'Everybody missed the boat' on alleged fraud scheme but can London hospital recoup costs?

A lawyer who specializes in fraud investigations said the procurement scandal enveloping London's largest hospital includes allegations of a graft that should have been easy to catch.

"It's not a sophisticated scheme," said David Debenham, president of the Association of Certified Forensic Investigators of Canada.

"There's so many ways this could have been caught and nipped in the bud that it really raises questions of the people hired to catch this kind of thing. They were either prevented from doing their job, or weren't capable of doing it."

Debenham was commenting on this week's bombshell news that London Health Sciences Centre (LHSC) is suing five of its former executives, alleging they took part in a "fraudulent scheme" to use hospital contracts to funnel money into companies for their own benefit.

The lawsuit, which contains allegations not proven in court, also alleges the money was used to purchase more than 60 houses.

Another revelation in the statements of claim: That some of the now-fired LHSC executives became aware there was a problem with how contract money was being handled but didn't act to report it.

Debenham said large public contracts should follow an open procurement process where multiple bids are solicited, so they can be subject to scrutiny and ensure taxpayers get fair value for public money.

According to the statements of claim filed in the two lawsuits, the executives side-stepped procurement rules that require open bidding. The alleged fraud also dates back to 2013, according to the statement of claim.

"Everybody missed the boat and the question is why," said Debenham.

No criminal charges have been filed in the case, although London police have confirmed to CBC News they are investigating.

Debenham said he'd be surprised if the entire mess doesn't trigger a public inquiry.

Norman Groot is a Toronto-based lawyer who specializes in helping fraud victims recover money. He said if it proves true money was spent on houses owned by the hospital executives, the funds shouldn't be difficult to recover.

"If they can do all the tracing, then they should be able to recover out of these homes," he said.

London's hospital isn't alone in dealing with procurement scandals.

In 2016, Ottawa Hospital sued two former directors, alleging they used contracts and kickbacks to defraud the hospital. The case was settled four years later with those settlements not made public, a decision Debenham was critical of.

In 2023 two men were charged with fraud after a probe into $300-million redevelopment of St. Michael's Hospital in Toronto.

Debenham said the news is frustrating for taxpayers accustomed to hearing about under-funding of the health-care system. Last September the province appointed an outside supervisor to take over LHSC operations amid questions about fiscal management of the hospital.

"We seem to be throwing a lot of money at the health-care system and now we're finding out that no matter how much we're throwing at it, it may not be going to patients. That's a scandalous thing in itself," said Debenham.

Doris Grinspun, chief executive officer of Ontario's Registered Nurses Association, said the lawsuit and the allegations surrounding it could lead to a decrease of public trust in the hospital and wider health-care system.

"It creates more and more instability for LHSC and spills over into the rest of the system," she said. "We need to clean up things and see if there are other organizations where this is happening and tackle it head on."