Executives with one of Ontario’s largest builders of public-sector projects participated in a scheme in which the company paid $80-million in suspicious invoices to suppliers who channeled some of the money back to company insiders, auditors have alleged in an investigation report filed in court.
The court-appointed monitor for Bondfield Construction Co. Ltd., which has been operating under bankruptcy protection since April, has obtained an Ontario judge’s permission to take legal action against three former Bondfield officials – including the company’s former chief executive officer, John Aquino – who are alleged to have received a portion of the funds, court filings show.
None of the allegations has been proven in court. In an e-mailed statement, a lawyer for John Aquino said that investigators compiled the report without speaking to his client. “The report is at best incomplete and one-sided,” Michael Citak said.
Between 2014 and 2015, Bondfield won high-profile public construction projects in Ontario that included the restoration of Toronto’s Union Station and the redevelopment of three hospitals. The projects have ground to a halt because of the company’s financial distress.
The allegations from the monitor, Ernst & Young LLP, cap a tumultuous period for the company, which is owned by Mr. Aquino, his younger brother Steven Aquino and their father, Ralph Aquino.
In October, 2018, the company announced in a news release that it had “removed” John Aquino as president, and replaced him with Steven Aquino. In April, Bondfield was granted protection under the Companies’ Creditors Arrangement Act, citing liquidity problems and more than 200 lawsuits against it from unpaid subcontractors and others.
In the Oct. 30 report, which was recently posted online, Ernst & Young disclosed the results of a forensic investigation of the company. The report identified 577 suspicious invoices that were issued over a seven-year period by 19 “suppliers of interest." Investigators found no evidence these companies performed work for Bondfield, but they were paid nonetheless, the report alleges.
“It has become clear that the invoiced services and supplies allegedly provided by the suppliers of interest were not in fact provided,” the auditors said. The report does not explain why the payments were made.
As part of the probe, investigators recovered more than 100 e-mails written by Michael Solano, a former Bondfield IT manager, that instructed the suppliers how much to invoice Bondfield and what work they should say they performed. Mr. Solano, who is John Aquino’s cousin, died in January, 2017.
The investigation report highlighted an unusual feature of the payments to the suppliers – their speed. Legitimate suppliers to Bondfield could be paid 30 to 90 days after they invoiced Bondfield, the report states. But when the suppliers of interest invoiced, they were paid “in a matter of a few days,” the report alleges.
“It appears that the Bondfield Group had a unique motivation to pay the suppliers of interest more quickly than other suppliers,” the report states.
The largest invoice the report cited was issued for work purported to have been performed on Hawkesbury and District General Hospital, one of the projects stalled by Bondfield’s financial collapse.
A company called MTEC Construction submitted an invoice for $361,713 dated Dec. 1, 2014, for providing labour and equipment to “cut, break and remove concrete slab on grade including disposal offsite inside existing hospital.”
The report quoted a Bondfield official saying: “This work was not performed on this project.” The Globe was unable to reach anyone at a phone number listed on the invoice supplied by MTEC.
In another case, a company submitted an invoice for $283,404 in 2015 for work on Union Station – a job actually performed by a legitimate Bondfield subcontractor, the report alleges.
That invoice, from MMC General Contracting, described its services: “To demolish existing slab on grade and remove offsite, install bracing columns and excavate for foundations.” In fact, the majority of this work was done by Priestly Demolition Inc., the report says.
The Globe was unable to reach anyone at an e-mail address for MMC that was listed in the court filings.
A Miami-based company in the business of buying, selling and trading Rolexes, Cartiers and other luxury watches also shows up in the report. Time Passion Inc. invoiced Bondfield for $198,000 on Dec. 18, 2013. It described its services as “supply and install clock and timing system for parking monitoring” at a GO Transit garage in Pickering, a city east of Toronto. A different, legitimate contractor actually installed the equipment, the report says.
A person who answered the phone at Time Passion on Wednesday hung up on a Globe reporter.
The investigators obtained a court order that required six financial institutions to hand over banking information for 31 accounts.
Although investigators have not been able to determine the ultimate destination for most of the money, they traced some of it to Bondfield employees, including John Aquino, the report alleges. The auditors allege that at some point between April, 2014, and April, 2019, John Aquino received $5.2-million.
Although the auditors say they have identified $80-million in “impugned transactions” from 2011 to 2018, the Bankruptcy and Insolvency Act allows them to target only payments made five years before Bondfield launched insolvency proceedings. During that period, the suspicious transactions totalled $33.2-million, the report alleges.
Two other Bondfield employees are alleged to have received some of the funds. Bondfield’s former chief financial officer, Domenic DiPede, received $1.3-million, and US$250,000, the report alleges. Mr. DiPede could not be reached for comment.
Mr. Solano, the former IT manager, received $507,000, the report alleges.
In a statement, Steven Aquino described the transactions as “concerning" and said none of the Bondfield employees identified in the report is still with the company.
“Since I became president of Bondfield in October, 2018, I have been committed to working with EY to uncover these concerning transactions and to facilitate their ongoing investigation,” he said.
Bondfield has sued The Globe and Mail, alleging it was defamed in stories published in 2015 and 2016 about links between John Aquino, at the time Bondfield’s president, and an executive at St. Michael’s Hospital who was one of four officials who selected the company to carry out a $300-million redevelopment. Bondfield alleged the stories improperly inferred the contract was obtained through corruption. The case has not proceeded since last April when Bondfield was put under bankruptcy protection.