Probe into AECL contracts hushed up

Former employees at Atomic Energy of Canada Limited say they witnessed potential wrongdoing in procurement practices at the Crown corporation, with managers receiving gifts from suppliers, favouritism toward certain suppliers and deliberate leaks of information.

Ex-employees accuse Crown corporation of 'wrongdoing' in bidding process

A company is suing AECL, alleging it was excluded from bidding on a $10-million contract for parts at the Bruce nuclear power plant in Ontario. (Courtesy Toronto Star)

Former employees at Atomic Energy of Canada Limited say they witnessed potential wrongdoing in procurement practices at the federal Crown corporation, with some senior managers receiving personal gifts from suppliers, favouritism toward certain suppliers and leaks of information to suppliers about their competitors' bids.  

CBC News has also learned that an extensive, months-long investigation into procurement at the nuclear agency by auditing firm Deloitte has been kept quiet for nearly five years.

AECL has refused to comment on the investigation, which insiders say began in 2008 when Deloitte was asked to probe the company's procurement department.

It is unclear what prompted the scrutiny, but former employees say auditors looked into how contracts were awarded to some suppliers of nuclear parts. 

"AECL does not want to be accountable to anyone. I have never seen such a secretive and elusive organization, either in a private or public role," said a former employee who wants the Deloitte report to be made public.

NDP wants answers on 'bid-rigging'

The revelations by CBC News point to a possible cover-up at AECL, the Opposition said during Thursday's question period in the House of Commons. "Former employees of Atomic Energy Canada are blowing the whistle on bid-rigging," NDP MP Mathieu Ravignat said. "But it appears that this was covered up."

Conservative MP David Anderson, speaking for the natural resources minister, replied that the government can't comment because of the ongoing court case.

"The report would show what I experienced when I worked there — that there is a complete irresponsibility at the senior level at AECL for public monies."

CBC News spoke to several former employees at the company, which developed all the commercial nuclear reactors in Canada before its Candu division was privatized two years ago. All the former staff asked to remain anonymous for fear of repercussions.

They said they saw certain suppliers get unusual preferential treatment — even when their bids were higher than equally qualified companies. The ex-employees said there was also a failure to protect sensitive bidding information from competitors, and bids were sometimes altered after the formal tendering process had closed. 

"I saw on several occasions that after bids had closed, it was not unusual to get an unsolicited bid from the chosen supplier with a lower price that would get the job," another former AECL employee said.

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The former staffers also allege some senior employees in the company's procurement department accepted gifts and inducements from suppliers of nuclear parts, such as golf games, a shared limo ride to a nuclear industry event and materials to renovate a cottage. 

"People would get raw material for personal projects that came from suppliers. I'd seen that. I'd become aware of that. I was told that, in fact, by one of the recipients who chose to share it. Saw photographs of it," the former employee said.

"I'd see abuse of the rules, channelling work into companies that don't deserve it, in my view. And it's just wrong," the person said. "I am convinced beyond a shadow of a doubt that there was wrongdoing there.… A secret is hard to keep. Keeping this out of the public eye, it's incredible."

Auditor stays mum

One of Deloitte's principal investigators in the case was accountant Tushaar Lakhotia, according to a former AECL employee. Lakhotia interviewed procurement department staff and asked questions about how bids were conducted and contracts awarded, the former employee said.

CBC News contacted Lakhotia by phone, but he declined to answer questions. His LinkedIn account states that around the time of the AECL investigation, he investigated procurement fraud for Deloitte. The accounting firm would neither confirm nor deny that Lakhotia was involved in the investigation.

AECL refused to release the audit, its findings or any information about it despite multiple requests from CBC News.

"The document in question was at issue in litigation that is currently before the Ontario courts," AECL's director of corporate communications Pat Quinn wrote. 

A request for the document under the Access to Information Act was also fruitless, with the company citing a section of the law that prevents information from being released when it may be harmful to law enforcement and investigations.

Deloitte has also refused to release the report.

Allan Williams, a procurement expert who worked for the federal Public Works Department and was an assistant deputy minister for the Department of National Defence, said it is "outrageous" that the findings of the report have been withheld from taxpayers. "Any public service owes their existence to the public and is beholden to the public."

$18.5M lawsuit

One company — Canada Forgings Inc., or CanForge — has gone to court alleging that AECL sourced a contract "without giving [CanForge] a chance to bid." CanForge, a supplier of custom forged metal products, specifically alleges it was excluded from a 2004 bid worth more than $10 million in favour of a competitor. The contract was for producing components for two nuclear reactors at the Bruce power plant in Ontario. 

CanForge's $18.5-million lawsuit claims AECL did not follow proper tendering processes and instead went directly to a CanForge competitor, even though the competitor had a higher price.  

A 2010 affidavit from the lawsuit also alleges that AECL terminated two of its own senior procurement employees for misconduct. "We understand that the cause of their termination was the discovery of improper conduct on their part," reads the affidavit, sworn by a lawyer representing CanForge.

Scott Naar, CanForge's vice-president, told CBC News that since he learned of the Deloitte investigation, he has asked to see it, but his requests have been turned down.  

"As a taxpayer and as a corporation that pays taxes, I am very disturbed. The government and its Crown corporations are supposed to be transparent in what they do," Naar said.

AECL declined all requests from CBC News to be interviewed, saying all matters are the subject of litigation.

The company's statement of defence in the CanForge lawsuit affirms that it had no knowledge of the allegation that a CanForge competitor was unfairly favoured.

The lawsuit's allegations have not been proven in court.

More oversight called for

The office of Natural Resources Minister Joe Oliver, who is responsible for AECL, also declined to answer questions or to make the Deloitte report available. A spokesperson said, "AECL is an independent Crown corporation and it's their decision to whether or not it can release the report."

Former senior civil servant Williams said he believes there is a lack of supervision of procurement work at Crown corporations such as AECL.

"Procurement is a very complex business, and it's very easy to fall prey to temptation," he said. "There ought to be a much more oversight so everything is open fair and transparent."

The procurement department that was investigated is no longer a government entity. The federal government sold AECL's Candu reactor business to Montreal-based engineering giant SNC-Lavalin in June 2011 for $15 million.

If you have more information on this story, or other investigative tips to pass on, please email investigations@cbc.ca