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Speech in Senate Chamber: Inquiry— Powers and Duties of the Auditor General of Canada—Debate Concluded

1987 Petrofina Case—Inquiry—Debate Concluded

Hon. Anne C. Cools rose pursuant to notice of June 7, 2018:

That she will call the attention of the Senate to the powers and duties of the Auditor General of Canada, the officer authorized by the 1977 Auditor General Act to be “the auditor of the accounts of Canada,” which officer and office was first constituted in 1878 by the statute An Act to Provide for the Better Auditing of the Public Accounts; and to the 1987 Petrofina Case in the Federal Court of Appeal respecting the Auditor General’s demand for access to specific documents respecting the purchase of Petrofina Inc. wherein Justice Pratte, concurring with the lead Justice Heald, ruled, saying “The respondent is the ‘auditor of the accounts of Canada.’  He is not the auditor of the accounts of Crown corporations like Petro-Canada.”

She said: Honourable senators, I rise to speak to my Inquiry No. 49. Tonight, I speak to the unique litigation in the Federal Court of Canada, at the instance of Kenneth Dye, the then Auditor General of Canada from 1981 until 1991. This litigation was known as the 1987 Petrofina case. Indexed in the courts as Canada (Auditor General) v. Canada (Minister of Energy, Mines and Resources), the Petrofina lawsuit attracted much attention largely because of the high political status of the litigant parties and the nature of the litigation itself.

At the heart of the Petrofina case was the Auditor General’s demand that the Minister of Energy, Mines and Resources and the Minister of Finance, and also their deputy ministers, provide the Auditor General with particular documents, specifically the documents respecting the valuation of Petrofina Inc. shares that the Government of Canada had purchased and acquired. For those who are new here, this was shortly after the Government of Canada had purchased Petrofina Canada Ltd. from its previous Belgian owners.

Colleagues, on appeal in 1987 to the Federal Court of Appeal, questions arose respecting the mandate, authority and legal powers of the Auditor General in the matters at hand. On January 22, 1987, in the Federal Court of Appeal, Justice Darrel Heald ruled, at paragraph 15 of his learned judgment, that:

I do not think a proper interpretation of subsection 13.(1) of the Auditor General Act leads to the conclusion that, pursuant to the authority of that subsection, the Auditor General has the right, on the facts of this case, to access all Cabinet documents dealing with the Petrofina acquisition. Likewise, I have the view that subsection 13.(1) does not entitle the Auditor General to access the records of Petro-Canada. Subsection 13.(1) requires careful analysis. It reads:

13.(1) Except as provided by any other Act of Parliament that expressly refers to this subsection, the Auditor General is entitled to free access at all convenient times to information that relates to the fulfilment of his responsibilities and he is also entitled to require and receive from members of the public service of Canada such information, reports and explanations as he deems necessary for that purpose.

The Federal Court of Appeal’s Justice Heald continued, at paragraph 16:

The opening portion of subsection 13.(1) which restricts the Auditor General’s access to information relating to the “fulfilment of his responsibilities,” is separated from the remainder of the subsection by the word “and.” Thus, the broad discretion conferred upon the Auditor General in the second portion of the subsection refers only to the “public service,” and not to Ministers of the Crown, the Queen’s Privy Council or the employees of Petro-Canada.

Colleagues, Mr. Justice Heald was clear that within the broad powers granted to the Auditor General by section 13.(1) of the Auditor General Act, the phrase “the fulfillment of responsibilities” applies to the Auditor General solely and exclusively in his constitutional capacity as the auditor of the public accounts and the public expenditure of Canada.

Honourable senators, our Sovereign Queen, the Senate and the Commons are not subject to the Auditor General’s audit compulsion or subpoenas. Federal Court of Appeal Justice Louis Pratte concurred with Justice Heald and ruled, at paragraph 3, that:

The respondent is “the auditor of the accounts of Canada.” He is not the auditor of the accounts of Crown corporations like Petro-Canada. Whatever be his rights under sections 13 and 14, he may only exercise them in fulfilling his responsibility as auditor of the accounts of Canada.

Colleagues, later, in 1989, the Auditor General appealed the Petrofina case to the Supreme Court of Canada. In ruling, Supreme Court Chief Justice Brian Dickson held that the Auditor General’s powers and duties are limited to those powers and duties enacted in his statute, the 1977 Auditor General Act, by the Parliament of Canada, being the Queen’s representative, the Governor General, the Senate and the House of Commons. Supreme Court Chief Justice Dickson, upholding Parliament’s role, ruled in his Supreme Court judgment, at page 103, that:

The grundnorm with which the courts must work in this context is that of the sovereignty of Parliament. The ministers of the Crown hold office with the grace of the House of Commons and any position taken by the majority must be taken to reflect the sovereign will of Parliament. Where Parliament has indicated, in the Auditor General Act, that it wishes its own servant to report to it on denials of access to information needed to carry out his functions on Parliament’s behalf, it would not be appropriate for this Court to consider granting remedies for such denials, if they do, in fact, exist.

Honourable senators, these learned superior court judges of both the Federal Court and the Supreme Court of Canada were clear on the nature, character and limits on the powers of the Auditor General, as stated and enacted in the 1977 Auditor General Act, which grant him no powers whatsoever to audit the two houses of Parliament, and most particularly not this Senate. Sadly, the Auditor General saw life differently.

Colleagues, all this begs the question when we look at Auditor General Ferguson’s 2013-15 audit examination of the Senate and senators’ expenses, as I shall do now.

Honourable senators, on June 4, 2015, only days before the Senate summer recess that year, the Auditor General of Canada, Michael Ferguson, delivered his duly signed but long overdue report on his perplexing two-year audit examination of the Senate and senators’ expenses to the Senate Speaker, the Honourable Senator Leo Housakos, in the words:

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I have the honour to transmit herewith this June 2015 Report of the Auditor General of Canada to the Senate of Canada - Senators’ Expenses. This Report completes the comprehensive audit of Senate expenses, including Senators’ expenses that the Senate requested in June 2013.

Yours sincerely.

Michael Ferguson, CPA, CA, FCA (New Brunswick)

OTTAWA, 4 June 2015.

Colleagues, the Auditor General’s transmission statement described his egregious Senate audit examination as his response to the Senate’s June 5, 2013, audit request to him. This odd term, “request,” appears to be a legal attempt to justify his audit examination of senators, which audit was neither authorized nor permitted by the Auditor General Act. In short, the Auditor General had no statutory authority, nor power, to conduct this audit exam of senators. This absence of such statutory authority is a shadow that continues to loom over this Senate and senators, not easily forgotten nor overlooked. And we will reach the place where senators were referred to the police, if we will recall. We will get there.

Honourable senators, the Auditor General’s transmission statement failed to clearly express and identify the specific legal and statutory power, and its related section of the Auditor General Act, on which the Auditor General relied as the appropriate legal authority for his unusual and prolonged audit examination of the Senate and senators.

An. Hon. Senator: And costs.

Senator Cools: And costs. That was huge. We will get there in a moment.

His transmission statement was wholly silent on this vital fact in this highly publicized audit examination of senators and the Senate. This omission reveals the colossal constitutional quagmire that was, and still is, the Auditor General’s 2013-15 audit examination of the Senate and senators.

I note that current and past Auditor General statutes have never intended, granted, nor enacted any legal or statutory power to authorize the Auditor General to conduct audit examinations of the one Parliament of Canada’s two houses, being the Senate and the House of Commons, and, most particularly, no audit examination of such politicized and exaggerated proportions. This audit of the Senate and senators was its own politics, actually bad politics, actually very bad politics, that insisted and persisted in this unique political and constitutional embarrassment that humiliated and diminished the Senate and senators, whom this June 2015 audit report maligned. In particular, I speak of the 30 senators, each of whom was wilfully and personally identified, individually by name, in this audit report. I repeat: Each of these senators was named and blamed. Until then, I had never encountered any such actions in any Auditor General’s report — and believe you me, I have read many of them.

This audit report was also unusual in its hurtful actions that assigned to our Honourable Senate Speaker, Senator Leo Housakos, the unusual and unpleasant task of delivering the files of 9 of the 30 named and identified senators to the Royal Canadian Mounted Police for investigation. This was odd, because the Senate’s referral and orders of reference powers are limited solely to its Senate and Senate committee business, which do not extend to, or even contemplate, the referral of senators’ files to the police, on the wish of the Auditor General of Canada. I shall quote the June 2015 Auditor General’s report at page 27 thus:

The Office of the Auditor General’s responsibility was to conduct an independent, comprehensive audit of Senate expenses, including Senators’ expenses, and provide objective information, advice, and assurance to the Senate to assist in the scrutiny of the Senate’s management of resources. This performance audit is the first in which the Office of the Auditor General has audited expenses incurred by individual Senators. In this sense, it differs from most of the Office’s performance audits, in that the subject of the audit was a set of individuals, rather than an institution. The Audit results are therefore reported both for the Senate as a whole and for individual senators.

Colleagues, the Auditor General was both the architect of the Senate audit and the author of his report; yet, in his last sentence, he expressed his audit findings not in the active voice but in the passive voice, saying:

The Audit results are therefore reported both for the Senate as a whole and for individual senators.

Honourable senators, this indulgent and extravagant use of public funds on this Senate audit was wholly unjustified and wholly unnecessary. University of Calgary Professor Lee Tunstall noted this fact. In a June 16, 2015, Huffington Post online piece, Tunstall wrote:

The auditor general spent around $23 million on this investigation, and found less than $1 million in questionable expenses — out of $180 million worth of expenses investigated. So we, the ever-patient, ever-indulgent taxpayers, spent $23 million to find out that 0.5 per cent of Senate expenses were questionable. Should we be outraged? Yes, by the dollar cost of the investigation, and by the cost to the reputation of Canada’s upper house.

I also note a June 9, 2015, ipolitics.ca article by Ian MacDonald on the Auditor General’s audit of the Senate and senators, titled “The AG and the Senate: $23 million to catch $1 million? Are we kidding?” Ian Macdonald wrote:

It isn’t just senators’ reputations that are on the line — it’s Ferguson’s as well. Leave aside for a moment the nine senators referred to the RCMP; should Binnie dismiss his conclusions about many or most of the Senate 21, Ferguson’s reputation for competence — not to mention that of his consultants — would be in trouble. He’d need to consider his own future at that point, if only for the integrity and standing of the AG’s office.

Colleagues, this June 2015 Auditor General report made several general findings respecting oversight, accountability and transparency of senators’ expenses. It also made some general recommendations regarding procedural improvements in senators’ expense claims. This report contained two appendices, the first of which had the heading “Appendix A Files recommended for referral to other authorities.” This Appendix A named and identified the cases and files of the nine senators whom the Auditor General had recommended that our Senate Internal Economy Committee refer to other authorities for further investigation; that meant criminal investigation by the Royal Canadian Mounted Police.

The second heading was titled “Appendix B” and contained another 21 named and identified senators whom the Auditor General had recommended be further assessed by the Standing Senate Committee on Internal Economy, Budgets and Administration.

The Auditor General’s June 2015 audit report to the Senate on senators’ expenses stated that the reason for including these nine senators in Appendix A, as opposed to Appendix B, was that the cases of the nine senators fell into one or both of the two categories, largely because the affected senators had made ineligible living expense claims based on an unsubstantiated declaration of their primary residence or, in the Auditor General’s own words at paragraph 119 on page 23 of his report, that:

There was such a pervasive lack of evidence, or significant contradictory evidence, that we were prevented from reaching an audit opinion about whether the expenses had been incurred for parliamentary business. . . .

Honourable senators, I note that the Auditor General offered no audit, legal or parliamentary reasons why these particular factors were sufficient grounds to engage criminal investigation and criminal prosecution for these senators whose files were delivered to the RCMP.

This is the Senate of Canada. That kind of behaviour is simply not acceptable from any office-holder.

In fact, the Auditor General’s 2015 audit report provided no explanation whatsoever as to just why concerns about expense claims respecting primary residence warranted referral to the RCMP —

The Hon. the Speaker: Senator Cools, your time has expired. Are you asking for five more minutes?

Senator Cools: Yes, I am. Thank you.

The Hon. the Speaker: Is leave granted, honourable senators?

Hon. Senators: Agreed.

Senator Cools: Thank you.

— for criminal investigation, whereas those related to other claims did not. Similarly, there is no indication as to why the Auditor General’s prevention from reaching an audit opinion was an indicator that there were issues deserving the heavy hand of criminal investigation that is necessary to lay criminal charges that engage criminal prosecution in all of its full force and gravity.

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I speak of the mens rea fact, known as the criminal or guilty mind. Mens rea suggests or asserts that the named and identified senator possessed both knowledge of and intent to commit wrongdoing respecting these wrongful expense claims. Neither does Mr. Ferguson’s June 2015 audit report to the Senate on senators’ expenses articulate how and why the Auditor General’s concerns respecting willful unlawful conduct led him to his report’s recognition that there were differing views among senators about the effect of the changes to the Senators’ Travel Policy.

Honourable senators, common among the auditor’s findings contained in his report’s Appendix A are findings that senators’ declarations of primary residence were not properly made and that senators' expenses were not incurred for parliamentary business. In some cases, these findings were express findings of improper expenses, and in other cases they were simply expenses that the Auditor General was “unable to determine” were proper. Auditor General Ferguson himself suggests that, in some cases, this inability was owed to an apparent, even evident, unwillingness on the part of some senators to provide their documents and records to him. It is unclear whether senators’ reluctance arose from their concerns about the Auditor General’s jurisdiction, even though there had already been speeches from the floor of the Senate, notably my own speech on June 6, 2013, wherein I asserted that the Auditor General had no power, authority and jurisdiction to audit this Senate and senators.

Thank you, colleagues, for your attention. I have three more of those speeches to give in the next many days. I thank you.

I shall use my last minute. We can never know the pain and the anguish and the agony that those senators went through when they were informed that their files were being handed over to the police. I knew all of those senators, and I would say I was very close to some of them. And, I tell you, I stood by them, and I made sure I supported them through that miserable agony and ordeal that they were put through for absolutely no reason.

Hon. Michael Duffy: I have a question for Senator Cools if she’ll take it.

Senator Cools: Happily.

The Hon. the Speaker: Two minutes.

Senator Duffy: Is Senator Cools aware of a report in The Huffington Post on December 1, 2015, that is headlined “Leo Housakos, Senate Speaker, Leaked Auditor General’s Report: Sources”?

Senator Cools: I have heard of such a thing, and I believe I have read it. But I must confess you that I do not believe for a moment that Senator Housakos acted improperly.

Some Hon. Senators: Hear, hear!

The Hon. the Speaker: Honourable senators, if no other senator wishes to speak, this matter is considered debated.

(Debate concluded.)