(Graphic: Andre Mougeot/CBC)A climate change initiative that's one of Saskatchewan's most prominent scientific projects has been embroiled for years in allegations of conflict of interest and financial waste, CBC has learned.

The Regina-based company known as IPAC-CO2 (the International Performance Assessment Centre for the Geologic Storage of Carbon Dioxide) was formed in 2008 to create international standards for carbon sequestration, which is the storage of carbon dioxide underground.

Millions of dollars from government and industry went into the venture, which is located at the University of Regina campus. Now a CBC investigation has discovered that some people running the company were in an apparent conflict of interest.

Among those who were asking questions about IPAC was Carmen Dybwad, who became CEO of the company in 2010.

She was excited to start at the project that's right at the heart of the Saskatchewan government's environmental plan.

'Emotionally and physically upset'

However, when Dybwad started reviewing the company's books, her excitement turned to shock.

"I was astounded and I was emotionally and physically upset," Dybwad said. "Like, literally on the verge of throwing up."

Dybwad discovered IPAC was spending more than 60 percent of its budget on its computer system, but there was a question mark over the actual services being delivered.

"We could not figure out for the life of us what we were paying for. There was no set of deliverables," she said.

IPAC's information technology provider was another company, Climate Ventures Inc. (CVI), run by businessman Henry Jaffe.

Deal called 'handshake agreement'

The two men running IPAC in its startup phase — Malcolm Wilson and Ian Bailey — also worked at the university. Wilson was director of the office of energy and environment, while Bailey was the director of the university-industry liaison office.

They asked CVI to run IPAC’s computers — a sole-sourced agreement where there was no competitive bidding and no written contract.

"I guess you would probably characterize it as sort of a handshake agreement," Dybwad said.

Then Dybwad made her most troubling discovery: not only were Wilson and Bailey managing IPAC, they were also founding directors of CVI and were on its board for months.

The web of relationships came to the attention of the government of Saskatchewan.

Province takes a look

When CBC asked Donna Harpauer — the cabinet minister responsible for the province's portion of the IPAC funding — about how it looked, she said: "It's a conflict of interest."

Harpauer says when the province and IPAC's other partner — Shell Canada — saw that conflict, they took immediate action.

"Both entities discontinued the funding obviously because they didn't agree with what was happening under the management of the U of R," she said.

Harpauer says the government requested a report on the relationship between IPAC-CO2 and CVI. After the report was done, funding was restored.

Harpauer says the government is disappointed with how all of this unfolded.

"We were maybe overly confident that the U of R was a very great partner to have and manage this. But obviously it was mismanaged," she said.

Procedures tightened up, U of R says

The University of Regina admits that it made some mistakes.

"We found in our review we did some things that were a little loose and we've tightened up policies and procedures," said Barb Pollock, the U of R's vice-president of external relations.

CBC News was unable to interview Ian Bailey, who is on long-term disability.

However, Malcolm Wilson's lawyer did send an email, saying Wilson is heading off on holidays and is too busy to do an interview.

His lawyer insists that Wilson did not profit at all from his role at CVI and there was no conflict of interest.

Accounting firm brought in

Eventually, a forensic investigation was ordered to look into how taxpayers’ money was managed in the IPAC case.

The IPAC board hired the accounting firm Meyers Norris Penny to see if IPAC delivered value for money.

According to the board, that review shows the money was well managed. However, the board says that for confidentiality reasons, it's not in IPAC's interest to make that report public.

(with files from Geoff Leo)