Condo Scam: Condo contractors on bidding fraud, kickbacks

In his 20 years working in condos, Fred Rosen, president and CEO of Spectrum, a flooring company, said he has seen corruption, but doesn’t think it’s a pervasive problem.

“I’d say you’re probably looking at less than 10 per cent of managers and contractors who are corrupt,” he said.

Sometimes, a manager will offer to help his company rig the bids for a job, he said. “The manager calls you up and says, ‘I’d like you to quote on the job.’ And then he says, ‘I’d like you to provide two other quotes for me.’ ”

Those quotes will be higher bids from other companies, which won’t get the job—but will satisfy the board’s requirement for competing bids.

“He can say that because he doesn’t want to be bothered going through the whole exercise of the board, or he might say it because he prefers to work with you and doesn’t want the board to get mixed in—but it’s his own agenda, he is deceiving someone from this point on,” he said.

His company works in 700 to 800 buildings, and he sees that scenario a couple of times a year, he said.

“But maybe people don’t approach us that frequently because we’re a large company and because they know we don’t do that, we don’t go that way,” he said. “It’s a moral choice as well. There’s an old saying, ‘You go to be bed with dogs you wake up with fleas. ’ ’’

He offers other anecdotes of condo “impropriety.” In one, a manager asked his company for the small favour of cleaning the area rug in his home—which turned out to be decked out with furnishings and TVs from the building he managed, including a pile of rugs he was trying to sell. In another, a board member gave a contract to build a condo website to her live-in boyfriend for $12,000.

His advice to condo owners on the lookout for bid rigging is: It’s hard to catch, but always have three quotations. “Be leery if they’re always from the same three companies, because someone who’s a crook will have two other crooks to put in bids with him.”

Another condo contractor, who has been in the field for 18 years, said in his corner of the industry, corruption is rampant. He insisted on keeping his name and exact type of contracting work anonymous.

“In our market, where jobs are tendered on a large scale and there are a number of bidders, the strong competitors are actually talking to each other,” he said in a phone interview. “And the bids end up being exorbitantly higher than they should be in a normal competitive marketplace. So the end result is the condo corporations are being ripped off royally.”

“I’ve seen jobs go for as much as double what they should be. Jobs that should be $300,000 to $400,000 are going for $600,000 or $700,000,” he said.

The contractor said boards would see four or five bids and “naturally assume that they are competitors, they’re aggressively bidding, they want the work,” he said. “You just don’t know what the market should be so you’re assuming the market will disclose a fair tender with sealed bids. But behind closed doors, all of the competitors are talking.”

He said his company doesn’t engage in bid rigging and will win jobs with honest low bids—but there is so much work to go around, he doesn’t know of all the tenders, let alone bid on all of them.

He is wary to warn others and go public with what he knows.

“I could be blacklisted. It’s a very difficult industry to get into if you’re a new player, it’s taken us many years to develop a good, honest, hardworking reputation,” he said. “And then there’s the actual fear of people put into a corner, when I’m accusing them of bid-rigging and fraud—desperate people will do desperate things. If their business and livelihood is crushed. I have a family.”

Part one
How contractors inflate their fees

Part two
“He talked a good game and gained everybody’s trust”

Part three
The mechanism of bidding fraud and kickbacks

Part four
What the law says

Full feature page: click here.