The lobbying activities of Neelam J. Makhija on behalf of Wavemakers, Inc.

February 2007

The Honourable Vic Toews, P.C., M.P.
President of the Treasury Board of Canada
House of Commons
Ottawa ON K1A 0A6

Dear Minister Toews:

I have the honour of presenting to you the fourth investigation report on an alleged breach of the Lobbyists' Code of Conduct, for tabling in both Houses of Parliament. The investigation was conducted in accordance with the provisions of section 10.4 of the Lobbyists Registration Act. This report has been prepared pursuant to section 10.5 of the Lobbyists Registration Act.

Yours sincerely,

Michael Nelson

Table of Contents

• The Lobbyists' Code of Conduct
  • Investigations of Alleged Breaches of the Lobbyists' Code of Conduct
• Background
  • Initiation of the Investigation
  • Methodology
• Findings
• Mr. Makhija's Views
• Conclusions
  • The Lobbyists Registration Act was Breached
  • Rule 3 of the Lobbyists' Code of Conduct was Breached
• The Lobbyists' Code of Conduct

The Lobbyists' Code of Conduct

Lobbying is a legitimate activity in our democratic system. When carried out ethically and transparently, in conformity with the highest standards of conduct, it can provide a useful conduit of information between government and Canadians.

The Lobbyists' Code of Conduct was developed to assure Canadians that lobbying in our country is carried out in a manner that ensures public confidence and trust in the integrity, objectivity and impartiality of government decision-making. The Lobbyists' Code of Conduct first came into effect on March 1, 1997, to complement and support the application of the Lobbyists Registration Act (Act). Individuals who must register as lobbyists in accordance with the requirements of the Act must also comply with the Lobbyists' Code of Conduct.

During the period covered by this report, individuals paid to communicate with public office holders in an attempt to influence government decisions were required to register. Public office holders include virtually anyone occupying a position in the Government of Canada, and include members of the Senate of Canada and the House of Commons and their staff, as well as officers and employees of federal departments and agencies, members of the Canadian Forces and members of the Royal Canadian Mounted Police.

The Lobbyists' Code of Conduct establishes mandatory standards of conduct for all lobbyists communicating with Government of Canada public office holders. Like most professional codes, the Lobbyists' Code of Conduct begins with a preamble that states its purpose and places it in a broader context. Next, a body of overriding principles sets out, in positive terms, the goals and objectives to be attained, without establishing precise standards. These principles of integrity, honesty, openness and professionalism represent goals that should be pursued, and are intended as general guidance.

The principles of the Lobbyists' Code of Conduct are followed by rules that set out specific obligations and requirements. The rules are organized into three categories: transparency, confidentiality and conflict of interest. Under the rules of transparency, lobbyists have an obligation to provide accurate information to public office holders, and to disclose the identity of the persons or organizations on whose behalf the representation is made, as well as the purpose of the representation. They must also disclose to their clients, employers or organizations their obligations under the Lobbyists Registration Act and the Lobbyists' Code of Conduct itself. Under the rules of confidentiality, lobbyists cannot divulge confidential information, nor use insider information to the disadvantage of their clients, employers or organizations. Finally, under the rules of conflict of interest, lobbyists are not to represent conflicting or competing interests without the consent of their clients or to use improper influence.

Investigations of Alleged Breaches of the Lobbyists' Code of Conduct

Lobbyists have a legal obligation to comply with the Lobbyists' Code of Conduct. If the Registrar of Lobbyists believes on reasonable grounds that there has been a breach of the Lobbyists' Code of Conduct, the Office must initiate an investigation. Breaches of the Lobbyists' Code of Conduct do not carry fines or jail sentences, but the Registrar's report of the investigation - including the findings, conclusions and reasons for those conclusions - must be tabled before both Houses of Parliament. There is no limitation period for investigating breaches of the Lobbyists' Code of Conduct.

Background

Neelam J. Makhija is the President of NJM Initiatives Inc. (NJM), a corporation registered in the province of Ontario. The company office is located in Oakville, Ontario. Company brochures state that NJM provides a unique service to Canadian high technology companies. Of particular relevance to this investigation is NJM's advertised expertise in "Federal Technology and Financial Investment Qualification and Mr. Makhija's role in "Proposal Advocacy and Company Representation".

Wavemakers, Inc. is a corporation based in Vancouver, British Columbia. The company develops processors and software that enhance voice quality and speech recognition in voice-activated equipment.

Technology Partnerships Canada (TPC) is a special operating agency of Industry Canada established in 1996. Its mandate is to provide conditionally repayable contributions to companies in Canada in order to bring research and development in technology to the marketplace.

TPC works with the National Research Council of Canada (NRC) to deliver the TPC program to Canadian small and medium-sized enterprises. TPC also works with the Communications Research Centre (CRC), an agency of Industry Canada whose mission is to be the federal government's centre of excellence for communications research and development.

Initiation of the Investigation

In October 2005, I determined that based on information provided by officials at Industry Canada, I had reasonable grounds to believe that Neelam Makhija had breached the Lobbyists' Code of Conduct with respect to his activities on behalf of four high technology companies in British Columbia. Pursuant to subsection 10.4(1) of the Lobbyists Registration Act, I directed that investigations be conducted.

This report deals with Mr. Makhija's activities on behalf of Wavemakers Inc. (Wavemakers).

Methodology

The Investigations Directorate of the ORL conducted an investigation with respect to Mr. Makhija's activities on behalf of Wavemakers. The investigative process included an examination of the following:

• correspondence between federal government employees and Mr. Makhija
• correspondence between Mr. Makhija and either Wavemakers or his other clients
• agreements between Wavemakers and the federal government
• contracts and agreements between Wavemakers and either NJM or Mr. Makhija
• payments by Wavemakers to NJM or Mr. Makhija
• government information related to the TPC program
• the Registry of Lobbyists
• publicly-available information from the Internet

Upon the completion of this process, the Investigations Directorate submitted a report to me. The findings contained in the report are based on information found in the Registry of Lobbyists and documents held by Industry Canada. The documents are from the period of October 2000 to February 2004 and include emails and letters written among the following: Neelam Makhija; employees of TPC; and senior officers of Wavemakers and the President of TIR Systems Ltd. (another Vancouver-based company that was Mr. Makhija's client). I sent a copy of the report to Mr. Makhija and provided him with an opportunity to state his views.

That work formed the basis for this Investigation Report.

Findings

In the fall of 2000, Mr. Makhija was in contact with a number of companies in British Columbia to determine if there was a match between their investment needs and the repayable contribution arrangements that might be available through TPC. Wavemakers, which was seeking investment funding for a project that involved the advanced technology in which they specialized, was among these companies. We have no evidence that Mr. Makhija was in a contractual relationship with Wavemakers at this time.

Mr. Makhija arranged a series of meetings to be held in Vancouver in December 2000 between several local companies including Wavemakers, and federal government employees involved in the TPC funding process. Mr. Makhija wrote to a TPC investment officer (investment officer) in November 2000 indicating the scheduled date and time of the meeting between TPC and Wavemakers in December and showing those times during the trip that were still open. He also provided the investment officer with Wavemakers's address and phone number, as well as the name of its CEO. The meeting took place in December as scheduled, attended by an investment officer and a Program Manager from CRC.

Wavemakers submitted its investment outline to TPC in January 2001. At that time, Mr. Makhija was assisting a number of companies and these companies as well were submitting investment outlines to TPC. These outlines were to be considered by TPC in a formal priorization that would determine which proposals would proceed to the next step in the funding approval process. In January, Mr. Makhija wrote an email to the President of one of the other companies regarding the status of the various projects with which Mr Makhija was assisting, including Wavemakers' project. In that email he summarized the meeting with the TPC officer and added:

"[The public office holders] assure me that my projects will be supported by them…. Any way this priortizing exercise will result in selection of half of my projects. We discussed on steps to take to fund the rest. Our aim is to fund all. … I will encourage the companies to develop and submit a full proposal (with … [the investment officer's] blessings)…. Political process from top down can also be initiated, if required. … For now, I am personally acquainting my associates with the merits of the projects and checking their receptivity. If they have questions, I'll try to answer or connect them to the companies directly."

In February 2001, TPC held a priorization meeting. Wavemakers was selected for further funding consideration at the meeting.

A Memorandum of Understanding (MOU) between NJM Initiatives Inc. and Wavemakers was signed by Mr. Makhija on February 23, 2001. The preamble states that NJM had been retained to assist in a planning process "with the objective of qualifying for and securing of financial support from government agencies". In this document, NJM undertakes to provide a range of professional services, including:

• Initial review of project feasibility.
• Joint review of corporate R&D strategic planning, assessment of strengths, future growth capability and directions, current business plan, to determine project scope.
• Identification and determination of project qualification criteria for potential funding and sources; project formulation strategy.
• Compilation of material supplied by the company and other sources; proposal preparation, initial presentation, submission, discussion and defence.

For these services, the company agreed to pay an amount on signing, and on approval of the government's financial contribution to the project, a professional fee calculated at a stated percentage of the total amount of the financial contribution. This type of arrangement is often called a "success fee" or contingency fee. The LRA requires that consultant lobbyists who are paid in this way disclose that fact as part of their registration.

Mr. Makhija arranged a series of meetings for May 2001 inVancouver, between a number of companies, including Wavemakers, and the investment officer and another Industry Canada employee. On April 12, 2001, Mr. Makhija wrote the investment officer that the Vancouver trip schedule was going well and that most slots were booked. A few days later, he provided the investment officer with a list of web sites, including Wavemakers', and commented, "this is how the visits are shaping up. More when we meet later this week."

In the period prior to the signing of Wavemakers' funding agreement, Mr. Makhija continued to communicate with TPC with respect to the corporation's proposal. On July 31, 2001, he sent an investment officer a list of companies that had shown interest in Wavemakers' technology and were viewed as potential customers for Wavemakers.

A repayable contribution agreement between the Minister of Industry and Wavemakers, Inc. was signed by the TPC Executive Director on October 22, 2001 and by both the Chair and CEO of Wavemakers and the finance director on October 24, 2001. The maximum funding to Wavemakers was set at $4,418,283. Section 6.11 of Schedule 1 of the agreement provides that any person lobbying for Wavemakers in order to obtain the agreement or any of its benefits would register under the Lobbyists Registration Act.

Payments by Wavemakers in accordance with its MOU with NJM began in February 2001 and continued until January 2004.

In the period from October 2000 to January 2004, there was no registration of either Neelam Makhija or NJM Initiatives in the Registry of Lobbyists.

Mr. Makhija's Views

Subsection 10.4(5) of the Lobbyists Registration Act provides that before finding that a person under investigation has breached the Lobbyists' Code of Conduct, the Registrar must give that person a reasonable opportunity to present their views.

On June 28, 2006, I sent a copy of the report that had been prepared by the Investigations Directorate along with a covering letter, via courier, to Mr. Makhija's home. In the letter, I gave Mr. Makhija until August 2, 2006 to provide me with written submissions. I also indicated that if he wished to present his submissions to me in person rather than in writing, he was to notify me no later than July 19, 2006. The courier returned the undelivered report to the Office of the Registrar of Lobbyists (ORL) on July 13, 2006. I again sent a copy of this report to Mr. Makhija on July 13, this time by Priority Post.

On July 27, Mr. Makhija's lawyer requested an extension of the original deadline for receipt of written submissions from August 2, 2006 to September 29, 2006. Because Mr. Makhija was being asked his views on a total of four Lobbyists' Code of Conduct investigations during the same period, I granted this extension. On September 27, 2006, the ORL's Director of Investigations spoke with the lawyer to inform him that I had also granted his subsequent request for an additional extension until October 6, 2006. During this conversation the lawyer first raised the issue of Mr. Makhija's wish to present submissions to me in person. On October 4, the lawyer sent his written submissions along with a covering letter. In that letter, his lawyer indicated that the written submissions would not constitute all of Mr. Makhija's views and that oral submissions from Mr. Makhija were necessary.

In my letter to Mr. Makhija's lawyer dated October 17, 2006, I stated that I had fully satisfied the obligations placed upon me pursuant to subsection 10.4(5) of the Act in that I had afforded Mr. Makhija a reasonable opportunity to present his views. Consequently, I determined that I would not meet with Mr. Makhija. Nevertheless, I offered Mr. Makhija an opportunity to present his further submissions in writing, provided that I received them no later than October 27, 2006. The lawyer responded on October 23, 2006 with, inter alia, arguments why I should meet with Mr. Makhija but, despite my offer, without any additional submissions. I wrote to the lawyer on November 7, 2006 to indicate that I would not change my decision with respect to meeting Mr. Makhija.

The following is a summary of Mr. Makhija's views as contained in his lawyer's letter to me of October 4, 2006. The letter contains biographical information about Mr. Makhija as well as descriptions of the work that he carried out during the 1980s and 1990s. Without being specific about Mr. Makhija's activities with respect to any particular company, the letter includes the following assertions:

Officials at TPC asked Mr. Makhija to find projects

During the period covered by this investigation, the registration requirements of the Lobbyists Registration Act did not apply if a public office holder made a written request to a lobbyist seeking their advice or comment on a matter (such as a grant or contribution) that would normally be registrable.

Mr. Makhija's lawyer states that TPC was actively searching for projects in 2000 because its funding and existence were jeopardized by a lack of credible projects and that TPC contacted Mr. Makhija to aid them in finding projects. In fact, "[h]ad it not been for TPC's initial request to Mr. Makhija, Mr Makhija would never have organized the Vancouver visit, nor would he have been involved in any way with the TPC funding process for the companies."

The meetings Mr. Makhija arranged were not subject to registration

The investigation report sent to Mr. Makhija cites two instances where he had arranged meetings - December 2000 and May 2001. The lawyer states that the arrangement of the December 2000 visit was made at the request of TPC officers; the visit was not arranged with respect to any particular company but was arranged so that TPC could see a variety of potential companies and projects; and, at that time, Mr. Makhija was not yet under contract with any of the companies. In the case of the May 2001 visit, it was arranged for the benefit of a TPC officer who had not been able to attend the December 2000 visit, but still wanted to make the trip in order to get a feel for the Vancouver high technology community.

Mr. Makhija did not attempt to influence TPC officials to award contributions

The lawyer contends that Mr. Makhija's communications with TPC officials were never done in an attempt to influence the TPC funding process. He states that the communications between public office holders and Mr. Makhija were logically necessary in order for the funding process to function, but all communications were restricted to providing TPC with information regarding the companies or with regards to the status of the TPC application. He further states that the wording in the MOUs between Mr. Makhija and each company related to advice and strategies discussed between Mr. Makhija and the company.

In summary, Mr. Makhija does not believe that he carried out any activity that would have required registration under the Lobbyists Registration Act.

My observations on Mr. Makhija's views as represented by his lawyer, are contained in the Conclusions chapter of this report.

Conclusions

Companies seeking a repayable contribution from government organizations such as Technology Partnerships Canada sometimes hire individuals to assist them with managing the application process and presenting their case to officials in the best possible light. These individuals may also arrange meetings between the company and officials or may communicate with officials to clarify technical details of a company's proposal. Similarly, a practical issue such as a company's location in Canada may lead the company to decide that hiring a person to be regularly "on the ground" in Ottawa to work with government officials, is more efficient than having their own staff travel frequently across the country.

These are legitimate actions on the part of companies and those they hire. The Lobbyists Registration Act acknowledges this legitimacy but imposes certain obligations of disclosure and behaviour on those who for payment, undertake to assist companies in this way.

I have concluded that Mr. Makhija did not meet his obligations under the Lobbyists Registration Act and the Lobbyists' Code of Conduct. This chapter contains my reasons for reaching this conclusion.

During the period of Mr. Makhija's activities on behalf of Wavemakers, subsection 5(1) of the Lobbyists Registration Act provided, in part, that:

Every individual who, for payment, on behalf of any person or organization, undertakes to

(a) communicate with a public office holder in an attempt to influence

…
(v) the awarding of any grant, contribution or other financial benefit by or on behalf of Her Majesty in right of Canada, or
(vi) the awarding of any contract by or on behalf of Her Majesty in right of Canada, or

(b) arrange a meeting between a public office holder and any other person,

shall, not later than ten days after entering into that undertaking, file with the registrar, in the prescribed form and manner, a return setting out the information referred to in subsection (2).

The following examines whether Neelam Makhija complied with these elements of the subsection with respect to his activities on behalf of Wavemakers.

Undertaking to Communicate with a Public Office Holder in an Attempt to Influence the Awarding, on Behalf of Her Majesty in Right of Canada, of a Grant, Contribution or other Financial Benefit or a Contract

The preamble of the MOU of February 23, 2001 between NJM Initiatives and Wavemakers states that NJM had been retained to assist in a planning process "with the objective of qualifying for and securing of financial support from government agencies". The list of services to be supplied by NJM includes "proposal preparation, initial presentation, submission, discussion, and defense." The MOU also provides that subsequent to approval of government funding, NJM would offer Wavemakers "ongoing liaison with funding source(s)" until completion or termination of the project. The language of the agreement indicates that it was the intention of the parties that NJM would work to influence the awarding of a contribution, contract or financial benefit to Wavemakers. During the period 2001-2003 Mr. Makhija met with investment officers and other TPC officials to discuss Wavemakers and the project it was proposing for TPC funding.

Arranging a Meeting Between a Public Office Holder and any other Person

The evidence shows that Mr. Makhija's role included arranging meetings between Wavemakers and public office holders. In May 2001, a TPC investment officer and another Industry Canada employee attended a meeting with Wavemakers in Vancouver. Mr. Makhija was responsible for the arrangements of this meeting as well. He co-ordinated between government and Wavemakers representatives, determining the availabilities of those attending, and setting or changing the time and date of the meeting.

Payment

The work performed for Wavemaker by NJM Initiatives and Mr. Makhija was for payment. NJM and Wavemaker signed a Memorandum of Understanding on February 23, 2001 that sets NJM's remuneration at the following rate:

(1) upon signing of the MOU, $2,000, which would be deducted from (2); and

(2) upon approval of government funding, a professional fee of 15% of the total amount of the funding.

NJM submitted an invoice to Wavemakers dated February 23, 2001 - the same date as the MOU - for $2,000 plus $140 GST. It indicated that payment of $2,000 had been received. Wavemakers paid the balance of $140 by cheque dated March 29, 2001. Subsequently, during the period March 2002 to January 2004, Wavemakers issued cheques totalling $291,136.03. All cheques were payable to NJM, except the first, which was payable to Mr. Makhija personally.

The Lobbyists Registration Act was Breached

Mr. Makhija argues that he was not required to register because he was contacted initially by TPC and asked to find companies. This is an incorrect interpretation of the former paragraph 4(2)(c) of the Lobbyists Registration Act, which was in effect during the period of Mr. Makhija's activities on behalf of Wavemakers. This part of the LRA provided public office holders with the ability to seek the advice of a specialist without triggering the requirement for the individual or organization to register. It did not sanction a lobbyist to seek out clients and perform lobbying activities on their behalf without registering.

He further argues that the meetings he arranged did not require registration. With respect to the meeting that he arranged in December 2000 I cannot dispute this assertion, since I have no evidence that there was an undertaking in place between Mr. Makhija and Wavemakers at that time with respect to securing a TPC contribution agreement. However, Mr. Makhija arranged at least one meeting after an MOU for his services was signed in February 2001.

Mr. Makhija argues that he did not attempt to influence TPC officials to award contributions. However, the means by which influence may be brought to bear are many and varied. In this Investigation Report, I am not suggesting that Mr. Makhija used unsavoury means of persuasion or personal connections to influence the awarding of a TPC contribution. Influence with respect to the decision to invest in a high-technology company such as Wavemakers arises in part through the presentation of data regarding the proposed investment, including technical data, financial data and market data. The MOU between Wavemakers and NJM provides for, among other services, compilation of material supplied by the company and other sources; proposal preparation; initial presentation; submission; discussion; and, defence. The intent of the MOU is clearly that NJM would carry out these services in order to obtain a financial contribution for Wavemakers from the federal government.

My conclusion is that Mr. Makhija contravened subsection 5(1) of the Lobbyists Registration Act. For payment, he acted as a consultant lobbyist. He arranged at least one meeting between public office holders and Wavemakers representatives. He communicated with public office holders in an attempt to influence the awarding of a financial contribution by TPC. Mr. Makhija was required under the Lobbyists Registration Act to register as a lobbyist but failed to do so. At the latest, he should have registered within 10 days of signing the MOU with Wavemakers on February 23, 2001.

Rule 3 of the Lobbyists' Code of Conduct was Breached

Individuals who must register as lobbyists in accordance with the requirements of the Lobbyists Registration Act must also comply with the Lobbyists' Code of Conduct. The Lobbyists' Code of Conduct contains three principles, including the following:

Professionalism

Lobbyists should observe the highest professional and ethical standards. In particular, lobbyists should conform fully with not only the letter but the spirit of the Lobbyists' Code of Conduct as well as all the relevant laws, including the Lobbyists Registration Act and its regulations.

Mr. Makhija's lobbying on behalf of Wavemakers without registering violates the Principle of Professionalism under the Lobbyists' Code of Conduct because he was in breach of his obligations under the Lobbyists Registration Act.

The Lobbyists' Code of Conduct includes eight Rules that flow from the Lobbyists' Code of Conduct's three Principles. During the period covered by this investigation, it was necessary to contravene one or more of the Rules in order to be found in breach of the Lobbyists' Code of Conduct. Rule 3, under the heading of Transparency, reads as follows:

Disclosure of Obligations

Lobbyists shall indicate to their client, employer or organization their obligations under the Lobbyists Registration Act, and their obligation to adhere to the Lobbyists Code of Conduct.

Mr. Makhija's view, as evidenced by his lack of registration and as confirmed by his written submission during the investigation, was that his activities were not subject to registration under the Act. It follows, then, that he did not disclose his obligations under the Act to Wavemakers.

My conclusion is that Mr Makhija breached Rule 3 of the Lobbyists' Code of Conduct.

The Lobbyists' Code of Conduct

Preamble

The Lobbyists' Code of Conduct is founded on four concepts stated in the Lobbyists Registration Act:

Free and open access to government is an important matter of public interest;

Lobbying public office holders is a legitimate activity;

It is desirable that public office holders and the public be able to know who is attempting to influence government; and,

A system for the registration of paid lobbyists should not impede free and open access to government.

The Lobbyists' Code of Conduct is an important initiative for promoting public trust in the integrity of government decision-making. The trust that Canadians place in public office holders to make decisions in the public interest is vital to a free and democratic society.

To this end, public office holders, when they deal with the public and with lobbyists, are required to honour the standards set out for them in their own codes of conduct. For their part, lobbyists communicating with public office holders must also abide by standards of conduct, which are set out below.

Together, these codes play an important role in safeguarding the public interest in the integrity of government decision-making.

Principles

Integrity and Honesty

Lobbyists should conduct with integrity and honesty all relations with public office holders, clients, employers, the public and other lobbyists.

Openness

Lobbyists should, at all times, be open and frank about their lobbying activities, while respecting confidentiality.

Professionalism

Lobbyists should observe the highest professional and ethical standards. In particular, lobbyists should conform fully with not only the letter but the spirit of the Lobbyists' Code of Conduct as well as all the relevant laws, including the Lobbyists Registration Act and its regulations.

Rules

Transparency

1. Identity and purpose

Lobbyists shall, when making a representation to a public office holder, disclose the identity of the person or organization on whose behalf the representation is made, as well as the reasons for the approach.

2. Accurate information

Lobbyists shall provide information that is accurate and factual to public office holders. Moreover, lobbyists shall not knowingly mislead anyone and shall use proper care to avoid doing so inadvertently.

3. Disclosure of obligations

Lobbyists shall indicate to their client, employer or organization their obligations under the Lobbyists Registration Act, and their obligation to adhere to the Lobbyists' Code of Conduct.

Confidentiality

4. Confidential information

Lobbyists shall not divulge confidential information unless they have obtained the informed consent of their client, employer or organization, or disclosure is required by law.

5. Insider information

Lobbyists shall not use any confidential or other insider information obtained in the course of their lobbying activities to the disadvantage of their client, employer or organization.

Conflict of interest

6. Competing interests

Lobbyists shall not represent conflicting or competing interests without the informed consent of those whose interests are involved.

7. Disclosure

Consultant lobbyists shall advise public office holders that they have informed their clients of any actual, potential or apparent conflict of interest, and obtained the informed consent of each client concerned before proceeding or continuing with the undertaking.

8. Improper influence

Lobbyists shall not place public office holders in a conflict of interest by proposing or undertaking any action that would constitute an improper influence on a public office holder.