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Raising the Alarm on Inadequate Life Safety Inspections in Toronto
By Beverly Romeo-Beehler and Elaine Au

How Attention to Detail, Diagrams and a Skeptical Mind Helped Shed Light on a Widespread, Potentially Life-Threatening Problem in Canada's Biggest City 
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TORONTO AUDITOR GENERAL'S OFFICE

False identities, multiple companies at multiple addresses all connected to one person, dozens of fire code violations, incomplete and missing paper trails, and significant safety risks to millions of Torontonians—our investigation into a life safety inspection business led to significant findings that are changing an entire industry.

The investigation began when we received an allegation that a life safety inspection business was overcharging and performing inspections poorly. Life safety systems include smoke alarms, fire extinguishers, emergency lighting, sprinklers, smoke control equipment, and fire pumps—critical equipment designed to save lives during a fire. The City of Toronto had been working with this business (often the business had a different name, but was connected to the same person) for a decade, awarding it more than 10 contracts with different city divisions, some for as much as $420,000.

The magnitude of the allegation quickly became clear: this business had been inspecting hundreds of buildings all over the city, including City Hall, Toronto Police headquarters, and Union Station (the busiest transportation hub in the entire country). Some city staff had their suspicions about questionable invoices, and told their superiors. But when senior city staff did their own investigation, they concluded "there was no indication of any mishandling."

But something just didn't quite add up, and the risk to public safety was too high, so we took a closer look.

Our year-long investigation used multiple techniques and was supported by experts at the Toronto Fire Service. In the end, we were able to determine there was a very high risk of fraud. More importantly, we determined that the city's critical infrastructure buildings were at risk because indications were that their life safety systems had not been properly inspected. This one case highlighted systemic problems across the entire life safety inspection industry.

The case received a lot of attention, both within the city and in the media.

Toronto's Deputy Fire Chief Jim Jessop said the report sent "shockwaves through the industry" and likely "saved lives."

Toronto Mayor John Tory said the report "chronicles an absolute failure to conduct proper due diligence when hiring life safety inspection vendors for City buildings" and expressed his "utter disappointment" in the weaknesses our findings revealed.

City Councillor Josh Matlow said "it is almost like one of those weird Netflix shows where you just can’t believe this mystery that’s being put together and fake names and fake dates where companies were started and people coming back with different shirts—it’s absurd. If somebody actually wrote a script like that, they’d probably get laughed out the door—like you couldn’t believe it. Yet, it happened. And the fact that this absurdity was then by the City of Toronto allowed to then turn into a contract where people got tax dollars and life safety was potentially put at risk, is beyond disbelief."

Toronto Star newspaper columnist Edward Keenan said "the auditor's report just gets stranger—stranger than fictional company owners, stranger than fiction in some places—and more disturbing. In its 144 pages, Romeo-Beehler details the bizarre history of the city's dealing with [business owner]'s companies. On almost every page there's something that makes you gasp and shake your head. If you have a taste for the outrageous, it's worth reading the whole thing. I found myself reading sections out loud in disbelief to whoever was around. I was often tempted to laugh in exasperation. But the stakes are too high to laugh. The implications are too disturbing."

The investigative team used a variety of techniques to reach the findings, including perhaps most importantly, old fashioned skepticism.


CHRONOLOGY

The basis of obtaining clear and relevant information starts early in the investigation process by preparing a file that organizes information in a manner that highlights where there does not appear to be any rational explanation for what the data and documents show.

We created a chronological file that included every piece of evidence related to the investigation, and added to it as the investigation grew. This included hundreds of invoices, emails, contracts and other documents related to the file.

This is an extensive but absolutely critical task—it helps to organize the information and makes it easier to follow the chain of events. In our experience, this investment of time always pays off in the end. The chronology helped us to see that some city staff members spotted red flags with this business, and raised them both with the business and their superiors many years ago. We could see the various evasive answers the business gave back to the City, and we could also see that senior management at the city did not take their staff's complaints seriously.


HANDWRITING ANALYSIS

When looking at the invoices this business submitted, as well as bids from different businesses, we noticed the handwriting from supposedly different people looked very similar. It wasn't until we stacked them that we could see just how similar they looked.

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Instead of just relying on our gut instinct, we contracted a handwriting expert. The expert said:

"…the evidence supports my opinion to a reasonable degree of scientific certainty that the signatures and handwriting on the three Requests for Quotation from the City of Toronto labeled 'Q1' through 'Q3' were written by one hand/same hand …There was a switch from writing in all capital letters to capital and lower case letters in order to disguise. There was an attempt to vary the formation of numbers in order to disguise. As in nearly all disguise attempts, the person cannot stop their brain from switching back to its usual writing habit at some point in the writing. This is what happened in the 'Q1', 'Q2' and 'Q3'."

Upon further questioning, the business owner at the centre of the investigation told us he had occasionally signed for some of his employees, but he insisted they were aware of it and consented to it. We confirmed this was not the case. The signature analysis also revealed that these companies were bidding against each other to win city business.


DIAGRAMS

One of the most challenging parts of this investigation was that there was a tangled web of shifting businesses, addresses and people (some of whom we later determined were fictional). The most effective way to sort out the information was to create a diagram to illustrate the relationships. This helped us to more clearly see the common links between all these different people. The people shown in red were not real people.

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Another diagram that significantly helped us was a timeline of events. This diagram, based on the chronology, gave us a clear view of the business's entire dealings with the City, from a decade ago to its most recent contract. We used different colours for contracts (purple), concerns raised (yellow), formal complaints (red), and senior city management's involvement (blue).

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This file required the review of a lot of paperwork over a long period of time. But these diagrams proved invaluable in seeing the chain of events and the relationships clearly, and it really helped the stakeholders to quickly understand the issues.


WEBSITE PHOTO TRACKING

Similar to the handwriting, when we saw photos of the business owner on his website, we felt something was off—the photos looked like stock photos. By searching through the website's source code, we traced the source of the photos and found, as we suspected, that the photos came from a stock image website.

We performed further analysis on the photos and found that the exact same photos and, in several cases, names of the business owner and employees were used on websites for several other completely unrelated businesses. Dave Daniels and Dave Williams signed almost a million dollars in contracts with the City—neither person existed. In total, there were up to seven pseudonyms used by the businesses in their interactions with the city.

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INTERVIEWING STRATEGIES

Obtaining clear and relevant information is also based on keeping an open, neutral, but curious mind to probe deeper to get the answers to find out what is actually happening. It may be that there truly is a reasonable explanation that supports what you are seeing in the data—but you need to have performed sufficient analysis to filter responses to questions so you can immediately identify when you are being “fed a line.” 

During the interview, we:

  • Used a prepared list of questions, but listened to the answers and asked follow-ups where needed, instead of just moving on to the next question on the list
  • Asked one question at a time—if you ask more than one at a time (known as double-barrelled questions), people will almost always only answer the second or easier question 
  • Asked open-ended questions.


IMPORTANCE OF A SKEPTICAL MIND

This file raised questions about the businesses, and there was a lot of conflicting and confusing information swirling around for it to make any logical sense. Instead of accepting what we saw, we sought evidence, following the old audit adage, “trust but verify.” When parts of the puzzle simply did not fit, we used critical thinking. This meant we asked questions, listened to our gut instinct and dug deeper to verify against evidence, and compared evidence to resolve illogical pieces.

"People's Safety Is Too Important to Cut Corners"
These techniques enhanced our understanding and knowledge of the file, and strengthened the case we made in our report.

The Auditor General's 17 recommendations stressed that improvements were needed in two main areas:

  1. The need for better documentation and a better audit trail to prove that life safety inspections are done and deficiencies are rectified, and for staff to have a better understanding of why documentation is both important and required under the Ontario Fire Code.
  2. The need to perform due diligence on vendors before awarding contracts, and addressing issues that are raised. Trust in the vendor must not override the need to perform this due diligence, nor the need to listen to the city's own staff. Staff should not be indifferent when serious concerns are raised, and must take steps to ensure public safety is protected when following up on billing and contract performance arise.

In addition to the companies in question being charged with more than 90 Ontario Fire Code violations, there have been several other significant changes since this report was published:

  • Improved contracting practices at the City of Toronto (better RFQ wording, for example)
  • Municipalities across the country are calling to find out how the work was done so that they can follow suit and internal auditors across Ontario received training to ensure they can check their own systems 
  • Fraud professionals are using it in their training classes
  • The Institute of Fire Engineers: Canada Branch thanked the audit team, including the Toronto Fire Services, for their work. At the Institute’s next AGM and Professional Development Seminar on June 06, 2019 in Toronto they are hosting a “lessons learned and next steps” seminar to brief stakeholders on the matters raised in the report
  • Legislative changes are being pursued to improve controls in the life safety inspection industry.

After the report was published, an industry inspector reached out to say, "I just wanted to say thank you for the great work you are doing on this whole fire protection case. I have been in this industry for almost 30 years, and have been saying this for years—it's about time this has come out. Liability and people's safety is too important to cut corners."


ABOUT THE AUTHORS

Beverly Romeo-Beehler is the Auditor General for the City of Toronto. Her expertise in public sector audit, oversight, transparency and accountability spans a 27-year career. Beverly has worked for Auditor General Offices across all three levels of Government. As an Assistant Auditor General in BC she led national initiatives for Auditors General, including serving as Chair of the Auditor General National Performance Audit Conference and leading the National Audit Learning Network collaboration. Beverly’s leadership in senior executive BC Government positions resulted in her receiving several high-profile leadership awards including awards from the Premier for ‘Service Excellence’ and ‘Organizational Transformation.’ Beverly also served as a senior reviewer of public complaints against the RCMP and worked with the National Defence Ombudsman in Ottawa. Beverly is a Chartered Professional Accountant (CPA, CMA) and has received recognition for providing extraordinary service to the CMA profession. She is a non-practicing lawyer and holds a Juris Doctor and a Bachelor of Business Administration degree. She has completed the Director’s Education Program at the University of Toronto’s Rotman School of Management. She has received her Institute of Corporate Directors designation (ICD.D) and is Certified in Financial Forensics (CFF).

Elaine Au is a Chartered Professional Accountant (CPA, CA) and has over 15 years of audit, forensic and risk management experience. She is also Certified in Financial Forensics and has completed the Diploma in Investigative and Forensic Accounting at the University of Toronto.