An Ontario Superior Court judge has frozen money owed to the former president of Bondfield Construction Company Ltd. from a $12.5-million property sale, saying there is persuasive preliminary evidence of fraud at the company based on work by forensic auditors.
Justice Thomas McEwen ordered that any proceeds owed to John Aquino from the sale of a commercial property in which he is a part owner must be paid in trust to lawyers for the court-appointed monitor overseeing Bondfield’s restructuring. The building in midtown Toronto was sold last November.
The monitor, Ernst & Young LLP, asked for the order, known as a Mareva injunction, because it is suing Mr. Aquino, along with four other individuals, alleging they engaged in a false invoice scheme designed to siphon money out of Bondfield. The monitor alleges that over an eight-year period Bondfield paid $80-million to companies that don’t appear to have real operations for services that were never performed. A portion of those funds allegedly flowed back to company insiders, including Mr. Aquino, who the monitor alleges received $5.2-million.
“I accept the monitor’s submission that there are sufficient ‘badges of fraud’ concerning the impugned transactions,” Justice McEwen wrote in his 18-page decision.
A lawyer for Mr. Aquino did not respond to a request for comment. None of the allegations have been proven in court. Justice McEwen specified that his findings were being made on a prima facie basis, meaning that the evidence has yet to be fully and rigorously tested in court.
Bondfield, a family-owned company and a builder of major public infrastructure projects across Ontario, announced in October, 2018, that Mr. Aquino had been “removed” from the company. He was replaced by his younger brother Steven Aquino. In April, 2019, the company was granted bankruptcy protection, stopping action on 200 lawsuits filed by subcontractors and other creditors. Ernst & Young was appointed as monitor.
The effects of Bondfield’s collapse have rippled through the construction industry and the public-sector agencies that relied on the company. The $187-million redevelopment of Cambridge Memorial Hospital in Southwestern Ontario is three years behind schedule. The $300-million restoration of St. Michael’s Hospital in downtown Toronto, which includes a 17-storey patient-care tower, has been delayed by about two years. Zurich Insurance Group, the multinational financial giant that guaranteed the completion of Bondfield’s work, says in court filings that it has had to pay more than $200-million in claims, the largest surety loss in Canadian history.
The monitor sought the freezing order, it alleges in court filings, because it understood that the sale of the property was “imminent” and once the deal closed the proceeds would “cease to be recoverable.” The property, which John Aquino owned with other investors through a corporation, is a low-rise commercial building on Gervais Drive. The building is occupied by, among other businesses, a bottled water venture called GP8 Sportwater. As of 2015, John Aquino was also a part owner of the company that produces GP8 Sportwater.
John Aquino opposed the freezing order. An affidavit filed on his behalf, sworn by Dara Hirbod a lawyer from Gardiner Roberts LLP, alleged that Ernst and Young has conducted a “one sided” and “inaccurate” investigation. Justice McEwen said he found this evidence unpersuasive.
“In my view, Aquino’s litany of complaints, as set out in his factum, are designed to sow confusion and deflect,” Justice McEwen wrote.
Justice McEwen also highlighted the fact that John Aquino declined to swear an affidavit of his own. Mr. Aquino’s legal team filed a four-paragraph affidavit from Toronto criminal lawyer Alan Gold, who said he advised Mr. Aquino to refrain from providing evidence before responding to the broader claims made by the monitor in its lawsuit over the alleged invoice scheme.
Justice McEwen was not swayed.
“Mr. Gold provides no explanation as to why, as a specialist in criminal litigation, he is giving advice in a civil matter (where Aquino is represented by counsel) or the basis for the advice as to why he considers swearing an affidavit before pleadings close is in any way germane.”
“I can see no reason why it might be and do not accept this explanation for not preparing an affidavit.”