|Posted on February 16, 2013 at 1:05 PM|
Ottawa Has a huge variety of Box stores, retail mom and pop shops and contractors to choose from with regards to flooring products and services and with that overabundance of stores and contractors some questionable practices come to light. We have seen the good the bad and the real ugly in this industry that even us as contractors aren’t immune to their deceptions. Scammers, liars and just plain ignorant sales people are taking advantage of many people, who get caught up in the sale of these professionals, and yes they are professionals, they are professionals at the art of telling you what you want to hear for the soul purpose to make a dollar. Even the good intentional sales person can be a part of taken your money from you for various reasons. An article below are reasons why you need to ask questions and make sure you have a good feeling about the process...you need to trust in your instincts and beware and if you have the slightest bad feeling about the sale...then question
OTTAWA — Ottawa Community Housing was awarded more than $880,000 in damages Wednesday when a judge ruled that a carpet company falsely inflated invoices and provided sub-standard material and installation in its units.
Argos Carpets, its owner and a sales employee conducted “an intentional scheme, covered up under false invoices, and carried out over a significant period,” after receiving a contract in 2004 to install carpeting and underpad for the city-owned social housing provider, Ontario Superior Court Justice Douglas Rutherford ruled.
The ruling ends a lengthy civil case in which OCH sought damages from Argos and its personnel, and the company argued a counterclaim for money that OCH withheld after management found problems with invoices.
Rutherford found “a high degree of blameworthiness” in the actions of the defendants, but also stated that Argos is entitled to about $141,000 that OCH held back.
“There is no doubt in my mind that the false invoice scheme of Argos Carpets amounted to fraud,” the judge wrote.
“The false invoicing was intended to induce, and succeeded in inducing OCHC to pay more for the carpet installations than the contract called for.”
The 29-page decision also suggests that Argos had won its contract with an unreasonably low bid, and that OCH managers didn’t do a thorough job of checking invoices during a period before the problems were uncovered.
In 2004, Argos won a one-year contract to supply and install carpeting and underpad in four districts overseen by OCH, after submitting the lowest of five bids. The contract was renewed in 2005, but a new manager began to go through the books late that year, the decision says.
The manager, David Loveridge, knew that OCH didn’t have floor plans for many of its units (despite that requirement being written into the contract), and that could make it difficult for managers to review and approve invoices. Invoices Loveridge inspected also didn’t contain information about the cost per square yard and how much carpet was installed, the decision states.
Loveridge sent the documents back to be filled out, and the details were included from then on, but he “suspected that invoices were showing more carpet installed than was possible, given the unit dimensions,” according to the decision.
After investigating further, OCH stopped issuing work orders to the company in May 2006 and withheld payment of invoices for carpet and other flooring work within and outside the scope of that contract.
Robert Grimes, the main sales contact for Argos, provided evidence that company owner Peter Foustanellas wouldn’t allow a job to go out unless it resulted in at least a 25-per-cent gross profit, the decision states, and “the invoices actually sent to OCHC charged for inflated carpet volumes, achieving profit margins between 25 per cent and 40 per cent as opposed to the modest 10 per cent to 15 per cent the contract pricing would achieve if followed.”
Foustanellas was named as a defendant in the case, along with Grimes, who died during the trial.
Grimes “was fully aware of the fraudulent manner in which OCHC was being induced to pay,” Rutherford stated, while Foustanellas “was aware of and acquiescent in the falsely inflated invoicing scheme resulting in the overcharging of OCHC.”
“While I am sure Mr. Foustanellas would argue that it was the only way to make any profitable sense of a contract price that was simply too low, he has to know that it was his unreasonably low bid that allowed Argos Carpets to secure the contract over the more realistic bids of his competitors,” the decision states.
A carpeting consultant retained by OCH also found various problems with how carpets were installed and their quality in relation to contract specifications, the decision states.
Foustanellas, a philanthropist who has donated millions of dollars to area hospitals, hadn’t spoken to his lawyer or seen the ruling when reached by the Citizen on Wednesday but said he planned to appeal.
Until Loveridge started to inspect the invoices, it seems managers at all levels approved ones that lacked important details, the ruling suggests, while there was no evidence that staff “verified substantial performance under the contract.
“As long as there appeared to be new carpeting in a unit, neither the quantity nor the quality of the materials or of the installation was ever questioned,” it states.
And before management looked into the matter “and shook the dust out of it, the manner in which the carpeting contracting was entered into and then managed gives the strong impression of poor and careless administration, rather than of intrinsic vulnerability,” Rutherford stated.
Councillor Steve Desroches, who chairs the OCH board of directors, said “each and every year since that we are strengthening our procurement practices.”
The overall decision is “a victory for the taxpayer,” said Desroches, who wasn’t on the board during the time in question.
“I think it sends a very strong signal that we’re going to take action if the taxpayer’s being ripped off.”
OCH overpaid Argos $633,844 that it should receive in compensatory damages for a breach of contract and fraudulent misrepresentation, Rutherford decided. He also awarded $250,000 in punitive damages.
“It should be borne in mind that not only did Argos Carpets specifically harm OCHC, its unreasonably low bids kept its competitors from trading with OCHC and injured competition in the marketplace as well,” the judge wrote.
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Categories: Flooring Scams...Buyers Beware.