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Ernst & Young said a forensic investigation found evidence that Bondfield allegedly paid 577 falsified invoices totalling $80-million to companies, without any real operations, for services that were never performed.

Fred Lum/The Globe and Mail

The former chief executive officer of Bondfield Construction Co. Ltd is trying to derail the legal approach taken by a court-appointed monitor to recover millions of dollars it alleges were improperly diverted out of the company’s coffers.

John Aquino, who has been accused by the monitor of participating in a scheme to siphon $80-million out of Bondfield, has launched a motion to block the monitor, Ernst & Young Inc., from relying on Canada’s bankruptcy law to retrieve a portion of those funds.

Bondfield, one of Ontario’s largest builders of public-sector projects, has been under court-ordered bankruptcy protection since April, 2019, when 200 lawsuits from unpaid subcontractors and other creditors forced the company to restructure.

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Ernst & Young said a forensic investigation found evidence that Bondfield allegedly paid 577 falsified invoices totalling $80-million to companies, without any real operations, for services that were never performed. The monitor alleged in October that some of those payments flowed back to Mr. Aquino and two other former Bondfield officials. Mr. Aquino, the monitor alleges, received $5.2-million from the scheme.

Mr. Aquino denies the allegations. “I am implicated in a matter that I believe is without merit,” he has said in an affidavit.

The monitor has sought a declaration from the court that the payments to the suspect companies were what Canada’s bankruptcy law refers to as Transfers Under Value – which includes questionable payments to companies or individuals that have the effect of putting assets out of reach of creditors.

Unlike a regular lawsuit, proceeding under the bankruptcy act means that the monitor can move expeditiously and attempt to recover the suspect payments without time-consuming discovery or a trial – procedures that Mr. Aquino has said are required in this case.

Mr. Aquino has asked the court to order a full-blown trial, arguing that “a complete and fulsome discovery process is necessary to ensure procedural fairness and natural justice.”

In an affidavit, Mr. Aquino raises a number of objections about how the monitor’s investigation was conducted. This includes allegations that information was withheld from him in what he calls the monitor’s “one-sided” approach. He also alleges that the monitor relied on information from his brother Steven Aquino, Bondfield’s CEO, who he alleges “has misrepresented many material facts” about his knowledge of the suspect payments.

Steven Aquino replaced John Aquino in October, 2018, which is when Bondfield announced in a news release that it had “removed” John Aquino from the company.

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The monitor has not taken any action against Steven Aquino or the brothers’ father, Ralph Aquino, who founded the company more than four decades ago. Both men have co-operated fully with the monitor’s probe, Steven Aquino said in an e-mailed statement.

“For the record, Ralph and I vehemently deny any accusation of involvement” in the alleged scheme, he said.

In response to John Aquino’s motion, the monitor said in court records that it relied on a “variety of sources of information and reviewed a large volume of documentation," as well as evidence from Steven Aquino It also says that a lawyer for the monitor wrote to John Aquino’s lawyer and invited him to provide information. None was provided, the monitor alleges.

Three individuals involved with many of the suspect companies that invoiced Bondfield are also opposing the monitor’s efforts to proceed under the bankruptcy act. In its response, the monitor has noted that they and Mr. Aquino make numerous references to the suspect payments "in their materials and there is no suggestion that those transactions did not occur.” The filings also provide no explanation about why the payments took place.

Michael Myers, a Toronto lawyer and expert in insolvency law, said that asking a court to declare a transaction as a “transfer under value” can be a preferred route for a monitor because it only has to prove that the transactions harmed creditors and does not have to prove fraudulent intent. In contrast, if the matter proceeded by trial, a creditor must prove that there was intent to defraud them, Mr. Myers said in an interview. “The bar is definitely higher.”

The issue is scheduled to be argued in Ontario Superior Court on Feb. 27.

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