A controversial custody hearing in Winnipeg involving a boy and girl who were seized by child welfare workers after one went to school with racist drawings on her skin wrapped up on Friday.

The grandfather of the two children, one of the last witnesses to testify, offered support for his son, who is seeking custody of the kids. He is the stepfather to the girl and biological father to the boy.

"[The father] has accepted responsibility for his actions and accepts he needs changing," the paternal grandfather said. "He loves his children dearly."

Under cross-examination, the grandfather had admitted telling a social worker that neither his son nor his daughter-in-law were dependable enough to even raise a cat because they didn't work and spent a lot of time partying.

"That was the way I was feeling when [the children] were apprehended," he explained.

He was also caught off guard on Friday after a lawyer for Manitoba Child and Family Services (CFS) confronted him with evidence his son admitted to recent episodes of binge drinking and impaired driving.

The grandfather had just told court he hadn't seen any evidence of his son drinking in the last six months. He also admitted he hadn't read a key doctor's report assessing his son's ability to parent.

The children were taken from their home in March 2008 when the girl, now eight years old, went to school with a swastika drawn on her arm. Her teacher scrubbed it off in the afternoon, but the girl showed up again the next day with another one, along with other white supremacist symbols drawn on her body.

Family services caseworkers were alerted and went to the family's apartment, where they found neo-Nazi symbols and flags. They took custody of the couple's two-year-old son and picked up the daughter at her school.

Children in foster care

The children have been in foster care since then. Manitoba Child and Family Services seeking permanent guardianship, alleging the parents taught them to hate minorities, neglected them and abused drugs and alcohol.

The couple, now separated, are also accused of failing to provide adequate care for their children. Lawyers and social workers have told court there were problems related to drug and alcohol abuse, domestic violence, criminal behaviour and mental health problems.

The mother, who lives in another province, testified last week that her estranged husband isn't fit to be a parent. She told the hearing that he is a heavy drinker and has been suicidal.

The mother had initially sought custody but has, for now, given up on getting her kids back. When she travelled to Manitoba for the hearing, she was arrested on charges of credit card fraud.

The man testified this week that he views himself as a skinhead and is opposed to people of different races having children together. He admitted he used derogatory words to describe black people, taught the girl to believe in white pride and told the girl that non-whites should go back to their own countries.

But he said he has a right to his beliefs and is a good father.

None of the people testifying at the hearing can be identified in order to protect the identities of the children.

A psychologist who testified on the man's behalf Thursday said he has kicked a drug habit and could be a motivated father. The psychologist cited a number of potential positive factors working in the man's favour, including his willingness to allow family and social workers to continue working with the family and his record of steady employment since the children were seized.

Man had difficult childhood, mother says

The man's mother also testified Thursday, telling court her son had a frustrated childhood and was picked on in school. She also told the court she saw no evidence of her son drinking when she would visit the children.

The man's parents have offered to house and support him and the children for six months until he gets a stable job.

A decision in the case could take weeks, if not months.