Manitoba Committee Hansard — Public Utilities Committee, Sitting 16 (33rd Legislature, 1st Session)

33-1-pu16

Manitoba — Debates (Hansard)

LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON PUBLIC UTILITIES AND NATURAL RESOURCES Monday, 1 December, 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, Harapiak (Swan River) , Hon . Mrs . Smith Messrs. Ash ton , Dolin , Enns , Filmon , Manness , Orchard and Scott APPEARING: Mr. Peter A. Cumming, Q.C., Professor of Law, Osgoode Hall Law School of York University Mr.

Charles Curtis, Acting Chief Executive Officer of MTX MATTERS UNDER DISCUSSION: Annual Report - Manitoba Telephone System MR. CHAIRMAN: The meeting of the Public Utilit ies and Natur al Resources Committee will come to order. The first item on the agenda is the resignation from the committee of Mr. Penner. Mr. Doer. HON. G. DOER: I would move that the Member for Churchill be a member of the committee, seconded by MR. CHAIRMAN: Is that agreed? (Agreed) The next item, the Minister has a statement . Mr. Mackling . HON. A. MACKLING: Thank you, Mr. Chairperson . MR. D.

ORCHARD: Does he have a copy of his statement, Mr. Chairman? HON. A. MACKLING: You know, Mr. Chairperson , we suffered through the discourtesies of the Honourable Member for Pembina last week . I think that he can suffer a little bit now. MR. CHAIRMAN: Before we get into the next four and-a-half hours, it might help if we could refrain from interrupting and if we could speak only when recognized. Mr. Orchard , on a point of order . MR. D. ORCHARD: Mr.

Chairman, the agreement that we have is that if the Minister opens with an opening 312 statement , it is customar y a copy be made available to members of the Opposition. If this is not going to be followed, then so be it. The Minister is abrogating an agreement that we have on opening statements. HON. A. MACKLING: On the point of order , I wasn't furnished with a copy of the honourable member's statement; I didn't, even during the course of the meeting, receive the courtesy from him of giving me one of those display documents that he so proudly furnished.

I see no reason, particularly when they 're handwritten notes that I'll be using , to give the member a co py. I doubt whether he'd be able to read most of my writing anyway. MR. CHAIRMAN: I don't believe there's any reference in our rules to opening sta tements of Ministers and I would suggest we proceed with Mr. Mackling's statement. Mr. Dolin. MR. M. DOLIN: I forget whethe r it was the Honourable Member for Pembina or the Leade r of the Opposition distributed documents to the press at the last meeting and promised members of the comm ittee a copy; I never got one.

I'm wondering whether they will prov ide those at some point, I know the press got them . MR. CHAIRMAN: Once again, Mr. Dolin, the rules make no provisions in regard to such materials . There have been certa in practices followed in the past but there's no reference to it in the rules so I will turn the floo r over to Mr. Mackling once again. Mr. Mackling. HON. A. MACKLING: Thank you , Mr. Cha irperson . If we are now all settled down . Over the course of these last two committee hearings, and indeed over the last six months , a lot has been said and done pertaining to the matters before us.

On the government side, we have done more to facilitate the work of this committee than perhaps any government has done for any committee in the history of this Legislature . We have provided more information to the public, to outside, independent auditors , the RCMP, and the Opposition, than has perhaps any government before us. And, Mr. Chairpe rson, we've acted firmly, decisively, quickly and responsibly . Mr. Chairperson , we have thrown the doors wide open on MTX ; we have thrown them open to this committee, to the Opposition, to the public, to Coopers and Lybrand , and to the RCMP.

What we found behind those doors is not pretty , but we've had the courage and the guts to deal with the problem . MTX is finished ; the wind-down of that subsidiary has begun. Gordon Holland , Glover Anderson , Maurice Provencher, Don Plunkett and Mike Aysan are no longer

Monday, 1 December, 1986 with the corporation - the scapegoats , as the Leade r of the Opposition likes to call them . Four months ago , members opposite were shock ed that these individuals were still being permitted to work , and they 're widely quoted in Hansard, the Winnipeg Free Press, the Winnipeg Sun, all saying why aren't these people dismissed. Well, four months ago, the members were shocked that these individuals were still being permitted to work, but now they are scapegoats to the Leader of the Opposition. Innocent people set up for a fall apparently.

Well, let's see what Coopers and Lybrand says about these scapegoats . I'll quote Page 42 of Volume I: "Our examination has revealed serious deficiencies in management decision making and the organization and control of MTX and its various ventures. Senior executives responsible for MTS and MTX must accept ultimate responsibility for exposing the Corporation to significant business risk and financial losses. " The Leader of the Opposition calls them scapegoats . Well, I don't see it that way and neither does Coopers and Lybrand .

We've identified weaknesses substantiated by Coopers and Lybrand in the reporting and accountability of Crown corporations , and we have taken action. We will be doing more to ensure that Manitoba Crown corporations are more accountable to the public than are Crown corporations anywhere else in Canada . And what does the Opposition say? What do they cry? Political interference. We want you politically accountable to us, but we don 't want the Crown corporations accountable to the government and hence the people.

We've grown used to this kind of opposition despite the Member for Pembina's continual heartwarming assurances that his interests in this issue are non partisan and therefore you should listen to him and believe everything he says .

If anyone in this room believes that , then I've got a little telecommunications company in Saudi Arabia you might be interested in buying; and , believe me, after I heard what the Member for Pembina was trying to sell here on Friday, I would not put it past him to try and sell that company along with the bridge and some prime real estate in Florida - "Those in the Know," a tidy little information package designed to get you to buy that little piece of land in Florida without seeing the whole picture. Well, Mr.

Chairperson, I think it's time that the whole story was told from beginning to end so that those who should and do know better can quit playing games with this issue and begin looking at what is in the bes t interests of the Province of Manitoba and not the Progressive Conservative Party or one 's own ambit ions within that party . I want to start with a period in time that members opposite don't like to talk about and that's 1978 .

I'm not starting in 1978 somehow to suggest that is the fault of the Opposition that MTX has ended the way it has, but rather to point out many of the problems cited by Coopers and Lybrand and this committee are not problems unique to any one Minister of government. Secondly , I want to begin looking at what I call a big deception perpetrated by the Member for Pembina and supported by all his colleagues, including whatever heavyweights they might want to claim in their caucus. Now , the first date I want to mention is April 17, 1978 .

It was on this day that the board of the Manitoba 313 Telephone System unani mously passed a motion of what must have seemed of moderate importance at that time and I will quote the board minute s: " It was moved by Comm ission er MacKenzie, seconded by Commissione r Anderson , that the Manitoba Telephone System enter into the international consulting area and that an initial fund of $50,000 be established for this purpose to be administered by the Assistant General Manager and Director of Finance ." I don 't know about you , but that sounds to me like the planting of a seed.

The Leader of the Opposit ion likes to talk about this NOP Government and international adventurism from a non-partisan position, of course, and he likes to talk about how, under this NOP Government, a Crown corporation is allowed to compete with the private sector. Well, that started in 1978, not by this NOP Government but by a Conservative Government. Did the Conservative Government of the Day approve of this? Did they know of it? We don't know. But what we do know is that that decision - well, I'll speak of the Honourable Member for Lakeside, his role in this later .

We don't know , but what we do know is that th is decision to have the Manitoba Telephone System, a Crown corporation , a government-backed monopoly , move into the international arena in competition with the private sector was unanimously approved not by, as Mr. Filmon calls it, an NOP board with no business sense, but by the Progressive Conservative Party board of the day, the kind of board that Mr. Filmon likes to hold up as a model. Competition with the private sector and international markets was approved eight years ago by the kind of Tory board the Leader of the Opposition is advocat ing.

Today he will tell you this is an NOP phenomenon and denounce it. Well, it didn't take long for the management of the Manitoba Telephone System to charge ahead into this new and exciting area . On July 6, 1978, less than three months after the Conservative board unanimously approved the motion I read earlier , Mr. Gordon W. Holland writes to the Honourable E.R. McGill, the then Conservative Minist er responsible for the Manitoba Telephone System , rega rding the ARAMCO project in Saudi Arabia. H'm, Saudi Arabia. The Conservat ive Minister tells Mr.

Holland to proceed as long as, and I quote, " we are within the bounds of policy approved by the Government of Canada for international contracts of this type. " So in 1978 any MTS employee, as long as they conform to the laws and customs of Saudi Arabia , can now have the oppo rtunity to work in Saudi Arab ia because it is accep table to the Federal Government and breaks no law. It wasn 't until 1986 tha t t he Conservative Party of Manitoba, and in its relentless defence of South Africa, found anyth ing wrong wit h this or anything hypocritical about it.

What's even more interesting about this approval to begin involving the Teleph one System in Saudi Arabia is the benefits that were to accrue . Let me quot e f rom Mr. Holland 's letter of July 6, 1978, in which he details for the Conservativ e Minister the reasons we should undertake the project, and I quote: "From MTS's point of view , this type of activit y has a number of advantages: (

a) Manitobans participate, to some extent, in these exciting communications projects and benefit the Manitoba economy;

Monday, 1 December, 1986 (

b) in a time of cost-containment and economic uncertainty flexibi lity is increased in ensuring that no layoff s of MTS permanent staff need occu r; (

c) there is no economic cost to MTS , in fact, some small financial benefit; (

d) the contribution in terms of sta ff challenge, satisfaction, development and pride is substantial; (

e) it represe nts an indication of the competence of , and demand for MTS personnel. The Conservative Minister approved , further moving MTS into international competition with the private sector for what appears to be almost exclusiv ely soc ial objectives. In 1986 the Conservative Party of Manitoba finds that unacceptable ; in 1978 it was just fine. In 1978 this was a very interest ing new direction in Crown corporation policy . Was it discussed or approved at Cabinet, a Cabinet that included such heavyweight s as Don Orchard, Harry Enns and Gerry Mercier ?

Did the heart and soul of the Progressive Conserva tive Party of Manitoba approve of this kind . . . MR. CHAIRMAN: Order please, order please . Mr. Mackling. HON. A. MACKLING: Did the heart and soul of the Progressive Conservative Party of Manitoba approve of this kind of international adventurism and competitio n with the private sector for what are, at the most par t, social obj ect ives? Either that party has grown up a lot over the years or someone has a very selective and, dare I say,

part isan memory . With the approval of the Conservative board , and the blessing of the Conserva tive Minister, things now really begin to move. One month later, in August of 1978 , three staff people, and $94,000 of MTS money is approved by the Conservative board for the remainder of that year for the purposes of pursuing extern al contracts. In September of that same year they began pursuing a contract in Iran.

It is also in 1978 that the Manitoba Telephone System - and I think the Honourable Member for Pembina is really excited to hear this - 1978, the Manitoba Telephone System begins doing business with one Sheik Abdullah Al Bassam. Initia lly th is arrangement involves the sale of surplus and obsolete equipment to the sheik from MTS. That wasn't '86; that wasn't'85; that was 1978, Mr. Chairperson. It isn't until 1980 that this relationship begins to heat up. It is in that year that Oz Pedde and Mike Aysan are introduced to the sheik through the Canadian Embassy.

A Conservative Minister , he's got Mike Aysan over there . . . It appears though that Saudi Arabia is not the only place Mr. Aysan and the staff of MTS are drumming up business on behalf of the Conservative board and the Conservative Government . Let me read now from an MTS Board minute. These board minutes that Mr. Orchard doesn't want to refer to. This is February 11, 1980, Item 13 . .. A MEMBER: Well let them be here to testify then . HON. A. MACKLING: Well, you 're going to get your chance. you 'll get your change to speak later . Item 13 . .. well, the boys in the back benches are a little unruly.

Item 13. -(Interjection)- Will that chipmunk over there cease? At the request of the Chairman , Mr. 314 M.A. Aysan joined the meeting to repo rt on external contracts. That's a familiar name to this committee, Mr. Aysan . By view gra ph presentation, Mr. Aysan noted that external contracts addressed three missions of the company; namely, the employee mission, the cor porate cit izen miss ion and the financial mission , observing the contracts ensured a minimum of 20 percent profit to MTS as well as an opportunity to dispose of obsolescent equipment.

Noting the world market structure consisted of OPEC nations, industrialized nations and develop ing nati ons, Mr. Aysan emphasized OPEC as being the significant opportunity market. Initially, three countries, namely , Saudi Arabia , Kuwait and Nigeria, were considered, but on the advice of External Affairs, Nigeria had been dropped fro m this list. Of the industrialized nations, New Zealand had expressed interest in the System's expertise in broad band communications .

Of developing nations, MTS had made contact with Red China - now I'm sure that the Honourable Member for Sturgeon Creek must have turned purple at this - contact with Red China, working through Richardson Securities; whe reas the Federal Government had encouraged MTS to investigate Tobago - all great stuff under a Tory Government. Mr. Aysan proceeded to review the Saud i Arabian market in detail, noting the potential of the private sector and the public sector respectively . Mr.

Aysan advised that the System 's private sector strategy was to work with Saudi interconnect telecom, concentrating in MTS strength areas and providing the .client telecom company with equipment, technology, people and training . In the public sector, the System strategy is to use a Saudi company as its sponsoring agent to bid on communications systems for government projects, as well as to prequalify MTS and the local interconnect telecom for Royal Commission of Jubail and Yanbu. Mr.

Aysan reviewed the development of the business relationship by MTS with Al Bassam International, which covered various matters such as sale of obsolescent inventory , sale of surplus equiment, sale of new equipment , prequalification for Royal Commission projects, as well as the preparation of estimates for nine separate projects which Mr. Aysan detailed for the board.

He advised that , at the urging of the Canadian Embassy in Saudi Arabia, MTS and its Saudi agent, AI-Sulaiman, group of companies , Saudicorp, had attended the pre-tender meeting for the Riyadh Airport Communications System and that tenders on this project closed April 14, 1980. Well, the Honourable Member for Tuxedo was very concerned about proper enunciation. I wish he'd been more concerned about the proper direction of MTS years ago . Mr.

Aysan reviewed the Phase 1 and Phase 2 requirements for the communications system at Riyadh International Airport, noting that four major American manufacturers and suppliers had attended and preliminary estimates indicated the value of the project at approximately $12 million . The Conservative board duly accepted this progress report. This little $50,000 a year exploration of international consulting opportunities had certainly taken off. It had a private and a public sector strategy for international

Monday, 1 December, 1986 competition and it was already talking with at least half a dozen countries and had already identified Al Bassam International as its window of opportunity into the Saudi mark et. Did this Conservative board report this to the Conservative Minister? Did the Conservative Minister report this to the Conservative Cabinet? What questions were asked? What answers were given? Did Mr. Orchard or Mr. Filmon articulate their concerns about international adventurism or competition with the private sector?

Did any of the heavyweights of the day think to ask anything about Sheik Al Bassam, or did they simply allow things to go merrily along, only expressing those concerns some five or six years later when it was politically opportune? Mr. Chairperson, what about senior management at MTS in 1980? What kind of concerns should the Minister and the government have had? I would argue, Sir, that in 1980 the Government of the Day had good reason to not only doubt but to perhaps discipline some of its senior staff . I've been led to believe that they regret that they didn't have the guts to do so.

In 1980, the Minister responsible for the Manitoba Telephone System, Harry Enns, was questioned in the House about what was described by my former colleague, Sid Green, as a .5 million loan to an out of-province company that had been awarded a contract by MTS over local bidders. Here are the questions that were asked. Here 's a question by Mr. Green , and I'm sure the Honourable Member for Lakeside was breaking out in a cold sweat. It says: "Yes, Mr. Speaker, I'd like to direct a question to the Honourable .. . "- now, first of all, Mr. Green asked the then Minister of Industry and Commerce, Mr.

Johnston, about this, Minister Frank Johnston. He asked about this electronics company bid, and Mr. Johnston, who was the heavyweight then, had this to say. "Mr. Speaker, as I understand it, the firm ... "- he was referring to lnter-Discom Systems Ltd.- " .. . the member is making reference to is in a very specialized area and one of the leaders in North America . As a matter of fact, it would seem that the work they're doing is going to be something that can be very greatly expanded.

" Just remember those words because later on, when the Provincial Auditor has a look at it, he talks about that high-risk venture, that high-risk situation. Well, Mr. Johnston's saying it's a leader in the field. Then the question -(Interjection)- to the member who's irritated now and speaking from his chair, the question from Mr. Green about this matter to the then Minister, Mr. Enns, and what does Mr. Enns say?

"Oh , I'm having the matter checked and investigated as to whether or not the monies advanced truly fall in the capacity , as the Member for Inkster suggests , as an outright loan to a company or as to whether or not it has been indicated to me by management staff of development and research nature ." Interesting. Then Mr. Green asked Mr. Enns what he knows about this . What about this loan? Mr. Enns says : " Mr. Speaker, yes, I can advise the Honourable Member for Inkster that I, as Minister, was not informed of any aspects of the loan prior to it being made." Sound familiar, sound familiar? Well, Mr.

Enns didn't know anything about it, but it did turn out to be a loan. What about the contract itself? What did the Provincial Auditor have to say about that contract? 315 What did he say ? " ISL was one of several entities . "- and I'm quoting from the Provincial Auditor's Report , that's lnter -Discom Systems Ltd.-" . .. which tendered for a research and development service pertaining to one of MTS ' current projects.

Although ISL was not the lowest tenderer , it was awarded the contract because MTS concluded that ISL's plan most closely approximated the intent, design criteria and specifications envisaged by the request for tender, and taking all factors into consideration, would provide the desired result at the lowest cost. MTS recognized that awarding the contract to this company was a high risk situation because of ISL's limited performance experience and its financial resources being extremely limited . However, MTS concluded, from its assessment, that the risk was justified and awarded the contract to ISL.

A performance bond was not required, but a provision was made in the contract for MTS to take control of the project, should this become necessary to protect its interests. Sound familiar? And he goes on: On March 26, 1980 - I should say, I'm not reading it entirely - there are supplemental portions added to the contract, but listen to this portion, Mr. Chairman. The March 26, 1980 amendment included a $156,000 adjustment to the original agreement to reflect the actual total value of the agreement, the total contractual obligation now stands at $1,599 ,212.00 . What does this tell you?

The Minister didn't know about it? Didn't know there was a loan? He said, well , maybe as management had indicated, it was for research and development ; he'd have to check into it. Does this tell you that the Minister was deceived, didn't know? It tells you a great deal, Mr. Chairperson , if we want to listen. Then , what happened there? Well, there was no change in staff, but six months later, the Minister was removed. Mr. Enns was gone and Mr. Orchard appeared on the scene.- (Interjection)- And the Free Press, what did it have to say about this? December 2, 1980.

I agree with the Honourable Member for Lakeside; it was a pity. What did the Free Press say about this? December 1980 . He says, in the second last paragraph : A loan of half -a-million dollars would involve senior decisions at a bank or any lending institution that lent money as part of its day-to-day active business . For an agency such as the Manitoba Telephone System, which is not usually engaged in lending money, one would think that no such loan could have been made without the direct intervention of Cabinet; and it would be unusual indeed if Cabinet did not know who it was lending money to.

Two possibilities exist: Either MTS made the loan without telling the Minister or the Cabinet, or the Cabinet has thrown to the winds any reputation it might have had as a group of astute businessmen determined to spend public money wisely and in accord with normal business practices. That was the astute business-oriented government , where the heavyweights , Mr. Enns and Mr. Orchard were dominant. What happened to the senior staff? Well, Mr. Chairperson, I can assume that Mr. Orchard, when he was appointed, called in Mr.

Holland and said , you know , Gordon , this isn't very nice , look at the embarrassment to my colleague, Mr. Enns, look at the embarrassment to this government, Gordon, I can't stand this, tut, tut, tut.

Monday, 1 December, 1986 Mr. Chairperson, I can only assume by Mr. Orchard 's remarks of Friday that after Mr. Enns was stripped of his Telephone responsibilities and watched them given to Mr. Orch ard, that a very lengthy and deta iled briefing occurred with Mr. Enns telling Mr. Orchard everything the re is to know about the Telephone System . We therefore have to assume that Mr. Orchard was made awar e that management at MTS had, in the past, misinformed the Minister.

We have to assume that these two heavyweights of the Conservative caucus , this heart and soul of the Conservative Party , then discussed in detail, or at least enough detail for some of Mr. Orchard 's very sensitive warning bells to start ringing abou t this rapidly growing international, private sector competition that the Telephone System was charging ahead with . So we would have to assume that Mr.

Orchard , his spider sense tingling, started talking to his Cabinet colleagues, including the Member for Tuxedo , who we know today won 't stand for a Crown corporation in competition with the private sector , or a Crown corporation in pursuing social goals , or a Crown corporation involved in interna tio nal adventurism. Do these heavyweights band together to put an end to all of this? Do they fire or discipline staff? Do they replace the Tory board that made these dec isions? Do they remove the Chairperson? They do nothing .

In fact, in May of 1981, they approved participation in the spectrum bid, the project that makes it clear that if MTS is going to continue in this area, then MTX must be created. It's clear to the management of MTS at that point; it's clear to the Conservative board ; and one would assume it would have been clear to the Conservative Min ister, Mr. Orchard. The board asked for a legislative change allowing MTS to participate and the Minis ter says go ahead. There was someth ing else that happened at that board meeting, and I'll quote the minute from May 11, 1981 . Mr.

Orchard, by the way, just doesn 't like to look at these old minutes, they're too old , we've got to look at the new thi ngs . Don't look at the past, don 't look at history. Here is the quote from the May 11 board meeting: "Concern was expressed that Saudi Arabi a was presently spending over its income and its prime export, oil, is a present glut on the market. Should the glut pers ist, then Saudi Arabia may well have to cut back expenditures on services such as spectrum management." I think I hear a warning bell. Someone on that Conservative board was thinking .

Someone is suggesting that we're getting involved in an unstable situation. Who else heard that bell and what did they do? Let's pause here for a minute, because I'm about to move into ano ther era. I want to remind people that the reason I've gone through this history of MTS and MTX from 1978 to 1981 is not to suggest that Mr. Orchard, Mr. Enns, or Mr.

Filmon or any of the members of that government should be held personally responsible for what has happened with MTX 's ill-fated venture into international competition, but rather to draw attention first to the fact that it is not something that miraculously cropped up in the fall of 1981 . Secondly , to show it for what it is, the hollow and transparent righteous ind ignation expressed by members opposite over the relationship of this government with the Manitoba Telephone System, and 316 finally, to show the differ ence between a government that acts and one that doesn't.

In 1981, we have MTS d eciding to get into international competition with private sector companies. We have this approved, based primarily on social objecti ves. We have a Minister misled by senior staff. We have a board requesting, and a government supporting legislative changes that would allow the creation of a wholly-owned subsidiary exclusively for the purposes of international high-tech competition with the private sector.

And since 1980 at least, under a Cons ervative board and a Conservative government , we have discussions occurring between MTS staff such as Mike Aysan and what has already been identified as our window into the Saudi Arabian market , Al Bassam Interna tion al. Mr. Orchard never likes to talk about those years, and I'm going to tell you why. Because Mr. Orchard wants you to believe , for non-partisan purposes , that this problem is not a government problem or an MTS problem, but rather an NOP problem.

He wants you to believe that MTX and SADL were created with unprecedented speed, that somehow, wh at in the normal course of government would take years to do, the NOP did within weeks of assuming government in November of'81 . Prepos terous? Well, I would think so. If he can convince you of that , then he has a political victory. The government and Manitobans don 't have a better understanding of exactly what went wrong. Nobody learns all they need to learn to ensure that someth ing like this never happens again . But that doesn't matter to the Member for Pembina. What matters to him is political victory .

That's why he doesn 't like to talk about the dark days and why he is a historical revisionist and a manipulator of the facts. Say it enough times and they'll believe it. And, you know, sometimes he's right . We're going to shortly see some examples of how the persistent repetition of inaccuracies can begin to sound like the truth. Let's move on. The next significant event occurs on November 17, 1981. That's the day that the people of Manitoba passed judgment on the kind of government those people had to offer.

That's the day that the Conservative heavyweights were sent packing and that was the day that this government was elected. What was the immediate effect of that on the Manitoba Telephone System? Well, if you believe what Mr. Orchard and Mr. Filmon would want you to believe, it's the day that MTS decided to get into international advent urism , to get into competition with the private sector, to seek out and finalize , at unbelievable speed and agreement with a Saudi sheik to start up a wholly owned subsidiary for purposes of international competition with the private sector . That 's the world according to Mr.

Orchard and if you say it long enough, people will believe it. Well, it may be the world according to Orchard, but it isn't the world according to reality. The reality is that these fundamental decisions and directions were taken long before November 7, 1981, taken by the very people who today denounce them and demand to put an end to them. I can only assume that either they were gutless in 1981 or they're hypocrites in 1986. December 13,'81, just weeks before the government changed, the still-Tory Board of Directors for MTS passes the motion calling for the establishment of MTX

Monday, 1 December, 1986 and any legislatio n requ ired to make that happe n. The Chair of this board was an astute Tory business person , the kind that was referenced by Mr. Orchar d on Friday . I suggest that you, Mr. Orchard, were the real father of MTX because although you were not present at birth, it doesn't mean that you had nothing to do with the conception . Three days after the meeting, the board is changed . Most of the board , I should say, because Mr. Chaput remains. This Conservative board member remains on what Mr. Orchard likes to describe as an NOP board . Just remember Mr. Chaput's name .

This new board, although appointed on December 16, will not meet for a month. In the meantime , the Conservative board presents to Len Evans, now the Minister responsible for the necessary material for a Cabinet submission; he'll take it forward, giving Cabinet authority for the incorporation of MTX . The seed planted in 1978 has bloomed and is prospering.- (Interjection)- Well, if the honourable member knows about germination, he and his colleagues certainly laid the seed .

On January 6, 1982, Cabinet grants appoval to the Manitoba Telephone System to incorporate a wholly owned corporate subsidiary for undertaking or participating in projects outside of Manitoba. The hard work begun by the Tory board and the Tory government has been concluded. MTS now has a subsidiary in competition with the pr ivate sector, active in international markets with primarily social objectives. At the new board's first meeting, they are informed of this fact. Here's what they were told.

The Board of Commissioners, at its meeting of March 1979 noted that the System had embarked upon a modest program in external contracts which had been highly successful and indicated its desire for the System to continue with its approach in external contracts, quietly building its System expertise with no risk to the System's ability to carry on its present operations, minimal financial risk and at all times ensuring the System proceeds with its statutory legislative authority . They are off and running . January'82 was a busy month for MTS .

On the 25th of January, discussions began perhaps as early as 1980 between Sheik Al Bassam and MTS officials, Oz Pedde, Glover Anderson, and Mike Aysan, culminate in a better understanding to start a joint venture company, this less than eight weeks after the change in government. In the world according to Orchard , you 're supposed to believe that this was an exclusively NOP project. Did Mr. Orchard not know, as Minister, that these discussions were occurring, or has he chosen simply to forget now that it is politically advantageous?

On February 8, 1982, Mike Aysan, back from concluding this letter of agreement, makes a presentation to the new Board of Directors on the history of MTS involvement in Saudi Arabia since 1978 . Following that review, Mr. Pedde makes a presentation to the board on the proposed joint venture. Before we get to Mr. Pedde's presentation, I want to read from the minute of the information given to the new board on a business associate of MTS since 1978. The System has been developing a business relationship with Al Bassam International , a well-known Saudi family that has been in international business for 170 years.

This relationship covered various matters such as sale of obsolescent inventory, sale of surplus 317 equip ment, sale of n ew eq uipment , as well as pre qua lifica tion for Royal Commis sio n proj ects . Mr. Aysan advised tha t 1 981 gross revenue from this relationsh ip was approxi matel y $2 million ,

whereas gross revenu es forecast for 1982 were $4 million to $6 mill ion, and fo r 1983, were forecast between $10 million to $15 million. The benefits from th is relationship were that MTS had maintained a profit margin of appro ximately 13 percen t on the equipment, that the orders placed or pending had guaranteed over 25,000 telephones from ITT plant in Winnipeg, thereby maintaining jobs in Manitoba, that all cable and wire had been purchased from the Canada Wire and Cable plant in Winnipeg, and that the forecasted equipment requirements had led to current discussions to establish a telelabs plant in Winnipeg.

The minutes then record Mr. Pedde 's presentation. Again, I will read : " Mr. Pedde proceeded by viewgraph presentation to review the preliminary net income statement projected for the first three years of the joint venture partnership , showing a preliminary net income growing from $575,000 U.S. in year one , to $2,395,000 U.S. in year three. Acknowledging that these were only projections and did not extend beyond year three, Mr. Pedde noted that based on these projections, MTS would receive return of its equity within one -and-a-half years. Mr.

Pedde noted that a five-year contract was being proposed with Al Bassam, to be renegotiated at the end of five years with an option for buy-out on the part of Al Bassam . It was recommended that the board of MTX Telecom Services Inc. approve the proposal for a joint venture partnership between MTX Telecom Services Inc. and Al Bassam International and authorized MTS Telecom Services Inc. to pursue its implementation ." Certainly sounds like a pretty good business deal and, after all , the government had been moving in this direction.

They had many years ago given their blessing to international competition with the private sector. This was, however , a little bit different because now we had a Crown corporation in partnership with a private Saudi company. Clearly this eventuality was one of the reasons for the creation of MTX, but the eventuality has become a reality and , according to the minutes, the board did discuss this twist and did express some concern. Obviously those concerns were taken care of and the motion passed. Mr. Orchard is right when he says, with the benefit of hindsight , that there were warnings .

There were warning signs all the way along and long before 1981, but what he chooses to forget is that those warnings were invariably addressed to the satisfaction of not only Ministers and board members , but also to auditors and consultants. Now, Mr. Chairperson, I would like to move along in respect to my analysis of the world according to Mr. Orchard . Mr. Orchard would like us to believe that the Provincial Aud itor was not listened to when his concerns were first raised in 1982. In fact, legislation was passed that satisfied the Provincial Auditor 's concerns . Mr. Orchard doesn 't like to remember facts .

He uses selected memory. The next item, the world according to Mr. Orchard , the approval of SADL in February of 1982. This was signed two months after the election. Submission to the MTX Board, the momentum was there , everything was rolling along. He wants us to forget about the early

Monday, 1 December, 1986 development; the reassurances; those glowing accounts of th at same management expertis e we had inherited from Mr. Orchard . On March 22, 1982, a dec ision was made that all MTX Board minutes would go to all MTS commissioners. Based on that key piece of information, oh, what great thunderous conclusi on did Mr. Orchard come to? He tells us, and I quote from Page 19 of the transcript: "Mr. Chairman, in March , 1982 , a decision was made by the board that all MTX Board minutes would be given to MTS commissioners ." I remind you , at that time Mr. Miller, forme r Cabinet colleague of Mr.

Mackling, was Chairman of the board of MTS and Chairman of the board of MTX. "The backbench Cabinet member received copies all along of MTX Board minutes in which the operations of MTX were fully discussed ," and Mr. Scott has indicated by nod of head he was in communication with his Minister and reporti ng to his Minister. He goes on later on to point out that the results were to be reported monthly. The fact is, and the honourable member, I believe, knows , that the MTS Board members never received the MTX Board minutes. That direction was never followed and the honourable member, I believe , knows that.

What the Honourable Member for Pembina does , he paints half a picture and puts a frame around it and says, see my masterpiece. That' s the kind of selective reporting of fact that the honourable member follows. Mr. Chairperson, that's the kind of false and misleading impression that the Honourable Member for Pembina left with this committee ; not on that point , on point after point after point. Next, I want to turn to Mr. Orchard 's selective recall of events . Isn't it interesting, Mr.

Chairperson , that in that long history - not that long history , he certainly didn't give us the 1978-81 history , but in that history that Mr. Orchard provided to the committee on Friday. Interesting that Mr. Orchard doesn't want to mention the flogging incident. Why? Why doesn't he do that, that was a big item? MR. D. ORCHARD: Because we were lied to, we were lied to. HON. A. MACKLING: Because it doesn 't fit into his scenario; becau se he wants the committee, he wants the public to beli eve that we knew everything and we didn't do anything about it. He knows and he just said from his chair we were lied to.

Yes, success of Ministers of the Crown were lied to. Ministers of the previous administration were lied to, but they did nothing about it. The fact is that the Honourable Member for Pembina didn't want to talk . He didn 't want to relate again about the flogging incident because , as he has confirmed from his seat again, it w ould confirm that the administration , the senior administration that he left with us were continuing to provide misinformation. When he, as member of the House, continued to say that I was being misled, Cabinet Ministers were being misled .

That's what the Honourable Member for Pembina said, time and time again . But now he wants to paint a scenario of Ministers knowing, we were all in the know. Why does he forget about the flogging incident? Why, Mr. Chairperson? Because he knows that he, himself, and his colleagues had identified , they're on rec ord as saying that Ministers were mis led; and the Honourable Member for Pembina , the Honourable Member for Tuxedo , those honourable members, were saying to me in the House : You have been misled . I didn't prejudge.

I wanted an independent audit to determine, and that independent audit clearly indic ates that was the case , that we were misled. I would like to quote from Volume IV, Page 69, of Coopers and Lybrand. Under Loan Authorities May be Vio lated. " The original authorizations by the Government and by MTS for the loan guarantees to, respectively, the Bank of Nova Scotia ($4 million Cdn) and Royal Bank Export Finance Co. Ltd. ($3 million Cdn) do not clearly match the form and nature of the loans in use." We were deceived. That is what Coopers and Lybrand are saying : We were deceived; Cabinet was deceived . But Mr.

Orchard doesn't want to talk about that. That's a finding of Coopers and Lybrand. The rationale for the loan was not followed. In Mr. Orchard's selective accounting of the history of MTX he passes it by. Well , let 's look at Mr. Orchard 's assessment of the real world again. His assessment of fact , what a distorted assessment . Mr. Orchard told you on Friday about Mr. Scramstad . Oh, he wanted to paint a good picture of Mr. Scramstad, because Mr. Scramstad was asking questions. He said, Mr. Scramstad was the only one , the only one doing his job, the only one asking about the accounts receivable. But Mr.

Orchard select ively reads from the minutes of the board. What did the board minutes say? MR. CHAIRMAN: Mr. Orchard, on a point of order . MR. D. ORCHARD: Mr. Chairman , the select ive reading from the minutes that the Min ister just accused me of is the selective minutes that the NDP would release to us, those were the only minutes we could lay our hands on. They were laundered by the New Democratic Government and this Minister . 318 HON. A. MACKLING: On the point of order . MR. CHAIRMAN: Mr. Mackling, there is no point of order. HON. A.

MACKLING: Well , let me just say to that non point of order , to the non-point of order and that silly statemen t from the Honourable Member for Pembina . He requ ested information from the House Leader; the House Leader conveyed that to me. Eve ry single document , with the exception of Cabinet reference documents , were given to the honourable member. Any minutes that the honourable member wanted he got , and included in the minute he referred to is information he doesn't want to provide the committee . He wants to talk about Mr. Scramstad asking questions and there being no answers .

But the answer was given at the board meeting , but Mr. Orchard chooses selectively not to read it. Let me read the board minute. The minute read - this is the September 13, 1983 board - "Pursuant to the request of the board at its August meeting, Mr. Provencher distributed a written analysis of the accounts receivable, accounts payable and accrued

Monday, 1 December, 1986 liabilities of MTS . Mr. Provencher reviewed the submission with the board which the board accepted as information . Commissioner Scramstad advised that his request of the previous meeting was related primarily to the receivables of MTX being high compared to its sales revenue . Mr. Provencher reviewed the receivables at MTX and noted that a large portion of these receivables were attributable to the delay in registration of Datacom in Saudi Arabia . What Mr.

Orchard selectively did is took from minutes and gave a false picture of people asking questions , only one or two people asking questions, but not receiv ing answers and not pursu ing it. This is selective reporting to a committee . It's a selecti ve analysis of history . It's like the kind of thing that the honourable member did when suggesting that I said not one 5 cents worth, wouldn't read the whole statement , wouldn' t read the whole quotation that I made . It's the selective use of statements that the honourable member is guilty of and he wants to leave an impression before this committee that is false .

Not only Mr. Scramstad , but as I will point out again and again , Ministers , boards , including previous Ministers of the previous administration, were assured that things were fine, that the concerns that were raised, and concerns were raised, could be justified , that accounts were being straightened out and the system was working . On Friday, Mr. Chairperson, Mr. Orchard referred to the MTS Board minutes of September 26th . He said that this board minute shows that SADL and Datacom were operating as one company. He continues to suggest that my colleague, Myrna Phillips , knew all about this . We know how Mr.

Orchard has treated the Speaker in the House . The minute says, and he selectively quoted , that they were considered as one company. But when you look at the minute , it says that they were considered as one company for adminis trative purposes. We know by the Coopers and Lybrand audit that initially all of the accounts were handled as one . Now, secondly, Coopers and Lybrand say the relationship between the two companies was continually misrepresented to the boards, to the Ministers, to the government and to this legislative comm ittee , continuously misrepresented .

Do you want me to read from Coopers and Lybrand? MA. D. ORCHARD: Do you need a little help, Al? You should write these things and then you'd know what to say, Al. HON. A. MACKLING: These are in my own writing. Thank you for your help . MA. D. ORCHARD: That's your problem . MA. CHAIRMAN: Order please. Mr. Mackling . HON. A. MACKLING: Mr. Chairperson, there are references. I've got a reference here from Coopers and Lybrand, but it isn't the reference I wanted. MA. D. ORCHARD: Maybe you'll selectively quote one then. 319 HON. A. MACKLING: Mr.

Chairperson, I've put up with the sarca sm, the innuendo, the invective . . . MA. CH AIRMAN: Order please. I think we could facilitate the proceedings of this -(Interjection)- order please , orde r please . Order please . I was about to say that it would facilitate the proceedings of this committee if members were to speak only when recognized. I have recognized Mr. Mackling. Mr. Mackling . HON. A. MACKLING: Mr. Chairperson , Coopers and Lybrand confirm in a number of areas in the report that Ministers , boards , this committee and this government were given false informa tion, incomplete informatio n. Mr.

Film on, his pict ure of histor y i s that Myrn a Phillips , my colleague, knew all abou t t he issues in the MTX minutes . The fact is that she never r eceived those minutes. We move on: November 14, 1984. The Provincial Auditor raises concerns , and Mr. Orchard is fond of talking about warning signs, but in retrospe ct, it was a warning sign. However, he doesn't tell you that the staff of MTS-MTX satisfied the audit. What he doesn 't tell you is that the Auditor accepted the explanations of MTS-MTX staff that accounts were being brought up to date , that things were moving along .

Then we refer to January 17, 1985, the Plunkett Report , that famous document . That document was never sent to this Minister , never sent to my predecessor , never recorded in our files. Eventually , that document was receiv ed by my office in Augus t and was promptly sent to Coopers and Lybrand . I wish now , of course , that the chairperson of that board had referred it to me, but what he did do, Mr. Miller , was bring it to the attention of the board and a special audit was obtained . The Honourable Member for Pembina , I know he likes to interr upt. I listened to his diatribe on Friday without interrupting .

It just shows you, Mr. Chairperson , the kind of would -be leader he is. He cannot hear anyone else speak . On February 7th - and the hono urable memb er wants to gloat over his famous letter of February 7th - I remind you, Mr. Chairpe rson , this is six days after I became Minister . I received a carbon copy of an informational request that Mr. Orcha rd sent to Mr. Holland. What it wasn 't, Mr. Chairperson , it wasn 't a letter of warning or caution to me as Min ister . Beware , beware of the senior management of MTS because they pulled the wool over my colleague , Mr. Enns' eyes , and I had trouble with them.

I believe tha t they lied to me. I want to say " lied to me" because the Honourable Member for Pembina will recall a conversation with me when the Honourable House Leader , Mr. Cowan, was present in the Legislature. It was in July or August of 1986. And he indicated to me personally tha t Mr. Holland had lied to him and deceived him, but Mr. Orchard only told me those things in July or August of '86 because he had waited for the political scenario to unfold. It was then safe for him to really warn me that Mr. Holland had lied to him in the past.

That's the kind of warning that the Honourable Member for Pembina gave me. When he wrote on February 7th, he wrote to Mr. Holland . He sent a carbon copy of it to me, and he

Monday, 1 December, 1986 said, I'd like to receive information , and he outlines information he wants. They were informational requests. I recall that Mr. Holland phoned me and said I've got a list of things Mr. Orchard wants. He's asked a series of questions. I said , well , is there any reason why we can't give him that information? Why are you asking me? Those are informational requests. He's entitled to that information. Maybe Mr. Holland was taken aback, but he said, well , fine, if you have no problems with it. Why should I have any problems with it?

A member of the Legislature wants information - he gets it, so there was no delay. I didn't ask to see the letter before it was sent, I got a copy of Mr. Holland 's response to Mr. Orchard. No problem, but where were the great warning bells ringing out in here? Where was the member cautioning me, as a minister , about the kind of deceit that he and his colleagues believed had occurred in 1980-81 on the part of senior management of MTS? It just wasn't there. If you look at the kind of information that was sent to Mr. Orchard that accompanied that letter from Mr. Holland. It says: "Mr.

Orchard, following are responses . . . "and Mr. Holland goes into a great deal of detail here, information about travel expenses, share structure , lines of credit, individual accounts receivable, all set out and explained, a very thorough and self assuring letter. You look at the accounts receivable; they don't look all that bad. Where's the warning in all of this? Where is the great danger that the honourable member is saying? Where is the signal that he says is given to the Minister?

It's just not there, but he wants to paint a picture: Hey, I showed the Minister , I told the Minister there was a great problem. Not at all, not at all. The honourable member says that he asked about accounts receivable. He admits that Mr. Scramstad asked about the accounts receivable, and he says that Mr. Scramstad was a bright guy, he asked the right questions. But the management of MTS reassured Mr. Scramstad, reassured him. If Mr. Orchard said he knew then that we shouldn't trust Mr. Holland's answers, then why didn't he tell me?

I'd only been in office for two months; he had been there for many more months with Mr. Holland and knew, and we know now how much he distrusted Mr. Holland , but he didn't tell me. What about the Arthur Andersen Report , all those warning bells that obviously the Arthur Andersen Report sends up? That report was not received by this Minister. Where did it go? It went to Gordon Holland . It didn't go to the MTS or MTX Boards until June 26th; never went near the Minister's office. Why? Could it be that again senior management of MTS didn't want the Minister to know?

The warning bells are ringing by that report in the chief executive officer's office, but they're not ringing in my office . Then we had Mr. Provencher, the executive vice president, reassuring the board that everything that has been done or is being done to take care of these concerns . Let's see what Mr. Provencher says: " May 28, 1985, the Provincial Auditor sent me an overview of audits for the year ending March 31 , 1985 for both MTX and MTS . Both contain serious concerns in respect to the MTX operations." MR. D. ORCHARD: You received that? HON. A. MACKLING: The Prov incial Auditor sent . Pardon me?

No, March 31st. Oh, on May 28, 1985, he sent me an overview of the audits for March 31, 1985, of both MTS and MTX, and they cont ained serious questions. Well, what did the boards do about these, the MTS?

The report indicated the conc erns the Auditor had the previous year regarding internal audit reviews had been resolved; raised new concerns regarding the method used for approval of advances to MTX and the infrequency with which the board of MTS received complete and accurate financial reports. 320 The Auditor noted that the observation had been reviewed with several key staff and he was pleased with the positive response to the recommendations. I had a copy of that report forwarded to the board chair.

On MTX , the report indicated there was still a concern following last year's report regarding the timeliness of financial information on SADL. The Auditor indicated that significant steps had been taken recently to improve the situation and they were encouraged by these signs of improvement. The need to start making longer-range financial plans was raised and the Auditor indicated the process was about to start , and they were encouraged by this initiative.

The other suggestion raised with MTX was not old enough to benefit from an increased formalization of the budget process, at least in part through the preparation of a formal budget, possibly variable, which would receive board approval. He indicated that MTX officials agreed with their recommendation. The final item raised was financial reporting and the fact that it had not yet been achieved . The Auditor noted that it was his understanding that the new accountant had been assigned to keep the records curre nt and produce monthly financial statements.

The Auditor indicated that these matters had been reviewed with senior staff and that he was pleased with the positive response to the recommendations. Noting those recommendations , those comments, I forwarded them to the board. The honourable member doesn't tell us about the auditors and the fact that auditors continued to receive confirmation, satisfaction of their concerns. What about the September 12th meeting that the honourable member referred to? Well, we had that meeting attended by Mr. Chaput, signed the document, Mr. Glover Anderson, Mr. Don Plunkett. Mr.

Chaput, who stayed on the board, appointed by Mr. Orchard's government back then. They appointed Mr. Chaput, he was acting chairperson, or chairman ; he resigned. Would you like me to read his letter of resignation? Would you like me to read that? MR. D. ORCHARD: If you wish. HON. A. MACKLING: If you want it read in the record, I will. MR. D. ORCHARD: Maybe as well. HON. A. MACKLING: If you'd like it, I'll read it. MR. CHAIRMAN: Order please. Mr. Mackling. HON. A. MACKLING: I won't lose my place, Harry , as long as you know yours.

Monday, 1 December, 1986 MR. CHAIRMAN: Order please . Mr. Mackling. HON. A. MACKLING: Mr. Chaput submitted this document to me and I'd like to read from it. This is a submission to me in respect to the capitalization of MTX Telecom Services. Paragraph one, the bottom of this document: "Revenues of the Saudi joint venture have grown from $1.4 million in 1983 to $6.4 million in 1984. Datacom is projecting break even in 1985 and profitability in 1986," and it goes on, it's a very glowing submission, Mr. Chairperson.

It glows with optimism, that same optimism that was exhibited by the administration and the Board of the Day when Mr. Orchard was Minister. Mr. Chairperson, I could read all of that into the record, but it will take an inordinate amount of time, but what it does is indicate that the re is, not only hope, there is real expectation that MTX is going to be a winner in every respect. Mr.

Chairperson, I was assured that what was necessary was that the venture in Saudi Arabia would be recapitalized, it had been starved for sufficient capitalization, and with that injection of capital they would get an injection of capital also from the partner. MR. D. ORCHARD: When was that; what date was that? HON. A. MACKLING: That was on September 12th, that's right, you know the date . That was the kind of assurance that was given to me. Things look good; things are going to even be better. MR. D. ORCHARD: That's on SADL in Saudi Arabia?

For a point of clarification that's on SADL in Saudi Arabia, is that correct? HON. A. MACKLING: Pardon me? MR. D. ORCHARD: Is that on SADL, an additional $2 million to SADL in Saudi Arabia? HON. A. MACKLING: It's a $2 million addition to MTX to facilitate the joint venture in Saudi Arabia . MR. D. ORCHARD: So it's to SADL in Saudi Arabia , September 12, 1985. HON. A. MACKLING: The document speaks for itself and you'll get a copy of the document. Now, at that meeting , Mr. Chairperson, there were certainly no indications that there were any problems with MTX, or with the joint venture.

A glowing assurance that things are going fine . That's the kind of misrepresentation that was made to this Minister. I know the honourable member would like the committee to believe otherwise, but that is the fact. Mr. Chairperson , the document I refer to , the submission to me, formed the basis for the submission to the ERIC committee. It was virtually the identical document that I've referred to . I should, I suppose, table a copy of this document with you. But, Mr.

Chairperson, at that meeting they didn't provide this Minister with a copy of the Plunkett Report of 321 December'84 that was high ly critical of aspects of the join t venture. They didn 't produce a copy of the Arthur Ande rsen Special Audit that the board had requested after seeing the Plunkett Report . I didn 't ask them about a secret audit, when they are telling me that things are going well , things are great . I should say, well is there some audit that I should know about that is negative to all of this?

They didn 't tell me about Note 11 in the financial statements and, if you read that document, you can see that it's a glowing report, it's a glowing accounting to a Minister. And , if you look at the document you see the person who signs, as chairperson in that submission is Mr. Chaput , the member of the board that was appointed by the previous administration, the one remaining Conservative board appointment, the kind of businessman that the Honourable Member for Tuxedo likes to talk about.

This is a strong business person , that's the kind of person you should have on the board, he says; and the honourable member, Mr. Orchard, says when this NOP Government was elected they took off a business person and put on a political hack . Mr. Chaput was the business person, the knowledgeable business person, and apparent ly he was hoodwinked by the administration, he was hoodwinked. The honourable member thinks that only the Minister was hoodwinked. Maybe he doesn't believe that, but certainly he has to accept the fact that Mr. Chaput did not knowingly try to deceive this Minister.

That business person, that businessman, surely acted sincerely. He was their appointment. Now, one of the classics in that great scenario that Mr. Orchard - the world according to Orchard - one of the classics of his presentation on Friday was that he said, Oh, you look at that September 22, 23 board meeting and . . . he talks about the Arthur Andersen Report and the concerns that were raised . He doesn't tell you about the meeting of October 21, 1985 of the MTS Board, the board minutes, the selective use of minutes. What is the October 21 board meeting , what do those minutes reveal?

The honourable member doesn't want to put those on the record . Well, let's read from the October 21 , 1985 board minutes. "At the request of the Chairman the Director of Finance proceeded to give his report. Mr. Provencher advised that the external auditor, Arthur Andersen and Company, had now resolved, to its satisfaction, the questions raised on overdue accounts, overdue notes , and a provision for uncollectables, as related to its audit of Saudi Arabia Datacom Limited, SADL.

The Director of Finance advised the term of Arthur Andersen and Company, as Auditor for the Manitoba Telephone System, has been extended by one year by the Departm ent of Finan ce of the Province of Manitoba." We went along, Mr. Chairman, with the system tha t was adopted by the previous Tory Governmen t, appointing external audit companies. In the initial days I was in government, back in 1969-73, we believed that the Provinc ial Auditor should be doing the bulk of the auditing for government, including Crown corporati ons; they changed it.

We didn 't reverse that, we said, all right, we 'll continue to go along with that. And those auditors, Arthur Andersen , were advising, through Mr. Provencher, that the problems had been resolved to its satisfaction. Now, maybe Mr. Provencher was not telling the board the truth, I don't know, but that was the information

Monday, 1 December, 1986 and advice the board was getting. Mr. Orchard doesn't want that kind of information on the record. The fact that boards, board members, Ministers, governments were being assured by senior management that the auditors were satisfied; that's on the record ; that's part of the minutes. That's part of the minutes that Mr. Orchard selectively leaves out of his scenario. But, that wasn't the only absurdity in the history according to Orchard.

The government now, it's September '85, we're going to be involved in a cover up, and he talks about meeting on November 18, 1985, and he says there's a problem now. There's a problem now, we have to try and hide this information. At the board meeting of November 18, 1985, how are they going to hide this information? You know how they're going to hide the information, Mr. Chairperson, they're going to hire a public relations person, a media consultant to hide it; that's how they're going to hide it. He reads from the minutes and the minute says that we have to heighten the public profile of MTX.

How absurd to say that that's part of a cover-up . Do they think that Roger Newman would be part of a cover up? Is that the kind of integrity that they think the media has in this province and in this country? That they can be used; they can be . . . MR. D. ORCHARD: That's what you think you can do. HON. A. MACKLING: . . . the board of the MTS saw no reason to believe that there was any significant problem, so they urged that there should be media involvement, because there was a false impression out there of MTX . The false impression was that the senior management knew the mistakes and the wrongdoing.

I suggest to you that the Honourable Member for Pembina knew his source of information and he has admitted this publicly. His sources of information were much better than mine . Mr. Chairman , we've heard the history of the world according to Orchard , and I have related to you the history of the world of a world of reality. Mr. Chairperson, we didn't hide things. When after that dramatic production of the affidavit by the Honourable Member for Pembina, we didn't dither .

We called in the RCMP within a matter of minutes of the tabling of that document, a document that was known to the Leader of the Opposition and the Member for Pembina for at least some days before, some days. We didn't dither, we didn't hide it, we didn't hold back knowledge. We moved decisively . We appointed Coopers and Lybrand, who everyone, including the Honourable Member for Pembina, has admitted have done a first-rate job. They got into the information quickly and made findings of fact and made those findings of fact known to us, findings of fact which we haven't hidden .

Within the days which we agreed to, all of that information is available to the public, unprecedented disclosure to the public - within days, all of that information. Every piece of information that the Honourable Member for Pembina requested, he received. Mr. Chairperson, this has been a record of a government that faced up to the problems . We didn't make snap decisions. We didn't, as honourable members say, fire people, dismiss them without an accounting . We didn 't shut down systems without an 322 accounting; we did the responsible thing. We got an account ing, we got an audit and we acted decisively.

All of that information, probably for one of the first times in legislative history in the public domain, within a matter of days. I suggest to you, Mr. Chairperson and members of this committee that this Minister and this government have set an example for unprecedented openness and decisivene ss. I think the example we have set in acting promptly, decisively, but responsibly, will set an example for future administrations .

We have, in addition, announced, as the Premier's outline, a decisive course of action to ensure that Crown corporations will be more closely accountable for their actions, actions that we saw in a previous administration, that in a previous administration went unreported and no corrective action was taken. We know the wrongdoing during the course of this administration, but we have taken the action and we are neither proud nor ashamed of it, but it had to be done and we have done it. Mr. Chairperson, all of the matters that are outstanding in respect to MTS operations have been referred by me by letter to Mr.

Robertson to carefully review and weigh the soundness of the business decisions taken , because we have learned to question the soundness of those decisions . Honourable members in the previous administration knew, and the Honourable Member for Pembina, particularly, questioned the soundness of those decisions in the past but did nothing about it. Mr. Chairperson, I think that the time has arrived for all Manitobans to want to ensure that the Manitoba Telephone System is returned to a position of strength . Mr. Chairperson, before I yield the floor, I want to deal with one other area of concern.

The Honourable Member for Pembina has been trying to exploit in the media and others the view that we were hiding, we were covering, we were trying to hold back. My goodness, I have outlined that this process, three committee meetings after the report, sitting until 11 :30 tonight, we haven 't tried to hide anything ; any information the Opposition wanted the Opposition received. We haven't tried to hide the report. We've made Coopers and Lybrand available to the committee for questioning .

I don't know on what basis the Opposition can continue to say that somehow we are not providing for full information to this committee and to the people of Manitoba, and then they want to twist it further and say, well, the inquiry, the audit, didn't go far enough. They should have looked at political responsibility and then they twist around the information that Mr. McKenzie gave at the previous meeting . I want to put on the record the question and answer that Mr. Manness gave, the question that Mr. Manness put to Mr. McKenzie and the answer that Mr. McKenzie gave to that.- (Interjection)- Mr.

Chairperson, we have grown used to the chattering of the Member for Pembina. We will ignore it. Mr. Manness asked this question: Mr. Chairman, again I ask the Minister if I might ask Mr. McKenzie, is it normal in your business, Mr. McKenzie, when you've these types of major reviews and investigations for a government in the past, whether a consulting firm reviewing activities of which government is ultimately responsible in one fashion or another, whether the terms of reference preclude an investigation such as yours from determining

Monday, 1 December, 1986 government or Minister or Cabinet knowledge through review of Cabinet minutes or committees of Cabinet minutes? Mr. McKenzie said the normal methology for conducting such investigations in terms of reference are to focus on the business, the effectiveness of its management and the decisions that are taken or have been taken by the responsible execu tives. It is not normal for us to pass judgment on the political process. That's what Mr. McKenzie said. Honourable members want to distort, but not only Mr. McKenzie.

What does another member of Coopers and Lybrand firm say? - and I quote from the Free Press of Saturday. Asked why the political masters were let off the hook. Mark Berkowitz , a Coopers and Lybrand partner, said the consultants couldn't find anything to implement the government or the Ministers who he said were kept in the dark by the officials.

He goes on: Our mandate was to review and assess the adequacy and accuracy of management and operations information provided to the Winnipeg head office, to the MTX Board and to the government, Berkowitz, one of the dozen or so Coopers and Lybrand people, who participated in the MTX review, said from his Montreal office. Berkowitz added that some of his colleagues have more than 20 years experience in management audit and they didn't write the report lightly. We can fully back it up. We are prepared to report on the basis of our interviews more than 40 and the documents provided to us by the government and MTX.

Coopers and Lybrand questioned Ministers; they questioned anyone that they wanted to question. We've had the RCMP questioning people. We've had more intensive inquiry into this matter than any other matter before in legislative history. I know the honourable members will tell all that we haven't got a judicial inquiry; we would have liked to have lawyers here; we would have liked to make presentations to committee. Every one of the MTS employees was invited to cooperate with the RCMP and with Coopers and Lybrand, speaking in confidence to those people, putting their concerns on record without attribution.

Every one of those employees received an assurance from this Minister that their cooperating with those inquiries would in no way jeopardize their employment with MTS. All of those assurances were given. We made every effort to make sure that Coopers and Lybrand and the RCMP provided this committee and this government and the people of Manitoba with full information . I know the Opposition will continue to say we're trying to hide. How are we trying to hide? We provided every document that they wanted with the exception of Cabinet documents . And the honourable members will continue to say that . Mr.

Chairperson, I am proud of the fact that this government acted decisively. I have concerns when I realize that, as I indicated in my earlier remarks, rea lly, it was like history revisited. Those same concerns, those same issues, those same officials seem to have deceived , lied, whatever, to previous Ministers in the Con~rvative Government, but regrettably nothing was done about it. That same spirit of adventurism was there, that lack of accountability was there, but nothing was done about it. This government has dealt with that matter . Thos e senior management people are no longer with us.

We are embarking on a new era in the Telephone System, 323 an era of accountability, an era of pride in our system , and we will not be detracted by the negative attitude of the Honourable Member for Pembina. Mr. Chairperson, we will go forward in a Crown corporation initially established by a Conservative Premier for the good of the people of Manitoba, a Crown corpo ration that has seen it go astray , start to go astray, encouraged to go astray under a previous Conservative Government. Mr.

Chairperson, we had the intestinal fortitude , we had the will to deal with the problem, and MTX is being wound down in a responsible, reasonable way, management has been changed and further management decisions will be made to ensure that the MTS will continue to serve the people of Manitoba in a responsible manner. I urge all members of the Legislative Assembly to join with me in ensuring that the Telephone System operates for the benefit of all the people of Manitoba. Mr. Chairperson , I'm given to understand that Mr.

Cumming who was here on Friday, who was available to the committee on Friday but was not called , I know that there were a number of questions that Mr. Dolin asked and I took them as notice. I would like to see Mr. Cumming respond to those questions, but I know that the Honourable Member for Pembina is very anxious. However, I certainly want to make sure that we have an opportunity of hearing from Mr. Cumming . I leave it to you, Mr. Chairperson, to decide . I took as notice questions from Mr. Dolin. I'd like to be able to deal with them, but I understand .. . MR. D.

ORCHARD : You can deal with them in a few minutes. HON. A. MACKLING : Well, if the Honourable Member for Pembina is going to assure us that he's not going to run out the clock as he did on Friday and break the understandings we had, well , then , I have assurance that Mr. Dolin will have an opportunity to ask those questions. MR. D. ORCHARD : Can you determine that. Mr. Chairperson? MR. CHAIRMAN: Order please. There seems to be an indication that this matter will be dealt with late r and perhaps the materi al could be distributed at that time . Mr. Orchard . MR. M. DOLIN: A point of order , Mr. Chairman. MR.

CHAIRMAN: Mr. Dolin, on a point of order . MR. M. DOLIN: I am perfectly willing, since the Minister spoke and I would think one of the members from the Opposition, probably the Honourable Member for Pembina, would like to respond. I would defer to him to give him this opportunity . But I would like to remind the Chair that this is now the third meeting th at I have been requesting information, to look at the Coopers and Lybrand Repo rt which, from my understanding . was the role of this committee and the reason for having these hearings.

I would like to look at Volume VI and the human rights aspect and I'd lik e some assurance that I will have some opportunity to do that. If the

Monday, 1 December, 1986 member will give me the opportunity , I will certainly defer to him. MR. CHA IRMAN: It appears that assurance has been given. Mr. Orchard. MR. D. ORCHARD: Mr. Chairman, first off, I want to correct the Minister in another one of his incorrect statements. I violated no agreement with his House Leader . His House Leader knows full well tha t when he put in the one hour condition, I said if we're on a ser ious of ques t ions in a presentation, I cannot guarantee to limit it to one hour. The House Leader is nodding his head in agreement. So, Mr.

Minister , I please urge you not to further mislead the committee. Mr. Chairman, the Minister has laid out a case which describes, if I can put it as gently as possible , the complete incompetence of this Minister in coming to grips and understanding with the very serious situation that we are faced with in the Telephone System and MTX today. We are talking about a minimum exposure of $25 million, none of which existed in 1981 at the change of the government .

All of that exposure is compliments of the incompetence primarily of this Minister that is sitting here tonight, and only for tonight , because he has resigned for his incompetence . None of that liability existed before. He wishes to cook up a story of involvement by the previous administration . Mr.

Chairman, that may be good to try to divert attention from the real issue ton ight , the real issue being that Manitobans are being asked to pick up a minimum of $25 million of loss incurred during the NDP term of government, and if we were to have Coopers and Lybrand further investigate within the Telephone System the area of cross-subsidization, which has not been accounted for within the Telephone System and its MTX operation, that loss would grow dramatically . I can assure you of that. Mr. Chairman, this Minister has given us absolutely no comparable analysis.

For instance, in 1981, when we were defeated in government and this NDP administration and the previous one took over, the Min ister skillfully forgets to tell the people of Manitoba, in his attempt to save political face, that there were no accounts recei vable in December of 1981 from Saudi Arabia or any oth er joint venture or any other exposure in sales. Mr. Chairman, there was no investment in 1981, December, in Saud i Arabia . Mr. Chairman, there was no free-standing 100 percent-owned corporation of the Telephone System named MTX .

The mother of MTX is one Muriel Smith , the father is one Howard Pawley; because in January of 1982 the mother and father signed the Order-in-Council which conceived MTX. We have Mother Muriel and Papa Howie in 1982, January. That is who created MTX, the 100-percent, joint-owned company of the Telephone System . Further, in 1981 in December when the government changed , there was no joint venture in Saudi Arabia in which this NDP Government has currently invested $794,000 to start and an additional 8.5 million in MTX and into Saudi Arab ia with an additional 2 million.

There were no liabilities to the Telephone System in 1981 as a result of a venture in Saudi Arabia . There was no 324 exposure to the Manitob a Telephone System in 1981 in December when this government took over because of external operations of the Telephone System in Saudi Arabia , the United States , New Zealand, China, you name it, there was no exposure to the Manitoba Telephone System and to the stakeholders of that Telephone System . There was none of that.

But if you just listened for that last hour-and-a-hal f to this Minister who is flailing in complete Ministerial incompetence, you would be led to believe that is the situation they inherited in 1981. Well, Mr. Chairman, I simply say that is a false impression that the Minister is trying to leave. I reiterate again, in 1981, there was no accounts receivable outside of the Province of Manitoba that we are still trying to collect. There was no investment in Saudi Arabia. There was no joint venture in Saudi Arabia. There was no freestanding corporation, MTX and the Telephone System.

There were no liabi lities owing to the people of Manitoba through their Telephone System, and there was no exposure to the Telephone System in 1981 in December when this government took over. Mr. Chairman, the Minister -(Interjection)- Mr. Chairman, do I hear the Minister babbling from his chair? Is he having a little trouble tonight . HON. A. MACKLING: No, I was responding to what one of your colleagues said . MR. CHAIRMAN: Order please, order please . I've reminded members before; I'll remind them again. The procedure is that, when individual members are recogn ized, they shall speak.

I would really recommend that people pursue private conversations in the hall. Mr. Orchard. MR. D. ORCHARD: Mr. Chairman, I want to draw to the Minister's attention, because he's trying to point out that he was terribly competent in his stewardship of the Manitoba Telephone System , I want to point out to him a very interesting scenario. He has mentioned Project Ida tonight. I want to tell you that Project Ida, I inherited in whenever I became Minister, October of 1980, whenever it was. You know what one of the first things that Mr. Holland did as Minister?

He came to me to ask me for an $8.5 million investment to advance Project Ida from an experiment al stage in Headingley - and maybe some of the staff over there who are sitting after listening to the Minister's diatribe for the last hour-and-a-half might remember this , some of the staff who were there then. The $8.5 million that Mr. Holland requested was to put Ida from an experimental stage in Headingley to a full-scale demonstration project. Now, $8.5 million is an interesting figure, because that's exactly the figure that the same Mr. Holland and board came to Mr.

Mackling in September of 1985 for to additionally finance MTX, the creation of Ms. Smith and Mr. Pawley in 1982. Mr. Chairman, in 1980, when Mr. Holland asked for that $8.5 million, I said, I'm afraid I need a little more information , Mr. Holland. As a result, to get that information, I sent my board chairman a copy of a letter. In that, I asked a series of questions. You know,

Monday, 1 December, 1986 it might be interesting for me to table that letter tonight , because this is what a Minister of a Conservative administration did when asked for $8.5 million. I'll table this letter, and get a copy out. I would like a copy of that for my files. Mr. Chairman, I then set up a three-person committee to study the Omnitel II technology that was to be expanded from experimental stage to a full-scale demonstration. After a period of several months, not being satisfied with the request for $8.5 million, that committee came back and said to me, the Omnitel II technology is not viable. Mr.

Chairman, in addition to that at a committee hearing in which I was sitt ing in the chair that this incompetent Minister is now occupying , I sat there and I listened to a member of the Opposition, the Member for St. Vital , ask questions about Project Ida . After that hearing , I asked the Member for St. Vital if he had concerns. He said he did . We discussed them and that , Mr. Chairman , was what a Minister responsible would do when members of the Opposition raised concerns about something the Telephone System has done.

In the four years that I have sat in this committee, including the fifth year this year when this whole bubble burst, I have raised concerns about MTX and not one NOP Minister has asked me why, what I'm concerned about , what is the problem, not one . Now, I offer you my course of action . I offer you the NOP course of action. Which was the competent and responsible one? I think it's fairly obvious. Now , Mr.

Chairman, on the $8.5 million request to expand Project Ida, basis the three-person consulting report, basis the answers to the questions I posed, I cancelled Project Ida and would not approve another $8.5 million. Now, I just want to take you to September , 1985, where this Minister is now sitting in the chair. Septembe r, 1985, this Minister is sitting in his office responsible for the Telephone System . The same Mr. Holland comes to him and says, we need $8.5 million . For what? To put into our MTX operation, to further capitalize MTX , the Crown corporation that Mother Muriel and Papa Howie set up in 1982.

Now, this Minister apparently said , yes, Mr. Holland ; I'll rubber-stamp that , and I'll take it to ERIC committee; and they did . He took it to ERIC Committee where the heavyweights, Mr. Cowan , Mr. Kostyra , Mr. Paras iuk, Mr. Schroeder were sitting in that committee. Mr. Holland came to the committee. He said , I need another $8.5 million for MTX . They said , rubber-stamp, we'll give it to you , no questions asked . Do you know where 2 million of that 8.5 million was to go? It was to go to the joint venture in Saudi Arabia that was set up in April, 1982 by the NOP Government , Mother Muriel and Papa Howie .

Sorry, somet imes, it' s confusing . Mr. Chairman, did Mr. Mackling, in agreeing to take that $8.5 million request for fund s to Cabinet, ask any questions of Mr. Holland? Did he ask him, what is the current financial analysis of SADL in Saudi Arabia? Well, I don't know whether he did or he didn't but, if he asked, he would have been given the 1985 May report of Arthur Anderson and Company which said that Saudi Arabia Datacom Limited has major concerns to the Telephone System , and I will quote.

" Our principal concern is the extent to which capital, approximately 12 million, has been exposed in a high-risk environment without adequate controls to protect either the capital or ensure a rate of return commensura te with the risk. " 325 This document, I believe , Mr. McKenzie identified as the first warning sign. This was available to a Minister who responsib ly asked questions in September of 1985 when he was being asked for another $8.5 million . That, ladies and gentlemen and Mr.

Chairman , is why we want this Minister resigned completely from Cabinet, because he is not responsible to ask the questions of his bureaucrats in which the answers for proper spending of money will be given. This was available to this incompetent Minister when he recommended another $8.5 million, 2 million of which to go to this venture that was already losing 12 million . So much for that Minister 's competence . Also, the Minister could have , in September of 1982 , asked for the current financial document of MTX - (Interjection)- did I say, '86?

In 1985 , he could have asked for this document and this doc umen t could have been presented to the Minis ter had he asked the question. But eithe r he didn't ask the ques tion, which is inco mpetence , or he did ask the question and received the answe r, which we would only find out if we get this Ministe r under oath in a judicial inquiry. We don 't know which, but the information was available and he asked for $8.5 million without asking the very simple basic ques tion that anybody would ask when requested for $8.5 mill ion: what does the latest financial statement say?

This Minister did not ask that question before he rubber-stamped an $8 .5 million request. Is that competence? Is that taxpaye r confidence to be given to this Minister who , when asked for $8.5 millio n, never asked to see the latest financial statement , which was available at that time? Is that competence, ladies and gentlemen , because had he asked for it, he would have seen in the notes , Page 2: "The recoverability of the investment in SADL and the related trade receivables, described above , is uncertain at this time." Do you need any more warning than this? And it was available , had the Minister asked.

But this Minister is not competent enough to ask , or he asked, received the answer, and decided not to tell the people of Manitoba becau se an election was coming . We don 't know which; we don't know whether it's cover-up or incompetence , but ei t her way the governmen t is culpable and can't get out of it. Mr. Chairman, this Minister is telling the peop le of Manitoba , and he expects the people of Manitoba to accep t his plea of ignorance and his Cabinet's plea of ignorance that they knew nothing. How stupid does this NOP Minister and his Premier and his Cabinet believe the people of Manitoba are?

Do they really believe that the people of Manitoba are stupid enough to believe that a Minister is compete nt in approving an $8.5 million loan without asking for the latest financial statement to see whether the company is in financial trouble or not? There are not too many Mani tobans who believe that they don't know, the reason being that this Minister simply decided he didn't want to know or else he wanted to cover up. As I say, we don't know which . Tonight I want to tell you, Mr. Chairman, the Minister has made the case better than I have ever heard it made before.

He has made the case for a judicial inquiry into the political culpability of the NOP Government and Cabinet , includ ing himself . I have never heard more reasons given in an hour-and-a-half to have a judicial

Monday, 1 December, 1986 inquiry examine the political role, the political knowledge and the political responsibility of this Minister and this government. He gave every reason that was needed . Mr. Chairman , it is with that thank you to the Minister for giving every reason available for a judic ial inquiry that I would like to move, seconded by Mr.

Filmon , that the committee recommend to Executive Council the appointment of a judicial inquiry in order to assess and report on ministerial and governmental responsibility for the MTS-MTX fiasco in Saudi Arabia and , in particular, the loss of up to $30 million in taxpayer money. That is the first of several motions that I will make, Mr. Chairman. We'll find out whether anybody was telling anybody . MR. DEPUTY CHAIRMAN, M. Dolin: I have been advised that the motion is in order. It has been moved by Mr. Orchard, seconded by Mr.

Filmon, that the committee recommend to Executive Council the appointment of a judicial inquiry in order to assess and report on ministerial and governmental responsibility for the MTS-MTX fiasco in Saudi Arabia and, in particular, the loss of up to $30 million in taxpayers ' money. Any debate? Mr. Filmon. MR. G. FILMON : Mr. Chairman, I might say I'm surprised that the Minister is not speaking on the matter .

Mind you, he has had more than ample time to present his case leading up to this motion and certainly in the hour-and-a-half he gave us plenty of reasons to support this motion , so perhaps his silence indicates that he supports the motion and I indeed hope that he does . Mr. Chairman, the major points that the Minister brought forward were that he believes that Mr.

Orchard and indeed all members on our side of the House in putting forth the facts, in putting forth the case with respect to the MTX issue, have only quoted selectively and only presented selectively certain pieces of information, that indeed, despite Coopers and Lybrand, despite an investigation by the RCMP, despite all of the hearings of the Public Utilities Committee throughout the summer and now, that the whole story hasn 't been told, that in fact there is much more in terms of the responsibility and the culpability that ought to be aired for public view.

He made that case, I won 't say eloquently but certainly at length ; he made that case this evening. That, to me, says that perhaps he's right. Perhaps there ought to be a far more thorough investigation, a far more thorough airing of all of the information that ought to be put forward to find out, in his words, what went wrong , why it went wrong, and how it went wrong . If indeed it's the Minister's case it went wrong because of certain investments that took place before his government took office in 1981 - now, he says investments - to my knowledge , there was not a nickel invested in Saudi Arabia .

In fact, there was a joint bidding on contracts , ultimately a joint bid prepared that was turned down , so it never came to fruition . There was a participation on the part of the Telephone System, along with Bell International, in contracts overseas, and AGT. Those contracts provided for all of the costs of the Telephone System to be covered 326 and , in fact, a p?vment of salary plus 40 percent on all of the salari es of people who were seconded by the Telephone System to work over there. So there was no risk whatsoever ; there was no investment whatsoever . In fact, there was a guaranteed rate of return. Mr.

Mackling tries to make the case that that is equivalent to entering into the establishment of an export corporation to do business outside of our provincial borders.

I might say at this point that it's interesting to note what is now viewed, or perhaps has been all along , as the mandate, the mission of that export corporation, and I quote from Coopers and Lybrand , which said that the MTX business mission has become, and I quote, "to undertake anything in telecommunications outside Manitoba which might be profitable and for which staff can probably be made available." That, it seems to me, is a far cry from the kind of mission and involvement of anything that the Telephone System had to do outside of its borders during the administration of the former Conservative Government.

Yet this Minister suggests that all of this is equivalent and, in fact , that operation of the Conservative Government was what really led to this investment in MTX, the passing of the Order-in-Council to form MTX, the passing of the amendments to The Manitoba Telephones Act to allow for this extra-provincial operation of the corporation and all of those things he says came as a result of that .

He says, too, that this was all part and parcel of the reasoning behind the involvement in the past despite the fact, as I've indicated, that there was no risk and, in fact a guaranteed rate of return, and yet his operation, in the words of the former executive vice-president, Mr. Anderson, and again I quote from Coopers and Lybrand where Mr. Anderson said, "Making money was not the prime purpose . It was to employ MTS people and provide them with an enriched environment ." I want to tell you, Mr.

Chairman, that at no time during the operations that he has referred to, prior to 1981, was that ever the mission and the mandate of the Telephone System in its operation. It always was and always ought to be to provide the best quality service of telephone and telecommunications to the people of Manitoba at the lowest cost. It was only as a result of this Minister 's administration that that became changed.

It was only as a result of that that the people of the Manitoba Telephone System, all of those loyal employees that the Minister referred to in wrapping up, were put into the situation where they were dragged into the mire of this high-risk foreign venture, this propensity to get into all sorts of extra-provincial investments to try and somehow become involved as a Crown corporation , become instruments of public policy, as has been quoted by the Premier and this Minister, as the route that they chose in the past and still choose to take.

So it seems to me that indeed he's making a case for the fact that we ought to have a full public inquiry and a full airing of th is to find out indeed if it was this kind of mission statement, this kind of determination on the part of his administration that led to us being where we are today, to having put at risk probably at least $25 million and indeed maybe a great deal more. The Minister took issue as well in his statement with my having said that the five senior officials have been

Monday, 1 December, 1986 used as scapegoats. He said that I am ignoring the fact that in the past we have suggested culpability on the part of senior management . Indeed, as we sat throughout the summer hearings of this Public Utilities Committee, we became convinced that there obviously was culpability on the part of senior management .

The reason I referred to scapegoats is that having accepted that senior management is responsible and would have to pay the price - and Coopers and Lybrand have confirmed and identified the responsibility - having accepted that, I say that they are now scapegoats when this Minister can get away without taking any responsibility whatsoever, can just simply wash his hands totally and suggest that the Coopers and Lybrand study that had no mandate to examine or comment upon any responsibility by the government, by the Ministers responsible, that this vindicates him and that he can walk off scot-free.

So I say that as long as this Minister retains a position in Cabinet where he can continue to wreak havoc on other government departments as he has through his involvement, either by negligence or irresponsibility, in the MTX fiasco, can continue to wreak havoc on other government departments, then they will have been used as the scapegoats to keep his head and his hands clean of this , and it won't wash.

The only way that he is going to be satisfied, as he has pied his case, is going to be to have that full and complete public hearing that we have been talking about, that we have been calling for, where people can be called and examined under oath to see whether indeed all of the things that he proposes were done without his knowledge. Here I have to say that he sounds a little bit like Richard Nixon as he says I don't remember; nobody told me; you didn't send the letter to me; it was just a copy that I got. All of those things that he says are starting to sound a little bit like Richard Nixon.

Let's maybe have the air cleared because he's the one who has said that the air isn't clear, that much more information should be presented, that we are quoting out of context , that we are presenting facts in iso lation without giving the total picture . Well, then , let's have the total picture. Let's find out everything that ought to be said about this before it goes any further because we have seen the most skillful job of political damage control that has ever been done on this province . We have seen the most ingenious manipulation of public opinion on this matter.

By putting forth, firstly, the case that says, no, there won't be a full and complete public inquiry; a management audit, yes, capably done within the scope of what it was designed to do, which eliminates totally any view of public involvement or any responsibility on the part of politically elected representatives and has no opportunity to investigate the books of the sheik's company wherein may lie the proof of the allegations that were made about kickbacks , about ill~gal payments, under-the-table commissions and all sorts of other matters that have yet to be attended to and, in all likelihood, will not be attended to as a result of this incomplete inquiry.

Of course, finally, the great part of this whole puzzle, the great final stroke of genius with respect to limiting the damage control on the part of the New Democratic Government was that decision that he calls such a forceful decision to remove the five senior officials prior to these hearings so that although they were available to Coopers and Lybrand, although they were able to be cross-examined and asked all of the relevant questions, they are not available to this committee.

The only public body that will have an opportunity to examine all of the facts with respect to this whole issue, they have been removed from the scene prior to these hearings. I say to you, Mr. Chairman, had that sort of action, the removal of the witnesses before the trial, had that sort of action been done by the Mafia, they would be facing a grand jury; but , instead, this Minister gets off scot-free and retains his position in Cabinet. It's an absolute crime.

So if this Minister believes that there needs to be a further airing, a more com plete hearing of this matter to find and assess public responsibility from previous administrations, previous Ministers, other people who have been involved, then I say that 's wonderful. Vote for this motion and you'll have that opportunity and then you won't have to hide behind anybody 's skirts. MR. CHAIRMAN: Mr. Enns. MR. H. ENNS: Mr.

Chairman, just not to prolong the debate on it, but to make it abundantly clear , it goes without saying that the mover of the motion before us would take the same position that as a Minister who had some respons ibility for Telephones , I welcome , indeed I insist on the public inquiry to take place. I want my record during my period of time as the Minister responsible for Telephones to be examined in the fullest possible way as does my colleague, Mr. Orchard, and we will get to the truth of this matter.

So let it simply be put on the record that those Ministers who have been referred to by the Minister in his lengthy speeches this evening before us welcome that kind of inquiry. MR. CHAIRMAN: Mr. Doer. 327 HON. G. DOER: Yes, I'd like to speak against the motion . First of all , Mr. Chairman, the Coopers and Lybrand has produced a 600-page report that many people in this room have called thorough and complete . It is 600 pages of material dealing with the MTX and MTS operation with a number of terms of reference that have been stated for the public record, which includes, Mr.

Chairman, issues of information that go to the government in point reference No . 5 and point reference No. 11. When Coopers and Lybrand looked through those two points of reference in terms of the information that did go to government , it concluded at every turn that the information that the government received, in fact indeed in many cases the board of MTS received, was incom plete and inaccurate . Let me quote just a couple of places where this material has been stated as incomplete and inaccurate in terms of the decision makers, because I think this is very critical.

If the government had received totally accurate information, and Coopers and Lybrand had said so, I think that's a very serious issue. When we look at Volume V of Coopers and Lybrand, Page 32, not only are we getting subjective opinions

Monday, 1 December, 1986 from the te lephone management system that's incorrect, it even states that the figures set out in the balance sheets that were produced to the board were different than what was in fact reality. When we further look at the critical period of time , and very critical in terms of the amount of money that was approved by the ERIC Committee of Cabinet on October 9, 1985 , Coopers and Lybrand again assessed the information provided to the decision-makers.

On Page 41 of the report , the process of providing for additional investment of $2 million Canadian in Saudi Arabia in 1985 rais es significant questions about the adequacy of the information provided to the MTS Board , the Minister, Crown Investments and ERIC relative to the profit and loss sharing arrangements in Saudi Arabia and throughout its history, and it goes on and on , Mr. Chairman .

So we do have points of reference where information going to government is critical in terms of government responsibility and the independent audit that the Member for Pembina has already called thorough and in totality has evaluated those issues. I think that's very important in considering a judicial inquiry. Further , Mr. Chairman , w e have an RCMP in vestigation that is still under way . An RCMP investigation is critical to some of the accusations raised in the summer.

We hope, certainly , that the air is cleared as soon as possible because I think that 's the second clou d hanging ove r the corporation's head. (lnter jection)- I don't control the RCMP, neither does the Member for Pembina, but I know they are working as expeditiously as possible. They have the Coopers and Lybrand Report and I know that they have interviewed a number of people and the Attorney General would be able to report on that more fully. The third issue is that everything about the Telephone System has been talked about in terms of a judicial inquiry .

I think again the Estey's Commission which was dealing with the $1 billion taxpayer bailout performed by Michael Wilson and Barbara McDougall in the federal Conservative Government, on Page 26 of that report there is a very inte resting quote: It was necessary throughout the hearings to make it known to the participants and to the community at large that the inquiry was not a convenient forum for the trial - and I use the word "tria l" because that's the same term the Leader of the Opposition just used - or settlement of all issues, public-private, arising out of these failures .

That was dealing with the whole issue of who was responsible for the billion dollar bailout authorized by the federal Conservative Government under the stewardship of Michael Wilson and Barbara McDougall. The other issue is the whole cost of having not only a Coopers and Lybrand Report, Mr. Chairman, where we had spent considerable sums of public money to find the facts and get the facts, and I think we have got the facts.

We do not want to spend millions and millions of dollars having lawyers and judges and whoever who would be involved in a judicial inquiry or a public inquiry re-evaluating the same ground that Coopers and Lybrand has just thoroughly done with their management audit team. So I believe, Mr. Chairman, that it's absolutely time to get the corporation on its renewal state that the Minister has talked about. It is absolutely essential that we do not cripple the Telephone System for two to 328 three years. It took us.

I think. one-and- a-half to two years to find out you shouldn "t mix metric and imper1ai gallons in airplanes in terms of the Gimli-near disaster and I think that's very, very important . but it took a long period of time . That is time the Telephone System does not have. It is time to get the Telephone System onto stable management and we know. Mr. Chairman . that when the Hydro inquiries took place. it crippled that organization for three years.

It 's time to get on with the business of the corporation, time to get on with the inadequacies of Crown monitoring, with the Crown reform proposal and that 's why I think this motion is counterproductive to the best interests of Manito bans . HON. A. MACKLING: Mr. Chairperson , I know the honourable members did hear my concerns earlier. I will not take a lot of time with the committee except to reiterate that this government did act decisively. I know that the members of the Opposition at one stage were saying fire these people immediately.

Then if we fired them and they hadn't appeared before the committee they would would say, well, you know, you did t hat , now they won't appear . We set up a management review. The representatives of that management audit firm have been made available to the members to question . We have mad e the copies available to the public . We have furnished to the Opposition every document that they requested, save submissions to Cabinet or Cabinet committees . We have provided the fullest kind of airing of this issue that is possible under the parliamentary process.

We have not spared ourselves in working very hard to make sure that all of the questions are answered. The RCMP are still investigating . We have referred to Mr. Robertson , the new CEO of the Telephone System. a very extensive list of concerns to do a real job evaluation of everything that the Telephone System - of the projects they had before, looking at management staff. We want to get that system operating to the benefit of the people of Man itoba. I know that the Honourable Member for Pembina, he sees this as an opportunity for his fur therance of his personal ambitions .

My concerns are for the good of the corporation , for the good of Manitoba. We have taken the decisive steps. I think some people may have thought that they were perhaps too tough. I believe that those management who are no longer with us, the same management that really had led the previous administration along paths that we followed, I sincerely believe, Mr.

Chairperson, that we have done a very effective , thorough and reasonable job of getting on with reviewing the problems , addressing those problems and I can see no benefit in the system being subjected to the same sort of ongoing inquiry that the honourab le member talks about. I know that he would iike to spin this out ad nauseum, but for our purposes, for the purposes of the people of Manitoba, it's best that the system get on with the job of providing excellent telephone service. MR. CHAIRMAN: Mr. Dolin. MR. M. DOLIN: I note in this motion , there is a 20- 20 hindsight here that the Minister has known this ,

Monday, 1 December, 1986 ERIC should have known that, this Minister should have known this, this one should have known that. I also noticed for about the last five hours in this committee , we have been looki ng at a six-volume report, which is excellent in its insight and thoroughness , but we have been hearing a debate between our Minister and a former Minister on who is right, who should have known what.

I think one of the comparisons you can make is you now have an inquiry going on which I think should have gone through the federal Committee on Rules and Privileges and tha t is the Sinclair Stevens inquiry, which is going to drag out for some years and cost $3.5-$4 million to the taxpayers of this country . I th ink that's what this resolution - if the political needs of the mover of this motion are to be served, I don't think it should be at the expense of the taxpayers of th is province . We pay $350-some-odd thousand for this report . I would like to get on with examining this report.

If I really felt there was sincerity behind the motion, I would think in the last five hours, we would have been questioning board members, staff people, from MTS .- (lnterjecti on) They're sitting right there. We would also be questioning the people from Coopers and Lybrand who are here at some expense to the taxpayer who have done a reasonably thorough job of looking at what happened , how things occurred, the way they present themselves today, but I see no sincerity on the part . . .

Here is a group who want to spend the equivalent of another Sinclair Stevens inquiry in the Province of Manitoba to look at, they quote "political culpability ." The Member for Lakeside talks about how he wants the inquiry to vindicate his record as Minister seven or eight years ago. My God , I don't want to spend the taxpayers ' money on such political absurdities . I think this committee is here to examine Coopers and Lybrand. When the Mounties report , we will examine those pieces of information provided to us. I think up to now the Member for Pembina 's done an excellent job of digging out the facts .

He has more resources , more sources of fact which he has not yet really touched . He has been making political statements; I think it's time that stopped. I think this nonsense about a judicial inquiry should cease , the motion should be defeated and we should go on with the business of this committee the same way the Federal Government should have used rules and privileges, rather than having a judicial inquiry at great expense to determine whether or not Sinclair Stevens is culpable . I can't support an insincere motion like this, Mr. Chairman. MR.

CHAIRMAN: There are no other members ind icating a desire to speak on this, so therefore I will ask if members are ready for the question. I have a request to read the motion. It's moved by Mr. Orchard, seconded by Mr. Filmon, that the committee recommend to Executive Council the appointment of a judicial inquiry in order to assess and report on ministerial and governmental responsibility for the MTS fiasco in Saudi Arabia and, in particular, the loss of up to $30 million in taxpayers' money . Are you ready for the question? Will all those in favour of the motion please indicate by saying aye?

All those opposed to the motion , please indicate by saying nay. 329 In my opinion, the nays have it. MR. D. ORCHARD: Mr. Chairman, could we have a formal hand count , please? MR. CHAIRMAN: There has been a request for a counted vote . Would all those in favour of the motion , please indicate by raising their hands. Would all those opposed to the motion, please indicate by raising their hands. MR. CLERK, W. Remnant: Yeas 4; Nays 6. MR. CHAIRMAN: The motion is defeated . Mr. Orchard. MR. D. ORCHARD: Mr.

Chairman, the Ministe r, in his argument to defeat the last motion , said that a most thorough review had been done by Coopers and Lybrand . That is a statement made by his Premier which is not true , nor is it true when he makes it because , as Mr. McKenzie has indicated to us in questioning on Wednesday, November 26, their mandate did not inc lude determining the political responsibility of Cab inet Ministers and the Minister responsible. Their management review ended at the sen io r management levels .

There was no examination of board culpability, minister ial culpability or Cabinet culpability in terms of the ERIC committee of Cabinet. Mr. Chairman, if the Minister who says a thorough review was done wishes that to happen, he would want to have his name cleared as the Minister responsible for the Telephone System . I thought he would have welcomed the judicial inquiry which , if he is innoc ent as he says , would have cleared him, but he is obviously afraid of something, Mr. Chairman, in tha t he turned down that motion. So we offer to the Minister an alternative to the judicial inquiry.

Incidentally, I just point out that a judicial inquiry was welcomed by this Min ister earlier this year when Mr. Parasiu k wanted to clear his name and we jumped in and we spent, I don't know how many tens of thou sands of dollars clearing Mr. Parasiuk 's name, but all of a sudden this same Cabinet, this same caucus , this same NDP Government does not want a jud icial inquiry to clear the name of Mr. Mackling . Is that how littl e you value you him now as a Cabinet colleague and a caucus colleague, that you will not clear his name, or is the problem that the heavyweights , Mr. Cowan , Mr. Kostyra, Mr.

Parasiuk , Mr. Schro eder, through their culp ability in the ERIC committee, would also be found negligent, culpabl e of blame in the MTS fiasco? Is that what you fear from a jud icia l inq uiry? We will not know because you 've turned it down once again. Mr. Chairman, bec ause Coopers and Lybrand have not bee n given the mandate to investigate political culpability of this government at the board , ministe rial and ERIC committee of Cabinet level, we offer this governmen t, this Minister, this Premi er, who have said there is no political culpability on his Cabinet , the opportuni ty to prove it. I move , Mr.

Chairman , seconded by Mr. Filmon , that this committee recommend to Executive Council tha t the terms of reference for the Coopers and Lybrand Consulting Group be expanded to examine political

Monday, 1 December, 1986 responsibility of the government and its Minis ters in the MTX affair. MR. CHAIRMAN: There is a motion before the committee . Is there any discussion? There being no discussion , I'll call for the question . Mr. Enns. MR. H. ENNS: It seems to me, Mr. Chairman , and I think, if there has been unanimity on one matter during these hearings, that is the general acceptance of the excellence of work done by Coopers and Lybrand . We have heard that certainly from members of the Opposition ; we've heard it just referred to a moment ago by a colleague on the committee, Mr. Gary Doer.

Everybody seems to acknowledge the excellent level of work that Coopers and Lybrand firm is capable of and has demons trated by putting the report that we now have before us. It seems to me, Mr. Chairman , that the government would have a great deal of difficulty , in fac t would be stretching everybody's understanding of what fair play is all about if now they, for some reason, would not want this same firm that has demonstrated its capabilities, demonstrated its excellence , to proc eed in an expanded manner as suggested by this motion before us. MR. CHAIRMAN: Mr. Manness. MR. C. MANNESS: Mr.

Chairman , my comments will be brief. I was looking for a place in Hansard where I posed a question to Mr. McKenzie on Wednesday last with respect to politi cal involvement; I can't find it. I believe the Minister came close to quoting him . I do have it now, Mr. Chairman . In my view and , as the members opposite know, I'm an individua l who's pretty cost conscious on these sorts of matter s, I don't want to see personally a multi-million dollar inquiry. Never theless, to me, this approach - (Interjection)- You prejudged, Mr. Scott, the cost of an inquiry. You know som ething maybe that I don 't.

You knew it would be multi-million, did you? Mr. Chairman, I think this proposal in itself could be one that would have a moderate price tag attached to it. Quite frankly, I see it being at a cost similar to the inquiry conducted by former Justice Freedman in the Parasiuk affair . I hon estly believe that it can involve a third party, one that would specifically look at Cabinet documents, one that would hold those in a closed system that would indeed evaluate them , determ ine government knowledge and government respons ibility on this issue . Mr.

Chairman , then and only then can we determine whether indeed members of Cabinet, indeed whether this Minister had knowledge of this issue , like he claims he did not. Mr. Chairman, it seems to me that for a very moderate cost, the people of this province would soon know whether indeed members of this government, whether indeed members of this Cabinet had prior knowledge to many of the issues that have been discussed in this committee over the last several months . I think our party would wait for that th ird-party evaluation, Mr.

Chairman, and at that time I'm sure we would be 330 prepa red to rest our case indeed , if the government was shown to have no involvement at that period of time. Mr. Chairman, I think that the member s opposite, indeed the government if they 're not prepared to accede to this motion, it says to me and I think many other people, that they are covering up some aspect of their knowledge in this issue. MR. G. FILMON: Mr. Chairm an , the members of the government side on this committee have rested their case on the fact that this was a thorough and complete study being done by Coopers and Lybrand.

The Member for Concordia , the Minister responsible, the Premier, have made the statement that Coopers and Lybrand have investigated and found the government absolutely clean on this and no responsibility for this . The responsibility , in their words, was only at the management level. I just want to quote from the committee hearings of Wednesday evening, in which I was questioning Mr. McKenzie.

I'll quote this first question, and say: "You make no attempt to make judgment as to whether or not there was any political responsibility, given that the political arm was starting to become more and more involved in approving additional financing and so on? You have not attempted to assess any political responsibility? "Mr. G. McKenzie : That is correct." As well , in the course of the discussion with Mr.

McKenzie , I refer to a number of questions that should have been asked, in my view, on the part of anybody taking res ponsibility for, certainly as Minister respon sibl e, and I referred to nobody was asking whether or not there were any business plans before making major management decisions , that we had any market analyses that told us whethe r there was any hope of selling our products. " At some point , you state, and I quote : 'At no point along the way was anybody asking the question , what business are we in?"' I asked Mr.

McKenzie : "Di d the management consultants seek to find out whether or not, at the political level , the Minister or any of the Cabinet members sitting on ERIC asked any of those questions? "Mr. G. McKenzie : No. " I go further, Mr. Chairman , in addressing this need to know how the Min ister can attempt to say that he has absolutely no responsibility. He has said that he acted quickly, that he acted decisively, tha t he did all the things necessary to bring this to a head and to finally assess the whole reponsibility for all this mess, this whole fiasco with respect to MTX .

I just want to refer him to Thursday, the 17th of July 1986 , and at that time my colleague , Mr. Orchard, was asking him questions in the Legislature, and I'll quote from Mr. Orchard. Now , this is Thursday, the 17th of July 1986, and he says, and I quote: "In today 's committee hearing, we had figures given to us for the year ending March 31, 1986 for MTX Telecom Incorporated. In view of the fact that they are projectin

Document details

Collection	Manitoba — Debates (Hansard)
Citation	33-1-pu16
Type	hansard
Volume / chapter	33rd 1st hansardpdf pu16.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	420c63582754f1eed59826a5437a10f5824c6c54

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