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We are on Resolution 10.4 Economic Development (a) Economic Development Board Secretariat (1) Salaries and Employee Benefits $545,200. Shall the item pass?

Mr. Jim Maloway (Elmwood): Mr. Chairman, might I suggest that we pass further sections at the end of today and that all we have got left is the Canada-Manitoba agreement, which is (e) on page 88, and then we have Minister's Salary and we have the final section that you are dealing with right now, and I would suggest we hold everything until all the questions have been asked and answered and then we will pass the whole thing at once.

The Acting Chairperson (Mr. McAlpine): Is that agreeable with the committee? [agreed]

Mr. Maloway: I would like to begin by asking the minister to give us a bit of the history of this Canada-Manitoba communications technology agreement, how it developed, when it developed and a list of the grants that it gave out.

Hon. James Downey (Minister of Industry, Trade and Tourism): I take it the member is referring to the Canada-Manitoba Communications and Technology Research and Industry Development Agreement? The agreement, actually, was negotiated between the federal and provincial government and was signed on November 9, 1992--it goes back a considerable ways--announced on March 23, 1993. It was a five-year agreement; each level of government was to contribute $5 million over five years to communications technologies.

The agreement was initially reduced to 4.490 by the federal government as a cost-cutting measure and Manitoba matched this cut. That is basically it, Mr. Chairman. It was to develop new opportunities in the high-tech communications field. I think there have been some substantial results. I think some of the projects, it is too early to conclude.

You know, the member seems to be wanting to make a lot about one of the particular parts of the program or one of the companies. I guess I go back, again, and point out to the member that the agreement basically was to do precisely what it says it was to do. It was to do research and industry development.

I think there are some very positive results that flow from this and will continue to flow from it. When you are in the research and development project business, you do not come up with winners all the time but, quite frankly, we have not come up with losers either, so I think it is important to point that out.

Mr. Maloway: Could the minister tell us then what dates the program finished, because it was a five-year agreement started November 9, 1992. Presumably it is still operating until 1997 and still getting grants.

Mr. Downey: The end of the program came in March 1996, the beginning of 1997.

Mr. Maloway: Would the minister give us a list of all of the grant recipients in this program since its inception on November 9, 1992, and the amounts that each participant received.

Mr. Downey: The member may well could have checked these out, because they are listed in the annual report, so there is not a matter of having to wait until this particular occasion to get that information. It is listed in the annual report. If he wants to avail himself of that it would be all right. I can give him the ones that were a part of it. Iris Systems Inc.; TeleSend Gateway Inc.; ManGlobe Virtual Corporation; and Blue Sky FreeNet.

Mr. Maloway: I did want to tell the minister that I had previously taken his advice and gone through the annual reports to determine just which companies did get grants, but I think the minister will have to admit that the figures that are shown in the annual reports, in the ManGlobe case, in any event, certainly do not add up to what we know ManGlobe to have received, at this point anyway, and perhaps the final figures will come in the yet to be released report for this year.

I wanted it from the minister as to how many participants were involved in receiving the grants. I would like to ask the minister to tell us what the first grant applicant got in terms of a grant and who approved it and what was produced as a result of the grant. What do we have to show for the expenditure?

Mr. Downey: I missed the first part of the question. I wonder if he would repeat it, please.

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Mr. Maloway: I wanted to ask the minister to take the very first grant that was made under this Canada-Manitoba communications agreement program and tell us the amount of the grant and the approval procedures involved in it, who approved it, and what were the results. Like, what is the current status of the grant and the project?

Mr. Downey: Mr. Chairman, the overall agreement was managed, and I can give him the answer that he wanted in Question Period today. The overall managers of the agreement were Stephen Leahey, from the province, who I told him the other day, and Kevin Paterson was the federal government's representative as it related to the agreement.

Iris Systems Inc. got 924,000.1. It is my understanding that it is no longer operating. They actually sold some of their product, probably the proper word, technology, to the U.S. company, but are no longer in operation. TeleSend Gateway Inc. are a successfully operating company. ManGlobe are operating, I understand, successfully. Blue Sky FreeNet is operating successfully and just recently received some support under the Canada-Manitoba Infrastructure Program, and they are providing service under the Internet, systems services to the remote and outlying regions of the province, so they are continuing to operate as well.

Mr. Maloway: Now, the minister has indicated that Iris Systems is no longer operating. What exactly was Iris Systems supposed to develop with this money, and what did it develop with this money?

Mr. Downey: They had a proposal, Mr. Chairman, to develop a system for metre reading for gas and hydro systems. It is my understanding that they initially had a program that looked very promising and for a certain number of reasons they basically lacked the ability to have enough resources to bring it to the marketplace, and it is my understanding that that is the technology that was sold to the U.S. company, that they are now in the process of doing it.

Mr. Maloway: So would the minister characterize the Iris Systems project as a failure or success?

Mr. Downey: I would not consider it a failure, Mr .Chairman. I would consider it part of the research and development that it was intended to do. There were resources utilized to develop a system which did not get to be a successful business under the auspices of those who originated it, but the technology, it is my understanding, has been sold. One could put it down to somewhat of a success, not overly a financial success, but as far as the overlying objective of developing technology and being available to the marketplace, they played a role in that development.

Mr. Maloway: Let me ask the question another way then. If the minister had to do it over again, would you have followed through with this particular proposal and project?

Mr. Downey: I guess one could look at it in this context. Hindsight is 20-20 vision, and if one were to have had the experience that we have had today, probably you would have changed some things. Basically, I think the work that had been done, the due diligence and the opportunities that had been presented to the province of Manitoba--after all, let us remember, people have to have their metres read, whether you are a consumer of gas, a consumer of electricity. To do that and generate revenue for a business doing it, I think it had all the right things going for it, but could not be brought to a successful commercial operation in Manitoba.

So the technology and the information that was developed, I would say, was somewhat of a success.

Mr. Maloway: Would the minister tell us then, what date did this grant get approved, and I would like to know what date the Iris Systems grant got approved. Was it given in one lump sum or was it given in instalments? Who were the principals of this particular project?

(Mr. Marcel Laurendeau, Chairperson, in the Chair)

Mr. Downey: Mr. Chairman, the agreement was signed on Iris Systems on June 1, 1993.

Mr. Maloway: Mr. Chairman, well, I asked the minister, you know, when it was signed, when the money flowed, what amounts they flowed. Was it one big sum or was it split up into smaller payments?

As the minister is well aware, we checked the annual reports going back a number of years and we were able to find only in the ManGlobe case $125,000 listed. The minister says the program ended, I believe it was, what, March last year, and the other two payments that would total to $500,000 do not show up in any of the annual reports up to this point. So would the minister account for all of this $924,000 as to when it was given? I would also ask him: Who were the principals in the Iris Systems project?

Mr. Downey: Mr. Chairman, I will try and get the principals who were involved in the project. I do not have it right here, but I will see if I can get that information forwarded. It is my understanding that money was advanced when there were invoices that were submitted and were approved as per the agreement. There was also a 5 percent holdback payment to make sure that all the things that were to be carried out under the agreement were in fact done.

Mr. Maloway: Mr. Chairman, can the minister then tell us whether he would release a copy of the agreement? Would he also tell us whether any audits were done on the expenditures of Iris Systems?

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Mr. Downey: Mr. Chairman, again, I have had this question as it relates to individual agreements, and I have not found the ability to release it, because of third-party involvement. The overall agreement, as the member knows, is available to him. There were ongoing audit activities as the project advanced and were, in fact, carried out before monies were advanced, so the question is, were there audits carried out? And the answer is yes.

Mr. Maloway: What type of audits were done, and what were the results of the audits on the Iris Systems project?

Mr. Downey: The audits were to indicate what the monies were to be applied to, and it is my understanding, the department indicates to me, that those monies were used for those purposes.

Mr. Maloway: Would the minister then tell us what the nature of the audits were? Were they forensic audits? Were they test audits? Were they requested? Were they requested by someone in the government?

Mr. Downey: I do not know why the member would want to know if there were forensic audits. Mr. Chairman, I think this agreement was entered into in good faith on all parts of all individuals and that there was not any intention of misappropriation of funds. It is my understanding that the internal audits, basically done I think by MDC, were of the nature that would make sure that the funds that were being used were for the purposes which the agreement stated. Unless the member has some additional information of the need for consideration of a forensic audit, I am not aware of any need for such an audit.

Mr. Maloway: Could the minister detail for us what due diligence was done on the part of the province in the selection of the Iris Systems people for this particular project?

Mr. Downey: I think, first of all, it should be understood that the project was advanced by the proponents. Secondly it was, as I stated, new technology. The technology is basically the development of two-way meter reading and load control systems. The project included the design of the load control software and miniaturization of the meter reading hardware, including the development of application-specific integrated circuits which reduce the number of components needed to assemble, and therefore end, the production costs per unit. The technology utilizes wireless communications over a unique network system. The products will be utilized in utility market with specific targeting of electrical utilities.

Again, the proponents of the project came forward with a legitimate proposal which quite frankly, when you are dealing with the costs of meter reading, and in some of the sparse areas of the province and throughout North America and through the world basically, it looked like and was to my knowledge a good proposal which had a lot of merit.

It was not in any way, shape or form to try and misuse government money or to try in some way to take advantage of government money. It truly was a legitimate project which would develop a system for meter reading that would have been a marketable product if they could have had the ability to stay with it as investors. They have seen that they could not proceed to do it, and that is the cost to the province and the federal government of being involved in research and development. I think, quite frankly, Mr. Chairman, that it has demonstrated its worth.

Mr. Maloway: I would like to ask the minister again what due diligence the government did. Did the government check the credit rating of the principals? Did it check the experience of the individuals, the proponents, and see what kind of a track record they had, and did they have a track record? I am just asking basic questions about due diligence. Can you tell us what you did in the way of due diligence before you signed on to this project?

Mr. Downey: It is my information that proper due diligence was done, that the individuals that I am aware of that were involved in the project--and when I get that list of people we can further discuss them if he has any questions, but to my knowledge they were reputable people with the proper kind of due diligence done to make sure that it was a legitimate proposal.

Mr. Maloway: Can the minister tell us then whether credit ratings were checked?

Mr. Downey: I have not got the specific answer, but I would speak from knowledge of other work that has been done on other agreements that, yes, I am sure that that kind of inquiry was carried out.

Mr. Maloway: Could the minister take us through the approval process, then, for this particular grant? Presumably an application was filled out. Take us from that stage to where the government would be writing the cheque. Who would be involved in the approval process of each step?

Mr. Downey: The normal process of government decision making was carried out as it relates to this program, as in any others, and he would be knowledgeable about that, I am sure.

Mr. Maloway: I am trying to discover how the approval process was conducted and who made the decisions on the funding of this particular project. The minister mentioned earlier that Steven Leahey was involved in the final approval from the provincial government side for ManGlobe, but it is by no means clear to me that he would be the same person involved in this particular project.

Mr. Downey: The program reports through the Department of Industry Trade and Tourism. I have identified who the provincial representative was on that overall umbrella agreement. The process moves from approval from the department through to senior executive level through the normal approval process of government.

Mr. Maloway: At what stage would this proposal have been dealt with by the Economic Development Board?

Mr. Downey: In the earlier stages, if this actually came through the Economic Development Board secretariat, if not it would have had to go through the Treasury Board system on a normal process basis.

Mr. Maloway: Could the minister tell us in the case of the Iris Systems project then, did it go through Treasury Board, or did it go through the Economic Development Board?

Mr. Downey: I cannot recall at this particular time as to whether or not it actually would have flowed through Economic Development Board, but it would have gone through Treasury Board for sure.

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Mr. Maloway: Can the minister tell us at this time who were the members of the Treasury Board and who were the members of the Economic Development Board at the time that this grant was made?

Mr. Downey: That is all public information through Order-in-Council. If the member wants to find out he can certainly check that out. There is nothing secret about that. It is all registered with the Lieutenant Governor.

Mr. Maloway: Perhaps to expedite matters, the minister would tell us and answer my question specifically about this particular Iris grant as to whether or not it was approved by the Economic Development Board or whether it was approved by Treasury Board, and who were the members. The annual reports going back to 1991-1992 initially indicate that there were five senior ministers involved sitting on the Economic Development Board, and then 1992-93, I believe, it changes to six ministers. So I would like to know, at the time that this grant, being the first one that was approved under this particular agreement, was approved, who were the people sitting around the table who decided to approve this as far as the Economic Development Board was concerned?

Mr. Downey: Mr. Chairman, as I indicated, I am not sure whether this project actually went through the Economic Development Board or whether it proceeded to go directly to Treasury Board. As far as who sits on the different boards and who goes to different meetings and that type of thing, that is information which has never been given at a committee stage and as far as I am concerned does not need to be given. If the member wants to find out who sat on Treasury Board or who sits on Economic Development Board, he is quite free to go and check the Orders-in-Council and find out who it is. There is nothing secretive about that. That is just part of the normal process of being a member opposite. That is the kind of research that has to be done if you want to find out that information.

Mr. Maloway: Mr. Chairman, I think we are simply trying to find out who the decision makers were or the decision maker was on this, the first grant under this Canada-Manitoba agreement, the first grant, incidentally, that went into the tank and resulted in a failure and a loss to the taxpayers. I want to find out whether there is a pattern here or whether this is just an isolated example of how this government conducted business at that time. There was a serious reorganization in this department over the last few years. The minister knows that. He has gone through a whole series of deputy ministers, and it certainly indicates that there is some sort of turmoil and upheaval in his department. So I am trying to get to the bottom of who in particular was responsible for this particular grant, and if it was the Economic Development Board, fine. And who was on the board? Who was ultimately responsible for approval of this grant?

Mr. Downey: Mr. Chairman, I have indicated who developed this particular proposal under the communications agreement, who was involved as it relates to the department, and as far as Economic Development Board--and I am not absolutely sure whether this went before Economic Development Board. It could have. I have not got the minutes. I can find out for the member, but as far as I am concerned the financial aspects of this kind of an agreement would have to go through the Treasury Board and the normal system. I do not know what more I can tell the member.

If he does not understand the decision making within government, I am surprised that he does not, because he was here for a considerable number of time under the Pawley government, and if he was not told how they make decisions, whether it was with MTX or with some of the other ones that I have got to put on the record here today, then I am sorry, I cannot help him. That truly is his problem and not mine that if he cannot understand the decision-making process within government--I have told him normally the process would be to go through the Treasury Board system to get approval.

Mr. Maloway: Mr. Chairman, could the minister tell us where the federal involvement was in the grant to the Iris Systems company? What process would it take as far as the federal government was concerned, or was it simply a case of Kevin Paterson from the government and Steven Leahey from the province sitting down and flipping a coin, deciding that this project was good, this project was not good? I cannot believe that they funded every project that came their way. I am sure there were some here that they refused. That reminds me of another question.

Mr. Downey: Mr. Chairman, I do not want the member to be misled in any way. The federal government did not necessarily participate in each and every one of these particular funding arrangements, so I cannot answer for the federal government, although when there was a project came forward it would basically be done, developed by the two leaders of the program and then presented to their two different levels of government, and whatever process each one had to go through would be carried out. In some cases, and I say this, in some cases the federal approval levels may be at a higher level, so they may not have had to go through the same process that we go through. For example, they may have exemptions under a certain level as it relates to an agreement and may not have to go back to their treasury board system. I do not know that for sure.

Mr. Maloway: I would like to know how many projects the government refused. For example, this particular project I am assuming was proposed by the proponents to the provincial government. Is that the route that it followed, or did it come from the federal side of things?

Mr. Downey: My understanding, Mr. Chairman, is that it came from the overall project leader or the person responsible for it and then advanced as it related to the approval process.

Mr. Maloway: The project heads, meaning who? Mr. Leahey and Mr. Paterson would be the project heads that he is talking about?

Mr. Downey: That is correct. They are responsible for the overall program, but they may have had other individuals working on their behalf as it relates to some of the day to day detail of it.

Mr. Maloway: Can the minister then give us some indication of how this program was advertised and how many applications were made that were denied under the program, because what we see here is perhaps only four successful applicants for this pile of money, and I cannot believe that when there is money available there would not be a whole legion of people interested in getting it. There are only four successful ones. How many unsuccessful applicants were there?

Mr. Downey: I think I put on the record that the overall umbrella agreement was signed November 9, 1992, and announced publicly on March 23, 1993, so the public knew about it through public announcement.

Mr. Maloway: It still does not answer my question. How many unsuccessful applicants were there for monies under this program over the duration and life of the program?

Mr. Downey: I would not be able to find out that number. I could attempt to do so, but I guess at what stage would you call them unsuccessful? Did they make a call to the office and not proceed any further? Did they go down to the wire and then get refused? Again, what I have to keep track of are those that were successful. I could try and find out from the department as to how many got a serious ways down the path of getting some developmental work done, but at this point I have not got that information.

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Mr. Maloway: I think it is reasonably important information to have, because I think one would want to know how well the program was advertised and how much interest there was in the program and how much due diligence was done on the projects and what the success rate was on the projects. I do not know that we need an exact number of applicants that were made or applications were filled out, but I wanted a general sense of how active was this program. I mean, did they have to pick four applicants out of 4,000, or was it four out of 400, or was it four out of 4?

Mr. Downey: I will determine to get that information, Mr. Chairman.

Mr. Maloway: Thank you. I would like to ask him what the second grant was and basically the same process. I would like to know when the second grant was made, how much it was made, was it made in one allotment, was it made in stages, and to whom that grant was made.

Mr. Downey: I think the initial discussions probably took place in 1993. No, I am sorry, TeleSend--

Mr. Maloway: I want to make certain that the minister did identify the grant, and he was about to do that. It is just that he identify the name of the people who were getting the grant.

Mr. Chairperson: Order, please. The honourable member did not have a point of order.

Mr. Chairperson: The honourable minister, to conclude.

Mr. Downey: Mr. Chairman, TeleSend, they approached the province in the spring of 1994 and received a $20,000 grant from the Business Development Fund, and then in July there was an additional $180,000 approved from the Canada-Manitoba communications agreement in October, so the initial $20,000 was to take an overall look at the proposed business plan to make sure that the monies would be used in accordance--you could call it due diligence, you could call it whatever. That was used for that purpose, and in July the $180,000 from the Canada-Manitoba communications agreement was approved.

Mr. Maloway: Mr. Chairman, if the minister could repeat some of what he just said. He said $20,000 from the Business Development Fund, and what was the date of that?

Mr. Downey: That was in July, and the $180,000 under the Canada-Manitoba agreement was agreed to in October.

Mr. Maloway: Of 1994?

Mr. Downey: Yes, '94.

Mr. Chairperson: Do you want to put that on the record, the year was 1994?

Mr. Maloway: Yes, the year was 1994. I would like to ask the minister then, in each of these two grants, what the dates of the applications were. Like, he has given us the rough dates of when the money flowed, but what were the dates of the applications themselves?

Mr. Downey: That kind of detail we will have to get.

Mr. Maloway: Likewise with this particular grant, could the minister tell us what this grant money was used for and what this project was all about?

Mr. Downey: Basically, the business was to further develop the business as it relates to the 1-800 number using voice recognition technology. I know that they were marketing it to the hotel industry and other areas to further develop the market as it relates to that same activity. It also was proposing to offer a network of goods and services through the use of 1-800, as I said, on the voice recognition, and it is my understanding that they have recently acquired a contract with a company out of Ontario and to my knowledge are operating on a successful basis.

Mr. Maloway: Likewise I had asked of the previous grants what due diligence was done in the case of Iris, I would like to know what due diligence was done in the case of this particular grant.

Mr. Downey: The same process as I expressed earlier.

Mr. Maloway: Well, the same process, the minister did not know what the process was for the first grant, and clearly there was no process for the ManGlobe grants which we will get to in a while. I would like to know specifically was a credit check done as I had asked about Iris. Was a credit check done in this particular case?

Mr. Downey: I thought I answered those, that that had been done.

Mr. Maloway: Had not?

Mr. Downey: Had been done.

Mr. Maloway: Had been done?

Mr. Downey: Yes.

Mr. Maloway: The minister is saying that in the Iris case and in the TeleSend case that credit checks were done on each of the principles involved in this project?

Mr. Downey: Yes, Mr. Chairman, I indicated the department had carried out to my understanding the necessary work that had to be done prior to the advancing of money under this agreement.

Mr. Maloway: Likewise as with the Iris Systems grant, could the minister tell us what the track record was of the people that got this grant, what sort of experience they had in this field and whether they had any experience at all?

Mr. Downey: First of all to talk about Iris, Vision was a co-investor with the Teachers Retirement Annuity Fund, Workers Compensation Board, as well as the founders, Michael Wiebe [phonetic] and Mr. Dennis Johnson [phonetic], were also co-presidents of the company of Iris.

It is my understanding that to TeleSend, the owner being Shalesa Charron, who is still operating the business, I am not at liberty to say a whole lot, but I understand that there had been some difficulties with a relative of hers which I am not prepared to talk about anymore because of possible implications, but I can talk privately to the member. But at this particular time the company is operating, and it is being headed by a person by the name of Shalesa Charron, which it is my understand was checked out by the department and appropriately accepted.

Mr. Maloway: Then would the minister confirm that in his due diligence credit checks were done then on this particular company owner, applicant?

Mr. Downey: It is my understanding that the department would carry out that kind of activity, correct.

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Mr. Maloway: Can the minister tell us, likewise I asked about the Iris Systems grant, about the auditing process, if any, that was done regarding these funds to make certain that they were used for the purposes intended. What sort of auditing was done on this particular grant?

Mr. Downey: I am sure the same process of auditing was carried out on all projects as it relates to this agreement.

Mr. Maloway: Mr. Chairman, the minister no doubt is aware that the grants, I believe he had indicated the grant to this particular applicant was--he had it listed in two stages. Can he confirm that the $20,000 was given at one time and that the $180,000 was given at one time?

Mr. Downey: The first $20,000 was under the Business Development Fund, which is available to anybody that comes forward with a proposal or looking at a business development. That was provided before any of the Canada-Manitoba communications agreement money flowed. That was done to a feasibility study. The Canada-Manitoba communications money flowed in two different batches. First was a $90,000 approval. The balance was put in trust until there was proof that all the bills had been paid from the previous $90,000 and all of the conditions were met as it related to the agreement. So it went in three different groups. The first was a $20,000 feasibility study, the second under the Canada-Manitoba communications agreement, and $90,000 was flowed. After there was satisfaction that the money had been used appropriately and the plans were still in place, the additional $90,000 was flowed. So it basically was flowed in three different lots.

Mr. Maloway: Mr. Chairman, can the minister then tell us who the three lots were flowed through to? Was it the company TeleSend Gateway Incorporated on all three cheques?

Mr. Downey: Mr. Chairman, I think the member may be dealing with, where initially the company was TeleSend Gateway Incorporated, now it is operating as TeleSend, and I think the company initially probably would have received the money as TeleSend Gateway Inc. and it is now operating as TeleSend, basically the same company, with Ms. Shalesa Charron as the president of the company.

Mr. Maloway: Can the minister explain to me then why TeleSend Gateway Incorporated, the company that he has named here and supposedly owned by Shalesa Charron, that our information is that TeleSend Gateway Incorporated, same company, is actually owned by Helen T. Ishmael. I see no Shalesa Charron listed as the owner of TeleSend Gateway Incorporated. And who might that be?

Mr. Downey: The person that the member for Elmwood refers to I believe was a director on the company.

Mr. Maloway: So the minister still has not told me whether all three cheques went to the same company.

Mr. Downey: We will have to check that, Mr. Chairman, but it is basically the same company that received the funds, because that was initially who applied for it and it was being operated as a--as I indicate, is being operated by Shalesa Charron, who is I think the president of the company.

Mr. Maloway: Can the minister tell me whether TeleSend World Card Inc. was a recipient of any of these funds?

Mr. Downey: I would have to check as it relates to the names, but it is my understanding that the TeleSend people are the recipients of the funds and audits have been carried out as to the use of those funds. There may have been some name changes, but it, in our estimation, did not change the overall intent of the agreement that was entered into between the province and the company.

Mr. Maloway: Where my confusion enters is the minister's statement where he says that TeleSend Gateway Incorporated owned by Shalesa Charron was a recipient of all three batches of money. But my information is that TeleSend Gateway Incorporated is actually owned by Helen T. Ishmael and that Shalesa Charron appears on the TeleSend World Card Inc., and that is where she is listed as the director, the president, the secretary. So would the minister explain this apparent inconsistency?

Mr. Downey: As far as I know, it is listed in the annual report as TeleSend Gateway Inc. as getting the $90,000 for that particular year. That was in 1994-95; '95-96 TeleSend Gateway Inc. also received $90,000. They were the two payments which were produced by the province of Manitoba for TeleSend Gateway Inc., the same company.

Mr. Maloway: So the minister is confirming then that all three cheques were made out to TeleSend Gateway Incorporated. Is that what he is saying?

Mr. Downey: I will double-check that, Mr. Chairman. That is how it is reported in the annual report, and if it is contrary to that, I will want to know why.

Mr. Maloway: Well, something is not right here, because if the minister is correct and his department have been sending cheques to TeleSend Gateway Incorporated, it does not list Shalesa Charron. At least my information does not list her as a director or president of this company; it lists one Helen T. Ishmael, 271 Cathcart, as the director and president. However, Shalesa Charron is listed as the director, president and secretary of TeleSend World Card Inc. These are separate companies, they have different directors, and I am wondering if perhaps one cheque did not go to TeleSend Gateway Incorporated and another one go to TeleSend World Card Inc. because the minister seems confused as to who he is actually dealing with here. He says that he is dealing with TeleSend Gateway Incorporated, and he says he is dealing with Shalesa Charron. Well, you cannot have it both ways because Shalesa Charron, if that is correct, she belongs to TeleSend World Card Inc. and TeleSend Gateway Incorporated, where he says these cheques are going actually belongs to somebody else called Helen T. Ishmael. So I am a little confused, Mr. Chairman.

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Mr. Downey: I can appreciate that. There may be some confusion as to the makeup of the company and the family. My information is, as of today, that Shalesa Charron is the operator of TeleSend Gateway. Our records that I have available here from the department show that the business start money went to TeleSend Gateway Inc. and two $90,000 checks went to TeleSend Gateway Inc. If there is a change in the makeup of that company, then I will find out. I am informed today by the department that it is Shalesa Charron who is in charge of it. There may have been previously other individuals that were directly involved. The individual he refers to was a director, I know was a director, was a director of that company.

Mr. Maloway: Well, then would the minister explain to us what role Mr. John Ishmael would have played in this whole grants application process?

Mr. Downey: I understand that the lady who that is referred to, Mrs. Ishmael, is the spouse of John Ishmael. I have no knowledge as to what role Mr. Ishmael played in the company, Mr. Chairman.

Mr. Maloway: Was any effort made to determine what role Mr. Ishmael played or was playing in the company at the time the grant application was made and the subsequent cheques were written?

Mr. Downey: I am informed by the department that he was not dealt with as it relates to this program or this initiative.

Mr. Maloway: Mr. Chairman, is the minister telling us then that in this case the controlling mind, the de facto controlling mind of these companies was--was there any due diligence done as regards to the controlling mind of these companies, Mr. John Ishmael?

Mr. Downey: It is my understanding from the department that there were no negotiations done with Mr. Ishmael, that it was done by Shalesa Charron and by Ms. Ishmael, who was referred to by the member.

Mr. Maloway: Mr. Chairman, could the minister tell us then, what was accomplished with the expenditure of this money? What product was developed specifically and what results have the taxpayers got to show for their investment in this company?

Mr. Downey: As I indicated, initially it is my understanding that Ms. Charron is--that the business is operating. They have just acquired a contract I believe with an Ontario company. Contribution from the communications agreement was to assist TeleSend in completing a feasibility study and business plan as well as to market the idea to private sector investors. The business plan has been completed and all indications are that the concept has excellent potential. In fact, as I have indicated, I understand that they have a contractual arrangement with a company. TeleSend partnered with a Canadian company that has an established client base and developed a plan to test a prototype of the system with the participation of both AT&T and MTS. However, MTS has not entered into a partnership with the other members. Basically it is my understanding that TeleSend is operating and operating successfully and, to my knowledge, the company that Ms. Shalesa Charron is operating is doing so successfully.

Mr. Maloway: Then would the minister term this particular project a success?

Mr. Downey: Again, Mr. Chairman, we are dealing with new technology, the development of new technology as it relates to voice identification. I know that they were targeting the hotel industry, tourism industry. Again, to measure in absolute dollars and cents, one may say that at this stage there is a business that is operating that would not have been operating without it. It is my understanding that is the case, that there is new technology that is being introduced to the marketplace right here from Manitoba that without doing this would not have been in the marketplace, and there are jobs being created because of this, so I would consider it somewhat a success.

Mr. Maloway: Mr. Chairman, the minister deems it somewhat a success. How many employees did it have and how did it spend this $200,000 specifically?

Mr. Downey: I am repeating my answer, Mr. Chairman. I told him what the initial $20,000 was for, and that was to develop a business proposal. The other $90,000 in two different lots was to further develop the technology and to market the technology and to get the company off and running. So that basically is what it was used for.

Mr. Chairperson: The committee will take a five-minute recess. [agreed]

The committee recessed at 3:56 p.m.

The committee resumed at 4:01 p.m.

Mr. Chairperson: Committee will come to order.

Mr. Downey: Mr. Chairman, I neglected--there were some other works done as it relates to this agreement, but not grants. There was some work done of which the department carried out some work. I did miss one grant that I want to put on the record, and it is called MBnet Networking Inc. for $31,500, which I want to make sure that I am not keeping anything back from the committee. That was signed March 31, 1993. The project was to support the use of a consultant in developing a feasibility study of upgrading of the MBnet to be consistent with the federal backbone network upgrades under the CANARIE program.

Mr. Maloway: Let us deal with the approval process as it relates to the TeleSend group or network of companies here. How was this project put together and what levels--like, did it go to the Economic Development Board of the government or did it go to the Treasury Board? Exactly what was the decision-making and approval process in this particular grant?

Mr. Downey: Mr. Chairman, it is my understanding, I believe, that it would have done the same as the previous one, that probably the Treasury Board process would have been the process it would have gone through. It would have gone through the Treasury Board process.

Mr. Maloway: Mr. Chairman, so is the minister saying that the Economic Development Board did not deal with this particular grant application?

Mr. Downey: They may not have, Mr. Chairman, but the approval of the spending comes through the Treasury Board system, through the normal processes I have indicated on the other one. It may or may not have gone through the Economic Development Board. I cannot recall, to be quite honest with you.

Mr. Maloway: What guarantees do we have that the monies that were advanced to this project actually ended up being spent on the things that they were intended to be spent on? Can the minister assure us that is, in fact, what happened?

Mr. Downey: Yes, Mr. Chairman, I am assured by the department. In fact, I know there was a holdback of the last $90,000 to make sure that the monies were going to be and had been used for the appropriate activities of which the agreement spoke to. So it is through departmental audit activities that give us that assurance.

Mr. Maloway: Well, how many audit attempts and audits were done on this particular grant applicant and what were the results?

Mr. Downey: It is my understanding, Mr. Chairman, that the audit is done on a monthly basis and that, before any monies were approved, the auditors, the departmental staff had to be assured that the monies were to be directed for the purposes that were stated in the agreement. That basically is the audit that was carried out, and I understand it was done on a monthly basis.

Mr. Maloway: Well, how would you know that that is where the money was going? What guarantee do you have that the money went for what it was intended?

Mr. Downey: It is my understanding that the department would see the invoices which were presented to make payment on.

Mr. Maloway: So is the minister saying that, in all the expenditures then, all of the $200,000 in expenditures that were expended on this project, the government saw receipts for the full $200,000?

Mr. Downey: Mr. Chairman, I should clarify for the member the first $20,000 was to carry out the feasibility study, which was to satisfy the department that the Canada-Manitoba communications agreement funding was in fact to be flowed in an appropriate manner. That was what the initial $20,000 was provided for. Secondly, I have told the member that, after that was done and the project started, the department made sure that the funds were being flowed for appropriate expenditures.

Mr. Maloway: Mr. Chairman, how many employees did this particular company hire as a result of the $200,000 in grants that were given?

Mr. Downey: I do not have the number of employees that the company has, but I can find that information out for the member.

Mr. Maloway: Mr. Chairman, I asked how many employees the company had at the time that the grants flowed and how many they hired with this grant money.

Mr. Downey: I will get that information, Mr. Chairman. I do not have it at my fingertips.

Mr. Maloway: Mr. Chairman, I would like to know what the minister's role was in this particular letting of this grant and the letting of the Iris Systems grant. These were done during the minister's tenure, I believe, as minister of this department. What was his role as far as Iris is concerned and as far as this TGI grant is concerned?

Mr. Downey: I am not trying to be difficult. The member can go back and check when I was appointed Minister of Industry, Trade and Tourism. It has been a long time now, but I think some of the projects had been approved previous to me being the minister and some of them following. That is correct, okay. The Iris agreement, which I referred to, was signed in June of 1993. That would be previous to my involvement. The TeleSend one, I believe, was after I was appointed minister.

Mr. Maloway: Mr. Chairman, so the minister got involved in this process at the point of the second grant. I would like to know just what involvement he had in the procurement of this grant for this particular project. Did he recommend the project?

Mr. Downey: Mr. Chairman, normally--again, I thought the member would have had an idea how the system works in government. The department, under the directors, does the negotiating with the proponents and advance it for ministerial discussion and if the minister-- as I saw fit to advance this, advanced it.

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Mr. Maloway: Mr. Chairman, before we move onto the next grants, I would like to ask the minister then, if he had to do it over again, would he have approved this project, and does he consider it a success?

Mr. Downey: Mr. Chairman, on the one hand, I am pleased to be in government. On the other hand, I am pleased to be a minister that is responsible to have to make decisions like this, and, quite frankly, I also found out that it is probably better not to answer hypothetical questions.

Mr. Maloway: I would like to go on to the third project that was funded under this agreement. Could the minister tell us what project that was, the amounts of money advanced when the application for the grant was made and when the monies were advanced? The minister knows that we have asked this question before.

Mr. Downey: Would it be helpful with the member--I did tell him of the other one, the MBnet. Did he have enough information on it?

Mr. Maloway: Was MBnet No. 3?

Mr. Downey: MBnet was No. 2.

Mr. Maloway: I am keeping them in some sort of order here, so Iris Systems is No. 1; MBnet for, I believe, $30,000 was two; and No. 3 was TeleSend.

Mr. Downey: That is affirmative, Mr. Chairman.

Mr. Maloway: So, Mr. Chairman, we are now dealing with grant No. 4.

Mr. Downey: That would be correct.

Mr. Maloway: Now would the minister detail for us the date of approval of grant No. 4?

Mr. Downey: Would that be ManGlobe, Mr. Chairman?

Mr. Maloway: It would, Mr. Chairman.

Mr. Downey: Mr. Chairman, I was not sure. Was there a question?

Mr. Maloway: Mr. Chairman, basically we are looking for the same details on the ManGlobe project as we were looking for on the other grants. I want to make it as simple as possible and consistent as possible, given that this minister has, since November 28 of last year, hidden under his desk every time he has been asked a question about this ManGlobe project, and I really do not know why he is so defensive about the whole project. Perhaps he knows a little more about it than I do, and that is what makes him reluctant, but we would like him to start from the beginning.

I happened to hear a radio show this morning in which a certain candidate running for election for the federal House right now, responding to a phone-in questioner, indicated that he was approached by the president of ManGlobe about six months after he was elected in 1993 and pitched the idea of the project. He thought at that time it was a good idea, and he evidently proceeded to do something to see that it became successful.

I would like the same approach by this minister. Would he just simply tell us how he became aware of this project, when he became aware of this project, what was his involvement in it and what were the dates of the first approval?

Mr. Downey: Mr. Chairman, I want to make the record perfectly clear. I have not in any way tried to keep any information back from the member. In fact, he made references to asking questions last November, which I took as notice and answered. I do not know where he gets this idea that I did not answer the questions. I did answer the questions that I took as notice. If he is not happy with those answers, I cannot help that. He will have to ask them again, and I will do my best to try and make sure he is satisfied. Well, I will do my best to make sure I try to answer the question. I do not suppose I would ever satisfy the member.

Mr. Chairman, it is my understanding that the department was first approached in 1994 with the opportunity to take advantage of the Internet marketing systems that could be available, that there were discussions carried on with the principal of ManGlobe. There was a considerable amount of activity carried out and certain conditions were laid down as it relates to the agreement, and then eventually it proceeded.

I believe the company proceeded with its operations in July of 1995. So following the initial discussions of 1994, the work that was done with the department, between the department and the principal and the company, actually got off and running in 1995, as I indicated.

One of the concerns, Mr. Chairman, that continues to come back to me is that there is and there appears to be a company that is operating successfully, that the member has a considerable amount of questions, continues to raise them. I do not know whether the member is doing the company any good or what his objective is by his questioning. He has every right to know the advancement of provincial monies, which I have answered, what we have produced or provided for the company. It was done under certain conditions. They are employing, I believe, probably 12 people in the corporation. They have a partnership. The Royal Bank has been involved. The Manitoba Telephone System was involved; they are no longer involved. Canada Post was involved. Human Resources Development Canada and the Business Development Bank of Canada were also involved, so there are a credible group of companies that have been part of this initiative.

Again, Mr. Chairman, I see it as a research and development project, and if I can go back to the title of the agreement, it says Canada-Manitoba Communications Technology Research and Industry Development Agreement. So that again spells out what the project is, what the funding came under.

Mr. Chairman, I believe, I think the process that it had gone through was one that satisfied not only the province, not only the people who were directing this agreement but the other partners who came forward with some resources to help determine whether or not this technology could in fact operate in the commercial field.

It is my understanding it is still operating. The member makes up several references too, I think it is important to point out, several references to the involvement of the spouse of a federal member of Parliament who is a member of a government who signed an agreement with the province and the involvement of that spouse.

Mr. Chairman, again, I would think it would be appropriate to ask questions of the federal government. I know that it would certainly be difficult under provincial rules and regulations to have a spouse of a member of the Legislature so directly involved in a program that was directly participated in by the government, but again, those questions should be directed more directly to the federal government or the federal member, the federal members or ministers. So I believe our responsibility was to carry out our part of the agreement.

We have done so, Mr. Chairman. We have put stipulations in place that have met the requirements of the agreement. I am pleased to see a company operating and doing business. I cannot say a whole lot more at this particular time, although I am prepared to deal with any other questions the members puts forward.

Mr. Maloway: My first question was: When was the agreement signed? What was the date that the Canada-Manitoba agreement as between ManGlobe and the government. What date was that signed?

Mr. Downey: I think, Mr. Chairman, it was December of 1994 the project was approved. Maybe that might not have been the signing date, but that is when the approval process took place.

Mr. Maloway: Mr. Chairman, I would like to ask the minister, as I have for all the other--

Mr. Downey: I think the approval took place, Mr. Chairman, as I indicated, in December of 1994, but the actual signing of the agreement was on July 12 of 1995.

Mr. Maloway: As I had asked about the previous grants, I would like to know what due diligence was done in this particular case in selecting the successful applicant. Was a credit check done, for example? Was any checking done of previous experience in this kind of business?

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Mr. Downey: Yes, Mr. Chairman, there was a considerable amount of work done as it relates to this particular project. I do not take lightly the amount of money that was being discussed. That is why there was some insistence on the individual having support from other than the Province of Manitoba, and as I indicated previously, and I will indicate it again if he wants to hear who the other participants were, the Royal Bank, Canada Post, Business Development Bank and the Manitoba Telephone System, not what I would consider second stringer companies that were participating in this project, so it is my understanding there was appropriate due diligence, and all the necessary activities were carried out by the province.

Mr. Maloway: Well, then, is the minister confirming that a credit check was done on the principal who was applying for this grant?

Mr. Downey: I am not sure what he means by a credit check, whether the individual has any capability. I mean, could he give me his definition of a credit check?

(Mr. Neil Gaudry, Acting Chairperson, in the Chair)

Mr. Maloway: In the due diligence process it is normal to check out the past credit history of people applying for grants, whether that be the TeleSend people, whether that be the Iris people or whether that be the ManGlobe people. The minister is familiar with the process. He deals with these sorts of things all the time. It is customary from the very beginnings, before the person is even let in the door, to have these checks, these credit checks done to see what sort of a credit risk or what sort of a credit history and business history the applicant has.

Mr. Downey: It is my understanding that all the necessary checking was done on those people who were being involved in the project. I will double-check to make sure that that in fact was done and report back to the member. I would see no reason why there were not appropriate credit checks done. It is my understanding that it in fact was done.

Mr. Maloway: I just want to clear up some misunderstandings that the minister has put on the record--I do not know whether it is deliberate or not--over the last few months. In Question Period we do not have the time to set the record straight, but I did want to. I was able to correct over time his misunderstanding about this grant being a loan, which he at least said on two occasions it was a loan. He had it coming from the MIRI, which was wrong, so I am pleased to see that he is now up to speed on that aspect of it, but there are a couple of other elements to this that he keeps making errors on, and I just wanted to either be proven wrong myself on the point or at least correct his information.

A couple of times during the questions, he has referred to the employment question as to how many people were working. We know who was working over at ManGlobe, but sometimes we get lost on the numbers of people working over there, and the minister should be aware that there are project documents around in various hands that indicate that in 1994-1995 there would be 31 people employed in this project. In 1995-96 there would be 85 people employed in this project. In 1996-97, which is last year, there would be 175 people employed in this project. So it is not just this little benign R & D project with 20 people that the minister would like us to believe was the original plan. This was not the original plan at all. The original plan had this 175 people after three years.

To go forward even further, Mr. Chairman, the Manitoba Telephone System--among others--in their project papers went so far as to say that the worst-case scenario, their worst-case scenario, this project will provide jobs for 20 people for one year, and they will have a global shopping mall featuring at minimum 20 Manitoba businesses, have an EDI order and processing system develop within a functioning prototype, and they will have gained some valuable experience. Well, that they certainly did.

But, at best--now this is his at worst--at best their projection was that the ManGlobe project could pave the way for effective commercial trade on the Internet. At best, we have a functioning electronic retail mall and the infrastructure to support additional application development. At best, we are creating a business that could employ over 400 people in five years, and Mr. Chairman, we are already almost at the five year or we are getting close to the five-year mark. Well, no, actually we are not. We are halfway there, but we have nowhere near the 400 people who were being projected.

So I think that it is time the minister came clean and admitted that this project has been a colossal blunder, that news reports from the very beginning sold this project as an Internet shopping mall and when the thing fell flat, they reverted to plan B which was to call it an R & D project. So that would be tantamount to saying that if the province of Quebec were to leave us in a future arrangement that we would explain away the whole 125 years as an R & D project. I mean, that is the only excuse this minister has for this comedy of errors, and that is what this project has actually become is a comedy of errors. I just want the minister to recognize that fact, to recognize that this thing has not in any way turned out the way he originally thought it would. Would he agree with that?

Mr. Downey: Mr. Chairman, again, I will take the member back to some of the comments that I made. I am not so sure where he gets his projection of employment, and I guess that certainly would have been really a nice situation to have been in if they would have accomplished that kind of employment. It is my understanding today they have something like eight to 14 employees. The number that we have through the department is eight. Again, that probably is not anywhere near what the owner would have liked to have had. It is not anywhere near what we would have liked to have seen. But, on the other hand, it is still a functioning company. It is still a company that is operating.

Mr. Chairman, the point I made and I will make again is it has not accomplished the goal that it was set out to accomplish. I do not have any problem saying that. I have a list here. I have a list of companies here that the former administration, not under the guise of R & D or anything other than strictly bad business loans and decisions that the member and his colleagues made when he was in government. [interjection] Well, I want the member to stand up and say that, that he does not agree with the NDP's losses in business. This is not a business loss we are talking about. It was not a matter of the province entering into an agreement with ManGlobe to say we are lending you so much money. We are putting in place--and I did apologize to the member for referring to it as a loan rather than a grant. I have cleared that up. I do not have any problem with correcting a statement if I have been wrong. I do not mind admitting that I have been wrong, and I did give information that I corrected for the member.

The point that has to be made is this woman who runs this company was nominated entrepreneur of the year, woman entrepreneur of the year. She is operating a business which is still operating. One of the difficulties that she is currently having is probably the advertising the member opposite is giving her that is not giving her any comfort and not giving the business any comfort in continuing on getting customer confidence. I think the member should take a look at what he is really doing. If it is me he is after, fine. If it is Mr. Alcock or Ms. Alcock that he is after, fine. But there is a company quite frankly that because of some of the things that he is bringing forward is not doing that company any good. I can tell you, Mr. Chairman, I think he should reflect on that. That has been stated to me that the individual I think is somewhat frustrated.

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The individual and her people have been advancing to try and get this company off and running, and every time they turn around they are reading criticism coming from the member for Elmwood. I again do not know what the member's difficulties are. If he wants to give me a shot for investing in a company of which his R & D, there is no question about it--in fact, I want to read to the member just a little piece of information here as it relates to an article of The Economist that might be helpful. This is a direct quote: Few companies are as yet making any money on-line as it relates to the Internet system, but plenty are trying. The survey that was carried out will argue that it is only a matter of time before they succeed in a big way. Andy Grove, the boss of Intel, the world's biggest chip maker, recently summed up the on-line pioneers' attitude when asked about the return on investment from his firm's Internet ventures. What is my ROI, return on investment, on e-commerce? Are you crazy? This is Columbus in the New World. What is ROI? The question really is there is a lot of work being done, a lot of research and a lot of new ground being broken.

I think the individual has put a considerable amount of time and effort. The people who have been part of the financial package have put their confidence in. The Business Development Bank, Mr. Chairman, certainly does not let their money out without doing considerable work. The Royal Bank, Canada Post and recently, and I have the name of the individual, there has been again an equity investor come to the table, an Ontario-based company has put cash resources on the table, are working with the current owner and manager of the company to try and make the changes that are necessary to make this the successful company that we all want it to be.

I guess the member has to come clean. Does he not want it to be successful? Is that really where he is heading? Has he got such a vendetta against this company and the fact that there is a business coming under this program? Is that what his objective is so that he can hold up an example and say here is where the Minister of I, T and T (Mr. Downey) has failed; he has put money into this and it is not successful. I, Mr. Chairman, do not think that is the right way for him to go but that is his call. I would hope that the member would do what he could to come forward in a positive way to try and help the company be successful. That is the objective I would hope he and his colleagues would have.

If it is a pound of flesh he wants, if he wants something from me, he is not going to get it because quite frankly the money I believe has been put into this project--it was put in for the purposes of research and development and to help a company develop. Yes, it has not got to where we would like to see it. Has it totally failed? The answer is no, it has not totally failed. Does it have people who are confident in it? Yes, there are people. Have there been problems, Mr. Chairman? Yes, there have been problems. There are not too many companies that start and go through the developmental stages that do not have difficulties. This one is having some difficulties. What does the member want me to do? The intent of the money initially was a grant to get the company going. The audits and the money that was advanced were for certain purposes of which we were satisfied, the department was satisfied it was expended in a manner which was appropriate and not misused.

The member brought information forward about an individual travelling on government expense. Not true, Mr. Chairman. Again, he keeps bringing this kind of information forward that is inaccurate. You know it would be helpful if he is going to try to bring somebody down at least he would use the truth. That would be helpful. I can go over some of these companies if he is concerned about the use of taxpayers' money. I can name some for example. I think the bill came to, well, in one particular venture, I mean, it runs from $328,000 of write-offs from the province to $672,000 for one project; $205,000 for another; $135,000 for another. Those are only a few. They add up to over $4 million in write-offs by the province under some of the projects that the NDP put in place. I would like him to stand in his place and say he disagreed with his government when they did that. He has said from his seat that he is. I think he should stand in his place and say it right here that he deplores his former colleagues who would in whatever way, shape or form get involved in such projects. I hope I have answered the questions.

Mr. Maloway: Well, Mr. Chairman, I only have to listen to the Tory candidate from Winnipeg South who in a TV interview just the other day berated this government for what Mr. Mackness called a boondoggle. Mr. Mackness was the former head of the Faculty of Management at the University of Manitoba. The Tory candidate for Winnipeg South has described this project in a way that is reasonably accurate.

Let me tell you, Mr. Chairman, where the complaints come from with regard to this project. If the proper due diligence had been done in the first place, we would not be sitting here today discussing this matter, but we have a large bunch of angry people out there. We have a bunch of creditors who are waiting for their money, including the federal government--income tax for $46,000, the GST for $18,000.

(Mr. Chairperson in the Chair)

I am told the PST--I have asked the minister how much PST is owed, and he is waiting for his colleague to come back with the answer, but I understand PST was owed. The minister has to understand that he is not doing himself any favours by getting involved in arrangements such as this, because people are phoning me who have successful companies. There was a successful company profiled on CKND a few weeks ago as part of their series on ManGlobe, and they have an example of an owner of a company who is making a thousand sales a month and not one nickel of government money.

Can you imagine how irritated and irritable this guy is who has done it all by himself? He did not know about any government grants, he did not apply for any government grants, he did not get any government grants and he is doing a thousand a month, not 150 in two years such as this company. This guy is not alone. There are legions of people who read this, who know through the Internet and know through friends what has happened in this case, and they cannot believe that this could happen. Those people are the ones that are going to be walking away from the Tories in the next election, because they cannot believe that the government would do something like this.

If the government had used some due diligence, if the government had checked out the credit references and done these things, it would not have got into this mess in the first place; it would not have even happened. If it had picked a partner with a track record, if it had picked a partner with good credit references, and if it had picked a partner with competence, then it would be doing its thousand a month or 2,000 a month transactions, and there probably would not be the complaints that you have right now. So this is not just a few people here. It is a list of creditors; it is a list of competitors in the business who saw what happened in this case and do not like what they saw and want this to stop. They do not want the minister to hide under his desk and hope that it will all go away.

Right now we are only on grant No. 4, and we are batting boondoggle after boondoggle here. We have not got any success stories at all out of this program, okay? What we have is major problems for this government and this minister. Clearly this minister has to take control of the agenda, stay in Manitoba a little more often and get a handle on these things because he is losing support, he is losing support among a growing group of people, an influential, intellectual group of people in our society who maybe had some respect for the minister and the government before but, because of this, are starting to question this.

There are people who have worked for this company who have been waiting for their money. They have been waiting for their money for months and months, in some cases, a couple of years. When they find out that the manager, who happens to be the person that has been mentioned several times, politically connected person, essentially gets her $30,000 settlement in just 52 days and heads off as a consultant and then executive assistant to the head of MTS Advanced, right, you can understand, I think, Mr. Minister, why these creditors would be a little upset, a little miffed.

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These were not creditors that were earning $100,000 a year. These are not creditors that got a settlement of $30,000 in 52 days. These are not creditors who got a soft landing and got a new job the next day. No, not on your life. These were creditors who were fired from their jobs, kicked out of the office, are lucky to get 50 cents on the dollar that they are owed. After legal fees, one of them is getting $2,500, if that. You bet, they are unhappy about this situation. They know how this deal was put together, and this deal did not make sense from the very beginning to a whole lot of people.

So, I mean, I guess we are just asking the minister to apologize for his mistakes and promise it will not happen again. We are not attacking the company. I want that made perfectly clear. We are not in any way attacking this company. We are attacking the processes, the excesses of the management, of the former management.

I am glad to hear that the company is turning itself around, that it has given up on the Internet mall and that it is selling off the shelf EDI stuff on an individual basis, and it has a contract with the federal government to develop something with Industry Canada and a couple of other projects that the previous manager was working on. Now we will see how far that goes in the future. But, nevertheless, there is potential, as the minister says, for the company to survive selling what it was selling.

But it did not take one and a half million dollars, because that is what we are talking about here now. The numbers keep going up and up. There are $250,000 that the federal Business Development Bank kicked into this thing. That throws this up to a million and a half and change, and I understand that there is more buried at the telephone system. There is another half million in kind and so on buried over there. So these are fairly big numbers. I am sure the government realizes its mistake, and now it is doing its best to cover up what it can, but we do not want it to do that. We want it to learn something by it and basically apologize for doing this. If the government could do the right thing and make things right with these creditors, I am sure that it would. As a matter of fact, I do not know whether any efforts have been made for it to do that.

Now, Mr. Chairman, I wanted to also clear up another misconception that this minister keeps putting on the record. He keeps insisting that the Royal Bank is part of this, and at one point I guess it was, but my information is the Royal Bank never did subscribe its shares. It never did take possession of its 30 percent of the shares, and in fact it is gone. When the new investor came in last fall and put in 1.2 million for 30 percent of the shares, he in essence took the 30 percent of the shares that were there for the Royal Bank.

So why does he keep saying on camera with different news outlets that the Royal Bank is still involved, when my information is that they have not been for a while, that they in fact never--never, never did they subscribe to their shares. So, when it is convenient for him, he uses, you know, invokes the name of the Royal Bank as a partner. Now they ran for the hills. I presume over there the bank does some due diligence, and when they started finding that things were not going out okay they just said goodbye.

So I would ask him whether he is still willing to say that as of this date the Royal Bank is still a 30 percent shareholder and actively involved in this business.

Mr. Downey: Mr. Chairman, I want to put something else to rest. Again, the member continues to come to this House with innuendo and all kinds of smear tactics, and I do not accept that he is sitting here saying he wants to see the company operate. It is not the company he is trying to get at. Why did he ask the question that they have GST due and payable? Why did he infer that there is PST payable to the province and almost today said there was? There is not any PST payable to the province. I am informed that there is not.

An Honourable Member: Was there any?

Mr. Downey: I am sure that people maybe run a monthly account but, to my knowledge, there has not been. There is not any monies owed to the province as it relates to PST. Again, innuendo that causes nothing but problems for a company they are trying to develop.

He sits here and he says: I am not trying to get at the company; I want it to succeed. In fact, what he is saying is he is advocating that we now go and pay some of the creditors. I think that is what he said, that he wants us to put more money in to pay the--

An Honourable Member: No.

Mr. Downey: Yes, that is exactly what he said five minutes ago. He wanted us to go and provide money for the creditors. It is precisely what he is saying. He is saying that the partners like the Business Development Bank are shabby partners to have, that Canada Post are not up to snuff, that the Royal Bank who were involved--and my understanding is, I do not have any reason to believe--I know that the MTS are no longer directly involved. The Royal Bank may not have taken up their option, but they have been--[interjection] They have been. I have made reference to the fact they have been part of this program. Even if they are not part of it, the Business Development Bank still is a pretty substantial partner. Canada Post is, and the reference to Elders Virtual Corporation, which has come to the table with some additional money to be part of it--have put considerable resources and are not an unreputable company.

So, Mr. Chairman, he comes to this committee, he comes to Question Period with innuendo and a lot of material to try and discredit, quite frankly, this company. Why, I do not know. I can tell you, there are a lot of people who go out and develop companies--and he is saying he is getting a lot of calls. Yes, I know. I do not mind admitting that there are people out there who never come to government, who do things on their own, that when people do come to government, they object. I have to say that for 16 years the public got a pretty good dose of people coming to the NDP to get considerable resources to do certain things, whether it was the MTX affair where they frittered $29 million away in Saudi Arabia. That money, that technology that was supposed to be developed has gone. People just cannot comprehend $29 million. They can comprehend what $500,000 is.

So he sits here and he belittles a company which is developing jobs here, which is developing new technology here, and he is belittling the government because we are involved and we have no problem with coming up front with the fact. I have a list of failures, absolute failures that he and his government were involved in over and above the MTX affair that would make your hair curl, Mr. Chairman, if you had some. [interjection] I apologize. The two just happened to come--the greatest of respect for you, because I am actually entering that stage of my life, too, where you do not have as--

Mr. Chairperson: Follicly impaired.

Mr. Downey: That is right, follicly impaired.

But, Mr. Chairman, I want to make this point to the member again. He cannot come to this committee, belittle and berate a person and her company who are trying to make a go of it. Yes, they have received some support from the provincial government. Yes, they received some support from the federal government, and they did so under an agreement that this member--the first time that he has brought it to the table, to the Assembly, to my knowledge, that he did not have comments or criticisms previously, but he apparently all at once thinks he has got himself a big issue. He does not have a big issue. That is the whole point around this thing. He thinks he has a big issue that in some way is going to belittle me.

I really wonder how sincere the member is when he said that I and this government are losing support because of what we are doing. When did it ever become a concern of his that the government was losing support and credibility? I thought he would cheer from the rooftops. But actually I am really interested that this member for Elmwood is actually a closet Conservative and really quite concerned about the welfare of the government. Is that what I am reading into this? He is worried about people leaving the Conservative Party. That is what he said. Now if he is not concerned about it, then I wish he would clarify it, but I really take seriously--I mean, this guy is--sorry, Mr. Chairman, this member actually must be a closet Conservative because he is now concerned about the well-being of our government and who is leaving us. I am really quite confused, so I will leave it to the member to try and clarify.

* (1650)

Mr. Maloway: I notice that the minister is now willing to talk about who owns what in terms of shares under the universal shareholders' agreement.

Mr. Downey: I did not say that.

Mr. Maloway: Well, he mentioned Mr. Elder. He has been very liberal about talking about the shareholdings of the Royal Bank and the telephone system. Would he tell us then who the minority shareholders are?

Mr. Downey: Again, I may have made reference to a company. I do not know whether I am at liberty to do so, but I have told them who the main participants were in the project, and I have also made reference to a new participant in the company. I may have done so inappropriately, but I have done so, and I do not think there will be any problem with it.

Mr. Maloway: The minister has quite ably explained to us here that 30 percent of the shares are owned by the De Leeuw family trust and 30 percent are owned by Elder and 30 percent are owned by the telephone system. I would like him to tell us at this point right now where the other 10 percent of the shares--

Mr. Chairperson: Order, please.

Mr. Downey: Excuse me, Mr. Chairman, I did not say who owned what percentage of what. It is he who is saying who owns what percent, not me, Mr. Chairman.

Mr. Chairperson: Order, please. The honourable minister did not have a point of order. It is clearly a dispute over the facts.

Mr. Maloway: Thank you, Mr. Chairman. I just want the minister to clear up a mystery for us here and that is: we know where 90 percent of the shares are; now we want to know where the other 10 percent are. Now I will try to make it easy for the minister. We could set this up sort of like a quiz. I will tell him that of the remaining 10 percent, Mr. Minister, 6 percent are unallocated. So could he tell us which two minority shareholders each hold 2 percent of this company? He has got the figures in front of him, the information.

Mr. Downey: First of all, the member put a lot of information on the record accrediting it to me, which is not true. I did not put anything on the record as to what he stated. I do not know, and I do not have the information in front of me, who in fact owns the minority shares or who owns what shares. He apparently has a lot of information of which he should take as information that is available to him. He did not get it from me.

Mr. Maloway: Now the minister, according to the project papers--they were quite enlightening I must admit--clearly spell out that the province requires senior management team acceptable to Manitoba to be in place prior to ManGlobe receiving the second installment of funds for the project. So that clearly outlined that the province, the minister, was in charge of this project. So he cannot hide from his responsibilities here, and he likes to hide behind the skirts of the board members and say, oh, that is the board; talk to the board.

But clearly he is the one who approved the management team, and what I was suggesting to him was, because of his situation that he was in, he should have intervened at the board level or at the management level to ensure that the creditors, that the employees were being treated properly. That is what I was trying to clarify. I was not, in any way, suggesting that any more cheques should be written to this company, that the government should be on the line to bail out the company's creditors or any such thing, and he knows better than that. All I am suggesting or did suggest was that he should use his influence and position to make certain that this thing did not deteriorate any further when he had an opportunity to do it.

Now, Mr. Chairman, I want to get into the approval process for this project. I want to know how this project got accepted. Did this project go before the Economic Development Board for final approval?

Mr. Downey: Mr. Chairman, I do not in any way want to mislead the member. I again would refer him to the fact that this kind of an expenditure would go through the funding approval through the Treasury Board process, not necessarily through the Economic Development Board process.

Mr. Maloway: Mr. Chairman, so is he saying that the Economic Development Board did not deal with this project at all?

Mr. Downey: Mr. Chairman, the Economic Development Board, like Treasury Board, like cabinet discussions and approvals, are really processes which are not to be discussed publicly. I told him it went through the normal approval process, and I said it went through the Treasury Board process which is normal.

Mr. Maloway: Well, Mr. Chairman, but the Economic Development Board's role was essentially to co-ordinate things like this. Why would the Economic Development Board not have the approval rights to this project?

Mr. Downey: Mr. Chairman, again, it is part of the process of government that I thought the member would have had a clear understanding as to how it would operate. Basically, the financial approvals which have to be carried out as it relates to a project like this would go through the Treasury Board process. They would not necessarily have to go through the Economic Development Board process.

Mr. Maloway: Mr. Chairman, so is the minister then saying that the project was not dealt with by the Economic Development Board?

Mr. Downey: I am not saying that it was and I am not saying that it was not, Mr. Chairman.

Mr. Maloway: Mr. Chairman, is the minister saying that the project was dealt with through Treasury Board?

Mr. Downey: I said, Mr. Chairman, it went through the normal process of approvals for expenditure which would include the Treasury Board process.

Mr. Maloway: Mr. Chairman, well, the minister has previously admitted that Michael Bessey was involved with this project. I would like him to tell me at what stage was Michael Bessey involved in this project?

Mr. Downey: Mr. Chairman, again, I am not saying that the people who work for the Economic Development Board may or may not have been involved. The secretariat of Economic Development Board of which Michael Bessey was part of, I think it would have, if at all--and I said he was--would have been in the very preliminary stages of it because Mr. Bessey left before this, I am sure, reached a final approval stage.

Mr. Maloway: Mr. Chairman, well, what were the dates then that Mr. Bessey left and what were the dates that this project received approval from the Economic Development Board?

Mr. Downey: Mr. Chairman, I did not say that it had gone through the Economic Development Board. I gave him the dates on which the approvals were made for this project, and I guess if he wants to look back--I can get him the information as to when Mike Bessey left, but I think probably it was previous to this final approval of this project. I will check that out. I do not know what the two have in relation to one another.

Mr. Maloway: Mr. Chairman, my colleague tells me that Mr. Bessey left on June 30, 1995, and the approvals for this project, according to the minister, were in the fall of 1994. To be even more specific, some of the ManGlobe Virtual Corporation status reports, which I am sure the minister reads every night, the July 11, 1995, minutes, indicate that the participants anticipated to be in the project when it was presented to government in the fall of 1994. So he is right that the department was approached in the fall of 1994 and Mr. Bessey did not leave until June 30, 1995, after the election.

Mr. Downey: Mr. Chairman, I also put on the record, the agreement was not signed between ManGlobe and the province until July 12, 1995, after Mr. Bessey had left.

* (1700)

Mr. Maloway: Mr. Chairman, it is impossible to believe that the agreement was not totally put in place, with Mike Bessey leaving on June 30 and the agreement not being signed for 10 days later. I can tell the minister, and the minister knows full well the reason for the delays and that was the general election of April 25, because we have documents that clearly show that, documents that were filed in court that indicate that a certain person could not be paid because the grants that ManGlobe had been promised were not forthcoming because of the election, and if she would just hold off until after the election, the money would be coming.

I would like to also point out to the minister that, in the fall of 1994, Faneuil ISG was listed as a participant to the tune of $350,000 in this project but by the time the agreement was signed, 10 days after Mr. Bessey left to work for Faneuil, Faneuil had dropped out of the project. So why did Faneuil drop out of the project? Did they do some due diligence that the rest of you did not?

Mr. Downey: Again, the member brings all kinds of inaccurate innuendo to this committee. Mr. Bessey did not go to work for Faneuil. Why would he put that on the record, Mr. Chairman? It is inaccurate. He went to university in Boston. He did not go to work for Faneuil. Again, how can we believe anything this member brings to the Chamber? Why would Mr. Bessey not, if he were still working for the province and the Economic Development Board Secretariat be working on this project? That was part of his job. I did not say the secretariat was not involved in working on the project. I said I did not tell him whether or not it actually had gone to the Economic Development Board. That is not information that should be privy to anybody, whether it does or whether it did not. It did go through the financial process of approval, which was the Treasury Board system.

Mr. Maloway: Mr. Chairman, that is precisely what I am trying to find out: What was Mr. Bessey's role? If the minister would quit hiding on this issue and attempt to protect Mr. Bessey, if the minister would come clean and just explain to us what happened during that period, it would make everything go a lot smoother, but he insists upon trying to avoid the question.

Mr. Downey: Mr. Chairman, I am not trying to hide anything. I have given him the dates on which the agreement was signed. I have given him the time at which the general approval was done. I am not trying to hide whether Mr. Bessey was or was not involved in the development of this agreement.

I can also tell you, the Department of I, T and T, through the people under which the agreement falls, were also involved. This is not singlehandedly done by one person. It is a team of people developing a proposal to make sure that all the bases are covered. Mr. Chairman, I again go back to the people, the partners that were involved. They did their due diligence, we did our due diligence. This was not done without a serious amount of hard work and consideration put in place.

The company is still operating. The company is hiring people. It has new capital that has come to the table. It is not a failure, as the member would like to see it. I mean, let us get right to the bottom line. He is desperately trying to help bring a company to its knees because we the province put in $500,000 to help in the economic development and the research work of it. Do not make any apologies for that. That is what the program was for.

So why does he not just stand up and say he does not like ManGlobe. He would like to see it fail. He did not like Mike Bessey being involved in it, and it is just wrong. He does not want the jobs that will flow from it, he does not want the new technology, it was just wrong, and we made a mistake. Again I do not know where the member is coming from, what he is trying to get. There was not anything inappropriate done as it relates to the department, the government and the handling of this affair.

Mr. Maloway: Why will the minister not admit that the project was approved through the Economic Development Board? Why will he not admit that, and why will he not tell us what the date of the meeting that it was approved at was?

Mr. Downey: Again I have told them the process that it went through. It went through the Treasury Board process, which approves the expenditures of money. I would not want to tell him that something went to Economic Development Board when it did not. I do not believe that it is imperative that that be part of the decision making. As far as I am concerned, I am not denying that the Economic Development Board Secretariat were not involved. That is a different story. To go to the Economic Development Board is another level of decision making. The secretariat working on behalf of the government worked with the department to develop such projects. Then it goes to the Treasury Board system. It may or may not have gone to the Economic Development Board. That is not relevant in this discussion.

(Mr. Jack Penner, Acting Chairperson, in the Chair)

Mr. Maloway: Would the minister endeavour to find out the process that it took?

Mr. Downey: That part of it is not relevant. It went through the proper decision making as it relates to the approval of the expenditure of funds. You cannot proceed to advance funds or spend funds without going through the appropriate channel. There is nothing that is compulsory about it having to go through the Economic Development Board. It may or may not have gone there. I can check. It is like asking the question, what goes to cabinet and what does not go to cabinet? Quite frankly, that is not necessarily in the public domain, what is discussed where and what goes to what particular area, but we do know that expenditures of this magnitude would go through the Treasury Board system, and did.

Mr. Maloway: I would like to ask the minister whether he recommended the ManGlobe project?

Mr. Downey: Following the work that had been done by the department, the work that had been done to do the due diligence to get the partnerships in line, to make sure all of the things that were done necessarily, it was recommended to me that the project should advance. I supported that departmental recommendation.

Mr. Maloway: And who recommended it to you?

Mr. Downey: There is a process of dealing with government, again which I am surprised the member does not understand, having had all of the many years of being in government, and he does not understand the process of the way government works. For goodness' sake, what has he been doing when he was sitting in the New Democratic government? He either did not understand it or he was not given any information, he was not given any knowledge as to what was going on. Mr. Chairman, the department recommends to the minister; usually, it comes through the deputy minister.

Mr. Maloway: Mr. Chairman, well, earlier the minister had indicated that Mr. Stephen Leahey was the person who made the approvals on these grants. Now he is saying it is the deputy minister who is recommending to him.

Mr. Downey: Mr. Chairman, I guess he does not understand how government departments work. Normally, the department would recommend a project, of which this project was recommended to me. Normally, and I say normally, just to help him with his political science education, the department, whether it is Stephen Leahey who is in charge of the project or whoever was part of it as a team--it may have been him with the other team members--would come forward to the deputy minister. That would be the normal process of moving a project from the department, through to the minister, through to the Treasury Board system for approval. I cannot make it any clearer for the member.

Mr. Maloway: Mr. Chairman, I would like to ask the minister then: Who was the deputy minister in December '94 when this project was dealt with?

(1710)

Mr. Downey: It would be Mr. Fred Sutherland, Mr. Chairman.

Mr. Tim Sale (Crescentwood): A point of order, Mr. Chairperson.

Earlier in Estimates, the minister gave the information that Mr. Eliasson was the deputy '91-94, Mr. Bessey was there in 1994, Mr. Goyan, the later part of '94, early '95, Mr. Kupfer on an acting basis, Mr. Sutherland following that, Mr. Cormack on an acting basis following that.

I wonder if we could clarify which dates the minister is using. It was three days ago he gave me those other dates.

The Acting Chairperson (Mr. Penner): What is being asked by the honourable member for Crescentwood is a point of clarification, not a point of order. So I would ask if the minister is willing to clarify that.

The Acting Chairperson (Mr. Penner): Thank you very much, Mr. Minister, for clarifying that.

Mr. Maloway: We have been told by enough sources and the minister, himself that Mr. Bessey was involved in the putting together of the ManGlobe project, so this has not been denied by the government. We just wanted to know whether Mr. Bessey had, in fact, recommended this project in writing to the government.

Mr. Downey: Mr. Chairman, I am not aware of any recommendation, but I can tell you the process it would have come through. It may have come as a recommendation to the deputy minister from the Economic Development Board Secretariat, but it came through to me from the deputy minister. That would be the normal process.

Mr. Maloway: Mr. Chairman, well, nothing about this Canada-Manitoba communications agreement is normal, I must say.

I wanted to ask about where the grant money went and whether it was used for the correct purposes. Both in the TeleSend case and in the ManGlobe case, we have people basically making allegations that money was misdirected in the ManGlobe case, that your grant money was misdirected in one case to pay a previous lawsuit of, I believe, $25,000. That is just one example of misdirection of this research and development grant. In the case of TeleSend, a former partner has alleged that grant money was diverted to another company, and I think you understand of which I speak, through Home Office Corporation or whatever it was called, HOC, I believe. So what we have is diversion of funds, alleged diversion of funds in both of these cases, in both of these grants. Clearly a forensic audit would have tied this down, if the allegations had been made.

I know there has been reference made to some sort of auditing procedure, at least in the TeleSend case, and I believe in the Iris case, but I do not know about the ManGlobe case. So I would like to know how can you be sure that money was used for its intended purposes, because that is at odds with some of the things we have been told.

Mr. Downey: Again, the member comes to this House with a lot of unfounded innuendo which does not do anybody any good. It is incumbent upon him to get his facts straight, because when he comes to this Chamber with inaccurate information, it causes a lot of people a lot of hardship.

Mr. Chairman, it is my understanding from the information I have received that there were not any funds forwarded to the principal to settle an outstanding lawsuit of which he has made reference. I understand there were funds that went as it related to a payment of wages, possibly. Again, I would like him to put on the record, if he has identifiable information, it would be helpful if he would put it on the record, so we could investigate it.

He keeps referring to a forensic audit. What does he want a forensic audit for? He has not brought one scrap of evidence that there has been any misappropriation of funds under this agreement. Again, he made reference to PST not being paid. He is inaccurate. He made reference to government paying for trips by the principal of ManGlobe. Not accurate. That is what we are finding out; everything he brings to this Assembly is inaccurate as it relates to the appropriation of funds.

We have the Manitoba Development Corporation carried out internal audits as it relates to the expenditure of the funds. It is my understanding that the expenditure has fallen within the agreement as to what was signed between ManGlobe and the Province of Manitoba. I have no reason to want somebody to take the taxpayers' money and inappropriately spend it or take advantage of it. That is not in the interests of good public policy. So I will not accept the fact that we, No. 1, (a) needed a forensic audit, and, No. 2, if there was anything that came out of the audits that were carried out that would show an inappropriate use of the funds.

Travel is referred to. Not correct. In fact, I will quote a statement that I have as it relates to travel. The individual that he has referred to as travel, each of the trips by the opposition was in fact paid for by sponsoring companies who asked the individual to speak at conferences, except for Japan which was paid for by the Royal Bank, and Italy which was a personal trip at her own expense on completion of a speech in Germany.

(Mr. Chairperson in the Chair)

That follows the innuendo that the member brought to this House that there were $250,000 in taxpayers' money spent for travel expenses. Again, the honourable member keeps bringing this information forward that cannot be substantiated. He is maligning the person and the company.

It may not all be perfect. I have made reference. He said: Was there money paid from the taxpayers as it related to a court settlement? I think he is making reference to the personal responsibilities that the principal had as it relates to a previous activity. It is my understanding that that was not paid for by the taxpayers under this agreement, but there was, I believe, a wage settlement or some settlement that was the responsibility of the company to be paid. So I am not saying there was not a court-ordered settlement that was approved, but it was not for the purposes of which he has again left the innuendo on the record.

I am confident that the people who were carrying out the audits and the responsibility of this agreement, they were doing it in a responsible manner. They, like us, do not want to see the taxpayers' money inappropriately used. There is a substantial amount of money that has been advanced to this company to help it get into the business of the Internet shopping mall, which the member makes reference that it has not been as successful. They have, and are changing direction, but the bottom line is we hope that there is a very successful company here hiring people, carrying out the kind of activities that we would expect in the province of Manitoba.

My biggest disappointment, Mr. Chairman, is the member continues to bring innuendo, inaccurate information to this Assembly, and it is not doing anybody any good. I am not worried about his reputation, but I certainly am concerned that the long-term viability of this company is not put in jeopardy because of his irresponsible, inaccurate information that continues to be brought to this Assembly.

Mr. Maloway: In the TeleSend case we have a former partner who put money into it, who has lost his money. He has alleged that some of the money was diverted. Is it not incumbent upon this government to, when suggestions like that are made, at least check it out?

An Honourable Member: It was checked out.

* (1720)

Mr. Maloway: The minister says it was checked out. What was found out?

Mr. Downey: It was checked out. The reference the member makes to the TeleSend issue, it is my understanding there were some allegations made about inappropriate use of money. It is my understanding it was checked out by the department, and it was found that the money had not been inappropriately used.

I am talking about our money, the money the province put in, not other investors' money. There may have been some difficulties between other investors and the principals of TeleSend. I am not saying there were not difficulties there. I am making reference in my answers to the monies the province put into TeleSend, into Iris, and into the ManGlobe operation. It was done so, at the satisfaction of the people within the department that had the responsibilities for the management of the agreement.

Mr. Maloway: Would the minister know whether it was spent correctly or not? I mean he does not even know who he sent the cheques to. He is not even aware--he has the wrong name on the wrong company of the people that he claims he is sending these cheques to. So how would he know? What kind of an audit did he do to satisfy himself that he should release the final $90,000?

Mr. Downey: I assume we are back on TeleSend. I am not sure what kind of a web he is trying to weave over there, but he is making reference to the fact, asking me whether we did an appropriate audit. I have answered that many times. I am told by the department that audits were carried out to make sure that the funds were spent and used in an appropriate manner. I have not got any evidence, Mr. Chairman, that would prove otherwise.

The member has not brought any evidence that would prove otherwise. I think it is incumbent upon him to do so. I mean, he could sit there, he has brought innuendo of all different kinds of expenses, but he has not laid one piece of hard evidence on the table, and I challenge him to do so.

Mr. Maloway: Could the minister tell us then how many audits were done and what kind of audits were they?

Mr. Downey: Mr. Chairman, I believe I have answered that question. The audits were done previous to the payment of funds by the Province of Manitoba as it relates to the agreements that were entered into, so that the monies that were to be spent would be done so in an appropriate manner. In fact, I said to the member previously and I will say it again, I think as it relates to TeleSend, before the final $90,000 was spent, used, there was an obligation entered into to make sure some of the outstanding accounts were paid for. I am of that understanding that is what was produced by the audit of the department. They made sure that outstanding accounts as it related to the company were in fact paid prior to the advancement of the final $90,000.

Mr. Maloway: Now in the case of ManGlobe, what kind of an audit was done to determine whether or not money was misappropriated to pay past lawsuits? The minister is not denying that that happened?

Mr. Downey: No, Mr. Chairman, but it did not happen for the purposes of which the member initially brought to the table that monies were paid on behalf of the individual for a former personal relationship. These monies were allowed to be paid as it related to the operations of the business, and I believe it was a salary payment that it was allowed to be paid on behalf of not the purposes of which he initially brought to this Chamber under the innuendo that it was for some personal court settlement.

Secondly, the monies that were advanced were done so after there was an audit done to make sure the monies previously had been properly used and that the future use of them were for the purposes intended. That is what the department's job is, and I am assured that the monies that were spent were done so for the purposes of which the agreement stated.

Mr. Maloway: Well, what kind of an audit was done? Were receipts demanded? What sort of an audit was this that was done in the ManGlobe case to determine just where this money went?

Mr. Downey: I am informed that the appropriate documentation was provided to the department as it related to the expenditures of monies from the companies.

Mr. Maloway: So the minister is then saying that actual receipts were given to the department for all of the expenditures of government money given to ManGlobe. Expenses were covered by receipts.

Mr. Downey: I am not going to put that blanket statement on the record that there was a receipt for every dollar because in some cases I am sure that the monies were approved prior to expenditures with the intention of it being spent, following that, that they would check it out. Whether there was a receipt for every last cent, I will not guarantee that, but I am told that the audits that are done by the department, that were carried out, were done so in a manner which would assure the taxpayers and assure the department that the monies were spent for the purposes of which they were intended. If not, there was approval given for those expenditures.

Mr. Maloway: I want to deal for a moment on this travel budget that the minister continually makes reference to and the project papers. That is what we had to go on, Mr. Chairman. We did not get any help from this minister, since October 28 last year, helping us out in any way, shape or form. In fact I could go through question after question with this minister and find out that very rarely did he ever respond to any of the questions he took as notice. As a matter of fact, the minister for telephones practically in the first--November 4. I am still waiting for the minister of telephones' response to his questions that he promised that he would take the question as notice and get back to me. I am still waiting for his response. I will be waiting a long time.

Now, on the travel question, we simply took the travel information from the project working papers, the project documents, the amount that was budgeted for president's travel budget, and we knew that a certain amount of travel had taken place. I asked the minister on November 4, 1996, about the funding for the president's travel budget, and far from coming back to this House and saying that the travel was being paid for by friendly corporations, far from that, Mr. Chairman, the minister said the following. He said that he put on the record that there was some $60,000 in travel. He said this is incorrect. I believe the numbers are somewhat just over half that. So we have the minister in his own words on November 5, 1996, coming back and saying that my information that I took from the ManGlobe project papers saying that there was $60,000 budgeted for travel was not correct, that it was in fact just over half of that, his own words, his own words. Now, he is trying to cover up and say that he did not say that.

Mr. Downey: Mr. Chairman, the $60,000 was in the budget. I understand that there was some travel, but again I was discounting the amount of money that the member made reference to in his question as to the magnitude of how much travel. What I answered just a few minutes ago was most of the travel that the member referred to. It is my understanding there was some approved travel but not in the magnitude of which was either budgeted and/or what the member brought to the table.

Mr. Maloway: Mr. Chairman, so the minister is not taking back what he said on November 4 then. He is admitting that, in fact, of the president's $60,000 travel budget, she did in fact spend a little over half on travel. This is on top of all the other trips that were paid for by friendly corporations.

Mr. Downey: Mr. Chairman, I believe that is correct that there was a budgeted amount of $60,000, and I stand by the fact that I think there was half of that that was spent. Again, it stands clear on the record, what I said came from the principal herself as it is related to other travel that was carried out by that individual.

Mr. Maloway: Well, I would like to ask the minister then, if he had to do this all over again, would he have recommended the approval of this project knowing what he knows now about the track record of the individuals involved and the experience and so on? Would he embark upon this same project again?

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Mr. Downey: Mr. Chairman, again, I think we have to go back and look at the overall objective of the Canada-Manitoba communications agreement, what were we trying to accomplish. We were at a time when there was new technology coming to the forefront. I believed, and the government believed, it was incumbent upon us to look at projects which could enhance the province's position. We could talk about TR Labs, which has been very much of a success story. We can talk about the other projects which we are involved with which were not total success stories, but out of the majority of the projects, we have some successes which I am not disappointed in. The member says, would I do it again? That is a hypothetical question. Could we have done different parts of it differently? I am not so sure we could have. I am satisfied the department, the information I have received from them, that the monies were directed in a way in which they were intended to be directed, that the person who was directing it was out in the process of trying to develop a company that would employ people. Yes, maybe a little ambitious on the number of people that they were trying to employ, but I think it is a worthy objective.

Is it over with, Mr. Chairman? Do we have to say we will write off the company as a total loss? No. What the problem is, is if he keeps bringing all of this innuendo and lack of factual information to the table and keeps maligning the company and this individual, I do not know where it will end up. I think it will proceed. I think it will succeed; but, if it does not, I think he can put his name on the door saying, I helped destroy this business because of my innuendo and information that I put on the record that was not accurate.

I do not particularly think that is a good situation, and I hope he reassesses what he is doing. If it is me he wants or if it is the member he wants, Mr. Alcock and that combination, I invite him to go after us as politicians, but I believe the work that was done was done so in good faith. I believe it was done so under accurate accounting and accountability methods. To answer the question again, I will not answer it. Would I do it again, Mr. Chairman? My department recommended it to me. The department advanced it to me under the work that they had done, that it was the right thing to do, and I proceeded to recommend that it should be proceeded with.

No, I am not regretting it. I think that it was done in the spirit of research and development. It is still operating and there is additional private capital that has come to the table. Could things not have been done differently? Probably, but they were not. We have to live with the reality of the day, and I am prepared to do that. Did we make a mistake? No. I do not think we made a mistake. I think we carried out the work in a responsible way.

Mr. Maloway: Well, the minister, if he had it to do again, would certainly want to reconsider or revisit the level of salaries that were involved in this project, I am sure. I mean, we are talking about salaries here of $100,000 a year, times two. All sorts of travel, all sorts of a very loose--you see, Mr. Chairman, what we have here is a pattern. We have not one example under the Canada-Manitoba communications agreement. We have, going down the road, almost all of them. We have TeleSend, we have Iris, we have ManGlobe, and the pattern is simply repeating itself. So you have to ask, how the minister could sit there and defend these projects and say that he got terrific results out of the expenditure of this money is beyond me, because if he can make a good case out of that, well, I would say, God help the people of Manitoba. That does not demonstrate any kind of competence or any grip on reality, and the public expects that their government is there to make decisions on their behalf and should be on top of these sort of issues.

So when you see not one isolated project--I mean, it is expected that you would have an isolated project in government go awry. But to have the entire program running off the rails, while this minister was at the helm, is what begs the question as to whether or not it is time for a change for this minister, or is it a time for a change for this entire government? I think in two years the public will be deciding that.

Mr. Downey: Mr. Chairman, again, I am telling the member that there are some success stories. TRLabs is also a program which was under this particular communications agreement, not so much seen as a grant to a company but a group of companies and the federal government--again, a major success story. TRLabs has received considerable funding under this project, $1.4 million of which is not in any way, shape or form a failure. It is very much a success story.

I have made reference to the fact that we have Blue Sky FreeNet--very much a success story--and providing Internet services to remote and outlying communities. Without this agreement, without this funding, it would not be operating.

There was one that I clearly admit did not succeed and that was the Iris program. The other businesses are in certain stages of development and have not gone down. They are still in the process, hopefully, of growing and developing. So one to go down with successes to certain degrees of the other ones, I do not think are revolting. I could go back again and make reference to the $4.5 million or $4.25 million in businesses that he and his government got playing around in, Mr. Chairman, that just were absolutely total write-offs. These are not write-offs; it is the development of R & D. It is working, TRLabs, clear example of a project that is doing what the people of Manitoba would expect. The work that was done on behalf of Blue Sky FreeNet, again, a solid investment that is providing opportunities for communities outside of the city of Winnipeg, so again it is a difference of opinion.

The member is trying to say that we spent money irresponsibly. I do not believe we did. I believe all the checks and balances were put in place. Again, would we have liked to have had some greater successes? Yes. Always greater successes, great objective. Are they accomplishable? Over time I believe they will be, Mr. Chairman. So I thank the member for his questions and will continue to be as co-operative as possible.

Mr. Maloway: Mr. Chairman, well, it scares me when the minister promises to be co-operative because it never develops that way. We are still waiting, and I would ask the minister: You know with today's technology and his funding of Internet malls and so on, you would think the minister could do just something basic like run a list off his computer of all the questions he has been asked and maybe keep an update as to whether he has responded to them. But what you will find is he has responded to none of these questions. There is the odd one that gets a response, but they are basically left unanswered, and unless he wants me to re-ask him all these questions, that is what he is looking for. So he wonders why we have to go day after day in the House asking questions. He wonders why we have to do that and that is because since October 28 last year we have question after question getting no response. A promise to get back but no response and a lot of the responses he does give, and he views these as responses, but they turn out to be inaccurate.

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These are things when he makes statements about it coming under MIRI and that it is a loan and not a grant, so in the few times that he has responded he has given incorrect information. We are better off when he takes them as notice and leaves them, and that is a sad truth of dealing with this government in 1997. I am sure you have your own experiences that you could regale us with, but this is probably not the appropriate time.

Mr. Chairman, I want to ask this minister why it is that the status report once again, the July 11, 1995, meeting, clearly says that the provincial government funds from the Canada-Manitoba communications agreement will be used mostly for human resources along with other operating expenses.

Now, human resources I assume is Salaries, and Other Operating Expenses could be travel and flowers and all sorts of things. I do not see any indication here that these people knew or understood that this could be for R & D, which this minister keeps saying it is. So the minister keeps saying this is an R & D project when everybody else was saying it was an Internet Mall. Because it failed, he calls it an R & D project and he claims that the money for R & D is spelled out in the agreement, but he will not give us a copy of the agreement. Right in his own project papers, here it is in black and white. It does not say anything about using it for R & D. It says it is being used, the provincial government money from this Canada-Manitoba communications agreement, is going to be used for human resources and other operating expenses. Now, what happened to this glorious use of this money, this singular use for R & D? What happened to it? When your own project people admit right in their papers that they are not using it for R & D, now is that not a misuse of money that was supposed to be for R & D?

Mr. Downey: I guess I am having a bit of a difficulty with the member for Elmwood's (Mr. Maloway) interpretation of what is going on. First of all, we have government employees, who I have confidence in, who have negotiated an agreement under the terms of an agreement of which he does have a copy. He does have a copy of the Canada-Manitoba communications agreement.

Mr. Maloway: I want the one with ManGlobe.

Mr. Downey: Ah, he is again not coming clean with his request. He talks about--and I am not able to give him the individual agreements between the government and those companies.

Secondly, Mr. Chairman, we have credible people working for the Department of Industry, Trade and Tourism. Does he not believe the people working for Industry, Trade and Tourism can be trusted doing the audits and making sure that the monies that are approved under this agreement are expended properly? It is not a politician's approval. He does not like me, he does not like my politics and yet, he is worried about my image, that this could damage it. I do not know why he keeps raising it, but, if he is so worried, one would think that is contrary to what he is saying.

The bottom line is, why does he not, if he does not believe me--I mean, I have told him the information that the department has done the audits, they have checked out the expenditures, and they are satisfied that it has been done appropriately as it relates to the agreement. I can tell him nothing more. He has not got any evidence that would be contrary to what I am telling him. If he would bring some forward, I would try and find out if there is any authenticity to it. He has not done so.

Mr. Maloway: Time and time again we have asked the minister for a copy. As a matter of fact, he is aware that we have filed the Freedom of Information request for a copy of this agreement with ManGlobe. I am told that this agreement clearly spells out what this money can be used for and what it cannot be used for. I am told that it was used for things that were not specified in this agreement.

Mr. Chairman, I can only go on what people have told me. The minister keeps asking me to come up with facts; I keep coming up with facts. I keep coming up with tons and tons, pounds and pounds, of internal documents. Yet this minister sits on the documentation that could shed some light on this situation; refuses to provide a copy of it when we ask over and over again. The reason for that, I respectfully submit, is that, if he were to release it to us, it would confirm what we have been told. What we have been told is from highly reputable sources backed up by not one, not two, but sometimes three or four people, and when two or three people say the same thing, you know that you are not far off the mark.

We have made all the efforts we can to provide this minister and this House with the information that is being requested, but we do not get answers from this minister. We get this minister hiding, and I can understand. He wants to protect his friend Michael Bessey. If this was not Michael Bessey that was stuck in this mess, we would be getting answers today.

If this was simply the federal Liberals who would be embarrassed by this, we would have that information wheeled over to us right now in a wheelbarrow saying, here guys, here is the information and go have fun with it. But it is because they want to protect their own, they want to protect Michael Bessey, they want to protect the incompetence that is shown by this grant, by the related grants. We know that it goes up the chain, because once you start getting up into the Treasury Board, once you start getting up into the Economic Development Board, we know the Economic Development Board since the Minister of Finance, the current Minister of Finance (Mr. Stefanson) was the minister in this department, that Economic Development Board has as its membership five in the beginning but now six senior members of government. I believe the Premier (Mr. Filmon) is mixed up in there, as well. So this is an embarrassment to the political apparatus, the political people over there and they know it, and that is why they are very reluctant to answer any questions of substance on this issue or any other issues dealing with these grants. Mr. Chairman, they know that we are right. They know sitting over there in the front benches that we are right on this issue.

Mr. Chairman, with that I realize I will not get any more answers from this minister or group of ministers than I have already got, and I respectfully turn this floor over to my colleague, the member for Crescentwood.

Mr. Sale: Mr. Chairperson, with the agreement of both House leaders, we were asked if we would pass Resolution 26.2. Is that your wish to do that now?

Mr. Chairperson: Could I ask the honourable member, were we going to pass the rest of the Industry Trade right away?

Mr. Sale: We are going to finish that by six o'clock, is my understanding today.

Mr. Chairperson: Okay. In that case, I will wait until Industry Trade is complete, and then we will pass it if that is okay with you.

The honourable member for Crescentwood, with his question.

Mr. Sale: Mr. Chairperson, the minister indicated that he might be tabling some lists of some Vision Capital, Manitoba capital companies. Are there any of those things available today?

Mr. Downey: Mr. Chairman, it is my understanding that we are unable to do that as it relates to the fact that it is private investment, it is an agreement we have entered into. We have checked and I am not able to provide the lists of people who are involved in Vision Capital.

Mr. Sale: Mr. Chairperson, I wish I had the last two and a half hours back. We could go over the same things that my honourable colleague from Elmwood (Mr. Maloway) has gone over. The loss of accountability that that implies, that public money is going into companies of whose identity we do not know, in amounts that we do not know, for purposes that we do not know, but it is going there anyway. I find that an appalling kind of nonaccountability, and we will pursue this in some other fashion. I find that just amazing that we can be pumping public money into private companies, and we do not know their names, and we do not know the amounts, and we do not know the terms of the investment.

Mr. Downey: Mr. Chairman, again, because they are both private agreements that the province has entered into--we are not afraid to answer the accountability of the amount of monies that are being put in and the overall global issues--but because there are private agreements entered into with the province and they could, in fact, be detrimental, not to the taxpayers, detrimental to the overall projects and the individuals involved, we have been advised that I am unable to provide that information. Again, if the member wants to check with the Manitoba Corporations Branch he may find some information that is disclosed publicly. That is his business. But I am not able to provide, and I told him I would check and I have checked, and I am not able to provide that information.

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Mr. Sale: Mr. Chairperson, what date did acting deputy minister Bessey cease to be acting deputy minister in 1994?

Mr. Downey: I am informed by the department that it was in late 1992 that Mr. Bessey left the department as it related to acting deputy minister.

Mr. Sale: Mr. Chairperson, I will have to check Hansard to see whether the minister's information that he gave us the other day is consistent with that information he just gave us now.

The money that was spent on ManGlobe, $125,000 of it shows in '95-96 annual report. Where is the other 375, or is there another $500,000 on top of that 125.

Mr. Downey: Mr. Chairman, I want to tell the member this, if I have misinformed as to the dates deputies were within my department, he may want to make a big issue out of it. It is certainly not intentional. I have asked the department to double-check to make sure we get the exact times and dates of which the deputies were there or were not there. Not a big issue. It is public information and I will get that information. Again, I will ask the department why I did not get the right information the last time I was asked the question, but that is not a big sin.

The 125 was advanced initially in 1995-96; 125 was advanced in '96-97 and the balance of $250,000 was advanced under the Manitoba Development Fund in 1996-97, the final amount of money to make up $500,000. There was no more than $500,000 advanced to ManGlobe.

Mr. Sale: Was the $125,000 that was advanced after the end of March '96 then pre-committed in some way, because you told us earlier today that the agreement expired at the end of March of 1996?

Mr. Downey: We signed the agreement with ManGlobe in 1995, I believe, July, I said. That is what I said. Commitments that were made then and agreement made, if they lived up to the commitment, the monies had to be flowed, and that is fulfilling an agreement.

Mr. Maloway: I have a quick question for the minister and that is page 45 of the annual report of '95-96. There is a note about the Manitoba Information Highway Advisory Council (MIHAC). There was to be a report, I believe, or some sort of an Internet study that was being conducted. Could the minister tell us about that study and give us a copy of it?

Mr. Downey: I am informed that it is in draft stage at this particular point. When it is ready and available, I will make it available. But I do not believe it comes to my department, it may go to the Minister responsible for Highways and Transportation (Mr. Findlay). I will check that out and, if possible, make it available.

Mr. Chairman, I do not want to debate the point, but I believe it may have been reporting back to the Minister of Highways and Transportation and also responsible for the Manitoba Telephone System.

Mr. Chairperson: 10.4. Economic Development (a) Economic Development Board Secretariat (1) Salaries and Employee Benefits $545,200--pass; (2) Other Expenditures $348,000--pass.

Mr. Maloway: Before we leave, Mr. Chairman, I would like to ask the minister, on page 24 of the annual report there is the MIRI grant since 1992. There are seven projects, seven loans totalling $4.6 million; then two new ones for $2 million in '95-96. Could the minister send us information on those?

Mr. Downey: I will do my best to provide the information the member has asked for.

Mr. Chairperson: 10.4.(b) Grant Assistance - Economic Innovation and Technology Council $1,029,100--pass; (c) Economic Innovation and Technology Fund $500,000. Shall the item pass?

Mr. Sale: Mr. Chairperson, in the last three years the spending in this section has never reached close to the Estimates. Is it expected to reach this year or is that just a plug figure that may be spent, maybe not?

Mr. Downey: That was noted that the monies had not been used, and there has been a reduction in that line. It is anticipated that that money will be used but, again, it is a reflection as to actually what had been happening as a reason for the reduction.

Mr. Chairperson: Shall the item pass? The item is accordingly passed.

Resolution 10.4: RESOLVED that there be granted to her majesty a sum not exceeding $2,422,300 for Industry, Trade and Tourism, Economic Development, for the fiscal year ending the 31st day of March, 1998.

We will now revert to Resolution 10.2.(e) Canada-Manitoba Communications Technology Research and Industry Development Agreement--zero--pass.

We will now revert to 10.1(a) Minister's Salary $25,700--pass. The staff can now leave.

I am going to do 10.2 first.

Resolution 10.2: RESOLVED that there be granted to Her Majesty a sum not exceeding $23,327,400 for Industry, Trade and Tourism, Business Services, for the fiscal year ending the 31st day of March, 1998.

We will now revert to Resolution 10.1: RESOLVED that there be granted to Her Majesty a sum not exceeding $3,521,000 for Industry, Trade and Tourism, Administration and Finance, for the fiscal year ending the 31st day of March, 1998.

This concludes Industry, Trade and Tourism.