Former St. Michael’s executive accused of failing to disclose conflict: documents

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St. Michael's Hospital in Toronto conducted an internal investigation into a former senior executive after learning about his "frequent lunches, golf games" and "other social interactions" with representatives of three construction companies that had been shortlisted for a $300-million redevelopment, court documents say.

But the probe, which was conducted two years ago and examined Vas Georgiou's private business dealings, did not uncover his commercial ties to the head of one of those construction companies, the documents allege.

Mr. Georgiou, the former chief administrative officer who was overseeing the major redevelopment, is accused of "deliberately" failing to disclose the fact that he and the president of Bondfield Construction were involved in two business ventures together, the documents say in a statement of defence filed by the hospital in response to a wrongful dismissal suit from Mr. Georgiou.

"Georgiou's failure to disclose these conflicts of interest constituted dishonesty and a significant breach of the hospital's trust in Georgiou as an executive of a public hospital," the court filing says. None of the statements have been proven in court.

Bondfield won the $300-million contract after submitting the lowest bid, but the private business ties between Mr. Georgiou and Bondfield's president were among the reasons Mr. Georgiou was fired in November, 2015.

Those ties were revealed during an ongoing Globe and Mail investigation. The Globe has reported that while Mr. Georgiou was evaluating Bondfield's bid as part of a four-person selection team, he was involved in a bottled-water venture and a commercial real estate business with Bondfield's president, John Aquino.

Both men have a stake in OTEC Research, which manufactures GP8 Sportwater – Mr. Georgiou through a family company in his control, Mr. Aquino as a "minority shareholder" – and were involved with commercial properties on Gervais Drive in Toronto.

Mr. Aquino partly owns and heads the companies that own the Gervais buildings, and Mr. Georgiou performed freelance work for them.

(Mr. Georgiou says he was not paid for this work. He did not respond to questions about whether his family company was compensated instead.)

In December, Mr. Georgiou launched a wrongful dismissal suit against St. Michael's. He contends he told the hospital about his ties to Mr. Aquino during the earlier probe and St. Michael's "condoned" his "prior activities."

But the hospital says in the statement of defence filed late last week that Mr. Georgiou did not give auditors a full picture.

According to the court filing, in early 2014, confidential feedback intended for one of Bondfield's rival bidders, a team led by construction giant PCL, was released to Bondfield instead. The hospital enlisted financial consultant Duff & Phelps to investigate.

The auditors determined no one at the hospital was responsible for the mistake.

However, they "uncovered additional issues" stemming from Mr. Georgiou's interactions with representatives of Bondfield, PCL and EllisDon – each company was shortlisted for the $300-million contract. "Specifically," the documents allege, "Georgiou had frequent lunches, golf games, meetings and other social interactions" with the representatives.

The court document includes no allegations of impropriety on the part of Bondfield, PCL or EllisDon in relation to these interactions, and all three companies declined to comment.

Mr. Georgiou's lawyer, Gavin Tighe, declined to answer questions about this aspect of the Duff & Phelps probe as the matter is before the courts.

During that phase of the Duff & Phelps investigation, auditors learned Mr. Georgiou was a board member of OTEC Research.

According to the hospital's filing, Mr. Georgiou told Duff & Phelps "that he did not have any interests, ownership or financial" in OTEC, as his former investments had been diluted due to inactivity.

What Mr. Georgiou failed to mention, the claim alleges, is that his family company – Arsenal Facilities Consultants – had lent OTEC $102,639 in March, 2013, more than two months into his tenure at St. Michael's.

St. Michael's also alleges Mr. Georgiou "implied" to Duff & Phelps that his work with the Gervais properties ended when he started his job at the hospital.

Further, Mr. Georgiou "deliberately omitted" Mr. Aquino's ownership interest, the statement of defence says.

(Mr. Georgiou's lawyer told The Globe the ownership of the Gervais property is "certainly no secret" and is available to the public.)

The hospital says it learned about Mr. Aquino's stake in Gervais only last fall, after it hired forensic auditor Kroll to also take a look at Mr. Georgiou in response to The Globe's reporting.

Kroll unearthed e-mails on Mr. Georgiou's hospital account that showed he was doing work for the Gervais properties until August, 2013, more than two months after Mr. Georgiou had helped name Bondfield to the redevelopment short list. According to the hospital's statement of defence, Kroll also uncovered OTEC meetings in the former executive's calendar scheduled in 2013, 2014 and 2015. It was Kroll that discovered the $102,639 loan, the document alleges.

The statement of defence also alleges that as of November, 2013, OTEC Research had only six shareholders – including Mr. Aquino and Mr. Georgiou's family company.

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