The founder of Cablevision said Government did not encourage a massive US group to invest in his company.

Gavin Wilson said the McDonald Group contacted him when the two brothers in charge of the group vacationed in Bermuda.

"The McDonald brothers were down here on holiday staying at the Castle Harbour hotel in about 1986. I had a big double spread prospectus in The Royal Gazette .

"I got this call from Bill McDonald saying he had read the prospectus, that he was in the cable business and could he and I get together for talks,'' said Mr. Wilson.

"Government did not know anything about the McDonald Group until I made an announcement. From what I understand now it is a matter for the judiciary and not the Government. That is my personal belief,'' he added.

Nine years ago the US Group put cash into Cablevision and worked out a deal where it received 60 percent of the profits as "consultancy fees''.

Later the Bermuda Telephone Company bought a block of shares in Cablevision and last year launched legal action over its control and the consultancy payments.

It is claimed Cablevision's structure is in breach of the 60/40 rule where a Bermuda company has to be 60 percent Bermudian owned. The case is due to be heard by the Privy Council next year.

However, US Senator Richard Shelby claims the Bermuda Government invited the McDonald Group into Bermuda to invest in Cablevision and along with the Bermuda Monetary Authority worked out the deal bringing the company onto the Island.

As a result he feels the Bermuda Government has abandoned the Group and should have explained the deal to the courts.

He also claims the Government is helping Bermudians wrest control of Cablevision -- which Bermuda's politicians strenuously deny. They are investigating whether Government encouraged the Group to come to the Island.

Mr. Wilson added that the McDonald Group had a management contract for the construction of the cable system and also provided the finances to get the construction up and running.

They put some of their money and the rest was raised through a bank loan, said Mr. Wilson who sold his stake in Cablevision to Telco.

He added that it had to be demonstrated to the Ministry of Telecommunications that various criteria had been met in order to get a licence.

And he said the Finance Ministry was involved through the BMA in terms of contractual agreements between Bermuda companies and foreign groups.

But he added: "I was not party to negotiations between the McDonalds and the BMA.'' If Government was involved in the deal it is felt there could be several options to help solve the situation.

It is felt Government could publicly state -- possibly after the Privy Council hearing -- that it approved the structure as legal in the 1980s.

Under the Companies Act the Finance Minister also has the power to grant a licence to Cablevision where it could continue to lawfully operate in Bermuda even if the 60/40 rule -- is violated.

The Minister of Finance has the power to overrule the 60/40 rule if he feels it is in the public interest. It is not known what Telco's response to either option would be.

As well as Sen. Shelby, Congressman Spencer Bachus is also involved in the case. Both represent Alabama, where the McDonald Group is based.

Congressman Bachus wrote to Mr. Farmer in July saying he was pleased that the Consul General was involved in "helping to protect the property of my constituent and good friend, Bill McDonald''.

"I know that you will do your best to prevent the Bermudians from essentially expropriating the McDonald's family interest in Bermuda Cablevision,'' the letter adds.

In his reply, dated August 21, Mr. Farmer said: "Because I believe an informal resolution would be best for the parties involved and for US/Bermudian relations, on August 8 I convened a meeting here in Bermuda between Mr. McDonald and Dr. King.'' But letter adds: "Several alternatives were outlined and discussed at this cordial meeting. Unfortunately Dr. King later informed me that he plans to pursue the litigation that is pending in this matter.

"I sincerely believe that the interests of the McDonald Investment Company have been violated.

"Since Dr. King informed me that he will proceed with the litigation, therefore, I have held several other meetings with the different players involved, including with the Premier of Bermuda.

"You may rest assured that the US Consulate and the Department of State, with whom I have been in constant contact, will do their utmost to see that this matter is resolved fairly and amicably.'' Last night a spokeswoman for Congressman Bachus said at this stage the Bermuda issue had only been raised with the State Department, which has also been contacted by Sen. Shelby.

"But I would think that if there is no appropriate response it could become a Congressional issue,'' added the spokeswoman.

"We want to make sure that US businesses are treated fairly and that we have a strong reciprocal relationship in terms of trade.

"We have been in touch with Robert Farmer and he seemed to be very positive about the chances of working this out. We feel this is important.''