Highlights of this article:

• The IWK Board of Directors seemed complacent about problems with expense accounting until CBC reporter Michael Gorman published an investigative article detailing “the magnitude of the personal expenses.”

• IWK CEO Tracy Kitch tried to blame her problematic expenses on poor recording-keeping by her executive assistants.

• IWK board member Karl Logan finally got the board to act on Kitch’s expenses

• Kitch produced a computer file she said was created (and lost) by an unnamed executive assistant and which would prove that her expenses were business-related, but when asked to provide that file to legal staff, she never did.

• Kitch made 13 trips to Toronto to meet with a former co-worker, now working as a communications consultant. The trips took place “around the weekends and long weekends” and travel was billed to the IWK, while the consultant billed the IWK for services exceeding her contracted amount.

Recently unsealed court documents obtained by the Halifax Examiner reveal new details about the expense scandal at the IWK.

The documents are eight “information to obtain” (ITO) applications for production orders — basically, the equivalent of search warrants but for documents and records — related to expenses claimed by former IWK CEO Tracy Kitch.

The problems with Kitch’s expenses were uncovered by CBC reporter Michael Gorman.

Kitch now faces charges of fraud over $5,000 and breach of trust. The IWK’s former Chief Financial Officer, Stephen D’Arcy, faces charges of breach of trust, unauthorized use of a computer, and mischief to data.

The ITOs were written by Detective Constable David Comer, a fraud investigator with the Halifax Regional Police Integrated Financial Crime Unit. Taken together, the ITOs provide a narrative of the IWK’s response to the expense irregularities and to the police investigation into the irregularities.

“Everything is fine”

The court documents show that the IWK board of directors was completely unaware of the expense problem until a December 2016 provincial directive required CEO expenses to be posted online.

“The Board of Directors became aware that the IWK would be late with posting these expenses,” wrote Comer. “Around the same time, there was a Freedom of Information request submitted by CBC reporter Michael Gorman, who was looking for information regarding IWK expenses.”

Comer relates that Gorman interviewed Stephen D’Arcy, the Chief Financial Officer at the IWK, about the missing expense reports, and D’Arcy told Gorman that “everything was fine.” Meanwhile, Kitch told the board of directors that “there were some failures due in part to her executive assistants” — Kitch had three EAs from the time she was hired in 2014 to June 2017.

On June 22, 2017, the CBC published Gorman’s article about “the magnitude of the personal expenses” that were charged on Kitch’s personal credit card. In response, Bob Hanf [Comer misspells Hanf’s name throughout the ITOs as “Hamp], who was then the chair of the IWK board, called an emergency meeting of the board. “Kitch and D’Arcy assured the Board of Directors there was no improper activity and any personal expenses had been reimbursed,” wrote Comer.

Just four days later, on June 26, 2017, Karen Hutt, the president of Nova Scotia Power, took over as chair of the IWK board of directors. Hutt had previously served on the IWK board as a director, and was on the search committee that recruited and then hired Kitch as CEO. (Kitch began her employment on September 1, 2014.)

The court documents do not say if Hanf’s replacement by Hutt was related to the Kitch expense issue.

Board investigates and fires Kitch

While up to that time the IWK board does not seem to have taken much action related to Kitch’s expenses, one of the directors, Karl Logan [Comer misspells his name as Carl Logan], took it upon himself to talk with D’Arcy about Kitch’s expenses.

On July 4, 2017, Logan texted Hutt to tell her he “had some concerns” about Kitch’s expenses. In response to the text, Hutt immediately set up a meeting with D’Arcy. Later that week, Hutt met with Kitch and told her the board of directors was going to conduct an “independent review” of her expenses.

On July 11, 2017, recent board chair Bob Hanf and new board chair Karen Hutt met with Kitch. At the meeting, “Kitch provided a file which Kitch claimed to have found in her executive assistant’s desk,” wrote Comer. “Kitch stated that this file would provide legitimate business explanations for her expenses.” Hutt told Kitch to give the file to the IWK’s lawyer, and the lawyer would in turn give it to the Finance Department. However, Hutt said that as far as she knew neither the lawyer nor the Finance Department ever received the file.

On July 14, 2017, Hutt called an emergency meeting of the board; at the meeting, the board formed a committee to review the situation, and hired Grant Thornton to conduct an audit.

“The special committee realized that the questionable expenses involved more than just the corporate credit card, but also included expense claims and direct billing,” wrote Comer.

The special committee received the Grant Thornton audit on August 14, 2017. “The [audit] report showed a lack of receipts and supporting documentation for Kitch’s expenses,” wrote Comer. Over the next week, both Hutt and Leah White, one of the Grant Thornton auditors, pressed Kitch for more documentation, but never received it. So on August 23, Hutt and two other members of the special committee met with Kitch and demanded her resignation.

The expense scandal broadens

Three days later, the IWK posted the Grant Thornton audit on its website. That audit noted $47,273.32 in personal expenses Kitch had charged to the IWK.

The bulk of the personal expenses — $26,463.80 — was for air fare for one unlimited three month pass and eight 10-flight passes. Other expenses included phone data, hotel rooms, meals, parking, gas, and charges on an iTunes account.

At the time of the audit, Kitch had repaid $25,009.28 of that amount, leaving a balance of $22,264.04. After the audit was made public, Kitch made more reimbursements, but by the time Comer wrote the applications for production orders, and apparently to the present, there was still a balance of $10,380.39.

Hutt told police that she wasn’t sure if Kitch’s irregular expenses were a criminal matter, so she contacted both Auditor General Michael Pickup and Halifax police chief Jean-Michel Blais. Pickup started an investigation, and Blais referred the matter to the Financial Crime Unit.

On September 28, 2017, Hutt met with Financial Crime Unit investigators Jason McNeil and Christian Pluta in her office at Nova Scotia Power. She related the lackadaisical oversight of expenses at the IWK. The conversation was recorded and the recording was turned over to Comer.

“Hutt stated that Kitch could incur work expenses through her corporate credit card, submissions claims, or direct billing,” wrote Comer. “Kitch did not need approval for a corporate credit card. Many businesses have accounts with the IWK. Direct billing expenses, such as hotel accommodations, are not reviewed by the Chair or the Board of Directors. Direct billing is dependent on the business. The Chair of the Board of Directors would only review the credit card statement.”

The IWK corporate credit card had a limit of $1,500 per transaction, but apparently no absolute limit.

“Expense forms were submitted and processed without receipts,” continued Comer. “It appears that it [sic] was approved by the Finance Department and then signed off by the Chair of the Board of Directors.” For the period in question, Hanf was the board chair.

On October 3, 2017, Comer obtained production orders for documents related to Kitch’s expenses that were in the control of the IWK. From those documents, Comer expanded his investigation.

In November, Comer obtained more production orders. RBC was required to produce records for Kitch’s IWK corporate card. Apple was required to produce records about Kitch’s iTunes account.

In January 2018, Air Canada was ordered to produce records about Kitch’s air travel.

On February 1, 2018, Comer got a production order for Kitch’s personal banking records as held by RBC. This was a joint bank account held by Kitch and Ian Hosein. “Tracy Kitch & Ian Hosein” are listed among “bronze” donors to the United Way in 2016.

The investigation took a much broader turn in mid-February. Comer noted that the Financial Crime Unit was examining meetings between Kitch and Tracy Chisholm in Toronto, for which there was an invoice for $7,051.20. Reporter Michael Gorman explained Chisholm’s involvement in the expense scandal in a February 28, 2018 article:

CBC News received extensive records related to cost centre numbers for a variety of the hospital’s departments for August 2014 until June 2017 (the time Kitch was CEO) through a freedom of information request. … The cost centre information also shows the hospital’s extensive spending on outside communications services, including more than $135,000 to T Chisholm Communications, which is owned by Tracy Chisholm. Like Kitch, Chisholm used to work at Mount Sinai Hospital in Toronto. As first reported last fall by AllNovaScotia.com, in late 2014, Kitch arranged untendered work for Chisholm that wasn’t to exceed 16 weeks and $35,000. Instead, Chisholm continued doing work for and sending invoices to the IWK until June 2017.

Comer wrote that Kitch’s Outlook calendar showed she had flown 13 times from Halifax to Toronto to meet with Chisholm, “which she claimed as a business expense. These meetings occurred around the weekends and long weekends between April 23, 2016 and February 21, 2017.”

Comer received a production order requiring Tracy Chisholm to produce “all documents related to meetings held with Tracy Kitch which includes dates of any meetings, ledgers, calendars, meeting notes, locations, receipts, topics of discussion, invoices charged to the IWK between September 1, 2014 to [sic] June 30, 2017 and any communication records between Tracy Chisholm and Tracy Kitch in relation to arranging meetings between September 1, 2014 to [sic] June 30, 2017.”

In March 2018, Comer received a production order for D’Arcy’s emails, especially those related to a Freedom of Information Act request — Gorman’s.

In July 2018, Comer got a production order requiring Equifax Canada to produce records for a personal credit card held by Kitch.

None of the allegations laid out in the ITOs have been proven in court.