Inside the Bondfield investigation: Hundreds of thousands in cash deposits flowed into account, records reveal

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It happened over and over again: cash deposits flowing into a bank account linked to Bondfield Construction Co. Ltd., one of Ontario’s largest builders of public-sector projects.

Between 2012 and 2014, banking records show 70 cash deposits of exactly $9,000 each in an account controlled by Bondfield’s former chief executive officer, John Aquino. On at least 20 occasions, the $9,000 deposits were entirely in $20 bills.

Each of the deposits – totalling $630,000 – was just under the $10,000 threshold requiring mandatory reporting to Canada’s anti-money-laundering watchdog. The transactions, spanning a 19-month period, bear telltale signs of money laundering, say two of the country’s foremost financial intelligence experts.

Now forensic auditors at Ernst & Young Inc., a court-appointed monitor, are combing through the account. Those deposits are among tens of millions of dollars transferred in and out of the account, transactions that are central to their investigation launched after Bondfield filed for bankruptcy protection last year.

The records are among a cache of financial documents filed in court, and shed light on the events leading up to one of the largest – and messiest – insolvencies in Canada’s construction industry.

Ernst & Young revealed in court in 2019 what it alleges is a false invoice scheme: Bondfield paid $80-million over eight years to 19 “suppliers of interest” for work that was not performed. These suppliers, in turn, allegedly funnelled some of the money back to three Bondfield officials, including $5.2-million to Mr. Aquino. The allegations, which have not been proven in court, led the monitor to obtain court orders, requiring financial institutions to hand over bank records documenting some of the transactions.

The monitor’s legal action is focused on the alleged false invoices and has not made any assertions about the cash deposits or raised any concerns about money laundering. The Globe and Mail reviewed the bank records and identified the numerous $9,000 cash deposits.

Bondfield won high-profile public construction projects across Ontario between 2014 and 2015. But many of these projects, notably the redevelopment of three hospitals, are years behind schedule and mired in their own protracted restructurings. Industry experts say the scale of the losses for the insurance company that backed the projects is unprecedented. The fallout from Bondfield’s collapse has also torn apart the family that owns it, leaving John Aquino exiled from a company founded more than four decades ago by his father, Ralph Aquino.

The court-appointed monitor for Bondfield, which has been operating under bankruptcy protection since April, has alleged that three former executives at the company, including John Aquino, siphoned money out of the company through an invoicing scheme. The monitor, Ernst & Young Inc., is suing the three men, as well as four alleged co-conspirators, to recover $33-million.

Bank records filed in court in support of that effort also reveal dozens of transactions that have little to do with the construction business: payments to Ferrari, Mercedes Benz and other luxury auto dealers; a $60,000 bank draft to a man later convicted of money laundering; and payments to beauty supply and hair extension companies.

The bank account that took in the $630,000 in cash deposits is at the centre of the probe. The monitor alleges that the account at the Woodbridge, Ont., branch of Italian Canadian Savings & Credit Union, known as IC Savings, was a vehicle for many of the suspect transactions.

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Red flags

The paper trail for the account controlled by Mr. Aquino starts on Nov. 1, 2012 – the same year he began playing a more prominent role in the company, court records show. Activity peaked that month, with a dozen cash deposits of $9,000, including several in stacks of 450 $20 bills. On four consecutive days in January, 2013, $9,000 in cash was deposited, the records show. The cash deposits gradually slowed to a trickle over the following months and stopped altogether on June 2, 2014.

The fact that the cash deposits were all for the same amount – in $20 bills, in many instances, and just under the $10,000 threshold – are “red flags of money laundering,” said Peter German, a former deputy commissioner of the RCMP.

Studies have warned that Canada has become a haven for money launderers. The British Columbia government called a public inquiry into the problem last May after three independent reviews, including two by Mr. German, concluded that billions of dollars in dirty money were washing through the Vancouver area’s casinos, luxury car dealers and its red-hot real estate market.

Mr. German reviewed the Bondfield banking records at the request of The Globe. Although some types of businesses are cash intensive – casinos, restaurants, convenience stores – multiple deposits in the same large sum are “unusual in normal business operations,” he said.

Michael Citak, a lawyer for John Aquino, said there is no truth to any suggestion of money laundering. He declined to answer any of The Globe’s questions about the source of the cash. As for the allegation that he was involved in the invoice scheme, Mr. Aquino has accused the monitor in an affidavit of conducting a “one-sided and inaccurate” investigation. “I am implicated in a matter that I believe is without merit,” his affidavit states.

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In 2014 and 2015, Bondfield vaulted to the big leagues of Canada’s construction industry. Infrastructure Ontario, the procurement arm of the provincial government, awarded five contracts to the company with a total value of $844.3-million. One of those projects, Cambridge Memorial Hospital in Southwestern Ontario, is three years behind schedule. The redevelopment of St. Michael’s Hospital in downtown Toronto is more than two years behind.

Bondfield has been hit with 200 lawsuits from subcontractors seeking payment for work they performed on stalled projects. Zurich Insurance Group Inc., the insurance giant that provided surety bonds guaranteeing the completion of dozens of Bondfield’s projects, was forced to assert control of the company – and brought in the auditors from Ernst & Young in 2018.

In October of that year, the Aquino family announced that John Aquino had been “removed” entirely from the company. His younger brother, Steven Aquino, replaced him at the helm and sought and obtained court-ordered protection from creditors.

The Globe identified the cash deposits in the records released by the monitor and asked experts to review them.

Suspicious transactions and cash deposits exceeding $10,000 must be reported to the Financial Transactions and Reports Analysis Centre of Canada, the federal agency known as FinTRAC, which monitors financial intelligence for signs of money laundering.

Garry Clement, a money-laundering expert and former RCMP officer, said breaking up a large amount of cash into smaller increments is typically done to avoid triggering a report to FinTRAC. The activity in the IC Savings account, he said, “has all the hallmarks of money laundering.”

IC Savings spokeswoman Susana Petti declined to answer questions about the cash deposits. Canada’s anti-money-laundering law “expressly prohibits us from disclosing information about any suspicious transaction reports we may have filed,” she said in an e-mail to The Globe.

The credit union, she said, maintains robust compliance policies and procedures and reviews them annually. FinTRAC also conducts periodic audits of IC Savings’ procedures, most recently in June, 2019, Ms. Petti said.

A spokeswoman for FinTRAC also declined to comment, saying Canada’s anti-money-laundering laws prohibit the agency from disclosing “financial intelligence” it may have received or forwarded to police.

The account at IC Savings belonged to a numbered company, 2304288 Ontario Inc., that was pivotal to the alleged invoicing scheme. Over the eight years reviewed by the monitor, Bondfield, the suppliers and John Aquino transferred tens of millions of dollars into and out of the numbered company, leaving it with $10.4-million at the end of the period, court documents show.

Although the numbered company was incorporated by Bondfield’s then-chief financial officer, Domenic DiPede, it was in fact John Aquino’s company. Mr. Aquino describes it as “my company” in his affidavit.

“Mr. DiPede had absolutely no involvement in the improper transfer of any funds to anyone including suspicious companies,” his lawyer, Kevin MacDonald, told The Globe, adding that Mr. DiPede also had no knowledge of the $9,000 cash deposits.

Mr. DiPede, who resigned from Bondfield in July, 2018, received $1.4-million and US$250,000 from the numbered company, the records show. He is among the three Bondfield employees, who are no longer with the company, that the monitor is suing.

In an affidavit, Mr. DiPede says a large portion of the money he received was for what he described as “incentive payments.” He says he had no involvement in the numbered company’s affairs “unless instructed by [John] Aquino.”

Steven Aquino, who is co-operating with the monitor’s investigation, said he had no involvement with Bondfield’s finances prior to becoming CEO. His brother was solely responsible for the company’s financial affairs, he said in a statement. In response to questions from The Globe about the companies and people who show up in the bank records, he said in an e-mail, “I had absolutely no knowledge as to the dealings between Bondfield and the various parties and individuals.”

John Aquino counters in his affidavit that his brother and father were aware of the transactions that the monitor has said were part of the false-invoice scheme. All three, he says, were “directing minds” of Bondfield.

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Miami Joe

According to the monitor, the invoice scheme involved more than a dozen companies that don’t appear to have legitimate operations. The companies – with such names as Clearway Haulage, MTEC Construction and others – issued 577 suspect invoices to Bondfield for work that was never performed, the monitor alleges.

An individual named Giuseppe Anastasio and his cousin, Marco Caruso, delivered many of the “apparently falsified invoices” to Bondfield, the monitor has alleged. Mr. Anastasio frequently visited Bondfield’s office. According to a former Bondfield employee, he was known around the office as Miami Joe because he had property in Florida.

Mr. Caruso owns Gem Stone, which makes marble and granite countertops, according to his LinkedIn profile. A company with the same name is among the 19 suppliers identified by the monitor.

The bank records show that Mr. Anastasio received $1.8-million through the invoice scheme and that Mr. Caruso received $782,000. The monitor is suing the two men.

Mr. Anastasio and Mr. Caruso did not respond to requests for comment.

The monitor has identified another Bondfield official as a key player in the alleged scheme – Michael Solano, a cousin of the Aquinos. The records show he received $507,000. Mr. Solano died in 2017 and the monitor is suing his estate.

Forensic auditors discovered more than 100 e-mails from Mr. Solano in which he instructed the suspect suppliers on how much they should charge Bondfield and what work they should say they performed. The monitor said this is the reverse of how the construction business typically works: It is suppliers who tell a company what work they did and how much they are billing.

Mr. Solano was an IT manager with no background in the construction sector. The monitor concluded there was no legitimate commercial purpose for engaging him in the transactions.

As part of its investigation, the monitor obtained bank records for some of the suspect companies that invoiced Bondfield. Although these companies were purportedly in the construction business, their bank records show a series of transactions that have nothing to do with pouring concrete, hauling waste to dump sites or erecting buildings. Many of these companies do not have websites and list a post-office box as their address.

One company that invoiced Bondfield for work it said it performed, MMC General Contracting, made 10 payments to beauty-supply companies totalling just under $1,500 in 2016. Another company that invoiced Bondfield, Clearway Haulage, made payments to eight law firms, ranging from just over $44,000 to $450,000 over a nine-month period, and to Ferrari and Audi auto dealers, the records show. Clearway lists its business address as Mr. Anastasio’s former residence in Maple, Ont.

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The business associate

Also contained in Clearway’s banking records is a payment to a business partner of John Aquino’s who was later convicted of money laundering. Clearway provided a bank draft for $60,000 payable to a “Nicholas Kyria” on July 18, 2016. Many names in the bank records are abbreviated.

John Aquino and Mr. Solano were associates of a man named Nicholas Kyriacopoulos. All three have been involved in a proposed housing development in Kingston, in eastern Ontario.

Mr. Aquino and Mr. Solano were officers of the development company, Conacher Kingston Holdings Inc., and Mr. Kyriacopoulos represented the company as president in negotiations with the City of Kingston. The company is seeking to build 257 townhouses. There is no explanation as to why Clearway, a supplier identified by the monitor, paid one of Mr. Aquino’s business associates.

But four months before Conacher Kingston submitted its final planning rationale to city staff in 2018, there was a hiccup: Mr. Kyriacopoulos was arrested in Mexico, at the behest of the United States Department of Justice, which had accused him of laundering money on behalf of an Ethnic-Albanian organized crime syndicate. The warrant for his arrest dated back to 2011.

In March of that year, Mr. Kyriacopoulos flew from Canada to New York City, where he met with a jeweller, Lance Schoner. The authorities considered Mr. Schoner to be the chief money launderer for a syndicate of violent drug dealers, court records show. Mr. Kyriacopoulos’s trip was “for the purpose of overseeing a money-laundering transaction,” the United States Department of Justice later stated in court records.

The two men were stopped in a car and the authorities seized US$286,000 in cash. According to the records, Mr. Kyriacopoulous acknowledged he was aware that the money came from “unlawful activity,” although not specifically from drug trafficking.

The police released Mr. Kyriacopoulos from custody without charging him.

In July, four months after his arrest, nearly 50 people, all participants in what the U.S. Justice Department called a “syndicate,” were charged criminally. Authorities said the group trafficked cocaine, marijuana, MDMA and oxycodone and laundered the proceeds.

Mr. Kyriacopoulos was also charged, although he had returned to Canada and was not apprehended. It wasn’t until a family trip to Mexico, on Dec. 1, 2017, that he was arrested and returned to the United States for prosecution, according to court filings. Two months later, on January 26, 2018, he pleaded guilty to conspiracy to commit money laundering. The court gave him credit for time served in custody and he returned to Canada.

Mr. Kyriacopoulos did not respond to requests for comment.

When it came time to persuade a judge to keep him out of prison, Mr. Kyriacopoulos turned to a number of business associates and friends to provide character references, including John Aquino. In a letter, dated Jan. 22, 2018, and on Bondfield letterhead, Mr. Aquino described Mr. Kyriacopoulos as a “law abiding, reputable man.”

“When I have needed him, he has consistently shown his dependability and has always followed through on his commitments.”

With research from Stephanie Chambers