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Aneal Basi (L), Dave Basi (centre left), his Lawyer Michael Bolton (centre right) and Bob Virk (R) leave BC Supreme Court October 18, 2010.John Lehmann/The Globe and Mail

Government delays in producing documents, restrictions on access to material, and blanket claims of privilege are threatening to derail an investigation into the payment of legal fees in a political-corruption case, the Auditor-General of British Columbia claims.

The allegations are made in a series of petitions and affidavits filed in a Supreme Court of B.C. case that pits the Auditor-General's office against the Ministry of the Attorney-General.

But in a statement issued Wednesday night, Attorney-General Shirley Bond said it is her understanding legal differences have now been resolved.

"As recently as last Friday, the Auditor-General assured me that he has been provided with access to all records not subject to solicitor-client privilege in the possession of Legal Services Branch in the Ministry of Justice and in the possession of the Risk Management Branch in the Ministry of Finance," she said in a statement.

The court record, however, shows no sign that matters have been resolved.

At the core of the dispute is the Auditor-General's demand for access to records related to the government's decision to pay the $6-million legal fees of Dave Basi and Bobby Virk, two former ministerial aides who entered guilty pleas on breach of trust charges.

The Auditor-General's office last year set out to investigate the government practice of providing indemnity for officials who face charges.

But a legal battle soon erupted concerning the Auditor-General's access to government files. The matter is still before the courts, with the next hearing set to take place in June, and documents filed in the case show the Auditor General fears the audit could be in jeopardy.

"As a result of the delays in production, withholding of documents and restriction on obtaining information the completion of the audit planning phase has been significantly delayed. If access to documents in situ is not provided, the Auditor-General advises me that he is uncertain whether he can even complete the audit in accordance with the audit standards," states an affidavit sworn by Beverly Romeo-Beehler, assistant auditor general.

Ms. Romeo-Beehler recounts several incidents in which the Auditor-General's staff were either refused access to documents, or had to wait up to 14 weeks for material, even though they had confidentiality releases from Mr. Basi and Mr. Virk, and had obtained a B.C. Supreme Court order clearing access to all material related to the case.

In June of last year, auditors picked up binders of information from the Ministry of the Attorney-General.

But Ms. Romeo-Beehler said in the affidavit that the ministry "withheld seven binders containing hundreds of documents…[by asserting]blanket claims of solicitor client privilege."

She said a second demand for material had to be issued, which "is a highly unusual step in a performance audit for the Auditor-General."

Ms. Romeo-Beehler also complained "the Government made a blanket public interest immunity privilege claim over a banker's box of documents (655 documents) without providing specific reasons . . .It took 14 weeks to obtain the documents . . .[and]it appears to me that the blanket claim. . .was too broad."

Ms. Romeo-Beehler said the Attorney-General's office also put restrictions on access to files, including demanding "that no notes will be taken when reviewing the documents" and requiring auditors to flag any documents they wanted copied. That material would then have to be cleared for release by "Cabinet Operations," she said.

"These restrictive terms prevented the auditors from properly utilizing the documents to conduct an audit," she stated in the affidavit. "Without access to the documents and information sought ... the Auditor-General will be unable to complete the planned audit."

The affidavits and petitions were filed with the court last November. When contacted this week and asked for a progress report, a spokesman for the Auditor-General said everything that has to be said is stated in the petition.

In its response to the petition, the Attorney-General's office states it "has been attempting to work with the Office of the Auditor-General to bring the issues respecting third party solicitor-client privilege and confidentiality to a resolution through the court."

It states that 10,000 documents have been produced and more will be released.

"The Auditor-General is currently doing a review, and we have been proactive in assisting him in fulfilling that mandate," Attorney-General Shirley Bond said in the House on Tuesday. "We have made every effort to cooperate and, in fact, have responded to all of the requests of the Auditor-General. As recently as Friday the Auditor actually sent another letter for requests relating to indemnities in British Columbia, and we are co-operating fully."

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