A Yukon entrepreneur can't understand why the Yukon Party government shut his business down and took money out of the economy by calling in an unpaid loan after promising it wouldn't.

Norm Smith owned Northern Analytical Laboratories (NAL), the only mineral testing company in the Yukon, until debt drove him under.

According to Smith, it was the Yukon government's decision to break its word on collecting an outstanding debt that forced his company under, putting 10 to 20 Yukoners out of work and leaving the mining industry without any local analysis lab.

'Why would they want to destroy a business that had been there for 15 years?' Smith wondered about the government.

Smith, along with a partner who later bowed out, started Northern Analytical in the late-1980s, filling a void in the territory because there was no company at the time doing analysis of mineral samples.

Smith said the business started well, with the help of some loans, including a few from governments.

A slide in the mining economy in the early-'90s hurt but Smith was able to keep the business going and also pay off most of the loans by 1993.

Two loans which were still outstanding were a pair of interest-free loans given to NAL in 1989 through a federal program administered by the territorial government.

The loans were for $15,000 and $96,000, totalling $111,000.

According to Smith, 65 per cent of the $111,000 came from Ottawa.

Smith was unable to pay any of it back over the next nine years because the company was not making much profit, especially with the small amount of mineral exploration taking place in the territory in the late-1990s and early-2000s.

Smith didn't take money out of the business and didn't give himself a salary. Instead, he supported himself and his family through other ventures.

However, he said he was one of the people who owed the government and one who checked in regularly with the government about the status of his loans.

'We have always recognized our indebtedness,' said Smith.

'We're not deadbeats.'

The government told him it would not go after the loans until he could afford to pay them back.

That was the situation he was in on the night of Feb. 3, 2002.

A blaze that took firefighters 5 1/2 hours to extinguish did extensive damage to Northern Analytical's office on Copper Road in Whitehorse.

At the time, Smith noted that much of the damage was done by smoke. The Whitehorse Fire Department determined a broken belt led to the furnace overheating and causing the blaze.

Smith decided he had to figure out what was going to happen with his business.

Part of the insurance money Smith would receive, once it arrived, would go to paying off a debt with the Business Development Bank of Canada (BDC).

The territorial government, with the $111,000 in loans, and the Bank of Nova Scotia, were listed on the insurance claim as being creditors. This meant the two creditors could be paid the amount they were owed out of the insurance payment before money went to NAL.

Shortly after the fire, he checked with the territorial government and the bank about whether he should try to keep the business going.

Both told Smith to keep going and promised they wouldn't collect their debts out of the insurance.

The assurance the Yukon government gave Smith came from the Department of Economic Development, which handled the outstanding loans at the time.

He was told by the department it wasn't in the business of putting private companies out of business and it would help him to keep NAL going.

The department officials told Smith they would sit down with him once the insurance payment arrived and work out a schedule for loan repayments, to which he gladly agreed.

This gave Smith confidence to keep his business going. While there was no written agreement, Smith said he definitely had a verbal agreement from the Yukon government that it would not collect its $111,000 from the insurance cheque.

While waiting for the insurance cheque, Smith borrowed money to clean up the facility, make repairs, keep paying his employees and buy replacement equipment. The company could not do testing for a few months after the fire.

The insurance cheque, for more $250,000 after BDC took its cut, arrived in October 2002.

In the interim, the Liberal government of the time reorganized the bureaucracy. As part of the restructuring, Economic Development was eliminated. The unpaid loans portfolio was shifted to the Department of Finance.

Like he did with the Bank of Nova Scotia, Smith took the cheque into the government to be signed off, because it was a creditor on the claim.

As far as Smith had been told, the government was going to permit the cheque to go entirely to him.

Wrong.

Bill Curtis of the Department of Finance informed Smith the government was taking its money.

This would leave Smith with about half of the cheque. He told the government taking the money would torpedo NAL because the money was needed to pay off the debts he incurred fixing up the laboratory.

Smith wouldn't have taken on that debt if he knew the government was going to take the money, but officials promised they would not.

He believes that if he had been told the government would turn around and do this, he could've walked away from the business without being in debt.

Smith looked for political assistance to his dilemma but this came at the time of the 2002 territorial election.

Shortly after the election, he spoke with members of the Yukon Party's transition team, including Craig Tuton and Gord Steele, about his company's situation.

Once the Yukon Party had assumed power, Smith was told cabinet would look at the problem.

He believed the problem would be fixed and he'd be able to afford to keep things going once it was settled. He kept going further in debt to keep the company alive while he waited for cabinet to deal with it.

The money he received from the cheque, about $140,000, was used to buy key pieces of equipment while he waited for the $111,000.

Even though he had to wait, Smith said he would've been slightly in the hole when it was finished but figured he could've kept the business going.

In March 2003, while Smith was waiting for cabinet's decision, Liberal Leader Pat Duncan raised the issue in the legislature. Smith did not comment because he didn't want to hurt his chances of getting help from cabinet.

By July, with still no word from cabinet, Smith could hold on no longer and was forced into bankruptcy. He had to shut down NAL.

In December, he finally received word from Steele that cabinet had dealt with the matter. Smith hoped he could recoup something from what he describes as a fiasco. Smith said Steele was disappointed and told him cabinet turned down Northern Analytical's appeal.

From what Smith heard through the government, the money was taken because officials believed he would take the money and run, not keep the business going.

He said that is totally false and his willingness to go deeply into debt to keep it alive should have proved that.

While Smith said he had a verbal agreement the $111,000 would not be collected out of the claim, Curtis of the Finance department said the government does not think he ever had that agreement.

Fentie did not return the Star's request for an interview to explain cabinet's decision.

An e-mail Smith obtained through an access to information request is his proof the government did not want to see the company in financial trouble.

The e-mail was written by Doug Kearns, who handled loan recoveries before Curtis and dealt with Smith for years.

'Tom (Lougheed of BDC) is very cooperative and shares our objective in having NAL continue as a going concern,' the e-mail reads.

When Duncan raised the issue, Fentie said the government had to take the money because it was listed as a creditor on the insurance claim.

Smith said that is not right.

'We know they had the legal right to take that money but they weren't obligated to do that,' he said.

While Fentie has said the government had to take the money, the Bank of Nova Scotia was also listed as a creditor on the insurance claim but it did not take its share of the cheque.

'The bank's a lot more forgiving than the God damn government,' Smith said. 'The banks don't do it. It's the last thing they'll do.'

But the government did collect the money which Smith said killed his business.

'I've lost every penny that I saved in my life. I've lost the business.'

On top of that, Smith said the Yukon has lost a lot of money which would've gone into the economy through wages and taxes. Plus, the Yukon mining industry lost its only testing lab, forcing all of the money which would have been spent for analysis to exit the territory and go south.

All over $111,000.

'So, what's the sense in all that?'

The Yukon government's budget this year is $705.8 million. Smith's debt was .015 per cent of the government's total budget.

He owed less than each of the two cabinet ministers, Archie Lang and Peter Jenkins, who still have unpaid debts.

While Lang has paid some of his more than $120,000 in unpaid debts, Jenkins hasn't paid anything on his company's $300,000 in debt in more than seven years.

The Liberal leader pointed out last year the government had control of money that flows to these two, with their MLA's and minister's salaries, but does not keep any of it.

She said by not collecting from Lang and Jenkins and yet collecting on Smith, the Yukon Party created a double standard.

Smith said his company put hundreds of thousands of dollars into the economy through salaries and expenses and that has been pulled out by the Yukon Party government.

'This isn't stimulating the economy or creating jobs, it's exactly the opposite.' An inquiry by the ombudsman into the case has just recently been started.

But for Smith, the business is done.

'They've broke me. They've ruined me financially,' said Smith, who's trying to dig himself out of the hole he's been left in by this mess.