Burgoyne Bridge audit leaked
Secret report finds no criminal wrongdoing
The secret forensic audit report into the Burgoyne Bridge replacement project has identified a cornucopia of conflict of interest problems at Niagara Region.
The Deloitte Canada report — it cost taxpayers $500,000 — probed relationships between Niagara Region employees and contractors going back to 2008, and found the Region has insufficient policies to guide procurement and hiring practices. The audit report, obtained by
The Standard, was presented to regional council behind closed doors last month.
It says the investigation into regional contracts awarded to three companies, only one of which was hired to work on the bridge, needs the help of law enforcement to progress any further.
Last month, regional council forwarded the report to Niagara Regional Police. The police services board then asked police Chief Jeff McGuire to pass the investigation onto to the RCMP or Ontario Provincial Police.
McGuire, who said he is confident his officers could conduct a fair investigation, has asked the OPP to take over the probe.
The report, titled “Investigation Related to the Burgoyne Bridge Replacement Project and Related Matters,” does not allege any criminal wrongdoing. In exclusive interviews with The
Standard, former high-ranking regional managers featured in the report deny any wrongdoing. One of them, former regional transportation director Joe Cousins, says parts of the Deloitte investigation are a “witch hunt” designed to find a scapegoat for the bridge project’s massive cost overruns.
The report says the process to hire Parsons Inc., the company contracted to do the environmental assessment, design and contract administration for the bridge — contracts worth tens of millions of dollars — was changed in a fashion that favoured Parsons with the knowledge of a regional manager.
The circumstances surrounding the contracts awarded to Parsons
(formerly Delcan) was one of the issues the report says requires assistance from law enforcement.
The report also points to several issues with the bridge project and other regional contracting: • The report says information
about the rising costs of the bridge project — originally estimated at about $50 million but has ballooned to more than $90 million — was tucked into the appendices of staff reports, rather than directly presented to regional councillors. Those reports, including their recommendations and appendices, were then approved by
regional council. • The report says a regional director violated a policy prohibiting regional staff from accepting gifts and gratuities, including lunches, from contractors by attending social events on the dime of a paving company hired by Niagara Region. These violations of policy are not connected to the bridge project in the report, but were one of the issues Deloitte says needs police assistance to proceed further. • The document also says regional staff worked with another paving company to manipulate work orders so they wouldn’t exceed $10,000, when they actually cost more than $50,000. Work that costs more than $10,000 requires the Region to use an open bidding process to hire contractors. The report says further investigation will require police assistance. The issue was not connected to the bridge project in the report. • It also says regional staff hired
friends and associates through a hiring process nearly silent on conflict of interest matters. Where conflicts of interests arose, they were not fully documented.
Deloitte auditors interviewed 49 people during the investigation, including nine regional councillors, current and past regional staff and parties external to the Region.
Regional Chair Alan Caslin and Couns. Tony Quirk of Grimsby; Selina Volpatti, Bart Maves and Bob Gale of Niagara Falls; Andy Petrowski and Tim Rigby of St. Catharines; David Barrick of Port Colborne and St. Catharines Mayor Walter Sendzik were interviewed by Deloitte.
Through several recommendations spanning these issues and several others, the Deloitte report says the Region should conduct a review of its procurement, conflict of interest and hiring policies.
Deloitte says it was asked to investigate five areas of concern. The first examined if there was a conflict of interest issue related to a South Carolina property coowned by former regional transportation director Joe Cousins, former Parsons project director and former regional transportation director Nick Palomba, and former Amec Foster Wheeler Inc. employee and former regional director of water and wastewater Paul Smeltzer.
Recently, the employment of Palomba and Smeltzer at the Region ended, but the reasons for their departure are unclear.
In an interview Smeltzer said he could not discuss why he is leaving the Region, but he did say Deloitte’s focus on the South Carolina property is a “red herring.” He also noted that as the director of waste and wastewater neither he, nor his staff, were involved in the Burgoyne Bridge project in any fashion.
Palomba, who is in South Carolina this week, could not be reached for comment for this story.
The report also looked at whether there were inappropriate procurements related to the bridge project, whether there were inappropriate procurements related to “venders of interest” identified by regional councillors, whether there was a conflict of issue related to a property owned by a regional employee on Hainer Street near the bridge, and whether inappropriate hiring practices took place.
While the report says there are no conflicts of interest related to the Hainer Street property, it does identify issues in the other areas Deloitte investigated.
The report says there is no official record of Cousins disclosing he owned the South Carolina property with Smeltzer and Palomba while their companies were contracted with the Region.
“The former commissioner of public works, Ken Brothers (who Mr. Cousins directly reported to) advised us that Mr. Cousins verbally communicated this information to him before the selection and review process began for the engineering design services for the [bridge project], but did not recall the date,” the report says. “The Niagara Region was not able to locate any written disclosure of this potential conflict of interest.”
In an interview Cousins said he disclosed the purchase of the property to Brothers when it was purchased in 2008.
“What exactly Ken did with that, I don’t know,” said Cousins. “At the time, I asked him if he needed me to do anything else, and my recollection is that he said no. It is not like our property was a secret. Several regional managers and staff knew about it, as did elected officials who knew about it through conversation.”
Not all councillors were clear on the nature of the property ownership and it was the source of some consternation at council. The Deloitte report says that St. Catharines Coun. Petrowski asked several times if Cousins and Palomba owned a “cottage” together, and was told they didn’t by then Niagara CAO Harry Schlange.
Later, in a closed-door session, the report quotes Schlange as saying, “You asked me, if they owned a cottage together. They didn’t. It’s a condo.”
The report goes on to say that while “we did not identify documentation or information indicating that Mr. Cousins was involved in the evaluation or selection of Parsons” for the bridge project, Deloitte did identify Cousins’ “involvement/knowledge” of changes to the criteria used to select a contractor.
The reports say the selection
criteria was changed to place more emphasis on the interview portion of the process.
Parsons scored the highest for the interview but it also had the highest price, says the report, which concludes the changes to the selection criteria would be beneficial to the company and the contract was “effectively sole sourced to Parsons.”
Cousins said the characterization of Parsons being sole sourced isn’t fair, and that while he may have been copied on some internal correspondence about the selection criteria — he said regional council wanted more information on the criteria before the final selection was made — he had no hand in designing it.
“That was the whole point. Ken (Brothers) didn’t want me to be involved at all in order to avoid even the appearance of a conflict of interest,” Cousins said.
The report also notes that Parsons was awarded the contract administration work despite Cousins writing to the public works committee on Dec. 20, 2013, that “we were very disappointed with [Parsons] understated tender estimate” on the bridge design.
Cousins wrote that he was still confident the company “has the qualifications and experience to complete this contract administration assignment.”
The Deloitte report says Cousins did not respond to requests for an interview. However, Cousins said he was never contacted by Deloitte.
He said the Region’s human resources department called him when Deloitte was working on it’s value-for-money audit of the bridge project last year, asking if they could pass his contact information to the auditors.
“I said they could, but I never heard from Deloitte,” Cousins said. “To my knowledge, they never called me or left a message. You’d think, given the scope of the project, they would have tried, or at least tried more than once.”
The report concludes that the Region’s conflict of interest policies “were not fully followed with respect to Messers. Cousins’ and Palomba’s relationship with Parsons.”
“In particular, potential conflicts
of interest were not formally documented, nor were steps required and/or taken to mitigate any actual or perceived conflicts of interest documented or formally communicated.”
Nevertheless, the report says that “based on the limited information available we were unable to determine if this resulted in an inappropriate benefit to Parsons.”
The report also concludes that further investigation is warranted “which will require assistance from law enforcement authorities.”
Cousins denied any wrongdoing in an interview with The Standard.
“It’s a witch hunt,” Cousins says. “They (regional councillors) are embarrassed by the cost of the bridge and are looking for someone to blame.”
However, Cousins did say regional staff erred in how it presented the rising costs of the bridge to council.
The report says that information about additional costs were presented to council in the appendices of staff reports, rather than in the body of those reports. Those reports, including their recommendations and appendices, were approved by council.
“That is the one mistake that was made,” Cousins said. Regional staff “should have presented that information to council.”
Cousins said there was a great deal of staff debate over the rising costs. He and other managers wanted to present the costs directly to council, but were overruled by Brothers, the public works commissioner.
The report concluded that assistance from police will be needed to further investigate the contracts unrelated to the bridge that were awarded to Circle P. Paving Inc.
After Cousin’s retired, Palomba was hired as the regional transportation director. The report says that from Nov. 13, 2014, to June 2015, a representative of Circle P. Paving — identified in the report as “Mr. Higgins” — paid for Palomba to attend three social events.
These events followed a Nov. 7 memo emailed to regional transportation managers, including Palomba, from the manager of transportation operations and technology which said gifts, gratuities — including lunches — from contractors cannot be accepted by regional staff.
“The new policy speaks directly to zero tolerance for accepting anything in the form of gifts and gratuities; this can be considered lobbying or soliciting which are directly prohibited under our purchasing policy,” the memo says. “This will be strictly enforced and will result in disciplinary action.”
The report says documentation relating to contracts given to Circle P. Paving “was often not in compliance with the Niagara Region procurement bylaw in place at the time, similar to other vendors examined.”
The report says there were17 invoices from Circle P. Paving filed in 2014 and 2015 totalling $147,408 for “sequential days of work at the same locations.”
“Invoices for this work were below the $10,000 pre-tax threshold that required a competitive bid process,” the report says. “The invoice approver advised us that the procurement may have been spilt into increments less than $10,000 to avoid a competitive bid process in order to expedite the procurement and ensure that the work would be completed before winter.”
Deloitte says police will also need to be called in to investigate a similar issue with regional contracts awarded to a company called Regional Trenching, which was paid $6.3 million by the Region from January 2008 to September 2016.
The report says two former regional managers met with a Regional Trenching representative in September 2009 after a invoice was issued in excess of $50,000.
“That set off flags,” the reports says, quoting former regional project manager Murray Krajewski. “And there was a need to rework the work orders in a form that wouldn’t exceed $10,000.”
The report also found issues with how the Region hired some staff.
It says that Palomba was encouraged to apply to Niagara Region in 2014 by his friend Ron Tripp, the regional commissioner of public works.
“From the records on file, Mr. Palomba was not the leading candidate going into the second round of interviews,” the report says. “There were no scores recorded for the second round. Mr. Tripp was on the evaluation committee for Mr. Palomba, and made the ultimate hiring decision.”
The report says that when Smeltzer was hired by the Region, Palomba, with whom he owns the South Carolina property, sat on the interview panel.
Smeltzer, in turn, hired his personal friend Lisa Vespi after one round of interviews, the report says.
Smelter said he could not comment on the hiring of Vespi. He said he was interviewed by Deloitte in August 2016, and he was only asked questions about his relationships with staff and contractors. He was not asked about the Burgoyne Bridge, he said.
The report recommends the Region review its hiring processes, including candidate evaluation and conflict of interest policies.
It’s a witch hunt. They (regional councillors) are embarrassed by the cost of the bridge and are looking for someone to blame.” Joe Cousins, former regional transportation director