Ontario health ministry was warned of
serious problems at ORNGE in 2008
Published On Thu Feb 2 2012
An
ORNGE accountant told the province’s health ministry and financial
investigations team in 2008 that ORNGE was “handing out money like water.”
Ron Bull/Toronto Star
Kevin
DonovanStaff
Reporter
Ontario’s health ministry and the province’s financial
investigations team were warned of serious problems at ORNGE three years ago,
documents reveal.
An ORNGE accountant blew the whistle in 2008, telling the
province that the publicly funded ORNGE was “handing out money like water.”
In an interview audio taped in 2008 by Ministry of Finance
investigators, Keith Walmsley said former ORNGE boss Dr. Chris Mazza (who was
terminated Thursday) and other executives were paying themselves whopping
bonuses and had set up a spiderweb of for-profit companies. Walmsley went on to
provide detailed allegations of numerous abuses of taxpayers money and said
ORNGE was deceiving the cash-strapped health ministry, hiding a $5 million
annual surplus in taxpayers funds by using a double set of books.
Walmsley had first brought his concerns to his bosses at ORNGE
in 2007 and was told “what the Ministry (of Health) doesn’t know won’t hurt
them.” When he complained further, ORNGE let him go just before his three-month
probationary period was up.
Walmsley put his issues in writing to provincial officials, was
interviewed by investigators in November 2008, then the health ministry told
him the next month that the problems were solved.
A spokesperson for current Health Minister Deb Matthews
confirmed that Walsmsley’s allegations were received by the ministry and passed
to finance for investigation. Zita Astravas said ORNGE assured the
investigators that all was well at the province’s air ambulance service. The
probe was dropped.
Astravas said issues first raised by Walmsley are now being
probed by a team of forensic auditors from the Ministry of Finance.
At ORNGE this week, there are now 43 auditors going through
computers and paper files. A guard has been posted on the ORNGE file room to
stop anyone from removing documents.
ORNGE was created in 2005 by then Liberal health minister George
Smitherman and Mazza, a former Sunnybrook emergency doctor. It was set up as a
not-for-profit agency to deliver air ambulance service across the province. At
the time, ORNGE received about $115 million a year and they now receive $150
million annually.
Walmsley, a certified general accountant, was hired in September
2007 as senior business analyst at ORNGE. His salary was $80,000, and he was
told he was eligible for performance bonuses of up to 7 per cent.
In an interview, Walmsley said ORNGE gave him the task of
setting up the next year’s budget. Walmsley, who currently works at a Toronto
hospital, had spent his career as an accountant in hospitals and private
industry.
What he saw in the fall of 2007 shocked him. He presented the
following information to government investigators as serious allegations that
should be probed:
• Big bonuses. Mazza was getting a $250,000 bonus on a salary
that back then was in excess of $300,000 (his compensation package grew to $1.4
million in 2011). Even junior employees were receiving a $16,000 bonus in 2007.
Walmsley counted $2.4 million in bonuses in 2007, which he told investigators
was unusual in what was supposed to be a non-profit, government-funded agency.
• For-profit companies. Walmsley said ORNGE Peel and other
companies recently shut down by the province were being used to pay “stipends”
or consulting fees to ORNGE executives. This shielded their salaries from the
public Sunshine List.
• Perks in the woods. Walmsley tripped over information he said
revealed weekend trips by ORNGE executives to Muskoka Woods, a high-end summer
camp ORNGE was using as a base for its J-Smarts charity program. J-Smarts was
supposed to teach youth how to safely do extreme sports. ORNGE had purchased a
$50,000 water ski boat and Walmsley said executives would go to the camp on the
weekend at ORNGE expense. A woman who became one of Mazza’s vice-presidents was
a former water ski instructor.
• Untendered consulting contracts. ORNGE was handing out
contracts with no tendering or advertising. Some people who were high-level
ORNGE employees were also paid through consulting agreements. “And T4 (tax)
slips were not being handed out,” Walmsley said.
• Big surplus. With health-care dollars scarce in Ontario,
Walmsley was surprised to see ORNGE had an annual surplus of $5 million. He
said he approached his boss and they both went to talk to then vice-president
Maria Renzella (terminated Thursday along with Mazza and one other executive).
“I complained and was told they would hide the surplus,”
Walmsley recalled. That $5 million, he said, was spread out among executives
and used to pay for what he later described as “luxurious” company purchases.
Shortly after he complained to Renzella, Walmsley was told his
employment at ORNGE was “not working out.”
That was just before the end of 2007. That December, with ORNGE
complaining it was strapped for cash, then health minister Smitherman
authorized a one-time $2.9 million funding to ORNGE for an increase in
“salaries and wages and other operating expenses,” according to a letter
written to ORNGE by Smitherman in December 2007.
After being let go by ORNGE, Walmsley waited until he found a
new job, then wrote on April 14, 2008 to Margaret Best, the provincial minister
for health promotion. In his letter, he set out allegations of financial
wrongdoing. Walmsley realizes now he should have sent it to Smitherman, who had
responsibility for ORNGE.
Best’s office forwarded Walmsley’s letter to the health ministry
on Nov. 14, 2008. By that time, David Caplan had replaced Smitherman as
minister. The letter was received by Ruth Hawkins, a senior health ministry
official. Hawkins forwarded it to the Ministry of Finance and two investigators
from the Sudbury head office were sent to interview Walmsley.
In a 45-minute tape recorded interview he set out the problems
he had seen and urged investigators to take action.
His letter of complaint to the ministry stated he saw “several
eye-opening situations” at ORNGE, including two sets of accounting records,
hiding the surplus and executives “benefitting far too luxuriously.” He asked
the ministry and investigators if it was possible that the ministry was
supporting what ORNGE was doing (that question was not answered). Walmsley told
the ministry he thought health-care dollars were supposed to be spent only on
health care.
On Dec. 29, 2008, Hawkins wrote on behalf of the Ministry of Health
to say that all of Walmsley’s allegations had been investigated by the
“Ministry of Finance’s forensic investigation team.”
“I am pleased to say that the issues identified in your letter
have been addressed and once again thank you for bringing forward your
concerns.” Hawkins wrote.
This week, the aide to current Minister of Health Matthews said
that after the investigators met Walmsley they “followed up with senior
officials at ORNGE and the ministry’s Health Audit Services Team and concluded
at that time that evidence did not exist to support Mr. Walmsley’s allegation
of a second set of books.”
Astravas said “senior officials at ORNGE also provided
assurances about their compensation policy to the ministry in December 2008
that led the ministry at that time to conclude that Mr. Walmsley’s concerns had
been addressed.”
The Star
revealed in a series of articles over the past two months that ORNGE was paying
exorbitant salaries to executives, had set up a series of for-profit companies
at taxpayer’s expense, and executives — including Renzella and Mazza — had many
perks (Renzella received $110,000 to fund an executive MBA including
international study in Belgium).
Walmsley’s tip off to the health ministry in 2008 came just a
few months before scandal erupted at eHealth over executive perks, high bonuses
and untendered contracts.
My Reflections:
1. What
is the link to Crisis Management
The company ORNGE and the Ministry of Health are in a full
blown crisis right now. ORNGE is a not-for-profit
organization funded by the Ministry of Health .The crisis emerged after the
Toronto Star published articles during December 2011 that exposed the mismanagement
of funds and possibly unethical behaviour tied to its book keeping, executive
compensation and deals with for-profit companies that were linked to some of ORNGE’s
management. This has put both ORNGE and the MOH in crisis. The Ministry is
currently trying to manage it by firing the Board, the CEO and 2 other executives
of ORNGE. This is tied to crisis management because the company ORNGE is
obviously in crisis mode but the Ministry of Health also faces the risk of
losing the public’s trust in being competent enough to manage these publically
funded companies.
2. What stage of Crisis Management does the system appear to be at?
The system appears to be in the damage control stage. From
the Ministry of Health’s perspective, the Minister of Health Deb Matthews is
trying to convey to the public that this is not acceptable and that the
Ministry takes the taxpayer’s money very seriously.
From ORNGE’s perspective they are in the post-crisis
organizational learning stage. As an organization, the leadership must look at
the warning signs of this crisis and how the company handled the crisis as it
was happening. They also need to have a media communications team and
spokesperson that they have trained because through this crisis, the only communications
from ORNGE consist of press releases on their website and even those are few
and far between.
3. How
well does the system appear to be handling the situation?
The system is not handling the situation very well. It seems
that the Toronto Star has more information on the unfolding situation than the
Ministry of Health does. As this news article points out, the Ministry had
warning signs that something suspicious was happening at ORNGE in 2008 but they
did not do their due diligence to properly investigate the situation. The management
of ORNGE was also not very well prepared and was taken by surprise when the crisis
hit. They were under the impression that they were untouchable and a crisis
could not happen to them. This is ironic, since the company transports trauma
victims who also go through crisis situations and events that we all think
cannot happen to us.
The crisis preparedness of the system appears to be very
poor. ORNGE was in a difficult situation because their crisis management team,
if they had one, may have been involved in the allegations. Since the leadership,
including the Board, CEO and COO were terminated; there was no one to guide the
crisis management team. It seems that this is the reason ORNGE did not have any
crisis communications and most of the communications that went out about the crisis
came from the Ministry of Health.
The Ministry of Health seems to be a bit better prepared for
the crisis than ORNGE. This may have something to do with the learning that it
has obtained from the similar eHealth Ontario scandal that took place in 2009.
The Ministry seems to have a plan that was enacted quickly when they replaced the
Board and followed that with terminating the CEO and 2 other executives. They
also seem to have some crisis communications that they had prepared
before-hand.
5.
What personal reactions/feelings does the description
trigger in you?
I am appalled at some of the allegations that have been made
against the CEO and other executives. I also feel disappointed by the Board of
ORNGE and the Ministry of Health whose jobs it was to ensure that taxpayer dollars
were being used appropriately. All I have heard about in the media recently is
the sustainability of our healthcare system and how the aging population will
overwhelm it. I feel that if business practices such as the ones at ORNGE are
not stopped, that may very well be the case. It also makes me suspicious of
other publically funded healthcare organizations and how they are spending my
hard-earned money.
6. What
advice would you offer to those involved?
To ORNGE’s new management and leadership, I would say that
they need to improve their communications in order to gain the trust back of
their shareholders and the public. They also need to be accountable and
transparent in how the company runs and ensure that best practices are being
followed.
To the Ministry of Health, I would say that they need to continuously scan their internal operations, the external environment, and companies they provide funds to in order to ensure that a crisis like this and eHealth Ontario do not happen again. Each time something like this happens, the public loses a bit more trust in the Ministry and the elected officials. I would also remind them that they are elected by the public and are paid by the taxpayers so they should be accountable to them and ensure that they do right by them.
