Second employee involved in case resigns: report
The City of Ottawa has fired a municipal employee implicated in a kickback scheme that funneled thousands of dollars from local landlords in exchange for inflated rental agreements under housing benefit programs.
A second employee linked to the scheme has resigned, CTV News reported, citing a report by Auditor General Nathalie Gougeon.
The scheme, uncovered earlier this year following a tip to the city’s fraud and waste hotline, revealed that the dismissed employee – referred to in the report as “Employee A” – received over $22,000 in payments from four landlords between November 2023 and October 2024.
These payments were made in exchange for securing favourable rental agreements at rates significantly above market value, often using their position within the city’s housing program.
The investigation, aided by Ernst & Young LLP, found that Employee A used their role to negotiate rental agreements directly with the landlords—an apparent breach of city procedures. The employee assisted housing clients in signing leases for units with rents inflated by 38% to 63% compared to average market rates.
For example, a three-bedroom unit in the Heron Gate area was rented for $4,050 per month, far above the area’s $2,491 average, noted CTV News.
"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 auditor general’s report said, according to CTV News.
Gougeon’s report also uncovered incriminating messages between Employee A and one of 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 auditor general’s report said, according to CTV News. "This included messages where the Landlord told Employee A if they could get the Landlord 'higher rent', 'the bonus will be much larger.'"
In 2023, Toronto’s Fraud and Waste Hotline received 1,054 complaints made up of roughly 1,450 allegations of employee fraud.
During the investigation, the auditor general's office also learned that a second employee – referred to as Employee B – and the landlords began operating a moving company, which moved a housing client of Employee A, according to the auditor general report, as cited in CTV News.
"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. We observed that Employee B and the Landlord both financially benefitted from a portion of the profits of this transaction."
The city is cutting all business relationships with the implicated landlords to prevent further misuse of housing programs, as Gougeon recommended.
“The report tabled today demonstrates the importance of mechanisms such as the Fraud and Waste Hotline, and that the program is functioning as intended,” said Gougeon, who tabled the report on Monday.
Previously, an engineering executive received a 14-month conditional sentence for rigging bids for Quebec City contracts.
