MARCH 31. 1951'

joerpts From

;isiiennen.'s Ens. Inquiry

iollowmg are excerpts from the re rt,of-the public inquiry into its ermen'e loans in this Province. conducted by Judge J.S. Desltoches asia Commissioner under the Pub- ilc; Inquiries Act. A summary of the report. which was tabled in thl Legislature this week. appear- ed;in yesterday's Guardian.

'.'rhe first public hearing was held at Charlottetown on July -1. 193). at ten o'clock in the foreman. afibr notice had appeared in the clmrlottetown newspapers. Four witnesses were subpoenaed for this hearing and were heard during the day.

"Before adjournirig it was de- cidcd to notify the public interest- ed'by inserting notices of times and places where the Commission would sit. Mr. J.O.C -Campbell, K.C.. Com ' A Counsel, also outlined the itinerary the Commis- sion would follow. the purpose of the Commission. and invited any- one who could give evidence to come forward with the same, from a sense of public duty. The Char- lottetown Guardian reported the proceedings of every hearing and also a notice of all adjournments with times and places. I feel that the public was well informed of all hearings.

"From Charlottetown I proceed- ed to the following centres where public hearings were held: North Rustico. Mont Carmel, Moreil, Miminigash, south Rustico. Mur- ray Harbour. Grand Tracadie, Ca- noe Cove, Egmont Bay. Tignish. Souris. Alberton, Georgetown,Suni- mcrside and Montague, 'making a. total of sixteen centres in the Pro- vince and about equally distributed in the three counties.

The hearings were very poorly attended. Thirty-six witnesses, of whom ten were subpoenaed. ap- peared and gave evidence. I also made informal inquiries from fish- eries, merchants and acquaintances as to any information or some- thing leading to information 021 the matters referred to me for in- vestigation, but I was unable to obtain any other help, formally or informally. except what follows later on in this report.

Old Board

"The Fishermen's Loan Board was vcstablished in this Province in 1036 as the result of an agree- ment between the Dominion Gov- ernment and the Provincial Gov- ernment, wherein the Dominion would contribute two-thirds and the Province one-third of the funds required for this agreement The original agreement appears to have been renewed from year to year ulth very slight changes. The Do- minion Government contributed during a four year period begin- ning in 1906 the total sum of sl85.90l.6l. This amount repro- scnts the total paid over by the Domihion Government to this Pro- vincb from 1936 to 1910 with the "mention of 830,000.00 paid as di- rect.rellef to the Province in 1933 andfnot included within my terms of reference!

”This fund was intended to be used as a revolving fund to assist fishermen. Although the Act re- fers tc needy farmers and fisher- men: no money was loaned to farm- ers as such. Up to March 31, 1949, when the New Board set up under 'h9IAct began to function. total loans made by the Province in- cluding Dominion assista (not. lnclvdinit S30.000.00 referred to above) totalled w5l.725.98. Pay. ments received for the same per- 10dl'WEre leaving a bal- ance outstanding in loans as of that date of S2'l2.93'l.03.

4 s

New Board

the 15th day of January 1949, regulations were enacted reg- "hi?-108 a new system of making loans. This latest board began to function on April 1. 1940 The op. erations oi the New Board do not come within the terms of my re- ference and I make mention of it ""9 only as a matter of record and history.

Organization 0f Board

"The first Fishermen's Loan Board appointed by the Provincial Government was named in 1933 and consisted of three members of Ihom one was chairman. The first chairman was Hon. B. W. IePage wbogwas the first witness to give evidence in this inquiry.

The staff consisted of one clerk- Itenosrapher employed in. Boards office in Charlottetown. From time in time members of the Board re- sisnad and the vacancy created was :”'9.d by the government so that mm 1006 to 1949. the personnel of the Board had changed se ral time; but at no time did it ex (1 three members." v , ,

The report then cited the torn: N Ipplication and the conditions Intier which loans were granted. '

"'l'he.qusstlons and other infor- mation asked for in this applies- ion form were completed and

Bnliiiioiz

SlGt”if.t;T. if

r..;.. S o.

signed by the fish applicant. Some r93l10nsible person or firm recommended the applicant for the lban required.

"When the application was re- turned to tile Board it. was check- ed by the tlerk-stcnographer as to proper filling-in of information and former loans after which it was submitted to the Board for approval. '-

"The Board normally met once a month but sometimes met every two weeks when business so re- quired.

"After an application for a loan had been approved by the Board the applicant was notified to this effect by the clerk-stenograplier and a note for his signature was enclosed with this notice During the first years of its operation. the Board required only the signature of the fisherman requiring the loan, but when the Board increased the amount available on loan to 3300.00, it required the name of an additional maker of the note.

"It might be well to state here that at first the loans were not to exceed si0,000. afterwards increas- ed to 375.00. then 5200.00 and fl- nally to 3300.00 for individual fish- ermen. Ioans to fishermen's as- sociations, co-operatives and for building fish-houses were much larger but were approved and passed by the Lieutenant-Goven nor-in-Council.

"The investigation of applica- tions was made by the members of the Board. In some cases at least one member of the Board was ac- quainted with the Board; in other cases the Board relied upon the recommendation given in'the ap- plication form. It appears also that when both the applicant and the person or firm recommending the applicant were not well known to the Board, the Board would make inquiries from responsible persons in the locality where the fisherman applicant resided. 'l'ncre was no regularly appointed and lil- dependent investigator ever named under this Act during the period under inquiry.

"After the note required by the Board was returned properly sign- ed. an order on the merchant for the amount of the fishing articles required was forwarded to the fish- erman who took it to the merchant named in the order. and the mer- chant delivered the Irticles or goods to the fisherman. The merchant then made out an itemized bill of his account against the fisherman. which he forwarded to the Board.

The Board. on receipt of the merchant's bill made out a voucher to which was attached the fisher- men's note and the merchant's bill. These documents were taken to the Provincial Auditor for approval, and, if approved. taken to the Provin- cial Treasurer who issued a cheque payable to the merchant. The fish- erman's name did not appear on the cheque but the number of the voucher appeared on the cheque to identify the transaction.

Ofllin of Inquiry

During the 1950 Session of the Provincial Legislative Assembly which opened sometime in the month of February, Mr D. L. Math. ieson. K. C.. Fifth Electoral District. of Queens County moved, seconded by Mr. -LR MacLean. First Elect. oral District of King's County, that the House adjourn to discuss ".1 matter of urgent public importance WSDECNHK the administration of loans to fishermen during the year 1947."

Mr. Mathieson. speaking further to his motion is reported in the Charlottetown Guardian of March 3. 1950 (Joumai of House not, pub- lished as this is being written) as having stated further. "In effect. what we ask for is that a commis- sion be appointed by this House to inquire into the whole transaction in so far as it reflects upon the honour and integrity of members and of the Legislature itself."

The same newspaper in its issue of March 4. 1960, reports that the Him W-E DBTUY. Attorney-General for the Province assured the Houge that a commissioner would be ap- pointed by order-in-council under the Public Inquiries Act. some weeks later. the Attorney-Genemi iirmiyted me to undertake this public

Rex vs. Wstierworth

"This was a case where the ac- cused watterworth was charged with conspir--y to defraud His Majesty in the right of the Gov. ernment of Prince Edward Islanrl, 10.. the Pishermen's Loan Board. The case came for hearing before H” I-Oldlhlli Chief Justice Thane A. Campbell and a Jury at George- town in King.'s County on July 20, 1040. The Crown was represented by Honourable F. A. Large, Attorngy. General. and Mr. Arthur Peake. Barrister. Charlottetown, and the accused by Mr. D.I.. Mathieson. K.C.. above mention d, and M.-, Joseph MacMillan, Barrister. Cher. lottetown. "At a stage in the supreme Court hesrinl. Mr. Mathieson moved for en adjournment on the ground that onoursble Thomas Grant (herein 1' referred to as Dr. Grant) was a material witness-and that a sub- poaea issued for Dr Grant had not been served. The Attorney-Gem Iralnobieoted to such adjournment. and the case proceeded. The Jury broillht in a verdict of "Not Guil- ty". If the Attorney-General at the trial of this case had consented to an adjournment. this inq mi ht n:t have gluon asked for-.ulr'am got a taching use to anyone for what happened in this case. In the ex- citement and heat of prosecuting or defending in accused. ilnexpect. ,ed matters come up which are aolnctinies difficult to appreciate Ind .'asssss on the spur of the mo-

'svieonuamr.oa-been

the evidence taken in the watter- worth case wgether with his Lord- ship's Charge to the Jury. This was made available to me through the Attorney-General's Department. I cannot. therefore. plead ignorance as to what this inquiry is about and what gave rise to its The unfortun- ate part, however. about this in- quiry is that part of the evidence was given in the Supreme Court where the rules of croes-examina- tion are almost boundless and the other part given before this public inquiry where ,the rules of cross- examination are rather limited. This makes the weighing of the ev- idence read and heard difficult to appreciate and to Judge.

"The substance of the watter- worth allegatio in his defence of the conspiracy charge was that he was acting as Dr. Grant's agent in obtaining loans from the Fisher- men's Loan Board and that the money obtained through these loans was used for political purp- oses at the provincial election held December 11. 1947.

some of the extracts taken from the Watterworth's evidence in the supreme Court are as follows: -

"'Then the application form would be made out and in the gen- eral rule, it went to Dr. Grant to be recommended. I was very much interested in politics, and anybody that wanted to make application for the Fishermen's Loan, I could pretty well assure them that it would be passed provided Dr. Grant's signature was on as a rec- ommendation . . . . At one time. I took as many as thirteen applica- tions at one time . . . . Dr. Grant signed the thirteen applications . . .. He (Dr. Grant) says, You are doing fine. This is great; get as much for the boys as you can and get it out!' . . . . It was very close to the election, and I put it out as I was instructed to do. It was cus- tomary to take them to Mr. Saville: he was the representative of the Board. Once I got Mr. Saville's sig- nature on it, I would present it to Mrs. l-Iigson for payment. In some cases I would get them inside of an hour. and if they were prepared, I would have them signed by Mr. Saville and I would have them right off the bat; and sometimes they would be turned down or held over for some reason or other, I could not tell you. But in general cases I took in the application and I got the cheque right away. She (Mrs. Higson) had a cheque for sl,000.00 made out. I said "which one does this cover?"; and she wrote five names on a piece of paper. That is the only document I ever got from Mrs. Higson what a cheque was for . . . . It was in December. close before the elec- tion. because I promised the boys I would have the cheques out for them before the election I passed it (Fishermen's Loan cheque) cut;, I passed out liquor, nets and money . . . . .The sole purpose was to lick Clark and Campbell. Dr. Grant is the Dominion Membe of the House of Commons for King's County. or was at this time. He is now Senator . . . . . I don't think he was interested in the Govem- ment (of Prince Edward Island). any more than I know he wanted Keir Clark and Joseph Campbell elected. I saw Dr. Grant very often. somctimes go up to his place; on several occasions particularly be- fore the election he was into my office.

Question: Did he know you had this money? A. Yes.

"How? A. I told him I had . . . . I told him the day before the elec- tion I had 3250.00 left and 1):. Grant said "Get it out". I said "write me some (doctor's prescrip- tions for liquor) then .. . . wrote me ten tickets and went out. As I statedg I gave out nets for part of it (350000 cheque) and cash for part of it. and liquor for no reason but election purposes . .. any commission that I-made on nets that fishermen took, I put out double or treble that to the fisher- men and received nothing from them. which are bills outstanding today. In no case did I ask any money to take the loan. -They all knew what they were signing. It was nothing to me . . . . It wasihc talk of the town and community- the fisbermen's loan and how it was being handled .. .. that he (Mr. Saville) knew of no cases where it was demanded to be re- paid. But. the only way of making collections was through the gasoline rebate from the fishermen when they used the gas for their boats. The last I saw Dr. Grant was the morning about eleven o'clock on December lith. He came to-see me.

Cross-examined by the Attorney- General. watterworth says: "All the loans up to the fall of 1047 were legitimate.”

Q. "Were you engaged in heavy drinking during the fall of 1947?"

A. "Yes. a few days before the election. I certainly was."

Q. "When did you first get into financial difficulties?"

A. "August 1'1, 1948."

Q. "And the purpose of the cheque was to reimburse you for the fish- lng equipment?" (020000 cheque to Nat. Campbell),

A. "He never got fishing equip- ment. He got the money."

watterworth appear ” in person before me at two hearings or the Commission held in Montague. He repeated in substance his evidence given in the supreme Court and asked that sub, oenaes be issued by

"Iefue I started in I had the advantagemvli "Kohl." "31

e time Dr. Grant and watterworth

g -ms GUARDIAN.

me and served on certain persons in and around Montague. This was done. some of the persons Watter- worth named were absent from the Province at the time and had been absent before this inquiry commen- ced. The object of having these wit subpoenaed. I gathered, was to corroborate Watterwortb's statements. watterworth also stat- ed that he and Dr. Grant had work- ed together on a voters' list for the 1947 election.

Dr. Grant's Evidence

Dr. Grant appeared before me at a public hearing in Murray River on July 31. 1950, where he denied Wstterworth's accusations above re- 'ferred to. He stated that he was interested in politics and had as- slated Watterworth with his cam- paign in the 1943 provincial elec- tion where watterworth was a can- didate. and had continued 'to work with him until 1946 when disagree- ment broke out in a provincial b'y- ehction. From 1946 on he (Dr. Grant) had nothing further to do with Watterworth. Dr. Grant also stated that when the rumor got. around that watterworth was keep- ing money out of loans. or part of it, he refused to sign any more ap- plications.

Misuse of Funds

There is no doubt that Fisher- men's Loan Board funds were ob- iained fraudulently by watterworth and some of his associates. This appears in the evidence given in the Supreme Court and before me. Watterwortli states that all the loans to the fall of 1947 were legit.- imate implying that those loans made after the fall of 1947 were not legally obtained. Dr. Grant states that when the rumor got around that watterworth was keep- ing money out of loans. or part of it, he refused to sign more applic- ations. Kelr Clark, M. L. A., Monta- gue, states that he was a bit sus- picious about the loans in general, made some enquiries about the loans around Montague and what he learned was not very reassuring. The question now arises, "Did the Fisherman's Loan Board know of these fraudulent applications?” Watterworth states that Keir Clark and Joseph Campbell were above board. Keir Clark states that after he investigated some of these loans in Montague, he notified Mr. Sav- ille. a member of the Board. partic- ularly about loans involving Wat- terworth as agent. This would be about three weeks before the elec- tion of December 11. 1947. He (Keir Clark) also warned Dr. Gran: at the same time about recommending loans. told him what he had heard around Montague and that he was suspicious of those loans. Keir Clark states further that Mr. Sav- ille as a result of the information given him.had turned down several applications for loans. but that some had already been passed. Should the Board have been sus- picious? Watterworth operated a fish plant in Montague and had dealings with fishermen. He had been a candidate in the 1943 elec- tion. He had recommended several applications for loans before those of the fall of 1941 which appeared to be regular. There was, however, a conviction in 1944 of breaking and entering the vendor's store at Car- digan against Watterworth. was this information available to the Board? And, if so. was that alone sufficient to turn down applications where Wa terwortb was concerned? With reference to Dr. Grant, much of the evidence against him is contradictory. particularly as to time. There is no doubt that at one

were good friends, to say the least. Dr. Grant says this association ceased with the by-election of 19-16. watterworth says that Dr. Grant signed applications in the fall of 1941. My terms of reference do not require me to express an opinion and for this reason. I will not quote or commc t further on all the ev- idence submitted.

Other Evidence

I have found no other evidence of irregularities elsewhere than in and around Montague. It is true in some places money was used to buy food and for purposes not intended in the Act."But in some cases an im- pression existed that the money was intended for relief. It is not quite clear to me really how the money was to be spent except to assist fishermen. I found very few fishermen who understood the loan was intended as relief and not to be repaid to the government. some members of the Board understood the money was intended for relief. although a promisory note was taken in all cases. The Board ex- plained this by saying that it was to comply with a requirement of the Dominion Government and the note was not intended to be acted upon. There were no regulations made under the Act governiru fish- ermen's loans during the period un- der review by me. It is really dif- ficult to say for what purpose the loans were to be made except to assist fishermen and that is a fair- ly broad expression.

Recommendations

The new board. I am informed. now employs a full time investig- ator. Loan Eheques are now pay- able to both merchants and fish- r-rmen. It is evident from the Wat- terworth case. that had this prac- tice been adopted prior to Decem- her if. 1047, much of the scandal created by this case would have been avoided.

(1) I recommend that the prac- tice of careful investigation and proper payees be continued and that the regulations now in force under the Act be carefully studied. en- forced and amended as times and- circumstanees change. .

(2) I recommend that a more serious effort be made to collect all loans now due or that some ar- rangement be made to have them brought up to date by collateral security or otherwise deal with these loans in a more business like manner. I believe that this is the onlypolicythbt wiilbeiairtoall those fishermen who have paid their loans. In cases. however. where there was a genuine belief

CHARI.O'l'FETOWN

Re "Eskim0”

Answers to some of the fol- lowing questions with respect to the operations of the M. V. Esk- imo were tabled in the Legisla- ture on Thursday by the Hon. Eugene Cullen. Minister of In- dustry and Nai.ural- . Resources. The answers. given below. corre- spond to the questions as num- bered:

Questions by Mr. D. L. Math- ieson: n