Construction contractors file defences to Ottawa Hospital fraud lawsuit

Two more Ottawa Hospital construction contractors are denying any wrongdoing in their legal defences filed this week responding to allegations made in a lawsuit launched by the hospital earlier this year.

In January, the Ottawa Hospital alleged five contractors and two employees conspired in a kickback scheme to defraud the hospital on construction contracts.

The alleged kickbacks included lavish trips, hiring employee family members paid through invoices to the hospital, as well as providing construction work on hospital employees' personal residences for free or at low-cost.

In return the hospital alleged the companies received contract procurement advantages and were allowed to pad bills.

The statements of defence filed in court this week by Federal Electric (1976) Limited and its owner Larry St. Pierre, as well as Pro Management and Diamond Construction, both owned by Roch St. Louis denied both the general allegations of taking part in a fraud scheme as well as the specific accusations in the original lawsuit.

Federal Electric continues to work at the Ottawa Hospital General campus as a subcontractor under PCL which won the contract to build the $135-million expansion of the University of Ottawa Heart Institute.

Pro Management owner St. Louis declared bankruptcy for that company in April 2015 and declared bankruptcy for Diamond Construction in October 2015 before the hospital filed its lawsuit in January.  

Gifts were part of 'business development activities'

The Ottawa Hospital lawsuit alleged Federal Electric and its owner St. Pierre hosted several hospital employees, including the director of capital projects and co-defendant Frank Medwenitsch at St. Pierre's cottage for a fishing trip in July 2015.

Also that month the suit alleged Federal Electric and another defendant GAL Power helped pay for a luxury fishing trip including flights to Vancouver and a trip to San Francisco and Napa Valley with spouses.

Federal Electric responded in its defence, that the gifts were "part of business development activities customary in the industry" but denied it did anything "wrong or illicit."

"Federal Electric says that any obligation to report hospitality received by Medwenitsch is an internal and private matter between him and the hospital," according to the statement of defence.

Medwenitsch denied he took gifts such as trips in his own statement of defence filed in late May.

Hiring daughter of former director of capital projects

The original hospital lawsuit also alleged Federal Electric hired one of Medwenitsch's daughters and paid her by padding invoices to the hospital.

Federal Electric acknowledged hiring her in its statement but said she was "a proper and bone fide employee" paid legitimately by the company.

The original suit also alleged Medwenitsch instructed Federal Electric to "inflate" a quote for a subcontract to work on a parking rehab project at the Civic Campus. 

The Federal Electric defence explained the additional money was a legitimate addition and had been approved by others at the hospital.

Hospital alleged contractor worked on employees' homes

Pro Management and Diamond Construction were alleged to have done work on Medwenitsch's cottage and home, as well as at another unnamed hospital employee's home in the spring of 2015 at below cost or at no cost.

The companies are also accused of doing work at hospital employee Brock Marshall's home under instruction by contractor DRS Construction — also a defendant in the Ottawa hospital suit. Marshall is also a defendant in the Ottawa Hospital suit.

Other than a general denial of wrong doing, Pro Management does not address the specific allegations in its defence.

Pro Management claims it had not submitted a single invoice to the hospital during the period in question and suggests the hospital sued the wrong company.

A spokesperson for the Ottawa Hospital said it did not wish to add any comment to the defences filed this week. 

None of the allegations has been tested in court.

Ottawa Hospital Lawsuit Time Line

• December 2015: Contractor DRS Construction files claim for nearly $1.5 million in unpaid invoices and loss of work.
• January 2016: Ottawa Hospital files lawsuit alleging two employees and five contractors (including DRS) took part in a kickback scheme to defraud the hospital (amount to be determined before trial).
  March 2016: Ottawa Hospital petitions the court to merge the DRS and Ottawa Hospital suits. Court grants consolidation.
• April 2016: DRS Construction makes new allegations against Ottawa Hospital in court documents.
• April 2016: Ottawa Hospital files statement of defence to DRS counterclaim.
• May 2016: Frank Medwenitsch files statement of defence and counterclaim alleging wrongful dismissal worth at least $350,000 plus "whatever the hospital claims."
• June 2016: Ottawa Hospital files defence to Medwenitsch's counterclaim.
• July 2016: Federal Electric files its statement of defence.
• July 2016: Pro Management/Diamond Construction file their statements of defence.

With seven defendants, including two employees and five contractors, Ottawa Hospital employee Brock Marshall and contractor GAL Power are the last two defendants yet to file defences to the original suit.