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Former St. Michael’s Hospital chief administrative officer, Vas Georgiou (pictured), and former Bondfield president John Aquino were convicted of fraud this week over allegations the bidding process for the hospital’s redevelopment was tainted by favouritism and undisclosed conflicts of interest.Sammy Kogan/The Globe and Mail
On the evening of June 25, 2018, an e-mail landed in the inbox of a senior executive at Infrastructure Ontario, citing a litany of problems with the work done by the construction company hired to build three state-of-the-art facilities for children with special needs.
In the e-mail, Bridget Fewtrell, CEO of ErinoakKids, questioned the way the Crown agency that manages public-private infrastructure projects, IO for short, handled her complaints about the contractor, Bondfield Construction Co. Ltd.
“I am perplexed at why IO has always been and continues to be so frightened of Bondfield,” she wrote, adding later in the e-mail “This project has been a failure of process on so many levels they are hard to enumerate and I have been told by numerous people that they have never seen anything quite as awful.”
Not only was Bondfield’s work incomplete at ErinoakKids, water leaked inside, columns and beams were cracked, and staff were getting trapped in malfunctioning elevators, according to documents obtained by The Globe and Mail through a freedom-of-information request.
ErinoakKids’s problems with Bondfield were no isolated incident. IO is facing a reckoning over its decision to invite the construction company to plunge into the pool with bigger competitors. Ontario’s former Liberal government created IO in 2005 to oversee the awarding of all contracts for major public-sector building projects, as part of its ambitious plan to renew the province’s roads, jails, schools and, most urgently, hospitals. IO currently has $30-billion in projects on the go.
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Between August, 2014, and January, 2015, IO awarded Bondfield five contracts worth a combined $840-million – entrusting the mid-sized, family-owned company with more high-profile projects than it had ever taken on at one time. The results have been nothing short of disastrous.
Bondfield’s largest IO project, the expansion and refurbishment of Toronto’s St. Michael’s Hospital, is expected to be completed in 2026, seven years behind schedule, and the cost has soared to $577-million from $300-million.
This week, St. Michael’s former chief administrative officer, Vas Georgiou, and former Bondfield president John Aquino were convicted of fraud over allegations the bidding process for the hospital project was tainted by favouritism and undisclosed conflicts of interest.
“The evidence that the defendants acted dishonestly over the course of the procurement process is overwhelming,” Ontario Superior Court Justice Peter Bawden said in his 135-page decision.
The verdict casts an enormous shadow over IO. Bondfield sought bankruptcy protection in 2019, resulting in the largest financial loss from the collapse of a construction company in Canada. Unpaid creditors submitted claims to the company’s insurer, Zurich International Co. Ltd., which had provided more than $1-billion in surety bonds on Bondfield’s projects, including St. Michael’s.
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The patient care tower at St. Michael’s Hospital under construction in August, 2018.Christopher Katsarov
Hundreds of lawsuits have been filed against Bondfield in Ontario, many of which were on its IO projects.
The procurement scandal – the largest since IO’s inception – happened despite the agency’s stringent rules governing the conduct of construction companies and public-sector employees during the bidding process.
“When concerns arose about the St. Michael’s Hospital procurement nearly 10 years ago, Infrastructure Ontario took immediate action to ensure our high standards of integrity were being upheld,” agency spokesperson Ian McConachie said in an e-mail response.
What’s at stake is public confidence in the fairness of procurement practices. Justice Bawden said the impact of Mr. Georgiou’s and Mr. Aquino’s “dishonest conduct” ripples well beyond St. Michael’s.
“Their actions demonstrate that even a well-regulated process may be susceptible to corruption at senior levels,” he wrote. “This undermines trust in public procurement and may discourage qualified bidders from participating in future projects, thereby weakening competition and damaging the integrity of the market.”
The morning after Ms. Fewtrell at ErinoakKids complained about IO, bureaucrats talked about her outburst, according to e-mails released through freedom of information.
“Unclear what IOs role is. Relationship lines have been crossed in inappropriate ways and [ErinoakKids] does not trust IO,” wrote Nadia Cornacchia, an assistant deputy minister at the Ministry of Children and Youth Services.
“IO’s handling of the construction problems “has been weak, to say the least,” wrote Tony Lazzaro, a director at the Ministry of Community and Social Services.
“The governance support from IO really need[s] to be looked at,” Ms. Cornacchia replied.
Later that morning, IO and ministry officials held a teleconference meeting with Ms. Fewtrell. In a summary of the call that he shared with other bureaucrats, Mr. Lazzaro said that Ms. Fewtrell recalled her apprehensions about Bondfield when IO awarded the $163-million project.
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“She also stated that in 2015 (project awarding) she went on record with EOK’s concern of the proposed GC but that IO replied with the ‘we have a process and will control the project’ line,” Mr. Lazzaro wrote, using the abbreviation GC to refer to the general contractor, Bondfield.
Ms. Fewtrell, now retired from ErinoakKids, did not return messages. Spokesperson Leona Hollingsworth said another contractor finished the work.
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Bridget Fewtrell speaks in Mississauga, on April 27, 2018.STEPHANIE LAKE/The Canadian Press
When allegations of undisclosed business ties between Mr. Aquino and Mr. Georgiou began swirling around St. Michael’s Hospital a decade ago, IO told police investigators they would handle the matter on its own.
A series of Globe stories published in 2015 and 2016 revealed that while Mr. Georgiou worked as one of the evaluators of Bondfield’s bid for the hospital project, he was involved in two businesses owned by Mr. Aquino – conflicts of interest that were not disclosed.
Unsealed court documents provide details about how senior executives at IO responded in September, 2015, to The Globe’s findings. On Sept. 11, IO’s then general counsel, Marni Dicker, contacted the Ontario Provincial Police’s anti-rackets branch about the allegations. But five days later, when a detective followed up with her, she said IO would handle it.
The procurement agency set up a special committee of the board, which produced a report in June, 2016, declaring that the procurement for St. Michael’s was not compromised. It found no evidence “of any attempt to improperly influence the procurement.”
IO’s Mr. McConachie said the committee’s report concluded that the undisclosed conflict of interest did not affect the procurement, because “all bidders knew the scoring criteria, in particular the emphasis on the lowest price.” As well, he said, IO’s process for evaluating bids “makes undue influence highly unlikely.”
The report’s conclusions puzzled a number of people with inside knowledge – several of whom previously told The Globe they were never interviewed. The findings stand in stark contrast to the conclusions of Ontario’s Serious Fraud Office, which opened a criminal investigation in 2019 amid new revelations: Zurich, Bondfield’s insurer, had unearthed evidence indicating that Mr. Georgiou funnelled confidential information to Mr. Aquino to help his company win the contract.
In his ruling, Justice Bawden said that, had Bondfield’s bid been excluded, “there was at least a chance” that PCL, another bidder, could negotiate a contract with the hospital and IO.
PCL’s $538-million bid had been rejected as too pricey. The project is now being completed by EllisDon at an additional contract cost of $277-million, according to a March, 2024, court decision.
In the end, the total cost will be $577-million, $39-million higher than PCL’s bid.
As for St. Michael’s, it hired Mr. Georgiou without knowing that he was dismissed less than a year earlier by his previous employer – Infrastructure Ontario.
As a senior IO executive, Mr. Georgiou was alleged to have been involved in a scheme to defraud a Toronto university.
Mr. Georgiou submitted invoices to York University totalling $64,800, through two family-owned companies, for door lock and water main work they never performed. York filed a statement of claim against all the people and companies it believed had defrauded it, including Mr. Georgiou. Mr. Georgiou signed a settlement agreement with York.
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IO’s chief executive officer at the time, David Livingston, terminated Mr. Georgiou’s employment in January, 2012 – information apparently not shared with anyone. Mr. Livingston announced in an agency-wide e-mail that Mr. Georgiou was resigning for personal reasons.
The hospital was unaware of the circumstances around Mr. Georgiou’s departure from IO. As a result, then St. Michael’s CEO Robert Howard actively encouraged Mr. Georgiou to apply for the No. 2 position at the hospital because he was knowledgeable about big construction projects and he knew people in the industry.
“That was his major, major strength,” Dr. Howard testified at the trial.
St. Michael’s dismissed Mr. Georgiou after The Globe reported on his business ties to Mr. Aquino. But the case against the pair wasn’t clinched until 2020.
That was when workers clearing out an office at Bondfield found a folder. Inside were printouts of e-mails showing the two men communicating in secret about the hospital procurement three days before the deadline for bids.
