Public Accounts Committee on Oct. 21st, 2024

[Konrad von Finckenstein]

As I said, the Auditor General identified the cases of conflict of interest. She's already outlined those cases, which is all I could have done. That's why, in my opinion, I don't think it's worth the trouble to conduct another investigation. Obviously, I know my opinion differs from yours.

[The Chair, Conservative, John Williamson]

Thank you both very much.

Up next is Mr. Cannings.

It's good to see you again. You have the floor for six minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I think one of the main tasks of this committee and others when we are presented with what is clearly an incredibly dramatic case of conflict of interest on multiple fronts, as the Auditor General found it, is to stop this from happening again.

I was a bit surprised when you mentioned that there are seven members, I think, who are appointed by the Governor in Council and who are subject to the Conflict of Interest Act, but you don't get information from those people when they're appointed. They're not required to report, as MPs and others are required to do. Is there even any form of orientation?

I used to be on a couple of administrative tribunals. When I took those positions, I was given training on what conflict of interest is, how you test for it and when you should recuse yourself. Is there any orientation at all for those board members?

[Konrad von Finckenstein]

Normally it would be the corporate counsel who would do that. If you were appointed to a board, that person would give you a briefing.

In this case, it's a government body and the members are public officers, so if they ask for a briefing, we would give them one in which we would explain it to them. That is what they have done. On the new board, the three members have asked for a briefing, and we have given that.

They were appointed as public office holders. It was the government's choice to make them either public office holders or reporting public office holders. If they decided that this organization was very important and dealt with a lot of money and had a lot of discretion and and they wanted to put the highest form of discipline on them, they could designate them as reporting public office holders. In that case, as with you as an MP, they would have to have a disclosure, they would have a special counsellor, we would monitor them each year, and they would have had to report.

The downside to that is, of course, that you want to have people who know something about sustainable development technology who have other interests and not.... Therefore, I assume.... I have no idea why the government chose to do that. Right now we have a different board, but they originally chose to have a board that was half nominated by the government and half by this council, but even for those who are nominated by the government, like Madam Verschuren, it's up to them to make sure they abstain. They don't have to be as closely monitored as reporting public office holders.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Okay.

As we all know, SDTC is now only temporarily at NRC and will eventually become, at least according to plans, part of the Canada Innovation Corporation. The act creating that corporation has passed, but it isn't in force. In that act, it says, “The guidelines respecting conflicts of interest must be consistent with sections 116 and 117 of the Financial Administration Act.”

Can you explain what those sections are? Will they have any bearing on how we can prevent this from happening in the future?

[Konrad von Finckenstein]

If they are part of the Canada Innovation Corporation, the same rules would apply as applied here. They are public office holders; they are not reporting public office holders.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

This would just repeat the situation we're dealing with right now, wouldn't it?

[Konrad von Finckenstein]

There's nothing preventing the government from making them reporting public office holders. They have the authority.

Michael, can you explain it to him, please?

[Michael Aquilino]

Often the decision on whether to make an individual a reporting public office holder or a simple public office holder is based on their role. Oftentimes, public office holders would be part-time appointees, but there is a provision in the act, which is what the commissioner was trying to allude to, whereby the Governor in Council can designate certain public office holders or even certain non-public office holders to get them into the ambit of the act.

The Governor in Council does have that power to designate certain officials and change their reporting status.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

How much time do I have?

[The Chair, Conservative, John Williamson]

You have 45 seconds.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I just want to be clear that this doesn't change anything about what SDTC would be in the future. It would be in the same position in terms of its board members.

[Michael Aquilino]

If they operate on a part-time basis, they'll most likely remain public office holders unless they are designated otherwise.

[The Chair, Conservative, John Williamson]

Thank you very much.

I'm going to begin the second round now. It is my intention to get through it fully, since this is an important witness we have here today.

We will begin with Mr. Nater.

You have the floor for five minutes, please.

[John Nater, Conservative, Perth—Wellington, ON]

Thank you, Mr. Chair, and through you, thank you to our witnesses for joining us here this morning.

Commissioner, I want to begin with the “Verschuren Report”, which you obviously undertook and in which you provided a thorough analysis of some of the challenges that were discovered with Ms. Verschuren and her work at SDTC.

I wanted to highlight a few sentences that were found at paragraph 151 of your report. You wrote:

In reality, the entire approval process for Seed funding was flawed. The evidence shows that decisions regarding Seed funding had essentially already been made at earlier stages and the Board's final approval was automatic since decisions were made by consensus and Seed funding, in any event, was included in the consent agenda. Thus, an abstention, especially a partial one in respect of particular projects contained within a single agenda item, had no impact on the outcome for those projects.

Effectively, to paraphrase, these decisions were already made by the time Ms. Verschuren recused herself or abstained, and that simple act at the end actually didn't do anything to negate the conflict of interest, because in the entire process leading up to that, she would have been conflicted.

Am I correct in that interpretation?

[Konrad von Finckenstein]

Yes. Proper corporate behaviour would have been to take it out of the consent agenda. If a member comes forth and says that they have a conflict with company X, then you take company X out of the consent agenda and deal with the consent agenda minus company X. Then deal with company X, and she has to recuse herself and leave the room. That would have been the proper way.

Here, they follow this rather strange procedure in which she says she has a conflict. It's noted. On consent agenda item one, is everybody agreed? Everyone says yes, including her, and it's done.

This doesn't make sense. If you abstain, which you can't—the act has no provision for it.... Anyway, obviously if you indicate your conflict, then you shouldn't be involved. You should actually leave the room. That wasn't followed. That's what this sentence that you cite is trying to drive at.

[John Nater, Conservative, Perth—Wellington, ON]

That effectively would apply to all board members and not just Ms. Verschuren. Anyone who would have had a conflict would have been in that same boat when it's simply being agreed to. There are all these things, and they're conflicted, but here they are.

Is it effectively the case that any of the board members who had a conflict would have been in that same spot? Were they effectively just giving a wink and a nod, and things were being approved?

[Konrad von Finckenstein]

I don't know about a wink and a nod, but effectively, yes, it applied not only to Ms. Verschuren but to anybody who was in that same position.

[John Nater, Conservative, Perth—Wellington, ON]

I want to back up from this specific issue in terms of your investigation and how you came to some of these outcomes.

Were you provided with copies of minutes and discussions that led up to some of these final decisions? Were you provided with all the information so that you could make these analyses leading up to these final decisions?

[Konrad von Finckenstein]

Under the act, we have the power to ask for any kind of document, which we do. It's like a subpoena, if you're a lawyer. It means it's a subpoena to bring the relevant documents. Then you come personally with counsel. You're put under oath, you testify under oath as to what's happened, and you can have reference to the documents.

[John Nater, Conservative, Perth—Wellington, ON]

One thing our committee has done is that we've passed a motion requesting certain documents. One of the motions was the minutes of all meetings of the selection committee that considered the appointment of the chair of the board—the same chair, obviously, that you found in a conflict of interest.

Interestingly, the PCO came back and told us that no such records exist since they were considered transitory in nature and were disposed of once the appointment had been made. Disposed of, obviously, means they disappeared in some way, whether they were deleted or were just never filed formally.

Would you have had access to any of those appointment considerations when Ms. Verschuren was initially appointed?

[Konrad von Finckenstein]

When there is a question of documents that are held by Privy Council and we ask for them, in some instances Privy Council will say there's a prerogative here, and as their prerogative, they do not have to disclose.

This always becomes a sensitive issue. We've never had to take it to court. We've always managed to resolve these issues of conflict.

They, of course, feel very strongly about some documents and want to preserve their confidentiality. We, obviously, want to go to the bottom of the situation, so sometimes there are tense discussions, but they have always been resolved.

[The Chair, Conservative, John Williamson]

Thank you very much.

Next up is Ms. Yip for five minutes, please.

You have the floor.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you to both of you for coming this morning.

You mentioned in your opening statement that when it is necessary, the Ethics Commissioner's office will investigate.

What is the tipping point of when you would start an investigation?

[Konrad von Finckenstein]

There are two reasons.

Number one is when I'm asked to investigate something by a member of the House of Commons. I have no choice; I have to do that.

I look at it, but I actually do what we call an exam. We look at the situation and ask if there is enough. Is this just an allegation, a rumour or something, or is there something substantive enough to have reason to believe that there has been a breach of the act? If so, then we start an investigation. If we don't have reason to believe that there has been a breach, then we don't investigate.

If it's on my own initiative, the same test applies. If somebody writes to me or if I see something in the paper or on the news, etc., and it looks like this is suspicious, then we may take a preliminary look at it and see if there is enough. We'll ask for some documents from the relevant person. On that basis, we make the decision of yes, this warrants a deeper investigation, or no, there's really nothing here and this is a bit of vapour produced by the media.