Contracting Out Is A Crime

Once again the attempt by the Liberals to Reinvent government, the mantra of the neo-con revolution of the nineties, ends up costing Canadians millions. Whether it was the P3 Boondoggle with the Firearms registry, the RCMP pension fund fraud or this case where the Department of National Defense was bilked for millions. It all has to do with contracting out and outsourcing IT functions of the State.

Ex-federal employee guilty of huge fraud

A former defence bureaucrat, who led a jet-set lifestyle, pleaded guilty today to two charges in a phoney contract billing scheme that bilked $146-million out of the federal government before it was stopped.

Paul Champagne, who had been an $80,000-a-year contract manager with the department, pleaded guilty to one count of fraud and one count of breach of trust in an Ottawa courtroom.

He was fired from his job in 2003 after billing irregularities were revealed involving a contract with U.S. computer giant Hewlett-Packard.

After a lengthy RCMP investigation, Champagne, 49, was charged with seven fraud-related crimes. After he pleaded guilty today to two charges, the Crown dropped the remaining five counts.

He will be sentenced in January.

In the late 1990s, the Defence Department issued a series of contracts to Hewlett-Packard (Canada) Inc., eventually paying $159 million for computer maintenance services. The government later discovered it got little or nothing for its money.

The Public Works Department red-flagged the contracts over the four years prior to Champagne's dismissal, but did nothing. A scathing report in 2003 found that managers at the federal government's tendering department failed to appreciate the significance of at least three audits that warned something was terribly wrong with the computer contracts.

After the scandal became public, Hewlett-Packard said it was told by the department to pay a group of subcontractors and their work was deemed secret.

In May 2004, the computer giant repaid $145 million to the federal government, and said its employees did nothing wrong.

Two Ottawa businessmen, Peter Mellon and Ignatius Manso, were also charged, but the Crown said Monday only one case remains to be resolved. A spokesman for the RCMP couldn't say what the status of the cases might be.

Over 10 years, starting in 1993, five contracts worth a total of $250 million were signed with the Compaq Computer Corp., Digital Equipment and Hewlett-Packard, which eventually bought Compaq.

Audits conducted by Public Works in 1999 and 2000 raised concerns about three of the contracts, but in 2001 a further review found unauthorized billing and "evidence of contractual funding appropriated for other purposes."

After Champagne was fired, National Defence did its own internal review of contracts and discovered problems with two dozen other projects. Today, the Defence Department did not respond to requests for comment about what safeguards have been put in place to prevent a repeat of the fiasco.

At the time of his arrest Champagne was a multimillionaire, who insisted his wealth and homes in exclusive districts of Ottawa, Florida and the Turks and Caicos were the results of shrewd investment in high-tech stocks during the tech boom of the late 1990s.

SEE:

Defense Lobbyist Now Minister

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