The Auditor General is pleading that the Caisse de Depot de placement du Québec, which manages $365.5 billion, should strengthen protection and disclosure of conflicts of interest, fraud and corruption related to its investments.
In 2019, a series of reports published by our FBI prompted Caisse to launch a major $5 million internal investigation and led to the dismissal of its CEO, Alfonso Griseva, and two-thirds of its board members. .
The subsidiary granted a $3.3 million loan to the CEO and his ex-wife’s company to finance a building. Following these discoveries, Caisse pledged to improve its ethical practices to make them compliant, according to the auditor general’s report.
However, even today, “key steps in the investment process” are not always implemented in accordance with the policies, particularly those related to conflicts of interest, according to the Auditor General’s report in her report on Wednesday to the National Assembly.
The auditor’s audit covers the period from June 2019 to May 2021 and covers Caisse’s private filings and principally the activities of its two subsidiaries Ivanhoé Cambridge and Otéra Capital.
Although measures were taken, the reviewer found that several items still needed improvement (see box).
“It is important to have policies, and have a code of ethics first (…) but it is important that people, especially managers, implement them, because they are facts,” stated VG, Guylaine Leclerc.
The auditor reveals that for a large investment there was an outflow of funds prior to approval, while the Caisse director who was involved in the discussions leading up to that investment also had a close relationship with a senior executive of the target company.
“He was in a situation of conflict of interest. It is a defect. So it is an activity that should not be done, especially because it is a manager, the manager should know about it.”me Leclerc.
For six investments from Caisse and one from Ivanhoé Cambridge, due diligence revealed there was a risk to its reputation, but this information was never reported to approval committees.
VG states that this is only a compliance audit, which prevents it from judging certain practices, noting that it does not have the ability to conduct a performance audit at Caisse.
“I cannot criticize the laws, but certainly we can do performance audits in all government entities, at the discretion of the auditor general. The only entity that cannot be done is Caisse de Depot, without the approval of the Board of Directors.
VG notes that the fund’s investment orientations have evolved towards private markets such as infrastructure and private placements, generating more risks in terms of conflicts of interest, fraud and corruption. Furthermore, investments in the international markets for Quebec woolen socks increased by $137 billion between 2015 and 2020.
“The globalization of its activities has enabled it to seize attractive investment opportunities in many countries. However, this globalization also creates additional challenges in terms of risk management (…) in particular in terms of ethics,” says the report.
What needs improvement according to the auditor general
– Lack of policies and guidelines for the risks associated with money laundering.
The Conflict of Interest Management Procedure went into effect in late December 2020 at Ivanoi Cambridge. Prior to this, the branch had not planned this;
– identifying the parties involved in the investments and performing their due diligence;
Delays in issuing declarations of interests of its employees and managers.
– The fund withdraws funds amounting to several tens of millions before obtaining permission to invest by an accreditation committee.