ENERGY REGULATOR BOMBSHELL
$2.3M in public funds misused: report
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.
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.
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.