Former director fires back at Ottawa Hospital over fraud claim

A former employee named in an Ottawa Hospital construction fraud lawsuit is fighting back in his statement of defence with new allegations of hospital executives breaking rules and spending recklessly.

Frank Medwenitsch is also countersuing the hospital, claiming at least $350,000 in damages for wrongful dismissal and emotional harm, stating "he's had his reputation destroyed."

Read the statement of claim and countersuit here.

In particular, the statement of defence claims:

• Current chief operating officer Cameron Love and other hospital senior managers directed staff to funnel some hospital construction spending through an Ontario Ministry of Health and Long-Term Care-funded construction project — a breach of ministry rules.
• Hospital executives directed spending on an annual splurge of year-end surpluses in the construction budget, colloquially referred to as "March madness."
• Love had a conflict of interest involving contractor DRS Construction, one of the co-accused in the hospital suit.

Medwenitsch's statement of defence and counterclaim come five months after he and another ex-hospital employee, Brock Marshall, as well as five hospital construction contractors, were named in a lawsuit launched by The Ottawa Hospital in January.

All are accused of being involved in an alleged kickback scheme to defraud the hospital.

The hospital claims Medwenitsch, the former director of capital projects, accepted gifts, trips and payments, as well as work on his cottage and home at low or no cost. In return, the claim alleges Medwenitsch gave contractors a number of advantages, including influence over tenders and invoice padding.

None of the claims in either the hospital lawsuit or Medwenitsch's counterclaim have been tested in court.

The Medwenitsch defence refutes all claims of wrongdoing against him.

"Mr. Medwenitsch denies any and all allegations of fraud, deceit, conspiracy, collusion, fraudulent misrepresentation, conversion, unjust enrichment, break of contract and/or breach of fiduciary duty..." it states.

Instead, the court document claims members of senior management broke rules and abused spending.

COO broke rules, claim alleges

Love is frequently named in the 20-page document.

In one example, the defence statement alleges Love ordered staff to pad ministry project budgets with local hospital work.

"The hospital's senior managers, including, but not limited to, Cameron Love, regularly failed to respect directives and/or guidelines established by Ontario's Ministry of Health and Long-Term Care (ministry) in matters of procurement," the statement reads.

"In cases where construction projects were approved through ministry guidelines, Cameron Love at times directed hospital staff to allocate the cost of other projects onto the ministry-funded project in question, without the ministry's knowledge or consent."

'March madness' spending could reach $1M, claim alleges

The defence statement describes the end-of-year surplus spending in the construction department, called "March madness," as a frenzy of project approvals — "at times in excess of $1 million."

"It was not uncommon for contractors to have invoices paid by the hospital's finance department prior to work being completed so as to get the funds 'off the books.' Such payments were known and approved by members of senior management, including Cameron Love," states the claim, adding work could continue on the same project months after contractors had been paid out.

The defence claim states it was Love that had a conflict of interest with DRS Construction — one of the co-accused contractors.

While the hospital lawsuit claims Medwenitsch and DRS President Gerry Dube colluded to extort the director of engineering and operations, Brock Marshall, to pay the "unsupported and improper invoices," the defence claims the invoices were in fact settled by vice-president of planning and support services Joanne Reid following a number of meetings.

During one of those meetings, "Ms. Reid advised Mr. Medwenitsch that Cameron Love had requested to be removed from any discussions surrounding the outstanding invoices because he was 'too close' to DRS Construction."

CBC reported earlier this year Love had been cleared in a forensic audit for having work done at his private residence by hospital contractors.

CEO's daughter also worked at hospital

As to claims his daughters worked for contractors, Medwenitsch's statement of defence points out Dr. Jack Kitts' daughter worked for the hospital during the summer, as did Marshall's two children.

"Throughout Mr. Medwenitsch's employment, friends and family were an accepted and encouraged part of the hospital's temporary short-term and /or summer help."

As to claims one of Medwenitsch's daughters, though working for a contractor, was actually paid out of the hospital budget, the statement of defence adds, "These employment relationships were fair and open."

The counterclaim states Medwenitsch, who took his position in 1999, had been subject to regular internal audits as well as an external audit each year.

"Despite years of positive reviews, reports, advice, correspondence and supervision, at no time prior to dismissal did (TOH) give Mr. Medwenitsch any warning, or any notice of any financial concerns regarding the procurement process or of his actions now put in issue."

Counterclaim damages worth at least $350K

The claim goes on the say the hospital, and "in particular Cameron Love and Joanne Reid, approved Mr. Medwenitch's conduct, reviewed it with independent auditors, received reports from auditors and other professionals retained to assist them, and did nothing to criticize or advise Mr. Medwenitsch that exception would be taken to his conduct."

The counterclaim seeks damages for wrongful dismissal, as well as punitive damages amounting to $350,000.

The claim also demands "damages in an amount equivalent to that as claimed by the hospital." The hospital claim states it will provide that figure before trial.

The counterclaim also asks for a declaration that Medwenitsch had been wrongly dismissed.

Hospital responds to claims

When reached, the hospital responded to some of the claims contained in Medwenitsch's counterclaim.

As to the allegation the hospital would use provincially-funded project budgets to fund other work at the hospital, the hospital responded that all ministry-funded projects were dealt with in accordance with ministry guidelines.

As for spending during the so-called "March madness" a hospital spokesperson said in an emailed statement: "When there is a budget surplus at the end of a fiscal year the hospital is in a position to move up and progress on projects and equipment purchases approved and slated for the following year.

"It is not an uncommon practice and the hospital complies with all ministry policies."

The Ottawa Hospital also says it complies with its hiring policies where family members of hospital staff are concerned.

"As the third-largest employer in the city, family members are hired at the hospital. These hires, as well as all of our hires, follow our rigorous hiring policies and processes including the policies related to the hiring of summer students and family members and are subject to our conflict of interest policy," the hospital said in an emailed statement.