LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON PUBLIC UTILITIES AND NATURAL RESOURCES Wednesday, 26 November, 1986 TIME - 7:00 p.m. LOCATION - Winnipeg, Manitoba CHAIRMAN - Mr. S. Ashton (Thompson) ATTENDANCE - QUORUM - 6 Members of the Committee present : Hon . Messrs . Cowan , Doer, Penner , Hon. Mrs . Smith Messrs .

Ashton , Dolin , Enns , Filmon , Manness, Orchard , and Scott APPEARING: Geoffrey McKenzie , Coopers and Lybrand Hugh Tidby , Coopers and Lybrand D'Arcy Elliott , Coopers and Lybrand Charles Curtis , Acting Chief Executive Officer , MTX Jean Edmonds , Chairperson , MTS Board MATTERS UNDER DISCUSSION: Annual Report of Manitoba Telephone System MR. CHAIRMAN: The meeting of the Public Utilities and Natural Resources Committee will come to order . First item of business is the resignation from the committee that has been sent to Binx Remnant , Clerk of the Legislative Assembly , from Wilson Parasiuk . Mr. Doer. HON.

G. DOER: I move, seconded by the Member for Fort Rouge , that the Member for Churchill be a membe r of the committee . MR. CHAIRMAN: So moved. Agreed? (Agreed) Mr. Cowan is on the committee. The next item of business is a statement. I believ e we have Mr. Mackling . HON. A. MACKLING: Thank you , Mr. Chairperson . MR. D. ORCHARD: Does the Minister have a copy of that for members of the committee? HON. A. MACKLING: There will be copies availabl e. MR. D. ORCHARD: Are they available now, Mr. Chai rman? HON. A. MACKLING: They will be available to the committee . Thank you , Mr. Chairperson .

Since the committee last met , the government has received the Coopers and Lybrand Management Audit of MTX ordered on August 19, 1986 . All members of this committee and, indeed , the public have had some time to revi ew thi s independent aud it. I am sur e that you will agre e it is a comple x, detailed and reasoned document . I would lik e to ackn owledge the efforts of the peopl e at Coopers and Lybrand and thank them for agreeing to attend these committe e hearings to answer question s dea ling with their report . For the ben efit of committee members I would lik e to introduce Mr.

Geoffrey McK enzie , Senior Managing Partner for Coopers and Lybrand in Canada , who headed up the audit team . Following the government's evaluation of the report, a number of initiatives were announced. There is no question strong measures were taken . I and my colleagues in government believe that this quick and decisive course of action was essential to ensuring that the Manitoba Telephone System remains a strong Crown corporation that all Manitobans can be proud of . We have announc ed the appointment , on an int erim basis , of a strong new team of senior officers at the Manitoba Telephon e System .

They are : Mr. Edward Robertson , Act ing President and General Man ager for the Manitob a Telephone System . Mr. Robertson was the Deputy Minister of Manitoba Industry Trade and Technology and has previously served as a senior policy advisor to the Ontario Government, and as a senior executive in a number of private sector corporations . Mr. Dennis Wardrop , Acting Executive Vice-Presid ent, Manitoba Telephone System . Mr. Wardrop has over 30 years experience at the Manitoba Telephone System , most recently as Vice - President , Corporate Marketing and Development. 255 Mr.

William Fras er, Acting Vice-President of Finance . For the last five years Mr. Fraser has served as Assistant Deputy Minister of Financ e and as Comptroller for the Province of Manitoba. And Miss Hea ther Nault , Acting Vice-Pr esident, Corporate Marketing and Developmen t. Miss Nault is a 22-year employee of the Manitoba Telepho ne Syst em and most recently employed as the Manager of Financial Information Services. In addition we have alre ady initiated the search for a new permanent President and General Manager.

We have begun the orderly wind-down of MTX , putting an end to the losses incurr ed by that corpo ration while at the same time attempting to recover as much as possible of the estimated exposure . Some time ago, the Premier announced the governmen t' s plan to introdu ce human rights legislation and Crown corporation guidelines to ensure that Manitoba corporations, both private and public, do not, as a result of foreign laws or customs , run the risk of discriminating against Manitobans. Earlier today the

Wednesday, 26 November, 1986 Premier announced major and rad ical steps to identify and ensure future efficiency in Manitoba 's Crown corporations . The system outlined by the Premier will create the most comprehensive system for policy direction , monitoring and dialogue with Crown corporations in place anywhere in Canada . As the Premier stated earl ier today , this government believes in the value and utility of Crown corporations as an instrument of government policy and as servants of the public interest.

Central to this approach is increased government supervision of Crown corporations , increased dialogue with Crown corporation boards, workers and executive management , improved planning within the corporations , and strengthened reporting and assessment systems both within the corporations and to the government. Auditing and monitoring procedures will be dramatically tougher . Boards will be strengthened.

In short , the changes announced and to be explored will ensure that the very serious problems of accountability and reporting that have been very much at the root of problems with MTX will be eliminated in the future. In addition to these actions, Mr. Ed Robertson, at my request, has already undertaken a number of initiatives. If I may read into the reco rd a letter I have sent to Mr.

Robertson dated November 24, 1986: "Now that you have had an opportunity to acquaint yourself with a new executive at MTS , I wish to re-emphasiz e that we look upon this interim period as an opportunity for a new beginning to the Telephone System . One part of the new beginning is the need to improve the reporting procedures between the government and the Telephone System. I am requesting that you work with Manitoba Crown Investments to develop and implement new reporting systems to ensure tha t I and the government are informed on a timely basis of all initiatives undertaken by MTS .

"Another aspect of the new beginning must consist of an examination of what went wrong in the past. I truly believe that we have succeeded in dea ling with a major problem at the system; however, we must not assume that other problems do not exist. As part of your mandate, I am requesting that you consult widely both within and outside of the corporation . I want you to undertake a thorough review of any problems that are brought to your attention. If corrective action is necessary, I want it to be undertaken as soon as possible .

"As a starting point, I am requesting that you undertake a review of all accounting and financial systems as they presently exist at MTS . This is necessitated by the critical comments of the Coopers and Lybrand report in relation to MTX . I wish to assure Manitobans that similar problems do not exist at MTS . In addition , I recommend you review the July 11, 1986 letter from the Minister of Crown Investments and the attached notes from the Premier's presentation to Ministers , board chairpersons and chief executive officers of Crown corporations.

You will want to ensure that all concerns with respect to Crown corporation policies and practices raised by the Premier have been fully addressed. "Finally, I want you to examine all technology projects at MTS, such as North American Telemetry , Fast Action Safety Team, Grassroots , Cellular Mobile Radio System 256 and other projects which may be identified during your consultations to ensure that they are financially and technically sound investments .

" I close by emphasizing again that this interim period allows us a fresh star t at the system and an opportunity to assure the board, the government and all Manitobans that no other MTX 's exist at the Telephone System and th at the MTX problem is behind us." Mr. Robertson has already contacted individuals who have indicated concern about Manitoba Telephone System operations, among them the Opposition critic for MTS . Mr.

Rober tson has requested that they bring to his attention as quickly as possible their concerns and any information they have that will help in his task of ensuring that all problems within the Telephone System are identif ied and remedied as quickly as possible . A similar request has been made of all of the employees of the Manitoba Telephone System. Finally, I wish to inform the committee that I have written to Mr. Gordon Holland, Mr. Glover Anderson , Mr. Maurice Provencher, Mr. Don Plunkett and Mr.

Mike Aysan indicating that neither I nor any of my colleagues in government would attempt to interfere with their appearing before this committee . In my letter , I indicated the choice would be theirs and that I was neither encouraging nor discouraging their appearance . In conclusion , I believe the decisive and necessary action taken by the government will serve the people of thi s province well. The deliberations of this committee have also served the province well.

I expect nothing less from this evening 's deliberat ions as we close the book on MTX and begin working on a strong and successful future for the Manitoba Telephone Syst em, its shareholders and customers , the people of Manitoba. MR. CHAIRMAN: Mr. Orchard . MR. D. ORCHARD: Mr. Chairman, as agreed with your Government House Leader , I will respond briefly to the Minister's opening remarks and my leader will kick off the questioning of the committee hearing. Mr.

Chairman , I find it rather ironic that this Minister , who has been Min ister responsible now for almost a two -year period , the Manitoba Telephone System would call his recent action a quick and decisive course of action essential to ensuring the Manitoba Telephone Syst em remains strong. This is the Minister that for the last two hearings has been warned of significant problems in the Manitoba Telephone System and chose to ignore those warn ings until such time as a sworn affidavit was presented by a former employee of the Manitoba Telephone System at this committee.

This government would still have taken no act ion at the behest of members of the Opposition and others unless that affidavit had been tabled in th is committee . His " swift and decisiv e action, " those words ring hollow to the people of Manitoba who have watched this government preside over a Telephone System that has rung up a $25 million loss over their four-year term of incompetent ministerial responsibility for the Telephone System, the last two of which this Minister has been responsible for. On that matter , Mr. Chairman , we will not accept on behalf of the people of Manitoba a partial resignation

Wednesday, 26 November, 1986 of this Minister . A partial resignation does not fit the role of parliamentary responsibility of Cabinet Ministers; this was the Minister responsible for the Telephone System, and he was not. If he was not guilty of anything, why would the Premier accept his resignation? And having accepted it, indicating that this Minister was not responsible in carrying out his duties, the Premier's duty was to demand his further resignation from Cabinet, but he failed to do that and the members of the Opposition are doing that on behalf of the people of Manitoba .

We don't need this kind of ministerial incompetence in th is Minister 's other portfolios for which he intends to attain and achieve and keep all of the perks, salaries and benefits, only giving up the $25 million minimum mess that he's left for the people of Manitoba . That, Sir, is unacceptable. This Minister has pleaded ignorance. He has said if only someone had told me of the problems in the Manitoba Telephone System, I would have done something about it.

How can this Minister plead ignorance when in December of 1981 the government that he is part of, the Pawley administration, replaced a private sector chairman of the board with a former retired Cabinet Minister and Cabinet colleague of this Minister and his Cabinet colleagues? How can this Minister plead ignorance when they have had successive backbenchers from the government caucus sit on the board of the Manitoba Telephone System? The former Chairman of the Manitoba Telephone System was also the Chairman of the Board of MTX. Mr. Miller had both responsibilities.

Are we to assume that those individuals as elected members and former Cabinet Ministers simply assumed their chairs on the board of MTX to warm the seats and to cash a little extra spending money, or were they there for a role , a political role , as the government appointed them to do? Mr. Chairman, this Minister pleads ignorance when he's had a member of his telecommunications group staff sitting at Manitoba Telephone System Board meetings.

What is that senior official from this Minister's Office doing there, if not to report activities of the board to the Minister? - while he sits here and pleads ignorance, "if only someone had told me." Mr.

Chairman, at some of these board meetings starting out as soon as 1982, we have by board minutes, acknowledgement of questions asked about the problems of MTX and Saudi Arabia starting in 1982, continuing in 1983, continuing in 1984, cont inuing in 1985, while this Minister , his appointed Chairman of the Board, his colleague from caucus , his advisor from his office, sat at those meetings and we are asked to believe this Minister was ignorant of the facts. Do we assume that they passed no information onto this Minister in collecting their salaries?

Is that what the people of Manitoba are asked to believe from this Minister? At this committee, I and others have , over a period of four years, asked probing and serious questions of previous Ministers and this Minister for two successive committee hearings. And this Ministe r says "if only someone had told me." Mr. Chairman, I want to table a letter, a copy of which went to this Minister seven days after he was appointed on the 7th of February 1985 . Mr. Chairman, that letter asks 13 pointed questions on the operation of MTX in 257 Saudi Arabia and this Minister says "if only someone had told me." Mr.

Chairman, the competence of this Minister is so discredited now that he should do the honourable thing and resign complete ly from Cabinet. Mr. Chairman , he has been warned consistently by board members , hopefully board members responsible, such as the Member for Inkster , and the Speaker of this House , Myrna Phillips, and former Cabinet Minister Saul Miller ; and if not by them, surely by his bureaucrats at the board; and if not by them, surely by taking seriously questions by members of the Opposition at this committee and letters written to him . Mr. Chairman , that is only the Minister's culpability.

We intend to demonstrate in the next three days of this committee hearing that the culpability of this government is far greater; that indeed this government has been fully informed at the Cabinet level of the problems in MTS and MTX over the last several years . Mr. Chairman , we will provide to committee and ask questions as to how the ERIC Committee of Cabinet , a Cabinet of the most powerful and senior Ministers in this government, four of whom I shall name for the record because their names fly in the face of this Minister 's plea of ignorance: Mr. Cowan , Mr. Kostyra, Mr. Schroeder and Mr. Parasiuk .

These are the same Ministers, no doubt , that will be on the new committee that the Premier has announced for purely damage control and nothing else . But those four Ministers were present at ERIC Committee meetings wherein they approved another $8.5 mill ion of monies to go from MTS to MTX. And where was.some of the money going? Into Cezar Industries in the United States, a venture which is seriously questioned by Coopers and Lybrand . In addi tion , Mr. Chairman, $2 million goes to the Saudi Arabian operation of MTX afte r the government was warned about problems in Saudi Arabia .

Are we to assume that this powerful group of Ministers on the ERIC Committee asked no questions , merely rubbe r-stamp ed an $8.5 million request for money and didn't take the time to ask Mr. Holland and other officials there and Mr. Mackling, the Minister responsible , how is this Saudi Arabian business doing , why does it need $2 million , is it making money, does it have a future? Are we to assume that those heavyweights in the Cab inet asked none of those questions? Mr.

Chairman, the MTS Board in the last severa l years has had representation by Industry, Trade and Technology at the board to partake in discussions wherein problems with Saudi Arabia were discussed. Mr. Chairman, the Crown Investments portfolio , created by the Pawley admin istrat ion to monitor Crown corporations - now , doesn't that sound familiar , ladies and gentlemen? - I believe the Premier just announced this powerful committee of Cabinet today . Well, what did he do with the Crown Investments portfolio with the Minister responsible for not one, not two , but 18 Crown corporations, one of them MTS?

All of them had membership on the Board of Directors, including MTS , except for 1985 when the Crown Investments member representative on the Board of MTS withdrew for unexplained reasons in 1985. Mr. Chairman , this Minister is pleading ignorance when we have MLA 's, former Cabinet Ministers , senior bureaucrats from his department - the ERIC Committee of Cabinet - IT and T representatives and Crown Investments representatives at board meetings wherein

Wednesday, 26 November, 1986 problems in MTX are being discussed and he pleads ignorance on behalf of his government. Mr. Chairman , that's incredible . Now, Mr. Chairman, the only thing one can conclude on this is that this Minister indeed lived up to the cynical tenets of that 1983 September Cabinet document after the French language debate and fiasco in this province wherein it was said by Cabinet that all the Ministers shall endeavour to avoid any issue which is controversial. Certainly, the MTX issue has been controversial for this government .

I maintain , and we will demonstrate to the people of Manitoba over the next three meetings, that this government indeed had knowledge, that this government had warnings, that this government knew what was going on, and they chose to sacrifice their political future as exposed in that cynical Cabinet document, September 1983. They chose to expose the people of Manitoba to a $25 million loss to avoid controversy which might have cost them four more years grasping at power. Mr. Chairman, that is what we are dealing with today and that is why, as a minimum, we believe this Minister has to resign from Cabinet .

We cannot accept any suggestion by this Minister that he did not know. This Minister cannot plead ignorance and competence . If he is ignorant, he is incompetent; and if he is incompetent, he shouldn't be in Cabinet, Mr. Chairman . HON. A. MACKLING: Mr. Chairperson, I feel obliged to say something in response to that outburst of - well, I won't call it an outburst - that statement of righteous indignation. MR. D. ORCHARD: Do you want me to pull out Hansard from ... saying the same thing? MR. CHAIRMAN: Order please, order please. Mr. Mackling . HON. A.

MACKLING: I can appreciate the concerns that the honourable member has. I have recognized the validity of those concerns in respect to issues that were raised in respect to MTX . I think I've been fairly outspoken in respect to that. But the fact is that decisive steps were taken by this Minister, steps that were taken to right what appears to be a very serious course of mismanagement that has persisted during the course of - the senior management - through the course of three administrations, not just this current administration.

Sometime, I think in the future, maybe some investigative reporting might look at the degree of competence of previous Ministers in previous administrations in respect to operations of Crown corporations. I won't say that I should spend time reflecting on that but I say, Mr.

Chairman, that this Minister ensured that the errors that were being committed were stopped, that senior management who gave the kind of information and assuring advice not only to this Minister but to the Honourable Member for Pembina when he was Minister, those assurances in respect to the operations of the corporation , the assurances that were given to this committee of the ongoing benefits of those investments, those assurances were given by those same senior administrators who advised the honourable 258 member when he was Minister responsible for Telephones. But this Minister has acted .

This administration has acted. Those people are no longer with us. We are going to put those problems behind us. We are going to ensure that the Telephone System in Manitoba continues to be the best telephone system in North America. MR. CHAIRMAN: Mr. Filmon. MR. G. FILMON: Mr. Chairman, as much as I'm tempted to enter into the fray and discuss the Minister 's negligence and irresponsibility, I think that there are a number of issues that we ought to get to right from the beginning of the meeting .

I'll seek the counsel and the assistance not only of the Chairman but perhaps of the Clerk, who is in attendance - I have heard in discussion the Minister and even, indeed , other members of the government speculating as to whether or not we would have the opportunity to be able to question various other officials at this committee, senior officers who are no longer with the corporation, perhaps former board members.

I believe that it is in the interests of the broadest possible scope of inquiry of this particular committee, because I think that the Chairman will recall that over the course of the summer months, in discussion, the Opposition were denied the request , the urgent request that they put forward for a full and complete public inquiry with opportunities to examine under oath, and instead our only opportunity to ensure public accountability in this process now rests with three meetings of this committee . That has been further eroded in that all of the various people, who Mr.

McKenzie and the staff of Coopers and Lybrand were able to question, interview, and gain all of the information that led to this report , this very lengthy and complete report, all of those people are no longer available to the committee. I believe that's a serious weakness. I note that the Minister in his opening statement said another aspect of the new beginning must consist of an examination of what went wrong in the past.

I suggest that without the presence of many of the people to whom I'm referring , we will not get that full and complete understanding of what went wrong in the past , why it went wrong , and perhaps what the government's responsibility was in having it go wrong . Many of those aspects will not be clear and will not be evident to this committee or, indeed, to the public at large if we don 't have an opportunity to have before the committee a number of people. Now, I've looked around the room and I suggest that some of the ones we would like to see are not here.

My question to the Chairman, and perhaps with counsel from the Clerk, is how will we go about compelling those people to appear before committee so that we may have the broadest possible inquiry into this report and , indeed, into all of the discussion and decisions that led to this report. MR. CHAIRMAN: Mr. Mackling, on a point of order. HON. A. MACKLING: No, not on a point of order. I want to respond to the Leader of the Opposition. I have

Wednesday, 26 November, 1986 had responses to the letter I sent out , responses from one or more of the individuals through legal counsel, and it is clear that at least one or more have retained legal counsel and I would assume are acting under advice of legal counsel. I do want to respond very briefly to the Leader of the Opposition in his continuing concern about the advantage of a judicial inquiry. I would like to point out to him that if we had followed the route of a judicial inquiry , we would have been many many months in hearing people and not acting .

I want to compliment Coopers and Lybrand for the efficiency and the speed with which they addressed that problem and put us in a position of being able to take decisive action and not spending many many months, as exhibited elsewhere , in trying to rattle skeletons where we knew there were problems already. I look at comparable inquiries . I look, for example, Mr.

Chairperson, at the Estey Commission where a Federal Government, acting presumably on the advice of bureaucracts or officials, pumped hundreds of millions of dollars into a failing system, banking system , and the results of the Estey Commission indicate that they received terrible advice, that there was bad supervision, all the rest of it. But we haven 't seen either one of the federal Ministers accepting any blame or acknowledging any fault in respect to the supervision of those departments and Mr. Justice Estey pointing out that the costs of that judicial inquiry were excessive.

They are in excess of $4 million and nothing has changed anywhere in respect to those problems. I suggest to you that we followed the decisive course of action. We not only within minutes had the RCMP involved in an investigation . A MEMBER: How 's it going? HON. A. MACKLING: ... and it's going well, but we appointed Coopers and Lybrand. They have done a first-rate job and we have been able to take the decisive actions that were necessary . MR. G. FILMON: Mr.

Chairman, in response to the Minister, and I know that he wants to get me off onto this kind of debate and we want to get at the point of the appearance of people before this committee, whose testimony is vital to this committee. I say to him that in the case of the Estey Commission, they had not been forewarned by the Opposition for over three years that things were going awry, that they had made wrong decisions, that there was corruption and that there were all of those things on the record at committee . Indeed, Mr.

Chairman , the Minister says that they have taken the appropriate action and they 've been able to act. Yes, they found five scapegoats to take the pressure off the Minister and they 've chopped the heads of those five top people so that the Minister takes no responsibility and can say that he had his head in the sand the whole time. That's his answer to quick action . I might say further, Mr. Chairman , that he might well have announced that there'd be no further investment and no further risk-taking while the public inqu iry went on and prevented any further erosion of the public interest and the cost in that.

He might well have done 259 that in the course of waiting for the results of the public inquiry, but at least in the public inquiry he would have had an examination of political responsibility, and of course he wants nothing of that. Mr. Chairman, I wonder if we can have some indication as to what this committee can do to compel witnesses before this committee so that we may have the opportunity to investigate the people who we would like to investigate who include former senior members of the Crown corporation and also former board members and others involved in the process . MR.

CHAIRMAN: The situation with regard to the calling of witnesses is as follows: The resolution which we adopt at the beginning of every Session establishing committees allows committees to invite people to attend before the committee; however, the committee does not have the power to subpoena or compel those witnesses to attend. MR. G. FILMON: Mr. Chairman, can you tell me what is necessary to be done to compel those people to appear before the committee? MR. CHAIRMAN: The

section covering what is described as a warrant for attendance of witnesses is

Section 37(1) of The Legislative Assembly Act and I can read it for you. "Where the Legislative Assembly requires the attendance of any person before the Assembly or before any committee thereof, the Speaker may issue a warrant or subpoena to the person named in the order of the Assembly requiring the attendance of the person before the Assembly or a committee thereof and the produ ction of such papers and things as are ordered ." That would be the proper . MR. G. FILMON: Mr.

Chairman, if you are saying that the Legislature can compel and have the Speaker issue a warrant for appearance before this committee, then it's convenient that we have the Government House Leader at this committee, and it's also convenient that we happen to be adjourned , which would allow us, on very short notice, to be able to reconvene the Legislature to consider such a motion, and I would think that the government members would want to have that motion considered and indeed dealt with quickly and expediently .

I'm sure that our House Leader would be able to give his assurance that no other business would be considered and that the only reason we would come together would be to have such a motion passed so that we may compel certain witnesses to come before the next two sittings of this committee. Would the Government House Leader be agreeable to that? MR. CHAIRMAN: Mr. Cowan . HON. J. COWAN: I guess, perhaps , first , Mr. Chairperson , we 'd have to ask the Leader of the Opposition or the critic exactly who it was they would be requesting to attend the committee hearings. MR. G. FILMON: Mr.

Chairman , I understand that the Provincial Auditor has been taken care of and that he

Wednesday, 26 November, 1986 will be available to this committee. Is that one that we can eliminate? HON. J. COWAN: It would be even more inappropriate for me than it is for the Leader of the Opposition to suggest that the Provincial Auditor has been " taken care of." The Provincial Auditor has been requested to attend this evening's meeting as a result of a request from a member of the Conservative caucus who phoned me this afternoon . On short notice, we did contact the Provincial Auditor and I understand that he is in attendance or will be in attendance here this evening .

That does not imply in any way that he is " taken care of." MR. G. FILMON: Mr. Chairman, I thank the Government House Leader for the correction in terminology . I certainly would not suggest that anyone was "taking care" of the Provincial Auditor, but it had been taken care of, the arrangements that he be here, is what I was referring to. The people who we would like to have called before the committee, and I might say, Mr. Chairman, that their testimony might well lead to further requests, but the ones that we would like to have appear before committee include former members of the board, Mr. Saul Miller, Mr.

Scramstad, Ms . Myrna Phillips ; representatives from staff who sat on board meetings, Mr. Feaver and Mr. Silver ; former senior staff members, Mr. Provencher and Mr. Holland . HON. J. COWAN: Mr. Chairperson , I have to indicate that a number of those people that have been mentioned, at least one, can attend as a member of this committee if they so desire. There are others that we have indicated can attend if they so desire that have been mentioned on that list, and there are others that may be available as they are still in the employment of MTS .

We have made, I think - I know we have made the suggestion that those individuals, such as Mr. Provencher and others who have recently terminated their employment or retired, can attend the meetings if they so wish. I guess my question to the Leader of the Opposition : is he suggesting that they should be forced or compelled to attend these meetings? MR. G. FILMON: Mr. Chairman, I might indicate, and I quote from the opening statement of the Minister responsible, that he in his letter indicated the choice would be theirs and I was neither encouraging nor discouraging their appearance.

Surely, it would be in the interests of helping the committee and the public to understand all of the background to this report to encourage them to attend , and I am somewhat surprised that the Minister hasn 't done so. My suggestion, Mr.

Chairman , since the matter has not been one in which the government has encouraged the attendance of some of these people, I am suggesting that we are looking for a way to compel these people to attend, and that is my opening request to the Chairman and through the Chairman to the Government House Leader because I'm told by the Chairman that it requires a motion of the Legislature, a resolution of the Legislature to allow that to happen . 260 HON. J. COWAN: So what I understand being requested is that those individuals be subpoenaed .

I want to be certain in my own mind that that is the request of the Leader of the Opposition . Is that the case? MR. G. FILMON: I believe that the terminology used by the Chairman was that a warrant be issued to summon them before the committee. HON. J. COWAN: I think the exact wording is " issue a warrant or subpoena " meaning the same thing when they suggest a warrant. Is the Leader of the Opposition suggesting that these individuals be subpoenaed to appear before this committee? Is that what he is asking be done? MR. G. FILMON: Yes, Mr. Chairman. HON. J.

COWAN: Then I'd like to speak to that particular issue because I think that what is being asked here is quite unusual and does deserve some comment and some discussion before a decision is taken. We have given some thought to this because there has been some indication by members of the Opposition that they would be requesting a subpoena . They are difficult issues and there are hard questions that need be addressed when one begins to consider that sort of action on the par t of this committee or indeed the House itself . I believe it's important , Mr.

Chairperson , to put the request for the power to subpoena before the committee into the proper context. I think we should address that particular issue from a number of distinct and different perspectives. I think we can accomplish that by addressing three specific questions . Firstly, what is the traditional response to similar requests, or how have those same sorts of requests, under the same circumstances , been dealt with in the past by this Legislature or committees of this Legislature?

Secondly , what would the purpose of those subpoenas accomplish and perhaps, even more importantly, is a sub-question to that , would we be able to accomplish the same objectives through more normal procedures or enhancements of existing procedures or practices?

The third question is what potential impact would that drastic change - and I underscore the word "drastic" because it is indeed a drastic change that is being requested by the Leader of the Opposition - have on the ability of this committee, other standing committees , and the Legislature itself and us, as members of the Legislature , to carry out our many duties and perform our responsibilities on an ongoing basis?

Those are all important considerations, regardless of the reason for the request, the decisions we take on these issues will indeed have a longstanding and profound impact on how we operate as a Legislature. It's funny, there 's been a number of suggestions by others - and I admit it's by others - so I don 't want to be accused of impugning motives here, that the Opposition is bringing forward these particular requests because they put the government in a no-win position, because this would be an embarrassment to the

Wednesday, 26 November, 1986 government. If we say no, there will undoubtedly be - as a matter of fact I heard some members of the Opposition already suggest - that there is a cover-up. Right now, they say, well, sure. I'd like them to remember those comments as we carry through a bit. They will most likely continue those charges , that our refusal to accede to their requests for subpoenas is in fact an attempt to hide information or to protect Ministers. I can hear them , who are you trying to protect? What are you trying to hide, cover-up?

We'll hear all those things over the course of the next little while, but we as a government - just as they had to in similar circumstances - must look beyond any possible posturing and those anticipated charges because there's much more at stake here than one day's headline and some possible -(lnterjection)­ em barrassment. MR. CHAIRMAN: Order please. Mr. Cowan. HON. J. COWAN: In spite of that, we must do what we believe to be right and we must carefully consider the long-term impact of whatever we decide to do here today.

Not surprisingly. these are not new issues and we are not the first nor the only government that has had to respond to such requests. Even less surprising is that, in most instances - as a matter of fact , to my knowledge - all instances , at least in Manitoba , the answers have always been the same , regardless of what administration was in place or what government happened to have power at that particular time.

There ·are some members in the room today , some sitting at this table, that will remember it was not all that long ago that this very same standing committee - not the same members , but the Standing Committee on Public Utilities and Natural Resources , had to deal with a motion to subpoena witnesses to testify before it. It's somewhat ironic that at that particular time - members in this room will remember it - it was reviewing the report of a Crown corporation.

I guess what's most interesting is that on that specific occasion it was a Conservative Government that refused to allow the committee to issue subpoenas to compel attendance of individuals before this committee. MR. H. ENNS: Who was asking for the subpoenas? HON. J. COWAN: Well, the Member for Lakeside , because he was there at the time , asks who was asking for the subpoenas. I want to address that point in a moment, so if he would be patient I will attempt to answer his question . I think, more importantly, is first to determine what the Conservatives said at that time - perhaps he recalls.

They said no; they said categorically no. They voted to a person, against a formal motion , to have this very same committee order the presence of a number of individuals before the committee by way of subpoena. What did they say at that time? Mr. Craik, who was the Minister responsible for Hydro, which was under consideration at the time , first said that the committee doesn 't have the power to call witnesses . He said , "This committee, in my recollection , 261 has never had the power to call witnesses." He repeated that on a number of occasions. That was on April 3 in 1981 .

On April 9 in 1981 , he went a bit beyond , and he said when there was a motion before the floor to subpoena witnesses that had been put forward by an NDP member of the committee , and I quote Mr. Craik , "Mr. Chairman , it's for the purposes of terms of reference of this committee, or at least the functioning of this committee and the powers it's always had over the years , and the decades in fact, it's impossible to accept this motion.

" He continued, " But I don 't want to suggest , in not accepting it, that the opinions of those people should in any way not be regarded as being a lack of desire by the public in general to hear from them." The Conservative members of the day voted, to a person, against the motion to subpoena witnesses, and they won that vote; and the four NDP MLA 's on the committee of that day voted , to a person, for the motion. So to answer the Member for Lakeside 's question - yes, it was the NDP that put forward the motion at that particular time, and when the vote was counted , six to four, the response was predictable .

The government won the vote , and I have to tell you that the Opposition of the Day charged cover-up. As a matter of fact , that was their exact word , " cover-up ." The Opposition also charged - I think I've already heard it from the bench here if not from the table - that the government had misled the committee and then refused to subpoena those individuals who the Opposit ion thought would be able to clear the air. Now , does that argum ent sound familiar already just today?

I can 't say for sure, and perhap s the Member for Lakeside can enlighten me on this , but I would tend to believe that it was an embarrassing day for the Conservative Government when they had to do that, when they had to use their majority on the Standing Committee on Public Utilities and Natural Resources to vote down that motion .

But they suffered through that embarrassment becaus e as they said at the time , and I think this is important, in reference to another similar situation in another standing committee, they did not want to turn these committees into courts, and they were as right in their approach then as we are in our approach today .

We do not want to turn these committees into de facto courts because it would act to the detriment of our work as committee members over the longer term; and as a government we must go beyond the potential embarrassment of the day or the posturing , if there is posturing , and concern ourselves with the longer term , just as that Conservative Government had to do back in 1981 . It's interesting, that finally , after all those years intervening , we 've come to the same conclusion.

Perhaps it's us who have grown wiser over time - I don't know - but those moment s of agreement are so rare, even if separated by six years, that I believ e we should cherish them rather than fight about them , but I don't think that's going to be the case this evening. So, in respect to subpoenaing the witnesses , we believe that it will act to the detriment , the longer-term detriment, of what we want to do as a government, and what I believe Opposition wants to do as legislators. The second question, and it's important to note that our approach today is no different than the approach

Wednesday, 26 November, 1986 of other governments , there have been some changes in approaches - and the Member for Lakeside will recall this as well. I believe, as a government, and it's as much evolutionary as it is enlightenment on our part, but as a government we have attempted - and I believe succeeded - to provide greater access to both individuals and to information than any other government at any time. Tonight, every member of this committee , the general public, the media , have access to the full Coopers and Lybrand report, all 500 -600 pages of it.

They can read it; it's in the library right across the hall. Copies were delivered to the members of the Opposition some time ago and to the Member for River Heights . But even beyond that full access, the Opposition critic and others have requested and received many source documents, including audits and correspondence and MTS minutes and MTX Board minutes.

You know, there's been an agreement with them for some time that the government would provide to them , upon request , source materials referenced in the Coopers and Lybrand report except where Cabinet, caucus or corporate confidentiality would be compromised . They asked for those materials ; they were provided those materials . I can remember that in 1981 the minutes of MTS were asked for at that standing committee and they weren 't forthcoming from the Conservative Government of the Day at that time. Eventually they were gotten , and they were gotten through release, but not at that particular committee .

There was quite a fight as to whether or not even the minutes of MTS would be available to members of the Opposition at the time. The Oppos ition also, in respect to individua ls, specifically asked for an assurance from us tha t we would not prohibit any of the recently terminated or retired senior officials of MTS or MTX from attending this series of three committee meetings. Let's be very clear about what the normal practice is because there is a change here . The normal practice would be that they couldn't attend .

As a matter of fact , the subpoena in'81 was asking for former board members of Manitoba Hydro to attend. That was a subpoena that was turned down by the Conservatives of the Day and they never did attend . That would not be normal practice. But when the Conservatives today asked us for the assurance that the prohibition would not apply to those individuals in spite of the traditions , we gave them that assurance, but we said we would not force individuals to come before this committee. That is wrong .

What we would do is neither encourage nor discourage them and we have done neither, and more importantly , we would not use the rules as we were able to , if we wished to , to prohibit them. We gave the Opposition our assurances there and we are standing by those assurances. We have notified those employees . We have told them that they can attend these meetings if they so desire . Members opposite, as I indicated just today earlier , asked that the Provincial Auditor be here . On short notice , we requested him to attend and he is in fact attending.

A full complement of staff at MTS are here tonight, many of whom have a working knowledge of the items and the issues that are going to be under discussion through the series of these meetings. I believe we have gone a long way to provide that necessary access to both individuals and information . 262 I know we have gone much further than any other governm ent in history and that is not to say that members opposite would not want us to go further . In their shoes , I would .

Understandably , when we were in opposition , we liked to have the opportunity to question every individual and to read every Cabinet and caucus paper and every background paper if it were to be made availab le to us, but I am certain that they understand that that can 't be, just as we gained similar understandings whe n we were in opposition and they were in government, because they said to us that just can't be and it wasn 't. So that addresse s the second question - can we achieve that acces s to information and individuals required to provide us with a full understanding without a subpoena?

I believe we made every effort to do so. Coopers and Lybrand are here to talk about what they 've found , senior staff are here, the Provincial Auditor is here and there is an invitation to others to attend if they so desire . I believe our actions to date , which are unprec edented , have met that object ive.

At the same time , I understand and I accept the fact that these actions , even although they go far beyond what members opposite were prepared to do when they were in government , and let there be no doubt about that , the fina l question and perhaps the most important, and I'll close on this , is what would be the long-term impact on the workings of this committee , on our work as MLA 's, on the work of representatives here , from the organ izations as staff, if we turn our back tonight on the precedent they they helped set and accede to the demands of the Opposition?

Well, I for one believe the previous government was right when it said that such actions as they are requesting tonigh t would soon turn these standing committee s into courts because that's what they said at the time in 1981 , and I believe if that were to happen it would significantly impact on our ability as members of the Legislativ e Assembly to carry out reviews of Crown corporations in an orderly fashion. Let's just follow the logic for a while .

If we subpoen a a witn ess befor e us - put yourself in the place of that witness - would it not be reasonable from the perspective of that person that they bring a lawyer with them? Because loo k at what can happen once we subpoena them here. This committee has been invested with immense powe rs by the Legislature and also its direct relationship to the Legislature gives it even more power. We can force individuals to come here in the first place . We can do that through the Legislature . We can then force them to take an oath; we can do that. We can then requir e them to answer all questions .

They cannot refu se to answer a question. And if they give false evid ence or prevaricate - and I'm using the language of the legislation - or otherwise misbehav e when answering qu estions, or if they refuse to give evidence or produc e required papers , we can , by our role as MLA 's, by moving to the Chamber just down the hall , subject them to imprisonment for such time as would be determined by the Legislative Assembly . By the way, that dec ision of the Assembly is both final and conclusive . Put yourself in the shoes of a reluctant witness subpoenaed befor e a committee with that power.

You would want to have your lawyer present for sure and speaking on your behalf - of course you would . And

Wednesday, 26 November, 1986 then we would want to have our lawyers present to address the points of their lawyers , and taken to the extremes , those of us who weren't lawyers to begin with - I remember the Member for Lakeside making some comment from his seat the other day that in fact he wasn't a lawyer and he was able to get good informat ion, along with his colleagues, from committee meetings of this sort and that we shouldn't turn them over to the lawye rs. What would happe n i s we would beco me observers .

I can tell you that not only did the previous Conservative government feel exactly this type of scenar io would develop when the y voted down the motion to subpo ena witn esses before a stand ing commit tee, but others suggest it will happen as well and we shoul d pay heed to what othe rs have to say. The 1980 rep ort on the Standing Procedural Affairs Committee, a rep ort on Witn esses before a Committee, states "The operation of parliamentary committees is only vaguely understo od by most people and appearing before a committee can be an intimi dating experience ." Certainly it can.

"In such circumstanc es, the con duc t of a committee's hearings should always be fair to a witness and to persons about whom witnesses may comment. They should strike a balance between what is necessary to achieve adequate protection for witnes ses and what is necessary to ena ble parliame ntary committees to funct ion effectively." Followi ng on that , the Law Reform Commission in Ontario lat er recommended - because they saw all this happe ning as well - that the right to retain counsel for witnesses should be expressly provided for in the leg islation .

The Ontar io Legislature rejected that rec ommendation because they said it would create difficulties by turn ing these committees into court. So Mr. Craik when he was in government said it; the Ontario government says it; any pers on who reviews the logic would have to say it; and we say it that what in the end it seems will happen , as a result of the actions being requested, is th at we will lead ourselves into a situation that no one wants to avo id .

So I'm certain it was embarra ssing to the Governme nt of the Day on April 9th when they had to vote down the sub poena and it may in fact be somew hat embarrassing today and there will be charges of cover -up as there were charges of cover-up at that time .

But I think they did what was right then and it was a difficult decision, a hard decision but the right decision, and I think it's impo rta nt today that we as a committee do what is right as well ; and that is to turn back this request to subpoena people before th is committee because it does not get at that which the members opposit e sugge st it will, but in the longer term make certa in that we will not be able to accomplish work as a committee and MLA's as we would like to . MR. CHAIRMAN: Mr. Enns. MR. H. ENNS : Mr.

Chairman, very briefly, if we dust off the rabbit tracks and wind that we just got from the Government House Leade r, the truth of the matter is th ings do change and our syst ems change, that' s very true, and I have never seen a situation where a govern ment has cynically removed virtually the entire level of management of the very Crown corporation that is under considerat ion by this committee a few 263 days before this committee is to sit. That brings upon the request , the legitimate request, that is made by my leader.

Furthermore , the names that we are talking about are not chosen at random as was the case you are citing where different peoples of different - not necessarily germane - but certainly with an interest to the situation of Hydro deve lopment and Hydro reports were invo lved . It was the Hydro issue that we were talking about. At that time, the senior management of Hydro was present to answer for their actions to this committee , to the comm ittee of the day. The chairm an of Hydro was present then but our managemen t isn't ready here.

You have acted in a cynical way by removing the senior mana gement of the Crown corporation that is unde r discussion befor e this comm ittee can mak e the kin d of inquiries. Had you chosen not to do that, this request probably wou ld not be facing the com mittee. Just allow me to say one more th ing, Mr.

House Leader, while you are saying there are those, of course, that see a constantly evolving role for committees of this kind, that would see broader congressional-type hearings taken on by committees so that our public would be more info rmed, that we would empower our committees on a more regular basis, I'm not necessarily advocating; I'm sim ply saying that comm ittee meetings of th is nature could chan ge.

I simply want to say tha t the big thi ng that has changed, the unprecedented thing that has changed our posit ion from the pos ition that you quote and have read into the record is the action on the part of this Minister , on the part of this government, in removing the very people that are germane to making this inquiry meaningful. MR . G. FILMON: Mr. Chairman, I wonder if the Government House Leader - and I assume that long disse rta tion in dicated tha t he was oppo sed to subpoenaing the committe e. I lost track , but . HON. J. COWAN: I hope I convinced you. MR. G.

FILMON : No, it didn't conv ince me one bit, Mr. Chairman , and I'll proc eed to tell the Government House Leader why in a moment, but I want to just ask him what was the issue for which people were going to be subpoenaed before committee. HON. J. COWAN: The issue at that partic ular time was to have those people appear before the comm ittee so that they could clear up what was suggested to be mislead ing of the committe e by the Minister of the day. MR. G. FILMON: Was it to do with the destruction of an annual report with different comments being placed in? HON. J. COWAN: Only peripherally and partly so. MR. G.

FILMON: Yes, okay, I think I recall the debate and I think it's an interesting comparison that had to do with having destroyed one annual report, some thousands of dollars wor th of pri nting , to change a parti cular comment in the report versus having put at

Wednesday, 26 November, 1986 risk and indeed likely lost $25 mill ion of taxpayers ' funds in what has been termed by the Minister a high­ risk foreign venture that had to do with a number of instances that I won 't go through

chapter and verse in which the committee, the public, the media had been lied to or misled, serious consequences that have resulted in the remov al of five seni or managers in the Crown corporation and tho se manage rs not being available to this committee, having been available and indeed most of their commentary, most of their evidence and testimony forms the large part of the conclusions drawn in the Coopers and Lybrand report, not available to this committee.

It seems to me that these are highly extraordinary circumstanc es that have never been ever counten anced by this Legislatu re, this committee, or indeed this pro vince, and he is attempting to make some comparison into the import and weight of having people appear before committee and whether or not that would be setting a precedent if indeed, Mr. Chairman , we' re going to be setting a precedent. I can't think of any more major issue upon which to set a precedent in this Legis lature . HON. J. COWAN: I would expect that the Leader of the Opposition and his colleagues would make such an argument.

He does in fact distort the case somewhat. It was not just the report of Hydro for that year that was under cons ideration , but it was the fact that the NDP Oppositi on of the Day thought that the Min ister was stonewalling the committee, thought that there was a cover-up , thought that there were specif ic den ials that were not in fact true, thought that there had been some actions taken in regard to dismissal of people that were in fact misrepresented, and believed at the time that it had every reason to ask the commi ttee to subpoena witnesses.

I don 't think it would have matte red whether that was the case or it was another issue that would be more profound in the minds of the Leader of the Opposition today or not. What was at discussi on and at stake was the very way in which comm ittees operate and certainly at any given time, at any juncture in history, people can bring forward arguments that the issue at hand is the most important issue of any issue that has ever been discussed or reviewed by a particular committee . The members opposite have done it on other issues . We, when in opposition , did it on issues.

But I think what you have to go back to, and I believe this is the important key, is how does that precedent - and it is a precedent - how does that precedent affect the working of these committees over a period of time. If the Member for Lakeside suggests that we shou ld review how these committees work and perhaps change them to a different form of committee, then let us tak e that under advisement as a Legislature because the se committees are servants of the Legislature.

Let us take that under advisement, let us take it through the Rules Committee, let us consider it not from the perspective of one particular request at one particular time but the impact that it will have on the system under which we operate , and if we come to that decisi on - Ontario didn't under similar circumstances - but if we come to that dec ision, then so be it. We have made it not in the heat of the moment around a particular issue that 264 will pass . We have made it around the matter of principle and what should we be doing as legislators .

I'm saying to you tha t to acce de to the demand for a sub poen a to force people to come here who do not wish to be at this committee under these circumstances would be wrong for tho se indi vidua ls bu t, more importantly , woul d be wrong for the lo ng -term effectiveness of us as MLA's, and we on this side are not prepared to throw that away just because the members today happen to think that this is the most important issue in the world. It is important , no doubt it is important, but there are more imp ortant considerations that have to be taken into account when making a decision of that magnitude. MR. G.

FILMON: Mr. Chairman, as members of this Legi slature , we will remember and remind the Minister when he talks about open governmen t, when he talks about freedom of information; we will remind him of his views and his desires and concerns with respect to having the truth and the information that is relative to this issue known publicly - in the only forum that is left to the public - to have question s asked on their behalf with respect to th is MTX issue.

If he thinks tha t whether or not a pa rti cular statement made by a Minister is misleading, we have those every day in the Legisla ture virtually and we have those procedural wrangles and they are not - I would submi t - of the same import and weight as these six volumes and this more half-million dollar study that has been enter ed into by Coopers and Lybrand. HON. J.

COWAN: I think the membe r who just spoke - the Leader of the Opposition - woul d do well to acquaint him self wit h exactly what happ ened at those committee meetings in April of 1981, because he does not know the facts , has obviously not taken the time to learn of them. But when he ta lk s about open governm ent , I remember when he was in government trying to get reports from him that were subsequently made public by the Government of the Day, when it was elected after his term in office and it was impossible. His words ring a bit hollow.

In 1981, we were talking about trying to get some internal documents from Hydro - what were those internal documents? Some reports and some minutes. Mr. Craik, who was then the Minister responsib le and who was a member of the party that had the voting majority in the committ ee, said that the only precedent we have is tha t int ernal documents are not avai lable from the utility unless the board wants to willingly mak e them avai lable.

The chairperson , who was a member of the governmen t caucus at the tim e, went on to say: "But I've never been aware of them having to produc e inte rnal working papers for the committee or for the Legislature." The chairperson again went on to say: "It would be up to the Hydro board to release" - we're talking about the minutes - " . . . if they so wish to." That would be my ruling . They ruled in fact that we couldn 't get the minutes. They ruled that we couldn't get the internal documents. What have we done? Let's go over it. The full report of Coopers and Lybrand is available.

We had promi sed to make one copy available to the Oppo sition upon a

Wednesday, 26 November, 1986 certain period of time passing since the rece ipt of the report and at least five days previous to th is committee meeting . They asked for four. We gave them four to save the m, as they asked, the need to copy it. I th ink that was a legi timate request and one which was acceded to. They asked that all source materials be a vaila ble to them. We said , " You request a sour ce document and if it is not conf iden tia l bec ause o f Cabinet, cauc us or corporate considerat ions, it' s yours. We' ll try to get it to you as fast as we can." I hope we've been able to fulfill that.

I believe we have. We have gotte n it to the m in a matter of hours. Some have take n longer to produce, but no ones have t ake n longer than a day to produce. They asked for the Provincia l Auditor to be here; the Provincial Auditor will be here. They asked that we not prohibit, th at we actually chan ge the practices a bit of this committee a bit to allo w members who are no longer staff members of MTS to attend if they so des ire and that was a request at the time, it wasn' t for a subpoena.

It was if they want to attend - and th at was the agreement - if they want to atten d, they in fact can att end this meeting . We would neither encourage nor discou rage them, but we will certainly not prohibit them, as was the case in the past when they were government. So I don't for one moment accept that we haven't treated this issue in the most open and forth right manner possible and that we have not gone beyond all bounds that were previously set in providing open and full information to those peop le who requested it, where the circumstances allow for that to happen.

But we will not force people to com e to th is committee against their will because that will in fact destroy over the longer term, the ability of this committee to function in the way in which it has grown to function, and will destroy, more impor tantly, the Leader of the Opposition, the Member for Pembina, the other members of this committee and our own ability to functio n well as MLAs in reviewing these report s.

The Member for Pemb ina says - and I thi nk he overstates the case but that' s his privi lege - that in fact he has been bringing these issues to this committee 's attent ion fo r four years now or to t he Min ister's attention, more directly.

The fact is this committee has allowed for those matters to be brought forw ard , for those matters to be discussed, for solutions to problems to be addressed, and I believe operates in the best interests of not only members of the Legislature but the best interests of the Cro wn corporations who have to serve all Manitob ans and we're not going to let that be cast asunder, because of a tempora ry need on their part to subpoena peop le and force them to attend these meeting s, when they wish not to. MR. CHAIRMAN: Mr. Dolin. MR. M. DOLI N: As a membe r of this committee, I have som e concerns.

One of the concerns is the reque st of the Leader of the Opposition seems to be that we would be putting ourselves in a position of short-term gain for long-ter m pain. I think the comments from the Member for Lakesid e saying perhaps we should be and act as some mini-courts, equivalent per haps , he suggests, to congression al committees. 265 Mr. Chairman , I have seen the House on American Activities Comm ittee in action . I've seen the McCarthy Committee in action. I've seen the Kefauver Committee in action in the United States . I don't think we want to turn this committee into those kind of cou rts.

We don 't w ant the same effect; we don 't want the same long -term pain for this province . I also hear - and I thin k this is worthy of longer term cons idera tio n of the roles of this committee - the Leader of the Oppo sition now is sugges ting this committe e shoul d bec ome a min i-court; wherea s in 1981 his colleagues, who were then governme nt, were suggesting that is an abs urd conte ntion for a c ommitt ee in a parlia mentary democracy and it's . MR. G. FILMON: A point of order, Mr. Chairman . I did not, at any time , suggest that th is . . . MR. CHAIRMA N: Mr. Filmon on a point of order. MR. G.

FILMON: . .. should be a mini-court . In fact, I s uggested very spec ific ally the very unusua l and extraordinary circumstances in which t he top five official s ha ve been removed and unava ilab le for comm entar y after they 've b een part and parcel of t he process that led to the report. That is not suggesting that this become a mini -court. MR. CHAIRMA N: That may be an explanat ion; it's not a point of order. Mr. Dolin. MR. M. DOLIN: I might have picked up also, Mr. Filmon read a list of names of peop le whom he wishes to appear bef ore t he comm ittee under subpo en a or warra nt.

I have always been of the impressio n t hat a warra nt should specif y a charge and a reason for being here . I also note he points out the five offici als - he only named two that I heard - and he named some othe r people who I really don 't know who they are and why he wan ts them here .

Now the fact is if th is committee is going to take upon itsel f powers to subp oena anybody that any member of this committee wishes to appear before it and to face the consequen ces - whic h are extremel y serious which was poin ted out by the House Leader - I think th is is someth ing this committee should not embark on just for the short-term gain of today 's headlines, but is somet hing that - as the House Leader suggests, the Rules Commi ttee should look at - is whether we, as parliamentarians in this Legislature, wish to embark upon thi s route.

I, person ally, am very, very frightened of embarkin g upon that route for the long­ term pain that it would cause for us as legislators; and us as members of the committe e. MR. G. FILMON: Mr. Chairman , I move, seconded by the Member for Pembi na: THAT this committee recommend to the Legislative Assembly; THAT it authorize the Speake r of the Assembly to issue her warrant for the attendance before the Standing Com mittee on Public Utilit ies and Nat ural Resourc es, cons ider ing the rep ort of the Manitoba Telephone System of the foll owing persons: Myrna Phillips, Al

Wednesday, 26 November, 1986 Scramstad , Saul Miller, Maurice Provencher, Gordon Holland , C. Feaver and Robert Silver . MR. CHAIRMAN : Any discussion on the resolution? No discussion on the resolution? Mr. Dolin, on the resolution. MR. M. DOLIN: I would like to know from the Leader of the Opposition who these people are; why he is calling them and what contributions he expects them to mak e. MR. G. FILM ON: Mr. Chairman, I am happ y to reiter ate what I said earlier and, if the Member for Kildonan had been listening , he would have heard what I said earlier.

I said former mem bers of the board Myrna Phillips, Alan Scramstad and Saul Miller, I said former senior executives Maurice Provencher and Gordon Holland and two staff members who sat in on MTS meetings according to the the board, C. Feaver and Robert Silver. MR. CHAIRMAN: Order please . If there is anybo dy wishing to speak, I will rec og nize them. There being no further speakers I'll put the ques tion. All those in fav our of the motion , please indicate. This is a voice vote inc identa lly. All those opposed, plea se say nay. In my opinion the nays have it. Mr. Orchard . MR. D.

ORCHARD: . . . do a hand vote in committee, Mr. Chairman . MR. G. FILMON: We'd just like to be sure that the Chairman can count. MR. D. ORCHARD: Mr. Chairman, we would like a count. MR. CHAIRMAN: You can be assured that the Chair can coun t. A MEMBER: All right , call the question. MR. CHAIRMAN: Mr. Orcha rd has requested a counted vote. All thos e in favo ur of the motion, please rai se their hands .

(4) All those opposed to the motion, please raise their hands.(5 ) The motion is defeated . MR. H. ENNS: So much for freedom of informa tion . MR. G. FILMON: Mr. Chairman, I regret very sincerely that the government has chosen to follow this course of action, to not have these people appear before committee .

I would ask and along the way th e Government House Leader suggested that he felt that some of these people might of their own volition want to participa te in this process and with some enc oura gemen t might voluntarily come and offer their appear ance before committee to be able to answer questions and to be able to participate in the process. I would like then to move a motion that Myrna Phillips, Al Scramstad, Saul Miller , Maurice Provenc her, Gordon Holland, C.

Feaver and Rober t Silver be invited to app ear at the committee at its next hearings on Friday and Monday next to be able to be availab le for 266 questioning on var ious issues to do with the Coopers and Lybrand Report. MR. D. ORCHARD: . . . very reasonable. HON. J. COWAN: I would think that if we do decide to offer that invitation that we also know that some of those individuals may not be available for reasons that are quite legit imate . I believe one righ t now might be in the hospital, anoth er is overseas.

I'm not certa in, we could check with the othe rs to determine , but I don't think that if we decide to pro ceed with that motion that because individuals cannot att end it should be th ought that they did not wish to attend . MR. H. ENNS: Mr. Chairman , just so that we all understand the motion before us put by the Leader of the Opposition, this committ ee is being asked to invite people to appear before thi s c om mittee.

Now if for some reason and as the House Leader has sugge sted some members cannot do so for physical reasons , we have to accept that, but surely am I hearing members of the Opposition refusing to even suggest that we invite these people to come and be here at this committ ee? Well, then let's get on with the question. HON. J. COWAN: Just so I don't have to worry about the Member for Lakeside's hearing, we did not say that. I'm sayin g if in fact this committee - and it would be wron g for me to presupp ose what decision this committee might make, so the words were carefully chosen.

If this committee decides to offer that invitation, it should not be a reflection on individua ls just because they do not attend if in fact there are compelling reasons that pre vent the m from attending. This comm ittee and the

schedule was really developed aro und our schedules to make certain that members of this committee could attend. It was not scheduled to take into consideration tho se names which were just mentioned. So I believe that the committee will support that invitatio n. I certainly am prepared to support that invitation, but I don 't want that invitation to be misconstrued, not by purpose, but inadvertently and out of ignora nce . MR. H. ENNS: Can we read the motion aga in? MR. CHAIRMAN: The motion is being written at the present time. It might be difficult to read.

Are there any further members wishing to speak on this? Mr. Scott . MR. D. SCOTT: I would like to know if within the intent of the motion whether or not when the Clerk drafts the letter that the people who we are requesting to attend should be advised that they may wish to seek counsel to bring with them when they attend, just for guarding and protecting individual rights and to make sure that when they do come forward that they are protected so that we do not end up in a kangaroo court, that we just prevented ourselves from becoming a coupl e of minutes ago . MR.

CHAIRMAN: There being no further disc ussion , I will read the motion for the benefit of the members of the committee . The motion is:

Wednesday, 26 November, 1986 MOVED that the following persons be invited to appear before the Standing Committee on Public Utilities and Natural Resources at its next two hearings for the purposes of answering questions on the Coopers and Lybrand Report: Myrna Phillips, Al Scramstad, Saul Miller, Maurice Provencher, Gordon Holland, C. Feaver and Robert Silver . I will move the question. All those in favour of the motion, please say aye. All those opposed say nay. The ayes have it. The motion is carried. Mr. Filmon. MR. G. FILMON: Mr. Chairman, I wonder if I may proceed and ask some questions of Mr.

McKenzie with respect to the detailed information in the report. MR. CHAI RMAN : Mr. Macklin g. HON. A. MACKLING: Mr. Chairpe rson, apropos of the earlier discussion about the workings of legislative committees, it has been traditional and appropriate for the Ministers to be directed to the Minister and then the Minister may decide that it's appropriate for Mr. McKenzie , Ms. Edmonds or any number of other persons to be responding to the questions.

It is more appropriate that way, it's traditional that way and I don't want to frustrate the work of the Opposition Leader or any other Opposition member , but I would appreciate it being that way so that the decision made as to who will answer is left with the Minister. If there is a series of questions, of course, we'll probably carry on with that person . But it's appropriate to direct the questions to the Minister first - not that I want to frustrate anyone. MR. G. FILMON: Mr.

Chairman , I won der if we could begin by asking the quest ion, in Appendix I of Volume 5, there is given a list of people who were interviewed by Coopers and Lybrand in arriving at their report. In that list, which is about a page-and-a-third, I see a number of names and I see a number of names that do not appear, including many of whom we have asked to appear before this committee.

I wonder if it can be clarifi ed as to whether or not these are the only people who were interviewed because , among others , I see no representatives of Arthur Andersen, who were the external auditors who did a numb er of analyses and investigation s. I see a numbe r of former board members who, from the minut es of Telephone System board meetings, appear to have shown an interest in MTX and been involved and so on. I wonder if it can be confirmed whether these are the only people who were interviewd as part of the managemen t audit. HON. A. MACKLING: It would be appropriate for Mr. McKenzie to respond to that.

MR. G. McKENZIE: Mr. Chairman, the appendix then , Volume 5, refers to the specific indivi duals who were interviewed as part of the particular project, which dealt with the assessment of management and financial controls . As you are aware, othe r volumes deal with the assessment of the Cezar project, U.S. SPRINT Project , and the Saudi Arabian operations. Other indiv iduals were interviewed as part of those projects. To the extent 267 that there were interviews conducted with respect to Cezar and SPRINT, those individuals are substantially identified in the text of the report per se, such as Mr. Robert Cezar.

In conjunction with the Saudi Arabian review, specifically Arthur Andersen was interviewed. In the context also of the Saudi Arabian project, individuals were interviewed with the assurance that their identity would not be disclosed, because of the nature of the investigation. But invitations were offered, as part of the Saudi Arabian review , to all existing and former members of MTS and MTX who had served in Saudi Arabia to come forward and to meet with us, and a number of individuals took advantage of that. MR. G.

FILMON: In the course of these interviews, was Sheik Al Bassam, for instance, interviewed, or his son Tariq? HON. A. MACKLING: It would be appropriate again for Mr. McKenzie to answer that. MR. G. McKENZIE: Neither of those individuals were int erviewed in conjunction with this investigation. Subsequent to the completion of this report , we have had the opportunity of meeting with the son of the Sheik Al Bassam , Mr. Tariq Bassam. Unfortunately, under Saudi Arabian law, access to the country is ver y difficult.

You have to have entry permits and exit visas and to do so requires anywhere from six to eight weeks to get such a visa. Given the time limitations which we were working under, we were not able to do so. But we had sufficient access that we were able to gather the information we needed without having to resort to those inte rviews . MR. G. FILMON: I must say I find that strange since one of the rationales that the Minister gave in the House for appointing Coopers and Lybrand was that they had a strong presence over in Saudi Arabia and that therefore this would all become very easy.

I might ask further whether or not all former board member s of MTS were interviewed by the Coopers and Lybrand investigation. MR. G. McKENZIE: Let me first go back to the Saudi Arabian review. Our firm does have a pre sence in Saudi Arabia, a member firm of Coopers and Lybrand, and two partners of that firm did meet with Sheik Al Bassam and his son. My response was with respect to our own direct involvement from a Canadian perspective. So, to that extent, we did have direct discu ssions with the sheik and the results of that were communica ted back to me and my staff in Canada .

In terms of the for mer board members , we endeavoured to interview all existing board members, as well as all past chairmen of the board. There were three members of the existing board whom we were not able to intervi ew, pu rely fo r reasons of time constraint. In one case three appointments were made and had to be cancell ed. So the intent was there ; it was not accomplished within the time constraints of our work. We were successfu l in interviewing all former chairmen . MR. G. FILMON: With reference to all former chairmen, Myrna Phillips was an acting chairman for a period of

Wednesday, 26 Novembe r, 1986 time. I think it was a n umber of months , perhaps as much as six month s. I wonder if she was one of the ones who was interviewed . MR. G. McKENZIE : I'll ask my colleague , Mr. Tidby, to answer that quest ion. MR. CHAIRM AN: Mr. Tid by. MR. H. TIDBY : Myrna Phillips was not interviewed as par t of our audit, no. MR . G. FILMON: Were t her e any former board members whose participation you sought who declined to be interviewe d? MR. G. McKENZIE : No one declined. MR. G.

FILMON: Are the results of the discussions with the Al Bassams contained with in the recomm endations that we have? MR. G. McKENZIE: Yes. MR. G. FILMON: Was the firm able to access the complete books of account of Al Bassam lnternational 's division known as Datacom, for which MTX was responsible for most of the operations? MR. G. McKENZIE: No. MR. G.

FILMON: I wonder, then, if we can know how the firm was able to make any judgment on whether or not there was an existe nce of, or evidence of kickbacks, illegal payments, commissions, or any other activities that had been referred to in earlier meetings of th is committee . MR. G. McKENZIE: The scope of our work was the non-criminal allegations arising from the Ferguson affidavit. I believe those items would fall outside of our scope of terms of reference . MR. G. FILMON: Mr.

Chairman, I wonder, as well then , how the firm was able to assess the handling and the veracity of the accounts that were being shared , the losses that were being shared by MTX, if they did not have access to Datacom division's books. MR. G. McKENZIE: We had access both to MTX books and the records of Saudi Arabia Datacom Limited. We also had access to the people and to other supporting documents , contracts, existing corporate records, etc., which allowed us to feel that we had an adequate understanding of the business and the activities that had transpired during the period of our review .

I do not believe that our conclusions would be significantly affected by the lack of access to the Datacom division of Al Bassam International. It would not change our opinion with respect to the affairs of MTX and SADL . MR. G. FILMON: How are you able to make any jud gment as to the colle ct ibi lity of the acc ounts owing to SA DL from Da tacom Diviso n of Al Bassa m 268 Intern ationa l if you don't have some picture as to the solvency of t he comp any or its financial position? MR . G.

McKENZ IE: Th e his tory of financial transacti ons, as described in ou r report, with reference to bank financi ng, the handling of drafts, etc., gives us suffic ient cause fo r concern to believe that the coll ectib ility is questi onable. MR. G. FILMON: Pres umably , equipment was being provided to Datacom Divison and Teleco m Division by SADL and MTX and being sold. Where were the proceeds going? MR. G. McKENZIE: The proceeds would be received either within the Datacom Division of Al Bassam International and/or SADL to the extent that there were collections made in Saudi Arabia. MR. G.

FILMON: Am I to conclude that equipment was being so ld and not co llected for; that there were many, shall we say, doubtful accounts, poor accounts, to which equipment was being sold; or was, in fact, the Datacom Division somehow eating up the proceeds? MR. G. McKENZIE: There are two elements to recogniz e that have been transpiring in Saudi Arabia .

One was the substantial losses that were being incurred which had to be financed to that extent, the proceed s of sales were utilized for that purpose ; and, secondly, there has been a history of poor collection, and the sales, there would be substa ntial periods of time , particularly given the economic condi t ions of the country , at which collections would not occur. MR. G. FILMON: Are we just talking about poor collect ions between Dat acom Division of Al Bassam International and SADL or are we talking about poor collections on the par t of Datacom Division from their customers? MR. G. McKENZIE: The latter .

MR. G. FILMON: On what basis do we have this information if we don't have access to the sheik's books? MR. G. McKENZIE: Interviews with staff . MR. G. FILMON: Whose word were the staff takin g? MR. G. McKENZIE: MTX was responsib le for both the management of SADL as well as Datacom Division of Al Bassam International. In the process of fulfilling those responsibilities, the staff would have the records or access to those record s. MR. G. FILMON: You didn 't actually see the records, but the information was transmitted to you by staff who told you how the process worked and how much they were losing and so on. MR.

G. McKENZIE: That is correct. MR. G. FILMON: So if there were commiss ions being paid on equipment never sold or illega l comm issions

Wednesday, 26 November, 1986 of any sort, kickbacks, whatever , that would never be found in the course of any of your investigations . MR. G. McKENZIE: We did not endeavour to establish whether that was occurring or not . MR. G. FILMON: There 's a note in your Volum e 4. " Although th is is clearly within his righ ts ... " - I think we're talking about the sheik not making available to Canadian auditors the information - " Although this is clearly within his rights, it lacks the good faith with which both part ners have operated for the past four years.

It also places MTX in the position of being unable to support the studies commissioned to fully investigate criminal allegati ons and to confirm the viability of the existing operations." Is that something that you believe is reasonable? MR. G. McKENZIE: I seek clarificatio n of what you mean by the term "reasonab le." MR. G. FILMON: To be put in that situation , for MTX to have been put in that situation. MR. G. McKENZIE: It's not a personal opinion , no. MR. G.

FILMON: Throughout. this is referr ed to as an " interim audit ." Is there an intention to do a broader audit and investigation that would flesh out much of the missing pieces? HON. A. MACKLING: That question will be determined as indicated in the rele ase of the report. Coopers and Lybrand will be associated and assisting MTX in the orderly and reasonable wind-down of MTX and assisti ng in that . So that question of further audit is not decided at this time. MR. G.

FILMON: Volume 1, Page 4, refers to: "Throughout the review, regular meetings were held with a steering co mmittee comprising senio r government and Civil Service repre sentatives ." Who was on the steering committee? HON. A. MACKLING: I think Mr. McKenzie can answer that , give the nam es of the individuals . MR. G. McKENZIE: The steering committee comprised Mr. George Ford, Mr. Charles Curtis and Mr. Grant Wilson. MR. G. FILMON: Those are the only members? MR. G. McKENZIE: That's righ t. MR. G. FILMON: Wh at was their role in the investigation? MR. G.

McKENZIE: We met at regular intervals to review the results of our work , t o discuss the implications of our findings, and to gain the benefit of a broader perspective in order to ade quate ly interpret our ultimate conclusi ons . MR. G. FILMON: Did the y inf luence the direction in which the stud y took on any particular matte rs, the 269 manner in which things were expressed in the ultimate study? MR. G. McKENZIE: No. The terms of reference were described to us by the steering committee and we were free to interpret those terms of reference in terms of the methodology we followed .

Suggestions were made from time to time by the steering committee in terms of people to be interviewed but they certainly did not in any way influence the ultimat e conclusions we drew. MR. G. FILMON: Mr.

McKenzie can correct me if I am wrong, but in the terms of reference for the study, I see only one reference to government , that being point 5, that says that the terms of reference were to "review and assess the adequacy and accuracy of management and operations infor matio n provided to the Winnipeg headquarters, to the MTX Board, to the MTS Board and to the governm ent." Was there no attempt to assess the adequacy of the government or the Min ister 's efforts to obt ain answers to questions , confirmation of success or failure of past investments or past bus iness plans , past marketing projections and forecasts?

Was there no att empt to assess the government's role and responsibility in, for instance, approving an Order -i n-Council for open account financing with the Bank of Nova Scotia or additional investments along the way, the $8.5 m illion; no attempt to assess the government 's role and responsibility on many of these issues, whether or not the Minister responsible or the government , Cabinet Committ ee of ERIC, pursue d questio ns with MTX senior ma nagement, question s that have been asked in committee for years by the Opposition critic and so on? Was there no attempt to assess that responsibility? MR. G.

McKENZIE: No. HON. A. MACKLING : was going to, before Mr. McKenzie answered, ind icate that there are sections of the report . MR. G. FILMON: Mr. McKenzie already answered no. HON. A. MACKLING: There are sections of the report which do deal, ma yb e not as extensively as the honourable member would like, with some of those areas that he raised. MR. G. FILMON: Are we io assume that those types of things were outside the scope of the management aud it then? MR. G.

McKENZIE: The scope of our audit was as described in the terms of reference , and the particul ar item you refer to dealt with the question of the adequacy of information pro vided , and that was the limit in which we addressed the question s t hat you raise . MR. G. FILMON: So, Mr. Chairman, there was no attempt to assess whether or not government acted responsibly in approving through the ERIC Committee of Cabinet, major investments , a business plan for Cezar Ind ustr ies that called for an 18-month pay-back and so on and so on; ther e was no attempt to assess whether

Wednesday, 26 November, 1986 or not government or Cabinet Ministers acted responsibly on any of these issues? MR. G. McKENZIE: That's correct. MR. G. FILMON: Mr. Chairman, the management audit calls forward some rather shocking revelations about the fact that I believe it stated, and I can quote it, that at no point along the way was anybody asking the question, what business are we in?

Nobody was insisting that we had business plans before we made major management decisions, that we had market analyses that told us whether there was any hope of selling our services and our products over there, or in any of these ventures, that there was a shocking lack of that kind of management questioning and considerat ion in all of the decision-making . Did the management consultant seek to find out whethe r or not at the political level , the Minister, or any of the Cab ine t members sitting on ERIC asked any of those questions? MR. G. McKENZIE: No. MR. G.

FILMON: Did the Coopers and Lybrand study team have access to the minutes of the Econ omic Resources and Investment Committee of Cabinet or submissions that were made to the Economic Resources Investment Committee of Cabinet with respect to MTX? MR. G. McKENZIE: I'd like to ask Mr. Tidby to respond to that question . MR. CHAIRMAN: Mr. Tid by. MR. H. TIDBY: We did have certa in of that information. In particular, we had the submissio n that went to Cabine t relative to the $6 million financing that took place in September of 1985. MR. G. FILMON: Did you have access to any of the ERIC Committee minutes? MR. H.

TIDBY: We had access to certain of the minutes that related to that specific meeting . MR. G. FILMON: Mr. Chairman, Cabinet had to pass an Order-in-Council authorizing the open account method of financing from the Bank of Nova Scotia for the expo rt financing to Al Bassam lnternational's divisions, Telecom and Datacom, essentially, and I'll quote from the report. It says, "In the very first year in which the export financing arrangements were made, 40 percent of the initial drafts drawn for both Telecom and Datacom could not be met and had to be restructured over a two­ year period .

In the second year, to March 31 , 1985, Telecom and Datacom were able to meet only about half of the notes that came due for payment. MTX met the obligations for the other half. " In total, over the four years to August 1986, MTX has met 48 percent of the Telecom notes and 75 percent of the Datacom notes which have matured. The rationale for doing so has been that the notes were guaranteed by MTS or the Government of Manitoba.

Neither of the loans in question are to the joint venture company, SADL. 270 Do you find it unusual that nobody sought to ask any questions abou t this at either the government level or the Cabinet level when they were the ones who were guaranteeing these loans, that they made no attempt to find out why the line of credit and the guarantees were there and were needed for this kind of arrangement whereby we were financing the sheik's operations? MR. G.

McKENZIE : I am not familiar with the regulations or the procedures in govern ment which would require the involvement of individual members of government, in addition to the officers of the corporation, so I really find it difficult to respond, express an opinion on that question . MR. G. FILMON : I wonder if Mr. McKenzie can indicate whether it is the opinion of Coopers and Lybrand that the MTX ventur e began as a good idea. MR. G. MCKENZIE : Yes, I believe there was sincere judgment exercised by the parties involved at the time that the MTX venture was a good idea. MR. G.

FILMON: Where do you expres s that in your report? MR. G. McKENZIE: Perhaps I could ask my colleague , Mr. Elliott, to assist me in that. MR. CHAIRMAN: Mr. Elliott . MR. D. ELLIOTT: Can I have a repeat of the question? MR. G. FILMON: Where, in your report, do you express the view that MTX began as a good idea? MR. G. McKENZIE: Could I hold on that question and do the research to respond accurately at a later date ? MR. G. FILMON: I'm sorry, I jump back and forth obviously.

Why specifi cally was the ERIC Committee minutes and the ERIC submission on the Cezar and I guess the total package of the $8.5 million , why was that specifically requ ested and other documents not? MR. G. McKENZIE: Our terms of reference included the question of the adequacy of information that was provided to the various parties you referred to earlie r in our terms of reference. In orde r for us to form an opi nion, we wanted to see that specific submis sion and the supporting minut es of board meetings, etc.

So what we did in effect was trace the development of the proposal for these investments th rough the various levels of decision-making up through and incl ud ing the ERIC Committee in Cabinet. MR. G. FILMON: Why would you have not then asked for the background material th at led to the adoption by Cabinet of Order-in-Council 854 of'83; that Orde r­ in-Council being the approval of the line of credi t from the Bank of Nova Scotia? MR. G. McKENZIE: As indicated earlier, first of all, we are not fam iliar with the extent of government

Wednesday, 26 November, 1986 regulations involved in lending authorities . What we were con cerned about was the effect of the lending tra nsaction on the financing as it impacted on SAD L and MTX . We weren 't concerned with respect to the need for governmen t appro val or not as the case may be. We were con cerne d about the appropri ateness of the financ ing per se. MR. D. ELLIOTT: Can I clarify that ? MR. CHAIR MAN: Mr. Elliott . MR. D. ELLIOTT: We did in fact have access to some documents and they may have been ERIC Comm ittee meetings.

I'd have to check my working papers wit h respect to the two Orders-in-Council referred to in Volume 4 of the report. MR. G. FILMON: I don't have a copy. There were two lines of credit as I recall. One was from the Bank of Nova Scotia and one was from the Royal Bank. I have an Order-in-Council covering the Bank of Nova Sco tia; I don't believe I have an Order -in-Council cove ring the line wit h the Royal Bank. Was one required? MR. D. ELLIOTT: To the best of our knowledge, the only security provided for the Royal Bank export corporation line of credit was a letter of credit by MTS. MR. G.

FILMON: A letter of comfort? MR. D. ELLIOTT: A letter of comfort. MR. G. FILMON : Okay. So you have no information as to what information was provided or asked for by Cabinet in approving the line of credit for the Bank of Nova Scotia and guaranteeing the line of credit for the Bank of Nova Scotia open account? MR. D. ELLIOTT: I have some working papers with me if you would like me to bring them out and read through them. MR. G. FILMON: Yes, if you can add to that information.

Going back to the topic of whether or not MTX began as a good idea and assuming that you have said that there was some justification, I might indicate that half a dozen of us or so have read the report as thoroughly as is possible given the time constraints and we do not see any reference to it having began as a good idea, but if your opinion on behalf of the firm is that there may have been justification, we'll accept that as the premis e and go from there.

If that is the premise that it began as a good idea, based on what business plan, what m arket o ppor tuni ties and what terms of reference was it a good idea? Let me tell you where I'm coming from . We have the initia l bus iness plan that seem s to have been scr ibbled on the back of some sheets on a plane ride back from Saudi Arabi a, and I may be unfair in th at but I don 't think so , because they're handwritten as the business plan upon which the board of MTS and MTX and presumably Cabinet were sol d on going into this venture .

So if that's the basis upon which you suggested it began as a good idea, I'd like to have that information. 271 MR. G. McKENZIE : When I made reference earlier to my opinion that it started as a good idea, I'm referring to the formalization of agreements between the parties , what we saw as the first formal business plan which was a typed doc ument and which was approved by the MTX board . If there were scribbled handwritten notes written on a plane, cer tainly they weren 't drawn to our attent ion . MR. G.

FILMON: At what poi nt in time w ou ld those documents have been put together, the ones that you're referring to , the typewritten business-plan documents? MR. D. ELLIOTT: There 's a business plan dated, I believe it's January 24t h and 25th of 1982. MR. G. FILMON: And based on that business plan, you would say that MTX began as a good idea? MR. G. McKENZIE: The first acti vit ies of MTS in Saudi A ra bia sta rt in conjunction wit h Bell Canada International with what's referred to as the Spectrum project an d we describe that in our re port .

The formalizat ion of a joint venture with Sheik Al Bassam started at a later date and that's the business plan in which I am referring to in January of 1982. I think it's fair to suggest that our report does make the point that that business plan and a subsequent business plan in subsequent years that were presented and approved by the board on a point of fact were never achieved in terms of the ob jectives and expectations in terms of financial and profit performance. So after you see that for a period of time , you start to question the judgment of the business planning process.

That's why we started to reach the conclusions that we ultimately reached in our report. MR. G. FILMON: Just for your information, this business plan for Datacom, which is supposed to be SADL but that was during the period of time when it was thought it was going to be the jointly owned company and then eventually it became two , Datacom and SADL separa tely, but this was intended to be the original SADL business plan. I just point out to you that perhaps one-third of the pages are written in pages of this nature.

This was dated Apr il 1982 , so presumably it had progressed to that point in time , but every third or fourth page has some handwritten aspects to it - these here and that and so on . That's the orig inal business plan that we were led to believe caused the decision to form the company. Having said that, if it began as a good idea, at what point did it start to become not so good an idea? MR. D. ELLIOTT : As we indicated in the report, the initial implementation of the business plan was lacking in a number of areas in our opinion. MR. G.

FILMON: So you 're saying that virtua lly from the day after it began, it started to become not so good an idea? MR. D. ELLIOTT: I didn 't say that. MR. G. FILMON: Would you like to clarify that? I wonder if I cou ld seek clarification as to how early on somebody

Wednesday, 26 November, 1986 who was attempting to do some rather objective analysis as an accountant or a business management consultant should have looked at this and said , hey, what's going wrong here, or why are we getting into these circumstances and why are we amending the terms of reference or the scope of the company . Particularly you make the point in Volume 5 of what the scope of the company has bec ome and the mission of the company.

I say to you that at what point should somebody with a little bit of accounting and management expertise have started to question because you're - well, let's stop there and then I'll ask you the next one. MR. G. McKENZIE: Let me try and respond to this question in two ways. First of all, from the point of view of our work in undertaking this review and ultimately reaching the conclusions we reach with respect to the inade quacies of MTX ventur es in Saudi Arabia , you go through a process of examination, through examination of documents, through use of peo ple, etc., etc.

At the end of the day, you use your judgment. In reaching that judgment, we did not try to pinpoint it in terms of the calendar . There is, however, one particular report in my judgment which was signi ficant - first warning of a serious problem. That was the Arthur Andersen Management Financial Audit Investigation in May of 1985. When I read that report, in my judgment, that was a signa l that someone should have been aware that there were some problems.

Now, in subsequent discussion, I was given to believe that corrective action had been taken by management and various people had been assured that the problems had been dealt with . MR. G. FILMON: That was before Cabinet approved the additional funding for the Saudi operation, wasn't it? That was possibly five months before? MR. G. McKENZIE: I made the point that the response to that report was that various parties gave assurances that the problems highlighted in the Arthur Anderse n Report had been dealt with .

I believe that those assurances in point of fact were given and had been relied upon presumably in reaching the decision for the further investment in October of 1985. MR. G. FILMON: There was another assessment done on December 31, 1984, by Mr. Plunkett. What about that? Did you not find any warning signals in that? MR. G. McKENZIE: I'm sorry, would you repeat the question? MR. G. FILMON: The report done by Mr. Plunkett on December 31, 1984, in which he speaks of among other things potential wind-up scenarios given the major problems with the collectibility of accounts. MR. D.

ELLIOTT: My reading of that report was that he had iden tified a number of problems and indicated in the body of the report that steps were under way to resolve those problems. MR. G. FILMON: Whose responsibil ity was it, or was there no responsibility on th e part of anyo ne who had 272 seen this report to find out whether or not the steps had been taken and were working? MR. G. McKENZIE: In our report , we make the conclusion with respect to accountability of senior management, in particular Mr. Holland, Mr. Provencher and Mr. Anderson.

It's for just those reasons that you allude to that we reached that conclusion, that one way or another the corrective action that , as the senior executives respons ible, they should have taken and didn't, adequately taken, that we' d reach that conclusion ultimately. MR. G. FILMON: You make no attempt to make judgment as to wheth er or not there was any politic al responsibi lity given that the political arm was starting to become more and more involved in approving additional financing and so on. You have not attempt ed to assess any political responsibility? MR. G. McKENZIE: That is correct. MR. G.

FILMON: Mr. Chairman, I'll at thi s point in time turn the floor over to another speaker and obvi ously I will have some other follow-up ques tions to pursue. MR. D. ELLIOTT: Mr. Chairman, did you want me to respond to an ear lier que stion regarding source documents? MR. G. FILMON: If you now have the information, yes. MR. D. ELLIOTT: Can you repeat what the question was, what you 're looking for? MR. G. FILMON: I can 't recall it. MR. D. ELLIOTT : We had back-up information regarding . .. MR. G. FILMON: Oh, source documents backing up the submission to Cabinet for the Bank of Nova Scotia line of credit. MR. D.

ELLIOTT: The original Order-in-Council 854/ 83, we have what appear to be the original approval and the justificatio n for the loan , in additio n to which we have some back- up materia ls that were presented describing the need for the loan .- (Interjection)- Pardon me? MR. G. FILMON: Presented to Cabinet by the Minister responsible? MR. D. ELLIOTT: Presented to the MTS Board and directed tow ards Mr. S. Miller. In addition, we have a partial copy of the minutes of the 293rd MTS Board Meeting in which the Royal Bank !ine of credit was discussed and approv ed. MR. G.

FILMON: You don 't have any source documents that went to Cabinet? MR. D. ELLIOTT: Not with respect to the Royal Bank

Wednesday, 26 November, 1986 MR. G. FILMON: But you believe that all the source documents you have on the Bank of Nova Scot ia went to Cabinet? MR. D. ELLIOTT : I have a submission to Cabinet by the Ministers responsible dated May 25, 1983 . MR. G. FILMON: Who are the Ministers responsible? MR. D. ELLIOTT: Murie l Smith and John Plohman are the names on that documen t. That's May 25, 1983. MR. G. FILMON : Tha nk you . HON. A. MACKLIN G: Mr. Chairperson , quest ions were put by Mr.

Filmon in respect to know ledge of any Minister or government in connection wit h the Arthur Andersen May 1985 audit and the Plunkett Report of December 1984 , and for the recor d I want to indicate that I became aware of that documentation as Minister in August 1986. MR. M. DOLIN: Mr. Chairman, I'm wondering if the Minister could indicate whether Mr. P.A. Cumming, the author of Volume 6, the Review of the Human Rights Issue as done by Coopers and Lybrand, is in attend ance or will be in attendance. MR. G. McKENZIE: He unfortunately could not be here, but he will be in attendance, hopefully on Friday. MR. M.

DOLIN: There are a few questions I would like to ask regarding some of the comments raised in Volume 6. There are some specifics I would like to ask Mr. Cumming, but I'll hold tho se. On Page 36 of the document, referring to appli cat ions for MTX employees, it says no person of the Jewish faith applied for an MTX position and no female applied. Circulars advertising the positions are non ­ disc riminatory in content. It goes on further to say employees are not labelled by rel igi on and therefo re there is some uncertainty about which employees may be Jewish.

There is no concrete suggestio n that anyone in management actually discouraged such possible applicants . But it goes on further on Page 37 to say entrepreneurial zeal by MTX management in pursuit of Saudi operations which makes one suspect that sensitive human rights issues would be given very short shrift as a nuisance factor to business goals. The suspicion coupled with recent comments made by MTX management and media, leave further suspicion that one or more persons in the MTX manageme nt may have at times orally discouraged prospective applicants who were of the Jewish faith or were females.

"This concern is compounded by a comp lete absence of Jewish or female employees applying for positions in Saudi Arabia. However, there is no conc rete indication of any active discouragement of applications from these groups as no application for an MTX position in Saudi Arabia came forward from a person of either group.

As no complaint is known to have been made by anyone at any time, it is speculative to venture a guess as to what management's reaction to the receipt of an application for some one who is Jewis h or female might have been." 273 At an earlier meeting of this committee, I was provided with this document by Mr. McGuire, which I gather, in one form or another , has been provided to all employees of MTX going to Saudi Arabia and that's an introduction to Saudi Arabia. I'm wondering - has this documen t been reviewed by the Coopers and Lybrand people? MR. G. McKENZIE: We were provided with a copy of that document .

MR. M. DOLIN: Am I correct in understanding that this document or a facsimile has been in the Personnel Departmen t and used by the Personne l Depar tmen t since involvement in Saudi Arabia under th e Bell subcontract and subsequent? Am I correct in that assumpt ion? MR. G. McKENZIE: I am unable to answer that question. MR. M. DOLIN: I'm wondering perhaps if the Minister or somebody else is able to answer that question . HON. A. MACKLING: I was questioned at earlier meeti ngs of the committee and I believe that Mr.

McGuire had indicated that that was the document which was made availabl e for anyone who had indicated an interest in going to Saudi Arab ia, and that was the documentation I think provided by Bell and they were foll owing the same process that had been initiated under the earlier Bell arrange ment s. MR. M. DOLIN: Perhaps coul d the Minister or perhaps the Chair of MTS? My concern is specifically around the matte r of no appli cation, any excessive zeal when this docum ent became available to a prospective employee going to Saudi Arabia.

The Minister just indicated if an employee was interested in applying for the job, this document would become available. This document points out that women are not allowed to own cars, not allowed to have certai n jobs, that no map can be taken, no globe that depicts the state of Israel, no icon with a six-pointed star, etc . Now, if this document was avail ab le to prospective employees before application, it is not surprising to me in any manner, shape or form that none would have applied. Now I'm wondering is that the case.

Was this document available to employees prior to application or only to employees who had applied and been approved for Saudi Arabia? HON. A. MACKLING: Mr. Chairperson, I understand the concern the honourable member has because I assume his concern is that if a person expressed interest and then was briefed with that material, they would not mayb e make a formal application. The report indicates tha t there were no applications from women or people of Jewish faith that expressed an interest in the job. I will ask for verification on that concern and report it at the next sitt ing of the committee. MR. M.

DOLIN: Further to that, I thin k one of the things that is rec ommended by Mr. Cumming, and I would

Wednesday, 26 November, 1986 like to get into some more detail , is at that time the code of business conduct had no relevance whatsoever to either The Human Rights Act or to human rights moral issues in doing business abroad . Now that's Mr. Cumming 's basic information and I am correct in that understanding? HON. A. MACKLING: I understand that Mr. Cumming is going to be here and I think it would be preferable if the honourable member put the question to him because it's his assessment he's looking at. MR. M. DOLIN: Fine, I'll hold that question for Mr. Cumming . Mr.

Cumming makes some recommendations whic h I think were excellent and he points out some of the weaknesses . One is tha t The Human Right s Act did not apply specif ically in the hiring, and I think one of the factors which I can consider covert discrimination in the availability of this introducti on to Saudi Arabia to any prospective employee would certainly dissaude anybody of the Jewish faith or any female from applying to th is position knowing the restrictions they will be facing in Saudi Arabia .

Now one of the concerns I have is that at an earlier Public Utilities meeting when I questioned the Chair and the board on this, the comment I got and I'm not quoting verbatim but however it would be dealt with on a case-by-case basis . I think what Mr. Cumming is recommending here is that this certainly cannot be dealt on a case-by-case basis. The Minister made some minimal reference in his opening statement to The Human Rights Act being amended to deal with Crown corpo rations, not only MTS but other Crown corporations, doing business abroad .

Also, the matter of a policy, a business policy , could the Minister elaborate on what policies and what amendments to the act are being proposed and will these apply to all Crown corporatio ns? HON. A. MACKLING: I'm wondering whether the honourable member wishes me to deal with that now or when Mr. Cumming is here because it might be more advantageous to deal with it in context of Mr. Cumming's comments on that

section of his report. I'd be willing to do so, but in the interes ts of the work of the committee, perhaps it would be better to do it all at that time . MR. M. DOLIN: Fair enough . I don't want to take too much time in the committee without Mr. Cummi ng here , but I do want to commend him on the recommendations . I want to have some assurance that his recommendations, which are basically a framework being recommended, that there are actually specific criteria to that framework which can become operative for any Crown corporation doing business in a foreign jurisdiction. I am not aware at . . . MR. H.

ENNS: Those are legitimate questions for the incoming Minister, Mr. Doer. HON. A. MACKLING: If the honourable member . MR. M.

DOLIN: In spite of the inte rrupt ion of my honourable friend from Lakeside, I would like Mr. 274 Cumming to have to be forewarned that this is the question I will be asking and I would also like some specifics on what criteria that framework should contain to ensure that the kind of discrimination that appears apparent , that certainly in a realistic way the people of the Jewish faith and women were discriminated against - covertly, I believe - in the hiring practices of MTS in the past , that this cannot happen in the future .

I'd like to know what the policy is going to be, what the legislation and what specific criteria Mr. Cumming or other members from Coopers and Lybrand would be recommending to ensure that there will never be a repeat of this situation in Manitoba. With that, thank you, Mr. Minister, I'll wait for Mr. Cumm ing. HON. A. MACKLING: I appreciate the concern the honoura ble member has and for the work ing of the committee if we can defer that when Mr. Cumming is here, then I will elaborate further on that. We do take that matter very seriously.

That is why it was included in the terms of refe rence of Coopers and Lybrand to deal with and we will be elaborating on policy on that matter during the course of th is hearing. MR. CHAIRMAN: Mr. Orchard. MR. D. ORCHARD: Thank you , Mr. Chairman . I'll defer to my colleague, Mr. Manness . MR. CHAIRMAN: If that 's agreeable to the comm itt ee, Mr. Manness. MR. C. MANNESS: Thank you, Mr. Chairman. I would ask the representatives from Coopers and Lybrand wheth er or not thei r firm . . . HON. A. MACKLING: I'm sorry, could you direct . MR. C. MANNESS: I'm sorry, Mr. Minister, I'll ask you. HON. A.

MACKLING: I don 't want to be technical but please -(Interjection)- No, i want the committee to work right, Donald . MR. CHAIRMAN: Could I suggest we follow the procedure we've been following? Mr. Mann ess. MR. C. MANNESS: Mr. Chairman, I agree with the Minister. I wou ld ask the Minister if it m ight be acceptable that I ask Mr. McKenzie whether or not his firm has undertaken a maj or investigation of this nature before involving a government Crown corpo ration. HON. A. MACKLING: It wou ld -be approp riate for Mr. McKenzie to answer that. MR. G. McKENZIE: Yes, we have. MR. C. MANNESS: Mr.

Chairman, again I ask the Minister if I might ask Mr. McKenzie, is it normal in your business , Mr. McKenzie , when you've done these types of major reviews and investigations for a government in the past whether a consulting firm

Wednesday, 26 November, 1986 reviewing act ivities , o f wh ich government is ultima tely responsible in one fashion or another , whether the terms of refe rence preclude an investiga tion such as your s from determining governme nt or Ministe r or Cabinet knowl edge, through review of Cabine t minutes or comm ittees of Cabi net minutes? MR. G. McK ENZIE: The nor mal m et hod ol og y fo r conducting such investigations in terms of refere nce are to focus on the business, the effect ivene ss of its mana gemen t and the decisio ns that are taken or have been taken by the responsi ble exec utives.

It is not normal for us to pass judgment on the political pro cess. MR. C. MANNESS: I can't remembe r, Mr. Cha irman, where the reference was made, which of the volumes, to the word, "stakeholders." I believe the stakeholde rs in this whole -(lnterject ion)- HON. A. MACKLING: Shareholders. MR. C. MANNESS: Well, the word was "stakeho lders." It wasn't shareholders; the word was stakeholders, I believe. Maybe, Mr. McKenz ie, you may wish to corre ct me. I believe that the stakeholders are , of course, the ratepayers, Manitoba Telephone System ratepayers and/or the taxpayers of the Province of Manitoba. Can Mr.

McKenzie tell the committee how it is that one can conduct a review of this type, of this nature, without following the flow of responsibility, ultimately, to the people who are responsible to the stakeholders - using that terminology - within the Pro vince of Manitoba? MR. DEPUTY CHAIRMAN, M. Dolin: Mr. McKenzie. MR. G. McKENZIE : We were asked to undertake this investigation in a manner which set established terms of reference, and we conducted our invest igation with respect to those terms of reference.

We did not attempt to form judgment as to the appropriateness of those terms of reference in the broader context that I think your question is framed. MR. C. MANNESS: Mr. Chairman , then I would ask Mr.

McKenzie, because I wouldn't ask him then to pass judgment on the appropriateness of these specific terms of reference, but in a private business or indeed a p ublic business where a company had shares that were traded publicly, would not a review of this natu re i nvolve the people that were ultimately responsible to the shareholders in that case, in other words, the board of directors , plus the very senior management, to determine whether or not mismanagement - and I believe that was one of the areas that you were asked to investigate - to determine whether mismanagement indeed did exist ? MR. G.

McKENZIE: Yes, and we did form judgments with respect to the effectiveness of management. MR. C. MANNESS: Mr. Chairman, through you to Mr. McKenzie, management then, in the terminology of your industry, does not then includ e political people, does not include then the Minister of Telephones, does not include Cabinet officials. 275 MR. G. McKENZIE: That is correct. MR. DEPUTY CHAIRMAN : Mr. Orchard . MR. D. ORCHARD: Thank you, Mr. Cha irman .

I' d like to ask a representative of Coopers and Lybrand a couple of questions surrou nding th e circ umstances d escribed on Page 64 or 65, Volume 4, Detai led R eview of SADL . Mr. Chairm an , we wer e assure d by the Minister in the Hou se that all shipm ents to Saudi Arabia wou ld cease and des ist. I believe, to quote the Ministe r, he said , "Not five cents of goods would go to Saud i Ara bia." Mr. Ch airma n, I was rather shocked, and thro ugh you to t he Minister through to Mr. McKenz ie, I was rather shocked to find out on Page 65 that in fact we have shipped $200,00 0 U.S., at the time of writing.

The time of writin g is possibly two, three , four weeks past now. I'd be interes ted in knowing whet her you have a c urre nt ind ication of value of shipments . Is it in excess of $200,000.00? Have they shipped more to Saudi Arabi a? MR. G. McKENZIE: I do not have with me a pre cise listing of shipment s, but I believe it's in the order of four or five shipments have occurred in accorda nce with the arrangements as described on the bottom of