The Ontario government is preparing to restructure Ornge amid an OPP probe into the troubled air ambulance service, the first major criminal investigation into a provincial agency on Premier Dalton McGuinty's watch.
The Ontario Provincial Police investigation has Health Minister Deb Matthews on the defensive, with opposition members calling for her resignation on Thursday. Ms. Matthews acknowledged that Ornge operated without enough oversight from her ministry. Sources said she is expected to put the organization on a tighter leash by restructuring it.
The growing scandal over Ornge raises fresh questions about the role played by some of Canada's most prominent legal and accounting firms, as well as the government itself. Documents obtained by The Globe and Mail show Ornge's plans to house for-profit companies within the publicly funded entity stoked controversy not just among board members, but also lawyers at its lead law firm, Fasken Martineau.
A plan to lend $1.6-million of taxpayers' money to an Ornge subsidiary was so unorthodox that it sparked opposing views among lawyers at Faskens, the documents show. Faskens partner Guy Giorno, a former chief of staff to Prime Minister Stephen Harper, warned in a 2007 memorandum to his colleagues that Ornge would violate provincial laws if it proceeded with the loan.
Alfred Apps, a Faskens lawyer who left the firm last week and a former president of the federal Liberal Party, disagreed. In a memo the same year to Ornge CEO Chris Mazza, he advised that keeping an investment in the private ventures to less than 2 per cent of the air ambulance's revenues would not violate its agreement with the province.
A spokesman for Faskens declined to discuss the memos from Mr. Giorno and Mr. Apps. In a statement last night, Faskens managing partner David Corbett said the firm has "pledged its full co-operation and support" to the OPP investigation.
The OPP probe focuses on for-profit ventures Ornge created to generate revenue by turning the publicly funded air-ambulance service into a world-class medical transport business.
As well, the Health Ministry is investigating 13 Ornge-related incidents, including three deaths, to determine whether the care of patients was compromised in the name of profit.
Ornge emerged in 2006 out of the McGuinty government's desire to shift services from bureaucrats to the private sector. The scandal has exposed what can happen when these ventures operate with little transparency or oversight: Taxpayers fund the organization and absorb the cost of potential business failures, while private sector partners pocket much of the profits.
Ms. Matthews said in an interview on Thursday that it is apparent to her now that Ornge must be more accountable. But critics want to know why it took her so long, as plenty of red flags were raised about Ornge.
Former New Democratic Party Leader Howard Hampton asked in November, 2010, how many for-profit companies Ornge had and whether Dr. Mazza and other executives were paid by more than one entity. Mr. Hampton, now a lawyer at Faskens specializing in mining and First Nations issues, said in an interview that he never got a response from Ms. Matthews.
Progressive Conservative MPP Frank Klees said in the legislature last April that there was no disclosure on whether public money was being used to subsidize the for-profit entities. But he, too, was rebuffed.
Ms. Matthews said officials at Ornge assured her that no public money was going into for-profit ventures.
"I think everyone's feeling pretty let down," she said. "We were lied to by Ornge on a number of occasions on a number of issues."
The McGuinty government signed a performance agreement with Dr. Mazza in November, 2005, that gave Ornge a monopoly over the province's air ambulance service. But the agreement was flawed, Ms. Matthews said. For starters, her ministry could not intervene in changes to Ornge's corporate structure. And unlike officials at other publicly funded agencies, a source said, Ornge executives did not have to testify about the agency's activities before an all-party committee of the legislature.
What also kept critics at bay, sources say, was the fact that Ornge's strategies were given the seal of approval from top legal and accounting firms. According to documents obtained by The Globe, the country's leading accounting firm, Price Waterhouse Coopers, and Davies Ward Phillips & Vineberg, another prominent Bay Street law firm, endorsed private-sector ventures.
PwC and Davies advised an independent committee of Ornge's board last year that its plan to create private sector divisions was fair and legally sound. Shawn McReynolds, Davies' managing partner, declined to comment on Thursday.
A spokesman for Price Waterhouse Coopers was unable to offer immediate comment.
The Ministry of Health called in the OPP on Thursday as a result of the findings made by a team of forensic auditors from the Ministry of Finance, who have spent the past few weeks poring over Ornge's financial records. Sources said two transactions triggered the criminal probe: $1.2-million in loans made to Dr. Mazza that Ornge is now seeking to recover, and a $6.7-million payment Italian aviation company AgustaWestland channelled back to Ornge as part of the air ambulance's purchase of 12 helicopters for $148-million.
A source close to Dr. Mazza said the loans were approved by the board. He also said Dr. Mazza sought advice from Faskens on the "propriety" of the payment from Agusta. The source said Dr. Mazza is "not in a position to comment."
A Faskens' spokesman said the firm will not comment on matters now before the OPP.
Even as news broke of the police probe, it appeared to be business as usual at Ornge's headquarters in Mississauga. No police officers were in sight, couriers continued to make deliveries, and staff came and went through the afternoon. Most employees would not talk, but one said nothing unusual was happening inside.
At the legislature, Mr. Klees, the Tory MPP, called on Ms. Matthews to step aside until the probe is complete.
"I'm not going anywhere," Ms. Matthews said. "I've got lots of work to do."
With a report from Oliver Moore