Why Tories Are So Afraid of What Deloitte’s Runia Might Testify
With all the reporting on the Senate scandal you might think there’s not much more to be discovered. But reading the actual documents the RCMP turned up in its Mike Duffy investigation is definitely worth the effort. The documents pull back the curtain on Harperland, a landscape so profoundly unethical Harper’s staff does not hesitate even for a second in plotting to interfere with a supposedly independent official Senate audit. You have to ask yourself that if this is how Harper’s inner circle behaved on the Duffy file, what kinds of things do they get up to when they are strategizing against Harper’s enemies.
The documents also suggest that despite the extensive media coverage on the Duffy scandal, we are still at risk of being played by the conservative political spin machine. Ezra Levant and Conrad Black are attacking the RCMP, with Black questioning how a mere RCMP corporal could have the effrontery to make allegations against a member of the elite like Nigel Wright. The scandal – according to the Globe’s Margaret Wente – has no more legs and we should move on to writing about things that are easier to understand.
Well, here’s another important leg to the story that is easy to understand and yet has gone largely unreported. The lynchpin of the PMO’s strategy to contain the Duffy scandal was the Deloitte audit. For their strategy to work, Deloitte could not say Duffy’s primary residence was in Ontario rather than PEI which is the province Duffy is supposed to represent. This was number one on Duffy’s list of conditions. The PMO could get Duffy to repay his expenses only if, in the words of PMO staffer Patrick Rogers, they had Deloitte “locked in”.
In February, the Senate hired Deloitte to conduct an independent investigation into whether Duffy had made inappropriate expense claims. Duffy seemed terrified the auditors might conclude that his home of thirty years in Ottawa was in fact his primary residence and he should not have been claiming a housing allowance for it.
Duffy repeatedly contacted Conservative Senators Dave Tkachuk, Carolyn Stewart Olsen, Marjorie Lebreton and PMO staff to get the audit called off. He insisted that the PMO do something about the audit if he was going to go along with the plan to reimburse the government for his expense claims. The audit was a deal-breaker.
Even with Nigel Wright covering the bill, Duffy vigorously resisted paying back his housing allowance and expense claims related to the time he spent in Ottawa for the obvious reason that this would look like he was admitting his primary residence was there and not in PEI. If Deloitte subsequently issued a report stating Duffy’s primary residence actually was in Ottawa, that could have been the kiss of death to his life as a Senator. So ending the audit was a key demand in the draft expense repayment deal sent by Duffy’s lawyer to Benjamin Perrin, PMO legal counsel, and reprinted on page 31 of the RCMP documents. This was the deal, with a few minor changes, that was eventually implemented by Duffy and the PMO.
But how could the PMO deliver on a deal that included something seemingly beyond their control – an independent audit? PMO staffers have a very expansive view of what is in their control. In an internal email, Patrick Rogers said: “I believe that we should make arrangements for repayment knowing [emphasis added] that Deloitte will not say one way or another on his residency.”
Duffy was not convinced by the PMO’s reassurances about the audit. His lawyer, Janice Payne, asked yet again in a March 20 email to Conservative Senator Tkachuk that the audit be called off. On page 39 of the RCMP documents you can find this extraordinary insight into the PMO’s ambitions for neutralizing the audit. When he was informed about Payne asking Tkachuk to call off the audit, Nigel Wright described it as a “very dangerous tactic” and expressed frustration that Payne was not understanding the game plan: “I wonder if she is paying attention, because Ben [Perrin]will have explained to her several times that it is not ‘the audit being called off’ but rather Deloitte ‘not having to come to a conclusion on primary vs secondary residence’…”
Wright apparently believed that Duffy and his lawyers should consider Deloitte not reaching a conclusion on primary residence as just as valuable to him as if the audit had been called off. He seemed to think Payne was thick for not understanding this despite repeated coaching by Benjamin Perrin.
Why did PMO staffers become so confident Deloitte would not determine that Duffy’s primary residence was in Ottawa? According to Duffy, in February Wright was warning him that Deloitte would find against him. Wright emailed Perrin on February 15 to say he was “gravely concerned that Duffy would be considered a resident of Ontario” according to Senate rules. Wright told Duffy in a February 20 email – reprinted on page 28 of the RCMP documents – that he expected Deloitte would conclude that his primary residence was not in PEI.
Duffy sent over his diaries to PMO staff to make their own judgment about his primary residence, diaries he refused to give to Deloitte. Wright informed his colleagues that if the diaries made it look like Duffy’s PEI residency claim would hold up with Deloitte, he would stop asking him to repay his expenses. But since Wright continued to insist that Duffy repay, the diaries must have confirmed for him that Duffy had a weak case.
Yet despite these pessimistic views about Duffy’s residency claims, by March the PMO’s opinion about the Deloitte report appears to change. Now they are certain Deloitte will not conclude anything about residency and they can go ahead with their deal with Duffy.
One of the tactics the PMO used to try to prevent Deloitte from issuing a finding on residency was for Duffy to refuse to give Deloitte the information they requested. Patrick Rogers recommended “that the Senator continue to not engage with Deloitte.” Nigel Wright warned against Duffy contacting Deloitte directly to find out how much he owed because that would “give Deloitte an excuse to ask for documents from Sen. Duffy again.”
Here is Wright, supposedly the taxpayers’ champion for personally covering Duffy’s $90,000 expense claims, frustrating an independent audit that cost taxpayers more than half a million dollars. And what was Wright’s response when Duffy finally offered in April to meet with Deloitte? On learning about the possibility of Duffy co-operating with Deloitte, Wright wrote in an email “Never heard of this. Is bad.” The Conservative-dominated Senate sub-committee handling the audit pre-empted Duffy’s meeting with the auditors, informing Duffy he could not talk to Deloitte because the audit was finished.
As well as putting roadblocks in the auditors’ path, there is no doubt the PMO also tried to shape the content of their report. On March 1, Wright wrote Conservative Senator Carolyn Stewart Olsen, a member of the Senate audit sub-committee. He expressed extreme frustration that the PMO could not “get Deloitte to the point” where they agreed that the audit is over once Duffy paid back his expense claims.
In Wright’s view, Duffy’s repayment of his expenses should have killed the audit, but it went ahead. The RCMP report on page 18 states it is unclear whether the Senate committee decided the audit should proceed, or that Deloitte refused when the committee told them to stop their work. Since the audit could not be stopped, Wright asked Stewart Olsen to ensure Deloitte did not say in their final report that Ottawa is Duffy’s primary residence. Wright could rely on Stewart Olsen because she had promised him in an email “I am always ready to do what is asked…” (Despite numerous email exchanges with Wright on the Conservatives’ Duffy problem, when questioned by the RCMP Stewart Olsen recalled only talking to Wright once in person at a meeting in April.)
Wright emailed Benjamin Perrin reporting that he and two other PMO staff were all working to get an update for Duffy on the Deloitte audit, even though the auditors were required to keep their work confidential. Wright wrote chief Conservative fundraiser, Senator Irving Gerstein, asking him “to work through senior contacts at Deloitte” to get the outcome the PMO was “pushing for”.
Gerstein then contacted Michael Runia, a Deloitte managing partner and the Conservative Fund’s auditor. On March 8, PMO staffer Patrick Rogers reported Gerstein told him that his contact at Deloitte “agreed with our understanding of the situation” and that he was working to get the Deloitte employee responsible for the audit to agree as well. On March 21, Rogers reported on an update Gerstein had received from his Deloitte contact. The contact told Gerstein that Deloitte would not “…reach a conclusion on residency…” And, in fact, they did not. The Deloitte report released in May stated “we are not able to assess the status of the primary residence declared by Senator Duffy against existing regulations and guidelines.” Deloitte blamed “lack of clarity” in the Senate’s rules.
The draft Senate report prepared by the Senate’s own administrative staff came to a very different conclusion. This report stated that the Senate regulations regarding residency were “unambiguous” and that Duffy’s continued presence in Ottawa over the years meant his place in PEI could not be considered his primary residence. PMO staff disagreed with the draft and thought it should be changed to reflect Deloitte’s opinion.
When the Senate committee was reviewing the draft report, Patrick Rogers met with Stewart Olsen to pass on the changes the PMO wanted. He reported back that “she agreed with them 100%… “ The Conservative Senators on the steering committee – Stewart Olsen and Tkachuk – deleted the references to Duffy’s residency status as well as to Duffy’s refusal to provide the documents Deloitte requested.
Chris Montgomery, who worked for Senate Majority Leader Marjory Lebreton, thought it was wrong to have PMO staffers sit in on Senate committee meetings and demand specific changes to Senate reports. He said in a May 8 email that Lebreton believed the report on Duffy needed to be consistent with the ones on Senators Harb and Brazeau, with all three reports making critical judgments about these Senators’ primary residence claims. But the PMO demonized Montgomery as “the Problem”. After a donnybrook meeting at the Senate, the PMO got what it wanted and references to Duffy not meeting primary residence criteria were dropped. A PMO staffer gleefully reported to Wright: “We’re done, Patrick [Rogers] made it happen.”
Yet when Harper was questioned about the revised Senate committee report, he said committee members “were not directed by anyone to reach any conclusions other than the ones they reached, which were the same conclusions as reached by an independent external audit.”
The response to all this could be a yawn. “Quelle surprise” that the Prime Minister of Canada’s top advisors would think that because the Conservative Party paid Deloitte to audit their books that entitled them to influence the firm’s other work. Quelle surprise that the managing partner of one Canada’s largest accounting firms would take a call from a politician inquiring about a supposedly independent audit and follow through on his requests. But it would signal a dangerous slide into corruption if we respond to these events with a bored cynicism.
Deloitte spokespersons, testifying to the Senate, denied that there was any outside influence on their work. However, they were at a loss to explain how the PMO could have been so well-informed in advance of their report’s conclusions despite the security steps they claimed to have taken to keep this information confidential. Conservative Senators blocked hearing from Deloitte’s Michael Runia to explain his role.
Obviously a number of Conservative insiders know the answer to what happened. It would be refreshing if one of them had the integrity and courage to speak up.
Timeline on key events related to the Duffy audit
Feb 7 – Duffy says in a phone call with Wright that he is upset he is going to be audited. (p. 14 of RCMP documents)
Feb 8 – Senate Standing Committee on Internal Economy contract Deloitte to review residency and related expenses of Senators Duffy, Brazeau, and Harb. Conservative Senators Tkachuk and Stewart Olsen and Liberal Senator Furey named to subcommittee to review Duffy expenses.
Feb 20 – Wright tells Duffy he expects Deloitte will conclude his primary residence is not in PEI. (p. 28)
Feb 21 – Duffy’s lawyer sets conditions for repaying expenses, including that the audit be stopped. (p. 31)
Feb 27 – Duffy’s lawyer emails Harper’s legal counsel, Benjamin Perrin, asking for confirmation the audit would be stopped. (p. 35)
March 1 – Wright emails Conservative Senator Stewart Olsen stating while he acknowledges that the audit is going ahead, he needs her help to get Deloitte not to make a conclusion on Duffy’s primary residence. (p.37)
March 1 – Duffy’s lawyer asks Perrin for an update on the audit. Wright tells Perrin he contacted Conservative Senator Gerstein to work through his Deloitte contacts to get the outcome the PMO was “pushing for.” (p. 37)
March 8 – Rogers reports to PMO colleagues that Gerstein has called to say his contact at Deloitte “agrees with our understanding of the situation”, would get “the actual auditor on the file to agree” and that Gerstein would call once Deloitte was “locked in.”(p. 38)
March 20 – Wright expresses annoyance that Duffy’s lawyer is still talking about the “audit being called off” rather than Deloitte not coming to a conclusion on residency.(p. 39)
March 21 – Rogers reports that Gerstein has found out from his Deloitte contact that the firm will not “reach a conclusion on residency.” Rogers says repayment should be arranged “knowing that Deloitte will not say one way or another on residency.”( p. 39)
March 25 – Duffy writes a $90,172.24 check to the government.(p.9) Wright writes a $90,172.24 bank draft for Duffy’s lawyer.(p.13)
May 7, 8 – Deloitte submits its report to the Senate stating they cannot determine Duffy’s residency status under Senate rules because the rules are unclear. PMO disagrees with criticisms of Duffy in Senate administration’s draft report and wants it to reflect Deloitte’s opinion.(p.19) PMO intervenes to have the draft report changed. (pps. 43, 44)
May 9 – Senate Steering Committee reviewing Duffy’s expenses publishes report finding no fault on Duffy’s part and say Deloitte could not determine Duffy’s primary residence.
November 28 – Conservative Senators vote against hearing from Deloitte managing partner Michael Runia on the role he played in the Duffy audit.
Murray Dobbin is an author, broadcaster and journalist. He is the author of five books and his work appears regularly in the Tyee.