Dalian founder David Yeo during a committee appearance on his time at public accounts, on March 19.Government of Canada
The founder of ArriveCan contractor Dalian Enterprises failed to declare a conflict of interest as well as other corporate “schemes” when he joined National Defence as a public servant, said the department’s deputy minister, who has informed military police.
Bill Matthews, the Defence Department’s top public servant, told parliamentarians on Thursday that he had concerns about the explanations offered by David Yeo for not disclosing his outside work with Dalian when he was hired by the department on Sept. 19, 2023.
“I would say it’s highly suspicious,” he said.
Mr. Matthews said Mr. Yeo had a long history working with the department as a private contractor and officials felt it made sense to bring him in as a public servant. However, the hiring process requires new hires to promptly declare conflicts of interest. Mr. Matthews said that did not occur until March, after he had been suspended in the wake of media reports that he was working as a public servant.
“Whether Mr. Yeo had a poor understanding of the rules or is ethically challenged, I would tell you my experience so far is he has an ethical issue. But the failing was on him to not disclose. We are looking at the process under which he was hired,” he told MPs on the public accounts committee.
Mr. Matthews said the department has learned that Mr. Yeo continued to work with Dalian, despite becoming a public servant, and alleged that “through Dalian, he had established other schemes with other companies.” Mr. Matthews did not detail these alleged schemes or identify those companies.
“We are continuing our work to ensure we have line of sight on any other companies with whom Mr. Yeo or Dalian is affiliated,” he said.
Mr. Yeo did not respond to requests for comment but has previously told the same committee that he believes he wasn’t in a conflict of interest.
Dalian, a company that provides IT support and other services for federal departments, including Defence, regularly works in joint ventures with another company called Coradix Technology Consulting. The two performed work on the federal government’s costly ArriveCan app for international travellers – work that has come under scrutiny by several federal watchdog offices and a parliamentary committee.
In total, including the two companies’ joint ventures, the federal government has paid Coradix and Dalian more than $400-million over the past decade.
Auditor-General Karen Hogan reported that the cost of ArriveCan grew to about $59.5-million because of heavy use of outsourcing contracts with IT staffing companies. The report said the main contractor, GCStrategies, received $19.1-million and Dalian received $7.9-million. The two companies dispute those figures.
The fallout from the ArriveCan allegations has sparked broad policy changes. Federal ministers announced a package of reforms Thursday, while also revealing that an internal review found nearly $5-million in fraudulent billing by three private subcontractors. The ministers declined to identify those companies by name, citing the government’s decision to refer the matter to police.
Mr. Matthews said he would provide MPs with a list of other companies associated with Mr. Yeo within the next two weeks. He was asked why the head of a company receiving millions of dollars in federal contracts would accept a low-level public-service job paying between $80,000 and $100,000 a year.
“Yes, I do find that odd and I find it concerning,” he said. “It is hard to comprehend, if he truly was making the amount of money through his business dealings that we now think he was, through the markups etc., it’s hard for me to understand how that math works for him as an employee.”
National Defence was not connected to the ArriveCan app project, but Dalian, Coradix and GCStrategies have worked with the department and they all worked on ArriveCan. All three companies have been suspended from receiving federal contracts.
All three are also connected to allegations of contracting-related misconduct brought forward by Montreal software company Botler. The RCMP has said it is investigating Botler’s allegations.
Mr. Matthews expressed concern that Dalian, Coradix and GCStrategies may have arrangements “where they subcontract each other.”
“I expect we’re paying markup on markup and that does not sit right with me,” he said.
Mr. Matthews said Mr. Yeo’s supervisors were not aware of his “broader business dealings or they would have asked questions.”
Mr. Matthews told the committee that he sent a letter on March 15 to the Canadian Forces Provost Marshal to flag the review being done by the department related to Mr. Yeo. He said at this point, he is keeping military police “apprised” and he has not referred formal files to them.
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Mr. Yeo appeared before the same committee on Tuesday. He told MPs that the department had determined that he was not in a conflict of interest. Mr. Matthews said that is not accurate.
Mr. Yeo also said he thought it was “fairly common” that public servants have companies that do work for the federal government.
“I would say that it’s my own perception. I’ve been around the department forever and everybody has their day-to-day work and maybe they have a little side gig at night doing something else,” Mr. Yeo said, later clarifying that he was not referencing public servants contracting with their own department.
Mr. Yeo said he should have moved more quickly to sever his ties with Dalian. He said he allowed Dalian employees to use his signature on contracts after he joined the government but he was not involved in those decisions.
Federal officials say public servants are allowed to have other jobs, provided the work is declared to their manager and that it complies with conflict-of-interest policies.
Mr. Matthews said he disputes Mr. Yeo’s comment that it is common for public servants to work as government contractors. He said he’s aware of about 50 civilian and military employees who have outside work that may be related to the Government of Canada. He also promised to provide MPs with more detail later.
Conservative MP Garnett Genuis said it is clear that there should be a blanket rule banning all public servants from working as government contractors.
“This practice of scandalous double-dipping should end.”