Total Incompotence Or Favoritism

I think this is just the tip of the iceburg when it comes to our tax $$$$ being stolen....

Government screening questioned

Tobacco Kings; Chapter 4 - Six Nations company given drug licence never incorporated or registered with Ottawa or Ontario
By Steve Buist and Joan Walters
The Hamilton Spectator
(Oct 5, 2006)

Some time in 2004, Health Canada received an application from a group calling itself Iroquois Trading, based on the Six Nations reserve.

Iroquois Trading wanted a 2005 Drug Establishment Licence, an operating certificate required by Health Canada before a business is allowed to manufacture, test, package, import or sell drugs wholesale in Canada.

More than 700 such licences were in place in 2005, covering everything from the Canadian headquarters of multinational name-brand pharmaceuticals to regional operators doing business as packagers, importers or wholesalers of drugs.

Acquiring a licence to handle drugs is supposed to be a closely scrutinized procedure, part of Health Canada's mandate to oversee the safety and distribution of prescription and over-the-counter drugs, including narcotics.

For the licence, Iroquois Trading listed its business address as 3326 Sixth Line, Ohsweken.

Health Canada gave Iroquois Trading a licence to be a wholesaler of over-the-counter and prescription drugs in January 2005, after one of its inspectors approved those premises in a pre-licensing inspection.

There was just one problem -- Iroquois Trading doesn't appear ever to have existed as a legal company, a Spectator investigation shows.

The Spectator's investigation also shows that the address of Iroquois Trading's licensed premises -- the site Health Canada inspected in December 2004 -- was the same address as a business called Sit-N-Bull Construction.

The location is the site of Sit-N-Bull's fabricated metal buildings, which include storage for backhoes, tractors and other equipment.

Sit-N-Bull is owned by Six Nations entrepreneur Ken Hill, one of the founders of Grand River Enterprises, part of an empire that includes cigarette manufacturing, mining, gas bars, bottled water and a junior hockey team.

Hill and Jerry Montour, controlling shareholders of GRE, have repeatedly declined requests from The Spectator to be interviewed about their business interests.

It's not clear who were the owners or operators of Iroquois Trading.

It's not known whether Iroquois Trading ever conducted business with its Drug Establishment Licence.

But The Spectator has learned that the company has now "ceased to hold a licence," in the words of Health Canada spokesperson Paul Duchesne. He said Health Canada cannot disclose the reason why Iroquois Trading is no longer licensed.

Asked how a federal regulatory body could have licensed a company that did not legally exist, Duchesne said Health Canada has no responsibility to ensure an applicant is a legitimate business.

Health Canada is only responsible for ensuring that a company meets federal food and drug regulations, said Duchesne.

"That's where our role pretty much ends," he said from Ottawa.

"As for whether the company is registered appropriately (as a business), that's the role of other government departments."

Duchesne said that meeting food and drug regulations, and passing the inspection for the licence, requires a company only to show it is doing such things as refrigerate and store drugs properly. That's so Health Canada knows "that the drugs within that operation are safe, effective and good quality."

Health Canada would not describe exactly what an inspection involves, how long it takes or what standards have to be met for a location to pass.

The licensing, and other details of how Health Canada handled the Iroquois Trading file, raise questions about government accountability and screening.

They are the same issues highlighted earlier this week in The Spectator's report on $1.5 million worth of federal purchasing contracts to a Six Nations company associated with illegal online gaming.

Critics of existing government procedures say there are weaknesses in the systems used by federal departments and agencies to scrutinize the businesses they deal with.

"It's Government 101 to do full scale screening of everyone," says Duff Conacher, head of the Ottawa citizens' group Democracy Watch.

"The basics of good governance is to use the public's money in a way that reflects good business and the values of the public. So you would think that it would just be normal good practice, that you'd always check the business record."

When The Spectator asked Health Canada for more specific details on how the Iroquois Trading licence was approved and issued, the federal agency said it would not divulge any other information about the licence or the people behind Iroquois Trading because of privacy issues.

Through checks of government records, The Spectator determined that no company with the name of Iroquois Trading has been incorporated or registered with the federal or Ontario governments. Nor has a company named Iroquois Trading been issued a business number by the Canada Revenue Agency.

Canada Revenue is the ultimate arbiter of whether a business legally is entitled to do certain kinds of business in Canada. If a company does not have a business number from Canada Revenue, it cannot collect GST, make payroll deductions, import or export or have a corporate income tax account.

Incredibly, there is nothing in the Health Canada application for a Drug Establishment Licence requiring a business to list its Canada business number, an incorporation date or similar business information.

The four-page form asks only for half a page of basic corporate details: the company name, mailing address, telephone, billing address and name of authorized signing official.

Health Canada also said it would not answer questions about whether it was appropriate to approve a licensed drug operation at a site with the same address as a construction company's heavy-equipment building.

Duchesne also said Health Canada cannot disclose the reason why Iroquois Trading is no longer licensed.

It is known, though, that a follow-up inspection was done in January 2006, "to make sure that operations were not ongoing."

Asked why Health Canada would need to make sure that operations had ceased, Duchesne said: "We do a check on some occasions to make sure that companies haven't continued to operate, without a licence."

The extent of government screening of Iroquois Trading raises similar questions to those The Spectator examined earlier this week in its investigation concerning $1.5 million worth of federal purchasing agreements signed with a company called SixNet.

SixNet is a supplier of name-brand software to Indian and Northern Affairs, Health Canada, Agriculture and Food, Foreign Affairs and International Trade and Public Works and Government Services.

SixNet, controlled by Hill and Montour, is associated with illegal online gambling -- an association that federal officials have declined to discuss.

It's not clear whether federal officials were aware of the association between SixNet and online gaming when they awarded the contracts.

But purchasing officials have said there is no obligation to examine the background of a business beyond its ability to fulfil obligations as a supplier.

SixNet is designated as an official aboriginal supplier to the government under a minority business support program that sets targets for spending on businesses operated by natives. The goal is to try to strengthen aboriginal enterprises by ensuring they have access to some of the billions of dollars spent annually by government through purchasing contracts.

Allan Frost, a director at Indian and Northern Affairs, says the aboriginal support program generated about $350 million in purchasing with First Nations businesses in 2005.

The requirement to set targets for purchasing from aboriginal businesses applies to all federal government departments and agencies with procurement budgets of more than $1 million. There are no specific quotas.

Frost says the program defines a First Nations business as being 51 per cent owned and controlled by aboriginals.

If a firm has more than six employees, one third of them must be aboriginal.

The program only requires aboriginal companies to state that they meet these requirements -- not to prove them.

"The only time that verification of their authenticity as an aboriginal firm would occur is when an audit process would be requested by the contracting authority," Frost said.

In other words, a government purchasing department could ask for verification of aboriginal credentials, but only after a contract has been awarded and only if something prompts the contracting agency to check.

And at no time would a purchasing agency look beyond a business's basic ability to fulfil a contract.

"They wouldn't be looking at the firm as to what kind of other business interests they'd be involved in," Frost adds.

Conacher, of Democracy Watch, says his organization has a Corporate Responsibility Coalition made up of 30 public interest groups who want major changes in the due diligence exercised by government before granting money or authority -- whether it's by licensing bodies such as Health Canada or Public Works, the central purchasing arm of government in Ottawa.

"Governments at all levels should all be saying 'you want our business, you have to be a good business, and here's how we define good,'" says Conacher. "As far as I know, there's not much screening at all now."

Not true, says George Butts, a director general with Public Works in Ottawa.

He says the government buys about $15 billion worth of goods and services a year from outside vendors and suppliers and is diligent about making sure companies can live up to the commitments of their contracts.

Contracting officials are careful about examining a company's capabilities, Butts says.

"They look at who the company is, the experience of the company, the financial viability of the company and we will also look for past experience or history with the company," says Butts, who has more than two decades of experience in purchasing.

There is in fact no obligation -- yet -- on purchasing officers to go beyond that base level of scrutiny, he adds.

Soon, though, when the Conservative government's much promoted Accountability Act becomes law, there will be new, tough policies on conflict of interest, fraud and other areas. These guidelines will be a mandatory part of dealing with contracts for both government and suppliers.

It's not clear if the federal government was even aware of potential conflicts of interest that may have existed in the past.

Take the example of the Toronto-based Aboriginal Labour Force Development Circle, which provides employment and training services to aboriginal people in Ontario.

In October 2001, the chair of the Aboriginal Labour Force Development Circle (ALFDC) sent a letter to Jerry Montour of Wahta Natural Springs Water, care of the Wahta First Nation near Bala.

Montour is the largest shareholder of Wahta Natural Springs Water as well as the CEO of Grand River Enterprises.

The letter stated that the ALFDC had approved Montour's request for $250,000 in Local Labour Market Partnership funding.

The letter was signed by the chair of the ALFDC, Steve Williams -- who has also been president of Grand River Enterprises since 1997.

The ALFDC received almost $10 million in federal government funding in fiscal 2001-'02.

The federal agency in charge of the program -- Human Resources and Social Development Canada -- said it could not locate information to The Spectator's questions.

Bill C-2, the Accountability Act, is before the Senate now. It is not known when the new policies will become law.

A Health Canada spokesperson said that Iroquois Trading has now 'ceased to hold a licence,' but could not disclose the reason why it is no longer licensed.