Toronto city council has imposed a five-year ban on a major infrastructure contractor after an audit found the company deliberately overbilled the city by more than $1 million.
Councillors voted Tuesday to suspend Capital Sewer Services Inc., its parent company Capital Infrastructure Group, and all affiliated firms from doing business with the city — the maximum penalty allowed under Toronto’s supplier code of conduct. The decision bars the companies from bidding on new city contracts or renewing existing ones.
The suspension followed a staff recommendation that passed without debate. Mayor Olivia Chow said last week she fully supported the measure, calling it necessary to protect public trust.
“It sends a very clear signal that if you cheat, you’re going to be suspended and punished,” Chow said. “We’re not doing business with you.”
In a statement after the vote, Capital Infrastructure Group criticized the decision, calling it “deeply irresponsible” and warning that it puts hundreds of local jobs at risk. The company said it was disappointed with the outcome and is reviewing its legal options.
Capital and its affiliates have been among the city’s most significant sewer rehabilitation contractors. Over the past five years, Toronto awarded the companies 31 contracts worth approximately $220 million, including work on major projects such as the Dufferin sanitary trunk sewer improvement.
The city began investigating Capital in March 2024 after internal controls flagged billing concerns. Complaints were also submitted through the auditor general’s fraud hotline, alleging the company added markups to subcontractor quotes and billed the city inflated amounts through change orders.
Toronto temporarily suspended the companies earlier this year while the investigation was underway. A third-party audit later concluded Capital overbilled the city by about $1.1 million on the Dufferin project and identified other potential instances of inflated charges.
In one example cited in the audit, Capital submitted a quote to the city of roughly $1.3 million for subcontracted work. When the city sought a direct quote from the subcontractor for the same work, the estimate came back at approximately $470,000 — about $870,000 less.
The audit also found that a senior executive at Capital had negotiated a bonus tied to 2.25 per cent of the value of change orders, which city staff said could have encouraged fraudulent behaviour and should have been detected by the company.
City staff told council that the misconduct involved “clear breaches of the supplier code of conduct,” including overbilling, retaining overpayments, and submitting misleading or false information. They added the city remains concerned that additional overbilling may not yet have been identified.
The staff report emphasized that the suspension is intended not as punishment, but as a measure to protect public trust and ensure taxpayer funds are spent with integrity and accountability.
Capital has maintained that the overbilling stemmed from the actions of a single executive, who the company says was dismissed once the issue was discovered. The firm says it has strengthened internal controls, cooperated with the city’s investigation, and is committed to providing full restitution.
Appearing before council last week, Capital CEO David Beswick said the company had been a dependable city contractor for two decades and argued the misconduct did not reflect its values. He urged councillors to reduce the suspension to six months, warning a longer ban could jeopardize the livelihoods of 600 employees and disrupt essential services.
The International Union of Operating Engineers Local 793 also submitted a letter supporting Capital, cautioning that a five-year ban could leave 80 union members without work.
Earlier this year, the Region of York imposed a similar five-year suspension on Capital and its affiliated companies.