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.
3:40 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
I'm sorry to interrupt. May I, on a point?
Because you've raised this, Staff Sergeant, I want to be clear.
We had mandated you and Chief Superintendent Macaulay to go and do this. It had the blessing of the commissioner. We had absolute assurances from the commissioner that there would be total cooperation.
Just to clear the decks and make sure that everything was cool, is that the way it unfolded, Staff Sergeant Frizzell?
3:40 p.m.
S/Sgt Mike Frizzell
I was given access to the information for my presentation; there was no problem at all. But getting you copies of it took a little longer.
3:40 p.m.
NDP
3:40 p.m.
S/Sgt Mike Frizzell
No.
3:40 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
Good. The record should note that the commissioner was as good as her word, and it's appreciated.
Sorry. Go ahead.
3:40 p.m.
S/Sgt Mike Frizzell
This will be a little more challenging, but I think we can do it. What I'm going to talk about today is the insurance investigation that took place.
As has been previously stated, the police investigation into the pension funds was broken into different streams. I was responsible for the contracting and the insurance streams. I'm only going to talk about the insurance today, because that's all we have time for. A lot of what we found in the insurance investigation is typical of the entire investigation, so it will give you a flavour for the types of things we were finding.
With respect to how it started, back in 1953 the Great-West Life Assurance Company became the underwriter for some life insurance plans for RCMP members. It was standard stuff. The insurance premiums came off the members' paycheques and were sent to Great-West Life. All the administration of that was conducted by the RCMP. This is what's known as an employer-sponsored group life plan—fairly simple.
What you need to know with the RCMP, and what's often confused, is that it's the Treasury Board who is our employer. For me, as a member of the RCMP, the Treasury Board is my employer, not the RCMP. That's under section 11 of the Financial Administration Act. As such, it's the Treasury Board that sets all conditions of pay and benefits.
From 1953 to 1995, the plans were held by the RCMP, with the commissioner as the policyholder. The RCMP at the National Compensation Policy Centre, also known as NCPC, its various forms before that, and the compensation specialists, who are out in the field, are the ones who deal with the members face-on. That's how the administration of the insurance took place. Great-West Life was the underwriter. They took in the premiums; they invested them, and they paid off the claims. They were paid a flat rate for that, along with a profit margin.
An insurance committee was formed quite a ways back. The insurance committee was made up of members of the sponsor, senior management of the RCMP, and the plan participants, the regular members of the RCMP. Their role was to act as representatives of the members to decide how the money should be invested—T-bills, whatever—to get a good return, without worrying too much about the money disappearing. These are self-insured plans, meaning they're not held by Great-West Life. Members of the plans are responsible if there are too many claims; the members are also responsible for any surplus.
In 1995 a fair surplus had built up in these plans due to the members paying more than there were claims. And 1995 was also a year—I think it was called “program renewal”—when things were kind of tight in the government. Programs were being cut, departments were being downsized. So the director of the NCPC decided that with the moneys sitting in these funds perhaps they should pay for their own administration. What in effect happened was that this representative of the RCMP decided they would now go into the premium funds that belonged to the members to fund what up until then had been an employer responsibility.
That started in 1995. In 1997 a number of other costs came into effect with changes to the plan, so they decided they would bill those costs to the plans as well. What started as a fairly small amount started to grow.
In 1998 a couple of interesting things happened. The disability insurance, which is paid 85% by Treasury Board, started getting billed for administration, and also the employees who had been working for the RCMP were changed over to Great-West Life employees.
This is significant, in that these employees were for all intents and purposes part of the National Compensation Policy Centre of the RCMP, but they were paid for out of the plans and they were called Great-West Life employees. They didn't work at Great-West Life. The ones we talked to had never even been to a Great-West Life office.
What this did was allow us to keep employees on. There would be no audit trail. Until then, Great-West West Life had been cutting a cheque to the RCMP to pay for the administration costs. They would take the money out of the members' plans, cut a cheque that would go to the Receiver General and then be routed back to NCPC, which of course makes a fairly clear audit trail. Once the employees were Great-West Life employees, they were no longer on the RCMP books.
That gives you a little background of how the moneys went from belonging to the members to being used by the RCMP.
In 2000 Mr. Crupi came to the NCPC, the National Compensation Policy Centre. When he arrived there had been talk at the RCMP that the computer system used to store insurance data was deemed to be unreliable. There was no guarantee that it would have good data integrity, which created a risk to the RCMP—you know, if a member was under-insured or they said the member was insured and he wasn't, that sort of thing.
It was decided that you could no longer rely on that system, so they would outsource and go to another company that would have good systems in place. An outsourcing should have had Treasury Board approval. Instead they went to the insurance committee and said, “We've got a great deal for you. It's good for the members. You guys will be very happy with the service.”
The way things are going these days, the plans have to pay their own way. This was right around the time when it was legislated that the pension had to start paying its own administration. The members of the insurance committee thought it was the same thing, so they didn't really feel it was their place to say no. They were told it was going to be great for the members. There are minutes here in the binder that contain the sales pitch that Mr. Crupi made. The bottom line was that it was good for the members, the plans could handle it, the plan should pay, and it was just the way things were going.
Around the same time, they went to Great-West Life and asked it to be the administrator. Because the RCMP had been doing the administration up until that point, the RCMP was outsourcing a service they were responsible for. That's the kind of thing that goes to tender. Other companies should get a chance to bid for this, but it was much easier to go to Great-West Life. Nobody would question that, because Great-West Life was the underwriter. Any outside observer would assume that Great-West Life had been paying for the administration because there had been Great-West Life employees on site.
Great West Life said, “Sure. We'll look at it. We have a couple of clients we do administration for, so we will look into it.” What they found, almost immediately, was that there was no process documented at NCPC, certainly not to their satisfaction. They learned that the payroll comes from PWGSC and not from the RCMP; there were a whole bunch of things. They ended up spending a quarter of a million dollars of the plan's funding—moneys in the premium accounts—before they realized they couldn't do it. They told NCPC they couldn't do it. NCPC was not very happy.
What has happened up until now on the committee is a lot of “he said, she said” stuff, so what I thought I would do today is actually read from some of the e-mails that went back and forth so you could hear from the people who were doing these deals.
3:50 p.m.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
As long as he understands, it's perfectly okay for Staff Sergeant Frizzell to read these e-mails; it's just that they can't be tabled in two official languages. If he feels that some content of the e-mails is important, he can read them and they will be translated.
3:50 p.m.
S/Sgt Mike Frizzell
They have the meeting, and Great-West Life is told by NCPC, “Keep it quiet that you're not going to do the administration. You guys should go see Morneau Sobeco. You just got them as a pension outsourcer. They're going to do the pension administration, and I'm sure they can do your insurance administration at the same time.”
Then there is an e-mail from Great-West Life to NCPC stating: “Following the meeting in Ottawa that our members attended, it was our understanding that your investigation into an alternate service provider was to be treated as confidential and not to be shared with our resources.”
They decided to cancel the next meeting because they didn't have an outsourcer, and they had to look for one. An e-mail is sent out to let everybody know the meeting is cancelled, but they're not told why. The e-mail reads that some of the members of the project team couldn't be there, so they were going to cancel the January 7 meeting “due to the scheduling conflicts of some team members”. This is from one of the people who knows Great-West Life isn't doing the outsourcing any more, or doing the administration. One of his co-conspirators—for lack of a better term—writes back to him giving some feedback on the e-mail, just one word: “Smooth”.
Within a few days—
3:50 p.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
Would it be possible to know who the individual was? There is an individual being quoted.
3:50 p.m.
Liberal
The Chair Liberal Shawn Murphy
Yes, you probably should identify who the e-mail was from and who it had been sent to.
3:50 p.m.
S/Sgt Mike Frizzell
I'm in a bit of a bad spot. That was the idea of having the books in front of you. It was a police investigation, but because this is a public forum it's something for which I could give the names in camera, but these are people who were subject to a criminal investigation.
3:50 p.m.
Liberal
The Chair Liberal Shawn Murphy
I'm not following. You have consent from your superiors to come forward with the information. They obviously vetted it and didn't see a problem. Once it's translated, it's going to be tabled the minute after it's translated. Do you follow the problem I'm having here?
3:50 p.m.
S/Sgt Mike Frizzell
When it's tabled, it's just to the committee members.
May 29th, 2007 / 3:50 p.m.
S/Sgt Mike Frizzell
I was given a letter explaining the ATIP process, and I think this would fall under that. I would defer to my senior officers here to give me some guidance.
3:50 p.m.
Liberal
The Chair Liberal Shawn Murphy
I can tell you once these documents are tabled, Staff Sargeant Frizzell, they are public documents. A document tabled in this committee is a public document.
Mr. Williams.
3:50 p.m.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
Perhaps we can have our legal counsel tell us that we don't operate under ATIP; we operate under parliamentary rules.
3:55 p.m.
Gregory Tardi Senior Parliamentary Counsel (Legal), House of Commons
Mr. Chairman, I think Mr. Williams is quite right in the sense that the Access to Information Act and the Privacy Act were meant to cover relations between institutions of the executive branch and private individuals. They were not meant to cover relations between institutions of the executive branch of government and the legislative branch. In other words, in this forum, access to information and privacy have very limited, if any, application. When the committee requests information, it is entitled to be given it.
Obviously, in the interest of fairness and equity, some accommodation can be made, but I'm having a bit of difficulty when a witness comes, starts reading from a document, and then says that one part of the document has to be protected and others do not.
3:55 p.m.
Liberal
3:55 p.m.
Senior Parliamentary Counsel (Legal), House of Commons
Absolutely, and in that sense public means public to the world at large.