1 2 3 TORONTO COMPUTER LEASING INQUIRY 4 5 6 7 ******************** 8 9 10 BEFORE: THE HONOURABLE MADAM JUSTICE DENISE BELLAMY, 11 COMMISSIONER 12 13 14 15 16 Held at: East York Civic Centre 17 850 Coxwell Avenue 18 Toronto, Ontario 19 M4C 5R1 20 21 ******************** 22 23 24 December 17th, 2002 25

2
  1                        APPEARANCES
  2  
  3  Ronald Manes   (np)     )Commission Counsel 
  4  Patrick Moore           )
  5  Diana Groskaufmanis     ) 
  6  
  7  Linda Rothstein         )City of Toronto 
  8  Lily Harmer (np)        )
  9  Robert Centa   (np)     )
 10  Gordon Capern           )
 11  
 12  David Moore             )MFP 
 13  Fraser Berrill          ) 
 14  Ken Jones (np)          ) 
 15  Brian Heller   (np)     )Ball Hsu and Associates Ltd.
 16  Melissa Kronick (np)    )CUPE 
 17  Raj Anand (np)          )Lana Viinamae
 18  Bay Ryley               )
 19  William Anderson        )Wanda Liczyk
 20  Valerie Dyer (np)       )Dell Computers
 21  Jennifer Lynch (np)     )
 22  Edward Greenspan (np)   )Jeff Lyons
 23  Todd White (np)         )
 24  Joyce Ihamaki           )Registrar
 25

1 TABLE OF CONTENTS 2 Page 3 ROBERT ASHBOURNE, Resumed 4 5 Cross-Examination by Ms. Bay Ryley 5 6 Cross-Examination by Mr. Gordon Capern 18 7 Cross-Examination by Mr. David Moore 146 8 Re-Direct Examination by Mr. Patrick Moore 188 9 10 Certificate of Transcript 200 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

1 EXHIBITS 2 No. Description Page 3 5 Volume 1 Amended, tabs 1 to 101 6 4 5 5 Volume 2 Bound document titled 6 "Rob Ashbourne-Supplementary 7 Documents" tabs 1-18 145 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

1 --- Upon commencing at 10:00 a.m. 2 3 REGISTRAR: The Inquiry is now in session. 4 Please be seated. 5 MADAM COMMISSIONER: Good morning. 6 7 (BRIEF PAUSE) 8 9 MADAM COMMISSIONER: All right. When we left 10 yesterday we were waiting to hear from Ms. Viinamae's counsel 11 as to whether or not she had any questions. 12 MS. BAY RYLEY: I did have a couple 13 questions. I figured would just take about fifteen (15) 14 minutes. 15 MADAM COMMISSIONER: You're on. This is Ms. 16 Bay Ryley and she's representing Lana Viinamae. 17 18 CROSS-EXAMINATION BY MS. BAY RYLEY: 19 Q: Good morning, Mr. Ashbourne. 20 A: Good morning. 21 Q: If I could take you to this new document 22 that was just put out this morning. It's COT0-3995. 23 MADAM COMMISSIONER: Is there a tab number? 24 MS. BAY RYLEY: It's -- 25 MR. FRASER BERRILL: Tab 101.

1 MS. BAY RYLEY: Tab 101. On the first page 2 is COT0 39948. I do apologize to the Commissioner and the 3 Counsel for the -- the late distribution of this document but 4 I understand that yesterday the issue of a alleged meeting 5 between Mr. Ashbourne and our client, Ms. Viinamae, arose and 6 there's no mention of this in -- this or any other contact 7 between Mr. Ashbourne and Lana Viinamae in the Will Say. 8 We actually have an articling student here 9 arti -- monitoring because of assurances given to us by 10 Commission Counsel that this witness' testimony was not 11 related to our client. 12 13 --- EXHIBIT NO. 5: Volume 1, Amended, tabs 1 to 101 14 15 MADAM COMMISSIONER: Well, what -- what point 16 exactly are you trying to make? 17 MS. BAY RYLEY: I -- is -- I do have a 18 question, a proper question -- 19 MADAM COMMISSIONER: Hang on a second. I'm 20 just asking because it is obviously of concern to me if 21 anyone is making an allegation about Commission Counsel then 22 I would like to know what that concern is. 23 Are you raising a concern about Commission 24 Counsel? 25 MS. BAY RYLEY: I -- I am concerned that this

1 information was not in the Will Say. 2 MADAM COMMISSIONER: I haven't seen the Will 3 Say so I don't actually know what's in the Will Say, but can 4 somebody help me with this? Mr. Moore or Ms. Groskaufmanis? 5 MS. DIANA GROSKAUFMANIS: Madam Commissioner, 6 I think we had discussions about the witness summaries last 7 week, as well. The Commission -- the witness summaries are 8 prepared by Commission Counsel and they're not intended to be 9 a verbatim of what the witness will say. 10 Ms. Viinamae's Counsel, as well as all other 11 Counsel, were provided with all documents for Mr. Ashbourne a 12 number of weeks ago and -- including references in Mr. 13 Ashbourne's calendar that referenced Ms. Viinamae and -- and 14 to that extent I -- I would -- I find it surprising that Ms. 15 Viinamae's Counsel somehow didn't believe that her name was 16 not mentioned. 17 That being said, last week I think it was 18 quite clearly made that the witness summaries were not 19 intended to provide a very detailed or very full-some or 20 complete statement of everything the witness would say. 21 MADAM COMMISSIONER: Okay, I gather then, Ms. 22 Ryley, your concern is that nothing was ac -- while there may 23 have been documents referring to Ms. Viinamae attached to the 24 Will Say, that there is nothing in the Will Say Summary that 25 mentioned Ms. Viinamae. Is that -- is that your concern?

1 MS. BAY RYLEY: Well, there -- in the Will 2 Say there were statements that Mr. Ashbourne met with other 3 people such as Mr. Andrew and perhaps Mr. Domi. 4 MADAM COMMISSIONER: I would think he'd meet 5 with Mr. Domi. They work in the same office. 6 MS. BAY RYLEY: Sorry, Mr -- definitely Mr. 7 Andrew and because of -- I just -- because Ms. Viinamae's a 8 party with standing, if the witness is going to testify about 9 a meeting that he recalls with her that is quite detailed 10 and, in fact, different from that of my client, we would like 11 to have notice of that. 12 MADAM COMMISSIONER: I guess the difficulty 13 is -- Commission Counsel might not necessarily know the 14 position that your client is going to take vis-a-vis Mr. 15 Ashbourne. 16 I certainly encourage Commission Counsel to be 17 as forthcoming as possible with all the documentation. We 18 have over twenty thousand (20,000) or so documents, all of 19 which were provided to Mr. Anand on behalf of Ms. Viinamae, 20 oh gosh, I don't know, many, many, many months ago and the 21 Will Says -- the summaries were provided as well. 22 I guess -- I think for people with standing, 23 when Commission Counsel provide all the documents, I take it 24 then there is a responsibility on behalf of those with 25 standing to look at the documents, to see whether there is

1 anything in there that actually affects their clients. 2 The vast majority of the evidence yesterday by 3 Mr. Ashbourne did not have to do with Ms. Viinamae. But, I 4 understand your concern. 5 I'm sure that Commission Counsel tried to be 6 as fair as possible in making sure everybody's -- the vast -- 7 that the main part of the evidence will be in there. 8 But, if there's something that's peripheral, 9 then it may not -- it may not make it into the summary, I'm 10 assuming without actually knowing that. 11 Ms. Groskaufmanis, does that -- can you help 12 me on that? 13 MS. DIANA GROSKAUFAMANIS: Yes. 14 Commissioner I think that's right. I don't 15 have -- I didn't review the transcript from Mr. Ashbourne in 16 detail, but I believe he recounted the one (1) meeting with 17 Ms. Viinamae. 18 MADAM COMMISSIONER: Well, I'm looking at my 19 notes, he said he had -- he only had one (1) meeting with Ms. 20 Viinamae in the spring of 1999, and he had two (2) 21 conversations with her, and he also referred to an event of 22 MFP which was sent to Ms. Viinamae. And that was one (1) of 23 the documents that is in the materials. 24 And that there was a meeting on April 27th at 25 3:00 p.m.

1 MR. FRASER BERRILL: That's Tab 40. 2 MADAM COMMISSIONER: Tab 40, yes, 25143. And 3 that was to gather information with respect to Y2K 4 deployment. 5 MS. BAY RYLEY: So, I just wanted -- I guess 6 my point would be, if I -- I -- we do have all the documents 7 available to us and we, of course, meet with our client and 8 get her version of thing, but -- and prepare that way. 9 But, it's hard to be fully prepared when we 10 don't know what the witness might say about our client, when 11 it's a significant issue. 12 And again, I don't -- we've talked about this 13 last week, as well, and we understand not every detail is in 14 the summaries, but I thank you for your consideration and 15 I'll move on. 16 MADAM COMMISSIONER: All right. 17 18 CONTINUED BY MS. BAY RYLEY: 19 Q: Okay. If we could please turn to page -- 20 well COT0-39957, and this is a -- 21 MADAM COMMISSIONER: I'm sorry, where are you? 22 Is this is on Tab 101. 23 MS. BAY RYLEY: This is back to Tab 101. 24 Tab 101. 25 MADAM COMMISSIONER: And it's 57 --

1 MS. BAY RYLEY: Yes, 39957. This is Ms. 2 Viinamae's calendar. 3 MADAM COMMISSIONER: Okay. Thank you. 4 5 6 CONTINUED BY MS. BAY RYLEY: 7 Q: Mr. Ashbourne, if you could please look at 8 the top of the page there, which is -- excuse me -- if you 9 could look at the previous page there 39956, starting at the 10 bottom of the page, April 27th, 1999. 11 If you could review that for a moment. 12 A: Yes. 13 Q: I don't -- do you see any meeting on April 14 27th in Ms. Viinamae's calendar, to meet with you, that day? 15 A: No, but, what I do see between 3:00 and 16 5:00, it's open. 17 Q: And down to April 28th -- 18 A: Hmm hmm. 19 Q: -- if you could just review -- quickly 20 review those entries? 21 A: I see an entry for my name between 4:00 22 and 5:00. 23 Q: Okay. And just above that, if you could 24 read the entry, the line above that entry from 4:00 to 5:00 25 p.m.?

1 A: "Accepted meeting with Margaret, Jim, Lana 2 re: Y2K Margaret's office." 3 Q: Okay. And the 4:00 to 5:00 p.m., both 4 meetings seem to be booked from 4:00 to 5:00 p.m, don't they? 5 A: Hmm hmm. 6 Q: But it does say, accepted on -- for the 7 meeting that Ms. Viinamae had with Margaret -- 8 A: Yes. 9 Q: -- and Jim? Now, are you -- are you 10 certain this meeting occurred? I -- 11 A: Yes. I did meet with Lana. 12 Q: On April 27? 13 A: I believe I did. 14 Q: I -- jus -- we anticipated that our 15 client's testimony will be quite different an -- and she, in 16 fact, has no recollection of meeting with you. 17 A: I'm sorry but I did. 18 Q: You also testified yesterday that there 19 were several phone calls between you and Ms. Viinamae? 20 A: There was phone conversation. How many, 21 I can't recall exactly -- specifically, but I know I talked 22 to her. 23 Q: And what matters did you discuss in these 24 phone calls? 25 A: I think I was trying to set up a meeting

1 with her on a few different occasions and I think probably 2 what occurred on the 27th was because -- I think, you see, I 3 didn't meet with Nadir at four o'clock and again, this is 4 going back a number of years but I'm trying to recollect 5 this, but I think I called her fairly last minute. 6 Whether it was the day before or whatever and 7 I think she indicated to me, look I've got a time slot, 8 because I think I said, I'm coming in to see Nadir, could I 9 come in and see you? 10 Q: But that doesn't appear to be in her 11 calendar, does it? 12 A: No, but they don't show up in mine 13 sometimes if they're last minute either. 14 Q: She -- our client will -- her evidence, 15 we anticipate, will be that she didn't speak to you on the 16 phone. That you have not had phone calls. Her only possible 17 suggestion was that you may have had a phone call to cancel 18 the meeting on the 28th. 19 A: I -- as I said, I attempted -- I 20 attempted over a period of time to set up meetings with her 21 and I know I did see her. 22 Q: Okay. Do you have any notes of these 23 phone calls? 24 A: No, I don't keep logs of those. 25 Q: If we could turn to Tab 49, please. It

1 doesn't appear to have a no -- a COT number. 2 MADAM COMMISSIONER: It is 25302. They're 3 very faint, Ms. Ryley. 4 MS. BAY RYLEY: Oh, I see. 5 MADAM COMMISSIONER: I had the same problem 6 yesterday. 7 8 CONTINUED BY MS. BAY RYLEY: 9 Q: This is a meeting you had with Jim 10 Andrew? 11 A: Yes. 12 Q: There's no mention of Ms. Viinamae being 13 present here, is there? 14 A: No. No. 15 Q: Do you recall her being present at all? 16 A: I don't believe she was but I'm -- I 17 don't think so. I don't believe so. 18 Q: And if you could look at the top left 19 hand corner. I think this was reviewed yesterday. The 20 reference to existing PC and I -- which word is that? 21 A: Population. 22 Q: Population and it says thirteen thousand 23 (13,000) seven (7) -- three hundred and forty-five (345), 24 correct? 25 A: Thirteen thousand seven forty-five

1 (13,745). 2 Q: And that would be thirteen thousand 3 (13,000) -- sorry, seven hundred (700)? 4 A: Seven hundred (700). 5 Q: Seven hundred and forty-five (745) units? 6 A: Yes. 7 Q: And when you left this meeting was that 8 figure clear in your mind? 9 A: I believe so. I mean, that's th -- the 10 discussion we had. 11 Q: Now the day of this meeting with Mr. 12 Andrew was approximately six (6) months prior to the alleged 13 meeting you had with Ms. Viinamae in April of 1999, correct? 14 A: Yes. 15 Q: And would you ag -- you agree with me 16 that the figure thirteen thousand three hundred and forty- 17 five (13,345) -- 18 MADAM COMMISSIONER: Seven forty-five (745). 19 MS. BAY RYLEY: Seven hundred and forty-five 20 (745), I apologize. 21 22 CONTINUED BY MS. BAY RYLEY: 23 Q: Thirteen thousand seven hundred and 24 forty-five (13,745) is very close to the figure of thirteen 25 thousand five hundred (13,500) units that, in your testimony

1 yesterday, you say Ms. Viinamae gave you in that April 2 meeting? 3 A: Approximately. I mean, I was given 4 different numbers at different times, so. 5 Q: I suggest to you that you, in fact, got 6 the figure that you gave yesterday of your discussion with 7 Ms. Viinamae from this meeting with Mr. Andrew in October 8 1998. 9 A: I mean, I don't believe so but -- 10 Q: You testified yesterday you had a lot of 11 -- a lot of meetings with a lot of different people, correct? 12 A: Yes. 13 Q: How many times per week in that time, 14 would you think you had meetings? 15 A: Depending on what -- 16 Q: Like in the -- 17 MADAM COMMISSIONER: I think we need to 18 clarify that a little bit. 19 MS. BAY RYLEY: Okay, sorry. 20 21 CONTINUED BY MS. BAY RYLEY: 22 Q: How many times per week do you think you 23 might have had meetings in, say, April or for the spring of 24 1999, on average? 25 A: With who?

1 MR. DAVID MOORE: Are we talking about -- 2 MADAM COMMISSIONER: Just hang on -- 3 MR. DAVID MOORE: Just for my clarification, 4 are we talking about meetings at large with anybody in the 5 world, or are we talking about meetings with -- relating to 6 City of Toronto of matters? 7 MADAM COMMISSIONER: It's a good -- it's a 8 good intervention. I don't actually know the answer to that. 9 Ms. Ryley...? 10 11 CONTINUED BY MS. BAY RYLEY: 12 Q: Meetings that you would have had with 13 anyone at any time for business purposes. 14 A: I can't answer that, I don't have a clue. 15 I'd have to look at my daytimer notes and refer back to that. 16 As I indicated not all my meetings were scheduled in their 17 either. 18 Q: And the meeting -- the April meeting that 19 you were telling us about, this took place about three and a 20 half (3 1/2) years ago, correct? 21 A: Yes. 22 Q: And do you have any notes at all of your 23 meeting with Ms. Viinamae in April -- 24 A: If there was they'd be in the file -- my 25 file that I kept. And if they were in that file, I suspect

1 they would be in here. 2 MS. BAY RYLEY: Thank you. 3 Those are my questions. 4 MADAM COMMISSIONER: Thank you. 5 Ready? Mr. Gordon Capern, acting on behalf of 6 the City of Toronto. 7 8 (BRIEF PAUSE) 9 10 CROSS-EXAMINATION BY MR. GORDON CAPERN: 11 Q: Good morning, Mr. Ashbourne. 12 A: Morning. 13 Q: I wanted to go back a little bit over your 14 testimony yesterday. First dealing with your experience in 15 finance and leasing. 16 I'm right, sir, that as of 1992, you said, I 17 think, you'd been in the industry for approximately seventeen 18 (17) years? 19 A: I started in 1980, so twelve (12) years at 20 that point. I think at the point of 1997, I'd been in the 21 business for seventeen (17) years. 22 Q: I see. So, you started work -- if I have 23 your evidence, you were born in 1956, you started work in the 24 leasing industry when you were twenty four (24) years of age? 25 A: Yes.

1 Q: For practical purposes, sir, you've worked 2 in the leasing industry for your entire adult life? 3 A: Yes. 4 Q: Your years at MFP started in 1992, when 5 your -- your previous employer was acquired by MFP? 6 A: That is correct. 7 Q: Your previous employer was in the same 8 business? 9 A: Yes. 10 Q: You -- by 1997, sir, I take it you would 11 agree with me, that you, yourself had developed considerable 12 expertise in leasing? 13 A: Yes. 14 Q: You, in fact, would call yourself an 15 expert in leasing? 16 A: Yes. 17 Q: In addition to that, sir, you had 18 experience in doing business with government up to that 19 point? 20 A: Yes. 21 Q: And in particular, leasing business with 22 the government? 23 A: Not a lot of business, but yes. Most of 24 my business, up to that point, had been in the private 25 sector.

1 Q: Right. Included with your government work 2 though, sir, was some municipal government work? 3 A: Very little. 4 Q: I'm going to ask you some questions about 5 MFP, as a company. I'm right, sir, that MFP, you know, 6 again I'm talking about 1997, just to be clear. 7 MFP at the time, marketed itself as the 8 largest independent leasing company in Canada? 9 A: Correct. 10 Q: It is among the largest in North America? 11 A: One (1) of the top five (5) or ten (10). 12 Q: Top five (5)? 13 A: I believe so, yes. 14 Q: In addition to you, sir, MFP would have 15 other employees who you would consider to be experts in 16 leasing? 17 A: Yes. 18 Q: Those would include Mr. Wilkinson? 19 A: Yes. 20 Q: And others? 21 A: Yes. 22 Q: I understood from your testimony 23 yesterday, based on �- and based on my own review of the 24 presentations that you made to the City over time that you 25 see MFP as being different than other major leasing companies

1 in what you can offer clients. Is that true? 2 A: Yes. 3 Q: And among those is that you �- MFP offers 4 a wider range of services than conventional lessors do? 5 A: Yes. 6 Q: That would include some of the things you 7 talked about yesterday which include asset management, 8 procurement management and the disposal of IT assets? 9 A: Yes. I mean there are other competitors 10 that offer similar services. 11 Q: But you see yourself, MSP -- MFP as being 12 different than those people? 13 A: Yes. 14 Q: I'm right, sir, that you want MFP -- 15 customers of MFP to think of MFP as their -- in effect, their 16 outsourcing partner to manage their IT assets from 17 procurement through to disposition? 18 A: Yes. 19 Q: And to use your own words, sir, if I can 20 take you to Tab 48 of your document brief. I believe it's 21 the -- the sixth page in. My copy of the document has quite 22 faint pages. 23 MADAM COMMISSIONER: What's the heading? 24 MR. GORDON CAPERN: Just bear with me one 25 moment, Commissioner, please. It's the government -- it's a

1 heading for "Government customer survey --" 2 MADAM COMMISSIONER: Okay. 3 MR. GORDON CAPERN: "-- major findings". 4 5 CONTINUED BY MR. GORDON CAPERN: 6 Q: Now, sir, I take it this is your summary. 7 This is your presentation which you referred to in your 8 testimony yesterday. 9 A: Yes. 10 Q: And in -- this was, on this particular 11 page, entitled "Government customer client survey" and just 12 for the record, I can see the number. It's COT -- 13 MADAM COMMISSIONER: That's the easy part. 14 MR. GORDON CAPERN: -- 025260. How am I 15 doing? I think I've got it right. 025260. 16 MADAM COMMISSIONER: Thanks. 17 18 CONTINUED BY MR. GORDON CAPERN: 19 Q: This was your summary of the results of a 20 survey that had -- that had been conducted with respect to 21 what government customers wanted from leasing? 22 A: Yes. Part of this presentation, though, 23 I did not create. This is something that I took from someone 24 else. 25 Q: But you -- you put that forward to the

1 City as something that had been a finding of a survey 2 conducted of government leasing needs? 3 A: Yes. 4 Q: And among those things that you 5 identified was, in this survey that governments found it 6 important that there be a provision of complete life st -- 7 life cycle services? 8 A: Yes. 9 Q: That's what I was referring to when I 10 said the management of IT assets from procurement through 11 disposition? 12 A: Yes. 13 Q: That's something you say MFP does? 14 A: We tend to, yes. 15 Q: Okay and, in fact, sir, you also used the 16 word partner in describing what you hope will be MFP's 17 relationship with its customers? 18 A: Yes. 19 Q: In addition to the matters we've just 20 discussed, Mr. Ashbourne, one of the other things that you 21 market as being an advantage of going with MFP is their 22 independence? 23 A: Yes. 24 Q: And I take it that what you mean by that 25 is that you are not a captive finance subsidiary of a major

1 manufacturer of IT equipment? 2 A: That's correct. 3 Q: So by -- by comparing MFP will Dell, for 4 example, one of the concerns that would be raised with a 5 relationship with Dell is that you're never sure that you're 6 getting exactly the right mix of equipment because Dell is 7 also a manufacturer? 8 A: Correct. 9 Q: And MFP -- establishing a relationship 10 with MFP will avoid that pitfall, because you're not tied to 11 one of those manufacturers. 12 A: Yeah, we're a non-biassed third party. 13 Q: You're objective. 14 A: Yes. 15 Q: And I take it that in addition to your 16 independence and you -- you've said to me earlier that you're 17 an expert and MFP is an expert in leasing. As an independent 18 expert in leasing, MFP's customers can look to it for advice 19 on leasing? 20 A: Yes. 21 Q: And again, they can also look to MFP for 22 the best way to structure a particular leasing transaction? 23 A: Yes. 24 Q: And I take it, sir, that because of your 25 personal expertise and experience, you can help clients avoid

1 potential pitfalls in leasing transactions? 2 A: Yes. 3 Q: One (1) of the advantages -- one (1) of 4 the things you said yesterday in your testimony, you gave an 5 example of the PST problem that the City faced with respect 6 to the sale and leaseback? 7 A: Yes. 8 Q: And you said, if I heard your evidence 9 right, that if it had been on the brief at the time, that's 10 something you might have been able to manage for the City, is 11 that correct? 12 A: Well, it something that obviously I could 13 have explained to them. 14 Q: Right. Because you had expertise in that, 15 right? 16 A: Yes. 17 Q: And you had experience with that issue? 18 A: Yes. 19 Q: And that's something that you knew the 20 City didn't have experience with? 21 A: I believe so, but we had discussed it. 22 MADAM COMMISSIONER: I'm sorry. 23 THE WITNESS: I said, but we had discussed it. 24 MADAM COMMISSIONER: You had discussed it with 25 somebody --

1 THE WITNESS: I believe Jim and I had 2 discussed that. 3 4 CONTINUED BY MR. GORDON CAPERN: 5 Q: Well, my point sir, is that prior to that 6 discussion, the City had not had experience in doing a major 7 sale leaseback of an IT platform, had they? 8 A: I don't know actually, they may have in 9 the past, but I wasn't aware of it. 10 Q: You were certainly not aware of any? 11 A: No, I wasn't aware of any. 12 Q: Now, because of your expertise and your 13 independence, MFP was able to provide this objective advice 14 to clients as to the advantages and disadvantages of the 15 structure of particular lease transactions, is that right? 16 A: Yes. 17 Q: In fact, sir, I'd suggest that you'd 18 regard it as one (1) of your responsibilities to your 19 customer to provide them with your best advice on the most 20 advantageous way to structure a lease transaction? 21 A: Yes. 22 23 (BRIEF PAUSE) 24 25 Q: I'd like to talk to you for a minute --

1 talk to you for a minute, Mr. Ashbourne, about the City 2 amalgamation in 1998. 3 You understood, sir, that amalgamation of the 4 municipalities required the new City of Toronto to invest 5 heavily in IT to integrate its various systems? 6 A: Yes. 7 Q: You understood, sir, I suggest in 1997, 8 that the City would also have to deal with the Y2K issues 9 that were on the horizon? 10 A: Yes. 11 Q: That was something, sir, that the private 12 sector had been dealing with already for some time, was it 13 not, by then? 14 A: Most companies were getting geared up at 15 that stage. 16 Q: You'd agree with me, sir, that the City 17 was, in some respects, a latecomer to solving its Y2K issues? 18 A: There was a lot of clients in that. 19 Q: But the City was one (1) of those, sir? 20 A: Yes. 21 Q: And the solving of the Y2K issues, you 22 knew as well, would contemplate a significant investment in 23 IT? 24 A: Yes. 25 Q: Am I right, sir, that what is now the City

1 of Toronto had previously been to use, I guess, the sales 2 term, had been several accounts prior to amalgamation? 3 A: Yes. 4 Q: So Metro was a separate account from the 5 City? 6 A: Yes. 7 Q: The City of Toronto was a separate account 8 from the City of Scarborough? 9 A: Yes. 10 Q: And the same is true of the other 11 municipalities? 12 A: Yes. 13 Q: Am I right, sir, that amalgamation served 14 to shake up existing relationships with vendors at the old 15 municipalities? 16 A: Yes. 17 Q: There was a significant benefit to be 18 gained in that there was about to be a fairly significant 19 consolidation of purchasing? 20 A: Yes. 21 Q: And therefore amalgamation represented a 22 large opportunity for MFP? 23 A: Yes. 24 Q: And I think you confirmed yesterday that 25 MFP saw the Councillor computer transaction as one (1) to get

1 your foot in the door? 2 A: Yes. 3 Q: And to exploit this new significant 4 opportunity arising from amalgamation? 5 A: Yes. 6 Q: And also to exploit the opportunity 7 presented by Y2K? 8 A: Yes. 9 Q: And if I can take it down, sir, to a 10 further level, I take it that you, personally, saw this as an 11 opportunity to enhance the business that you were personally 12 doing on behalf of MFP? 13 A: Yes. 14 Q: And right or just -- I'm quite confident 15 that you testified to this yesterday, but I want to make sure 16 the record is clear. 17 As at December of 1997, you were the sole MFP 18 salesman in charge of the City of Toronto account? 19 A: Yes. 20 Q: And that continued following amalgamation 21 in early 1998? 22 A: Yes. 23 Q: I'd like to ask you, sir, about the -- if 24 I can call them the major players at MFP. How many employees 25 has MFP had, or how many did it have in 1997, December 1997,

1 approximately? 2 A: I'd say approximately two seventy five 3 (275). 4 Q: Sorry, sir, I couldn't hear. 5 A: Two hundred and seventy five (275), I 6 believe, approximately. 7 Q: How many of those would have been in a 8 sales capacity, approximately? 9 A: Again, approximately twenty (20), 10 something of that nature. 11 Q: And that was to service business both in 12 Canada and in the United States? 13 A: Yes. 14 Q: Sir, Peter Wolfraim is the President of 15 MFP? 16 A: Yes. 17 Q: And everybody at MFP is responsible to 18 report to Mr. Wolfraim, ultimately? 19 A: Ultimately, but there are other senior 20 managers, yes. 21 Q: Mr. Wolfraim is responsible for the 22 overall day to day operations of the company? 23 A: Yes. 24 Q: Mr. Wolfraim is responsible for setting 25 company policy and direction?

1 A: Yes. 2 Q: Irene Payne, when did she first begin to 3 work at MFP? 4 A: Approximately, in my mind, it was around 5 1990. 6 Q: So her arrival at MFP was slightly before 7 your own? 8 A: Yes. 9 Q: By 1997, she had arisen to the position of 10 Senior Vice President of Sales and Marketing? 11 A: Yes. 12 Q: And I'm right, sir, that after Mr. 13 Wolfraim, she was the senior-most executive at the company, 14 involved in sales? 15 A: Yes. 16 Q: You reported to her? 17 A: Yes. 18 Q: Now, Ms. Payne left MFP in late 1999? 19 A: Yes. 20 Q: Did she have a falling out with Mr. 21 Wolfraim? 22 A: I'm not aware of the circumstances, but -- 23 Q: You know nothing about it, sir? 24 A: Very little. 25 Q: No company gossip?

1 A: That's gossip, that's not reality. 2 Q: This may be a throw-away question, sir, 3 there was a gentleman named Danny Levesque, whose business 4 card appears in the materials? 5 A: Yes. 6 Q: Does he have any relevance to these 7 proceedings? 8 A: Not that I'm aware of. 9 Q: Was he involved in any way in assisting 10 you with the City of Toronto account or any of the other 11 municipalities? 12 A: He attended with me at one (1) meeting. 13 MADAM COMMISSIONER: Can we have the spelling 14 of that name please? 15 MR. GORDON CAPERN: Yes. Danny is the usual 16 spelling, and Levesque is in former Premier Levesque, L-E-V- 17 E-S-Q-U-E. 18 MADAM COMMISSIONER: Thank you. 19 20 CONTINUED BY MR. GORDON CAPERN: 21 Q: Mr. Domi, sir, I have -- 22 MADAM COMMISSIONER: You mean Dash or -- 23 MR. GORDON CAPERN: Yes, Dash Domi, I'm not 24 all that interested in the right winger for the Leafs. 25

1 CONTINUED BY MR. GORDON CAPERN: 2 Q: But, Dash Domi, sir, if I have his history 3 right, how old is he approximately today? 4 A: I'm not aware of it -- in mid-30's, I 5 believe. 6 Q: He's considerably younger that you are? 7 A: Thank you, yes. 8 MADAM COMMISSIONER: Well, considering -- 9 MR. GORDON CAPERN: I don't know why that's an 10 affront. 11 MADAM COMMISSIONER: -- this gentleman doesn't 12 look to me to be -- 13 MR. GORDON CAPERN: You look fantastic for 45, 14 but -- 15 THE WITNESS: Thank you. 16 17 CONTINUED BY MR. GORDON CAPERN: 18 Q: Mr. Domi, sir, you think he's in his mid- 19 30's? 20 A: I believe so. 21 Q: He started at the company at MFP in late 22 1998? 23 A: Yes. 24 Q: Am I right, sir, that he was a hairdresser 25 at some point in his prior life?

1 A: Again, I understand that to be correct, 2 but I don't believe he told me that. 3 Q: But, that's what you understand? 4 A: Yes. 5 Q: And I'm right, sir, that prior to joining 6 MFP, Mr. Domi, had been running a gym? 7 A: I believe so, yes. 8 Q: And I'm right, sir, that Irene Payne was 9 responsible for his hiring at MFP? 10 A: Yes. 11 Q: And she did so, sir, on the recommendation 12 of Dave Robson? 13 A: That's what I understand, yes. 14 Q: And Mr. Robson is the same gentleman who 15 was involved in the City of Waterloo deal for MFP? 16 A: Yes. 17 Q: Now, if I can take you, sir, to -- just so 18 that I can understand this properly, sir, you'd said in your 19 testimony yesterday, that there was a period of time that you 20 and Mr. Domi were sharing responsibility for the City of 21 Toronto account? 22 A: Yes. 23 Q: Okay, am I right, sir, that that period 24 -- that period was approximately January through the end of 25 April of 1999?

1 A: Yes. 2 Q: Had you come to know Mr. Domi? 3 A: Casually -- not -- not very well. 4 Q: You'd come to know a little bit about his 5 history? 6 A: Not a lot. 7 Q: If I can take you, sir, through -- to Tab 8 84, which is the result of the OPP Investigation. 9 And in particular, I'd like to refer you to 10 COT0-41781. 11 12 (BRIEF PAUSE) 13 14 A: Whose testimony is that? 15 Q: This is reported to be the interview of 16 Ms. Payne, by the OPP. 17 A: I'm sorry, what document number again? 18 MADAM COMMISSIONER: 417 -- 19 MR. GORDON CAPERN: 41781. 20 21 CONTINUED BY MR. GORDON CAPERN: 22 Q: Do you have that open, sir? 23 A: Yes, I do. 24 Q: And there's a question that begins by AK. 25 "Now, Mr. Domi, as I understand it, doesn't

1 have a sales background specifically to your 2 industry, why would you hire Mr. Domi?" 3 The answer from Ms. Payne: 4 "He was recommended to me by Dave Robson. 5 Dave Robson had met him at some event in 6 Toronto. And Dash is one (1) of those 7 hockey players, you know, and -- um -- he 8 seemed to -- Dave said he was just a dynamo 9 you know, he's really good. You -- you've 10 got to meet this guy. And I met him and he 11 was entrepreneurial, and he had his own 12 gym." 13 AK: 14 "Hmm hmm." 15 I -- again, Ms. Payne continues: 16 "Um -- you know you -- you hear about him 17 being a hairdresser, but he's -- he's an 18 entrepreneur, and he would make it, you 19 know, so I interviewed him and I liked his 20 personality, he's very aggressive, but he 21 had some -- a charisma about him that I 22 know customers would like him, so I hired 23 him to give him a chance, because I could 24 surround him with technical people anyway. 25 You don't have to know the business to be a

1 -- something -- you just have to know." 2 MADAM COMMISSIONER: I think IA means 3 inaudible. 4 MR. GORDON CAPERN: Right. 5 6 CONTINUED BY MR. GORDON CAPERN: 7 Q: AK: 8 "Sure." 9 Ms. Payne continues: 10 "So that's why I hired him, and he was very 11 personable, got along with everybody you 12 know, and just got the job done." 13 Now, what I'd like to do, Mr. Ashbourne, is 14 ask you a couple of questions -- 15 A: Yes. 16 Q: -- about what's purported to be Ms. 17 Payne's evidence to the OPP. 18 First, you knew, sir, he had no experience in 19 leasing? 20 A: Yes. 21 Q: You knew that the reason he was hired was 22 for the personality traits described in Ms. Payne's answer to 23 the OPP? 24 A: Yes. 25 Q: He is not someone, sir, who has your

1 level of experience or expertise in leasing? 2 A: No. 3 Q: You agree that he would lack your 4 technical skill? 5 A: Yes. 6 Q: He would lack Mr. Wilkinson's technical 7 skill? 8 A: Yes. 9 Q: To use the hockey analogy, sir, he was 10 for all intents and purposes, a rookie? 11 A: Yes. 12 Q: And you knew that? 13 A: Yes. 14 Q: At the time? 15 A: Yes. 16 Q: And so did Ms. Payne? 17 A: Yes. 18 Q: And I suggest, sir, so did Mr. Wolfraim? 19 A: Yes. 20 MR. DAVID MOORE: Well, I'm not sure how he 21 can speak for Mr. Wolfraim. I don't know if there's a big 22 issue about this -- 23 MADAM COMMISSIONER: Right. 24 MR. DAVID MOORE: -- but -- 25 MADAM COMMISSIONER: Okay. Well, maybe we

1 could ask him how he knew that Mr. Wolfraim knew? 2 THE WITNESS: What I would anticipate anyway. 3 MADAM COMMISSIONER: Okay. So you don't know 4 for sure that he knew that, you just -- you anticipate that 5 Mr. Wolfraim knew that Mr. Domi was a quote, "Rookie," 6 unquote? 7 THE WITNESS: Yes. 8 MR. DAVID MOORE: That's why I -- actually I 9 don't anticipate there's going to be a huge issue about that, 10 I'm just -- to the extent that this witness and this 11 particular question may not be a huge issue, but to the 12 extent that -- that other people's beliefs or knowledge or 13 whatever, that there's going to be an extensive area of 14 cross-examination dealing with that, we'll have to take it as 15 it comes I guess. 16 MADAM COMMISSIONER: Well, Mr. Capern, carry 17 on, it is cross-examination. The only thing, Mr. Ashbourne, 18 if you're not sure whether someone else knows, then -- then 19 you don't have to say yes or no -- 20 THE WITNESS: All right. 21 MADAM COMMISSIONER: -- simply because the 22 question is put to you, you can -- you can elaborate more 23 than yes or no if you wish. 24 THE WITNESS: Okay. 25 MADAM COMMISSIONER: All right, and explain

1 how you know that. 2 THE WITNESS: One (1) thing as well, I should 3 add at this point, is there were two (2) other people hired 4 at that same time, that were basically in the same position, 5 had no leasing background whatsoever. 6 7 CONTINUED BY MR. GORDON CAPERN: 8 Q: The company, sir, I take it, was pursuing 9 a course of bringing in people who would be viewed as being 10 predominantly salespeople; is that correct? 11 A: People that could develop good 12 relationships, which is what's required in our business. 13 Q: You're good at that too though, aren't 14 you, sir? 15 A: Yes. 16 Q: And in addition to that, you've got 17 leasing expertise; right? 18 A: Yes. 19 Q: So the company's going off on a -- on 20 another path, which is to take in -- in hiring -- in hiring 21 people who simply are salespeople; is that right? 22 A: Yes. Again, as I said, they were looking 23 for people that they felt had the proper personality to 24 develop relationships. 25 Q: And that was to the extent, sir, that

1 they were not concerned, they being Mr. Wolfraim and Ms. 2 Payne, were not concerned about what particular expertise 3 they might have in leasing? 4 A: That's correct. 5 Q: And I take it, similarly, Mr. Ashbourne 6 is that in that Mr. Domi had no experience in leasing, he had 7 no experience whatever in doing leasing transactions with 8 Government? 9 A: That's correct. 10 Q: In fact, sir, to the best of your 11 knowledge, Mr. Domi had no experience in dealing with 12 Government at all? 13 A: I can't answer that. 14 Q: Right. Sir, MFP itself has a -- I 15 understand, a long history of dealing with Government; is 16 that right? 17 A: Yes. 18 MADAM COMMISSIONER: Mr. Capern, I wonder if 19 you might -- if I could just stop you, I'm having some 20 trouble with my computer. 21 MR. GORDON CAPERN: Sure. 22 MADAM COMMISSIONER: And I don't know why. 23 24 (BRIEF PAUSE) 25

1 MADAM COMMISSIONER: Okay, thank you. I 2 don't know what happened, one (1) of those computer 3 mysteries. 4 MR. GORDON CAPERN: Well, we've got a roomful 5 of experts, Commissioner. 6 MADAM COMMISSIONER: I know, I didn't dare 7 ask. 8 MR. GORDON CAPERN: Ms. Rothstein's at the 9 top of the list, I'm sure. 10 11 CONTINUED BY MR. GORDON CAPERN: 12 Q: If I can turn you -- I'll be turning back 13 to this document, Mr. Ashbourne, but -- but if I can turn you 14 to Tab 43, for a moment, this I understood from your 15 testimony yesterday was part of the presentation you put 16 together for Mr. Brittain? 17 A: Yes. 18 Q: At the City? 19 A: Yes. 20 Q: And if you can -- if you can turn in 21 several pages, sir, to the page which begins MFP Government 22 sector? 23 The doc number for the record, is I believe 24 COT0-25199. Do you have that, Mr. Ashbourne? 25 A: Yes, I do.

1 MR. GORDON CAPERN: Commissioner? 2 MADAM COMMISSIONER: Yes, I do, thank you. 3 4 CONTINUED BY MR. GORDON CAPERN: 5 Q: In this presentation to Mr. Brittain, Mr. 6 Ashbourne, you identified that MFP had been active at all 7 three (3) levels of government in Canada. That being 8 municipal, provincial and federal? 9 A: Yes. 10 Q: And, sir, I take it that although you 11 yourself may not have had as much experience in the 12 government sector, your company surely had lots? 13 A: Yes. 14 Q: The -- you go on to identify that you had 15 -- MFP had done work with select municipal, state and federal 16 governments in the United States? 17 A: Yes. 18 Q: I'm right, sir, that you included this 19 material -- let me just back up. 20 You understand that the City may draw some 21 comfort from the fact that you had existing relationships 22 with other governmental authorities? 23 A: Yes. 24 Q: That's why it's included there? 25 A: Yes.

1 Q: Sir, there are special considerations, are 2 there not, that are attached to doing business with the 3 government? 4 A: Yes. 5 Q: And I'm going to run through some of those 6 now, sir, and just get you to confirm that you understood, 7 dealing first at the municipal level, some of these special 8 considerations that exist, when you're doing business with 9 government. 10 First of all, sir, I'm right that you 11 understand that there's a general requirement when -- that 12 City purchases, in particular, the City of Toronto purchases 13 are to be properly approved by Municipal Council? 14 A: Yes. 15 Q: And that's something you understood at the 16 time in 1997? 17 A: Yes. 18 Q: That's something which there would have 19 been a institutional knowledge of that fact at MFP, if I can 20 put it that way? 21 A: Yes. 22 Q: Certainly, anybody at MFP who was doing 23 business with the Municipal Government of Toronto, would have 24 known that requirement? 25 A: Yes.

1 Q: Sir, you're aware that the City of Toronto 2 and other municipalities have purchasing bylaws which govern 3 the circumstances in which the City of Toronto must tender 4 bids through RFP's and RFQ's? 5 A: Yes. 6 Q: And again, that is something that would be 7 familiar to anybody at MFP doing work with the City of 8 Toronto? 9 A: Yes. 10 Q: You're aware, sir, that municipalities 11 general have conflict of interest guidelines, which govern 12 the manner in which its officers and employees can interact 13 with vendors? 14 A: Yes. 15 Q: And last, sir, this is going to -- I'm 16 going to throw the acronyms in anyway, just to see whether 17 you're familiar with it. 18 There's an act called MFIPPA, the Municipal 19 Freedom of Information and Privacy Protection Act. Are you 20 aware of that statute, sir? 21 A: No, I don't believe so. 22 Q: Are you aware of the general proposition 23 that people who are submitting bids and other related 24 information to the City, are entitled to have that 25 information treated in a confidential fashion by the City?

1 A: I wasn't aware of that, but -- 2 Q: You have no knowledge of that, sir? 3 A: No. 4 Q: But -- 5 A: But that typically is the case with all 6 clients. 7 Q: Typically, sir, I take it with government, 8 your expectation as a salesman with MFP, is that your 9 response to RFP's and RFQ's will be kept confidential by the 10 City? 11 A: Yes. 12 Q: And that same protection, sir, and that 13 same expectation would be the case with other bidders as 14 well? 15 A: Yes. 16 Q: Including your competitors, sir? Dell? 17 A: Yes. 18 MADAM COMMISSIONER: By Dell, you mean Dell 19 Financial Services, not Dell Computers. 20 MR. GORDON CAPERN: Thank you, Commissioner, I 21 do. 22 MADAM COMMISSIONER: Ms. Dyer isn't here to 23 make that -- and I know she would want me to, so -- 24 MR. GORDON CAPERN: That's right. 25

1 CONTINUED BY MR. GORDON CAPERN: 2 Q: Now, just going over these -- I -- I've 3 given you four (4), if I can call them broad categories, Mr. 4 Ashbourne, of these special considerations, if I can call 5 them that. 6 The first that I gave you was a Council 7 approvals of spending. The second I gave you was the 8 purchasing bylaws and the need to tender. 9 The third I gave you was the presence of 10 conflict of interest guidelines and the fourth was the 11 protection of confidential bid information. 12 You agree with me, sir, that is incumbent on 13 all persons wanting to do business with the City of Toronto 14 to know and understand these by-laws and policies to the best 15 of their abilities? 16 A: Yes. 17 Q: And that would apply to MFP, sir? 18 A: Yes. 19 Q: And to all of its employees? 20 A: Yes. 21 Q: And is it your evidence, sir, that these 22 by-laws and policies were generally understood by MFP and its 23 staff at all relevant times? 24 A: Yes. 25 Q: Now, in early 1998, sir, you knew that a

1 new City of Toronto had been formed from the amalgamation of 2 the former Municipalities? 3 A: Yes. 4 Q: What steps -- sorry, sir. Prior to 5 amalgamation, what steps, if any, had you taken to learn and 6 understand the conflict of interest guidelines that were in 7 place at any of the former Municipalities? 8 A: In regards to? 9 Q: Conflict of interest, sir. 10 A: Conflict of interest? I don't think I 11 asked the question specifically. 12 Q: You never took the opportunity to look 13 for or obtain a copy of any of the Municipalities Conflict of 14 Interest guidelines? 15 A: No. 16 Q: One was not provided to you by your 17 employer? 18 A: No. 19 Q: I'm correct, sir, that nobody at MFP ever 20 conducted a training session or offered any information to 21 you on the existing conflict of interest guidelines at the 22 former municipalities? 23 A: No. 24 Q: And I take it, sir, that following 25 amalgamation you made no efforts to inform yourself to

1 determine what the state of the City's conflict of interest 2 policies were? 3 A: No. 4 Q: And that's also true of everybody else at 5 MFP to the best of your knowledge? 6 A: I can't answer for them. 7 Q: But in any event, there were no efforts 8 undertaken at MFP following amalgamation to provide any 9 information to staff dealing with the City of Toronto about 10 the state of its conflict of interest guidelines? 11 A: I can't speak for anyone else, only 12 myself, so. 13 Q: You certainly didn't hear anything about 14 that from Ms. Payne? 15 A: Not that I'm aware of, no. 16 Q: And you certainly didn't hear anything 17 about that from Mr. Wolfraim? 18 A: No. 19 Q: So it's fair to say, sir, that as of 20 early 1998, you didn't understand what the state of the 21 conflict of interest guidelines were at the new City of 22 Toronto? 23 A: No. 24 Q: It's not fair to say? 25 A: Right, sorry.

1 Q: Or it's fair to say? 2 A: It's fair to say. 3 4 (BRIEF PAUSE) 5 6 Q: And I take it it's also fair to say, sir, 7 you are unaware of any efforts made by Mr. Domi to 8 familiarize himself with the City's conflict of interest 9 guidelines? 10 A: I am not aware. I have no idea. 11 Q: Am I right, sir, that in your mind the, 12 if I can call it, policing of the conflict of interest 13 guidelines was something that was the responsibility of City 14 employees? 15 A: Can you -- 16 Q: I can re -- I can put that in a way that 17 maybe makes more sense. 18 I'm right, sir, that to the extent that a City 19 employee was prepared to participate in an entertainment 20 event, go to the Rafter's Foundation dinner as Mr. Andrew 21 did? 22 A: Yes. 23 Q: Go to the Legends of Hollywood cruise? 24 A: Yes. 25 Q: Those types of events. To the extent

51
  1  that the individual employee didn't advert to the possibility
  2  that it was in breach of the City's conflict of interest
  3  guidelines, that was good enough for you?
  4                 A:   Yes.
  5                 Q:   So, in your mind, MFP has no obligation 
  6  -- had no obligation to come to its own conclusion about
  7  that?
  8                 A:   Yes.  Basically, as I had indicated, most
  9  of my dealings were in the private sector and we had
 10  conducted a lot of entertainment venues over the years since
 11  I've been in the business.
 12                 Q:   But do you agree with me, sir, that the
 13  considerations that apply to entertainment of clients in the
 14  private sector are much different than they are in the
 15  government sector?
 16                 A:   I don't view it a whole lot different, to
 17  be quite frank, with the limited experience I've had with the
 18  government.
 19  
 20                       (BRIEF PAUSE)
 21  
 22                 Q:   I'd like to ask you about the City, if I
 23  may, for a bit, Mr. Ashbourne.  
 24                 I'm right that as at 1997, the conventional
 25  means of financing at the City of Toronto and other

1 Municipalities would have been through Municipal debentures? 2 A: Yes. 3 Q: And I'm right, sir, that following your 4 introduction to Mr. Andrew, it was apparent to you that there 5 might not be broad acceptance of the concept of leasing 6 computer hardware and software? 7 A: Yes. 8 Q: Now, the people you mentioned in your 9 testimony yesterday, Mr. Ashbourne, if I can just review 10 those with you one (1) at a time. Mr. Andrew, if I've got it 11 right, is to your knowledge is -- was the Executive Director 12 of IT for the City? 13 A: When I first met him, no. 14 Q: I'm sorry. You're -- you're quite 15 correct, prior to -- you were expecting that Mr. Andrew was 16 to become the Executive Director of IT for the new City? 17 A: I anticipated that may occur. 18 Q: At the time he held a similar position at 19 Metro? 20 A: That is correct. 21 Q: His experience, to your knowledge, sir, 22 was in Information Systems? 23 A: Yes. 24 Q: He was not a leasing expert? 25 A: He had had some dealing in his previous

1 employment, I believe. 2 Q: But -- but he's not an expert like you're 3 an expert, sir? 4 A: That is correct. 5 Q: And to your knowledge, sir, he had -- he 6 had never done a major leasing deal for IT? 7 A: That I cannot answer. 8 Q: But to your knowledge, you weren't aware 9 of any other one (1) he'd been involved in? 10 A: Previous employment or -- or at Metro? 11 Q: At Metro? 12 A: Not that I'm aware of. 13 Q: Right. Mike Franey? 14 A: Yes. 15 Q: What was his expertise in, sir, to the 16 best of your knowledge? 17 A: Basically managing client server. 18 MADAM COMMISSIONER: I'm sorry, he was what? 19 THE WITNESS: Managing client server. 20 MADAM COMMISSIONER: Okay. 21 22 CONTINUED BY MR. GORDON CAPERN: 23 Q: That's an IT function, sir? 24 A: Yes, that's correct. 25 Q: You wouldn't characterize him as a

1 leasing expert? 2 A: Again, not that I'm aware of, but I don't 3 know what his history was prior. 4 Q: To your -- to your best of your knowledge 5 at the time, he was not a leasing expert? 6 A: Correct. 7 Q: Mr. Brittain, now he was in finance; is 8 that right? 9 A: Correct. 10 Q: Now, to the best of your knowledge, in 11 his history in finance, had -- I take it that Mr. Brittain 12 had not been involved in a major lease transaction for IT? 13 A: I don't know, you'd have to ask him. 14 Remember I didn't meet with him. 15 Q: Well, I -- I -- okay, but I thought you 16 prepared a presentation for him, sir? 17 A: I prepared one (1) for him, but I never 18 met with him. 19 Q: All right. Now, Mr. Rabadi, also in 20 Finance, sir? 21 A: Yes. 22 Q: I'm right, to -- to the best of your 23 knowledge, he had never done a leasing deal in IT before? 24 A: Again, I cannot answer that, I have no 25 idea.

1 Q: Do you -- you're not aware of any 2 transactions that he's been involved in? 3 A: I'm not, that doesn't mean he hadn't done 4 any. He seemed to be fairly knowledgeable. 5 Q: Dave Beattie was in Purchasing? 6 A: Yes. 7 Q: I'm right, sir, that to the best of your 8 knowledge, he had not been involved in any major IT leasing? 9 A: Again, not that I'm aware of. 10 Q: Okay. Mr. Patrick Moore yesterday took 11 you through a number of the presentations that you made to 12 the City between December of 1997 and April of 1999? 13 A: Yes. 14 Q: I'm right, sir, that the presentations 15 that you made were carried out at least in part with a view 16 to educating the City on the benefits of leasing? 17 A: Yes. 18 Q: You felt that education was needed? 19 A: Yes. 20 Q: That's why you did it? 21 A: Yes. 22 Q: The presentations also were carried out, 23 sir, with a view to educating the City on the benefits of 24 leasing with MFP? 25 A: Yes.

1 Q: Is that right? 2 A: Yes. 3 Q: It was also an education you felt the 4 City needed? 5 A: Yes, in regards to the services that we 6 could provide that they were looking for. 7 Q: If I can -- I'm just going to refer to a 8 couple of the presentations, sir, pick up on some points from 9 yesterday. 10 If I can refer you first to Tab 54, which 11 begins at document COT0 25442. 12 A: Yes. 13 Q: If I can direct you to line item 7, which 14 is the -- you say, one (1) of the advantages gained by 15 leasing is the protection against obsolescence? 16 A: Yes. 17 Q: Am I right, sir, that what you mean by 18 that is, that it facilitates an orderly substitution of new 19 equipment for old? 20 A: Yes. 21 Q: And thus, sir, to the extent that a lease 22 is structured in such a fashion that it is longer, the -- 23 there is a reduction in that benefit, sir? 24 MADAM COMMISSIONER: I'm sorry, I didn't 25 understand your question.

1 2 CONTINUED BY MR. GORDON CAPERN: 3 Q: To the extent -- let me put it in 4 practical terms. 5 You've got a -- to the extent, sir, that a 6 lease goes from being from three (3) years to five (5) years 7 in duration -- 8 A: Yes -- 9 Q: -- for IT equipment, you agree that there 10 is diminishing protection against obsolescence? 11 A: No, I wouldn't agree with that. 12 Q: Well, sir, I suggest that you couldn't -- 13 that is put on lease, for a three (3) year period is more 14 likely to be replaced at the three (3) year mark, is that 15 your experience? 16 A: Than what? 17 Q: Than equipment that's on a five (5) year 18 lease? 19 A: But you still have the flexibility during 20 the term to replace that equipment. 21 Q: I understand, but you're still paying for 22 it, sir, isn't that right? 23 A: Correct. But you -- 24 Q: But, even though you've got new 25 equipment --

1 MR. DAVID MOORE: Let's just -- let him 2 complete his answer to the question. 3 THE WITNESS: In a five (5) year structure, 4 you can still replace the equipment at any point. I mean 5 that's what leasing allows you to do, especially with a 6 company such as ourselves that has the re-marketing 7 capability to move those assets during the lease term to 8 someone else, to another retail account. 9 10 CONTINUED BY MR. GORDON CAPERN: 11 Q: Am I right, sir, that one (1) of the 12 effects of that, speaking from a budgetary perspective, is 13 that even though you've replaced the equipment that was on 14 the five (5) year lease with newer equipment, the lessee, the 15 City continues to be obliged to pay MFP throughout the 16 balance of the lease, even though they don't have the 17 equipment anymore? 18 A: Again, we can look to giving some credit 19 for that equipment when we move the equipment to another 20 facilities, to another retail user, whatever methodology we 21 use for re-marketing, we could give some credit for the 22 remaining obligation. 23 Q: But in any event, sir, the City -- that 24 may well work out, but the City remains liable to MFP over 25 the duration of the five (5) year lease?

1 A: Correct, taking into consideration that 2 there could be a credit if they want to move equipment out 3 early. 4 Q: I understand. 5 A: I've done that in many cases, over the 6 years. 7 Q: The -- having said that, until you do 8 that, the City is on the hook for the balance of the payments 9 owing under the lease? 10 A: That's correct. 11 Q: And in addition to that, sir, on that 12 business model, there would be new equipment coming in that 13 would be put on a similar operating lease, if MFP's business 14 model is to be pursued, is that right? 15 A: Yes. 16 Q: So there is possibility, is there not, 17 sir, that the City with an original longer term lease, would 18 put itself in the position where it may very well be paying 19 in years four (4) and five (5) of a five (5) year lease, for 20 equipment that has been removed from desktops? 21 A: Yes. 22 Q: And in addition, paying for equipment that 23 has been on the desktops? 24 A: Yes. 25 MADAM COMMISSIONER: And paying what, sorry?

1 MR. GORDON CAPERN: For equipment that has 2 been on the desktops. The new equipment that has come in. 3 MADAM COMMISSIONER: Oh -- 4 MR. GORDON CAPERN: To replace the old 5 equipment that has gone out. 6 MADAM COMMISSIONER: I'm just not -- you're 7 referring to -- I don't know if you're referring to a desktop 8 being the computer or the top of the desk? 9 MR. GORDON CAPERN: Either. 10 MADAM COMMISSIONER: Well, we've been 11 talking, I think, about a desktop as being the computer. 12 MR. GORDON CAPERN: Fine. I -- I'm simply 13 saying that a -- when the computer is gone -- 14 MADAM COMMISSIONER: Right. 15 MR. GORDON CAPERN: -- you've got -- on -- on 16 Mr. Ashbourne's evidence, you have the old computer, the old 17 desktop, being removed in years four (4) or five (5). 18 MADAM COMMISSIONER: Right. 19 MR. GORDON CAPERN: The City remaining 20 potentially liable for the payment on that computer in years 21 four (4) and five (5) and in addition, having a new desktop 22 computer on the person's desk. 23 MADAM COMMISSIONER: Right. And paying for 24 that. 25 MR. GORDON CAPERN: And paying for that one

1 at the same time. 2 3 CONTINUED BY MR. GORDON CAPERN: 4 Q: And you agree with me, sir, that in that 5 event that may indeed have an impact on the City's budget -- 6 operating budget in years four (4) and five (5)? 7 A: Yes. 8 9 (BRIEF PAUSE) 10 11 Q: And I take that that would have been 12 something that you would have explained to the City had you 13 been on the brief at the relevant time that the leases were 14 signed up for the major -- on -- on master lease 838? 15 A: I basically go on what the customer tells 16 me they want to go with. If they want to go -- I explain, 17 obviously, different lease terms and the benefits of 18 different lease terms to each and every client that I deal 19 with but they're the ones that select the lease term that 20 they want to go with. 21 They're trying to save dollars over the five 22 (5) year period then they stretch it to a four (4) or five 23 (5) year lease term to reduce the operating costs on an 24 annual basis in the first few years. 25 If they elect to go with a three (3) year

1 term, I mean, it's the client that tells us what they want to 2 do. 3 Q: But s -- 4 A: We did -- we educate them -- help educate 5 them then they decide based on budget constraints, usually, 6 of what term they want to go with. 7 Q: And sir -- 8 A: And that doesn't necessarily match useful 9 life. 10 Q: Understanding all of that, sir. I'm just 11 simply -- I asked you a simple question, which is that that's 12 something you would have explained to the City had you been 13 on the brief at the time? Correct? 14 A: Yes. 15 Q: And that's because you're an expert? 16 A: Yes. 17 Q: And you've been doing this, at that time, 18 for seventeen (17) years? 19 A: Yes. 20 21 (BRIEF PAUSE) 22 23 Q: If I can take you, sir, to Tab 74. 24 A: Yes. 25 Q: The very last entry, sir, on Page 2 of --

1 this is a memo dated December 19th, from you to the 2 Investment Committee that Mr. Pat Moore took you to 3 yesterday. 4 MADAM COMMISSIONER: And that's 25495, just 5 in case you can't see it. I've written it down. 6 MR. GORDON CAPERN: Thank you, Commissioner. 7 MADAM COMMISSIONER: They're hard -- they're 8 hard to see. I -- I -- I'm told that the -- these were made 9 very early on and all the -- or this particular document 10 brief was made very early on before our articling student 11 knew how to do all of this properly. 12 So now all of the subsequent ones have the 13 numbers right up there in bold print. Okay? 14 15 CONTINUED BY MR. GORDON CAPERN: 16 Q: This reference at the end, Mr. Ashbourne, 17 you see, to get in early while transition is still taking 18 place. 19 I -- I take it, sir, that you -- you 20 appreciated that based on what we've discussed previously in 21 your testimony that the shake-up in the vendors at the 22 amalgamation was going to create an -- an opportunity for 23 those who were in early -- 24 A: Yes. 25 Q: -- and you wanted to be one of those

1 people? 2 A: Yes. 3 Q: And what you wanted to do was to get the 4 City onto a program where it would be increasing convenient 5 for them to funnel business to MFP? 6 A: Well, there's certain benefits of dealing 7 with MFP, yes. 8 Q: But also, so that you could get business 9 to MFP? 10 A: I'm sorry? 11 Q: Also, so you could get business to MFP, 12 it's not just about showing the City the benefits of it, sir, 13 I'm suggesting that it's also so that you get the business? 14 A: Yes. 15 Q: You appreciate, sir, that people in IT 16 positions are under difficult pressures to meet demands from 17 end users? 18 A: Yes. 19 Q: They're also under difficult pressures to 20 deal with capital and operating budgets? 21 A: Yes. 22 Q: You appreciate that it's one (1) of the 23 struggles that IT Directors in particular face, is the 24 difficulty of showing up every three (3) or four (4) years 25 and asking for a large capital outlay from City Council?

1 A: Yes. 2 Q: The leasing structure helps alleviate 3 those pressures, does it not, sir? 4 A: Yes. 5 Q: It makes it easier for the IT Director, 6 who's responsible for these purchases, to go to City Council 7 and in effect say, instead of coming to you every three (3) 8 or four (4) years for many millions of dollars, you should 9 simply put a tag line now in your operating budget forever, 10 that says you'll be paying this much per year? 11 A: Yes. 12 Q: That makes the IT Director's job easier, 13 doesn't it? 14 A: Yes. 15 Q: It alleviates pressure on him? 16 A: Yes. 17 Q: That was part of the reason why you went 18 to see Mr. Andrew at first instance? 19 A: Yes. 20 Q: And to the best of your knowledge, sir, I 21 take it that that was one (1) of the things that Mr. -- that 22 was attracting Mr. Andrew to leasing? 23 A: Yes. 24 25 (BRIEF PAUSE)

1 Q: You knew, sir, that the proposed 2 transaction with respect to the major computer acquisitions 3 in 1999, would be a significant transaction? 4 A: Yes. 5 Q: It would involve decisions and 6 recommendations from many people at the City, including 7 people in IT and Finance? 8 A: Yes. 9 Q: It would require buying in from senior 10 management at the City? 11 A: Yes. 12 Q: And it would require the blessing or the 13 buy in of those Councillors who would seem to be the key 14 decision makers on the political side of the City? 15 A: Yes. 16 17 (BRIEF PAUSE) 18 19 MR. GORDON CAPERN: Commissioner, I'm about 20 to go into an area, I expect that I will be probably another 21 thirty (30) minutes -- 22 MADAM COMMISSIONER: Hmm hmm. 23 MR. GORDON CAPERN: -- I will -- I'm about to 24 go into an area that may cover the 11:30 time slot, I'm in 25 your hands whether you'd like me --

1 MADAM COMMISSIONER: No, that's okay. Why 2 don't you just carry on now and we'll break at -- 3 MR. GORDON CAPERN: Very well. 4 MADAM COMMISSIONER: -- 11:30. Unless you're 5 asking me to -- 6 MR. GORDON CAPERN: No, no, I'm fine 7 continuing -- 8 MADAM COMMISSIONER: -- break now? 9 MR. GORDON CAPERN: -- I just wanted to -- 10 MADAM COMMISSIONER: Okay, no, I'm quite -- 11 that's okay. 12 MR. GORDON CAPERN: Wonderful. 13 14 (BRIEF PAUSE) 15 16 CONTINUED BY MR. GORDON CAPERN: 17 Q: There's one (1) that -- I apologize for 18 jumping around, Mr. Ashbourne, there were two (2) documents 19 that I wanted to take you to, along the topic of the 20 communications that you had with the City during this period 21 when you were making the presentations to the City. 22 If I -- there was a document that Mr. Pat 23 Moore referred to you yesterday in his examination of you at 24 Tab 51. 25

1 (BRIEF PAUSE) 2 3 MADAM COMMISSIONER: And that's 25310. 4 5 CONTINUED BY MR. GORDON CAPERN: 6 Q: And if we proceed then, Mr. Ashbourne, 7 and, Commissioner, to COT0-25314, which is the same page that 8 Mr. Pat Moore was referring you to yesterday. 9 MADAM COMMISSIONER: Where it says, Leasing 10 quotation? 11 MR. GORDON CAPERN: Yes. 12 MADAM COMMISSIONER: All right. 13 14 CONTINUED BY MR. GORDON CAPERN: 15 Q: We paid attention in the examination 16 yesterday, Mr. Ashbourne, to the first two (2) sentences of 17 that and then the last sentence. 18 19 (BRIEF PAUSE) 20 21 A: Yes. 22 Q: And in the first two (2) sentences, I -- 23 just on a conceptual level, I understand that what you're -- 24 what MFP is offering is guarantees of interest -- of lease 25 rate factors for a period of ninety (90) days in the event of

1 a quarterly lease schedule? 2 A: That's correct. 3 Q: In other words, any leases that are 4 entered into over the next ninety (90) days will be at this 5 rate? Will be at a particular rate as set out in the bid, is 6 that right, Mr. Ashbourne? 7 A: As set out in -- as I described yesterday, 8 the schedule A, yes, which is signed prior to the beginning 9 of the quarter when the equipment is to arrive. 10 Q: And we then came to the last sentence in 11 which MFP offered that it would be prepared to adjust 12 subsequent quarterly lease rate factors, in accordance with a 13 mutually agreed upon index? 14 A: Yes. 15 Q: Now, sir, I suggest the one (1) sentence 16 that we skipped over, that I'd like to take you back to is 17 the -- earlier in the paragraph, right at the third sentence 18 in which begins: 19 "The interest rate to be used following 20 this initial period, will be two hundred 21 (200) bases points above the corresponding 22 Canada bond yield, equivalent term two (2) 23 weeks prior to lease commencement." 24 A: Yes. 25 Q: That, sir, I'm right is a means by which

1 MFP can fix in a bid lease rate factors that will be in 2 effect for leases entered into after the original ninety (90) 3 day guarantee? 4 A: No, leases entered into within that ninety 5 (90) day period. 6 Q: I'm sorry? 7 A: Not after. 8 Q: I see. But, sir, that is something that 9 you could -- that particular number, if I've got this right, 10 is something that you could use for subsequent periods as 11 well? 12 A: As far as the interest rate is concerned, 13 yes. 14 Q: And that would be, that would be just an 15 example of one (1) of the indices that MFP could use to tie 16 its future interest rates? 17 A: Yes. 18 Q: And that's something, if I've had it right 19 in your evidence, this is a feature that you explained to Mr. 20 Andrew? 21 A: Yes, I believe so. 22 Q: And you agree with me, sir, that this -- I 23 should stop to ask you to confirm, have you actually taken 24 the opportunity to read MFP's response to the computer 25 leasing RFQ in July of 1999?

1 A: Actually, no. 2 Q: I see. But you're aware sir, that MFP, in 3 fact, did not make such an offer to the City, in responding 4 to its RFQ in July of 1999? 5 A: I'm not aware of that. I haven't read it 6 so -- 7 Q: And that's because, sir, you weren't 8 involved in the response to the RFQ? 9 A: That's correct. 10 11 (BRIEF PAUSE) 12 13 Q: I just wanted to clarify one (1) point 14 from Mr. Pat Moore's examination yesterday about your meeting 15 on October the 23rd of 1998, with Mr. Andrew. It's referred 16 to at, I believe, Tab 49, at document COT-25303. 17 A: Yes. 18 Q: And Ms. Ryley took you to that document 19 this morning. 20 A: Yes. 21 Q: I want to be clear, sir, that in this 22 meeting Mr. Andrew -- this meeting was in October of 1998, is 23 that right? 24 A: Yes. 25 Q: And this, just to make sure I understand,

1 your knowledge, sir, of the state of -- your view at the 2 City, at that time. You knew that the City had issued a 3 vendor of record RFQ in September of that year? 4 A: For what? 5 Q: To identify suppliers of hardware for the 6 City? 7 A: Yes. 8 Q: And you knew, sir, that there had been 9 responses to that RFQ received by the City? 10 A: I was probably aware, yes. 11 Q: I take it, sir, that you were similarly 12 aware that the matter was to be -- the matter being the 13 report which recommended specific vendors of record for 14 computer hardware was to be at Council in November of 1998? 15 Is that right? 16 A: I don't know whether I was aware of that 17 or not. I can't recall. I probably was. I don't know. 18 Q: But in any event, sir, in the month prior 19 to the matter being before City Council -- 20 A: Yes. 21 Q: -- Mr. Andrew was already disclosing to 22 you that there had been suppliers selected by the City. 23 A: He had indicated who wo -- well, I assume 24 he indicated to me, who was -- had bid, anyway. 25 Q: Well, sir, you --

1 MADAM COMMISSIONER: I'm sorry, I didn't hear 2 that. I assume, what? 3 THE WITNESS: That he told me who had bid. 4 MADAM COMMISSIONER: Told you who had bid? 5 6 (BRIEF PAUSE) 7 8 CONTINUED BY MR. GORDON CAPERN: 9 Q: I suggest to you he did more than that. 10 You're aware that three (3) vendors of record that were 11 ultimately selected by the City were the very ones listed at 12 the bottom. That being GE, SHL and Questech? 13 MR. DAVID MOORE: Well, can I just interject. 14 I don't -- I'm not at all sure that we have all of the 15 documents that evidence just what the City did or didn't do 16 with respect the supply of the hardware, $40-odd million 17 decision that makes any leasing decision pale in comparison. 18 So based on my understanding of the database, 19 there are gaps in what did or did not happen, to my 20 understanding. So if My Friend is going to put these 21 questions in his cross-examination, that's fine, but in 22 fairness, I think it should reflect what remains, to my 23 understanding, an unresolved uncertainties as to exactly what 24 did happen. 25 That's certainly my state of mind and

1 Commission Counsel may be able to assist as to whether of the 2 gaps have been fully filled. I don't believe they have. 3 4 (BRIEF PAUSE) 5 6 MADAM COMMISSIONER: Mr. Pat Moore? Are you 7 in a position to assist here? 8 MR. PATRICK MOORE: By and large, we -- we 9 think that the submission that David Moore has made is -- is 10 -- is right but there are some documents that have recently 11 been provided to us which will be of relevance to you, 12 Commissioner, in the upcoming TECI inquiry and they're off 13 for scanning so, for the purposes of today's examination, 14 there are no other documents that we're aware of that are 15 available that might assist. 16 MR. DAVID MOORE: My -- my -- 17 MADAM COMMISSIONER: Well, that was 18 sufficiently -- 19 MR. DAVID MOORE: My -- my -- my simple point 20 and fact is -- is this. In fairness of this witness, to put 21 questions to him founded upon a premise that it's obvious 22 that everybody knew and knows now what the City did in terms 23 of its decisions to procure the hardware. 24 In -- in the state of the record that I'm 25 aware of in the database, I don't think that's a fair

1 question because in my mind, at least, there may be more 2 documents to come but I certainly don't understand what that 3 process was sitting here this morning. 4 So, in fairness of this witness, who I expect 5 has not gone through the exercise of looking through this 6 database the same way I have, I think the questions on this 7 topic should be -- should be phrased with that reality in 8 mind. 9 MR. GORDON CAPERN: If I may assist, 10 Commissioner. I -- I'm -- I agree with Mr. David Moore that 11 I -- I'm not here to cross-examine Mr. Ashbourne with respect 12 to the state of the deliberations of the committees and 13 Council -- and Council with respect to the vendors record 14 RFQ. 15 I'm more interested in examining Mr. Ashbourne 16 with respect to his own personal knowledge, regardless of its 17 accuracy, of what he understood the state of play to be at 18 the relevant times in the fall of 1998. 19 MADAM COMMISSIONER: All right. Then you 20 might want to frame the questions that way because I think 21 the way you put them was to suggest to this witness that Mr. 22 Andrew had done more than that and then you asked -- you 23 suggested to him that he was aware that the three (3) vendors 24 of records, are the very ones listed on Tab 49, and I think 25 that might have --

1 MR. GORDON CAPERN: Yeah, I agree that the 2 questioning elicited the -- the objection, Commissioner, I 3 apologize. I can perhaps make things a little smooth -- 4 smoother on that. 5 6 CONTINUED BY MR. GORDON CAPERN: 7 Q: Just to come back to it. I take it at 8 some point, Mr. Ashbourne, Mr. Andrew or somebody else at the 9 City informed you that there had -- there were specific 10 vendors of record for the supply of computer hardware and 11 software? 12 A: Well, as I indicated yesterday, I knew 13 that there was Compugen and SHL supplying both the City 14 itself and Metro. They had had their contracts extended, I 15 believe through the end of '98, based on what we discussed 16 yesterday. 17 Q: But just carrying that through, Mr. 18 Ashbourne, we're now talking about prospective acquisitions 19 being made by the City into 1999? 20 A: Hmm hmm. 21 Q: Correct? 22 A: Hmm hmm. 23 Q: That was the purpose of your discussion 24 with Mr. Ashbourne on October the 23rd of 1998? 25 A: Mr. Andrew?

1 Q: I'm sorry, Mr. Andrew, October the 23rd, 2 1998? 3 A: Yes, I was gathering information with 4 respect to volume of computers, that's what my -- I was more 5 concerned about that than anything else. 6 Q: But as at that date, sir, I'm -- I -- I 7 thought I had your evidence right, that you were at least 8 aware that the City had issued an RFQ or P -- 9 A: Yes. 10 Q: -- to identify vendors of record for -- 11 A: I believe I was -- I believe I was aware, 12 but -- but again, I wasn't part of that, so I really didn't 13 care too much in terms of who was going to be the supplier. 14 Q: And I'm not suggesting that you did, sir, 15 I'm simply trying to elicit from you and make -- understand 16 the information that was conveyed to you by Mr. Andrew. 17 A: Right. 18 Q: As I understand that what -- if I can 19 just come straight to the point, I understand that what Mr. 20 Andrew was in effect doing here, on October the 23rd, was 21 identifying for you, the suppliers that had been at least on 22 a tentative basis, recommended by City staff as the vendors 23 of record? 24 A: I guess so. 25 Q: And that wasn't clear to you at the time?

1 A: Not really. 2 Q: Mr. Andrew didn't make it clear to you? 3 A: Maybe he did, but I don't recall, to be 4 quite honest. 5 Q: Okay. 6 A: Again, I don't really -- it wasn't my 7 job, I didn't really under -- I didn't care about that, I was 8 more concerned about -- Okay, what are we looking at in terms 9 of a potential opportunity for MFP at the time, with regards 10 to financing. 11 Q: Yeah, so I take it then, Mr. Ashbourne, 12 that similarly, Mr. Andrew did not make clear to you that -- 13 that the approval of the vendors of record was subject to 14 Council, was it? 15 A: No, I did not -- I don't believe I had 16 any of those discussions, because I don't recall them. 17 MADAM COMMISSIONER: Is now a good time, Mr. 18 Capern? 19 MR. GORDON CAPERN: That would be wonderful. 20 MADAM COMMISSIONER: All right. We'll take 21 the morning recess and we'll be back at ten (10) to 12:00. 22 THE REGISTRAR: Order. The Inquiry is 23 recessed until ten (10) to 12:00. 24 25 --- Upon recessing at 11:30 a.m.

1 --- Upon resuming at 11:50 a.m. 2 3 THE REGISTRAR: The Inquiry will resume, 4 please be seated. 5 MADAM COMMISSIONER: Yes, Mr. Capern. 6 MR. GORDON CAPERN: Thank you, Commissioner. 7 8 CONTINUED BY MR. GORDON CAPERN: 9 Q: Could I get you to turn up Tab 81, Mr. 10 Ashbourne, please? This is the yellow sheet that we went 11 over in some -- with effort yesterday. 12 A: Yes. 13 Q: And I have to confess that I don't fully 14 understand the mathematics, Mr. Ashbourne, I'm going to have 15 to go back over them in some respects again and make sure 16 that I properly understand them. 17 MADAM COMMISSIONER: It's 29546. 18 MR. GORDON CAPERN: Thank you, Commissioner. 19 20 CONTINUED BY MR. GORDON CAPERN: 21 Q: If I can start with going to the document 22 for a moment, Mr. Ashbourne, just start it at a higher level 23 than sort of the nitty gritty of the math for a moment. 24 If I understood your answer correctly, 25 yesterday you do not expect -- let me back up and start

1 really right from the start of that. 2 A significant portion of the money that goes 3 into a deal that MFP does, it comes from lenders to MFP? 4 A: Yes. 5 Q: And that would be conventional lending 6 sources like banks and insurance companies? 7 A: Yes. 8 Q: And that borrowed money comes at a cost to 9 MFP, in the form of interest? 10 A: Yes. 11 Q: And I'm right, let's just start with what 12 I understand to be the -- a basic transaction in which MFP is 13 the lessor of equipment to the City and there's no subsequent 14 effort to sell the deal, if I can call it that to an outside 15 buyer like Clarica or Canada Life, as an example. 16 A: Yes. 17 Q: Let's just assume that the deal is 18 maintained in-house, if I can put it that way, at MFP? 19 A: Yes. 20 Q: Are we all on the same page? If I 21 understood your evidence correctly yesterday, on a deal of 22 that nature, MFP would pass its cost of borrowing from its 23 lender through to the customer, that would be the City of 24 Toronto? 25 A: Yes.

1 Q: And that would be reflected in some 2 respects in the periodic payment made by the lessee under the 3 lease. In other words, whether it's quarterly or annually or 4 monthly, there's an interest component, if I can put it that 5 way, built into the payments being made by the lessee? 6 A: Yes. 7 Q: But, if I had your evidence correctly, 8 yesterday, it is not MFP's intention to earn a profit with 9 respect to the pass through of its lending cost to its 10 customer, is that characterized properly? 11 A: For the most part. I mean as a 12 salesperson, we go to an individual within the organization 13 who actually goes and funds the transactions and he prices 14 the interest rate or gives us the interest rate based on the 15 credit, the size of the deal, term, things of that nature to 16 us. 17 So, what actually happens in the background, 18 the salesman is typically not privy to that. 19 Q: Right. So you have people other than you 20 at MFP who go out and find the money to fund the deal? 21 A: Correct. The salesman does not do that. 22 Q: And in part the pricing that individual -- 23 that MFP gets on individual deals reflects the credit 24 worthiness of the end customer? 25 A: Yes.

1 Q: For example, the City of Toronto would 2 have an excellent credit rating? 3 A: Yes. 4 Q: The City of Toronto -- deals done with the 5 City of Toronto would have -- it would be priced at a better 6 loan rate for MFP. 7 In other words, MFP would be able to get loans 8 to fund that deal at a lesser cost to MFP? 9 A: Lesser cost than what? 10 Q: Lesser cost than say, for example, a 11 corporation which had a credit problem? 12 A: Yes. 13 Q: The City of Toronto is an attractive 14 borrower, if I can put it that way? 15 A: Yes. 16 Q: They are credit worthy? 17 A: Yes. 18 Q: So where I guess I had a little conceptual 19 problem yesterday, was this issue of the grid that you use 20 and how that grid number is determined. 21 You used numbers which yesterday in relation 22 to the Councillors' deal, which I didn't quite understand. 23 You said at the time, the Councillors' deal was done, you 24 were operating on a grid of 10.5 percent, did I get that 25 evidence right?

1 A: Yes. But again, that has nothing to do 2 with the interest rate. 3 Q: No, I just want to understand what that 4 means because I wasn't clear from your testimony with Mr. 5 Patrick Moore yesterday, what -- what goes into the grid 6 pricing or the grid level? 7 What does that mean? 8 A: It's basically a component of the equity 9 or the residual position that MFP is willing to take in that 10 particular asset based on the individual lease term. 11 Q: You're going to have to, if you can, Mr. 12 Ashbourne, be patient, because I don't have an expertise in 13 leasing, like yours. 14 If you can just, I guess, if I can ask you to 15 explain that concept to me, as if you were explaining it to 16 perhaps a complete lay person in the field, how would you 17 explain that concept to them? 18 MADAM COMMISSIONER: You notice he pointed to 19 me when he said that. 20 MR. GORDON CAPERN: I didn't at all, 21 Commissioner. 22 23 (BRIEF PAUSE) 24 25 MADAM COMMISSIONER: I think the -- I think

1 the question is can you in, as lay-person of a way as 2 possible, explain to all of us what that means. 3 THE WITNESS: As I indicated, I think 4 yesterday, there are two (2) components to a lease structure. 5 Well, there's many but two (2) that are valid in terms of the 6 way we are going to price a transaction. 7 One is the residual position or equity 8 position, the risk position that MFP is willing to take in 9 that asset. That would be our cash commission in that asset. 10 11 CONTINUED BY MR. GORDON CAPERN: 12 Q: Can -- can I just stop you right there 13 for a moment, Mr. Ashbourne. I just want to, sort of, 14 dissect this one -- 15 A: Sure. 16 Q: -- certain line. When you say the equity 17 position that you're taking in a deal or the residual 18 position you're taking in a deal, what is that meant to 19 reflect? 20 A: It reflects that residual that we're 21 taking on that asset. 22 Q: Let's just stop for a second. If I -- 23 let -- let's assume a hypothetical deal in which there's 24 going to be $1 million worth of computer equipment bought -- 25 A: Yes.

1 Q: -- that's going to be put on lease for a 2 period of three (3) years. Assume -- I think the numbers you 3 used yesterday resulted in a residual of about one hundred 4 and seventy thousand dollars ($170,000) on that transaction 5 -- I can't remember the exact number but it was about 17 6 percent. 7 A: Eighteen (18) percent. 8 Q: Eighteen (18) percent. 9 A: Yes. 10 Q: So call it one hundred and eighty 11 thousand dollars ($180,000). I just want to make sure that I 12 understand properly. Is that one hundred and eighty thousand 13 dollars ($180,000) your estimate of what the equipment is 14 going to be worth at the end of the term? 15 A: No. 16 Q: What does it mean? 17 A: That's the actual cash -- when we go and 18 finance that transaction with an insurance company or a 19 lender, we're going to finance approximately eight hundred 20 and twenty thousand ($820,000) of the $1 million with that 21 lender and one hundred and eighty thousand dollars ($180,000) 22 will be an equity position that MFP will take in terms of our 23 cash position in that particular asset. 24 That's our residual -- the up front residual. 25 Q: I see -- so that ref -- so the term

1 residual doesn't refer to residual value of the equipment. 2 It simply refers to what's the residue of the deal that's not 3 going to be financed by -- 4 A: That's correct. 5 Q: -- the finance company. That's why I'm 6 off on a path of folly. That'll -- you'll forgive me for 7 that. 8 A: And there's several definitions of that 9 used in the industry. The residual -- 10 Q: You're particular term of art is 11 residual. 12 A: Residual, equity position. There's a 13 number of different terms that people use. 14 Q: Okay. So let's just stop there for a 15 minute. So you've got a -- we've got our hypothetical $1 16 million deal in which using your determination that you -- 17 you, being MFP, are prepared to put one hundred and eighty 18 thousand dollars ($180,000) in the deal. 19 A: That's correct. 20 Q: How do you come to that determination 21 about the extent to which MFP will contribute its own funds 22 to the deal? 23 A: We take into consideration historical 24 trends, in terms of the history of transactions that we have 25 taken in the past. We look at our overall portfolio and

1 determine based on what's called residual realizations over 2 time based on those types of assets. 3 Q: Am I right, sir, that the -- ju -- just 4 helping me through this, if MFP identifies a deal as one 5 which it's prepared to put a higher residual or higher equity 6 position that would -- would that generally reflect a deal 7 where you believe that there is a very good rate of recovery 8 for MFP? It's a good deal for MFP? The better the residue 9 for it -- the higher the residual level for MFP, the better 10 the deal is for MFP? 11 A: Not necessarily, no. 12 Q: Is it meant to reflect some sort of -- is 13 it -- is it a reflection on the quality of the deal at all, 14 the extent to which MFP is prepared to put equity in it? 15 A: There are a number of factors that go 16 into deciding upon individual transactions, what type of 17 equity residual position we want to take in a deal. 18 Q: And perhaps you can just tell me what 19 those factors are and how they would sway your decision about 20 whether you were prepared to put more or less equity in the 21 deal? Let's try to take them one (1) at a time. 22 A: The type of client that we're dealing 23 with. 24 Q: So with the type of client, you've got a 25 client that's a better quality credit risk, like the City of

1 Toronto? Would that increase your ab -- your interest in 2 putting in higher equity? 3 A: It could, yes. 4 Q: Or I guess -- I'm not -- I don't want to 5 be putting words in your mouth. 6 A: No. 7 Q: I'm just simply trying to understand. 8 A: It's one (1) factor that goes in to the 9 equation. There are a number of factors, as I said. So it's 10 the quality of the lessee. Who are you dealing with in terms 11 of do you feel that you are going to be able to build a long 12 term relationship with this client over a per -- a long 13 period of time. 14 Q: And if -- and if the answer is that you 15 are, that it's a good quality client and you want to be with 16 them for a long period of time, does that have the, at least 17 internally at MFP, does that have the effect of increasing 18 the amount of equity you're prepared to put in deals? 19 A: Yes. If you feel that you can work with 20 that client, that they're someone that you can see having a 21 long term partnership/relationship with. 22 Q: So -- so conversely then, to the extent 23 that you do not see a long term relationship, or you don't 24 feel the client's necessarily as creditworthy as others -- 25 A: Yes.

1 Q: -- that would decrease MFP's interest in 2 putting a high amount of equity into the deal? 3 A: Yes, it could. 4 Q: And that would then shift the risk out to 5 other participants in the deal? 6 A: Yes. 7 Q: So the -- the better the client, the more 8 that you wanted to be with that client over the longer term, 9 the more you were going to put your own money in the deal to 10 make that happen? 11 A: Yes. 12 Q: And I take it that the impact of that is 13 that it -- it takes MFP -- with respect to its -- its own 14 equity position in the deal, it puts MFP in the position of 15 being the defacto lender to the customer, as opposed to being 16 a flow through of other people's money? 17 A: Well, in most cases it's our money going 18 into these types of transactions. 19 Q: Sorry, in most -- 20 A: In most cases, most of the leases that we 21 write on this type of equipment, there is an equity position 22 held by MFP. 23 Q: Right, but they're not all 100 percent 24 MFP equity deals are they? 25 A: Not a 100 percent, but I'm saying in the

1 majority of cases of this type of -- these type of 2 transactions, we have some type of an equity position in the 3 equipment. 4 Q: Okay, but just -- and again, I rec -- 5 recognize that this is sort of hypothetical level of 6 questions -- 7 A: Hmm hmm. 8 Q: -- but you'd given us a number yesterday 9 where on the -- I think on the Councillors' deal you were 10 prepared to put in as much as 18 percent of the equity on -- 11 A: Yes. 12 Q: -- the deal? 13 A: 18 percent of the cost of the equipment, 14 yes. 15 Q: And is that -- is that a big number or a 16 small number, in relation to positions MFP might take in 17 deals? 18 A: That's a significant position. Not 19 something that we have not taken in the past, I've done it 20 elsewhere. 21 MADAM COMMISSIONER: It's not something what? 22 THE WITNESS: It's not something that I 23 haven't done this elsewhere, but it is a significant 24 position, yes. 25

1 CONTINUED BY MR. GORDON CAPERN: 2 Q: And that, sir, I take it was reflective 3 of the first two (2) factors that you mentioned to us, which 4 were the quality of the client, and the long term interest in 5 pursuing the client? 6 A: Yes. 7 Q: What are the other factors that you 8 considered in determining the extent to which equity is going 9 to be put into the deal by MFP? 10 A: I would suggest the most important is -- 11 is as I've -- as I've already stated, in terms of you feel --