Former IWK Health Centre executives charged with fraud, breach of trust

Halifax police charge former IWK executives Former IWK CEO Tracy Kitch and former CFO Stephen D'Arcy have been charged with fraud and breach of trust. Heidi Petracek reports.

HALIFAX -- Two former children's hospital executives have been charged with fraud and breach of trust in relation to an expense scandal at Halifax's IWK Health Centre.

Former CEO Tracy Kitch was arrested at her Oakville, Ont., home Tuesday, while former CFO Stephen D'Arcy of Toronto turned himself in to police.

Kitch is charged with fraud over $5,000 and breach of trust, while D'Arcy faces charges of breach of trust, unauthorized use of computer and mischief to data.

Kitch stepped down in August 2017 after an independent Grant Thornton audit said she owed tens of thousands of dollars for "potentially personal" expenses charged to her corporate credit card.

D'Arcy stepped down on Sept. 25, 2017.

Police said Tuesday they launched their investigation following a "complaint of financial mismanagement" from the IWK board of directors on Sept. 20, 2017.

"Investigators with the Financial Crime Unit of the Integrated Criminal Investigation Division made two arrests today ... with assistance from Halton Regional Police Service and Toronto Police Service," Halifax police said in a release.

Kitch, 57, and D'Arcy, 55, are scheduled to appear in Halifax provincial court on Dec. 20.

"We are pleased this matter is moving forward. As it is now before the courts we will not be commenting further," Karen Hutt, chair of the hospital's board, said in a statement.

Kitch joined the IWK in August 2014 and was earning an annual salary of $296,289 at the time of her departure.

Before joining the Halifax hospital, Kitch was executive vice-president of patient care and chief nursing executive at Mount Sinai Hospital in Toronto.

The Grant Thornton review found there were "significant delays" in the submission of claims by the chief executive, which limited the Halifax hospital's ability to identify potential issues.

The report found Kitch had been allotted 10 days annually for professional development but exceeded that by 14 days in 2015 and seven days in 2016.

It found the IWK paid for membership fees beyond those contractually agreed to, including the Air Canada Maple Leaf Club Lounge and membership in the College of Registered Nurses of Ontario.

The report also found Kitch performed a review of the Montreal Children's Hospital, and was compensated with an honorarium and expense reimbursement. But travel expenses were charged to the IWK and not reimbursed upon receipt of payment, it said.

Among items seen as potentially personal, the report detailed $26,463.80 for flight pass usage; $4,636.55 for mobile data overages; $4,474.34 for taxis; $1,580.31 for hotel-related costs; $394.75 for meals; and $161.40 in iTunes charges.

"Hotel costs include a hotel stay by a family member of the CEO during a visit to Halifax, as well as hotel charges related to a personal trip to the U.S. that were charged to the corporate credit card," the report found.

A report by Auditor General Michael Pickup found significant weaknesses in financial controls at the IWK Health Centre, as well as at the Nova Scotia Health Authority and Housing Nova Scotia.

The problems ranged from "weak controls" over procurement at the Nova Scotia Health Authority -- the agency that oversees the province's most of the health system -- to "poor monitoring" of who has access to the financial systems of Housing Nova Scotia and the IWK Health Centre.