Public Accounts Committee on Feb. 21st, 2007

[The Chair, Liberal, Shawn Murphy]

I'd like to welcome everyone here.

I hope the decorum and rancour of today don't extend over to this committee meeting.

This meeting is called pursuant to the Standing Orders. We are looking at chapter 9 of the 2006 Auditor General's report, “Pension and Insurance Administration--Royal Canadian Mounted Police”.

We are very pleased to have with us today, from the Office of the Auditor General, Hugh McRoberts. He's accompanied by Gordon Stock, principal, and of course we know Hugh is the Assistant Auditor General. Welcome, Mr. McRoberts and Mr. Stock.

From the Canadian Mounted Police we have the new commissioner, Beverley Busson. Welcome, Commissioner, and congratulations. With her is Barbara George, the Deputy Commissioner, Human Resources; Paul Gauvin, the Deputy Minister of Corporate Management and Comptrollership; and Brian Aiken, the chief audit executive.

We also have with us the chief of police for the city of Ottawa, Chief Vince Bevan. From Treasury Board Secretariat we have Paul Charko, assistant secretary, pensions and benefits sector.

I understand that the Office of the Auditor General, the commissioner, and the chief have opening statements. I will call for the opening statements, but before that, I do remind witnesses that this is a rather complicated issue. I want to ask members to keep their questions short and to the point, and I ask witnesses to keep their answers brief and focused on the questions. This committee has zero tolerance for any long-winded, irrelevant answers.

I should point out to members, before I turn it over for the opening statements, that I'm going to suspend at the end to present the minutes of the steering committee, which was held on Monday. However, if there is a vote, I would like to seek the committee's indulgence to put that over until Monday to accommodate Mr. Christopherson, who may have to rush to catch a plane.

Having said that, I'm going to call upon Mr. McRoberts for his opening statement.

[Hugh McRoberts, Assistant Auditor General, Office of the Auditor General of Canada]

Thank you, Mr. Chair, for inviting me to discuss the audit of the RCMP pension and insurance administration. With me today is Gordon Stock, principal of the public safety team, who is responsible for this audit.

I'd like to take this opportunity to provide committee members with an overview of our findings related to the RCMP's response to the abuses in the administration of its pension and insurance plans.

In 2003, allegations of fraud and abuse in the management of the RCMP's pension and insurance plans came to the attention of the commissioner of the RCMP, who then triggered an internal audit. Following this internal audit, the Ottawa Police Service carried out a criminal investigation.

In June 2005, the Ottawa Police Service reported to the RCMP that it had found abuses of the pension and insurance plans, nepotism, wasteful spending, and overrides of controls by management. Two senior officials resigned and the RCMP considered disciplinary action against others.

The objective of our audit was to determine whether the RCMP had responded adequately to the findings of its internal audit and the investigation by the Ottawa Police Service. We did not re-audit or re-investigate the allegations of abuse.

However, we did examine additional allegations that were brought to our attention during our audit. In addition, we looked at whether the Ottawa Police Service conducted its investigation independently of, and without undue direction or bias by, the RCMP.

We concluded that the RCMP had responded adequately to the findings and recommendations of its internal audit and of the OPS investigation by addressing issues directly connected to the abuses. In particular, the RCMP reimbursed or credited about $4.3 million that had been improperly charged to the pension plan. It also took steps to prevent future inappropriate charges to the pension plan and it strengthened staffing and contracting controls. However, we found that the internal audit and criminal investigation raised additional issues that remained unresolved.

Perhaps the most significant issue was the question related to the independence of the criminal investigation itself. We received complaints that the investigation lacked independence. We found that the RCMP does not have a policy on the conduct of external investigations of itself. While the RCMP had signed a formal memorandum of understanding with the Ottawa Police Service for this investigation, we noted that in previous investigations it had not.

The memorandum with the Ottawa Police Service was signed 10 months after the start of the investigation. We found that the organization of the investigation, with the lead investigator reporting to an RCMP assistant commissioner, compromised the appearance of independence. The RCMP justified this arrangement as being the best way to provide administrative support to the investigation, and the Ottawa Police Service told us it had not been directed or influenced by the RCMP. Our recommendation was that the RCMP develop and institute a policy for such investigations to ensure that future investigations are independent in both substance and appearance.

We also found that while the RCMP had reimbursed or credited inappropriate charges made to the pension plan, it had not completely reimbursed or credited the plans for wasteful and unnecessary expenditures charged to them. We estimated that about $1.3 million was charged to the plans for work of little value and that only about $270,000 of that had been reimbursed or credited to the pension plan. We understand that the RCMP has reviewed our estimate, refined it, and made additional adjustments to the plans since the end of our fieldwork.

We found that the pension outsourcing initiative, the project that led to most of the abuses, had not been supported by an adequate business case, and that the cost estimates had not been complete and had greatly underestimated the cost of outsourcing. The RCMP finance branch did not challenge the numbers presented by the National Compensation Policy Centre for inclusion in the RCMP's Treasury Board submission. The branch told us it had relied entirely on the advice and decisions of the sponsoring managers. We recommended that as part of its internal review process, the RCMP challenge all important program changes.

Just prior to the publication of our report, the RCMP informed us that it was no longer considering disciplinary action against RCMP members about whom allegations of misconduct had been received. This was because the RCMP had elected to begin its internal disciplinary processes after the criminal investigation was completed instead of at the same time.

During the intervening period, a court decision in another case clarified that the time limit on internal discipline should have started when the appropriate officer knew of the alleged offence and the identity of the member involved—well beyond the time allowed in the RCMP Act had elapsed. In its internal disciplinary investigation, the RCMP identified that disciplinary action was warranted against four of its members.

We did not make a recommendation on the management of internal investigations and disciplinary proceedings by the RCMP. It is evident, however, that these need to be clarified.

Mr. Chair, that concludes my opening statement. Thank you for the opportunity to discuss this chapter. I will be happy to respond to the committee's questions.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. McRoberts.

We are now going to go to Commissioner Busson for her opening statement.

[Commr Beverley Busson, Commissioner, Royal Canadian Mounted Police]

Thank you, Mr. Chairman.

My colleagues and I are pleased to appear before this committee today to discuss chapter 9 of the Auditor General's report on RCMP pension and insurance administration.

With that in mind, I wish to recognize and acknowledge the importance of the Auditor General's work and to thank her for her indulgence with respect to this matter.

I would also like to extend my thanks to Chief Vince Bevan for the professional manner in which the Ottawa Police Service performed its investigation into allegations of fraud and mismanagement in the administration of the RCMP pension and insurance plans.

I am accompanied today by Deputy Commissioner Barbara George, Human Resources; Mr. Paul Gauvin, Deputy Commissioner of Corporate Management and Comptrollership; and Mr. Brian Aiken, chief audit executive of our audit and evaluation branch.

As you are no doubt aware, I have only recently been appointed commissioner, and I have been briefed on this file by those who have been directly involved in implementing corrective actions. While I cannot provide you with firsthand knowledge of these events, I am confident that the questions put forward by this committee can be responded to by those present today.

It's important to note that the OAG audit was in fact one of four important reviews conducted during the past four years to examine allegations of mismanagement in the administration of the pension and insurance plans. After a 2003-04 internal audit identified issues related to the expenses charged to the RCMP pension plan, and the Government of Canada and the RCMP policies and procedures for contracting and staffing practices, the RCMP requested that the Ottawa Police Service lead an investigation into this matter to ensure transparency and openness.

At the outset of the investigation it was agreed that the RCMP would provide and facilitate access to the required information and personnel within the RCMP to the Ottawa Police Service. After completing its independent investigation in June 2005, the Ottawa Police Service informed the RCMP that no criminal charges would be laid in this case, as the provincial crown attorney's office advised that there was no reasonable prospect of conviction on criminal charges. The Ottawa Police Service investigation thus corroborated the results of our own internal audit that determined that the irregularities identified were administrative.

In June 2005, the RCMP was then able to review the OPS investigation. After carefully studying the report, the RCMP conducted a third probe, an internal investigation under part IV of the RCMP Act. Under the act, this investigation was to determine whether a disciplinary hearing should be conducted to decide if any members had breached the code of conduct. As the Auditor General has observed, it was not possible to proceed with a formal hearing in this regard because the prescribed one-year limitation period had lapsed. This is something the Federal Court of Appeal clarified in February 2006, after the investigation had been initiated. I would like to advise this committee that we have taken a number of steps to ensure the timeliness of future disciplinary proceedings.

In September 2005, the OAG commenced a fourth review of this matter. This OAG report was tabled in the House of Commons on November 28, 2006. Chapter 9, while recognizing the RCMP had already acted in response to the issues raised in the internal audit and the OPS investigation, also provided recommendations to further strengthen the administration of the RCMP pension and insurance plans.

It was and remains an RCMP priority to take corrective action to address each issue raised through both the internal audit and the Ottawa Police Service investigation. In her report, the Auditor General noted that the RCMP had indeed responded adequately to the findings of the internal audit and to the Ottawa Police Service investigation.

As RCMP commissioner, I want to assure this committee that all recommendations stemming from chapter 9 of the Auditor General's report will be implemented. The majority of those recommendations have already been addressed, and corrective measures are being taken to address the few that remain outstanding. I would like to emphasize that the RCMP pension plan is not, and was never, at risk.

Our primary goal is to administer the pension and insurance plans in the most efficient manner, ensuring that all current and retired members are provided with the highest possible levels of service. The RCMP has demonstrated its commitment to achieving this goal by acting on the recommendations of its own internal audit as well as those of the Auditor General.

I might also add that we received only last week the results of the Auditor General's audit of the pension administration plan for the year ended March 31, 2006. The OAG provided the RCMP with a clean and unqualified report and commended the RCMP for the administration of the pension plans.

Thank you for your attention. I hope we will be able to respond to your questions. Thank you very much.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Commissioner Busson. Merci beaucoup.

We're now going to hear from Chief Vince Bevan.

[Chief Vince Bevan, Chief, Ottawa Police Service]

Thank you, Mr. Chairman.

Members of the Standing Committee on Public Accounts, I am pleased to appear before you as a part of your consideration of the 2006 report by the Auditor General of Canada to the House of Commons.

In 2002, internal complaints were voiced within the RCMP about the management of the force's pension fund. Following an internal audit, the RCMP contacted the Ottawa Police Service to conduct an investigation into activities surrounding the administration of the force's pension fund. This was a criminal investigation.

A major case management model was used to manage this investigation. There are many aspects to that model. In this case it means that a crown attorney was consulted regularly at all stages of the investigation. The investigation itself was exhaustive. It included 238 interviews, including Commissioner Zaccardelli himself, and produced an investigative report the size of a banker's box, along with an additional 75,000 pages of supporting documents.

The Ottawa police investigation also ordered a third-party independent forensic audit as part of their work. Ultimately, the Ottawa Police Service, in consultation with the provincial crown attorney, concluded that the issues uncovered, while serious, were administrative in nature rather than criminal and that there was no reasonable prospect of conviction on criminal charges.

I would like to draw to your attention that after a comprehensive review by the Office of the Auditor General, we received compliments to the investigators on the thoroughness and professionalism of their work.

I respect the important mandate of this committee, and I am pleased to extend my full cooperation to these deliberations and to answer all of your questions.

Mr. Chair, I have Vince Westwick from the Ottawa Police Service with me today. He is here to provide me with advice.

Earlier I realized my staff indicated to the clerk that I would have to leave after the hour that had been set aside. I recognize the importance of the deliberations today, and I am prepared to stay until released, Mr. Chair.

Thank you very much.

[The Chair, Liberal, Shawn Murphy]

Thank you, Chief Bevan, and thank you, Mr. Westwick, for coming.

We are now going to the first round.

I remind witnesses that under the Standing Orders you're deemed to be under oath.

Mr. Wrzesnewskyj, eight minutes.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Thank you, Chair.

Millions of dollars of rank-and-file RCMP officers' pension and life insurance funds were, in the words of the Auditor General, misused “due to management overriding controls”. Much of these funds have still not been repaid. This appears to be a tale with no best-case scenario and the worst case of fraud, obstruction of investigations, of whistle-blowers and investigators punished and constructively dismissed, of criminal investigations suspended, evidence buried, and of wrongdoers rewarded with fraudulent leave payouts.

Deputy Commissioner of Human Resources, Ms. George, during the criminal investigation of the RCMP insurance outsourcing project, Staff Sergeant Mike Frizzell was the lead investigator. Staff Sergeant Frizzell has over 15 years of criminal investigative experience and an impeccable track record. On June 19, 2005, two superintendents arrived at his office. He was physically removed and his computer and files were seized. The 15-month Ottawa police criminal investigation was terminated the following week.

Did you or Mr. Zaccardelli order that Staff Sergeant Frizzell be removed, and was it you or Mr. Zaccardelli who ordered that the investigation be shut down?

[D/Commr Barbara George, Deputy Commissioner, Human Resources, Royal Canadian Mounted Police]

I can state with absolute finality that it was neither Commissioner Zaccardelli nor me who had anything whatsoever to do with, as you say, the removal of Sergeant Frizzell.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Can you tell us who it was?

[D/Commr Barbara George]

No, I'm not aware of who it was. The best I can state is that when Sergeant Frizzell left, I understood he returned to his home division, which was “A” division. I'm being careful with regard to the privacy concerns here, but I understood it was for health reasons.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Well, in that case, over to you, Police Chief Bevan.

The so-called independent Ottawa police investigation was based at RCMP Headquarters, also working out of the RCMP Orleans facility. Of 20 people involved in the investigation, only two were Ottawa police. Reports went to RCMP Assistant Commissioner Gork.

As well, I have a gag order here on RCMP letterhead and signed by RCMP Assistant Commissioner Gork, which was designed to silence investigators and that your officers presented to those being investigated. These facts do not support the claim of independence and non-interference by top RCMP officials in this criminal investigation. Do you agree?

[Chief Vince Bevan]

No, sir, I do not agree. I can tell you the investigation was housed in the RCMP facility because they had the space. I didn't have the space to house 20 investigators. I had conversations with Deputy Commissioner Loeppky about where it would be housed. We looked at putting it off-site, but they had space to accommodate it. As long as the security of the investigation and the security and integrity of the files that were being gathered and managed was adequate, I was satisfied it could be conducted and housed safely within an RCMP facility.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Mr. Bevan, it seems to indicate this gag order was signed by the Assistant Commissioner, Mr. Gork. That seems to indicate he was the decision-maker when it came to these particular issues as opposed to you. Was it the Ottawa police or was it the RCMP making these sorts of decisions?

[Chief Vince Bevan]

It was the Ottawa police. If an administrative gag order was in place, it may have been for RCMP administrative purposes, about information that was being released out of the investigation, which was one of the concerns I shared. That's why we were so concerned about having adequate security measures in place around the investigation itself and the files.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Mr. Bevan, are you familiar with the letter from that time, from the lead investigator, that reads as follows:

Chief Bevan was right when he said that we should be moved out of here and set up independently from the RCMP. I was too naive then to realize just how right he was.

Because of time limitations, I'd like to move on to Deputy Commissioner Paul Gauvin, Corporate Management and Comptrollership.

Deputy Commissioner Gauvin, I understand some of your staff were charged criminally, some under the RCMP Act, and others resigned as a result of an OPP investigation. Were you disciplined under the RCMP Act in November 2002 for failure to act in dealing with staff receiving privileges? Were you and former Deputy Commissioner Ewanovich compelled to take one day of ethics training, and did Mr. Ewanovich even have to forgo the Queen's Jubilee Medal?

[D/Commr Paul Gauvin, Deputy Commissioner, Corporate Management and Comptrollership, Royal Canadian Mounted Police]

Mr. Chairman, under the Privacy Act I'm not sure I can answer that. I'll rely on your judgment.

[The Chair, Liberal, Shawn Murphy]

You're invoking the Privacy Act?

[D/Commr Paul Gauvin]

He asked me about Mr. Ewanovich. I don't know whether I can talk about him.

[The Chair, Liberal, Shawn Murphy]

He should answer the question unless it's a criminal prosecution.

I would direct you to answer the question.

[D/Commr Paul Gauvin]

I was not criminally charged, but I had to take a day of ethics, yes.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Mr. Gauvin, you assisted Mr. Ewanovich, appointed by Mr. Zaccardelli. Mr. Crupi and six others were party to a golf game at the St. Andrews golf course in New Brunswick on August 26, 2001.

I have here an e-mail from an official hired by Mr. Crupi with instructions on how to bury this cost in pension fund expenses. This e-mail clearly shows the intent and the mechanism of how to commit fraud against RCMP pension funds. It reads in part:

I need to make an adjustment on the rate for the RCMP Pension Advisory Board.... The purpose of this is to hide the golf rates in the room rates and to expense the golf.

How often did senior RCMP officials use the RCMP pension and insurance funds to cover inappropriate living, hotel, recreational, and personal expenses?

[D/Commr Paul Gauvin]

I can't answer how often, but I can say this was done by individuals without our knowledge. It came out after the investigation that some of this had been built into the room rate, but we were not aware of that when that happened.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

These instructions came from an individual hired and working out of Mr. Crupi's office. There seems to be a pattern here, because in another part of that same e-mail it states:

Also, can you make sure the golf club employees are aware of the payment arrangement. Last year they seemed a little confused....

[D/Commr Paul Gauvin]

I have no information on that, sir.