How the P.E.I. government inked a deal with a company that became embroiled in a securities investigation

Teresa Wright
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Businessman Paul Maines, left, and Finance Minister Wes Sheridan have waged a public war of words against one another in recent months.

This is Part 2 of The Guardian’s investigation into P.E.I.’s failed E-gaming plan. For Part 1, visit: How Prince Edward Island almost made millions from Internet gambling

The Prince Edward Island government hoped to cash in on millions from Internet gambling with a plan that would have seen the province become an online gaming hub for the whole country.

But after more than three years of work, “legal and technical challenges” were identified with the E-gaming plan, and it was scrapped in February 2012.

But there was another idea pitched to the P.E.I. government by the same company that would have paved the way for Internet gambling regulation in P.E.I. That plan aimed to turn P.E.I. into a financial services centre, similar to the Cayman Islands or Dublin, Ireland.

The idea was to attract international tech and banking companies to bring their back-office operations to P.E.I. They would benefit from having a North American presence with low corporate taxes for routing their transactions. Prince Edward Island would benefit from a boom in IT jobs and a stimulated economy.

But, just like the Internet gambling proposal, this idea never materialized.

It did, however, lead the province to sign a deal with a company that would later become embroiled in a securities investigation.

The handling of that investigation, and a subsequent settlement, may yet prove problematic for some government officials and other well-connected business people on the Island, with a threat of potential legal action looming in the near future.

 

The proposal

It was the U.K.-based firm Simplex that worked in 2011-12 with P.E.I. government and Mi’kmaq Confederacy officials on a proposal to make P.E.I. the first and only Internet gambling regulator for Canada.

But this company was interested in P.E.I. for more than just E-gaming. It was considering making the province its potential North American headquarters.

When the province asked Simplex to come up with a plan for E-gaming, the company came back with a proposal to make gaming the first of several phases that would have made P.E.I. a financial transaction ‘hub’ for the continent.

In its August 2011 report to government and the Mi’kmaq Confederacy, Simplex suggested its 'Global Transaction Platform' would be attractive to many financial and I.T. companies, “which are, or will be, considering moving some or all of their operations to P.E.I.”

Data centres, bank outsourcing, corporate payments, financial cloud and messaging services — these were just some of the services that could have been attracted to the Island, creating hundreds of high-wage IT jobs and badly needed economic development for the province.

 

Province signs MOU with ‘shell company’

After the P.E.I. government said its final no to E-gaming in February 2012, there were those who still wanted to explore the Simplex proposal to turn P.E.I. into a financial services hub.

Businessman Paul Maines was one of those people. He was director of business development for a company called Capital Markets Technologies (CMT). CMT was a 32 per cent owner of Simplex, and Maines presented himself to the province as a business partner of Simplex CEO Philip Walsh. As a major shareholder in Simplex, Maines was interested in finding new business ventures for Simplex’s expansion and growth.

So when Maines approached Innovation P.E.I. with the proposal to locate a financial services centre in the province, government officials were interested.

A memorandum of understanding (MOU) was signed in July 2012 between Innovation P.E.I. and a numbered company, which was operating under the trade name Trinity Bay Technologies and had formerly been called Financial Markets Technologies. This company was a wholly owned subsidiary of Maines’ company CMT, and its sole director was local businessman Paul Jenkins.

The 30-day MOU was to “set out the parameters for the parties to commence formal negotiations … to establish a financial services centre in the province,” the agreement states. It was later extended by an additional 30 days.

P.E.I. Finance Minister Wes Sheridan has told The Guardian it was Maines who walked away from the MOU before it expired, after providing no official documentation for the technology needed to support the financial services hub.

Sheridan also says he believes Maines may not have been truthful in presenting his company as a 32 per cent owner in Simplex. Sheridan believes that’s why he never produced the necessary information to Innovation P.E.I.

But Maines has documentation to prove CMT was a major shareholder of Simplex. When Simplex was bought recently by a larger U.S.-based company called Bottom Line Technologies, a share purchase agreement lists CMT as a shareholder and

beneficiary of the sale.

 

Securities investigation

Around the time the MOU between Maines’ company and the province ended, a complaint was filed about Maines, CMT and its subsidiary companies with the Securities Commission of P.E.I.

The Guardian has obtained a copy of the affidavit that Steven Dowling, a Justice Department lawyer, filed to the province’s superintendent of securities. The affidavit says the original complaint came in September 2012 by two employees of ScotiaMcLeod, Edward Curran and Yousef Hashimi.

They told Dowling they were “in possession of information about what they perceived to be suspicious trading or advising activity being undertaken in Prince Edward Island.”

They told Dowling Maines had approached them with an “investment opportunity,” telling them all about Simplex’s exciting technology platform and that his company, CMT, was a part owner of Simplex.

Hashimi told the Justice Department lawyer he had been getting enquiries from both clients and non-clients who had been solicited by Maines for investment. He gave Dowling a list of people he understood had invested in Maines’ company, CMT.

Dowling followed up with some of those people, including: Mark Rodd, who invested $50,000, Garth Jenkins, who invested $100,000, and Paul Jenkins, who also invested $100,000.

Dowling noted Paul Jenkins was also listed as the sole director of a numbered company that was a wholly owned subsidiary of CMT — the same numbered company that had signed the MOU earlier that year with the province.

Jenkins told Dowling he was aware of this numbered company but had no knowledge of the MOU and had no idea how he had become a director. He said he owned many numbered companies and “did not actively keep track of them all,” the affidavit states.

He resigned as director that day.

Throughout his interviews with Islanders who had been solicited to invest in CMT, Dowling notes repeatedly these investors were never advised of the term ‘accredited investor” or its meaning nor were they presented with any kind of offering document or prospectus.

A prospectus is a document that provides details about an investment, disclosing information necessary for investors to make an informed decision.

 

Cease-trade order leads to settlement

Shortly after Dowling filed his affidavit to the provincial superintendent of securities in February 2013, the Justice Department issued a news release saying it was seeking a temporary stop-trade order against Maines, and his companies CMT and FMT/Trinity Bay Technologies.

The superintendent listed several grounds for seeking the order, including an allegation Maines and the companies traded in securities without issuing receipts for a prospectus.

After months of back and forth legal dealings that were closed to the public and the media, a settlement was reached between the CMT and the securities superintendent. As part of the settlement, CMT was ordered to pay a total of $15,000 in administrative penalties and investigative costs. The company was also ordered to refund all “unsophisticated” investors.

It remains unclear how many of CMT’s investors received refunds, but The Guardian has obtained a copy of the company’s list of investors, as of March 5, 2013. A number of high-profile names are included in this list, including government lawyer William Dow and conflict of interest commissioner Neil Robinson. These individuals are no longer believed to be shareholders of CMT.

Legal action threatened

Maines maintains his belief that he has been the target of a smear campaign mounted by local investors and officials within the P.E.I. government. He questions why the Justice Department issued news releases regarding the securities dealings with his companies.

Maines also takes strong issue with public statements made by Finance Minister Sheridan that he and his company had nothing to do with the gaming file and Simplex.

In an email to The Guardian, Maines’ lawyer, Gary Jessop, called these assertions by Sheridan “factually incorrect.”

Jessop says he met with the premier’s chief of staff, Alan Campbell, and Executive Council clerk Steven McLean in October of 2012 in his role as CMT’s counsel, “to discuss the alleged complaint filed against CMT and Maines. During that meeting, CMT’s business on the province including the e-gaming project was discussed,” Jessop said in the email.

“Given the corporate structures of CMT, Simplex and (CMT’s subsidiaries) … there is no way that the government of P.E.I. or MCPEI could have dealt directly with Simplex to the exclusion of CMT, it is just not possible. It is also not possible that the government was not aware of CMT’s involvement with Simplex in the e-gaming and related matters.”

In the end, neither E-gaming nor the financial services hub proposals ever materialized.

But Maines has told The Guardian he intends to file a defamation suit against some of those involved in the securities investigation, and intends to subpoena Sheridan and other officials on the gaming file.

Sheridan, for his part, says he is not concerned.

“(Maines) was out there selling securities to people based on the concept that the government was going to do a deal … and people bought into it,” Sheridan said.

“This is a disgruntled company that was found to be acting against the law in Prince Edward Island, so they’re trying to uphold their reputation in other jurisdictions.”

To date, nothing has yet been filed in court.

 

twright@theguardian.pe.ca

Twitter.com/GuardianTeresa

Organizations: Capital Markets Technologies, North American, Justice Department Financial Markets Technologies Bottom Line Technologies Securities Commission of P.E.I.The Guardian Executive Council

Geographic location: Prince Edward Island, Cayman Islands, Dublin Canada Trinity Bay U.S.

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Recent comments

  • Shifty guy
    November 30, 2014 - 14:11

    I don't usually judge a book by its cover but that guy looks pretty shifty. pick one you'll be right

  • Stop - Just Stop!
    November 29, 2014 - 08:05

    I used to work in Economic Development and a key mandate is job creation. This requires business attraction efforts for new investment to the community or the province you are working for. In that role, great companies will come forward, establish their business and create new jobs for Islanders. That's awesome! Meanwhile, you are going to get crooked business people who put forth false information as part of their sales pitch. It's clear who ever was working on this BREA file did their due diligence to find out the company was committing criminal activity so all plans of provincial investment was ceased. BE HAPPY they didn't go forward. This is business, there's a cost to doing business. This ended up being a deal that didn't move forward because those in charge discovered criminal activity on behalf of the company wanting to set-up in PEI. I suppose, if you have never operated a business you may not understand. Bottom line, the province and stakeholders shut down the opportunity when it was discovered the prospect was committing illegal activity. BE HAPPY THEY SHUT THE DEAL DOWN!!!!!

    • Chester L
      November 29, 2014 - 12:21

      well and constructively said.;)

    • SlyFox
      November 29, 2014 - 12:54

      If criminal activity was going on as you stated then why was the R.C.M.P not called in?

    • so sad
      November 29, 2014 - 14:34

      So is it common practice to loan money to people and only get the money back if they made money.Were you involved in just giving out money with no strings attached. Where is the accountability not with wes.

    • John
      November 30, 2014 - 08:53

      You get crooked mla ,s who put forth false information every day, what's the difference besides the fact they hide behind the walls of province house and cannot be held accountable until election

  • Stop - Just Stop!
    November 29, 2014 - 08:04

    I used to work in Economic Development and a key mandate is job creation. This requires business attraction efforts for new investment to the community or the province you are working for. In that role, great companies will come forward, establish their business and create new jobs for Islanders. That's awesome! Meanwhile, you are going to get crooked business people who put forth false information as part of their sales pitch. It's clear who ever was working on this BREA file did their due diligence to find out the company was committing criminal activity so all plans of provincial investment was ceased. BE HAPPY they didn't go forward. This is business, there's a cost to doing business. This ended up being a deal that didn't move forward because those in charge discovered criminal activity on behalf of the company wanting to set-up in PEI. I suppose, if you have never operated a business you may not understand. Bottom line, the province and stakeholders shut down the opportunity when it was discovered the prospect was committing illegal activity. BE HAPPY THEY SHUT THE DEAL DOWN!!!!!

  • so sad
    November 28, 2014 - 17:15

    Teresa Wright now that the Mi’kmaq Confederacy has come out with a statement regarding their dealings with the province re gaming can you do a story why Wes Sherdian states that his trip wasn't public money but the Confederacy never put the money in their audited financial reports

  • patty cakes
    November 28, 2014 - 15:32

    Humm, this smells bad. Maybe this story answer a few questions as to why Mr Ghiz resigned and his chief of staff left the province. Mr. Ghiz;s election promise of transperency is a laugh. What a joke, the rich get richer and the poor pay for it. 99% and 1%,,,

  • frank
    November 28, 2014 - 15:14

    did the dirt finally catch up with Ghiz and the gang???? now Wade is supposed to come in and sweep the whole mess under the rug., or will he have enough integrity to put Islanders first and the liberal party second? He said he would take on the leadership if he thought he could make a difference. Well,. show us you can make a difference, let the truth co me out and let the perpetrators take the consequences of their actions. Let's see what you are made out of Wade??.

  • Embarrassed......
    November 28, 2014 - 14:31

    Learn to spell Bert....learn to spell! You're comments are good but you are making yourself appear illiterate.

    • Mutt McGraw
      November 28, 2014 - 17:13

      It is your, not you're. That is all. Carry on. When shall I return for your next grammar lesson?

  • Matthew webster
    November 28, 2014 - 12:33

    In the first part of this story there was a comment from a reader that appeared in the comment section that was quite critical of the story. Not sure of the user name but do know it included "the temerity of the writer to write such a puff piece". My question is does the guardian regularly remove comments simply because they don't agree with them or think questions their abilities. I believe it should not be left to the authors of these stories to only allow comments that put them in a positive light. If freedom of the press is allowed to yourselves and you put stories out based on that, should the same not be afforded to those reading said work. Don't believe a proper discussion can be held if that is not the case. I will see what the cbc has to say on this subject, just to see what their process is and if they allow their reporters to pick and choose as well. Thank you

    • Jocelyne Lloyd
      November 28, 2014 - 13:25

      Hi Matthew, We never remove or approve comments because we agree or don't agree with them. We have some terms of use we employ to determine whether the comment is posted or not. If your comment hasn't appeared it's usually for three reasons: 1. It will be posted but our moderators are busy with the volume of comments or other duties and just haven't gotten to it yet; 2. We didn't get it at all -- some technical glitch occurred. If you think that's the case, please email me with the story your comment appeared on and the email address you used to post it and I'll look into it; 3. It didn't meet our terms of use. To answer your question specifically about whether we allow comments criticizing our reporters, it depends on the criticism. If it is personal, we don't allow it, nor do we allow it if your comment somehow calls into question the credibility of our journalists. Or if the criticism is not true. I hope that answers your question. Sorry it's taken me so long to get to it -- I've had a particularly busy day with other duties and have not been moderating comments as quickly as I would like. Thanks. Jocelyne Lloyd, web editor

  • Tom Paine
    November 28, 2014 - 10:31

    Teresa Wright is the only working journalist on PEI. It's amazing that she's still employed.

  • Quiet Observer
    November 28, 2014 - 08:58

    Funny that whenever shady dealings by this government pop up some of the same names are involved. For example, Premier Ghiz's pal, and Liberal hack, William Dow is involved with insider info, and is the same lawyer who was given authority by the Premier's office to advise and direct Brooke MacMillan to break the rules and approve inelligable companies for PNP funds. I can't believe there has not been a full investigation of these antics. We have media here on PEI who basically run press releases but seem incapable of doing full investigative journalism. We know government will not order an investigation. that leaves the media to dig into it. God help us.

    • Bert
      November 29, 2014 - 14:08

      I agree.IMO , The Guardian and CBC are part of the cover up as they are seen to be very red. If the Island had national media investigated reporters then we would see the proper picture. CBC have young and inexperienced reporters and the Guardian has only one person and she does her best. I am sure the FIFTH ESTATE would have a field day with the Ghiz /Sheridan coruption issues.

  • don
    November 28, 2014 - 08:54

    impossible wes and a few brains on PEI would never fall for anything the dumb LOL. NO WONDER WE THE TAX PAYERS ARE BEING SCREWED BY THIS GOVERNMENT. they screw up and we pay for it. i hope the law suits comes towards all involved. but i still think there is a smell looming over wes and this trip. wes said the tax payers payed nothing for his trip. but this Mi’kmaq Confederacy i believe wes said hey got money from the tax payers and as of yet has not paid it back so wes the tax payers did pay for your trip. but i love this of this story. ( some government officials and other well-connected business people on the Island, with a threat of potential legal action looming in the near future.) it will look good on them as GREED will cost them money LOL.

    • Stop - Just Stop!
      November 29, 2014 - 08:08

      But they didn't fall for it. They terminated the deal once it was discovered the prospect was committing illegal activity.

  • Fed up
    November 28, 2014 - 08:51

    Only one thing Wes Sheridan is good at...being a Liberal....they blame someone else for EVERY SINGLE MISTAKE!!!

  • Bert
    November 28, 2014 - 08:07

    This is very interesring reading and to see the names of who were involved with these investments. The top legal advisor to our Premier , who I assume knew everything that was transacted in the Premiers Office , taking advantage of inside information for his own benefit.The Conflick of Interset Commissioner also taking advantage of info for his own benefit. It is no wonder the Conflick of Interest blocks all conflick of interest cases involving the current Government. He should resign immediately. I wonder how man of these numbered Companies that Mr.Jenkins owned received PNP U nits and how much went back to the Liberal Party? This Government will go down as most corrupt administration in PEI history.

  • This Doesn't Pass The Smell Test
    November 28, 2014 - 07:46

    "Jenkins told Dowling he was aware of this numbered company but had no knowledge of the MOU and had no idea how he had become a director. He said he owned many numbered companies and “did not actively keep track of them all,” the affidavit states." Not to beat a dead horse but you have to wonder how many of these numbered companies received PNP funds...

  • so sad
    November 28, 2014 - 06:00

    How does conflict of interest commissioner Neil Robinson invest in a company that is doing deals with the province.This in itself is a conflict.And government lawyer William Dow could have committed insider trading. The securities commission should be looking into this with outside legal council.