Tories didn’t bother to notice MPI boss was on unchecked spending spree

Opinion

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This article was published 26/01/2024 (592 days ago), so information in it may no longer be current.

After reading a consulting firm’s review of operations at Manitoba Public Insurance, it would be easy to conclude that all the mismanagement was the work of a single, incompetent executive.

There’s no doubt that former CEO Eric Herbelin is the central figure in that independent review. Released Friday, it paints the picture of an organization with little or no control over basic operations and expenditures.

But anyone who understands how government and Crown entities interact will quickly deduce that Herbelin was only allowed to run wild, hiring hundreds of staff and squandering hundreds of millions of dollars on a technology upgrade because the Progressive Conservative government was too indifferent to pay attention to the mayhem at one its most valuable Crown corporations.

What is government’s role when it comes to a Crown entity?

The corporations operate at arm’s-length with their own board of directors and management. Government exerts control in several different ways, including appointing board members, hiring senior leadership and through formal and informal interactions the ministers responsible have with chief executives and board chairs.

Ministers may also issue public directives that are binding on Crown corporations. And, finally, at least one MLA from the governing party is appointed to the board as a last line of oversight.

In other words, there are several mechanisms and opportunities for government to detect problems and help a Crown entity course-correct. That is, if government cares enough to look.

In the case of MPI, there were clear early warning signs of Herbelin’s colossal mismanagement that somehow never seemed to prompt action from the Tories.

For nearly two years prior to Herbelin’s dismissal last May, interveners at the Public Utilities Board and media reports had been raising red flags about cost overruns with the Project Nova information-technology overhaul and the CEO’s insatiable desire to hire. In at least two rate applications, those issues played major roles in PUB orders and prompted warnings from the regulator that MPI had to start reigning in its spending on Nova and dialing back hiring plans.

In the months before Herbelin was unceremoniously removed from his post, the Free Press published several major revelations about MPI, including Herbelin’s improper decision to take $113 million in Autopac revenues to pay for Nova overruns and the escalating costs of operating driver and vehicle licensing.

Under an agreement with government, MPI and its network of private brokers delivers all services related to driver and vehicle licensing. Government is supposed to transfer a sum of money every year to MPI to pay for DVL, so that Autopac revenues are not used to underwrite the delivery of what is a government service.

The PC government flatly refused to increase its transfer. Despite a firm agreement with the PUB to use Autopac revenues only to cover claims costs, rate reductions and rebates, Herbelin ordered that reserve-account money be taken and used to cover DVL and Nova overruns.

There were also revelations that Herbelin gave himself and other MPI executives salary bumps and bonuses in contravention of a provincial edict to freeze compensation. And that in his last full year at the executive helm, Herbelin spent more than three months away on paid business travel that was never fully explained.

All this information — transcripts and decisions from the PUB, public statements by interveners and investigative media reports — were all readily available to the Tories. And what did they do?

Like a disinterested bystander, key members of the PC government stood idle, satisfied to warm their hands on the raging MPI dumpster fire that Herbelin had started.

How could a government that came to power on a pledge to be more fiscally accountable have allowed this to happen?

When he was elected in 2016, former premier Brian Pallister promised rigid accountability for public spending. The last few years of NDP government had been a fiscal disaster. Pallister’s vow resonated with Manitobans who were hungry for competent fiscal management and expenditure control.

What they got, however, was incompetent fiscal management that cut government expenses first and asked questions about the impact later. Well known is the impact this approach had on health care, where it now takes much longer to get ER treatment or any kind of priority elective procedure.

Less known is the impact this had on government’s ability to enforce fiscal accountability. The Tories may not have been indifferent; instead, they might not have had the staff to keep proper watch.

The PC party tried to dismiss the findings of the consultant’s report by pointing out that the PUB recently ordered MPI to cut Autopac rates by five per cent. This, the Tory critic said, was evidence they had handed over a Crown insurance company that was in very good shape.

The reality is the PUB cut rates as punishment, warning MPI that it would have to come up with a valid plan to pay for Project Nova without passing on the costs of mismanagement to vehicle owners. It very much remains to be seen if that can be done.

The Tories may try to run from Herbelin’s legacy but they will not be able to hide.

Herbelin may have authored the mismanagement at MPI. But the Tories created the opportunity that allowed his motive to run wild.

dan.lett@winnipegfreepress.com