Ontario cleans house at OLG

Government fires CEO, leading to resignation of the entire Ontario Lottery board in a clean sweep at one of the province's most high-profile agencies. With revelations of employees billing taxpayers for pen refills and gym memberships, questions emerge about the McGuinty government's ability to oversee its own agencies. And that's not the end of the story...

KAREN HOWLETT, TORONTO From Tuesday's Globe and Mail Last updated on Wednesday, Sep. 02, 2009 02:56AM EDT

The McGuinty government has taken the extraordinary step of cleaning house at the Ontario Lottery and Gaming Corp., dismissing its chief executive officer amid a looming scandal over expenses.

Revelations that employees of the lottery corporation billed taxpayers for everything from pen refills to gym memberships raise questions about the McGuinty government's stewardship over its agencies, opposition members said yesterday.

But more bad news might be in store for Ontarians, Finance Minister Dwight Duncan warned yesterday as he launched a government-wide review of the accountability of all agencies, boards and commissions.

The latest scandal on the McGuinty government's watch has bred a heightened sense of urgency around Queen's Park. Premier Dalton McGuinty plans to interrupt his summer vacation today and return to the provincial legislature, where he will announce further details about the review.

Mr. McGuinty has been under siege from the opposition in the past few months over lucrative contracts that another government entity, eHealth Ontario, awarded without competitive tenders and over nickel-and-dime expense claims by consultants.

That led to the departures of eHealth CEO Sarah Kramer and chairman Alan Hudson. But the problems at the lottery corporation eclipse those at eHealth because they involve one of the province's biggest, most high-profile agencies.

Mr. Duncan said OLG is a multibillion corporation that pays annual dividends to the province of $1.8-billion. He said he is not satisfied that the corporation's assets are being maximized for taxpayers.

"I don't like this," he said at a news conference. "I don't think taxpayers like this. The challenge for us is to ensure that we put an end to it in a responsible fashion."

The government moved swiftly yesterday in an attempt to douse the controversy. The corporation's entire board of directors resigned, including chairman Michael Gough. The new interim board, led by deputy finance minister Peter Wallace, dismissed chief executive officer Kelly McDougald with cause. As a result, Ms. McDougald, who was paid $411,000 in salary and benefits last year, will not receive severance pay.

This is the first time since the Liberals came to power in October, 2003, that a CEO of a government entity has been dismissed with cause. Mr. Duncan said the expenses are a symptom of a bigger problem at the lottery corporation. Ms. McDougald was hired two years ago to turn the lottery corporation's corporate culture around after a scandal over the unusually high number of retailers who won lottery prizes.

She could not be reached for comment yesterday.

Mr. Gough said in a statement that neither he nor other board members billed any of the expenses. But he said he offered to resign because he is ultimately responsible for the corporation's actions. While board members worked tirelessly to bring about cultural change within OLG, he said, the expenses billed by employees indicate that the transformation is not complete.

Mr. Duncan's office released five thick binders containing expense reports and receipts for lottery corporation executives and senior staff covering a two-year period beginning Jan. 1, 2007. The reports came without explanations of whether they met the corporation's policies on expenses.

The Finance Minister has also asked the province's Auditor General to review the expense practices at the lottery corporation governing travel, meals and hospitality, including the approval process.

Many of the receipts reveal that employees of the lottery corporation broke the government's own rules stipulating that expenses for alcoholic beverages must be reasonable, a Finance official said.

Opposition members accused the government of moving pre-emptively to head off another scandal at the lottery corporation. The Progressive Conservatives had obtained the documents through a freedom-of-information request and were poised to expose the spending on travel and entertaining when the legislature returns on Sept. 14. But the government beat them to it.

Progressive Conservative Leader Tim Hudak said the expenses at the lottery corporation are just the latest in the government's "culture of scandalous spending." He called on the Premier to dismiss cabinet ministers who have had responsibility for the agency since the Liberals took office.

"What we need to see, in fact, is a minister's head on the chopping block," Mr. Hudak told reporters. "You can play musical CEOs all you want. You can replace one group of hand-picked Liberals to run OLGC with another group of hand-picked Liberals to run the show. That's not going to bring an end to this mess."