l Volume 1 ( PROVINCE OF NEWFOUNDLAND THIRTY-SIXTH GENERAL ASSEMBLY OF NEWFOUNDLAND 1st Session VERBATIM REPORT Thursday, May 4, 1972 SPEAKER: THE HONOURABLE JAMES M. RUSSELL Number 11

The Bouse l'let at J~oo P ,1". '·'r. Speaker in the r:hair. lt is a great pleasure for me to welcome to the ..,onourahle ~ouse today Ttie Second r.amho Ranrer Group 1.:ith t heir leadt>r :1rR. LlRiP Tl,oms. A r,roup nf forty - five r.rade l X frol'I St Pius Tenth Girls School t•ith their teacher ~lrs. Furlong. A group of fifty - five Grade IX students from the Glovertown Repional lli 11h "chonl with their teacher,; Hr. El t iah Fel thasr. and 'Ir. f'tanle y Sparl<es. and indee d any other visitors "1ho are ncre today. IJe trust that vour visit here will he most enioyable and rnoi;t interestinsz. PETITIONS '1R.

I'. S ._ Tll0' 1S: Hr. ~peaker. l he~ leave to prei;cnt a pl!tition on behalf of the residents of Travt01m, Bonavista nay. Also Mr. Sr>eaker T her- leave to present a petition on hehalf of tile peoolr of C.ull 's l!arhour, Bonavista. The prayer of thei;e t1,•n • etitinm;, 1!r. Snea ker . is that the hiphway frol'l the 1-'.astport l':11!:hway to the To1.-n of Travtown also on to the Town of Cull's Farhour he upizraded and paved. Also Hr. Speaker, the prayer of this petition also encloseR the need for the UPl!:radinr and reconstructi on of the presP.nt Cullsway i:ause'l,7av.

As honourable members of this House realize Cull's 11arhour is one of the few communitieR that in the past have heen deisolatecl hecaui,e of a combination cause'l,7ay and hriclJ?;e, However. "'r. Srieaker. hecause of the time factor the deterioration of the hridr.e hecause of Peather conditions and especially durinii: this past winter 'l,7e have experienced one of the most severe winters in our history, the oiles in under a riortion of this hriclpe are deteriorated to a ooint where so~P of them have been hroken off hv the flowinp. ice. 698

Tape 258 T'I' - 'J '.:,I!. T_l~•_c;_: The rrayer of the r,etition. !!r. Sne11ker. :Is thilt thii; c11ui;e1.1.tv he extented ,that nart of the rre!lent structure he tal· rn out and tha t a concretP hridr.e take the pl3CP. of t t. T aRI:, '1r.

Spraker, that thei,e petition!! he laid upon the t arle nf this House and referred t n the departme nt tn which it r el ates. ••r. i:11eaker, { t ~ { vrs P1e pren t plea!lurr to suprort the pPtitfon 111st tahlrd in the honourable l'om:P nreRente1I hv the honourahlE> memher rnr r.onavi11ta =,orth rer,11eRtinr repair<1 to the causeway hen•·en C•1Ll 's flarh , ur nnd Tr11yto1,'11. ~ir .

T think ft ls moqt annronriate and fittin p that t hr hnnoura~le mPnher "hould rre!lent a petition nn a dil\' vhPn so m;inv of hiR younJ? con!lt:ltuents .-ire sitter! in the honourable llou!le,ar:d t o s eP ho~• ct,e hononr.t rl<' r:emt-,•r iR in th,q••· h;ittlinl.' for hfs cnnstit11Pt>t s . T fef!I. sure. "r. ~reaher. that the <lerartment rr.<1i,onsihle fnr tht s cause~•av wiJ I ser thrir 1.1:iy clrar .tt an Par.lv date ;ii; r,osc:i!,lp to mnlre t 1•e nr.ccR s;arv rf'l'lnir,:; so th.1t thr ncnple tn <:ull 'R l111rro11r will continue to en.:or thts ir.irort,mt I ink w:lth Trayto'-'11. HO'l. ,\ • .I.

HURPIIY:_ (!'lNT'-TrT: OF !'ROVU!CTM. AFF'AIR~) • "r. <:neaker. H T mnv for ju"t one mo1t1ent I "ould like to surport this pPt1t1on also. recall in 1'168 during th" last: frc!eral election 1 vas in this are11 anti these. penplP vr,:e !ltU.l i;ufferinp. the same condition!!. So T certainlv honr. that our f(ov e rnment can see its wav clr.ar. if thrrc is nnv rnonev left.to improve some of the conditions in this narticular area. 699

• ~- J • • _ , .. - •'-t'""' .. .., • .. J~ 'ln motion peti tion received. HO!, A. SENIOR: Mr. Spenker, I beg leave to introdu ce a petition on behalf of the residents of Brown's Ann in Lewisporte District. The prayer of the petition ia that thia road from Lewis porte to Brown's Ar111 be upgraded and paved this year. Mr. Speaker, I do not think it is necessary for me to go into too many details concerninp the situation at Brown's Arm because I believe most of the people in Newfoundland are quite familiar with the situation as it exists there.

As most of us know, Brown's Arm is the location of one of the most extensively used P,ravel pits in Newfoundland and the road leading out of Brown's Arm is not paved which results in quite a dust nuisance to the people who live in this vicinity. Also, on 11any occasions I have driven over this road and can say that a ~reat danger exists here because of this dust situation, especially to the school buses which operate in this area and a particular nuisance to the people, Mr.

Speaker, who live in this community who are unable to open their windows and doors in the sulT!Dler time, who are unable to do such simple things as hang their washin ~ out to dry , It is for this reason, Mr. Speaker, that I support this petition and beg at this time that it be tabled in this honourable House and referred to the Department to which it relates. MR. HARVEY (J.B.): Hr. Speaker, I would like to support the petition presented by the hon. Minister of Community and Social Development.

I understand the problem with the dust, especially concerning school buses travellinr, over unpaved roads and the same problem with hanging out the wash and the other proble111B that the hon. gentleman mentioned, I would also add that the area I represent, Hr. Speaker, has no pavement whatsoever, all dirt road s for sixty miles,and I understand the situation that exists in Lewisporte . So I therefore support the petition also. On motion petition received. 760

Hay 4, 1972 Tape No. 259 NC - 2 MR CROSBI~: Schedules "A" to "J" of Bill No.55 to be debated this afternoon, with signed originals for the House. A copy has been supplied for the Leader of the Opposition and the press have several copies. ORDERS OF THE DAY: MR. NEARY (§.A.): ~r. Speaker, I would like to direct a question to the hon. Minister of Hines, Ar,riculturc and Resources.

Can the hon. minister inform the honourable House that it is correct that the employees of Newfoundland Farm Products are on strike and if it is correct as reported on the radio to~ay,that Treasury Board has refused to negotiate with these employees? Is is also correct, as reported on radio, that the government has implemented a wage freeze on employees either getting their pay directly or indirectly from the Provincial Treasury? HR. CROSBIE: Hr. Speaker, the rumors that the hon, member is repeating is not correct.

Certain employees of NewfolDldland Farm Products Limited, which is the crown corporation that operates the abattoir and poultry processin~ plant at Pleasantville, did not turn up for work this morning. Whether they are on strike or not 1 do not know. If this constitutes a strke, then they are on strike. These are members of the Newfoundland Fishermen Food and Allied Workers Union. 701

Mr. Crosbie. last year ne~otiated and entered into a collective ar.reement with government on behalf of the employees, That agreement expired Aprill, 1972. Negotiations for a renewal of the agreement had been in progress since March l, 1971.'l"here is no wa11:e freeze as the hon. member suggested nor is there any refusal to bargain on the part of Treasurv Board. The last proposal which our negotiatin~ committee made to the union on May l would provide a minimum increase of twenty cents an hour for all employees. That does not sound to me like a wa~e freeze.

We a~reed to make adjustments in rates for some classifications which would provide increases ranging from thirtv cents to fiftv-two cents an hour for the employees affected. There were thirteen of them. That does not sound like a wage freeze. In addition to the proposed wage increases, we agreed to grant two additional statutory holidavs bringing the total up to eleven, The union negotiating committee called a meeting of its members on Tuesday, Hay 2 and put our proposal to a vote. We were informed that approximately two-thirds of the members present voted to accept the proposal.

The eleven employees who voted against it insisted that another meeting be held and another vote be conducted. The negotiating committee agreed to the wishes of the minority ~roup and another meeting ~as held. The vote was conducted after that meeting and rejected our proposal bv a narrow margain. The union made certain last proposals of their own; effective Aprill, 1972.

They wanted a fourteen per cent or twenty-eight cents across the board increase for all classifications and another ten per cent on Aprill, 1973 across the board for all classifications; effective January 1, 1974, they wanted an eight per cent or sixteen cents across the board increase to apply until October 1, 1974 thus making it a twenty-seven month contract. In addition they wanted an additional two per cent or four cents increase for the abattoir workers only at each stage in the above rates of pay, two additional statutory holidays in the first year and two in the second 702

May 4. 1972 Tape no. 260 Page 2 Mr, Crosbie year of the contract, The employees who were a minority at the first meeting now are a ma1ority and are insistin~ that we accept their proposal. We have a ~enerous offer to the union concerned, If they do not wish to accept it, the next stage for them is to withdraw their services if that is what they whh to do. I WOl•ld like to point out that the position prior to 1971 was that the avera~e wage in the plant was $1.65 an hour. The rate of pav for the lowest paid classification then was $1.10 an hour.

That was in 1971 , After the negotiations of 1971, the average wage in the plant rose to $2 ,00 an hour. The rate of pay for the lowest paid classification was $1.50 an hour. Those increases granted last year averaged out thirty-five cents an hour or twenty-two per cent. They ranged from twelve cents an hour to eight-one cents an hour or from six per cent to forcv-eight per cent. They already have had very generous increases last year, If our offer were accepted this vear, our final offer, the average wage in the plant would be $2.23 an hour. The rate of pav for 703

,..av 4 • 1972. Tape 261. P.ir,e 1 . the lowest oaid classification "1ould be $1.70 an hour. Our waj!;e nffer orovido s a ~·entv cents an hour across the hoard incrense or ten per cent average increase. Ad,1ustments have been made to certain claRRifications whi.ch provi rle for additional increases up to thirty -two cents an hour for thirteen emnlovees. We have made a very generous offer to the union. New­ foundland Products rorporation itself is losinr · .onev, has lost monev from its incep•fon, is still losing money.

If the majorJtv of the employees in the bargaining unit are not satisfied with our last offer, then it is their ·i~ht to strike if that is what they wish to do. As to whether Chev are on strike at the moment is not ciuite clear, the matter mav he settled today or tomorrow. That is the decision. There are some cor,ies here, one for the honourable gentleman, of tht.remarks that I have just outlined and some for the press. So there haR been no wage freeze and no lack of willingness to haroain. The union has rejected our last generouR offer. '-IR,HARVEY: Mr.

Sneaker, I would H ke to direct a ouestion to the 'Minister of llighwavs. Has he been contacted bv anvhodv in mv district, Labrador South, concerning the road conditions pert ,dninit to or between West St. ModeRte and Pinware a distance of three: miles. T understand the school bus could not get through there for the past four or five davs . 1,as he been contacted, has an thing been done to clear that road of s· ow and slush so the kids can go to school? HR,\lAYNARD: No, Mr. Speaker, 1 have not been contacted oersonallv regarding anything from the district of Labrador South.

The officials of the department mav have been, I will check it out this afternoon when I ~et the chance to talk with the officials. 'ffi.THOMS: "-Ir, Sneaker, I \<.'ish to direct a question to the 'Minis ter of Health. In view of the fact that the doctor in the Glovertown area has been sick approximatelv six wee·s and will he off duty for some time to come, is there any plan to temporarv orovide medical services to the Glovertown area until the present doctor is back to work? l take notice of t hat Mr. Speaker. 704

'lay 4, 197: Tare 261 rar.~ 2. )tll , RORERTS: Mr. Sneaker, mav I ao;k a ques~ion of the 'linister of Finance? I wonder if,' ere are anv ar,reements which the ~overnment are required to table under

section 43, of the original Melville Puln tr Paper l.td. Act, this ii. the one th11t requires all a~reements entered into hv the government under the terms of that act to be tabled withf.n fifteen rlavs. r helieve thi10 is the fifteenth day.

We m11y have that theoloi:ical ar~ument 'Ir. ~neaker, µIJether it hi ftftcen sit tinµ days or fifteen days from the hci:innlnr of the se11sion. 1 wonder if there arc any a~reements to he tabled on this and when we rnip,ht expect them? 1-'ILCROSIHE: Th~rP ;ire no apreements to he tabled that J know of,"r. ~peaker.1 can h~ve it chec~ed. ]f the honourable r.entleman feels thPre 1s some agreement, we s,ill he glitd to table it. v~.ROBERT~: T ttonde~ if the agreement,; under which the interim financinr. which we lo.'ill rlouhtless he dtscmising a little later; some advances were made under sectton 6 & 10 cf the ~ct as amended, MR.CROSRIE: l have no nb1ectic,n to tahltnr, those if vou want them tabled.

MR, P..llBERTS: I cannot fin cl my own ORDl::RS OF THE DAY: 765

Motion. second readin!( of a Bill, ''An Act To Ratify And Confirm ftn Agreement ~ade Between The GovernmPnt And rertain Companies l!elatinr To The Linerboard '!ill At Stephenville /.na To Provic!e l"or Certain ~atters ~elatinp. Thereto.' . HON. J .c .C'l!Oc;BIE (Hinister of t:"fnance) ! Hr, Snenlter, T rise r move second rend:ln~ of this Bill, the c;tenhenville Linerboard ~1 /let, I <!72, if it is passed hv the House of A!'lser,bly. and Ai;treement ~1r. Speaker, it was 1ust about four vears aJ?o "'hPn l resir>ned from the Smallvood ftdministration, "ay 14, 1968. It ~dll he four years in ten days. I resigned, Hr.

Speal·er, because I disa~reed with the financial and economic development policies of that p.overnment as I outlined in a letter to the Premier of that day. The ' frmedinte occeaion waa the oil refinery pro1ect. The basic reason ~~as disal!ree,,,ent with the approach of thot rovernment to economic: developmt>nt and to the financial matter .ind to the financial prohleirs of this t"rov:lnce. T believe. ~r.

Speaker, that the events that I wfll recount todnv in connection uith the linerbm,rd tr.il l at Sterhenvillr. will more than c1mr,ly demonstrate that that was a rfpht decision and 111y only rerret is that the ~overnr,,cnt that toolt that arproach uas left to remain in office until January 18, 1972 to carrv on as it was carryinp. on with this pro1ect arnonp: others, because the i,ill that we are introducinr here today and as~inp. the House to pass is an attesnnt to salvare somethinJ!, to salvage a situation that should never have happened, that should never have occurred if proper, competent ~anagement and administration had been in effect in this l"rovince in the intervening years.

At second readinJ? of the Bill I would like to outline brieflv . if T can, the history of this nroiect, the linerroard mill at Ster,henville and the develoPl!'ent of the lo~ginr. complex at r.oose Ba}'. What hanr-ened between .Tune of 1971 and January 18. of this year, when 766

''ay 4. 1972, T:me 262, Par-e 2 -- apb the ~foore 's ,\dministration took office. To show members of the House P.nd hopefully the public what the situation was when thP P.r.Administration tool· over control of the affairs of this rrovince on Januarv 18. How desperatP the situ.Ation wns, what state the pro1ect wa11 in nnd why we have h:td to tnlrP the stens we hnve tal·en since, which are the nnlv steps thnt could have J,een tnken to salvape this pro1ect and attemnt to save the ~110 inillion that the neop l e of Newfouni'land nlreadv have in it. 7G7

• ' After doinr. that, "r. Sreaker. I pror>ose to 011tl ine uh11t haJ>pene<l from .Januarv lR, 1 q72, the date endinr. up in the Ae:reement Entered Into l!etween 'lhe G'.lvernment .lnd The Javelin C'ormimies which hopefullv the House will ratifv.

Tt will not become effective until the !louse does r11tify the hi U bv passim• this ler,islation and I flt"onose to outline hc-w we propose to c.1rrv on with this project in the next few months nr several vrars in thr attemnt tc- m11ke it viable, in an ntte~pt to keep it Of1er11tin~ anrl in .1n attempt to l'lakr it n s11ccess which we hoJ>e it will he and which we think it will have a fair chance of beinr. hecamie of the steJ>S we hnve talcPn nnd are takl ng. I hel ieve. t-'r.

SJ>caker, in all the annals of industrial develop­ r.ient in C:anad.i that this is one of the prime illustrations of how not to nroceec! with industrinl or economic development. There have been somewhat similar examples in other provinces and thin. I would snv, is in the catenorv of beinc amonl!, the worst of them.

The reason or part of thP reasons for it are that the nrnvinces, certainly the poor ones,are desnerate for development and therefore fair rame for anvone who nroroses to come alonJ? to start 11nythinP. have very little money of their mm to do it with and want to use thr nonev of the peonle of the province to carrv out the: r J>ro1ects .

I for one would not have to care or this r.overnment would not havr to care essentially,if there was no public monev in this.how it was beint run . llut this was a project, 1'1r, Spe11ker, that from the start was to be financed almost entirely by government and the safenunrds that were instituted and the controls that were effected and the soirit behind them were not suffident as we will soon see. ~ow, Mr. Speaker, this started in 1967 ori~inallv,with le~islation 708

May 4. 1972 JM - 2 ~-. -~RO_S.f!.I_r.: cnmin,:t he fore this l!ouse, which authorized the entering into of certain a1?reements with Melville Pulp and Paper J. imited which aften:arrls became Jave lin P11per Limited. Amon11: the d;mses was clause (

f) er.i11owerinr t he J!overnment to 1tuarantef' one 1mndred and s eventeen french fran cs and twentv-seven millinn f i ve hnn, !red thousand dn ll 11rs in C:anadi :m or ll .S. C'urrency to be raised bv that co~nanv for the purpose of a linerboard mill pro1ert £t 'ltephenville. Th;it amounted to some $53. l'lillinn.

The bill al sc, c nntnined clause (10) anrl clause (10) stated tha t notw:f thst11nd 0 ing the other nrovi sinns of th,~ a ct and in addition tn the rn,1rante PA ,111thnrize d elsewhere in the 11ct, thl' 1?nvernment mav suh1ect t (lo thl' nrior annroval of the> LJtm tenant Governor-in-Council r u;iranter quch loan s and indehte~nPss nnrl other o~lir.ations and pav or i nvC'i; t !'Inch r,nni es 11nd e xtend ,rnc h C" Tedit anrl enter intn, execut e 11nd deliver all surh further and other ap.reements. contr11cts and und e rtakini:-s as the rnvPrnment mav decl!' necessarv or desirahlr to r,rnvirle 709

!iR. CROSBIE· directly or indirectly for the establishment and operation in the nrovince of the mill referred to in

section two. In other words this llouse, nr. Speaker. a,·thorh:e the government of that dav to J?;uarantee additional monies if it deemed it necessarily desirable to help establish this mill in the province. I was one of the members of the povenunent that put that before the llouse,rep.retfully. The House therefore put a tremendous discretionary po1,1er in the hands of the p.overnment of the day. And the p.overnrnent of the day ahused that discretionary po\.•er and used this

section of the net to increase the r,uaranteei; under the act from $53 million until it ended u11, hy the da •~e, Pe had taken it over, some $110 million. That

section cort mplated that there mi~ht he some increases necessary. It mip.ht be a fe1,1 million dollars somethinv that 1-1011ld need to he done. the )!:ov,~rnnent Pould have to p.uarantee forever. Passed in 1967. The Liheral 1uhnfnistratfon used it to practically double the J?uarnntee, refm~ed to rsive information tu the House ahout it. Refused to ,.1ve information to the puhlic and completely ahuserl the discretionary power it was piven. ~fo one anticip11ted that when the clause was passed,hut ft :fs obvious that there should be no more similar clauses in any other lel!iRlation. That was suppose to be, Mr.

Fpeaker, an aj!reement between Canadian Javelin Limited, the Government of Newfoundl and, Societe F.nsa of France associated with Schneider-Creusot and r.orfu r.nnstruction Company. The various contracts were tabled in the House at that time. Jn 1Q68 amendment was passed to the act authorizinl!, ~ecauRe in 196R, '·Ir. Doyle discontinued his arrangements with the 'F'rer,ch interests­ an amendment was pasaed to make the guarantee ~53 million in Canadian or U.S. currency. That was Hay 23, 196R. J helieve at that time, !-Ir.

Speaker, the concept was that there would be a mfll at gtephenville, a lor,ging operation at Goose Bay, there would he a woodchip mill at Goose Day, the woodchip mill would take the ra~r logs and turn them into woodchips. The woodchips would 710

1-(ay 4. 1972 Tane 264 PK - 2 MR,~~ be transported hy two 65,000 ton vessels from Goose Bav to Stephenville, where they would he used in the linerhoard mill, It ,Jas stated that the feasibility of all of this depended upon transportation,of these two larr.e vessels carryinr. woodchips. At that time the pro,lect was suppose to co~t, includinir SlR million for the two vessels , ahout c; ion million_ some'IJhere in that vicinity, includinp; the vessels. vorl :inp. capital and the rest. At the end of l '>(,r, and, hy the way, Hr.

Speaker, in all these early arr ms;ementi; Javelin was to completelv finance the 11oods operations f.n 1,ahrador it11elf. The Government of :-Jewfoundland "'ere not t I he involved 1.n the ffnancinr. of their wood operat:fon11 in J.ahrador. Thcv ,;ere to arr:mp.e that themselves, The ~53 million was to help complete the mill. At the end of December llJ~R it was announced t~at, and by the 11ay. ''r.

Speaker, ~.~ \.'SS proposed then that there would be an A~DA p.rant of c;5 ~illion to the pro1ect and the federal p.overnment had to spend some ~20 million dredp.:fn~ and makinR harbour improvements at f.oose Bay and ~t el"henville sn that these t1.o lar~e shipa could use thof'e r,orts, an,ountf nr tn ahout '>20 million. At the end of December l'>fiR it was announced hy itr.

Smallwood that this concept had chnnJ?ed,the woorlchip mill was now to s;o in Stephenville not to be in r.oose ~ay and that the wood was to he broup;ht from Goo11e Bav to Stephenville in the form of loJ?s, 'IJhich would he transported in 11maller ships. As to why this chanp.e was made, I was never clear on it. I think what happened was that the Government o f Canada refus ed tn s pend $20 milU .on on extensions and dredRing of the harbours at Goose Bay and Stephenville for these l arge ships hecaus e i t was not satisfied that the project was fea sible , Jt had i tR own s tudf .e,; done.

There were too many p;aps in the pro.1ect. 711

MR. CROSBIE: There was quite a fuss in Goose Bay at the time, as we all remember. Then, "'r. Speaker, this was changed,of course, the reason;the economical transportation of woodchips by these two large vessels which was so vital to the project a year earlier had now di sappeared. And no real reason was ever given for that. Then it was announced on ~ovember 21, 1Q69 that the Smallwood Administration, includin~ some of the gentlemen onnosite, had entered into an agreement on the linerhoard mill. AN l!ON ._ !!.f'~'t;FR: 1naudi1'1e. HR. CROSDif.: No, 1-lovemher 21, 1969.

I was gone myself since May 19fi P. , I would have been gone in November 1~69 certainly. Hut I was p,one in 1-lay of 1968. ~~-' On November 21, 1%9 the Linerhoard HI!] ::rrornent hzd hu ;1f:1 a:!!1'1 This was when the government entered into a govet'Tll!lent p,uarantee agreement wi.th Canadian .Javelin Limited, .Tavelin Paper, Javelin Forest and NAT.CO for the financinp. of the construction of the mill at ~tephenville. There was suppose to be a construction contract with McAlpine Construction Company, which is an F.np.lish company.

The financing 1.•as to he done throup.h Lazard Brothers in England with the financing guaranteed bv the English Export Credit Department that is p.uaranteed the Lazard's hy them, not guaranteed, we were still guaranteeing ultimately all the financin~. That the Finnish Firm of Rauma-Repola were ~nin~ to construct the woodroom or chip mill and the contract entered into with Walmsleys of Hury Limited of Enr,land who were ~oin~ to supply the linerboard machinery and equipment. This all heing financed under Lazard nrotherB and F.,C.G.D. Jt waR reported in the press then that the loans total $41,4 million.

It v.as $120 million proposed comolex . The figures chan~ed everytime you looked at a clippin~. Javelin was ~oin~ to harvest RS0,000 cords of pulp wood annually from the vast reserves at Melville, 712

Kav 4. 1'172 Tape 264 PK - 4 ~ -- CRO~RIF} 55n,onn for the mill and 300.000 cords a vear as eXf1ort •••ond and so on. Grevhound Leasing was :In it and Grevhound l.eaainp was out of it and so on ilnd so forth, J.ate.r . I. think it waa in 197() i.t was revealed that the Y,overnmPnt 's 11:uarantee had Jione to $58 million, 55/1 ,86(),0nl). This 1,.•as revealed in the session of 1g70 1-1hen nuestions 1Jere asked. There is no point in rlvinr. all the details, T do not thin!: so. There ls the HcAlpinc Contract nnd Walm1deys and financed hv Lazard 's and that was ~58,860,() 00 .

Then there was a 1:Prman loan of $1 7,oOn,nrm. fome nf whJch will he duplication.~nvwny enclinr up with a total 11:uarantee of ',58,Ri;O,OOll, So what •••ns renorted in the pres11 in ;!oveMher 1969 is a $41 million loan, was not that at al I, <:SR r, fl lion . $5 mi1 lion more than the $53 mU lion nrovided for in the l c-r1 slation. f\t that time in anv event, that t-ras uhen thel'<e agreements wen• entered into, construction contract. R:i,,na-Rer,ola and the rest of 1.t. Tt was st:11 1 thP position, Hr.

Speaker, that Canadian Javelin Itself va.c; tn finance the 11cti.vitfes that 0-•ent on in Lahrador, the harvestinp of e ufp~ent and ~enerallv. There •••as il nr:lv11te me111hers' resolut ton tablet! in i<l70 renuestinf,! that a select commi.ttee he aprointr.d to look into what va~ haopeninp to date and reoort hick to the t!ou11e. That wts voted down !iv the povernr,Pnt t,1ho dJ,I not Pant to rive ilny information on this )lro_1ect at all.

On A11r11st 5, 1 o ?n our nast Prenter announced that the province's fifth mill for nrocessing forest :·roducts will be huilt at Steohenville at a cost of $72 111illton to produce 11,050 tons of sulphate pulp da:lly, That ft would rr. huilt hv .lnvelin Paper next to the linerboard mill. That was the announcement of Aupust 1g70. That fift mill to produce sulnhate pulp dnilv fs not at ~tephenville and ~oth:ln~ has hePn heard of it rPCP~tlv . 713

Mr. l;rosble. I assume it is not going ahead now. But that is typical of the kind of poppycock and sillv puffed up announcements that usm to come out every month or two in connection with this project and others, It was not until the end of March, Mr. Speaker, 1972, that we got some inclination of the fact that the project was getting into deep trouble. Did we get that information from the administr,,tion of the day? No, Sir, we did not.

We got it from a prospectus that the government had to file in New York because the government were borrowin~ money down in New York, the Liberal Administration• That was March, 1971, borrowing $25 million. It was a public issue and to comply with the Securities and Exchange Commission Regulations, the go,ernment had to give the facts, the financial facts that affected the province. ln that prospectus, Mr, Speaker, not from the government, not in this House, we learned that the cost had now increased.

The cost had increased,according to the prospectus, from $75,3 million to $91 million, which is a $15,7 million increase and chat the province's liability had now increased to S75.3 million. The province's guarantees are now up to that, including the $2,850,000 loan through the Bankers Trust Company down in New York and the prospectus had two pages of details on this situation. Mr. Speaker, the Guarantee A~reement by the way and these other agreements were sii:ned November 21, 1970 .

The Guarantee A 5reement provided for there to be signed a trust deed which would give a first mortgage on the property to the Province of Newfoundland, Yet a year later there was still no trust deed, (In January, 1971, there was a tl'U!!t deed). In November, 1970 the Cuarantee A~reement was entered into - ro, 1969. A year later NovCJDber, 1970,there was still no tr~st deed. Althouch the Guaranteed Agreement called for it, we did not even have a mortgage on the premises . (That is flooring them instead of tabling them) . In Januar y , Mr. Speake r, January, 1971, a trust deed was entered 714

May 4. 1972 Mr. Crosbie Tape no. 265 Page 2 into between the Government of Newfoundland, Canadian Javelin Limited, Javelin Paper, Javelin Forests and NALCO, giving the government a first mort~age on the premises of the linerboard mill at Stephenville and on other propertv of the company in exchange for our guarantee of these various monies. In other words fourteen months after the guarantees were given, fourteen months after the orig· 1nal ag'reements were sir.ned, the government fin a lly entered into a trust deed - January 18,1971. Why did the ~overnment enter into a trust deed?

It was not because the govermnent wanted to enter into a trust deed, Mr. Speaker, but because the people purchasing out bond~ or their lawyers down in New Yo-rk had insister.J th.it the p.overnment enter into this trust deed or if not 715

o,r ... . .... . , ..... --, - .. ..,..,, , . ,,_,.. , ...,..., ,. ther e would be clifficul ty selling our own bonds because we hncl no security for the r.unrantees we would l!ive exc e pt the r.urrr.nntee Ai::recl'11•nt. Fourteen months later a trust deed "Was enter ed :Into and, 'Ir. Snr ,1 lrer.

T wil 1 come to it !n a few minutes and explain how ranndi1m .Taveline alles:es that the trustee is of no vaHdity because it is not pronerly er.Pcuted hv ther, and it is within the knowledve they llil\' and td tli the consent of the foT'l'ler Premier of thP province. that this ~~as siS?ned conditionally, the conditfons were never met and the trust deed nr ver vnlidlv executed by r., nadi an Javelin t.fmited and the cither comr,.,ni e,<;. 1117l .accordinl! to the pro1111ectus our J!Unrnnt e e was up to i;evt"!nty­ f ive point three (75.3) million nnd the cost cif thP nlant was escalatinf.

It ls now estimated to he ~gl million. They rive various fi5?urcs for co11t rof construction. eouirll'ent. interest .anrl hnnldnr. fet>s and so on :ind also where all the J!lt:n·m1tces are. fln tl('lvrriher 13. 1970. "r. ~nenker. the former acll'lfnistration apnointec' n. n. T>jd·. ronsul tintt :nrineerinr. l ,ill'ited of Toronto ns the rnvcrnrnent consultinr- en)!ineers on this r,ro1ect.

In other words, thev "1cre appointed to ;1ct for the rovcrnne n t, to su11ervise what was happenin)! wf th Cowan ancl with thr coni=:truction and how the thinr was r.oinr and rc•'lort back to the povern: ,ent, rrn them informed or advised if enythinr al11rminr was happeninr and presuria\,ly ndvisc them if they thou~ht the pl11,1r, ~•ere not sui tahlc etc.

That itself ,,.,s a vear after the 11overnrrnt had entered into th.-, ::11~r11ntce ,'.rreement ., nd "u ,,ranteecl the $58 l!'ill ion and then a lot n,orr i,,oney, :tl year later that our consul tinr, cnl!ine,!rS were anpointed ,.'10 •-,ere s11r,posed to advise us 11ml nrotect thP )!Overnment and advise the rovernncnt of ,.1,at was h:ipnenin r- in the situation . They should havP been appointed at lrnst a yrar enrlter. Thcv should have b een appointed to lool· nt the construction contract and the other documents to sec whether thev t-icre suit;ihlc documents for the rovernmcnt to nTlnrove. Recause, ''r.

Srenker. the cons truction contr a ct wt th l'cAlpine is one of the rost 716

May 4. 1972. Tape 266, Paite 2 -- aph ~enerous construction contracts ever let to a construction company and that is sayinr somethinp in Newfoundland, because it provided for the wory to he donC" at cost nlust ten and a-nuarter oercent. In other words, no nntcer 1.'hat it cost, "cAlpine would j?et ten and a-om1rter oercent on top of that. It was not a fixed orice contract, it was not a firn price contr;ict anll the cost under that contract, they have not doubled but they hnvP rone un anpr~ciahlv sincP this oro1Pct started.

Th11t f.s when our enJ!ineer should have been there, That is when our consultinl? t!npineers should h:1Ve been there, to say: No, do not 17ive a y.uarantee if this is the !•ind of contract that j~ p,oinr. to be entered into. Because, we guaranteed, the J?OVernment Ruaranteed "'cAlpine pa}'l'lent under their contract ~u!!ranteed to Rauma - Repola that the prC"1ect would be completed and the rest of it. They l.'ere ap•ml.nted Novemher 13, 1970. The principal of that firm is }Ir. Oonnld Diel:.

One of the first thinps we did upon takinP office and findin!! out what a fantastic mess this pro1ect was in, was to contnct ~•r. Jliclr. "r. l)fd· came down and Ye have heen usinr hin ever sincP. and the J!Cntlcman is invaluable. I ~ust say we would he in a verv hnrcl spot without hiM. lie knoYs about the pro .1ect, he i s knowlcd ~ea~le. he spent a lot of ti~c on it, he has heen a trenendous help to th1~ J!Ovcrnrnrnt. We are luck we have hirn, he was a good ai,pointment.

Rut; he wal'I ins t r ucted t,y the Premier of the day to keep vritten rerorts ~hort nnd to report di rectly to the Premier orally rather than in writin~. To keen his writt en ren orts short and to report to fir, Smallwood orally not in writinp. Why1 You can only hazzard a "ucss. HaVinF heen in that povcrmnent thP. J!Uc~ ,i I ha?.7.ard is that ~fr, Smallwood did not ~•ant all or some of hi5 ninisters to knov vhnt these reports hnd in them • .. , 17

J. apt! L•U •LOI MR, CROSBIE.!_ Right, It was, In a letter of January 20, 1971, ~r. Speaker, Hr. Dick reported that Javelin should start to recruit key operatin~ personnel with a view to having o skeleton st~ff on the site by the early summer of 1971, as this was eYnential for the start-up. That is sixteen months ar,o, Mr. :)onald Dick told the government that in a report to the Premier, In a letter to the Premier. January 20, 1971 he reports the

schedule start-up date was May 1972 but the project is running later than that, Third paragraph, ''It is our opinion that Javelin 3hould start to recruit key operating personnel with a viev to having a skelton staff on site by the early summer of this year as these men will be of paramount importance when hiring the remainder of the staff, R<?aring in mind that ·they will shoulder the burden of start-up which is never easy in a mill of this size, they need to be choAen carefully.

It would be advisable to give first opportunity to those people with appropriate experience in the Newfoundland mills,without looking elsewhere," Those men are still not there, Mr. Speaker, The government was warned about them,a year lAst January. We have people out to recruit now, we have found two so far - not the general manager and the mill manager but we have found two suitable persons on a supervisory level who have now been hired hv the Labrador Linerboard Limited. So hopefully the ~111 will pass the House. These will be the first two on the site, Mr.

Speaker, getting ready for a start up and they should have been there early this sUDDDer, actually they should have been there earlier. that was January 20, 1970. Nothing had been done about that by January 18,1972, when we took office. In a report of May 1, 1971, the Dick Firm reported their grave concern over the course of a construction contract, gravely concerned about that . It is behind schedule. They have complaints about the general contr actor. They think that he is exceeding the budget, charging too much for equipment and so on .

There is a dispute between the owners and contractors about this,and wantin g to know the government's intentions . 718

Hay 4, 1972 Tape No. 267 NC - 2 MR. CROSBIE: So it was obvious then that there was trouble in -- - -- construction. In their fourth report, dated ~ay 25, 1971, Mr. Dick reported that there was a serious shortage of funds. He says, "Financial - The serious shortage of funds may result in the suspension of all construction activities within the next few days.Until new funds are provided the purchase of Canndian process equipment nnd piping will continue to be delayed.

If this delay is prolonged any further, the end completion for the project will suffer, which will result in further escalation in cost and so on." So the serious shortage in funds was reported on May 25. Just a few days after, Mr. Speaker, a private member's 1110tion was debated in this Chamber, asking for information on this project and again requesting that a select committee be appointed in view of the report in this prospective, to report to the House what was happening, Once again,whcn the debate was held, the government refused to give any worthwhile information about the project, MR.

MURPHY: There was a unanimous vote against the opposition at that time. ~• .CROSBIE: Ri~ht. It was unanimous. In this same report we have a prospectus in March 1971, Mr, Speaker, saying the cost is now $91 million. In this same report of Mr. Dicks, he says, "To the best of our knowledge and information available from the engineer and the owner, the total over all cost of the project,including wood harvesting and wood room is about $123,500,000 including $7,850,000 for working capital. This latest cost is $13 million higher than the figure earlier given to the government.

That would have made that figure $110 million, The difference arises from increase in the estimates for interest during construction, start-up expense and working capital, Then they enclose a comparison of the latest estimate s with the original feasibility 9tudy. '"/ 1 (l

HR. CROSBIE: Then they go on to tal k about the amount of wood that has to be shipped. They say that it had to be shipped from f.oose Bay to Stephenville between Ju.~e and December of 1972 - 429,000 chords of wood and it is essenti al for dredging to be done and other wor~s on the harbour. Then the y ~1~e a comparison. The feasibility study of November 6, 1967 revised ~ay 13, 1968, showed a total estimated co'lt at Stephenville, excluding the wood chip mill.of $68,921,000, now that cost at Hay 19, 19 71 had escalated to $93,9A~.OOO.

The wood preparation plant was $3. 7 million, There had to be harbour facilitl~s - $1 million spent on that, not included before, An affluent treat ment pla nt - $4 million, not in the figures before, working capital - $7,850,000, not in the figures before and th~• wood harvestinp; costs and loadinr, facilities at Labrador still remain at $13 miJlion. So the total cost tor May 1968 was $81,921,000, that was the esumate. lt is now $123,598,00IJ 720

May 4. 1972 Tape 268 J!-4 - 1 ~--~.nSA_l;_f~:- so it had r.one ur since 19fi8 to 1971, in those three vears to ahout $42. million. The r.overnment ni.-ver told this House that it h11d a report. '·fo were still onen when th11t rerort cnme tn. :t;iv 1971. The ~overnment never said nor reported tn the !louse that the cost is now incrl!11sed to 'H23. mill ion, that it was nnt even the ,:g1, million. 'lo, <;fr, not II word. not one 1,mrd. In a renort nf .lune 22. 1971.Mr.

Dick deals with the .. rnhle111 of shipninr- wood from r.oose to Stcrhenville anrl the work necessarv tn he done. ~e ru•ints out the prohlems there is goin~ to he with 11hiopinl! this 428.nno cords. the dredrinr is not done ;,nd so on. ~c encloses a list of critical ite~s that need to be done fnr the nro1ect. "lnw this hi l•tne 1971 and this is now, 1 think. ~frlv 1972. ''Ohtain halancc- nf fin11ndnl!, that was one of them and when we took over in JnnW1rv 1972 th.,t "711S not rlonr.

It vas a critical iter.i in June ]<l71 nnrl in ,lanm1rv 1072 it i.,as still not arranred, the halanc-e nf fjn;incinl!, ".?solve contractual difficulties with Mc-Alpine" and th11t I suppose you could sav was more nr less clone,but they were not rr.nllv resolvf'cl. the :-,:irtics wcrc not rcallv 111:! ider,. "llrcdP.inr, hnor,, and stor.,i:e f.,r 11 It ir.R 11t Stephenville !!arbour " - that is not vet com.,leteci ancl at Gno11e nay Harbour that is not yet completed. •·The nff.lnent trcatnrnt plant'' - it is undervay nov and hopefully it slioul,l !,e finished hv thr end of .Julv.

It w,is only authorized in '>eptrmhcr 1 °71. 111 thonl!h Mr. Dick rP.ported it to be a critical item in June 1971. ''F.xecnct.ve a,l111inistration of Javelin'' - this was a critical item so thnt thev would get sone decent administration. some r-ood staff for manai:ement. Thi<1 was not donc vhen vc took over on .Jnnunrv 18, 1q72, "5et 111> como1tnv nl'lirv, administration procedures. Cl'l!llovcc benefit r,lans etc.' was not clone, not even startec! whPn ve took 721

!-Ill. CRO<;'ffF. • o\•cr. '"Re<"rttitr.tent and hirinr of personnel" - the personnel to operat.e t'1e nlnnt.tci s tart it un, to run it, thiR was 'l cr itical itP.rn in 1o,., .. 1 °71 aml when we> took it over on ,hnuarv 1 fl, l 97'.! there hnd not J:,,•rn " thinr rlr,ne ahout that. tin, nl 1 thnt vas r1onr. •,•as allow this ~1~~•r1rcrnent, this n~ladminlstration. this mrss. this chaos to rontlnur month :ifter month after month hecansc rhe rovernment of the:- rl,w di cl not wnnt thr people of Nevfoundlnnd to know what was hann<'nin.r with thrir money on this !'lro.1ect.

Thnt is the only exolnnntion for it, The r.overoment. These WP.re all critic.al items rP.portcd on June IR. 1971. In ,., l.1•rt er of <:eptemher R. 1971. ~fr. l1irk reports thnt one of the thin"!! nceric>,t 1~ r,rocurement of harllv neederl eoui.pmE'nt to mal".e the woo,!lnmls Oflerntion :mcl voorl shtnpinl! operation Jl'ore efficient; that wns not done. To renli~n personnel in the woodlands or2anization nnrl introduc-c an efficient svstem in maintenance: thnt 11as not rlone.

To set 111'1 a t><'Tn.'lnent staff orr.anization, to ornvide over n11 corrorate rn~narcrncnt anrl to contra] nnd norrnte the mill. that vas not rlone. Tl1e n,,n.:iremr.nt nnd extcni.ion of the marketim! functions: they were not ••on('. '{one of those thfnps were> done when we tool< offic-e on Jan11.1rv 18, none of them, Marketinr was not orooerlv arranr.ed, no prooer ~anapenent. no mana~ement, no flermanent staff nrranizatton, no realirn of personnel in the voodlands or~anization, the system of maintenance still inefficient, hadlv needed equifl!llent not in effect, none of it done.

Anvbodv want to nsk or is there anv question whv we had to take over the oroiect? Where would it h,1ve ended if we hnd let it continue on like that and slinRed alon2 because we knew there had to he an clrction in the next co11rle of months? Where uould it havr been if ve had takl!n that attiturle. Mr.Speaker? lt would have heen a lot 722

Mav 4. 1Q72 Ta!le 2Ml JM - 3 ~.:..-~R _O:<;~IF.: worse than it ir; n<N. Whnt was the l!ood o f ~,-.

Dick s oq!llnization mal: in~ these reports. and that is all there is for that periorl, Ile w11s told nnt tn r.nk e too n11nv rellnrts hut to rerort verball'.f What was the rood nf him makinr these reports. they were not carried out, nn nnr ~afcl anv nttPntion to the~~ "r. <;pen ker , it was ohvinus. anvonc could see "'ho wnnterl to cliscnvcr 1 t. who wanted tn find out about it . who wanted tn !·now ,1ho11t it. anyone in thf' i:nvernment would kno1,1 in ~lay 1971 it was in critical trouble and thev woul d knm1 then thnt it s honld he t.iken over by the J!OVern111ent then .

There can he no dou b t in mv 111fnrl thtit the l(overnment must have known and realized then and, Mr. <;!'eaker, th a t is 11hrn i t coulrl have been taken over, that i s when thPre stiJ l would h;ivp been t i"le to takC' it over bv roinr 1mrlrr the r>1mrrmter ar.r<' t'nf'nt nr Qoi nr tfirn11rh the C"nurt!I when til'l'e w:1s not nf the e!lsencf' n!I lt wns in .Janunrv 197:!. l wnndcr will sol'!eonP on tlw other ,=;ide h:we the 1:all and the affrnnterv to sav thnt thf' q~. milJinn we arr nnvin~ J avelin to settle this is n sell-out. T -...ondc-r l' thev 1,1iJ I • I wonder bN•ausC', 1-'r.

Spt'aker, if the i\C"tinn hnd heen taken in ~1ay l 0 71 and we had gone tn court then or t.nken the i.teps then or tnkrn the ap!lroach then that we tool: in FE'hrunrv 1972,thPre would li,ve been a lot less necessitv for :my settler.ient with .Jnvelin even thot11lh it still miP,ht h11ve heen the hci;t thin/' to do and the most reasonable thinr... Hhv \o'aS it not done? That is 110methinr. onlv the honourable p.entlemen "llJlOSite can answer. Hr.

Si,eal<cr. on t!ovember 'J.7, 1970 Peet, Marwick, Mitchell and Comnnny were an!'ointed by the last p.overnment aa :mcH tnr11 for the r,nvernr.1ent of the accounts of .Jnvelin Paper and associatl:'d comnnniei; . instructed tn examine 11nd renort on various aspects nf the nrniect.

ffit. CROSBTE: - - ~nvenber 1970, that, Mr. qrenker was twelve months nfter the GunranteP ArrE'enents wPrc sir.nr<l. Thev were slimed 'lover.:her 191'.9 and under the Guar:mtcc ArrC'!ement the 1tovernment had the rirht to anpoint auditors hut thPv were not appointed until Nover.iber 11170. ~!ovC'r.iher 27. Why n11t? l,hv the twelve month dclnv? Thcv were apnoint t'rl nri~arily to rcnort on the utili?.atinn hy Javel i n Pnner and associated companies of the financinr t hat had been ruarantec i! hv t hc 11overnmcnt. 'low, Mr.

Spea1'er, thev should ha ve been a1>nointerl in November 1969 when fund:a ruaranteerl by the r.overnmrnt first corr.menced to he used. not n vear later althou~h eve n a year later was somethin~. A record of ne~lizenrc and mismanarE'nent! That was when they were appointed, ~ovemher 1°7n. twelve months late.

I remember an honourable member of this l!nusc . the ncrnbcr for <;t • .John's North then. now no lonr.er a r,,enber, standin~ in this House when we were rlebattnr this nrivate mt'mhers resolution and statinp how tmportant it was ,mt.I the RJ!rCf'­ ments were important. yes hut it was so much more important to have rror,er inspection and control hv the government and it would he al 1-imnortant who were the 11uditors i\n<I 1111-imnortant who was the c-ommltinl! enrineer and the rest of it. a lot of hot'!wash 11nd bunkum - 724

~!av 4, 1972. Tape 269. Par,e 1. when vou have a r,ovemment that does not care and does not want to check and doe!l not \./ant to control and doe!l not t••1mt to have anything to do with it excent to keep scooping it out. Twelve month!l it was, before auditor" were appointed and longer before a consult"np, engineer wa!I a1111ointed. !'in, \./hat do the government do when thev t•ere faced t:i th this cri!lt!I , with Javelin in Mav l'l717 In June t'h~ !ltartecl makinp -.ecret l <>11ns and a<lvances to them without one word to the pennle of Ne,.,foundland or to the members of this llou!le.

Not a word On June 25, 1971, $9 million, thev arranr,ed a b11nk loan to the Rank of "'ontreal for 'levfoundland Indufltrial flcvelooment rnrl"loration, then lo11ned that ancl invested that i n t he nro1ect thnt Javelin naid for Javelin forest. 1 \./ill come to the ngreements. There ~•ere f our a r,reements si11ned. That va !I June 2S, 19 71, not a 1un·cl to the public. The prt!sent Premier revenled it to the nuhli c a few days I ater. ~•r. Smallwood had to come back and admi.t that thev had pf ven another $9 million to the project.

October 1,1971, anothrr clfrect government loan of Sn million through the Newfmmdland Tnduatri al nevelo11ment Corporation, That is October l. The election I think WRS onlv three weeks later. Not a wordJ The people of Newfound] and ,..ere not going to hC' ~iven a chance to think about this nr to diRCURR it . Nnt 11.kelv. anvone kno~• that w111< (:. ! ", mil 1 ton. Sl 1nP,e it out aecretly, do not let Then, we had the election of Octoher, 11racticallv a ti.r, when a govl!rnment in office 11hould dn nothing hut the mm;t routi ne, What hannenecl after t hat lfr. Sneaker?

Then they hur+ecl out S6 million.That ,..as October l. Then $ 7.8 million on November 19, 'fhe i:overnment defeated at the !lolls reoudiate d at the onlls with a majoritv of the !leor>l e vo t ing a ,iaJm;t them, no longer in the government with the will of the !leople, slapped ont nnother $7,1100,000 "'ithout a word to the public, not one s yllahle to the nublic, $7,800,000. Oecember 16, l97l another loan of $ 1.2 million from the oublic trcaaurv, $9 million afler the election 1.'ithnut a word to the oublic, wf thout the authority or the will of the ::,ro ,il e of this province behind them. ,Jus t in hv the skin

!-fay 4, 1972, Tal'e 269, P,111e 2 . nf their teeth. Out, $lo Into the tremendous hungrv mAw of the !'eonle who were rulinr- this nro1ect, who did not know how 1'.0 mnnar.e i.t, money o( the l'eoole o f :fowfou ::dl:md. Yes, l will not be surnrised if someone a cross s a ~s it is a sellout, l~P arl! r>nvinr $5 mi.llion to trv to salvav,e it , It takes some call. Jt vill take so~c !!all imcl some hide to s11v it hut J w11t not he surprised if snmP one does. So, Hr.

S!'eaker, that 1,1as; $ 12 n tU fon from "av of lQ]J tc, Oe'1.emher of 1972 of the mo1 cv that the peonle of this province out 1.nto this nro j ect without a word exce11t (or what the Prcnt1 er reve,iled on A tip off in June or ,July. Nnw, \fr, <:neaker, vhile this was hanreninr., ~r. llnVll! 14 .'.IS 11ermittecl to run around the world with a r,uarantec, a rovernment Ruarantee. One month the\' WP.re P,oinr. to allm.r ~•r.

Ooyte to horrov mnnev on a Ru11rantee, the next month thev were not ooinr. to, He "'11s nermi tted tn ro11 ,1 Eurooe ' n the fin11nc1al circlec;,vith our !!,u11r:mtee,wl1fch rrevPnterl U!'I from horrowi.n!! 11nv mone v ourselves, direct. \,w, here ,,•;tR some mcmher Of'T'ORi.te t11lki.ni: the other dav ahout the <;lll'J r1illic,n we had tn horrnw at the end of tlnrch, and e:irlv Anril. We had to hrrrm•• it because the last gnvernment that Sl"lent it wa!I unable to bl"rrrw i.t hPcause thev had tlr • .John C.

Dov] e out fli.cking around the ffn.inci.il markets of the wnrld for the tfowfoundl:md C:overnment ituarantee. Ther fore thev c<'ul,1 not horrow direct for this province• <.loini: us incillcuahle harm in are •r where ve had said we would onlv borrow direct. and would not puarantce an,, more loans like that. 'Ir. John "!ahonev, he was over I think in t ondon two weeks in August waiting to borrow $45 mi.Ilion, nr<.ler-in-council in his pocket, That fell through. So th11t wai; ho,,, that ctisis wa!I dealt with. "Ir. ~neaker.

That wa:< how it vas fllced un to hv not facing un to it and by g:fvine: out monev, $24 million without anv information to the oubl ic whlltsoever. what hanpened next? On December 10, 1971, order 0 in-council 1386 wa~ nassed to authorize a ruarantee by the government of ll loan of $100 million 726

May 4, 1971. Tape 269. deutschemarks to the Javelin Companies, or approximatelv $30 million, There is II copy of the Cl rder•in-Council, Hr. Doyle Yas now ahle to get the money in Gennanv,and the government was to guarantee it. No'II, I forgot to menti.on,Mr. Snenker, in connection with each of these four advances there Yas an interim agreement, a loan agreement entered into hetween the 2overnment and the Javelin Comoanies conta:lninp, clauses meant to nrotect the government, I will refer to each of those a~reements in a minute. Th is Order-in-Counci 1 i.•as pm;sed necemher 10, 1971.

At the end it s11id the honourahle Min 1 ster of Economic Development he and he ii! herebv authorized on hchalf of the govcrnr.1:!nt to negotiate and conclude a hackup agreement hetween Javelin paper and its affiliates in terms which shall receive the prior approv,il of the Lieutenant Governor jn Council Now, "Ir. SJ>eaker, ohviouslv , unfortunatelv,it was not worder properly.

The oh .. iou!! intent was that before the Minister of F.conomic Development p.ives the ~overnment 1s guarantee, signs it and delivers it to Javelin he 11ets a hackun agreement, to p,overn what is goinl! to happen with the nroceeds of the loan because we 1.1ere owed $24 million bv Javelin. That is what the Cabinet intended when thev pasae d this nrder-in-r. o uncil. But, the last 11aragraoh wa!I not warder properlv. It dicl not say that this would be a condition precedent to the guarantee, 1-/hat haopened? Our former Premier, 'Ir. Speaker, ~ave the guarantee shned hy him to ''r.

Dov le or his agents And thev were able to borrow the monev with our guarantee 1.ithout anv a~reement entered into as to what was to happen with the oroceeds. An outra1:ed, a niece of ; el!1ililcnce, a piece of criminal negligence by the leader of the government. He fooled his accomplices, they did not know ahout it. I am sure,to he quite fair about it, if thev had known about it they would have stOl'fled it. At least I imagine t hey would at this sta11e, Imagine that,~r. Soc/Iker, $30 million bein g borrowed vithout any agreement hein ~ entered into first. Now, to come hack to the other inte~im

lfav 4 , 1972. Tape 269. agreement. 'fhere are four ap,reements, the honourable minister wants - I can get other copies to tahle, this ts just mv own file. Each time there wai; an advance, startin~ nn June 2CJ, 1971,there was an agreement entered Into. l will r.ive the main conditinnR. The proceeds nf this investment were onlv to be used to complete the nroject. The nuditors were to do a cash-flow ;orecast. Tt 1.'as tn he 1.nveRted into Javelin, some of the monev was to he invested bv Javelin l'aJ"er and .Javelin Forc,a.

Ynu see nm1.,t.1r. ~neaker, we have r,otten to the 11tar.e where we "-'ere financinP thf' whole forest oneratinn too. We were not SUOJ"OSed to in the beninninr,. That was ••r . Oo~Je's reanonsihi]it,•, hut nm,• ,.,e were ,loin" it. '"/28

May 4, 1972 Hr. Crosbie. Tape no. 270 Page 1 - mrv so Javelin Paper could advance some of it to Javelin Forest to use in the forest operation, Peat-Marwick would audit what was happening to the loan. No part of the proceeds of the investment were to be paid to any subsidiary associated or affiliated company of Javelin Paper with the exception of NALCO, In other words Javelin Paper was not to take this money and pay some of it to Canadian Javelin or to Javelin Bulk Carriers nr to Javelin Export.

It was to use it for purposes of the project, not pay it out to Canadian Javelin or transfer it to some associated company, That was a condition, The agreement was signed and entered into, the first one, June 25.

The shares that Canadian Javelin and NALCO had in Javelin Paper were to be deposited with the Royal Trust Companv in trust as long as this agreement was in effect and they would be voted as directed by the government when requested, The government could be placed in control and given the management of Javelin Paper and Javelin Forests as well as all the other assets that the agreement was defaulted with ' and so on. So they are all good conditions.

Javelin Paper was to find a president experienced in senior management for the Forest Products Company and a competent financial officer and report to the directors and to the government, That agreement was entered into. There was another agreement entered into on October 1 and t think this one has Canadian Javelin joined in as a guarantor. Canadian Javelin guarantees repavment of the loan of $6 million, There is an agreement on November 19 and there is an agreement on December 16, when the other monies are advanced, continuing with the earlier provision and having Canadian Javelin as a guarantor.

There were these agreements. Now what happened? In the meantime further alarming news was coming to the attention of the government. Disturbing facts began.to appear with reference to the $7.8 million advance given Javelin, November 19. From that amount $2,7 million should have been paid McAlpine but now Canaidan Javelin 729

Mr. l:rosb1e. were telexin~(or Javelin Paper) requesting that money, the $2.7 mill 1on owed HcAlpine be ~iven them as part of the money they needed in Uecember,15. In other words they had not paid HcAlpine out of that S7.8 million, as thev should have done. They apparently used it on something else. They were now telling the government that thev needed this money - December 15.

It waR discovered that Javelin Paper no lon~er had funds available to meet this co1n111itment because approximately $2 million had been paid hy Javelin Paper to Canadian Javelin in breach of the interim agreements and they claim that this was partial repayment of a loan made earlier bv Canadian Javelin to Javelin Paper. In other words, in defiance of these agreements, Javelin Paper was advancing $2 million or paving it over to Canadian Javelin despite theRe interim ar,reement9.

Now I am not going tn go into all the details of the next few weeks, Thev were prettv her·cJc and thev are not altogether relevant except to indicate that the thin~ was ~oing very unsatisfactoril;. There was constant pressure from the Office of the Premier from Uecember 9 on,that Canadian Javelin be given further funds because of their financial difficulties and their deteriorating financial condition.or Javelin Paper, On December 10, Hr.

Doyle called to state that the $2 million in question were funds loaned to Canadian Javelin by a bank in Panama with that loan guaranteed by Javelin Paper and that the bank in Panama nov demanded repavment of the loan, since neither Canadian Javelin nor Javelin Paper were in funds to repay the loan,askin~ the government t o repay the loan, the $2 million. This bank loan was aupposedlv from the Union Bank of Panama who confinned that there was such a loan. However, a little detective work revealed some unusual things in connection with the Union Bank of Panama.

First the telex nmnber f or the Union Bank of Panama 730

Hay 4, 1972 Hr. Crosbie Tape no. 270 Page 3 turned out to be the same as the telex number I think for Canadian Javelin. Then the branch office of the auditors used by the government, Peat-Harwick,reported on December 16 that this bank occupied the same premises as Canadian Javelin, used the same telex as Canadian Javelin, On December 17 thev reported that the Union Bank of Panama,S.A. was originallv formed by Hr. John C.

Doyle and two others in 1959 and that durinp, 1971 the name was changed to the Union Trust and Finance Corporation so that it was not registered with the ~anking Commission in Panama, The Panama law is: "If vou want to use the word 'bank' in your name, you must register with the Banking Comission and lodge a deposit," This had not been done. This bank that was demanding repa}'lllent from Canadian Javelin and Javelin Paper allegedly was a bank originally incorporated bv Mr.

Doyle hicself in Panama,that did not appear to be a bank at all and which was not re{'istered as a bank and whose name had been changed anywav to Union Trust And Finance Corp~ration, TI1at guarantee,that is only for us.

The Union Bank of Panama, S.A, was now Union Trust ·ind Finance Corporation, Well, Hr, Speaker, to be quite fair about it, that aroused a bit of suspicion in the minds of the government, I believe the Government decided or the Treasury Board decided that an investigation should be made of this or of all inter-government advances, On December 24, 1971, the Treasury Board engaged Peat, Harwick, Mitchell and Company to examine and report upon certain inter-co111pany transactions from June 29, 1971 to November JO, 1971.

In other words, had Canadian Javelin Paper observed these agreements or had they been transferring money out from Javelin Paper and Javelin Forests, supplied by the Government to Canadian Javelin, Javelin Bulk Carriers, Javelin Export and the rest of it? That is what they were appointed to do, As I understand it.on the same date or the day before, certain members of the cabinet (They shall be nameless, unless they want ""}., 1

Mr, Crosbie to name themselves) heard about this loan over in Europe, They did not realize that the ~uarantee had been given because thev knew there was no back-up agreement but thev heard disturbing words from Europe that on December 22, the money had been drawn do11n and given to Javelin Paper. On De,ember 24 some members of the cabinet started to 1118ke inquiries about this. I think on December 28 they discovered ln what bank account the monev was or where it had p;one from the time l t was drawn down, 28th or 29th December.

At the insistence of the ~overnment, Javelin was persuaded (you might put it that way) that the money had to go into a 1oint account - $24 million with Curtis, Dawe, Fagan and Mahoney and the balance of the $6 million in a bank account up in Montreal under an agreement that the monev could only be spent if a representative of Javelin and a representative of the government signed the chenues, The money o! Curtis, Dawe, Fagan and Mahoney could only be released ·' both parries agreed.

TI1en they started to ne~otiate the back-up a~reemenc, Hr, Dovle now had the monev but Canadian Javelin wanted the r.overnment - his ar~ument was: If I pav vou hack the $24 million vou advanced me, you are now paid back and therefore I want the interim ar.reements torn up. They arc supposed to 7:i2

t1ay 4, 1972, Tape 271, Pa~e 1 -- apb ?~qt.Q.Sll.!Y..:. last a year or a year and eight months, but I want them torn up. I do not want you to h1we the shares any lon1?er, I do not want to he ruaranteeinl!' them - well he llould not be J!uaranteein • that ~oney anv lonJler, but I do not want to observe these conditions any longer. So, if I give you back your $24 million out of the S30 million you guaranteed for me, I will do that if you tear un those a~reements. The J!all of it, the unmitil!'ated Jlall of it takes your breath away. I have had four months to Jlt>t it hack.

Honey, our 111oney ~otten vi.th out l!'Uarentee, Mr. Doyle will a~ree to pay back $24 million of our money that we advnnced if we tear up theoe a~reements. AN llON. ?~ER: (Ineudibl

e) MP._ C)!9_SBI_E_· He certainly has n lot of it and there is a lot left over. The r.overnment and 11r. Doyle could not agree, Mr, Speaker, on this. So, when we came into office on January 13, the $24 million was still at Curtis, Dawe, Fal':an and ~ahoney and the five million odd dollars was still in a hank at Montreal. The project t1as sta~r.erinJ! in the limbo, the creditors were not beinl? paid, the bills were pilinr: up and it was a deadlock between the rovernment and ~r.

Doyle, all caused by the misfeasance, the malfeasance, the nonfeasance, the mismanagement of the Premier of the dav and those who permitted him to do it or to continue do inf! it. Because, l'r. Speaker, in my view, there was only one way of stor,r,inr his madness from .Tune onwards and that was to resirn,for anvone who uantecl to stor, it . AN HON. ~lfJIBEP • Look in~ for a way out. tlJI . CROSBIE· Not a wav out , a way to stop it, because that could have been stopped. Now that is an account of what had happened up to January 18. There is another interestin~ - there are a number of interestinR points.

By a letter dated November 23, 1971, ~r. Doyle on behalf of Canadian Javelin wrote Premier Smallwood alleping that thf! agreement concerning voting shares,dated t'av 1, 1967, betwee n the ¥rovince, Canadian Javelin and Doyle, was now no l on~er valid and the 11overnrnent should return the

shares as forfeited to Javelin. This is the af!reement, J!r. !>peaJter, thnt was Ri)?ned "av l, 1 °67, where five ll'illion three hunrlred thousand votini: nreferred shares - six million were created, hut five million three hundred thousand votinf! preferred shares were issued to the f':overffl'!ent of ·.ewfoundl:mrl to be voted hy a comm:1.ttee aJ>pointed, one by t he t:ovcrnr,,ent of: Ne,.,foundland, one by .Javelin nnd with the two of ther, t o choose a chai\,.,an.

Now, the af!reernent, and I have the aJ!reement here. this ar.reement , ''r. ~r,r.;,1-er, was tabled in this llc:,uRe \.•hen it ,las entered into M:iy 1, 1967. It recit~s that because the Uewfoundland r.overnment is f!Uaranteeinf! these <;53 million, these shares vould he issued to the Mewfoundland r.overnment as further security, w 1.,1 to Five the pover11111ent control or the committee cc:,ntro] over the 11ffairs of Canadian Javf'lin. I thinJ, it J!Oes so fnr as tn su~rest that to keep t•r. J'lov]e in control would be for the benefit of the pro1cct and Canadian Javelin.

Those shares were j ssued and a co111111i ttee W:1!3 appointer! - Pardon? .\ti HO_N_ •• !'fl-''lfR · MP • rrn<:r rr. • ... - -- - - (Inaudible) Rjrht. Now. the a1treenent wns ostensibly or said to he protection for the Newfoundlnnd r.overnment in connection wHh the linerboard mill project l,ut the real reason - I think evcrybod,• I-nows that. It was to keep 11r. Doyle in control of Canadian Javelin Limited because certain shareholders were dissatisfied with the way hP was conductinr, the operationR of that company and there was p:oinJ? to hP. I.' fipht at the next annual meetinp.

With these five million three hundred thousand shares issued, . votcd by this cor.imittee with one ar,pointed by Mr. Doyle,in effect,one appointed by ~r. ~mall=od,in effect, there would he no worry that these minorities, these other shareholders could out~vote t•r. novle. On November 23, 1'171. ••r. Dovle wrote to sav that this ap:reement ~me now void. It is 1 nterestin1t to see thP !?rounds that he pave for that. (I had these all in line when I started out, now they are all mixed up) Novemhl"r 23, 1971 a letter to Mr. Smallwood frol'I ~1r.

J}oylc referrinr to thf' share a1treement and the nain burden of the letter is that the povernment S!ll:1ranteed the w~ole col!lf'lex. ite sayc;, "not 1ui:;t the ll'onev we puaranteed " 734

1-'ay 4, 1972, Tape 271, Pa!?e 3 -- apb and that is whv the shares were issued. That we did not become liable within two years on the !?Uarantee under this apreement. "The ~overnment takes a position that there is no ~ompletion a~reement,which disappoints them,and the government is in default for failure to issue leasea and licences to cut timber." This is Canadian Javelin's bi~ quarrel with the fast government. (Thev have not really nuarrelled 1o1ith us about it, they have not had til"le.) That is that the iiovernmcnt did not issue them timher leases.

They had these concesi::lons in J.ahrador under the NALCO Act. rirhts to get timber leases but they rlirt not have the timber leases, r•r. Doyle claims that the ,::overnrnent not p1'1inr them the timber leases was a violatio .1 of the a~reerrient with the l'Overnment and mt.de '\'oid this sh11rc a~reement, nnd in fact, it ~ade void the i:uarantec nr.reenent,anrt it made void the trust deed and it made it all void. That is the position they took with us and they ari:ued with us that the rovernment wag in default because they were never issued licences and leases on the timber. '-'r.

SJ'lealcer, it Has 11 cardinal r,rinciple up to vhen I left in ?•Ay 1 Q68 that the wood of Labrador was not r.oinr. to be morti?ap.cd. The only reason ''r. noyle could have for wantinr. these timher leases was to run out and mortirare our wood up in Ln~r.ador,to horrou monev with it. Thank Cod! he never rot the timher leases! This he alle~ed was a violation of the newfoundland Govcrn~ent's agreenent with them and,therefore, he argued that this nreferred share n~reemcnt was nov no lonµer valid. Ry the ~:av, ••r. Sneaker. we made it absolutely clear to 'Ir.

Dovlc that it was nonne~otiable, that if he entered into the present agreement \11.th us.that agreement in connection with the preferred shares was ending and that those preferred shares were to be redeemed and cancelled so they cannot be used again. Despite their strenuous efforts to have that changed,we maintained to the end includin~ t1o1enty-four hours a~o when another attempt was made to chanre it. When the Uouse T'asses this agreement it will not become effective until the preferred shares are redeemed and forfeited, and no one can vote them and disappear forever. That is a condition we made

nf this a~re erne nt. On J 11nu11rv 13 and 14. ''r. Doyle was !!ett ! nr ready I believe for the chnn r e of administration, hrcnusr various letters arrfvrcl from }1r. Ooyl c to t-•r. Smallwood nnd to '-'essrs. Rob erts nncl Rouc, t he meinhers for White flny tTorth and South, r>rotestinl! vartous facts and settinv rrounds for ]e!'nl Actfon or tr'linr to estnblis h n no,c;ition, I presume fc,r when the ncv administr;itfon took over. There ;irp i;everal letters J;inuary 13 and 14. that alle!!cd violation of a!!reements by the rovernrnent. 736

May 4, 1972 Tape No. 272 NC~ l ~ CROSBIE: Copies went everywhere, On January 14 there was a letter to the hon. Mr. Roberts about $2 million due Canadian Javelin Paper, Union Trust and Finance Company in Panama. On January 14 a letter went to Mr. Smallwood c2lling to attention to him about the timber leases an<!. pointing out that this was a violation. It was their arp.ument that it was a violation under the agreement.

On January another letter bringing to the Premier's attention the scandalous behaviour of several of his ministers, refusing to authorize certain releases from jointly held funds and so on, There is a series of these letters protesting the fact and alleging,and this was a joke, Mr. Speaker, alleging that the construction of the mill was not under the:fr control because ~!cAlpine had too much power under the contract. What a consumate piece of nonsense!

The contract that Javelin entered into with UcAlr,ine they were now saying to the government, protesting that the construction was not under control and actin2 as though it was the government's fault . There is a series of these letters alleging that the government was in default to '·Ir. Doyle, On January 18, we took office and on January 19, the Premier appointed the hon. Minister without Jortfolio, the hon. Minister of Justice, and myself, as a co111111ittee to deal with this situation,and we were only in office about one hour when we had to start to deal with it.

It was quite an interesting situation to deal with, There is enough material for ten books that I skipped over, ~r. Speaker, but I cannot go into all the details. I suppose it is not important enough. In any event, the new government had now taken over. What did we discover was the condition of the project? We discovered the government had advanced $24 million. The Javelin people had gotten $JO million of our guarantee without any agreement covering it, There was a ~ead-lock on that situation, the two parties have not been able to agree, Neither one could spend the money without the agreement of the other.

Bills were piling up. Creditors unpaid, crisis on every hnnd and 1-'cAlpine Cons true tion had made a demand on the govemment,under its guarantee,to pay them the monies that

- -,1 • I -- • - ~~IE: was due them under the construction contract. As we looked into the project it became obvious that it was a complete and utter mess, that the marketing contract was not a contract of any great value, because there was no price set at which they would buy the linerboard product and there were too many things left out of it, it was too vague.

We discovered that the situation in Labrador was chaotic, that there was no chance in this world of ~etting $469,000 chords of wood from Labrador to Stephenville this year, not a chance in the world; that at the best we might gee $200,000, We discovered that the forestry operation in Labrador was completely mismanaged. We discovered that the costs had escalated tremendously.

We discovered that out of the $30 million borrowed in December in Germany, $24 million repaid us, the $6 million in the bank was already nearly gone or would be gone very qu!l,·kly just to pay off outstanding bills so chat immediately you would have to again advance money to Javelin to keep the project going. That is the shape it was in. So what did we do about it? The first thing we did about it, Mr.

Speaker, was to tell Javelin, as 1 announced on January 26 on behalf of the government, that they were to pay us back the money or they would not get another cent and legal action would be commenced,and to give the people of Newfoundland the facts, In a press conference on January 26 we gave the press seventeen pages,sll facts, reciting what the financiil position was What it cost to date About the $24 million 1 and we gave Javelin certain alternatives.

The alternatives were that he repay to us, or Javelin repay to us, this $24 million signing a satisfactory back-up agreement or satisfactory terms be entered into for the withdrawal of Javelin from the project so that we would take it over entirely or legal action would be co111111enced, That is what we did. It only took one week to do that, to decide that, Mr. Speaker. This could not be allowed to go on. This shambles could not continue indefinitely In another seven days we had the money back, as was announced on February 4. They paid us back the $24 million. They 738

May 4, 1972 Tape No. 272 NC - 3 ~R. CROSBIE: paid the ~overnment, under an agreement between the two of us, that we would allow the courts to decide whether the interim agreements were still in effect or not but we had the $24 million. Then we told them that if there was to be any 1110ney spent out of a joint bank account it would be d~ne under our direction and control. That no longer would any money be given to Javelin companies touse as they saw fit.

That money in the bank account in Montreal could only be spent if they presented us with an invoice, certified as being correct, signed a cheque themselves and then sent it here to St, John's and if we agreed that everything was in order, we would sign the cheque also and then the invoice would be paid. We were no longer going to advance money for Javelin who could not 1- ~ trusted to observe agreements that were entered into as to what to do with the advancements. From then on,Hr. Speaker. January early February onwards, that i& how bills were paid, . only if we satisfied ourselves they were in order.

As the House knows some were not in order. One to carry the late member for Labrador West from Wabush to St. John's on October 29. we did not find to be valid or reasonably necessary for the continuance of the linerboard project. In fact it would have been disastrous for the linerboard project had that hon, gentleman succeeded in his eventual aims, that was $3,001.

Another one for $6,000 to take the former Premier and his family down to Florida, we did not consider that relevant to the linerboard mill project, An account for $750 to pay to lawyers to sue the Montreal Star,as security for costs, we did not consider that to be relevant to the project and so on. So there were quite a few bills we refused to pay, But from the time we took over this government, ~r.

Speaker, there has been complete control on the spending of govern111ent money on this project, not one cent has been spent except we have satisfied ourselves it was to pay legitimate bills for the project, I have an account of the amount spent which I shall come to shortly, 739

_._t' .... . ........ - · .... M)l. CR~ McAlpine's we have been payin~ them ever since, they have not had a cent from Javelin since January. We have had to pay them under our guarantee, We discovered at the same time, Mr. Speaker, that Javelin had no pennanent personnel on the site at Stephenville to prepare for start-up, no mill manager, no superintendents, no one looking after marketing. That the 5hipping arrangements proposed to be entered into were not arccptable, All of these things were unsatisfactory .

That there wns no firm estimate of what it would eventually cost to complete the mill and get it through start-up. That there is no ovrr ~11 2eneral manager, That Javelin Export Limited of Nassau, the Bahamas, had a contract for Javelin papcr,where all the wood,the linerboard would be sold through Javelin Export and Javelin Export and Nassau would get 5% for doing exactly zero, for doing nothing, just siphoning, removing, slin~eing five percent 740

Tape 273 PK - 1 ~ 1R. r.Rf).f._fl_J_F.: of the sa \ eq o f the pro1ect off to this company down in Kassau where it Pould he tax free and available to he used hy the honourable l!ent lPman ' s friend. !Ir. Doyle in Nassau These are th~ kind of little dodr.es and little r.im~icks that were goinr on, a compan•, :fn Nassau. When this 11as pointed out last year the former Premier o;a:fd this 1•as juat a norna J commerical thinF that anvone would do. Tt certafnlv fa,H vou can ret ai.•ay with it. But why should he he al101-~ed to do it vith our monev?

I do not care ,,,hat anyone does vith their own, their own operation, hut not ,-,fth thP funds of the n"'o nle of ~•evfoundlnnd. So we found a contract entered into "1it'1 .Tavrl in F.xport. l'e found Javelin F,xnort T.imited charr.ing all the othPr comnanies consultinr fees for ••r. Poyle. f.veryone of them had to phonv un so manv thou!land a month , consultinr fees for "r.

Ooyle, send do\m to l1a,isau where it lo•ould not he taxahle and all cominit out of the monies we r,uaranteed 1 and an apartment up in ~•ontreal,furnished, luxuriously furnished,~1 1\,000 11nrth of curtains, c.1rret11.You would qmoth,..r in the carpets, a:-t ,J.oui t'I X"l furniture all paid for out of t'1e oro1ect. Phnt have the peop l e of Nevfoundland been taken for these taRt fev vears? \,'hat have t-•e heen taken for? Well, we are not roinr to he ta~en for anythin~ any more.

There is not much left to 11queeze out of us no••. l!e are certainly not r.olnr. to 1 et anyone slinr.e or S'Jueeze anvthfnr. like thin out of this province aP,afn t-•hilP we are fn office. Nou, }tr. ~peaker. t.1e had two alternativeA really with this situation, {1'.. r roceed with ler.al action to try and take over the project under the Trusteed and i,uarantee Ar.reement or (2) reach some voluntary qettlement ,,1th Javelin if that could he done.

The mo11t preferable solution was the second one, Why? necause at this stage,February 1972, with the r>ro1ect hein~ in the shape it was in,with such majo: decisions hein~ made about marketinr., about shipping, to get the logging operation in order, to get all of these things done that need to be none,we did not "/41

1!.R_•_ CRO~DJ1=_· have tir.u~, we could not risk the delays 1ming through the court. Ile di.d not have the tir,e. Now if we were forced to the wall. if they wen! absolutclv unreasonahlc. rinc! l:!e were rrepared to ~rasn the nettle and ro on to court. Or t.'e could attempt to pass leJ!Jslation and tab! the project that way. There would have hecn lernl pro'ilems there. constitutional problems. !io if it c.,uld 1--e rlonc-,a voluntary settle1cent "'as hetter. r. nother r"ason for that 1.s this, that Canadian J avelin Limited has some 20,000 odd shareholders.

They are not all in on the action, A lot of them. manv of trem , the great Majority o f them are ordin,n;r men and women '-'ho hroup;ht shares in Canadian .Javelin. Thev rlo not control the comnany, cannot control it~ manar,emer.t and are at its mercy.

Tf we were successr-111 in a lep;al actior: were we foreclose,whcre s11c:cessf11l,.lavelin conlrl not have J.".Otten a cent hack nut of this proiect and T feel sure it 1-·011ld have become insolvent anrl ~one under Tf char c, uld he avoided, PC felt it was rreferahle . i•e were not out to kill or knife or finish Canadian .Ta•·elin. 1•'e have no reason to do that. llut we t!ere out. we are out to protect ''ewfoundland to save thiR nrovince, to out our interest first. l\11t if 1,,1e could clo that. if 1.1e could do that without also causinJ? the demise of Canadian .Javcl1 .n, so much the hetter.

That was our rosition. ~o on Fehruary 4. l·•r. ~peaker, we hat.I a rneetinJ? \.'i th Hr. l)ovle' s lawyr.rs or representative to discuss the ne~t wove. Thev had now 1?ivcn uo back the S24 million and J riresented thel'l with a sug~ested proposal for ,liscussion purposc>s. I said, here is sol'!ethin,i: 11e can discuss. This is not an offer . It was not authori:,:ed hy the ~ov,-rnment. Th:ls is 1ust so as we can J?Ct down to brass tacks and start rlhcussinJ? i·h11t Rhould he done.'' That is roughlv - these are th'! pri.nc:lr,lei:; r.cnerally that are in the a~rcel'!ent hefore the !louse today .

That ii; as the l'ouse l·nowi; in eo;senc e ::1 at we pay Canadian .Javelin Limited and the associated companie s $5 million for their interest in the 742

~'ay 4. 1972 Tape 273 PK - 3 I-IR. CROSBIE: project, S2.5 million,i.f the House ratifies this ar.rcement,upon ratification and $2,5 million within six month~ suhject to our havinr the ri,zht to deduct from that any monies that t••e find that have been spent on the pro1ect since Hovemher 21, 1969 , not reasonahly neceFHiary for the project. We can J!O to arhitration if there is disaAreement. This was a proposal aloni:t those lines just for dhcussion. After that meetinr. the .Javelin peonle went away and after they went away thev were suppose to r.et us inforr.111tion.

They were suppose to eive UR complete details on their assets and their liabilities all their compl ete po~ition,so we could discuss this proposal further. We heard no more until Fehruary 17 hv nr. Doyle'R legal renreRentative . (tJhen I sav. Mr. Dovle. T mean .Javelin/ telexinA me. AN HON. nnm1m • Tnaudihle. 1-fll. CR0!'RU:: They are nretty well. After a t elephonP conversation 1 where my co111T1ent to him I cannot repeat, he telexed me,Fehruary 17.

Ile i;a:ld the follo"1in,z fieures renrcsent the approximate Javelin investment in the project 50 ono shares of p~Pferred stoc~ 1 S5 million: for q~O Rhares of common Rtock ~2.2R0,000; for inter-company advances rouAhly $5,600,000 and !IALC"O invest1:1cnt of vnnds 1 S5,900,000, Canadian .Javelin investment in the south Concession $3, !.\77, 500 of \.1hich $2 million is unpaid nnd pa,;t ,'uf> llarmon !luildinr .s $650.000. Pe remain ready to diRcu11s the,;e .. 1.t>i vou: That amounted. l!r. !':peaker, to $2 3,407,500 that Javelin had alleitedly invested in the project.

Now when you deduct the inter-comnanv advances Raid to he $5.6 that comes to $17,807,000 in other words Javelin 1-!as "'illin!? to se11 thi,; map.nific an t project to us for $17.807,000 nlus repayment of thei~ inter-compan~ advances, They have now 11cceptc d what was RUJ?fi?ested in early Fehruarv and that is $5 million plu11 repayment of the inter-co~~anv advances,

Now. 'Ir. Speaker. that vas Februarv 17, they ,-,ere told it 11as entirely unaccentahle. But there ••ere several neH features,One •1as that Canadian Javelin '"'anted $650,1)00 for the Harmon buildin~s ,t-,hen they had only paid us $100. non for them. i:o they Pere asked naturally why the difference? l'hv S550, 000 more to l!et these huUdings back? The ani:wer Pa!! that some third nartv had ~otten SS.50 JJ()O worth of .Javelin sharP!I in connect ion Pi th the transaction. !-le were heln,-. ai:il:ed to repav them Pith a ssso.ono hri.' e thev had aprarcmtly i: fven to some third partv . N: Hnt!. ' 1PffiER !

Tnaudihle. ~!R.___f~OSIHE_: T do not know, they ,-,f.11 not tell 11!'1 naturallv. AN !ION. 'IF.?-!nl'.R: Tnaudf.hle. T. think so rnvqelf. l really do. $1\50 ,nnn hecause thPv hrihed o;omehody with sssn.nnn aml asked uo;, thP "rovince of ~?e••foundlaml, to reo.ivment to them the amount of the hrihe Monev. l'll!> anvthin!! more cvnical and morP st11'.)id Pver <;uP.i?ested to anyone hefore'? You ,,,j 11 notice that we arc 744

Hay 4, 1972 Tape 274 JH - 1 HR. CROSBIE: buvinp.. the buildinn back for Sl'lO,OllO. I would have given them $650,000 if they would give me the nnme but it was not offered. Sn we are getting the two bui]dinJ?s back fnr $100,000 and these ~ A.~ !!_Q.N.:. -~~_E_R_!. (tnam!ible). HR. __ C:_1!,Q.S~If.: T 1m1t want to tell the llomie some facts on these two huilrlinl?S. f>lr. SpeakPr. It will onl v take a minute. There was nn agreement sir.nee! on fier,tember 22, 1970 between lier Ma1estv the r'lueen in Rip.ht of Newfoundland rer>resented bv the Honourable .Joseph R.

Smo.llwood. /\ctinr Minister of Pnhlic Works, called the vendor t o one nart, Harrnn Co:moration and Canadian Javelin Limited; where for ~250.000 nav.1hle S50.ono on sir.nature and $51),000 a year in the next four vears, the first ins tallment to be paid September 30, 1971 and the other installment Sentember 30 in each year thereafter, amom,tinr to a total of $250 ,000 1 the r,overnment and Harmon Con>oration nssir.ned tn Javelin the laud desrribecl with two huildinJ?S thereon at Stcnhenville. Nnw do vou know hO\l we J?Ot this document, Mr. Speaker? Did we f:lnd it down in the records of the Harmon Cor!')oration?

No. Did we find it in the records of Public Works? 'io. Did we find it in the records on the eir.hth floor? No, there were no rer.or(ls. !low did we find it? \-fucrc did we !l'et hold of it7 We i::ot it frort the lawyers for Canadi1m ,Javelin. There 1,1ae not even a copy of this in this b11ildin11,and nen!lle lauJ;!h about what files are J;!one.

There was not a copv of that SAree~ent in this buildin~ when we took over and we had to ask the lawyers for r.anadinn Javelin to ~ive us a CO!lY• Unheard of in narliamentary historv that one AOVernment left their records in a condition l ike that to a succeerlinr one or some members nf it. 745

MR. CRO'iBIE · ~o the rrice was supposecl to he ~?50,000 and not one cent was n,,f <l. not one cent until "10\'1?riber )n. 1071. a yeat" anti two ll'Onths later when s1nn,noo was naid-after the election. Thr election was 'lctnher 28 anrl November ]n. ~1nn.ono wns nnic' rlnwn on that aJ!reerient. !t l.'/lS not n.ii~ bv "'r. Vardy. The $101J,{)00 Mr. Vardv r:ot en flc t n'- rr 2f. from Javelin Pn.pPr was a nolitical contribution and he ditl no t to:1y that tlown on anv H:trmon build:lnf!S as hP sa:lc.

The monev "rnM the Harmon huildinJTs was naid hv Curtis and Dawe te thC' l!OVernMent :ind that is the wav the receipt is made out. s100,onn was raid on ~nveriber ]ll. 1071, no you l<now, ~Ir. ~neakcr, that these huilclinp.s were valued hv "nhli.c Works at the time that th;it aP.reement was entered into,that thrv werP v11l11ccl ,lt SR. million. Builclinp nu,.,,ber 31,J. a concrete bricl• structure 121, 0 ')n snmtrP feet built in l'l58 with an historical ro,;t of $f, ,062.non .tn,l an est.irnatecl renlacement cost of c;f',.5 IT'illion. ThP t•stimatecl v11luP nf t 1i11t h11ildinr M11v '.!o, ]Q70 - <:4.o'i],OOIJ.

Buil clin" nuMher 1(,1. ~ dormitory bu.ilrli nl', concrete nntl brirk tnl!.non sQuare '"eet built in }(ISS. On !'ay 26. 1970 valuerl by thr llennrtmrnt of Puhli c Wort--s 'l3.501,00f'. That is valued, the two of' them tot'ether . over $8 , 150,000,a~rccded to be ,iolrl to Canadian Jnvelin for $250.00ll,to be oaid over five years. How does that stril:e vou? Tt strikes me as hein~ a prl!ttv noor de;il , $8. ~:111:lon thev arc valued at and sold to Canadian Javelin fnr S2~n.nno. Oh. I for~ot. nluR the ssso . onn. I have not had a chance to see if there is any Order-in-Council nmrncd aoprovin~ that and so on.

There miJTht he. He will have to have all this look e d into when time rermits. That was ;1 scandalous venture ancl vnu know, Mr. <;neal:er. that this aPreement here was flown out to Harmon to be si ~ned in a rush on <;el')teMher 22 nncl no 746

Mav 4, 1972 Tape 274 JM - 3 HR. _CRq_s_B_I_~ • copy of it left at the Harmon Corporation. They wanterl ~~50,000, as the telex shovs here. to p.ive us back those two buildini;?s. l!ell thev arc rivinll; them back now for $100.000. I do not know, nerhaps thev ll;Ot their shares back. That is the storv on the two Harmon buildinrs and I an: sure. Mr. Sneaker, that the people of Npwfoundland w:111 find a lot het:ter use for them out in Stephenville, some public nurnose out there . before we are throull;h.

Hy the wnv there ia 11n excellent opnortunitv out in that area now for someone to put 11p a ~ood motel or hotel because neither one of these buildinp,s are p.oinr to be used ·for that nurpo11e. Pnrdon. A~ HON. 1-!E!-fllER: ~r. Spencer - ~R. _~_R!)~~~I~: Snencer has one in Windsor, no. but I hone that some- borlv out that way wil 1 put till o,1e becnuse tltey can do now with a fifty or sixty roo!'I hotel. at least, out there. HR_:._ ~~~A-~Y: (Tnaudiblc). !'ffl ._ CROSBIF.: Mr •• Yohn Diefrnhal-;cr was sneakin~ in the !lotLse of Cotnrnons one time.

Mr. ~peaker. and lam sure most of us heard the story. and he wns interrupted by one of the minor members across thc llous t', nncl he s11id, "llhen the bi1t J?ame hunter is out after elephnnt he does not notice rabbit tracks. " And I do not notice mushroom caps . Now. l'r. <;ne11ker. that tJas thr. llnrmon huildinJ?S. The same telex referrer! to Canadi11n Javelin investment in the !'lo11th conressfon 'l3,977. '100 of which S2 . mi.llion is 1mrrnid nnd nast due.

T nsked wha t this was, whnt is this <;outh concession thnt C11nadian .Tnvelin h11s invested nrnrly $1,. million in ,an<l I w11s told thnt this is 10, JO() sriuarc triles of tb,ber 1 anc! in Labrador that .Javelin is huyinir f rom s01rebodv called 'locietv Transshippin1t . T said, "Why is Javelin nnvin~ this money? Do they have title to the l11nd? Was 747

Mil. _C~QS_l!J.~ • n sc:irch "Ind tit J e ever donr? ' ' \lell. the lawver ;ictinST for ?-{r . Dovle c! le! not know 11nvthinr7 about that but he kne.t that tht>v harl aSTrcerl to n;iv thel'1 $3.977,500, thilt they had naid them$] ,977,500 an~ owP.d them S:!, 1'1'!llion and thev wantec! 11s, th~ nC'oplc of "fewfoundland. to reill'hnrsc thew the S~. rillion. Rv r,ollv , you tnllt ,, t,,, ut the rrC?at lancls dC",1lia wait until vou see this one . llere it h. 'fr. Soeal<Pr, ! .,hrndor.

On the ;ipnenrlb:, Mr. <,nenker , to the a~reement we are rettinl' b:ick frolt' Can:idian .Jnvclin and NALCO all this nrea here. that is unrlcr the 'lfl.l .C'O Art. and al 1 t h :! s ;irea UJ'I here arounc 1 ~!ilhush. th:it Is timh<'r rfrhts •mder thr NA1,CO Act, and anv int c.>rest thcv havr. we rlo not think thev have :mv, hut ;,nv interrst thev h;1vr in JO. 300 snu.,re milrs rhht hC're,whic-h i11 c;,lled the <,011th Snvl:!reirn r.oncrssion, This 10. 3no sn1111re triles .Javelin ,1Prerd to buy from ';oc-ietv TransshipninP of T.fochten!;tri.n. Nn1.1 we co111rl not rrt anv infomatlon on it.

Mr. <,ornl<C'r. thl're Wl'Tt' 1111Pstions a11ked in thiFI 1'011Ee in 1°7Cl anrl in 1971 . "Does ;mv c-nr111anv incorporated in l.irchtenstt'in h:wr ;mv interPst whntsocver in timhrr rirhti:; in Lnhrador? " 748

May 4, 1971 Mr. Crosbie. Tape no.275 Page 1 - MRW ~~e were told that it was a lot of mumbo-jumbo but we were told that this is all in the public registries; this is public information that there is no Liechtenstein company the government knew about. You are howled down and yowled down. Anyway there was nothing to it, 10,300 square miles of it. It is not on any public registry in this province and it is not on any record in the Department of Hines, Agriculture and Resources. _!.N HON. HEMliER: (Inaudible). _MR. CROSBIE: I will come to that Mr. Speaker.

Now as we got down to brass texs after we filed a notice of default on Javelin because we did not get down to the hardtack until after that was done, we got some information on Society Transsnipping. Society Transshipping is reported to be founded in Vaduz, Liechtenstein in 1947. The officers are PEter Ritter, Robert Fournier and John Francois. l do not know who thev are. I believe they are lawyers.

An agreement,dated March 6, 1968, was entered inio between Societv Transshippinr, and Canadian Javelin Limited 'Whereby Society rransshipping transferred to Javelin the rights and oblir;ations then invested in them by virture of a letter of grant. "A letter of grant?" says you. "From whom?" "From Hr. Smallwood," says I. It 'Was dated March 3, 1965. The letter confir111s that Labrador Wood Reservation as per a map attached was granted to Society TranAshipping, I 'Will read the letter.

These copies were supplied to us by Canadian Javelin after we got down to hardtack, after the notice of default 'Was filed on them , The agreement is here, a copy of it, dated March 6, 1968, Society Transshippin g and Canadian .Javelin, The letter of grant means the letter from the head of the Government of the Province of Newfoundland attached hereto, marked NX-1. The letter is signed by the then Premier Smallwood . "March 3, 1965, Society Transshipping, Geneva So itzerland. Dear Sirs: This i's to confirm that the Labrador Wood Reservation as per the attached map has been ~ranted to you. In it 749

the province reserves all areas subject to flooding in the drainage basins flowing into the St. Lawrence River and the rights to power developments are also excluded from this reservation. TbiG wood reservation is for a period of two and one-half years from this date with a grace period of one year additional to provide your paper interests and technicians with ample time to make an assessment of its commercial possibility. (It had seven vears to do that).

You will be entitled to a timber lease on the same basis as other concessionaires now eKisting in Labrador; namely, an annual ground rental plus a stumpage charge of $1.50 per cord with a time restriction on the building of vour operating facilities the same as in the NALCO Act. Sincerely yours, Joseph R. Smallwood," We have searched records of the government and Order's-in-Council for 1964. There is no Order-in-Council approvin~ this, We have searched for 1965. There is no Order-in-Council approving this letter. We have searched for 1966. There is no Order-in-Council.

If there were an Order-in-Council, Hr, Speaker, we are infonned by our legal advisors that there would be no authority under anv statute for Mr. Smallwood to ~ive this letter to any one grantinr, them rights to 10,000, 300 square miles of timber. AN HON. HEMBER:(Inaudible). HR, CROSBIE: That is a possibility. Hr. Speaker, that was the letter and the only other reference we can find in government on it is an Order-in-Council - l will come back to the agreement.

But Order-in-Council - 1000,of 1968 refers to this South Concession and the Order-in-Council states: "Any undertaking or c0111111itment that might have been entered into with Society Transshipping for that timber was rescinded and it is replaced bv another Order-in-Council d3ted April 10, 1969, No, 250 of 1969,' which has something to do with 750

May 4, 1972 Tape no. 275 Page 3 Mr. Crosbie. NALCO and mentions Society Transshipping. These are the only two, · It appears to consent to the transfer of its rights bv Society Transshipping to NALCO. AN HON. MEMBER: (Inaudible), MR. CROSBIE: It could not have had any ri~hts anyway. w~ have had the Department of Hines, Agriculture and Resources search all the records. There is no record in their files of any correspondence or agreement with Society Transshipping or any company by that name, So, Mr. Speaker, - AN HON. MEMBER: W:itch your language, MR.

CROSlil_~: This a~reement was signed on March 6, 1968, Canadian Javelin Limited, Mr. Speaker. agreed to pay approximately $4 million to get whatever rights were given by this letter. Now any lawyer who acted for them on it would advise them that this letter has no validity, It would not be worth paving a dollar for. But they agreed to pav $4 million, the directors of Canadian Javelin or the people who si~ned this, to acquire this letter. They have paid $1,977,500 to whoever Society Transshipping is, They owe them $2 million more they Ray. The question arises: Who owns Society Transshipping?

As far as I am concerned this was a scheme to divert $4 million out ,of this pro1ect or out of Canadi~n Javelin for person or persons unkn01Jn hiding behind Societv Transshipping incorporated in Liechtenstein also a tax haven and also a place where you can incorporate a company and the real owners will never be known. Anyway there is a detailed agreement here as to how the money is to be paid, etc, There is a copy of the Premier's letter attached.

NO!J that agreement was later signed by Society TransshippJng to another company called, Pioneer Investment Limited,whenJavelin are now alleged to owe•the money to, ' 751

Hr. Crosbie. ~ow that is all w~ have been able to find out about this at the moment, Hr. Speaker, except this that we made it clear that as soon as we discovered it:

(1) No one had any ri~ht to that timber and the 10,300 square miles because it was never properly granted;

(2) That Canadian Javelin Limited would not be paid one plugged niclel by us for the timber;and (3) ~hat whatever rights they mir,ht think they had to the timber, thev would have to convey to us lf; they were ~oinp. to reach any agreement with it. You will see in the agreement that any rip.htu that Canadian Javelin might have to that 10,300 square miles is transferred to us for the $5 million and not a cent or nickel extra. Whoever Societv Transshipping is, Mr. Speaker, not one cent, not one nickel, not a woodchip, not a sliver, not II match will they ever get off that 10,300 square miles. They are not entitled to it. 752

May 4. 1972 Tape 276 J'K - 1 '!R. C:ROSBTE • I believe Javelin is r,oin~ to sue to r,et theil" money hack. AN HON, ~Hf.R: Tnaudihle. ~ CR<?:~n~ :10 it ,.ras removed off, the $4 million was rernovrd oH fol" the l,il 7 million. Well they asked fol" it when they we Te askinfi for the S17 milHon. They wanted $3,977,500, They alle~ed their investment :In the project February 17 at $17,807,500 and you for~et the intcr-comnany advances included in which was $J,q77, 500 for this, for this ar,reement. Now, •Ir. Speaker, •: Pi;tion,; used to be asked in this !louse ahout Society TrRnsshipi"lr, , Why? Recause in ··,., Leans HaJ?azine in February 1969 there was an

article hy one 1-!alter Stei.•ard on tir.

John c. noyle and on pas:c 36 it va!l stated that the whole linerho:ird scheme was based on timber riPhtR coverinr, 21,00~ qnuare mileR of J.ahrador divided :Into two hlocl-!1, one hy NALCO and the second 10,325 snuarc miles purchased from a curiou,=; company called Society Transshippinr Owen in J.iechtenstcin a tiny princinalitv on the unner Rhine River •• Javelin will nay Snciety Transshippin~ about S4 nillion for its timher risl~ts, hut Dov le does not !leem to know much ahout the comnany. ··1 hey are controlled by some ( - -) bank or somethinr, and T do not know who they arc exce nt that they are in the paner businPs~ in thP r.uronean area and frankly 1 do not want anbody ever to conP. near me on H, ' (!'loyle wits once accused of SJ'iritinr. ~4.R million worth of steel< out of Canada into Liechtenstein and althourh the ca!!e was thrm-m out o ' court , he is touchy ahout that nation . ) That

article was in' ~•cLean 's Ha~azine," questions were asked in this llouse l'!VP.rv year, Mr. Speaker, ahont this. noes any col!'pany incorporated in J.iechtenstein have anv riphts to any of our wood? T1'c impression p:iven was that the ani;1o.-er was no. Yet Mr. !':mallwood knew that in 'farch, 1Cl65, he had riven then a letter and in 1968 there was an Order-in-Counril and ' in 1969 there 1•as an Order-in-Council . If that is not mal-administration 753

misfeasance. nonfeasance. mnl reasance, mala fide 7 1 do not know what is. 10,300 square miles of this province J'IUrl'orted to be given to this Society Transshippin~ and Javelin payinR $4 million for it. AN HON. MPIT\F.R. Inaudible. ~R. Cl!.D_SBI.f~ Pip.he. Thev do not ~et anythin~ for it hut Javelin 2ives us whatever right they have in it, •,ow. ~1r. Speaker. after this telex came, we did not hear too much from Cana,Jian Javelin. They were not givin~ us the information that we had requested.

They are obviously just stalling, So we nrepared lep.al action whi ch meant that we had to p,o over the guarantee apreement and the trust deed and ~et legal advice and decide what defaults there were and so on. f.o uc s tarted to prepare for le~al action. l1nder the trust dr.ed, Mr. Speaker, unfortunately, had to ~ive thirty days notice before we could commence action in the courts. We had to notifv f-lontreal Trust rompany, the tru11tee, of the various defaults we aller.ed a~ainst Javelin and they had to serve the notice on Javelin and aft,•r thirty days \.'e could start action in the courts. Unfortunately, Mr.

Speaker . if you start action in the courts. it cloes not matter what prov:ls:lons are in the trust deed, they can disputP. them, they can apply for an in1unctlon, they can deny they are in default, legal action goes on. That was the situation we were faced with .

So here was SlOO million gone on the project, everything in slin~s. we were not in the position to do anythin~ about marketing. to do anything ahout shipping. to do anvthing about loggin~. apart from this, that on February 11, 1972. we appoint Forrcstnll I nternational Engineering to look into the whole lo~gin~ situation for us and I will come back to that. Every month delay, ~r. Speaker costing hundreds of thousands of dollars 1n interest and the rest of. it, so that if we commenced the court action Pe could be tied up in court for months with appeals for '\ years.

Now the court can appoint an interim receiver. 754

?-fay 4. 1972 Tape 27fi PK - J im. CR.Q_S~IE· But. ~r. Speaker, that may be suitahlE' where you have a project that is completed and operatinJt. You can 1tet n receiver,~d there is an or~anization, personnel there,that directs and accounts for all the money and goes to the court ever y time he has to make a decision, and gets their o~ay. Rut it is not suitable, ~•r. Speaker. when you have 11 project that is not completed, where construction has not stopped, where the major thin~s have not been done and there is no permanent personnel at all.

Then it is a verv different l·ettle of fish to itet a receiver and, tf you got one. it would he very di ff icult for him to ret t hem to act quickly and make major decision, hecause he had to keep voin~ back to a 1 udJte to Ret the okay and to itet approval. l'owever, if that were the onlv alternative . that we would have to do. }?ow we looked into the Question of the lep.islation to brini? before the llousP. to nationalize it immediately and take control that 1-•ay. without any delays, and to allow the courts to decicle whether there were any c!efaults - if there ,·ere defaults. no compensation and if the courtR found there were no defaults. we would havP to pav compensation.

There are leRal problems there ch1eflv conRtitutlonal oneR. In anv eVPnt vou do not t.."ant to have to do that unles11 ahsolutclv driven to it. ''r. ~nenker. ~m. 1-!.N. f!Ol,'E· Hould the honourahle lllember, Mr, ~neaker, mind elahoratin!' on the constitutional prol •1 e,,,s he mentioned that the rovernment mfr.ht "e up n'1;ain11t in tald.nf!: over the nroject? t~CROSR_IE: By legislation, one of the prohlemR would he whether Canadian Javelin Limited is a federal company, others are Newfoundland companies, wheth e r the decision in R.C. that holds - Tnaudihle. 7G5 '

''R .• CROS!lI_f:...:_ Yes, r1.iiht. 1lut that aritish Colml'hia Il ydro is not exactly similar. then• thev had a!lsets and here the y had 11hares and , trer questions. Al-! IION. ~IF"'BER • Inaudi h lf'. ---------· '!Jt CROFn lE: The question would he wheth er vo u are takinJ? assets of the federal company 1.:ithout compen!!at 'i.on and oth1.>r oue11ti Pn.o:;. Ml llm!. !-IF'lllF.R • lnaudih l e. ~:.R.'. _ _£P~<;,!~IF_- T am imrrv u e did not consult the honourahle p,entleman. nh. ves, it would he without compensation if they 1o1ere in default.

Anvvav there were col'!nlications in it • .A.N IION. ~1FJ!JlER: lnaudihl1.>. lfR •. i=!~.S.:'l_I~· I/ell we can 11rJZue abnut it later. T am _iust tell i.nJ? vou 1-1hat our no,d tion •·11s that it is a la11t remedy •~r. rnie:ht attempt to do that. ~o we are orepared.

Mr. ~peal:er, our notice of default - nnd on ' 1nrch 2, we served on '!ontr<?l Trust r.ompany a statement of t hP chifault!. ve alleped a!!'ainst Canadian .Javel:ln and on 1-'arch 1 "ontr,nl Trust served notice on Canadian Javelin of these defaults so thnt thP thirty day nerin<l st;irted to run, There are all i{inds of defaultq t hat we allel!ed, 'Ir , ~neaker. hecause there ,,,ere manv defnultq, J m;t to refer to a fe~• of them t-rieflv

(1) Javelin ForeRt and J avel:f.n Paper were im;olvent •••ithin the !!'PAn:fnp of the Jlankruptc·r act. Thev could not meet their ohli t.atinns as the v fell due. The companies had not expended the whole nroc e edR of the J?uaranteed sum in the cost of constructinR the mill and t ile chip mill because they Rpent more than $75,noo on leasin r , equippinp and furnishtn :; a flat for "'r . noyle. tt spend 55,400 for furnish-lnl! an executive suite for Ravmond J. Oovle. Thev had s pent payments in excess of $~000 for return af.rfarei: 1-et\.'een Canada and ~u rooc of sons-in-lawi1 and dau11:hters ,f "r. Jo' ,n C. Doyle. The y rnade mf.Rcella11eous poiym<!nts for rent in~ 756

May 4. 1972 Tape 27(, Pr: - 5 ~R. r.ROSB1E: a dwellinP house in Montreal. Had pai d i n e,ccess of S40,000 to Javelin r.xport Limited for purpo~es not related to the project. Had l!:iven credits in excess of that amount to Javelin F.xport for consultation fees in excess of $70,00~ and travellinp. and entertaininp, expenses of Mr. Doyle, none of which were relevant to the estahlishment of the mill, Failed to maintain plant and machine r v equipment in p.ood and suhstantial repair and condition. And there are all kind!! of other defaults.

Failure to carry on their husiness in the proper Rnd efficient manner so as to orote ct the r,overnment's security. r.roAs lack of planninr, and lac~ of orp.anized control and supe~ision of work in Labrador. Failure to appoint suicahle manapeda l and technical staff in the wood cuttinp. operat:f on. Failure to plan and conqtruct suitahle stockpiling nnd loadinr facilities for the shipment of '-• ood to Stephenville and on .:ind on and on. Tn relation to the 111!11 at StephenvillP had taken no adequate steps to employ !!'ill mana~er. hir., superintendents or hire trained i,;taff II ad permitt ed cost tn 7r_j7 '

L G t'ID U-U • ._II '"""' - .... "ffl.. CROSBIE: to escalate had not ordered relevant spare parts and tools, failed to take adequate steps to get adequate markets, were in default with reference to the binding contract with a markeer for marketing a major part of the product and so on. In connection with the German loan of December 22, contrary to the government ~uarantee agreement had not held, the notes issued for the money were not held nor were they being held by the government, as the government guarantee agreement provided.

Then they failed to pay ~acAlpine amounts due them on Januarv l - $1,957,000, February 1 - $2,393,000 and on March 1 - so on. These were all defaults under the trust deed and the guarantee agreement, So Montreal Trust served that on Javelin, two dayB after the election cnmmencec. No~ Mr, Speaker. once that was served, Javeling contact~d us again and came down to start negotiating again and providing us with the infonnation that they had promised us, Now what about the Labrador situation? What did we do about that? The hon. memb~r for Labrador North, I am sure is interested in that. What we did, Hr.

Speaker, was on FebruaTV 11, 1972. we appointed forestry and F.ngineerlng Limited of Vancouver to examine and assess the present wooll production and delivery operations of Javelin • forest in Labrador and Stephenville, Newfoundland, That is what they Yere asked to do.

To assess the suitability of existing logging equipment and facilities. the condition of the logging equipment facilities, the probable wood production, shipping practices and costs, suitability of the present organization~ effectiveness of the present staff, probable wood costs delivered to Stephenville and so on 1and they made a report to us early in March,after being in Labrador and in Stephenville -'.Ind so on • . This is the report here.

On February 22, 1972 Javelin employed 266 people, 123 housed in the Goose Bay bunk house, the balance sleeping in houses in Goose Bay and Happy Valley , The current projeclions forecast a labour force of 600 people in 1972, Present accommodations - 300 men in bunk houses 1would be unable to house the additional staff I and additional facilities will be required, Then they go over the planning and what is happening up there and examine iL all and at the same time,I will skip to their conclu ~ions. 758

Hay 4, 1972 Tape No. 277 NC - Z HR. CROSBIE: and examine it all and - to save time I will skip to their conclusions. One of the major things wron~ up there is our maintenance facilites are poorly kept. The road programme is inadequate. The major road location and construction programme is urgently needed in the next two vears if t.hcy ar~ to n~rrly 550,000 cordR of wood. Project pulp wood requirements ur.til July 1973 totalled 425,000 cords. Labrador wood and wood now on hand totals 230,000 cords •. During the period June 1972 to June 1973 - 195,000 chords had to be purchased elsewhere.

That is on the Island of Newfoundland. Anyway, they say, "Provided an effective development progr1l11111!e is undertarcn at r.oose nay, it is likely that the Stephenville Hill can be Gntirely supplied from Labrador by 1976." An estimate of the possible supplied programir.e is given here: 1972 they estimates we could r.et 230,000 cords from Labrador, 1L would be less than that now and we would have to get 195,000 from Newfoundland, total 425,000; 1973 that we get 350,000cords . from Labrador,if the right steps were taken. 190,000 cords from the Tsland to make 540,000 cords.

In 1974 - 450,000 from Lahrador, 90,000 cords fro~ the Island, in 1975 - 500,000cords from Labrador, 50,000 cords from the island, in 1976, if the rir,ht thin~s ttre done, 550,000 cords froffl Labrador we would not have to r,et any from the island. Rut it would take at least four years to reach that if all the right thinps are done. 759 '

"'av 4, 1972. Tape 278. Pafle l. Woodla•ds Operation should he heacled hy a Woodlands manager resident in Stenhenville. P.e ~hould be res nons i hle f or overal l direction of all woods suonlv activity and so on. Operations at Goose Rav ~ould be the direct resp .. nsibil:ity of a resident nroduction manaf!er who \lould report to the woodlands manager and so on. They con c lude ~,r. Speaker, that the J,ahrador Wond] ands operation of Javelin are still vet\' much in the earl v stages of establi s hment. The 1unnt\tV of wood which could be delivered from Labrador in 1972 estimated 210,50 0 cords.

With careful immed.iate detai.l plannin y and a vi PlOrous prograrmne of development it wc,uld be rnssihle to rleHver 550 . 000 cords hy 1976. The nresent or~anization and staff do not have sufficient exnerience to nlan and establish the necessarv noerations to achieve the required annual production within a reasonable time. While the nresent equinment is renerallv adequate, major imnrovements in maintenance practises are urr ently required. Substantial expansions and all tvpes of facilitie,; 11re needed if an e,·onomic oneration to produce 550,000 cunits is to be Achieved.

Seven major probO:.ems had to be reRolved in ship loading and transnnrtat f on r,hases, maintenance organization facilities wood reception and stora~e in Stephenville. It ifl neceRsary to develop sources of pulpwood 1.n Newfoundland for four year~. Then they give the delivered wood cost, which I do not th i nk I should Rive here • hut anvway let us sav thev are higher than ~as orojected tuo or three years ap,o fn connection with thifl nro.fect. But thev feel they would decreaRe. 'IR.HARVEY: Ill it mentioned in the report concerninp taking wood out o f Sandwi ch Jlay ,\le-xis Jlay area on the Labrador Coast ? P'R.

CPO~RtF: They have to Rtudy that. They \lere only u~ a ~ound the Coos e Rav area. 'IR. HARVEY : Say they cannot ~et all they want from ~elville, and they have to come to the iRlan<l.surel y they do not have to come to the island - MR.CROSBIE: Well they sur,ges t tha t we get it from the island . Perhaps we 760

~lay 4, 1972. Tape 278. t'aJ:• z. can r,et some from Sandwich nav. We will certainly have a look at it. If 1 mav conclude 1 the Labrador oneration is feasihle if properly developed, So that was their conclusion. There is a lot to be done there "!r. ~peaker, but that there was hope for, properl~• managed with the rf ht thin i~s done, 1..•hich h11.cl not heen J?ettinl!, done up to this time. '·'c- have enJ!al!,ed l'oristall, rorei::trv & Eni;ineerinit Limited now to do certM,n th1nr,s in connection 1,t.th the wood operations, which I 1ust mention nm-, .

That ts to prepare a comprehensive woodlands , eveloo- ment n t an. Thev are to nrovide short-term engineering and development nsi;istancc to 11.ccelerate the constructi.on of roads in the r.oose Bay area. They are to heln provide nroduction managernant until the or ,: rations are we] I established and 11 nermanent management 1:roup has been developed and trained. ~o that iR what '-le di. <l in thi!l interim period about the wood situation in l,at.rador, It is not hopeless. in fact it looks reaaonably oromisin~.

The cnst\will he higher, ouite a bit higher than were oril!.inallv stated to be, prohnble, in earlier reports.

These should decrease over the next four vears a~ the right management gets to ~ork and thev become more efficient, "R, 'It.ARY: T!l thi!'l the ame outfit that did the study on Newfoundland l'ore!'lt l'roclul'ts in 'ltephenvi.lle and Hawkes•Bav? rR,(~ROSHl_!: The!'le are the same pen~le that did a study on the third mill, Nevfoundlnnd l'uln f Chemical. for the (',overnment of ~ewfoundland. : IR,NE/IRY: Whv did not the honourable member emplov a Newfoundlnnd firm '-!R.CROSBU: : \•.'hv clin I not emoloy a Ne'Wfowtdland firm? What Newfoundland firm?

"IR,Nt:ARY: There is a consultinr, firm in Newfoundland. ~!R.<;ROSBlf: l see, \.tell there mav very well be a consultinp; firm in 1;ewfoundland. and it mav be a verv good ollf, But for this we enmlnyed Forristall because of th1.!1 r sf z, , their experience, thev were recommended to us from !'leveral sourer.fl anu despite the fact they were a subsidiarv

' lav 4, 1972. Tape 278 ea~a 3 . of ~and~ell, the honourable ~entleman durinp the elec tion camnai~n u a:,; out with some fl uff - sm'le information i:iven hfia bv the honourahle "r. flovle, his friend, Ynu know that !,andwell uas controlled by some ~wedf.sh comnany that was a comnctitor of th:fs. Remember that Junk thP hnnourahle member p.ot on \.•ith durin~ the election, This is the comn.,ny. No ,.it i.R not true, of course not. 762

Mav 4, 1972, Tape 279, Pare 1 -- anh The hon. iientleman did not check his source. llis source was Mr. Doyle. That is what we did about the wood while we were serving this leizal notice. ~r. S~eaker, we still had to wait thirty days before we could proceed with court action because of the nature of the trust deed. March 17, Javelin disouted the notice of default. That is a, formality, 'T'hev disy,ute<l that they were in default, They aller.ed that the Ne1,,•foundland r.overnmcmt were in default. Thev allered that the Neufoundland roverrunent had promised to ruarantee them financing and had not done it.

They alleped that the Newfoundland Government had promised to deliver to the~ ti~her leases and had not done it and so on. Thev had their tale of uoe and they were f!O:iniz to disrute evervthinr in court. They had letters from l!r. Smallwood, we never had the letters, there are no copies here, they are all irone frol'I the brdldinit. Anyway, they said thev did. Negotiations then continued in earnest aizain after that and, on ~arch 17, ~r. Speaker, ~r. D~yle's lawyer, Mr. r.olomb_at a meetin~ presented me with a letter.

He c111De to a meet:fnJ? with the committee - I thinlt it was the t-'inister without Portfolio and myself, the "''inister of Justice and his district,to continue the ne~otiations. When he came in he presented me with a l <tter acceptinr my offer to him of October or Fenrunry 4. The document that had not been an offer at all, that was headed a proposal for discussion and given him on February 4, He cmne with a letter addressed to me sayin~: ' We now accept your offer of February 4, ' and prctendiniz it was an offer.

Of course that had to be Rtopoed because it was not an offer but just a basis for dicussion and we had chan~ed our minds on many thinga since then. In anv event, neiotiations then conunenced again on March 17. Now, ~ir. Spea~er, the previous administration had this to deal with from November 1969 onward until January 18. I already hear indications ere soundJfrom across the isle. They are goia~ to say that we had a very strong le~al position and we should have taken legal action. Now they are roinr to say we should not pay ffr. Doyle a cent or we should not pay

Canadian Javelin a cent , t ha t this l s not necessary. You know, that it was silly for us to do that. I hope they do not do that. It would make them look so foolish in the eyes of the menbers of this House if they did, because they were in there for at least the last vear and did nothin~, !er.el action or otherwise to deal with this problem. It is even mooted to us that the hon. r.entlemen were willinJ? to pay twenty or twenty-five million dollars to take it over a few !l'onths ago. One of ~r. Doyle's ne~otiators. !IR. ROBERTS• Does the hon.~entleman believe anythinr that .•• ~m.

CROSBIE· "One of his negotiators, I said". AN HON. v.£!-'RFR: Does he want to believe that source? ~'P. CROSBIE· J. do not know, the hon. member can comment on it if he likes. Now, Hr. Speaker, why is it that our leJ?al position was not 11s stronJ? as it should l111ve been? First the trust deed and the 1?U11rantee agreement were not sufficient protection anyway, because of delays that can occur throur.h the courts. If we arc to be involved with this amount of Money, the only way to possibly achieve any control over the nroiect is to have a ma1ority of the shares.

If we had had votinJ? control of the maioritv of the shares and they were actin~ unsatisfactorily we could have voted them and just put them out the next day, We could have • alled a directors meeting or a shareholders meeting and had them out 1n a week or two and taken control. We did not have it - we should have had it if this pro1ect was to no ahead in this way,at least fifty-one percent of the shares.

There might have been some agreement that once it operated satisfactorily and our debt was retired, that the other people involved ~et a majority of the shares, or that we sell our shares to them, There was nothing like that in this arranrement. There was an interim ap.reement. Oh yes! there were these marvellous interim agreements which had a clause statinr that the shares of Javelin Paper and Javelin Forest would he left in trust at the Royal Tru~t Comnany and that they be voted as 764

May 4, 1972, Tape 279, Pa~e 3 -- apb the poverl'l!11ent directed. Yes, there was that and another clause that unon anv default the manal!ement and control of the operation would be immediately taken by the ~overnment. There was that, that is what the document said. WorthlP.ss, u,ielesi;, because you had to 11:0 to court. If they challenged that vou would have to r.o to court, You say; ' All rip.ht gentlenen, vou r.ive them a letter; ''you are in default, we a.-e now assuminp: manaitet:'ent and control. · TI1ey would say; "Like hell you are, vou are not takinr. over our offices, we are not takinp: vour inatructions, you arc not assuminp: manap.enent and control. W