Canadian Contractor

John Bleasby   

UPDATE: Ottawa Hospital seeks contractor asset freeze

Canadian Contractor

Request is part of a civil suit concerning kickbacks, personal benefits

Ten days after news broke concerning an alleged bid rigging and kickback scheme at the Ottawa Hospital, the Ottawa Citizen reports that the hospital is asking the court to freeze the assets of two former employees as well as four of the companies said to be co-conspirators: Federal Electric, DRS Construction, GAL Power Systems and Pro Management Construction Inc.. The Hospital had previously filed a civil suit, although the dollar amounts involved have yet to be released.

The “irregularities” identified in the suit involve “day-to-day repairs and minor renovations,” Requesting a freeze of assets could be interpreted as a move to prevent the transfer of corporate and private assets beyond the reach of any court settlement.

Frank Medwenitsch, former director of facilities for the Ottawa Hospital. (photo: Ottawa Construction Association)

Frank Medwenitsch, former director of facilities for the Ottawa Hospital.
(photo: Ottawa Construction Association)

The Ottawa Citizen also reports that the hospital’s former director of facilities Frank Medwenitsch became employed under contract by Federal Electric shortly after he resigned after being confronted with the fraud and kickback allegations. Medwenitsch had worked for the Ottawa Hospital for 25 years and oversaw capital projects that exceeded more than $200 million. Federal Electric is also alleged in the civil suit to have hired Medwenitsch’s daughter, with her salary partly paid by the hospital.

The alleged conspiracy is massive in scale
According to the 29 page statement of claim, and as reported widely in local media, “The alleged payments included work on the homes and cottages of two hospital employees, jobs for their children, luxury trips, including one to a British Columbia fishing resort ending with a trip to California wine country in 2015, bid rigging and more. Some or all of these trips are alleged to be have been provided, directly or indirectly, to electrical contractors as a rewards program by PCL, general contractor for the $135-million addition to the University of Ottawa Heart Institute now underway. The heart institute is on the same campus but is independent of The Ottawa Hospital. None of the allegations have been proven in court.

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The claim also alleges a second employee Brock Marshall was coerced into approving improper invoices for half a million dollars of work that “nobody ever recalls happening.” Marshall was the hospital’s director of engineering and operations from 1989 until his early retirement in 2015, and is reportedly still receiving paycheques.

Five contracting company and associated individuals were among the named parties to the suit: Gerard Dubé of D.R.S. Construction; Larry St. Pierre of Federal Electric Limited; Guy Adrian LaPierre of G.A.L. Power Systems Ottawa Ltd.; Roch St.-Louis of Pro Management Construction Inc.; and Ottawa Diamond Construction Inc., all of whom have worked on projects and renovations at the Ottawa Hospital. Although the civil suit action has not been heard by the courts, the Ottawa Hospital has already passed the file on to Ottawa police.

Contractor files their own suit against the hospital
In an interesting twist, DRS has filed its own suit against the hospital for unpaid invoices and broken contractual promises amounting to $1.4 million that have allegedly resulted in the layoff of five employees.

Sole-sourcing granted to some suppliers
Medwenitsch is alleged to have granted considerable influence over tenders and equipment supply. As a result, one hospital contractor told the Ottawa Citizen that he was directed to purchase a  generator from G.A.L. Power which was several times more expensive than one he might have purchased elsewhere.

Work conducted on personal properties
Both DRS and Pro Management are alleged to have undertaken considerable work at Medwenitsch’s cottage, at Marshall’s home and hobby farm, and at the home of Marshall’s daughter, all at either below or at no cost, including installing windows, replacing a deck, moving a gazebo, and installing river stone. Furthermore, Dubé of DRS and St. Louis of Pro Management are alleged to have “conspired and colluded together to essentially extort Marshall so he’d sign off on “improper” invoices. After Marshall professed ignorance of any such invoices, Medwenitsch himself reminded Marshall of the ‘$100K plus done on your house and farm.’ “

Outrage from the hospital union
Having faced cutbacks of $80 million during this time period, Ottawa Hospital’s union president Rob Driskell said in an email sent to CBC “It’s outrageous that this appears to have happened at the same time as the Ottawa Hospital has been making drastic cuts to care hours and staffing.”

Ottawa construction practices called into question
Newspaper reports also suggests that “members of the city’s construction community have long questioned why work at The Ottawa Hospital seemed to be a “closed shop” and the majority of contractors could not even get in to bid for jobs.” One contractor, upon hearing the news of the civil suit and investigation, was quoted saying “It’s about time’.

With files from:
The Ottawa Citizen
CBC News
The Ottawa Sun

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