Public Accounts Committee on May 29th, 2007

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

The name once again...?

[S/Sgt Mike Frizzell]

Sorry. Mr. Crupi's boss at that time was Mike Séguin, who was an assistant commissioner of the RCMP.

Also of note that year, even the person who ruled on the ostensible authority said, “You know, we're going to have to pay it”—in his opinion. But he states in his e-mail where he gives that opinion, “Furthermore, it is critical to the interest of the Force that the performance by the aforementioned individual”—Mr. Crupi—“be addressed immediately as to mitigate any and all further occurrences and possible risks to the RCMP.”

This is the year that Mr. Crupi actually made a performance bonus of five times the average in the public service.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Who do we attribute that to?

[S/Sgt Mike Frizzell]

Staff Sergeant Stew MacDonald, who was a legally trained member working in procurement at the time.

So that's what happened with the investigation. When I found all this out, I was taken aback. Although there were a lot of questions around procurement's actions and corporate's actions, it seemed to me that once they knew about this, the senior members of the RCMP would do something about it right away. That's why I told Mr. Roy, who then said, “Well, you've got to tell Mr. Gork.” I told this whole deal to Mr. Gork, whose response was, “Oh, my God.” I'm paraphrasing. He immediately set up a meeting with Ms. George. His response to me was that Barb has to know about this.

So on February 9, 2005, I met with Ms. George—Mr. Roy and Mr. Gork were with me—and I explained all this. I further explained something that I haven't covered here, but I'll briefly cover. The way the moneys were being taken from the plans by this time wasn't based on effort; it was based on which plans had the most money. It seemed that the highest percentage was being taken out of the disability insurance, which is 85% funded by Treasury Board. This was the richest plan, and one would have noticed the money draining from it the least. That seemed to be a red flag, as well, for me.

I explained all this to Ms. George on February 9. Again, as I explained, this was at Mr. Gork's urging. He thought this was a big deal.

On February 9, I received an e-mail, which I have already read into the record, that Mr. Gork felt I had done a very good job and that I explained it very well. But the next day I received an e-mail that was addressed to both me and Mr. Roy:

Gentlemen: After our discussions of the past two days and knowing that you are meeting with the audit personnel today, I would just like to underline the aspect that once you have determined if there are no criminal charges to come out of the insurance stream—then we turn our information as to the workings over to the audit personnel for their follow up. If there will be charges then we carry on as normal. I do not want us spending time on investigations that we know are not criminal in nature.

This is an example of Mr. Gork giving the direction to both Mr. Roy and me as to how the investigation should go.

I replied that as far as I was concerned, that was the stream that charges were going to come out of. Mr. Roy replied back to me that he and I need to sit down and that he needs more details about it.

Again, that's just to give you an idea. There was a drastic change in Mr. Gork's outlook. An internal audit into the insurance had started at that point as well. There was some indication that our investigation would be shut down and the internal audit would be allowed to go, much the same as what happened in 2003. I was adamant that this not happen again. With respect to my personal relationship with some of the auditors, I struck a deal that we would work together as to what should have happened in the first place.

On that note, there is something else I forgot to mention. The contracts that allowed the money to go from the pension into the insurance funds were signed in the middle of the internal audit. The first one, the one that was called after the investigation, was cancelled. So even though the NCPC were breathing down their necks, they were still able to work these deals.

In March 2005, I met with Deputy Commissioner Gauvin and a number of others from finance and HR. The meeting was all about the insurance. I've given evidence previously, but I'll just summarize by saying that my interpretation of that meeting was that the RCMP was going to take back responsibility for the administration.

Up to this point, the audit had also found that it was inappropriate for the moneys to be removed. So it wasn't just the investigation; the internal audit found the exact same thing: it was inappropriate for the moneys to be removed from the insurance plans for administration.

My understanding was that it was going to stop, and then they were going to look for authority to pay back the moneys that had already been removed. My understanding, from the evidence I've heard since, is that this was the intent. But the evidence is that even though that was the intent, they received a legal opinion that they couldn't do it. My understanding is that the legal opinion was received a month or so after the money had already been taken out, so the timeline was a little off.

I didn't find out about the money being removed from the insurance plans—that half million dollars—until June, when Mr. Roy actually called me into his office to point out—and I've given this evidence—that another $542,000-plus had been removed from the insurance plans. He asked me if I knew about it. I did not. It came as quite a shock.

I asked Mr. Roy to forward that e-mail to me so I would have it, which I do. I immediately called the chief financial officer at this meeting I've talked about. He was put in charge of putting together an insurance committee to figure all this out.

He and I met. I expressed my concerns. He stated that he remembered things a little differently than I did.

[An hon. member]

[Inaudible--Editor].

[S/Sgt Mike Frizzell]

No, this would have been a gentleman named Claude Caron. He reported to Mr. Gauvin.

He said that this was an HR decision. It was an HR issue, which you've heard a few times here, but he agreed to set up a meeting with him and HR, and he would have me along to try to provide the information to, hopefully, set the record straight.

At the same time, I contacted members of the insurance committee to find out how it was, because I had been told that they had agreed to this money coming out of the plans. When I contacted them, they told me that no, actually, they hadn't agreed to the money. In fact, they were assured at the meeting that the money was coming out of the RCMP's budget, not the plan's. I asked him if he had seen the minutes, because the minutes said something different entirely. He then asked for a copy of the minutes, determined that the minutes were different from his—

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Once again, he is—

[S/Sgt Mike Frizzell]

Sorry. The gentleman in question is Brad Chugg. At the time, he was a division representative and a member of the insurance committee.

I have strong reason to believe that Mr. Chugg has since laid a complaint, forwarded to Ms. George, complaining that the minutes had been changed and that the person who changed the minutes knew full well what he was doing. To my knowledge, that was never investigated. But perhaps Mr. Mole knows more about that than I do.

[An hon. member]

Who said they'd been changed? Who made that statement?

[S/Sgt Mike Frizzell]

It was Mr. Chugg.

I spoke to another member of the committee, a gentleman named Allen Burchill, who is, I believe, a retired assistant commissioner of the RCMP, and he agreed that at the meeting it was agreed that the money would come out of the RCMP's A-base and not the—

Whether the insurance committee agreed to it or not is really a side issue. But the fact that somebody thought it was important enough to apparently falsify the minutes—

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Was Mr. Crupi still around at that time?

[S/Sgt Mike Frizzell]

No. From the evidence I've heard here, apparently he was still on the books, but he wasn't working.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

He was being paid, though.

[S/Sgt Mike Frizzell]

Apparently.

That's when I made the phone call to Rosalie Burton. I received notification that the meeting that Mr. Caron had set up had been cancelled and had been cancelled by Ms. Burton. I called her, expressed my very sincere and very profound concern, and said that I'm writing up the final report for this big investigation and I want to be able to put in there that yes, all this happened, all this nonsense happened, but that as soon as the senior members of the RCMP found out about it, an end was put to it and it was made right.

Shortly after that, I was summoned to Ms. George's office. It was shortly after that that I didn't go. And then we know the part about my being ordered off the investigation.

I believe that takes us up to slide K, and that's where my presentation ends and Chief Superintendent Macaulay's begins. But of course I'm available for questions.

[C/Supt Fraser Macaulay]

I will do a quick summary of basically what we have gone through here today. Just before I do so, it is important for the committee to understand that as Staff Sergeant Frizzell started to get down this path, work on these things, and see that more money was coming out of the fund, this was when he was removed. This was when the order was made that we've all heard about, and the references made to—

[The Chair, Liberal, Shawn Murphy]

Mr. Williams, on a point of order.

[John Williams, Conservative, Edmonton—St. Albert, AB]

I ask that Chief Superintendent Macaulay be instructed that he has to supply names where appropriate. He is no longer bound by the RCMP oath, and that if this committee requires a name, we have to be given these names.

[The Chair, Liberal, Shawn Murphy]

Yes, Chief Superintendent Macaulay, I instruct you to make full disclosure in your testimony.

I also ask—I know that we're in a bit of a difficult position here with the way it's flowing—that you try to not refer to “bosses“, or “he“, or “they”, and make it flow for the members of the committee.

[C/Supt Fraser Macaulay]

Right, thank you.

As I was stating, it was at that time that Staff Sergeant Frizzell was removed from this investigation and the investigation was stopped. I think it's imperative that, as you've heard as a committee, the phone call was played back to you, the testimony that's been brought forward. Since then, there have been numerous other events, including people suggesting that the interviews that Mr. Frizzell had done throughout this investigation, whether it be with Mrs. Bellemare, with Mr. Hutchinson, with Mr. Ewanovich, were all people he did not interview. The key components were back to these were the events that led to his removal, and, as you can now start to piece together, there were some serious issues he was dealing with as a police officer to try to get to the bottom of this.

Having said that, I will quickly go over what has been said to you folks today. It starts in 1953 with the RCMP insurance fund being paid and administered through funds that were coming from Treasury Board. In 1995 there's an MOU to Great-West Life, not to the employees and not with the knowledge of the employees of the RCMP or with the knowledge of Treasury Board, that changes the benefits without consultation. In other words, it was at that time, during program renewal, that due to some cutbacks in our budgeting from Treasury Board a decision was made to start administering the insurance funds from the members' funds and no longer from Treasury Board appropriations.

In 1997 this got further entrenched into the organization, and in 1998 got even further entrenched with the changing of employees' relationships in regard to the RCMP and back to Great-West Life, and the addition of the disability insurance plan.

By 2000, NCPC's insurance administration outsource decision gets made, and it's being done under the guise that it's good for the members of the plan and that this is a good thing for the members, and not as much about the issues, which were again management driven, around the fact that there was an evergreening process with regard to the insurance computer systems and those types of things that needed to be corrected.

Great-West Life then spends $250,000, or a quarter of a million dollars, out of the members' funds to examine the outsourcing responsibilities, with no contract, no issues, no anything else. And again, the members are paying for that.

By 2002, Morneau Sobeco, which had been approved as the pension outsourcer through an appropriate process, is then asked to do the administration outsourcing of the RCMP's insurance plans, and they spend another $612,000 out of the plan in order for them to adjust and determine what they need to be able to do.

With the assistance of NCPC and Great-West Life, Morneau Sobeco then signs an agreement for $800,000 a year, or thereabouts, to conduct the administration of the benefits for the members. Again, all of this money is coming out of the members' funds, as opposed to the administration costs that should be coming out of Treasury Board appropriations. During that time, RCMP corporate services procurement facilitates that contract after they find out about it, don't do their due diligence, and the contract is signed. And today we are still living that.

At that same time, because of the increase in cost from the $400,000 and something that was proposed to the insurance committee, when the bills are now coming in around $800,000, the decision is made to start pulling it from the lucrative pension fund plan, which had been sitting on the sidelines. You've heard about how that was just a cash cow for the organization and NCPC. As a result, we now have 40% coming out of there and 60% coming out of the serving members' funds.

What's interesting to note is that the 40% was then covered up under the guise of being administrative and O and M costs under the PAC committee, or the pension advisory committee. We have heard that numerous people of the senior managers sat on that pension advisory committee, including the chief financial officer. When you look at the books and start to see that the costs for PAC increased that year by close to $600,000 or $700,000, there was no question by the senior managers at that table as to why all of a sudden there was an overrun of $700,000 on the PAC.

It's all there, it's all documented. The money is showing there, but no questions are being asked as to where that money is going. It's not for the pension administration committee; it has simply been taken out under that guise and put into our insurance administration.

In 2005, when senior management were shown the facts and what had taken place, we ran into the issue around the minutes. Great-West Life continued to take money out of the plans, Staff Sergeant Frizzell was removed, and the investigation was concluded. As of today, in 2007, we are still paying the same way we were in 2005.

As you've heard today, our conclusion is there was a deliberate plan to circumvent legal authorities, including a lack of personal accountability and inappropriate responses to those who were asking or ensuring or trying to ensure accountability. Members of the NCPC were more concerned about their reputation than doing the right thing, both corporately and personally.

As a lot of you have heard and asked questions about throughout the time we've been here, it's around why people did this and what they got out of it. One of the key beneficiaries is people's personal pension plans. When individuals are examined, with increases in both their salaries and in their pension contributions for their best five, you'll see a substantial increase that will now carry them until the time of their subjective lives, which would be somewhere around their eighties, with a huge benefit to them personally. The money didn't go into their personal pockets, but over the next 30 years they're going to benefit from the promotions they receive and from the fact that their salaries have gone up and these bonuses are all part of your pension.

In Mr. Crupi's case, as you can imagine, the 18 months he sat on suspension with pay, what was falling off the lower end of his salary, in comparison to the salary he is now at, is almost double. Therefore, his pension is increasing for the next 30 years as a result of his being able to sit at home. These are the impacts that people and employees are seeing around their behaviours. Again, while it's not a direct link into their pockets, there are extreme issues that needed to be looked at to determine the motive behind some of these decisions.

The question today, sir, when you ask what happened, why Morneau, and why all of these, it is the same question that all of us had in 2003 when we first started looking into this. It was our belief that by getting these people, including Staff Sergeant Frizzell and other members of the Royal Canadian Mounted Police, to investigate that these folks would have dug into those issues, especially around kickbacks or any other motives that would have relied on this.

We have heard at this committee from Mr. Gauvin that they hid money and did things around their PAC meetings, and from Mr. Crupi, who openly admitted he had received some form of tickets, etc., but once he found out, they were stopped. When these folks were questioned they were unable to continue along that path, along that stream, and have never been able to search where all this money and excess money went. The pieces of the pie that had been referred to on numerous occasions at this table were never followed up. Why would people go and contract three people for exorbitant sums of money if there was no value to them? Those streams were not properly investigated and those led to the complaints we made to you in the first instance.

The bottom line for us is that this is just another stream that adds up to a breach of trust that was never laid and never able to be brought forward through the courts, and that's where we're at today.

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

Before we go to questions, do you have anything to add, Mr. Mole or Mr. Pickett?

[D/Commr Kevin Mole]

No, Mr. Chair. I haven't seen any of the information presented today except for the deck last evening.

[The Chair, Liberal, Shawn Murphy]

Officer Pickett, do you have anything to add?

[Insp Tony Pickett]

No, sir. I came into this situation in December 2006. I look forward to what the RCMP has done to try to rectify some of the issues that were brought forward. I'm here for questions with regard to that.

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

Mr. Williams, point of order.

[John Williams, Conservative, Edmonton—St. Albert, AB]

I'd like to know whether this is a personal presentation by Staff Sergeant Frizzell and Fraser Macaulay, or if is this a presentation by the RCMP. I'd like to think it was a presentation by the RCMP, an official presentation of the force. I think it should be taken in that light.