A Review of Payments to Paul Rich and Edgar Branton

Transcription

1 A Review of Payments to Paul Rich and Edgar Branton

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3 Table of Contents INTRODUCTION AND BACKGROUND 3 SCOPE 5 EXECUTIVE SUMMARY 7 CONCLUSIONS 15 DETAILED FINDINGS Paul Rich 2. Edgar Branton 3. Other Observations on IDLP Practices and Controls APPENDICIES A. Cheques Paid, Expenditure Categories and A/R Balance - Paul Rich 91 B. Listing of Cheques Paid and Cashed - Paul Rich 93 C. Copies of Cheques Paid and Cashed - Paul Rich 101 D. Cheques Paid, Expenditure Categories and Total Benefit - Edgar Branton 539 E. Listing of Cheques Paid and Cashed - Edgar Branton 541 F. Copies of Cheques Paid and Cashed - Edgar Branton 545 G. Examples of Inadequate Documentation - Paul Rich 805 H. Examples of Inadequate Documentation - Edgar Branton 845 Page 1

4 Table of Contents 2

5 INTRODUCTION AND BACKGROUND

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7 Introduction and Background The Innu Development Limited Partnership (IDLP) was formed 1 April 1998 pursuant to a Memorandum of Understanding between the Mushuau Innu First Nation and the Sheshatshiu First Nation. The partnership was registered as a limited partnership under the Limited Partnership Act of Newfoundland on 2 March The business of the partnership consists of pursuing business ventures, partnerships, joint ventures and enterprises in Labrador or elsewhere for the benefit on Innu members of the Mushuau Innu First Nation and the Sheshatshiu First Nation. At 31 October 2013, IDLP had entered into 8 partnership arrangements as outlined in Table 1. Table 1 Partnerships As at 31 October 2013 Partnership Name % Owned by IDLP Start Date Labrador Catering Limited Partnership 51% 20 March 1998 Innu SNC- Lavalin Limited Partnership 51% 28 October 2008 Innu-Shaw Accommodations Limited Partnership 51% 31 August 2011 Innu Mikun Limited Partnership 51% 24 July 2000 Innu-Municipal Limited Partnership 51% 13 April 2009 Innu Rail Limited Partnership 51% 6 October 2009 Innu Kiewit Constructors 50% 10 April 2001 Katsheshuk Fisheries Limited 25% 9 August 2000 Source: IDLP Co-CEOs In addition to the limited partnerships, as at 31 October 2013 IDLP had two wholly owned subsidiaries as outlined in Table 2. 3

8 Introduction and Background Table 2 IDLP - Wholly Owned Subsidiaries As at 31 October 2013 Entity Name % Owned by IDLP Start Date Ueushuk Fisheries Limited 100% 3 February 2000 IDLP Properties Limited Partnership 100% 5 December 2002 Source: IDLP Co-CEOs On 3 October 2013, I was engaged by the Board of the Innu Development Limited Partnership (IDLP) to undertake a review of remuneration (including regular salary, bonuses, and incentives) and any other amounts paid through either the IDLP or any of the partnership entities to Paul Rich, former Chief Executive Officer (CEO) and Edgar Branton, former Chief Financial Officer (CFO) for the 5 fiscal years 2008, 2009, 2010, 2011 and 2012 along with the 3 month Stub Period (1 April to 30 June 2012). The employment of Paul Rich and Edgar Branton was terminated on 29 June

9 SCOPE

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11 Scope We commenced the review in October 2013 and completed our work in January We identified all payments made to and/or on behalf of Paul Rich and Edgar Branton based on a review of documentation (e.g. supplier invoices and statements, bank records, Board minutes, and correspondence), electronic records (e.g. Simply Accounting general ledger and payroll files, and s) made available to us by IDLP staff and electronic records (e.g. Simply Accounting general ledger and payroll files) made available to us by IDLP s external auditors. In addition, on 30 October 2013, the 8 limited partnership partners and 2 wholly owned subsidiaries were requested to provide the following information: All payments made directly to either of the individuals (including date, cheque number and purpose of the payment); All payments made on behalf of either of the individuals (including payee, payment method and purpose of the payment); All loans made to either of the individuals (including date, loan amount, repayment terms and current balance); All amounts written-off for either of the individuals (including the date and reason for write-off); and If no payments (either directly or on behalf of these individuals) were ever made, if no loans were ever issued for these individuals or if there have been no amounts written-off for these individuals, please clearly state that to be the case. In the case of remuneration, bonuses and incentives paid to the two individuals, we checked employment contracts and Board Minutes for evidence of approval. 5

12 Scope 6

13 EXECUTIVE SUMMARY

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15 Executive Summary The employment of Paul Rich, CEO and Edgar Branton, CFO was terminated on 29 June On 3 October 2013, I was engaged by the Board of the Innu Development Limited Partnership (IDLP) to undertake a review of remuneration (including regular salary, bonuses, and incentives) and any other amounts paid through either the IDLP or any of the partnership entities to Paul Rich, former CEO and Edgar Branton, former CFO for the 5 fiscal years 2008, 2009, 2010, 2011 and 2012 along with the 3 month Stub Period (1 April to 30 June 2012). The review identified that Paul Rich and Edgar Branton both received remuneration in excess of what was authorized by the Board of IDLP. The evidence available at IDLP indicates that Paul Rich and Edgar Branton took full advantage of the lack of Board oversight by taking excessive salaries, bonuses and incentives. As is so often the case, it seems as though Paul Rich and Edgar Branton did what they did because they could! Paul Rich There were no signed employment contracts on file for Paul Rich; however, there were a number of unsigned employment contracts with annual salary ranging from $65,000 in 2006, $87,599 for and $125,000 in We found that Paul Rich received total remuneration well in excess of these salary levels. Table 3 helps to put the magnitude of the excessive remuneration provided to Paul Rich into perspective: Table 3 Total Compensation Paul Rich Fiscal Years along with Stub Period Fiscal Year IDLP Salary Ueushuk Salary Bonus Incentive Total Compensation Annual % Increase , , , , , , % , , , % , , , , % , , , , , % Stub Period 35, , , , Total $728, $85, $632, $37, $1,483, Salary $813,

16 Executive Summary As Table 3 shows, Paul Rich s total compensation increased significantly each year with the most substantial increases occurring in fiscal years 2011 (105.7% increase in compensation from 2010) and 2012 (88.2% increase in compensation from 2011). Paul Rich received bonuses totalling $466, in fiscal years 2011 and It was also in fiscal years 2011 and 2012 that Paul Rich was paid a salary by Ueushuk Fisheries a wholly owned subsidiary of IDLP and operated out of the St. John s office by Edgar Branton. In 7 instances during fiscal years 2011 and 2012, Paul Rich s monthly compensation was $50,000 or greater. In particular, Paul Rich s compensation in April 2011 was $69,615.38, in December 2011 it was $95, and in February 2012 it was $80, The excess was significant and increasing. IDLP officials could not provide any evidence of Board authorization for the excessive salary and bonuses or the incentives. In addition to Paul Rich s compensation, as at 30 June 2012, he owed IDLP $53, related to employee loan advances. During the five fiscal years 2008 to 2012 and the stub period 1 April 2012 to 30 June 2012, Paul Rich received and cashed cheques totalling $1,868, from IDLP, IDLP Properties and Ueushuk Fisheries. Of the cheques totalling $1,868,987.97, $1,348, ($1,483, less deductions of $135,347.00) related to remuneration and the balance of $520, related to other expenses such as travel, entertainment, and vehicle mileage. A summary of the cheques issued by entity and by fiscal year for Paul Rich are detailed in Appendix A while a complete listing of cheque numbers, dates and amounts is included in Appendix B. A copy of each cheque paid to Paul Rich is included in Appendix C. There was no adequate supporting documentation for many of the bonuses, overtime, incentives, and claims for travel and CEO expense claimed by Paul Rich. The common modus operandi for support for many of the amounts paid to Paul Rich was for Edgar Branton to either make a note to the effect as per Paul Rich or the IDLP staff to indicate as per Edgar. Examples of the type of inadequate support totalling $398, can be found in Appendix G. 8

17 Executive Summary In addition to the excessive remuneration and lack of supporting documentation for many of the bonuses, overtime and incentives and claims made by Paul Rich, there were numerous issues identified with the expense claims made by Paul Rich. The following examples were identified from the documentation available at IDLP for the 2011 and 2012 fiscal years and the stub period (1 April 30 June 2012). IDLP officials could not locate files for Paul Rich for fiscal years 2008, 2009 and Issues identified are as follows: In July 2010 Paul Rich claimed $3, related to 27 days per day when an employee of IDLP (Fred Hall) stayed at Paul Rich s house; Paul Rich made claims totalling $5, for kilometers travelled without adequate explanation comprised of $1, (46 additional and $3, (7 trips with no dates identified); Paul Rich claimed $38, in instances where only either, the personal credit card statement of Paul Rich or his spouse Angela Rich, or their on-line personal banking transaction report was used as support for an expense claim; Paul Rich claimed $3, relating to 3, litres of fuel from Ultramar many of the purchases were for fuel in excess of his vehicle s fuel capacity; Paul Rich claimed $4, relating to charges at Woodward s Oil; however, there was no indication of what was purchased; Paul Rich claimed numerous restaurant charges without any indication of the purpose of the meeting or who was in attendance the total of all claims for some of the more frequented restaurants included: Hotel North - $1,664.35, Maxwell s - $1,507.03, The Keg Montreal , Hong Kong Restaurant - $ and St. Hubert - $530.31; There were several instances where Paul Rich purchased and claimed such items as cigarettes - $32.07, lotto tickets - $30.00, spa (massage therapy) - $183.92; There were examples where hotel bills included charges for in room movies and room service even though the full per diem was claimed; and Conflict of interest IDLP made loan advances to Michel Rich (Paul Rich s brother) resulting in an amount of $10, owing to IDLP as at 30 June

18 Executive Summary Edgar Branton There were no signed employment contracts on file; however, there was an unsigned employment contract that referred to a $25,000 salary for We found that Edgar Branton received total remuneration well in excess of that salary level. Table 4 helps put the magnitude of the excessive remuneration provided to Edgar Branton into perspective: Table 4 Total Compensation Edgar Branton Fiscal Years along with Stub Period Fiscal Year IDLP Salary Ueushuk Salary Bonus Incentive Total Compensation Annual % Increase , , , , , , % , , % , , , , % , , , , % Stub Period 36, , , Total $570, $118, $28, $0.00 $717, Salary $689, As Table 4 shows, Edgar Branton`s total compensation increased significantly each year with the most substantial increases occurring in fiscal years 2011 (73.4% increase in compensation from 2010) and 2012 (35.0% increase in compensation from 2011). IDLP officials could not provide any evidence of Board authorization for the excessive salary and bonuses. During the period Edgar Branton received and cashed cheques totalling $541, from IDLP, IDLP Properties and Ueushuk Fisheries. Of the cheques totalling $541,905.06, $503, ($717, less deductions of $213,641.55) related to remuneration and the balance of $38, related to other expenses such as travel, entertainment, and vehicle mileage. A summary of the cheques issued by entity and by fiscal year for Edgar Branton are detailed in Appendix D while a complete listing of cheque numbers, dates and amounts is included in Appendix E. A copy of each cheque paid to Edgar Branton is included in Appendix F. 10

19 Executive Summary There was no adequate supporting documentation for many of the bonuses, overtime, vacation pay and claims for travel and other expenses. The common modus operandi for support for many of the amounts paid to Edgar Branton was for Edgar Branton to either make a note to the effect as per Paul Rich or the IDLP staff to indicate as per Edgar. Examples of the type of inadequate support totalling $195, can be found in Appendix H. In addition to the excessive remuneration and lack of supporting documentation for many of the bonuses, overtime, vacation pay and claims for travel and other expenses made by Edgar Branton, there were numerous issues identified with the expense claims made by Edgar Branton. Issues identified are as follows: Edgar Branton claimed a total of $5, for restaurant charges. The majority of the restaurant charges were incurred Friday and Saturday evenings at the Red Rock Bar & Grill (previously called My Brother s Place). There were no details as to who attended or the purpose of the meeting. There were examples of remuneration provided to Edgar Branton by IDLP which were not included on his T4 - Statement of Remuneration Paid. Fiscal Cheque #9649 dated 29 January 2008 $1,500.00; Fiscal Cheque #13253 dated 23 July 2010 $2,500.00; and - Cheque #13673 dated 14 December 2010 in the amount of $10, (gross pay $15, less deductions of $5, for net pay of $10,000.00). Cheque # dated 26 August 2010 for $ was noted as to create petty cash fund ; however, in January 2014 officials at Ueushuk Fisheries indicated that the petty cash fund is $ Cheque # dated 28 September 2009 included a double billing re: My Brother s Place restaurant. Edgar Branton claimed $75.56 and also $89.56 the same $75.56 bill with a $14 Tip. On 10 September 2010, Edgar Branton claimed a charge of $61.53 for Golden Phoenix restaurant at 2:58 PM and at basically the same time 2:57 PM claimed a charge of $43.99 for Red Rock Bar & Grill. It is difficult to determine how Edgar Branton could be in two different places at the same time. 11

20 Executive Summary There was a charge on the Ueushuk VISA card relating to a wheelchair purchased for Edgar Branton. The total was $6, comprised of two separate amounts - $ on 6 October 2010 and $5, on 26 October There was an from Edgar Branton to Paul Rich on 4 May 2011 asking Paul to confirm that he had approved the wheelchair purchase. Paul Rich responded I authorize edgar branton to use our company visa totalling 6000 towards repairs for his wheelchair. Conflict of interest - Payments totalling $7, were made to Rose Branton (Edgar Branton s wife) from IDLP and Ueushuk during the fiscal years 2009, 2010, 2011 and Support for the payments was, for the most part, a notation on a piece of paper and approved by Edgar Branton there was no other authority or approval for the payments. Edgar Branton used IDLP VISA reward points for personal purposes. The VISA statement, for the period June 4 to July 4, 2011, indicated that 48,000 RBC reward points were redeemed by Edgar Branton. Upon enquiry, we determined that the reward points were redeemed by Edgar Branton on June 19, 2011 for the purchase of 4 - $100 gift certificates for Future Shop. The gift certificates were mailed directly to Desmond Smith. IDLP Controls The following observations are made as a by-product of the review of amounts paid to Paul Rich and Edgar Branton. Generally, IDLP did not adhere to sound financial management practices with regards to the completion, filing and organization of adequate supporting documentation and accurate accounting records. In particular: To facilitate sound management, monitoring and decision making it would be expected that the Co-CEOs at IDLP would be provided with monthly financial management reports showing actual revenues and expenditures relative to budgets and cash flow projections relative to bank balances with explanations of all significant variances. However, the Co- CEOs are not being provided with the financial information necessary to support them in the discharge of their financial oversight responsibilities; Signed blank cheques were routinely sent to the St. John s office where Edgar Branton was then able to fill in particulars such as the payee and amount and then issue the cheque; 12

21 Executive Summary Although IDLP has an Personnel Policies and Procedures Guide which was issued in 2005 and contains direction for staff to follow regarding such items as travel and leave, IDLP officials aren t enforcing many of the provisions of the Guide and, as a result, employees do not properly complete such things as travel claims and leave slips; there were numerous instances where supporting documentation for expenditures was not available to determine the legitimacy of certain expenditure claims; supporting documentation (receipts) were not matched and filed with VISA statements; the filing system was not well organized and many filing errors were discovered; although the accounting system Simply Accounting was maintained to record cheques and deposits, the external auditors had to make a significant number of adjustments to the records during the annual year-end audit; there were no signed employee contracts on file; Although staff use a Travel Expense Sheet to claim per diems, vehicle mileage to and from the airport, accommodations and other expenses, the Travel Expense Sheet is not matched with any travel expenditures such as airline tickets, hotel bills and rental vehicle costs. As a result, there is no reasonable way to gather information on each business trip to determine total costs and whether there are duplicate claims for such things as meals; Although a Miscellaneous Expense Claim Form is used to get reimbursed for such things as fuel, meals and meeting expenses, there are no details provided as to the validity of fuel claims, the purpose of the meetings or who was being entertained at the meals. Generally, there was very little explanation as to why expenses being claimed were legitimate business expenses; and 13

22 Executive Summary Minutes of Board meetings were not always recorded. Without complete accurate Board minutes, it is difficult to establish whether certain activities (e.g. bonuses and incentives) were appropriately authorized. Furthermore, minutes of Board that were kept were not signed and were incomplete (e.g. no acceptance of previous minutes). JOHN L. NOSEWORTHY, CA 14

23 CONCLUSIONS

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25 Conclusions I recommend that IDLP contact police authorities with a view to having a determination made as to whether the activities detailed in this report related to Paul Rich and Edgar Branton constitute criminal activity. IDLP should consider the weaknesses identified in controls at IDLP with a view to taking corrective action to strengthen current practices. 15

26 Conclusions 16

27 DETAILED FINDINGS

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29 Adequate internal control procedures require that there be an audit trail to trace all revenue and expenditure transactions and that there be adequate supporting documentation to support the transactions. In that regard, IDLP officials indicated that they keep files on each supplier and employee by year and all documentation to support transactions is required to be filed in each file. However, we identified a number of significant matters that had an impact on the scope of our work. Generally, IDLP did not adhere to sound financial management practices with regards to the completion, filing and organization of adequate supporting documentation. We observed that internal controls at IDLP were deficient, there were significant deficiencies with regards to documentation to support expenditures at IDLP and, as a result of the lack of documentation, in many instances there was no clear audit trail. In particular, there were numerous instances where documentation required to support a disbursement was not on file, the filing system was not well organized and many filing errors were discovered and, although the accounting system Simply Accounting was maintained to record cheques and deposits, the external auditors had to make a significant number of adjustments to the records during the annual year-end audit. To illustrate: When we commenced our review, there were no bank statements or cancelled cheques on file for the general IDLP bank account for July 2007, and March and April Eventually, we were provided with the three bank statements and cancelled cheques for March and April 2008; however, IDLP officials could not locate the cancelled cheques for July In that July 2007 period there were 6 cheques totalling $10, relating to Paul Rich and 3 cheques totalling $5, relating to Edgar Branton in those 9 instances the cheque number and amount was agreed to the bank statement. As a result, we were able to identify all cheques paid to and cashed by Paul Rich and Edgar Branton during the period reviewed. Files, which would include supporting documentation for expenditure transactions, are required to be kept each year for each staff person at IDLP. We found the following: IDLP officials could not locate files for Paul Rich for fiscal years 2008, 2009 and It seems most unusual that required files for the very person being reviewed were not available. IDLP officials could not provide any explanation as to why the files could not be located. IDLP officials did inform us that those files were kept at the Ueushuk Office in St. John s the Office from where Edgar Branton worked. IDLP officials also indicated that Edgar Branton had access to all files for a number of days subsequent to his termination of employment on 29 June

30 With regards to Edgar Branton, the file for the fiscal year 2009 could not be located when we first requested it; however, it was subsequently located by IDLP officials and provided to us. If accounting records are kept up-to-date and accurate, external auditors are required to make only a few adjustments e.g. allowance for bad debts, accruing the audit fee and other routine matters there is no need for a significant number of adjusting journal entries. The external auditors had to make a significant number of year-end adjusting journal entries to the IDLP accounting system as follows: ($19.5 million); ($12.8 million); ($7.3 million); ($11.6 million) and 2012 [audit not completed as at January 2014]. Supporting documentation (receipts) were not matched and filed with VISA statements. Instead, VISA receipts were placed, unorganized, in a file folder. Upon request, IDLP staff attempted to match the receipts with the VISA statements; however, there were no receipts located for the majority of the charges on the VISA statements. This is an unacceptable situation from a management control perspective and highlights the weakness in recording keeping at IDLP. In addition to not having all supporting documentation on file, there were numerous instances where documents were filed in incorrect supplier statement files. Although staff use a Travel Expense Sheet to claim per diems, vehicle mileage to and from the airport, accommodations and other expenses, the Travel Expense Sheet is not matched with any travel expenditures such as airline tickets, hotel bills and rental vehicle costs. As a result, there is no reasonable way to gather information on each business trip to determine total costs and whether there are duplicate claims for such things as meals. Although a Miscellaneous Expense Claim Form is used to get reimbursed for such things as fuel, meals and meeting expenses, there are no details provided as to the validity of fuel claims, the purpose of the meetings or who was being entertained at the meals. Generally, there is very little explanation as to why expenses being claimed are legitimate business expenses. 18

31 In addition to these documentation issues, we also found the following: Minutes of Board meetings were not always recorded. Without complete accurate Board minutes, it is difficult to establish whether certain activities (e.g. bonuses and incentives) were appropriately authorized. Furthermore, minutes of Board meetings that were kept were not signed and were incomplete (e.g. no acceptance of previous minutes). There were no signed employment contracts on file for either Paul Rich or Edgar Branton; however, unsigned employment contracts were located. Employment contracts normally include such things as an employee s duties, responsibilities, hours of work and expectations for performance along with details of the employee s salary, benefits, and any other entitlements. We completed our review of remuneration (including regular salary, bonuses, incentives and any other amounts paid through either the IDLP or any of the partnership entities) to Paul Rich, former CEO and Edgar Branton, former CFO for the 5 fiscal years 2008, 2009, 2010, 2011, 2012 along with the 3 month Stub Period (1 April to 30 June 2012). The employment of Paul Rich and Edgar Branton was terminated on 29 June The detailed findings are presented for each individual as follows: 1. Paul Rich We reviewed all payments made to or on behalf of Paul Rich for the 5 fiscal years 2008, 2009, 2010, 2011 and 2012 along with the 3 month stub period (1 April to 30 June 2012). We found the following: During the period Paul Rich received and cashed cheques totalling $1,868, from IDLP, IDLP Properties and Ueushuk Fisheries. A summary of the cheques issued by entity and by fiscal year for Paul Rich are detailed in Appendix A while a complete listing of cheque numbers, dates and amounts is included in Appendix B. A copy of each cheque paid to Paul Rich is included in Appendix C. Table 5 shows the cheques totalling $1,868, issued to Paul Rich, by entity, in each of the five fiscal years 2008, 2009, 2010, 2011, 2012 along with the Stub Period (1 April 30 June 2012). 19

32 Table 5 Cheques Issued to Paul Rich Fiscal Years along with Stub Period Fiscal Year IDLP Ueushuk Fisheries IDLP Properties Total Cheques % of Total , , % , , % , , % , , , , % , , , % Stub Period 75, , % Total $1,782, $85, $1, $1,868, % % of Total 95.4% 4.5%.1% 100% As Table 5 shows, of the cheques totalling $1,868, paid to Paul Rich during the five fiscal years 2008, 2009, 2010, 2011, 2012 and the Stub Period (1 April to 30 June 2012), $1,782, (95.4%) of all cheques paid to him were issued by IDLP, $85, (4.5%) were issued by Ueushuk Fisheries and $1, (.1%) was issued by IDLP Properties. Table 5 also shows that the dollar value of the cheques issued to Paul Rich escalated significantly in the 2011 and 2012 fiscal years. In fact, of the cheques totalling $1,868, paid to Paul Rich during the five fiscal years 2008 to 2012 and the stub period (1 April 2007 to 30 June 2012), $1,093, (58.5%) of all cheques were paid during the 2011 and 2012 fiscal years. It was also during the 2011 and 2012 fiscal years when cheques were issued by Ueushuk Fisheries to Paul Rich. Figure 1 depicts the total cheques paid to Paul Rich by fiscal years 2008, 2009, 2010, 2011, 2012 and the Stub Period (1 April to 30 June 2012). 20

33 Figure 1 Cheques Issued to Paul Rich Fiscal Years along with Stub Period Cheques Totalling $1,868,988 Paid to Paul Rich by Fiscal Years and the Stub Period 1 April - 30 June 2012 $700, $600, $500, $400, $300, $200, $100, $0.00 Stub Period As Figure 1 shows, there was a considerable escalation in cheques issued to Paul Rich during the 2011 and 2012 fiscal years. The cheques paid to Paul Rich are only part of the total benefit he received while at IDLP. In addition to the cheques totalling $1,868, issued to Paul Rich, there were payroll deductions totalling $135, which have to be added to get his gross pay and there were payments to third parties on Paul Rich s behalf totalling $40, These benefits totalling $2,044, have to be reduced by amounts totalling $155, Paul Rich paid on the loan advances resulting in total benefits of $1,888, Figure 2 depicts the total benefits Paul Rich received for each of the five fiscal years 2008, 2009, 2010, 2011, 2012 along with the stub period (1 April 2012 to 30 June 2012). 21

34 Figure 2 Total Benefits Provided to Paul Rich Fiscal Years along with Stub Period Benefits Totalling $1,888,929 Provided to Paul Rich for Fiscal Years and the Stub Period 1 April - 30 June 2012 $79,004 $169, $672,375 $310, $213, Stub Period 1 April 30 June $443,130 Table 6 outlines the total cheques paid to Paul Rich, expenditure categories, and the total benefits provided to Paul Rich for the five fiscal years 2008, 2009, 2010, 2011, 2012 along with the Stub Period (1 April to 30 June 2012). Table 6 also shows advances, payments and receivable balance by fiscal year for Paul Rich. As Table 6 shows, Paul Rich owed IDLP $53, as at 30 June 2012 related to employee loan advances. 22

35 Table 6 Cheques paid, Expenditure Categories and A/R Balance Paul Rich Fiscal Years along with Stub Period Wages Co-CEO & Loan Total Cheque Amount Gross Pay Deductions Net Pay Bonuses Incentive Payment Vehicle Milege CEO - 2 Other Advances Benefit Opening Balance IDLP , , , , , , , , Cheques to Paul Rich 139, , Paid on Behalf of Paul Rich 23, , Loan Repayments -15, , Loan Balance 21, P/R Deduction 169, Net Benefit IDLP , , , , , , , , Cheques to Paul Rich 293, , Paid on Behalf of Paul Rich 10, , Loan Repayments -14, , Loan Balance 21, P/R Deduction 310, Net Benefit IDLP , , , , , , , , Cheques to Paul Rich 267, , Paid on Behalf of Paul Rich 6, , Loan Repayments -90, , Loan Balance 30, P/R Deduction 213, Net Benefit IDLP , , , , , , , , Ueushuk , , , Properties , , Total , , , , , #VALUE! 7, , , , Cheques to Paul Rich 435, Paid on Behalf of Paul Rich , Loan Repayments -19, , Loan Balance 26, P/R Deduction 443, Net Benefit IDLP , , , , , , , , , Ueushuk , , , Total , , , , , , , , , Cheques to Paul Rich 657, Paid on Behalf of Paul Rich , Loan Repayments -13, , Loan Balance 27, P/R Deduction 672, Net Benefit IDLP Stub Period Apr -Jun $75, $35, $7, $27, $25, $17, $ $4, $ Cheques to Paul Rich 75, Paid on Behalf of Paul Rich , Loan Repayments -3, , Loan Balance 7, P/R Deduction 79, Net Benefit Grand Total $1,868, $813, $135, $678, $632, #VALUE! $14, $302, $33, $169, $1,888, The only reasonable way to check the validity of an expense claim submitted for reimbursement or support for a payment made to an individual is to check the supporting documentation for the transaction. IDLP officials indicated that they keep files on each supplier and employee by year and all documentation to support transactions is required to be filed in each file. Therefore, we requested the files for Paul Rich for the fiscal years 2008, 2009, 2010, 2011 and 2012 along with the Stub Period 1 April 30 June

36 However, IDLP officials could not locate files for Paul Rich for fiscal years 2008, 2009 and It seems most unusual that required files for the very person being reviewed were not available. IDLP officials could not provide any explanation as to why the files could not be located. IDLP officials did inform us that those files were kept at the Ueushuk Office in St. John s the Office where Edgar Branton worked from. IDLP officials also indicated that Edgar Branton had access to all files for a number of days subsequent to his termination of employment on 29 June As a result of the lack of supporting documentation for the fiscal years 2008, 2009 and 2010, the following observations are based on a review of the documentation provided for the fiscal years 2011 and 2012 along with the Stub Period 1 April 30 June 2012 and information taken from the Simply Accounting records at IDLP. Compensation Paul Rich, as an employee of the IDLP, would be subject to all rules of employment applicable to other IDLP staff. IDLP has a Personnel Policy and Procedures Guide which outlines such things as Conditions of Employment (e.g. hours of work, overtime and compensatory time, and various types of leave), Salary and Remuneration (e.g. pay period, pay scales, and vehicle allowance), and Travel (e.g. meals, accommodations and vehicle allowance). Furthermore, IDLP officials indicated that there were employment contracts for both the CEO (Paul Rich) and CFO (Edgar Branton). As a rule, the purpose of a written employment contract is to outline the rights, obligations and conditions of a person s employment. Provisions should be written in plain language, using terms which relate to the workplace and are easily understood. Employment contracts normally include such things as an employee s duties, responsibilities, hours of work and expectations for performance along with details of the employee s salary, benefits, and any other entitlements. We requested copies of employment contracts for Paul Rich; however, IDLP officials could not produce a signed copy. Table 7 outlines details of unsigned employment contracts that were available at IDLP: 24

37 Table 7 Unsigned Employment Contracts Paul Rich Fiscal Years along with Stub Period Year Salary Contract Details 17 January 2005 $65, Base Salary 1 Year Contract to 17 January 2006 Pay to The Employee an annual gross base salary (the Base Salary ) of $65,000. The Employee shall not be entitled to any further compensation for work undertaken and performed for the Employer. 11 October Year Contract to 11 October 2012 In particular, the Employee is not subject to the Overtime provisions of the Personnel Policy and Procedures Guidelines and shall not be entitled to compensation in excess of his base salary as a result of hours worked. $87,500 9 (a) Base Salary Pay to The Employee an annual gross base salary (the Base Salary ) of $87,500.00, which Base Salary shall be paid in bi-weekly installments in accordance with the Employer s standard payroll practice. The Employee shall not be entitled to any further compensation for work undertaken and performed for the Employer. In particular, the Employee is not subject to the Overtime provisions of the Personnel Policy and Procedures Guide and shall not be entitled to compensation in excess of his base salary as a result of hours worked $125,000 9(a) Base Salary Pay to The Employee an annual gross base salary (the Base Salary ) of $125,000.00, which Base Salary shall be paid in bi-weekly installments in accordance with the Employer s standard payroll practice. The Employee shall not be entitled to any further compensation for work undertaken and performed for the Employer. 25

38 Year Salary Contract Details In particular, the Employee is not subject to the Overtime provisions of the Personnel Policy and Procedures Guide and shall not be entitled to compensation in excess of his base salary as a result of hours worked. In addition the CEO cannot issue and approve a bonus for himself. Bonuses, if any, for the CEO, must be approved by the Board of Directors. As Table 7 shows, the three unsigned employment contracts relating to Paul Rich included the following clauses: The Employee shall not be entitled to any further compensation for work undertaken and performed for the Employer; and In particular, the Employee is not subject to the Overtime provisions of the Personnel Policy and Procedures Guide and shall not be entitled to compensation in excess of his base salary as a result of hours worked. In addition, the final contract 3 years to 11 October 2012 included the following clause: In addition the CEO cannot issue and approve a bonus for himself. Bonuses, if any, for the CEO, must be approved by the Board of Directors. Our review indicated that Paul Rich received salary well in excess of amounts stipulated in the unsigned employment contracts. Contrary to provisions identified in the unsigned employment contracts and without evidence of Board approval, Paul Rich received substantial bonuses, overtime, incentives and honorariums. Table 8 shows the total compensation of $1,483, (salary, bonuses, and incentives) provided to Paul Rich for fiscal years 2008, 2009, 2010, 2011, 2012 and the Stub Period (1 April 30 June 2012). 26

39 Table 8 Total Compensation Paul Rich Fiscal Years along with Stub Period Fiscal Year IDLP Salary Ueushuk Salary Bonus Incentive Total Compensation Annual % Increase , , , , , , % , , , % , , , , % , , , , , % Stub Period 35, , , , Total $728, $85, $632, $37, $1,483, Salary $813, As Table 8 shows, Paul Rich s total compensation increased significantly each year with the most substantial increases occurring in fiscal years 2011 (105.7% increase in compensation from 2010) and 2012 (88.2% increase in compensation from 2011). Table 9 provides a summary by month by year of all salary, bonuses, and incentives totalling $1,483, paid to Paul Rich for fiscal years 2008, 2009, 2010, 2011, 2012 and the Stub Period (1 April 30 June 2012). Table 9 Summary of Compensation by Month and Year Paul Rich Fiscal Years along with Stub Period Month and Year IDLP Salary Ueushuk Salary Bonus Incentive Total April , , May June 5, , July 11, , August 2, , September 5, , October 5, , November 5, , ,

40 Month and Year IDLP Salary Ueushuk Salary Bonus Incentive Total December 9, , , January , , , February 6, , March 9, , , Fiscal , , , April , , May 6, , , June 6, , , July 9, , , August 6, , September 6, , , October 6, , November 6, , December 10, , , January , , February 6, , March 8, , , Fiscal , , , April , , May 10, , , June 3, , July 10, , August 6, , September 6, , October 30, , November 10, , December 10, , , January , , February 7, , , March 14, , , Fiscal , , , April , , May 21, , , June 10, , July 16, , , August 4, , September 16, , , October 31, , , November 23, , December 14, , , , January , ,

41 Month and Year IDLP Salary Ueushuk Salary Bonus Incentive Total February 19, , March 9, , , Fiscal , , , , April , , , , May 24, , , June 15, , , July 10, , , August 10, , , September 15, , , October 25, , November 25, , , December 25, , , , , January , , , February 40, , , March 20, , , , Fiscal , , , , , April , , May 10, , , June 15, , , Stub Period 35, , , , Grand Total $728, $85, $632, $37, $1,483, As Table 9 shows, Paul Rich received compensation from IDLP and Ueushuk Fisheries. The payments from Ueushuk didn t start until the 2011 fiscal year. Table 9 also shows that there were substantial increases in salary, bonuses and incentives in the 2011 and 2012 fiscal years. In 7 instances during fiscal years 2011 and 2012, Paul Rich s monthly compensation was $50,000 or greater. In particular, Paul Rich s compensation in April 2011 was $69,615.38, in December 2011 it was $95, and in February 2012 it was $80, The excess was significant and increasing. Details of payments from each of the three remuneration categories (i.e. salary, bonuses and incentives) are outlined in the following sections: 1. Salary A review of all cheque payments to Paul Rich indicated that, during the 5 fiscal years 2008, 2009, 2010, 2011, 2012 along with the Stub Period (1 April 30 June 2012), Paul Rich received a total salary of $813, during that period. Table 10 provides details of the salary paid to Paul Rich by fiscal year and by entity. 29

42 Table 10 Salary by Year and Entity Paul Rich Fiscal Years along with Stub Period Fiscal Year Gross Salary Gross Salary Annual % Cumulative % Total Salary IDLP Ueushuk Increase Increase , , , , % 16.6% , , % 62.1% , , , % 175.9% , , , % 275.6% Stub Period 35, , Total $728, $85, $813, As Table 10 shows, Paul Rich received significant increases in salary each year. From fiscal 2008 to fiscal 2012, Paul Rich s salary increased by approximately 275% (from $75, in the fiscal year 2008 to $283, in the fiscal year 2012). Paul Rich had a 70.2% increase in salary during the 2011 fiscal year and a further 36.1% increase in the 2012 fiscal year. These salaries are significantly in excess of amounts identified in the unsigned employment contracts. IDLP officials could not provide any evidence of approvals for increases in Paul Rich s salary. Details of the salary cheques paid to Paul Rich from IDLP and Ueushuk Fisheries are outlined in Table 11: Table 11 Salary Cheques by Entity Paul Rich Fiscal Years along with Stub Period Cheque Payroll Gross Month Salary Date Number Amount Deductions Salary And Year Amount IDLP Fiscal /05/ , , /20/ , , April , /08/ , , /21/ , , June , /06/ , , /19/ , , , July , /06/ , , August , /14/ , , ,

43 Cheque Payroll Gross Month Salary Date Number Amount Deductions Salary And Year Amount 09/28/ , , , September , /12/ , , , /26/ , , , October , /07/ , , , /23/ , , , November , /07/ , , /14/ , , December , /18/ , , , /28/ , , , January , /15/ , , , /29/ , , February , /14/ , , /19/ , , /20/ , , March , Total Fiscal , , , , Fiscal /10/ , , /24/ , , April , /01/ , , , May , /04/ , , /19/ , , June , /02/ , , /16/ , , /17/ , , July , /15/ , , /28/ , , August , /12/ , , /26/ , , September , /10/ , , /23/ , , October , /06/ , , /21/ , , November , /02/ , , /16/ , , December , /15/ , , , /26/ , , , January , /10/ , , , /27/ , , , February , /05/ , , , /26/ , , , March ,

44 Cheque Payroll Gross Month Salary Date Number Amount Deductions Salary And Year Amount Total Fiscal , , , , Fiscal /09/ , , , /24/ , , , April , /08/ , , , /13/ , , , May , /19/ , , , June , /02/ , , , /14/ , , /16/ , , July , /13/ , , /25/ , , , August , /09/ , , /23/ , , , September , /06/ , , , /21/ , , , /26/ , , October , /03/ , , , /19/ , , , /20/ , , November , /04/ , , , /15/ , , , December , /15/ , , , /27/ , , , January , /11/ , , , /26/ , , , February , /09/ , , , /26/ , , , /31/ , , , /31/ , , , March , Total Fiscal , , , , Fiscal /05/ * 14, , /07/ , , , /20/ , , , May , /03/ , , , /17/ , , , June , /02/ , , , /16/ , , ,

45 Cheque Payroll Gross Month Salary Date Number Amount Deductions Salary And Year Amount 07/22/ , , , July , /27/ , , , August , /03/ , , /10/ , , , /24/ , , , September , /08/ , , , /19/ , , /22/ , , , /26/ , , October , /04/ , , , /11/ , , /19/ , , , /19/ , , /26/ , , November , /01/ , , , /16/ , , , December , /14/ , , , /27/ , , , January , /04/ , , /10/ , , , /25/ , , , /25/ , , February , /11/ , , , /16/ , , March , Total Fiscal , , , , Fiscal /08/ , , , /21/ , , , April , /06/ , , , /12/ , , /20/ , , , May , /03/ , , , /17/ , , , /29/ , , , June , /14/ , , , /22/ , , , July , /12/ , , , /18/ , , , August , /09/ , , , /15/ , , , September ,

46 Cheque Payroll Gross Month Salary Date Number Amount Deductions Salary And Year Amount 10/05/ , , /21/ , , , /28/ , , October , /03/ , , , /17/ , , , /18/ , , November , /02/ , , , /15/ , , , /16/ , , /22/ , , December , /13/ , , , /27/ , , , January , /10/ , , /10/ , , , /24/ , , , /28/ , , February , /02/ , , , /05/ , , March , Total Fiscal , , , , Stub Period 04/05/ , , , April , /04/ , , , May , /01/ , , /15/ , , /26/ , , June , Total Stub Period 27, , , , Total IDLP $593, $135, $728, Ueushuk Fisheries Fiscal /14/ , , December , Total Fiscal , , , Fiscal /04/ , , April , /14/ , , December , /13/ , , March , Total Fiscal , , ,

47 Cheque Payroll Gross Date Number Amount Deductions Salary Total Ueushuk $85, $0.00 $85, Grand Total $678, $135, $813, *Cheque # $35,000 ($14,000 salary + $21,000 Bonus) Month And Year Salary Amount As Table 11 shows, of the salary payments totalling $813,612.23, $728, was paid by IDLP while the remaining $85, was paid through Ueushuk Fisheries. The salary payments from Ueushuk Fisheries didn t start until the 2011 fiscal year. IDLP officials were surprised to learn that Paul Rich would have received salary payments from Ueushuk Fisheries. 2. Bonuses IDLP traditionally has paid an annual $5,000 bonus to staff. Up until the 2011 fiscal year, all bonuses were paid in December; however, commencing in the 2011 fiscal year, one half of the bonus (i.e. $2,500) was paid in July and the remaining $2,500 was paid in December. A review of all cheque payments to Paul Rich indicated that, during the 5 fiscal years 2008, 2009, 2010, 2011, 2012 along with the Stub Period (1 April 30 June 2012), Paul Rich received bonuses totalling $632, well in excess of any traditional bonuses paid by IDLP to staff. Table 12 provides details of the bonuses paid by IDLP to Paul Rich by fiscal year along with the Stub Period. Table 12 Bonuses by Year Paul Rich Fiscal Years along with Stub Period Fiscal Year Amount % of Total Annual % Change , % , % 109.4% , % (36.6%) , % 208.2% , % 155.7% Stub Period 25, % Total $632, % 35

48 As Table 12 shows, of the $632,500 in total bonuses, Paul Rich received bonuses totalling $466,000 in fiscal years 2011 and % of all bonuses received during the period under review. Details of the frequency and amount of cheques taken by Paul Rich as bonuses are detailed in Table 13: Table 13 Bonus Cheques by Year Paul Rich Fiscal Years along with Stub Period Date Cheque Number Amount Bonus Amount Month and Year Bonus Amount Fiscal /08/ , , /27/ , , November , /14/ , , December , /29/ , , January , /31/ , , March , Total Fiscal , Months 32, Fiscal /02/ , , May , /27/ , , June , /02/ , , July , /12/ , , September , /16/ , , /16/ , , /23/ , , December , /27/ , , /31/ , , March , Total Fiscal , Months 67, Fiscal /01/ , , May , /17/ , , December , /26/ , , February , /26/ , , March , Total Fiscal , Months 42, Fiscal /05/ , , April ,

49 Cheque Bonus Month and Bonus Date Number Amount Amount Year Amount 05/05/ , , May , /07/ , , /23/ , , July , /03/ , , /18/ , , September , /01/ , , October , /11/ , , /17/ , , December , /16/ , , /23/ , , March , Total Fiscal , Months 131, Fiscal /01/ , , /28/ , , April , /05/ , , /26/ , , May , /02/ , , /10/ , , June , /11/ , , /21/ , , July , /12/ , , /26/ , , August , /15/ , , September , /23/ , , November , /12/ , , /20/ , , /22/ , , /29/ , , December , /06/ , , /19/ , , /27/ , , /31/ , , January , /16/ , , /21/ , , /24/ , , February , /01/ , , March , Total Fiscal , Months 335, Stub Period 06/09/ , , June ,

50 Date Cheque Bonus Month and Bonus Number Amount Amount Year Amount Total Stub Period 25, Month 25, Grand Total of Bonuses $632, $632, As Table 13 shows, the amount of bonuses received by Paul Rich escalated significantly in the 2011 and 2012 fiscal years. Bonuses totalling $335, were paid in 11 of the 12 months in the 2012 fiscal year while bonuses totalling $131, were paid in 7 of the 12 months in the 2011 fiscal year. Other than the normal $5, bonus paid to all IDLP employees, IDLP officials could not provide any evidence of authorization for the extent of bonuses paid to Paul Rich. There was no approval in the Minutes of the Board for the bonuses paid to Paul Rich. Furthermore, IDLP officials could not offer any explanation as to why these bonus payments to Paul Rich would be justified. 3. Incentives Paul Rich received payments totalling $37, from IDLP related to incentives during the 2012 fiscal year and Stub Period (1 April 30 June 2012). Details of the payments are outlined in Table 14. Table 14 Incentive Cheques by Year Paul Rich Fiscal Years along with Stub Period Date Cheque Number Amount Incentive Amount Month and Year Incentive Amount Fiscal /01/ , , December , Total Fiscal , Stub Period 05/03/ , , /17/ , , May , Total Stub Period 17, Grand Total of Incentives $37,

51 As Table 14 shows, Paul Rich only started to be paid incentives in the 2012 fiscal year. Paul Rich also received incentive payments during the Stub Period (1 April to 30 June 2012). Expenditure Claim Forms IDLP officials indicated that the following expenditure claim forms are used by staff to get reimbursed for expenses related to travel, vehicle mileage, entertainment and other legitimate business expense items: 1. Miscellaneous Expense Claim Form; 2. Vehicle KM Record Sheets; and 3. Travel Expense Sheets. As a result of the lack of supporting documentation for Paul Rich for the fiscal years 2008, 2009 and 2010, the following observations are based on a review of the documentation provided for the fiscal years 2011 and 2012 along with the Stub Period 1 April 30 June 2012 and information taken from the Simply Accounting records at IDLP. Issues identified during a review of the documents filed by Paul Rich are outlined as follows: 1. Miscellaneous Expense Claim Form Miscellaneous Expense Claim Forms are used by IDLP staff to claim all legitimate business expenses not claimed on either Travel Expense Sheets or Vehicle KM Record Sheets. IDLP officials indicated that the Miscellaneous Expense Claim Form should be accompanied by appropriate supporting documentation. We identified a number of issues from a review of the Miscellaneous Expense Claim Forms for the fiscal years 2011 and 2012 along with the Stub Period 1 April 30 June 2012 (there was no supporting documentation and/or files for fiscal years 2008, 2009 and 2010). A. We identified numerous examples where Paul Rich s Miscellaneous Expense Claim Form did not have adequate documentation or information to explain the legitimacy of the claim. These examples are outlined in Table 15 as follows: 39

52 Table 15 Examples of Inadequate Documentation Paul Rich Fiscal Years 2011 and 2012 along with Stub Period Cheque No. Date Purpose Amount Explanation Aug 2010 A/R 8, As per Edgar Jun 2010 A/R 5, As authorized by Edgar Branton Jul 2010 Bonus 10, Cheques issued from St. John s office by Edgar Branton Jul 2010 Bonus 2, Bonus paid as per Paul Rich Sep 2010 Bonus 10, Bonus given as per Edgar Sep 2010 Overtime 8, (140 hrs) 4 weeks overtime paid at the request of Paul Rich Sep 2010 Travel 5, Travel expense claim as per Paul Rich Oct 2010 Bonus Expenses 10, , Bonus paid at request of Paul Rich Expense claimed by Paul Oct 2010 CEO Expense 3, As per Paul Rich Nov 2010 Overtime 4, (70 hrs) 2 weeks overtime paid at the request of Paul Rich Nov 2010 Bonus 5, NO EXPLANATION NOTED Dec 2010 Bonus 2, NO EXPLANATION NOTED Feb 2011 Overtime 4, (70 hrs) 2 weeks overtime paid at the request of Paul Rich Feb 2011 CEO Expense 6, Payment made at the request of Paul Rich Feb 2011 Overtime 4, (70 hrs) 2 weeks overtime paid at the request of Paul Rich Sep 2010 Travel 10, As per Paul Rich approved by Edgar Mar 2011 Bonus 10, Cheques issued from St. John s office Dec 2010 Bonus 15, NO EXPLANATION NOTED May 2010 Overtime Bonus 14, , Cheque was made by Edgar at St. John s office Apr 2010 Bonus 30, Bonus paid to Paul from St. John s office by Edgar Branton Jul 2010 Travel 12, Travel expense cheque issued from St. John s office by Edgar Branton Oct 2010 Bonus 15, As approved by BOD authorized by Paul Rich Sep 2010 Bonus 15, As per authorized by Chiefs at the request of Paul Apr 2011 Bonus 20, Cheque issued from St. John s office Mar 2011 Travel 10, Cheque issued from St. John s office Mar 2011 Bonus 5, Cheque issued from St. John s office Apr 2011 Travel 2, Travel expense claim as per Paul Rich Apr 2011 Bonus 10, Cheque issued from St. John s office Jul 2011 Bonus 10, Bonus as per Paul Rich authorized by Edgar Branton Jul 2011 Travel 2, Travel expense claim as per Quebec City Montreal Return airfare Goose Bay Quebec - kms 40

53 Cheque No. Date Purpose Amount Explanation Aug 2011 Bonus 15, Bonus paid as per Edgar Branton Oct 2011 Overtime 10, weeks of overtime paid as per Edgar Branton Nov 2011 Overtime 15, weeks overtime paid as per Edgar Branton Dec 2011 Management / Directors Remuneration 20, In recognition of the excellent financial arrangements Authorized by: Paul Rich, Edgar Branton NB signature does not appear to be Paul Rich Dec 2011 Bonus 10, Christmas Bonus Feb 2012 CEO expense 2, Travel expense claim for Paul Rich Feb 2012 Bonus 15, Bonus paid as per Edgar Branton May 2012 CEO expense - Incentive Payment - 2, , Total $398, Cheque # includes per diems totalling $ NO EXPLANATION NOTED Table 15 shows examples of payments totalling $398, which were made to Paul Rich without adequate documentation and with no explanation as to the either the authority or legitimacy of the amounts claimed. The support is no more than a scrap of paper with references to either Paul, Edgar or the both of them. The table also shows that many of the cheques were issued from the St. John s office the office from which Edgar worked. Copies of the available documentation are included in Appendix G. In addition to the information in the table, a Miscellaneous Expense Claim Form on 2 June 2011 indicated: To reimburse for the payment made by Paul Rich from his own personal A/C. Cheque No dated 2 June 2011 for $5, was issued to Paul Rich relating to the following two payments: - Bank draft - 27 May 2011 Simeon Tshakepesh $2, Bank draft - 27 May 2011 Makusham Studio $3, $5, The $5, was charged to general ledger account # Donations MIFN. There was no explanation as to why the amounts were not paid directly by IDLP. B. We identified that there were 8 instances totalling $38, where either, the personal credit card statement of Paul Rich or his spouse Angela Rich, or their on-line personal banking transaction report was used as support for an expense claim. There was absolutely no documentation, invoices or receipts on file to support the expense claim. Details are included in Table 16 as follows: 41

54 Table 16 Credit Card Statements / On-Line Banking Reports Paul Rich Fiscal Years 2011 and 2012 along with Stub Period Cheque No. Date Amount Card Information Explanation July , RBC VISA Platinum Avion Airline tickets (Paul Rich / Angela Rich) July , CIBC (Angela Rich) Airline tickets August , RBC VISA Platinum Avion (Paul Rich / Angela Rich) Airline tickets $2, RBC VISA Platinum Avion (Paul Rich / Angela Rich) On-line banking record August , RBC VISA Platinum Avion (Paul Rich / Angela Rich) October , RBC VISA Platinum Avion (Paul Rich / Angela Rich) 2, CIBC (Angela Rich) 9, Parking charge - Serco 9, October , RBC VISA Platinum Avion (Paul Rich / Angela Rich) December , RBC VISA Platinum Avion (Paul Rich / Angela Rich) January , RBC VISA Platinum Avion (Paul Rich / Angela Rich) Airline tickets $ Hotels $1, Hotel $ Softball jerseys $ Airline tickets $2, Other $ Airline tickets $4, Other $2, Airline tickets $2, Airline tickets $2, Other $ Goose Bay Motors $1, Philip & Henry Production $3, Ticketville Montreal $1, Sheraton Montreal $ Other $1, Airline tickets , , Total $38, CIBC (Angela Rich) Various expenses Airline tickets 42

55 C. We identified the following transactions claimed by Paul Rich on Miscellaneous Expense Claim Forms: Ultramar - $3, Paul Rich claimed $3, relating to the purchase of 3, litres of fuel. Many of the fuel purchases were for litres of fuel in excess of his vehicle s fuel capacity e.g litres of fuel on 14 September 2010 and on 31 May There was no explanation as to why Paul Rich would be entitled to claim these fuel charges. Woodward s Oil - $4, Paul Rich claimed expenses totalling $4, at Woodward s Oil; however, there was no indication of what was purchased. Restaurants Although Paul Rich claimed significant amounts for food and beverage expenses, there was no indication of either, who was being entertained, or whether the entertainment related to IDLP business. The total of all claims for some of the more frequented establishments are as follows: - Hotel North - $1, Maxwell s - $1, The Keg Montreal - $ Hong Kong Restaurant - $ St. Hubert - $ Cigarettes / Lotto Tickets / Massage Therapy There were a number of expenses claimed by Paul Rich which would not seem to be claimable as a business expense: 4 October cheque number for $1, included a receipt for $ Included in the $ was a charge of $10.69 for 1 package of cigarettes - RBH CRVN A MTH KS 20S. 12 January 2012 cheque number for $ included a receipt for $ Included in the $ was a charge of $21.38 for 2 packages of cigarettes - RBH CRVN A MTH KS 20S, a charge of $30.00 for ONLINE LOTTERIES and a charge of $1.15 for HALLS VIT C Citrus. 43

56 20 February 2012 cheque number for $2, included a receipt for $ relating to SPA GIBSON Quebec for Massage therapy. D. A review of available hotel bills for Paul Rich identified the following charges that may not be considered as appropriate: 22 May 2011 Delta Hotel Montreal ($702.52) Charged on IDLP RBC Business Gold IDLP (Edgar Branton) Le Cordial Restaurant - $68.80 Movie - $17.08 Per diems also claimed on Travel Expense Sheet ($320.15) cheque no May 2010 Delta Hotel St. John s ($877.65) Charged on IDLP RBC Business Platinum (Flora O Neil) Movie - $ Movie - $ Restaurant - $ Restaurant - $ Movie - $ Per diems also claimed on Travel Expense Sheet ($351.95) cheque no E. There were a significant number of charter flights through Universal Helicopters Newfoundland Limited. Details of invoices paid by IDLP that we reviewed are outlined in Table 17 as follows: Table 17 Universal Helicopters Invoices Paid by IDLP Fiscal Years along with Stub Period Date Flying Passenger Name of Total Details Hours Names Booking Invoice 9 Jul Whitey s Pond Paul Rich IDLP 1, Michel Rich 16 Feb Whitey s Pond Paul Rich IDLP 2, Pants Lake Peter Penashue 16 Apr Park Lake Not noted Paul Rich 2, Apr Park Lake Not noted 18 Apr Park Lake Not noted Paul Rich 1, May Misken Lake Not noted Paul Rich 1,

57 Date Flying Passenger Name of Total Details Hours Names Booking Invoice 5 Jul Muskrat Lake Not noted Paul Rich 1, Aug Winokapau Lake Not noted ** IDLP 3, Oct Muskrat Lake Not noted Paul Rich 1, Oct Muskrat Lake Not noted Paul Rich 1, Apr Park Lake Not noted Paul Rich 2, Apr Apr Pants Lake Muskrat Lake Not noted Not noted Paul Rich 2, May Muskrat Lake Not noted Paul Rich 1, Jun Cache River Paul Rich and Paul Rich 2, Party 25 Jun Muskrat Lake Not noted Paul Rich 1, July Cache River Paul Rich Paul Rich 3, Sep Cache River Paul Rich Paul Rich 4, Sep Muskrat Lake Paul Rich Paul Rich 1, M. Rich 23 Sep Muskrat Lake Not noted Paul Rich 1, Sep Muskrat Lake Not noted Paul Rich 1, May Muskrat Lake Not noted Paul Rich 3, Jun Muskrat Lake Not noted Paul Rich 1, Total $46, ** The charter on 29 Aug 2010 was signed for by Angela Rich We identified a number of issues with the invoices as follows: IDLP officials could not provide a passenger manifest for each charter to see who was on the flight. Without a passenger manifest it is difficult to determine the purpose and legitimacy of the invoice being paid; There was no explanation as to why Paul Rich s spouse (Angela Rich) would have the authority to sign for a charter billed to and paid by IDLP (29 August 2010); Some invoices were addressed to IDLP while others were addressed to Paul Rich. IDLP officials could not offer an explanation as to why the invoices were addressed differently or whether they were all legitimate charges for IDLP; There were two invoices dated on 18 April 2010 each charging.8 hours. Invoice referred to Park Lake (take off 1600 landing 1730) with 4 passengers while invoice referred to Park Lake (take off 1600 landing 1735) with 5 passengers. 45

58 There was no explanation provided by IDLP officials as to why both of these invoices were legitimate; and On 12 June 2012, IDLP paid $14, (Cheque No ) to Universal Helicopters relating to last 6 invoices Table 17 ($4,685.06, $1,239.45, $1,508.26, $1,508.26, $3,760.05, and $1,880.66). As Table 17 also shows, the first 4 of these 6 invoices ($4,685.06, $1,239.45, $1,508.26, $1,508.26) totalling $8, were all dated September 2011 almost nine months before they were paid. It was not clear why there would have been such a delay in the payment of these invoices. F. Conflict of Interest There were a number of loan advances to Paul Rich s brother (Michel Rich) that could be considered as putting Paul Rich in a conflict of interest situation. Details of the activity with Michel Rich are outlined in Table 18 as follows: Table 18 Loan Advances Paid to Michel Rich Fiscal Years along with Stub Period Date Cheque Number A/R-Other Sep Dec , Balance owing Fiscal , Sep Balance owing Fiscal , Aug , Aug 2010 J533 (journal reference) (1,500.00) Balance owing Fiscal , May , Jun , Balance owing Fiscal , May , Balance owing Stub Period 10, Balance owing as at 30 June 2012 $10,

59 2. Vehicle KM Record Sheets Vehicle KM Record Sheets are used by IDLP staff to claim vehicle mileage incurred in the conduct of IDLP business. In addition to business mileage, IDLP officials indicated that it is common practice for all IDLP staff living in Sheshatshiu to claim $30.00 per day as a vehicle allowance. Documentation on file for fiscal years 2011 and 2012 along with the Stub Period 1 April 30 June 2012 indicated that Paul Rich received $15, for vehicle KM claims. There were instances where Paul Rich s Vehicle KM Record Sheet had amounts claimed without adequate information to explain the legitimacy of the claim. For example: In addition to a date reference and a charge for $30.00, there were numerous instances where Paul Rich s Vehicle KM Record Sheet included a reference to (+ additional days) without any details as to what dates were being claimed. Table 19 outlines instances where Paul Rich claimed additional days without details: Table 19 Additional Days Claimed by Paul Rich Fiscal Years 2011 and 2012 along with Stub Period Cheque No. Date Additional Days June July July September March April May June June July July January Total Days 46 As a result of claiming these 46 additional days, Paul Rich received $1, $30.00 per day). 47

60 There were numerous examples where the Vehicle KM Record Sheet submitted by Paul Rich did not include any dates to evidence the legitimacy of the amount claimed. Table 20 outlines instances where Paul Rich submitted a Vehicle KM Record Sheet without adequate documentation: Table 20 Inadequate Documentation re: Vehicle KM Record Sheet - Paul Rich Fiscal Years 2011 and 2012 along with Stub Period Cheque No. Date Notes Amount Claimed July 2010 No explanation provided August 2010 No explanation provided 1, December KMS Lab City Return November 2011 No dates identified November 2011 No dates identified December 2011 No dates identified January 2012 No dates identified Total Claimed $3, As a result, Paul Rich claimed and received payment for $3, even though there was inadequate documentation to support the claim. 3. Travel Expense Sheets Travel Expense Sheets are used by IDLP staff to claim per diems, vehicle mileage to and from the airport, accommodations and other expenses. There were instances where Paul Rich s Travel Expense Sheet had amounts claimed without documentation or details to explain the legitimacy of the claim. For example: Re: cheque No dated 18 August 2011 there was a notation of Accommodations $ ; however, there was no explanation or supporting documentation. Re: cheque No dated 14 October 2011, in addition to the per diems, there was a notation of Meals $ ; however, there was no explanation or supporting documentation. Re: cheque No dated 10 November 2011, there was a notation of Taxi $ ; however, there was no explanation or supporting documentation. 48

61 Re: cheque No dated 23 July 2010, there was a notation of (July & Aug 22-18) 27 per day $3, ; however, there was no explanation as to why this expenditure claim was appropriate. We were informed that Fred Hall, an IDLP employee, stayed at Paul Rich s house for 27 days for which IDLP compensated Paul Rich. It is not clear why Fred Hall didn t stay at a hotel. 2. Edgar Branton We reviewed all payments made to or on behalf of Edgar Branton for the 5 fiscal years 2008, 2009, 2010, 2011 and 2012 along with the 3 month Stub Period (1 April to 30 June 2012). We found the following: During the period Edgar Branton received and cashed cheques totalling $541, from IDLP, IDLP Properties and Ueushuk Fisheries. A summary of the cheques issued by entity and by fiscal year for Edgar Branton are detailed in Appendix D while a complete listing of cheque numbers, dates and amounts is included in Appendix E. A copy of each cheque paid to Edgar Branton is included in Appendix F. Table 21 shows the cheques totalling $541, issued to Edgar Branton by year and by entity. Table 21 Cheques Issued to Edgar Branton Fiscal Years along with Stub Period Fiscal Year IDLP Ueushuk IDLP Total % of Fisheries Properties Cheques Total , , % , , % , , , % , , , , % , , , % Stub Period 23, , , % Total $431, $109, $1, $541, % % of Total 79.7% 20.1%.2% 100% 49

62 As Table 21 shows, of the cheques totalling $541, paid to Edgar Branton during the five fiscal years 2008 to 2012 and the stub period (1 April to 30 June 2012), $431, (79.7%) of all cheques paid to him were issued by IDLP, $109, (20.1%) were issued by Ueushuk Fisheries and $1, (.2%) was issued by IDLP Properties. $475, (87.8%) of the cheques totalling $541, related to Edgar Branton s payroll. Edgar Branton s gross pay for the period amounted to $689, with payroll deductions totalling $213, resulting in net pay totalling $475, Gross pay included regular pay, overtime pay, severance pay, Christmas and other bonuses and vacation pay. Of the remaining cheques totalling $66, ($541, $475,615.52), $28, were cheques related to bonus payments and $38, related to the reimbursement of Miscellaneous Expense Claims for travel, entertainment and general office expenses. Figure 3 depicts the total cheques paid to Edgar Branton by fiscal years 2008, 2009, 2010, 2011, 2012 and the Stub Period (1 April 2012 to 30 June 2012). Figure 3 Cheques Issued to Edgar Branton Fiscal Years along with Stub Period Cheques Totalling $541,905 Paid to Edgar Branton by Fiscal Years and the Stub Period 1 April - 30 June , , , , , , , , , , Stub Period

63 The cheques paid to Edgar Branton are only part of the total benefit he received while at IDLP. In addition to the cheques totalling $541, issued to Edgar Branton, there were payroll deductions totalling $213, which have to be added to get his gross pay. Therefore, Edgar Branton s total benefits total $755, Figure 4 depicts the total benefits Edgar Branton received for each of the five fiscal years 2008, 2009, 2010, 2011, 2012 along with the Stub Period (1 April 2012 to 30 June 2012). Figure 4 Total Benefits Provided to Edgar Branton Fiscal Years along with Stub Period Benefits Totalling $755,546 Provided to Edgar Branton for Fiscal Years and the Stub Period 1 April - 30 June 2012 $39,978 $45, $95, $262,883 $114, Stub Period 1 April 30 June $197,706 Table 22 outlines the total cheques paid to Edgar Branton, expenditure categories, and the total benefits provided to Edgar Branton for the five fiscal years 2008, 2009, 2010, 2011, 2012 along with the Stub Period (1 April to 30 June 2012). 51