EN­ERGY REG­U­LA­TOR BOMB­SHELL

$2.3M in pub­lic funds mis­used: re­port

Edmonton Sun - - FRONT PAGE - JANET French @jantafrenc­h — With files from chris Var­coe

The for­mer CEO of the Al­berta En­ergy Reg­u­la­tor “grossly mis­man­aged” pub­lic funds, pub­lic as­sets and pub­lic ser­vices when he cre­ated a non-profit cor­po­ra­tion to sell Al­berta’s reg­u­la­tory ex­per­tise to other coun­tries, ac­cord­ing to in­ves­ti­ga­tions by Al­berta’s au­di­tor gen­eral and pub­lic in­ter­est com­mis­sioner.

Al­berta au­di­tor gen­eral Doug Wylie found at least $2.3 mil­lion of AER money was spent and never re­cov­ered from the non-profit, called the In­ter­na­tional Cen­tre of Reg­u­la­tory Ex­cel­lence (ICORE), ac­cord­ing to its in­ves­ti­ga­tion re­sults, re­leased Fri­day.

In a third and fourth re­port, also re­leased Fri­day, Al­berta’s ethics com­mis­sioner Mar­guerite Trus­sler found for­mer AER pres­i­dent and CEO Jim El­lis breached the Con­flicts of In­ter­est Act and was in breach of the reg­u­la­tor’s con­flict of in­ter­est poli­cies.

Fur­ther own in­ter­ests

In an un­prece­dented joint news con­fer­ence Fri­day with the ethics com­mis­sioner, pub­lic in­ter­est com­mis­sioner and au­di­tor gen­eral, Trus­sler said thou­sands of text mes­sages and emails re­cov­ered from El­lis’ elec­tronic de­vices show he used his po­si­tion at AER to fur­ther his own in­ter­ests, and those of three oth­ers, in at­tempt to cre­ate lu­cra­tive fu­ture jobs.

“I found a cul­ture at the se­nior man­age­ment level at the Al­berta En­ergy Reg­u­la­tor that pro­moted a wrong­ful ma­nip­u­la­tion and omis­sion of facts de­signed to mis­lead both the board and the gov­ern­ment. I found those ac­tions to mis­lead both trou­bling and un­ac­cept­able,” Trus­sler said.

El­lis was fac­ing a pay cut un­der new gov­ern­ment rules to cut the salaries for heads of pub­lic agen­cies, boards and com­mis­sions. In 2018, he earned $692,401 in salary and ben­e­fits, ac­cord­ing to the AER’S salary dis­clo­sure list. El­lis re­signed from the AER in Novem­ber 2018, while all three in­ves­ti­ga­tions were un­der­way. At­tempts to reach him Fri­day were un­suc­cess­ful.

En­ergy Min­is­ter Sonya Sav­age and En­vi­ron­ment and Parks Min­is­ter Ja­son Nixon is­sued a joint state­ment in re­sponse on Fri­day, say­ing the for­mer AER lead­ers’ con­duct was a “clear be­trayal of the or­ga­ni­za­tion’s obli­ga­tions to Al­ber­tans.”

Last month, the pro­vin­cial gov­ern­ment fired all AER board mem­bers and, in Au­gust, launched a re­view into its man­date and gov­er­nance struc­ture.

While at the AER, El­lis spurred the cre­ation of ICORE to help train peo­ple from other en­ergy-pro­duc­ing coun­tries about how Al­berta reg­u­lates ex­trac­tive in­dus­tries like oil and gas.

Pro­vid­ing ad­vice to other ju­ris­dic­tions is not part of the AER’S man­date.

El­lis es­tab­lished ICORE En­ergy Ser­vices as a not-for­profit cor­po­ra­tion in May 2017 af­ter ex­plor­ing dif­fer­ent ways of of­fer­ing train­ing and con­sul­ta­tion ser­vices, the pub­lic in­ter­est com­mis­sioner’s re­port said.

But AER and ICORE didn’t op­er­ate sep­a­rately, as they should have, the four in­ves­ti­ga­tions found.

“(El­lis’) ac­tions demon­strated a reck­less and will­ful dis­re­gard for the proper man­age­ment of pub­lic funds, pub­lic as­sets, and the de­liv­ery of a pub­lic ser­vice,” pub­lic in­ter­est com­mis­sioner Mar­i­anne Ryan con­cluded.

Ryan said she is work­ing on sep­a­rate in­ves­ti­ga­tions into more than one other per­son in­volved in the mat­ter. She wouldn’t spec­ify how many. All three in­de­pen­dent of­fi­cers of the leg­is­la­ture re­ceived com­plaints about sus­pected wrong­do­ing be­tween June and Oc­to­ber 2018, and opted to re­lease their find­ings in tan­dem.

As many as 50 AER em­ploy­ees were work­ing on ICORE, from a few hours oc­ca­sion­ally to full-time, the au­di­tor gen­eral found. The ethics com­mis­sioner found 14 AER em­ploy­ees work­ing on ICORE full time.

$3.1M re­cov­ered

AER spent an es­ti­mated $5.4 mil­lion on ICORE ac­tiv­i­ties, such as de­vel­op­ing and de­liv­er­ing train­ing cour­ses in other coun­tries and pay­ing salaries. Only $3.1 mil­lion of that was re­cov­ered from ICORE, the au­di­tor gen­eral said.

Court records show the AER also sued ICORE for nearly $2.7 mil­lion for un­paid in­voices and li­cens­ing fees. The AER won the case by de­fault, plus costs. The AER would not say on Fri­day whether any of the money has been re­paid.

AER is funded by levies from the en­ergy in­dus­try. The reg­u­la­tor’s le­gal coun­sel told its board those levies should not be used for ICORE. The for­mer en­ergy min­is­ter told El­lis those fees couldn’t be used for ICORE, the reports say.

Email ex­changes be­tween El­lis and an un­named AER em­ployee dis­cussed con­ceal­ing the pur­pose of in­ter­na­tional travel for ICORE work in ex­pense claims, the pub­lic in­ter­est com­mis­sioner’s re­port said.

There were “mul­ti­ple scrub­bers be­hind the scenes on your ex­penses," the em­ployee said in a mes­sage to El­lis.

When word reached El­lis that whistle­blower com­plaints had prompted in­ves­ti­ga­tions, he said in a text mes­sage to a con­fi­dant he would “cru­cify” a per­son he sus­pected of talk­ing.

Ryan de­scribed a trou­bling “cul­ture of fear” at the AER that pre­vented em­ploy­ees from re­port­ing po­ten­tial wrong­do­ing.

The au­di­tor gen­eral pored over thou­sands of mes­sages to con­clude pub­lic money was spent in­ap­pro­pri­ately on ICORE, pro­tec­tions to pre­vent con­flicts of in­ter­est failed, AER board over­sight was in­ef­fec­tive, and con­trols to mon­i­tor ex­penses were poor.

Wylie said the af­fair is a case study into “how pub­lic money can be wasted and harm can be­fall an or­ga­ni­za­tion when con­trols and pro­cesses are in­ef­fec­tive.”

In Novem­ber 2018, the AER board halted all ICORE ac­tiv­ity af­ter di­rec­tors were ap­prised of the com­plaints.

The AER’S new board takes the of­fi­cers’ rec­om­men­da­tions se­ri­ously and will im­ple­ment any that will re­store pub­lic con­fi­dence in the agency, it said in an un­signed state­ment Fri­day.

The reg­u­la­tor did not an­swer a ques­tion Fri­day about which rec­om­men­da­tions it plans to adopt.

The se­nior lead­ers who mis­used pub­lic re­sources are no longer em­ployed at AER, the state­ment said. At the rec­om­men­da­tion of the ethics com­mis­sioner, an in­de­pen­dent firm re­viewed the ac­tions of three cur­rent em­ploy­ees and found no con­cerns, it said.

“The find­ings from the reports are dis­ap­point­ing, es­pe­cially to the em­ploy­ees, stake­hold­ers, and Al­ber­tans who put their trust in the lead­er­ship of the AER,” it said.

The pub­lic in­ter­est com­mis­sioner in­ves­ti­gates reports of po­ten­tial wrong­do­ing for whistle­blow­ers/em­ploy­ees of the Al­berta pub­lic sec­tor. Among other du­ties, the ethics com­mis­sioner can con­duct in­ves­ti­ga­tions and in­quiries into sus­pected breaches of the Con­flicts of In­ter­est Act.

Larry Wong/postmedia

Al­berta ethics com­mis­sioner Mar­guerite Trus­sler, left, Al­berta pub­lic in­ter­est com­mis­sioner Mar­i­anne Ryan and Al­berta au­di­tor gen­eral Doug Wylie dis­cuss the find­ings from their re­spec­tive in­de­pen­dent in­ves­ti­ga­tions into the ac­tiv­i­ties re­lated to the In­ter­na­tional Cen­tre of Reg­u­la­tory Ex­cel­lence at the Al­berta En­ergy Reg­u­la­tor on Fri­day. The in­ves­ti­ga­tions con­cluded that there was con­flict of in­ter­est, gross mis­man­age­ment of pub­lic funds and crit­i­cal over­sight fail­ures.

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