Evidence of meeting #99 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was board.
A recording is available from Parliament.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
I appreciate that. Thank you.
Before you were appointed to the board, the companies that you invested in had received $93 million in grants through Cycle Capital from SDTC. Is that correct?
I have a list, which I can table with the committee if you'd like. You list them as investments on your website: GaN Systems, Enerkem, Encelium, Agrisoma, Concentric. I can go through the 17 or 19 companies.
Founder and managing partner, Cycle Capital, As an Individual
Actually, a number of companies in our portfolio received investment funds from Sustainable Development Technology Canada before, during—that was the case with four of them—and after our investments. So during my term on the board of directors—
Conservative
Liberal
The Chair Liberal Joël Lightbound
Mr. Perkins, can you let the witness finish her sentence at least?
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
No, she answered my question, and I'm moving on to my next one since I have limited time.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
The next question is this: While you were on the board, Cycle Capital and the companies you invested in received $42.5 million from SDTC. These are companies that you have a financial interest in—you personally and your fund. It's $42.5 million. I can table those companies if you'd like, too.
Founder and managing partner, Cycle Capital, As an Individual
Yes, I'm glad to be scrutinizing this with you, as I don't have the same number as you do.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Are you an investor in Enerkem, MineSense Technologies, Spark Microsystems, Concentric Agriculture, and Polystyvert? They're all listed on your website as investments.
Founder and managing partner, Cycle Capital, As an Individual
Absolutely, but allow me to clarify something. I'm going to state the facts as they are.
Four of the businesses in Cycle Capital's portfolio have received support from SDTC since I was appointed to the board of Sustainable Development Technology Canada in 2016. They are MineSense, which has received $4 million and in which Cycle Capital holds a 9.6% equity interest; GreenMantra, which has received $2 million and in which Cycle Capital has a 19.5% holding; Inocucor, which has received $1.2 million and in which Cycle Capital owns a 28% interest; and Polystyvert, which has received $3.5 million and in which Cycle Capital is an 8.5% shareholder.
SPARK Microsystems, the example you cited, received money from SDTC in 2016. However, Cycle Capital invested in SPARK Microsystems at the end of 2020. So SDTC invested in it long before we did, nearly three years earlier.
Liberal
The Chair Liberal Joël Lightbound
Mr. Perkins, I'm sorry. You're out of time.
I'll now turn to Mr. Turnbull.
Liberal
Ryan Turnbull Liberal Whitby, ON
Thanks to the witnesses for being here today. I know this is a hot topic for this committee and some others. I'm looking forward to your testimony.
I know that SDTC has been around for about 22 years, if I'm not mistaken. I know that it was, in fact, awarded an extra $325 million around 2013, which I think is a testament to the fact that the organization has been recognized by multiple governments as doing some really great work.
That doesn't solve the issue at hand, which is really talking about board governance and about assuring both us, as members of Parliament, and the general public that the funds that the organization presided over and distributed were presided over and distributed in a way that hopefully navigated the challenges and made sure that the organization abided by the highest standards of governance.
Obviously, I think that's a balancing act. It's important for us, as members of Parliament, and for this committee in particular, which has the job of holding the government to account on everything to do with industry and its large portfolio. Given the fact that SDTC falls under that portfolio, I think it's important that we have these debates and discussions.
I know that we've learned from investigations that were initiated by the minister and from the committee testimony that we heard around conflict of interest policies at SDTC in the past. They left a lot to be desired, I'll say quite frankly. Board members didn't necessarily recuse themselves from decisions where they had conflicts or where there could be perceived conflicts. At least, that's what we've heard. If they did recuse themselves, those things were not necessarily noted anywhere. Decisions were taken unanimously without any notation of dissenting votes. Board members, including the chair, gave money to their own companies in some cases.
I'm going to start with you, Ms. Méthot. Can you comment on some of these challenges and your experience while you were on the board?
Founder and managing partner, Cycle Capital, As an Individual
Thank you for your question.
I have always disclosed conflicts of interest. I even have a letter here confirming that I have complied with all the rules. This was also observed by a departmental representative. I don't really know his title, but I think he was an assistant deputy minister. He was there during all our deliberations. In addition, the common practice when I was there was to declare our conflicts of interest, actual, potential or apparent, in advance and to recuse ourselves in advance. Here I have a letter confirming that I recused myself in advance and complied with all the rules. It's available if you want to see it.
That being said, the comment about the minutes is fair. If there's one thing that all the organizations and boards that I've been a part of have in common, it's that they aren't perfect and are improving. In this instance, a certain amount of progress remains to be made. As you can understand, having left the board more than two years ago, I'm not in a position to judge the present situation. I can only speak to the period when I was there.
Here's a very specific example. I read the minutes on the weekend. They state that we are an investor in SPARK Microsystems, whereas the declaration of interest states that SPARK Microsystems could be an investment but in fact isn't one. That was incorrectly entered in the minutes.
You're entirely right on that point, sir. I agree with you.
November 28th, 2023 / 6:05 p.m.
Liberal
Ryan Turnbull Liberal Whitby, ON
If I could follow up on that, were there times when you had to recuse yourselves from decisions of the board as a result of a real or perceived conflict of interest?
Mr. Cape, I'll ask you the same, and I'll start with you, Madame Méthot.
Founder and managing partner, Cycle Capital, As an Individual
Yes, I recused myself every time I declared a potential or actual conflict of interest. That was the common practice, but it was incorrectly entered in the minutes.
Liberal
Ryan Turnbull Liberal Whitby, ON
You're saying you did recuse yourself.
How many times, roughly, would you say you had to recuse yourself?
Founder and managing partner, Cycle Capital, As an Individual
I can assure you that I recused myself four times over real conflicts of interest, five times over apparent conflicts of interest and 26 times over potential conflicts of interest. As you can understand, since I was no longer on the board, I didn't have access to all the information needed to validate these numbers, but I would say it happened at least 35 times. There were four actual conflicts of interest in which Cycle Capital was already invested in a business in which SDTC was preparing to invest. That's a very significant nuance.
Liberal
Ryan Turnbull Liberal Whitby, ON
Thank you for that.
Mr. Cape, I'll go to you. Could I ask you the same? Did you have to recuse yourself at times, while you served on the board, from a real or perceived conflict of interest? Could you give us an estimated number of times, if your answer is yes?
Chief Executive Officer, R-Hauz, As an Individual
I felt like an outsider. I had no conflicts, and no recusals were ever required, so I never did sit out in those situations.
Liberal
Ryan Turnbull Liberal Whitby, ON
As a result of your work on the governance committee, during the time you served on the board, would you say improvements were made to governance, procedures, and processes? If so, could you tell us why we've heard, at least in a few cases, that these recusals were not documented anywhere? I would think they should be documented.
Could you speak to that, please?
Chief Executive Officer, R-Hauz, As an Individual
I certainly imagine they would have been recorded properly. They were managed rigorously, and the conflict of interest policy was well understood by all board members. The policy was reviewed each year by all board members. In any orientation program for new board members, it is one of the primary themes, so it was a well-understood policy, and it was rigorously managed.
We had corporate legal counsel in the room that managed the process. Not being documented was a mistake, obviously. I'm not aware of that particular challenge, though.
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
Thank you, Mr. Chair.
First of all, I must say that both of you have impressive CVs. You are pioneers in investment, sustainable development and the emergence of a new technology that may perhaps save the planet. Let's hope. The fact remains that what we're interested in here is concerning.
I would mention, Ms. Méthot, that you have a very calm tone of voice, which I find quite reassuring in the circumstances. I'd like to go back to the context of the COVID‑19 pandemic because you mentioned it.
I remember the workload the committee was coping with at the time. We were considering a bill to amend Canada's Investment Act, and there was this sense that we had to save our businesses from devaluation. You suggested in your remarks that this desire to save businesses tainted your work.
What would have happened if the board hadn't made the decision to adopt an emergency plan for clean technology businesses during the pandemic?