N.S. Liberal officials say party acted above board in misuse of public funds case

HALIFAX — Nova Scotia Liberal Party officials told a legislature committee Wednesday that their handling of a case in which thousands of dollars in public funds were misused by a former employee was “above board” and legal.

Several top officials, including party leader Zach Churchill, appeared before the all-party public accounts committee to speak to a February report on the matter by the province’s auditor general, Kim Adair. In her report, Adair called on the RCMP to investigate the party’s “apparent concealment” of the misuse of funds.

Joseph Khoury, who was party president when the theft was discovered in December 2020, told the committee the employee — not the party — is the “wrongdoer in this matter.”

“Our priorities were to protect taxpayers and donors, judiciously deal with the human resource elements of this matter and fully understand the depth of this fraud,” said Khoury, who added “we did everything above board.”

The auditor general’s report said the theft was the result of the employee’s misuse of travel claims and party credit card. Khoury said the Liberal association quickly obtained legal counsel when it learned money was missing. 

Khoury said the party followed the advice of its lawyers and forensic auditors and was able to successfully recover $194,000 — a figure that includes the missing funds and the investigative and legal costs.

He said the auditor general misinterpreted the facts of the case, adding that he wasn’t interviewed by Adair’s office until 13 months into the investigation.

Had she interviewed him earlier, Khoury said, “she may have gotten things right.”

But Adair told reporters after the hearing that she stands behind her report.

“We were looking for preliminary information and it took many months and many hurdles to get that information,” Adair said. “The report stands for itself and I fully support the contents of it.”

The report said the auditor’s office was aware of “concerning information” that the party tried to delay revealing the matter until after the 2021 election. It wasn’t until the spring of 2022 that the public was made aware of the theft in a note included in the party’s financial statements, the audit said. As well, Adair said there were delays in receiving information from the party.

Paul Doucette, who was Liberal party president during Adair’s investigation, recognized that it did take time to get some documents requested by the auditor general because they were being held by “other parties” who were concerned about client-solicitor privilege.

“We were following legal advice that was provided to us by our external legal counsel and doing as much as we could to comply with the auditor general’s request,” Doucette said.

Under questioning from Progressive Conservative committee member Nolan Young, Churchill said he first learned about the misappropriation of funds along with other caucus members in 2021. He became party leader in July 2022.

Churchill said he contacted RCMP 24 hours after receiving Adair’s report in February; Young wondered why the Liberal leader waited so long.

“I think the party who was dealing with this issue at the time had a priority of recouping the funds, which I think there was very good rationale for, it was a substantial amount,” he said.

Churchill added that he called in police because it was among the recommendations in the auditor general’s report.

“We recognized the consequential nature of the auditor’s recommendations and we followed through on them as swiftly as we could.”

Meanwhile, the Tory majority on the committee gave notice that it intends to keep the Liberals’ feet to the fire by pushing for another committee hearing on the subject. Tory member Tom Taggart said he wants to hear from the Liberal party’s auditors, who weren’t available to appear Wednesday.

“There were so many comments that they did this on the advice of their auditor or their legal advice, so I’d just like the opportunity to ask questions,” Taggart told reporters.

NDP committee member Lisa Lachance said her party was satisfied with the answers it heard on Wednesday and is now interested in the outcome of the RCMP complaint rather than another committee meeting.

This report by The Canadian Press was first published April 3, 2024.

Keith Doucette, The Canadian Press