PACP Committee Report

PART III — SENIOR GOVERNMENT OFFICIALS

THE ACTIONS OF THE DEPUTY MINISTER OF PUBLIC WORKS AND GOVERNMENT SERVICES CANADA

One of the Committee’s principal objectives was to determine whether the actions of the Deputy Minister were appropriate in light of the circumstances.

There was one deputy minister of Public Works and Government Services Canada throughout the entire period during which the events described in various audits and in this report took place: Mr. Ranald Quail. Mr. Quail was the Deputy Minister at the time that the Department was created in 1993 and left in April 2001.

Mr. Quail indicated that he had signed off on the submission to Treasury Board requesting funding for the sponsorship initiative in November 1996. As Deputy Minister, Mr. Quail held the responsibility, with his minister, for determining the internal structure of the Department and presided over any reorganization that occurred. Accordingly, Mr. Quail would have been engaged in the merging of the Advertising and Public Opinion Research Sector into the Communications Coordination Services Branch in November 1997. However, Mr. Quail later told the Committee that he was not part of the decision to implement the Sponsorship Program through CCSB, which he described as political in nature.

Ms. O’Hara told the Committee that “deputy heads [i.e., deputy ministers] are delegated organizational authority up to the EX-3 level.” Thus, when Mr. Guité became a director general in 1995 and was reclassified from an EX-1 to an acting EX-2, Mr. Quail’s authorization would have been necessary. This would have applied as well when Mr. Guité became an EX-3, a reclassification that took place when the CCSB was established with Mr. Guité at its head. Throughout these changes, Mr. Guité reported directly to two successive assistant deputy ministers

The allocation of additional funding to APORS for the purposes of the sponsorship initiative under Mr. Guité, the creation of the CCSB and Mr. Guité’s instalment as its head and advancement in classification all took place after the 1996 Ernst and Young audit. Mr Steinberg testified that it would have been the responsibility of the appropriate assistant deputy minister to see that any corrective actions recommended by the internal audit were implemented. Nevertheless, according to his own testimony cited above, Mr. Quail did not consider the results of the 1996 audit at any point during these events. However, Mr. Steinberg testified that “as a result of [a] decision that Mr. Quail took in 1997, [the audit branch] had an accord which said that Mr. Guité’s directorate would be subject to the audit process.” Mr. Quail testified that he “worked on the basis of trust” and did not feel that there was any need to conduct an internal audit of the CCSB prior to 2000.

In April 1998, Mr. Guité’s position was reclassified to an EX-4 and he became an assistant deputy minister with a direct reporting relationship to the Deputy Minister, Mr. Quail. According to Mr. Quail’s testimony cited above, this change was initiated by Mr. Guité who spoke to the Minister (the Hon. Alfonso Gagliano) who in turn raised the matter with Mr. Quail. At no time did Mr. Quail ever object, in writing, to any of the reclassifications of Mr. Guité’s position or the assignment of additional responsibilities to him. Once Mr. Guité had been made an assistant deputy minister, Mr. Quail instructed him to speak to the head of the Internal Audit, Mr. Steinberg, but could not recall if he had followed up to see if his request had been obeyed.

In 2000, Mr. Quail initiated the internal audit of the sponsorship files managed by Mr. Guité and the CCSB. Prior to launching the internal audit, Mr. Quail informed Minister Gagliano and Privy Council who “were in agreement that we should go ahead.” As he noted, this audit was conducted after Mr. Guité had been reclassified as an EX-4. Following completion of the audit, Mr. Quail (with his Minister’s involvement) suspended sponsorships in order to allow time for the implementation of the action plan.

Mr. Steinberg defended the actions of Mr. Quail. He testified that in the early 1990s, while the audit functions in most government departments was being reduced, Mr. Quail “did the opposite” by ensuring that the Department maintained a strong internal audit function. Mr. Steinberg asserted that following the 2000 internal audit, Mr. Quail, in his view, “took the responsible action and ensured that there was an action plan in place that people were going to follow.”

Mr. Quail had a direct involvement with the Sponsorship Program. He testified that he:

[c]ertainly got involved, …, in the preparation of the submissions, the listing of the events, the amount of money that was required in totality, and where we could find it to make it happen.

Lastly, and as previously noted, while the sponsorship initiative was underway for approximately one year and when Mr. Guité became an EX-4, the Executive Director had a formal, direct reporting relationship with Mr. Quail. These facts, however, are not out of keeping with normal relationships and levels of involvement by a deputy minister and are not suggestive of any impropriety on Mr. Quail’s part. They do demonstrate, however, that at least on the surface Mr. Quail maintained an active interest in the CCSB and the Sponsorship Program and ought to have known what was going on.

Mr. Quail was asked what recourse was available to a deputy minister who wanted to signal concerns about activities or individuals with his or her department. Mr. Quail answered in hypothetical terms:

It is a difficult situation, that interface between ministers and deputy ministers. In this particular case, you’d give your advice to the Minister and if the Minister decided he wished to proceed, you would proceed. … If you felt there were issues outside of you and the Minister and the department, … you could talk to the Clerk [of the Privy Council], if you wanted to.

However, during his second appearance before the Committee, when he was asked if he had ever brought concerns about the mismanagement of the program to the Deputy Clerk of Privy Council Office (whom he worked with), Mr. Quail said that he “didn’t discuss it because [he] didn’t have any indications of mismanagement.”

THE DEPUTY MINISTER’S RELATIONSHIP WITH THE MINISTER

As part of his normal functions and responsibilities, Mr. Quail had a direct reporting relationship with his minister. The Hon. Alfonso Gagliano testified that he — like the Hon. Diane Marleau before him — had a good relationship with Mr. Quail and that they would meet regularly, “two, three times a week.” Based on his testimony, cited above, Mr. Quail was responsive to requests put to him by his minister.

Mr. Quail was aware that there was a very direct relationship between Mr. Guité and Minister Gagliano. This relationship was not captured by any departmental organizational chart and, in fact, does not represent the reporting relationship that is normally found between any department and a minister. These relationships are strictly hierarchical and commonly an assistant deputy minister (Mr. Guité) would only report to the Minister through the Deputy Minister or in the Deputy Minister’s presence. (See former Minister Marleau’s testimony, cited below.)

Mr. Quail testified that this arrangement was an awkward one for him. He told the Committee that it was:

[a] very difficult situation for a deputy in terms of the fact that you’re working with the minister. On one hand, you can say, “Well, Minister, you can’t talk to that particular group. You have to come through me every time you want to talk to it.” I did not do that. I did not do that. The Minister wanted to have these discussions. He wanted to be involved. He had a responsibility. He had signed the submissions. He had direct approval to proceed and get this done.

At his second appearance before the Committee, Mr. Quail testified that Privy Council was “aware of the fact that Mr. Guité met with Mr. Pelletier; they were aware that they met with my minister, particularly Alfonso Gagliano.” Mr. Quail said that although he was not annoyed that these meetings took place, his “pride could be a bit hurt” when decisions were made regarding which events to sponsor. Mr. Quail added, however, that these sorts of meetings were part of Mr. Guité’s job description:

The job description … talked about the responsibility of the individual in those positions to be able to and had a responsibility to have conversations, have liaison, work in relationship with PCO, with PMO, with Treasury Board, because those are all people that have issues dealing with communications.

Asked if he had ever asked for letters of direction from the Minister seeking clarity as to actions that he should be taking if he perhaps were uncomfortable with something and wanted the direction put in writing, Mr. Quail replied: “No. I had no letters of direction.”

The Committee has determined, on the basis of the evidence presented to it, that there was a failure with respect to deputy ministerial responsibility in the case of the Sponsorship Program, and that corrective action needs to be taken. The Committee has undertaken a review of ministerial and deputy ministerial responsibility and will present its views when it reports its findings.

THE ACTIONS OF THE MINISTERS OF PUBLIC WORKS AND GOVERNMENT SERVICES CANADA

During the period under review, Public Works and Government Services had five ministers.³⁵ As indicated above, the Committee was told that the removal of the procurement process from APORS that was recommended by Ernst and Young did not happen because the Minister at the time, the Hon. Alfonso Gagliano, opposed this change. In earlier testimony from Mr. Cutler (see above) the Committee was told that Mr. Guité, then in charge of APORS, dispensed with the rules governing contracting for advertising with the approval of the Minister.

The Committee has also learned that the Sponsorship Program started as an initiative that was funded on the approval of Mr. Dingwall’s successor, the Hon. Diane Marleau.

Ms. Marleau told the Committee that she had made it clear to departmental officials that while she was Minister “all protocols and rules to control expenditure and ensure transparency would be followed.” According to Ms. Marleau’s testimony, the unusual reporting relationship that existed between Mr. Guité and the Minister must have predated her tenure as minister. Ms. Marleau told the Committee that when she first became Minister:

[a] gentleman showed up in my offices and said, “By the way, I report here.” That gentleman, …, was Mr. Guité. I said, “No, a director … does not report directly to a Minister.”

Instead, she testified that she “did not deal directly with people from that shop [APORS]. I insisted that these people report through proper channels, through the Deputy Minister’s Office.” She indicated that a direct reporting relationship with the Minister would have removed many of the checks and balances in place.

This version of events was not confirmed by Mr. Guité, when he appeared before the Committee on 22 April 2004, although it was not explicitly denied. He did not recall the conversation Ms. Marleau described. He indicated that his contact with her had been very limited: “I met with Mme. Marleau, during the whole time she was there, perhaps twice.” It was during this period that he began to meet, at his request, with Jean Pelletier in the Prime Minister’s Office (meetings which occurred on average every other month, according to Mr. Pelletier). According to Mr. Guité: “When Mme Marleau came on staff or became minister, the message I got was, deal with PMO.”

The reporting relationship between Mr. Guité and the Minister that had developed under Minister Dingwall was restored under the minister who succeeded Minister Marleau, the Hon. Alfonso Gagliano. Minister Gagliano was the longest serving Minister of Public Works and Government Services during the time of the events under review by the Committee.

Mr. Gagliano became Minister in June 1997, after the sponsorship initiative began and before the CSSB had been established within PWGSC in November 1997 with Mr. Guité as Executive Director. Mr. Gagliano told the Committee that he was not aware of any problems with the Sponsorship Program or with the APORS when he became Minister and had not been told about the 1996 Ernst and Young audit. He also testified that the objective of raising the profile of the federal government in Quebec was established before he became Minister.

The former Minister denied that he had taken an active hand in the day-to-day operations of the CCSB or delivery of the Sponsorship Program. He told the Committee that he:

[d]idn’t know about the micromanagement of the day-to-day management. I was not appointing the agencies. I was not deciding which agencies should get the contract. I didn’t decide which events — we had discussions in terms of the budget and then the civil servants would continue to do their job.

Mr. Gagliano also denied that he had appointed Mr. Guité Assistant Deputy Minister, but instead “signed the Treasury Board submission creating a position called Assistant Deputy Minister for Communication and Coordination. That was the position. The filling of the position was not my responsibility.” Furthermore, he rejected any suggestion that he had instructed Mr. Guité or the CCSB to contravene rules and guidelines. He told the Committee that “moneys were supposed to be spent according to the Financial Administration Act and the Treasury Board guidelines. Nobody ever gave instruction to anybody not to do the things that were supposed to be done.”

Mr. Gagliano’s testimony in this respect was supported by Mr. Quail, who testified earlier that there was:

[a]n understanding we would not break the rules. He [the Minister] did not think we would break the rules. In my view, he did not think we would break the rules. He didn’t say, let’s get on with this and break all of the rules.

There were, however, a number of discrepancies between Mr. Gagliano’s testimony and testimony given by other witnesses. Mr. Gagliano stated that in 1997, when he first became minister, he reviewed “and followed” the recommendations of the Treasury Board including the “redirection of the procurement process within the Department.” Mr. Quail testified that procurement “never went mainstream,” that the Minister “wanted CCSB to be the group that was responsible in totality for sponsorship,” and that the Minister “wanted the procurement left alone.”

Mr. Gagliano told the Committee that he had directed the 2000 internal audit to be done of the management of sponsorships at the CCSB, an assertion that he made several times during his testimony. Mr. Quail, in contrast, told the Committee that he had initiated the audit. This was confirmed by Mr. Steinberg, who was responsible for the Department’s internal audit function at the time the audit was performed. Mr. Gagliano told the Committee that he asked the internal auditor “whether [he] should call the police but … was told that the nature of the problems was administrative, not criminal.” Mr. Steinberg testified that he was:

[d]eeply concerned that there were perceptions that these findings [of the 2000 internal audit] had been characterized as administrative in nature. I consider these lapses to be significant and unacceptable. I never used the word “administrative,” nor would I, as these were significant material lapses.

Mr. Steinberg also vigorously denied the suggestion that he had been asked by Mr. Gagliano whether the police ought to be called.

Mr. Gagliano insisted throughout his testimony that that he had met with Mr. Guité “maybe three or four times a year.” This assertion, however, was contradicted by testimony given by Ms. Tremblay who told the Committee that “[t]he executive directors [Mr. Guité and later Mr. Tremblay] met with the Minister personally in his office once a week on average.” Furthermore, Mr. Guité himself testified that he met with Mr. Gagliano “… regularly. … On the average, I would meet with Mr. Gagliano probably every month.” As well, he indicated that he met more frequently with officials in Mr. Gagliano’s office, on average once a week.

Mr. Gagliano maintained that his relationship with Mr. Guité involved “strictly … budget approval.” In contrast, Ms. Tremblay testified that “[t]he decision-making process, in terms of sponsorship approval, was up to the Executive Director, Mr. Guité, who in turn received his instructions, in the vast majority of cases, from Minister Gagliano himself or from his office.” Mr. Guité, she told the Committee, “would come back from that meeting with the minister’s instructions, which we were to follow blindly.” Mr. Guité’s account of the relationship also did not support that provided by Minister Gagliano. He distinguished between political interference (which would have involved pressure to select certain agencies) and political influence (involving input into decisions about individual events that would receive sponsorship funding): “Did they (ministers) have input into the program of who got the sponsorship, which sponsorship we’re going to do? Obviously. I met with them and we went through the programs together.”

THE PRIME MINISTER’S OFFICE (PMO) AND THE SPONSORSHIP PROGRAM

Apart from learning that the Prime Minister signed the Treasury Board proposal that initiated funding for the Sponsorship Program, the Committee also learned that Mr. Pelletier, who was in charge of the PMO acknowledged meeting with Mr. Guité to discuss the Program, he vigorously denied having any involvement in the selection of communications agencies or in awarding of contracts. Mr. Pelletier also denied that he or his office had ever instructed Crown corporations to get involved in sponsorships  or that he had ever given any instructions to deputy ministers. He furthermore rejected any suggestions that the PMO had instructed that the rules should be bent.

For his part, Mr. Guité testified that he had approached PMO for more funding for sponsorships. Ms. Isabelle Roy also told the Committee that she was aware that meetings had taken place between Mr. Tremblay, Mr. Guité’s successor, and Mr. Pelletier, but did not know what they had discussed.

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35	The Hon. David Dingwall (November 1993-January 1996); the Hon. Diane Marleau (January 1996- June 1997), the Hon. Alfonso Gagliano (June 1997-January 2002), the Hon. Don Boudria (January 2002-May 2002), and the Hon. Ralph Goodale (May 2002-December 2003).