Did he really say that?

We believe that a strengthened public service will ensure that individuals are being hired on their merits as opposed to who they know in government.

According to the Telly editorial on Monday, those were the words Premier Danny Williams spoke in 2004. He said them, on province-wide television in the infamous January 5, 2004 speech about government's financial plans.

It is a laudable sentiment and the provincial government's 2005 action in creating a public service secretariat within the government itself is a commendable step to making merit-based hiring a reality throughout government.

That's why a competition for commissioners and a chief executive officer for the public utilities board was a great leap forward in handling appointments traditionally made by cabinet from a rather closed process that didn't always appear to be based on merit as most of us would understand the term.

The 2007 public competition showed signs of a real change, despite the efforts made to work around the process for selecting the chair and chief executive at the offshore regulatory board.

In light of all that, it remains very odd that the provincial government made no effort to point out that the selection of Andy Wells as head of the public utilities board came out of a merit-based hiring process, the one the provincial government itself started.

Not only that, but as Bond Papers pointed out on Friday, there isn't any public indication of what happened to the competition. Resumes were assessed but after that, there's been no sign of the whole affair. There are still two commissioner positions vacant at the board.

There's no question that Danny Williams made it a policy of government to move to merit-based hiring throughout government.

He did it on province-wide television in 2004.

So what happened to the PUB competition?

-srbp-

...thy father's spirit

By the clicking of the thumbs, something wicked this way comes.

There is a ghost at the old CBC building on the Parkway, so it seems.

The ghost of one news producer long since past not from the Earth but from the building.

Your humble e-scribbler dialed a familiar number this weekend, in order to follow up on the strange case of the missing SAC story.

The number rang and rang, as it should on a weekend.

But instead of going off to message manager as it usually does, an unfamiliar voice suddenly entoned that the call had reached the desk of Bob Wakeham.

Bob was apparently not available but the call was then re-routed to the newsroom where some kind - and hopefully non-spectral - voice answered.

No message, sez your e-scribbler, maybe the cell phone is working properly.

Eerie that calls should go to Wakeham when one is inquiring about why a major political story never made to air at CBC. It's the kind of story people of Wakeham's time would have delved into until every ounce of information had been wrung from it.

Those sort of things never seem to happen in these days of Crackberries.

Odd that.

-srbp-

Time to worry: CBC and Indy both omit big story

Two different people with no connection to each other posed the same question to your humble e-scribbler yesterday:

Why hasn't CBC mentioned the SAC Mfg story?

It's a good question.

Every other news outlet in the province - except the Indy - has mentioned the story.

That's pretty odd company for the Mother Corp to be keeping.

Time to make some calls and fire off some e-mails.

More to follow.

-srbp-

Separated at birth: the Gong Show version

City councillor Gerry Colbert, right, who is rumoured to be starring in an off-off-off-Broadway run of Duck Soup next fall, as well as hosting a new version of "You Bet Your Life" on the gameshow channel.

And Kazakistan's greatest export, Borat Sagdiyev, left.

Conoco hints all not well in local oil patch

ConocoPhillips is working to counteract the impression left in a National Post story Friday that it was unhappy with the provincial government's equity demand for offshore oil and gas projects.

The Post reported that the company was having a hard time justifying an exploration program in the Laurentian sub-basin off the south coast of Newfoundland, based on the equity demand:

Kevin Meyers, president of ConocoPhillips' Canadian subsidiary, said yesterday one of the well's challenges is that the new regime involves the province taking an equity stake if the well produces a discovery, but not sharing in the cost of exploration, which could add up to hundreds of millions of dollars.

"That makes it a much more tolerable risk scenario for them - if you find something and it's economic, then they participate," Mr. Meyers said in an interview.

"But it does add an extra burden on the people who have to carry the exploration cost, so they are essentially carrying that ownership, and so that is one of the challenges in the regime."

As the Telegram reports on Saturday, the company issued a terse statement late Friday afternoon. The statement - issued by the vice-president of corporate communication said, in full:

"ConocoPhillips Canada continues to be interested in its deep water exploration project off the southern coast of Newfoundland and Labrador.

"This is a high-risk, high-cost project located in a harsh environment, and thus has considerable technical and economic challenges.

"We have been working with the province to progress the project and to gain better understanding of the recently released energy plan, and we appreciate the government's willingness in doing so.

"The implication portrayed in (Friday's) National Post article is that ConocoPhillips is challenging the province and the premier and that is simply not the case.

"ConocoPhillips looks forward to continuing to work with the province in order to test this unexplored region."

Go read the Post story again.

There's no implication that the company is challenging the provincial government. The operations vice president pointed to the obvious concern the company shares with others interested in further exploration. Sure there are projects underway and the province has acquired small shares of projects that have been already developed or where the so-called "equity" stake can be calculated and the financial implications controlled.

It's very different for exploration where there is more risk than guaranteed return. Exploration is the key to the long-term future of the province's oil and gas industry.

Drilling in deep water is costly. The provincial government's position is that it will assume no risk for the cost of exploration. If the wells are dry, the company or companies eat the cost fully. If the wells produce, the provincial government wants a slice of the gold medal, but no share of the pain incurred to get to the podium.

Kevin Meyers also made public what has been known in the oil patch for some time: the companies still don't have clarity on the financial implications of the province's energy plan and that is affecting decisions on exploration. Uncertainty or shifting provincial demands may also be affecting conclusion of the Hebron deal.

The energy plan - announced as part of last fall's election campaign after a decade of development by the provincial government - eliminated the existing generic oil royalty regime entirely promising that a new one would be developed at some undefined point in the future. Meanwhile, a draft gas royalty regime was unveiled, but it is still at the draft stage. A version shared with the oil companies before the plan was released was reportedly criticised sharply, in private. That's why the energy plan contained a "draft" and not a final royalty regime.

As such, companies interested in exploration suddenly found themselves with less certainty about the future than greater certainty. Meyer's comments contradicted the political spin from the provincial government that the energy plan was completed and had restored "clarity" to the ofshore's fiscal issues.

Companies like ConocoPhilips - which has potential for natural gas in it's south coast licenses - have to justify exploration costs without knowing what the overall financial implications might be resulting from a discovery. That's a difficult exercise where exploration costs are escalating anyway, outside the added costs of working in deep water.

A well drilled in the Orphan Basin last year cost a reported US$200 million, double the cost of a typical well offshore Newfoundland. Changes in the strength of the Canadian dollar also effectively increased the cost of drilling offshore by removing the dollar's discount bonus.

The companies appear to have been trying to keep their dissatisfaction quiet in the hopes that the problems could be solved more effectively behind closed doors. Meyer's remarks undermined the media blackout, hence the quick reaction by the corporate communicators to slap a happy face seal on further comment.

If the Premier responds at all and does so calmly, then the whole thing will blow over and the problems can be sorted out.

If he's having an off day and vents a little spleen, the whole offshore mess - currently contained - could spill on the streets of St. John's like a political Exxon Valdez.

-srbp-

SAC one of largest investments under new program

SAC Mfg, the defunct natural gas company, received one of the largest provincial government investments under its commercialization program, according to a report by Rob Antle in Saturday's Telegram.

SAC received $500,000 - the maximum possible - from the program in December 2006 but ceased operations in September 2007 after relocating to Alberta. Since 2006, the provincial government has spent $2.6 million in investments of varying sizes in local ventures.

SAC is the only company of the 10 to fail. The others are going concerns, some with highly successful products and services being marketed globally.

SAC is also the only investment from this program in which the provincial government took shares. Similar investments, i.e. equity stakes, in three other operations - Blue Line, Consilient and Orphan Industries - occurred in 2005.

Of the other investments, only NewLab Clinical Research also received the maximum. NewLab recently announced the company's merger with Newfound Genomics, another local company doing similar or compatible research.

VMT - Virtual Marine Technology - received $450,000. The company provides training simulators for lifeboat operators. Data Sentinel, which markets a USB-based computer data backup storage system, received $400,000.

Northern Radar of St. John's received $374,900 from the provincial government in February 2007. It manufactures a locally-developed high frequency surface wave radar system marketed by Raytheon. The company has one sale in Sri Lanka with others confirmed or pending, according to media reports earlier this year.

A development and acquisition program with the Department of National Defence was cancelled in 2006. A research program is pending but the Government of Canada is planning an open tender call which would see the radar developer compete with other companies to continue work on its own project. Two test and demonstration sites in Newfoundland operated for the Canadian navy have ceased operation since the project cancellation.

Superior Waterproof Coatings, of Gander, received $153,600 from the province for its exterior rubber sealant coating for residential and commercial buildings.

St. John's-based Jackman Brand Marketing received $125,000. No details of any of the investments were reported in the Telegram. [Corrected:] Mediclink received $57,900. The company develops and markets practice management software for optometrists and optic stores.

Dockside Appetizers received $31,000 and [corrected] a car safety apparatus for pets called Koby Seat received $2,132.

Only three of the 10 projects were announced publicly. Two other announcements are pending, according to the Telegram.

-srbp-

PUB job competition: what happened to it?

Last summer, the Public Service Commission (PSC) held a competition for the position of chief executive officer of the public utilities board.

They also held a competition apparently for the vacant commissioner positions at the same time.

Bond Papers e-mailed the PSC on Friday and asked for confirmation the competitions had been held, and whether they had been completed or cancelled.

The reply confirmed that a competition was held for "CEO, Public Utilities Board" and that "the resumes of the candidates who applied for the opportunity were assessed" by one of the PSC commissioners and a representative of the Clerk of the Executive Council.

That's it.

A second e-mail asked - for the third time, all told - if the competition was actually completed.

You see, saying that someone assessed the resumes doesn't say anything at all. That would be one step in a full selection process that included interviews, some kind of written test and then a final set of recommendations. Then again, if the resumes were deemed lacking qualification after they were assessed, the whole process might have come to a screeching halt.

The second e-mail has gone unanswered. The one from last Friday likewise has gone unanswered.

This aspect of the current public utilities board controversy is really quite interesting.

Recall that in the offshore board matter, the provincial government twice agreed to a process to select a person for the chair/chief executive job based on merit criteria. Andy Wells wasn't even in the first competition. That was halted when the Premier injected Wells into the whole thing.

In the second go-round, based on a statutory process, Wells didn't get the job then either.

Now this whole Public Service Commission angle pops up and the whole thing takes on another aspect.

First, the vagueness - let alone incompleteness - of the PSC reply is suggestive there is more to the story.

Second, there have been no appointments made since the competition to fill two vacant commissioner jobs at the board.

Third, the news release announcing Andy Wells would collect a second big salary for a second big job contained not a single reference to Wells having been selected by a competitive hiring process based on merit. you see, while senior appointments don't normally refer to the selection process, in this case the successful conclusion of a process would be a really good thing. These sorts of appointments haven't been handled that way and establishing competition based on merit goes a long way to giving cabinet appointments more credibility than they have.

Of course, the news release omitted a description of the public utilities boards full set of statutory responsibilities - like municipal water and sewer rates - so maybe there's nothing to it. That's like saying there was a competition for CEO of the PUB when the position was merged with that of board chair in 2006.

Then again, given that the whole appointment looks suspiciously familiar, maybe there was a failed or interrupted public service competition in this case as well.

Andy Wells and the conflicts of interest

Surely no one who has been following the strange case of St. John's Mayor Andy "Two Jobs" Wells was surprised at the revelations this past week that both Wells and Premier Danny Williams had discussed Wells serving as head of the public utilities board and staying on as mayor.

Note however, that they discussed it, as it appears, not after the issue was raised publicly, but before Wells was appointed to the public utilities board in the first place. An army of lawyers scoured the books to make sure there were no obvious impediments, like, say wording to the effect that the chairman can't hold down two jobs.

There is no conflict of interest, we are assured.

The lawyers from the city, the province and utilities board - presumably the ones who scoured originally - were dutifully trotted out to attest that there was no conflict in Wells serving as the mayor of a city which operates a public utility governed by the act - i.e. water and sewer services - and sitting as the head of the body that regulates the utility.

Well, sort of.

The board's in-house counsel, Dwanda Newman, wasn't quite as sure of the thing as some people seem to suggest, at least if you take a look at her comments in the Transcontinental story:

"The board has certainly — not to my knowledge — treated the City of St. John's as a public utility," said Newman. "That's certainly not the intention (of the PUB Act) to capture a large municipality that's incorporated by its own legislation. That's what I'd guess. I'm sure the intention was to capture a private company that's offering the service. But that's just a guess. I've only been here six years. I'm not aware of any history whereby the city was ever regulated by us."

Look at that last part again:

"...But that's just a guess. I've only been here six years. I'm not aware of any history whereby the city was ever regulated by us."

My lawyer guesses, I get the shakes.

Like my accountant telling me to go ahead and claim it and let's see what happens.

Or my doctor saying "geez, never saw that before."

Ms. Newman's cautions seems to derive from the clear intention of the public utilities act itself , in section 81, for example, to bring municipalities under the act for the purpose of fixing rates for providing certain public utilities. That section of the act dates from 1989.

It is by no means clear what the other lawyers are arguing given the plain English meaning of the statute's wording. Maybe they were referring not so much to the law as to the fact that the city of St. John's doesn't use the board to set water rates for its residents.

For his part, Wells is quoted by Transcontinental as saying:

"I was on the PUB 18 years ago and that definition was there [That the City of St. John's wasn't covered by the PUB]. And I was a member of council. The bottom line is that the city is not a utility within the meaning of that definition. So there is no conflict of interest there."

What Wells ignores - perhaps due to a faulty memory - is that in 1989 the utilities board was reorganized, with a changed role. Section 81, for example, applied after Wells left the board. Whatever definitions were used before 1989 may not count since the whole thing changed. Incidentally, there is some useful information in the decision rendered by the Supreme Court of Canada in Wells' subsequent law suit for compensation for the portion of his original term cut short by the re-organization.

There are other aspects of the conflict of interest inherent in Wells serving as mayor of the city and as the chief commissioner of a public regulatory body which oversees, among other things, municipalities providing certain services. These aspects of the conflict of interest has been ignored to date.

A mayor is the elected chief representative of the people of the city of St. John's. He or she is responsible for defending their interests in dealings with the provincial government. While undoubtedly the role of mayor is defined under various provincial statutes, a mayor will inevitably be required to advocate for citizens collectively and sometimes find himself in conflict with the provincial government.

Wells is no stranger to conflict and it is his forthright advocacy on behalf of his constituents collectively which Wells often cites as one of his strengths.

However, as the Supreme Court consistently noted, Wells occupied - and now occupies again - a public service position at a senior level in a quasi-judicial body. He will be paid handsomely for that job, in fact almost double his municipal salary and mayor and chief executive of the city.

His position at the PUB is tenured for at least 10 years and he serves in the appointment during good behaviour. However, it is a cabinet appointment and, given the situation, government may elect to re-organize the PUB as it did in 1989 or take some other action which will relieve Wells of his sinecure. As the Supreme Court noted, the legislature may do that, as long as they provide compensation as they would for any other employee.

So when it gets down to it, there are several problems inherent in appointing the full-time mayor of a city as the full-time chair/chief executive of the province's public utilities board:

1. There is a conflict in a fellow doing what are clearly two full-time jobs running two full-time organizations. It's not like having a day job and moonlighting at a fast food outlet or doing some other kind of job in your off hours. These are jobs that were clearly intended - both evident from legislation and from Wells' own words - to be held by someone without outside distractions. Full-time mayor used to mean working more than eight hours, according to Wells. Now he seems to believe he can fit the job in when needed or fit the PUB into the city.

Something's gotta give in the demands of two full-time jobs and the giving shouldn't be the obligations of either job. There are other people who could be mayor. or there are other people who could run the PUB.

2. There is a potential conflict in the mayor of the capital city running a board to which other municipalities in the area may be subject. Regional co-operation has been hard enough to achieve in the past. Wells' views on amalgamation and on how other cities and towns are run are well known. Imagine the idea of say Conception Bay South or Mount Pearl looking to have rates set by the PUB with the mayor of St. John's running the show. Sure he could remove himself from a hearing itself, but take a look at the Act: the chairman and chief executive officer is responsible for work assignments and scheduling.

3. There is a potential conflict of employers. Does Andy work for the citizens of St. John's or the provincial government? He can't realistically do both jobs cleanly since at some point the interests will collide. How that collision is reconciled will tell much.

And before anyone brings up public servants serving on town and city councils, let's just say that this is a conflict of interest which has gone unaddressed for some time. Just because no one has dealt with it doesn't mean it isn't an issue or that it doesn't exist.

4. There is a potential conflict of future public interest. With a single person as mayor and chair - take Andy personally out of the equation - the provincial government may have to face policy choices it shouldn't have to face.

Take municipal services. Currently, the PUB looks at water and sewerage. It wouldn't be unreasonable to consider a future point in which solid waste disposal - garbage to you and me - would be brought under the PUB to ensure that both public and private operators provide a proper service at suitable rates to the consumer.

Rather than all providers - public and private - heading off to an impartial adjudicator, they'd be staring at a stacked deck. The private company may wonder if the rates set truly are reasonable and fair if the municipality has some interest in continuing to control services within its own municipality or regionally.

When it gets right down to it, there simply is no legitimate, defensible reason to let Andy Wells - or any other full-time mayor - hold down the full-time job of chairman and chief executive officer of the public utilities board. The only reason this situation exists is because Andy and the cabinet created it.

Why they did so is not much of a mystery; Wells himself has talked about paying off his legal bills. That's a reason to pass the hat among your friends or just knuckle down and pay the bills out of your own pocket, over time. Heck, take the higher paying job and get the debt off the books faster.

None of what has been offered up by the Premier, the Mayor or the legion of lawyers can get against the inherent conflicts of interest in the arrangement the Mayor and the Premier have put together.

Then again it's not the first time we've seen this administration embrace conflict of interest as its favourite policy option.

-srbp-

Fed agency suing SAC for loan

Transcontinental's Rob Antle reported today that the federal Business Development Bank of Canada (BDC) is suing SAC Manufacturing over a $150,000 loan the defunct natural gas company received from BDC in February 2006.

The provincial government is also reportedly moving to secure $675,000 it invested in the failed venture. The province loaned the company $175,000 in early 2006 and a further $500,000 in December 2006. The directors of the company moved to Alberta four or five months later and notified the province in September 2007 the company lacked funding to continue operations. BDC alleges SAC defaulted on over $134,000 remaining on its loan in November 2007.

As Antle reported:

The province says it has moved to take action to recover its $675,000. Officials said they have security for the province’s investment, in the form of assets, personal guarantees and an equity stake.

The company directors had personal guarantees for the BDC loan as well. There are no assets of the company left in Newfoundland and Labrador, at least in terms of real property, and the equity stake - in the form of Class B shares - is really only worth anything if there are company assets to cover them.

-srbp-

Doing nothing to save the national emblem

A woodland caribou population in serious trouble. The overall drop is from over 90,000 animals to just under 40,000 in a little over a decade. Some herds are at a tiny fraction of their numbers a few years ago.

The fairly obvious reason: an increase in predation - especially from invading coyotes which are not native to the island - and other pressures from things like human development. Those reasons , especially the predation one, are acknowledged in the news releases describing government's response:

$15.3 million.

Five years.

To develop a strategy - that can be implemented after the situation is five years further developed - to figure out.

Not we have a strategy or that it will take us a few weeks or months since we have already been studying this, but rather we will now study the problem to confirm there is a problem and then tell you what we will do.

Five years from now.

And that's in addition to two years and $3.7 million to study the decline already.

If the same rate of decline obtains, there will be something like 20,000 or fewer caribou left by the time they finish the study.

At that point the Do Nothings will probably announce a study to determine if the study that was just concluded actually had any impact or if things just kept getting worse on their own.

And according to the news release continuing to study rather than studying and then acting is part of their "strategy".

Strategy for what?

Doing Nothing, evidently.

And it's not like that should be a surprise.

Just remember the throne speech from a few years ago telling us what the Do Nothing philosophy was all about: and there shall be plans and plans for plans and plans to integrate the planning for plans.

The tale of the tape

Cash register tape, as well as the stuff pouring out of adding machines in both the Clinton and Obama campaigns for the Democratic nomination.

American political campaigns are expensive affairs with paid staffers and heavy expenses across the continent.

Hilary Clinton and Barack Obama each raised US$100 million in 2007 and, as Associated Press reports, Obama has raised another $7.6 million since Super Tuesday. He raised $32 million in January 2008 alone.

Meanwhile, Hilary loaned her campaign $5.0 million from her own personal funds to keep the fight going in the run up to Super Tuesday.

At a more mundane level, consider that pretty well every major political campaign these days has some form of campaign store. It started out in the 2004 presidential campaign with Howard Dean and online fundraising, most notably through cafepress.com. Sir Robert just opened his own tchochke emporium. cough. cough.

Since Dean paved the way, democraticstuff.com has taken on the market for merchandise geared specifically for candidates for just one party. That's how big the political market for geegaws and online fundraising has become in four short years. Go to any Democratic candidate's website and odds are the "store" link will lead you back to a d-stuff.

-srbp-

As innovative as a 55 gallon oil drum

Since we first introduced you to SAC Manufacturing - here and here - the Telegram has taken up the story and added interesting new details (see below).

VOCM makes it sound like the provincial government is looking for the cash rather than trying to avoid noting that the cash is missing in the first place but hey, that's a whole other story.

Anyway, the Telly confirmed that the company went under, a fact the provincial government knew in September 2007 yet for some bizarre reason, apparently failed to disclose to the Auditor General while he was doing the Public Accounts.

AG John Noseworthy included mention of Hebron and some other changes long after the close of the fiscal year he was auditing that looked rosy for the books, but this little story somehow escaped attention.

However, since the company shares could be worthless, the AG really should have listed that fact in the notes to his audited financial statements.

Somewhere.

And he might well have done so.

If he knew.

But in order for him to know, the people who did have the information would have to pass it along.

And apparently they didn't.

Just like they never issued a news release on the $500,000 equity position the provincial taxpayers took in a little company no one heard of. Not like say, Consilient or Blue Line both of whom received a similar equity injection. Or Orphan Industries and it's nearly $1.0 million of provincial cash.

Oh and don't forget that like those other equity stakes, this $500,000 equity position was decided and approved by cabinet.

And for another example, the Telly discovered that the province's $500,000 was in addition to a $175,000 loan dropped into the mysterious company the year before.

And for another example, the Telly quotes the province's innovation minister admitting his department was aware the company had "cash flow issues" and that there were other problems with the company yet dropped the cash in anyway.

Interesting his explanation that somehow SAC Mfg had an innovative product and therefore the cabinet invested in it.

That's interesting because some further digging in the oil patch turned up some people who were familiar with the SAC idea. While they didn't know all the details, these experienced industry players, referred to the concept as a pressure vessel for natural gas, in other words a form of compressor like the industry already uses in several forms.

Or like an oil drum?

Exactly.

Or as one of them put it: as innovative as a 55 gallon oil drum.

If that's the case, the market basically gets its 55 gallon drums from the people who can produce them at high speed at the lowest price. Not much time consuming analysis needed on that one. Also no surprise since, as Trevor Taylor admitted, SAC is now a floater in the East River of failed Newfoundland government business ventures, due to competition from the American market. Innovative ideas don't have much competition.

The Telegram also notes that the company got the $500,000 cash in December 2006 and, as Bond Papers can now note, the directors of the company listed their house for sale the following April. The two year old home was sold within two months.

And if all that wasn't odd for you, try comparing innovation minister Trevor Taylor's comments about SAC to what he said last week about local companies and the investments the Ag criticised in his report.

Last week, Taylor was talking about the need to keep companies here through government investment rather than see them up-stakes and head to where the capital is that might just buy into this or that product.

Ok.

Except in this case, the product was aimed - as Taylor admits - at the Alberta natural gas acreage.

Alberta.

The place with lots of capital, private especially, looking for innovative ideas. As Bond has already noted, the product in this case really isn't useful locally - unlike Blue Lines energy monitor, for argument's sake - and is pretty much aimed at a niche market. Whatever SAC might have gotten around to building, it also wouldn't be a product that needed to be built here, as opposed to Alberta or Saskatchewan.

So why the heck would the provincial government drop cash into it?

That is as much a mystery as the company itself.

And as for government's explanations so far?

Well, those are about as innovative as a 55 gallon drum.

They ring about as hollow too as a brand new empty one rolling down Barter's Hill.

-srbp-

The story below was also carried in The Western Star (Corner Brook). Note that some information at the back end of the piece was chopped. Note especially, though, that the headline conveys a bit of a different twist on the story than what the story itself suggests.

The Telegram

February 5, 2008, p. A1

Business

Company shut down after $675-K handout
Closure came months after infusion of tax cash

Rob Antle

A local oil industry firm ceased operations last year, just months after quietly receiving a $500,000 equity investment from the provincial government.

The province had previously provided a $175,000 loan to SAC Mfg. Inc. of Paradise. Taxpayers are now out a total of $675,000.

But Innovation Minister Trevor Taylor insisted that officials did due diligence on the company, which was working to develop a natural gas compressor for use in the Alberta oil industry.

"We knew it was a high-risk investment," Taylor told The Telegram. "We knew that the company, there were cash-flow issues ... that this was as far as we could go, and that they were going to need to change the way they were conducting their business, or get further private investment or whatever in order to be able to carry forward.

"The reason we invested in it is because it was an innovative product. It was something that was explained to us - as we understood it, based on the analysis that was done - (that) this was an unconventional piece of equipment, that if it took off, would have had a good placement in the oil industry."

There are no news releases in provincial government archives announcing or even referencing any investments in SAC Mfg. Inc. Details of the equity infusion are buried in a schedule attached to the recently-released 2006-07 public accounts.

Taylor said he didn't know why there was no news release trumpeting the SAC cash, even though his department routinely does so for other infusions of government money. "I really couldn't tell you, to be honest with you ... I don't know." But Taylor noted there was no direction from him to keep it quiet.

In early 2006, the province loaned SAC $175,000. Later that year, in mid-December, the government made a $500,000 equity investment in the
company through its new commercialization program.

But soon after SAC received the money, the company's sole two directors - Dana Clancy and Sandy Clancy - sold their Paradise home, according to records filed at the provincial Registry of Deeds. That address doubled as the contact point for the company, according to documents filed at the Registry of Companies.

The house sale went through in June 2007, less than six months after the $500,000 government investment in SAC. There is no record of the Clancys subsequently buying another house in Newfoundland and Labrador. Taylor said one of the firm's principals moved back to Alberta.

The government said it was informed in September 2007 that SAC lacked sufficient capital to continue operations, citing competition from the U.S. and downturns in selected markets.

Government officials are now examining their options to recoup the cash. Taylor acknowledged he is concerned that the company's directors left so soon after the equity investment, but defended the actions of his department.

"We don't have a crystal ball around here that we can gaze into and say, 'Oh yeah, I just saw this person selling a house six months after we gave them money.'"

The province knew SAC Mfg. Inc. was a "high-risk" venture, and decided it was "worth a shot," Taylor said, insisting that the people of Newfoundland and Labrador want the government to take such risks.

"They've asked us - as a department, and as a government - to invest in research and development, and to put our money on the line and to do our due diligence, and understand what the risks are, and understand what the benefits might be if a technology is developed."

SAC officials were not reachable for comment. Sandy Clancy's e-mail address returned messages as undeliverable. All local phone numbers associated with the firm are out of service. And SAC's website has disappeared from the Internet. In fact, its domain is not currently registered by anyone.

The Department of Innovation was slow to respond to inquiries about SAC.

The Telegram first asked about the investment on Jan. 30, following a posting on the company by Internet blogger Ed Hollett.

rantle@thetelegram.com

Fail to plan...

Plan to fail.

It's an old military axiom.

That's why it was surprising when CanWest called last week to discuss a story they were working on in which the Department of National Defence said he didn't have any casualty estimates or projections for the mission in Afghanistan.

Runs contrary to everything your humble e-scribbler knows about armies anywhere, let alone the Canadian version of the beast. Even on a road trip to training ranges at Mackinsons, there'd be provisions for a road accident or for a cut or scrape. There'd be a casualty estimate - even if it was zero - and there'd be contingency plans to deal with what would occur if something went off the rails.

But no cas estimates at all?

Sheeet, in the work up for a possible deployment to the Persian Gulf in 1990, the Canadian army included a casualty estimate in Contingency Operations Plan Broadsword.

In a 1995 international exercise, casualty estimates were prepared as part of the normal planning routine. That situation was a bit special since the public affairs officers on the exercise - role-playing media - used their knowledge of the military world to ask questions most journalists would miss.

The media briefer - somewhat inexperienced with reporters - talked frankly about the whole thing, referring to a certain number of casualties as light. In his world, they were light. To the rest of us out here in the world, the numbers he used would be considered appalling. They actually weren't appalling, but civilian sensibilities have changed with 60-odd years of peace.

Anyway, said senior officer learned the value of picking words carefully and understanding how his audiences out beyond the tent flaps might respond.

But he had casualty estimates.

His successor apparently goes to morning prayers with his boss and smiles like Dr. Flox, er, an idiot: "No sir, no casualties. None. Nada. And we know because we didn't prepare a casualty estimate."

Sounds like every anal ops officer or J7 plans guy you'd ever meet.

The inevitable headline

First this.

Watch next for Jack Harris to announce he'll run for the Dippers, which will make the next headline, followed by the next one: Harris wins in landslide.

Ironically, Jack Harris was first elected as a member of parliament in a Jurassic Park battle where he was the furry, agile little mammal as the alternative to two dinosaurs.

Now, Harris will likely be one of the dinosaurs, but with no alternative, voters will have an extremely limited choice.

The thing about inevitable headlines is that they aren't all inevitable; the other thing about them is that if the first one turns out to be inevitable, the rest will just fall in line.

-srbp-

Possible privacy breach at MUN

As many as 150 Memorial University students are being contacted concerning a possible leak of their personal information resulting from the theft of a professor's personal laptop, MUN's official online news service reported on January 31.

The theft occurred while the professor was out of the country. He returned home to find his home had been burgled. Among the items stolen was a laptop computer on which the professor had kept class lists, student grades and their Memorial University student identification numbers. The affected students were enrolled in two sections of Business 1000 from fall 2006 and a section of Business 7302 from fall 2007.

“We are obviously very concerned about the possibility of such privacy breaches,” said Rosemary Smith, the university’s information access and privacy protection co-ordinator. “Our first priority has been to advise our students of what’s happened. We remain confident that the information that may have been exposed by this theft was minimal and cannot lead to further problems for the students affected,” she said. “Still, we are reminding all faculty and staff at the university, and anyone who teaches at the university and who may handle private information, to use password protection and/or data encryption on all laptops and removable media devices.”

-srbp-

The Do Nothing Department in a Do Nothing Administration

in American politics, there used to be the Know Nothings.

They were a group of native-born Americans who had a problem with immigrants yet whenever anyone asked a member of the group about it, he'd claim that he "knew nothing" at all.

In Newfoundland and Labrador, we should call the current administration a Do Nothing government.

You see, in 2004 a provincial government task force laid out a plan to deal with the problem of hospital-related infections. That's when you go to hospital and get sick from a bug you picked up in the place where you went to get better in the first place.

Anyway, it is now 2008.

Four, maybe five years later depending on how you count it.

The Auditor General released a report this week noting that not only does the province have no freakin' idea how many infections are caused by hospital infections or nor how many deaths come from those infections, but also that there are a raft of problems with hospital sterilization techniques and cleaning procedures.

That's pretty much what your grandmother taught you about disease prevention: wash your hands. Oh yeah, and boil things to make them sterile.

And the hospitals aren't quite getting it yet. But anyway, someone gave them a plan.

In 2004.

So, in response, health minister Ross Wiseman promises that by 2009 - that is 12 months from now and definitely five years AFTER the plan was laid out - there will be "significant progress" made on a "comprehensive, provincewide infection control program."

Uh huh.

And we are supposed to believe this from a guy whose department is embroiled in controversies of one form or another.

Like the breast cancer one.

Or the one also revealed this week where the health boards created in 2004 that were supposed to save money are actually costing more money.

And we are supposed to believe a guy who just by pure coincidence scheduled his media availability to coincide with one being held by his colleague minister talking about the InfoSec breach.

Flying wingman for a guy who is himself trying to obscure the facts of a very serious political and legal problem for government is not a way to enhance your credibility.

But then again, speaking of Jerome, this is a government where things explode, fail, fall-apart or collapse based on government inaction over a long period of time and the standard government response is that a "plan is in the works", that this is "a priority of government" and that "all is well."

These cabinet ministers seem to spend too much time torquing and talking to actually accomplish anything real.

Around these parts, they used to be the serial government: one thing after another.

But all this talking and lack of action is actually part of a bigger problem: this is a Do Nothing Administration.

-srbp-

Related:

- Serial government and Labrador

- "and there shall be plans, and planning for plans, and plans to co-ordinate the plans of the planning for plans..."

Missing company has half million in provincial cash

The Government of Newfoundland and Labrador invested $500,000 in a natural gas-related company in 2006 which has apparently disappeared in the meantime.

The company is SAC Mfg Inc.

According to the recently released Public Accounts:

During the year, the Province acquired 500 Class “B”Common shares at a cost of $500,000. Commencing in June 2007, these shares are conditionally redeemable based on after tax earnings. All shares must be redeemed no later than 19 December 2016.

There is no SAC Manufacturing listed in the current Newfoundland and Labrador telephone directory and a number available through an Internet search is not in service.  The fax number with the same listing will ring but there is no fax machine at the other end, apparently.

Likewise, a check with the telephone company's directory assistance turned up no listing for SAC Mfg in Rochan Sands Alberta, another address for the company that shows in a listing for an Alberta oil and gas exposition last June.

The contact name for SAC at the exposition is the same name as a director of SAC in the company's entry in the Newfoundland and Labrador registry of companies. The corporate registration hasn't been renewed since 2006.

A local telephone number for the two corporate directors, showing a Paradise address also in the telephone directory as the couple's home address, is also no longer in service. [Update:]  The company web domain - www.sacmfg.ca - is unregistered.

There is no indication on the Internet of what the company did  except that it was related to natural gas manufacturing. SAC is not listed as a member of the province's oil and gas supplier association, NOIA.

The Public Accounts for the year ending March 31, 2007  - quoted above - gave no indication that there had been any change in the company's operating status. 

The Auditor General's annual report for the same period  - released on Thursday - makes no mention of the company whatsoever.  Instead, the AG report raises questions about provincial government small business support for 2005. 

The provincial government has issued no news releases about the investment in SAC Mfg. 

-srbp-

It's the software's fault

Apparently the latest provincial government InfoSec breach can be blamed on the software, specifically a file sharing program known as LimeWire.

A popular file-sharing program exposed the private details of more than 150 people over the internet [sic]earlier this month, the Newfoundland and Labrador government said Thursday.

That's an interesting take on the story, given that people operated the computer involved, loading the software without changing the default settings.

Apparently, no one at the Workplace health and safety commission had anything to do with it either, even though they handed over highly confidential information without ensuring the outside contractor was following appropriate security procedures.

No people were involved at all.

Well, that is, except, ummm, of course for the 153 people whose files were exposed, including 108 who had their medical histories and work histories, as well as names and birthdates openly accessible on the Internet for 24 or so days.

And that identity theft thingy that Attorney General Jerome Kennedy warned about in the news release on Thursday? Well, when he spoke to reporters, Kennedy had a slightly different tune to sing:

"The file sharing program allows for access of various information that's on an individual's computer. It doesn't mean it will be accessed," Kennedy told reporters.

So why all the big fuss about government officials taking proper measures in the wake of the leak or of the giant lock-down being applied to every computer in government? Apparently it was nothing to worry about after all.

In other words, the giant news release Kennedy authorized for distribution was just a waste of energy.

Is it just an overactive imagination or did the province's attorney general sound less like a cabinet minister looking out for the public interest and more like the government's chief legal counsel representing a client staring at potential lawsuits?

-srbp-

Remember the story yesterday and the Telegram's short version? The story on page three of the Friday edition didn't mention identity theft anywhere.

Gov Comm 101: How to manage crisis spin

1. Write a news release which deliberately buries the real news so far down the page that reporters are likely to miss it.

2. Omit key information from the news release, like the fact that the information in a security breach was exposed to the Internet from December 30 until at least January 22.

3. Hold a newser to discuss the security breach later on the same day when the Auditor General releases a scathing report into government operations. (Since you have the AG report months in advance in order to prepare replies and since you know in advance the day, time and place the thing will be released, then deliberately scheduling the newser you want to bury is very easy. Experience tells you that newsrooms will be so consumed with the AG report they won't have the resources - people or time - to dig through your presentation for the news you buried.)

4. Send the number two person in the Communications and Consultation branch to supervise the execution of the spin plan. (That's a clue as to how much concern there is in government about ensuring the story is highly torqued.)

-srbp-

AG raises issues with public cash in three private ventures

in his annual report, the Auditor general examined the provincial government's investment programs for business, including three businesses which fell outside the programs already established.

The three companies are identified as High Technology Company A, High Technology Company B and High Technology R&D Company. They are, in order, Blue Line, Consilient and Trans Ocean, as revealed by comparing Volume II of the Public Accounts with the AG report.

The Auditor General's conclusions on the three were:

We are of the opinion that there is no explicit authority under the Financial Administration Act
for the Department to make direct investments in companies. During 2005-06, the Department made three such investments totalling $1,050,000 to three companies. Furthermore, there are no documented procedures for approving, disbursing and monitoring such unique investments and, as a result, these investments were not subject to the same due diligence required for investments under the SME Fund. As a result, there were deficiencies. For example:

- none of the three companies were required to repay the investment contingent on either income earned or a maximum seven year period;

- one company was not required to submit documentation to support specific expenditures;

- shareholders for one company (Knowledge-based IT Company A) who received $500,000 were not required to make new equity investments as part of their contribution to the project; instead,
previous investments were accepted;

- shareholders for one company (Knowledge-based IT Company B) who received $500,000 were not required to provide personal net worth statements; and

- Department officials were not entitled to attend any company meetings for one company (Knowledge-based IT Company B) even though the company was provided with funding totalling $500,000

The innovation department responded:

With respect to other investments outside our normal programs, we do not concur with your interpretation that there is no explicit authority under the Financial Administration Act for the Department to make direct investments in companies. We understand that there is a separate section
in the Report on the Financial Administration Act to which the Department of Finance has responded.

Government, as has always been the case, receives proposals from companies seeking financial assistance of various types and levels that do not fit our normal business programs. Government reviews each case based on its own merit, including full due diligence, and, when considered appropriate, has provided assistance to some of these companies. The process that is followed in these cases is the Cabinet process. Economic development and business growth, especially new growth sectors, are priorities. Access to capital is an important issue for these SMEs in this Province. These investments levered additional funding for these companies and involved young entrepreneurs, leading edge technology, the potential to increase export sales and to increase quality employment opportunities in new growth sectors for our post-secondary graduates.

As noted, these investments were approved, with the required analysis and due diligence outside the SME program and therefore were not subject to the same requirements for auditing purposes. At the time of the approval, the Department did not have a program to support commercial research and development, and/or invest in businesses at the pre-commercial stage of operation. Since then, the Department has established a Commercialization Program that accommodates projects of this nature.

Given that these transactions took place two fiscal years ago, perhaps the Auditor General will report on some more recent transactions similar to the ones cited above - which took place since then - when he issues his next report: January 2009.

-srbp-