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Francois-Philippe Champagne, Minister of Innovation, Science and Industry of Canada, speaks to reporters in the foyer of the House of Commons, in Ottawa, on Nov. 24.Spencer Colby/The Canadian Press

Industry Minister François-Philippe Champagne on Tuesday denied a whistle-blower’s allegation that his office softened the final report of an investigation into governance and conflict of interest breaches at Sustainable Development Technology Canada to protect the federal agency’s senior leadership.

A former SDTC employee, who launched the initial complaints about its board and management, testified before a House of Commons industry committee Monday that the federal government knew for several months of serious financial and governance infractions, and in the end covered up the full extent of the problems.

Mr. Champagne contended there was no coverup, telling reporters that the department hired Ottawa accounting firm Raymond Chabot Grant Thornton to conduct the investigation, showing the government was “responsible and transparent.”

“I think it’s ludicrous, to be honest, because you have one of the top accounting firms in the world which did the investigation,” he said. “People are entitled to their opinion, but they’re not entitled to their own facts.”

He did not specifically address the whistle-blower’s allegation that the report was softened in the weeks leading up to its release so that the chief executive and directors could remain in their jobs. Long-time SDTC chief executive officer Leah Lawrence and board chair Annette Verschuren have since resigned, though they did so several weeks after the early October release of the report.

“What I did was to respect due process. I’m a lawyer. So when you have allegations of wrongdoing, what you do, you investigate. That’s what we did,” the minister said.

Israr Ahmad, the former employee, told the industry committee that senior bureaucrats at Innovation, Science and Economic Development (ISED) Canada had kept him apprised weekly of the probe into SDTC from its start early this year. As late as the first week of September, the government was planning to replace the agency’s management and board, said Mr. Ahmad, who revealed himself as the whistle-blower for the first time Monday.

In the following weeks, however, officials changed tack, releasing a report that identified shortcomings in conflict-of-interest reporting, funding that appeared to be outside SDTC’s mandate and inadequate human-resources policies, Mr. Ahmad said. Mr. Champagne kept the management and board in place to complete a series of measures to improve governance and financial practices – but suspended the agency’s ability to grant money until those measures were completed.

“The real truth of the matter is there was a definitive consensus across the bureaucracy at both ISED and [the Privy Council Office] that the full board and executive team at SDTC needed to be terminated. This was described to us in detail on multiple occasions in late August and September,” Mr. Ahmad said. “The outcome of the situation only changed when the minister’s office became involved, and he is ultimately responsible for SDTC. He’s the one who needs to tell the truth about what the real situation is.”

His testimony represents the latest in a series of developments surrounding the beleaguered publicly funded agency, which has been a key source of capital for early-stage technology for more than two decades, having granted more than $1.6-billion. Its ability to provide grants remains frozen.

Mr. Ahmad was a cleantech lead at SDTC from 2020 to 2022, conducting investment and due diligence. He told the industry committee he is one of a few former employees able to speak freely about the agency because he left of his own accord and is not bound by a non-disclosure agreement. The committee chair advised members not to use his name in the hearing, but his image was webcast, and The Globe and Mail was able to confirm his identity.

In testimony before the House ethics committee last month, Doug McConnachie, assistant deputy minister at ISED – and one of the senior bureaucrats Mr. Ahmad cited in his testimony – said he had been baited by the whistle-blower into “making these speculative and inappropriate remarks” about terminating SDTC officials, adding that his comments were selectively taken from more than 30 hours of conversations. His remarks were recorded during briefings with the whistle-blower and subsequently leaked to the media.

On Monday, his boss at ISED, deputy minister Simon Kennedy, told the committee that he could not account for why his staffer said what he did on the tapes.

The investigation was triggered by a voluminous file of allegations presented to the government by Mr. Ahmad and his colleagues – all current and former SDTC employees. Mr. Ahmad said he estimates that as much as $150-million could have been granted improperly.

When she resigned last month, Ms. Lawrence said she was subjected to “a sustained and malicious campaign to undermine” her leadership, which put her in an untenable position. Meanwhile, the Auditor-General’s office has launched its own investigation, and the federal Ethics Commissioner is looking into Ms. Verschuren’s role in the board’s approval of $38-million in relief funding for SDTC’s stable of companies during the pandemic, including one she leads as chief executive.

In his testimony, Mr. Ahmad had harsh words for Ms. Lawrence and the directors, saying they presided over a “toxic” workplace where employees who raised questions about procedures or investments were threatened with termination. Those who left were frequently required to sign non-disclosure agreements, he said.

Within a two-year period, four human resources directors were either fired or went on stress-related leave, he said. “And every single one of them was put under an NDA which specifically had language that prevented them from even going to the federal government to complain about these issues that were ongoing.”

SDTC spokeswoman Janemary Banigan said in a statement that the testimony contained “very serious allegations against SDTC, much of which is either false or grossly misrepresented. SDTC continues to co-operate openly and transparently with all third-party reviews under way.”

The agency has completed its response to Mr. Champagne’s management action plan and is awaiting the government’s approval of it. However, the minister has hired law firm McCarthy Tétrault LLP to complete a fact-finding review of SDTC’s human resources practices and has said funding won’t resume until all corrective actions are completed to his satisfaction. As part of that review, current and former employees have been invited to speak, and the government has waived the terms of any non-disclosure agreements.

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