Federal watchdog failed to sniff out wrongdoing: audit

OTTAWA – While former commissioner of the Public Sector Integrity Office Christiane Ouimet had been tasked with investigating complaints, a recently published audit by federal Auditor General Sheila Fraser found Ouimet repeatedly failed to investigate alleged wrongdoing by government employees.

Now, the Ottawa Citizen has obtained correspondence detailing some of Ouimet’s apparent reluctance.

The correspondence between Ouimet and Suzanne Boudreau, a former Department of Justice employee and Crown prosecutor who urged Ouimet in 2007 to investigate, among other things, alleged instances of fraud, conflict of interest, libel and a breach of a court order by bureaucrats in several departments.

In many ways, Boudreau’s case seemed tailor-made for a commissioner new to her job and presumably eager to make a mark. Boudreau has more than 30 years experience as a lawyer and spent thousands of hours compiling evidence. Yet, Ouimet not only declined to probe, she showed herself more than willing to accept the point of view of the very departments accused of unethical behaviour.

The case in question involved 178 former government workers who exercised an obscure but legal rule in 2000 to transfer their pension entitlements to several private-sector firms including Loba Cryptic Web. But Treasury Board and other officials didn’t like it, in part because the rule had been set up to serve a different policy. So they moved in unethical ways to prevent the transfers or undo them, according to the September 2008 Ontario Superior Court judgment by Madam Justice C. Aitken.

The judge found that bureaucrats from Treasury Board, Canada Revenue Agency and the RCMP colluded to crush Sylvain Parent, the Ottawa actuary who set up the pension funds in question. Aitken’s ruling also determined that government officials lied and withheld critical pieces of information from both Parent and the government employees who transferred their pensions. The latter faced ruinous financial losses when the minister of national revenue threatened in 2003 to revoke their pension plan.

Boudreau, a Cryptic Web employee, fought a number of legal battles on behalf of the pensioners. In 2007, she urged the new federal integrity office to investigate the behaviour of government officials.

The case was still very much alive as Canada Revenue Agency was preparing to inform Cryptic Web’s pensioners that the amounts they transferred from their federal pension would be treated as income and therefore taxable – all at once. A considerable chunk of their retirement assets would disappear.

Boudreau got an 11-page reply on Feb. 1, 2008 from Ouimet, who had taken on the commissioner’s role the previous August.

In Ouimet’s letter, the commissioner adopts the language and tone provided by Treasury Board and other government officials – and devotes considerable space to why her office has no need to act.

She notes, "I understand that Cryptic Web was set up as an ‘umbrella-type’ company that offered working arrangements with ‘self-employed’ consultants."

This was the line used by Treasury Board officials who were convinced Cryptic Web’s employees had fraudulently misrepresented their employment status. But they were wrong.

Aitken found that Parent at the time had received two confirmations from government agencies that the employment arrangements were, in fact, legitimate. She also noted it took the Canada Revenue Agency years to obtain a different ruling – one "seriously tainted" by the amount of pressure applied. The tainted ruling provided the basis for the minister’s revocation of the pension plan.

Boudreau invited Ouimet to question the officials who may have misled the minister about the legitimacy of the Cryptic Web employee-employer relationship.

Ouimet’s response: "Alleging libel and a possible violation of the Criminal Code in and of itself without evidence is insufficient to show grounds of a possible wrongdoing and to justify my office commencing an investigation."

The commissioner’s mandate is to examine allegations of wrongdoing to see if there’s anything to them.

Ouimet also repeats a number of inaccuracies, for instance that Parent was improperly pocketing a fee for arranging the pension transfers.

This had also been the understanding promoted by Treasury Board officials. In fact, as Aitken pointed out in her ruling, Parent was providing a guarantee that the value of the pension would never sink below a certain amount. There was no transfer fee.

In her Feb. 1, 2008, letter, Ouimet briefly reviewed seven Boudreau allegations but declined to investigate any of them.

"Nothing in the information provided reveals any grounds . . . to commence an investigation," Ouimet wrote in response to Boudreau’s allegation of fraud – specifically, that federal officials failed to advise civil servants considering a transfer to Cryptic Web that an RCMP probe was underway.

Aitken ruled that Treasury Board and other government agencies owed a duty of care to the departing employees and should have warned them their pensions were potentially at risk.

Aitken’s ruling in September 2008 came seven months after Ouimet wrote in detail to Boudreau. However, Boudreau also presented Ouimet with evidence being presented at the trial over which Aitken presided.

Boudreau’s reply came 10 days later. "Should Madam Justice Aitken’s ruling contradict the questionable conclusions arrived at by your officials, your credibility in handling this matter will have been irretrievably damaged."