Fraud investigation at LHSC involves ‘multiple individuals’: Source

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The fraud investigation involving London Health Sciences Centre’s past financial practices involves “multiple individuals,” a hospital source says, underscoring what may be a “systemic” failure of governance at the region’s largest hospital, according to one expert.

The criminal probe at LHSC, which was put under provincial supervision little more than a month ago over its concerning financial performance, involves “multiple fronts, with multiple people,” an unnamed hospital source told The London Free Press on Friday.

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The subjects of the London police investigation, the number of individuals involved and the specifics of the alleged frauds have not been released by LHSC or investigators.

The criminal investigation comes after several scandal-plagued years at LHSC, including controversies about international travel by executives, executive compensation, organizational restructuring and the dissolution of formal ties with St. Joseph’s Health Care London.

It is not surprising that, in a place such as LHSC, which has seen considerable tumult and governance issues among its top ranks, criminal acts could occur, one expert says.

“The ethical, organizational culture of the organization is the responsibility of the senior governance bodies and leaders of that organization,” said Len Brooks, a professor at the University of Toronto’s institute for management and innovation who specializes in corporate corruption and fraud.

“Any organization can have an unfortunate occurrence. But if you have continuing episodes, that suggests there’s something systemic that needs to be given attention.”

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Leaders of an organization set the guidelines and expectations for ethical behaviour, Brooks said, and are in charge of enforcing those standards. When either is lacking, serious problems can occur, he said.

As for financial oversight at LHSC, it does conduct internal audits. On Monday the hospital’s new chief financial officer and vice-president of facilities Nicholas Vlacholias starts work, replacing Abhi Mukherjee, who was fired in August.

David Musyj, who was appointed by the province as LHSC’s supervisor five weeks ago, jokingly referred to Vlacholias as his “wartime CFO.”

Jillian Johler, professor at the University of Toronto and an expert in health care corruption, called hospitals “one of the most vulnerable areas” when it comes to fraud.

“It is complex, there is a lot of money and the accountability is not clear,” she said of health care administration.

The health care environment needs constant scrutiny and hospitals have to ensure “oversight” is in place, she said.

“Mechanisms have to be in place and they have to be effective. Who is the watchdog and who is watching the watchdog?”

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It is difficult to know whether questions about financial matters are corruption, fraud or mismanagement and the only way to find out, “is to dig deeper,” Johler said.

“Is there budget oversight and looking at that is a management issue. Budgets are approved and audited; there are standard steps every hospital in this province needs to take.”

Hospitals in Ontario have a series of internal processes in place for all areas of purchasing and administration, said Jonah Arnold, who practises health law in Toronto with Weinman Arnold LLP.

“They have to have internal checks and balances and audits to maintain their accreditation. They have to open their books and allow audits,” he said.

“It is for everything from charitable events to transfer of OHIP payments, purchasing of equipment and supplies and drugs. Every computer keystroke is recorded in a hospital under the user name. But are there still internal problems and waste? Absolutely,” Arnold said.

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“You have rules and regulations and policies, but they are only as good as the people following them. Remember, the primary job of a hospital is to deliver health care.”

The public should not expect the police investigation into the alleged frauds at LHSC to unfold overnight, said James Zegers, a London criminal lawyer.

“If it’s a complicated fraud allegation, certainly there are a lot of documents to go through,” Zegers said about the general process of a fraud investigation, not the specifics of the LHSC probe.

“Police will have to obtain all the documents that support the allegation. . . . That can involve production orders. They’ll look at business records, which can be hard to understand, so they’ll often get forensic accountants involved, too.”

Fraud charges that result in a conviction or guilty plea do not often result in steep jail sentences, Zegers said.

“Convictions in Canadian frauds often end up in conditional sentences. You do not see the kind of jail sentences in Canada that you see in the United States,” he said. “But it does depend how big the fraud is.”

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The announcement of the police investigation comes five weeks after the province appointed a supervisor to run LHSC, a move that triggered the voluntary resignation of the hospital’s board of directors.

Musyj, who was seconded from Windsor Regional Hospital to LHSC in May, is reporting directly to the Ministry of Health during his 18-month term as supervisor.

The province appointed Musyj as supervisor due to LHSC’s “concerning financial performance” including a $150-million deficit in its 2024-25 budget year. His role will scrutinize “concerning financial performance that (was) found as a result of a third-party review,” the ministry said at the time.

jbieman@postmedia.com

ndebono@postmedia.com

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