New Evidence On Grand-MèRe Loan

Her view is supported by a previously undisclosed internal BDC memo from 1997. That memo reveals that when the Grand-Mère Inn first applied for a BDC loan, bank analysts checked the inn's finances and concluded "the financials clearly indicated inadequate cashflow to service the current obligations of the company."

Ms. Bergeron's comments, the BDC memo and several other pieces of evidence were not included in a sworn affidavit RCMP Corporal Roland Gallant drafted in July, 2002, to get a search warrant and order to force the National Post to surrender leaked BDC documents.
The leaked documents purport to show that the Inn owed Mr. Chrétien's family company a debt of $23,040 at the time the Prime Minister was calling a bank executive to push for the loan's approval. The BDC insists the debt never existed, and that someone forged a reference to it on a real BDC document.

Ms. Bergeron's signed statement was among the new evidence to emerge about the Grand-Mère Inn-BDC loan controversy in the Superior Court of Ontario this spring.
The evidence surfaced as the Post cross-examined the RCMP investigator about his search warrant and his Grand-Mère Inn investigation as part of an application the newspaper made -- backed by CBC News and The Globe and Mail -- to quash the search warrant.
Other evidence that has emerged:
- A critical page of a key document in the BDC's Grand-Mère Inn loan file has vanished and an electronic document has been erased from BDC computers and destroyed, RCMP reports show.
A BDC executive told RCMP investigators about the file integrity problems on April 9, 2001, but it was never made public. The missing page is the one on which any reference to the Prime Minister's family company would have appeared.
Despite that fact it has gone missing, the RCMP maintains that a confidential BDC loan authorization document leaked in 2001 which showed the inn owed $23,040 to Mr. Chrétien's family company was a forgery.

- Until now, it was believed the Grand-Mère Inn's first BDC loan application in April, 1996, was for money to expand the existing inn businessman Yvon Duhaime bought from Mr. Chrétien and his partners in 1993. A BDC memo shows that what Mr. Duhaime initially sought was a $1.4-million loan for a previously unknown $5.5-million venture with an unidentified partner to build "a new 80 room Auberge on a local golf course."
(The only local course is the Grand-Mère Golf Club, in which Mr. Chrétien had a financial interest at the time.)
- The Grand-Mère Inn used part of its BDC loan to repay $17,000 it owed to a hardware store in the Prime Minister's Saint-Maurice riding owned by Claude Gauthier, a millionaire businessman friend of Mr. Chrétien and one of his most generous political supporters.
- The RCMP has taken the unprecedented step of reviewing the accounting records for the Prime Minister's family holding company, J. & A.C. Consultants Inc., and interviewing its accountant. An RCMP officer says he saw nothing to indicate the Grand-Mère Inn once owed $23,040 to the Chrétien company in 1997 -- as the leaked BDC loan document purported to show in 2001.
Stephen Hogue, an aide to the Prime Minister, read the National Post a prepared statement after being provided details of this story yesterday afternoon.

Mr. Hogue said: "The Prime Minister sold his shares in the Grand-Mère Golf Club in 1993. This file has been looked into repeatedly. Any allegation of wrongdoing on the part of the Prime Minister is false. That is all we have to say for today."
Since 1999, opposition MPs have accused the Prime Minister of having a conflict of interest by helping the Grand-Mère Inn -- located next door to the Grand-Mère Golf Club -- obtain almost $1-million in loans and grants.

Mr. Chrétien admitted he phoned the BDC president in 1996 and 1997 to urge that a loan be granted to the Grand-Mère Inn. His first call was made four months after he learned that the 1993 sale of his 25% stake in the adjacent golf club had collapsed in January, 1996, a move that left his shares in limbo for three years.
Opposition MPs said Mr. Chrétien helped keep the inn afloat so its bankruptcy would not hurt the value of his golf club shares or efforts to find a new buyer.

Mr. Chrétien denied such claims, insisting he sold his golf club shares in 1993 and they never returned to him, even after his original deal collapsed.
(Akimbo Development, the company to which Mr. Chrétien said he sold his shares for $300,000 under a handwritten deal, did not exist as a legal entity.)
The Prime Minister said he helped Grand-Mère Inn owner Yvon Duhaime secure loans and grants because it was his job as the MP for Saint-Maurice to help a constituent.
Opposition MPs contend that regardless of who owned the shares after the 1993 deal with financier Jonas Prince's Akimbo Development collapsed, Mr. Chrétien retained a financial interest in the club until he was paid in 1999.

Opposition MPs raised more questions about the golf club shares after the Post revealed that Mr. Gauthier, the Grand-Mère businessman, bought $525,000 of undeveloped land from the Grand-Mère Golf Club in 1996, days after his Transelec Inc. won a $6.3-million foreign aid contract under disputed circumstances.
The controversy deepened in March, 2001, after federal officials confirmed another Post report that revealed that Mr. Chrétien's name remained on the golf club shareholder register for eight years after he sold his shares.

PMO aides dismissed the issue as a "bookkeeping error."
Weeks later, in the spring of 2001, an internal BDC loan authorization document for the Grand-Mère Inn loan was leaked to the Post and others in Ottawa.
It purported to show the inn had a $23,040 debt to a Chrétien family company that would be repaid using the BDC loan money.
BDC officials said the leaked document was altered and forged, saying its own original version of the Grand-Mère Inn loan document had no reference to the inn owing J. & A.C. Consultants money.
The BDC asked the RCMP to investigate. Sixteen months later, the RCMP obtained a search warrant and order to force the Post to surrender its leaked document.

The Post declined to co-operate and launched its legal challenge.
Cpl. Gallant disclosed more than 500 pages of secret RCMP police reports, internal BDC memos and other documents obtained during his BDC-Grand-Mère probe to the National Post after a ruling by Ontario Superior Court Justice Mary Lou Benotto.
Judge Benotto ruled that Post lawyers Marlys Edwardh and John Norris should have the right to cross-examine him about his search warrant and ongoing investigation.
One signed statement the RCMP collected during its probe was from Ms. Bergeron, manager of the BDC branch manager that served the Prime Minister's riding. She was interviewed in June, 2001.
Ms. Bergeron, a 20-year BDC veteran, was unaccompanied by BDC officials when she was interviewed by Cpl. Gallant and Staff Sergeant Chantal Fortin.

The RCMP officers asked her: "Did this file follow the normal stages in the authorization of a loan?"
She replied: "It followed the normal stages for a loan authorization, but without the intervention of the federal MP, the project would never have been accepted."
The RCMP officers did not ask any more questions on that subject.
Ms. Edwardh, a lawyer representing the Post, cross-examined Cpl. Gallant about his search warrant.
Cpl. Gallant said he understood that his legal duty as a police officer is to make "full, frank and complete disclosure" of facts discovered during his probe in the sworn affidavit he provides to the judge or justice of the peace who must decide whether to issue a warrant.
Cpl. Gallant added he would "normally" disclose facts that weren't necessarily helpful to his case and would not omit important details from any warrant -- including the one he prepared in his BDC-Grand-Mère Inn probe.

"My duty is to present the facts as they were to the judge and that is what I have done," he testified.
In the warrant he served on the Post, Cpl. Gallant's affidavit quoted Ms. Bergeron as saying the Grand-Mère Inn loan went through all the "normal stages."
The second part of the banker's statement, where she said there would be no loan to the inn if Mr. Chrétien had not intervened, was omitted.
Ms. Edwardh suggested to Cpl. Gallant he misrepresented the signed statement.

"It isn't quite true, Cpl. Gallant, to say that the loan followed all the normal steps. While the steps were there, it took the PM to make it happen, wouldn't you agree? ... You didn't tell the full truth, did you?"
After she pressed the RCMP officer to explain why that part of Ms. Bergeron's statement was absent from his affidavit, he said: "It is not up to me to comment on what might be normal or not normal with respect to the work of a Member of Parliament."
Ms. Edwardh noted that other affidavits filed by Cpl. Gallant in the lawsuit have reported remarks from two other BDC employees who said there was no pressure or special instructions given to them to approve the Grand-Mère Inn loan.
The RCMP officer quoted Chantal Parent, a BDC loans officer who in 1997 reported to Ms. Bergeron at the Trois-Rivières BDC branch. She told the RCMP on Aug. 23, 2002, that no political pressure was applied "at my level."
Though she did not attend Ms. Bergeron's RCMP interview, Andrée LeBlanc-Daviault, the BDC's top lawyer, did attend Ms. Parent's interview.
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Ms. LeBlanc-Daviault also met RCMP investigators on April 9, 2001, to discuss the federal bank's complaint that the footnotes to the financial statements in the leaked version of the BDC loan authorization document for the Grand-Mère Inn loan were altered and forged.
Ms. LeBlanc-Daviault told RCMP Inspector François Deschenes and Staff Sgt. Fortin about two serious problems with the BDC's Grand-Mère Inn loan file. According to the RCMP reports, she laid out the following:
- Part of the BDC loan to the Grand-Mère Inn was to be used to pay off $350,000 in unpaid supplier bills it had amassed. As part of the application process, the inn submitted a four-page list of its unpaid suppliers and the amounts they were owed, dated July 11, 1997.
After the leaked BDC loan document surfaced in April, 2001, BDC officials checked that list in their own file to see if the Chrétien family company was on the 1997 list of unpaid suppliers. They found page three of the suppliers list was missing -- the page on which creditors whose names began with 'J' appeared. The BDC then asked the inn's accountant to provide a complete list of unpaid suppliers from July, 1997. The inn provided a second list of unpaid suppliers -- this one dated July 31, 1997. J. & A.C. was not on the second version of the unpaid suppliers list.

- BDC officials prepare notes to the financial statements of their clients on a bank computer and submit them to BDC headquarters in print and electronic form with all loan applications. When the BDC searched for the electronic version of the Grand-Mère financial footnotes to see if it contained a reference to the $23,040 debt, BDC officials found the notes were erased from its computer system.
The document was erased "sometime before Jan. 1, 2001," the RCMP report states. Because of major weaknesses in BDC computer security at the time, BDC officials were unable to trace who erased the document and when, the report states.

After examining BDC systems and interviewing BDC staff, Sergeant Marc Gosselin, an RCMP computer crime expert, concluded in a report that computer security was so lax at the BDC "the documents in question could have been modified by almost anybody at just about any time."
That conclusion was not in the warrant served on the Post.
Sgt. Gosselin recovered a "fragment" of the electronic version of financial footnotes prepared for an earlier, undisbursed $445,000 loan for the Grand-Mère Inn that was approved in 1997, from a CD-ROM backup disc made by the BDC's Trois-Rivières branch in 2001.
That document fragment, of source and date unknown, includes no reference to any $23,040 debt owed by the inn to J. & A.C. Consultants.

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For almost two years after the leaked BDC loan document surfaced, the RCMP did not bother to check the books of the Prime Minister's family holding company to determine if the Grand-Mère Inn ever owed money to J. & A.C. Consultants. Ontario Crown attorney Scott Hutchison finally requested the RCMP do it.
Almost two months passed, however, between the time the RCMP told Mr. Chrétien's lawyers they wanted to inspect the books and the time its officers performed the inspection, RCMP police reports show.
Cpl. Gallant called David Scott, the Prime Minister's Ottawa lawyer, on Jan. 17, announcing he wanted to inspect J. & A.C. Consultants' books and records.

Cpl. Gallant asked if he would need a search warrant.
Mr. Scott consulted the Prime Minister, who decided no warrant was required. He asked the RCMP to call Debbie Weinstein, the Ottawa lawyer who oversees Mr. Chrétien's blind trust, for an appointment on Jan. 17.

Five days later, Ms. Weinstein spoke to the RCMP investigator and asked him to sign an agreement to keep details of the Chrétien family finances confidential. Cpl. Gallant balked, citing the need to consult Mr. Hutchison before "I compromise myself," one report shows.
No such agreement was signed, but Cpl. Gallant agreed to not disclose figures he saw.

"They did not want me to disclose the figures, given that these were the assets of the Prime Minister, in order that this does not wind up on the front page of the newspapers," Cpl. Gallant testified.
The RCMP inspected the books and records for J & A.C. Consultants and took a statement from its accountant, Robert Chevrier of KPMG, on March 10, 2003.

Mr. Chevrier, who has been J & A.C. Consultants' accountant since 1994, gave a statement saying:
- No revenue entered J. & A.C. Consultants accounts from the Grand-Mère Inn or its owner Yvon Duhaime between 1994-2002.
- J & A.C. Consultants had no "outside revenue" -- he defined this as "income other than interest income, dividend income and gains on stock market transactions" -- entering its accounts during this period.
Ms. Edwardh, the Post lawyer, asked Cpl. Gallant if he knew the Prime Minister, through J. & A.C. Consultants, once owned 25% of the Grand-Mère Golf Club and that he had reportedly sold his shares in the club.
Cpl. Gallant testified he didn't know what company owned the golf club shares.

Ms. Edwardh showed Const. Gallant a March 26, 2001, letter from Ms. Weinstein stating the Prime Minister in 1997 received a $40,000 partial payment for his golf shares. (The balance was reportedly paid in 1999.)
Ms. Edwardh then asked the officer: "Did you see the payment of funds flowing into JAC in 1997 from the sale of the shares? Was that recorded in the books?"

Cpl. Gallant: "I have not seen this transaction."
Ms. Edwardh: "I see. So, it's not in the books?"
Cpl. Gallant: "It's not that it does not exist, but that it does not -- I do not see it. I did not see it."
Ms. Edwardh: "In the books?"
Cpl. Gallant: "I have not seen it, personally."
Ms. Edwardh: "The evidence you gave was that you personally inspected the books?"
Cpl. Gallant: "That's correct ... I have reviewed the accounts, the books, but I have no memory of seeing that transaction."
Ms. Edwardh: "Could you indicate, Corporal Gallant, whether your study of the books was thorough? How long did it take you?"
Cpl. Gallant: "I believe we spent two, three hours with the accountant of JAC Consultants."
Moments later, Ms. Edwardh asked: "I thought you testified that between 1994 and 2002 there was no outside revenue to the company?"
Cpl. Gallant: "What I said was that the accountant for JAC said that between 1994 and 2002, there was no outside revenue ..."
When a Post reporter sought an explanation from the Prime Minister's Office about why the RCMP officer did not see the $40,000 payment for the golf club shares anywhere in the books of J. & A.C. Consultants, Mr. Hogue, the PMO spokesman, said: "I will not enter into discussions about those particular details."