Manitoba Hansard — Sitting 82 (38th Legislature, 4th Session)

38-4-82

Manitoba — Debates (Hansard)

Fourth Session - Thirty-Eighth Legislature of the Legislative Assembly of Manitoba DEBATES and PROCEEDINGS Official Report (Hansard) Published under the authority of The Honourable George Hickes Speaker Vol. LVII No. 82 – 10 a.m., Friday, June 2, 2006

MANITOBA LEGISLATIVE ASSEMBLY Thirty-Eighth Legislature Member Constituency Political Affiliation AGLUGUB, Cris The Maples N.D.P. ALLAN, Nancy, Hon. St. Vital N.D.P. ALTEMEYER, Rob Wolseley N.D.P. ASHTON, Steve, Hon. Thom pson N.D.P. BJORNSON, Peter, Hon. Gimli N.D.P. BRICK, Marilyn St. Norbert N.D.P. CALDWELL, Drew Brandon East N.D.P. CHOMIAK, Dave, Hon. Kildonan N.D.P. CULLEN, Cliff Turtle Mountain P.C. CUMMINGS, Glen Ste. Rose P.C. DERKACH, Leonard Russell P.C. DEWAR, Gregory Selkirk N.D.P. DOER, Gary, Hon. Concordia N.D.P. DRIEDGER, Myrna Charleswood P.C. DYCK, Peter Pembina P.C. EICHLER, Ralph Lakeside P.C.

FAURSCHOU, David Portage la Prairie P.C. GERRARD, Jon, Hon. River Heights Lib. GOERTZEN, Kelvin Steinbach P.C. HAWRANIK, Gerald Lac du Bonnet P.C. HICKES, George, Hon. Point Douglas N.D.P. IRVIN-ROSS, Kerri Fort Garry N.D.P. JENNISSEN, Gerard Flin Flon N.D.P. JHA, Bidhu Radisson N.D.P. KORZENIOWSKI, Bonnie St. James N.D.P. LAMOUREUX, Kevin Inkster Lib. LATHLIN, Oscar, Hon. The Pas N.D.P. LEMIEUX, Ron, Hon. La Verendrye N.D.P. MACKINTOSH, Gord, Hon. St. Johns N.D.P. MAGUIRE, Larry Arthur-Virden P.C. MALOWAY, Jim Elmwood N.D.P. MARTINDALE, Doug Burrows N.D.P. McFADYEN, Hugh Fort Whyte P.C. McGIFFORD, Diane, Hon.

Lord Roberts N.D.P. MELNICK, Christine, Hon. Riel N.D.P. MITCHELSON, Bonnie River East P.C. MURRAY, Stuart Kirkfield Park P.C. NEVAKSHONOFF, Tom Interlake N.D.P. OSWALD, Theresa, Hon. Seine River N.D.P. PENNER, Jack Emerson P.C. REID, Daryl Transcona N.D.P. REIMER, Jack Southdale P.C. ROBINSON, Eric, Hon. Rupertsland N.D.P. ROCAN, Denis Carman P.C. RONDEAU, Jim, Hon. Assiniboia N.D.P. ROWAT, Leanne Minnedosa P.C. SALE, Tim, Hon. Fort Rouge N.D.P. SANTOS, Conrad Wellington N.D.P. SCHELLENBERG, Harry Rossmere N.D.P. SCHULER, Ron Springfield P.C. SELINGER, Greg, Hon. St. Boniface N.D.P. SMITH, Scott, Hon.

Brandon West N.D.P. STEFANSON, Heather Tuxedo P.C. STRUTHERS, Stan, Hon. Dauphin-Roblin N.D.P. SWAN, Andrew Minto N.D.P. TAILLIEU, Mavis Morris P.C. WOWCHUK, Rosann, Hon. Swan River N.D.P.

2909 LEGISLATIVE ASSEMBLY OF MANITOBA Friday, June 2, 2006 The House met at 10 a.m. COMMITTEE OF SUPPLY (Concurrent Sections) INDUSTRY, ECONOMIC DEVELOPMENT AND MINES * (10:00) Mr. Chairperson (H arry Schellenberg): Will the Committee of Supply please come to order. This

section of the Committee of Supply meeting in Room 254 will now resume consideration of the Estimates for the Department of Industry, Economic Development and Mines. As had been previously agreed, questioning for this department will proceed in a global manner. The floor is now open for questions. Hon. Jim Rondeau (Minister of Industry, Economic Development and Mines): Thank you, Mr. Chair. Following past practice, the member opposite had asked some information and some of it is available. I will go through the 2005 petroleum industry activity. That was a question asked, I think, last time we talked.

There were 285 wells drilled, that was up 139 percent. It is the third highest on record, and this is all in 2005. There were 384 drilling licences issued, that is up 180 percent and it is the highest on record. The average production is 13,000 barrels per day, which is up 18 percent. The value of the 2005 production is $300 million, that is an estimate, it is up 91 percent. Industry expenditures are about $190 million, that is an estimate, up 90 percent. Provincial revenue from oil and gas leases, Crown royalties and production taxes for the financial year of 2005-2006 is $16 million, up 102 percent.

This includes record revenue from oil and gas lease sales of $6.4 million. I have the year-over-year from 2001-2002, 2002- 2003, 2003-2004, and I will go through it. The oil and gas production tax for 2001-2002 was $3,428,100; 2002-2003 was $2,945,600; 2003-2004 was $2,785,800; 2004-2005 was $3,195,000, and I am happy to say that 2005-2006 was $6,190,400. The Petroleum Royalties and Fees, again from 2001 on: Petroleum Royalties and Fees for 2001- 2002 was $2,998,100; 2002-2003 was $3,748,000; '03-04 was $2,990,200; 2004-2005 was $4,780,900, and I am very pleased to say 2005-2006 was $9,822,000.

So, if you take the oil and gas production tax and the Royalty Fees you will see that in 2005-2006 it is at $16,012,400. As far as the mining tax revenue, that was the other question you asked the other day that I took on notice. Mr. Chair, 2006-2007, I will go from 2001- 2002, sorry. The mining tax revenue was $9,357,067; '02-03 was $17,541,067; '03-04 was $21,895,001; '04-05 was $40,826,218; '05-06, which I am very pleased to say, was $57,200,000, that is an estimate. And '06-07 was $41 million, estimate.

Some of the decreases from '05-06 to this year: the processing of Voisey Bay concentrate is increasing from 35 to 50 percent, so they are refining more and more of the Voisey Bay concentrate rather than the concentrate that is mined here. Other companies have carried forward losses which they can take into this year, which we assume they are going to be taking and putting the profit into their balance sheet. Mining taxes do not apply to metal not mined in Manitoba, so that if it is just refined here, the mining taxes do not apply. It is only if it is mined here. Thank you very much, Mr. Chair. Mr.

Glen Cummings (Ste. Rose): Well, just on that last point, material being shipped in from Voisey Bay, the Newfoundland government was always adamant that that would not happen, or if it did, it would not happen for long. There was some considerable question raised about what the impact would ultimately be here. Does the minister have access to any information other than that? Is there still planned expansion at Voisey Bay, and will that have a negative impact on our potential to produce here profitably? Mr. Rondeau: This is an interim measure, Mr. Chair.

It is set up while they are ramping up and developing smelter capacity in Newfoundland. Mr. Cummings: Mr. Chairman, I wanted to get back to what I am sure the minister considers more mundane questions again, but during the– An Honourable Member: Nothing is mundane in this department.

2910 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 Mr. Cummings: Well, I hope it is not mundane, but we have been on this merry-go-round before. I would like to know that, while the minister, undoubtedly, was not in the department at the time that the Solidarité loan was made from the Québec Fonds to Crocus, and we all know the characterization of this as being an investment as opposed to a loan, but, then, upon closer scrutiny, it becomes pretty obvious that it was probably portrayed in a way that was inappropriate.

But this is a $10-million transaction which is not small, one that dealt with an outside entity and was publicized. My question would be, and I presume the minister will have to ask the department, what would have happened at a time such as that? Would the department, through its representative, have been made aware of the magnitude of this transaction? Mr. Rondeau: What often happens is that the fund's auditor, so Crocus' auditor would have had a discussion with the fund. In the normal course of business, if something is done it follows generally accepted acco unting practice, GAAP .

Basically, if the fund's auditor would be Wellington West, the company that produces the prospectus, what happens is that they are responsible for following generally accepted accounting practice. In fact, if there is ever a case where something does not follow generally accepted accounting practice, the auditor would make it under notes. So, if it did not follow a generally accepted accounting practice, they would make a note at the bottom of the page, and they would make some sort of comment on it. As far as the department is concerned, they looked at annual reports, looked at the prospectuses.

They understood that they were signed off by the fund's auditor. They were signed by Wellington West as portraying the information accurately, and, as the Auditor General has said, generally what you do is you accept those end pieces of information, that material, as true and portraying a true picture of the fund. * (10:10) I understand that the people in the department did that. They accepted the auditor's signoff and the prospectus as full, plain and true disclosure as explained in the prospectus. So that has happened. The interesting

part is that, as we talked about yesterday, by separating the compliance from the promotion of venture capital and having a long-term trusted person as the person who is enabled to oversee the fund on a more proactive basis, we hope to alleviate that in the future. Mr. Cummings: Well, it would appear from the minister's answer that he is saying that there was not very detailed oversight at that particular time, which I doubt. Is he saying that it is his understanding that the Solidarité transaction was not of any note even when at the shareholders' meeting a shareholder questioned the nature of the investment?

It seems to me that that person was pretty accurate, if I understand the notes, from how the questions would have been asked. So my question is much the same but on a slightly different angle: Is he saying that there was not the type of oversight at that point that would have raised any comment about the Solidarité transaction? Mr. Rondeau: What I am saying is that it is not the responsibility of the government to provide or prepare the financial statements for the Crocus Fund. It is up to the board, the administration of the fund, the fund's actual auditor to create and sign off on the financial statements.

It was up to the fund's auditor, Wellington West, and the board to create a prospectus which has full, plain and true disclosure of all material facts. It was never up to the government to set valuations. It was never up to the government to sign off on the prospectus. In fact, if you read the prospectus which is signed off or approved by the board, Wellington West, and the fund's auditor, if you read those two things, it has disclaimers saying that the government is not involved, does not certify the books, does not authorize the information.

In fact, it is the auditor, Wellington West, the underwriter, and the board that signs off on the prospectus and annual reports. It had nothing to do with this government signin g off. If you were at the shareholders' meeting, it is not the government that holds the shareholders' meeting. It was the board that held the shareholders' meeting because they were responsible to the people who invested. They were responsible for the operation and the disclosures, and that is where the responsibility lies. We were not the nanny for any venture capital fund now or in the future. Mr.

Cummings: Is the minister saying there would not have been any comment from government- appointed representatives to the board, or that the government would not have taken note of a question such as this at the shareholders' meeting that the

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2911 government would not have taken an interest at that point? Mr. Rondeau: The shareholders' meeting is a meeting run by the board of directors of the fund which the fund's auditor provides the financial report which is presented to the shareholders. It provides all the information on full, plain and true disclosure. The fund provides that. The management admini- stration of the fund, the chair of the board of directors, presents the financial picture to the fund shareholders. That is what the meeting is all about.

It is not where the government sits there and says, okay, you can do this certain ways, or the government did not sign off on the prospectus as was noted in the Auditor General's report. The fund, if you read the prospectus–actually, there are about three or four disclaimers where the government says, hey, this is where we are not involved. As you note, the people who sign off on the information would be the firm's auditors, Crocus' auditors. The government never signed off saying th at there was accuracy.

If you read it, what happens is that the auditor, the firm's auditor, said that they have a fiduciary responsibility to follow generally accepted account- ing practice. If they do not follow generally accepted accounting practice, or the auditor believes that it does not provide accurate disclosure, they do not sign off, or they put a footnote which says, we do not agree or this is outside of generally accepted accounting practice.

If you look at the financial reports, this was not done by the auditor; it was not done by Wellington West; and the prospectus and the financial report says that this is full, plain and accurate disclosure of all financial transaction. This is a real financial picture of the fund. The government did not sign off on it. The government's rep was not supposed to be nanny of the fund. They were representing the general public interest and they had no way that they could tell us what was going on directly to the board, and that was nailed down by Bernard Wilson.

As you have been aware, what happened as practice of the board is individuals actually conducted a session with the Crocus board when they got on board and they found out where their fiduciary responsibility was. They found out that they could not report directly to the minister, any minister, because of what they found out on the board, and so what happened at the meeting was what was accurate. The shareholders or Class A shareholders had questions. They brought them up to management who was responsible and the board who was responsible, and that was what the appropriate action was.

The responsibility was with the board and the management of the fund. Mr. Cummings: Well, we have comments from the auditor that demonstrate the character of this agreement. It contained covenants that would control or limit the investment activities of Crocus management team and the proceeds could not be used to support the investment portfolio. The investment activities could be no more than $3 million. If the Crocus Fund wanted to invest more, they were required to first divest dollar for dollar to provide the additional capital.

So this was a very tightly structured arrangement that infringed on Crocus Fund's ability to function. Should that not have been something that the minister would be interested in? Mr. Rondeau: I think, Mr. Chair, you have to understand what information was available to the government. I think the Auditor General said and I quote for December 7, '05. The Auditor General: It is important to understand that from our point of view, Crocus did not do an open and transparent job in disclosing the nature of that transaction in its financial statements or in its prospectus. Then he goes on to say, Mr.

Chair, so they provided financial statements and information to the government and to the shareholders. He goes on to say, it is very common in the business world that when you receive an audit instead of financial statements, you rely on the audit opinion. When you receive the prospectus you presume that appropriate due diligence, the appropriate disclosures are contained in that prospectus. So I think it would highly impractical for anyone to say I do not believe the prospectus or I do not believe the financial statements.

This would not be able to do that kind of monitoring on that basis unless you had come to specific evidence that came to you some other way that caused you to want to ask a question. I do not think anyone raised this as a particular concern until we brought it forward. That is the Auditor General on December 7, '05. What that means is that we relied on the prospectus and the financial information which was signed off by the fund's auditor. It was signed off by the board of directors and it was signed off by Wellington West, the underwriter.

So these all have in it where GAAP, generally accepted accounting practices, are followed, and also it is signed off that

2912 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 that information is full, plain and true disclosure of all material facts. If that is not the case, that is not for the government to go in and do a fiscal audit of every transaction in the fund. We were not the nanny. We were not supposed to do and conduct, and we did not sign off on the fund. The fund's auditor signed off on the accuracy of the disclosure. The board of directors did. The government would have been inappropriate to sign off on disclosure. That was not a response to legislation, that was not our fiduciary responsibility. * (10:20) Mr.

Cummings: Did the government have a representative on the board at that time? Mr. Rondeau: The government appointed a representative on the board. It was a public interest appointment. What we had done is we had appointed civil servants to the public representatives on the board, and so their fiduciary responsibility was not to the government. It was to the public in general. The other thing was, Mr.

Chair, they had a workshop when they were appointed to the board by the government or any organization, and any organization or our representative understood that their fiduciary responsibility was to the public, and that it would be inappropriate for them to report what was going on in the board or to have the government control what was going on in the board. They understood that they were arm's length; they understood their fiduciary responsibility; and they understood that it would have been inappropriate for them to come to the government with information that they obtained in the board meeting. Mr.

Cummings: The minister puts considerable stock in the auditor for Crocus being one of the governing factors. Who was the auditor? Mr. Rondeau: Pricewaterhouse, Sir. Mr. Cummings: I am sorry, excuse me just a moment. Mr. Rondeau: The firm's auditor is Pricewaterhouse, and I und erstand that the firm's auditor had remained constant for a number of years. Mr. Cummings: But the name of the firm is? Mr. Rondeau: The name of the firm is Pricewaterhouse, and I und erstand that the firm's auditor had remained the same for a number of years. Mr.

Cummings: So the minister has stated that their reflection of what was going on at the fund should have been the basis upon which we trusted the information that was put forward. Mr. Rondeau: Yes, and as the Auditor General attested, it is very common in the business world that, when you receive an audit instead of a financial statement, you rely on the audit opinion. The auditor has an obligation to provide full, plain and true disclosure.

The auditor has an obligation to follow generally accepted accounting processes, and if there is a deviation from generally accepted accounting practice, then what would ha ppen is that the auditor would have to either choose not to sign off or put it on a footnote if there was a deviation from these generally accepted accounting practices. Mr. Cummings: Did the auditor note this transaction as being an exception? Mr. Rondeau: No. Mr. Cummings: Well, the obvious question is: Should he have? Or, should they have? Mr. Rondeau: That will be an interesting thing in the go-forward basis.

That will be shown in a court of law, and that is one of the things that I believe is in front of the courts right now. Mr. Cummings: I n w h a t f o r m i s i t i n f r o n t o f t h e courts? Mr. Rondeau: I understand that Pricewaterhouse is a defendant in the class-action lawsuit that is before the courts now. Mr. Cummings: Has the government taken any action in that respect? Why are we waiting for the shareholders? If the minister has, in a roundabout way, described that this is a problem, why has the government not taken action? Mr.

Rondeau: The Manitoba Securities Commission is also conducting an investigation into the Crocus issue. The Manitoba Securities Commission has a role under legislation to ensure that full, plain and true disclosure happens in the prospectus. And so I would assume that under The Securities Act, looking at what has happened in the Crocus issue, that the Manitoba Securities investigation would be finding out if they did not provide full, plain and true disclosure, why not, and what went wrong. That is part of the Manitoba Securities investigation.

As far as redress, that is why it is in front of the courts as far as the civil suit.

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2913 Mr. Cummings: Well, the Securities Commission would have been my next question. I do not mind stating on the record that I am disappointed that their investigation has been delayed by a full year. Does the minister have any information he can share to substantiate the Securities Commission's claim that they cannot deal with this any sooner? Mr. Rondeau: It would be inappropriate for me to get directly involved with either the Securities Commission investigation or their court case. It would be inappropriate for me to get involved with the class-action lawsuit.

There is division of powers between the executive branch and judiciary, and I respect that. So these cour t cases and investigations, we do not get involved. When the government referred things to either Canada Customs, the Manitoba Securities Commission, any of the other outside organizations, when we referred to the investigations, we do not tell them how to investigate or how to proceed. What we do is provide them general informa- tion. They conduct an investigation, and they move forward in their spheres of influence.

It would have been inappropriate and career-ending should I have gotten involved, and I did not get involved in any of the investigations nor on how they proceed. Mr. Cummings: However, in the last few minutes, the minister has said that it is possible–and I am paraphrasing here, so I do not want to be putting words in his mouth–but Hansard will show that he believes the auditor had a bigger role in properly displaying what occurred here. But the Securities Commission had a role. Who is investigating the Securities Commission role? Mr.

Rondeau: I think what the auditor has said is that there could have been prompt action or more action. But what happened in most cases is that people believed the information they were receiving from Wellington West in the prospectus and the fund's financials. So there may have been cases where there was too much trust put on the information provided by the fund. However, that would have been normal course of actions. There are a number of safeguards. There is PricewaterhouseCoopers, who was the fund auditor, who is a safeguard on making sure there is full, plain disclosure.

There was Wellington West who signed off on full, plain and true disclosure. There is the board of directors. So there are a number of groups that were supposed to make sure that the information was true and accurate. I think that my department officials relied on the information that was provided by the fund, its auditor and the underwriters. I think that may have been the case other places, but I cannot say. * (10:30) What we can do is we can make sure that the experts in the field, the people who have the expertise to make sure that there is good ongoing investigation, we have to trust them.

That is why, of course, we not only provided in 2001 the ability for the Auditor to go into the fund, but we also, when there were some issues and when people say, what did you do to facilitate the investigation? When the Auditor asked Crocus to go in, Crocus started to put up barriers and started to threaten legal barriers. What happened was we knew, because the Minister of Finance (Mr.

Selinger) and myself both knew the acts–what we did was we facilitated the Auditor's unfettered investigation by making him an authorized person to make sure that he had access to all information because of the tax credit, and so he could follow the money, follow the transactions to do a complete and thorough investigation of Crocus, unfettered. Now, had we not acted, it might have been left in the courts for weeks, months or years. What we did was we made him an authorized person so that he could act expeditiously.

In fact, I have a letter from the Auditor basically saying thank you for allowing us, reacting very, very quickly to end the log jam and allowing him to do his job. Mr. Cummings: Well, what the minister has just said, I do not dispute. Was this investigation initiated by the Auditor or was it requested by government? Mr. Rondeau: I understand that the Manitoba Securities Commission was conducting an investi- gation before the Auditor General's investigation, and it was one part of what they would do in their ongoing work. It was not something that was directed by the government or the Auditor.

I understand the MSC was conducting an investigation prior to the Auditor General's investigation. Mr. Cummings: Just so I understand, is the minister saying that the Securities Commission raised the flags and asked the Auditor to get involved or suggested that the Auditor should be involved or was it the fact that the Securities Commission was investigating that piqued the Auditor's interest? Who initiated the Auditor's inquiries?

2914 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 Mr. Rondeau: As of 2001, The Auditor General Act was changed so that he could go and investigate and do audits in any organization that receives government funds or tax credits. So, in 2001, the Auditor General had the right to go into Crocus or ENSIS or any other groups that received tax credits. What happened was we have found out that the MSC was conducting somewhat of an investigation prior to the Auditor General, but we did not direct the MSC to conduct an investigation. We did not direct the Auditor to conduct an investigation.

What we did was we facilitated the Auditor General's investigation because, although he had, we believe, the right to go in as of 2001 under The Auditor General Act, what we did was, when Crocus started to say, wait, you do not have this ability and they could have hung them up and slowed down the investigation, the Auditor General requested us to make him an authorized person under the Department of Industry and also under Finance.

What we did was the Mi nister of Finance and myself sent letters to ensure that he could conduct the investigation by making him an authorized person under the Industry Department act and the Finance Department. So what we did was we allowed him unfettered investigation and what we do in all cases, when we send it to CCRA, we do not tell them how to investigate. We do not tell them specifically what to investigate. We say, there is an issue, here is the issue that was raised.

So, in the case of Canada Customs and Revenue or the Manitoba Securities or the RCMP, what we do is we provide the Auditor General's report. We say, here are some allegations. We do not tell them how to investigate, we do not tell them how to proceed. That would be getting involved in things that we should not be involved in. So we provide the information and that is that. But we also do not get involved in quasi-judicial bodies like the Manitoba Securities Commission and say, you must investigate instantly this. They are professionals. Mr.

Cummings: Well, just on that point, though, the minister, if he was convinced that it needed to happen, could ask the Securities Commission to review a file, could he not? Mr. Rondeau: Well, part of the whole process is that people can always, in hindsight, be 20-20, and, if you look just to see– An Honourable Member: I am not asking about Crocus; I am asking in general terms you could– Mr. Chairperson: Excuse me. Wait until I, you know, recognize you. It will make it easy for Hansard. The Member for Ste. Rose. Go ahead. Mr. Cummings: Sorry to interrupt , Mr.

Chair, but I do not need to know whether or not the minister had a choice about asking them to come into Crocus. But I am asking in a general sense that if he was so moved that he felt there was an issue somewhere, anywhere, there is nothing precluding him, is there, from advising the Securities Commission that they might take interest in a particular file? Mr. Rondeau: Any member of the public has a right to go to the RCMP or the Manitoba Securities Commission to bring up any issue. So, if you look at past history you have a person from your own party who might have had information.

He was your former leader who might have had information on issues in Crocus, and, although he might have had a public reason to go to the Manitoba Securities Commission and give them information, understand that he might have had issues, and he might have had a public reason to protect the public by going to the Manitoba Securities Commission or RCMP and allege issues. Well, that did not happen.

Apparently, your former leader was visited by executives from Crocus, and I believe the term is "shakedown," and so he basically says that, Murray says he got a visit from Mike Bessey and Crocus boss, James Umlah, who basically tried to shake me down, and then he says that he decided that he did not have enough facts at the time to come forward with his concerns in the face of potential lawsuits. So, after the shakedown, he decided not to go to the RCMP; he decided not to go to Manitoba Securities Commission.

I understand the same sort of thing happened with a former Member for Fort Whyte, where the Member for Fort Whyte was going to call a news conference, chose not to go to call a news conference after he got information, and, I believe at the time, both the Member for Fort Whyte and the former Leader of the Conservative Party said that they were happy with evaluations whic h was far, far in excess of what the Manitoba government ever said. So the Leader of the Opposition, the Member for Fort Whyte said they were happy with the way Crocus was conducting business.

Th ey were satisfied that evaluations were accurate, wh ich is far, far more of an attestation to the evaluations than the government ever would do because the government does not attest to evaluations. Also, at the time, the Member

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2915 for Fort Whyte invested in Crocus, he was so confident in the management practice and the investments. So this government has not made any attestations. This government, I know in hindsight it would have been nice to have caught the problem earlier, but in fact that with the shakedown the former Leader of the Conservative Party could have gone to the MSC, could have gone to the RCMP, if he had allegations. He was satisfied with what was going on with Crocus, and the Member for Fort Whyte was so satisfied he bought shares and invested.

So I think it is the right and obligation of every citizen and every member of this Legislature that, if they think something illegal, improper is going on, they go to the appropriate authorities. If you look, there was supposed to be a news conference. The news conference was cancelled, and then you have the Member for Fort Whyte investing money in Crocus and saying he thinks things are okay and agrees with evaluations. This government never did that, Mr. Chair. * (10:40) Mr. Cummings: Well, I must be getting close to something because the minister wants to get nasty.

If the Member for Fort Whyte were here, I would think he would get his head taken off verbally. I am not going to enter into that debate, although I have a grossly different opinion of what occurred than the events that the member has just described. Truth to tell, I think I am looking at the authority who had an opportunity to do something about this fund, and that was members of the Cabinet of the day who probably knew that there were a few things awry, but will not share with me or with anyone in the public what was really going on.

The reason that I ask about the fund or the Fonds–I love that word; it reminds me of Fonzie–the fact is that the reason I ask about that is that this was such an obvious approach to the edge of honesty by Crocus. I cannot believe that the government had a representative who sat on that board, who acquiesced in this development where there was a public proclamation via a press release, and no one in government–I mean, "don't know, don't ask and hope it goes away," seems to be what the problem is.

I am pretty sure, given the nature and the quality of the people that I am aware of who would have been, I think, knowledgeable about what occurred, I find it absolutely impossible to believe that there were not people in government, elected officials, who were given an opportunity to realize that there was a problem there and that they chose to look the other way. The characterization of a $10-million loan as an investment–and the member talks about shakedowns.

He knows full well that without parliamentary immunity, there have been a number of things said on both sides of the House about what occurred in this area that would be suable if they were said outside of the Chamber. The fact that a lawsuit is launched does not necessarily mean that what was said is wrong. To think that the government saw what was going on with the events that the member just referenced and simply quietly chuckled with glee and did not start asking serious questions about what in the heck is going on over there.

Even the auditor, as I recall, and the implication was–and I think it was actually stated–that he was accused of not knowing what he was doing and perhaps should be sued as a result of some of the comments that are in this. It became pretty much the modus operandi of the fund. I do not think the minister would condone that. My concern is when did he first know that that was the way the fund was dealing with anything where concerns were raised. If you take out a postmaul to flatten a mosquito, you know that person is not just worried about the mosquito.

There are problems, and at the very time that we are talking about how a press release was put out, the minister is saying the Auditor did not pick up on it. He is saying that his representative did not say anything about it. Certainly, he was part of the board. The board should have and would have had knowledge and approval of an arrangement of this magnitude. Ten million buck s is not walking-around change in anybody's business. So is that what the minister is saying? Everything was fine. Nobody in any line of chain of command said anything? Mr.

Rondeau: What I am saying is that you have an auditor, a fund auditor, whose job is to audit the books, audit the way Crocus was doing business, and sign off on the financial statements as full plain disclosure. Here is an example. If you read the information, Crocus underwriter, Wellington West, signed the following declaration ever y year, and this is the declaration in the financials: To the best of our knowledge, information and belief, the financial

2916 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 statements of the Crocus Investment Fund, and it continues, and the Auditor's report thereon, together with this prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by

part 7 of The Securities Act and the regulations thereunder, and do not contain any misrepresenta- tions. So what I am saying is that the auditor's fiduciary responsibility is to ensure that GAAP, generally accepted accounting procedures, are followed. The auditor's and Wellington West's fiduciary responsibility is to make sure that there are no misrepresentations, and it is the board and the management to ensure that they communicate with the fund's auditors and the u nderwriters to make sure that they have confidence that the information as provided is accurate.

I look at the Member for Fort Whyte as a businessman. I assume that he also looked at the prospectus and the financials and made a fiduciary responsibility. That does not mean that I do not have a great deal of respect of the Member for Fort Whyte as a businessperson and as a member of this Chamber. I believe that he was provided information as was said, that he was provided information from the fund, from the people who manage the fund that ensured that he felt comfortable with the information they were providing was accurate.

If you read the prospectus and the financials, it looks like the company is very, very solid. It looks like the loan was, in fact, an investment. It looks like a lot of things. So I do not question the acumen of the Member for Fort Whyte. What I am saying is he, after he met with fund officials, said that he believed that they were providing information and that they were in sound, financial assistance. That is what he said. Now, Mr. Chair, that may be because he trusted the financial statements and the prospectus. I do not know. I have not talked to the Member for Fort Whyte.

But I do believe as a businessman and a very successful businessman whom I respect, he probably followed what would be normal business practice which is looking at the financials which are signed off by an auditor, looking at the prospectus which was signed off by an audi tor and the underwriter and making appropriate decisions based on the information that they provided. That would be normal conduct. I have looked at hundreds of financials.

I have looked at hundreds of prospectus when I was in investments and you make the assumption that because they are signed off by an auditor and an underwriter that they contain full, plain and true disclosure of all material facts as they are required to under the Manitoba Securities Commission's laws. So I understand, and I am not saying that the Member for Fort Whyte or the former Leader of the Conservative Party were involved in anything.

What I am saying is that, after they met with executives from the fund and the fund's lawyers, they believed that the fund valuation was accurate and that may be because they trusted the prospectus and the financial statements. Mr. Cummings: Well, the minister takes probably even a little bit of glee in recounting the events that he just has described, but should that not have triggered the thought process in government to talk to the Securities Commission and give us some level of confidence of what is being raised is wrong? * (10:50) Mr.

Rondeau: I do not think anyone from this government or the previous government that had any involvement whatsoever with Crocus Fund takes any glee of what has occurred in the last few years. I do not think members of the previous government, the former Leader of the Conservative Party, the Member for Fort Whyte, any member of this government or any MLA takes any happiness over what happened. We are all very sad about what happened. We are all very disappointed in what happened, and we wish that it had not happened, but all members want to look at what happened and move on.

We also want to make sure that we investigate to make sure that it never, ever happens again. So, Mr. Chair, what we do is you look at a situation, and in hindsight it would have been nice to have caught this earlier. In hindsight it would have been wonderful to not have had the losses and investment losses, and in hindsight it would have been wonderful to have had the legislation absolutely perfect in 1992-1993. It would have been wonderful, when we made some changes in reporting in 2001, to have known what was going to happen four or five years later.

But what was important to note is that we are taking action in Bill 51 and Bill 37. We make sure that we follow the Audi tor General's report. We make sure that appropriate investigations are going to occur, unfettered investigations, and that we find out to make sure that in the future things like this

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2917 never happen again. I do not think anyone ever takes glee in what happened. I know that if you look at the information provided, the picture may not have been accurate, but that is not for government to sign off on. It is nothing that government would ever be happy about, whether it was a Conservative government or an NDP government. These are people who invested money and trusted full, plain and true disclosure. I hope that something like this never happens in the future under any government. Mr.

Cummings: Well, for the record, I think the government would have and certainly should have looked at the circumstances that were unfolding, and any smart political body, which is what a government is, would have started asking questions. The minister has cited his favourite expert on responsibility of board governance several times, and I have not chosen to challenge him.

The name does not mean that much to me, but I think there could be an equal number of experts who would respond that, under similar circumstances where someone has been appointed in the public interest, that that person would also have a responsibility to make sure that the person ultimately responsible for the public interest, i.e., the minister that appointed him, would have some knowledge of events that would concern him or her.

So that strikes me that, while the minister is pointing, I would say quite directly, at the auditor as perhaps not having done their job in the reflection of these numbers, can the minister tell me what happens to the minutes of the board at Crocus? Mr. Rondeau: I can tell you, Mr. Chair, that I do not know what happens to the minutes at the board of Crocus because we are not involved in the day-to-day management of the fund nor are we the overseer of what goes on by the board in Crocus. The Crocus has a board that has fiduciary responsibility to the shareholders.

It does not have a responsibility except for, under the act, the public policy objectives, the pacing and the investment requirements to the government. So, when you ask the question: Do we get to know what exactly happens at the board? The answer is no. I do not see the board minutes, nor should I. What I do have is, in 2001, the government started a reporting structure where the public policy objectives of how fast the money is invested in Manitoba and where it is invested were reported. So have I seen those reports on the public policy objectives? Yes, I have. Have I seen the board minutes?

No, I have not, nor should I. Mr. Cummings: Well, on that point, the minister knows and has reflected that it was important that they understand whether or not the fund is meeting its public policy objectives, which leads to the question of pacing. As I recall, that is sort of fundamental, so would the minister of the day–and it would be probably prior to this minister's appointment–but would the minister of the day, should he not, then, have had some information about the progress of the pacing? Mr. Rondeau: From what I understand, the pacing was never off line. This was confirmed by the Auditor General.

What would have happened is in 2001–prior to 2001 there was no formal reporting from the board to the government on the public policy objectives. I understand from 2001 on, there was a reporting system established and that the pacing, which is the public policy objectives, that means how fast the money was invested into Manitoba businesses, that was never offside. Mr.

Cummings: Well, again, it has to do with the quality of the information, I suppose, that the minister was receiving, and I do not want the minister to be too vindicated by that because that was really why, as I read the Auditor's report and try to piece together what really happened, it seems to me that that was why the Fonds was embraced because there was a liquidity issue, which is not disconnected from the pacing. Should the minister have been aware of any liquidity problems? Mr. Rondeau: F r o m w h a t I u nderstand from the fund, the fund had some issues with how they would address liquidity.

So they had made no pretence of the fact that they would have had to use certain techniques to make sure that they were liquid enough, make sure that their pacing was done, but there was no time that the liquidity issues or the pacing broke the act or the public policy objectives of the act. I understand that from the Auditor General. So it is not something that I would have been reported to because basically the pacing was they had to invest 70 percent of the money within 24 months, I believe, and they were never offside on the pacing. Mr. Cummings: Well, I would challenge that statement.

It seems to be pretty common knowledge that they were on the verge of having liquidity issues, and that is why they embraced the Fonds.

2918 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 Why would the minister not have had knowledge of that? Mr. Rondeau: The reason why is because, if you read the prospectus and if you read the financial statements, and you realize that they were always, they may have not placed the loan as a loan. They had referred to it as an investment. The investment of $10 million was signed off by the auditor, and by the firm's auditors, not by the government auditors.

It was signed off on Wellington West as an investment, and what had happened was the branch, and all reasonable people, would have assumed generally accepted accounting practices were followed, and it would have been registered as an investment if it was an investment. If it was a loan, it would have been characterized differently . It was not on the prospectus or the financials, and so the fund was never offside on pacing or on its liquidity.

Now, whether or not it was portrayed accurately on the financial statements or on the prospectus is not something the Minister of Industry or the Minister of Finance would have signed off on or been aware of. It would have been the management of the fund, the fund's auditors and the underwriters who sign off on it. The Minister of Finance does not, or the Minister of Industry does not, say, go to every company or every fund that is operating in Manitoba and sign off on their books. This does not happen. It is the board of directors of the fund.

It is the auditors, the fund management; those are the people who construct the books and the financials and the prospectus. It is not this government. This government has not and will not sign off on the financials of any venture capital fund. It is not our responsibility. * (11:00) So, when you are asking the question of whether we knew pacing was a difficulty, the fund was never offside on pacing. The Auditor General in his investigation stated that. Whether or not in the future they were offside on pacing, I would never, ever be able to say.

If there was a pacing issue, it would have been something that would have been discovered, because they were now reporting to the government, and if the loan was mischaracterized or misrepre- sented, that is not something that the government did or was aware of. It would have been something that the auditor of the fund should have caught and Wellington West, the underwriter, should have caught. Mr.

Cummings: Well, immediately prior to or about this time in the sordid history of this fund, I am led to believe that there were times when reporting of the fund was not up to speed and that members of the department actually had to initiate and encourage and compile some of the information on behalf of the fund. Does the minister think that was appropriate and would the minister of the day not have been at least concerned? Mr.

Rondeau: Any of the report s that were from Crocus or ENSIS, were signed off by the individual funds, the directors of the individual funds. [interjection] Sorry, I want to make sure the record stays accurate. They were signed off by the chief financial officer of the fund. So, in other words, any report on Crocus or ENSIS was signed off by the chief financial officer of the fund. Mr. Cummings: Well, is the minister aware of any allegations that the department literally had to hold the hand of the people in the fund, and those are my words, but to direct and assist and get the reporting up to speed?

Is the minister aware, or was the department itself aware that that was an issue? Mr. Rondeau: Two points, Mr. Chair. First, prior to 2001, there were no formal reporting requirements, so, in 2001, this government prepared formal reporting requirements. The second point is this is no different than in my prior life, I would prepare tax returns for many people. I would prepare tax returns. Other people I know at H&R Block prepares lots of income tax for lots of people.

What happens is the individuals sign off on their own income tax returns, certifying that the information is accurate, certifying that they have portrayed a true financial disclosure to Revenue Canada, or in the case of Crocus or ENSIS, they would sign off, the chief financial officer would sign off to say that the information is accurate. So, whether it is H&R Block preparing your income tax, or whether it is different people preparing the information, the funds itself signed off that it was accurate, and, no matter who prepares it, there was a signoff by Crocus that it was true, accurate information. Mr.

Cummings: Let me be very clear. I am not suggesting anybody in the department did anything inappropriate, but I think it is a signal of, perhaps,

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2919 the fact that the management at the fund resented and chafed at the idea of an ongoing reporting responsibility. The fund would have had, I hope, plenty of financial expertise, which they could use to compile information. I am just asking the question if it is plausible or true that the scenario that I described occurred, and if that should not have been a signal to the minister that the fund was chafing under the idea of closer scrutiny, but, in fact, not necessarily all that co-operative. Mr. Rondeau: Prior to 2001 there were no formal requirements.

After 2001 th ere were formal require- ments. And I think part of the issue was that the Department of Industry staff wanted to work co-operatively with both funds, ENSIS and Crocus, to develop a reporting structure, and I think what happened was they wanted to work with, and I think with the different funds. I think by having an independent administrator we have looked at Bill 37 to make sure that we now have not all the reporting and the monitoring and the working with the funds in one department.

Now, what we have done in Bill 37 is we followed the Auditor General's report, who said in hindsight it might have been better to have more aggressive monitoring of the funds. Well, we have accepted that. We have split the monitoring into an independent administrator in Bill 37, and up to 2001 there was no reporting. So, in 2001 we instituted reporting. In hindsight, it might have been better to have more aggressive monitoring. Hindsight is always 20-20, Mr. Chair. So what we did have is we had a co-operative approach, a willingness to work in partnership with the funds to develop a reporting structure.

Now, I have never found many organizations or groups that wanted to do government reports. I have never found people who have been excited about creating more government reports and more government reporting no matter where I have been, even in the private sector. I never said, geez, Mr. Chair, I want to create more information to government, I want to create more reports to government. That generally has not happened, and I have never found anyone who has voluntarily been excited about creating more information to government.

So I can understand how, now in 2001 we wanted to set up a reporting structure, I can understand how the government department wanted to work co-operatively with the venture capital funds, both of them, and I can understand how they wanted to do this and develop a reporting structure that recorded the public policy objectives. Again, hindsight is 20-20, Mr. Chair, and it would have been wonderful if we had seen this as it was.

What we saw it as, I understand from the department, is that no one wants to create more reports to government, no one wants to willingly provide more time, staff time, to create yet another issue where they were reporting to government. So the government was trying to work co-operatively with the fund. They were trying to establish a reporting on the public policy objectives , and these reports were signed off by the funds, whether it was Crocus or ENSIS. Mr. Cummings: Well, the minister did not answer my questions.

Would that not have given the department and ultimately the government a pretty clear insight into what was occurring at the funds? And I say it in plural. Obviously, it was more than one fund being monitored. Mr. Rondeau: By having these reports, these reports did not raise any issues as far as, you know, the Auditor or our department, because what we were trying to do is establish new reporting that had not been conducted in the past, and the reports never raised any issues as far as either funds being offside for pacing or for the liquidity. * (11:10) Mr.

Cummings: Just for the record, the government had a representative on the board of Crocus. Crocus did an analysis sometime during '02 that showed they were on the verge of having a liquidity problem, but the board would not have been aware of that, and, ultimately, the minister would not be aware. Mr. Rondeau: As we said, it would have been inappropriate. First, Mr. Chair, there was no time that the public policy, the pacing or the liquidity were ever offside. That is important to note. The Auditor noted that, and that would have been plain in any of the reports.

So the reports from Crocus and ENSIS have never said that they were offside on pacing or their liquidity. Okay, that becomes important. Secondly, as was stated previous many, many times, it would have been inappropriate for the board member to come and tell me what was going on in the board meetings. The government appointed a representative to represent the public. It was not a government-board representative to tell the

2920 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 government what was going on or to manoeuvre the board. It was a public policy person to represent the public interest. It was not to represent the minister at the board level. Mr. Cummings: I would say the minister has his opinion, or I could conclude his lines, and he is going to stick to it. But the fact remains that it was unlikely that it would have been a secret around the board table at Crocus. Either that or there were a lot of board members who were derelict in their duty. The minister keeps pointing to the fact that they were not there to represent him.

They may well have found themselves in a situation where they were privy to information, but the minister did not want to hear. I cannot, for the life of me, understand, given the events that the minister referred to earlier when considerable concerns were raised, people's reputations got booted around the block, at the same time there were real issues occurring at Crocus and no one talked to the minister. Am I still supposed to believe that? Mr. Rondeau: Mr.

Chair, I think the Auditor General says it very, very accurately when they are saying about what was going on in the finances, and I will just read a little bit from Hansard. Mr.

Gerrard says that: Whether it was an accurate statement of what was going on in the fund, the question in this circumstance is that if it is unusual or–talk about the whole issue of the investments and whether they were accurately portrayed or whether the Québec Fonds was accurately portrayed–the question is to the deputy minister: Was this the first time that there had been such activity in Cr ocus, related to the fund, whether it was provided ac curately, et cetera.

And the Auditor General stated: Before the question is answered, I think it is important to understand that from our point of view Crocus did not do an open and transparent job of disclosing the nature of the transaction in its financial statements or in its prospectuses. Then he started to talk about the prospectus and the information being portrayed in the financials, and the prospectus, and that it is the job of the auditor, the firm's auditor, to make sure that the information is disclosed accurately according to GAAP, generally accepted accounting principles.

It is the job of the underwriter to make sure the prospectuses are portrayed correctly. I do not know whether it would have been the job of what the board knew or did not know, because the minister did not appoint a board to represent the minister. The minister appointed one person to the board to represent the public interest. We have gone over this, where it would have been inappropriate fiduciary responsibility to have the board rep telling what was going on in the board, et cetera. We have explained that the pacing was never offside.

The liquidity was never offside, and it would have been inappropriate for the government minister to direct the board rep to do anything, because it was a public policy board rep, not a political board rep. That is very, very important. It was confirmed on December 7, 2005, by the Auditor General; it was confirmed by the deputy minister; it was confirmed in the press what the fiduciary responsibilities were and the board rep responsibilities were. I did not know what was going on at the board meetings, nor should I have. Mr.

Cummings: Well, in fact, this minister was not there a great deal of the time when we were concerned about what knowledge was available around Crocus. He was not in the current chair, but is the minister saying that there would not have been any reports to Treasury Board about the financial implications of activities at Crocus or venture capital opportunities that were being available or otherwise in the province?

Because that is the underpinning for all of this activity is that, in the long run, and we are all pretty conscious of the fact that Manitoba needs a sound industry that is capable of pulling together risk capital. Is the minister aware of any reports or does he believe any reports would have gone to Treasury Board about the function of venture capital funds and the condition that they were in? Mr. Rondeau: Mr. Chair, Treasury Board would not have been privy to what was occurring inside the Crocus board. Mr. Cummings: Would Treasury Board have been made aware of liquidity issues? Mr.

Rondeau: Because there was no issue with liquidity, in other words, Crocus was never offside on the public policy objectives of liquidity or pacing. That would not have been brought to the minister's attention or to Treasury Board's attention because there was no liquidity issue. In other words, it was still onside for public policy objectives of pacing and liquidity. Mr. Cummings: The technicality of no liquidity problems is correct, but ther e is a close relationship between members of this administration and those

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2921 who were the managers of the board. And for the senior people in this government to have not known early on that there were issues arising on the function of this venture capital fund certainly stretches credulity when there was so many co-investments that were done. Was the minister ever requested to look or to approve–"approve" is the wrong term–to encourage co-investments on behalf of Crocus? Mr. Rondeau: Mr. Chair, I think it is very important to note that the government board members were civil servants under this go vernment.

In other words, we had actually a series of civil servants, many of which were long-term civil servants who have served both governments very, very well. In fact, one of our appointments was on the Conservative transition team, so these are not partisan people who are appointed to the board. These are civil servants under our government. They we re not Order-In-Council. Well, sorry. They were not people appointed to political parties or political positions. These were deputy ministers, people in the Industry Department. These are civil servants, non -partisan.

They did not donate to political parties under this government. * (11:20) As far as due diligence, the member asked whether I would have influenced the investment from the Crocus board or others. I would not have said, as a minister, to Crocus or the board that I wanted them to invest in any particular way. That would have been inappropriate. Every fund does their own due diligence. It would have been inappropriate for me to walk into the Royal Bank or to any other group and tell them how to invest. Every organization has a fiduciary responsibility to do their own due diligence and do their own investing.

It is not up to the government to tell people how to invest. Mr. Cummings: The minister's answers have the implication that somehow I am trying to skewer what are capable and honourable civil servants. That is not at issue here. What I want to know is the relationship between the elected members of this government and the management and the board at the Crocus Fund. On the surface, I do not think the minister could even attempt to deny–or it would fall into the category of the biblical, when the rooster crowed three times–the connection between his colleagues in Cabinet and his Premier (M r.

Doer) and the leaders of the labour community. Of course, this fund is a labour-sponsored fund for obvious reasons, one of the net benefits hoping to be that we can create jobs and business activity in this province. Mr. Cris Aglugub, Acting Chairperson, in the Chair But it has fallen into a situation where there were some pretty questionable investments, and some of them were co-investments with this minister's department. Where there were co-investments, was there any exchange of evaluations and/or recommendations? Mr.

Rondeau: I think it is important to note that this government always does its own due diligence before any investment. I just look at the Manitoba Science and Technology Fund which was created in 1999, was announced by Merv Tweed, the Conservative Minister of Industry, and it put James Umlah in charge of a co-investment between the Conservative government, and Crocus was managing it, James Umlah. It was interesting to read the press release issued by the Conservative government which put James Umlah in charge of a co-investment with the government and put Crocus in charge.

It was interesting to note that they mentioned his management expertise and abilities in the press release. I look at that, and I look at this record of this government which never put government money to be managed by Crocus. You look at the Manitoba Science and Technology Fund. It was a government fund. It put Crocus' James Umlah in charge of the fund, and we did not follow that pattern in this government. So, when the member opposite asks about co- investing, the best example of co-investing was done by Mr. Merv Tweed, a Minister of Industry under the Conservative government. We did not do that, Mr.

Acting Chairperson. Mr. Cummings: Well, again, my frustration is that this minister was not actually the minister at the time when certain issues I would like to pursue occurred. But we were talking about liquidity and pacing, and, of course, there are a lot of other conditions that are put on these funds. But the minister was talking about amendments that were made in order to make sure that the Auditor had access to the fund.

In that same vein, there is a reference to the fact that investment in a particular company that occurred in '01 would not have occurred if there had not been amendments made to the governance. The best that I can

2922 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 determine, it was his government that would be in authority at that time. With those events occurring, and with what we are led to believe was a fairly consistent series of requests from the fund to have a more flexible operating regime, did that not raise any issues with government? Whether this minister was in this portfolio or not, I believe he sat on Treasury Board, and, of course, obviously, his other responsibilities that would have exposed him to debate about this, should that not have been of significant interest to members of the government?

Frankly, the bottom line is why would they be making changes. Mr. Rondeau: Mr. Acting Chair, no, I was not a minister in the government when the Science and Technology Fund was created, which was the co-management of money from the government by Crocus and by Mr. Umlah, basically because I do not think the members opposite would have made me Minister of Industry in their Conservative government. However, I am minister now under the NDP government, and I do look at what happened.

I look at the past and you look at the financial losses Crocus has made, and you look at the Isobord plant, where there were millions of dollars lost by the provincial government and Crocus. You look at Westport. It was an interesting idea, but it did lose money for Crocus. You look at Westsun. These were huge investments that were lost by Crocus and sometimes the taxpayers, and they were made under the former government.

I look at that record and I look at some of the investments that we have made under our government, and we have consistently tried to make sure that we have done our due diligence and made sure that in all cases we have made sure that we have appropriate security and have done appropriate due diligence to make sure money has been invested wisely. That does not mean that in the future we may not have a deal go awry, but, so far, we have been successful in making sure that the MIOP program has made money under this government.

I look at the record under the previous government–again, when I was not minister–and the program lost or cost about $39 million. I look at our record, where, so far, it has made about $180,000, because what we do is we charge an interest rate. We have had appropriate due diligence and, Mr. Acting Chair, I hope that in the future that we still continue the record. That does not mean that we may not have a loan that does not perform. To date, we have done quite well in the MIOP program. We have done our due diligence and to date we have made money on the MIOP program.

We have had very successful investments in CanWest Global. We have had successful investments in the MIOP program in the bus companies. But we do make investments. We try to secure them appropriately. We try to make sure that they create jobs in the Manitoba economy and grow the economy, just as happened in the past. To date, we have been very successful in getting a return on our MIOP program. I hope that continues, but I cannot guarantee it.

But we try to do our own due diligence, and I have to commend the financial part of the department for doing good due diligence and trying to always represent the public interest in getting appropriate security, and in investing in companies that will grow the economy. Mr.

Cummings: Well, Minister Mihychuk, has stated that she would be more than glad to discuss her concerns about this fund in a properly structured inquiry where others are al so required to explain their role, I presume. * (11:30) Was the minister, who would have been responsible when, in fact, the fund invested beyond its allowable maximum in June–but much to everybody's pleasure the act was changed by September prior to the repo rting period, and it was back in compliance.

So there were, I would think, one could conclude that there were pressures brought to bear on the government that would have been known by the minister, because, as we saw last night, you do not introduce legislation and have long-term impacts without having a reason for doing it. Either that, or you hope the oppos ition is asleep at the time. It could be argued that the opposition should have raised concerns in '01, but the government was in the middle of it and the government made these changes. Does the minister have any defence about why they would have made those changes in that fashion? Mr.

Rondeau: The changes, Mr. Chair, had to deal with changing some of the act. It also started the reporting issue, and I know that we have dealt with some of the changes in 2001, but part of the changes in 2001 was to make sure that we started to have actual reports from the funds that dealt with pacing and their liquidity and issues like that. Prior to 2001 there were not, there were no formal reporting

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2923 processes, so in 2001 there were some changes made. I often look at our meetings. I meet with lots of companies, lots of organizations, lots of interest groups from the oil industry, manufacturing, investors who are coming through the business immigration program. I meet with many, many groups, and most groups give me advice on what they would like to see changed. In fact, Mr.

Chair, I would say it is probably 9 to 1 where groups are asking me to change things or improve things or change legislation or change taxes or change this or that, and that is what happens. We try to be an open government where we listen to many groups who talk to us about what they want to see in the future. So I try to be open as a minister, and I hear lots of advice. Most of it has to do with changing taxes or changing legislation or changing issues, and we try to listen. Now, that means that we are listening.

That does not mean we always change legislation, but lots of groups lobby me and every other minister for what they want, and we try to listen to them. We do not always act. Sometimes we do, and we try to make the situation improved. Mr. Cummings: Well, in some forms this would be circumstantial evidence that the government was trying to play footsy with the fund and make sure that they did not get themselves offside.

Considering that the majority of the board was held by their union associates and considering that the government had a representative on the board as well, this would be, I assume, the person who would have recommended the changes that would keep the fund onside. Again, I would suggest these are answers to this that we are not going to get until we have a forum whereby people have some opportunity for protection and retribution from their employer if they are given an opportunity to state what they knew was happening at that point.

There are a number of matters that are raised by the lawsuit that have been put forward, the most recent one from the Crocus Shareholders Associ- ation, and the government did not file a defence on the basis. They said that it has not yet been approved as a–that is not the right term, but the minister knows what I mean. It has not yet been accepted through the courts in the form that it is.

When we look at the number of issues that are raised there, they do make it very clear that they believe, whether there is a written trail or not, there was certainly a trail of relationships that would lead one to believe that information could have, would have easily flowed between the Crocus board and the government. Of course, because it is close to the possibility of going into court, I suppose the minister would want to defer from answering any direct questions. But, in the lead-up to this point, the minister has been pretty clear about saying that he felt there were problems with the auditor at Crocus.

He has indicated that he or his government had no idea of what was going down at Crocus in terms of some questionable decision making. Does he believe that there is any veracity to the claim being brought forward by the Crocus shareholders that there is a charge that many people and too many to go through at this point, but frankly, many people were somewhat derelict in their responsibilities? Mr. Rondeau: In the court case that will be in front of the judicial system soon, the government will endeavour to represent se ven and a half years of Conservative rule and four years of ours.

We will endeavour to represent the government interest and that is part of it. The lawsuit has not yet been certified, and we will defend seven and a half years of Tory government and four years of ours. We will represent the government of Manitoba for those two periods. Mr. Cummings: Well, the minister was a little bit more forthcoming in talking about why he did not have any answers relative to the activities of the Fonds and the relationship with the Crocus and what went wrong there. He was very quick to point towards the auditor.

Has he or his department had any discussion with the auditor about the situation they now jointly find themselves in? Mr. Rondeau: Mr. Chair, I actuall y referred to what the Auditor General said, not the firm's auditor. So I was quoting the Auditor General's report and Hansard. Mr. Cummings: I am not quite sure I understood that answer. Is he saying that he has not had any contact with his people representing government, i.e., the government lawyers would not have been in touch with the auditor to discuss the problems that are now starting to fall out of this issue? Mr.

Rondeau: I have not had direct discussions with the Auditor General about the legal case.

2924 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 Mr. Cummings: I am not talking about the Auditor General; I am talking about the auditor at Crocus. The minister seems pretty willing to indicate that perhaps they are negligent in the reports that they made which, in his rationale, leads to the problems that we are now dealing with, particularly regarding the Fonds and how it was represented. Has he had any communication with that firm? * (11:40) Mr. Rondeau: Mr. Chair, I actually was quoting from the Auditor General's discussion on Hansard. I was also quoting from the Auditor General's report.

It would have been inappropriate for me as a minister to contact Crocus's audit firm. Mr. Cummings: I do not think it would be inappropriate for people representing him, given that the government is now finding itself embroiled in a court case, to be obtaining information and/or confirmation. He was not quoting from anybody, I do not believe, earlier when he answered my question saying that the auditor may have inappropriately represented or allowed the $10-million loan from the Fonds to be represented as an investment. Am I interpreting him wrongly? Mr.

Rondeau: I think that if you read, I think it is December 7, page 34, in Hansard, you will hear the Auditor General's comments about how the Solidarité loan was discussed by the Auditor General. Mr. Cummings: Well, to some extent, this is a circular argument. I just wanted to link the comments of the minister earlier where he was concerned about and, I would suggest, believed that the auditors for Crocus had not appropriately represented the situation at Crocus, which then led him to overlook the Solidarité agreement.

Now that this lawsuit is closer to proceeding, that could be one of the central items, as far as I can see. I would simply ask the minister whether or not, taking the initiative, to have someone in government who is going to have to file a defence pretty soon, if they have had any opportunity to discuss this with the auditor in question. Mr. Rondeau: Mr. Chair, I refer the member opposite to December 7, 2005, page 34, on the second side of the page, on the right-hand side of the page. In it there is a question from Mr. Gerrard, and the chairperson of the co mmittee referred it to the Auditor General.

The fi rst quote was from Mr. Singleton, the Auditor: "Just before the question is answered, I think it is important to understand that, from our point of view, Crocus did not do an open and transparent job of disclosing the nature of that transaction in its financial statements or in its prospectuses." That is a quote from the Auditor General. He goes on to state: "It is very common in the business world that, when you receive an audited set of financial statements, you rely on the audit opinion.

When you receive a prospectus, you presume that appropriate due diligence and appropriate disclosures are contained in that prosp ectus." He goes on: So I would think it would be highly impractical for anyone to say, well, I do not believe the prospectus or I do not believe the financial statements, because you would not be able to do any kind of monitoring on that basis unless you had some specific evidence that came to you in some way that caused you to ask questions. I do not think anyone raised this as a particular concern until we brought it forward. So that is a quote from the Auditor General.

It is in Hansard, and that is what I was referring to earlier. It is very appropriate that the Auditor–we listen to the Auditor–it is very appropriate that we look at what he said in his report and in Hansard, and I think it is not appropriate for me to get directly involved in a lawsuit. Mr. Cummings: Well, nevertheless, the government is embroiled in one. My leader asked the Premier (Mr. Doer) and I will as k this minister: Are you going to be filing a defence? Mr. Rondeau: I do not believe, Mr. Chair, that the lawsuit has yet been certified.

The lawsuit defends seven and a half years of government oversight of the fund or discussion of the fund. It deals with seven and a half years of Conservative government rule, and it deals with four years of NDP, so it deals with about 70 percent of the time that the government will be defending will be during when the Conservative government was in power in Manitoba, and four years of NDP government in Manitoba. That is the first one, and we will at the appropriate time issue a statement of defence. Mr.

Cummings: Well, the minister also passed legislation last night; we passed legislation last night as a committee, collectively, that provides, in my opinion, some opportunity for government, and it is clearly stated, to waive the clawback clauses for tax credits, which leads me to the question: Is the ministry or anyone on behalf of this government currently in negotiations to examine and oversee or

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2925 to provide input into an offer that is currently on the table, I am led to believe, from GrowthWorks, which was hanging out there about three months ago, frankly? The report I saw yesterday did not look a lot different from what I heard them offer the shareholders when they firs t presented to the people here in Manitoba. Is the government involved, to the knowledge of this minister, in any discussions? Mr. Rondeau: The honourable member might know, Mr. Acting Chair, that the GrowthWorks proposal goes to the receiver. It does not come directly to the government.

It goes to the receiver who has the obligation, the financial obligation, to manage the fund and sell the assets. It is overseen by the courts. So the government does not sell the assets of Crocus. It is actually the receiver who has the fiduciary or financial responsibility for the management of the fund and the selling of the assets. It is not this government. So GrowthWorks would make a proposal to the receiver who is managing the assets of Crocus and disposing of them. The receiver then reports to the court. This government does not sell the assets because we do not manage the fund.

We have never managed the fund. We do not administer the fund. It is the people who are legally responsible to do that. This government is not legally responsible to operate, sell or manage the fund. Mr. Chairperson in the Chair Mr. Cummings: I recognize that, but the government has responsibility for management of the clawback or otherwise of th e tax credit. That is one of the basic underpinnings of these types of funds. So the government has a role. What is that role then? Mr. Rondeau: We have said on the record that we will not clawback the tax credit.

In fact, it is interesting to note that Bill 37 has it so that there is a discretion that in the future should a fund involuntarily or voluntar ily cease trading or stop business, that the Minister of Finance, in the future, has the discretion to not clawback the tax credit. Mr. Cummings: It is a discretionary decision. I am assuming that the government is not going to just lay back and not be actively pursuing this responsibility or actively overseeing this responsibility.

Because it is discretionary, I am assuming that GrowthWorks or their representatives would be approaching govern- ment to determine whether or not that discretionary authority would be used, because that would certainly sweeten any deal for anyone, GrowthWorks or anyone else. Whose department does that lie with? Is it this department or the Department of Finance solely? Mr. Rondeau: The Minister of Finance (Mr. Selinger) has stated on the record that we would not claw back the 15 percent in the case of the Crocus issue.

I understand from th e federal government that, if the Province does not claw it back, they will not claw back their 15 percent. * (11:50) Mr. Cummings: So the minister has not had or does not know about any discussions or approaches that may have been made from people within the industry about the possibility of enacting this clause that we just passed last night? Mr. Rondeau: The government has already stated its position on the clawback.

We are not going to claw back the 15 percent tax credit we issued, and I understand the federal government is not going to be clawing back their 15 percent on the Crocus issue. So we have been on record. We have been consistent, and that is the position I understand it from the Minister of Finance. Mr. Cummings: What is that number? It would be a known number, I suppose. Can the minister tell us what the value of that action would be? Mr. Rondeau: That is an interesting question because we have already issued the tax credits. People have already got their tax credits.

It does not cost the government any more to not claw back the tax credit. In other words, people, when they purchased the shares, received the 15 percent additional tax credit from the provincial government and the federal government. So this is already given to investors in the Crocus Fund. The not clawing it back is not an additional cost to the provincial government. Mr. Cummings: Well, there is such a thing as value for dollar in government, I hope. I am not going to get the full value for the dollar on this one. What would the amount have been, then?

Because technically, and more than technically, in reality there is a considerable loss there. Mr. Rondeau: From what I understand with the tax credit, people got the tax credit when they bought the shares. Crocus and ENSIS would have then invested the money in Manitoba businesses. They would have put the money, 70 percent, that is the pacing issue,

2926 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 into Manitoba businesses. So we already got value for the tax credit. They created Manitoba jobs, invested in Manitoba busi nesses. That has already occurred. So, Mr. Chair, the actual public policy objectives which are in this department, of creating jobs, investing in Manitoba businesses, have already occurred. That is the public policy objectives in the Department of Industry. The financial issues would have been in the Department of Finance.

They would have more information on that should there have been a clawback, but we have already stated on record we are not clawing back the 15 percent tax credit. Mr. Cummings: Well, we know that there are a number of companies who were participating in investments or had investments participating in their operations who are probably seeking relief some- where else from other financial institutions. So it is not like the original objectives have been thoroughly realized now that Crocus is in some trouble, and in fact is frozen. Those companies may well be seeking other sources of investment.

So a little bit of an overstatement on the part of the minister to say that you already accomplished your goals. Mr. Chair, you may have, on an up-front basis, accomplished them, but the long-term objective of providing investment capital is still going to create some heartburn for some of the companies that are in Crocus as the receiver winds this up. He has either got to find a buyer or he has got to have the portfolio bought out. I am assuming that the amount of money that was available for the tax credit would be a known amount. Is that amount available to comment on in the minister's department? Mr.

Rondeau: Mr. Chair, it is up to the receiver to get money and wind up the fund. It is not up to the Department of Industry or the Department of Finance. The receiver has the financial objectives of winding up the fund, managing the fund and getting the best price of the fund. I am shocked at the member. I hope that he is not suggesting that we should not or we should claw back the tax credit. I think it is good. The people who have invested in Crocus, we have said publicly that we would not claw back the tax credit. We believe that it is appropriate not to claw it back. People have made an investment in Crocus.

There has been an issue. We have been publicly on record that we would not claw back the tax credit. The federal government has decided to follow the Province's lead and so they will not get th e tax credit they received earlier. They got money up front when they bought the shares. We are not goi ng to claw back that 15 percent that they got. That would be, I believe, inappropriate. So we are not doing that, and the Department of Finance has said that they would not do that. The Department of Industry has the public policy objectives. We had to make sure that the money was invested.

The tax credit was in the Department of Finance. If they have chosen to not claw it back, that would have been a financial issue by the Minister of Finance (Mr. Selinger) as in this case or in the future cases as we talked about yesterday. We have said that, as a policy, we would not claw back. I assume that the Conservative Party is agreeing that we should not claw back the tax credit, that we should ensu re that if any people get some money out of the receiver for their shares, they get it without the government taking some money from them regarding what they got in the previous tax credits.

We want to make sure that, whatever money they get from the receiver, they get the entire amount, and we do not take a share from the government. We have given them a tax credit which we believe that they are entitled to in this issue. Mr. Cummings: I would advise the minister not be putting words in my mouth. It seems to me that I am going to have to put on record the fact that we supported the amendment providing the flexibility. No one is suggesting that the government should not do this in terms of waiving its obligation regarding the tax credit.

Given, I would suggest, the culpability of government in this whole situation, that is probably the least that they could do in order to try and provide some relief to the Crocus shareholders. The fact is that there is an implication and reality in terms of providing the tax credit and then the ongoing benefits are not there. So that was my reason for answering the question and asking the question. Obviously, the minister is not going to answer it, and at some point, the public will recognize that there has been a real cost to Treasury. It is a neat reflection to say that the benefit has already been allocated.

It has, but the actual benefit of the success of the program has failed. At some point, the government will have to held accountable for its oversight and whether or not that money that

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2927 was put out in tax credit actually benefited the economic activity that we want to have occur in this province. * (12:00) I have always said, and I do not mind putting it on the record, that this is a situation where the government–it is another way of citing what I said a moment ago, that the government can help extricate everyone from this situation by taking the action that is described in terms of its willingness to waive the clawback clause.

The very fact that that now has to be exercised probably demonstrates as well as anything to the public that government has more of a fiduciary responsibility, if we want to use that word, to oversee and to be involved with the regulation and the management of the regulation of functions such as this so that the taxpayers are able to have some satisfaction that it is not just a loophole, that, perhaps, we should have been more cautious about in the first place.

You know, we need to consider that there is a real dollar value that is attached to that, and I will let the minister think about that, if we want to take a two-minute break. I did not know where that message came from for a minute. Mr. Chairperson: We will have a two-minute recess. Thank you. The committee recessed at 12:01 p.m. ____________ The committee resumed at 12:04 p.m. Mr. Chairperson: Will the Committee of Supply, please come to order. The floor is open for questions. Mr.

Cummings: Well, I do not think the minister is likely to give me an answer, so I would conclude what I was asking by saying, does he have any concept of what the amount of tax credits that were issued on the amount of money that is–I mean, it is a calculation that I can make myself, I suppose–but the amount of tax credit that has been issued on the money that is now at risk in the fund as it is being wound down? Obviously, we are not at full value, but someone knows the total amount of money that was invested.

If we know that amount, we would come pretty close to k nowing how much tax credit would have been extended. Does the minister have that number at his fingertips? Mr. Rondeau: No, I do not, Mr. Chair, have the figure, and you are right, it is 15 percent of the value of the shares that were sold. But the reason why I do not have the number is because we very quickly determined that it would have been inappropriate for us to claw it back. So what we said was that we did not want to claw it back. We wanted to make sure that if the receiver sold the assets of Crocus, that the monies would flow to the shareholders.

The taxpayers have already been provided a tax credit when the money was invested in Crocus or in ENSIS, and we said that we would not claw it back. So the reason why I do not have the figure is that I did not look at the figure because we knew that we were not going to claw back the tax credit. Mr. Cummings: Well, just on that question or on that aspect of where the fund is at today, the receiver has, as I understand it, two or three legal challenges facing him right now, including a challenge from the–I believe it is the federation that is taking a position regarding the wind-up of the fund.

Without going into detail, the object of my question is, does the government have any involvement or status or need to take a position relative to the to- and fro-ing of the legal activities around the winding-up of the fund? Mr. Rondeau: I do not believe we have to take a position because it is rather simple. The fund is in receivership. There is a receiver in charge of the fund. It is overseen by the courts, and, basically, the receiver's job is to wind up the fund, manage the fund until it is wound up, get the best price possible for the assets of the fund, and when that is done, it will present to the court.

It presents periodically to the court, and the court is overseeing the receiver. So the government does not have a direct role in the wind-up of the fund. What we do is we have said that we are not going to cl aw back the tax credit, and we will stay out of the way of the receiver whose job it is to sell the fund. I think that is appropriate. We do not want to be involved in the management, and I believe the court's and the receiver's fiduciary responsibility, of course, is to the shareholders.

Whatever money the receiver can get for the assets, we have said we believe should go to those people who invested as Class A, and we are not going to try to claw back and take our 15 percent, or whatever, out of the assets that are sold. We want the people who have made the investment to get any

2928 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 money that the receiver realizes from the sale of the assets. Mr. Cummings: Well, there are a number of co- investments, MIOPs being one example, I guess. That does not change what–and a simple yes or no will do. I do not need to extend this any longer, but that would not change the position of the minister on this matter? Mr. Rondeau: The only co-investment with Crocus is the Manitoba Science and Technology Fund. Other than that, there are no co-investments. There are MIOPs, but not joint investments.

The joint investment is the Manitoba Science and Technology Fund that was set up by Mr. Merv Tweed, when he was the Conservative Minister of Industry. So the joint investments are through the Manitoba Science and Technology Fund, and, other than that, there is no joint investment. * (12:10) Mr. Cummings: Well, we know how many angels can dance on the head of a pin. MIOPs, it was my terminology, and the minister can play with that if he likes, but when MIOP and Crocus are in the same company, to me that is a co-investment or a co-risk. That does not change the minister's answer. Mr.

Rondeau: Our job when we do a MIOP is to ensure that we do appropriate due diligence on behalf of all taxpayers, make sure we have appropriate security. So we try to get assets secured against businesses or machinery or whatever, and we also charge an interest rate. We try to make sure that we try to grow the pie economically at the same time as we have security for the Manitoba taxpayers.

That is what we have done in MIOP and, as I mentioned earlier, that is probably the reason why we have made about $180,000 in MI OP in the last few years versus previously where there was not money earned or it lost or cost about $39 million. So we have done two things; one, we charge an interest rate and we try to get appropriate security. Mr. Cummings: How many files would be impacted by the wrapping up of Crocus? Mr. Rondeau: One. Mr. Cummings: Mr. Chair, including MIOPs, how many would there be? Mr. Rondeau: Two. Mr. Cummings: Okay, that is a smaller number than I had in mind.

The minister should know, so I will be happy to leave that there. I think we should probably start moving through wrapping up the expenditures and go to the Minister's Salary. I get a chance to ask a few questions at that point without his expertise at his ear. Before staff leave, Mr. Chairman, there are only two files that would be impacted. That is not quite as small as it sounds if we put it in dollar value. How big is the dollar value of that? Mr. Rondeau: Mr.

Chair, I understand that one loan was initially set at $1.2 million, of which $500,000 has been repaid, and there is about $700,000 outstanding which we are now in a process of trying to realize. We do, I understand, have security on that loan and we are trying to realize the proceeds from that transaction. Just give me a second for the second part. The second part of that is $2.4 million has been committed to the Manitoba Science and Technology Fund and I understand that Manitoba Science and Technology Fund is still operating. Mr. Cummings: That is actually what I wanted to know. Thank you. Mr.

Chairperson: We will begin with passing the resolutions. Resolution 10.2: RESOLVED that there be granted to Her Majesty a sum not exceeding $14,682,200 for Industry, Economic Development and Mines, Business Services, for the fiscal year ending the 31st day of March, 2007. Resolution agreed to. Resolution 10.3: RESOLVED that there be granted to Her Majesty a sum not exceeding $8,827,600 for Industry, Economic Development and Mines, Mineral Resources, for the fiscal year ending the 31st day of March, 2007. Resolution agreed to.

Resolution 10.4: RESOLVED that there be granted to Her Majesty a sum not exceeding $1,891,300 for Industry, Economic Development and Mines, Community and Economic Development, for the fiscal year ending the 31st day of March, 2007. Resolution agreed to. Resolution 10.5: RESOLVED that there be granted to Her Majesty a sum not exceeding

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2929 $142,700 for Industry, Economic Development and Mines, Costs Related to Capi tal Assets, for the fiscal year ending the 31st day of March, 2007. Resolution agreed to. The last item to be considered for the Estimates of this department is 10.1(

a) the Minister's Salary contained in Resolution 10.1. At this point, we request that the minister's staff leave the table for consideration of this last item. The floor is open for questions. Mr. Cummings: Is the minister currently a member of the Treasury bench? Mr. Rondeau: Not at this time. Mr. Cummings: Was he previously? Mr. Rondeau: No. Mr. Cummings: As a member of the Economic Development Committee of Cabinet, would it not be true that Treasury would provide analysis to that committee on various projects? Mr. Rondeau: No. Mr.

Cummings: If some analytical evaluation of projects is not provided to this committee, what stage would that occur? Is that entirely within the department? Mr. Rondeau: The department would provide information to the CEDC and then CEDC would provide analysis. If Treasury Board wanted to do a separate analysis in front of Treasury Board, they would do their own. Mr. Cummings: The minister's answer causes me a little bit of concern. If his department does an analysis, then of course they would be the lead, but would that not be done in conjunction with Treasury Board? Mr.

Rondeau: What we would do is that the department would do its own analysis, its own investigation, its own recommendations. * (12:20) Mr. Cummings: And that, to the best of the minister's knowledge, is not then vetted through Treasury Board? Mr. Rondeau: That information, the analysis, would be provided to the Treas ury Board, but Treasury Board would do its own analysis at that point. Mr. Cummings: So, when the minister's department does the analysis of a project, what are the financial limitations that are imposed on his department or on his decision-making authority?

Do the projects, as proposed through his department, at what point are they approved solely by his signature or at what point do they go to Cabinet? Mr. Rondeau: Generally, Mr. Chair, if it is a new project requiring MIOP or support or something like that, that goes in front of the CEDC that is then vetted through Cabinet. It has to be approved by Cabinet. Vetted is backwards. Mr. Cummings: I was going to ask the question about the difference between vetting and approving. The minister corrected that. So I do not need to. I think that we can probably proceed. I just want to make one comment for the record.

I think the minister and I seriously disagree upon the accountability process as I see it and as he sees it for the Crocus Fund, but I think it is fair to say that we have been reasonably civil with each other. I am now prepared to deal with his salary. Mr. Chairperson: I will read the Resolution 10.1 into the record. RESOLVED that there be granted to Her Majesty a sum not exceeding $3,640,700 for Industry, Economic Development and Mines, Administration– An Honourable Member: You missed something. [interjection] Mr. Chairperson: I will read this resolution again.

I will read the entire resolution as written from the record and into the record. Resolution 10.1: RESOLVED that there be granted to Her Majesty a sum not exceeding $3,640,700 for Industry, Economic Development and Mines, Administration and Finance, for the fiscal year ending the 31st day of March, 2007. Resolution agreed to. This concludes the Estimates for the Department of Industry, Economic Development and Mines. The hour being 12:30 p.m., committee rise.

2930 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 HEALTH * (10:00) Madam Chairperson (Bonnie Korzeniowski): Will the Committee of Supply please come to order. This

section of the Committee of Supply meeting in Room 255 will now resume consideration of the Estimates for the Department of Health. As had been previously agreed, questioning for this department will proceed in a global manner. The floor is now open for questions. Mrs. Myrna Driedger (Charleswood): Normally, as I recall in the past, every April, numbers were crunched in terms of coming up with nursing vacancies in Manitoba. I do recall that, in the past year or two, those numbers might have been crunched a little later in the year.

I wonder if the minister could tell us if the most recent numbers have actually been put together in April. Hon. Tim Sale (Minister of Health): I think the member is correct in saying, well, not I think, I know the member is correct in saying that we changed the time of the compilation so that we would catch the graduating class because people tend to register or re-register on an annual cycle.

So that time was changed but I cannot tell the member, and we do not currently have the information at the table as to whether this cycle's numbers have been crunched and entered into– [interjection]–whether this cycle's numbers have in fact been compiled. We will try to get that information for the member. Mrs. Driedger: I appreciate that undertaking by the minister. Does the minister have any numbers in terms of how many nurse practitioners we have in Manitoba practising now? Mr. Sale: Immediately, no, not without getting that information for the member.

I know the number is growing and I know our enrolment is growing but in terms of actual numbers, if she is referring to extended practice nurses which is the full registry because as she knows better than I, that the term "nurse practitioner" has been used to cover a variety of positions and not necessarily all nurse practi- tioners would be on the EP register. So I can find for her the number in the EP register relatively easily, but I am not sure that I can tell her quickly the number of jobs that are filled by positions called nurse practitioners. Mrs.

Driedger: Now I received a letter, and I do not h a v e i t w i t h m e , s o I a m g o i n g t o t r y t o g o f r o m memory.

It might have been a copy of a letter to the minister from a nurse in an advanced practice situation where they were asking for a name change, I think, or a protection of the name "nurse practitioner" because all of the other provinces, I believe, use the term "nurse practitioner." So Manitoba seems to have gone off on a different track, and I believe she was asking for us to change the legislation here in Manitoba to use the term "nurse practitioner." I wonder if there is any movement towards following along with what the nurse practitioners want. Mr. Sale: It is an interesting question.

I recall at least one letter to that effect. Whether it is the same letter or not, I cannot say, but I do recall one letter to that effect. The common term that people use is nurse practitioner. I think that that is absolutely true. The development of the regulation took over four years of discussions among and between the College of Physicians and Surgeons, the association of pharmacists and the college of nursing. There was a great deal of debate about this issue as to whether nurse practitioner was the right term or not.

At the end of the debate it was the recommendation of the three bodies together, which, I think, was actually quite a unique development in Canada–the decision was to use this RN(EP) nurse designation. I think it was at least in part because the nursing college wanted to be able to get across to the public, as well as to their own members, that the registry for EP nurses is not unlike the College of Physicians and Surgeons registry in that it is EP in an area, so within a scope of competence based on a process of accrediting that competence.

So there might be an EP in primary care, an EP in public health, an EP in trauma, an EP in anesthesia. In fact, I hope there is an EP in anesthesia at some point relatively soon in Canada; it would solve a lot of problems. So that was the decision. I am not aware of any decision to revisit that question at this point. Although it is possible there are other letters that I do not recall, but I have only one I recall. I think probably in

part it is a matter of getting used to it. I think that over time people will get used to that designation and will probably become more comfortable with it. The member had asked about numbers. In terms of practising RN(EP)s, which means people who are actually on the registry, as of February 22 of this year there were 13 on the re gistry. The first offering of the Canadian nurse practitioner examination was November 9, '05, and 11 people from Manitoba

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2931 wrote that exam. We are hoping that this number will grow quite quickly, because where they are in place in rural Manitoba, Thompson, Norway House, Beausejour, one in the pediatric ICU in Health Sciences, the remaining EP s provide primary care in Winnipeg. But we have a large number of nurses in many different places doing very much the same functions by delegation, as the member knows.

So the big difference is that if you have a nurse working by delegation, doing many of these things in say an emergency unit, they cannot discharge a patient without the physician's signature. So what that really means is that the ability to use an EP nurse in an emergency ward does not speed up the treatment of minor issues as quickly as having that person having a full EP designation would because they could then discharge people after having done whatever tests were necessary and prescribing drugs if necessary. They could then complete the treatment with a discharge.

So the quicker we can move in that direction, the more we will be able to extend our support of emergency rooms. Mrs. Driedger: The minister indicated that there were 13 on the registry, and 11 wrote the exam. Does that mean it is going to be in total then, if the 11 pass, 24 in Manitoba? * (10:10) Mr. Sale: No. What I was giving the member was the total as of February of '06 was 13. Of those 13, 11 had written the exam in November, or challenged the exam. So the other two presumably had that status, and had it grandparented for whatever reason. I do not know. I cannot tell the member that.

The college would have to let us know that. Mrs. Driedger: The number seems small, I think, compared to what I have noticed in other provinces. Does the minister have any sense of why there are not more writing or out there or why our numbers are that low? Mr. Sale: I do not have numbers for other provinces so I cannot comment on whether fully qualified EP or NPs are in greater quantity in other provinces. I would be a little surprised if the registers have that many more people on them, but I think this is part of what we were discussing at the beginning.

There are a number of places where, in Ontario for example, there are nurse practitioners practising with primary care doctors. They are called nurse practitioners, but whether they are licensed to do the kinds of things that an EP nurse here under a regulation and a scope of practice is, I simply cannot tell the member. She may know whether this is the case or not. We are supporting the ex pansion of the training program at the university a nd very keen to see that happen.

There are jobs available for any nurses we can recruit both in urban and rural Manitoba, and we have instructed the RHAs that when they decide to hire an EP nurse that they are to treat this as a permanent hiring and not as a stopgap. In other words, it should buy system change in the way in which we practise whatever it is they are hiring that nurse to do, whether it is primary care or some other form of care. I am not interested in seeing nurses hired into these kinds of positions and then let go when there is a doctor available.

I think we need to buy the change and make it plain that this is expected to be system change, not just temporary, because I think we have seen that happen at times in the past, and I do not want to see it happen again. I am sure the member does not either. Mrs. Driedger: Considering the person that wrote the letter to the minister, and I believe she is probably speaking on behalf of a large number of the nurse practitioners out there, would the minister be willing to have a closer look at her letter and give some consideration to the request to change the name from extended practice to nurse practitioner?

There is across Canada a nurse practitioners' association and that is the term they are using. I just wondered if Manitoba would be willing to have a closer look at that request because I do not think she was just a nurse on her own putting forward that letter. I do believe that it could be bigger than that. I just would ask if Manitoba would have a closer look at that and see if there might be a willingness to do as they are requesting. Mr. Sale: The principle of what the member is suggesting I have no problem with, but the way in which a professional college or association regulates itself is through

an act that they put forward. Obviously, the Legislature has to consent to it, but they put it forward. The EP regulation did take a lot of conscious effort by a lot of people not just in nursing, but as I have said earlier, in other professions. So I would think that that kind of request would properly have to come from the association, from the college, and certainly, if their recommendation is to review this

2932 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 and canvass members, you know, do a process and then, say, come forward with a recommendation, I would think that any government would probably accede to that recommendation, but I really do not think it is up to the government to intervene with the question of a name that is protected under title, title protection. Maybe the member disagrees with that, but I think I would be more respectful of the profession as a whole and say, this issue has come up, do you want to look at it? But I do not think I would initiate that process. Mrs.

Driedger: I do not have any problem with that way of looking at it. You know, I can certainly follow up, too, with the person who wrote us the letter as well and just indicate that that maybe should be the process that they follow is to work through their college and formalize it. I mean, it would probably be fairly easy to do after the fact then or later on through an amendment to the legislation in the fall or something. Mr. Sale: We would have to check to be sure, but I am actually fairly sure that it is not in the legislation. I think it is just a regulation.

I think the legislation provides for, in a generic sense, the ability to have sort of, I do not want to use the term "ranks," but whatever that would mean and then the regulation prescribes it. So I think it is actually just a reg, but we can check that if the member wishes. An Honourable Member: No. Mr. Sale: No, okay. Thank you. Mrs. Driedger: How close is Manitoba to looking at nurse anesthetists? Mr. Sale: I am glad you asked that question.

Some 60-plus percent of anesthesia in the United States is administered by nurse anesthetists, and there are over 90 programs that train and certify nurse anesthetists that are university-based , usually in a medical college allied with a nursing college. I have forgotten the absolute numbers, but I think it is over 6,000. I think when we looked at this last year, I think it was over 6,000 nurse anesthetists. They are not doing the very complex eight-hour surgeries, but they are doing the vast majority of surgeries and therefore freeing up considerable numbe rs of a profession that are in very short supply.

So I am very favourably disposed to this issue. The member probably knows that the medical profession is somewhat reluctant to investigate these kinds of newer models of providing care. So I think it is something that does bear careful thought because, with the newer anesthesia techniques, the automation of monitoring in terms of blood gases and where a patient is at in terms of sedation level and the brevity of a lot of surgery, in fact the localizing of a lot of anesthesia.

I was watching someone yesterday at Seven Oaks with a spinal block having pretty complex surgery and fully conscious and quite absorbed in watching the process, which I must give that person credit for because I am not sure I have that level of courage, but apparently it was pretty fascinating. So I think it is a very good question, and I think it is one that is well worth having more public dialogue about because it is frustrating to have a profession that is in very short supply and takes 12 years to produce and r ecognizes long hours anesthetists are working but is anxious about exploring alternatives.

I do not think there is ever going to be a shortage of work for trained anesthesiologists, and it seems to me that it is the same issue we are facing with nurses who become EP nurses and extend the capacity of primary care and specialist physicians. We are looking at it with physician assistance. For example, there is a proposal currently before the U of M to expand our physician assistance training capacity.

We already train Canada's armed forces PAs at Winnipeg and we are the only province in the country that actually does that, and we are the only province that licenses and uses PAs in our civilian operating theatres. A lot of our success at Concordia is directly related to having PAs available to the orthopedic surgeons to extend their capacity and make their productivity so much higher than it was in the past. * (10:20) So I think the medical profession itself is changing.

I hope that relatively soon there will be an interest in saying where are all the places where optometrists, nurses, pharm acists, physiotherapists, all of whom have specialist knowledge that can greatly extend and support the physician. That is, in a general sense, we are well aware of the opportunity. There is no training program for anesthesiology in Canada for nurses. It is simply not a recognized profession. My own view is that it should be. Mrs. Driedger: I certainly would support that.

I would certainly support looking at it fairly aggressively in this country, and if Manitoba could play a leadership role in any of that, that would be

June 2, 2006 LEGISLATIVE ASSEMBLY OF MANITOBA 2933 fabulous. I note that we are consistently short of anesthetists here, and right now six and a half, according to the last Freedom of Information. I am not sure that is ever goin g to change much so this sounds like a really good opportunity. If there was a way to look very closely at that and move more quickly in that area, plus other areas where there would be, I think, good opportunities to look at the shortages of professions down the road and find out where we can plug some of the holes with other disciplines.

I like the new Pharmaceutical Act, where pharmacists are now going to be having an ability to prescribe medication. I have always thought there is a big role that they could be playing in the communities. They are right there. I sometimes stood and watched them talk to somebody who has come to pick up medications and noticed that we have really got an uptapped source there if we really looked at a lot of the professions out there that could play more of a role than what traditionally maybe has. So I am glad to hear that the government is open to all of that.

Can the minister tell us how many fast-track systems are in place in our city ERs? I understood that one of the recommendations was to establish fast tracks run by nurse practitioners. Mr. Sale: If I can just revert to the previous comment first. I see the pharmacists act as a non- partisan act. It is not one that I think we have a particular, you know, there are no partisan elements in it, except I guess in the sense that we think, along with the member, that the additional role of pharmacists is something that is needed, and it provides us with an opportunity that I do not think we should turn down.

So I really hope that we can facilitate this act to get to committee as soon as we possibly can. I know that the member opposite has indicated support. I believe that the Leader of the Liberal Party has also indicated support, so it would be good if we could get that moved, because the sooner we can get into the regulations and get them done the sooner we can actually start to use that capacity. So I just hope we can figure out how to get that act completed before the Legislature rises. In terms of how many fast-track programs exist, I am not sure we can tell you without checking with the RHAs.

I am told that at the present time there is a minor injury clinic at Pan Am which is essentially a type of fast track. It has been very successful. We have put about 24,000 through that in the first year, about 2,000 a month. It has flattened out at about 2,000 a month. I think as the public begins to understand more clearly that Pan Am is a wonderful place to go for injuries, particularly any kind of soft tissue or bone, joint, mechanical type of injuries that this is a great place to go, because they have immediate access to physio.

They have all the diagnostic equipment required to deal quickly with those kinds of things. It is absolutely fascinating when you look at–I get a report weekly on ER use, volumes, and when you look at Pan Am, it is absolutely consistent that Monday, they get a great big demand on Monday and it tails off to Friday and then it grows again, as all of us take seriously the need to become fit but perhaps more aggressively than we should. It really follows the weekly pattern, and it seems to be absolutely predictable. Summer or winter, it does not matter.

It is busy in the beginning of the week and tails off towards the end of the week and then gets busy again. So that clinic is now open seven days a week, Monday to Friday, 8 to 8, Saturday and Sunday, 10 to 6. If we saw more demand outside of those hours, we would be open to extending that further. New positions have been created in each of the emergency departments, reassessment nurses. I think the member knows that. The minor treatment stream fast-track was initiated at HSC on July 1 of '04. The point here is to try and use nurse practitioners and get as many hired as we can. That is our problem, is the supply.

So the nurse practitioners are present there 12 hours a day, 7 days a week. Minor treatment fast-track stream was initiated at Miseri some years back and Seven Oaks currently, and as quickly as we can hire nurses for the other hospitals, we will move to do that. I had a chance yesterday, a very nice opportunity to visit Seven Oaks. In the lobby of the hospital now, on the main floor, if the member might be interested, if she is heading out on the weekend towards the north, dropping in at Seven Oaks and taking a look at the schematics for the new emerg there, is posted in the lobby.

I was talking with the head of Emergency Medicine there, and he said this is the first time that, in Winnipeg, they have had an opportunity to design an ER based on traffic flow, that instead of starting from architectural design principles, to start from treatment principles.

2934 LEGISLATIVE ASSEMBLY OF MANITOBA June 2, 2006 So it was very interesting to see ho

Document details

Collection	Manitoba — Debates (Hansard)
Citation	38-4-82
Type	hansard
Volume / chapter	38th 4th hansardpdf 82.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	984e2a5adbaa364fc4e39bcb63a0e64194722946

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