Thursday, September 17, 2009

Revenue Canada and the Culture of Corporate Concealment

I have written blog postings in the past on organizational behaviour and the tendency to conceal unpalatable facts that may affect the public's view of the organization. My years in teaching yielded many examples of such conduct. There is a story in today’s Globe and Mail of malfeasance concealed within Revenue Canada, uncovered only after a freedom of information request by a researcher.

Apparently, in 2008, two employees created fictitious tax returns, one netting $300,000, the other $100,000. I can almost hear the conversation that must have ensued after discovery of the crimes, which, by the way, also entailed the invasion of privacy of many taxpayers as the miscreants plumbed their tax records to facilitate their crimes. Undoubtedly the argument for concealment was made on the basis of these crimes being 'aberrations,’ and that letting the public know about them would serve only to undermine confidence in an institution that ‘operates so well.’

Despite the fact that these crimes have been uncovered, Revenue Canada refuses to answer any questions regarding what happened to the errant employees, other than to say they no longer work for Revenue Canada. They would not reveal whether they were charged (unlikely, since there would then be a public record) or whether the criminals made restitution. Our government agency justified its refusal to provide details, saying to do so would “violate privacy laws.” I wonder if the spokesperson realizes the irony of such a risible declaration.

If you would like to read the full story, I am reproducing it below:

Steven Chase

Ottawa — From Thursday's Globe and Mail Last updated on Thursday, Sep. 17, 2009 08:21AM EDT

Two Canada Revenue Agency bureaucrats siphoned hundreds of thousands of dollars from Ottawa's coffers by filing fraudulent tax returns and diverting refunds and related benefit payments to their personal bank accounts.

The tax collection agency, which uncovered the fraud in 2008, kept news of it from going public for more than a year, until the facts were released through a request under access-to-information law.

In one case, a veteran male Revenue employee routed $300,000 generated from illegitimate returns into his bank accounts. In an apparently unrelated matter, a female staffer racked up $100,000 using similar means of tricking the government into issuing refunds and payments to accounts she controlled.

The two facilitated this by snooping through taxpayer records – using invasive database searches that, among other things, grant access to Canadians' social insurance numbers.

It was heavy use of some searches that caught the eye of investigators.

On Wednesday, the Canada Revenue Agency refused to name the fraudsters or reveal whether they were fired or charged and convicted, saying that to identify them would violate privacy law. It also could not say if the money was recovered after the fraud was discovered last year.

Revenue spokeswoman Caitlin Workman would reveal only that the two individuals have left the tax collection business. “They no longer work here,” she said.

She dismissed the notion the two cases represent a problem with the corporate culture of Canada Revenue Agency, which is trusted to handle the confidential files of millions of taxpayers.

“We have close to 45,000 employees here, and they deal with millions of tax and benefit files on a daily basis. And here we are talking about two individuals,” Ms. Workman said. “Yes, we take it very seriously, but it should also be put in perspective.”

The male employee took more than $300,000 by routing bogus refunds and related Canada Child Tax Benefit and GST credit payments to personal accounts, just-released Canada Revenue Agency memos say.

The staffer was an expert on these benefits and “could have created fictitious accounts without any assistance,” the internal investigation found.

“For the last eight years, at least, he had filed tax returns and claimed [benefits and credits] for individuals he did not know,” the probe said.

The male staffer used dozens of taxpayer accounts for his fraud.

“Based on the information gained [from the investigation] and the list of social insurance numbers found at his workstation, it is reasonable to believe that [he] may have had a role to play in the issuance of illegitimate refunds on more than 50 accounts,” investigators found.

The female Canada Revenue Agency worker, who had eight years on the job, prepared and filed hundreds of illegitimate returns, ensuring the tax refunds and goods and services tax credits were routed to her own bank accounts.

The records from this investigation were obtained through access-to-information requests by researcher Ken Rubin.

Other Revenue employees became suspicious in the $300,000 fraud case when they tried to verify some of the claims and could not reach the taxpayers.

“After reviewing the motor vehicle records and conducting credit bureau checks ... [a staffer] was unable to determine the whereabouts of the taxpayers involved and could not establish whether or not they actually existed,” the probe reported.

Ms. Workman said internal fraud of this magnitude is very infrequent, but couldn't provide a historical record.

“I don't have any numbers for you but they are very rare.”

Both fraudsters made thousands of unauthorized searches into taxpayers' files, investigators found. The male staffer's transgressions included gaining access to his own files, and those of his spouse and his stepchildren.

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