A former bureaucrat from Ontario pleaded guilty to embezzling $47.4 million from taxpayers, including $10.8 million in pandemic aid and $36.6 million from a "fee-for-service" consultant scheme since January 2011.
"This was extremely complicated — some might say genius-style — fraud," said Superior Court Justice Suhail Akhtar as he sentenced Sanjay Madan. "You deprived taxpayers of money that could have gone into so many different things, including public services required in this province."
On April 4, the judge sentenced Madan to ten years in prison after he pleaded guilty to six counts of fraud, breach of trust, and money laundering.
The former bureaucrat earned $176,608 yearly as the Ministry of Education's information technology leader on the Support for Families program (SFFP) until his prompt termination in October 2020.
According to Ontario's public sector Sunshine List, nearly 267,000 employees make more than $100,000 annually. Organizations that receive public funding from the province must report the names, positions and pay of people who make more than $100,000 as stated in the Public Sector Salary Disclosure Act.
The province filed a civil claim in 2020, alleging Madan participated in two fraudulent schemes between April 2020 and August 2020.
Firstly, the Crown alleged that banks approved payments of over $10.8 million into over 2,500 accounts Madan and his appellants opened for fraudulent applications. They used fictitious names to make thousands of fraudulent applications under the SFFP.
Secondly, the Crown alleged that Madan received kickbacks from consultant vendors who obtained fee-for-service contracts with the Ministry of Education. The former bureaucrat selected the vendors and approved the consultants' timesheets. The province alleged the kickback scheme went on for ten years.
Madan accused the Ontario government of "[hiring] incompetent employees, [who] failed to use appropriate hardware and software safeguards, and failed to take proper steps to guard against unscrupulous employees."
Ultimately, he entered a plea bargain where the Crown dropped criminal charges on April 4 against Madan's spouse, Shalini Madan. Their adult sons, Chinmaya and Ujjawal, have remained in civil court since 2020.
According to the Fraser Institute, all levels of government in Canada spent $352.1 billion (inflation-adjusted) subsidizing businesses over 13 years, excluding loan guarantees and direct investment.
"These subsidies for businesses — also known as corporate welfare — come with huge costs to government budgets and taxpayers while doing little if anything to stimulate economic growth," said Tegan Hill, an economist at the Fraser Institute and co-author of The Cost of Business Subsidies in Canada.
From 2007 to 2019, the federal government spent $76.7 billion on business subsidies, while the provinces spent $223.3 billion, and local governments spent $52.1 billion.
During the same period, Ontario spent the second most of any province on business subsidies at $73.4 billion.
Spending by the province on business subsidies increased (after adjusting for inflation) from $1.5 billion in 2007 to $11.8 billion in 2019. On a per-tax filer basis, that amounts to $171 to $1,138 — an increase of $967 over the 13 years.
"Rather than give preferential treatment to certain companies and industries, governments could reduce business income taxes and help foster a pro-economic growth environment that gives all businesses the opportunity and incentives to succeed," added Hill.
"Such spending might be justified if it led to widespread economic benefits. However, there's little evidence that corporate welfare generates widespread economic growth or creates jobs."
Hill suggests corporate welfare hurts the economy as "government interference in the market distorts private decision-making and misallocates resources."
"The government's attempt to select winners and losers in the economy generally makes the economy less efficient than if those decisions were left to individuals. Indeed, the better option is to let [taxpayers] decide where to spend their money and determine what businesses will succeed," she said.