What the RNC told a judge to get a search warrant in the NLESD fraud probe
CBC News won a court order to partially unseal police affidavits, supporting documents
It began when an internal auditor with the Newfoundland and Labrador English School District found "unusual trends and other concerning information" in purchases from a specific business back in 2015.
The top financial official at the district concluded that those purchasing patterns were consistent with "quote-fixing or vendor collusion."
Soon after, in January 2016, the school board went to the police.
The internal auditor went on to provide the Royal Newfoundland Constabulary with details about missing jet pumps and fencing, sets of tires installed on employees' personal vehicles, and mysterious 20- and 40-foot containers.
That initial RNC investigation was put on hiatus months later, after the government called in the auditor general to look at the books.
The police probe restarted after the AG issued a report a year ago that found "pervasive" financial rule-breaking and oversight problems at the NLESD. Her review focused on the facilities branch of the school district's eastern region, from 2011 to 2016.
This summer, CBC News won a court challenge to partially unseal documents related to the fraud scandal at Newfoundland and Labrador's largest school district.
They include what is called an ITO, or information to obtain a search warrant, affidavits, and other materials.
The Royal Newfoundland Constabulary provided those documents to a judge this March in support of their application for a search warrant.
That warrant allowed fraud investigators to seize computers from the auditor general — computers that contained work product and supporting documents from the AG's 2½-year review of financial issues at the school board.
The unsealed court records provide new information about the ongoing probe, including:
- What red flags first went up at the school district.
- Items bought by taxpayers that went missing.
- Some of the schools affected by potential fraud.
- An outline of how the ongoing investigation could widen.
The documents don't disclose the name of the main suspect — a school district employee who police believe bilked taxpayers and took kickbacks — or the identities of other potential suspects or businesses. Those all remain redacted, by order of the judge.
But many details were released.
Here are some of them.
Tires bought for non-NLESD vehicles
In the summer of 2012, the NLESD paid $940 for a set of tires, wheel balancing, a road-hazard warranty, and tire levies.
But the tires were not for a school district vehicle.
Instead, they were for a European luxury SUV that currently carries a base price tag of around $60,000.
The police later checked to see who owned the car, according to the unsealed search warrant documents.
"The relationship between the registered owner and (name redacted) is not known at this time," the RNC said in court filings.
"It is possible (name redacted) is a witness, or an additional target of the investigation."
But that wasn't the only suspicious tire purchase highlighted by the NLESD's internal auditor.
More were bought, listing a shipping address at the NLESD maintenance department. But those tires didn't match any vehicle owned by the school board.
An appendix in the search warrant documents outlines 10 occasions between 2012 and 2014 when tires were bought for district staff, "unknown" people, and in one case, a non-district government employee.
In addition to the luxury SUV owner, another person "may become an additional target of the investigation," in relation to a $922 invoice for two sets of tires.
Container located at private business
Two containers — one 20 feet, the other 40 feet — were listed as being used at Holy Trinity in Torbay.
There were monthly payments made from the public purse, totalling $17,000. But the containers were nowhere to be found on school board property.
Later, a shipping container was located on the yard of a private business, being used to store tires.
The RNC believe that storage container and those tires could have been the ones flagged by the internal auditor.
An array of missing items
But the tires just got things rolling.
There were two missing generators — one 7,800 watts, another 8,000 watts.
Jet pumps that were tagged for Holy Heart of Mary in St. John's and Swift Current Academy also couldn't be located.
And then there was the fencing.
Taxpayers footed the bill for rent-to-own payments for temporary fencing at Holy Trinity Elementary in Torbay and Beachy Cove Elementary in Portugal Cove-St. Philip's. A lot of that was also on the missing list.
The unsealed documents also fill in some of the blanks in the public report released by the auditor general a year ago.
The AG's report listed more than $100,000 worth of items that couldn't be found — items that had been purchased from "vendors of interest" by "buyers of interest" at the school board.
The list of items was redacted in the AG's report released to the public.
But the black ink disappeared in the search warrant documents that were unsealed by the judge.
That list includes:
- Two dehumidifiers that cost $4,238.
- Six hammer drills with a price tag of $4,092.
- Five snowblowers totalling $6,554.
- Eleven circular saws for $2,842.
- A $1,413 air compressor.
- A $565 hole auger.
Another list detailed $68,000 more in unaccounted for items purchased by "buyers of interest" from other vendors.
- Seven snowblowers costing $9,796.
- Three wet/dry vacuums, which came in at $2,581.
- Motorized blinds costing $4,972, which were supposed to be for a high school but were not located there.
- Shades for a cathedral-style window, carrying a price tag of $4,419, which were approved to be bought for a high school, but were never delivered.
- "Ledgestone backsplash," a half-dozen for $194.
- A $170 faucet and showerhead.
- A $90 vanity light fixture.
- A $399 bicycle rack.
That list also includes what appears to be firefighting attire — a "G-Xtreme" jacket, trousers and suspenders, totalling around $1,800, and what is described as a $450 "NFPA boot — glove, 14 inches."
In their search-warrant submission to the judge, the police said the auditor general had information that would link those purchases to specific buyers and vendors involved in potential fraudulent activity.
The RNC believes the goods and services that were paid for, but not accounted for, and the items "inconsistent with NLESD needs" were "used for the personal gain of an employee(s)."
Internal auditor examined company
Back in 2015, district internal auditor Kayla Freake zeroed in on one particular company, reviewing all purchase orders to that firm over a 17-month period from mid-2014 through late 2015.
The auditor looked at how quotes were obtained prior to the award of those contracts.
In part, that was to determine whether other companies asked to bid on the work had actually performed services for the NLESD before.
Red flags went up.
The police search warrant documents outline some of what the internal auditor found.
"(Name redacted) has never been hired by NLESD," the RNC search warrant application notes.
"Furthermore, the company cannot be found in the phone book (including Yellow Pages) or by Internet search. The HST number associated to the company was only valid as of May 1, 2015, after the company had bid on NLESD contracts."
Despite all that, the company appears to have been contacted for a quote on 17 separate purchase orders.
(Names redacted) do not appear to be legitimate companies, despite receiving bids from these companies.- Royal Newfoundland Constabulary search warrant application
Another company was also never hired by the NLESD.
"(Name redacted) is associated to hoses, hose couplings and fitting work. (Name redacted) placed bids for concrete, lining painting and asphalt work."
None of the four maintenance field staff employed by the school board had ever heard of those latter two companies who were asked for bids.
"The maintenance supervisors were asked to list the main companies responsible for asphalt work around St. John's-area schools," the RNC search warrant application notes.
"None of the managers listed those two companies."
The RNC documents note that all 10 jobs involving line-painting work in the St. John's area were awarded to one firm, over the time frame reviewed by the internal auditor.
All that work by the school board's internal auditor resulted in a December 2015 memo from one senior executive at the NLESD to another.
The top financial official, Terry Hall, sent it to CEO Tony Stack.
According to the RNC search warrant application, Hall's memo identified three vendors as being "of particular interest."
One of them had a "significant win ratio for contracts."
The other two failed to win any business with the NLESD.
"In totality, Terry Hall is of the belief that the patterns associated to the awarding of work to (name redacted) are consistent with quote fixing or vendor collusion," the police court filings note.
The RNC documents say "(names redacted) do not appear to be legitimate companies, despite receiving bids from these companies."
Possibility of more suspects
While the police search warrant filing makes corruption allegations against one specific NLESD employee, there are indications that the investigation could widen.
"The office of the auditor general indicated that there was a possible second subject; however, this person was not named," the police documents note.
"At this point of the investigation, police have only received a preliminary report. It is possible that the scope of this investigation will increase as more information becomes available. This includes the potential for additional offences coming to light."
In the initial application to the judge, the RNC argued for a sealing order by noting that "the information obtained through the search warrant being sought may lead to further interviews with the wife and son of the subject."
Court challenge to sealing order
The RNC executed the search warrant at the auditor general's office in March — six months after AG Julia Mullaley issued her report.
A judge ordered all the documents the police filed to get the warrant sealed.
Soon after, CBC News filed an application at provincial court to access those materials.
The Crown contested that application, saying some of the material could be released, but significant portions should remain off-limits.
A hearing was held in April, and Judge Colin Flynn issued his decision in late June.
The unsealed documents were provided to CBC News a month later, in late July.
Flynn ruled that "allowing access to the identity of those who are either under investigation or are suspicious persons, both individual and corporate, would compromise the nature and extent of an ongoing investigation."
Those names all remain shielded from disclosure in the unsealed search warrant documents.
But the judge decided the Crown's arguments were not "sufficiently strong" to keep the details of items possibly involved in fraud under wraps.
And a Crown claim to withhold information outlining "investigative techniques" to be used by police was "without merit," Flynn ruled.
"The next steps are the logical next steps that anyone would logically take in the investigation," the judge wrote in his decision.
As for the current status of that investigation, the RNC is remaining mum.
The police didn't not respond to a CBC News request for comment.