Doug McConnachie expressed his honest opinions on Aug. 25, without realizing that his words were being recorded.
Commenting on a fact-finding report he’d just received, the assistant deputy minister at Innovation came down hard on the senior leadership of Sustainable Development Technology Canada (SDTC), a foundation in the middle of a five-year, billion-dollar funding deal with Ottawa.
He stated that there is a significant lack of care and effort, along with evident incompetence. The current situation is extremely difficult to manage.
Speaking with a member of a whistleblower group, McConnachie predicted a fiery reaction when his minister at Innovation, François-Philippe Champagne, would get briefed on the report.
McConnachie predicted that the minister would become extremely angry and demand a drastic reaction upon hearing the information, possibly even shutting everything down.
Whistleblowers’ hopes were fueled by recorded conversations.
In late August, the individuals who reported misconduct at SDTC were still optimistic about a change in management and a comprehensive investigation. Their complaint, submitted earlier in the year, detailed various instances of conflicting interests and potential mishandling of public funds within the organization that supports Canada’s cleantech industry.
In one of the recorded conversations, McConnachie raised their hopes by stating that there was a general agreement within the federal bureaucracy that the management team of SDTC was no longer in favor.
In late August, it was mentioned that it is improbable for specific individuals or the entire board and executives to remain in their positions. They seem to have lost the trust and support. Hence, the focus of the conversation will revolve around the methods to remove them from their roles.
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The SDTC management team and board of directors are still in their positions after a period of over two months.
The authorities have also urged them to carry out a set of changes in light of the report by Raymond Chabot Grant Thornton, an independent company that investigated the deficiencies at SDTC, which were initially brought to their attention by a whistleblower.
Basically, the individuals who were targeted by the public service in late August have now been given the responsibility to address the problems that occurred during their time in power.
Hours of recordings
The whistleblowers submitted hours of recorded conversations with top officials to Radio-Canada/CBC in an effort to compel the government to alter its approach.
The whistleblowers currently hold the belief that the government made several “unfulfilled commitments” and instead focused on minimizing the impact of their complaint, without any genuine intent to fully investigate the matter.
Gérard Deltell, a Conservative Member of Parliament, claims that the government mishandled the situation by maintaining the identical management team at SDTC.
“Their conduct has given rise to this investigation,” he said. “When people are involved in bad decisions, I’m not sure they are in the best position to apply the ensuing recommendations.”
In the upcoming weeks, a parliamentary committee is anticipated to conduct hearings regarding the situation at SDTC. Furthermore, Radio-Canada has been informed that the Office of the Auditor-General recently made the decision to initiate an audit into the accusations brought forward by the whistleblowers.
While it enjoys a quiet public profile, SDTC is in the middle of a five-year, billion-dollar agreement with the federal government. Its job is to redistribute this money to small- and medium-sized businesses in the cleantech field, which is at the heart of the Liberal government’s strategy to fuel a transition to a green economy.
Concerns about public funds
Radio-Canada provided assurance of confidentiality to the group consisting of approximately 20 whistleblowers. Many of these individuals are concerned about facing negative consequences in their current or past employment for exposing the situation.
In November 2022, the whistleblowers initially contacted the Office of the Auditor General in Ottawa to express their worries regarding the administration of public funds and human resources at SDTC.
They were told to send their complaint to the Privy Council Office, which received the group’s 300-page document that laid out their allegations in February of this year. Shortly after, McConnachie and his team took over the file as Innovation, Science and Economic Development (ISED) hired Raymond Chabot Grant Thornton to conduct an in-depth investigation of the facts. That contract ultimately cost the government $300,000.
During their initial encounter, McConnachie expressed admiration for the accomplishments of the whistleblower group.
The whistleblowers presented various instances in their complaint where potential conflicts of interest were identified between SDTC executives, board members, companies seeking funding, and experts responsible for evaluating the proposals.
The whistleblowers raised concerns about unfair terminations of multiple employees and claimed that there were evident instances of bias in the recruitment and advancement procedures within the human resources department.
COVID funding criticized
The group expressed concerns regarding the financial matters and questioned the utilization of new funding sources established by SDTC, which amounted to a substantial sum of money. They claimed that these sources were employed to bypass the funding agreement with the federal government.
Furthermore, the group strongly condemned the allocation of approximately $40 million in funding to companies that already had existing financial agreements with SDTC amidst the COVID-19 pandemic.
In May, McConnachie informed the whistleblowers that the investigation was yielding positive results and that numerous of their claims had raised concerns.
“He stated that we had promised to trust you, and now we possess sufficient evidence to truly affirm our trust in you. Consequently, the government will be compelled to take appropriate actions.”
Raymond Chabot Grant Thornton provided an update to the whistleblowers by the end of June. They verified that there were multiple instances where SDTC failed to effectively handle conflicts of interest and awarded substantial funding in violation of relevant regulations.
Investigators suggested that the payments made during the pandemic may have assisted specific managers in meeting their performance goals. However, they were unable to acquire any documents from SDTC regarding this matter, and thus, it was not discussed in their final report.
“It was money that didn’t cost anything.”
By the end of July, McConnachie had become certain that some spending decisions were poorly managed. This included the allocation of nearly $40 million during the pandemic, which was not based on specific requirements and did not need any further monitoring.
“He described it as free money,” he remarked, drawing a comparison to the scandal that impacted Jean Chrétien’s Liberal government in the early 2000s. “It’s almost equivalent to a giveaway on the scale of the sponsorship scandal.”
During the entire process, the public service operated with the understanding that the innovation minister would ultimately be accountable for the final decisions in this issue. However, McConnachie and his fellow public service members attempted to influence the political reaction, or at least moderate it.
McConnachie stated that the bureaucracy prioritized the survival of SDTC, along with efforts to manage the controversy and prevent legal complications.
“The minister is going to want to do a cleaning of house, and we think that’s the right thing to do as well. It’s just making sure we do it in a way that doesn’t have a [blowback],” he told whistleblowers in early September.
Raymond Chabot Grant Thornton discovered several inadequacies but did not find any evidence of misconduct or significant ethical breaches, which constrained the government’s choices.
McConnachie stated that they lack the means to punish individuals for their wrongdoings.
‘We must gain authority over the board’
During conversations with government lawyers, as well as his peers from the Privy Council and ISED, McConnachie proceeded to support a cautious approach, pending his ability to persuade Champagne.
McConnachie explained that even if the minister becomes extremely upset, we are confident in our ability to convince him otherwise. We would say to the minister, “That is not a good idea, we have alternative suggestions.”
He opted for a strategy where he would gradually replace the board members at SDTC and eventually persuade them to alter the management team.
“In September, he stated that before pursuing the executives, it is essential for us to establish control over the board. We are currently strategizing and working on the necessary actions.”
It was around that time that the relationship between the government and the whistleblower group began to deteriorate. The latter were beginning to find the investigative process that had been going on since the start of the year was taking too long, exposing members of the group still at SDTC to potential reprisals.
By mid-September, the government found that SDTC had violated its agreement with ISED, yet the foundation proceeded with its annual public meeting without acknowledging the incident.
Champagne expressed a strong commitment towards acknowledging the importance of the findings.
ISED claimed that they had no authority over the management of human resources at SDTC when an employee was terminated.
Champagne expressed his deep concern regarding the findings on October 3 through a post on social media.
He instructed SDTC to enforce a set of changes, and also to halt the provision of any fresh funding. Nevertheless, no employees were dismissed and Ottawa did not end its funding contract with SDTC.
Champagne stated in a statement that the fact-finding report highlighted several cases where SDTC did not fully adhere to the agreement made with ISED. Additionally, the report pointed out areas for potential improvement in aspects such as human resources, governance, and oversight, which fall beyond ISED’s intervention scope and are not covered by the agreement.
Later that evening, SDTC made it clear that the report did not highlight any significant problems.
“A spokesperson for the foundation stated that the report did not uncover any concrete proof of wrongdoing or misconduct at SDTC, and therefore, no additional investigation is necessary.”
Raymond Chabot Grant Thornton’s report was made available to media members upon request, however, it is not accessible on the internet.
In fact, when a member of the whistleblower group requested a copy from ISED, they were told to make a request under the Access to Information Act.
During an interview, a member of the group exposing wrongdoing mentioned that they had decided to document their conversations with the government right from the beginning.
When ISED took control of the matter, they were concerned that the department might be reluctant to thoroughly investigate due to the fact that the subject under investigation was being funded and supervised by ISED.
A whistleblower stated that this served as our protection plan.
The auditor comes in
In the past few days, Auditor General Karen Hogan made the decision to initiate her own inquiry into the circumstances surrounding SDTC.
According to federal sources, the decision indicates that the Office of the Auditor General is not pleased with how the federal government has handled the whistleblowers’ complaint thus far.
The federal government has chosen to enlist the services of a law firm to investigate all matters concerning human resources at SDTC. As per the agreement between Ottawa and the organization, former employees of SDTC will not be obligated by any non-disclosure agreement that might have restricted their ability to openly testify about their experiences at SDTC.
“This review will be led by an independent, third-party law firm that will report its findings to me. SDTC will allow current and former employees to freely speak to the law firm without violating any applicable settlement agreements or non-disclosure agreements,” Champagne said in a written statement. “Our government is committed to ensuring organizations which receive federal funding adhere to the highest of standards of governance.”
A senior government official mentioned that the federal government has granted SDTC a deadline until late 2023 to implement changes in its conflict of interest and funding policies. Nevertheless, the ongoing investigations by the OAG and human resources are expected to cause delays in this schedule. The official also acknowledged that Ottawa recognizes the importance of sustaining funding within the cleantech sector.
Whistleblowers appreciate the presence of the auditor general, but they are doubtful about whether the human resources investigation will possess the required independence and power to thoroughly investigate the matter.
The individuals who exposed the information stated that they desire assurance that the findings will be made available to the public. Additionally, they seek equivalent protection for current SDTC staff, similar to what federal civil servants receive, when they communicate with the lawyers overseeing the investigation.
“The group’s relations with the federal government are characterized by a clear absence of trust,” stated a whistleblower.