Marshmallow Report from the AG

The latest special Report of the Auditor General on the fibre-optic deal is a marshmallow.

I am frankly surprised that the man who likes to dig deep has barely scratched the surface on this particular task.

It does nothing to convince me that Newfoundlanders and Labradorians got the "best" deal for its investment - and is particularly weak when it comes to the Lobbyist Act.

First of all the project or "investment" of 15 million was not tendered and there was no request for proposals to achieve the government's stated objectives. On that basis alone we cannot determine if we got the "best" deal our money could buy.

Secondly - the financial assessment of whether or not our 15 million was needed was based on the cost of construction and did not include potential markets and revenues which could be generated for the companies involved. That is not acceptable.

Third - the Auditor General has a radio and a television and presumably keeps up with current affairs - he would then have known that this project was sold to the people as a "consortium" of companies - that did not have a name - as the party that needed the 15 million not Persona alone. In fact when the Electronic Warfare Associates report was - in part - made public - people questioned why Persona's finances could not be investigated - the response was that Rogers was a public company while Persona was private. This supposed consortium did not really exist as Persona is the owner of the system.

Fourthly - the AG determined that officials of Persona were not in violation of the Lobbyist Act as the Act states that 20% of the individuals time had to be spent lobbying. Clearly MacDonald could argue as the President of Persona - he did not spend 20% of his time lobbying for this project. However the Act provides for 2 types of lobbyists - in house - and consultant - The AG and according to him the office responsible for the lobbyist registry - found therefore there was no violation. They apparently ignored the possibility that MacDonald was acting as a consultant lobbyist which has no % of time associated with it.

MacDonald claimed he met with government officials on behalf of the consortium - Rogers - Persona - and MTS. This clearly makes MacDonald a consultant lobbyist as he was not only representing Persona - but a consortium. I therefore continue to believe the Act was violated.

Finally while there has been much fanfare from the AG office over the past year or so concerning the "spending scandal" and while the AG has been quite available for the camera - holding his own News Conferences - this report was floated out following the constituency allowance report on appropriateness of spending which had all taxpayers losing their stomachs and as such went under our radar.

This was a marshmallow report - which in the end did not provide taxpayers value for their money. In fact an imaginary News Release from the so called "consortium" probably would have looked very similar.

No recommendations - no concern about the lobbyist act - and no concern about the "best" value for our dollar.

Between the election call - the constituency spending - and conferences - and regular news events - the media did not have time to blink. I hope when the dust settles this report gets more scrutiny and more questions are asked.

Remember now - one of the key reasons government gave was that one partner of the "consortium" was a local company. Well Persona just as Cable Atlantic before it has been flipped to out-of-province interests.

For further background material on the Lobbyist Act refer to these previous posts:

Part I
Part II
Part III
Part IV
Summary

Is this a Pork Barrel?

A pork barrel,The term is commonly used as a political metaphor for the appropriation of government spending for projects that are intended primarily to benefit particular constituents or campaign contributors.


Let's look at the situation in its very basic form.

According to government - they wanted to own strands on a fibre optic network.

According to Dean MacDonald a consortium of Persona - MTS Allstream - and Rogers wanted to build a second fibre optic infrastructure in the province.

Aliant currently operates one fibre optic facility.

If government wants to own strands - then issue a Request for Proposals outlining specifically what government wants - for how long - including what additional services and maintenance may be required.

No - not here - not in Newfoundland and Labrador - the place of Kings - where our piece of geography is essentially owned and controlled by various families.

There is no consortium! There is an owner of the new fibre-optic infrastructure (Persona) and clients purchasing/renting/leasing strands.

It was pointed out originally by government that the consortium of MTS Allstream - Rogers - and Persona required government investment. It was later learned - that was based on a consultant's (Electronic Warfare Associates - Canada Ltd.) report which stated in part:

"Persona has declined to disclose its financial statements for the reason that they are privately held company and that they are involved in many other projects in other parts of the country which are not of concern to this project."

I guess Bragg Communications had no problem having a look before they agreed to buy them right?

This is it in a nutshell - Dean MacDonald wanted Persona to build and own a fibre optic network in Newfoundland and Labrador. He found two parties who would buy/rent/lease strands from the new infrastructure - he then wanted the government to invest 15 million in the deal - thereby gaining another client for the strands and additional value for Persona. That does not include the maintenance management fee and risk for catastrophic failure + renegotiated positions in 20 years.

Dean asked his buddy's government for the investment and got it. Now Persona is being sold having just reached the legal deal with government for the initial investment and other services. Dean will gain personally from his buddy's government investment.

The government should not have travelled this route and should have issued an RFP. There is more than a potential conflict here - there is an ethical conflict.

Dean MacDonald having brokered the deal with his buddy's government - is now involved in the sale of that same company to a wholly owned subsidiary of Bragg Communications in Nova Scotia.

The best part is - they only just signed the legal papers - yet the network is almost built. The Auditor General is "reviewing" the deal - but the legal papers are signed.

Regardless of the advantages Williams or Taylor espouse regarding cost savings - there was no reason for an RFP not to be issued - and there is no proof that an RFP would not have netted a better deal.

We were clearly told that all parties who could be in this "consortium" were. First of all it is not a consortium - secondly - the entirety of Persona is being sold to Bragg Communications - why couldn't they be involved in the so-called original consortium.

This was a flipper for MacDonald who had just come off the sale of Cable Atlantic to Rogers - shortly after invested in the purchase of Persona - and is now flipping it in 2007 - with increased value partially paid for by the people of Newfoundland and Labrador.

What a crock - people - what a crock.

We have not seen the complete deal with Persona and there are many serious questions that need to be asked - regarding maintenance and equipment to convert the dark fibres to lit fibres - and the risks associated with catastrophic failure. Also - how much of the network (strands) percentage-wise will we but/rent/lease? Will the complete contract be released?

And Trev is on open-line trying to commend the deal.

Don't miss this Blueberry Festival

Six weeks before the next provincial election - a blueberry happening of major proportions is occurring - be sure not to miss it.

It's taking place P.O. Box 220 Oxford Nova Scotia - the mailbox of Oxford Frozen Foods Limited and now the mailbox of Eastlink Persona Holdings Inc.

Now up until Thursday of last week Eastlink Persona Holdings Inc. was named 4402511 CANADA INC.

This is important because the CRTC last Friday posted the following request:

Ottawa, 24 August 2007
The Commission has received the following applications. The deadline for submission of interventions/comments is 13 September 2007.

1.Across Canada Application No. 2007-0791-1

Persona Communications Corp. (Persona), on behalf of itself and Bragg Communications Incorporated (Bragg), filed two applications that would authorize 4402511 Canada Inc. (4402511 Canada), a wholly-owned subsidiary of Bragg, to acquire ownership and control of Persona and its wholly-owned subsidiary Northern Cablevision Ltd. (Northern). One application is seeking authority to transfer the shares and effective control of Persona to 4402511 Canada and a second one is seeking authority to transfer the effective control of Persona’s wholly-owned subsidiary, Northern, to 4402511 Canada.
Persona is the licensee of cable distribution undertakings in Sudbury and Timmins, Ontario, Marystown, Newfoundland and Labrador and Delta and Sechelt/Gibsons, British Columbia, and of a radiocommunication distribution undertaking in Tumbler Ridge, British Columbia. 4402511 Canada is committed to operate both undertakings under the same terms and conditions as those in effect under their current respective licences. Persona also owns some 600 Class 2 and Class 3 broadcasting distribution undertakings across seven provinces.
Northern is the licensee of a cable distribution undertaking in Grande Prairie, Alberta. 4402511 Canada is committed to operate that undertaking under the same terms and conditions as those in effect under the current licence.
The Commission is consequently inviting comments on the particulars of these applications, as well as on the potential effects that approval of these applications would have on the broadcasting industry as a whole.
Applicant's address:
P.O. Box 12155, Station "A"
17 Duffy Place
St. John’s, Newfoundland and Labrador
A1B 4L1
Fax: 709-754-3883
E-Mail: dmacdonald@personainc.ca

And today - just a couple of days later - the Government of Newfoundland and Labrador signs the fibre-optic contract that gives great additional value to Persona - right upon the sale of the company.

And was it the great deal talked about?

Who knows?

The government issued a -

SUMMARY OF CONTRACT

between

Persona Communications Corporation and Government of Newfoundland and Labrador - not the consortium talked about during the whole debate on the potential conflict between the head of Persona - Dean MacDonald and our Premier.

From the details provided - MTS Allstream - Rogers and the Government of Newfoundland and Labrador are owners/users of numbers of strands on a network - that Persona will build and own - referred to as the Atlantic Cable Facility.

Indefeasible Right of Use Agreement (IRU) - The IRU granted between Persona and the Provincial Government is for an initial term of 20 years, with the right to renew.

Does this mean we own the strands for 20 years?
Who has the right to renew - at what cost?
I thought we would own them!

Then there is this:

All fibre strands are "dark", that is, the equipment necessary to use the fibres will be the separate responsibility of government. Persona will make available, should the Provincial Government request it, space, electricity, back-up power, air conditioning, etc. at any of its equipment shelters along the fibre route.

How much will it cost to have use of the Persona equipment?

Will that form another agreement - value adding to Persona again?

Then this:

The Provincial Government has an initial 10-year period in which maintenance will be provided at Persona's cost. After this period, the actual average annual cost will be determined and shared amongst the IRU parties based on a sharing formula, with Persona performing the work for an administration fee based on 25 per cent of the costs.

Well now - after 10 years and after Danny is gone - we have maintenance costs - which we cannot know - because we don't have the sharing formula - we don't know what percentage of this we "own/lease/rent".

And to top it all off we add value again to Persona by contributing to an administration fee equalling 25% of the maintenance cost (?).

And last but not least this:

Persona and the IRU parties will share in the cost of catastrophic failure of the cable. For instance, should a break occur on the underwater portion, a ship would be retained to raise the cable and repair it. Costs will be shared on a formula based on the number of strands each party owns in the segment that failed.

We have no clue what portion of what segment we own - we are not told - but we could be responsible for close to an entirety of a catastrophic failure - even though we are not the owners of the facility - we are IRU's for 20 years. Once again adding to the value to Persona.

And all of this comes on the wake of CRTC announcing the request for Personna to be sold to Bragg Communications under a wholly owned subsidiary - and a few days after 4402511 CANADA INC changes it's Corporate name.

What is the value to Dean MacDonald personally from this transaction?
What value has been added to this pending sale based on the contract with the Government of Newfoundland and Labrador?

Remember what was said when we all asked why a Request for Proposals was not issued by government for a new fibre optic arrangement. It was said and widely reported by government and Dean MacDonald that all parties that could be involved were.

That's strange - because on the heels of the sweetheart deal with Persona - Bragg Communication has no problem getting involved - in fact they are going to buy Persona - to get in on the action.

And back to that mailbox - Oxford Frozen foods sells quite a few blueberries.

Blueberries can be pretty potent when left to ferment - and then any politician can get drunk with power.

Anybody other than me find it ironic that the new fibre-optic facility is called Atlantic Cable? That's original - the last one the boys sold was Cable Atlantic. I wonder is this just an inside joke?

Newfoundland and Labrador is not their oyster...

This Province and potential opportunities from resource development must not be restricted to a few close buddies or a "special" corporate group.

I recognize that right now - it is difficult for one to question Premier Williams on anything he does - as the "fan power" right now is similar to one NFL player before they found dead dogs on his property.

One example - the Sullivan boys from the Southern Shore. Loyola - after just leaving as the Minister of Finance for the province - emerges to become Canada's new "Fish Ambassador" - Karl - Senior Manager of the Barry Group - has managed to steer assets - quite cheaply into the Barry Group's list of holdings with government guarantees - and just the other day - significant assets of FPI purchased by Ocean Choice - of the Penney Group - with Ches Penney flanked by Martin and Blaine Sullivan President and CFO respectively.

Think about the various potential conflicts or influence here - and within one of our most important resources - fish.

Then let's look at the fibre optic deal - remember that one? Persona - whose chief is Dean MacDonald and his buddy's government pumps a 15 million dollar investment that way - without any Request for Proposals - arguing that anybody that could be in the deal already was - Rogers - Persona - MTS Allstream. That's if first you can get past the potential conflict or influence with Rogers involved - with the Premier's selling of his company Cable Atlantic to them or the Premier's former law and business partner Steve Marshall's brother Ken Marshall remaining in a senior position with Rogers.

Then there was the whole mess of Aurora Energy appointing Dean MacDonald to the Board when the company is involved in uranium potential for energy - even though Dean at the time was the Chair of Newfoundland and Labrador Hydro including the responsibility of the Lower Churchill Development. Although MacDonald quit the Aurora Board within a couple of days after Sue's Blog and then media pointed out the potential conflict - we are left to wonder what type of influence Aurora has and more importantly Altius - which as at January 2007 held a 10% interest in Aurora - 30% Rambler gold-copper mine - 37.5% interest in Newfoundland and Labrador refining corporation (you know the refinery proposal) and then there was and is their proposal for financing the Lower Churchill project described this way:

Altius has also made a proposal to the provincial government for financing the Lower Churchill hydroelectric project. Its proposal was put on the three-bid short list; its proposal (involving a royalty foundation for provincial residents) has the benefit of benefiting the local populace, a sensitive issue in a poor province where many projects have been sold to outside interests. Altius’ proposal could also be combined with other financing proposals. Currently, the provincial government is working on the development plan. Once this plan is complete, after three or four months perhaps, then it will turn again to the financing proposals. If successful, Altius would likely end up with a free-carried interest generating cashflow, for very little initial cost.

So there we have the fisheries - minerals - oil and gas - hydro - and communications all wrapped up in a little corporate gang.

For more specifics refer back to the following posts:

Dean MacDonald Please Resign

Why it's okay to question Dean and Dan on the Fibre Optics

The Fibre Optic Deal and Lobbyist Part 1

The Fibre Optic Deal Part 2

The Fibre Optic Deal Part 3

The Fibre Optic Deal Part 4

Political Patronage "Persona"fied

Now we can fight with Ottawa (as we should) but there is no plan to correct the deficiencies in our federation - and it will do wonders to keep our eye off the ball.

Williams is becoming the master of red herrings - to cover for:

rural Newfoundland and Labrador decimation,

FPI fiasco,

Paper Mill in Stephenville,

the Metis,

continued loss of our graduates and job fairs to Alberta,

Danny's friends and colleagues and positions of influence,

no energy plan,

net outmigration,

high unemployment,

giveaway of wind power resources - in part to the Government of Italy,

Persona and fibre optics,

Newfoundland and Labrador Hydro hires Summa to lobby Ottawa on the Lower Churchill - including the employment of Timothy Powers - a strategist for the federal Conservatives - while Danny launches an ABC campaign,

Failure to release MOU with Hebron partners.

Keep your on the balls being juggled by Williams while he attempts to divert your attention with nationalistic heroism.

The Amazing Persona and the Magic Hat

That always sounded like a magic act to me. And presto - now you see em now you don't.
I wonder if that's what happened to the Dean Macdonald "this is a local company" cable operator?

One thing for sure - this company with it's partners in the great "Newfoundland" fibre optic trek - apparently needed money to make the "second" line project viable.

The thing that bothers me most about this magic trick - is the company that ended up buying out the Amazing Persona.

Here's the News Release

What's up with this?

You see - if you think back and remember what was said regarding the contribution of public money to the fibre optic project - Macdonald and Williams along with Minister Taylor explained the money was needed because there were no other possible partners to go in on the deal. They had the only possible partners in the deal - so government money was needed.

Now let's be logical - East Link - Bragg Communications can afford to buy out the entirety of the Amazing Persona but what? Could not afford to be a partner in the fibre-optic project? I think not!

So what is the truth?

Where does this leave the Auditor General's review - considering a portion of it would be to review Persona's need for Government money?
Which companies are involved in the fibre-optic project now? Which one received government money? Is there an official consortium yet? Does it have a name?

The sale made the whole thing look more questionable to me - who will go after the answers?

Are MTS and Rogers still involved?
Will their interests in the project be bought out?
Did the government money help the sale potential of Persona?

Anybody remember the Fibre Optic Deal?

As the fibre optical illusion slips from our memory ROGERS reminds us once again why they don't need our 15 million dollars.

This is a paragraph from story in the Globe and Mail

Ted Rogers could be forgiven for enjoying a moment of schadenfreude as his company, cable operator Rogers Communications Inc., reported growing demand for all its services last year, leaving phone companies in the dust.

Revenue increased 14 per cent in the fourth quarter, driven by the addition of wireless, Internet, basic and digital cable, and phone customers, along with rate increases earlier in the year. For the full year, revenue rose 21 per cent.

Read the story and see if you can find one reason they need taxpayer dollars to build infrastructure.

Here's another piece of the story!

Rogers forecast that revenue this year will rise to between $9.7-billion and $10-billion from $8.84-billion in 2006. It expects an increase in 2007 operating profit to between $3.25-billion and $3.4-billion from $2.89-billion in 2006. And free cash flow is expected to jump to between $800-million and $1-billion in 2007 from $543-million last year.

If the Premier is upset at the oil companies looking for a handout via a tax break - what must he think of Rogers looking for provincial cash.