Dodgy rumours

“We are talking about maladministration, incompetence and dereliction of duty”

The speculation that incoming prime minister Paul Martin might appoint current Bank of Canada governor David Dodge to head the Privy Council Office (PCO) — an advisory body for the prime minister — is spurring Judy Wasylycia-Leis's call for a public inquiry into Dodge's former role as deputy minister of health between 1998 and 2000.

Wasysclia-Leiss, an NDP MP (Winnipeg North Centre) says that Dodge's loyalty and friendship with Martin makes the rumours of such an appointment plausible. “We often hear about Dodge ['s presence] at functions where Paul Martin might be honoured or vice versa,” she says.

Dodge himself has indicated his intention to complete his seven year term, which has another four years to go, says Pierre Laprise, a communications spokesperson for the Bank of Canada.

As deputy minister of finance during the mid-1990s, Dodge advised then finance minister Martin on major cuts in the millions of dollars to social programs including unemployment insurance, health care and social housing.

What Dodge would have in mind at the PCO “scares us all,” within the NDP, says Wasylycia-Leis.

More concrete, she says, are questions surrounding Dodge's previous role as deputy minister of health, following several charges of fraud and breech of trust laid by the RCMP against a former assistant deputy minister (ADM), Paul Cochrane.

They stem from a series of contracts that Cochrane signed with the Virginia Fontaine Addictions Foundation in the Sagkeeng First Nation in Manitoba when he administered the First Nations and Inuit Health Branch at Health Canada between 1994 and 2000. The First Nations and Inuit Health Branch oversees a budget of more than one billion dollars and has close to 2,000 contracts involving programs with aboriginal communities across Canada.

The allegations involve money that was awarded to the centre but was then funneled back to Cochrane in the form of bribes and kickbacks.

One CBC report, quoting an RCMP affidavit, states that Cochrane misappropriated almost $1-million to purchase personal items such as condos, SUVs and travel. He is also alleged to have signed a funding deal with the centre and then provided several hundred thousand dollars more than it requested.

It was in July 2000, while Dodge served as deputy minister at Health Canada that a five-year agreement with the Virginia Fontaine Addictions centre totaling $34.3-million was signed, followed by another $2.5-million that was added that August, says Wasylycia-Leis.

“Dodge was new to Health, but he was certainly in tune with the intricacies of finance and accountability,” the Winnipeg MP told rabble.

Health minister Anne McLellan and the federal government have rebuffed Wasylycia-Leis's call for an inquiry into Dodge's role.

“It may not be that we are talking about corruption, but we are certainly talking about maladministration, incompetence and dereliction of duty. How could huge sums of money like this, be signed off and additional sums added, without the deputy minister knowing about it or asking questions?” Wasylycia-Leis adds.

On August 7 of this year, Paul Samyn of the Winnipeg Free Press, obtained a 2001 report by forensic auditor, Kroll Lindquist Avey, that Health Canada had repeatedly refused to release. Its details were subsequently revealed in court filings the RCMP used for raids in three provinces, the reporter wrote.

In addition to finding poor management, poor auditing and a lack of checks and balances at the First Nations and Inuit Health Branch, the forensic auditor cited Health Canada for its failure to pay sufficient attention to the Virginia Fontaine Addictions Foundation, even though the department had identified financial problems in the centre five years earlier.

Samyn quotes Kroll Lindquist Avey pointing to red flags from previous audits that should have led to more frequent internal audits. “However, internal audit had undergone major downsizing during program review&and is short of the resources needed to ensure that major areas of concern are reviewed in a timely manner.”

Meanwhile, Michael McBane, the Ottawa-based national coordinator of the Canadian Health Council, is not surprised that Dodge, as deputy minister of a large and sprawling federal department like Health Canada, might not have known what one of his several ADMs was doing in a specific branch.

McBane says, “Fraud can happen because there is no accountability in Health Canada.”

He told rabble that there is a “culture of secrecy” at Health Canada, which tends not to give breakdowns of its annual expenditures to Parliament.

“[Health Canada] used to have detailed breakdowns, of how the budgets are allocated within a branch: how much money is going to food safety, how much money is going to drug safety, how much money is going to other programs. Now, we have no idea of what's going on,” McBane says.

Furthermore, McBane says that downsizing and restructuring of federal departments — including Health Canada — since the days of Brian Mulroney helped drive out “competent” senior managers.

Dodge helped to complete the work undertaken at Health Canada by previous senior officials to make the department more “subservient” to the food and pharmaceutical industries, McBane says.

Symbolically, the word “protection” was dropped from the health protection branch, which is now called the Health Products and Food Branch, adds McBane.

Wasylycia-Leis has written a letter to the federal Auditor General, Sheila Fraser, requesting an examination of Dodge's time at Health Canada. In response, Fraser has indicated that her office isdoing an audit of the First Nations and Inuit Health Branch and is welcominginput from the Winnipeg MP.

That is probably the MPs best choice of action under the circumstances, says Duff Conacher, a lawyer with the Ottawa-based Democracy Watch.

One complication is that Fraser is only legally permitted to look at the spending of public funds by senior public servants within the federal government. Decisions involving methods of management or ethics are not part of her mandate, Conacher says.

It is not clear if Dodge broke any of Treasury Board's spending or management rules for senior public officials in the federal government. So, in one possible scenario, if Dodge broke a Treasury Board management rule, even though it involves expenditures, the auditor general might not technically be empowered to investigate his actions at Health, continues Conacher.

Furthermore, Dodge, as governor of the Bank of Canada, is a federal cabinet appointee and therefore outside the federal public service. Here, his ethical conduct is governed by the ethics counsellor Howard Wilson who reports directly to the Prime Minister. (Conacher has called for a more independent role for the ethics counsellor).

“Overall the federal government lacks accountability measures to ensure that the public servants follow all of their public servant rules. Mainly what they are lacking is independent enforcement of those rules and effective penalties that can capture people, even if they move to another position in the public service or retire, or move on to a cabinet appointment office like the Bank of Canada.”

A personal defense of Dodge's managerial abilities, particularly at the Bank of Canada, comes from an unlikely source — Andrew Jackson, the senior economist at the Canadian Labour Congress.

“We have a real disagreement over monetary policy right now, but I don't in any sense doubt his competence to run the bank,” Jackson told rabble.

Jackson has profound disagreements about Dodge's current strategy to maintain high interest rates and a high Canadian dollar, which he says, is being conducted at the expense of thousands of Canadian manufacturing jobs.

Nevertheless, adds the CLC economist, “[Dodge] has been extremely open to having a dialogue and a relationship with the labour movement.”

Jirina Vik, a spokesperson for Health Canada, said her department has fully co-operated with the RCMP in its investigation of the management of the First Nations and Inuit Health Branch and has internal processes in place to ensure that situations like the alleged fraud does not happen again.“However, no policies or processes can stop individuals who are determined to deceive the system. It will be up to the courts to decide if any individuals deceived the system,” she told rabble.

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