73 Superior Avenue

Toronto, Ont.

M8V 2M7

Tel: (416) 255-5198

October 12, 1995

PRIVATE & CONFIDENTIAL

Dear Ms. Elliot:

Implications of Criminal Fraud and Two Cover-Ups in Ontario Hydro

I am a well-educated, eighteen year veteran of Ontario Hydro, with a good work record. However, a number of fraud-related issues have arisen recently at work, which concern me. Despite several complaints to Management, no action has been taken. (From a personal perspective, as an employee of a government corporation, no financial gain is obtained from such complaints.)

* * *

Specifically, during a job challenge at Ontario Hydro Technologies in 1992, it became apparent that my then-Manager was likely defrauding the Corporation. A memo to the Vice-President brought several meetings, then a formal investigation by Internal Audit. The V-P's memo cleared the Manager of all the (several) accusations.

The Audit Division investigation was faulty. Most obvious, Audit only interviewed one of my four designated witnesses. Not surprisingly, Audit "found" no evidence for most of my claims, though my sources of information were referenced for Audit before the investigation. The Audit investigation would not withstand public scrutiny.

Some months later (October 1993), I hired a private investigator, with the instructions that the PI's find lots of circumstantial evidence, but no criminal case. Their investigation took two weeks from scratch, and provided the following: evidence that the target external company was suspect; written evidence of criminal fraud practices at the same company; plus evidence that my ex-Manager was leading an unstable and financially suspect life. The ex-Manager was connected to this company through the suspect external contracts.

There was no criminal case, deliberately, because of the potential repercussions. The case was presented to Arthur Anderson in June 1994, following Mr. Strong's instructions. Arthur Anderson seemed duly impressed by the case at the time. Apparently the other OHT witnesses questioned also gave supporting stories.

In November 1994, a memo was received from the Senior Legal Counsel, essentially saying that "no evidence of wrongdoing" was found, and threatening me with dismissal. The Power Workers' Union attempted to bring the issue to the Board of Directors, but were not permitted. Similar information to the above was delivered to Mr. Strong on or by January 31, 1995, with no response.

* * *

As my actions hopefully show, it has always been my objective to resolve this issue quietly, with the minimum of dislocation or embarrassment, and the maximum of benefits. However, there have been a number of "systemic factors" that have permitted this situation. Similar factors can be seen in the morale of the Corporation, eg. at Pickering. Consequently, it would be appropriate to make more long-term fundemental changes in the way Ontario Hydro is run.

I am requesting a one-hour meeting with you to present the documented case, please, and the proposed fundemental changes. These changes could be announced by Mr. Strong before his departure, paving the way for his successor. Such fundemental social changes would help develop the "New Hydro" considerably.

Yours sincerely,

Michael Moles

cc. Mr. M. Strong, Chair, Ontario Hydro

Mr. R. Darrah, Darrah & Associates, Barristers and Solicitors

Mr. J. Murphy, President Power Workers Union