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The elderly founder of a onetime Canadian stock market darling has been convicted of fraud in the United States. (iStockphoto/iStockphoto)
The elderly founder of a onetime Canadian stock market darling has been convicted of fraud in the United States. (iStockphoto/iStockphoto)

Founder of Canadian soil cleanup firm, convicted of fraud in U.S. Add to ...

The elderly founder of a onetime Canadian stock market darling has been convicted of fraud in the United States.

John Bennett, who started Bennett Environmental Inc. more than 40 years ago and built the company into a major player in the contaminated soil cleanup business, was found guilty Wednesday of “conspiring to pay kickbacks and committing major fraud against the United States,” according to the U.S. Department of Justice.

Mr. Bennett “corrupted the competitive bidding process” for a huge cleanup contract in New Jersey between 2001 and 2004 by arranging more than $1-million (U.S.) in kickbacks to the project manager at the site, the DOJ said. In return, the project manager let Mr. Bennett’s employees look at competitors’ bids before the company submitted its own winning bid.

The site, about 50 kilometres from New York City, had been the location of a railway tie manufacturing business, and 300,000 tonnes of soil was laced with wood treatment chemicals. The cleanup was part a federal U.S. program that funded the rehabilitation of hazardous waste sites.

Mr. Bennett, who was extradited to the United States in 2014 to face the charges, was convicted after a three-week jury trial in Newark. He will be sentenced on June 27 and could face up to 10 years in prison.

The former manager of the cleanup site, who received the kickbacks, was convicted in 2013 and sentenced to 14 years in jail. Another Bennett Environmental executive, Robert Griffiths, was sentenced to 50 months in jail in 2011 for participating in the scheme.

Mr. Bennett, who is now in his early 80s, started out as an oil spill cleanup specialist in the late 1960s. Bennett Environmental went public in 1996, around the time the company moved into soil remediation, a growing and lucrative business. The big New Jersey contract was the beginning of the end, however. Regulatory concerns arose over the size of the deal and disclosure issues, the stock plunged, and by the end of 2004, Mr. Bennett was gone from the company.

Bennett Environmental still exists, although with a different name and in a different business. It is now called Diversified Royalty Corp. and owns the royalty streams from a number of retail businesses, including the Mr. Lube car maintenance chain. The company hasn’t been in the soil cleanup business since 2013, when it sold the old Bennett soil remediation facility in St-Ambroise, Que.

But Diversified Royalty still has some exposure to Mr. Bennett’s legal troubles. Because he had been an officer of the predecessor company, Diversified Royalty was on the hook for the legal expenses Mr. Bennett incurred in defending himself from the U.S. criminal charges.

The company’s insurer has paid about $3.3-million of those expenses, and Diversified Royalty has paid about $1.4-million directly. Diversified Royalty president Sean Morrison said Thursday that now that Mr. Bennett has been found guilty, the insurer will want its money back from the company.

Diversified Royalty got a stay order from an Ontario court Thursday to allow it to stop paying Mr. Bennett any more for his legal expenses, but it will take longer to get court approval for any attempts to get reimbursed by Mr. Bennett for earlier payments, Mr. Morrison said. And it will likely be hard to collect because Mr. Bennett may be in jail by then and “he is not a rich man,” he said.

The company has already accrued the expenses on its books, so there should not be any impact on its financial situation, Mr. Morrison said.

At the peak of its success, Bennett Environmental stock traded as high as $28 a share. The shares of Diversified Royalty closed Thursday at $2.30.

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