One of Canada's most prominent hospitals has launched a probe into the conduct of a top executive after a Globe and Mail investigation uncovered his involvement in a scheme to defraud a Toronto university.
Toronto's St. Michael's Hospital said it is reviewing the tenure of Vas Georgiou – a senior executive hired in 2013 to oversee construction of the hospital's planned $300-million patient centre. The hospital said it was unaware when it hired Mr. Georgiou that, when he was working for Infrastructure Ontario, he had issued false invoices that were used in a kickback scheme at York University.
As a result of The Globe's inquiries, Infrastructure Ontario will also conduct an examination of Mr. Georgiou's six years at the provincial government procurement agency.
One reason St. Michael's was unaware of Mr. Georgiou's involvement in the York fraud, The Globe's investigation has determined, is that, although at least one Infrastructure Ontario official knew about it, that information apparently was not shared with anyone. The hiring of Mr. Georgiou raises questions about whether former executives of Ontario's procurement agency withheld this vital information from officials who ought to have known – including Infrastructure Ontario's own board of directors.
St. Michael's and Infrastructure Ontario have ordered forensic audits.
"These swift and prudent actions have been taken by the Board of Directors and Management to preserve and protect the public trust invested in St. Michael's Hospital," a statement from St. Michael's said. In its own statement, Infrastructure Ontario said it was "very troubled" by some of the facts The Globe presented to four of its officials in an interview. "The activity in question goes against everything [Infrastructure Ontario] stands for," said Bert Clark, the agency's chief executive, and Linda Robinson, vice-chair of Infrastructure Ontario's board.
Mr. Georgiou, who has been placed on a leave of absence from the hospital, said in an e-mail that The Globe had not provided him enough time to give proper answers to about 40 questions it e-mailed to him last Wednesday. In a statement, he said he never profited from the "exercise" at York and stressed that he was never charged criminally for his role in the false invoice scheme.
Court records show the scheme required Mr. Georgiou to invoice the university, through two family-owned companies, for work that those companies never performed. After cashing York's cheques, he passed on about $40,000 of the total $65,000 paid by York to an intermediary who was connected to a facilities official at the university. Mr. Georgiou said he kept $25,000 to declare for income tax purposes.
"Once these events came to light, I fully co-operated with the authorities and counsel for York University, and I assisted them with their investigation. In addition, I ensured that the party who requested the invoices, repaid the entire amount to York University," he said in the statement. He did not address questions about what he told St. Michael's, if anything, about his role in the scheme.
Mr. Georgiou, 51, is a long-time senior public servant. Between 2006 and 2012, he held various executive positions at Infrastructure Ontario, the procurement agency that was set up to administer the McGuinty government's ambitious plans to restore the province's outdated infrastructure through public-private partnerships. He was a project manager on the construction of several major projects, including some of the facilities for this summer's Pan Am and Parapan games, eventually rising to the role of chief administrative officer.
How he ended up admitting he issued false invoices – and why that information was not passed on by at least one of his former colleagues at Infrastructure Ontario – dates back to 2009, after a whistleblower complained to management at York about questionable invoices.
York investigated and concluded it had been the victim of a $1.2-million kickback scheme involving false invoices for non-existent construction and maintenance work. A forensic audit determined that between 2007 and 2010, the university cut cheques to eight different companies for services that were never rendered.
The York investigation found that two of those companies, Arsenal Facilities Consultants Inc. and Toronto Engineering Company, were connected to Mr. Georgiou. (He was the listed officer and director of AFC, and the other company was owned by his wife and her parents.)
Mr. Georgiou and his lawyer, Gary Clewley, agreed to meet with auditors in February 2011, and he admitted writing three false invoices totalling $64,800 between the two companies. The Globe has obtained a transcript of this meeting, which was marked "confidential" but included in court filings. Mr. Georgiou created paperwork showing that AFC did $22,000 worth of door lock repairs in November, 2007. In February, and then again in April, 2008, he drew up documents claiming that TECO completed a total of $42,800 worth of watermain work.
He wrote these invoices, he told investigators, at the request of a friend who had nothing to do with the university, a parking industry executive named Luigi Lato. According to Mr. Georgiou, Mr. Lato told him maintenance work had been performed and he was hoping Mr. Georgiou could create invoices for that work. But for reasons Mr. Lato never explained, Mr. Georgiou said, whoever did the work did not issue its own invoices. Mr. Georgiou said he believed Mr. Lato was doing a "favour" for a friend at York who needed to pay for the work.
A lawyer and an auditor for York pressed Mr. Georgiou on why the companies that actually did this work would not, or could not, issue invoices, and Mr. Georgiou said he did not know. "There were no details provided to me," he explained at one point. Pressed further, he said "I didn't ask any questions."
York paid AFC and TECO, but Mr. Georgiou told investigators he did not keep the money. He withheld about $25,000 to declare as income tax for both companies, which he said he paid. As for the rest of the money, he made two trips to see Mr. Lato in which he paid him a total of about $40,000 in cash. Mr. Lato could not be reached for comment.
William McDowell, a lawyer acting for York, asked Mr. Georgiou how the teller at his bank reacted when he withdrew $14,500 in cash for Mr. Lato's first instalment: "Doesn't your banker kind of squint when you go in and ask for $14,500 in cash?"
Mr. Georgiou replied: "I didn't go into the bank and ask for $14,500 in cash, you know, like in one shot. I had, you know, some cash at home, went to the bank for some cash..."
About a year later, on January 26, 2012, York filed a statement of claim against all of the people and companies it believed had defrauded the university, including Mr. Georgiou. The same day, the university's general counsel, Harriet Lewis, met with a senior executive at Infrastructure Ontario, Bill Ralph, who at the time was the procurement agency's chief risk officer, both York and IO said in separate statements.
Ms. Lewis informed Mr. Ralph that York had launched a lawsuit against Mr. Georgiou and others because of what the internal investigation uncovered.
Mr. Ralph did not respond to requests for comment. Two weeks after the meeting, Mr. Georgiou suddenly resigned. A few days later, the CEO of Infrastructure Ontario, David Livingston, announced in a company-wide e-mail that Mr. Georgiou was "leaving." The departure e-mail made reference to "various personal and family matters" Mr. Georgiou needed to address. "I know it was a tough decision for him, but I admire him for making it."
Mr. Livingston did not respond to repeated requests for comment e-mailed to him and his to lawyer.
After leaving IO, Mr. Livingston was appointed chief of staff in May, 2012, to Dalton McGuinty, then premier of Ontario. Mr. Livingston has been accused by Ontario Provincial Police of orchestrating a plan to purge government records after the controversial cancellation of two power plants. He has denied through his lawyer that he did anything wrong.
Employment lawyer Natalie MacDonald said a chief risk officer should give the board of directors any information that could damage the organization's reputation. A risk officer has a "duty to inform the board so it can make an informed decision," Ms. MacDonald said, speaking generally. But according to Infrastructure Ontario's organization chart, the chief risk officer reports directly to the CEO rather than to the board.
In an interview last Wednesday, Ms. Robinson, the board vice-chair, said the news that Mr. Georgiou had, at one time, been named a defendant in the lawsuit, and admitted writing false invoices never made its way to the agency's board.
In April of 2012, Mr. Georgiou and Mr. Lato signed a settlement agreement with York that required them to pay restitution – the amount has not been disclosed in public documents – which Mr. Georgiou said in his statement to The Globe was covered by the "party" who requested the invoice. One of the conditions of the settlement is that York "shall not make any statements to the media" about the agreement or about allegations levelled in York's claim, except to say that Mr. Georgiou co-operated.
Seven months later, St. Michael's board meeting minutes show that it had identified a preferred candidate to replace its chief administrative officer, and in the New Year, Mr. Georgiou officially started his new job. In its statement, St. Michael's said an external search firm was enlisted to identify Mr. Georgiou, and a separate firm conducted reference interviews. The issues at York were "never disclosed by Mr. Georgiou," St. Michael's statement said.
In his statement to The Globe, Mr. Georgiou said he has led the hospital in securing government funding, as well as capital redevelopment funding. "During my tenure at St. Michael's we have achieved tremendous results for the hospital both in the excellence of our hospital's performance as well in the success of our redevelopment project."
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