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 February 17th, 2003 25

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

1 TABLE OF CONTENTS 2 Page 3 List of Exhibits 4 4 5 ROBERT BRIAN STEVENS, Sworn 6 Examination-in-Chief 7 by Ms. Daina Groskaufmanis 5 8 Cross-Examination by Mr. Roberta Centa 79 9 Cross-Examination by Mr. David Moore 114 10 Discussion 118 11 Re-Cross-Examination by Mr. David Moore 152 12 13 Certificate of Transcript 153 14 15 16 17 18 19 20 21 22 23 24 25

1 EXHIBITS 2 No. Description Page 3 17, VOLUME 1 Bound document titled 31 4 "Brian Stevens" tabs 1-26 5 6 18, VOLUME 1 Bound Document Titled 32 7 "Masterlease 838" tabs 1-17 8 9 18, VOLUME 2 Bound Document Titled 32 10 "Masterlease 838" tabs 18-29 11 12 18, VOLUME 3 Bound Document titled 32 13 "Masterlease " tabs 30-52 14 15 18, VOLUME 4 Bound Document titled 32 16 "Councillors Lease 784" 17 tabs 1-25 18 19 20 21 22 23 24 25

1 --- Upon commencing at 10:00 a.m. 2 3 THE REGISTRAR: The inquiry is now in 4 session. Please be seated. 5 MADAM COMMISSIONER: Good morning, just give 6 me a second here. 7 8 (BRIEF PAUSE) 9 10 ROBERT BRIAN STEVENS, Sworn: 11 12 MADAM COMMISSIONER: Good morning, Mr. 13 Stevens, how are you today? 14 THE WITNESS: Good morning. 15 MS. DAINA GROSKAUFMANIS: Good morning, 16 Commissioner. 17 MADAM COMMISSIONER: Good morning. 18 19 EXAMINATION-IN-CHIEF BY DAINA GROSKAUFMANIS: 20 Q: Mr. Stevens, my name is Daina 21 Groskaufmanis, I act as Commission Counsel and I'll be asking 22 some questions this morning. 23 Mr. Stevens, I'd like to just start off with 24 some questions about your background. I understand that you 25 currently hold the position of Vice President of Debt

1 Placement and Treasurer at MFP? 2 A: Yes. 3 Q: And you have both a BA from the University 4 of Toronto and a MBA? 5 A: I do. 6 Q: And you got those -- 7 MADAM COMMISSIONER: Your microphone is not 8 working -- 9 THE WITNESS: You'd like me to -- 10 MADAM COMMISSIONER: -- there you go, it's 11 working now. 12 13 CONTINUED BY DAINA GROSKAUFMANIS: 14 Q: And you got your BA in 1970 and your MBA 15 in 1972? 16 A: Yes. 17 Q: And since that time, you've been working 18 pretty much exclusively in the leasing business? 19 A: Yes. 20 Q: And you worked for a succession of leasing 21 companies, joining MFP for the first time in 1991? 22 A: Yes. 23 Q: And initially as a consultant and later as 24 a full time position? 25 A: Right.

1 Q: And in your position at MFP you were 2 looking at -- initially at debt funding for the Canadian 3 market and you later started working for debt funding for 4 across North America? 5 A: Yes and then picked up the Treasurer 6 responsibilities, as well. 7 Q: And when did you pick up those Treasurer 8 responsibilities? 9 A: '94, '95. 10 Q: A while ago? 11 A: A while ago, yes. 12 Q: To whom do you report, Mr. Stevens? 13 A: Robert Wright, who is CFO and Senior Vice 14 President. 15 Q: And you are part of the senior management 16 team at MFP? 17 A: That's a debate, I'd say second tier, yes. 18 Q: And other members of that management team 19 would be people like Peter Wolfraim and Bob Wright, to whom 20 you report, and Mike Flanagan, is that right? 21 A: Yes. 22 Q: Is there anyone else? 23 A: Fraser Berrill. 24 Q: Mr. Stevens, we've heard a great deal 25 about a committee at MFP called the Investment Committee, are

1 you part of that? 2 A: Not officially, I observe some of the 3 meetings. 4 Q: And in what -- and you observe them with 5 respect to issues of debt placement? 6 A: Yes. 7 Q: And we've heard about another committee 8 called the Credit Committee? 9 A: Yes. 10 Q: And what is that? 11 A: It's a committee which would sit and 12 decide on the credit worthiness of our potential customers. 13 Q: And whose -- and you're an actual member 14 of that committee? 15 A: I think so, yes. 16 Q: And who else is on that committee? 17 A: Oh boy -- Peter Wolfraim, Bob Wright, Mike 18 Flanagan, Fraser Berrill, I'm not sure if there are others, 19 not many more at the moment. There used to be more. 20 Q: So, pretty much the same make up of the 21 Investment Committee? 22 A: Pretty much. 23 Q: And the two (2) I take it were in tandem 24 or parallel? 25 A: Supposed to, yes.

1 MADAM COMMISSIONER: And what's it called 2 again, the Debt Committee? 3 THE WITNESS: No, the Credit Committee. 4 MADAM COMMISSIONER: Oh, Credit Committee. 5 Thanks. 6 7 CONTINUED BY DAINA GROSKAUFMANIS: 8 Q: Mr. Stevens, I want to talk to you about 9 what you do right now at MFP in your position as Vice 10 President of Debt Placement and Treasurer. 11 What are you job duties as a Treasurer? 12 A: Dealing with the banks that we deal with 13 on a day to day basis, foreign exchange, we buy and sell 14 equipment all over the world. Insurance matters. Making 15 sure there's enough money in the bank to pay all the bills. 16 And that -- in doing that, that melds in very 17 nicely with the debt placement on funding, I believe. 18 Q: What does -- what are your job duties 19 relating to debt placement? What does that involve? 20 A: My department would take leases written by 21 the sales and administrative staff and go to various 22 financial institutions, banks, insurance companies, 23 commercial lenders, and we would borrow against those leases, 24 using the streams in the leases and the assets under lease as 25 security for loans, which gave us the funds to purchase the

1 equipment to be leased out under those leases. 2 Q: I'm going to come back to you right now, 3 with respect to talking about debt placement in some more 4 detail, since we've heard a great deal about -- a great deal 5 about the assignment of leases and debt placements. 6 I'm not sure anyone has ever explained to us 7 how it actually works. 8 A: Oh, boy. 9 Q: Now, with respect to the City of Toronto 10 transaction, I take it the credit worthiness of the City of 11 Toronto as a client, wasn't at issue? 12 A: No, it wasn't. 13 Q: So, that part of your job, taking a look 14 at whether the City of Toronto could meet its stream of 15 payments wasn't something you particularly concerned yourself 16 with? 17 A: Yes and I guess we should have looked at 18 the difference between ability to meet their meet commitments 19 and willingness to. 20 Q: Well, -- and that -- that's an issue for 21 another forum. 22 A: Yes. 23 Q: But the main issue here -- the main issue 24 with respect to the City of Toronto account, I take it then, 25 sir, was the debt placement?

1 A: Yes, before we did this series of 2 transactions there was also many meetings of what we call, 3 the Master Lease Committee, which from MFP's point of view, 4 would look at the legalities, the terms and conditions of the 5 contracts being proposed. 6 Q: Sir, we haven't heard about the Master 7 Lease Committee beforehand. Is this, essentially, a similar 8 committee to the Investment Committee? Does it exist all the 9 time? 10 A: Yes, but it only acts in relation to -- 11 to new or -- new customers or customers where new contracts 12 are required. 13 Q: And what's the purpose of that committee? 14 A: It would include the legal staff, the 15 sales staff, my staff in going through every term and 16 condition in a proposed contract on whether we can live with 17 it, whether we can fund that particular clause. 18 Sometimes customers have their own ideas of 19 what they want in the leases, some of which are accessible, 20 some of which just can't be accessible. 21 Q: So this is what puts a lease in place? 22 It's like -- during the negotiation stage? 23 A: Yeah. When we're answering an RFQ and -- 24 and say the City of Toronto example, we'd have to go through 25 some of what we understood to be the customer's request for

1 various terms and conditions. 2 There's one I remember quite well. The -- the 3 City wanted thirty (30) days prior written, I think, approval 4 of our ability to sign those leases. 5 Well, that could be acceptable but it's going 6 to slow down funding and it's going to cost us and so my 7 department might say well, we should price for that as well. 8 Q: And who sits on this committee? 9 A: The legal staff, I think Mike Flanagan 10 would represent sales, myself and th -- the people working 11 for me, the administrative staff. 12 Q: Does the committee keep notes or records? 13 A: We did at one time, but it wasn't very 14 well documented though. Th -- there would be a lot of, I 15 think you've seen them, e-mails go back and forth between the 16 constituents to haggle over any bones of contention. 17 Q: And this would be involved at the RFQ 18 stage, sir? 19 A: Well, it could be, yeah. In fact, it was 20 at City of Toronto. 21 Q: And then thereafter at -- I take it at 22 the lease negotiation stage as well or is that -- 23 A: Well, no. That would already be set. We 24 -- we'd tell legal department, this is acceptable, this 25 isn't, and we'd put it in their hands too, and the

1 salespeople to negotiate. 2 Q: And so you produced all your notes and 3 records dealing with this Master Lease Committee? 4 A: I believe so, yeah. 5 Q: Did the Master Lease Committee, for 6 example, discuss other terms and conditions that the City 7 wanted such as the ninety (90) day guarantee period? 8 A: No, that was pretty standard in what we'd 9 call a program agreement scenario. This is where the rates 10 were issued every ninety (90) days -- 11 Q: Well -- 12 A: -- and the customer was free to take them 13 or not. 14 Q: Yes, that would be one way but for 15 example, in this RFQ, as you may have heard and I'm happy to 16 turn it up, the City of Toronto wanted bidders to provide 17 rates that they would hold for ninety (90) days. 18 A: Right. 19 Q: Would that -- 20 A: That's what we call a program agreement 21 and that's what we do. 22 Q: Okay and is that the kind of thing that 23 would be discussed at the Master Lease Committee? 24 A: No, because that was a standard operation 25 for us. We do that with a lot of customers. It's very

1 convenient for the customers to acquire and accumulate assets 2 over a ninety (90) day period and then write one (1) lease 3 rather than having to write ten (10) leases over the quarter. 4 Q: Would the Master Leases Committee have 5 discussed something like the inclusion of the RFQ and the RFQ 6 -- the response to the RFQ as part of the master lease 7 agreement? 8 A: I don't remember that having come up. 9 That's not normal, it's -- you have a master lease and a 10 program agreement that is the whole agreement. 11 Q: So the issue about the inclusion, for 12 example, of MFP's response -- 13 A: Yeah. 14 Q: -- was not -- to the best of your 15 recollection, that was not discussed? 16 A: Not that I remember, no. 17 Q: And was the legal representative on this 18 committee for the City of Toronto transaction, Kim Harle? 19 A: I -- I believe so, although quite often 20 there was more than one. 21 Q: And did you meet formally over these -- 22 you know, were there set meetings or did you meet informally, 23 catch as catch can? 24 A: Both plus a whole windmill of e-mails. 25 Q: And would Ms. Harle have been copied on

1 most of those e-mails, I take it? 2 A: She would have authored a few. I don't 3 know. Probably. 4 MADAM COMMISSIONER: Can I just have the 5 correct spelling of her name? Is it C - A - R - R. 6 MS. DAINA GROSKAUFMANIS: I -- sorry, it's 7 Kim Harle. 8 MADAM COMMISSIONER: Oh. 9 MS. DAINA GROSKAUFMANIS: It's K - I - M and 10 the surname is spelled H - A - R - L - E. 11 MADAM COMMISSIONER: Right. I remember now. 12 (BRIEF PAUSE) 13 14 Q: Sir, I want to turn you away right now, 15 from the issue of the Master Lease Committee and actually 16 talk about how debt placement works. 17 And I'd first like to talk to you about how it 18 works, sort of, written large or in principle, before we talk 19 about how it actually worked in the City of Toronto's case. 20 You started by saying that MFP gets the money 21 by lease by assigning the stream of payments and the 22 equipment that it secures. 23 A: Yes, those dollars we get in are much 24 after the fact, so actually they're to fund the next lease, 25 but, yes, the principle is correct.

1 Q: Let's actually start by going at this -- 2 assume that most of us know very little about debt placement 3 and most of us know very little about assigning leases. 4 A: Okay. 5 Q: So, explain to me, as simply as you can, 6 how this process works? 7 A: Okay. At the very beginning, somebody on 8 the sales side would come to me and say, hey, we think we're 9 going to write a lease with ABC Corporation, let's say. 10 We would take a look on the credit side, 11 whether that company was credit worthy, whether we thought we 12 could fund it. If there was any question of that, we would 13 go to one (1), two (2), or three (3) potential funders for 14 that lease, get an idea of the credit worthiness and what 15 rates might be available for that particular credit. 16 We're actually borrowing money on the balance 17 sheet and financial statements of our customers. We would 18 then go to pick one of the financial institutions, banks, 19 life insurance companies, commercial lenders, and assign that 20 lease legally to a financial institution. 21 The financial institution enjoys that stream 22 of payments, plus they would have a first charge, a mortgage 23 if you like, on the assets under lease, even though they're 24 still in the hands of ABC Corporation. 25 The loan that I take from the bank or life

1 insurance company, is then paid off exactly, by the rental 2 payments under the lease, after taxes are stripped off. 3 Q: Sorry, after taxes are? 4 A: Well, we would bill ABC Corporation rent 5 and tax every month -- 6 Q: Yes -- 7 A: -- as we're bound to do. The rent and tax 8 would come to us, we'd take the tax and send it to the 9 appropriate authorities, and then the rent goes to the 10 financial institution to pay down the loan. At the end of 11 the lease, the loan is over. 12 Q: All right. Let me break that down a 13 little bit more, because I have some questions that have 14 arisen out of that. 15 A: Okay. 16 Q: Let me start, who are your potential 17 funders? You said banks and insurance -- 18 A: Companies, commercial lenders and -- we 19 deal in the US and here, so just about every financial 20 institution you could name, we do talk to. 21 Q: And do you have, sort of, a list of people 22 that you go through on a regular basis, or does it depend on 23 the deal? 24 A: It depends on the deal. But yes, I mean 25 there are some institutions are much more open to this type

1 of business, than others. 2 Q: And I take it that you -- 3 A: The smart ones, in our mind. 4 Q: And I take it, sir, that you have contacts 5 at those organizations that you keep in touch with? 6 A: Yes. 7 Q: You said that a sales person would 8 typically come to you, and you'd check the credit worthiness 9 -- to have some idea of the credit worthiness of the client, 10 and then you'd go out to the funders? 11 A: Yes. 12 Q: At what stage, do you actually go out to 13 the funders? 14 A: Well, if there's any question on the 15 credit worthiness, before we oblige ourselves to enter into 16 the leases. If there's no question, usually after the lease, 17 or about the time the lease is ready. 18 Q: And when you say, about the time the lease 19 is ready, I take it what you mean, is actually when the lease 20 is formalized, when its executed? 21 A: When its executed, yes. 22 Q: Not beforehand? 23 A: It depends. If it's going to be a big 24 lease, and it's multi-million dollars, yes, I think I do have 25 to go out and it may have to be split into several different

1 funders, large leases sometimes get syndicated amongst 2 various institutions. It's all situational, it depends. 3 Q: Okay. And that's the -- but you can't 4 actually assign the lease, sir, I take it until the lease has 5 actually -- 6 A: No, true -- 7 Q: -- been executed? 8 A: That's right. 9 Q: And it would be premature to be looking, 10 for example, months and months before a lease is actually 11 signed, because things can fall through, fair enough? 12 A: Things can fall through, but, my lenders 13 are used to me coming to them with deals that do not come to 14 fruition. I try and keep that to a minimum. 15 But again, if it's a sizable transaction, 16 yeah, it can be even months before. Especially in terms of a 17 program agreement where invoices are going to be paid and 18 accumulated over a quarter, I might come to them in January, 19 but I wouldn't have a lease to fund until maybe April. 20 But yes, I would talk to them up front and 21 while I wouldn't lock them into a rate, I would want to get 22 an idea of what kind of spread they would charge that credit 23 so I know how to price my accumulation over those four (4) 24 months. 25 So, yes, it can be quite a number of months

1 beforehand. 2 Q: Sir, you said that MFP, when it takes in 3 the lease payments from the lessee, it strips out the taxes 4 and then pays the funder directly, is that right? 5 A: That's what mostly happens, yes. 6 Q: Is there a difference from time to time, 7 between the rate -- the stream of payments -- let me phrase 8 my question a different way. 9 When you've assigned a stream of payments at a 10 certain interest rate, let's say to an insurance company. 11 A: Yes. 12 Q: And let's just use 6.5 percent as an 13 example. 14 A: Okay. 15 Q: That's the -- that's the rate at which 16 they've bought it -- 17 A: They've lent it. 18 Q: -- they've lent it, I'm sorry. 19 A: Okay. 20 Q: Do the stream of payments coming in from 21 the lessee ever exceed the amount to which you have to -- 22 that which you're paying the lender? 23 A: Very rarely. Sometimes a lease will amend 24 during its term, we've added a few laptops, for instance. 25 ABC Corporation decided they wanted a couple of extras, and

1 so it's a thousand dollars ($1000). 2 We'd send the amendment to the life insurance 3 company and it's way too small for them to take assignment of 4 that amendment. We'd let them know it, that we were 5 collecting an extra thousand dollars ($1000) a month or 6 whatever, but yes, there could be a differential in the 7 dollar amount. 8 But the loan stays in place. It's still at 9 6.5, we'd still pay that interest. 10 Q: So, except for an occasion when there's a 11 small amount of extra equipment added to -- 12 A: Yes -- 13 Q: -- a lease, you wouldn't have a situation 14 where a lessee is, let's say, paying MFP, net of taxes, ten 15 thousand dollars ($10,000) a month, but MFP is paying the 16 lessor, eight thousand dollars ($8000) a month? 17 A: The lessor is paying MFP -- 18 Q: I'm sorry the -- 19 A: -- the eight thousand (8000) -- that can 20 happen as well. 21 I'm sorry -- if there is, for instance, a 22 credit situation, the financial institution only wants to 23 take so much credit, the odd time, yes, we'll partially fund 24 the lease, so that only part of the payments are going to -- 25 to the funder, the rest are staying with MFP, which is taking

1 additional credit exposure. 2 There can be a lease which is split between 3 hardware and software and there could be an annual 4 maintenance fee or something. 5 So, yes, it is -- now that you say it, fairly 6 frequent that all the payments coming in don't go back out to 7 the financial institution. 8 It's not the norm but -- 9 Q: So -- 10 A: -- it's frequent. 11 Q: So usually, it's not quite perfect -- 12 A: Oh, no I'd say 90 percent of the time, it 13 is perfect. A perfect match. The lease payments are 14 extinguishing the debt I've made, I've borrowed that money 15 and they go away at the same time, exactly. Most of the 16 time. 17 Q: I understand the part about going away -- 18 A: Yes -- 19 Q: -- but, the dollar amounts don't 20 necessarily match, dollar per dollar? 21 A: Ninety (90) percent of the time, I'd say. 22 Q: They do match -- 23 A: -- yes, they almost always match. 24 Q: All right. Thank you. 25 MADAM COMMISSIONER: What were you saying

1 then, Mr. Stevens, about it being fairly frequent? I thought 2 you were saying it's fairly frequent? 3 THE WITNESS: Well, 10 percent is -- okay -- 4 it's fairly frequent. I mean it happens that later on in the 5 lease, if they want to add a few laptops it can happen. 6 But for the beginning term they match exactly 7 and we may end up getting a few more dollars from the lessor 8 -- lessee, excuse me, in an amendment between ourselves, but, 9 the insurance company, it's too small for them to -- 10 MADAM COMMISSIONER: All right, so 10 percent 11 is what you meant by the amount of frequence? 12 THE WITNESS: Yes, yes. 13 MADAM COMMISSIONER: Okay. 14 15 CONTINUED BY DAINA GROSKAUFMANIS: 16 Q: Sir, you said that the sales people will 17 come to you when there's some issue with perhaps the credit 18 worthiness of the client to get some sense about whether a 19 lease can be funded, right? 20 A: Yes, they should if they're kind of heads 21 up, they know it has to come through me eventually. There's 22 a place on our approval form for credit to sign off and it's 23 got to be signed off before leases are consummated on both 24 sides. 25 Q: But coming to you before, for example, a

1 sales person actually puts a proposal to a potential client 2 or before MFP responds to an RFQ or an RFP, they would -- 3 they should be -- they would come to you if there was some 4 issue about the credit worthiness of a client, right? 5 A: Yes. 6 Q: And in this case, the City of Toronto, I 7 think you've already agreed with me there was no issue with 8 respect to credit worthiness? 9 A: No, there were master lease issues but 10 not -- not credit issues, per se. 11 Q: Did any salesperson come to you or s -- 12 or did anyone from MFP speak with you prior to the -- MFP 13 putting its response in in June of 1999 to the City of 14 Toronto leasing RFQ? 15 A: I believe I was approached on the master 16 lease issues. I -- I can't remember if somebody came and 17 asked me about that, I'm sorry. Other than the debt rate and 18 the interest rate. 19 Q: You have no recollection of being -- you 20 d -- have no recollection of discussing the debt rate but you 21 have a recollection about discussing issues with respect to 22 the master lease? 23 A: Yeah. I -- I remember that and I've also 24 seen -- you and I are going to know what this means, the 25 yellow sheet of -- which was the original internal approval.

1 I didn't find that -- it wasn't given to me. In fact, in my 2 famous e-mail I was asking for one. I didn't know one 3 existed. 4 Q: Sir, how do you usually start looking for 5 -- for debt placement? How do you do that? 6 A: I take a look at ABC Corporation, what 7 kind of credit it is, what kind of deal we're talking about, 8 whether it's multi-mullions. The term is very important, 9 especially to life insurance companies and what I did in my 10 own mind was think of a short list of people to talk to and 11 then I'd get on the phone. 12 Q: And do you keep notes of those 13 discussions? 14 A: No. Mental notes. 15 Q: So there'd be no -- do you know who you 16 called, for example, in the City of Toronto case? 17 A: I -- I would have probably have spoken to 18 a couple of life insurance companies and I -- I would have 19 thought about using our Aztec securitisation vehicle as well. 20 Q: Let me just ask you about Aztec for a 21 minute. Wh -- we've heard Az -- there are a number of leases 22 at the City of Toronto that it has with respect to Aztec. 23 A: Yes. 24 Q: Can you tell me what that is? 25 A: Aztec is a -- is an entity. It's a

1 securitisation vehicle. I -- I don't know the -- I -- I 2 can't spout the legal ramifications for you. It's a -- it's 3 a partnership, I believe. There's a legal trust involved. 4 We would initiate leases within Aztec and then 5 Aztec virtually issues commercial paper against a pool of 6 leases or even single leases in the case of large ones and 7 finances that way. It's very economical way and tax- 8 effective way of funding our business. It gets the customer 9 the lowest rates possible. 10 Q: Why does it get the customer the lowest 11 rates possible? 12 A: Swapped commercial paper gives you the 13 best interest rate possible and it's also capital tax 14 effective, which we can pass on to the customer. 15 Q: I think you have us all confused, now. 16 So I'm going to take -- this may not matter a great deal but 17 I want to make sure we understand what Aztec is and how it 18 works. At least at -- at least at a rudimentary level. 19 A: Okay. 20 Q: And so Aztec, I take it, is -- is a 21 limited partnership, we've already heard. 22 A: I believe so, yes. 23 Q: And there is -- it becomes -- it actually 24 becomes one of the partners on -- one of the -- 25 A: It --

27
  1                 Q:   -- signi --
  2                 A:   It's the lessor.
  3                 Q:   It's the lessor.  And I take it then the
  4  income stream from the lease is also assigned to -- to Aztec?
  5                 A:   Aztec is the lessor.  It own's the --
  6                 Q:   It has the income stream.
  7                 A:   There's no assignment involved in -- in
  8  an Aztec lease except in one specific instance, which we'll
  9  undoubtedly get into later.
 10                 Q:   And then Aztec issues commercial paper
 11  into the marketplace?
 12                 A:   Aztec's the -- the limited partner of
 13  Aztec limited partnership issues commercial paper, is my
 14  understanding.  That's blind to us.
 15                 Q:   And commercial paper, sir, as I
 16  understand it is -- is debt that is fairly short term, is
 17  that right?
 18                 A:   I think it's ninety (90) days.  I'm not
 19  that aware of it.  I think it is and then that gets swapped,
 20  again blind to us, into exactly the term and shape of income
 21  stream that the lease calls for.
 22                 Q:   It may not matter a great deal in this
 23  case but let me make su -- let me see if I can describe this
 24  correctly.  
 25                 Basically, what you've done is Aztec has --

1 Aztec has the leases, it issues commercial paper in the 2 market place and those leases are created to a new fungible 3 instrument, is that accurate? 4 MADAM COMMISSIONER: I don't know what you 5 mean by that. 6 THE WITNESS: I didn't know what you meant 7 either, I'm sorry. 8 9 CONTINUED BY DAINA GROSKAUFMANIS: 10 Q: The commercial paper, sir, is being 11 swapped blind to -- blind to you? 12 A: Yes. 13 Q: And it's being created into some new form 14 of debt that the market place wants? 15 A: Okay, it's going from short term to -- 16 short term -- you'd call it variable rate, to a fixed rate. 17 Banks make a market in this kind of swap, it's called, and it 18 gives us a fixed rate for the thirty six (36) or sixty (60) 19 month term of the lease. 20 Q: So, MFP is seeing one (1) small part of 21 it. That paper is then subsequently being traded on the 22 commercial market? 23 A: It's paper issued by the partner it's not 24 -- and it's based on the security of that lease, if you like 25 --

1 Q: Yes -- 2 A: -- but it's not dividing up a City of 3 Toronto lease into a thousand (1000) pieces of paper, which 4 are then sold to the public. It's not that. 5 Q: Okay. 6 A: And it only works, by the way, for very 7 high rated obligors , like City of Toronto. Only our best 8 business, our most credit worthy business went into Aztec. 9 Q: And then Aztec -- Aztec was the 10 securitization that sold off -- 11 A: Yes -- 12 Q: -- this commercial paper? 13 A: Yes. 14 Q: That may be all we need to know. 15 16 (BRIEF PAUSE) 17 18 Q: And, sir, in the City of Toronto case, a 19 number of the leases that the City of Toronto signed with MFP 20 and Aztec were, in fact, assigned to different lenders? 21 A: Yes. 22 Q: Or different funders? 23 A: Yes. 24 MS. DAINA GROSKAUFMANIS: Madam Commissioner, 25 I realized I neglected to place Mr. Stevens book of

1 documents, as an exhibit. 2 MADAM COMMISSIONER: Oh, that's okay. Mr. 3 Manes, doesn't usually do it until -- well, it varies. 4 Sometimes it's right at the beginning and sometimes just as 5 he's about to get there. So -- I have something in front of 6 me. 7 MS. DAINA GROSKAUFMANIS: That's right. 8 There's one (1) volume of documents, Mr. Stevens documents 9 are Tab 1 to 26. 10 MADAM COMMISSIONER: Oh, no, I have something 11 Tabs 1 to 8. 12 MR. DAVID MOORE: I think 1 to 8 is the 13 original book with the documents identified by Commission 14 Counsel and then the balance of the documents, I understand, 15 are ones that the City identified late last week. 16 So, there should be an additional -- 17 MS. DAINA GROSKAUFMANIS: Madam Commissioner, 18 I have an extra volume here to hand up. 19 MADAM COMMISSIONER: The Registrar has given 20 me hers and then if you could arrange with her at the break, 21 to give her what would have been mine, I'll mark up this one, 22 and that one will stay mine. 23 MS. DAINA GROSKAUFMANIS: I will do that. 24 MADAM COMMISSIONER: Okay. 25 MS. DAINA GROSKAUFMANIS: The other matter is

1 that -- although I don't expect I will be referring to them, 2 a number of weeks ago, we handed out four (4) volumes of the 3 master leases. 4 Basically, what Commission Counsel has done, 5 is taken all the leases that the City of Toronto -- I'm sorry 6 -- five (5) volumes, Madam Registrar? 7 THE REGISTRAR: Four (4) volumes. 8 MS. DAINA GROSKAUFMANIS: Four (4) volumes, I 9 saw a waving of a four (4). 10 MADAM COMMISSIONER: Okay. 11 MS. DAINA GROSKAUFMANIS: There are four (4) 12 volumes of master leases. And it's possible that Mr. Stevens 13 may be referred to some of those leases. 14 MADAM COMMISSIONER: Okay. 15 MS. DAINA GROSKAUFMANIS: And so rather than 16 have him go through some other books, it may just be sensible 17 to have those four (4) volumes of leases now entered as the 18 next exhibit. 19 REGISTRAR: Exhibit 18. 20 MADAM COMMISSIONER: So, this Brian Stevens 21 one is Exhibit what? 22 MS. DAINA GROSKAUFMANIS: Oh, I'm sorry. Mr. 23 Stevens book of documents is Exhibit 17. 24 25 --- EXHIBIT 17, VOLUME 1: Bound document titled

1 "Brian Stevens" tabs 1-26 2 3 MS. DAINA GROSKAUFMANIS: The four (4) volumes 4 of Master leases, are exhibit 18. 5 6 --- EXHIBIT 18, VOLUME 1 Bound Document Titled 7 "Masterlease 838" tabs 1-17 8 9 --- EXHIBIT 18, VOLUME 2 Bound Document Titled 10 "Masterlease 838" tabs 18-29 11 12 --- EXHIBIT 18, VOLUME 3 Bound Document titled 13 "Masterlease " tabs 30-52 14 15 --- EXHIBIT 18, VOLUME 4 Bound Document titled 16 "Councillors Lease 784" 17 18 MADAM COMMISSIONER: Okay. 19 MS. DAINA GROSKAUFMANIS: Thank you. 20 21 CONTINUED BY DAINA GROSKAUFMANIS: 22 Q: Mr. Stevens, in your book of documents, if 23 I could just have you turn up, Tab 5. 24 A: Yes. 25 Q: Mr. Stevens, this is a letter dated

1 December 10th, 1999 to Lana Viinamae at the City of Toronto, 2 and it has as the subject line, a notice of security 3 interest? 4 A: Yes. 5 MADAM COMMISSIONER: Can I have the Begdoc 6 number please? 7 MS. DAINA GROSKAUFMANIS: Yes, the Begdoc 8 number is COT0-23325. 9 10 11 CONTINUED BY DAINA GROSKAUFMANIS: 12 Q: And I take it, sir, reading this letter 13 that this is a notice to the City of Toronto, that equipment 14 schedule 838-3, has been assigned to the Canada Life 15 Insurance Company? 16 A: Yes. 17 Q: And this is the kind of assignment where 18 -- this is the kind of assignment we were just talking about, 19 isn't it? 20 A: This would have been a lease between City 21 of Toronto and MFP, not Aztec. 22 Q: Yes. 23 A: And yeah, we would have assigned it to 24 Canada Life, who is going to lend me exactly the amount at 25 their interest rate that the lease payments would amortize.

1 Q: And obviously this lease wasn't -- this 2 lease couldn't have been assigned to Canada Life until the 3 City of Toronto has actually signed up the Master Lease, as 4 well as equipment schedule 838-3? 5 A: Correct. 6 Q: And what you're assigning is the lease, 7 all the equipment and the remaining stream of payments? 8 Canada Life has taken a security interest in this? 9 A: Agreed, yes. 10 Q: And sir, if I could just ask you to turn 11 up Tab 6? 12 A: Yes. 13 Q: It's Begdoc COT0-18202. And I take it, 14 sir, this is a similar kind of assignment with respect to 15 equipment schedule 838-5, 838-6, 838-7, 838-8 and 838-9? 16 A: Yes, and this is the anomaly I was 17 speaking of a few minutes ago. These are the -- 18 MADAM COMMISSIONER: I think she's going to 19 get there, but, I -- this was what was sent to the City, 20 right? 21 THE WITNESS: Yes. 22 MADAM COMMISSIONER: Okay. 23 THE WITNESS: And there's a couple of pages 24 behind it, usually for the City to sign back. 25

1 CONTINUED BY DAINA GROSKAUFMANIS: 2 Q: And why is this an anomaly, sir? 3 A: They were Aztec leases that we weren't 4 going to use as securitization. We were going to assign them 5 directly to another insurance company, Clarica Life, in this 6 case. 7 Q: And why is that an anomaly -- what did you 8 do it? 9 A: I can't remember why. It was just kind of 10 neat we were able to do it. We would have gotten 11 approximately the same rate. I can't remember, maybe we were 12 getting too heavily concentrated in the Aztec vehicle, need 13 to make room. I just -- I can't remember why. In fact, I 14 think that probably was the reason. 15 Q: When you say, you were too heavily 16 concentrated in the Aztec vehicle, what do you mean? 17 A: Any lender or vehicle like that is going 18 to have an upper limit, even for City of Toronto credit risk. 19 Q: So, it was basically -- there was too much 20 money -- too much money had been lent or was at risk for the 21 City of Toronto? 22 A: Or we expected more, one (1) or the other. 23 I just don't remember. 24 Q: Sir, I just want to talk about the effect 25 of that assignment, and I don't know whether you can answer

1 these questions for me, or not. 2 A: I'll try. 3 Q: The assignee has essentially purchased 4 that stream of payments from the City of Toronto, correct? 5 MADAM COMMISSIONER: I didn't hear your 6 question, sorry. 7 8 CONTINUED BY DAINA GROSKAUFMANIS: 9 Q: The assignee, the person who took the 10 assignment has purchased the stream of payments from the City 11 of Toronto or is getting the stream of payments? 12 A: They're getting the stream. They've made 13 a loan, taking that obligation on the lessee's part as 14 security. They're not really purchasing it. It's a loan, 15 but essentially, yes. 16 Q: They're getting the stream of payments? 17 A: They're getting the stream. 18 Q: And I take it, sir, it would be difficult 19 to change that stream of payments mid-stream, you couldn't 20 for example, go to Clarica and say, you used to get ten 21 thousand dollars ($10,000) from the City of Toronto, now 22 we're going to change that? 23 A: Oh, it happens all the time, yes. 24 Q: It happens -- that change is made? 25 A: Yes, whether our leases are thirty six

1 (36) months or sixty (60) months, things happen. I mean 2 people get laptops stolen, or they want to add a classroom to 3 a School Board. It happens all the time. It's the nature of 4 the business. 5 It changes constantly. It drives us crazy, 6 but we accommodate it. 7 Q: And when those changes are made, the -- 8 Clarica's for example, security interest changes, as well? 9 A: It would, we'd give them copies of the 10 amendments, we'd ask them if they could, to finance the 11 amendments. Obviously, if the payments are going down, debt 12 would have to be repaid quicker, that would come from us. 13 MADAM COMMISSIONER: I'm just not sure I'm 14 understanding this. 15 I thought what you said earlier, was that if 16 it just changes by a thousand dollars ($1000), then you don't 17 go through that with the life insurance? 18 THE WITNESS: Probably not. 19 MADAM COMMISSIONER: Okay. 20 THE WITNESS: They wouldn't want to, but if it 21 were a large change, we'd want to finance it. If it was a 22 change up. If it was a change down, yes, we have to take 23 care of the differential. 24 MADAM COMMISSIONER: Okay. I guess I'm not 25 certain then when it's worth it to you to make the change

1 with the insurance company and when it's not? 2 THE WITNESS: In the best of all worlds, we'd 3 always like to make a change to true up, if you like. But if 4 it's only a thousand dollars ($1000) a month more, the life 5 insurance company isn't going to be interested. We'll 6 collect the extra thousand and use that to pay for the 7 acquiring of the extra lap tops, in that example. 8 If the payments have gone down because a bunch 9 of laptops were stolen or burned in a fire or something, then 10 the insurance company, for their own records, is going to 11 need to lower the stream of ex -- expected payment. 12 MADAM COMMISSIONER: Okay. 13 THE WITNESS: And we're going to have to 14 accommodate that. 15 16 CONTINUED BY MS. DAINA GROSKAUFMANIS: 17 Q: And when you say, sir, you're going to 18 have to accommodate that -- 19 A: Yeah. 20 Q: -- that's MFP paying out more money to 21 the insurance comp -- to -- to the -- to the purchaser? 22 A: In -- in a lump sum to true up such that 23 the remaining lease payments equal the remaining debt 24 payments. We always want to keep them equilibrium if we can. 25 Q: So, for example, let's say a l -- large

1 lessor like the City of Toronto wanted to return a whack of 2 equipment -- 3 A: Yeah. 4 Q: -- a whole bunch of equipment -- 5 A: Yeah. 6 Q: -- that's going to -- and for one of the 7 leases that has been assigned, for example -- 8 A: Yeah. 9 Q: -- to a third party. 10 A: Yeah. 11 Q: That's going to have an effect on that 12 stream of payments, right? 13 A: Yes, absolutely. So we'd go to the 14 insurance company and say what's your breakage rate and that 15 would give us a basis for going to the City and okay, this is 16 how the amendment can work. It's going to cost you, but this 17 is -- we can absolutely accommodate you. 18 Q: Okay, but it's going to cost -- it's 19 going to cost the City of Toro -- there's a third party 20 involved -- 21 A: Yes. 22 Q: -- that's going to have an effect on what 23 the City of Toronto, for -- in my example, would have to pay 24 to break that lease? 25 A: This all pre-supposes interest rates have

1 gone the wrong way. If they've done the right way, then 2 there wouldn't be a breakage and nobody's got a problem. 3 Q: Okay, but it makes it a little bit more 4 difficult, for example, when there's a third party involved 5 like an insurance po -- company? 6 A: It doesn't make it easier, yes. 7 Q: The -- the -- the flexibility for the -- 8 for someone like the City of Toronto is somewhat lessened? 9 It just makes it a bit harder, right? 10 A: We'll always get there. No, I -- I don't 11 think it's any more of a hardship on the customer at all. 12 The -- they're going to have to deal with us anyway and we're 13 just getting advice from the back benches, if you like. 14 Q: So what you're saying is if the City of 15 Toronto wants to make a change in its lease -- 16 A: Yeah. 17 Q: -- a significant change, sir. There's 18 going to -- they're going to be dealing directly with you 19 anyway? 20 A: Yeah. 21 Q: And there's going to be a financial cost 22 to the City of Toronto to make significant changes? 23 A: There could be depending on which way the 24 market's gone in interest rates. 25 Q: And you'll -- in addition, for what the

1 lease has been assigned -- 2 A: Yeah. 3 Q: -- one extra step or one extra 4 complication is that third party that's now involved. 5 A: It's -- it's just like your house 6 mortgage. Your house mortgage may be with Bank of Montreal 7 but Bank of Montreal doesn't keep that paper. They 8 securitise it out the back door. 9 So, yes, it's exactly the same as that. You 10 have other people to deal with even though it's blind to you. 11 Q: And it might make it a little bit more 12 difficult to make change? 13 A: I don't know. Does the Bank of Montreal, 14 because they securitise the debt, give you any more grief? I 15 don't think so. 16 Q: Let's talk in the City of Toronto's 17 example with MFP. 18 A: Yeah. 19 Q: It might make it a little bit more 20 difficult? 21 A: I -- I can't agree. 22 MADAM COMMISSIONER: Do you mean -- I'm not 23 sure, Ms. Groskaufmanis, if you're saying it means it makes 24 it more difficult for the City or for MFP or for -- 25 MS. DAINA GROSKAUFMANIS: I meant,

1 Commissioner, from the -- from the City of Toronto's point of 2 view -- 3 MADAM COMMISSIONER: Hmm hmm. 4 MS. DAINA GROSKAUFMANIS: -- it's somewhat -- 5 and Mr. Stevens, I -- feel free to clarify this. I was 6 putting to you the proposition that if the City of Toronto 7 wanted to make significant changes to one of the leases it 8 held with MFP, a lease that had been assigned to a third 9 party like Clarica -- 10 THE WITNESS: Hmm hmm. 11 MS. DAINA GROSKAUFMANIS: -- or Canada Life, 12 that it wh -- might make -- it might make making those 13 changes somewhat more difficult for the City of Toronto. 14 It's more difficult to make changes if the 15 lease has been assigned. 16 THE WITNESS: I'm saying, I -- I disagree. 17 That's my job to go to the financial institution and work out 18 that side and I'm quite comfortable with that and the City of 19 Toronto will never be affected. 20 MADAM COMMISSIONER: It's just not -- it 21 comes down to dollars. 22 THE WITNESS: Yes. 23 MADAM COMMISSIONER: It might cost them more. 24 It might not, depending on the market. 25 THE WITNESS: Yeah.

1 MADAM COMMISSIONER: It might and probably 2 will. 3 THE WITNESS: And -- and in the act of 4 assigning it or not assigning it would have no effect. 5 MADAM COMMISSIONER: Okay. 6 And so is it -- is what would happen then, is 7 all of this would take place without the City even really 8 being aware of it. They would come to you, for example, and 9 say we want to make these big changes -- 10 THE WITNESS: Yes. 11 MADAM COMMISSIONER: -- and then you speak to 12 whoever you need to speak to behind the scenes without their 13 participation or involvement and then come back to them and 14 say here's what it is. 15 THE WITNESS: Right. The City wasn't 16 involved in my borrowing money in the first place. 17 MADAM COMMISSIONER: Right. Okay. 18 19 CONTINUED BY MS. DAINA GROSKAUFMANIS: 20 Q: Sir, you understand that the City of 21 Toronto on one (1) of its leases, purchased a number of 22 Oracle licenses? 23 A: I understand. 24 Q: And has that lease been assigned? 25 A: Just a minute, you said purchase, they

1 acquired. 2 Q: They acquired. 3 A: And asked us to purchase them for us 4 (sic). 5 Q: I apologize -- 6 A: No, it's okay -- 7 Q: -- you're very correct. It acquired a 8 number of Oracle licenses? 9 A: Yes. 10 Q: And has that lease been assigned, sir? 11 A: I believe so, yes. 12 Q: So, for the City to now say, that they 13 don't -- if they, for example, decided they didn't need as 14 many Oracle licenses anymore -- 15 A: Right -- 16 Q: -- they -- are you saying, they could come 17 to MFP and say, we want to return some of these Oracle 18 licenses, help us make a deal? 19 A: No, they don't come to us, they go to 20 Oracle, I'm afraid. If, in this house mortgage analogy, if 21 you decided you didn't need that quadruple garage, you go 22 back to the builder and say, take that down and pay me back, 23 you don't go to the mortgage company and say, I want to pay 24 less on my mortgage, cause I overbuilt my garage capacity. 25 Q: Okay. I'm confused now.

1 A: Okay. 2 Q: Because if I understood what you told me 3 before -- 4 A: Yes -- 5 Q: -- I put to you the example if the City 6 wanted to return a whole bunch of equipment -- 7 A: Yes -- 8 Q: -- I believe you told me, MFP could 9 accommodate them -- 10 A: Right -- 11 Q: -- and they'd never -- they'd never know 12 that you were making a deal to accommodate them -- 13 A: Yes -- 14 Q: -- with Clarica or with Canada Life. 15 A: Okay. 16 Q: But if I put to you that I want to return 17 a whole bunch of Oracle licenses, you've now told me I have 18 to deal with Oracle? 19 A: Well, you absolutely do. 20 Q: What's the difference, sir? 21 A: There's some intrinsic worth in the PC's 22 and other hardware you're going to be returning and that was 23 our bet in the first place, that that equipment would be 24 worth something, in fact, if it's coming back early, it's 25 going to be worth a whole lot more than what we expected in

1 thirty six (36) or sixty (60) months. 2 Software licenses don't have a secondary 3 market. The City went out and decided on their own accord, 4 that they needed so many licenses apparently, and that was 5 completely between Oracle and the City. 6 The City turned around and said, MFP under the 7 RFQ you're obligated to buy these things for us, or however 8 you acquire software, so we did. 9 If you want to unwind that, go talk to Oracle 10 who perhaps would have a re-market value for these licenses. 11 We'll unwind the debt, as soon as we get our money back from 12 Oracle. 13 We only paid that money out to Oracle because 14 the City asked us to. 15 Q: I understand that, sir. So, if I 16 understand your evidence, if the City of Toronto is now able, 17 for example, to successfully negotiate with Oracle 18 Corporation for a return of some of its licenses -- 19 A: Yeah -- 20 Q: -- whatever deal they strike, MFP stands 21 ready to be able to work out a new deal on that Oracle lease? 22 A: Absolutely. And we've offered that. 23 Q: I'm sorry? 24 A: I believe we've offered that. 25 Q: Sir, I want to turn you now to the famous

1 congratulations e-mail. It's a Tab 1 of your book. 2 A: Number one (1) with a bullet. 3 Q: It's Begdoc COT-027582. 4 5 (BRIEF PAUSE) 6 7 Q: And, sir, this appears to be an e-mail 8 written by you on July the 14th, sent at 12:45 in the 9 afternoon to Dash Domi and Sandy Pessione, and copied to 10 Irene Payne and Christine Vivaldo, with the subject line, 11 City of Toronto. 12 And the text of the e-mail reads: 13 "Congratulations! Please copy me with 14 yellow sheet (draft will do) ASAP, or at 15 least advise deal parameters as currently 16 understood so we can begin to get funding 17 in place. Thank you. 18 Brian Stevens." 19 Sir, did you send this e-mail? 20 A: Absolutely. 21 Q: Do you actually recall sending it? 22 A: I've tried over the last while, since it 23 hit the press, sort of -- I sort of remember sending it -- 24 but -- 25 Q: What do you mean, you sort of remember

1 sending it? 2 A: I don't remember sitting down and typing 3 it. I'm not the best typist in the world. I've said to you 4 before, I remember my frame of mind, if you like, while 5 sending it. 6 There was a lot going on concerning City of 7 Toronto, there was the master lease issues, there was an e- 8 mail earlier in the day by Kim Harle just talking about the 9 RF -- whatever you call it, the -- the response and how that 10 had got in. I knew we were one (1) of the lower bidders, if 11 not lowest bid, when that was publicly opened some time 12 before. 13 And I'm trying to remember what the -- the 14 cause was why I would pick this particular day and time, but 15 I remember being kind of frustrated, in fact I've said to you 16 that this is a fair amount of sarcasm in this e-mail, even 17 though it doesn't look like it, and even though it's politely 18 written, I'm not doing some -- some of the other things I do 19 in my other e-mails, even to the point of signing my whole 20 name is a -- I realized that as a -- a sarcastic twist. 21 Nobody had come to me with exactly what the 22 deal was going to be, like if -- with the City of Toronto, if 23 and when we won it. 24 It was a good chance and I don't know if it 25 was Sandy Pessione or Rob Wilkinson or somebody like that had

1 come to me and said, hey, we've -- we've got a decent chance 2 of winning tens of millions of dollars worth of business 3 here, what have you done to get going. 4 And all of a sudden I'm thinking, well, I'm 5 not getting going, because nobody has come to me and said, 6 this is what the deal is going to be looking like, and how 7 many dollars, what kind of term, what kind of equipment, 8 hardware/software split. 9 I hadn't seen a yellow sheet that had been 10 signed weeks before by a senior management. So here I was 11 down on the mushroom farm asking now for details so I could 12 go and talk to funders, who in July and August, are difficult 13 to find and deal with. 14 People go on vacation, credit committees don't 15 meet, and all of a sudden I'm faced with perhaps very quickly 16 having to come up with these multi-millions of dollars, and 17 I'm just asking for help, let me know what you think the 18 deal's going to look like. 19 Q: Mr. Stevens, you have already talked to 20 us about the Master Lease Committee? 21 A: Yeah. 22 Q: And that was a committee that you were a 23 member of? 24 A: Yes. 25 Q: And that was a committee that was, if I

1 understand what you were saying, starting to meet when they 2 were formulating the response to the RFQ? 3 A: Yes. 4 Q: So, this is a deal you certainly knew 5 about already? 6 A: I knew about and -- and I was involved in 7 the terms and conditions of the leases, but I didn't know 8 what the first leases were going to look like or when they 9 were going to happen, or even when the City was going to put 10 its final rubber stamp of approval on the response. 11 Q: Okay, I understand that, sir, but you -- 12 I think you've told me in the Master Lease Committee you were 13 negotiating certain contentious -- you were looking at 14 certain contentious terms? 15 A: Yeah. 16 Q: And you were looking at things, for 17 example, that the City of Toronto might ask MFP to do? 18 A: Yes. 19 Q: Like stand ready to finance the software 20 deal? 21 A: Yes. 22 Q: Or to acquire equipment that wasn't in 23 the RF -- that wasn't specified in the RFQ? Do you agree? 24 A: I'm sorry, again, I'm sorry? 25 Q: The RFQ included a list of -- of

1 equipment quantities and later a list of -- of approximate 2 dollar values. Are you aware of that? 3 A: Is this the 43 million? 4 Q: Yes, sir. 5 A: Okay. It -- it spoke to I think thirteen 6 thousand (13,000) PCs and a whole whack of software of 7 undetermined value. 8 Q: That's right, and that there was 9 provisions in the RFQ, and I'm happy to turn it up -- 10 A: Yeah. 11 Q: -- that MF -- that there could be further 12 acquisitions? 13 A: Oh, yeah, we were obligated to do 14 whatever the City wanted us to do. The City wasn't obligated 15 to do any of it with us. 16 Q: That's right, and certainly you were 17 aware, sir, when you were a part of that Master Lease 18 Committee, that already a -- approximately $43 million worth 19 of acquisitions was already contemplated by the City? 20 A: That's sort of a start, the 21 down payment -- 22 Q: And could be more? 23 A: Yes. 24 Q: And, sir, I'm just trying to understand, 25 you're -- you're aware of this, certainly through the month

1 of -- at some point during -- through the month of June and 2 July, I take it? 3 A: You know what, I'm not sure, I may 4 retract my agreement to that, I -- I'm not sure I knew the 5 amount. I was honed in on the thirty (30) day notice period 6 and things like that, not necessarily the amount or the -- 7 the term that it was going to be, but the things I needed to 8 know to talk to lenders halfway intelligently. 9 Q: I -- I thought, sir, that you told me 10 before that to talk to lenders intelligently, you had to know 11 the term of the deal? 12 A: Yes. 13 Q: So that is something you would have been 14 aware of? 15 A: I -- I could have been, but I -- I don't 16 remember being aware. What I'm asking for here is details. 17 MADAM COMMISSIONER: Yes, Mr. Moore. 18 MR. DAVID MOORE: Now, I don't want to 19 interject, but I thought he'd made it plain that part of the 20 frustration he felt was not knowing some of those details, 21 and that's why he was asking for them through this e-mail. 22 THE WITNESS: I -- if I can go on. Part of 23 this -- it's -- it's written to Dash Domi, and he's the 24 salesman involved, but it's copied to Sandy Pessione because 25 I know he knows what's going on.

1 CONTINUED BY MS. DAINA GROSKAUFMANIS: 2 Q: I believe it's actually written to Sandy 3 Pessione? 4 A: Well, okay, he's the second one (1) on 5 the -- on the title. At this point, on July 14th, 1999, I 6 don't think I'd even met Dash Domi. 7 And as I said before, in the normal course, 8 salesmen would come down and say, okay, this is the deal 9 we're talking about. 10 So, I'm writing it to him, but I don't expect 11 him to answer, and I certainly don't expect Irene to answer, 12 in fact, I included Christine Vivaldo because Irene never 13 answered e-mails, but it's Sandy I'm getting at, saying let 14 me in on what you think's going to happen here, because I've 15 got a job to do and it's harder in the summer to do it. 16 So, congratulations, but please let me in on 17 what's going to happen, do you think. 18 Q: Sir, I understand that you're telling me 19 that that e-mail was written with a sarcastic tone? 20 A: Yes. 21 Q: I'm just trying to understand, you'd 22 alread -- you'd told me earlier this morning that you were 23 part of the Master Lease Committee; correct? 24 A: Right. 25 Q: And that Master Lease Committee started

1 meeting in or around when, roughly? And if it helps you, the 2 RFQ was -- the RFQ response was due to the City of Toronto 3 around June the 11th? 4 A: Yeah, I'm not sure, but probably in April 5 or May, I don't know when it was issued, but -- 6 Q: It was issued May 31st. 7 A: -- anyway, a long time before this e- 8 mail. 9 Q: So, it may very well have been -- started 10 meeting when it was putting together the response to the 11 RFQ -- 12 A: Yeah. 13 Q: -- and I take it, perhaps shortly 14 afterwards; correct? 15 And, sir, did you -- did you see the RF -- MFP 16 -- the RFQ issued by the City, or MFP's response? 17 A: I would have seen parts of it to do with 18 the terms and conditions, the thing like the thirty (30) day 19 prior written consent, I can't remember other -- 20 Q: But it's not -- it wouldn't surprise you 21 if you'd seen the entire -- if you'd taken a look at the RFQ, 22 and I certainly appreciate there are parts you would have 23 concentrated on more than others? 24 A: I don't think I saw the whole thing, I 25 might have, but if I saw it, I probably wouldn't have read

1 it. 2 Q: Okay, fair enough. And but you would 3 have read MFP's response? 4 A: Parts of it to do with the things that 5 came up in the Master Lease Committee, I wouldn't have read 6 that either. 7 Q: Okay, and are you telling me that in the 8 Master Lease Committee, the dollar amount of what MFP had to 9 fund or what it should be ready to fund or even the 10 approximate amount they'd have to fund, was never discussed? 11 A: I don't remember it being discussed, it 12 wouldn't be important. We're -- we're talking about a big 13 deal here, and it's not the biggest deal, MFP has a lot of 14 transactions similar size, and I would have been working on 15 several others of those at the same time. 16 Q: So, the Master Lease Committee you're 17 telling me, never actually looked at dollar amounts? 18 A: I don't know. 19 Q: You don't recall that? 20 A: No. 21 Q: And you don't recall the Master Lease 22 Committee, for example, looking at the term of the lease? 23 A: I don't recall it, no. If it was in the 24 normal terms of thirty-six (36) to sixty (60) months it would 25 be a non-issue, it was not important.

1 Q: But it would be important, for example, 2 the term of thirty-six (36) or sixty (60) months is important 3 for you from a funding point of view? 4 A: Yes. 5 Q: Sir, how did you realize that Kim Harle 6 had sent an e-mail? 7 A: I -- I've seen it in productions, or 8 whatever. 9 Q: But it was that e-mail, sir -- it's at 10 Tab 8 if you'd like to turn it up. 11 A: Okay, thank you. Okay, that's much 12 earlier the same morning. 13 Q: That's right, and this is an e-mail that 14 was copied to you, sir; right? 15 A: Yes. 16 Q: And, Ms. Harle is -- is writing about 17 reviewing MFP's response to the RFQ and the implications that 18 that has for the lease negotiations, is that -- is that a 19 fair summary of that e-mail? 20 A: Yes. 21 MS. DAINA GROSKAUFMANIS: I'm sorry, Madam 22 Commissioner, it's Begdoc number C02-027581. 23 MADAM COMMISSIONER: Thank you. 24 25

1 CONTINUED BY MS. DAINA GROSKAUFMANIS: 2 Q: Sir, this may be a question that Ms. 3 Harle is in a better position to answer, but would she have 4 started the reviewing and negotiate -- reviewing the -- the 5 master lease and trying to put a lease in place before MFP 6 knew they had won? 7 A: Well, yeah, well we'd -- we'd been 8 working on the -- in the Master Lease Committee at -- at 9 trying to formulate a lease. Sometimes it takes quite a 10 while, it's a negotiated process. And, yeah, we'd work on it 11 on the hopes that we would win, absolutely. 12 Q: So what you're telling me is that MFP 13 starts to work on a master lease in preparation for 14 responding to an RFQ; correct? 15 A: Yeah. 16 Q: And -- 17 A: Because many of those same issues, I mean 18 you have to say in your response what the shape and format of 19 the contract is going to be, as I understand it. 20 Q: I understand that. 21 A: Okay. 22 Q: And then it continues to work on it, sir, 23 after the RF -- after MFP has responded to the RFQ, it 24 continues to work on that master lease? 25 A: Hopefully most of our work is done, but,

1 yes, not probably as diligently as before the response, 2 because there's nothing imminent, but hopefully we're going 3 to win and hopefully we're going to have to say, here's the 4 document, let's get going, because -- 5 Q: Okay, so -- 6 A: -- we won some business. 7 Q: -- there's work on the master lease 8 before you'd won, I understand that -- 9 A: Yes. 10 Q: -- in preparation of your response, and 11 then you continue that work -- 12 A: Sorry. 13 Q: -- you continue that work once the 14 response has been submitted? 15 A: I -- I would think so. 16 Q: Even though you don't know whether you've 17 won or not? 18 A: You don't know you -- you've won, but 19 what she's talking about here is hey, Sandy, I'm not that 20 thrilled with a couple of things that went into the response. 21 Q: Sir, I'm just trying to -- and obviously 22 this is a question that -- that may be better put to Kim 23 Harle, but I'm hoping you can help me out here. 24 A: Yes. 25 Q: I -- I'm trying to understand why you're

1 continuing to work on the master lease and the terms of that 2 master lease, sir, when you don't in fact know if you have 3 won. 4 MADAM COMMISSIONER: When you don't know if 5 what? 6 MS. DAINA GROSKAUFMANIS: If you in fact have 7 won. 8 THE WITNESS: That we haven't won necessarily 9 the -- 10 11 CONTINUED BY MS. DAINA GROSKAUFMANIS: 12 Q: That's right. 13 A: Yeah, okay. We're pre-emptive, 14 proactive, whatever the word is. We have to be ready to turn 15 around and do business right away, and it's not something 16 that can be done quickly. So, yes, there is work to do. 17 Q: On July the 14th, sir, did you know you'd 18 won the City of Toronto RFQ? 19 A: No, and in fact I guess we hadn't, from 20 what I've read. 21 Q: Is it MFP's practice to continue to -- to 22 draft master lease agreements as a pre-emptive measure for 23 things you might win? 24 A: It wouldn't be unusual. We're a pretty 25 upbeat organization, certainly the salespeople think they're

1 going to win every deal, which they don't, so they keep us 2 working on funding on master lease issues and everything, 3 until we know. 4 Q: So, sir, if I understand what you're 5 saying now, is that MFP is working on funding arrangements 6 for deals you don't know you have? 7 A: Yes. 8 Q: And you're working on lease -- 9 A: I waste some time. 10 Q: -- and you're working on leases that you 11 don't know you have? 12 A: Yes. 13 Q: Bec -- on the hopes that you might win 14 it, even when you don't know? 15 A: True -- 16 Q: And -- 17 A: -- and you know, the -- I'm being told, I 18 think, at this time, that there's a pretty good chance we 19 will win, we had a very good bid. One (1) of the lower ones 20 if not the lowest, when they were opened publicly. 21 Q: But you know, sir, that having the lowest 22 bid does not mean -- 23 A: Yes, absolutely. 24 Q: -- that you have won? 25 A: Absolutely. And I'm sure we've lost bids

1 where we had the lowest. 2 Q: So there's -- what you're saying is that 3 there's -- there's some time being wasted at MFP, not just in 4 the City of Toronto case, but across the board, preparing for 5 deals that you may not win? 6 A: Yes. 7 Q: Not just for -- 8 MADAM COMMISSIONER: Sorry, just on that. 9 Did you know that MFP had made the lowest bid on this one 10 (1)? 11 THE WITNESS: I don't know if the lowest, but 12 certainly one (1) of the lower ones, people were pretty 13 positive that we were going to get some business, and it's in 14 the sort of a rah, rah team work, almost sports connotation 15 of, sure we're going to win, that's all there is to it. 16 MADAM COMMISSIONER: Sorry, Ms. 17 Groskaufmanis. 18 19 CONTINUED BY MS. DAINA GROSKAUFMANIS: 20 Q: Sir, you also said that you can tell now 21 looking at the e-mail that there are other things you do in 22 e-mails that makes you think that this was sarcastic. What 23 do you mean, sir? 24 A: Well, as I said, I -- I don't think I'd 25 even met Mr. Domi, so this was my -- even signing my whole

1 name is something I almost never do. But I'm trying to 2 introduce myself, I'd seen him around the office, obviously I 3 know who he is, I remember him coming into the office, et 4 cetera, but I don't think I'd ever met him. 5 So, again, I'm a little bit ticked that he 6 hasn't come and told me what -- or somebody hasn't come and 7 told me what they think is going to be required of my 8 department, perhaps in fairly short order. 9 Q: Sir, you'd agree with me that 10 congratulations isn't usually a word that would -- that's 11 meant to convey sarcasm? 12 A: Well, it can be if you say, oh, 13 congratulations, now tell me what you're talking about. 14 Q: So, but it's usually a word that says 15 good job done -- 16 A: Yes. 17 Q: -- praise for a good job? 18 A: Yeah, but again, I'd never met the man, 19 so -- 20 Q: But you'd met Sandy Pessione, sir? 21 A: Many times. 22 Q: And Ms. Payne and Ms. Vivaldo, you knew 23 them as well? 24 A: Yes. 25 Q: Okay. So, the congratulations was -- the

1 congratulations -- the sarcastic congratulations, sir, was 2 simply meant for Mr. Domi? 3 A: Well, no, it was also meant for Ms. 4 Payne, she wasn't exactly on my wavelength of letting me know 5 what she thought was going to happen. That's why I had to 6 send it to Christine, as well. 7 I'm trying to get somebody's attention that 8 there's a big job to do here and may have to be done fairly 9 quickly; let me know what you're thinking. Wh -- what do you 10 think is going to happen here? 11 Q: But, sir, you'd already -- you already 12 knew that there was -- that MFP -- that there was this RFQ 13 out there. 14 A: Hmm hmm. 15 Q: And that MFP had been responded and you'd 16 been part of this committee that had been negotiating a 17 master lease. 18 A: Yeah, but I didn't know the parameters on 19 which I could go and approach funders. 20 Q: Okay and -- and, sir, you -- y -- you're 21 telling me that the indication that you've signed your full 22 name is supposed be a message that -- 23 A: I'm not the best typist in the world. 24 It's usually just a string of capital Bs but I'm saying to 25 Dash, hey this is me. I live in the basement. Come see me

1 sometime. 2 Q: The basement being the mushroom farm? 3 A: Yes and literally, we were on the first 4 floor. All the salespeople were on the second and the rest 5 of the recipients. 6 Q: Sir, I don't want to put too fine a point 7 on it, but if you can just turn up Tab 2. 8 A: Yeah. 9 Q: This is a -- an e-mail sent a couple 10 months later to Mr. Wilkinson and copied to Mr. Domi and to 11 Mr. Pessione. 12 A: Yeah. 13 Q: Begdoc COT0-24970 and you've signed this 14 with your full name too? 15 A: Yeah. 16 Q: Does that mean you're being sarcastic in 17 this e-mail, as well? 18 A: That came out when I was speaking to Rob 19 Wilkinson. He was wondering if he should go back and look at 20 all my e-mails. It's possible, and what I'm saying here is 21 this is how we would want to approach doing leases now that 22 we know we're probably going to do, so. 23 Q: I mean, this looks pretty innocuous. 24 Basically, you're asking Mr. Wilkinson to advise the software 25 component of the deal and when the take downs are scheduled

1 for and that MFP may very well -- much want to document 2 software on MFP lease schedules and hardware and other assets 3 on Aztec schedules and would this be a problem. 4 A: Again -- 5 Q: It doesn't sound sarcastic. 6 A: Well, again, I'm very much still in the 7 dark on important things like on the breakdown of hardware 8 and software and I'm saying hey, this is how we'd want to do 9 it. 10 Q: So w -- 11 A: So yeah, there is a component -- 12 Q: Th -- 13 A: -- there -- 14 Q: This is a sarcastic e-mail, too? 15 A: Not as -- not as sarcastic. 16 Q: Okay. 17 A: I didn't put congratulations at the 18 beginning. 19 Q: And -- and, sir, if I can just ask you to 20 turn up Tab 7. 21 A: Yes. 22 Q: It's Begdoc COT0-24269. 23 24 (BRIEF PAUSE) 25

1 A: Sorry. Yes. 2 Q: And this is an exchange of e-mails, I 3 take it, between Lee Ann Currie initiating the e-mails and 4 then you writing back to her? 5 A: Yes. 6 Q: And this has to do with the execution of 7 documents. Ms. Currie writes to you: 8 "Hello, I have received your request this 9 morning from the City to pre-execute lease 10 documents prior to issuing. Please let me 11 know how you would like to proceed as I 12 have not yet responded." 13 And I take it you respond: 14 "Can do, so long as all approvals are in 15 place beforehand and no changes are made by 16 the City when they sign. Besides, it's too 17 cold to execute people outside." 18 A: Yeah, that's -- 19 Q: So that's clearly sarcastic, right? 20 A: No, that -- that -- her title here is 21 City of Toronto internal execution. 22 Q: Yeah. 23 A: I'm saying it's warm enough inside to 24 execute people, not outside. I'm fooling around and I signed 25 a bunch of B's. It's not sarcastic, it's --

1 Q: Okay -- 2 A: -- a lame -- 3 Q: -- fine -- 4 A: -- attempt at humour. 5 Q: That's fine. 6 MADAM COMMISSIONER: Okay, hang on. Hang on 7 the two (2) of you. 8 THE WITNESS: Okay. 9 MADAM COMMISSIONER: If one (1) of -- just 10 one (1) of you could speak -- 11 THE WITNESS: Okay. 12 MADAM COMMISSIONER: -- it would make it a 13 lot easier. First of all for me to hear -- 14 THE WITNESS: Okay. 15 MADAM COMMISSIONER: -- and for me take notes 16 and possibly even for the court reporter. 17 THE WITNESS: Sorry. 18 MADAM COMMISSIONER: Okay. Thanks. I didn't 19 underst -- I didn't hear any of that because it was both of 20 you talking at exactly the same time. 21 MS. DAINA GROSKAUFMANIS: I apologize, Madam 22 Commissioner. I ta -- 23 MADAM COMMISSIONER: Go ahead. 24 25 CONTINUED BY MS. DAINA GROSKAUFMANIS:

1 Q: I take it, sir, this is -- this is meant 2 to be funny? 3 A: It's a lame attempt, yes. 4 Q: Okay. Maybe a little bit -- sarcastic 5 funny? Sure? 6 A: I wouldn't agree. I m -- it's Lee Ann, 7 I'm just joking around. 8 Q: It's joking around and you've signed it 9 BBB? 10 A: Yes. 11 Q: Okay. 12 A: And I said it's too cold to execute 13 people outside. 14 Q: Okay 15 A: I'm going to be a lot more careful about 16 what I put in e-mails from now on. 17 Q: Sir, are there any formal means by which 18 you're usually advised that MFP has won a deal? 19 A: No. 20 Q: Usually you would just hear it from 21 somebody else? Hear it around the office? 22 A: Yeah and quite often it's kind of -- I 23 don't know what the right word is, denouement. I mean, we 24 were expecting a win, we want a win, all the sudden you win, 25 and where's the next deal, let's work on something -- that's

1 the exciting part is trying to compete and win. 2 Q: But there's no formal means, for example, 3 there's no e-mail sent to everyone? 4 A: Not that I remember, no. 5 Q: No formal announcement that's usually 6 made? 7 A: No. 8 Q: And there wasn't in this case either? 9 A: No. 10 Q: So, this is not -- it's not surprising 11 then, that you might not have heard the day that MFP won -- 12 it's not -- you'd hear it through the grapevine, right? 13 A: Essentially. 14 Q: And you'd usually hear it when MFP had 15 won. That's usually when you'd hear something? 16 A: Sometime after, yes. 17 Q: But in this case, you're saying you hadn't 18 heard anything, but you sent a congratulatory e-mail 19 nonetheless? 20 A: Yes. 21 MR. DAVID MOORE: In fairness, he didn't say 22 he hadn't hear anything, he said that there was talk around, 23 he can't -- he wasn't specific -- 24 MADAM COMMISSIONER: He hadn't heard that 25 they'd won?

1 MR. DAVID MOORE: No, that's right, but -- 2 MADAM COMMISSIONER: I think that's -- isn't 3 that all what the question is? 4 MR. DAVID MOORE: I didn't appreciate the 5 question that way. If that's what the question is. 6 MADAM COMMISSIONER: I'm sorry. That's what I 7 took it. That it was just -- 8 MR. DAVID MOORE: All right. 9 MADAM COMMISSIONER: -- is that -- if I'm 10 wrong, can you just make sure that you correct the record. 11 Because if I'm not wrong then I don't want to be cutting Mr. 12 Moore off if he has a valid objection on that. 13 MS. DAINA GROSKAUFMANIS: You are correct, 14 Commissioner, I believe the witness has said, he had not 15 known -- he did not know that they had formally won, he'd 16 just heard that they might win. They were a low bid. 17 MR. DAVID MOORE: That's fine. I mean, 18 putting the question, you hadn't heard anything, given the 19 state of the record, in terms of what the witness has said, 20 it would be preferable to clarify exactly what that question 21 is meaning so there's no confusion. 22 MS. DAINA GROSKAUFMANIS: I'm happy to clarify 23 that, Madam Commissioner. 24 25 CONTINUED BY DAINA GROSKAUFMANIS:

1 Q: So what you're telling me, Mr. Stevens, is 2 on January -- pardon me -- July the 14th, 1999 you had not 3 heard the MFP had won? 4 A: No. 5 Q: And there is not -- there was no formal 6 means by which you did hear eventually anyway? 7 A: No. 8 Q: Okay. 9 A: The ultimate formal means would be a lease 10 would be plopped on my desk, signed by the City of Toronto. 11 Q: And there was nothing unusual about 12 hearing things through the grapevine? 13 A: No. 14 Q: So, there was nothing unusual that you 15 hadn't heard about -- I'll leave it never mind. 16 A: Okay. 17 18 (BRIEF PAUSE) 19 20 Q: Sir, were you involved -- the City of 21 Toronto leases, most of them were eventually written for five 22 (5) years, sir? 23 A: I believe so. 24 Q: Were you involved in that decision to 25 write the leases for five (5) years, or to change them from

1 three (3) to five (5) years? 2 A: No, it seems to me that's the customer's 3 purview, not mine. 4 Q: And would you have been advised that the 5 term of the lease was -- had changed from thirty six (36) to 6 sixty (60) months? 7 A: I don't know if I would -- I would have 8 been advised they were sixty (60) months, not that they'd 9 been changed, necessarily. I get a lease and it's evident on 10 its term -- on its face what the term is. 11 Q: And you wouldn't know, for example, why 12 that change was made? 13 A: No. 14 Q: Or who was involved in making the decision 15 to change the term of the lease? 16 A: No, but it's got to be the customer. 17 Q: Sir, the City of Toronto leases were also 18 re-written in July of 2000? 19 A: Two (2) or three (3) of them were, yes. 20 Q: Yes. And, sir, were you involved in that 21 decision to re-write the leases? 22 A: No, I had to deal with the funding that 23 was already in place and then re-fund them, but sort of after 24 the fact. 25 Q: And the funding that was in place, was in

1 place through Aztec? 2 A: Yes. 3 Q: And Aztec is essentially an internal 4 securitization vehicle, right? 5 A: Yes. 6 Q: So, dealing with changing the leases, the 7 re-write isn't a big deal when it's Aztec? 8 A: Oh, no, I still have to go out and break 9 the swaps and pay if there's a difference. That way it's no 10 way else different. 11 Q: Okay. And so those termination -- you 12 still would have been doing some backroom negotiations -- 13 A: Oh, yes -- 14 Q: -- with Aztec to do the re-writes? 15 A: Yes. 16 Q: And once the leases were re-written, I 17 take it, sir, you were involved in getting the debt placement 18 in place for those re-written leases? 19 A: Yes. You showed me the Clarica letter 20 there. 21 Q: That's right. That's the document at Tab 22 6, where they were assigned to Clarica? 23 A: Yes, even though they were Aztec leases. 24 Q: Sir, the last area that I want to cover 25 with you, deals with the re-execution of the leases?

1 A: Okay. 2 Q: You -- you understand that a number of 3 leases were -- had to be re-signed by the City of Toronto? 4 A: Yes. 5 Q: Were you involved in that -- that 6 re-signing? 7 A: Well, I would have signed them on behalf 8 of whoever the lessor was for the particular lease. 9 Q: Whether it was Aztec or MFP? 10 A: Yes. 11 Q: Sir, how did that -- how did the 12 situation arise whereby -- whereby you learned that the 13 leases had to be re-signed? 14 A: Well, we had undertaken the original 15 leases based on a certificate of incumbency, it's called, 16 that the City Solicitor had given us, and they said, these 17 are the officers of the City and there -- by their office 18 they are authorized to enter into leases, the master lease 19 and program agreements and schedules thereto. 20 But when we went to Canada Life, who is a very 21 particular funder, and has a very strong, I believe, outside 22 legal presence, they decided that wasn't enough and we would 23 have to get a -- a legal opinion by the City of Toronto as to 24 the authorization and -- and proper execution of the lease 25 that was going to them.

1 So, we went back to the City and said, this is 2 something that our funder has come up with, we need to have 3 an opinion from the City. 4 Apparently that caused some discussion down at 5 City Hall, because right after that we were told, no, we -- 6 we have to get some of the leases re-signed. 7 Q: And this was -- you didn't have a concern 8 though with respect to -- when you -- when you saw the leases 9 on their face, you had no concerns? 10 A: No, and we had a certificate of 11 incumbency from the City Solicitor saying, these are the 12 people who could sign, and they're authorized and away you 13 go. 14 Q: And then the leases were eventually re- 15 executed, sir? 16 A: Some were, yes, I -- I don't know which 17 ones. 18 Q: And that matter was not -- that -- that 19 matter was not brought to MFP's attention again, basically it 20 was a closed deal once the leases were re-executed? 21 A: And we had the opinion of the City 22 Solicitor, that these leases, which were $60 million worth of 23 leases over six (6) -- sixty (60) months, were firm 24 obligations of the City, properly executed and authorized. 25 MS. DAINA GROSKAUFMANIS: Madam Commissioner,

1 those are my questions for Mr. Stevens. 2 3 (BRIEF PAUSE) 4 5 MADAM COMMISSIONER: Do we know who's going 6 next? Do you want to -- we can take the break now if you'd 7 like and we'd have you discuss that. All right, why don't we 8 do that, we'll take the morning break now and we'll come back 9 at twenty-five (25) to. 10 MS. BAY RYLEY: Sure. 11 THE REGISTRAR: Order. The Inquiry will 12 recess until 11:35. 13 14 --- Upon recessing at 11:15 a.m. 15 16 --- Upon resuming at 11:35 a.m. 17 18 THE REGISTRAR: The Inquiry will resume. 19 Please be seated. 20 21 (BRIEF PAUSE) 22 23 MADAM COMMISSIONER: Mr. Centa, you won the 24 draw. 25 MR. ROBERT CENTA: I won the draw.

1 MADAM COMMISSIONER: Mr. Centa is a lawyer 2 for the City of Toronto. 3 THE WITNESS: Thank you. 4 MR. DAVID MOORE: Madam Commissioner, there's 5 just one (1) matter briefly and I'm going to say more about 6 it tomorrow but just before the cross-examination begins, it 7 came to my attention on Thursday of last week that the City 8 has filed affidavit material in the pending litigation 9 between the parties making extensive reference and placing 10 extensive reliance on the evidence adduced in this forum and 11 it's a matter of considerable concern to me because it -- it 12 indicates quite clearly what -- what the City views the 13 purpose or at least one of the major purposes of this Inquiry 14 to be, at least from MFP's perspective. 15 I don't -- I'm not going to say anything more 16 about it now. I -- I -- there's a letter that -- that I'm 17 finalizing my instructions about -- for my client that I'll 18 be communicating and -- and -- and perhaps, I'll -- I'll -- I 19 expect I'll address the issue in greater detail tomorrow but 20 -- but it is something that -- that's recently come to my 21 attention and I just wanted to -- to alert you to it briefly. 22 MADAM COMMISSIONER: Okay, thank you. Mr. 23 Centa? 24 MR. ROBERT CENTA: Commissioner, I don't know 25 if any response is required from City of Toronto at this

1 time. I -- I'd simply say we may disagree with some of the 2 things that Mr. Moore may believe the City's purposes are in 3 the Inquiry but I don't want to get into it now. We'll wait 4 for his letter and an opportunity to discuss it at greater 5 length tomorrow. 6 MADAM COMMISSIONER: All right. Thank you. 7 MR. ROBERT CENTA: Mr. Stevens, my name is 8 Rob Centa and you'll quickly learn that I know a whole lot 9 less about placing debt than Ms. Groskaufmanis does, so we'll 10 have to go especially slowly for my benefit. 11 THE WITNESS: I've tried to explain it maybe 12 fifty (50) times to my own mother and she hasn't got it yet. 13 MR. ROBERT CENTA: Well, we'll add your 14 mother to the witness list -- 15 16 (BRIEF PAUSE) 17 18 MR. ROBERT CENTA: Commissioner, I anticipate 19 I will be less than half an hour. 20 MADAM COMMISSIONER: Okay. Thank you. 21 22 CROSS-EXAMINATION BY MR. ROBERT CENTA: 23 Q: If I could ask you to turn up Tab 8. 24 This is document COT0-27581. It's the Kim Harle e-mail from 25 July 14th, 1999.

1 What, if anything, did you do as a result of 2 receiving this e-mail? Do you recall anything? 3 A: I don't recall at all. It may have been 4 part of the -- the impetus for me to send my e-mail late in 5 the day. I note that this one is at 6:54 a.m. so I wouldn't 6 have received it when it was sent. To be sure, I don't 7 remember. 8 MADAM COMMISSIONER: You wouldn't have opened 9 it? 10 THE WITNESS: I'm sorry? 11 MADAM COMMISSIONER: You wouldn't have opened 12 it? 13 THE WITNESS: Not at that time. 14 MADAM COMMISSIONER: Hmm hmm. 15 16 CONTINUED BY MR. ROBERT CENTA: 17 Q: Do you recall Sandy Pessione following up 18 that e-mail directly with you as he's invited to do by Ms. 19 Harle in the e-mail? 20 A: I don't recall. I mean, he -- he should 21 have but again she's talking about, correct me if I'm wrong, 22 a response we've already made and we're probably going to 23 have live with. 24 She's just saying hey, this may not work out 25 too well, the fact that the City is going to have this

1 ability to delay payments at only prime, is that enough. We 2 may just have to live with it. 3 Q: Right. And I -- there's the last 4 sentence in the second paragraph of the e-mail is please 5 contact Brian -- 6 A: Yeah. 7 Q: -- and me to discuss it. Do you recall 8 Sandy directly contacting you? 9 A: I'm sorry, no. 10 Q: Okay and y -- you told Ms. Groskaufmanis 11 this morning that in your experience, it's not uncommon for 12 MFP to start drafting contract documents in advance of 13 formally being awarded a successful bid? 14 A: Sometimes they take quite a long time to 15 -- to get done. 16 Q: And there's nothing particular about the 17 fact that MF -- that the legal department had started 18 drafting that leads you to believe that -- that MFP had 19 locked the bid in? 20 A: No. 21 Q: And did it surprise you that le -- the 22 legal -- legal department was starting to draft documents 23 before you had started to get funding in place or had gotten 24 any of your ducks in a row? 25 A: They don't have that much to do with each

1 other. No, that's -- 2 Q: And you said that you may recall -- Kim 3 Harley's -- Kim Harle's e-mail may have been an impetus for 4 you to -- to write the next e-mail -- 5 A: It might have been or -- 6 Q: -- as such? 7 A: -- or for me to ask Sandy, you know, 8 what's going on and he may have said well, we're going to get 9 some business. 10 Q: If I could turn you now to your e-mail at 11 Tab 1. 12 A: Yes. 13 Q: Document COT0-27582. Do you recall 14 receiving a response to this e-mail? 15 A: No, I don't. 16 Q: An e-mail message from any of the four 17 (4) people that was -- that you sent this message to? 18 A: Well, I'm almost 100 percent certain I 19 didn't get one from Dash or Irene. I doubt Christine and 20 Sandy may have come to talk to me. I just don't know. 21 Q: So you have no specific recollection of a 22 telephone call or an e-mail from any of the four (4) people? 23 A: No. 24 Q: Okay. Did you receive a copy of the 25 yellow sheet as a result of sending this e-mail?

1 A: I don't know. I think not, but I don't 2 know. 3 MADAM COMMISSIONER: You think not? 4 THE WITNESS: I think not but -- 5 MADAM COMMISSIONER: Why would that -- why 6 would that be? 7 THE WITNESS: Well, I just saw it very 8 recently and it certainly didn't look familiar to me and I 9 hadn't signed it. So I'm -- if I had to guess, I'd say not. 10 11 CONTINUED BY MR. ROBERT CENTA: 12 Q: But -- but you're -- sir, if I c -- if I 13 understand correct, you're -- you're senior in the 14 organization to everyone you sent that e-mail to but -- no, 15 you're senior -- you were senior to Irene Payne and you -- 16 A: No. 17 Q: No? 18 A: No, no, no. 19 Q: Senior to everyone but Irene Payne? 20 A: Yeah. 21 Q: And you sent a fairly specific request, 22 sarcastic or not, for some information? 23 A: Yeah. 24 Q: You didn't receive a yellow sheet? 25 A: Not that I remember. I could have but I

1 don't remember. 2 Q: Did you receive any other information -- 3 A: Well, -- 4 Q: -- in response to your -- 5 A: -- hopefully at some time I did in order 6 for me to go do my job. Like, I -- I probably would have 7 escalated it if I hadn't but I -- I just don't remember. It 8 was a while ago. 9 Q: What did you do after you sent the e- 10 mail? You said you wanted to start getting funding in place. 11 When did you start trying to get funding in place? 12 A: I don't know. If -- if I got a response 13 to this, l -- let me know when it was all going to happen it 14 would either have been right away or a number of weeks even 15 later but it seems to me if I had gotten some sort of a 16 response to it which gave me some of the basic information 17 then I would have made a few phone calls. 18 Q: And do you remem -- do you know when you 19 first started making phone calls to try and place the debt 20 for the City of Toronto deal? 21 A: I'm sorry, I don't. No. 22 Q: And you have no documents that detail 23 that? 24 A: No, again, it w -- would have been phone 25 calls but only to a very specific group who I'd hope to

1 interest in taking -- taking on the business. 2 Q: Do you remember specifically for the City 3 of Toronto deal, how many institutions you would have 4 contacted to try and place the deal? 5 A: Well, we ended up funding with three (3), 6 so three (3) or more, but maybe just those three (3). 7 Q: And when you learned about the deal and 8 the parameters of the deal, did you think that that was going 9 to be a difficult deal to place? 10 A: Not difficult, but any large deal -- 11 maybe it has to be broken up and I want to get the very 12 lowest rate we can, so there's going to have to be some 13 discussions, some back and forth. 14 Q: So you don't have any specific 15 recollection of contacting anyone other than the three (3) 16 parties you eventually placed some of the -- the deal with? 17 A: No, and again to reiterate it, it's a 18 difficult time of the year, people are on vacation and 19 perhaps I'm a little nervous that I'm going to get somebody 20 on the other end of the line that can deal for those 21 institutions. 22 Q: And do you recall -- have a specific 23 recollection of whether or not you had difficulty -- 24 A: No. 25 Q: -- tracking down people?

1 A: I can't. 2 Q: And you said that you contacted the 3 financial institutions by telephone? 4 A: Usually, yeah. 5 Q: And you would have had a list of 6 potential institutions -- you said you -- firstly, you said 7 MFP deals with a broad range of financial institutions to 8 place its deals? 9 A: Right. But we'd make an internal 10 assessment of who would be the most likely. 11 Q: Based on your experience -- 12 A: Yeah. 13 Q: -- understanding what the deal looks 14 like -- 15 A: Yes. 16 Q: -- the -- the term? Yes? 17 A: Yes. 18 Q: The equipment, whether it's hardware or 19 software? 20 A: It can be -- 21 Q: The -- the size of the deal are all going 22 to determine who in your Rolodex you're going to call? 23 A: Yes, my mental Rolodex. 24 Q: Your mental Rolodex, you'll go through 25 the list of possible institutions and you'll say, well, this

1 is a deal that looks like it might interest the following 2 three (3) or four (4) -- 3 A: I agree. 4 Q: -- financial institutions? 5 A: I agree. 6 Q: So by the time you make the calls, you 7 have to know some of the contours of the deal? 8 A: That's right. 9 Q: And what would you say are the necessary 10 elements of the deal for you to know, in order to make those 11 calls? 12 A: About how much, in terms of dollars we're 13 talking about, the start date, whether it's going to be quart 14 -- monthly, quarterly or annual pay. Is it hardware or 15 software, the term of the lease. 16 Q: And I take it in the -- in the size of 17 the deal, one (1) of the questions that you're going to want 18 to know is whether MFP itself is making an equity insertion 19 into the deal, and the size of that? 20 A: That's not going to phase me, no. 21 Q: You still have to look for the -- if it's 22 a $43 million deal, whether MFP inserts 15 or 16 percent, 23 you're still going to go look for a $43 million funder? 24