Federal Contracting | $64 Million Lawsuit Against Ottawa

(Ottawa) One of the consulting firms whose 81 contracts were suspended in the wake of the scandal ArriveCAN is suing the federal government for $64 million. Coradix Technology Consulting is accusing it of negligence and defamation. It believes Ottawa caved to political pressure to create a diversion as headlines about the app’s mismanagement piled up.

“The termination and suspension of the contracts were made in bad faith,” the company wrote in a motion filed in Federal Court in late May.

Coradix had 40 employees and 280 information technology consultants that it deployed to departments, agencies and Crown corporations as needed. It has received more than $400 million in federal contracts since its founding in 1995, according to the Department of Public Services and Procurement.

In March, Assistant Deputy Minister Dominic Laporte sent him a letter announcing the immediate suspension, until further notice, of all his contracts and bids for calls for tender.

The ministry then issued a statement the next day, and the news was covered by several media outlets, including The PressCoradix believes that this statement wrongly implied that she had committed reprehensible acts and attracted negative media coverage.

Conflict of interest

It was Coradix’s relationship with David Yeo, president of the consulting firm Dalian Enterprises, that cost him his bread and butter. The two formed a joint venture to secure contracts for Aboriginal entrepreneurs. They shared offices in downtown Ottawa, had the same chair on their respective boards, and together managed 475 information technology consultants for the federal government, for hefty commissions.

Mr. Yeo made headlines last winter for his companies in tax havens and for his dual employment within National Defence. His company was awarded contracts by the department while Mr. Yeo was a civil servant there. Coradix should have reported this conflict of interest, according to the government. It believes it violated the code of conduct for procurement by failing to do so.

Mr Yeo’s conflict of interest therefore did not concern the firm, she argues.

She blames the Ministry of National Defense. Officials who hired David Yeo as a civil servant in September 2023 “should have known at that time or shortly thereafter” that he was the founder and chairman of Dalian. He did not declare it. He was suspended from his post in March and eventually resigned a few days later.

The joint venture between Coradix and Dalian had held a $3 million contract with the National Defense since 2018. That contract ended in January 2024 before the scandal broke.

18% commission

Mr Yeo gained attention in February after the release of the auditor general’s report into the scandal. ArriveCAN. The app, developed in the urgency of the pandemic to check the vaccination status of travellers, has been hit with major cost overruns. Its initial version cost $80,000, but the bill has skyrocketed to nearly $60 million. Mr. Yeo’s firm, which has two employees, reportedly received nearly $8 million in contracts from the Canada Border Services Agency. He disputes that estimate and says he received nearly $5 million in contracts. His company, like many others, played middleman by subcontracting the federal government’s work to other IT consultants, for an 18 per cent commission.

The Press discovered in February that Mr. Yeo had opened two companies in tax havens since 2011, raising a red flag. Because he is a member of the Alderville First Nation in Ontario, his company is eligible for a share of contracts set aside for Aboriginal people.

When checking his background, reporters and the Ministry of National Defense were surprised to learn that Mr. Yeo worked both for the government as a civil servant and as a consultant with Dalian.

His company lost its security clearance in March following the revelations and, like Coradix, has been barred from federal contracts ever since.

Coradix claims it learned that Mr. Yeo worked for National Defence on October 31, 2023. That same day, both companies testified before the House of Commons Standing Committee on Government Operations, but did not disclose Mr. Yeo’s special status to elected officials.

Coradix, which is a minority shareholder in Dalian, claims it took the necessary precautions by asking Mr. Yeo to sign a confidentiality agreement and put his Dalian shares in a blind trust. Mr. Yeo had indicated that he had created the trust late in another parliamentary committee testimony in March. The agreement was signed in December, according to the firm.

Neither Coradix nor the Department of Public Services and Procurement would comment as the matter is before the courts.

With the collaboration of Vincent Larouche and William Leclerc, The Press