Whistleblowers secretly recorded civil servant slamming 'outright incompetence' at federal green fund

Doug McConnachie laid out his unvarnished thoughts on Aug.25, unaware his words were being caught on tape.

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 TechnologyCanada (SDTC), a foundation in the middle of a five-year, billion-dollar funding deal with Ottawa.

"There's a lot of sloppiness and laziness. There is some outright incompetence and, you know, the situation is just kind of untenable at this point," he said.

Speaking with a member of a whistleblower group, McConnachie predicted a fiery reaction when his minister at Innovation, Franois-Philippe Champagne, would get briefed on the report.

"The minister is going to flip out when he hears the stuff and he's going to want an extreme reaction, like shut it all down," predicted McConnachie.

Taped conversations fuelled whistleblowers' hopes

Back in late August, the whistleblowers who had filed a complaint against SDTC still hoped for a management overhaul and the launch of a full-fledged investigation. In their complaint filed early in the year, they alleged a series of conflicts of interest and a number of potential cases of mismanagement of public funds at the foundation that subsidizes Canada's cleantech sector.

In one of many taped conversations, McConnachie fuelled their hopes, saying there was a consensus in the federal bureaucracy that SDTC's management team was on the outs.

"It's unlikely that certain members of the board, or the entire board, and executives are going to be able to continue to serve. Like they've kind of lost the confidence. So really, the discussion will be the mechanisms for getting them out," he said in late August.

WATCH |'There's a lot of sloppiness and laziness,' civil servant says of federal green fund in secret recording:

'There's a lot of sloppiness and laziness,' civil servant says of federal green fund in secret recording

10 months ago

Duration 1:23

Doug McConnachie with Innovation, Science and Economic Development Canada comes down hard on the senior leadership of Sustainable Development Technology Canada. McConnachie was unaware his words were being recorded by a whistleblower.

More than two months later, however, the SDTC management team and board of directors remain in place.

The government has even called on them to implement a series of reforms in response to the whistleblower complaint and the investigative work of Raymond Chabot Grant Thornton, the external firm that produced the report into various shortcomings at SDTC.

In short, the very people who were in the crosshairs of the public service at the end of August were entrusted this fall with resolving the issues that arose under their reign.

Hours of recordings

In response, the whistleblowers provided Radio-Canada/CBC with hours of recordings of conversations with senior officials in a bid to force a change in the government's approach.

So far, the whistleblowers believe the government served them a number of "broken promises" and instead tried to contain the damage from their complaint, with no real intention of getting to the bottom of things.

Conservative MP Grard Deltell argues the government mishandled the situation by keeping the same 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."

A parliamentary committee is expected to hold hearings into the situation at SDTC in coming weeks. In addition, Radio-Canada has learned that the Office of the Auditor-General has just decided to launch an audit into the allegations raised 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 offered confidentiality to the members of the group of about 20 whistleblowers, many of whom fear professional repercussions for having denounced the situation in their current or former workplace.

The whistleblowers first approached the Office of the Auditor General in Ottawa in November 2022 to raise concerns about the management of public funds and human resources within SDTC.

They were told to send their complaint to thePrivy 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.

In their first meeting, McConnachie told the whistleblower group their work was "impressive."

In their complaint, the whistleblowers raised numerous examples of potential conflicts of interest between SDTC executives, board members, companies that make funding requests and experts who evaluate the proposals.

On the human resources side, the whistleblowers complained that several staff members had been unjustly fired and alleged clear cases of favouritism in the hiring and promotion process.

COVID funding criticized

On financial issues, the group raised questions about new funding streams created by SDTC worth tens of millions of dollars alleging they were used to circumvent its funding agreement with the federal government.

In addition, the group sharply criticized nearly $40 million in funding during the COVID-19 pandemic to companies that already had financing agreements with SDTC.

In May, McConnachie told whistleblowers that the investigation was bearing fruit andthat many of their allegations raised red flags.

"We told you we would believe you. Now we have enough evidence to tell you that we really believe you. This means that the government will have actions to take," he said.

At the end of June, Raymond Chabot Grant Thornton briefed the whistleblowers on their initial conclusions. They confirmed they had found numerous cases where SDTC did not adequately manage conflict-of-interest issues and where significant funding was granted outside of applicable rules.

In connection with payments awarded during the pandemic, investigators raised the possibility the spending helped certain managers to "achieve performance objectives."Still, they said they were unable to obtain documents from SDTC on this subject, and this issue was not addressed in their final report.

'It was free money'

By late July, McConnachie was convinced certain spending decisions were badly handled, including the payments of nearly $40 million during the pandemic that was not based on precise needs and did not require follow-ups.

"It was free money," he said, before making an analogy with the controversy that affected Jean Chrtien's Liberal government in the early 2000s. "That is almost a sponsorship-scandal level kind of giveaway."

Throughout the process, the public service worked on the basis that the final decisions in this matter would be the responsibility of the innovation minister. Still, McConnachie and his public service colleagues tried to direct the political response or at least to temper it.

Ensuring the survival of SDTC was a priority for the bureaucracy, in addition to trying to contain the controversy or avoiding the matter getting bogged down in court, McConnachie said.

"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]," hetold whistleblowers in early September.

While Raymond Chabot Grant Thornton identified numerous deficiencies, it did not identify proof of wrongdoing or major ethical lapses, which limited the government'soptions.

"We don't have the goods to whack people for misconduct," said McConnachie.

'We need to have control of the board'

In discussions with government lawyers, as well as his colleagues from the Privy Council and ISED, McConnachie went on to advocate for a measured approach, as long as he could convince Champagne.

"Even if the minister kind of goes nuclear, I think we're pretty well prepared to talk him off the ledge. Like minister, '[That's a] bad idea, we've got other ideas','" McConnachie explained.

His preferred strategy was to take the time to gradually replace the members of the board of directors at SDTC and eventually get them to change the management team.

"First of all, we need to have control of the board [...] if we want to go after the executives. So that's the stuff or kind of machinations we're figuring out right now," he said in September.

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.

The government had determined by mid-September that SDTC was in "default" of its agreement with ISED, but the foundation still held its annual public meeting, as if nothing had happened.

Champagne said he took findings 'very seriously'

When an employee was fired,ISED said they had no control over human resources management at SDTC.

After having received the report, Champagne posted on social media Oct. 3 that he took the findings "very seriously."

He told SDTC to implement a series of reforms, in addition to suspending the granting of any new funding. However, there were no firings and Ottawa did not terminate its funding agreement with SDTC.

"The fact-finding report identified a number of instances in which SDTC was not in full compliance with the contribution agreement made with ISED. It also identified opportunities for improvement in other areas not covered by the contribution agreement, and outside of the scope of intervention for ISED, including human resources, governance, and oversight," Champagne said in a statement.

That same evening, SDTCemphasized that the report had not raised any major issues.

"We note the report found no clear evidence of wrongdoing or misconduct at SDTC and indicated that no further investigation is merited," saida spokesperson for the foundation.

Raymond Chabot Grant Thornton's report was provided to members of the media who requested it, but it is not posted online.

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.

In an interview, one of the members of the whistleblower group said a decision was made from the start to record conversations with the government.

One of their fears when ISED took charge of the file was that the department would hesitate to get to the bottom of things because the target of the probe was funded and supervised by ISED.

"This was our insurance policy," said a whistleblower.

The auditor comes in

Auditor General Karen Hogan decided in recent days to launch her own investigation into the situation at SDTC.

Federal sources said the decision reflects a level of dissatisfaction on the part of the Office of the Auditor General with the federal government's response to the whistleblowers' complaint to this point.

For its part, the federal government has decided to hire a law firm to look into all human resources issues at SDTC. Under an agreement between Ottawa and the foundation, former SDTC employees will not be bound by any non-disclosure agreement that would have prevented them from testifying freely about issues related to their employment 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."

In a statement Wednesday evening,SDTC spokeswoman Janemary Banigan said the organization will collaborate with the AG's audit.

"We categorically reject the continued allegations by disgruntled former employees. SDTCis a responsible steward of taxpayers' money with a proven track record of helping cleantechentrepreneurs grow successful companies, creating jobs, lowering GHG emissions, and setting Canada up for the green transition," she said.

The federal government has given SDTC until the end of 2023 to implement a series of reforms to its conflict of interest and funding policies. However, the OAG investigation and the human resources investigation are likely to disrupt this timeline, said a senior federal official, who added that Ottawa was also aware of the need for the funding to continue within the cleantech community.

The auditor general's arrival on the scene is applauded by whistleblowers, but they remain unconvinced that the human resources investigation will have the necessary autonomy and authority to get to the bottom of things.

The whistleblowers said they want guarantees that the report will be made public and that current SDTC employees will receive the same protection as federal civil servants if they talk to the lawyers leading the inquiry.

"There is an obvious lack of trust," said a whistleblower about the group's relations with the federal government.