Two former executives with the government-created Ontario Tire Stewardship are facing provincial charges for the alleged theft of hundreds of thousands of dollars in “eco fees” paid by Ontario drivers on each tire purchased.

The Investigations and Enforcement Branch of the Ministry of Environment and Climate Change has charged the two men with regulatory offences under the provincial Waste Diversion Act. The first court appearance is Jan. 19. Convictions could result in hefty fines.

Perminder Kandola, the stewardship’s former chief financial officer, is facing two charges for “failing to pay into the fund established by the Ontario Tire Stewardship,” according to court documents.

The first charge against Kandola is related to a previous allegation — originally described in a 2016 lawsuit filed against Kandola by the stewardship — that he diverted $346,565 from a tire importer to a private bank account in the name of “Ontario Tire.”

A second, similar, charge was laid against both Kandola and Frank Fragale, the stewardship’s former director of audit, alleging that $220,149 was diverted from the stewardship.

Fragale’s lawyer, Nader Hasan, of Stockwoods, confirmed his client has been charged with a “regulatory offence” and would not comment further. Kandola’s lawyer, Scott Hutchison of Henein Hutchison, did not return the Star’s call.

The Toronto Police fraud unit is investigating the alleged thefts. Det. Sgt. Ian Nichol said the investigation into the tire stewardship is “ongoing.” So far, no charges have been laid.

Last year, the Star exposed numerous problems at the stewardship — an agency that oversees Ontario tire recycling programs. It is funded by the tire and rubber companies who recoup their costs by charging consumers tire recycling or “eco-fees.” Last year, the stewardship was sitting on a surplus of roughly $50 million in consumer-paid fees. The cost of the recycling fees charged per tire has since dropped.

An ongoing Star investigation into the stewardship’s activities detailed executive spending on high-end restaurants, alcohol, trips and political donations; an allegation that Kandola stole $346,565 in 2012; an attempt by a second former executive (Fragale) to anonymously return more than $200,000 and a “partial” audit that found the multimillion-dollar recycling system is so flawed it invites the “manipulation” of large sums of money.

Sources say all of the money has been paid back.

After the Star reported on stewardship expenses last January, the organization filed a lawsuit against its former CFO, Kandola, who resigned in mid-2015. The lawsuit alleged Kandola created bogus stewardship bank account called “Ontario Tire Account.” It was later dropped after the money was returned.

The second alleged theft apparently occurred in roughly the same time frame. The stewardship had no idea the money was gone. As the Star reported, the alleged theft was discovered last spring when a lawyer for the stewardship’s former director of audit called with an offer: They’d get the money back if the name of the former employee, an accountant, was kept confidential, according to a source close to the stewardship.

That allegation was kept secret from other accountants on the board and audit committee (to potentially avoid reporting a fellow accountant to the professional regulatory body) according to a letter from the government-created agency that oversees tire recycling. According to the letter, the former director of audit is alleged to have worked with Kandola to divert a rebate cheque to a private account.

The allegations against Kandola led to an audit called “Partial Evaluation of Controls.” In the report, the auditors said their work was incomplete because the limited time they were allotted by the stewardship prevented them from answering numerous questions and accessing information related to, among other issues, the alleged fraud.

After months of demands for a full forensic audit by the province’s recycling oversight organization — including the threat of a court order — the stewardship agreed last fall to hire Ernst and Young to conduct the audit. Auditors will also look at possible fraud in the supply chain.

Michael Scott, CEO of the Resource Productivity and Recovery Authority (recently created under the new Waste-Free Ontario Act) said the audit’s terms of reference will allow a full investigation. The new authority, which has increased enforcement powers, will be deeply involved in the audit, Scott said.

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“Are we going to have a sense, a good sense, of any additional allegations of fraud coming out of this investigation? The answer is yes,” he said.