Ottawa Hospital paid $500K to auditor for lawsuit that never went to trial

The audit that led to an Ottawa Hospital lawsuit, with explosive allegations about a fraud conspiracy involving its contractors and two hospital managers, cost taxpayers more than $500,000, according to new information obtained by CBC.

The hospital has fought CBC's efforts to obtain information about the true cost borne by the public for a case that began in 2016 and was settled more than four years later without going to trial.

A CBC appeal under Freedom of Information legislation resulted in access only to the cost of the audit itself, however.

This likely represents only a small portion of the total cost of the suit, including legal fees and any settlements, according to lawyer and forensic auditor David Debenham.

"They spent a lot of money on this, and the question is, is it well spent?" he said. "Did they get value for money? We have no way of telling."

A 'fraudulent scheme'

In 2015, EY Canada was hired as an outside auditor to investigate "irregularities" among the hospital's procurement practices.

Some of the findings of the initial investigation were detailed in an eye-popping statement of claim filed by The Ottawa Hospital (TOH) in January 2016.

It alleged a "fraudulent scheme" involving two former longtime directors, both in charge of large budgets and projects. The suit alleged the managers conspired with five contractors to defraud the hospital in exchange for luxury vacations, family favours and discounts on home renovations.

EY's investigations continued for three more years, billing a total of $549,235.32, according to the information released by the hospital last Friday.

By early 2019 — three years after launching the suit — the hospital's legal team still hadn't shared their evidence with the defendants, some of whom began planning a motion for summary judgment — essentially asking the judge to throw out the case against them.

Later that spring, the hospital began settling with each of the parties, including countersuits by the two managers.

In July 2020, four years after the lawsuit began, the hospital announced on its website that "the proceedings have now entirely concluded. All settlements are confidential."

Lawyer David Debenham is president of the Association of Certified Forensic Investigators of Canada. (Amanda Pfeffer/CBC)

In an emailed statement Thursday, the hospital noted Ontario's information and privacy commissioner upheld its decision to withhold its legal fees and settlement costs.

The hospital then repeated its online statement from July 2020:

"As a public institution, TOH holds its financial practices to the highest standard of accountability and follows all procurement rules required by provincial and federal governments," the hospital said.

"As a result of the proceedings, TOH completed detailed internal reviews and implemented additional controls and monitoring processes that are much more stringent. TOH continues to remain diligent in the stewardship of health-care funding while ensuring the community receives first-class care."

True cost under 'cloak of confidentiality'

Debenham, who's also president of the Association of Certified Forensic Investigators of Canada and a member of the Canadian Bar Association's anti-corruption team, questions the hospital's use of confidentiality agreements in cases that involve alleged fraud against the hospital.

"Aren't they supposed to be transparent?" said Debenham. "They paid public money for settlements or they released a claim, and all of that is under a cloak of confidentiality."

Debenham said the lack of transparency erodes public trust, particularly as the hospital undertakes work on its ambitious new Civic campus.

Construction has begun on The Ottawa Hospital's new campus off Carling Avenue. (Amanda Pfeffer/CBC)

Peter Mantas, the lawyer for the CEO of one of the contractors, GAL Power Systems, said after the settlement the company was happy with the agreement and that the two sides agreed to resume their relationship.

GAL Power Systems and another contractor named in the initial suit continue to work for the hospital. Both are subcontractors under the public-private partnership building the new campus.