Mike Duffy audit: 3 things we've learned about Deloitte

More than a week after the latest RCMP court filings turned the spotlight on alleged communications between Conservative Senator Irving Gerstein and a senior partner at the auditing firm that investigated Senator Mike Duffy's expense claims, the two lead auditors responsible for conducting that review appeared before the Senate committee that ordered the initial investigation last spring.

Here are three things that we learned from their testimony.  

Deloitte partner called up one of the auditors working on the Duffy file

Under questioning at committee, Gary Timm, one of the two lead auditors on the investigative team that handled the Duffy audit, confirmed that Michael Runia — a senior partner at Deloitte who also serves as official auditor for the multi-million-dollar Conservative Party war chest — called him "on one occasion."

"He wanted to know, if Senator Duffy were to repay, how much that would be," he noted, in response to a query from Liberal Senator George Furey. 

According to Timm, he told Runia that he couldn't divulge any confidential information, directing him instead to "public information, where, if he wanted, he could find out the total entitlements."

"It was a short call, and it ended there," Timm concluded.

He was also asked about the now infamous March 8th email from PMO staffer Patrick Rogers on Senator Irving Gerstein's "Deloitte contact ... agreeing with our understanding of the situation," with the only step remaining to ensure that  "the actual Deloitte auditor" was "locked in." 

Timm confessed he had no idea what it could mean, and maintained that he had only heard from Runia once. He also noted that he had asked around, and no one else on the team had any other contact with him.

Thanks to the interviews and emails included in the latest batch of court documents filed by the RCMP, here's what we knew -- or thought we knew -- about the events leading up to that call:

On March 1, then-PMO chief of staff Nigel Wright asked Gerstein to, in Wright's words, "actually work through senior contacts at Deloitte," apparently in pursuit of the outcome that both PMO and Duffy hoped would come to pass: specifically, Deloitte dropping the audit into Duffy's primary residency claims due to the contentious expenses having been paid.

In conversation with the RCMP, Gerstein recalled that Wright had initially asked him to "ascertain the status" of the audit into Senator Mike Duffy's residency claims and expense.

He obligingly called up Deloitte senior partner Michael Runia, who, he said, he knew due to his work for the Conservative Party, who told him that he "didn't know anything about it," according to Gerstein's account of the conversation.

This apparently prompted a second call between Gerstein, Wright and Rogers, during which Gerstein was asked to "contact Deloitte" once again; this time, to find out if repayment of the $90,000 "would result in conclusion of the audit."

According to Gerstein, he did so, and Runia advised him that it would not -- the audit would continue.

In a subsequent interview with the RCMP, Runia confirmed that Gerstein, with whom he was in "regular contact" due to his work for the party, had, indeed, called him up to ask "what the result would be if Senator Duffy repaid the money."

Runia told the RCMP he advised Gerstein that "he believed the auditors would still report, and note the repayment in their findings."

It appears that the Mounties either didn't ask Runia if that was the only time Gerstein had called him, or decided not to include that information in the interview summary filed with the court. 

Thanks to Tiimm's testimony Thursday, however, we now know that at some point in March, Runia did call him up to ask how much money Duffy owed.

That, it bears noting, wasn't actually what Gerstein had asked him to find out — nor was there any reason for him to do so, as the $90 K figure had been circulating through PMO email chains since Feb. 26, when a "beyond furious" Wright was advised that the total owing was far higher than the $32 K they had previously been led to believe. 

In any case, according to Gerstein's account of his second conversation with Runia, Wright wanted him to find if paying off the full amount owing would stop the audit. Runia, he told the RCMP, told him it likely would not. 

That would seem to be corroborated by an March 21 email sent by Rogers to Wright and unspecified "others," in which, according to the RCMP summary, "he advised ... that he had heard from Gerstein with an update on his inquiries with Deloitte."

According to an excerpt from that email, Rogers provided the following recap of what Gerstein had allegedly told him:

Any repayments will not change Deloitte's conclusions because they were asked to opine on residency. However, they can 't reach a conclusion on residency because Duffy's lawyer has not provided them anything. This is despite their attempts use "public information" about Duffy's residency. Their report will state that Duffy's lawyer did not provide information when requested. They were asked to complete the work by the end of March and plan to.

It's fair to say that update provided by Gerstein — or, at least, as reported by Rogers — appears to go considerably further than the information that Timm says he provided to Runia, or that Runia recalls passing on to Gerstein.

As it turned out, it was also remarkably accurate, which brings up the second point on the list:

Auditors find it 'troubling' emails in RCMP documents raise possibility Duffy audit information may have been leaked

As noted above, Rogers' March 21 email on what the Deloitte audit would eventually conclude proved to be remarkably prescient.

That, in turn, raises still unanswered questions about just how Roger — or, indeed, Gerstein, who he credited as his source — could have known what the audit team would ultimately conclude.

During their appearance this morning, Deloitte forensic partner Alan Stewart — who, like Timm, had been actively involved in the Duffy audit — agreed that it was "troubling," but declined to speculate on how, exactly, it could have happened.

He also pointed out that it wasn't actually correct, as far as the claim that they would state they were unable to draw any conclusions on Duffy's residency due to his refusal to provide information:

That was not our position. That was never our position in the investigation. The reason that we did not reach a conclusion on Senator Duffy or any of the other three senators' residencies, when we were asked to look at it, is because of the lack of criteria in the rules for establishing a primary residency.

It was not the position of the investigative team at any time that we would be unable to reach a conclusion on Senator Duffy's residency because he would not be providing us information.

I don't know where that information came from, but it did not come from the investigative team.

He did, however, acknowledge that Rogers' email accurately predicted the "ultimate conclusion."

He also pointed out that Deloitte had delivered a status audit to both Senate committees, during which they "indicated ... our likely conclusion regarding our inability to come to a determination of primary residency" due to "concerns ... about the lack of criteria." .

Finally, he outlined the protective measures employed at Deloitte to make sure confidential information is kept confidential from anyone not authorized to access it, including a secure room, padlocked filing cabinets and stand-alone, password-protected computers.

Of course, either Gerstein, Rogers or both could have simply been playing out what would have been an incredibly high-risk bluff: namely, presenting what would amount to speculation, informed or otherwise, on what Deloitte would likely conclude as inside information. If that's the case, given the stakes involved, all one can say is that if that's what actually happened, they were extraordinarily lucky to be right. (That is, until the RCMP got involved.)

Despite the above revelations, the Conservative majority is unconvinced there's any need to hear from Runia

It's difficult to fathom how anyone, let alone a senator tasked with defending how the Upper House has handled the ongoing expense controversy, could sit through Thursday's testimony without concluding that it might be helpful to hear what Runia himself might have to say about all this, but that's precisely what the eight-member Conservative majority apparently managed to do.

They weren't even willing to debate a Liberal motion to invite Runia to give his side of the story, instead backing up what would turn out to the final ruling by outgoing chair Gerald Comeau that it was simply not within their mandate.

Undaunted, Senate Liberals have already drafted a second motion — this time, for the full chamber, not the committee — which will likely be debated early next week.

Finally, just to round off the list, here are 5 new questions sparked by Thursday's testimony, all but one of which, it would seem Runia would be ideally placed to answer:

• Did Runia mention that he was calling at Gerstein's behest?
• How unusual is it for a senior Deloitte partner to call an auditor to discuss an ongoing investigation?
• Why wasn't the call disclosed to the steering committee, or included in the final report?
• How many communications were there, in total, between Gerstein and Runia or anyone else at Deloitte?
• Why on earth would anyone have thought it was a good idea for PMO to get Gerstein to call Runia — or anyone else at Deloitte — in the first place?