Forensic Investigation: Appendix - M. Sack Companies

PRIVILEGED AND CONFIDENTIAL
SUMMARY OF FINDINGS
FROM MNP LLP
TO
PINK LARKIN LLP

IN THE MATTER OF
INDIAN BROOK (SHUBENACADIE) FIRST NATION

APPENDIX #10 M. SACK & RELATED COMPANIES

Pink Larkin LLP Shubenacadie First Nation Privileged and Confidential
Appendix 10 M. Sack and Related Companies, April 21, 2014
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TABLE OF CONTENTS
1 BACKGROUND ...................................................................................................... 1
2 M. SACK COMPANIES AND ASSOCIATED COMPANIES .................................... 2
3 AMOUNTS PAID TO M. SACK AND RELATED COMPANIES .............................. 5
4 LOANS .................................................................................................................... 6
5 CRANBERRY BOG ................................................................................................ 9
6 SNOWPLOWING .................................................................................................. 13
7 WALLACE HILLS ................................................................................................. 18
8 FISHERIES ........................................................................................................... 24
9 CAPITAL AND HOUSING ..................................................................................... 34
10 J. HAYES HOME .................................................................................................. 44
11 POTENTIAL CONFLICT OF INTEREST ............................................................... 48
12 RCMP INVESTIGATION ....................................................................................... 53
13 CONCLUSION ...................................................................................................... 54
14 RESTRICTIONS AND LIMITATIONS .................................................................... 58

TABLES
Table 1: Amounts Paid to M. Sack and Related Companies ............................................ 5
Table 2: Short-Term Loans and Repayments to Mainland J uggage and Sacks
Contracting ...................................................................................................................... 6
Table 3: Payments to Sacks Excavating ......................................................................... 9
Table 4: Cranberry Bog Cost to March 31, 2012 ........................................................... 12
Table 5: Snowplow Bids ................................................................................................ 14
Table 6: Payments re: Wallace Hills .............................................................................. 22
Table 7: Wallace Hills Questionable Amounts ............................................................... 23
Table 8: Sources of Lobster Revenue ........................................................................... 27
Table 9: Comparison of Lobster Catch Revenue and Lobster Wages ........................... 28
Table 10: Actual and Achievable Snow Crab Gross Profit per pound ............................ 32
Table 11: Housing Project Construction Timeline .......................................................... 34
Table 12: Summary of Capitalized Housing Construction Costs .................................... 38
Table 13: Summary of Schedule 4 expenses related to M. Sack Companies ................ 50

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Table 14: M. Sack Questionable Amounts .................................................................. 57

SCHEDULES
Tab Title
1. Housing Capital Costs Sacks Excavating re Account 5870 10 Unit Project
2. Housing Capital Costs Sacks Excavating re Account 5871 13 Unit Project
3. Housing Capital Costs Sacks Excavating re Account 5873 2009 6 Band
Homes
4. Housing Capital Costs Sacks Excavating/Sacks Contracting re 4 Units
5. Housing Capital Coss Sacks Excavating re Account 5881 Housing
Brown Flats Extension
EXHIBITS
Tab Title
1. MRJ J Management Inc. Certificate of Incorporation, J anuary 13, 2010
2. $250,000 Michael Patrick Sack loan plus interest reconciliation
3. J ames Moore & Associates update re: Cranberries, dated September 22,
2009
4. Copies of cheques 45629, 45630 and 45631 issued to Sacks Excavating
5. Memo re: Council requests for tenders to be issued for snow removal, salting,
sanding roads/parking lots/driveways in reference to December 9
th
Council
Meeting
6. Service Agreement with H. Sack dated December 15, 2009
7. Letter from McLellan, Richards & Bgin dated February 17, 2014
8. Sacks Plowing cheque requisitions and cheque stubs for year ended March
31, 2010
9. Sacks Contracting & Management Limited (Sacks Contracting) Invoice
16042012snow for the amount $133,000, dated April 16, 2012 for snow
plowing and salting services
10. Sacks Excavating Ltd. (Sacks Excavating) Invoice 20120104 in the amount
$60,000, for blueprint drawings regarding Wallace Hills Entertainment Centre,
dated J anuary 4, 2012
11. Pockwock Road Property assessment for 2012 and 2013
12. Sale of Pockwock Road Property by Susan Wenning Cameron, J oan Wenning
McMillan and Andrew S Wenning to Ramar Developments Limited

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13. Sale of Pockwock Road Property from Ramar Developments Limited to
Michael Patrick Sack
14. Sale of Pockwock Road Property from Michael Patrick Sack to Shubenacadie
First Nation (SFN)
15. Cheque #21321 in the amount $65,000 dated September 11, 2009 to
Carruthers & MacDonnell for Wallace Hills from SFN CIBC Administration
Account
16. Payment to Halifax Regional Municipality in the amount $229.26 for delinquent
property taxes
17. Michael Patrick Sack Memorandum of Understanding
18. Michael Patrick Sack Development and Management Agreement dated J une
2011
19. Sacks Excavating invoice 20110074wall dated September 6, 2011 in the
amount of $28,523.60
20. Agreement between Alexander P. McDonald and SFN re: $20,000 loan to
lease a commercial licence, dated November 17, 2009
21. Fisheries Lease Agreement between SFN and Michael Patrick Sack dated
September 14, 2011
22. Email exchange between J effrey Hayes and Gary Richard re: lobster licences,
dated September 14, 2011
23. Mainland J uggage loan reconciliation
24. Letter from Chief J erry Sack re: Cheryl Maloney has access to snow crab
quota and lobster licence, dated February 23, 2009
25. Chase Fisheries Project Proposal for Crab Fishing Operations, April 22, 2009
26. Band Council Resolution (BCR) 2010-2011-54 re: sale of snow crab quota to
Mainland J uggage dated March 10, 2011
27. Letter from Canadian Mortgage and Housing Corporation (CMHC) re:
2007/2008 Project 13 Units, dated April 8, 2009
28. Wekatesk Invoice 2009-001 in the amount $1,269,500 re: construction of 13
homes, dated May 6, 2009
29. Bid Call Notification #RFP-09-01 with a closing date May 29, 2009 and Bid
Proposal Form with a total bid of $60,220
30. Wekatesk quote for upgrades for heating to the 13 Unit Project, dated
September 9, 2009
31. BCR 2009-2010-016 re: request an Accountable Advance for 75% funding of
the capital costs of two housing units, dated December 16, 2009

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32. BCR 2009-2010-027 re: request to administer the 2009/2010 housing program
including funding for a CMHC capital loan in the amount $180,200, dated
March 17, 2010
including funding for a CMHC capital loan in the amount $362,420, dated
March 17, 2010
34. BCR 2009-2010-040 re: re: request to administer the 2009/2010 housing
program including funding for a CMHC capital loan in the amount $180,200,
dated J uly 6, 2010
including funding for a CMHC capital loan in the amount $362,420, dated J uly
6, 2010
including funding for a CMHC capital loan in the amount $189,190, dated J uly
28, 2010
37. Sacks Excavating invoices re: 10 Unit Project
38. Sacks Excavating invoices re: 13 Unit Project
39. Sacks Excavating invoices re: 6 Band Homes
40. Sacks Contracting Invoice 12032012brflfinal in the amount $130,000 for two
Energuide homes dated March 12, 2012
41. Sacks Excavating invoices re: Brown Flats Extension
42. 22 Kittiwake Property Assessment
43. Indian and Northern Affairs Canada Band Council History Report dated March
4, 2013
44. Sacks Contracting Invoice 100159 in the amount $19,400, dated J uly 7, 2011
45. Sacks Contracting Invoice 100174 in the amount $170.54, dated J une 17,
2011
46. Sacks Contracting Invoice 100189 in the amount $98.58, dated J uly 26, 2011
47. Sacks Contracting Invoice 05052011ib17 in the amount $25.00 for house visit
when nobody was home, dated May 5, 2011
48. Castone Construction Limited corporate search
49. Sacks Excavating Invoice 20110071 in the amount $13,463.04, dated August
18, 2011, example showing lack of detail in invoice
50. CJ S Excavating Invoice 2009-74 in the amount $29,839, dated J une 1, 2009

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1 BACKGROUND
1.1 Throughout our review we have noted that Michael P. Sack (Mike Sack or M.
Sack) or companies associated with M. Sack were financially involved with
various operations of Shubenacadie First Nation (SFN or the Nation or the
Band). These include Housing, Operations and Maintenance, Economic
Development and Fisheries.
1.2 The Sack family of companies (M. Sack Companies) offer a number of service
lines to SFN. The companies in the family are wholly or partially owned by M.
Sack who is currently a Councillor at SFN. This is M. Sacks fourth time as a
Councillor for SFN. Prior to the current term he served on Council as follows:
October 4, 2004 to October 3, 2006;
November 5, 2006 to April 19, 2007; and,
J une 13, 2009 to September 23, 2010.
1.3 We understand that SFN was doing business with M. Sack and some of the
related companies while he was a Councillor. This presents a potential for a
conflict of interest depending on how the relationships and transactions were
presented to Council.
1.4 Concerns have been raised with respect to the lack of contracts with the Sack
companies, amounts paid and documentation related to invoicing. In addition, we
understand that M. Sack loaned money to SFN where cash flow was an issue.
Concerns have been raised with respect to how the loans were initiated and the
amount of interest paid.
1.5 Unless otherwise noted the period of review is April 1, 2009 to March 31, 2012
(Period of Review). Amounts have been rounded for reporting purposes.

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2 M. SACK COMPANIES AND ASSOCIATED COMPANIES
2.1 Collectively, the Sack group of companies is a major vendor to SFN. The group
of companies is associated with M. Sack through ownership or operation. In
order to understand the breadth of M. Sacks involvement with SFN, we have
identified committees, relationships and companies that conduct business with
SFN.
2.2 To date, we have identified five companies directly associated with M. Sack.
They are as follows:
Sacks Contracting and Management Limited (Sacks Contracting);
Sacks Excavating Ltd. (Sacks Excavating);
CJ S Excavating or CJ s Excavating (CJ S Excavating);
Castone Construction Limited (Castone); and,
Mainland J uggage Seafood Broker (Mainland J uggage).
Sacks Contracting
2.3 Sacks Contracting is a Nova Scotia Limited company. M. Sack is the director,
president and recognized agent. The civic address is 582 Church St. Indian
Brook, Nova Scotia, and it was incorporated in J anuary 2010. This company
replaced Sacks Contracting and Management which was a partnership
registered in October 2009.
Sacks Excavating
2.4 Sacks Excavating is a Nova Scotia Limited company. The director and president
of this company is M. Sack. The civic address for this company is 582 Church St.
Indian Brook, Nova Scotia. The recognized agent is Greg Mullen of Burchell
MacDougall Lawyers (Burchell MacDougall). The company was incorporated in
August 2010. This company replaced Sacks Excavating which was a
partnership registered in April 2006. Sacks Excavating (2002) was registered to
Lyn Sack which was registered in J uly 2002 but revoked in September 2005 for
non-payment. Prior to this, Sacks Excavating was registered in 1988 by Carl
J oseph Sack the father of M. Sack. This company was revoked in 1998 for
non-payment.

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CJS Excavating
2.5 CJ S Excavating was a partnership registered in Nova Scotia on April 12, 2006
and changed names to Sacks Excavating in 2009. It was formally dissolved on
August 3, 2010. M. Sack is listed as the partner and the registered office was
located at 582 Church St, Indian Brook, Nova Scotia.
Castone
2.6 Castone is a Nova Scotia Limited company. The directors are Michael P. Sack
and Dean R. Shea. The civic address is 528 Windmill Road, Unit 1, Dartmouth,
Nova Scotia and M. Sack is listed as vice president and treasurer. The
recognized agent is Denny Pickup of Burchell MacDougall LLP. The company
was registered on November 10, 2005. The company was previously registered
as a partnership in October 2005 by Ron Lovett of 330-1096 Queen St. Halifax
Nova Scotia, but dissolved in November 2005.
Mainland Juggage
2.7 Mainland J uggage is a partnership registered in Nova Scotia. The sole partner of
the company is M. Sack. The civic address for this company is 582 Church St.
Indian Brook, Nova Scotia, and was registered on October 18, 2007. This
company was previously known as Mainland J uggage Seafood Buyers. This
company changed names as of October 28, 2009.
Other Related Companies
Gloade Electrical and related companies
2.8 Gloade Electrical Services Limited (Gloade Electrical) is a company owned by
Dana Gloade (D. Gloade), the former Housing Manager at SFN. D. Gloade
advised us that he sold the customer list, equipment and transferred his
employees to M. Sack. He advised us that he worked for M. Sack on those times
he was not working for the Nation. Gloade Construction Ltd. is a N.S. Limited
company which has been revoked for non-payment. This company listed D.
Gloade as director and president. This company was registered in March 2009
and revoked for non-payment in May 2010.
2.9 Gloade Electric is a partnership in Nova Scotia. Stephen Ling (S. Ling) is the
recognized agent for the company which has been revoked for non-payment. S.
Ling is also the recognized agent for Gloade Construction Ltd. S. Ling is a
partner in the Dartmouth law firm Landry McGillivray. This company was
registered in May 2002 and revoked in J uly 2010 for non-payment.

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2.10 Gloade Holdings Inc. is a Nova Scotia Limited company. The director and
president of this company is D. Gloade. This company was registered in March
2009 and revoked in May 2010 for non-payment.
MRJJ Management Inc.
2.11 MRJ J Management Inc. (MRJ J ) was incorporated on J anuary 13, 2010 by
Burchell MacDougall Lawyers (Burchell MacDougall), a law firm in Truro, Nova
Scotia (refer Exhibit 1). The companys recognised agent is Gary Richard (G.
Richard), a partner at Burchell MacDougall and the Bands former solicitor. The
sole director is listed as J effrey Hayes (J . Hayes). The shareholders of MRJ J
were Michael Sack, Ronald Augustine (R. Augustine), J erry (F.) Sack (J erry F.
Sack or Chief Sack) and J . Hayes. We are not aware of a change in the
shareholding of MRJ J .
2.12 We understand that MRJ J was incorporated in anticipation of the development of
the Wallace Hills property at Hammonds Plains being made a reserve of SFN. It
was intended that the company become a development corporation for the land
and would be presented as such to Council. Council would then determine
whether it wished to take control of the company and use it for the development.
In our review of the Council Minutes, there was no reference to the incorporation
of MRJ J .
2.13 The Wallace Hills Development is also referred to as the Hammonds Plains
Development; they are the same development. The focus of the development
was a casino and related businesses which would produce revenue for the SFN.
The Council Minutes on J uly 9, 2009 indicate that Wallace Hills Development
Committee (the Wallace Hills Committee) is made up of Chief J erry F. Sack, M.
Sack, Ryan J ulian (R. J ulian), R. Augustine and J . Hayes. We note that a
number of these individuals are also shareholders of MRJ J , however, the Wallace
Hills Committee is not referred to as being the same as MRJ J .
Sacks Plowing
2.14 Sacks Plowing is not an incorporated company but we understand it to be owned
by Henry Sack (H. Sack). Payments for snowplowing are made in 2010 to
Sacks Plowing and then in 2011 to Sacks Contracting. We do not have any
information to understand the relationship between Sacks Plowing and Sacks
Contracting.

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3 AMOUNTS PAID TO M. SACK AND RELATED COMPANIES
3.1 To further understand the relationship between SFN and the M. Sack Companies,
we summarized the amounts paid to M. Sack and the collective group. According
to the general ledger, a total of $5.67 million has been paid to M. Sack and the M.
Sack Companies during the Period of Review as follows:
Table 1: Amounts Paid to M. Sack and Related Companies
Company Amount
Mainland J uggage $1,116,125
Michael P Sack 24,134
Sack's Contracting 3,451,925
Sack's Excavating 889,588
Castone 136,177
Other 50,000
Total Paid $5,667,949

3.2 The $50,000 listed as Other payments in the table above relate to interest
charged on a $200,000 advance. M. Sack advanced $200,000 to SFN on
February 15, 2012 for a lobster licence. This interest was not paid to him and
instead was used to offset amounts he owed to SFN.

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4 LOANS
4.1 During the period December 16 2010 to J une 1, 2012, Mainland J uggage and
Sacks Contracting loaned $1,550,000 to SFN. All loans were on a short term
basis and the total interest charge was $252,500. We understand that loans
were to assist with cash flow and the payment of Christmas bonuses. We
identified the following loans and repayments:
Table 2: Short-Term Loans and Repayments to Mainland Juggage and Sack s Contracting
Ref Issued Repaid
Days
of
Loan Loan from Repayment to Capital Repayment Interest
1 16-Dec-10 11-J an-11 26 Mainland
J uggage
Mainland
J uggage
$200,000 240,000 40,000
2 09-Feb-11 22-Feb-
11
13 Mainland
J uggage
Mainland
J uggage
200,000 200,000 -
3 18-May-11 01-J un-11 14 Mainland
J uggage
Sacks
Contracting
100,000 100,000 -
4 26-Aug-11 01-Sep-
11
6 Mainland
J uggage
Sacks
Contracting
100,000 100,000 -
5 14-Dec-11 12-J an-12 29 Mainland
J uggage
Mainland
J uggage
500,000 600,000 100,000
6 14-Dec-11 01-Feb-
12
49 Mainland
J uggage
Sacks
Contracting
70,000 87,500 17,500
7 25-J an-12 01-Feb-
12
7 Sacks
Contracting
Sacks
Contracting
180,000 225,000 45,000
8 15-Feb-12 01-J un-12 107 Mainland
J uggage
Mainland
J uggage
200,000 250,000 50,000
Total $1,550,000.00 1,802,500 252,500

4.2 In preparing Table 2 above, we have relied on descriptions in the general ledger
and discussions with accounting staff. No loan agreements between M. Sacks
companies and SFN have been identified and we were advised that no such
agreements exist. It is assumed that the amount to be repaid would have been
directed verbally but it is not known by whom.
4.3 We have also reviewed Council Minutes for the periods April 7, 2009 to
December 15, 2009; J anuary 5, 2010 to April 27, 2010 and November 23, 2010
to February 28, 2012 and were unable to identify any motions from Council
approving SFN taking loans from M. Sack.

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4.4 We have therefore made the following assumptions as to which repayment(s)
relate to loans made and therefore the terms of the loans. In Table 2 above we
assume the following:
After a loan has been made, the first payment identified as a loan payment,
to any of M. Sacks companies is allocated to the loan. Where necessary,
we apply the next payment and so on, until repayment exceeds capital
loaned;
Loans #5 and #6 ($500,000 and $70,000), both of which were received on
December 14, 2010, were repaid as follows:
o $600,000 on J anuary 12, 2012; and,
o $87,500 on February 1, 2012. This repayment was made along with
repayment of loan #7 ($180,000) made on J anuary 25, 2012.
We assume a loan is repaid on the date the funds clear the bank, not the
date on which the cheque was issued.
4.5 In addition, although we note that loan #8 ($200,000) was received on February
15, 2012, we understand that repayment of this amount was not by cash.
Instead, repayment of the loan amount plus interest was made by way of an
offset against amounts owed by Mainland J uggage for lobster and snow crab.
The reconciliation showing the offset of the $250,000 loan including interest is
attached at Exhibit 2. There is no date on the reconciliation, however the
general ledger records this offset transaction took place on J une 1, 2012. We
therefore assume that the $200,000 was repaid on that date.
4.6 Based on our analysis in Table 2 it appears M. Sack did not charge interest on
loans #2, #3, and #4. However, for all other loans, interest was charged at an
implied rate of 20% or 25%. Although we refer to an implied rate, this does not
reflect the Annualised Interest of the loan, i.e. the interest rate that would be
charged if the loan had been held for one year
1

1
For the purposes of this Report, we have calculated interest on a simple interest basis, rather
than using a compound interest basis.
. M. Sack provided short term
loans ranging from 6 days to 107 days, we calculate the Annualised Interest for
each of the loans to be in excess of 85%. In the case of three of the loans, the
Annualised Interest rate is in excess of 200%. Such a high interest rate is
demonstrated on loan #7 of $180,000 on J anuary 25, 2012. The money was
loaned for seven days, yet the interest charge was $45,000.

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4.7 By applying an illustrative Interest rate of 25% per annum on all of the loans, the
total interest charges would have been $34,514 which is $217,486 less than the
$252,000 charged by M. Sack. Given the Annualised Interest rate charged by M.
Sack was in excess of 85%, $217,486 of the interest is considered questionable.
Conclusion
4.8 Although we do not know the specific circumstances and/or relationship that SFN
had with its bankers/institutional lenders at that time, we note that RBC charged
an overdraft interest of Royal Bank Prime +5% and an overdraft handling fee of
$5.00 on RBC account 131-124-0 (Tobacco). Additionally, during the 2011
calendar year the Royal Bank Prime rate was 3%. It is not clear whether SFN
would have been able to obtain additional credit from their bankers and
consequently avoid entering into arrangements with M. Sack for loans at such a
high interest rate.
4.9 As noted in Paragraph 4.6 above, no interest was charged on three of the loans.
It is not known why this is the case. We have reviewed the general ledger for
payments to M. Sacks companies around the time of the capital repayments and
note no payments which approximate 20% or 25% of the loan, or which indicate
that they relate to a loan. However, we note that on February 18, 2011, around
the time that the loan of February 9, 2011 was repaid, a payment of $40,000 was
made to Mainland J uggage for Snow Crab Quota. Based on our knowledge of
snow crab, we would not expect a payment to be made to Mainland J uggage for
the quota. We note that $40,000 is consistent with the 20% implied charge for a
loan of the same amount which was made on December 16, 2010. We have
found no supporting documentation for this transaction and are therefore unable
to confirm if this payment relates to snow crab.

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5 CRANBERRY BOG
5.1 We were advised as a result of our interviews that M. Sack was involved with the
preparation and excavation of the cranberry bog. We reviewed documents that
indicated that planning for the bog commenced in 2008/2009 with the report
submitted by J ames Moore on September 22, 2009 (refer Exhibit 3). It would
appear that work commenced in December 2010 and the majority of the
excavation was conducted in the summer of 2011. We were advised, and we
have identified, invoices which indicate that Sacks Excavating conducted partial
construction of the cranberry bog. M. Sack was not a Councillor at the time of the
construction.
5.2 The financial projections in the business plan were prepared by Blake J ohnston
and correlated by an accounting firm in Truro, Nova Scotia. Based upon the
financial plan, the clearing of the first five acres was to have cost a total of
$90,000.
5.3 The payments to Sacks Excavating are as follows:
Table 3: Payments to Sacks Excavating
Invoice Payment
Date Reference Amount Cheque Date
Aug 22, 2011 22082011cran $175,798.66 45629 Sep 28, 2011
Sep 08, 2011 20110073 17,995.00 63058 Apr 23, 2012
Sep 28, 2011 28092011cran3 194,612.00 45630 Sep 28, 2011
Sep 28, 2011 28092011cran4 19,500.00 45631 Sep 28, 2011
Nov 30, 2011 30112011cran5 26,862.43 63058 Apr 23, 2012
Total $434,768.09

5.4 We have located copies of the cancelled cheques related to the remaining
invoices totalling $389,911 and have confirmed that they were issued to Sacks
Excavating. Copies of those cheques are attached as Exhibit 4. The three
cheques were all issued on the same day and bear the signatures of Chief J erry
Sack and J . Hayes. Upon review, the signature of Chief J erry Sack is virtually
identical on each cheque indicating that a signature stamp could have been used
versus Chief Sack personally signing the cheques. In addition, Chief J erry Sack
typically signs using his middle initial F. Invoices supporting these payments
have not been found.
5.5 In an interview with M. Sack, he discussed the work his company performed on
the cranberry bog as follows:

10
SACK: (Talk over) Yeah. Like they hired their own guys to cut and stuff and then
we did all the machine work, cleared all of the grubs, did a cut and fill, like
a six foot cut in at one side and took it to the other side and built it all up
to make it level and stuff. And to me it was crazy, they wanted it done,
we're in business, well do it, right but I would never have tried that myself
but . . .

MCCORMACK: The, when you did the bog, like you said so your guys only did the cut
and fill part, right or the cut, no sorry you didnt do any of the cuts, you
guys just took out all the grubs and all the other stuff.

SACK: (Talk over) They, all the excavating and stuff.

MCCORMACK: All the excavating and stuff.

SACK: (Talk over) Yeah. Yeah we didnt actually cut the trees, no.

MCCORMACK: How big or how much land did you have to do? Do you remember?

SACK: I think the first section was like five acres or something. Right?

And further M. Sack stated:

MCCORMACK: (Talk over) Yeah, yeah. Now in terms of the work that youve done have
you, did you finish what you were supposed to do on that, on the bog?

SACK: I . . .

MCCORMACK: Except for the sand.

SACK: (Talk over) . . . I think we got to the sand point I think and that's where it
stopped.

MCCORMACK: So youve done all the clearing . . .
5.6 Based upon our discussion with Blake J ohnston (B. J ohnston), we were advised
that he was asked to work with M. Sack and Bedford Excavating although he did
not see either when on site. B. J ohnston indicated that he started to have
problems getting his work paid and was advised by M. Sack during the
construction process, to provide him with the invoices, that M. Sack would
increase the costs by $10 per hour and then get them paid. We assume that M.
Sack would then invoice SFN for the work. B. J ohnston advised that he did not
follow M. Sacks suggestion. He advised that:
MCCORMACK: Right.

JOHNSTON: But I know, again, you know, the big part of the project is to generate
work.

MCCORMACK: Mm hm.

11
JOHNSTON: ..so at that point, Mike Sack had been talked about all the way
through the project as a local contractor who could get involved in
excavating this thing. I was very supportive of the idea of using a local
guy. I dont really, Im not really in the business of running construction
equipment. I had a construction equipment business in Ontario for about
eight years which was a lot of fun. But thats not what I do now. But I do
have specific equipment for cranberry bed preparation. My bulldozer, for
example, has laser grading equipment which is just vastly more efficient
than what most guys have. Same thing, my excavator has a plough on it
for ploughing in the irrigation and the draining products. So, that was
really my only real interest in getting involved in the project was to do
those things. So I was very happy with the idea that Mike Sack would
headline things there. Interestingly through the almost year and a half, or
whatever, before we got rolling on the project, I traded voice mails with
him a couple of times. I think I actually spoke with him once on the
telephone trying to schedule meetings. Every time I went down there I
said, lets get together and see how this is gonna go together. And we
never met. It was not until things were actually moving along. I had, you
know, laid out an area that needed to be cleared and grubbed and, but
again, hed never met with me directly, but just gone through Jerry.
Finally I was actually on site one time and I said, I really, really need to
talk to Mike to find out, you know, what exactly his interest is in this. But
it had been obvious at that point, I think the project had been up and
running for a week or two, his guys were on site, but he hadnt been
there. He hadnt actually arrived on the job site. So. Which I thought
was a fairly interesting way to run a construction. As well, by that point in
time, hes got, I think at that point, John from Bedford Excavating
Services. Let me just put his name out of here. No, I never got his last
name. Bedford Backhoe Services. Ive got a telephone number, but no
last name for him. He had a couple of pieces of equipment there. Theyd
been working on some other projects on the site. And swung into gear
on this one. Anyway, so I did meet with Mike once in all the time that I
was down there. At his house. And at that point it was fairly obvious to
me that things were starting to get out of control. There was no control in
terms of budgeting, in terms of money. Yeah, we were a couple weeks
into it. I hadnt got paid of course, and so I discussed the issues of billing
and he said, well just send me the invoices and Ill mark them up. I think
it was ten bucks an hour or something of that nature, and submit them
and youll get paid, no problem. I said, well, thats not really the way that
this is going to work because I am involved in trying to make sure that
this thing is a success. So, Ive gotta make sure that I see whats going
on so that I have some semblance of control.
5.7 B. J ohnston advised that, through his companies, he invoiced SFN a total of
$120,528 for which he has not been paid. Of that total, he billed $46,058 from
J uly 9, 2011 to J uly 30, 2011 for excavation, land clearing and supervision.

12
5.8 Based on the above, the total cost of the cranberry bog to date is shown in Table
4 below:
Table 4: Cranberry Bog Cost to March 31, 2012
Description Amount
Excavating $ 434,768
Payroll 151,497
Legal 14,719
Consultants 12,450
Other 11,603
Total Paid 625,037
Excavating and consulting - Unpaid 120,528
Total Effective Cost $ 745,565
5.9 B. J ohnston advised that when he was last at the property in late 2011
approximately five acres had been cleared at that time. However, the property
needed additional work to be ready for planting and growing cranberries on the
cleared area.
MCCORMACK: At what percentage of completion do you think theyre at now? I know
you said that the land, from what you can tell, the land has been cleared.

JOHNSTON: For the first five acre bed, maybe fifty percent.

And

MCCORMACK: So about fifty percent completion. Dollar value?

JOHNSTON: Id have a hard time nailing down right now, you know, what it would take
to get it into production only because I havent been there since theyve, I
havent walked the site or done a level survey since these other
contractors got off. But after we left, John from Bedford Backhoe
Services and Mike Sack and his guys continued moving dirt around there
with no direction. So, you know, they had a general idea of what needed
to be done, but I, you know, stopped providing information because really
that was the only hammer that I had in terms of trying to get paid.
5.10 Although $745,565 has been effectively incurred, the bog is not operational. It
appears that much more work is required to fulfill the plan of having 25 acres in
production. The cost of the additional work and timeline to do so is unknown.
Conclusion
5.11 Due to the lack of supporting documentation and the indication that work
performed by Sacks Excavating was essentially performed by B. J ohnston, the
$434,768 paid to Sacks Excavating is considered questionable.

13
6 SNOWPLOWING
6.1 Based upon our review of available materials, Sacks Contracting and Sacks
Plowing have been providing snowplowing services for SFN without a contract
during the Period of Review. SFN attempted to have a bid process for the
snowplowing in 2008/2009 which was frustrated.
6.2 Prior to 2009 we understand that the snowplowing on the reserve was done by
two employees of Operations and Maintenance (O&M) with a Bobcat equipped
and a three ton truck both equipped with a plow. Both were owned by SFN and
used on an as needed basis. When the employees were not doing the
snowplowing they were employed doing other operations such as garbage
removal. When the Manager of O&M left the community for approximately one
year, and returned in late 2010, he discovered that the snowplow equipment had
been sold or given away. In addition, snowplowing had come under the control of
Housing. The Manager of O&M was under the impression that there was a 10
year contract for the snowplowing and did not question it. As he was not
responsible for the budget he did not monitor the expenses.
6.3 Documents related to the tendering of a snowplowing contract were found in the
records of Burchell MacDougall. In 2008, a memo was released which
referenced a Council Meeting on December 9, where the Council requested
invitations for tenders be issued for snow removal, salting, sanding roads/parking
lots/driveways. The bid process stipulates that the contract is from December
16
th
, 2008 until March 31
st
, 2009 for all main roads and subdivisions and lanes,
community parking lots/driveways, emergency responders driveways and
seniors, disabled, driveways. The memo does not indicate how much snow
must fall before snow removal is to take place. A copy of the memo is attached
as Exhibit 5.

14
6.4 The Band received five bids; J ohn Peter Paul, M. Sack, CJ Sack, CJ S Excavating
and Thomas Maloney (T. Maloney). However, a note on the bid from CJ S
Excavating indicated that it was not received on time, therefore not considered.
The bids can be summarized as follows:
Table 5: Snowplow Bids
Name Bid
M. Sack $1,070 for 107 and $2,080
for 208
1

CJ Sack $802.50 for 107 and
$1,560 for 208
2
CJ S Excavating

$124,750.00
T. Maloney $127,454.15
J ohn Peter Paul Total not provided

6.5 We understand that the tendering process failed and no bid was accepted.
Burchell MacDougall was asked to provide an opinion on the process. The
J anuary 14, 2009 opinion found that the process was fatally flawed and that the
bids were largely not comparable. The recommendation was to reject all
proposals and contact the four bidders who submitted their documents on time to
offer them the ability to re-submit bids. We are not aware if this was done.
Invoices and payment for snowplowing services prior to March 31, 2009 have not
been examined as they are outside of our Period of Review.
6.6 In addition to the Burchell MacDougall comments, we also note that the bids
attributed to M. Sack and CJ Sack are identical in formatting and the handwriting
appears to be the same, however the cost is different. According to corporate
searches, M. Sack was the owner of CJ S Excavating at the time.
6.7 The next reference to snowplowing was found in the Council Minutes dated
November 18, 2009. They refer to Gary Richards to complete a contract for snow
removal. Based upon the date of the meeting we assume that the contract would,
at a minimum, be for the winter of 2009/2010.
6.8 MNP was provided a Service Agreement between SFN and H. Sack dated
December 15, 2009 by Pink Larkin LLP. Pink Larkin LLP also provided a letter
from Alain Begin, the legal counsel of H. Sack in regard to the termination of the
snow contract. A copy of these documents is attached at Exhibits 6 and 7
respectively.

2
We believe that the reference to 107 and 208 refer to the number of homes or driveways to be
plowed.

15
6.9 The contract stipulates that this is a contract for the performance of a service and
Mr. Sack is engaged under the contract as an independent contractor for the sole
purpose of providing a service. The contract further stipulates
i) the Band will pay Mr. Sack upon acceptance of invoices for services
provided. The value of the monthly invoices submitted shall not
exceed forty thousand dollars ($40,000).
ii) Total amount of remuneration to be paid to Mr. Sack by the Band shall
not exceed ($158,000) one hundred and fifty-eight dollars per annum.
iii) The Contract is limited in term commencing on December 1, 2009 and
terminating on November 30, 2016
iv) The Contractor and the Band may, by mutual agreement, terminate
this Agreement upon ninety (90) days written notice delivered to the
other party.
v) An appendix titled Schedule of Remuneration indicates The months
of December, January and February will be billed at a flat rate of
$40,000 per month. March of each year will be billed at a flat rat of
$38,000. Snow removal outside of the billed months are included in
these costs., and
vi) The contract refers to the Contractors address shall be as it is stated
in the Registry of Joint Stock Companies records but there is no
referral to a corporation name within the contract itself.
6.10 The letter from Mr. Bgin of McLellan, Richards and Bgin Barristers and
Solicitors indicates that H. Sack did 85% of the work himself and that he leased
the equipment from Sacks Excavating. Although there is reference to a
termination of the contract the financial records reflect payments to Sacks
Plowing in fiscal 2010 which were primarily signed by M. Sack. In addition, the
financial records indicate that Sacks Excavating, a business associated to M.
Sack, has billed SFN for snowplowing services for the years ended 2011 through
2012.
6.11 Based upon a review of the general ledger and available supporting
documentation we note the following with respect to snowplowing:
March 31, 2010
The billing for the year ended March 31, 2010 consisted of five progress bills;
four for $30,000 and the last one for $38,000. Available invoices from Sacks
Plowing, cheque requisitions and cheque stubs are attached as Exhibit 8.

16
The registration of a business under the name of Sacks Plowing was not
found and the invoices do not list an address;
The progress billings indicate that the total amount spent on snowplowing for
the 2010 fiscal year was $158,000 whereas the financial statements report a
total expense of $120,000. The financial statements are prepared on an
accrual basis therefore the final payment was recorded in the 2011 fiscal
year. It is likely that the final draw was not set up as an accrual. One reason
for this could be that the contract was not available to refer to and the invoice
does not indicate when then work was performed;
Of the cheque requisitions obtained, J . Hayes approved all the payments.
There is no evidence of any other approval from the O&M Manager or the
Housing Manager;
None of the cheque requisitions refer to a purchase order or work order.
Although the description of services rendered refers to a snow contract H.
Sack signed the cheque requisition for draw #2 as the person who received
the payment. M. Sack signed the others; and,
The invoice and cheque requisition for the first draw was not located,
however the general ledger record shows that cheque #24568 in the amount
of $30,000 was issued on J anuary 7, 2010 to Sacks Plowing.
March 31, 2011
No invoices or cheque requisitions were found for the year ended March 31,
2011;
As noted in the 2010 financial statements, the amount reported is based
upon the payables recorded in the general ledger. In the case of fiscal 2011,
the last draw from 2010 in the amount of $38,000 was added to the first four
draws recorded for 2011; and,
Looking at the transactions on a cash basis, the general ledger indicates that
two cheques were issued totaling $158,000 as follows:
o December 17, 2010, cheque #38221 for $30,0000 to Sacks Plowing;
and,
o March 31, 2011, cheque #40674 for $128,000 to Sacks Contracting.
March 31, 2012
One invoice was located with respect to snowplowing for fiscal 2012. Invoice
16042012snow, dated April 16, 2012 in the amount of $133,000 is attached
as Exhibit 9;
The invoice refers to the snow plowing and salting services contract, Winter
2011/2012. The amount of this invoice is net of a payment of $25,000

17
which was made on December 13, 2011. Cheque #49277 was recorded in
the general ledger as paid to Sacks Plowing New contract 2011-2012;
The new contract referred to on the invoice and in the general ledger has not
been found;
Invoice 16042012snow was effectively settled by M. Sack offsetting the
amount against fishing revenue owed to SFN. The application of this
amount is discussed in the Fisheries Appendix, Appendix 9; and,
Although the invoice for 2011/2012 totals $158,000, the final payment from
2010/2011 in the amount of $38,000 was effectively expensed in 2011/2012.
The difference of the $38,000 is a timing difference for reporting purposes.
In effect, $158,000 was paid in each of the three years reviewed, for a total
of $474,000.
Conclusion
6.12 Based on the above, the total cost of snowplowing for the three year period was
$474,000.
6.13 We believe that Mike Sack has an interest in Sacks Plowing and owns Sacks
Excavating. This belief is based on the following:
i) The initial invoices under the Sacks Plowing letterhead were signed by
Henry Sack and then only by M. Sack after February 2010.
ii) M. Sack invoiced the Band using Sacks Excavating letterhead in 2011
and 2012. These invoices were not in relation to snowplowing;;
iii) M. Sack applied monies owed for snowplowing against monies he
owed the Band for fishing revenues.
6.14 It does not make sense that the snowplowing contract would be reviewed and
authorized by the Housing department. Operations and maintenance historically
was responsible for this area and would have the expertise to determine the
condition of the roads, the responsiveness of the snowplowing contractor and the
effectiveness in the community. We were not advised of the rationale for the
change of responsibility to Housing. We note that D. Gloade, the Housing
Manager at the time was also an employee of M. Sack. This is a serious risk to the
organization and potential conflict of interest for D. Gloade.
6.15 The contract was signed by H. Sack but M. Sack did the majority of the invoicing
and received most of the payments for the snowplowing. M. Sack is not
referenced in the contract and appears to have circumvented the bid process he
engaged in the year previously. M. Sack was a member of Council and did not
declare his conflict of interest in regard to this contract.

18
7 WALLACE HILLS
7.1 The lands of Wallace Hills were awarded to SFN by the Federal Government on
March 10, 2011 as Wallace Hills Indian Reserve no 14A in Nova Scotia,
consisting of 54.799 hectare (135.35 acres) excluding mines and minerals. The
Band had been negotiating for these lands since the 1960s.
7.2 M. Sack was a member of the Wallace Hills Development Committee (the
Wallace Hills Committee) created by Council and noted in the minutes of J uly 9,
2009.
7.3 In an interview with J . Hayes he was asked about the incorporation of MRJ J , he
indicated that it was a condition of Aboriginal Affairs Northern Development
Canada (AANDC) that a corporation be formed to handle all the economic
development related to Wallace Hills. He further indicated that the funds
generated from the tobacco rebate program with Loblaw Companies Limited
(Loblaw) were to be used for the Wallace Hills Development.
7.4 The Council Minutes on April 12, 2011 indicate that there was a meeting about
[the] layout of land architect for Wallace Hills. At this same meeting, there was a
motion to remove M. Sack from the Wallace Hills Committee however, the motion
was defeated. We were advised that the motion was presented because of M.
Sacks involvement with MRJ J and the proposal for Wallace Hills at the time.
7.5 The Council Minutes on J une 7, 2011 indicate that M. Sack approached the Band
in regard to constructing a building on the Wallace Hills property. His plan was
called the Wallace Hills Entertainment Centre. A motion to accept the proposal
and work on an agreement at the same time was initiated by Councillor R.
Augustine and seconded by Councillor Ian Knockwood.
7.6 The Council Minutes on August 5, 2011 indicate that SFN passed a Band Council
Resolution (BCR) that stated any band developments involving gaming matters
will be with 100 per cent ownership of the band unless otherwise with full
community support through a community referendum.
7.7 The following are transactions and documents detailing the involvement of M.
Sack with the development of Wallace Hills.

19
Sacks Excavating Invoice 20120104
7.8 Invoice 20120104 dated J anuary 4, 2012, from Sacks Excavating (refer Exhibit
10) is for blueprint drawing regarding the Wallace Hills Entertainment Centre
from Harvery Mackenzie Architects as approved by Council in the amount of
$60,000 was identified in J uly 2013 through inquiries by the auditors. We
reviewed the Council Minutes from J uly 28, 2011 until February 28, 2012 and
found no instance of Council discussion or approval of this invoice. We further
contacted the third party managers of SFN who advised that Council was not
aware of Harvery Mackenzie Architects or having requested M. Sack to conduct
this or any blueprints received. We understand that this invoice has not been
paid or recorded as a payable.
7.9 MNP conducted Internet research and identified Harvey and Mackenzie
Architects conducting business at 5531 Cunard in Halifax Nova Scotia which we
believe to be the company indicated above.
Pockwock Road Property
7.10 MNP was advised that SFN had purchased an acre section of land, Property
Identification (PID) #00423335 (Pockwock Road Property) from M. Sack in
November 2009 and that he had bought it only four months prior to the sale to
SFN. The lot is now considered part of or close to the Wallace Hills reserve
lands.
7.11 In an email from G. Richard to Thea Langille, from the Planning Department of
the Halifax Regional Municipality (HRM), dated May 14, 2012, G. Richard
indicated that he had attached a survey plan of the Wallace Hill Reserve.
Reserve 14A consists of Lots 325, 327, 328 and 330. The survey plan and legal
description notes that all watercourses remain under provincial jurisdiction. As
you can see, Reserve 14A straddles the Hammonds Plain Road, has access to
Pockwock Road via a non-Reserve property purchased in fee simple by the Band
contemporaneous with the addition to Reserve in March 2011. This property is
assumed to include the Pockwock Road Property.
7.12 MNP reviewed the Nova Scotia online land registry and noted that the Pockwock
Road Property abuts the reserve land to the northeast and appears to be a
strategic location which could provide access to the MicMac Rd residential area.
Image 1 below is a map of the area obtained from the land registry. The black
outlined property just above the words Hammond is the area identified as the
Pockwock Road Property.

20
Image 1: Pockwock Road Property Map

7.13 The assessment value of the Pockwock Road Property as per Nova Scotia
Online was $40,500 in 2012 and $42,800 in 2013 (refer Exhibit 11).
7.14 Exhibits 12 to 14 contain land registry information for the Pockwock Road
Property which shows the historical ownership as follows:
J anuary 1999 - the property was sold by Susan Wenning Cameron, J oan
Wenning McMillan and Andrew S Wenning to Ramar Developments (refer
Exhibit 12);
J uly 23, 2009 - Ramar Developments sold the property to M. Sack (refer
Exhibit 13); and,
October 7, 2009 - M. Sack sold the property to SFN, however, the
transaction was not registered until November 27, 2009 (refer Exhibit 14).
7.15 MNP contacted Ramar Developments Chris Marchand, who advised that the
land was sold to M. Sack for $40,000 in J uly 2009. A review of the general ledger
showed that a $65,000 cheque was drawn on the CIBC Administration account
on September 11, 2009. Cheque number 21321 was paid to Carruthers and
MacDonnell and the memo field refers to Wallace Hills. Carruthers MacDonnell
and Robson is a law firm situated in Shubenacadie Nova Scotia. The cheque
requisition describes the payment as for Wallace Hills Land and is approved
for payment by J . Hayes. The cheque advice, requisition, and letter confirming
the payment from Carruthers and MacDonnell are attached as Exhibit 15.

21
7.16 In addition to the purchase of the land, a payment of $229.26 to HRM for
delinquent 2009 property taxes was found. The invoice, attached as Exhibit 16,
indicates that the taxes were delinquent as of October 12, 2009, effectively five
days after the property was purchased. Based on the documentation obtained to
date it is not clear if the taxes were the responsibility of SFN or the previous
owner(s).
7.17 MNP reviewed the Council Minutes from April 2009 until J anuary 2010 and there
is no notation of a BCR or discussion in regard to the purchase of this land from
M. Sack. There is also no discussion about the necessity to purchase this acre of
land. M. Sack was a councillor with SFN commencing in J une 2009 and was
present for a number of Council Meetings when the discussions were occurring
with respect to the Wallace Hills Development and was also a member of the
Wallace Hills Development Committee.
7.18 Based upon the available documents, it appears that M. Sack realised a profit of
approximately $25,000 ($65,000 - $40,000) in the sale of the Pockwock Road
Property while he was a Councillor and member of the Wallace Hills
Development Committee. We did not find any disclosure to Council or the
Community of this transaction and the parties involved. It is not known if the
amount paid by SFN was fair market value as there is no indication that the
property was appraised by a third party.
7.19 Absent further information we consider the profit and payment of the delinquent
property taxes totalling $25,229 questionable.
Wallace Hills Plans
7.20 We are aware of two submissions by M. Sack for the development of Wallace
Hills. They are as follows:
Memorandum of Understanding (refer Exhibit 17), and,
Development and Management Agreement (refer Exhibit 18).
7.21 The Memorandum of Understanding was not dated and was based upon a ten
year management agreement where M. Sack would construct the building but the
Band would own the building. In the agreement M. Sack would receive 20% of
the gross revenue from all operations at the business over the term of the
agreement. This agreement was not executed.
7.22 The Development and Management Agreement is dated J une 2011 and the
terms included the following:
The construction of a facility to be utilized and operated for the purposes of
housing video lottery terminals;

22
Retention of the Developer [M. Sack] for the purposes of developing and
constructing the Facility as well as to manage and operate the Facility; and,
A fifteen (15) year exclusive licence as well as the operation of forty-five (45)
VLTs on site.
7.23 There are sections in the contract that appear to give a great financial advantage
to M. Sack, including:
Section 3.7 - provided that it fulfills its obligation to pay the Monthly License
Fee to the Band, the Parties hereby agree that the Developer shall be entitled
to all of the net revenue derived from the Business during the course of the
term; and,
Section 3.8 - notwithstanding any other provision of this Agreement,
including section 2.4 hereof [refers to ownership of facility] for the purposes of
permitting the Developer the better assurance of its rights under this
agreement, the Band shall, on the written request of the Developer, provide
the Developer with a certificate of possession, or other similar instrument or
declaration, in respect of the Subject Land for the Term.
7.24 This agreement was never signed as we understand that the Community raised
concerns over the ability of M. Sack to obtain a Certificate of Possession on the
land and the revenue sharing he was proposing.
Wallace Hills Expenses
7.25 Amounts recorded to account 5331, prior to adjustment for financial statement
purposes were as follows:
Table 6: Payments re: Wallace Hill s
Payments 2010 2011 2012 Total
MRJ J $ 38,682 130,755 - 169,437
Land 65,000 - - 65,000
Legal 16,825 20,487 22,617 59,929
Sacks Contracting /
Excavating
7,765 - 28,524 36,289
Marketing 12,657 - - 12,657
Audit - - 2,200 2,200
Amcrest 845 900 - 1,745
Other 10,548 5,090 4,079 19,717
Total $ 152,322 157,232 57,420 366,974

23
7.26 The payments to Sacks Contracting in 2010 and Sacks Excavating in 2012
totalling $36,289 are related to single invoices recorded on J uly 9, 2009 and
September 6, 2011, respectively. We have not located the invoice for J uly 9,
2009, therefore it is not known what the charges were for and why the amount
was capitalized. Invoice 20110074wall in the amount of $28,524 from Sacks
Excavating is dated September 6, 2011 and attached as Exhibit 19. The
charges are for plan preparation, labour, machine time and materials. However,
the details (hours and rates) of the charges are not set out in the invoice and the
invoicing follows the submission of proposals in April and J une for the project.
Concerns have been raised that the invoice represents M. Sacks cost to prepare
the proposal for Wallace Hills. If that is the case then it is highly unusual for a
proponent to charge for preparation of a proposal. Pending the receipt of the
2009 invoice and confirmation of the work performed we consider these amounts
questionable.
Conclusion
7.27 Based upon our review of the transactions related to Wallace Hills, M. Sack and
the M. Sack Companies we consider the following amounts to be questionable:
Table 7: Wallace Hill s Questionable Amounts
Description Amount
Pockwock Road $ 25,229
Sacks Contracting unsupported payment 7,765
Sacks Excavating invoice #20110074wall 28,524
Total $61,518

24
8 FISHERIES
8.1 SFN manages two main fisheries; a ceremonial food fishery (Food Fishery) and
a communal commercial fishery (Commercial Fishery). The two fisheries are
administered under agreements with the Department of Fisheries and Oceans
(DFO) on behalf of the Government of Canada. Licences are granted to the
Band under these agreements.
8.2 The Commercial Fishery is represented by licences assigned by the DFO to SFN.
They are managed by SFN with the oversight of the DFO. These licences can be
used by Band members or leased to third parties. We understand that there is a
requirement for the individual holding the lease to be a licensed boat captain.
8.3 Through various interviews and review of the Council Minutes, we understand
that the Council directs how the licences will be issued and the lease amount per
licence. The Fisheries Manager is then responsible for the management of the
licences, including the collection of revenue and managing the first nation crews.
The licences include lobster, snow crab, swordfish, scallop, herring and
groundfish.
8.4 The crew of the boats fishing the SFN licences are to be made up of members of
SFN. We understand that the terms of the lease for lobster licences require the
company or person who fished the licence to submit 24% of the value of the
catch to SFN. There would typically be three crew members, therefore SFN
would in turn issue a third of the 24%, or 8%, to each crew member.
M. Sack and Mainland Juggage Role in Fisheries
8.5 M. Sack operates Mainland J uggage and we were advised that Mainland
J uggage purchases catch from the snow crab and lobster fisherman and acts as
a middleman for Wedgeport Lobsters Ltd. (Wedgeport Lobsters). Wedgeport
Lobsters is owned by Reginald Leblanc (R. Leblanc) and sells the lobsters at
market.

25
8.6 We reviewed a newspaper article from the J une 2012
3
8.7 According to the news article M. Sack acted as the broker in the deal to sell the
lobster to Wedgeport. It further states that M. Sack may have received a
handling fee with LeBlancs lawyer suggesting that the sales were used for Band
purposes. We are not aware of any funds flowing to the Band from M. Sack or
Mainland J uggage for fisheries outside of the payment for the commercial
licences and payroll.
Yarmouth County
Vanguard that indicated that M. Sack and R. Leblanc were charged as a result of
a search and forensic audit conducted at Wedgeport Lobsters in J uly and August
2010. The audit revealed that lobster that had been caught as a part of the food,
social and ceremonial fishery had been sold. This is in reference to food fishery
licences. SFN and DFO had an agreement to bring together 81 of the individual
two pot licences to create one overall community licence that had a daily trap limit
making it easier for DFO to manage and monitor.
8.8 R. Leblanc was fined $15,000 and M. Sack was fined $5,000 after they entered
guilty pleas of buying, selling, trading or bartering lobster without a licence.
8.9 MNP contacted Terry Zinck (T. Zinck) who operates Xsealent Seafood
Company (Xsealant Seafood). T. Zinck advised that his company has been
leasing lobster licences from SFN, via M. Sack (or Mainland J uggage), for a
number of years. He advised that:
They have leased four (4) licences in the past but in the past couple of years
have only leased one (1);
Xsealent Seafood leases the licences directly from M. Sack who approached
them. They paid $30,000 for the lease. T. Zinck indicated that his company
provides 6% of the catch revenue to M. Sack for each crew member;
Xsealent Seafood also pays M. Sack $0.40 per pound for the landed catch
as a commission;
Xsealent Seafood sells the lobster to its vendors. T. Zinck stated that M.
Sack does not buy seafood;
Xsealent Seafood does a direct deposit to an account (it is assumed this is
the account of M. Sack) for the crew percentage and the commission; and,
T. Zinck does not know M. Sack personally and has only dealt with him once
or twice.

3
http://www.thevanguard.ca/News/Regional/2012-06-18/article-3011241/$20,000-in-fines-in-
lobster-case/1

26
8.10 T. Zinck stated that when he approached Council, they were concerned that M.
Sack paid $20,000 for the licences and were not aware of the commission he was
receiving. T. Zinck indicated that it is not unusual for third parties to act as
brokers and to receive commissions to pay for the crews and their expenses. We
have not reviewed the invoices of T. Zinck at the time of this Report.
8.11 We are aware that SFN has a Fisheries Manager and completes all payroll for the
crew members assigned to the fishing vessels. Therefore, it is not known why
the Fisheries Manager did not or could not have set up a direct relationship with
Xsealant Seafood for the Band.
Fishing Licence Revenue
8.12 In the next section, we will discuss three principal areas;
Amounts owing by Alex McDonald Sr. (A. McDonald) from his loan from
SFN;
Lobster licences; revenues and issues; and,
Snow crab licences; revenues and issues.
A. McDonald - Loan
8.13 At the November 17, 2009 Council Meeting, A. McDonald requested a loan of
$20,000 to lease a commercial licence (refer Exhibit 20). A. McDonald was a
Councillor at the time and left the room during a discussion of the request. The
minutes reflect a revision to the request as follows:
REVISED: asking for an additional 15K to pay Mike Sack and he will make
payments on the 20K fisheries license as well.
8.14 We note that M. Sack was a Councillor at the time of this meeting and there are
no notes of M. Sack exiting the room while this motion was discussed and voted
on. The motion was passed with six votes for and five votes opposed. The
minutes do not indicate if M. Sack voted or not, however according to the
minutes, there were 12 Councillors at the meeting and only 11 voted, therefore it
is plausible that M. Sack did not vote.
8.15 The $15,000 amount to pay M. Sack was paid from SFN funds directly to M. Sack
and the repayment has been discussed in the Fisheries Appendix, Appendix 9.

27
Lobster Licences
September 2011 M. Sack all LFA Licences
8.16 In Council Minutes for September 13, 2011, a financial update was provided by J .
Hayes where it was noted that there was no funding for payroll, LSK
4
8.17 A Fisheries Lease Agreement between SFN and M. Sack dated September 14,
2011 (refer Exhibit
and Admin
and that the Council would have to worry about welfare within the next week.
J erome Paul (J . Paul) was summoned to the meeting to discuss what could be
done for payroll etc. A motion was then passed with respect to the fisheries
licences where it was agreed to lease the fisheries licences for $40,000 each and
a 24% allocation of catch revenue to SFN to pay for labour costs. There is no
indication in the minutes of who the licences would be issued to and there is no
distinction made between the lobster licences and other licences.
21) was located in the records. The agreement appears to
reflect the Council Minutes from September 13, 2011 and is signed by Chief
Sack, seven Councillors and J . Hayes. The document does not bear the
signature of M. Sack. The agreement provides for the lease of all licences for
LFA 34 (9 licences) and LFA 35 (3 licences) for the 20112012 Lobster season
for $40,000 each. Therefore, M. Sack was to pay SFN a total of $480,000;
$240,000 was due immediately, $60,000 no later than October 14, 2011 and
$180,000 no later than November 25, 2011.
8.18 An email exchange between J . Hayes and G. Richard, legal counsel to SFN, on
September 14, 2011, attached as Exhibit 22, confirms that the agreement relates
to lobster licences only. In the last email sent by G. Richard at 3:42 PM, he says
that J . Paul has advised that all the captains that would have been licensed, are
financed through M. Sack, so whether the band deals with Mike directly or
through Captains, it is essentially the same transaction.
Lobster revenue
8.19 Based upon the general ledger, catch revenue in relation to Mainland J uggage is
broken down as follows:
Table 8: Sources of Lobster Revenue
Licensee 2010 2011 2012 Total
Mainland J uggage $ 214,472 405,794 347,105 $ 967,371

4
LSK is the Lnu Sipuk Kinamuokuom.

28
8.20 We note the following with respect to lobster revenue:
SFN entered into an agreement with Mainland J uggage to lease three LFA
35 licences and nine LFA 34 licences (refer Exhibit 21), for the 2011 2012
lobster season, for a total of $480,000:
o $240,000 to be paid on September 15, 2011;
o $60,000 no later than October 14, 2011; and,
o $180,000 no later than November 25, 2011.
In reviewing how the $480,000 was settled, we identified a payment of
$240,000 on September 15, 2011. Our review of the records indicate that
$200,000 of the outstanding $240,000 was offset against amounts that M.
Sack claims was owed to his other companies by SFN (refer Exhibit 23).
We have not identified how the remaining $40,000 was settled;
Lobster wages should approximate lobster catch revenue. A comparison
between catch revenue and wages identified that wages were significantly
higher than reported revenues during the years ended 2011 and 2012. This
is inconsistent with our expectations that wages should approximate revenue
earned:
Table 9: Comparison of Lobster Catch Revenue and Lobster Wages
Description 2010 2011 2012
Lobster catch revenue $ 255,126 343,841
(1)
347,105
Lobster wages (261,797) (536,808) (564,430)
Difference $ (6,671) (192,967) (217,325)
(1) This amount includes an audit adjustment in respect of unreconciled bank balances, writes offs
of balance sheet items and other which lowers total revenue by $83,796. This is why this
balance is lower than revenue earned from Mainland J uggage in Table 8 above.
8.21 Based upon the summary comparison above, we have attempted to reconcile the
differences between salaries paid and reported revenue in Table 9 above.
Documentation with respect to catch revenue is voluminous, consequently we
have performed testing on a sample basis of the available documentation. The
following were sampled:
Invoices from licensees setting out catch weight, catch price and crew share;
SFN payroll records including payroll calculations and cheque payments;
and,
DFO Lobster Buyer Summaries (DFO Landing Summaries) which set out,
by vessel, the weight and value of lobsters landed.

29
8.22 Our review of the above documents noted that payroll records were not always
complete, for instance some did not detail the catch weight, and others did not
have invoices from licensees attached to the records. We would expect this
information to be attached to the payroll records as catch revenue forms the basis
for the calculation of amounts payable to the crew.
8.23 In order to reconcile the differences in Table 9 above, we considered calculating
expected revenue based on amounts paid for payroll, i.e. assuming wages are
correctly calculated, then revenue should approximate wages paid. However,
there is uncertainty as to whether the records, which form the basis of payroll and
which are provided to SFN by the licensee, report accurate landing weights.
8.24 To confirm the accuracy of reports from the licensees, we compared catch
weights in the DFO Landing Summaries to those found in the payroll records.
We compared the records for October 2010, December 2010 and J anuary 2011.
The comparison showed that the DFO records had much higher landed weights
than those reported to SFN. However, in a number of cases, the licensee
reported landed weights to SFN which do not appear in the DFO records. Absent
any further information, it appears that not all licensees are reporting catch
weights to the DFO and not all licensees are reporting the correct catch weight to
SFN. Additionally, one sample indicates that revenue due from the licensee was
higher than 24% of the catch. It is not known why this occurred
5
8.25 Due to the variations in the reported catch weights, it is not possible to test for
unaccounted revenue based on SFN payroll, or based on the DFO records. We
note that the disparity between reported lobster revenue and wages could include
the following:
.
Monies not received from licensees;
Wages not being properly calculated resulting in overpayment of wages; or,
A mixture of both.
8.26 In each of the above circumstances, SFN suffers a loss where wages are
significantly higher than revenue. This imbalance is reported in the financial
statements for the years ended March 31, 2011 and 2012. Due to incomplete
payroll documentation and uncertainty as to the accuracy of catch weights
reported by the licensees to SFN, we are unable to quantify the losses due to this
imbalance.

5
We also noted that the price per pound listed in the payroll records did not always reflect that
reported by the DFO. Despite this, we assume that the prices used for payroll purposes are
based on an agreed price between licensees and SFN.

30
8.27 An examination of the Mainland J uggage records would be required to determine
the reason for the disparity.
Snow Crab Licences
8.28 Based upon the available records, crab licences/quotas were leased to Cheryl
Maloney (C. Maloney) for the 2009-2010 and 2010-2011 fishing seasons and
then M. Sack for 2011-2012. Although C. Maloney was granted the
licences/quota the records indicate that she was required to sell to M. Sack. A
summary of the history of the licences for those years follows.
C. Maloney Crab Licence 2009-2010
8.29 In February 2009 Chief Sack issued a letter stating that C. Maloney will have
access to snow crab quota and lobster licences (refer Exhibit 24). Following
that, C. Maloney submitted a Project Proposal for Crab Fishing Operations under
the name Chase Fisheries to the Council at the April 22, 2009 Council Meeting
(Exhibit 25). The project proposal outlined two options for C. Maloney to obtain
a SFN snow crab licence. A motion was made to accept the proposal submitted
by C. Maloney. All members present at the Council Meeting were in favour of the
motion and although it was passed, the Council Minutes do not specify if Option
1, a straight buyout per pound, or Option 2 fixed rate was accepted by Council.
Manual notes on Exhibit 25 indicate that Option 2 was preferred for two years at
a time.
8.30 On August 3, 2009 C. Maloney sent a letter (refer Exhibit 25) to the Council
requesting clarification on the snow crab fishing arrangement. Her main concern,
among others, was regarding instructions she received from the Council to sell
her catch to Mainland J uggage due to a perceived conflict of interest. There is no
indication in the minutes that C. Maloneys concerns were addressed at this time
and if so, how.
C. Maloney Crab Licence 2010-2011
8.31 During the Council Meeting on April 6, 2010 C. Maloney offered to lower her rate
she receives from the Band to $0.60 per lb from $0.65 per lb and expressed her
concerns about selling to M. Sack, aka Mainland J uggage. Various accounting
documents were presented during the Council Meeting by C. Maloney to explain
her concerns; however, they were confusing to the Council and it was agreed that
Shawn Fitzgerald, accounting clerk, would have a more in-depth look at the
numbers and explain them to Council. A motion was made to give C. Maloney
the crab quota at $0.60 per lb and she would supply the fuel, bait, gear, lodging
and all other expenses and the SFN would pay only the all native crew.

31
8.32 It is not known if Shawn Fitzgerald completed this task prior to the termination of
his employment in J uly/August 2010. There is no reference to a Fitzgerald
analysis in the Council Minutes after April 2010.
8.33 After the motion was passed, the Council revisited the crab discussion. A request
was made by a Council member for clarification as to why C. Maloney must sell to
Mainland J uggage and that G. Richards send/draft a letter stating the sell price to
Mainland J uggage must be at a competitive rate. It is not known if this letter was
drafted or issued.
M. Sack Crab Licences 2011-2012
8.34 BCR 2010-2011-54, dated March 2011 and titled Crab Quota - Mainland
J uggage was identified in the BCR Register as dated March 2011. This is
attached as Exhibit 26 and states Shubenacadie First Nation Agrees to sell
their 2011 snow crab quota to Mainland Juggage (in the water) for a total of three
hundred and seventy-one thousand dollars, $371,000.
8.35 During the September 20, 2011 Council Meeting, a motion was made to allow the
Band to borrow money from M. Sack with the revenue from snow crab quota
being used as collateral. This motion was defeated.
8.36 Snow crab revenue during the year ended March 2012 was based on a flat in the
water price. This is inconsistent with the 2011 and prior period which was based
on the shore price less boat owner costs (the 2011 revenue formula). Upon
entering into the agreement the $371,000 was received which was prior to the
commencement of the snow crab fishing season. In the prior years, revenue was
received once catches were landed.
8.37 The accounting records indicate that $371,000 was paid into the Tobacco Shop
bank account (RBC account 131-124-0) (Tobacco Account) on March 15, 2011.
The total deposited was $459,315
6

6
Although the accounting records indicate that $371,000 is included within the deposit, we have
been unable to review the deposit slip or other similar documentation to confirm that this is the
case.
. On the same day, $474,640 was paid to
Atlantic Wholesale, we assume to settle debts owed with respect to tobacco
purchases. It is not known why fisheries revenue was paid into the Tobacco
Account or why other funds were not used to settle amounts owed to Loblaw. It
is also not known what circumstances led to the agreement to sell the quota in
advance rather than continue with the 2011 revenue formula.

32
8.38 Based on catch weights reported to SFN by Mainland J uggage, the sale of the
entire snow crab quota for 2012 represents a price of approximately $1.10 per
lb
7
8.39 We have considered the impact of entering into this agreement compared with a
continuation of the 2011 revenue formula. We calculate that as a result of
entering into the agreement, there is a potential difference between actual and
achievable gross profit as follows:
. Consistent with the year ended 2011 crew wages of $0.28 per lb were paid
out of this sales price, leaving SFN with a gross profit from snow crab of $0.82
per lb. This gross profit compares favourably with the amounts achieved in the
years ended 2010 and 2011, $0.21 per lb and $0.57 per lb, respectively.
Table 10: Actual and Achi evable Snow Crab Gross Profit per pound
Description 2012
Snow Crab price per PEI Fish Report $3.25
Less: $0.60 per lb for boat owner (0.60)
Less: $0.28 per lb for crew wages (0.28)
Achievable gross profit 2.37
Actual gross profit (0.82)
Potential difference in gross profit $1.55

Catch weight reported to SFN (lbs) 336,776.88
Potential additional profit $522,004

8.40 Although the circumstances leading to the agreement with Mainland J uggage are
not known, based on Table 10 above, should SFN have retained the 2011
revenue formula, it would have achieved a further $522,004 of gross profit
7
. It is
not known whether the potential difference of $1.55 per lb was retained by
Mainland J uggage.
8.41 Finally, we have compared total catch weights reported to SFN by Mainland
J uggage with those listed on the Snow Crab DFO Landing Summary of
374,143.41lbs. Mainland J uggage reports a total catch weight of 37,366.53lbs
less than the Snow Crab recorded on the DFO Landing Summary.
8.42 Although the payroll records indicate that the buyer was Mainland J uggage, the
Snow Crab DFO Landing Summary states the buyer is Three Ports Fisheries
Limited. The reason for selling the 2011 quota to Mainland J uggage if the
ultimate buyer was Three Ports Fisheries Limited is not explained in the records
of SFN.

7
Based on total catch weight of 336,776.88 lbs reported to SFN by Mainland J uggage.

33
8.43 Finally, during the year ended 2011, we noted the following unsupported
miscellaneous expenses which are considered questionable:
$18,125 paid to Mainland J uggage for snow crab; and,
A payment of $40,000 dated February 18, 2011 to Mainland J uggage. The
transaction description states Snow Crab Quota; however we have not
identified any supporting documents for this transaction. We do not know
why the payment was recorded in revenue, rather than expense.
Other
8.44 As indicated above, Mainland J uggage was the organization which contracted
with SFN for the purchase of commercial lobster licence and snow crab quota yet
the ultimate buyers were third parties as listed on the DFO records. It is not
known why the Fisheries Manager or Council would not have investigated dealing
directly with the third parties or through a tendering process to ensure that the
revenue from the commercial quotas was maximized.
Conclusion
8.45 There are unreconciled differences between lobster catch revenue and lobster
wages. We have been unable to reconcile these differences due to incomplete
records and lack of documentation. We also note that there are discrepancies
between landing weights reported by DFO and those reported to SFN. An
examination of the Mainland J uggage records would be required to determine the
reason for the disparity.
8.46 The Band missed out on revenue of approximately $522,000 when the Council
agreed to sell the 2011-2012 crab quota to Mainland J uggage for a flat fee in the
water. The decision to change the revenue formula in 2012 is an anomaly when
compared to the prior and subsequent years.
8.47 Similarly to our findings with respect to lobster catch weights, there are
discrepancies between landed snow crab weights reported by DFO and those
reported to SFN. An examination of the Mainland J uggage records would be
required to determine the reason for the disparity.
8.48 The payments to Mainland J uggage for snow crab of $40,000 and $18,125, a
total of $58,125, are unsupported and therefore considered questionable.

34
9 CAPITAL AND HOUSING
9.1 SFN Housing was managed by D. Gloade from May 2009 until December 2012,
when he resigned. D. Gloade now works for M. Sack on a full-time basis. SFN
Housing operations consisted of the construction and property management of
SFN housing.
9.2 It is our understanding that during the Period of Review, SFN planned five
housing projects to construct 31 houses, also referred to as units, on Band lands.
The first was a 10 Unit Project and the second a 13 Unit Project. The 10 Unit
Project was started prior to our Period of Review. The 13 Unit Project was
contracted to Wekatesk Planning and Development (Wekatesk), a business that
Councillor Thomas Maloney (T. Maloney) has an interest in. The remaining
three housing projects were planned for a total of eight units. Construction
related to these units appears to have been done in part by M. Sack companies.
No contracts were found in relation to these homes but the largest amounts paid
to a contracting company were paid to a combination of Sacks Contracting and
Sacks Excavating.
9.3 During our review of the records, it was not apparent that budgets and project
files were maintained for these houses. Absent project files, we reviewed the
Council Minutes, BCRs and other documentation to understand the development
of these sites. Table 11 below is a summary of the timeline of events from these
records related to the construction of the housing projects:
Table 11: Housing Project Construction Timeline
Date Event Reference
Apr 8, 2009 Letter from CMHC re: 2007/2008 Project 13 Units.
The letter indicates that the 13 Units had not been
started.
Letter (refer
Exhibit 27)
May 6, 2009 Invoice 2009-001 from Wekatesk and related
documents referencing the construction of 13
homes at various locations on the Nation.
Invoice (refer
Exhibit 28)

May 19, 2009 M. Sack and Pat Gehue ask for some work on the
new housing units; however, they dont get along
with the contractor, T. Maloney. According to the
minutes after a lengthy discussion, an altercation
took place between Pat Gehue and Councillor
Thomas Maloney.
Council Minutes
May 26, 2009 Request for proposal to fill, fine grade, driveways
and landscaping for the ten new homes
constructed in SFN. The bid form documents are
available for pick up commencing on May 26,
2009 with a closing date and time of May 29, 2009
at 11:00 am.
Bid Call
Notification for
RFP-09-01 (refer
Exhibit 29)

35
May 29, 2009 Bid proposal from Sacks Excavating bidding
$60,220 for RFP-09-01, for fill, fine grade,
driveways, landscaping of 10 new homes.
Bid Form RFP-
09-01 (refer
Exhibit 29)
J un 23, 2009 Council requests an update on the 10 housing
units under T. Maloneys direction. The minutes
state that Gary [Richard] will give Council the
breakdown of the budget for these 10 units at the
next meeting. According to the minutes there is
no reference to the follow up.

The first 10 housing units are completed and the
next 13 are ready to go. Council passed a motion
to put the 13 housing units on hold for 2 weeks
until a project management contract with T.
Maloney is completed. J . Hayes was to meet with
T. Maloney to discuss the details.
Council Minutes
Sep 9, 2009 Quote from Wekatesk for upgrades for heating to
the 13 Unit Project.
Quote (refer
Exhibit 30)
Dec 15, 2009 T. Maloney provided an update on the
construction of the 13 homes. The major concern
was that the 13 houses would not be finished by
March 31, 2010, as it was determined that they
had completed 48% of the construction, and
CMHC stated that all homes were to be
completed by March 31. T. Maloney stated
several times that the houses will be completed
on time.

The question of a contract was raised and the
minutes reflect the confirmation of the Chief that a
contract was signed. It is assumed that the
minutes are referring to a contract between T.
Maloney and SFN. If there was a contract none
was readily identified.
Council Minutes
Dec 16, 2009 BCR to request an Accountable Advance for 75%
funding of the capital costs of two (2) housing
units. Capital costs are budgeted at $265,650.
BCR 2009-2010-
016 (refer
Exhibit 31)
J an 5, 2010 J . Hayes presented a BCR requiring signatures to
obtain 75% capital funding for two special houses.
Council Minutes
Feb 2, 2010 Concerns were raised regarding the status of the
13 house project. T. Maloney was summoned to
the Council Meeting, however, it is not noted if he
attended or what discussion was held.
Council Minutes

36
Feb 23, 2010 The housing / funding situation was worked out
with CMHC and the expected end date of the
project had been extended to J une 2010. The
contractor [T. Maloney] on these new homes had
made a complaint that there is a cash flow
problem. The minutes refer to a letter from the
contractor and funding to be obtained from the
First Nation Infrastructure Fund. The funding
reference is attributed to J . Hayes.
Council Minutes
Mar 16, 2010 T. Maloney raised concerns regarding the bank
hold times on cheques and he indicated he could
not say when the homes would be completed.

The funding agreement between CMHC and SFN
was extended; however, the agreement between
T. Maloney and SFN was not amended, nor
extended. T. Maloney indicated in a letter
Council Interference is claimed as a delay.
Council Minutes
Mar 17, 2010 BCR Request to administer the 2009/2010
housing program including funding for a CMHC
capital loan in the amount of $180,200 for the
construction of two (2) housing units. The
remaining cost of $85,450 is to be funded by SFN
from band funds. The total budget was $265,650.
BCR 2009-2010-
027 (refer
Exhibit 32)
Mar 17, 2010 BCR Request to administer the 2009/2010
construction of four (4) housing units. The
remaining budgeted cost of $100,000 is to be
funded by SFN from band funds. The total budget
was $462,420.
BCR 2009-2010-
028 (refer
Exhibit 33)
J ul 6, 2010 BCR This BCR appears to be identical to BCR
2009-2010-027. It is assumed that this BCR is
referring to the same two houses.
BCR 2009-2010-
040 (refer
Exhibit 34)
J ul 6, 2010 BCR This BCR appears to be identical to BCR
2009-2010-028. It is assumed that this BCR is
referring to the same four houses.
BCR 2009-2010-
041 (refer
Exhibit 35)
J ul 28, 2010 BCR Request to administer the 2010/2011
construction of two (2) housing units. The
remaining budgeted cost of $50,000 is to be
funded by SFN from band funds. The total budget
was $239,190.
BCR 2009-2010-
042 (refer
Exhibit 36)
May 3, 2011 J . Hayes states money is being held by CMHC for
4 houses to be completed and there are 2
foundations that need houses built. Council
reached a consensus that they need to find
someone to build the houses and that they should
put the houses up to tender.
Council Minutes

37
9.4 It is assumed that Wekatesk Invoice 2009-001 represents the 13 Unit Project and
therefore identifies the addresses of the properties.
9.5 MNP interviewed T. Maloney who was involved in the construction of the 10 and
13 Unit Projects under review. During the interview he advised of the following
with respect to M. Sack:
On the original 10 houses, he had CJ S Excavation dig the basements and
then put in the footings but the work was so shoddy that it had to be redone
at the demand of a CMHC inspector. He indicated that M. Sack charged the
Band $87,000-$90,000 for the work then another contractor had to be called
in to do the work properly. He indicated that he built the 10 houses for
$95,000 per unit; and,
M. Sack constructed six (6) houses in 2011 after the 13 houses were
finished. T. Maloney indicated that M. Sacks unit cost was $120,000 to
$150,000.
9.6 M. Sack signed all BCRs referenced in the Table 10 above. Therefore, he
signed as a Councillor authorizing the expense and while being a vendor
supplying the service which drew on the funding. Records evidencing a proposal
process for awarding the work were not found. With the exception of BCR 2009-
2010-016, there is no mention of the BCRs in the Council Minutes, therefore, no
mention of M. Sack removing himself from the meetings where the housing
projects were discussed.
Property Management of Band Housing
9.7 The Housing Department coordinated and facilitated repairs and renovations of
homes on the SFN lands. These are homes owned by SFN with band members
as tenants. The work is performed by SFN employees and external contractors
as required.
9.8 Requests for repairs and renovations were generally documented by a work order
or purchase order. Work orders were used for larger repairs and where time and
materials were involved, whereas purchase orders were used for the purchase of
supplies that were paid for directly by SFN. When the work is completed in-
house, no work order is generated; however, when the work is completed using a
contractor a work order should be completed.
9.9 D. Gloade stated during his interview that work orders were signed at the repair
site and then used to generate an invoice for payment. He stated that he was not
involved with approving all of the work orders because of a potential conflict of
interest due to his employment with M. Sack.

38
9.10 Although work orders are required for external contractors, we were advised that
this rule did not apply to M. Sack Companies. Work performed by M. Sacks
Companies was not subject to pre-approval or the completion of a work order. D.
Gloade described the arrangement as a standing offer however there was no
documentation or contract to show what arrangements were in place and who
approved them. It is not clear if the work assigned to M. Sacks Companies was
dispatched in the same way as other work. Nor is it clear if other contractors
were given the opportunity to quote on work conducted by M. Sacks Companies.
Based upon the information known to date, it cannot be determined if the work
invoiced by M. Sacks Companies was allocated fairly or fairly priced.
Invoicing
9.11 Supplier invoices were received by either the Housing Coordinator or Ms. Paul for
repair work completed. According to D. Gloade, the invoices were then reviewed
and approved by V. Maloney, who verifies the work has been completed. It is not
clear how he verifies the work completed. We note that without an initial work
order or estimate there is no documentation to show what was originally intended
for repair versus what was invoiced.
Financial Summary of Housing Construction Projects
9.12 Band and community housing construction costs are capitalized and reported on
the Schedule of Tangible Capital Assets to the Audited Financial Statements. A
summary of those capital costs grouped by general ledger account coding are
summarized in Table 12 below:
Table 12: Summary of Capitalized Housing Construction Costs
Project 2010 2011 2012 Total
10 Unit Project $ 399,022 1,500 - 400,522
13 Unit Project 1,216,596 401,103 - 1,617,699
2009 6 Band Homes 163,911 - - 163,911
4 Units - Brown Flats
(2 Brown Flats / 2
Ross) 43,002 121,495 24,127 188,624
2 Energuide Units -
Browns Flats - - 295,249 295,249
Brown Flats Extension - 407,504 - 407,504
Retrofits and
Renovations 23,704 350,008 - 373,712
Total $1,846,235 1,281,610 319,376 3,447,221

39
10 Unit Project (Account 5870)
9.14 This project was started prior to the Period of Review, accordingly we have not
reviewed transactions prior to April 1, 2009 and the total of approximately
$400,000 shown in Table 11 does not represent the total cost. With respect to
transactions in fiscal 2010 and 2011, we note that the amounts paid out are
related to individuals and what appears to be finishing of the houses. The most
significant vendors were:
Stewiacke Building Centres $175,058
Sacks Contracting (Sacks Excavating) 93,774
J .D. Henderson Plumbing & Heating 77,419
S. Sorensen Electric Co. Ltd. 51,912
Berrys Furniture Ltd. 37,683
9.15 The total amount charged to Account 5870 in 2010 was $529,022. This amount
was adjusted by $130,000 for what appears to be a prior year accrual.
9.16 The amounts recorded as Sacks Contracting were six invoices submitted by
Sacks Excavating. It is unknown why the name in the general ledger does not
reflect the company who invoiced SFN. The six invoices are summarized in
Schedule 1 attached to this Appendix and documentation for the four larger
transactions are attached as Exhibit 37. We note the following with respect to
these invoices:
The description for work performed on the larger invoices is general in
nature;
The total amount paid for landscaping was $61,540 as compared to the
contract amount of $60,220. The invoices did not refer to any change
orders;
All invoices were approved by J . Hayes. There were no work orders
attached to the invoices and it is not clear if someone from housing approved
the work or confirmed completion of the work; and,
On invoices 2009-128 and 2009-130 requested by Chief & Council there is
a second initial which has not been identified. These invoices are vague in
description and we found no reference in the Council Minutes directing this
work. Accordingly these invoices totaling $30,975 are considered
questionable.

40
13 Unit Project (Account 5871)
9.17 The first transaction recorded to Account 5871 for this project in Fiscal 2010 was
a cheque to Wekatesk dated May 7, 2009 and the last transaction was an invoice
from Stewiacke Building Centers on March 2, 2011. Significant vendors on this
project were as follows:
Wekatesk 1,402,192
Ezee Enviro Direct 86,234
Sacks Contracting (Sacks Excavating) 70,740
Richibucto Furniture 2000 Ltd. 42,290
Chester CR J ohnson 20,649
J .D. Henderson Plumbing & Heating 20,035
9.18 We reviewed the Sacks Excavating (recorded as Sacks Contracting) invoices
recorded to this project. They are summarized in Schedule 2 and attached as
Exhibit 38. We note the following with respect to these invoices:
The work performed under invoice 2009-131, for $19,115 is not clear.
Although the invoice indicates that the work was requested by Council there
is no mention of the work in the Council Minutes. The invoice appears to be
approved by D. Gloade. Due to the lack of authorization from Council this
invoice is considered questionable;
Invoice 2009-170 relates to a location that is not listed on the Wekatesk
listing of the 13 homes to be built; and,
Invoice 2010-01 for $28,512 refers to a New Ross house and therefore it is
allocated to the incorrect account. Homes built on New Ross Road during
this time were recorded to Account 5895.
2009 6 Band Homes (Account 5873)
9.19 The first transaction recorded to Account 5873 for this project in Fiscal 2010 was
an invoice from Central Home Improvements Warehouse dated November 13,
2009 and the last transaction was an invoice from Stewiacke Building Centers
recorded as March 31, 2010. Significant vendors on this project were as follows:
Sacks Contracting (Sacks Excavating) $106,894
J ohn Marr 13,838
Central Home Improvements Warehouse 10,416

41
9.20 We reviewed the two Sacks Excavating (recorded as Sacks Contracting)
invoices recorded to this project. They are summarized in Schedule 3 and
attached as Exhibit 39. We note the following with respect to these invoices:
The work performed under invoice 2009-179 refers to the extension of the
Brown Flats road and was requested by Operations and Maintenance.
Therefore, it appears to be incorrectly recorded to the housing account;
Invoice 2009-179 in the amount of $15,168, dated December 2, 2009 is for
the extension on the new sub-division road down Brown Flats. Other
charges for the extension have been recorded to Account 5881. It is
important that all costs be recorded to the designated account so that a full
reconciliation of the cost of the project can be easily reviewed; and,
The invoices do not refer to a contract or quote.
4 Units - Brown Flats (2 Brown Flats / 2 Ross) and 2 Energuide 80 Homes
(Accounts 5881, 5882, 5895 and 5900)
9.21 Due to the recording of transactions, we have addressed the expenditures
grouped as the 4 Units and 2 Energuide Homes together. Transactions related to
these projects started in Fiscal 2011 and continued throughout Fiscal 2012.
According to Michael Paul, the current Housing Manager, these homes are
complete. Significant vendors on these projects were as follows:
Sacks Contracting (Sacks Excavating) $280,227
Central Home Improvements Warehouse 47,976
Stewiacke Building Centres 60,607
Barclays Heating & Contracting 20,460
Vernon Maloney Sr. 14,360
Andrew J . Maloney 13,464
Gloade Electrical 11,168
9.22 We reviewed the records for the transactions related to Sacks Contracting and
they are summarized in Schedule 4. We note the following with respect to these
transactions:
With the exception of Invoice 12032012 brflfinal for $130,000 (refer Exhibit
40), invoices supporting the remaining transactions totaling $150,227.08
were not found therefore, they are considered questionable;
Invoice 12032012 brflfinal bears a manual notation that identifies the 2
Energuide homes as 146 and 150 Brown Flats Rd. These two addresses
are referred to in CMHCs list of projects as project 19-042-787-009 (Project
009); and,
The payment on September 1, 2011 for $120,000 does not reference to an
invoice. We have necessarily relied on the general ledger memo notation to

42
allocate this payment to the 2 Energuide homes. Further documentation is
required to verify the nature of the payment.
9.23 Based upon the records located and payments recorded to March 31, 2012 the 4
Units Brown Flats and 2 Energuide Homes cost an average of $80,645
8
9.24 Assuming that the cost of the 2 Energuide homes is $250,000 then the remaining
cost would be associated with the 4 Units Brown Flats. If this were the case
then the cost per unit for this project would be $58,468 as of March 31, 2012.
This amount appears very low. We considered the possibility that expenses
coded to Account 5873 - 2009 6 Band Homes belong in this category, however
that would mean that amounts were expended prior to the BCRs authorizing the
funding were signed. Based upon the current documentation we cannot conclude
on the cost of these six homes.
. This
amount appears low. Based solely on the description of the invoice and
payments to Sacks Excavating, this company billed SFN $250,000 for the 2
Energuide homes, therefore $125,000 each. Although there are other costs
recorded to Account 5900 identified as 2 Units Energuide the addresses in the
memo portion of the entry do not match those shown on the Sacks Excavating
invoice and Project 009.
9.25 T. Maloney indicated that he was on budget for the completion of the house and
that the documentation he received from J . Hayes supports this. He indicated
that expenses incurred by M. Sack were moved to his budget and then
demonstrated that he was over budget. MNP has not been provided with this
documentation to confirm these contentions.
Brown Flats Extension (Account 5881)
9.26 The Brown Flats Extension cost of $407,504 is made up of three invoices from
Sacks Excavating (recorded as Sacks Contracting). They are summarized in
Schedule 5 and attached as Exhibit 41. We note the following with respect to
these transactions:
The manual notations on the cheque requisition to pay invoice 2010012
show that a new general ledger code was set up for this project and that
payment was to be timed with the receipt of funding. The type of funding is
not identified;
J . Hayes approved the payment of invoices 2010012 and 20110036. The
document does not bear a sign-off from the Operations and Maintenance
Manager or reference to a contract;

8
Calculated as $188,624 (4 Unit Brown Flats) plus $295,249 (2 Energuide Homes) equals $483,873,
divided by 6 homes.

43
The second invoice, #2011018 dated J anuary 17, 2011 in the amount of
$27,630 has not been located; and,
Invoice 20110036 in the amount of $113,962 was paid by cheque 41269 on
April 13, 2011.
9.27 In reconciling the payments to Sacks Excavating a further payment of $113,964
was located. Cheque 44126, issued to Sacks Contracting and dated J uly 29,
2011 is not shown on the vendor list and there is no reference to an invoice. The
memo description is Brown Flats Extension and the payment was coded to
Account 1670 Paving Project in Fiscal 2012. It is not known why this payment
was not coded to Account 5881 with the rest of the paving and extension costs.
As there is no invoice to support this payment it is considered questionable.
9.28 Based upon the above analysis, we calculate the total cost of the 1,200 foot
extension to Brown Flats Road to March 31, 2012 to be $536,636
9

9
Total cost is comprised of Account 5881 ($407,504) plus cheque 44126 ($113,964) and invoice 2009-179
from Paragraph
therefore, a
cost of approximately $447.00 per foot. It is outside of our expertise to comment
on the reasonableness of this cost.
9.20 ($15,168).

44
10 J. HAYES HOME
10.1 We have been advised that M. Sack built the home situated at 22 Kittiwake Road,
Halibut Bay, Nova Scotia which belonged to J . Hayes during the Period of
Review. The house was built in and around the summer of 2011, and concerns
were raised with respect to the use of SFN funds to build the house. Specifically,
could materials and labour used to build the house have been billed through an
M. Sack Company to SFN?
10.2 Stewiacke Building Centre advised that no purchases for SFN had been delivered
to 22 Kittiwake Ridge.
10.3 We note that many invoices from Sacks Excavating, Sacks Contracting and
Castone Construction do not contain details with respect to labour, materials and
the site worked.
10.4 In an interview with J . Hayes we asked how his home was built and he confirmed
that it was built by M. Sack, however he did not identify the specific company.
With respect to how M. Sack was paid for the construction and the potential that
the cost could have been charged through to SFN. Excerpts from the J . Hayes
interview with respect to this question are provided below:
MCCORMACK: Okay. The, have you ever been concerned that the materials that were
used to build your house were actually charged to the band?
HAYES: Did I have any concerns?
MCCORMACK: Yeah.
HAYES: No geez I hope not. Well are you telling me they were?
MCCORMACK: I don't know that's what Im asking, I'm wondering, I'm wondering if during
the course . . .
HAYES: (Talk over) They could very well have been because I find out, I have to
jump ahead but I find . . .
MCCORMACK: (Talk over) Yeah absolutely.
HAYES: . . . out later on that he didnt even, I shouldnt say he, the contractor
didnt even set up anything to cover his cost to build that house until he
got my draws kind of, now whether hes so rich he can do that is, I have
no idea.
MCCORMACK: Sorry when youre talking about the contractor . . .
HAYES: (Talk over) Mike.
MCCORMACK: . . . youre talking about Mike Sack?
HAYES: Mike, yeah.

45
MCCORMACK: So in your mind, I mean I'm not, I, one of the things that I'm trying to get
to the bottom of with the house is one, we're wondering whether the
building supplies would have been charged through the band . . .
HAYES: They could have very well been.
MCCORMACK: Okay.
HAYES: But I would have no idea and I'd never pick up on that.
MCCORMACK: Just because of the way the Housing, how busy Housing is or how much
. . .
HAYES: No. Well that's part of it but also the fellow that ran Housing also
combined or sold his electrical company to Mike Sack and worked for
Mike Sack at the same time.
MCCORMACK: Dana.
HAYES: Yeah so the two people there and it could have been, he could have
been covering the costs to build that house through whatever, which
goes back the original Housing guy that Gary Richards and I got rid of
because he was doing the same thing, he was charging off his home
repairs and other peoples homes through Housing.
MCCORMACK: Who was the original guy? I . . .
HAYES: Oh . . .
MCCORMACK: . . . dont know if I remember that name.
HAYES: (Talk over) . . . Gabe somebody. Gabe, I forget his last name.
MCCORMACK: Ohhh, yeah okay. Yeah I have, I remember seeing that name
somewhere.
HAYES: So the thought or the idea of Mike Sacks construction company charging
off his cost through Housing could very well have happened but I would
not pick up on that because all Housing things were approved in
Housing, and the only thing that came across were invoices approved by
the head of Housing . . .
MCCORMACK: Right.
HAYES: . . . and then we just coded them and paid the bill so yeah I have no idea
whether he was doing that or not.
10.5 In a further interview, J . Hayes advised that he had paid Sacks Contracting
between $130,000 to $140,000 to build the house with money drawn from a
mortgage. Excerpts from the interview addressing this question are as follows:

46
MCCORMACK: Well I did land titles, like we had to like we did the land titles on it and all
the, usually the land titles all show the, like all the mortgage documents
and all the rest of it, and it doesnt show up on your land titles documents.
HAYES: I just looked at them about an hour ago. Well there is one, three hundred
and fifty.
MCCORMACK: So . . .
HAYES: I can get you that, I mean . . .
MCCORMACK: . . . so you still have an existing . . .
HAYES: Oh yeah.
MCCORMACK: . . . mortgage . . .
HAYES: Oh no, no, I dont have an existing.
MCCORMACK: Okay so the mortgage is paid off?
HAYES: Well I . . .
MCCORMACK: (Talk over) Or . . .
HAYES: . . . I only paid, it was three hundred and fifty grand for . . .
MCCORMACK: Yeah.
HAYES: . . . to build the house.
MCCORMACK: Right.
HAYES: I paid out maybe I don't know a hundred and thirty, a hundred and forty to
Sacks Construction . . .
MCCORMACK: Right.
HAYES: . . . and then . . .
MCCORMACK: (Talk over) And that came out of, that came out of the mortgage?
HAYES: Mortgage funds, that's correct.
MCCORMACK: Okay.
HAYES: And then when the band said goodbye to me . . .
MCCORMACK: Yeah.
HAYES: . . . I went to the lawyers the next day or two days later and said, that's
when Sack and I did the deal saying look it, if I'm not working anywhere
how the hell am I gonna be able to pay for interest on a mortgage
etcetera etcetera etcetera all the way down the line . . .
MCCORMACK: Right.
HAYES: . . . so that's when Mike and I did the separate agreement through those
lawyers in Truro . . .
MCCORMACK: Okay.

47
HAYES: . . . stating that either he paid out the mortgage or whatever he did I have
no idea but the bank agreed saying okay well take the mortgage out of
my name, Mike builds the house and then I have the option to go in, rent
it for a year to two years and with, and hopefully get my feet on the
ground then turn around buy the house back, mortgage it whatever . . .
MCCORMACK: Right.
HAYES: . . . Mike gets his money and then we're gone.
10.6 The assessed value of the home for 2013 is $420,100 (refer Exhibit 42). In
examining the costs to build the home we have found records which indicate that
J . Hayes drew down approximately $140,000 on the mortgage which is supported
by the sale price of $144,000 on February 16, 2012 when the house and
mortgage were transferred to M. Sack. It is beyond our area of expertise to
estimate if the house could have been built for $140,000, as suggested by the
mortgage draw down. These amounts do not include the purchase of the land
which was approximately $110,000.
10.7 According to J . Hayes, the house was sold to M. Sack for $1 in consideration and
that he could buy the property back when he could afford it. The transfer of this
property occurred shortly after J . Hayes employment was terminated by the
Council.
10.8 The RCMP have charged M. Sack and J . Hayes with criminal offences as a result
of this transfer (see Section 12).
Conclusion
10.9 Based upon our discussions with J . Hayes and other third parties we estimate
that the house was built in the summer of 2011 which would mean the costs
borne by SFN, if any, would likely be recorded in Fiscal 2012. Based upon our
examination of the records to date we have not identified any specific payments
or invoices that could be attributed to the construction of J . Hayess house.

48
11 POTENTIAL CONFLICT OF INTEREST
11.1 As noted in the Background section of this Appendix, concerns were raised with
apparent conflicts of interest involving D. Gloade and M. Sack due to their
positions with the Band and business relationship.
D. Gloade and Gloade Electrical
11.2 A potential conflict of interest was identified during our interview with D. Gloade
when he stated that he had performed electrical work for Housing under his
company Gloade Electrical. He advised that once he committed to SFN as the
Housing Manager, he perceived this as a conflict of interest and sold his trucks
with tools, supplies and customer base to M. Sack. However, he retained his
company. We understand D. Gloade worked part-time for Sacks Contracting
while working at SFN. D. Gloade stated he spent 50% of his time at each job and
received 50% pay from Housing.
11.3 When asked about the transfer of the Gloade Electrical business to M. Sack, D.
Gloade advised of the following:
MCCORMACK: Okay so Mike takes over that portion of your business. Is that right?

GLOADE: He took the customer.

MCCORMACK: He took the customer.

GLOADE: The customer.

MCCORMACK: And the trucks you say.

GLOADE: Yeah, he needed a service truck so I, in communicating with him I said
well youre gonna need a truck youre gonna need some ladders, youre
gonna need a bender, pipe bender, you know what I mean, that type of
stuff and I said thatll give you a nice little package, hit the road . . .

MCCORMACK: Right.

GLOADE: . . . you know, and we were only doing Housing so it wasnt that big of a
deal.

MCCORMACK: And then what does he use for resource, the, like manpower? Like who
does . . .

GLOADE: (Talk over) People.

MCCORMACK: . . . who does his electrical work then? Did you have . . .

GLOADE: (Talk over) His employees.

49

MCCORMACK: . . . did you have electrical? Like did you have other electricians working
with you and (unintelligible)?

GLOADE: (Talk over) Yeah. He took on a couple, like a journeyman and just a
journeyman really . . .

And he continued;

MCCORMACK: Now do you still do business then for Mike?

GLOADE: No. I work for Mike.

MCCORMACK: You work for Mike.

GLOADE: I get a paycheck. I put in hours, I put in a time slip, he pays me.

MCCORMACK: Okay and does, is that work on res?

GLOADE: Not so much. I, when it comes to res stuff, I more do quality control. You
know what I mean, its, because its electrical, its only wire and houses,
its not like I really need to be involved.

MCCORMACK: (Talk over) Right.

GLOADE: Electricians are competent.

MCCORMACK: (Talk over) Yeah.

GLOADE: So they just write up time material sheets and they go into the office.
Nobody really scrutinizes that. Ladies in Sacks office take the time
materials, make sure theyre signed and so on so forth and because Im
in the conflict of interest, Vernon or Shirley or someones gotta sign off in
the housing. So . . .
M. Sack and M. Sack Companies
11.4 Another potential conflict was identified regarding M. Sacks Companies due to
M. Sacks role as a Councillor during a portion of the Period of Review. M. Sack
was a Councillor for SFN from J une 12, 2009 to November 2, 2010 and again
since November 2, 2012 (refer Exhibit 43). During the period M. Sack was a
Councillor, his companies were billing SFN for services where it is not clear if the
services were performed under contract or with the full knowledge of the Council
members.
11.5 During the Period of Review, a total of $1,546,336 in expenses in Housing were
attributed to M. Sack Companies. $983,335 of the total was expensed in Capital
Projects and $563,002 in repairs and renovations. Table 13 is a summary of the
expenses recorded in Schedule 4 from M. Sacks Companies during the Period of
Review:

50
Table 13: Summary of Schedule 4 expenses rel ated to M. Sack Companies
Vendor / Payee 2010 2011 2012 Total
Sacks Contracting $ 12,399 194,686 195,131 402,216
Castone 115,564 4,678 - 120,242
Sacks Excavating - - 22,044 22,044
CJ S Excavating 18,500 - - 18,500
Total $ 146,463 199,364 217,175 563,002

Sacks Contracting
11.6 During the Period of Review, we identified transactions totalling $402,216 that
were expensed. From our review of the Sacks Contracting invoices we noted the
following:
The descriptions of the services performed listed on the invoices often
contain insufficient detail. For example, the description on invoice 100159
for $19,400 attached as Exhibit 44 is For survey services in various
locations. Invoice descriptions often omit the number of hours, dates and
location of the services performed;
The names of the employees listed on the Labour and Materials Record
(LMR) are typically Ray, Mike and Chad. On or about J une 2011, the
hourly rates of the employees increased from $50.00hr to $55.00/hr for Ray
and from $25.00/hr to $27.50/hr for Mike and Chad. The reason for the
increase in rates is not known;
The invoices of Sacks Contracting to SFN are generally in sequential order.
This may indicate that SFN was Sacks Contractings main customer;
Where LMRs are attached to invoices, a majority of them bear no signature
to indicate that the work was completed in a satisfactory manner. On a few
invoices, the authorized signature was Chad. However, in those cases
Chad is also the employee who performed the work. We would expect the
work to be approved by an employee of SFN authorized to do so. Examples
of these documents are attached as Exhibit 45 and Exhibit 46;
Several times notes on the LMR included notes such as: went and knocked
on door, waited around, knocked few times no answer went back next day
did the same thing still no answer. SFN was billed for 30 60 minutes in
labour for each instance as shown on example Invoice 05052011ib17
attached as Exhibit 47; and,
Several of the Sacks Contracting invoices were not supported by LMRs. As
a result, the only evidence to support that the services were performed are

51
the invoices and there are no documents to support the number of hours
worked.
11.7 The lack of detail and supporting documents found in the records with respect to
Sacks Contracting is contrary to what would be expected from a non-arms length
vendor. In addition, there appears to be a lack of oversight from the Housing
Manager or other management at SFN with respect to the work completed by
Sacks Contracting for Housing. In contrast, there is documentation indicating a
review of work performed by Sacks Contracting under O&M by Stephen
Knockwood.
Castone
11.8 Castone, according to its website has completed numerous commercial and
residential renovations projects including outdoor/indoor, complete projects,
home building, plumbing and electrical work. The directors are listed as M. Sack
and Dean R. Shea. A corporate search is attached as Exhibit 48.
11.9 Invoices were found for all amounts totalling $120,242 related to Housing. Based
upon a review of the invoices and related documents we noted the following:
Quotes were found for Invoice 766 dated March 15, 2010, in the amount of
$29,747.60. Although quotes were found they were not dated, signed off by
anyone at SFN and no indication that quotes were sought from other
contractors;
Work Orders were found for 12 out of 31 invoices and some invoices
referenced Purchase Order numbers. Work Orders representing $105,477
(77%) of the total invoiced were found and signed for approval of payment by
J . Hayes and who we assume to be D. Gloade; and,
The invoices provide no detail with respect to hours worked, rates or material
costs.
11.10 From our review of available documents we note that Work Orders were used for
a majority of the work performed by Castone. The Work Orders bear the
signature of J . Hayes and what appears to be the Housing Manager and are
therefore approved for payment. We have not interviewed the individuals listed
on the invoices to verify what work was done.
Sacks Excavating
11.11 Expenditures related to Sacks Excavating and expensed in Schedule 4, during
the Period of Review, commenced in May 2011. During the 2012 fiscal year
there were nine invoices totalling $22,044.

52
11.12 Invoices were found for all amounts totalling $22,044 related to Housing. Based
upon a review of the invoices and related documents we noted the following:
Invoice and attachments do not refer to a work order;
Details regarding the number of hours and rates charged for the services are
not provided on the invoices;
The descriptions of the services performed listed on the invoices often
contain insufficient detail. For example, invoice 20110071 totalling $13,463
attached as Exhibit 49 is for topsoil delivered to a large number of homes in
Indian Brook. Details regarding the locations of the homes, the dates and
rates of the services are not included on the invoice; and,
The business number for Sacks Excavating, are not shown on the invoices.
CJS Excavating
11.13 During the Period of Review, one CJ S Excavating amount of $18,500 was
expensed in Schedule 4. Invoice 2009-72 described as moving trailers in the
general ledger was not found.
11.14 Invoice 2009-74 attached as Exhibit 50 is for Preparing three lots for the trailers
that were located by the community centre. This amount was originally coded to
Account 5832 but was reclassified to paving. The invoice does not contain
information regarding the rates, hours or dates of the services performed. In
addition, there is no work order or approvals to support the invoice.
11.15 As with invoices from the other M. Sack Companies, the invoices from CJ S
Excavating provide little detail to support the amounts invoiced.
Conclusion
11.16 Based upon the documentation the M. Sack Companies which invoiced for
services in Capital and Housing benefited or had an advantage over other
vendors in providing services to SFN. There is not enough documentation or
evidence of a transparent tendering process or independent review of amounts
invoiced to conclude that the M. Sack Companies did not benefit from the
relationship that he, as a Councillor, had with SFN. The Housing Manager
confirmed that the M. Sack Companies were not required to follow the same
process as other vendors with respect to the completion of work orders. This
exemption without other mitigating controls indicates that the M. Sack Companies
were treated differently. A detailed examination of work performed in relation to
amounts billed would be required to conclude if the M. Sack Companies
inappropriately benefited.

53
12 RCMP INVESTIGATION
12.1 MNP understands that the RCMP Commercial Crime Unit and RCMP Proceeds
of Crime Unit were conducting a criminal investigation into the matter involving J .
Hayes and the use of band funds for personal use during the course of our
forensic investigation. As a result of their investigation, we were advised that J .
Hayes was charged on J anuary 31, 2013 with:
Possession of property obtained by crime over $5,000 contrary to section
355(a)of the Criminal Code for the property located at 22 Kittiwake Ridge,
NS;
355(a) of the Criminal Code for the 2009 J eep Liberty;
355(a) of the Criminal Code for the 2009 J eep Patriot; and,
Possession of property obtained by crime under $5,000 contrary to section
355(b) of the Criminal Code for a 32 Samsung television.
12.2 We were also advised that M. Sack had been charged on the same date with:
355(a) of the Criminal Code for the property located at 22 Kittiwake Ridge,
Nova Scotia; and,
Making a false statement under oath with intent to mislead contrary to
section 131 (1) of the Criminal Code.
12.3 We understand that M. Sack was charged as a result of the transfer of the
Kittiwake Ridge property from J . Hayes to M. Sack in 2012. These matters are
still before the Courts at the time of this Report.

54
13 CONCLUSION
13.1 Based upon our observations, the M. Sack Companies have benefited from the
relationship with SFN. They have been involved with SFN for numerous years
and provided services where other providers may not have been willing.
13.2 M. Sack has provided contracting/construction services to the Nation during the
Period of Review. MNP has noted that there are no requests for proposals,
standing offers or other contractual agreements which would define the
obligations of each party. The lack of these contracts is unusual for organizations
of this size.
13.3 The lack of invoicing, detail of invoicing and pre-approval process is suspect in
the Nation. It is questionable why D. Gloade, who has a business relationship
with M. Sack, would be allowed to approve invoices and grant work without the
consent and approval of Council or some other oversight.
13.4 Council minutes reflect that M. Sack, while a Councillor, did not recuse himself
from discussions or from voting on matters in which he had an interest. This is
the fundamental issue surrounding conflict of interest. The Indian Band Council
Procedure Regulations of the Indian Act section 19 states:
Every member present when a question is put shall vote thereon unless the
council excuses him or unless he is personally interested in the question, in
which case he shall not be obliged to vote.
13.5 The SFN Conflict of Interest Guideline indicates:
A conflict of interest arises when a person making a decision as an elected
official or as a staff member has a personal or business interest in the outcome
of the decision, and thus might gain from a decision.
There are no rules in the Indian Act addressing conflict of interest. However,
there are INAC guidelines and substantial case law on this subject. We
understand that conflict of interest in the Nation communities can be a
challenging issue, because the community is small and people who live in the
community tend to be closely related.
13.6 MNP has reviewed expenses, invoices, BCRs and interviews in regard to the
aforementioned projects and have identified the following issues;
M. Sack has made a substantial amount of loans to SFN. Since 2010,
loaned a total of $1,550,000 of which $1,802,500 has been repaid; principal
plus interest. M. Sack provided short term loans ranging from 6 days to 107
days and the illustrative Annualised Interest for each of the loans is in excess

55
of 85%. In the case of three loans, the Annualised Interest rate is in excess
of 200%;
By applying an Annualised Interest rate of 25% on all of the loans, with the
exception of three loans where no interest was charged, the total interest
charges would have been $34,514 which is $217,486 less than the $252,000
charged by M. Sack. Given the Annualised Interest rate charged by M. Sack
was in excess of 85%, $217,486 of the interest is considered questionable;
M. Sack has invoiced SFN over $400,000 for work on the Cranberry project
although the project was initially budgeted to cost $90,000. The current
stage of completion does not appear to justify that amount accordingly
$434,768 is considered questionable;
During the years ended 2010 to 2012, the Nation was invoiced $158,000 per
year for snowplowing services. A contract was signed by H. Sack but M.
Sack did the majority of the invoicing and received most of the payments for
the snowplowing. M. Sack is not referenced in the contract and appears to
have circumvented the bid process he engaged the year previously. While
M. Sack was a member of Council, the minutes do not reflect a declaration of
his conflict of interest in regard to this contract;
M. Sack appears to have submitted three (3) bids in 2009 for the
snowplowing contract; CJ S Excavating, CJ Sack and Mike Sack bids. This
type of conduct is contrary to standard bidding processes (one company,
one bid);
M. Sack purchased a piece of property that abuts the Hammond Plains
development in J uly 2009 for $40,000 and sold the property to the Band for
$65,000 in October 2009 while he was a Councillor. Absent further
information we consider the profit and payment of delinquent property taxes
totalling $25,229 to be questionable. M. Sack was also a member of the
Wallace Hills Development Committee at this time. M. Sack has benefitted
from his role as a Councillor in the profits received from the sale of this
property. As a Councillor, M. Sack has a fiduciary duty to put the Bands
interests ahead of his own;
M. Sack made a proposal to assist with the development of the land at
Wallace Hills. MNP noted that the subsequent proposals to Council were
substantially different; the second proposal was seeking a Certificate of
Possession. The M. Sack companies have been paid $36,289 for which
complete supporting documentation has not been found. The proposals were
not accepted and the unsupported payments are considered questionable;
M. Sack purchased the fisheries licences for $20,000 and in at least one
case he sold one (to Xsealent Seafood) for $30,000 plus $0.40 per lb
commission on all landings;

56
We noted a payment of $40,000 dated February 18, 2011. A further $18,125
was paid to Mainland J uggage for snow crab. No supporting documents for
either payment have been identified therefore, the payments totaling $58,125
are considered questionable; and,
Snow crab revenue during the year ended March 2012 was not based on the
2011 revenue formula. Instead, Council agreed to sell the entire snow crab
quota to Mainland J uggage. Should SFN have retained the 2011 revenue
formula, it would have achieved a further $522,004 of gross profit
10
Table 10
. It is not
known whether the potential difference of $1.55 per lb (see above)
was retained by Mainland J uggage;
M. Sack was involved in the construction of homes on the Nation when he
was a Councillor and did not recuse himself from the BCR signings;
M. Sack was a contractor who provided repair services on the Nation homes.
There was no contract between M. Sack and SFN, and the invoices provided
by his companies do not provide enough detail to understand what work was
performed and in some cases the location of the work;
Sacks Excavating invoices 2009-128 and 2009-130 totaling $30,975 for the
development of the 10 Unit Housing Project are vague in description and we
found no reference in the Council Minutes directing this work. Accordingly
these invoices totaling $30,975 are considered questionable;
The work performed under Sacks Excavating invoice 2009-131 regarding
the 13 Unit Housing Project for $19,115 is not clear. Although the invoice
indicates that the work was requested by Council, there is no mention of the
work in the Council Minutes. The invoice appears to be approved by D.
Gloade. Due to the lack of authorization from Council this invoice is
considered questionable;
Sacks Contracting invoices totaling $150,227 regarding the 4 Units Brown
Flats Housing Project were not found therefore, they are considered
questionable;
Cheque 44126 in the amount of $113,964 issued to Sacks Contracting and
dated J uly 29, 2011, is not shown on the vendor list and there is no
reference to an invoice. The memo description is Brown Flats Extension
and the payment was coded to Account 1670 Paving Project in Fiscal 2012.
It is not known why this payment was not coded to Account 5881 with the
rest of the paving and extension costs. As there is no invoice to support this
payment it is considered questionable;

10
Based on total catch weight of 336,776.88 lbs reported to SFN by Mainland J uggage.

57
M. Sack built the home of J . Hayes located at 22 Kittiwake Ridge. M. Sack
has been charged by the RCMP for proceeds of crime charges in respect to
this home; and,
M. Sack has been a Councillor with SFN on a number of occasions and
should be aware of Conflict of Interest Guidelines and his fiduciary duty to
put the Bands interests first. M. Sack has benefitted financially from his
relationship with SFN.
13.7 Based upon the above, the following amounts paid to the M. Sack and related
Companies have been identified as questionable:
Table 14: M. Sack Questionable Amounts
Project Entity
Questionable
Amount
Excessive interest on loans from M. Sack Mainland J uggage /
Sacks Contracting
$217,486
Cranberry Bog Sacks Excavating 434,768
Wallace Hills sale of Pockwock Road
11
M. Sack 25,229
Wallace Hills Sacks Contracting 7,765
Wallace Hills Sacks Excavating 28,524
Fisheries Snow Crab Mainland J uggage 58,125
Capital and Housing 10 Unit Project
Sacks Excavating 30,975
Capital and Housing 13 Unit Project
Capital and Housing 4 Units Brown Flats
Sacks Contracting 150,227
Capital and Housing Brown Flats
Extension
Total $1,086,178

11
Includes $229 of property taxes paid on behalf of M. Sack for the time he owned the property.

58
14 RESTRICTIONS AND LIMITATIONS
14.1 This Appendix to MNP Report is not intended for general circulation or
publication, nor is it intended to be used for any purpose other than to advise Pink
Larkin, or as outlined in the Terms of Reference noted at Section 1 of the Report.
We will not assume any responsibility or liability for losses suffered by any party
as a result of circulation, distribution, publication, duplication, reproduction, or any
use of this report contrary to the provisions of this Paragraph.
14.2 We reserve the right, but will be under no obligation, to review all calculations and
comments included in or referred to in this report and, if we consider it necessary,
to revise our comments in light of any information existing at the date of this
report that subsequently becomes known to us.
14.3 Our Report must be considered in its entirety by the reader. Selecting and relying
on specific portion of the analyses or factors considered by us in isolation may be
misleading. The procedures performed do not constitute an audit and an audit
has not been performed on the financial information.

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