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 November 19th, 2002 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             )
  8  Ruth Holtham     (np)      )
  9  
 10  Chris Paliare              )City of Waterloo
 11  Richard Stephenson         )
 12  Edward Majewski  (np)      )
 13  
 14  Wayne Bumstead             )John Ford
 15  
 16  Robert Fleming             )Coalition
 17  Paul Berger                )
 18  Barry MacCormack (np)      )
 19  
 20  Kirk Stevens               )Clarica
 21  Paul Alexander             )
 22  Melanie Schweizer (np)     )
 23  
 24  Elaine Nairne              )Registrar
 25  Wendy Warnock              )Court Reporter

1 TABLE OF CONTENTS 2 Page No. 3 4 John Ford, Resumed, 5 Questions on Behalf of Coalition by 6 Mr. James Caskey 4 7 Cross-Examination by 8 Mr. Wayne Bumstead 108 9 10 Certificate of Transcript 208 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

1 --- Upon commencing at 10:13 a.m. 2 3 THE REGISTRAR: The City of Waterloo Judicial 4 Inquiry is now resumed. Please be seated. 5 MR. COMMISSIONER: Good morning, ladies and 6 gentlemen. 7 I want you to know, I'm happy to be here. 8 Happy to be anywhere. Thanks to the very talented people in 9 the Cardiac Care Unit at St. Mary's and at University 10 Hospital in London, I will probably outlast most of you. 11 It seems there's some interest generated in 12 the state of my health, in the newspaper anyway, and for that 13 I'm grateful. But I can tell you that the procedures in 14 clearing out one of my arteries was successful and -- and I 15 don't seem to have any other problems. And it's a miraculous 16 thing to experience, and I don't recommend it, but it's a 17 wonderful thing to have happen when you need it. 18 So, as I said, I'm very, very happy to be here 19 and to continue. And I just want to let you know that the 20 state of my health is fine and I don't look towards any 21 further delays in the process. We'll carry on. Thank you. 22 Mr. Caskey...? 23 MR. JAMES CASKEY: Thank you, Mr. 24 Commissioner. On behalf of all of us, sir, how delighted we 25 are that you -- you have come through this so magnificently,

1 and you are so well. So, from all of us here, 2 congratulations on that, sir. 3 MR. COMMISSIONER: Thank you. 4 MR. JAMES CASKEY: If I may, sir, introduce 5 to you Mr. Linton, he's seated over here. He's appearing on 6 behalf of Mr. White. And when we get to that stage in -- 7 MR. COMMISSIONER: Mr. White. 8 MR. JAMES CASKEY: -- in the proceedings, he 9 will participate. I think everyone else, you're familiar 10 with, here, is at the table. 11 MR. COMMISSIONER: Thank you. 12 MR. JAMES CASKEY: Mr. Commissioner, we're at 13 the stage where there are questions from the Coalition, of 14 Messrs. Fleming, Berger and MacCormack. And these come, at 15 this point in time, to allow Mr. Ford and his counsel to -- 16 to wrap up with their questions. So these are not the final 17 examinations, they're the Coalition's questions of Mr. Ford, 18 following which Mr. Bumstead will be able to -- to wrap up 19 with Mr. Ford, as his counsel. 20 MR. COMMISSIONER: Is that satisfactory, Mr. 21 Bumstead? 22 MR. WAYNE BUMSTEAD: Yes, it is. 23 MR. JAMES CASKEY: Thank you. 24 MR. COMMISSIONER: Thank you. 25 MR. JAMES CASKEY: Mr. Ford...?

1 2 JOHN FORD, Resumed; 3 4 MR. JAMES CASKEY: Mr. Commissioner, I would 5 indicate to you that on behalf of the Coalition, the first 6 question is perhaps Phase 2, but if Mr. Ford answers it now, 7 we may be able to avoid bringing Mr. Ford back, which is why 8 it's number 1 on the list. And it -- it really deals with 9 some of the financial aspects, but -- but I think it's one 10 that, then we don't have to have Mr. Ford back. 11 The remaining questions, the Coalition wants 12 you to know, have been prepared sequentially. And -- and if 13 they are appropriate in your view, and -- and constitute 14 something that will assist this Commission, you should allow 15 us to go through with those questions in the sequence in 16 which they appear, because they tend to build one (1) on the 17 other. 18 MR. COMMISSIONER: All right. 19 MR. JAMES CASKEY: Having made those 20 observations, Mr. Ford, I would ask you these questions on 21 behalf of the Coalition. 22 23 QUESTIONS ON BEHALF OF THE COALITION BY MR. JAMES CASKEY: 24 Q: Of the $7 million in donations to finance 25 this project, was any of it donated to the City, in the form

1 of stock options? 2 A: I'm not familiar with all of the forms of 3 fundraising that were presented to the municipality, but I 4 believe that a portion of the fundraising was, indeed, a 5 stock option. 6 Q: Did the $2 million that Research in 7 Motion donated to the City form part of the $7 million? 8 A: To my knowledge, yes, that's what the 9 City was advised from the fundraising committee. 10 Q: Did any of this donated $2 million come 11 in the way of a stock option? 12 A: My understanding, from the -- the 13 fundraising committee, was that -- that -- I'm not sure 14 whether I'd say all of that donation was by way of a stock 15 option, but a portion of it -- I would perhaps say a goodly 16 portion of it, was a stock option. 17 However, that was never -- I was never -- in 18 dealing with that, first hand, that was the advice from 19 the -- the fundraising committee. 20 Q: If that stock option had been, in fact, 21 converted into cash, when did the stock option get converted 22 into cash to finance the project? 23 A: Prior to my departure from the City, it 24 had not been converted. And I don't know if, subsequently, 25 it's been converted, I have no knowledge of that.

1 Q: Mr. Ford, we know that the City of 2 Waterloo had discussions with MFP concerning financing the 3 First Gulf Downtown Redevelopment Project, the downtown 4 parking facility and the library project. I think that is 5 correct? 6 A: That is correct, sir, yes. 7 Q: These projects never materialized, nor 8 did their financing; that's correct -- through MFP? 9 A: Through MFP that is correct. The -- the 10 Downtown Project or the Uptown Project has materialized in -- 11 in some fashion but not the fashion that was originally 12 contemplated. 13 Q: All right. 14 A: And the fin -- but the financing did not 15 occur for those projects. 16 Q: Notwithstanding that it wasn't through 17 MFP, is it fair to say that some of the RIM Park MFP 18 financing arrangements loosely flowed, almost seamlessly, 19 from these earlier financing discussions with MFP without a 20 clearly understood demarcation point regarding the financing 21 promises and the financing expectations? 22 A: I'm going to have to get you to give me 23 that one again please, sir. 24 MR. COMMISSIONER: Not sure I understand the 25 question either. Maybe you might have to confer with

1 Mr. Fleming about that. My -- my understanding is what is -- 2 what is meant by the demarcation point reference with respect 3 to the financing promises and the financing expectations by 4 whom. I just don't quite understand the question. 5 Maybe Mr. Fleming could -- you can speak with 6 him for a minute, he might be able to clarify for me. 7 MR. JAMES CASKEY: Yes. Thank you. 8 9 (BRIEF PAUSE) 10 11 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 12 Q: I think the essence, Mr. Ford, of it is, 13 in your discussions with relation to this project here, of 14 the Millennium Project or the RIM Park and the discussions 15 with First Gulf, was there a clear delineation or a clear 16 demarcation between those two (2) projects or those three (3) 17 projects so that one could know where one started and one 18 stopped and what representations were made in relation to 19 some projects and in relation to this project? 20 Was there any clearly defined demarcation 21 between them so that you'd know whether you were talking 22 about one or the other? 23 MR. COMMISSIONER: Which three (3) -- which 24 three (3) which -- one of the three (3) -- 25 MR. JAMES CASKEY: The projects are the

1 Downtown Parking Facility, the Library Project and the 2 Redevelopment Project. 3 MR. COMMISSIONER: All right. Thank you. 4 THE WITNESS: I would say that, yes there was 5 -- at least in my mind there was a very clear understanding 6 as to where one began and the other one -- where one began 7 and ended and the other one began and ended. 8 Any discussions -- there were -- there were I 9 think one or two meetings where I attended where we spoke 10 about both projects, but they weren't co-mingled. They were 11 dealt with or spoken about separately and it -- I would say 12 that the answer is yes, that there was a clear understanding 13 of the difference between -- amongst the three (3) of them. 14 15 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 16 Q: Were there any documents that -- that 17 were put forward by anybody that clearly demonstrated those 18 -- those lines of demarcation? 19 A: I believe there was a letter written to 20 Mr. Stockie, it was a draft. I don't recall if there was a 21 final signed copy of that document but there was a draft of a 22 letter written to Mr. Stockie with respect to, I believe, the 23 interest rate and some other preliminary conditions. 24 With respect to the Library Project, I don't 25 believe there was any written documentation. I think there

1 may have been some memos or e-mails back and forth requesting 2 information about the Library, as I recall. But I don't 3 recall that there was any -- anything that would constitute 4 an offer or a proposal with respect to the Library. 5 MR. COMMISSIONER: I take it from what you're 6 saying, Mr. Ford, that the RIM Park project was considered, 7 at least by you, as an independent project unrelated to the 8 Downtown Project or the Library Project or anything else? 9 THE WITNESS: That would be fair, sir, yes, 10 that's correct. There was discussion about the other 11 projects, but, there was never any discussion they would be 12 combined and it was very clear to me that they were 13 peripheral to the Rim Park Financing issue. 14 15 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY 16 Q: I take it Mr. Ford, that -- that they were 17 ones that might be an incentive in the future to a continued 18 relationship with the City? 19 A: That may be a fair comment, sir. I think 20 that when we started out the first discussions with MFP that 21 they were focussed around the uptown parking structure. But 22 those -- that project and this project were running pretty 23 well concurrently. 24 And the uptown project -- I don't know whether 25 I want to use the word, stalled, but, it was -- it was taking

1 a longer time to come to -- come to fruition. 2 And so, it got kind of put on the side burner, 3 if you will, the discussions with MFP and we continued 4 primarily with the discussions with respect to this facility. 5 And there was an expectation that, at some 6 point in the future, if some financing vehicle was required 7 for the uptown redevelopment, we would certainly be 8 discussing that with MFP. 9 Q: All right. September 25th, 2000 there was 10 an in-camera meeting before there was the meeting that was 11 held at which the bylaws were passed authorizing the 12 execution of the head lease and the sub lease? 13 A: Yes, sir. 14 Q: What is your recollection of your 15 activities on the 25th of September, what all were you doing 16 that day by way of getting ready for that in-camera meeting 17 and for that meeting? 18 A: With respect to getting ready for the 19 in-camera meeting, I don't believe I had much to get prepared 20 for, for the in-camera meeting, inasmuch as there was, to my 21 recollection nothing dealing with finance, on the -- for that 22 in-camera meeting. 23 So, I would have done very little to be 24 prepared for that in-camera meeting, inasmuch as there was 25 nothing I needed to deal with.

1 With respect to the bylaws that were being 2 passed at that meeting, or proposed to be passed at that 3 meeting, and the agreements that were attached to those 4 bylaws, I probably spent the majority of the day either with 5 Mr. White, or tracking down the final schedules and things 6 that had to be attached to those schedules -- or I'm sorry -- 7 to those agreements. 8 Q: All right. And did you keep detailed 9 notes of your activities on that day, or is it primarily just 10 your recollection that you're giving us? 11 A: There are some -- I have some notes, but, 12 most of it is my recollection. 13 Q: Right. 14 A: And the recollection is based upon the 15 notes that I do have. 16 Q: What interaction did you have with Mr. 17 Stockie that day? 18 A: I may have -- I don't recall specifically 19 what I spoke with Mr. Stockie on that day, but, I may have 20 spoken to him with respect to the fact that the final 21 schedules had not yet been received and we were waiting for 22 them to be received. 23 But, I don't recall having any -- any specific 24 discussion apart from something like that. 25 Q: Was there any discussion with Mr. Stockie,

1 either that day, or before that time, that -- that the sub 2 lease payments would come in the form of a formula? 3 A: I don't -- I don't recall whether I 4 advised Mr. Stockie, one way or the other, as to how the 5 repayment -- or how the payments would be calculated. 6 I may have discussed it with him, but, I don't 7 specifically recall having done that. 8 Q: All right. Then you go to the in-camera 9 meeting and you say, you didn't have any -- much a part to 10 play, that was at six o'clock. At the time that you went 11 into that meeting, did you have the final schedules for the 12 head lease and the sub lease -- all the schedules? 13 A: I did sir, yes. 14 Q: And what did you do with them? 15 A: I believe I gave them to Mr. Dobbs? 16 Q: Right. At the start of the in-camera 17 meeting? 18 A: Yes, sir. 19 Q: All right. And, then I take it, they were 20 in his possession from that point in time, on, as far as you 21 knew? 22 A: As far as I know, yes. 23 MR. COMMISSIONER: Were those the final -- 24 the final documents, Mr. Ford? I recall there's some 25 evidence that -- that the initial schedule that had been

1 forwarded by MFP, had some error in it or wasn't quite 2 correct, and it had to be adjusted. 3 And the one you're talking about now, is that 4 the -- the initial one, before the -- before the adjustment? 5 THE WITNESS: No, sir, that would be the 6 final one that was received with the correction on it. 7 MR. COMMISSIONER: Okay. And so that would 8 be just at the -- at the in-camera meeting, just before 9 the -- before the council meeting, itself? 10 THE WITNESS: That's correct, sir, yes. 11 MR. COMMISSIONER: What about the -- the 12 Coalition has indicated the desire to have put in place 13 the -- for the purpose of this Inquiry, the minutes of that 14 in-camera meeting. I'm not sure that -- that that's 15 appropriate because I don't know what's in the -- in the 16 minutes, myself. 17 What view did you -- you don't have access to 18 those minutes, I take it? 19 THE WITNESS: No, I don't, sir. 20 MR. JAMES CASKEY: All right. Perhaps -- 21 MR. COMMISSIONER: Thank you. 22 MR. JAMES CASKEY: -- Mr. Stephenson -- 23 MR. RICHARD STEPHENSON: Mr. Commissioner, if 24 I can assist on this. I have seen the minutes and I can tell 25 you that there is no reference to this issue, at all, in

1 them. As Mr. Ford indicated, this was not an agenda item 2 before the -- before Council, at the in-camera. And you've 3 heard from Mr. Ford precisely what was or wasn't said, at the 4 in-camera, about this. 5 But, within the minutes themselves, which are 6 very brief, there is no reference to MFP, to RIM Park, to 7 financing, at all. There are other matters which are 8 unrelated to anything dealing with this Inquiry. 9 MR. JAMES CASKEY: My associate, Ms. Hocking, 10 indicates that she, too, shares the view of Mr. Stephenson. 11 However, the Coalition would like you, Mr. Commissioner, to 12 review those minutes, yourself, to satisfy yourself that that 13 representation is, in fact, correct. 14 MR. COMMISSIONER: Well, I suppose we could 15 do that when Mr. Dobbs is -- when Mr. Dobbs is testifying. 16 MR. JAMES CASKEY: Thank you. 17 MR. COMMISSIONER: All right. 18 MR. WILLIAM McDOWELL: There's something that 19 I probably should have raised with Mr. Caskey before we 20 began, but in Mr. White's witness summary there is reference 21 to a rather relevant minute -- or rather relevant quotation 22 in the in-camera meeting. I will just show it to Mr. Paliare 23 and Mr. Stephenson. 24 And this is something that I think, in 25 fairness, should be put to Mr. Ford at some point during the

17
  1  testimony, whether it be re-examination, or otherwise.  It's
  2  just come to our attention and --
  3                 MR. COMMISSIONER:   Well, I think Mr. Caskey
  4  should look at that --
  5                 MR. JAMES CASKEY:   Yes, sir.
  6                 MR. COMMISSIONER:   -- and decide whether he
  7  wants to do it now.  
  8  
  9                       (BRIEF PAUSE)
 10  
 11                 MR. RICHARD STEPHENSON:    Mr. Commissioner,
 12  I'd like you to come back to the issue of the -- the
 13  September 25 in-camera minute.  The City doesn't have any
 14  difficulty with you seeing the -- the September 25 in-camera
 15  minute.  But almost by definition, the City does not want
 16  those minutes to become part of a public record, because they
 17  are in-camera, and -- and they were designed -- those are
 18  matters which are not properly part of the public record. 
 19                 And -- and to the extent that they dealt with
 20  a matter before the Inquiry, then they would have no
 21  objection to that part of them being made public.  But with
 22  respect to matters which are irrelevant to the Inquiry, 
 23  the -- the City, I think quite properly, does not want that
 24  to become part of the public record. 
 25                 MR. COMMISSIONER:   That's why I raised the

1 question, myself. But -- but Mr. McDowell has raised a -- 2 raised an issue that I'm not sure -- 3 MR. RICHARD STEPHENSON: And -- and -- and 4 to be clear that Mr. Mc -- the issue that Mr. McDowell 5 raised, does not relate to the September 25 in-camera 6 meeting. 7 MR. JAMES CASKEY: Right. Yes. It's -- it's 8 an in-camera meeting, but it's not the September 25th in- 9 camera meeting. 10 MR. WILLIAM McDOWELL: Oh, I agree. I just 11 -- I just raised it now, before we -- Mr. Ford -- 12 MR. JAMES CASKEY: Right. Yes. 13 MR. COMMISSIONER: What in-camera meeting is 14 it about? 15 MR. WILLIAM McDOWELL: I assume June 2001. 16 But there's statements attributed to Mr. Ford. And in 17 fairness, if there's a minute of it, it should form part of 18 the Inquiry. Or part of the record. 19 MR. COMMISSIONER: Well, is it relevant to -- 20 to the dealings between the City and MFP? 21 MR. WILLIAM McDOWELL: Yes. I think we all 22 agree that it is. 23 MR. COMMISSIONER: Well, can you help me, Mr. 24 Caskey? 25 MR. JAMES CASKEY: Well, the point of the

1 Coalition is, if some in-camera matters are relevant to this 2 hearing, why aren't all in-camera matters relevant to this 3 Hearing? 4 MR. COMMISSIONER: Well, that -- that does 5 not follow and does not flow. If they're -- if it's got 6 nothing to do with the subject matter that this Inquiry is 7 undertaking to investigate, then I don't see why we need to 8 trouble ourselves about it. But if, on the other hand, it -- 9 it does have some bearing on the subject matter, maybe I 10 should have a look at it. 11 MR. JAMES CASKEY: And determine whether or 12 not it's relevant. 13 MR. COMMISSIONER: And determine whether or 14 not it's relevant. If it's not relevant it's not going in; 15 if it is relevant, we'll deal with it. 16 MR. JAMES CASKEY: That's satisfactory, sir. 17 MR. COMMISSIONER: Now, Mr. McDowell has 18 suggested that this is something that should be addressed by 19 Mr. Ford. 20 MR. WILLIAM McDOWELL: Probably not right 21 this minute, but I'm just alerting you, sir, and Commission 22 Counsel that it's a rather important statement attributed to 23 Mr. Ford. If there's -- if that's recorded somewhere in the 24 in-camera minutes then, in fairness, it should -- 25 MR. COMMISSIONER: What's the date of the in-

1 camera meeting? 2 MR. WILLIAM McDOWELL: It's not dated in the 3 statement. It's -- so you're not in the dark, I'm happy to 4 hand up my copy of the -- 5 MR. COMMISSIONER: Well, is it something that 6 -- is this something that arises out of -- out of the 7 investigatory statement made by Mr. White? 8 MR. WILLIAM McDOWELL: It's a new statement 9 of Mr. White, let's put it that way. 10 MR. COMMISSIONER: All right. Well, why 11 don't we deal with that when Mr. White's -- 12 MR. JAMES CASKEY: Except for the fact that 13 -- that Mr. White is relating what Mr. Ford had said and 14 Mr. Ford should be given the opportunity to either confirm or 15 deny, at this point in time, that that is, in fact, what was 16 said at that meeting. 17 MR. COMMISSIONER: Okay. Let me have a look 18 at it. 19 20 (BRIEF PAUSE) 21 22 MR. COMMISSIONER: The commentary that you -- 23 Mr. McDowell is referring to is -- is repetitious of what -- 24 what Mr. Ford's already told us and I don't see any 25 particular problem with it coming back in subject to --

1 subject to Mr. White adopting the -- the unsworn statement -- 2 MR. JAMES CASKEY: Right. 3 MR. COMMISSIONER: -- he's made here in this 4 -- in this alleged in-camera meeting. The problem I've got 5 is I'm not sure when that meeting was held and the commentary 6 refers to a time when Mr. White was at "an in-camera meeting 7 after this happened". I don't know what "this" is unless it 8 happens to be the -- the Maple Leaf Hockey game. 9 If that's what we're -- what we're talking 10 about, that's fine. Mr. Linton, can you shed any light on 11 the subject matter on behalf of Mr. White? 12 MR. DAVID LINTON: Yes, Mr. Commissioner, it's 13 my understanding that this meeting was not a meeting that was 14 held in proximity to a Maple Leaf hockey game, rather, it was 15 a meeting that was held in June of 2001. 16 MR. COMMISSIONER: When? 17 MR. DAVID LINTON: June of 2001. 18 MR. COMMISSIONER: June of 2001. 19 MR. RICHARD STEPHENSON: Yes, and as we know 20 the Leaf's never play hockey in June. 21 MR. COMMISSIONER: -- the way the NHL is, they 22 seem to never quit. 23 MR. JAMES CASKEY: Unfortunately, they go on 24 without the Leafs. 25 MR. COMMISSIONER: Okay, so it appears that

1 the reference is to an in camera meeting in June of 2001? 2 MR. DAVID LINTON: Yes, sir. 3 MR. COMMISSIONER: Okay, if you want to put it 4 in that context, you can ask Mr. Ford. 5 6 CONTINUED BY MR. JAMES CASKEY: 7 Q: Yes, Mr. Ford, I'll read you this and then 8 you can say whether or not it's accurate. It comes from Mr. 9 White's summary, if you will, and it says: 10 "Mr. White was at an in-camera meeting 11 after this happened" 12 And by "this" undoubtedly meaning the 13 revelation about the financing. 14 "At the first in-camera meeting when 15 Council was advised of the problem, Mr. 16 Ford stood up and took the whole blame. 17 Mr. Ford said he blew it and it was all his 18 fault. Mr. Ford said he just got the 19 schedules at the last minute and never 20 checked them. Mr. Ford said he trusted the 21 people like they were his brothers. Mr. 22 White thought was big of Mr. Ford at that 23 time. Mr. Ford just took the full blame 24 for it at that time. Mr. White never 25 admired Mr. Ford so much as that, when he

1 stood up and he didn't hedge at all. Mr. 2 Ford didn't say anybody else should have 3 checked it, he just said, he blew it." 4 Those are the statements made by Mr. White, 5 and the question is whether or not that's an accurate 6 portrayal of what happened at that meeting, or whether you 7 would take issue with it? 8 A: I believe I recall the meeting and I'm not 9 sure that I used the word, I take full blame for it. I have 10 said on the record here and I made the comment on many other 11 occasions, that I accept responsibility for the 12 recommendation I made to Council. 13 I accept responsibility for the actions that I 14 took as the Chief Financial Officer, I was required to make 15 recommendations to Council on a number of matters. 16 I take full responsibility for all of those 17 recommendations to Council. If that's the -- if Mr. White 18 believes that interpretation of that, is that I'm taking 19 blame for what happened, then I believe that that's Mr. 20 White's prerogative to take -- to take that position. 21 I don't recall I used the word, blame except 22 for that I blew it -- I may indeed have used the words, I 23 blew it. I don't know. But, I've always maintained and I 24 will maintain and for the rest of my career, I will maintain, 25 that I'm responsible for the recommendation and the actions

1 that I do and the recommendations that I make. 2 But, I don't -- I don't believe that actually 3 said, I take full blame for what happened. I believe that it 4 was in the context that I'm responsible for what I 5 recommended. 6 Q: All right. 7 MR. COMMISSIONER: Would you give that back to 8 Mr. McDowell, please. Thank you. 9 10 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 11 Q: All right. You'll have to bear with me on 12 this next question, it goes on a fair time. Listen very 13 carefully please, Mr. Ford. 14 A: Yes, sir. 15 Q: Let's try and bring things into a simple 16 and straight forward perspective. The main problem here, 17 really, is that the City simply did not know what its stream 18 of payments would amount to under the sub lease Schedule B 19 formula provided by MFP, isn't that correct, Mr. Ford? 20 A: I would say that, depending upon the time, 21 that that statement is factually correct. On September 25th, 22 2000, we had not done an extensive review of the schedule, so 23 on that date, I would say that that statement is correct. 24 On dates subsequent to that, I would say that 25 that statement is not correct.

1 MR. COMMISSIONER: The subsequent date being 2 when; six (6) months later? 3 THE WITNESS: April or so, I think. Late 4 March or early April of 2001, and then at dates subsequent to 5 that. 6 MR. COMMISSIONER: Would that be at a time 7 when Clarica became involved? 8 THE WITNESS: No, sir, that was before 9 Clarica was involved. That was when my staff was preparing 10 the capital budget, in the -- in the March time period of 11 2001. Preparing the capital budget and the -- and the year 12 2000 financial statements. 13 14 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 15 Q: And at that -- at that point, you knew 16 that the stream of payments wasn't -- or had some problems? 17 A: No, at that point we -- 18 Q: You actually made the calculation? 19 A: -- we made the calculation, at that point 20 in time, and sent it to Mr. Robson. Mr. Robson confirmed 21 that those payments were correct. 22 Q: All right. At that point in time, you 23 did know the stream of -- of payments? 24 A: That is correct, sir. 25 MR. COMMISSIONER: What stream -- we've

1 heard -- we've heard of two (2) streams? One of -- one of 2 THE WITNESS: That -- 3 MR. COMMISSIONER: Just let me finish. 4 THE WITNESS: I'm sorry, sir. 5 MR. COMMISSIONER: I know, I'm going to lose 6 my train of thought. One of -- one of the streams added up 7 to $113 million, another stream added up to $227 million. My 8 recollection of previous evidence is that -- is that the 9 stream -- the -- the evidence is that the stream that Mr. 10 Robson confirmed was that which added up to $113 million, is 11 that correct? 12 THE WITNESS: That is correct, sir, yes. 13 14 CONTINUED BY MR. JAMES CASKEY: 15 Q: Now, backing up to the time of the 25th 16 of September, when the question was, if you didn't know the 17 stream of payments, it says, 18 "And if you had -- if that hadn't happened, 19 the City would not have signed the deal and 20 subsequently, none of us would be here, 21 today, isn't that correct?" 22 A: I don't know what that refers to. 23 Q: If -- if -- I take it, if you -- if you 24 had known the stream of payments, at that time, the deal 25 wouldn't have gone through?

1 MR. COMMISSIONER: Well, that's -- we're back 2 to the same -- the same problem. We have had evidence of two 3 (2) streams of payments. It's obvious that it was -- that 4 the stream of payments that's being referred to, adds up to 5 $113 million, the City would have signed it. That's what 6 they expected, at least, that's what we've been told the City 7 expected. 8 What would have happened if you had a stream 9 of payments that added up to 227 million? I appreciate it's 10 probably just a guess, but what -- what would have happened, 11 do you think? 12 THE WITNESS: I -- I think I would -- I would 13 concur with the comment that we wouldn't be here. 14 MR. COMMISSIONER: All right. 15 THE WITNESS: We would never have accepted 16 the terms of that transaction and we wouldn't be here. 17 The -- the bylaws would have never been passed by Council. 18 MR. JAMES CASKEY: All right. So, 19 considering this simple and straightforward perspective, this 20 problem -- I'm doing the best I can. 21 MR. COMMISSIONER: I'm just glancing over at 22 Mr. Fleming, and I -- it's a little -- nothing about this 23 case is simple and straightforward. But I understand what 24 you're saying. I understand -- 25

1 CONTINUED BY MR. JAMES CASKEY: 2 Q: This problem, a failure to perform the 3 necessary calculations when considering this deal, really has 4 nothing to whatsoever to do with whether or not the deal was 5 a tax flow through arrangement? 6 A: I think I know what you're saying with 7 that, sir. But I wonder if you could just repeat that? 8 Q: Yes. The failure to perform the 9 necessary calculations on the 25th of September, on your 10 part, has nothing whatsoever to do with whether or not it was 11 a tax flow through arrangement? 12 A: That would be a fair statement, yes, sir. 13 Q: Or whether it was a lease or a lease-back 14 arrangement? 15 A: I would say, yes, sir. 16 Q: Or whether it was a straight loan? 17 A: I would say, yes, sir. 18 Q: Or whether payments matched revenue 19 streams between the head lease and the sub lease? Perhaps 20 that's not right. Perhaps, whether payments matched revenue 21 streams -- 22 MR. COMMISSIONER: At all. 23 MR. JAMES CASKEY: -- at all? 24 MR. COMMISSIONER: Period. 25 MR. JAMES CASKEY: Period.

1 THE WITNESS: Now I've lost my train of 2 thought. If we could -- 3 MR. JAMES CASKEY: Yes. 4 THE WITNESS: -- get the first part of that, 5 together? 6 7 CONTINUED BY MR. JAMES CASKEY: 8 Q: The failure to perform the necessary 9 calculations, under the formula, has nothing to do with 10 whether or not the payments matched revenue streams? 11 A: Yes, I -- yes, I would say that that's 12 correct. 13 Q: Or whether payments allowed for facility 14 ramp up time? 15 A: Facilities, is that the word that you 16 used? 17 Q: It allowed for facility ramp-up time or 18 revenue stream ramp-up time? 19 A: Well, the monthly amount that is quoted 20 in the -- provided in Schedule B of the sub lease is, in 21 fact, ramped up by the very nature of the way it's -- it's 22 printed on that schedule. 23 So, I'm not exactly sure how to answer that 24 part of the question but the -- that portion of the sub lease 25 does, in fact, show that it is ramped up.

1 Q: All right. That's before you get into 2 the calculations? 3 A: That's correct. That's before you get 4 into the calculations. 5 Q: But the failure to do the calculations 6 doesn't relate to the fact that it was ramped up? 7 A: No. In that case -- stated that way, 8 yes, that's correct. 9 Q: Or whether you were financing a revenue 10 generating facility? 11 A: Yes. 12 Q: Or whether Revenue Canada would approve 13 the transaction? 14 A: Whether Revenue Canada approved the 15 transaction or not was not part of the transaction so it was 16 irrelevant. 17 Q: But all those statements are correct? 18 That -- that your failure to perform the necessary 19 calculations had nothing to do with those matters? 20 A: That's correct. 21 MR. COMMISSIONER: Well, it seems to me on 22 the evidence thus far that there was a failure to perform the 23 -- to do the calculations, you accept that? 24 THE WITNESS: Absolutely. 25 MR. COMMISSIONER: Then that -- this question

1 sounds a little more complex than it really is. None of 2 these constituents, if I can call them that, of the 3 transaction had anything to do with -- with the failure to 4 make the calculation; it didn't matter. 5 THE WITNESS: Yes. 6 MR. COMMISSIONER: As I understand your 7 evidence, Mr. Ford, you simply didn't make the calculation 8 and that was not because of any of these other important 9 parts, it was simply that you didn't make the calculation for 10 whatever reason? 11 THE WITNESS: Yes. That's correct. And all 12 of those -- I would agree with you, sir, that those other 13 things are not relevant to whether I did or did not make the 14 calculation. The fact remains, I didn't do the calculation 15 period. 16 MR. COMMISSIONER: That's fine. 17 18 CONTINUED BY MR. JAMES CASKEY: 19 Q: And this problem was then further 20 exacerbated as the City, albeit very late in the game, begins 21 trying to cram the formula into a pre-supposed or pre- 22 anticipated result rather than simply following the formula 23 as it is put forward within Schedule B; is that correct? 24 A: I'd disagree with that entirely. 25 Q: All right. I take it that -- that when

1 Mr. Steffler came to you with the problem of making the 2 calculation that -- that at that point in time, if you'd 3 allowed him to carry on, you'd have ended up at some larger 4 number than the one that you ended up with Mr. Robson? 5 A: I would say that that's a fair statement, 6 yes. 7 Q: All right. And -- and the question here 8 is around the pre-supposed or pre-anticipated result, if it 9 hadn't been for you having a pre-supposed or pre-anticipated 10 result, would you not have simply made the calculation in 11 accordance with the formula and ended up with a higher 12 number? 13 A: We did the calculations and determined 14 that the amounts that we were arriving at didn't fit with 15 what we thought the payments should be. So, in that sense, 16 yes, we were comparing it to a pre-supposed amount. That 17 wouldn't be any different than anyone would do in any 18 calculation where you have a -- a straw man or a rough guess 19 as to what the answer should be. You go through the 20 mathematical process to either prove it's correct or prove 21 that it's wrong. 22 So we had -- in that sense, we -- yes, we did 23 have a pre-supposed amount that we were trying to -- that we 24 were using as a straw man, for want of a better word. 25 The question seemed to imply that what we were

1 doing was bending the formula to meet what our expectation 2 was. In fact, we were using what was in the formula to 3 calculate an amount and it wasn't making any sense to us. It 4 didn't match the straw man, so to speak. 5 So, that's what prompted us to go to the 6 author of it and ask if we were interpreting it incorrectly 7 and we were advised that, in fact, we were interpreting it 8 incorrectly. 9 So I suppose, in some sense, I would agree 10 with the statement, although it seems to imply that what we 11 were doing was trying to bend the formula or manipulate the 12 formula to get the result we wanted. 13 I think the reality of it is, that our 14 interpretation of the way the formula worked didn't appear to 15 be equal to what our straw man was, and we asked for 16 clarification as to how that formula worked. And that was 17 what the process was. 18 Q: Okay. On October 30th of this year, Mr. 19 Stevens was cross-examining you, and he put to you some 20 calculations of Schedule B sub lease and then said, isn't 21 this, Mr. Ford, the way it should be. Do you remember him 22 examining you on that? 23 A: I do sir, yes. 24 Q: All right. Question is, do you recall 25 when you personally first performed the completed Schedule B

1 sub lease payment calculations that you and Mr. Stevens were 2 discussing? 3 A: No, I don't -- I don't know which 4 calculations we're referring to here. 5 Q: Did you ever make a calculation that came 6 to $227 million dollars? 7 A: Myself personally? 8 Q: Yes? 9 A: No, no. 10 Q: You did make a calculation that came to 11 $112 million odd? 12 A: Yes, sir. 13 Q: All right. 14 A: I did that personally. 15 Q: When did you first make that calculation? 16 A: I don't have the notes in front of me, 17 but, I'm going to say that it was approximately April the 18 3rd, 4th or 5th. Somewhere -- of 2001. Somewhere in that 19 time period. 20 Q: And I take it that was as a result of 21 advice given to you by Mr. Robson, as to how to do it? 22 A: That is correct, sir. 23 Q: Prior to that time, you'd never made a 24 complete calculation or had Mr. Steffler or anybody that you 25 know to come to $227 million dollars?

1 A: That's correct, sir. 2 Q: All right. And you've already told us 3 that you never calculated the $227 at any time, in your 4 endeavours? 5 A: No, I have not sir. 6 Q: In your earlier testimony, you indicated 7 you had access to Excel and were an advanced user of this 8 software. Did you make use of this software to make your own 9 personal calculations of the $112 million? 10 A: Yes, sir. 11 Q: All right. The question seems to be, your 12 seven (7) volume exhibit is devoid of any such personal 13 calculations and I don't think that's right? 14 A: I don't' think it's right either. The 15 $112 million dollar spread sheet -- or not the spread sheet, 16 but, the results of the spread sheet are in there -- the 17 schedule is in there. 18 Q: That should be the 227, there's no -- you 19 never done a 227 spread sheet? 20 A: No, I have not. I have not personally 21 done a $227 million dollar spread sheet calculation. 22 Q: Mr. Robson promised you there would be a 23 sub lease Schedule B formula forthcoming, you indicated that 24 you had a high confidence in Mr. Robson, is that correct? 25 A: At the time, I would say, that's correct,

1 yes, sir. 2 Q: When the formula arrived only three (3) 3 minutes before the in-camera meeting on Monday, September 4 25th, were you appalled and aghast? 5 MR. WILLIAM McDOWELL: Well, that's not, 6 actually, the evidence. The evidence is it came, was 7 amended, and it came back to him. 8 MR. COMMISSIONER: Well, I suppose, Mr. Ford, 9 can -- can say whether he felt those expressions or those 10 feelings. 11 MR. WILLIAM McDOWELL: Well, we better 12 separate them out and get appalled first and aghast next. 13 MR. COMMISSIONER: Did you have any such 14 feelings? 15 THE WITNESS: Well -- 16 MR. COMMISSIONER: When you got them late or 17 were you just surprised? 18 THE WITNESS: Well, I was going to respond to 19 the question this way, that I in fact, had received the 20 calculations somewhat before three (3) minutes to 6:00. It 21 was much earlier than that in the afternoon, it was probably 22 somewhere between 5:00 and 5:30, not -- not much earlier, but 23 earlier. 24 I wasn't appalled and aghast. I wouldn't say 25 that I would -- I would use those words. Was I surprised

1 that the -- that that was -- that there was a formula? No. 2 Was I surprised it was that formula? I'd have to say, no, 3 because I had no expectation it was going to be formula A or 4 B or C or D. I just knew it was going to be a formula. 5 MR. COMMISSIONER: What about the timing? 6 That's the issue. 7 THE WITNESS: But as far as the timing was 8 concerned, I was -- I was disturbed about the fact that the 9 documents were not received until that late on -- on Monday. 10 MR. JAMES CASKEY: All right. 11 MR. COMMISSIONER: So you were disturbed 12 rather than appalled and aghast? 13 THE WITNESS: Yes, I -- 14 MR. COMMISSIONER: Is that right? 15 THE WITNESS: Appalled and aghast I think is 16 a little strong. I was -- I was a little disturbed about it. 17 MR. COMMISSIONER: All right. 18 19 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 20 Q: Did your personal confidence in Mr. 21 Robson, significantly wane, when this formula arrived only 22 before the in-camera meeting of Council? 23 A: I would say that the answer to that 24 question would be, no. 25 Q: All right. Being disappointed in its

1 late arrival, or surprised at its late arrival, didn't that 2 cause you to think that there was something that -- that Mr. 3 Robson wasn't living up to, from your expectation standpoint? 4 A: I would say, to an extent, yes. But, I 5 think the question was asked, would it significantly? And I 6 would say that, no, it didn't significantly change my 7 opinion. I was disturbed that it hadn't been received 8 earlier. 9 Q: When you were cross-examined by Mr. 10 Stephenson, you indicated you knew Schedule B to the sub 11 lease would necessarily only contain the minimal payment 12 calculation, with a formula for calculating the remainder of 13 the sub lease payments; is that correct? 14 MR. COMMISSIONER: You're asking was it 15 minimal. In the six (6) years? The six (6) -- there were 16 six (6) years? 17 MR. JAMES CASKEY: Yes. 18 MR. COMMISSIONER: Out of the thirty-one 19 (31). I'm not sure that's minimal. 20 MR. JAMES CASKEY: Right. 21 MR. COMMISSIONER: I understand -- I 22 understand -- I think I understand what the question is. 23 24 CONTINUED BY FOR THE COALITION MR. JAMES CASKEY: 25 Q: Did you understand that the reason why

1 the first six (6) years of payments were detailed, and then a 2 formula, was because it had to have the appearance of an 3 operating lease? 4 A: The way it was represented to me was two 5 (2) things. Firstly, that the first number of years were 6 presented in the form that they were, in order to provide us 7 with the dollar amounts that could be entered into the 8 business plan. And it also indicated that there was this 9 ramping up period, and that subsequent to that, the formula 10 would, for want of a better word, kick in. 11 And it would be, because if there is an 12 inflationary factor that is in there, it would give the 13 appearance of being a -- an escalating payment that mirrored 14 the increase in rev -- net revenues, for the facilities. 15 And that the -- the first five (5) years, or 16 six (6) years, were -- were shown separately for two (2) 17 reasons. One, in order to show that they are -- they can be 18 put into the business plan. And secondly, because there's a 19 -- the ramp up didn't lend itself to a -- to an escalation 20 formula. 21 Q: All right. I take it, then, that -- that 22 was part of what you anticipated might appear in the lease? 23 A: I was anticipating something like that. 24 Had, before it arrived, you would had asked me to sketch out 25 what I thought it was going to be, I'm not sure that I'd

1 actually come up with that, but I was expecting something of 2 that stripe. 3 Q: All right. With your anticipation in 4 mind, what provisions did you make to ensure that this 5 formula that was going to be provided to you by MFP, would 6 result in the payment stream expected by the City? 7 A: Could I have the first part of that 8 again, please? 9 Q: Yes. With your state of mind, 10 anticipating as you did, a formula being received -- 11 A: Yes? 12 Q: -- what provisions did you make to ensure 13 that this formula, as provided by MFP, would result in the 14 payment stream expected by the City? 15 A: I didn't make any arrangements to review 16 it and I did not review it. 17 Q: You, yourself, did not? Did you have any 18 staff available on hand to perform the necessary 19 calculations, once the formula arrived? 20 A: No, I did not. 21 Q: Was Mr. Stockie aware, or made aware, 22 that Schedule B of the sub lease would be arriving in a 23 formula form? 24 A: I don't -- I don't recall whether I 25 discussed it with Mr. Stockie one way or the other. I

1 believe I did. I believe I indicated to him the schedule 2 would, in fact, follow the revenue stream, the net revenue 3 stream of the facility. I don't recall whether I said to him 4 that would be based upon some formula or not but he was 5 aware, I believe he was aware, that it would follow the 6 revenue stream of the -- of the facility. 7 Q: Do you recall Mr. Stockie making any 8 response to you if that's what you told him? 9 A: I believe the only response Mr. Stockie 10 made was -- was something to the effect that that's what 11 we've been anticipating that we would have is that the 12 repayments would match the revenue stream of the facilities. 13 Q: Do you recall any suggestion by 14 Mr. Stockie that you should have persons available to make 15 the calculation once the formula arrived? 16 A: No, sir. He didn't make -- he never 17 spoke those words to me at any point. 18 Q: Was City Council or any member of City 19 Council aware or made aware that Schedule B would be arriving 20 in a formula form? 21 A: I don't believe I ever said to Council it 22 would be a formula. I did, on many occasions, advise Council 23 that the payment stream would match the revenues of the 24 facility but I don't think I ever said to them it would be 25 based upon some arithmetic formula.

1 Q: Did you ever apprize Council of the fact 2 that it was in a Schedule B form at a Council meeting, either 3 in-camera or in open session? 4 A: No, sir. I wouldn't have given them that 5 information. 6 Q: Was there any suggestion by any member of 7 Council to you that if a formula was presented for the 8 calculation of payments that you should have it externally 9 reviewed or have someone there to make that calculation? 10 A: No. That was not said to me at all, sir. 11 Q: Was Mr. White aware, or made aware, that 12 Schedule B would be arriving as a formula? 13 A: Don't recall whether I ever said that to 14 Mr. White that it would be a formula. 15 Q: Did you ever apprize Mr. White of the 16 fact that a formula would be contained in Schedule B before 17 it arrived? 18 A: Again, I don't believe that I ever said 19 to Mr. White it was going to be an arithmetic formula, but I 20 do believe that I had said to him that it was -- that the 21 payments going to, in some way, match the revenues of the 22 facility. 23 MR. COMMISSIONER: Before you go on. A 24 couple of things I'd like to get, I think it's timely. A few 25 minutes ago you were talking -- you were responding to one of

1 the questions, the terms of the matching of revenue 2 streams -- 3 THE WITNESS: Yes, sir. 4 MR. COMMISSIONER: -- with respect to the 5 repayment -- or the lease payments? 6 THE WITNESS: Yes. 7 MR. COMMISSIONER: How did you -- how did you 8 look upon the -- the revenue projections that you received 9 from -- from MFP or Mr. Robson that were obviously different 10 from the revenue projections that Mr. Friedel had prepared, 11 in this regard? Was that part of the matching -- revenue 12 matching process? 13 THE WITNESS: No. My -- my understanding was 14 that the repayments would match our business plan projections 15 of net revenue and that there was never any indication to me 16 by MFP that the repayments would match the revenues -- the 17 schedule that they had prepared -- the cash flows they had 18 prepared. 19 When I received that from Mr. Robson I 20 indicated to him that I thought their numbers were overly 21 aggressive and that we would not be using those numbers for 22 our business planning purposes, that we would be using the 23 City of Waterloo's numbers which were, a) more conservative 24 and, b) met the requirements for net tax funding going 25 forward so that there would be no impact on the tax payer.

1 MR. COMMISSIONER: All right. 2 MR. JAMES CASKEY: So that the issue, Mr. -- 3 MR. COMMISSIONER: Go ahead. 4 MR. JAMES CASKEY: I beg your pardon, sir. 5 MR. COMMISSIONER: Go ahead. 6 7 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 8 Q: The issue then is, you had your 9 projections of revenue streams and you could have made the 10 calculations had you seen fit to do so? 11 A: Yes. 12 MR. COMMISSIONER: All right, now, I'm going 13 to be switching gears for a minute. 14 There's been some discussions here, on these 15 questions about when Mr. Stockie or City Council or Mr. White 16 became aware that a formula was to be used in Schedule B to 17 the sub lease. 18 I'm not sure we've ever heard from you when 19 you first became aware that a formula was going to be used in 20 respect of that schedule. 21 THE WITNESS: I believe that question did come 22 up and I -- during the proceedings -- 23 MR. COMMISSIONER: You have to excuse me -- 24 you could just remind me. 25 THE WITNESS: My notes are -- I've been here

1 for a long time, so I believe it did, I should say and I 2 think I did speak to that, but, I've been through this so 3 much in the last number of months that maybe I'm just 4 remembering it. But, it was earlier than September the 25th 5 was indicated to us, and I can't tell you the date, sir, so I 6 don't know what the exact date was. 7 But, I did know earlier that there would be 8 some formula for calculating the rents going forward, the 9 rent payments going forward. The intention of the formula 10 being that it was to match or mirror or follow the same cash 11 flow projections or net revenue projections for the park 12 facilities. 13 MR. COMMISSIONER: It might be unfair to press 14 you on the issue, but, how long before September 25, would 15 you guestimate? 16 THE WITNESS: I would say it would have been 17 within a couple of weeks prior to that. It wouldn't have 18 been -- it wouldn't have been in order of months prior to 19 that, it would have been, I would say weeks prior to that. 20 And probably not much more than a couple of weeks. 21 MR. COMMISSIONER: All right. Thank you. 22 23 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 24 Q: Mr. Ford, did anyone ever suggest 25 that perhaps Council might consider delaying the acceptance

1 of this deal while you or your staff began generating the 2 Schedule B numbers? 3 A: No, sir. 4 Q: Did any one ever raise the issue that you 5 should go back to your office and generate the Schedule B 6 numbers yourself while Council pushed back the voting on this 7 matter until the very last moment of this Council meeting? 8 A: No, sir. 9 Q: Had you been asked by Council to make the 10 Schedule B sub lease calculations yourself, on behalf of the 11 City, was there anything more pressing that would have kept 12 you from being able to do so? 13 A: No, sir. 14 Q: In your testimony on October 31 of this 15 year, you also indicated it was very clear between you and 16 Mr. Stockie that you are leading the charge on this matter. 17 You are the point man in this matter, is that accurate? 18 A: That would be an accurate statement, sir, 19 yes. 20 Q: All right. Who was it that decided that 21 you were to be the point man, was it you or Mr. Stockie? 22 A: Mr. Stockie. 23 Q: Was it expected that the formula would 24 arrive as a written description of a formula or was it 25 expected that it would arrive as a mathematical equation?

1 A: I'd have to say that there was no 2 expectation one way or the other. I knew that the repayments 3 or the sub lease payments would be based on some formula that 4 matched the net cash flow for the facilities. 5 Q: Was this an issue that was ever raised, 6 discussed by you with anyone at the City or anyone at MFP? 7 A: The fact that it was a formula? 8 Q: A formula or a mathematical equation? 9 A: I'm not sure whether the matter of it 10 being a formula or a mathematical equation was ever 11 discussed, but, the fact that the payments would somehow -- 12 there would be some mathematics or so used to calculate the 13 payments that would match the cash flow or mirror the cash 14 flow was discussed on numerous occasions. 15 But, whether that would be based upon an 16 arithmetic formula or equation or a repayment schedule, that 17 particular detail was never discussed with staff. 18 Q: Clearly you and perhaps others were well 19 able to anticipate the need for making your own calculations 20 once this formula arrived, it was implicitly understood that 21 MFP would not be providing a complete payment stream from 22 which you could read and verify your expected payments, is 23 that right? 24 A: I would say it's fair to say that it's not 25 -- it wouldn't be up to MFP to -- to make sure that we did

48
  1  the calculations.  They gave us the -- the -- the formula. 
  2  And I think that their expectation would be that we would
  3  check it.  
  4                 I don't -- there was no expectation on my part
  5  that they would do that for us.  
  6                 Q:   All right.  Would it not be part of your
  7  job description, as the Chief Financial Officer and
  8  Treasurer, to provide suitable suggestions and to provide
  9  suitable solutions in the face of such anticipated
 10  circumstances?  
 11                 A:   That's a pretty wide ranging and vague
 12  question.  And if we could focus in on some specifics, it
 13  might help me to answer the question.  But --
 14                 Q:   Well, let me put it this way.  You -- you
 15  were not blind-sided when a stream of sub lease payments were
 16  not supplied?
 17                 A:   No, sir, I was not.
 18                 Q:   Okay.  You knew that was going to be the
 19  case?
 20                 A:   I expected that -- let me -- I think
 21  you've -- you've asked me two (2) different questions, there. 
 22  Was I surprised that there was not a schedule of payments?
 23                 Q:   A complete schedule of payments?
 24                 A:   I wasn't surprised that there was not a
 25  complete schedule of payments.  The second question, then,

1 you asked -- 2 Q: Well, it's -- it's couched in these terms 3 because of -- of media coverage. Contrary to what was 4 conveyed to the citizens via the media, you were not blind- 5 sided when a stream of sub lease payments were not supplied, 6 because you knew that was going to be the case? 7 A: I wasn't surprised that there was -- 8 that -- 9 MR. COMMISSIONER: I don't recall any 10 evidence from Mr. Ford, that he was blind-sided; that might 11 be an interpretation that was placed on the situation, but -- 12 MR. JAMES CASKEY: I think the inference, 13 sir, is that, in the media reports relating to this, Mr. Ford 14 may have conveyed the impression that he was blind-sided, in 15 news reports. It certainly is not evidence, here at this 16 Inquiry. 17 MR. COMMISSIONER: Well, that may be an 18 interpretation, but it's an interpretation for me to make, 19 not the media or anybody else. I don't recall you ever -- 20 there's -- there's been a lot of -- there's been a lot of 21 commentary in the media about what happened, and I'm not sure 22 that Mr. Ford feels that he was implying that he was blind- 23 sided. 24 Did you intend that implication, sir? 25 THE WITNESS: I never, at any point in time,

1 said that I was -- I -- I was blind-sided. That may have 2 been what was reported in the media, and that is something 3 that the media would have done on their own. 4 I have not spoken to the media on this matter, 5 for a year and a half. So anything that they've reported is 6 something that they have done themselves, because they've had 7 no interviews with me, in -- in at least a year and a half. 8 And I'd have to say that, I wouldn't say I was 9 blind-sided by the fact that there wasn't a complete 10 repayment schedule in there. And I -- I can't say that I was 11 even surprised that there wasn't a complete repayment 12 schedule in there. The facility was there to do a complete 13 repayment schedule, so I'd have to say that, no, I don't feel 14 that I was blind-sided or surprised at all. 15 16 CONTINUED BY MR. JAMES CASKEY: 17 Q: All right. If that comment had been 18 made, Mr. Ford, in relation to the amount of the payments in 19 the ultimate calculation, would you have considered that to 20 be a blind-side? That is, the $227 million amount? 21 A: I don't know whether I'd say I would 22 consider it blind-side. I would -- I would say I consider it 23 shock. But I don't know whether I'd say I was blind-sided. 24 Q: All right. If you could, sir, turn to 25 Schedule B of the sub lease? And that would be found at --

1 Schedule B to the sub lease -- tab 130. 2 A: That would be in Volume 4, I would think. 3 Q: Volume 4. 4 A: The very last document, I think, of 5 Volume 4? 6 MS. STACEY HOCKING: Correct. 7 8 (BRIEF PAUSE) 9 10 THE WITNESS: I have it. 11 12 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 13 Q: All right. You have it there in front of 14 you? 15 A: I do, sir. 16 Q: Which calculation do you think you would 17 most likely have come up with first if you'd done your own 18 calculations on September 25th when Schedule B first arrived; 19 that is, looking at the wording, what mathematical equation 20 would you have come up with? 21 MR. COMMISSIONER: Well, it's more than -- 22 I'm not sure the question is put fairly. I gather the 23 question is whether or not, if Mr. Ford was doing the 24 calculation, at first if he would have come up with the $113 25 million stream or the $227 million stream.

1 MR. JAMES CASKEY: Or some other stream, 2 Mr. Commissioner. 3 MR. COMMISSIONER: Don't tell me there's a 4 third one. 5 MR. JAMES CASKEY: Oh yes. I believe it's a 6 billion 600 million -- 7 MR. COMMISSIONER: I don't want to hear it. 8 The -- the -- it's fairly apparent, I think, I might be 9 jumping off the deep end here, if I am, counsel can jump all 10 over me. But the difference, as I understand it, between the 11 two basic calculations, the two streams of payments, is to be 12 found in whether you maintain a level monthly payment and 13 simply add the -- the differential to those level payments 14 each month or whether you compound the -- the payments. 15 Now, the interpretation that I understand 16 Clarica was following was that there is a compounding of the 17 monthly payments with the differential to be used rather than 18 the same level monthly payment to which is added the 19 differential each month. 20 Now, it's -- it's over-simplistic to ask -- to 21 ask the witness, I think, which would he have discovered -- 22 which would he have done first unless you first offer him the 23 alternatives. I don't know if I'm making myself clear or 24 not. 25 MR. FRASER BERRILL: What we do have in

1 evidence, all that we seem to have is evidence is what 2 happened in this gentleman's department when Mr. Steffler did 3 the calculations and he came up higher. Presumably we'll 4 never know whether or not it adds up to 227, but we know they 5 were the higher stream. 6 MR. COMMISSIONER: Well, all right, in order 7 to put the question fairly, when you say which calculation 8 would you most likely have come up with, is it the 9 $115 million calculation or the $227 million calculation? 10 MR. JAMES CASKEY: That is, if you look at the 11 formula and you give the words their plain and ordinary 12 meaning, what is the more accurate calculation that would be 13 made? 14 MR. COMMISSIONER: No. That's not right. 15 Excuse me. I'm going to interrupt because I've got to figure 16 this out myself. 17 The question -- the question is, not which is 18 the most accurate, the question is which one would he have 19 developed? Mr. Ford, am I making myself clear as mud or am I 20 making it sufficiently clear for you to answer the question? 21 MR. WAYNE BUMSTEAD: Mr. Commissioner, the 22 other -- the other thing I'd like to say about that question 23 is I think it has to be put in context as to whether Mr. Ford 24 is to take into consideration the context of all of the other 25 circumstances and documents and discussions that were

1 occurring around September 25th -- 2 MR. COMMISSIONER: I think that overly 3 complicates the issue, Mr. Bumstead. What I think the 4 question says is you've got -- you've got the formula set out 5 in Schedule B and the test -- the question that -- that the 6 Coalition representatives are asking, is which calculation 7 would you have come up with first? 8 Is it -- there's only two (2) that are being 9 considered. One is $113 million dollar stream and the other 10 is a $227 million dollar stream. 11 And when you look at this -- I'm not sure 12 whether you can answer the question, but, would you like to 13 take a shot at it? 14 THE WITNESS: Well, I believe, and it's going 15 to be a bit of speculation because it wasn't done. But, I 16 believe if we -- if we look at what happened in April 2001, 17 it's likely that that would have been what would have 18 occurred on September 25th. 19 That I would have reviewed this formula and 20 said I don't understand it, you're the author of it, you 21 people are the author of it, could you explain it to me? 22 And I believe that what would have happened 23 and again it's speculation, but, I think I'm being asked to 24 give a speculative answer, I believe, that Mr. Robson would 25 have said the same thing that he said to me in April.

1 He said, here's how you interpret it. And I 2 believe I would have gone through that calculation and done 3 the same thing that I did in April and satisfied myself that 4 that was correct and that -- 5 MR. COMMISSIONER: And so your answer to the 6 question is -- 7 THE WITNESS: Twelve million -- 8 MR. COMMISSIONER: -- is you would have done 9 the calculation to arrive at the $113 million dollar stream? 10 Is that fair? 11 THE WITNESS: Yes, I believe that that -- and 12 the scenario that I just put forward is likely -- I mean 13 based on speculation -- it's likely what would have happened 14 and I would have come up there with $112 or $113 million 15 dollars. 16 MR. COMMISSIONER: And that -- I break in 17 again to ask a further question. That is based on the -- the 18 level amount of the monthly rent to which is added the 19 differential without compounding it, is that fair? That gets 20 you to $113 million? 21 THE WITNESS: Yes, how you get there is 22 similar to what you said, sir. Maybe I could say it a little 23 bit differently and see if we're both on the same page. That 24 the rent in the year 2006 becomes -- is referred to as the 25 base rent to which the annual differential is added.

1 And the differential is escalated annually, 2 but, the base rent is not. And that's what will get you to 3 approximately $113 million dollars. 4 MR. COMMISSIONER: I understand what you're 5 saying. I'm not saying I agree with you, but, I understand 6 what you're saying. 7 8 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 9 Q: But, in March or in April or whenever it 10 was that Mr. Steffler was going through the calculations, he 11 obviously took an interpretation of that clause that would 12 have arrived at a much larger number and theoretically, 13 speculatively, if you'd taken that to its logical conclusion, 14 that's the $227 million? 15 A: We didn't do that, but, I would say, based 16 on the numbers that we were -- that Mr. Steffler was 17 calculating, that it would be fair to say that it would have 18 ended up in a $227 million dollar number. 19 Q: So, if you want to back that off, without 20 the input from Mr. Robson, on September 25th, if your staff 21 had done the calculation and read this Schedule B as Mr. 22 Steffler apparently was reading it, one can speculate that 23 you would have been at $227 million? 24 A: I think I would speculate, sir, that we 25 would have gone through the same scenario that we did at the

1 end of March, early April, that Mr. Steffler would have said 2 that this is what I'm getting and I haven't got all the way 3 through it but, I'm mid way through it and I'm getting some 4 really weird numbers and I believe at that point, we would 5 have probably followed the same scenario that we did in the 6 March/April time frame and gone to the authors of the -- of 7 the schedule for interpretation. 8 Q: I take it, Mr. Ford, that at that point in 9 time on September 25th before you signed the deal, if you'd 10 got into that problem you might have gone to some external 11 review, someone outside your organization, to actually make 12 the calculation in accordance with what they thought? 13 A: We may have. We may have. And if there 14 was a confusion like that, we may very well have recommended 15 to Council that evening, not to pass the bylaws. 16 Q: Mr. Friedel, in his evidence, looked at 17 this and I'll quote: 18 "I think as I pointed out when I -- when I 19 interpret the schedule in the sub lease it 20 seems to me that it is purposely designed 21 to be -- to be deceptive. And when -- when 22 there's one party trying to deceive another 23 party, that makes it a challenge, 24 sometimes, to find all the details out." 25 Do you agree or disagree with Mr. Friedel's

1 observations? 2 A: Those are Mr. Friedel's observations and 3 I would -- I would concur with them. Mr. Friedel is a very 4 intelligent, young man, and I -- and I would generally concur 5 when he makes an observation about something. So I would 6 agree with that. 7 Q: All right. From your own perspective, 8 did you feel that the formula was designed to be deceptive? 9 A: Could I ask you to put a time frame on 10 that? 11 Q: That -- that's -- obviously, at September 12 25th, you didn't. You didn't give it any consideration? 13 A: That's -- that would be a fair comment at 14 that point, yes, sir. 15 Q: All right. But after the events? 16 MR. COMMISSIONER: Well, that's a -- that's 17 a -- you're asking, with this witness, to determine whether 18 the formula was designed to be deceptive. I don't know how 19 we can do that. He's expressing -- he can express an 20 opinion, I guess, if that's what you're asking him to do. 21 But when you get right down to it, somebody, I 22 guess, is going to have to look into the mind of the author 23 of the formula, to determine whether or not deception was 24 part of the plan. I don't think it's right. 25 MR. WILLIAM McDOWELL: Forgive me if this

1 sounds like a bit of editorial comment, but we've just heard 2 him say that there was nothing stopping him from making a 3 calculation, all the rest of it and then to say, well, was 4 this designed to deceive? 5 MR. COMMISSIONER: I'm inclined to agree 6 with -- agree with you, Mr. McDowell, but -- Mr. Stephenson? 7 MR. RICHARD STEPHENSON: For what it's 8 worth, those two (2) propositions are not inconsistent, one 9 from the other. The fact that a person has an opportunity to 10 -- to review something, doesn't mean that it wasn't designed 11 to mislead. They are not mutually inconsistent. 12 MR. COMMISSIONER: Well, I -- 13 MR. RICHARD STEPHENSON: Both can't be true. 14 But it seems to me it's entirely appropriate -- fair to -- 15 to -- for this witness, if he has a view on the matter, he 16 may have no view and if that's the case, he can tell you, but 17 that he can say, by looking at it, he can express his view, 18 based upon what he sees in terms of how the schedule works, 19 how it is possible to generate two (2) payment streams, what 20 he's just spent the last half hour talking about and he can 21 suggest what his view is, in terms of whether it was designed 22 to mislead or not. 23 At the end of the day, of course, his view is 24 worth what it's worth. 25 MR. COMMISSIONER: Well, he obviously -- he

1 obviously didn't think it was designed to deceive, on 2 September the 25th. 3 MR. RICHARD STEPHENSON: And -- and I think 4 that's exactly -- 5 MR. COMMISSIONER: Whether Mr. McDowell has 6 come to a different conclusion, what's the relevance of it? 7 MR. RICHARD STEPHENSON: At the -- well, 8 he's -- he's actually already said that he agrees with Mr. 9 Friedel's view of the matter, which is exactly that. I think 10 he's now being asked to repeat, independently, whether he 11 came to that conclusion, one way or another. 12 But he's already said, he agrees with Mr. 13 Friedel who said, in his view, it was designed to mislead. 14 MR. COMMISSIONER: He didn't say that. He 15 didn't say that. He's not being -- 16 MR. RICHARD STEPHENSON: That's exactly what 17 he said. He -- Mr. Friedel said, in his view, -- 18 MR. COMMISSIONER: Well, that -- 19 MR. RICHARD STEPHENSON: -- Mr. Friedel 20 said, in his view, it was designed to mislead. Mr. Ford was 21 asked the question, do you agree with Mr. Friedel? Answer, 22 yes. 23 MR. WILLIAM McDOWELL: This is all for 24 argument. At the end of the day, Mr. Stephenson can make 25 that argument and he can suggest to you that the City of

1 Waterloo is entitled to the same protection as the little old 2 lady who buys a couch at Leon's and should have all the 3 payments set out for her, with rate and everything else. 4 But, his opinion about this -- and there's no 5 disrespect to him or to Mr. Friedel, that's -- this is the 6 inner finding that you may be asked to make. 7 8 (BRIEF PAUSE) 9 10 MR. JAMES CASKEY: He may have no opinion, 11 personally. 12 MR. WILLIAM McDOWELL: Well, he's already 13 said that he did. 14 MR. COMMISSIONER: Nobody said he did. Do 15 you have a -- do you have any kind of opinion with respect to 16 the -- 17 THE WITNESS: Well, what I said was -- 18 MR. COMMISSIONER: On your -- 19 THE WITNESS: -- that I respect Mr. -- 20 MR. COMMISSIONER: On your own? 21 THE WITNESS: -- Mr. Friedel's -- 22 MR. COMMISSIONER: Forget about Mr. Friedel. 23 THE WITNESS: Okay. On my own? I would say, 24 based upon what I knew on September 25th, no, I didn't see 25 that it was -- it was intended to be -- to deceive, if that's

1 the word -- or be deceptive. 2 On April -- in April, when I did the 3 calculation, did I -- did I feel that it was deceptive? I -- 4 I would say, that's not the word I'd use, I'd say I'd use the 5 word confusing. The formula was confusing. 6 In June, when the revelations from Clarica 7 materialized, I would say that, again, at that point, my 8 opinion would be that it's -- it was in -- it was confusing. 9 Would I say at that point in time that it was intended to be 10 deceptive, I wouldn't have made that conclusion at that 11 point. 12 MR. COMMISSIONER: All right. Thank you. 13 You can speak to Mr. Fleming for a minute but we are going to 14 get on with this thing and finish. 15 16 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 17 Q: The issue Mr. Fleming raises is whether 18 or not -- whether it was intentionally deceiving, did it, in 19 fact, deceive? 20 MR. COMMISSIONER: He said he confused them. 21 MR. WILLIAM McDOWELL: Well -- 22 MR. COMMISSIONER: That's all he said. 23 MR. WILLIAM McDOWELL: Again, that's not a 24 proper question. 25 MR. COMMISSIONER: The witness has already

1 answered the question. He said he was confused. 2 MR. WILLIAM McDOWELL: Right. 3 MR. COMMISSIONER: He would not categorize it 4 as deceptive; that's what he said and that's the end of it. 5 Okay. 6 MR. JAMES CASKEY: Thank you. 7 MR. COMMISSIONER: Next question. 8 MR. JAMES CASKEY: Thank you, sir. 9 10 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 11 Q: On April 6th, 2001 Robson said, you don't 12 have a feeble math mind. He indicated that your 112 million 13 calculation fax to him on April 5th was absolutely correct; 14 is that right? 15 A: Yes, sir. 16 Q: Mr. Ford, please show us in Schedule B of 17 the sub lease where and why it may be construed that the 18 differential only comes into play beginning in the year 2008? 19 A: My initial understanding, and it was 20 confirmed by Mr. Robson on April 5th, was that the 21 differential came into play on -- in year 2007. It was 22 subsequently corrected by Mr. Robson, I believe on the 29th 23 of May, 2001, that the differential comes into play in a 24 different way. But -- but it was explained to me that the 25 differential kicks in starting in 2007.

1 It says, 2 "The differential for the current year 3 shall be determined by ..." 4 et cetera, et cetera, which -- which my 5 interpretation of that was starting in 2007. 6 Q: Why would you not immediately insist that 7 Mr. Robson create or have created an addendum to the wrongly 8 worded Schedule B to the sub lease and forward it to the City 9 immediately? 10 A: I felt that by my preparing the schedule, 11 sending it to him and having him confirm that the numbers are 12 correct would be that. 13 Q: We see there was even confusion between 14 the words, preceding and proceeding, both being utilized in 15 this formula, one word's intent perhaps even negating the 16 other word's intent; would you agree with that? 17 A: I'm not sure whether I put my mind to 18 that. Those words -- to what you just said, sir, when I read 19 that, I found it confusing and hence the reason why I asked 20 for someone -- the author of it to explain it to me. 21 I never thought that one negated the other; 22 that one was intended to do something over the other. I just 23 found it very confusing and asked Mr. Robson to explain it. 24 Q: You indicated that you trusted 25 Mr. Robson, I take it that was your evidence and your

1 feeling? 2 A: Yes, sir. 3 Q: You had a gentlemen's agreement type of 4 relationship with him? 5 A: I would say that we had more than that. 6 Q: Wouldn't you expect that he would have 7 been delighted in fulfilling your need for an addendum to 8 correct? 9 MR. COMMISSIONER: Well, I have to argue that 10 how can he say how Mr. Robson felt. It's pure speculation. 11 MR. JAMES CASKEY: Thank you. Mr. 12 Commissioner, the coalition of Messrs. Fleming, Berger and 13 McCormack would like Mr. Ford to make the calculations under 14 this sub lease, to at least come up with the formula of the 15 way in which you calculate the sub lease so as to demonstrate 16 the various ways in which the sub lease can be calculated? 17 MR. COMMISSIONER: We've already been through 18 that. I don't know, we're not going to advance the 19 situation. Tell Mr. Fleming that I'm not going to put Mr. 20 Ford through that. I can calculate it. 21 MR. JAMES CASKEY: The suggestion is that 22 there are no mathematical formulas in existence before this 23 Commission at this point in time. 24 MR. COMMISSIONER: Sure there is, in the 25 exhibit that we just looked at the calculation has already

1 been made that raises the -- raises the stream to $227 2 million and another one for $113 million. 3 If Mr. Fleming -- Mr. Fleming -- if you want 4 to give evidence that you can get up and give the evidence 5 yourself. We're not -- I'm not going to ask Mr. Ford to try 6 to justify numbers that you want to put in evidence. 7 MR. ROBERT FLEMING: Your Honour, can I try to 8 help articulate and help with the confusion? 9 MR. COMMISSIONER: No, you talk to Mr. Caskey. 10 We're going to take a recess for 15 minutes 11 and we'll get back and finish this. 12 THE REGISTRAR: The City of Waterloo Judicial 13 Inquiry now stands recessed for fifteen minutes 14 15 --- Upon recessing at 11:41 a.m. 16 --- Upon resuming at 12:02 p.m. 17 18 THE REGISTRAR: The City of Waterloo's 19 Judicial Inquiry is now resumed. Please be seated. 20 MR. COMMISSIONER: Mr. Ford...? 21 22 (BRIEF PAUSE) 23 24 MR. COMMISSIONER: Mr. Caskey...? 25 MR. JAMES CASKEY: Thank you, Mr.

1 Commissioner. I may have the way around the impasse. 2 MR. COMMISSIONER: All right. 3 4 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 5 Q: Mr. Ford, would you agree with me, sir, 6 that, mathematical formula, such as we have in Schedule B, 7 can be subject to interpretation and different results, 8 depending on the interpretation you place on the wording? 9 A: I would say that that formula could -- 10 could be interpreted differently, yes, sir. 11 Q: All right. But the mathematical 12 equations are absolute. And if you have a mathematical 13 equation and you do your math property, you end up at the 14 same figure, no matter who does the mathematical equation, as 15 long as they do it properly? 16 A: I would say that, my -- my knowledge of 17 math would say, yes, that would be a fair comment, yes. 18 Q: All right. So that if, instead of a 19 formula in this Schedule B, there had been a mathematical 20 equation, there wouldn't have been a problem in making the 21 calculations and coming out at the same number, whatever the 22 number may be? 23 A: I'd put the word "may not" be a problem. 24 I wouldn't be as absolute as saying there would not be a 25 problem. I would say it'd be fair to say there may not be a

1 problem. 2 Q: So that if a recommendation went forth 3 from this Commission to the municipality to require all 4 contracts to have a mathematical equation in them that might 5 not, in your view, solve the problem? 6 A: It's going to -- that -- that 7 recommendation will be irrelevant. The Provincial Government 8 has already passed regulations to the effect that all 9 financing transactions, leases, whatever the case may be, 10 must have a repayment schedule in them. 11 So, I believe that if -- if this Commission 12 were to recommend doing that, I mean that may -- may be fine 13 that that's one of the conclusions, but the Province has 14 already taken steps to make sure that that does occur. 15 Q: Okay. So it's required the whole 16 repayment schedule to be there so you don't even have to 17 worry about the formula? 18 A: That's correct. And I believe it was a 19 month or so -- a couple of months ago that I read that 20 regulation and I believe it also requires that an interest 21 rate be stipulated or stated in the agreement. 22 Q: Okay. So that the problems that you have 23 in interpretation of this formula in Schedule B have 24 legislatively, in your view, been cured? 25 A: I wouldn't say that they've been

1 legislatively cured. What they have -- what's happened is 2 that the Province has passed a regulation which is different 3 than a piece of legislation. 4 Q: All right. 5 A: And, if I could just make a comment about 6 that, sir, while we're at it. What led the Province to 7 produce that regulation was input from Mr. Stockie and I with 8 respect to what we felt should be important for the Minister 9 of Finance -- the Ministry of Finance in terms of our 10 experience going forward from this. 11 So, in some respect, I'd like to think that 12 some of our comments found their way into that regulation, 13 although I'm not going to be so naive as to think that other 14 people didn't have contribution as well, but I was very 15 pleased to see that that regulation came out. 16 Q: Thank you. Mr. Ford, when was it 17 unequivocally determined by you and or City staff and or 18 Ernst & Young that the lease, leaseback nature of this loan, 19 although characterised as off-balance sheet financing, still 20 needed to be included in the debt capacity reporting 21 calculations for the City? 22 A: I would say, firstly, that at no point in 23 time was Ernst & Young ever involved in the decision as to 24 whether this should or should not be included in our debt 25 calculations.

1 Right from the onset we considered it, and I 2 say we, finance staff, considered that the repayments under 3 this transaction would form part of our calculation for -- 4 for debt capacity. I made it clear to Council on -- any time 5 that I spoke about this issue that the Provincial 6 Government's calculation -- the Ministry of Municipal Affairs 7 and Housing calculation of debt capacity was vague in terms 8 of how lease payments of this nature were to be -- were to be 9 handled for calculation of debt capacity. 10 And I also, at every opportunity, informed 11 Council that, for my purpose and financial advice purpose, we 12 would include those amounts for debt capacity calculations. 13 The reason why I made Council aware of that like that is 14 because we don't do the debt capacity calculation, the 15 Province does. 16 And I didn't want to find a situation where 17 I'm saying that our debt capacity is X and when the Ministry 18 of Municipal Affairs and Housing filed it excluding the debt 19 pay -- the lease payment that they came up with Y and then 20 now I've got to explain why the different -- there's a 21 difference between X and Y. 22 So I always made sure that when I told Council 23 that -- about how we were dealings with these -- these 24 repayments to give them the -- the information that the 25 Province may treat it one way, but we were certainly treating

1 it another way. 2 So the answer to your question, after having 3 gone on for three or four minutes, is that we never really 4 came to a decision with our auditors and our staff at a point 5 that we could say that at the adjournment of this meeting, 6 we're all on the same page, that we're going to include this 7 in our debt capacity. It was just known -- knowledgeable 8 from day one that we were going to include it. 9 Q: Right. And you're satisfied that the 10 City, both the administration and the Municipal Council, knew 11 that it needed to include this in its debt capacity 12 reporting? 13 A: I would expect that they should know it. 14 I said it enough times that they should. 15 Q: Exhibit 30, tab 139, which is the 16 affidavit that you swore in relation to debt capacity. Can 17 you take a look at that please? 18 MR. COMMISSIONER: That's Volume 5? 19 MR. JAMES CASKEY: Volume 5 of 7. 20 21 (BRIEF PAUSE) 22 23 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 24 A: Yes, sir. 25 Q: And that was an affidavit that you swore

1 so that you could tell, I take it, the parties to this 2 transaction that you didn't need municipal Board approval for 3 the transaction? 4 A: That affidavit is saying two (2) things. 5 That's the second thing it's saying, yes, sir. 6 Q: All right. Would you then explain the 7 first part? 8 A: That we're attaching to it the municipal 9 -- the Ministry of Municipal Affairs and Housing's -- at that 10 point, the most recent report we had from them with respect 11 to what the City's -- I used the word, debt capacity, they 12 used the word, annual repayment limit. It's essentially the 13 same thing, but, I used the word debt capacity, it's a little 14 less confusing. 15 We're attaching that document to this 16 affidavit and I'm swearing that the -- well, I'm not swearing 17 that the payments fall within that credit limit, but, that 18 the credit limit is -- that we're within the credit limit. 19 That's -- I don't think I actually say those 20 words, but, the implication is that we're within our debt 21 capacity with this transaction. 22 Q: Because it's 25 percent of revenues that 23 you cannot exceed in your debt capacity, is that -- 24 A: 25 percent of own-purposes revenues, yes, 25 sir.

1 Q: All right. And that was sworn on the 2 27th, which is two (2) days after the closing of the deal? 3 A: Yes, sir. 4 Q: And at that point, you had not made any 5 personal calculations of the Schedule B formula? 6 A: No, I did not, sir. 7 Q: All right. How could you swear an 8 affidavit not knowing what the calculations were? 9 A: Well if you -- if you look at the ARL, the 10 annual repayment limit calculation, that the Ministry has -- 11 Q: That's at tab 140? 12 A: Oh, I'm sorry -- yes, sir. At tab 140, 13 CW-1272, page CW-1272. 14 15 (BRIEF PAUSE) 16 17 Q: Okay. 18 A: About two-thirds of the way down the page, 19 you will see the annual repayment limit, approximately $7.3 20 million dollars. 21 Q: Yes. 22 A: That's the amount of funds on an annual 23 basis as of 1999, based on the 1998 financial statements that 24 the municipality had that could be applied to new debt. 25 If you capitalized that at -- if you look

1 below it, for illustration purposes only, twenty (20) years, 2 10.5 percent, $59 million dollars. So if you capitalize that 3 at 10.5 percent for twenty (20) years, you'd have the 4 capacity to borrow $59 million dollars without, quote, 5 "blowing your limit". 6 If you capitalized that at five percent the 7 number is something in the order of $70 or $75 million 8 dollars. Hence, we were well within out capacity to do this 9 transaction. 10 And, indeed, if you go to thirty (30) years, 11 at any interest rate, we're well within our capacity. 12 And this, of course, sir, is based on the 1998 13 financial statements. If you take this calculation and move 14 it forward to the 1999 financial statements, you see that 15 that number is substantially different, substantially lower 16 -- I'm sorry. 17 The amount of debt payments are substantially 18 lower, and the annual repayment limit that's available is 19 substantially higher, so that our debt capacity would be well 20 in excess of -- probably at -- at five percent, probably 21 approaching $100 million. 22 Q: All right. Would it be fair to say -- I 23 mean, you didn't make the calculations so you didn't know 24 what was in Schedule B, fair to characterize it as, say, you 25 personally swearing an affidavit based upon Mr. Robson's

1 verbal commitment to you, that the calculations were as you 2 thought they should be? 3 A: No, I -- I wouldn't say that. What I 4 would be saying is that the -- the annual repayment limit of 5 $7.3 million would allow us to capitalize approximately -- 6 well, in excess of $59 million, probably more in the order 7 of -- even at the interest rate that we was -- was ultimately 8 determined, something probably in the $65 million range, 9 would be our -- our new debt capacity. 10 I didn't do the calculation, I'm -- I'm kind 11 of guessing. But it would be well in excess of $50 million. 12 Q: When the ultimate calculation came out at 13 $227 million, did you then make the debt capacity calculation 14 to see whether or not you were in compliance or not? 15 A: Yes, sir. And I believe at some point 16 during the proceedings, I think I provided graphical 17 presentation of that. 18 Q: Yes, you did. It's a separate exhibit. 19 A: Yes, it -- I don't know -- I can't put 20 my finger on it right now, sir, but we did have a -- a 21 graphical representation of that. And at no time during the 22 thirty-one (31) year period, did the municipality's debt 23 capacity ever get breeched, for want of a better word, or 24 even come close to being exceeded. 25

1 (BRIEF PAUSE) 2 3 Q: I take it, Mr. Ford, that if the formula 4 had worked out at a lot higher figure than $227 million, 5 that you could have been in trouble with your debt capacity 6 load? 7 A: No. 8 Q: No? 9 A: No. No. If you take a look at the 10 graph -- I don't know where the graph is, unfortunately -- 11 MS. STACEY HOCKING: 217. 12 MR. JAMES CASKEY: It's at tab 217. 13 14 (BRIEF PAUSE) 15 MR. JAMES CASKEY: At tab 217, I'm sorry. 16 That would be at the very end of Volume 7. It's an add-on. 17 THE WITNESS: Oh. It's an add-on. Yes, I 18 understand, yes, sir. 19 MR. JAMES CASKEY: Yes, there it is. 20 THE WITNESS: Okay. If I could have a 21 second, just to get -- familiarize myself with this. 22 23 (BRIEF PAUSE) 24 25 THE WITNESS: Okay, if we -- if we have a

1 look at that tab 217 document, and I'll try and walk us 2 through that graph, as -- as quickly as I can. 3 If you look at the solid line in the middle of 4 the page and perhaps if I hold this up, I can illustrate. 5 This -- this line, here, the top line? 6 7 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 8 Q: The top dark line? 9 A: It says, "debt repayment limit." That 10 represents, on an annual basis, 25 percent of the 11 municipality's own-purposes revenues, over a period of time 12 from 2002 through to 2032, both inclusive. That line 13 comprises from left to right, based upon approximately a 2 14 percent growth in own-purposes revenues. 15 At the bottom there are two (2) lines 16 presented. One of them is a solid line and one is a dotted 17 line. The dotted line represents the annual debt repayments, 18 including payments due per sub lease. And that represents 19 the payments due for the $227 million sub-lease. 20 And you'll see that, at no point in time, does 21 that line come anywhere near the debt repayment limit line. 22 Said another way, if you look at the difference between those 23 two (2) lines? That line -- the dotted line and the one 24 above it, if you look at the space in between the two? I use 25 this word with Council, they never liked to hear me say it,

1 but I'll use it anyways, that represents excess debt 2 capacity. And every time I use those words with Council, 3 they would admonish me for doing that, but that is exactly 4 what it represents, is excess debt capacity. 5 So at no point in time was even the $227 6 million -- sorry, let me change the way I've said that. At 7 no point in time would the $227 million repayment schedule 8 exceed the City's debt repayment limit. 9 Q: At some point in time, if you got above 10 that top black line, then you would be in trouble? 11 A: Yeah. Absolutely. 12 Q: All right. So that because you didn't 13 know, the question is, did you just get lucky? 14 A: No. Absolutely not. Because if you go 15 back to that previous calcu -- previous document at Tab 140 16 and you look at for illustration purposes only section at the 17 bottom, based on the 1998, and I'm very, very careful to 18 point that out, 1998, annual repayment limit available is 19 $7.3 million. If you capitalize that at 10 and a half 20 percent you had the ability to issue $59 million worth of 21 debt. 22 If you capitalize it at 9 percent, that number 23 is probably in the order of 62 million, 63 million, a guess 24 on my part, I haven't done the calculation. The amount of 25 debt that was issued was $48,353,000 which is well below,

1 either the 59 million of the $62 million. So, if you look at 2 it from two perspectives, number one, look at the macro 3 dollar amount being borrowed, it's well below the 59 million. 4 Look at it in terms of the schedule that was 5 prepared subsequently, looking at future 30 year debt 6 repayment and 30 year repayment requirements, both of those 7 would not cause the debt repayment limit to be exceeded. 8 Q: Okay. Mr. Ford, as the City Chief 9 Financial Officer, Treasurer you would have, and should have, 10 all knowledge concerning matters of the City's financing, 11 including such things as alternative sources of funding that 12 the City might hope or expect to receive for various 13 projects; would that be correct? 14 A: I would say that's a fair statement. 15 Yes. 16 Q: On January the 9th of 2001 Linda 17 Whittaker, in contacting Dave Robson and Sandy Pessione 18 concerning the SuperBuild funding program, and that is an 19 application that's in here. It's at Exhibit 30, Tabs 157, 20 158 and 162. 21 Now, in the SuperBuild application you're 22 applying to the Government of Ontario for funding? 23 A: That's correct. 24 Q: And what was that funding for? 25 A: That was for a proposed project to build

1 a -- a facility -- a joint facility for the Waterloo Public 2 Library and the YMCA. 3 Q: All right. At the City's Chief Financial 4 Officer and Treasurer during that time, can you explain why 5 the City is still contacting MFP on this matter since the 6 City has already assigned the MFP financing over to Clarica 7 as of October the 4th, 2000 with Clarica then assigning part 8 to Maritime; that is, MFP's out, Clarica and Maritime are in, 9 why would you still be referring to MFP as a financing 10 partner? 11 A: Well, there's two reasons why we 12 contacted MFP at that point or why we were including MFP at 13 that point, I should say. One of them was for illustrative 14 purposes in the application to illustrate that having had 15 this relationship with MFP it represented a -- a substantial 16 savings in terms of the cost to finance this facility. 17 The second reason why we included them with 18 that -- in that application is that it was our intention that 19 if financing was required for the Library -- the joint 20 Library/YMCA project that we would likely entertain them 21 financing. 22 So there was two reasons why they were 23 included in that application. 24 Q: In the SuperBuild application of 25 April 12th of 2001 we see that the City indicates,

1 "MFP is the City's financial partner in the 2 Millennium Recreation Park Project" 3 was that statement correct, at that time? 4 A: Based on what I learned -- I've learned 5 since this whole matter has evolved that MFP was out of the 6 transaction, if you will, and -- and Clarica was in so, I 7 suppose in that respect we were repay -- we were repaying 8 Clarica not MFP, I could argue that that word "is" is 9 probably incorrect, but, I could also argue that they were 10 the people who put the lease financing transaction together 11 and that they indeed were our partners when the transaction 12 was done. 13 So, I think I could argue both sides, that it 14 is correct and it is not correct and unfortunately, that's 15 probably not the answer you're looking for, but -- 16 Q: Well, in the acknowledge agreement, of 17 October the 4th, 2000, we clearly see that the City had 18 already agreed Clarica shall be entitled to all rights, 19 benefits, powers and privileges of MFP, and shall perform all 20 of MFP's duties and obligations under the lease. 21 And that's what it says in that agreement. 22 The question is, is the City not back peddling here after all 23 the application for SuperBuild was made more than six (6) 24 months after the City signed the acknowledgment agreement. 25 Is the City not embarking upon a bit of

1 puffery of its own here, by making things appear that we are 2 still partnered with our innovative financial partner? 3 Is the City lying to the government, or at the 4 very least breaching its contractual obligations with 5 Clarica? 6 A: I think those are pretty strong words. 7 Are we lying? I would say no. MFP was indeed our financial 8 partner when that transaction was put together and MFP sold 9 that transaction to a third party and have signed all over to 10 a third party. That is correct. 11 Are we lying to the Provincial Government, I 12 would say, no. Are we practising puffery? I would say, if 13 you look at that entire application we are probably guilty of 14 puffery. 15 And I would suggest that every municipality 16 that submitted an application to the Provincial Government 17 under that program was probably guilty of puffery. 18 MR. COMMISSIONER: Now, that you're talking 19 about puffery, maybe you could answer a question for me. 20 I was driving home the other night and I 21 noticed driving past the University, north campus, Columbia 22 Street, there's a road under construction that I presume is 23 intended to lead to the proposed industrial project -- 24 industrial land project that's going in on the -- supposed to 25 go in on the north campus of the University.

1 And low and behold there's a big sign, the 2 entrance to that roadway that talks about SuperBuild being a 3 partner on that project. Do you know anything about that? 4 THE WITNESS: Yes, sir. 5 MR. COMMISSIONER: Tell me about it. 6 THE WITNESS: That's under the infrastructure 7 program. SuperBuild has a number of different programs. 8 This one that we're talking about with the library was the 9 SCTP -- sport, culture and tourism initiatives. 10 There's the -- the university project is under 11 the infrastructure program. 12 MR. COMMISSIONER: I think I'm sorry I asked. 13 But I appreciate the information anyway. 14 THE WITNESS: Two (2) completely different 15 programs, but, they're both called SuperBuild programs. 16 MR. COMMISSIONER: The one -- the sports, 17 culture and -- 18 THE WITNESS: -- and tourism -- 19 MR. COMMISSIONER: -- was that done in concert 20 with the federal government? 21 THE WITNESS: Yes. All of them are in concert 22 with the federal government. 23 MR. COMMISSIONER: Oh they are. 24 THE WITNESS: Yes. 25 MR. COMMISSIONER: But, it's got nothing to do

1 with the -- with the proposition of a potential arrangement 2 with SuperBuild to deal with some other project, downtown 3 Waterloo or uptown Waterloo, or I hesitate to say it, the 4 library? 5 THE WITNESS: All of the projects sir, are 6 exclusive of the -- unfortunately, they all have -- they come 7 under the one umbrella, but, there are -- I think there are 8 four (4) different streams within that umbrella. One is the 9 SCTP, that we're talking about here with respect to the 10 library. 11 The project at the University is under the 12 infrastructure program which those two (2) of four (4) in the 13 overall umbrella. 14 MR. COMMISSIONER: They all develop out of 15 what has been called the application to SuperBuild that has 16 been put in here? 17 THE WITNESS: No, separate applications. 18 Separate applications to separate streams. 19 MR. COMMISSIONER: Okay. So, I am sorry I 20 asked. Go ahead. 21 22 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 23 Q: Mr. Ford, was the SuperBuild Program in 24 existence at the time that -- that this project, the RIM 25 Centre, was conceived?

1 A: It was just starting to be discussed. 2 I -- I believe, I should say, I believe it was just starting 3 to be discussed by the Province. But, this project -- we 4 tried to get a -- a grant under that program for this 5 facility, but, 6 (A) The program -- I believe it was in 7 October/November 2000 was announced. The government had been 8 working on it prior to that but the announcement of it was 9 October or November, 2000 and projects that were already 10 underway were specifically excluded. 11 We tried to -- to get portions of this 12 project -- an application in for them but it -- they -- it 13 wouldn't work. 14 Q: All right. 15 A: Wouldn't satisfy their rules. 16 Q: That may -- may, in part, answer the 17 following. We already know that as early as March, 2001, the 18 City, through Wayne Steffler, was beginning to have inklings 19 that something was wrong with the MFP Financial deal? 20 A: I wouldn't say he -- that there were 21 inklings that there was something wrong. He did some 22 calculations and was scratching his head about them. 23 Q: And you are seeking clarification about 24 the sub lease formula from Mr. Robson, as of April the 5th. 25 On April the 12th, you submit your SuperBuild Application.

1 Wouldn't this back pedalling, this complicity with MFP on the 2 SuperBuild Application, further serve to compromise the 3 City's ability to deal with MFP, given the concerns already 4 beginning to surface about the financing arrangement? 5 A: I would give a short answer and say, no. 6 I'd give a longer answer and say that there weren't any 7 concerns about it. We -- we had some confusion about how the 8 payments were calculated and felt that we had that clarified. 9 I wouldn't say that there was concern about the financing, at 10 that point. 11 Q: Did the SuperBuild Application, and the 12 wording contained in it, in any way compromise the City's 13 desire to get to the bottom of its financing concerns with 14 MFP? 15 A: I -- I'm sorry, I don't -- I don't quite 16 understand that question. 17 Q: You know, don't push too hard or they 18 might blow the whistle on our SuperBuild Application? 19 Does the City change -- correction, does the City chance 20 losing the $7 million SuperBuild dollars, or do we persist in 21 thrashing things out, if we persist in thrashing things out 22 with MFP? 23 A: Well, I'm going to emphatically say, no. 24 And in the fulness of time, with the SuperBuild Application, 25 what happened is, we told the folks at SuperBuild, that MFP

1 was no longer a partner with us, in the application, and 2 removed their names from the application. 3 That was in -- I -- I don't know exactly the 4 date but it would be June of 2000 -- after June of 2001, June 5 4th, 2001. We advised -- as I say, we advised SuperBuild 6 that MFP's name was to be removed and any reference to them 7 to be removed from that application. 8 And we were prepared to suffer the consequence 9 of that, if that meant the application was going to be -- be 10 turned down. In the fullness of time, actually, the province 11 approved it. So even without MFP in there, the province 12 thought that it was a pretty, by their rules, innovative 13 project. 14 Q: All right. Did -- did the SuperBuild 15 application, then, have any bearing on your dealings with 16 MFP, and whether or not you pursued MFP with vigour? 17 A: I would say, no. We pursued MFP with 18 vigour because of the library project? No. 19 We were looking at the -- the library project 20 as being -- the library and YMCA joint project, I should say, 21 as being a -- a pretty -- pretty innovative project that -- 22 that fit the criteria that -- that SuperBuild had. I believe 23 the fact that they approved it, it must have fit their 24 criteria. And it would have required some financing, at some 25 point in time.

1 Our expectation was that that financing may -- 2 may have been with MFP. In the fullness of time, that 3 isn't -- wasn't and isn't going to be the case, but I believe 4 that the project -- I haven't been involved with the project 5 for some many months, but I believe it is still a very viable 6 project, but I don't know where it currently sits. 7 Q: As things began to fall apart with MFP, a 8 meeting was scheduled to take place down at the MFP offices 9 in Mississauga. You did not attend the meeting; is there as 10 reason why you would send your subordinates; very capable 11 subordinates in Steffler and Friedel, to investigate a matter 12 that you had the most intimate knowledge of? 13 A: Is there some -- some reason for that? 14 Q: Yeah. Why didn't you go yourself? Why 15 would you send subordinates? You were the person who knew 16 the most about it. 17 A: I think that both Messrs. Friedel and 18 Steffler are, I would say, wouldn't call them mathematical 19 wizards, let's not go that far, but they are extremely 20 capable mathematics folks and that they were more than 21 capable of having the discussion and getting to the bottom of 22 the issues and I believe that Mr. Stockie and I felt that it 23 would be appropriate to have a different set of eyes, very 24 capable eyes, looking at that -- was being presented. 25 Q: Did that in any way remove you as the

1 point man on the transactions with MFP? 2 A: I certainly didn't perceive myself to be 3 removed from the point position. Mr. Stockie never indicated 4 to me that I was being removed as the point position. Our 5 reason for doing that was to send some different eyes with 6 some pretty -- some pretty capable mathematical capabilities 7 to -- to discuss those matters with MFP. 8 Q: Okay. The question is, you had doubted 9 Mr. Steffler's calculations and took the calculations of 10 Mr. Robson in preference to those of Mr. Steffler, why would 11 you not be the one that went then to see Mr. Robson to -- to 12 work through those issues? 13 A: I wouldn't say I doubted Mr. Steffler's 14 calculations. I think Mr. Steffler was doubting his own 15 calculations because the numbers he was getting were a little 16 -- a little -- I'll use the phrase, out of whack, of what we 17 thought it should be. 18 I don't think in any way shape or form that 19 diminished my view of Mr. Steffler's capability or his 20 knowledge or his ability to deal with mathematical issues. 21 He was having some difficulty, as I was, interpreting the 22 formula. 23 Having Mr. Steffler go with Mr. Friedel to 24 MFP's office was really -- I didn't see it as being out of 25 the ordinary at all.

1 Q: Mr. Ford, now, I'd like to refer you to 2 your testimony of October 31, 2002. On that day, Mr. Richard 3 Stephenson was asking you why the target date for receiving 4 financing from MFP would be set for sometime after the 5 project had already commenced, sometime being September 25, 6 2000 the project was already underway. I will read you this 7 "Q: What, typically, my experience has 8 been in previous organizations where we've 9 been involved in debenture financing or -- 10 or financing of some stripe, is that you 11 try to hit the financing about mid-point 12 through the construction project so that 13 the impact on the repayment side is felt 14 after the project is completed." 15 Now, that is from your transcript, do you 16 recall that as being accurate, Mr. Ford? 17 A: Yes. I do. 18 Q: Right. In your October 31st, 2002 19 testimony, Mr. Stephenson and you continue on. 20 "But as I understand it, you had some 21 conversation, at some point in time, with 22 Mr. Stockie about the fact that, you know, 23 if this whole MFP thing didn't work out, 24 there's always debentures that we could 25 always revert to; is that -- is that my --

1 am I right about that? 2 A: Yes. We had that conversation and 3 also Mr. Stockie, being a former treasurer, 4 would also be aware that that option 5 existed. 6 Q: Okay. And I take it that this whole 7 issue about sort of debentures as 8 contingency plans didn't get a lot of 9 attention during the Summer of 2000? 10 A: No. 11 Q: And was that because you had just -- 12 you had such a high level of confidence 13 that this MFP -- that this MFP thing was 14 going to work? 15 A: Yes, sir." 16 Those statements are accurate, Mr. Ford? 17 A: Yes, sir. 18 Q: I take it from the many testimonies you 19 have given here to date, that debenture financing through the 20 region compromises one of the more -- comprises correction, 21 comprises -- my mind is oftly confused -- comprises one of 22 the more usual and more understood types of City financing -- 23 is that correct, Mr. Ford? 24 A: Yes. 25 Q: And is it fair to say that for City staff

1 and City Councillors are reasonably well versed with that 2 method of financing? 3 A: I would say that I'm well versed with it. 4 I'll go out on a limb and say, I believe, my staff is well 5 versed in it. And I would -- I would think that the majority 6 of Members of Council would understand it. I don't know 7 whether I would say they're well versed in it. But, I'd say 8 they understand it. 9 Q: Mr. Stockie would be well versed? 10 A: I would say that Mr. Stockie would be well 11 versed in it. 12 Q: Okay. And are they also reasonably well 13 versed as to what is necessary to qualify to get debenture 14 financing? 15 A: Same group that you spoke of a moment ago? 16 Q: Yes? 17 A: I would say Mr. Stockie would be well 18 versed, my staff -- the ones that deal with capital projects 19 would be well versed in that requirement. 20 I believe again, I'd say that the majority of 21 Council would be well versed in it, but, whether they're all 22 -- they would be knowledgeable, but, whether they're all well 23 versed in it, I don't know whether I'd say that. 24 Are they all knowledgeable about it, I would 25 say that they -- that generally they know that there is a

1 requirement or there's a limit or there's some formula that 2 has to be met in order to have debt financing. 3 I'm not sure that they would know the intimate 4 details of it. 5 Q: Both you and Mr. Stockie were of the mind 6 that should the MFP financing collapse during the summer of 7 2000, or even at the very last minute on September 25, 2000, 8 then debenture financing was your best contingency plan as a 9 sort of safety net, is that correct? 10 A: I would say that that is a fair statement, 11 yes, sir. 12 Q: I think that you indicated to Mr. 13 Stevenson in your prior testimony that reasonable debentures 14 were available in a heartbeat? 15 A: I believe that's the word I used. 16 Q: And you know Mr. Larry Ryan who works for 17 the Regional Municipality of Waterloo? 18 A: I do indeed, sir. 19 Q: As the Chief Financial Officer in the 20 Region of Waterloo, would it be fair to say that Mr. Ryan 21 would have intimate knowledge and dealings with the debenture 22 issue process? 23 A: I would say that would be one of the 24 requirements you have there, yes, sir. 25 Q: All right. Mr. Ryan provided a letter

1 that is part of Mr. Ryan's Will Say material -- do we have 2 that? 3 MR. COMMISSIONER: Mr. Ryan has been 4 subpoenaed to testify? 5 MR. JAMES CASKEY: Yes. 6 MR. COMMISSIONER: What are you going to ask 7 this witness? 8 9 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 10 Q: On page 3 of Mr. Ryan's letter, Mr. Ryan 11 says this. 12 "Each participating municipality also 13 provides relevant documentation and 14 approval, i.e. OMB orders, construction 15 bylaws, MOE orders, Board resolutions, debt 16 capacity levels, projects to be financed by 17 the new debt issue are not to have been 18 commenced. And the life of the asset 19 should at least match the term of the 20 issue." 21 The underlying part there is, "are not to have 22 been commenced.". Were you aware that if a project had been 23 commenced that debenturing would not have been available to 24 you? 25 A: Debenturing is available for any project

1 whether it's been commenced or not. The region prefers that 2 it not be commenced. It would require an additional level of 3 approval because the project had already been commenced, in 4 order for debentures to be issued. 5 Some of the comments in there, as well, I'd 6 speak to is that Mr. Ryan -- I believe that's Mr. Ryan's 7 letter, although I haven't seen -- 8 Q: Yes -- 9 A: -- he refers to OMB Orders. OMB Orders to 10 my knowledge, are not required for debt financing unless 11 there's some really obscure reason for it. The main one 12 would be that you're approaching your debt capacity limit. 13 But, in my experience and in my history, I 14 financed projects with debentures that, in fact, had 15 commenced. 16 Q: All right. If, in fact, you are mistaken 17 about that, and if, in fact, you could not have been able to 18 obtain a debenture because the project had commenced -- 19 A: Yes? 20 Q: -- would you agree that both you and Mr. 21 Stockie were sadly mistaken about your shared position? 22 A: Our shared position of? 23 Q: That you could obtain -- 24 A: Oh. 25 Q: -- debenture financing as a back up for

1 safety. 2 A: Well, I wouldn't -- I don't know about 3 Mr. Stockie but I wasn't sadly mistaken. I've done debenture 4 financing at other municipalities, so I know that debentures 5 can be issued for projects even though they have commenced. 6 Q: If, in fact, you're wrong about that, 7 would you not have painted yourself into a corner, so that 8 you couldn't -- you've gone ahead and -- and you don't have 9 MFP, you can't get debenture financing and yet you've got the 10 project underway? 11 A: Well -- 12 MR. COMMISSIONER: That isn't what he said. 13 In fairness to the witness he has said that his experience is 14 that debenture financing would be available, even though the 15 project has commenced. If somebody wants to stand up here 16 and give sworn testimony that that's not the case, then we'll 17 hear from them. 18 But, I don't -- you know, I don't know how you 19 can say that -- that Mr. Stockie and Mr. Ford had painted 20 themselves into a corner because debenture financing isn't 21 available. He's already said, in his opinion, it is 22 available. So, where do we go? 23 MR. JAMES CASKEY: All right. 24 MR. COMMISSIONER: I just don't -- you know, 25 it's argumentative. And I think properly left to submissions

1 on that issue. 2 MR. JAMES CASKEY: As you know, Mr. 3 Commissioner, the rest of the questions lead on from there, 4 that the Coalition would like to have asked of Mr. Ford, as 5 to whether or not, once he's painted himself into that 6 corner, would it colour his ability to get himself to get 7 himself out of that pickle? 8 MR. COMMISSIONER: Well, you can ask him the 9 question, but he's already said that, as far as he's 10 concerned, that there -- there's a method of making 11 debenture available. 12 Mr. Ryan's going to come up here and he's -- 13 he's under subpoena, he's going to testify. We'll find out 14 what he says. 15 MR. JAMES CASKEY: Yes. 16 MR. COMMISSIONER: And, as I said, it 17 becomes -- it then becomes testimony of Mr. Ford becomes 18 argumentative. And so, what are the other questions? 19 You can ask him. Ask the questions. 20 MR. JAMES CASKEY: All right. 21 MR. COMMISSIONER: You can ask the questions. 22 23 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 24 Q: Was there ever any consideration given, 25 Mr. Ford, that you were in that state, where you had started

1 the project, MFP not being available, and debenturing not 2 being available? 3 A: Not at all. Not at all. I felt a 4 debenture -- I -- I believed then I believe now and I 5 continue to believe that debenture financing is available, 6 period. So it didn't effect anything, at all; it's 7 available, period. 8 Q: Did you ever contact Mr. Ryan and 9 specifically ask him whether or not, having started the 10 project, you could still get debenturing? 11 A: I don't recall whether I ever had that 12 specific conversation with Mr. Ryan. I did have 13 conversations with Mr. Ryan earlier on, with respect to the 14 region financing this particular project. I never formally 15 asked him to give me a response or a quote or anything of 16 that nature. I did have discussions with him. 17 Did I have a discussion with him in and around 18 the September time period of 2000? Not that I recall. I was 19 aware that, from previous conversations, previous experience, 20 previous discussions with -- with Mr. Ryan, what the process 21 was required for debentures, et cetera. 22 So -- but I -- I don't recall that I had a 23 specific request -- specific discussion with him with respect 24 to this specific project. 25 Q: All right. There is -- Exhibit 26 is a

1 letter from Mr. Seiling to Mr. Herb Epp. And it says, in 2 response to Mr. Epp's letter, number 1, 3 "No-one approached the region's staff or 4 myself, either formally or informally, 5 directly or indirectly, about the region 6 providing financing for the RIM Park 7 Project." 8 Does that not run contrary to what you've just 9 talked about? 10 A: Well, I -- I did not make a formal 11 request to the region, to Mr. Ryan or to anybody in 12 Mr. Ryan's staff for a quote, terms, rates or anything like 13 that with respect to this specific project. 14 I talked to him about the options in terms of 15 financing. We have con -- when I was the Chief Financial 16 Officer here, we had conversations on many occasions about 17 debenture financing. Did I ask for a specific quote for this 18 project? No. Did we discuss this particular project in 19 terms of financing it? I believe we did. 20 Did Mr. Ryan -- I'm sorry, Mr. Ceiling, it 21 is -- 22 Q: Yes. 23 A: -- writing that? He may be writing it 24 from the perspective, was anything in writing and formally 25 done, the answer is no. They were in -- they were

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1 discussions with Mr. Ryan and they were done by telephone, 2 they were done in person and Mr. Ryan also had that 3 discussion with all of the area treasurers at the regular 4 monthly meetings that the group had. 5 Q: Right. And the letter goes on to say 6 "Once the matter had become public, the 7 region was asked to calculate for the 8 financing package from the region might 9 have involved." 10 Do you recall -- 11 A: I never asked -- 12 Q: -- were those words -- 13 A: -- I never asked them to do that. 14 Q: I'm having a little difficulty. Bear 15 with me just a moment. 16 A: Yes, sir. 17 MR. COMMISSIONER: Well, somebody asked the 18 region what it would take to finance $48 million? 19 MR. JAMES CASKEY: Yes. 20 MR. COMMISSIONER: And Mr. Ceiling responds, 21 presumably on the advice of his staff, that this is what it 22 would have taken in paragraph 3 of this letter -- 23 MR. JAMES CASKEY: Correct. 24 MR. COMMISSIONER: -- Exhibit 26? So, that's 25 the rate, 6.6 percent, annual payments of $3,700,000 over 30

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1 years. 2 MR. JAMES CASKEY: Yea, so if the region had 3 been asked -- 4 MR. COMMISSIONER: I don't know who asked. 5 MR. JAMES CASKEY: I think it said "Had it 6 been asked." 7 MR. COMMISSIONER: Oh, yes. I'm sorry. "Had 8 it been asked." Yes. 9 MR. JAMES CASKEY: Yeah. So they -- what 10 it's going on to say is, if you'd bothered to ask the region, 11 this is what the answer would have been? I think that's the 12 wording that's there. 13 MR. COMMISSIONER: The other thing that I 14 want to ask about this particular letter and we'll obviously 15 have to hear more about it from Mr. Ryan or Mr. Ceiling if 16 he's got this. Mr. Ceiling unequivocally states that no one 17 approached the region's staff or himself and that's contrary 18 to what you say? 19 THE WITNESS: I didn't make a -- I didn't 20 make a formal request to Mr. Ryan or any member of his staff 21 for a quote for this particular project. But, on many 22 occasions, discussions about debt financing, availability of 23 it, what the market rates are, what the market terms are, how 24 active the market is, all of those discussions were had with 25 Mr. -- Mr. Ryan on a regular basis.

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1 In terms of going back to an earlier period of 2 time, and I would say probably in the early 2000, maybe even 3 before February 2000 time-frame, there was a discussion with 4 regional staff with respect to what the rates at that time 5 were. 6 I have that conversation as well as my staff 7 had that conversation. So we knew at that time what a 8 typical debenture issue at that time -- a traditional 9 debenture issue at that time would have been. But it wasn't 10 a -- wasn't a request -- a formal request for a specific 11 quote for this project. 12 13 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 14 Q: Mr. Ford, if, in fact, you had known that 15 debenturing wasn't available, could that realization have 16 contributed to the City remaining silent for so long while it 17 wondered what to do about the MFP financing problems? 18 A: Well -- 19 MR. RICHARD STEPHENSON: I -- I mean, I think 20 this is an - a level of hypothetical that is, I think, 21 getting a little bit beyond the pale. I mean, it's totally 22 inconsistent with all the evidence that we've heard to date. 23 MR. COMMISSIONER: I agree. I agree that the 24 what if's don't help me. It's obvious that, if you take the 25 what if's to the logical conclusion, that you get the answer

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1 you want, or that Mr. Linton wants. You know, it doesn't 2 help me. I'd like to move on. 3 MR. JAMES CASKEY: Mr. Ford, do you believe 4 that Mr. Stockie should bear no responsibility in this whole 5 matter? 6 MR. COMMISSIONER: Do you still believe, he's 7 already said, Mr. Stockie didn't. Have you had any chance to 8 think about it, to change your mind? 9 THE WITNESS: No, I, you know, my position on 10 it hasn't changed from what I said previously. 11 12 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 13 Q: All right. He's the ultimate overseer at 14 the City? 15 A: Yes is, indeed. 16 Q: He's the one that is the go between, 17 between the elected people and the rest of the 18 administration? Isn't he the one that bears the 19 responsibility to the Council for ultimately what happens? 20 A: I would say that that's a fair comment. 21 That, yes, ultimately bears that responsibility. 22 Q: And -- 23 24 (BRIEF PAUSE) 25

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1 Q: "The Coalition readily acknowledges no 2 evidence has been introduced to date that 3 would allude to these final few questions. 4 The Coalition also acknowledges that the 5 purpose of this Inquiry is not to affix 6 blame. The Coalition simply wishes to ask 7 the following questions for the Inquiry 8 record, to be certain that there were no 9 such mitigating circumstances affecting Mr. 10 Ford's handling of things. This handling 11 forming part of the subject matter of this 12 Inquiry. We apologise in advance to Mr. 13 Ford, if he finds these last questions to 14 be offensive." 15 MR. COMMISSIONER: I've read the questions, I 16 don't find them to be offensive, myself. I'm going to let 17 you ask them. 18 MR. JAMES CASKEY: Thank you, sir. 19 20 CONTINUED FOR THE COALITION BY MR. JAMES CASKEY: 21 Q: As with Mr. Stockie, did you also 22 consider Mr. Robson to be a personal friend? 23 A: A personal friend. I would say that he 24 was a business acquaintance and a business friend. Would I 25 -- would I classify him the same as a personal friend, of

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1 which I have many? I'm not sure. I'm not sure whether I 2 would or I wouldn't. 3 I classify him as a -- as a friend, I'm not 4 sure whether I'd go to the point that I'd say he was a, you 5 know, a bosom buddy and a personal friend. I'm not sure I'd 6 go that far. 7 Q: Are you at all in contact with Mr. 8 Robson, today? 9 A: I haven't spoken to Mr. Robson since June 10 4th, 2001. 11 Q: Did you ever receive or are you still to 12 receive any kind of finders fee, bonus, commission, or other 13 form of valuable consideration for your part in introducing 14 MFP to the City of Waterloo and/or your part in arranging the 15 financial agreements as made between MFP and the City of 16 Waterloo? 17 A: I'll simply say, no. 18 Q: Did you offer to resign your employment 19 with the City of Waterloo or was it negotiated that you 20 should resign your employment with the City of Waterloo? 21 MR. WAYNE BUMSTEAD: I want to rise on that. 22 MR. COMMISSIONER: I find that irrelevant. 23 24 CONTINUED BY MR. JAMES CASKEY: 25 Q: Was it part of your resignation agreement

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  1  with the City of Waterloo that you should be the only one at
  2  the City of Waterloo, who willingly and openly shouldered
  3  complete and utter responsibility for the mishandling of the
  4  RIM Park financing deal with MFP?
  5                 A:   Nothing of that nature was discussed
  6  during the -- during my exit with the municipality.
  7                 MR. JAMES CASKEY:   The Coalition wishes to
  8  thank Mr. Ford for his time and effort to put the answers to
  9  his questions.  
 10                 MR. COMMISSIONER:   Okay.  Thank you very
 11  much.  Now, Mr. Bumstead, your next in the barrel?
 12                 MR. WAYNE BUMSTEAD:   Yes.
 13                 MR. COMMISSIONER:   I think we'll -- we'll
 14  recess now until two o'clock.  And do you have any idea how
 15  long you'll expect to be?  Roughly.
 16                 MR. WAYNE BUMSTEAD:   I would think I'll be a
 17  couple of hours with Mr. Ford.
 18                 MR. COMMISSIONER:   Okay.  I understand Mr.
 19  White is standing in the wings.  I don't want him required to
 20  hang around if he doesn't want to, but he may want to, I
 21  don't know.  I'll let you have a conversation with him and
 22  you can let me know what -- what he wants to do, if you want
 23  to get him started this afternoon.
 24                 MR. JAMES CASKEY:    Thank you.
 25                 THE REGISTRAR:   The City of Waterloo's

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1 Judicial Inquiry now stands adjourned until 2:00 p.m. 2 3 --- Upon recessing at 1:00 p.m. 4 --- Upon resuming at 2:00 p.m. 5 6 THE REGISTRAR: The City of Waterloo Judicial 7 Inquiry is now resumed. Please be seated. 8 MR. COMMISSIONER: Before Mr. Bumstead 9 begins, I forgot this morning to announce that on Thursday, 10 we'll be rising at -- we'll sit until one o'clock. I have 11 a -- my replacement is arriving down at the -- at the court 12 house so I want to be there to make sure he gets sworn in 13 properly. So, we'll sit from ten o'clock until one o'clock 14 on Thursday. 15 Mr. Ford...? 16 THE WITNESS: Yes, sir. 17 MR. WILLIAM McDOWELL: Just for the record, 18 sir, who is your replacement? 19 MR. COMMISSIONER: My replacement is another 20 Irishman. 21 MR. WILLIAM McDOWELL: Never enough. 22 MR. COMMISSIONER: Pat Flinn is his name. 23 And he can hardly wait. 24 Mr. Bumstead...? 25 MR. WAYNE BUMSTEAD: Thank you, Mr.

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1 Commissioner. 2 3 CROSS-EXAMINATION BY MR. WAYNE BUMSTEAD: 4 Q: Mr. Ford, I'd like to begin by getting a 5 little bit more about your background and experience. I know 6 you touched on it a little bit, but there's some more detail, 7 I think, that we should bring out at the Commission. 8 I understand that you started your municipal 9 career for the City of North Bay in about 1975, is that 10 right? 11 A: No, actually I -- I started my municipal 12 career for the City of St. Catherine's earlier than that. 13 Q: All right. 14 A: In North Bay was where I -- I moved to a 15 senior management position. Prior to that I'd -- the most 16 senior position I had was Chief Accountant. 17 Q: All right. So when did you -- when did 18 you work for the City of St. Catherine's? 19 A: 1967 to about '72. And then I worked for 20 the School Board for about a year and half, and then went to 21 North Bay. 22 Q: All right. So, you're at the City of 23 North Bay in 1975, is that right? 24 A: May -- May, 1975, that's correct. 25 Q: And I understand the position you

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1 initially held there was Deputy Treasurer? 2 A: It wasn't called Deputy Treasurer, but 3 that's, essentially, what it was. It was a head of the 4 Accounting and Finance operation, but the Deputy Treasurer 5 was retiring, so I was hired as a -- I can't remember what 6 exactly the title was, but it was essentially the Deputy 7 Treasurer. 8 Q: And you performed the duties of that 9 position, whatever it was called, for about a year and a 10 half, before you -- 11 A: That's correct. 12 Q: -- before you became the Treasurer for 13 the City of North Bay? 14 A: That's correct. 15 Q: So that would have been in 1976 or 1977? 16 A: I believe it was -- I was appointed 17 Treasurer, I think it was October, 1976. 18 Q: And I understand you carried on, then, as 19 the Treasurer for the City of North Bay, until 1984, is that 20 right? 21 A: Yes, that's correct. 22 Q: Okay. And then you were out of -- of 23 municipal employment, for a period of time, before you were 24 hired by the City of York in 1996, is that right? 25 A: That is correct. That is correct, sir.

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1 Q: And again, your position with the City of 2 York was Treasurer, is that right? 3 A: That is correct. 4 Q: And I understand that you were with the 5 City of York through 1996 and 1997, and then became the 6 Treasurer of the City of Waterloo January 1st, 1998? 7 A: That's correct. 8 Q: And -- and of course, taking that through 9 to September, 2000, when this transaction was signed, that 10 would be two and a half years as the Treasurer of the City of 11 Waterloo at that point, correct? 12 A: Yes, that's correct. 13 Q: Roughly? 14 A: Yeah. Roughly two and a half years. 15 Q: All right. Leaving aside, I guess, the 16 City of St. Catherine's and -- and considering your 17 employment at the City of North Bay and the City of York and 18 the City of Waterloo, it would appear that you had something 19 in the order of 13 or 14 years as either a Deputy Treasurer, 20 we'll call it that, or a Treasurer of a municipal corporation 21 prior to September, 2000? 22 A: Yes. That would be fair. 23 Q: Okay. And during that -- that period of 24 time, I understand that you had some involvement in debenture 25 financings and long-term municipal financings?

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1 A: Yes. I did. 2 Q: And could you describe in a little bit 3 more detail what your experience and involvement was? 4 A: When I was in North Bay, North Bay is a 5 single tier municipality, that means there isn't a region 6 above it and so that municipality is responsible for all of 7 the things that the City of Waterloo, for example, and Region 8 of Waterloo are responsible for, including policing, social 9 services and because it's relevant to what we're speaking 10 about here, debt financing. 11 During the period of time that I was Deputy 12 Treasurer and Treasurer, I was involved with, I don't know 13 the exact number, but six (6) or seven (7) long-term debt 14 financing -- debt financings. Those were all in the order of 15 four (4) to $6 million each. 16 I was also involved with, during that same 17 period of time, possibly three (3) or four (4) smaller debt 18 financing projects which we called "over-the-counter". Small 19 -- small issues, 200, $300,000 that we sold locally to local 20 investors. Whenever we had one of the major debenture 21 issues, one of the complaints was that the local investor 22 didn't have an opportunity to purchase a municipal, City of 23 Waterloo municipal debenture. 24 So we would typically, every second year or 25 so, have a small 200 or $300,000 debenture issue. We called

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1 it "over-the-counter". The other debenture issues were major 2 -- major issues, as I said, in the four (4) or $5 million. I 3 think the biggest one I ever did was six (6) or $6.5 million. 4 Q: Now, all of that took place while you 5 were at the City of North Bay? 6 A: Yes, sir. 7 Q: Were you involved in any long-term or 8 debenture financings while you were at the City of York? 9 A: No, sir. City of York, it was a -- I 10 don't know whether you want to call it a closed city. It was 11 totally surrounded by other municipalities. There was no 12 room for expansion or improvement. It was mainly in a 13 maintenance, caretaker mode. There were no major capital 14 expenditures undertaken. So that most of the capital 15 projects were financed from current tax revenues. There were 16 no debenture issues. 17 Q: All right. Were you involved with any 18 debenture financings or long-term financings at the City of 19 Waterloo prior to the -- the one that's the subject of this 20 Inquiry? 21 A: No, sir. 22 Q: All right. So, I take it then, your 23 experience in -- or your involvement in financings consisted 24 of what you gained while you were at the City of North Bay? 25 A: Yes. That's correct. I was also -- the

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1 City of Waterloo did not do any debt financing -- debenture 2 financing or any long-term financing, other than this 3 facility here, during my term as Chief Financial Officer. 4 There were many occasions where there were 5 discussions with the region about the inner workings of the 6 -- the current inner workings of the market, things of that 7 nature, but the Municipality of the City of Waterloo tried to 8 finance most of the projects without going to debentures. 9 Q: All right. Now, you've described the 10 size of these other financings that you have experience with, 11 a maximum of $6.5 million. Of course, the one that's the 12 subject of this Inquiry was substantially larger than that? 13 A: Yes. 14 Q: How do you feel that your experience with 15 debenture financings prepared you for the one that -- that 16 we're dealing with here today? 17 A: I wouldn't -- I wouldn't say that I'm an 18 expert in debenture financing, that would be far too 19 generous. I would say that I'm fairly knowledgeable, very 20 knowledgeable, extremely knowledgeable, maybe something of 21 that nature but I wouldn't say I'm an expert. 22 And I don't think -- I don't believe that 23 there was anything that occurred during the course of the 24 discussions about this transaction that I wasn't -- I didn't 25 understand, I wasn't capable of understanding, there weren't

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1 any rocks unturned. 2 I felt very comfortable throughout the whole 3 process with what was going on. 4 Q: Did the size of this financing for the MRP 5 cause you any concern, given that you'd only been involved in 6 financings up to 6.5 million dollars before? 7 A: Not really. No, a debt instrument of 8 financing, I don't want to say, once you've done one, you're 9 an expert. But the background, the knowledge and how the 10 mechanisms of the -- they're pretty consistent whether it's a 11 small issue or big issue. 12 Q: All right. Now, clearly all 13 MR. COMMISSIONER: Excuse me, Mr. Bumstead. 14 The dealings with MFP did not involve any debenture issues as 15 such? 16 THE WITNESS: No, sir. 17 MR. COMMISSIONER: This was a new adventure 18 for you as well as for others in the City? 19 THE WITNESS: I would say that that would be a 20 fair comment, yes. 21 MR. COMMISSIONER: And if I recall the 22 evidence correctly, you're familiarity with the -- with what 23 you understood to be a lease and sub lease arrangement, was 24 first brought to your attention through the City of Windsor, 25 is that correct?

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1 THE WITNESS: I had some familiarity of how 2 leasing worked prior to that, but, for this particular 3 transaction, the first exposure I had to it, yes, was from 4 the City of Windsor. 5 MR. COMMISSIONER: Thank you. 6 THE WITNESS: Perhaps I could add another 7 comment, Mr. Bumstead, during the period of time that I was 8 in North Bay, I was also involved with -- I'm not sure the 9 number, but, at least two (2) and possibly three (3) credit 10 rating exercises. 11 The credit rating that was done through MFP 12 was done with CBRS. I believe that when I was in North Bay, 13 we used Standard and Poors, same company -- same thing just 14 different company. 15 But, I've been through at least two (2) or 16 three (3) credit ratings, so I was familiar with -- with the 17 things that make up a municipalities credit rating and credit 18 risk, as well. 19 20 CONTINUED BY MR. WAYNE BUMSTEAD: 21 Q: You say you'd been through a credit 22 rating, what do you mean, you engaged someone to do a credit 23 rating? 24 A: Yes. When I was in North Bay, we did that 25 on, I'm not sure -- the exact number, but, it was at least

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1 two (2) or three (3) occasions. 2 Q: Now, the earlier experience that you had 3 at North Bay, I think you already indicated they were all 4 debenture finances? 5 A: Yes, sir, all of them were debenture 6 finances. 7 Q: Nothing comparable really to the lease, 8 lease back arrangement that MFP was offering here? 9 A: That's correct. 10 Q: But, I take it that in those debenture 11 financing that you had been involved with, there were certain 12 consistent elements to them, including -- there would be a 13 necessity to deal with the repayment terms -- 14 A: Yes. 15 Q: -- for the borrowing? 16 A: Yes. 17 Q: And there would be a document generated in 18 those transactions that would be the debenture itself, I 19 suppose? 20 A: Yes, the debenture documents, yes, that's 21 correct. 22 Q: And typically did the debenture document 23 have a schedule in it that set out in it payment terms? 24 A: Typically there would be a repayment 25 schedule that would be attached to the debenturing bylaw that

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1 would having the annual repayment terms on it. Annual 2 repayment amounts on it. And typically the repayment terms 3 would be contained somewhere in the consolidating bylaw. 4 Q: All right. So, from your previous 5 experience you were used to seeing payment schedules? 6 A: Yes, sir. 7 Q: But, they were schedules that would set 8 out annual amounts for the payments to be made over the life 9 of the debenture? 10 A: Yes, sir. 11 Q: And did you ever see a payment schedule in 12 your previous experience that contained a formula? 13 A: No, I don't recall it at any point 14 previously I'd seen a repayment schedule with a formula in 15 it. 16 Q: All right. And would it be fair to say 17 that the payment schedules that you'd seen in your earlier 18 experience were schedules that looked more or less like 19 Schedule B to the head lease? 20 A: Save and except that Schedule B to the 21 head lease is done on a monthly basis, typically the 22 schedules that I would have seen would have been, at the very 23 minimum, an annual payment, but more typically, a semi-annual 24 payment. 25 Q: In the other instruments that you -- that

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1 you were involved with, was the interest rate set out? 2 A: Yes. 3 Q: And, I take it that the instruments would 4 also show the principle amount to be repaid? 5 A: Yes, sir, that's correct. 6 Q: And I take it that, in the other 7 instruments, you didn't have to do any calculations to work 8 back to an interest rate, or -- or arrive at a present value, 9 anything of that nature? 10 A: No, I didn't do any -- anything of that 11 nature, no, sir. 12 Q: And in the other instruments, were the -- 13 the payments typically blended principle and interest 14 payments? Or, how did they -- how did they appear? 15 A: Usually the repayment schedule would 16 show -- there are a couple of different repayment schedules. 17 Sometimes there would be a repayment schedule that would have 18 the principle separate from the interest payment. Sometimes 19 you -- there would be a schedule where you have an interest 20 payment and then a second payment in the year, if it was a 21 semi-annual instrument, where the interest and pen -- I'm 22 sorry, interest and principle would be blended. 23 So there's, you know, a variety of different 24 types of presentations, but they would be, you know, 25 either/or both.

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1 Q: All right. Typically, did the payment 2 schedules show a total for the payments, at the end? 3 A: I don't recall whether the -- the 4 repayment schedule showed a total. 5 Q: Do you recall ever performing the 6 exercise of adding up the payments in the schedule to see 7 what the total was? 8 A: I don't recall that I ever did that, on 9 any of the issues I was involved with. 10 Q: Now, I understand that, in the course of 11 your career, you've had an opportunity to attend AMCTO 12 conferences? 13 A: Yes, on a -- quite -- quite a number of 14 them. 15 Q: Quite a number of occasions? 16 A: Quite -- quite a number of them, yes. 17 Q: Yes. And in fact, we've seen in the 18 material that's been presented here, a copy of a presentation 19 that you made to one of those conferences? 20 A: Yes, sir. 21 Q: And I take it that you've -- you've had 22 an opportunity to talk to your fellow Treasurers and CFO's 23 about their practices in the performance of their duties? 24 A: Yes, on many occasions. 25 Q: And have you had an opportunity to talk

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1 to them about how they assess and consider debenture 2 instruments and financing instruments? 3 A: How they -- how they assess -- they 4 assess them? 5 Q: Yes, how they -- 6 A: And deal with them? 7 Q: -- how they deal with them? 8 A: I haven't talked to all of them about 9 that specific question, but I have spoken to a number of -- 10 of Treasurers about them -- about that. 11 And, typically, their -- their response has 12 been that they generally accept the repayment schedule as 13 being what it is, and don't add it up or do any present value 14 calculations or calculate any of the interest amounts. And 15 that they -- they assume that the, typically, that the 16 repayment schedule is correct. 17 Q: All right. And I think you've already 18 testified to the fact that you had specific discussions with 19 officials in Windsor and Leamington -- 20 A: Yes. 21 Q: -- about their transactions with MFP? 22 A: Yes. 23 Q: And did you discuss with them about 24 whether they had performed any calculations of the schedules, 25 in their instruments?

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1 A: Yes, I did ask that question specifically 2 of Windsor. And they said that they had not. My response to 3 them was, I think something along the lines, I think you'd 4 better. 5 Q: Well, when -- and we should deal with 6 when you had that discussion. 7 A: That particular comment was made after -- 8 before June 4th and after May 20 -- I think if Monday was the 9 26th of -- of -- whatever the Monday was, the 26th or 27th of 10 May. 11 When the suggestion was made that there might 12 be something wrong with the net present value calculation of 13 the -- of the lease, I spoke to the City of Windsor and asked 14 them if they'd ever done a calculation on it and they said, 15 no and I suggested to them that they should. 16 Q: All right. 17 A: Subsequent to June 4th, I was speaking 18 with the folks in Leamington and I asked them that same 19 question and -- at that time -- and I said the same thing to 20 them, I think you should have a look at the repayment 21 schedule -- the repayment formula. 22 Q: Have you ever received any information, 23 Mr. Ford, that indicates to you that other municipalities go 24 through a -- a calculation of payment schedules with respect 25 to long-term financings that they enter into?

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1 A: I -- no. No, I haven't. 2 Q: And did the -- did the experience that 3 you had from the City of North Bay, in dealing with those 4 debenture financings, affect the manner in which you 5 considered and -- and dealt with the MFP documentation? 6 A: I don't believe so. I think I treated 7 the information in the process with the -- with MFP the same 8 way as I did when I was in North Bay. 9 Q: Dealt with it in the same way? 10 A: In the same fashion, the same manner, 11 yes. 12 Q: All right. I'd also -- I'd like to ask 13 you some questions about the tax flow through aspects. 14 You've admitted, in your testimony here, that you're not a 15 tax expert, Mr. Ford. 16 And I think you've also indicated that you had 17 tax expertise available to you, but that you -- you didn't 18 utilize that expertise -- you didn't ask the tax experts to 19 comment upon the MFP model, or -- or the documents that they 20 produced. Is that right? 21 A: Yes, I'd say, yes, to both questions. 22 Q: And I think, in response to a question 23 from Mr. Caskey, you indicated that you didn't see any reason 24 for that to be done because you felt there was no tax impact 25 upon the City from these -- from this transaction?

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1 A: I think there's two (2) levels there. 2 One of them is that there are -- the City of Waterloo is not 3 a tax paying entity so there is no tax impact to the City of 4 Waterloo. 5 And secondly, that the -- the tax liability, 6 tax application, whatever words you want to use, rested with 7 MFP and not with the City. 8 Q: All right. And, how did you come to that 9 conclusion? Was that something you arrived at on your own or 10 was it a subject -- was it a subject of discussion? 11 A: Well, for the first part -- 12 Q: First part, yes. 13 A: -- the first part's obvious -- 14 Q: Sure. 15 A: -- the municipality doesn't pay tax. For 16 the second part, it was what was represented to me. And many 17 of the representers said to me, by -- by Mr. Robson, that -- 18 that the tax liability was all on MFP's side of the 19 transaction. 20 Q: All right. And, I think you've already 21 testified to the fact that there was some -- or you did 22 receive some information that there was a tax consideration 23 being made by somebody? 24 A: Yes. 25 Q: And that was something you heard from Mr.

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1 Robson? 2 A: That's correct, sir. 3 Q: And what was it that he told you, 4 exactly? 5 A: Well, he -- he told me a number of things 6 about it. The -- the one thing that he said was that, you 7 know, the tax liability all rests with MFP, that the -- that 8 any effective and adverse ruling from the CCRA, 9 Canadian -- the name escapes me now, the tax department -- 10 any negative ruling from the tax department would be their 11 liability, that they would -- they would assume the liability 12 to take care of that. 13 Q: "They" being MFP? 14 A: "They" being MFP, I'm sorry, yes. And 15 that one other comment that was made that stands out is 16 that -- that they had received a -- Mr. Robson advised me 17 that they'd received a -- an opinion from -- from their -- 18 their law firm, McCarthy Tetrault, that the transaction 19 qualified for the tax flow-through application. 20 Q: Tab 59 of Volume 2, Mr. Ford, you may not 21 have the turn of this, I'll just remind you that this is the 22 presentation from Dave Robson that you obtained from him in 23 order to generate the presentation that you subsequently made 24 to the AMCTO? 25 A: Yes, sir.

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1 Q: And at page 2153 of the documents that 2 were given you by Mr. Robson there's a -- there's a section 3 there that I believe is a statement that Mr. Robson was 4 planning to make when he presented this and he's speaking 5 here about the -- an example that is the Essex-Windsor MFP 6 Partnership and he says as follows; he says, 7 "This solution addressed current issues and 8 future issues. It lowered costs long-term. 9 It is pay-per-use so it is measurable. It 10 can be benchmarked against other solutions 11 in an on-going fashion." 12 And then he goes on and says, 13 "... and it was crafted with the help of 14 outside experts. Our experts in this case 15 meaning all the work didn't fall on the 16 shoulders of the municipal partners." 17 Did Mr. Robson tell you about the outside 18 experts that MFP had available to it? 19 A: Yes. What he indicated to me was that 20 they were -- they, MFP, were receiving tax advice from 21 McCarthy Tetrault and from a gentleman by the name of Beau 22 Peleck. 23 MR. COMMISSIONER: Sorry. 24 THE WITNESS: Beau Peleck? 25 MR. COMMISSIONER: Thank you.

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1 2 CONTINUED BY MR. WAYNE BUMSTEAD: 3 Q: Mr. Peleck's name has been mentioned a 4 number of times during the course of the evidence here. I 5 understand that Mr. Peleck was an employee of MFP; is that 6 your understanding as well? 7 A: Yeah. Yes. My understanding was that he 8 wasn't an employee, employee. He was a -- a consultant/ 9 employee or hired on a -- on a consulting basis. So he -- I 10 don't think there was an employer/employee relationship with 11 him. I think there was a consulting employee relationship 12 with him, if I could categorize it that way. 13 Q: And he was introduced to you by 14 Mr. Robson? 15 A: He was indeed, sir. 16 Q: And how did Mr. Robson describe 17 Mr. Peleck to you; the role that he would be playing? 18 A: He referred to him as, I think some words 19 like, he's our tax whizz or income tax whizz or wizard or 20 some such words as that. The implication being that he was 21 their, you know, their tax expert. 22 Q: And I take it that that was in the Spring 23 of 2000 that you were introduced to Mr. Peleck? 24 A: Yes. I think it was in the March or 25 April time frame; that would be about the right time, yes.

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1 Q: And thereafter, Mr. Peleck was involved 2 in the discussions that took place at the City? I understand 3 he attended committee meetings with respect to the MRP? 4 A: If you mean City of Waterloo Council 5 Committee Meetings, no -- 6 Q: No. Not those committee meetings. 7 A: -- but the small c, committee meetings -- 8 Q: Yes. 9 A: -- he -- he did attend a number of 10 meetings with City officials, yes. 11 Q: Right. The committee that was formed to 12 spearhead the MRP is what I meant? 13 A: Yes. 14 Q: And, in fact, was he -- was he more or 15 less involved in the discussions, I guess, that were taking 16 place about the MRP than Mr. Robson? 17 A: He was involved less than Mr. Robson but 18 he was -- if I were to put all of the parties in terms of 19 your know, one, two, three in their hierarchy -- or not 20 hierarchy, in their involvement, I would say that Mr. Robson 21 was first and Mr. Peleck was second. 22 Q: All right. 23 A: In terms of involvement. 24 Q: Now, there's been a little bit of 25 confusion, I think, in the evidence about whether a ruling

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1 was sought from CCRA about tax flow-through aspects of this 2 and you've mentioned that McCarthy Tetrault's name was given 3 to you by Mr. Robson. I take it, that it wasn't a ruling 4 that was being sought but a tax opinion from a law firm; is 5 that fair? 6 A: Yes, that's correct. A ruling only comes 7 from CCRA. 8 Q: Right. 9 A: It doesn't come from the law firm and my 10 -- to my knowledge, MFP never got a -- a ruling from CCRA but 11 what they got was an opinion from McCarthy's. 12 Q: Nor, did they tell you that they were 13 going to try and get a ruling, did they? 14 A: There was never any implications they were 15 going to get a ruling from CCRA or apply for it. They were 16 going to rely on the -- excuse me -- the opinion given by 17 McCarthy's. 18 Q: All right. So, the only thing that was 19 happening there, was that MFP was going to their law firm 20 McCarthy's to get a tax opinion about the tax flow-through 21 aspects? 22 A: Yes, that was what was told to me. 23 Q: All right. And if the City was to seek 24 expertise about the tax flow through aspects of this 25 transaction, I take it that what it would likely do would be,

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1 go to a law firm and seek an opinion about that, as well? 2 A: I think what our first step would be 3 possibly to speak with our auditors and then perhaps 4 formulate a plan which would probably include a law firm 5 doing -- that had expertise in tax law. 6 Q: And did it appear to you, Mr. Ford, that 7 there was any need to do that, given what was taking place at 8 the MFP end in consideration of the tax aspects? 9 MR. WILLIAM McDOWELL: Sorry, I didn't hear 10 that question, sorry. 11 12 CONTINUED BY MR. WAYNE BUMSTEAD: 13 Q: Did it appear to you, Mr. Ford, that there 14 was any need for the City to seek an auditor's opinion or a 15 legal opinion, in view of the fact that MFP was doing those 16 things? 17 A: None whatsoever. 18 Q: One last point to clear up about the tax 19 flow through. To take you to the June 2001 meeting where 20 Clarica, MFP and the City are all getting together a search 21 report, I understand from your evidence that there were some 22 statements made by Mr. Wolfraim at that meeting about the 23 transaction? 24 A: Yes, sir. 25 Q: And was there a discussion at that meeting

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1 about whether the tax flow through aspects of the transaction 2 were real or not real? 3 A: There was no discussion as to whether the 4 -- the tax flow through was real or not real. The discussion 5 was Mr. Wolfraim said, I believe, what I said previously and 6 I think -- like I'm almost quoting it, that we couldn't -- we 7 couldn't find anyone to buy the tax play, I think is the 8 exact words that he used, or something very close to that. 9 And that -- and that it was not a tax flow 10 through transaction. There was no discussion about whether 11 the tax flow through is real or not real. But that it wasn't 12 relevant to this transaction. 13 Q: All right. So, was it your understanding 14 from that that it might have been structured in a way that 15 would allow tax flow through, but, that they simply couldn't 16 find someone who was interested in buying it on that basis? 17 A: That's the way I understood it from what 18 Mr. Wolfraim said. 19 Q: So was there anything said at the meeting 20 that would indicate that they had received an opinion from 21 McCarthy's or anybody else that the tax flow through wouldn't 22 work? 23 A: No there was no comments to that effect, 24 at all, during that meeting. 25 Q: Was it ever suggested or indicated, I

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1 guess, by Mr. Wolfraim at that meeting that because MFP had 2 decided to assign the transaction to Clarica, the tax play or 3 the tax flow through was no longer workable? 4 A: That information was never discussed. 5 Nothing like that was discussed at that meeting. 6 7 (BRIEF PAUSE) 8 9 Q: I'd like to ask a few questions about the 10 due diligence investigation that you performed, Mr. Ford, 11 moving to a different topic here. You've testified that you 12 spoke to some people that were involved in the Windsor Essex 13 Landfill Project, which was a MFP project? 14 A: Yes, sir. 15 Q: And you've also indicated that you spoke 16 to some people at the Kingsville Water Authority? 17 A: Yes, sir. 18 Q: And that's the same as the Leamington 19 Project, is it? 20 A: Yeah, it's the same -- the same group. 21 Q: Okay. 22 A: Actually Leamington, I believe, is the 23 head of that -- of that consortium. 24 Q: All right. And you spoke, as well, to 25 some people that were involved in the Waterloo Regional

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1 Education Public Network financing? 2 A: I -- I actually sat on the steering 3 committee for that group. 4 Q: Okay. Well, I really focussing in on the 5 period after your -- well -- the period just before February 6 of 2000, when you make your report to Council and the due 7 diligence investigation -- 8 A: Okay -- 9 Q: -- you were performing at that time? 10 A: That -- the -- the Waterloo -- the WREP 11 Net -- the Waterloo Region Education and Public Network, I 12 don't believe the financing for that was done before 13 February, 2000. 14 Q: So you didn't make any inquiries on that 15 one? 16 A: No. 17 Q: But the other two (2) still are accurate? 18 A: The other two (2) -- I also spoke with 19 the -- the head of the project in Nova Scotia, it's called 20 iWAN, small i, capital W-A-N. 21 Q: All right. 22 A: Made a similar transaction to Windsor 23 and -- and Leamington. 24 Q: Did you speak to anybody else? 25 A: Any other of MFP's customers with respect

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1 to asset based financing, no. But I did speak to some other 2 customers with respect to other leasing transactions that 3 they had, mainly for mainframe computers. 4 Q: How many other customers, then, did 5 you -- 6 A: Probably -- 7 Q: -- contact? 8 A: On that side of it, probably two (2) or 9 three (3). Two (2) of them I can think of right off the top 10 of my head but there may have been another one (1). 11 Q: All right. So it would appear that you 12 made contacts with five (5) or six (6) MFP customers, as part 13 of your -- 14 A: Yes, that's -- 15 Q: -- investigation? 16 A: Yes, sir. 17 Q: And you testified that nobody had a bad 18 word to say about MFP? 19 A: Not at all. 20 Q: But I take it, they, in fact, offered 21 some positive comments? It wasn't just that they didn't say 22 anything bad? 23 A: No, they offered -- the -- the comments 24 ranged from, we're really glad to be involved with these 25 guys, all the way up to, you know, being wildly ecstatic

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1 about it, if accountants can be wildly ecstatic about things. 2 One -- on one occasion, I -- I know one of 3 them said, tongue in cheek, we're not really crazy about you 4 guys meeting with them because that means that, you know, 5 we're -- they're expanding their -- their client base and 6 that's going to effect us. They wanted -- they were -- they 7 wanted to hold the -- that opportunity close to the vest. I 8 thought that was a pretty positive comment, as well. 9 But, even customers that we spoke to, without 10 getting a -- that were not public sector customers, that we 11 talked to, without saying what their trans -- without 12 discussing their transactions, their response, dealing with 13 the company, was always very positive. 14 Q: All right. And so each one of them had 15 something good to say about MFP? 16 A: Absolutely. 17 Q: And, I take it that, those contacts were 18 all arranged by you, independently, without being directed 19 there, particularly, by Mr. Robson or anybody at MFP? 20 A: The only connection between -- only 21 involvement MFP had was to provide us with a list of who 22 their customers were. They did not arrange the contacts, 23 I -- I did the contacts myself. But it was certainly -- it 24 was from their customer list. 25 Q: Did Mr. Robson or anybody else know, in

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1 advance, that you were going to be contacting these people? 2 A: When he gave me the list of customer 3 contacts that they had, or customers that they had, he knew I 4 was going to contact them, he didn't know which ones I was 5 going to contact. 6 Q: Okay. Now, we've heard, also, in 7 evidence here, from Mr. Friedel, that he did some background 8 investigations about MFP. And he conducted that 9 investigation while he was still being supervised by you, in 10 the -- in the finance group? 11 A: Yes. 12 Q: And was that something that you 13 instructed me to do? Or did -- what was your involvement in 14 that? 15 A: I believe Mr. Friedel did that -- that 16 was his own decision to do that. I did not instruct him to 17 do that. 18 Q: Did you know it was taking place? 19 A: Yes, after the fact he informed me what 20 he had done. 21 Q: And after the fact, refers to what time 22 point? 23 A: Well, within days or weeks after it was 24 that he had done the investigation. 25 Q: So he -- I take it that he informs you

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1 about his investigation before he left the finance -- 2 A: Yes. 3 Q: -- group? 4 A: Yes, sir. 5 Q: And we know, as well, that it was shortly 6 after that that he was seconded to become the Assistant Chief 7 Administrative Officer for the City? 8 A: Executive Assistant to the Chief 9 Administrative Officer, not the Assistant Chief 10 Administrative Officer. 11 Q: All right. And he was also then given 12 the position of co-chairing the MFP project with Mr. 13 McFarland? 14 A: That's correct, sir. 15 Q: And contemporaneous with those changes, I 16 guess you lost Mr. Friedel's services from your department? 17 A: I lost him from the department, yes, 18 that's correct. But he was still involved with some of the 19 business plan development and some of the other aspects 20 specifically related to this project, but, yes, I had lost 21 him as a member of my team. 22 Q: And did the movement of Mr. Friedel off 23 your team have any bearing upon the due diligence 24 investigation that was being performed under your supervision 25 at that time?

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1 A: I don't believe so. 2 Q: In addition to those items, I gather that 3 you also obtained some financial information about MFP? 4 A: Yes. I got some of it directly myself 5 and my staff, I think Mr. Friedel was involved in that before 6 he left as well as either Ms. Card or Mr. Steffler. We had 7 copies of financial statements and the staff, my staff, did 8 some investigation and I'm not sure what, but I think it was 9 through the Ontario Securities or the on-line public forum 10 for -- for receiving information about -- about corporations. 11 They did some of that investi -- I didn't do that myself 12 directly, my staff did it. 13 Q: Your staff did it. Did you take a look 14 at any of the work that your staff had done though in that 15 regard? 16 A: Yes. Yes, I did. 17 Q: And it was -- you were satisfied with it. 18 A: Yes. It was all very -- very positive 19 and it was all very -- I use the word, I think on a couple of 20 occasions, it was blue chip, I think is the word I used. But 21 I was -- I was very impressed with what we'd seen in the 22 financial -- on the financial side for the company. 23 Q: Is there anything that you didn't do in 24 the way of due diligence at that time, that is leading up to 25 February 18, 2000, that you wish you'd done?

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1 A: No. I -- I felt that we had done a 2 sufficient investigation to prove that this was a reputable 3 company to deal with and that transactions that were done 4 with other municipalities seemed to be pretty -- pretty 5 positive, pretty square transactions and it seemed to fit the 6 kind of profile that we had for this transaction. 7 Q: And I gather that you were pretty excited 8 by all the positive information that was being revealed 9 through this? 10 A: Absolutely. 11 Q: And you shared that with Mr. Stockie? 12 A: Yes, sir. 13 Q: And he was pretty excited about it too; 14 wasn't he? 15 A: I would say that would be a fair comment. 16 Yes. 17 Q: Just one last point to cover. It may 18 have already been covered, I just want to be sure the 19 record's clear about this. 20 Exhibit 26 is the letter from Mr. Ceiling to 21 Mr. Epp dated February 21, 2002 and I think it was already 22 put to you through the questions from the Coalition about 23 your -- about whether you agreed or disagreed with the first 24 numbered paragraph in that letter. 25 Mr. Ceiling says in that paragraph

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1 "No one approached the regional staff or 2 myself either formally or informally, 3 directly or indirectly, about the region 4 providing financing for the RIM Park 5 Project." 6 And I take it that your response to that was 7 that you agree with that because there wasn't an approach 8 made specifically about the RIM Park Project? 9 A: That is correct. 10 Q: But there was a -- there were contacts 11 made and inquiries made generally about debenture financing? 12 A: On many occasions. Yes. 13 Q: Okay. When you were cross-examined by 14 Mr. Stephenson, Mr. Ford, he put to you that in reporting to 15 Council you had basically generated three (3) documents. The 16 February 18, 2000 report with its recommendation, you'd 17 generated a September 18, 2000 Presentation that was made at 18 a meeting and then you generated a September 21, 2000 memo 19 that was provided just before the bylaws were passed on the 20 25th? 21 A: Yes. 22 Q: And I wasn't clear as to whether, in the 23 normal course, one might expect more or less documentation 24 than that on a project such as this; can you elaborate a bit 25 on it?

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1 A: Those were three (3) formal presentations 2 that were presented to Council on February 18th, as you said, 3 September the 18th and then again on September 21st. 4 There were other informal discussion with 5 Council, generally they were during in-camera meetings when 6 discussion would be going on about contract awards or 7 negotiations or things of that nature. And negotiations of 8 the purchase of properties and some other variety of things. 9 Where I would say that it was an informal 10 discussion about aspects of the financing, I would consider 11 those three (3) periods to be formal, where there was 12 actually a piece of paper, a formal presentation geared 13 specifically to that subject. 14 But, on other occasions, and I -- I can't tell 15 you whether there were, you know, one (1) or a hundred and 16 one (101) occasions where that was done. But, there were 17 other occasions when the aspects of financing were discussed 18 on an informal basis. 19 Q: Does the fact that there were only three 20 (3) documents strike you as being odd or indicating 21 incompleteness? 22 A: No, I don't believe so. I asked Council 23 on both the 18th of September and the 25th of September, if 24 there were -- if there was additional information they 25 required and the answer was, no.

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  1                 And I believe during some of the informal
  2  presentations I asked Council if they required any further
  3  explanation or additional information and generally the
  4  answer was, no.
  5                 So, I felt that they were as informed as they
  6  wanted to be.
  7                 Q:  Is that something that you try to gauge,
  8  Mr. Ford, as you go along, the level of information that
  9  Council wants to have, as opposed to the level of information
 10  that perhaps they ought to have?
 11                 A:  Yes, that's a fine line to determine, you
 12  know, how much additional information to give the Council. 
 13  It's never -- it never has been, never is and never will be
 14  my intent to withhold any information from Council.  
 15                 But, what I -- what I do when I make a
 16  presentation or present as a topic to Council is give them
 17  what I think is an appropriate amount of information.  If
 18  they feel that it is too little, I expect that they're going
 19  to ask for some additional detail.
 20                 Typically what I will say is, you know, is
 21  this enough detail, do you want some additional detail, is
 22  there any parts of this that you want further explanation of
 23  and if they require it, then I'll get more.
 24                 I think it would be presumptuous of me to say
 25  to Council on any matter, let me -- let me - you know, force

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1 a bunch more information down your -- down your throat on 2 this issue. 3 But, it is a bit of a balancing act, in terms 4 of the information given and I would like to think that if 5 any member of Council or staff or the public has a question 6 that hasn't been answered, that they would ask and we'd get 7 more information. 8 Q: And was that true in this case, that 9 anytime a question was asked an answer was given? 10 A: Yes, and if an answer wasn't available 11 immediately, it was certainly given at a later date, either 12 in writing or verbally. And that's pretty typical of the way 13 that I perform my duties all the time. 14 Q: Okay. At tab 72, in volume 3, we have the 15 presentation that you made to the AMCTO -- 16 A: I'm sorry Mr. Bumstead, what tab? 17 Q: Tab 72 of volume 3. 18 A: 72, yes. 19 Q: This is the presentation that you and 20 Kathy Durst made to the AMCTO in -- I think it was -- 21 A: It was June 13th, 2000. 22 Q: -- June 2000. And you comment on -- on 23 the burden or the duty, I guess, of reporting to Council at 24 page 1307. 25 MR. COMMISSIONER: What page was that?

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1 MR. WAYNE BUMSTEAD: 1307, Mr. Commissioner. 2 3 CONTINUED BY MR. WAYNE BUMSTEAD: 4 Q: The second heading on that page, is 5 Council input and updates, and is this a section that you 6 wrote, Mr. Ford? 7 A: Yes. 8 Q: In that section you write as follows: 9 "We all know how important it is to keep 10 Council up to date. Council is also like 11 any of the community groups. They have 12 their needs and requirements. One of our 13 strengths in Waterloo is the relationship 14 between staff and Council. They trust 15 staff implicitly and understand the nature 16 of ever changing project scope. However, 17 keeping Council up to date did present some 18 challenges because of the evolving nature 19 of the project." 20 The project that you're talking about here, 21 is -- is the MRP, isn't it? 22 A: Yes, sir. 23 Q: And can you elaborate on -- on what the 24 challenges were that you encountered, in keeping Council up 25 to date on this project?

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1 A: What I was doing, in that particular part 2 of the presentation, was talking about the project in 3 general, not talking about the project as it relates 4 specifically to the financial aspects of it. 5 One of the things that Ms. Durst and I were 6 doing, here, is not only talking about just the financing 7 side of it and just the fundraising side of it, but all of 8 the things that are related to -- to dealing with a -- a 9 project of any large scope. 10 And with that in mind, what I was saying, 11 here, is that, because of the complexity of this project, 12 there's -- there's a skating comp -- a skating component, a 13 soccer component, a golf component, I mean, there's -- 14 there's multiple different components, multiple different 15 groups, a very large tract of land to be developed and a 16 number of different things going on at the same time. 17 So that presented some challenges to keep 18 Council informed as to what was going on. And the point I 19 was making to the group is, is that, that -- that's something 20 that you have to be aware of because it is a challenge to 21 keep an entity like Council apprised of what's going on with 22 a project of this scope, when they've got ten (10) or fifteen 23 (15) or twenty (20) or fifty (50) or a hundred (100) other 24 conflicting matters, as well. 25 How we dealt with that was to have what Mr.

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1 Friedel did on a -- on a regular basis, I believe it was 2 monthly, a monthly update as to what the progress was on it, 3 on a number of different fronts, not just -- 4 Q: Not just financing? 5 A: -- not just on the finance, on the entire 6 project. So that -- that was the objective that I had when I 7 was making those comments. 8 Q: All right. Focussing in on the financing 9 part of it, then, were there any particular challenges in 10 reporting or keeping Council up to date about the financing? 11 A: No, there weren't. 12 Q: Now, in your February 18th, 2000 report 13 to Council, which is at tab 40 of Volume 1, this has been 14 looked at a number of times already and I don't want to spend 15 a lot of time on it. 16 I guess the question I have, Mr. Ford, is one 17 of -- one of these hindsight questions. And that's whether, 18 with hindsight, you feel there was anything left out of that 19 report, that should have been included in it? 20 21 (BRIEF PAUSE) 22 23 A: I have to say that, no, I think that, you 24 know, the information that we'd -- was -- was presented there 25 was -- was -- was adequate and appropriate. I don't -- I

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1 can't think of anything I would -- I would add to it, at this 2 point. 3 Q: And there's nothing that's untrue in that 4 report, is there, Mr. Ford? 5 A: Not that I'm aware of. Everything -- 6 Q: And -- 7 A: -- everything, as far as I know, is 8 everything that I knew when I wrote it. 9 Q: And is there anything in that report 10 that -- that's exaggerated, to try and make a -- or persuade 11 Council that -- that it should go ahead with MFP? 12 A: I don't believe there's anything 13 exaggerated in there, I think it's all just factual. And I 14 think the facts speak for themselves, that when -- when one 15 reads this, at that point in time, it looks like a pretty 16 good deal. 17 I don't believe that there's anything in there 18 that is what I would refer to as marketing or anything like 19 that. I believe there's -- I -- I think it's just pretty 20 straight forward facts. 21 Q: Now, this report, as we know, came before 22 Council at its February 25th meeting -- 21st meeting -- 23 A: 21st, yes. 24 Q: -- sorry. And before it arrived at the 25 Council meeting, I gather that it had been through a number

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1 of other considerations by staff. And particularly, I guess 2 it had been considered by the Senior Management Team? 3 A: I'm not sure whether this actual report 4 had been reviewed by senior management. And I don't recall 5 whether I, at a Senior Management Team, actually discussed 6 the contents of this report. The members of senior 7 management were aware of the transaction that we were 8 discussing with MFP, I don't recall whether there was a 9 formal presentation to -- to senior management about this 10 project -- or about this report. 11 Q: All right. There's a box in the upper 12 right-hand corner of the document that's titled "clearance"? 13 A: Yes. 14 Q: And I take it that's a standard box on 15 all of these types of reports? 16 A: Yes, sir. 17 Q: And the purpose of that box is to 18 indicate the levels of consideration that the report has 19 cleared, I suppose? 20 A: Yes, sir. 21 Q: Now, in this particular case it says 22 "team leaders" with nothing beside it, then it says 23 "Committee February 21, 2000" and then it says "Council" with 24 nothing beside it? 25 A: Yes.

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1 Q: Can you explain what that means? 2 A: What that means is that the report was 3 presented to the -- let me take a step back. Waterloo City 4 Council has two types of meetings. One of them is a 5 Committee meeting, Capital C, Committee, where Council meets 6 as a committee of the whole. And that's where most matters 7 are discussed and debated and so forth. 8 The other type of meeting the Council has is a 9 Council meeting and that's the formal Council meeting where 10 resolutions and bylaws and other things are passed. What 11 this is saying it was -- it went to Committee on February 12 21st. Committee on February 21st would have adopted this -- 13 this report and then a subsequent Council meeting they would 14 have -- they would have approved the minutes of the 15 February 21st meeting therefore -- therefore accepting or 16 adopting the -- the actions. 17 Q: So, in another evolution of this document 18 we might find one where there's a date next to the word 19 "Council" in that box. 20 A: That may very well be the case. 21 Q: All right. Now, the fact that there's 22 nothing beside the words "team leaders"; does that indicate 23 anything to you, Mr. Ford? 24 A: No. No, that's -- in that box there's a 25 -- it's a form that's in the City's system and I think

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1 there's one other, usually has SMT in there as well, Senior 2 Management Team. And it just indi -- it's just a place to 3 put in a date that those -- the report cleared that 4 particular group. 5 And sometimes it will go to team leaders, 6 sometimes it'll go to senior management, sometimes it'll 7 bypass those completely and go directly to Council. 8 Q: This report is signed by you and by 9 Mr. Stockie -- 10 A: Yes, sir. 11 Q: -- at the bottom? And I take that that, 12 well, we've heard the terminology "signed off" on it. I take 13 it that Mr. Stockie signed off on this report as did you? 14 A: Yes, sir. 15 Q: And that signing off indicates that there 16 was some consideration of the contents of the report by the 17 people that put their signatures there? 18 A: Yes, sir. 19 Q: All right. And so although it may not 20 have gone to the senior management team, it was considered by 21 you and by Mr. Stockie before it went to Council? 22 A: Yes, sir. 23 Q: Did this report follow the ordinary 24 process or did it bypass some steps that normally should have 25 been taken?

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1 A: No. It would follow -- it followed 2 normal process. 3 Q: So the fact that it doesn't go to the 4 senior management team isn't out of the ordinary or of 5 concern? 6 A: No. Not all reports go to senior 7 management; some of them do, some of them don't. 8 Q: Okay. Mr. Stockie testified, Mr. Ford, 9 and I think you may have mentioned this as well, but he 10 testified that in early 1999 he issued a challenge, 11 generally, to the people that were involved with the MRP 12 project at that time and the challenge that he issued was to 13 come up with things that were innovative. Do you remember 14 Mr. Stockie making that statement? 15 A: Yes. I do, sir. 16 Q: And did you take it that that applied to 17 you and to the financing that might be developed for the 18 project as well? 19 A: Yes. I did take it that way. 20 Q: And what did you understand the word 21 "innovative" to mean? 22 A: Something that was -- I guess to use a 23 vernacular expression, outside the box. Something that was 24 different. Something that would allow the municipality to 25 move forward with the project in a -- a viable financial --

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1 viable financial option that would allow the project to -- 2 would allow the project to go forward. 3 Q: Did the word "innovative" mean to you 4 something that wasn't financed by a debenture? 5 A: Not necessarily but my knowledge at the 6 time about debentures is that I knew what the rates were and 7 I knew what the terms were and all of the -- the options 8 around them and that unless there was something that we could 9 do with an investor with a debenture that was really unusual, 10 that it was probably not what I would call innovative, a 11 debenture issue. 12 Q: All right. So, would it be fair to say 13 that at that point, you started looking outside of the 14 debenture method for financing? 15 A: Yes, sir. 16 Q: And, of course, I think you testified 17 already that that's why you renewed your contact with MFP, 18 you heard about MFP prior to this? 19 A: That's correct, sir. 20 Q: And we know as well that you had the May 21 3rd, 1999 meeting with Mr. Pitre? 22 A: Yes. 23 Q: And Mr. Pitre's presentation is at tab 17 24 and your notes of that presentation are at tab 24. I just 25 wanted to go over a couple of points about that.

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1 I take it that this was a presentation made by 2 Mr. Pitre to you and Mr. Stockie? 3 A: Yes, sir. 4 Q: And the purpose of getting together with 5 Mr. Pitre was to find out if there was something innovative 6 that MFP had to offer, would that be fair? 7 A: Yes. 8 Q: And Mr. Pitre presented a model of 9 financing at that meeting that is summarized at the first 10 page of tab 17, it's page 2164? 11 A: Yes, sir. 12 Q: And he outlines a number of aspects of 13 that -- that model in that executive summary. And the first 14 one, I think that's mentioned there is financing at cost of 15 funds more than two hundred (200) basis points below 16 traditional financing? 17 A: Yes, sir. 18 Q: Now, was that considered by you and Mr. 19 Stockie, to be an innovative aspect of the financing? 20 A: I would say that it certainly peaked our 21 interest. I'm not sure whether that piece of it would fall 22 into the words, innovative. 23 But, the fact that somebody had a financing 24 vehicle that was more than two hundred (200) basis points 25 below traditional financing would certainly want you to go to

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1 the next step and find out what it is and why it is. 2 Q: All right. He goes on then to say that -- 3 he's making a reference to the public/private partnership 4 that was -- that took place in Windsor, I believe, here where 5 a trust was involved, is that right? 6 A: I believe that's what he's referring to, 7 yes. 8 Q: And he goes on to say that: 9 "The trust provides off balance sheet 10 funding." 11 Was the off balance sheet funding, something 12 that was considered by you at that time to fit within the 13 innovative criteria, to use your term? 14 A: Yes, I think that would be fair to say 15 that that was -- that was true, yes. 16 Q: And then the next point is that the off 17 balance sheet funding is at more than two hundred (200) basis 18 points below the incremental costs of funds. 19 And is that -- is that different than what we 20 looked at higher up in the paragraph where it describes two 21 hundred (200) basis points below traditional financing? 22 A: I don't believe so. I believe that 23 they're interchangeable words. 24 Q: Okay. I guess we've already dealt with it 25 basically --

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1 A: Yes. 2 Q: Next point is, in the next sentence: 3 "A flexible pay for use program, tailors 4 payments to volume of land fill 5 consumption." 6 Was the pay for use aspect something that you 7 considered to be innovative? 8 A: Absolutely. 9 Q: And so would it be fair to say that what 10 Mr. Pitre was outlining for you and Mr. Stockie on May the 11 3rd, appeared to meet the challenge that Mr. Stockie had 12 issued earlier in the year? 13 A: I would say that that's a fair statement. 14 We were quite -- I don't know whether excited is the right 15 word, but, we were quite taken by the presentation that was 16 made by Mr. Pitre, that it certainly was a -- seemed to fall 17 into some things that we would -- that I would certainly at 18 that time, and I would probably under normal circumstances 19 say is pretty innovative. 20 Q: And correct me if I'm wrong, Mr. Ford, 21 but, I think you've already testified as to the aspects 22 described by Mr. Pitre that caught your attention the most. 23 And I gather it was the two hundred (200) basis points below 24 costs of funds aspect? 25 A: That was certainly the number one (1)

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1 thing that got my attention, yes. 2 Q: And the pay per use aspect? 3 A: The pay per use is probably a one point 4 five (1.5) 5 Q: And the off balance sheet aspect wasn't of 6 particular interest at all? 7 A: No because in -- all the way along, I've 8 always considered this as part of our debt capacity, whether 9 it's balance sheet at transaction or not. Really, kind of 10 academic. 11 Q: All right. 12 MR. COMMISSIONER: Can I interrupt you for 13 just a moment, Mr. Bumstead? 14 MR. WAYNE BUMSTEAD: Certainly. 15 MR. COMMISSIONER: I hadn't noticed this 16 before, if I had, I've forgotten, in tab -- tab 17, talking 17 about this executive summary of the regional landfill 18 project, which I gather was down in Windsor, is that right? 19 THE WITNESS: Yes, sir. That's my 20 understanding, yes. 21 MR. COMMISSIONER: They talked, in there -- 22 Mr. Pitre talked about the establishment of an investment 23 trust? 24 THE WITNESS: Yes. 25 MR. COMMISSIONER: I don't recall the words

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1 investment trust being used anywhere, in connection with the 2 financing with the City of Waterloo. Am I wrong, or was 3 there some discussion, or was there some expectation, in that 4 regard, in your discussions with MFP, regarding the financing 5 in Waterloo? 6 THE WITNESS: There was no expectation that 7 it was going to be there. What it was, was discussed, but it 8 wasn't put forward as being part of the -- a component of the 9 City of Waterloo financing. 10 It was only discussed in the sense of, what is 11 it that it was done for the Windsor, Essex transaction, but 12 there was never any indication that that would be brought 13 forward into the City of Waterloo transaction. 14 MR. COMMISSIONER: All right. Was there any 15 suggestion ever made that the investment trust component 16 of -- of the financing was -- was essential to the low 17 interest rates? 18 THE WITNESS: None at all. 19 MR. COMMISSIONER: Not at all? 20 THE WITNESS: None at all. 21 MR. COMMISSIONER: Okay. Thank you. 22 23 CONTINUED BY MR. WAYNE BUMSTEAD: 24 Q: And just to follow up on that, the -- the 25 reference to the investment trust is also where we see, in

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1 the -- in the summary, about the head lease, sub lease 2 arrangement. And I -- I take it that that was another unique 3 aspect of the model being outlined by Mr. Pitre? 4 A: Yes. 5 Q: And, did you consider that to be 6 something that was innovative? 7 A: Certainly, from a municipality's 8 standpoint, it's different and I would say, probably 9 qualified as being innovative. 10 Q: I'm sorry, what did you say? 11 A: I said I -- I said it was certainly 12 different from a municipality's perspective, and I would -- I 13 would consider that it falls into the heading of being 14 innovative. 15 Q: All right. And was that aspect something 16 that -- that you were interested in, and Mr. Stockie was 17 interested in? 18 A: The exact head lease, sub lease 19 structure, I -- I don't really think that it was on -- of any 20 consideration, one way or the other. The -- that was viewed 21 by us as being the vehicle that had to be used in order to 22 make the transaction work. And that's -- that's the vehicle 23 that makes the transaction work. 24 Q: All right. Not as interesting as the 25 cost of funds aspect, or the pay per use aspect?

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1 A: Absolutely correct. 2 Q: All right. I'd like to ask you some 3 questions about the schedules to the head lease and sub 4 lease, Mr. Ford. And, at tab 55, which is in Volume 2, I 5 believe? 6 A: Yes. 7 Q: Is a letter to you from Mr. White, dated 8 August 5th -- I'm sorry, dated May 25, 2000. 9 MR. COMMISSIONER: May 25 or May 26? 10 THE WITNESS: May 26th. 11 12 CONTINUED BY MR. WAYNE BUMSTEAD: 13 Q: Oh, I'm sorry, May 26th. 14 And this is the letter where he has -- he says 15 that he's reviewed the draft head lease and sub lease, and 16 generally the documents are in the expected form, but the 17 schedules clearly aren't available, here, at this point in 18 time, right? 19 A: Yes, sir. 20 Q: And he makes a comment in this letter, I 21 believe, too, that it will be necessary to review the full 22 details of the schedules? That's on the third page of the 23 letter, item 12. 24 A: Yes. 25 Q: And I gather that nothing much has

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1 changed about that, by August 15th. Tab 82 -- yes, tab 82 in 2 Volume 3 is Mr. White's memo, page by page notes on his 3 review of the draft sub lease and Item 6 says 4 "Schedules A and B referred to in paragraph 5 1.02 are still to be determined." 6 A: Yes. 7 Q: Now, is it correct that by August the 8 15th you had received, I guess, an indication that there was 9 going to be a formula in the sub lease? 10 A: I may have received it by that point. 11 I'm not sure whether there was a -- fully disclosed that 12 there would be a formula, formula or that some formula would 13 drive the payments, but certainly that some formula would be 14 part of -- of that, one way or the other. 15 Q: Is it fair to say that at this point, the 16 tax flow-through mechanics of the documentation were still on 17 the table, still in the picture? 18 A: Absolutely. 19 Q: All right and did you understand that the 20 tax flow-through consequences would only flow if the lease 21 was something characterized as an operating lease? 22 A: That was my understanding. Yes, sir. 23 Q: And was it your understanding, as well, 24 that the document might be considered to be an operating 25 lease only if it contains some sort of a formula?

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1 A: My understanding was that the -- for it 2 to be an operating lease that it may not necessarily have 3 been a formula, but that a formula of some sort would be 4 driving the repayments. 5 Q: All right. And would it be fair that -- 6 that those comments apply only to the sub lease? They don't 7 -- they don't apply to the head lease? 8 A: That was my understanding. Yes. 9 Q: In other words, there was no expression 10 of any need or desire to generate income tax flow-through 11 from the head lease or -- or have it considered to be an 12 operating lease or have it contain a formula? 13 A: Never had any discussion to that effect. 14 Q: All right. 15 A: At all. 16 MR. COMMISSIONER: At that point, did the 17 head lease -- the head lease still required a single payment? 18 THE WITNESS: That -- that was -- that was 19 what our understanding was an ultimately was what happened; 20 that the head lease would end up being a pre-payment of a 21 number of years lease payments, that it would be a single 22 dollar amount. 23 24 CONTINUED BY MR. WAYNE BUMSTEAD: 25 Q: Now, Mr. White's memo is entitled "MFP

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1 Financing Page by Page notes on draft Sub Lease". It doesn't 2 say page by page notes on draft head lease, do you know 3 whether the schedules that he's referring to in item 6 are -- 4 they're Schedules A and B to the sub lease as opposed to 5 Schedule A and B to the head lease? 6 A: I believe they're Schedules A and B to 7 both of them. 8 Q: All right. If we could turn for a moment 9 to Schedules B to each of those leases. Schedule B to the 10 head lease is at Tab 125 and Schedule B to the sub lease is 11 at Tab 130. 12 A: Volume 4. 13 Q: Correct. 14 A: 125 did you say, sir. 15 Q: 125 and 130. 16 A: Yes, sir. 17 Q: Of Volume 4. 18 A: Yeah. 19 Q: That's right. 20 A: I have them. 21 Q: And when you were giving your evidence in 22 chief to questions asked by Mr. Caskey, Mr. Ford, Mr. Caskey 23 on October the 25th put this question to you. This, 24 Mr. Commissioner, this is on page 15 of the transcript from 25 October 25th. The question was

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1 "Q: All right. So, now, Mr. Robson 2 arrives with Schedule B; did he have both 3 schedules with him, by the way, to both the 4 head lease and the sub lease?" 5 And your answer, Mr. Ford, was 6 "A: No. I -- I believe that we'd 7 received Schedule A earlier." 8 Now, your answer isn't directly responsive to 9 the question there because you were asked about Schedules B 10 when Mr. Robson arrived. 11 Did you have Schedule B or I should say, did 12 Mr. Robson arrive with Schedules B to both the head lease and 13 the sub lease on September 25? 14 A: I don't recall whether Schedule B to the 15 head lease was received on September 25th. Schedule B to the 16 sub lease was. But, I don't recall whether Schedule B to the 17 head lease was received on September 25. 18 Q: Do you have any recollection that it was 19 received earlier? 20 A: I believe that it -- it was received late 21 the previous week which would be -- I think that week is the 22 19th to the 22nd -- 18th to the 22nd. I believe, it was in 23 that week that it was received. 24 Q: And do you recall what consideration, if 25 any, you made of it at that time?

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1 A: Don't recall any particular consideration 2 I made at that time, at all, other than the fact that I think 3 I may have made a comment to Mr. Robson, I was surprised to 4 see that it was, you know, each month it was detailed out 5 like that. But, beyond that I don't think I made any other 6 consideration. 7 Q: All right. 8 MR. COMMISSIONER: That's the head lease is it 9 not? 10 THE WITNESS: Yes. 11 12 CONTINUED BY MR. WAYNE BUMSTEAD: 13 Q: Now, if we look at Schedule B to the head 14 lease at tab 125, as you already mentioned, it contains 15 details monthly payments, throughout the thirty-two (32) 16 years of the life of the document. 17 A: Yes, sir. 18 Q: And if you start in year one it appears 19 that the monthly payments for the first fifteen (15) months 20 are zero (0)? 21 A: That's correct 22 Q: And then they go up to an amount just over 23 -- well, just under seventy five thousand dollars ($75,000) 24 until month twenty-eight (28), when they increase to a 25 hundred and seventeen thousand and change (117,000) --

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1 A: Yes, sir. 2 Q: And then they go up to two hundred 3 thousand (200,000) and change, beginning in month forty (40)? 4 A: Yes, sir. 5 Q: And so on -- to a point where in month 6 seventy-six (76) they're at three hundred and thirty seven 7 thousand dollars ($337,000). And that appears to be -- 8 that's the January 2007 month? 9 A: Yes, sir. 10 Q: And I take it that that trend would be 11 consistent with the ramping up feature that the City was 12 interested in having on this financing? 13 A: That would be a fair comment, yes, sir. 14 Q: However, it's clear isn't it, Mr. Ford, 15 that by this time, which is the week before September 25th, 16 you knew that all of the rent payable under the head lease 17 was going to be advanced in a lump sum? 18 A: That's correct 19 Q: So there's no real need to show any 20 ramping up in the schedule of payments to the head lease is 21 there? 22 A: Probably not -- 23 Q: From that perspective? 24 A: Probably not, yes, that's correct. 25 Q: And then after January 2007, the monthly

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1 amounts go up but not by as much as we've seen them go up to 2 that point in time, is that accurate? 3 A: Yes, sir. 4 Q: By January 2008, I'm sorry -- actually 5 they go up again -- yeah, January 2008, they go up very 6 little another three hundred and some odd dollars ($300) and 7 then they go up slightly again the year after that -- 8 A: Yes -- 9 Q: -- and that continues to be the trend 10 right through to the end of the lease when the payments max 11 out at three hundred and forty-eight thousand dollars 12 ($348,000)? 13 A: Yes, sir. 14 Q: And I take it that that pattern from 15 January 2007 through to September 2031, would be consistent 16 with your understanding of how the payments on the sub lease 17 were to be matched with the revenue generated from the MRT? 18 A: That it -- yes, yes, it would follow the 19 same pattern, yes. 20 Q: And I take it that there's once again, no 21 real necessity for setting out that kind of detail in 22 Schedule B to the head lease because as we've already said a 23 couple of times, all of the payments were being advanced as a 24 lump sum? 25 A: Correct.

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1 Q: Did you make any inquiries about why the 2 detail that seems to be unnecessary as contained in Schedule 3 B to the head lease? 4 A: Yes, I did. Mr. Robson advised me that it 5 was necessary for them in terms of their accounting for the 6 head lease payments in each of the years going forward. 7 Q: You were satisfied with that answer? 8 A: That an -- yes, I was. 9 Q: Okay. Now, there's no total set out in 10 the schedule, for the sub lease payments? 11 A: That's correct. 12 Q: Did you add them up at the time? 13 A: Actually, just to correct, this is the 14 head lease. 15 Q: Sorry. There is no total -- 16 A: I -- 17 Q: Yes, let me get that clear on the record. 18 There is no total to the payments in Schedule B to the head 19 lease? 20 A: That's correct. There is no total and I 21 did not total it up. 22 Q: All right. Have you totalled it up 23 subsequently? 24 A: I have not, personally, but one of my 25 staff has.

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1 Q: All right. And, do you know what the 2 total comes out to be? 3 A: 112 odd million, 112,900,000, I believe. 4 Q: It comes out to be the same figure that 5 you calculated in the April, May period of 2001? 6 A: Yes, sir. 7 Q: As per your discussions with Mr. Robson? 8 A: Yes, sir, I believe it comes out to that 9 same number. 10 Q: All right. Now, there's no interest rate 11 in the head lease document? 12 A: There is not. 13 Q: And I think you testified that you asked 14 a question of Mr. White the absence of a -- of an interest 15 rate, I'm not sure that it was in the head lease, but let's 16 say, generally, in the -- in the lease documents. And Mr. 17 White indicated to you that it wasn't unusual to not see an 18 interest rate in the lease documents -- 19 A: That's correct. 20 Q: -- is that right? 21 A: That's correct. 22 Q: And I gather that, the only way to work 23 out the interest rate that's reflected by these payments in 24 Schedule B to the head lease, would have been to add them up 25 and do a present value calculation?

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1 A: That would be -- that would be -- it 2 would probably be the easiest way to do it, yes. 3 Q: And that's -- that's a calculation that 4 you didn't undertake, at the time? 5 A: That's correct. 6 MR. COMMISSIONER: Is that going to be an 7 accurate expression of an effective interest rate? 8 THE WITNESS: It would give -- it -- it 9 should give you an average interest rate. If the interest 10 rate was the same throughout the entire period of time, then 11 it would give you the interest rate. 12 If there were different interest rates at 13 different intervals, what it would probably do is give you an 14 average interest rate, kind of smooth it out. 15 MR. COMMISSIONER: Well, what I was getting 16 at, really, is that, given the formula that was being used, 17 different -- different amounts each year, and for that 18 matter, I guess, for each twelve (12) month period -- 19 THE WITNESS: Yes. 20 MR. COMMISSIONER: -- my mathematical 21 abilities don't go to the point of permitting me to -- to 22 determine an effective interest rate just by averaging. It 23 would seem to me that the -- that the interest rate would be 24 different from just a straight average, the effective 25 interest rate, given the different amounts of -- different

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1 amounts of payments that are being made each year? 2 THE WITNESS: You -- you could take -- if the 3 interest rate was the same rate, consistently, through the 4 whole -- you assume that the interest rate is the same 5 interest rate from start to finish, you could come back to 6 the net present value by assuming that the interest rate is 7 the same throughout the entire period. 8 If -- if you were to assume that the interest 9 rate is different for different periods, you'd have to put 10 that into the calculation. And it would still get you back 11 to the present value, but you'd have to know where the 12 interest rates change. 13 MR. COMMISSIONER: All right. 14 THE WITNESS: If you were just to do this -- 15 to take these numbers and apply it, as a -- as a straight net 16 present value, without taking into consideration different 17 dates for different interest rates, you'd get an average 18 rate. You'd get one (1) rate. 19 MR. COMMISSIONER: Okay. I think it might be 20 a convenient place to break? 21 MR. WAYNE BUMSTEAD: Certainly. 22 THE REGISTRAR: The City of Waterloo Judicial 23 Inquiry now stands recessed for fifteen (15) minutes. 24 25 --- Upon recessing at 3:30 p.m.

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1 --- Upon resuming at 3:53 p.m. 2 3 THE REGISTRAR: The City of Waterloo Judicial 4 Inquiry stands resumed. Please be seated. 5 MR. COMMISSIONER: Mr. Ford, you're getting 6 dangerously close to the end. 7 THE WITNESS: I'm not quite thinking in those 8 terms, sir. 9 MR. COMMISSIONER: Okay. 10 11 CONTINUED BY MR. WAYNE BUMSTEAD: 12 Q: Thank you Mr. Commissioner. Mr. Ford, 13 just before the break we were looking at Schedule B to the 14 head lease and discussing the implicit interest rate in the 15 head lease and I had asked you about your inquiry to Mr. 16 White about that. 17 So, I take it that based on Mr. White's 18 response, you didn't see a red flag when you noticed that 19 there wasn't an interest rate in the head lease? 20 A: That's correct. 21 Q: And when you reviewed Schedule B to the 22 head lease, I take it that nothing jumped out from that that 23 caused you to think there should be a calculation performed 24 that would bring out the implicit interest rate? 25 A: No, sir.

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1 Q: And I think that the question that the 2 Commissioner had for you just before the break had to do with 3 the type of interest rate that would drop out of a net 4 present value calculation, had one been performed, and I 5 gather that you would have been able to arrive at an 6 effective average interest rate if you'd performed a 7 calculation? 8 A: Yes, sir. 9 Q: And was it your understanding, at that 10 time, that there was to be a single interest rate effective 11 throughout the term of the financing from MFP? 12 A: Yes, that was my understanding. 13 Q: And as at the week before September 25th, 14 I gather, your understanding was that that rate was to be no 15 worse than 4.76 percent? 16 A: That's correct, sir. 17 MR. COMMISSIONER: Now, that -- when you say 18 you drop out that interest rate, are you talking about from 19 the payments that -- payment schedule set out with the head 20 lease at tab 125? 21 THE WITNESS: Yes, if you -- I believe, the 22 question you're asking sir, is if you take all those numbers 23 that are in there and you plunk them into a formula of some 24 sort, could you come up with an interest rate -- you'd have 25 to know two (2) things.

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1 You'd have to know what the payments are and 2 what either the present value or future value is, then you 3 could come up with the interest rate. 4 MR. COMMISSIONER: Okay. 5 THE WITNESS: To do that calculation you need 6 to know at least two of the three variables. 7 MR. COMMISSIONER: All right. But, the way 8 the formula was set up on Schedule B to the sub lease -- 9 THE WITNESS: Yes -- 10 MR. COMMISSIONER: -- you couldn't do that? 11 THE WITNESS: Ah -- 12 MR. COMMISSIONER: Without running a 13 calculation on for the whole thirty-one (31) years. 14 THE WITNESS: Yes, you'd have to do two (2) 15 sets of calculations, yes, sir. 16 MR. COMMISSIONER: Do you have any expectation 17 about those schedules being the same? 18 THE WITNESS: No, none at all. 19 MR. COMMISSIONER: The payments -- the monthly 20 payments looking at Schedule B to the sub lease, at tab 130, 21 for the first six (6) years -- 22 THE WITNESS: Yes, sir -- 23 MR. COMMISSIONER: -- those payments happen to 24 be the same as the payments on Schedule B of the head lease? 25 THE WITNESS: Yes, sir. They -- yes --

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1 MR. COMMISSIONER: But, after year six, 2 something magical happens? If I can put it that way, I don't 3 mean to be facetious, I shouldn't be facetious, but, 4 something happens after year six and the payments start to 5 deviate? Or do they? 6 Somewhere I guess in order to determine that, 7 one has to look at the schedule of payments that were 8 produced by Clarica, correct? 9 THE WITNESS: That would be fair. I think 10 that's what the -- at the end of the day, what the issue is, 11 is that what the repayments are on that, Schedule B to the 12 head lease -- I'm sorry, Schedule B to the sub lease. 13 MR. COMMISSIONER: I'm struggling with this 14 and forgive me, if I'm delaying the process here. 15 Maybe Mr. Caskey, can you help me as to where 16 I find that schedule of payments that was produced by 17 Clarica? 18 MR. JAMES CASKEY: Yes, sir. That will be in 19 volume 7, I believe. 20 21 (BRIEF PAUSE) 22 23 MR. COMMISSIONER: Okay, about tab 214 -- 215. 24 MR. JAMES CASKEY: I see it's only Mr. Ford's 25 calculations we have here. Although if I look at tab -- if I

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1 look at tab 215 -- 2 MR. COMMISSIONER: Yes? 3 MR. JAMES CASKEY: -- 215, Mr. Ford, has the 4 227 million, so it obviously has the -- what would be the 5 same as tab 187 in your material, which is what we call the 6 fourteen (14) column spreadsheet. 7 So if one looks at tab 187 and then looks, 8 again, at tab 215, you should see that the payments are 9 reflective of being the same. Am I correct? 10 THE WITNESS: Yes, sir, you are correct. The 11 second last column of 187, where it says, sub lease rents? 12 MR. COMMISSIONER: Yes? 13 THE WITNESS: Is the same as tab 215 -- 14 MR. JAMES CASKEY: Under, current year rent. 15 THE WITNESS: Yes. The -- the second last 16 column of 187 and the fourth column of 215 are the same 17 numbers. 18 19 (BRIEF PAUSE) 20 21 MR. JAMES CASKEY: I think, Mr. Commissioner, 22 if you were to add up the monthly payments shown in Schedule 23 B to the head lease, and get an annual total, you would find 24 that they total the same up to the year 2006. 25 THE WITNESS: I believe that's correct. I

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1 haven't done that but I believe it's correct. 2 3 (BRIEF PAUSE) 4 5 MR. COMMISSIONER: Well, okay. What I was 6 getting at, rightly or wrongly, was that the monthly payments 7 pursuant to the formula at tab 130, would create rent for the 8 year 2008, forward. Oh, there it is. After the year 2008 -- 9 10 (BRIEF PAUSE) 11 12 MR. COMMISSIONER: -- to an amount, per 13 month, significantly different from the rents provided for in 14 Schedule B to the head lease. If I look, just for example, 15 take year 2010, and the calculation at tab 215 is $428,000 a 16 month, is there -- that's in tab 125, the monthly rent -- the 17 monthly payment is $338,000. Is that right? 18 THE WITNESS: Yes. Yes. 19 MR. COMMISSIONER: Therein lies the rub; 20 right? 21 THE WITNESS: I think that's correct, sir. 22 MR. COMMISSIONER: Okay. 23 MR. WAYNE BUMSTEAD: All right. 24 MR. COMMISSIONER: Let's -- I guess what I 25 was trying to do, Mr. Bumstead, is just to get some kind of a

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1 handle on the differential -- 2 MR. WAYNE BUMSTEAD: Differences. 3 MR. COMMISSIONER: Maybe that's what I did 4 get a handle on, but on the -- on the difference between the 5 amount that would result from a calculation of the formula 6 based on Schedule to the sub lease and what considerably 7 lesser amount shown on the head lease. 8 MR. WAYNE BUMSTEAD: Right. 9 MR. COMMISSIONER: Okay. How that -- how you 10 get there, I'm not sure. Obviously, you get them from the 11 application of differential that is provided for in the 12 formula and the compounding of the numbers from year to year? 13 MR. WAYNE BUMSTEAD: Correct. 14 MR. COMMISSIONER: If anybody disagrees with 15 me, they can take a shot. 16 MR. WAYNE BUMSTEAD: I don't disagree with 17 that. 18 19 CONTINUED BY MR. WAYNE BUMSTEAD: 20 Q: The point that I was trying to address 21 though, Mr. Ford, was that you believed you had Schedule A to 22 the head lease the week before September 25th? 23 A: I believe it was sometime in the week 24 before September 25th. 25 Q: In the week; right?

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1 A: Yes. 2 Q: And we've already reviewed the detail 3 that it contains and -- and how it appears to conform with 4 your understanding of how the -- the City was going to repay 5 the obligation with a ramping up and then smaller increasing 6 amounts after the sixth year or so? 7 A: Yes. 8 Q: And then on September 25, for the first 9 time, you see Schedule B to the sub lease -- 10 A: That's correct. 11 Q: that's right? 12 A: Yes, sir. 13 Q: And looking at Schedule B to the sub 14 lease at Tab 130, if you compare it to Schedule B to the head 15 lease at Tab 125, it's entirely consistent? In fact, it's 16 the same right up to the point where you get to the formula 17 isn't that right? 18 A: That's correct, sir. 19 Q: The payments are identical? 20 A: Yes, sir. 21 Q: And they show the ramping up feature that 22 you were interested in seeing that was a -- 23 A: Yes, sir. 24 Q: -- an essential component of this from 25 the City's point of view?

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1 A: Yes. 2 Q: And to the extent that you checked the 3 Schedule B to the head lease the week before, we've covered 4 -- we've covered the checking that you did, you made some 5 inquiries, you looked at it, you didn't do any calculations 6 though; right? 7 A: Correct. 8 Q: And to the extent that you checked 9 Schedule B to the sub lease on September 25th, did you -- did 10 you compare it to Schedule B to the head lease? 11 A: No, sir. 12 Q: Were you -- were you cognisant of the 13 fact that the figures that we see up to the point where the 14 formula starts in Schedule B to the sub lease were the same 15 as the figures that you'd seen the preceding week in the head 16 lease? 17 A: No, sir. 18 Q: Okay. Looking at those documents now, 19 Mr. Ford, is there any reason -- does any reason jump out at 20 you as -- for -- for carrying on with the sub lease to see 21 whether the rest of it, after December 31, 2006, also matches 22 the payments set out in the head lease? 23 A: I -- I think it you were comparing these 24 two documents, you put them down side by side, I think that I 25 would logically conclude, at least if I was reviewing the two

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1 of them side by side, that if the first, I don't know, 70 or 2 80 months of payments were identical document to document, 3 the likelihood of me going through the check the remainder of 4 it, I probably wouldn't. Probably assume that the 5 calculation at Tab 130, that formula, would give me the same 6 numbers that were in the other document if I was comparing 7 them side by side. 8 Q: All right. And would that -- would that 9 particularly be so because there was no other -- there was no 10 apparent reason for having that structure set out in the 11 Schedule to the head lease? 12 A: Say that again? 13 Q: Well, the head lease didn't -- you've 14 already indicated the head lease didn't require a structure a 15 ramping up -- 16 A: Oh yes -- 17 Q: -- and matching up revenue, only the sub 18 lease required that? 19 A: Right, that's correct I understand your 20 question. The answer is, yes. 21 Q: If you could turn to tab 147, which is in 22 -- you'll find it faster than I will -- it's in Volume 5, tab 23 147. 24 25 (BRIEF PAUSE)

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1 Q: This is Mr. White's opinion letter to the 2 October 2, 2000? 3 A: Yes, sir, I've got it. 4 Q: And if you turn to page 2638 of Mr. 5 White's letter -- 6 A: Yes, sir. 7 Q: -- at that tab. The numbered paragraph, 8 the second set of numbered paragraphs on the bottom part of 9 the page, it says: 10 "Based on a review of the foregoing, 11 Dwight, Duncan, Oscar and Linton is of the 12 opinion that, number one, the City has the 13 full capacity, power and authority to 14 execute the head lease, sub lease, 15 acknowledgment agreement and indemnity 16 agreement and to perform its obligations 17 thereunder, including without limitation 18 the City's obligation to make all payments 19 contemplated under the sub lease." 20 Now, to this point in time, Mr. Ford, are you 21 aware of anyone having calculated all the payments 22 contemplated under the sub lease? 23 A: No, sir. 24 Q: And had Mr. White ever asked you to 25 calculate all the payments contemplated under the sub lease?

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1 A: No, he did not, sir. 2 Q: Are you aware of any calculation that Mr. 3 White used to base that opinion at that point in time? 4 A: No, sir. 5 MR. COMMISSIONER: That opinion simply says 6 that the City has full capacity and power to perform in 7 accordance with the -- in accordance with the documents? 8 It doesn't say what the -- what the amounts 9 are supposed to be? All right. 10 MR. WAYNE BUMSTEAD: Has capacity, power and 11 authority, it says. 12 MR. COMMISSIONER: To perform its obligations. 13 MR. WAYNE BUMSTEAD: To perform, right -- 14 MR. COMMISSIONER: Whatever they are -- 15 MR. WAYNE BUMSTEAD: Whatever they are, right. 16 MR. COMMISSIONER: It doesn't spell out what 17 the obligations are, right? 18 MR. WAYNE BUMSTEAD: Nor -- and I think what 19 Mr. Ford has indicated, nor had anyone at that point 20 performed a calculation to spell out what they were. 21 22 CONTINUED BY MR. WAYNE BUMSTEAD: 23 Q: Had Mr. White, at that point, asked you if 24 you were satisfied with Schedule B? 25 A: I don't believe so.

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1 Q: Or had you indicated to him that you were 2 satisfied with Schedule B? 3 A: I don't believe that I did that, sir. 4 Q: I'd like to ask you some questions about 5 the CBRS report, tab 70 of Volume 3. 6 Now, just to back up a little bit, Mr. Ford, I 7 understand that you were aware that MFP had engaged somebody 8 to do a shadow credit report prior to you seeing this CBRS 9 report? 10 A: That's correct. 11 Q: And, in fact, I understand that that first 12 came out at a meeting held on July the 5th, 2000 when you 13 were advised of it by Mr. Robson? 14 A: Yes, I believe that's the first time I'd 15 heard it. 16 Q: And I think that's reflected in the notes 17 at tab 79 of that meeting made by you, probably not necessary 18 to turn to them, but -- and I take it that when you heard 19 that from Mr. Robson, that was volunteered by him? 20 In other words, it didn't come out as a result 21 of any inquiry that you were making? 22 A: No, no, it was volunteer, you're correct. 23 Q: And when he spoke to you about it, did he 24 indicate in any way that the result of that shadow credit 25 rating might have an impact on the interest rate that might

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1 be available to the City? 2 A: None whatsoever. 3 Q: The report, itself, if I understand your 4 evidence correctly, was actually seen by you in early 5 September, is that right? 6 A: I believe that's when it was. I -- I 7 don't have a -- a clear recollection of what day or date it 8 was but it was -- I -- I recall, it was a couple of weeks 9 before the final report went to Council, so that would put it 10 early part of September. 11 Q: All right. And between July 5th and the 12 early September date when you first saw the report, had there 13 been any more discussion of the shadow credit rating? 14 A: Other than Mr. Robson saying that it 15 was -- it had been done, or -- or some comments to that 16 effect, I don't recall if there was any real discussion about 17 it, other -- other than that it had been done. There was a 18 favourable report, or maybe some comments to that effect, but 19 nothing much beyond that. 20 Q: Were you asking for it? Or asking to see 21 it? 22 A: I had asked to see -- I had asked for a 23 copy of it, I don't recall the date that I had asked for a 24 copy of it but I had asked for a copy of it. 25 Q: All right. So when it was disclosed to

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1 you in early September, that was in response to a request by 2 you? 3 A: Yes, sir. Yes, sir. 4 Q: All right. And, Mr. Robson provided it 5 to you, is that right? 6 A: Yes, he did. 7 Q: And, did he indicate to you that -- well, 8 first of all, the report, itself, has a date on it of June 8, 9 2000 -- 10 A: Yes, sir. 11 Q: -- in the upper right hand corner? 12 A: Yes. 13 Q: Did he indicate to you that anything had 14 changed since CBRS had performed its shadow credit rating? 15 A: No, sir. 16 Q: How did he -- he did he describe or tell 17 you about the report? 18 A: He'd indicated to me that the report 19 was -- that they'd received the report and I think he -- he 20 indicated to me that it was a -- a pretty favourable report, 21 or it was a positive report or some such words to that 22 effect. I don't believe that there were -- there was any 23 comment beyond that kind of thing, that he'd -- he'd made. 24 Q: All right. You read the report, at that 25 time?

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1 A: When he handed it to me, I don't recall 2 that I read it right at that time, but I think within the 3 next day or so, I had. 4 Q: All right. And when you -- when you read 5 the report, you understood that CBRS was making an assessment 6 that was a forward looking assessment? 7 A: Yes, typical -- this is pretty typical of 8 a credit -- a credit rating, that I've seen, is that they 9 look at a -- they take a snapshot and also look forward. So 10 it's -- it's a combination of both those, but they -- they do 11 have a forward look to the -- to their credit raring. 12 Q: Right. And -- and what -- what they mean 13 by a forward looking assessment is they -- they assess the 14 City's credit rating, as if the City had already incurred the 15 financial obligation that was being considered at the time? 16 A: Correct. In this particular case, 17 this -- this credit rating was being prepared because of the 18 $50 million debt financing. Other credit ratings that I've 19 seen are -- don't focus around a particular debt instrument 20 that's being negotiated, but this one does. 21 Q: All right. Would you agree with me that 22 in order for CBRS to make that forward looking assessment, 23 they have to understand the details of the debt obligation? 24 A: That would be a fair comment, yes, sir. 25 Q: They have to understand what its

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1 financial impact is and they have to understand the payments 2 that would ultimately have to be made by the City? 3 A: I would think that that would -- that 4 would be a fair comment, yes. 5 Q: And, did you provide any information to 6 CBRS, for the purposes of this assessment? 7 A: I don't recall that I provided anything, 8 personally. There is some information in here about -- right 9 near the end of it, about City of Waterloo. I did not 10 provide that information, personally. I don't believe any of 11 my staff did, although they may have. 12 But it's very readily and easily available 13 from the Ministry of Municipal Affairs data base, and a 14 variety of other sources. So it's -- I mean, it's not secret 15 stuff, but I don't recall ever -- ever providing any 16 information directly. 17 Q: No, but -- okay, that's the general 18 information about the City. 19 A: Right. 20 Q: As to CBRS's information about the 21 details of the financing obligation, though, -- 22 A: Oh. 23 Q: -- was there anything that went from the 24 City to CBRS, that you know of? 25 A: No, in that respect, sir, no. None of

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1 that was provided by the City. 2 Q: All right. So is it your understanding 3 that that detail went to CBRS from MFP? 4 A: I'd have to guess that that's where it 5 came from. I don't know how else they would have got it. 6 They could have got it from any source but they didn't get it 7 from me. 8 Q: As at June 2000 you certainly didn't have 9 any schedules or payment amounts that you could have provided 10 to CBRS that would show the -- the scope of the payment 11 obligation? 12 A: No, sir. 13 Q: All right. And is it fair to say, 14 Mr. Ford, that generally CBRS describes the financing in the 15 same terms as you understood they were to be prior to 16 September 25, 2000? 17 A: Yes. I would say that that's -- that's 18 accurate. When I read this, I felt that it was -- there's 19 nothing there that was -- I wasn't aware of. 20 Q: And, in particular, they talk about lower 21 cost of funding compared to traditional debenture financing? 22 A: Yes. 23 Q: I mean, that was consistent with your 24 understanding? 25 A: Yes, sir.

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1 MR. COMMISSIONER: Where do they say that 2 please? 3 MR. WAYNE BUMSTEAD: That's on page 2016, 4 Mr. Commissioner. Sorry, I should have pointed that out. 5 It's the fifth bullet point on the left-hand column. 6 "Lower cost of funding for the Millennium 7 Project compared to traditional debenture 8 financing makes this venture more 9 affordable." 10 MR. COMMISSIONER: Yes. I see it. Thank 11 you. 12 13 CONTINUED BY MR. WAYNE BUMSTEAD: 14 Q: And on page 2018, I think Mr. Stevens 15 directed your attention to this as well, Mr. Ford, but the 16 left-hand column underneath it is the heading "reserve fund 17 positions" the second paragraph starts off saying 18 "While the proposed $50 million 19 construction loan to fund the Millennium 20 Recreation Project provides a low-cost 21 financing alternative, due to its tax 22 advantageous treatment to prospective 23 investors." 24 The statement in brackets there is consistent 25 with a feature that you considered existed in September?

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1 A: Yes, sir. That's -- that was my 2 understanding of what was in the transaction. 3 Q: And from what you've said already, I take 4 it that Mr. Robson didn't make any effort to correct you on 5 either of those two statements in the CBRS report when he 6 gave it to you in early September? 7 A: None whatsoever. 8 Q: And, in fact, Mr. Robson graciously made 9 many copies of this report available to you so that you could 10 distribute it to members of Council; isn't that right? 11 A: Yes. He did, sir. 12 Q: And you did that? 13 A: Yes. I did. 14 Q: I'd like to ask you a few questions about 15 the 180 day limit that is set out in Mr. Robson's May 26 16 letter at Tab 62 of Volume 3. You've been asked a lot about 17 this already, Mr. Ford, but I gather the -- the gist of it is 18 that you weren't concerned about the 180 day limit; is that 19 fair to say? 20 A: That's correct. 21 Q: And why was it that you didn't -- you 22 weren't concerned about it? 23 A: The reason I wasn't concerned about it is 24 because the -- my understanding of how -- how that worked was 25 that if the interest rate -- the Government of Canada rate

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1 was lower than the 5.78 percent interest rate that the 2 benefit would accrue to the City and if it was higher, there 3 would be an additional cost to the City. 4 At the -- at this -- at the time in September, 5 I wasn't aware exactly what the Ontario -- I'm sorry, Canada 6 Bond Rates were, but I knew that -- that they were below 5.78 7 but I didn't know exactly what they were. And I knew there 8 was nothing on the horizon that was going to force that 9 interest rate higher. 10 There was nothing in the economy and there was 11 nothing in the projections that any of the learned 12 individuals with respect to those things were saying that 13 there was an issue that the rate would be higher. 14 So I felt that the City was -- that there was 15 no issue with respect to the City. 16 Q: Is it fair to say, Mr. Ford, that the 17 only negative here for the City is if the rate goes higher 18 than 5.78 percent after 180 days? 19 A: That was my understanding and that is my 20 understanding. 21 Q: Did you monitor that in any fashion? 22 A: Not on a daily basis. I was aware and I 23 can't tell you at what date through that piece, but, I was 24 aware what the Canada Bond rate was, it was below 5.78. 25 And as I said, I also knew that all the

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1 economic indicators at that point in time, were actually 2 pointing to interest rates being lower, not being higher. 3 But, I didn't monitor it on a day to day basis, no, sir. 4 Q: And after the fact have you investigated 5 to see what the Government of Canada Bond Rate, how it 6 performed after the one hundred and eighty (180) day period? 7 A: Actually, I looked at the Canada Bond rate 8 from August 1st, 2000 to I think about the middle of October 9 2000, from the Government of Canada data base, that was done 10 about a month ago, and at no point in time, during that 11 period of time, from August the 1st, I think until about the 12 8th or 9th or something of October, was the interest rate at 13 any point in time above 5.78. 14 The long Canada Bond rate was not above 5.78 15 during that period of time. 16 Q: All right. The one hundred and eighty 17 (180) day period would have expired, I guess, on or about 18 August the 24th or so, give or take a day. I take it that 19 you had conversations and discussions with Mr. Robson after 20 that time, prior to September 25th? 21 A: No there was no discussion with Mr. -- I 22 had discussion with Mr. Robson about many other issues, yes, 23 I did -- 24 Q: Generally -- 25 A: -- generally, yeah, many other issues with

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1 respect to the head and sub lease agreements and a variety of 2 other matters, yes. 3 Q: And in the course of your communications, 4 generally Mr. Robson, did he ever indicate to you that the 5 hundred and eighty (180) days was expired and that that might 6 -- that might manifest some negative result for the City? 7 A: Not at all. 8 Q: Never came up at all? 9 A: Not at all. 10 Q: I'd like to ask you some questions about 11 your knowledge of Clarica's involvement, I think you've 12 already testified that you weren't aware that MFP was 13 assigning its interest to Clarica until September 22nd, as a 14 result of a communication you received from Mr. White, which 15 flowed from a communication he received from Ms. Britton, is 16 that accurate? 17 A: That's the -- September 22nd is the 18 Friday? 19 Q: Yes -- 20 A: The answer to the question is yes. That 21 that's when I was aware that MFP was assigning the agreement 22 to -- to Clarica. 23 Q: Now, prior to that you were aware that 24 Clarica was in the background, correct? 25 A: That's correct.

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1 Q: But, your understanding was that they were 2 providing funds to MFP, which MFP would then in turn provide 3 to the City, is that accurate? 4 A: That was my understanding of it, yes, sir. 5 Q: And I gather that that arose at a meeting 6 with Mr. Robson on September 13, when there was a -- I'm 7 sorry -- on September 19, when there was a discussion about a 8 sign? 9 A: I just have to do a calculation. Yes, I 10 believe it was the 19th that that was Tuesday that week and I 11 believe that that was the point, at which Mr. Robson made the 12 inquiry about putting up the sign, and made the comment that 13 Clarica was providing all of the financing or all of the 14 funds. 15 Q: He said that Clarica was providing all of 16 the funds? 17 A: Yes. 18 Q: And I take it that the City, through you 19 and perhaps Mr. Stockie rejected the request for a sign that 20 would have had Clarica on it, because you considered 21 yourselves still dealing with MFP, at that point? 22 A: That's correct. Mr. Robson asked me if -- 23 and I believe Mr. White was present at the time and asked if 24 we could put up a -- if the City would entertain putting up a 25 sign. I said I didn't think so and I'm not sure whether

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1 there was any conversation with Mr. White about it at the 2 time, but, I did call Mr. Stockie. 3 We had a conversation on the phone and the 4 conclusion we came to is what you just said, sir, that our -- 5 our transactions, we believed it was with MFP. We offered to 6 put up a sign for MFP, but, that we thought it would be 7 inappropriate to put up a sign for Clarica because we were 8 not dealing with Clarica. 9 Q: And you told that to Mr. Robson? 10 A: Yes, sir. 11 Q: That you didn't want to put a sign up for 12 Clarica because you felt you were dealing with MFP? 13 A: Yes, sir. 14 Q: And did Mr. Robson say to you anything 15 that would -- to the tune of, well, you're actually not going 16 to be dealing with MFP because MFP is assigning to Clarica? 17 A: No, sir, he didn't make any comment to 18 that effect, at all. 19 Q: Nor did he indicate anything like that 20 when you met with me again on September 21st? 21 A: No, there was no comment about anything 22 like that at all, sir. 23 Q: All right. Now, you had a conversation, 24 a telephone conversation, with Mr. Pitre in June, 2001? 25 A: Yes, sir.

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1 Q: You remember that telephone conversation? 2 A: Yes, sir. 3 Q: And that was a call that you placed to 4 Mr. Pitre at the suggestion of the City's counsel, is that 5 right? 6 A: That's correct, yes, sir. 7 Q: That's legal counsel. 8 A: Yes, s-e-l. 9 Q: Right. And, I'd just like to ask you a 10 little bit about that -- that conversation. 11 Was Mr. Pitre forthcoming with information or 12 was he reluctant to give it to you? 13 A: He was extremely forthcoming. 14 Q: And, did he describe his knowledge of the 15 transaction that had taken place between the City and MFP? 16 A: He -- he didn't describe the actual 17 mechanism or terms of the -- the agreement between the City 18 and MFP. He made some general comments about the -- about 19 the -- the transaction but he didn't talk about the 20 specifics, as it related to it. 21 Q: Did he purport to have knowledge of what 22 had transpired between the City and MFP? 23 A: I would say that, yes, he -- he had 24 knowledge of -- of what the transaction was but not what the 25 specifics were.

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1 Q: All right. And did he tell you what the 2 source of his knowledge was, because I gather he didn't work 3 for MFP at the time? 4 A: No. He -- all -- all he said was -- 5 what -- what he was talking about was -- was, in general, how 6 that -- that particular transaction worked, now how -- 7 necessarily how specifically -- what the specific details of 8 the City of Waterloo transaction were, but how that -- the 9 transaction of the asset based, or financing worked. 10 Q: All right. So, his description was more 11 of a general description rather than a particular description 12 of -- of the City of Waterloo's transaction? 13 A: Correct. 14 Q: All right. And what did he tell you, 15 generally, about the asset based financing transactions 16 conducted by MFP? 17 MR. WILLIAM McDOWELL: Well, we've been 18 through this, I thought. That there's -- the substance of 19 this transaction, i.e., the Waterloo transaction. There's 20 been a host of other transactions. What Mr. Ford described 21 in his memorandum is quite contentious, there is denying by 22 Mr. Pitre and it's irrelevant. 23 So, I especially object to this kind of 24 inquiry. 25 MR. COMMISSIONER: Well, it may -- it may or

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1 may not be irrelevant, but it's certainly -- it's certainly 2 hearsay. The information coming from someone not connected, 3 at the time, to -- to MFP. 4 MR. WAYNE BUMSTEAD: Well, what I'm saying, 5 Mr. Commissioner, is that, first of all, Mr. Pitre is going 6 to be called as a witness. 7 MR. COMMISSIONER: Right. 8 MR. WAYNE BUMSTEAD: He's going to be asked, 9 I -- I believe, he's going to be asked about the same 10 conversation, and what he said. I think it's only fair that 11 Mr. Ford give his side of -- of what was said in the 12 conversation. I submit that what the conversation was, is 13 relevant, particularly to Mr. Ford who has been put on 14 notice, that there may be potential findings misconduct. 15 MR. COMMISSIONER: Okay, I don't want you to 16 talk about that unless you're telling me that you're prepared 17 to go into the public domain on the -- on the misconduct 18 issue. I -- those -- those notices are published on a 19 confidential basis, by the -- by counsel, to the Commission. 20 And they're to remain confidential, as far as I'm concerned, 21 at this stage, unless and until the persons to whom they are 22 delivered, decides to go public. And if you go public, there 23 may be other ramifications. 24 MR. WAYNE BUMSTEAD: Well, I'm not -- I'm 25 not wishing to disclose the contents of that notice.

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  1                 MR. COMMISSIONER:   Well, I don't want you 
  2  to -- to do it, even by, you think you're on -- you're on --
  3  not on solid ground, if you even -- the disclosure might lead
  4  to -- might lead to disclosures that are not an item.
  5                 MR. WAYNE BUMSTEAD:   Well, I guess the
  6  question I --
  7                 MR. COMMISSIONER:   It's up to -- it's up to
  8  you and your client, whether you want to go public on the
  9  issue.
 10                 MR. WAYNE BUMSTEAD:   Well, I haven't obtained
 11  my client's instructions on that so I can't answer that for
 12  you, right at this moment.  But it strikes me that if there's
 13  a potential for there to be a finding of misconduct against
 14  anybody through this Inquiry, it's only fair that they should
 15  have the opportunity to give evidence that would address that
 16  issue. 
 17                 MR. COMMISSIONER:   Well, they are certainly
 18  entitled under the rules we've established.  They're
 19  certainly entitled to give evidence with respect to matters
 20  relating to possible findings of misconduct.  
 21                 Mr. Caskey, maybe you can help me out here.  
 22                 MR. JAMES CASKEY:   Mr. Commissioner,
 23  Mr. Pitre will, indeed, be called and I'm quite sure
 24  Mr. Pitre will be asked whether or not this conversation took
 25  place with Mr. Ford and the import of it and, at that point

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1 in time, he's going to give his answers and then that puts us 2 in the position where Mr. Ford has to be called back in order 3 to be able to make answer to those. 4 It would seem to me that if that's the process 5 and I have indicated to everyone that I am calling Mr. Pitre, 6 that now may well be the time to ask specifically, in so far 7 as this transaction is concerned, what that conversation was 8 because Pitre will be asked that question. 9 MR. COMMISSIONER: All right. Well, 10 Mr. Bumstead has made known the existence of -- of his notice 11 -- or his client's notice and it may be that it's appropriate 12 to advance the situation somewhat by getting the evidence 13 now, but I will listen to Mr. McDowell. 14 MR. WILLIAM McDOWELL: All right. Well, I 15 don't have knowledge of the particulars of the notice and my 16 position might be different but I suspect it wouldn't. But I 17 agree with Mr. Caskey, if Mr. Pitre says, here's the way I 18 understood the MFP transaction then that's one thing. But 19 that's not the question that was asked. 20 The question is transaction and all these 21 other things and it's from someone after the fact, 22 anecdotally, in an on-going bitter lawsuit with MFP at the 23 time. I mean, through the content of what was said, which is 24 really demeaning of a number of people who are not named in 25 the terms of reference to this Inquiry.

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1 MR. COMMISSIONER: Well, he's named insofar 2 as he's been subpoenaed as a witness. 3 MR. WILLIAM McDOWELL: No, I understand that. 4 I understand that. But I disagree with My Friends if they 5 say, well, Mr. Pitre could come here and then we're going to 6 ask him about all this unrelated supposed shenanigan that -- 7 that is irrelevant then as it is now. 8 MR. WAYNE BUMSTEAD: I can indicate to you, 9 Mr. Commissioner, that I don't propose to ask Mr. Ford 10 questions about how Mr. Pitre described the character of 11 other people who are involved in this. That's not the 12 evidence that I was seeking to elicit from the conversation. 13 MR. WILLIAM McDOWELL: Well, the other party, 14 just through you, Mr. Commissioner, the other part of it is 15 the other transactions which we maintain have nothing to do 16 with this transaction. 17 And the -- and lastly, if -- I don't know how 18 good your hearing is, but lastly, if this is to make full 19 answer and defence of some notice of misconduct then, 20 frankly, the cat's out of the bag, we should all know what 21 the particulars of this supposed misconduct are. 22 MR. COMMISSIONER: All right. I am going to 23 hear the question -- let me hear the question and before 24 Mr. Ford answers, he could look to me for a nod or an 25 otherwise. Go ahead.

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1 2 CONTINUED BY MR. WAYNE BUMSTEAD: 3 Q: The question, Mr. Ford, is, how did 4 Mr. Pitre describe the asset-based financing transactions of 5 MFP? 6 MR. COMMISSIONER: To the City of Waterloo -- 7 with the City of Waterloo? 8 MR. WAYNE BUMSTEAD: He didn't purport to 9 have specific knowledge of that transaction. As I understand 10 Mr. Ford's evidence, he had general knowledge of those types 11 of financings by MFP. 12 MR. COMMISSIONER: Frankly, I don't -- I 13 don't see how that -- the answer to that question is going to 14 reflect on -- on Mr. Ford with respect to any potential 15 findings of misconduct. Mr. Caskey ...? 16 MR. JAMES CASKEY: To this extent, 17 Mr. Commissioner, if, in fact, the City of Waterloo 18 transaction is an asset-based transaction, one of and if he 19 has a comment about whether or not it is or was viable or 20 not-viable, that may very well be an issue here, in the mind 21 of people at MFP going through the transaction at the time 22 that Mr. Ford was going through it. 23 I mean I appreciate that he has not said, I 24 had specific knowledge of your transaction, but, it was to be 25 an asset based transaction.

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1 And if it's an asset based transaction, I can 2 tell you the way in which those things happen. So, to that 3 extent, I would think that he could comment on it and then 4 you'll have to determine when -- when we ask Mr. Pitre that 5 same question, whether or not there is any validity to it. 6 MR. COMMISSIONER: Well, rather than go 7 through the process of recalling Mr. Ford, I'm going to let 8 him answer the question. 9 THE WITNESS: I reviewed my notes and -- my 10 handwritten notes from the conversation, one of the comments 11 that Mr. Pitre used was that the -- was that it was -- I 12 think -- I'm not sure whether the word classic is in there, 13 or not, but, I'll take that word out for now, but, he 14 referred to it as a bait and switch. 15 I don't know whether -- not necessarily 16 transaction, but, it was a bait and switch and that it was, I 17 used the word sleight of hand, in one of my comments 18 previously and it was interesting that Mr. Pitre also in the 19 conversation used -- according to my notes, the comments of 20 legal and accounting sleight of hand. 21 And I think the third comment that I recall 22 from there is that that it was -- I believe Mr. Pitre used 23 the word, that it was common knowledge and I'm not sure what 24 -- how common knowledge is, common knowledge with whom, that 25 the City got -- got suckered or got sucked in. One or the

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1 other two (2) terms that I recall. 2 MR. COMMISSIONER: Now, when you used the 3 term, slight of hand, my recollection is at that particular 4 time, you were using that as colloquialism? 5 THE WITNESS: Yes. I was -- 6 MR. COMMISSIONER: As a description -- 7 THE WITNESS: Right -- 8 MR. COMMISSIONER: -- that had no context in 9 reality other than as a method of describing -- 10 THE WITNESS: Yes -- 11 MR. COMMISSIONER: -- a mysterious type of 12 transaction, but, certainly nothing -- there was no 13 suggestion of illegality or anything like that? 14 THE WITNESS: No, no. But, those are three 15 (3) points that Mr. Pitre, in particular, the notes with 16 respect to the whole issue of the type of transaction that I 17 -- from reading my notes, sort of, jumped out at me. 18 MR. COMMISSIONER: Okay. How are we doing? 19 MR. WAYNE BUMSTEAD: A couple more questions, 20 I can wrap up with Mr. Ford. 21 MR. COMMISSIONER: That's fine. 22 MR. WAYNE BUMSTEAD: If we can just go a 23 little bit longer. Thank you. 24 25 CONTINUED BY MR. WAYNE BUMSTEAD:

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1 Q: Mr. Ford, let me take you to the June 4th, 2 2001 meeting again. 3 A: Yes, sir. 4 Q: We talked about it a little bit, but, you 5 mentioned in your evidence that after MFP left that meeting 6 there was a discussion between you and Mr. Cameron at 7 Clarica? 8 A: Yes, other members of the meeting were 9 still there, not all of them, but, some of them were still 10 there. So, it wasn't a one on one conversation with Mr. 11 Cameron, but, I was responding to Mr. Cameron. 12 Q: All right. And my notes, what you said 13 was, you asked Mr. Cameron, if he thought you were nuts? 14 A: I believe what I said was, is I asked him 15 if he thought I was insane. 16 Q: All right. 17 A: I mean nuts is the same thing, but, I 18 think the word I used was insane. 19 Q: All right. And why did you say that to 20 Mr. Cameron? 21 A: Because at that -- during the course of 22 that meeting, we were advised that the interest rate, 23 although it wasn't firmly set, the interest rate was -- 24 firmly said what the interest rate was, but, the implication 25 was it was somewhere in the order of 9 percent.

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1 And what I said to Mr. Cameron was, you must 2 think I'm insane that I would go and borrow money at 9 3 percent when on a regular debenture issue I can borrow it at 4 least 2 percent lower than that. 5 Mr. Cameron kind of shrugged his shoulders and 6 said that's -- you know -- we were advised that that's the 7 kind of transaction you were looking for. And I said to him 8 again, you must think that I'm insane, that I would actually 9 consider borrowing money at 2 percent -- more than 2 percent 10 higher than I could borrow it conventionally. 11 And he didn't respond to that the second time, 12 he just kind of shook his shoulders and so made just a -- 13 just a body language response, not a verbal response. 14 Q: And was it your view, at the time, that 15 you would have had to have been insane or -- or nuts, in 16 order to agree to that type of a transaction? 17 A: Absolutely. 18 Q: And was that because you would never 19 knowingly put the City in the position of having to borrow 20 money at a higher rate of interest, than was available to it, 21 under a traditional debenture format? 22 A: Absolutely. Absolutely. 23 MR. COMMISSIONER: Was there anything -- 24 MR. WAYNE BUMSTEAD: That -- 25 MR. COMMISSIONER: -- just let me interrupt,

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1 was that the time, when you were having this conversation 2 with Mr. Cameron, is that when you -- when -- was that when 3 you first learned that this was -- what was happening, here, 4 was a straight loan as opposed to the tax flow through type 5 of transaction? 6 THE WITNESS: That's correct, sir. 7 MR. COMMISSIONER: Prior to that time, you 8 were totally unaware -- 9 THE WITNESS: That is correct, sir. 10 MR. COMMISSIONER: -- that this was turning 11 into a straight loan? 12 THE WITNESS: That is correct, sir. 13 14 CONTINUED BY MR. WAYNE BUMSTEAD: 15 Q: That's when you first heard that there 16 was a 9 point something interest rate involved? 17 A: The interest rate was never said during 18 the course of the meeting, that it was 8.5, 8.8, 9.2 or 19 anything of that nature. But the -- the information that 20 was -- was provided by Mr. Wolfraim, doing simple arithmetic, 21 it looked like the interest rate would be in the 8.8 -- 8. -- 22 8.8 to 9 percent range. Although, I don't believe Mr. 23 Wolfraim actually came out and said what the interest rate 24 was. 25 Q: All right. Mr. Ford, your reputation is

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1 important to you? 2 A: Absolutely. 3 Q: You feel you've achieved a good 4 reputation over your career? 5 A: I like to think so. 6 Q: And, did you ever do anything, in the 7 course of representing the City, throughout this transaction, 8 that -- that you realized would put your reputation in 9 jeopardy? 10 A: No, sir, not at all. 11 Q: Did you ever act in a manner that you 12 realized was contrary to the best interests of the City? 13 A: No, sir. 14 MR. WAYNE BUMSTEAD: All right. Thank you, 15 sir. I have no further questions. 16 MR. COMMISSIONER: All right, thank you very 17 much. Mr. Caskey? 18 MR. JAMES CASKEY: I have no re-examination 19 of Mr. Ford, sir. 20 MR. COMMISSIONER: All right. Thank you. 21 Mr. Ford, I thank you very much for your lengthy stay. 22 THE WITNESS: Thank you, sir. And I'm -- to 23 repeat something that Mr. Caskey said this morning, I, too, 24 am very pleased to see that you are in good health and I wish 25 you continued good health, sir.

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1 MR. COMMISSIONER: Thank you very much. All 2 right, then you're excused. 3 4 (WITNESS STANDS DOWN) 5 6 MR. COMMISSIONER: And we'll recess now until 7 ten o'clock tomorrow morning. 8 THE REGISTRAR: The City of Waterloo Judicial 9 Inquiry now stands adjourned until 10:00 a.m. tomorrow 10 morning. 11 12 --- Upon adjourning at 4:47 p.m. 13 14 Certified Correct 15 16 17 ____________________ 18 Wendy Warnock 19 Court Reporter 20 21 22 23 24 25