The eHealth Ontario spending scandal has claimed one of the most powerful people at Queen's Park – Health Minister David Caplan, whose resignation forces Premier Dalton McGuinty to revamp his cabinet.

But McGuinty has one hand tied behind his back as he struggles to reshape his embattled Liberal government because Deputy Premier George Smitherman, who is planning to run for Toronto mayor next year, does not want to quit his energy and infrastructure post just yet.

"Things are chaotic," an insider said as worried Liberal MPPs held a late-night conference call to demand answers about the confusion at the highest levels of the provincial government.

Caplan's departure from cabinet, which takes effect Wednesday, comes as the auditor general releases a scathing 50-page report concluding successive Progressive Conservative and Liberal administrations squandered more than $1 billion on electronic health records for patients with little to show for it.

The health minister's move comes after McGuinty spent months rejecting opposition calls for Caplan's resignation. Critics cited Caplan's handling of eHealth, as well as his performance previously as minister responsible for the Ontario Lottery and Gaming Corp., where problems included lottery kiosk clerks and other insiders winning a stunning $198 million in prizes.

"The auditor is going to say eHealth has fixed a lot of things and that's good, but the blame for the disaster really lies with the ministry," said a source privy to the report.

Other heads should roll, charged a former eHealth official. "To have spent $1 billion and achieved very little – there is a severe problem with the bureaucratic leadership."

Sources said Tuesday night the top contender for Caplan's job was Attorney General Chris Bentley.

Such a move would set dominoes tumbling and could see new assignments for Children and Youth Services Minister Deb Matthews, Aboriginal Affairs Minister Brad Duguid and Environment Minister John Gerretsen, among others.

Caplan, who was not available for comment, is scion of one of the most prominent Liberal families in Ontario. His mother, Elinor Caplan, was health minister under premier David Peterson. She left cabinet under a cloud in 1986 but returned the following year and later served as a federal minister.

MPP for Don Valley East since 1997, the affable Caplan, a married father of two young sons, has many friends and admirers in the party. His departure had them in shock.

"None of this happened on his tenure – it's all under George," said a senior Liberal, referring to Smitherman, health minister from 2003 until 2008. "But with the report coming out, David takes the fall and is a good soldier."

Another long-time friend fought back tears as she described Caplan as "competent, capable and compassionate."

A high-ranking official insisted Smitherman's mayoral ambitions "aren't part of the equation" as McGuinty replaces Caplan, but conceded another shuffle looms to address that situation.

Progressive Conservative Leader Tim Hudak, who called Caplan's ousting "long overdue," said Smitherman deserves to be punished for the eHealth scandal since he was in charge longer. "Smitherman should be gone. Quite frankly, he has one foot already in the mayor's campaign office."

NDP Leader Andrea Horwath said Caplan should have resigned last June when the eHealth scandal erupted with details of $16 million in untendered contracts and consultants earning $3,000 a day while expensing snacks and meals.

"It's no surprise ... the minister decided to fall on his sword," said Horwath. "I don't believe this is the end of the situation, though. I believe there's a lot more work this government needs to do to restore the confidence of the public."

McGuinty has banned untendered contracts for high-priced consultants in the wake of the eHealth debacle.

Also under the microscope in Wednesday's report are the actions of the senior bureaucrat at health, deputy minister Ron Sapsford, who the Star reported Tuesday collects almost $500,000 a year in salary and benefits funnelled through a Hamilton hospital.

Sapsford is in charge of day-to-day operations in the health ministry, and oversaw contracts for eHealth.

Loading... Loading... Loading... Loading... Loading... Loading...

The Liberals conceded they need to improve disclosure of how senior bureaucrats are paid.

Lucrative salaries for Sapsford and other senior bureaucrats are being channelled through hospitals such as University Health Network and Hamilton Health Sciences to skirt government pay guidelines, a practice Horwath called being "paid through the back door."

"It's a good question whether that's the best way to do it," acknowledged Smitherman.

Read more about: