Duffy’s lawyer slams Senate officials for not keeping tabs on taxpayer money

OTTAWA – His client may be facing a laundry list of fraud and breach of trust charges, but Mike Duffy’s lawyer on Tuesday slammed Senate administrators for failing to keep tabs on taxpayer money.

A day after the Crown alleged Duffy funnelled $65,000 worth of contracts to a friend to pay for services that had nothing to do with his work as a senator, defence lawyer Donald Bayne took to criticizing officials who approved such contracts in the first place.

“There is no oversight to be avoided,” Bayne told the court.

He suggested officials in Senate human resources and in the finance directorate had breached their “statutory obligation” because they failed to follow up on the work being done in Senate contracts.

In his cross-examination of Senate human resources officer Sonia Makhlouf, Bayne accused Senate officials of a lack of oversight on the contracts, which senators are allowed to award for outside research at his or her discretion.

“You don’t know what actual work was done, at all, under the contact?” Bayne asked the witness.

“No, because it’s at the discretion of the senator,” she replied.

“You don’t know and you don’t ask who actually did it, especially if it’s a corporate contractor?”

“I go only by the information provided to me by the senator,” Makhlouf said.

Bayne suggested Duffy set up the contracts over four years with his friend Gerald Donohue’s company, Maple Ridge Media, and later Insulated Concrete Forms (ICF), but that Donohue subcontracted the work to outsiders.

Mike Duffy trial: Prosecution examines contract with friend

And there is nothing in the rules that prohibited this, Bayne said, because the senators have full control over who does their research.

“You never asked, was the work actually done?” Bayne asked Makhlouf.

READ MORE: Senate has no rules for primary residence, Duffy trial hears

“That’s why you don’t know …who’s actually doing the research,” Bayne said.

“It’s not part of my responsibility,” Makhlouf replied.

Court heard that prior to November 2011, there was no policy for procurement contracts.

Instead, there were guidelines, and even if senators didn’t always follow them, their money got approved.

Bayne referred to a 2010 report from the Senate’s board of internal economy, which informs Senate administration.

The report cites an internal audit that found, in the unspecified number of contracts examined, 9 out of 10 were signed after work had already started.

Makhlouf confirmed that each senator had full discretion of his $150,000 office budget, which included a maximum of $70,000 for external service contracts.

And she agreed Duffy did not go over budget.

“The concept of research is wide open, right?” Bayne asked Makhlouf.

“A senator should be granted latitude to what he wants done and who he wants to do it?” Bayne continued.

“Yes,” she said.

Which expenses are allowed?

On Monday, Crown prosecutor Jason Neubauer alleged Duffy used the contract money to pay for services that had nothing to do with his work as a senator, including a makeup artist, personal trainer and a “volunteer” in his office.

The Crown also alleged Duffy expensed personal items, such as a framed photograph of his family and one of former first lady Barbara Bush, through the funnelled contract money.

READ MORE: 10 things we learned about Mike Duffy from his diaries

But Bayne suggested those items are within Senate rules.

Bayne referred to a list of “Senate-related business” items included under the senators’ research and office expense budget.

Postal services, advertising and publicity and even photographs and photo albums are among the items on that list.

Other legitimate expenses included books and subscriptions, framing services, and purchasing editorial cartoons and photos from newspapers.

Bayne also pointed to a section of the office budget policy that says senators do not need to get approval from Senate administration for items under $2,500.

He argued there is no explicit policy that says senators can’t pay volunteers – but they are given freedom to change personnel without informing the administration.

“It’s not a personal or private benefit to Senator Duffy – it’s running his Senate office,” Bayne said.

The 2010 internal economy report also that warned that Senate contract policies were confusing, citing 12 different policies and procedures for processing senators’ expenditures.

“There is a risk of inconsistent application of policies and understanding of the policies across senators’ offices,” it says.

The report recommended clearer criteria for what constitutes consulting and personnel services.

Makhlouf testified that in the years which apply to Duffy’s eight charges of fraud and breach of trust relating to the contracts, Senate human resources referred to an internal document from 1988 to determine which contracts were allowed.

The 1988 document was in place until November 2011, but the new policy does not apply to Duffy’s contracts with Donohue, court heard.

Duffy is facing 31 charges in total, including a bribery charge for accepting a $90,000 cheque from former chief of staff Nigel Wright. He has pleaded not guilty.

Makhlouf is back on the stand Wednesday morning.