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'Shocking' fraud claims in Norman Wells detailed

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The Town of Norman Wells is alleging its former senior administrator defrauded the community of more than $1.25 million.

The Town's current mayor and management made the allegation public last week following a forensic audit, the results of which a senior territorial official described as "shocking."

Mayor Frank Pope confirmed to Cabin Radio on Friday that both Catherine Mallon, the former senior administrative officer (SAO), and former mayor Nathan Watson had been served civil suits regarding the alleged fraud.

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No other prior council members or staff, past or present, are being held responsible, said Pope.

The new mayor, elected last fall, resolved his council would get to the bottom the scandal and make sure nothing like this happened again – in Norman Wells, or elsewhere in the territory.

The town council updated community members about the forensic audit's findings on Wednesday, saying steps had been taken to freeze related assets and bank accounts.

Half a million dollars in overtime

“Our Interim SAO Darren Flynn discovered some abnormalities with our former SAO’s T4s, and mayor and council asked MACA [the Department of Municipal and Community Affairs] to initiate a forensic audit of our former SAO’s payroll, purchasing, and payment activities,” Pope said.

When the current council, elected this past October, began reviewing the forensic audit, Mallon's claim for 3,880 hours of overtime – equivalent to more than half a million dollars – immediately stood out.

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A normal town employment contract, Pope explained, allows the SAO to earn six weeks of vacation per year, plus an additional two weeks in lieu of any overtime worked.

Despite Mallon's apparent claim, the Town of Norman Wells does not allow overtime pay.

“We paid out vacation leave that was ‘not taken’,” Pope continued. “We know it was taken, but it was still paid out."

This is part of the reason Watson is also named in the civil suit. Council is alleging he allowed Mallon to pay herself when she shouldn't have.

“This goes on and on and on. I could write a book on this stuff. It’s disgusting," said Pope.

Mallon could not be reached for comment. Watson did not show up at court for sentencing regarding a separate drug charge on Friday, and could not be contacted. A warrant for his arrest was reportedly issued.

'A toxic, toxic regime'

Pope described an atmosphere in which staff members who tried to talk to councillors about financial malpractice "had lawsuits filed against them by the SAO" at the time.

“It was rather unbelievable that somebody could get away with this over a period of three years,” he told Cabin Radio.

“It was a toxic, toxic regime. I believe as many as 30 to 35 employees may have gone in and out the door in that period of time.

“It was just painful. And we're still hearing more stories coming out about it – this thing’s got a long way to go."

No claims have yet been tested in court.

Norman Wells as a community has had its governance under the microscope for several years.

In the fall of 2017, the Minister of Municipal and Community Affairs stepped in and dissolved the town’s council, placing its affairs under municipal administration.

Mallon, however, held on to her position despite that change and only wrapped up her contract in early November 2018.

'A perfect storm'

Deputy Minister Eleanor Young, who presented to the community alongside council on Wednesday, told Cabin Radio forensic audits are not commonly conducted by her department.

“It’s shocking,” she said, to discover the extent of the apparent fraud.

“How did it happen?" Asked Young of the situation. "Why was it not picked up on earlier? … There were definitely concerns raised by previous council, but why did it take so long?

“It was a perfect storm – anything and everything that could have failed did fail.”

Young said around 50 community members attended the forensic audit presentation.

“It’s pretty emotional in the town,” she said on Thursday before she left the community.

“There was a lot of shock, a lot of dismay, a lot of broken hearts.”

New policies

Pope pledged his council is now working out how to ensure nothing similar can happen again. He says councillors themselves have received extensive training since last fall's election.

“One of our main roles is to achieve the support of the community – get that back so they can support their local council," he said.

Over the past weekend, councillors worked on a strategic plan to be released in the coming weeks.

A new credit card policy is in place, while Pope said financial policies and bylaws are being overhauled.

“No member of the staff, no member of council has a credit card on them. There is one in the safe which can be used as required," the mayor said.

The goal, said Pope, is to create an environment where council can “provide informed oversight of any contracts, financial abnormalities, and human resource policies of the Town.”

Norman Wells has also hired a new SAO, Cathy Clarke.

Pope suggested MACA could offer support more proactively in the future.

“Maybe they should be producing better policies to support municipalities and to support communities," he said.

“Maybe when they’re recruiting SAOs, [the department can] help check references and make sure that we’re getting good, qualified employees.”