Alberta Energy Regulator's former CEO grossly mismanaged public funds to create international centre: auditor

Alberta's energy regulator wrongfully used itsresources to establish an international centre outside its mandate, while its former CEO displayed "reckless and wilful disregard" for the proper management of public funds, according to investigations by three different provincial government watchdogs.

The damning reports by Alberta's auditor general, public interest commissioner and ethics commissioner centred on the creationand operationof the now-defunct International Centre for Regulatory Excellence, or ICORE.

The Alberta Energy Regulator (AER), which is funded by a levy charged to the energy sector, oversees the province's massive energy sector and is expected to ensure the safe and environmentally responsible development of the industry.

It establishedICORE in 2017 as a separate, external entity that would offer training to regulators around the world.

In findings released Friday, both the auditor general and public interest commissioner found this was outside the AER's mandate and that public money was spent inappropriately on ICORE activities.

"AER engaged in activities outside of its mandate and public money was spent inappropriately on ICORE activities," read the report from Alberta Auditor GeneralDoug Wylie.

He estimatedthe total financial impact of ICORE activities on the AER totalled $5.4 million, though $3.1 million was recouped. The AER is still out of pocket $2.3 million, according to the audit.

Wylie also concluded that ICORE activities lacked a credible benefit to the AER.

'Gross mismanagement' by former CEO

The Office of the Public Interest Commissioner report levelled some of its strongest criticism at Jim Ellis, who was president and CEO of the AER and president of ICORE.

"His actions demonstrated a reckless and wilful disregard for the proper management of public funds, public assetsand the delivery of a public service, which constitutes gross mismanagement,"the report said.

Ethics Commissioner Marguerite Trussler's report also found that Ellis had a conflict of interest "in that he furthered his own interest and improperly furthered the private interest of three other employees."

"The primary motivation behind ICOREnot-for-profit was to provide future employment for Mr. Ellis and others."

However, Public Interest Commissioner Marianne Ryan told reporters during a news conference thatthere was no evidence to suggest Ellis benefited personally from a financial perspective.

The matters did not reach thethreshold to refer them to the solicitor general for potentialcriminal charges, she said.

Ryan added that her reportis not a condemnation of the AER as a whole."It was employees of the AER that brought this matter to my attention and assisted with the investigation," she said.

Controls to monitor expenses at first 'non-existent'

The auditor general'sreportalso foundthat controls and processes to protect against potential conflicts of interest failed and that oversight from the AER's board was ineffective.

"Controls to track and monitor expenses related to ICOREactivities were at first non-existent and then poorly implemented," the report states. "The tone at the top at AER did not support a strong control environment or compliance with policies."

Wylie's report said a "culture of fear" at theAERstifled concerns regardingICOREactivities,with a number of staff interviewed by his office saying thatemployees who expressed complaints felt at risk of losing their jobs.

The culture at the AERstifled concerns regarding ICORE activities, Wylie said.A number of staff interviewed by his office used the phrase a "culture of fear" and said employees who were vocal about expressing complaints were at risk of losing their jobs.

AER sued ICORE in 2019

A recent CBC News investigationfound a close and complicated relationship between the AER and ICORE, including the involvement of Ellis.

Several key figures who were involved with ICORE, including Ellis, are no longer associated with either organization. Ellis resignedfrom his post at the beginning of 2019. Ellis couldnot immediately be reached for comment Friday.

Also earlier this year, the AER sued ICOREand received a default judgment in its favourfor $2.6 million for money it said itwas owed for the development and delivery of training materials.

The results of the provincial investigations come at a time when the energy regulator is under scrutiny from the provincial government.

In September, Energy Minister Sonya Savage announced her department was launching a review of the AER and appointed an interim board of directors to set its future direction.

Savage and Environment Minister Jason Nixon issued a joint statementFriday on the results of the investigations, saying they "cannot condemn the practices noted in these reportsstrongly enough."

"Our government was elected on a promise to reform the AER, which is precisely why we have already taken action, launching a review of the AER in August and replaced the board in the same month," the statement said.

The recommendations contained within these reports will inform the Albertagovernment's review of the AER, they said, noting that they expect the agency's interim board to implement the reports'recommendations.

Among the recommendations outlined in the three reports:

• Corporate governance throughout Alberta agencies, boards and commissions needs to be strengthened.
• AER staff need to bemade aware of and sufficiently trained on the whistleblowingprocess.
• The AERshould evaluate whether any additional funds expended on ICORE activities are recoverable.

In statement, the interim board of the AER said it will take the recommendations seriously and implement any required actions "in order to enhance public confidence" in the regulator.

"While ICORE was originally established to provide training to AER employees and support information-sharing across jurisdictions, it is clear now that a small group of senior leaders used AER resources in a way that is unacceptable," the regulator said in a statement. "These individuals are no longer employed at the AER."