Toronto councillors consider maximum ban for contractor that overbilled city $1.1M

Toronto urban center councillors ar go down to adjudicate the fate of a declarer that intentionally overbilled the city more than $1 million, a breach of the supplier code of conduct uncovered by a forensic audit conducted for the city. 

Staff are recommending Capital Sewer Services Inc. Face the maximum suspension Toronto can issue against suppliers that break the city's rules: a five-year contracting ban on it and all its affiliated companies.

In the past five years, Capital Sewer has been awarded 31 contracts by the city, totalling about $220 million. 

Capital Sewer intentionally overbilled the City of Toronto $1.1 million for a sewer rehabilitation project in York Centre, according to a forensic audit by professional services firm KPMG. The KPMG forensic audit was launched in July 2025, after the city’s internal controls, as well as complaints to the auditor general’s fraud and waste hotline, found irregularities in change orders throughout 2024.

“There needs to be penalties, I absolutely support [the five-year ban],” Mayor Olivia Chow said Monday at an unrelated news conference. 

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The report before council says there is no dispute that the city has been overbilled by at least $1.1 million, and an ongoing audit will determine if any additional financial deception took place. 

Councillors will be voting to approve the maximum suspension after David Beswick, president of the firm’s parent company, Capital Infrastructure Group, argued against its length at a city committee meeting earlier in December. 

“A single, long-time trusted employee, someone who held a position of great responsibility, betrayed not only me and our company, but also the trust of you,” Beswick told the general government committee. 

Beswick said that the employee's actions "do not reflect who we are or what we stand for," and he said he will ensure nothing similar happens again. 

That “single, long-time trusted employee” Beswick referred to was a member of Capital Sewer’s senior management team who, through a promotion in 2022, gained administrative oversight of change orders, according to a city report. 

As a result of a clause that that same senior leader negotiated, they would receive 2.25 per cent of the value of all change orders executed under their control. The person is not identified by name in the report councillors received.

“It is concerning to staff that senior management of Capital Sewer did not identify the incentive scheme as a potential for fraud,” the report says. 

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Beswick told councillors it was implemented because the employee had offers from other companies. 

In one example, Capital Sewer submitted a change order quote from a subcontractor with a price of about $1.3 million, the report says. When the city asked the subcontractor directly, the same quote was provided around $470,000, meaning the city was overbilled nearly $900,000. 

Beswick said once the city began asking questions, the senior manager started showing “erratic behaviour” and tried to erase company records.  

The statement refers to a forensic report conducted by a third-party hired by the company. 

The city’s report, based on its KPMG audit, said Capital Sewer had "deficiencies" making it so people in finance and accounting roles, who were paying subcontractors, couldn’t identify the “overbilling schemes.”

Council is expected to vote on the potential ban later this week.

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