HANSARD

Printed and Published by Nova Scotia Hansard Reporting Services

Ms. Maureen MacDonald (Chair)

Mr. James DeWolfe (Vice-Chairman)

Mr. Mark Parent

Mr. Gary Hines

Mr. Graham Steele

Mr. David Wilson (Sackville-Cobequid)

Mr. Keith Colwell

Mr. David Wilson (Glace Bay)

Mr. Michel Samson

[Mr. David Wilson (Glace Bay) was replaced by Mr. Leo Glavine.]

In Attendance:

Ms. Mora Stevens

Legislative Committee Clerk

Mr. Roy Salmon

Auditor General

WITNESSES

Atlantic Lottery Corporation

Ms. Michelle Carinci

President and Chief Executive Officer

Mr. Patrick Daigle

Vice President Finance and Corporate Services

Mr. Stirling (Ginger) Breedon

Chairman of the Board of Directors

HALIFAX, WEDNESDAY, JANUARY 25, 2006

STANDING COMMITTEE ON PUBLIC ACCOUNTS

9:00 A.M.

CHAIR

Ms. Maureen MacDonald

VICE-CHAIRMAN

Mr. James DeWolfe

MADAM CHAIR: I would like to bring the committee to order, please. I would like to welcome our witnesses from the Atlantic Lottery Corporation. My name is Maureen MacDonald and I'm the MLA for Halifax Needham.

What we do procedurally - I believe you've been here before, but it's been awhile - is first we have an opportunity for members to introduce themselves, and this will be followed by an introduction by yourselves and the Auditor General - this is for the purposes of getting a sound check for Hansard. Then we will proceed for a brief five or seven-minute opening statement from the corporation, to be followed by questions from the members. I would ask members to turn their cell phones off or to etiquette mode, please.

We'll start with introductions.

[The committee members and witnesses introduced themselves.]

MADAM CHAIR: Thank you very much. The floor is yours.

MS. MICHELLE CARINCI: Good morning, Madam Chair, and committee members. I'm Michelle Carinci and I'd like to first of all thank you for inviting us today. It's our pleasure to be able to talk to you about the Atlantic Lottery Corporation and what we do and how we do it. We do appear annually before the New Brunswick committee and also recently in Newfoundland and Labrador. I'm accompanied today by Ginger Breedon, our Chairman of the Atlantic Lottery Corporation Board of Directors. Ginger will share some brief opening remarks and then I will follow.

MR. STIRLING (GINGER) BREEDON: Thank you, Michelle. Good morning, Madam Chair, and committee members. My remarks will be brief, but I'm prepared to answer any questions about ALC's board, and governance as a whole, following Michelle's remarks.

ALC is owned by the four governments of Atlantic Canada and is therefore very much accountable to them. Each shareholder appoints two directors through the board of directors and the board, in turn, determines ALC's strategic direction and corporate policies and guides business operations.

In addition to the eight voting members, additional support and guidance is provided by an independent chair, which is a non-voting position. The board also approves the annual business plan and operating capital budgets and oversees their implementation at monthly meetings. With the assistance of the audit committee, the board also monitors the corporation's internal controls and financial systems.

ALC's shareholder in Nova Scotia is the Nova Scotia Gaming Corporation. The Nova Scotia Gaming Corporation provides strategic leadership for this province. The Province of Nova Scotia contributes to the overall governance of ALC and ensures that Nova Scotia's interests are at the board table. The two Nova Scotia directors are Sean O'Connor and Stephen Mont, and I would like to take an opportunity here today to thank them for their excellent work, both for ALC and on behalf of the Province of Nova Scotia.

As a board, we take governance very seriously and we're proud of what Atlantic Lottery contributes to the economy of the region. The directors of ALC's board are directly responsible to their respective provincial governments and are held accountable for their decisions. As a board we meet regularly and review detailed monthly business reports. ALC provides wide public regional circulation of its annual report, and its policies and procedures are monitored by internal and external auditors.

ALC is an excellent example of Atlantic Canadian regional co-operation. Four provinces are represented on the board and the interests of all four are considered in the decision-making process. While we strive to reach consensus whenever possible, we do provide some flexibility to accommodate provincial differences.

ALC follows the four provincial access to information Acts. We've committed to the principles of good corporate governance, one of which is transparency. ALC also follows the Atlantic Procurement Agreement. This agreement ensures that all interested suppliers have a fair and equal opportunity to bid on work for ALC. ALC's evaluation committee includes representatives from the Procurement Department of ALC and Internal Audit to ensure the process is consistently followed.

ALC also has a conflict of interest policy and process that is exactly the same as the Nova Scotia Auditor General's suggested process to avoid conflict of interest. In fact, we follow the same process and procedures as other government agencies. All ALC employees must sign a conflict of interest form every year, and all employees, including our president and CEO, withdraw from any situation where there could be an appearance of a conflict of interest. In the case of the president and CEO, the board has confirmed that Michelle did make the necessary declarations each year and the board is completely confident that there has been no conflict of interest.

Part of our overall governance approach includes a very strong and rigorous auditing process. Internal Audit works directly with the board audit committee to make sure that ALC's core internal controls and activities are conducted within the principles of fairness and integrity. In closing, ALC believes long-term success requires an effective governance framework that ensures that ALC is conscientious, transparent and accountable in its business practices and to its shareholders. Thank you.

MS. CARINCI: As ALC enters its 30^th year of operations, we're taking a look back at our success over the years. The Atlantic Lottery Corporation is a stellar example of Atlantic co-operation. As Ginger explained, ALC is equally owned by the four Atlantic Provinces and it contributes actively to the region's economic vitality. As the primary organization authorized to develop and market gaming products throughout Atlantic Canada, it is our mission to provide sustainable financial success by offering memorable gaming experiences to our customers in a socially responsible manner. All profit we generate is returned to the four provinces for essential programs.

Since 1976, in Nova Scotia, ALC has returned $1.7 billion in prizes to players, $1.9 billion in profit to the shareholder, and $705 million in compensation to our retailers and site holders. Last year ALC purchased $11 million in goods and services from suppliers in Nova Scotia. We employ 68 dedicated people in this province. Integrity and responsibility are the core values for our organization and for our employees. I cannot stress this enough, which is why I would like to take a few moments to address an issue that arose this Summer, since I understand this subject is part of why ALC was invited here today.

ALC complies with the freedom of information legislation in all four provinces. More specifically, in Nova Scotia, the agency agreement between our shareholder, the Nova Scotia Gaming Corporation, and the Atlantic Lottery Corporation is a legal and binding one. In it, ALC specifically agrees that it must comply with the Nova Scotia Freedom of Information and Protection of Privacy Act. This is a formal and legally-binding contractual obligation. This agreement is clear, unambiguous, and is a matter of public record.

The corporation is an advocate for corporate social responsibility, lives by the principles of leadership, governance, transparency and integrity. In fact, the corporation has been recognized for the past two years by Maclean's magazine as being one of the top 100

employers in Canada. We work very hard at ALC to be socially responsible and to act with integrity and responsibility. Responsibility runs through everything we do, every aspect of our business. This is part of the benefits of a regulated gaming sector. Today, however, unregulated competitors such as the Internet gambling sites are testing the boundaries of regulation and enforcement with bold advertising and popular sponsorship deals. Many of these sites do not feature safeguards for our players. In fact, our children can access these sites 24 hours a day.

In Canada, regulated gambling began in the 1970s. The industry became regulated for the following reasons: because prohibition was not viewed to be an effective option, our experience with alcohol proved that; to protect the public and the players by ensuring that the games were run with integrity; to ensure those who have problems and those at risk receive the help they need, regulated gambling made it easier for those with problems to seek treatment; and, of course, to keep gambling revenues in the community to fund causes for the public good.

In 2004, after more than five years of research and development, ALC launched a Web site called PlaySphere to offer a regulated alternative. This site gives Atlantic Canadians, especially those already comfortable with the Internet, the option to purchase their lottery products online. If we were going to offer products online, it was imperative to us that our responsible gambling approach be one of the most progressive in the industry and it is. A number of responsible gaming features are present on our site.

The environment and the market have dramatically changed over the last few years in the gaming industry. Maturing products, demographic changes, emerging technology, retail developments and increased lottery competition through deregulation and offshore gambling are propelling industry change. For instance, our traditional lotteries, as you know, like 6/49 and our instant tickets, are experiencing a decreasing portion of overall gaming revenue. There is a growing consumer preference for social entertainment and interactive gaming. Today's younger adult generation is technologically focused and looking for an experience. They expect more convenience than they did 25 years ago and they're also expecting more interactive entertainment.

MADAM CHAIR: Could I ask you to bring your comments to a close, please.

MS. CARINCI: Sure. This leads me to a very important topic for this province, the Nova Scotia Gaming Corporation, ALC and problem gambling. While gambling remains a fun and safe pastime for most, the most recent gambling prevalence study tells us that less than 1 per cent of the adult population are problem gamblers and that another 1.3 per cent are at moderate risk. We view responsible gaming very seriously and we work very closely with the Nova Scotia Gaming Corporation to promote the responsible use of our products and I want to take the opportunity to commend both the Nova Scotia Government for the detailed Gaming Strategy and the Nova Scotia Gaming Corporation for their excellent

leadership in responsible gambling. ALC fully supports Nova Scotia's efforts to address gambling concerns.

MADAM CHAIR: Thank you very much. We'll begin now with the NDP caucus, Mr. Steele, the first 20 minutes.

MR. GRAHAM STEELE: Thank you very much and I would like to welcome our guests. I don't know if it's the first time ALC has been before this committee, but if it's not the first time, it's certainly the first in a very long time. I noted in your opening statement that you said that ALC is a stellar example of Atlantic co-operation, which is wonderful and probably we should all be doing more of this kind of thing. The problem is that we've run into a few hiccups along the road that have to do with accountability and that's what I want to focus on this morning.

It seems to me that the root of the accountability problems is at ALC's head office in Moncton. It's in a different province so Nova Scotia law doesn't apply in New Brunswick and, therefore, so even though ALC is acting as an agent of the Nova Scotia Gaming Corporation, sometimes it's not entirely clear, apparently even within ALC, about exactly what rules ALC has to follow when it comes to Nova Scotia. So that's the theme I want to follow this morning. The first thing I want to ask you, along that theme, is simply this, this is the Public Accounts Committee of the Nova Scotia Legislature, is it the ALC's position that when we ask you to appear here, your attendance here is compulsory or do you believe that it's voluntary? I would probably direct that to Mr. Breedon as chair of the board.

MR. STIRLING BREEDON: From my understanding we've always accepted that as being something that we would have to do, that it is compulsory for us to appear. Your shareholder has a perfect right to ask ALC to partake in any of the elements within their province in terms of their process of accountability.

MR. STEELE: But, you see, the wording you used just now, that the shareholder has the right to ask. I guess what I'm asking is that when we invite ALC, is it your position that ALC must appear here or that it is your choice to appear?

MR. BREEDON: No, we must appear here was the short answer, sorry.

MR. STEELE: Back in 1995-96 our Auditor General, who is sitting over there to your left, raised an issue concerning the auditing of the books of ALC. ALC's opening position back then in 1995 was that the Auditor General of Nova Scotia did not have the right to go in and audit the books. ALC's position at the time was that the shareholder, namely Nova Scotia Gaming Corporation, could request the Nova Scotia Auditor General to go in and as long as that request was received, then ALC had to comply, but the objection raised at the time by our Auditor General was that when he was dealing with a public agency and public money, he shouldn't have to ask anybody and it was, in fact, over a year of debate and

discussion and pushing by our Auditor General before, in fact, he was allowed to see the books, but even then it wasn't entirely clear whether ALC was doing it compulsorily or voluntarily. So, my second question to you is - actually maybe I will direct the question first to our Auditor General. Today, in 2006, Mr. Salmon, do you believe this issue has been resolved? Do you believe you have the right to go and audit ALC's books without asking permission of anybody?

[9:15 a.m.]

MADAM CHAIR: Mr. Salmon.

MR. ROY SALMON: I don't think it's entirely clear. You refer to the audit in 1995. Certainly, at that time, I could not go in unless the Minister of Finance asked me. That caused significant difficulty because I didn't want that process to be followed, and I asked the Minister of Finance not to ask me. The way I got in to do the audit was that I asked the Auditor General of New Brunswick to lead the audit and I provided the staff, but I issued the report. I believe that since we went through that process, it is unlikely, in my view, that the Atlantic Lottery Corporation would refuse if I asked to go in and do an audit. In fact, we are planning such an audit within the next year.

MR. STEELE: Does ALC know, Mr. Salmon, that you are planning an audit for the next year?

MR. SALMON: I believe that the Nova Scotia Gaming Corporation has been in communication with the corporation and informed them that that is our plan. I have not heard that there is any reluctance.

MR. STEELE: Mr. Salmon, is it your understanding that you no longer need to go through the Gaming Corporation or the Minister of Finance in order for you to go in and see ALC books?

MR. SALMON: That's the approach I'm taking, and until I'm told that that is not acceptable, that is the way I will proceed.

MR. STEELE: Okay, back to Mr. Breedon then. Today, in 2006, you have now learned, if you didn't know already, that the Nova Scotia Auditor General is planning an audit within the next year. Is it ALC's position, today, that Nova Scotia's Auditor General has the right to see ALC's books without asking anybody else's permission?

MR. BREEDON: As far as we're concerned, as an organization, absolutely. I can't speak to the law, I will be honest. I know, in another sidebar, that I believe the Auditor General Act is in fact included within the agency agreement between the Nova Scotia shareholder and ALC anyway, which says we are, in fact, bound by that Act amongst other

Acts, and other Acts that the Nova Scotia Gaming Corporation wants to identify in the Province of Nova Scotia.

MR. STEELE: Okay, so is it ALC's position that Nova Scotia's Auditor General doesn't have to go through the Gaming Corporation, doesn't have to go through the Minister of Finance, doesn't have to go through the New Brunswick Office of the Auditor General?

MR. BREEDON: From our perspective, no.

MR. STEELE: In, August 2005, that is just five months ago, a Halifax newspaper ran a series of articles about a potential conflict of interest inside the ALC. Just for the record I am going to describe it very briefly, although I know that you all know very well what I am talking about. The suggestion was that the spouse of Ms. Carinci was employed by or contracted by an advertising public relations firm that did a great deal of business with ALC, something in the order of $2.5 million a year. In particular, he had worked on a particular contract dealing with the new, for want of a better term I will call it Racino Prince Edward Island, and so had received payment from the ALC for the work that he did. The ALC's response was - and again I'll summarize briefly - that there was no difficulty in principle with such a contract being awarded provided that a proper conflict of interest process had been laid down and followed. It was ALC's position that in fact they did have a proper conflict of interest policy and that in fact it had been followed to the letter and, therefore, there could not reasonably be any objection to the fact or the coincidence, I suppose, that the ALC President and CEO's spouse happened to have been awarded a contract or worked on a contract for ALC.

I want to say immediately that I happen to agree with that, we can't go on a witch hunt for people trying to find relations and relationships and saying that that in and of itself is a problem. That's going to happen, especially in a small region like Atlantic Canada. The essential thing is that there be conflict of interest policies, that they be laid down in advance and that they be followed and they are clearly followed. The difficulty was that it wasn't apparent that in fact that was what had happened in this case.

In your remarks this morning, Mr. Breedon, and in response to inquiries from that newspaper, you had suggested that all ALC - I'm just quoting from your remarks this morning - employees must sign a conflict of interest form every year.

MR. BREEDON: Yes.

MR. STEELE: And ". . . all employees, including our President & CEO, withdraw from any situation where there is the appearance of a conflict of interest. In the case of the President & CEO, the Board has confirmed that Michelle did make the necessary declarations each year, and the Board is completely confident that there has been no conflict of interest." The difficulty was that last year Nova Scotia's representatives on that committee

couldn't recall ever having seen that form. Stephen Mont was quoted in the paper as saying he had no recollection of ever seeing it. Sean O'Connor was quoted as saying that he was vaguely aware of where the CEO's husband worked but couldn't recall any discussion or paperwork around that.

Time has passed. Can you now confirm, Mr. Breedon, that in fact those forms were filled out and that they were presented to members of the board before any of this arose?

MR. BREEDON: The forms are filled out every year and I can confirm that categorically. In the case, the one I know of is Michelle's because Michelle's form comes to me first, it's between she and I as her immediate supervisor on behalf of the board.

In turn, the board is informed each year of the content of that form. I guess, in fairness to all the board members, we deal with an awful lot of things in the run of a year and quite honestly, that process is reasonably routine. It has been the same declaration for five years, four and a half, whatever it is, years. I take it most of us don't keep it on top of the mind because once the declaration is made, once it's filed with me and passed on to the director of internal audit, the potential for conflict is noted and the process is put in place to ensure that conflict doesn't take place. That is, in fact, organized between the purchasing people - in this case, Internal Audit and so on - to ensure that in fact Ms. Carinci is not in a position to influence or to appear to have any influence or involvement in any of those kinds of decisions.

MR. STEELE: Is there any reason that you can think of why those forms couldn't be given to this committee?

MR. BREEDON: On a general basis, clearly when we have 500-plus employees fill in and sign declarations annually in terms of conflict of interest, typically, there is fairly personal information in those forms. As a matter of process, we don't make those available to individuals in the public. That is part of, I guess, a balance under the Freedom of Information and Protection of Privacy Acts. Sometimes we forget the privacy part of the Act, is that employees and individuals have a reasonable right to privacy and confidentiality about their own personal information.

So, I think in line with my own understanding from my experience, when I worked for the Government of P.E.I., these forms are not provided to the public. People put confidential information on those forms so they're not. That has been our position in terms of not only all our employees, but with Ms. Carinci to date as well.

MS. CARINCI: And that is one of the reasons that we didn't release the conflict of interest form. It was really to ensure that individuals know that their confidentiality is protected. However, I'm quite prepared to go on record today and to provide that form to this committee that I did declare in the year 2001 and subsequent years that, in fact, there was the

possibility of a potential conflict of interest because my husband was engaged with Bristol Communication. I also declared that a family member worked with another supplier who does business with the Atlantic Lottery Corporation and I can tell you that neither of those two relationships has had any impact on the procurement in the past or in the future.

I'll go further, it wasn't on the conflict of interest but just for the record, my husband and I met in 1996 while we were working at the British Columbia Lottery Corporation, as he was hired on contract as a communication advisor because he is a specialist in that area and, subsequently after that project was finished he was hired full time with the British Columbia Lottery Corporation. He did not report to me and I had no influence on that hiring, and subsequent to me leaving the British Columbia Lottery Corporation, Mr. Carinci was appointed as the Director of Communications for the British Columbia Lottery Corporation, reporting directly to the President and CEO.

MR. STEELE: Thank you for that clarification.

Mr. Breedon, am I wrong? I thought P.E.I., was the only province in Canada that doesn't have freedom of information legislation.

MR. BREEDON: No, we do now. It took a while. We were the last.

MR. STEELE: You were the last, and when was it adopted?

MR. BREEDON: Oh, gosh, it was four or five years ago. I'm trying to think. I've been retired for two years - four years ago.

MR. STEELE: Okay, because I know you have had a long and distinguished career in the P.E.I. civil service and then on IRAC (Island Regulatory and Appeal Commission). But for most of that career, in fact almost all of it, there was no freedom of information legislation in P.E.I.

Of course I'm not asking for the conflict form for all 500 employees - just for one. Ms. Carinci, I just want to clarify, to make sure that I have understood you correctly. You are saying that yes, you agree to release those forms from 2001 forward, and you do understand that if you release those, then they are public documents?

MS. CARINCI: Yes.

MR. STEELE: Okay, thank you. Today?

MS. CARINCI: I can get them today, yes, for the committee.

MR. STEELE: That would be very helpful. Thank you.

Now, I have already said that I agree that as long as there is a conflict of interest policy laid down and it's followed to the letter there is no problem. So I want to make sure that you understand, Ms. Carinci, that I'm not suggesting the fact that your husband had some part in the contract is in and of itself a problem, it's a problem if the conflict of interest policy isn't followed.

What really concerned me about what happened there was that it appeared that ALC's opening position was just to say we're sorry, freedom of information laws in Nova Scotia don't apply to us here. In fact, contrary to what you have said in your opening statement, in the article from The ChronicleHerald by Jeffrey Simpson, dated August 22, 2005, ALC spokesperson, Darlene Doucet, said ". . . the corporation isn't compelled to comply with freedom-of-information legislation." Now, there are two possibilities here, either Ms. Doucet was misquoted or she was misinformed. Which one of those is correct?

MS. CARINCI: Well, I have a couple of points to make on that. First of all, the Atlantic Lottery Corporation takes its responsibility and its accountability to its shareholder very seriously and, while we don't fall directly under the legislation of the Freedom of Information and Protection of Privacy Act, we are compelled to abide by and comply to the Act as per our agency agreement with the Nova Scotia Gaming Corporation, among other Acts such as the Auditor General Act as well.

I think what became clear when this issue arose is that we needed to have a more concerted effort in order to educate and inform our public about the rules and the responsibility and the accountabilities of the Atlantic Lottery Corporation. In this specific issue that you refer to, information was provided. The only information that wasn't provided immediately was information that may come under the third-party notification articles within the Freedom of Information and Protection of Privacy Act, and subsequently that information also was released on a very timely basis.

MR. STEELE: Okay, that's all very well, Ms. Carinci, but you didn't actually answer my question. A spokesperson for the ALC is quoted in Nova Scotia's largest newspaper as saying, "the corporation isn't compelled to comply with freedom-of-information legislation." Was she misquoted, or was she misinformed?

MS. CARINCI: I wasn't privy to those conversations as you can understand, but I know that the spokesperson for the Atlantic Lottery Corporation fully understands the compliance and accountability to its shareholder in Nova Scotia.

[9:30 a.m.]

MR. STEELE: But, if she fully understands it, she wouldn't have said that the corporation isn't compelled to follow it. Work with me a little bit on this - was she misquoted or was she misinformed?

MS. CARINCI: I would have to make a leap of faith. Again, I wasn't part of the conversation, but knowing that this spokesperson fully understood our obligations, then I would have to assume that perhaps the facts from that conversation had not been represented in this particular report.

MR. STEELE: Because it's your view that no spokesperson for ALC could possibly have taken that position because it's not correct.

MS. CARINCI: It's my view that a spokesperson for the Atlantic Lottery Corporation who fully understands the accountability to its shareholder would not take that view.

MR. STEELE: Okay. Because, of course, when the agency agreement was released yesterday, I hasten to say that it was released to me the same day that I asked for it, certainly nobody is suggesting that it was withheld, but I don't think this document has been widely known while all of this was going on. Clause 3.04 is as clear as day that the ALC is bound by the Gaming Corporation to follow not only the Auditor General Act but also the Freedom of Information and Protection of Privacy Act. Is it possible, Ms. Carinci or Mr. Breedon, that when this story was coming forward in August 2005 that there was some confusion within the ALC itself about its obligations?

MS. CARINCI: Yes, it's very possible. Answers that ALC was answering on this particular issue, we were giving answers of a general and regional nature. In the other three provinces in Atlantic Canada, we don't directly fall under the legislation. We do comply with all the principles of the legislation, where more specifically in Nova Scotia in the agency agreement, we're legally bound by it. So in the initial stages there may have not been immediate reference to the agency agreement, but there's certainly no question or confusion about what that agreement says.

MADAM CHAIR: Thank you. The time has now expired for the NDP caucus. I recognize Mr. Colwell for the Liberal Party caucus.

MR. KEITH COLWELL: Thank you very much. I have just a couple of questions to start with on the FOIPOP. For many years we've been asking for full financial disclosure. As Nova Scotians, I can remember one time when I was in government that indeed we went to the Atlantic Lottery Corporation and said we're going to terminate the agreement because we were about $4.5 million roughly short of the revenue that we thought we should have. At that time we decided to stay in it after we renegotiated the deal a bit.

It has always been an issue, even when we were in government, getting information from the Atlantic Lottery Corporation. Presently, are you accepting FOIPOPs from Nova Scotia? I just want to get this on record.

MS. CARINCI: Absolutely. We would accept any requests under the Freedom of Information and Protection of Privacy Act. I might add, though, that as far back as 1995 I found no record of any formal FOIPOP request to the Atlantic Lottery Corporation. There have been two, but they have come from the Provinces of Newfoundland and Labrador and Prince Edward Island.

MR. COLWELL: What's the cost associated now with doing a FOIPOP with the Atlantic Lottery Corporation? What's the charge?

MS. CARINCI: Are you referring to fees? We currently have no fees.

MR. COLWELL: No fees?

MS. CARINCI: No.

MR. COLWELL: As far as providing complete public disclosure of where you spend all your money - has that happened so far? I just want to get that on the record too - where you spend all your advertising money, the general things. Has that publicly been disclosed or is it just a financial statement that comes out every year?

MS. CARINCI: In our annual report there are, of course, our full financial disclosure. In the annual report there aren't always all the specific details, for instance, around, as you suggested, advertising spent. It will state what we've spent on marketing promotions, however, we would disclose, should someone ask the question, the details of those things. As a matter of fact, I know we were discussing the Freedom of Information and Protection of Privacy Act, but the ALC handles and fields thousands of routine questions on an annual basis and would much prefer to do that, and does that, as a matter of business. It is only when it's questionable of whether there's an issue around privacy, protection of an individual, or third-party notification where there might intellectual property or commercial competitive issues around that information, or it might be breach the integrity or security, or compromise the corporation, it's only then that we would ask for that formality in that process of the request.

MR. COLWELL: I appreciate that, and there are times that I fully understand that you have to keep things confidential for obvious reasons. Back again to the way you tender. Do you always tender for advertising and promotion as you go forward and, out of those tenders, how are they advertised and when do you advertise them?

MS. CARINCI: We follow, first of all, the Atlantic Procurement Agreement, and the principles of that. Any contract that has the potential to be over the amount of $50,000 goes to a formal request for proposal and then goes through a very, very rigorous process that includes the parties that are interested in that contract within the corporation, Internal Audit,

in some special occasions we might also include external audit in that process, as well as our purchasing department. So that's the rigour that's put behind that process.

In the case of advertising or communication firms, what we do is, through that request for proposal, we will qualify a number of companies that we could do business with, a roster if you will, so that we have the freedom to spread that business around based on the abilities of any one of those agencies to deliver, because some of them are very robust agencies and some of them are very specific to things such as promotions, but they may not have an advertising department, for instance. So it gives us the freedom once they're qualified. In the case of advertising, we do have 16 such suppliers throughout Atlantic Canada and one outside of Atlantic Canada, which is Media Buying, that do qualify.

Then within that roster, the marketing department would determine whom they would do business with based on a formal process, based on creative, how they would strategically approach a particular campaign. So there's another competition, once they've qualified on that roster, that they would follow through. To answer your question on how do we advertise that, we certainly reach out through I think the Web on the Internet with our RFPs and, in some cases, we would go in the newspaper, I believe, as well, to make sure that all firms that would qualify in Atlantic Canada would have an equal chance of bidding on the business.

MR. COLWELL: Yes, and how often would you do that on the contracts over $50,000, how often would you qualify someone?

MADAM CHAIR: Mr. Daigle.

MR. PATRICK DAIGLE: I would love to talk a little bit about our supply chain management process because I'm very proud of it, and, to Michelle's point, it's a very rigorous process. Every contract for service that is in excess of $50,000 is publicly tendered, and that's in accordance with the Atlantic Procurement Agreement. We do adhere to that agreement. So we would advertise either in the newspaper or on the provincial Opportunities electronic bulletin boards. So virtually every opportunity above $50,000 from a services perspective.

MR. COLWELL: How do you handle contracts below $50,000?

MR. DAIGLE: We delineate between goods and services. Goods that are less than $5,000, we require one quote; goods that are greater than $5,000, we require three quotes; goods that are greater than $25,000, we publicly advertise, either through a request for a quotation or a request for proposals. Those guidelines are in accordance with the Atlantic Procurement Agreement. From a services perspective, any services under that threshold of $50,000, we seek one quote; above $50,000 we go a public tendering process.

MR. COLWELL: You spend a lot of money under $50,000 in little contracts. How much a year do you spend under $50,000, how much do you buy under $50,000 a year in dollars?

MR. DAIGLE: I don't have that information right now in front of me. I'm sure I could accumulate it.

MR. COLWELL: Yes, and could you forward that to our committee?

MR. DAIGLE: Absolutely.

MR. COLWELL: I would appreciate that. There was a new deal struck with the present government, with Neil LeBlanc when he was the Finance Minister, and the other parties involved. At that time, the Auditor General's opinion was, I believe, that they gave us a lot less than we were due at that point. Is it possible to have that agreement made available to our committee?

MS. CARINCI: The unanimous shareholders' agreement, is that what you're referring to?

MR. COLWELL: Yes.

MS. CARINCI: Absolutely. I can see no reason why not, absolutely, yes.

MR. COLWELL: That would be very useful to have.

Back to your procurement again, anything under $5,000, you could basically call someone up and say okay, it's $5,000, you're a supplier of this particular item - whatever it may be - and we'll buy it from you. That's how it can work on that basis?

MR. DAIGLE: Yes, consistent with the four governments and the Atlantic Procurement Agreement, that's correct.

MR. COLWELL: Yes. Even up to $50,000 - before you get to $50,000 - you say you could buy then with only one quote?

MR. DAIGLE: That's for services. For goods, the threshold is $25,000.

MR. COLWELL: Again, I'm going to be very interested to see how many contracts you have under that amount. How much do you purchase a year in total?

MR. DAIGLE: I have that number here. In Nova Scotia, the amount spent was approximately $11 million. I have the total here for the corporation. In 2005, payments to vendors were $73 million.

MR. COLWELL: Who's the biggest shareholder among the provinces? Who provides the most revenue? Is it Nova Scotia or New Brunswick or . . .

MR. DAIGLE: Well, to answer your question about who the largest shareholder is, our shares are owned equally by the four provinces. The Province of Nova Scotia has . . .

MR. COLWELL: That's not the question I'm asking, maybe you misunderstood my question. My question - who generates the biggest amount of revenue?

MR. DAIGLE: Nova Scotia.

MR. COLWELL: How much more? What's the percentage breakdown?

MR. DAIGLE: From a profit perspective, Nova Scotia has 39 per cent; Newfoundland and Labrador, 28 per cent; Prince Edward Island, 4 per cent; and New Brunswick, 29 per cent.

MR. COLWELL: Yet, when you do your purchasing you only buy $11 million within Nova Scotia? Is that correct? Why isn't there more effort to buy more product in Nova Scotia, where we're the biggest contributor to the Atlantic Lottery Corporation?

MS. CARINCI: I think I would ask Patrick maybe to put some perspective around what is seemingly a very large number. There are a number of major purchases such as the capital that we spend on our equipment outside of Atlantic Canada, as well as inside Atlantic Canada. The fact is, for instance, in that case we are lucky enough to have a manufacturer in Atlantic Canada for some of our equipment, but the fact of the matter is most of those vendors reside outside of Atlantic Canada and, in fact, outside of Canada. So if I could ask Patrick to put that total amount into perspective so that it would be more understandable, to answer your question more specifically.

MR. DAIGLE: I would also like to make a comment on the fact there aren't more Nova Scotia vendors successful in the process. The reason for us abiding by the Atlantic Procurement Agreement is so that we do offer a very fair, equitable and open process for all vendors to participate in, and so we evaluate them according to pre-set criteria, with a number of controls set out through the process.

In relation to whether Nova Scotia is getting a fair share of purchases, one of our governing documents is the Unanimous Shareholders' Agreement. What that agreement does is it lays out how revenues and expenses are going to be shared by each of our shareholders.

So, revenue that's attributed to a province - in other words, where product is sold - that revenue is attributed to that province. In Nova Scotia, for example, expenses that are attributed to provinces directly are recorded and charged off to that province. Then, common costs like overhead costs are shared according to a formula that was agreed upon with the shareholders at the time which is 30 per cent in all of the provinces, except for Prince Edward Island, and their share is 10 per cent. So that's how the profits are shared.

[9:45 a.m.]

MR. BREEDON: I think it's important - as Patrick talked about - as well, to understand that following the Atlantic Procurement Agreement does, in fact, say that you put product out, put requests out and you assess and take the best package coming in. There's no effort by ALC - and it would be wrong if there was - to target purchases from one province or another. It's the fact of who provides the best value for money, which all governments in Atlantic Canada are supposed to follow as well, whether it's highway works, construction, what have you.

MR. COLWELL: I understand that, and I appreciate trying to get the best deal for the dollar, because we all gain, there's no question about that. I'm a little concerned about the revenues. What have the revenues consistently been year over year from Nova Scotia, percentage of the total revenues?

MR. DAIGLE: Consistently 40 per cent. Some years it's 39.5 per cent and some years it's 40.5 per cent, but on average it is 40 per cent of our business.

MS. CARINCI: That is specifically revenues, profits 40 per cent.

MR. COLWELL: So revenue and profit would be the same?

MR. DAIGLE: Roughly the same, yes.

MR. COLWELL: Then, of course, like you say, you take your general overheads and distribute them to everybody. (Interruptions)

MR. DAIGLE: Interestingly enough, the population is also 40 per cent relative, adult population Atlantic Canada.

MR. COLWELL: Has there been any effort for Nova Scotia to come back and renegotiate their return on this up to 40 per cent where the revenues are in line?

MR. BREEDON: No, that part of the agreement, when you get a chance to see it, the shareholders agreement does require each of the four shareholders on every three years from the date of signing to revisit the shareholders agreement and see if there's any changes or

things they would like to see done differently within the agreement. We went through one of those in 2003, the agreement was signed in 2000, all the shareholders were very comfortable with how the process was working, and we are in the process of that right now. In fact, I sent a letter out to each of the board members from the individual provinces asking them to revisit, take a look at the agreement and see if there's any concerns or issues they wanted to bring to the board in terms of whether there were any changes or other things that they were interested in doing. We haven't had the feedback. In fact, I think I passed the letter out at the last board meeting to the members.

That, within the process, has worked very well. I think once you see the agreement, part of the arrangement, there is a formula for overheads, for instance, which sees that three of the provinces pays 30 per cent of those overheads and P.E.I. pays 10 per cent. It was, I think, very much out of the Auditor General of Nova Scotia's work that brought us to the fore to take a look at what was fair and reasonable to the four provinces, and some provinces gained a little bit and some provinces, quite honestly, lost a little bit.

MR. DAIGLE: While we're on the topic of the unanimous shareholders agreement, there are a couple of points that I think are very important to make, and you'll see this when you get the agreement. On an annual basis the agreement is subject to external audit by our external auditors and they provided opinion to the audit committee and the board of directors that states that we are in compliance with that agreement. The second point I would like to make is that there is a dispute resolution clause within the agreement to allow for, if there is a dispute that cannot be resolved on an informal basis or through discussion there is a procedure laid out in the agreement.

MR. COLWELL: What percentage of gross profit and net profit do you have on the total sales?

MR. DAIGLE: I'm going to divide this into our two basic lines of business being traditional lottery and video lottery. In the Province of Nova Scotia, our net profit margin was 66 per cent in 2005 and our traditional lottery net profit margin was 18 per cent.

MR. COLWELL: The traditional one is the lottery tickets and that sort of thing, is it?

MR. DAIGLE: That's right.

MR. COLWELL: Why is it only 18 per cent? Is it advertising costs? Is it prizes you give out? How is that 18 per cent arrived at?

MR. DAIGLE: What we do is directly charge off and allocate our costs by line of business to fully cost those two lines. The reason the traditional lottery line has a lower margin than the video lottery line has to do with the infrastructure that is necessary to deliver that product. We have a network in Atlantic Canada of our terminals, they're all connected

to our central system, so there's a fairly heavy capital investment from that perspective, and also from a marketing perspective you had mentioned the cost of tickets, advertising, salaries and benefits, et cetera.

MR. COLWELL: When you amortize your capital equipment - what I'm getting at here is I want to make sure Nova Scotia is getting a fair share of what they should be getting, because every time we can get more revenue into the province, of course it helps the province - how do you write that off? Do you write if off in one year? Do you write it off over 20 years? How do you do it?

MR. DAIGLE: Our accounting policy on fixed assets and depreciation is amortized over the useful life of the asset, and so it does vary by asset. There's a note to our financial statement that lays out by asset class the life of the asset. For example, a vehicle would be amortized over three years, where a piece of office furniture may be amortized over five years.

MADAM CHAIR: Mr. Colwell, you have one and a half minutes.

MR. COLWELL: Could you provide to the committee a detailed breakdown of your costs, particularly in the traditional lottery operation? I would like to see that because it has always been a problem trying to get information - or in the past it has been - so I think it would be very useful and prevent a lot of questions that we would be asking.

MS. CARINCI: I would certainly welcome the opportunity to be able to answer your questions and, as I said earlier, we would like to treat most of those questions as sort of routine access questions. I would like to make a comment though about the traditional.

Part of our challenge with the traditional lotteries such as Lotto 6/49 and the instant product that most of us are very aware of, at least we are during big jackpot times, is that because of the changing behaviours of players, the demographic shifts and other elements within the marketplace, in fact those games have matured and flattened. So while the revenue has flattened and, in some cases, actually decreased, the costs have pretty well remained the same in order to support and have the infrastructure to support those products. So that has an impact as well, and that is why you see such a difference between those lines of business.

MADAM CHAIR: Thank you. The time has expired now for the Liberal caucus. I'll recognize Mr. DeWolfe from the PC caucus.

MR. JAMES DEWOLFE: I just want to cut to the chase, I guess - what would the impact be of banning VLTs in Nova Scotia?

MS. CARINCI: The question is what would happen if prohibition was to come into play around the video lotteries? Well, I have several points on that question. One, we haven't seen, globally anywhere where that has actually been effective. What it does do is it drives the activity underground. What stems from that is that you have lack of integrity, perhaps, you have lack of player protection around gaming, and you also have the issues of not being able to effectively identify those who are at risk, or who have problems, and be able to offer treatment openly to them. Thirdly, the issue is that the revenue will either be going into the private sector or out of the province.

Those are the very reasons that I believe government got into the regulated gaming business. It wasn't so much that government woke up one day and felt it would be a good idea to operate gaming or get into the entertainment business, it was rather to protect the public from an activity that could possibly be harmful, and an activity that they didn't believe, through experience, that they could actually ban or prohibit effectively.

MR. DEWOLFE: Some say that by banning them it doesn't necessarily mean that it's going to drive it underground. Are there any statistics to show that this would be the case, that it would just blossom underground?

MS. CARINCI: There's experience, certainly, and some of those statistics are difficult to get, so some of what I'm going to talk about is somewhat anecdotal, and from personal experience and the experience of others. There are jurisdictions in North America and elsewhere that do not have this particular distribution model that we see in Atlantic Canada. They may have a destination model, where the only place you find electronic gaming devices would be in, for instance, at the track or in casinos, or community gaming centres in the case of British Columbia, but that does not mean that there is not, what we call a grey market. In fact, it does exist, but statistically, it's difficult to give you all of the exact numbers because it's certainly not at the top of the priority list from the law enforcement perspective, but we know that it exists out there.

MR. BREEDON: The history, the video lottery program became a government program in 1991, in terms of regulated lottery programs. I think most of us here have been around long enough to remember that there was not a service club, a curling club, a gentlemen's club, whatever you want to call them, that did not have some type of what would be colloquially called one-armed bandits, for many years. I can remember going with my father to the officer's mess in the Militia in P.E.I., and these machines were amazing. I saw these things, I had never heard or saw such things, and that was an entertainment product and quite clearly that was not what it was about, it was about gaming. About gambling, about people winning and losing.

MS. CARINCI: I think that is the merit of having a regulated control, is that you have control over many aspects, you protect the integrity of games, you protect those who are at risk. You protect the revenue that is going to probably be spent anyway, and you can offer treatment.

MR. DEWOLFE: Just while we're on the subject, maybe you could elaborate on the economic impact that Atlantic Lottery Corporation has on this province. Of course that is what we're interested in most, is this province.

MS. CARINCI: Sure, I will hand that over to my finance expert here.

MR. DAIGLE: We look at the economic benefit, the direct economic benefit, let me be clear, in the province. The number that we have for the 2005 year in Nova Scotia is $352 million, and I just want to give you a little bit of a breakdown of how that economic benefit is derived, $110 million of that was paid back to players in the province, and that is a very significant number to us. Obviously, winners in Atlantic Canada are no different than you and I. The money that they win typically stays in the region. They go to the local car dealerships and they buy cars, they build houses, and they put money in the bank and they distribute to charities. So that's $110 million in prize money. About $59 million is distributed in the form of commissions to our retailer and site holder network throughout the region, throughout the province, and the $11 million we referred to earlier has to do with the supplier and the vendor network in Nova Scotia supplying us. We spend about $4 million in salaries for Nova Scotia employees, and we deliver $168 million to the province in profit, to allow the province to put that money to use in their programs.

MR. DEWOLFE: Thank you. I guess that all adds up to $352 million, I didn't quite finish the math there. I will go back to our CEO. I have heard some concerns from your men and women on the street, and I'm talking about the sales reps, that you have stripped the incentives, the freebies, the giveaways that they used to promote sales, and I'm just wondering by doing so, what did that amount to in savings?

MS. CARINCI: While I'm answering the question, I'll have Patrick figure out how much that actually saved the corporation. We have looked at what can we effectively do to reward our partners in retail and our site holders for doing an excellent job with our products, not just from a sales perspective, but also the obligation they have around responsible gaming, in which they all take training over a period of time, with regard to responsible gaming, so there are a number of ways that we measure the effectiveness of our partners. We have put an incentive program in place that measures those, almost like a balanced score card, if you will, that a corporation uses with regard to their sales ability, their ability to promote products responsibly, customer service and whether or not they take training.

So, in place of what I'll call trinkets and trash, perhaps, we've done something more substantive to reward those who are doing an excellent job. I don't know if you've found that number? I will get that number for you. I'm sorry, sir, I don't have it. It wasn't a huge amount of money, as I recollect. It was more the principle.

[10:00 a.m.]

MR. DEWOLFE: I don't think trinkets and trash is the proper term for that. They had hats and they had travel bags and things like that. It helps those guys who are out there. Now they're trying to promote sales, unarmed really, and it makes their job much easier if they have a few incentives because some of the people they're dealing with are working marginally, as are a lot of people in retail in Nova Scotia. I was curious about how much the savings would be, if you have that figure or an approximate?

MR. DAIGLE: I don't have the savings, but I do have the amount that we spent on retailer and employer support last year. It was about $1 million. Although we have made some reductions in that area, we still do spend a great deal of time and effort in merchandising at the retail level and supporting our retail network and in helping our retailer network with promotions at store level.

MR. DEWOLFE: I guess what I'm getting to, I was wondering how much of the savings was used, Ms. Carinci, in office renovations? I understand you have had some major office renovations, a very expensive desk and so on, and I was wondering if some of that savings went into this elaborate office?

MS. CARINCI: I'll make a couple of points on that. We've had no major renovations in any of the offices. We've done a regular upkeep in maintenance. A couple of years ago, I made the request to the purchasing department - which falls under corporate services that Patrick is responsible for - as there were needs within the organization for furniture and other things - by transfer what I considered to be sort of more furniture than I needed, for instance, within my particular office and have it transferred to other offices and then I would replace it with something that was more practical for my purposes. In addition, I think for the first time since we moved into that building in 1996, we did replace the carpet and the wallpaper.

MR. DEWOLFE: How much did your renovations cost, by the way, including that desk?

MS. CARINCI: I think the net cost when you looked at where we transferred the needs that we were going to be purchasing furniture elsewhere in the organization, I'll have to get you the exact figure, but the net was in around a few thousand dollars.

MR. DEWOLFE: I understood the desk itself was worth more than that, it was quite elaborate.

MS. CARINCI: That may be so. The net overall, though, of the furniture - my original furniture that was moved, where we would have spent money on that anyway, where it was relocated, the number I'm giving you is the net. I don't have the exact number of that piece, but I can get that for you.

MR. DEWOLFE: Thank you. I will pass to my colleague for Kings North.

MR. PARENT: Thank you.

MADAM CHAIR: You have until 10:13 a.m.

MR. PARENT: A quick question. What's the difference between gaming and gambling?

MS. CARINCI: That's a very interesting question, it's a very good one, certainly one within the gaming or gambling industry that we've debated. Recently the corporation has called it what the public calls it, which is gambling. That's why you've seen a shift, from where we used to refer to it as responsible gaming, we now refer to it to what it is, which is responsible gambling.

I think in the early stages, if I could, when we were evolving from the lottery and what we called sort of the fun for a buck, you buy a ticket and you wait for a week, in some cases, way back when, you might wait for a month for a draw, we referred to it as the lottery. As we evolved into things such as video lottery, some organizations are involved with casino gaming, et cetera. Then we sort of made that shift to gaming. I think, quite frankly, it was probably that it sounded better at the time, when we were making that transition in the gaming field. To call it gaming and gambling, I don't think there is a big difference.

MR. PARENT: You say prohibition doesn't work. I assume then that you are in support of legalization of illicit drugs in Canada?

MS. CARINCI: No, I am not in support of illicit drugs in Canada that are very harmful to people. I am merely pointing out the facts. What I support or not support I think is really academic. I think what the role of government and the decision that they made on the gaming front is that regulated gaming is the right path for all the reasons that I expressed earlier from a public protection . . .

MR. PARENT: So, prohibition works in some cases, but not in others?

MS. CARINCI: That may be so. As I say, the facts around gaming, the evidence that we have seen in our experience is that this activity would be merely driven underground, but I think more to the point is that those folks who are at risk or who have problems, when

gaming became regulated and legitimized, it allowed people who may not have otherwise in the past sought treatment, to be able to do it, they may have been uncomfortable . . .

MR. PARENT: Which is exactly the same argument that is made for example, in the City of Vancouver in terms of having open clinics for those who have drug problems.

MS. CARINCI: I believe that the government chose to get into regulated gaming because they felt that that was the best path and the best decision in terms of control and regulation around the activity.

MR. PARENT: One more question on this whole issue of prohibition. I guess I'm focusing on use of words here because I find that in our society, we tend to obscure the reality by using words that aren't really accurate and unless we know what the accurate facts are, how we can deceive ourselves. I think there is some of that with the word gaming, and I am glad to hear you say it is gambling - let's call it what it is - and the whole issue around when we talk about prohibition.

You may be interested to know that at the conference we had in Halifax just recently, one of the top experts on gambling issues stated very strongly that prohibition of gambling did not work. So I asked the question, does prohibition of certain forms of gambling work? I used the example with the alcohol, for example. Say you had a specific type of alcohol which you knew caused a lot of alcoholism, had a fairly toxic effect, could you ban that particular product and yet sell other products? He said yes, that's not prohibition, that would be responsible gambling, and I think we need to be careful about that. One could, for example, say, okay, VLTs are particularly toxic, we're going to either change that product or get rid of that product, but we still have other gambling venues. We're not advocating prohibition, and so that is really what lies behind my question here.

MS. CARINCI: I think that's an excellent point, and I believe that and commend the Nova Scotia Government and the Nova Scotia Gaming Corporation, our shareholder, for doing just what you referred to as taking the initial steps to modify that product. As you are aware, through the gaming strategy, there are a number of things - the Nova Scotia Gaming Corporation is a leader in this field and the world is watching because nobody else has taken these steps to the extent that they have, those being adjusting the game, the speed of play, the hours of play, the features that are on this particular form of gaming; in addition to that, piloting something which is the player card research that right now is happening within the Windsor area, is of real interest, I know to my colleagues internationally. We belong to the World Lottery Association; all regulated gaming organizations for the most part belong. The world is watching what's happening in Nova Scotia, because we are trying to do that, modify this product so that it can be safe for those who want to be entertained by that form of play and reduce the harm that it actually can inflict.

MR. PARENT: A very quick question. Do you know how much of the money that is spent on various forms of gambling comes from problem gamblers or at-risk gamblers?

MS. CARINCI: I don't have that number specifically, but I know that we have some research and surveys that have been done. I will provide the information that we do have. One of the issues that we do have is identifying a problem gambler - it's a small sample group for us - but we certainly do on an ongoing basis strive to be able to understand the answer to your question.

MR. PARENT: One of the issues that has been raised by many different people is the proclivity of young people, the susceptibility of young people, to gambling problems. There are many different theories for this, one is young people just sort of tend to push the limits, the other is perhaps growing up on the Internet. One of the main concerns is not so much with lottery tickets but with VLTs and on-line gambling, Internet gambling. Are you monitoring these concerns? They've been raised by many, many people that young people are at particular risk of becoming problem gamblers and, again, they don't know why. No one knows why, but they're fairly confident that they are.

MS. CARINCI: It's definitely an issue that we take very, very seriously both at the Atlantic Lottery Corporation and the Nova Scotia Gaming Corporation. To that end, we are really studying the Internet unregulated market to see who's playing. We know, for instance, it has increased worldwide from 22 billion to over 70 billion today. There is a concern that because it's unregulated and it's in the home that minors are able to access that on a regular basis and we're not protecting our youth. We're monitoring activities to see where youth engage and at what point they engage. I think another more important point is though that the Nova Scotia Gaming Corporation has undertaken a youth awareness program, there has been a play that was going around to the high schools. We're starting to do preventive things, educate, so that young folks will be making informed choices and understanding the realities, the myths around gaming. That particular piece was called, Caught In The Game, it has been very successful in impacting youth in the Province of Ontario before it was brought here.

We have a policy about minors being able to play our games that our retailers must enforce which goes back to that balanced scorecard we talked about. Should they not be enforcing it, then we would take action. We're in discussions right now with the folks from Operation I.D. who have a very progressive program around products that retail that we could piggyback onto and perhaps engage with them.

It's a concern, we're monitoring a number of fronts and we're also taking preventive action through education, awareness and information.

MADAM CHAIR: Thank you, the time has expired now for the PC caucus. We will have a second round of questioning, 14 minutes per caucus. We'll go back to Mr. Steele with the NDP caucus.

MR. STEELE: Thank you very much. I just want to take a minute or two to wrap up my questions on accountability. Mr. Breedon, I had forgotten to ask you - I assume the ALC's conflict of interest policy is in writing?

MR. BREEDON: Yes, it is.

MR. STEELE: And I assume that it's a public document?

MR. BREEDON: It should be, yes.

MR. STEELE: And if we don't have it - and I don't believe we have - I assume ALC would have no difficulty in releasing that to the committee?

MR. BREEDON: No, not at all.

MR. STEELE: So, just to summarize where we were in the first round of questioning, Mr. Breedon, it's your position that ALC has no difficulty with the AG auditing ALC's books without request or permission from anybody - correct?

MR. BREEDON: Auditors General, yes, absolutely, from any one of the Atlantic Provinces.

MR. STEELE: And it's your position that the Nova Scotia Freedom of Information and Protection of Privacy Act applies fully to ALC, no ifs, ands, or buts?

MR. BREEDON: Absolutely.

MR. STEELE: Okay. I want to turn to the question of Internet gambling, but before I get right into the middle of that, I want to clarify the role of the Atlantic Lottery Corporation with respect to a responsible gambling strategy. You are conducting lotteries, including video lotteries, in Nova Scotia as an agent of the Gaming Corporation. The Gaming Corporation has a responsible gambling strategy, does the ALC simply accept that strategy and put it into effect or does ALC have any independent views on responsible gambling?

[10:15 a.m.]

MS. CARINCI: We work very closely with our shareholder who has a strategy, as you say, around responsible gambling. We work very closely with them in implementing that strategy. We work very closely with them in developing that strategy on bringing points of view to the table, other research things we may have access to through our colleagues on a worldwide basis. So we work very closely in having input in developing the strategy with our shareholder and, of course, in executing that strategy.

MR. STEELE: Okay, just to ask the same question in a different way, does ALC simply accept the gambling strategy, whatever it may be, as adopted by the Nova Scotia Gaming Corporation, or do you have an independent view about the quality of that strategy?

MS. CARINCI: Just to be clear, are you referring to the gaming strategy, or the responsible gambling strategy from within that gaming strategy?

MR. STEELE: Responsible gambling.

MS. CARINCI: Responsible gambling strategy. Again, I don't know what else to say to answer that question. I believe I answered it, that we work very closely with our shareholder in developing that strategy.

MR. STEELE: Is it a good strategy?

MS. CARINCI: Yes.

MR. STEELE: Would you make any changes to it if you could?

MS. CARINCI: We are always looking at how we can do it better and more robust and, again, we work very closely with NSGC in pursuing how we can actually raise the bar on that strategy, yes.

MR. STEELE: Two years ago when you appeared before the New Brunswick Committee on Crown Corporations you said something which really caught my eye because it was stated in fairly strong language and something that I hadn't really seen before, even from experts in the field, and I am going to quote it back to you, you said, and here you were talking about Internet gambling, "I might add that there are a lot of misconceptions or myths surrounding gaming on the Internet as well. It is probably one of the areas that we could control the most, in terms of knowing and being able to validate that you are who you say you are, that you live where you say you live, that you are not underage. We could control the amount spent and the amount of time actually playing. In fact, the fears are based on a lack of communication." So that's fairly strong language. Is that still your view today?

MS. CARINCI: Absolutely. When we put PlaySphere into place, which is our on-line site for our traditional products, we spent five years researching that. We wanted to have the most progressive responsible strategy around that and, in fact, I can confirm that we were obligated to ensure that if you were to play on that site that you had to be a resident of Atlantic Canada. We have put the rigor in place to ensure that you are who you say you are, that minors will not be able to engage unless, of course, parents are collaborating with them, I can't stop that in the home, but assuming that doesn't happen, we were able to control that. The other thing that we can control in the Internet environments that we can't control to the same extent in our other environment is we can put maximums, and we have; maximums on

the amount that you play at any given time. That can be voluntary or we can enforce that. We have self-exclusion also on PlaySphere, so if you choose to self-exclude, then you're out; you are not allowed to play. That maybe is to clarify my comments that, in fact, those things have been done on the Atlantic Lottery Corporation site.

MR. STEELE: Okay, this is going to come as a bit of a surprise to people, because I think the common conception of the Internet is that because you don't know who is at the other end of the terminal that it's actually very difficult to control, because you can't see them, if somebody who is 14 says they are 40, you can't really verify that. Now what protocols and procedures do you have in place to express such a degree of confidence about your control over Internet gambling?

MS. CARINCI: We have a number of processes to validate who you are, from identifying a credit card, your birth date, a number of things, all within, of course, bearing in mind the privacy Act. We put you through that rigor, and then we use a company, TransUnion, that then filters that to ensure and validate that in fact you are who you say you are.

MR. STEELE: Yes, TransUnion is one of Canada's largest credit rating agencies. That's their primary line of business. Am I understanding you correctly by saying that you use TransUnion to verify the information?

MS. CARINCI: We use TransUnion as one of our verifications, yes, as well as the banking information. There's a number of processes that we go through, Mr. Steele, in order to ensure that happens. I would be more than happy to send you the document and the policy paper around our approach to this because there's nothing more important to this corporation than integrity and responsibility. It was critical that before we ever engaged in that activity we could ensure to the very best of our ability that we would be protecting our integrity and responsibility and our players.

MR. STEELE: Does it cause you any concern that you're using a credit rating agency which gathers information for one purpose and you're using it for a different purpose that people probably didn't have in mind when they signed up for a credit card? Of course, most people don't know what information TransUnion holds about them.

MS. CARINCI: Under the privacy and protection Act - again, I'm quite happy to provide that - we have a policy in position on disclosure also to those individuals who are registering on the site. I'd be happy to share that with you. To answer your question, no, I'm not concerned and I will provide you with information so that you will see why.

MR. STEELE: I tried to sign up on the PlaySphere site using a fake name and birth date and to the site's credit, it didn't allow me to but it appeared to be because there was no match between the name and the address.

MS. CARINCI: And that would be one way. Interestingly enough, the individual that was responsible for the development of PlaySphere over the last three or four years also was rejected. There's a number of elements that you can be rejected on in matches.

MR. STEELE: Some parts of my constituency are very transient, people move all the time. There is a certain element of society that is on the move a lot. Presumably, if they're using name and address matches, those people would never be able to sign up for your site even though they're adults who are perfectly legitimate, their credit's good, it's just TransUnion doesn't know everything about everybody. So, what do you do about that?

MS. CARINCI: I think you're making a very good point because from a marketing perspective, one of the observations that our players and our consumers are making is that we don't make this easy. From a marketing perspective, we would like to make it a lot easier. We're looking at how we could do that and at the same time, protect the integrity of the site. We are examining that from a consumer perspective.

MR. STEELE: It's my understanding that PlaySphere is simply the on-line sale of products that you can get from a regular retailer. There are a few extra, small minor games, but basically it's an on-line version of anything you can walk down to your corner store and do. Is that correct?

MS. CARINCI: That's correct. It's all the games that you can buy at retail today.

MR. STEELE: What do you have on PlaySphere that's not available at a corner store type retailer?

MS. CARINCI: We have what I'll call an interactive game that takes about 10 minutes to play which is called Golf. There's one called Gong, which is sort of a version of Mahjong and . . .

MR. STEELE: What's the top prize for these games?

MS. CARINCI: And there's two others. The top prize is $10,000, $5,000 - they're very similar to an instant product in terms of their prize payout.

MR. STEELE: Does ALC have any plans to expand its on-line gaming site to include games that are not available from regular retailers?

MS. CARINCI: We have no plans to do that today, but that is not to say that as an organization we are not looking at where the market is going. What's driving this is not so much from a revenue perspective, but from what's happening in the marketplace. Things like the games that we see offered on the Internet today, would they or should they be offered on

our site would be a question for our shareholders. Our role is to provide all of the information and the options to our shareholders for them to make those gaming choices in the future.

MR. STEELE: Of course, where the market is going is a huge, huge increase in on-line poker games - huge.

MS. CARINCI: Yes.

MR. STEELE: Literally billions of dollars. Does ALC have an on-line poker game in development?

MS. CARINCI: No, we do not have an on-line poker game in development. We certainly are following and researching what that game is all about, who's playing it but, again, more from a regulated and controlled perspective. The numbers, by the way, that are guesstimated around on-line poker is, last year $1.2 billion was spent, it's expected over the next couple of years that that number will rise to about $5.9 billion. Our projections on Internet gaming, by the way, have always been too low in terms of what the reality actually happens to be.

MR. STEELE: On October 3 and October 4, 2005, the Nova Scotia Gaming Corporation sponsored a responsible gambling conference here in Halifax, I'm sure you were there.

MS. CARINCI: Yes.

MR. STEELE: The experts on Internet gambling who were there expressed a much, much more reserved view of on-line security than you expressed to the New Brunswick committee two years ago and that you have affirmed today. It makes me wonder, you say that it's almost more secure than any other form of sales of the gambling products, yet the experts are saying no, this is something we all need to think about and worry about. Can you explain the difference of opinion between what you have expressed this morning and the experts who appeared at that conference?

MS. CARINCI: I think, if I could clarify what I meant by my comments, is that we have more control over the play on that site because we can restrict the amount of play, as can the unregulated market if they chose to; we can provide for self-exclusion, as could the unregulated market if they chose to. So my remarks were specifically around our ability to control and regulate play on that site.

MR. STEELE: Is it possible for people sitting at home at a computer or at a public computer to, as it were, game the system? Does the ALC have a view on that?

MS. CARINCI: Could you repeat the question?

MR. STEELE: I'm just wondering what is the view of the ALC on how difficult or easy it is for people doing Internet gambling from home or from a public computer in a library to sign up even though, strictly speaking, they shouldn't?

MS. CARINCI: I believe it's ALC's view and the view of the shareholder that there is grave concern about what's happening now. If you have a PC at home or in the workplace you basically have the ability to game at any time during the day and spend any amount with no protection. It's very different than the issues, I believe, that the shareholders and the governments had to deal with going back 30 years, where we had the Irish Sweepstakes and we moved into a regulated market to keep the money at home. In the 1990s, for a number of reasons that I have expressed earlier, governments came into the VLT market because it was so pervasive and they needed to regulate it to protect the player's integrity and be able to apply responsible gaming pieces to that form of gaming.

At this time, it's not as easy. This time the grey market is located in Gibraltar, in Antigua, in Malta, in the U.K., and they are very large operators whose stock is exchanged on legitimates like the U.K. stock exchange. They have more transactions than the stock exchanges. The last IP for Party Poker went to over $10 billion U.S. within two days from blue chip companies investing in these types of companies overnight. So all that to say yes, there's grave concern, and it isn't as simple as it used to be in terms of a government being able to look at this from a regulatory perspective.

MADAM CHAIR: Thank you. The time has expired. I recognize Mr. Samson from the Liberal caucus.

MR. MICHEL SAMSON: Thank you, Madam Chair. I'm just wondering if I could ask Mr. Salmon, it's my understanding that in 1997 the audit identified that Nova Scotia was getting shortchanged about $4.5 million a year from Atlantic Lottery. A deal was later reached by the then Finance Minister Neil LeBlanc. I'm wondering, Mr. Salmon, if you could tell us today, in 2006, are Nova Scotians in any way being shortchanged by Atlantic Lottery on what our fair share of the profits should be?

MADAM CHAIR: Mr. Salmon.

MR. SALMON: I'm sorry, could you repeat that?

MR. MICHEL SAMSON: In 1997, I believe it was you who identified that we were receiving approximately $4.5 million less than what our true share should be here in Nova Scotia. A deal was later reached by Neil LeBlanc on behalf of the province with Atlantic Lottery. I'm curious, today, in 2006, are Nova Scotians still getting shortchanged or are we receiving our full, fair share of the profits from Atlantic Lottery?

[10:30 a.m.]

MR. SALMON: My understanding is that the agreement that was reached resulted in fair allocation of revenues among the provinces. I do not believe Nova Scotia is being shortchanged. As I mentioned earlier, we haven't been in to Atlantic Lottery Corporation in 10 years. We are planning to conduct another audit within the next year.

MR. MICHEL SAMSON: If you haven't been in in 10 years, I'm curious on what basis you believe that there's not a possibility that we are being shortchanged?

MR. SALMON: My understanding is that the Nova Scotia Gaming Corporation ensured that the agreement was reached, the method of allocating expenditures that we questioned was corrected, and my understanding is that the Gaming Corporation is satisfied that Nova Scotia is receiving its fair share.

MR. MICHEL SAMSON: You haven't looked at that yourself, from your office?

MR. SALMON: No.

MR. MICHEL SAMSON: I'm just curious, on some of the issues of a ban of these machines, do you keep track of how many Nova Scotians play VLTs?

MS. CARINCI: Yes.

MR. MICHEL SAMSON: How many?

MS. CARINCI: In terms of a percentage we have . . .

MR. MICHEL SAMSON: Overall numbers. Are there 100, 1,000, 10,000? How many Nova Scotians typically play VLTs?

MS. CARINCI: We say 18 per cent. (Interruptions) When we look at the market, just to be specific, we don't look at the overall adult population, we look at actually those who go to licenced premises because those are the only folks who are going to be able to engage because they only are at licensed premises. So 18 per cent of bar-goers actually engage in video lotteries.

MR. MICHEL SAMSON: Do you keep track of how many of those are criminals?

MS. CARINCI: No.

MR. MICHEL SAMSON: If we make the possession of a VLT and the playing of a VLT illegal in Nova Scotia, how many of that 18 per cent do you believe are going to participate in an illegal activity, therefore becoming criminals here in Nova Scotia?

MS. CARINCI: I couldn't answer that question directly. You would hope that if the Nova Scotia Government made the decision to ban VLTs and make it an illegal activity that most Nova Scotians, if not all Nova Scotians, would abide by that law. However, having said that, we know from our previous experience where it was an unregulated and not a legal activity prior to 1991 that there were folks who were engaged in that activity.

MR. MICHEL SAMSON: Your whole argument is on the basis that if we don't make the possession of a VLT illegal. Previously, the one-armed bandits, it was not illegal to have them. Even when they did become grey machines it was very difficult to prosecute because you had to establish the possession itself was not illegal, you had to establish that there was actually money being put in. If we make the mere possession illegal, an officer walking into an establishment that has one will be charged, someone playing one will be charged.

MS. CARINCI: That's right.

MR. MICHEL SAMSON: So your whole argument is based on what was happening in the past and not taking into consideration that making them illegal, the mere possession or the playing - your argument is out the window. Yet, for some reason, this government in Nova Scotia and Atlantic Lottery keeps holding on to an old argument which is no longer relevant in this day and age with the legal enforcement that we have and the ability to make it legal. So why do you continue to say a ban will not work when you've just indicated that making the possession of a VLT illegal, the playing of a VLT illegal, you just basically indicated that it will work. Why do you keep hanging on to that old argument which clearly no longer has relevance when the new argument is made of making the possession and playing illegal?

MS. CARINCI: I think there are two parts to that. There is not just the amount of participation of those who might be willing to break the law, should there be a law in place, but what regulated gaming does is allow folks who do have problems to not be in the closet or underground. It allows us to be able to provide treatment and opportunities for those individuals who may be affected or at risk who may be prone to be involved in an activity whether it's regulated or unregulated.

MR. MICHEL SAMSON: So you're saying regulating gaming is because we want to keep track of who has problems gaming? Are you seriously arguing that in front of us here today . . .

MS. CARINCI: No, I'm not. I'm saying . . .

MR. MICHEL SAMSON: . . . and expecting us to believe that to be a legitimate argument of why regulated gaming is in place, because governments want to know who the problem gamblers are. You're not serious, are you?

MS. CARINCI: No, absolutely not. No, what I said was, one of the benefits of regulated gaming was it did make the activity legitimate, it also allowed for people, for us to be able to and governments to be able to actually determine to what extent there was problem gambling and to what extent we needed to provide more opportunities and invest more in problem gambling. Prior to that, there was very little data, and certainly not the investment that you see today in problem gambling.

MR. MICHEL SAMSON: With all due respect, gambling has been regulated in Nova Scotia for some time, and had it not been for the pressure put on by both our caucus and the NDP caucus, I would submit to you there wouldn't be the amount of funding there is now for problem gambling. It took political pressure, not data from Atlantic Lottery, to convince the government to invest money in that. It was a farce what this government was putting in knowing the numbers that were out there, hearing the stories. So, with all due respect, had we had a majority government here in Nova Scotia we may still not have the amount of money there is now for problem gambling. It's a minority government that brought that about, and pressure from the Opposition. I just find it amusing to hear the argument that regulated gambling is to help problem gamblers.

Anyway, the argument around a ban, it just doesn't hold. If you say you are going to pass the law that makes the possession of a VLT illegal, the playing of a VLT illegal, the amount of people who will actually participate in that activity I would submit to you is minuscule compared to what is taking place now, and to argue that we can't do that because problem gamblers will go underground, that's a weak argument, to say the least.

Let me take you to a more recent issue which has Nova Scotians and Atlantic Canadians talking. It's the issue about the poker games which are taking place at Dooly's in the Atlantic Provinces and the money that is being raised for charity and the recent concerns, all of a sudden, that the RCMP are questioning whether this is legal. I'm curious, what is the position of the Atlantic Lottery Corporation in regard to this activity taking place, these poker games at the Dooly's establishments, and I believe there may be more establishments?

MS. CARINCI: It's not really our position. The law and the Criminal Code in the regulations are very clear - unless you are licensed by or have been given the authority by the shareholder, in the case of the Province of Nova Scotia, or Nova Scotia Gaming Corporation, it is not a regulated or a legal activity.

MR. MICHEL SAMSON: Have you had any discussions with the RCMP on this matter?

MS. CARINCI: We have had informal discussions with the RCMP in New Brunswick about the activity, and I think from an enforcement perspective, and that's it.

MR. MICHEL SAMSON: Is the Atlantic Lottery Corporation the body which is directing the RCMP to stop this activity?

MS. CARINCI: Absolutely not.

MR. MICHEL SAMSON: Do you have any sort of memos or correspondence you can share with this committee on the issue of those poker games that are taking place, whether they are internal discussions or external discussions with any parties regarding the poker games taking place at Dooly's?

MS. CARINCI: I can share with you, certainly, the legal opinions around the activity that we see with poker in bricks and mortar today, yes.

MR. MICHEL SAMSON: Okay, but it is your position that these games are illegal, is that correct?

MS. CARINCI: Under certain conditions they can be legal.

MR. MICHEL SAMSON: How? How could they be legal?

MS. CARINCI: Well, for instance, the province has the authority to regulate gaming through an agent or an agent of the Crown, for instance, that's us in this case, from an operating perspective. So they could ask, for instance, the Nova Scotia Gaming Corporation to consider this activity, then that would make it regulated and that would make it legal. The second piece, if they were to license a charitable operation, like we do with bingo. Bingo is a legitimate form of fundraising for non-profit organizations. So, if it was licensed by the regulator in the respective provinces, then that would make it a legal activity.

MR. MICHEL SAMSON: Has there been any request by either the provincial government or by the Nova Scotia Gaming Authority to intervene in these games?

MS. CARINCI: To the Nova Scotia Gaming Corporation?

MR. MICHEL SAMSON: Or to the Atlantic Lottery Corporation?

MS. CARINCI: No.

MR. MICHEL SAMSON: So, basically, this is an initiative that's being undertaken by the RCMP, that Atlantic Lottery Corporation is not involved in?

MS. CARINCI: That's right.

MR. MICHEL SAMSON: Okay. I'm curious - you've talked a bit about some of the safeguards. One of the issues that we're hearing about more and more is youth involvement in gambling at a very young age, whether it's poker games, scratch tickets, other initiatives. You've spoken about a few of the safeguards at the point of sale that you're trying to regulate. I'm curious - bingo, is there an age restriction on who can play bingo?

MS. CARINCI: I don't think so. I don't believe there is a legislated age restriction on bingo today in Nova Scotia. I'd have to look at that, but I'm not aware of one.

MR. MICHEL SAMSON: Why isn't there?

MS. CARINCI: That's really the purview of the regulator and of the government of this province.

MR. MICHEL SAMSON: Is there any age restriction in any other provinces?

MR. BREEDON: For what it's worth, I recall reading in a paper a debate in P.E.I. about the same issue, whether there was an age restriction. My recall is, in fact, there has not been. Kids 10, 11, 12 can go to a bingo hall and play bingo.

MR. MICHEL SAMSON: They are, so that's why I asked.

MS. CARINCI: I believe it's the case in most provinces where there isn't an age restriction on bingo. There isn't legislation either on minors' playing activity, it's enforced through policy.

MR. MICHEL SAMSON: Have you been keeping any data that would indicate to us as to the revenues of bingo operations, for example, with the onslaught of VLTs? Have you kept data to indicate what impact this has had on bingo, especially charity bingos?

MS. CARINCI: Is the question, do we have data and do I think there's an impact, a relationship between the two? We don't actually collect that data, but certainly we have the data which is accessed through those who regulate bingo. What we've observed, not just in this province but right across Canada, is that bingo as a legitimate source of revenue to charitable organizations or non-profit organizations has definitely been on the decline.

MR. MICHEL SAMSON: Okay. Here in Nova Scotia, am I correct that every bingo hall, every charity would have some sort of a licence number?

MS. CARINCI: Yes.

MR. MICHEL SAMSON: Have you kept track of how many have abandoned their licence numbers in the last number of years?

MS. CARINCI: No.

MR. MICHEL SAMSON: That would basically tell you how many have closed down.

MS. CARINCI: We haven't. That's the role of the regulator in this province who regulates bingo. Bingo does not come under the Nova Scotia Gaming Corporation so it subsequently doesn't come under us as the operator. The responsibility and accountability for bingo operations and licensing and compliance is with the regulator in this province.

MR. MICHEL SAMSON: So it's all with the Nova Scotia Gaming Corporation? So you don't receive any of the funds that come from bingo?

MS. CARINCI: No, bingo is not under our purview. We do not operate bingo today.

MR. MICHEL SAMSON: What else isn't under your . . .

MADAM CHAIR: Thank you. I'm sorry, Mr. Samson, the time has expired. Mr. Parent.

MR. PARENT: Thank you very much. Just a few quick questions and then I'll turn it over to my colleague. I've advocated in the past and I wonder what your view is on putting a small tag on advertisement for gambling products that the use of this product can lead to gambling addiction - do you agree or disagree with that?

MS. CARINCI: I fully support informed choice and I fully support looking at all opportunities to ensure that we're educating. In terms of putting tag lines on our advertising or our products - by the way, it is something that we're looking at this year on how we could logistically do that.

MR. PARENT: Good, I'm glad to hear that. Another concern that I have and I know this is much larger than you and I hope you don't feel that - it's really a government issue. A lot of the questions I've asked have been government choices. A concern, and I'll raise it again just to get it on the record, I'm concerned by the promotion of gambling and what effect it has on the work ethic. If it's just a form of entertainment, that's fine, then we deal with those who maybe don't use that entertainment properly.

On a larger sort of basis I've seen in fundraisers in every activity, in the Rotary Club I'm in and everything, rather than just asking for donations, everything comes down to buying tickets to win a prize now. The work ethic in Canada has been, in my opinion,

something that has been under assault for a while from various quarters and without a strong work ethic you have, I think, a very society that is in trouble. So, I worry about any message that goes out, you can get rich without having to work. I wonder if you share that worry?

[10:45 a.m.]

MS. CARINCI: That's certainly as you pointed out, a larger discussion, it's a philosophical discussion. If your question is, do we think that the growth of gaming and lotteries over time has impacted the work ethic, I certainly don't have the data to be able to answer that question. Philosophically though, if we look at the types of games that we offer, they are meant to be entertaining. Some are, like the big lotto, to dream, what would you do with that? Most of our winners, by the way, are very responsible; often don't quit their jobs, by the way; invest in the education of their children or their grandchildren, pay off their mortgages and do very responsible things. That doesn't mean if you are a fool before you won that getting rich makes you smart. Most games, for instance, the instant game, it's a break in the day, you might win $10,000 or you might win $2. Sports games aren't even actually about winning, per se, that product is about I'm smarter than you, I know who is going to win the Superbowl.

I think that for the most part, gaming is fun for most folks who indulge in it. That's not to say that it's not an issue for a percentage of folks, but that overall, it's an entertaining, innocent indulgence for the most part that people engage in to have an experience or to be entertained or to dream.

MR. PARENT: Thank you for your response. I probably disagree with you a little bit and think there is probably more threat to the work ethic, but I appreciate your response. One last question I want to ask. In rural Nova Scotia, and I represent a riding that is considered rural Nova Scotia, Kings North, in the community right near where I live, the PetroCan just closed their pumps. It's not that they weren't making a profit there at the station, but they weren't making enough of a profit. They moved everything into New Minas. The bank, Scotiabank closed its branch there, it wasn't that they weren't making a profit, but they wanted more profit. They wanted to consolidate. Fortunately we had a co-op bank come in, so we have that and I suspect we will have that with gasoline as well. So really I think both PetroCan and Scotiabank will have lost money from those moves.

That's just background to a constituency concern that came to me from a fellow in Grafton, Greg Pulsifer, who owns a corner store. He wanted to be able to provide one of your products, and he was told that unless he sold a certain level that he wouldn't be given that product. There was nothing we could do, we tried and tried. He has a good store. He is in an area where there are not many people around, so they force people to drive elsewhere, out of the community, in order to buy the product that you offer.

I just wonder why you have this policy, particularly against the backdrop as you said, of Internet gambling, which people can access from anywhere in the community. If that's the competition and if your argument is, far better for them to gamble through the products we have, where we can regulate if people get into trouble or when young people get in trouble, yet you are competing against Internet gambling, which is available from anywhere, why you would have a policy that would not allow this small, rural corner store to sell your product?

MS. CARINCI: I would be more than happy to look at the specifics around that particular retail and I'm sure my colleague has made note of that, but in principle what we say is that Nova Scotians should have reasonable access to be able to play our games. So we look at trading areas and a number of other attributes.

MR. PARENT: Can I ask a question? Does it cost you any more to have it in his store?

MS CARINCI: Well, that was my second point I was going to, yes, there is a significant investment that we make, it's probably close to $16,000 that the corporation has to put up front, and that's in terms of the terminal that you see sitting on the counter, the servicing, the collateral that we have at retail, and then there's the ongoing cost of the communications between the central system, you know, the line costs - those are fairly minimal mind you.

MR. PARENT: The fellow was selling far more than that. You were covering your costs, you were making a profit, but not as much of a profit as you would like because he wasn't selling quite as much of the product.

MS. CARINCI: I will volunteer to take a look at that, absolutely. Certainly, we do have minimums that we expect retailers to make so that we can cover profit. Having said that, if there isn't reasonable access and the retailer is not meeting those sales levels, that's a different issue. We would continue to operate within the community even if they didn't meet those levels.

MR. PARENT: Maybe afterwards I can get the researcher to work on it and we can get the case to you to look at it.

MS. CARINCI: Sure, I'd be happy to look at it.

MR. PARENT: Thank you, I'll turn it over to my colleague.

MADAM CHAIR: Mr. Hines.

MR. GARY HINES: I guess I would like to lead off with some comments regarding the word "prohibition". My personal opinion of prohibition is that when you prohibit something you create another level of lawlessness, you make criminals out of innocent citizens, and I don't think there is anywhere we can prove that prohibition has actually worked. I just question the suggestion that if you prohibit these machines that you're not going to have that activity because people have natural inclinations toward gambling.

To ban the machines, you don't automatically turn the switch off for that individual who wants to participate, so you drive him underground - and there will be an underground - and I think that's best exemplified by one of your board members who has travelled extensively and talked to police officers off-duty and off the record. The police will not give you an opinion that goes public for the simple reason that if they have to enforce prohibition, they would be perceived as admitting that they couldn't enforce it, so they will talk off the record. One of your board members has done extensive research on that and I'm sure you've drawn on his experience as a result. Those are my comments on prohibition. I just shudder at the fact of criminalizing another element of society.

My other question is, it's a fact of life that our Native reserves are under the jurisdiction of the federal government. Do you have special policies and procedures in place in dealing with the reserves, in terms of regulations and so on regarding gambling?

MS. CARINCI: This is with regard to gaming on First Nations?

MR. HINES: Yes.

MS. CARINCI: I'll let Patrick talk to the specifics of the policies around that.

MR. DAIGLE: In Nova Scotia on 10 reserves there are 600 terminals and they are generating approximately $40 million in revenue. First Nations gaming in the Province of Nova Scotia is administered by Aboriginal Affairs. The relationship that ALC has is that we supply the terminals, we supply the central system and we also offer technical support to those terminals. In exchange for that service we receive an administration fee. It's a flat fee, per terminal, per day and basically it's a recovery of our costs. That admin fee is something that is negotiated - my understanding is - by Aboriginal Affairs and it's communicated to us by the Nova Scotia Gaming Corporation. That recovery is approximately $3 million.

MR. HINES: So prohibition, reductions and so on, changes to mainstream gambling are not applicable to the reserves, is that my understanding? There's not blanket participation in those changes?

MS. CARINCI: Could you repeat the question, I'm sorry.

MR. HINES: When we make changes to the Act, which allow a reduction in VLTs or changes to be made in the way we do gambling procedures, those are not blanket across the board, those would not apply to the reserves, they would have to be negotiated through a federal jurisdiction?

MS. CARINCI: No, actually, in some cases with the introduction of the gaming strategy, I believe that (Interruptions) Sorry. There are a number of aspects and I just wanted to consult to make sure I'm accurate. There's a number of aspects to the gaming strategy, two of which for certain apply to the games that are on reserves and that is the reduction of the speed of play and the removal of the stop button.

MR. HINES: I'm just concerned that at all levels of discussion you make sure that the reserves or the Aboriginal people are part of that discussion, because sometimes they get left out of it and you have to go back and revisit it and it becomes a contentious issue, and we're perceived as creating an unfair advantage for the Native people. I think they should be involved at all times in the discussion.

One of the other questions that I want to ask is about racinos. There is presently a racino working, and apparently working well on Prince Edward Island. I just wondered, are they driven by private entity or are they driven somewhat by ALC as well?

MR. DAIGLE: The gaming venue in Charlottetown is being operated, managed, and conducted by Atlantic Lottery Corporation.

MR. HINES: Do you see a racino coming to Nova Scotia in the near future? Has there been discussion regarding that?

MS. CARINCI: I'll speak to that. We've not had any discussions with our shareholder with regard to any future, particularly in the near future, gaming at the tracks.

MR. HINES: Thank you. I'd just like to move to another area regarding Internet gambling. Has Internet gambling increased the number of people participating, or has it just been a shift in dynamics? Have you information on that?

MS. CARINCI: That's a very good question. Is it a lot coming from a few? We don't entirely know what the answer to that question is. We certainly know the participation rate is starting to go up. Definitely the amount of money being spent has dramatically increased, and we're monitoring that closely. I would take an educated guess that not only is the revenue going up, but the numbers of folks who are participating are going up, just by the nature of the diversity of the games. From a marketing perspective, when you look at segmentation, different folks play different games for different reasons. It's not the same people playing everything all the time. I think a very educated guess would be that those numbers are increasing as rapidly as the actual dollars that are being spent.

MR. HINES: Thank you. That concludes my questions.

MADAM CHAIR: Thank you very much. The time has concluded now for our questioning. I would like to thank our guests for their presentation and their presence here today. I would remind you that there are a number of documents that we will be looking forward to receiving, and I would offer you an opportunity to wrap up with some closing comments if you so choose.

MS. CARINCI: I would like to thank the Chair and thank this committee for giving me my first opportunity to be able to talk about the Atlantic Lottery Corporation and its relationships in this province. I'd like to reiterate that we take our responsibility and our accountability to our shareholder, the Nova Scotia Gaming Corporation, very seriously. I believe that this is the first of many opportunities for us to make sure there's clarity around the corporation and its roles, and I thank you for that opportunity today.

MADAM CHAIR: Thank you. I'll entertain a motion for adjournment. So moved.

The committee is adjourned.

[The committee adjourned at 10:58 a.m.]