Province to shut down Ontario Tire Stewardship by 2018
The move by Environment Minister Glen Murray comes after a Star investigation revealed suspicious money transfers, allegations of fraud and wasteful executive spending at the agency, which collects “eco-fees” paid by Ontario drivers.

thestar.com
By Moira Welsh and Robert Benzie
Feb. 24, 2017

Ontario’s environment minister is closing the province’s troubled tire recycling agency after Star stories exposed suspicious money transfers, allegations of fraud and wasteful executive spending.

Glen Murray, minister of the environment and climate change, said the Ontario Tire Stewardship, the smallest and least complex of Ontario’s three government-created recycling programs, will be the first eliminated under new legislation designed to improve the recycling process in Ontario.

Murray said the Star’s investigations proved the “accountability, the transparency, the protection of the public interest wasn’t sufficiently strong” at the tire stewardship.

“The system was very vulnerable to the kinds of things that the Toronto Star exposed. When I read it, it confirmed my concern that in fact the system had too many loopholes in it.”

The Star stories showed the stewardship spent thousands of dollars on luxury trips, fine wine and donations to the Ontario Liberals. Stories also exposed allegations of executive fraud and questionable bank transfers pinpointed by the federal intelligence organization that investigates money laundering and terrorism.

The money in question comes from “eco-fees” paid by Ontario drivers every time new tires are purchased. Every year, roughly $70 million in fees from consumers is collected by tire retailers for the stewardship.

In a letter sent to the stewardship on Feb. 17, Murray gave executive director Andrew Horsman a deadline of Oct. 31 to submit a wind-up plan for the province’s waste oversight authority. That plan, Murray noted in a written statement to the Star confirming the letter, “requires the cessation of operations by Dec. 31, 2018.”

Murray’s statement said the stewardship must be “transparent and clear” with the public. It must “avoid disruption” of its tire recycling program until the end date and “not adversely affect Ontario’s tire marketplace.”

Another key point, according to the Ontario Waste Management Association, is the disbursement of the stewardship’s surplus. Last year, the surplus hit $49.5 million - ultimately from consumer eco-fees - and the association questioned where that money would go when the program eventually ended.

Murray’s letter said assets must be managed in a “fair, open and transparent process.”

Horsman, of the tire stewardship, said his office is “evaluating the direction provided” and referred additional questions to the minister or the oversight authority.

The Waste-Free Ontario Act, which came into force in November, will eventually dissolve all three government-created recycling programs for tires, old electronics and hazardous household waste.

The tire stewardship is currently the only program that has been given a timeline to end its operations. It is headquartered in Etobicoke, where stewardship staff control the collection and movement of used tires. The goal of the new law is to force producers and retailers to take individual responsibility for their products by creating innovative recycling programs.

Before the new legislation took effect, the Star exposed a series of problems with lax spending controls at the tire stewardship.

Murray said the issues raised “certainly put a red flag in the middle of this. I think the industry wants to put this behind it and get a clean start.”

In January 2016, a story revealed credit card statements and invoices that showed tire executives spent consumer-paid eco-fees on expensive trips and dinners with copious drinks, along with donations to the Liberals and NDP.

One invoice showed the stewardship paid $3,200 to send four executives to the Liberal’s 2015 Summer Golf Classic “with special guests Hon. Kathleen Wynne & Members of the Ontario Liberal Caucus.”

Last year, stewardship chair Glenn Maidment said they were “absolutely” justified in paying to see Wynne on the golf course and share concerns about plans for the $49.5-million surplus. Maidment called the additional donations to the Liberals and NDP “modest contributions as a way of supporting the democratic process.”

The stewardship later filed a lawsuit against its former chief financial officer, Perminder Kandola, alleging that he transferred $346,565 from a tire collector to a personal account named “Ontario Tire.”

A few months later, a second former executive, a chartered professional accountant, contacted the stewardship with an offer to return additional money - with a request to remain anonymous. The stewardship’s decision to remove all other accountants from related meetings (to avoid professional reporting rules) sparked an outcry by the oversight body.

Despite two identified cases of missing money, the stewardship balked at the waste authority’s call for a full forensic investigation.

Instead, an accounting firm hired to examine spending produced a report called a “Partial Evaluation of Controls,” saying the stewardship didn’t give time or access to investigate fraud allegations. The report concluded that the multimillion-dollar recycling program was rife with problems that invited “manipulation” of large sums of money.

Last fall, after the waste oversight authority threatened to go to court in order to force a forensic audit, the stewardship agreed and hired Ernst and Young to do the job. The Waste-Free Ontario Act created a new oversight body, called the Resource Productivity and Recovery Authority, with greater enforcement powers.

In November, the ministry filed provincial charges against Kandola, the former CFO, for “failing to pay into” the stewardship fund. A second provincial charge was filed against Kandola and former director of audit Frank Fragale, both related to $220,149 that went missing. Sources say all of the money has been returned.

The most recent Star investigation detailed a report by the federal intelligence agency that scrutinizes money laundering and terrorism, which uncovered millions of dollars in suspicious bank transfers from the tire stewardship to an auto recycling firm.

The report by the federal Financial Transactions and Reports Analysis Centre said bank records showed that “74 direct deposits” totalling $2.6 million were sent from the stewardship to a small eastern Ontario auto recycling company. The stewardship has previously said it has no record of that amount.

It’s unclear when the current forensic audit will be completed. Its findings will be reported to the new waste authority.