Evidence of meeting #60 for Public Accounts in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was rcmp.
A recording is available from Parliament.
Liberal
The Chair Liberal Shawn Murphy
We don't want to interrupt him at every sentence, Mr. Sweet. But if there is something you think he's misleading the committee on or you're looking for more clarification, you can jump in.
Conservative
David Sweet Conservative Ancaster—Dundas—Flamborough—Westdale, ON
Now that we have stopped, I want to get a specific answer on this. Who was the author of the business case of February 4, 2002?
S/Sgt Mike Frizzell
The final draft of the business case appears to have been done on March 15, 2002. It contained an evaluation grid that would make it appear as though a proper bid evaluation took place. This evaluation grid showed a bid from Great-West Life and a bid from Morneau Sobeco versus keeping it internal. It showed the costings and, son of a gun, Morneau Sobeco won.
When we interviewed the people who were supposed to have been part of the bid, the evaluation committee told us no such process ever took place. This was merely a paper exercise to add legitimacy to the process.
In April of 2002, an e-mail within Great-West Life stated:
If the RCMP balked at the three way agreement Dallas would split it into two two way agreements.
Great-West Life wanted a three-way agreement among the RCMP, Morneau Sobeco, and Great-West Life.
The reply was from Great-West Life internally:
the RCMP will not want a three way agreement. They will want us to subcontract with MS. They want to avoid putting things out to tender through PWGSC. We are dealing with a 50 year client that has never had a documented agreement with us. Getting things on paper could be a challenge.
This created quite a bit of fuss back and forth. Great-West Life was being asked to act as a conduit. There was nothing in it for them except to retain the RCMP as a client.
An internal e-mail within Great-West Life stated that a Great-West Life representative has had discussions with the RCMP:
In the discussion with the RCMP they indicated that they would like to avoid signing any agreement as this would require involvement of the Commissioner and RCMP legal. Somehow they would like to be able to just do it through a letter of authorization/commitment. If we go the agreement route it may force a tendering process.
The reply to that was:
Regarding the RCMP's request that no agreement be signed, the law department has serious concems related to the risk involved in proceeding this way.
Of course they do.
These legal agreements are going back and forth, and RCMP legal is being kept out of the loop. These are contractors and Mr. Crupi's shop that are going back and forth.
At one point, Mr. Casey sent a copy of a contract to another consultant that said:
Dom suggested that you and your colleagues could review these clauses and give us your interpretations/suggestions concerning the following.
Instead of using legal services, he's asking another consultant to have a look at this. It is a significant risk to both the members of the RCMP and the Government of Canada, and this is the way it's being handled.
While all this is going on, a briefing note was being written by a young man in corporate procurement. He had noted all the things that were happening within internal procurement. Before he wrote this briefing note, he also found out about what was going on at CAC and that Mr. Crupi had gone to CAC. It's Consulting and Audit Canada, the KPMG reference there.
He wrote a briefing note that started with the issue:
Questionable contracting practices relating to the pension reform project, and more specifically, related to Mr. Dominic Crupi, the project manager. Mr. Crupi entered into a number of service agreements with CAC totalling more than $2.5 million. Mr. Crupi does not have the delegation of contracting authority to enter into these agreements.
This is a two-page little briefing note, the last recommendation being:
A letter of notice is to be submitted to CAC to inform them of our delegations of authority matrix and that no other representatives other than RCMP procurement personnel have the authority to enter into these agreements on behalf of the RCMP.
While Mr. Crupi was trying to negotiate yet another very questionable contract, this young man was bringing all of these goings-on to the attention of senior members of the RCMP.
S/Sgt Mike Frizzell
The author was Mr. Shawn Duford, who has since passed away. The date of it was between July 10 and July 17, 2002.
This is very significant to me, because here is a young man, a member of the public service—
Conservative
S/Sgt Mike Frizzell
No, it never went to CAC as far as we could tell. It was stopped long before that.
It was brought to the attention of the senior procurement personnel and Mr. Crupi's supervisor. And according to the senior procurement personnel, it was brought to Mr. Gauvin's attention as well.
The point is that while all this was going on, a red flag came up about Mr. Crupi and what he was doing, and very little came of that.
We have yet another e-mail. This time it's between Great-West Life and Morneau Sobeco. You have to understand that these two companies were a little frustrated by now. They were being asked to do something very unorthodox.
Great-West Life states to Morneau Sobeco:
If circumstances permitted, the RCMP and Morneau Sobeco would contract directly and Great-West Life would have no additional liabilities. Great-West Life's role is one of being a conduit so that Morneau Sobeco can provide the required services to the RCMP. Our main role in the agreement is to simply pay the authorized bills.
The two companies reached an impasse, and Morneau Sobeco was quite exasperated and sent an e-mail to Great-West Life, stating, “We are not prepared to give the RCMP a direct indemnity in this agreement.”
I don't pretend to know what that means, but it sounds to me that they were not going to cover the RCMP's butt in the agreement between Morneau Sobeco and Great-West Life.
They say: “First, the RCMP is not a party to this agreement—the agreement deals with our contractual obligations to you”—that is, Great-West Life. “This underlies the fundamental nature of a subcontracting relationship.”
Great-West Life replied,
This may be, but practically speaking, everyone understands that Great-West Life is merely a conduit for payment. The real relationship is between Morneau Sobeco and the RCMP. This argument is strengthened by considering the real nature of this arrangement.
That's from Great-West Life legal.
The point of all this is that neither company was comfortable with what they were doing, but they were trying to make it work for their client.
Great-West Life then wrote another internal e-mail, talking about a conversation they had had with Mr. Casey.
Pat now understands that Great-West Life will not indemnify the RCMP for damages related to the performance of services by Morneau Sobeco.
In other words, if Morneau Sobeco screws up, Great-West Life isn't going to wear it.
It was made clear to Pat that as it stands, the RCMP cannot rely on indemnification from either Great-West Life or Morneau Sobeco. I advised Pat to obtain the advice of his own law department as to the way to manage this risk. He replied that he didn't want to involve them.
The idea behind reading these is so you could hear the actual words going back and forth. My interpretation of what I read was that these two companies were doing something they were not at all comfortable with, but they were doing it at the behest of their client.
The other reason this is important is that when this agreement was eventually set up, it had to be paid. And part of the deal, which you heard about earlier, was about money coming from the pension and going into the insurance. Morneau Sobeco was going to charge far more than what they'd anticipated it was going to cost. The plans were never designed to pay for administration, only claims and underwriting costs, so the plans would be drained at quite a rate.
They came up with this idea—and when I say “they”, I mean contractors working at NCPC—of taking money out of the insurance plans. But in order to do that, somebody had to sign the bills.
NDP
David Christopherson NDP Hamilton Centre, ON
May I just ask a quick question?
Why, again, were NCPC so anxious to go with Morneau Sobeco? What was the win for them?
S/Sgt Mike Frizzell
The win was that we had just taken on Morneau Sobeco as the pension outsourcer. So it's keeping it within the newly formed family.
NDP
David Christopherson NDP Hamilton Centre, ON
So it's a matter of their convenience. They just think it's easier. You're not finding anything else questionable about their motivation for doing these unorthodox things?
S/Sgt Mike Frizzell
I'm sorry, it actually was given a reason: it wasn't part of the mandate of the investigation.
Conservative
Brian Fitzpatrick Conservative Prince Albert, SK
Pat Casey's name keeps on showing up. What was Pat Casey, or where does—
Conservative
S/Sgt Mike Frizzell
Yes, I believe it is.
The agreements go into place in April of 2003. Now we have a whole bunch of bills to pay, both for the $600,000 in set-up costs plus the ongoing bills to supplement the insurance plans. An invoice is sent to our finance section, and from my understanding of the FAA, when you find a breach of the FAA, you're to report it up. What happened was they simply told NCPC, you need a contract, go see procurement, which they did.
This is the same procurement section that was very well aware of Mr. Crupi's goings-on with contracting both within the force and within the CAC. NCPC brings to them these two contracts, and you've just heard about how they were put together.
This creates quite a stir, but they're paid. The different documentation is done up to authorize this. It's signed by Mr. Crupi, by Mr. Crupi's boss, by Mr. Ewanovich, who's Mr. Crupi's boss's boss--
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
On a point of order, Mr. Chair, when the staff sergeant is referring to the bosses, could we have the names?
S/Sgt Mike Frizzell
I'm sorry. So that's Mr. Crupi. Mr. Crupi's boss at the time was Chief Superintendent Yves Bouchard, whose boss at the time was Jim Ewanovich, and then it was also signed by a procurement representative, who was then Inspector Guy Rochette.
What happened? We don't actually know exactly what happened here. There were very poor memories around this event. What we do know for sure is that two people from NCPC took an agreement to then Deputy Commissioner Lange, who was the chair of the insurance committee. Mr. Lange signed an agreement that basically committed the RCMP to $6.3 million, to be paid out over eight fiscal years to cover the cost of the insurance, and 40% of those costs would be taken out of the pension.
When it came to the procurement office, they decided not to send it to legal. They decided that Mr. Crupi had signed on the line, therefore he had ostensible authority. I learned the word “ostensible” much like I learned the word “fulsome”. It was new to me, but I became intimate with it. Ostensible authority, as it was explained to me, was that nobody from outside could tell that Mr. Crupi wasn't a bona fide representative of the RCMP and therefore they wouldn't question that he could sign this contract, therefore the RCMP would be liable, so they had to pay these bills.
You heard evidence before this committee that that was the interpretation of our chief financial officer. The truth of the matter is that the bills came from Great-West Life. As we've heard, Great-West Life did no work. They were merely the conduit for payment. Had anybody picked up the phone, had anybody done any checks whatsoever—“due diligence” is definitely the term here—they would have found out exactly what I found out, and believe me, I'm no financial or procurement expert.
The bills were paid. This was September 2003. You've heard evidence that as soon as finance knew about it, they had to pay the initial bill but immediately they put an end to it and made it all better.
The evidence is also that the moneys weren't paid back to the pension until March 2005, after the investigation found it and made it quite an issue. I'll leave it to you to draw your conclusions, but a year and a half seems to be a long time to continue paying bills that you believe shouldn't be paid.
Just give me a moment to catch up to myself.
Of note, something I skimmed over here, when Shawn Duford had written out the briefing note talking about Mr. Crupi's issues, Mr. Crupi obviously wasn't too concerned, as a week later he wrote to his boss saying that he needed a promotion, that because of all his responsibilities, he should be bumped from an EX-01 to an EX-02.
