City of Ottawa's auditor general finds kickback scheme involving city employee and local landlords
The City of Ottawa's auditor general has found that a city employee was engaged in a kickback scheme with a group of four local landlords, collecting thousands of dollars in payments in exchange for more favourable rental rates under specific housing benefit programs administered by the city.
In her report, Nathalie Gougeon said a call to the city's fraud and waste hotline earlier this year alleged that the scheme was underway. Gougeon's office immediately began an investigation and informed the city solicitor, the city manager, the general manager of the Community and Social Services Department and Ottawa police.
Due to the complexity of the investigation, the AG also hired Ernst & Young LLP to assist.
- Sign up now for daily CTV News Ottawa newsletters
- The information you need to know, sent directly to you: Download the CTV News App
What the investigation found was more than $22,000 in payments from the landlords (referred to as the Landlord, in the report) to the city employee in question (Employee A) between Nov. 14, 2023 and Oct. 1, 2024. Several of the payment records reviewed referenced addresses of units that the employee assisted the landlord with as part of the employee's role at the city. Furthermore, the investigation found a family member of the employee in question, who was also employed by the City of Ottawa (Employee B), knew of the scheme and did not disclose it, and was directly involved in collecting the money from the landlords.
"From our analysis of chat and messaging data from Employee A’s mobile device, we observed several messages between Employee A and the Landlord that would indicate that these payments were made by the Landlord with the intention to utilize Employee A’s role at the City to provide a financial benefit to the Landlord," the report says. "This included messages where the Landlord told Employee A if they could get the Landlord 'higher rent', 'the bonus will be much larger.'"
Employee A was found to have negotiated rental agreements on behalf of housing clients – an apparent breach of city process – and helped clients sign leases for rentals with the landlords that were actually well above market rates.
Examples provided in the report show leases signed with rental prices that were 38 to 63 per cent above the average market rates for their respective areas. A three-bedroom unit in the Heron Gate area was negotiated at a rent of $4,050, well above the average of $2,491.
"Without information to legitimize the payments made by the Landlord to Employee A, we observed multiple factors that indicate that these payments are consistent with a kickback scheme designed to provide a benefit to both the Landlord and Employee A," the report said.
During the investigation, the auditor general's office also learned that Employee B and the landlords began operating a moving company, which moved a housing client of Employee A.
"We further observed that Employee A submitted an invoice on behalf of the Moving Company, which was paid by the City for moving services rendered," the report states. "We observed that Employee B and the Landlord both financially benefitted from a portion of the profits of this transaction."
Neither the employees nor the landlords were identified in Gougeon's report.
City staff told Monday's Audit Committee meeting that one of the employees was fired and the second employee resigned.
Gougeon recommended the city cut all business relationships with the group of landlords, which city management said it is doing.
"A plan is underway to terminate all existing business relationships with the landlord as it relates to housing allowance programs. Tenants in receipt of housing allowances, that are currently residing in units owned by the landlord, will be supported to transition to alternate accommodations in a manner that will not put them at risk of homelessness," the city's response said.
The investigation also identified gaps in city processes including the absence of: appropriate monitoring processes to deter and assist in the detection of unusual or irregular transactions; a fraud risk assessment to ensure necessary controls were in place to deter, prevent and detect fraudulent activities; and a consistently applied accountability mechanism to ensure all staff have completed the required Code of Conduct training.
City management says it will be addressing these gaps.
"We were really appalled about what is happening," said Bader Abu-Zahra, the co-chair of ACORN's Vanier chapter. "Doing this is really robbing money from a trust, which is a fund which was created to help the homelessness rather than making profit for the landlord."
Ottawa Police Chief Eric Stubbs told reporters at a media availability Monday afternoon that he could not confirm whether a police investigation was underway into this incident, but said it would not be any different from an investigation triggered by the private sector.
"Whether it's internal theft at a business or corruption within a business, whether it's the auditor general, or an accounting form, or Walmart… it doesn't matter what the company is, we have to receive the information, assess what evidence they've gathered and determine if a criminal offence occurred," he said. "Receiving something from the auditor general is no different from any other criminal investigation that we might launch."
An Ottawa police spokesperson later confirmed the police service will be commencing an investigation into the matter.
--With files from CTV News Ottawa's Katie Griffin
CTVNews.ca Top Stories
Trudeau says Trump's comments on 51st state 'flattering' but a 'non-starter'
Prime Minister Justin Trudeau says talk of Canada becoming the 51st state is a distraction from more pressing threats of U.S tariffs on Canada and their likely impact.
Alberta premier Danielle Smith meets with Trump at impromptu Mar-a-Lago visit
Alberta premier Danielle Smith met with President-elect Donald Trump Saturday at Mar-a-Lago in Florida.
Former PM Chretien says Liberal party must move back to 'radical centre'
As the Liberal party searches for a new leader, former prime minister Jean Chretien says it's time for the party to move back to the "radical centre" to help its electoral fortunes.
Why Canada and the U.S. are seeing a trend of wildfires in recent years
As Los Angeles continues to battle one of the most destructive wildfires in its history, experts say the devastation signals a troubling trend fuelled by a larger climate crisis.
Vance says Jan. 6 participants who committed violence 'obviously' shouldn't be pardoned
Vice President-elect JD Vance says people responsible for the violence during the Capitol riot “obviously” should not be pardoned, as President-elect Donald Trump is promising to use his clemency power on behalf of many of those who tried on Jan. 6, 2021, to overturn the results of the election that Trump lost.
Are there U.S. military bases and American troops in Canada?
The U.S. military has more than 165,000 troops deployed in over 170 countries and territories, including Canada.
Teen's road test halted by stunt driving charge
A 17-year-old driver failed their road test before it even began after being stopped by police in a community safety zone.
'Everything is on the table': Joly won't rule out cutting off energy exports to U.S. in face of Trump tariff threat
Foreign Affairs Minister Melanie Joly is not ruling out any countermeasures when it comes to dealing with U.S. president-elect Donald Trump — his threat of significant tariffs on Canadian imports, in particular.
Sault motorist was driving 175 km/h on Hwy. 17, northern Ont. police say
A 20-year-old from Sault Ste. Marie has been charged with stunt driving and is accused of exceeding the speed limit by 85 km/h.