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The 17-storey patient care tower at St. Michael's Hospital in Toronto on Aug. 31, 2018.Christopher Katsarov/The Globe and Mail

A former senior executive at Toronto’s St. Michael’s Hospital and the former president of a once prominent Ontario construction company have been criminally charged as part of a long-standing probe into corruption at one of Canada’s premier health care facilities.

Vas Georgiou, the former chief administrative officer at St. Michael’s, and John Aquino, the former president of Bondfield Construction Co. Ltd., voluntarily surrendered to police in the Toronto area on Tuesday. Both men were released.

Each man is charged with two counts of fraud over $5,000, as well as one count of paying or accepting secret commissions. In addition, Mr. Georgiou is charged with one count of committing fraud on the government. The charges, announced Thursday, are the culmination of a four-year probe by Ontario’s Serious Fraud Office – a group of police officers and prosecutors dedicated to investigating alleged financial crime.

Alan Gold, a criminal lawyer representing Mr. Aquino, declined to comment on Thursday, saying in an e-mail that his client, “will respond to the accusations in the court process.” Peter Brauti, Mr. Georgiou’s lawyer, said, “We continue to deny any criminal conduct and will not be commenting further while the matter is before the courts.”

The cases against both men, which involve allegations of collusion and kickbacks, date back to 2015, when Bondfield was selected as the winning bidder to redevelop the aging hospital, located in downtown Toronto. A series of Globe and Mail stories published that year and in 2016 revealed that while Mr. Georgiou was working as one of the evaluators on Bondfield’s bid for the $300-million project he failed to disclose he was personally involved in two businesses owned by Mr. Aquino. Citing these undisclosed conflicts, the hospital fired Mr. Georgiou in 2015.

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Since then, the project has fallen into disarray and is years behind schedule, while Bondfield’s multinational insurer, Zurich Insurance Co. Ltd., has unearthed evidence that the two men improperly communicated with each other throughout the procurement process on a Blackberry.

The ripple effects of the scandal have been felt widely across Ontario. In 2019, Bondfield sought bankruptcy protection, resulting in the largest financial loss from the collapse of a construction company in the history of Canada. Bondfield’s public-sector projects across Ontario, including hospitals, universities and libraries, came to a standstill. Scores of unpaid subcontractors submitted claims to Zurich, which had provided more than $1-billion in guarantees – or what are known as construction surety bonds – on Bondfield’s construction projects, including St. Michael’s.

Faced with this massive financial liability, Zurich installed itself at Bondfield’s then head office, north of Toronto. The insurance company, along with Bondfield’s court-appointed insolvency monitor, launched an investigation into the St. Michael’s procurement and discovered that, during the bidding process, Mr. Aquino had supplied Mr. Georgiou with a secret Blackberry and his very own e-mail address. Mr. Georgiou used the device to leak confidential information about the procurement to Mr. Aquino, Zurich has alleged in court filings.

That investigation also revealed that in September of 2015, Mr. Aquino ordered Bondfield’s IT staff to permanently wipe all references to Mr. Georgiou from the company’s e-mail server. An estimated 5,000 e-mails were destroyed. The e-mail deletion took place about a week before The Globe and Mail published its first story about the commercial ties between Mr. Georgiou and Mr. Aquino.

Zurich’s forensic sleuthing also uncovered evidence that Bondfield staff performed hours of free work at Mr. Georgiou’s house in north Toronto. This included landscaping his yard, demolishing his driveway, carpentry inside his residence and work on his gazebo.

Citing the alleged collusion, Zurich has sued Mr. Georgiou, Mr. Aquino and Unity Health Toronto, the hospital network that includes St. Michael’s. The insurance company has also sought court orders rescinding the surety bonds it issued on the project. The court case is unresolved.

Zurich is not the only financial institution that has turned to the courts to minimize its exposure to the troubled St. Michael’s project.

The St. Michael’s procurement was overseen by Infrastructure Ontario, the agency that manages the province’s major public sector building projects, and which requires bidders to secure private-sector financing to complete projects. Under Infrastructure Ontario’s model, often referred to as a P3, successful bidders are only paid in public dollars once construction has been completed – an incentive for builders to finish projects on time and on budget.

In the case of St. Michael’s, Bondfield borrowed from a consortium of banks, led by the Bank of Montreal. The consortium says it is out $230-million, and has launched a lawsuit against Unity Health and Infrastructure Ontario, alleging both organizations failed to keep the procurement from becoming “tainted and compromised.” That litigation is also unresolved.

The conclusion of the probe by the Serious Fraud Office, which is led by the Ontario Provincial Police, stands in stark contrast to the findings of a review ordered by Infrastructure Ontario in 2015. After The Globe published its stories about the ties between Mr. Georgiou and Mr. Aquino that year, Infrastructure Ontario formed a special committee of its board to look into the matter. With help from Bay Street law firm Blake, Cassels & Graydon LLP and forensic auditor Cohen Hamilton Steger & Co. Inc., the special committee produced a report that said the process had not been compromised, and that it found no evidence “of any attempt to inappropriately influence the procurement.”

Bondfield, meanwhile, launched a $125-million libel lawsuit against The Globe. But that lawsuit has been effectively dead since Bondfield sought bankruptcy protection.

As for the St. Michael’s construction project, it remains incomplete. The redevelopment was supposed to unfold in two phases: the erection of a 17-storey patient care tower, followed by a new Shuter Wing and renovations to the existing hospital. Both phases were supposed to be completed by 2019.

Although the hospital was able to hire replacement contractors and open most of the tower in 2020 to meet surging demand for beds during the COVID-19 pandemic, the second phase has not been completed. Work continues on the rest of the project, including the Shuter Wing, which is “under active demolition,” said Unity Health spokesperson Jennifer Stranges. Unity Health also “fully co-operated” with the police investigation, she said.

Mr. Georgiou resigned this week as chief executive officer of construction management firm Saddlebrook Management Consultants Inc., the company confirmed.

The two men are scheduled to appear in Old City Hall courthouse in Toronto on March 28.

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