McInnes Cooper claims to have acted solely as representative of Confederacy, but was paid entirely by government funds

Days before a $50-million lawsuit is set to be heard in court, newly released documents have raised further questions about the role played by local law firm McInnes Cooper in the e-gaming saga.

The public court documents, which include excerpts of email communications between McInnes Cooper lawyers and several public officials involved in the egaming initiative, were obtained by the plaintiff in the lawsuit, Capital Markets Technologies, Inc. The correspondence shows that McInnes Cooper was identified as the project manager for the e-gaming initiative in government briefing notes and that the law firm lowered its budget for services it billed the province despite acknowledging it would incur cost overruns. McInnes Cooper has maintained it only offered representation to the Mi’kmaq Confederacy of P.E.I., not to the province. Between 2009 and 2012, the province and the MCPEI attempted to establish the Island as a regulatory centre for internet gaming sites. The e-gaming initiative was abandoned in 2012 after the province spent at least $1.5 million on the initiative. Most of the funds were disbursed to McInnes Cooper.

The court documents show that McInnes Cooper originally submitted a budget to the Island Investment Development Inc. for $1,195,000 in expenses related to the e-gaming initiative but later dropped the budget down to $950,000.

It is unclear whether McInnes Cooper was able to obtain the $245,000 discrepancy between the two budgets through other funding means.

“The change from $1,195,000 to $950,000 did not reflect any change in the scope of anticipated costs of the project but rather was changed to allow the confederacy to meet the funding thresholds of Innovation P.E.I. It was understood that the actual cost of the project would likely exceed $950,000,” wrote McInnes Cooper board chairman Kevin Kiley in a Sept 25, 2012, memo to McInnes Cooper lawyer Mike O’Brien.

An IIDI loan of over $1 million would have required approval by cabinet, which would have been made public through an order-incouncil.

In her 2016 report on the egaming saga, P.E.I. auditor general Jane MacAdam was critical of the $950,000 loan to McInnes Cooper, stating it was “essentially a grant,” as there was little expectation of repayment. MacAdam also noted $600,000 of costs had been incurred by McInnes Cooper prior to the loan application and that costs were incurred despite “high risks, no tangible assets and only intellectual property as security.”

Gary Scales, a regional lead partner with McInnes Cooper, is named as one of the defendants in the e-gaming lawsuit. In a statement of defence filed on behalf of Scales, it is claimed that neither he nor McInnes Cooper provided project management or legal services to the province, and that the government had retained a separate firm as its external counsel. CMT has named a total of 14 defendants in the lawsuit, including former Premier Robert Ghiz, former minister of finance Wes Sheridan and current deputy minister of finance Neil Stewart, as well as Scales.

CMT alleges that government officials committed “misfeasance of public office,” and that malicious harm was done to the company, which was in talks with the province to establish a financial services platform. A previous $25 million lawsuit filed by CMT was dismissed in 2016.

The first hearing in the lawsuit is set to be heard on Oct. 9 in Charlottetown.