Special report of the board of directors
St. Michael's Hospital board of directors formed a special committee to oversee an investigation related to a senior executive's employment background and his involvement in the 3.0 procurement process. The report is below.
A separate investigation by Infrastructure Ontario (IO) was conducted into the 3.0 procurement process, including the role played by the senior executive.
In September 2015, the board of directors the ("Board") and management of St. Michael's Hospital ("SMH") became aware that a newspaper reporter was working on a story relating to a senior executive of SMH (the "Senior Executive"). The story related to the Senior Executive's employment background and to his involvement in the procurement process that led to the awarding of the contract with respect to St. Michael's 3.0 to one of three contractors who had bid on that contract. The story was published on September 24, 2015 and was followed by additional articles that month and into October 2015.
The Board formed a special committee of elected directors (the "Special Committee") to oversee an investigation. Based on the findings and recommendations of the Special Committee and the advice of its counsel, the Board determined that it was in SMH's best interests to terminate the Senior Executive's employment with SMH. The Senior Executive's employment with SMH was terminated with cause on November 12, 2015. The Senior Executive commenced an action against SMH for wrongful dismissal and, on the date of this Report, that action remained in progress.
The procurement process pursuant to which the contract to build St. Michael's 3.0 was led by Infrastructure Ontario ("IO"). IO conducted an investigation into this procurement process, including the role played by the Senior Executive. SMH cooperated fully with IO throughout this investigation. The IO Investigation concluded that the Senior Executive did not properly disclose his conflicts of interests relating to that process. However, the IO Investigation also concluded that this failure in disclosure did not compromise the procurement process.
The investigations into these matters by SMH and by IO have now been concluded.
In September 2015, a newspaper reporter contacted SMH seeking information with respect to a possible story relating to the Senior Executive. The story related in part to activities in which the Senior Executive was alleged to have engaged prior to his employment with SMH. It also related to the Senior Executive's role in the procurement process that resulted in the award of the contract for St. Michael's 3.0 to one of three bidders. The newspaper story was published on September 24, 2015.
2. SMH Investigation
a) Progress of the Investigation
The Board formed the Special Committee to oversee an investigation into the issues relating to the Senior Executive (the "SMH Investigation"). The Special Committee was comprised of elected directors. It retained Hansell LLP to act as its independent counsel. The Special Committee also had the benefit of litigation and employment law advice from Borden Ladner Gervais LLP. Hansell LLP retained Kroll Consulting Canada Inc. to conduct an investigation into certain matters in order to inform the legal advice being provided to the Special Committee. That investigation included the conduct of the Senior Executive over the course of his employment with SMH. The Senior Executive was on administrative leave throughout the investigation.
The Special Committee met regularly, received advice from counsel and instructed counsel with respect to the progress of the SMH Investigation.
b) Action Taken in November 2015
Based on the results of the SMH Investigation and the advice of counsel, the Special Committee recommended to the Board that the Senior Executive's employment with SMH be terminated with cause. The Board adopted the recommendation of the Special Committee and, on November 12, 2015, the Senior Executive's employment with SMH was terminated with cause. The Senior Executive later commenced a wrongful dismissal action against the hospital, which SMH is defending the action vigorously. On the date of this Report, this matter is still ongoing.
Throughout the SMH Investigation, SMH responded to questions from the press as appropriate. It also responded to a number of Freedom of Information requests. It should, however, be noted that the SMH Investigation related primarily to a human resources issue. This limited the extent of the disclosure that the Board considered appropriate and that SMH was permitted by law to make.
3. Infrastructure Ontario
The procurement process pursuant to which the contract to build St. Michael's 3.0 was led by IO. Following the allegations made in the press with respect to that process, IO conducted an investigation into that process. The IO Investigation concluded that the Senior Executive did not properly disclose his conflicts of interests relating to that process. However, the IO Investigation also concluded that this failure in disclosure did not compromise the procurement process. SMH cooperated fully with IO in the course of its investigation.
4. Board and Management Governance Practices
Throughout the period of the SMH Investigation, the Board and management considered where SMH's Board and management governance practices and processes relevant to the matters covered by the SMH Investigation could be improved. In particular, SMH's hiring and conflict of interest disclosure practices were reviewed, as were the processes and controls in place relating to the St. Michael’s 3.0 procurement process and the ongoing implementation of the project. Immediate actions were taken to strengthen SMH's governance practices in the hiring and conflict of interest areas. In addition, the Governance Committee oversaw a complete review of its governance, based on the practices recommended by the Ontario Hospital Association. This review included all key areas of governance, including Board accountabilities, the role of the Board, duties, obligations and expectations of directors, Board policies, Board structure and Board resources. It is noteworthy that the May 2016 Accreditation Canada review, which included an assessment of SMH’s governance practices looking back four years, resulted in SMH receiving the maximum approval rating of exemplary.
The SMH Investigation and the IO investigation have now been concluded and the Special Committee has been dissolved. The Board appreciates the support of the SMH stakeholders over the course of these investigations.