UPAC SWEEPS ST. CONSTANT
Investigators facing special problems
The provincial anti-corruption unit touched down in St. Constant yesterday, executing search warrants across the town south of Montreal, including at the home of Mayor Gilles Pepin and at city hall. The raid was one of only a handful carried out by the squad in more than a year since its creation, leaving critics to wonder what’s taking so long.
Some may find the pace of investigations into municipal dirty tricks by the year-old UPAC, the Unité permanente anticorruption, too leisurely. But experts in accounting and politics say it’s not surprising given that investigators often face a wall of silence and a culture of turning a blind eye.
The Gazette talked to Denis Hamel, an independent forensic accountant; Michel Magnan, a professor of accounting at Concordia University; and Bruce Hicks, a researcher in political science at the Université de Montréal. Here’s how they described the thorny process of investigations into fraud – that may probe alleged bid rigging of municipal contracts – and what law enforcement is facing at town halls when trying to root it out. How does a fraud investigation begin? Hamel: Police can’t act without a complaint. Somebody has to be a whistleblower and say ‘I’m complaining about something that makes no sense.’ Most of the time it’s anonymous. Sometimes it may be the competitor of a company that is getting all the work in a small town. What proof do police need to get a search warrant? Hamel: If, for example, the secretary of a mayor saw something suspicious and she made a copy of certain files or emails on a computer disk and she gave that to police, well that’s already something to go on. Police have to verify that so they will want to seize computers and go through all the emails and check all the calls made from the mayor’s Blackberry or phone. How would a mayor hide a kickback? Hamel: Let’s say the town wants to build an arena and agrees it will cost $100,000. But, after the contract has been signed, the mayor says ‘I’d also like to include a gym and a spa.’ Those are extras but at that point it’s the contractor alone naming the price. He’s no longer in competition with other contractors. That’s how the final price can go to $150,000.
If I’m the mayor I can turn to my town councillors and convince them it’s better to have a gym and a spa, too, and pay the additional cost. If the contractor charges, let’s say $50,000 more but gives the mayor $10,000 of it in cash for the mayor’s political party or for his kids’ education, then you have a system of kickbacks in the awarding of contracts for construction.
Investigations can take a long time because police don’t want to get it wrong. They know what they need for charges to work. Can one person alone perpetrate a fraud? Magnan: There will always be solitary fraudsters but (in large companies or public entities) it usually takes a few people. There can’t be too many because someone might talk. Fraudsters generally don’t boast about their acts. On the other hand there is a thrill in getting away with it. Their downfall may come at the point when they are confident they can get away with it. How is such fraud hidden from colleagues? Magnan: Fraud is really just masking reality. So people may alter documents. But it can be difficult to prove that two people are conniving. Let’s say I agree to submit a low bid but we agree there will be extras later that I can charge more for. Now, is that a fraud? You’ll tell me it doesn’t look very honest but it’s easy to hide because there is little or no written proof.
Or you could overcharge for hours worked. You could charge me for 1,200 hours but you only worked 1,000 hours. Unless someone does an in-depth investigation it is hard to disprove. Has fraud poisoned Quebec’s municipal politics? Hicks: I think there has been a breakdown in honesty. On a radio call-in show I did on this all people wanted to talk about was their own experience with municipal corruption. It seems to reflect our society’s culture (that encourages padding expenses).
With procurement fraud is too easy for politicians. And there is the culture of needing to be re-elected. There are election financing laws but there is less scrutiny at the municipal level.