ArriveCan vendor Dalian won government contract on same day its president joined DND

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Dalian Enterprises, one of the vendors hired by the federal government to work on its troubled ArriveCan app, was awarded a contract from the Defence Department the same day its founder started working at the department as a full-time public servant.

Dalian founder David Yeo told a parliamentary committee on Tuesday that he started leading an IT project team as an employee of the department on Sept. 19, and public records show his company received the service contract, worth $42,555.29, on that day. He told the committee that, “in hindsight,” he should have fully separated himself from his company before commencing his public service job.

“I should have done all of that prior to even looking at the offer from the government. So that one’s on me,” he said.

Mr. Yeo’s employment at the department was first revealed publicly late last month. Treasury Board President Anita Anand and Defence Minister Bill Blair expressed surprise, and announced his suspension from that position. They also announced that Dalian has been suspended from obtaining further federal contract work. Ms. Anand said at the time that “there is certainly a rule that would prevent a conflict of interest of that sort.”

Mr. Yeo said on Tuesday that the department has determined there was no conflict of interest, and he pledged to provide MPs with a document to support that claim.

Auditor-General Karen Hogan’s recent report on ArriveCan said that Dalian had received $7.9-million to work on the app, a pandemic-era project that was intended to help international travellers submit documentation to border officials. Parliament’s review of the project’s $59.5-million price tag, and of the many contractors who worked on the app, has revealed details of the opaque world of procurement in the federal government, where scores of staffing businesses bid on such work and then farm out technical tasks to subcontractors.

Ottawa to release review of ArriveCan contractor’s use of Indigenous program

In his testimony Tuesday, Mr. Yeo disputed the Auditor-General’s accounting of how much his company was paid for ArriveCan, saying his staff put the number at $4.9-million.

Mr. Yeo, who appeared by video link sitting in an office and wearing a grey suit with four medals, told MPs on the Commons public accounts committee that he has spent most of his life connected to the Canadian military, first as a member of the Canadian Forces, then as a member of the reserves and a private contractor. He said he only became a full-time IT team leader at the department in September.

Mr. Yeo said it is common for federal government employees to have other jobs.

“I’m out doing what I need to do for the government during the day, but then I’m an entrepreneur at night and trying to do other things,” he said. “So I can’t imagine others aren’t.” He added that he has resigned from the public service.

He also played down his obligation to hire Indigenous workers as part of a set-aside procurement program that was a key factor in his company’s ability to win millions of dollars in federal contracts.

Mr. Yeo has previously said that Dalian, which describes itself as an “aboriginally owned” company, has just two full-time employees. Over the years, Dalian has frequently worked in joint ventures with a non-Indigenous-owned company called Coradix. The companies have together won business under the set-aside procurement program, which is called the Procurement Strategy for Indigenous Business.

That program sets aside some federal contract work specifically for Indigenous businesses. Non-Indigenous businesses can qualify if they are in joint ventures with Indigenous businesses, but the Indigenous partner or Indigenous sub-contractors must perform at least one-third of the work.

In total, including the two companies’ joint ventures, the federal government has paid Coradix and Dalian more than $400-million over the past decade.

The rules of the set-aside program say participants are subject to mandatory preapproval audits and random after-the-fact audits to ensure compliance. The initial audits are primarily focused on confirming that the Indigenous company is on an existing federal directory of Indigenous businesses.

After-the-fact audits could determine whether the company followed through on the program requirements related to Indigenous workers.

The Globe and Mail reported in December that Indigenous Services, which is responsible for the program, has never conducted an after-the-fact audit to determine whether Dalian or Coradix followed through on those requirements.

Federal departments have also suspended Coradix and GCStrategies, a third IT staffing company that worked on ArriveCan, from federal contract work.

Liberal and opposition MPs challenged Mr. Yeo on Tuesday to confirm that Dalian hires Indigenous workers to deliver on its federal contracts.

Mr. Yeo said he would have to check with Dalian staff “to see if any of them are actually Indigenous.” He said a challenge is that “we don’t have enough trained technical people coming out of the Indigenous side of things.”

Liberal MP Majid Jowhari expressed skepticism of Mr. Yeo’s answers.

“Your investment, the company of Dalian, into either hiring or training and building capacity within that Indigenous group, is non-existent,” he said.

Mr. Yeo said he is Indigenous, but does not have status because of the second-generation cut-off rule in the Indian Act.

That rule prevents some First Nations people with status under the Indian Act from passing on their status to successive generations, if they parent children with people who aren’t eligible for status.

“My entire family is caught up in it, and hundreds of thousands of Canadians are caught up in it,” Mr. Yeo said of the rule.

Mr. Yeo ran as an Ottawa-area candidate for the People’s Party of Canada in 2021. He said the reason he wanted to become a Member of Parliament was to create a private member’s bill that would fix this part of the act “once and for all,” for him and other people.

Alderville First Nation Chief Taynar Simpson has confirmed to The Globe that Mr. Yeo’s late father was a status member of the community whose children did not receive status. He added that this may have been because of the second-generation cut-off rule.

The committee also asked Mr. Yeo about his companies in offshore tax havens. According to the Pandora Papers database, Mr. Yeo incorporated ISBN Inc., an entity in the British Virgin Islands, in September, 2011. La Presse reported last month that Mr. Yeo also had a company by the same name in Curaçao, a Caribbean island.

“According to what La Presse has found, you opened accounts in your name in tax havens on two occasions since 2011,” Bloc Québécois MP Nathalie Sinclair-Desgagné said. “How much money did you put into tax havens, Mr. Yeo?”

In response, Mr. Yeo said the companies amounted to an “exercise” in entrepreneurship.

“As an entrepreneur, I’m very interested in international business,” he told the committee. “When I came back from Afghanistan, I looked into trying to understand how to do international business, and that’s what led me to figuring out how to do international bank accounts and things like that. It was just purely an exercise on my own entrepreneurship and trying to figure out stuff.”

“But yeah, no, there’s no smoking gun there, there’s nothing down there.”