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Ontario’s air ambulance scandal soars to new level

March 21, 2012, Toronto – Ontario's governing Liberals failed to sufficiently
monitor the province's air ambulance service, despite giving Ornge
hundreds of millions of dollars that it used to make questionable
business deals, auditor general Jim McCarter said Wednesday.

His long-awaited report shed some light on the troubled agency,
which has been mired in controversy over high salaries, questionable
business practices and allegations that public dollars may have been
used for personal gain.

It's also under a criminal probe for "financial
irregularities."

"Ornge is a textbook example of what happens when the government
doesn't get the information it needs to properly do its job,"
McCarter said.

On top of the $730 million Ornge received from the government
over five years, it also borrowed almost $300 million to buy more
airplanes and **>helicopters<** than it needed and used taxpayer dollars
to repay the debt, McCarter's long-awaited report found. The agency
is selling some of the used helicopters it bought with the money at
a loss.

Government funding to Ornge rose 20 per cent in its first four
years of operation, even though the number of patients transported
by air fell during that period, it said.

The health ministry was told in a letter early last year that
Ornge planned to create a “complicated network'' of for-profit and
not-for-profit subsidiaries, McCarter said. But it didn't look into
the arrangements, even though it knew some of the companies would be
directly involved in delivering services but would be outside of
ministry oversight, the report found.

"Avoiding potential conflicts would be especially important
given that the January 2011 letter indicated that some members of
Ornge's management and board were shareholders of certain of these
entities," it said.

Ornge's former management refused to give McCarter records
related to subsidiaries that weren't directly funded by the
province, not even saying who the shareholders were, how much senior
management was being paid, nor providing details on the millions of
dollars it paid to a law firm that provided advice on its business
deals.

Many of these for-profit and not-for-profit subsidiaries provided
most of Ornge's air ambulance and administrative services, then
billed Ornge for the cost, the report found. But under the
performance agreement with the government, the ministry had no right
to access any of those records.

In 2010, Ornge's top five senior executives received $2.5
million, which wasn't disclosed to the public. One board member
received over $200,000, excluding expenses. Some of the money came
from the borrowed funds, the report said.

One of Ornge's for-profit subsidiaries purchased a building for
$15 million to serve as Ornge's headquarters, then leased it back to
the publicly funded agency at a rate that was 40 per cent higher
than fair-market rent. That allowed the subsidiary to obtain $24
million in financing for the building, $9 million of which was
intended to flow back to a related for-profit company that was owned
by a senior Ornge manager.

His report also found that even though Ornge received $65 million
from the government to create a land ambulance service to transport
20,000 patients a year starting in 2008, it transported only 15 per
cent of the projected number at a per-patient cost that was nearly
as high as the cost to transport them by air.

Ornge's former management and board of directors, who were
replaced in January, also refused to provide the agreement relating
to a $4.8-million payment that a European company _ which sold
aircraft to Ornge for $148 million _ made to one of the subsidiaries
to provide marketing services.

It's been reported that a Ornge subsidiary controlled by
then-chief executive Chris Mazza received $6.7 million from
helicopter firm AgustaWestland after Ornge used provincial funds to
buy 12 **>helicopters<** from the company. Mazza's replacement, Ron
McKerlie, has acknowledged that the marketing work performed by the
Ornge subsidiary didn't reflect the amount of money that was paid.

AgustaWestland has denied any wrongdoing, saying the propriety of
its actions "cannot be questioned" and that it would co-operate
fully with any inquiries from a "competent authority."

Before the report was even released, Health Minister Deb Matthews
said she would act on all of McCarter's recommendations.

The minister, who has refused to resign over the scandal, said
she'll introduce new legislation Wednesday to tighten the leash on
Ornge. The government has also signed a new performance agreement
with the agency.

Matthews has acknowledged that the 2005 performance agreement
that led to Ornge's ill-fated foray into the for-profit sector
wasn't adequate to prevent the apparent “abuse'' of taxpayer
dollars.

The new rules would stop Ornge from selling assets or taking on
more debt without ministry approval, strengthen conflict of interest
provisions and give the ministry more audit and inspection powers.
It will also create a new patient advocate and complaint process to
ensure patient safety.

The NDP and Conservatives combined Tuesday to out-vote the
minority Liberals and demand a special legislative committee be set
up to investigate Ornge. It's not known if the Liberals will agree
to the committee.

In addition to the criminal probe and McCarter's report, the
Ministry of Health's emergency health services branch is also
investigating 13 incidents related to air ambulance transports,
three of which involved deaths of patients.