Proceedings of the Special Senate Committee on the

Pearson Airport Agreements

Evidence

---

Ottawa, Monday, November 6, 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: It seems unnecessary, colleagues, ladies and gentlemen, but Mr. Nelligan, as usual, will introduce our witnesses.

Mr. John Nelligan, Q.C., Counsel to the Committee: Senators, this morning we have again before us Mr. Robert Nixon, Chairman of the Board of Atomic Energy of Canada; Mr. Allan Crosbie of Crosbie & Company; and Mr. Stephen Goudge of Gowling, Strathy and Henderson.

I would remind you that they have previously testified, having appeared before you on the 26th, 27th and 28th of September.

The Chairman: Now, colleagues, I think that we have agreed that the time constraints now on questioning would be 45 minutes but anybody who runs out of time is entitled to come back and finish the point. But the 45 minutes in blocks seems to be a fair determination of our time today.

Mr. Nixon, are there any statements you would like to make before we begin?

(Previously sworn)

Mr. Robert Nixon, Chairman of the Board, Atomic Energy of Canada Limited: No, Mr. Chairman.

The Chairman: All right, then, the first questioner will be Senator John Lynch-Staunton, 45 minutes, followed by Senator Bryden.

Senator Lynch-Staunton: Thank you, chairman. At the risk of starting on a sour note, and before questioning the witnesses, I'd like to bring to the attention of the committee another added evidence of the lack of cooperation of the government in supplying documents on time.

On Friday in my office - and I assume in all committee members' offices - a fax was sent out by Mr. O'Brien. It was received at 5:24 p.m., stating that on November 3rd, which was Friday, at 4 o'clock, "we received from the Department of Justice/PCO, five binders of documents concerning witnesses that have already appeared before the committee."

Of what value is it to receive, at the end of business Friday, before the weekend, five volumes of documents concerning witnesses who have already appeared before the committee?

I think this is the ultimate insult, following a series of insults where we are victims of white outs; of refusal to see Treasury Board submission which everybody else has seen; of friends across getting documents which are not whited out; and now we are told, "We have five boxes there, if you'd like to look at them. They might have helped you in assessing the evidence of witnesses that came before you. So when you have a chance, look at them." I feel very strongly about this - and I'm sure that my views should be shared by both sides - that we have been treated in a most cavalier fashion by the government and their million-dollar outside law firm and gum shoes in the availability of documents pertinent to our investigation or to our inquiry.

Mr. Nelligan: May I just make a comment on that, senator, by way of at least partial explanation? At the conclusion of the last session, I heard from the justice representatives who told me that in the collation of documents they had come upon documents from time to time which they did not attribute to any particular witness. As a result of that, these documents, which, in their view, didn't pertain to the evidence of a particular witness, had still not been given to us. And it was suggested at that time that they could send those over to us. And I welcomed that and told them "Yes, that it would be useful simply to have those documents available." But I just wanted to correct you. I don't think they purport to relate to particular witnesses - at least, that's what they told me in the first place.

I must say that they were a little longer in delivering them than I thought and, since they only came in on Friday night, I don't think the committee or the staff has had any opportunity to review them. But preliminary review, I understand, indicates that none of them are particularly substantial. But we will continue that review and advise the committee if we feel any of them are of particular importance. Indexes were sent to representatives of Senator Kirby and Senator MacDonald on Friday. But it is unfortunate that, having had this long delay, we weren't able to get them a little bit earlier before this hearing.

Senator Lynch-Staunton: That is the point. And it's is certainly not up to the government to decide which documents should be offered in a timely fashion and which others might be assessed as being of not great relevance. They can come at the last minute. I have made my statement.

There is one document in there that we have seen in the short time we've had to look at them, which would have been very helpful for both sides in the evaluation of Minister Corbeil's testimony, who was not the least significant witness we had. And there may be others.

The point is that we have had little cooperation from the government, all reluctant and certainly something, I hope in our report we will be able to elaborate on so that this doesn't happen again.

Now, I want to thank the witnesses for returning. It's been some time since they first appeared, and I hope that it's allowed us all to reflect on what we've heard from them and to review the transcripts because their testimony is particularly significant, the Nixon report having led to Bill C-22 and which, in turn, allowed the Minister of Transport and others in government to make certain statements regarding the Pearson agreements: That they were nothing short of a cesspool of intrigue; that this was the biggest rip off in Canadian history; and that those senators who are holding up the passage of a vote on C-22 are doing so to line their friends' pockets. So, hopefully, this committee will be able to disprove or even prove some of those allegations. They certainly are not to be taken lightly. And what we have heard so far: There is no cesspool, there is no rip off, and there is certainly no lining of pockets - at least from the evidence, on the sworn evidence that we have heard by those directly involved in the Pearson agreements from the very beginning.

Senator Bryden: Perhaps, Mr. Chairman, it would have been cheaper for the Canadian taxpayers to simply have passed the hat for the group of developers instead of holding up C-22 in the Tory dominated Legal and Constitutional Affairs committee.

Senator LeBreton: Really. That's the kind of attitude that's got us into this mess.

Senator Doyle: Indeed, indeed!

Senator Bryden: He started off on list usual polemic. So, if we're here to ask questions and gain facts, then let's do that. Let's no get back up on the stump and repeat all of the things in an attempt to grab somebody's headlines.

Senator LeBreton: You never miss a chance to lower yourself to the occasion, Senator Bryden.

Senator Bryden: I would think the reporters we're more interested to be making sure we're clear to are the people who are taking transcripts not the ones who will write tomorrow's headlines.

Senator Lynch-Staunton: Now you gentlemen, on the other hand, in three weeks, in the most casual, amateurish lackadaisical - I even say sloppy and detached manner - have been able to conclude in your report and in testimony here that the process was flawed, the bid was rigged, the fix was in. Some senior government officials had no choice but to defend the contracts because, in Mr. Nixon's words, it was "their deal" -

Senator LeBreton: Their baby.

Senator Lynch-Staunton: - which, by the way - their baby, which, by the way, is a terrible indictment of the neutrality and professionalism of Canada's civil service - and that there was excessive lobbying.

Now, the problem that I'm having and others are having, is that you were the only ones who have asserted all of this. And you've done so without any evidence to support these allegations except to base your comments on hearsay, on innuendoes and on bad mouthing by those who simply did not favour and do not favour any form of privatization.

We're still also, may I say, a bit vague on your mandate, your policy advisers. But in the Nixon report, they go far beyond what I would define as giving advice on policy. You've destroyed, through conclusions, the reputations of hundreds of Canadians. If that's called policy advice, then there's a new definition which has been created.

And what we have heard and read so far as far as I can see, your mandate was to destroy and condemn the previous governments's policy on Pearson, no matter how beneficial it might be to taxpayers, in order to support rash political promises made in the heat of an election campaign in total ignorance of the facts.

Senator Bryden: Mr. Chairman, I haven't seen that we have seen or heard this.

Senator Lynch-Staunton: Before we -

Senator Bryden: I mean, why don't you just keep that and make a statement in the Senate if you want to make a political statement.

Senator Lynch-Staunton: I intend to also.

Senator Bryden: The fact is we have received a great deal of evidence showing that millions of dollars were spent on lobbyists.

Senator LeBreton: Millions?

Senator Bryden: We have had evidence of chiefs of staff being debriefed after cabinet meetings and committee meetings being debriefed by lobbyists.

Senator Lynch-Staunton: There must be two inquiries going on here.

Senator Bryden: Well, you're very selective. When it comes to real facts, you tend to ignore them. When it comes to the statements that people stand and recite for hours, that is self-serving, then, that you seem to take as meaning something.

The factual evidence, as you will find as you go through our proceedings, will bear out the fact that this was a bad deal. It was arrived at by a very flawed process dictated at the very highest ministerial levels and, in fact, there was a huge amount of political manipulation and interference.

Senator LeBreton: No evidence.

The Chairman: Now, look -

Senator Bryden: I don't know what we've been doing for the last four months.

Senator LeBreton: Well, you were down in New Brunswick.

Senator Kirby: I kind of thought our purpose this morning was, in fact, to have members of this committee ask questions of the witnesses not read prepared statements, which is what Senator Lynch-Staunton is doing. Can we please revert to the purpose of the meeting, which, as I understood it, was to allow your members, who asked these people back, to ask questions. If we just to hear his speech, we don't need these guys.

Senator LeBreton: And Senator Bryden's statement isn't a prepared statement?

Senator Kirby: No. Senator Bryden's statement is in direct response to Senator Lynch-Staunton's-

The Chairman: Come on. Let's, you know. Now, Senator Bryden, you'll have your turn at polemics as well.

Senator Bryden: I never do that. That's why it bothers me so much to have, you know, I mean-

Senator LeBreton: Oh, my God!

The Chairman: Senator Lynch-Staunton, I assume, was getting to his questions.

Senator Lynch-Staunton: Well, yes.

Senator Bryden: Well, I assume that there must be a question here somewhere.

Senator Lynch-Staunton: There is a question.

Senator Kirby: It looks to me like he's got another couple of pages left in his speech.

Senator Lynch-Staunton: I'm doing the witnesses a favour in saying what I've said. The point is that everything they've said has been contradicted by every other witness who has come before us. And so I'm asking - And my question is: Based on that-

Senator Bryden: It depends on whether you are buying or selling.

Senator Lynch-Staunton: So my question, following these statements, is to allow the witnesses, based on that evidence that's been before us, which has contradicted just about everything they've told us, do they not want to amend some of their testimony or even have a chance to revise the Nixon report in order to get into sync with all of the evidence that we've heard so far? And I would like to know if any, or all of the three witnesses, would like to clarify some of the statements they have made and some of the things that they have allowed to go into the Nixon report.

Mr. Nixon: No, Mr. Chairman.

Senator Lynch-Staunton: Fine. Then, hopefully, I will try and respect the 45 minutes as much as possible, with the understanding that if I can't get through we'll come back a second round. And I don't know what arrangements have been made with the witnesses, Mr. Chairman. I assume that if we don't get through today they can come back tomorrow or on another day, or is it assumed that we have to finish by the end of today or this evening?

The Chairman: I think the agreement was because of the difficulty in getting, harmonizing the witnesses and the members of the committee that we were going to try to finish today.

Senator Lynch-Staunton: Well, I'll certainly cooperate as much as possible to meet that.

I'd like to address my first questions to Mr. Crosbie and ask him to tell us how he felt qualified to take on the major undertaking that he was asked to do, which is to evaluate a 57-year contract - which, well, I won't go into all the details; he knows them, as well as we all do. I just wanted to know how he felt comfortable, in the short time given him, to evaluate in-depth this very complex transaction.

Mr. Allan Crosbie, Managing Partner, Crosbie & Company Inc.: Senator, yes, we were retained in late October, very early November of 1993, with a view to working with and providing advice to Mr. Nixon in his preparing the report. We had a month to do it. We made a major commitment to it.

We spent a lot of time reviewing the transaction with the designated representatives from Transport Canada and we reviewed that with them and a number of the documents and papers that they provided to us. And, based on that, as outlined in our report to Mr. Nixon, we were able to make certain statements, which we made. And we felt comfortable making them and we stand by them.

Senator Lynch-Staunton: I hope we won't have any problems, Mr. Crosbie. I'd like you to just answer the question. The question was: What background do you have which would allow you to review such a complex transaction as this one in such a short period?

Here we have a transaction - if I can refresh your memory - it's for the redevelopment of two terminals which involved over 100 supply and service contracts and over 100-year leases involving hundreds of thousands of documents - 200,000, we were told -

Senator Jessiman: Pages.

Senator Lynch-Staunton: - pages of documents, for 57 years with a possible capital input of $700 million. That sort of deal in Canada, that I'm aware of, is very rare.

So, what expertise could you bring, based on previous work, that would allow you to go into this deal cold and come out with your decision so quickly - not in a month, but in less than three weeks.

Mr. Crosbie: Well, I guess there are several aspects to that. And just building on my answer previously, our company and our people in our company, and myself, have been in the investment business and in the financial business for a long time. We've acted - Myself and my partners have, over our careers, acted in some of the largest transactions in this country. And we've acted in many transactions over our business careers in the financial business. And we're quite used to being brought into very complex situations and assimilating the information and drawing conclusions. So the role that we played is something that we're used to and we've done on many occasions over many years. And, based on that, we drew certain conclusions; we made certain statements. And those statements are statements that, based on our experience and the work done, we felt confident making.

Senator Lynch-Staunton: Can you give us examples of projects, similar to this one, which you have evaluated?

Mr. Crosbie: Yes. I think the thing here is that every project you do - In the financial business, all projects tend to have certain unique characteristics.

Senator Lynch-Staunton: No, the question is: Can you give us examples of projects, similar to this one, that you have evaluated in the past? What I'm trying to do is get an appreciation of the experience and ability which you brought to an extraordinary demanding task. I don't envy the job that was given you, but I'd like to get a better a understanding of your conclusions through the knowledge and ability you brought, based on past experience. What other airport deals have you done at this time?

Mr. Crosbie: Yes. Well, okay. If you're talking in airport deals -

Senator Lynch-Staunton: Well, I'm talking about Pearson development.

Mr. Crosbie: You're talking specifically.

Senator Lynch-Staunton: Yes. That's why we're here.

Mr. Crosbie: No. I mean, this is a unique project. And this project, and the way it was structured and the way it was financed is unique to this country. So that I don't think this has ever been done before in Canada. So its a unique project. But the various components of the project are not unique.

I mean, the fact that there was a lease with Air Canada. Many transactions and financings are structured on leases from major corporations. The fact that there was a major construction project is quite common to many projects. I mean, if you go through the various components of this, those components are, well, I think, by and large there's a lot of experience with the various components in the Canadian capital markets. And we certainly feel comfortable with them. And we had access to our various people within our organization, and so forth.

But, when you put it altogether, and all the different components, it's a unique project. And that's one of the reasons why we felt so strongly that this project - because it's unique; because it's so difficult to know exactly the kind of deal you could in fact do in the marketplace - is that this project should have been taken to the market in a professional, sophisticated and rigorous way, which we felt it wasn't. And that's the reason why -

Senator Lynch-Staunton: Yes, we'll get to that in a sec. We'll get to that.

Mr. Crosbie: - we felt that it should have gone to market.

Senator Lynch-Staunton: Well, it should have gone to market. Fine. We'll get to that. I'm just trying to establish - and I think I have - that this is a unique project. It has features similar to other types of - what you find in contracts, which were also found here. But the concept itself was unique, the project was unique. And the question which is hanging there - 'cause there is no answer - is: How could anyone, in three weeks, and not three full weeks, give an evaluation of a unique concept which had taken three to four years to develop?

Mr. Crosbie: Yes, and -

Senator Lynch-Staunton: I don't think that you could do it. I don't think there's anyone in Canada could do it in such a short time. That's what I'm trying to establish.

Senator Bryden: Mr. Chairman, as a point of clarification, it took three or four years to develop; it took 90 days on a request for proposals. I mean if this is such a-

Senator Tkachuk: One twenty-five, senator.

Senator LeBreton: No, 127.

Senator Bryden: No, a 90 days request for proposal time limit and no expression of interest period. I mean all of a sudden, Senator Lynch-Staunton -

Senator Tkachuk: Two years.

Senator Bryden: - this has become a very complex, unique, most difficult transaction which, once the button pressed, was able to be rushed through in less than a year.

Senator LeBreton: There is an awful difference between 127 days and 15 days.

Senator Lynch-Staunton: Well, from the Nixon report, page four, there are things we can agree to. Page four:

This agreement is an enormously complicated transaction.

I didn't say that. Mr. Nixon said that, or at least he signed off on it. Mr. Crosbie, in his report, said that he had to work in very tight time frames and for the same reasons a review, by necessity, was limited in nature. I'm not surprised at seeing that.

Senator Bryden: No, because he worked from tight time frames throughout this. Everybody was working in tight time frames.

The Chairman: If we're going to get through today in a fairly timely fashion,we can't have- If anybody interrupts you, Senator Bryden, I'll ask them to be silent. Now, please don't interject. Don't talk back and forth. Just don't. Let's just stick to the questions and get through this.

Senator Lynch-Staunton: What I'm trying to get at is Mr. Crosbie, and Mr. Nixon, and Mr. Goudge and others, were given an impossible task. I'm just surprised they took it on no matter how profitable it might have been. It was an impossible task.

Mr. Crosbie: Senator Lynch-Staunton, now, the inference was that we did a valuation. We did not do a valuation, we did a review of this project and from that we drew certain, a sense of it. And we expressed our views in our report. But we did not do a valuation. We were not retained to do a valuation.

Senator Lynch-Staunton: But you evaluated the rate of return and you evaluated the -

Mr. Crosbie: No, we did not do a valuation of the rate of return, with respect.

Senator Lynch-Staunton: Well, are you like Mr. Nixon, you just signed the report and didn't read it?

Mr. Crosbie: Well, if you read our report.

Senator Lynch-Staunton: I've read it. I've read all the versions of it over and over again and all the variations and all the conclusions you started with and the ones you ended with.

Mr. Crosbie: With respect, it was not a valuation.

Senator Lynch-Staunton: I see.

Mr. Crosbie: A valuation has a very strict sense of what that means in the financial business and this was not a valuation.

Senator Lynch-Staunton: Well, we are in the financial business here, we're in the business of understanding each other in simple English language. Now, you evaluated the contracts. That was your job, to give an assessment of them from the financial point of view. And that's what you did or, tried to do.

Mr. Crosbie: Yes. And I want to make it very clear that the conclusions that we expressed and the things that we said, we felt comfortable saying those based on the work that we did within the three or four weeks that we had.

Senator Lynch-Staunton: Three weeks.

Senator LeBreton: Three weeks.

Mr. Crosbie: And we felt very comfortable and we stand by them.

Senator Lynch-Staunton: Fine. Well, that's fine that you stand by them. But I would still like to question you on some of your conclusion and how you came about them.

Senator Tkachuk: Mr. Chairman, could I just have a supplementary? He didn't answer the question. What did you do, then?

Mr. Crosbie: We did a review -

Senator Tkachuk: Of what?

Mr. Crosbie: - and an assessment of the project.

Senator Tkachuk: Of the whole project?

Mr. Crosbie: Well, of certain aspects of the project, particularly relating to the business aspects. And reviewed it under the direction of Mr. Nixon. We were working for Mr. Nixon.

Senator Tkachuk: So you didn't do an evaluation and you didn't do a valuation.

Mr. Crosbie: We did not do a formal valuation, no.

Senator Tkachuk: You just did a review. You read it and gave your opinion.

Mr. Crosbie: And we drew certain -

Senator LeBreton: Under instructions from Mr. Nixon.

Mr. Crosbie: And we drew certain conclusions, which we expressed in our report.

Senator Tkachuk: Okay.

Senator Bryden: Mr. Chairman, is it only me that's not allowed to interject.

The Chairman: That is a supplementary question.

Senator Lynch-Staunton: Could you tell us who hired you, Mr. Crosbie? Who actually went to you and said, "We'd like you to do this work?" Who approached you to do the work you did?

Mr. Crosbie: Well, I had a phone call from Mr. Goudge, who said he was calling on behalf of Mr. Nixon.

Senator Lynch-Staunton: And what was the nature of your mandate? Did he give you something in writing? What did he actually ask you to do?

Mr. Crosbie: We ended up with a formal engagement, yes.

Senator Lynch-Staunton: Have we received a copy of that? Do we have that in our files? But there is a written document -

Mr. Crosbie: Yes.

Senator Lynch-Staunton: - on which your mandate is set out?

Mr. Crosbie: Yes.

Senator Lynch-Staunton: And are the financial terms, your billing rates, and so forth, are they set out there, too? Is there a budget?

Mr. Crosbie: Yes, I'm sure there was. I mean, I don't have it with me and I can't, you know, I can't be 100 per cent certain but I'm virtually certain it set forth what we're going to do and the costs and billing rates and all the details, and so forth.

Senator Lynch-Staunton: So what were you asked to do? Since we don't have the document in front of us, could you tell us what your mandate was?

Mr. Crosbie: We were asked to review this from a business point of view and work with and for Mr. Nixon and give him our thoughts and our views in a number of areas relating to the business aspects of this transaction.

Senator Lynch-Staunton: So a very general mandate then, just like in any other deal? There was no specific reference to the nature of this deal in your mandate? I mean, we've agreed that it was a unique contract, but there was no uniqueness in the mandate given to you and how to assess it?

Mr. Crosbie: I can't remember the specific details of the conversations and I don't have the actual contract with me, but often we're retained on many unique engagements under those kinds of terms of reference.

Senator Lynch-Staunton: No, no, Mr. Crosbie, please. I hope that you have a lot of mandates in your career and I hope they're all successful. We're here to try and appreciate the weaknesses and the strengths of the Pearson contracts. You played a key role in conclusions that Mr. Nixon came to.

Mr. Crosbie: That's right.

Senator Lynch-Staunton: Therefore, it's very important that we know exactly what you were asked to do and how you accomplished what you did to come to the conclusions you did. So what I want you to tell us is what was the nature of your mandate. Did Mr. Goudge say, "Look, Nixon is out here to embarrass the government. Help us in coming to the conclusions that can support that"?

Mr. Crosbie: No, absolutely not.

Senator Lynch-Staunton: Fine, so we know what you were supposedly not told. What were you told?

Mr. Crosbie: They asked us to review it and form our views, and whatever those views were, those were the views. And we reviewed it and we formed our views and we expressed our opinions.

Senator Lynch-Staunton: As you were reviewing and found that you didn't have enough time to complete your review, did you go back to -

Mr. Crosbie: Hold it. I didn't say that.

Senator Lynch-Staunton: But your report does. Your report says, "Our review, by necessity, was limited in nature."

Mr. Crosbie: That's right.

Senator Lynch-Staunton: That's what your report says. Therefore, you did not do a complete review.

Mr. Crosbie: Hold it. You said -

Senator Lynch-Staunton: I've got nothing to hold.

Mr. Crosbie: We completed our job and we did our job, which was -

Senator Lynch-Staunton: What was your job then?

Mr. Crosbie: - which was a review and an overview, and which we did.

Senator Lynch-Staunton: But you didn't do it completely, in your own words. I'll read it to you, because I'm supporting the problem that you had. On the first page, "In performing our analysis, given the very tight time frames in which we were working and the scope of our engagement, we have relied on the information provided to us by Transport Canada officials with whom we met without having independently verified the information provided to us. For the same reasons, our review, by necessity, was limited in nature."

So you have made an incomplete review.

Mr. Crosbie: Well, our review is what it is.

Senator Lynch-Staunton: It's incomplete. Therefore, why didn't you ask, as you found, surely, as time went on, that you couldn't complete it in the three weeks that you did this partial incomplete review, go to Mr. Goudge and say, "I need more time. I'm a professional and if you want me to do a proper job, I need more time to do it"?

Mr. Crosbie: We're talking at cross purposes here, Senator Lynch-Staunton. It is quite normal in our business, in my profession, to be retained with a specific time frame. I mean, we might be brought in by a bank to examine a company and they give us three days. They say, "Look, we have to have your views at the end of three days." They're not saying it's got to be complete, or whatever. You have three days to do it and you give your views, and then based on that they will take that information into account.

And that was this case. We had a month to do it and we did the best job we could and we drew certain conclusions based on our analysis and we presented those views. And I think that that's quite a proper way to approach it.

Now, no one is saying that perhaps more work could have been done, or whatever. We're not talking about that. We're just saying, "This is what we did", and based on that we drew certain conclusions, formed certain views and opinions, and we provided those to Mr. Nixon.

Senator Lynch-Staunton: So you have confirmed, indirectly, that your review was limited by the time allotted and therefore, by that restriction, you could only do an incomplete job and had you had more time your job would have been more complete; the review would have been more complete.

Mr. Crosbie: Yeah, I mean -

Senator Lynch-Staunton: So that's what we're faced with.

Mr. Crosbie: That's a truism, of course. We said that in our report.

Senator Lynch-Staunton: Well it's a very important truism because Mr. Nixon, by Mr. Goudge's own admission, has based some conclusions on hearsay and now we are getting confirmation that he's based other conclusions on an incomplete review.

Let's see how, suffering under these time frames, how you went about it. You say in your report that you met with Transport Canada officials and had conservation with Deloitte & Touche. Those are the only organizations you mentioned. So I would like to find out if perhaps there are other persons that you had discussions with in order to do your review, people who were intimately involved in the process at various stages.

For instance, Don Dixon and Keith Jolliffe of Finance and Transport; did you get in touch with them?

Mr. Crosbie: Yes. We had conversations - those are two familiar names. I believe we did.

Senator Lynch-Staunton: You believe you did, but did you?

Mr. Crosbie: I'm virtually certain we did, you know, yeah.

Senator Lynch-Staunton: I hope we're not going to have the same problems with a faulty memory as we had when Mr. Nixon was here. I mean Mr. Jolliffe played -

Mr. Crosbie: I can go through my notes -

Senator Lynch-Staunton: I hope you brought them.

Mr. Crosbie: - of the different people we spoke with. I'm sure we spoke with Don Dixon and John Desmarais, and I believe I also have notes with Mr. Jolliffe's name on it.

Senator Lynch-Staunton: But you're not sure?

Mr. Crosbie: I do have, I'm sure I do, I just - I mean, yes, yes, the answer is yes.

Senator Lynch-Staunton: You're sure you made a complete review but you're not sure. You're sure you met these people but you're not sure. What about Connie Edlund of Industry, Trade and Technology that was called in who did an analysis for the Minister of Finance?

Mr. Crosbie: That name does not ring a bell.

Senator Lynch-Staunton: What about Paul Stehelin at Deloitte Touche who gave us -

Mr. Crosbie: Yes, we had several conversations with Mr. Stehelin.

Senator Lynch-Staunton: Did you meet with him?

Mr. Crosbie: No. It was a telephone conversation.

Senator Lynch-Staunton: Just a casual telephone conversation?

Mr. Crosbie: No, it was not a casual telephone conversation.

Senator Lynch-Staunton: Well if you're not going to tell us the nature of it, I'm going to have to help you by provoking you. What kind of a telephone conversation was it?

Mr. Crosbie: Sorry, I hadn't realized you were asking that question.

One of my associates and I had a very lengthy conference call with him in which we reviewed a number of these issues. And then we - I believe we also had a couple of other telephone follow-up conversations with him.

Senator Lynch-Staunton: Who was your associate?

Mr. Crosbie: Linden Rollitt.

Senator Lynch-Staunton: So you think you had one, maybe two conversations?

Mr. Crosbie: Well, I think we actually had three, and I'm certain we had one, that I remember, but our notes, I believe, show that we had three.

Senator Lynch-Staunton: But you didn't see Mr. Stehelin and go over his report with him?

Mr. Crosbie: We had a very lengthy conference call.

Senator Lynch-Staunton: Okay. What about Richardson Greenshields who advised the evaluation team on assessing the pros and cons of each bid and did an evaluation of the bids; did you meet with them?

Mr. Crosbie: We were provided information relating to Richardson Greenshields from Transport Canada.

Senator Lynch-Staunton: Did you meet with them?

Mr. Crosbie: No, we not meet with them.

Senator Lynch-Staunton: No, you didn't. Did you meet with -

Mr. Crosbie: We were provided the information.

Senator Lynch-Staunton: Did you meet with any members of the evaluation team; I mean those who found that Paxport had the best bid? Did you meet with them?

Mr. Crosbie: No.

Senator Lynch-Staunton: No.

Mr. Crosbie: Sorry, we met only with representatives from Transport Canada and Mr. Stehelin from Deloitte's.

Senator Lynch-Staunton: Well, you didn't meet with Stehelin. You spoke with him.

Mr. Crosbie: Well, we spoke with him at some length.

Senator Lynch-Staunton: So anybody else involved in the process on the government or private side were not found necessary in your review. Their expertise was not found - was assessed at the time not to be useful in your review?

Mr. Crosbie: No. I feel like you keep on trying to put words in my mouth.

Senator Lynch-Staunton: No, no.

Mr. Crosbie: We met with the Transport Canada people.

Senator Lynch-Staunton: No, no, I know you met with -

Mr. Crosbie: We went over a broad array of things. We asked them a number of questions. We asked them about Richardson Greenshields and they gave us certain information about Richardson Greenshields. We asked them about Price Waterhouse; they gave us certain information about Price Waterhouse. We asked the DS Marcil report; they gave us certain information about the DS Marcil report. But, as we said in our report to Mr. Nixon, we did not independently verify this. We accepted what Transport Canada provided us. We accepted the documents they provided us at face value and we drew certain inferences, conclusions, opinions. But we did not independently verify this, nor were we hired to do so. We accepted what we were told and the various documents from these various organization at face value.

Senator Lynch-Staunton: Did you meet with Wood Gundy who left the consortium because they felt the rate of return was not high enough for a project of this nature?

Mr. Crosbie: No -

Senator Lynch-Staunton: Wood Gundy is no slouch.

Mr. Crosbie: Yes, I started my career at Wood Gundy -

Senator Lynch-Staunton: Fine.

Mr. Crosbie: - and have very fond memories of the firm and they're an outstanding organization.

Senator Lynch-Staunton: One of the conclusions you've come to is that the rate of return of 14.2 per cent after tax was unusually high.

Mr. Crosbie: Yes.

Senator Lynch-Staunton: Now, Wood Gundy felt that at 17 or - well it was 18 per cent, back to 14, they felt that it wasn't worth the risk. Now here is a major financial house which feels that the rate of return is so low, by their evaluation, that they're pulling out of the deal.

Now surely it would have been helpful, before coming to the conclusion you have, to find out on what they based their decision to pull out of a deal in which they'd been from the beginning.

Mr. Crosbie: Yes. I mean we did an extensive review. We looked at a number of things -

Senator Lynch-Staunton: No, Mr. Crosbie. Why did you not ask Wood Gundy's opinion, who have been in this business for a long time, and who have a high reputation for evaluating risk for their customers and for themselves, why they felt the rate of return was such that it was no longer of interest to them given the nature of the project? Why didn't you ask them; pick up the phone and say, "Hey, what's the problem here?"

Mr. Crosbie: We did our work, and we did an extensive amount of work -

Senator Lynch-Staunton: I have a feeling, Mr. Chairman, that I'm not -

Mr. Crosbie: - and we feel comfortable drawing the conclusions that we drew based on the work that we did. And ...

Senator Lynch-Staunton: Did you meet anybody from Claridge?

Mr. Crosbie: No.

Senator Lynch-Staunton: Did you meet anybody from Paxport as it was then?

Mr. Crosbie: Sorry. We only met - we met with the Transport Canada people and we had the telephone conversation with Mr. Stehelin. We met with several of the Transport Canada people, we had telephone conversations with several more, and we asked a range of questions. We asked questions of these people about these various institutions that you're talking about; Claridge, Wood Gundy, Paxport and all the rest, and they provided us with the information. And we relied on the information that we were provided by the people from Transport Canada. And we felt that they were telling us the truth, we relied on it and, as we said in our report, we did not independently verify this. We accepted what they said and we drew certain conclusions, and in drawing those conclusions we factored into that our own sense of things, our own business judgment, our own knowledge of markets.

Senator Lynch-Staunton: Well, I mean, I'll just let your answer stand there. I just find it unbelievable that you would not go outside government to those people who also had an active interest in this file to get their views to help you come up with a more thorough review.

Now, as you were coming to conclusions, did you and Mr. Nixon meet to discuss your conclusions with him; preliminary as they might be? What was the relationship? Again, it's important because you're playing - the conclusions Mr. Nixon came to are, to a large extent, based on your limited review. So did you discuss with him, as you went along with your work, how it was coming on and how, well, how you were progressing?

Mr. Crosbie: Yes, we met regularly with Mr. Nixon and Mr. Goudge and we shared with them how we were coming along and what our sense of things was and asking for their feedback as to what areas would be helpful to them that we analyze and so forth and so on.

Senator Lynch-Staunton: When did you come to the conclusion that the rate of return was unusually high, or unacceptably high?

Mr. Crosbie: You know, I mean just offhand I can't say that there was a specific point where we came to that conclusion. It's something that evolves. I mean you're doing this work -

Senator Lynch-Staunton: But was it in the first week, second week, third week? You only had three weeks.

Mr. Crosbie: Yeah.

Senator Lynch-Staunton: What time - I mean you come to a significant conclusion; rate of return is too high.

Mr. Crosbie: To do this analysis we looked at a number of things and we had a number of things going on simultaneously in terms of assessing rates of return. We looked at a number of things and you sort of go down a number of roads at the same time and then the conclusions start coming in and you form a judgment. That's how it worked in this particular case.

Senator Lynch-Staunton: Did you come to the conclusion towards the end of your review? Did you have your conclusion in mind through a conversation with Mr. Goudge right at the top?

Mr. Crosbie: No, we had no conclusions in mind when we started.

Senator Lynch-Staunton: You had no conclusions to start with, okay.

Mr. Crosbie: It was an open book when we started and we did our work and we got information -

Senator Lynch-Staunton: So when did you come to the conclusion - because you only have three or four major conclusions, one of them being this rate of return, which one comes back to all the time.

Mr. Crosbie: Yeah, I mean if you asked me to guess, sir, I mean this is a guess, but I would have said something like the end of the second week.

Senator Lynch-Staunton: End of the second week.

Mr. Crosbie: It started - I'm not saying it was -

Senator Lynch-Staunton: That's fine, at the end of the second week, or some time around.

Mr. Crosbie: - definitely a conclusion, but that was our sense.

Senator Tkachuk: November 15th?

Senator Lynch-Staunton: Because in the first draft of the Nixon report, document 002452, which, in pencil or pen, is dated November 11, Mr. -

Mr. Stephen Goudge, Legal Counsel, Gowling, Strathay and Henderson: Senator, it's dated November 19.

Senator Lynch-Staunton: Well I haven't seen November 19. I've heard that that date is supposed to be the handwritten date, but the documents we have, unless they came in on Friday night late, still show November 11.

The second report I think is dated November 18. In that there is a sentence to the effect - the November 18 document is 002455 - "an unconscionably high return over the life of the contract to the private sector." This is a conclusion in Mr. Nixon's first and second drafts. And what you have told us, you have yet to tell him that. So I'm trying to find out - maybe Mr. Nixon can answer us - how this conclusion was already in the preliminary draft when your report had yet to be completed.

Mr. Crosbie: We met on a regular basis and we would bring Mr. Nixon up to date. Every time we met he asked us, "Bring us up to date on what you've found", and we would bring him up to date on what we found. So we would relay this information or this piece of information or that piece of information and as we do that, and over those period of days, a consensus evolved. It wasn't, "As of today we concluded this." It didn't work that way. It was a gradual thing that evolved over those period of days.

Senator Lynch-Staunton: But Mr. Nixon was able to put in his report that conclusion. It must be based on more than impressions and casual conversations over coffee.

Mr. Crosbie: These were not casual conversations. I mean these were formal meetings that we had and we presented our views or what we found in a proper fashion. I mean it was done in a very organized and professional way.

Mr. Goudge: Senator, the dates we're talking about are November 18 and 19.

Senator Lynch-Staunton: The dates we have on documents show November 11.

Mr. Goudge: I wrote it, senator. It's November 19.

Senator Lynch-Staunton: Well the dates we have are November 11.

Mr. Goudge: I wrote it, senator. It was fully discussed. I wrote it. It's November 19. I gave you a blow-up.

Senator Lynch-Staunton: You were going to provide us with a blow-up, remember.

Mr. Goudge: I gave you a blow-up.

Senator Lynch-Staunton: Where is it?

Mr. Goudge: It's in the record.

Senator Lynch-Staunton: In the which?

Mr. Goudge: In the record.

Mr. Nelligan: My recollection, senator, is that when we were reading that the last time that Mr. Goudge pointed this out, and I think the original document, which wasn't quite as obscure as the photostat was, indicated it could well be the 19th.

Senator LeBreton: This is a point of clarification, Mr. Chairman. When you look at this document, when you look at his actual November 19th, it's very clearly a "9". And this November 11, it could be November 13, but Mr. Goudge said in testimony that in fact November 11 was supposed to be November 19th and it was the first draft, and yet there's one dated November 18th. So which is it? I mean -

Mr. Goudge: We went over this the last time, senator. November the 18th is a document that is put by counsel behind the document dated November the 19th. I had nothing to do with the ordering of the documents in the book you have. What I testified to last time - and frankly I had thought that senators had been prepared to accept this, given the blow-up we filed and my testimony - was that the document is dated November the 19th.

Senator Jessiman: You said you'd get the original. Let's have a look at it.

Senator Lynch-Staunton: Well, whatever the dates, it seems strange to me that after only a few days a basic conclusion to the report can already be included in preliminary drafts. Do you have any notes or tables or a written assessment that you provided to Mr. Nixon in order for him to share in your conclusion?

Mr. Crosbie: Yes. We prepared notes for our meetings with Mr. Nixon, and they've all been provided to this committee.

Senator Lynch-Staunton: I've looked at some of them and one thing we can agree on is your handwriting, Mr. Goudge's handwriting and my handwriting have to rank among the most illegible handwritings around. It's very hard to go through your handwriting.

Mr. Crosbie: Senator, I agree with you, but these notes that were provided to Mr. Nixon, those were all - they were typed and they were prepared -

Senator Lynch-Staunton: Do we have those?

Mr. Crosbie: Yes.

Senator Lynch-Staunton: Those have been submitted? Well we can get them.

Senator Bryden: Mr. Chairman, they weren't submitted on Friday night, were they?

Mr. Nelligan: They've been in our hands for some time.

Senator Bryden: So people could have had an opportunity look at them, if they wished.

Senator Lynch-Staunton: We can't look at them all. We don't have the advantage of -

Senator Bryden: Let's not get the facts in the way of rhetoric, Senator Lynch-Staunton.

Senator Lynch-Staunton: We don't have the advantage of previews of documents like others do. We have to wait for the boxes to arrive.

On the 18th of November you prepared - this is document 002433, Private and Confidential, Pearson International Airport Review. Do you recall that document? It's been filed and it was filed before Friday, that's why we have it before us and could have read it. And in it you say, "Our sense was that the underlying assumptions used in preparing the projection appeared reasonable." Is that correct?

Mr. Crosbie: Yes. Yeah, I mean you have the document in front of you. I don't.

Senator Lynch-Staunton: You didn't bring any documents with you?

Mr. Crosbie: I've brought some, but I didn't bring that one.

Mr. Goudge: Is there a copy of it that could be provided? I think it might be helpful.

Senator Lynch-Staunton: You also state in this document that a pre-tax compounded rate of return of 23 per cent to the providers of equity may not be unreasonable.

Mr. Goudge: I wonder, Mr. Chairman, if the senator is going to go through it in detail it might be helpful if the witness had a copy as well.

Mr. Nelligan: I've asked that we get a copy of this material.

Mr. Goudge: Thanks, Mr. Nelligan.

Senator Lynch-Staunton: We don't have to wait for the copies for the comment on the conclusion.

Mr. Crosbie: Senator Lynch-Staunton, that was one of our drafts leading up to our final report?

Senator Lynch-Staunton: Yes.

Mr. Crosbie: Okay.

Senator Lynch-Staunton: But on the 18th of November the comment was:

A pretax compounded rate of return of 23 per cent to the providers of equity may not be unreasonable.

And in the Nixon report of same date it's called an unconscionably high return over the life of the contract to the private sector. So within two days we have two diametrically opposed conclusions.

Mr. Crosbie: I think you're jumping to conclusions. The report that our firm stands by is our final report and the drafts leading up to that, I mean, those are drafts. They could have been typos, there could have been anything. I'm not standing by the drafts. I don't know what the drafts are.

Senator Lynch-Staunton: You're not standing by your drafts. I see.

Mr. Crosbie: Our conclusion evolved over the period of time.

Senator Lynch-Staunton: So then we can't go by your notes either then. All we can go by is your final report.

Mr. Crosbie: Well, what do you mean "my notes"?

Senator Lynch-Staunton: Well you say we can't go by your drafts.

Mr. Crosbie: Well, look, I mean come on. You know how when these -

Senator Tkachuk: No, we don't.

Mr. Crosbie: Come on, we've all been through processes where you're preparing drafts and you crank out a draft and it gets done quickly and those are drafts, that's what they are. The final report speaks for itself and those were our views. I mean, if there's any suggestion here that in some way Mr. Nixon was trying to lead us to a conclusion, that's absolutely wrong. Our conclusions evolved over the three- or four-week period or whatever it was, and they are our conclusions and we stand by them based on the work we did.

Senator Lynch-Staunton: Well this is not a draft report. We have your draft reports. This is another document called "Private & Confidential" - has it been distributed? It's being printed, okay - in which you come to that conclusion and in which you also talk about suggested negotiating points. There seems to have come a point here in your review that perhaps a contract would be renegotiated. Was that ever discussed as a possible conclusion.

Mr. Nixon: No.

Senator Lynch-Staunton: It never occurred to you that the deal could have been improved?

Mr. Nixon: Are you looking at me?

Senator Lynch-Staunton: I'm look ago at all three witnesses since they are all collectively responsible.

Mr. Nixon: If the senator is questioning me, Mr. Chairman, naturally the possibility of renegotiating the contract was in my mind from the time that I got the assignment and we considered that possibility and rejected it finally in the report.

Senator Lynch-Staunton: Yes, you certainly did, despite what I read here that Mr. Crosbie had that in mind. So as early as the 18th of November, when he brought this to your attention - I assume that this document was discussed at the time - the possibility to reduce the lease term or the option renewal, the ground lease adjustment, participation, excess returns - very interesting subject matters, which I had hoped would have been developed - were set aside. There was no discussion on improving a contract. It was judged so flawed it had to be rejected.

Mr. Goudge: Senator, if you're going to review it in detail, it really would be helpful, at this end of the table, if we had the same piece of paper.

Senator Lynch-Staunton: Well, I guess I assume that when you come as witnesses before a committee, or anywhere, you bring basic documentation. But I guess I assumed in error.

Senator Kirby: Historically, certainly our side, and I will speak exclusively for our side, we have been always very careful that whenever we were going to question a witness about a document we not only gave the document to the witness, we gave it to senators on the other side and we gave it to other people in the room. That's the process we've followed from day one I don't know why we're changing it on the last day.

Senator Lynch-Staunton: I'm not changing the process. I'll just limit myself to the one comment. We don't have to distribute a 10-page document for the one comment which I find very revealing, and we are now rejecting, that on the 18th of November, Crosbie and Company Inc. commented that a pre-tax compounded rate of return of 23 per cent to the providers of equity may not be unreasonable, and then less than a week later it becomes an unconscionably high return. I'm just wondering what kind of review can lead one from one conclusion to the other, both diametrically opposed. What kind of an analysis is that?

Senator Bryden: Mr. Chairman, in fairness to the witnesses, if he's reading one sentence out of a lengthy document - it could very well be out of context, we have no idea - I think in fairness they have asked to see the document that's being referred to.

Mr. Nelligan: We've sent for copies of everything.

Senator Lynch-Staunton: We can come back to that document when we all have it. I didn't bring copies of the request for proposals either. Am I supposed to have that pointed up?

Mr. Goudge: Senator, if you're going to ask questions about it, we can get copies beforehand. It's just as helpful, if you've got documents, if we have them too.

Senator Lynch-Staunton: You have them for your analysis. Now you don't seem to - how much time do I have anyway? Maybe I should stop now. I'm going to stop now and get all the documents that I will be referring to printed up in adequate copies and then ask that I come back to continue the questioning once those documents are available.

Mr. Goudge: That would be helpful. I don't mean to act like counsel at this end of the table, Mr. Chairman, but if we have some notice of the actual documents that are going to be referred to then we could-

Mr. Nelligan: If I could just ask a question, Mr. Goudge. My recollection was the last time you were before us that you had, I thought, your original documents with you. But was I mistaken on that?

Mr. Goudge: I remember- I have this memory of sort of six binders of documents. I don't know where they are.

Mr. Nelligan: We've sent for those binders, but my recollection was that you had the original copies as well, but I may be mistaken.

Mr. Goudge: I don't know whether those were originals.

Mr. Nelligan: In any event, we don't have them here right now, but we'll have at least two sets down within a few minutes.

Mr. Goudge: That will be great. And if senators can flag the documents that they might want to take us to, then we can get them tabbed or something.

The Chairman: That's a good idea, Senator Lynch-Staunton. You suggested now you'll finish and come back a little later this afternoon or tonight or tomorrow.

Senator Lynch-Staunton: Yes, I'll come back this afternoon or tonight or tomorrow.

The Chairman: Senator Bryden.

Senator Bryden: Thank you, Mr. Chairman. I don't know how long it was, but when you appeared before us the last time, I had in my beginning questions indicated that I would ask three questions relating to I guess the sentence or the paragraph in your report that has been referred to more frequently than any other in this committee, and that was, I think I had put it in my terms, the paragraph is:

My review has left me with but one conclusion. To leave in place an inadequate contract, arrived at with such a flawed process and under the shadow of possible political manipulation, is unacceptable. I recommend to you that the contract be cancelled.

And I had indicated to you gentlemen that I would ask principally Mr. Nixon, but each of you, if you had something to contribute to it, questions in three areas. One, the conclusion that the recommendation to cancel was because it was a bad deal; secondly, because the process by which it was reached was flawed; and the third one, that there was a possibility of political manipulation.

Now, before my time ran out or I was cut off or whatever, I had the opportunity to ask each of you questions in relation to why the deal was inadequate or bad and, Mr. Goudge, you answered on the basis of the return and the financial view and the fact that it was not put forward to any sort of North American or global presentation, and that the 23 per cent return was too high, that something like up to $300 million was left on the table.

Mr. Goudge, in answering the question, referred to the fact that there was very difficult means under the contract in the event that there was default, that a receiver would take place, the lack of requirements for consent, and a great deal of emphasis was put on the non-arm's length transactions. Mr. Nixon you commented on that from a public policy point of view.

The second one- and I'm just doing this as quickly as I can go through it- was to cover off 14 points of process- I'm sorry, nine points of process where ministerial decisions directed that there be things such as no expression of interest stage, only a 90 day reply, no LLAs involved; that the contract be concluded in a very short period of time, although the Public Service had recommended it would take at least a year; that the final decision to sign the contract was at the direction of the Prime Minister and so on.

So, I'm not going to go through all of those; they're on the record. But I have one area left, and that is the area of political manipulation. Some of the documents that we received on Friday night where instructive in that regard and so I would like to refer -

The Chairman: Those are the documents that came in last week?

Senator Bryden: Yes, and I didn't get them any earlier than Friday night either. So I would like to refer to document -

Senator Lynch-Staunton: Do we have copies?

Senator Bryden: Yes.

Senator Lynch-Staunton: Where are they?

Senator Bryden: Well, I haven't got the number out yet, senator.

Senator Kirby: When he gives you the number we'll give you the document.

Senator Lynch-Staunton: You were just criticizing us for not distributing documents.

Senator Kirby: Oh, no. It's clear that he hasn't introduced the document. He just said I've got a document. Give him a chance to introduce it.

Senator Bryden: I'd like to refer to a document which is document 00585. It's dated June the 14th, 1991. It's my tab A and perhaps we could just- this document is headed "Richard LeLay". Richard LeLay is Chief of Staff to Minister Corbeil. It's dated the 14th of June, 1991 and appears to be the notes of a meeting. And I will deal with parts of it and then I want to ask you some questions in relation to it as it relates to your review.

The real issue, as is noted there in the second paragraph, is the issue of delinking. It goes on to say: The pressure is tremendous from the PMO down, Toronto MPs, developers/consultants, the provincial Minister of Transport, even Hession/Shortliffe...

And then in quotes, "PCO wouldn't object." And then: "Can contract be out by JAN 1, 92?" And then a rather interesting note of that meeting, "TB approvals? - can be fixed!"

I want to just flip to the next page. The bottom of that page says:

Issue is can dept put it together so that it doesn't blow up on everyone!!

My question to you is: Was this document made available to you or any of you? Were you familiar with it when you were doing your investigation.

Mr. Nixon: No, we were not.

Senator LeBreton: Who wrote it?

Senator Bryden: It appears to be the notes of a meeting from Richard LeLay.

Senator LeBreton: Well, that's not clear.

Senator Tkachuk: Is it to him or from him?

Senator Bryden: I really don't know but-

Senator Lynch-Staunton: We don't know who authored this but we're going to put it in the record anyway. You only found it Friday night.

Senator Bryden: It is always amusing to me that the other side demands documents be produced by the government. The government produces a document. This is a Transport of Canada document.

Senator Lynch-Staunton: Is there a heading on it? I don't have a copy here.

Senator Bryden: It's filed by Transport Canada, yes, on Friday.

Senator LeBreton: Here's the problem. It was filed on Friday in we were told five binders. If this isn't a set-up rehearsal if I've ever seen one. You pick out this document. We don't know who the originator of it is. There's no heading on the top. So you pick this document out. God knows who wrote it or even in fact whether it was written and Mr. Nixon has already said he didn't see it. So if this isn't a set up in your whole pre-rehearsal thing, I'd like to know what it is.

Senator Bryden: You can give it whatever weight you wish. Those are documents that were filed with this committee. We have a perfect right to refer to them.

Mr. Nelligan: One of the problems I have, senator, is that I understand that the set we received was not distributed to anyone over the weekend. So I just wonder where this document came from, where you made the copy from.

Senator Bryden: I thought we received copies.

Mr. Nelligan: We only got one copy at the Senate and it was within the custody of the staff of the Senate and, as I understand it- and I stand to be corrected- no Senate representative asked for a copy over the weekend. So, I don't know where this came from.

Senator Bryden: You had yours on Friday night.

Mr. Nelligan: No. We sent out a list of the index of the documents to both sides. We got them late Friday night. In that emergency I said all we can do is give both sides a copy of the index. I have not seen any of the documents and I do not think any member of the other side received any documents, so I am concerned as to how it came into anyone's possession under those circumstances.

Senator Bryden: Over the weekend?

Mr. Nelligan: Yes, exactly.

Senator Jessiman: Or at any time.

Senator Bryden: I was able to get access. We had access to them over the weekend after they had been filed with the committee.

Senator LeBreton: How?

Mr. Nelligan: I'm sorry, I misspoke.

I was told that the thing didn't go out and it would appear that both representatives came over and looked at the documents. They were looking at it between 4:00 and 6:00 on Friday. It's still a mystery to me. I haven't been able to see it. I think this is one of our great difficulties with this document and it demonstrates- and I think it's a problem on both sides. These documents we were told were going to come a month ago and we didn't get them until 4 o'clock on Friday afternoon. I'm sorry that I spoke as I did, but you can see I was naturally concerned as to what was happening here because we should have received those a long time before.

Senator Bryden: I'm not making excuses for myself, but I had no access and my staff had no access to these documents until after they were filed.

Senator Kirby: We never even knew they were coming.

Senator Bryden: We had no idea that they were coming. As I understand from those documents, so it doesn't appear that- what I understand from those documents is it's the clean up documents. I mean, those are the documents that are left after all of the briefs for different witnesses were supplied.

Mr. Nelligan: There's no doubt about that. The only point was that they had been promised to us several weeks ago and we didn't get them until Friday night.

Senator Bryden: We would have loved to have had them earlier as well.

Senator LeBreton: Where did you get them printed, Senator Bryden, because we were told that the printers had gone home at 4 o'clock. Who printed them for you?

Senator Bryden: These are photocopies.

Senator Kirby: There's a photocopier machine right outside my office. In the hallway on the second floor of this building there is a photocopier right outside my office.

Mr. Nelligan: My other concern at this point, senator, is that these witnesses having said they have never seen them before, I would suggest that it's not appropriate to ask them any more questions on it because we don't know either the author or the circumstances of the paper and they can't help us on it, and it would appear that it didn't form part of their deliberations.

Senator Bryden: But is it not legitimate to ask them if they did?

Mr. Nelligan: Of course, that's right. And you've asked that question and you got a perfectly proper answer.

Senator Bryden: I mean, they have been asked many, many times why they didn't talk to this person and this person and this person. Surely I can ask if they were at least shown this document.

Senator Lynch-Staunton: Surely to help us you can give us the origin of that document, who wrote it.

Senator Bryden: I have given you exactly what I have.

Senator Lynch-Staunton: No, but you're referring to it, Senator Bryden. So therefore you're giving it authenticity. I'm asking who prepared the document. That's all I'm asking.

Senator Bryden: It was photocopied from the documents that were filed. This is all that I have.

Senator Lynch-Staunton: Well, you don't know whose notes they are.

Senator Bryden: It is headed "Richard LeLay", and people can take whatever conclusion they want. I asked if they had seen it, if it was part of their deliberations and they said no.

Senator Lynch-Staunton: So it could be prepared by somebody in Minister Young's office.

Senator Bryden: It could have been.

Senator Lynch-Staunton: That's right. And that's what we're faced with, innuendos and documents with no supporting evidence.

Senator Bryden: Are you suggesting that this is a forged document?

Senator Lynch-Staunton: I'm suggesting that you don't know its origin.

Senator Bryden: What I'm saying is it originated with the government.

Senator Lynch-Staunton: It came in a box in the middle of the night.

Senator Bryden: It came in a box, the same as the mistaken Treasury Board minutes came to Mr. Goudge and Mr. Nixon in a box.

Senator Lynch-Staunton: "Inadvertent" is a more eloquent word. The same as you got documents which were not whited out, just plucked out from the minister's office in the middle of the night.

Senator Bryden: You know that's not true. There was one sentence by mistake.

The Chairman: The problem here is that we don't know who wrote it, Senator Bryden. We don't know to whom it was addressed and the handwriting in the document is totally different in two particular places. It's very, very difficult to-

Senator Bryden: I think, Mr. Chairman, in fairness, the reason that the two are together, I assume because they've both got the same number, 00585, but they really are two documents. One is the one that has Minister Corbeil's Chief of Staff's name at the top. The other one has a date, the 17th of June, 1991, and that clearly is notes from something else.

Senator LeBreton: Again, with no author and different handwriting.

Senator Bryden: Sure, I'd love to have an author on it too, but nevertheless this is a government document that was seen fit to be filed with this committee.

Senator LeBreton: Seen fit by the gumshoes, exactly.

Senator Bryden: You can give it whatever weight, but it -

Senator Lynch-Staunton: You've already established that.

Senator Bryden: But it appears to be the notes that have been made at the time when the discussions were going on.

Once again, Mr. Chairman and witnesses, I would like to call your attention to a document that is my tab B and it's document 001047. And this one is to V.W. Barbeau from L.A. McCoomb. It's dated 21 August, 1991. Once again it is the terminal redevelopment project. The first paragraph says:

This is to confirm my understanding of the Minister's recent direction with respect to the redevelopment...

It has a whole list and many of those we have seen before. I wanted to draw your attention, gentlemen, to page 2.

Mr. Nelligan: First of all, may I suggest, senator, you ask them whether they've ever seen this document before.

Senator Bryden: Have any of you seen this document before?

Mr. Nixon: No, Mr. Chairman.

Senator Bryden: Had you discussed the issue of whether or not there would be a base case, a Crown construct- whether there was a Crown construct base case to compare the development to?

Mr. Nixon: I believe there was, Mr. Chairman.

Senator Bryden: There was a Crown construct case?

Mr. Nixon: If there were it would have been in the documents that came originally to me from the Ministry where they were -

Senator Bryden: I'm sorry?

Mr. Nixon: If there were a Crown construct base case, it would have been in the documents that came to me directly from the Ministry at the beginning of our deliberations. But I can't say for sure whether there was or not.

Senator Kirby: Can I just ask Mr. Crosbie a supp, then, because earlier witnesses had testified- I know because I've asked this question two or three times, the question essentially being whether or not in looking at the issue of privatization the Crown did what one would normally do under those circumstances if you're considering changing from A to B. You do an analysis of A so that when you ultimately look at options B, C, D, and E you know whether or not they compare or how they compare with option A.

Did you in any of the documents that you saw or any of the work that you did do an analysis of what the return would have been to the government had they in fact maintained the terminals in government hands? That is to say, before evaluating- either you or any of the material you saw before, evaluating what the benefits or costs would be of a switch, did we in fact have an analysis of maintaining the status quo, which is what I mean by the Crown base case.

Mr. Nixon: No, I think the base case was in fact the status quo. That is, this is the return from Pearson that we get now and this is the return that would be available under other circumstances like privatizing.

There was not an extension of adjustments that would increase the return from Pearson by changing rentals or parking fees or docking fees or anything like that.

Senator Kirby: So, the base case assumed absolutely no changes whatsoever in spite of the fact it didn't assume any of the other, let me call them peripheral additions like the parking fee changes, like the rental changes?

Mr. Nixon: That is correct.

Senator Kirby: In order to make the comparisons more accurate?

Mr. Nixon: That is correct. The base case was in fact the status quo, and as I recall Mr. Heed referred to the fact that certainly revenues could be changed depending on policy in that regard. At least I recall him talking about that, that the revenues could be changed.

Senator Kirby: Thank you.

Senator Bryden: I would like to refer now to a document which is my tab C. It's government numbered 00208. Attached to the- I was a bit perplexed by this document, but I looked at the table of contents that is supplied with each and attached to the front of the document that I would like you to look at is, if you go down to number six, I think it is in the list where it says October 15th, 1992, and these are from the documents not used in briefs, and the title of it, "Reviewed in Brief Prepared for Transport Canada". And it says: "Issues and Implications of a Merger of Paxport and ATDG Proposals."

Whatever else- if you look at the next document it's titled, "Issues and Implications of a Mergers of the Developmental and Financial Elements of the Paxport and ATDG Proposals".

This is a Transport Canada document. The date that is on there is October the 15th, 1992. Up until now the earliest suggestion that a merger was being contemplated was on November 16th in a note from Shortliffe to Prime Minister Mulroney. This document establishes that at least as of October 15, 1992 a document was prepared, a discussion document of whether a merger could take place. This is two months before Paxport was named the winner.

Did you have the opportunity to see this document, Mr. Crosbie, or Mr. Nixon or Mr. Goudge?

Mr. Nixon: I did not, Mr. Chairman.

Mr. Goudge: No, I did not.

Mr. Crosbie: No, I didn't see it either.

Senator Bryden: Because it would seem to be a very relevant piece of information, the fact that a merger was at least being contemplated in the Department of Transport two months before Paxport had been selected a winner, and you didn't get an opportunity to see this?

Mr. Nixon: No, but it does seem strange.

Mr. Nelligan: Do you know who authored this report?

Senator Lynch-Staunton: I find it strange, I agree. This is the problem we're having, these very pertinent documents, where the government claims are just cancelled, leftovers appear in a box.

Senator Bryden: And there are probably more.

Senator Kirby: In particular, because this document says, and I'm quoting,

A preferred approach would seem to be to clear both proposals off the table.

That's what the document says two months before in fact it was awarded to Paxport. But there's no I indication of who actually wrote it, except it comes in an MOT binder.

Senator LeBreton: Again, there's no author. How do we know? No author and no date by the look of it.

Senator Kirby: There is a date because the date is on the front October 15th, 1992.

Senator Lynch-Staunton: On this sheet but not on the document itself.

Senator LeBreton: That's right.

Senator Lynch-Staunton: The point is that we're getting these documents at the last minute. It a deliberate attempt by the government to muck up this inquiry. That's all it is. This is a very pertinent document. And the notes may be pertinent. But not one of the documents you've brought so far, Senator Bryden, has an author attached to it. I find that very indicative too.

Senator Kirby: In fairness, the second one we handed you had Mr. McCoomb's name on it.

Senator Lynch-Staunton: I take it back, then. I hadn't seen that one. The first one and this one have no author.

Senator Bryden: Let's try this one. This one is from David Broadbent. It's document number D, my tab D, the numbered 00912. To that may be attached a document number E which has already been filed before this committee, which establishes, and I can establish not only the author and the recipient, but I believe I can also establish the date from these two documents.

Senator LeBreton: Mr. Chairman, just on that last document where they have unused document binder, the last one that has the unsigned, undated document, you'll notice that has a revised index on 11/3/1995. I should point that date out as well, this year.

Senator Bryden: This document, the one that I just gave you, D, with the backup which probably is attached, there is a memorandum at the back that says the date, March 18th is stamped on the corner, the last page.

Mr. Goudge: This is the memorandum for Mr. Shortliffe from David Broadbent?

Senator Bryden: Yes, the last page, though. You have a stamp on the right March, 18th. The reason that I put that in there is to establish that the memorandum you're looking at, although it's undated, would have been written on the 19th. The reason for that is we have evidence from both Mr. Broadbent and from Jack Matthews that there was only one dinner meeting between the two of them and that that meeting was on the night of the 18th of March.

Mr. Nelligan: Senator, what concerns me here is this is all very important and relevant material. We don't know the background, unfortunately, and particularly in a case like this. We were told that these documents we were going to receive after all the hearings didn't relate to any of the witnesses that were called. This is a memo from one witness to another witness.

I don't think it's appropriate to put it to these witnesses because they know absolutely nothing about it. What I am respectfully suggesting is that the Senate itself is going to have to consider, in the light of these documents, whether we have to call some of these people back.

But I don't think it's fair to either side to simply read them in the record while these witnesses, who know nothing about it, are sitting there and simply saying, "I don't know anything about it". But I think that's a matter of procedure for the committee to suggest.

Incidentally, we have made inquiries and it would appear that two sets of these documents where released on Friday afternoon, one to the committee and one to the minister's office. So that there were two sets of the documents available as of Friday afternoon. The one set we know what happened to it. The other set went to the minister's office and I don't know who got copies of it from there.

Senator LeBreton: Did you get yours from the minister's office, Mr. Bryden?

Senator Bryden: I get my copies once they are made available to the public through the clerk's office.

Senator LeBreton: You didn't answer the question.

Senator Bryden: I did not get any copies before they were filed here.

Senator Kirby: Either did I.

Senator LeBreton: Did you get them from the minister's office, Senator Kirby?

Senator Bryden: No, they were filed at the same time with the minister and the clerk.

Senator Jessiman: Did you get copies from the minister? That was the question, the minister's office? Did your clerk get the copy that you have there from the minister's office?

Senator Bryden: I can't answer that question. It could have come from one of two sources. It would either come from the inspection of the documents between 4:00 and 6:00 here on Friday or they could have come from the minister's office after that time. Now, is one illegal? Is one-

Senator Lynch-Staunton: No, but one's unfair.

Senator Bryden: Why is it unfair? I mean, you could have come here.

Senator Lynch-Staunton: Why should you have access to two sources if we only have access to one? We're all equal here, aren't we?

Senator LeBreton: They were shut down for the weekend here so they had to get them from the minister's office.

Senator Lynch-Staunton: I mean, this is more favouritism and obviously more-

Senator Kirby: Since we got them, my staff was up going through the documents.

The Chairman: At what time?

Senator Kirby: Four o'clock on Friday afternoon. It was confirmed by Mr. Nelligan.

Senator Bryden: In any event, I wish, as everyone, that we had had access to them a little earlier. Counsel, if I may, I attempted to draw the committee's attention to some of these documents because I thought that this would be the only and last opportunity to put them on the record. If that's not true, then, fine. I would have liked to have had the Broadbent one because it went together with the 18th the 19th. It just puts them together very nicely.

I just want to conclude on the issue of the manipulation and ask Mr. Nixon if, in the course of your investigation, you were made aware, as we have been made aware, of the debriefing of chiefs of staff by lobbyists after cabinet committee meetings?

Mr. Nixon: The answer to the question is yes. I would like to say something further, and that is at my first appearance I explained to you, Mr. Chairman, that part of my role in this investigation, in this review was to make myself available to people who did not feel that they wanted to come forward publicly and express certain views and concerns, that I began my comments by saying that it would not be possible for me to identify those people. But the fact is that there were pieces of information of that type that came to me which didn't indicate that any laws had been broken but that did allow me to say that there was presentment of political influence in the decision finally in the award of the contract, that this is a matter that was certainly of great concern at the time of the volatility of the issue during the election and immediately following the election and may have been an indication of why people were anxious that I hear their views in that regard.

So that while I have to answer the honourable senator's question affirmatively, that this falls into the area where it's impossible for me to say I was told these matters by a specifically named individual.

Senator LeBreton: So you make the charge without a name.

The Chairman: These people with whom you spoke requested anonymity?

Mr. Nixon: That is correct, sir.

Senator Lynch-Staunton: Where is due process? There is no due process.

The Chairman: We spoke to six airport authorities and airports, three elected officials, seven lobbyists, 11 corporations, 28 federal government officials, consultants for the government three, academics three and others, including yourself, and they all testified under oath. There was no anonymity there. That's where we received our information since July 11th.

Senator Jessiman: Mr. Chairman, I'd like to ask a supplementary. Mr. Nixon, the person that gave you this information, do you know whether that person gave testimony before this committee?

Mr. Nixon: I can't answer that question, Mr. Chairman.

Senator Jessiman: You can't?

Mr. Nixon: No.

Senator Jessiman: Could you find out today, I mean?

The Chairman: But it's a fair question, Mr. Nixon.

Mr. Nixon: If you press me, the answer is yes.

Senator Jessiman: If we press you. Do you know the testimony- have you read the testimony that that witness has given to this committee?

Mr. Nixon: Yes, Mr. Chairman.

Senator Jessiman: And does it say what you've told us?

Mr. Nixon: The specific review of the matter was approached in a different way.

Senator Jessiman: I ask you did he or she -

Mr. Nixon: If you're saying that if there is any indication in my mind that someone gave inappropriate information, the answer is no.

Senator Jessiman: So, there is no - that person that told you whatever she or he told you has sworn under oath to us and has not told us the information that you have received?

Mr. Nixon: Well, there's certainly no indication in my reading of the review of the work of this committee or the transcripts that anyone that I'm aware of had given inappropriate or incorrect information.

Senator Jessiman: Can you tell us whether under examination here was that witness asked whether he or she spoke to you?

Mr. Nixon: Yes, she did, he did.

Senator LeBreton: You just named her.

Senator Jessiman: That witness, also was that person asked whether the testimony that they gave to us was in any way different from the testimony given to you?

Mr. Nixon: As far as I'm concerned I saw nothing inconsistent in the material that was provided to me and the material that was provided to this committee.

Senator Jessiman: I didn't ask that question.

Mr. Nixon: Well, that's my answer.

Senator Jessiman: But I want an answer to the question. The question is- because you're not telling us who the individual was. If we had the name of the individual we would be able to go and look at the testimony that was given here.

I'm asking because, if not every witness, most witnesses were asked, "Did you speak to Mr. Nixon?" The answer was yes or no. If it was yes, "You've given testimony to this committee and you've told us what the story was as far as what would happen. Did you tell Mr. Nixon anything different than what you're telling us?" And there isn't one witness that said, "Yes, we told Mr. Nixon something different."

Senator Bryden: In fairness, Mr. Chairman, I don't know that we always asked the same questions of each witness.

Senator Jessiman: I didn't say that. I said most. If we knew who the witness was we would be able to go and look. The witness knows who that person is. He's read the testimony. I'm asking the question and I want him to give me an answer.

Mr. Nixon: I've given the answer as completely as I feel I can, Mr. Chairman.

Senator Jessiman: Come on, now, Mr. Nixon.

Senator Bryden: Mr. Chairman, it's been frustrating for all of us, but it began, as you know, with Mr. Hession refusing to divulge the name of the person who approached him two or three days after the awarding of the best overall proposal. And we've respected that. We respected it in the case of one other person, that accountant. I don't know how at this stage-

Senator Lynch-Staunton: The accountant corrected himself the next day. At least we got one correction.

Senator Bryden: In any event, I don't think we can have one set of rules that apply to the private proponents who are here and another set that apply to other witnesses. If we are prepared to respect a person giving his word that he will not divulge that person's name in one case, then we have to be prepared to respect it in the other cases.

The Chairman: Senator Bryden, I don't see the analogy. That wasn't the question put to Mr. Nixon and it has nothing to do with- Mr. Hession's statement that he wouldn't reveal the name of the person was a straight forward statement: I won't reveal it.

We were just asking Mr. Nixon, as I understand your question, as to whether he received evidence from a witness that we already received information from under oath which was contradictory. But we didn't ask you the name of that person.

Senator Bryden: And he said no.

Senator Jessiman: That's not my question.

This witness has read the testimony of the person we're talking about. He therefore knows whether or not that particular witness was asked the question ordinarily by Mr. Nelligan, our counsel, "Did you testify before Mr. Nixon?" The answer in this case was yes, because he told us we've examined that person and he's also told us that Mr. Nixon talked to him. So Mr. Nixon told us- all I'm asking is did that witness say to this committee the evidence you've given to us today, this is by Mr. Nelligan asking this witness, he's saying the evidence you've given to us today, is it in any way different from the evidence that you gave to Mr. Nixon. And I'm saying that every witness that was asked that question said no, it was not different.

So my question is: You know who the witness is. You've read the testimony. You can tell us whether our counsel asked that question of him or her. We know what the answer was because there isn't any that didn't say no.

Mr. Nixon: Mr. Chairman, I have two things to say. The first is I cannot answer the question directly. The second is that I took no evidence, that this particular committee has the power to swear witnesses and we are sworn witnesses as others were, that my responsibility was entirely different, that I had the responsibility to go into the community and get information that I thought was appropriate in this regard. Any of the discussions I had were nothing about- nothing like the investigations that are going on here where the witnesses are sworn and that there is a backup of legal advice for the questioning senators, that it was more of a conversation about the situation as it prevailed at that time, not two years later.

I've already indicated to you that having read the reports of the deliberations of this committee, that I have found nothing in any of those reports that would indicate the information that came to me was different from the information that was solicited by this committee and the information they received.

Senator Jessiman: Why do you refuse to answer a very simple question? You have read the testimony of that witness. Near the end of the testimony as a rule the witnesses were asked, "Did you speak with Mr. Nixon?" This witness obviously said yes because you've said she or he spoke to you.

The next question that was always asked or mostly asked, and I'm asking you, you're the only one that knows, was this person asked the question, "Now, the evidence you gave to Mr. Nixon, was it in any way different from the evidence that you've given to us?" And I'm telling you that every witness said no, it was not. I'm only asking you under oath as to whether or not that person was asked that question and did she or he give that answer, no.

Mr. Nixon: I'm not aware that the question was asked and I say again that in my perusal of the verbatim reports of the committee and the reports from the committee, I have no reason to believe that anyone misrepresented anything to this committee.

The Chairman: I think that the witness has answered the question.

Senator LeBreton: But, Mr. Chairman, I would like to - Senator Bryden's question and the evidence we've had before us, there's only two names have come up in this regard. One early on was a memorandum from Bill Neville to Ray Hession about Warren Everson, and both Bill Neville and Mr. Hession have- or Bill Neville testified as to the background of that. The other was an exchange that I had with Mr. Nixon over Mr. Kozicz, and we got into the whole discussion about Greg Kozicz and Peter Kozicz, and the fact of the matter is- and Mr. Nixon then tried to say Peter. Well, it is true that Peter Kozicz was at the table. He was part of the Paxport group but was never a staffer to a minister, and Greg Kozicz wrote a letter and filed it with this committee.

So, for whoever he or she might have been that gave this information to Mr. Nixon, they were clearly wrong because when they referred to Mr. Kozicz, one of them worked for Paxport and one of them never worked for the Minister of Transport, and we've already got a letter on file. So, if we're talking about the Koziczes, it's already been established; unfortunately, Mr. Bryden, we have already answers to that. And if we're talking about Mr. Everson it also has been answered.

The Chairman: We're not speculating on who it was.

Do you want to continue, Senator Bryden.

Senator Bryden: Mr. Chairman, this would be a good point for me to stop this line of questioning and give somebody else a chance. I've been I guess 45 minutes at least.

The Chairman: We'll take a break for 10 minutes.

The committee adjourned until 10:50 a.m.

Upon resuming at 10:50 a.m.

Senator LeBreton: Mr. Chairman, before we start, could I just ask the - I'll put this on the record. Can you check, clerk or counsel, on this document that we got, unused document binder one of five documents not used in brief. So it's a pile of documents at 5 o'clock on Friday. Now, Friday was November the 3rd, correct. On the bottom is a date, the 11th month, 3rd day, 1995. So, can you check to see if in fact all this list of documents that they provided to us last Friday they had simply revised and updated this list actually on that date, which was November 3rd, because this is really incredible if that's the truth. To say I'm suspicious, Mr. Chairman, is putting it mildly.

The Chairman: Originally when John Lynch-Staunton's 45 minutes was up he turned it over to you and he was to come back to continue his examination of Mr. Crosbie. But he has not got the documents that he was looking for so that I think Senator Jessiman, do you want to- is that agreeable?

Senator Lynch-Staunton: Yes.

The Chairman: Senator Jessiman, then.

Senator Jessiman: Mr. Nixon, I have handed to you a letter on your letterhead dated November 30th, 1993. That's a copy of it. And also another letter dated November 29th, 1993, both of which letters have four paragraphs in it, but there are some differences. You have told us before that the letter dated November 30th, 1993 was in fact typed in there some time earlier than that, is that correct?

Mr. Nixon: Yes, Mr. Chairman.

Senator Jessiman: Have you any idea how much earlier that would have been done? Was it a week earlier?

Mr. Nixon: Longer than that.

Senator Jessiman: Two weeks earlier?

Mr. Nixon: At least.

Senator Jessiman: Maybe three weeks?

Mr. Nixon: Possibly.

Senator Jessiman: I'd just direct your attention to both of them. They have different dates but they're addressed differently. You notice the one that was done- obviously if it's three weeks earlier that would be around November the 9th. You address it to The Right Honourable Jean Chrétien, Office of the Prime Minister, Parliament Buildings, Langevin Block, 80 Wellington Street, Ottawa, Ontario, K1A 0A3, whereas in the other one you just address it to The Right Honourable Jean Chrétien, Parliament Buildings, Ottawa. Was it your decision to address it differently or was it the person that typed it or whose decision was that?

Mr. Nixon: The first one covered the original draft.

Senator Jessiman: I'm asking about the address, sir.

Mr. Nixon: And I'm telling you about it, if I may.

Senator Jessiman: Okay.

Mr. Nixon: And the November 30th one is one that I typed myself and I had it arranged that way because I had the correct address available. This covering letter was-

Senator Jessiman: When you say "this covering letter", which one-

Mr. Nixon: That is the one on top, November 29th is the one that actually covered the report, and I don't know why the address is truncated. I guess the thought was that since I was going to be handing it to him personally that the proper mailing address was superfluous.

Senator Jessiman: You said you typed- which one did you type?

Mr. Nixon: The one dated November 30th, I believe.

Senator Jessiman: And who typed the one dated November 29th?

Mr. Nixon: A secretary.

Senator Jessiman: Was it dictated?

Mr. Nixon: Yes, it was. And it was done in the last few days before we took the report to be presented.

Senator Jessiman: And you say it was your secretary?

Mr. Nixon: It was a secretary available to me at the offices that we were using on Wellington Street. I believe that they are hired to serve cabinet ministers; but at that time there were no cabinet ministers in that office.

Senator Jessiman: But she wouldn't have decided just to change the address; she wouldn't - if she had the first one that you said you had typed, and you had the proper - what appears to be the proper address - it says the Office of the Prime Minister and -

Mr. Nixon: It may very well be that I had asked that the address be reduced in detail because it was obviously unnecessary; and I could see that I would have done that. It is not necessary.

Senator Jessiman: So you just don't remember.

Mr. Nixon: No, but I take, certainly, responsibility for the reduced address.

Senator Jessiman: Right. There are other changes. I said both had four paragraphs but they are not the same paragraphs. If you look at paragraph two on November 30th, you will note that that paragraph, and I am going to read it, "Because of the time constraint I held no public hearings and of course there was no sworn testimony. I consider this report to be policy advice requested by you and not a public document unless you decided otherwise."

Now, I think - and you correct me if I am wrong - I think you agreed earlier that that is a correct statement.

Mr. Nixon: Yes.

Senator Jessiman: If you didn't, I am asking you now: That is a correct statement?

Mr. Nixon: Yes, Mr. Chairman.

Senator Jessiman: But that was taken out of the second draft, if you look to the next draft, the one that actually was sent.

Mr. Nixon: That is correct.

Senator Jessiman: Can you explain why you took it out?

Mr. Nixon: I didn't believe it was particularly necessary because I think most people understood what my duty was in this regard. It had been made reasonably clear at the time that the Prime Minister announced my appointment that he was asking me for policy advice and that is simply the way that I interpreted it and, in my view, the way it has been interpreted by everybody else.

Senator Jessiman: But you didn't think it was necessary -

Mr. Nixon: No.

Senator Jessiman: - to say so in your letter to him, but it was in fact the case?

Mr. Nixon: Yes.

Senator Jessiman: You will note that also in the latter one dated earlier, November 29th, it has another paragraph that the other one doesn't have and that says, "Much of the documentation and necessary background was supplied by the officials at Transport Canada. In all cases, they were co-operative and professional." Was that something that you decided to add to the document?

Mr. Nixon: Yes, I thought it was appropriate to add in that regard.

Senator Jessiman: And then in the last paragraph on November 29th, which is your final document, you chose to add the words, "of the area". You are now talking about: "My comments are based on what I consider to be in the best interest of the tax-payers, the travelling public, and general economic development..." In your first letter, you just left it off there. Why in your second letter did you reduce the effect on these taxpayers, travelling public and general economic development of the area to - of the area?

Mr. Nixon: It is hard for me to answer the question. I am trying to think of what my thoughts might be because, obviously, the brief that came from the province of Ontario had emphasized the economic impact in the Ontario and particularly the general Toronto region. It may have been that in my mind I was thinking more in terms in the second draft of the economic impact in that part of the nation rather than the nation as a whole. Obviously, the economic impact is far greater there than it is in Regina or Halifax.

Senator Jessiman: Mr. Nixon, in both letters, in both letters, you say, "...you asked me to carry out a review of the matters pertaining to the privatization of Terminals 1 and 2..." You see that, sir?

Mr. Nixon: Yes.

Senator Jessiman: Let me tell - and you think you did a review?

Mr. Nixon: Yes, Mr. Chairman.

Senator Jessiman: Let me tell you what a review is according to the concise English dictionary: to look back, to look over carefully and critically; and to look at something critically one must be a critic, and that is someone who is competent to criticize, fastidious - that is difficult to please - or exacting. My questions, Mr. Nixon, are these: Did you look over your assignment carefully and critically?

Mr. Nixon: Mr. Chairman, I think you are aware that my first responsibility was to hire competent advisors and these people are before you and have been answering your questions now into the fourth day; that my judgment, and I find this reinforced as we work before this committee, has been that these persons are competent and I am confident in their abilities to provide me with the advice asked for.

Then, I suppose I have learned, over the years, to be critical.

I am not sure that everybody in my family would agree that I am fastidious, but I keep trying.

The responsibility that I had was taken seriously. It came from the Prime Minister of Canada as one of his first acts that he was concerned, as were the people of Canada, that this decision had been entered into even though it was extremely volatile and controversial in the dying days of an election campaign and was very much in the minds of the people who had dismissed the previous government and elected a new government; that to imply that somehow my review was inadequate and superficial is a matter of opinion, which I reject.

So that I feel that I was provided with the wherewithal to do a reasonable review under the circumstances and I have no reason to think that I might have done it otherwise.

Senator Jessiman: Do you really honestly think you are a person who was competent to criticize this particular transaction?

Mr. Nixon: Yes, Mr. Chairman.

Senator Jessiman: Okay. You also - you have said sometimes you think you are fastidious but not always, that was my next question.

Mr. Nixon: Well, that was probably a facetious remark. I think I am fastidious with matters of integrity and the truth. I am fastidious with fairness and equity, that sometimes I don't wash behind my ears, my mother used to tell me.

Senator Jessiman: You can't honestly say that you have been fair and equity when you consider the situation and what has resulted from your advice to the Prime Minister. But I want to go into that -

Mr. Nixon: Well, in that connection I think that the Prime Minister took the appropriate action and that I don't feel that he can be criticized in that regard.

Senator Jessiman: You surely can't say you are exacting; you were exacting in this case.

Mr. Nixon: We reviewed the matter carefully, Mr. Chairman, as you are aware, that we certainly didn't spend as much time on it as the honourable senators have because our term of reference was restrictive in that regard. The Prime Minister wanted to have the policy advice that would permit him to go forward. But, obviously -

Senator LeBreton: There is the answer.

Mr. Nixon: - he had other sources of policy advice and the decision he took was his own. I am sorry, what is happening here?

Senator LeBreton: I just said you gave us the answer that you wanted the policy advice that would allow him to go forward, which was a cooked-up, predetermined - was a predetermined conclusion.

Mr. Nixon: Mr. Chairman, that is not correct.

Senator LeBreton: Well, it is correct.

Mr. Nixon: I am not in a position to argue with the senator, but I would reassert the fact that it was a fair and honest review of the situation and I have no doubt that the recommendation to cancel the contract was the right one.

Senator LeBreton: We have just had evidence of Mr. Chrétien not being a detail person. This is more proof of it.

Senator Jessiman: Mr. Nixon -

The Chairman: Just one questioner, please. Senator Jessiman.

Senator Jessiman: You have told us you didn't really consider yourself then or now as an unbiased person; isn't that correct, and looking at this contract?

Mr. Nixon: I can't imagine that anybody who had undertaken their responsibilities as a citizen of Canada in the election campaign would be unbiased; that this was a matter of extensive public review and discussion; that it was a volatile issue during the time of the election; and some people, who probably have the insulation of academia, have indicated that the decision taken by the then Prime Minister to proceed with an enacting of the contract in the dying days of an election campaign had acted inappropriately. I strongly believe that.

I don't have any more fastidiousness when it comes to public policy than the honourable senator and his colleagues, but I thought at the time that it was bad judgment in the extreme and I thought that the then Leader of the Opposition acted and spoke appropriately when he said that he would see that the matter was reviewed and was prepared to reverse the decision.

Senator Jessiman: You have also admitted that you did not look at this objectively and you really considered yourself - and I am suggesting this and you tell me if I am wrong - a loyal Liberal supporter and a good friend of Jean Chrétien asked to give policy advice; is that correct, Mr. Nixon?

Mr. Goudge: Speaking as a lawyer, if you are going to put admissions to Mr. Nixon, it might be safer if you actually read the transcript.

Senator Jessiman: I am not quoting. It is just - I think this is what he said, but these are my words.

Mr. Nixon: My words would be I think all of those things probably underline my good judgment rather than detract from it.

Senator Jessiman: But the real words are you were giving policy advice?

Mr. Nixon: That is correct.

Senator Jessiman: Right. And I have checked on the word "policy" and I want to see what it says there. It is defined as prudent, foresight or sagacity - sagacity being shrewd, wise - political wisdom; a course of action; and commended by a party or government. Isn't it true, Mr. Nixon, what you were doing was testing the political climate at the time in the Toronto area - I am suggesting that is why you are limited to the Toronto area - and saying to Jean Chrétien that this is something you can make political points with by cancelling the contract because that is what the politicians from Mr. Bandeen up or down, depending on your perspective, to the Toronto Liberal MPs and maybe cabinet ministers; isn't that correct?

Mr. Nixon: Mr. Chairman, what we found was an agreement that had been entered into by the Government of Canada with Paxport without having been reasonably assured in the first instance -

Senator Jessiman: It wasn't entered into with Paxport.

Mr. Nixon: - in the first instance that the financability of their program was viable and that in fact protracted negotiations had to be undertaken and they were finally granted a 57-year lease at a return before taxes of 23.6 per cent on their investment; that the process had been one-stage only; that we found that the government had rejected the obvious alternative of a local airport authority, which should have been more carefully considered; that we found the contract enabled the investors to award themselves internal contracts and permit the kind of double dipping which was seen by some as, to some degree, inappropriate; that this was decided in the dying days of an election campaign; and, on the basis of the information that came to me in this regard, I had no difficulty whatsoever, when the facts were put before me and the views that I solicited were put before me, to recommend that the contract be rejected.

If the honourable member would care to describe that as some sort of a superficial political advice, well, of course, he is has every right to do that and so report to his Senate colleagues.

Senator Jessiman: If you wouldn't mind, Mr. Nixon, I know you and your colleagues don't want to be here another day or two. We all want to get finished. I asked a simple question that either yes or no and I get -

Senator LeBreton: And you get a canned answer.

Mr. Nixon: It may be a canned answer, Mr. Chairman, but he asked me if I agreed, yes or no, that there was a superficial political advice that had been given by myself to the Prime Minister and I felt that since the question itself was somewhat leading and somewhat slanted that I better put on the record what my views were in such an important situation.

Senator Jessiman: Could you answer this yes or no? You never at the time when you delivered this to the Prime Minister in your wildest dreams thought your supposedly sage and wide advice would be questioned by anyone?

Mr. Nixon: I would say to you, Mr. Chairman, that that is not correct. As a matter of fact, it occurred to me at the time that senators being in a position that they are in might very well find that they would not want to agree with the recommendation that I had made and I don't find it - I don't find it terribly uncomfortable here, and if the honourable senator, you know, wants to continue in this line I don't mind that.

Senator Jessiman: But your answer is you expected that, is that right?

Mr. Nixon: I didn't expect it. I realized that in our democratic system that that was quite a possibility.

Senator Jessiman: Would you ever have guessed that all those false statements, innuendos set out in your report would be proven false by persons swearing under oath at what the true facts are respecting this 14 pages of, I suggest, garbage, which as even you should know is anything which is worthless or offensive, and your report surely is that?

Senator Bryden: Mr. Chairman, we have studiously tried to avoid in this committee a cross-examination type of technique. We have attempted to try to let the witnesses provide the evidence as they see it. Now, this is not only an attempt at cross-examination to garner yes or nos to some sort of political polemic, but it is being done rather badly. I would suggest that, perhaps, you could direct us all to get back on course and ask for information.

Senator LeBreton: Perhaps, Senator Bryden, you could move up there.

Senator Bryden: You are doing well.

Mr. Nixon: If I may answer the question, Mr. Chairman, of course I can't deal with it the way the senator would expect, but I can tell you that I object to the use of the term "false" and I would suggest to you, Mr. Chairman, that it is your duty to see that the members of the committee do not make those attributions of motive.

Senator Jessiman: We will see when the day is over as to how some of them are or are not false.

Let's go to the report itself. I am now looking at your report, the one that is accompanied by the November 29th letter. I did not make copies of that because I assumed that you have copies. Is that correct, Mr. Nixon?

Mr. Nixon: Yes, Mr. Chairman.

Senator Jessiman: Now, you say in the first line on the first page:

Over the course of the last 30 days, I have had the opportunity to review -

But you have told us that within about 18 days you had made up your mind.

Mr. Goudge: Again, senator, if you are going to do that, would you please quote or indicate that you are using your own conclusions about what the witness -

Senator Jessiman: This is what he said earlier.

- the agreement to privatize and redevelop Terminals 1 and 2 at Pearson Airport...I have had counsel and business analysts consider all the contract documents...

Now, are you suggesting now that that is a true statement?

Mr. Nixon: Yes, Mr. Chairman.

Senator Jessiman: "...all the contract documents making up that agreement." Do you know how many there were? Let's talk about the time when you wrote this, October the 11th - or November 11th - but November the 29th, let's assume that is the date you say - as at that date, how many agreements did you think you had at that time?

Mr. Nixon: Mr. Chairman, I think you are aware that -

Senator Jessiman: Just answer. You should either know is there one -

Mr. Goudge: Senator, can you let the witness answer the question, please?

Senator Jessiman: We will be here forever.

Mr. Nixon: I think you are aware, Mr. Chairman, that it was a voluminous compendium of documents and that - not even all of that were delivered to us in the very early days of my review; that between Mr. Goudge and Mr. Crosbie that the review of those documents was done by referring to the process with the officials of the Department of Transport and with other people who are knowledgeable in this area. For the senator to suggest that my understanding of this, that page by page it was carefully read and reviewed, is not my understanding of the wording of this document; that the whole of the contract, and in detail, was reviewed first on the basis of the sections of the deal by Mr. Goudge, who had the advantage of a good deal of input, a good deal of input, and by Mr. Crosbie, on the basis of the economics and the fiscal aspects of the deal.

I was satisfied that the contract was reviewed in sufficient detail so that I had advice that was useful for me to proceed.

Senator Jessiman: I am going to try it just once again. It requires a one or two word answer. As at November the 29th, 1993, how many documents did you think there were in respect to this agreement?

Mr. Nixon: Mr. Chairman, I don't know how many documents there were.

Senator Jessiman: Look to page 4 of your own document.

Mr. Nixon: What does it say?

Senator Jessiman: What does it say? You have got it there and you don't know. It says 20.

Mr. Nixon: Twenty separate contracts.

Senator Jessiman: Right.

Mr. Goudge: It says "over 20".

Mr. Nixon: Are you suggesting that these were not reviewed?

Senator Kirby: Mr. Chairman, if he is going to quote, let him quote accurately. He says that there are over 20.

Senator Jessiman: All right, over 20. You didn't know what it was. But how much over 20; was it 21?

Mr. Nixon: I really don't know what the precise number was; but I say again to the crux of the matter that the senator is trying to describe that my colleagues and I reviewed the contracts and that was our job.

Senator Jessiman: You also say you have read the testimony that has gone on here. Is that correct?

Mr. Nixon: Yes, Mr. Chairman.

Senator Jessiman: Did you know that Mr. Desmarais said that there were 65 major contracts? Did you know that?

Mr. Nixon: I read the testimony.

Senator Jessiman: Yes. Did you also know that at closing that the total documentation was 110 documents? Did you know that?

Mr. Nixon: Mr. Chairman -

Senator Jessiman: Just yes or no - just yes or no.

Mr. Nixon: I don't see what the number has to do with it because I have already indicated to you that I didn't know the exact number of the contracts and I don't know what relevancy that has other than in the mind of the senator because we reviewed all of the contract parts that were put before us by the Department of Transport and anything else that was significant that we felt we should look at.

Senator LeBreton: And you say over 20. It is like saying Marjory LeBreton is over 20.

Mr. Nixon: Obviously, that is not true.

Senator LeBreton: That is how ridiculous it is.

Senator Kirby: How many did it actually turn out to be, 65?

Senator LeBreton: No, 127. I can assure you I am not 127. Over 20 is so easy to say.

Senator Kirby: We certainly haven't suggested you were 127.

Senator LeBreton: I am just making the point that over 20 is such a ridiculous statement.

The Chairman: Okay. Mr. Jessiman.

Senator Jessiman: Still on page 1, if you will look, please, and dealing with policy, I want to find the exact one. Yes, it is your second paragraph I refer you to where you talk about policy:

This policy together with the -

Mr. Goudge: What page are you on now?

Senator Jessiman: Page 1 of the report, second paragraph, "The Process to Privatize Terminals 1 and 2 at Pearson". Do you see that?

On April 8, 1987, the Government of Canada issued its policy on a future framework for the management of airports in Canada.

Do you see that, sir?

Mr. Nixon: Yes, Mr. Chairman.

Senator Jessiman: And you say:

Only passing mention was made of private sector leasing as something which would be considered.

Do you see that, too?

Mr. Nixon: Yes.

Senator Jessiman: Did you also - did you read the testimony of Mr. Desmarais under oath where he said also in that policy statement there was this paragraph: "There was also a portion of that policy on the last page which said, and I quote, where the airport stayed in government hands the government would pursue innovative solutions to providing facilities and seek more commercialization of the airport. So in both respects I think this privatization of the terminal fell within the ambit of the policy."

Mr. Nixon: I referred to that as passing mention. It was in the last paragraph. And the thing that I think made the most impact on me was that the policy of the government had been to provide an LAA and a number of other airports across the country -

Senator LeBreton: No.

Mr. Nixon: And that these had been very well received and moved into a rather effective process whereby there was no private profit associated with them.

Senator LeBreton: That is wrong.

Senator Jessiman: Ask the chairman.

Senator Tkachuk: Could I have a couple of supplementaries on this policy question? The agreement of -

The Chairman: Go ahead.

Senator Tkachuk: The policy paper was published in 1987; was that not correct, was that the policy paper -

Mr. Nixon: April 8th, I believe.

Senator Tkachuk: When was the first LAA established?

Mr. Nixon: I don't know the date of that. I believe was it the one in Edmonton?

Senator Tkachuk: What was the date?

Mr. Nixon: Was it the one in Edmonton that was the first one?

Senator Tkachuk: Was it 1989?

Mr. Nixon: I don't know the date of it. Was it the Edmonton one? Perhaps there is somebody here who knows that.

The Chairman: Montreal was the first.

Mr. Nixon: Montreal was the first.

Senator Tkachuk: When was the first private sector commercial development - when did that take place?

Mr. Nixon: I don't know, Mr. Chairman.

Senator Tkachuk: Oh yes, you do; it's in the report. I am asking you: When did it take place? When was Terminal 3 - what year was Terminal 3?

Mr. Nixon: Terminal 3, if the date is in here, then that is the date it was because we were well -

Senator Tkachuk: Mr. Nixon -

Mr. Goudge: Senator -

Senator Tkachuk: 1987, you put it in your own report. Now, you are either going to answer questions to your report or you're not. Now, when I ask you a question -

Mr. Goudge: Senator, you have got to give him a chance to answer the question.

Senator Tkachuk: He said he didn't know.

Mr. Goudge: Is this a memory test? Is this a quiz about memory; or is the Senate interested in facts and policy and conclusions as opposed -

Senator LeBreton: The policy was not LAAs.

Senator Tkachuk: Just a minute now, let's just go back here, Mr. Chairman. I thought that this man authored this report. Now, I may be mistaken here, but this is my - you know, this is the Nixon report. I assume that if he authored this report that he is an expert on the report. We are here to learn from him. I am not testifying to him. He says he is talking about public policy. I asked him: When was it enunciated, which you talk about in your report? I asked him: When was the first LAA? He said he didn't know. I asked him: When was the first major commercial transaction Terminal 3, which he refers to in his report, and he says he doesn't know. Now, I am either going to get some answers or I am not, Mr. Nixon.

Mr. Nixon: Mr. Chairman, do you want to direct me on the basis of his comments?

The Chairman: Senator Tkachuk, try to put the question in a less arrogant fashion and give the witness an opportunity to answer.

Senator Tkachuk: I am going to do this again. When was the first LAA established?

Mr. Nixon: Mr. Chairman, I have already indicated that I did not know the date of that but that I had been well informed as to the usefulness of the LAA and, in my own view, it was a very important alternative to the policies that had been developed by the previous government; that I know that the LAAs had been functioning in Vancouver and Edmonton and Calgary, I believe, the two airports in Montreal, and there was every reason to believe that the government of the day was going to move to provide that sort of direction at Pearson and there was some disappointment that that was not the case, since it would have been something that had been designed to provide the good services for the travelling public without profit being the essential driving force.

Now, as far as the numbers and the dates, the senator feels that this is important, he wouldn't be asking me the question if he didn't know the answer, and I don't know the answer because I feel that it is not directly relevant to the policies that we are discussing.

Senator Tkachuk: Let me go back to the policy again. The first commercial privatization was in 1987 which was Terminal 3. What kind of an initiative was that?

Mr. Nixon: It was a privatizing initiative of the Government of Canada.

Senator Tkachuk: Of a terminal?

Mr. Nixon: Yes, it was.

Senator Tkachuk: Would it have any similarity to Terminal 1 and 2?

Mr. Nixon: Yes, it would.

Senator Kirby: Mr. Chairman, could I ask a supplementary, then? I think I am correct in saying that the decision to do Terminal 3 was in fact done before a couple of years before the LAA policy was announced -

Senator LeBreton: No, it wasn't the LAA policy.

Senator Kirby: - as opposed to when Terminal 3 was actually open.

Senator Tkachuk: That is fine, Mr. Kirby. I would say, then, would you not say then - would you not say, then, that if the government carried out a policy of commercialization in Terminal 3 that that would give indication that that was part of their policy?

Mr. Nixon: Yes, it would.

Senator Tkachuk: Whose policy was that?

Mr. Nixon: We are talking about the policy enunciated by the Department of Transport.

Senator Tkachuk: No, no. Who approved the policy of the government regarding commercialization? Who did that?

Mr. Nixon: I presume essentially the Parliament of Canada.

Senator Tkachuk: The Government of Canada? The Progressive Conservative government of Canada? Were they not -

Mr. Nixon: They were the people who took the initiative with Terminal 3.

Senator Tkachuk: Would they have not approved the policy?

Mr. Nixon: Presumably.

Senator Tkachuk: Now, so they did a privatization in 1987, and then they did their first LAA in 1989. So they really have two parallel policies running here, don't we?

Mr. Nixon: Yes. The one enunciated in their policy statement, however, treated anything other than the LAA as peripheral.

Senator Tkachuk: Start again. Would you repeat that?

Mr. Nixon: The policy of the government had been essentially to establish LAAs except at Pearson where, for some reason -

Senator Tkachuk: How do you know that?

Mr. Nixon: Well, there were no others privatized except Terminal 3.

Senator Tkachuk: I am asking you, Mr. Nixon, who made this decision? Who was the government of the time?

Mr. Nixon: That was the Mulroney government.

Senator Tkachuk: The Progressive Conservative government of Canada?

Mr. Nixon: Yes.

Senator Tkachuk: Was that their policy?

Mr. Nixon: You mean the Terminal 3? The decision to go ahead with Terminal 3 presumably was.

Senator Tkachuk: The Transport policy on Terminal 3, on LAAs; whose policy was it?

Mr. Nixon: Presumably the Government of Canada.

Senator Tkachuk: Mr. Nixon, who was the Government of Canada at the time?

Mr. Nixon: In 1987?

Senator Tkachuk: Yes.

Mr. Nixon: The Progressive Conservative Party had the majority in Parliament.

Senator Tkachuk: And in 1989?

Mr. Nixon: The same.

Senator Tkachuk: And in 1985?

Mr. Nixon: That was the Mulroney government.

Senator Tkachuk: So whose policy was it?

Mr. Nixon: It was the Progressive Conservative policy.

Senator Tkachuk: It was. And who did you ask in the Progressive Conservative Party of Canada to tell you or to interpret the policy for you?

Mr. Nixon: We read their document.

Senator Tkachuk: You never asked anybody about -

Mr. Nixon: Presumably we thought the document was policy.

Senator Tkachuk: Well, if you read the document, tell me in the document where commercialization is not a policy of the Government of Canada.

Mr. Nixon: I think that Mr. Jessiman just read that section of the policy which refers to other processes that might be used.

Senator Jessiman: The question, if I may. I want to get back. I still want to talk about this. You say you read the policy. I've read to you the part that's in the policy which Mr. Desmarais - you must have read it. I read it to you. Why did you leave that part of the policy out of your document? You're really misleading. It's a misleading statement.

Mr. Nixon: It was our consideration, since the LAA was, in my view, an attractive alternative that had not been considered for Pearson but had been considered in a number of other major centres across Canada, and there was some indication that the policy of the government, to put it in the terms that I would understand it, had been that what was okay elsewhere was not okay for Pearson, and that Pearson, being the most lucrative and most important airport in Canada, should be turned over to private interests rather than to community operation.

Senator Jessiman: Now, you interviewed these senior civil servants. Did you question them on this, as to whether or not it was within the policy?

Mr. Nixon: We spoke to them about the possibility of an LAA repeatedly.

Senator Jessiman: I didn't ask that. I asked you, did you ask them as to whether or not what they were doing here, Transport Canada, the Progressive Conservative government, were they within their policy? Did you ask the senior bureaucrats?

Mr. Nixon: We asked them why they did not consider the LAA.

Senator Jessiman: I didn't ask that.

Mr. Nixon: That's my answer, Mr. Chairman.

Senator Jessiman: That's not an answer. Did you ask them whether they were within the policy? Because we did.

Mr. Nixon: I didn't feel that was necessary. The government can change its policy. The section is in my report simply to point out the fact that in most other communities, the Progressive Conservative government, in its wisdom, had moved into an LAA type of local governance.

Senator Jessiman: They had the right to do that.

Mr. Nixon: Of course they did. They had the right to make any adjustments to the policy that they saw fit.

Senator Jessiman: Sir, you are misleading. If you intended this to be a public document, you're misleading the public. If you meant it to be just for Mr. Jean Chrétien, you're misleading him, because you're saying to him the government isn't complying with their own policy. The senior bureaucrats that testified before us said it was their opinion that this was within the policy of the government, and the government proceeded on their policy. And your statement is wrong.

Mr. Nixon: Mr. Chairman, my statement is correct, and I resent the use of the word "misleading".

Senator Jessiman: Well, it is.

Mr. Nixon: If the honourable member would think about it, he would realize that it is unacceptable in a forum such as this, particularly when he sees that that paragraph says that passing mention was made of private sector leasing as something that would be considered. That is in there for anybody's consideration, whether they are misled or not. The point is, however, that the government of the day had taken the initiative with an LAA in almost every other centre except Toronto where they decided, because it was highly profitable and highly important for the economy of Canada, that they would move to privatization.

Senator Jessiman: Are you suggesting that, at the time, at the time, that the announcements for the privatization of these two terminals, that there was an LAA in existence?

Mr. Nixon: There could have been.

Senator Jessiman: There could have been, yes.

Mr. Nixon: It was rejected by the Minister of Transport, who wouldn't recognize it.

Senator Jessiman: All right. The announcement was made, Mr. Nixon, in 1990. Did you know that? Seventeen months before March of 1992 when the request for proposals were given. Are you saying to me at any time during that period, 1990, 1992, that there was even an LAA considered?

Mr. Nixon: Well, there was already in existence a policy in the Government of Ontario to foster an LAA centering on Pearson which would extend into a much larger area of southwestern and central and eastern Ontario, which never really came to fruition. I think my point here, and the one that is reflected in my report, is that an LAA could have been readily established if it had been the policy of the Government of Canada to move in that direction. Instead of that, the policy of the Government of Canada was to find obstructions that would make it very difficult for a Pearson LAA to come to fruition.

Senator Jessiman: You know, Mr. Nixon, you're under oath. I can't believe you're using those kind of words. You chastised me for using words. You know very well what happened here. Who are the people you talked about the LAA? Did you talk to Mr. Church?

Mr. Nixon: I talked to Mr. Church, yes.

Senator Jessiman: Did he say that the LAA were being held up by the Progressive Conservative government?

Mr. Nixon: I can't say what his specific response in that regard was, but he was deeply concerned that it appeared that the policy of the Government of Canada was such that Pearson was not going to have the benefit of an LAA but in fact it would be turned over to the private sector with the 23.6 per cent profit.

Senator Jessiman: And he was against that?

Mr. Nixon: He favoured LAA.

Senator Jessiman: Did he say that he could live with Terminal 1, Terminal 2 being privatized?

Mr. Nixon: I don't recall that he did, but he may have.

Senator Jessiman: But he may have. Let me read you some of his testimony. I've got two or three I want to. There was an exchange - this is on page 519, on the 25th of the 7th, 1995, and it's Mr. Church:

There was an exchange of correspondence at some point shortly after that meeting designed to determine whether the opposition to privatization by the Heads of Council Committee was opposition to privatization per se or a concern about the order in which things were done. And a letter was sent back from Peter Pomeroy, the chair of the group, indicating that the group as a whole believed that the private sector had an important role to play and should have an important role to play, but the public policy framework had to be in place first in order to ensure that the management, not only of Pearson, but of the other airports in the area, maximized the economic potential for Toronto and Toronto's surrounding area.

Did he tell you that?

Mr. Nixon: I don't recall that, Mr. Chairman, but our discussions were extensive.

Senator Jessiman: Did you speak to Mr. Meinzer?

Mr. Nixon: I did.

Senator Jessiman: On page 5.29, 25th of July, 1995, this is what he had to say:

But we nevertheless felt that if a private developer would build the terminal improvement prior to the runways being given out for tender, that an airport authority could actually live with that and live around that, that there would be enough revenue generated through the operation of the air side, if you like, for an airport authority to exist.

Did they tell you that?

Mr. Nixon: I don't recall specifically what the discussion was. I know that he expressed some dissatisfaction with the policy of the government in that regard, and he may have been expressing a view that, with one owner in Terminal 3 and another owner in Terminal 1, 2, and the possibility of an additional ownership privately of the runways and the other facilities there, that it would lead to a sort of confusion that would make the actual administration of the facility expensive and difficult.

Senator Jessiman: Did you also speak to a Mr. Harrema?

Mr. Nixon: He was, is, chairman of the committee of regional chairs.

Senator Jessiman: Did you speak to him?

Mr. Nixon: Yes, I did.

Senator Jessiman: Yes. Let me tell you what he said on page 5.36, on the same day:

So we might as well be very honest with you. We took a bit of time to decide what we were doing, and it was the leadership of Alan Tonks that finally said this is too important to let us go any longer squabbling between two mayors for the greater good of our community, and that's why we didn't quite - we talked a lot and finally said, "We'll get resolutions from our council and we will proceed on."

Did he tell you that?

Mr. Nixon: Yes. He was expressing some concern that the policy of the Government of Canada was such that they would - the then minister would not recognize an LAA because I believe one of the municipalities had not given it its support. And I think the reference there is the fact that at least two of the municipalities were arguing about different but somewhat related issues, and therefore the possibility of getting unanimous support was remote and difficult, and that the committee of regional chairs, rather than insisting that time be taken to resolve those difficulties, that they simply proceed in support of the policy for privatization that is under discussion.

Senator Jessiman: Then on page 359, same day, Mr. Church again:

I don't think there's any dispute, Mr. Chairman, that all of the municipal leaders supported private sector participation in fixing up the terminals, in building the runways, in providing the ground-oriented transit that was needed, in upgrading the general aviation facility ...

Did he tell you that?

Mr. Nixon: Mr. -

Senator Jessiman: Did you ask him?

Mr. Nixon: Mr. Chairman, his view was that we wanted the economic base of this area to be supported and strengthened in every way possible and that this was very important that it proceed. It was apparent to him as well that the government of the day would not accept an LAA and therefore people at the provincial and municipal level might as well accept the leadership of the Government of Canada and support the privatization, which they did.

The Chairman: Senator Jessiman, could I have a supplementary, please? I don't think anybody disagrees, Mr. Nixon, that there was a great number of people in favour of a local airport authority in the general Toronto area. But do I gather that you're suggesting that the minister of that time, Mr. Corbeil, deliberately set up roadblocks to prevent the establishment of an LAA?

Mr. Nixon: My view is that, with the leadership of the Minister of Transportation at the time, that an LAA could have been achieved. The word "deliberate" concerns me, but, in my view, he favoured the concept of privatization, and the fact that an LAA was not recognized by him, and it required his signature so to do, they could not proceed in that way. I think it is interesting to note that, in the case of Montreal, there was at least one municipality that did not go into the agreement on the LAA, but still the government of the day, which was the same government, proceeded and recognized the LAA there.

Senator LeBreton: Because they waived.

The Chairman: Yes. The need for uniform identical resolutions from the major actors in the area was not forthcoming until 1994, and even Mayor McCallion of Mississauga, on whose ground the airport lies, referred to the so-called Toronto LAA groups as illegal.

Mr. Nixon: In that they had not been recognized by the Minister of Transportation.

The Chairman: She was one of the hold-outs.

Mr. Nixon: The hold-out.

The Chairman: It's just that Mr. Farquhar's testimony before us indicated that the minister was on the verge of giving a clearance.

Senator LeBreton: Mr. Chairman, just a point of clarification: Minister Corbeil actually wrote a letter in July, 1993, asking Mayor McCallion to waive her objection and he would recognize the LAA. That's on the record. It's been put on the record before this committee several times. So what Mr. Nixon says is factually incorrect.

Mr. Nixon: I think perhaps in response I would simply say that the policy of the government up until 1994 had been to take the initiative as to whether an LAA would be recognized or not; that the rule of unanimity was one which, in my opinion, was inappropriate, but it was the accepted policy of the government of the day, but it was a new policy.

Senator Jessiman: Mr. Nixon, surely to goodness you'd have to get the agreement of the municipality in which about eight or nine-tenths of the airport is located. Would you not agree with that?

Mr. Nixon: I think you would have to examine the motivation for withholding approval.

Senator Jessiman: You talked to the mayor. What did she say? What did the mayor say?

Mr. Nixon: She's a very effective municipal leader and obviously she wanted a good deal of revenue from the facility in her municipality. She wanted some control over the development of the runways so that her people would not be bothered by noise pollution and things like that.

Senator Jessiman: What's wrong with that?

Mr. Nixon: There is nothing wrong with that other than I'm not sure that the mayor of a municipality should have the last word in the policy for transportation in and out of Pearson.

Senator Tkachuk: Who should it be, then?

Mr. Nixon: The Government of Canada.

Senator Lynch-Staunton: Big brother. Typical Liberal arrogance.

Senator Jessiman: Do you know that Mr. Church said this about the Government of Canada and the delay that you're talking about? He was answering a question from Senator Tkachuk. He said:

I chuckled as you made your point. I don't think there's any question that Toronto was slow off the mark, and any suggestion ...

Any suggestion.

... that that was the fault of the federal government is simply wrong.

Under oath. Your Mr. Church. And you, in what you're saying to us today, sir, I can't believe you've read this testimony. You said you have. These gentlemen -

Mr. Nixon: Mr. Chairman, I did read that, and I simply return to the point that if the Government of Canada had wished to proceed with an LAA, they could have done so; that they were the ones who made the rule that unanimity had to be found among all of the municipalities.

Senator Jessiman: They should have, regardless of what the municipality -

Mr. Nixon: That's what they did in Montreal.

Senator LeBreton: No, they did not.

Senator Lynch-Staunton: Dorval gave its approval.

Senator Bryden: Mr. Chairman, we have a lot of evidence that indicates that there was no requirement for unanimity among all the municipalities in any of the other areas.

Senator Jessiman: Surely to goodness where the airport is located -

Senator Bryden: We also have evidence that when there was - I can't remember the name of the tiny municipality in the Toronto area that still had not agreed. The permission to proceed was withheld. I mean, it is in there on the record. It is also the case that I believe what the witness is indicating, there was certainly no encouragement on the part of the minister or the Government of Canada.

Senator LeBreton: This is wrong. The testimony clearly says the opposite.

The Chairman: Let's get off the subject.

Senator Lynch-Staunton: Don't confuse him with the testimony.

The Chairman: Let's keep with the topic.

Senator Jessiman: Did you ask Mr. Church, Mr. Meizner or that other gentleman any of the questions that we asked them so we got the answers?

Mr. Nixon: I wouldn't have phrased them in that particular way. I don't recall the questions, other than I do recall their response to the concept of the LAA and the fact they were disappointed that it did not proceed under the aegis of an LAA.

Senator Jessiman: Did they not admit to you, sir, that they could live with the privatization of Terminals 1 and 2 and then they get their LAA?

Mr. Nixon: I don't think anybody feels that they can't live with privatization. No one made that point to me. As a matter of fact, most of them were reasonable enough to realize that if the LAA were not going to be established and recognized by the minister for whatever reason and whatever rules applied, then certainly they thought that the privatization was fine, and they were rather proud of the fact that Terminal 3 had received a good deal of approval and it is considered to be a very convenient terminal, however seriously under-utilized it is.

Senator Jessiman: Well, maybe someone will ask you some more questions in respect of that. Let us go on to the next, if we may, please. It's the third paragraph of that part of page 1 that is numbered number 1, the third paragraph down. Could you read that, sir?

Mr. Nixon: "In September ..."?

Senator Jessiman: Yes. Why did you choose to refer to the Matthews Group, first of all, as opposed to Paxport, and two, why did you select that group as an unsolicited proposal?

Mr. Nixon: Because they were the eventual successful bidders.

Senator Jessiman: The Matthews Group was not.

Mr. Nixon: Well, the name changed substantially and a number of times. Eventually it was T1T2 Limited Partnership. Before that it was Mergeco, referred to as Mergeco, and before that it was Paxport, and the Matthews Group in general was the one that had expressed the original interest. The Matthews Group, as I understand it, had done business for a number of years in the Mississauga area; that they had been in some ways largely involved in the commercial development in Square 1 and had been very successful and very much involved in the Mississauga area.

Senator Jessiman: You knew then, did you not, that there was at least two, three, four, or five unsolicited offers?

Mr. Nixon: We've discussed this previously. I think we've listed the unsolicited offers that are in the record.

Senator Jessiman: Why didn't you mention it here, sir?

Mr. Nixon: Because this was the one that was successful. I believe they were one of five.

Senator Jessiman: But this isn't the one that you were to be considering. It was the Pearson Airport Development Corporation.

Mr. Nixon: Yes.

Senator Jessiman: That's the contract.

Mr. Nixon: In response to that, the Matthews Group was the basis for the Paxport proposal. Jack Matthews was the president, I'm sure you're aware, and that it was his proposal that was deemed best overall, but deemed unfinanceble. And then it moved forward with the involvement of Claridge. Claridge came in at about 30 per cent, and then finally Claridge came in at about 67 per cent and assumed control of it, and finally it was T1T2 Limited Partnership that got the contract and was prepared to proceed. The root of that was the Matthews Group, unless you would like to take the other root which is the Claridge root, and it was interesting to see in the papers that the honourable senator presented to us just before the break that there was quite detailed discussion of the cooperation of those two groups, so to speak, during the development of this policy.

Senator Tkachuk: How would you know all this at the time you were writing this report? How would you know how the Matthews Group or Paxport carried on their business?

Mr. Nixon: It was obvious from the material that had been provided to us that they were the ones who had initiated the original unsolicited bid, if you want to call it -

Senator Jessiman: That's not true. You know it now. There was one before that, and you know it. You've told us you know it. You said in your testimony you knew of four now. There are five.

Mr. Nixon: Mr. Chairman, if the honourable senator would indicate what the significance of that objection is, I would be glad to respond.

Senator Jessiman: Why did you say they were the first unsolicited offer?

Mr. Nixon: We believed that they were.

Senator Jessiman: But you now know you're wrong?

Mr. Nixon: They were one of five.

Mr. Goudge: It doesn't say the first, senator. Read the report.

Senator Jessiman: He said the first.

Mr. Goudge: Read the report. Read the report.

Senator Jessiman: He just mentioned under oath now they were the first, and he knew it wasn't so, or should have known.

Mr. Nixon: Well, if the point of your question is that I'm deliberately lying, I reject that. That is not true. The material put in here is correct by the information that was given to me.

Senator Jessiman: Did you ever look at the unsolicited offer made by Paxport?

Mr. Nixon: I did not. I don't know whether -

Senator Jessiman: Did any of your group?

Mr. Nixon: Did anybody else?

Mr. Goudge: I didn't look at it per se, but I certainly -

Senator Jessiman: It may have been Matthews Group, as you said. I'm asking, did any one of you look at it?

Mr. Goudge: I certainly discussed it in substantial length with the Transport officials, yes.

Senator Jessiman: Did they tell you the difference between the two? Did they tell you that one was a number of pages, 20 or 30 pages in length, and the other was eight volumes?

Mr. Goudge: Between which two, senator?

Senator Jessiman: Between the unsolicited offer, which is we're made to understand a very few number of pages, compared to eight volumes comprising about 10,000 pages.

Mr. Goudge: My sense of that discussion was that the Matthews bid, the unsolicited bid, was the product of substantial work - I don't know what precisely was tendered and what lay behind the tender - and that substantial work constituted something that, given the short time frame that later emerged, would produce a substantial advantage.

Senator Jessiman: And who did you get that from?

Mr. Goudge: The Department of Transport officials.

Senator Jessiman: Which person?

Mr. Goudge: Mr. Desmarais, Mr. Rowat, the people that spoke to us from time to time through the 30 days that we met.

Senator Jessiman: They swore otherwise under oath. You know that too, don't you.

Mr. Goudge: I have not read their testimony, and what I can tell you is the impression that their information conveyed to me.

Senator Tkachuk: Do you have notes of those meetings?

Mr. Goudge: I have notes of those meetings. Whether I have notes of that precise concept, I can't tell you, senator. I can recall clearly that they left me with that impression.

Senator Jessiman: Well, that's news to us, what you've now said.

Mr. Goudge: Did they say that the previous bid had nothing to do with the subsequent bid?

Senator Jessiman: They said it was like night and day. I'm using my words. They said they had a very -

Mr. Goudge: Did they say "like night and day"?

Senator Jessiman: Those are my words.

Mr. Goudge: I suspect they are.

Senator Jessiman: What they are saying is - I think he used in number, he said the document - we got an unsolicited offer was 20 or 30 pages, and I could be wrong five or ten either way, compared to something like 10,000 pages. So they left the distinct impression with us that there was no advantage. And you know, and Mr. Nixon should have known, that Huang & Danczkay had put in an unsolicited offer, and they were in the competition by virtue of the fact that Claridge took over Huang & Danczkay. You knew that. I'm asking whether either you, Mr. Nixon, or you, Mr. Goudge, knew that.

Mr. Goudge: I knew that, yes.

Senator Jessiman: Why didn't you mention it in the report?

Mr. Goudge: Why would it be necessary to mention it in the report? What we are doing at this stage, senator, was outlining the chronology of things that were very importantly in the public domain. They did not succeed ultimately.

Senator Jessiman: They did succeed. You -

Mr. Goudge: Well, they didn't succeed in the original award.

Senator Jessiman: They ended up with the contract. This is what you people were talking about. This is what you were looking into. And you pick out Matthews, which made an unsolicited offer, and you don't mention Claridge, who also through the company that it had taken over, has also made an unsolicited offer. And my question is, why?

Mr. Goudge: I think we've given you the best answer we can, senator, because what was in the public domain was the controversy over the award to the Matthews group, and Matthews was the ultimate successful bidder.

Senator LeBreton: So it didn't fit your witch hunt.

Mr. Goudge: Senator, you have obviously started this set of questions with that conclusion right from the beginning. I simply reject it.

Senator LeBreton: It was in the public domain -

Mr. Goudge: This wasn't a witch hunt, and I don't know how many times we could say it. I know we won't persuade you otherwise because you come to this with a predisposition.

Senator LeBreton: Why didn't you correct it when you had the opportunity?

Mr. Goudge: Correct what?

Senator LeBreton: About the Matthews Group.

Mr. Goudge: There is nothing to correct. What we say about the Matthews group is accurate.

Senator LeBreton: It is not accurate.

Mr. Goudge: You and I differ, I regret.

Senator LeBreton: You just said you were trying to substantiate something that was in the public record about the Matthews Group, and you've just again proven that you tailored the whole Nixon report to what your predetermined set of instructions were, based on hearsay, as you said yourself, and misinformation.

Mr. Goudge: You know, senator, that that is categorically untrue. I don't know how many times we have to say it. We obviously are going to end up differing, but we will give our evidence, and it will be up to the senators to decide.

Senator LeBreton: It is not categorically untrue because we've got witnesses to say that in fact what you say is categorically untrue, but our witnesses said was the truth under oath.

The Chairman: I think, gentlemen, that part of our problem, as Conservative senators, has been the emphasis upon Paxport, Paxport, Paxport, Matthews, Matthews, Matthews, for weeks and weeks and weeks and weeks. We took that to be an impoverishment of the arguments that are being put forward all along the line. It's sometimes fairly easy and popular at a given time to disallow the rights to court, access to courts, to people who are perceived as fat cats or politically connected. But that which you recommended for cancellation was a design by Paxport and big money from Claridge, Bronfman. That was the T1T2 partnership with the Pearson Development Corporation as the managing partner. That is what you cancelled, and that really is the case.

Senator Bryden: Why, Mr. Chairman, would that be of concern only to Conservative senators? They obviously recommended the cancellation of a contract that involved both the Paxport/Matthews people and Claridge, so presumably it was an unbiased decision.

The Chairman: Unless I misunderstood you, did you not say approximately seven or ten minutes ago that there was a document presented here today that led you to believe that there was collusion between the two parties prior to when the two partners came together for the first mergeco?

Mr. Nixon: Mr. Chairman, the senator who had raised the matter was good enough to provide that document all the way around, and the date on it would indicate that Paxport and Claridge or somebody had been considering the possibility of accepting the Paxport plan and the Claridge money.

The Chairman: Yes, but -

Senator Bryden: If you don't mind, I can just clarify. That's a Transport document. That's a discussion that I would take it comes out of the Department of Transport. It does not imply that discussion was taking place. Somebody is making a proposal in there that that may very well happen. My point was that it's being considered by somebody at that early stage.

Senator Lynch-Staunton: Which document are we talking about? The one Senator Bryden came down?

The Chairman: Senator Bryden answered the question. Senator Bryden was the first one to bring up the suggestion there was kind of a cooked up deal, and now he's clarified it.

Senator Lynch-Staunton: Based on a document which has no heading, no signature, and no date.

Mr. Nelligan: But he's made the point that it doesn't apply to what Mr. Nixon said.

Senator Lynch-Staunton: Why use it in the first place? It's a very serious matter to bring documents of this nature to support a report of that nature.

Senator LeBreton: Updated by the Department of Transport last Friday, with unsigned documents.

The Chairman: We are breaking now for lunch until one o'clock.

The committee adjourned.

---

Ottawa, Monday, November 6, 1995

The Special Senate Committee on the Pearson Airport Agreements met this day at 1:00 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: Order, please.

When Senator Lynch-Staunton's time ran out this morning, he asked leave to return to the subject he was pursuing at that time. So, we'll recognize the lead question this afternoon to Senator John Lynch-Staunton.

Senator Lynch-Staunton: Thank you, chairman.

Mr. Crosbie, we now have - and I hope they are being distributed - a copy of your mandate because I asked you this morning exactly what your responsibilities - how they had been outlined to you. You said you had had a conversation with Mr. Goudge.

The document is 002366, Articles of Agreement between Her Majesty and Crosbie & Company. The copies are being distributed.

The last page:

The Contractor -

- meaning Crosbie -

- shall:

1.1.1 review all factors relating to the agreement between Pearson Development Corporation and Transport Canada for the redevelopment of Terminals 1 and 2 at Lester B. Pearson International Airport;

I gather from what you said this morning that you did not complete your work. Your work is only partly done.

(Previously sworn)

Mr. Allan Crosbie, Managing Partner, Crosbie & Company Inc.: No, I don't think I said that.

Senator Lynch-Staunton: I said "I gather from what you said."

Mr. Crosbie: No, I said we did what we did.

Senator Lynch-Staunton: Yes.

Mr. Crosbie: And we've told you what we did. We did the job that Mr. Nixon asked us to do.

Senator Lynch-Staunton: No, but the government of Canada here is asking you to review all factors relating to the agreements. Did you do that?

Senator Bryden: Mr. Chairman, I thought we would be getting copies.

Senator Lynch-Staunton: They're being distributed.

Senator Bryden: It would be preferential, I would think, if they were given to the witnesses first and to the other senators before they -

Senator Lynch-Staunton: I don't have anybody to snap my fingers at, fortunately. I don't know who is distributing them.

Senator Bryden: - get distributed to the press, albeit the press should have them. But, it would be nice, if you were going to examine the witness on them, if he in fact has them in front of him. I would like to have it.

Senator LeBreton: Excuse me, Senator Bryden. This happens all the time. It goes to those people at that end and then around the table. It's nothing unusual. You distribute things in the press that aren't even relevant to the hearing.

Senator Lynch-Staunton: We'll come back to that.

We can discuss the rate of return according to the Nixon report based on the Crosbie argument. On page 11:

On the other hand -

this is Nixon writing -

- as I have been advised by my business valuation advisor -

I assume this is Crosbie & Company -

- the rate of return provided to T1 T2 limited Partnership could, given the nature of this transaction, well be viewed as excessive.

Is that still your opinion?

Mr. Crosbie: Yes, it is.

Senator Lynch-Staunton: It is. So your opinion is that 14 per cent after tax for a project of this nature is excessive.

Mr. Crosbie: Our opinion is that the return of 23.6 per cent before tax is excessive.

Senator Lynch-Staunton: What is the difference between 23.6 before and, assuming a 40 per cent tax rate applicable to all the partners, a 14 per cent after?

Mr. Crosbie: Because, Senator Lynch-Staunton, this transaction was structured on a before-tax basis. The transaction, per se, bears no tax. It's a flow through to the investors, and the return to the investors after tax depends on each investor's actual tax rate.

Senator Lynch-Staunton: That's right.

Mr. Crosbie: And the investors may all have very different tax rates. Some of the investors may have tax losses or may do other things where they effectively aren't paying any taxes or very little taxes. So we felt, anyway, and we feel that the way to assess this more properly is the before-tax rate of returns because that is, in fact, the way the deal was structured.

Senator Lynch-Staunton: Did you discuss that concept with Mr. Stehelin in your telephone conversations, to not look at the after tax?

Mr. Crosbie: Well, we had a fairly lengthy conversation with Mr. Stehelin. We asked him for his views, and he provided us with information, and so forth and so on.

Senator Lynch-Staunton: Yes, I know all that, but did you discuss his argumentation that 14 per cent after tax by his calculation, based on a nominal tax rate applicable to the partnership in toto, was reasonable?

Mr. Crosbie: Oh, yes. We discussed his view on that subject, yes.

Senator Lynch-Staunton: And you disagree with it?

Mr. Crosbie: Yeah, we disagree with his view for a lot of reasons.

Senator Lynch-Staunton: And what are they?

Mr. Crosbie: Would you like me to take you through the reasons why we -

Senator Lynch-Staunton: I would like you to give us the reasons why you feel the rate of return was too high, yes.

Mr. Crosbie: Well, one of the things in Mr. Stehelin's letter, he looks at it as a utility. The analysis is based around the required after-tax returns for a utility investment.

Now, our view is that one should also look at this from the point of view of a real estate investment, that this project has many characteristics that are similar in many ways to that of a major real estate development. We feel that in assessing the kind of return the investors would require, one should also look at it from the point of view of a real estate project.

Now in coming to that view, I think we're supported by Richardson Greenshields. Richardson Greenshields were retained by Transport Canada to assess the two proposals. Transport Canada gave us information in which Richardson Greenshields said that in their view the best way to look at this project and the best basis of comparison was to compare it to a major real estate shopping centre development and that that was the best way to look at rates of return.

Secondly, it's interesting that Mr. Stehelin, in his comments before this committee from the transcripts, says quite clearly, I believe, that there's no question this is a real estate project. So our view is that one should be looking at this as a real estate project and giving consideration to that, and that's supported by Richardsons and supported by Mr. Stehelin in his testimony to this committee.

Now if one looks at it as a real estate project, you get different returns and different views as to returns. It's interesting. One of the things that we had difficulty with in Mr. Stehelin's letter was that he really, from the way we read it anyway, made no reference to looking at the returns on a real estate project. He looked at it solely from a utility point of view, and he did not give any justification in his letter why they only looked at it from a utility point of view.

Now in looking at it as a real estate project, we think you come up with different numbers, which we feel are probably closer to the kinds of returns that investors in real estate projects would require.

Now, for example, Price Waterhouse did a study for Transport Canada, and they presented that study in July of 1992. Price Waterhouse's view was that the pre-tax return on equity should be in the order of 12 to 14 per cent per annum.

At that time, Government of Canadas were trading at a higher rate than at the time this deal was signed. If one were to adjust Price Waterhouse's calculations to the level of Government of Canadas at the time this transaction was done, Price Waterhouse's opinion was that equity return should be in the order of 11 to 13 per cent.

Now the document that I gave -

Senator Lynch-Staunton: Before tax?

Mr. Crosbie: Yes.

Senator Lynch-Staunton: 11 per cent before tax?

Mr. Crosbie: Yeah.

Now it's also interesting to us that in Mr. Stehelin's letter, which he gave to Transport Canada in August, '93, he quotes Price Waterhouse to support his view as to the opinion. He says that Price Waterhouse assumed an after-tax return on equity in the range of 12 to 14 per cent, which is generally in line with the internal rate of return calculated by Mergeco of 14 per cent. So he relies on Price Waterhouse.

Then he goes on to say:

Price Waterhouse's return appears to be on a pre-tax basis.

However, this remains unclear.

Now, we were provided with the Price Waterhouse report by Transport Canada, and the Price Waterhouse report is very clear, or the way we read it, it's very clear. It just says that based on the risks factors previously noted, they estimated the pre-tax rate of return on the 30 per cent equity portion of the investment to be between 12 and 14 per cent. So Price Waterhouse, as I say, if you adjust it for the rate levels in place at the time of the deal, are talking 11 to 13 per cent pre-tax. It seems to us that Price Waterhouse have been misquoted in Mr. Stehelin's letter.

Now, also, we were provided with a report that DS Marcil had done for Transport Canada on another project basically related to the runways. Now in that project, if you take the DS Marcil report and take the rates of return that they were talking about in their report for real estate-type returns and adjust it for rate levels in place at the time the transaction was signed, DS Marcil are talking about a pre-tax equity return for the equity investors of 14.5 per cent, slightly more than the Price Waterhouse but in the same general range.

Now they also looked at it from the point of view of utility returns. So DS Marcil looked at it from the point of view of real estate and utility and provided all these various returns as a framework. But the interesting thing to us is in the Deloitte letter to Transport Canada, which I've mentioned, in August '93, they only pick up what DS Marcil had to say about the utility returns. They don't make any reference to what DS Marcil had to say about the real estate returns. So if you look at it from the point of view of a real estate project, which we believe should be given significant consideration in approaching value, DS Marcil are suggesting a rate of return on the equity, pre-tax, of 14.5 per cent.

Now, also, Wood Gundy - you mentioned this morning that Wood Gundy apparently backed out of this project because the return wasn't high enough. Now, in this letter of Deloitte Touche of August, it makes reference to Wood Gundy and it gives an indication - it says what Wood Gundy's views are as to the spread over Canadas that you would have to pay on the debt. It gives Wood Gundy's views as to the discount rate or the weighted average cost of capital that would be required to fund this project. If you back that through and do the mathematics - and it's a very simple calculation - and adjust for the changing rate structure at the time of this deal, Wood Gundy's view as to the rate of return required on the equity, pre-tax, is 13.75 per cent. That is taking various things that the author of this letter has quoted or stated from Wood Gundy, and you get a 13.75 per cent pre-tax rate return on the equity.

It's interesting that when he comes to his conclusions, he doesn't make any reference to this Wood Gundy calculation. Wood Gundy's aren't included.

So you've got Price Waterhouse at 11 to 13 per cent, you've got DS Marcil at 14.5 per cent, and you've Wood Gundy at 13.75 per cent.

Now you look at some other things. The original T3 project - that was the original deal - we were told by Transport Canada, and adjusting for changing interest rate levels - so you put it all on the same basis, compare apples with apples and oranges with oranges, the original T3 had a projected before-tax equity rate of return of 14. If you look at the valuation put on T3 at the time of the Claridge/Paxport transaction, we were told by Transport Canada that there the projected rate of return on the equity in that transaction, the way they valued the T3, was 14.1 per cent.

So you are getting all these numbers. They are all coming out. You know, PW 11 to 13, DS Marcil 14.5, WG 13.75, the original T3 at 14, and T3 at the time of the Paxport/ Claridge 14.1. So they are all in a range there.

Also, at the time of this particular transaction, our firm was involved in a very, very major - one of the very major real estate restructurings that was taking place in the market. So as part of that transaction, we had an indepth understanding of the real estate markets at that time and the values and so forth. We were in touch with a number of the leading experts on the street in values, in discount rates, in rates of return on equity and all the rest of it. We also saw the prices that these companies were being valued at in the marketplace. These returns were coming in at around a return on equity suggestive of a number for this type of project of 15 per cent before tax. So you add all this up and it starts to tell you a story.

We also looked at it in some other ways too. Another way we looked at it was basing it off the Air Canada lease. Air Canada is a triple-B credit. So if you go into this project, you're really - one might argue that you are lending money to Air Canada. So what does Air Canada borrow at?

Now if you use - at the time this deal was done, long-term Canadas were trading at around 7.5 per cent.

Senator Lynch-Staunton: When was that?

Mr. Crosbie: In the fall, August through October, long-term Canadas were around 7.5 points.

Senator Lynch-Staunton: That's not what Mr. Stehelin has in his - he has 8.30.

Mr. Crosbie: Well, I can give you the numbers.

Yeah, they were around 7.5 per cent in August through November.

His letter is based off the rate structure in the spring. Now although the letter was written in August, he was basing it off rates in the spring of 1993. Rates in the spring of 1993 were much higher, and he was basing - that letter seemed to us, anyway, the way we read it, was they were basing it off the higher rates in the spring, but it doesn't seem as if the letter had been updated to reflect the rates that were closer to the rates that were in place at the time the letter was written. In any event, at the time the deal was done, rates on long-term Canadas were around 7.5 per cent.

Now then you say, okay, so you got your so-called "risk-free security" at 7.5 per cent. Now you are lending money on a project backed by the Air Canada lease, which is lending money to Air Canada. So what do you add to that? Well, we looked at the spread of junk bonds in the U.S. over U.S. treasuries.

Senator Lynch-Staunton: I've let you go on, but I think you are straying a little bit.

Mr. Crosbie: No, I'm trying to tell you how we looked at it to try to come up with the rate of return.

Senator Lynch-Staunton: I've got a pretty good picture how you looked at it. What I'm wondering is why -

Senator Bryden: I think, Mr. Chairman -

Senator Lynch-Staunton: No. I'm trying to help out -

Senator Bryden: Let him be allowed to complete his answer. He was asked a question, quite specifically, "How did you arrive at the view that the rate of return was too high?" He is in the middle of giving you an answer.

Senator Lynch-Staunton: I hope he's more than in the middle. He's gone on for 10 minutes.

Senator Bryden: You asked for an answer, and he's entitled to give it.

Senator Lynch-Staunton: You didn't want us to interrupt when you were talking to the witness. Show the same courtesy to us as you want shown to yourself.

Senator Bryden: Well, if you will stop interrupting the witness, I certainly will.

Senator Lynch-Staunton: That's the chairman's role. If you want to chair a committee, you put in your name. Until now, the chairman is in charge.

Senator Kirby: He just doesn't like the answer.

Senator Bryden: Once you get into a line of answers you don't like, you try to stop -

Senator Lynch-Staunton: I'm very happy to have the answer. My problem is why was that not introduced in the Nixon report instead of having a casual dismissal of the return as being excessive?

Senator Bryden: You asked for specifics on it, and you are getting it.

The Chairman: Mr. Crosbie, do you have anything else to add?

Mr. Crosbie: If you are asking me the various things which went into our consideration of our view, the answer is, yes, I do have other things to add if you would like me to.

Senator Lynch-Staunton: Well, I am just wondering why all that was not in your own report and why at least a summary of it was not put in the Nixon report. Why do we have to find this out on the last day of our appearance that these were the - which I find interesting, and I don't have to accept them - comparisons made between utilities and real estate and consultations? I think you do say in your report you didn't have time to consult with people in the real estate business. Now you tell us that you did a thorough examination. So there are elements coming out today which were not in the written word that is before us and has been before us all summer.

Mr. Crosbie: Maybe I'm missing something here, but our report expresses our opinion, and that was the purpose of our report. Now you are asking us a further question. You are saying, "Can you give us the basis of your opinion? What were the factors that you considered?" Our report just contained our view. Now I'm giving you some of the things that went in to form that view.

Senator Lynch-Staunton: And a very impressive listing it is too, but I still wonder why it is that we didn't have that documentation when you first came to us. We would have had a better appreciation of your work. I still can't understand while equally -

Mr. Crosbie: I mean, no one has asked us.

Senator Lynch-Staunton: What do you mean nobody has asked you?

Mr. Crosbie: No one has asked us for our view as to why we thought the return was excessive.

Senator Lynch-Staunton: Well, why do you think you're here?

Mr. Crosbie: No one has asked us that question -

Senator Lynch-Staunton: No, but why do you think you're here?

Mr. Crosbie: - until now.

Senator Lynch-Staunton: To discuss your report.

Mr. Crosbie: Yes.

Senator Lynch-Staunton: And what's in your report? The rate of return.

Mr. Crosbie: Yes, but no one has asked us these questions. You have now asked us, and I'm giving you the answer.

Senator LeBreton: After two years of thinking about it.

Senator Lynch-Staunton: So equally reputable firms like Deloitte Touche are rejected; Wood Gundy is rejected; the Department of Finance and the Department of Transport with independent advice's view on the rate of return is rejected; that of Price Waterhouse is rejected.

Mr. Crosbie: Hold it. Hold it. Sorry. Price Waterhouse, they are not rejected at all. Their view is a return before tax of 11 to 13 per cent.

Senator Lynch-Staunton: So Mr. Stehelin's interpretation of Price Waterhouse is rejected.

Mr. Crosbie: Well, yes, because we have the Price Waterhouse report, and we have Mr. Stehelin's letter. We read them. I mean you can draw your own conclusion.

Senator Lynch-Staunton: I mean Mr. Stehelin's report has, on both sides of this table, been a very important element in our assessment of the deal.

Mr. Crosbie: Yeah.

Senator Lynch-Staunton: This is the first time we've heard it being challenged. I don't say it's not challengeable, but it's interesting that it takes a Conservative member of this house to try to get to the bottom of everything by asking the appropriate questions. Now what should we do? Bring Mr. Stehelin back?

Mr. Crosbie: I can't answer that.

Senator Lynch-Staunton: No.

Let's go into some elements of the Stehelin report.

Mr. Crosbie: Pardon me?

Senator Lynch-Staunton: I want to go into some of the things that Mr. Stehelin said on page 7. I haven't had copies of this made because everybody has a copy available.

Mr. Stephen Goudge, Legal Counsel, Gowling, Strathay and Henderson: I take it, senator, you don't want Mr. Crosbie to complete his answer.

Senator Lynch-Staunton: Oh, certainly. If he wants to come back tomorrow and elaborate, I'm more than willing. He can take all the time he needs.

Mr. Crosbie: Would you like me to complete?

Senator Lynch-Staunton: Your counsel suggested you complete your answer.

Mr. Crosbie: Well, it's up to you.

Senator Lynch-Staunton: No, it's up to you. I was accused by Senator Bryden of cutting you off. I don't want to cut anybody off. I was just saying I've heard a considerable amount and it satisfies me, but if you have more to add, add on.

Mr. Crosbie: Okay. Well, the other factors that bore on our thinking in terms of coming up with the opinion that we expressed in our report, one of the things we looked at, as I said, was assessing this as providing a financing and leveraging it off the Air Canada lease. We looked at the interest rates on junk bonds in the U.S. market, in particular, triple-B credits, which are less than investment grade credits, which is what the Air Canada credit was at that time. They traded at about 4 points over treasuries. So if you use long-term Canadas as a benchmark of 7.5 per cent and add 4 points for the Air Canada credit risk, you are up to 11.5 per cent. Then add, say, 2 more points because it's an indirect credit of Air Canada, not a direct credit of Air Canada, and you are up to 13.5 per cent. So once again, that 13.5 per cent pre-tax ties in with Price Waterhouse, DS Marcil, Wood Gundy, the T3 returns. So we looked at all these things.

Now one of the other things that we also considered was that that projected return of 23.6 per cent on which all this analysis is taking place in fact could be low. As we talked about last time, there are additional profits potentially to the participants through their involvement in the concessions, the construction and the management fees. In fact, in our conversation with Mr. Stehelin, he told us that he felt that Claridge thought that the management fee that had been agreed to was higher than it need be, that there was extra profit in the management fee to the consortium. So there's those additional profits.

Plus, you have a residual value at the end of year 37. So you have your returns through to year 37. It's 23.6 per cent through to the end of year 37, but at the end of year 37, you have an option to continue for another 20 years. So you have additional residual value.

Plus, you have synergies when you put T3 together with T1T2. Transport Canada told that us they thought these synergies of putting these two together could be in the order of $2 million.

Plus, you now have virtually a monopoly situation where you have got control of these two terminals in the hands of one party, Claridge, which creates opportunities in terms of pricing and so forth.

All of these suggest that the returns may, in fact, be higher than 23.6. The interesting thing to us is that the document that shows the returns of 23.6 was prepared by the Pearson Development Corporation and Paxport. Typically, the bias on the part of a buyer when they are preparing those kind of returns is to understate the returns rather than overstate. As a buyer, you don't normally go in and present an optimistic case to the seller. You normally present a slightly more pessimistic case to the seller. Here you have a case that the buyer prepared all the documents, prepared all the forecasts, and it showed a return of 23.6 per cent. Our sense is that the returns, in fact, to the participants could well be higher than 23.6 per cent.

When you add all this up, you have got the returns that these various parties are talking about. You have got a return that could well be in excess of 23.6 per cent.

One of the other things we looked at, too, were the risks. What are the risks in this project? If you go through the risks and analyze them one by one, which we did with Transport Canada, it seemed to us that many of these risks are contained and controlled and managed. So, on balance, when you put all this together, we feel that you come to the conclusion that it would appear that the returns to the investors are excessive.

The document that we provided to you last time showed that if you assumed the return to the investors need be in the area of 15 to 20 per cent pre-tax, which we think is not unreasonable -

Senator Lynch-Staunton: 15 to 20?

Mr. Crosbie: 15 to 20 pre-tax - and you use a middle ground of 17.5 per cent, depending on how you look at it, the government or Transport Canada or whatever may have entered into a transaction that left something in the order of 200 or $250 million or close to a quarter of a billion dollars on the table.

Senator Lynch-Staunton: Wait a minute. That's not answering the question. That's supposition based on prejudice. What we are trying to establish here is whether the rate of return is excessive. I guess it depends on the definition of "excessive".

Mr. Crosbie: Yeah.

Senator Lynch-Staunton: Unfortunately, we don't have a dictionary here. Even Senator Jessiman quoting the dictionary doesn't seem to impress anyone.

You mentioned the risk factors. Mr. Stehelin does mention a number of risk factors. First of all, you quarrel with making comparisons on returns for utilities. You feel it's more of a real estate venture; is that correct?

Mr. Crosbie: Yes. Our bias is in that direction.

Senator Lynch-Staunton: Now, can it not be said, in general terms, that real estate ventures are riskier and therefore should have a higher return than utilities?

Mr. Crosbie: I'm not here to discuss the rates of return on real estate versus utilities. I am here to discuss -

Senator Lynch-Staunton: I'm asking for your opinion -

Mr. Crosbie: I'm here to discuss the rates of return on major real estate projects of this sort in the marketplace at that time.

Senator Lynch-Staunton: But, in your opinion, is it not traditional that, assuming that real estate ventures are riskier than an investment in a utility, that one can assume that you expect higher return from a real estate venture?

Mr. Crosbie: I don't think that's the relevant question. The question is -

Senator Lynch-Staunton: Well, it is. If you're faulting Stehelin for using utilities and you feel he should be using real estate, there must be a difference between the two.

Mr. Crosbie: The question is what sorts of returns do investors require? There is a marketplace out there that sets forth the kinds of returns that investors require. And the kinds of numbers that I have just been giving to you are the kinds of returns that investors in major real estate projects require.

Senator Tkachuk: What could T1T2 Pearson Development Corporation sell the terminal for - Terminals 1 and 2 for, in, say, 1999?

Mr. Crosbie: Well, we did some calculations on that, as you know, and we presented that table to you at our last meeting where we used a cap rate - we looked at three different cap rights, 9, 9.5, 10.

Senator Tkachuk: What could they sell it for?

Mr. Crosbie: Well, you'd use a cap rate of 9 - between 9 and 10 per cent are the numbers we presented last time, which means, what you do -

Senator Tkachuk: What's the number?

Mr. Crosbie: Well, hold it, hold it.

Mr. Goudge: He is answering the question, senator.

Senator Tkachuk: I just want to know the number.

Mr. Crosbie: Well, here, we will figure it out together.

Senator Tkachuk: I don't need a bibliography. I just need the number. What could you sell it for in, say, 1997? What could they sell T1T2 for?

Mr. Crosbie: Well, what you would do is you would take the cash flow in the property.

Senator Tkachuk: Yes.

Mr. Crosbie: So the cash flow is projected out in - nine years out. And you'd take the cash flow of that property, and you'd apply a cap rate of 9.5 per cent to it. And that would give you the value of that property at that time.

Senator Tkachuk: What is it?

Mr. Crosbie: Well, let's just - the operating cash flow, before debt service, at the end of year eight, was projected at around $111 million. If you applied a 9 per cent cap rate, that property would have a value of $1.23 billion.

Senator Tkachuk: Could they sell it?

Mr. Crosbie: Yeah. Something in that order, yeah.

Senator Tkachuk: Could they sell it?

Mr. Crosbie: Yeah, hm-hmm.

Senator Tkachuk: Were they allowed to sell it?

Mr. Crosbie: In year nine?

Senator Tkachuk: Were they allowed to sell it in year nine?

Mr. Crosbie: Yeah, I believe they -

Senator Tkachuk: Were they allowed to sell it in year five?

Mr. Crosbie: There were restrictions on their ability to sell it.

Senator Tkachuk: They couldn't sell it in year five?

Mr. Crosbie: Yeah.

Senator Tkachuk: And they couldn't sell it in year nine.

Mr. Crosbie: I don't know what the limit -

Senator Tkachuk: Ten, year ten.

Mr. Crosbie: Okay, ten years. So in year 11, they could.

Senator Tkachuk: Is there a difference - in real estate - I'm from Saskatchewan, but we've got a lot of land up there and, when I own real estate, I can sell it.

Mr. Crosbie: Yeah. What are you getting at?

Senator Tkachuk: You based your evaluation on real estate, so can you sell it?

Mr. Crosbie: I think, if I understand you correctly, what you're going to is liquidity, the liquidity of the investment.

Senator Tkachuk: I am asking you if you can sell the real estate, and you are telling me you can't. Therefore, is it really real estate? I'm just asking you a simple question. Can you sell it in year five?

Mr. Crosbie: I'm having trouble with your question. It is real estate. It is a project. There are restrictions on the liquidity of the investor. And that's one of the factors that one would take into account in assessing the required return.

Senator Tkachuk: That's fine, Mr. Crosbie, but you just explained to Senator Lynch-Staunton - and I am sorry, but this real estate kept bothering me.

You based all of your calculations on real estate. And you're telling us all of that, that you're basing all of your calculations on real estate and those other people didn't know anything. I'm asking you -

Mr. Crosbie: I didn't say that.

Senator Tkachuk: In year one -

Mr. Crosbie: I didn't say that.

Senator Tkachuk: In year one, real estate, in year one, could they sell it?

Mr. Crosbie: There were restrictions on their ability to sell.

Senator Tkachuk: No, they couldn't sell it. Could they sell it in year two?

Mr. Crosbie: Well, there were restrictions on Claridge's and Matthews' ability to sell their interest.

Senator Tkachuk: If I have real estate, I can sell it. If I don't have real estate, I can't sell it. So I'm just asking you -

Mr. Goudge: Not necessarily. There are all kinds of real estate transactions where the developer can't sell it.

Senator Bryden: Your mother has a life estate in it and you can sell it subject to that. You can't sell it just because you own real estate -

Senator Tkachuk: I am asking if he could sell it and he said - I'm saying you can't sell it for ten years and there are restrictions after that. So is this exactly a real estate transaction, a simple real estate transaction?

Mr. Crosbie: Hold it. It is a real estate transaction. There are restrictions on the liquidity. You can say that about any investment; sometimes there are restrictions on the liquidity.

Senator Tkachuk: So when you did the comparison, did you compare your numbers to the same situation?

Mr. Crosbie: The numbers that I have given you, we looked at it from a number of different ways, as you can see.

Senator Tkachuk: What other situation was there?

Mr. Crosbie: And there is not a strictly, exactly comparable situation.

Senator Tkachuk: That's true.

Mr. Crosbie: That's right, and that's why I come back to the point. I mean, this is a hard thing to value, be there no mistake about it. And that's why, when it's a hard thing to value, and it is hard to know what the value is, that's why it is so important to go to the market and go to the market in a proper and professional and rigorous and sophisticated way. And that, in our view, wasn't done. And if that had been done, we wouldn't be having all these discussions.

But it wasn't done, so then you've got to do the best you can. And I've given you a number of benchmarks, you know, a number of ways of looking at this.

Senator Tkachuk: Junk bonds, that's fair.

Senator LeBreton: Junk bonds. Some benchmark.

Mr. Crosbie: Well, some benchmark? With respect, this is a much higher return than a junk bond yield. You are arguing against yourself.

Senator Lynch-Staunton: I have trouble understanding how the values of triple-B junk bonds in the United States have anything to do with trying to value deals in another country with a different -

Mr. Goudge: Just that the rate of return on this deal was higher than even junk bonds, senator.

Senator Lynch-Staunton: But American interest rates and Canadian interest rates are not the same and not comparable.

Mr. Crosbie: It is the spread.

Senator Lynch-Staunton: Theirs are traditionally lower than ours, aren't they?

Mr. Crosbie: It is the spread, senator. It is all the spread, senator.

Senator Lynch-Staunton: It is a spread that widens or narrows, and also the interest rates are built partly on where the buyers are for these bonds. And that's another factor that one should have looked into. But, anyway, you've given us a lot of information which I'll try and digest by reading the transcript. But I still want to get back, now that we have a document photocopied and distributed hopefully, 002433, on the letterhead of Crosbie & Co., private and confidential, Thursday, November 18.

I have numbered the pages, so I ask you to go to page 3. The heading is:

Rates of Return Analysis

- Real Estate Approach

- Public Utility Approach

- Alternative Investment Approach

Comments: A pretax compounded rate of return of 23 per cent to the providers of equity may not be unreasonable.

Now, I can only take from that, that, by the 18th you've done a lot of work along the lines that you've very professionally given us this afternoon and come to this conclusion - and came to this conclusion, a conclusion which, suddenly, within the next few days, is contradicted in the Nixon report. So, I just - I'm trying to follow how you proceeded to come to this conclusion that 23 is fine and then, a few days later, if not the same day, there is a different conclusion in the draft of the Nixon report which is picked up in the final report.

So what happened between the 18th and the 25th or 26th?

Mr. Crosbie: Well, as we tried to discuss this morning, as I tried to say, I think the only thing that counts is the final report. That's when we brought it all together and we draw our conclusions. And I think it is very normal in our business and in our industry, in the financial business, when you are trying to figure out a deal, whether it is rates of returns or whether you should invest or not invest, it is a process of evolution.

And you go through - it evolves. And at that point in time, I am doubtful if we would have had all the information available to us. As I have said, we are looking at a number of different approaches and it is an evolving situation. And there is a lot of consensus and discussion within an organization like ours and out of it evolves a view. And how - the process, I don't think - what counts is at the end of the day. Really, you know, these are sort of discussion documents.

This is not a - this is a report to Mr. Nixon. And we have a number of things in here. And we were looking at a number of different things. And I really - I don't think - you know, at any time in the investment process, your ideas evolve as more information becomes available.

Senator Lynch-Staunton: What is this document then? You're rejecting it?

Mr. Crosbie: Well, my guess is that this was -

Senator Lynch-Staunton: Did the government make a mistake in releasing it to us?

Mr. Crosbie: No, not at all. As I said, we met with Mr. Nixon and Mr. Goudge on a regular basis, we had a laid-out schedule, and -

Senator Lynch-Staunton: But I'm talking about this particular document.

Mr. Crosbie: Yeah. We prepared for each -

Senator Lynch-Staunton: Excuse me. It comes to a definite conclusion on an assessment of the rate of return. It is not a "may be" or a "could be". It is "may not be unreasonable".

So somebody, those who worked on this - and there are tables here doing the junk bond thing and other comparisons with airlines and airports elsewhere; so it is not as if it was off the top of the head; this is after a lot of thorough work - has come to this conclusion on the 18th of November.

All I want to know is what happened between the 18th and the 25th to have a complete reversal in the assessment of the 23 per cent pre-tax return? That's all I want to know.

Mr. Crosbie: Senator, I am having trouble getting my ideas across. This is an evolving process. And we were doing work in a number of different areas to try and get a sense of the returns under different scenarios, different approaches, different ways of coming at it. And we were preparing, throughout the piece, various updates and discussion documents and so forth and so on, to advance the discussion and help our thinking evolve. And we came to the view that we did.

Whether we were up or down or round about in the middle I don't think is relevant. What counts is the view at the end of the day, after all the work - we had done all the work. We brought it all in. As a firm, we were able to meet. We were able to get the different views of the partners and crystallize our thinking -

Senator Lynch-Staunton: I will interrupt this time because mine is a question which requires a precise answer. On the 18th of November, Crosbie & Co. had come to the conclusion, written out and distributed, that 23 per cent may not be unreasonable.

Mr. Crosbie: No. That is absolutely wrong.

Senator Lynch-Staunton: Well, I am only reading what is written on your letterhead.

Mr. Crosbie: This is a document, this is a draft document that was before -

Senator Lynch-Staunton: It doesn't say draft anywhere.

Mr. Crosbie: Well, it was a report to Bob Nixon and Steve Goudge and it had not been vetted in the firm. It had not been gone over with the firm. These were discussion documents, working documents, whatever you want to call them.

Senator Lynch-Staunton: So what you are saying is that this was the firm's conclusion -

Mr. Crosbie: No, it was not the firm's conclusion.

Senator Lynch-Staunton: - but it would have to be approved by -

Senator LeBreton: Mr. Nixon.

Mr. Crosbie: It was not.

Senator Jessiman: Mr. Goudge.

Mr. Crosbie: It was not -

Senator Lynch-Staunton: It is not a conclusion then?

Mr. Crosbie: What?

Senator Lynch-Staunton: It is not a conclusion?

Mr. Crosbie: No, it's a document. It's a process you're going through. The only conclusion is the final report.

Senator Lynch-Staunton: So what we're to do then, Mr. Crosbie, and you said it again this morning, we should only discuss the final report, nothing leading up to it. All your notes, all your drafts, all your -

Mr. Crosbie: No, I didn't say that either, Senator Lynch-Staunton. You are welcome to discuss anything you want. I'm just trying -

Senator Lynch-Staunton: You said all that counts is the final report.

Mr. Crosbie: You're welcome to discuss whatever you want and the process. We've been trying to be 110 per cent open with you, but I'm just saying, I don't think you should read anything into this.

Senator Lynch-Staunton: Then why was it given to us?

Mr. Crosbie: Well, we had to give everything to you. We gave all our files to you.

Senator LeBreton: I have a question. Is there another final draft? You say that's a draft, although it is not -

Mr. Crosbie: Well, no, but there were reports every week or so when we met.

Senator Lynch-Staunton: Where are they?

Senator LeBreton: How then -

Mr. Crosbie: They've all been provided to you. Everything, you've got everything.

Senator LeBreton: How then on the 18th of November -

Senator Lynch-Staunton: No, we didn't get everything. We got everything that was selected by the gumshoes.

Senator LeBreton: How then on the 18th of November did you draw that conclusion, and yet, on the 18th of November, the pre-determined conclusion was already in the Nixon report. It wasn't in the -

Mr. Crosbie: Now, look, you're -

Mr. Goudge: Where is that, senator?

Senator LeBreton: It's in November 18th, an unconscionably high return over the life of the contract, the private sector, on the 18th.

Mr. Goudge: Is that on page 1 of -

Senator Jessiman: Page 1 of the 18th.

Senator LeBreton: Of the 18th.

Mr. Goudge: In bold letters?

Senator LeBreton: Yes. So you have Mr. Crosbie submitting this, it does not say draft, and as a conclusive document. And already you have - despite his good work, you've already drawn your conclusions. And Mr. Crosbie now has been brought around to this conclusion. So I'm asking you, Mr. Crosbie, who convinced you that this was wrong and this is what was right?

Mr. Robert Nixon, Chairman of the Board, Atomic Energy of Canada Ltd.: Before Mr. Crosbie answers, perhaps I should say that the reference to my report that you're referring to was opinions, based on opinions expressed to me by a number of people who had been associated with the deal and they had expressed those views. But it was definitely - it was not the final report, although, in the final report I did find that the rate of return was excessive.

Senator LeBreton: Well, Mr. Nixon, you relied on Mr. Crosbie's work for your report. He comes out with a document, a very definitive document. You've already predetermined what the answer is and Mr. Crosbie -

Senator Jessiman: Same day.

Mr. Nixon: I can't agree with the senator's -

Senator LeBreton: So I want to know who -

Mr. Nixon: - assumptions in that regard -

Senator Jessiman: They are not assumptions.

Senator LeBreton: I want to know who told them -

Mr. Nixon: - because we were receiving views from a number of people and, as Mr. Crosbie said, his work continued. He had a number of parallel streams in reviewing this matter, and it wasn't until the last week, when Mr. Goudge had reviewed the provisions of the contract, and Mr. Crosbie had completed his review of the financial aspects of the contract, that we put it all together and made a report to the Prime Minister.

Senator LeBreton: Well then, why didn't Mr. Crosbie put together a document that, in fact, tailored itself to your preordained conclusion, instead of doing a document where he says it is all, you know, one thing?

Mr. Crosbie: Senator LeBreton, the only thing I can infer is that you are suggesting that we were somehow influenced by Mr. Nixon and that's not the case.

Let me tell you categorically, absolutely - the opinions expressed in our report are our opinions. We believe them, we've backed them up, and we came to those conclusions on our own and we were not -

Senator LeBreton: Well, Mr. Crosbie -

Mr. Crosbie: - influenced in any way whatsoever by Mr. Nixon.

Senator Lynch-Staunton: Why did you discuss it with him?

Senator LeBreton: Mr. Crosbie, why then did you have one conclusion and Mr. Nixon had another, and Mr. Nixon -

Mr. Crosbie: This is not a conclusion. This is part of a process.

Mr. Goudge: You are misstating the November 18th document. You are misstating it.

Senator LeBreton: I'm not.

Mr. Goudge: Yes, you are, senator, with the greatest respect. It is in bold in that document. What Mr. Nixon is there referring to, as he has just said, is the complaints he was getting by a number of people he talked to about their views. Read the document. It says this chapter lists these criticisms in bold.

One of the criticisms that was being told to Mr. Nixon time and again was that there was an unconscionably high rate of return over the life of the contract to the private sector.

Senator Jessiman: That is not what he -

Mr. Goudge: That is not his conclusion.

Senator Jessiman: - said under examination.

Senator LeBreton: But, Mr. Goudge, Mr. Goudge, I do not -

Senator Jessiman: He depended on -

Senator LeBreton: - dispute what you have just said. Mr. Nixon gathered very biased views. He had those - and those were his benchmarks. Mr. Crosbie conducts a report, finds a different conclusion. All we're asking is, how does Mr. Crosbie's conclusion stand up -

Mr. Crosbie: That is not my conclusion. This is not my conclusion.

Senator LeBreton: You tell me what this document is.

Mr. Crosbie: This was a reporting document. We prepared reporting documents for Mr. Nixon every week and it was discussion papers and thoughts and ideas and where we were in the process.

Senator Jessiman: But you, in this document, refer to three matters: real estate approach, public utility approach, and alternative investment approach which you changed to T3. Those are the three things that you were looking at through the piece and you came to that number. I don't know who changed your mind.

Mr. Crosbie: No, no, you cannot draw an inference.

Senator Jessiman: It was either Mr. Goudge, Mr. Nixon -

Senator LeBreton: Or maybe Mister -

Senator Jessiman: - or maybe somebody else.

Mr. Crosbie: You are reading something into it that you want to read. You cannot draw that inference. It is absolutely improper to draw that inference.

Senator LeBreton: So we can't take your word.

Mr. Crosbie: No, you cannot draw that inference either, right?

Senator LeBreton: Obviously, obviously.

Mr. Crosbie: You are putting words in our mouths and you are attributing things to us that are not proper.

Senator LeBreton: Oh!

Senator Lynch-Staunton: To say the least, it is an amazing conversion -

Senator LeBreton: It sure is.

Senator Lynch-Staunton: - from a definite statement to a definite statement, both directly opposite, contradictory to each other. In any event, we will read the transcript and hopefully get to the bottom of this. I would like to suggest that this was not a risk-free, ordinary-type real estate development but a high-risk venture, quite unprecedented. And I just want you to agree with me that the commitment of the principles was way beyond $61 million, which is what the rate of return is always based on.

Is it not a fact and should it not also be considered as a type of equity that the $31 million spent on preliminary expenses is something on which the consortium would have a right to earn a return?

Mr. Crosbie: If my recollection is correct, weren't the pre-expenses $5 million?

Senator Lynch-Staunton: No. There was a $5 million notional figure used, but I believe the total preliminary expense was about $30 million, when you throw everything in. It can be attributed -

Mr. Crosbie: The number we worked off of was - it was, I believe, a $66 million investment.

Senator Lynch-Staunton: Well, yes.

Mr. Crosbie: And that's the basis on which we computed the returns.

Senator Lynch-Staunton: But somebody has forgotten the -

Mr. Crosbie: These are the numbers that were provided to us by Transport Canada.

Senator Lynch-Staunton: Well, these are the numbers provided to us by Transport Canada.

Senator Bryden: Mr. Chairman, I was under the impression that the $33 million figure, the first time that I was aware of it was when it was raised by one of the proponents, that they had somewhere like $31 million in soft costs.

Senator Lynch-Staunton: All right, by one of the proponents, someone before us.

Senator Bryden: But certainly after Mr. Crosbie would have been doing his financial analysis.

Senator Lynch-Staunton: If Mr. Crosbie had interviewed the proponents, he might have gotten more facts to base his assessment on. That's the problem. He only talked to Transport.

Mr. Crosbie: We worked off -

Senator Lynch-Staunton: You worked off of Transport documents.

Mr. Crosbie: - the spreadsheet and financial analysis provided by Transport Canada -

Senator Lynch-Staunton: That's right. Selected documentation -

Mr. Crosbie: - which had been provided to them by the Pearson Development Corporation. So we worked off their numbers.

Senator Lynch-Staunton: Supplied to you by Transport.

Mr. Crosbie: Yes, but it was -

Senator Lynch-Staunton: Yeah. So you'll never know whether you got all the documents to come to as fair an assessment as you could. You got selected documents. We've seen the list of them, including Treasury Board submissions that we weren't entitled to see. But not only are we working with different documents, you were working with documents that we could not see and apparently will never see.

Now, did you look at those submissions and base conclusions on those?

Mr. Crosbie: We reviewed a tremendous number of documents.

Senator Lynch-Staunton: Yeah, but I'm talking about the three Treasury Board submissions.

Mr. Crosbie: Oh, no.

Senator Lynch-Staunton: You didn't see those?

Mr. Crosbie: No.

Senator Lynch-Staunton: You didn't look at them?

Mr. Crosbie: No.

Senator Lynch-Staunton: You didn't know anything about them?

Mr. Crosbie: No, knew nothing about them.

Senator Lynch-Staunton: How extraordinary.

I know my time is running out and the day is running out, so I will just go to - you interviewed John Desmarais, did you not? You had meetings with him?

Mr. Crosbie: Yes.

Senator Lynch-Staunton: You are aware of his participation in this whole process? You are aware of how involved he was in it and how familiar he is with it? As you were interviewing him, you could tell that he was one of the principal sources of information for you in evaluation and so forth?

Mr. Crosbie: Yes, yes.

Senator Lynch-Staunton: And you relied a great deal on his judgment, I'm sure. And you found him up front and -

Mr. Crosbie: Yes.

Senator Lynch-Staunton: - as he has been here, remarkable and to be commended. The reason I want your assessment of Mr. Desmarais' opinion is because, when he was here on the 16th of August, and I refer you to page 12:69 of the final transcript, he was asked by Mr. Nelligan: All right, did you discuss that - I will go back.

Mr. Rowat: The departmental experts, as well as our outside expert, Mr. Stehelin, said that the rate of return fell within an appropriate range.

Mr. Nelligan: All right. Did you discuss that with Mr. Nixon?

Mr. Desmarais: We did not discuss it with Mr. Nixon. We discussed it with his business advisor. We had Paul Stehelin discuss it with his business advisor as well.

Mr. Jolliffe: It was at this point I had my only conversation with Mr. Rollit if Crosbie and Company, and later with Mr. Crosbie, particularly around this rate of return question.

Does that jive with your memory?

Mr. Crosbie: Well, yeah, it's hard for me to follow it when you're reading it.

Senator Lynch-Staunton: Okay.

Mr. Nelligan: Did you explain your position to him at that time?

Mr. Jolliffe: Yes. We went through calculations of the rate of return and the pre- and post-tax situation.

Mr. Desmarais: Mr. Stehelin did explain to him, by the way, on the phone the rates of return for utilities that we were using as a model.

That jives with what you told us earlier.

Mr. Nelligan: I think Mr. Crosbie did not feel those rates were available.

Mr. Desmarais: I'm not sure what Mr. Crosbie felt.

Mr. Nelligan: In any event, I wonder, Mr. Desmarais, if you could give us a few moments of the opinions -

I guess it means in a few moments.

...of the opinions you have expressed in other litigation - the rate of return notwithstanding - as to the risk which was being incurred by the developer as to having any return at all?

This is Mr. Desmarais here, asked to repeat some of the testimony he's given at the litigation in Toronto about a year ago, I guess.

Mr. Desmarais: I believe I said in my cross-examination for the litigation that occurred last January that the risks were of such an extent that there was a possibility that this development would not make any money.

Mr. Nelligan: So that the rate of return might have been zero?

Mr. Desmarais: Yes, sir.

Mr. Nelligan: And that is what your present opinion is?

This is quite a new months later.

At least, that's the opinion you filed in the litigation?

Mr. Desmarais: That is still the opinion, sir.

So here is a senior transport department official who has helped to negotiate the deal, has followed it closely and who knows it as well as anybody could, I think, except for very few people - I don't think anyone in this room can claim the same familiarity as Mr. Desmarais - saying that his assessment is that the risks are such that, in the long run, there is a high chance that this deal won't make any money at all.

Now, what is your opinion on his opinion?

Mr. Crosbie: Well, I mean, one of the things we did with Mr. Desmarais was go through all of the various risks and try to assess them. And, I think, if you go through each of the risks and categorize them one by one, I think it's hard to come to that conclusion.

I mean, you can look at - I mean, we can go through the risks. Like, the risk that Air Canada defaults. Well, if Air Canada defaults, you then have a right, under the agreement, as we understand it, to put on a passenger fare charge subject to government approval.

What happens if other airlines default? Well, the other airlines are obligated to pick up their share of the leases. Finally, if all the airlines default, you've still got an airport and, presumably, if this thing is competitive - and we would assume it would be competitive or else Air Canada would not have entered into these deals in the first place - airlines have still got to fly in and out of Toronto.

So, you know, you can go through that risk. And it is - when you analyze it component by component, it is not - sure, it's a risk, but it's a contained risk, it's a managed risk. And you can go through risk after risk after risk and analyze it in the same way. And I think if you do that, as we have tried to do, and we tried to do it with Mr. Desmarais, and so forth, I think it is hard to come to that conclusion, to say that there is a very high probability. It depends what he means by "high".

But, sure, there is a possibility, but to say a high probability based on the information that he gave us, I think that is too strong.

And the rates of return that I gave you, Price Waterhouse, DS Marcil, Wood Gundy, outside real estate advisors - those rates of return all have in them, you know, business risks.

So you're using those as a benchmark; they have business risk in them. Sure, there is business risk in this one. And we have provided a lot of extra return to compensate for that to the extent there is business risk.

Senator Lynch-Staunton: Do you think CIBC, the Canadian Imperial Bank of Commerce, is a high-risk investment?

Mr. Crosbie: Do I think CIBC -

Senator Lynch-Staunton: Yes.

Mr. Crosbie: - is a high-risk investment?

Senator Lynch-Staunton: Yes.

Mr. Crosbie: Just the stock, you mean?

Senator Lynch-Staunton: Yeah.

Mr. Crosbie: I'm not going to comment on that because I haven't done a proper -

Senator Lynch-Staunton: All right then. Do you think that an after-tax return on CIBC stock of 17 per cent is excessive, based on equity?

Mr. Crosbie: I'm just not going to get into that.

Senator Lynch-Staunton: No, but you've made comparisons between public utilities and real estate, and I want to take you through, in the few minutes I have left, the returns on equity of other forms of investment to suggest again that that 23 per cent or 14 per cent is far from excessive based on the high risks involved in this deal, when you're asked to commit up to $700 million based on certain things happening and no return in the first 10 years and all sorts of risks right through until there is a turning point and then you start getting your money back.

On Rogers Communication, total tax return equity is 52 per cent. That seems high to me but nobody -

Mr. Crosbie: I don't know where you're getting these numbers and I don't know how you're interpreting them.

Senator Lynch-Staunton: These are done by professionals who are competitors of yours in Toronto.

A utility, Atco, 18 per cent. Eighteen per cent.

TransCanada Pipeline for fiscal 1995, a regulated utility, 17 per cent. That's after tax. West Coast Energy for fiscal 1995, after-tax return on equity 19 per cent. These are the utilities. Canadian Utilities, 17 per cent.

So there are 17 to 18 to 19 in fiscal 1995, after-tax. The real estate, I have only got two here - there are obviously others and I'm sure they are all over the lot - Margro Properties, after-tax 15 per cent. And that's not a high-risk investment in terms of committing $700 million over a 10-year period. And Trizec which is certainly higher risk by the nature of its business but still is returning, on equity, 21 per cent. All after tax.

Mr. Crosbie: Yeah, but -

Senator Lynch-Staunton: Now, if we're going to say that -

Mr. Goudge: That sounds like giving evidence.

Senator Lynch-Staunton: I beg your pardon?

Mr. Goudge: That sounds to me like giving evidence.

Senator Lynch-Staunton: Giving evidence of what?

Mr. Goudge: Rates of return.

Senator Lynch-Staunton: We are trying to establish whether the 23-point-whatever-it-is before, or 14 point after tax, is reasonable or unreasonable. And after seeing the return on equity, after tax, on established companies in Canada, including banks, and assessing the high risk of this project with no return for the first 10 years, and all the other aspects of it that we've been discussing, my suggestion is that 23 per cent before was quite reasonable and the Government of Canada had a very good deal at the time which unfortunately now is down the drain.

Thank you, Mr. Chairman.

The Chairman: Mr. Crosbie, how did you identify the risks?

Mr. Crosbie: Well, we reviewed the project in some detail with the officials from Transport Canada and identified the various risks. And, I mean, some of the risks that we identified and assessed in our own mind, for example, was an airline default; what happens if Air Canada defaults? What about the risk of the concession income covering the concession portion of the operating costs and capital costs? What about capital cost overruns? What about capital expenditures to maintain the facility? What about the risk on accounts receivables? What about the environmental risks? What about the risks to undertake phases 2 and 3?

We've gone through - we itemized all the various risks and we tried to analyze them and assess how significant a risk were they really? And I could take you through each one of those risks and make comments to give you a sense of it. But I think when you do, I think one sees that these risks have been assessed, identified and the agreements provide - are structured in such a way as to contain and manage those risks.

The Chairman: Yes. Well, it seems to me it's very similar to the risks which we have heard about partly through our great and dear friend Mr. Weston of The Ottawa Citizen, of the ones that are identified in the Treasury Board document, which you have and we haven't.

Senator LeBreton: And which he said he didn't see.

The Chairman: Well, we'll take his word for that, of course. But all those risks that we might assume were contained in the Treasury Board document are, in your opinion, easily containable or manageable.

Mr. Crosbie: "Easily" is too strong a word, I think. We tried to work through with the Transport Canada officials and to understand the risks, and we itemized those.

The Chairman: Yes.

Mr. Crosbie: Then we tried to assess them: How significant are they and how have they been dealt with.

The Chairman: Yes.

Mr. Crosbie: And if you go through them, each one of them has been dealt with in different ways.

The Chairman: Yes.

Mr. Crosbie: And we think those risks have been managed and contained.

The Chairman: Yes. No, it was - You were helped in identifying the risks by the Department of Transport, clearly.

Mr. Crosbie: Yes.

The Chairman: You really didn't have to do a great deal of assessment on your own part, the Department of Transport assisted you in determining what those risks would have been.

Mr. Crosbie: Yes, we asked them questions.

The Chairman: Yes. That's right.

Senator Lynch-Staunton: Mr. Chairman - sorry.

The Chairman: But you said that they were contained risks - I think you said "manageable risks".

Mr. Crosbie: Yes.

The Chairman: Yet Mr. Desmarais testified before the Ontario Court (General Division) that it might have a zero rate of return because of the risks involved. I mean, you'd make a great witness for the Pearson Development Corporation in that case.

Mr. Crosbie: Well, you know.

The Chairman: No. That's all.

Senator Lynch-Staunton: At $2500 a day, I don't think they could afford him.

Mr. Chairman, I'm sorry. If I may be allowed, I don't want to take advantage of your generosity but I have two letters that I should like to table and ask Mr. Crosbie a quick answer to them. One is 002277 - I understand they are being distributed. Yes they are; the witnesses get them first.

It's a letter dated December 8, '93 from Allan Crosbie and Lyndon Rollit to Keith Jolliffe, thanking him for the opportunity of working with him and his associates.

This is a very large and complex project. As newcomers to this who were trying to get a grasp of the project under very tight time frames...

So here, if anyone needs any admission of the problems that these people faced is that they were newcomers to the project and didn't have time to assess it -

Mr. Crosbie: Now hold it, hold it.

Senator Lynch-Staunton: - with the same diligence that they would have liked to give to it, apply to it.

Mr. Crosbie: No, no, no, no.

Senator Lynch-Staunton: No? So you weren't newcomers?

Mr. Crosbie: We - no. Hold it.

Senator Lynch-Staunton: Well, you said "No, no" after I finished reading it.

Mr. Crosbie: We were newcomers to the project, yes we were.

Senator Lynch-Staunton: Yes.

Mr. Crosbie: Stop. We were newcomers to the project, now.

Senator Lynch-Staunton: Right.

Mr. Crosbie: Okay? We agree with that. But we don't agree with the other phrases that you said.

Senator Lynch-Staunton: Well let's just stick to your words:

...who were trying to get a grasp of the project under very tight time frames,...

Mr. Crosbie: Right. Tight time frames.

Senator Lynch-Staunton: Right.

Mr. Crosbie: Yes.

Senator Lynch-Staunton: And you got a grasp of it?

Mr. Crosbie: Yes.

Senator Lynch-Staunton: Just.

Mr. Crosbie: No.

Senator Jessiman: No you didn't?

Mr. Crosbie: We got a significant grasp of this project.

Senator Lynch-Staunton: A significant one.

Mr. Crosbie: And we feel - Based on the analysis that we did, we feel very comfortable with the report and the opinions and views that we have expressed.

Senator Lynch-Staunton: 'Cause this report cost the taxpayers $100,000 and led to C-22, which cost the travelling public of Toronto two years delay in the redevelopment of Pearson and may cost the taxpayers hundreds of millions of dollars in claims.

Senator Bryden: That is because that's still tied up in your committee.

Senator Lynch-Staunton: That is completely wrong.

Senator LeBreton: No, that's wrong. That's is where you are wrong.

Senator Lynch-Staunton: You can start working on the airport any time.

Senator Bryden: That's where it is. You've simply -

Senator Kirby: The bill is tied up in committee!

Senator Lynch-Staunton: Oh, the bill is tied up there and, hopefully, it will die there.

Senator Bryden: That is exactly your purpose.

The Chairman: Peace!

Senator Bryden: You would have been better off to pass the hat, as I said - at least for the people of Canada -

Senator LeBreton: No, no.

Senator Bryden: - than to highjack that bill and hide it in there.

Senator Lynch-Staunton: I think even Mr. Goudge would agree that it violates the rule of law and I doubt that he, as a responsible officer of the court, would accept that such legislation be passed.

Senator Kirby: What, tying it up in committee violates the rule of law? Some people might even argue that.

Mr. Goudge: No, not at all. Not a chance.

Senator LeBreton: There's nothing that ties up the -

Senator Lynch-Staunton: The other document I want to present is - The other document I want to ask Mr. Crosbie about, and then I will stop, is 002395, a letter dated November 25 from D.G. Dixon, Director General Finance and Administration Transport Canada.

Dear Mr. Rollit,

Crossed out, "Lyndon":

As discussed, I understand that you will be providing me with a draft copy of your report or appropriate sections of your report containing information and comments I have provided. This will help to ensure the accuracy of the information and ... also provide an opportunity to add any additional details or clarify points that are included.

Was this done?

Mr. Crosbie: I believe so.

Senator Lynch-Staunton: It is on the 25th.

Mr. Crosbie: I know that we were on the phone to them, to different people in transport going over various statements that we'd made in the report or clarifying certain facts, and so forth.

Senator Lynch-Staunton: But did you supply them with a draft copy of the report?

Mr. Crosbie: I don't believe we supplied a draft copy of the report.

Senator Lynch-Staunton: No. Although you'd agreed to, in order to eliminate any inaccuracies.

Mr. Crosbie: It was more parts of the report which were based on facts from Transport Canada that we were reviewing with them.

Senator Lynch-Staunton: And were those submitted to him?

Mr. Crosbie: I believe so.

Senator Lynch-Staunton: Could you find out for us, but before we adjourn today?

Mr. Nelligan: I think, senator, that Mr. Desmarais said that he got certain pages of the report. He didn't think he got the whole report but that he got particular pages.

Senator Lynch-Staunton: I'm talking about the Crosbie report not the Nixon report.

Mr. Nelligan: Yes, I'm sorry. It was the Nixon report, yes.

Senator Lynch-Staunton: I'm talking, this was a letter from Mr. Rollit of Crosbie. It's very important to know whether this was double checked with transport to make sure that there were no inaccuracies. Forget the opinion side, just the figures.

Mr. Crosbie: I'm virtually certain it was, but I'd be happy to check.

Senator Lynch-Staunton: Could you check with your office?

Mr. Crosbie: I'd be happy to check.

Senator Lynch-Staunton: Thank you. Thank you, chairman, for your patience.

The Chairman: Okay. Senator Kirby and then Senator Tkachuk.

Senator Kirby: Thank you, Mr. Chairman. I'll be fairly brief, but since Mr. Goudge hasn't done any work today, I wonder if I could ask him a few questions.

Mr. Stephen Goudge, Gowling, Strathy and Henderson: Don't feel you have to, senator.

Senator Kirby: Well, you know, I mean, you've just been sitting there all day.

As a non-lawyer, what I've been trying to get a handle on is the government's legal position at various points in time as we went through this process. And I want to look at it on four specific dates. And I'll give you the dates and I'll tell you why I picked them.

August 31, because it's the day after the minister made the announcement that there had been a general agreement; October 2, because it's after the writ was issued but before anybody signed anything. Okay?

October 5th, because it's after the minister had signed but before the documents came out of escrow and the final documents were signed; and then October 8th.

And, I guess what I'd like to do - October 8th - What I want to do is, I want to understand how, if at all, the government's position changed as a result of those evolving events. That's why I've tried to pick specific points in time.

First, am I correct - because I think there's even been written legal evidence to the fact that on October 8th - i.e, after October 7th - there was, in fact, a legally binding agreement?

Mr. Goudge: That certainly was my view and it was the view of the Department of Justice.

Senator Kirby: And we've had a written opinion on that. Okay. Let me go back.

I'm clear where we ended up, which is a legally binding opinion in a contract that didn't have a cancellation clause and that was on the 8th of October -

Mr. Goudge: Yes.

Senator Kirby: - when the election was on the 25th. Okay. Let me go back to the 31st of August.

On the 30th (sic) of August the minister made a statement where he talked about a general agreement. The general agreement was the terms he's used in his press release.

In your opinion, does the - What are the legal implications of the minister making an announcement that government intends to do something and that there's been a general agreement? What are the implications of that to the government?

Mr. Goudge: Let me approach that two ways.

Senator Kirby: And recognize, please, that I'm not a lawyer. So you've got to Dick and Jane it for me.

Mr. Goudge: Well, I can only Dick and Jane it for you; I can't do more than that.

It is clear to me that contractual liability is created on October the 7th. So that by October the 8th, the government has a contractual obligation. What, if any, obligation the government has before that I find, frankly, very obscure.

I cannot imagine that a government announcement as of the end of August creates any liability that somebody could sue over. There is clearly no contract at that point in time. It is clear that the officials knew they were not making a contract and were indeed, as I read the transcript, concerned about the use of the word "agreement" and saw that it was modified by the "fuzzifier" general. So there's no contractual liability at that stage. I don't think there's any contractual liability from then on until October the 8th. So, I can kind of telescope your other dates and say to myself: This notion of kind of incremental legal responsibility that I know has been in the air is one that's been -

Senator Kirby: It's been more than in the air, it's been in the testimony from a couple of people.

Mr. Goudge: I understand that. I find that a legal notion the basis for which I don't understand, because for me contractual liability requires the conclusion of a contract. That happens on October the 8th. What ability anybody has to sue the government up until that point, if there is no contract ultimately concluded, I, frankly, find difficult to understand.

Senator Kirby: In that answer you used the word - You always preface the word "liability" with the word - I guess it's an adjective - "contractual".

Mr. Goudge: Yes.

Senator Kirby: Suppose you drop the word "contractual" - and I say that only because at least two witnesses that I can think of, there may have been more, have talked about liability imposed on the government increasing with, at various sort of demarkation points or various stages. And I'm trying to understand whether your use of the word "contractual", whether the adjective "contractual" is pivotal to your answer or whether there is some other - and, my not being a lawyer - form of liability? Like, if I promise to do something and then don't do it before we sign a deal, have I not incurred some risk or some liability?

Mr. Goudge: Not if it's not a promise that is part of a contract or some kind of - I mean, one can reach for notions of negligent misrepresentation but no analogy I can think of provides an easy substratum of liability, to use the unqualified phrase.

The only thing that I can conceptualize that provides the foundation for liability is the conclusion of a contract. As I said before, there's no law of semi contract. That is, the ordinary bargain that you and I might try to strike as we go through the bargaining process. It is very difficult for me to conjure how any of us can be liable at any instant of that if we never conclude a contract. I mean, apart from my defaming you, or something like that, which is outside the contractual relationship.

How, just by conducting our negotiations as they build towards a final contractual conclusion, either of us could engage liability, could attract liability, if a contract is not ultimately formed, is beyond me. I don't know what the legal foundation of that would be.

Senator Kirby: Someone - and I can't, frankly, remember who - talked about, if the government had not proceeded on October the 4th, if the minister had not proceeded on October the 4th to sign the documents, the government might have been liable for the costs that the company had incurred in preparing, responding to the RFP, et cetera, and that's some sort of theory of restitution in some sense. Can you explain to me whether that applies and, if so, what it means in layman's terms?

Mr. Goudge: Well, I can't get in the head of the person that was making that assertion. I mean, I don't know whether one could create a notion of, "Here was an RFP. So we did the work and we're entitled, if the government decides ultimately not to go ahead, to be compensated for that."

Senator Kirby: Well, to be compensated - it's out-of-pocket expenses - to get the money back you spent -

Mr. Goudge: I can't imagine that. I would have thought that -

Senator Kirby: Sorry, you can't?

Mr. Goudge: Whenever the government issues an RFP, surely they are entitled - as, indeed, we were told they could have done in this case - to say, "None of the quotes, none of the bids come up to scratch and we're not going ahead." I mean, I would have thought that that was a precondition of the RFP process. I mean, you don't, presumably, get the right to say, when you submit a response to a request for proposals, "I know I'm going to be compensated if this thing doesn't go ahead." I mean, there's a business risk in putting in a proposal. So, just because there's an RFP that yields a quote does not seem to me to necessarily give the quoter any comfort that they're going to be able to recover the cost of putting the bid together.

I don't think that comes with the notion of the RFP that I understand. In fact, I bet - I can't remember but I bet - if you go back to the RFP that took place in this case there, I suspect, might well be an explicit provision that says that the government doesn't owe have to go ahead with this.

Senator Jessiman: I would like to ask after you on this particular part.

Senator Kirby: You want to ask a sup? Go ahead and I'll come back.

Senator Jessiman: Is that all right?

Senator Kirby: No, that's fine to me. Go ahead.

Mr. Goudge: There's one other point, senator, that I do want to raise because - I, frankly, would be delighted if somebody would indicate to me what other legal theory there could be for pre-October 8 liability on the government side.

Senator Lynch-Staunton: Can I answer that?

Senator Jessiman: I just have one.

Mr. Goudge: The one thing that is absolutely certain to me is that the decision to go ahead on October the 8th had nothing to do with avoiding perceived nothing. I mean, they didn't even get an opinion on whether there was pre-October 8 liability.

Senator Kirby: Pre-October 7th, sir.

Mr. Goudge: Yes, pre-October 7 liability. I mean, the decision to go ahead has nothing to do with somebody saying "Gee, if we don't we're going to be liable."

Senator Kirby: Right. Okay. Senator Jessiman, then back to me?

Senator Jessiman: My question is to Mr. Goudge. Mr. Goudge, you do know, or do you, that there was an offer outstanding?

Mr. Goudge: What do you mean "an offer", senator?

Senator Jessiman: I mean, page 39 of the request for proposal said:

Each proponent is invited to submit one Proposal which constitutes a firm, irrevocable offer to the Government.

Having made that proposal, this corporation, or the corporations that made the bid, had an irrevocable offer outstanding for 18 months from the date set by the government as the latest date for submissions of proposals. So we now have, long before October the 7th, an irrevocable offer - part of a contract. Correct? One part of the contract? One part of a contract. Forget an acceptance, we've got a contract, right? I'm asking you as a lawyer.

Mr. Goudge: Sure, yeah.

Senator Jessiman: You've got an irrevocable offer outstanding. If it's accepted, do we have a contract?

Mr. Goudge: Yes.

Senator Jessiman: Yes. Okay. We now go to page 52 of the same request for proposals:

Right to Accept or Reject Proposals

The Government has the right:

i) to reject any or all of the proposals;

ii) to accept any Proposal;

...to elect not to proceed with the Project all as it so determines in its sole and absolute discretion.

Well, it did reject one because one that Mr. Nixon failed to mention - or whomever did this report failed to mention - because they didn't put up the million dollars. The firm of -

Senator LeBreton: Morrison Hershfield.

Senator Jessiman: Yes, Morrison Hershfield. But we'll talk about that later.

Now, did they accept this proposal? I'm suggesting to you - and I'm trying to get copies for you; and I don't know if they're being handed out now or not but I'll get it for you - and I'm sure you've seen it, a letter sent to Paxport which sets out that they were the best acceptable overall proposal. And they had two conditions, two conditions. It says: "We will negotiate towards an agreement subject to two things."

The first thing was financeability. And it was evidence given here not many days ago by Mr. Desmarais and Mr. Rowat that financeability had been arrived at and satisfied by March of 1993. The other was to complete the terms of the balance of the documents.

Now, the politicians that are involved in this had to be satisfied that this offer that was outstanding, and their acceptance was conditional upon certain things. And by August the 27th, which was four days prior to the announcement you spoke of, they passed an order in council because all the - everything was complete as far as the politicians were concerned. They didn't change one article, one preposition, one adverb, one adjective, one verb, or any other matter in all those 110 documents that were closed on October the 7th. And you tell me there's no contract?

Mr. Goudge: I tell you and the people that negotiated it tell you.

Senator Jessiman: That's not true.

Mr. Goudge: Yes they do. I read the testimony.

Senator Jessiman: That's not true.

Mr. Goudge: The people negotiating it were absolutely crystal clear that there were substantial negotiations yet to be completed at the end of August.

Senator Kirby: And they didn't negotiate between the fourth and the seventh?

Mr. Goudge: Yes. That's what Mr. Rowat said to you.

Senator Jessiman: None of which required any input -

Senator LeBreton: Or return to Treasury Board -

Senator Jessiman: - from the persons - There is liability and you know it.

Mr. Goudge: With respect, senator, there's not. I mean, Mr. Rowat was crystal clear. He said there were further ser-

Senator Jessiman: Mr. Rowat?

Mr. Goudge: Absolutely, he was.

Senator Jessiman: He's not a lawyer.

Senator Lynch-Staunton: On a supplementary, if I may, I have Mr. Rowat's testimony here.

Senator Jessiman: He concluded, he said.

Senator Lynch-Staunton: On October 23rd, page 1110-3:

If you're asking, did I, as the negotiator, have a view on potential liability, I guess I would have to say, as a layman, my view was one of incremental exposure at every major milestone.

So we had a milestone, let's say, in June when we signed the document, the status document; we would have another major milestone when we got the order in council. An expression of that major milestone would be the general agreement that was announced on August 30, and so on.

So if you see what I mean, as you step through the process of negotiation, my view is that we had incremental exposure in terms of liability.

This only confirms what Madam Bourgon told us. Her terms were: "Some degree of liability increasing every step of the way."

Mr. Rowat also repeated himself, Mr. Shortliffe and others, and even Robert Green, the lawyer from the Department of Justice was here on the 23rd. On page 1130-4, when asked about whether there was any financial risk if the government did not sign, did not conclude on the 7th of October:

I think from experience or exposure these types of situations you have an awareness that if something goes wrong the other side might very well - particularly if there is a lot of money involved - take an action. Had I reached a conclusion? No. Was I aware of the possibilities to exposure? Yes.

Now, if those authorities are not enough, let me quote from certainly the ultimate one around this there table, Senator Bryden, who, on the same day on the same page said:

No one disagrees with the fact that there was incremental exposure as the parties went down the line here.

So liability was being created and increasing. And the suggestion is that, had the deal not been concluded on the 7th of October, the Government of Canada would have been exposed to a very significant action and damages for breech of something, which I think is -

Senator Bryden: I don't think, Mr. Chairman, in fairness - since I'm, since it's final -

Senator Lynch-Staunton: Well, you're my authority, Senator Bryden.

Senator Bryden: Senator Lynch-Staunton has recognized my wisdom and all of that good stuff. The fact is, he didn't complete what is said. Rowat and Green agreed with Mr. Goudge that there was no contractual liability.

Senator Lynch-Staunton: There was an increase in liability.

Senator Bryden: But there's nothing to prevent, as I think Green said very clearly, that somebody might sue. And somebody might be successful and somebody might fail. But the fact is that, as they went down the line, in my opinion, I believed there was increasing exposure to costs and to other things.

Senator Lynch-Staunton: That's right.

Senator Bryden: But that's a long way from huge liability.

Senator Jessiman: Not on October the 4th.

Senator Lynch-Staunton: I'm not talking about the - Anyway, I just wanted to put that on the record. Thank you very much.

Mr. Goudge: The two passages I wanted to refer to, senator, were where Mr. Rowat says there was still a lot of fundamental and substantive negotiation to go on after October the 30th.

Senator Lynch-Staunton: We agree with that.

Senator LeBreton: Well, we agree with that.

Mr. Nelligan: After August 30th, I think. Sorry.

Senator Lynch-Staunton: After August 30th.

Mr. Goudge: August. Yes. Thanks. And later on he says that that's not to say there was an agreement of any sort until the final closing. It's been my view then and now that the deal only closed on the 7th.

Senator LeBreton: We don't disagree with that, either. We don't disagree.

Senator Lynch-Staunton: And Mr. Pigeon, who was negotiating as a lawyer for the Department of Justice acting for transport, put it this way.

On August 27, when the Order in Council was made, at that point some high profile issues, which the parties used to refer to as "the blockers", had obviously been taken out of the way, and otherwise the government would not have gone to seek the necessary authorities that were required. So the blockers were out of the way...but I would emphasize though that some of them were out of the way in concept. And there were still negotiations to happen after to basically flesh them out, and to basically define the rights and obligations of the parties around those blockers.

So the bulk of the work had been done. They were doing fleshing out and dotting the "I's" and crossing the "T's".

Mr. Goudge: They were doing further substantial negotiations.

Senator LeBreton: No.

Senator Lynch-Staunton: The liability was there.

Senator LeBreton: No new initiatives.

Senator Lynch-Staunton: Significant liability.

Senator Kirby: Part of the problem, I think, Mr. Goudge, is that liability can mean a little or liability can make mean a lot.

Senator Lynch-Staunton: That's not the way he answered it.

Senator Kirby: And rarely is liability - it can mean a little or it can mean a lot. And the point - What seems to be very clear, even using Senator Lynch-Staunton's extracts from the testimony, is certainly up until the day the writ was issued and in the weeks following that up until the 4th of October when the minister signed, clearly the liability would have increased substantially presumably after the minister has signed, but that one could have not signed this contract once the writ was issued and, yes, you might have had some out of pocket liability but not a huge amount. Is that a fair assessment?

Senator LeBreton: Who knows?

Mr. Goudge: I would not even go that far, senator. I concede that the very, very cautious view, the very, very cautious view would be that, had the government decided as, clearly the report implies it should have, not to precede with this on October the 7th, there might have been the ability for somebody to commence a law suit and, conceivably, there could have been some limited liability.

Now, the question you asked me is: What do you think? My own view is I find it very difficult to imagine the legal basis for that limited liability, even for that limited liability because - and I don't want to get off into the esoteric of law, but, contracts produce potential liability when they are breached. Setting that aside, because I think everybody, including the senators on this side, say there was no contract until October the 7th, subject to the debate Senator Jessiman and I had about whether the response to the RFP produces a contract. But, for the moment, set aside the contract as something that does not arise until October the 8th. Then, as a lawyer acting for a potential plaintiff against the government, let us assume cancellation on October the third. I have to look around for what lawyers call a cause of action. What is it that I can say provides the legal foundation for the right to get damages out of the government? And I can tell you, I got a tough time finding it. I don't know what the legal pigeon hole is into which you put the cause of action that allows you to say: "Pre the contract, the government is liable." Is there some kind of detrimental reliance? Is there some kind of negligent misrepresentation? None of those concepts fit this factual circumstance for me.

Now I concede that in any circumstance where there is something of this kind of public scrutiny it might well be that to cancel would provoke a law suit. Would it provoke a successful law suit? In my opinion, no. Even a successful law suit for a minor damage point.

Senator Lynch-Staunton: Am I going to - if you'll allow me, Senator Kirby to ask, that two parties can negotiate right until the last minute, having committed themselves, over a period of time, to come to a certain decision together and one can pull out and not be exposed to any kind of liability whatsoever? I mean, this is what negotiation is all about now?

Mr. Goudge: Well, negotiations are all about reaching contractual conclusions, senator. And if a contract isn't reached, in my respectful submission, then you have to look hard and into the distance to find any potential, what I would call cause of action.

Senator Lynch-Staunton: Let me, then, use my old example of two parties agreeing on the sale and purchase of a house.

Mr. Goudge: We went through this the other day and I think-

Senator Lynch-Staunton: Yes, and we'll go through it again because I think it's very relevant. And you dismissed it, and I don't think you should.

Two parties agree to the sale of a property, a residence. And they agree on the price. And they sign the equivalent of a letter of intent, "I will see you in three months in front of the notary. And I will bring you such and such amount of money and I will arrange forever financing in such and such a way. And, meanwhile, you'll let me into the house because you're going to sell me the carpets, and this and that." So they all come to an agreement. An agreement, okay? It's not a contract. It hasn't been signed yet. It's a letter of intent - I call it that.

Mr. Goudge: Well, with respect, it is a contract in the normal house sale, senator. I mean, it's what, in Senator Jessiman's parlance, is an offer of acceptance. I mean, in the parlance of the trade -

Senator Lynch-Staunton: I see, so -

Mr. Goudge: - it's an Agreement of Purchase and Sale.

Senator Lynch-Staunton: So when the government agrees on something and wants to back out it can be absolved -

Mr. Goudge: No -

Senator Lynch-Staunton: - on that same letter of agreement.

Mr. Goudge: - because there's no Agreement of Purchase and Sale in this context. To "analogize" here -

Senator Jessiman: Mr. Goudge, you admitted, because the document said so, that we do have an irrevocable offer outstanding, which is one part of the contract. You admit if we can get an acceptance, then we have a contract.

Mr. Goudge: Yes, sir.

Senator Jessiman: Now there's a letter that I'm suggesting to you is that acceptance, subject to certain things being done, and I'm saying they were done long before October the 7th.

Mr. Goudge: You would say on that score, senator, that there was a binding contract back the previous November.

Senator Jessiman: I'm saying yes, subject to certain conditions, and there were only two conditions. One condition was met in March and the other one shortly thereafter, but once the parties are ad idem as to what they want done, then you've got a contract.

Mr. Goudge: A couple of things. First of all, as I heard you read it, and I'd have to go back to the RFP, what the RFP says is here's an outstanding offer and if we accept there will be continued negotiations. That's what I heard you say.

Senator Jessiman: No, that -

Mr. Goudge: The second obvious fundamental is the ultimate contracting party isn't Paxport, is it; it's T1T2. You tell me where T1T2 ever put in a proposal under the RFP that was accepted.

Senator Jessiman: That was agreed to as among the parties, that they were representing the same -

Mr. Goudge: It all gets done outside the RFP, doesn't it, senator?

Senator Jessiman: Not according to the government.

Mr. Goudge: T1T2 never puts in a proposal under the RFP, does it?

Senator Jessiman: Not according to the government. Whatever rights they had, Paxport would have assigned them to Pearson Development Corporation.

Mr. Goudge: Let me put it this way: Is what was dealt with on August the 30th the Paxport proposal under the RFP or something different?

Mr. John Nelligan, Q.C., Counsel to the Committee: That was the evidence of Mr. Desmarais.

Mr. Goudge: It's something different, isn't it?

Mr. Nelligan: Mr. Goudge, I'm just putting this to you just as evidence. Mr. Desmarais, and I believe some of the others, said "We only dealt with the Paxport deal." Does that make any difference to your answer?

Mr. Goudge: As I understand it, what's dealt with in August, Senator Nelligan, is substantially different from what comes in from the Paxport group. It has a partnership attached to it where Claridge has a major financial component.

Senator Kirby: These guys do a better job of asking my questions than I do, Mr. Chairman.

Can you just do one last thing, and then I'm finished. Since we've had the house sale analogy used repeatedly by my friend who's also not a lawyer, Senator Lynch-Staunton, can you explain in simple terms why the house analogy doesn't work since you've indicated -

Mr. Goudge: Because when there's an acceptance of an offer to sell a property there is a contract.

Senator Kirby: Because both sides have signed it.

Mr. Goudge: Yes. That's what happens, you know. When you give your offer to the real estate agent and the real estate agent trots along to the vendor and the vendor accepts it, two things are true. First, there's a contract. Secondly, the contractual rights about what happens between that date and the date you take over the house is clearly spelled out. You normally have the right to inspect; you've the right to search the title. I mean we've all done this. You've got to go out and get your mortgage arranged and all that stuff. All that is pursuant, senator, to a contract that is made when the vendor accepts the offer that the purchaser makes, okay. So you've got a contract. The whole point of this arrangement is that the house deal doesn't arise until October the 8th.

Senator LeBreton: Wrong.

Mr. Goudge: It's a bit of a stretch to call this a house deal, but the contract, which is the offer and acceptance, doesn't arise till October the 8th.

Senator Kirby: Thank you.

Mr. Chairman, that's all I have.

Mr. Goudge: But not pursuant to a contract, senator. Nobody is suggesting there was a contract in July.

The Chairman: On this point, before we leave it and go to Senator Tkachuk, just a couple of clarifications.

Mr. Nelligan: Perhaps Mr. Goudge, I don't know whether you are in the same position on contracts as I am, but all law is my field and I have to start to look particularly at a particular subject. Did you yourself do any research on the law of contract as applicable to this particular problem at the time the report was made?

Mr. Goudge: No, sir.

Mr. Nelligan: No. So that what you're telling us now is your general approach as you understand the principles of the law of contract?

Mr. Goudge: That's correct, sir. And, senator, it was clear that, as I indicated last day, nobody with whom we came into contact, or at least let me put it, nobody with whom I came into contact during the 30 days of our effort, ever suggested that there was the risk of liability to the government prior to the formation of the contract, nor that that risk was something that in any way motivated anybody to conclude the contract on October the 7th.

Mr. Nelligan: What I just wanted to put to you is the theory which, as I understand it, we got from Mr. Baker, and I didn't quite follow it at the time. You are familiar, of course, with the Ron Engineering case? I'll help you.

Mr. Goudge: I'm embarrassed to say that my answer to that question is no.

Mr. Nelligan: All right. The Ron Engineering case - we feel more sensitive about it because it was an Ottawa case - was the case of the Supreme Court of Canada which said that when a person makes a tender on a contract that they are bound to the terms of that tender until released by the person inviting the tenders. And in this particular case, as I understand Mr. Baker's theory, is that Paxport and Claridge, in filing proposals and having to make deposits, were then bound by the terms of the proposal until released by the government. And that's what Ron Engineering has to say.

We then heard from Mr. Desmarais that the Paxport proposal remained on the table throughout and that the participants in the proposal varied with the consent of the government, but that in effect at some point, and I'm not suggesting what day it was, at some point that proposal was accepted in its revised form.

And Mr. Baker cited to us another case which I believe is the Canamerican Auto Lease case, which is a Federal Court of Appeal, which says that when the government accepts such a proposal, then, notwithstanding the provisions of the requirement in the Department of Transport Act that a signature must be by the minister, that that acceptance of the tender is then binding upon the government.

Now, that, as I understand it, is Mr. Baker's proposition and I wondered if you had given any consideration to that or if you wanted to make any comment on that.

Mr. Goudge: Only the consideration and the comments that I've already made, Senator Nelligan, and that is that as we get to the point of October the 7th it is clear that the government does accept. I think it is impossible, from my perspective, to say that during the course of what are described as further and substantial negotiations to reach the point of acceptance, one could say there had been acceptance.

So I come back to my bottom line and that is the contract is formed on October the 7th. What is interesting to me, Mr. Nelligan, from what you tell me about Mr. Baker's theory, is that it is founded on contract. He just says the contract is formed at a different point in time than I say it is and, frankly, it seems to me that the overwhelming evidence, as I understand it shared by a number of senators, is that the contract is made on October the 7th.

Senator LeBreton: No, we said completed.

Mr. Nelligan: The other question I had is I understand there have been a number of studies made on this question of where there is no contract. Are you familiar with the articles, and one is Gareth Jones, "Claims Arising Out of Anticipated Contracts Which Do Not Materialize"? There are a series of legal reports on that. Have you examined those or do you have any opinion on that aspect of the law?

Mr. Goudge: I've examined them in other contexts, Mr. Nelligan. I have not examined them in this context. Transporting my knowledge from one area to another, as I said before, it is conceivable that had the government cancelled its willingness to go ahead in early October that a claim would have been launched. Knowing what I know about those concepts, I think it is extremely unlikely that litigation would have been successful as against the government.

Mr. Nelligan: Thank you very much.

Senator LeBreton: Can I just ask a supplementary to this?

Mr. Goudge, in your handwritten note - and it's 2417 I believe, and it's headed "Private Sector Lease" - in this document your handwritten note says "legal issue".

Mr. Goudge: Can you give me the date or something, Senator LeBreton?

Senator LeBreton: You don't seem to date your notes.

Mr. Nelligan: Immediately after your meeting with Mr. Rowat.

Mr. Goudge: Yeah, I think I've got it. It's got a "2" in the upper right-hand corner?

Senator LeBreton: Yeah. You say "Bob Green gave verbal advice of maybe legal consequences of cancellation pre-October 7". But in response to questions you say this was just a note to yourself, in your earlier testimony, that you never spoke to Mr. Green on the day you made these notes. So which is it?

Mr. Goudge: This is a note that I made -

Senator Jessiman: You don't say "note" beside it as you said it indicated something you would -

Mr. Goudge: I take from that, senator, and this is reconstruction on my part, that somebody from the government side, either Mr. Rowat or Mr. Desmarais or Mr. Power, would have given me that indication at the meeting.

Senator Jessiman: So you knew that. So you said earlier that no one in the government had even suggested it. Now you're saying that they told you this.

Mr. Goudge: Well, that's a fair comment.

Senator Jessiman: Thank you.

Mr. Goudge: I am puzzled, as I was then, about the basis on which you could do that, okay. And I have no idea of how Mr. Green could have suggested that and, frankly, what I recall was the individuals at that meeting saying Mr. Green may have addressed that. I don't know what his view was, but that's what I recall.

Senator Jessiman: Okay.

Senator LeBreton: Thank you.

The Chairman: Senator Tkachuk.

Senator Tkachuk: There will be two documents that are being distributed; one for some questions to ask of - just a couple to ask of Mr. Goudge; 002412, and it's notes that you've made for yourself, I believe, but I just want to verify with you, one, that these are your notes and, two, do you have an idea about when these were put together?

Mr. Goudge: Certainly looks like a photocopy of my writing, senator. Let me just try to find - yeah, okay. The second question was when...?

Senator Tkachuk: When do you think they might have been put together?

Mr. Goudge: Probably on November the 3rd.

Senator Tkachuk: You're pretty precise on your "probably".

Mr. Goudge: The only reason I say that is I have a note of a meeting with Mr. Coughlin and Mr. Spencer and Mr. Vineberg on November the 3rd, and I think I made these notes to myself before that meeting.

Senator Tkachuk: It seems to me it would be rather early because you're talking about certain things. It seems to me at the top it says "administration, things to do, terms of reference, finalized, public or not".

Mr. Goudge: Sorry, where are you reading from?

Senator Tkachuk: The first page.

Mr. Goudge: "Concept, performance obligations?"

Senator Tkachuk: No, "administration". Is it the wrong document being distributed there?

Mr. Goudge: I've got something that's headed -

Senator Tkachuk: 002412?

Mr. Goudge: 2422.

Senator Tkachuk: Did we make wrong copies?

Mr. Goudge: What you asked me about was my notes headed "Questions for PDC"? Is that what you want to talk about?

Senator Tkachuk: No.

Mr. Goudge: What I answered about was my note headed "Questions for PDC".

Senator Tkachuk: Okay. Well I'm sorry. I think we distributed the wrong one.

Mr. Goudge: I've now got another one.

Senator Tkachuk: Which is the one I want. I don't care about 22. Sorry about that, senators and witness.

Senator Bryden: Which one is it?

Senator Tkachuk: 002412. It's coming.

Mr. Goudge: I have it now. Thank you.

Senator Tkachuk: You've got it?

Mr. Goudge: Yes. Thank you.

Senator Tkachuk: Now, you commented on the other one. Let's go back to this one. One, that's your handwriting, I take it, and two, what date do you think this may have been done?

Mr. Goudge: I can't tell, senator. And the reason I can't tell is what I've got in my hand here are the originals of my notes and I know the way I kept them. I kept them in a binder divided by a divider, and my chronological notes start back down towards October 29 with a meeting with Mr. Nixon and Mr. Wilson. The bundle of documents above that was compiled and added to at various points through the month and didn't relate to chronology or interviews. So I mean I would assume from some of the references here that at least the top part was done very early in the beginning of the month, but I can't tell.

Senator Tkachuk: Okay. I would assume so. That's what I would have thought by looking at it because you've got sort of like, it looks like you're organizing yourself: "Administration", "contract for Crosbie", "Process of the review - interviews, briefs, solicitations".

Mr. Goudge: Right.

Senator Tkachuk: You've got a line here, "How much is the government relying on us alone?", on that first page. What did you mean by that?

Mr. Goudge: I guess that was a question to myself. I mean I didn't know whether they were going to have an internal review of the contract as well. I presume that's what I was thinking.

Senator Tkachuk: Did you think it may have been - when you were making notes to yourself as to what would happen here, did you think about a public process? Did you think it might have been a public process, or did you have any impression of what would happen here?

Mr. Goudge: I can't tell from my notes, senator. I can tell you in the beginning I simply had a question in my mind about how the process was going to operate.

Senator Tkachuk: Because they're not numbered I'm going to go to - I'll say that's the first page there, "How much is the government relying on us alone?" The second page would say "Sources", and then where it says "Legal Issues" you have something called "Duty of fairness owed in our process?"

Mr. Goudge: Yes.

Senator Tkachuk: What do you mean, "duty of fairness"?

Mr. Goudge: What I had in my head then is the administrative law and notion of duty of fairness.

Senator Tkachuk: Which is?

Mr. Goudge: It's impossible to encapsulate in a sentence, but it has to do with bodies that hold hearings and then render administrative decisions, and I wasn't certain whether there was any sense either that we should consider ourselves that sort of body or that the government wanted Mr. Nixon to be that sort of body.

Senator Tkachuk: So it's a legal principle that applies to bodies that would look at something in a balanced way?

Mr. Goudge: No. It's a legal principle that applies to bodies that essentially render decisions.

Senator Tkachuk: So what does it mean?

Mr. Goudge: Well, for example, if you want a zoning change in your property and I'm the board that you have to come to to make submissions and I render a decision at the end of that that either changes your zoning or doesn't, I'm bound by certain procedural norms that are encapsulated in that shorthand "duty of fairness".

Senator Tkachuk: Legal principles?

Mr. Goudge: Yes.

Senator Tkachuk: That you have some sort of process principles?

Mr. Goudge: Process principles.

Senator Tkachuk: Process, but also responsibility because of your position or the position that a person was put into?

Mr. Goudge: If you're a quasi-judicial tribunal you have to observe the norms of the legal concept of fairness or natural justice, to slip into another kind of doctrine that's related.

Senator Tkachuk: Duty of fairness and natural justice?

Mr. Goudge: Yes.

Senator Tkachuk: Did you -

Mr. Goudge: For example, this body -

Senator Tkachuk: Did you think this applied to the three of you?

Mr. Goudge: No.

Senator Tkachuk: You're saying you did not have a duty of fairness in this process; you didn't owe a duty?

Mr. Goudge: In that sense, no, any more than this committee does.

Senator Tkachuk: Even though you were serving the Prime Minister of Canada?

Mr. Goudge: No, because it isn't that kind of quasi-judicial tribunal any more than this is. I don't think the senators -

Senator Tkachuk: I want to go back to the principles, because it seems to me they don't seem very onerous. Due process, fairness; what else would they be? Would they be that you might hear the parties involved that you're talking about?

Mr. Goudge: You'd take testimony under oath and you'd permit cross-examination, that sort of thing.

Senator Tkachuk: But even if you didn't, you would think that you would still hear both sides of the question. In other words, even though you weren't a tribunal and even though you made a decision that you weren't a tribunal and you would not take testimony in oath, or evidence, or testimony in evidence, could you not decide that perhaps that you would adopt some of the principles, that you would hear both sides, or perhaps let the parties know that were involved what was said?

Mr. Goudge: Well, you're asking a couple of different questions, senator. Did we have this legal duty to observe, let us say, natural justice as if we were a quasi-judicial tribunal as opposed to a body like this one, okay. I mean you don't have that kind of duty here. And one has to categorize the nature of the entity to which you are ascribing this legally defined, okay, technical notion of duty of fairness.

I get the sense that what you're asking me is did you view the process that you used as being in some sense fair altogether apart from the legal concept I'm talking about. And if that's the question you're asking, I'll attempt to respond to that. If you'd rather have me stick to what my note addressed, then I'll do that.

Senator Tkachuk: Well, that's what I'm trying to get at because you're legal counsel here, I believe.

Mr. Goudge: Yes.

Senator Tkachuk: So what did you advise Mr. Nixon his responsibilities might be to the Prime Minister of Canada?

Mr. Goudge: I advised him that from my perspective the operation he was engaged in did not have attached to it the requirement to meet this technical legal notion called the legal duty of fairness, which has very precise attributes to it.

Senator Tkachuk: But even if they were imprecise, considering who you were representing did you not feel - obviously Mr. Nixon must have asked his question, or why did you bring it up to him? Did you not feel that perhaps - I'm giving advice to the Prime Minister of Canada about people, corporations, major policy issues; I think I have an obligation to conduct myself in a way that even though - not this particular body, but in a way that would exercise a duty of fairness?

Mr. Goudge: Did I address that question?

Senator Tkachuk: Yes.

Mr. Goudge: Yes, and in a technical legal sense the answer is no. The precise attributes of the legal duty that I described do not attach, in my view, to Mr. Nixon's work any more than they attach to, for example, a deputy minister's analysis of a senior policy problem when he gives advice or she gives advice to a minister, or any more than when the senators conduct this hearing they are guided by what I would call the rules of natural justice.

There are all kinds of bodies that we have that render views, that give advice, senator, that conduct investigations and so on, which are not characterized by having to deal with that technical legal notion. If we were a court or -

Senator Tkachuk: Get away from technicality then, because you weren't that. Did you have any moral obligation?

Mr. Goudge: That's why I asked you before; what do you want me to address, my note or your broader question of whether we, say, had a moral obligation to proceed fairly.

Senator Tkachuk: Yes.

Mr. Goudge: The answer is yes, and we did, in my judgment.

Senator Tkachuk: Okay.

The Chairman: Is there a difference between morality and the sense of, in Senator Tkachuk's question, advocacy?

Mr. Goudge: I'm not sure I understand the question, senator. There is clearly - the legal notion of fairness is quite precisely defined and has precise aspects to it. The question the senator asks of whether there was a moral duty to proceed in a way that was fair or equitable or appropriate - I can use a variety of words - is a question on a broader plane and I've answered it as best I could. Yes, I think we attempted to proceed appropriate, and yes, I think we did so.

The Chairman: I'm struggling to try to put this into words. I think I know, because it's come up before, about the duty of fairness, but in the absence of that, which you have excused yourself, for good reason, for legal reasons, you then are free to pursue a course of advocacy which is quite something else.

Mr. Goudge: We are not bound by the technicalities of the legal duty I described. If the assertion implicit in the question, Mr. Chairman, is was this report a piece of advocacy or an attempt to do a responsible piece of advice giving to the government, Mr. Nixon has already addressed that as many times as I think is probably useful.

Senator Tkachuk: I think another document was distributed dated November 9th and it's 002536. I believe this is Mr. Crosbie's handwriting. I just want to ask a couple questions. It's this one here with the writing on it. I think it's been distributed.

The Chairman: Senator Tkachuk, could I just ask one question I've been dying to ask for weeks and weeks.

Could you fellows not afford a typist?

Mr. Goudge: If we'd known where we were headed, senator, we would have had a transcript.

Senator Kirby: May I say, Mr. Chairman, his writing is more legible than that of our counsel.

Senator Tkachuk: Because it is difficult, it's a lot like mine, I'll tell you, let's go to page - Mr. Crosbie, let's go to page 34.

Senator Kirby: I can't even read the page numbers.

Senator Tkachuk: Well I can. I resolved that issue because I read 36 and then I figured that 34 had to be right behind it.

This list, this paper dated November 9th, this is a meeting with Don Dixon; this is a result of a meeting with Mr. Dixon, it says at the top there?

Mr. Crosbie: Yeah.

Senator Tkachuk: Department of Transport, is that what it is, DOT?

Mr. Crosbie: Which page are you talking about?

Senator Tkachuk: The whole thing, I would think.

Mr. Crosbie: Oh, it's a series of meetings.

Senator Tkachuk: Is it? Who did you meet on page 34?

Mr. Crosbie: That was Paul Stehelin from Deloitte's.

Senator Tkachuk: Okay.

Senator Kirby: Is that why the second to last dash point is "Paul says"?

Senator Tkachuk: Let's go to that last paragraph there. Could you read that to me?

Mr. Crosbie: Page 30?

The Chairman: Thirty-four.

Mr. Crosbie: "Paul says", yeah. That's Paul Stehelin.

Senator Tkachuk: Could you read it for me, please?

Mr. Crosbie: It says, "Paul says after early June neither party could in good faith have walked away from the deal."

Senator Tkachuk: Why did he say that? You must have asked him a question.

Mr. Crosbie: I must have asked the question as to his view as to when the agreement was in place, or he volunteered it. I don't know. Anyway, he said it and I wrote it down.

Senator Tkachuk: Okay. Then if we go to page 59, who were you meeting with here?

Mr. Crosbie: On page 59?

Senator Tkachuk: Yeah.

Mr. Crosbie: It says at the bottom "John".

Senator Tkachuk: So that would be?

Mr. Crosbie: I presume that's John Desmarais.

Senator Tkachuk: John Desmarais?

Mr. Crosbie: Yeah.

Senator Tkachuk: I'd like you to read - you're discussing here the terms of the lease, I think, eh?

Mr. Crosbie: M'hm.

Senator Tkachuk: So could you read it from "37 years", I think it says, "initial term is 4".

Mr. Crosbie: "4 years of existing rent" plus "33 years on the new lease".

Senator Tkachuk: So continue on.

Mr. Crosbie: And "T3 was 60 years term of which 57" years "to go". Do you want me to carry on?

Senator Tkachuk: Yes.

Mr. Crosbie: The next point was "all of the LAA's - 5 of them Vancouver, Calgary, Edmonton, Dorval & Mirabel are all 60 year terms."

Senator Tkachuk: Yes.

Mr. Crosbie: "reason this one is 57 is because Transport Canada wanted to have it expire with Terminal 3."

Senator Tkachuk: Yes, continue.

Mr. Crosbie: "John says he can't say any real thought as to whether terms should be 40 or 60 years, just that as a matter of practice doing these deals on a 60 year basis."

Senator Tkachuk: So it was simply a matter of government policy. There was nothing unusual about the time of the lease; the years?

Mr. Crosbie: Yeah, he said that -

Senator Tkachuk: Do you agree with that?

Mr. Crosbie: Well, I can't comment as to government policy, but he says what he said.

Senator Tkachuk: Yeah, but you wrote this down. You're reviewing this process here and you're getting information and you're getting it from John and John is telling you this and you're writing it down.

Mr. Crosbie: Yeah, that's right.

Senator Tkachuk: So is this your background to why the deal was the length of time it was? You're talking to a fairly senior official in the Department of Transport.

Mr. Crosbie: Yeah.

Senator Tkachuk: So it seems to me that there would be nothing unusual about the length of time of the lease.

Mr. Crosbie: Yes. He said that was their practice, that these generally were 60-year deals although there wasn't a lot of real thought as to whether the terms should be 40 or 60 years.

Senator Tkachuk: They just did it that way?

Mr. Crosbie: Yes.

Senator Tkachuk: And so the reason they did the 50 - why did they do the 57 years?

Mr. Crosbie: Well, that, I believe, was - yes, the reason they did 57 is because they wanted this terminal to tie in with the expiry of T3 because there were 57 years left on the T3.

Senator Tkachuk: Did you inform Mr. Nixon of this?

Mr. Crosbie: Yes. I mean, we have informed Mr. Nixon of -

Senator Tkachuk: Did you tell him there -

Mr. Crosbie: - the correspondence generally.

Senator Tkachuk: - was nothing unusual about the length of terms of the lease?

Mr. Crosbie: Well, we had some comments from Mr. Nixon about the term of the lease, yes.

Senator Tkachuk: What were your comments?

Mr. Crosbie: I think we talked about it in our report.

Senator Tkachuk: Yes.

Mr. Crosbie: We made the point that adding the other 20 years does not increase the return to the investors; and we raised the question that it - as to whether it might have been possible to obtain an investor for the project without having had to give them another 20 years, to limit it to the 37; and that given all the prospect for changes and technological change and other changes, the question is: From a government point of view, do you want to lock up this airport for 57 years or would you like to lock it up for a shorter period?

Senator Tkachuk: Yes. So did you mention - did you say that it was anything unusual about the lease he had or was this - it seems to me this was just an opinion you had, like -

Mr. Crosbie: We were raising the question as to whether this was a question that may want to be considered, the appropriate length of term for the lease. We were saying, you know, why give somebody a lease for 57 years if you don't get something extra for it? You may not be getting anything extra for it.

Senator Tkachuk: But you just told me that that was - that the information you received - now unless you got somebody else's information - this was not unusual for the government to do. Would it be possible that you would have advised Mr. Nixon that, perhaps, LAAs got too long a term?

Mr. Crosbie: I can't remember specifically -

Senator Tkachuk: I am just asking you -

Mr. Crosbie: - but I think we all generally knew that the normal terms were - normal lease terms were 60 years.

Senator Tkachuk: And there was nothing unusual about that?

Mr. Crosbie: And that that was the normal thing -

Senator Tkachuk: Very good.

Mr. Crosbie: But that doesn't necessarily mean that it's - just because that is sort of normal practice or that is the normal basis doesn't necessarily mean that that is the right thing to do.

Senator Tkachuk: I didn't ask that question. I asked whether you thought that in this particular case there was something unusual about the fact that the lease was 57 years. That is very important because Mr. Nixon makes a big deal of it in his document. Is there a big deal about this or this was a normal lease for the government at the time? Not your opinion, was this a normal lease?

Mr. Goudge: Can I be clear, senator? Are you saying "normal" in the sense of it is done with LAAs; or "normal" in the sense that there is nothing wrong with 57 years? Because there are two different issues.

Senator Tkachuk: I am asking if this is what the government did. I mean he was reviewing it. He made notes. And I am asking him - he is the one who has made the conclusion, not you, Mr. Goudge, so I am asking Mr. Crosbie to explain it.

Mr. Goudge: I am sorry. I am starting to serve as a lawyer.

Senator Tkachuk: Are you his lawyer at this thing, too?

Mr. Goudge: No, I am not. I am just one of the accused as was put to me.

Mr. Nelligan: And you no longer get Legal Aid either.

Mr. Goudge: That is right.

Senator Kirby: But we can blame him for that, Mr. Chairman, as the guy who runs Legal Aid.

Senator Tkachuk: So I was just asking him: There wasn't anything unusual about the way the government did it at the time?

Mr. Crosbie: Our point here in our report, and the lease term doesn't go to whether it is usual or unusual; it simply goes to the fact that they gave a - the government gave an option for another 20 years and may not have gotten anything for it. And does the government want to do that? Do they want to lock this up for 57 years when maybe they could have done a - the same deal and only had to lock it up for 37 years?

Senator Tkachuk: That is fine. That is your opinion, right?

Mr. Crosbie: I am just raising the question.

Senator Tkachuk: Yeah, you raised the question that it is your opinion. You say, "Gee whiz, instead of being 60 years, it should have been 37." All I am asking you is there was nothing unusual about the way the government did it; you just disagree with the way they did it.

Mr. Crosbie: In our report, we didn't comment on whether it was usual or unusual; but if you read this and take what they are saying -

Senator Tkachuk: I am asking if you told Mr. Nixon this. What did you tell Mr. Nixon?

Mr. Crosbie: Mr. Nixon, what did I tell you?

Mr. Nixon: If it is any help, although this line of questioning is intentionally interesting, it was made clear by people other than Mr. Desmarais that 60 years was a magic number. One of the big differences, of course, is that T1T2 Limited Partnership was based on making a profit for 60 years, whereas LAA an is based on operating the airport for the good of the whole community and without making off with the 24.6 per cent.

Senator Tkachuk: Okay. One more question, Mr. Crosbie. Earlier on you were talking to, I believe, Mr. John Lynch- Staunton, who probably finds this, I can tell, as interesting as you do.

Senator Kirby: He likes some questions.

Mr. Goudge: He has an option.

Senator Tkachuk: You mention that the government could have picked up an extra $250 million.

Mr. Crosbie: Yes.

Senator Tkachuk: The government is now negotiating with the Toronto Airport Authority for a lease. Are you engaged by the Government of Canada to negotiate with the Toronto Airport Authority to get a good deal?

Mr. Crosbie: No.

Senator Tkachuk: You're not?

Mr. Crosbie: No, we have not - we are not acting in that, no.

Senator Tkachuk: Who is negotiating with them?

Mr. Crosbie: I don't know. We're not.

Senator Tkachuk: Same people that negotiated this particular deal?

Mr. Crosbie: We are not party to the -

Senator Tkachuk: I am just asking.

Mr. Crosbie: We are just not party to it. I just don't know.

Senator Tkachuk: Okay. Mr. Nixon, who was the chairman of the Mulroney leadership campaign in 1983?

Mr. Nixon: I believe it was Mr. Matthews.

Senator Tkachuk: I am asking you under oath - you are supposed to tell me what you know. If you don't know, it's okay. Who was the chairman, I am asking.

Mr. Nixon: I believe it was Mr. Matthews.

Senator Tkachuk: You believe it was. Who told you that?

Mr. Nixon: I read it in the public press.

Senator Tkachuk: And so you went ahead and told the Prime Minister this?

Mr. Nixon: Yes. I think the main point, however, is that Mr. Matthews -

Senator Tkachuk: I didn't ask you for the main point. You state in your report, Mr. Nixon, that - I am asking you who the chairman of the Mulroney leadership campaign was in 1983. If you don't know, say you don't know.

Mr. Nixon: I believed it was Mr. Matthews.

Senator Tkachuk: You are wrong. You didn't think to ask him -

Senator LeBreton: Or Mr. Matthews.

Senator Tkachuk: - before you told the Prime Minister?

Mr. Nixon: I understand that he was also a principal fundraiser for Mr. Mulroney as well.

Senator Tkachuk: I am going to ask you: When was Mr. Matthews President of the PC Party of Canada?

Mr. Nixon: I presume that it was in the days during the election of - the first election of the Mulroney government.

Senator Tkachuk: Well, when you - Mr. Nixon, I am going to just be - I am going to try and hold my temper here -

Mr. Nixon: I will do the same.

Senator Tkachuk: I am gonna just ask you - you are the one who wrote this report, I did not, right, you wrote it?

Mr. Nixon: Are you suggesting -

Senator Tkachuk: I am asking when.

Mr. Nixon: - he was not a well known and aggressively administrative Progressive Conservative?

Senator Tkachuk: I didn't ask that, Mr. Nixon. I asked when was Don Matthews President of the PC Party of Canada?

Mr. Nixon: I referred to that in my report as generally known in the public that he was not only the President of the PC Party of Canada but a principal fundraiser for the Mulroney leadership convention.

Senator Tkachuk: It was generally known, but you didn't know when. It was generally known but you didn't know when.

Mr. Nixon: I was under the impression that it was during the period when the Mulroney government was first elected and when Mr. Mulroney became the leader of the Progressive Conservative Party.

Senator Tkachuk: Little things are important because little things tell you what you do with the big things. That is why I'm asking these questions. If you didn't know, which you don't know, say you don't know because you don't, do you?

Mr. Nixon: I was under the impression, I say for the fourth time -

Senator Tkachuk: I'm asking if you knew.

Mr. Nixon: - that Mr. Matthews was not only President of the PC Party but a senior fundraiser for Mr. Mulroney.

Senator Tkachuk: He was the President of the PC Party in the early 1970s.

Mr. Nixon: Well -

Senator Tkachuk: Wouldn't you have asked that to see if he really was the president? How did you know -

Mr. Nixon: He was the president of the party.

Senator Tkachuk: You didn't know that?

Mr. Nixon: You just told me. I knew he was the president of the party. You say: "What year?" Gosh, was it '79, '74, you know -

Senator LeBreton: Twenty years ago.

Senator Tkachuk: Seventy-two. You didn't know.

Mr. Nixon: Now I know. He was president of the party. I was correct in that regard.

Senator Kirby: That is what it says in your report.

Mr. Nixon: Is that what the report says?

Senator Kirby: Yes, that is exactly what the report says.

Mr. Goudge: That is exactly what the report says.

Senator Tkachuk: But I am saying if you didn't know when he was president, how would you know he was president?

Senator Kirby: Like we know you're a senator -

Mr. Nixon: It is generally known that he was a senior administrative figure in the Progressive Conservative Party.

Senator Tkachuk: I am going to ask you - chief fundraiser - you mention he was chief fundraiser, and you capitalize it in the last report. Why do you capitalize it?

Mr. Nixon: Quite often, it is a clear responsibility in the party. A person who has that job has that title.

Senator Tkachuk: Who was chairman of - who was the chief fundraiser for the Conservative Party of Canada in 1984?

Mr. Nixon: I can't say because - I was under the impression that Mr. Mulroney was served by the people that we are talking about here and that it was during the days when he first became leader and when he first won the government.

Senator Tkachuk: Was he the - who was the chief fundraiser? Was it Mr. Matthews?

Mr. Nixon: I believe it was.

Senator LeBreton: Wrong.

Senator Tkachuk: Well, it wasn't. When was he the chief fundraiser?

Mr. Nixon: If it wasn't that year, when was it?

Senator Tkachuk: No, he never was. He never was.

Senator LeBreton: Nor was he the campaign chairman for Mr. Mulroney.

Senator Tkachuk: Just in the whole big section here on what you call patronage, and in your last report, I mean, one, he wasn't the chairman of the Mulroney leadership campaign, which you state in your report he was, and you never bothered checking it out, did you?

Mr. Nixon: It was generally reported that he had high offices in support of the Progressive Conservative Party and in support personally of Mr. Mulroney, both in his leadership convention and as Prime Minister.

Senator Tkachuk: Mr. Nixon, you were advising the Prime Minister of Canada, were you not?

Mr. Nixon: I believe the information I gave the Prime Minister was not misleading.

Senator LeBreton: Just false. What's the difference?

Senator Tkachuk: It seems to me - I don't - I may have a different sense of how you talk to a Prime Minister. I may have a real different sense, but if I was advising the Prime Minister of Canada, I would want to make sure that what I told him had, you know, was factually correct, simply because what he does has great consequences for the people of Canada. This is not some parlour dining room gossip; is it?

Mr. Nixon: The implication in what I told the Prime Minister is that the gentleman was a senior, active Progressive Conservative and that during the election campaign it was widely reported and commented on that there was some possibility of preferment in this regard. In my report, I did not report anything associated with inappropriate actions, but I said that there was a clear presentiment of political favouritism.

Senator Tkachuk: Would you read that section, page 9, "The Role of Patronage", do you want to read that to me?

Mr. Nixon: "Donald Matthews, the principal of Paxport Inc., was Chairman of the Mulroney leadership campaign in 19 -"

Senator Tkachuk: Stop. Was that correct?

Mr. Nixon: I believe it was.

Senator Tkachuk: You know, you are under oath. You have no -

Mr. Nixon: I said I believe it was. Does that mean that I don't believe it was?

Senator Tkachuk: Well, is it true now?

Mr. Nixon: I believe it to be correct; and you would have better knowledge of that than I, but I can't question you. But are you denying in any way that Donald Matthews was not a senior, influential Progressive Conservative, closely associated with the campaigns of Mr. Mulroney and raising money in his support?

Senator LeBreton: That is not what you said.

Senator Tkachuk: That is not what you said.

Mr. Nixon: Right. Are you denying that that is not the indication here? President of the Progressive Conservative Party and chief fundraiser of the party.

Senator Tkachuk: I would be proud of that fact.

Senator LeBreton: This inaccuracy is indicative of your report. That is what he is trying to get at. If you -

Mr. Nixon: Is this a tag team here or what is it?

Senator LeBreton: Yes. We are a good tag team. If you can't get a simple fact like that correct, what else in this report -

Mr. Nixon: If you can base your response to the report on that -

Senator Tkachuk: You do.

Senator LeBreton: You do.

Mr. Nixon: - then hop to it.

Senator Tkachuk: Mr. Nixon, I am going to ask you -

Mr. Nixon: I believe that the clear indication of the Prime Minister is that the person who was influential in getting this - a contract -

Senator Tkachuk: Because he was a Tory.

Mr. Nixon: - had been an effective supporter of the Prime Minister.

Senator Tkachuk: Because he was a Conservative, that is the only reason.

Mr. Nixon: Not the only reason.

Senator Tkachuk: I don't get it. Then why is this such a big deal?

Mr. Nixon: I was asked, Mr. Chairman, to respond to the public view of what had happened which resulted in the signing of this contract a few days before an election when it was a volatile issue, that we have gone around and around as to why the Prime Minister at the time was justified in giving personal approval for the signing of that contract, and I have been here trying to convince the members of the committee that I felt the Prime Minister now, who was then Leader of the Opposition, was quite justified in saying that he was going to have it reviewed and cancelled if in fact they went forward with that signing.

Now, all of that was associated in the public's mind not only with the length of the contract, the high return - the unjustifiably high return to the people who were getting the contract, and many other aspects that were inappropriate about the contract by the fact that it was given to a well known and senior Progressive Conservative.

Senator Tkachuk: Okay. Is Otto Jellinek a board member of Paxport Inc.; was he today - was he ever?

Mr. Nixon: He was - according to the information given to me -

Senator Tkachuk: By whom?

Mr. Nixon: - was associated with Paxport and I believe was a representative of Paxport in their international operation.

Senator Tkachuk: Is Otto Jellinek a board member of Paxport Inc.?

Mr. Nixon: Not that I know of now.

Senator LeBreton: Well, you put it in the report.

Senator Tkachuk: Well, was he ever a member?

Mr. Nixon: What do I say here? I was certainly informed at the time that he was.

Senator Tkachuk: By whom?

Mr. Nixon: Most of this material came from material that was carried in the public press.

Senator LeBreton: The media.

Senator Tkachuk: So you just - I can do that. You charge 750 bucks a day to read a newspaper?

Mr. Nixon: Depends who wants to hire me.

Senator Tkachuk: Nice work if you can get it.

What is the name of the Asian subsidiary of Paxport Inc.?

Mr. Nixon: I don't know what that is.

Senator Tkachuk: You say that Mr. Jellinek was president. What is the name of the agency?

Mr. Nixon: I don't know the name of that subsidiary.

Senator Tkachuk: Who is its president?

Mr. Nixon: I understand that he was the executive of that agency at one time. I understand that he is now in -

Senator Tkachuk: You understand - did you read that in the newspaper, too?

Mr. Nixon: - the Czech Republic and operating in business there.

Senator Tkachuk: Did you read that in the newspaper, too?

Mr. Nixon: All that information was in the public domain.

Senator LeBreton: I guess he thinks Czechoslovakia is in Asia.

Senator Tkachuk: So in all - the statement you make about the chairman - who is the chairman of the Mulroney leadership campaign, that he was president of the party, the chief fundraiser, Otto Jellinek was a board member of Paxport, with the name of the Asian subsidiary, which you don't know, and the fact that Mr. Jellinek was the president of a company you don't know anything about, was something that you read in the newspaper and then put it in an official document to the Prime Minister of Canada. That is what you did.

Mr. Nixon: This was essentially to inform the Prime Minister of what the views of the community were in connection with the contracts he had asked me to review.

Senator Tkachuk: What newspapers were they?

Mr. Nixon: The general press.

Senator Tkachuk: Like Citizen, Globe and Mail -

Mr. Nixon: Star, Brantford Expositor.

Senator Tkachuk: The Prime Minister doesn't read the Star?

Mr. Nixon: Maybe he does, but I felt it appropriate to bring this to his attention.

Senator Tkachuk: Then when the Prime Minister said, "Just a minute we're not going to gossip in my office about those old Tories; this is going to be a public document," did you think that, perhaps, you might check some of this information out because now we are talking about people in the community?

Mr. Nixon: I don't think the material that I provided the Prime Minister is misleading in any way. It is simply an indication and in the mind's of the community Mr. Matthews was a leading and influential Conservative who had done a good deal of direct and personal supportive work for the then Prime Minister.

Senator Tkachuk: So why didn't you say that?

Mr. Nixon: I thought this was all right.

Senator Jessiman: Even though it was wrong.

Mr. Nixon: I believed it be to be true when I wrote it.

Senator Tkachuk: You believed all this to be true when you wrote it?

Mr. Nixon: Yes, I did.

Senator Tkachuk: You believed this whole report to be true when you wrote it?

Mr. Nixon: Yes, of course I do.

Senator Tkachuk: And actually judging from what you said today even stuff that you know is not correct and is the case you still stand by it.

Mr. Nixon: Well, you will probably get to that in some detail -

Senator Tkachuk: I am getting to this.

Mr. Nixon: - but I can assure you, Mr. Chairman, that there is nothing in this report that I included which I did not believe to be the truth.

Senator Tkachuk: Okay. Was the Matthews Group the majority partner of Paxport Inc.?

Mr. Nixon: The president was Jack Matthews and he is the one -

Senator Tkachuk: I didn't ask you that question.

Mr. Nixon: Well, I am answering it that way. Jack Matthews was the administrative head of it and he was, of course, an influential part of the Matthews Group supported by his father; and I felt that Paxport was the Matthews emanation. They had a number of partners, quite a list of partners, most of whom had additional deals with Paxport that would give them special duties in the event that Paxport got the responsibility to operate the airport so that these people had positions of ownership in Paxport and also had contracts that would permit them to undertake certain aspects of the operation of the airport and therefore had access to two sources of income.

Senator Tkachuk: Let me ask that question again. Was Don - was the Matthews Group the majority partner of Paxport Inc.?

Mr. Nixon: I have seen the lists of the various components. I believe that Paxport is the largest, but I don't believe they have 51 per cent.

Senator Tkachuk: No, they didn't. What position were they in with the Pearson Development Corporation?

Mr. Nixon: Was that at the stage when Claridge had moved in with about 33 per cent? I believe it was at that stage. And, once again, I have seen the list of equities from a variety of sources, and then Claridge moved into full control finally for the T1T2 Limited Partnership.

Senator Tkachuk: What you are saying, then, is Mr. Matthews, or the Matthews Group, was a minority partner of Paxport and a minority partner of the Pearson Development Corporation?

Mr. Nixon: Yes.

Senator Tkachuk: So if he is a minority partner, why would you pick him out? Why didn't you talk about the President of AGRA or Allders or many of the other - or Mr. Bronfman? Mr. Bronfman was the majority partner; why didn't you talk about him in here?

Mr. Nixon: Because the information that was available to me made it clear that the Matthews Group had been influential, not only in giving an unsolicited commitment to the T1T2 prospects, but beyond that had actually managed the affairs of the organization which led finally for them to be designated as the best overall proposal.

Senator Tkachuk: Can the Paxport Group be described as a Tory firm?

Mr. Nixon: I would certainly say that there is no doubt that the Matthews always maintained good relationships and good direct political relationships with the government of Mr. Mulroney.

Senator LeBreton: How about the government of the David Peterson?

Senator Tkachuk: Let me just - can the Pearson Development Corporation be described as a Tory firm?

Mr. Nixon: Let's put it this way, that certainly the Matthews association with any of these firms would mean that they would have a ready contact with the senior levels of government, and I don't think that that can be doubted.

Senator Tkachuk: Okay. I am going to go to a - you have got this document with you, eh, the various drafts of the - of your report, and I am just gonna - I want to ask you a question about that November - if you go to the - if you would go to the one on the front that - the one on the front which says the 11th but you claim is the 19th -

Mr. Nixon: I don't claim it; I say it is the 19th.

Mr. Goudge: You claim it is the 11th.

Senator Tkachuk: Okay, it is the first one in the book. Can we do this again? Let's just go to the first one in the book; would that be all right?

Mr. Goudge: The one dated November 19, senator?

Senator Tkachuk: The one that you claim is dated November 19.

Senator LeBreton: You seem to have a funny way of writing nine, two different ways.

Senator Tkachuk: On page 2 on the top you talk that, "The RFP was rushed and had an insufficient time allocated for bid preparation..." Have you got that paragraph?

Mr. Nixon: I do.

Senator Tkachuk: "...that resulted in an unfair advantage for the successful applicant and certain others who were associated with the privatization of Pearson."

Then, if we go to the second report, under tab 2, top of the page, page 2, "The RFP was rushed and had insufficient time allocated for bid preparation that resulted in unfair advantage for the successful applicant." And you have got that scratched out. Have you noticed that you scratched that out?

Mr. Nixon: I see that.

Senator Tkachuk: "...and certain others who were associated with the privatization of Pearson".

Mr. Goudge: I should think I probably scratched it out.

Senator Tkachuk: You scratched it out? Why did you put it back in on the first report then?

Mr. Goudge: I am glad I have got to the first report coming after the second one. We are making progress.

Senator Tkachuk: Let's go to tab 1. Why would you take it out, then?

Mr. Goudge: I think the two are the same, are they not? If you look at the text, are the two not the same?

Senator Tkachuk: This one is dated the 18th and then you tell me this one is dated the 19th.

Mr. Goudge: Yes.

Senator Tkachuk: But let's go back to that "...and certain others who were associated with the privatization of Pearson". You have got that scratched out. Why did you put that back in on what you say is the 19th -

Mr. Goudge: Can I reconstruct this for you, senator?

Senator Tkachuk: - which is tab 1.

No, no, I am asking why you put it back. Why did you put that line back "...and certain others who were associated with the privatization".

Mr. Goudge: The dates on these two documents are dates that I put on and I think they are the dates I got them from Mr. Nixon. I think they are the same document so, of course, they wouldn't be changed, okay? I think what I did was to work on the one on the 18th, okay, and I crossed it out. I have no idea whether my cross out ever made it anywhere. But it wasn't a case of the one on the 19th being redone after my cross out on the 18th. That is not the way it works.

Senator Tkachuk: So these are now the same document.

Mr. Goudge: I think they are if you look at them, aren't they?

Senator Tkachuk: So it wasn't the 19th, it was the 18th, and they were the same document.

Mr. Goudge: No, no. I got one on the 18th and I dated the other one on the 19th when I got it. But they are the same document.

Senator LeBreton: No, they are not the same document.

Mr. Goudge: I think. I don't know. I mean I haven't done a careful look but I bet you they are.

Senator LeBreton: Lookit, you can tell by the type face.

Senator Tkachuk: I just want to - you took that out and then you put it - if we go to November 22, which looks like 19 to me, but nonetheless you say it is November 22, which is tab 3, you got that part taken out again. If we go to page 2 of that tab 3, I go to section 4, "After the publication of the RFP an insufficient time was allocated for bids resulting in an unfair advantage for the successful applicant". Why would you do that? Or is it because one was the 11th, which would make sense, not the 19th, then you scratched it out on the following one, which was on the 18th, which makes sense, so that the one on the 22nd doesn't have it in.

Mr. Goudge: It would make equal sense if it was crossed out on the 18th, the 19th is the same and the cross out gets into the 22nd.

Senator Tkachuk: No, but the 19th has it back in.

Mr. Goudge: No, it just doesn't have my work on it. It doesn't have my notes on it anywhere.

Senator Tkachuk: Oh, okay. All right. Then who is writing this?

Mr. Goudge: Who is writing what?

Senator Tkachuk: Who wrote document tab A?

Mr. Goudge: These are both drafts from Mr. Nixon. But they both come out of my file. They both come out of my file and what was happening as I recall it was that I was getting the drafts as Mr. Nixon produced them. I would get a draft on the 18th; I would make some notes on it. What you see in handwriting in tab 2 is my handwriting. See where it says "consequences in future" and so on, all that stuff.

Senator Tkachuk: Yes.

Mr. Goudge: I think what I did were these were my thoughts on a quick look at this document, okay?

Senator Tkachuk: Yes.

Mr. Goudge: When I get one the next day, I have already worked on it. That is tab 2. And I presume that maybe one or two of my comments found favour with the author as you get to tab 3.

Senator Tkachuk: Okay. If we go to the first draft, which will be tab 1 - we will call them tab 1, tab 2, because you were the ones who put these dates on them, Mr. Nixon did not?

Mr. Goudge: Yes, sir.

Senator Tkachuk: So you just dated these as they rolled into your office?

Mr. Goudge: Yes, sir.

Senator Tkachuk: Did you date them the day you received them or did you date them like later?

Mr. Goudge: I can't recall for sure you but, sure, I would be virtually certain I did. That is what I normally do. I would have put the date on when I got it.

Senator Tkachuk: Did you do it to all of them when you got them?

Mr. Goudge: I can't remember.

Senator Tkachuk: Would you be consistent?

Mr. Goudge: If there are dates on them all, then I did it on them all. If there aren't they either didn't come from my file or I didn't do it.

Senator Tkachuk: Okay. Mr. Nixon, on the first draft in the tab 1, page 2, fourth paragraph, you say, "These events gave the first strong suspicion, however inappropriate and premature -" and that was referring to a deal that was seen as patronage ridden. You say, "These events gave the first strong suspicion, however inappropriate and premature, that the policy was only to privatize but that the eventual outcome was already fixed in the minds of the politicians directing the process". Did you write that?

Mr. Nixon: Yes.

Senator Tkachuk: Do you agree with that?

Mr. Nixon: I did at the time. I think I was advised otherwise in the final report because we were talking to people who had been associated with the process, talking to them about why they had spent some money on this and a good deal of effort and that had not followed it really to the extent that they might have had serious consideration for approval.

Senator Tkachuk: You hadn't read the newspapers yet? You told me that you got this information from the newspapers about the patronage.

Mr. Nixon: About the matter of the whole report, that's not correct. We're talking about the political involvement of Mr. Matthews that we got from the newspapers.

Senator Tkachuk: Okay. So it's patronage, not to Mr. Matthews, but just to Paxport. I am trying to get my hands around this. You first told me earlier on when I asked you these questions, you said you got them all out of newspapers. Now I'm asking you about a particular paragraph which refers to patronage. It says:

first strong suspicion, however inappropriate and premature, that the policy was not only to privatize but that the eventual outcome was already fixed in the minds of the politicians directing the process.

Now you tell me that there were other sources that helped you along.

Mr. Nixon: Yes. We talked to the people who had been associated with these alternative presentations.

Senator Tkachuk: Like who?

Mr. Nixon: Well, it's Morrison Hershfield is the "MH" reference.

Senator Tkachuk: When did you talk to Morrison Hershfield?

Mr. Nixon: We had talked to them - I don't know. It was part of our evidence.

Senator Tkachuk: Previous to the 19th?

Mr. Goudge: We gave that evidence last day.

Senator Tkachuk: When did he talk to Morrison Hershfield? Previous to the 19th?

Mr. Nixon: The date is on the record. Maybe we could look that up if we need it. But we had a meeting with Morrison Hershfield, and I spoke to the representatives of the British part of the Canadian Airport Authority.

Senator Tkachuk: Who did you speak there?

Mr. Nixon: I don't recall the name of the leading person, but there were others associated with that presentation that spoke to me in some confidence.

Senator Tkachuk: Like who?

Mr. Nixon: I'm not going to name them.

Senator Tkachuk: Mr. Nixon, Mr. Nixon. You know, when I was involved in politics, I remember - and I still am involved in politics - when a person gives advice to a minister of the Crown, when a minister of the Crown even gives advice to the Prime Minister, it's like very special deal here. It's a very special deal. And I'm asking you questions that you're giving to the Prime Minister of Canada, and you're telling me that, one, you can't tell me; two, that you don't know who you spoke to; three, that you got all the events from the newspapers on the patronage. Then when I ask you to back it up, because even in your own handwriting you say it was inappropriate and premature, you tell me that you got it from someone else but you don't know who.

Mr. Nixon: Right. When I described the matters to the Prime Minister, when I presented the report to him, you understand that we had an hour's discussion or more, and I was able to provide him with the additional information in confidence that had come to me.

Senator Tkachuk: According to the testimony, you met Morrison Hershfield on the 10th of November. This was written on the - well, who knows. Could be the 11th, could be the 19th. We'll assume it's the 19th.

Mr. Goudge: Thanks, senator.

Senator Tkachuk: Well, nine days after. Nine days after. We're going to go by what you say. So you've already talked to Morrison Hershfield, but you still say it was inappropriate and premature.

Mr. Nixon: Well, that was the first indication that there were people who were clearly concerned about the matter. I believe the last time I was here I indicated to you that someone in the group in Morrison Hershfield had conveyed that view to me and that they had not proceeded for a number of reasons, but that was one, that they felt that they could not be successful.

Senator Tkachuk: That's the meeting with no notes, we don't know who told you, and we don't know who the other two people were in the room that could verify what you said. Isn't that correct?

Mr. Nixon: Well, normally I had the lawyer there keeping notes. I don't believe he was present at that particular meeting.

Senator LeBreton: According to the testimony, he was not.

Senator Tkachuk: You say in page 2, fourth paragraph:

It is alleged that the terms of the RFP closely paralleled the previous Paxport unsolicited proposal.

Who alleged that?

Mr. Nixon: People who described the circumstances to me, and it may - I can't answer the question more directly than that.

Senator Tkachuk: Like, in other words, you're not going to tell us. This is a big secret.

Mr. Nixon: It's not a secret. I've indicated to you that people who expressed opinions on this normally were in a position to have informed opinions, and that often they expressed views that they wanted to be kept in confidence and would not have been available to me if I'd been holding public hearings or that they were appearing as witnesses under those circumstances.

Senator Tkachuk: Yes. On page 4, third paragraph:

Although the Minister ostensibly was trying to proceed without unnecessarily stimulating inter-municipal controversy, the perception is that he was adamant that the authority would not be allowed to be in place and thus jeopardize the award of the contract to Paxport.

Who told you that?

Mr. Nixon: I talked to a number of people, and I have referred to them on several occasions here, who were very strongly in favour of the LAA alternative; that the view had been expressed by some of those people to me that they felt the policy of the Government of Canada vis-à-vis Pearson was that it be privatized and not be handed over to an LAA. They regretted this and felt that it was inappropriate since Pearson is the most productive airport in Canada and produces revenue even when it was directly run by the Ministry of Transport, which produced surpluses that were then spent on the development and maintenance of other airports.

Senator Tkachuk: Okay. In paragraph 3, page 2 of the first draft, which we'll go to say Tab 1, you indicate there were four companies who made unsolicited proposals for T1T2: Paxport, Claridge, Canadian Airport Authority, and Morrison Hershfield. In the third and successive drafts, mention of Morrison Hershfield unsolicited proposal does not appear. Why was the reference to Morrison Hershfield unsolicited proposal deleted from the report?

Mr. Nixon: I can't think of a reason, because we certainly met with them. They had some interesting ideas for the development of Pearson. I don't recall that they were in the group that was totally committed to the LAA concept, but they did have some interesting ideas, particularly about Terminal 1 and how the development of 1 and 2 might go forward.

Senator Tkachuk: They actually submitted a proposal. They actually submitted a proposal and answered the proposal call itself, did they not?

Mr. Nixon: But they did not ante.

Senator Tkachuk: They submitted it. They just didn't meet the qualifications.

Mr. Nixon: They didn't submit the million dollar fee or whatever it was.

Senator Tkachuk: The million bucks. Does it seem passing strange that they did all that work and didn't just sort of - like, the government didn't get to keep it, you know, if you lost.

Mr. Nixon: I know. I've already indicated why, from my point of view, it was passing strange.

Senator Tkachuk: Because?

Mr. Nixon: They felt it was not an open competition.

Senator Tkachuk: You thought that perhaps there may have been some illegal activity involved here?

Mr. Nixon: No, I don't think it was illegal. I don't think there is anything particularly illegal about it.

Senator Tkachuk: What you are saying?

Mr. Nixon: They felt they were not going to have - be able to enter the competition on a level playing field.

Senator Tkachuk: Well, why did they put the RFP in?

Mr. Nixon: Perhaps you should talk to them more specifically about it because, as Mr. Goudge said a couple times, I can't get into their head, because they had some very interesting alternative concepts for development.

Senator Tkachuk: Tell me the names of the three people and we may do that. Who are the people?

Mr. Nixon: The Morrison Hershfield firm is well known, and the people there, Senator LeBreton and I discussed this some weeks ago -

Senator LeBreton: You only give us one name, Dale Patterson.

Mr. Nixon: Perhaps that would be enough to hang an invitation to the senior members of that firm.

Senator LeBreton: Dale Patterson, a former Liberal staffer when you were in the Government of Ontario. That will be really helpful.

Senator Tkachuk: You were concerned in that November 19 report that no Toronto firm submitted proposals. Was that a problem?

Mr. Nixon: I think it is an emanation of Mr. Crosbie's view that the government had not gone out on a business-like basis to solicit proposals, and also the feeling that those people who had participated in the early proposals and the unsolicited proposals were well ahead of the game in their consideration of what the detailed proposal might be. And the people who might have been interested under those circumstances were - I wouldn't say frightened off, but were deterred by the understanding that some of the people who did go into the competition were considerably ahead of them and that they had only 90 days in which to function.

Senator Tkachuk: You mention on page 3 of that same report that the formal evaluation was professional and audited. On the 19th. The formal evaluation was professional and audited.

Mr. Nixon: That was on the basis that no financability was required, and that the government picked, as the best overall concept, one that they then deemed unfinancable until another company were brought in with them.

Senator Tkachuk: I'm going to get to that. You say that, and you have said it before, and you've been reading the testimony, but I'm just going to carry through that. So the reason that you changed your mind about professional opinions supported Paxport - you also said that in the paragraph two of page 3, that professional opinion supported the Paxport position. Who was the professional opinion you're referring to?

Mr. Nixon: I think it was referred to by the Department of Transport officials. Was it not audited by one of the -

Senator Tkachuk: Supported the Paxport position. So that would be the evaluation team, the Transport Canada, the -

Mr. Nixon: That's correct. I don't think there's been any indication from me that their proposal for redevelopment of the airport was not a good one.

Senator Tkachuk: You say that it was not a good one.

Mr. Nixon: I said the deal was not a good one. They were charging too much for what they were going to do over a period of 57 years. We can go through that mantra.

Senator Tkachuk: I don't want to do that. But you mentioned when you refer in a couple other reports, just to get to that, you talk about the problem that the Claridge Group had because they were forced into a very strange situation. Could you explain that to me?

Mr. Nixon: Well, there were many anomalies. For example, Paxport, in putting forward their presentation in competition with Claridge, was convincing the government officials that competition was in the best interests of - in the best interests of providing good service. There was a quote that I haven't read to you yet. If I can find it readily, I should like to bring forward. This is from the submission of the Government of Ontario to my review, and on page 13 of document 002318, it says at the bottom:

In an August, 1992 letter to the Metropolitan Toronto Chairman, Paxport outlined its views on the implications of monopoly terminal management at Pearson. Paxport noted the example of single management of Heathrow airport which has resulted in, quote, fees and charges that are amongst the highest in the world:

... tenancy costs for duty free operators are more than double those currently charged at Pearson International. Airline costs per passenger are also more than double those charged at major American airports and close to quadruple those at Pearson's Terminals 1 and 2.

So the big argument was that Paxport should get it and that we would all have the benefits of competition. Well, Claridge had to respond to that and in fact lost the bid on the basis that the return that they had proposed for the Government of Canada was not as great as that that was proposed to be paid by Paxport. Then, in the course of events, when the manoeuvring to achieve financability occurred, then Claridge found themselves really the owner of the Paxport submission, and Paxport was submerged in the 66 per ownership of T1T2 Limited Partnership. There was something rather ironic that that was the case, particularly when you've had evidence a few moments ago that some of the officials indicated that the 23.6 per cent before-tax profit might be difficult to achieve and that there were certain risks involved. That was one of the areas that I found ironic.

Senator Tkachuk: Actually it is, because you say that about Claridge, forced to accept the less advantageous position. I would take it you mean by that they were paying less rent to the government?

Mr. Nixon: Yes. Less advantageous for them, of course.

Senator Tkachuk: They were getting a higher return, were they not?

Mr. Nixon: Well, certainly their original proposal that was not deemed the best overall was not as advantageous to the Government of Canada as the Paxport one was.

Senator Tkachuk: In other words, if they would have won the proposal call, the government would have got less rent and would have - and the Claridge Group would have made more money. Now, it seems to me that in the end, the government had no choice. I mean, the evaluators made the right decision because they chose the one that gave the government more rent, plus got a better rate of return, and secondly, it seems to me that Claridge was able to find a way to do an acceptable deal based on the Paxport financing.

Mr. Nixon: And also found themselves in complete control of all the terminals at Pearson, so that there was no competition, which had been one of the bases of the winning proposal from Paxport.

Senator Tkachuk: That's right. You mention the November 18 report.

The Chairman: You said "one of the bases". I think that's a misuse. They advocated that. They advocated competition, but that wasn't the basis for the evaluation.

Mr. Nixon: Right. I certainly bow to your view in that regard, Mr. Chairman, but I simply read that quote from the Ontario report as an indication that Paxport, whether it was useful or not in the presentation of their alternative, they put it forward very strongly indeed and indicated that what had happened at Heathrow would be the sort of thing that we would not want to have happen at Pearson, because at Heathrow of course one authority runs the whole thing and there is no competition and the people who use that facility pay what the rate is without competition.

Senator Tkachuk: In that November 18 report, you mention David Peterson being the son-in-law of Mr. Matthews. Why did you do that?

Mr. Nixon: I didn't put that in the final report, but I thought that, when I was drafting that, that if I was going to be talking about the Matthews influence with the Progressive Conservative Party, I was certainly well aware that David Peterson had a close association with them through his marriage and that I should refer to that as well. And I took it out because I felt it was unnecessary.

Senator Tkachuk: When was the election in 1990? The provincial election in Ontario?

Mr. Nixon: I have blotted that date from my memory.

Senator Tkachuk: Was it in September?

Mr. Nixon: It may have been, but I tell you, I don't know what the date was.

Senator Tkachuk: That election was in September. The government announced in 1990 that they would do an RFP. Did the Government of Ontario of which you were a member submit a brief disagreeing with that?

Mr. Nixon: I would say no brief was submitted, but I was not in that area of responsibility. It could be that the Ministry of Transportation and Communication, I think it was known as then, may have expressed their view, but I'm not aware of that.

Senator Tkachuk: As president of Treasury Board, you wouldn't have taken an interest in this matter?

Mr. Nixon: Well, actually I was chairman of Management Board. You got to get all these things correct. You're in trouble if you use an incorrect term or get a date wrong.

Senator Tkachuk: I asked the date.

Mr. Nixon: In that regard, I'm not aware that any submission was made on behalf of the Government of Ontario.

Senator Tkachuk: After the Terminal 3 lease was given out, was there a submission by the Government of Ontario contradicting this policy of the Government of Canada?

Mr. Nixon: Not that I'm aware of.

Senator Tkachuk: Is it possible that you may have put Mr. Peterson in there because you were going to show that the reason the Government of Ontario didn't object to privatization was because Mr. Peterson was the son-in-law of Mr. Matthews?

Mr. Nixon: No, it certainly had nothing to do with that. I thought in the early draft, since I was saying these things about Mr. Matthews, that it would be only fair to put Mr. Peterson in with him, and then fortunately, in the final draft, I thought better of that.

The Chairman: We will have a break now. You can resume at four o'clock.

The committee recessed.

Upon resuming.

The Chairman: Colleagues, could I have a motion that it's agreed that the staff be instructed to compile a list of all documents received by the committee and that this list be filed as an exhibit? Is that agreed?

Hon. Senators: Agreed.

Senator Lynch-Staunton: Including those of Friday night.

The Chairman: Everything.

They always do this in the last of the ninth inning. I just have a list of people I wish to thank quickly. It's been a long, hot summer. I want to thank the interpreters, the reporters, the research staff, the translators, printers and messengers. I want to thank CPAC for their coverage, and Beaver Foods for their wonderful lunches.

The Chairman: Senator Tkachuk.

Senator Tkachuk: I think I just finished up with Premier Peterson. I know it was a stretch when I asked you that question. It was just that I had heard it somewhere, but I can't tell you who told me.

Senator Kirby: Heard what?

Senator Bryden: What was the name?

Senator Tkachuk: Premier Peterson.

On November 22nd, which is tab 3, you say that the privatization deal increased the value to the public. Did you mean to the people of Canada, to the Government of Canada?

Mr. Nixon: I wonder if you can just tell me where that is? What page? I have the tab number.

Senator Tkachuk: Well, it would be right on "Issues and Observations":

The privatization deal increases the net revenue to the government of Canada compared to what is presently taken out of Pearson by Transport Canada.

Mr. Nixon: Oh. I see that, yes.

Senator Tkachuk: You were talking about advantages to privatization.

A further significant advantage to privatization is the requirement that the developer must find and invest $700M in capital over the next 10 years for the development and expansion of the Terminals 1 & 2 facilities.

These two points, do you agree with that?

Mr. Nixon: Yes.

Senator Tkachuk: You seem to be arguing with yourself here. You say this is privatization, this is very good, and it's not going to add to the deficit; but, then, on the other side we have the local airport authorities. They don't have any money, but I'm sure they'll be able to find it, and they are good because they are non-profit.

Mr. Nixon: That is correct. I have repeated my view in this regard about the concept of handing this over for a period of time, et cetera, et cetera, at a pre-tax profit of 23.6 per cent. It's difficult for me to see the advantage of that compared to giving it to an LAA. I am ruminating here a little bit about the fact that the LAA would also have access to capital that would be independent of the government guarantee. I'm not sure that that is correct.

Senator Tkachuk: Okay.

Senator Jessiman: There's a charge, a passenger tax. So it's going to come out of the public, but it's going to come out of the travelling public, and you would have known that.

Mr. Nixon: People don't like paying that.

Senator Jessiman: You're right, and that certainly isn't, as you say -

Mr. Nixon: On the other hand, they would not like paying the increased costs that would provide the service and at the same time provide before-tax profit over 57 years of 23.6 per cent.

Senator Jessiman: Your recommendation was for the government to do this.

Mr. Nixon: Yeah.

Senator Jessiman: This was your recommendation and the government -

Mr. Nixon: My recommendation is for an LAA; that is correct.

Senator Jessiman: That's not what you said.

Mr. Nixon: Yes, it is.

Senator Jessiman: You say hand it over. You say to construct it now, the government, go and, however, get the money. That's what you said. They didn't follow your recommendation because they didn't have -

Mr. Nixon: Well, Mr. Chairman, there may be some aspect of this that the senator and I are reading somewhat differently, but in my final report, my proposal to the government is that they proceed along the lines of an LAA. Frankly, I hope they do.

Senator Tkachuk: You say something interesting immediately following. You say:

The previous -

and you scratched out "Progressive Conservative", but really that's what you were referring to -

- government was to move to profit based privatization.

You said that was our policy.

Mr. Nixon: On that particular airport.

Senator Tkachuk: No, you didn't say that.

The new government and Parliament may have different goals for the ownership and operation of this and similar facilities particularly involving a monopoly of service.

Mr. Nixon: Well, my reading of that and my understanding of it is that I'm talking about Pearson, which is the subject of the review. The policy of the Progressive Conservative government was to move to profit-based privatization, obviously. The new government may have different goals for the ownership and operation of this and similar facilities, particularly involving a monopoly of service.

Senator Tkachuk: I don't want to argue with you, but it was very clear to you that the privatization of facilities at an airport was the policy of the Progressive Conservative government of Canada.

Mr. Nixon: Pearson airport.

Senator Tkachuk: You're telling me what the Conservative government policy was?

Mr. Nixon: No, but I don't know of another airport that they have privatized, although I could be mistaken in that regard.

Senator Tkachuk: There's a long way to go.

Mr. Nixon: Because it's their policy, as you are aware, to give control of the development to an LAA in every other case.

Senator Tkachuk: On November 22nd, on page 6, you mentioned that:

The appendix provides an independent appraisal of these matters.

You stated that the net return to the private sector was not clearly revealed.

Have we got a copy of that appendix? What was that appendix on November the 22nd?

Mr. Nixon: I'm not sure.

Senator Tkachuk: Would that be the Crosbie report?

Mr. Nixon: Yeah, that's what I have in mind anyway.

Senator Tkachuk: So you already knew what it said.

Mr. Nixon: No, because I don't believe I got a final copy of the Crosbie report until the last week of our situation.

Senator Tkachuk: But you were drawing conclusions.

Mr. Nixon: We were discussing it, as Mr. Crosbie earlier said, on a regular basis once a week. We were talking about those matters. Just like Mr. Goudge was talking about the provisions of the deal and we were discussing those and his report was made available to me in the final week, the same was true of Mr. Crosbie's material.

Senator Tkachuk: Now if we go to tab 4, November the 24th, 1993, memorandum from Robert Nixon to Stephen Goudge, Pearson Airport review -

Mr. Nixon: I have this. It reads that way, but the arrows indicate that it was from Stephen Goudge, Q.C.

Senator Tkachuk: Then what was the next one? From Stephen Goudge to Robert Nixon, draft number two?

Mr. Nixon: You mean number 5?

Senator Tkachuk: Draft number two. Is that tab 5?

Mr. Nixon: I'm sorry. It appears that the next one is to Robert Nixon from Stephen Goudge, and I believe that the first one was as well.

Senator Tkachuk: Okay. So they were both from Mr. Goudge to Mr. Nixon.

Mr. Nixon: I haven't checked them, but there are many aspects of it that are similar if not identical. It looks like the first one has got a few notes into it like inter alia, which is the sort of insertion that I would not be guilty of.

Senator Kirby: Only a lawyer would do that.

Mr. Nixon: He has shoved that in a couple of times, and it looks very good.

Senator Bryden: Lawyers and accountants like Latin.

Senator Tkachuk: Well, he also uses things like force majeure.

Could I ask you, Mr. Nixon, both of them are draft two. Where is draft one? Maybe I should ask Mr. Goudge that question.

Mr. Goudge: I can't answer that, senator. What you've got before you is, I think, your counsel's yeoman attempt to put in what his staff determined to be chronological order what I presumed came out of our working files that we shipped in January of 1994 up to Ottawa. I can't tell you. I mean in my files I'm certain there was nothing like this chronology with these tabs. So if you say to me was there a draft number one, I can't remember that. You know, I can't tell you which day, whether one was tab 4 and one was tab 5, or whether they were ordered in that respect in my files. I just can't tell you that.

Senator LeBreton: But you say they were shipped in January 1994.

Mr. Goudge: It was right after.

Senator LeBreton: So they were anticipating an inquiry, obviously.

Mr. Goudge: No, no. Senator, don't be so suspicious.

Senator LeBreton: I can't help it.

Mr. Goudge: We were asked by the Clerk of the Privy Council to ship all our stuff up. There's a freedom of information regime, or something, that requires us to -

Mr. Nelligan: To help you with the chronology, it would appear that the one at tab 4 was shipped by somebody on the 24th of November at 10:39 a.m., and the one at tab 5 apparently came from your office on the 49th floor at 12:07 the same day. There only seems to be an hour and a few minutes between the transmission of both documents.

Mr. Goudge: That's helpful, Mr. Nelligan.

Senator LeBreton: And they've been retyped.

Senator Tkachuk: When you go through this, you can tell these two, Mr. Goudge's reports to Mr. Nixon's? They seem a little - what's the word for it... They don't talk about Don Matthews and what a Tory was and how awful all this was. All that sort of local gossip isn't in here. Did you not hear it, Mr. Goudge, in your meetings, or did you think it was maybe not relevant?

Mr. Goudge: (A), I heard it. (B), for what it's worth, it isn't my report; it's Mr. Nixon's. I thought it was relevant. (C), I think what I -

Senator Tkachuk: Where is it in yours?

Mr. Goudge: It seemed to me that what I was doing here - and I would have to look back over this - was to describe in relatively sort of antiseptic detail the way the contract looked, the process that led to it in terms of the RFP and stuff like that as opposed to a number of the other issues that are dealt with by Mr. Nixon. In other words, it was my commentary on the agreement, per se, as opposed to the context in which the agreement was awarded.

Senator Tkachuk: If we take all of the reports to this time and your testimony that we had this afternoon and this morning, the Government of Canada had an RFP, a call for proposal, which even you said, Mr. Nixon, was a fair and appropriate appraisal process of the documents that were submitted. Am I right so far?

Mr. Nixon: Yes.

This is not directly on that, but my main objection was that the responses had to be available in 90 days.

Senator Tkachuk: But was it also not clear, and you were fully aware of this, that anybody who wished to ask for an extension of period was urged to do so.

Mr. Nixon: Yes. I was also very much under the impression that the people who might have considered putting in a proposal were deterred by a number of things. The fact that there was 90 days but they might ask for additional time, and the fact that some of them felt that they would not be coming into a level playing field, and we've discussed that.

Senator Tkachuk: None of this is substantiated in fact. This is what people have told you that you will not give us the names of.

Mr. Nixon: It was matters that were clearly in the minds of -

Senator Tkachuk: No, I'm just asking you that.

Mr. Nixon: That is correct, Mr. Chairman. There were matters that were clearly in the minds of the electorate. I might as well -

Senator Tkachuk: That's fine.

Mr. Nixon: At the time, when I was asked by the Prime Minister to review this matter, anybody who felt that the role of lobbyists and patronage should not have been included in our discussion I think is unrealistic, and these were my views to the Prime Minister as to what I found in talking to the people involved in the matter.

Senator Tkachuk: All views that we have shown earlier on were incorrect.

Mr. Nixon: So you say.

Senator Tkachuk: Fine. That's what I say; that's what you say.

Senator LeBreton: So the evidence says.

Senator Tkachuk: Let me go back again. You said the process was fair. We had two people. There was a call for proposal, 17 months. There was an announcement and a call. Now you may claim that there was a 90-day time period, and that may have been insufficient, but we know of one instance where someone asked. The evidence will show that somebody asked, namely the Claridge people, who said, "not enough time". They got an extension, so it worked out to what, 125 days?

Senator LeBreton: 127 days.

Senator Tkachuk: 127 days. Nobody else asked. So up to the time - you also say that the Paxport proposal had a better deal for the government because it had more money to the government and had a lower rate of return than the other proposal.

Mr. Nixon: But it was not financeable.

Senator Tkachuk: Let me just take it to that point. Let me take it to the point of the awarding of the call for proposal by a contingency saying that they have to prove financeability, and we'll forget about that argument. But, up to that point, the process seemed to be reasonably fair.

Mr. Nixon: I've indicated that I felt -

Senator Tkachuk: I'm asking you.

Mr. Nixon: I've indicated that I felt that Paxport had certain advantages associated with the fact that they had made a previous submission.

Senator Tkachuk: No. They got more money, more money than the other proposal.

Mr. Nixon: Right. They had made a previous submission, and the indication was that the competition would be difficult for anyone who had not been fully involved in the matter previously to come in with any expectation to be successful.

Senator Tkachuk: Well, you know, it's just like when you don't run the race. You can always say, "I didn't run it because I never had a chance." Isn't that what you can say? But you got to run the race. Who else wanted to run the race besides Morrison Hershfield?

Mr. Nixon: It gets to the point where the recommendations from Mr. Crosbie were quite influential in my thinking when they said that the government had not gone out into the financial and the development community and sold this deal.

Senator Tkachuk: Okay.

Mr. Nixon: They appeared that they were okay dealing with the limited number of people who had participated in Terminal 3 and certain related aspects.

Senator Tkachuk: You know, outside of the testimony that we have heard to this time about the process itself, about the fact that Paxport won the proposal and that there was a greater return to the government, which you state in your reports here that they had a lower rate of return, you also say that it was an excellent design and recommend that the Government of Canada should actually use their development plan because it was excellent.

Mr. Nixon: I wanted them to proceed without delay because I felt that -

Senator Tkachuk: No, no. Did you not say that it was?

Mr. Nixon: Yes. I have not criticized the plan at any time.

Senator Tkachuk: Right. We're following a line of reasoning here. What we're saying is there were two proposals. The complaint here is that people weren't able to run the race, but really there was three proposals. One was taken off the table; one won and should have won. You said it was a fair process, that maybe financeability was an issue. Then you say that it was an excellent proposal besides and recommend that the Government of Canada begin on it immediately, actually, and use that design and that they should be paid for that design.

Mr. Nixon: So?

Senator Tkachuk: Okay. So we got more money. It's a real good design. Why is this a bad deal?

Mr. Nixon: I felt that it was entered into in a process that was inadequate. I felt that the decision to proceed in spite of the fact that the issue was before the public during election flew in the face of any kind of democratic morality in that regard and that it should have been postponed for the re-elected government or the new government to deal with. On that recommendation, on the basis of these matters - and I can go over the whole thing about the LAA and the 57 years and the 23.6 per cent profit and so on - that I felt that the government would be well advised to cancel the deal, which they did.

Senator Tkachuk: Let's go to page 8, paragraph 7 of that same tab, I think.

Mr. Nixon: Which is that, 5?

Senator Tkachuk: Tab 4. Let's go to page 8, paragraph 7. You say these people are responsible business people, and then you say at the bottom of the page that the conclusions are that there be a fair market value assessment and a payment of fair market value for using the design -

Mr. Nixon: Sorry? You're on page 8, but I can't find -

Senator Tkachuk: Let me go to that tab here. I may be getting lost here myself. You know, there's so many of these. Tab 4.

...other intellectual property created by T1 T2 Limited Partnership that on a technical level appears to be first class. This would be particularly so if the Government of Canada saw a future for T1 T2 in conformity with those plans.

What was the future that you foresaw for T1T2?

Mr. Nixon: If the government decides not to cancel the program.

Senator Tkachuk: So at this time, November the 24th, you're not seeing your way clear to cancelling?

Mr. Nixon: I can't tell you what the time line is there, but I was specific in wanting to not only recognize the value of the plan, but to be as positive as I could with the manner in which the T1T2 principals had been dealing with the Government of Canada. I went on to say - I'm not sure if it's in this part here - that if there was cancellation, that I thought that the situation ought to be done without the payment of foregone profits for the 57 years.

Senator Tkachuk: I understand that.

Mr. Nixon: But if the government decided not to do that, then as far as the plan was concerned, they could proceed with that or have them reviewed in any way they saw was appropriate.

Senator Tkachuk: And yet in tab 3 you say:

To leave a...government with...such a flawed process and under the shadow of apparent gross political manipulation is seen by the citizens as taxpayers as unacceptable.

Mr. Nixon: Gross political manipulation was seen by the citizens and taxpayers and reported to the Prime Minister by me because they reported it to me. I felt that the process had been seriously flawed and that it was under the shadow that I have described and which you find so offensive.

Senator Tkachuk: I don't find what you say - well, I do find what you say offensive, but not for those reasons.

Let me just get back here. Just give me a minute here, chairman. I have to go back to another piece of paper here. It will take me a minute to see if I'm in the right place.

Senator LeBreton: May ask I a supplementary?

Senator Tkachuk: That would be helpful, Marge.

Senator LeBreton: In view of your testimony just this moment in terms of you were still looking at another option, I'm going to go back and refer to comments made by you at the very outset of your short mandate. I refer to testimony under oath by Mr. Peter Coughlin and Mr. Jack Matthews which convinced both of them that you were pursuing other options. We now have the proof. One can only conclude that even though you and your staff were beavering away with their pre-ordained report, with its pre-ordained conclusion, you, as an experienced politician, preferred another approach.

So I'm asking you, Mr. Nixon, under oath and as an experienced politician, did you pursue this objective of in fact continuing on with the contracts? And here we have a memo now where -

Mr. Nixon: Not at this stage here, but I realized that the government, whatever advice I gave them, would of course take the action that they saw fit.

My own view, frankly, is that the cancellation of the contract was their best course of action, but that if they actually maintained and wanted to move forward, that the plans already had been approved by the Department of Transport and where essentially the T1T2 plans could be used. As I say, there's something in here about the people who had developed those plans would have to be compensated.

Senator LeBreton: Mr. Nixon, obviously in your deliberations the word was getting around that you were pursuing this other option, hence -

Mr. Nixon: Excuse me, what other option?

Senator LeBreton: The option of continuing on with the contract. Hence, the angst and the stress of the Liberal caucus for Metro Toronto, who by your previous testimony you indicated called a meeting in late November with one agenda item, the Pearson Airport development. The interesting thing is that, when you read the press reports, they were all up in arms threatening the Prime Minister, threatening you. Now if they had been aware of this pre-ordained instruction that you got obviously along the way, why were they so upset and why did they react so viciously? If you had presented the report as we are now studying, why would they have even needed a meeting?

Mr. Nixon: Mr. Chairman, it's difficult to answer a question that's couched in such objectionable terms, that this is not a pre-ordained report and that I took every possible precaution I could that no one outside a group of four people knew what my thoughts were and how they were changing during the three or four weeks of the review. If Senator LeBreton prefers to think that somehow we received instructions or it was pre-ordained, I can't help that. I just tell her that she is wrong.

Senator LeBreton: Mr. Nixon, I beg to differ with you. According to your own testimony, you were called by the then Leader of the Opposition and the Leader of the Liberal Party, Jean Chrétien, asking you to review for him personally the contracts relating to Terminals 1 and 2.

Media reports of your appointment quoted you as saying that there could be a "meeting of minds" between the new government and the business consortium. You were also reported as saying:

It might possibly be that the thing could be rearranged without going to Draconian lengths -

- your words -

- to change it.

And then you go on to say, about scrapping the deal:

It's difficult to go down those lines because it leads you into scenarios that are tougher than surely would be contemplated.

That was when you were appointed. According to your testimony, you met with Mr. Chrétien and Eddy Goldenberg the following day where:

...the PM designate reiterates his desire that "I personally review" the Pearson contracts.

So what happened at the meeting with Mr. Chrétien and Mr. Goldenberg to have you so quickly move so off your stated public position?

Mr. Nixon: Mr. Chairman, the senator has the timing incorrect.

Senator LeBreton: Well, I'm going by your testimony.

Mr. Nixon: The report of my comments, which were intended to be moderate and level, that I was prepared to consider all alternatives such as maintaining the contract the way it was or adjusting the contract or rejecting the contract, were made not before I met with Mr. Chrétien but after I met with Mr. Chrétien. And I felt that it was incumbent on me, having this responsibility and just starting my hearings, to indicate to anyone who was interested that I was prepared to think of those three alternatives and any others that might be reasonably part of such a consideration.

So I can assure the minister - the senator, not that it will do any good, that there was nothing fore-ordained or instructioned or instructed about these matters. And on the basis of my review, my discussions with many people, some of whom would not have come forward unless they could do so with some confidentiality, and on the basis of the professional opinions provided by Mr. Goudge and by Mr. Crosbie, I was able to come up with a recommendation which was quite clear. I felt the government should reject the contract. They should pay for out-of-pocket expenses. If they could in any way use the work that was done, they would pay for that work and use it to proceed with the renovation of Terminals 1 and 2.

I don't see anything unreasonable about that. There was simply no dark, paranoid plot, because it just didn't exist. And if the Liberal caucus in Toronto was concerned about what I was thinking, well, it's because they didn't know what I was thinking. And they exercised what they considered to be their right, and I thought it was, too, to express their views to me. And, you know, I would have met with any other caucus.

Senator LeBreton: They expressed the view and the Prime Minister and the public, but I'm just going by your testimony, Mr. Nixon, when you said that you were called by the Prime Minister asking you to undertake this, these press reports of what you said -

Mr. Nixon: The timing is incorrect, Mr. Chairman.

Senator LeBreton: Well, I was going by -

Mr. Nixon: The senator is incorrect in her timing.

Senator LeBreton: - your testimony, Mr. Nixon.

Mr. Nixon: Well, you should certainly never believe anything your read in the press.

Senator LeBreton: That's right, no - as one who takes no notes and can't remember who they talked to.

The Chairman: Senator Tkachuk, have you composed yourself yet?

Senator Tkachuk: I'm back, I'm back. If we go to that first tab again, that great November 19th one, but it's tab 1, we go to page 3. The second paragraph that starts, "In a letter dated December 7" or a continuation of a paragraph. It's a full paragraph. And a letter dated December 7, 1992, from Transport Canada.

You write in here that Paxport was designated the best overall bid, and you quote that so that's obviously taken from the press release or whatever or the letter of the government. The letter indicated that financeability was a substantial concern and that this problem would have to be settled before negotiations proceeded. A deadline of February 15th was set. Paxport requested it be extended.

Then you say something very interesting here. You say Paxport canvassed a variety of capital sources, both public and private and unwillingly - and then in parentheses - according to their president - which I assume would be Jack Matthews - and followed the suggestion which may have come from an influential political source to approach their only competition left in the RFP, Claridge Properties, owner of Terminal 3.

When did the president of Paxport tell you that?

Mr. Nixon: At a meeting with him and some of his colleagues in November of 1993.

Senator Tkachuk: The president of Paxport.

Mr. Nixon: That's correct.

Senator Tkachuk: Who are you referring to?

Mr. Nixon: Jack Matthews.

Senator Tkachuk: Jack Matthews said that they canvassed a variety of capital sources, both publicly and privately, and then unwillingly, accordingly, followed the suggestion that may have come from influential political to approach their only competition?

Mr. Nixon: The suggestion that it may have come from an influential political source is something that, I think, sprang full-blown in my mind. He would not have said that, but they were obvious - it was obvious that -

Senator Tkachuk: You concluded that.

Mr. Nixon: - even though he had been extremely critical of the prospect of Claridge taking over Terminals 1 and 2, since they already had Terminal 3, that his view on that was moderated when it was necessary to use their financial resources in order for his own bid to proceed. But he told me that he had gone to some of the pension funds and the banks and had been unsuccessful in getting the support that Paxport needed to proceed independently.

Senator Tkachuk: What date was that meeting?

Mr. Nixon: It is on the record and it was in November, and if you want us to scramble around and find that, we can do so.

Senator Tkachuk: And how long was it?

Mr. Nixon: It was a solid meeting of an hour or so.

Senator Tkachuk: And did you talk about this particular problem here, about the feasible -

Mr. Nixon: About the financing?

Senator Tkachuk: Yeah.

Mr. Nixon: Yes, because one of the problems which concerned me from the start was that the government was prepared to establish an RFP process that did not have financeability as one of its cornerstones. Without that, I felt that it was inappropriate that the government go forward and designate best overall when the financeability of that plan was, in the minds of the officials of the Department of Transport, inadequate.

Senator Tkachuk: This is a very intriguing point because you say "may" have come from an influential political source. You just made that up.

Mr. Nixon: Actually, it was - there was some material in your own hearings that indicated that somebody else had made it up as well.

Senator Tkachuk: Mr. Nixon, I'm asking about you.

Mr. Nixon: And it was - the thought was quite clear in my mind that somebody, somewhere, would see that Claridge had the dough, Paxport had the good idea, and why shouldn't the two of them get together and do their work?

Senator Tkachuk: You know that's not what happened. You've been reading the testimony.

Mr. Nixon: Of course.

Senator Tkachuk: Did this happen or did it not happen?

Mr. Nixon: As far as I am concerned, all that is apparent in the public record is that Claridge brought in the financing that permitted the Paxport proposal to go forward.

Senator Tkachuk: About how they got together.

Mr. Nixon: That's not in my final report, you'll notice.

Senator Tkachuk: You say here something. You say, from an influential political source. I'm saying you made that up. You just said - like, what I'm trying to get at through this whole thing, Chairman, is that throughout this whole report, we have got the stuff on Mr. Matthews; we have the stuff on the Matthews Group; we have the Otto Jelinek information.

We have now - you know, you have a meeting with the guy and he tells you Mr. Matthews says - well, I got a - let's say he did, but he didn't tell you who it was, and you assume and write into your report right away an influential -

Mr. Nixon: It is not in my report.

Senator Tkachuk: But you wrote it down.

Mr. Nixon: That's correct, in a draft, and it's not in my report.

Senator Tkachuk: But why? You know what it looks like. These are simply ruminations of: What can I say? What can't I say? What's political?

You had no interest in getting the facts on these people, did you?

Mr. Nixon: Of course, I did.

Senator Tkachuk: Mr. Nixon, you told me that you got your information from the newspaper.

Mr. Nixon: I find it very reliable to do so on things like who is president of the Conservative party. Why would they get it wrong?

Senator Tkachuk: Mr. Nixon, I mean, you got it wrong, so they had it wrong.

Mr. Nixon: Other way around.

Senator Tkachuk: They had it wrong therefore you got it wrong? You relied on them as a source?

Mr. Nixon: Sure, I relied on them as the basis of their political offices and so on.

Senator Tkachuk: So how about all this other information? Well? How about all this stuff?

Mr. Nixon: I just simply say, Mr. Chairman, once again, that I reject the implication that has come from the senator and his colleague that, for some reason, there is deliberate misinformation in the report. That is not the case. The material in the report was put in there with a clear understanding. I believed it to be true. And the matter pertaining to the financing -

Senator Tkachuk: Mr. Nixon -

Mr. Nixon: - came from my colleague on my right. The matter pertaining to the individual sections of the deal came from my colleague on my left. And both of these people are competent to independently review them and give me the benefit of their -

Senator Tkachuk: Mr. Nixon, you took no notes at any one of your meetings. I'm going to wrap this up quickly, but you did not take one note at any of meetings that you had as a representative of the Prime Minister of Canada, did you?

Mr. Nixon: No, I didn't take notes, Mr. Chairman, I took -

Senator Tkachuk: You relied on newspaper -

Mr. Nixon: I think you have to understand, Mr. Chairman -

Senator Tkachuk: I just - yes or no?

Mr. Goudge: Let him answer the question.

Mr. Nixon: - that this was - well, I have already answered it. I'm going to say something further if the chairman will permit me.

Senator Tkachuk: Go ahead, I've got other questions to ask.

Mr. Nixon: It is important, I think you understand, to realize that this report was to be done in a month. We had a series of meetings for three weeks.

Most of the material that came to me was very clearly in my mind and, from evening to evening, formed drafts of the report that the honourable senator is referring to during this part of the discussion.

The fact that some of those concepts and ideas are not remembered in detail, two years almost to the day later, I don't apologize for. I did my job. The material that I presented to the Prime Minister was factual; it was timely; I got it in within the month that he designated; and he went forward and made the decision of the government of the day to cancel.

I think it was the proper decision and, I believe, in the efflux of time, it will be seen to be the proper decision.

The Chairman: I think we should make it clear that you are not under any circumstances suggesting that there was deliberate misrepresentation. You were pointing out the fact -

Senator Tkachuk: No, I didn't say that.

The Chairman: No, but we want to make that clear, Mr. Nixon.

Senator LeBreton: Can I just say -

The Chairman: There were errors. That is all.

Senator Bryden: Mr. Chairman, I'd like very much to respect the time frame, but I know Senator Tkachuk, as he has gotten to know me a little bit. If he gets in full flight, I will not be able to sit here and not say something. I would like us to - if we want to wrap it up constructively, I think we can do that in a short period of time.

Senator Tkachuk: I only have one more question, and that is: If there are, as we discussed today, a number of errors, omissions perhaps - I don't know what the reason was, Mr. Nixon. If they weren't deliberate, then the reasons have to be sort of mental laziness about these things or casualness or whatever the reasons are. I'm not sure what they are.

But if they were for that part of the report that I tried to cover today, then surely there is a suspicion that all of the other work in the report might be of the same calibre and quality. Could I draw that conclusion, perhaps?

Mr. Nixon: Well, it's -

Senator Bryden: Mr. Chairman, can I just ask one point of privilege?

Senator Tkachuk: And that's my last question.

Senator Bryden: Okay, but there is before this committee - because what Senator Tkachuk is attempting to do is to make a link between certain things and some sort of tendency. There is, before this committee, the report of Judge Lederman in relation to the Bitove case in the 1988 election where the Prime Minister of the country interfered in a lease -

Senator Lynch-Staunton: Where is that document?

Senator Bryden: It's filed. I filed it.

Oh, no, I brought it in and I filed it. So what you're leading up to is, I can legitimately draw the same conclusion. There is a propensity then for the Prime Minister to interfere during election years in leases. And this one is a much bigger one. And I think, in this instance, you may have bit off more than you can chew.

Senator LeBreton: Senator Bryden, the Clerk of the Privy Council answered that. When you tabled that document, he answered exactly what happened. And if you were truthful at all, you would also acknowledge that in the - because he didn't - he very clearly -

Senator Bryden: What I'm really saying is you can't take about half a dozen sentences and say those were not as precise as they might be and therefore we should throw out that 30-page report.

Senator Tkachuk: They were long sentences, Mr. Chairman.

Mr. Nixon: Mr. Chairman, if I may have a word in my own defence, that if for some reason of lack of application, I didn't get the exact year when the gentleman was president of the Conservative party or the chief fundraiser, well, I don't particularly apologize for that because it is well known by everyone, including everybody around this table that Mr. Matthews has been and probably continues to be an influential member of the Progressive Conservative party with easy access to the former Prime Minister and strongly in support of his efforts.

And there is nothing improper about that and many people here would say it is totally proper indeed. But this gave him the kind of access which was criticized by people, at the time of the last election, two years ago, which gave an aura of patronage which people resented. And they showed their resentment in a clear way by defeating the Progressive Conservative candidates under those circumstances.

Now, I just want to tell you that, if the senator is saying that, because I didn't know the exact date when Mr. Matthews was president of the PC party, that therefore the report is somehow under a cloud, well, I simply can't accept that. I can tell you that my colleagues and I worked assiduously at this. I dedicated all of my time to it including weekends. I made myself available not just in my office but around the Toronto area to meet people who wanted to speak with me, and I felt that I conveyed their views as effectively as I possibly can to the Prime Minister to assist him in his decision.

Senator LeBreton: That's highly partisan. Mr. Chairman, I have two questions, two points of clarification as a result of Mr. Nixon's testimony.

Senator Tkachuk: I am done, Mr. Chairman.

Senator LeBreton: I won't take long.

The Chairman: You have two questions?

Senator LeBreton: Two questions.

The Chairman: Senator Lynch-Staunton has asked for a couple of questions. And Senator Bryden, anything on this side?

Senator Bryden: Depending on what comes out of those four questions.

The Chairman: Yes, all right. And then Mr. Nelligan is going to require - no? You, too?

Senator Jessiman: What do you mean, "No? You, too?" What are you talking about?

The Chairman: Well, I mean, how many people are going to get in this?

Senator Jessiman: You know, I am limited now. I have gone through about four questions. I only asked the questions as written here. They went on in answers forever.

Senator LeBreton: Well, the same old mantra.

Senator Jessiman: Now, I've got about five, six questions I want to ask.

Senator LeBreton: I just wanted - there's a couple of things in the evidence, Mr. Chairman, that I want to get at, as a result of testimony we've had. And one of them is, Mr. Nixon made much of a so-called Ontario government report, and yet we had testimony from Mr. Rowat, Mr. Desmarais, that they were not - they were not aware - they had never heard of this report.

In your - in the testimony that you gave here previously, you said that the Ontario government called you and they wanted to present you with a brief.

So I'm going to ask you some specific questions about the Ontario government report. Who actually provided it to you? What individual handed that report to you?

Mr. Nixon: It arrived in the mail under the signature of the Ministry of Transportation and Communications. But I also had an opportunity to meet with the premier and the minister and two or three of their other colleagues at Queen's Park during the course of the November review.

Senator LeBreton: Does it not strike you as strange that the chief negotiator for the government, Mr. Rowat, had no knowledge whatsoever of this report? So does it not therefore indicate that the report was written after the fact?

Mr. Nixon: It certainly was. The review of Pearson International Airport was prepared by the government of Ontario during that period of time and presented to me as a submission for my consideration.

Senator LeBreton: After the fact.

Mr. Nixon: I do not know the date on which it was actually written but - do you know anything about that?

Mr. Goudge: I can't answer that. I think we testified to this last time, Senator LeBreton.

Mr. Nixon: What was the firm that did that?

Mr. Goudge: Fraser & Beatty. My understanding was that they received at some point, following October of 1992, 99 per cent of the contractual documents in a plain brown envelope, and that's how the report gets generated.

Senator LeBreton: "They" being who, Mr. Goudge?

Mr. Goudge: The provincial government.

Senator LeBreton: That they received the report? What report?

Mr. Goudge: The contractual documents.

Senator LeBreton: The contractual documents.

Mr. Goudge: Yes.

Senator LeBreton: But I'm talking about the report that Mr. Nixon said was prepared by the Ontario government which he said he used - he relied, I'm asking - and in your own testimony, said that the Ontario government called, wanted to meet with you and wanted to give you a brief. And I think it was dated, if my memory serves me correctly, the 18th of November. I'm asking you - and he said it was sent in by the department. Who wrote the report, as far as you know, the Ontario government report?

Mr. Nixon: I understood that the law firm Fraser & Beatty had done some of the review matters pertaining to it, but it is simply presented by the Government of Ontario to me.

Senator LeBreton: After the fact.

Mr. Nixon: And it comes from the Department of Transportation and Communication.

Senator LeBreton: After the fact.

Mr. Goudge: After the fact of what?

Senator LeBreton: When you were doing your review of the Pearson Airport. Because we have the man, the main negotiator for the government, Mr. Rowat, we have Mr. Desmarais, we have - no one had any knowledge whatsoever of this report. So I'm asking you does it not strike you as passing strange that you, once Mr. Nixon has been named to head up this investigation, gets a call from the Ontario government and says, poof, we've got this report we'd like you to have?

Mr. Goudge: No.

Senator LeBreton: Well, why wouldn't it - if it was in fact a report about the Pearson T1T2 development, why would no one in the government have the advantage of seeing it?

Mr. Nixon: It might be helpful to note that one of the substantial working papers in the report is entitled "Economic Consequences of Alternative Management Structures for Pearson International Airport" prepared for the Ontario Ministry of Transportation, and it is dated November 12, 1993. So whether or not that had not been -

Senator LeBreton: After the fact.

Mr. Nixon: Yeah. That's the date of that one.

Senator LeBreton: Thank you. Now, I'm asking you, are you aware of who wrote the report, the author?

Mr. Nixon: Nothing other than to say that it came from the Department of Transportation and Communication, and their officials were present with the premier when he had the meeting that I've previously referred to, their deputy minister and at least four of their officials.

Senator LeBreton: And when you met with the premier, Mr. Rae, at the time, did he specifically discuss this report with you?

Mr. Nixon: No, he expressed informally the ideas of himself and his minister of transportation who was there, the treasurer who was there. There may have been another minister but those three were there.

Mr. Nixon: Did you not ask them why it was not made public? Why, you know, you were getting this as a sort of after-the-fact - I mean -

Mr. Goudge: You keep saying after the fact, senator. After the fact of what?

Senator LeBreton: After Mr. Nixon was named to conduct this inquiry, he just said it was -

Mr. Nixon: Well, I wouldn't expect to get it before I was named, would I?

Senator LeBreton: Well, I mean - but you left the impression that the Ontario report had done this report criticizing - criticizing the deal, but it is easy to criticize it after it has become a political hot potato in the middle of an election campaign, thanks to the less-than-perfect judgment of the now Prime Minister.

And I am just wondering, when they handed it to you, did you not say: How long have you been in possession of this? How long have you held these views? Why didn't you make this public?

Mr. Nixon: I certainly had the clear impression that their views were arrived at after careful consideration and review and using professional assistance, and that they were anxious that I be in possession of those views because they felt very strongly that the contract as they understood it should not proceed.

Senator LeBreton: Do you believe that Mr. Gardner Church perhaps was one of the drafters of this document?

Mr. Nixon: Mr. Gardner Church was not a part of the government at that time.

Senator LeBreton: I didn't ask you that. I asked you if you -

Mr. Nixon: My answer then is no.

Senator LeBreton: I just - why did you not cite in your report as a source - why did you not cite in your report the fact that this was just an after-the-fact document, if you relied on this report so much in the Nixon report?

Mr. Nixon: Well, it may be useful for you to discount it. From my point of view, I considered it an extremely valuable document and I did use it extensively in forming my conclusions.

Senator LeBreton: Well, you know, Mr. Nixon, going back to your earlier testimony, you heard from the Government of Ontario, although you can't say who drafted it; you've heard from LAA people; from Gardner Church who, according to your testimony, you met in your kitchen and obviously he had a great deal of influence on you because his language, according to the notes you took at that meeting, end up in the Nixon report. And you've heard from Chern Heed and from Morrison Hershfield. And even though we have a Treasury Board document saying the bid from Morrison Hershfield group was rejected - not, according to what you said, that the - I've forgotten your exact words -

An Hon. Senator: Taken off the table.

Senator LeBreton: Yeah, but that they - that they thought that they were - I can get it, I've got it in the testimony. But the fact of the matter is that Morrison Hershfield were part of a Treasury Board document that listed three different people spinning a proposal, and they did not withdraw it because they thought the fix was in. Those were your words.

And so you constructed your report on the basis of this, this evidence. You did not, as we've discussed before, talk to the proponents. You didn't talk to the lobbyists. You didn't talk to the ministers. You didn't talk to any of the people - you didn't talk to the evaluation group. You didn't talk to anyone.

So did it ever occur to you, Mr. Nixon, that you were conducting a poll amongst the losers in this process and that they would naturally present a biased point of view to you, because that's exactly what has happened, is it not?

Mr. Nixon: No. We considered the people that we would contact. And then, of course, there were a number of people that contacted us without our particular invitation. A number of people made presentations of that type.

We felt that we were well informed in this regard, and I feel very comfortable that the basis of the report is sufficient and equitable, and I feel that the report was well-drawn and effective.

Senator LeBreton: That's your biased, partisan, political view, Mr. Nixon. That's all I have to say.

The Chairman: Senator Jessiman, if you -

Senator Jessiman: I will be very quick. I am sure he can answer them quickly if he will. I will give you the page. I'd like you to look at your report, if you would, please. Do you have your report in front of you?

Mr. Nixon: Shoot.

Senator Jessiman: All right, I'll shoot, if I may. Page 2, paragraph 2. On the same point that Senator LeBreton was talking about. Why did you fail to mention the Morrison Hershfield in that paragraph? You knew there were three, and you knew -

Mr. Nixon: They had submitted it but they had not covered it with the $1 million ante.

Senator Jessiman: I understand that, but you just -

Mr. Nixon: On that basis, I did not mention it.

Senator Jessiman: But they didn't make a - did they have an unsolicited offer? They didn't, did they?

Mr. Nixon: Do you recall? I don't recall, but they were certainly involved and interested in it. I think I have already indicated that they had some rather imaginative and novel ideas for the utilization of Terminal 1.

Senator Jessiman: Page 5, first paragraph. That $26 million is an incorrect figure, is that not right? Isn't it $27 million?

Mr. Nixon: I think it is 27 if you include the heating plan.

Senator Jessiman: So why didn't you?

Mr. Nixon: I think both numbers are correct for any person who would carefully read it.

Mr. Goudge: No, no.

Senator Jessiman: But you didn't explain that though.

Mr. Goudge: No, it isn't. No, I don't think that's right. I think the 27 that should have been 26 is over on the preceding page.

Mr. Nixon: That's right.

Senator Jessiman: The 27 should be 28?

Mr. Goudge: No. There is a debate about whether the annual rent is 27 or 26 depending on whether you include the heating plan.

Senator Jessiman: That's right.

Mr. Goudge: That has nothing to do with the rent received in 1993.

Senator Jessiman: I understood it was. So, anyway, what you're telling us, you forgot or you chose not to put in the heating plan rental of $1 million.

Mr. Goudge: No, we included it because we think the right figure on page 4 in the last paragraph is $27 million, because you should include the rent for the heating plan.

Senator Jessiman: I am told it is 28.

Mr. Goudge: Sorry?

Senator Jessiman: That's the information I was given. But, all right, we're arguing about it. The facts are the facts, whatever they are, right?

Mr. Goudge: That is a proposition I can agree with, senator.

Senator Jessiman: Let us go to page 5, paragraph 3 - 1, 2, 3. Why did you not mention there are restrictions for 10 years in the T1T2 from carrying out other ventures? Did you not know that or did you forget?

Mr. Nixon: I think we -

Mr. Goudge: I think I answered this last time, senator, when we went through the Vineberg letter. I think I acknowledged that there were restrictions in the first ten years, but beyond that there weren't.

Senator Jessiman: We know you admitted to that. I'm asking why wasn't it put in the document? I'm not asking you. I'm asking Mr. Nixon. If you want to speak for him, if you've drawn this part of it, fine.

Mr. Goudge: I did indeed draw this part of it.

Senator Jessiman: All right. So why did you leave it out?

Mr. Goudge: Because I relied on the Treasury Board submission.

Senator Jessiman: And the Treasury Board submission, you're saying, left that out?

Mr. Goudge: It was phrased exactly as you see it. Shouldn't say that. I can't say that. That's whited out.

Senator Jessiman: You do now admit if there was - if you hadn't seen something in the Treasury Board that we can't see but you can, and you say quoted from it.

Mr. Nixon: I think it is true to say, Mr. Chairman, as well, that there are modifying views that surround almost every fact in this. And if all of them were to be included, I think the main features of the report and the basic information on which it rests would become obscure.

The senator feels affronted that we did not include the fact that there were restrictions on liquidity up to the tenth year, and maybe I would agree with him that that is an omission which - that we should not have made. But the same is true of many of the materials in here. There are all orders of modifications that could be put in to be totally fair and to put all of the information forward. And I don't - I would agree with you but I don't apologize for it.

Senator Jessiman: Page 6, paragraph 1, remedies for default, you fail to state that, in the case of default, the government would get the terminals back plus the improvements and an 87.5 per cent share of T3. You knew that. This was one heck of a good deal for the government.

Mr. Nixon: Yeah, but in the unlikely event that that were to occur, it would mean that there would be financial chaos or administrative chaos out there and, it seems to me, an arrangement that leaves the government of Canada with a total mess at Pearson is not something that is to be desired or to be permitted if it can be obviated by a reasonable agreement, and we felt that they should have done better on that.

Senator Jessiman: Even though many others felt otherwise. My last question, and this is to Mr. Goudge. It is the second full paragraph dealing with mortgagee subletting without consent. I know we went over it the other day, but here is what Mr. Pigeon said to us after you had been here:

And we, at the time, had a discussion with Mr. Goudge of certain matters, and one of the matters, I believe, was the kind of restrictions that there was around assignment and subletting. And I believe that we distinguished - We tried to make him focus on the distinction that there was prior to completion of the development and after the completion of the development, because there are some very important distinctions in the lease agreement on that topic, and I believe that was discussed.

Of course, there would be no consent required on subletting because it would involve the government consenting to every lease of shop in T1T2.

Why did you not make that distinction?

Mr. Goudge: I don't know that I referred to that point at all. Can you point me to the report where you looked to that, senator?

Senator Jessiman: Sure. Page 6.

Mr. Goudge: I am on page 6.

Senator Jessiman: Second full paragraph.

Mr. Goudge: Leasehold mortgage.

Senator Jessiman: With mortgagees?

Mr. Goudge:

...If the mortgagee enforces its security it need not complete further stages of construction, and no consent of the Government of Canada is required if the mortgagee assigns, leases or sublets the premises.

That's accurate as far as I know.

Senator Jessiman: Just a minute. All right. But I think what they describe to you, although I'm not reading that - I think that came up later.

If it were the private sector - this is what Desmarais was saying. I've read the wrong one, I'm sorry. It said, we look at this deal - the same point you are talking about, mortgagee - if you like, as a transfer of the airport to the private sector, and we looked at the LAAs as transferred to an LAA - an LAA to - as not the private sector.

And they said if there was default on a private one, you ended up with a private person. Okay? But you don't with the LAA. If they default on the mortgage, then you're going to get a private person back. I think I am mixing up two -

Mr. Goudge: I'm afraid you are mixing me up, too.

Senator Jessiman: Wait a minute. Let me just read this again, because page 6, second full paragraph.

Mr. Goudge: That's the one headed -

Senator Jessiman:

The Government of Canada, in the event of default, could enter the premises and operate them for the purposes of curing the default or terminate the lease. These are the two main remedial avenues available.

And we then put in -

Mr. Goudge: That's the first full paragraph. You want the second full paragraph?

Senator Jessiman: I'm sorry, yeah.

The Tenant has certain rights to enter into a leasehold mortgage with one or more lending institutions. If the mortgagee enforces its security it need not complete further stages...and no consent of the Government of Canada is required if the mortgagee assigns, leases or sublets the premises.

And I am saying we put that to Pigeon and I read it to you.

Mr. Goudge: I don't think that's what you did put to Pigeon.

Senator Jessiman: Well, let me just read it again. It says, "And we, at that time" - this is Pigeon.

...had a discussion with Mr. Goudge of certain matters, and one of the matters, I believe, was the kind of restrictions that there was around assignment and subletting.

That's what that is for. Right?

Mr. Goudge: This is after the mortgagee takes possession.

Senator Jessiman: And I believe that we distinguished - we tried to make him focus on the distinction that there was prior to completion of the development and after the completion of the development, because there are some very important distinctions in the lease agreement on that topic. And I believe that was discussed. Of course, there were no consent required on subletting because it would involve the government consenting to every lease of a shop in T1 and T2.

Mr. Goudge: That's not talking about when the mortgagee takes possession, is it? That's talking about the ordinary sublet. The report talks about the mortgagee having taken possession of the security?

Senator Jessiman: Yes.

Mr. Goudge: That's not what Mr. Pigeon is talking about. He's talking about the every sublet -

Senator Jessiman: The sublease.

Mr. Goudge: The every sublet circumstance where there is no default on the mortgage. That's what he's talking about. I didn't refer to that when I drafted stuff for Mr. Nixon. This is the context where the mortgage is in default.

Senator Jessiman: Right.

Mr. Goudge: The mortgagee takes possession.

Senator Jessiman: Right.

Mr. Goudge: The mortgagee can then flip it to a new "owner" without the government's consent.

Senator Jessiman: Right. But -

Mr. Goudge: That's correct. That's what the agreement provides for.

Senator Jessiman: Right.

Mr. Goudge: And Mr. Pigeon doesn't -

Senator Jessiman: But it goes from one private owner to another.

Mr. Goudge: Yeah, but it sticks the government with somebody they haven't dealt with. There are all kinds of commercial transactions where -

Senator Jessiman: It sticks the government? But the government has security of at least $100 million extra in T3.

Mr. Goudge: But they've now got a mortgagee assigning a lease without their consent.

Senator Jessiman: Yes.

Mr. Goudge: And I simply recited that as one of the terms of the agreement and one that gave me some concern.

Senator Jessiman: That's all. Thanks very much.

The Chairman: Senator Lynch-Staunton, you had a short question.

Senator Lynch-Staunton: I have a short question, and I want to end up with a quotation. The question has to do - well, I asked this morning if you gentlemen, after hearing the testimony before your last appearance and since, would amend the report in any shape or form or whatever in light of some of the testimony not agreeing with your conclusions? And the answer was an adamant no which came as no surprise except, in one case, and that is the allegation that the fix was in.

And I want to go back on that because, to me, if this is allowed - if you confirm what you said then, then the entire conclusions of your report are very suspect.

I will quickly quote to you, Mr. Nixon, what you said at the time when Senator LeBreton was questioning you on the Morrison Hershfield group. You said:

...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.

Now, you told us that in September. Are you standing behind that statement?

Mr. Nixon: Yes.

Mr. Goudge: That's what they said.

Senator Lynch-Staunton: And you believe that statement?

Mr. Nixon: That's what they told me.

Senator Lynch-Staunton: Do you believe that statement?

Mr. Nixon: I can't respond to that. I've already indicated that I expressed concerns about this, but I do not believe that the Government of Canada would allow this to go forward if there were a pre-formed decision. So I - that's not the phrase I used.

Senator Lynch-Staunton: No. It is a phrase that you quoted. And "the fix was in" implies bid-rigging which implies criminal activity. It is not a loose accusation which was brought to you; it was a strong suggestion there was criminal activity going on.

Did you not feel, with your legal advisor, that this was something that should be brought to the authority's attention?

Mr. Nixon: If I had felt that, I would have made a recommendation in my report that the matter be put in the hands of police authorities. I do not have that feeling.

Senator Lynch-Staunton: So you heard it, you reported it to us, but you didn't find it important enough to pass on because you actually dismiss it?

Mr. Nixon: I don't dismiss it. I think it's an indication that the community at large, at least some members of it, felt that the process had been inappropriately influenced by politics.

Senator Lynch-Staunton: Inappropriate influence by politics is one thing. Saying that the fix is in is something else. The fix is in means that it is predetermined that so-and-so is going to get it, no matter what happens. That is not political influence or patronage or excessive lobbying; that is a determined policy, in league with civil servants and others, that, no matter what happens in this case, Paxport was going to get it. And you reported that to us, that one of the unsuccessful bidders used a phrase, "the fix is in."

That is a serious accusation. It is not a passing comment by a dissatisfied, rejected suitor. And it was brought to your attention. And it was brought to your attention and you used it in your conclusion.

Mr. Nixon: No.

Senator Lynch-Staunton: You use it in your conclusion. Mr. Goudge, when he was being questioned on this, said:

...And in terms of what Senator Jessiman is saying, as a substantiation for the conclusion this transaction was concluded under the shadow of possible political manipulation, I considered the views of Morrison Hershfield to be substantiation of that conclusion.

So Morrison Hershfield told you the fix was in. No report of that was made to any authority. There was no evidence to support that brought to you, but I am sure if there had been, you would have gone to the authorities. That was your obligation; certainly that of your legal advisor.

And then Mr. Goudge tells us, tells us that this comment was substantiation for the conclusion that this transaction was concluded under a shadow of possible political manipulation. And I suggest to you, sir, and to your colleagues, that if this is the kind of so-called evidence that you are using to come into conclusions, your whole report is a tragic farce.

Mr. Nixon: Mr. Chairman, may I respond? The senator has, in the official papers that are available to him, a letter signed by a political colleague, Don Blenkarn, which says, in part, what comes through to all sorts of people is some sort of 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. Now, that's the sort of thing that I thought I was hearing.

Senator Lynch-Staunton: I've heard it, too. We've all heard it.

Mr. Nixon: That came from Blenkarn who is a highly respected former chairman of the finance committee of the House of Commons to one of his colleagues.

The other thing that really concerned me - and I simply have to quote this because you've raised the matter - from the province of Ontario, 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.

Senator LeBreton: Well, name them!

Mr. Nixon: There is 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 bid.

Senator LeBreton: Name that.

Mr. Nixon: This stuff is not conjured out of my mind or some sort of political paranoia that I have but it came to me as a person asked to review this by the Prime Minister from a number of sources, three of which have now been quoted public but which were legion.

Senator Lynch-Staunton: Yes, I agree they were legion. I agree -

Senator LeBreton: Mr. Nixon, name names.

Senator Lynch-Staunton: - but your responsibility was not to take them at face value but to find support for them before forcing the government into the most expensive - and when you -

Mr. Nixon: Well, I can assure you, Mr. Chairman, that I am not an investigative authority with police powers -

Senator Lynch-Staunton: That's for sure.

Mr. Nixon: - and don't intend to take those powers.

Senator Lynch-Staunton: That's correct.

Senator LeBreton: But you don't name them.

Senator Lynch-Staunton: And when you made that quotation in the Ontario report, I asked you: "Where is the supporting evidence for that? That's what we're looking for. I don't care what brief it's in." And you said, "This comes to me." And I interrupted you and said, "And you take it at face value?" And you continued, "From the province, and I present it to this committee for their consideration." And I said, "Yes, at face value?" And you reply "This committee can dismiss it or call these people in or take whatever they deem fit, but this was the sort of material that was presented to me." And I say, "And it's on that that you based your conclusion?" And you reply, "In part."

So you took hearsay, you took comments from disgruntled people, rumours in the street - everybody was saying that the fix was in. And you took that so seriously that you incorporated that so-called evidence in your conclusion.

Mr. Nixon: I felt it appropriate to do so, Mr. Chairman.

Senator Lynch-Staunton: I know you felt it appropriate because it met the requirements of the government, which was to do anything you could to substantiate the conclusion that you came to. And what appals me is that you did it on the advice of your legal adviser who, I would have thought if he had one responsibility, was to see that due process was followed in this, if nothing else. But, obviously, not.

Senator Bryden: Mr. Chairman, I take it that who Senator Lynch-Staunton is objecting to is the terminology "a fix is in".

Senator Lynch-Staunton: No.

Senator Bryden: He's really not objecting -

Senator Lynch-Staunton: No.

Senator Bryden: - not objecting to the fact that, as we've gone through these proceedings it was quite clear the Matthews Group needed a contract. They dissed T3, they had the transport building pulled out from under them and, ultimately, "Damn the torpedoes. Full speed ahead". That, in fact, is what developed no matter what needed to be done.

Senator LeBreton: That's wrong.

Senator Bryden: And if we look at the real facts that come out of this hearing and you look at the documents, you go through them piece by piece, there is no answer that comes available to us other than it was clearly being directed to have one result if the Matthews Group couldn't have 50 per cent at least give them 17 per cent and a bunch of side deals.

Senator LeBreton: So you're saying - You're sort of like a -

The Chairman: Okay, come on.

Senator Bryden: I have one document that I want to introduce.

Senator Lynch-Staunton: Let me finish. I haven't finished. Let me finish. If the fix was -

Mr. Nelligan: Do these witnesses know anything about them?

Senator Bryden: I can ask them if they do.

Mr. Nelligan: Well, I suspect, senator, you know they don't.

Senator Bryden: Well, as a matter of fact, I think you would find out. I'll even let you have a look.

The Chairman: Well, let's finish with -

Senator Lynch-Staunton: I just want to finish. I would like to know if a fix was in. I would like to know if there were people experiencing such influence that no matter who did, there was one preferred bidder all around. This is what we're here to find out. And all we're finding out is that we're getting the same rumours repeated over and over again without any substance to them. "I heard this. I believed it. I put it my report. If you don't believe it, tough." And you call that fair to the hundreds of civil servants who were involved in this process; to the hundreds of people who were involved in it on the private side to let that shadow of criminality hang over them?

Senator Bryden: The hundreds of civil servants weren't directing this process, it was being directed at the highest political level, at the ministerial level, at the prime ministerial level.

Senator Lynch-Staunton: Well, how do you think the process of government should be directed?

Senator Bryden: Well, exactly.

Senator Lynch-Staunton: Of course it's by -

Senator Bryden: - and every time that the public servant says, "Look, it's going to take a year to do this," you say: "No. We need to do it in six months."

Senator Lynch-Staunton: Well, good.

Senator Bryden: You should have a line where you don't need that; you need 90 days.

Senator Lynch-Staunton: Good.

Senator Bryden: I mean, we can have this argument out for a long time.

Senator Lynch-Staunton: Well, then, I'll end. Then I'll end.

Senator Bryden: Okay.

Senator Lynch-Staunton: I'll end with a quotation. And it's not my quotation because if I gave it, of course, Senator Bryden would jump in again.

Mr. Goudge, I know you're certainly familiar with Patrick Monahan, a very distinguished constitutional lawyer who has appeared before our committee to testify on C-22. Whether we share his views or not, we certainly respect him for what he is. He is not partisan. I don't even know if he belongs to a political party.

Senator LeBreton: Actually, he advised David Peterson.

Senator Lynch-Staunton: Fine. And he's written a paper which has been reprinted in part in the Fraser Institute and which will be, if its not done already, published in the Osgoode Hall Law School Review. And it's entitled: "Why the Pearson Airport Legislation is Unconstitutional:" - that's not the debate for today - "The Rule of Law As a Limit on Contract Repudiation By Government". And I hope that Mr. Goudge and others will read it. This is the pertinent paragraph. I want to put it on the record. It comes from a very distinguished, apolitical individual who is highly respected.

"The difficulty relying" - and I have copies here if any one wants to have it for distribution:

The difficulty with relying on the Nixon Report as a basis for limiting compensation is that other independent and detailed audits of the Airport Contracts had reached quite different conclusions. The Nixon Report was prepared over a 30 day period through a closed-door process that did not provide any guarantees of due process.

I'm not saying this; Patrick Monahan is saying it.

The Nixon Report itself essentially raises questions and concerns over the Airport Contracts, as opposed to undertaking a detailed analysis of what amounted to a very complicated commercial transaction. In short, it seems difficult to conclude that the amended version of Bill C-22 could be justified based on such an inconclusive and hastily prepared internal review.

Thank you, Mr. Chairman.

The Chairman: Mr. Nelligan.

Senator Bryden: Just one point. Is it the case that Mr. Monahan was retained to advise Pearson Development Corporation on the constitutionality?

Senator Lynch-Staunton: Yes. He says that right at the beginning of his paper and he said it to us when he came to testify in front of legal and constitutional affairs.

And has Mr. Goudge been hired by Mr. Wright to help him do evaluations? I mean, what is the pertinency of that question?

The Chairman: Okay. Mr. Nelligan. Order, please.

Mr. Nelligan: Mr. Nixon, we, of course, were alerted at your opening statement last month to the meeting with Morrison Hershfield. And this has been discussed at lengths today. And at that time you put the situation broadly that they had originally - You went with them on the 10th of November. They had originally responded to the request for proposals but decided not to provide the $1 million deposit as a condition of being considered for the simple reason that the company was of the impression, under the realities of the situation, that their opportunity for success was remote.

Now, you told us later that you had no notes of that meeting but we have found in your papers the presentation which was made to you on November the 10th in Toronto. And I wondered if this assists your recollection - and it's just what it was they said to explain why they did not provide the $1 million deposit.

The objectives on the agenda say that they were going to brief you on their proposal for terminal redevelopment under two headings: What our role was and why we were outside the RFP.

Was that your understanding of what they were going to do with you?

Mr. Nixon: I don't understand about "Why we were outside of the RFP". Maybe that was made clear, but.

Mr. Nelligan: Well, let's go through the notes and perhaps it will help. Because this seems to be - Was there a slide presentation?

Mr. Nixon: No. When I look at this, it looks as if there might have been, but there were only three or four of us around the table.

Mr. Nelligan: All right. Well, in any event, they've set it up as if it was to be projected on a screen. And they have all sorts of capital headings, and so on. We go into the "context", which is the back of the second page, and there they have quotes from the Minister of Transport about private sector, comment on the Air Canada's earnings, and comments by the, Mr. Eyton, Canadian Airlines, as to the hope for future profitability. And then it says, "This presentation answers two questions: What was our role? Why were we outside the RFP?"

And again, I'm asking you, here they didn't say, "Why did we abandon it", but they said, "Why were we outside the RFP?" Do you recall anything more on that basis?

Mr. Nixon: I'm sorry, Mr. Chairman, I do not.

Mr. Nelligan: All right. They go on, on the next page, and they set out the names of the persons, I gather, who made the presentation. And then they talked about, "Flagship: The beginning - 1989." And I take it that flagship was some kind of concept as to how to run airports?

Mr. Nixon: I see this note that says the "Parkin's Concept" was "removing private autos from the core of T1". And they were talking about the efficiency and imaginative value of the original T1 design and concept.

Mr. Nelligan: All right.

Mr. Nixon: And, as I recall, they were very concerned that that be thrown away just on the basis that it's old and, therefore, should be replaced.

Mr. Nelligan: And I recall you've told that they gave you some very imaginative concepts.

Mr. Nixon: Yes.

Mr. Nelligan: Well, then it goes on and it talks about T1 for the next two pages. And then, if you'll turn to the next page, it says, "The Federal Program". And it says, "Private development on crown lands at airports", and it identifies Marathon Aviation Terminals. Do you remember what that was?

Mr. Nixon: If I recall correctly, it was the initiative that allowed long term leases to be made available to corporations that wanted to put capital structures on federal lands at airports by way of trans-shipment of goods, and so on.

Mr. Nelligan: These would be private terminals on the airport lands.

Mr. Nixon: Yes. And there are a number at Pearson now, as you're aware -

Mr. Nelligan: Yes.

Mr. Nixon: - for the use of private aircraft.

Mr. Nelligan: All right. And then it mentions T3, which we have all heard about, and then it mentions Vista. What was Vista, do you remember?

Mr. Nixon: I can't recall.

Mr. Nelligan: All right. Then it goes on and says that "1987, '89 and '90: Transport Minister announces: Two tracks for terminal development, retained ownership and divestiture, long term lease." Do you recall what the distinction was between "Retained ownership and divestiture, long term lease?"

Mr. Nixon: I don't recall it, but the phrases, of course, have some intrinsic meaning.

Mr. Nelligan: All right.

Mr. Nixon: But in fact, with a long-term lease you divest, I suppose, certain responsibility but the ownership is not divested.

Mr. Nelligan: All right. So this is explained a little later because then it says under the next bullet "Invitation (challenge?) to private sector, show entrepreneurial spirit, demonstrate creativity." Then it says in "1992: RFP released - divestiture track". So I take it from this that they at least thought that of the two tracks available that the government in 1992 selected the second, or divestiture, track.

Mr. Nixon: There's no doubt that the government of the day had decided to move to privatize rather than "LAAize"

Mr. Nelligan: Yes. So, then, they distinguish those two routes. Then on the next page they show "The Competition", and they name four different groups. And I assume that these were the four groups that Hershfield, Morrison Hershfield considered to be their competition?

Mr. Nixon: I guess so, although I thought Cadillac Fairview was out of it by the time I met -

Mr. Nelligan: Oh, I quite agree but I think this was the competition over the whole negotiation period.

Mr. Nixon: Yes; okay.

Mr. Nelligan: All right. Then it turns over to "Industry Contexts" and it shows what the problems were in the airline industry and what the problems were in the real estate industry. Is that correct?

Mr. Nixon: Those are the headings, yes.

Mr. Nelligan: Yes. So I assume that you discussed those.

Mr. Nixon: Yes. And it looks to me as if one or two of those items would quite readily leave me behind, like "Decimated Book Value".

Mr. Nelligan: Right. Then it says "Business Elements For Success of Airline Industry: Fill Seats" and it sets out various elements of that on the next page.

Mr. Nixon: I see that.

Mr. Nelligan: Yes. And then on the next one they have some kind of a chart, which these people seem to love, showing different plans of market, physical and financial leading into a business plan. And the next page again comes to this word "Pearson Flagship: A Unique Threshold Asset". Was this a particular proposal that they were trying to sell that they thought was the way to deal with the airport situation?

Mr. Nixon: I think that the concept was enthusiastic support for the idea that Pearson would become the number one hub access to North America.

Mr. Nelligan: Yes. And that was your idea, Pearson being a flagship?

Mr. Nixon: That's correct.

Mr. Nelligan: And then the next page shows the flagship framework and the different elements that they thought should be included?

Mr. Nixon: Yes.

Mr. Nelligan: And then the next page they show "Flagship History". I take it these are things that they did to pursue this idea of flagship, the flagship concept?

Mr. Nixon: Right. I can't remember what "Kumagai Gumi" is. Do you happen to know?

Mr. Nelligan: I was going to ask you, sir. I was just coming to that.

Mr. Nixon: Well, don't bother.

Mr. Nelligan: All right. We'll never know.

In any event, it shows the history, including such things in 1992, the British Airways authority team disbands three weeks before RFP and then it says, "Kiewit released by BAA and joins MH." I gather that's Kiewit Construction the, well-known international constructing firm?

Mr. Nixon: They're not well-known to me but I'm sure you're correct.

Mr. Nelligan: I think there's something called Peter Kiewit and Sons that have been largely involved in Canadian construction work and I don't think it's Kuwait, the well-known country.

Mr. Nixon: Well, I can remember they had some views about BAA drawing back from -

Mr. Nelligan: Yes.

Mr. Nixon: - the competition three weeks before the RFP.

Mr. Nelligan: All right.

Senator LeBreton: No, not three weeks, Mr. Nixon.

Mr. Nelligan: And then it says, "CIBC endorses financeability" and then it says, "Submitted as alternative to RFP". I take it from that they're suggesting that the kind of concept they were pushing was as an alternative to the requests for proposal.

Mr. Nixon: I think that's correct. They had a fully worked out alternative that would not fit into the proposal as they understood it -

Mr. Nelligan: Yes.

Mr. Nixon: - and were not prepared to adapt to it under those circumstances.

Mr. Nelligan: All right. Then turn to the next page. And the question they then ask is: "Why did we not submit as RFP responsive?" I take it from that that they are conceding to you there that they never expected their proposal to succeed because it wasn't responsive to the RFP.

Mr. Nixon: But I think there was some discussion that it could be adjusted to fit into it if they wanted to take that role. I think part of it, as I recall, was they felt their concept about the future of Terminal 1 was not acceptable to the people producing the RFP. But, just like we've already spoken today about people who have adjusted their views, when they realized what the policy of the government was, evidently they were not prepared to do so. But at the same time, they were expressing some concerns that it was probably not worth their while to make those efforts.

Mr. Nelligan: All right, but let's look, because they show what their flagship model is. They say "An infrastructure facilitation model driven by the market needs of the airlines under a retained ownership model and benefit accrues to tenant and Crown. Value shift provides competitive levers to both". On the other side, they show the RFP as a real estate model "driven by the federal government's plan to divest itself of staff and capital investment and the benefit accrues to the developer."

So all I'm asking you, sir, is: Does this suggest to you that at the time they were telling you that the reason they were not RFP responsive is because their proposal was based upon some retained ownership by the government where there was a direct benefit between the airline tenants and the Crown and it didn't involve any divesting of staff or capital investment and that that was why they didn't think their proposal would be successful?

Mr. Nixon: I would say that, from my recollection of the discussion, it was one of the reasons that they felt that they could not undertake the effort to adjust their proposals to fit the RFP.

Mr. Nelligan: Yes. So in effect they're saying, "We put something into the government but we didn't think it complied with the terms of the RFP."

Mr. Nixon: They assert that it does not.

Mr. Nelligan: Yes.

Senator LeBreton: Right.

Mr. Nelligan: And is that not, sir, the reason, then, they were giving you for answering the question in the first page: "Why we were outside the RFP?"

Mr. Nixon: It clearly is.

Mr. Nelligan: Yes. Well, all that concerns me, sir, then, is having shown that they couldn't comply with the RFP at all, why would they then suggest to you that they withdrew their proposal because they didn't think there was a level playing field?

Mr. Nixon: The alternative for them was to adjust their plan to fit in with the RFP. They'd obviously done a good deal of work on it and that they had decided not to bother doing that because they felt that the playing field for them had irregularities, which would mean that they would be wasting their time. And that's what they said to me.

Mr. Nelligan: But they didn't show that in the documents that they provided.

Mr. Nixon: I don't find that surprising.

Mr. Nelligan: But the answers for why they were outside is contained in this memorandum?

Mr. Nixon: I agree.

Mr. Nelligan: Thank you. That's all the questions I have.

The Chairman: Now, colleagues, ladies and gentlemen, in just a few minutes I'm going to adjourn this meeting at the call of the chair, which might suggest to you that I'm going to keep our options open. This might not be the last meeting of this committee. It might be; it might not be.

So, I just wanted to say to you, Mr. Nixon, that the author of the Nixon report is a very well-known, highly respected, partisan Liberal. And the chairman of this committee is -

Mr. Nixon: Almost identical.

The Chairman: - is a partisan Conservative. But I hardly think that this should be held against us, do you?

Mr. Nixon: No.

The Chairman: No. So, as one choir boy to another, I want to thank you and your colleagues for joining us again today.

Mr. Nixon: Thank you, Mr. Chairman.

The committee adjourned.