TORONTO—The Toronto Transit Commission is suing Manulife Financial for alleged negligence in connection with a benefits fraud scheme that first came to light three years ago.
To date, 170 TTC employees have been dismissed, retired or have resigned to avoid dismissal, and 10 former employees are facing criminal charges for their part in the alleged fraud.
In a statement of claim—filed in the Ontario Superior Court of Justice—the TTC alleges Manulife Financial did not have appropriate fraud management controls in place nor were there systems in place to detect and analyze unusual trends or patterns that might indicate fraud or abuse.
It maintains that Manulife breached its duties of care, which contributed to losses suffered by the TTC.
The TTC says it is seeking up to $5 million in reimbursement and damages.
The allegations in the statement of claim have not been proven in court.
Manulife spokesman Sean Pasternak said Sept. 21 that the company does not comment on active litigation, but added it “takes fraudulent insurance claims seriously.”
“Manulife works with policyholders, law enforcement and others in order to detect and prevent fraudulent activity for the benefit of our customers,” Pasternak said in an email.
The TTC began an investigation in 2014 following a tip to its “integrity line.”
The tip alleged receipts were being provided to employees by Healthy Fit, a health care products and service provider, where claim reimbursements were being made, but where no product or service (such as orthotics, compression stockings and sleeves) was obtained or where receipt amounts were inflated.
It was also alleged that Healthy Fit and the employee making improper claims would then share the money paid out by Manulife Financial.
Adam Smith, the proprietor of Healthy Fit, pleaded guilty this week to two counts of fraud over $5,000 and was sentenced to two years in prison.
The TTC said Thursday that investigators continue to interview employees as part of its own internal investigation.
In 2016, the TTC saw a reduction in benefit claim costs of almost $5 million over 2015, which the transit agency says reflects its continued success in bringing an end to improper benefits claims.
The statement of claim alleges the TTC has suffered losses due to “negligence and breach of contract” by Manulife.
The TTC alleges Manulife stated it had comprehensive systems and procedures in place to detect and prevent fraudulent benefits claims.
“Manulife employed incompetent managers, employees and contractors in connection with administration and operation of the systems and procedures so that such systems and procedures were inadequate in all of the circumstances for the purpose of preventing and detecting fraud,” the claim alleges.