A Canadian Crown corporation paid out a travel claim to the chair of its board based on a false receipt, and approved two taxpayer-funded trips to international conferences that overlapped with his private business interests, CBC News has learned.
Ray Castelli, a one-time aide to former Conservative prime minister Kim Campbell, was appointed by the former Harper government as the Canadian Commercial Corporation board chairman in 2012.
He is also the CEO of a Vancouver-based company called Weatherhaven, which, like the Crown corporation he represented, services the defence industry, in Weatherhaven's case by making large temporary shelters used by militaries around the world, including Canada's.
"If you end up going to a conference that benefits you personally, and the government is subsidizing that, that could be considered a conflict of interest," says Ian Greene, a retired professor of public policy and government ethics at York University.
"It raises a lot of questions to me because a conflict of interest is when you're in a situation where you could use your government office for personal gain."
Castelli's appointment was renewed by the former Conservative government, along with several other appointments, in June, just weeks before the federal election campaign got underway.
When the Liberals came into power, Castelli offered to step down, but he told CBC News he was "willing to stay on." Last month, however, he resigned after being asked to by the minister.
Castelli was one of three recent board chairman at CCC whose expenses and per diems were part of an ongoing review by CBC News of spending at Crown corporations and government agencies.
The Crown corporation in this case, the Canadian Commercial Corp., acts as a broker between foreign governments and Canadian companies, including the defence industry. It was the agency, for example, that negotiated the controversial $15-billion contract to sell Canadian-made light armoured vehicles to Saudi Arabia.
The issue in this case flows from two foreign trips Castelli took on behalf of CCC, one to Abu Dhabi and the other to London.
"Worth noting that, in both cases, I sought advice from our internal auditors in advance and took their advice (as outlined in my memo to the board) in how and what to claim," Castelli told CBC News in an email.
"It's also worth noting that every board member's expense claim is reviewed and audited by the corporation's internal auditors."
In February of 2013, Castelli travelled to a defence conference in Abu Dhabi on behalf of the CCC.
A review of his expense claims by CBC News reveals a number of peculiarities about the trip, including a false airline receipt, official approval that came after he left on the trip and, ultimately, a revelation that he conducted personal business for his own defence company while at the conference.
"Given that [he] had ... private sector interests for the back end of the trip, [it was decided] CCC would cover the front-end expenses, and [his] other interests would cover off the back end, the return fare," says CCC's director of strategic business development and marketing, Susannah Denovan Fortier.
"We often have to refresh their memories about what [the board members] are entitled to."
When Castelli proposed travelling to the conference, he said the whole trip would cost "under $5K" because he was already travelling in the region for his own business, and the CCC portion would only involve an airline ticket for a "side trip" at a "reasonable cost."
Instead, he submitted a business class airline ticket from Canada to Abu Dhabi and back, which wasn't his actual ticket, worth just over $7,000.
In a phone interview, Castelli says the substituted plane ticket was used because it was "easier to understand."
"Although I could have (under the policy) rerouted my trip so as to claim a full-fare flight, I structured my travel to minimize cost to the corporation, resulting in a claim of only 50 per cent of a return plane ticket," he told CBC News in a follow-up email.
The CCC also defended its decision to approve a travel claim based on a substituted receipt.
"In this case, specific guidance was sought from our auditors on the best approach for reimbursement and their direction was followed," Tamara Parschin-Rybkin, the CCCs vice-president of legal services wrote to the CBC in an email.
Not good enough according to Aaron Wudrick with the Canadian Taxpayers Federation.
"The whole reason we require documents as proof, providing receipts for reimbursement is so that you have hard evidence," he says. "If you start saying it's too complicated and making substitutions then you undermine the integrity of the whole system."
Ken Froese, a Toronto based forensic accountant, calls the substituted receipt "misleading."
Froese says if the substituted airline receipt resulted in Castelli getting more money then he would have, had the actual receipts been used, then that's a bigger problem.
"If you got a personal benefit from it ... then it's more than misleading. If it's not the actual incremental cost you paid, then there's a benefit there."
When it was discovered Castelli conducted personal business while at the conference, the CCC decided he would have to pay for some of the trip himself, leaving taxpayers paying almost $8,000.
In September of 2013, Castelli went on a second international trip, this time to London, England, at a cost of nearly $11,000.
As he put it, it was to attend "the largest and most important defence show in the world."
There is no mention in the documents reviewed by CBC News of Castelli conducting personal business at the London defence conference. But given that his private company is also in the defence business, his attendance at the conference raises questions of conflict of interest.
"I think it would be important in advance to discuss that situation with somebody in the conflict of interest office to find out is this acceptable," says Ian Greene. "That would've been done in advance. If it wasn't, then it's asking for trouble."
Weatherhaven had launched one of its new products at this same conference two years earlier, and in the year Castelli attended, a South African-based company that carries Weatherhaven's products was in attendance.
Both Castelli and the CCC, declined on-camera interview requests for this story, but in an email the CCCs Parschin-Rybkin, says the trip was "validated as compliant and approved by the auditors and the board."
"One of the objectives in attending these shows was to assess Canada's marketing presence and provide recommendations for improvement," she added.
"Based on his assessment, the chair led the development of an enhanced 'whole of government' approach to improving Canada's presence, which has substantially improved Canadian trade promotion at these shows and been widely praised by Canadian exporters."
For confidential tips on this story, please contact Timothy Sawa firstname.lastname@example.org or 647-382-7789