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OTTAWA (CP) – Officials suspect a multimillion-dollar fraud ring may have been operating for up to 10 years in at least two federal departments – National Defence and Public Works – and possibly elsewhere, a key source told The Canadian Press on Friday.


So far, only one federal employee, civilian director Paul Champagne, has been fired after auditors discovered National Defence had paid $160 million for military computer hardware and support services it never received.


Federal audits continue and an RCMP investigation is underway.


The principal company involved, Hewlett Packard, has said that Steve Bailey, a sales representative who worked with Champagne, is no longer with them.


But a highly placed government source said others are believed to have been involved in what Public Works Minister Stephen Owen described as a “very sophisticated criminal scheme” that racked up $160 million in phoney billings.


“We don’t know how extensive, but I would be very surprised if the RCMP investigation and the Ingatbola88 audit didn’t uncover more involvement than simply one or two people,” said the source, who spoke on condition of anonymity.


A spokesman for HP said the company’s own investigation pointed to that conclusion, as well.


There is no suggestion at this point, however, that any of the six companies subcontracted to do the work were considered “Liberal-friendly,” said the official.


In Windsor, Ont., Prime Minister Paul Martin emphasized the scandal occurred before he was prime minister.


“I have met with the minister of Defence, the RCMP are on it,” Martin said.


“The Department of Defence has already brought in the lawyers and is very, very confident that we’re going to get our money back, and that those who engaged in this are going to be punished.”


Federal ministers say HP chose the subcontractors at its own discretion. HP says the government instructed it to use specific subcontractors for unspecified work.


The firm said Defence repeatedly refused to provide it with particulars about the subcontracted work on security grounds.


The government has told HP to account for the services or pay the money back by March 22. Ottawa has already withheld $50 million in payments to the computer giant.


Owen has said the scheme aimed to defraud both the government and HP. And Defence Minister David Pratt has said there was a “very deliberate and well-crafted strategy to hide irregularities from audit teams at both Defence and Public Works.”


Rob Ireland, HP’s manager of corporate and public relations, said Friday a company investigation “revealed the potential for fraudulent activity by an employee and others unknown to HP.”


“There is the potential for it to be multiple people,” said Ireland. “That would be an employee of DND and others unknown to HP.


“To the best of our knowledge, no HP employee knowingly participated in wrongdoing or derived any benefit.”


In the Commons on Friday, Opposition MPs wondered how so much money could go out the door without the relevant ministers’ knowledge.


Tory Cheryl Gallant noted the Financial Administration Act limits the signing authority for public servants to $250,000. Anything over that must go to Public Works.


“How could one person have signing authority for $160 million?” she asked.


Owen said Champagne had no authority to sign any contracts. Owen said the scheme involved a series of small contracts.


“There may be further disciplinary action forthcoming,” he told the Commons.


Champagne lived in a $1.3 million Ottawa mansion with a gym, indoor pool and tennis courts on a 12-acre plot “on Billionaires’ Row.”


“Did anyone think to ask him how he could afford all that on a director’s salary?” asked Conservative Jay Hill.


“Why did no one take the time to investigate whether Paul Champagne had won a lottery or made a killing on the stock market, as he claimed?”


Pratt said improvements have already been made to the contract management process and he urged opponents to wait for the outcome of the investigations.


“We can’t jump to any conclusions. Let’s let the process work.”







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