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. Wayne Gaudet

Mr. Michel Samson

[Mr. Gary Hines was replaced by Mr. Peter Christie.]

[Mr. Wayne Gaudet was replaced by Mr. Manning MacDonald.]

In Attendance:

Ms. Mora Stevens

Legislative Committee Clerk

Mr. Jacques Lapointe

Auditor General

Mr. Roy Salmon

Former Auditor General

Mr. Gordon Hebb, Q.C.

Chief Legislative Counsel

WITNESSES

Office of Economic Development

Mr. Paul Taylor

Chief Executive Officer

Mr. Marvyn Robar

Director of Development Initiatives

Mr. Chris Bryant

Director of Decision Support

Mr. Andy Hare

Director, Lending and Special Projects

Nova Scotia Business Incorporated

Mr. Stephen Lund

President and Chief Executive Officer

Mr. Pat Ryan

Vice-President, Financial Services

HALIFAX, WEDNESDAY, MARCH 1, 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 call the committee to order, please. Good morning. We have a busy agenda today. This morning we have before us witnesses from the Office of Economic Development and Nova Scotia Business Inc. with regard to the loan to S&J Potato Farms.

The process here, as everyone will be aware having been in front of this committee before, is one in which we have a period where the witnesses have an opportunity to make a brief opening statement, the members have a set period of time to ask questions and we have two rounds of discussion. That is the agenda as established; that is the agenda that will be followed here this morning. After that occurs, other items of business arising either out of the proceedings or in terms of where the committee goes next will be dealt with.

I say this because we've just received from the Department of Justice a piece of correspondence with respect to the committee's request for documents from the parties in front of us today. This has only come to the members now - they are in fact just reading it now for the first time - and we will not deal with the substance of that correspondence until the end of the meeting in the usual practice. So we will be proceeding in the normal manner.

Having said that, it was the intention and the hope of members of this committee that prior to their opportunity to ask questions of the witnesses, documents would be available to inform their questioning. So I think because documents have not been brought forward in the manner in which we had hoped, I want to ask if there are additional documents for the members here today as a point to start before we get into the actual questioning.

I would direct my question to both Mr. Lund and Mr. Taylor. Perhaps Mr. Taylor first - have you brought with you today any additional documents for the Public Accounts Committee?

MR. PAUL TAYLOR: They're still searching for them.

MADAM CHAIR: Perhaps we could do a round of introductions so Hansard will know where people are sitting.

[The committee members and witnesses introduced themselves.]

MADAM CHAIR: The question has been posed to Mr. Lund and to Mr. Taylor and we'll start first with Mr. Taylor. Mr. Taylor, have you brought with you any additional documents for the committee?

MR. PAUL TAYLOR: Yes, I have. In response to the committee's letter of late yesterday, I am prepared to table with the committee this morning those documents in the files for both S&J Potato Farms and Magic Valley that relate to third party confidentiality.

MADAM CHAIR: Thank you very much.

Mr. Lund?

MR. STEPHEN LUND: No.

MADAM CHAIR: Okay, thank you very much. To the members of the committee, we will have an opportunity to discuss further the matter of documents before the end of this meeting, or we may have to schedule a special meeting to deal with that.

We will proceed now with an opening statement from the Office of Economic Development in the normal manner, which is to extend to the witnesses an opportunity to speak for two to three minutes. I would open the floor, first with you, Mr. Taylor.

MR. PAUL TAYLOR: Madam Chair, I thank you for the invitation to appear before the committee today. This invitation, today, to appear before the committee is to discuss assistance the Office of Economic Development will provide to S&J Potato Farms operation in Cumberland County.

This company farms seed potatoes which it ships to customers in New Brunswick and Prince Edward Island. The company manages 2,500 acres in the Amherst Shore area which it rotates 750 acres of seed potatoes in a three-year rotation with grain and hay.

When S&J Potato Farms met with OED early in the Summer of 2005, it was to discuss a problem the company continues to encounter in getting its product to market. The company needed a solution to weight restrictions on the secondary road it must use to get to the 100-Series Highway. Without a solution to the transportation impediment, 25 full- and part-time seasonal jobs in the Amherst Shore area were at risk.

This company is based in P.E.I., where it continues to farm land. It came to Nova Scotia to diversify its farming locations and protect its product. If disease infected crops in one province, it could still operate from another. The company also hopes to expand its market to customers in Nova Scotia.

In many ways the S&J Potato situation is not unlike many others OED has been involved with in the past and will likely be involved with in the future - a small company in rural Nova Scotia needing help to maintain employment and help ensure the success of its business plan. While Office of Economic Development includes supporting new business and industry opportunities for Nova Scotia, it also means maintaining those jobs we already have here. It means supporting initiatives that maintain and improve the ability of companies to continue in business and to expand their markets.

The process of providing support to the S&J Potato file was basically typical for the OED staff. Staff discussed the situation with the company, assessed the merits of the various solutions, and the Minister of Economic Development took the issue before Executive Council. A decision was made by that body to support the company's request for assistance with a forgivable loan of up to $250,000.

That assistance will help the company buy lighter-weight trailers that can be used to transport its products over that secondary road. This assistance will help maintain existing jobs and provide an opportunity for the company to grow into a significant player in the seed potato supply industry in this province. This company is the first and only company in Nova Scotia growing and supplying seed potatoes, and offers the opportunity to begin a new sector of the Nova Scotia agricultural industry.

Just before ending my opening statement, I would like to say that OED and NSBI staff are certainly here today to try to answer all the committee's questions as best we can. We will discuss these facts as we know them, but we must be careful not to contravene our obligation to uphold Cabinet confidentiality. We will discuss the steps we took and the process used that led to our advice to Cabinet, but we cannot reveal or discuss that advice.

We can discuss aspects of the company S&J Potato Farms' business plan, but we are also bound to try to protect the proprietary business information of the company. We need businesses to have confidence that when they enter into discussions with agencies of the Government of Nova Scotia, their confidential information will be protected.

Madam Chair, as part of this opening statement I was going to make reference to the aspect of the documents and Cabinet confidentiality, but in terms of your opening statement of dealing with those procedural matters following our appearance here today, I think I will at this point conclude my opening statements and thank you for the opportunity once again and look forward to the questions from committee members.

MADAM CHAIR: Thank you very much, that's very much appreciated.

So we will begin with the first round of questioning, 20 minutes per caucus. Mr. Steele, the floor is yours.

MR. GRAHAM STEELE: So a senior and experienced and, if I may say, respected member of Cabinet has resigned in circumstances that are not at all clear to the general public and, because we don't know why the minister resigned, we don't know if the resignation from Cabinet was justified. Because we don't why he resigned, we don't know if or when his return to Cabinet will be justified, and, because we don't know why he resigned, we don't know what to do to prevent this from happening again, and this mystery about why the minister resigned is all wrapped up in an Economic Development loan administered by your office, Mr. Taylor, and that's why you're here today.

So let me begin by asking you what was the specific event that caused the Office of Economic Development to open a file on S&J Potato Farms? Who precisely was it who first contacted your office with this proposal?

MR. PAUL TAYLOR: The initial contact with the staff of this organization was by an e-mail from the minister's office asking us, as staff, to be in touch with the principals of the company regarding the opportunity.

MR. STEELE: And this e-mail from the minister's office came from who exactly?

MR. PAUL TAYLOR: As I understand, it came from the minister's secretary.

MR. STEELE: And what's the minister's secretary's name?

MR. PAUL TAYLOR: At that time the secretary's name was Noella Reardon.

MR. STEELE: Is it at all unusual that an OED file would be opened as a result of contact from the minister's office?

MR. PAUL TAYLOR: Certainly in my experience, no, I would not say that it is unusual at all. The opportunities our office ends up dealing with come from a variety of sources: they can come from RDAs; they can come in through ACOA; they can come from NSBI; and they can come from MLAs of all stripes in the Legislature. Generally the protocol

is if somebody is looking for our department to get involved, certainly the general protocol is that they would form that request through the minister, i.e., if it's a member of the Legislature who's looking for us to investigate an opportunity in any part of this province, general protocol would be that that person would approach the minister and the minister would approach his staff.

MR. STEELE: In your opening statement you said that the file was opened in early 2005. I wonder if you could give us a precise date when that e-mail was received?

MR. PAUL TAYLOR: I'm informed it was June 22, 2005.

MR. STEELE: Now, in the documents that OED has provided to the Legislature - which I note were only released to the Legislature about a month ago, only a few weeks ago, before the events that we're talking about today - it says that the first step in consideration of any file is to determine whether the proposal is more appropriately dealt with by a different agency of government. Now, again, in the very scrawny package of materials that OED has provided to this committee, there's an e-mail from Andy Hare confirming that he had discussions with the Truro office of the Farm Loan Board, and I wonder if you or Mr. Hare could tell the committee why this proposal was not dealt with by the Farm Loan Board.

MR. PAUL TAYLOR: Just to go back to the earlier part of your question. We do, as part of the process when opportunities do come into the office, we are one of the agencies of the province, but we're also one of the agencies of the province, the federal government and the municipality who often can be partners on these projects. Our earliest consideration on the file is, are we the most appropriate agency to be handling this file. That determination could lead us to any number of agencies, not only in the province but at the federal level.

[9:15 a.m.]

The Farm Loan Board is one of those agencies, particularly when dealing with someone in this sector. Our understanding at the time of dealing with the issue is that this opportunity would not be eligible under the Farm Loan Board's criteria. I should expand on that and tell you the approach we used at the time. As opposed to this being an issue strictly dealing with a farmer, this issue very much was one, as we saw it, as dealing with a transportation and road issue. This is a gentleman who for some time now has had difficulty - given the size of his operation and the location of his warehouse, he has had significant problems with the Spring weight restrictions and when he has to move the product over the roads.

MR. STEELE: So, in short, it wasn't a farmer looking for a farm loan. That's why the Farm Loan Board didn't want to deal with the file.

So now I want to talk about NSBI. Mr. Lund, the letter that you sent to the committee indicates or suggests that NSBI has a file on S&J Potato Farms. I was wondering if you could tell the committee, briefly, whether that's true and if it is true, why did NSBI feel that it was not the appropriate agency to deal with the proposal?

MR. STEPHEN LUND: Let me start by saying that in respect to the commercial confidentiality, we don't normally talk about companies that we're in discussions with. When a deal is finalized, then we make public the financing that we've done. In this particular situation with S&J Potato Farms, there was a financing deal in place within the government, so we don't believe that we're contravening commercial confidentiality by telling you that we do not have a file on S&J Potato Farms.

MR. STEELE: That's fine, thank you very much. Now, moving specifically to the involvement of Mr. Ernie Fage, now the former minister, at what stage in your office's consideration of the S&J Potato Farms proposal, to your knowledge, did Mr. Fage first become personally involved in any way?

MR. PAUL TAYLOR: Perhaps I will refer that question to Mr. Hare, who was dealing more specifically with the file.

MADAM CHAIR: Mr. Hare.

MR. ANDY HARE: Could you explain to me what you mean by personally involved?

MR. STEELE: Mr. Taylor has indicated that the file was opened as a result of an e-mail from the minister's secretary. What I'm asking you is at what point did Mr. Ernie Fage personally, this is himself, not through any intermediaries, but personally, have any involvement with the S&J Potato Farms proposal?

MR. HARE: To begin with, I had a difficult time getting hold of Mr. Ellis, so it was probably sometime in August that I did go to the minister and ask him for a clarification on his e-mail before I was able to get in touch with Mr. Ellis and get to meet with him, but there are very limited dealings with me and the minister with respect to this file.

MR. STEELE: You haven't answered my question. When was the first time you became aware that Mr. Ernie Fage was personally involving himself in the file?

MR. HARE: Well, that's a difficult thing. To be honest with you, I don't know.

MR. STEELE: Now, back to Mr. Taylor, at what stage in the process did you or your staff become aware that the minister responsible for your office, Mr. Fage, had a personal

financial interest or a personal financial connection with S&J Potato Farms, namely that he was an owner of land leased by S&J Potato Farms? When did you become aware of that?

MR. PAUL TAYLOR: Speaking for myself, I became aware of that fact when he resigned his position as minister.

MR. STEELE: Okay, Mr. Hare, when did you become aware of that fact?

MR. HARE: I read it in The Daily News on February 14^th.

MR. STEELE: Now, Mr. Taylor, I wonder if you could explain to me the analysis that the Office of Economic Development undertook of the S&J Potato Farms proposal and how it is that your office could do an analysis of this proposal without learning who the owner of the land was from which S&J Potato Farms had a lease arrangement? How is it that that crucial fact - of any business, no matter what business you are talking about, you know when you are running a farm operation the crucial things you've got are the land, your equipment and your markets, and I would think that it would be a crucial part of any analysis, of an economic development agency of any farm to know who actually owned the land - how is it that your office was able to do an analysis of the proposal without learning that crucial fact?

MR. PAUL TAYLOR: We, as part of the due diligence, do a review of the company's financial position, its financial statements, obviously, on its balance sheet. We would explore the land base, particularly for an operation like this, the land base that the company does own or has tenure over. We do not go to that level of detail to try to uncover who owns all the individual parcels of land that this company - again, looking at us providing a loan to buy trailers to put on the road, we don't go to that level of detail to try to dissect the farming operations. If the nature of the question is to why we did not do the due diligence to try to uncover any potential conflict with our minister, that is not something . . .

MR. STEELE: In fairness, that is not what I am asking. I understand that that would be an unreasonable thing to ask, but the conflict would have been uncovered if you knew who owned the land that the company was leasing. If we are looking at the financial viability of a company, I would think that the ownership of land and equipment would be a fairly key consideration.

So let me ask you this, I would like you to explain, as precisely as you can, to your knowledge, and of your staff, what points of contact did Mr. Fage have with the file as it was going through the system?

MR. PAUL TAYLOR: On this file it's hard to separate individual contact points. For example, as we are dealing with these files we would probably have anywhere between six to a dozen of these things underway at the same time. As part of my regular meetings with

the minister, I would review the contents or the status of these opportunities we are pursuing, those meetings and the need for those meetings, and the type of information that flows through those meetings, flow both ways. Sometimes on any one of those files, the minister will be in contact with me and the staff to seek an update on where the file is and its status, and just as likely I am in contact with the minister to update him on where the file is and how much longer it's going to take us to complete our due diligence before there is a decision made as to whether this is going to Cabinet.

MR. STEELE: Do you have a specific recollection of talking about the S&J Potato Farms proposal with Mr. Fage?

MR. PAUL TAYLOR: Yes, I do.

MR. STEELE: How many times?

MR. PAUL TAYLOR: Over that period of eight months, it probably would be six times, in that neighbourhood.

MR. STEELE: And at any time did Mr. Fage tell you about his interest in the land?

MR. PAUL TAYLOR: No.

MR. STEELE: Did Mr. Fage, in any fashion, suggest to you that this proposal ought to be dealt with in a way different than normal? For example, that it ought to be speeded up, That it ought to be looked upon favourably, and did he give you any indication on not just to get an update, but on how he felt your office ought to handle the proposal?

MR. PAUL TAYLOR: No.

MR. STEELE: The report and recommendation to Cabinet, which this committee of course has not seen, is dated February 7, 2006. Did you prepare or at least approve this report and recommendation?

MR. PAUL TAYLOR: Yes, I did.

MR. STEELE: Did it contain any reference to Mr. Fage's ownership interest in the land leased to S&J Potato Farms?

MR. PAUL TAYLOR: We're getting into that narrow ground again, around me disclosing the contents of a Cabinet document, but . . .

MR. STEELE: I'm not looking for your advice. I'm not looking for your recommendations - I'm asking you, did it contain a reference to Mr. Fage's ownership interests?

MR. PAUL TAYLOR: But you are asking for my assessment of the file, and the type of assessment I provided to the minister in that document.

MR. STEELE: I think you and I have a different conception entirely of what it is exactly that Cabinet confidentiality applies to, not to mention the fact that this committee has a right to get an answer to any question it chooses to place. I am not asking for advice. I am not asking for recommendations. I'm asking whether that R&R that you prepared or approved contained any reference to Mr. Fage's ownership interest?

MR. PAUL TAYLOR: In this case, I'll answer this question, Mr. Steele, because I've already answered it. As we were absolutely unaware of the ownership interest in the land, therefore it could not form part of our advice to the minister.

MR. STEELE: Did you attend the Cabinet meeting at which the S&J Potato Farms loan was considered?

MR. PAUL TAYLOR: No.

MR. STEELE: Did anyone from your office attend that meeting?

MR. PAUL TAYLOR: No.

MR. STEELE: Mr. Fage's version of what happened during that meeting was first reported in the Halifax Daily News on Tuesday, February 14^th, the day after the news release. He says, "He dropped his department's case for an interest-free, 'forgivable' loan to S&J Potato Farms Inc. on the Tory cabinet table. Then he left the room while his colleagues decided if the company deserved public money." Are you in a position to say whether that's true, whether that happened, or whether that didn't happen?

MR. PAUL TAYLOR: As I did not attend that meeting, no, I am not in a position to say that.

MR. STEELE: Do you have any information about whether Mr. Fage's Cabinet colleagues were informed of his ownership interest?

MR. PAUL TAYLOR: Again, I'm not in a position to answer that question. I was not there.

MR. STEELE: The government issued a news release on February 13, 2006, at 2:27 p.m., to be precise, announcing the loan to S&J Potato Farms. Did you approve the contents of that news release before it went out?

MR. PAUL TAYLOR: I honestly can't remember if I did or not. I honestly don't remember whether I signed that release or not.

MR. STEELE: Okay. The news release says that S&J Potato, "owns 2,500 acres in the Amherst Shore area, where it rotates 750 acres of seed potatoes in a three-year rotation with grain and hay." The problem is that that's not actually true and, in fact, it precisely masks the situation that has led to the minister's resignation, because S&J Potato Farms doesn't own the land. The words used this morning is that it manages the land. I'm very interested in knowing who it was who selected that phraseology that appears to have been designed to mask Mr. Fage's ownership interest? Who would have decided how that news release was worded? Was it you or anyone in your office?

MR. PAUL TAYLOR: The original draft or the news release would have come out of the Communications section in my office. That's where that news release would have been prepared.

MR. STEELE: Do you acknowledge that that sentence that I have just read from the news release is, as a matter of fact, untrue?

MR. PAUL TAYLOR: As events unfolded after that news release, yes, it has come to our attention that the use of the word "owns" was not correct.

MR. STEELE: Is it possible that that part of the news release was written by political staff other than your professional staff in your office?

MR. PAUL TAYLOR: No, the way those news releases are prepared is they come out of the Communications section and are cleared through our Communications planning group and released.

MR. STEELE: In your view, should Mr. Fage have been more forthcoming with you and your office about his ownership interest in the land?

MADAM CHAIRMAN: Mr. Steele, you have one minute.

MR. PAUL TAYLOR: It would be fair to say that I do believe it is the minister's responsibility to declare such a conflict.

MR. STEELE: In my opening remarks, I explained to you why you are here today, because the mystery about Mr. Fage's resignation hasn't been cleared up and we need it to be cleared up. In your view, why did your minister resign?

[9:30 a.m.]

MR. PAUL TAYLOR: I would refer back to the statement he made at the time he did resign, I believe the words he chose were that he did not declare the conflict with his Cabinet colleagues and, therefore, was not in a position to continue as minister.

MADAM CHAIR: The time has expired. We will go to the Liberal caucus. Mr. Samson, you have the floor.

MR. MICHEL SAMSON: Thank you, Madam Chair. I just want to take you back a little bit. You said that S&J Potato had this issue with transportation for some time. Do you know exactly how many years this has been an issue for them?

MADAM CHAIR: Mr. Hare.

MR. HARE: They've been in business since 1997, and I know it has been at least a couple of years that they've had this issue. In fact, it was suggested to him by a couple of the members of the Opposition that he go public with it last Spring. He did not want to do that, he wanted to find a solution to the problem.

MR. MICHEL SAMSON: Prior to the e-mail that came from the assistant to the minister, had S&J Potato had any contact with the Office of Economic Development?

MR. HARE: Not with me.

MR. MICHEL SAMSON: Anyone else in the department that you're aware of?

MR. HARE: I don't believe so.

MR. MICHEL SAMSON: Mr. Lund, did S&J Potato Farms have any contact with your department of NSBI prior to the e-mail referred to that was sent from the minister's office to the Office of Economic Development?

MR. LUND: No, not to the best of my knowledge.

MR. MICHEL SAMSON: Have you ever had any direct contact with the owners or representatives of S&J Potato Farms?

MR. LUND: No.

MR. MICHEL SAMSON: Why is that?

MR. LUND: I don't know. You would have to ask them, I'm not sure. We weren't approached.

MR. MICHEL SAMSON: Did the Department of Economic Development approach you to deal with S&J Potato Farms?

MR. LUND: No, not to my knowledge, but I will have to ask my colleague.

MADAM CHAIR: Mr. Ryan.

MR. PAT RYAN: No.

MR. MICHEL SAMSON: How did your department, NSBI, become aware that there were any dealings on behalf of the government taking place with S&J Potato Farms?

MR. LUND: Well, I can only speak for myself, I think when I read it in the paper.

MR. MICHEL SAMSON: When you read in the paper that they received money?

MR. LUND: That there was a transaction between the Office of Economic Development and S&J Potato Farms.

MR. MICHEL SAMSON: Okay, thank you. Now, Mr. Taylor, back to you, was the e-mail sent to you from the minister's secretary?

MR. PAUL TAYLOR: No, it was sent to Mr. Hare.

MR. MICHEL SAMSON: It was sent to Mr. Hare. Do you have that e-mail with you?

MR. PAUL TAYLOR: No, I don't.

MR. MICHEL SAMSON: Why don't we have that e-mail?

MR. PAUL TAYLOR: I think you do have that e-mail.

MR. MICHEL SAMSON: We do have that e-mail?

MR. PAUL TAYLOR: I'm not sure if it was in the package. (Interruptions) It is in the package.

MR. MICHEL SAMSON: It is in the package. Well, we seem to have a differing of opinion as to whether that e-mail is in there or not. I'm sure we'll find out in a few seconds.

MADAM CHAIR: I think it is, but I think it's undated, and there are a number of difficulties with identifying exactly what that e-mail is about.

MR. MICHEL SAMSON: So who was the e-mail sent to, say it again?

MR. PAUL TAYLOR: Mr. Hare.

MR. MICHEL SAMSON: It was sent directly to Mr. Hare. Is that normal, that the minister would send a request directly to Mr. Hare when there are issues with companies in Nova Scotia?

MR. PAUL TAYLOR: The request, some of them come through me, some of them go directly to the staff. It varies depending on the status of the opportunity we're pursuing and the timing.

MR. MICHEL SAMSON: You've indicated that it's not uncommon that requests come through ministers, and I agree. I have often written to the minister on behalf of an individual saying can you have your staff make contact with them. In the e-mail or in any discussions from the minister's office, did he indicate what prompted him to make this request to you?

MR. PAUL TAYLOR: There was nothing in the e-mail that indicated the source of the e-mail. It was simply a request for staff to get in contact with the principals of the company.

MR. MICHEL SAMSON: Do we know who the representatives of S&J Potato Farms spoke to in the minister's office that this request then came forward to you from the minister?

MR. PAUL TAYLOR: No, I don't know.

MR. MICHEL SAMSON: You don't. My question comes down to one of the main issues that we have in trying to figure out exactly how OED works and how NSBI works. Now, Mr. Taylor, you've previously appeared before this committee, and your statement was that any requests that you receive for assistance for Nova Scotia companies is first to go to NSBI for their review and then come back to you if necessary. How do you explain the fact that Mr. Lund, who is the head of NSBI, is telling us here today he learned of the Government of Nova Scotia's dealings with a company looking to expand and grow through a press release? What went wrong?

MR. PAUL TAYLOR: I would submit that nothing went wrong. As I said in response to an earlier question, we are one of the agencies involved in this Economic Development file. We spend a lot of time and we have an awful lot of experience in dealing with these agencies at the federal, provincial and municipal level. We have a very clear idea of where these agencies can and cannot operate. In the case of the S&J Potato Farms file, when it first arrived on our door, it was fairly easy to make a determination that it was a file that NSBI could deal with.

MR. MICHEL SAMSON: So, is that the procedure? That you make that determination, and not NSBI?

MR. PAUL TAYLOR: If it's black and white, yes, we will make that determination.

MR. MICHEL SAMSON: Okay. I'm going to take you back to when you appeared before the committee and the question was put to you, is there a policy in the Office of Economic Development that any entity coming to the Office of Economic Development for financing in any form has previously had to have talked with NSBI? Your answer, sir, is, "That is certainly the policy that OED follows, absolutely." Why was that not followed here?

MR. PAUL TAYLOR: Perhaps in looking back at that statement I could have been clearer. That is exactly the policy of this organization, if there is any doubt whatsoever in our minds that this is a file that NSBI could be handling, that is our first port of call, if you will.

MR. MICHEL SAMSON: Do you have that policy statement? We have your statement and we have what you're doing here. Nova Scotians are trying to understand what the policy of your department is. We have your statement and now we find out you've done exactly the opposite of what your statement was. Where is this policy that tells you now that if you don't think NSBI is the right body, that you have the opportunity to decide, leave NSBI out, the arm's-length lending agency created by the government, and you're going to decide on your own how to deal with this. Where is that policy statement? Can you give that to this committee?

MR. PAUL TAYLOR: It's a set of operating instructions.

MR. MICHEL SAMSON: You have those, do you?

MR. PAUL TAYLOR: It's a set of operating instructions that I have given to my staff. This is not a policy that's written down in any way, shape or form inside our organization, it's the way we operate.

MR. MICHEL SAMSON: So you've verbally told your staff, we will determine on our own whether it should go to NSBI or not.

MR. PAUL TAYLOR: I have told my staff that if it's at all unclear that NSBI is an organization that can handle this file that's where it's to go. If it's abundantly clear. These people have worked with the NSBI staff that we deal with on a daily basis for years and years.

MR. MICHEL SAMSON: Mr. Taylor, I'm going to stop you there. I don't question that. I have your statement I've just quoted, and you've done the exact opposite of your statement. I'm not questioning your staff or their capabilities. We have two different policies taking place here. Now you're telling us we have a verbal policy that Nova Scotians don't have access to and I'm assuming your staff - hopefully none of them missed the meeting where you verbally told them this, because they would have no paper trail to follow.

Let me ask you, how many files have come to your office that Mr. Lund and his staff are not aware of? Basically, how many companies have come to the government, to your office directly, either through the minister or through someone else, that Mr. Lund is not aware of and that NSBI had absolutely no dealings with or even an opportunity to look at their file?

MR. PAUL TAYLOR: Could you give me a time period over which you're basing that question?

MR. MICHEL SAMSON: Since 1999.

MR. PAUL TAYLOR: I have no idea.

MR. MICHEL SAMSON: One? Two? Twelve? Twenty?

MR. PAUL TAYLOR: I can comment, in the last year, I can think of one.

MR. MICHEL SAMSON: One. Which one is that?

MR. PAUL TAYLOR: That would be Michelin Tire.

MR. MICHEL SAMSON: Michelin Tire. Had Michelin Tire ever gone before NSBI before? Maybe Mr. Lund can answer that.

MR. LUND: We did not take Michelin to our board for any decisions. We, over the years, have had discussions with Michelin.

MR. MICHEL SAMSON: Has NSBI ever authorized funding to Michelin?

MR. LUND: No.

MR. MICHEL SAMSON: Mr. Lund, how many files are you aware of that you read - basically, as you said earlier for S&J Potato Farms - that you saw the press release, knowing that obviously they had dealings with OED that they had no dealings with NSBI? Was S&J Potato Farms the first one, or have you seen other cases where this has happened?

MR. LUND: I will have to ask Pat.

MR. RYAN: There have been a few other cases that I'm aware of.

MR. MICHEL SAMSON: Which ones?

MR. RYAN: CanJam Trading Ltd. is one I recollect where there hadn't been prior contact with us.

MR. MICHEL SAMSON: Anything other than Can Jam?

MR. RYAN: Michelin, as Mr. Lund mentioned. S&J Potato Farms, as we're here today to speak about. I noted in the Annual Report for the Industrial Expansion Fund that there was reference to a project called DRUM! I don't really know what that was. Those are the ones I recollect.

MR. MICHEL SAMSON: Thank you, Mr. Ryan. So, we have NSBI, the arm's-length agency, that has no idea of some of the business that is taking place in the Office of Economic Development. That's basically a statement. Let me ask you this, Mr. Deputy, are you aware if S&J Potato Farms made any sort of request to the Farm Loan Board, for assistance in the matter that was obviously, in the end, dealt with by OED?

MADAM CHAIRMAN: Mr. Hare.

MR. HARE: Yes, we know that they did go to the Farm Loan Board. They wanted them or the Department of Agriculture to find a solution with respect to their transportation issue and basically all that they would be offered there would be a loan which isn't what they wanted.

MR. MICHEL SAMSON: Okay, so the Farm Loan Board was prepared to offer them a loan.

MR. HARE: Consider.

MR. MICHEL SAMSON: To consider a loan. And what's wrong with a loan, if they wanted to purchase equipment?

MR. HARE: This individual had a business that had a transportation problem that would have been a significant cost for him, and he was willing to contribute a significant amount of money to it but he was asking for assistance from the province to help sort out a transportation issue that would let him keep 25 people working.

MR. MICHEL SAMSON: Okay, so he wasn't turned down by the Farm Loan Board, it's just he wanted a better deal than what the Farm Loan Board potentially would be offering? That's your statement is it?

MR. HARE: I don't believe that there was an offer from the Farm Loan Board . . .

MR. MICHEL SAMSON: No, no, but they were never refused? That is your statement. They were not refused by the Farm Loan Board? You're saying they didn't like the type of loan the Farm Loan Board was making available to them, potentially?

MR. HARE: You would have to ask the Farm Loan Board that question.

MR. MICHEL SAMSON: Okay, do you have any correspondence from the Farm Loan Board that deals with S&J Potato Farms?

MR. HARE: Correspondence, no.

MR. MICHEL SAMSON: Okay, Madam Chair, may I make the request now that this committee be given all information regarding the Farm Loan Board with S&J Potato Farms, as relates to this specific matter?

You said you spoke to the Farm Loan Board?

MR. HARE: Yes.

MR. MICHEL SAMSON: What did they tell you? Tell me exactly.

MR. HARE: The Farm Loan Board, I called them to determine one, are they aware of S&J Potato Farms or Steven Ellis. They basically told me that they are a client of theirs, personal clients, basically financing the land and that they are a good client and they are meeting all their obligations.

MR. MICHEL SAMSON: Okay. So this request came from the minister. We don't know who asked the minister to make this request to your department. Is that the statement of all of you, that none of you is aware how this came from the minister's office prior to that e-mail, or who was pushing for this, or whether it was a result of a meeting or telephone conversation? You have no idea?

MR. HARE: I don't know.

MR. MICHEL SAMSON: And that is normal for the minister . . .

MR. HARE: Quite often.

MR. MICHEL SAMSON: . . . to send a request without ever telling you, this is because Michel Samson wrote to me or because Maureen MacDonald made a request on their behalf? You're not given that?

MR. HARE: No, the message was, make contact with the client.

MR. MICHEL SAMSON: Make contact with the client. When you had discussion with S&J Potato Farms, who had the discussions? Was it yourself, Mr. Hare?

MR. HARE: Myself, I picked up an individual in Debert from the Department of Agriculture and our regional office person in Amherst.

MR. MICHEL SAMSON: Did you make the decision not to contact NSBI?

MR. HARE: I worked for NSBI. I'm aware that NSBI does not finance primary producers.

MR. MICHEL SAMSON: They don't finance primary producers, but this is a company that was looking to grow, is that not correct? Everything I'm hearing from why S&J Potato Farms went to you, sounds like something that should have gone to NSBI, at least for their review and then a determination to say, no, this doesn't fall under our criteria, you're going to have to find somewhere else. But, yet, you made that determination on your own.

MR. HARE: I would say that's fair.

MR. MICHEL SAMSON: Okay, did you tell the deputy that you were specifically not sending this to NSBI, or is it just internal procedure to determine what they see and what they don't see?

MR. HARE: When we assess a file, we determine where is the best place to make contact. There is the Farm Loan Board, there is a number of places other than NSBI. Every deal isn't a fit for NSBI. It may be one of the other lending agencies.

MR. MICHEL SAMSON: Did S&J Potato Farms specifically ask for an interest-free loan that would be forgiven after a certain period of time? Who came up with that proposal? Was it the company that made the request, or did you offer it?

MR. HARE: That was basically what was negotiated. We were asked to take a look and negotiate an offer to the company that would help resolve this transportation issue and it just evolved over the eight months that we worked on it.

[9:45 a.m.]

MR. MICHEL SAMSON: Is it now the policy of the Office of Economic Development that any farmer in this province who has transportation issues and is looking to upgrade their equipment can now come to your department and receive financial assistance in the form of interest free loans that will be forgiven?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: It certainly is the policy of the Office of Economic Development that no matter what the request that comes in the door, we will explore to find out what that request is and we will determine how best for government to handle that request. The response may be a flat-out no, this is not something we do, it may be a referral to another agency and it may be a file that's opened inside the Office of Economic Development.

MR. MICHEL SAMSON: Mr. Taylor, could you tell us how many other farming operations in this province have received assistance under the Industrial Expansion Fund?

MR. PAUL TAYLOR: I'm afraid I'm going to have to ask you to be a little bit more specific as to what you are including in the definition of farming.

MR. MICHEL SAMSON: Basically farming as we all understand it, asking to purchase new equipment for farming purposes whether it be potato or other forms of farming.

MR. PAUL TAYLOR: We have dealt with issues in that food sector for - the reason I asked the question, Bowlby fine foods is an example, Apple Valley Foods is another example, but these are companies that are dealing more with taking primary production and upgrading it into another product.

MR. MICHEL SAMSON: And they all went through the Industrial Expansion Fund?

MR. PAUL TAYLOR: Yes, they did.

MR. MICHEL SAMSON: They didn't go through NSBI either?

MR. PAUL TAYLOR: No, they didn't.

MR. MICHEL SAMSON: Okay, Mr. Lund, you're confirming that the companies he has just listed didn't go through NSBI?

MR. LUND: Apple Valley we provided financing to. I'm not sure of the other two, I don't think we have.

MR. RYAN: No, Bowlby was one that we weren't aware of. I should have added that to my list earlier.

MR. MICHEL SAMSON: This is a P.E.I. company, let's make that straight, right. What holdings do they have in Nova Scotia?

MADAM CHAIR: Mr. Hare.

MR. HARE: They own significant lands around the Amherst Shore area.

MR. MICHEL SAMSON: Okay, now, you're saying they own the lands?

MR. HARE: They own and they lease.

MR. MICHEL SAMSON: And they lease. How much do they own and how much do they lease?

MR. HARE: My understanding is a significant amount of it they own and, as well, they're around trying to lease as much as they can with the idea that, one, they want to grow and, two, they can only produce potatoes or grow potatoes in basically a third of the lands they have in any particular year.

MR. MICHEL SAMSON: That's right. So one would think that a primary factor in determining the sustainability of that business, is making sure that they can lease lands and that those leases are safe leases and that this is something they can continue. Did you not think at any time you should find out who these leases were with and how sound they were whether historically or even with an eye to the future?

MR. HARE: No.

MR. MICHEL SAMSON: Mr. Taylor, you don't find that alarming?

MR. PAUL TAYLOR: No, not at that level of detail.

MR. MICHEL SAMSON: So any company telling you we're leasing land, we've leased it before, you take it at face value and accept that?

MR. PAUL TAYLOR: I would refer again to the fact that we do a detailed review of the financial statements of the organization. That gives us the best assessment of the risk of the company that we're dealing with, not the tenure of its land.

MR. MICHEL SAMSON: Our interest is in the best interest of taxpayers' dollars and in this case we're now finding out that you weren't even aware of who they were leasing land from. You sent a release out saying they owned the land which you're now saying is not correct. I'm curious, who prepared that release? You said Communications Nova Scotia. That's a big office so there has got to be someone more specific than that.

MR. PAUL TAYLOR: As it turns out, I have a copy of that press release in my hand and the copy I have says, "The company manages 2,500 acres in the Amherst Shore area, where it rotates 750 acres of seed potatoes in a three-year rotation with grain and hay."

MR. MICHEL SAMSON: I will let Mr. Steele explain his release that he has got there. I'm curious, you've indicated throughout all this that looking back you felt it was the minister's responsibility to declare a conflict of interest. Looking at this file now and seeing how it has proceeded, what comfort should Nova Scotians have that these conflicts of interest with either this minister or possibly other ministers is not a common occurrence that you guys just missed?

MR. PAUL TAYLOR: I would say again, in answer to that question, we didn't miss a conflict of interest. It's not the role of the staff of my organization to determine whether the minister is in conflict. It's up to the minister to declare that conflict. That is not part of our due diligence process. So it was not missed.

MR. MICHEL SAMSON: It was not missed. So, looking back, you have no regrets that you didn't look closer into these leases to try to see the players who were involved? What other companies were involved? The reason why I'm curious is because you're giving money to a company that's competing against other companies. So, naturally, I'm sure there is going to be a bit of a reaction from the other companies to say why did they get money and we didn't get money, and you're financing our competition? At no point you thought it useful to go and review who the other companies involved are that might own the lands that you are now giving money to one to compete against possibly others?

MR. PAUL TAYLOR: As I understand it, they are the only seed potato producer in this province. There is no other company to go assess.

MADAM CHAIR: Thank you, the time has now expired for the Liberal caucus. I recognize Mr. DeWolfe from the PC caucus. You have 20 minutes.

MR. JAMES DEWOLFE: Thank you very much, Madam Chair. Thank you, gentlemen, for being with us today. I just want to go back to a couple of points that were

made earlier. First of all, Mr. Hare, I'll go to you. It was indicated that it's not unusual for members of the Legislature to go to your organization in support of organizations and companies in their districts and, indeed, that is an important part of our jobs to support workforces in our ridings, and businesses that provide work for those people. Indeed, you and I have met on many occasions - I'll just say Arisaig Fisheries employees and management - in helping me with the support I needed for those workers in Lismore and Arisaig. I thank you for that, because not only perhaps we don't have the successes that we would like to see, but I also seem to have been provided with a great deal of information and suggestions from you and your staff in what we might do to find alternate employment for those workers and give direction to laid off members of the community and so on. So, it's a great service, in a sense that even though, as I say, we don't win all our battles, we do get some support, other than financial, at times, from your company.

Also, we're talking about leasing of properties, and I can relate to the leasing of additional properties, because I was born and brought up on a dairy operation in Pictou County, and the leasing of property is an integral part of the success of most farms in rural Nova Scotia. Most farms, as they expand, couldn't possibly own all the land they require for their operations, whether it be for feed for their stock, or the growing of crops for the market. Wouldn't you agree that is, indeed, an important part - most successful farming operations is the leasing of lands, and very often leasing of more lands than they actually even own, in some cases, in some major operations.

MR. HARE: I agree.

MR. DEWOLFE: That's good for the community as well, because you can drive through miles of countryside now and it's almost a sad commentary that the houses seem to disappear, the land sometimes grows up in shrubs. I can't help but think of their forefathers, how they cleared these lands only to see 100 years later that they are no longer in use. I think it's a great way to put land that is sitting idle back into the useful marketplace.

I want to go to Nova Scotia Business Inc. I just want to ask a question, why don't some of these businesses go the commercial route? Why is that, Mr. Lund?

MR. LUND: Many of them do. We talk to companies, sectors in all shapes and sizes and from all areas. Some of them that we talk to end up going to some of our partners for financing - it could be OED, ACOA, it could be the credit unions. We're one of many players in the sector. Depending on how the economy is doing, there may be more receptivity from banks and others at certain times, depending on the economy, but we do talk to a lot of companies.

In some situations, we're able to help a company where a bank might not be able to and it could be in rural Nova Scotia where there may be a transaction that might require an

extended term, for example, on a piece of equipment that we can be more flexible. Many times we partner with a bank and many times we partner with other organizations.

We have a team out in the field and we've had over 2,400 meetings with companies in the last four years. Again, our role is to help companies and if we can help them get financing somewhere else, then great. If we can be of assistance with NSBI, then we'll do that.

MR. DEWOLFE: I guess while I'm on the subject, how do you measure the success of NSBI? What criteria do you use to measure the success? We keep hearing that the work that you're doing is very successful, I think it would be interesting to find out how you measure that success.

MR. LUND: I think there are many measures of success and we have our own criteria that we measure. When our organization was set up five years ago, there were a couple of criteria set up and one was a number of jobs to create or maintain over the first five years, which was 18,000.

But, we look at a number of factors and I think the economy has done very well in the last number of years. We play a role in that, as do other organizations. If you look at the numbers, they speak for themselves. The unemployment rate in Nova Scotia is 7.8 per cent, the lowest it's probably ever been in our history. Halifax itself is 5.4 per cent, it can compete with any place in Canada - we have the lowest unemployment rate east of Ontario. I think we're seeing some strong growth throughout the province. Again, it's not perfect, but I think we've done pretty well.

We've created and maintained close to 17,000 jobs in the first five years, of which 12,000 of those are new. I think we really realized a couple of years ago that we have a lot of things going for us in Nova Scotia and we need to get the word out and that's what we've been doing. We've had significant success in building an IT sector here which is the envy of the rest of Canada today. In fact, the Winnipeg Free Press had an article a few weeks ago basically saying, how come Nova Scotia can do that and we can't.

We're seeing many models of success in our first year if you look at the number of jobs we were able to help bring here. The average salary of those jobs was in the $26,000 range, the next year was $28,000, last year the average salary was $53,000 which I can't imagine anywhere else in Canada that can match that. So, we've been very successful - for the first time in our history we can actually go out to people that have left here and say that we have jobs here.

The biggest measure of success is from the companies that are here or the companies that have come here. Research In Motion is a great Canadian success story. They were approached by 30 different jurisdictions around the world over a two year period and they

picked Halifax. I think it says a lot about our province and this city that a company like this would pick this place over every place else to establish.

[10:00 a.m.]

We've been fortunate to work with some good partners, and I think one of the reasons we were successful with RIM is that we were proactive, first of all in going after the business but, secondly, we have a lot of the basic foundation in place here with the workforce that we have and the infrastructure and, thirdly, we were able to rally a Team Nova Scotia-approach and we have the full support of the government, academia, the business community, all working together - probably better than any place that I have seen, and we hear that constantly - and I think that the fact that we work well with our partners in OED or ACOA and others, it sends a strong message throughout the country and that's why we're getting a lot of attention from the rest of the country in terms of some of the things that are happening here.

MR. DEWOLFE: Thank you. I hope you are working on some new initiatives for Pictou County, particularly to offset some of the job losses at TrentonWorks . . .

MR. LUND: Well, we've been working closely with TrentonWorks and, as I said, it's not perfect and we do face issues in the economy with respect to the Canadian dollar and productivity. What we can do is try and do our best and work with companies in the area and help them grow, and if there are opportunities to bring new companies in that would be a fit for Pictou County then, obviously, we're going to work on that.

MR. DEWOLFE: It's a difficult situation. It's tough to compete with Mexico.

MR. LUND: Absolutely.

MR. DEWOLFE: I, just last week, sent off a letter to William Furman about our workforce down there and indeed the potential for jobs for building cars is great right now; there is a need for about 70,000. So that's another topic I would like to talk with you about another time.

I'll go on back to Mr. Taylor with the same question, how do you measure the success of Economic Development, your department, at the end of the day?

MR. PAUL TAYLOR: We have, in Economic Development, a bit broader mandate

than NSBI. In reality, this only forms really one-third of our business. Growing the economy is obviously an important part of our business, but we're also the department responsible for running the procurement agency of government. We're also the organization that is responsible corporately for all the information technology and information management initiatives in government.

On the economic development side, there are many ways to measure whether economic growth is being achieved. The most common one, and the one we have been focusing on from a strategy point of view, is we look to renew the economic growth strategy in this province. Some people will take issue with the measure, but the most common measure used to determine progress in the economy is simply GDP per capita. We've had a lot of work done, we've had a lot of assistance provided by organizations like Voluntary Planning, trying to assess where Nova Scotia stands relative to its peer group in North America with respect to GDP per capita. We are focused on trying to get that number to move and our economic strategy focuses specifically in on that as one of the main determinants of economic success in this province, and I think when what we are calling opportunities for sustainable prosperity is finally adopted by government and released - as we hope it will be - that will be a very clear indication of how we measure economic success in the province.

MR. DEWOLFE: You must be very pleased with the success of the employment rate in Nova Scotia and where we stand relative to the rest of the provinces now - we've come a long way even in your time, Mr. Taylor.

MR. PAUL TAYLOR: I think Nova Scotia is making progress. It's been a long time since I can remember, in this province, where we've actually talked about labour shortages - that's a nice problem to have. As I said, I would agree with you that progress is being made, but there is always more work to be done. We would very much like to continue to work to try to increase the average income of Nova Scotians, not just get them to work, but see their income levels rise so that there is more disposable income in our economy - more cars, more fridges, and more houses to be bought - and that's good for us all. I would agree with you, we've seen I think quite gratifying reductions in unemployment rates and increases in employment levels in every region of the province. In some areas there are still challenges regionally, but it's nice to see success, or progress I should say is the better term, being made in all regions of the province, yes.

[10:00 a.m.]

MR. DEWOLFE: Thank you, Mr. Taylor, and Madam Chair, I would like to pass to the member for Kings North, please.

MADAM CHAIR: Thank you very much. Mr. Parent, the floor is yours.

MR. MARK PARENT: I always try to look at the underlying philosophical questions behind the issue at hand and this is the way I think. The philosophical question, of course, here is support for agriculture and how one handles support for agriculture and beyond that, support for rural industries.

I used to have an ongoing disagreement with my federal Member of Parliament, even when he was on our side, who was very much against ACOA and thought that the ACOA model was wrong. I would argue that in the sector of agriculture - he has since changed his tune, of course, when he walked across the floor, but at that time he was very much against it - from what farmers tell me in my area, that access to capital is very difficult to get. I guess the question is what are the challenges, and this could be to either you, Mr. Taylor, or to you, Mr. Lund, that agricultural industries face and how do we meet those challenges in a way that's responsible and yet reactive?

MADAM CHAIR: Mr. Taylor and then Mr. Lund.

MR. PAUL TAYLOR: I can certainly talk about the sector in general. I'm by no means an expert in agricultural economics, but certainly two of the - and I refer this more to the sector of the agricultural industry that's responsible for taking the primary product and upgrading it into value-added products - common problems that we constantly see are access to skilled labour and access to capital.

For those organizations that are looking to expand their business, there are challenges, particularly if companies are looking to access their incremental markets. If those markets are to be in the United States, there are growing pains for companies to understand how one accesses export markets, how one deals with the issues of crossing that border and all the different rules, and simply the risks of going that next step into another country, or even into the central Canadian marketplace, getting outside their comfort zone, but the one we hear most of all is access to capital.

It is a challenge not just for the agricultural sector, it's a challenge for the business sector right across the economy of this province. Obviously, there are issues associated with the quality of their business case and whether commercial lending institutions are going to take up the offer based on the quality of that business case, but I think, in general, there's a sense out there that there has been an increasing, how would I say it, formula-driven approach to lending that is making it more difficult for people to access capital and particularly in rural areas where risks are generally perceived to be higher.

MR. PARENT: The banker in the Scotiabank in Canning, Merv Lowe, a good friend of mine who was manager of the bank and since retired, was very knowledgeable of the agricultural industry within the Kings County area and was able to make those decisions. Since he retired, most of those decisions in the bank on the commercial side are made according to this formula, as you say, and many of them out of Toronto which really in many senses disadvantages agricultural industries in Nova Scotia. So that's what lies behind my question and I noticed that Mr. Lund wanted to come in on it.

MR. LUND: I think it was just to back up what Paul said. We don't provide financing to primary producers, but we work closely with a number of companies through our field

group and I think the issues that are faced by some of the companies here are no different than any place else across Canada whether it's access to people or capital, those are issues that a lot of companies face.

MR. PARENT: Countries across the western world have seen agriculture as sort of a unique area that deserves some form of support and, of course, the world trade talks that we just had in Hong Kong, around there, and the whole question of supply managed commodities, and it's a difficult area. I commend what you've done in my riding with Apple Valley Foods, with Great Valley Juices, with many other industries there. Is there a sort of special understanding for the needs of agriculture, that your department has?

MADAM CHAIR: Sorry, the time has expired. We'll have to return to that question. Mr. Steele, you have 13 minutes for the next round of questioning.

MR. STEELE: Since my last round ended, Madam Chair, we've been able to clarify this issue about the news release. I was reading from the copy of the news release that was in the package provided by the Office of Economic Development which talks about the company owning the land. We've confirmed that the news release that actually was issued uses the word "manages" and that this version that I was reading from was a draft. I think I would be a lot more concerned about the change of wording if the change had been the other way, but since it has happened this way, I don't see any particular significance to it any longer.

I should mention as well, Madam Chair, that in the time since my last round of questioning, the members of the committee have been handed another batch of documents. This is not a helpful way for this committee to do its work, to get documents in the middle of a hearing. It shouldn't have happened this way, and having read the documents, there's no reason why we couldn't have had these documents on Monday, as requested. What I want to ask you is, the money came from the Industrial Expansion Fund, did it not, Mr. Taylor?

MR. PAUL TAYLOR: You are referring to S&J Potato Farms?

MR. STEELE: Yes.

MR. PAUL TAYLOR: Yes, it did.

MR. STEELE: Okay. Now, the Industrial Expansion . . .

MR. PAUL TAYLOR: Sorry, I should clarify. The money has not flowed to the company . . .

MR. STEELE: Okay, but it will . . .

MR. PAUL TAYLOR: . . . it is backed by the Industrial Expansion Fund.

MR. STEELE: Now, when the government gave the IEF an infusion of $50 million on January 19^th of this year, it issued a news release saying, "The fund is used to help establish, develop or expand industries in the province. It also serves as a funding source for broader government initiatives and policy implementation." On February 14^th of this year, when questioned by reporters about the two loans announced on February 13^th, the then Premier designate said that it's not just an Economic Development decision.

You've confirmed this morning that the S&J Potato Farms loan was not considered strictly as an economic development matter, it was, in your terms, also a transportation/rural matter. Mr. Taylor, do you think the Office of Economic Development is well suited to considering loans and other financial assistance for criteria other than economic development? Shouldn't transportation issues be dealt with by the Department of Transportation and Public Works?

MR. PAUL TAYLOR: When I look at the criteria with which the proposals are evaluated under the IEF, I conclude from looking at that list that we are well suited to be able to assess the criteria that are listed there. When dealing with an issue like what I had termed a transportation issue, obviously the conversations that our staff would have to have on those issues is to go to the department that has that expertise, and that's where we would go, or did go, to talk to the Department of Transportation and Public Works on the road issue. We received the advice, but it's still our staff and our minister who eventually has to make a decision as to whether this goes to Cabinet, because there's not a mechanism inside the Transportation and Public Works Department to do this.

MR. STEELE: I am aware of the fact that, for example, one of the solutions last year that was proposed for S&J Potato Farms was an agricultural exemption for the Spring weight restrictions on roads such as exists on Prince Edward Island. In fact, because the company is a P.E.I. company and the owner is from P.E.I., he's well aware of the agricultural exemption, and said, well, why can't we do the same thing here in Nova Scotia.

[10:15 a.m.]

But, instead of an agricultural exemption, the way this has ended up is a loan to buy lighter trucks. It adds an interesting dimension to this particularly because, just in my quick read of the documents that were provided to us just a few minutes ago, it appears there was more to this proposal than simply giving money to S&J Potato Farms in order to buy lighter trucks. Part of the deal as well was that the Department of Transportation and Public Works would spend money to improve the local roads over which those trucks would be running.

This adds a different dimension to what we've been talking about because it's one thing to say the minister had a personal financial interest in the company that was leasing his

land. We can all acknowledge that the amount of money involved was very small, very small - a few thousand dollars a year which for a businessman like Mr. Fage is pocket change. Now we learned today that it was more than that, not only that but the roads leading to his farm were going to be upgraded in order to accommodate the trucks of the company leasing his land. What does Economic Development know about that part of the deal? What involvement did Economic Development have in that part of the deal?

MR. PAUL TAYLOR: As far as I know, there is no "that part of the deal". This project is designed to essentially bridge this company around the weight restriction problems until such time as that weight restriction problem is solved in another manner. That weight restriction problem can be solved in several ways - there can be a policy decision made in this government that like P.E.I. from a business climate point of view we are going to start to waive weight restrictions for the agricultural sector in this province with a consequential cost to the Department of Transportation and Public Works budget.

The problem can also be solved by that road eventually being upgraded for reasons that are not specifically related to S&J Potato Farms, that are simply that road is sitting somewhere on the priority list inside the Department of Transportation and Public Works to be dealt with for any number of reasons. This project is simply designed to tide this operation over until such time as that problem is solved. It could be many, many years from now; what we're trying to do is preserve those 25 jobs until such time. If that solution is not found now, then the employment's going to be lost.

MR. STEELE: One of the proposals on the table, as I mentioned, in fact one supported by our caucus was the granting of an agricultural exemption which wouldn't have, at least directly, cost the taxpayers anything. Does your office know why an agricultural exemption was not considered or was not granted in this case, or, why a road-specific exemption wasn't considered or granted in this case?

MR. PAUL TAYLOR: I'm not aware specifically why the exemption was not granted. Obviously, there would be, I presume inside the Department of Transportation and Public Works, the issue of a precedent being set and the implications for the overall road network and the cost. I think it's fair to say there are challenges maintaining - I think we have 23,000 kilometres of road to maintain in this province at the provincial level. There is a significant cost in the rural areas of bypassing those weight restrictions and a significant hit on the budget of the department. I presume, in order to do that there would have to be a careful assessment of the pros and cons of going in that direction.

MR. STEELE: Now, the documents we've just been given reveal another dimension of the issues. I've talked about two - the fact the minister stood to gain a very small amount of money from the continued leasing by S&J Potato Farms of the land, that's actually the smallest part. Now we've learned the second dimension which is that the roads leading to his land were going to be upgraded as part of accommodating S&J Potato Farms. But the third

part, which I've also learned just from glancing at the documents, is that it was within the minister's discretion as to whether the loan should be forgiven or not. The terms of the loan, which I'm not going to get into in detail because I think that is another discussion for another time, but I don't think I'm violating any confidentiality of any kind if I say that the loan was forgivable and it was forgivable over time, provided a certain number of jobs were maintained over the course of the loan. Which is fine. That's admirable. That's fairly common, I think, a good way to do business in the typical case, but the terms of the loan also say that it's within the minister's discretion, if S&J Potato Farms doesn't meet the targets, about whether to allow forgiveness of the loan or not.

So, now we learn the third dimension, which is, it was within that minister's discretion as to how to deal with the company's loan that was leasing land from his farm, and about whether the money would be forgiven or not. Now, I don't expect you to respond to that because I think you are right, the more I hear about this, the more I agree with you that it wasn't really for the Office of Economic Development to ferret out the conflict. It was for the minister to declare it, and it probably wasn't the kind of conflict that the Office of Economic Development should be expected, in the normal course of business, to have ferreted out.

Let me ask you this, Mr. Taylor, more by way of summary than anything else. One of my main concerns in all this is to make sure that this doesn't happen again. We've lost the services of a very capable and experienced and respected minister. How do we make sure that doesn't happen again? What is your office going to do differently, to make sure that we're not faced with this situation again?

MR. PAUL TAYLOR: You're referring specifically to the conflict of interest issue?

MR. STEELE: I'm referring specifically to S&J Potato Farms and Mr. Fage, and the fact that he did not declare his conflict either to the Office of Economic Development or apparently to his Cabinet colleagues, before the financial assistance was approved. How are we going to make sure this doesn't happen again?

MR. PAUL TAYLOR: Responding as the senior staff person to the minister in that operation, I would say we're not going to do anything differently from the staff point of view. Our role is to gather the facts, assess those facts and provide advice to the minister. The minister is going to make a decision of what he is prepared to take to his Cabinet colleagues and they are going to make a decision on the advice they were given. I don't, in any way, let me say it this way, I'm confident the role that the staff of this organization played, was the proper one to do. It was a role of assessing and providing advice.

MR. STEELE: Thank you, Mr. Taylor. Just by way of closing, in your preparations for this meeting of the Public Accounts Committee, did you speak with or meet with Mr. Fage or anyone representing him?

MR. PAUL TAYLOR: I spoke with Mr. Fage immediately following his resignation. I spoke with him, I think, three times.

MR. STEELE: Did you discuss with him the evidence that you are giving today?

MR. PAUL TAYLOR: We would have discussed primarily the files that we were working on at the time, to ensure the proper transition to the new minister. We discussed the scheduling of the Public Accounts Committee, and I think there was a very brief conversation on the role of Cabinet confidentiality in this discussion this morning.

MR. STEELE: Thank you.

MADAM CHAIR: Thank you, the time has expired. Mr. Samson, the floor is yours for 13 minutes.

MR. MICHEL SAMSON: Thank you, Madam Chair. I just want to go back to a question I asked earlier. Mr. Taylor, did you or any member of your staff meet with Mr. Ellis prior to the e-mail that came from the minister's secretary asking you to start discussions with him?

MR. PAUL TAYLOR: I did not.

MR. HARE: I did not.

MR. MICHEL SAMSON: Did not, okay. I asked you earlier if any of you were aware as to how the request came from the minister's secretary, how did it get to that point? Is it still the response of each one of you that you have no idea how this got to the minister's secretary, how this request was made? Is that still your response?

MR. PAUL TAYLOR: The request from the minister's secretary would have been the first time I would have known of the existence of the S&J Potato Farms file, yes, to my knowledge.

MR. MICHEL SAMSON: Today, March 1^st, do you know how that request came to the minister?

MR. PAUL TAYLOR: Do I know?

MR. MICHEL SAMSON: Yes.

MR. PAUL TAYLOR: No, I do not.

MR. MICHEL SAMSON: None of you know? Have all of you read the documents that you have given us here today?

MR. PAUL TAYLOR: I haven't read those documents, no.

MR. MICHEL SAMSON: Has anyone read these documents you have given us here today?

MR. HARE: I have read them but I haven't seen what you specifically have.

MR. MICHEL SAMSON: So you don't know what I have in front of me here today, is that your answer?

MR. PAUL TAYLOR: The documents you have in front of you today were prepared in my office, through an assessment by legal counsel and myself, as to what would constitute a risk to third-party disclosure.

MR. MICHEL SAMSON: Okay. I have a letter here. It's dated September 22^nd. It's stamped October 4, 2005, from Mr. Steven Ellis, To Whom It May Concern. Have any of you read that letter? Mr. Taylor, have you read the letter?

MR. PAUL TAYLOR: No.

MR. MICHEL SAMSON: In the letter it says in the fifth paragraph, "Fortunately I have had meetings with Mr. Stonehouse of Dept. of Highways in Halifax, Vehicle Compliance and MLA Ernie Fage, Minister of Economic Development. Together we came up with a plan to do some upgrading of the highway and for me to upgrade my trailers with partial assistance from the Economic Development program. This would enable me to meet the regulations on secondary roads, which would satisfy all parties involved." Did none of you know that your minister had met directly with Mr. Ellis and had somehow negotiated some sort of deal with him? Is that your response today?

MR. PAUL TAYLOR: As I said, the first time that I would have become aware that that project was in the Office of Economic Development, was a result of that e-mail in June.

MR. MICHEL SAMSON: Okay. Have you read this letter that I have just quoted from?

MR. PAUL TAYLOR: No, I have not.

MR. MICHEL SAMSON: Has anyone read the letter I've just quoted from?

MR. HARE: Yes, in fact I requested a letter from Mr. Ellis as a result of our meeting earlier in September.

MR. MICHEL SAMSON: So in his letter Mr. Ellis is telling you that your minister has met with him at some point, and Mr. Stonehouse from the Department of Transportation and Public Works, and they worked out a plan to deal with this issue. Are you not concerned at all, Mr. Deputy, or any of your staff, that your minister was having discussions with a company outside of your knowledge? The letter seems to say your minister worked out a deal - now I'm just going by what Mr. Ellis has said in the letter, but he seems to be inferring there's a deal that's been worked out by the minister who he's calling MLA, but he also said the Minister of Economic Development, that your department would be funding this project, does that not cause you any concerns?

MR. PAUL TAYLOR: I am in no way privy to all the conversations my minister has, absolutely not. Any minister I have ever worked for has discussions of all sorts of which I am not aware. When the minister chooses to make me aware of those discussions, because he wants the staff to follow up as a result of those discussions, that's when we become involved in the file.

MR. MICHEL SAMSON: To your knowledge, are there other files that have ended up in your department that your minister was out negotiating with the proprietors prior to your knowledge that they were even making a request?

MR. PAUL TAYLOR: I have no knowledge of any such files, no.

MR. MICHEL SAMSON: In your time in the Civil Service, is this a normal course of action for a Minister of Economic Development to meet with a proprietor? Obviously none of his senior staff was at that meeting. Is that normal for a minister to put himself in the situation of even entertaining such discussions without having senior staff with him at the time?

MR. PAUL TAYLOR: In my experience that has happened many times, yes, that a minister will actually - there are times when senior staff are with him, there are times when the conversations are quite accidental, they occur at economic events like the chamber of commerce, where people run into one another and those discussions take place. It's not at all unusual for the minister to discuss details of a project with the principals of the company involved, no.

MR. MICHEL SAMSON: Even before the project's brought forward to the department?

MR. PAUL TAYLOR: No.

MR. MICHEL SAMSON: So that's normal?

MR. PAUL TAYLOR: As I said, it happens depending on when these conversations take place and how they are initiated. As I said before, in answer to a previous question, things come to this department when conversations occur between my minister and MLAs and companies who are associated with MLAs from various stripes. They come to him, make the proposal and the minister decides whether he's going to take it forward to his staff and get this thing up and into the system and that's - I presume, I wasn't aware of the conversations he had before that e-mail showed up - I presume that's all that's happened in this case, I don't know.

[10:30 a.m.]

MR. MICHEL SAMSON: That's the reason we're here today, because you didn't know. I would submit to you that I would question how many other ministers are out there talking with companies, or talking with businesses, or even individuals, without having staff present about issues such as taxpayers' dollars being spent and working out plans to assist a business without even having staff present. Then you get an e-mail from his secretary saying I would like you to start discussions with this individual, pay no attention that I've already worked out a plan with the individual. So your statement today is, to your knowledge, your department had no idea of the discussions your minister had, or any commitment, whether it be about a loan, interest free, forgivable, you have no idea what the minister may have told Mr. Ellis when he met with him, is that correct?

MR. PAUL TAYLOR: I personally had no idea what those conversations would have entailed, no. Just before we leave that on the record though, as if that's the end of the process, regardless of how these things arrive at the department and at what stage they have been dealt with up to that point, the process remains the same - those files end up in the hands of people who have been doing this for over 20 years. They do the due diligence on the file. They put their assessment on a piece of paper in black and white. They tell the minister exactly what those things mean, what the details of the file mean, and then the minister makes a call as to whether he's going to take that to Cabinet. Once it goes to Cabinet, you have the Executive Council of this province make a decision on the merits of that case as to whether they're going to do it.

MR. MICHEL SAMSON: Okay, let me stop you there. Who made the decision to make the loan forgivable? Who recommended that?

MR. PAUL TAYLOR: The fact that the loan is forgivable is a result of the negotiations between the funding organization and the principal of the company.

MR. MICHEL SAMSON: Okay, so who, who in your department, which one of your staff said let's make this loan forgivable?

MR. PAUL TAYLOR: It's not that black and white. You end up with a package of benefits on both sides of the fence here. The company commits to doing things. We commit to doing things. That's part of the deal that ends up going on to the minister's desk for assessment before it goes to Cabinet.

MR. MICHEL SAMSON: So it was your staff in your negotiations that decided let's make this forgivable?

MR. PAUL TAYLOR: Yes. Let me explain it this way. There are times when companies like this, one of the problems these companies have - and I refer back to access the capital - many times these companies are not in a position to wait for money to come in the door two or three years from now, they need the money up front to invest in a physical piece of infrastructure if the business plan is going to survive.

MR. MICHEL SAMSON: Okay, let me ask you this. From the time you received that e-mail from the minister's secretary to the time this went to Cabinet, what discussions did you have with the minister about this specific project?

MR. PAUL TAYLOR: Well, as I said in answer to a previous question, my recollection is that I would have been involved with this file with the minister and the staff probably half a dozen times.

MR. MICHEL SAMSON: Do you remember any sort of statement that the minister may have made regarding this file, whether it be in support, whether it be let's make it interest free, forgivable, were there any such discussions from the minister with you on that file?

MR. PAUL TAYLOR: As I said previously, we're handling up to a dozen of these things at a time. My conversations with the minister involve the details of a number of these things within the same meeting and, in all honesty, nothing stands out on this file as a result of those discussions.

MR. MICHEL SAMSON: You don't have any e-mails or anything about conversations you may have had with the minister regarding this specific file that hasn't been shared with this committee?

MR. PAUL TAYLOR: No, our discussions would be face to face with the staff in the room, sometimes with the staff not in the room.

MR. MICHEL SAMSON: Mr. Hare, did the minister ever ask you any questions or have any discussions with you about the S&J Potato Farms loan that's in front of us for discussion today?

MR. HARE: The only times that I can remember discussing this file with the minister were times when we had general meetings discussing basically all the projects that I was working on.

MR. MICHEL SAMSON: Looking back, do you have the same belief as Mr. Taylor, that there was nothing about this loan at all to cause you any concern in relation to the minister prior to you learning of his resignation?

MR. HARE: No.

MR. MICHEL SAMSON: You had nothing either. Again, when did you read this letter from Mr. Ellis?

MR. HARE: Probably October 4^th.

MR. MICHEL SAMSON: Did you not see fit to inform the deputy that the minister had met already with this gentleman and had, obviously, discussions about what type of financial arrangements might be put in place for the company? Did you not think that relevant - a red flag for him just so he would be aware of the levels of discussion that had obviously already taken place by the minister without staff?

MR. HARE: We have weekly discussions with the deputy with respect to our files. Along the way I can't tell you whether I brought that issue up or not.

MR. MICHEL SAMSON: Looking back, if you would see that a letter saying your minister had met with a company prior to staff even being aware the company had an interest in working with the government, would you not raise that as a bit of a concern to say, I just want to give you the heads-up, deputy, the minister's already talked to this company and has had some level of discussion about our involvement?

MR. HARE: Our minister saw this - first of all, it was basically they met with him in his constituency. Second of all, he saw it as a Transportation and Public Works issue. He brought Don Stonehouse from Transportation and Public Works into his meetings with him as opposed to staff members. Once he saw it as an issue for us, he asked me to participate.

MADAM CHAIR: The time has expired, but I will allow Mr. Taylor, he's been trying to get in.

MR. PAUL TAYLOR: I would just like to reiterate the fact that the minister would have talked directly with the people on this file is not unusual. Therefore, it's not something I would expect my staff to come rushing in the door saying something unusual is happening here.

This is part of another series of routine transactions that we've discussed on and on and on for years and years and years. It's the way the department works.

MADAM CHAIR: Thank you. Mr. Parent, you have 13 minutes.

MR. MARK PARENT: A very quick question and quick answer. S&J Potato Farms is the only seed potato company you're aware of in Nova Scotia?

MR. HARE: To my knowledge, yes.

MR. PARENT: Do you know how long that's been the case?

MR. HARE: No.

MR. PARENT: Were there other seed potato companies operating in the province before?

MR. HARE: I understand there was another one at one time, but they're not in operation now. That's what I was told by the Department of Agriculture.

MR. PARENT: That's the one in my riding.

MR. HARE: Possibly.

MR. PARENT: Okay, thank you very much and I'll turn it over to the member for Pictou East.

MR. DEWOLFE: I don't wish to hog all the time. Mr. Taylor, I understand and I want to know if you are aware the leased lands in question belonging to Mr. Fage are indeed some 30 kilometres away from S&J Potato Farms warehouse and, indeed, some 30 kilometres away from the roads the company is hauling their product on? Are you aware of that?

MR. PAUL TAYLOR: No, I was not aware of the extent of the separation between Minister Fage's lands and the road in question.

MR. DEWOLFE: Well, Mr. Taylor, that is indeed the case. I will now pass to the member for Bedford.

MR. PETER CHRISTIE: Mr. Taylor, I have been happy to hear the discussion. The committee has focused this morning on process and I want to go back to process here. The committee has spent a lot of time on where the e-mail came from and so on - can you clarify the process for us? Normally when something comes into the department, are there many different avenues that it comes in from for request for assistance?

MR. PAUL TAYLOR: These opportunities spring up from - I couldn't begin to count the number of sources through which they come. They come out of a federal agency, individual people, companies, MLAs, RDAs and that's a good thing. From a staff point of view, it is quite gratifying to be sitting in a time in the economy of this province where the opportunities are showing up faster than we can almost deal with them. I think I speak for NSBI as well on that.

Our economy is showing surprising life. There is an attitude of optimism, there is a can-do attitude inside many sectors of the Nova Scotia economy now and people are thinking outside the box, they're coming with new ideas that we welcome. They come from everywhere, but once they arrive in our offices, they're all treated the same. It's the same process from there on in.

MR. CHRISTIE: Would it be fair for me to make the assumption that it's not only the minister's responsibility but it's a challenge of the Minister of Economic Development to find areas for development and to assist them in any way possible? Is that a fair assessment of the minister's and your role in economic development?

MR. PAUL TAYLOR: Certainly it's a fair assessment of where we as economic development agencies want to go. We want to see as many opportunities as possible come to fruition in this province. That's the way we keep people employed. Without employment in rural Nova Scotia, some of the forecasts that are being put forward now, through agencies like the Atlantic Provinces Economic Council, showing their projected changes in the demographics of rural Nova Scotia, to use the word, are frightening. We are going to become a much older province.

Every time we lose a young couple to Alberta, especially a couple of child-rearing age, our birth rate declines one more. If the departure of those young people are replaced by two people moving back here who are retiring from Alberta, on the surface that looks just fine, but you project the changes in those demographics off into the future, we have a much older population, we have a huge challenge, not only in Halifax, but in rural Nova Scotia finding people to work. That demographic challenge stares us in the face every day. Not just finding bodies to work, but finding bodies who have the right education to fit into the sectors of this economy where we think it's going to grow. Without jobs in rural Nova Scotia, I would submit, there is not going to be much left of rural Nova Scotia, other than retirement villages.

MR. CHRISTIE: May I make an observation from Mr. Ellis's letter of October 4^th, that was quoted here earlier. He indicates in his letter, he says, ". . . to ease some of the financial burden" and to allow me to continue to ". . . expand my seed operation . . ." Now my quick glance of this balance sheet, which was referred to earlier, seems that it's a fairly strong company but he needed some assistance. Would that be that he needed some help in establishing and, indeed, to carry on that tradition you have just alluded too, of staying in

rural Nova Scotia and providing jobs? Would that be the assessment of the department, that the company is fairly strong and some assistance would allow him to achieve the future that we all want for our rural companies?

MR. PAUL TAYLOR: I think that's a fair assessment of the company's financial position. The company, on the facts, is a going concern. They are a profitable organization, and they have a challenge in front of them - from an operating cost point of view - they believe they need to have solved if they are going to keep that operating margin and are going to be able to remain in business in that location.

MR. CHRISTIE: Mr. Taylor, would it be a fair assessment to say that when you hear that banks are pulling out loans - and we've heard testimony this morning that they don't fund primary resources and neither does Nova Scotia Business Inc., that banks are pulling out in certain areas - that we as a province and we as citizens of this province have to find unique and different ways outside the box to get these companies to fund them, to assist them, to get them to stay there? Is that a fair assessment, would you say?

MR. PAUL TAYLOR: I think that's fair within reason. Access to capital, as I said before, is a significant challenge in this province. We have taken steps within the provincial government to address that, from venture capital to the small business loan program through the credit union, CDIFs is another example. We're trying to enhance the access to capital in this province, because without that investment capital there is no chance for organizations that do not have access to commercial to turn over their technology. If I refer back to that statement or that report that was done by Voluntary Planning around the GDP per capita, their conclusions were quite stark in saying that if we want to remain competitive in what is a very shrinking planet here, from a supply-chain point of view, we have got to increase the productivity of our businesses. In many cases that productivity will come from technology, it will come from new equipment and infrastructure allowing more to be produced at less cost, and that's the way one accesses and stays alive in what is a very globally competitive marketplace.

[10:45 a.m.]

MR. CHRISTIE: I just want to refresh my memory. You quoted some statistics earlier, but what would be the number of active files in Economic Development at any one time? We seem to be zeroing in on this one, worrying about this piece of paper or that piece of paper, but what would be the active amount of files that you would be working on at any given point in time? I'm not looking for a precise number, just a rough one.

MR. PAUL TAYLOR: I would say 20 would be an average number. Many of those files we are the lead agency on. Some of the other ones we are assisting - whether it be NSBI, or InNOVAcorp, or someone else, we are providing advice and assistance to them on a file that they're the lead agency on. I believe the system we have now is working and it's working

quite well. There is a very good working relationship amongst not only the Economic Development entities that report through the Minister of Economic Development, the Crown Corporations and OED, but we have very strong working relationships with agencies like the Regional Development Authorities, ACOA, HRSDC. As I said, very strong working relationships and it very much is a partnership and you will see - particularly on some of the larger files that end up being invested in by the province - a number of those organizations' names attached to those files in that they each brought different pieces of the solution to the table.

MR. CHRISTIE: Perhaps if I could, I would just like to go to Mr. Lund for a moment. Mr. Lund, you were clarifying some of the distinction between yourself and Economic Development and your working relationship with them there. Is it the normal practice for when somebody comes in to speak to you first, that you then advise Economic Development and then you kind of shop it back and forth between the two of you to decide where the best fit is, is that the normal process?

MR. LUND: Well, you're talking about specifically on the financing side of it, which is only a small part of what we do. We work with companies every day, and we work with companies outside of the region on an investment attraction side of it, we work on the export side of it, and we work with companies providing advice. On the financing side of it, generally speaking, if there's a file that comes in, we would assess it on its business merits, and if there's a strong business case then we would look at providing financing. In some cases that's not always the case and, as Paul said, the system works, we have a good relationship between the two groups and how we work with companies.

MR. CHRISTIE: I guess I was trying to establish the question, is there a cut-off, is there a floor level for you that says if they don't have sales of, or they don't have number of employees, or they don't have capitalization of this, that you then refer them back to Economic Development? They're below your threshold, let me put it that way.

MR. LUND: Well, we have an agreement in place between the two parties, two organizations in terms of how we would look at transactions. So, you know, if a transaction came into OED, for example, then Paul would likely give us a call for us to look at it unless it's quite obvious that we could not handle the financing which he would know. There are really two types of financing. We partner with OED on a number of files and some of the investment attraction files that we've dealt with, where in this competitive world clients look for a combination of things like payroll rebate or upfront training, then we may have to engage other groups, whether it's the Office of Economic Development or ACOA, we would engage other groups in order to be successful.

MADAM CHAIR: Mr. DeWolfe.

MR. DEWOLFE: Thank you. I realize we only have about 30 seconds left.

Mr. Taylor, I have just a quick question. Is this file any different than other files? Was there any special treatment with regard to this file or was it handled like all others? A very simple question - was it handled like other files?

MR. PAUL TAYLOR: As I have said previously this morning, from my perspective on this file there was nothing unusual about how it was administered by the staff of this organization.

MR. DEWOLFE: Thank you, that says a lot.

MADAM CHAIR: Thank you. The time for questions has now expired. I would offer an opportunity to our witnesses to make some closing comments if they wish.

Mr. Taylor.

MR. PAUL TAYLOR: I don't have any prepared closing comments, Madam Chair, I would just reiterate the message that I just delivered in response to that last question.

It never stops me from talking even if I don't have prepared remarks. Again, to clearly understand the role of the staff of this organization, we prepare the assessment of the facts of the case. We give our opinions. That's what we're paid for; we're paid to think. We're paid to do our assessment, uncover the facts to the extent we can, and provide that advice to the minister. Executive Council will then make a decision on the basis of those facts and we proceed accordingly. That's the way this system works and we hope to be able to continue to bring forward more opportunities for the Province of Nova Scotia to employ our fellow citizens. Thank you.

MADAM CHAIR: Thank you. We're going to adjourn for a few moments but before we do this, I have a couple of questions that can be dealt with really quickly, to help us procedurally around documentation. I would like to, first of all, go to Mr. Lund. Mr. Lund, earlier you indicated that Nova Scotia Business Inc. has no file on S&J Potato Farms. Is that correct?

MR. LUND: That is correct.

MADAM CHAIR: So, my question is, do you have a file on Village Developments?

MR. LUND: Yes, we do.

MADAM CHAIR: There is a file. Okay, thank you very much. Mr. Taylor, we have received today additional documentation on S&J Potato Farms. We have no documentation on Village Developments. Oh, we have some now? Okay. Well that answers my question.

I think at this point, I would like to thank the witnesses on behalf of the committee. We will take a short adjournment . . .

MR. MICHEL SAMSON: Madam Chair, I realize that the clerk of the committee has said we received documents on Village Developments. This morning we had documents and then all of a sudden we get this delivered to us in the morning. Can we expect that whatever rationale was used to give us more documents, will be applied also to the second file and that we receive those immediately, not the morning of our meeting with them that we have full disclosure of the information we have requested?

MADAM CHAIR: I think that I would agree with the point you are making, but I think part of that will come from the discussion we are about to have, in terms of the procedure. First of all, how we will treat the materials we have received today because I believe that part of the materials here need to be dealt with in a confidential matter. There may be some privileged or proprietary financial information, income tax forms. These kind of things here. So we need to have that discussion. We would be happy to have any point of view from the department around this as well. They have asked for an opportunity at least to speak to that. So we can have that discussion and additionally, we still have to see what we're getting from Magic Valley. So with that, let's adjourn and reconvene at 11:00 a.m.

[10:54 a.m. The committee adjourned.]

[11:03 The committee reconvened.]

MADAM CHAIR: I'd like to call the committee to order. The first thing that we can do is a fairly easy thing. Mr. Lund indicated that Nova Scotia Business Inc. does in fact have a file on Village Developments Limited. In our request to NSBI for documentation, Mr. Lund had responded by pointing out that our original motion made no reference to acquiring documents from NSBI. So we could rectify that fairly easily with a motion.

Mr. Colwell.

MR. KEITH COLWELL: Yes, I'd make a motion to that effect, and also maybe any other information they have on the other projects, as well, that we've been talking about, so we would capture them all at one time, without question.

MADAM CHAIR: So, essentially, a motion that would indicate that the Public Accounts Committee is requesting all information in the possession of Nova Scotia Business Inc. on Village Developments Limited.

MR. COLWELL: And correspondence with Economic Development, and anyone else they had correspondence with regarding that file, and all details, not edited details, because

the information we got today from Economic Development, which is another issue we will hopefully address shortly, is far short of what we should have had here today.

MADAM CHAIR: There's a motion. Is there any discussion?

MR. JAMES DEWOLFE: Could you please explain the motion?

MADAM CHAIR: If you look in your package that we were provided, Ms. Stevens, our clerk, had written Mr. Lund and had requested not only his attendance at this meeting this morning, but had also requested any documentation they had related to S&J Potato Farms Inc. and Village Developments Limited. Mr. Lund responded in a letter to Ms. Stevens, indicating that he would attend, but he indicated in the third paragraph that the committee's motion only requests that the Office of Economic Development provide files. In other words, because our original motion did not request files from NSBI, he said he would attend but he did not feel that there was a need to comply with providing information that NSBI had because our original motion didn't refer to them.

This motion that's on the floor now addresses that oversight in the original motion. He did indicate, here this morning, that they indeed have a file on Village Developments Limited, but not on S&J Potato Farms Inc. So this is what we're dealing with.

Mr. Christie.

MR. PETER CHRISTIE: Madam Chair, I'd like to amend the motion, so that the motion reads, with the exception of financial information, those being balance sheets, income statements, banking records and information that is really not pertinent to this committee and would do damage to a company if that should become public. I'll make that amendment.

MADAM CHAIR: An amendment has been put on the floor by Mr. Christie. Is there any discussion on that amendment?

Mr. Colwell.

MR. COLWELL: Well, I believe that if we're going to get the information, we need all the information, not part of it, not a little bit of it, not just sort of piecemeal out to us, we need everything. We have to fully understand why the government took the decision they did, whether the decision was right or wrong, whether there was any kind of interference any place, and we need all the information to really properly review that. So I'm not going to be supporting the amendment.

MADAM CHAIR: Mr. Steele.

MR. GRAHAM STEELE: On behalf of my colleague and myself, I want to indicate that we agree with what Mr. Colwell has just said. In terms of confidentiality, I really believe that's something that can be appropriately handled by our Subcommittee on Agenda and Procedure, to go through the material document by document, because we certainly accept the idea that not everything we get should be public. For example, the income tax returns of S&J Potato Farms are really neither here nor there for the issue that we're discussing, and

there's no reason why those should be released to the public. But the important principle is the documents be released to us, and then we decide what is or is not relevant. Therefore, we agree with Mr. Colwell that the amendment should be defeated.

MADAM CHAIR: Mr. Christie.

MR. CHRISTIE: Speaking in favour of the amendment, I would suggest that I had an opportunity to observe Mr. Jean Laroche coming in the back of the room here this morning, looking over information of somebody sitting behind one of the committee members. Confidentiality is a very fleeting thing, it becomes a question of how and who and what. I truly do not see how determining how many investments in stocks, bonds and the Royal Bank that a company had is going to shed any light to this committee on what might have happened to the loan. That's, consequently, why I made the amendment.

MADAM CHAIR: We will now have the question on the amendment moved by Mr. Christie.

Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The amendment is defeated.

We will now have the vote on the main motion, as moved by Mr. Colwell.

Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

Now I think we need to move to the larger question of receiving full disclosure from both the Office of Economic Development and NSBI. I'd like to just bring the committee members' attention to the fact that we have been joined by Mr. Joe Pettigrew, who is a solicitor with the Department of Justice. Just before the committee met this morning Mr. Pettigrew hand-delivered to me this letter from Mr. Doug Keefe, from the office of the Minister of Justice. We also know that we did not receive full disclosure of documents prior to this morning's meeting. I want to hear from the members of the committee with respect to your thinking about how we should proceed at this point.

Mr. Parent.

MR. MARK PARENT: Could we ask Mr. Pettigrew, Mr. Keefe quotes on Page 2, "In carrying out its role the Committee will seek to: obtain all financial information and documents necessary for the Committee's work except for records which are privileged in the narrowest sense such as Executive Council papers;" Could he tell us where that quote is taken from? Is it from the handbook to the members?

MR. JOSEPH PETTIGREW: It is taken from the government Web site, dealing with House committees and specifically the Public Accounts Committee. I believe it's under the Additional Mandate section.

MR. PARENT: Thank you very much.

MADAM CHAIR: It's the Operating Principles/Practices of the Public Accounts Committee, I'm told by the clerk.

Mr. Colwell.

MR. COLWELL: Well, I said from the beginning, and as my colleagues have said, it's very important we get complete and full disclosure on this. I was very disappointed, number one, as my colleague here beside me said, that we received this today, this information from Economic Development. The information contained in that would take a very short time for someone to photocopy and send to us. It's not really documents that are relevant. Even in this limited amount of documentation, my colleague made reference to a meeting that was held between S&J Potato Farms and the minister. These are supposed to be public documents, so what is in the documents that we haven't seen?

I really want to see a complete set of documents, including notes, correspondence back and forth, with everybody, the whole nine yards on this, all the financial analysis that was done. It appears to me there wasn't proper financial analysis even done on this application. They didn't even know there was a connection with the land that was leased, and who the land was leased from. I think we have to take whatever steps, including issuing a warrant, to get the information, and we proceed with that immediately.

MADAM CHAIR: Mr. Steele.

MR. STEELE: I'd like to open with a question. Mr. Pettigrew has been invited to comment on the letter from the Deputy Minister of Justice. Speaking for myself, I have no idea who Mr. Pettigrew is; I'm just wondering who he represents.

MR. PETTIGREW: My apologies. I'm a lawyer with the Department of Justice, and at the present time I'm assigned to give legal advice to the Department of Economic Development and a variety of agencies, including NSBI, InNOVAcorp., the Waterfront Development, some to the Trade Centre Limited. I give advice to some other departments, as well, but that's my primary task within the department.

MADAM CHAIR: Mr. Steele.

MR. STEELE: Again, I would like to indicate that my colleague and I agree with Mr. Colwell. We think the important principle to be established here is that this committee has

the right to and should receive all of the documents. We also believe that those documents should not be released publicly until the Subcommittee on Agenda and Procedures has had an opportunity to go through them, to hear what the Department of Justice or NSBI or the Office of Economic Development might say about why any particular document should or should not be released publicly. But, it is very important to establish the principle that we get the documents, and the final decision about what to do with them rests with us.

MADAM CHAIR: Mr. DeWolfe.

MR. DEWOLFE: Well, I think, Madam Chair, that we must abide by the operating principles of the committee, and recognize that there are sensitive records, as the former Minister of Finance, who is sitting on this committee today, has indicated, and records that are privileged, an example was made, Executive Council papers. I do agree that anything that is coming towards this committee should and hopefully will be reviewed by the subcommittee, which I, myself, sit on.

[11:15 a.m.]

Having said that, I would like to hear Mr. Pettigrew's assessment of this letter. Perhaps you could shed a little more light on it, from your point of view. You've obviously looked into this matter or you wouldn't be sitting here today. Perhaps you could give us some sense of where you're coming from on this.

MADAM CHAIR: I don't think, at this stage, it's necessary to have any intervention from the Department of Justice. What we have is a very excellent opinion that has been prepared for us by legal counsel to this committee. We have an opinion from Mr. Hebb. I haven't had a great deal of time to look at this letter and think about this letter, given the time frame in which we've received this letter, but when I look at that particular section that's quoted there, it refers to records which are privileged in the narrowest sense, in the narrowest sense, such as Executive Council papers.

This committee has not asked for Executive Council papers. We are looking for the files of the Office of Economic Development, we are looking for the files of Nova Scotia Business Inc. It doesn't seem to be more complicated than that. While I'm not a lawyer, the opinion we received from the Legislative Counsel seems to be fairly clear, in terms of what it is that we can look for and what the precedent is for that.

At this stage, I don't think it really is necessary to hear further from the solicitor who is here on behalf of the government.

MR. DEWOLFE: Madam Chair, I see Mr. Hebb wishing to address (Interruptions)

MR. GORDON HEBB: I was just pointing out that Mr. Christie had his hand up.

MADAM CHAIR: Mr. Christie.

MR. CHRISTIE: Madam Chair, you've made reference twice now to an opinion from Mr. Hebb. I don't have that. Is that in circulation? Do we all have that now?

MADAM CHAIR: That opinion was circulated by the clerk to all of the members of the Public Accounts Committee.

MR. CHRISTIE: Perhaps you can just help me, is it in conflict with what Mr. Keefe has said, is it in conflict with that?

MR. MICHEL SAMSON: Very much.

MADAM CHAIR: I don't know that it's in conflict. The other thing is Mr. Hebb is here. I don't know if Mr. Hebb would feel comfortable at this stage, making any comment or giving any advice to the committee, but we certainly will seek his advice further on this matter.

Mr. Hebb.

MR. DEWOLFE: Madam Chair, on a point of order. I would like to hear both gentlemen address this committee on this subject. I asked for Mr. Pettigrew's opinion. I value Mr. Hebb's opinion. There is some disagreement. I would like to hear both parties address this issue before we go to a vote.

MADAM CHAIR: First of all, Mr. DeWolfe, that's not a point of order. I think we need to be clear. We are a functioning committee of the House of Assembly. We are fully entitled to have Legislative Counsel attend our proceedings and provide advice to us. There is no procedure that I'm aware of where the government will send a lawyer who sits in our proceedings without our invitation and makes submissions to a committee. We have not invited this individual. This individual is actually sitting here, with all due respect, as a courtesy. But, normally this person would be in the gallery until we, as a committee, have made a decision to ask somebody to come and present to us. That is the procedure as I understand it.

For us, for me as the Chair, to ask for counsel from Legislative Counsel is in keeping with the process that we use in the Legislature. Until the committee decides to have a presentation from the Department of Justice, that's out of order.

Mr. Parent.

MR. PARENT: In light of the fact that there's a slight difference of opinion between yourself and the member for Richmond, in terms of whether there's a conflict between these

two letters, I'd like to make a motion that this matter be discussed at the subcommittee, and that the larger committee, ourselves, discuss it next week, after we hear back from the subcommittee. I make that motion.

MADAM CHAIR: There's a motion to refer all of this to the subcommittee. Is there any further discussion?

Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is defeated.

I think that at this stage I would ask members to consider the issuing of a subpoena for documentation. The original motion empowered the Chair to issue a subpoena for documents. I have not done that yet, because I wanted to give the parties ample opportunity to provide the documents on a voluntary basis. We did receive additional documentation this morning, but I think we recognize that that is not the totality of the information that is held in those files. I would like to hear from members, in terms of their views around the issuing of subpoenas.

Mr. Colwell.

MR. COLWELL: I would agree, I think we should issue subpoenas for this information from the sources we have identified in both businesses, and get that in place. It appears that the departments are not interested in providing the information we requested, as they should have done, to this committee. I think it's an affront to the committee that they haven't supplied the information, and I think they should be issued forthwith.

MADAM CHAIR: Mr. Steele.

MR. STEELE: Speaking for my colleague and myself, we agree with Mr. Colwell.

MADAM CHAIR: Thank you very much. Because a motion has already been passed with respect to this, I don't think we need to . . .

MR. COLWELL: Madam Chair, just for clarity, let's do a