P-2002-0004

IN THE MATTER OF AN ARBITRATION

Under

THE PUBLIC SERVICE ACT

Before

THE PUBLIC SERVICE GRIEVANCE BOARD

BETWEEN

Varinder Mehan

Grievor

• and -

The Crown in Right of Ontario (Ministry of Finance)

Employer

BEFORE

D.J.D. Leighton

Vice-Chair

FOR THE GRIEVOR

Varinder Mehan

FOR THE EMPLOYER

Yasmeena Mohamed Senior Counsel Ministry of Government Services

HEARING

June 3, 4, 10, 11, 17, 18 & 24, December 1, 2, 9 & 10, 2003; May 26, August 10 & 16, 2004.

Decision

Varinder Mehan grieves that he was wrongly terminated from his employment as a Group Manager Audit, with the Ministry of Finance on August 31, 2001. He had worked for the Ministry since 1994, when he began as a Field Auditor. The grounds for dismissal were outlined in the termination letter as follows:

I have now reviewed the report, a copy of which has been provided to you, and have concluded that you did engage in a conflict of interest and did act contrary to the Conflict of Interest Guidelines for Employees document. The investigation has substantiated that you were engaged in providing financial and/or accounting services to a number of client companies and individuals while you were employed with the Ministry. Without reiterating the findings of the report, I accept the accuracy of the conclusions, which are reached in it and base my decision on these findings.

The Ministry takes the position that having carefully considered the findings of the report, the grievor’s work record, and his knowledge of the conflict of interest policies, dismissal was appropriate. Mr. Mehan denies running an accounting business from his home. Essentially, it is his position that the financial records found in his home were of clients of his brother, Mr. Sanjeev Mehan. He has therefore been wrongly terminated and should be compensated for his losses.

THE EVIDENCE

a) Introduction

This arbitration proceeded over the course of several years and required many days of hearings and extensive documentary evidence. Having carefully reviewed all the viva voce evidence and documentary evidence in this case, I will provide a summary of the relevant evidence. Further, I may refer to details of the relevant evidence as necessary in the reasons for the decision.

In September of 2000 the Director of the North York Regional Tax Office learned from the grievor’s then-wife, Ms. Neeru Sharma (known before her divorce as Neeru Mehan) that the grievor might be in potential conflict of interest in his work for the Ministry. The Internal Audit Services Division (IAS) was asked to investigate whether the grievor and his wife were in a conflict of interest for alleged business dealings being carried on while the grievor was a Group Manager in Audit and his wife was a Tax Auditor, contrary to regulations under the Public Service Act, RSO 1990, c.P.47, and Conflict of Interest Guidelines for the OPS, specifically for the Ministry of Finance. The Tax Revenue Division Conflict of Interest Guidelines (TRD) provide at section 2.3 as follows:

Tax Revenue Division employees working in a function that involves direct contact with the public, auditing tax payers’ financial accounting systems, remittances, refund or benefit applications, or collecting overdue taxpayer accounts, must not engage in outside activities that include the provision of financial or accounting services for any individual, corporation, enterprise or organization …

While the investigation was being conducted the grievor was suspended from employment with pay pursuant to section 22(1) of the Public Service Act. The investigation was conducted by Linda Lim, an Audit Manager within IAS, and took 18 months. Ms. Lim began in September of 2000 and the report was issued August 1, 2001. The executive summary of the audit report summarizes the findings of the auditor succinctly:

IAS found that while working with the Ministry, Mr. Varinder Mehan had provided bookkeeping/accounting services to seven vendors (including King’s Head Pub and four pizza stores) and had a business relationship with one other pizza store vendor. The subsequent Ministry RST audits of King’s Head Pub and the four pizza stores revealed suppression of sales. As of the date of this report, the Ministry has levied or estimated a tax liability of at least $50,000.00 to each of these vendors. On April 30, 2001, the Canada Customs and Revenue Agency (CCRA) reported convictions and fines of approximately $60,000.00 against Gurmit Dhami, Agent for King’s Head Pub, for evading the payment of Goods and Service Tax and Personal Income Tax. Court documents released by CCRA to IAS also indicates suppression of sales. These court documents indicate that Mr. Varinder Mehan prepared the financial statements and returns.

While the IAS investigator was charged with investigating Ms. Sharma as well, the evidence with regard to the allegations against the grievor’s ex-wife will be referred to only as strictly necessary.

THE INVESTIGATOR’S EVIDENCE

Ms. Lim testified on behalf of the employer as to how she conducted the investigation into this matter. The Director of the North York Regional Tax Office, Ms. Nicole Anidjar, advised Ms. Lim that it was during a meeting with Ms. Sharma that she became aware of the potential conflict of interest. Ms. Sharma had told the Director that she was going through a difficult divorce with the grievor. She also said that while employed by the Ministry, Mr. Mehan had engaged in providing accounting and bookkeeping services to various companies including King’s Head Pub and several 2-4-1 Pizza stores. The Director also advised Ms. Lim that Canada Customs and Revenue Agency (CCRA) had seized financial documents for King’s Head Pub from their home.

Ms. Lim took the following steps in her investigation. She obtained public documents from the Newmarket Court House regarding the Mehan divorce. She met with CCRA in Sudbury and an RST Audit Manager there and reviewed files seized by CCRA from the Mehan home. With Ms. Sharma’s consent, she took a 486 home computer from the Mehan home and a 5.25 floppy diskette found in this computer. An external firm was used to recover deleted files. When the files were recovered, she reviewed and followed up on the companies and individuals whose information was found on the 486 computer. She also scanned file directories and files stored in the IBM Aptiva computer, a second home computer, and with Ms. Sharma’s consent copied these files to diskette, to determine whether there were other financial and tax records of companies and individuals on it.

Ms. Lim met with the owner of King’s Head Pub in North Bay, obtaining a signed statement from Mr. Gurmit Dhami and his wife identifying Mr Varinder Mehan as their bookkeeper and annual payments made for those services. She also reviewed telephone bills obtained from Ms Sharma of calls made from the Mehan home for the period between May 1999 and September 2000. She reviewed the RST audits for King’s Head Pub and other companies identified or listed in the 486 home computer.

Ms. Lim received a signed statement from Ms. Sharma that the home 486 and home Aptiva computers were matrimonial assets and the 486 computer and the 5.25-inch floppy diskette were used by Mr. Mehan to run his home bookkeeping tax business. Numerous documents were sent to the Centre of Forensic Sciences to determine whether the handwriting matches were either Mr. Mehan’s or Ms. Sharma’s known handwriting. Ms. Lim reviewed Ministry vendor records and databases of the companies named in Ms. Sharma’s initial allegations or linked to Mr. Mehan as a result of the investigation. She also reviewed a prior investigation of alleged conflict of interest conducted by IAS with regard to Mr. Mehan in 1994. Ministry computers for both Mr. Mehan and Ms. Sharma were reviewed and sent to an outside firm to recover files that had been deleted.

Ms. Lim’s evidence was that Mr. Mehan had not declared a possible conflict of interest since joining the Ministry. Further he had received a copy of the TRD policy. Mr. Mehan’s personnel file included a report on an investigation by IAS in 1994. In that investigation there had been a complaint that Mr. Mehan was soliciting clients while performing RST audits. During that investigation Mr. Mehan told the investigator that before he was hired by the Ministry he had been operating a business preparing books and records for several clients, but at the time of this investigation indicated he no longer performed that work. He also stated in 1994 that he was aware of the Ministry conflict of interest policy and guidelines. The investigator concluded there was insufficient evidence to find any wrongdoing.

Ms. Lim testified that there was evidence that a home bookkeeping business was being conducted in the matrimonial home of Mr. Mehan and Ms. Sharma. The evidence to support this conclusion was as follows:

On January 28, 1999 CCRA seized records (invoices, cash register detailed tapes, cancelled cheques, payroll information, diskettes containing tax returns and financial records, receipts, cheque stubs, sales journal, GST/PST returns etc.) of King’s Head Pub and its related companies (Mr. D’s Furniture) from the … matrimonial home of Mr. Varinder Mehan and Mrs. Neeru Mehan. Statements made by CCRA investigators on October 30, 20002 IAS indicated that, in their opinion, an ongoing bookkeeping business was being conducted from the matrimonial home. CCRA also provided a general description of the layout and the state (open files, receipts, invoices, etc.) of the home office on the day of their seizure.

We were further informed by CCRA that both Mr. Varinder Mehan and Mrs. Neeru Mehan initially agreed to fully cooperate with CCRA. Mrs. Neeru Mehan was to provide a handwriting sample, which she did, but when CCRA asked for the writing sample of Mr. Varinder Mehan’s handwriting, Mr. Varinder Mehan apparently sought legal advice and refused to cooperate with CCRA.

Ms. Lim’s initial review of the 486 home computer revealed that the hard drive files had been deleted. An external data recovery firm was able to recover a number of files. Financial records, financial statements, payroll records, T4 summaries, price lists etc. for the following companies between the years of 1991 and 1997 were found on the 486 home computer and the diskettes.

• 1164596 Ontario Inc (241 Pizza Store # 61 at 235 Dixon Road)
• 11384174 Ontario Inc. (241 Pizza store #50 at 900 Albion Road)
• 1247162 Ontario Inc. (241 Pizza store #43 at 833 Westlock Drive)
• Brass Era Trading Company*
• ND Business Centre
• Pari Inv. (France Patisserie)*
• Pat Knowles Investments Inc.*
• 1033895 Ontario Inc. (Rockwood Furniture)*
• N (symbol “and”) N Trading Company (Brass Source)*
• Art Hut*
• Pryanka Inc.
• Accu Electric Motors Inc.
• Simson Mattress (a related company of Pryanka)
• Simson Bedding Manufacturer*
• G S J International star
• Maple Delivery Service*
• Home Accents*
• Prianka Imports*
• Unique Brass and Lighting*
• 1020989 Ontario Inc (Mac’s Milk #1055) *
• Brass Era Trading Co. Ltd. *
• Mattress Village*
• Art in Diving*
• Britannia Furniture*
• The Caves Restaurant*

*-company no longer in operation or unable to locate current listing

Ms. Lim’s research indicated that of the remaining active companies, the Ministry found no similar records in the Ministry’s databases or in the vendor files. Ms. Lim concluded that this indicates that the records found in the home computer were not from Ministry related work of either Ms. Sharma or Mr. Mehan.

In an interview on May 24, 2001 with Mr. Mehan, in the presence of Mr. Mehan’s lawyer, the grievor told Ms. Lim that he did not know how these files got on to his home computer. He thought perhaps it was his wife who loaded the information into the home computer or that perhaps some of the information belonged to his brother, Mr. Sanjeev Mehan. He stated his brother, also a Chartered Accountant, operated a bookkeeping business from the Mehan matrimonial home between 1993 and 1999. Mr. Mehan indicated that the 2-4-1 Pizza stores and the business centre, Pryanka Inc. and King’s Head Pub, were all clients of his brother’s. He did from time to time help his brother by completing vendor application forms, cheques and business registration forms. He also mailed some items to vendors for him and submitted the RST cheques and RST returns to the Ministry. Mr. Mehan said he did not charge his brother for the use of his matrimonial home for his bookkeeping business. He denied being the accountant of King’s Head Pub. He was presented with two cheques made out to King’s Head Pub in the maiden name of his wife, one of which was not cashed and one of which was deposited into their joint account before Ms. Sharma had joined the Ministry. He could not explain why Mr. Dhami, the agent of the pub, would say that he was his bookkeeper and not his wife, unless he was influenced by her and somehow hoped to save himself. He stated that he had no relationship or involvement with any of his brother’s clients except the owner of Pryanka whom he knew previously as he did some business with him prior to joining the Ministry. When asked how it was that some of the 2-4-1 Pizza stores were in his Ministry audit bank, he stated perhaps some administrative staff had put the pizza stores in his audit bank.

In a follow-up to this interview with Mr. Mehan, Ms. Lim asked him to provide evidence to support the claim that his brother, Mr. Sanjeev Mehan, was operating the business from the Mehan home, and especially with regard to the eight vendors linked to the grievor’s Ministry duties. Mr. Mehan informed Ms. Lim that Mr. Sanjeev Mehan was presently in Toronto. Subsequently a meeting was set up for June 25, 2001 with Mr. Sanjeev Mehan. He asked for a list of questions before attending the meeting, which IAS provided. Mr. Sanjeev Mehan also gave Ms. Lim an affidavit witnessed by a Commissioner, which declared the following:

I am a Canadian immigrant since September 1994 and a resident of Canada. Since October 1994 I have been in the business of providing bookkeeping and tax services for a variety of clients. My work involves preparation and compilation of financial statements and tax returns based on information provided by the clients. The data on computer, floppy diskettes and other accounting documents seized by the Ministry of Finance on September 6, 2000 from the residence of my brother (Mr. Varinder Mehan) pertains to my clients and me.

IAS followed up by asking for documentation of Mr. Sanjeev Mehan to prove and substantiate the sworn statements and the answers to the questions that they gave but they never received any documentation.

Ms. Lim testified in considerable detail to the links that she found between the eight companies identified in the 486 home computer. The summary in the IAS report succinctly provides a précis of her oral evidence.

Of the 26 companies identified in the 486 home computer IAS linked eight to Mr. Varinder Mehan. For the 2-4-1 Pizza at Westlot Drive, Store #43, the following links were identified:

• The financial statements for December 31, 1996 and December 31, 1997, 1995-1996 sales and purchase journals and payroll records of this business were found in the home 486 computer. These records were not available in the Ministry databases or vendor files.

• A computer diskette found in the home 486 computer included the personal tax returns of the owners and their families.

• IAS found two NSF cheques (cheques #0095 dated July 23, 1996 and #0464 dated October 23, 1997) in the Ministry vendor file and sent them to the Centre for Forensic Sciences (CFS) to determine if Mr. Varinder Mehan or Mrs. Neeru Mehan wrote the documents. CFS concluded that Mr. Varinder Mehan “wrote the payee line and the written amount line on item 35 (cheque #0464) as well as the payee line and amount line (including the numerical amount) on item 36.” (cheque #0095) CFS found “a significant combination of similarities in handwriting characteristics was observed between the questioned items … and the known writing …” Mr. Varinder Mehan confirmed during our interview on May 24, 2001 that it was his handwriting on the two cheques.

• Ministry RST audits just completed revealed suppression of sales as at the date of this report. The Ministry has assessed a tax liability of $107,000.00 against the owners of this store.

The RST auditor indicated that the owner of this pizza store said his accountant was Nick, although he had no contact number and he didn’t know Nick’s last name.

For the 2-4-1 Pizza at Philosopher’s Drive, Store #80, the following links were identified:

• The financial statements for December 31, 1997 were found in the home 486 computer. These records were not available in the Ministry databases or vendor files.

• A computer diskette found in the home 486 computer included the personal tax returns of the owners and their family.

• IAS obtained a Vendor Application Form date stamped November 27, 1997 and the Article of Incorporation Form date stamped July 18, 1997 submitted to the MCCR for this vendor and sent them to the Centre for Forensic Science (CFS) to determine if Mr. Varinder Mehan or Mrs. Neeru Mehan wrote the documents. CFS concluded Mr. Varinder Mehan “probably wrote the back of the item 40 (Application for Vendor Permit) (excluding the signatures) and all of the particulars on item 41 (Articles of Incorporation). Mr. Varinder Mehan confirmed during our interview on May 24, 2001, that it was his handwriting on the two forms.

• We found this vendor was in Mr. Varinder Mehan’s audit bank … on June 21, 2000 even though this vendor belongs to the Mississauga Regional Tax Office. Furthermore we noted that Mr. Varinder Mehan approved the issue of a Clearance Certificate (see below for the descriptions) on August 8, 2000 without and audit or a holdback for possible liability and removed the potential audit from his audit bank. Follow-up work has revealed the business has not been sold.

• RST has commenced an audit of the vendor. As of the date of this report the RST audit based on third party records indicated suppression of sales and estimated tax liability of approximately $75,000.00. IAS contacted the vendor regarding the name of their account on June 26, 2001 and did not receive a reply.

For the 2-4-1 Pizza at Dixon Road, Store #61, the IAS investigation found the following links to Mr. Varinder Mehan:

• The financial statements for December 31, 1996 and December 31, 1997, 1995-1996 sales and purchase journals and payroll records of this business were found in the home 486 computer. These records were not available in the Ministry databases or vendor files.

• A computer diskette found in the home 486 computer included the personal tax returns of the owners and their family.

• IAS obtained a Vendor Application Form dated January 26, 1996 and sent it to the CFS to determine if Mr. Varinder Mehan or Mrs. Neeru Mehan wrote the documents. CFS concluded that Mr. Varinder Mehan wrote the vendor application … Mr. Varinder Mehan confirmed during the May 24, 2001 interview that it was his handwriting on the form.

• We found this vendor in Mr. Varinder Mehan’s audit bank on May 26, 2000. On August 31, 2000 Mr. Varinder Mehan approved the issue of a Clearance Certificate without an audit or a holdback for possible liability and removed the potential audit from his audit bank. Follow-up work has revealed that the business has not been sold.

• RST has commenced an audit of the vendor. As of this date of this report the RST audit based on third party records indicated suppression of sales and estimated tax liability of approximately $50,000.00. IAS contacted the vendor regarding the name of their accountant on June 26, 2001 and did not receive a reply.

For the 2-4-1 Pizza at Albion Road, Store #50, the IAS investigation found the following links with this company and Mr. Varinder Mehan:

• The financial statements for December 31, 1996 of this business were found in the home 486 computer. These records were not available in the Ministry databases or vendor files.

• A computer diskette found in the home 486 computer included the personal tax returns of the owner and his family.

• We found this vendor was in Mr. Varinder Mehan’s audit bank on May 26, 2000 and we noted that Mr. Varinder Mehan made a visit to the vendor on the same day.

• RST has commenced an audit of the vendor. At the date of this report the RST audit based on third party records indicated suppression of sales and an estimated tax liability of approximately $50,000.00. IAS contacted the vendor regarding the name of their accountant on June 26, 2001 and did not receive a reply.

For the ND Business Centre IAS found the following links between this company and Mr. Varinder Mehan:

• The financial statements for December 31, 1995 and December 31, 1996 and 1997 sales journal of this business were found in the home 486 computer. These records were not available in the Ministry databases or vendor files.

• The 1999 T1 return of the vendor’s daughter was found in the home Aptiva computer.

• IAS review of phone calls made from the home of Mr. Varinder Mehan and Mrs. Neeru Mehan for the period May 1999 to September 2000 listed two calls to this vendor.

• Phone number provided to us by the vendor of his previous accountant matches the previous home phone number for Mr. Varinder Mehan and Mrs. Neeru Mehan (home phone number was changed in December of 1999). However the name of the accountant provided in a signed statement by the vendor to the RST auditor was Sanjiv Mohan. He was unable to provide the RST auditor with the address of his accountant. A subsequent call made to the vendor by IAS on May 25, 2001, the vendor reiterated the name of his accountant as Sanjiv Mohan. In a follow-up letter to the vendor to confirm the name of this accountant, dated June 26, 2001, the vendor now stated that his account is Sanjeev Mehan and that his practice is somewhere in Maple.

• The 1997 sales journal found in the home 486 computer and not available at the Ministry matches the one subsequently provided by the vendor to the RST auditor who recently performed an audit. Results of this RST audit in February/March 2001 reveal a tax liability of about $500.00.

For Pryanka Inc. (including Simson Mattress) IAS found the following links between this company and Mr. Varinder Mehan:

• Payroll records and the T4 summary from 1997 of Pryanka Inc. and the financial statements for December 31, 1995 and T4 summary and payroll records for 1997 for Simson Mattress were found in the home 486 computer. These records were not available in the Ministry databases or vendor files.

• IAS review of phone calls made from the office of Mr. Varinder Mehan made from the period of May 23, 2000 to September 30, 2000 listed numerous calls to this vendor. Mr. Varinder Mehan indicated in his interview on May 24, 2001 with IAS that this owner is a friend.

For 1118893 Ontario Inc. (operating as King’s Head Pub) the IAS found the following links between this company and Mr. Varinder Mehan:

• The financial records for this vendor were seized in January 1999 by CCRA from the home of Mr. Varinder Mehan and Mrs. Neeru Mehan. Mr. Varinder Mehan stated in his divorce documents that the owner is a family friend.

• IAS obtained copies of two un-cashed cheques, cheque #160 dated October 12, 1998 and cheque #0161 dated October 21, 1998 (issued by the vendor to Mr. Varinder Mehan each for $4,000.00). According to the vendor the two cheques were not cashed as Mr. Varinder Mehan requested to be paid in cash instead.

• IAS obtained a signed statement from the vendor on February 9, 2001 that he retained Mr. Varinder Mehan and Mrs. Neeru Mehan as his bookkeepers for King’s Head Pub in 1996, the time when King’s Head Pub records were seized by the CCRA and the compensated Mr. Varinder Mehan for his services in cash, about $3,000.00 a year on most occasions, and that there were two occasions when Mr. Varinder Mehan was compensated by cheque out of the King’s Head Pub account with the Bank of Montreal. The vendor provided a copy of one of the cheque payments (cheque #0031 dated May 3, 1997) for $2,000.00 made payable to Ms. Sharma, her maiden name. This cheque was banked in the matrimonial bank account of Mr. Varinder Mehan and Mrs. Neeru Mehan on May 6, 1997.

• IAS review of phone calls made from the home of Mr. Varinder Mehan and Mrs. Neeru Mehan for the period of May 1999 to September 2000 listed numerous calls made to this vendor.

• On April 31, 2001 CCRA reported convictions and fines against Gurmit Dhami, agent for King’s Head Pub, for evading the payment of Goods and Services Tax and personal income tax. In CCRA media release dated May 2, 2001, CCRA investigation showed that Mr. Dhami, the owner of King’s Head Pub, relied on a second set of records to hide the understatement of the income and GST. Court documents released from CCRA to IAS indicate suppression of sales and confirmed that Mr. Varinder Mehan prepared the falsified returns. Mr. Dhami stated that the financial statements attached to the tax returns and the GST returns for taxation years ending October 31, 1996 and 1997 were prepared by Mr. Varinder Mehan (his accountant) and that Mr. Varinder Mehan completely ignored the sales journals prepared by the previous two accountants when completing the returns. Mr. Dhami pleaded guilty to tax evasion and was fined approximately $60,000.00.

• The Ministry’s 1999 RST audit of King’s Head Pub resulted in tax assessment against the vendor for $73,161.00.

For the 2-4-1 Pizza at Steeles Avenue East, Store #63, IAS found the following links to Mr. Varinder Mehan:

• The audit of this 2-4-1 Pizza, #63, was assigned by Varinder Mehan on June 6, 2000 to an auditor.

• Based on the auditor’s review, the vendor was assessed $66,526.08 plus 25% penalty ($16,631.52) and applicable interests ($17,065.23), totalling $100,233.00 on June 28, 2000 for the audit periods September 1996 to May 31, 2000.

• On August 18, 2000 the vendor visited Mr. Varinder Mehan and produced a photocopy of clearance certificates for VP #57603634 the vendor permit number of this 2-4-1 Pizza. Mr. Varinder Mehan instructed the auditor to adjust the assessment based on the clearance certificate and adjust the audit period to be from January 1999 to June 2000. No original of the clearance certificate has ever been located.

• The vendor was assessed $30,218.88 plus penalty and interest for the period April 1999 to March 2000, a reduction of $59,698.99 from the original assessment.

• There was no record in the Ministry’s databases or vendor files that this clearance certificate was issued; TRD’s Business Solutions branch has also confirmed that there is no record of this clearance certificate being issued through the Consistency Control of Correspondence Module.

• The vendor, or his representative, did not provide this to his auditor at the commencement or during the audit even though the auditor had asked about the possible existence of a clearance certificate.

• The clearance certificate was further investigated. It was signed by another RST manager on behalf of Richard Townshend, Service Manager. However Mr. Townshend was not aware of this certificate and stated that he would not have issued the certificate based on the vendor information in the Ministry information system because the 1997 and 1998 tax yield analysis on the business was very low and far below industry average. The person who signed on behalf of Mr. Richard Townshend also had no knowledge of this certificate. Mr. Husain Mirza indicated that he did not recall signing this certificate and he also noted there is usually documentation such as a lawyer’s letter requesting the clearance. None of this was in the vendor file.

In her evidence in chief, Ms. Lim testified that the grievor's explanation for helping his brother fill out the forms did not make sense. She testified that Mr. Sanjeev Mehan was a Chartered Accountant and should be able to complete vendor form applications in any country.

Ms. Sharma told Ms. Lim that Mr. Sanjeev Mehan came to Canada with his family in September of 1994 and left in December of 1994. Mr. Sanjeev Mehan came back in May of 2000 and left approximately June-July of 2000. Ms. Sharma also stated that her brother-in-law did not stay with them and could not have operated a business from their home.

Ms. Lim reviewed the OMBUS database and discovered a company called "Mehan & Mehan" in

August 22, 2002. The company had been registered on January 31, 1991 and was located at 1004 Old Lawrence Avenue West. The owner was indicated as a Mehan and the company was active. The business was identified as a sole proprietorship providing tax and accounting services.

Ms. Lim also testified that an Internet search identified a company in Chandigarh, India that was operated by Mr. Sanjeev Mehan.

THE EVIDENCE OF NEERU SHARMA - PREVIOUSLY NEERU MEHAN

Ms. Sharma testified that she was an Auditor with the North York Branch in the retail sales tax group. She began work in December of 1997 as an Administrative Clerk. She became a Retail Sales Auditor in 1999. Ms. Sharma testified that she married the grievor in 1987. She separated from her husband in June of 2000 and was legally divorced in 2003.

Ms. Sharma testified that the CCRA came to the matrimonial home on January 28, 1999 to seize documents of King's Head Pub. The CCRA broke the lock and entered the home when neither she nor her then-husband was at home. Ms. Sharma was named as the accountant on the search warrant. She said that when she learned that her name was on the search warrant she was frightened and wanted to make full disclosure to the Ministry. The CCRA called the grievor from the house and he returned to meet with them. When Ms. Sharma returned, the grievor told her that he had told CCRA that the work had been done by an accountant called Nick Sharma who had returned to India. He told the CCRA that Nick Sharma was his cousin and that his wife had kicked him out. Ms. Sharma testified that there was no such person as Nick Sharma and that her husband made this name up to mislead CCRA.

Ms. Sharma testified in addition after the CCRA left, that she helped her then-husband destroy records of the King's Head Pub. They put them in plastic bags and put them in the garbage. Ms. Sharma also phoned the Dhamis to ask why her name had been used as the accountant on the search warrant. The Dhamis had told her that the grievor had told them to use her name since she was not working for the Ministry at the time. Ms. Sharma testified that when she spoke to the Director about the CCRA raid she told her that she had never been the bookkeeper for King's Head Pub or any other client: it was the grievor who was the bookkeeper. She stated that she had assisted her husband before she had started work at the Ministry, but that she stopped after she began work there. She also stated that when questioned by the CCRA she supported her husband's story that the work had been done by a Nick Sharma.

Ms. Sharma testified that she gave two cheques from the Dhamis, the search warrant from the CCRA, and some other documents to Ms. Lim. Ms. Sharma also stated in evidence that she had given Ms. Lim the 486 personal computer and a floppy disk from the Aptiva computer. Ms. Sharma also met with Ms. Lim several times to be questioned as to details about the investigation.

Ms. Sharma testified that Mr. Sanjeev Mehan and his wife lived in Canada for three months in 1994. From September to Christmas Day in 1994 the family lived with them. Mr. Sanjeev Mehan returned in May of 2000 for approximately a month. During the time that he lived in Canada he worked for Pryanka Inc. and was paid in cash. She testified that Mr. Sanjeev Mehan never operated a home accounting business from her matrimonial home. She stated that he had his own accounting practice in India.

She testified further that it was her ex-husband who ran the accounting business from their home. He never had a partner, although she assisted him with data entry. She stated further that she had never prepared a financial statement, nor had she prepared GST or PST returns.

When asked specifically why she had told the Ministry about her husband in September 2000 she testified that she had always been afraid of him, that he would throw things and that he was abusive. After the CCRA raid she was frightened that she would get fired because her name was on the warrant. Then she heard from senior managers in the Ministry that the grievor was telling them that she was not capable to the work she was doing and that she was bringing work home in order to finish it. She testified that she had not asked for any “immunity” nor was she promised that if she cooperated with the investigation she would not be fired.

THE EVIDENCE OF GURMIT DHAMI, OPERATOR OF KING'S HEAD PUB

Mr. Dhami testified that he came to Canada in 1992 from India. He opened a mattress factory called Simson Bedding. He also had another business called Pryanka Imports for approximately two years. He testified that the grievor was his accountant and that he also prepared his personal tax returns for him. Mr. Dhami also owned a furniture store called Mr. D’s Furniture, which operated between 1993 and 1996. The grievor was his accountant during the time he owned this store as well. His next venture was a pub in North Bay called King's Head Pub. The grievor was also the accountant for the pub, which was actually owned by his wife, but managed by him. Initially when it first opened he used a local bookkeeper, but then the grievor took over being the accountant in this business as well.

Mr. Dhami testified that from 1992 onward he paid the grievor $300.00 per month which was paid sometimes in cash and sometimes by cheque. Mr. Dhami testified that the CCRA audited King’s Head Pub and subsequently he was charged with tax evasion. Mr. Dhami told the CCRA that the pub’s financial documents were at the grievor's home. He testified further that the grievor told him not to tell the CCRA or anyone that he was his bookkeeper because he would lose his job. Instead the grievor advised Mr. Dhami to use his wife's name or then his brother's name as the accountant. The grievor also told him that he had destroyed all the King’s Head Pub documents not seized by CCRA. This, as the witness put it, had backfired on him because he could not defend himself in the CCRA preceding. He testified further that Ms. Sharma helped her husband with data input and that if information was needed she made the telephone calls. The two families were friends.

Sometime around 1996 or 1997 the grievor visited the Dhamis in North Bay. He told them he had come to audit a business called Exite Battery and that he could arrange a retail sales tax audit for King's Head Pub that would clear the Dhamis of any potential tax liability.

In response to questions about Mr. Sanjeev Mehan, Mr. Dhami testified that he had met the grievor's brother although he could not remember his name. He said he had never used his brother as an accountant. He did not know that Mr. Sanjeev Mehan had an accounting business in Canada, but he was aware that he had a business in India.

Mr. Dhami testified that when Ms. Lim first contacted him, she asked him who his accountant was and he did not want either to get involved in the investigation or to tell. However, when the grievor would not help him with his troubles with the CCRA, he phoned Ms. Lim and told her that the grievor had been his accountant. His contact with the grievor after the CCRA raid was limited. The grievor telephoned right after the seizure of documents to inform him that the CCRA had not gotten all the documents and he had destroyed what was left. Sometime around June 2002 the grievor travelled to North Bay and asked Mr. Dhami not to give evidence against him. The grievor threatened Mr. Dhami that if he did testify he would get a ministry auditor to re-open the Dhami's file, but if he did not testify he would share the benefits of the damages once he won his wrongful dismissal grievance against the government.

When cross-examined, Mr. Dhami stated that he had hired an accountant in 1999 to assist him with the CCRA charges and the mess that the grievor had left him in. Mr. Dhami also said that at no time did the Ministry offer him any kind of a deal to give his evidence.

THE EVIDENCE OF MS. NICOLE ANIDJAR

Ms. Anidjar testified that as the Director of the North York Regional Tax Office she was responsible for a staff of about 340 employees. Before joining the OPS in 1997 she had worked with Revenue Canada and through the years had held several directorship positions within the Ministry. At the time of the hearing she had over thirty years of experience in the area of taxation.

Ms. Anidjar said that she met with Ms. Sharma on August 17, 2000 to discuss a job competition. This was the meeting where Ms. Sharma informed her that her husband was operating an accounting business and about the CCRA seizure of documents at the Mehan matrimonial home. Further, Ms. Sharma disclosed that she was in the middle of a difficult divorce and alleged that her husband was making life difficult for her at work. Ms. Sharma also told the Director that the grievor solicited business while he performed work at the Ministry. And further that he had advised companies on the suppression of sales. Ms. Sharma told the Director that she was concerned that the CCRA warrant was in her name because it was the grievor who was the accountant for King’s Head Pub. Ms. Anidjar informed Ms. Sharma that the allegations with regard to her husband operating an accounting business at home and the CCRA were serious charges that had to be investigated by the Ministry.

A further meeting with Ms. Sharma and an OPSEU representative occurred on September 8, 2000. Ms. Anidjar’s evidence with regard to this meeting was that she was asked by OPSEU for an assurance if Ms. Sharma cooperated with the Ministry that her future would not be affected. Ms. Anidjar testified that she made no such guarantee to Ms. Sharma, and advised her that she should be cooperative with regard to the investigation. Another meeting with Ms. Sharma occurred on September 13, 2000 where Ms. Sharma informed the Director that her husband had helped her to get the job in the Ministry. Ms. Sharma appeared to be under a great deal of stress according to Ms. Anidjar.

Once the decision was made to have IAS investigate the allegations made by Ms. Sharma the Director testified that she acted in an advisory capacity. It was also her role to keep the Deputy Minister, the Assistant Deputy Minister, and Human Resources up-to-date on the developments of the investigation.

When the investigation was finished and a report finalized the Director reviewed the findings and came to the conclusion that the grievor had committed an egregious breach of the conflict of interest rules and regulations. The findings were clear that the grievor was running an accounting business. Further, the report made it clear that the grievor had put these clients in his audit bank. The subsequent audit of these clients revealed suppression of sales. Ms. Anidjar took this to be serious misconduct. Since the grievor was providing bookkeeping services to the clients that were suppressing sales she concluded that this sort of behaviour could not be tolerated.

Ms. Anidjar considered the grievor’s allegation that the business was not his but his brother’s. However she concluded that even if this was true his admitted assistance in his brother’s business put him in a conflict of interest since, as a manager, he must be above reproach and must not be seen to give any person an advantage. For all the above reasons and after discussions with the ADM, her own supervisor, she concluded that termination was the appropriate course of action. She made this decision after reviewing mitigating circumstances. She testified that a tax administrator must be held to a high standard of honesty and trust and that she concluded that the grievor had breached that trust. The grievor was aware of his obligations to disclose a conflict and failed to do so. The employment relationship was totally broken and beyond repair in her view.

THE EVIDENCE OF VARINDER MEHAN

Mr. Mehan testified that he has a B.Com., with honours, and a CA, which he achieved in India in 1986. He came to Canada in June of 1987. He received his CGA in 1991. Mr Mehan joined the Ministry of Finance in 1994 as a Field Auditor and won a competition for Senior Field Auditor in 1995. He won a competition for Corporate Tax Field Auditor in 1996. In 1997 he won another competition to take the position of Senior Analyst. He became a Group Manager Audit Retail Sales Tax in 1998. In 2000 he became a Group Manager Audit in the Corporate Tax. The grievor testified that he achieved five promotions in six years based on competition and merit and that because of all this advancement he had made a lot of enemies. He said that this had led to his downfall. He also testified that he was an excellent employee for the Ministry of Finance.

Mr. Varinder Mehan said that during the OPSEU strike in 1996 when he was an OPSEU member he returned to work after one week of the strike. He stated that he had made enemies within the bargaining unit as a result of crossing the picket line. He testified further that he was the first manager to introduce training to his employees and that this had created jealousy both in the workplace and at home.

Mr. Mehan testified that both the Dhamis and Ms. Sharma were conspiring against him. It was his evidence that the telephone calls that Ms. Lim discovered between his home and various businesses including the Dhamis were made by his ex-wife, Ms. Sharma, and not him. The grievor said that he had never seen the two cheques from King’s Head Pub, issued to him and provided to the Ministry by Ms. Sharma. The grievor also said that Ms. Sharma’s evidence with regard to the CCRA handwriting samples was inaccurate. He testified that both had provided handwriting samples.

Mr. Mehan testified that he was suspended on November 16, 2000. His evidence was that he was asked for his keys and told to leave the office. It was not until May of 2000 that IAS first contacted him. He hired a lawyer to represent him and this lawyer attended with him at a meeting with the Ministry in May of 2001. Every time Ms. Lim asked him a question his lawyer asked for documents and evidence before he answered the question. When he was asked specifically about calls made to a J. Sharma he answered that he had made calls to this individual because he was looking for an apartment. He noted that Ms. Lim only wrote down a response that yes, he had called J. Sharma. When he was questioned about the 2-4-1 Pizza stores and whether he knew the owners, he did tell Ms. Lim that he knew a person called “Sabhi.” At the time he did not know the last name but he testified that a few days after this meeting he provided the proper name to Ms. Lim.

When he was asked about personal tax returns at the May 2001 meeting, the grievor testified that he acknowledged that he did do personal tax returns for friends, but he did not charge them. It was the grievor’s evidence that he did not recognize the list of companies or names retrieved from the home computer. He was adamant in his evidence that he had not done tax returns for any of the companies or individuals found on the home computer. He had done tax returns for his father and mother-in-law and his brother and sister-in-law and two or three friends.

The grievor testified in summary that he did not do any bookkeeping for clients. He did help friends to prepare income tax returns just as a favour but he did not receive any money for these. He acknowledged that he helped his brother in filling out forms such as vendor permit applications and articles for incorporation. He stated that he did not receive any money for this, that he was just helping his brother.

Mr. Mehan testified further that when he was at a vendor’s store he would often assist with forms. A vendor would hand him a cheque and he would write Ministry of Finance on it for them. He also reiterated that his brother had asked him to deposit cheques for 2-4-1 Pizza stores and when he saw that the cheque was blank he filled in Ministry of Finance. On one occasion when he found both a blank cheque in order to make the deposit he wrote Ministry of Finance and he wrote in the amount. He stated that he never helped with anything that was not available to all taxpayers.

With regard to the evidence of two of the employer witnesses that said he was an accountant who was also receiving cash for his work as an accountant he denied this. He provided the board with bank statements showing that there were no deposits of cash. His evidence was that his brother was the accountant and it was not until this hearing that he discovered that his wife was helping his brother. He also produced his brother’s passport to prove that the brother was a resident of Canada. The passport was stamped that Mr. Sanjeev Mehan arrived in Canada September 27, 1994 and that he returned to India on December 27, 1994. He testified that the evidence of Mr. Dhami and Ms. Sharma, that his brother was not a resident of Canada, was not correct. Although the passport did not show the stamp his brother returned to Canada in March of 1995. The grievor stated that his brother, Mr. Sanjeev Mehan, was Pryanka’s accountant.

With respect to the 2-4-1 Pizza stores that appeared in his audit bank, the grievor explained in March or April of 2000 his manager approached him and said that the unit had to achieve a certain number of audits so he selected all of the 2-4-1 Pizza group. He stated that there were over 200 2-4-1 Pizza stores in his audit bank. He also noted that they were all numbered companies. He testified that at the time in question, around April of 2000, he had an administrative clerk assisting him and inputting the list for him. He said he would have put some in himself and some would have been input by the administrative assistant. He noted that the 2-4-1 Pizza franchise owners were often not educated and had difficulty with their records. Thus the Ministry would estimate what was owing in retail sales and then the owner would provide documents and proof if it should be less than the estimate. At some later date his manager again approached him and said not to keep companies in the audit bank over 100 days. Because of his manager’s instructions he cancelled them out. He stated that there had never been a policy in place about how to issue clearance certificates but he knew the procedure which was that a lawyer for a vendor would request a clearance certificate if the business was to be sold. It was not actually part of his job to issue clearance certificates. Service managers reviewed the taxpayer’s information and if it all seemed appropriate a clearance certificate was issued. If the information did not seem correct the company would be referred for an audit. With regards to the 2-4-1 Pizza store #63 he stated the original assessment was issued for $100,000.00 and that there was a refund issued for $60,000.00. He claimed that he did not issue the clearance certificate, which was signed by Dan Massaro.

He testified with regard to the conflict of interest investigation against him in 1994 when there was a complaint by a convenience store owner that he tried to solicit his business during an audit. He stated that when Internal Audit investigated him he advised that when he had been in the vendor’s store and reviewed the cash register, it showed that the vendor was collecting tax but not paying for it. The vendor was not punching in small amounts of sales, but was still collecting the tax for it. He stated further that he took documents for approximately four months from this vendor and figured out that the vendor should pay approximately $10,000.00. He said the vendor was very upset with him.

He stated further that he was fully aware that he would be in a conflict of interest if he operated a bookkeeping operation and received money for it while working for the Ministry. However he stated that no one had ever told him that if his brother was doing the work of bookkeeping and living in the same house that that constituted a conflict. If he had known that that was a conflict he would have declared it.

He testified that he did register a company called Mehan and Mehan in 1992 at the same time as he was working for the Royal Bank. The only income he received under this business was from Associated Accounting and he stated that he has not used the company from 1992 on and that the company expires after five years.

He testified with regard to the evidence of Mr. Dhami that it was Mr. Dhami who had threatened him. He stated that Mr. Dhami said to him that if he would lend him $25,000.00 to pay Revenue Canada, he would not testify against the grievor. The grievor took him to a loan company to assist him but the loan company refused the loan. He testified that he went to Mr. Dhami’s restaurant in 2002 after he learned about Mr. Dhami’s statement to Ms. Lim to ask him why he would give such a statement. He gave no evidence as to what the response was from Mr. Dhami.

The grievor testified that he was annoyed that the employer did not give him a chance to explain himself. He stated that the investigation began in August of 2000 without even informing him that it had begun. He was told in his suspension letter that an audit was going to be done because of a possible conflict, but was not told anything else. It was his evidence that this investigation had totally ruined his reputation and that as a manager he deserved, at a minimum, a meeting to explain the allegations. He also noted in his evidence the only records found by the Ministry were in the computer and that there were no hard copies

THE GRIEVOR’S EVIDENCE ON CROSS-EXAMINATION

On cross-examination the grievor maintained that he did not know the people or companies listed on the home computer. He denied that he knew a person called Manohar Singh Flora. A return retrieved from the home computer was put before him and he was questioned with regard to the language found at page 2 which was the following:

To Whom It May Concern:

This is to confirm that Manohar Singh Flora has been working for Varinder Mehan, Financial Consultant, since February 15, 1993. His weekly hours are ten at $8.00 per hour. He is a permanent part-time employee.

If you need further information please do not hesitate to contact the undersigned at 669-0095.

Yours truly,

Varinder Mehan

The grievor maintained that this person was not employed in his consulting firm and further, that he had never employed anyone in his life.

Counsel for the employer put the grievor’s 1995 tax return before him, showing that a man called Chharbra Rabinder Nath had been paid as an employee of the grievor. Mr. Mehan acknowledged knowing Mr. Nath. He testified that Mr. Nath was doing market research on a company in 1995 on behalf of his brother. His brother wanted to buy the company but did not want the company to know that he was interested in it. So this person was sort of an employee. Mr. Sanjeev Mehan paid Mr. Varinder Mehan, who then paid Mr. Nath for the market research.

The grievor was questioned in cross-examination with regards to a tax return found on the home computer with Mr. Sanjeev Mehan’s name on it. The grievor had said in examination-in-chief that Mr. Sanjeev Mehan and his family lived with the Mehan’s in their matrimonial home. The address on Sanjeev Mehan’s returns indicated a different home address on Midhurst Lane in Mississauga. When questioned about this the grievor explained that this was not his brother’s address; it was an address of a friend. He said that his brother did not want to put his home address on a personal tax return because he believed Ms. Sharma would open it if it came to the Mehan matrimonial home.

He was questioned further about Mr. Jasbir Singh whose 1994 income tax return was also found on the home computer. Mr. Singh is the owner of a 2-4-1 Pizza store on Dixon Road. He was also questioned about Mr. Rajwinder Rai whose tax return was also found on the home computer. He is the owner of a 2-4-1 Pizza store. The grievor denied being the accountant for these people. When asked regarding the evidence that these companies were listed in his Ministry audit bank the grievor testified that he would not recognize the companies because they are listed as numbered companies in the audit bank. He testified further that he would not know who the owner was unless he had asked for the file. He was questioned about the fact that he cancelled audits on both these 2-4-1 Pizza stores and issued clearance certificates. The grievor denied doing this.

Counsel for the employer put a list compiled from the home computer of companies before the grievor and questioned him about an earlier statement during the investigation to the Ministry where he said that these people were his brother’s clients. He testified during the hearing at several points that they must be his brother’s clients but he was not sure now. With regard to the documents of the companies found on the home computer that pre-dated his brother’s arrival in Canada in September of 1994, he stated that the dates must be wrong. He said he could not explain why a tax return for Pat Knowles Investment Inc. was dated in 1993. He stated further that the Ministry, his ex-wife or perhaps Nick or the outside firm that retrieved the documents must have tampered with the dates.

Tax returns for Pat Knowles Investment Inc. were found on the home computer for 1993 to 1997. The grievor denied being the accountant for this company. Counsel put further documents in front of the grievor to show that the returns for Pat Knowles Investment Inc. were identical in format to his own personal return, found on the home computer, which he did acknowledge preparing. The grievor’s explanation for this was that it might have been the same programme, a programme called Can Tax.

Counsel for the employer asked directly who did this work since Mr. Sanjeev Mehan was not yet in the country, and the grievor answered someone else could have done it; he did not know whom.

Having denied any contact with Simson Bedding, counsel questioned why he used the address of this company as his business address in his 1993 tax return. The grievor then admitted knowing Simson Bedding as a company. When asked why he used the address of Simson Bedding he responded that he thought it was more professional than using his home address. He also stated that his ex-wife, Ms. Sharma, was an employee of Simson Bedding. Counsel cross-examined him on this statement saying that two other witnesses said that she did not work at Simson Bedding. The grievor maintained that Ms. Sharma was an employee for this company.

Counsel for the employer questioned the grievor further on his earlier statements that he had no relationships with Pryanka, Simson Bedding or the Dhamis. She put a tax return found on the home computer for a person related to Simson Bedding. The grievor testified that he did not prepare these 1992 returns. Counsel pointed out that this was prior to his brother’s coming to Canada. The grievor testified that there could be other ways for the information to have gotten into the computer and he suggested that his brother might have put in the information later. He flatly denied creating this return.

The tax return of Mirza Mubashar, a 1991 tax return found on the home computer, which included the grievor’s social insurance number, was put before the grievor. He stated that he did not recognize the return and he had no idea why his SIN was in the return. He suspected that the return had been fabricated.

The grievor was questioned on the evidence by Ms. Sharma that he destroyed the Dhami’s records after the CCRA raid. He denied destroying these records. He testified further that he did not want to give his brother’s name to the CCRA and somehow get his brother in trouble. He told CCRA that the accountant was Nick Sharma. Counsel asked where his brother was living at the time of the CCRA seizure and the grievor testified that he was still a resident in the Mehan’s home. He had no idea where Nick Sharma was now. He stated that he really was not sure of Nick’s last name.

Counsel questioned the grievor as to why it was that Mr. Dhami named him as his accountant in the court documents in the CCRA proceeding. He had no explanation. She questioned him as to why Mr. Dhami would blackmail him as the grievor had testified earlier. The grievor stated that he did not know why, but that Mr. Dhami was a friend of his ex-wife, Ms. Sharma. He stated that he called it blackmail because Mr. Dhami telephoned Ms. Lim, the day after he did not get a loan from him. Counsel asked why it was that Mr. Dhami did not then ask Mr. Sanjeev Mehan, if he was his accountant. The grievor had no explanation for this.

The grievor was questioned further about how his brother could have such an extensive list of clients in 1994 when he only arrived in Canada in September of 1994. The grievor said he did not know. Counsel asked why it was that the files on the home computer were deleted, if they were client’s files of his brother. He stated that he did not delete the files, that it was perhaps Ms. Sharma who did so.

Counsel questioned the grievor’s evidence-in-chief that his company was inactive from 1992 on and asked why it is that Chharbra Rabinder Nath is noted on his 1995 income tax return as his employee. He replied that the income that he was getting in 1995 from consulting work was from marking CGA papers only.

THE GRIEVOR’S REPLY EVIDENCE

The grievor testified with regard to clearance certificates that if he was dishonest he could have put his “so-called” clients in his bank so that no other manager could audit them. Further, with regard to the information found on a diskette from the home computer, the list of tax returns of individuals, the grievor said that this information could have been from the hard drive. There was no password on this computer so that anyone could have loaded information onto the computer. He said further that maybe it was not even on the hard drive and just on the diskette. He said there was a lot of “outsourcing” in tax returns and so maybe this was how the information got on his computer. He said that a lot of outsourcing is done when information is sent to India and China for data input.

THE EVIDENCE OF TEJA SIDHU

Mr. Sidhu testified that he was the owner of a 2-4-1 Pizza store, #43. He was involved in the day to day running of the store making the pizza dough, writing the chits, and making bank deposits. He stated that he wrote blank cheques for his accountant and that that was his usual practice. He testified that his accountant was Majeet Singh and that before that it was Mr. Sanjeev Mehan. A man called Nick had introduced him to Mr. Sanjeev Mehan and that they would both come in and pick up sales slips and PST/GST returns from the store.

He testified that when he was audited by the Ministry he was threatened. He testified that the Ministry of Finance auditor told him to confirm that his accountant was the grievor or the Ministry would take him to court. After he was audited he was given a large assessment that he could not pay and he had to close the store.

In cross-examination he testified that he came to Canada in 1977 and initially worked in a factory before opening up his own business. Initially he opened a video business and then in February of 1996 he began a 2-4-1 Pizza franchise. His partners are Rajwinder Rai and Jasbir Singh. He testified further that Rajwinder Rai and Jasbir Singh had all worked at the same factory. His partner, Mr. Rai, was responsible for all the paperwork and so made the arrangements for the accountant. He stated that he did meet Mr. Sanjeev Mehan sometimes when he came to pick up paperwork (and pizza) but that he only came a few times. When asked whether he had met Nick he answered that Nick used to come once in a while and that sometimes he would give documents to him.

Mr Sidhu testified that he believed that Mr. Sanjeev Mehan was living in the Maple area. He said that he had not met Mr. Varinder Mehan at the time he operated this store and stated that Mr. Sanjeev Mehan never mentioned that he had a brother. He was asked specifically whether he knew that it was Mr. Varinder Mehan who wrote the name of the Ministry on some of the cheques that were deposited on behalf of his business and he said that he did not know that.

He was asked specifically when Mr. Sanjeev Mehan would have visited the store and his answer was anytime from 1996 to 2001. Mr. Sidhu testified that he did not so much terminate Mr. Sanjeev Mehan’s services as an accountant as Mr. Sanjeev Mehan just did not turn up to help him with the audit. He stated that it was a very upsetting experience. He stated further that they had tried to contact him and ask for help but that there was no response. His partner, Mr. Rai, was to handle the audit people since he himself was taking care of the store. He did not know if Mr. Rai asked for documents from Mr. Sanjeev Mehan.

His new accountant, Mr. Singh had an office near the store so they got him to do the work. The date of the audit was early 2000 and there were at least three visits from the Ministry. The first visit by the Ministry was very short, only a minute or two, and he advised the Ministry person to speak with his partner, Mr. Rai. The second visit was longer. Two people from the Ministry attended. Ms. Lim came into the store for approximately twenty minutes. He repeated his evidence-in-chief that he was threatened by one of the Ministry representatives that if he did not agree that Mr. Varinder Mehan was his accountant the Ministry would take him to court. He stated that he asked who Varinder Mehan was and why the Ministry people were being so hard. He said at the time he did not know a Varinder Mehan and neither did Mr. Rai. Mr. Rai had specifically asked the witness who Varinder Mehan was.

He stated further in cross-examination that in 2001 Mr. Varinder Mehan came to visit him and introduced himself as Mr. Sanjeev Mehan’s brother. He came with a letter for him to sign and although he cannot remember the subject matter he remembers that it was all right so he signed it. He said that his partner had another 2-4-1 Pizza store. Mr. Rai has a store on Dixon Road.

THE EVIDENCE OF RAJWINDER RAI

Mr. Rai testified that he was the owner and director of several 2-4-1 Pizza stores - #61, #43 and #80. He had partners. For store #80 his partner was Jasbir Singh and for store #43 it was Teju Sidhu and Jasbir Singh. He was in a partnership for store #61 with Jasbir Singh and Caldee Singh. He testified that he was responsible for sales and finances and that he visited the stores almost every day. He kept an eye on how the service was going and the housekeeping. He collected the sales information to pass to the accountant. His accountants at first were a man called Nick and Mr. Sanjeev Mehan, and then after than Mr. Manjeev Singh. He testified that all three stores were audited.

Mr. Rai said that a lawyer had acted on his behalf to get a clearance certificate for one of his stores. His lawyer received a letter from a Group Manager of Audit, on June 29, 2001 stating that the clearance certificate was not valid and that an audit had to be done of one of his stores, #61. They had sought a clearance certificate because the three partners were going to split the ownership and they wanted to clear any tax liability.

On cross-examination Mr. Rai testified that he was born in India and came to Canada in 1980. Currently he works for Magna International. He still runs several 2-4-1 Pizza stores and he is also part owner of a pizza store in Buffalo. He testified that he took care of the accounting work for the stores, but that the accountant did all the work. The accountants were Mr. Sanjeev Mehan and Nick. He testified that he met Nick in 1990. Initially Nick was doing his personal tax returns and then later took over the business accounts. He didn’t know Nick’s last name but thought it was Sharma. He met with Nick at the Albion Mall or sometimes at Mr. Sanjeev Mehan’s home. He testified further that it was through an advertisement in an Indian newspaper that he met with Nick. He testified that Nick started to work for Mr. Sanjeev Mehan in 1996. It was through Nick that he met Mr. Sanjeev Mehan. He stated that Nick did his personal tax returns from 1990 to 1999, then Nick moved away and he does not know where he went. The first time that he met Mr. Varinder Mehan was approximately 2001, perhaps 2002. Mr. Mehan called him to say he was having a problem with the Ministry and that he wanted a letter stating the name of his accountant.

Counsel for the employer asked the witness to state what his social insurance number was and he provided it. She then put a 1992 tax return with his name and the social security number as he had identified, which was found in the Mehan home computer, and asked him to comment. The witness became very upset and required a break.

When his cross-examination resumed, counsel stated that the Ministry believed that Mr. Varinder Mehan was his accountant. The witness was adamant that it was not so. He repeated that it was Nick and Mr. Sanjeev Mehan. He stated that he delivered the sales information for each of the stores on a monthly basis to either Mr. Sanjeev Mehan or to Nick. Mr. Sanjeev Mehan called to tell him he was going back to India around the end of 1999 and Nick left sometime in early 2000. Counsel for the employer also put financial statements before the witness, and payroll records for store #61. He testified that he did not know how this information could have been found on the Mehan home computer.

THE EMPLOYER’S SUBMISSION

Counsel for the employer argued that the evidence clearly established that the grievor was operating an accounting/bookkeeping business. She argued that this amounted to a conflict of interest contrary to the regulations under the Public Service Act and the Ministry Directives and Policies on Conflict of Interest. Counsel argued that the grievor’s denial that he was operating an accounting/bookkeeping business is not credible, nor is his testimony that it was his brother or Nick Sharma who were operating the business. Counsel pointed out inconsistencies and contradictions in the grievor’s evidence to support her submission that his evidence was not credible.

In counsel’s submission public servants are generally held to a higher standard than in the private sector. The TRD policy specifically prohibits an employee of the Ministry from engaging in “outside activities that include the provision of financial or accounting services for any individual, corporation, enterprise or organization” (Section 2.3 TRD policy). The grievor was fully aware of this policy and had signed an acknowledgement form proving that he had received copy of the TRD policy. Thus there was no doubt in counsel’s submission that the grievor was aware that it was improper to conduct an accounting/bookkeeping business while he was a Ministry employee. Counsel argued that case law supported a finding of a more serious conflict of interest where there was a strong overlap between the grievor’s private operation and the work done for the employer.

The issue in counsel’s submission is whether or not the misconduct happened and, if it happened, whether or not it was deserving of discipline. The next issue is whether dismissal was appropriate in the circumstances. Counsel argued that it is clear that documentary evidence shows the grievor was operating a business well before his brother arrived in Canada and while working for the employer. The evidence is also clear that the grievor benefited financially. In making the decision to dismiss the grievor the employer considered mitigating circumstances, the fact that the grievor was fully aware of the conflict of interest rules, the seriousness of the conflict of interest, and concluded that dismissal was the only appropriate penalty here. The fact that companies linked to the grievor were found in his manager’s audit bank and that these companies were found to be suppressing sales was of grave concern to the employer. Counsel argued that this amounted to a breach of trust and that the employment relationship was not reconcilable.

Counsel for the employer relied on the following cases in support of her argument:

OPSEU (Edward) and the Ministry of Health (1995) GSB 2216/94 (Finley); OPSEU (Van der Linden) and the Ministry of Industry and Tourism (1980) GSB 247/79 (Swinton); Re Woodward Stores Limited and United Food and Commercial Workers, Local 2000 (1987) 1987 CanLII 8818 (BC LA), 28 L.A.C. (3rd) 59 (Fraser); Re Canada Customs and Revenue Agency and Oliver (2003) 2003 PSSRB 43, 118 L.A.C. (4th) 414 (PSSRB); Sarin and Treasury Board (Energy, Mines and Resources Canada) (1986) 9 PSSRB Decision 44 (Bendel); Lalla and Treasury Board (Industry, Science and Technology) (1994) 25 PSSRB Decision 24 (Tenace); Perras and Treasury Board (National Revenue-Customs and Excise) (1989) 15 PSSRB Decision 11 (D’Avignon); OPSEU (Guelph) and the Ministry of Transportation (2003) GSB 2001/0562 (Harris); OPSEU (Hannen) and Ministry of Economic Development (Trade and Tourism) (1988) GSB 0008/96 (Gray); Reid and Treasury Board (Revenue Canada-Customs and Excise) (1991) 20 PSSRB Decision 34 (Chodos).

THE GRIEVOR’S SUBMISSION

Mr. Varinder Mehan submitted that he was wrongly discharged from his employment on August 30, 2001 after being suspended on November 16, 2000 by the employer on the grounds of conflict of interest. He submitted that he had not been informed of the reasons for his suspension, nor was he given an opportunity to explain his conduct, which he stated, was “unusual and surprising, discriminatory and extremely unreasonable on the part of the employer.” He further submitted that this had caused significant damage to his reputation. He took the position that the investigation had been lengthy and discriminatory, and he said that he had been discharged on August 30, 2001 without an opportunity to speak to the allegations against him.

Mr. Mehan argued that the investigation had begun because his ex-wife was seeking additional financial support in their divorce preceding. Mr. Mehan stated that his wife had filed an affidavit in the Newmarket court claiming that he made $50,000 in cash from a business in addition to his normal salary. His ex-wife then informed the manager who in turn informed Ms. Lim who was in charge of the conflict of interest investigation. Mr. Mehan argued that his ex-wife manipulated IAS, Ms. Lim and Ms. Anidjar. He also argued that his wife’s suspension at the same time as his on November 16, 2000 was a sham. He believes this is true because he was discharged on August 30, 2001 and his ex-wife was not.

Mr. Mehan submitted that the documents tendered in this hearing proved nothing except that they were “regenerated from the deleted hard drive of a computer.” He submitted further that no source documents were produced with any proof that he had prepared them. He argued that the two witnesses presented by the employer, his ex-wife and Mr. Dhami should not be believed and that it would be grossly unfair to the grievor to rely upon their evidence. Mr. Mehan also submitted that he had a clean record and seven years of good service to the employer. He submitted that someone with excellent performance and no attendance problems would not find the time for a side business like bookkeeping, which is time consuming. He submitted that had he been doing such a business, his performance and attendance at work would have been affected.

Mr. Mehan submitted that there were several issues before the board. The first is whether or not the board should accept the employer’s investigation and evidence as unbiased and non-discriminatory. The next question is whether the board considered the grievor’s conduct to constitute a conflict of interest. The next issue is whether the termination was justified or a lesser penalty should be substituted. The final issue is whether or not it is appropriate to order compensation for damage to his reputation, for his mental stress, and the bad faith on the part of the employer.

Mr. Mehan urged me to find that the evidence did not support a finding that he gained financially from any of the knowledge that he obtained in his employment with the Ministry. He argued that the information taken from the computer had never been authenticated. Further, there was no evidence that the data found on the computer had not been altered or fabricated between June 2000 and September 2000. The grievor had left the matrimonial home in June 2000. He further noted that he had never been given any prior oral or written warning about conflict of interest or proposed disciplinary actions. Thus he argued the termination was unjust and even if the employer had had some doubts about his situation, a lesser penalty should have been imposed.

Mr. Mehan argued that he had been firm in his evidence that he was not involved in any financial/bookkeeping business. He did admit that he had prepared some personal tax returns for family friends and relatives, but without payment. He stated this is permitted under the conflict of interest guidelines, TRD paragraph 2.4. He also said that he admitted that he had assisted his brother in filing some of the forms and non-bookkeeping documents such as Articles of Incorporation. He had assisted his brother with vendor permit forms and cheques, but did nothing for his brother that he would not have done for any other member of the public in his official capacity as a tax auditor or manager. He submitted that it was a common practice for the employer’s staff to help the general public in filling out such forms.

Mr. Mehan also pointed out that his evidence was clear that it was his brother, Mr. Sanjeev Mehan, who lived with them and ran an accounting/bookkeeping business from his home with his partner, Nick Sharma. His evidence was clear he submitted that any and all records found on the home computer were those of Mr. Sanjeev Mehan or Mr. Nick Sharma. He noted that both his witnesses, Mr. Sidhu and Mr. Rai, confirmed this evidence.

With regard to the allegation made at the hearing and found in the report that he was responsible for issuing a clearance certificate for the 2-4-1 Pizza Store, #63, which was later found to have suppressed sales, he argued that his evidence was clear that it was the service manager’s responsibility to issue a clearance certificate and not an audit manager. It is the service manager who makes an audit referral and in this case no audit referral was ever made. However, Mr. Mehan submitted that when he allowed the 2-4-1 Pizza storeowner to use a photocopied clearance certificate, it was a “professional misjudgement”.

In summary, Mr. Mehan argued that the dismissal was wrong. But he noted that the relationship between himself and the employer had deteriorated to such an extent that he no longer wished to be re-instated. In his written submission to the board Mr. Mehan stated:

The grievor does not want to work for this employer any more and simply wants a judgement that this dismissal was unjustified and that the employer’s treatment to managerial employees, especially to the grievor, was unjust. In addition, the employer should be warned not to indulge in biased and discriminatory investigations and create situations that lead to destroying the reputation of any individual. The grievor should be awarded the damages, as the board feels appropriate.

REPLY ARGUMENT

Counsel for the employer made the following points in direct response to the grievor’s argument. Mr. Mehan argued that all the documents that the employer was relying on pre-date 1997. However, counsel argued that it was clear that documents, for example for King’s Head Pub, went to 1999. That was when the CCRA seized the King’s Head Pub documents from the Mehan house. Regarding the argument put forward by the grievor that the documents found on the home computer could have been altered or were not authenticated, counsel argued that the grievor had said the documents of the clients found on this computer were his brother’s and/or his brother’s partner, Nick Sharma. Thus it was the grievor’s position that his brother used the home computer.

With regard to the grievor’s argument that he simply cancelled two stores out of his audit bank, 2-4-1 Pizza, #80 and 2-4-1 Pizza, #61, counsel pointed out that the evidence was clear they were not simply cancelled out of the audit bank, but they were given clearance certificates by the grievor. The evidence also was clear that the grievor had used a photocopied clearance certificate to reduce the liability of 2-4-1 Pizza Store, #63.

Counsel argued in sum that the grievor had been given ample opportunity to provide information and documentation to prove that he was not running a business before his employment was terminated but he did not do so. The employer had established the conflict of interest and counsel asked the board to dismiss the grievance.

DECISION

Mr. Sanjeev Mehan failed to attend on May 26 to finish his cross-examination. This date had been scheduled with his concurrence in December 2003.

The grievor requested an adjournment. The only reason given to the board for this non-attendance was that Mr. Sanjeev Mehan left India on or about May 24, 2004 to fly to London and then on to Toronto. Mr. Varinder Mehan stated that he received a voice mail message on May 25 from his brother that his brother was stranded in London, having missed the British Airways flight that he was scheduled on, because of a delay. He did not provide a flight itinerary or any reason for why his brother was not able to fly from London to Toronto since arriving in London on May 24.

Counsel for the employer, Ms. Mohamed, argued that the motion should be dismissed for several reasons, but primarily 1) because the grievor gave no cogent or compelling reasons for Mr. Sanjeev Mehan not appearing, and 2) because to allow the adjournment would deny the employer's right to proceed and amount to an abuse of process.

Counsel argued that the employer has gone beyond what is generally required for setting dates for this matter, which began on September 17, 2002. The record showed that many dates were set and cancelled for the convenience of Mr. Mehan's witnesses. For example, February dates in 2003 were cancelled to accommodate the needs of Mr. Mehan’s witnesses. The dates in question - May 26, 27 - were set last December 10, 2003 with Mr. Sanjeev Mehan's agreement so that he could return to the stand for the remainder of his cross-examination. This was after the Board had offered to schedule an additional day between Christmas and New Year’s Eve, so that Mr. Sanjeev Mehan could finish his evidence without having to return to Canada. Mr. Sanjeev Mehan declined this offer and agreed to the May dates. Since Mr. Sanjeev Mehan knew about the dates for over five months, counsel argued that there was no excuse for his not attending and that it would not be fair to the employer, who was prepared to go forward.

Counsel argued further that the grievor did not provide a clear and cogent reason for the adjournment. She provided information from British Airways that there were no flight delays between India and London on May 24. Had Mr. Sanjeev Mehan missed his flight (BA0093) to Toronto on May 24 there was a later one leaving that day with seats available. There were two flights on the 25th and two on the 26th. Thus counsel argued the reason given was simply implausible.

The grievor's response to the last argument was that perhaps his brother was ill in London - he could not explain the reason for not making one of the connecting flights.

Having carefully considered these submissions I denied the motion to adjourn and the hearing proceeded. This board has the discretion to grant adjournments, but there is no right to one. There must be some clear and cogent reason for the request. I found that there was no credible reason for the request in this case. There was nothing before me to indicate when Mr. Sanjeev Mehan would arrive or even if he was truly en route.

Counsel for the employer argued that if the motion was denied I should dismiss the grievance. I was not prepared to do this. I decided that it would not be appropriate in this case. However, I granted the second remedy requested, which is that the board disregard all of Mr. Sanjeev Mehan’s evidence, since counsel for the employer was not able to finish cross-examining him. As a result of this interim ruling issued orally on May 26th, I have not recorded the viva voce evidence given by Mr. Sanjeev Mehan.

DECISION ON THE MERITS OF THE GRIEVANCE

The first issue that must be addressed is whether Mr. Varinder Mehan was operating an accounting business from his home, while he was an employee of the Ministry of Finance.

Having carefully considered all the evidence, the viva voce and documentary evidence, I have come to a conclusion that Mr. Mehan was operating a financial and accounting business from his home. The onus was on the Ministry to establish that a business was being operated and that Mr. Mehan was the one operating the business. In order to satisfy that onus the Ministry provided documents and oral evidence that Mr. Mehan and not his brother or any other person was operating the business. Without pointing to all the evidence that supports this conclusion, since I have summarized it in some detail, I find for example that the documents seized by the CCRA on January 28, 1999 for King’s Head Pub and the information from the CCRA that a business was being conducted in the Mehan matrimonial home is persuasive. The evidence described open files, receipts, and invoices in a home office, consistent with a business being run from the home. Ms. Sharma testified that her husband ran an accounting business and she assisted her husband by data entry in this home business. Her evidence is credible. She was consistent, forthright and her evidence was plausible. Mr. Dhami, the person running King’s Head Pub, testified that initially he did not want to get involved in the investigation or tell Ms. Lim that it was Mr. Varinder Mehan who was his accountant. However when he went to the grievor for assistance and got no help he decided to phone the investigator and tell her the truth. Mr. Dhami’s evidence was clear and consistent that the grievor was his accountant and had been since 1992. He had paid Mr. Mehan $300.00 per month, mostly in cash and sometimes by cheque. Two uncashed cheques, dated October 12 and 21, 1998, from King’s Head Pub issued to Mr. Varinder Mehan for $1,000.00 each support Mr. Dhami’s evidence that the grievor was his accountant. Mr. Dhami indicated these were not cashed because Mr. Mehan wanted cash instead. Mr. Dhami’s evidence also supports Ms. Sharma’s statement that she was not his bookkeeper. Mr. Varinder Mehan told Mr. Dhami to tell the CCRA that his bookkeeper was Ms. Sharma because, if Mr. Dhami told the CCRA the truth, Mr. Varinder Mehan said he would lose his job.

The evidence regarding King’s Head Pub and the evidence with regard to several 2-4-1 Pizza stores and an operation called N.D. Business Centre establishes that the grievor was operating a substantial part-time accounting business from his home. Although the files on a 486 home computer had been deleted, a consulting company was able to recover a number of files. That evidence included financial records, statements, payroll records, T-4 summaries etc. for various companies between the years of 1991 and 1997. Personal tax returns of various people including people associated with the companies found on the home computer were also on the Mehan home computer. One of the grievor’s own witnesses, Mr. Rai, was surprised to see his 1992 personal tax return (found on the Mehan home computer) presented during cross examination when in his chief he had claimed not to have met the grievor until 2001 or 2002.

The grievor’s allegation that these documents and the clients belonged to his brother is simply not credible. Mr. Sanjeev Mehan did not arrive in Canada until September 1994. The returns on financial documents found on the home computer date back to 1991. The grievor had no explanation for this. Further, the best evidence before this board is that Mr. Sanjeev Mehan and his family came to Canada in September 1994 and left Christmas day of the same year. This was the evidence of Ms. Sharma and it is corroborated by Mr. Sanjeev Mehan’s passport, provided by the grievor. His passport shows that Canadian “Immigration Canada” stamp, dated September 27, 1994. It also shows a return to India on December 27, 1994. The passport was originally issued on February 1990 and was renewed in 1995 to February 18, 2000. It also shows Mr. Sanjeev Mehan’s permanent residence as in Chandigarh, India. There are no further stamps for Canada customs and immigration on the passport, although there are several stamps showing travel from India to other countries in 1995.

Further, Ms. Lim provided emails from the Indian Chartered Accountant’s Association that Mr. Sanjeev Mehan was a Chartered Accountant in good standing in India in the 1990s and is currently so. A representative of the association responded to Ms. Lim that if Mr. Sanjeev Mehan had worked in Canada between 1994 and 1999, he was obliged to inform them. The association had no record or knowledge that Mr. Sanjeev Mehan was not in India during the time the grievor says he was living in Canada.

Most importantly, the documents on the home computer date back to 1991 when the computer was purchased by Mr. Varinder Mehan and Ms. Sharma. The grievor’s evidence that the client information found on it was his brother’s is, therefore, simply not credible. As noted earlier, his brother did not arrive until September 1994. At one point in his evidence the grievor suggested that it could be that this information came from “Nick Sharma.” The grievor would have the board believe that this man, whose last name he was unsure about, used his personal computer. The evidence of Ms. Sharma is that there is no Nick Sharma. While the grievor and his witnesses claim to know him and to have seen him, not one document was provided from the home computer with his name on it. Nor was there any other evidence that would support a finding that Nick Sharma was an employee of Mr. Sanjeev Mehan or that he even existed as alleged by the grievor.

The grievor also stated at various times that he did not know how this information got onto the 486 computer. In cross-examination he suggested that, since there is a lot of outsourcing done these days in India and in China, perhaps this is how the information between 1991 and his brother’s arrival got onto the computer.

It is well-established law that in assessing the credibility of a witness, especially in the case where there is a conflict in the evidence, the test of truth must be whether the witness’ story accords with the preponderance of the probabilities. Given the inconsistencies, contradictions and lack of plausibility in the grievor’s evidence, and of his witnesses, I do not accept it. It is clear from the evidence that Mr. Varinder Mehan operated an accounting business, under the name Mehan and Mehan, which he acknowledged he registered in 1991. He told the first investigator in 1994 that he ran an accounting business before he joined the Ministry in 1994. But in his evidence before the board, he denies running a business between 1991 and 1994. I have to conclude that the only reason for denying this now is because the clients that he served between 1991 and before he joined the Ministry, are the same or related clients as those he served between 1994 and 1999. Documents found on the home computer establish this history, Mr. Dhami’s companies being just one example. Thus, the evidence establishes that grievor began a business in 1991 and continued to run this business while the Ministry employed him.

To the extent that both Mr Sidhu and Mr. Rai echoed the grievor’s evidence that he was not their accountant, I do not accept their testimony. Mr. Rai was unable to explain how his 1992 personal income tax return was found on the Mehan’s 486 home computer, when he testified in chief that he first met Mr. Varinder Mehan in or around 2002. He maintained his story that someone called Nick did his tax returns. He did not know Nick’s last name, or his address, either current or old, and since he always paid him in cash, he had no documents that would support his testimony that Nick was his accountant. Moreover, Mr. Rai’s 2-4-1 Pizza store # 80 and Mr. Sidhu 2-4-1 Pizza store #43 were linked to the grievor during the investigation. Documents for both businesses were found on the Mehan computer and the stores were found in the grievor’s audit bank. Both stores were subsequently audited by the Ministry and found to be suppressing sales. Given this documentary evidence, I find that I cannot accept their testimony.

Given the grievor’s lack of credibility, his witnesses’ lack of credibility, and the clear, consistent, cogent evidence of the employer, I find that it was Mr. Varinder Mehan who was operating an accounting/bookkeeping business from his home.

Having found that the grievor was operating an accounting business while an employee of the Ministry, the next issue for this board to decide is whether this amounts to a conflict of interest so serious that it warrants dismissal. It is clear from the record that the grievor contravened the conflict of interest guidelines for employees for the tax revenue division by operating an accounting business. The Tax Revenue Division’s Guidelines provide:

Conflict of Interest Guidelines for Employees – Tax Revenue Division

2.3 Providing Financial or Accounting Services

Tax Revenue Division employees working in a function that involves direct contact with the public, auditing taxpayers’ financial accounting systems, remittances, refund or benefit applications, or collecting overdue taxpayer accounts must no engage in outside activities that include the provision of financial or accounting services for any individual, corporation, enterprise or organization. Engaging in such activities, whether or not employees are reimbursed for such services, could result in a real or potential conflict of interest. If such employees would like to provide financial or accounting services for a business owned by a spouse or close family member, then the employee must seek advice from the Deputy Minister before providing such services.

Employees that have training in accounting, but do not work in a function that involves direct contact with the public, auditing or collecting, must seek advice from the Deputy Minister before engaging in an outside activity of providing financial or accounting services.

Employees wishing to sell units in mutual funds for an outside company must also seek advice from the Deputy Minister before engaging in such activity.

When financial and accounting services are provided to any individual, corporation, enterprise or organization, a conflict of interest will exist when employees use information gained through their work.

This guideline provides that anyone working in the Ministry in the Tax Revenue Division with direct contact with the public in a role of auditing taxpayers financial accounting systems must not engage in any “financial or accounting services for any individual, corporation, enterprise or organization.” The provision further provides that even if there is no remuneration for such work the employee could put himself or herself into a real or potential conflict of interest. The evidence is clear that Mr. Mehan was working in direct contact with the public. He began as a Field Auditor in 1994. As an Audit Manager he was supervising those in the field doing audits. It is also evident that the grievor was remunerated for his work. For example, Mr. Dhami’s evidence was that he paid the grievor $300 a month or around $3000 a year, usually in cash, between 1992 and 1999 for accounting services. Thus, the evidence establishes that Mr. Mehan profited in his private accounting business while in his position in the Ministry, which is a serious breach of the Conflict of Interest Regulation under the Public Service Act, which provides as follows:

Ont. Reg. 435/97 – Rules of Conduct for Public Servants made under the Public Service Act

A public servant shall not become employed by or engage in a business or undertaking outside his or her employment in the service of the Crown in any of the following circumstances:

1. If the public servant’s private interests in connection with the employment or undertaking could conflict with his or her duties to the Crown.

2. If the employment or undertaking would interfere with the public servant’s ability to perform his or her duties to the Crown.

3. If the employment is in a professional capacity and is likely to influence or detrimentally affect the public servant’s ability to perform his or her duties to the crown.

4. If the employment would constitute full-time employment for another person. This paragraph does not apply with respect to a public servant who is employed part-time by the Crown, or is on a leave of absence (as defined in subsection 70(1) of the Regulation 977 of the Revised Regulations of Ontario, 199) or secondment.

5. If, in connection with the employment or undertaking, any person would derive an advantage from the public servant’s employment as a public servant.

6. If government premises, equipment or supplies are used in the employment or undertaking.

The evidence clearly establishes that Mr. Mehan issued two clearance certificates for two 2-4-1 Pizza stores, #80 and #61, who were his clients. These stores were subsequently found to be suppressing sales to avoid remitting sales tax to the Ontario government. In addition, Mr. Dhami testified that Mr. Mehan offered to get a clearance certificate for Kings’ Head Pub. Taken together this evidence supports a finding that the grievor was using his position in the Ministry to assist clients for whom he was doing bookkeeping and accounting work.

The board heard evidence that clearance certificates are generally issued under the Retail Sales Tax Act to protect the purchaser of a business from tax liability prior to purchase. When a request for certificate is made, the tax office considers whether an audit is necessary before issuing the clearance certificate. There was also evidence that if a manager had a company or store in his audit bank, no other manager would review those businesses. Mr. Mehan had put a large number of 2-4-1 Pizza stores from his area and from outside his jurisdiction, including many that were his clients in his audit bank. By doing this he insured that other managers would not audit these stores, thus protecting them from Ministry scrutiny. In sum, I find the grievor put himself into a conflict of interest with his duty to the Crown, breaching the regulation under the Public Service Act, most particularly section 5 of that regulation which provides that a conflict of interest will occur “if in connection with the employment or undertaking, any person would derive an advantage from the public servant’s employment as a public servant.” By issuing clearance certificates to the two 2-4-1- Pizza’s stores, who were his clients, and without a proper audit, he used his position as a public servant to advantage his clients and for personal gain, and breached his duty to be faithful to the Crown.

Public servants are obliged to disclose even the possibility that an outside business activity may result in a conflict of interest. The Corporate policy provides as follows:

Conflict of Interest and Post-Service Directive for Public Servants and Public Officials- section 23

(a) Any situation covered by the provisions in this Part that may be a real or potential conflict of interest between the private interests of a public servant or a public official and his or her duties and responsibilities to the Crown must be disclosed to the designated official to resolve. This includes:

(i) any conflict of interest in which the individual may benefit personally from the matter that, in the course of the individual’s duties, he or she can influence;

(ii) any conflict of interest situation arising from the individual’s outside activities.

(b) Where there may be a conflict of interest in a particular situation, the public servant or public official must make a confidential report to the designated official. The report must identify the nature of the potential conflict of interest.

(c) The designated official may require that the identified activity be curtailed, modified or stopped if he or she concludes that a real or potential conflict of interest exists.

The Ministry of Finance employees are bound to follow both the corporate conflict of interest guidelines and the Tax Revenue Division guidelines. The evidence establishes that Mr. Mehan was well aware of the conflict of interest guidelines. He signed an acknowledgment in 1994 that he had received a copy of the guideline. Moreover, in 1994, he was investigated for allegedly soliciting clients while doing a sales tax audit on a vendor. Mr. Mehan told the investigator that he had been operating an accounting business before joining the Ministry. The investigator also recorded Mr. Mehan’s statement, that if he were working doing bookkeeping or accounting that would be a conflict of interest. Thus this evidence shows that the grievor was well aware that operating a bookkeeping/accounting business was contrary to the conflict of interest guidelines of the Ministry.

The evidence before this board shows that in 1994, when he was a Field Auditor and during this first investigation of the grievor, he was operating an accounting/bookkeeping business. So not only did Mr. Mehan not disclose a potential conflict of interest, he knew at the time that he was in an actual conflict of interest and failed to disclose it. Moreover some five years later he told Mr. Dhami that CCRA must not learn that he was the accountant for Kings’ Head Pub, or he would lose his job. Clearly the grievor recognized that operating an accounting business was not permitted under the conflict of interest guidelines of the Ministry, and yet he operated his business for over five years while an employee.

Counsel for the employer argued that case law establishes that public servants are generally held to a higher standard with regard to conflict of interest because members of the public are not necessarily able to distinguish between the public and private role of the employee. Further, actual conflicts of interest have generally been considered more serious and dismissal has been upheld in these cases. In cases where the conflict of interest has actually resulted in dishonesty, the conflict of interest has been taken to be very serious and to justify dismissal. Having considered all the evidence in this case I have no hesitation in finding that Mr. Mehan put himself in a serious conflict of interest in his role initially as a Field Auditor and ultimately as a Manager in the Tax Revenue Division of the Ministry. As noted earlier his conduct, particularly with regard to issuing clearance certificates to vendors who were subsequently found to be suppressing sales, is serious and justifies discipline. The fact that he operated the business over so many years is also significant. And finally that he clearly knew that if he were caught he would lose his job makes his misconduct more egregious.

In this case the employer argued that as a Tax Audit Manager the grievor must be seen as completely trustworthy. The employer argued that the trust here had been irretrievably broken and, therefore, dismissal was warranted. I am persuaded by the employer’s argument in this case. By operating an accounting business, the grievor put himself in a serious conflict of interest, and used his position for the benefit of his clients, his own gain and to the significant detriment of the Ministry. This is such a serious breach of trust that, in my view, dismissal is appropriate.

There are no mitigating factors to support a lesser penalty. There can be no doubt from the record that the grievor was not forthcoming during the investigation or in the hearing into this matter. The only mitigating factors to be considered are the grievor’s discipline free record and his seven years of service. It is hard to give much weight to the lack of discipline or his service, when the evidence establishes that the grievor operated an accounting business throughout his active tenure at the Ministry. Thus, there are no mitigating factors that warrant the substitution of a lesser penalty.

Mr. Mehan accused the Ministry of acting in bad faith and being discriminatory when they investigated him. He also suggested that he was a victim of a conspiracy, largely driven by his ex-wife. However, there is no evidence to support these allegations. As the summary of the evidence in this case shows, the Ministry conducted a meticulous and fair investigation into very serious allegations against the grievor.

Thus having carefully considered the evidence and submissions in this case, I hereby dismiss the grievance and uphold the discharge.

Dated at Toronto this 7th day of November 2005.