Given the serious breaches and “deceitful tactics” that taint the contracts entered into by the City of Montreal with the company Services Ricova for the processing of recyclable materials, the Office of Inspector General (OIG) recommends that the file be transferred to the Permanent Anti-Corruption Unit (UPAC).
In a report filed Monday with the Montreal City Council, Inspector Brigitte Bishop’s team also concludes that the contracts awarded to Services Ricova should be terminated. But since maintaining the operations of the sorting centers is essential, the OIG suggests instead that the City put Dominic Colubriale and the companies he manages on its blacklist of individuals and companies ineligible for the City’s calls for tenders for five years and to cancel the contracts as soon as possible.
Services Ricova was selected in July 2020 to take over the companies MD Paper Recycling Company and Canadian Solid Waste in the management of the Lachine and Saint-Michel sorting centers. Both companies were struggling with financial difficulties and wanted to withdraw from the Quebec market.
Montreal has thus entered into an agreement with Services Ricova, a company headed by Dominic Colubriale, to operate the two sorting centers. Under these contracts, the company had to invoice the City for material sorting activities and a clause provided for the sharing of revenues and losses.
A misleading “profit margin”
In fact, found the BIG, it was two separate companies, namely Ricova Lachine Inc. and Ricova RSC Inc. – also controlled by Dominic Colubriale and created expressly for the occasion – which carried out all the obligations of the contracts. However, if Services Ricova holds an authorization to contract from the Public Procurement Authority (AMP), this is not the case for its associated companies, which contravenes the Law on contracts by public bodies, believes the BIG.
Ricova Services also had to bill the City for materials marketing activities, but in this case, it was Ricova International Inc., also owned by Dominic Colubriale, who handled this aspect. Like the other two companies, Ricova International does not have an authorization issued by the AMP.
In principle, Services Ricova had to declare to the City the prices obtained for the materials sold to its sister company, Ricova International. The OIG found, however, that the price declared by Services Ricova was “systematically lower” than that obtained by Ricova International from the buyers of these materials, because Ricova International kept an amount of $20 per ton, which contravenes the contracts concluded with the City, reports the BIG. This is a “profit margin” described as “modest” by Dominic Colubriale during the investigation.
“For the Saint-Michel contract alone, and for the period analyzed from August 2020 to July 2021 inclusively, this average minimum reduction of $20 per tonne is equivalent to a total of approximately $1.15 million,” underlines the BIG which concludes that it is a “deceitful maneuver” having deprived the City of “considerable sums”. This amount is “unduly deducted” from the sale price declared by Services Ricova to the City and that this maneuver was made without the knowledge of the City, reports the BIG.
Closely related companies
The report also describes the control that Dominic Colubriale exercises over the four companies. The OIG even questioned him on the absence of taxes imposed during transactions between Ricova Services and Ricova International. According to counsel for the companies, since the two companies are closely related, they would be exempt from GST and QST between them.
During the investigation, Services Ricova maintained that it submitted an authorization request to the AMP in July 2020 and that this authorization was finally issued in July 2021. A request was also made for Ricova Lachine, but the authorization would still be pending. As for Ricova International, such authorization is not required, Dominic Colubriale would have argued. The OIG, however, considers that these companies violated the law since the contracts were in force.
The OIG concludes that due to the misleading practices observed, the file should be brought to the attention of the Permanent Anti-Corruption Unit, as well as to the AMP.
In addition, all these shortcomings should have led to the termination of the contracts, but the OIG considers it important that the operations of the sorting centers can continue, especially since such termination would have taken effect 45 days after its submission to the Board. council, which would have left the City very little time to award new contracts. “The proper operation of the Lachine and Saint-Michel sorting centers is undeniably essential in maintaining cleanliness and public health,” notes the BIG.
The BIG therefore recommends that the City register Dominic Colubriale and his four companies in the Registry of Persons Ineligible for City of Montreal Calls for Tenders for five years and that it terminate the contracts “as soon as possible”.
This isn’t the first time Ricova has made headlines. A report fromInvestigation broadcast by Radio-Canada last February reported numerous bales of mixed paper purchased at the Saint-Michel sorting center to be transported to India, where they would be used in particular as a combustion element in highly polluting factories. The report also showed that the Lachine sorting center, although inaugurated with great fanfare in 2019, was also doing poorly with a contamination rate of its mixed paper bales which would fluctuate around 20%.