator Jessiman: To you, Mr. Nixon, again, on November 17th there is a letter on file that you received that large document from the Ontario government in which there is a suggestion that there is some improper things being done by the federal government. And you received that on November 17th. And on the third week of that month you also interviewed Morrison Hershfield where they said the fix was in, or on, or something to that effect; is that correct?
Mr. Nixon: I am sorry I can't verify the date, but the best I can do, although there has been some discussion as to the precise date of the Morrison Hershfield meeting, is to assure you that it was in the three-week period that we have been referring to and my view probably toward the end of the second week.
Senator Jessiman: So it certainly was after the November 11th -
Mr. Nixon: What about November 11th, I am sorry?
Senator Jessiman: I am just saying you have said it was at the end of the second week. You said earlier, and I think you will find your testimony, you thought it was near the end of the third week. Now you have come back and now you are saying it is the end of the second week. So that is the -
Mr. Nixon: I thought I just said third week but I, perhaps, am mistaken.
Senator Jessiman: All I want you to tell me it is before November 11 that you met with Morrison Hershfield.
Mr. Nixon: No, I think it would be -
Senator Jessiman: I am sorry, after November 11, I am very sorry. And the same for the letter that was dated November 17th is after November 11th.
Mr. Nixon: That is right.
Senator Jessiman: And the question was asked you before, on November the 11th, because you have provided us with - you started to write your report, and on November the 11th, on page 5, because what you told us earlier was the information these two - the province of Ontario and the government had given you, that is where you based the question of influence. Now, on November the 11th, about -
Mr. Nixon: I am sorry, Mr. Chairman, if I may interrupt. The impact of the date November 11th is not clear to me. I think I have made it clear to the committee, Mr. Chairman, that my views evolved over the three-week period, that there were a number of drafts of the report and at some stage I undertook to draft the findings and the recommendations but that the actual conclusion and recommendations to the Prime Minister were entered into in the fourth week. Now, I don't recall that November 11th was a significant date from my point of view.
Senator Jessiman: I am only - you provided the committee with these various drafts of your report, drafts; and the first one starts with "Issues and observations November 11, 1993".
Mr. Nixon: I don't think - is that the correct date?
Senator Jessiman: Well, I can only say it is November 11th. It wouldn't be a note November 11th, '94, would it?
Mr. Goudge: What are you looking at, senator?
Senator Jessiman: It is a document, "Drafts of the Nixon Report".
Mr. Goudge: Who put this book together?
Senator Jessiman: I can't tell you who put it together. It was handed to me.
Mr. Nelligan: This is simply a compendium of all of the documents in the files which appear to be drafts of the final report. We have attempted to identify dates. We have indicated we are not sure of what some of the dates are. Perhaps the witnesses can assist you as to when each one was -
Mr. Nixon: If I may, Mr. Chairman, I didn't have it opened to the page that Senator Jessiman -
Senator Jessiman: First page, sir. The first page, right-hand side, at the top.
Mr. Goudge: Is it the upper right-hand thing you are going from?
Senator Jessiman: Yes, November 11th. There is not - well, if it's not '93, it certainly isn't 92.
Mr. Nixon: What it is is Goudge's writing.
Mr. Goudge: Do you want me to speak to that?
Senator Jessiman: Sure. I would like you to tell me.
Mr. Goudge: Given what was said yesterday, I went back and asked an examination of the original to be done because it, frankly, is November the 19th, not November the 11th, okay?
Senator Jessiman: Does that say November 19th?
Mr. Nixon: Yes, it does.
Mr. Goudge: If you look at the original, when you examine the original, it is clear it is November the 19th.
Senator Jessiman: Have you got it there?
Mr. Goudge: It is in Toronto, but I do have, because I had it faxed up this morning, an enlargement of the original taken from the original. And I can tell you that makes sense to me, senator. What I know is that - and I have inquiries made about this, too -
Senator Jessiman: You say this one is the 19th?
Mr. Goudge: Yes.
Senator Jessiman: Look at the next one.
Mr. Goudge: Yes.
Senator Jessiman: It is November the 18th.
Mr. Goudge: Yes. I had nothing to do with ordering these, senator.
Senator Jessiman: You didn't put it together?
Mr. Goudge: No.
Mr. Nelligan: Just so you will understand, senator, we misread that document as the 11th so we put it before the one that we could clearly read as the 18th. But we were never quite sure of where they all fitted in time. This was simply done in house here.
Senator Jessiman: And read it the way I read it because it looks pretty obvious to me it is the 11th, but if you're saying it is the 19th -
Mr. Goudge: It is clear on the original and it is very clear on the fax blow-up that it is November the 19th. And it makes sense, senator. If you look at it, it is precisely the same as the one dated November 18th.
I can tell you my recollection is that there was nothing of this nature as early as November the 11th. Frankly, I was very puzzled because there was some passing reference to that yesterday. It didn't make sense to me.
Senator Jessiman: Have you got the blown-up fax?
Mr. Goudge: Yes.
Senator Jessiman: May I see it?
The Chairman: Okay, Mr. Goudge. We can get that.
Senator Jessiman: That is a peculiar looking 9. You tell me.
I think that should be filed and if you could produce the original so we could see it I would appreciate it because it certainly -
Mr. Goudge: It is in Toronto, I was told. Frankly, we haven't had - I haven't had physical custody of this stuff for a long period of time.
Senator Tkachuk: The original is with Lindquist Avey.
Senator Jessiman: It is pretty important, Mr. Chairman, and I think that should be part of our record.
Mr. Goudge: I don't know where it is.
Senator Jessiman: And put in somehow.
Senator LeBreton: You said you turned over your documents to Lindquist Avey and Hunter?
Mr. Goudge: No. I would have, senator, turned over all these documents to the Crown as part of the litigation months ago, months and months ago.
Senator LeBreton: So they would be in the courts?
Mr. Goudge: I don't know where they are. All I know is that I asked Mr. Hunter if I could get a copy of the original and what was produced was the fax blow-up of the first page. Because it didn't make sense to me that we had any document like the one under tab 1 as early as November the 11th. I just don't recall anything that early in the game.
Mr. Nixon: There wasn't anything there.
Senator Jessiman: Okay. But you will try and produce the original. Maybe you could phone at noon hour.
Mr. Goudge: I will try to go back up the trail, senator, and determine where that came from.
Senator Jessiman: Thanks very much.
The Chairman: Senator Jessiman, can we take the word of the witness that it is November 19th?
Senator Jessiman: Does it look like November 19th to you?
The Chairman: It could, yes.
Mr. Nelligan: It doesn't look like November 11th.
Senator Jessiman: I don't know what it looks like.
The Chairman: The witness has said November 19th. Could we not take -
Senator Jessiman: All right, sure, of course, Mr. Goudge. But I would still like to see it if you don't mind.
Mr. Goudge: I will do my best.
Senator Jessiman: I know the airport is in bad shape, but I am sure your office is in good shape and you must have a fax machine that can fax us that.
Mr. Goudge: I will do my best, senator.
Senator Jessiman: Terrific. Thank you very much.
Mr. Chairman, are we going to close at 12?
The Chairman: Yes.
Senator Jessiman: I better stop. I want to get into Madam Labelle. That is going to take an hour.
The Chairman: All right. That gives you an extra five minutes for lunch.
Senator Jessiman: Or we can start at five to two, I don't care.
Senator Bryden: Mr. Chairman, if we have five minutes, and I can take a long lunch hour as well as anybody, but there are two points that I would like to raise. Do you mind?
Senator Jessiman: No.
Senator Bryden: Please don't deduct it from my time this afternoon.
In the briefing book that was provided to us of the various drafts of the Nixon report, under tab 2 there is a whiteout.
Senator Jessiman: Page?
Senator Bryden: Let me see if there are - if it is page numbered. Yes, it is. There is one on page 5. The one that I was interested in, because I think it bears on this hearing, there is a whiteout on page -
Mr. Nelligan: The unnumbered page.
Senator Bryden: Yes, beyond that. It is not the next page but the next page. It is a piece of what looks to be out of a sentence. "There was some surprise when -" is that "Huang and Danczkay"?
The Chairman: M'hmm.
Senator Bryden: "supported by the lobbyists Moores was successful" and then it starts out "Otto Jellinek" whiteout "arranged to have his assistant attend".
Now, can we find out if it is possible why that was whited out? I would be very surprised if that is not pertinent to what is before us. And before you answer that, there is one other one. It is under tab 3 and it is page 2.
Once again, it is the same type of reference in another draft. "There was some surprise when Huang and Danczkay supported by the lobbyists Moores was successful" and then "Otto Jellinek" whiteout "arranged to have".
Mr. Nelligan: I think that is the same paragraph.
Senator Bryden: Can you shed any light on it? And is it possible for us to revisit this and see if we can -
Mr. Nelligan: Well, we certainly will, senator; and I may say that while I can understand there may be some confusion because these witnesses did receive the Treasury Board submissions, of which we know, and as a result might inadvertently, from time to time, have referred to matters that someone might consider a cabinet confidence.
I am satisfied, and they can assure me, that nothing in the Treasury Board submissions would have had anything to do with Otto Jellinek. Now, they may or may not confirm that, which strikes me - I am totally mystified as to why that paragraph would have been censored in the form it was, and I will pursue that with the Department of Justice.
Senator Bryden: I would appreciate that very much.
Senator Jessiman: Mr. Chairman, I do have one question.
Senator Bryden: You just don't want me to have the last word.
Senator Jessiman: No, that is not true.
Mr. Goudge explained how helpful it was for the lawyers and the forensic accountants to talk to you people because it did refresh his memory. Is that the case with you, too, Mr. Nixon?
Mr. Nixon: Yes.
Senator Jessiman: And Mr. Crosbie?
Mr. Crosbie: Yes.
Senator Jessiman: Thank you.
The Chairman: Okay. We will break for lunch. Two o'clock.
The committee adjourned until 2 p.m.
Ottawa, Wednesday, September 27, 1995
The Special Senate Committee on the Pearson Airport Agreements met this day, at 2:00 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. Before Senator Jessiman continues with his questioning, I have two letters which I would like to read. The first letter is to Mr. Greg Weston of the Ottawa Citizen, 165 Sparks Street, Ottawa.
Dear Mr. Weston:
In your Monday, September 25, 1995 article you have cast a long shadow on the credibility of the Committee's work. In your article entitled "Pearson inquiry whitewash spreads beyond deleting details", you state that "we happen to have the complete set of those highly classified cabinet documents, the contents of which helped touch off the original furore over the Pearson deal exactly two years ago this week." The description of these documents in your article suggests that they would be important to the Special Senate Committee on the Pearson Airport Agreements carrying out the mandate given to it by the Senate.
Accordingly, the Committee invites you to appear before it on Thursday, October 12, 1995 for the purpose of producing copies of these documents for the Committee. However, if you provide the documents to the Committee before October 12, your appearance may not be necessary.
A response to this invitation within 48 hours would be appreciated.
If you would like any clarification of this request please contact the Committee's Counsel, Mr. John Nelligan...
Telephone numbers are given.
That is signed by Mr. Gary O'Brien, the clerk of the committee, and there are copies to me, Senator Michael Kirby, the deputy chairman, and Mr. John Nelligan, the counsel.
Senator Kirby: For the record, you and I should point out that we jointly produced the text and are jointly in agreement with that text.
The Chairman: Yes, Senator Kirby, yes.
With regard to the letter to Mr. Weston, as you have heard and you will see, the committee requests only the documents leaked to Mr. Weston. If they are provided to us, there will be no need to question Mr. Weston, nor to ask him to reveal his sources. I might add that we first requested these documents from the Department of Justice and after deliberation their response was "ask Mr. Weston".
The second letter, which is signed by myself and Senator Kirby, is to Mr. George Thomson, the Deputy Minister of the Department of Justice, Ottawa.
Dear Mr. Thomson:
Last week you discussed with us the application of solicitor-client privilege to testimony given by members of your Department. In so doing, you indicated a reluctance to have Justice Department in-house legal staff, who have worked on the Pearson Airport issue, appear before the Committee. You have also indicated this reluctance in conversations with the Committee's counsel, Mr. Nelligan. We are concerned that the position you have taken has serious consequences for the ability of the Senate in general, and this Committee in particular, to carry on its business.
Your position puts members of the Justice Department legal staff in a position in which their advice to other public servants (not to ministers) is not available to this, or any other, Senate committee. Yet, as the documentary and oral evidence received by this Committee clearly establishes, the advice of any other government employee to members of the public service is not privileged and is available to this and other Senate Committees. We do not agree with the position that Justice Department legal staff should be treated differently from every other public servant with respect to the issue of advice given to public servants.
We believe that it is crucial to the work of this Committee that we be able to question Messrs. J. Pigeon and R.J. Green on the advice they gave to various public servants with respect to the Pearson Airport Agreements in general and, in particular, on their views on the question of the precise point in time at which time at Agreements were fully binding on the federal government. Consequently, we ask that Messrs Pigeon and Green be given a waiver, by the appropriate client, of any solicitor-client privilege by which they may consider themselves bound.
We would be happy to discuss with you an appropriate time for hearing this evidence. We will seek to fix a date convenient to the witnesses.
That is signed by me as chairman and by Senator Kirby as deputy chairman. Copies of these letters are available to anyone who requests them.
Senator Jessiman: I've just been handed a copy of a letter addressed by the Department of Justice to Gary O'Brien, clerk of this committee, in respect of certain documents on which I did question Madam Bourgon, the Clerk of the Privy Council. I did speak to Mr. Goudge beforehand hoping that we could clarify what you actually did receive and when you received it from the department between the dates you were appointed, which was October the 29th, and - I have four documents in front of me and they're all entitled - well, three of them are entitled "Terminal 1/Terminal 2 Privatization". Actually I guess four of them are. And on the front of the four is a letter to you, sir - or sorry, a memorandum to Brad Wilson, who's your administrative person working for you, Brad Wilson?
Mr. Nixon: That's right, senator.
Senator Jessiman: And it's dated October 29 and it says this: "Attached as requested for Mr. Nixon's review is a presentation on Terminal 1-Terminal 2 privatization. Please ensure Mr. Nixon has signed the confidentiality agreement before you give this to him. Thank you. William A. Rowat."
Now, when we discussed this document with Mr. Rowat it was also brought to our attention, and Mr. Rowat said, that the minister, in introducing this subject in the House of Commons, referred to a document which is number 803279, copies of which I have given to all persons, but unfortunately not today, and it is "Terminal 1/Terminal 2 Privatization", document 803279, dated November 4, 1993, which is similar but seems to have more to it.
And the parts I'm most interested in, the first document, along with the letter, if the attachment is correct, it stops on page 11 and it says, "Possible outcomes of review" and then it says, one, stopping the deal - restart with LAA or Crown - I can't tell you what it says, Crown something, "construct" I think. Then 2, renegotiate restructured deal.
Now, the one dated November 4, 1993 has three extra pages and I'm not saying they're identical because this one is at page 11 and then on page 12 of November 4th it's similar. It says, 12 - there's actually a "25" here and I don't think that's - that certainly isn't the number of the page. But there's a "25" above one of the words but it's certainly not the page.
It says, "cancel the deal", "renegotiate/restructure the deal."
I'd like you to look at this document, if you would please, and tell me, if at some point, whether when you first got it on the 29th, or after November 4th, after this was prepared, was this document at least discussed with you that gave details of what they thought cancelling the deal meant and also what renegotiation/restructuring of the deal meant?
And I'll just give you this and if you'd look at it and just tell me whether or not you got this document, because Mr. Rowat said you did, but whether or not, if you could remember, because I'd like to ask you some questions if you did, in respect of it.
Mr. Nixon: Mr. Chairman, Mr. Goudge is having a look at it to begin with, but I recall receiving a document and discussing it with the officials from Transport Canada early in my review in which certain alternatives were, as I recall, making up the last two pages, or even the last page. The alternatives, as I recall seeing that document, were not fully laid out. There were two or three alternatives that were mentioned.
Mr. Goudge tells me that he doesn't remember us seeing the document that you've passed to us and it appears that the alternatives, or alternative courses of action, is more fully described there than I recall. The thing that sticks in my mind, of course, and the one that I did see is, I think on the last page, they indicated that the financial penalty would range from $500 million to something like $2 billion or something rather earth shaking.
Senator Jessiman: Five hundred million to $2 billion? If you look at that document you'll find - and that's one of the things I wanted you to tell us.
Mr. Nixon: Okay, that's in this, but this does not look to me like the page that we were dealing with at the time.
Senator Jessiman: I guess my point was that you knew very early on in the piece that if we cancelled this deal, or you made recommendation to cancel it and the government followed your advice and cancelled it, that you knew right from the start that the department's telling you - it's not the proponents or the other Pearson Development Corporation, it's the department itself is telling you that if this deal is cancelled that the government has got to know right up front, which you did know, that the possibility is that the government could find itself where it had to pay damages from $500 million to $2 billion. And that's what you knew and you're agreeing with that. So I just want that on the record and that you acknowledge that you knew that.
Mr. Nixon: Perhaps I might add just a bit more information to that, Mr. Chairman, with your permission. I was somewhat surprised, when that number was put before me, that the power of Parliament to restrict that payment in any way was not recognized. And that's why when I made the recommendation to the Prime Minister suggesting that a negotiated end to the contract would be possible, but if not, recourse to the power of Parliament was available to him and that suitable costs be paid for out-of-pocket expenses but that consideration for the payment of forgone profits should not be a part of it; that our review would indicate that the out-of-pocket expenses would be much lower even than the low number that the department put before me. And I have to tell you that I felt that it was quite possible that if the cancellation involved meeting even in part the forgone profits that would be based on the 23.6 per cent for 57 years, that it would present a number upon which no further consideration could be given.
But if Parliament has the power to cancel a contract, and a part of Parliament has taken that action twice, that they would also have the power to indicate on a legal basis that the cancellation of the contract would carry responsibilities for the payment of certain costs that would be determined in certain ways, but my advice to the government that they should not consider any payment of forgone profit.
Senator Jessiman: But you did know that it was the government telling you, the persons in government. This isn't on the other side, this is what the Justice Department, I assume, telling Rowat to tell you that this the situation we could find ourselves in.
Mr. Nixon: I can remember thinking at the time that their spectrum of alternatives was surprisingly limited.
Senator Jessiman: And I'll get that back if I may, so I don't lose it. If you didn't have it, I did get it and I'd like to keep it.
Mr. Nixon: It's been a favourite topic of the editorialists in the Globe and Mail, actually, but they see it very much the way you do.
Senator Jessiman: It's interesting because I'm told that this was drawn by the senior civil servants and that there was no political input. It makes it hard for me to believe that because the possible outcomes that you were given were just to restart with an LAA or Crown construct or renegotiate or restructure the deal.
Mr. Nixon: Or leave it alone, presumably.
Senator Jessiman: Sorry?
Mr. Nixon: Or leave it alone, presumably.
Senator Jessiman: It doesn't say that. I'm asking you now, did anyone, did the Prime Minister say, "Now, look at this -". He didn't have this document obviously when you spoke with him. When you spoke with the Prime Minister, he didn't have this document or any document in respect to this transaction from -
Mr. Nixon: He was not Prime Minister.
Senator Jessiman: Sorry, Prime Minister to be or Prime Minister in waiting; leader of the Opposition officially.
When he spoke to you, were there any documents available?
Mr. Nixon: None.
Senator Jessiman: Did he, when you were asking what he expected you to do, did he at any time say, "If it's a good deal, if it's a good deal", and people that are fair about this, like he expected you to be, I assume he did, if he said this, but I'm asking you whether he did, "Just tell me, if it's a good deal, let's run with it." Was that ever said?
Mr. Nixon: His advice to me was to review the matter, to give him the benefit of my opinions and advice, and it was not more detailed than that. He didn't say, "Look at it this way" or "Look at it that way." We did not discuss that. He simply handed it to me and said, "I'll hear from you in a month."
Senator Jessiman: When you discussed it at the civil service level, did anyone say you should at least consider going with the deal?
Mr. Nixon: I think they just presented the alternatives and did not advise me on which alternative they thought was most appropriate. I had to understand that the people that I was talking to, that those people were the ones who had negotiated the deal, and while they were not in a position to sell it to me particularly, I understood that in some respects, if I may be colloquial, it was their baby.
Senator Jessiman: You see, I'm looking at an earlier copy of that same document, which is undated, and it's document 00304. You see, it said -
Senator Kirby: Can I just ask a question? If it's undated, how do you know it's an earlier document?
Senator Jessiman: Well, I can't find a date on it.
Senator Kirby: I'm sorry. I'm being picky. You said it was an earlier copy and then you also said it was undated. That strikes me as kind of -
Senator Jessiman: I'm assuming it's earlier because a lot of it is in handwriting, and I was assuming it was an earlier document. If it's a later document, the witness might tell me.
Mr. Nixon: I'm sorry to interrupt the senator's flow, and it may be the pressure of the senator's line of questioning, but it feels as if somebody has turned the heat up. Can it be turned down?
The Chairman: It seems to happen every noon time. I've been appointed in charge of the heat but I don't have my proper tools with me.
Mr. Nixon: Maybe a chair through the window is appropriate.
Senator Jessiman: I say it's an earlier copy, Mr. Chairman, because the letter I referred to -
Senator Kirby: I don't have the document.
Senator Jessiman: It says: "A draft was prepared and a meeting was held in the central agencies on October 25th, 1993 to obtain their comments."
This draft is undated and is included as part of document 00304, the one I mentioned.
So what I'm saying is in this document it says the first option that they thought you should consider was retain PDC to develop T1T2. It's unfortunate that you didn't get to see this document because it's your recollection that the one that you looked at you hadn't received and the only one you received was October the 29th with the two options.
Mr. Nixon: But to be fair, senator, as I recall the document we did have, either implicit or directly in it was the alternative of reviewing the contract and recommending to the government certain changes, short of rejecting it. I can't say for sure, but it seems to me obvious that that would be an alternative they would put to me.
Senator Jessiman: You see, I asked Ms Bourgon, and it's surprising to me and I'd just like you to know that it's my view that there probably was someone in the political scene involved in this. That's said; it's only prepared by the bureaucrats. But this is what it says: "The pros to the status quo; no legal problems, no compensation, construction proceeds as scheduled. Cons; perception that the deal is bad not dispelled, patronage will remain a public issue."
Now, that to me is surprising.
Mr. Nixon: Let me just comment about that, because there was no Minister of Transport when those were prepared and in fact given to me.
Senator Jessiman: I'm not saying you got this, sir.
Mr. Nixon: Well, the document in which they put forward their alternatives, I believe it was prepared, and I think I read this in the testimony that had been presented to this committee by perhaps Madam Bourgon or Rowat, that at the time of the election they realized that somebody would want to receive advice on this matter and they began to prepare it. And when I met them, having just gone from the Prime Minister designate's office, they said that it had been prepared and where did I want it and when did I want it and what people did I wish from the department to assist me in understanding it and providing clarification.
I don't think you should underestimate the small "p" political capabilities of the civil servants. They understand what the politicians elected are going to have to face, and my experience with them is that they're quite capable and, in fact, understand that it's their job to present them the alternatives as they actually exist. And sometimes, although probably not in this case, there are political exigencies associated with those alternatives.
Senator Jessiman: I guess the reason I thought it was unusual, sir, is that the persons that did in fact prepare this document; Mr. Desmarais, Mr. Dixon and Mr. Rowat, all gave evidence before this committee and they swore under oath that it was a good deal and there was no patronage. So that's why I say I find it unusual.
Mr. Nixon: And believe me, I would not question their judgments from their point of view in this regard. I simply say again that as far as the government was concerned, they were the civil servants at the forefront of negotiating the deal. In Mr. Rowat's case he had been seconded from the Privy Council Office into the position of associate deputy, clearly with the responsibility to get this thing out of the mire and get it reasonably and suitably completed, which he did. And on that basis there was no reason for me to do anything but listen to their advice, but I had to weigh their advice on the basis of their responsibility in preparing the deal.
I simply say again colloquially, it was their baby and they had worked long hours on achieving it. Mr. Rowatt particularly in his comments about the difficulties with the forgotten Air Canada lease arrangements had, according to him, had to move in and use his undoubted skills to get that thing fixed up.
Then there was a change in his boss, the deputy, just in June, and over that period of time as one deputy was going and another was coming, he must have felt very strongly that he had a very major role to play in the development of the deal at that stage which was sort of the penultimate one.
Senator LeBreton: As a point Mr. Chairman, Mr. Nixon just said that Mr. Rowatt was seconded, and being a senior minister in the government you will understand -
Mr. Nixon: I withdraw that and use "assigned".
Senator LeBreton: He was promoted to an ADM position in Transport Canada from a position in Privy Council Office.
Mr. Nixon: I didn't think any move out of the PCO was a promotion, but I guess it is.
Senator LeBreton: Well, I think so.
Senator Jessiman: I want to start -
Senator LeBreton: Mr. Rowatt is now deputy minister.
Senator Jessiman: Now, the famous Nixon report, and I will refer to the one that you say was the last one, although it is dated earlier. You said the request for proposals preceded the decision on the proposed expansion of the runway system at the airport.
Mr. Goudge: What page are you on, senator?
Senator Jessiman: Page 2 of the report - or Page 1.
Mr. Nixon: You are talking about the relative timing of the redevelopment of the terminals as opposed to airport runways?
Senator Jessiman: Yes. I am asking you, was that - you seem to think that was something that was -
Mr. Nixon: It was brought to our attention by the Deputy Minister. In her view, the decision to go with the terminals before the runways, I think her phrase was putting the cart before the horse. That in talking to the officials -
Senator Jessiman: You don't say that in the report.
Mr. Nixon: I just said it.
Senator Jessiman: I know you said it. You said it yesterday too. You didn't say it in the report and when was the statement drawn that you produced here yesterday? And who drew it?
Mr. Nixon: Well, the statement is my statement.
Senator Jessiman: I understand, but who drew it?
Mr. Nixon: I consulted with my -
Senator Jessiman: Dealing with that part - because that is - there are only two parts of the new statement that vary somewhat from your actual report.
Mr. Nixon: So, to be clear, we are dealing with my report and yesterday's statement which I will now fish out of the pile.
Senator Jessiman: I was dealing with the report, but you don't say in the report what you said in your statement about - it didn't mention any of that.
Mr. Nixon: It seems to me that the deputy's comment about her view that the runways should have gone before the terminals is a piece of information that I am glad to pass on and that you would have every right and opportunity to elicit from the then deputy yourselves. The fact that it was not in the report and was in my statement I guess is just a fact.
Senator Jessiman: The difficulty I have is that she did come before us. We did discuss that with her, and that is not what she said.
Now, I am asking you, because you now have given us the report, it is almost two years ago. You all said, and I asked you all at the end before we adjourned for lunch, that you know it was good that you had met with the people from Justice so that they could refresh your memory as to what was said two years ago. Now, I don't think I have to ask this but maybe I better, I am sure Madam Labelle wasn't there, was she, at any of those meetings?
Mr. Nixon: No.
Senator Jessiman: And Justice were not able to give you any information to refresh your memory about your meeting with Ms Labelle?
Mr. Nixon: That is correct.
Senator Jessiman: So the only thing you had available in respect to your meeting with Ms Labelle approximately two years ago would be the notes of Mr. Goudge, right?
Mr. Nixon: Where this matter is dealt with, I believe.
Senator Jessiman: Well, we will see if it is. We will see if it is. All right. I want to deal firstly, as I said, with - the RFP proceeded the decision. Sir, did you know at the time that you were sitting - and this is '93 now that you are sitting - that in December '92 that the Environmental Assessment Review Panel had made their decision, given their report?
Mr. Nixon: I can remember receiving information I believe from Transport Canada about the role of the environmental review, particularly having to do with runways, and this was a matter that was raised by Mayor McCallion, the citizens group opposed to airport extension, whatever its correct name was. I can remember hearing this I believe from the newly elected MP's from the area who were relying on the environmental assessment to give them support in their opposition to increasing the number of runways and their attempts to locate alternative air service so that they would not be impeding the economic development of the Toronto region. Other than that, I don't recall a piece of paper handed to me about it.
Senator Jessiman: Is not it true - and I am suggesting to you it is true - that before the decision of the best overall acceptable proposal, which was announced on December 7th, 1992, that that report, Environmental Assessment Review Panel, had made its report to the government. I am telling you that is a fact, okay? And I am going to read some evidence to that affect.
That really saved the government some time. The review by the environmental people has to do with the runways, not the terminals, is that correct?
Mr. Nixon: I believe that to be correct.
Senator Jessiman: So we really save some time by doing it the way they did it?
Mr. Nixon: Except the runways were not part of the T1T2 -
Senator Jessiman: Exactly.
Mr. Nixon: I thought you meant saving some time in the preparation of bids for the terminals.
Senator Jessiman: Sir, what I am suggesting is if, as they originally thought, you said so, Ms Labelle said so. Originally they were going to say look, let's get the environmental people to do their work in connection with the runways and then we will go and modernize the terminals. But it took a very long time. As a result one of the ministers, Mr. Lewis made a decision, said let's run with them together.
Let's save some time here. Let me just read into the record some of the things that were said. This is Mr. Lewis, and this is at his testimony on the 13th of August at 9 o'clock and the page is 23 and all he said here "prepared to proceed with both runways and terminals, even if others slowed down."
Then Mr. Lewis was asked a question by Senator Hervieux-Payette and her question is:
How did you decide to develop the project - develop a request for proposal and all at the same time I mean deal with this question of the environment? How did you do that?
Mr. Lewis: I will do my best to answer that question without having had a chance to review whatever documentation was on the file, senator. The Cabinet agreed with the theory of going out for request for proposals and we went out and sought them. That was the announcement I made in 1990. At the same time, there was an environmental assessment hearing process going on and we made the decision, as I remember, to proceed with request for proposals at the same time as the environmental assessment hearing was going on. It is, as I explained earlier, if you spend a lot of time debating which comes first the chicken or the egg, in this situation you ended up never getting anything done. I saw no reason why two couldn't proceed side by side.
Then later Mr. Lewis said, "Any project that eventually turned up would have to meet the demands of that environmental assessment."
Further on, on page 4-13 on the same date, the 13th of August, 1995:
So we fast tracked on two tracks and kept the environmental assessment going, and at the same time went out for request for proposal because something had to be done.
Ms Labelle on August 1st, 1995, page 8:39.
And the original approach that the government decided on was to have the environmental assessment done, then proceeded with request for proposal. And, of course, they changed their mind for the reason that, you know, were identified because of the protracted approach that the runway environmental assessment was taking.
That does not sound like a person that is saying hey, you got the horse before the cart. She is saying this under oath.
Mr. Goudge: Other way around.
Senator Jessiman: You are right. Good for you. Thank you.
Senator Kirby: He is clearly listening.
Mr. Goudge: Can I go now?
Senator Jessiman: Air Canada - August 16th, 1995. Page 1277.
The ideal time for him to have commenced the redevelopment of Terminal 2 was 1993 while passenger numbers were down. Carrying on construction around existing facilities is less than ideal under any circumstances, but the disruption to the travelling public would have been substantially less compared with the impact it will have today and in the future.
Let's deal with your - I think it goes without saying, sir, that that statement - that the cart was before the horse. If she said it, she understood why it was done and certainly there was an advantage to having it done then, wouldn't you agree with that?
Mr. Nixon: Wouldn't I agree with your contention?
Senator Jessiman: No. Wouldn't you agree that in hindsight, that having done all the work for the request for proposals to do the terminals - because of the delay of the environmental part of it, that they took it on a fast track, they didn't award or didn't even announce who was the best overall acceptable proposal until they got that - was good for Canada?
Mr. Nixon: I think it was a good idea to do both of them at the same time.
Senator Jessiman: That is all I wanted.
The next thing that you said which - and you mentioned a lot about this, and particularly with Ms Labelle again, it called for a one stage process. You know and I know that there are different types. You can go and you can just appoint them just like yourself. They didn't go out to bid to appoint you, they decided - and they can do that if there is only certain people who they want to do a job and then they can have the two stage proposal where you send out requests for proposals. Now the first one is you pick the party and there is no choice at all. Request for proposals, whomever is out there, if you know who the players are, you send it to them, you let it be known around, and those that see it and hear about it, they can bid on it.
Then if you don't know who the players are, as was the case with Terminal 3, and we are building a big airport of this size, so they send out requests - or expressions of interest. That is what happened. Then there is the fourth, like they did in Prince Edward Island because there was environmental there so they had four stages in that one. So they chose the one stage process and it was your view that this gave a great advantage to Paxport. And you have said that in the notes that talked about unsolicited proposals. Sir, at the time, how many unsolicited proposals did you know about when you wrote your report?
Mr. Nixon: If I were asked to list them -
Senator Jessiman: Just give me the number.
Mr. Nixon: Maybe four.
Senator Jessiman: There were actually five. So you knew - why is it that you in your report would just mention Paxport? Why would you not have said, you know, anyone because that was your view. And I am going to suggest to you that even your view is wrong because the unsolicited proposals, the comparison to what they actually make when they reply to a request for proposals is quite a different thing. But why would you emphasize in that report and imply - I am not saying you expressly said so, but you certainly implied in that report - when I first read it, I thought that Paxport was the only one that had an unsolicited proposal.
You know now, because I have told you, that there were in fact five. The first one was from the Airport Development Corporation. That was March 10th, 1989. It was sent again April 19th, '89 and then again on June 27th, 1990, to the new minister. And you know that company was the Huang and Danczkay at the time which Claridge had a minority interest and later bought control of that company, and so had the advantage of that unsolicited proposal.
Then there was the Paxport proposal September 25th, '89 and then there was the Canadian Airports Limited, which is the British Airports Authority of May 13th, 1990, and then Air Canada with an 80 year lease including options, May 15th, 1990. And then another one by Air Canada on June 1st, 1990 being a Paxport plan which was supported by Air Canada. So there were five.
My question, why did you only mention one? Why did you infer in your report that Paxport had an inside track because they had unsolicited proposals?
Mr. Nixon: I have to tell you that the implication in the report was that Paxport did have an advantage over competitors because of that. I hesitate to mention it because I know how strongly your colleagues respond to it, but there are others who thought that Paxport was getting an advantageous hearing before the Government of Canada.
Senator Jessiman: Who were the people, sir, because - were there any of the people - you are saying - Mme Labelle is saying that?
Mr. Nixon: No, but we discussed this morning some sources of that view, and the view was expressed on a number of occasions that have not been, so far, discussed around the table.
Senator Jessiman: Who are the people? I am asking the witness and if you can tell us who they are -
Mr. Nixon: I can't. I know that will elicit a good deal of response. It is clear when you think of the discussions in the community at the time of the election that there was a clear feeling, however misplaced or however ill-based, that Paxport had a favourable position in this. And that was put to me on more than one occasion by people who have been mentioned here. I have to tell you that because it would be untrue to say otherwise.
Senator Jessiman: So far, you have told us there is the Government of Ontario and Morrison and Hershfield. I always get them mixed up. You have told us about those two. Are there any others?
Mr. Nixon: It came to me on a number of occasions that people in the community were under that impression. And if you find that statement unacceptable, all I can do is say that I am sorry about that, but that is what came to me.
Senator Jessiman: But you know that you interviewed Mr. Rowatt, Mr. Desmarais, Mr. Dickson? I don't think you talked to Mr. Joliffe, did you?
Mr. Nixon: He was present in the group that we spoke to.
Senator Jessiman: Who did you talk to in the - you spoke to Broadbent. Did you bring up - you knew at the time you were interviewing these people. Did you ask him?
Mr. Nixon: We pursued this to some extent, but the public servants have testified before this committee and were very careful with me that they were not saying that they were under any undue and serious pressure. They said there was no pressure at all. As I read the material that was placed before you, most of these people said that they never met a lobbyist. And I was quoted as saying, rather ungrammatically, something about, well, what the devil were they paid for because it appeared that most of the people who were in the business in this town were definitely hired by one or perhaps both of one of the people involved in it.
Senator Jessiman: You knew about - you were making - or were you? I better ask this because - were you making inquiries about your commission? Were you making inquiries about Mr. Doucet and him being registered to do business for a Paxport company? Was your committee doing some research on that?
Mr. Nixon: Well, we requested the information where we felt it was possible and appropriate, and we requested from Paxport for example that they give us their invoices to their lobbyists, which they did so.
Senator Jessiman: I don't want to interrupt you. I want you to talk all you want, but I asked you whether your committee, either yourself, obviously on your direction, did you apply to the government to give you information under the authority of that act that allows you to get certain information? Did you go to the government and say - and give them information with respect to Mr. Doucet's company?
Mr. Nixon: No.
Senator Jessiman: You are sure of that?
Mr. Nixon: I can't recall having - I certainly didn't go to the government. Mr. Goudge says he did not go to the government.
Mr. Goudge: We got the cooperation of Paxport and Claridge, who supplied us with the information about the invoices that they had been paying.
Senator Kirby: Can I have one supplementary?
Senator Jessiman: Sure.
Senator Kirby: In response to your earlier question, you said essentially who were some of the people who felt that Paxport had had an inside track or something? I wonder if I can show you document number 000996 which is a letter to the Minister of Transport from Don Blenkarn who was then the MP from Mississauga South? I wonder, Mr. Nixon, if you might just look at the last three paragraphs on page 3. You will notice that this is from Don Blenkarn to Mr. Corbeil.
Senator Jessiman: Was this now - was a copy sent to this committee?
Senator Kirby: Absolutely. I got it out of the committee files.
Senator Jessiman: I don't mean this committee. I mean Mr. Nixon's.
Senator Kirby: I was responding - I was trying to help you because the question you asked was, as I understood you to ask, could you tell me of examples of sorts of people who thought that things were biased in favour of one of the clients - excuse me - one of the competitors? I was just pointing out that Mr. Blenkarn himself says on page 3 of that letter:
What comes through to all sorts of people critical of our government is some sort of a quick pay off to friends who want to develop airports and it doesn't taste well and it doesn't sound well and it leaves all sorts of suspicions and it doesn't add up or balance.
The succeeding paragraphs go through that. I was just trying to help Senator Jessiman when he raised that question. Is that the kind of implications you were getting from various people you talked to?
Mr. Nixon: Yes, it definitely is, senator. As I say, I have not seen this letter before, but many people who spoke to me, I regret to tell the senators in general, worked from the presumption that there had been advantage given to the Paxport proposal. The response was, well what proof have you got of that? We examined this as closely as we could and that was why there was some indication that the short turn around on the RFP was advantageous, and some of the officials indicated to us that that was so.
Mr. Goudge: Madam Labelle says that.
Mr. Nixon: Madam Labelle was in the notes as saying -
Senator Kirby: Ontario government obviously felt the same.
Mr. Nixon: I am sorry to pursue it further, but there is not much point in trying to get me to say that many of the people who spoke to me did not raise this matter. Those people particularly who had been stimulated to contact me because of the recent election campaign, we understand about those things, were particularly pointed and hot on the item.
Senator Tkachuk: I have a couple supplementaries on that because this office gossip troubles me when it comes to a representative of the Prime Minister of Canada. You mention these items about Paxport. Who is the President of Allders International?
Mr. Nixon: Don't know his name.
Senator Tkachuk: You don't know his name? He was a major partner, a 20.8 per cent partner of the Matthews Group with the Matthews Group in Paxport.
Mr. Nixon: Allders is basically a company in the UK with a Canadian subsidiary. I realize that Allders was -
Senator Tkachuk: That is not right. It is a company that is owned by -
Mr. Nixon: I do not know the president.
Senator Tkachuk: Let me go through this. Who is the President of CIBC Wood Gundy Capital Inc., who owned 13.9 per cent of the original proposal?
Mr. Nixon: If you give me the name, I will tell you whether I knew the person, but I cannot answer the question.
Senator Tkachuk: Who is the President of Ellis-Don?
Mr. Nixon: It is one of the Smiths.
Senator Tkachuk: Do you know his politics?
Mr. Nixon: Don Smith is a good Liberal, if you don't mind the conjunction of adjectives there, but as far as -
Senator Kirby: Senator Lebreton might find that an oxymoron.
Mr. Nixon: As far as the president, it may very well have been his son at that time, and I do not know what his politics were.
Senator Tkachuk: Bracknell Corporation?
Mr. Nixon: What about it?
Senator Tkachuk: Who was the president?
Mr. Nixon: Mr. Bracknell?
Senator Tkachuk: You can be flip with me. Do you know who the President of AGRA Industries is?
Mr. Nixon: No.
Senator Tkachuk: Do you know who the president is? Do you know what AGRA Industries does?
Mr. Nixon: I think the company that I deal with - presently AECL does some business with AGRA in an engineering -
Senator Tkachuk: Large engineering firm in Western Canada?
The Chairman: Senator Tkachuk, this is another indication of one bad supplementary deserving another. Senator Kirby was out of order and you are out of order.
Senator Tkachuk: Why am I out of order?
The Chairman: Those were not supplementary questions.
Senator Tkachuk: Paxport means all of these people. Paxport doesn't mean Matthews Group. And I have tried to make that point for the last three months, and I will continue to make it until people understand. NORR Partnership, who was the President?
Mr. Nixon: Don't know.
Senator Tkachuk: You don't know. Sunquest Vacations?
Mr. Nixon: Don't know.
Senator Tkachuk: Well, would you not have thought that when these rumours came about that you might have asked those questions?
Senator Kirby: He continues even though -
Senator Tkachuk: I think maybe - and he agrees with me. I just asked the questions. It is not a big deal to ask - we have been talking about Paxport here for three and a half months.
The Chairman: Senator Jessiman?
Senator Jessiman: I just wanted - you were talking about these unsolicited proposals and saying that they were going to give them a one upmanship. Mr. Nelligan is talking now and asking of Mr. Desmarais, one of the persons that you interviewed, he said "Was there any similarity between the proposals submitted back in the early days by the Matthews Group and the type of proposal which would be required under your RFP?" Mr. Desmarais answers: "The unsolicited proposals were received - were very thin volumes. What we received from the proposal call was 10,000 pages of documents, give or take a few thousand."
Now responding to the question of financial quality: "The proponent should have its financing in place on signing the deal. There were qualifications in the business plan and to list assets and show whether they had where with all to do the project, responding to the question if there was any government or department predisposition to any particular bidder at the time." The answer was no.
Nelligan, counsel: "Did anyone suggest to you -" to Desmarais "-that someone was to be given the edge?" The answer is no.
Let's deal with some of the testimony by Dr. Labelle.
This is on the 1st of August 1995 at page 8:62.
So let's deal with expressions of interest. In 1986, the minister then of Transport, Mr. Crosby, on September 11, '86, gave notice that they were going to have the private sector involved in Terminal 3. And we're told they did have expressions of interest.
And I understand, and you correct me if I am wrong, that, at that time, neither Transport Canada nor anyone in Transport Canada, nor anyone in the government, really knew who the players were, who the persons were who could build terminals of this size in Canada. Am I correct on that?
Ms Labelle: Yes.
Senator Jessiman: And when they did send out their expressions of interest, I'm told and evidence has been given here that about seven or eight people indicated that they might be interested. And I am also told that, in fact, there were really only four consortia that actually bid? Am I correct on that?
Ms Labelle: This was before my time, senator, but that's my understanding of the facts.
Senator Jessiman: Let me just tell you who those four were.
There was Bramalea-Ward Air, and we all know, or at least most of us know that Bramalea had some problems; Ward Air had some problems and are no longer with us; Cadillac Fairview was the head of another consortium; Falconstar, which was really the earlier Paxport. And then there was the Airport Development Corporation which was Huang and Danczkay, but I understand the Bronfmans had an interest in it. And those were the four that actually bid. Am I correct on that?
Ms Labelle: That's what I understand.
Senator Jessiman: And that Huang and Danczkay won the bid?
Ms Labelle: Hm-hmm.
Senator Jessiman: And at that time, the Bronfman Group were a minority interest in the Terminal 3 airport, and then, later, they became the majority factor because they bought Huang and Danczkay out.
Now, following that, there was some indication that there was going to be some repairs done, or something at Terminal 1-Terminal 2. And we were told, to start with, or at least in reading Mr. Nixon's report, I was informed that there was one unsolicited offer, and that was by the Paxport group, where, in fact, there were really three unsolicited offers.
At that time, when I was questioning Miss Labelle, I understand there were only three. I found out later that there were another two.
Ms Labelle: That's my understanding as well. It was in the summer before I arrived in Transport.
Senator Jessiman: And those three people, or those three companies, were the Paxport Group, Canadian Airports Limited and Airport Development Corporation. And those were three of the companies that were interested, that were able to do the job if they were granted it.
So when the announcement was made that they were actually going to go ahead - and then 17 months followed before they actually had requests for proposals - your department, Transport Canada, really knew who the players were? Is that not correct? I mean, you generally knew who was going to bid on this thing, who were able to bid on it?
Ms Labelle: We certainly knew who had, you know, identified themselves as being interested. We didn't know if there were going to be someone else, but I think we could assume that this was well known in the country because it had been announced that it would happen quite a long time before.
Senator Jessiman: Right. So it is not unreasonable, under those circumstances, to go - because, it is not always that you have expressions of interest. You know that because you have been in other departments. It is only when you don't know who the likely players are that you're going to say, "Who is going to bid on this?", so you ask for expressions of interest. But in a lot of cases, you don't ask for expressions of interest. Isn't that correct?
Ms Labelle: That's fair.
Senator Jessiman: And in this case, a decision was made. We know who they are. We're going to publicize it. We're going to tell everyone. They have 17 months since they made the announcement. And so you went for requests for proposals.
And now they complain about the 90 days. Is it not true that when they announced that it would be 90 days, that the minister did in fact say in the House of Commons - and have other people say to other persons, and I remember at one meeting, two weeks following, about 200 persons - that if there were some serious players out there that thought this was an unfair number of days, that they would give an extension of time?
Ms Labelle: Yes.
Then, Miss Labelle, having said that -
Mr. Nelligan: Could you gave the page number, senator, for the reporter?
Senator Jessiman: I am sorry, I thought I did. It is the 1st day of August, 1995, 8:63; and the next one, Labelle, is the same date, 8:70-71; and it is Mr. Nelligan.
Now, she has given her evidence and he is saying:
Mr. Nelligan: And you have already told us that you spoke with Mr. Nixon.
Ms Labelle: Yes, I did.
Mr. Nelligan: And told him what you told us today.
Ms Labelle: Yes.
Mr. Nelligan: Was there anything in addition to that that he might have asked you or that you might have told him?
Ms Labelle: Not to my recollection, Counsel.
Now, that is what she told us in the 1st of August, which seems to be quite different from what she has told you two years ago that you now recall now.
Mr. Goudge: More than recall, senator. May I remind you that my notes have her saying -
Senator Jessiman: I will go over your notes later. I want you -
Mr. Goudge: But I think it is important to get this on the record at this point, senator, because she is absolutely clear in my notes as saying to us when we met with her on -
Senator Jessiman: Let's get your notes.
Mr. Goudge: - early in November that the fast track for the RFP gives Paxport an enormous advantage. It is simple. That was her view.
Senator Jessiman: But she told us what she said. She told this committee, and Mr. Nelligan asked him (sic) -
Here is what your - you have got notes here and then below the notes there is a line and it indicates that Ms Labelle is there, Dr. Labelle is there, and you show the three something, key decisions, sorry, "three key decisions, none of" - it is "privatize Terminal 3, the LAA policy, OD Link T1T2 and runways" - these are important things, but then she - it says "July 1990", and I don't know -
Senator LeBreton: Unsolicited.
Senator Jessiman: "unsolicited proposals." I have given you the dates of all five. It is not July 1990, somewhere in '89, but there were five, then the runways is the key decision.
Mr. Goudge: That is the cart before the horse idea.
Senator Jessiman: But we have agreed now and the chairperson of that, Mr. Nixon, now with you, has admitted that it was a good idea to fast track it. So whether she thought the cart was before the horse, we have got Mr. Nixon agreeing with us that it was a good idea.
Mr. Nixon: Before you get too much comfort from that, I think I agreed with the concept that if the government could handle both at the same time I saw no reason why they shouldn't be able to do that.
Senator Jessiman: Well -
Mr. Goudge: What she said, senator, just to flesh out the discussion, that she said was that runways are the major driver of airport needs, so the first thing to decide on is how many runways you are going to have and then you build your terminals to suit; and to do it the other way around is to put the cart before the horse.
Senator Jessiman: The evidence before us was that we were modernizing these terminals to make them first class. It is not increasing the capacity; we are building new terminals.
Anyway, we have got the evidence as it was. Now, I am just going to quote a small -
Mr. Goudge: The line about fast track is just a couple of lines down, senator, just to help you out.
Senator Jessiman: Yes, and you say "gives -
Mr. Goudge: That is her saying, that is my note of her saying.
Senator Jessiman: But I guess my question to you was: Did you ask her the question and did she say "Yes", or did you -
Mr. Goudge: That would be my recording of her assertion.
Senator Jessiman: In an answer to a question from you?
Mr. Goudge: Did I cross-examine her to elicit that answer? No. That is what she told us, senator. That was her view.
Senator Jessiman: I am reading what she said, and I think I have some other quotations I will give you later.
Here is another one. It is the 13th of August (sic), and the numbers are 1330-30, and this is from Shortliffe. The department was aware of those organizations capable of developing Pearson. That was in answer to a question as to whether or not we needed expressions of interest.
Now, this is Mr. Berigan on the 26th of August (sic), and the number is 0930. The minister felt that the RFP initiative had been public knowledge since October 1990. We are now talking about March 11th, 1992.
Those interested already working on it. Serious proponents could participate because he would entertain extensions - it says here to the 95 day and there is some confusion as to whether it was 95 days or 90, I think originally it was 90, but they would grant extensions but didn't think it would be necessary. It was the minister's decision. That is Mr. Berigan.
Now, you also know that one of the proposals - one of the proponents did ask for an extension and that was the Claridge Group. You knew that?
Mr. Goudge: Yeah, but not until you are almost down to the 90 days. I mean you got all your bidders in.
Senator Jessiman: Do you know why they asked for the extension?
Mr. Goudge: They needed it.
Senator Jessiman: Let me tell you what they told us. Because one of the LAAs was going to bid with them; they were going to bid along with an LAA, and they got part way through the process and the LAA came along and said, "We can't get the money." So they had to start all over again. That is why they had to ask for an extension.
Mr. Nixon: The reason they couldn't get the money is that they were not recognized by the Government of Canada as an LAA, I believe.
Senator Jessiman: Here is what Labelle said, and this is on the 1st of August, the number is 1600-2. Expressions of interest used if a number of parties are far from meeting the requirements. It is an additional expense due to the need to evaluate a greater number of proposals. Mr. Corbeil decided to call for a one-step process.
You have to remember she is talking about this and she told Mr. Nelligan, for the use of the committee, that she didn't tell you anything else. So what you have said is certainly contrary to what she said to us under oath.
Now here is Labelle again. Minister announced in the House of Commons that if serious players thought 90 days unfair they would be given an extension. That was on the 1st of August 1990-21.
Then Simke. Do you know who Mr. Simke is?
Mr. Nixon: Price Waterhouse?
Senator Jessiman: Yes. Transport Canada had a good idea of potential bidders. Decision made by Transport Canada and communicated through Wayne Power. That is the 23rd of August. That was 9 to 1230 A-5-17 Simke.
Later, same day, same time, two-stage process would be redundant. Transport Canada had good idea of potential bidders. Previous qualifications process accomplished because number of players had put forward unsolicited proposals. Decision made by Transport Canada and communicated through Wayne Power.
Harry Near, 23rd of August, 2-5-A-32. Ninety days was fine. At least there was a deadline and there was going to be a speedy decision. Anyone serious knew this kind of thing in process. Claridge had Huang and Danczkay's base work on T1 and T2.
Coughlin, on the 12th of August, 1940-7-8. There was no need for a two-step proposal. The government knew, was able to handle the project. It was handled well. Ninety days was reasonable. Extensions were available and Claridge submitted its bid within the time period. It needed the extension because its partner, the local airport authority, pulled out of the bid.
Coughlin again 12-9-1645-10-11. The 60-year term in the RFP was important to be able to finance the project and was in line with government policy. It became a 57-year lease so it coincided with T3. That is another thing that I will talk about later.
The Chairman: Senator Jessiman, I wonder, could we - Mr. Goudge, you have good notes on that conversation you had with Miss Labelle?
Mr. Goudge: Yes.
The Chairman: And I have got and Senator Jessiman - do you agree that the information appears to be contradictory?
Mr. Goudge: I can't comment on what she says to the committee. I take Senator Jessiman's word, although in reciprocal fashion, senator, I would like to see the transcript.
Senator Jessiman: Okay.
Mr. Goudge: But if I see the transcript, I will take your word for it and then absolutely, Mr. Chairman, there is a contradiction.
The Chairman: Senator Jessiman has been reading at length.
Mr. Goudge: I am just teasing.
Mr. Nixon: Mr. Chairman, just before Senator Jessiman moves on, he has expressed the considered views of a number of people on the usefulness of the 90-day process and said that the government was prepared to extend it, if necessary, and they said that they knew who was interested in it and so on.
While we had contrary opinions expressed and have already brought this to the attention of the committee, for example, the province of Ontario and others, I suppose my best advice, I felt it was my best advice, came from Mr. Crosbie who was retained by me from a firm that had some knowledge and expertise in this area, and I know that he reviewed the matter with Mr. Desmarais, did you not?
Mr. Crosbie: And Mr. Dickson.
Mr. Nixon: I wonder if you would permit him to add his views at this time because certainly they were available to me.
Senator Jessiman: I have some more.
Mr. Crosbie: Senator Jessiman, the impression that is conveyed from your quotations and so forth is quite different from the impression that was conveyed to me and my associates in our meetings with the Transport Canada staff that we met with.
In particular, I was going through our notes and so forth of our conversation with Mr. Dickson, which you have been provided with, and the impression that he gave us was that - and I am just quoting from my notes, when he says, "But the government did not sit down and think through various ways of marketing it" i.e. the terminal "and make a conscious decision. Rather they just went ahead and did it the way they did it in the T3 model."
And he says the selection process and the way of identifying bidders and so forth was just the same way as they did it in T3.
He says, in T3 they did not really go through a process of identifying bidders.
So he left us -
Senator Jessiman: They had expressions of interest in T3.
Mr. Crosbie: What?
Senator Jessiman: They had expressions of interest in T3. That is how they identified bidders.
Mr. Crosbie: The impression that I had -
Senator Jessiman: Yes, okay.
Mr. Crosbie: - and I think these notes confirm it, is that they sort of stuck a for sale sign on it and let it be known that anyone who was interested should come forward; and in T3 they had several parties come forward. And he says that they had, for T3, they had five or six people come forward and make bids.
Senator Jessiman: Four.
Mr. Crosbie: These are what my notes say.
Senator Jessiman: There were four.
Mr. Nelligan: Let's hear what he says.
Mr. Crosbie: This is for T3.
Senator Jessiman: Yes.
Mr. Crosbie: I am just reading my notes.
Senator Bryden: Can I just ask for one thing? Is there any way those notes are on file with us?
Mr. Crosbie: Yes, all these notes are on file with you.
Senator Bryden: Are they identified? Do you have a number on them? Those are yours.
Mr. Crosbie: They have all been provided to you.
Senator Bryden: Do you have a date or anything?
Mr. Crosbie: It is my - it is a big thing like this of notes. It is the same package of notes although different pages.
Senator Bryden: Can I ask that the Clerk find those notes because those notes may be very helpful to us?
Mr. Nelligan: I think the difficulty with the witness' notes is that they are copies of his originals. They don't have the numbers on and they don't have many dates or identifying marks so it is sometimes difficult to trace them to our official volumes and, perhaps, we can do that.
Senator Bryden: I am sorry, I shouldn't interrupt senior counsel.
But even if at the break Mr. Crosbie and the clerk could get together so that the clerk would have some assistance as to how to find them.
Mr. Nelligan: Yes. He was very helpful. I had asked him about some of his other notes yesterday and he gave me them and I had copies made, but they are all together and they are very hard for someone not totally familiar with Mr. Crosbie's handwriting to read rapidly.
Mr. Crosbie: Yes. Anyway, reading these notes that I have made in our conversations with Transport Canada personnel, and combining that with my own recollection of those conversations, I came away with a very different feeling as to the process and the rigour with which Transport Canada identified bidders; and it came through to us as not a terribly professional and sophisticated process of identifying bidders.
Now, the other thing that I would like to say, and I think it is a misconception in the business, that there is a feeling often when you have a business asset for sale that you can stick a for sale sign on it, or publicize it in the press that you want bidders and that people will come forward.
Senator Jessiman: You have to remember there were 200 people at a meeting about two weeks after this was announced and they were told - and these were consultants that had connections all over the world -
Senator Stewart: Perhaps the witness could be allowed to answer the question.
Mr. Crosbie: I think what I am about to say - I don't think it matters how many people there were at the meeting, I think it is the old story. I think it is businesses are sold, they are not bought. I think it goes to the packaging and how you present it. And there is a way to present deals to enhance your interest as a seller, in this case the government was the seller, and if you look at the RFP it is a very dry document. It doesn't stand out as a selling package. It is not a package that is written from the point of view of explaining to somebody why this is an attractive deal in setting forth the deal and how they are going to make some money and how they can finance it and the amount of money they can make and all the advantages. So that the packaging was not the kind of packaging that you would see if you were really trying to do a deal and maximize value and interest people in what you have got.
So I think it is twofold. It is not just sort of telling people that this thing is for sale, which they seem to have done through the press and otherwise. I think to have an effective selling process you have to have a very strong packaging approach to really show people, and I don't think that was done.
And, secondly, you have got to have a very strong process to identify bidders, create bidders, approach bidders, show them how they should do the deal, help people in the consortium to get together. And, once again, I don't think that was done and that was in our mind anyway -
Senator Jessiman: You have talked about -
Senator Stewart: Let him answer the question.
Mr. Crosbie: In our mind that was confirmed and was told to us by officials from Transport Canada.
Senator Jessiman: Are you through now?
Mr. Crosbie: Yes.
Senator Jessiman: Thank you. You have said this is an asset they have got and they should describe what their asset is and let everybody around the world know what the asset is. This was a development deal. This was - they were going out to the private sector and saying, "Look, we have got an old T1 here, it needs one hell of a lot of repairs or replacing, and we have got T2, part of which is up to date but the rest of it requires a lot of improvement. Now, we want you, the private sector, to come in with your ideas. We don't want to tell you how it has to be done," as if they said, "Okay, you are going to do it this way or that way," and I am going to read something in on that. So it wasn't just a sale of assets per se. They wanted people with some know-how, with some imagination, and that is why you have requests for proposals and you don't go out just to tender. And that was different than what you are talking about.
Mr. Crosbie: No, I think - I have got some comments on my notes that were made to us by Transport Canada officials on the very point you are talking about. I think it is -
Senator Jessiman: But you didn't read those parts.
Mr. Crosbie: I am happy to and I will.
Senator Stewart: Please -
Mr. Crosbie: What they say is that doing the design work for a terminal could cost, say, a million dollars. I am reading from my notes. By doing it the way they did it, where they set out these requests for proposals, he says, "This way they got the private sector to come up with a design at no cost to the government." And he says the government did not want to do this because they didn't want to spend the money. That is what is in my notes. So this is sort of doing it on the cheap.
Senator Jessiman: They still don't want to spend the money and do you know why they don't want to spend the money?
Mr. Crosbie: They are doing it on the cheap. They are saying, "Look, we don't know what to do here. We will put out the request for proposal, which doesn't show anybody why they would want to really take this thing on, and we will get them to spend the money."
Now, the way it is typically done, and I think I can say this categorically, the way it is typically done, if you want to maximize value you do your own up-front homework, and you figure out what you have to sell and you figure out why someone would want to have an interest in it, and then you spend the money up front and then you go to them and you persuade them and you say, "I have got a deal for you and this is how you are going to make some money -"
Senator Jessiman: And the "them" to you is the government?
Mr. Crosbie: I thought I could finish.
Senator Jessiman: Is that the government?
Senator Kirby: Go ahead and finish.
Senator Jessiman: Are you not finished yet?
Mr. Crosbie: No, I am not. And you go out and you show them how they can do the deal. You show them the kind of money they can make. You show them the investment they have to make, the returns they can get. You may even help them find their partners. You may even help them find their financing sources. You bring together a lot of things to sell them and by doing this you enhance your ability to do a better deal.
Also, you reduce the up-front cost that the bidder has to spend to put forward a proposal. By putting that RFP out, which doesn't really do any of these things, but also requires that guy to spend a huge amount of money to put together his proposal, that is a significant disincentive for someone to put forward a bid. But he said, "Well, the government doesn't want to spend the money." Well, I think what we would say is if the government had spent some money up front, brought some professionalism and brought some sophistication and brought some of the traditional ways of selling major projects like this, our view is the government would have - would most likely have been significantly advantaged.
I have finished now.
Senator LeBreton: It is not a sale.
Senator Jessiman: What you are saying is - you have to understand, and the government is the same today, the government isn't bankrupt but, boy, they have got some big problems and they have got to get out from under them and that is why they ask that the private sector get involved.
But let me go on. I want to read some of this into the record.
Mr. Crosbie: I could expand by saying that in the capital markets today if you want to do deals like this and if you are a vendor and you are tight for cash, which you are suggesting the government was, there are ways to structure deals with advisors where a big portion of their income can be on a contingency basis so that the up-front cash to the government could have been reduced.
Senator Tkachuk: Perhaps a company like yours?
Mr. Crosbie: I think there - for a project of this scale and type and nature, I think there are other companies -
Senator Tkachuk: But a company like yours?
Mr. Crosbie: A company like ours. I think there are others that would have been better suited.
Senator Tkachuk: A merchant banker?
Mr. Crosbie: Some of the major investment banks in this country and the U.S. and the U.K., yes.
Senator Tkachuk: Okay.
Senator Stewart: But you are advocating a market approach and these senators do not believe in the market economy.
Senator LeBreton: It is only the Liberals that don't believe in the market economy.
Senator Jessiman: Anyway, as you say -
The Chairman: Senator Jessiman, I wonder now, I would like to take a break in two minutes at 3:30.
Senator Jessiman: I have just got a couple of quotations I want to read. This is very important, Mr. Chairman. I have about three paragraphs I want to read in and then break, please, and then I am going on to the next subject.
This has something to do with the Province of Ontario, all right? This is Mr. Coughlin, and this is - the page I have is 1940-5. Mr. Coughlin's answering a question I have asked him. He says:
Again, I think it's been said, it was in 1990, or at least 17 months leading up to the issuance of the RFP. There was a lot of talk about the RFP. We were aware that the RFP was coming. So we were aware of the RFP. You know, our engineers that we had as part of our bidding process were aware of it. And I mean, I guess beginning the date the RFP came out, we began to work extensively on putting together our bid. But we certainly had knowledge that it was coming, and we were certainly prepared.
As I testified earlier, I was approached by Mr. Bullock. Mr. Bullock on behalf - at least I was told - of the Ontario government was trying to put together a local airport authority. He asked if we would make a joint bid with the local airport authority. We agreed to do that. We began together to put together a bid.
Sometime around the middle of - the end of May, the beginning of June of that year, Mr. Bullock informed me that he could not proceed with a bid, that he was not able to get the five Toronto municipalities to agree on a structure. And so we took over the bid.
And it was really for that reason, because we at that point had to step in and really take over I would call the day-to-day management of the bid, that we requested an extension from the government. The government gave it, and we submitted that bid in July 13.
Then I am asking Coughlin again:
Mr. Nixon was highly critical of the fact that the RFP used a one-step process rather than a two-step process as was used in Terminal 3. As a losing proponent, what is your view as to the necessity of a two-step process in this particular case?
Mr. Coughlin: I never believed that there really was a need for a two-step proposal. I think if you go back to Terminal 3, Terminal 3 was sort of a new venture, and I think the government had no idea if there was really anyone out there willing to build and finance and operate a terminal. From that bid came I believe four or five proposals.
Senator Kirby: I just want to ask a question, and this is just for information. I have no objections to any of the things that Senator Jessiman said, but maybe it is just my mathematical mind but I have trouble with the notion of reading the record into the record. As I understand what he is doing is he is reading the record back into the record and I would have assumed that that -
Senator Jessiman: I want these witnesses in particular -
Senator Kirby: I understand. My problem is a logical problem here and the question is why doesn't he just give us the page numbers and show them to the witnesses rather than read the transcript, that is all.
Mr. Nelligan: I am afraid a number of senators have had that failing over the hearings, but normally if they are brief statements it is often faster to read them to the witness and ask for his comment. It depends on where he has his material. I think it is just a matter of saving time.
Senator Stewart: Remember, Chairman, that when I tried to paraphrase what we had been told there was great outcry and it was insisted that I read their very words.
The Chairman: That is because you are so royally disliked, senator.
Senator Stewart: So, chairman, you enforce different rules for different senators.
Senator Kirby: Different strokes for different folks.
The Chairman: On a serious note, before we take the break, I am going to confer with Senator Kirby on this. I am conscious, as we all are, of the value of these witnesses to our determination. I am also conscious of the fact that they have been asked to stay a day that they didn't expect, an extra day tomorrow, for which I thank them. I do know that as of 4 o'clock tomorrow afternoon that they have, particularly Mr. Nixon, has very, very serious appointments.
I want to speak to Senator Kirby on two matters: one, if senators want to get in the information they want to do they are going to have to take stock of the time we have. If that is the case, Senator Kirby and I may call for extended hours. By that I mean possibly meeting earlier in the morning, shortening up the luncheon break and a number of things like that. I said we will confer and come back to get your approval.
I also ask for your permission to allow counsel, who ordinarily follows senators' questions, to occasionally interject one or two questions, not a series of them, but one or two questions at some point for clarification. That also will help speed up the process rather than having to say, "Now Mr. Nelligan needs an hour or a half an hour or something for follow-up questions."
Senator Kirby: We don't need to consult. I am happy to say, first, with respect to Mr. Nelligan that is fine.
Secondly, in the interests of maximizing the time with the witnesses, while at the same time enabling the witnesses to make their 4 o'clock commitments tomorrow, can I make a suggestion, which is that we start at 8, which means we have added an hour, and that we take only an hour for lunch, and thereby, in effect, we have added two hours and taken one hour off. So we, in effect, have added an hour for tomorrow.
On behalf of my colleagues, I am prepared to make that suggestion, if it helps.
The Chairman: That would be 8 a.m. to -
Senator Kirby: Eight to twelve and one to four.
The Chairman: Is it agreed?
Hon. Senators: Agreed.
The Chairman: Senator Bryden asked a question with regard to the notes of the witnesses and maybe you can supply the answer, Mr. O'Brien.
Mr. Gary O'Brien, Clerk of the Committee: Honourable senators, the notes Mr. Crosbie was reading from are found in Volume III of V of the Nixon documents. The document number is 002536 and it was on pages 12 to 15.
Senator Jessiman: Mr. Nixon, you set out in your report that the RFP didn't set out many of the fundamental aspects of the proposed development and you thought that was bad, and there was some discussion between myself and Mr. Crosbie previously.
I just want to tell you that the evidence that we had, and I want you to tell me other than what Mr. Crosbie had in mind - Mr. Hession said, and I'm going to be short, "This is the best proposal call I've seen in my 30 years of experience." Mr. Simke, who's with Price Waterhouse, an international firm, the primary reason for the proposal the way it was, he said, was that Transport Canada felt that what they wanted to get out of this process was the creativity and innovativeness of potential bidders.
So they said that that's what a request for proposals is. So if you wanted to put something out to bid, like your cohort there Mr. Crosbie is suggesting, it's just that wasn't what the government was trying to do. This was their decision that they wanted the private sector to spend their money, not the government's money, to do this.
So I'm suggesting to you that that, from what I'm told, is what they used to do, maybe in your day. But now, later on, today, what governments are doing, and what this government decided to do, and I hope if they're going to go ahead, that the present government will do the same, is get the private sector involved.
The Chairman: Is there a question there?
Senator Jessiman: Yeah. Don't you agree with that? You still want to go the old way?
Mr. Nixon: Mr. Chairman, I would agree that Senator Jessiman and I have similar days, if you know what I mean.
Senator Jessiman: Yes, we have. You're younger than I am.
Mr. Nixon: Both of us are resigned to that and we're enjoying them.
But the information that Mr. Crosbie presented just before the break was similar, of course, to the advice that he gave me during the preparation of our report. And he indicated that he felt that the approach was not so much old-fashioned as inefficient and insufficient and that if the proposals for leasing had been better packaged, to use his word, that we might, as a government and as a country, have done better than the deal that was finally arrived at. We had others that indicated dissatisfaction with the way the proposal was put forward. I think -
Senator Jessiman: Who were the people?
Mr. Nixon: Well, let's see. Have we discussed this previously? Who thought the 90 days -
Senator Jessiman: Have you got any notes on that?
Mr. Nixon: The 90-day insufficiency was put to us by the name of the company that you had a little trouble with a minute ago; Morrison Hershfield. It was certainly put to us by other critics such as the government of Ontario and various briefs that were put to me by municipalities and regional municipalities. These people -
Senator Jessiman: Was this in writing?
Mr. Nixon: Oh yeah. The briefs were before the committee and there was indication of that. And we were told, according to the notes of Mr. Goudge and my own memory, by the then deputy minister, that the proposal and its process gave a decided advantage to Paxport and perhaps others, but specifically Paxport.
The idea that the people were out there already involved in what you might call the manoeuvring for advantage and establishment of their position goes without saying. It seems to me, however, that the fact that unsolicited proposals had been put forward would deter a company that was going to enter this for the first time with the thought that competent people had been working assiduously on this in their proposals for Terminal 3. Particularly the losers, as well as those successful, had gone on with their proposals for Terminals 1 and 2, and that it seemed to be an exclusive group where others whose interest may have been stimulated by a more appropriate approach to the RFP -
Senator Jessiman: You're not really answering the question. You told us about the unsolicited proposals before. I've read into the record a number saying that it was no problem, but we're now talking about your statement that you're asking the private sector to do something at their expense and from Mr. Crosbie's ideas, and you followed them, or I'm asking you if you followed them because this is why you put it in here, it's his idea that government should have spent the millions and millions of dollars to decide what they wanted. Is that what you think the government should have done; spent the millions and millions of dollars -
Mr. Nixon: Mr. Crosbie I think might add something.
Senator Jessiman: I want to know - you're the one that made the decision.
Mr. Nixon: That's correct, and his recommendation to me was that the RFP was insufficiently drawn for the full benefit - or at least the process for the RFP was insufficiently drawn for the full benefit -
Senator Jessiman: I'm not talking about the process here.
Mr. Nixon: - and I agreed with that and put it in my report.
Senator Jessiman: I'm asking about the fundamental aspect, what you say left these to the bidders to define for themselves. So I'm asking you, because they left it up to the private sector to spend the money; their money, not the government's money, to come up with some ideas and then send them to the government, see if the government's happy with that, you think the government should have spent the money first; is that what you're saying to us?
Mr. Nixon: Yes, senator.
Senator Jessiman: Thank you.
Mr. Goudge: Senator, could I just make a comment? You've heard the evidence that we gave about the deputy and the advantage to Paxport. Let me just set that aside for the moment because I think - and I'm just going speak to personally here. I think there is a very legitimate public policy issue here. The Government of Canada was then, will be in the future, and other governments across the country will be in the future, in the business of disposing of public assets. That's a way of life I suspect we will all be living with for a good period of the rest of our lives.
Senator Jessiman: But in this case -
Mr. Goudge: Let me finish.
Senator Jessiman: - they were not disposing -
Senator Bryden: Senator Jessiman, we've always at least allowed the witness to finish.
Mr. Goudge: Apart altogether from whether the rules of this game gave Paxport an advantage, I think there is a really important public policy question here about how governments best structure the divestiture process to maximize value in the public interest. And the advice that Mr. Crosbie gave to Mr. Nixon was this process wasn't structured to do that, and it could have been structured in a way that would more likely achieve full value for the public in disposition of assets.
There may be disagreement, senator, about whether the kind of thing that Mr. Crosbie is talking about is sound or not, but it's a really important public policy debate and you simply have Mr. Nixon's view based on Mr. Crosbie advice.
Senator Tkachuk: Could I ask a couple of supplementaries on this, Chairman?
The Chairman: A couple of supplementaries?
Senator Tkachuk: I don't know, it may be two or three, but it's to follow the line of questioning -
The Chairman: Those aren't supplementaries; that's further questioning.
Senator Tkachuk: There's a point that's being made, chairman, that's being made here about a better deal, so I was just going to ask a couple questions.
The Chairman: Just ask one supplementary question.
Senator Tkachuk: It will be difficult for me because I've been listening with interest to Mr. Crosbie.
Mr. Nixon, have you ever dealt with a real estate agent?
Mr. Nixon: Yes, but not in anything approaching the terms that we're discussing around this table. I think I sold my mother's house after her demise.
Senator Tkachuk: I always found that with real estate agents there was always one who could get me a better price than the other, and I think that's probably true of anybody who's had experience.
Mr. Crosbie, part of your business is evaluation and part of your business is merchant banking?
Mr. Crosbie: Yes.
Senator Tkachuk: Do you seek out that business?
Mr. Crosbie: Yes, we do.
Senator Tkachuk: So we have evaluations done, Mr. Nixon, by Price Waterhouse, Deloitte Touche, we had Raymond Chabot overseeing the - you know, accounting firms who do consulting on financial things and comparisons and who would not have a self-interest in this project. Why wouldn't you have hired one of those?
Mr. Nixon: Mr. Chairman, I had no responsibility for any hiring in this regard. I was asked to review the process. Certain shortcomings in the process were brought to my attention. I felt that these shortcomings that were brought to my attention had some validity and should be passed on to the Prime Minister who sought my views, and that's what I did.
Mr. Crosbie: Can I just please respond to your question, because I think you're perhaps inferring that we may perhaps have some conflict of interest.
Senator Tkachuk: I'm not inferring that, I'm just asking.
Mr. Crosbie: Just for the record, and just so that we clearly understand, in terms of the expertise that we think one would want to bring into this to best represent the interests of the government to achieve maximum value, we do not think that our firm would be the firm that you would want to bring in. We are not one of the major investment banks in this country or in the major financial centres of this world. For transactions of this scale, which had a value to the government of $842 million, that is a significant transaction, and a transaction of that size usually commands one of the major investment banks. And we have some major investment banks in this country. There are major investments banks on Wall Street and in London who would be the kinds of firms that one would typically bring into a transaction like this. But our firm would not be one that you would - we would not hold ourselves out as a kind of firm that one would actually retain to execute this transaction.
Now, when I was in my previous capacity as head of mergers and acquisition for Merrill Lynch in Canada, in that capacity this obviously would have been the kind of business we would have gone for in a serious way, I believe, and we would have, I think, in my old capacity, we would have been one of the contenders for this. But in our present firm we would not be putting ourselves forward. There would be others that would be better qualified.
I'm just giving you, to the best of our ability, our sense of this and our view on this and I believe that we're not in any way conflicted and I think we are totally objective.
Senator Tkachuk: So name me one kind of a domestic or international firm with expertise in airport development that could have done this project.
Mr. Crosbie: Well, I think -
The Chairman: Senator Jessiman, are you prepared to let Senator Tkachuk take over the questioning?
Mr. Crosbie: I think there are a lot of major investments banks.
Senator Tkachuk: No, no, I didn't ask that.
Mr. Crosbie: One would have to go and speak with them and find out which ones had expertise in this area.
Senator Tkachuk: You're the one telling me the story, Mr. Crosbie. You name a few to me here.
Mr. Crosbie: It's not my job to tell - I think it's beyond the scope of anything we could be expected to advise you on which one happens to be the best one; whether its Goldman Sacks or Dominion Securities or Warburgs or Rothchilds.
Senator Tkachuk: Who should have developed this airport?
Mr. Crosbie: Oh, you mean who could have come in and done this deal other than Paxport?
Senator Tkachuk: No, other than the Pearson Development Corporation.
Mr. Crosbie: I think there are a lot of major engineering and construction and other types of organizations who could have been identified that would -
Senator Tkachuk: Like?
Mr. Crosbie: Well, once again, that's not my job to do -
Senator Tkachuk: Mr. Crosbie, name one. That would be good. That's a good start.
Mr. Crosbie: Morrison Hershfield, British Airport Authority. You know, there are lots of them.
Senator Tkachuk: Keep going, more on the list.
Mr. Crosbie: Acres. I don't want to get into -
Senator Tkachuk: You're giving advice to the Prime Minister of Canada, are you not?
Mr. Crosbie: Holds it, hold it. Let's just slow down here.
Senator Tkachuk: You're giving advice to the Prime Minister of Canada.
Mr. Goudge: He's giving advice to Mr. Nixon.
Mr. Crosbie: When we are brought in on an engagement and somebody says, "Who would be potential investors for this? Who would be potential buyers for this?", we spend a lot of time doing that work. And if you wished us to, and I'm not suggesting you should, but if you wished us to go away and do a thorough, professional, rigorous assessment of potential bidders and investors for a project of this sort, we would be delighted to go and do that on a proper basis. And to do that, for example, we have a big engineering and construction group based out of our Los Angeles office. We would be delighted to get them involved. We have our project finance group in New York who are doing project finance deals around the world. We would be delighted to get them involved. We know a lot of the Canadian environment for this. I mean, identifying the people around the world who have the skills, capabilities, the financial credibility, all the things required to put a deal like this together and put a bid together, that's a serious job and you don't do it sitting here over a cup of coffee. That takes a lot of expertise. So I don't think it's professional for you to ask me that question and expect an immediate response. I think that's a response that requires a lot of work and a lot of thought, but there are serious groups out there that have the expertise and skills and money and all the rest of it.
Senator Tkachuk: And something you should have done -
Mr. Crosbie: No, we were not hired to do that. We weren't hired to sell this. It surprised us that the government hadn't done it.
Senator Tkachuk: Thank you. I'm done.
Senator Bryden: Mr. Chairman, you tell me whether this is a legitimate supplementary question.
Senator Tkachuk: I only asked two questions.
Senator Bryden: It took you a week.
Senator Tkachuk: Well, he answered.
Senator Stewart: That's the trouble; he answered.
Senator Bryden: The supplementary question is this, and I would direct it probably to Mr. Goudge: The issue is around the issuance of the RFP and the length of it, and I'd like to ask this question: Until the RFP issued, government could have changed its mind and there would have been no question of compensation for cost to the bidders.
Mr. Goudge: Absolutely.
Senator Jessiman: I direct this to you, Mr. Nixon. I suggest that you knew when you said this that this was not true, wasn't accurate. You say that the lease does not restrict the freedom of T1 and T2 Limited Partnership to carry out an undertaking other than the management, operation and maintenance of Terminals 1 and 2. You knew that wasn't correct, didn't you?
Mr. Goudge: Where is that, senator?
Senator Jessiman: That's page 5.
Mr. Nixon: I think that's an unacceptable question, Mr. Chairman. There's nothing that I put in the report that I believe to be untrue.
Senator Jessiman: What I'm telling you is what I understand are the facts, that that only applies after ten years or until the construction is finished. Now, is that not true?
Mr. Nixon: At the end of ten years all of the investments is made -
Senator Jessiman: Yes.
Mr. Nixon: - and the owners of T1T2 lease can flip it and sell it to whomever they choose.
Senator Jessiman: After ten years, right?
Mr. Nixon: They can do it in between under certain circumstances.
Senator Jessiman: Not according to the information I have.
Mr. Nixon: Can you help me with that, Mr. Goudge?
Mr. Goudge: Can I respond to that, senator?
Senator Jessiman: And you were told that by letter; Mr. Goudge was.
Mr. Goudge: Can I respond to this, because I suspect that this paragraph in the report was part of the material that I prepared for Mr. Nixon. In precise terms, senator -
Senator Jessiman: Were you written to and told that this was inaccurate? Did you receive a letter shortly after the report was sent out?
Mr. Goudge: I got a letter from Mr. Vineberg, yes.
Senator Jessiman: Did you answer it?
Mr. Goudge: No.
Senator Jessiman: Why didn't you answer it?
Mr. Goudge: Because I didn't think it was appropriate after Mr. Nixon's report had gone in, senator, to engage in any kind of volleying of letters back and forth. The report was in. But let me just say this, senator; in precise terms there is absolutely no constraint following ten years. I can also say, senator, that what I did, and I can go no further than this given the confidentiality agreement I got, I can indicate to you that the source of the information that I used for that paragraph is the material we got that was the Treasury Board submission and the source is absolutely faithfully recorded in the report.
Senator Jessiman: Are you saying that the information that was given to you by Mr. Vineberg is incorrect?
Mr. Goudge: I'm saying that the information I used to write this is the source I have recited. As a result of Mr. Vineberg's letter I did indeed confer with Mr. Desmarais and, absolutely, the qualification on that paragraph that I wrote for Mr. Nixon I accept. It's accurate. That is the qualification -
Senator Jessiman: Mr. Vineberg -
Mr. Nelligan: Let him finish. He's answering.
Senator Bryden: He's trying to answer your question.
Mr. Goudge: Let me try to go back from the beginning. The source of information I used, senator, for the paragraph that appears on page 5, is the source I have recited. When I got Mr. Vineberg's letter I did indeed talk to Mr. Desmarais and I'm absolutely prepared to say that the qualification you put on that paragraph is correct.
Senator Jessiman: Thank you. That's all I want.
Mr. Goudge: But I do think it's nonetheless important to say two things. First of all, after ten years there's absolutely no constraint.
Senator Jessiman: After ten years or when the construction is finished.
Senator Kirby: Let him finish.
Mr. Goudge: And the second thing is the information, I think I can safely say, that is in the report is the same set of information that whatever decision was taken in August was based on.
Senator Jessiman: All right. You also say, in the report, page 7, that the government had entered into ten contracts - sorry, the partnership represented to the government that had entered into ten contracts with non-arm's length parties prior to October 7, 1993, one of these was said to be a construction management agreement with Matthews and this information was not publicly disclosed, but you also knew, or you certainly knew after you got your letter from Mr. Vineberg, that the Department of Transport had requested T1T2 Limited Partnership to grant to the Department of Transport the right of approval with respect to such agreements, by letter to the Department of Transport dated November 25, 1993 agreed to permit the Department of Transport to review such agreements. And you also knew that any agreements that were after that date had to be at market value; isn't that correct?
Mr. Goudge: Let me explain that paragraph, senator, because it is absolutely accurate. In the closing documents, there is a representation by the partnership of the non-arm's length pre- October 7 contract. That list has 10 contracts listed on it. So those contracts were represented by the partnership to exist as of October 7.
The government had the right to see those contracts, but no further right in connection with them. We were told that they never exercised that right. We also were of the view or I was of the view, although it does not record it in the paragraph, that that is a very weak right. They had a no right to veto on the basis of the non-arm's length contracts, and they had no right even to assure that they were at fair market value.
After October 7th when the deal was made, then a letter comes along saying we would like you to give us an additional right that is not in the contract as of October 7th.
Senator Jessiman: The government asked for that.
Mr. Goudge: The government asked for it and the partnership gave it after the fact. What we were describing, there was the contract as it was entered into as of October 7th. If the partnership chose to make a concession, knowing frankly that I had expressed some concern about this through the 30 days of November, that is up to the partnership and the concession was made. The concession that was made, in my view, would have been better had it been stronger. That is all the concession did was to say these contracts that were represented to be pre-October 7 contracts when they are in fact entered into will be at fair market value.
One would think with a transaction like this with the major players who were there that the government might want something more than that, namely the right to veto if the terms were not acceptable.
Senator Jessiman: But it is true though that for the purpose of determining what the revenue is to Transport Canada, to the government has to be, regardless of what they did between each other, they had to be at market value, and you knew that?
Mr. Goudge: All I can tell you about senator is the pre-October 7, non-arm's length contracts, okay? I am not quite sure what you are referring to. Do you want me to go through it again?
Senator Jessiman: I am refer to ones that are non-arm's length after October 7th. Regardless of whether they are at fair market value or not, for the purpose of determining rent to the government, they have to be at market value.
Mr. Goudge: That is the attribution that is made of them if you will, fair enough.
Senator Jessiman: Right.
Mr. Goudge: My own view, senator, you may not agree, that if I were the government and I were dealing with this kind of arrangement, I would want to make sure that I had a little more authority over post-October 7th, non-arm's length contract than that.
Senator Jessiman: I want to go to another point if I may. Page 9, paragraph 8. In this report you say, "The privatization of Terminals 1 and 2 is inconsistent with the policy of the Government of Canada."
Mr. Goudge: Where is this?
Senator Jessiman: "After permitting the privatization of Terminal 3 at Pearson, the process to privatize 1 and 2 is inconsistent with the major thrusts of the policy of the Government of Canada."
The Chairman: Senator Jessiman, I can't find it.
Mr. Goudge: I am lost.
The Chairman: Are you referring to the Nixon report? You said page 9.
Senator Jessiman: I am sorry, it is my ninth question, it is page 8. Page 8 of the Nixon report, "After permitting the privatization of Terminal 3 -" I am saying that Mr. Desmarais told us that it is consistent, did he tell you otherwise?
Mr. Nixon: Perhaps I should respond to that. I understood the policy of the Government of Canada in these matters was to be similar to that used in the other cities across Canada where an LAA had been introduced.
I think the change in policy that Mr. Desmarais told us about was that although there had been no restrictions in the recognition of an LAA in other urban centres such as Montreal, that a restriction was going to be used in the Metropolitan Toronto area and that would be that all of the municipalities participating had to agree. So that my point is that it did not follow the policy of the government which had been used in other major centres, but for the reasons that -
Senator Jessiman: But he explained why.
Mr. Nixon: Well, I think one of the things is that they were going to have difficulty with Mississauga.
Senator Jessiman: And they did.
Mr. Nixon: And Mississauga was refraining from participating because of an ancillary matter dealing with the Island Airport. I indicated that they could have gone forward, recognized an LAA if they had used the policy that the government had exercised in other jurisdictions.
Mr. Nelligan: May I just get some clarification here because Mr. Nixon, as I read that first paragraph, they are talking about the thrust of the policy of the Government of Canada announced in 1987.
Was there a specific policy announced on LAA's there or were you talking about the general policy simply to give control to LAA's where possible? I am not aware of these details -
Mr. Nixon: I only mention the details because, for the people whom I hesitate to mention again to this committee, but those who felt that the government or at least some aspects of the government were especially interested in this privatization, it appeared that they were setting up barriers to the acceptance of an LAA in Toronto which were unnecessarily rigid and difficult.
Senator Tkachuk: Did you ask the government what their policy was?
Mr. Nixon: The government policy was set out in public documents.
Senator Jessiman: Was there anyone in the government that told you that it was not consistent with their policy?
Mr. Nixon: Mr. Desmarais indicated that in the Toronto area, they asked for unanimous support of the municipalities concerned and this meant that Mr. Corbeil was very much within his rights to say, well, we don't have unanimous consent so we cannot proceed, and I cannot recognize an LAA. That led to all of the difficulties that had been described by one of the senators a few moments ago when Claridge said that they were delayed because the LAA could not participate. The LAA could not participate because it was not recognized. It was not recognized -
Senator Jessiman: Because it was not organized.
Mr. Nixon: It couldn't be organized without the approval of the Government of Canada. It could not raise money unless it was approved by the Government of Canada, and it could not be established as long as Mississauga would not give its approval.
So it was a funny little catch-22 situation that in -
Senator Tkachuk: Are they organized now?
Mr. Nixon: I really don't know. They have just hired somebody from San Francisco. It was mentioned by someone else. I think one of the senators.
Senator Jessiman: I say Mr. Desmarais said something. I am telling you what he said under oath in one short sentence, "I do not believe this deal is inconsistent with the 1987 policy." That is what he said to us. That is what we believe. That's not what you think. Let's go to the next if I may.
Mr. Goudge: To be fair, it says "inconsistent with the major thrust". If you reprise the second paragraph on page 1, you can see what Mr. Nixon was talking about. I mean, the major thrust of the policy was to use LAA's.
Senator Jessiman: But there was another part to it and you know it, and he told you and he told us. Let me get on to the next thing if I may.
Mr. Nixon: Before you proceed if I may, and I may be getting oversensitive because it is late in the afternoon, but the implication in the senator's comments that somehow or another there is material included in this report that I knew was incorrect I would put to you, Mr. Chairman, is unacceptable.
Senator Jessiman: All I can say to you sir is that this is what we were told under oath and it is certainly -
Mr. Nixon: We are all under oath here.
Senator Jessiman: You are now, but you weren't when you wrote this report.
Mr. Nixon: I'm not sure what the implication is.
Senator Jessiman: What I am saying to you sir is that you said one thing. We have evidence. There is no other evidence at all to the contrary that says that statement is wrong.
Mr. Goudge: Can I invite you senator to read the policy? It is clear on the face of the policy.
Senator LeBreton: Have you got it?
Mr. Goudge: It is clear on the face of the policy that the major thrust of the policy is to use LAA's.
Senator Tkachuk: What happened in Terminal 3?
Mr. Goudge: The major thrust of the policy. Let me answer the question, senator, "the major thrust of the policy" which is all the sentence says -
Senator Tkachuk: Can a government make policy by action as well as what it writes down?
Mr. Goudge: What the report says senator -
Senator Tkachuk: Answer the question.
Mr. Goudge: I am replying, if you let me.
Senator Tkachuk: Yes or no?
Mr. Goudge: Are you going to let me answer the question or not?
Senator Tkachuk: Can the government make policy by action as well as in the written word?
Mr. Goudge: What the report says, senator, is that what took place was inconsistent with the major thrust of the 1987 policy. And I have told you what I think the policy says on its face.
Senator Tkachuk: Was the statement by Mr. Trudeau imposing wage and price controls the policy of the government - well, I am asking a question.
Senator Bryden: This is turning into a mugging rather than examination. Can we please get some decorum here and allow the courtesy to the witness to answer the questions and proceed in some type of orderly fashion?
Senator Jessiman: Mr. Goudge, you do know that that same policy - two parts to it. One part that said that the government could assign land by way of lease to the private sector, is that not correct?
Mr. Goudge: I am prepared, senator -
Senator Jessiman: Is that correct?
Mr. Goudge: I often try to get yes or no answers out of witnesses myself, senator, and I know that I am entitled to say what I think the right answer is.
I think the statement on the first page of the report is that the major thrust is the use of LAA's. And as the paragraph on page 1 says, there was only passing reference to the use of the private sector. That is an accurate recitation of the policy.
Senator Jessiman: Mr. Desmarais said otherwise for other reasons. But let's go on.
This is page 8 of the report that says: "Further it is significant that no financial prequalification was required in this competition." Are you familiar - I am asking any one of the three of you, but I direct it firstly to Mr. Nixon. Are you informed in respect to the PEI project in Prince Edward Island, the bridge?
Senator Bryden: Point of order. It is the New Brunswick, PEI project.
Senator Jessiman: Northumberland Straits, are you familiar with that project?
Mr. Nixon: I am not.
Senator Jessiman: It is a project of probably the same size or a little larger. It has the same project financing in it. And you were familiar, I assume, with that part of the RFP's that had the project financing and also the financial resources. Do you have any idea what is behind that? Your suggestion is from - or I assume your suggestion is that someone should have $840 million and come forward and sign a cheque and go ahead with this.
Now Mr. Stehelin's evidence to us was that there was no one in the world regardless, including the Bronfmans who were going to come up to finance something like this and put up $840 million. Sure, the Bronfmans have lots of money, but when you saw what they did on their own bid, the Claridge bid which was together with the other airline, Lockheed - yes sorry - although they were behind the bid between them where the money was and you actually got down to the corporations that were making the bid, they were shells.
The reason for that is that even though you have the money up there, you are only going to put so much at risk. If you did it the way you wanted it done or are suggesting it should be done, you would only have people with the kind of money that were prepared to take that kind of risk.
Mr. Stehelin, who is the President of Deloitte Touche, said even the Bronfmans, who are probably one of the richest if not the richest family in Canada, he said it is just unreasonable to think it would happen. And it gives an opportunity to those people that have the ability to put people together as Paxport did, Claridge and Lockheed, and all the others that were going to get together. You had to have consortia to do it. But if you have to have the money right up front, it makes it more difficult for Canadians that are entrepreneurs who have some money - and they have to have a lot of money, they have to produce $61 million. Actually it is more than $61, it is $93 million because there are costs involved in getting it done. So, I am suggesting to you that is reasonable.
Senator Stewart: The process produced almost exactly what you say would be reprehensible.
Senator Jessiman: Say that again, sir?
Senator Stewart: And the process that was followed produced a close approximation to what you say should have been avoided.
Senator Jessiman: I don't understand.
Senator Stewart: You say that the process was a good process because it made it - it didn't bias the operation in favour of the Bronfman family, nevertheless, if we look at the final result -
The Chairman: There is two comments and no questions to the witness. Would you like to go to the next one?
Mr. Nixon: If I may respond, Mr. Chairman, and I just have a point to make and then I would ask Mr. Crosbie if he might add something to it because this is in his area of expertise.
In answer to the senator's direct question, no, I would not expect a proponent to have $840 million in the bank and be able to have evidence to that to satisfy someone. I suppose my concern was similar to that which was eventually expressed by Transport Canada when they undertook a series of hearings into the financeability of the Paxport - accepted plan by Paxport, and that - those discussions went on. We have already discussed them here. And it was not deemed to be financeable until in fact the much sought after competition in Pearson evaporated and the owners of Terminal 3 came in with sufficient resources to eventually satisfy the Government of Canada, and particularly Transport Canada, that the thing could properly be financed.
Now there has been some indication, I think in the questions previously, that Paxport, that is the Matthews Group of Paxport and their colleagues, could have raised the money. But they did not raise the money until their chief competitor came on the scene and accepted a less advantageous contract than the one they had proposed and found the money which eventually resulted in them taking over the ownership of the plan. So that besides my own concern about the financeability, there was concern expressed from Transport Canada eventually.
Senator Jessiman: You know and I know that the financeability was not anything to do with the limited partners of the Paxport group. What the financeability was was the financeability - the charges they were suggesting should be paid by the airlines. And it was the problem with the airlines, both Air Canada and Canadian Airlines, the problems that they were having, and they were going to be - if they were going to merge or whatever was going to happen. They all had problems.
So what Transport Canada was concerned about was if they had granted this to Paxport, that maybe the airlines could not afford to pay the money.
Now, over and above that, of course, was the problem about the "Air Canada sandwich", and so it was not the question of the individual companies within the Paxport group. You agree with that, do you not?
Mr. Nixon: Mr. Chairman, Mr. Crosbie had previously given me advice on this matter and it might be worthwhile if we gave him a moment now to express a view.
Mr. Crosbie: On this question as to the financeability and Paxport's ability to come up with the $66 million and the way that was handled, in our mind this is one of the more peculiar things in the process. As we understand it, in December '92, the government, Transport Canada, came to an understanding with Paxport which was announced publicly which was subject to Paxport being able to prove that it could come up with the money. Now, that in itself is not unusual.
Senator LeBreton: It is wrong.
Senator Bryden: It is not wrong. I would refer you to the record. Best overall proposal announcement was subject to proof of financeability by the 15th of February.
Senator Jessiman: Mr. Crosbie, you know and I know it had nothing to do with the $61 million that was part of their project. The problem was that the government said that in Paxport's proposal, they were proposing to charge the airlines the same kind of money that the other airlines were paying over at Terminal 3. And they said Air Canada cannot afford that.
So the government - and particularly in view of the "Air Canada sandwich" which was a problem for Transport Canada and from what we have understood - there was this Deputy Minister Labelle and there was the Assistant Deputy Minister Barbeau, both of whom were responsible for the RFP's for whatever reason left that out of the RFP.
That caused a problem for the Government. It comes to the attention of the bidders, end of June of '93, the government knew this and that the financeability was the airlines.
Mr. Crosbie: I think - I am not sure - perhaps I am missing something, but it is not clear to me that what you are saying really bears on what I am saying.
Senator Jessiman: Okay.
Mr. Crosbie: As I understand it, in December '92 Transport Canada and Paxport came to an understanding that they would move forward together, subject to -
Senator Jessiman: December 9th there was the first discussion.
Mr. Crosbie: Yes, December 9th or whatever it was. That they would move forward, and this was subject to Paxport being able to come up with the financing - it was perhaps subject to a whole bunch of other things, but one of the things was that Paxport had the money to do the deal. And the way the deal was structured and the way the parties had agreed was that there was going to be $66 million of equity going in.
Senator Jessiman: Sixty-one I think.
Mr. Crosbie: Sixty-one plus the 5 million of up-front costs is 66.
So they are saying, "Okay, we are going to go ahead with you, Paxport. There are a bunch of conditions out here. But one of the conditions is that you can come up with the equity of new cash of $61 million." That's okay. That's fair ball.
Senator Jessiman: And the evidence -
Mr. Nelligan: Let him finish.
Mr. Crosbie: Okay, so there we are.
Now, then, then they go to Paxport and they say, "Can you give us -" I believe they said, "Look, can you give us some indication that you can come up with the money?" And Paxport were unable to give them any indication that they could come up with the money.
Senator Jessiman: That is not true, you know. It is not true.
Mr. Crosbie: I believe it to be true.
Senator Jessiman: I am telling you, under evidence before us it is not true. What happened, when they got together -
Mr. Crosbie: Well, what evidence did Paxport come up with that they had the money, that they had 66 million?
Senator Jessiman: Now, let me finish, okay?
Mr. Crosbie: Sure.
Senator Jessiman: The evidence that we had before us was that on December the 7th, when it was declared that Paxport was the best overall acceptable proposal, that they had the $61 million. You have to accept that. I am telling you that was given under oath.
Mr. Crosbie: Now, I can -
Senator Jessiman: Just a moment.
Mr. Crosbie: Okay.
Senator Jessiman: Now, on December 9th, Mr. Matthews calls Mr. Bronfman and at Mr. Bronfman's suggestion, because Mr. Coughlin said they talked about it about a week or two weeks before saying, "God if we lose this we want to be part of that deal". Mr. Coughlin also said, "There is no question if Paxport can get the right, and they can get the lease with Air Canada and they can be declared the actual winners, not just the best overall proposal, that they, Paxport -" this is Coughlin saying, "They can finance it without question." Coughlin is saying, "We're not going to take a chance. We would rather take a piece of this than give it up." Because if they went out to some of its own parties within its own consortia they could have raised the money, or they had gone outside, outsiders so - but once they got together what Paxport did it got a half interest to start with in Terminal 3, and they were 50/50 until two of the parties, Wood Gundy, withdrew because, and you know why they withdrew, because the return was not satisfactory, and one other party withdrew and instead of being 50/50 it ended up 63/32 or 67 or 68 or whatever it is, whatever the actual - it is about a third, two-thirds.
Mr. Crosbie: I am not quarrelling with you, but the impression that we had from speaking with the Transport Canada people was that when this announcement was made, subject to Paxport's ability to raise the money, they had asked Paxport for evidence that Paxport could raise the money and Paxport were not able to establish that they could raise the money. So that the deal that was - when it was entered into and announced, at that time they had no assurance, and in fact Paxport had not been able to establish in their minds that they, Paxport, in fact had the money or would have the ability to raise the money. I am just relaying to you what we were told by Transport Canada officials.
Senator LeBreton: Did you ask Paxport?
Mr. Nelligan: I wonder, Senator Jessiman, this has all been very confusing on facts, and I can appreciate that the witnesses today didn't have available to them the same information as we have heard. On the other hand, they obviously had some information we have been denied.
Senator LeBreton: They were also -
Mr. Nelligan: Please. But we have scene documents, and I don't know whether you saw them, which would indicate that the concern about financeability in December was the fact because of the crisis in the air industry that the revenues which were necessary to establish a financeable project may not be there, and that the Paxport proposal therefore might not be able to float on the markets because of the uncertainty in the air industry generally. Did you see those memoranda?
Mr. Nixon: I did not see those memoranda.
Mr. Nelligan: Were you aware, Mr. Crosbie, that this was one of the concerns expressed by Mr. Shortliffe and a number of persons in confidential memoranda at that time?
Mr. Crosbie: No. We did not see that memoranda.
Mr. Nelligan: Subsequently, it appeared that since the revenues from Air Canada were one of the primary bases for going to the financial markets to borrow money, the Paxport Group complained that they were unable to negotiate with Air Canada as to a permanent lease for some period of time and that until that was done they would not be able to establish financeability. Were you aware of that problem as it arose?
Mr. Crosbie: Yes. It wasn't so much the financeability of the debt that my comments go to; it was the ability of Paxport to say, "We can come up with the equity." Typically, before somebody enters into some kind of a preliminary agreement with somebody, they make sure that the party at least has the equity.
Mr. Nelligan: Well, sir, that is where I think there has been the confusion in this matter. The evidence that we have heard so far has not suggested that they were unable at the time they made the proposal to come up with the 61 million and that the word "financeability" related in every respect to the willingness of the financial markets to issue debentures on the security of the revenues coming in.
Now, I take it that your interpretation was different and that when they talked about financeability they were talking about the capacity of the proposer to come up with equity?
Mr. Crosbie: That is right, yes.
Mr. Nelligan: So that if the documents demonstrate something different, your conclusions are based on something other than the evidence that we have?
Mr. Crosbie: Yes.
Senator Bryden: With all due respect, Mr. Chairman and to counsel, that is not all of the evidence that we have, and I just - we have lots of evidence that there was huge concern over where the Matthews Group was going to get their $20 million; where was the $8 million going to come from to replace the fact that Ellis Don had gone. And that all related to the first $61 million of equity.
The major concern in relation to Air Canada and whether they would accept the tripling or quadrupling of their charges came to whether they could finance the next step and go out to the market and raise funds.
Senator Jessiman: Not true.
Senator Bryden: Or whether they could raise their loan funds. It was levered at 66, or something like that, 61 per cent equity and the rest was to be financed by loans.
Senator LeBreton: Mr. Chairman, we are talking about December 1992.
Senator Stewart: May I ask a question?
Senator LeBreton: It is December 1992, on December 7th, when Paxport was awarded the best overall, whatever it is we call it, the fact of the matter is, and there has been no evidence before this committee that says that they were not able on that date to produce their $61 million. As a matter of fact, we had testimony from Paxport that said just that. The Ellis Don and the CIBC were issues that came up much later, not -
Senator Bryden: There is no evidence either that they were able to do that and they were asked to do it by the 15th of February and they were unable to do it. It was extended -
Senator LeBreton: No.
Senator Bryden: - into March and they were unable to do it.
Senator LeBreton: No, that is wrong.
Mr. Nelligan: Senators, the confusion, then, and we are pinning it down to is: Are we talking about financial viability or financeability? And that was the distinction I wanted to make because it appears to me that financeability had a very special meaning to Mr. Stehelin, to Mr. Shortliffe and so on. You may discuss amongst yourselves whether or not they were financially viable. But the financeability, which is referred to in the original document, appears, so far as I have interpreted the evidence, to the ability of the financial markets to absorb this financing on the basis of the current industry.
The other point, I want to stay out of. That is yours.
Senator Stewart: Before we leave this, Chairman, I want counsel to clarify one point that he made. He made a point concerning the financeability, I hope I have got it right, as of December 1992, and that arose because of the conditions in the airline industry at that time.
Were the conditions in the airline industry of December 1992 different from those when the request for proposals was put forward; and if so in what way? Because you pick a particular time point and I want to know if the circumstances - if the seas had become rougher, as it were, from the time of the launch.
Mr. Nelligan: My understanding is that is the evidence but I wouldn't want to pin that down. I am simply relying on what the documents say in December because they specifically refer to that period. So I am not going to - we will have to search the record for the remainder of it. But that is my understanding of both Mr. Shortliffe's evidence and Mr. Stehelin's evidence as to the distinction between those two groups.
Mr. Nixon: Mr. Chairman, may I add -
Senator LeBreton: Sorry, counsel, if I could just refer for the record, and I don't have to read it in, at page 91 of the proposal, evaluation report, document number 530655, on the whole financing issue where, in fact, Mr. Lane, and if Mr. Nixon had taken the time to talk to Mr. Lane, Mr. Lane in his report makes it very clear that proponents B, meaning Paxport, "had developed a credible, well-documented financial plan which appears to provide sufficient equity and debt service coverage." So I don't have to read the whole thing, counsel. I simply refer you to that - I will be happy to make a copy of it and give it to you.
The Chairman: Mr. Nixon, Mr. Goudge an hour ago or so made a very interesting observation about public policy, which I think is the heart of this matter. We are talking about the contract which you recommended for cancellation. Mr. Broadbent described it as having all the design and creativity capabilities and the deep pockets of Bronfman. They came together, regardless of what went before, whether the assumptions are wrong or whether we argue them, whatever that was, that was the contract that was finalized. That was the contract that as of October 7th was certainly agreed on as finalized.
Now, what did you find wrong with that contract, other than those things to which you have already alluded, the page 6, the development agreement, et cetera? In other words, was there anything wrong with the T1T2 partnership as a contract other than the points - what are the points that you found that we can get to?
Mr. Nixon: Mr. Chairman, you ask a totally valid question, and I would say that the answer in my report is detailed in the sections under the ground lease, the development agreement, the management and operations agreement, and then my own comments on the process which have been discussed here to some extent.
Now, the sections that Mr. Goudge reviewed for my benefit and we included in the report are the ones that I have just referred to. It may very well be that the senators would like to deal with those sections one by one.
Senator LeBreton: Yes, we would.
Mr. Nixon: I think in the discussions this afternoon about three of those have been dealt with satisfactorily or otherwise. I think we have ended with a difference of opinion. But those are the matters that were brought to my attention by counsel and by Mr. Crosbie and which I included in the report.
Senator Stewart: May I ask a question, Chairman?
The Chairman: The development agreement -
Senator Stewart: May I ask, Chairman, for the implication of your question? I think it may be clear but I am not perfectly sure. You seem to be saying that if a good deal was achieved in the end the implication is that there is retrospective validation of the process; is that what you are saying?
The Chairman: You are not trying to trap me into a question that the end justifies the means.
Senator Stewart: No. I had no thought of that. But it seemed to me that was really the proposition you are advancing.
The Chairman: I am a bit puzzled about the emphasis upon what you consider to be the inadequacies of Paxport, whether true or untrue. I am suggesting that all these things fell from our brow when, as Mr. Stehelin's report of August 7th points out, there was nothing else. There was nothing else. The Air Canada thing had been settled. The Allders question had been settled. financeability had been settled. Everything had been settled. Everybody agreed. The documents were all put in a little blanket. October 7th was set as the closing date in July. The government took no new initiatives from the time of the writ until the time of the election. All those things slept happily. All conditions were met. The Prime Minister was asked: "Will you now permit us to release these documents from escrow?" She said "Yes". And Mr. Nixon has just answered the question, "Aha, yes, but now you should," he has said to the committee quite properly, "you should, however, even so, apply yourself to the development agreement, the process," and there was a third one, Mr. Nixon?
Mr. Nixon: Ground lease.
Senator Bryden: In all fairness, Mr. Chairman, if I heard Mr. - I may have been asleep but did Mr. Nixon say, "Yes, that was all done. It was a good deal"? You just said that and I don't think I heard Mr. -
The Chairman: No. I said there is no evidence to indicate that there wasn't a good deal because it went through all the processes. But I accept the fact that Mr. Nixon still had reservations and I asked him to outline what they were.
Senator Bryden: Yes.
The Chairman: Those things like financeability of Mergeco, to quote the Prime Minister, "If my aunt had -" I want to be careful about this and not misquote it.
Senator LeBreton: "If my grandmother had wheels I would be a bus."
The Chairman: I am not suggesting you are going back to the Highland settlement, senator, but I mean you are talking about things which had been looked after, had been overcome. All those problems had been overcome. That is a fact.
Senator Bryden: At what price is also at issue.
Senator Stewart: And the participants -
Senator Jessiman: Two hundred million more dollars to the government -
Senator Stewart: - came in and said that they had done a good job. Rise and applaud.
Senator LeBreton: And three people in 15 days are the great experts on something that took months and months of work by hundreds of people. That is truly amazing. They should be -
Senator Stewart: You know, thousands of thousands and thousands of soldiers participated in a war on behalf of the Nazis. I am sure that if they had won a victory they would have said that it was a great victory and the process was valid.
Senator LeBreton: How can you possibly make the comparison? Honestly.
The Chairman: I call it 5:00 o'clock. Thank you very much, gentlemen, again. We adjourn until 8:00 o'clock tomorrow morning.
The committee adjourned.