Friday, 30 March 2012

The government was asleep at the switch

The province of Ontario desperately needed an air ambulance service where the patients could be flown to the hospitals. That is when Chris Mazza, a doctor stepped into the picture. He was to be the boss of the operation. Mazza has now been forced to leave the service he founded in 2005. His services were terminated after a series of scandals involving secretive and high salaries, executive perks, mysterious payments from suppliers, and wasted public money. Mazza was terminated from ORNGE because the for-profit company that employed him as a consultant had declared bankruptcy.

Unfortunately this all came about because Ontario’s health ministry ignored warnings and allowed the ORNGE problem to continue festering. And like a bad wound in which blood loss is inevitable, ORNGE was being drained of taxpayer’s money. While the money was being squandered, the Health Ministry was snoozing at the switch.

The ORNGE fiasco represents a colossal failure of governance and accountability and is hobbling the province of Ontario in its ability to cut the deficit, according to a former deputy health minister. Michael Decter, who served as deputy in the former Bob Rae government and continues to be a leading Canadian expert on health systems, told an audience of senior health officials recently that the scandal at Ontario’s air ambulance service is making it difficult for the province to ask the health sector to cough up millions in savings.

Decter said, “In my view it couldn’t have come at a worse time for the sector.” He noted that Don Drummond’s recommendations on paying down the $16 billion deficit were released earlier last month just two months after the Toronto Star first broke the story about improprieties at ORNGE.

He told about 300 people at a Breakfast with the Chiefs event at St. Michael’s Hospital, a speakers’ series organized by Longwoods Publishing. “Getting any change made requires getting some moral authority that we have to do things together. The problem with ORNGE is that everyone in this room and everyone out there in the health sector are going to say, “That $25 million is the money I needed to run my program.” Decter was referring to $25 million unaccounted for after $275 million was raised by ORNGE with taxpayers’ help.

There can be no doubt that this fiasco has really diminished the credibility of not just the minister but also the government at a really bad time because the province is really getting into difficult economic times.

When ORNGE was originally created, it represented a new way of doing things, by bringing together Ontario’s public expertise and intellectual property with private enterprise.

Control freak, passionate, tyrannical, inspiring and given to obsessive tendencies is how former co-workers describe the founding president of the air ambulance service that annually received $150 million in taxpayer money. Even though Mazza had more than 200 employees, including veteran flight controllers and doctors at ORNGE’s state-of-the-art command centre, (called the Crystal Palace) Jacob Blum, the savvy right-hand man who did his bidding until 2008 said, “Chris Mazza always insisted on trying to do everything himself. He always considers himself the smartest guy in the room.” Would you believe it? Mazza’s curriculum vitae is 28 pages long. He must really be full of himself.

People at ORNGE recall Mazza as saying, (frequently using a morgue reference) when someone’s time at ORNGE was up and that they were to be fired by saying, “He’s done. Put a toe tag on him.” Well, Mazza was done and the government put a toe tag on him also.

Mazza got ORNGE to give him $1.2 million in loans (one for a house), plus a big cash advance over a period of 18 months. In the spring of 2011, ORNGE Global gave Mazza a $250,000 advance on his 2011-2012 fiscal year bonus for securing investors for the renamed ORNGE Global. However, while looking at the advance for securing investors, investigators have determined that no investors were secured by ORNGE Global.

Further, immediately after the purchase of the property and house, Mazza applied to the city of Toronto for a building permit to demolish the existing structure down to the foundation. He then constructed a beautiful three-bedroom, four-bathroom home.

Later it went on sale for a price of $1,425,000. Now ORNGE wants its money back. No doubt ORNGE has placed a lien on the house and property so that any monies owed to ORNGE that is received for the sale of the house and property will go directly back to ORNGE.

The two loans and an advance against a bonus were on top of Mazza’s annual salary of $1.4 million. The term of the loan was for five years. Alas, auditors have found no evidence that interest was ever charged Mazza and no evidence that Mazza had made any repayment of interest and principal. That being as it is, one would have to presume that the board gave him the money as a gift, which was not theirs to give.

The decisions to provide loans and cash advances to Mazza were approved by ORNGE’s board, chaired at the time by Rainer Beltzner. Both Renzella and Beltzner were brought into ORNGE by Mazza. Renzella received funding from ORNGE for a $110,000 executive Masters Degree on Business Administration, with some of her studies being done in Europe. They are no longer with ORNGE so the province subsidized Renzella’s education for naught. As I see it, the government should sue her for the money back.

The third Mazza payment being investigated is a $450,000 loan made in the summer of 2011, which documents now in possession of the province show was ‘secured’ by shares in a company called ORNGE Global Management Inc. According to documents the Toronto Star has, that is one of the for-profit companies that Mazza controlled. It is now defunct. As with the first loan, there is no evidence of an interest rate or that any repayments of interest or principal have been made by Mazza or anyone else for that matter.

Tom Lepine, an executive with Global who is still there, recently disclosed to the Toronto Star that Mazza gave him a $50,000 consulting fee on top of his $282,000 salary for helping with the for-profit business. Global hoped to provide medical and air ambulance services to rich clients willing to pay high payments for the service but the project never got off the ground.

An ORNGE accountant who tried to blow the whistle on excessive spending in 2008 said the publicly funded ORNGE handed out money “like it was water.”

For some time now, readers of the Toronto Star have watched with mounting disgust the revelations about ORNGE. Their disclosures have included what appear to be vast overpayments to executives, to lawyers and to others, as well as dubious expenditures on a range of executive perks, including Harley Davidsons, a ski boat and expensive European MBAs.

Once the ORNGE story landed on the front page of the Toronto Star, Health Minister Deb Matthews moved swiftly. In less than eight weeks, Mazza, his board and the management of ORNGE had been dismissed and replaced and a large team of auditors has been combing through its records. Ontario Auditor General Jim McCarter, who delayed his report on ORNGE in December to do more work, is set to release his findings shortly. Coroners are also reviewing a number of patient cases to see what if anything went wrong with the services of ORNGE.

Some lessons can already be drawn about preventing the next version of ORNGE from happening like the first one did.

For example, paramedics, who had their requests for air ambulance denied, believed something was wrong. So did those who found the new helicopters a difficult environment for patient treatment. At times, some of the complaints had no real justification but sometimes the adage that where there is smoke, there is fire had some real meaning. Complaints from within should not have been dismissed.

The Public Sector Salary Disclosure Act requires annual publication of the salaries of vast numbers of public servants, such as employees of Crown corporations, hospitals, universities and others, earning more than $100,000 per year. As a consequence, a long list of hydro linemen and others who work considerable overtime are swept onto the list. However, ORNGE’s related companies were not subject to salary publication under the Act. Excluded from salary disclosure are many quasi-public entities that have almost been completely funded by the provincial government because of loopholes in the legislation that provide justification not to disclose the said entities. That legislation about disclosure will have to be amended.

Provisions should be expanded to cover all those whose pay is overwhelmingly funded by taxpayers, including doctors whose payments from government are disclosed in other provinces and certainly high-paid executives who are employed by partially paid monies supplied by governments should have their salaries made public.

Transparency is appropriate in situations such as this fiasco when it is applied broadly and rigorously. Greater transparency in the ORNGE operation could have alerted the public, the opposition and even the government far earlier than it did that something was terribly wrong with ORNGE.

When the government seeks to move a function such as air ambulance to an arms-length organization, there should be competitive bidding. This didn’t happen with respect to ORNGE. E-Health Ontario provided ample evidence of the additional cost to the provinces' taxpayers of sole-source contracts. Rules were tightened on such contracts but ORNGE, the outsourcing of an entire division, had not been put to competitive tender either at the beginning of the process or even later on.

Where government decides that a private sector or arms-length entity can do a better job, there should be sufficient evidence of that improved efficiency. Tendering for bids is a well established practice as the best means of achieving that end.

There are many entities operating at arms-length in Canada from government that do so with proper regard for the public interest and the taxpayer’s money. What is needed is to subject all such agencies to transparency and competitive bidding that will encourage conduct by all parties that is fully in the public interest. Some people may believe that the real problem governments have with competitive tendering is that the government’s official’s own friends don’t always win. I don’t know if that is true but the possibility that it may be true should be a concern to the taxpayers in any case.

Fiascos like ORNGE shakes the confidence of citizens who expect their tax dollars will be used with greater respect that what was done by those managing ORNGE. The real and continuing challenge for government is to prove to the public that their tax dollars are being carefully and wisely spent and the quality of their services has not been compromised. Unfortunately, we have not yet seen such proof.

The provincial police in Ontario along with auditors should look into this fiasco to see if criminal acts took place with respect to the operation of ORNGE. If such acts did take place, then charges should be laid promptly.

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