Ottawa extends probe into allegations of conflict of interest, financial mismanagement at Sustainable Development Technology Canada

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Investigators retained by Ottawa to review allegations of conflict of interest and financial mismanagement at Sustainable Development Technology Canada have extended their probe to pore over more documents and conduct additional interviews, the federal ministry in charge says.

SDTC, a federal funding agency that provides capital for early-stage cleantech companies, is the target of a fact-finding review. The probe stems from allegations by a group of former employees who allege that some projects put forward for funding by entrepreneurs with close ties to the agency’s management and board received preferential treatment.

As The Globe and Mail has reported, the complainants also described a volatile work environment with unusually high turnover rates during the tenure of chief executive officer Leah Lawrence, who is a well-known figure in the country’s green technology circles. SDTC has denied its managers and board breached any ethical rules, but it formed a special committee of its board and conducted an internal investigation.

The ministry responsible, Innovation, Science and Economic Development Canada (ISED), hired the accounting firm Raymond Chabot Grant Thornton (RCGT) to investigate whether the allegations have merit and that work had been expected to be completed by mid-May. ISED told The Globe this week that the review has been extended and is now expected to be completed by the end of July.

“Additional time is required to ensure that all of the relevant facts are obtained as they relate to each allegation,” ministry spokesman Sean Benmor said in an e-mail. “This will require RCGT to review additional documents and conduct further interviews prior to reporting its findings to ISED.”

Mr. Benmor did not say what investigators have determined so far, or if Industry Minister François-Philippe Champagne had been briefed on the situation. But he said the ministry acknowledges the seriousness of the allegations.

Internal documents reviewed by The Globe show, for example, that startup companies at times received funding after outside reviewers initially recommended they be rejected.

The documents were among those used to support the allegations that prompted the third-party probe, according to sources connected to the complainants. The Globe is not identifying the sources because they are not authorized to discuss the matter while it is being investigated.

“If the fact-finding exercise determines that any of the allegations are credible, ISED will not hesitate to take further action, which may include a more fulsome investigation of any issues that are identified,” Mr. Benmor said.

SDTC plays an important role in the federal government’s push to develop the homegrown cleantech sector as it pursues national emissions-reduction targets. It leads early-stage financing, partnering with provincial agencies and private investors to take new technology to the commercialization stage. It recently expanded its role to help scale up more established companies and expand their market reach.

SDTC supports entrepreneurs developing products dealing with a range of environmental issues, including climate change, the circular economy, deforestation and energy efficiency.

Officials with other federal departments, including the Privy Council Office and the Auditor-General’s office, said they were made aware of the allegations, the latter as far back as last fall. It referred the matter to appropriate authorities, said Vincent Frigon, spokesman for the Auditor-General.

ISED has been briefed on the results of SDTC’s internal investigation, for which it brought in legal counsel from national law firm Osler, Hoskin & Harcourt LLP. But neither would disclose what, if anything, it concluded. ISED’s Mr. Benmor said the ministry would not comment on SDTC’s internal probe until its own investigation is complete.

Meanwhile, SDTC is advertising for a new position as Manager, Program Compliance & Risk Management, a job that will encompass many of the processes that are subject to the allegations. According to the ad, those include ensuring SDTC’s compliance and risk management are conducted with a thorough understanding of the agency’s financial policies and obligations with the federal government.

Tasks also include choosing and working with a third-party internal auditor and making sure the organization is meeting targets for diversity and inclusion, as well as supporting flexible and remote-work arrangements.

The agency is also seeking an independent ethics adviser for the board of directors, which is not expected to be a full-time position.

Janemary Banigan, spokeswoman for SDTC, said both positions were planned last year, and are not related to the allegations. Until now, the compliance and risk-management work has been shared by other managers. Growth in the organization necessitates hiring someone to focus on these issues in line with best practices, Ms. Banigan said.

“The workload has grown to merit a full-time position. That’s part of a work-force planning exercise we did in the fall, and so that’s being rolled out right now,” she said.