Federal government scrutinized contractors named in Ottawa Hospital lawsuit

The federal government took steps to protect itself from the controversy erupting over a lawsuit by the Ottawa Hospital against several of its contractors — including one with ongoing government contracts worth $1.6 million —  CBC News has learned.

The government ultimately cleared the companies for future federal contracts, but with new conditions.

The explosive allegations in the original suit against five hospital construction contractors, their owners and two hospital employees claimed they conspired in a "fraudulent" kickback scheme involving free luxury fishing trips and work on the employees' homes in return for padded invoices and rigged contracts. 

• Ottawa Hospital files lawsuit against former directors, contractors

• Construction contractors file defences to Ottawa Hospital fraud lawsuit

The federal government was particularly concerned since it used two of those contractors, Federal Electric and GAL Power Systems. GAL still has $1.6 million in maintenance contracts with the government lasting until 2020, documents reveal.

The issue is dealt with in a memorandum to the deputy minister of Public Works and Government Services Canada, Barbara Glover, titled "Implications of adverse media regarding Federal Electric Ltd. and GAL Power Systems Ottawa Ltd."

Memo details allegations

The document, obtained by CBC News through access to information, is dated Jan. 27, 2016, just a few weeks after the hospital filed its civil suit with Ontario Superior Court on Jan. 6.

The memorandum makes special note of the hospital's allegations against GAL Power Systems, including:

• Paying for hospital employees, and sometimes their spouses, to attend trips.
• Employing the daughter of a hospital employee named in the suit.
• Choosing how two generator-related bids would be run, including which competitors should be allowed to bid.
• Inflating prices — with a hospital employee's knowledge — for a sole-sourced contract for hospital generators and maintenance.

None of the allegations has been proven in court, and GAL's statement of defence calls the hospital's claims "patently false."

Wait-and-see approach

In the end, the federal government opted for a wait-and-see approach, and found no evidence of the sort of fraud alleged in the hospital's claim.

"Given the type of contracts Public Services and Procurement Canada (PSPC) currently has with GAL, i.e. mostly ongoing maintenance, the behaviour the hospital alleges GAL demonstrated is not duplicated in the reviewed PSPC contracts," according to a heavily redacted update to the memorandum issued in May.

The memorandum notes the hospital suit is a civil case, and no criminal charges have been laid against the contractors. Furthermore, "if the allegations are upheld, none of the companies will become ineligible to be awarded contracts by PSPC or any other federal organization currently implementing the integrity regime."

However future contracts with any of the companies named in the suit will now need the approval of a higher authority, according to the memorandum.

"It will now be necessary for contracting officers to receive clearance from their director general in order to award contracts to DRS Construction, Federal Electric Lt, GAL, Pro Management Construction and Ottawa Diamond Construction Inc." (Both Pro Management and Diamond are now defunct.)

Publicity 'sensational,' GAL owner says

Ottawa police confirmed there are no charges related to the hospital's allegations, but would not confirm or deny whether an investigation is ongoing. 

GAL owner Guy Lapierre responded to inquiries from the CBC through a statement from his lawyer noting GAL has been doing business with the federal government for about 20 years.

"Mr Lapierre is gratified that despite the sometimes sensational publicity surrounding the civil claim made on behalf of The Ottawa Hospital, the federal government, along with GAL Power's many other clients, continues to have confidence in him and his company."

Lapierre's lawyer also noted GAL Power continues to work for the Ottawa Hospital as well, despite the lawsuit.