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— May 20 2000, Sat. - by Richard Mackie, Queen's Park Bureau
ORC documents allege fraud
Court filing by Ontario Realty Corp. Claims three former employees took part in scheme
Toronto – Three former employees of the Ontario Realty Corp. participated in a complex but unsophisticated pattern of rigged bids, false invoices and secret commissions to defraud the government agency of tens of thousands of dollars, according to documents filed in court yesterday.
The allegations are contained in a statement of claim filed by the ORC in an attempt to recapture money it says was siphoned off from the agency. The ORC also wants to recover land that was sold in questionable deals. The documents say that the false bids were so evidently phony that the three former employees would have had to have been "negligent" not to notice the bid-rigging, if they were not part of it.
Different bids from supposedly independent companies were strikingly similar "in respect of their content, style, format, font and errors," according to the statement of claim, filed yesterday in the Ontario Superior Court (Commercial Court).
The allegations by the ORC cover contracts to carry out environmental cleanups of land owned by the agency and deals to sell land at terms that were unreasonably beneficial to the buyers.
None of the allegations have been proven in court.
The documents also indicate that the ORC and the auditors investigating the agency's files expect more revelations of apparent wrongdoing. "ORC is not aware yet of all of the transactions and of all the parties involved in the fraud, but its investigation continues," the documents say. Further, they complain: "Many documents are missing from ORC's files for the fradulent transactions."
The auditors and the ORC have gone to court twice in the past month to get orders allowing them to seize records held by the defendants. The auditors and later the Ontario Provincial Police were called in to investigate deals signed by the ORC after reports in The Globe and Mail, starting last fall, about questionable practices at the agency.
The documents filed yesterday are the strongest allegations to date by the ORC that former employees and people with whom they dealt were defrauding the agency of money in schemes that would have been obvious if there had been tighter controls over the contracts signed by the employees.
"In this document, for the first time, the Realty Corp. and, through it, the government, have admitted that taxpayers have been ripped off," said Dominic Agostino, a Liberal MPP who has been a dogged critic of the agency.
"They've outlined a case of potential criminal wrongdoing. . . . It's significant because up to now [Management Board Chairman Chris] Hodgson and [Premier Mike] Harris have always said there's an investigation and that they can't comment until the police investigation is over," Mr. Agostino said.
He argued that the government must take the blame for these problems because of the lack of proper supervision of contracts being signed by ORC employees.
"These people, under their system, could work independently and make decisions on their own without scrutiny. There was clearly a management problem, a serious management problem," Mr. Agostino said.
ORC president Tony Miele has conceded in past in terviews that there was a lack of control over contracts signed by employees. Now, contracts must pass a tighter supervision process and the board of directors at the ORC has the power to intervene directly to review or cancel contracts.
The three former employees named in the statement filed yesterday are Vincent Catalfo, Ross Farewell and Kent Banting. The statement also names the Gabriele group of companies along with Pierino Gabriele, Frank Gabriele and Antonio Gabriele.
Others named in the statement are the Sirman group companies, along with Ivan Sirman, Cynthia Stiles and Robert Allan.
All those named have been cited in documents filed earlier in court by the ORC and by the forensic auditors who are reviewing past contracts signed by the agency going back 15 years.
The deals mentioned in the court documents only cover contracts signed in the past couple of years.
Documents filed two weeks ago set out how Mr. Sirman arranged to pay money to Mr. Banting, according to testimony from Ms. Stiles, who worked for Mr. Sirman.
The ORC is an agency under the supervision of the Chairman of Management Board, which manages 25,000 hectares of real estate owned by the government, including 8,000 buildings. The real estate has a value of more than $5-billion.
After the Progressive Conservatives were elected in 1995, they gave the ORC a mandate to sell off real estate to fight the deficit and as part of the Tories' agenda of privatizing government assets.
The mandate opened the way for deals in which the defendants engaged in "a course of conduct and series of transactions the effects of which were to defraud the ORC," the auditors and the corporation said in the documents filed yesterday.
"These transactions are characterized by suspicious circumstances," the documents said. "These suspicious circumstances, when combined with the fraudulent activities summarized [elsewhere], demonstrate that these real-estate transactions were or are part of a scheme to defraud the ORC." In particular, the documents said, there were four types of transactions that were fraudulent:
"Rigged bids were submitted for environmental consulting and remediation conducted by one or more of the defendants."
"Environmental remediations conducted by one or more of the defendants, and which was paid for by the ORC, was not completed properly or at all, and test results and reports were falsified."
"Inflated invoices were submitted to, and paid by, the ORC for environmental work done by one or more of the defendants."
"Illegal secret commissions were paid to former ORC employees." The ORC is asking the court to award it "damages for fraud and breach of contract in an amount to be specified."
It is also asking the court to cancel all contracts between the province and the Gabriele companies covering any property in which the Gabriele companies still have an interest.
And the ORC wants the court to return to the province the ownership "of all properties and other assets acquired by the Gabriele companies" from the province and in which the Gabriele companies still have an interest. Further, the ORC is asking the court to award it "damages for fraud, breach of fiduciary duty and negligence" from the three former employees it names in the documents.
No amounts sought by the ORC are specified.
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