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37th PARLIAMENT, 3rd SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Tuesday, April 27, 2004

0910

The Chair (Mr. John Williams (St. Albert, CPC))

0915

Mr. Dennis Mills (Toronto—Danforth, Lib.)

The Chair

Mr. Dennis Mills

The Chair

Hon. Robert Thibault (West Nova, Lib.)

The Chair

Hon. Robert Thibault

0920

The Chair

Hon. Robert Thibault

The Chair

Mr. Bernard Michaud (As Individual)

The Chair

Mr. Bernard Michaud

The Chair

Mr. Bernard Michaud

The Chair

Mr. Bernard Michaud

The Chair

Mr. Bernard Michaud

The Chair

Mrs. Diane Ablonczy (Calgary—Nose Hill, CPC)

Mr. Bernard Michaud

Mrs. Diane Ablonczy

0925

Mr. Bernard Michaud

Mrs. Diane Ablonczy

M. Bernard Michaud

Mrs. Diane Ablonczy

M. Bernard Michaud

Mrs. Diane Ablonczy

Mr. Bernard Michaud

Mrs. Diane Ablonczy

Mr. Bernard Michaud

Mrs. Diane Ablonczy

Mr. Bernard Michaud

Mrs. Diane Ablonczy

Mr. Bernard Michaud

Mrs. Diane Ablonczy

Mr. Bernard Michaud

Mrs. Diane Ablonczy

0930

Mr. Bernard Michaud

Mrs. Diane Ablonczy

Mr. Bernard Michaud

The Chair

Mr. Michel Guimond (Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans)

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

0935

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

M. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

Mr. Michel Guimond

Mr. Bernard Michaud

0940

Mr. Michel Guimond

The Chair

Hon. Shawn Murphy (Hillsborough, Lib.)

Mr. Bernard Michaud

Hon. Shawn Murphy

Mr. Bernard Michaud

Hon. Shawn Murphy

Mr. Bernard Michaud

Hon. Shawn Murphy

Mr. Bernard Michaud

Hon. Shawn Murphy

Mr. Bernard Michaud

0945

Hon. Shawn Murphy

Mr. Bernard Michaud

Hon. Shawn Murphy

Mr. Bernard Michaud

Hon. Shawn Murphy

Mr. Bernard Michaud

Hon. Shawn Murphy

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

Mr. Bernard Michaud

0950

Ms. Judy Wasylycia-Leis

Mr. Bernard Michaud

Ms. Judy Wasylycia-Leis

Mr. Bernard Michaud

0955

Ms. Judy Wasylycia-Leis

Mr. Bernard Michaud

The Chair

Mr. Bernard Michaud

The Chair

Mr. Peter MacKay (Pictou—Antigonish—Guysborough, CPC)

1000

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

The Chair

1005

Hon. Robert Thibault

The Chair

Hon. Robert Thibault

The Chair

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

The Chair

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

Mr. Bernard Michaud

Mr. Peter MacKay

The Chair

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.)

1010

Mr. Bernard Michaud

Mrs. Marlene Jennings

Mr. Bernard Michaud

Mrs. Marlene Jennings

Mr. Bernard Michaud

Hon. Robert Thibault

The Chair

Mr. Greg McEvoy (Forensic Auditor, KPMG)

Hon. Robert Thibault

1015

Mr. Greg McEvoy

The Chair

Mr. Bernard Michaud

The Chair

Mr. Dennis Mills

The Chair

Mr. Dennis Mills

The Chair

Mr. Greg McEvoy

Hon. Robert Thibault

Mr. Greg McEvoy

Hon. Robert Thibault

The Chair

Mrs. Marlene Jennings

The Chair

1020

Mr. Dennis Mills

The Chair

Hon. Robert Thibault

The Chair

Hon. Robert Thibault

The Chair

Hon. Robert Thibault

The Chair

Mrs. Marlene Jennings

The Chair

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ)

The Chair

1025

Mrs. Diane Ablonczy

The Chair

Mr. Dennis Mills

Mrs. Diane Ablonczy

The Chair

Mrs. Diane Ablonczy

The Chair

Mr. Dennis Mills

The Chair

Hon. Walt Lastewka (St. Catharines, Lib.)

The Chair

Hon. Shawn Murphy

The Chair

1030

Hon. Walt Lastewka

The Chair

Hon. Walt Lastewka

The Chair

Mrs. Marlene Jennings

Mr. Bernard Michaud

Mrs. Marlene Jennings

Mr. Bernard Michaud

Mme Marlene Jennings

Mr. Bernard Michaud

Mrs. Marlene Jennings

1035

Mr. Bernard Michaud

Mrs. Marlene Jennings

Mr. Bernard Michaud

Mrs. Marlene Jennings

Mr. Bernard Michaud

Mrs. Marlene Jennings

Mr. Bernard Michaud

Mrs. Marlene Jennings

The Chair

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

1040

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

1045

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

Mr. Bernard Michaud

Mr. Odina Desrochers

The Chair

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

1050

Mr. Dennis Mills

The Chair

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

Mr. Dennis Mills

Mr. Bernard Michaud

The Chair

1055

Mr. Bernard Michaud

The Chair

Mr. Bernard Michaud

The Chair

Mr. Bernard Michaud

The Chair

Mr. Bernard Michaud

1100

The Chair

Mr. Bernard Michaud

The Chair

Mr. Bernard Michaud

The Chair

Mr. Bernard Michaud

The Chair

Mr. Greg McEvoy

1105

The Chair

Hon. Robert Thibault

The Chair

Mr. Dennis Mills

The Chair

Hon. Joe Jordan (Leeds—Grenville, Lib.)

The Chair

1120

Mr. John Hayter (As Individual)

The Chair

Mr. John Hayter

The Chair

Mr. John Hayter

1125

The Chair

Mr. John Hayter

The Chair

1130

Mr. John Hayter

1135

The Chair

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

1140

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

Mrs. Diane Ablonczy

Mr. John Hayter

The Chair

Hon. Walt Lastewka

1145

The Chair

Hon. Walt Lastewka

The Chair

Hon. Robert Thibault

The Chair

Mr. Dennis Mills

The Chair

Mr. Dennis Mills

The Chair

Mr. John Hayter

The Chair

Mr. Odina Desrochers

1150

The Chair

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Hon. Robert Thibault

The Chair

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

1155

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

The Chair

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

1200

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

1205

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

Mr. John Hayter

Hon. Robert Thibault

The Chair

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

1210

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Mr. John Hayter

Ms. Judy Wasylycia-Leis

The Chair

Mr. John Hayter

The Chair

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

The Chair

Mr. John Hayter

1215

Ms. Judy Wasylycia-Leis

The Chair

Hon. Walt Lastewka

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Mr. John Hayter

Ms. Judy Wasylycia-Leis

The Chair

Mr. John Hayter

The Chair

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

Ms. Judy Wasylycia-Leis

Mr. John Hayter

The Chair

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

1220

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

The Chair

Mr. Peter MacKay

Mr. John Hayter

The Chair

Mr. John Hayter

The Chair

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

The Chair

Mr. John Hayter

Mr. Peter MacKay

The Chair

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

The Chair

Mr. Peter MacKay

The Chair

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

1225

Mr. John Hayter

Mr. Peter MacKay

The Chair

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

Mr. Peter MacKay

Mr. John Hayter

The Chair

1230

Mr. Alan Tonks (York South—Weston, Lib.)

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

Mr. John Hayter

Mr. Alan Tonks

Mr. John Hayter

1235

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

Mr. John Hayter

The Chair

Mr. John Hayter

Mr. Alan Tonks

Mr. John Hayter

Mr. Alan Tonks

Mr. John Hayter

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

Mr. John Hayter

Mr. Alan Tonks

Mr. John Hayter

Mr. Alan Tonks

Mr. John Hayter

Mr. Alan Tonks

The Chair

Mr. Dennis Mills

Mr. John Hayter

1240

The Chair

Mr. Dennis Mills

The Chair

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

1245

Mr. John Hayter

M. Odina Desrochers

Mr. John Hayter

M. Odina Desrochers

The Chair

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

The Chair

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

Mr. Odina Desrochers

Mr. John Hayter

The Chair

Mr. John Hayter

The Chair

Mr. John Hayter

The Chair

Mr. John Hayter

Mr. Odina Desrochers

The Chair

Mr. John Hayter

Mr. Odina Desrochers

1250

Mr. John Hayter

Mr. Odina Desrochers

The Chair

Hon. Joe Jordan

Mr. John Hayter

Hon. Joe Jordan

Mr. John Hayter

Hon. Joe Jordan

Mr. John Hayter

Hon. Joe Jordan

Mr. John Hayter

Hon. Joe Jordan

Mr. John Hayter

Hon. Joe Jordan

Mr. John Hayter

1255

Hon. Joe Jordan

Mr. John Hayter

Hon. Joe Jordan

Mrs. Marlene Jennings

Mr. John Hayter

Mrs. Marlene Jennings

Mr. John Hayter

Mrs. Marlene Jennings

Mr. John Hayter

Mrs. Marlene Jennings

Mr. John Hayter

Mrs. Marlene Jennings

The Chair

CANADA

Standing Committee on Public Accounts

NUMBER 033

3rd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, April 27, 2004

[Recorded by Electronic Apparatus]

¿ (0910)

[English]

The Chair (Mr. John Williams (St. Albert, CPC)): Good morning, everybody.

We are studying, pursuant to Standing Order 108(3)(g), chapter 3, “The Sponsorship Program”, chapter 4, “Advertising Activities”, and chapter 5, “Management of Public Opinion Research”, of the November 2003 Report of the Auditor General of Canada, referred to the committee on February 10, 2004.

As a witness today from 9 to 11, as an individual, we have Mr. Bernard Michaud. Proceedings will be televised after 11 o'clock. We will have about a ten-minute break at 11 o'clock, by the way. At 11 we will have, as an individual, Mr. John Hayter. It's not on the notice here, but in the afternoon we will have the quick response team coming in.

There's a letter dated April 23, 2004, addressed to me as the chair from the Clerk of the Privy Council and Secretary to the Cabinet.

Dear Mr. Williams:

I am writing further to your letter of April 7, 2004, concerning the motion of the Standing Committee on Public Accounts “requesting that Order in Council P.C. 2004-0119 of February 20, 2004 be amended so as to include the confidences from December 1, 1993 to July 1996 relating to the matters discussed in Chapters 3, 4, and 5 of the Auditor General's report of November 2003.” As you know, the Order in Council currently permits the disclosure of relevant Cabinet confidences created between July 1996 and the date of the order.

This request is similar to the Committee's motion of March 11, 2004 concerning records of Cabinet committees wherein communications and sponsorship activities/programs were discussed between January 1, 1994 and February 10, 2004. In my reply dated April 6, 2004, I enclosed all relevant documents for the period July 1996 to February 20, 2004 in accordance with the Order in Council. I also indicated that I had directed my officials to identify any Cabinet documents relating to the government's sponsorship program and advertising activities for the period January 1994 to June 1996.

In light of the Committee's more recent motion, however, I have asked my officials to expand their search to all Cabinet confidences from December 1, 1993 to July 1996 relating to the matters discussed in Chapters 3, 4, and 5 of the Auditor General's report of November 2003. As I indicated in my earlier letter, a new Order in Council will be required for the release of any documents identified during our search that are relevant to your inquiry, and this will necessitate the approval of the former Prime Minister.

Please accept my assurances that we are proceeding expeditiously to complete the steps necessary to comply with the motion.

Yours sincerely,

Alex Himelfarb.

There is a copy to the clerks. That is tabled and a public document.

In addition to that, there is a letter from the Auditor General of Canada dated April 26, 2004, addressed to me as the chair.

Dear Mr. Williams,

At its meeting of April 19, 2004, the members of the Committee expressed a desire to obtain further information regarding files referred to in paragraphs 3.60 and 3.69 of Chapter 3 of my November 2003 Report. The Committee asked for a list of the 53 files examined in our sample and to indicate in which cases documentation was lacking.

Further to the Committee's letter of April 20, 2004, I have attached the information requested.

Yours sincerely,

Sheila Fraser, FCA

That information is attached. It is tabled and a public document.

I just received from the clerk, seconds ago, another letter. I have copies for everybody for distribution.

Actually, this is the first response to our bar on the television with regard to whistle-blowing. It is addressed to the law clerk, and it's from the University of New Brunswick's Professor David Murrell.

He writes:

Dear Sir/Madam:

Below are two documents I received through an access-to-information request two years ago. I gave two complete files to the National Post and the Globe and Mail. Both did news stories on these two documents, so the gist of the documents are in the public domain.

It is ok if you use my name as a source. I am a public interest researcher with no financial connections to Public Works Canada.

Sincerely,

David Murrell

Professor

He included two documents for us. The first is a copy of an e-mail sent by Edith Laflamme to Isabelle Roy and David Myer, with a carbon copy to Denise Muzik. The subject is “FW: Meeting with PCO & PMO re: CCSB Audit”, and it says:

For your information. Pierre will attend tomorrow.

Then a number of people are mentioned here. The e-mail says:

Hi,

The DM has asked that you attend a meeting which will be held tomorrow evening, September 28th, from 5:00 p.m. to 6:00 p.m. The meeting will be held to discuss the CCSB Audit Release Strategy which will include Q's & A's, the key message and the next steps.

The participants are the following:

PCO - Ron Bilodeau, Dick Fadden, Mario Laguë

PMO - Françoise Dugros, John Malloy, Eddy Goldenberg

The meeting will be held in room 408, Langevin Block. Please note that the location may change due to the large group of people. I will advise you if the location changes.

Thank you,

Lynn

That's Lynn Bertrand from the deputy minister's office at PWGSC.

The second document is entitled “Lac Carling Retreat: Minutes from the Information Session between PWGSC and Presidents of Communication Agencies, September 21, 2000”. It reads:

1. Attendees

Pierre G. Tremblay - Acting Executive Director, CCSB

Edith Laflamme - Executive Assistant, CCSB

Isabelle Roy - Communication & Strategic Planning Officer, CCSB

Jean Brault - President, Groupaction Communications

Tony Blom - President, Compass Communications

Claude Boulay - President, Groupe Everest

Peter Fassbender - President, Focus Strategies and Communications Inc.

Jean Lafleur - President, Lafleur Communication Marketing

Paul Coffin - President, Coffin Communications

Gilles-André Gosselin - President in counsel, Gosselin public relations - Groupaction

2. Introduction by Pierre G. Tremblay

Pierre G. Tremblay thanked everyone for attending. This retreat was very timely. It was important that the Communications Agencies, who manage sponsorships, and CCSB meet to discuss the future of sponsorships. Pierre G. Tremblay proceeded by saying that this meeting was to give an update on sponsorships in general, on the audit regarding sponsorships (a copy was not made available since it had not been made public) and to discuss the role and responsibilities of the Communications Agencies.

3. Update regarding Sponsorships

Pierre G. Tremblay emphasized on the fact that a clear distinction had to be made between a sponsorship and a grant. It was well explained to the Communication Agencies that sponsorships through PWGSC consisted of buying services.

These are the only two documents we received from Professor Murrell, and we thank him for sending these on to us.

These are the documents I've tabled this morning. Mr. Toews has given us notice of motions. I deal with motions at the end of the day, so we'll do that then.

I would therefore like to welcome....

Mr. Mills.

¿ (0915)

Mr. Dennis Mills (Toronto—Danforth, Lib.): On a point of clarification, Mr. Chair, with regard to the documents you just read out--and I'm referring specifically to the one we received so expeditiously from Ms. Fraser, identifying the 53 files--are they now in the public domain? Would the media and everybody be able to have these?

The Chair: As soon as I read them and tabled them, they became public documents, yes.

Mr. Dennis Mills: Thank you.

The Chair: Welcome, Mr. Michaud. We appreciate your coming here today.

I have some statements and questions for you. First, the refusal to answer questions or the failure to reply truthfully...or no, we're going to swear you in first.

Yes, Mr. Thibault.

Hon. Robert Thibault (West Nova, Lib.): Before I forget, one of the items that was among the documents you circulated--the one with Lac Carling--is a note from Madam Lynn Bertrand. There's no date.

The Chair: On the e-mail there's the date of September 27, 2000. On the other one, the Lac Carling retreat, it's September 21, 2000.

Hon. Robert Thibault: Okay, so the e-mail date was the date of the meeting. It isn't the date it was sent to the committee.

¿ (0920)

The Chair: No. It's a copy of the e-mail of September 27, 2000. It was addressed to the law clerk on April 23, 2004. It's from Mr. David Murrell, a professor at the University of New Brunswick.

Hon. Robert Thibault: Thank you.

[Translation]

The Chair: Mr. Michaud, please

Mr. Bernard Michaud (As Individual): The evidence I shall give on this examination shall be the truth, the whole truth, and nothing but the truth, so help me God.

[English]

The Chair: We'll have some notes and questions first.

The refusal to answer questions or failure to reply truthfully may give rise to a charge of contempt of the House, whether the witness has been sworn in or not. In addition, witnesses who lie under oath may be charged with perjury. That comes from the House of Commons Procedure and Practice, Marleau and Montpetit, at page 862.

You're appearing before us as an individual this morning. Did you discuss or have any meetings with any employees of the Government of Canada, any members of this committee, or any former members of the government in preparation of your report before coming to this meeting?

[Translation]

Mr. Bernard Michaud: No.

[English]

The Chair: Has legal advice been provided or paid for by the authorization of any official of the Treasury Board Secretariat, the Department of Public Works and Government Services Canada, or any other government department or agency? In other words, is the government paying for your legal services?

[Translation]

Mr. Bernard Michaud: No.

[English]

The Chair: Okay.

Monsieur Michaud, do you have an opening statement to read to the committee?

[Translation]

Mr. Bernard Michaud: Yes.

[English]

The Chair: Okay, the floor is yours.

[Translation]

Mr. Bernard Michaud: My name is Bernard Michaud. I worked at Groupaction for about six and a half years, from July 1991 until February 1998. I held the position of Comptroller.

Before coming here today, I met with the RCMP four times. I also met with KPMG before coming, and I am appearing before you today. I know there is another commission that will also be enquiring into this matter. I thought I had already done my share, but it would seem that it was not enough. I am not very happy about being here, but we'll just have to make do.

I have read the three chapters of the report. Most of the events discussed in those chapters occurred after I had left Groupaction, although that certainly won't prevent me from answering all your questions honestly and sticking to the facts. I do not intend to comment in any way on hearsay and presumptions. Having said that, can we begin now?

The Chair: Yes, thank you very much.

[English]

Ms. Ablonczy.

Mrs. Diane Ablonczy (Calgary—Nose Hill, CPC): Thank you for being here. Sometimes public service is a bit of a pain, but I know Canadians who are watching are pleased that we have someone else who perhaps has some insight into the situation.

I'd like to first of all ask you to describe the nature of your relationship with the communications coordination services branch, CCSB, or Public Works and Government Services Canada. Did you have any direct dealings with that government agency during your time as comptroller for Groupaction?

[Translation]

Mr. Bernard Michaud: No, never.

[English]

Mrs. Diane Ablonczy: So you did not meet with anyone directly from government.

¿ (0925)

[Translation]

Mr. Bernard Michaud: Yes, one other time, but not about the Sponsorship Program. It was about an advertising contract for the CRTC. Groupaction had been commissioned by the CRTC to handle the mandatory advertising needed when a new channel is created or for similar reasons. We had to meet with them for that purpose, but it was an informal meeting to discuss procedures, specifically how the advertising material would come to us at Groupaction. It was to talk about technical matters, rather than specific issues. It was really specific to that contract.

[English]

Mrs. Diane Ablonczy: I take it, Mr. Michaud, that you would have been familiar with the contracts that Groupaction had with CCSB, and the work that was done on those contracts and the payment of those contracts. Is that correct?

[Translation]

M. Bernard Michaud: I saw the contracts, but I certainly could not tell you what the day-to-day business associated with them was. Yes, I saw the contracts, and yes, I was the person who did the invoicing. The Accounting Department is not the one that issues the invoices; it's Client Services that decides what to write on the invoice, what specific items should be mentioned, and when they are to be sent. That is really a responsibility of Client Services. And that does not only apply to Groupaction; it's like that in every advertising agency. The Accounting Department does not initiate an invoice. It's always Client Services that does that.

[English]

Mrs. Diane Ablonczy: I understand, Mr. Michaud. I just want to establish that you did see the contracts and that you did see the invoices. Did CCSB, the communications coordination services branch of Public Works, to your knowledge, ever inquire about the substance of these invoices? Did they ever inquire about the hours worked, or the details of production costs, or about the evidence that the sponsored events occurred? What kinds of inquiries might have come to your knowledge with respect to those invoices from CCSB?

[Translation]

M. Bernard Michaud: After my first meeting with the RCMP, they obviously brought out x number of invoices. But I was only there for the first and the second. They were temporary invoices dealing with exactly the same three contracts, if you will, that have been discussed in the newspapers. I was there until a quarter of the way through the first one. So, they have already questioned people. When the invoices were finalized, I was no longer with the firm. So I was never in contact with any of the people who had questions about the invoice or the number of hours that had actually been worked. Never.

[English]

Mrs. Diane Ablonczy: Were you aware if any questions were raised?

Mr. Bernard Michaud: No.

Mrs. Diane Ablonczy: To the best of your recollection, Mr. Michaud, did Groupaction ever bill or charge for services that were not performed? Did it ever double bill? Did it ever issue inflated invoices or charge for sponsored events that did not take place?

[Translation]

Mr. Bernard Michaud: To my knowledge, no.

[English]

Mrs. Diane Ablonczy: No, on all of those?

[Translation]

Mr. Bernard Michaud: No on all of those.

[English]

Mrs. Diane Ablonczy: Mr. Michaud, the Auditor General found, in her audit of the Maurice Richard series, money coming from CCSB to Groupaction, $235,000 and change. Groupaction then took $24,600 and then passed the money directly to L'Information essentielle to do the Maurice Richard series. Would it have been usual for Groupaction to be used, basically, as a conduit for money or a courier for money? Can you shed some light on this transaction, sir?

[Translation]

Mr. Bernard Michaud: First of all, I wasn't working there at the time. I had already left Groupaction by then. So, it's difficult for me to say whether that is the usual practice or not. I'm not really in a position to say. I wasn't working there then.

[English]

Mrs. Diane Ablonczy: That's why I asked the question the way I did. To your knowledge, as comptroller for six and a half years, would it have been something you would have expected to have Groupaction basically be a conduit for moneys from the government to a production agency in this manner?

[Translation]

Mr. Bernard Michaud: As far as I'm concerned, that is not something I ever witnessed during my time there.

[English]

Mrs. Diane Ablonczy: Mr. Michaud, you are aware, of course, of the audit that the Auditor General did of the three Groupaction contracts. In that audit, released in 2002, the Auditor General said that every rule in the book was broken. Can you assist the committee, please, by outlining to us your observations of contracting or payment rules that were broken during your time with Groupaction?

¿ (0930)

[Translation]

Mr. Bernard Michaud: I am tempted to say no, because I was only there until a quarter of the way through the first contract. As far as I'm concerned, we were still just feeling our way at that point. It was the very beginning of the process. I can't comment on that, because I wasn't there. Yes, I saw the reports via the RCMP, because I was given access to them—against my will, I might add—but that doesn't really matter. I was asked to comment, and I commented. I can tell you that as regards the files I was given at the RCMP, all the invoices were always there. Am I in a position to say whether they were valid invoices or not? No, because I wasn't working there at that time. But as regards the files I saw at the RCMP, everything was always there, pretty well to the last cent.

[English]

Mrs. Diane Ablonczy: So just to clarify, Mr. Michaud, as comptroller for Groupaction for six and a half years, you saw no departure at all from appropriate procedure. Is that your evidence to us?

[Translation]

Mr. Bernard Michaud: Yes, but once again, it's important for you to know that I was not in charge of the contracts. Client Services was responsible for managing contracts. Client Services would give us instructions to prepare an invoice, including specific wording for the invoice. The Accounting Department does not decide what will appear on the invoice. Those instructions are received from Client Services. In the specific case of the first contract, Jean Brault was the person giving instructions as to what should appear on the invoice. He was the one in charge of the file. Did that constitute an irregularity? I really have no idea. I can't answer that question, because I just don't know. Jean Brault is the one who could answer it.

[English]

The Chair: Thank you very much, Mrs. Ablonczy.

Monsieur Guimond, s'il vous plaît, huit minutes.

[Translation]

Mr. Michel Guimond (Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans): Thank you, Mr. Chairman. Good morning, Mr. Michaud.

Mr. Michaud, could you just refresh my memory with respect to some specific dates. You left in January of 1998?

Mr. Bernard Michaud: Yes, I resigned in January, 1998 and I left on the last day of February, 1998.

Mr. Michel Guimond: So, you left the firm at the end of February. Why did you leave?

Mr. Bernard Michaud: Because I was the Comptroller, I was, in a sense, the “skipper“ at the time. Jean Brault had decided to buy out two of his partners and bring in two new partners. At least, that's what he told us. I am not in a position to say whether he actually did that or not. But he was supposed to bring in Mr. Roger Desjeans et Ms. Lucie Dumas as Groupaction partners. Roger Desjeans had previously been Groupaction's external auditor and personal advisor to Jean Brault. He looked after his taxes and his holdings, things that I never dealt with. I only handled the Groupaction studio and Groupaction itself. I would have moved into the number two spot and I just wasn't interested. I had an opportunity to move to another agency, and I jumped at the chance. So, I left the firm.

Mr. Michel Guimond: What agency did you join?

Mr. Bernard Michaud: Armada.

Mr. Michel Guimond: When Mr. Gagliano appeared before us, he testified that Groupaction had worked for the Liberal Party of Canada during the 1997 election.

Since you were the Comptroller, can you either invalidate or confirm that testimony?

Mr. Bernard Michaud: Groupaction was not directly involved. An employee by the name of Richard Boudreault was put on leave without pay. So, he was not paid by Groupaction. He worked on the campaign.

Mr. Michel Guimond: Did you personally engage in any partisan work?

Mr. Bernard Michaud: Never.

Mr. Michel Guimond: Never. I am obviously referring to the years during which you were working at the agency. You cannot provide testimony regarding what happened after the end of February, 1998. In the context of the Sponsorship Program, did you meet… After all, Groupaction did not have its offices in a building at the likes of Place Ville-Marie. Did you ever see any senior members or officials of the Liberal Party at Groupaction's offices? For example, did you ever see Mr. Gagliano there?

Mr. Bernard Michaud: Never. I never saw either Mr. Gagliano or Mr. Guité.

¿ (0935)

Mr. Michel Guimond: And what about Mr. Jean Carle?

Mr. Bernard Michaud: I couldn't even tell you who he is.

Mr. Michel Guimond: Jean Pelletier? Minister Coderre?

M. Bernard Michaud: No.

Mr. Michel Guimond: Did you see other ministers?

Mr. Bernard Michaud: No.

Mr. Michel Guimond: In his testimony last week, Mr. Guité told us that he carefully compiled all the documents. Did you either hear or read Mr. Guité's testimony of last week?

Mr. Bernard Michaud: I only read what appeared in the newspapers.

Mr. Michel Guimond: What was reported in the media. So, you didn't listen to his testimony?

Mr. Bernard Michaud: Well, I heard bits and pieces of it at the office, because we have television sets all over the place, but nothing more than that.

Mr. Michel Guimond: Mr. Guité explained the sequence: first there is an event, then a purchase order, an invoice and a post-mortem. That is basically the way things work in agencies. As far as you are concerned, were all the documents delivered to the government? Mr. Guité tells us that when he left, all the supporting documents were in the files. Yet the Auditor General, in her report, and the internal investigations carried out in 1996 and 2000 showed that there were documents missing from the files. As far as you know, were all the documents in the possession of Groupaction delivered to the government?

Mr. Bernard Michaud: If you're talking about the three reports, I have absolutely no idea. I can't answer for that, because I wasn't there at the time. If you're referring to the sponsorships per se , well there weren't any while I was there. I have no recollection of seeing any sponsorships throughout the time that I was there. According to the documents, they began in November, 1997, and I resigned in January, 1998. I'm sure that in the interim, there could not have been many sponsorships awarded, considering that the events in question were often activities or festivals that occur in the summer. In the middle of winter, that kind of thing is fairly rare. So, from what I can recall, there were none.

Mr. Michel Guimond: Let's talk about the radio ads in 1997. They cost $1,036,000. They were produced by Polygone, but managed by Groupaction.

Mr. Bernard Michaud: That doesn't ring a bell at all.

Mr. Michel Guimond: And what about the People's Almanach?

Mr. Bernard Michaud: Well, that rings a bell.

Mr. Michel Guimond: $515,000.

Mr. Bernard Michaud: In that case, we received an invoice from Polygone, and then we invoiced the government with a mark-up of 10, 12 or 15% or whatever it was. I had an invoice from Polygone. I remember it because it was a large amount.

Mr. Michel Guimond: Fine. In your opinion, did family members of Liberal ministers or members of Parliament work at Groupaction?

Mr. Bernard Michaud: Did they work there? Well, there was a Ms. Chrétien who worked in Groupaction's Multimedia Department. I believe she is related to Mr. Chrétien. How? I really couldn't say, but based on my recollection, she is a relative of Mr. Chrétien.

Mr. Michel Guimond: Do you remember her first name? If I suggest it…

Mr. Bernard Michaud: It seems to me it's a double-barrelled name.

Mr. Michel Guimond: Yes, right. Maria-Lyne Chrétien.

Mr. Bernard Michaud: Yes, something like that.

Mr. Michel Guimond: I'd say it's very much something like that. She worked in the Finance Department for a company called GroupaXion. It was your Multimedia Division, for your Web site.

Mr. Bernard Michaud: That division was created after I left. You're right; she worked for that department, which was only starting up at that point.

Mr. Michel Guimond: So, she started when you were still working there.

Mr. Bernard Michaud: Yes, she was there.

Mr. Michel Guimond: She was already there. When did she start working there, from what you can recall?

Mr. Bernard Michaud: I'd say she began working there late in 1996.

Mr. Michel Guimond: Are you sure that she is related to former Prime Minister Chrétien?

Mr. Bernard Michaud: If my memory serves me well, I would say she is.

Mr. Michel Guimond: What was the relationship between them, as far as you know?

Mr. Bernard Michaud: I have no idea.

Mr. Michel Guimond: You don't know?

Mr. Bernard Michaud: No, I don't know.

Mr. Michel Guimond: What was Jean Brault's wife's name?

Mr. Bernard Michaud: Johanne Archambault.

Mr. Michel Guimond: Was she the Director of Promotion?

Mr. Bernard Michaud: Yes.

Mr. Michel Guimond: According to the invoices we've received, she was the Director of Promotion.

Mr. Bernard Michaud: Of Special Events and Promotion, yes.

Mr. Michel Guimond: How do you explain the fact that many hours of work were invoiced in her name? We're talking about more than 300 hours.

Mr. Bernard Michaud: It's true that she wasn't often at the office, but what can I say? She wasn't the only person to not always be at the office, and there is no doubt that she was not there 100% of the time. She was there when needed, when there were special events she had to take care of. I couldn't possibly say whether her time was justified or not. I have no idea.

¿ (0940)

Mr. Michel Guimond: Thank you.

[English]

The Chair: Merci beaucoup, Mr. Guimond.

Mr. Murphy.

Hon. Shawn Murphy (Hillsborough, Lib.): Thank you very much, Mr. Chairman.

Mr. Michaud, as comptroller of the Groupaction company, do you have a professional designation?

Mr. Bernard Michaud: No.

Hon. Shawn Murphy: What qualifications do you bring to the job?

[Translation]

Mr. Bernard Michaud: I have a Bachelor's degree in Management Accounting from the University of Quebec in Montreal.

[English]

Hon. Shawn Murphy: But you're not a CGA, CMA, or—

[Translation]

Mr. Bernard Michaud: No, I studied to be a CMA. I did two exams, but I never completed the final one.

[English]

Hon. Shawn Murphy: Give us some scope of the size of Groupaction. At the time you were the comptroller, what were its approximate annual revenues on a consolidated basis?

[Translation]

Mr. Bernard Michaud: Just to give you an idea, in 1991, when I started working for the agency, there were twelve of us on the payroll and maybe two freelances, whereas when I left in 1998, there were probably 80 employees working in two four-story buildings located side-by-side. It's important to understand that in the advertising business, if you want to compare one agency to another, you really have to talk about gross revenues. I would just like to quickly explain what is meant by gross revenues. If I bill a client $100 and the media costs me $85, that leaves $15, that amount of $15 constitutes our gross revenues before administrative expenses, etc. So, in order to compare two agencies, we have to talk about gross revenues. At that time, Groupaction had gross revenues of $5 or $6 million, which means…

[English]

Hon. Shawn Murphy: Are you saying the industry standard is that when you do the books, if the gross revenues are $10 million, your revenue before administrative expenses, taxes, and depreciation would be 15%, or $1.5 million?

[Translation]

Mr. Bernard Michaud: No. If I bill for advertising in the amount of $1 million, that advertising automatically costs us $850,000. The commission is always 15% on top of the gross price. That's really the difference. The report confuses the two. It talks about 17.65% or 15%. It's the same thing, but it all depends on where you're starting from. If you're talking about a gross price for advertising space in a newspaper that costs $100, the cost to the agency will be $85. Depending on a client's volume, that commission may be discounted. Rather than charging 15% on $100, we might tell the client we will bill him $100 minus 5%. That means it will cost the advertiser $95, but in spite of that, it will still always cost the agency $85. That's the way it works. The report refers to 17.65%. But it is still costing me $85. Theoretically I'm making $15. If you divide $15 by $85, you got 17.65%. We're still always talking about the same amount. It's always 15% of the gross price or 17.65% of the net price. It's the same thing. There's just a slight difference between the two.

¿ (0945)

[English]

Hon. Shawn Murphy: Is that across the board in all advertising agencies?

[Translation]

Mr. Bernard Michaud: Yes, that is a Canada-wide and even an America-wide standard. That is always the way it works with the media. As a general rule, the “commission” concept can be transposed to production. Supposing I make a television ad that costs $100,000. In that case, there is the cost price, to which I will add a commission of 17.65%, and then sell the product to my client for $117,650. That's the way it works. In some cases, professional fees are added to that for creative work or ad copy work by the artistic director and his ad writers. Their services are often billable, just as production supervision would be—with the film stripper or printer, to be sure the colours come out properly. Fees are sometimes charged for that. It all depends on how big the client. The larger the client, the more the commissions are discounted. When production is not used for publicity—for example, if I make posters that I'm not going to use in the newspapers, since a poster is not used in a newspaper, then fees are often charged on top of the commission, because there is no media component, which does bring in a lot of money.

If production is used for advertising in the newspapers, on television, on the radio or on billboards, the usual charge is only the standard commission of 15% for production, and a 15% commission for media which may, depending on the volume, be discounted at that point.

[English]

Hon. Shawn Murphy: Mr. Michaud, let's deal with this situation in general terms. Our Auditor General went in first of all to audit three Groupaction contracts. I know you were only an employee of Groupaction when one of them was there. Then she went back and examined a lot of the whole sponsorship program.

The nuts and bolts of her report is that there isn't any documentation to support the Canadian taxpayer having got value for money, and in a lot of cases there are no supporting documents as to what was contracted for by the government and what the government got in return.

You were at the other end of a lot of these contractors. You were the comptroller of Groupaction. Can you not square the circle and explain to the Canadian taxpayer that there was no money missing, and that the Canadian taxpayer got value for money?

[Translation]

Mr. Bernard Michaud: As I said previously, sponsorships per se began only in 1997, according to what I read in the report. I was at the agency for only two months during that period. I am therefore not in a position to pass judgment on what happened at Groupaction during that time. However, after that, I went to work at Armada. As far as Armada is concerned, as I recall, the Auditor General had only good things to say about the contract referred to in the second call for tenders—the one in 2001. All the supporting documents were there, the visibility plans were also there, the work was performed, and the photographs showing what went on at these events were also there. Everything was there; otherwise, we would not have been able to get paid. So, that work was very well done. I can attest to that for Armada: it was very well done. As far as Groupaction is concerned, however, I really can't say. I don't remember seeing any sponsorships during the period when I was there, because they were only just starting up at that time.

So, I can't answer for Groupaction, but as regards Armada, the Auditor General had nothing but good things to say about all the subsequent contracts starting in 2001. She had no criticisms in that regard.

[English]

Hon. Shawn Murphy: We're not talking about Armada; we're talking about Groupaction.

The Auditor General really didn't have anything that great to say about Groupaction. Certainly, if you read her first report released in 2002, it was a very negative report on all three contracts. The three contracts were for $500,000, $550,000, and $575,000. There really weren't any supporting contracts, documentation, or invoices to support what the taxpayer contracted for or for what the taxpayer got in return.

I know you were there as the comptroller for Groupaction, so can you shed any light on this whole issue?

[Translation]

Mr. Bernard Michaud: Once again, I would remind you that I was only there through about one quarter of the first contract. I can't comment on the other two, because I wasn't there at the time. As regards the first one, I can't really answer because those were only temporary invoices that I sent. I know that I did in fact prepare them, on instructions from Jean Brault. Were the time sheets there? These were only temporary invoices, so I can't answer that question. I don't know if that was done.

[English]

Hon. Shawn Murphy: Thank you very much, Mr. Chairman.

The Chair: Ms. Wasylycia-Leis, please, for eight minutes.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Mr. Chairperson.

Thank you, Mr. Michaud. Could you tell us your job description for the position of comptroller?

[Translation]

Mr. Bernard Michaud: There are two parts to the job. As I mentioned earlier, there is the media dimension and the production dimension.

As regards the media, the accounting software used at Groupaction is called AdTrack, and it is an advertising management software that I would say is used by the top 15 or at least the top 10 agencies in Quebec. Pretty well everyone uses the same software. As for the media component, for every media campaign, whether it is in print, billboard, radio or television, every placement is recorded in the accounting system and is available for invoicing, depending on the agency's specific policy.

In the case of Groupaction—and it's pretty well the same thing everywhere—on the first day of each month, we invoice all the bookings for a given month. Then there is a second temporary billing on the 15th of the month if other campaigns began after the first billing of the month, and so on. That's the way it works on the media side. It really is systemic. The system generates the invoice based on the media service input. So, if we buy so many columns by so many lines at such and such a unit price per line in La Presse or any other newspaper, the system will generate an invoice that will reflect the media buy. With a television or radio campaign, if I have five rotating advertising spots between 6 and 9 a.m. on CKMF, for example, that will automatically appear on the invoice with the appropriate amounts. So much for the media component.

On the production side, I would say there are more players involved. So, Client Services is more involved in this end of things, as well as in production. The creative team is certainly involved, depending on the nature of the project. At that point, an estimate is prepared. This is not only the way it works at Groupaction. All agencies, without exception, prepare a quotation for every one of their contracts. Whether it is an ad to be placed in the newspaper tomorrow morning or a television campaign that is going to run in three months' time, one way or another, a cost estimate is prepared. Invoicing normally follows the cost estimate.

At Groupaction, in accordance with its policies, we would invoice at the end of the contract for production. There was only one exception, and that was for television and television production campaigns. In that case, we would follow the rules established by the Quebec Association of Film and Television Producers, which require that we invoice 50% of the cost during pre-production, 40% the day of the shoot, and 10% or any adjustment, where appropriate, 30 days after final product delivery. It's another way of doing things.

In the Accounting Department, we would record the time sheets and purchase invoices, and prepare the invoices according to instructions received from Client Services. For media work, however, because it was systemic, we would generate the invoices ourselves, although they still had to receive higher approval by the Media Department. So that is basically it. If there were fees to be billed, we would prepare those invoices according to instructions from Client Services. We often had to invoice based on an estimate, because we would have prepared a quotation to estimate the time. That was based on the estimate or on the contracts in place with different clients. We would take into account actual time devoted to each of the contracts.

So that pretty well summarizes what my work involved.

¿ (0950)

[English]

Ms. Judy Wasylycia-Leis: So basically you were on the front line in terms of being able to monitor and observe the whole process of billing invoices, and you would have been able to get a sense if anything was going on in terms of overbilling or improper invoicing.

I say that...and my question relates not just to sponsorship but also to advertising and market research and the whole range of issues the Auditor General referenced. Are you saying that you, at no point, experienced, observed, or witnessed overbilling or improper invoicing throughout this period of time between 1991 and 1998?

[Translation]

Mr. Bernard Michaud: No. Generally, for anything involving media, there is always an invoice to support the billing, and we take a commission on top of that. It's a straight in and out, so there is no problem there. As regards fees, however, invoices were prepared according to instructions from Client Services. I am not in a position to say whether the billed time corresponded to hours that were actually worked. I was not in charge of approving time sheets. The Accounting Department certainly did not have the authority to approve those time sheets. The time sheets were completed, then approved by the immediate supervisors and forwarded to the Accounting Department, which would then input them into the accounting system. Was that time justified or not? Were the time sheets in the right file? There is no doubt that the person initially responsible for approving the invoices was also supposed to ensure that they were in the right files. Was overbilling or anything like that occurring? All I can say is that I witnessed nothing of that kind.

[English]

Ms. Judy Wasylycia-Leis: So who should we be talking to from Groupaction who would have observed some of this, if you didn't see any of it in the accounting office? Who would know?

[Translation]

Mr. Bernard Michaud: During the period when I worked there, I didn't see anything like that. As for the subsequent period, you may want to talk to Mr. Roger Desjeans, who replaced me.

¿ (0955)

[English]

Ms. Judy Wasylycia-Leis: I'm talking about the period you were there, 1991-1998, where in fact there is significant documentation in all areas pertaining not just to sponsorship but to advertising as well. Certainly you were on the front lines when it came to media and production, so if you didn't.... And there were wrongdoings that have been documented. The government's own internal audit that was carried out by the quick response team pointed out that there were some 43 files from Groupaction and many of these would deal with the period well before you left in 1998. There's clear documentation of incomplete files, lack of project information, a pattern of overbilling, excessive hours being billed, and on and on the list goes. There's a well-documented series of problems with Groupaction. Yet you say you didn't observe a thing? You didn't see anything? You were never asked to do anything you found unethical?

[Translation]

Mr. Bernard Michaud: Once again, it was not the Accounting Department that initiated invoicing. And it was certainly not the Accounting Department that decided what to write on the invoice. Let me give you an example. On an invoice issued for posters, it says: “50,000 posters on 40M paper, four colours”, and so on. But I have no idea what was done. I didn't even see the final product when the invoicing was done. For a television campaign, I never saw the ad that appeared on TV. I was not around the day it was filmed. However, I can tell you that where production is involved, it is always supported by external costs, because we use sub-contractors. Whether it's a film stripper, a printer, a production house for a TV ad campaign or a studio for a radio campaign, there are always invoices and there is always a standard markup, which is 15%. If there are fees to be charged, they are based on time and a lot of other things. Is that irregular? No, I couldn't say that it is irregular.

In terms of sponsorships, as I said earlier, I was only there until a quarter of the way through the first contract. So I can't say whether there was overbilling or not, because I wasn't around. I can't answer that question. During my time there, there was almost always an estimate and invoices associated with all these things. I repeat: the Accounting Department does not have the power to question what appears on an invoice. We don't know what work has been performed; we weren't there. I can't answer the question because that is not my “bailiwick“. I don't work in that area.

[English]

The Chair: Mr. Michaud, the question from Ms. Wasylycia-Leis was, during your employment at Groupaction, were you aware that anything unethical was taking place in the company? It wasn't the procedure within the accounting department. Again I ask you, were you aware of anything unethical, as far as business practices were concerned, within Groupaction during the time you were employed there?

[Translation]

Mr. Bernard Michaud: No, not that I can recall.

[English]

The Chair: Mr. MacKay, please, eight minutes.

Mr. Peter MacKay (Pictou—Antigonish—Guysborough, CPC): Mr. Michaud, it's obvious you don't want to be here; you've made it very clear. What I have a huge problem with, sir, is the fact that you're telling us that in every case, in every file you saw between the time you worked there in 1991 to 1998, everything was A-OK. All the files were documented; all the invoices were accounted for. You, as comptroller, thought Groupaction, as far as you were concerned, was billing the government for legitimate work that they were doing.

You told us you read the report, what the Auditor General has said, and I'm quoting from paragraph 3.69:

There was little evidence that any communications agency had analyzed the results of sponsored events in our sample. Communications agencies were required to submit post mortem reports summarizing the visibility benefits, with relevant documentation, photos, and examples of visibility, such as brochures and press clippings. In 49% of our files, there was no post mortem report, and therefore no evidence that the government had obtained the visibility it paid for.

She says in paragraph 3.60, “Most of the 53 files in our audit sample contained no assessment of the project's merits or even any criteria for assessing merit.” And she goes on to say, “...there was no information about the event organizers, no description of the project, no discussion of the visibility”, etc.

Mr. Michaud, how do you account for such a glaring difference in the assessment the Auditor General has made about files that come from your firm, Groupaction? How do you account for that?

À (1000)

[Translation]

Mr. Bernard Michaud: First of all, I was not around when the things she described were taking place, so I am not in a position to judge. However, even if I had been around, I would not have anymore…

[English]

Mr. Peter MacKay: Hold on, Mr. Michaud. You were there during the relevant time. Groupaction was doing work for the Government of Canada during the time in question when the Auditor General was looking at these files. You were there. You were the comptroller of that company.

[Translation]

Mr. Bernard Michaud: Even assuming that I was there, it's important to consider the roles of the different players involved. It is not up to the Accounting Department to perform follow-up or do a post-mortem. Was that done or wasn't it? I have no idea. That is the job of Client Services.

[English]

Mr. Peter MacKay: So you just accepted from another department at Groupaction that everything they gave you was correct. You never asked questions about it. There were never any complaints. Nobody from the government ever contacted you and said, “Look, where is the post-mortem report for the file?”

[Translation]

Mr. Bernard Michaud: Never.

[English]

Mr. Peter MacKay: Do you know what a post-mortem report is?

[Translation]

Mr. Bernard Michaud: Yes.

[English]

Mr. Peter MacKay: Okay, what is it?

[Translation]

Mr. Bernard Michaud: As regards these sponsorships, it was to see whether an event had actually taken place. Let's begin with that. Did the event really take place? Did the government get its money's worth? If it was a softball tournament, for example, were there enough Canadian flags or logos on the fences around the field? Those are the things you're looking at. There have to be photographs. Was it decided that the t-shirts or caps would have the Government of Canada logo on them, according to the pre-approved feasibility plan? Sorry, I'm referring to Armada here. That is what a post-mortem is to me. But it's not the Accounting Department's job to pass judgment on that or to perform that work—far from it.

[English]

Mr. Peter MacKay: Okay, and in every case you're telling us that in the files you saw, reviewed, and invoiced it was there. All of that information, all of those things the Auditor General says were missing, was in the files you saw.

[Translation]

Mr. Bernard Michaud: I can't judge that. I can't say it was there, because I didn't do the work.

[English]

Mr. Peter MacKay: I'm not asking you to judge; I'm asking if you physically saw it there.

[Translation]

Mr. Bernard Michaud: No.

[English]

Mr. Peter MacKay: You didn't see it there.

[Translation]

Mr. Bernard Michaud: I never ever saw the visibility plans or post-mortem reports, just as I never ever saw a television ad before it went to air. It's the same thing. We don't see any of that in Accounting. We come along afterwards. We're asked to invoice and we invoice. It's not the job of the Accounting Department to obtain documentation or pass it along to others. That material is sent to Client Services, which appends any necessary supporting documents based on the invoice requested of us. That is not the Accounting Department's job. We certainly would not see that.

[English]

Mr. Peter MacKay: Were you aware of verbal contracts? When advice was given by Groupaction and it was done verbally there was no paper trail. Did you ever hear anything about that? Did you ever see anything that would indicate you were invoicing for verbal advice? Does that ring a bell?

[Translation]

Mr. Bernard Michaud: No, not at all.

[English]

Mr. Peter MacKay: You don't remember that.

You mentioned that an individual named Richard Boudreault was seconded to the Liberal Party of Canada, you told my colleague from the Bloc. Is that correct?

[Translation]

Mr. Bernard Michaud: In 1997, we put Mr. Richard Boudreault on leave without pay to allow him to work on the 1997 election campaign.

[English]

Mr. Peter MacKay: So he wasn't being paid by Groupaction while he was working for the Liberal Party.

The Chair: I'm going to interrupt at this time. I'm sure, like everybody else, we're wondering why Mr. Michaud is here. We try to vet the witnesses to ensure they can add significantly to the hearing and the understanding of the issue.

As you know, we are assisted by KPMG, which is interviewing many of the witnesses before they come forward here. I asked KPMG representatives, who are sitting at the table, to check why they recommended that Mr. Michaud come forward. They have written out a couple of points that Mr. Michaud told KPMG in the private hearing. This was why they felt it was appropriate that Mr. Michaud be brought forward.

He has written that down in handwriting. I've had it translated, and I'm distributing it to every member of the committee at this time. These are the questions you may want to ask. Because the photocopies may not be that good, I'll just read what they say. Members may wish to ask questions on this.

First, the chief executive officer of Polygone was a Mr. Coderre. He used to pay invoices and mark them up by 15%. The wording on the invoices was dictated by Mr. Brault.

Second, a number of companies within Groupaction's umbrella would mark up inter-company transactions by 15% as they passed them through.

These are two issues that Mr. Michaud advised KPMG. I think it's appropriate I put that on the table for members to ask questions on so they have a better idea why Mr. Michaud is here today.

My apologies for interrupting, Mr. MacKay.

Mr. Thibault.

À (1005)

Hon. Robert Thibault: I just have a question—I wasn't hearing very well. Did Mr. Brault provide the information to the committee?

The Chair: Mr. Michaud provided it to KPMG, which interviewed him to find out if it was worth bringing him to the committee in the first place.

Hon. Robert Thibault: Thank you.

The Chair: Okay.

Mr. MacKay.

Mr. Peter MacKay: Mr. Michaud, are you familiar with the unity fund? Did you ever hear anything about the unity fund? You've said there was nothing to do with the sponsorship program, but was any work done for or was there any reference to the unity fund during your time at Groupaction?

Mr. Bernard Michaud: No.

Mr. Peter MacKay: You don't recall that.

In your capacity as comptroller did you ever see any receipts; did anything go through the office that was receipted to the Liberal Party of Canada, as opposed to the Government of Canada?

[Translation]

Mr. Bernard Michaud: What do you mean by receipts?

[English]

Mr. Peter MacKay: Nothing that you recall.

The Chair: What do you mean by receipts?

Mr. Peter MacKay: I mean any reference, any invoices, any receipts that went to the Liberal Party, as opposed to the Government of Canada.

[Translation]

Mr. Bernard Michaud: I don't really understand your question.

[English]

Mr. Peter MacKay: Well, you're a comptroller. You invoiced for work done. I'm assuming you were also in charge of payroll when you were working at Groupaction. As the company grew, there were more employees. Is that correct?

[Translation]

Mr. Bernard Michaud: Yes, in consultation with Mr. Jean Brault.

[English]

Mr. Peter MacKay: Okay. With Mr. Brault there by your side, did you ever see receipts? Did you ever issue receipts, or invoice the Liberal Party of Canada?

[Translation]

Mr. Bernard Michaud: To my knowledge, no.

[English]

Mr. Peter MacKay: Are you familiar with Mr. Alain Renaud?

[Translation]

Mr. Bernard Michaud: Yes.

[English]

Mr. Peter MacKay: Was he also an employee of Groupaction?

[Translation]

Mr. Bernard Michaud: No.

[English]

Mr. Peter MacKay: He never worked at Groupaction?

[Translation]

Mr. Bernard Michaud: He invoiced us based on the contracts awarded to him.

[English]

Mr. Peter MacKay: So he subcontracted.

[Translation]

Mr. Bernard Michaud: Yes.

[English]

Mr. Peter MacKay: On this issue you raised or referenced in evidence about Groupaction's markup by 15% and a pass through, what did you mean by that?

[Translation]

Mr. Bernard Michaud: That's the agency commission, for any costs…

[English]

Mr. Peter MacKay: The 15% commission was for what?

[Translation]

Mr. Bernard Michaud: Well, for any outside costs. This goes back to what I was saying earlier about gross and net costs. Any external cost is marked up. So there is a mark-up that takes the form of an agency commission of 17.65% on any given cost. With a media buy, it's more like 15%, but on the gross price.

[English]

Mr. Peter MacKay: Who is Mr. Coderre?

The Chair: Mr. Mackay, your time has expired.

Madam Jennings.

[Translation]

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Mr. Chairman.

Mr. Michaud, I want to begin by thanking you for being here today. I have a few brief questions.

What companies were affiliated with Groupaction at the time you were working there?

À (1010)

Mr. Bernard Michaud: I'm going to tell you which companies were affiliated and which were not. We will go through the organization chart as a whole. At the top echelons of Groupaction, at the time I was working there, were four individuals, including Jean Brault via his holding company called Alexsim Management, and of which I assume—because I did not handle that particular aspect of things—he was the sole shareholder. There was also Johanne Archambault, Jean Brault's wife, who had one share or 1% of the shares in her own name. Then there was Richard Boudreault, through his company which I believe was called Richard Boudreault inc. Finally, there was Mr. Michel Pepin, who also had his own company, called ISAMI Management Inc. Those are the four owners of Groupaction. Those same four owners were also owners of a studio called Alleluia Design. The share ownership for one and the other was the same, but in the case of Groupaction, it is not set up as a subsidiary; in other words, it is not a shareholder of the Alleluia Design studio.

In addition to that, located at 69 Sherbrooke Street West was another company called Alexsim… In any case, it was another company that owned the building at 69 Sherbrooke Street West. It was wholly owned by Alexsim Management, Jean Brault's holding company.

Located at 75 Sherbrooke Street West, which was the main entrance to Groupaction, was a corporation in which Jean Brault's Alexsim Management had 70% ownership and ISAMI, Michel Pepin's company, 30% ownership.

Finally, located at 81 Sherbrooke Street West was the former Everest building. That building was purchased after I had already left. I was no longer with the agency. I don't believe that was even being discussed at that time, but it was purchased in 1998 or 1999, after I had already left.

I don't believe there are any other companies associated or affiliated with Groupaction.

Mrs. Marlene Jennings: Thank you very much. Before you leave, could you put all that information in the form of a schematic, identifying which companies were 100% owned by the consulting firm, which itself was 100% owned by another individual, and so on?

Also, in answer to certain questions, you mentioned a firm by the name of Polygone in your testimony. Mr. Coderre's name was also mentioned in relation to that company. Could you tell us whether, to your knowledge, Mr. Coderre was the owner of Polygone and, if not, what his exact title or role was?

Mr. Bernard Michaud: I can't even answer that because I don't know which Mr. Coderre you are referring to. I have no idea who owns Polygone.

Mrs. Marlene Jennings: You don't know who owns Polygone?

Mr. Bernard Michaud: I'm tempted to say the owner is Mr. Luc Lemay, because I've heard that name before, but I think I may have seen it in the newspapers.

[English]

Hon. Robert Thibault: I just want a clarification. This document was circulated a short time ago by, I understand, the research staff of the committee, and it indicates Mr. Coderre was président-directeur général, chief executive officer, of Polygone. I want to confirm this from the researcher, from the chair: is the information provided to us the information that had been provided by the witness?

The Chair: I was advised by our KPMG people that these were the things.... I'm going to ask KPMG to speak to this note.

Mr. Greg McEvoy (Forensic Auditor, KPMG):

Thank you, Mr. Chair.

It is my understanding from our individual who interviewed Mr. Michaud with regard to Polygone that Mr. Coderre's name was referenced, and it was in the context of him being either an executive or a part owner of the company. Perhaps you can clarify that, but that was the information our investigator had—

Hon. Robert Thibault: Again, on a point of order, Mr. Chair, could I ask the researchers, through you, if the Coderre referred to is the minister?

À (1015)

Mr. Greg McEvoy: That's a good question. That was my understanding, and I think we need to confirm that with the witness. That was the information I was getting.

The Chair: Mr. Michaud, on Polygone and Mr. Coderre, you did apparently advise, when you talked to KPMG in Montreal, that Mr. Coderre was either the part owner or the CEO of Polygone. Can you confirm that you mentioned that to them?

[Translation]

Mr. Bernard Michaud: Never.

[English]

The Chair: No?

I'm going to ask Greg to talk to his people in Montreal and get back to us as quickly as he can. You can tell us what you've found out when you've done that.

Mr. Dennis Mills: On a point of clarification, Mr. Chair, this is a very serious moment for the credibility of this committee, because there's an inference here, an implication, that has profound effect on the Government of Canada. I really think we need to get some advice from our legal counsel here on how we should proceed, because a document is now in the public domain that, according to our sworn-in witness, is not accurate.

The Chair: That's correct, and that's quite disconcerting to me, Mr. Mills. That's why I've asked KPMG to immediately talk to their Montreal office to confirm their side of the story so we can know exactly what is going on here.

Mr. Dennis Mills: But do you think we should maybe suspend any further questions on this document until we find out whether it's true or false?

The Chair: I think it's appropriate that we suspend questions on point number one. We can ask a question on point number two, and if he confirms that, then that would be legitimate.

Greg.

Mr. Greg McEvoy: Thank you, Mr. Chair.

I just wanted to point out that the document does not state that Mr. Coderre was an executive or had any ownership; it says to confirm that it was owned by, that this was the point of discussion. I don't have any evidence myself right in front of me here today to suggest it's accurate. This is information that was relayed to me, and I think it's just something that was discussed and we needed to confirm.

Hon. Robert Thibault: On a point of order.

Mr. Greg McEvoy: There was a difference that was a fact and put on the document, and that's not true.

Hon. Robert Thibault: On a point of order, this is serious. There's a document that's provided to the committee by our research staff who are professionals and have been hired by the Library of Parliament to achieve this task. The document presented to me says “Polygone” and in brackets

[Translation]

“Owned by or CEO was Coderre?”

It doesn't say anything about who this Mr. Coderre was or what year is referred to. Is this the Mr. Coderre who is now a Minister? Did this occur in the years when he was a Minister or when he was a Member of Parliament? Was this during a previous life—in other words, before he got here?

We are told that this was part of the testimony given by the witness appearing before us this morning, and everything is on hold. We hear people's reputations, including that of the witness, being questioned, and then we are handed a document which we are told is official. Perhaps we should consider ending this meeting now to check the facts.

[English]

The Chair: Madame Jennings and Monsieur Desrochers.

[Translation]

Mrs. Marlene Jennings: I would like to know exactly who produced this document. Did the person who prepared it meet with Mr. Michaud first and ask the questions listed on this paper?

I would simply like to ask you, Mr. Michaud, if you met with representatives of KPMG and, if so, if they asked you questions about Polygone. If they did, what answers did you provide?

[English]

The Chair: And before we go there, just to respond to you, Madame Jennings, this document that you have was written by a Mr. Greg McEvoy from KPMG. As I mentioned earlier, I was wondering why Mr. Michaud was here because they are vetted or cleared by KPMG as having something to contribute to the investigation. There was not very much forthcoming, and I asked Mr. McEvoy to talk to his Montreal office. He wrote down these two points. I had them translated and I had them circulated. I felt it was important that if this was the information KPMG had from a private meeting, I should bring it forward here.

So now, Mr. Michaud—

À (1020)

Mr. Dennis Mills: A point of clarification.

The Chair: No. We're going to have Mr. Michaud's response, Madame Jennings answer, to a question.

Mr. Michaud, were you interviewed by KPMG? If so, were the discussions regarding Polygone? And what was said?

Hon. Robert Thibault: I have a point of order.

The Chair: After we get the answer.

Hon. Robert Thibault: I think you should hear this one first, because the question I want to raise brings into question the validity of the work of this committee.

We have some professionals we used to decide whether a witness has something to contribute to the committee. Those experts are selected by the Library of Parliament. We all subscribe to that.

The witness is brought forward, in this case Monsieur Michaud. At some point during the meeting today our chairman decides that some of the elements discussed by the experts we hired, KPMG, and the witness might be relevant. It is handwritten on a piece of document circulated to the committee without any provenance, without telling where it's from. I had to ask the researcher who it is that's giving us this information.

The Chair: No, I did answer that.

Hon. Robert Thibault: We did. But we have two elements out of those supposed discussions—and I should say “supposed”—between our research staff and the witness that are brought forward. If any, I would say, are brought forward or made public, all should be made public. And the elements chosen should not be selected either by the chair or by the research staff. I think it's been agreed generally that those discussions were not public, that what transpired in those discussions with the potential witnesses was not made known to the members of this committee. All of sudden, two elements, unsubstantiated, are put forward.

The Chair: I understand your concern and it was a concern of mine, Mr. Thibault. It was a conversation between Monsieur Michaud and KPMG. It wasn't coming from a different source. Mr. Michaud would be aware of it. As I say, we have faith in the competence of the firm—

Mrs. Marlene Jennings: Mr. Chair, I believe you're testifying on behalf of KPMG and on behalf of Mr. Michaud.

The Chair: No, I'm giving the rationale as to why I brought the documentation forward. That was why I tabled the document. The document was handwritten and was prepared at the very last minute. I had it translated and distributed.

Mr. Desrochers, Madam Ablonczy, and Mr. Mills.

[Translation]

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): Mr. Chairman, I don't know if this is the appropriate time, but I want to say that in my opinion, it is soon going to be necessary to clarify the role of the firm that has been hired. We are told that this firm was hired to help us determine which witnesses we may or may not want to hear from. Is it empowered to make recommendations or to ask questions? The Notices of Motion recently tabled by the Liberal Party completely demolish all the work surrounding the firm's recommendations.

Also, Mr. Chairman, the sheet of paper you have had circulated, which provides no clarification whatsoever regarding the origin of this firm, does not seem to be very serious, in my view. You have to admit that. This firm is being paid to provide us with handwritten documents like this where questions have been scribbled down at the last minute? I'm really wondering about its role in all of this. I also am wondering what possible reason there can be for the slowness of the witness determination process.

This afternoon, when we are discussing our future work, we will have to engage in that exercise. Mr. Chairman, we are working 24 hours a day. I think we need to develop some sort of vision and have a clear idea of where we're going with this Committee.

[English]

The Chair: Thank you, Mr. Desrochers.

It was normal, I would have thought, that the witness would disclose the same information he had disclosed to KPMG. I thought that would have been the appropriate way, without having to transcribe the discussions that took place in private and to determine if the witness had something to contribute. That is why it's an informal document.

Mrs. Ablonczy, Mr. Mills, Mr. Lastewka, Mr. Murphy, and then we'll cut it off there.

À (1025)

Mrs. Diane Ablonczy: Mr. Chairman, I guess the concern of my colleagues opposite is the reference in this document to Minister Coderre.

The Chair: No, no, it's not a reference to Minister Coderre, but to “a Mr. Coderre”.

Mr. Dennis Mills: Excuse me, Mr. Chair, I have a point of order.

Mrs. Diane Ablonczy: I am on a point of order, so I'm entitled to speak.

So if it's to “a Mr. Coderre”, I assume from the alarm expressed by my Liberal colleagues that they have some apprehension this could be Minister Coderre.

Surely, this is a simple matter to clear up, because if the information came from the witness, then he can clarify it. Is that not your concern?

Some hon. members: —[Inaudible—Editor]—

The Chair: No, no, we're not going to have discussion across the floor.

Mrs. Diane Ablonczy: But, Mr. Chairman, I think it's entirely appropriate for the committee to be advised by the forensic auditors, who have been engaged to assist the committee, as to what information they received from the witness that they felt was relevant and that would be relevant for us to examine the witness on.

I don't understand why we are wasting the committee's time arguing about this. We have KPMG telling us this is what they heard from the witness. I'm assuming they didn't fabricate it, but the witness is here and we can ask him what he said.

The Chair: We're trying to get to the question.

Mr. Mills, Mr. Lastewka, and Mr. Murphy.

Mr. Dennis Mills: I want to get right to the verb, Mr. Chair. You interjected on behalf of this witness, who I thought was answering all of the questions directly and who was short and to the point.

As I wrote it down, you said the committee must have been “wondering” why this witness was here today. That's what you said.

Well, I have some information here from KPMG that I want to circulate and point out.

What I'd like to ask you is, was this document the sole reason why you or KPMG thought this witness was relevant today? In other words, you seem to suggest that the committee must have wondered why this witness was in front of us today, but you had this knowledge of this basic discussion or information.

I'm just trying to clarify where you're coming from.

The Chair: I did not have knowledge of what's in this document that's been circulated. I asked for it to be translated and circulated. I got it before translation, which was ten minutes before you got it, and I had no contact with Mr. Michaud; I had no contact or discussion with KPMG about what they'd do about Mr.Michaud before I asked that it be translated.

Mr. Lastewka.

Hon. Walt Lastewka (St. Catharines, Lib.): That was part one of my question, whether you had discussions with KPMG on these items or on that page. So you're denying that.

The Chair: Absolutely.

Mr. Murphy.

Hon. Shawn Murphy: Mr. Chairman, I really think we have to take a step backwards, take a deep breath, and try to stay focused here. This is just an attempt to get a document and for you to run out in the foyer and talk about it, as we did Friday afternoon. We went the whole day, and we had this document from Guité that didn't mention Earnscliffe; it just mentioned that people from Martin's office wanted more competition, and they wanted the competition sooner rather than later. The same thing happened today, and I just think it's a joke, it's a circus, it's a dog and pony show. We have to read this document and stay focused on it. I know you want to talk about the unity fund; I know you want to talk about whatever. It's fine, it's great media play, sir, but let's stay focused on what we're supposed to do. I'm disgusted.

The Chair: It may be the opposition's role to do that. I'm trying to run this investigation as clearly and as fully as possible, and if information is available to the committee, I would like them to have it. If I were to ask KPMG to prepare a complete synopsis of the discussion by the witnesses and distribute that before the witnesses come here, you can be guaranteed it would be in the media's hands before a question was asked. I have this problem. We had an in camera meeting last week and within the hour it was in the media. I have the serious problem of trying to keep the members informed of information that is coming to the committee, while at the same time ensuring that it's not in the media's hands before it's in your hands or before the witness has a chance to respond.

Mr. Lastewka.

À (1030)

Hon. Walt Lastewka: I want to proceed, but you started your discussion by saying the witness was not forthcoming, and that's where I—

The Chair: Did I say that?

Hon. Walt Lastewka: Yes, you did. When you say something like that, it means you have additional information to be brought forward to this table. So when you, as chair, say the witness is not forthcoming, I have a great concern.

The Chair: I perhaps should not have used those words. If I said that, I was trying to say to myself that in bringing the witness forward, there should be some serious information put on the table for discussion, and that was not forthcoming. Therefore, I thought to myself, I talked to KPMG, to Mr. McEvoy, who talked to Montreal, got this information, and I thought the committee should be apprised of it. No one can say the committee should not be apprised of it, and if the committee's research staff are in command of information, surely that should be ours as well.

Madam Jennings, pose your question once more, please.

[Translation]

Mrs. Marlene Jennings: Thank you, Mr. Chairman.

Did you meet with representatives of KPMG regarding the study being conducted by this Committee? This is not an inquiry; it is a study pursuant to Standing Order 108.

If you did meet with representatives, what was the nature of your discussions with them? Did they ask you about Polygone? If so, what information did you provide regarding that company? Did they talk about companies affiliated with Groupaction? If so, what information did you pass along to those representatives?

Mr. Bernard Michaud: I would like to begin by addressing the last part, because while you were debating a point earlier…

Mrs. Marlene Jennings: You have already pretty well answered the last part, because I asked you the question previously, and you described the whole organizational structure.

Mr. Bernard Michaud: As concerns the organization chart…

Mme Marlene Jennings: Perhaps you could just answer the first part of the question. Did you meet with KPMG? Was Polygone mentioned, and so on?

Mr. Bernard Michaud: Yes, I met with KPMG, but as to whether I discussed Polygone… I believe I did. However, I did not talk about Mr. Coderre, because I am equally as surprised to hear that name come up this morning. The only thing I may have mentioned, as I said earlier with respect to Polygone, is that there was one contract that I remember because it involved very big numbers. I don't remember the exact number, but several hundreds of thousands of dollars were involved for advertising in the People's Almanach. That's the only thing I could possibly have mentioned. Whether I did or not, the fact is that is the only thing I could have referred to. I do remember that we received the invoice from Polygone and then billed the government, adding on a commission of 10 or 12 per cent to the price that appeared on Polygone's invoice, but that's all.

I know that Mr. Lemay is there now because I read that in the newspapers, but other than that, I have no idea what connections Mr. Coderre could possibly have with Polygone. I have never referred to this because I am not aware of it.

Mrs. Marlene Jennings: Do you know who owned Polygone at the time you were working for Groupaction?

À (1035)

Mr. Bernard Michaud: No, I have no idea.

Mrs. Marlene Jennings: Do you know who the Chief Executive Officer of Polygone was at the time you were working for Groupaction?

Mr. Bernard Michaud: No idea.

Mrs. Marlene Jennings: Did you know any employees or senior managers with Polygone at the time you were employed by Groupaction?

Mr. Bernard Michaud: No, not at all.

Mrs. Marlene Jennings: Thank you.

I want to come back to my questions now.

You gave us an overview of the companies that, at the time you were working for Groupaction, were acting as consulting firms and which were wholly owned by Mr. Brault or someone else. You have sketched out in fairly good detail all the connections between them and Groupaction, and so on.

When there were sponsorships during the time you were Comptroller, in cases where the production work was performed by a subsidiary of Groupaction or one of the companies you referred to in describing the organization chart, how was the invoicing done? Let me give you an example. One of the owners of Groupaction has a company that does media production. He decides to award a sub-contract to his subsidiary to perform production work, and the subsidiary sends an invoice to the parent company. In a case such as that, how was the invoicing done? Was the 15% or the 17.63% included, and then Groupaction would send the client an invoice, to which a further 15% was added? How did it work in those cases?

Give us a specific example; it can be a hypothetical case, but if it is, please say so.

Mr. Bernard Michaud: First of all, Groupaction doesn't have any subsidiaries; it's a company in its own right. The studio connected to Groupaction, which is called Alleluia Design, has the same share ownership at the top.

The other company that I mentioned earlier, GroupaXion, spelled with an x in the middle, which looks after multi-media, did not exist at the time I was working there. So, everything that company is now doing was done inside Groupaction at the time.

When the studio invoices Groupaction, it bills a studio price. There is no mark-up on that. Sometimes the studio covers a mixed bag—if you'll pardon the expression—of suppliers, including strippers, printers, photographers, illustrators, and so on, and then invoices Groupaction for those individual amounts, with or without a mark-up. Groupaction invoices the client directly, with a mark-up at that point. That is the way it works.

Invoices from outside suppliers generally come through Alleluia Design or Groupaction, depending on the nature of the projects involved, and at that point, there is a mark-up.

Mrs. Marlene Jennings: Thank you.

[English]

The Chair: Thank you, Ms. Jennings.

Mr. Desrochers, for eight minutes.

[Translation]

Mr. Odina Desrochers: Thank you, Mr. Chairman.

Mr. Michaud, thank you very much for being with us today, although you do seem rather annoyed by this whole matter.

I would like you to give us an example of how the production chain worked in your firm. What was your specific role? What was your basic relationship with Mr. Jean Brault?

Mr. Bernard Michaud: I don't understand the first part of your question.

Mr. Odina Desrochers: At what point in the chain of production did you get involved?

Mr. Bernard Michaud: Only at the time of invoicing. That is when we would record the purchases.

Mr. Odina Desrochers: When you received invoices from Mr. Brault, did they include personal comments or use specific terms, and was that something that happened regularly?

Mr. Bernard Michaud: Are you asking me whether I received instructions about how to do the invoice? No, they simply told me what to write on the invoice and I would retype it or ask an accounting clerk to type it.

Mr. Odina Desrochers: Were there no invoices on which specific information appeared?

Mr. Bernard Michaud: No. The questions I would ask as a matter of course, where fees were involved, had to do with things like cost price and selling price. Is there an anticipated cost and an anticipated selling price? There clearly is a selling price if we are billing for something, but is there also a budgeted cost? The accounting rule that you always have to remember is that revenues and expenses have to match. Is there income? The expense associated with it generally has to be accounted for at the same time. So, that was my primary concern. In such cases, I would ask that question.

Mr. Odina Desrochers: Were you Comptroller at the time of the referendum campaign in Quebec?

Mr. Bernard Michaud: Yes.

Mr. Odina Desrochers: Did you see any invoices for work that may have been performed by Groupaction as part of the referendum campaign?

Mr. Bernard Michaud: As far as I can recall, no.

Mr. Odina Desrochers: As Comptroller, were you responsible for signing cheques from Groupaction to the Liberal Party of Canada?

À (1040)

Mr. Bernard Michaud: No, I did not have signing authority.

Mr. Odina Desrochers: You didn't have signing authority and yet you were Comptroller!

Mr. Bernard Michaud: Yes. I don't have any more signing authority now than I did at the time. As a general rule, when there are several owners, the owners share that task. There may be one person with signing authority, or two, which means that a counter-signature is needed. That's all.

Mr. Odina Desrochers: But you are a Comptroller. It seems to me, unless I went to the wrong school, that a comptroller's job is to control. And yet you didn't control everything since your signature did not appear. Who could Mr. Brault go to to find out whether the organization was functioning properly?

Mr. Bernard Michaud: The Accounting Department obviously issued the cheques. There is no doubt about that. There was a schedule for that for the media work. As for all the other cheques made out to production houses or other contractors, we would prepare those cheques. To each of the cheques would be appended all the invoices mentioned on the cheque stub and Jean Brault would then sign the cheques along with another person with signing authority. That's it.

Mr. Odina Desrochers: Did you take part in preparing the annual report? Did Groupaction publish an annual report?

Mr. Bernard Michaud: Yes, the external auditor was responsible for the annual report.

Mr. Odina Desrochers: Did you help to prepare figures?

Mr. Bernard Michaud: I would provide the monthly and annual financial statements, but the annual reports verified and provided by the auditors were not my responsibility.

Mr. Odina Desrochers: Before the annual report was sent to the auditor, who within the organization was responsible for ensuring that cash receipts and disbursements matched, and that the figures were accurate? Was it you?

Mr. Bernard Michaud: Yes.

Mr. Odina Desrochers: You must certainly have seen cheques issued to the Liberal Party of Canada.

Mr. Bernard Michaud: Yes, there were cheques made out to the Liberal Party of Canada. There is no doubt about that.

Mr. Odina Desrochers: Were there some made out to other parties, or only to the Liberal Party of Canada?

Mr. Bernard Michaud: There were some made out to other parties: the Parti québecois, the Quebec Liberal Party—I'm fairly certain of that—but I know for a fact there were some issued to the Parti québecois.

Mr. Odina Desrochers: Were the amounts larger in the case of the Liberal Party of Canada?

Mr. Bernard Michaud: That was certainly the case in the later years. Initially, they were about the same.

Mr. Odina Desrochers: Can you tell us approximately what those amounts were? You say that initially, your participation was quite modest. You also mentioned that there was considerable expansion of the Groupaction staff complement at one point. Was that staff expansion reflected in the donations made to the Liberal Party of Canada? You say that at the beginning, they were modest amounts.

Mr. Bernard Michaud: No. I compared the Parti québecois to the Liberal Party; that's all I did. I said the amounts were about the same. Later on, the donations made to the Liberal Party were higher than those made to the Parti québécois. Funding sources for a political party can range from a benefit cocktail party to a golf tournament. If I put all that together, yes there were some, but at what level? I really don't know.

Mr. Odina Desrochers: You also talked about a contract that was awarded by the CRTC. What were the requirements set out in the call for tenders for that contract?

Mr. Bernard Michaud: Well, that happened a long time ago—in around 1993 and 1994. Advertising is mandatory for what are called invitations to tender. It was a specific department within Groupaction's Media Service that looked after that. That was one of the good contracts we had at the time.

Mr. Odina Desrochers: What kind of amounts are we talking about?

Mr. Bernard Michaud: I think it represented something like $500,000 or $600,000 a year.

Mr. Odina Desrochers: And you don't know how Groupaction was able to secure that contract?

Mr. Bernard Michaud: It was probably through an invitation to tender. We answered the invitation and we were selected. There again…

Mr. Odina Desrochers: And who would receive the invitations to tender?

Mr. Bernard Michaud: It was someone in Client Services that was in charge of going…

Mr. Odina Desrochers: What it Mrs. Archambault again?

Mr. Bernard Michaud: No, never.

Mr. Odina Desrochers: She didn't look after that.

Mr. Bernard Michaud: No, not calls for tenders.

Mr. Odina Desrochers: There were three reports prepared by Groupaction and Mrs. Fraser had some pretty strong comments to make about them. Someone must have worked on those reports, because Groupaction said it had produced the reports. Can you tell us the names of the people who had a role to play in writing those three reports? You say that you participated…

Mr. Bernard Michaud: I can tell you who handled government accounts. Client Services comprises several different groups. There is one group that is more concerned with retail, in the broadest sense of the word, another group for government accounts, and another group again to handle large corporate accounts, and things like that. So, there was a department responsible for government accounts that was headed by Mr. Jean Lambert. When I left the firm, there were two or three employees reporting to Mr. Lambert.

Mr. Odina Desrochers: At the time, was Mr. Lambert responsible for writing the three reports, as per the organization chart explained to us earlier?

À (1045)

Mr. Bernard Michaud: It was either him or Mr. Brault—one of the two.

Mr. Odina Desrochers: You say it was either Mr. Brault or Mr. Lambert?

Mr. Bernard Michaud: As far as I am concerned, they were the ones handling government accounts.

Mr. Odina Desrochers: Mr. Michaud, as regards these three reports, we have been told there were supporting documents missing, and so on.

To your knowledge, was there any discussion at Groupaction of the fact that one report had been submitted but the other had not, or that the reports were similar? Was this discussed at Groupaction?

Mr. Bernard Michaud: I can't even answer that, because I wasn't there at the time.

Mr. Odina Desrochers: You weren't there?

Mr. Bernard Michaud: I repeat: I was there only until about a quarter of the way through the first contract. For me it was a new contract. We were just starting out. My recollection is that I prepared two invoices, because I saw them at the RCMP, but that's as far as it goes. Were there any discussions about this? No, not at all.

Mr. Odina Desrochers: So, you assert that you never issued any cheque to pay for any one of the three reports, because you were not working for the firm at the time?

Mr. Bernard Michaud: Issue a cheque?

Mr. Odina Desrochers: Yes, issue a cheque. Mr. Lambert and the others most certainly got paid.

Mr. Bernard Michaud: There were on the payroll.

Mr. Odina Desrochers: They were on the payroll. Did you notice any large amounts in the case of Jean Lambert or was it regular?

Mr. Bernard Michaud: It was always the same. It's an annual salary that is subdivided into 26 pay periods. He always receives the same salary.

Mr. Odina Desrochers: No special commissions?

[English]

The Chair: Merci, monsieur Desrochers.

Mr. Mills, please, you have eight minutes.

Mr. Dennis Mills: Thank you, Mr. Chair.

Mr. Michaud, you mentioned earlier that before you generated an invoice, you had time sheets or production sheets backing them up. Is that essentially what you said earlier?

[Translation]

Mr. Bernard Michaud: I said that the new accounting system was implemented in 1996. I am the one that implemented it. The software can be subdivided into three media modules: radio, television, and print. The print module includes billboard advertising, magazines, newspapers, dailies, and so on.

So, there are three components. When we implemented the system, we started with the print media module, given the importance of the mandatory advertising department, which primarily looks after print ads at Groupaction. We began with that, as well as with the production module, general accounting, and profitability, by client.

Then in 1997, we moved to the next stage, which was time sheets. In the fall of 1996, we implemented the radio and television modules. So time sheets were in the accounting system. People were required to complete the sheets in Excel and we would charge them to a file in the accounting system.

[English]

Mr. Dennis Mills: Okay.

So, Mr. Michaud, would it be fair to say that you could not generate an invoice without backup?

[Translation]

Mr. Bernard Michaud: No, not necessarily. We were not required to take the time to support an invoice. We could just prepare the invoice and enter it into the accounting system as internal costs. So, we would input internal costs into the system and record an amount.

[English]

Mr. Dennis Mills: But you had to have direction.

[Translation]

Mr. Bernard Michaud: Yes, of course.

[English]

Mr. Dennis Mills: Okay.

You mentioned earlier that your gross revenues, before overhead, salaries, and so on, were approximately $5 million to $6 million at the peak period?

[Translation]

Mr. Bernard Michaud: As far as I can recall, yes.

[English]

Mr. Dennis Mills: Was the company profitable?

Mr. Bernard Michaud: Of course.

Mr. Dennis Mills: Did you ever do work for any government agencies other than the Government of Canada—the Province of Quebec, the City of Montreal...

[Translation]

Mr. Bernard Michaud: You want to know whether I personally ever worked for them?

[English]

Mr. Dennis Mills: No, Groupaction, in terms of accounts or clients.

[Translation]

Mr. Bernard Michaud: Groupaction did in fact have accounts with the Government of Quebec or with paragovernmental agencies. One of its clients was the SAQ. I believe that was its only provincial client.

[English]

Mr. Dennis Mills: Was it the same fee structure?

[Translation]

Mr. Bernard Michaud: Generally speaking, yes. For private companies as well, the process was generally the same.

[English]

Mr. Dennis Mills: What were some of the private sector accounts that Groupaction had?

[Translation]

Mr. Bernard Michaud: When I left, there must have been Métro-Richelieu—in fact, the Richelieu banner; that particular company has two banners. The other accounts were Trévi Pools, Germain Larivière, Fidelity Investments, Couche-Tard convenience stores, and many others as well. There were a lot of private companies.

[English]

Mr. Dennis Mills: Was it the same fee structure you had with the Government of Canada?

[Translation]

Mr. Bernard Michaud: The process was generally the same. In some cases, if we were aware of the annual volume at the beginning of the year, for cash flow reasons, we would sometimes distribute the fees on a monthly basis.

For example, knowing that a client was going to spend $2 million in a given year—15 per cent of $2 million is $300,000—we would distribute the $300,000 across the whole year on a monthly basis, in the amount of $25,000 per month. We would then invoice for all the related files. We would invoice at the net rate, since the fees were already being billed on a monthly basis, and at the end of the year, we would reconcile the business volume against the fees. That was one way of operating.

We generally work that way. In advertising jargon, where production is concerned, we use terms like client, product and file. For media, we say client, product and campaign, meaning a media campaign.

À (1050)

[English]

Mr. Dennis Mills: Thank you.

Mr. Chair, how much time do I have left?

The Chair: Just under three minutes.

Mr. Dennis Mills: In this committee, Mr. Michaud, one of the challenges we have, separate and apart from general accountability, is value for money for the Canadian taxpayer on the moneys that were sent to you, to the ad agency where you were the comptroller, on behalf of the people of Canada. Now, in the industry there are always evaluation systems, whether it be for the private sector or any other account. Did you ever see any of these evaluations or qualitative studies to see whether or not the taxpayers were getting value for money because of the work that Groupaction did on behalf of Canada?

[Translation]

Mr. Bernard Michaud: No, never.

[English]

Mr. Dennis Mills: As the comptroller of the company, were you not curious about the quality of performance of your fellow teammates in the organization, whether an account was generating success or whether it was a failure? I mean, it seems to me that most advertising agencies have a pride where, if a campaign is successful, then everybody talks about it, as in “We achieved our results”, or “We went beyond our targets.” That's the basis of maintaining the account or maintaining the business.

Were there never any discussions like that, you being a person who would value whether or not... I mean, surely to goodness you would analyze and value whether or not the people performing underneath you were meeting their targets of responsibility. Doesn't the same principle apply to the taxpayer?

[Translation]

Mr. Bernard Michaud: I certainly hope that it applies to taxpayers. As far as an advertising agency is concerned, it's very important to understand one thing: the Accounting Department is not in a position to judge whether Client Services has been productive or whether it has done its job properly. The Accounting Department is responsible for setting expense budgets, salary budgets, and so on. We perform the control function in consultation with the President, in this case Mr. Jean Brault. The Accounting Department's job is not to judge whether the work related to sales, commissions, and so on has been properly performed or not.

[English]

Mr. Dennis Mills: I have one last short question. Were there never any general senior management meetings where you'd be discussing amongst one another the qualitative effect of campaigns for the business you had for any accounts, or was that just not part of the accounting?

[Translation]

Mr. Bernard Michaud: We would have meetings on a weekly basis. There was a Management Committee where we would talk about various things, including business opportunities, the most recent campaigns, issues associated with a particular campaign, etc. We obviously had discussions. However, I did not take part in meetings where determinations were made as to whether a campaign had been successful or not. That was more within the purview of Client Services. Because Groupaction had a lot of retail accounts, part of its mandate was to determine whether sales were reaping the benefits of any advertising being carried out at the time.

[English]

The Chair: Thank you very much, Mr. Mills.

We've completed two rounds and we're supposed to wrap up at 11 o'clock. As there are only a few more minutes left, I think I'll just stop there and ask a couple of questions.

Mr. Michaud, as the comptroller you issued the cheques, but you didn't sign the cheques. Didn't you have a responsibility of ensuring that there was value behind the cheques, that the invoices submitted by your suppliers actually were for value delivered, and therefore that you wouldn't have authorized the cheques to be issued until you assured yourself that the invoices were valid and appropriate for the work that had been done on behalf of the company?

À (1055)

[Translation]

Mr. Bernard Michaud: I want to point out that the Accounting Department doesn't approve any invoices, except for office expenses such as purchases of paper, and so on. But as soon as it has anything to do with a file…

[English]

The Chair: But you were the comptroller.

So an invoice would come into Groupaction for x number of dollars for production fees, for example. Did you verify to make sure those production fees were legitimate before authorizing or saying the bill could be paid?

[Translation]

Mr. Bernard Michaud: First of all, whatever the file involved, there is always an estimate. Second, there's always someone in Client Services or in Production Services whose responsibility is to ensure that everything is there. That person issues purchase orders and approves the invoices. The Accounting Department is really more of a “necessary evil” in an advertising agency. No invoice ends up in the Accounting Department unless it has prior approval or is supported by a purchase order, or has been approved by the manager of each of the departments authorized to make purchases through an external supplier. It is not my place to judge their relevance. If it was included in the estimate, then I invoiced the client and was paid. It is not up to me to question the legitimacy of an invoice I receive that is signed by the Director of Production. My job is not to question.

[English]

The Chair: As the comptroller, it's not your job to question the legitimacy of an invoice? What does a comptroller do?

[Translation]

Mr. Bernard Michaud: My job was simply to ensure that the billing was consistent with the purchases. If I have a cost of $100 and the client's invoice says $95, then obviously there is something wrong there. If I have a cost of $100 and the client's invoice says $115, then I can't challenge that. It is consistent with normal profit margins for an ad agency, and I can't say a thing about that. By the way, this is not something peculiar to Groupaction; it works the same way in any agency. With a TV shoot, my job is not to check whether the amount of $100,000 being billed by the production house is valid or not. I'm not even around when they do the shooting and have no idea how many actors are involved, or whether it was shot outdoors or indoors. I know nothing about any of that.

[English]

The Chair: Thank you.

You mentioned one client, one product, one file, which I think was your statement.

Did you determine the profitability of each project so that you could determine the revenues from the client, the production fees, and whatever else one paid, the gross commission, the 15% you talked about, your internal expenses? Did you determine the profitability of each project?

[Translation]

Mr. Bernard Michaud: Well, it isn't systematic in every project, but it is certainly done every month in terms of the account revenues, or billing and income, as it's called. We ensure that the profit margins are there and are consistent with the contracts we have signed with clients or, if it's a client we don't have a contract with—which sometimes happens—we ensure that the margins are provided for. Certainly, that is something that the Accounting Department does, but I wouldn't say it's done systematically, file by file. However, overall if the account revenues yield a 15 or 20% margin, and if there are fees attached to that—because there can be fees on top of the margins—if the numbers are there, then yes, it's done monthly, and again at the end of the year, to ascertain whether a client's volume jibes with the anticipated budgets.

It's important to remember that there were income budgets, as opposed to sales budgets. We made that distinction earlier. So, there was an income budget to ensure that this would be done monthly. On an annual basis, we would develop the monthly breakdown. If, in a given month, we had anticipated $20,000 in revenues but had only taken in $10,000, well then we would obviously have started asking questions. We would have asked if the campaign anticipated at that date had been postponed, or simply cancelled. So, we went through all of that, but not in great detail for every single file.

Á (1100)

[English]

The Chair: When Mr. Guité appeared before this committee last week he said, if I can paraphrase, what you gain on the roundabouts, you lose on the swings. Maybe some contracts were a complete loss for the ad agency, and he didn't mind if there was a very significant profit in another file because overall, if it balanced out and the agencies were making a reasonable profit, that was fine by Mr. Guité. Was that the way Groupaction did business with the government and Mr. Guité, that you lost on some and gained on others and it all balanced out?

[Translation]

Mr. Bernard Michaud: Certainly not. I am certain that Groupaction made sure it was making money on every single file. Yes, it could happen—not that the agency would necessarily lose money, but that certain amounts had been underestimated when the quotation was prepared, but that never happened with the big files. For some clients, we invoiced based on the estimate, meaning that the price indicated on the estimate was the final billing price. Supposing we had an anticipated printing cost of $100, yet the actual printing cost had ended up being $103. Because the client had already been billed and expected to pay $100, Groupaction would absorb the additional $3. But as a general rule, where estimates involving large sums are involved for longer term files, if there are cost overruns, we are aware of that as things progress. In that case, we simply revise the estimate or prepare an additional quotation to justify the extra costs. So we had to ensure that every file was profitable.

[English]

The Chair: Basically, I have two questions and then I'm going to wrap this up, Mr. Michaud. One, on the contract, did you always have a contract in the file before you started doing work? And if you didn't, on what basis did you know what you could and could not do?

The second question I have is this. I think you mentioned that your affiliated companies would also do the production work, ad placements, and so on, and charge a 15% markup for doing so. But I understand that if you were to use an outside organization to do the production work, for example, you'd just pay the bill for their services and it would not have a 15% markup. Did you have a different policy for dealing with affiliated companies than for dealing with outside companies?

[Translation]

Mr. Bernard Michaud: No. It really was the same for both. If the printer billed Groupaction directly, we would add 15% on top. If the printer billed the studio—Alleluia at the time—directly, then the studio would absorb the invoice and re-invoice Groupaction. Groupaction would then add a 15% markup. We're still talking about the same 15%. No matter whether this one or that one actually received it, it is still the same 15%.

[English]

The Chair: And what about the contracts? If you didn't have a contract on file, how would you be able to know exactly what you were supposed to be achieving and doing? How often did you not have a contract in the file?

[Translation]

Mr. Bernard Michaud: With government accounts, I believe there were always contracts. With private clients, when there is no annual contract with a particular client, we operate project by project. In such cases, an estimate is always prepared for every single project and is signed before we begin the work. Groupaction's policy at that time was to invoice the client as soon as the work was completed. We would bill the client the same day the work was completed, even if the estimate had been signed a month earlier. That was the way we operated. So there was either a contract… Even when we had signed a contract with a client, for every job we had, we would provide an estimate to the client.

[English]

The Chair: Thank you very much.

Mr. McEvoy from KPMG, please. You had some comments?

Mr. Greg McEvoy: Thank you, Mr. Chair.

I just wanted to clarify what has transpired here. As the witness presented today, it was apparent that there was not a lot of information coming from him in terms of his knowledge of certain aspects of the Groupaction activity, so I was asked to determine what was discussed with our investigator and Mr. Michaud and get to the reasons why he was put forward in front of the committee today.

I made some hurried phone calls and attempted to determine some of the key points in regard to what was discussed with Mr. Michaud. I should say that the conversations over the phone went through a couple of people in trying to reach the investigator, and we relayed back and forth.

I have to apologize that in the back and forth there was an error made. I apologize to Mr. Michaud for that. There was no discussion with Mr. Michaud regarding a Mr. Coderre. There were discussions regarding invoices from Polygone, invoices that were then prepared by Groupaction, and we understand the information on the invoices was directed by Mr. Brault.

In the conversation that transpired, we understand that as well as our interview with Mr. Michaud, we did some independent research and determined that there was a Mr. Coderre who worked for Polygone in a senior position at some time during that period. What transpired was that it was suggested that maybe some of the committee members could ask questions along this line. So that was where the miscommunication took place.

Again, I apologize to the committee for that problem, for that mistake, and I apologize to Mr. Michaud.

Á (1105)

The Chair: Thank you very much, Mr. McEvoy.

Mr. Thibault, s'il vous plaît.

Hon. Robert Thibault: Mr. Chair, I thank Mr. McEvoy for the clarification and for pointing out that by not being careful, we risk doing harm to individual witnesses, to individuals who have no recourse to defend themselves, as in the case of Mr. Coderre, who is mentioned here—we still don't know who he is.

But it brings an important question to mind. How do we get billed? How does the Government of Canada get billed for this work? Is there supporting documentation or simply a phone call, as we have seen in some of these files? Is there value for money? Is there anything on the files to show these things? Is the public accounts committee beyond reproach when we're questioning all the people we've been questioning so far?

The Chair: No, we're not going to get into a long debate about this issue.

Mr. Dennis Mills: Excuse me, Mr. Chair, on a point of order, this is very serious.

I accept the acknowledgement by KPMG, but earlier in this discussion there was an inference made that it was—and the blues will show this—Mr. Coderre. So I think Minister Coderre should get a very specific apology as well.

The Chair: I'm sure on behalf of KPMG and myself and the committee, we certainly want to assure Minister Coderre that it was not the assumption that Mr. Coderre was that Mr. Coderre.

Mr. Jordan, you have a point.

Hon. Joe Jordan (Leeds—Grenville, Lib.): I have just a brief point. Not to get into the content, but I just want to point out that during this process, Mr. McEvoy did brief me, on his own initiative, on what they were doing. He told me exactly what was happening, what they were trying to do.

At that point, given the nature of the testimony, it wasn't something I thought was offensive or objectionable. Unfortunately, I think Mr. Murphy is right. I think we have to tighten it up a bit, but it wasn't a unilateral action by you.

The Chair: No, as I say, I knew about it just minutes before everybody else did. The issue, of course, is that I'm caught between putting down on paper and giving the committee all the information, which means it's out in the public before the question is asked to the witnesses to verify it and so on, get it on the public record, or holding it back. That is the dilemma of the chair, the clerks, the researchers, and KPMG.

Mr. Michaud, I would ask you to step back from the table. I will recess after you've done that and before the cameras come into the room.

Thank you very much.

Á (1108)

Á (1119)

The Chair: We're resuming the meeting, ladies and gentlemen.

I would now like to welcome to our meeting, Mr. Hayter, from Vickers & Benson, I believe it is. Welcome, Mr. Hayter. We thank you for coming here today.

I have some things that I have to read before we start.

First of all, swear in the witness, please.

Á (1120)

Mr. John Hayter (As Individual): The evidence I shall give on this examination shall be the truth, the whole truth, and nothing but the truth, so help me God.

The Chair: Thank you very much, Mr. Hayter.

I have some points that I have to raise. First:

...the refusal to answer questions or failure to reply truthfully may give rise to a charge of contempt of the House of Commons, whether the witness has been sworn in or not. In addition, witnesses who lie under oath may be charged with perjury.

I read that to everybody who comes forward. It is from page 862 of House of Commons Procedure and Practice, by Marleau and Montpetit.

Now, I have a question for you. You are appearing before us as an individual this morning. Did you discuss or have any meeting with any employees or former employees of the Government of Canada or any members of this committee in preparation of your report before coming to this meeting?

Mr. John Hayter: No.

The Chair: Thank you.

Third, has legal advice been provided or paid for by the authorization of any official in the Treasury Board Secretariat or the Department of Public Works and Government Services, or any other government department or agency?

Mr. John Hayter: No.

Á (1125)

The Chair: Thank you very much, Mr. Hayter. We welcome you here this morning. Do you have an opening statement?

Mr. John Hayter: I do.

The Chair: Proceed. The floor is yours.

Á (1130)

Mr. John Hayter: Thank you.

When you walk into our office, there are four corners. On the extreme left there is a reception area. The second corridor is a meeting room. The third room is our board room, and the fourth room is a hallway down to our offices. At each aspect, as you enter that room, on the wall there is a statement. The statement is not a motto; it is a principle, a conscience, a guiding value that has driven our company and that we've earned in over 80 years of doing business.

We've done business with some of the most significant and largest corporations in Canada. We've worked with every federal government that has been Liberal since the Pearson government, as well as many Tory governments, Ontario Liberal and NDP governments, and many of the leaders and mayors of the city of Toronto. So we're very experienced in government.

I say this because in the Auditor General's report, the question of ethics and everything in our industry and individual companies has been challenged.

Those words on the wall are: “Making our clients famous and our mothers proud.” They're our principle, our guiding light, our value system, and everything that drives our conscience.

So today, as I give this appearance, it's equal to the oath, but to me in principle it's greater than the oath. I'm going to demonstrate to this group that this company has given the Government of Canada and the Canadian taxpayers exceptional value. I'm going to start by giving you an overview of where most of our funds came from and what they did.

Our main participation in sponsorship contracts related to a venture created in partnership with the central Chinese television network in China, dating back to the summer of 1993. The central Chinese television network is the state-owned national television network of China.

Back in the early summer of 1993, we were approached to see if we had the qualifications and interest to produce a television series that would teach North American business practices and culture through an English language learning program. The Chinese had decided on English as their second language for conducting international trade. The Chinese knew that if they were to become the world's most dominant economy, they had to have a well-educated workforce, prepared and ready to capitalize on what was to be. There were 60 million university-educated Chinese between the ages of 18 and 40. These people had a basic English vocabulary of 500 words. It was to this group that the series was to be targeted.

Back in the recession days of 1993, we saw this as a business opportunity and decided to pursue it actively. At the time, we did not know whether the opportunity was best executed from a Canadian perspective or an American one. We had the option. All we knew was that it was an opportunity, and we should enter into a contract with the Chinese so we owned the rights--and I emphasize, owned the rights.

This was before there was a Chrétien government; this was before there was a Team Canada. It took several years—three in fact—to engage the Government of Canada that this was a natural extension of the Team Canada initiative. It could have been sold to Motorola, Intel, or any other American company, but in the end it made the most sense for Canada, because it solved the most significant problem the Team Canada mission had: How could the Canadian team keep in front of the Chinese for the 362 days after the three days during these trade missions?

Á (1135)

Because more than one in three Canadian jobs depends on exports, the Team Canada trade missions became the central policy of the government, starting in 1994. They were supported by every province, save one, and by all political stripes. China, which was becoming the world's fastest growing economy, and was predicted to become the largest, became the priority.

From 1998 to 2001, a series of 26 thirty-minute television programs was produced and aired in China to a cumulative audience estimated at 3.1 billion people. These television programs were essentially 30-minute commercials for Canada--our culture, values, business expertise, and the way we did business.

Our host on that program was a Canadian, Mark Rosewell, known as Da Shan. Da Shan is the most famous Canadian in the world. Mark Rosewell's name in Chinese is Da Shan, and he's known by hundreds of millions of people in China.

We shot these 26 thirty-minute programs in every province except Newfoundland and the territories. The commercial value, if Canada were to have paid and bought this commercial time, was $51 million. The cost to the crown over four years was $9.4 million.

Our work included travelling the country, communicating with over 30 corporations, making presentations to the Canada-China Business Council, and informing all members of Team Canada at the Team Canada 1995 meeting, including the Prime Minister, all premiers present, which were nine, and of course the corporate leaders of Canada. In 1996, at the Shanghai Team Canada meeting, we once again presented the programs to members, individually and in group meetings.

Our first 13 episodes won China's best foreign language series. Our second 13 of the 26 episodes won the best education series. A video cassette of our first 13 episodes was given to China's President Jiang, who then requested additional copies for his key cabinet ministers.

It was a world-class project. We made our client--Canada--and the values of Canadians famous, and we made our mothers proud.

Much has been said about the Liberal-friendly ad firms. We are individuals in a company that has been involved in the political process of our country. We see it as our right and a requirement that every political party has needed since Confederation. Our people have been active with the Liberal Party since the Pearson years. It's true that we have won government competitions for major contracts, not because of cronyism but because we can be counted on to give Canadian taxpayers value for money.

If it were cronyism, as many people keep stating, weigh that comment against this: why did it take this company, with the involvement of several hundred people meeting and interacting with the executives of Canada, Canada's leading corporations, the Canada-China Business Council, bureaucrats from several government departments, Team Canada participants in Beijing, Montreal, and Shanghai, provincial governments, people from all political parties, and the ministries of education, culture, and communication of China, three years to begin this very important undertaking of marketing Canada and Canadians to the Chinese?

The belief that all it takes is a donation to the Liberal Party and a three-minute call to the Prime Minister's office is a myth. It took three long years and then another six to place Canada and Canadians in a winning mindset within China and China's future leaders. This isn't cronyism, and if it is cronyism, cronyism should be made of sterner stuff.

I want to spend a minute or two talking about the Auditor General's report.

The opening remarks of the Auditor General's report, third paragraph, state this:

Rules were broken or ignored at every stage of the process for more than four years and there was little evidence of value received for the money spent.

Measure that statement against what I just said.

During that time, the Sponsorship Program consumed $250 million of taxpayers' money, and more than $100 million of that amount went to communications agencies in fees and commissions.

This is an important matter. It's a matter that should be discussed, and discussed with the Auditor General. There's a big difference between fees and commissions. The Auditor General has interchanged, on many occasions, “fees and commissions” with “production fees and commissions”.

Anyone in our industry, including millions of people who interact with marketing companies, and all major marketing and advertising personnel, who are in the hundreds of thousands or millions, know the difference between “production fees”, “fees”, and “fees and commissions”. It's like day and night.

The other thing to consider is that “production fees” is not the right terminology. Production fees are part of a total cost that I just talked about. It should have been “production costs”, which include the raw materials of the automobile; the design of the automobile; the manufacturing of the automobile; the shipping of the automobile to the dealers; and the selling of the automobile at $30,000. Those are all the costs.

So I think it is important that we clarify this position. This is a major, major, major matter, and if it is not clarified, I don't think we're going to get clarification on the $100 million. I ask you, as a committee, to ask the Auditor General this.

The other matter that I would like to discuss is this, where it says that little or no work was done. I just mentioned the work that we did. The QRT, or quick response team, asked for our files back in May 2002. We did not know we were in the sponsorship fund. There's nothing on one's contract saying, “sponsorship fund”, but it was then that we found that out, and we supplied them with the materials they needed. I've read the response of their quick response team, who apparently did a very rigorous review of the top 126 contracts. We qualified because of the value of our contracts, not because they felt there was something missing.

What we do know, as the Auditor General said in her report, is that she spent a lot of time working with the quick response team in reviewing the value in these contracts. So I wonder why, and I would like this committee to ask why, that wasn't taken into consideration when this statement was made about little or no work.

Last week, this committee met with an advertising executive, and a good part of the discussion was on the Rocket Richard series. Rightly so, the committee talked about a commission, but the vast majority of those funds was for a product that ran and was apparently very successful. People saw it, and it is there for all time for Canada. Is that not value?

That same individual who was here was also very involved in Attractions Canada, which I saw many times as a consumer during the time it was run. So I also take issue with that, and I would ask you to ask the Auditor General if that was taken into consideration in the $100 million. I think it is very important for Canadians.

By saying this, I am not trying to embarrass the Auditor General. I think they are important questions that must be asked, so this committee and everyone can deal with this issue.

I personally am a leader in our industry. Our industry has been embarrassed by this and has met on several occasions and said, “What are we going to do?” It's like the accounting scandals in the United States. They said, “This is an Enron”, but I said, “It's not an Enron where you're going to just have to be patient”. But it's a matter that involves the people we deal with. I have executives of major corporations questioning me. I think it needs to be clarified, not only for Canadians but also for the people who do business in Canada.

Thank you very much.

The Chair: Thank you very much, Mr. Hayter, for that opening statement.

Ms. Ablonczy, please, for eight minutes.

Mrs. Diane Ablonczy: Thank you.

Mr. Hayter, can you tell the committee what your position was with Vickers & Benson, and over what time period?

Mr. John Hayter: I bought into Vickers & Benson in 1991. I was the president and chief executive officer. I became the chairman and CEO in approximately 1996, and I still hold that position.

Mrs. Diane Ablonczy: Mr. Hayter, in the 2001 political parties' financial report, which is available publicly on the Elections Canada website, there's a substantial statement of unpaid claims to Vickers & Benson from the Liberal Party. The invoices are dated between October 23, 2000, which is the day after the 2000 election was called, and June 26, 2001. The claim is for $1,012,381.47.

Mr. John Hayter: Correct. That's correct.

Mrs. Diane Ablonczy: First of all, was this money repaid by the Liberal Party to Vickers & Benson?

Mr. John Hayter: It's for services rendered during the 1997 election. We were part—

Mrs. Diane Ablonczy: That wasn't my question.

Mr. John Hayter: The answer is for production of commercials that were done under our involvement as part of Red Leaf.

Mrs. Diane Ablonczy: My question was, was the money repaid?

Mr. John Hayter: Yes, it was. I'm sorry.

Mrs. Diane Ablonczy: When did this repayment take place?

Mr. John Hayter: It's a matter of public record. I would think it took place in 2002. But it's a matter of public record. Elections Canada would have that information.

Mrs. Diane Ablonczy: All Elections Canada shows is that in the next reporting period the debt is nil. So Elections Canada doesn't--

Mr. John Hayter: It was paid. That's why it's nil; it was paid.

Mrs. Diane Ablonczy: I understand that, but I wanted some details of payment. Was the payment done by a single cheque? Was it paid in installments? Can you give us more information about the payment?

Mr. John Hayter: It was paid in one cheque. That's my recollection.

Mrs. Diane Ablonczy: Mr. Hayter, do you find this claim for over $1 million an unusual claim? It's a lot of money.

Mr. John Hayter: It is a lot of money, but it happens in every election. I believe the Canadian Alliance Party was unable to pay all their bills on a timely basis after the last election. We know the Conservative Party has not been able to. I don't know about the New Democrats, but it happens after every election.

Á (1140)

Mrs. Diane Ablonczy: Mr. Hayter, you made some reference to the Auditor General's report, and I believe you told the committee that the Auditor General did not seem to know the difference between fees and commissions. Is that what you told the committee?

Mr. John Hayter: No.

Mrs. Diane Ablonczy: Can you reprise what you told the committee?

Mr. John Hayter: Did not make a differentiation between production fees and commissions and interchanged it with fees and commissions in statements and in interviews, and interchanged it within chapter 3 of the sponsorship program itself. It's like saying “it's this” and then “it's this”.

Mrs. Diane Ablonczy: Mr. Hayter, I'm reading from the Auditor General's report, page 1, the fourth bullet, where it says as follows:

Documentation was very poor and there was little evidence of analysis to support the expenditure of more than $250 million. Over $100 million of that was paid to communications agencies as production fees and commissions.

Mr. John Hayter: You're making my point.

Mrs. Diane Ablonczy: If the Auditor General saw no distinction between the two, why did she make reference to the two?

Mr. John Hayter: I don't know. I think you have to ask the Auditor General that. If you—

Mrs. Diane Ablonczy: We certainly will.

Mr. John Hayter: Here's what she states before the report is even issued. This is the Auditor General's opening statement on her November 2003 report, at the press conference on February 10, so the report hasn't even been referred to by her. She says:

During that time, the Sponsorship Program consumed $250 million of taxpayers' money, and more than $100 million of that amount went to communications agencies in fees and commissions.

If you turn to page 29 of the sponsorship program, she makes that same statement.

Mrs. Diane Ablonczy: Yes, that's my point, Mr. Hayter, she mentions them both.

Mr. John Hayter: That's what's created the confusion.

Mrs. Diane Ablonczy: Here's my question. She mentions the two, so obviously she sees them as two separate and distinct forms of payment.

Mr. John Hayter: Then what she's saying is there was $250 million--$100 million of it was for production fees and commissions, $100 million was for commissions and fees, and $50 million was for something else. So ask her what that means.

Mrs. Diane Ablonczy: We will, Mr. Hayter, but my point is you told this committee that she didn't make a distinction. She mentioned them both, so clearly she had the two types of payment in mind because she repeatedly referred to the two types of payment.

Mr. John Hayter: Ms. Ablonczy, she has confused them. I don't know how you could say it's not being confused.

Mrs. Diane Ablonczy: Let me ask my second question, Mr. Hayter.

The Auditor General of Canada is an auditor, shall we say, of very high reputation, having just been given a peer review by an international panel that gave her very high marks. Are you seriously suggesting, Mr. Hayter, to this committee that such a professional is completely dim on the difference between production fees and commissions?

Mr. John Hayter: No, but you may be. I've asked you to ask the Auditor General. There is a difference here, and Canadians deserve an explanation.

Mrs. Diane Ablonczy: Well, Mr. Hayter, you were the one who said she didn't know the difference. That's what you told the committee. Is that your evidence?

Mr. John Hayter: The Auditor General is fallible.

You see, here is the problem. The problem is that anyone who takes facts and talks about the Auditor General's report is hammered, because the Auditor General is infallible. The Auditor General is not infallible, she's human, and she can and should be, in this process, subject to someone else's point of view. And that's what I'm giving, another point of view.

She is fallible, and I believe what she has stated is confusing, and it's causing a major, major problem for this.

Mrs. Diane Ablonczy: I'm sure you do believe that, Mr. Hayter, but when the Auditor General made her investigation, which was over many, many months, was this distinction not pointed out to her?

Mr. John Hayter: I don't know; you'd have to ask the Auditor General. All I can tell you is that this is very confusing.

If you brought anyone from our industry in here, I don't think you would hear anything different from what I'm saying, Mrs. Ablonczy.

Mrs. Diane Ablonczy: I'm sure not, but my point, Mr. Hayter, is that it's, shall we say, somewhat arrogant of you, not being an auditor, to come after the fact to the Auditor General's report—

Voices: —[Inaudible—Editor]—

Mrs. Diane Ablonczy:—and try to suggest that she does not know the difference between fees and commissions. I just don't find that a credible position.

Mr. John Hayter: I'm asking the Auditor General to clarify things. That's all I'm asking. You're trying to put words in my mouth.

The Chair: We've run out of time.

We have some points of order. Mr. Lastewka.

Hon. Walt Lastewka: I was very patient, Mr. Chairman, until that last remark. The witness made it very clear, I thought, to the questioner that this committee needs to ask the question to the Auditor General on fees, commissions, production costs, and so on, because she has confused.... To then turn that around to say that the witness is insulting the Auditor General is I think totally out of order.

I'm surprised you didn't move in on it, as chair, before the last remark was made.

Á (1145)

The Chair: You can't move in until the remark is made, as you know, Mr. Lastewka.

Hon. Walt Lastewka: Well, you should have moved in right away.

The Chair: She was out of time, and it was the end of her statement.

I would like to basically clarify for the committee that as far as I understand it, the Auditor General is saying...because she audited the government files. She did not audit the files of Vickers & Benson or anybody else. She audited the government files, and there was little evidence that we got value for our money.

Now, this is the issue that is under debate, under investigation. The government files, the ones that should contain all of this information, don't, and she was quite emphatic about that. But she could not go to Vickers & Benson or Groupaction or anybody else, and they've all made the statements that the documentation is all there. And we are at a loss, because that issue has not been clarified.

Mr. Thibault, are you going to make a statement?

Hon. Robert Thibault: Mr. Chairman, I agree 100% with the comment you just made. The Auditor General has raised the point that she cannot, by looking at the government files, ascertain that there was value for money on all the funds.

My problem is that in the communications that have come out of this committee, and sometimes in interviews with you, Mr. Chair, there have been terms around the $100 million, that $100 million “vanished in mid-air”, or was “stolen”, or is “missing”. And that's where we sometimes, by using that terminology, confuse the facts of what the Auditor General actually said.

The Chair: Mr. Mills.

Mr. Dennis Mills: Mr. Chair, on a point of clarification--it's relevant to our witness--this morning you distributed a document from the Auditor General's department that identified, under point 11, the Team Canada China project.

Under “Information available--Yes/No”, with regard to paragraph 3.60 she has the affirmation of “no”, that there was “no assessment of the project's merits” or “rationale supporting the decision to sponsor the event”, and “no information about the event... nd no discussion of the visibility the Government of Canada would achieve by sponsoring the event”.

So if in fact this Team Canada China project is the one we're referring to today, from Mr. Hayter, I think it's very important that we realize how the process has unfolded here.

The Chair: That is something the committee will have to discuss. As I said, I tabled that letter from the Auditor General this morning. I personally have not had the time to analyze it, but as you can see—

Mr. Dennis Mills: But Mr. Chair—

The Chair: No, no, we can raise that issue at a later time, Mr. Mills. We're doing an investigation of Mr. Hayter, and Mr. Hayter has something to say, so we're going to go to Mr. Hayter.

Mr. John Hayter: Just in response to that, Public Works was given a great big box with every episode—CD-ROMs and textbooks on all the material we did, every learning lesson. It was an impressive and very heavy box. That was reviewed by the quick response team. The Auditor General said she reviewed the files of the quick response team, so that's all I know.

The Chair: Okay. Thank you very much.

Ms. Ablonczy, your time is finished.

Monsieur Desrochers.

[Translation]

Mr. Odina Desrochers: Thank you, Mr. Chairman.

Mr. Hayter, you say that in fulfilling your duties, you acted as a good Canadian, but I think you also acted as a good Liberal, did you not?

Á (1150)

[English]

The Chair: Mr. Desrochers, we just heard the comment regarding Madam Ablonczy. While you may ask questions regarding the interaction between Vickers & Benson and the Liberal Party, or any other political party for that matter, I'm not sure that getting into the political persuasion of the witness is appropriate.

Monsieur Desrochers, s'il vous plaît.

[Translation]

Mr. Odina Desrochers: Mr. Chairman, I'm asking this question because this firm apparently paid the amount of $106,000 to the Liberal Party of Canada. I would say that this is relevant. Mr. Hayter, did you play any role in organizing election campaigns for the Liberal Party?

[English]

Mr. John Hayter: Yes, I was—

[Translation]

Mr. Odina Desrochers: Can you tell me in what year?

[English]

Mr. John Hayter: —as a member of Red Leaf, which is a consortium of advertising agency people who get together and work as a team for the Liberal Party.

[Translation]

Mr. Odina Desrochers: Was that in a personal capacity or through your company? Did you play a strategic role in these election campaigns?

[English]

Mr. John Hayter: There are two questions there. I worked as an individual. Did I have a strategic role? Yes.

[Translation]

Mr. Odina Desrochers: Yes?

Mr. John Hayter: Yes.

Mr. Odina Desrochers: Thank you.

Mr. Hayter, as you know, there is a firm by the name of Genesis—I hope it is still around—that previously was responsible for following up on contracts let for sponsorships and advertising. Is that correct?

[English]

Mr. John Hayter: I don't understand the question

Hon. Robert Thibault: Mr. Chairman, I don't know if there's a problem with the sound, but I didn't get the name of the firm either.

[Translation]

The Chair: Could you please repeat what you said, Mr. Desrochers?

Mr. Odina Desrochers: Mr. Hayter, does a company by the name of Genesis ring a bell?

[English]

Mr. John Hayter: Yes.

[Translation]

Mr. Odina Desrochers: Was this the company responsible for following up on files under the sponsorship or advertising program?

[English]

Mr. John Hayter: Not that I'm aware of.

[Translation]

Mr. Odina Desrochers: We were told that previously, when the company run by the Everest Group was awarded this contract, your firm was responsible for administering it. Is that correct?

[English]

Mr. John Hayter: Oui. Do you mean our company, or Genesis?

[Translation]

Mr. Odina Desrochers: I asked the question.

[English]

Mr. John Hayter: Genesis managed it.

[Translation]

Mr. Odina Desrochers: Genesis, yes.

[English]

Mr. John Hayter: Yes.

[Translation]

Mr. Odina Desrochers: For how long?

[English]

Mr. John Hayter: Genesis was formed for the Conservative Party. It was called Canada Media Company, and it became Genesis in 1992, I believe.

[Translation]

Mr. Odina Desrochers: Is it true that part of your mandate was to perform follow-up—in other words, to ascertain whether the work had been performed properly, and that you were given a commission to do this, just as Mr. Boulay admitted with respect to the new company that was set up?

[English]

Mr. John Hayter: I don't know. I don't understand the question. I'm sorry. There was no sponsorship then, so I don't understand why “sponsorship” is there. It's confusing. There was no sponsorship, to my knowledge.

[Translation]

Mr. Odina Desrochers: Let me get straight to the facts.

That firm had a large contract with the Canadian government. However, there was an invitation to tender, and Media/IDA was awarded the contract. Were you informed of that?

[English]

Mr. John Hayter: Media/IDA, yes, I was aware of it. We weren't involved with Genesis then. We weren't involved in the AOR. We had left it. We were gone.

It went from Genesis—and we were not involved in Genesis—to Media/IDA. We were at one time involved with Genesis, but we divested ourselves of Genesis. So we weren't involved when it went to Media/IDA, not involved at all.

[Translation]

Mr. Odina Desrochers: Mr. Hayter, I would now like to address the contracts connected to China that you performed for a total of $6.6 million. Is that correct?

Á (1155)

[English]

Mr. John Hayter: I believe that's correct.

[Translation]

Mr. Odina Desrochers: Which Canadian government agency awarded you that contract?

[English]

Mr. John Hayter: Well, the contract came from Public Works. All contracts come from Public Works.

[Translation]

Mr. Odina Desrochers: To your knowledge, was there an invitation to tender for these large contracts?

[English]

Mr. John Hayter: No, because we own the rights. We formed a joint venture with the China Central Television network. We asked the Government of Canada, do you want to be involved in this and have Canada promoted to China or not? We were the salespeople. We were the “L'Information essentielle”. We were not an advertising agency in that function. We were the creators and the producers and the marketers and the media of that program. We owned it.

[Translation]

Mr. Odina Desrochers: So, Mr. Hayter, you were certain that if you asked Public Works Canada for money, you would be awarded the contracts?

[English]

Mr. John Hayter: No, it took us three years. That's not knowing you're going to get it.

[Translation]

Mr. Odina Desrochers: I have difficulty understanding your thought process, Mr. Hayter. You have just said that you own certain series, that you called on Public Works and, in addition to that, that you are the one who developed this model. So, I repeat: you were obviously certain, Mr. Hayter, that by taking this project, to which you own the rights, to Public Works and asking for the necessary funding, you would obtain that funding, even though it ended up taking three years. Is that correct?

[English]

Mr. John Hayter: You know, they say that one must have “the freedom to fail”. I guess if you wait three years, you have the freedom to fail, and you also have the ability to succeed. Three years is three years.

If you go back to 1993, when out-of-business signs were all over the place, it was a pretty high risk we were taking. You can draw your own conclusion.

[Translation]

Mr. Odina Desrochers: Mr. Hayter, I have a question. You had a made-to-measure project that you had developed and were absolutely certain of getting the money when you went to Public Works.

Was that not a roundabout way of ensuring you would get the money you needed from Public Works?

[English]

Mr. John Hayter: We met over 30 corporations. It was a grassroots effort that started with the business community first and then later involved the Government of Canada. It's on record. If you do an access to freedom of information, you'll see it. It's there.

[Translation]

The Chair: Thank you very much, Mr. Desrochers.

Mr. Thibault, please. You have eight minutes.

Hon. Robert Thibault: Thank you, Mr. Chairman.

[English]

Welcome to the committee, Mr. Hayter. I'll make it a little easier on the translator. I will be speaking in English, and the translator will still be translating into English.

You made reference earlier to information essentielle. You said, “We were the L'information essentielle”. Were you talking about the company?

Mr. John Hayter: No, but we performed the same function.

Hon. Robert Thibault: Okay, the same function as L'information essentielle.

The Auditor General referred to a number of problem files, and when she did her analysis she went and looked specifically at problem files. She did a risk analysis of what she was going to look at, and they went to look at some because of the size. In the original 50-some files, mostly where there was risk, were any of the files managed by your company?

Mr. John Hayter: No.

Hon. Robert Thibault: None of those files were?

Mr. John Hayter: Not that I'm aware of. They didn't say, “You're at risk.” No one knew.

Hon. Robert Thibault: I presume you would have been aware, because you would have had contact with the auditors or had—

Mr. John Hayter: We submitted our material in May 2002 and didn't hear anything until the Auditor General's report.

Hon. Robert Thibault: That was to the quick response team or to the Auditor General?

Â (1200)

Mr. John Hayter: We didn't hear anything from anyone after we gave the materials they requested. They said, “Thank you very much; this meets our needs and they're there.”

Hon. Robert Thibault: But you furnished those materials to the Auditor General?

Mr. John Hayter: No, we gave them to the quick response team.

Hon. Robert Thibault: To the quick response team. Thank you.

When Mr. Boulay was testifying, he indicated that the method of operation was that the files—and I understood that to mean the supporting documents on the files—would generally be held by the advertising agency or the communication company rather than necessarily submitted to the Department of Public Works. Is that your understanding of the modus operandi of this program?

Mr. John Hayter: I know it's a contractual requirement of advertising firms to keep the files. The Department of Public Works obviously didn't have all the files, because the quick response team requested them, so I guess that's the case.

I don't say, “Are you keeping your files?”

Hon. Robert Thibault: In your opinion—and I will have a chance to discuss this with the Auditor General—could this method of operation be part of the confusion, where if she would have done an audit at Public Works and Government Services Canada, at Communication Canada, she would not necessarily have seen all the supporting documents on file, but they may or should have existed at the communication company?

Mr. John Hayter: I believe that is very possible, but in our case, I know the quick response team had our files. That's my concern, because—

Hon. Robert Thibault: But they had it after you submitted it and not as a matter of course, not as a matter of program.

Mr. John Hayter: Correct.

Hon. Robert Thibault: As the chair pointed out earlier—and I'm paraphrasing the report—the Auditor General states that there's $100 million of this program in which she can't ascertain that there was value for money. She doesn't say there was not value for money, if you read the report. She does not say that money is missing or that $100 million is missing, although we've heard that in the media. She doesn't say it vanished into thin air, although we hear it in the media. It becomes part of the fear that is given to Canadians.

Of the $100 million in question, to the best of your understanding, how much of that would have been managed by Vickers & Benson?

Mr. John Hayter: Of the $100 million? I believe it's $7,143,000.

Hon. Robert Thibault: And you, Mr. Hayter, and your company can account for that $7 million?

Mr. John Hayter: Yes.

Hon. Robert Thibault: So we know it didn't vanish into thin air. The only question that remains is the question of value for money.

Mr. John Hayter: Yes.

Hon. Robert Thibault: When you have a contract to do some work for an agency of government or sponsorship, when you submit your invoice to Public Works and Government Services Canada, who verifies the value for money? Is it yourself that's doing it, or is it the agency of record? How would that work?

Mr. John Hayter: It's ourselves. We certify it, and it goes to the Department of Public Works.

Hon. Robert Thibault: You certify that you have received value for money, that you have the coverage intended.

I have heard that, much in the way that travel agencies would work, the advertising agencies would get a break on the fees charged by magazines, radio, and TV, and that would be part of the profit generated.

If I ask Vickers to do work for me, $100 million worth of publicity, it would cost me $100 million if I went to Global, but you could get it for $85 million. You would get $15 million. Is that generally true?

Mr. John Hayter: Well, if you're talking about commission, it's a commission of 15%. That's correct, and it's the way the commission system has worked for probably 200 years.

Hon. Robert Thibault: But are there times when you would earn commission plus a discount?

Mr. John Hayter: If we earn any discount, it's passed on to our client; it would be passed on to the Government of Canada.

Hon. Robert Thibault: Would those supporting documents of your costs be passed on, or would they be held in your files?

Mr. John Hayter: Supporting costs?

Hon. Robert Thibault: The supporting documents to ascertain what those costs are—not the production costs, but the media buy costs.

Mr. John Hayter: Yes, they would be held by us, but if we get a discount, we pass the discount on.

Hon. Robert Thibault: But at Public Works and Government Services they wouldn't necessarily have a copy of the invoice of Bell Globemedia or CanWest, or whatever agency you bought the media from?

Mr. John Hayter: No, but in our case, we went through Media/IDA, so that was their matter.

On China, there was no discount. We managed it, and did it, and produced it, and what have you.

So Media/IDA would be responsible for that as the agency of record.

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Hon. Robert Thibault: As a parliamentarian and a Canadian, I have a great concern when it comes to matters like L'Information essentielle, the Maurice Richard file—not with the product, not with what it bought, but with the way it was done.

I have a problem when I look at the Auditor General's report and see that a commission was charged for the transfer of funds from the treasury to an agency of government, or another agency, without necessarily any value being added or any work being done on behalf of the people of Canada, but simply as a way of getting around, it would seem, the rules governing the transfer of funds to those projects.

Has your company ever participated in what I just described?

Mr. John Hayter: Not to my knowledge.

Hon. Robert Thibault: You weren't part of that Maurice Richard project.

As one final question, in the course of working on the sponsorship program, were you personally in direct communications with Mr. Guité?

Mr. John Hayter: Yes. He was in charge of all expenditures. So, yes, of course.

Hon. Robert Thibault: Mr. Gagliano?

Mr. John Hayter: I met Mr. Gagliano.

Hon. Robert Thibault: To discuss this matter?

Mr. John Hayter: I presented this matter to Mr. Gagliano, yes.

Hon. Robert Thibault: Thank you, Mr. Chair.

The Chair: Merci beaucoup, Monsieur Thibault.

Madam Wasylycia-Leis please, for eight minutes.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chair, and thank you, Mr. Hayter, for your presence here today.

I want to ask you generally about the industry, and not specifically about your company, since you referenced at the outset your concerns on behalf of the industry about the kind of attack the industry is under presently.

As a collective, when did you first feel this kind of pressure?

Mr. John Hayter: I think it was in the first 48 hours. The media were omnipresent on this matter. It began and has increased; it's got to the point now where there are a lot of questions being asked about, “Really, is this money gone?”

Ms. Judy Wasylycia-Leis: Did members of the ad agencies get together and try to brainstorm what to do and manage this issue?

Mr. John Hayter: Yes.

Ms. Judy Wasylycia-Leis: So would they have been all of the heads of the agencies involved in the Auditor General's report? Mr. Boulay, Mr. Gosselin...

Mr. John Hayter: None, none.

Ms. Judy Wasylycia-Leis: So who did you get together with?

Mr. John Hayter: Well, the ICA has a board, and they had a board meeting, but none of the agencies that are written up in the Auditor General's report on the sponsorship program.... No one, no one.

Ms. Judy Wasylycia-Leis: But did you have chats with Mr. Boulay or Mr. Gosselin or...

Mr. John Hayter: No, no.

Ms. Judy Wasylycia-Leis: You said it was within the first 48 hours that you felt this pressure. Then I guess you would have been somewhat concerned by the Prime Minister's response to the whole issue, given the fact that he...

Mr. John Hayter: No.

Ms. Judy Wasylycia-Leis: Well, as you said no, let me ask you if you would have no objection to the four-part strategy the Prime Minister has laid out, including the work of this committee, to thoroughly get to the bottom of it, no matter how difficult the questions may be for the industry—an independent judicial inquiry, which has yet to get up and running; a separate commission to collect moneys that have been lost to taxpayers, which says a lot about what the Prime Minister believes happened; and of course the ongoing RCMP investigation.

Mr. John Hayter: Everyone in this has a job to do. The Prime Minister has a job to do. The Auditor General has a job to do. Individuals in this committee and collectively have a job to do. The media has a job to do. The advertising industry has a job to do. I have a job to do as an individual. I have a job to do as the CEO of a company. We all have to think it through and do what we think is best. Everyone has that right and that responsibility. I believe everyone has to do what they feel is right, in order to get to the bottom of this.

Ms. Judy Wasylycia-Leis: I appreciate that answer. I think you would probably agree that if we could get some more answers from the ad agencies we might get to the bottom of it a lot more quickly.

Mr. John Hayter: I'm here to give you answers.

Ms. Judy Wasylycia-Leis: Good, because we've had very little success to this point. Certainly when Mr. Boulay was here we got almost no answers—a basic “I don't know” to everything, and almost an “I don't care” attitude.

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The Chair: Ms. Wasylycia-Leis.

Ms. Judy Wasylycia-Leis: Let me go on to the questions. The kinds of issues we can't get addressed include why we would have a commission to not really do anything. That was put to Mr. Boulay—and we're back to the Maurice Richard series. He basically gave us a general answer, “Oh, just to manage the contract”. Is that acceptable, in your mind?

The Chair: Ms. Wasylycia-Leis, you're going to have to ask questions to Mr. Hayter of Vickers & Benson. I'm not sure asking him to pass judgment on other companies is appropriate.

Ms. Judy Wasylycia-Leis: On a point of order.

The Chair: No. You've got the floor, so you can respond.

Ms. Judy Wasylycia-Leis: On a point of order, Mr. Chair—since I don't want this to be taken from my time—I'm asking these questions because at the outset Mr. Hayter made it very clear that he was raising general concerns on behalf of the industry, not specifically his company. He chose to go on the offensive and be very critical of the Auditor General, and by implication criticize the kind of work we're doing. So I think it's only fair that I raise the general questions and put them in the context of other witnesses.

The Chair: Okay. You can ask general questions, but do not phrase them in a way that you're basically asking him to pass judgment on the management of another company.

Ms. Judy Wasylycia-Leis: All right. I simply wanted Mr. Hayter to know that on some very fundamental issues, where there are clear patterns of wrongdoing, we aren't getting answers. We didn't get them from Mr. Boulay, and I don't know if you can shed some light on any of this.

Let me ask you a specific question pertaining to Mr. Chuck Guité's response to that same question. He suggested to us that this was about loss leaders, and that commissions, amounts of money, were given to ad agencies to make up for moneys they might have lost elsewhere. So in other words, government was to be the welfare agency for the ad agencies. I find that somewhat worthwhile of criticism, don't you?

Mr. John Hayter: I'm not here to respond to what other witnesses say; I'm here to respond to what we have done. I'm more than willing to answer anything in that regard--but I'm not going there.

Ms. Judy Wasylycia-Leis: Do you think government is part of this whole support of ad agencies or sponsorship programs? Should it be involved in loss leaders? It's a straightforward question.

Mr. John Hayter: That has nothing to do with what I am—

The Chair: I think we're—

Ms. Judy Wasylycia-Leis: All right, let me try another question then.

The Chair: Let me interject here. I think Ms. Wasylycia-Leis—

Mr. John Hayter: Vickers & Benson does not practise loss leaders with the Government of Canada.

Ms. Judy Wasylycia-Leis: Would you support it generally?

The Chair: I think Ms. Wasylycia-Leis is referring to a statement by Mr. Guité, who said it was quite acceptable to have contracts with minimal work and significant profit to offset losses in other contracts. As long as it balanced out, he was quite happy.

I'm sure that is the context in which Ms. Wasylycia-Leis is asking the question. Mr. Guité said he was quite happy to allow big profits in some cases if there were losses in others. That's the question I think she's asking you. I think you rightly responded that is not the way Vickers & Benson does business. Is that correct?

Mr. John Hayter: Correct.

The Chair: Ms. Wasylycia-Leis.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chairperson. Thanks for the clarification.

So I understand that you really don't approve of the notion of loss leaders in that context.

Mr. John Hayter: No. We're in the business of giving value for money.

Ms. Judy Wasylycia-Leis: That's just one example of a whole lot of concerns we have on this whole file. We're talking about sponsorship, advertising, and market research. There's well-documented evidence, and we're getting more and more whistle-blowers every day suggesting there was overbilling and production costs were inflated. I'm not saying it happened with your firm; I'm saying generally there are enough examples in the industry of those kinds of things. There's lack of documentation.

So my question to you is—

The Chair: Ms. Wasylycia-Leis, let me interrupt again. You are making an awful lot of general accusations and so on. I would prefer that you ask Mr. Hayter specific questions on either his company or his being a member of the ICA.

Mr. John Hayter: All I can say is the advertising industry is a very honourable industry, and it plays a very important role in our economic system. They are some of the brightest and cleverest people I know. They are of very high principle.

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Ms. Judy Wasylycia-Leis: I don't think anyone would dispute that.

When there is evidence of wrongdoing, it's the job of our committee and of Parliament to get to the bottom of it. That's what we're trying to do.

I asked wide-ranging questions, Mr. Chairperson, because the witness made wide-ranging statements at the outset and cast aspersions on the Auditor General. If we're going to get to the bottom of this...

Let me finish.

The Chair: Ms. Wasylycia-Leis, Mr. Lastewka has a point of order.

Hon. Walt Lastewka: Mr. Chairman, I think it's very important for the questioner to direct a question to Vickers & Benson and to let him answer the question. To go around the world and cast aspersions and all the other stuff—

Ms. Judy Wasylycia-Leis: I have two more questions.

The Chair: Just a minute. The chair is going to speak. Ms. Wasylycia-Leis, I have already cautioned you a couple of times.

Ms. Judy Wasylycia-Leis: All right. I'll ask a question.

The Chair: You pointed out that Mr. Hayter made specific comments about the Auditor General. Therefore, referring to that is basically legitimate. But the key is to get information on the table, not to reiterate or paraphrase what other people have said. The job here is to get facts on the table.

You have the floor.

Oh, Mr. Hayter has something to say.

Mr. John Hayter: What I have said with regard to the Auditor General's report is that there are questions that should be asked. Don't say that I cast aspersions or anything like that. I have given you, as an individual, my interpretation of what the Auditor General has said. I have come to this committee to give my opinion, and that is my personal opinion. But I am not making disparaging remarks about the Auditor General. I have concerns and questions about her report that I believe this committee should ask.

Ms. Judy Wasylycia-Leis: If we could get some more answers to our questions about ad agencies, we might be further ahead. Do you think ad agencies, at least the five or six key ones that we're dealing with in this report, saw government as a cash cow?

The Chair: Ms. Wasylycia-Leis, I said you can't ask questions about the other ad agencies. You can ask Mr. Hayter about Vickers & Benson and the ICA because he sits on the ICA board.

Mr. John Hayter: I'm no longer on the board. I was vice-chair and on the board.

The Chair: My apologies. You can ask questions with regard to Vickers & Benson, but you can't go down the road of asking his opinion on other ad agencies.

Ms. Judy Wasylycia-Leis: Thank you very much.

Did your company provide support to the Liberals in the 1993 campaign, the 1997 campaign, and the recent leadership campaign of Paul Martin?

Mr. John Hayter: What do you mean by “support”?

Ms. Judy Wasylycia-Leis: I'm talking about donations.

Mr. John Hayter: No. On the leadership, I don't believe we did. There were some fundraising cocktail events or something like that. We may have bought tickets. But that would be it.

Ms. Judy Wasylycia-Leis: Would you be able to give us a total at some point, if not today?

Mr. John Hayter: I don't have it.

We also participated in the Confederation Dinner, which was held in January, I think. We bought a table.

The Chair: Your time is up.

Mr. MacKay, for eight minutes.

Mr. Peter MacKay: Thank you.

Mr. Hayter, the issue of the work that Vickers & Benson was doing for the government of the day has produced an impression that they were doing, I would say, a disproportionate amount of work. An article in Marketing Magazine of September 2002 describes your firm as a long-time Liberal firm. It says “...Vickers & Benson Arnold collected $47 million in government contracts in the last fiscal year....” They talk about this being almost half of the advertising work that was done that year. Is that correct?

Mr. John Hayter: That's half of what communications work?

Mr. Peter MacKay: That's half of the $210 million advertising budget for the government that year.

Mr. John Hayter: Well, if we had $47 million and there was $210 million, that sounds like about 25% to me.

Mr. Peter MacKay: If you'll let me finish, there was another group, Groupaction—or I should say “le groupe BCP”—that amassed a $53 million net amount that year. So those two firms—

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Mr. John Hayter: No, no, no, no, not net; not net. Let's not do the net stuff.

Mr. Peter MacKay: Those two firms netted almost 50%.

Mr. John Hayter: It's not net. No, it's not net. There's a big difference between net and gross, so don't do the net.

The Chair: Mr. MacKay, Mr. Hayter, order.

Mr. Peter MacKay: All right, Mr. Hayter, I'm asking you, if your firm did 25% of the advertising budget—

Mr. John Hayter: Eighty-five per cent of that money goes to the media—

The Chair: Mr. MacKay.

Mr. John Hayter: —to help these people here so they can do their jobs.

The Chair: Mr. MacKay, we're going to lower the tone in this meeting here.

Mr. Hayter has been quite clear about the production costs as a major part of advertising. Of course, the media buy major parts. These are largely, if I can use the expression, flow-through funds that come from the principal, say the Government of Canada. They are paid to the agency of record, say Vickers & Benson, which then purchases the production costs for what the media buy, and the agency gets a commission for that.

Now, when you're talking of $40 million and $50 million, that is the gross buy by the sounds of it; that is not the 15% commission they would end up with. You must be very careful, when you're talking about “net” and “gross”, that you don't confuse the issue.

I want the rhetoric a little bit lower too, please.

Mr. Peter MacKay: The point, the reference here, is that 25% of the work done that year on advertising was done by your firm. Do you agree with that?

Mr. John Hayter: I don't know.

Mr. Peter MacKay: You don't know.

Mr. John Hayter: I do not know.

Mr. Peter MacKay: You were only the CEO. You don't know that.

Mr. John Hayter: Why would I know that?

The Chair: Mr. MacKay, Mr. MacKay.

Mr. John Hayter: The Government of Canada doesn't say to me, Mr. Hayter, I want you to know it's $210 million this year, so figure out your share. They wouldn't do that.

Mr. Peter MacKay: Well, if it's $210 million and you did—

The Chair: Mr. MacKay, Mr. MacKay, Mr. MacKay. Mr. Hayter cannot speak for the Government of Canada. He's absolutely correct in pointing out that it's not for him to determine what percentage of the gross amount of the advertising he gets. You pointed out that he had forty-odd million dollars; you confirmed that, and you've pointed out that another company had fifty-odd million dollars. These are facts you're putting on the table, and let's move forward from there.

Mr. Peter MacKay: All right, we'll move forward.

The work you described at the outset for the Chinese television project was approximately $6.6 million. Is that correct?

Mr. John Hayter: Yes, that's correct.

Mr. Peter MacKay: And with respect to a project referenced in the Auditor General's report, there's the work that was done for the Canada Mortgage and Housing Corporation. Are you familiar with that file?

Mr. John Hayter: Somewhat.

Mr. Peter MacKay: The final payment, according to the Auditor General, was made directly to Vickers & Benson, although there appeared to be no contract with you at that time—

Mr. John Hayter: For what? A contract for what?

Mr. Peter MacKay: Well, it was a contract, as I understand it, for Canada Mortgage and Housing.

The Chair: Mr. MacKay, where are you quoting that from?

Mr. Peter MacKay: I'm quoting this, Mr. Chair, from page 14, chapter 4, of the Auditor General's report.

The Chair: Continue.

Mr. Peter MacKay: This contract appeared to have established an arrangement whereby CCSB would contract with the suppliers, yet it appears, at least in the Auditor General's report, that Canada Mortgage and Housing had no basis for making a payment. There was no contract, and there was an original payment, Mr. Hayter, of $225,000.

Mr. John Hayter: I don't understand the “no contract” part, though.

Mr. Peter MacKay: Well, I'm asking you about that. Was there a contract?

Mr. John Hayter: Yes, there was a contract. The contract was with Public Works because Public Works was asked to do the contracting on behalf of CMHC. We got a letter from the Auditor General three days before her report came out that said this mention of this particular issue was not an issue for Vickers & Benson, it was an issue for the Government of Canada.

Mr. Peter MacKay: So the contract was with Public Works and not Canada Mortgage and Housing?

Mr. John Hayter: Yes. We submitted the proposal, however, to Canada Mortgage and Housing. There was some reason for contracting to be done that way, but I have no understanding of why it was done that way.

Mr. Peter MacKay: You can't explain why it was done that way.

Mr. John Hayter: No, I can't.

Mr. Peter MacKay: But you did the work.

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Mr. John Hayter: We did the work. They're still using the work. It's a new—

Mr. Peter MacKay: There's a reference to an additional $125,000—

The Chair: Let him finish.

Mr. John Hayter: It was Canada Mortgage and Housing, “Home to Canadians”, a new logo. We did a brand essence video that was presented to, I believe, 70-some-odd people, and the work is still being done. That's four or five years later, so there was great value for the crown.

Mr. Peter MacKay: There was an additional reference in this report to $125,000 that was transferred. Again, there was no amendment to the contract. Is that because it was all done through Public Works?

Mr. John Hayter: There was an amendment. What she's saying—I believe this is what she's saying, but you'll have to ask her for clarification—is that it was work for Canada Mortgage and Housing Corporation, but it was contracted through CCSB. So there's some confusion there, and it's between those two departments, but not with us. We did the work.

Mr. Peter MacKay: Are you familiar with or has there ever been any practice that you're aware of where contracts were done verbally—there was no written contract whatsoever?

Mr. John Hayter: Is that in the industry?

Mr. Peter MacKay: I'm talking specifically about with your firm.

Mr. John Hayter: I'm not aware of any... without a written contract?

Mr. Peter MacKay: Without a written contract.

Mr. John Hayter: Not to my knowledge.

Mr. Peter MacKay: You have never made any arrangement like that with Mr. Guité or any official--Mr. Gagliano?

Mr. John Hayter: No.

Mr. Peter MacKay: Did you ever meet with Mr. Pelletier?

Mr. John Hayter: I met with him once, I believe it was during the 1997 election period, but very briefly. If he were in this room he wouldn't recognize me.

Mr. Peter MacKay: Did you ever meet with Mr. Tremblay?

Mr. John Hayter: Mr. Tremblay, yes. He was the replacement for Chuck Guité.

Mr. Peter MacKay: Did you ever socialize with any of these individuals?

Mr. John Hayter: I socialized with Chuck Guité.

Mr. Peter MacKay: With Mr. Guité.

With respect to backdating, again, there's a reference to a contract that was made over a certain period of time, and it was backdated—invoices being backdated. Did that practice ever arise in your firm, to your knowledge?

Mr. John Hayter: I think on occasion, yes.

Mr. Peter MacKay: That would occur.

Mr. John Hayter: That would be because work was in progress and we would get a verbal okay to go ahead, and then the contract would follow and it would say “Per a verbal discussion.”

Mr. Peter MacKay: I want to give you a specific example. The Auditor General notes in section 4.58 that the Department of Finance approved an invoice of $294,593 from Vickers & Benson before it had been approved and before it had been estimated. There was an invoice, although the invoice had not been paid until February 28. The department had received these estimates. The Auditor General seems concerned that it didn't receive them until three months after the work was completed and the invoice sent.

So is this what you're saying would happen, that there would be a verbal go-ahead for the work, and invoices would be sent later?

Mr. John Hayter: I do not know the facts on that particular case. That would be something... again, the Auditor General, in her note to us, mentioned that this was a matter between the Government of Canada and her, so I don't know what happened there.

Mr. Peter MacKay: You referenced pressure, that you felt pressure immediately after the Auditor General's report broke. Has that had any financial harm on your company? Have there been any implications for your company? Have you done less work for the government?

Mr. John Hayter: I didn't say the word “pressure”. I didn't say that. I said we were embarrassed. The industry had some embarrassment, and everyone can understand that.

Mr. Peter MacKay: Has that resulted in any changes in practice? Have you gone about doing things differently?

Mr. John Hayter: No.

Mr. Peter MacKay: So your work with the government continues. You're still doing a lot of work for the Government of Canada?

Mr. John Hayter: We're doing some work.

Mr. Peter MacKay: Is it at the level you were doing before?

Mr. John Hayter: No.

Mr. Peter MacKay: Are you doing less or more?

Mr. John Hayter: Less, considerably less.

Mr. Peter MacKay: You referenced the fact that the Auditor General is not infallible, and you went to great lengths—

Mr. John Hayter: I said not infallible.

Mr. Peter MacKay: Right, not infallible. You're saying you're not attacking her, but you're disputing the facts she has put forward in this report. Is that a characterization?

Mr. John Hayter: No, I'm questioning certain points that were made, which, as a marketing and advertising person, if you were to read, you would be confused by them. I don't think she meant to confuse people. What I'm saying is that the outcome of those points I made is confusing and could therefore lead you in a different direction.

The Chair: Thank you very much, Mr. MacKay.

Mr. Tonks.

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Mr. Alan Tonks (York South—Weston, Lib.): Mr. Chairman, I would like you to know that I am not capable of filling the full eight minutes of questions, so I am going to share my time with Mr. Mills. If he can't fill them, then Mr. Lastewka is going to pick it up.

The Chair: Are you going to go until you cease, and then I will pass it over, or are you going to go 50-50?

Mr. Alan Tonks: I'll let you know about that.

The Chair: Okay.

Mr. Alan Tonks: On the question that was raised by Mr. McKay about the fact that there wasn't a contract between Vickers & Benson and CMHC, there is an explanation for that. I'm not attempting to get into the middle of the argument on it, but on page 14 of chapter 4, the Auditor General points out that in the arrangement, CMHC took the highly unusual step of transferring money to CCSB. In return, CCSB contracted with each advertising agency to deliver goods or services directly to CMHC, and to invoice CCSB. In nearly all cases, based on CMHC initialing that goods had been received, CCSB approved the payment of services.

According to industry standards and your experience, Mr. Hayter--which I appreciate and respect very much--wouldn't the convention be to deal directly with CMHC or the crown corporation on whatever their needs were? Did you view it as unconventional? Do you have any opinions on the practice of CCSB being party to the contract, as opposed to dealing directly with CMHC in this case?

Mr. John Hayter: I guess things do happen in government, I don't know.

This is probably unusual. I don't know. I read here that it was done because they didn't have the staff to do it. We normally contract directly through Public Works with the contracting authority. When our people saw this on the Auditor General's report I asked them what it was all about, and they said they had no idea.

They get a contract that says Government of Canada. They process it. Was the work done, and what have you? Someone didn't say, “Wait a minute, I'm confused here. There's this and that--and oops, what's going on here?” They didn't do that. But the work was done, and whatever the reason, you'll have to ask the Government of Canada. I don't know the answer.

Mr. Alan Tonks: Mr. Hayter, one of the other questions the Auditor General has raised is this whole issue of value for money. I go to another document that has been produced, and that's the breakdown of production budget. I note that Vickers' in-house production was $4.5 million, etc., but there was a subcontract. What has come under the scrutiny of the committee is where there is a subcontract, it seems there was a breakdown in accountability. Who was accountable to make sure that when there were subcontracts the work was done?

In that particular instance it was $200,000. I'm not sure what the contract was for, and I don't think that's important. But Vickers would have been responsible at their end for making sure that when out-of-house work was done, the invoices were supplied to Vickers & Benson prior to billing CCSB or the government for the work. Was that the process followed by Vickers?

Mr. John Hayter: On that particular $200,000, $175,000 went to others because it was sponsorship for the Summit on Ice hockey series in September 1972. That was for media time. Our company was very involved in the original 1972 Canada Cup series. We designed the sweaters and did a lot of the planning, and what have you, for them. This series was produced and had one of the largest sports documentary audiences. We worked with CTV and the producers to sell the time and package it. The Government of Canada, through Team Canada, had some sponsorship of that. There was $25,000 for in-house production.

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Mr. Alan Tonks: I see.

The Chair: Are you quoting, Mr. Tonks, from this breakdown of production budget for the period 1997-2000?

Mr. Alan Tonks: Yes, Mr. Chair.

My final question, Mr. Hayter, is that we were given this from the Office of the Auditor General with respect to two questions under paragraph 3.6 and paragraph 3.69—

Mr. John Hayter: Where is this?

The Chair: It's in the letter we received from the Auditor General this morning.

Mr. John Hayter: I don't have that. Can I have a copy of that, please?

Mr. Alan Tonks: Yes.

Mr. John Hayter: Thank you.

Mr. Alan Tonks: You've already indirectly responded to this.

Mr. John Hayter: Is this 3.69?

Mr. Alan Tonks: Yes.

The Chair: I'll recap here for you, Mr. Tonks.

Mr. Alan Tonks: Thank you, Mr. Chairman.

The Chair: In paragraph 3.60 of the Auditor General's report she talks about 53 files that contained no assessment of project merits and so on and so forth, and I'll just make reference to Team Canada China project number 11. She said the information was not available from the Team Canada China project, for example, on the “assessment of the project's merits or even any criteria for assessing merit”. This is a kind of front-end situation.

And then in paragraph 3.69, which is the post-mortem concept, it says “Little documentation was delivered.” Taking that one, number 11, for example, she said, yes, there was documentation for the China project.

So at the front end for the China project, they didn't save the documentation on the government file. At the rear of the post-mortem side, there did appear something for that particular project. So that's the context.

Mr. Alan Tonks: So my question, Mr. Chair, is this. Vickers & Benson obviously did supply the information with respect to the post-analysis, but what wasn't supplied was at the front of the process.

The charge has been made, from time to time, that there was no competitiveness. In other words, if I can use the cliché, “the fix was in”.

I'd like Mr. Hayter to have the opportunity to respond with respect to why there would be a “no” in terms that there was not a competitive bid for the Team China approach. I think he's alluded to that, but I think I'd like to hear him expand on it.

Mr. John Hayter: All I can say is that we were requested... I can give you a copy of a letter in which Mr. Mustapha of the Public Works audit department requested documentation that would have had a “yes” to that. It should be with Public Works. It should have been with the quick response team. I understand they're coming in later. You should ask them. It would be there, and the Auditor General should have referred to it.

And your second question was, was the fix in?

Mr. Alan Tonks: No, I--

Mr. John Hayter: I don't think so, after three years of hard work.

And was it a competitive bid? We owned it. We owned it with the Government of China. They couldn't get it from anyone else. We qualified as a sole supplier.

Mr. Alan Tonks: I was going to say that would fall into the category of sole source.

Mr. John Hayter: Yes, copyright and everything. For all of the things they require to be a sole supplier, we qualified.

Mr. Alan Tonks: Mr. Chairman, those are all my questions.

The Chair: Thank you very much.

You have 20 seconds, Mr. Mills.

Mr. Dennis Mills: I want to make two comments in that 20 seconds. First of all, I thought it was terribly insightful of Mr. Hayter to remind all Canadians that nearly 85% of all of that disbursement money from a project goes for media buys. I think that's pretty important to note.

But my only question to you, Mr. Hayter, comes from your opening statement. You noted that there was a commercial value of $51 million for the China project while it cost the taxpayers $9.4 million. Who assessed the commercial value?

Mr. John Hayter: In 1995 we signed a contract with the China Central Television network, putting a value on time for 45 seconds in Canadian dollars. It was the value based on their rate cards and what have you, and if you take the number of exposures of the programs and the time and what have you, and applied 1995... We didn't start running these until 1997, so it would have been actually higher than that, but we used their 1994 rate card. It's there. It's—

Â (1240)

The Chair: Thank you, Mr. Mills.

Mr. Dennis Mills: Mr. Chairman, I have no more questions, but I point to you that we're quick to knock where value hasn't been spent, but here I think we should credit the taxpayers with a $40 million value added of this $100 million so far. Before this is over, I think we'll find this will be a profit centre for taxpayers.

The Chair: Thank you, Mr. Mills. I'm glad you got that on the record.

Mr. Desrochers, vous avez huit minutes.

[Translation]

Mr. Odina Desrochers: Thank you, Mr. Chairman.

Mr. Chairman, I would like to refer to a document that has already been tabled here—namely a memo from Ms. Terrie O'Leary. Does the name Ms. Terrie O'Leary ring a bell, Mr. Hayter?

[English]

Mr. John Hayter: Yes. She was the EA of Mr. Martin, I think.

[Translation]

Mr. Odina Desrochers: Thank you.

Mr. Hayter, prior to 1994, did you have any contracts with the Department of Finance?

[English]

Mr. John Hayter: No.

[Translation]

Mr. Odina Desrochers: In the memo I have here in front of me today, Ms. Terrie O'Leary mentions that it would be a good idea for your firm to be one of those bidding on contracts with the Department of Finance. Were you aware of that?

[English]

Mr. John Hayter: I've been aware of it through the media. I wasn't aware of it at the time, no. She wouldn't send me a copy of that.

[Translation]

Mr. Odina Desrochers: Because, Mr. Hayter, the memo actually mentions the fact that the contact person at Vickers & Benson is John Hayter. So, I imagine you must have been told by someone that your name would henceforth be on a list.

[English]

Mr. John Hayter: In no way; no, I wasn't.

[Translation]

Mr. Odina Desrochers: No one ever got in touch with you to tell you that, depending on whether someone acted on the memo, of course, you would have an opportunity in future to receive contracts if you bid on them at the Department of Finance?

[English]

Mr. John Hayter: No.

[Translation]

Mr. Odina Desrochers: Given that there was a change of government, Mr. Hayter, did you take any action in relation to the new Minister of Finance or other Liberal ministers in order to ensure that your name would be on a list of agencies able to receive contracts?

[English]

Mr. John Hayter: No. Each competition was advertised. We would respond. We were then asked to complete a submission. We would send in a submission. Sometimes we would be accepted to go forward and compete; sometimes we weren't. Sometimes when we competed, we won; sometimes we didn't.

[Translation]

Mr. Odina Desrochers: Mr. Hayter, how exactly were you informed that you could bid on a contract? Was it through an invitation to tender? How did that process work at the Department of Public Works?

[English]

Mr. John Hayter: It was advertised. It was in the trade press.

[Translation]

Mr. Odina Desrochers: So, Mr. Hayter, you always went through the public tendering process, as opposed to being invited to bid.

[English]

Mr. John Hayter: That's correct.

[Translation]

Mr. Odina Desrochers: I would like to come back to one point, Mr. Hayter. Mr. Guité was very clear when he was here. He told us that before the Liberals came to power, there were two political assistants working in his office that decided how the contracts would be awarded. Have you ever received contracts from the Conservative Party based on a similar process, or by Mr. Guité?

Â (1245)

[English]

Mr. John Hayter: No.

[Translation]

M. Odina Desrochers: You never received a contract and never intervened politically or did anything to benefit from contracts, according to the way Mr. Guité ran things previously?

[English]

Mr. John Hayter: We were never invited. In that era, you were invited to be on a list of possible agencies. We were never on that list.

[Translation]

M. Odina Desrochers: It's possible that they were Conservative, rather than Liberal agencies, Mr. Hayter. You are pretty closely identified as a Liberal, which may explain why you were not awarded a contract by Mr. Guité at the time.

Let's go back to 1994. After Ms. O'Leary's memo, did you receive any contacts from the Department of Finance in 1994?

[English]

The Chair: Qu'est-ce qui est la date du memo? And to whom is it addressed?

[Translation]

Mr. Odina Desrochers: The memo is dated May 30, 1994. It's the same memo that was tabled and in which she makes a recommendation…

[English]

Mr. John Hayter: Can I have a copy of that, please? I don't have a copy of it.

[Translation]

Mr. Odina Desrochers: There are some personal notes on my copy, but I'll give you a chance to look at it.

[English]

The Chair: We'll give him a minute to review it.

Mr. John Hayter: There's no date on it.

Oh, there is one, May 30, 1994. Yes, we did compete after that.

Where does it mention our name, in what paragraph? This is quite blurred.

[Translation]

Mr. Odina Desrochers: Mr. Chairman, with your permission, I would like to respond. Mr. Hayter, you have a copy of the memo in front of you. The last name that appears on page 4, under the heading “Ontario Firms” is Vickers & Benson.

[English]

Mr. John Hayter: Okay, “ONTARIO FIRMS”, I see it.

I was unaware of this. It's the first time I've seen this, but I've heard about it in the press the last week or so.

[Translation]

Mr. Odina Desrochers: Mr. Hayter, I gather you are confirming that you only heard through the media that your company's name was on a list of firms likely to receive contracts from the Department of Finance. No one from Public Works or the Department of Finance ever informed you of the fact that your name would henceforth appear on a list of firms that could receive contracts from the Department of Finance?

[English]

Mr. John Hayter: No.

[Translation]

Mr. Odina Desrochers: Subsequently, did you apply or bid on contracts from the Department of Finance?

[English]

Mr. John Hayter: Yes, we did.

[Translation]

Mr. Odina Desrochers: How many contracts were you awarded by the Department of Finance?

[English]

Mr. John Hayter: We became the agency for Canada Savings Bonds.

The Chair: Is that the only one, Mr. Hayter? Was it just the one contract?

Mr. John Hayter: No, we became their AOR for Canada Savings Bonds. It's a year-round program.

The Chair: And was that the only contract you had with the Department of Finance?

Mr. John Hayter: Right.

The Chair: Okay.

Mr. Desrochers, s'il vous plaît.

Mr. John Hayter It's now CI&S, Canada Investment and Savings. It's an agency, I guess, of the Department of Finance. We don't deal with the Department of Finance, but with CI&S.

[Translation]

Mr. Odina Desrochers: To your knowledge, Mr. Hayter, was your firm the only one to bid on that contract, or did you take part in a competition, attend interviews, and so on?

[English]

The Chair: Mr. Desrochers, if it was a public...

Mr. John Hayter: Public, and there were probably 20 or more submissions. There would have been 5 or 6 who competed, and we were one of the 5 or 6.

[Translation]

Mr. Odina Desrochers: Mr. Hayter, the reason I'm asking this question is that we learned last week, with respect to a contract awarded to Earnscliffe, that 17 firms had actually shown an interest in the job, but only one had actually been awarded the contract based on the specifications. I'm sure you understand why I'm asking this question.

Â (1250)

[English]

Mr. John Hayter: No. I understand why you asked the question, but I don't know the number that would have made submissions. I would be surprised if I'm not in the ballpark in saying that 20 would have applied and that five or six would have competed.

[Translation]

Mr. Odina Desrochers: There is one thing I would like to know, Mr. Chairman. Would it be possible, through Public Works, to obtain the list of agencies that bid on the contract mentioned by Mr. Hayter?

[English]

The Chair: I'm sure we can ask for that.

Mr. Jordan.

Hon. Joe Jordan: Thank you, Mr. Chair.

I'll be dividing my time with Madam Jennings.

Mr. Hayter, I want to go back to what my colleague from the Bloc was saying. He said there was a memo from Terrie O'Leary that mentioned Vickers & Benson, and you specifically. You now have that document. How many advertising firms does it actually mention? I got the impression from his question that it was just yours?

Mr. John Hayter: Well, McLaren Communications is an advertising agency. We are. I think Hawke Communications was one. Rudnicki Murphy is and McKim is. I don't know about McKay. I think there are either four or five.

Hon. Joe Jordan: Thank you.

My point is that certainly that wasn't a specific direction—

Mr. John Hayter: Is BCP on there as well? So there are five or six.

Hon. Joe Jordan: Yes. So essentially these companies were added to the list of companies that could then go through a competitive bidding process and perhaps get some work at the end of the day.

Mr. John Hayter: Correct. But more agencies than these would have submitted credentials, and these agencies weren't necessarily in the final competition of five or six.

Hon. Joe Jordan: I understand.

I want to go back to the line of questioning that Ms. Wasylycia-Leis was pursuing. When I was asking Mr. Guité questions—and this speaks more to general industry norms and standard—what I took from Mr. Guité's explanation of why there was a flat 15% commission... Somebody said, “Well, in the Maurice Richard series it doesn't look like the companies did a lot for the 15%.” He said “It's the industry standard. With some contracts you make more money than others, and on some contracts you might even lose money. That's just the way the industry works.”

Is that a fair assessment of how that 15% was arrived at?

Mr. John Hayter: I will give you an example. I'm not going to reply directly to what Mr. Guité said as it relates to the Government of Canada.

We didn't sign a contract; we had a handshake contract—not one written word—with McDonald's of Canada. We booked with them for 25 years, and for 25 years we got paid a 15% commission. We had a team of probably 20 people who worked on it, not 24/7, but at the time we would have said it was 24/7. On some things we did we got killed on the commission and on others we did very well.

At the end of the year we would sit down to see how things had gone. We would discuss our labour that went against it, but it was never done on a contract-by-contract basis. They would be out of business if they did that, because they just issued so many contracts that they had to keep moving.

Hon. Joe Jordan: What is the process within your company to essentially estimate... When you quote a contract, I assume you go through some kind of analysis of the known costs—

Mr. John Hayter: There's a scope of work.

Hon. Joe Jordan: If you can give me an example, what would throw something so out of whack that you'd take a big loss on something?

Mr. John Hayter: The most important thing would be a change in the scope of work, so the end product was changed materially. That could be downwards or upwards. They might say, “We're not going to do this the way we decided. We want it handled this way, and there's less work.” So there would be less. It also goes the other way.

There are two ways that works. There is a fixed contract price. So once you do your estimate you'd better be right, because if you go over in your labour charges you're going to lose money. Then there are contracts where they say they're going to pay a certain hourly rate, and if they change the scope of work and it goes up, we will get paid for it.

Â (1255)

Hon. Joe Jordan: What was generally the approach the Government of Canada used?

Mr. John Hayter: The Government of Canada used commissions and in some areas fees. The commissions were on advertising. The fees were generally on non-advertising contracts, and they could not be run up. If the contract was going to go over, you had to get a contract amendment.

Hon. Joe Jordan: Thanks.

Mrs. Marlene Jennings: That's really my segue, because I was going to ask you, given the statements you made about the Auditor General's report, and about a news release from the Auditor General's office in which she's talking about the $100 million, and in one case talking about production fees and commissions and in another about production and commission fees, which you've stated is confusing, and that in the industry one doesn't talk about production fees, but about production costs, and then you gave us a pretty broad and clear, detailed definition of what one would see under the rubric of production costs...

Here, you've just said the Government of Canada uses commissions generally in the case of advertising contracts, but that in some areas it uses fees, and that would be for non-advertising contracts. Could you give an example of a non-advertising contract?

Mr. John Hayter: It would be a direct marketing program where you were sending out brochures or information that would be sent to Canadians. That would be a fee contract.

Mrs. Marlene Jennings: Such as for the Canada Savings Bonds?

Mr. John Hayter: That's right, or for HRDC, or Health.

Mrs. Marlene Jennings: It would be about a particular service, or a product that's available through or provided by the government?

Mr. John Hayter: That's right.

Mrs. Marlene Jennings: In that case, if you're asked to bid on a non-advertising contract and it's, say, a retail marketing campaign or something, and you know it's happened before, that there's been a previous campaign, would you expect to see—or would your company, if you were bidding, do—an analysis of the previous campaign to determine if there were weaknesses that you could improve on, etc.? Would you do that, or would you consider it to be part of the evaluation criteria of the bids that came in?

Mr. John Hayter: If we had an ongoing relationship so that we were working on it throughout the year, the answer would be yes. If it is one contract that has a beginning and an end, of a month or two or three or four, you don't necessarily get all the benchmark information to do that. You use your best assessment, and often your experience working in similar areas and so on, but you wouldn't necessarily have the rigour you would have if you had a continuing relationship and contract.

Mrs. Marlene Jennings: Thank you.

The Chair: Thank you, Ms. Jennings.

I think we're going to wrap up here, but before we do...

I had discussions yesterday with Madame Jennings, the vice-chair, regarding a letter I received from Mr. George Hunter. I have copies in both languages, if you want them. Basically, what he's saying is that Mr. Quail cannot come here next week because he is scheduled to be out... He is “not in Ottawa for the latter part of this week due to a longstanding engagement that cannot be rescheduled.” As such he is unable to attend with his client on the proposed dates. That's available to be circulated.

I discussed this with Madame Jennings yesterday, and Mr. Quail is scheduled to come the following week—not this week but next week. We need to get the notice out for the meeting for tomorrow afternoon. It would have to go out with Mr. Quail's name, unless we change it.

Is it agreed that we remove Mr. Quail as the witness for tomorrow? We have lined up Mr. David Myer from the CCSB for tomorrow. Is that agreed?

Some hon. members: Yes.

The Chair: That's agreed.

Mr. Hayter, I'd like to thank you so much for coming.

The meeting is adjourned.