06/11/2013 02:32 EDT | Updated 08/11/2013 05:12 EDT

Matthews admits she approved contract with $406,000 severance for eHealth CEO

TORONTO - Health Minister Deb Matthews admits she approved the contract to pay the outgoing CEO of eHealth Ontario a $406,000 severance package after barely three years on the job.

The Opposition accused the Liberals of fiscal mismanagement after learning of the generous golden handshake negotiated by eHealth boss Greg Reed, who will leave his post six months early on Oct. 1.

Reed had been brought in by the Liberals to clean up eHealth after the agency spent $1 billion trying to develop electronic health records but had very little to show for it.

A lot of the eHealth money went for untendered contracts given to highly-paid consultants who then billed taxpayers for additional expenses in a scandal that cost former health minister David Caplan his job.

Reed's tenure was anything but smooth, and last year he was forced to give back an $80,000 bonus he had accepted despite a wage freeze imposed on eHealth workers and the broader public sector.

Reed had cancelled bonuses promised to eHealth staff, but the agency ended up having to pay out over $7 million after the workers successfully sued.

Matthews said she won't defend the generous severance Reed will collect, but promised the government would set up a panel to review executive compensation across the Ontario public service.

"We must assure that, as much as possible, money is going to the front lines to serve patients and to serve the people of Ontario," Matthews told the legislature.

"So we are going to be attacking this issue, and I look forward to that, across the health sector and well beyond."