Deconstructing the Mike Duffy affair

What’s this? Two blog posts in one day? I know, crazy.

I’ve been following this Mike Duffy scandal at a relatively high level but finally read the Deloitte report on the matter.  I have some faith in the ability of external auditors to report their finding faithfully.  Now that I’ve said that, I should qualify that I’m not expressing a professional opinion on the details in the report, since I haven’t seen any of the source documents.  Everything in this blog entry is speculation on my part based on what’s in the report.

From what I can tell from the report, Deloitte cannot conclude on what Mike Duffy’s “primary residence” is, since such term is not defined anywhere.  If Deloitte can’t figure it out, I don’t blame Duffy for confusion in interpreting this.  They have prepared their report based on his “Declared Primary Residence” being interpreted as his “primary residence” under the rules for Senate expenses.  That “Declared Primary Residence” is of course his home in Prince Edward Island, the province he purportedly represents.

Put simply, their report found that, on the assumption his PEI home was his primary residence, all of his expenses from April 1, 2011 to September 30, 2012 were more or less valid – that they actually did occur, and that they match the whereabouts he claimed to have.  They even have a very detailed calendar showing what city he was in and why – they were able to piece together the vast majority of dates over the period they were looking at.  There were a number of dates that could not be accounted for, but there doesn’t appear to be any connection between these dates and the expenses claimed – at least they haven’t explicitly said this was the case.  There was one notable exception – Duffy claimed $1,050.60 of per diem expenses for his time spent on vacation in Florida in January 2012, which he agreed was an error and blamed on a “temporary worker” in his office while his regular staff person was on mat leave.  His exact quote is in the report:

“Following our informal conversation, Tuesday evening, I went through my files for January 2012. I discovered that through a clerical error, per diems were inadvertently charged for several days when I was not in the National Capital Region. My regular staff person was away on maternity leave and a temporary worker processed that claim. This claim was clearly not appropriate, and I will reimburse The Senate without hesitation.”

Seems reasonable enough.  It certainly doesn’t vindicate him, but clerical errors do happen, particularly when someone temporary is filling in.  Here’s the funny part though – that admission came on April 18, 2013.  Almost two full months after this:

We [Deloitte] have received documentation from Senator Duffy’s counsel indicating that Senator Duffy has repaid $90,172.24 related to housing allowances, represented by a total expense amount of $81,332.54 for the 2008/2009 to 2012/2013 fiscal years, plus $8,839.70 in interest. The amount of repayment was based on a calculation provided to Senator Duffy by the Senate Standing Committee on Internal Economy, Budgets and Administration as outlined in a letter dated February 27, 2013 signed by Senator Tkachuk.

For the period of our examination, the amount of expenses repaid was $19,989.58 for the 2011/2012 fiscal year, and $17,126.12 for the 2012/2013 fiscal year (representing a longer period than our examination period which ends on September 30, 2012).

Deloitte was not involved in the determination of the amount that was repaid by Senator Duffy.

[Emphasis mine]

So Duffy’s counsel provided documentation to Deloitte that Duffy would be paying back $90,172 in February 2013, with no explicit admission of error.  Duffy then admitted two months later to a $1,051 error which he agreed he would repay.

I think the big question we’re missing here is: if Duffy believes he only owed back $1,051, and Deloitte only has enough evidence to show he owed back $1,051 (with a million qualifications to suggest he could owe more but they don’t have enough information), why did he (or as we’ve since learned, Nigel Wright) pay back $90,172?

There are only two plausible explanations I can think of.

Explanation 1 – Duffy and/or Wright wanted to make things go away.  In theory, if the full amount was repaid, then Duffy was never paid any expenses and there’s no need to perform any audits. It could simply have been a way to make the auditors go away – Deloitte asked for bank statements and an interview with Duffy and were denied, and Duffy may simply not have wanted to deal with the hassle.  Giving him the benefit of the doubt, it may have just been easier for him not to deal with them, even if he had nothing to hide. In the worst case, there may have been other skeletons in the closet he (or someone else) didn’t want seen – who knows what went into or out of his bank account.  That said, it should also be noted that it was the Senate sub-committee, not Duffy, that prevented a meeting with Deloitte. In Deloitte’s words: “We understand that the Senate sub-committee notified Senator Duffy that it had agreed Senator Duffy’s offer to meet with Deloitte would delay the process, and that the sub-committee agreed that there should be no further delays in the process.”

Explanation 2 – Duffy’s “primary residence” is not actually in Prince Edward Island.  If this is the case, all his housing expenses in Ottawa and per diems for travel to Ottawa, not just the inadvertently-charged trip to Florida, were invalid.  This is possible – Deloitte noted in its report that all of Duffy’s trips were from Ottawa to PEI and back, not from PEI to Ottawa and back.  They made no conclusions about his “primary residence” because the term isn’t clearly defined – but if Duffy or Wright concluded that, in fact, Duffy’s “primary residence” was not in PEI, then the repayment of the expenses could be an admission of this.  But the problem is this brings up more troubling concerns.  If Duffy’s “primary residence” is in Ottawa, does that mean he is not “resident” in PEI? The fact that he has declared on his tax return that he is a resident somewhere else (this is also in the Deloitte report) and has a health card from some province that is not PEI suggests he might not be.  Granted, every act in Canada has a different definition of “resident,” and this term is interpreted by courts in many ways, but I don’t think the definitions are all that different.  And it would be very difficult to imagine that The Travel Guidelines and the Travel Policy of the Senate of Canada would have a definition of residence that differs materially from the definition of “resident” in the portion of the constitution that relates to the Senate.  So, if he’s not resident in PEI, this causes a much, much, bigger problem.  Subsection 23(5) of the Constitution (yes, the Constitution) requires that a Senator “shall be resident in the Province for which he is appointed.”  If Mike Duffy is not resident in PEI, his appointment as senator is in direct violation of the constitution.

In sum – no one has concluded that Duffy actually owed $90,172 and no one has publicly forced him to pay it back.  This payment, regardless of who made it, may have been a way to chase away the auditors to have them stop asking questions, or it may have been an inadvertent admission that he is not actually resident in PEI.  Neither looks very good on him, or the Prime Minister responsible for appointing him.

I think the answers – or at least clues to them – are in a few key documents mentioned in the Deloitte report – and I suspect that when or if these surface, they will contain some answers to the questions everyone has about this:

  • Deloitte “have received documentation from Senator Duffy’s counsel indicating that Senator Duffy has repaid $90,172.24 related to housing allowances, represented by a total expense amount of $81,332.54 for the 2008/2009 to 2012/2013 fiscal years, plus $8,839.70 in interest. The amount of repayment was based on a calculation provided to Senator Duffy by the Senate Standing Committee on Internal Economy, Budgets and Administration as outlined in a letter dated February 27, 2013 signed by Senator Tkachuk.” [emphasis mine]
  • “Senator Duffy, through his counsel, has provided a letter he wrote to Senator Tkachuk, dated April 18, 2013,” which was excerpted above regarding the $1,050.60 error.

These three documents seem to provide some of the missing pieces.  As letters to and from Senators, are these not ultimately public documents? And if Duffy has nothing to apologise for, as he now asserts, why won’t anyone release them?

Update: May 23, 2013, 11:30 AM Pacific time

Aaron Wherry at Maclean’s managed to get an interview with Senator Tkachuk, who is named multiple times in the Deloitte report on Duffy. Unfortunately, like the rest of the media, he still hasn’t asked some of the key questions I’ve noted above (such as why Duffy paid the full amount back rather than just the $1,050 – Senator Tkachuk received a letter dated February 27, 2013 on this matter so he would have had some more insight than he provided. But they did discuss one thing. I’ll quote it exactly:

Q: It also seems to be the case that Senator Duffy stopped cooperating with the auditors after he made the payment. Did that bother you then? Does it bother you now?

A: He never cooperated with them before either.

Q: Okay.

A: He didn’t cooperate with them at all.

Q: Does that bother you?

A: No. It’s his right to do that. He doesn’t have to talk to them. We don’t live in a police state.

Q: Would it bother you if his not cooperating in some way linked to his agreement with Nigel Wright?

A: You know what I think? He paid the money. He said, that’s it. Here’s the money, I don’t owe any money, I’ve paid it back for four years. I don’t know what he was thinking, you’d have to talk to Mike about that. I don’t know what he was thinking, but that didn’t bother me too much at all. I would have liked him to cooperate, but he didn’t. Although when I did ask him to send a letter, he did cooperate. I said he was in trouble.

Most of the holes in the Deloitte report are explicitly noted as being a result of not being able to meet with Duffy to confirm specific information.  But Duffy did offer to meet with them — albeit much later in the process.  The exact quote from the Deloitte report:

On April 20, 2013, we received an email from Senator Duffy’s counsel attaching a copy of a letter from
Senator Duffy to Senator Tkachuk, wherein Senator Duffy offers to meet with the Senate or Deloitte,
among other things. We understand that the Senate sub-committee notified Senator Duffy that it had
agreed Senator Duffy’s offer to meet with Deloitte would delay the process, and that the sub-committee
agreed that there should be no further delays in the process.

So, whether Tkachuk himself decided Duffy should not meet with Deloitte, or if the committee outvoted him on the manner, he knows full well that Duffy agreed to cooperate with the auditors and Duffy’s offer was turned down by the committee of which Tkachuk is the chair.  Someone is not telling the truth here.

Either way, today’s Conservative talking point seems to be that Duffy should resign.  This interview Tkachuk provided seems to suggest he doesn’t like Duffy much either, and that Duffy is somewhat to blame for all of this. Duffy insists his “expenses do not merit criticism.”  I’m beginning to believe Duffy – and can’t figure out what the remaining Conservative senators are trying to achieve by scapegoating him.

Further update:

CBC found the letters.  

So the series of events was:

  • February 22, 2013, Duffy wrote to say “it turns out I may have been mistaken” with respect to claims for housing allowances. Not an admission he’s not resident in Ottawa, but that he’s really truly not sure, and that the rules are ambiguous.  He says he intends to repay the housing allowance collected to date and asks for the total amount to repay.
  • February 27, 2013, Tkachuk replies with a schedule totalling $90,172.24 including interest – this is the letter referenced in the Deloitte report.  Tkachuk neither confirms nor denies Duffy’s assessment of whether or not he was in compliance.  There is then a two-month gap before the next letter, and no information on whether Duffy actually repaid anything.
  • April 18, 2013, Duffy confirms consistent with the Deloitte report that he acknowledges an overpayment of per diems for January 2012.  These are, apparently, over and above his housing allowances, and he offers to reimburse without hesitation. Then, most importantly, he says “I will be happy to appear before your committee or sub-committee or auditors from Deloitte, to respond to questions on this, or questions about my residency in PEI.”
  • April 25, 2013, a week later. Tkachuk wrote Duffy back, lambastes him for refusing to meet with Deloitte before, says “your offer to meet with Deloitte stands to delay the process. Steering has determined that there should be no further delays and is of the opinion that your concerns should have been addressed to Deloitte before the preparation of the report.”  Which is unusual, since Deloitte’s report is dated May 7, 2013 – the report was not “prepared” on April 25, 2013, and Duffy would have been able to provide insight into most of the missing pieces.

If I had to speculate, I would guess that Duffy was actually not cooperative at first, and when he realised the matter was serious he offered to help figure things out.  This is hardly becoming behaviour of a senator, but Tkachuk’s refusal to allow him to speak with them – when it was Deloitte requesting this, not Duffy – is suspicious.  Did Duffy’s February 22 letter imply he wasn’t actually a PEI resident, which has Tkachuk worried about whether Duffy is constitutionally allowed to be a PEI senator? And was there a concern that talking to Deloitte would reveal this? If so, this falls right back into the PMO – Harper appointed Duffy, and if doing so violated the constitution, his caucus members have everything to gain by protecting this information.

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One response to this post.

  1. I also haven’t commented on the Nigel Wright involvement, since there is much less information about this. There are really, again, only two plausible explanations, neither of which looks very good. Either he was helping out a friend in one of the two uncomfortable situations described above, as was initially claimed, or more nefariously was involved in simply providing a bribe to a parliamentarian. What other possible explanation could there be for his involvement?

    Reply

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