News / Ottawa

Ottawa Hospital civil lawsuit alleges massive kickback scheme

The lawsuit implicates a number of local contractors and two former hospital employees who were conspiring to rig the hospital's procurement process.

The Ottawa Hospital has filed a civil lawsuit and notified police of an alleged kickback scheme involving the hospital's procurement policies.

Joe Lofaro / Metro

The Ottawa Hospital has filed a civil lawsuit and notified police of an alleged kickback scheme involving the hospital's procurement policies.

Shocking allegations have surfaced about a massive kickback scheme at the Ottawa Hospital.

The hospital is alleging that two of its former directors paid inflated prices to certain contractors, gave them insider information on upcoming projects and helped rig bids in their favour in exchange for luxury fishing vacations, classic cars and home renovations.

The allegations of fraud, embezzlement and kickbacks – which have not been proven in court – are contained in a statement of claim filed as part of a civil suit at the Ontario Superior Court of Justice.

The two former employees named in the civil suit are Frank Medwenitsch, who was the hospital’s director of planning and capital projects, and Brock Marshall, who was the director of engineering and operations.

Medwenitsch resigned in October. Marshall took an early retirement package last February and stopped working in April, according to the hospital’s statement of claim, although he continued to receive a salary until August.

Reached at his home Wednesday morning, Marshall told Metro he has yet to see the lawsuit and was surprised to hear the allegations.

“I know they’ve been doing a big risk review and I talked to them about everything that went on,” he said. “I was very forthright and honest about things that had transpired.”

Marshall said he never received any kickbacks.

Medwenitsch could not be reached for comment.

The suit also names five Ontario companies: DRS Construction, Federal Electronic Ltd., G.A.L. Power Systems Ottawa Ltd., Pro Management Construction Inc. and Ottawa Diamond Construction Inc.

Roch St-Louis, whom the lawsuit identifies as the sole registered director of Pro Management and the operator of Ottawa Diamond, said he was a sub-contractor and never worked directly for the hospital.

“It’s basically a fishing expedition. It’s only been allegations for the last six months,” he said. “It’s all he said, we said, they said.”

None of the other contractors returned calls for comment.

The Ottawa Hospital said in a statement published on its website that it called in police after an internal investigation into its planning and facilities department uncovered “grounds for concern.”

Neither the hospital nor the police had much to say Wednesday. It is still unclear if a criminal investigation is underway.

“We can’t comment on an investigation on a named person until charges are laid,” said Const. Marc Soucy. “We’re not talking about it.”

Hospital spokeswoman Kate Eggins declined comment.

The civil suit alleges Medwenitsch and Marshall gave the companies an unfair advantage by leaking them advance copies of procurement documents, and giving them details about their competitors’ bids and insider information about hospital projects.

The hospital also alleges Medwenitsch and Marshall rigged bids and “knowingly allowed and approved improper invoices” for work that was either not done at all, half done or hadn’t been finished. The lawsuit further alleges they knew about and approved “inflated pricing” by the contractors.

In return, the suit alleges, the two former hospital employees received luxury trips – including a stay in a Montebello, Que., resort as well as a lavish British Columbia fishing excursion that ended with a trip to California’s Napa Valley with their spouses – jobs for Medwenitsch’s daughters, work on their homes and cottages and free tickets to sporting events.

None of the gifts, trips and other benefits was ever disclosed to the hospital, the suit alleges.

The civil suit alleges Medwenitsch made sure the companies were chosen for hefty hospital contracts.

One example cited in the court documents involved a fireproofing project at the hospital’s General campus. Four companies bid on the project this past June. DRS Construction put in the second-lowest bid, the lawsuit alleges, but Medwenitsch made sure the company got the $88,000-job.

The hospital alleges that in 2014, Medwenitsch and two contractors “conspired and colluded together to essentially extort Marshall” to get his approval for “numerous unsupported and improper” invoices going back to 2010.

The suit alleges Medwenitsch and one of the contractors pressured Marshall to rush through invoices without proper review. The hospital claims Marshall knew the invoices were falsified but collaborated with Medwenitsch anyway.

The hospital says it discovered the scheme last August and suspended Medwenitsch. Around the same time, the hospital brought in an outside auditor to investigate its planning department.

Then, in September, the hospital sat down with Medwenitsch and his lawyer. During that meeting, the lawsuit claims, Medwenitsch denied all of the allegations against him.

But he later admitted his wrongdoing when the hospital confronted him with records of text messages and emails he exchanged with the contractors, the lawsuit alleges. He resigned in October.

The hospital is seeking $250,000 in punitive damages. It has also asked for an unspecified amount of money it claims to have lost to the scheme. The lawsuit says the hospital will have a final tally before the trial begins. 

–With files from Michael Woods and Joe Lofaro

Metro Savers