1 2 3 RIM PARK FINANCING 4 5 CITY OF WATERLOO JUDICIAL INQUIRY 6 7 8 9 10 11 HELD BEFORE: The Honourable Mr. Justice R.C. Sills 12 13 14 15 Held at: RIM Park, Manulife Financial Health and 16 Sports Complex, 2001 University Avenue, 17 Waterloo, Ontario. 18 19 20 21 22 23 24 February 13th, 2003 25

2
  1                        APPEARANCES
  2  
  3  James Caskey Q.C.          )Commission Counsel
  4  Stacey Hocking             )
  5  
  6  William McDowell           )MFP Financial Services LTD.
  7  Fraser Berrill   (np)      )
  8  Karen Britton              )
  9  
 10  Chris Paliare    (np)      )City of Waterloo
 11  Richard Stephenson         )
 12  Edward Majewski            )
 13  
 14  Robert Fleming   (np)      )Coalition
 15  Paul Berger                )
 16  Barry MacCormack (np)      )
 17  
 18  Wayne Bumstead   (np)      )John Ford
 19  
 20  Kirk Stevens               )Clarica
 21  Paul Alexander             )
 22  Melanie Schweizer          )
 23  
 24  Elaine Nairne              )Registrar
 25  Wendy Warnock              )Court Reporter

1 TABLE OF CONTENTS 2 Page No. 3 4 David Robson, Resumed, 5 Cross-examination by 6 Mr. Richard Stephenson 4 7 8 Certificate of Transcript 192 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

1 --- Upon commencing at 10:28 a.m. 2 3 THE REGISTRAR: The City of Waterloo Judicial 4 Inquiry is now resumed. Please be seated. 5 MR. COMMISSIONER: I apologise for the delay, 6 ladies and gentlemen. Okay, Mr. Robson, have a seat, please? 7 8 DAVID ROBSON, Resumed; 9 10 (BRIEF PAUSE) 11 12 MR. COMMISSIONER: Mr. Stephenson...? 13 MR. RICHARD STEPHENSON: Thank you, Mr. 14 Commissioner. Good morning, Mr. Robson. 15 16 CROSS-EXAMINATION BY MR. RICHARD STEPHENSON: 17 Q: Can you turn up Exhibit 71 for me? It's, 18 I think, on the top of that tall stack in -- in front of you, 19 taller stack. That's it. 20 A: Which -- 21 Q: Just the paper one, the -- the very top 22 one. 23 A: Sorry. 24 Q: Mr. Robson, you -- I don't know if you 25 know, but apparently MFP is a member of this organization,

1 the Canadian Finance and Leasing Association. 2 Did you know that, sir? 3 A: Yes, sir. 4 Q: Okay. And -- and, this is their annual 5 report. And if I could get you to turn up page 4? Okay. 6 Apparently, this organization has a Code of Ethics to which 7 MFP ascribes. And -- and I've asked other of the managers 8 from MFP about this and I'm going to ask you about it. 9 First off, were you aware of the Code of 10 Ethics of -- of this organization, sir? 11 A: Not specifically, no. 12 Q: Okay. If you need a moment, by all means 13 take a moment and -- and review it, but I'm just going to ask 14 you if you are generally aware of the kinds of things they 15 talk about here, and -- and your views on them. 16 17 (BRIEF PAUSE) 18 19 A: Okay. I've -- I've read it and you 20 wanted me to comment on it? 21 Q: No. Now, just my question for you is 22 whether or not you were aware of this specific document. I 23 take it that you would agree that these -- these provisions 24 are the kinds of things that would be applicable to you in 25 your job and -- and would govern your activities in your job;

1 is that fair? 2 A: Generally, yes. 3 Q: Okay. And specifically, I just wanted to 4 take you down to, I guess, the third item there 5 "Not knowingly make false or misleading 6 statements or withhold information vital to 7 an intelligent business decision concerning 8 any aspect of a leasing transaction" 9 I take it that that is something that you 10 would personally ascribe to; is that fair? 11 A: Yes, sir. 12 Q: Okay. And then the one immediately below 13 that 14 "Disclose all relevant information as to 15 the terms and conditions of the lease which 16 may affect the lessee's decision" 17 It take it, again, you would personally 18 ascribe to that in terms of your own conduct; is that fair? 19 A: Yes, sir. 20 Q: And would you agree with me that in terms 21 of these kinds of concepts of Codes of Ethics and so forth 22 that the purpose of -- of these kinds of things is to 23 emphasize to people in the industry that there are 24 expectations upon them which may be greater than or higher 25 than whatever the strict legal obligations they may have to

1 -- in their particular place? 2 MR. WILLIAM McDOWELL: How would he know 3 what? He's not a governor of this august body of leasing -- 4 MR. COMMISSIONER: Well, he may not. At a 5 certain point it becomes argumentative but I'm going to allow 6 the question and he can answer it to the best of his ability. 7 If he knows, fine. If he doesn't know he can say so. 8 THE WITNESS: Can you repeat the question? 9 10 CONTINUED BY MR. RICHARD STEPHENSON: 11 Q: That the purpose of these kinds of codes 12 is to tell people in your industry that there are 13 expectations of them which may be higher, greater or 14 different than whatever the strict legal obligations they may 15 happen to have? 16 A: I -- I don't know that, sir. I don't -- 17 Q: Would you, yourself, personally view that 18 in the conduct of your business that in addition to whatever 19 legal -- strict legal obligations there are that there -- 20 that you are governed by ethical obligations which may be 21 higher or greater? 22 A: Yes. Certainly at MFP we pride ourselves 23 on our -- our own -- 24 Q: Okay. 25 A: -- professionalism.

1 Q: Okay. And you did -- and you included 2 yourself in that? 3 A: Yes, sir. 4 Q: Not only corporately, but personally; 5 fair? 6 A: Yes, sir. 7 Q: Now, would you agree with me that part of 8 these -- these kinds of obligations and you're not going to 9 see this on that particular page, but relevant to these sorts 10 of ethical obligations is -- is that you're to make all 11 relevant information available to the customer as soon as it 12 is available to the company, not to withhold information for 13 tactical advantage? 14 A: I'm sorry. Where does it say that? 15 Q: No. It doesn't say it there. But what 16 I'm asking you, sir, I said you won't -- you won't see it 17 there, but would you agree with me that that would be an 18 additional kind of ethical dictate that would govern your 19 activities? You -- you provide relevant information as soon 20 as it's available? 21 A: On a timely basis is that -- is that what 22 you're saying? 23 Q: Yeah. 24 A: I would -- timely basis would make sense. 25 Q: Sure. And you -- you don't withhold

1 something for tactical advantage for the company as opposed 2 to the customer; is that fair? 3 A: No. We -- that's fair. We disclose 4 the -- 5 Q: In addition to that, I take it, you would 6 also agree with me that another kind of -- of ethical type of 7 -- of concern would be that you shouldn't use terminology 8 with your customers which is deceptive or misleading? You 9 should be using language that is clear and comprehensible to 10 the person that you're using it? 11 A: Now, you're drawing these things from 12 your interpretation of the CFLA Code of Ethics? 13 Q: No. I'm not. I said you won't find this 14 here, but would you agree with me an additional -- an 15 additional kind of ethical obligation upon you, sir, would be 16 not to use terminology which is deceptive or misleading? 17 MR. WILLIAM McDOWELL: I'm sorry, this 18 Inquiry inquires into the circumstances which led the City 19 the misunderstand, and if the City wanted to broaden it, to 20 discuss whether it sells short of this ethical code, or Mr. 21 Stephenson's idiosyncratic view of the way business should -- 22 should be conducted, it could have done that, but it didn't 23 do that. 24 So, with the greatest of respect, I'd ask him 25 to move on to something else.

1 MR. COMMISSIONER: I think, it creates a 2 problem for me, because I understand that in different types 3 of commercial endeavours, there may be a type of language 4 that is used in the trade, so to speak, and that would 5 probably, whether the use of that language is ethical or 6 unethical, I don't think it comes to a point within my 7 mandate. 8 I don't think this witness can really 9 adequately respond in any useful way to that question, unless 10 you've got something specific you want to ask him about. 11 MR. RICHARD STEPHENSON: No, that's fair 12 enough. Let me -- let me just go to a different point then. 13 14 CONTINUED BY MR. RICHARD STEPHENSON: 15 Q: I take it, Mr. Robson, that one (1) of 16 the things, the key thing that -- that MFP saw itself 17 bringing to the table in terms of its competitive advantage 18 as -- as amongst its own competitors in its business, was a 19 willingness to really get to know the client, and its needs, 20 is that fair? 21 A: Of the setting of the objectives, I think 22 was -- was my -- was my evidence, certainly. 23 Q: Yeah, I know you said that, and what -- 24 but I want to -- what I want to ask you, is that -- and -- 25 and certainly, your colleagues have agreed with this

1 proposition, it's that -- that MFP was prepared to invest the 2 time, effort and energy to really understand the client, the 3 client's needs, and what the client -- what he could do for 4 the client, and that was a little different than, perhaps, 5 what some of your competitors were doing. Don't you agree 6 with that? 7 A: Certainly MFP is a company in a -- a 8 small company in -- with very large competitors had to go the 9 extra mile, if -- if that's -- if that's what your asking, 10 vis-a-vis -- 11 MR. COMMISSIONER: I think he's asking you 12 how do you do that? How do they go the extra mile? 13 THE WITNESS: We would spend a lot of time, 14 as we've talked earlier, qualifying the opportunities, 15 because of our limited resources, and -- and thoroughly 16 understanding the client's objectives before we launched into 17 a -- a, you know, what was for MFP a tremendous amount of 18 sweat -- what we would call sweat equity, which is, you know, 19 tying up of our resources. 20 MR. RICHARD STEPHENSON: Okay. Now, at -- in 21 this particular transaction, sir, who was your client? 22 THE WITNESS: The -- the client ef -- 23 effectively was represented by the -- the Chief Financial 24 Officer for the City of Waterloo. 25 MR. COMMISSIONER: The question can be a

1 little more simply answered, it was the City of Waterloo, 2 right? 3 THE WITNESS: Yes -- well, we had a single 4 point of contact -- 5 MR. COMMISSIONER: Well, fair enough, but the 6 client was the City? 7 THE WITNESS: Yeah, fair enough, sorry. 8 9 CONTINUED BY MR. RICHARD STEPHENSON: 10 Q: I take it in spending time getting to 11 know the client's objectives, one (1) of the things that 12 would be important for you to do, as a representative of your 13 company, would be to describe to your client, the information 14 about your company, about what -- who they are, what they do, 15 in a fashion which is assist them in being -- making a 16 decision about the bus -- the business decision they have to 17 make, what it is that you can offer them. 18 That's a big part of what you have to do, is 19 that fair? 20 A: Certainly. 21 Q: And, part of that exercise, I take it, 22 would be to let the customer know about the relevant 23 experience that you indiv -- personally had, and you -- MFP 24 as a company had, in terms of the kind of things that the -- 25 the customer was interested in, is that fair?

1 A: We would call that reference selling. 2 We -- we did a large amount of reference selling. 3 Q: Right. You inspire a comfort level in 4 the customer by saying, we've got a lot of experience and 5 expertise in this particular area, and we can help you. 6 Fair? 7 A: I don't know -- I think, effectively, 8 what we did in reference selling is we encourage the clients 9 to -- to talk amongst themselves, with existing clients. 10 Q: Right. But, I mean, surely you didn't 11 just simply, you know, drop off a list of names and numbers 12 and say, you know, satisfy yourself. There was a descriptive 13 element in this, in terms of meeting with people and saying, 14 listen, we did some great work with those folks and it was 15 similar in nature what we're talking about, and did great 16 work for these other folks, et cetera. We invite you to call 17 them. Fair? 18 A: Sure. 19 Q: Okay. Now -- and I take it that the 20 City, in this particular case, the City of Waterloo, was 21 interested in that? They wanted to know what it was -- what 22 kind of experience your company had had in this area. Is 23 that fair? 24 A: Fair, yes. 25 Q: Yes, I mean, they were not, in a sense,

1 before 1998, I guess, they -- you -- you were unknown to the 2 City, so you had to introduce yourself. Fair? 3 A: Fair enough. 4 Q: And that process was commenced by Mr. 5 Pitre and continued by yourself, correct? 6 A: Yes. 7 Q: And as we've heard from Mr. Pelech, one 8 (1) of the things that the City was very interested in was 9 how MFP could structure a transaction in a tax advantageous 10 fashion, such that it would have the effect of reducing their 11 cost of funds. Fair? That was one (1) if the things they 12 were very interested in? 13 A: Certainly there were discussions, yes. 14 Q: Okay. Can you tell me, sir, I suggest to 15 you this, that never -- never Mr. Pitre and never you, did 16 you ever tell anybody from the City that MFP had never done, 17 never successfully completed an asset based transaction using 18 a tax investor. You never told them that, did you? 19 MR. WILLIAM McDOWELL: I've -- I've lost 20 track of the number of nevers there. 21 MR. RICHARD STEPHENSON: Never, ever, ever, 22 ever. 23 MR. WILLIAM McDOWELL: All right. 24 MR. RICHARD STEPHENSON: No one ever told 25 them that you'd never successfully completed such a

1 transaction? 2 MR. WILLIAM McDOWELL: Thank you. 3 MR. COMMISSIONER: That's a long time. 4 THE WITNESS: I guess I -- I would -- I would 5 argue that point. But we, at MFP, had had experience in 6 doing tax transactions. So if you're asking me, had we ever 7 done an asset based finance tax transaction, the answer, 8 similar to that of the City's, I would tell you that we made 9 it very clear to the City that every transaction that we do 10 is unique and is tailored to the client. 11 MR. COMMISSIONER: Well, the question -- 12 THE WITNESS: At no -- at no time -- 13 MR. COMMISSIONER: -- the question is -- 14 THE WITNESS: No, sorry. 15 MR. COMMISSIONER: Just a minute, now. The 16 question whether you ever did another -- the asset based 17 group ever did a tax based transaction. Either yes -- you 18 know, it's simple, either yes or no, and if he wants to know 19 more about it, he can ask you. 20 THE WITNESS: There are tax aspects to some 21 of the asset based finance transactions that we had 22 undertaken, not similar to -- or dissimilar to or unique, 23 from the head lease/sub lease proposal that we -- we began 24 with the City of Waterloo. But that's, again, from an MFP 25 perspective, we certainly stressed the unique opportunity

1 here. We had never done a financing of -- of a recreational 2 facility. 3 4 CONTINUED BY MR. RICHARD STEPHENSON: 5 Q: Yes. And I don't care what the 6 underlying asset is, sir. But what I do care about is this, 7 it was clear by, at the latest, early 2000, that the 8 contemplated transaction that the City was interested in, was 9 one (1) where there was a tax equity investor. 10 Is that fair; that that was what was on the 11 cards at that point in time? 12 A: Yes. 13 Q: Okay. And you never told the City that 14 you'd never successfully completed such a transaction, did 15 you? 16 A: You see, again, I -- I would disagree 17 with that, because if you look at some of the other 18 structures that we have done, there is a tax component and 19 tax neutrality in those other transactions, but I will say 20 that this type of tax transaction we -- we -- we had never 21 done. 22 Q: And you certainly never told the City 23 that; did you? 24 A: A tax transaction, in all due respects, 25 is a tax transaction and I'm sure Mr. Pelech would have been

1 pretty clear on it. 2 Q: Now, listen, Mr. Pelech was very clear. 3 What he told us was this. The contemplated transaction was a 4 transaction where more or less 90 percent of it was going to 5 be a debt portion funded through some debt participant, 10 6 percent funded through an equity participant, be it MFP or 7 another player. 8 Those funds would be co-mingled. There would 9 be an effective reduction in the cost of funds to the 10 borrower by virtue of the tax efficiencies for the tax equity 11 investor. That was the nature of the transaction under 12 contemplation; fair? 13 A: That's at ten (10) thou -- 10,000 foot 14 level, I'm sure. 15 Q: I mean, that -- that's as it's been 16 described to the Commissioner. I think that's a fair 17 description of what was under consideration; correct? 18 A: Fair enough. 19 Q: You've never done such a transaction 20 before? Never? 21 A: Again, we'd never done a recreational 22 facility before and the City was very aware of that. 23 Q: Can -- can I get an answer to the 24 question? 25 A: Oh, sorry. That specific one, you're

1 correct. Yes. 2 Q: All right. 3 A: We had not successfully done one of 4 those. 5 Q: Don't you agree with me, sir, that that 6 would have been something that was very relevant for the 7 City's consideration in assessing whether it wanted to do 8 business with your company? 9 A: No, sir. Because although we hadn't done 10 one, we had never tried to do one either. And any of the 11 deals that we had worked on prior we had been successful. 12 Q: So, in other words, you're a complete 13 neophyte in this area. Not only haven't you successfully 14 completed one, you've never even attempted one? 15 A: I wouldn't use the word neophyte but -- 16 Q: Well, you were -- you were a rookie, sir? 17 You'd never ever even tried to do such a deal? 18 A: Frankly, Mr. Stephenson, almost every 19 deal we did in asset based finance you could consider us a 20 rookie. 21 Q: Did you ever have a conversation with 22 anybody from the City where you said something of this 23 nature. You've got to understand -- 24 A: If these questions were asked, we 25 certainly would have responded to them frankly.

1 Q: Well, listen, sir, you'd agree with me 2 that this is not a game of hide and seek? A customer isn't 3 set out on an effort to lurk around in the dark to ask every 4 single question in the hope they get the right one to get the 5 right answer, sir? Your obligation is to be at least 6 somewhat frank with your customer; isn't it? 7 A: Mr. Stephenson, all due respect, there 8 were a lot of objectives that were on the table and we 9 discussed all those objectives openly and frankly with the 10 City of Waterloo. 11 Q: All right. I want to know if you said 12 anything like this, sir? I want to know if you said this? 13 Listen, these are -- there's all sorts of different ways you 14 can structure these transactions. Every one of these 15 transactions is unique. There's lots of different factors at 16 play. 17 These are the factors at play that we see as 18 relevant to this transaction but you need to know, frankly, 19 we've never done it and frankly we've never even tried to do 20 it before. You never had that conversation did you? 21 A: We -- every conversation we had had 22 caveats, Mr. Stephenson. 23 Q: Yes. 24 A: Every letter from MFP to the client had 25 caveats or valid dates. Please, I don't think we're grade

1 school children here. 2 Q: Well, sir, can I get an answer to the 3 question, sir? 4 A: What was the question? 5 Q: The question was you never had a 6 conversation where you said these are -- everything's unique 7 but we've never even tried to do the one we're proposing 8 here? You never had that conversation? 9 A: We certainly had conversations that this 10 was unique. And we certainly had conversations that we had 11 not -- we'd put caveats around. But to stand there and say, 12 we've never tried and we never will, from a marketing 13 perspective, Mr. Stephenson, that makes no sense at all. 14 Q: I know that. 15 MR. COMMISSIONER: Well, just a moment. The 16 question really was quite simple: Did you ever tell the City 17 that you've never done one of these deals or you'd never 18 tried? Those are pretty specific words. 19 THE WITNESS: And the answer to that would be 20 yes. We certainly had that discussion with Mr. Ford and he 21 was very aware of what we were doing at all times. 22 23 CONTINUED BY MR. RICHARD STEPHENSON: 24 Q: All right, hang on. Now we're hearing 25 for the first time. So you say you said to Mr. Ford,

1 straight up, listen, we've never done this particular kind of 2 transaction and we've never, in fact, attempted to do this 3 kind of transaction before; is that what you're telling us, 4 sir? 5 A: When we had the discussions with Mr. ford 6 vis-a-vis the tax player, those discussions weren't one (1) 7 or two (2) word discussions, they were lengthy discussions. 8 Q: I understand that. 9 A: And, as you -- I think as my evidence 10 was, your -- early this week, or mid-point last week, on 11 September 6th, when we had our discussions, they were long 12 and thorough discussions and were -- it's going to be a debt 13 deal, and it changes everything. 14 MR. COMMISSIONER: Just a moment. I think 15 you just think about the question again, and it doesn't 16 require a lengthy answer about the nature of the transaction, 17 or the details that you may have discussed about the 18 transaction with Mr. Ford. 19 What it does require, is an answer as to 20 whether or not you told Mr. Ford, we've never done one (1) of 21 these transactions before, or we've never tried it. 22 In that language, did you have that 23 conversation -- 24 THE WITNESS: Yes, sir. Yes, sir. 25 MR. RICHARD STEPHENSON: Yeah --

1 MR. COMMISSIONER: You did, okay. 2 3 CONTINUED BY MR. RICHARD STEPHENSON: 4 Q: You see, the problem I got, Mr. Robson, 5 is not five (5) minutes ago, you said you didn't, and that -- 6 and here, you know, you said you couldn't have that 7 conversation, because marketing people don't have those 8 conversations. 9 A: No, five (5) minutes ago, we were talking 10 about the -- the February of 2000. 11 Q: Yeah. 12 MR. COMMISSIONER: Okay, now I don't want you 13 arguing with each other. You answer the questions, he's 14 going to ask the questions. Don't either one of you argue 15 with each other. 16 17 CONTINUED BY MR. RICHARD STEPHENSON: 18 Q: Okay. I want to know when this -- this 19 conversation occurred, sir, because until -- you just uttered 20 it, we hadn't heard about this, including this morning. 21 A: You -- 22 Q: It's inconsistent with your evidence from 23 about ten (10) minutes ago, so, let's get it right here. 24 When did this happen? 25 A: Well, sir, it's not inconsistent.

1 September the 6th, we had a lengthy discussion, Mr. Ford and 2 I, and we talked about the actions, and where we were, and 3 what process, and what due diligence MFP had done. 4 Q: And, I -- 5 MR. COMMISSIONER: Did you tell him that MFP 6 had never done one of these transactions before? 7 THE WITNESS: Absolutely. I was quite 8 apologetic that we were unable to get this thing done. 9 MR. COMMISSIONER: When did you say that to 10 him? 11 THE WITNESS: September the 6th. 12 MR. COMMISSIONER: Okay. 13 14 CONTINUED BY MR. RICHARD STEPHENSON: 15 Q: Are -- so, now I understand it. So, the 16 time you're telling him that you've never done one of these 17 transactions, is when it's off the table. 18 When it was on the table back in February, you 19 never told him. 20 A: We were very bullish in getting this done 21 as discussed, in February, certainly and beyond. 22 Q: Right, but was there any reason in the 23 world why you wouldn't have told him in February that, 24 listen, you know, we were very optimistic, we -- we -- we've 25 got good people, we've got good ideas, but, you know, this is

1 new ground for you and us, and, you know, we'll -- we'll hope 2 for the best. 3 Surely, you know, that would have been the 4 thing to say back in February. 5 A: No, sir, every -- as I'm sure you're 6 aware, asset based finance at -- was a -- a newer area for 7 MFP, and the transactions we had attempted to complete up 8 until that point, we were successful, so we were building on 9 that success. 10 Q: All right. Don't you think that by not 11 telling this information to Mr. Ford, or anybody else in the 12 City, back in the January, February, March time frame, that 13 you were, in fact, withholding information that was vital to 14 an intelligent business decision on the part of the City? 15 A: No, sir. If you look at the 16 correspondence in October of '99, you'll see that we laid out 17 the -- our proposal in relation to, at the time, was the 18 parking facility, had three (3) caveats, it was subject to 19 tax regulations was one of them, then current interest rates, 20 and I forget what the third one was, frankly. 21 So, for us to put those types of caveats 22 around any type of correspondence I think speaks volumes. 23 Q: I take it that you would -- a reasonably 24 educated reader of such correspondence would infer that 25 you're telling them that you've never even attempted such a

1 transaction before? 2 A: It would say that -- that there are some 3 caveats, Mr. Stephenson. 4 Q: All right. I -- was that a yes? I'm not 5 sure. I -- are you telling me that a reasonably educated 6 reader of the October 15th letter would conclude from the way 7 that letter is drafted that MFP is telling us that it's never 8 completed, and indeed, ever attempted such a transaction 9 before? 10 A: Wh -- or, I mean, if -- if you're 11 speaking to the tax aspect of the transaction, have you done 12 one (1) before, I don't think we would have put a caveat 13 subject to tax regulations, Mr. Stephenson. 14 How would that caveat make any sense if it was 15 just like an on -- an -- another RRSP that we're just rolling 16 out there -- 17 Q: Well, it would make sense for the very 18 reason that Mr. McDowell keeps saying that it makes sense, is 19 because tax regulations change all the time. And it said, 20 it's subject to then prevailing interest rate tax regula -- 21 regulations, et cetera. That's why you say it, sir. 22 A: No, sir. I disagree. 23 MR. COMMISSIONER: Okay. You're starting to 24 argue with each other again, I'd like you to move on a little 25 bit. I get mixed up when we start talking about tax

1 regulations. 2 3 CONTINUED BY MR. RICHARD STEPHENSON: 4 Q: One of the terms, sir, that -- that gets 5 bandied about, in -- in your presentations and in your 6 evidence, is the expression, incremental cost of funds. 7 A: Yes, sir. 8 Q: Okay. And -- and you'll recollect, 9 amongst the places that this appears, is, there's that 10 PowerPoint slide that says, "City of Waterloo Asset Based 11 Finance Objectives", and there's one (1), two (2), three (3), 12 four (4). Remember that one? 13 I don't -- I don't think you need to turn it 14 up, but if you do -- 15 A: Generally -- generally, yes. 16 Q: Yes. And one of them is lowest overall 17 cost of funds and a reference sometimes to a hundred and two 18 (102) basis points below incremental cost of funds, right? 19 Remember that? 20 A: Yes, sir. 21 Q: Okay. Now, as I understand, part of the 22 purpose of that presentation, I take it, is to give the 23 customer some sense, on a comparative basis, of whether, from 24 a cost of funds perspective, the proposed transaction is 25 expensive, cheap, relative to other potential options.

1 That's -- that's part of the purpose of that, isn't it? 2 A: It's -- it's driven, as much, off of it 3 as the desire for an operating lease. 4 Q: I understand the operating lease is one 5 (1) of the objectives, for sure, but at least part of that -- 6 that -- the purpose of that presentation is to give the 7 customer a basis for comparison on a cost of funds basis. 8 Isn't that fair? 9 A: It's fair enough. 10 Q: And -- and it's part of the analysis, 11 that you would expect a customer to undertake when they are 12 weighing and assessing the advantages and disadvantages of 13 MFP's proposal, as compared to other options they may have. 14 Fair? 15 A: Again, I think it's driven off the 16 operating lease desire as well as the -- the spread -- 17 Q: I appreciate that. The whole bundle of 18 advantages and disadvantages -- 19 A: Correct. 20 Q: -- right? 21 A: Hmm hmm. 22 Q: You're offering a bun -- you're offering 23 a bundle of -- of attributes. There's some that are -- are 24 very beneficial, some may not be quite as good as some other 25 people can offer. Fair?

1 A: Fair enough. 2 Q: And the purpose of the exercise is to 3 allow them to do a bit of comparison shopping? 4 A: It could be, yes. 5 Q: I mean, you would expect people to do 6 that? 7 A: Yes. 8 Q: Fair? 9 A: I would expect them to tender. 10 Q: Now, as I understand it, from your 11 evidence, on a tax deal, the tax equity investor type deal, 12 when you use the term incremental cost of funds, you're using 13 it to mean the cost of the debt portion from the funder. 14 Correct? 15 A: For the tax deal? 16 Q: Yes. 17 A: Incremental cost? Yes. 18 Q: Okay. And then, secondly, in the context 19 of a money-over-money deal, it is the cost of money from the 20 funder, plus MFP's margin? 21 A: It would be an MFP capital lease versus 22 an MFP operating lease. 23 Q: Right. 24 A: Effectively. 25 Q: The way you get there, you're -- you're

1 still going out to a funder and borrowing money, and then 2 you're marking it up. And -- and the incremental cost, at 3 that point in time, becomes the cost of the money from the 4 funder, plus the mark up? 5 A: Correct. Right. 6 Q: And the term, money-over-money, we -- we 7 certainly understand from your evidence, that you had these 8 discussions with Mr. Ford in September about that, and -- 9 A: Hmm hmm. 10 Q: -- we've heard you on that issue. The 11 question I have for you is, back in the end of '99 through 12 the beginning of 2000, when you're -- you're on the file, I 13 take it that that was discussed with the City as amongst the 14 various options that might be on the table from MFP? 15 A: Which -- sorry, the -- which -- 16 Q: The money-over-money deal. 17 A: The money-over-money deal, it only came 18 into the discussions in September of 2000. 19 Q: Okay. So -- and prior to that, I take 20 it, there's no -- just simply no -- no discussion of that 21 issue; fair? 22 A: Certainly it was one of many tools that 23 MFP had at its disposal. 24 Q: Right. But -- but you don't have any 25 recollection of any particular discussion around that prior

1 to September? 2 A: No. Affordability -- 3 Q: Okay. 4 A: -- as I said was the -- 5 Q: Okay. 6 A: -- key. 7 Q: And so, up until September when MFP is 8 using incremental cost of funds, that language, the City, I 9 take it, is understanding it to mean the cost of money from 10 the funder on the debt component because that's the nature of 11 the deal? 12 A: I think that what the City understood via 13 the CFO was how MFP made money. At the end of the day MFP, 14 Clarica, Maritime Life, City of Waterloo all have objectives 15 and MFP was very up front with their objectives as well as 16 the City of Waterloo was up front with theirs. 17 And the understanding that Mr. Ford had was 18 that in a tax deal if MFP kept it for their own book or sold 19 it off there was sufficient margin to justify the effort. In 20 a money-over-money deal, similarly, there would be a spread 21 and MFP would achieve its targets through the spread. As 22 would the City of Waterloo. So that -- those were the 23 discussions. So if that flavours the discussion for you, 24 helps you, I'm not sure. 25 Q: Mr. Robson, before September of 2000 when

1 MFP is using the expression incremental cost of funds, I take 2 it, you understood that the City understood that that meant 3 the cost of money from the funder on the equity -- on the 4 debt portion of a tax deal; that was my question? 5 A: Yes. 6 Q: Thank you. Now, we've heard from many 7 witnesses that one of the things that -- that MFP would never 8 do would disclose to the end use -- end customer what the 9 cost of money from the funder was? 10 A: We had a confidentiality agreement -- 11 Q: Right. 12 A: -- in place with -- 13 Q: And I understood that that was, in fact, 14 the case with Clarica on this particular transaction and that 15 was entirely typical in your experience; fair? 16 A: Yes, sir. 17 Q: Okay. And so there's a -- you've got a 18 legal problem in terms of disclosing that because you've got 19 a confidentiality agreement. I take it there's also a 20 business issue because you may not want the end customer to 21 know the precise margins involved in -- you know, you never 22 do that and I appreciate that that's part of business; is 23 that fair as well? 24 A: Yes, sir. 25 Q: All right. So, as I understand it then

1 you're -- you tell the City that it's going to be a hundred 2 and two (102) basis points off the incremental cost of funds, 3 but the City has -- doesn't know what the incremental cost of 4 funds is; fair? 5 A: We wouldn't disclose what Clarica was -- 6 was -- was charging -- 7 Q: Okay. 8 A: -- us but we certainly disclosed what the 9 lease rate was. 10 Q: Well, but, hang on a second. It's -- the 11 math isn't very complicated, Mr. Robson. 12 As I hear it, it's we're going to give you a 13 hundred and two (102) off something but we're not telling you 14 what the something is and we can't tell you what the 15 something is, but rest assured you're getting a hundred and 16 two (102) off it; isn't that what's going on? 17 A: No. Not at all. If the benchmark is 18 incremental cost of funds, which it is, then when you're into 19 discussions early on in the process before anybody's 20 committed, then it's very much of a theoretical discussion. 21 So you would say if your incremental cost of funds is 22 8 percent then a hundred and two (102) is -- is -- is going 23 to be 6.98 to you, for example. And then as you go -- 24 Q: We can all do that math. That's not very 25 difficult.

1 A: Right. 2 Q: But the problem is, whether or not the -- 3 the illustrative incremental cost of funds has any basis in 4 reality. 5 A: Well, they do, because at the end of the 6 day, the -- obviously, you would categorize this as a -- as 7 an operating lease. 8 Q: No, tha -- 9 A: And, if -- 10 Q: -- and you're -- you're a whole year 11 ahead of me here, Mr. Robson, a whole year ahead of me. Come 12 on back into 2000. 13 You say, early on in the process, we're having 14 a theoretical discussion, and you say, you know, if your 15 incremental cost of funds is eight (8), then you're going to 16 be at -- at 698. 17 Well, I know we can all do that math. We can 18 subtract a -- a hundred and two (102) from eight hundred 19 (800). 20 A: Right. 21 Q: But, you could also say that it's your 22 incremental is twelve (12), then it's going to be 1,098, or 23 if your incremental cost of funds is fourteen (14), then it's 24 going to be 1,298. 25 I mean, it -- it's not very helpful, you'd

1 agree? 2 A: But -- but at that point in the 3 discussion -- 4 MR. COMMISSIONER: Whether it's helpful or 5 not, I'd really like you to ask the question. 6 7 CONTINUED BY MR. RICHARD STEPHENSON: 8 Q: Well, my question is this: The City 9 understands, you say, that they're -- they're going to get a 10 incremental less a hundred and two (102). 11 We also understand that you're not going to 12 tell them what the incremental is? 13 MR. WILLIAM McDOWELL: Well the -- here's the 14 problem with that line of inquiry, that Mr. Stephenson now 15 seems to concede that incremental cost of funds is properly 16 understood as having reference to the private cost of funds 17 to the funder -- 18 MR. RICHARD STEPHENSON: I'm saying that's 19 what his evidence is. 20 MR. WILLIAM McDOWELL: Right, so that -- but 21 the City's evidence is, for better or worse, all in all, this 22 just has to do with debentures, and that's quite easy the 23 only -- what the debenture rate is. 24 MR. COMMISSIONER: Everybody talks about 25 incremental cost of funds as having a different basis.

1 MR. WILLIAM McDOWELL: Right. 2 MR. RICHARD STEPHENSON: Yeah, and I'm -- I'm 3 asking this witness, I -- when I started this, if you 4 remember, Mr. McDowell, by saying that his understanding of 5 what the City understood was this, and I'm proceeding on that 6 basis. 7 MR. COMMISSIONER: Okay. Okay. Just ask him 8 what his understanding was, see -- 9 MR. RICHARD STEPHENSON: Well -- 10 MR. COMMISSIONER: -- see if you get 11 agreement. 12 MR. RICHARD STEPHENSON: Yeah -- yeah, we -- 13 we've already got that, sir. It's -- it's on the record. He 14 said it's the rate from the funder. 15 16 CONTINUED BY MR. RICHARD STEPHENSON: 17 Q: That's what you understood the City 18 understood, right? 19 A: Because by definition, it's -- that's the 20 incremental cost of funds. 21 Q: I understand that's your evidence. Okay. 22 A: For that type of transaction. 23 Q: Okay. My problem is this, that how is 24 the City going to do some comparison shopping, when it's a 25 hundred and two (102) basis points off a number that we're

1 not going to tell you? 2 MR. WILLIAM McDOWELL: But, I think -- 3 MR. COMMISSIONER: You're assuming a lot, 4 because -- 5 MR. RICHARD STEPHENSON: No, I'm not assuming 6 -- his -- his evidence is, they can't tell him, they cannot 7 tell the City the Clarica rate. 8 MR. COMMISSIONER: Well -- 9 MR. RICHARD STEPHENSON: Without -- 10 MR. COMMISSIONER: -- that's what he said, 11 but -- 12 MR. RICHARD STEPHENSON: Well, I -- 13 MR. COMMISSIONER: If -- 14 MR. RICHARD STEPHENSON: -- that's all I have 15 to work with, sir. 16 MR. COMMISSIONER: Well, you've got a lot 17 more to work with. You've got a lot of documents, I've got 18 25,000 pages of documents here, that all say different things 19 to different people. 20 MR. RICHARD STEPHENSON: I just want to get 21 an answer, sir. 22 MR. WILLIAM McDOWELL: Yeah, but -- but 23 there's no air of reality to the question, because he thinks 24 how could the City comparison shop, but City does not 25 understand the term this way. They're wrong, but they don't

1 understand the term this way. 2 MR. COMMISSIONER: Well -- 3 MR. WILLIAM McDOWELL: They understand it in 4 a way that allows them explicitly to compare it. 5 MR. COMMISSIONER: If you're going to get 6 into a conversation about the City's comparison shopping, and 7 I've heard no evidence that the City did any comparison 8 shopping. 9 MR. WILLIAM McDOWELL: Well, there's that 10 too, yeah. 11 MR. RICHARD STEPHENSON: Well, and that's my 12 point, sir, is they had no basis upon which to comparison 13 shop, because vital information -- 14 MR. COMMISSIONER: Well -- 15 MR. RICHARD STEPHENSON: -- an intelligent 16 business decision was being withheld. 17 MR. COMMISSIONER: I'm not sure there was a 18 very intelligent business decision ever made. 19 MR. RICHARD STEPHENSON: I -- but, they may 20 not have been, sir, but the question is, did they get the 21 chance, if they had been so inclined. 22 MR. COMMISSIONER: I don't think they asked 23 for it. They were not so inclined as far as I can tell at 24 this stage. They were dealing with MFP because MFP said they 25 had an innovative method of providing costs by lesser cost of

1 money, and Mr. Ford's evidence is -- 2 MR. RICHARD STEPHENSON: Is he bought it 3 hook, line, and sinker, absolutely. 4 MR. COMMISSIONER: Your description is, 5 maybe, a little strong. I know where this particular line of 6 questioning is going, but I know that we got about a year and 7 a half to add to the point where you're at in your line of 8 questioning, we got into the hundred and two (102) basis 9 points off, but I think at the outset, the evidence from the 10 City's perspective is that they were told that there was a 11 rate. At lease, that's their evidence. 12 MR. RICHARD STEPHENSON: And, I'm going to 13 get to that. I'm going to get there. I want to do it this 14 way -- 15 MR. COMMISSIONER: Do me a big favour. Let's 16 go right there. 17 MR. RICHARD STEPHENSON: I just want to deal 18 with this man's evidence on his own terms. 19 MR. COMMISSIONER: I don't -- 20 MR. RICHARD STEPHENSON: It doesn't make much 21 sense to me. 22 MR. COMMISSIONER: Well, to on the City's 23 terms. Go on the terms of the evidence we've got, because I 24 having an awful lot of trouble -- this Inquiry is not about 25 secrecy, I'm trying to get the facts.

1 And I want to know what everybody says, 2 happened. And if there's a difference of viewpoint as to 3 what happened, then I have to make some decisions as to what 4 I'm going to accept. 5 But I have to tell you that you're confusing 6 me in this line of questioning, about when this person was 7 discussing the hundred and two (102) basis points off 8 whatever. 9 MR. RICHARD STEPHENSON: Right. And -- well, 10 let me just get that point crisp, from what this witness 11 said. 12 MR. COMMISSIONER: Mr. Berger would like to 13 have a conversation with you, I don't know if you want to 14 have a conversation with him. 15 MR. RICHARD STEPHENSON: Not at the moment, 16 thanks. 17 MR. COMMISSIONER: Okay. I just thought I'd 18 ask. 19 20 CONTINUED BY MR. RICHARD STEPHENSON: 21 Q: Just to clarify this one (1) point. Just 22 as I understand your evidence, your evidence is, that a 23 hundred and two (102) off incremental, meaning, in effect, 24 rate from the funder, was discussed right from the outset, 25 correct?

1 A: The incremental cost of funds, 2 effectively, is, as you know, the -- the rate that we get 3 from the funder, which is a direct reflection of the profile 4 of the instrument, the payment stream, the structure, 5 associated credit risks, et cetera. 6 So in February timeline, of 2000, which is, I 7 think the timeline you're talking to, Mr. Stephenson? 8 Q: I'm talking to earlier, right from the 9 very beginning, that's, as I understand your evidence, is 10 that -- that was the discussion? 11 A: But you have to understand that, you have 12 to use a term like incremental cost of funds, and it has to 13 be a moving target, because you don't know the -- the 14 underlying asset, from a valuation perspective, and I'm sure 15 Mr. Pelech went on in great detail about that. You also 16 don't know the underlying credit rating. 17 So you have no choice but to use a term 18 that -- that, certainly, by its own definition, is something 19 that is -- that is moving. So that's the incremental cost of 20 funds. And that's why we use it. 21 MR. COMMISSIONER: I understood Mr. Pelech to 22 define the incremental cost of funds, as the rate you're 23 going to get from your next deal. 24 MR. RICHARD STEPHENSON: Yes. And -- and I 25 think what he's saying -- I think it -- I think it amounts to

1 the same thing, because the next deal would be, in effect, 2 funded by the funder. It -- it's -- I think it's two (2) 3 different ways of describing exactly the same thing. Am I 4 right, there, Mr. Robson? 5 THE WITNESS: Correct. And the funder could 6 be Clarica or MFP. 7 MR. RICHARD STEPHENSON: Anybody else? 8 THE WITNESS: Or it could be MFP, if it's 9 money-over-money. 10 MR. RICHARD STEPHENSON: All right. 11 MR. COMMISSIONER: Okay. Let's go on and see 12 if we can -- 13 MR. RICHARD STEPHENSON: All right. 14 MR. COMMISSIONER: -- make some sense out of 15 this. 16 MR. RICHARD STEPHENSON: Now -- 17 MR. COMMISSIONER: And try another topic. 18 19 CONTINUED BY MR. RICHARD STEPHENSON: 20 Q: Let me -- let me just put it to you 21 absolutely squarely, sir. The evidence from the -- the 22 City's witnesses has been pretty clear, that on repeated 23 occasions, in the time frame of the end of -- you know, 24 through '99 and into 2000, what they were told by you, Pelech 25 and Pitre, was, they were going to get, or could get, a

1 hundred and two (102) off the thirty (30) year Canada's, or 2 two hundred (200) off -- effective -- approximately two 3 hundred (200) off their debenture's which amounted to 4 something in the neighbourhood of 4.75, some number under 5 5 percent. 6 They all gave that evidence. Said -- said 7 that you -- you, Pitre, Pelech said that to them. You deny 8 that, correct? 9 A: Yes. 10 Q: All right. 11 A: Now, to them. Who's "them"? 12 Q: Stockie, Ford, Friedel, at least. Okay? 13 Did you say it to anybody else? 14 A: No, I -- I -- again -- 15 MR. WILLIAM McDOWELL: Well, he said he 16 didn't say it, so it's a bit of a -- 17 MR. RICHARD STEPHENSON: Well, he invited me 18 to describe who them is. 19 MR. COMMISSIONER: Accept it. He says he 20 didn't say it. 21 MR. RICHARD STEPHENSON: All right. Okay. 22 So we'll just ask him -- that's something the Commissioner 23 will have to figure out. 24 MR. COMMISSIONER: Lucky me. Lucky me. 25

1 CONTINUED BY MR. RICHARD STEPHENSON: 2 Q: Now, As I understand it that -- let me 3 just go back. One of the things that the City thought when 4 people were talking to them about incremental, and they say 5 it was made clear to them, that incremental to the City is 6 looking at how the City would otherwise finance a project. 7 And, from the City's perspective, the way 8 they'd otherwise finance long-term financing projects is 9 debentures. That's how the City does long-term financing; 10 okay? And you knew that? 11 A: No. I disagree. 12 Q: All right. Well -- 13 A: The City of Waterloo does not issue 14 debentures. 15 Q: We know that. But it does it through the 16 region and it's done through the region all the time? 17 A: And we were told that they did not want 18 to debenture this -- 19 Q: All right. 20 A: -- project. 21 Q: All right. And who told you that, sir? 22 A: Both Mr. Ford and Mr. Stockie. 23 Q: Okay. Now, but you knew that up until 24 this point in time, until this transaction, the City 25 traditionally used debenture financing to do long-term

1 financing; you knew that? 2 A: I don't know that we actually got into 3 that, but it's a fair statement. Not that I knew it, but 4 certainly that -- 5 Q: Well -- 6 A: -- if that's, in fact, what happened, 7 then that's -- that's what happened. 8 Q: I mean, didn't you -- I mean, isn't part 9 of your job to know your client? I mean -- 10 A: To know our client's objectives. 11 Q: Well -- 12 A: Not necessarily their history. 13 Q: Okay. So, I mean, one of the things you 14 did know, however, was that, you know, there's the big 15 project downtown called the Waterloo Rec Complex which had 16 been -- was -- was the last major recreational project 17 undertaken by the City; you knew that? 18 A: They made reference to it. 19 Q: Okay. And you knew that that had been 20 financed through debentures? 21 A: That I did not know. 22 Q: Okay. Now, as I understand it there is 23 some significance to you in this notion of the -- the hundred 24 and two (102) off the MFP rate in a money-over-money deal and 25 the significance of that, as I understand it from your

1 perspective, is that assists in the qualification of that 2 lease as an operating lease; is that fair? 3 A: It -- it -- it does. Yes. 4 Q: Okay. And in that context we're using 5 this notion of incremental cost of funds in a very, very 6 different way; aren't we? Because in that context you're not 7 looking at the City's -- the cost of the City's next 8 transaction at all; are you? 9 A: Yes. You are. 10 Q: Well, why wouldn't it be the rate from 11 the funder, sir? 12 A: MFP, by definition, is the funder then 13 because it's talking then about an MFP capital lease. 14 Q: Well, I understand that but incremental 15 is always compared to alternatives; right? It's the next -- 16 it's where you're getting your next money from, wherever that 17 might be; right? 18 A: Correct. 19 Q: Okay. Now, one of the things you said on 20 repeated occasions is that MFP always viewed outfits like 21 Clarica to be potential competitors; right? 22 A: Yes. 23 Q: Right. And -- and the concern there 24 would be that, you know, at some point in time the City and, 25 say, Clarica, might hook up directly and cut the middleman

1 out, that was an underlying concern; right? 2 A: Certainly. 3 Q: Okay, so looking at this from the City's 4 perspective, MFP comes back with a money-over-money deal, the 5 City's incremental cost of funds remains the same? They 6 could just, if they get the wherewithal, the inclination or 7 whatever, they can go across the street to Clarica and do 8 this deal, back at Clarica's rate and cut you right out? 9 A: No. The City -- the City's incremental 10 cost of funds in the money-over-money does not remain the 11 same. 12 Q: Well, the incremental cost of funds for 13 the City at that point in time is -- is where -- what money 14 -- the cost of the funds, otherwise available to them, for 15 this transaction? 16 A: With MFP. 17 Q: Well, that's a bit self-defining, isn't 18 it, sir. I mean, they always have the option of going across 19 the street, for Pete's sake. 20 MR. COMMISSIONER: I'm not sure they do. I 21 suppose you could say that that's the case. 22 MR. RICHARD STEPHENSON: Well, it's the very, 23 is -- issue he's concerned about. 24 MR. COMMISSIONER: But, he's got to borrow 25 the money -- I know that his point is that MFP gets the money

1 at 7.6 percent, and MFP provides the money to the City from 2 Clarica at 8.8 percent. 3 MR. RICHARD STEPHENSON: I understand -- 4 MR. COMMISSIONER: But, what he says is that 5 the incremental cost of funds from Clarica to the City is 8.8 6 percent. That's what he's saying, as I understand it. 7 MR. RICHARD STEPHENSON: Well, I -- I think 8 in -- 9 MR. COMMISSIONER: Whether he's right or 10 wrong, I -- 11 MR. RICHARD STEPHENSON: I -- 12 THE WITNESS: Actually, I would say it's 13 higher end, but -- yeah. 14 MR. WILLIAM McDOWELL: From MFP it's 8.8 15 percent. 16 MR. RICHARD STEPHENSON: Yeah. 17 MR. WILLIAM McDOWELL: Yeah. 18 19 CONTINUED BY MR. RICHARD STEPHENSON: 20 Q: I take that if -- if MFP was inclined to 21 mark it up from Clarica by 15 percent, and then knock a 22 hundred and two (102) off that, then, you know, the City's 23 getting a great bargain, because it's been -- it's a hundred 24 and two (102) off -- a hundred and two (102) off 20 percent. 25 MR. COMMISSIONER: You have got to put that

48
  1  in your written argument.
  2                 THE WITNESS:   Now --
  3                 MR. RICHARD STEPHENSON:   Well --
  4                 THE WITNESS:   Well, all --
  5                 MR. COMMISSIONER:   I don't mean to be
  6  facetious.
  7                 THE WITNESS:   I mean, all -- all due 
  8  respect --
  9                 MR. COMMISSIONER:   Just a minute.  Just a
 10  minute.  I'm not through yet.  You know, there's no point in
 11  presenting argumentative statements to the witness.  I'd like
 12  you just to ask him your questions --
 13                 MR. RICHARD STEPHENSON:   All right --
 14                 MR. COMMISSIONER:   -- and I will let you ask
 15  him almost any question.
 16  
 17  CONTINUED BY MR. RICHARD STEPHENSON:
 18                 Q:   Has -- has MFP ever lent money, that
 19  wasn't a hundred and two (102) off?
 20                 A:   Yes.
 21                 Q:   Okay.  Now, let me just understand why is
 22  it that MFP would -- is it just out of some sort of
 23  generosity to the City that the City -- that -- that MFP
 24  knocks the hundred and two (102) off?
 25                 Well, I -- what's -- what's the business

1 rationale from MFP's perspective to knock off a hundred and 2 two (102)? 3 A: It's the operating lease. 4 Q: Well, why does MFP care about that? 5 A: It's the client's objectives, I mean, 6 it's the client's objectives, I mean, it's -- one (1) of them 7 was to keep the -- the transaction off balance sheet. 8 Q: Well, you know, I mean, why don't you 9 just say -- you know, we haven't been able to work out the 10 tax deal, and that's a problem, and you know, well, we're not 11 so sure about this operating lease business either. The cost 12 of money's going to be 10 percent. 13 That's our -- that's our best price, take it, 14 or leave it. 15 A: Is that -- what's your question? 16 Q: Why wouldn't you just do that, I mean, 17 then your -- then your -- then your margin's even bigger. 18 A: The reason that -- that we took a hundred 19 and two (102) off, is that what you're asking? 20 Q: Yeah, is this just some sort of largesse? 21 A: No, it's, with respect, at MFP we have a 22 -- a pricing grid effectively internally for capital leases, 23 and -- and that grid does not interrupt wh -- what we would 24 charge for a capital lease. 25 Q: Okay.

1 A: And when we -- 2 Q: And -- and I take it, Mr. Wolfraim's 3 going to back you up on that, is he? 4 A: There's a grid, absolutely, he will. 5 Q: All right, and that's the spread that 6 we're talking about? 7 A: Yeah, typically, 220 to 240 over. 8 Q: Let me just make sure I understand this 9 issue with how -- how this rate actually affects this 10 operating and capital lease, because you say that was 11 important to the City. 12 A: Yes, sir. 13 Q: Okay. I want you -- I'm going to give 14 you a hypothetical, just so it's -- I can make this clear to 15 myself. 16 We got -- and -- and it's going to be simple, 17 because one (1) of the levels of the hypothetical is the 18 actual Waterloo deal, okay? 19 And, I want to compare that to another town, 20 with another deal, okay? 21 MR. WILLIAM McDOWELL: Is it a real town, or? 22 MR. RICHARD STEPHENSON: It's Robsonville. 23 24 CONTINUED BY MR. RICHARD STEPHENSON: 25 Q: Robsonville -- ville wants to build a

1 park just like the MRP, okay? This is happening 2 simultaneously, and for the sake of assumption, just assume 3 Robsonville is identically creditworthy as Waterloo, okay? 4 And, that market conditions are in all 5 respects otherwise identical, okay? 6 A: Hmm hmm. 7 Q: So, simplifying assumption, they are, in 8 effect, identical deals proceeding in parallel. 9 You're with me so far? 10 A: Yes, sir. 11 Q: Okay. Somewhere down the line, the good 12 folks in Robsonville say, you know, we were real interested 13 in this operating lease business, but, you know, we've got 14 some local gad flies in town, that are used to be, you know, 15 they're a bunch of ex-accountants, and send, frankly, you 16 know, it's just not worth the political heat to us, to take 17 this thing off balance sheet, you know, it's -- it -- it's 18 going to be a distraction for us, we've got other priorities. 19 We're going to put this thing on the balance 20 sheet, regardless of what other advantages there are. It's 21 just not worth the political heat to us, okay? You with me? 22 A: Yes. 23 Q: All right. So, that's the only 24 difference between the two (2) transactions, okay? Does MFP, 25 then, mark up that transaction by a hundred and two (102)

1 points? 2 A: It really depends. It really depends. 3 It depends on the affordability of the facilities -- 4 Q: Well -- 5 A: -- the structure, et cetera. 6 Q: Wait a minute. Now, these are all 7 identical, sir. I'm just -- 8 A: So everything -- 9 Q: -- it's not that I -- 10 A: Everything is the same. 11 Q: -- I'm simplifying assumptions for you, 12 they're, in all other respects, identical. 13 MR. WILLIAM McDOWELL: Yeah, but his people 14 founded Robsonville so. 15 16 CONTINUED BY MR. RICHARD STEPHENSON: 17 Q: The good burgers of Robsonville, though, 18 are very strict and they insist that all the assumptions 19 otherwise remain the same. Okay? 20 I take it that you then say to then say to the 21 good folks in Robsonville, sorry, this isn't an operating 22 lease, it's going to be a hundred and two (102) more, take it 23 or leave it. 24 A: I think the point that you're missing, I 25 maybe should have brought this up earlier, is, these are

1 negotiations. I don't think at any point in time, Mr. 2 Stephenson, that any of our clients, that I've been aware, 3 of, have just layed down and let us tell them, here's what 4 we're going to charge you and you're going to pay it. That's 5 just not realistic. 6 So if it was going to be a capital lease, we 7 would price it accordingly and we would negotiate 8 accordingly. 9 Q: Well, the thing I don't understand, 10 from -- from MFP's perspective, what difference does it make 11 to them? They don't have any additional risk, any additional 12 cost. They're offloading this thing in both cases, it's just 13 a straight money-over-money transaction. 14 Why would you all of a sudden charge a hundred 15 and two (102) more, just because the good burgers in 16 Robsonville want to put this on their balance sheet? What 17 difference does it make to MFP? 18 A: I mean, I don't want to go through a -- a 19 whole lesson of -- 20 MR. COMMISSIONER: Well, does it make any 21 difference? 22 THE WITNESS: -- Canadian finance, but -- 23 MR. COMMISSIONER: In those circumstances? 24 THE WITNESS: I -- I don't think -- yes, I -- 25 does it make a difference to MFP? Other than we, I guess,

1 generate more margin in the capital lease. But -- 2 MR. COMMISSIONER: Well, I take it your 3 answer is, it doesn't make any difference? 4 THE WITNESS: No, I don't think so. 5 MR. COMMISSIONER: Okay. We're going to take 6 fifteen (15) minutes. 7 THE REGISTRAR: The City of Waterloo Judicial 8 Inquiry now stands recessed for fifteen (15) minutes. 9 10 --- Upon recessing at 11:29 a.m. 11 --- Upon resuming at 11:51 a.m. 12 13 THE REGISTRAR: The City of Waterloo Judicial 14 Inquiry is now resumed. Be seated please. 15 THE COMMISSIONER: Thank you. Mr. Robson, 16 please? 17 18 CONTINUED BY MR. RICHARD STEPHENSON: 19 Q: Okay, thank you. I just want to take you 20 to the Windsor transaction for a moment on it -- on this 21 issue of incremental cost of funds. 22 Am I right that the -- the reason, or at 23 least, one (1) of the reasons that MFP, or put it this way, 24 that Windsor was able to successfully characterize the -- the 25 Windsor landfill transaction for a period of time at least,

1 as a -- an operating lease, was because in that case, MFP had 2 done the same that it did in the Windsor -- or in -- in the 3 Waterloo deal, in the sense of knocking down it's -- it's 4 rate by a hundred and two (102) basis points, thereby gutting 5 a hundred and two (102) below incremental -- 6 OBJ MR. WILLIAM McDOWELL: Just a second. Mr. 7 Commissioner, may I register my traditional objection to 8 this, which is that this is ask -- asking for quite detailed 9 information on the Windsor transaction, and that's not what 10 we're here for. 11 MR. COMMISSIONER: I understand what you're 12 saying. I don't consider the question to constitute very 13 much detail. I think he's entitled ask the question, as it 14 may relate to what we're doing. Okay, carry on. 15 16 CONTINUED BY MR. RICHARD STEPHENSON: 17 Q: Is that how it gets a hundred and two 18 (102) below and, therefore, part of the equation on operating 19 lease? 20 A: The auditor, Ernst & Young, audited and 21 review the transaction in detail, and -- and came to the 22 determination it was an operating lease. 23 Q: Yeah, I understand they did whatever they 24 did, and you're not privy to their inner workings, as -- as I 25 understand, but my -- my question was, obviously, it was

1 designed with the hope that it would be ultimately classified 2 as an operating lease. Is that fair, I mean, that 3 transaction, that was part of the objective? 4 A: That -- that would have been part of the 5 objective -- 6 MR. COMMISSIONER: Well, you fill out the 7 decision tree that comes with the material from the Institute 8 of Chartered Accountants, isn't that right? 9 THE WITNESS: Yes, sir. 10 11 CONTINUED BY MR. RICHARD STEPHENSON: 12 Q: Yeah, and I just -- I'm -- I'm under -- I 13 know that you told us that part of that analysis is, is that 14 you got to get that incremental cost down below at least -- 15 at least one hundred (100) points below -- or sorry, you -- 16 it's not -- you've got to get the cost at least one hundred 17 (100) points below the incremental cost. 18 That's one (1) of the qualifiers, correct? 19 You understood that? 20 A: That's one (1) of the objectives that we 21 would -- were setting with the client, yeah. 22 Q: Yeah, I und -- you under -- yeah, and so, 23 my question was, in that case, was it achieved in the same 24 fashion that it was achieved, you would hope, in Waterloo, 25 simply by marking it down off the -- the rate that MFP would

1 otherwise have charged? 2 A: It -- it's a totally different 3 transaction, Mr. Stephenson, with all due respect. Yesterday 4 evening you gave me a hundred and fifty (150) pages for 5 today, and included in there was Windsor material. I have 6 three (3) boxes at home of Windsor material, so I'm happy to 7 bring three (3) boxes, and I'm happy to spend the time -- 8 MR. COMMISSIONER: Well, I'm not happy if you 9 bring three (3) boxes of anything. The question isn't all 10 that complicated. 11 THE WITNESS: Well -- 12 MR. COMMISSIONER: What he's asking you, is 13 whether or not the deduction of a hundred and two (102) basis 14 points in the Waterloo transaction was of assistance in 15 satisfying the requirements of that decision tree to -- 16 THE WITNESS: For the -- 17 MR. COMMISSIONER: -- enter into an operating 18 lease. That's all he's asking. 19 THE WITNESS: I believe it was, yes. 20 21 CONTINUED BY MR. RICHARD STEPHENSON: 22 Q: Okay. You see, because, and -- and you 23 -- you spoke earlier about the nature of -- about the Windsor 24 transaction, your pro --- in your prior evidence, and that's 25 why I was asking the question, because, as I had understood

1 it, in that particular case, the savings, getting you down a 2 hundred and two (102) basis points below incremental hadn't 3 been achieved through a mark down. 4 But rather, it had been achieved by virtue of 5 a loan profile, and the fact that you had this deemed 6 reinvestment of the difference between the low interest rate 7 payments under the lease, and the -- and the higher payments 8 that would have been made under a straight line instrument, 9 and that that had achieved a savings over the full term of a 10 -- amounting to a hundred and two (102) basis points. 11 That's what I had thought you'd said. Am I 12 wrong about that? 13 A: Yes, you're wrong. 14 Q: Okay, but there is that aspect to it, as 15 I understand? 16 A: It was treated as an operating lease, 17 yes. 18 Q: No, no, but there was this aspect that 19 part of the -- the -- the savings there is this notional 20 reinvestment? 21 A: It -- suffice to say it's a very 22 different transactions. And -- 23 MR. COMMISSIONER: Well, try -- 24 THE WITNESS: But I will -- 25 MR. COMMISSIONER: Just try to respond to the

1 question. I appreciate that, I mean, there were differences 2 in the transaction. 3 THE WITNESS: Yes. 4 MR. COMMISSIONER: But he's asking whether or 5 not this notional transfer of reinvestment, was something 6 that was part of the ability of the company to deal with 7 reduction of a hundred and two (102) basis points. 8 THE WITNESS: Yes. No, that had nothing to 9 do with the hundred and two (102) basis points. 10 MR. COMMISSIONER: Okay. 11 MR. RICHARD STEPHENSON: Okay. 12 THE WITNESS: That's a totally -- that's a 13 different point. 14 15 CONTINUED BY MR. RICHARD STEPHENSON: 16 Q: Yes, okay. We -- I mean we -- and the 17 reason I ask that is because we saw that notion of this 18 notional reinvestment, come up in the May 31st document, May 19 31st, 2001 document presented to the City of Waterloo. You 20 remember that? That was part of that package that goes to 21 Mr. Friedel and Steffler. 22 It's not specifically in relation to Windsor, 23 of course, but there is this concept of a notional 24 reinvestment, right? You remember that? 25 A: That I don't recall. The notional

1 reinvestment on May 31st? 2 Q: Yes. Okay, well, we can take you there, 3 it's in your material. I guess it would be in -- 4 5 (BRIEF PAUSE) 6 7 Q: Yes, it's -- it's Tab 73 in Volume 5 of 8 Exhibit 107. 9 MR. COMMISSIONER: Exhibit 107? 10 MR. RICHARD STEPHENSON: Yes. 11 MR. COMMISSIONER: Tab 73? 12 MR. RICHARD STEPHENSON: That's right. The 13 second page. Or -- no, sorry, third page. 14 15 CONTINUED BY MR. RICHARD STEPHENSON: 16 Q: That's what I had understood that part of 17 what was going on in this particular slide, was attempting to 18 describe. It was that, the -- there would be this 19 opportunity saving, in effect, but virtue of a notional 20 reinvestment of the differential between the lease payment 21 and the payment under a straight line instrument? 22 A: Yes, that -- you're -- you're mixing 23 apples with oranges. 24 Q: Okay. 25 A: This is not a -- a notional reinvestment

1 in the facility, this is just a -- a monthly savings, vis-a- 2 vis, a payment. 3 Q: No, no. But we -- we see the monthly 4 savings, the total monthly savings over term -- 5 A: Hmm hmm. 6 Q: -- 11,888,151. You see that? 7 A: Yes. 8 Q: All right. And then below that, there 9 is, it's called -- you call it, "opportunity cost/revenue at 10 4 percent", and that's the notional reinvestment? 11 A: That's not the notional reinvestment that 12 deals with Windsor, at all. 13 Q: Okay. But it -- you'd agree with me, 14 it's a notional reinvestment? That's what you're talking 15 about here? It may be different in kind to Windsor, but 16 that's -- that's -- that's what you're talking about, isn't 17 it? 18 A: No. No, it's -- I wouldn't draw that 19 comparison. 20 Q: Well, this is your document. What are 21 you talking about? 22 A: We're just talking about a -- a -- a, 23 kind of an apples to apples, if you will, monthly amount, 24 that -- that the client would then save in their budget. 25 But also it would, if put into -- if put into

1 a -- a -- an instrument that earns 4 percent compounded 2 monthly, then it would spit out, over and above the principle 3 amount, an incremental interest, if you will. 4 Q: And I may be just having a -- a 5 nomenclature problem here, but isn't that a notional 6 reinvestment? 7 MR. COMMISSIONER: Well, you might be able to 8 help me, now, because I'm not sure I understand. I'm looking 9 at this third page of Tab 73. And there's an "opportunity 10 cost/revenue --" 11 THE WITNESS: Hmm hmm. 12 MR. COMMISSIONER: "-- (at 4 percent)". 13 THE WITNESS: Hmm hmm. 14 MR. COMMISSIONER: And it comes out to some 15 $11,578,000. 16 THE WITNESS: Yes, sir. 17 MR. COMMISSIONER: Where is that number 18 derived from? Can you help me? I don't want you to have to 19 do a huge mathematical calculation, but I need to know, by 20 way of understanding it, where that number comes from? 21 THE WITNESS: The term of this -- this slide 22 is three hundred and seventy-two (372) months. 23 MR. COMMISSIONER: Yes? 24 THE WITNESS: And if your monthly payment, 25 from an incremental cost of funds perspective, is $301,000

1 versus $269,000, then you're saving approximately $32,000 a 2 month. 3 MR. COMMISSIONER: Yes? 4 THE WITNESS: Okay. Well, that 32,000 that 5 you're saving monthly if you -- you have to do something with 6 that money and you would put it, effectively, in this 7 example, in the bank -- 8 MR. COMMISSIONER: Yes. 9 THE WITNESS: -- and it would earn interest 10 compounding every month, of course, so that the last -- the 11 372nd payment would have very little interest associated with 12 it. The very first payment would have a lot because it -- 13 that 10,000 dollar savings earn interest over the three 14 hundred and seventy-two (372) months. 15 MR. COMMISSIONER: Okay. And is it that 16 accumulation that constitutes the opportunity cost? 17 THE WITNESS: That's correct. Just that 18 interest piece. Not -- not -- 19 MR. COMMISSIONER: The interest portion? 20 THE WITNESS: That's correct. 21 MR. COMMISSIONER: And that interest portion 22 is calculated at the 4 percent? 23 THE WITNESS: Right. 24 MR. COMMISSIONER: Okay. And that 4 percent 25 is an arbitrary percentage?

1 THE WITNESS: It's -- it's what the market 2 would have been at that point in time -- 3 MR. COMMISSIONER: Okay. 4 THE WITNESS: -- for that type of -- 5 MR. COMMISSIONER: Now then, the total 6 monthly savings that shown over the term that's shown in this 7 document is that -- that is simply the $10,000 a month over 8 the three hundred and seventy-two (372) months; right? 9 THE WITNESS: Correct. 10 MR. COMMISSIONER: So, these two (2) things, 11 sort of, duplicate each other, in my sense, because you're 12 saving $10,000 a month so you put that aside. You invest it 13 and at 4 percent is comes out to another 11 million? 14 THE WITNESS: Right. 15 MR. COMMISSIONER: So together -- 16 THE WITNESS: At the end of -- 17 MR. COMMISSIONER: -- at the end of the game 18 they add up to $23,458,000. Now, what Mr. Stephenson is 19 saying to you, does that not constitute a notional 20 reinvestment of the $30,000 each month? 21 Does it or doesn't it? 22 THE WITNESS: I think where I -- where I 23 struggled is he was using it in the context of another 24 transaction. 25 MR. COMMISSIONER: Well, okay, in the context

1 of this transaction -- 2 THE WITNESS: If you want to -- 3 MR. COMMISSIONER: On this piece of paper -- 4 THE WITNESS: If you want to call it that. 5 MR. COMMISSIONER: Okay. Then that is 6 essentially a notional reinvestment of the savings? 7 THE WITNESS: Yeah. We -- we would tend to 8 call that opportunity cost, Your Honour, because it's only 9 available if you have sufficient -- if you budgeted, if you 10 will, in the municipal sense the greater amount. 11 MR. COMMISSIONER: All right. I think I 12 understand it. I don't know if I have expressed myself in 13 your terms, Mr. Stephenson, but I wanted to get to the bottom 14 of it and I think I understand what -- what this -- 15 MR. RICHARD STEPHENSON: Fair enough. 16 MR. COMMISSIONER: -- piece of paper says. 17 MR. RICHARD STEPHENSON: While we've got this 18 turned up, I was going to deal with some of this later, but 19 let me deal with some of it now so we can avoid shuffling. 20 21 CONTINUED BY MR. RICHARD STEPHENSON: 22 Q: I see in this particular slide, you -- 23 you make reference to, of course, this phrase, incremental 24 cost of funds. And here you're using it in a way which is 25 quite distinctively different from either of the other two

1 ways that you've referred to incremental cost of funds. It's 2 not related to either of those two -- those two definitions 3 at all; is it? 4 A: No. It's -- in this slide it relates to 5 the head lease. 6 Q: Well -- 7 A: And I'm -- 8 Q: I don't think so, in fact, sir, because 9 we know that the head lease isn't at 6.47? What -- what this 10 is relating to, sir -- 11 A: Sorry, this slide I'm -- 12 Q: Yeah. On this slide what the incremental 13 cost of funds is, you are -- it is some kind of notional 14 straight line financing instrument; right? It is a financing 15 at 4 -- 6.47 whether it's a loan or a lease doesn't really 16 matter, but it's a financing instrument at that rate; fair? 17 A: Yeah, fair enough. 18 Q: Okay. And you're -- you're -- the number 19 that you're using, incremental cost of -- relating to this 20 concept of incremental cost of funds is some number which is 21 about less than a point higher than -- than the thirty (30) 22 year Canada Bond Rate; right? Because you say 23 "Of the then current thirty (30) year 24 Canada Bond Rate" 25 I think, in fact, it's -- eighty -- eighty

1 (80) basis points? 2 MR. COMMISSIONER: Well, wait a minute. I 3 don't understand that. 4 THE WITNESS: No. 5 MR. COMMISSIONER: The thirty (30) year 6 Canada Bond Rate that could be anything at any given time. 7 8 CONTINUED BY MR. RICHARD STEPHENSON: 9 Q: Yeah. But as you recollect, back on 10 September -- sorry, May 31st you'd gone through this somewhat 11 elaborate exercise of talking about how you look at the 12 thirty (30) Year Canada Bond Rate as at a certain date. You 13 -- you added eighty (80) for a credit spread, and then 14 subtract one hundred and two (102). 15 What you get, when you do that analysis, is 16 you get, I think, if you'd simply st -- you -- before you 17 subtract the one hundred and two (102), you're at 6.47, 18 right? 6.47 less -- 19 A: Yes. 20 Q: -- one hundred and two (102) is 5.45. 21 A: Yeah, we were actually working the 22 opposite way. If you -- I don't know if you recall the 23 discussion, but we were -- we were wrestling with the -- the 24 -- putting the 5.45, effectively, in the context of Mr. Ford, 25 putting in a rate in his September Council report, and it

1 just made no sense, 4.76, I think what was the number. 2 So, what we were doing here, was showing, in a 3 very simplistic fashion, you know, how you could look at the 4 -- the head lease, if you will, and how it would make sense 5 in the context of -- of a 5.45. 6 Q: Yeah, and I -- frankly, I had a real 7 problem with that, Mr. Robson, because that's not what this 8 document does at all. 9 What you're doing here, is you're comparing 10 two (2) different financing instruments. You're comparing 11 something which is a straight lined finance, it's an -- 12 actually, both straight line financing instruments, one (1) 13 of them, which is sort of like a debenture, or it could be a 14 capital lease, who cares, but in any event, the first one is 15 a straight line instrument at 6.47 percent, right? 16 That's the incremental cost of funds line? 17 A: Yeah, that's correct. 18 Q: Okay, and what you're saying is, in -- in 19 this scenario, see, maybe you could have gone out, and 20 borrowed, say, you know, the 48,000,000, at 6.47. Maybe they 21 could have, maybe they couldn't have, but that's the 22 assumption, and this is what it would have cost you. 23 And if, in fact, you take a look at that 24 monthly payment of 301,494, the implicit rate there, the -- 25 but that -- that loan's fully amortizes over the three

1 hundred and seventy-two (372) months, at 6.47 percent, right? 2 That's what you're demonstrating, correct? 3 A: It -- it -- that's what -- you -- again, 4 I'm trying to give you the sense of the -- of the purpose of 5 this presentation, as opposed to if you just look at this, 6 it's a very simple, straight line analysis of -- of two (2) 7 different transactions. 8 Q: I understand that. The first one (1) is, 9 you go out an borrow money at 6.47, you'll make -- you -- 10 you'll -- at that interest rate, you make payments of 11 $301,000 a month for three hundred for seventy-two (372) 12 months, and fully amortize that loan. 13 That's what the -- the first column does, 14 right? 15 A: Fair enough. 16 Q: Okay. The -- under the operating lease 17 one (1), you've also made it a straight line instrument. 18 You've said, specifically, to -- as a simplifying assumption, 19 and that's what goes at the bottom, but in that one (1), the 20 implicit rate of interest, whereby you're fully amortizing 21 it, is actually 5.45. 22 A: Correct. 23 Q: Okay, so what you're saying is, in this 24 document, is if you view this as a 5.45 financing, you're 25 going to save $11,000,000 in payment. Now, $11,000,000 in

1 opportunity costs compared to if you had done this through a 2 borrowing at 6.47. 3 That's what this document demonstrates, 4 correct? 5 A: Yes. 6 Q: Okay. That's got nothing to do with the 7 head lease. 8 MR. COMMISSIONER: Well, the only thing 9 that's got to do with the head lease is, if you're starting 10 out with a number that happens to be -- 11 MR. RICHARD STEPHENSON: In the head lease. 12 MR. COMMISSIONER: -- in the head lease. 13 MR. RICHARD STEPHENSON: Absolutely, but 14 these are both neither -- the head lease, of course, isn't a 15 -- isn't off -- isn't an extension of -- but the head lease 16 is the money coming to the City. It's got nothing to do with 17 the repayment obligations at all. 18 THE WITNESS: And, that was our point in the 19 meeting. That was exactly the point. 20 MR. COMMISSIONER: Okay. I understand what 21 he's saying. Let's move on. 22 23 CONTINUED BY MR. RICHARD STEPHENSON: 24 Q: Now, was it ever suggested to the City 25 that in the Waterloo transaction, we do have a situation

1 where, obviously, there is a profile to the payments, it's a 2 -- a low to high profile, right? 3 A: Yes. 4 Q: On the -- on the sub lease? 5 A: Hmm hmm. 6 Q: Okay. Was it ever suggested to the City 7 that one (1) of the additional benefits of this low to high 8 profile would have been the fact that as compared to some 9 other straight line instruments, that was theoretically 10 available, you'd have again, this additional advantage, that 11 in the early years, payments would be lower than they likely 12 would have been under a straight line instrument and, 13 therefore, you have, at least the opportunity to re-deploy 14 your resources elsewhere, either through reinvestment in real 15 things or reinvestment in the bank. 16 Was that discussed as an advantage? 17 A: We certainly discussed the matching 18 concept. And beyond the matching concept, which would be the 19 performance of the underlying asset, here, the RIM Park, with 20 the associated financing instrument. We then talked, really, 21 about coverage. 22 Q: All right. So, as I -- 23 A: We didn't -- we didn't -- sorry. 24 Q: Okay. I take it the answer is, no? 25 A: As far as a reinvestment?

1 Q: As that -- yes. You'd have the ability 2 to, in effect, re-deploy these resources, otherwise, into 3 either activities or -- or into the bank? 4 A: Right. And there's a rationale behind 5 that, as well, but -- 6 Q: All right. But I -- I take it that that 7 was not part of the discussion? 8 A: No. 9 Q: Okay. 10 11 (BRIEF PAUSE) 12 13 Q: Now -- 14 A: Actually, I should draw your attention, 15 before you leave that schedule. If you -- 16 MR. COMMISSIONER: Has this got anything to 17 do with your last answer? 18 THE WITNESS: Oh. If -- as it relates to 19 this schedule, I guess. 20 MR. COMMISSIONER: Well, why don't you wait? 21 THE WITNESS: I'll wait. 22 MR. COMMISSIONER: I understood what had 23 happened. 24 MR. RICHARD STEPHENSON: Yes. 25 MR. COMMISSIONER: So let's --

1 MR. RICHARD STEPHENSON: Okay. 2 MR. COMMISSIONER: Let's -- you'll 3 probably -- 4 THE WITNESS: Okay. 5 MR. RICHARD STEPHENSON: Yes. 6 MR. COMMISSIONER: Let's wait for the next 7 question. 8 MR. RICHARD STEPHENSON: The Commissioner has 9 achieved a state of clarity that we don't want to disturb. 10 MR. COMMISSIONER: Thank you. 11 MR. RICHARD STEPHENSON: Can I get you to 12 turn up Exhibit 30, Tab 17? I believe it should be the next 13 document on the top of your -- the tall pile, there. 14 MR. COMMISSIONER: Tab -- is that Volume 1? 15 MR. RICHARD STEPHENSON: I believe so, yes. 16 MR. COMMISSIONER: Yes, it is. It's the Ford 17 document brief. 18 THE WITNESS: Yes, I've got it. 19 20 CONTINUED BY MR. RICHARD STEPHENSON: 21 Q: And, you'll recall that My Friend, Mr. 22 Caskey, reviewed at least parts of this document with you. 23 And -- and one (1) of the problems that was identified -- 24 A: Sorry, which tab? I'm sorry. 25 Q: Seventeen (17).

1 A: Sorry. 2 Q: Sorry. 3 4 (BRIEF PAUSE) 5 6 A: Sorry, I've got the wrong book. 7 MR. COMMISSIONER: Okay. 8 9 (BRIEF PAUSE) 10 11 THE WITNESS: Yes, sir. 12 13 CONTINUED BY MR. RICHARD STEPHENSON: 14 Q: Okay. You'll remember this document? 15 A: Yes. 16 Q: Okay. And Mr. Caskey asked you some 17 questions about that, you remember that? 18 A: Hmm hmm. 19 Q: Okay. And -- and one of the problems 20 that was identified when -- when you and Mr. Caskey were 21 reviewing this document, was this -- there's this -- this 22 problem in the terminology. That, in the first page, in that 23 single paragraph, you have a reference both to two hundred 24 (200) basis points below traditional financing, and then two 25 hundred (200) basis points below incremental cost of funds?

1 A: Correct. 2 Q: Right. And the -- I'd suggest to you 3 that the -- a reasonable reader would, given the fact that 4 they appear to have both the same two hundred (200) basis 5 point number in it, and the fact that they both appear in the 6 same paragraph, would conclude that they're talking about the 7 same thing, notwithstanding this change in terminology? 8 You'd agree with me that that -- that's a 9 reasonable conclusion for a reader to come to? 10 MR. COMMISSIONER: Do you agree with that or 11 not? 12 THE WITNESS: I -- I don't -- I don't, 13 because I'm in the finance business -- 14 MR. COMMISSIONER: Okay. If you don't agree 15 with it -- 16 MR. RICHARD STEPHENSON: All right. 17 MR. COMMISSIONER: -- just say so. 18 MR. RICHARD STEPHENSON: Okay. 19 20 CONTINUED BY MR. RICHARD STEPHENSON: 21 Q: But, if you're talking about the -- did 22 somehow, two (2) different aspects of this transaction 23 somehow miraculously both achieve two hundred (200) basis 24 points, off two (2) different benchmarks? 25 A: This transaction had a -- and you can see

1 it in the first instance, there was a public/private 2 partnership aspect to this. 3 Q: Yes? 4 A: And it was that reinvestment into the 5 facility, not into an opportunity cost stand alone 6 instrument, but back into the facility that allowed them to 7 go beyond 102 -- what we would categorise as an operating 8 lease benchmark, if you will, or bar and -- and -- and get 9 even beyond that. 10 Q: Okay. So this is, sort of, an internal 11 rate of return? 12 A: Very much. 13 Q: Okay. And then when we go further down 14 in the middle of the paragraph where they talk about 15 "The trust provides off-balance sheet 16 funding at more than two hundred (200) 17 basis points below incremental cost of 18 funds" 19 Is that talking about something completely 20 distinct from the first time? Or is it simply describing 21 another -- the same thing in a different way? 22 A: No. It's not the same thing. 23 Q: Okay. 24 A: Incremental cost of funds, certainly my 25 evidence is different from traditional financing.

1 Incremental is your next transaction going forward. 2 Traditional would be effectively looking backwards. 3 Q: Right. And -- and we know that for 4 municipalities, you know, presumably with some exceptions, 5 traditional means debentures? 6 A: Some. 7 Q: Well, you know, let's not fool around on 8 this, Mr. Robson. I mean you make the presentation -- 9 MR. COMMISSIONER: I know the answer. The 10 answer is what you suggested. He says, some. 11 12 CONTINUED BY MR. RICHARD STEPHENSON: 13 Q: No, but you say it yourself, Mr. Robson, 14 you make the presentation, the reach the beach presentation 15 and you say, we're competing against -- that the standard has 16 always been debentures. That's what we must compete against 17 ver since Hazel McCallion was dating. That's what you say. 18 A: I mean, I don't -- I don't want to, kind 19 of, split hairs with you, but certainly there's other 20 financings that municipalities use. 21 Q: I appreciate that. It's not unique. And 22 it's not -- it's not exclusively but traditionally that's 23 what we're talking about? All right. Let's come back to 24 this. 25 So -- so the thing I want to find out is, if

78
  1  we're not talking about describing the same thing in a
  2  different way, what are we talking about in the second
  3  comment here about the 
  4                   "Two hundred (200) basis points below
  5                   incremental cost of funds"? 
  6                 A:   Okay, so are we back into defining what
  7  incremental cost of funds is? 
  8                 Q:   No -- no.  I want to know -- maybe the
  9  statement is just simply false and if it is, let us know? 
 10  But I understand what you told us about the two hundred (200)
 11  basis points traditional -- below traditional financing.  You
 12  said that that was achieved through an essentially an
 13  internal rate of return analysis.  I understood that.
 14                 And then I want to move down to the middle of
 15  the paragraph and say, are you talking about that same
 16  internal rate of return or are you talking about something
 17  else entirely different? 
 18                 A:   And I apologize if I was unclear.  I, for
 19  some reason, I was under the impression with Mr. Caskey, I
 20  corrected traditional financing and said that -- should --
 21  that should have said incremental cost of funds. 
 22                 Q:   Okay.  So, -- 
 23                 A:   So -- so -- 
 24                 Q:   This is just, in effect, that there's an
 25  error in the document and they should be using consistent

1 terminology? 2 A: That's my view. Yes. 3 Q: Okay. Now, and I take it that if -- if 4 you were responsible -- I mean, in a presentation you would 5 do that's not the kind of -- you would want to ensure you got 6 that consistent terminology; right? 7 A: Well, generally, yes. I mean, there's -- 8 Q: Yeah. And -- and I take it you indicated 9 that you -- I don't know if you actually were at this 10 specifically, but do you know what the source of this 11 specific -- specific document is? 12 A: The cover -- the Executive Summary? 13 Q: Well, as I understand it -- 14 A: Or the whole? 15 Q: -- this was -- this was all part of a 16 bundle and, in fact, -- I mean, all we have is what we have. 17 But I think we understood it to be part of one bundle. 18 MR. COMMISSIONER: Are you trying to find out 19 who prepared this document? 20 MR. RICHARD STEPHENSON: No. No. My 21 question was, does -- does he know? I mean -- 22 MR. COMMISSIONER: Does he know what? 23 MR. RICHARD STEPHENSON: Does he know who 24 prepared it? Yeah. 25 MR. COMMISSIONER: Do you know who prepared

1 this document? 2 THE WITNESS: This one, in particular, I -- 3 it -- I -- I don't recall whether Mike -- 4 MR. COMMISSIONER: Well, did you? 5 THE WITNESS: I don't think so -- 6 MR. COMMISSIONER: Okay. 7 THE WITNESS: -- because I -- MFP may have 8 but I don't know if I did, sir. 9 10 CONTINUED BY MR. RICHARD STEPHENSON: 11 Q: You see, that the issue I have with that 12 is, Mr. Pitre says this was a presentation you gave; okay? 13 That -- and he re -- it was -- he saw you give this 14 presentation and then -- 15 A: Are you -- are you asking about the 16 Executive Summary -- 17 Q: Yeah. 18 A: -- or are you asking about -- 19 Q: The whole thing? The whole thing? 20 A: And I gave a lot of presentations. 21 Q: I understand -- 22 MR. COMMISSIONER: Well, you didn't give this 23 one to the City of Waterloo, Mr. Pitre did. 24 MR. RICHARD STEPHENSON: That -- that's 25 right. And what Mr. Pitre said is that he had seen you, Mr.

1 Robson, make this presentation to others previously. 2 MR. COMMISSIONER: Is that -- is that 3 correct? 4 THE WITNESS: It -- 5 MR. COMMISSIONER: You may not have authored 6 the document but did you make the presentation? 7 THE WITNESS: I may have, I just -- I don't 8 know which one (1) he's referring to. I've made a lot of 9 presentations. 10 11 CONTINUED BY MR. RICHARD STEPHENSON: 12 Q: Yeah. No, I'm -- I'm talking about Tab 13 17. 14 A: No, I understand that, but I'm -- I'm 15 trying to rec -- I don't have the -- there's no date on it. 16 There's no -- 17 Q: Okay. 18 A: --but it -- you know, certainly it's 19 consistent -- 20 Q: But, in any -- in any event, it's -- it's 21 got wording imperfections that you now recognize that as 22 needing correction, fair? 23 A: In the summary -- 24 Q: Yeah. 25 A: -- as I say, I -- I would -- I would look

1 to traditional financing and -- 2 Q: Okay. 3 A: You could call it incremental cost of 4 funds, yeah. 5 Q: All right. 6 A: Actually, if you'll notice, there's a 7 note underneath that, which is consistent with my comment. 8 It says, in handwriting: 9 "Off balance sheet at two hundred (200) 10 basis points below incremental cost of 11 funds." 12 Q: Yeah. 13 A: I feel a little better. 14 Q: Yeah, which is what it says in the -- in 15 the pair of them. 16 A: Except for the first -- 17 Q: Yeah, now, I just want to come back to 18 that -- you -- you don't need to turn it up, but it's the -- 19 it's Exhibit 30, Tab 59 and 60, which is the so-called Reach 20 The Beach Presentation. Do you remember that? 21 It's the one (1) that was prepared outside, 22 and -- 23 A: Do you -- do you mind if I turn it up? 24 Q: Oh yeah, absolutely. 25 A: If you're going to refer to it, I'd like

1 to -- 2 Q: Yeah, no, the only -- I only got one (1) 3 question for you about it, okay, and if you need -- 4 MR. COMMISSIONER: Why don't you ask the 5 question, maybe he won't have to turn it up. 6 7 CONTINUED BY MR. RICHARD STEPHENSON: 8 Q: Yeah, if you need to look at, let me 9 know. Ms. Fraser gave evidence about this document. 10 A: Okay. 11 Q: Ms. Fraser said that she accompanied you 12 to the -- the presentation? 13 A: Yes. 14 Q: And, she was assisting you in the 15 presentation, because she ran the PowerPoint machine. 16 A: Okay. 17 Q: Okay, and she says that she had the 18 speaking notes, because she had to follow along, and she 19 pushed the buttons to make the slides go at the appropriate 20 time. That's what she did. You remember all that eh? Is 21 that fair? 22 A: I recall her -- 23 Q: Okay. 24 A: -- working. 25 Q: She says that you gave the presentation

1 word for word in accordance with the speaking notes. Do you 2 have any reason to quarrel with that? 3 A: I -- 4 MR. COMMISSIONER: Just a minute. 5 MR. WILLIAM McDOWELL: I stand to be 6 corrected, but my recollection was the question was put to 7 her, these are the sorts of things that were said in these 8 presentations. 9 MR. RICHARD STEPHENSON: No. She said word 10 for word. 11 MR. WILLIAM McDOWELL: Do you have the 12 excerpt there? 13 MR. RICHARD STEPHENSON: I will call it up. 14 MR. WILLIAM McDOWELL: All right, well -- 15 MR. RICHARD STEPHENSON: But -- 16 MR. WILLIAM McDOWELL: -- but carry on. 17 MR. COMMISSIONER: You're prepared to accept 18 his word for that, now? 19 MR. WILLIAM McDOWELL: Yeah, all right. He 20 -- he tends to be right about these things. 21 MR. COMMISSIONER: Your credibility went 22 right down the toilet, if you're wrong. 23 MR. RICHARD STEPHENSON: And -- and, you 24 know, you -- if I am wrong, by all means, you know, I will -- 25 I'll extend you my -- my heartfelt apology on this. That's

1 my recollection. 2 MR. COMMISSIONER: Okay. 3 4 CONTINUED BY MR. RICHARD STEPHENSON: 5 Q: In any event, if she says that, do you 6 have any reason to quarrel with that? 7 A: Yes. I -- I mean, Mr. Stephenson, you're 8 asking me to endorse the presentation word for word, without 9 looking at it -- 10 Q: Let's -- I -- 11 MR. COMMISSIONER: I don't see anything -- 12 MR. RICHARD STEPHENSON: No, no, I -- I -- 13 THE WITNESS: It's a pretty far-reaching 14 question. 15 16 CONTINUED BY MR. RICHARD STEPHENSON: 17 Q: All -- all I'm saying to you, is that's 18 what Leanne Fraser said, okay, and she's sitting here, 19 following along. 20 A: Okay. 21 Q: Okay, and she says, that's what you did, 22 okay? 23 A: That I, word for word, made it -- and -- 24 and again, if you recall my earlier evidence, that 25 presentation was prepared by a marketing company called

1 Connections, which we used one (1) time, and that was the one 2 (1) time we used -- 3 Q: I understand that, sir. 4 A: Right. 5 Q: But, clearly, you gave the substantive 6 com -- content of the presentation, came from MFP -- 7 A: This -- 8 Q: They -- they wouldn't know anything about 9 that? 10 A: Absolutely, the substantive comment -- 11 content came from MFP -- 12 Q: Okay, and then it comes back to MFP, and 13 -- and you would, at that point in time, have got two (2) 14 choices. You can -- or -- or more, you can throw it in the 15 dust bin, you can revise it, or you can use it. 16 Leanne Fraser's evidence was, it was used, 17 okay, and it was used word for word. 18 A: Yeah, I -- I would disagree, because I 19 mean, I don't know that I've ever memorized anything word for 20 word, rightly or wrongly -- 21 Q: Well, you had speaking notes. You didn't 22 have to memorize anything, sir. 23 A: But, my speaking notes are point form, 24 and if I understand from what I saw, Reach the Beach, it 25 was --

1 MR. COMMISSIONER: Okay, let's get to the 2 bottom of it, for whatever purpose it's going to serve. Mr. 3 Stephenson's referring to Exhibit 30, Volume 2, John Ford's 4 documents at Tab 59. Have you got it up there -- Elaine, 5 would you see if you can help him with it, please? 6 THE WITNESS: Which -- sorry, Volume -- 7 Volume -- 8 MR. COMMISSIONER: Volume 2, Exhibit 30. 9 You've got it? Thank you. 10 THE WITNESS: Okay. 11 MR. COMMISSIONER: Go to page 2. The big 12 number at the top, it says, City of Waterloo 2149. And 13 that's the document. 14 Now, Mr. Stephenson is suggesting to you that 15 the other witness said that you did this presentation, on a 16 word for word basis. I don't know -- 17 THE WITNESS: No. 18 MR. COMMISSIONER: -- whether you did or you 19 didn't. What do you say? Did you do a word for word basis? 20 THE WITNESS: Well, I didn't, Your Honour. 21 MR. COMMISSIONER: Okay. 22 THE WITNESS: And I -- 23 MR. COMMISSIONER: No, that's the question. 24 THE WITNESS: Okay. 25 MR. COMMISSIONER: You don't have to

1 embellish it. 2 THE WITNESS: Fair enough. 3 MR. COMMISSIONER: He says he didn't do it. 4 Mr. Stephenson? 5 MR. RICHARD STEPHENSON: Okay. 6 MR. COMMISSIONER: He said he didn't do it, 7 on a word for word basis. 8 MR. RICHARD STEPHENSON: All right. What -- 9 to be fair to you, sir, that what Leanne Fraser said, was -- 10 the question I asked her was, did he more or less follow 11 those speaking notes? Her answer was, "yes, exactly". 12 MR. WILLIAM McDOWELL: "Did you follow those 13 speaking notes, more or less? Yes, 14 exactly." 15 You're right, exactly that's what more or 16 less -- 17 MR. RICHARD STEPHENSON: Yes. Okay. 18 MR. COMMISSIONER: I don't know where we're 19 going on this, but -- 20 MR. RICHARD STEPHENSON: All right. 21 MR. WILLIAM McDOWELL: I demand that My 22 Friend withdraw -- 23 MR. COMMISSIONER: Okay. 24 MR. RICHARD STEPHENSON: It's true. She 25 didn't say, word for word, she said, exactly.

1 MR. WILLIAM McDOWELL: More or less. 2 MR. RICHARD STEPHENSON: Okay. 3 4 (BRIEF PAUSE) 5 6 CONTINUED BY MR. RICHARD STEPHENSON: 7 Q: You indicated earlier this morning, and 8 probably earlier, that Stockie and Ford both told you that 9 they didn't want to debenture this project, correct? 10 A: That's correct. 11 Q: Okay. Aside from what they told you, did 12 you have any independent knowledge about whether or not this 13 project could have been feasiblely financed through 14 debentures? 15 A: No. 16 Q: Okay. 17 18 (BRIEF PAUSE) 19 20 Q: Just -- I should have asked this question 21 one (1) back, but it's -- it's back to this reach for the 22 beach thing. One (1) of the slides, and Mr. Caskey did ask 23 you about this, the -- the advantages of three (3) case 24 studies that were, you know, referred to, which were IWANS, 25 the Nova Scotia matter, Windsor landfill, Union Water.

1 One (1) of the advantages that is specifically 2 listed, is lowest cost. And I take it that, whether you said 3 anything, that slide certainly appeared before the collective 4 masses. You've no reason to doubt that, is that fair? And 5 certainly feel free to go back to it. 6 A: I'm -- I -- I apologize, I just -- it's 7 been -- 8 Q: Yes. No, I should have -- it's my fault, 9 I should have -- 10 A: Many surprises. What's the tab again, 11 sorry? 12 Q: It's Exhibit 30, Tab 60. It's the last 13 tab in Volume 2, I believe. 14 A: Okay. 15 Q: And I'll get you a page reference. 16 17 (BRIEF PAUSE) 18 19 Q: What happens, actually, is if you look -- 20 you start at 3772? And -- and what you get is a building up 21 of points on successive slides. And you'll see the second 22 point is lowest cost, and then it appears at, one (1), two 23 (2), three (3), four (4), five (5), six (6) -- the next six 24 (6) slides. 25 A: Hmm hmm.

1 Q: Regardless of what you may or may not 2 have said, there's no reason to doubt that these slides were 3 all presented, including the ones that refer to the lowest 4 cost? 5 A: Yes. 6 Q: Is that fair? 7 A: That's fair. 8 Q: Okay. And lowest cost is like one of 9 those great terms like incremental cost of funds. 10 MR. COMMISSIONER: I don't know about that. 11 MR. RICHARD STEPHENSON: Well, and I'm just 12 going to get to it. Because Mr. Stevens had a -- said that, 13 by definition, every deal he does is at -- is the lowest cost 14 because he goes and gets the lowest cost he can get and 15 whatever that is, is the lowest cost. So it -- it -- it's 16 from his perspective topological. 17 MR. COMMISSIONER: Okay. 18 19 CONTINUED BY MR. RICHARD STEPHENSON: 20 Q: And, are you using it in the same fashion 21 that Mr. Stevens is using it there? In the sense that, we -- 22 the -- the lowest cost is simply, we couldn't do it any 23 lower? 24 A: It's, I think, similarly, I guess. But I 25 wouldn't necessarily agree with Mr. Stevens, all due respect.

1 That's my own views. But lowest cost in this context related 2 to how the -- the entire transactions were done which 3 included more than just RP's. So as you've noted already 4 with the landfill, there was a -- a reinvestment portion and 5 so that's -- there's a lot -- there's a lot of variables that 6 went into this. 7 Q: Okay. 8 A: As well as with Union Water. There was a 9 lot of variables. 10 Q: But, certainly, there was discussion 11 earlier in the presentation about debentures and -- and -- 12 and you are certainly not there suggesting that your 13 transactions, the three (3) referred to, were, from a cost of 14 funds perspective, cheaper than debentures? 15 A: From -- and I'll -- I'll be -- give you 16 two answers, in effect. From a -- if you just look at it, 17 sheer interest rate alone, period then -- 18 Q: No way? 19 A: -- I would agree with you. From a cash 20 flow perspective then I would disagree with you. 21 Q: Okay. And the cash flow perspective 22 comes back to this deemed -- or notional reinvestment. This 23 internal rate of return concept; is that right? 24 A: That's part of it. And then there's 25 actually a third answer as well, sorry. And the third one

1 relates to there was some existing instruments in place in -- 2 in one of the deals that were at exceedingly high rates and 3 all that stuff. 4 Q: And you took them out? 5 A: We took -- right. 6 Q: Okay. All right. Now, there -- another 7 one of the comments here and I may as well just deal with it 8 because I'm at the page, is this, sort of, more flexibility 9 which reappears in slightly different terms in -- in the -- 10 the presentations to Waterloo. 11 You'll recall there's this jargon of 12 "flexibility without financial penalty" and that appears in 13 -- in a series of slides that Waterloo gets; remember that? 14 A: Yes, sir. 15 Q: Okay. And just so I have your -- your 16 evidence clear on this, that post-September 25, 2000 I take 17 it that the only flexibility that exists in the transaction 18 is any mutual willingness to renegotiate; is that fair? 19 A: I -- I don't understand your question. 20 Q: Okay. You'll recollect that one of the 21 -- the objectives that was itemized in presentations made to 22 Waterloo echos this more flexibility one that's in the reach 23 for the beach. That one that says, flexibility without 24 financial penalty? 25 A: That -- that's correct.

1 Q: Okay. Now, my next proposition is that 2 once you get to the execution of the documentation on 3 September the 25th, there -- there is no intrinsic 4 flexibility written into the document; you'd agree with me 5 there? 6 A: I think that's been established. 7 Q: Okay. So, to that extent the only 8 flexibility that exists would be any mutual willingness 9 amongst the parties to work together and renegotiate in the 10 event of changed circumstances; is that fair? 11 A: No. Sorry. I -- I misspoke. Within the 12 document there was some flexibility. Sorry. The -- the 13 prepayment -- the ability for them to pre-pay some of the 14 obligations -- and there was, as well, termination language 15 that in some documents, termination would be a gross payment. 16 So, that's -- that's -- in -- in our view, in 17 -- in our industry, that's a significant penalty. 18 Q: Right, I -- in the -- in the actual 19 Windsor -- or sorry, Waterloo, pardon me, sub lease, I think 20 there are both of those at -- elements, if I recollect. 21 A: Right. 22 Q: Both the termination clause, and a 23 prepayment clause. 24 A: Right. 25 Q: But I think Mr. White fairly

1 characterized them as punishing. 2 A: He said they were punishing? 3 Q: Yeah. They are -- those are -- they are 4 -- well, they exist in theory, the terms upon which they can 5 exercised, he described as punishing. 6 A: I -- I wouldn't agree with him, 7 unfortunately. 8 Q: Okay, and we can all read them, and 9 decide for ourselves. To the extent that -- okay, so you've 10 got -- you've told us that's yes. Those are the two (2) 11 aspects of flexibility within the four (4) corners of the 12 document -- 13 A: Are -- those are the two (2) that come to 14 mind. There may be others, but I can't -- 15 Q: Okay, fair enough. I hear you, and then, 16 the only other aspect, subject to flipping through the 17 document more, but I'll give you that, but subject to that, 18 it's simply the willingness of the parties to work 19 cooperatively thereafter, is that fair? 20 A: It's -- it's -- I think it's -- in a 21 concerted effort that MFP makes with its client to keep track 22 of the performance -- 23 Q: Right. 24 A: -- of the underlying asset. 25 Q: Right, and --

1 A: And, if it under-performs, or over- 2 performs, or whatever, then we're there to en -- help him 3 through it. 4 Q: Right, but, I mean, but again, that's 5 just simply a brand new negotiation, and the parties may 6 agree, or disagree, may be inclined to deal or not deal, 7 maybe on terms that are good, bad, or indifferent, but it's 8 just a clean sheet, and it may be, you can work it out, and 9 maybe you can't, fair? 10 A: I -- I think contractually, you're 11 correct, but, certainly, from a -- an MFP perspective, we had 12 a, you know, a -- an eighteen (18) year history of -- of 13 solving financial problems -- 14 Q: Right. 15 A: -- for clients, so it's -- it's -- it's 16 -- I -- I -- my view is MFP took -- helped take ownership of 17 the client's problems -- 18 Q: Right. 19 A: -- and try to help them. 20 Q: Right. Right, and the problem here 21 being, of course, that MFP -- come October the 4th, is gone. 22 They are out of the picture, everything's gone. 23 A: No, sir. 24 Q: Yeah, well, we know that, sir, just -- 25 just to be fair, it's pretty clear --

1 A: That MFP -- 2 Q: -- that -- MFP -- 3 A: -- is gone October the 4th? 4 Q: -- is absolutely gone. They're back in 5 Mississauga, and this is now -- 6 A: No. 7 Q: -- a Clarica deal, they stay -- you -- 8 you assign all your right, title and interest in this 9 transaction, to Clarica. 10 A: We maintained servicing of the contract. 11 Q: And, we understand that's not a 12 gentleman's agreement with Clarica, apparently, and Clarica 13 can speak to that, but there's documentation about that 14 anywhere, is there, sir? 15 A: I mean, the -- the nature of the 16 financial industry, all due respect to Clarica, is assignment 17 is a way of life. Assignment happens on an on-going basis, 18 Mr. Stephenson. For example, Clarica, two (2) weeks after 19 closing, assigned 21 percent of its interest -- 20 Q: Sure did. 21 A: -- in this, to Maritime Life. 22 MR. COMMISSIONER: You're wandering a little 23 bit. What Mr. Stephenson has said, is that there was nothing 24 in writing between MFP and Clarica, that gave you direction 25 to --

1 MR. RICHARD STEPHENSON: Do anything. 2 MR. COMMISSIONER: -- deal further with the 3 City of Waterloo. You say it was agreement to borrow, or 4 whatever, but it was certainly not in writing -- 5 THE WITNESS: Yeah, I -- 6 MR. COMMISSIONER: -- it's as simple as that. 7 THE WITNESS: I don't know that, Your Honour, 8 I -- I mean, Brian Stevens, was he -- 9 MR. COMMISSIONER: Did you ever see one? 10 THE WITNESS: It -- it -- I personally did 11 not, no. 12 MR. COMMISSIONER: Okay. That's fine, Let's 13 go -- 14 15 CONTINUED BY MR. RICHARD STEPHENSON: 16 Q: Yeah, Mr. Wright never saw one (1), Mr. 17 Stevens never one (1). 18 A: Okay. 19 Q: Presumably if one (1) existed, they would 20 know about it, fair? Unless Mr. Wolfraim's got it? 21 A: No, no, fair enough. They -- it would be 22 Mr. Stevens, because he is the single point of contact for 23 Clarica. 24 Q: All right. On the October 15th letter, 25 and I'm not going to ask you about the -- any of the details

1 of it, so I don't think you need to turn it up, but you know 2 the one (1) I mean, about the parking garage? 3 There's only two (2) letters you wrote -- 4 A: Can you -- 5 Q: -- I can -- three (3) letters -- 6 A: Can you -- 7 Q: -- three (3) letters. 8 A: Can you direct me to that. 9 Q: Yeah, well -- 10 A: I don't mean to be a pain -- 11 Q: Yeah -- 12 A -- but I'm on the stand -- 13 Q: Yeah. 14 A: -- and I am under oath. 15 Q: Yeah, I understand, but remember, you -- 16 you wrote three (3) letters on this deal, sir? 17 A: Okay. 18 Q: Just so we remember. October the 15th, 19 May the 26th, and September the 25th, okay, and I'm just 20 asking you now about the first one (1), and it's in Volume 1 21 of your materials, I believe -- 22 MR. WILLIAM McDOWELL: Tab 8. 23 MR. RICHARD STEPHENSON: Tab 8. 24 25 CONTINUED BY MR. RICHARD STEPHENSON:

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1 Q: And the question I have for you, sir, is 2 just simply this, would anybody else at MFP have been aware 3 that this letter was sent, at the time? 4 A: Would anyone else from MFP be aware? 5 Q: Yes. Yes. Aside from Leanne Fraser. I 6 meant, in management? 7 A: Sorry, I -- oh, anyone within MFP's 8 management? 9 Q: Yes. 10 A: Yes, certainly. Mr. Wolfraim had 11 instructed me to take over the account from Mr. Pitre. 12 Q: Hmm hmm? 13 A: And he certainly would have been aware of 14 the content of what we were doing, but he's not cc'd here, so 15 I can't say that he saw this. 16 Q: Yes, and I -- actually, I'm not -- I'm 17 not terribly concerned about that. I guess the question 18 would have been, would he have been aware of the fact that a 19 letter, containing, generally speaking, these kinds of 20 things, was being sent? 21 A: Oh, certainly. 22 Q: Is that fair? 23 A: Certainly, yes. 24 Q: Okay. And he would have known that, 25 indeed, before it went?

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1 A: I -- I can't say whether he knew before 2 or after, but certainly, we had a very close working 3 relationship. 4 5 (BRIEF PAUSE) 6 7 Q: Okay. I sort of dealt with this earlier, 8 but I -- I want to come back to it, to make sure that I've 9 got your evidence definite. Certainly, it was Mr. Pelech's 10 evidence that there was never any discussion of rates, with 11 the City, expressed, if you will, in numerical terms. They 12 were always expressed, I think, as you've said -- this is 13 what you've said, by way of spreads off some benchmark. 14 That's -- 15 A: Fair enough. 16 Q: That's -- that's consistent with your 17 understanding, as again, your evidence here. Is that -- am I 18 right about that? 19 A: Yes, sir. 20 Q: Okay. Now -- and the second thing that I 21 just want to make sure I've got right, is -- and you spent 22 some considerable time with Mr. Caskey on this. But it comes 23 back to the math associated with that May 26th letter. 24 But the -- as I understand it, your evidence 25 was, based on the assumptions at that point in time, say you

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1 were going to do this deal in February -- we all know you 2 didn't, but if you were, the best deal MFP could put together 3 would have been -- and I think you said it was the 6.6 range. 4 And I think -- because you added some numbers and you 5 subtracted some numbers, and I think you said 6.6. 6 Am I right about that? 7 A: I think it was 6.3. The Commissioner and 8 I -- 9 Q: 6.36, I apologize. Yes. Okay. 6.36. 10 Okay. But that, I take it, obviously, again, is something 11 you've worked out subsequently, and you never would have been 12 talking about actually saying 6.36 or 6.3 or even -- you 13 know, you just don't talk in absolute numerical terms. Fair? 14 A: Fair. 15 Q: Okay. Now, as I understand it, there was 16 a period of time in early 2000, where discussions were taking 17 place between the City and MFP, in -- on both projects, in 18 tandem. The park on the one (1) hand, the parking garage on 19 the other. Am I right about that? 20 A: Yes. 21 Q: Okay. And indeed, there were at least -- 22 there were several three (3) way meetings between MFP, City 23 and First Gulf, in relation to the parking garage? 24 A: Yes, I was at -- I was in one (1) of 25 them, in February of 2000.

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1 Q: Yes. And that would have been at First 2 Gulf, in their offices, which are somewhere down near 3 Mississauga I believe? 4 A: Correct. 5 Q: Okay. And I think in that -- in that 6 occasion, we've had other evidence about this, in fact the 7 City came, I think, and met with MFP first, maybe talked 8 about the -- the park. 9 And then, I think, perhaps, all of you met 10 later and talked about the parking garage; correct? 11 A: Possibly. I -- I don't recall the 12 specifics of if the City met us first or -- 13 Q: Yeah. And I may have the order wrong but 14 eventually the result was that there was a couple of 15 different meetings, at least, on that day? 16 A: Could have been. 17 Q: Okay. Now, the principals at First Gulf 18 that would have been involved in these meetings were, as I 19 understand it, a fella by the name of David Gibson who, I 20 believe, is the President of that company? 21 A: Yes. 22 Q: And -- and then there was another fella 23 by the name of Mark Kindrachuk and I can't remember what his 24 position is; but you remember him too? 25 A: I -- I remember David Gibson.

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1 Q: Okay. 2 A: We had on-going discussions. 3 Q: Okay. I understand that Mr. Gibson will 4 say that he met with you at least twice with -- maybe with 5 Pelech and maybe not with Pelech but probably with Pelech as 6 well. And that on both of those occasions you indicated on 7 behalf of MFP that MFP would be able to provide financing on 8 the parking garage at below 5 percent. He remembers it very 9 clearly. 10 A: Okay. I remember very clearly that 11 Mr. Gibson asked us for a term sheet. 12 Q: Yes. 13 A: And I remember very clearly saying, MFP 14 doesn't provide term sheets, we work off of our -- our lease 15 documentation because there are leases and not loans. I 16 don't recall putting a hard number to the discussions. 17 Certainly we put spreads out there. Talked about a hundred 18 and two (102) basis points, certainly. But a hard number 19 that's -- that's certainly not our method of operating. 20 Q: Right. So if -- if Mr. Gibson said that, 21 he'd be mistaken; is that fair? That's your evidence? 22 A: He may -- he may have heard that from the 23 City other than MFP, but certainly MFP or any of our 24 representatives, i.e., Bo Pelech our consultant -- 25 Q: Right. Now --

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1 A: -- would be too experienced to say 2 something like -- 3 Q: Right. And I -- 4 MR. WILLIAM McDOWELL: Just a sec. I think 5 if My Friend is going to pursue this, I think it's fair. But 6 this is a Public Inquiry and he should produce what 7 Mr. Gibson is going to say in its entirety now so that we're 8 all on the same page. 9 MR. COMMISSIONER: Well. I don't know what 10 Mr. Gibson may say. 11 MR. RICHARD STEPHENSON: He may not say 12 anything. 13 MR. COMMISSIONER: And the best we can 14 produce, he's not been interviewed by any of my staff -- 15 MR. WILLIAM McDOWELL: No but -- I don't know 16 if you follow my point but it's a bit unfair for 17 Mr. Stephenson to have some private knowledge of what a 18 witness might say and then be putting that to the witness 19 with some assurance that the witness, if called, would say 20 the following -- 21 MR. RICHARD STEPHENSON: Well -- 22 MR. COMMISSIONER: Well -- 23 MR. WILLIAM McDOWELL: -- and, you know, 24 there has to be some kind of reciprocity here. If he's going 25 to put this to him, and I'm quite content that he does, just

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1 tell us what Mr. Gibson's going to say. 2 MR. RICHARD STEPHENSON: Here's the problem I 3 have, Mr. Commissioner, is that I have no doubt that 4 Mr. McDowell has significant private knowledge of what this 5 witness will say. 6 MR. WILLIAM McDOWELL: Actually, you'd be 7 amazed, Mr. Stephenson. 8 MR. RICHARD STEPHENSON: You know, I mean, 9 there is no exchange between -- 10 MR. COMMISSIONER: Well, just -- 11 MR. WILLIAM McDOWELL: Well, no but -- 12 MR. RICHARD STEPHENSON: -- Intervenors -- 13 MR. WILLIAM McDOWELL: Here -- here's the 14 problem. I've got limitless respect for My Friend but I 15 don't like being in the position of him saying, you know, the 16 witness, if called, would say this, what do you say to that, 17 because the possibility exists that Mr. Stephenson is 18 tailoring what's being said, all right? 19 And I'm not for a minute suggesting that 20 that's what he's doing and he wouldn't do that. But we're 21 entitled to know the context in which Mr. Gibson's going to 22 say whatever he's saying. 23 MR. COMMISSIONER: Well, this witness has 24 said that to this point that he did not say to Mr. Gibson 25 what Mr. Stephenson says and if Mr. Stephenson does not

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1 appear as a witness then I will accept what this witness has 2 said. 3 MR. RICHARD STEPHENSON: Yeah, you mean, 4 Mr. Gibson? 5 MR. WILLIAM McDOWELL: Well, Mr -- 6 MR. COMMISSIONER: No. 7 MR. WILLIAM McDOWELL: Mr. Stephenson's been 8 appearing as a witness for ages. 9 MR. RICHARD STEPHENSON: Yeah, I -- 10 MR. COMMISSIONER: Well, I'm not going to 11 accept anything -- 12 MR. RICHARD STEPHENSON: No. You said 13 Stephenson instead of Gibson. 14 MR. COMMISSIONER: Oh, did I? Well -- 15 MR. WILLIAM McDOWELL: Well, no, but -- 16 MR. RICHARD STEPHENSON: It's not evidence 17 unless the witness accepts it. I understand that. 18 MR. WILLIAM McDOWELL: But the people sitting 19 back here are left with the impression that somehow there's a 20 contradiction and there may be, there may not be. Just give 21 us the goods and then carry on with it. 22 MR. RICHARD STEPHENSON: I'll give you his 23 phone number. 24 MR. COMMISSIONER: I'll tell you what you're 25 going to do, is you better give the phone number to my

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1 Council. 2 MR. RICHARD STEPHENSON: He's got it. 3 MR. COMMISSIONER: Well, okay, he's got it. 4 If he's got it, and he's not going to call the witness, then 5 I don't think that that witness' evidence is worth the powder 6 it would take to blow it to hell. This witness has said what 7 he said, let's go on. 8 MR. RICHARD STEPHENSON: Mr. -- Mr. Cask -- 9 Mr. Caskey can -- 10 MR. COMMISSIONER: Let's go on. 11 MR. RICHARD STEPHENSON: All right. I also 12 understand that -- that Mr. Gibson would say, that this would 13 be achieved through a flow-through of tax benefit, and that 14 this had -- precise thing had been done in Windsor. You were 15 going to replicate the Windsor transaction for the parking 16 garage. That's what you told him. 17 MR. COMMISSIONER: That's what he says. 18 19 CONTINUED BY MR. RICHARD STEPHENSON: 20 Q: Well, I'm asking you, did -- is that -- 21 is that what he said? Is that what you said, sorry? You 22 know what -- you were there? 23 A: Yeah, the -- the Windsor transaction, and 24 the Waterloo transaction are two (2) very different 25 transactions.

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1 Q: I'm -- I'm -- we're talking about parking 2 garage here, just to be clear. 3 A: Did you -- 4 Q: Mr. Gibson is the parking garage man, 5 right? 6 A: Right. Did you say the Windsor 7 transaction though, in your question? 8 MR. COMMISSIONER: Yes, he did. 9 MR. RICHARD STEPHENSON: If I did -- 10 MR. COMMISSIONER: Just a minute. The 11 question is, I'm going to take over here for just a second, 12 to get to the bottom of this. 13 Mr. Stephenson is asking you whether or not 14 you said to Gibson at First Gulf, that you were going to 15 replicate the Windsor transaction, and there would be a 16 provision of funds, the low rate in the 5 percent range. 17 Did you ever say that to him, or not? Did you 18 come close? 19 THE WITNESS: No, because the first thing we 20 would do if we -- we were going to do that is fire Bo Pelech, 21 because what value would Bo Pelech bring, if all we're going 22 to do is replicate the Windsor transaction, time and time 23 again, so -- 24 MR. COMMISSIONER: So -- 25 THE WITNESS: -- my --

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1 MR. COMMISSIONER: So, what's your answer to 2 the question? 3 THE WITNESS: My -- my answer -- my answer is 4 no, and -- 5 MR. COMMISSIONER: Okay. That -- 6 THE WITNESS: -- intuitively it's -- it has 7 to be. 8 MR. RICHARD STEPHENSON: In any event, you 9 certainly -- I mean, I -- we now know, that the best you 10 could have done there, in -- for that kind of transaction, is 11 the 6.36, number, right? I mean, that's -- that's what we 12 now know. 13 MR. COMMISSIONER: We don't know that. 14 MR. RICHARD STEPHENSON: Well no, he told us 15 as evidence. 16 MR. COMMISSIONER: No, that's what he said -- 17 THE WITNESS: I -- 18 MR. COMMISSIONER: -- whether he can do 19 better, I don't know. I don't want to get into these other 20 transactions, unless they give a direct bearing on what we're 21 here for. 22 23 CONTINUED BY MR. RICHARD STEPHENSON: 24 Q: I understand that, but the Waterloo 25 people are in the room, while your meeting with -- with Mr.

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1 Gibson, right? 2 A: Yes. 3 Q: Okay. 4 5 (BRIEF PAUSE) 6 7 Q: Now, can I get you to turn up Exhibit 18, 8 Tab 99, it's Mr. Friedel's -- I believe it's his addendum. 9 MR. COMMISSIONER: Mr. Friedel? 10 11 (BRIEF PAUSE) 12 13 MR. COMMISSIONER: Volume 2? Thank you. 14 Okay. It's Volume 2, Exhibit 18. 15 16 (BRIEF PAUSE) 17 18 CONTINUED BY MR. RICHARD STEPHENSON: 19 Q: And, this is Mr. Friedel's DayTimer, and 20 I'd like you to turn up his page for February 3, 2000. 21 MR. COMMISSIONER: What Tab are we at, 22 please? 23 MR. RICHARD STEPHENSON: Oh, I'm sorry. 24 We're at Tab 99. 25 MR. COMMISSIONER: Tab 90?

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1 MR. RICHARD STEPHENSON: Nine (9). 2 MR. COMMISSIONER: Nine (9), thank you, and 3 the date you want? 4 MR. RICHARD STEPHENSON: February 3. 5 MR. COMMISSIONER: February 3. It's in the 6 year 2000? 7 MR. RICHARD STEPHENSON: That's right. 8 9 (BRIEF PAUSE) 10 11 MR. COMMISSIONER: Okay. 12 13 CONTINUED BY MR. RICHARD STEPHENSON: 14 Q: My quest -- on the -- the right-hand side 15 of the page, it's about half-way down, you'll see the 16 heading, "MFP", do you see that? 17 A: Yes. 18 Q: Okay. And then there's a series of 19 bullet points. And as we understand it, these are Mr. 20 Friedel's notes taken at a meeting with MFP, and I believe, 21 First Gulf. And if you go down one (1), two (2), three (3), 22 four (4), five (5), six (6), seven (7), eight (8), the eighth 23 bullet point. 24 Mr. Friedel is making a note that MFP is 25 indicating that,

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1 "It will indemnify the City so tax changes 2 don't flow through." 3 Do you ever recollect being at a meeting, 4 saying that? Or having anybody say that? 5 A: Yes, what I think Mr. Friedel's referring 6 to is, once a transaction is done and closed, should there 7 be -- and if it's a tax motivated transaction, should there 8 be a change in the Tax Act, we would not, from a client 9 perspective, revisit the transaction. 10 And there's an example of that currently, 11 where MFP has a -- I think it's under reassessment, I don't 12 know all of the details, of software tax motivated 13 transaction. And -- 14 MR. COMMISSIONER: Well, just so we 15 understand, I'd like to know exactly what these words are, 16 I'm having a little difficulty reading them. It certainly -- 17 the note is that, 18 "MFP will indemnify the City --" 19 I'm not sure what the next word is. 20 MR. RICHARD STEPHENSON: I think it's, so. 21 MR. COMMISSIONER: " -- so tax -- " 22 MR. RICHARD STEPHENSON: Tax. 23 MR. COMMISSIONER: " -- dependence 24 don't flow through." 25 MR. RICHARD STEPHENSON: No, no. I think

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1 that's a delta. I -- meaning changes. I mean, is that -- 2 MR. COMMISSIONER: Tax changes, correct. 3 MR. RICHARD STEPHENSON: Yes. I mean, 4 that's -- that's a reasonable assumption, isn't it, Mr. 5 Robson? 6 THE WITNESS: Yes, I -- 7 MR. COMMISSIONER: What does that mean? 8 THE WITNESS: Again, indemnify is a very 9 strong word. What I believe Mr. Friedel is trying to -- to 10 say, here, and I do recall a discussion from First Gulf, 11 about what if tax laws change in the future? And our comment 12 back was -- I think it was Bo's comment back, was typically, 13 they're not grandfathered. The changes tend not to be 14 retroactive. 15 But for us to go back to a client, three (3), 16 four (4) years after a deal is closed, because we got a -- a 17 bad ruling from Revenue Canada, would be extremely unlikely. 18 MR. RICHARD STEPHENSON: Okay. 19 THE WITNESS: And extremely unlikely that the 20 client would open up negotiations with us. 21 22 CONTINUED BY MR. RICHARD STEPHENSON: 23 Q: Yes. And I take it the reason that that 24 arises, it's not really even necessary to get into the 25 concept of an -- an indemnification. Once the deal is done,

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1 the customer's got a schedule of payments, which, in -- in a 2 tax equity investing model, would be, I guess, somewhat lower 3 than they otherwise would have been. But nevertheless, 4 they've got -- that is their payment obligation? 5 A: Right. 6 Q: And frankly, if the -- there's some 7 adverse tax consequences to the tax investor, whether that be 8 MFP or somebody else, that's not the City's problem, they've 9 got their payment obligation, which gives them that benefit. 10 Fair? 11 A: Fair. 12 Q: Okay. 13 MR. COMMISSIONER: I have to point out that I 14 haven't heard any evidence that there was a similar 15 commentary with respect to the recreation complex -- 16 MR. RICHARD STEPHENSON: No, I think you 17 have. 18 MR. COMMISSIONER: Well, you can bring it on 19 later. I don't remember it, at this stage of the game, 20 anyway. I'm sure if it's there, you'll remind me of it, and 21 that's fine. 22 In the meantime, we're going to have lunch -- 23 MR. RICHARD STEPHENSON: Okay. 24 MR. COMMISSIONER: -- until two o'clock, 25 please.

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1 THE REGISTRAR: The City of Waterloo Judicial 2 Inquiry now stands adjourned until 2:00 p.m. 3 4 --- Upon recessing at 1:00 p.m. 5 --- Upon resuming at 2:04 p.m. 6 7 THE REGISTRAR: The City of Waterloo Judicial 8 Inquiry is now resumed. Please be seated. 9 MR. COMMISSIONER: Okay, Mr. Robson, please? 10 Okay, Mr. Stephenson...? 11 MR. RICHARD STEPHENSON: Thank you. 12 13 CONTINUED BY MR. RICHARD STEPHENSON: 14 Q: One (1) of the issues that we've heard 15 about from -- from prior witnesses, and indeed, you seen 16 certain documents about this, but that the City was advised 17 by MFP in conjunction with the potential tra -- tax 18 transaction, that MFP had a limited tax appetite, that it 19 was, within any given fiscal year, MFP had to assess its own 20 internal tax position, and it may or may not be interested, 21 or able to a -- become itself, the tax investor. 22 Am I right about that? There were those kinds 23 of discussions? 24 A: Yes, sir. 25 Q: Okay. Now, if I could get you, sir, to

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1 turn up -- it's in Mr. Ford's material, it's, I believe 2 Volume 1 at Tab 34. It might be Volume 2. 3 MR. COMMISSIONER: Tab 30? 4 MR. RICHARD STEPHENSON: Thirty-four (34). 5 MR. COMMISSIONER: Thirty-four (34). I've 6 got 30. 7 MR. RICHARD STEPHENSON: Do you -- it's 8 Volume 1, apparently. Thank you. 9 MR. COMMISSIONER: That's 30 -- oh, I'm 10 sorry. I'm sorry, what Tab are we looking at? 11 MR. RICHARD STEPHENSON: Thirty-four (34). 12 MR. COMMISSIONER: Thirty-four (34). Thank 13 you. 14 15 CONTINUED BY MR. RICHARD STEPHENSON: 16 Q: Okay, you'll see, we understand these to 17 be Mr. Ford's notes, and you'll see the date on them is 18 January 21 of 2000. Apparently present yourself, Neil 19 Andrews, Leanne Fraser, Ken Douglas and then Ford and Andrew 20 Friedel; you see that? 21 A: Yes. 22 Q: Okay. And I take it, it's fair to say 23 there likely was a meeting on that date with those people 24 there? You may not have specific recollection; is that a 25 fair assumption?

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1 A: Yeah. That's fair. 2 Q: Okay. And we see that we've got, at the 3 very top, it's a note to -- I guess for him 4 "FYI, March 31 is year end" 5 And I assume that is a reference to MFP's year 6 end? 7 A: I think so. Yes. 8 Q: Okay. And the note we have below that is 9 "May be able to move financing forward before 10 March 31 and give some form of incentive" 11 You see that? 12 A: Yes. 13 Q: Okay. And then the next line it's -- I'm 14 not sure I -- I assume that means 15 "30 - 50 million..." 16 And I'm not sure what the next word says. But 17 then it's got 18 "...could be a few basis points" 19 How I read that? 20 A: Yes. 21 Q: Okay. My question for you is this, do 22 you recollect the suggestion being made to the City, back in 23 January of 2000, that, in essence, if you go to the hurry up 24 offence and we get this deal done before the end of the 25 fiscal year we -- we may be able to give you some additional

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1 form of incentive in terms of the rate? 2 A: I think the discussion related more to 3 quantity as well as timing. There, as quantity being more is 4 typically better than less. 5 Q: I remember that and I think we saw that 6 notation somewhere else about -- 7 A: Right. 8 Q: -- if you combine maybe the parking 9 garage and the park you get a few basis points of -- 10 A: Correct. 11 Q: -- benefits? But this seems to be 12 addressing -- maybe that -- and that may be what the second 13 point refers to. The 14 "30 - 50..." 15 But the first point seems to be a different 16 one and that seems to be a timing issue? 17 A: Okay. 18 Q: That to some -- the suggestion appears to 19 be being made that somehow MFP could provide an additional 20 incentive if we got this deal done before the end of its 21 fiscal year; fair? 22 A: Fair. Sure. 23 Q: Okay. And I take it that that comment -- 24 let me back up. First off, I take it that if you were, in 25 fact, going to be able to do that, you really would have to

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1 go to the hurry up offence? I mean, there would be an 2 enormous amount of work to be done between January 21 and 3 March 31st? 4 A: Well, our year end is March 31 but the -- 5 the books typically didn't close March 31, typically they 6 were left open. 7 Q: Right. But I read this comment as 8 suggesting that if you get the deal -- no, it says 9 "Move financing forward before ..." 10 Suggests that if you get closed this deal 11 before the end of the fiscal year then somehow that's to your 12 benefit? 13 A: Yeah. I would take all those points 14 together because I think it involved looking at all the -- 15 the financings. 16 Q: Am I right, however, that the only 17 significance of MFP's fiscal year that could have in terms of 18 providing any benefit to anybody here would be if MFP was, 19 itself the -- the tax investor. I mean, otherwise it's just 20 totally irrelevant; isn't it? 21 A: Oh no. Absolutely not. It's relevant. 22 I mean were -- it's a publicly-traded company. I mean we're 23 Q: So, that -- 24 A: -- profit motivated. 25 Q: I see. So that, in essence, if you can

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1 book the revenue in a -- in a particular fiscal year that's 2 something that a lot of people benefit from? 3 A: And I think that point came out when we 4 talked about the September 25th close. From an MFP 5 perspective our fiscal year end is March 31, that's where we 6 tend to be most concentrated on getting deals booked, if you 7 will. 8 Q: Right. But, I mean, to be fair, I mean, 9 I think we're all used to everybody publishes quarterly 10 results now and those seem to have -- you know, there's -- 11 there's an earnings report period in the markets and that 12 affects share prices. I mean, I think everybody does that 13 these days and MFP's no different? 14 A: Fair enough. But from our perspective, 15 within asset based finance, we were committed to certain 16 targets and quotas, if you will, on a -- 17 Q: On an annual basis? 18 A: -- on a fiscal year basis. 19 Q: Right. 20 A: We weren't -- we weren't assessed, within 21 my department, on a quarterly basis. 22 Q: Okay. Okay. Okay, so you think that 23 this incentive might simply be that, you know, it's good for 24 MFP and, therefore, we -- well, we'd make it worth your while 25 or --

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1 A: Well, we do everything we could -- 2 Q: Yes. 3 A: -- to get it done. Sure. 4 Q: Right, right. Okay, I understand. Thank 5 you. Now, I just want to come back to -- to the issue 6 about -- about discussions around rates. And believe me, 7 I've heard you about what your evidence is in terms of what 8 you -- you've said to anybody at the City in terms, always 9 off incremental, always expressed in terms of spread. I've 10 got that point. 11 But here's where I need your help, sir. 12 You'll remember Mr. Caskey took you to a series of different 13 spreadsheets, it's actually copies of the financial plan that 14 had been prepared by Mr. Friedel and we can turn them up of 15 you need it, but I don't think so. 16 My -- my recollection of the evidence is, is 17 that, the first one (1) that MFP gets, they get in January, 18 and it's an -- an early draft. And -- and then they get 19 another one (1) in April, they get two (2) in April, one (1), 20 I believe on April the 11th and one (1) on April the 20th. 21 Okay? 22 And you'll remember this included those 23 spreadsheets that had the very tiny print and extended out 24 over thirty (30) years? Do you remember that? And we'd 25 blown them up and you had the fold out one (1) that gave you

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1 a more clear picture? That -- that's what I'm talking about. 2 A: Okay. Are you going to ask me questions 3 about it, or -- 4 Q: I'm not going to ask you any detailed 5 questions about it, at all. Here's the question I have for 6 you, in those spreadsheets, in particular in April, there are 7 rates that are included in there. And the rates for most of 8 the -- the assumptions, in terms of financing costs, are 9 4.76, okay? And it's right on the face of the document. 10 The question I have for you is, if you didn't 11 give that number to the City, where the heck did they get it 12 from? 13 A: I think in my evidence last week, I 14 discussed that we were focussed in on that five (5) year 15 analyses of the facilities. MFP was not focussed, certainly, 16 on anything other than that. 17 Q: Yes, and I -- and I understand, sir, that 18 you didn't pay any -- if you paid any attention to that long 19 spreadsheet at the time, it was minimal. And I hear you on 20 that, sir. 21 And my -- my question isn't whether you 22 reviewed the document at the time, but clearly, the City had 23 prepared a document at that point in time, and indeed it 24 forwarded it off to MFP. But most importantly, they'd 25 prepared a document and embedded in that document, on the

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1 face of the document, was an assumed interest rate at 4.76. 2 My question for you is, where on earth did 3 they get the number? 4 MR. COMMISSIONER: In fairness to the 5 witness, I think it should be recalled to him, that there 6 were two (2) numbers. 7 MR. RICHARD STEPHENSON: Yes. 8 MR. COMMISSIONER: One (1) was 4.76 -- 9 MR. RICHARD STEPHENSON: And the other's 10 seven (7). 11 MR. COMMISSIONER: And the other's seven (7). 12 MR. RICHARD STEPHENSON: Yes. 13 MR. COMMISSIONER: And the evidence was that 14 they were related to -- the 4.76 was related to revenue 15 generating assets and the 7 percent was concerned with non 16 revenue generating assets. 17 So having that information, now, the question 18 asked is, where did the City get that information? And I 19 don't know if you know, or you don't know. Can you tell us? 20 THE WITNESS: I -- I don't know specifically, 21 so I hesitate to guess. 22 23 CONTINUED BY MR. RICHARD STEPHENSON: 24 Q: Well, the problem is -- and -- and I hear 25 you. But here's the issue. I mean, it's not like it's a --

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1 we -- we know from the prior evidence, the first -- the first 2 iteration of that document, the assumed interest rate was 5 3 percent, okay? That's the evidence we've heard to date. 4 And, you know, it may well have been that that 5 was an estimate. You know, it's a round number and a 6 ballpark, so to speak. But 4.76 doesn't have the hallmarks 7 of being a ballpark number to me. It's -- it's -- it's 8 remarkably specific. It doesn't sound like a guestimate? 9 A: Hmm hmm. 10 Q: And -- and so I can only assume that they 11 got that number based upon some information from somebody. 12 And I take it your evidence is you just can't assist us as to 13 where that came from? 14 A: I mean, because I'm not the author of the 15 document, I have a hard time taking ownership of that number. 16 I also have a hard time guessing in the position I'm in right 17 now, especially with the benefit of hindsight. So I -- I -- 18 I do apologise, Mr. Stephenson, but I -- I can't help you. 19 Q: And you realise now that, of course, -- 20 okay, so that's April the 20th or thereabouts; mid-April or 21 late April. It's not for more than a whole month later that 22 the May 26th letter comes in which, and I'm not going to get 23 into a debate about what it means or anything like that. 24 Don't worry. I'm -- I'm not going there. 25 But -- but certainly because of the absence of

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1 the reference to the spread in that letter, if you simply do 2 the math as it appears in the letter you wind up, 3 miraculously, at 4.76; right? That -- that's what happens? 4 A: Okay. I'll take your word. Because I -- 5 I -- we did the math with the spread, the Commissioner and I. 6 So I don't -- 7 MR. COMMISSIONER: I don't know if it's 8 miraculous or not, but it's certainly that's where he ended 9 up. 10 MR. RICHARD STEPHENSON: That's where you 11 wind up. 12 13 CONTINUED BY MR. RICHARD STEPHENSON: 14 Q: But -- and the thing -- you know, so -- 15 Mr. Friedel is not Kreskin. He didn't know what you were 16 going to write six (6) weeks later obviously. And it is 17 simply just a complete coincidence that these are the same 18 numbers? 19 A: You -- you have to ask Mr. Friedel. I 20 can't and I wouldn't speculate. 21 Q: Yeah. Well, Mr. Friedel's evidence is 22 that that's what you told him? 23 A: I told him that? 24 Q: Yeah. 25 A: Well, I would disagree with that.

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1 Q: All right. And I want to zip along one 2 more point in Mr. Friedel's date book before I get that put 3 away forever. This is back at Exhibit 18, Tab 99 and we -- 4 we were looking at this just before lunch, Mr. Commissioner. 5 MR. COMMISSIONER: I got it. Here we are. 6 MR. RICHARD STEPHENSON: Yeah. Volume 2 of 7 the addendum I believe. Thank you. 8 MR. COMMISSIONER: Yeah. 9 MR. RICHARD STEPHENSON: And if I could ask 10 you to turn up May the 5th. 11 MR. COMMISSIONER: May the 5th, 2000? 12 MR. RICHARD STEPHENSON: Yes. 13 14 CONTINUED BY MR. RICHARD STEPHENSON: 15 Q: And there -- there -- there's a meeting, 16 you've actually got your own notes of this meeting, and I 17 think Mr. Caskey referred you to them. You might want to 18 have -- 19 A: Can I refer to mine? 20 Q: Yeah, absolutely. 21 MR. COMMISSIONER: Do you know where your 22 notes are? 23 MR. RICHARD STEPHENSON: Yeah. It's 107, 24 Tab 2. 25 MR. COMMISSIONER: 107, Tab 2. Thank you.

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1 107 Volume 2. Is it actually Tab 2? 2 MR. RICHARD STEPHENSON: Sir, it would be 3 Volume 1, Tab 2. And -- and I'm only referring you to that 4 simply to give Mr. Robson some comfort by way of reference 5 point. Am I -- am I wrong? 6 MR. COMMISSIONER: Tab 2 is -- you're wrong. 7 MR. RICHARD STEPHENSON: Okay. Hang on. 8 Bear with me a moment. Oh, apparently Tab 20. 9 MR. COMMISSIONER: Tab 20. That's just 10 Volume 2. 11 MR. RICHARD STEPHENSON: Yeah. Thank. 12 MR. COMMISSIONER: Thank you. 13 MR. RICHARD STEPHENSON: Yeah, and -- and 14 you'll recall, Mr. Caskey did take you through these notes, I 15 believe. 16 MR. COMMISSIONER: Okay, so we have your 17 notes there at Tab 20, and we have -- whose diary are we 18 looking at here? 19 MR. RICHARD STEPHENSON: It's Mr. Friedel's. 20 MR. COMMISSIONER: Mr. Friedel's diary. 21 22 CONTINUED BY MR. RICHARD STEPHENSON: 23 Q: And -- and, I think actually, Mr. Caskey 24 had you look at this too, and I'm -- fear the -- I'm not 25 going to re-plow the same ground. I just -- I literally

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1 wanted to ask you about the quest -- about the -- the fourth 2 bullet point there, where it says, "rate risk is MFP's". 3 That's the thing I want to focus on, and it's 4 Mr. Friedel's evidence that he's taking these notes down at 5 the meeting. These are literally as things are being spoken, 6 he's writing them down, and I take it you -- you -- you 7 simply will say that at no time would you have suggested at 8 that meeting on May the 5th, that in any respect, was -- it 9 -- was MFP accepting any rate risk, guaranteeing any 10 particular rate. Is that -- is that fair? 11 A: That's correct. 12 Q: Okay, so, Mr. Friedel's just got it 13 wrong. If he's noted it here, that's -- he's just simply 14 made an error. 15 A: There was a discussion in earlier 16 evidence, which was a negotiating point to the interim 17 construction loan agreement, and I -- I don't know if this is 18 the -- if this is where that came up, but -- 19 Q: It -- 20 A: -- so, I'm not sure if this is in 21 relation to the ultimate head lease sub lease of -- and we 22 shouldn't form -- or the construction loan agreement, or any 23 bridge instrument that Mr. Ford was -- 24 Q: Yeah. 25 A: -- was trying to get us to.

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1 Q: My recollection -- 2 A: And -- 3 Q: -- is that discussion happened in the 4 June meeting. 5 A: Oh, okay. 6 Q: And we had a note from Mr. White about 7 that, but I could be wrong. 8 A: Okay. 9 Q: Okay. 10 11 (BRIEF PAUSE) 12 13 A: No, ac -- actually, in my notes, I -- I'd 14 have to disagree with you, Mr. Stephenson. The reason I have 15 to disagree is the -- the second page of Tab 20, it -- if you 16 look at the mid-point in the page, after -- after the 17 asterisk beside Bill White, then underneath that, talks about 18 the grading contract awarded, and then, under that, it talks 19 about biweekly draws, therefore paid early June. 20 Q: I see, yeah, no, I got you. 21 A: So, just so you -- 22 Q: Yeah. 23 A: If -- if that helps you in your -- 24 Q: Yeah. 25 A: -- frame of reference.

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1 Q: Okay. Now, I just -- 2 MR. COMMISSIONER: What's that got to do with 3 this note that you were drawing his attention to in the first 4 place, about the rate risk being -- 5 MR. RICHARD STEPHENSON: I take it's from -- 6 from -- from Ms. -- Mr. Robson, if that -- there was any 7 discussion of MFP accepting any rate risk, then -- then it 8 was simply somehow in relation to a potential -- some interim 9 construction financing. Is that what I understand? 10 THE WITNESS: Yeah -- yes, the issue at -- at 11 hand, Mr. Commissioner, was the -- the inability -- potential 12 inability for us to begin the lease in a timely fashion. We 13 hadn't either done our due diligence, and nor had concurrence 14 from McCarthy's, so the issue was one (1) of cash flow for 15 the City, just to help pay the -- the bill of -- of the 16 park. 17 MR. COMMISSIONER: Go ahead. 18 19 CONTINUED BY MR. RICHARD STEPHENSON: 20 Q: Yeah, the -- the only thing I'd say about 21 that, thought, Mr. Robson, is that if you -- if you look at 22 the rest of Mr. Friedel's notes, and you can -- you can 23 actually, sort of, dovetail his notes to yours at some level. 24 There are references, here, to the -- a 25 reference to a tax opinion that -- that he's writing down,

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1 that apparently has been obtained, that the City of Waterloo 2 owned the -- will be owning the facility throughout. And an 3 accounting opinion that he's writing about, saying that 4 the -- the asset won't be on the balance sheet of the City of 5 Waterloo. 6 And all of those matters clearly relate, 7 apparently, to that -- the head lease/sub lease and not any 8 interim financing matter. 9 A: And I think Mr. Caskey brought up that 10 very same point, and my comment was twofold. To me, COW 11 means City of Windsor, because that's a long time MFP client, 12 1984. So I -- I would -- 13 Q: Yes, I appreciate it means that to you. 14 But I think it's fair to say that to Mr. Friedel, it means 15 the City of Waterloo and these are his notes. 16 A: Fair enough. But I -- how we could be 17 talking about those opinions, from an MFP perspective, 18 without some frame of reference, being an existing client -- 19 Q: Yes. 20 A: -- just makes no sense. 21 Q: Okay. Mr. Friedel says that you said it, 22 you disagree. On -- I just want to go back to the February 23 18th, CORP/FIN 00-17 document. And I'm not going to ask you 24 any detailed questions about the content of the document, I 25 doubt you'll need to turn it up, okay?

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1 A: I've -- I've been surprised. 2 Q: No, I -- it's not -- this is not about 3 the content of the document, at all. In fact, I'm asking you 4 about Mr. Wolfraim. 5 A: Oh. 6 Q: Okay? 7 A: Okay. As I understood your evidence, you 8 indicated that you -- upon receipt of the document, you had a 9 fairly detailed discussion with Mr. Wolfraim, and you 10 reviewed the document with him, and you both had concerns 11 about the content of the document? 12 A: Yes. 13 Q: Okay. And that led to you subsequently 14 calling Mr. Ford, expressing those concerns. And -- and we 15 heard what happened after that. 16 A: Yes. 17 Q: I understand that Mr. Wolfraim will say 18 that no such discussion ever took place. He never saw the 19 document, you never had a discussion with him. What do you 20 say about that, sir? 21 MR. WILLIAM McDOWELL: Sorry, he never saw 22 the document, he never had the discussion, is that what you 23 mean? 24 25 CONTINUED BY MR. RICHARD STEPHENSON:

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1 Q: That's right. Wolfraim will say, never 2 saw the document, never had a discussion with you about it? 3 A: Mr. Wolfraim will say that? 4 Q: Yes. 5 A: I -- I -- what I have to say about that 6 is I absolutely disagree with Mr. Wolfraim. 7 MR. COMMISSIONER: I'm sorry? 8 THE WITNESS: I disagree with Mr. Wolfraim. 9 MR. RICHARD STEPHENSON: Okay. 10 THE WITNESS: If that is, in fact, what -- 11 what he said. 12 MR. RICHARD STEPHENSON: That's what we 13 understand. 14 15 (BRIEF PAUSE) 16 17 CONTINUED BY MR. RICHARD STEPHENSON: 18 Q: Now, I want to turn to the meeting of -- 19 of February the 21st. On -- as I understand your evidence, 20 at this meeting, Mr. Ford goes some considerable distance 21 offside, in the sense that, you've had a discussion with him 22 about his presentation. 23 You've asked him -- or you've advised him that 24 there are certain material respects you consider his -- his 25 report to be inaccurate, or, you know, in some respect,

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1 misleading, not -- not accurately reflecting the nature of 2 the deal with -- with MFP, at that point in time. 3 And you find out on the 21st, that he's not, 4 in fact, amended it, at all. It's gone forward in -- in 5 precisely the fashion you've seen. You -- you knew all that, 6 fair? 7 A: I guess the question I have is, just by 8 way of clarification, what point in time are you talking 9 about? 10 Q: You knew all that on February the 21st? 11 A: On February the 21st when I arrived at 12 the Council meeting? 13 Q: Not when you arrived but certainly by the 14 end of the Council meeting, it's fair to say, you've learned 15 all that. Is that fair? 16 A: Yes. 17 Q: Okay. 18 A: In particular, I -- if you recall my 19 evidence, there was a presentation that was made during that 20 Council meeting, and it talked about locking in rates. In 21 particular, that's what I recall. 22 Q: Right. But in addition to that, and you 23 may not have had it in front of you, by this point in time, 24 by the time the meeting open, those -- those reports to 25 Council are -- are part of the public record?

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1 They're available publicly in the Council 2 Chamber for distribution. You may or may not have seen it at 3 that moment, but certainly it was sent to you by Mr. Dobbs 4 within a day or two? 5 A: Sure. 6 Q: So, at the very latest, by the 24th of 7 February, you know this Council report has gone forward 8 completely unamended; right? 9 A: Yes. 10 Q: Okay. Here's my problem, sir. Who's 11 your client? 12 A: The client, from our perspective, was the 13 City of Waterloo -- 14 Q: Yes. 15 A: -- as represented by the Chief Financial 16 Officer. 17 A: Yeah. No. It's the City of Waterloo, 18 sir, right? And you knew that the City of Waterloo, their 19 operating mind, their responsible authority is Council and 20 then there's the CAO, Chief Administrative Officer and 21 there's the CFO; right? That's the, sort of, chain of 22 authority; right? 23 A: Hmm hmm. 24 Q: So, at that point in time, you 25 understood, on your evidence, that Council had been misled;

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1 fair? 2 A: We understood that we were beginning a 3 very long process and that Council had authorized us to being 4 that process. But we took exception, in particular, not so 5 much with the report but with the resolution. 6 Because the resolution spoke to entering into 7 an agreement with MFP and what our experience has been with 8 municipalities is a resolution at that stage of the game 9 would be to enter into negotiations with MFP. The result of 10 those negotiations goes back to be ratified by Council. 11 Q: No, but -- I mean, correct me if I'm 12 wrong, sir, but I understood your evidence to be that that 13 report was incorrect in -- in -- from your perspective, in a 14 material sense in at least the following ways: Number 1, 15 reference to interest rates in the low 5 percent range? 16 A: Right. 17 Q: Right. You agree with me that -- at that 18 point in time on the math we've done subsequently, that was 19 not achievable; correct? 20 A: In our minds, we believed that to be 21 aggressive. 22 Q: Well, no -- we know what the number is, 23 sir. We've done the math; right. It's 6.36? 24 A: You've got to understand, Mr. Stephenson, 25 it's a moving target. As you work on these transactions the

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1 market moves -- 2 Q: I understand that. 3 A: -- and rates move. 4 Q: We're talking now, real time, sir. We're 5 talking it -- we're talking in February. We know what the 6 numbers are in February and at that point in time you can't 7 do low 5's; can't do it? 8 A: I think, you have to understand, that we 9 were pursuing this transaction and I don't -- we took 10 exception to the low 5's comment. I'm not saying that we -- 11 Q: Exactly. 12 A: -- agreed with the low 5's comment. 13 Q: Well -- 14 A: But we brought that up to Mr. Ford. 15 However, to say that the low 5's may never have been 16 achieved, at that point in time, I -- I don't think that's 17 reasonable. 18 Q: You certainly -- I hear you. Okay. So 19 you -- you agree that the report was misleading in a material 20 respect in the sense that the low 5's was something you did 21 not agree with? 22 A: Yes. There's three points -- 23 Q: And I'll get to them. The second one is 24 the lock in of the rate? 25 A: Right.

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1 Q: Absolutely. You just say, from our 2 perspective, no way. Way too early, don't have a commitment 3 from you? 4 A: Right. 5 Q: Not fleshed out, et cetera? That -- 6 A: Correct. 7 Q: You take mat -- that -- that was 8 materially incorrect; fair? 9 A: It was incorrect. Yeah. 10 Q: Okay. Well, if Council thinks that 11 they're locking in rates and they're not locking in rates, 12 that's material; fair? Okay. And you said there was three 13 (3) and I -- 14 A: Yeah. Three (3) of them. 15 Q: I had two (2). 16 A: Searching for the report. 17 MR. WILLIAM McDOWELL: Guarantees, I think 18 was the third one. 19 MR. RICHARD STEPHENSON: Well, no, that's the 20 lock in. The same thing; isn't it. 21 MR. WILLIAM McDOWELL: All right. 22 THE WITNESS: All right. 23 MR. JAMES CASKEY: Yeah, we can get that for 24 you, sir, if you like. It's -- it's in your material. 25 MR. COMMISSIONER: The third was the rates

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1 going up or down. 2 THE WITNESS: Right. 3 4 CONTINUED BY MR. RICHARD STEPHENSON: 5 Q: That's right. Getting the one way 6 benefit that if your -- the City gets the benefit of a 7 decline but is protected from it's -- an increase. Maybe 8 that -- 9 A: Right. 10 Q: It's at Tab 13? 11 A: Oh. 12 Q: Exhibit 107. 13 A: Thank you. 14 15 (BRIEF PAUSE) 16 17 A: Yeah, and it's -- on that last point, 18 just by way of reference, the rates -- the movement of the 19 rate, the client gets the benefit of the movement of the rate 20 until the deal is signed, obviously, and this is what we're 21 -- when you're talking about spreads, as opposed to talking 22 about a -- 23 Q: Well, I think it's the benefit -- 24 A: -- sort of -- 25 Q: -- this benefit, as the case may be.

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1 A: Well, to be fair -- 2 Q: It's getting wider. 3 A: Yeah, because the tax flow, fair enough. 4 Q: Anyway, my point simply is this, sir, I 5 mean, there is some -- in -- there's some -- you have some 6 significant issue with it, fair? 7 A: Yes. With this report, yes. 8 Q: Okay, and my problem I have with it is 9 this. Your client is not Mr. Ford. Your client is the City, 10 and you surely understood on your evidence, sir, that Mr. 11 Ford is engaged in some form of material deception at this 12 point. 13 MR. COMMISSIONER: I'm not sure "deception" 14 is an accurate word. 15 MR. RICHARD STEPHENSON: Well, misleading? 16 MR. COMMISSIONER: Well, how about erroneous? 17 MR. RICHARD STEPHENSON: Well, you -- no, 18 because Mr. -- 19 MR. COMMISSIONER: Well, you can infer 20 whatever you want, but I know what I thought of it. 21 MR. RICHARD STEPHENSON: Mr. -- no, but -- 22 but Mr. -- Mr. -- Mr. Robson says he corrected Mr. Ford about 23 that, and notwithstanding those corrections, he went ahead 24 and did it anyway. 25 MR. WILLIAM McDOWELL: Yeah but -- but the

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1 possibility exists that Mr. Ford was dim rather than 2 fraudulent in doing this. 3 MR. COMMISSIONER: Well, you know, the -- 4 MR. RICHARD STEPHENSON: Well, I'm not sure 5 that it happened at all. I'm just -- this is what the 6 witness said. 7 MR. WILLIAM McDOWELL: No, but -- but you're 8 putting it to him in the most aggressive way possible, and he 9 could -- could have done it in error, he could have done it, 10 because he didn't understand, or for some other -- 11 12 CONTINUED BY MR. RICHARD STEPHENSON: 13 Q: At -- at a minimum, a material mistake, a 14 material error, has taken place, from which the -- the City 15 Council could receive a materially wrong impression, fair? 16 A: You -- I think you have to put in 17 context, Mr. Stephenson, that we took less issue, in effect, 18 with the report, because the report could have, in effect, 19 worked out, had all the things lined up that we were 20 attempting to do. 21 What we took issue with, was a resolution that 22 says, they're entering into an agreement with us. 23 MR. COMMISSIONER: It took -- 24 THE WITNESS: -- because that -- it -- it -- 25 it's -- what that's saying, it's solidifying --

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1 2 CONTINUED BY MR. RICHARD STEPHENSON: 3 Q: Sir, the rate -- the report on your 4 evidence could never have been true, because the rate wasn't 5 locked in. 6 A: Had we -- 7 Q: Council thought it was, and you say it 8 wasn't. 9 A: But -- but you're saying two (2) 10 different things. How could it be locked in, and at the same 11 time, it's going to -- if it gets lower, then they -- then 12 they get a lower rate. Then it's not locked in, it's capped. 13 That's a different -- 14 Q: Anybody that's ever got a mortgage 15 understands that, sir, you get one (1) way benefit, and maybe 16 it doesn't apply in commercial circumstances, that's fair 17 enough, but Council certainly would understand that. They've 18 all, by -- 19 A: Well, and this was -- and I'm -- I'm glad 20 that you bring up the mortgage as an example, because that 21 was the exact response we got from Mr. Ford, and that was how 22 long do we keep it simple. 23 Q: Hey, listen. Listen. I'm -- I'm saying 24 to you, this report from your -- on your evidence is 25 materially misleading. Council would have understood on

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1 reading this report, that their rate was locked in, and had 2 the benefit of a downward movement, and you say that was not 3 true. 4 A: Correct. 5 Q: Okay. The City is your client, sir. 6 A: We did -- our -- 7 Q: You have an obligation to ensure-- 8 MR. COMMISSIONER: You made the point that 9 the City was going to be under a misapprehension, and at 10 least -- 11 THE RICHARD STEPHENSON: At a minimum, fair 12 enough. 13 MR. COMMISSIONER: -- and, you've done that, 14 and then, your going on now to become argumentative about -- 15 MR. RICHARD STEPHENSON: No. 16 MR. COMMISSIONER: -- what the effect of that 17 is, and it doesn't matter, and I know -- 18 MR. RICHARD STEPHENSON: I -- 19 MR. COMMISSIONER: -- I know what the effect 20 is going to be -- 21 MR. RICHARD STEPHENSON: But, my point simply 22 is this, he's already agreed with me, that one (1) of his 23 obligations is to ensure that all relevant information 24 necessary to make an informed business decision, is made 25 available to the client and this is -- is the diametric

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1 opposite of that, on your evidence. 2 THE WITNESS: No, sir. When -- when a 3 municipality, or any body assigns a responsibility for 4 someone to be their Chief Financial Officer, it is not MFP's 5 place to circumvent, in at least -- certainly in our opinion, 6 to circumvent what the -- the -- the -- the existing 7 protocol. You -- I don't think we could do that. 8 MR. COMMISSIONER: Mr. Robson, let me ask you 9 a question. You're cutting a deal with the City of Waterloo, 10 and you see a document that you know is wrong, or conveys 11 wrong information? 12 THE WITNESS: Yes, sir. 13 MR. COMMISSIONER: Are you telling me that 14 just because that information is provided by the Chief 15 Financial Officer, that you have no obligation to correct 16 that in the face of the -- 17 THE WITNESS: We -- 18 MR. COMMISSIONER: -- City Council? 19 THE WITNESS: -- we have an obligation, Your 20 Honour, to be certain that the Chief Financial Officer 21 understands. 22 MR. COMMISSIONER: How about your client 23 understanding this? That's the point that Mr. Stephenson is 24 making. 25 THE WITNESS: I understand.

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1 MR. COMMISSIONER: Your client is not John 2 Ford, your client is the City of Waterloo. And what he's 3 asking you is, do you have an obligation to the City of 4 Waterloo? And you're telling me that your obligation is to 5 John Ford, not the City and I find that very difficult to 6 accept. 7 THE WITNESS: Well, Your Honour, this 8 unfortunately was the way it played out, rightly or wrongly. 9 MR. COMMISSIONER: Well, whether it plays out 10 that way or not, you're being asked, who is your client? And 11 you said, the City. It's not John Ford. 12 THE WITNESS: The City appointed the Chief 13 Financial Officer. 14 MR. COMMISSIONER: So what? What do you 15 care? 16 THE WITNESS: Well, let me put it in context, 17 Your Honour. 18 MR. COMMISSIONER: Okay. We're getting -- 19 now I'm getting argumentative. 20 MR. WILLIAM McDOWELL: Exactly. I was going 21 to say that -- 22 MR. COMMISSIONER: Okay. 23 MR. WILLIAM McDOWELL: -- with the greatest 24 of respect. 25 MR. COMMISSIONER: At least I recognized the

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1 point. 2 MR. WILLIAM McDOWELL: Right. 3 MR. COMMISSIONER: And I recognize that I'm 4 argumentative and I apologise for that, and it will never 5 happen again. 6 MR. WILLIAM McDOWELL: You're not under oath, 7 here, Your Honour, you don't -- 8 MR. RICHARD STEPHENSON: And I'm not about to 9 hold you to it, sir. 10 MR. COMMISSIONER: All right. Well, we'll 11 get through this thing, let's move in to something else, 12 that's equally interesting. 13 MR. RICHARD STEPHENSON: All right. 14 15 (BRIEF PAUSE) 16 17 CONTINUED BY MR. RICHARD STEPHENSON: 18 Q: I just want to ask you, for a moment, 19 about Mr. Friedel. Because you gave evidence about your 20 understanding of what Mr. Friedel's role within the City was, 21 from time to time and in particular, what his role was in 22 relation to this transaction, from time to time. 23 And am I right that your evidence is that, to 24 the extent you have any knowledge of that, it was what Mr. 25 Ford told you?

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1 A: Yes. 2 Q: Okay. And am I right that you didn't 3 know that Mr. Friedel was Mr. Stockie's Executive Assistant 4 at this point in time, in the early 2000 time frame? You 5 didn't know that? 6 A: In the early 2000 time frame, he was the 7 CAO's assistant, and you're asking me if I was aware of that? 8 Q: Yes. That he was Mr. Stockie's EA, yes. 9 A: I don't know that we knew his title, but 10 I certainly know that we -- actually, I don't think I thought 11 he was Assistant for the CAO, but fine. 12 Q: Okay. And you'll recall that -- did you 13 know that he had been tasked on a -- there was a -- there was 14 an organization known as the Millennium Recreation Park 15 Implementation Team. And I believe, actually, Mr. Caskey 16 took you to the ORG chart, do you remember that? 17 A: Is that the ORG chart where I had some 18 notes on, is that the one? 19 Q: You're right, it did have some notes on 20 it, that were really, actually, unrelated to the ORG chart, 21 itself. 22 A: Yes, hmm hmm. 23 Q: He was, on that ORG chart, he was the 24 person, as the co-chair of the implementation team, 25 responsible for the business plan. I take it, if you had the

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1 ORG chart you would have known that information? 2 A: Okay. The initial business plan, is that 3 what you're talking about? 4 Q: Well, it just simply says, "business 5 plan", okay? That's what the ORG chart says. Okay? And did 6 you know, sir, that Mr. Friedel completed a number of drafts 7 of the business plan, but that the, essentially, final 8 business plan was created and completed by him, and submitted 9 to Council, on May 29 of 2000? 10 A: The final business plan? 11 Q: That's right. From the City's 12 perspective. 13 A: Certainly, from MFP's perspective, there 14 was no final business plan. 15 Q: I'm talking now about the City's business 16 plan. 17 A: Oh. 18 Q: The City gets to control its business 19 plan, fair? I mean, that's up to them. 20 A: Okay. 21 Q: Okay. And from the City's perspective 22 they had a final business plan in hand on May the 29th of 23 2000 and it was received by Council on that date? 24 A: That -- that's make no sense whatsoever 25 to me. They had an outstanding KPMG Report that didn't come

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1 out until December of 2000 and you're telling me in May of 2 2000 they had their final business plan? 3 Q: That's right. 4 A: Then what's the purpose of the 5 outstanding KPMG Report? 6 Q: Well, let's put it this way, and I was 7 going to get to that in a moment, but, of course, as at May 8 it wasn't outstanding. It didn't -- it only came -- the 9 initiative for the -- the second KPMG Report didn't come 10 about until August. So they couldn't have been waiting for 11 something that they didn't know about at that point; okay? 12 A: Okay. I wasn't privy to those 13 discussions. 14 Q: Okay. And, indeed, Mr. Friedel's 15 disappearance so to speak, from your -- from -- from a -- 16 that the interface between the City and MFP actually occurred 17 as a result of that. He had completed his task of the 18 business plan as of May 29, 2000. I take it you just didn't 19 know that? 20 A: Well, it certainly wasn't our 21 understanding. 22 Q: All right. And I can assure you that 23 Mr. Ford didn't tell this Commission that somehow Mr. Friedel 24 was removed because his numbers were ultraconservative. I 25 can assure you that Mr. Ford did not tell us that. But, I

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1 gather, you say he told you that; is that right? 2 A: I mean, it made no sense for us to -- to 3 continue working on the business plan if -- if there was a 4 final business plan in place. I mean it -- it's a shock to 5 me. 6 Q: Yeah. Mr. Friedel says, of course, you 7 know, the business plan gets updated every year, you know, as 8 these things do. But, in so far as Business Plan 2000 was 9 concerned, that was the final iteration accepted by Council 10 May 29th? 11 A: All right. That wasn't our 12 understanding. 13 Q: All right. And I take it you didn't know 14 that, indeed, not only had Council accepted it, Council was 15 very pleased with the fact that Mr. Friedel had used 16 conservative assumptions and, in fact, that was entirely 17 consistent with their direction? I take it you didn't know 18 that either? 19 A: This is all news. 20 MR. COMMISSIONER: Okay. That's fine. 21 Just -- 22 THE WITNESS: I did not know. Sorry. 23 MR. RICHARD STEPHENSON: Okay. And, in fact, 24 Council -- the evidence of the Councillors here was that if 25 anything other than conservative assumptions was going to be

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1 used for the business plan, that was something they wanted to 2 be expressly advised about and have the opportunity to 3 review, consider and approve if there was going to be a 4 change from conservative assumptions? 5 MR. COMMISSIONER: Now, just before you try 6 to answer that. I don't recall, and you can correct me if 7 I'm wrong, but I don't recall any evidence to the effect that 8 Council had expressed themselves in that way. 9 MR. RICHARD STEPHENSON: I asked all of them. 10 MR. COMMISSIONER: Well, they must -- 11 MR. RICHARD STEPHENSON: That was -- 12 MR. COMMISSIONER: I don't know what they 13 said when they responded. 14 MR. RICHARD STEPHENSON: They -- 15 MR. COMMISSIONER: I don't remember it. 16 MR. RICHARD STEPHENSON: They all concurred 17 with me that that was something that they would have -- that 18 they wanted and that they had made clear that if there was 19 going to be something other than conservative assumptions 20 used, they wanted to be made known and they wanted an 21 opportunity to consider that before it was approved. 22 MR. COMMISSIONER: Well, I didn't know that 23 and I'm not sure that the witness does. 24 MR. RICHARD STEPHENSON: And -- and the 25 witness has said, he didn't know that.

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1 MR. COMMISSIONER: He said he didn't know. 2 MR. RICHARD STEPHENSON: Didn't know that. 3 MR. COMMISSIONER: That makes two (2) of us. 4 MR. RICHARD STEPHENSON: That's fair enough. 5 6 CONTINUED BY MR. RICHARD STEPHENSON: 7 Q: And, I take it, you also didn't know that 8 after Mr. Friedel had completed his task with the business 9 plan he was then charged with the task of essentially 10 managing this $50 million construction project and that's 11 what he was doing, essentially, for the balance of 2000? 12 A: We -- we knew he would -- they had moved 13 him away from the business plan side of the house, the 14 financial side. I'm not sure that we knew where he ended up. 15 Q: Okay. All right. Fair enough. Now, we 16 know that the original in-house legal counsel at MFP assigned 17 to this transaction was Mr. Robinson. You remember Mr. 18 Robson? 19 A: Yes, sir. 20 Q: Okay, and we know -- he was a witness 21 here, and he, among other things, told us that he was the one 22 (1) that forwarded to Mr. White, the original drafts of the 23 head and sub lease, I believe, on May the 19th, so that -- 24 that's consistent with your understanding, I take it? 25 A: Yes.

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1 Q: Okay. Now, you're the -- the sort of, 2 the business guy running point on this deal. I take it that 3 when the legal person comes in, they don't know anything 4 about the transaction in particular, and they get briefed by 5 you about, generally speaking, what the nature of the 6 transaction is, and -- and get -- and given some basic 7 instruction of where you're at, and what it is likely be 8 needed to be done to get you to the finish line, fair? 9 A: Not always. Not at M -- MFP as a company 10 was -- our legal department were brought in then the deal -- 11 deal's firmed up, ef -- effectively, because we had a large 12 volume of transactions, and a very small legal department. 13 Q: Right, but in any -- but -- and -- but 14 you're -- you're now heading that way -- 15 A: Not -- not in May, we weren't. 16 Q: Well, except, sir, you remember there was 17 an e-mail that Mr. Caskey referred you to, from, I believe, 18 it was Leanne Fraser, whereby you'll recall there was a time 19 line at that point in time, starting in mid-April, whereby 20 you had a series of milestones, getting you to a closing at 21 the end of May. 22 Now, we know that wasn't achieved, and it may 23 never have been achievable, but it was certainly the -- for a 24 period of time, MFP's understanding that this was where the 25 City wanted to be, closing at the end of May.

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1 You'll recall that e-mail? 2 A: I -- I recall the e-mail. I don't recall 3 it being the City's desire to be there. I think possibly, it 4 was, I -- I -- I do know that MFP was certainly nowhere 5 near -- 6 Q: Right, well -- 7 A: -- right? 8 Q: -- Ms. -- Ms. Fraser says John Ford gave 9 her -- gave her these dates. 10 A: Oh, fair enough. 11 Q: Dave wants you to know. 12 A: Okay. 13 Q: Okay? So, and I appreciate, sir, that 14 when you were received that, I assume there was some 15 discussion between yourself and Mr. Ford about the 16 achievability of that timeline. 17 A: Hmm hmm. 18 Q: Fair enough, and -- and obviously, we now 19 -- you moved off it at some point, but in any event, there 20 was -- you must have had knowledge, we -- in the April time 21 frame, that the City was looking at a much shorter time frame 22 than ultimately occurred, fair? 23 A: I -- if there's that e-mail -- 24 Q: Yeah. 25 A: -- which -- I -- there is, I'm -- I'm

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1 sure -- 2 Q: Okay, but -- 3 A: -- I would have been a party to it. 4 Q: -- you're - now getting -- Mr. Robinson 5 gets involved, and he sends off a draft to Mr. White, and 6 presumably, Mr. White's going to comment on it, and do the 7 thing that lawyers do, they -- they bat the commercial 8 agreement back and forth, and that's what happens in deals. 9 A: Yeah, I -- I -- as deals head towards 10 close, this deal, the -- the lawyers didn't really become 11 hand-on until September, really. 12 Q: I know that happened, but I can tell you 13 Mr. White didn't know that when he got it. In fact, he was 14 being quite diligent at -- at his end of the deal, getting -- 15 trying to get comments from Mr. Ford, and so forth. 16 He didn't know that this wasn't going to 17 happen until September. 18 A: Did he meet with Mr. Robinson? 19 Q: Yeah, there was a -- he met with Mr. 20 Robinson in July, July the 5th, as it turns out. You're 21 there. 22 A: Okay. I guess I'm talking about prior to 23 this -- this June timeline that you've talked about. 24 Q: Well -- 25 A: If there was urgency, and -- and -- and

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1 we felt that there was urgency, when he got the documents, 2 which was a template, in May, then, shortly thereafter, he 3 would have been meeting with Mr. Robinson -- 4 Q: So, am I right that -- that, as far as 5 you're concerned, or as far as you're aware, essentially, all 6 Mr. Robinson was told within MFP is simply, can you send over 7 a couple of template heads -- head and sub leases to Mr. 8 White? 9 A: Pretty much so, that -- 10 Q: Okay, so he knows -- he has no idea of 11 the -- the structure of the transaction, the timeline, the 12 players, anything else. 13 A: Again, MFP -- the deals change so 14 frequently until we get to close, that to keep burning cycles 15 within the legal department would make no sense. 16 Q: All right. So, I take it, it's entirely 17 likely then that Mr. Robinson was never advised that the 18 plan, at this point in time, that is, in May, was that this 19 was going to be a tax equity transaction? 20 A: That's not something we would get Legal 21 involved in. 22 Q: Well, but you've got to -- Legal is going 23 to be doing -- I mean, when you have a tax equity investor, 24 you're going to be documenting the transaction between the 25 tax equity investor and the other players. That -- there's

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1 going to be a lot of legal work in relation to that part of 2 the transaction? 3 A: I'm -- I'm just going to use Mr. Pelech's 4 descriptions, as they've come to me, but effectively the head 5 lease and the sub lease don't change, materially. 6 Q: I appreciate that. But you're going to 7 have -- your lawyer is going to be -- at that point in time, 8 will have two (2) separate tasks. There will be the head 9 lease and the sub lease, and they're going to look more or 10 less the same, regardless of the structure of the 11 transaction. 12 But in a tax equity investor transaction, 13 you're going to have a whole other set of documentation, 14 where the tax equity piece is going to be documented? 15 A: We don't view that as onerous, from 16 our -- I don't think MFP viewed that as onerous. 17 Q: Well -- 18 A: And if you look at the money-over-money, 19 it's an acknowledgment assignment -- 20 Q: Well, with all due respect, sir, I don't 21 think you have the foggiest idea how onerous it is. 22 A: Yes, you're -- fair enough. 23 Q: Because you've never done one (1) and you 24 never even tried to do one, fair? 25 A: We -- we've had done many, many

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1 transactions, at MFP, so -- and -- and I was there fourteen 2 (14) years, so -- 3 Q: I understand that. 4 A: -- trust me 5 Q: I'll give you that one. And they're all 6 unique, remember? 7 A: Fair enough. 8 9 (BRIEF PAUSE) 10 11 MR. COMMISSIONER: Are you going to another 12 topic? 13 MR. RICHARD STEPHENSON: Yes, I am. 14 MR. COMMISSIONER: Okay. Fifteen (15) 15 minutes. 16 MR. RICHARD STEPHENSON: Thank you. 17 THE REGISTRAR: The City of Waterloo Judicial 18 Inquiry now stands recessed for fifteen (15) minutes. 19 20 --- Upon recessing at 2:58 p.m. 21 --- Upon resuming at 3:29 p.m. 22 23 THE REGISTRAR: The City of Waterloo Judicial 24 Inquiry is now resumed. Please be seated. 25 MR. COMMISSIONER: Okay. Mr. Robson, please.

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1 I don't know if it's become a matter of public record yet, 2 but I thought I should take this opportunity to discuss the 3 on-going schedule that we'll be resuming again on Monday. 4 We'll do the usual schedule start at 5 eleven o'clock to permit everybody to get here; snow or sleet 6 notwithstanding. We will not be sitting on Tuesday because 7 of other commitments and we will sit Wednesday and Thursday. 8 After which, we will recess and we will resume again March 24 9 or 5. On March 25th. Is that a Monday? 10 MR. JAMES CASKEY: That's a Tuesday, sir. 11 MR. COMMISSIONER: Tuesday, ten o'clock on 12 that day. And will resume again then on March the 25th at 13 ten o'clock and we will continue until we finish after that 14 date. I guess that's the best I can do. 15 Anyway, I wasn't sure -- I wanted to make sure 16 that those of you who have an interest in attending were 17 fully aware of the schedule. Okay. Thank you. 18 MR. RICHARD STEPHENSON: Thank you. 19 20 CONTINUED BY MR. RICHARD STEPHENSON: 21 Q: I just want to talk a moment about the 22 efforts to -- to find a tax investor, and -- and I appreciate 23 that you had no direct involvement in those efforts. Those 24 were being undertaken, as I understand it, from your 25 perspective, by some combination of Mr. Wright, and Mr.

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1 Pelech. Am I right about that? 2 A: Ye -- yes. 3 Q: Okay, and you had concluded by -- I 4 apologize, I think I've just forgotten the date, but there 5 was -- there's a date, I think, at the end of August, some 6 time at the end of August -- 7 A: The 22nd. 8 Q: -- that the tax deal is just a -- a no 9 go, but that, I mean, just -- the August 22nd, of course, is 10 only significant by virtue of the May 26th letter, I take it. 11 There wasn't any event in, you know, that 12 happened on the 21st, but, you know, caused you to think, you 13 know, it's -- it's a dead end, is it? I mean, that -- the 14 only significance is the nexus to the May 26th letter? 15 A: The marketing update letter, correct. 16 Q: Okay, and at -- at that point in time, is 17 there some meeting of the minds within MFP that say, well, 18 this -- as far as we can tell, the tax deal is a dead end, or 19 is this just simply -- is this an existential exercise by 20 yourself, saying, this -- this tax deal is over? 21 A: No, I -- I don't think MFP internally 22 looked at it, and said, the tax deal's over, I know we 23 didn't, in a sense that we would continue, you know, Bo 24 Pelech would continue modelling things, and certainly we 25 would continue to try to find a way to get it done.

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1 Q: Now, did somebody -- 2 A: It was only September -- sorry. 3 Q: Sorry. Did somebody tell you that there 4 were on-going efforts? 5 A: We had the discussion in -- internally, 6 certainly. 7 Q: And now, just -- who's the discussions 8 amongst? 9 A: Well, generally, the discussions would be 10 in relation to any tax issues would be Mr. Pelech, and Mr. 11 Pelech with his single point of contact, on tax issues, and 12 it -- it would be Mr. Wright. 13 Q: Okay, and that's taking place even in 14 late August? 15 A: Certainly I -- we wouldn't discourage 16 that from taking place. I -- I don't know that we were -- 17 Q: But, you don't know for a fact that it 18 did either? 19 A: Well, we -- I -- I wasn't party to those, 20 other than knowing that Mr. Pelech was continuing to work. 21 Q: All right. Here's the problem that -- 22 that we've been having, at least, where -- from where I sit, 23 about this whole tax deal. 24 As far as we could tell, there are virtually 25 no efforts to find a tax investor. Let me just tell you what

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1 the evidence is, and let me just see if you know this. 2 The evidence is this; Mr. Wright had 3 considered MFP's internal tax capacity, and had made the 4 decision to the negative, okay? We know that. 5 A: Yes. 6 Q: And, you knew that? 7 A: Yes. 8 Q: Okay. Secondly, Mr. Wright says that he 9 spoke to two (2) people, or two (2) -- two (2) entities. For 10 the life of me, I've forgotten what the first one (1) was, I 11 think it was Canada Life, or somebody like that, and there's 12 a name of somebody there. It doesn't matter who it is. 13 Secondly, he spoke to somebody from Mr. 14 Stockie's company, Acktion Corp., and indeed, Mr. Pelech was 15 brought in to do a -- sort of a curb-side consultation with 16 them. 17 A: Okay. 18 Q: Thirdly, Mr. Pelech, sort of, put it out 19 into his community, of the, sort of accounting firms, and law 20 firms, that there was some possibility, or an expression of 21 interest, I guess, would it be -- in a -- in non-specific 22 terms, without identifying the transaction. 23 And, he says -- but he took no -- there was no 24 active efforts on his part about that at all. He simply put 25 the word out, and waited to see what came back, okay?

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1 That's it. That's the totality of the efforts 2 to find a tax investor. Two companies spoken to, that's it. 3 Do you have any evidence that -- contrary, or inconsistent to 4 that? 5 A: No -- no, that's -- again, that's not my 6 mandate to -- 7 Q: Okay. 8 A: -- or MFP's. 9 Q: I take it, you would have been expecting, 10 from your position, getting this thing together, that there 11 would have been some ongoing active effort out there, dealing 12 with a variety of different potential players? 13 Isn't that fair? 14 A: Well, I -- I think it's in my evidence, 15 I -- I've verbally beat up, if you will, Mr. Pelech over the 16 fact that he was our -- our Bay Street eyes, call him the 17 wonder-child, in effect. But effectively, it's been a lot of 18 years on Bay Street, that he couldn't, you know, bring in 19 somebody. 20 Q: Well, he told us, in no uncertain terms, 21 that he made it very, very clear, at -- at MFP, that that is 22 way outside his core competency, and it was not something 23 that he was going to do. Is that inconsistent with your 24 conversations with Mr. Pelech? 25 A: It's not inconsistent with his core

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1 confiden -- competencies, but certainly, he was, and 2 continues to be, a very well connected individual. 3 Q: I understand that. But he says, he told 4 you, I'm not going to do it. It ain't my job, I'm not doing 5 it, I -- it's not something I'm -- I'm good at, particularly. 6 I don't want to do it and I'm not doing it. 7 A: I don't think he would put it that way, 8 but -- 9 Q: Not in those precise words, but he said 10 to us, in no uncertain terms, he told you he wasn't doing it. 11 A: That's exact -- he's not a salesperson, 12 effectively, which is what you needed, was someone to sell -- 13 Q: Right. 14 A: -- the -- the -- 15 Q: Right. 16 A: -- the tax -- 17 Q: So he -- he's not doing it. 18 A: I don't know that he'd ever say he 19 wouldn't do it, he probably said, I'll do my best. But, you 20 know, you -- you've got to understand, you know, he was a 21 consultant to MFP, so -- 22 Q: Right. So, but that's it, sir. There's 23 -- there's no beating of the bushes here, sir. There's two 24 (2) companies, two (2). That's it. 25 And is this the, you know, the sort of the --

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1 the -- the resources of MFP, being deployed for the benefit 2 of their client? That's as good as it gets, sir? 3 A: I mean, I -- again, that wasn't my -- 4 that's not my mandate so you'd have to -- I don't know what 5 Mr Wright had to say about that. 6 Q: Well, I told you what he said, talked to 7 two (2) companies. 8 A: No, no. But I think what you asked me 9 was, that's it? I mean, that's all you -- you know, I can 10 certainly tell you there were times that, internally, where I 11 -- I would have had discussions with, vis-a-vis, funders or 12 whatever, that I always felt that, as a company, we needed to 13 do more. But that, again, I was -- 14 Q: Okay. 15 A: -- that wasn't my task. 16 Q: Did you get reports back from Mr. Wright, 17 vis a vis, the outcome of his discussion with Acktion Corp. 18 and the other company he spoke to, saying that he'd struck 19 out? 20 A: He may have communicated -- sorry. He 21 would communicate with Mr. Pelech. 22 Q: Okay. Would Bo tell you, then -- 23 A: Right. 24 Q: -- about what Wright had told him? 25 A: Very much so.

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1 Q: Okay. So you found out that those ones 2 struck out, fair? 3 A: Yes. 4 Q: All right. The other thing that Mr. 5 Pelech told us about the tax deal was that, he actually 6 was -- one (1) of the reasons for his frustration about it 7 was, that, frankly, he didn't understand what was so 8 difficult, notwithstanding his own lack of interest, but he 9 didn't understand what was so difficult about finding 10 somebody, because as he described it, frankly, the tax play 11 wasn't all that big. 12 A: Fair enough, yes. 13 Q: And -- and I got the distinct impression 14 from him, that he thought, frankly, this was very doable? 15 A: Yes. 16 Q: So again, I understand it's out of 17 your -- out of your -- your department, so to speak, but can 18 you understand what's going on here? Why -- why isn't it 19 happening? 20 A: I -- again, I'm not the one to answer 21 that. 22 Q: All right. 23 A: Unfortunately. 24 Q: All right. And what about Mr. Wolfraim? 25 Does he -- what's his -- how is he in the loop on this

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1 discussion, so to speak? 2 A: Vis-a-vis, the tax deal? 3 Q: Yes, the status of the tax deal, whether 4 it's working, not working, so forth. 5 A: I mean, Mr. Wolfraim, with respect to 6 asset based finance, was kind of the -- the -- the -- the 7 General Manager. He was our -- our report (sic), 8 effectively, even though contractually -- 9 Q: Right, you went -- 10 A: -- our employment contract was with 11 the -- 12 Q: -- through Flanagan. 13 A: -- Senior Vice-President of Marketing, 14 right, which happened to be Flanagan at the time. 15 So, are you asking, what would his role be in 16 finding an investor, or -- 17 Q: No, I mean, what would he know about the 18 status of that, as it proceeded? 19 A: Mr. Wolfraim was very hands on. 20 Q: So he'd be on top of that? 21 A: He would understand, yes. 22 Q: All right. We understand that Mr. 23 Wolfraim will say that, as of June 2000, the tax structure 24 was not going to work with the City of Waterloo, full stop; 25 June?

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1 A: For MFP. 2 Q: No. Not going to work for the City of 3 Waterloo full stop? 4 MR. WILLIAM McDOWELL: I actually think it's 5 qualified the way Mr. Robson suggests. 6 MR. RICHARD STEPHENSON: No. I don't think. 7 MR. WILLIAM McDOWELL: Well, -- 8 MR. RICHARD STEPHENSON: We'll ask him but 9 let's try -- 10 MR. COMMISSIONER: Wait a minute. I need to 11 understand what you're saying. 12 MR. WILLIAM McDOWELL: Well, having been 13 present for his interview, it was -- Mr. Wolfraim's 14 interview, the point was that MFP, by June, realized that in 15 it's subjective circumstances, it was not in a position to do 16 it. 17 MR. COMMISSIONER: All right. Well -- 18 MR. RICHARD STEPHENSON: Mr. Wolfraim will 19 say what he says. I don't know -- 20 MR. COMMISSIONER: Yeah, that's right. He'll 21 tell us. 22 MR. RICHARD STEPHENSON: Yeah. 23 MR. COMMISSIONER: The deal is here that, and 24 the evidence is, is they couldn't find a tax investor and the 25 deal was off and the question is when. You covered that.

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1 MR. RICHARD STEPHENSON: Well, and -- and 2 that -- 3 MR. COMMISSIONER: I think you said in June. 4 MR. RICHARD STEPHENSON: And I -- certainly, 5 I mean, there's an issue about, yeah, is there -- is it June 6 that it's off or is it later that it's off. But, I take it, 7 the bottom line is it's never on? You know, you never get a 8 positive report; is that fair to say, sir, on the tax deal? 9 That there's a -- 10 MR. COMMISSIONER: Well, when you say it's 11 never on, I think the evidence is clear that they were 12 looking for it. And Mr. Pelech's evidence was very strong 13 that he kept looking for it even though he probably knew it 14 was off. 15 MR. RICHARD STEPHENSON: Mr. Pelech's 16 evidence wasn't that he kept looking for it, he kept hoping 17 for it, I think, was his evidence. 18 MR. COMMISSIONER: Well, okay. Hoping for it 19 because he's not the salesman. He's not -- 20 MR. RICHARD STEPHENSON: Right. 21 MR. COMMISSIONER: -- going to do anything 22 about it. 23 MR. RICHARD STEPHENSON: No. But -- but 24 let's put it this way. As far as you were aware, MFP never 25 received a positive re -- and when I say positive, I simply

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1 mean encouraging response on the tax deal? 2 MR. COMMISSIONER: I'm not sure -- how is he 3 going to know whether any response was encouraging or not? 4 MR. RICHARD STEPHENSON: Well, Wright talks 5 to Pelech, Pelech talks to Robson. I think that's what he 6 said. 7 MR. COMMISSIONER: That's, about, a third 8 hand encouragement. I don't care -- 9 10 CONTINUED BY MR. RICHARD STEPHENSON: 11 Q: I just want to know what you know? And 12 if the answer is you don't know one way or the other, then 13 that's your answer, I don't know. 14 A: Yeah. I mean, I don't know one way or 15 the other. I guess that's my answer. 16 Q: Okay. Did you ever give the City, at any 17 time prior to September the 6th, a heads up? Saying, listen, 18 we're doing our best, we're beating the bushes, we've struck 19 out so far, you know, never say die. But, at the moment, it 20 ain't happening? 21 A: I think we covered that in my -- my -- 22 MR. COMMISSIONER: Well, just try and answer 23 the question. 24 THE WITNESS: Okay. 25 MR. COMMISSIONER: He's asking you if you

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1 could tell us if, up to September 6th -- 2 MR. RICHARD STEPHENSON: Yeah. Up to. 3 MR. COMMISSIONER: -- you had provided the 4 City with any kind of a heads up information that there was 5 no tax deal; had you? 6 THE WITNESS: No. 7 MR. COMMISSIONER: Okay. That's fine. Thank 8 you. 9 10 CONTINUED BY MR. RICHARD STEPHENSON: 11 Q: And, I guess, the question I have for 12 you, sir, is at this point in time the City is in the process 13 of making a variety of commitments with its contractors; you 14 know that? There was the grading tender and the -- 15 A: Yes, sir. 16 Q: -- main building tender and those were 17 coming down through May and June of 2000. You were all aware 18 of that? 19 A: Hmm hmm. 20 Q: Okay. Don't you think, sir, that it 21 would have been relevant to the City, as it's proceeding down 22 this pace and making more and more financial commitments to 23 have an update about either things are looking good or 24 they're looking bad or we simply don't know? 25 Isn't it -- wouldn't it have been important

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1 for the City to get that update? 2 A: The -- the dialogue with the City was 3 on-going as I think in my evidence. However, you 4 specifically asked about the tax piece and the Commissioner 5 is correct that until September the 6th we didn't have the -- 6 we did not give a definitive one way or the other. Other 7 than understanding that the marketing letter expired August 8 22nd. 9 The City, at the time, and MFP, were -- our 10 dialogue was about as you -- as we're aware of, the interim 11 financing pieces. Potential interim financing because 12 McCarthy Tetrault had indicated to us, and we'd indicated to 13 the City, that we're going to have a hard time leasing 14 nothing. 15 Q: Right. 16 A: In effect, that the park wasn't going to 17 be ready until September of 2001 played into those 18 discussions and certainly Mr. Ford raised with us his 19 alternatives, that he had other alternatives, as does any 20 municipality frankly. 21 Q: And, sorry, what -- what did he tell you, 22 sir? 23 A: He -- he -- he talked about just going to 24 the bank, and -- 25 Q: Well, and this is for your interim

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1 financing issue? 2 A: Well, the interim financing, understand, 3 Mr. Stephenson, potentially extended all the way to September 4 2001. 5 Q: Sure. Sure, but that was -- that's 6 qualitatively different than a -- than a long term, you know 7 -- ten (10) -- ten (10), twenty (20), thirty (30) year 8 financing, but I -- 9 A: But that gives you lots of time to run 10 another tender, and to say, guys, thanks for the effort. 11 Q: I'm hearing you, but we are talking -- 12 yeah, we're -- he has options, I -- the question I was asking 13 what about the options, I thought you meant options regarding 14 the long term financing, and -- 15 MR. WILLIAM McDOWELL: Now, wait a second, 16 you mean, your question was implicitly, he's signing up 17 contracts for the construction of the building, and the 18 answer is, well, he could have gotten bank financing to do 19 that. I think it's just -- his answer is actually right on 20 your question. 21 MR. COMMISSIONER: Whether it's long term or 22 short term, if you want to ask him that, you can ask him 23 that. 24 25 CONTINUED BY MR. RICHARD STEPHENSON:

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1 Q: What -- what I'm boiling down to, sir, is 2 my -- my question is this, is that you know that if you're 3 not able to line up a tax deal, then the deal that you're 4 going to be able to do for the City is going to be more 5 expensive. Simple, right? 6 A: We -- we know, the -- the -- 7 Q: Yeah, you know that. 8 A: We, meaning MFP, and -- 9 Q: Yeah, MFP knows that -- 10 A: -- CFO. 11 Q: Okay, and -- and through the course of 12 the summer, the City is entirely unawares of your 13 difficulties, or your lack of success in lining up a tax 14 investor, fair? 15 A: Fair. 16 Q: Okay. So, if they're going to do a deal 17 at the end of the day with you, was that -- once the tax deal 18 goes off the table, it's going to be more expensive. 19 Don't you think, sir, that it would have been 20 relevant and important for the City, as it's beginning to 21 make financial commitments, to understand that there's a -- 22 becoming a more and more real prospect that this financing is 23 going to be more expensive. 24 A: And, it was aware, on September the 6th. 25 Q: I understand that, but September the 6th,

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1 but, you know, how about -- how about June? How about June 2 15, June 30th? July 15? 3 A: All I think -- we didn't give up the 4 ghost even beyond September the 6th internally, as you know, 5 so. 6 Q: I understand that, but the window is 7 shrinking, sir. 8 A: But, you have to understand that we also 9 thought there'd be another window potentially opening, 10 because there was still an opportunity, as -- as Mr. Pelech, 11 as I'd mentioned, is -- is in therapy over, that that deal 12 still could have been a tax deal -- 13 Q: I understand that, sir, but you know, you 14 can only hold your breath for so long before you keel over. 15 A: Well -- well, from our perspective, the 16 -- the deadline, if you will, in our minds, again, this is 17 MFP speaking, would have been September of 2001, when the 18 park is effectively built. You just do -- I mean, the 19 traditional way, or re -- regular way is you do construction 20 financing, and then you get your -- your -- all your ducks in 21 a row, and do your final financing the following, when 22 everything's built. 23 Q: Okay. 24 A: That's -- that -- that would be the 25 normal way of pursuing this.

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1 Q: Okay. Okay, and so, from your 2 perspective, you didn't see anything unusual, or 3 inappropriate, or an -- imprudent about the City having made 4 its commitment to the trades, in effect, the contractors -- 5 A: No, sir. 6 Q: -- before the long term financing was in 7 place? 8 A: No. 9 Q: They -- that was de rigueur? 10 A: Sorry, that was -- 11 Q: That was -- that was -- in the ordin -- 12 in the ordinary course. That was what you'd become 13 accustomed to? 14 A: That was certainly something we'd seen 15 before. 16 Q: Okay. 17 18 (BRIEF PAUSE) 19 20 Q: Let me just go to August. We know that 21 in August of -- of 2000, Mr. Robinson's left MFP, and -- and 22 Ms. Britton is now at MFP, and she winds up, in effect, 23 picking up the file, right? 24 A: Yes, sir. 25 Q: Okay, and we've seen various notes, and

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1 I'm not going to take you to them, because I'm not going to 2 ask you any specifics, of meetings that involve, among other 3 people, you, and Ms. Britton, in the -- in the late August 4 time frame, right? 5 A: Certainly. 6 Q: Because you'll recollect, what you're 7 doing is, you're -- you've got a meeting scheduled with the 8 City on September the 6th, and you're beginning to work 9 internally, to -- to prepare, right? 10 A: Yes. 11 Q: Okay. And as you'd indicated, on 12 September the 6th, you gave Mr. Ford the -- your three (3) 13 options? 14 A: Yes. 15 Q: And I don't need to go through those. 16 But as I take it, when you're -- you're now getting to the 17 point, in -- in late August, where a -- the transaction has, 18 at least, a real potential of becoming very real, in 19 a reasonably foreseeable time frame, right? 20 A: Yes. 21 Q: And -- and indeed, you talked with the 22 City about, you had tentative closing dates all mapped out, 23 right? 24 A: Yes, correct. 25 Q: Literally circled the 25th of September

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1 in one (1) of the notes? It's maybe not you but one (1) of 2 the people did, anyway? 3 A: Yes, I had October the -- the next two 4 (2) anyways. 5 Q: Okay. I take it that, you get -- Ms. 6 Britton's new to the file? 7 A: Hmm hmm. 8 Q: And -- and relatively -- a relatively 9 inexperienced lawyer, I take it, in these kinds of 10 transactions. I think you've said that? 11 A: Yes. 12 Q: Fair? Okay. Now, I take it, you brought 13 her up to speed in that late August time frame, about what 14 the -- the status of the transaction was, and where you 15 anticipated it going, fair? 16 A: I think what we did with Karen, she was 17 very interested in understanding the deal because it was her 18 first. 19 Q: Right. 20 A: So we -- we tried to give her some 21 material to reference from -- 22 Q: Right. 23 A: -- so we gave her similar deals. 24 Q: You might even be more fulsome than usual 25 because of that, in your --

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1 A: Oh, in the description? I don't know, I 2 think we gave her more, you know, reference type stuff. 3 Q: Okay. 4 A: Just to help her. 5 Q: And -- and I take it that what you would 6 have said to her is, listen, we've got this meeting on 7 September the 6th. And frankly, we're not 100 percent 8 certain where this transaction is going to go after that, 9 because there's some important decisions that have to be 10 made. 11 And essentially, the issue for the City is 12 going to be that, you know, that so far, we've not been able 13 to get the tax investor, so they're going to have these 14 options, one (1), two (2), three (3), and we're going to -- 15 they'll have to make a decision and we'll have to react and 16 respond and go from there. Is that a fair analysis of what 17 you would have -- the kind of thing you would have told her? 18 A: No, what -- what was -- what was 19 happening September the 6th, onwards, effectively, was a -- a 20 series of -- of events. A series beginning September the 6th 21 when Clarica was introduced as, you know, the money-over- 22 money player and that was the only deal, at that point, that 23 we could -- we could offer up because the tax deal was dead. 24 Q: Yes. Sorry, Mr. Robson, I just want to 25 be clear. I'm not actually asking you what happened after

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1 September the 6th, but I'm now thinking, you're looking 2 forward toward September the 26th, and advising Ms. Britton 3 as to what might happen thereafter? 4 A: The 26th? 5 Q: I'm sorry, September the 6th. Okay? 6 A: Okay. 7 Q: You're at -- you're in the end of August, 8 you're preparing for September the 6th, you're meeting with 9 Ms. Britton, you're give -- you know, she's new on the file. 10 And what I want to find out is, the nature of the -- the 11 presentation or discussion you would have had with her, as to 12 where this things going? 13 MR. COMMISSIONER: If any. 14 MR. RICHARD STEPHENSON: Well, we -- we know 15 there was a discussion about that because we've seen the 16 notes. I just -- I just want to get -- 17 MR. COMMISSIONER: Well, let's find out -- 18 MR. RICHARD STEPHENSON: -- Mr. Robson's take 19 on it. 20 THE WITNESS: Can I look at the notes, or is 21 it -- 22 MR. COMMISSIONER: Sure you can. 23 MR. RICHARD STEPHENSON: Sure. Sure, by all 24 means. And frankly -- 25 THE WITNESS: -- help me. It's just --

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1 MR. RICHARD STEPHENSON: Frankly, there isn't 2 much, and that's why I'm -- 3 THE WITNESS: Oh, okay. 4 MR. COMMISSIONER: Well, let's let him 5 interpret his notes. 6 MR. RICHARD STEPHENSON: Sure. 7 THE WITNESS: Which -- which tab, sir? 8 MR. RICHARD STEPHENSON: Yes. Bear with me. 9 10 (BRIEF PAUSE) 11 12 MR. COMMISSIONER: Volume 5. 13 THE WITNESS: Volume 5. 14 MR. COMMISSIONER: Yes. Tab 71, I think. 15 MR. RICHARD STEPHENSON: No, 71? No, that's 16 his diary. 17 MR. COMMISSIONER: That's what it is, that's 18 where he keeps his notes. Is that right, sir? 19 THE WITNESS: Yes, very much so. 20 21 (BRIEF PAUSE) 22 23 MR. RICHARD STEPHENSON: It's Ms. Roberts 24 that has the notes, and it's in her exhibit, which is Exhibit 25 100, so, just bear with us.

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1 (BRIEF PAUSE) 2 3 MR. RICHARD STEPHENSON: Yeah. Tab 32, 4 Exhibit 100 is one set. 5 MR. COMMISSIONER: I don't know if they help 6 or not. We'll find out. 7 MR. RICHARD STEPHENSON: And then -- 8 MR. COMMISSIONER: Do you have Exhibit 100 9 there? 10 THE WITNESS: I'm sorry, I was -- 11 MR. RICHARD STEPHENSON: Also exhibit -- Tab 12 33 in Exhibit 100. 13 THE WITNESS: Okay. Carmen Roberts. Which 14 tab again? 15 MR. RICHARD STEPHENSON: Thirty-two (32) and 16 thirty-three (33)? 17 THE WITNESS: Okay. 18 MR. COMMISSIONER: I guess we're assuming 19 that Carmen Roberts was privy to discussions had between Mr. 20 Robson and Ms. Britton? 21 MR. RICHARD STEPHENSON: Well, we know that 22 because we've actually covered this already in the evidence. 23 MR. COMMISSIONER: Well, not sure we covered 24 the -- 25 MR. RICHARD STEPHENSON: And there may --

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1 MR. COMMISSIONER: -- discussions about where 2 this deal is headed. 3 MR. RICHARD STEPHENSON: And, indeed, I don't 4 know. He may have had other conversations with Ms. Britton 5 as well. I'm just refreshing -- sending him here because he 6 wanted to see the notes. 7 MR. COMMISSIONER: Okay. 8 MR. RICHARD STEPHENSON: But, certainly, 9 August 30th at Tab 33 you've got a meeting, 10 "Sandy, Bo, Leanne Fraser, Karen Britton, 11 conferenced in Dave and Suzanne" 12 MR. COMMISSIONER: Well, it may be that if 13 you look at Tab 32 on September the 6th they're talking about 14 the September 6th meeting. 15 MR. RICHARD STEPHENSON: Absolutely, yeah. 16 MR. COMMISSIONER: That they're going -- I 17 don't know who was meeting, but Karen was supposed to be 18 introduced to Bill. I presume that's Bill White. 19 MR. RICHARD STEPHENSON: Yeah. And these are 20 -- I think the evidence has been that these are -- are 21 objectives being set for the September 6th meeting from MFP's 22 perspective but this is actually recording a meeting earlier 23 on. 24 MR. COMMISSIONER: That's right. 25 MR. RICHARD STEPHENSON: And -- and if you go

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1 to Tab 34 there's additional notes and these ones are from 2 August 31 involving 3 "Bo, Dave, Karen, Jerry and Carmen" 4 MR. COMMISSIONER: Okay. Well, okay. Let's 5 let the witness have a look at those three tabs and maybe he 6 can answer your question. The question being, what 7 conversations did you have with -- 8 MR. RICHARD STEPHENSON: Ms. Britton. 9 MR. COMMISSIONER: -- Ms. Britton to get this 10 deal on the road? That's the question. You can look at 11 those notes and see if they help you. 12 13 (BRIEF PAUSE) 14 15 THE WITNESS: Okay. Now, do I -- do I know 16 if Karen was in the August 24th meeting? 17 MR. RICHARD STEPHENSON: I don't think we 18 know that. 19 MR. COMMISSIONER: No. We don't. 20 MR. RICHARD STEPHENSON: I don't think we 21 know that for sure although it's clear that it appears that's 22 one of the -- one of the objectives discussed at that meeting 23 was introducing Karen to Bill. Doesn't mean Karen's there. 24 THE WITNESS: Okay. 25

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1 CONTINUED BY MR. RICHARD STEPHENSON: 2 Q: But, on the other two (2) meetings, it 3 does appear she is there? 4 A: Okay. Yeah. I mean, I can -- I can 5 tell you what -- what I believe was being discussed based on 6 the August 30, Tab 33 note, which gets back to your point, 7 Mr. Stephenson, about urgency or lack thereof. What -- 8 what's -- where it says 9 "Waterloo" 10 With a circle -- 11 Q: Yes. 12 A: And then it says 13 "The contingency fund of 2.1 million" 14 If you go down to 15 "Give Clarica draft, then give the client, 16 we can get agreement down to twenty (20) 17 pages, but a one (1) page prom note will be 18 a little harder." 19 Q: Right. 20 A: "Karen said." That's discussing the 21 interim financing -- 22 Q: Yes. That's what we understand. 23 A: -- from September 1, effectively, or 24 September of 2000, to September of 2001. So, that just gets 25 back to that -- that -- your comment about how -- how were

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1 they going to pay for the construction without the long term 2 instrument in place. 3 Q: Yeah, and -- and if I can, just -- just 4 while we're on that point, and it's at the next Tab of the -- 5 the -- the famous you can't lease nothing line appears. 6 A: Oh, okay. 7 Q: But, I take it that McCarthy's -- or -- 8 or, well, let's put it this way. Either McCarthy -- MFP 9 didn't accept McCarthy's deal, or McCarthy changed their 10 view, because of course, at the end of the day, that's 11 exactly what you did do, right? You did enter the head lease 12 sub lease in September, notwithstanding the fact that it 13 wasn't complete. 14 You changed your mind on that issue, is that 15 fair? 16 MR. WILLIAM McDOWELL: Well look, let's not 17 get into the advisable. It was done -- 18 MR. RICHARD STEPHENSON: Well, we -- yeah, 19 but, how -- what -- for whatever reason, MFP satisfied 20 itself, that in fact, you can lease nothing, however it did 21 so, because that's what you did, right? 22 MR. COMMISSIONER: No, I don't think they 23 were leasing nothing at that point. 24 MR. RICHARD STEPHENSON: Well -- 25 MR. COMMISSIONER: This place is half built

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1 by then. 2 MR. RICHARD STEPHENSON: I understand that, 3 but there wasn't -- it wasn't appreciably more built between 4 August the 31st, and September the 25th. 5 MR. COMMISSIONER: It's quite a bit built by 6 August, by the looks of it. 7 MR. RICHARD STEPHENSON: That -- that's what 8 I mean, but whatever the state of play was in August 30th, it 9 wasn't all that much different three (3) weeks later. 10 MR. COMMISSIONER: Maybe not. 11 12 CONTINUED BY MR. RICHARD STEPHENSON: 13 Q: Anyway, I -- let me just boil it down to 14 you, Mr. -- Mr. Robson, here's my question for you. 15 You're going to go to the meeting on September 16 the 6th, and you're going to have to put to Mr. Robson -- or, 17 sorry, Mr. -- Mr. Ford, you know, some bad news, in effect, 18 and as you say, as a -- as a good marketing person, when you 19 -- you're delivering bad news, you like to be able to give 20 options. 21 You're going to give him the three (3) options 22 that you referred to, and each of those three (3) options 23 will result in -- in different exercises from MFP's 24 perspective as well, right, in terms of the activity that it 25 would -- MFP would have to undertake, is that fair?

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1 A: Yes. 2 Q: And, I'm assuming that for Ms. Britton, 3 certainly, and perhaps for the others, you would be letting 4 them know that, listen, this is an important meeting on 5 September the 6th, we're going to have to put the Cit -- to 6 the City they're three (3) options, and frankly, we're not 7 sure what they're going to do, but depending upon what 8 they're going to do, we're going to have vastly different 9 levels of activity on this file. 10 I take it, that -- that was the kind of thing 11 that you discuss with these folks? 12 A: No, I don't -- I -- I can't say that I 13 did. The reason being that Karen, in -- in all due respect, 14 was junior on the legal side, and -- and Carmen junior on the 15 -- on the analyst side, so I -- I wouldn't necessarily take 16 them through all the different options, because I think I've 17 -- I've talked to you about -- or, it's in my evidence, a lot 18 of the stuff we did with Carmen was instructional in nature, 19 so when you go -- 20 MR. COMMISSIONER: We're talking about Karen. 21 THE WITNESS: Carmen, oh, sorry. 22 MR. COMMISSIONER: We were talking about 23 Karen. 24 THE WITNESS: Oh, sorry. 25 MR. COMMISSIONER: What did you tell Karen?

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1 THE WITNESS: Oh but -- oh, okay, but Carmen 2 was in these meetings. 3 MR. COMMISSIONER: Yes, she was there, yes. 4 THE WITNESS: So -- 5 MR. RICHARD STEPHENSON: We're only really 6 interested in Karen. 7 THE WITNESS: I probably wouldn't go into it 8 in that form, because it would just chew up a lot of -- a lot 9 of time. 10 11 CONTINUED BY MR. RICHARD STEPHENSON: 12 Q: And -- and I guess the difficulty I'm 13 having with this, is that, you know, she's -- she's your 14 lawyer, right? 15 A: Hmm hmm. 16 Q: And, you know, depending upon the 17 decision that's going to get made in -- on September the 6th, 18 and in the days following, she's either going to be very, 19 very busy on this transaction, or she's going to be downing 20 tools, and doing very little, indeed. Fair? 21 A: Fair enough, sure. 22 Q: And, I -- it just would seem natural to 23 me that when you're discussing the upcoming meeting, that you 24 would be laying that out for her. 25 A: No, but --

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1 Q: Say, clear the decks, because this 2 thing's going to be coming down the pipe, but there's a real 3 prospect that it might not happen at all? 4 A: No, but September the -- until we 5 received the dates from the client, we didn't know how long 6 the fuse was, I mean it was the client that -- that said 7 September 25th is what we're going to do, and that was posted 8 to the September 6th meeting, because it was in the September 9 6th meeting when those dates came up. 10 So, prior to September the 6th, we weren't in 11 the hurry up offense at all. 12 Q: So you had no inkling at the end of 13 August, that they're looking for a end of September time 14 frame closing. Is that your evidence? 15 A: That's my evidence, yes. And I think -- 16 well, that's my evidence. There's lots of reasons. 17 18 (BRIEF PAUSE) 19 20 MR. COMMISSIONER: Are you going to something 21 else? 22 MR. RICHARD STEPHENSON: Yes, I actually was 23 about to move to another area. 24 MR. COMMISSIONER: Are you going to be -- the 25 new area you're going to, is something you can finish in five

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1 (5) minutes? 2 MR. RICHARD STEPHENSON: No. 3 MR. COMMISSIONER: Okay. We are in recess. 4 MR. RICHARD STEPHENSON: Thank you, Mr. 5 Commissioner. 6 7 (WITNESS RETIRES) 8 9 MR. COMMISSIONER: We'll recess until eleven 10 o'clock on Monday. Thank you. 11 THE REGISTRAR: The City of Waterloo Judicial 12 Inquiry now stands adjourned until Monday morning at 11:00 13 a.m. for continuation. 14 15 --- Upon adjourning at 3:57 p.m. 16 17 Certified Correct 18 19 20 __________________________ 21 Wendy Warnock 22 Court Reporter 23 24 25