Ex-deputy told Charlottetown council CAO Peter Kelly fired him for raising financial concerns

A chartered accountant who spent eight years working in the office of P.E.I.'s auditor general said he was fired from his job with the City of Charlottetown in 2019 for raising concerns around financial irregularities, adherence to city bylaws and possible breaches of provincial law.

"I believe my dismissal was retaliation for highlighting the significant number of problems at City Hall and [chief administrative officer Peter] Kelly's incidents where he exceeded his authority," Scott Messervey told council members in a letter dated Jan. 27, 2019.

CBC News has obtained a copy of that letter and related documents Messervey gave to council, some of which are included in a legal proceeding he has initiated against the city.

Messervey took on the job of deputy chief administrative officer for the City of Charlottetown in January 2018 and was fired by Kelly less than a year later.

After he was fired, he provided council members with a detailed list outlining 18 areas of concern where he said the city was either breaking its own financial rules or not complying with the province's Municipal Government Act.

He also cited examples where he said his superior, Kelly, had exceeded his authority under the act in some cases, according to Messervey, authorizing expenditures that could only be authorized by council.

He told council he had brought the various issues to Kelly's attention and in response, Kelly fired him.

Messervey filed a complaint with council under the city's whistleblower protection policy. According to the court record, the complaint never received a response.

Eventual replacement also fired

After Messervey's firing, the city went almost three years without hiring a replacement.

Tina Lococo, a lawyer who previously worked for the town of Midland, Ont., was finally hired in October 2021 as Charlottetown's new deputy CAO.

Earlier this month, after six months on the job, she too was fired by Kelly, who told councillors in an email that he could not disclose the reasons why. The firing raised concerns among several councillors, none of whom would express those concerns publicly for fear of being sanctioned. In the same email this month, Kelly advised councillors not to speak to the media about the firing.

When reached by CBC News after her departure, Lococo declined to comment.

'Looking for errors' cited as reason

In Messervey's letter of termination dated Jan. 17, 2019, Kelly told him he was being fired "as a result of an unsuccessful probationary period," his probation having been extended from six months to a year.

In the letter, Kelly cited concerns about Messervey's interactions with staff and council members, saying some staff felt Messervey was "looking for errors, rather than attempting to work with them to meet city and departmental goals."

He was provided with six months' severance pay, according to the terms of his contract.

Messervey responded to Kelly's letter, saying he took "great exception" to the CAO's negative characterization of his performance and professionalism.

"My efforts were solely aimed to improve city operations," he wrote.

What council was told

Among the issues raised in Messervey's Jan. 27, 2019 letter to council:

• Messervey claimed capital cost overruns worth millions of dollars had been approved by the CAO when, under the terms of the Municipal Government Act, that spending required authorization from council.
• He pointed to a "large number of material errors" in the city's audited financial statements, telling councillors these were examples of instances in which the CAO had ignored the advice of finance staff. For two consecutive years, in 2017 and the 2018-19 fiscal year, the city received qualified audit opinions from its auditors, in essence a declaration from the audit firm that it could not vouch for the material accuracy of the city's stated surplus or its cash flow position. The 2017 audit flagged more than a dozen errors in the city's financial reporting.
• Messervey said tendering for police ticketing software was done outside the city's tendering process, and no record of the tenders could be found in the files of the finance department. He said councillors had been given incorrect information on which bid came in lowest.
• Messervey raised concerns about meal expenses and per diems claimed by councillors and staff. He said per diems were claimed at events where meals were already included in the cost. He also pointed to a meal expensed at the Dundee Arms restaurant in December 2018, attended by some current and former council members, their spouses and one member of staff. Messervey said all charges, including spousal meals, alcohol and the $160 tip, were originally expensed to the city's finance department, with the meal classified as a finance meeting. He said costs for alcohol and some but not all spousal meals were recovered. He said the expensing of meals in this way constituted "a reputational risk for the city."

Rent-free deal, auditing issues

CBC News has previously reported on some of the concerns raised by Messervey, including an arrangement going back decades allowing the Rodd Charlottetown Hotel to use city property rent-free for its parking lot, an arrangement Messervey said could be a breach of the Municipal Government Act.

In those previous stories, Rodd Hotels and Resorts declined to comment.

Some of Messervey's other concerns have been validated through the city's audited financial statements, but for the most part the issues he raised remain unsubstantiated.

In another letter filed in court as part of Messervey's legal action against the city, Kelly advised Messervey that many of his concerns "are open files and we continue to do our due diligence to bring them to a satisfactory close."

But after being contacted by CBC News last week, the city provided no information as to whether or how any of Messervey's concerns had been addressed.

In legal documents replying to the court filing over severance, a lawyer for the city said the city denies every allegation in Messervey's claim.

Closed meeting, no action

On Feb. 5, 2019, just over a week after Messervey delivered his concerns to councillors, council moved into a closed session. A number of councillors have told CBC that letter was discussed during the closed session, though the minutes from the meeting don't specify the topic.

Afterward, a motion was put forward by councillor Terry MacLeod, seconded by Terry Bernard, "that personnel issues discussed in closed sessions now be considered closed, and that no further action is required."

The motion passed, supported by councillors Greg Rivard, Kevin Ramsay, Mike Duffy, Alanna Jankov and Mitchell Tweel, along with MacLeod and Bernard.

Councillors Jason Coady, Bob Doiron and Julie McCabe opposed the motion.

Doiron would go on to question how one of the items on Messervey's list was handled, setting off a series of events that ended in him being out of pocket $10,000.

"I was voted in to speak my mind, ask questions that have to be asked," he told CBC News in an interview this month.

• RELATED STORY: More on why this Charlottetown councillor says he was reprimanded for speaking out.

Doiron brought forward Messervey's concerns to the P.E.I. Department of Municipal Affairs seeking a review, but said the province did not conduct one.

A spokesperson for the department said they could not comment on the matter.

Written statements provided

CBC reached out to Kelly, Mayor Philip Brown, and several members of council seeking an interview to talk about the issues Messervey raised and how they were dealt with by council.

The administration, along with my personal character, have come into question and these need to be addressed accordingly.- Charlottetown CAO Peter Kelly

The city provided a statement on behalf of Kelly: "Unfortunately the matters at hand have become personal and I will be seeking advice to ensure that my accountabilities, along with others, are held up to," the statement reads.

"The administration, along with my personal character, have come into question and these need to be addressed accordingly."

Brown also provided a written statement.

"Employee matters are a human resources matter that falls under the purview of the office of the CAO," the mayor said in his statement. "As a council, it is our responsibility to ensure that the CAO is accountable and conducts these responsibilities effectively."

Brown referred to an upcoming performance review of the CAO, which might be discussed at a special council meeting being held Monday. The matter does not appear on the meeting agenda, however.

"I look forward to discussing this matter with council directly and determining a clear path forward," Brown's statement said.

External review urged

Messervey also declined a request for an interview, but provided a written statement.

"During my brief time as the city's [deputy CAO], a significant number of issues and concerns came to my attention," the statement reads.

If you have information about this story, or a news tip to share with CBC Prince Edward Island, please email kerry.campbell@cbc.ca or compass@cbc.ca.

"I brought all of these matters to the CAO for resolution. In my opinion, the CAO did not share my concerns and was dismissive.

"Given the significant number of issues and concerns highlighted in the media related to city operations, I believe an in-depth independent external review of City Hall's governance and operational practices is warranted."

Kelly has been criticized before

This is not the first time serious concerns have been brought forward involving Kelly.

In 2011, when he was mayor of Halifax, Kelly assumed responsibility for $400,000 advanced to a concert promoter without council's knowledge. The city ended up losing $360,000 on the two outdoor concerts.

And in 2016, a senior staff member in Westlock County, Alberta, where Kelly was working as CAO, raised concerns that he had exceeded his authority, authorizing nearly $400,000 in unbudgeted spending to develop a property, requiring the municipality to write-off more than $200,000 in costs as a loss.

A provincial review concluded Kelly acted outside his authority, in breach of that province's Municipal Government Act.

At the time Kelly, who by then had been hired as CAO of Charlottetown, referred to the review as "a selective witch hunt."

'Shooting the messenger'?

Former Charlottetown city councillor David MacDonald told CBC that when a council receives the kind of information Messervey provided, from an employee or former employee with his expertise, it ought to take action. But he also wanted to clarify he can't comment on the specific decision by council not to act on Messervey's information, since he wasn't part of those discussions.

However, MacDonald said, "I think that council has an obligation when any staff member, especially a senior staff member with specific professional qualifications, brings to them a concern."

MacDonald said he "couldn't see a situation where I would be on council, that one of the options for addressing those concerns would be okaying the firing of the person who brought the concerns to the table. I don't think that makes any sense, that's shooting the messenger.

"I think you have to do your due diligence, look at the information that was brought forward. You can't just ignore [the concerns]. They have to be dealt with."

• TOMORROW on CBC.ca/PEI: 'Why are we so scared to talk?' asks Charlottetown councillor who challenged CAO in 2019