NB Liquor CEO faces conflict-of-interest hearing over consulting business

A well-known New Brunswick Liberal and close friend of Premier Shawn Graham is facing a hearing before a judge under the province's Conflict of Interest Act.

Dana Clendenning is the subject of a complaint filed by Fredericton businessman Barry O'Donnell. He alleges that Clendenning, the president and chief executive officer of NB Liquor, violated the act, which says the head of a Crown corporation cannot "carry on business other than as a head of a Crown corporation" unless it's been cleared by the judge who oversees the legislation.

Clendenning's wife continued to invoice O'Donnell for several months after Clendenning took on the top position at NB Liquor on Oct. 30, 2006. O'Donnell said the invoices were for Clendenning's work for him as a consultant.

Nothing in O'Donnell's complaint, or in his version of events, has been proven in court.

A hearing before Court of Queen's Bench Justice Paulette Garnett is scheduled for June 4 and 5. The province's conflict law states that a judge can order a hearing when there is "sufficient evidence in support of the allegation to satisfy the designated judge that there is a reasonable possibility that a conflict of interest may exist or that the act has not been complied with."

NB Liquor CEO is former Liberal executive director

Clendenning, a former executive director of the New Brunswick Liberal Party, has repeatedly refused to discuss O'Donnell's allegations. "I will not be giving interviews on this matter," he said in an email in December. He refused again when approached by CBC News during an NB Liquor event in March.

O'Donnell filed his complaint after his business relationship with Clendenning went sour. He said Clendenning worked for him as a consultant-lobbyist and didn't deliver on a promise to arrange job-creation grants from the Liberal government.

But it is unclear from financial records provided by O'Donnell how active Clendenning was with the company after he took over at NB Liquor. Clendenning's wife Colleen is a director of his company and her name is on the emails that invoiced O'Donnell from 2005 and 2007.

Business relationship started in 2002

O'Donnell's relationship with Clendenning began after he bought a call-centre business called Connect North America in 2002 and moved the facility from St. Stephen to Fredericton.

He said his main U.S. client was offering more work than the Fredericton call centre could handle, so he subcontracted some of it to a Bathurst call centre owned by Clendenning and his wife.

O'Donnell said that late in 2003, after the Graham Liberals had come within one seat of winning the provincial election, Clendenning offered to sell the Bathurst call centre to O'Donnell. He said Clendenning told him "that his interest was more in the political arena" than in the call-centre business.

O'Donnell turned down the offer twice. Then, in O'Donnell's words, Clendenning put "a little more on the table" and offered to use his political connections to obtain business grants from a future Liberal government for Connect North America. Some of the grants would have been to fund new positions, and some to help O'Donnell maintain existing jobs, he said.

O'Donnell said he assumed he would pay Clendenning a commission after the grants came through, but Clendenning insisted on monthly consulting fees, starting immediately, of $2,500 per month, rising to $4,000 monthly whenever the Liberals formed a government.

"He wanted to get paid every month, rather than something that would be a little more uncertain," O'Donnell said.

Payments made in hopes of expanding business

O'Donnell said he agreed to the payments because he needed the grants to expand his business. Without an expansion, his U.S. client would go elsewhere.

He also said he trusted Clendenning could get the money because of his connection to Graham.

"I don't think I had ever seen one without the other, most places around town where I'd seen them," he said. "So I believe there was a close friendship there in addition to the political business relationship or whatever."

Lobbying, representing the interests of clients to government for payment, is legal in New Brunswick. Unlike in other provinces and in Ottawa, no regulations for the practice exist.

O'Donnell provided CBC News with invoices from Clendenning's company starting in May 2005. The emails, with the invoices attached, are signed by Clendenning's wife.

The invoices are for $2,500 per month, though the amounts sometimes vary because they cover other elements of the business partnership between O'Donnell and Clendenning.

The two men co-founded a separate company, Connect Research, that used O'Donnell's call centres to conduct public opinion polling for the Liberals leading up to the 2006 election.

Problems started after 2006 election

The Liberals won the 2006 election and that's when O'Donnell said his problems began with Clendenning.

He believed that Clendenning would remain in business and wouldn't be going to work for the government. But on Oct. 12, just nine days after the Liberals were sworn in, Premier Shawn Graham announced Clendenning's appointment as chief executive officer of NB Liquor. The appointment took effect Oct. 30. O'Donnell said he started having trouble reaching Clendenning. Instead he found himself dealing with officials at Business New Brunswick, who poured cold water on what he had assumed was a done deal for the grants.

"Essentially we got the message back that they do not fund existing positions," O'Donnell said, "which was the complete opposite of what I'd been represented for the previous two years."

O'Donnell said he stopped paying the invoices in November 2006 because he wasn't seeing any results, though the invoices kept coming until April 2007.

O'Donnell said the last invoice he paid was the one dated Nov. 1, 2006, two days after Clendenning started work at NB Liquor. He said he paid that invoice in April 2007 when he was briefly optimistic the grants would materialize.

He also paid Clendenning a dividend on the profits from Connect Research in February 2007.

Connect Research also did polling for the Liberals in the March 2007 byelection in Moncton East.

O'Donnell lost U.S. client in 2007

The timing of the invoices and the payments, and the fact that the emails were signed by Clendenning's wife, may become critical in the hearing if O'Donnell is to prove that Clendenning was actively involved in the business at the same time he was running NB Liquor.

In August 2007, O'Donnell ran out of time. His U.S. client got fed up waiting for him to expand and pulled all its business, forcing him to shut down the company and lay off 400 people.

Greg Byrne, the minister of Business New Brunswick, refused to be interviewed. In September 2007, his spokeswoman, Sarah Ketcheson, said the department had been "in the process of gathering information from" O'Donnell when he closed the call centre.

Byrne was also Clendenning's lawyer during his business dealings with O'Donnell. Byrne ended his law practice in October 2006, when he was sworn into cabinet. He was not representing Clendenning during the period covered by O'Donnell's complaint.