Almost 10 years after it began investigating an alleged price-fixing scheme that affected close to $20-million worth of condominium renovations, the Competition Bureau of Canada has obtained its first guilty plea.
On Jan. 17, the Bureau announced that CPL Interiors Ltd. had plead guilty to violating the Competition Act, a criminal offence that can be punished with up to five years in prison and fines up to $10-million.
CPL’s plea outlines 31 instances between 2009 and 2014 where it participated in bid-rigging, though in actuality it only won 10 of those bids and was able to undertake the work. The total value of the contracts was $19,098,651, and CPL will be paying a $761,967 fine for its participation in the scheme.
In the Statement of Agreed Facts that went along with the plea, for the first time the public can see how the scheme was alleged to have functioned.
In an interview with The Globe and Mail, CPL’s founder and principal Richard Lyons offered context on his role in a conspiracy to submit false bids on projects that were put out to tender, and expressed regret that he went along with the plan.
“We participated in the process because we thought we had no other option; it was kind of a sink or swim feeling at that time,” Mr. Lyons said of his agreement to join a bid-rigging cartel in 2009. His was the last of four companies to join the alleged conspiracy, according to the Bureau. The first three were “TRI-CAN Contract Incorporated (Bob Vlahopoulos), JCO & Associates (Jose de Oliviera) and Lidio Romanin Construction Co. Ltd., doing business as LAR (Tony Romanin).” Those companies and individuals have been charged with conspiracy and fraud, though the allegations against them have not been proven in court.
Mr. Lyons, who has been operating CPL since 1990, said he first heard of the three companies as he was trying to drum up business more than a decade ago. “They made sure doors were closed and they made sure projects didn’t go our way,” he said, and expressed regret that he hadn’t been aware of the federal anti-trust law and enforcement agency at the time. “One thing I’ll share with you is that, if I actually knew the Competition Bureau existed to do what they actually do, I probably would have been the guy who called.”
The probe began in 2012 when the Bureau received a whistleblower report about potential bid-rigging. Over the course of its investigation the Bureau looked at 300 construction projects and in 2014 it began to offer immunity deals to third-party suppliers for more information. On Oct. 7, 2014, investigators carried out a search at CPL’s office. The next day, Mr. Lyons requested leniency and began to give evidence of the scheme and cooperate with the probe.
“The Bureau learned that the conspirators agreed not to compete against the company first involved or involved very early in the life of a condominium refurbishment project known as the design stage. This first-in company became the designated winner of the refurbishment project,” the statement of facts reads.
“This arrangement suited the four conspirators because the company involved at the design stage had to invest considerable time and effort, typically for no pay, assisting the designer with estimating the cost of the project. At the call for tender stage, the designated winner would provide the other co-conspirators with the numbers they were to use in their bid submissions. … The designated winner would ensure it won the contract by making all the other co-conspirators’ bid submissions higher than its own,” the statement reads.
The contracts at issue ranged from as little as $108,000 to projects worth more than $1.6-million. The highest-value contracts CPL was able to win in the bid-rigging scheme were two deals worth a little more than $900,000. The first came at the beginning of its participation, when it won a contract for $913,574 from Toronto Standard Condominium Corp. 2388, a 252-unit complex called Courtyards of Concord at 18 Concorde Place in North York, Toronto. The second came in the months just prior to CPL’s office being searched, and was a $932,485 contract with Peel Standard Condominium Corp. 671, a 549-unit building known as The Palace at 1900 The Collegeway in Mississauga.
“As much as this criminal investigation focused on contractors, I question the deeper context: whether condo property management companies should be alert to the possibilities of contract collusion,” said William Stratas, who has carved out a specialty in investigating condo fraud as head of Eagle Audit Advantage Inc. Mr. Stratas notes the larger condo management firms work across hundreds of different buildings, and deal with everything from payments to documentation and should have “eyes wide open to the risks of bid tendering shenanigans.”
Though carpet-suppliers ViFloor Canada Ltd. and Mohawk Industries Inc. have been named in a class action lawsuit aimed at the cartel – brought by Sotos LLP on behalf of Toronto Standard Condominium Corp. 1654 (known as Voyager at Waterview II at 2119 Lake Shore Blvd. W, and incidentally, not one of the buildings named in CPL’s guilty plea) – Mr. Lyons said these projects where bids were rigged were not solely about flooring. Rather, they would involve everything from wallpaper to carpentry to update common areas such as party rooms or hallways: “You’re changing the architectural finishes in an area,” he said. Lawyers for ViFloor and Mohawk declined to comment in response to The Globe and Mail’s questions about the class-action lawsuit.
CPL’s cooperation has saved it some money: when calculating CPL’s fine, $4,367,588 was removed from the total value of the contracts in the scheme, reflecting nine bids discovered thanks to its information. The Bureau’s leniency program offers discounts on the fines for various levels of cooperation, and CPL is paying almost a million dollars less than it would have, had the company not participated in the probe.
Additionally, CPL has entered into a settlement with the class-action plaintiffs that requires CPL to help “in the form of interviews and document production” as that case pursues the other companies. CPL has also agreed to pay $555,000 into a settlement fund for that action, subject to court approval.
“I understand there was a cost to pay … That’s part of the responsibility of owning up to what happened. So, do I like it? No. But I do appreciate why it happened and respect the process,” said Mr. Lyons, who said at this point CPL has ceased to operate as a going concern. “We chose the wrong path.”
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