Alberta NDP dismisses Agricultural Financial Services board over problems with expense claims

Unnecessary travel on the taxpayer’s dime, and gifts of booze, theatre tickets and rounds of golf have resulted in the suspension of three top-level executives at an Canada Crown corporation, and the dismissal of its entire board.

An anonymous tip to government in November sparked an investigation by the province’s internal auditor, who examined senior executive expenses at the Agriculture Finance Services Corp.

The resulting report has been handed over to the RCMP to investigate whether there was criminal wrongdoing.

Suspended with pay are the corporation’s president and managing director, Brad Klak; its chief operating officer, Merle Jacobson; and its vice-president of innovation and product development, Wayne McDonald. None of them could be reached for comment.

Its six-member board — made up of Klak, George Groeneveld, Dean Gallimore, Harold Schmaltz, Patrick Bieleny and Ian Reynolds — has been dismissed, replaced by an interim board while the government searches for new members.

“I’ve lost confidence in the board doing what they were supposed to do, and that was have oversight for the executive,” Agriculture and Forestry Minister Oneil Carlier said Monday.

According to the corporation’s 2015 annual report, Klak took home $670,000 in pay and benefits in the 2014-15 fiscal year.

He, McDonald and Jacobson won’t play an active role in the corporation, but will continue to be paid.

Whether or not they lose their jobs will be determined by an interim board, which will have the power to do further digging. If the men are let go, severance will be determined by their contracts.

Interim chair Bev Yee said Monday there’s no timeline, but the new board will work as quickly as it can.

Dismissed board chair George Groeneveld said Monday he thinks the NDP government targeted him because he was formerly a Progressive Conservative MLA.

“The writing was probably on the wall,” he told Postmedia. “I just hate to see something political affect my fellow board members and indeed some of the staff.”

Groeneveld stands by the board’s governance, and disputes the internal auditor’s finding that there was a lack of oversight for corporate executives.

“I have no regrets,” he said. “I’m very proud of what (the corporation) and these people have accomplished in the last eight or nine years. It’s been amazing.”

The biggest question in the report is over reinsurance contracts, which the corporation buys to protect its own insurance.

 The entire corporation board has been dismissed. From top left: Brad Klak, Dean Gallimore, Harold Schmaltz. From bottom left: George Groeneveld, Patrick Bieleny, Ian Reynolds AFSC

The broker, unnamed in the report, received a five-year contract with the Crown in April 2009 after winning a public tender. However, from 2012 to 2015, the corporation ended up paying the broker about $300,000 more than quoted in the contract.

The broker also did work that wasn’t included in the contract, and the contract was renewed early for a five-year term.

According to the report, that same company provided meals, alcohol, entertainment and rounds of golf on a frequent basis over four years to the three executives — a “significant violation” of the Crown’s procurement policy and code of conduct, which prohibits gifts of any kind.

“Procurement was not conducted through fair, open, competitive and transparent processes, with privilege/favour in selection of the successful vendor,” the report concluded. 

The report found the three suspended executives also incurred bills to the tune of $342,000 to travel to meetings with reinsurance companies, even though such companies often travel to Canada and Canada.

“Trips often included other activities such as golf or entertainment paid for by the broker,” the report reads.

Carlier said the report’s findings speak to a “culture of entitlement” under the previous Progressive Conservative administration.

“I’m troubled by this one,” he said, adding the “little things” also stand out.

“If you look at one instance of a limo ride, well, that’s not that expensive, but it still speaks to a sense of entitlement that we need to be aware of,” he said.

That Carlier would “throw political mud” at the former administration rankled Tory interim leader Ric McIver, who said he has “no patience for breaking rules of public trust.”

“In no way, and at no time, did we stand behind anybody who’s broken the rules of public trust,” he said Monday.

“I welcome the audit, the public disclosure of what happened, and real consequences if indeed it turns out there was bad behaviour.”

Limo trips, golf and travel

Some of the expenses highlighted in the internal auditor’s report:

• $1,880, including tip, for limousine trips in November and December 2011, and $1,512 related to attendance at Christmas parties and functions ($720 of which was for the corporation’s Christmas party in Lacombe). That included a return limo ride from Edmonton to Lacombe, and a four-hour wait for the ride, for Brad Klak.

• $5,108 for a 2011 dinner in Tokyo, hosting the Canada government representative in the country.

• $19,144 to a consultant for a 25-per-cent share of Edmonton Oilers luxury box tickets in 2011.

• $12,500 for 500 Starbucks gift cards from 2012 to 2015, about 200 of which were gifts for reinsurers while travelling outside Canada.

• The broker paid for $12,700 worth of alcohol, meals and golf fees for 17 corporation staff and board members, three reinsurer staff and four broker staff during the 2014 Calgary Stampede and board tour. The Crown also incurred $32,141 for those events.

• Each year from 2012 to 2016, senior executives attended events where costs were paid for by the broker. That included rounds of golf, theatre tickets, major league baseball games and concerts.

Alberta NDP dismisses Agricultural Financial Services board over problems with expense claims


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