Saskatchewan Tories in Fraud Scandal"Greed is good."
For many, those three words, uttered by the villainous financier Gordon Gekko in Oliver Stone's 1987 film Wall Street, sum up the Eighties - a decade of excess, self-aggrandizement and corruption. As it turns out, some members of former Saskatchewan premier Grant DEVINE's Conservative government were doing their own bit to live down to the era's prevailing ethos. In what is easily the biggest political scandal in Saskatchewan's history, no fewer than 12 members of Devine's government - which was swept out of office in 1991 after nine years in power - have been charged in relation to a scheme that defrauded taxpayers of more than $837,000. So far, six of those charged have been convicted and three others acquitted in an unfolding saga that is tarnishing not only personal reputations, but the political profession as a whole. The TORY scandal, says University of Regina political scientist Howard Leeson, is feeding into "the tremendous cynicism towards politics that we see today."
The most sensational of the trials to date - that of former Tory whip Michael Hopfner, who pleaded not guilty to two charges of fraud over $5,000 and one count of conspiracy to commit fraud - was scheduled to hear closing arguments this week. Hopfner conducted his own defence and opted to be tried by Saskatchewan Court of Queen's Bench Justice Ross Wimmer alone because, in Hopfner's words, he could not get a fair jury trial at a time when "there's a lot of people out there who hate politicians." He also subpoenaed a number of prominent Conservatives, including Devine and his former deputy premier, Senator Eric Berntson, in a pointed attempt to suggest that the Tory scandal reached into the most senior echelons of the provincial party. Portraying himself as a scapegoat, Hopfner told Maclean's last week that "the reason I'm here is so that others, higher up than myself, can be protected and kept at arm's length. Others had to have knowledge or this kind of money could not have been transferred around."
The seeds of the current controversy were planted in 1987, when Devine's caucus agreed to pool 25 per cent of the communications allowances that MLAs are entitled to receive from the legislature into a central account. The CROWN has alleged that some members of the Devine government signed expense allowance claims that were submitted to the legislature along with invoices from four shell companies set up by John Scraba, then the caucus communications director. Many of the invoices were for services never rendered, or for expenses that were illegitimate. After the invoices were approved by the legislature's finance offices, cheques were issued to the phoney companies. That money was then funnelled back to several caucus members and Scraba in the form of cash and merchandise.
Police were first alerted to the scam in July, 1991, when legislature clerk Gwenn Ronyk reported some suspicious invoices. The investigation received a break in April, 1992, when a Regina bank branch opened a safety deposit box after its registered owner failed to respond to a notification that the bank was moving. Inside the box were 150 $1,000 bills. The owner's name proved to be bogus, but his address was quite revealing: Room 203, Saskatchewan legislature, aka the Tory caucus office. After contacting other banks, police uncovered a second safety deposit box, under the same phoney name, that contained 90 $1,000 bills.
In April, 1995, police laid charges against Scraba and 12 current or former Tory MLAs. By the fall, Scraba had been sentenced to two years less a day after pleading guilty to fraud. He served only four months and has recently worked as a disc jockey in Edmonton. At about the same time, former caucus chairman Lorne McLaren also entered guilty pleas. Receiving the stiffest sentence to date, McLaren was given 3 ½ years for his central role in organizing the $837,000 fraud. McLaren served eight months in jail; at 68, he now spends his nights in a Salvation Army hostel in Regina that acts as a halfway house and during the day returns to his home, 60 km northeast.
The Tory funding scandal has combined elements of the comic and the tragic. One of those convicted, former cabinet minister Joan Duncan, pleaded guilty to defrauding the Saskatchewan government of $12,405. Duncan, who was fined $5,000 and ordered to make full restitution, told the court that she accepted money from Scraba in a fit of pique over being dropped from cabinet and spent it on a Hawaiian vacation. Another former Tory MLA, Gerald Muirhead, was found guilty of fraud after he purchased a $2,200 riding saddle and bridle sash engraved with his name and MLA title that he displayed in small-town parades. Muirhead, who was fined $5,000, is seeking leave to appeal his case to the SUPREME COURT OF CANADA.
In a much darker vein, former cabinet minister Jack Wolfe committed suicide in February, 1995, leaving behind a pregnant wife and three young children. The 39-year-old Wolfe, who had been questioned by police but not charged, left a note to his family saying, "I love you all too much to have you bear the pain of having my name and reputation destroyed because of the partisan political interests of others."
The most recent fraud trial also had its bizarre moments. Testifying in his own defence last week, the 48-year-old Hopfner was asked questions - which he had prepared himself - by an assistant to his chartered accountant. As soon as Hopfner completed his testimony, he called the accountant, John Hutchinson, as his final witness. Hutchinson's main role appeared to be to convince the court that Hopfner lacked the business savvy to commit fraud on the scale alleged. "I viewed your understanding of financial affairs as almost negligible," Hutchinson told Hopfner at one point. He also testified that Hopfner often signed blank cheques and put his signature on other financial documents before they were properly filled out.
But perhaps the most explosive testimony came on Oct. 24, when another former caucus chairman, Myles Morin, told the court that Devine had approved a plan in 1985 to transfer $455,000 - an amount unrelated to the $837,000 fraud scheme - in surplus caucus funds into an investment account. There is nothing illegal about such a transfer and the transaction bears no direct relevance to the fraud charges before the court. But Morin's assertions drew a blistering response from Devine, who the next day sent a statement to reporters declaring, "In my entire political career, I have never been involved in, approved, or condoned or even been aware of any illegal activity or wrongdoing."
A month earlier, Devine had testified that he was too busy during his years in power to pay attention to caucus finances. Outside the courtroom, he said that, as former party leader, he accepted responsibility for the funding scandal - even though he had known nothing about it. While he stands by those comments, Devine cannot disguise his consternation over how the fraud charges have cast a pall over himself and his government. "There's no way to defend yourself," Devine told Maclean's last week. "The whole process has turned into a free-for-all and you're guilty by innuendo." Added Devine: "It's like an unexpected wound in your side that catches you by surprise and takes a long time to heal. You feel a degree of hurt, some betrayal, disgust and sadness."
In fact, the evidence emerging from the fraud trials only adds to the already heavy baggage that provincial Tories carry from their most recent stint in power. For many, the Devine years are synonymous with profligacy, an image underscored by the Tories' fiscal record. After taking over balanced books in 1982, the Tories spent liberally on a number of voter-friendly initiatives, including tax rebates and mortgage subsidies, as well as investing millions in several money-losing megaprojects. Under the Tories, the provincial deficit peaked at $1.2 billion in 1986-1987, and the accumulated debt rose from $3.5 billion to $12 billion.
The politician most affected by the Devine legacy is the current provincial Tory leader, Bill Boyd, who surprised many observers by winning his own seat and four others in last year's election (the NDP holds 41 seats and the Liberals 10). "The negative impression of the former administration spills over on to us," admits Boyd, who did not sit as an MLA during the Devine years. "But we do believe we have been able to achieve a degree of separation." Among other things, says Boyd, the Tories have adopted a "zero tolerance" policy towards financial impropriety, with every caucus expense being reviewed and approved by all five MLAs. Such precautions are undoubtedly welcome. But with many more months of potentially damaging revelations to come, Saskatchewan's once-powerful Conservatives face an enormous challenge in regaining the public's trust.
Maclean's November 18, 1996