SISO Board Chair Hamdani claimed that he did not know what SISO whistle-blower meant when he told him that he had been asked to “manipulate” official SISO records, including cheques

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Author: Joan Walters
Source: The Spectator / Hamilton, September 11, 2013, p. A1

Original title: Former board chair ‘shocked’ at fraud

Former SISO board chair Hussein Hamdani called lawyers and a liability insurer – but not police – when an employee of the Hamilton-based immigration agency complained in the fall of 2012 that he’d been ordered to manipulate official documents.

Marius Carciumaru – the computer technician who became a star Crown witness in the SISO fraud trial – did not have the evidence it would have taken for SISO’s board of directors to act, Hamdani said.

The Hamilton lawyer said the eventual realization that criminal fraud had in fact taken place stunned him.

“It shocked my world. But if two people are conspiring together to defraud the company – even your due diligence will not find it.”

The once respected organization had been under suspicion since 2009 for overbilling its major funder, Citizenship and Immigration Canada – culminating in federal audits and then a police probe that resulted in forgery, fraud and conspiracy convictions last week for its former finance director and its former CEO.

Through 2010, SISO’s funding – $13 million that year – was cut, partially reinstated, then yanked altogether. SISO would go bankrupt in January 2011. A jury found former CEO Morteza Jafarpour and finance director Ahmed (Robert) Salama guilty of skimming at least $4 million in public money from Canadian government funding to SISO.

Police interviewed a number of SISO directors during the 18-month investigation, but said there was no evidence of criminal responsibility related to the board of directors.

Carciumaru was the saga’s whistle-blower. He testified he went to police in early November after telling Hamdani and another board member in person and by email that he’d been told to “manipulate” official SISO records, including cheques.

Justice James Ramsay asked Hamdani when he came to court why the former board chair – a lawyer – had not reported Carciumaru’s allegation to police.

“We had no idea what he (Carciumaru) meant,” Hamdani said in an interview. “It’s good to get legal counsel, it’s good to talk to your insurer, and let them tell you and advise you on what the next steps should be.”

Hamdani said the advice the board got was to “call the employee up again and reiterate the point that if you know anything, produce the evidence, speak up now … but bring the actual evidence, not hearsay.”

He said he never received more from Carciumaru.

Hamdani said there was such chaos as the Settlement and Integration Services Organization collapsed that following up on Carciumaru without evidence was not a priority. People who question the board’s actions “may not appreciate what was going on then in the SISO world,” he said.

That fall, employees had been told they would lose their jobs and there were a number of ongoing financial probes by federal officials.

Hamdani said that from Nov. 9 to 17 alone – the two-week period in which Carciumaru contacted the board and then went to police – directors were grappling with tumultuous events.

Jafarpour was arrested with uttering a threat to cause death to seven managers, a charge later withdrawn.

SISO had just learned it was not going to have at least half its CIC contracts renewed.

Seven senior managers had contacted CIC to complain they had lost confidence in the SISO board – prompting the board to issue a disciplinary letter to that group.

Negotiations were under way with SISO’s bank, which was threatening to withhold credit, jeopardizing the agency’s ability to pay its staff.

“Our biggest priority at that time was making that Friday payroll,” Hamdani said. “That’s the one thing we (directors) were personally liable for. We would go on our hands and knees begging the bank to extend the line of credit, begging the government to release some of the millions of dollars they were withholding.

“That was priority No. 1.”

Experts in how boards of directors are supposed to work say one of the major responsibilities of a board is oversight of a corporation’s executives.

“If the directors sit there and just blindly accept whatever it is that management is putting forward to them – thinking that when things go wrong, their defence is ‘we trusted management’ – well then they’re in for a shock,” said McMaster University’s Dr. Chris Bart.

“And when things are going really bad, directors have to roll up their sleeves and be much more intensive and involved than when things are operating under normal circumstances,” said Bart, founder and lead professor of the Directors College, an Ottawa-based collaboration of the DeGroote School of Business and the Conference Board of Canada.

“The fiduciary duty – the legal duty of a director – is always, always to act in the best interests of the organization.”

Catherine Raso of CMR Governance Consulting, a Hamilton firm that coaches directors, said situations such as SISO’s do not often arise. But all directors should be acutely aware that vigilance is a crucial part of their responsibilities.

“In Hamilton, there’s a lot of money being managed by a lot of volunteer board members,” Raso said.

A board’s relationship with its managers should absolutely be one that follows the credo: “I tell you what I expect you to do and then I monitor to make sure you’ve done it.”

jwalters@thespec.com

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Illustration

Caption: Hussein Hamdani