MONTREAL – A civil lawsuit filed by a city of Montreal contractor makes the first detailed allegations into the workings of a phony-billing scheme that the city announced more than a year ago it had uncovered inside its computer-systems division.
The Surete du Quebec arrested Gilles Parent, who was fired as a section chief in the computer-systems division, and businessman Benoit Bissonnette in September following a 14-month investigation into false billing involving municipal contracts within the division.
Yet the $6.47-million suit filed in Quebec Superior Court in November by a municipal contractor, OS4 Techno Inc., against Parent, Bissonnette and others alleges more people and companies were involved in the scam.
Quebec-based OS4 Techno Inc., a computer management firm, says the city stopped payment on its municipal contracts after the scheme was uncloaked.
The city now estimates it was defrauded of as much as $12 million through the scheme, though it has never revealed details of how it’s alleged to have operated.
Documents supplied by the city to the SQ last year and obtained by The Gazette show Parent admitting under questioning by private investigators hired by the city in 2008 that he invoked the name of city executive committee chairman Frank Zampino to gain OS4 Techno officials’ confidence. The documents quote Parent as saying he made up the Zampino role.
Zampino was Mayor Gerald Tremblay’s right-hand man during the 2005-to-2008 period that the scam is alleged to have operated.
The OS4 Techno suit alleges Parent utilized Zampino’s name while he was second in command at city hall to lure businesspeople into the ruse and extract a "commission" on the municipal contracts they obtained. The lawsuit has yet to go to trial.
Tremblay has taken credit for calling in the SQ to investigate the phony billing after the city conducted an internal probe in 2008 and fired Parent.
The SQ has said it closed its investigation with the arrests of Parent and Bissonnette.
They are charged with fraud, forging documents and using forged documents. Their preliminary inquiry is set for February.
OS4 Techno launched the suit against the pair, as well as two other individuals, a lawyer, two companies and two law firms for repayment and damages on amounts it says it paid in a complex invoicing pipeline through which city money allegedly went to various companies on instructions from Parent and Bissonnette. Four computer firms that also had municipal contracts are named as interested parties to the case, along with the city.
Lawyers for Parent and Bissonnette have so far not filed a defence against the lawsuit.
Zampino, who is not a target of the lawsuit, has never been interviewed by any police force on the billing scam, Zampino’s lawyer, Claude-Armand Sheppard, told The Gazette last week.
A high-ranking city bureaucrat wrote to an SQ investigator in February 2009 saying Zampino’s name was falsely used in the scheme.
The letter, signed by city director Pierre Reid, said Parent admitted in September 2008 in questioning by two investigators from the firm Navigant Consulting, which was hired by the city once suspicions of fraud arose, that he created "a deception by falsely using the nameof Mr. Zampino" with OS4 Techno to "give himself credibility" with company officials "to take money out of the budgets of framework agreements with a story that could seem credible."
The letter was accompanied by excerpts from what the page numbering suggests was a several-hundred-page transcript of Parent’s interview on Sept. 10, 2008, with the two private investigators.
Zampino quit politics before the end of the Tremblay administration’s second mandate in summer 2008, citing family reasons and saying he wanted to leave public life.
It was revealed last year that Zampino twice vacationed on a luxury yacht owned by Antonio Accurso, whose firm Simard-Beaudry Construction was a partner in a consortium that won a $355-million water meter contract from the city while Zampino was executive committee chairperson.
Sheppard provided the letter and transcript excerpts to The Gazette last week. He said Zampino gave him the letter and excerpts that day, after The Gazette had left messages for Zampino about the OS4 lawsuit. Sheppard said he did not know how or when Zampino obtained the documents. Zampino and he were unaware the OS4 lawsuit was filed, Sheppard added.
"I think that it’s an absolute scandal that something which admittedly is false, and is admitted by the individual who started this story to be false, finds itself now to be in some court proceedings unbeknownst to Mr. Zampino," Sheppard said. "He has nothing to do with this matter."
Zampino doesn’t speak to the media, he added. However, Zampino denies all of the allegations against him, Sheppard said.
Reid’s letter says the investigators hired by the city found documents in Parent’s computer making reference to "a certain Mr. Zampino" as well as a "Therese Mathieu," who is also mentioned in OS4 Techno’s lawsuit.
In 2006, Parent allegedly showed OS4 Techno’s then-president, Alain Perron, an email from a Jeannette Tremblay in the city’s legal department to a Therese Mathieu in the mayor’s office with a coded reference to money that was to be used in the false billing, the lawsuit alleges.
Parent is quoted as saying in the excerpt of the transcript the city sent to the SQ that he made up the name Therese Mathieu, and said "it’s easy to make this sort of email."
Reid’s letter says that no one named Therese Mathieu or Jeannette Tremblay has worked for the city.
As for Zampino, the transcript shows Parent saying: "I pulled their leg by putting Zampino’s name in the backdrop, which is anyway a credible person…"
It also says Parent said "… it was invented … let us understand that the word Zampino is smoke and mirrors (poudre aux yeux) … to sugar-coat (passer une pilule)."
OS4 Techno contends in its lawsuit that Perron, the former president, went along with false billing and acted in good faith because Parent’s story sounded believable. The firm was interested in maintaining "good relations" with the representatives of the city, it says.
"(The company) never would have participated in the plan elaborated by Parent and Bissonnette if it had known that it hid a veritable embezzlement operation," the lawsuit says.
It began in 2006, after the company was awarded a $2.6-million contract, the lawsuit says. It alleges Parent suggested to Perron that his company participate "as other suppliers and partners of the city have done" in a system of "pre-billing" the city before providing services on a municipal contract.
Parent told OS4 Techno’s Perron that the mayor’s office, the city’s legal department and the city’s computer-systems division set up the "pre-billing" system "apparently … for budgetary reasons" to ensure that project budgets voted within a year "appear to have been effectively spent during the same financial year," the lawsuit says.
Parent said the company would pay the money back to the city by paying invoices that would come its way from different companies, including a numbered company and a law firm, the lawsuit says.
It was Bissonnette, an independent computer consultant working for Parent’s division, who submitted bills to Perron, and later other OS4 Techno officials, and gave instructions on whom to bill and how to label the work performed in the invoice, the lawsuit says.
"The pre-billing plan that (Parent) set up, by all evidence in concert with (Bissonnette)," it says, "sought only to divert funds to their benefit and to the benefit of other people from whom they were assured their involvement and close collaboration."
The suit also alleges Parent told company officials that firms doing business with the city were expected to pay city officials a commission or "tax" on the contracts they obtained. This was understood as a levy separate from the pre-billing process.
The commission was charged to all of the city’s suppliers and consultants, the lawsuit alleges, citing a conversation between OS4 Techno’s Perron and one of his firm’s employees. Perron explained to his employee that Parent had told him the levy was charged in the form of a commission on the contracts they obtained, the lawsuit says. OS4 Techno has submitted emails and invoices it received from Bissonnette and Parent as evidence.
OS4 Techno had accumulated more than $7 million worth of contracts with the city’s computer-systems division by 2007, city records show.
Following Perron’s death in September 2007, the lawsuit alleges Parent told the same OS4 Techno employee that the "tax" scheme was "a way for the city of Montreal to bring money back into its coffers and balance certain budgets. A municipal administration is complex. You have to be creative with finances. Mr. Zampino is responsible for all this. He appreciates the services that the city’s suppliers render to it."
The lawsuit contends OS4 Techno made eight commission payments around 2007, but does not mention the amounts or where the money ended up.
The lawsuit contends that Parent and Bissonnette told OS4 to pay the levy to a numbered company, 9177-3341 Quebec Inc.
The same company billed OS4 Techno in the pre-billing scheme, the lawsuit alleges.
Michel Cere, another individual named as a defendant in the lawsuit, was listed as the sole administrator of the numbered company. In April, a judge rejected a motion from his lawyer to throw out the case against him because there’s no allegation of wrongdoing on his part in the lawsuit.
Cere and his lawyer did not return The Gazette’s calls.
OS4 Techno sent its first "pre-bill" of $521,787 to the city on Bissonnette’s orders in December 2006, the lawsuit says, even thought it had no timesheets or other documentation to support it. And on Parent’s instructions, the company indicated on the bill that it covered "professional services" it rendered between June 1 and Nov. 30, 2006.
A company called Developpement Web (Dev. Web) Inc. was the first to send OS4 Techno an invoice, the lawsuit alleges. Dev. Web never performed work for OS4 Techno, it adds.
Dev. Web and its owner, Emmanuelle Aubin, are among the defendants being sued by OS4 Techno. However, Aubin’s lawyer told The Gazette last week Aubin closed the company and filed for personal bankruptcy a few weeks ago because she can’t afford the lawsuit, which has been mired in back-and-forth motions between lawyers for the various parties. The bankruptcy effectively suspends the lawsuit against her.
The lawsuit doesn’t mention whether Dev. Web had a relationship with the city. However, it alleges Aubin and Parent knew each other for several years.
On some occasions, OS4 Techno was instructed by Parent or Bissonnette to bill any of three computer companies that had municipal contracts, even though none of those firms performed any work for OS4 Techno, the lawsuit contends. On a few occasions, OS4 Techno was on the receiving end of a bill from another municipal computer contractor even though it did no work for the firm, it adds.
In one example, Bissonnette sent an email to OS4 Techno in February 2007, containing a bill for $635,737 payable in trust to the Chambly law firm of Cayer Ouellette. Lawyer Claude Leblanc, who works out of the same office, cashed the cheque in a trust account.
OS4 Techno’s Perron sent an email to Parent saying he required the law firm’s tax registration numbers, the lawsuit says. A new bill was issued to OS4 Techno with the tax numbers. The billing information on the invoice this time indicated a remaining balance of $1.695 million to be paid by OS4 Techno to the law firm to cover professional fees. OS4 Techno never received services from the lawyer, it says.
Later, in spring 2007, Parent forwarded to OS4 Techno’s Perron an email that had been addressed from a person in the city’s legal department to a person in the mayor’s office saying "a sum of about $1.7 million will be added … to the billing of partial settlement by the firm Cayer Ouellette."
Later, Parent handed OS4 Techno three bills adding up to $1.1 million on separate dates, the lawsuit says. OS4 wrote two cheques for the first two payments, it says.
However, Parent sent Perron an email written in French in June 2007, telling the company president: "I met Mr. Z. Friday P.M. I have in hand the two certified documents. The law firm has been identified as an interested party and cannot pursue the transaction (La firme d’avocats a ete mise en cause et ne put pas poursuivre la transaction.). A new strategy was proposed to me and has to be carried out quickly."
Perron died in September that year, but his agenda shows he met with Parent in June, the lawsuit says. It alleges that at that meeting Parent returned OS4 Techno’s two cheques made out to Cayer Ouellette, which were then cancelled. The third bill from the law firm was also cancelled, the lawsuit alleges. However, the numbered company then billed OS4 Techno for the same amounts, it says. OS4 Techno gave cheques for the amounts to Bissonnette, it says.
Cayer Ouellette, Leblanc and Leblanc’s firm Claude Leblanc Avocat Inc. are also defendants in the lawsuit.
A judge rejected their motion to have the case against them thrown out in May, saying it would be premature to reject it at this stage.
However, they argued that OS4 Techno actually made a profit of $288,552 from the phony billing scheme.
OS4 Techno "voluntarily blinded itself " by following Parent’s instructions, they contend in their statements of defence, filed in May.
OS4 Techno "cannot ignore that it was participating in an operation its lawyer qualified as ’embezzlement’ by issuing fake bills to companies to which it didn’t render any professional service as well as in paying bills to companies that never rendered it services," the statements say.
And while the OS4 Techno lawsuit alleges Leblanc billed Dev. Web as well, Leblanc denies billing either Dev. Web or OS4 Techno.
In his statement of defence, Leblanc says he cashed the $635,737 cheque in his trust account. However, he says he can’t explain the circumstances because he’s bound by attorney-client privilege, it says. He also denies knowing anything of an arrangement between Parent and OS4 Techno or of any billing of OS4 Techno.
"It would be very unfortunate that his name be tainted by a journalist," Leblanc’s lawyer, Claudine Lagace, said.
"It would be maybe more prudent to not talk about it than to put his name."
Leblanc has not yet filed a full statement of defence, she added.
Cayer Ouellette points out in its defence, also filed in May, that the invoice is a fake. Among the signs, it says: the firm’s name was misspelled "Cayer Ouelette" on the invoice, a digit was wrong in the civic address and the invoice number doesn’t match the firm’s numbering system.
"It’s all a mistake," Leblanc told The Gazette of the lawsuit against the law firms.
OS4 Techno’s involvement in the scheme apparently came to an end in 2008, when Daniel Malo, a manager in Parent’s division at the city, asked OS4 Techno to provide proof to support several of its invoices. The lawsuit says Perron’s successors provided Malo copies of emails from Parent.
OS4 Techno contends in its lawsuit it acted in good faith in following Parent and Bissonnette’s instructions.
Malo retired following the city’s internal probe, while the city fired two of Parent’s other bosses for what it described as a lack of vigilance.
The city says it has so far recovered $9.5 million from various computer companies on $12 million in billing irregularities. The city says it has gotten each firm to sign a confidentiality agreement as the money in question is recovered.
lgyulai@thegazette.canwest.com
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