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Manitoba Legislative Building scandal — lieutenant-governor forces government to appoint commission
Mar 27, 2009

 

by Bruce Cherney (part 2)

In a prelude to the Mathers Commission’s first session on April 20, the Roblin government used friendly newspapers to mount a campaign designed to discredit the Liberals and deflect criticism. For example, the Portage Weekly Review (April 3, 1915) cited Sir Rodmond Roblin as accusing the Liberals of trying to “deceive the people and make it appear that something was radically wrong with the affairs of the province ... The whole aim and purpose of the Opposition campaign before the public accounts committee was to discredit and injure the government and to create distrust in the minds of the people as to the honesty and integrity of the administrators of the province.”

The newspaper claimed the Liberals perpetrated a “scandalous and barefaced conspiracy” against the Roblin government, which was the worst “in the history of the province or of the Dominion.”

During the 19 days leading up to the appointment of the commissioners, the lieutenant-governor was also threatened with removal from power. The Conservatives accused him of exceeding his authority when he demanded Roblin resign or call a royal commission. When he didn’t budge from his position, Douglas Cameron was then offered a second term in office if he would reverse his earlier ruling. Cameron continued to resist the pressure exerted upon him, which included a visit from Robert “Bob” Rogers, a Conservative MP from Winnipeg and a former public works minister in the Roblin government, who expressed displeasure with the accusations against the premier and his government.

In the meantime, legislative building contractor Thomas Kelly fled to the United States to avoid appearing before the commission, joining other potential witnesses in self-imposed exile. Kelly’s lawyer, E. Anderson, advised the commission that his client would not appear and would remain in the U.S.

“We regret our inability to procure the evidence of Thomas Kelly particularly,” wrote the commission in its later report, “and to secure the production of the firm’s books.”

The day before the commission was appointed, Victor W. Horwood, the provincial architect, left for Minneapolis and then Rochester, Minnesota, to undergo a serious operation. Dr. Walter Montague, the minister of public works, then suggested to Horwood he should take an extended holiday to recover.

Montague had allegedly approached Horwood to sign an application to be relieved of the responsibility of testifying “pending the result of the investigation of the royal commission.”

His lawyer advised Horwood to refuse to sign the document and instead apply for a lengthy leave of absence.

Although Horwood was obviously ill, the commission concluded he left Canada to avoid being served with a subpoena.

Dr. R.M. Simpson, the treasurer for the Conservative Party’s election campaign, left for military service before he could testify, but the commissioners said their investigation revealed his “complicity in the matter.”

With the scandal intensifying in scope, Premier Roblin on May 12, 1915, handed in his government’s resignation to Lieutenant-Governor Cameron. The same day Cameron approached  Tobias  C. Norris asking him to form the new government. After a 15-year hiatus,  the Liberals returned to power.

Roblin issued a statement giving his reasons for resigning, which in no way implied his government was guilty of  misappropriating funds in its dealing with Kelly. The only measure of complicity in the scandal admitted was that the government was “constitutionally responsible for the acts of their officials in matters of this kind.”

“The production of certain evidence during the sitting of the Public Accounts Committee caused the government to institute a departmental enquiry,” wrote Roblin, “together with the statement made before the Royal Commission by counsel for the contractors, convinced the government that adjustments between the province and contractor were necessary. Further, the government believed that such adjustments could be made with more satisfaction to the public by a new government.”

Roblin said his decision was also influenced by the outcome of the July 10, 1914, provincial election. “The result (significantly reduced majority) indicated the withdrawal of that public confidence which had hitherto been extended to me.”

Roblin said the part he played will be left “to the judgement of my fellow countrymen and the future historian of this province.” He was confident that historians would judge his government on its benefits to Manitobans rather than the taint of scandal that led to his resignation.

It was alleged that a deal was struck between the Liberals and Conservatives, promising the end of the Royal Commission if the Roblin government resigned. But the public was so antagonistic to the Roblin regime that Norris was unable to fulfill his end of the agreement without evoking a loud cry of protest, so the commission continued its investigation.

In retaliation, another publicity campaign was launched against the Liberals, which solicited aid from any friendly source. 

Brandon architect W.A. Elliott claimed the Liberals had all along been involved in the legislative building over-payments. He told the commission that Horwood said the Liberals received $12,000 from Kelly “as an insurance that if in the (July 10, 1914) election the government should change, he would be allowed to go ahead with his contract without any inconvenience from the new government.”

The commission would later report the allegation was completely unfounded.

When testifying before the Mathers Commission on June 8, Roblin said he had become disturbed by the session of the public accounts committee which indicated the amount paid for the caissons was not accurate. He then engaged lawyer A.J. Andrews to conduct a departmental investigation with John Sweeney, the Canadian government’s district engineer.

Sweeney reported to Andrews, said Roblin, that a quantity of yardage paid for by the government had not been used in the caisson construction, but he didn’t receive the information until the day before the legislative session ended. The next day, the assembly was prorogued and Roblin appointed a Royal Commission.

On the witness stand, Roblin said he had signed the contract for the caissons in error as the contract was among a pile of other public works department papers on his desk. 

At the time, Dr. Montague was ill and the premier took over his responsibilities. Roblin said when Montague returned he told the premier a mistake was made in signing the contract. Montague said he wanted to consult experts before taking responsibility for the $800,000 contract.

Roblin expressed his sorrow in making the mistake and asked Kelly to hand over the new contract, which allegedly occurred.

Roblin then told Montague to obtain all official documents as well as the original order-in-council calling for the alteration. Once he obtained the documents, Roblin said he threw them in a wastepaper basket.

“There was no attempt to destroy all traces,” Roblin told the commission. “That was impossible, as 30 or 40 people in the various departments knew about it. It was only the formal record that was wiped out.”

On June 12, the commissioners travelled to Minneapolis to hear testimony from provincial architect Horwood, who broke down when he was asked if he had deliberately perjured himself as a witness appearing before the public accounts committee in March. Horwood was so remorseful that he offered to go to prison for his role in the affair.

Just before he broke down, Horwood told the commissioners he had gone to Roblin and George Coldwell, the education minister, prior to his public accounts committee testimony and said, “He had better tell the truth,” but lied to the committee at the urging of the two politicians.

With Horwood excused until he regained his composure, William Salt, the government inspector at the building construction site,  testified that 25,194 yards of material was placed in the caissons, which was 10,799 yards less than what Kelly had been paid for. 

Salt was one of the important witnesses who had “disappeared.” Over a two-month period he fled to Minneapolis, then to Chicago, then Minneapolis again and then Denver under the alias of William Malcolm.

Salt had been offered first $2,000 and then $10,000 in hush money, which was confirmed by several witnesses, including Salt. His testimony was important to the commission as Salt had documented the construction on the legislative building and had kept two sets of plans — one of which was fraudulent.

Harry Whitla, the former counsel for Horwood, told the commission he had arranged for the bribery of Salt in the interest of his ex-client. He claimed not to have any dealings with Dr. Simpson prior to arranging the bribe. 

Whitla said he only acted on Horwood’s behalf as he believed any testimony from Salt would result in his client being charged with perjury.

Whitla took $5,000 to Pinkerton detective Captain Hatfield in  St. Paul to be forwarded to Salt across the river in Minneapolis. Salt then asked for another $5,000 which was obtained.

In testimony during a closed session at the Royal Alexander Hotel,  Montague, who was ill at the time, told the commissioners about the contract with Kelly negotiated by the premier. The public works minister said the steel, including grillage (beams covering foundations) for the north wing, was bought for $230,000, but a contract for $215,000 surfaced for grillage steel only.

Montague was not involved in changing the plans from pilings to caissons, which occurred when Coldwell was the public works minister. And it was Coldwell who ratified the alteration to the original plan.

When talking with Horwood,  Montague said “there must be something wrong with this contract for $215,000 which only included grillage ... Mr. Horwood replied that if it only included grillage it must be a mistake.”

Kelly, who was present at the meeting, agreed that the contract must include sufficient steel. Montague then instructed Horwood to have new plans made “for the purpose of binding the contractor to put in the quantity of steel which he ought to put in at the price we arranged for in the first contract.”

A new contract was arranged for $802,000, but Montague said he had nothing to do with its preparation. According to Montague, he thought the new contract was for construction of the dome.

“Did the amount not strike you as exorbitant?” asked commission lawyer C.P. Wilson.

“I have already told you that I wanted skilled engineers’ plans,” replied Montague, although he admitted no such plans had been produced.

Wilson also wondered why the excessive contract for grillage alone — not the entire dome — had been paid six days before the provincial election.

The minister said he made no inquiries into the matter.

“I suppose the reason was obvious, that if he (the premier) was giving such an exorbitant amount he was getting a quid pro quo (from Kelly),” said Wilson.

“I am not discussing what is obvious or not obvious,” declared Montague. “You might think it was, if you like.”

Wilson then mentioned the $1.25 million in “extras” added to the contract, bringing the cost of construction to $4.5 million.

Montague replied he didn’t understand all the extras.

In their overview of the evidence, the commissioners said Simpson had explained to Horwood that there was to be no record of the contract for the caissons going before the legislature. Instead, the funds were to be placed in the Conservative election fund.

Horwood told Simpson he would not take instructions from anyone other than a cabinet minister. The result was a visit from Coldwell who told Horwood to act upon Simpson’s instructions.

Horwood’s part in the scheme was necessary as it was his signature that was needed on the certificates in order for the government to pay Kelly.

The report filed by the Mathers Commission on August 24, 1915, said a “fraudulent scheme or conspiracy formed before the contract (for the caissons) was entered into to obtain from the extras an election fund ... For this purpose Dr. R.M. Simpson, V.W. Horwood, the provincial architect, and at least some members of Thomas Kelly & Sons became parties to and active participants in carrying it out in addition to those by whom the original conspiracy was formed.”

The commission said Kelly had obtained the original contract for $3,250 less than the Lyall tender by obtaining advance knowledge from Premier Roblin.

The commission said there was no direct evidence linking J.H. Howden, the provincial attorney-general, to the conspiracy at its inception, “but his subsequent conduct convinces us that he early became a party to it.

“We believe that Dr. Montague for some time after he became public works minister did not become a party to the fraudulent scheme or conspiracy entered into by his colleagues, but that he was informed of its existence and purpose by Dr. Simpson in January  or February, 1914, and he then became a party to it.”

The commission charged that Kelly’s company was paid the following sums it was not entitled to:

• Caissons — $680,704.50

• North wing steel — $102,692.36

• South wing and grillage — $68,997.71

• Brick for rubble — $17,968.73

• Excavation paid for but not performed  — $21,734.80

The total came to $892,098.10, but other “extras” resulting from the alterations to the plans increased the amount to $1,182,232.50, according to the commission report.

Even before the commission filed its report, Manitoba voters had drawn their own conclusions from the evidence. The result of the public indignation was a sweeping victory for Norris during the August 6, 1915, provincial election with Liberals claiming 42 of 49 seats in the legislature. Winnipeg Labour candidates Fred Dixon and Richard Rigg also won seats, helping to reduce the Conservatives to just five MLAs. 

It was a spectacular fall from grace for a “political machine” lead by Roblin that had won majority governments in 1903, 1907, 1910 and 1914 with popular support ranging from 45 to 51 per cent — today governments commonly attain a majority with popular support in the high-30s to low-40s percentages.

With the findings of the Mathers Commission in hand and overwhelming public support, all that remained for the Liberals was the implementation of the second phase of the legislative building scandal — the trials of politicians who allegedly took part and the extradition of Kelly from the U.S. to answer to the serious charges levelled against him.

On September 1, 1915, proceedings were begun in the city police court against Roblin, Dr. Montague, former education minister George R. Coldwell, and James H. Howden, the former attorney-general, all of whom voluntarily surrendered to the police on October 31, 1915. Pending an indictment, the four ex-cabinet ministers were released on $50,000 bail each until a preliminary hearing began on September 14. 

The October 9, 1915, Free Press reported Magistrate P.A. Macdonald committed the four ex-ministers for trial. The men were again released on $50,000 bail “the amount that was fixed by (Winnipeg Police Magistrate) Sir Hugh Macdonald in the police court, and the same bondmen went good for the new sureties. ...

“None of the accused seemed surprised at being committed.They stood up when the clerk asked them if they had anything to say, and replied in the negative.”

It would be months until Roblin, Howden and Coldwell were tried. The other defendant, Montague, had been ill for a long time, and died on November 13 of “apoplexy.” 

Meanwhile, the person who was not on-hand to appear before the magistrate was contractor and fugitive Kelly, who was facing criminal and civil charges in Manitoba. The Manitoba government brought a civil suit against Kelly to recover the money he was alleged to have padded the contract to build the legislative building. The warrant for his arrest listed  perjury, conspiracy to defraud and obtaining money under false pretenses as the criminal charges.

While Kelly hid out in the U.S., Winnipeg police armed with a warrant raided his company’s office in the Lindsay Building as well as his Assiniboine Avenue home. Deputy Attorney-General Allen, J.B. Coyne and Crown counsel R.W. Craig took part in the raids to select “papers they believed might be used in the case.” 

Kelly’s employees had refused to open the vault in the office, so the combination was knocked off and a hole drilled through the lock, which was pounded off to open the door. 

At his home, “some rather important papers” were found.

The police and court officials were unable to obtain all the papers needed for their case, as some had been spirited away to the U.S. and destroyed.

Testifying at the preliminary hearing on November 4, Maurice Kelly, 20, the son of Thomas and a partner in the firm Thomas Kelly & Sons, said he had taken some documents from the office in early September to the family cottage at Detroit Lakes, Minnesota, burning some in the furnace.

“Kelly’s explanation of his act was that he was nervous alone and that he wanted to make sure that if the authorities made another search of the company’s office they would find nothing,” reported the Free Press.

“I did it of my own accord, and I got the deuce for it from my father and two brothers.”

Although he got “the deuce,” neither his father nor brothers told Maurice to return the papers to the company safe.

While in the U.S., Kelly apparently believed himself to be quite safe from the long hand of the law in Manitoba, which, as it turned out, was not the case.

Kelly had actually been under surveillance for weeks after fleeing Manitoba by “special officers” from Winnipeg’s Thiel Detective Agency hired by the province.

A rumour relayed to Manitoba by the detective agency was that Kelly intended to make his way from Minnesota to South Carolina where the state law on extradition was “lax.” Kelly was reported to be in Chicago where he was believed to be only making a brief sojourn before heading south.

A “hurried conference by the authorities (in Manitoba) resulted in (Winnipeg Police) Commissioner (John) McRae telegraphing (to Chicago) for the arrest of Kelly.”

Detectives in Chicago had traced Kelly to the city through an attorney named Thripple who had left Winnipeg a few days earlier. A “detective followed Thripple, who registered at the Blackstone Hotel,” reported the Free Press on October 2, 1915. “Then by watching for Kelly they finally saw him walking along the street. Detective Moody, accompanied by Lieut. Larkin and Sarg. O’Brien, of the Chicago Police, recognized the grey haired contractor ... After he was locked up at detective headquarters, he admitted he was Kelly, and asked for attorneys ...”

Eventually, Kelly hired eight lawyers to fight his extradition to Manitoba. It was said he was willing to spend his entire fortune in order to avoid returning to Canada to face trial.

“The only reason father was grabbed at Chicago was because he was away from the influence of his friends,” claimed sons Charles and Laurence. “He is a property owner in Minnesota and preferred to fight at St. Paul, where all arrangements had been made. It was a deliberate trick to catch him in Chicago.”

Kelly’s sons claimed citizens of Mexico received more justice than Canadians and the charges against their father were “ridiculous.”

McRae and Crown attorney R.A. Bonner travelled to Chicago hoping to bring the fugitive back to Canada. “We are going to take Kelly back with us if we have to stay here a year,” asserted McRae.

Actually, it was a lengthy process to extradite Kelly, who vigorously fought his removal to Canada all the way to the U.S. Supreme Court.

On October 15, Kelly first appeared before U.S. Commissioner Louis F. Mason to be extradited on charges of defrauding the Manitoba government. His hearing was postponed and Kelly was denied bail as a flight risk.

Being denied bail was not overly onerous on Kelly as he only spent one day in jail in Waukegan, Illinois. Instead of awaiting his extradition hearings in a “proper jail,” Kelly was permitted by local police to lease the entire second floor of the Genesee Hotel where he was joined by his wife and daughter-in-law, a son and a “retinue of servants.”

The lavish accommodations had apparently been allowed by Sheriff E.J. Griffin of the Lake County police with the tacit approval of local U.S. Marshall John J. Bradley.

Hundreds of kilometres away in Washington, Solicitor-General John W. Davis heard about Kelly receiving special privileges while supposedly in the custody of the U.S. government. He telegraphed Bradley in late December asking why the prisoner was not in a proper jail, pointing out it would be embarrassing to the U.S. government if an international prisoner escaped.

Bradley’s reply was that it was none of  Davis’s business. The solicitor-general was not amused and wired Bradley back to have Kelly committed to a “proper jail, there to remain until surrender shall be made.”

In the meantime, U.S. Commissioner Lewis F. Mason first heard the Kelly case and concluded, after being presented the evidence gathered in Manitoba, that the charges against the contractor were justified and ordered his extradition.

Kelly appealed to the U.S. District Court, but Judge Kenesaw Landis, the man who cleaned up baseball after the infamous Chicago White Sox gambling scandal in 1919, upheld the earlier ruling and again ordered Kelly extradited.

The U.S. Supreme Court then heard the case on April 17, 1916, and upheld the earlier rulings. 

Justice Oliver Wendell Holmes said: “The fact that there were other steps necessary in addition to sending in a false account, or that other co-conspirators co-operated in the fraud, does not affect the result that on the evidence Kelly obtained the money from the provincial government by fraudulent presentations to which he was a party and that his statement was the foundation upon which the government was deceived.”

(Next week: last part of series)