03/11/2015 08:58 EDT | Updated 03/11/2015 09:59 EDT

Diane Finley, PMO Under Fire For $1-Million Violation Of Conflict-Of-Interest Rules

'How can [Harper] defend this corruption?" Liberal MP Judy Foote asked

Canadian Press

OTTAWA — Opposition parties demanded to know Wednesday why the Prime Minister’s Office influenced a $1 million funding decision that the ethics watchdog said broke conflict-of-interest rules.

“What was Nigel Wright doing in the approval process?” NDP leader Thomas Mulcair asked Prime Minister Stephen Harper in the Commons.

Diane Finley, the minister of human resources and social development at the time, had dared to go ahead and approve a failing project only after she had discussed it with Harper’s then chief of staff, Mulcair said.

“There were 167 projects submitted, and only five were chosen,” the NDP leader said. “Four fulfilled all the criteria, but the fifth was managed by a good friend of the Conservatives. According to the evaluation of the department, it was one of the worst projects out of the 167. Guess which one was chosen?”

A damning report by Ethics Commissioner Mary Dawson found that Finley, now the public works minister, had broken the Conflict of Interest Act and Treasury Board policy by giving preferential treatment to a non-qualifying project championed by a well-known Jewish leader with ties to the Conservatives.

Harper told Mulcair that Finley believed the project, designed to help people with disabilities in Markham, Ont., was in the public interest.

“The minister was acting within her discretionary authority as a minister,” the prime minister said. “I think it is also clear she was acting in good faith.

“Obviously, we will examine the report to determine how things can be done in the future.”

Liberal MP Judy Foote noted that Wright had told Finley the Prime Minister had told him to “sort it out.”

“When arranging to cover up for Mike Duffy, Nigel Wright said, ‘We are good to go from the PM.’ Soon after, [$90,000] was paid from Wright to Duffy,” she said.

Then when the human resources minister speaks to that same Nigel Wright about a project that failed badly against all others but was good for the Conservative Party, Foote said, the project is approved for more than $1 million.

“Just like Duffy, this leads right to the prime minister. How can he defend this corruption?”

Finley told the Commons she did not know the person championing the Markham project.

“[N]either I nor any of my family or friends had any personal interest in this matter,” Finley said. “Far from being friends with Rabbi Mendelsohn, we have never even met.”

Dawson’s investigation into the Markham project’s funding decision lasted three years, an unusually long time to complete, she said in her report, in part because people were giving her contradictory statements.

The proposal was submitted on behalf of the Canadian Federation of Chabad Lubavitch by Rabbi Chaim Mendelsohn, the federation’s director of public affairs, in early 2011, she wrote.

It was one of 167 proposals that met the initial screening criteria under the Enabling Accessibility Fund, “but it failed the department’s internal assessment, receiving one of the lowest ratings,” Dawson said.

Nevertheless, “the Markham project was added, at Ms. Finley’s request, to the four projects previously selected for funding.”

Dawson found that Finley had broken the Conflict of Interest Act by giving the Markham project preferential treatment, based on what she said were possibly political considerations.

The Enabling Accessibility Fund provides not-for-profit and small for-profit groups, educational institutions, and small municipalities funds for retrofit projects to improve accessibility for people with disabilities.

The department of Human Resources and Skills Development Canada considered 167 proposals for mid-size projects in 2011, with senior bureaucrats reviewing assessments by program officers to ensure that they received a fair evaluation and score, Dawson wrote. While 135 proposals passed the initial assessment and were further evaluated, the Markham proposal was one of the 32 that failed. Only three other proposals received a lower score than the Markham proposal, Dawson noted.

Following the internal assessment, the top 25 proposals were selected for an external evaluation by experts who considered the projects’ feasibility, value for money and proposed timelines. Then an internal review committee within the department considered the results and recommended the top four highest scoring projects for funding. Those four projects received money.

Dawson said she was told that Rabbi Mendelson is well-known to many cabinet ministers, that he often organizes and attends events on Parliament Hill and has provided advice to MPs and the Prime Minister’s Office with respect to Jewish customs, such as the Hanukkah celebrations hosted at the Prime Minister’s residence at 24 Sussex Drive. Mendelson was also a member of Harper’s delegation to Israel in January 2014.

In emails following the 2011 election, Dawson said Mendelson had boasted that his organizations had mobilized tens of thousands of volunteers and voters. But the Ethics Commissioner said she found no evidence that he or his organization had significantly contributed to the Conservative party’s election campaign.

Mendelson submitted three proposals, including the Markham project. One didn’t make the cut even to begin the first assessment, another project in Montreal passed the first assessment but didn’t make the top 25.

After he submitted the proposals, Dawson said, Mendelsohn started calling ministers’ offices to check on their status and to solicit support. A paper trail suggested that John Baird, then the government house leader, spoke to Finley about the project. Mendelsohn urged several staff members in ministers’ offices and in the PMO to call Finley’s chief of staff, Phil Harwood, to express their support.

Dawson said she found that Peter Kent, the MP for Thornhill, Ont., who was the environment minister, as well as the Prime Minister’s Office had intervened for what appeared to be “political” reasons.

Kent told Dawson that rivalries within different organizations in the Jewish community had become a very real issue. One funding decision through the Infrastructure Stimulus Fund, to a group just north of Kent’s riding, evidently provoked complaints from Jewish groups in the Greater Toronto Area, Dawson said.

Kent said he talked to Wright about the problems they were having with the Jewish community. Wright told Dawson that Kent had mentioned the Markham proposal – although Kent denied it. Wright said he thought Kent was suggesting that the proposal should be carefully considered in light of how other funding applications by the Jewish community in the GTA had been handled. Wright also said the prime minister was aware “there was a political issue” regarding the awarding of grants to the Jewish community.

Harwood, Finley’s chief of staff, spoke to Wright and Harper’s then-principal secretary Ray Novak (now his chief of staff) about the project after the election. He said that he was trying to determine what Mendelsohn’s connection was to the PMO and that he was told the rabbi tended to exaggerate the nature of his relationship.

Wright acknowledged talking to Finley about the Markham project, saying she asked him after a cabinet meeting whether he considered the proposal “important.” Wright said he had been asked by Harper to “sort it out.” Finley didn’t recall that conversation in her interviews with Dawson. She also didn’t remember which of her colleagues had raised the Markham proposal with her.

In July, when Finley approved the top four projects recommended by the department, she asked them to send the Markham proposal to an external evaluator and to inform her of the result. Harwood, her chief of staff, had earlier asked Mendelsohn to provided additional information to the department in order to strengthen his proposal.

No other applicants had been permitted to submit additional information for their assessments.

The external evaluator gave the Markham project a rating of 51 out of 80 possible points and recommended more information be requested from the federation. Dawson said it didn’t appear anything more was asked and the project didn’t get reviewed again as had the top 25 projects. The department sent Finley a memo outlining the proposal’s low scores, referring to a “number of weaknesses” and asking whether she wanted to fund it. She wrote back “yes.”

Because the funds available for mid-size projects had already been used on the other four projects recommended by the department, funding for the Markham project, $1,044,000 was taken from money set aside for smaller projects.

In the end, however, the project never got off the ground. The organization, Chabad Lubavitch of Markham, was unable to obtain necessary construction permits within the negotiated timeframe and there were significant increases in cost to deal with building deficiencies. Dawson said it appeared only $50,000 was spent, and the rest of the money was returned.

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