Winnipeg Free Press - ONLINE EDITION

Company pleads guilty in illegal kickback case linked to former CN Rail manager

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A Manitoba company headed up by a CN Rail manager took an illegal cash kickback in bogus "consulting fees" after awarding maintenance and construction contracts on behalf of CN.

And now, the company has been ordered to pay more than $100,000 in compensation, fines and costs after admitting to a rarely seen criminal charge of taking "secret commissions."

Randolph Wallack, acting as agent for and director of 5626146 Manitoba Ltd., pleaded guilty on the company's behalf in provincial court on Tuesday.

Wallack, once a CN manager, was fired after a $78,000 payment from a CN contractor to the numbered company on Aug. 19, 2010 came to light, Crown prosecutor Terry McComb said.

The kickback was discovered after CN accountants performed a routine financial review and noticed an "unusually large" amount of legitimate business the rail company was doing with St. Lazare-based Canwest Rail Services Inc.

A CN police probe uncovered that Canwest Rail had paid Wallack's company "consulting fees" between 2008 and 2010, McComb said.

"CN Police concluded that these payments were due to (the numbered company) being associated to Mr. Wallack," McComb told Judge Sandra Chapman.

In 2010, Wallack approved about 90 per cent of the contracts Canwest Rail received from CN, said McComb.

It amounted to about $11 million worth of work, involving a "huge" number of projects, McComb said.

Ties between Canwest Rail and the numbered company came to light after police searched Canwest's offices.

Officers obtained court production orders to allow them access to further documentation, Chapman heard.

"That's when it was determined that there was this financial trail," McComb said.

Canwest Rail officials acknowledged to investigators the $78,000 payment was made due to their business association with the numbered company.

Even though the payment was put down on paper as consulting-related fees, "there was no indication of services having been provided to Canwest," McComb said.

The repercussions of the case for CN were large, said McComb.

The company had to undertake an expensive and complex audit and also lost the use of a major service provider in Canwest Rail, she said.

Canwest previously pleaded guilty for its role in the case. The company was fined $20,000 on top of paying CN double that amount in restitution.

Wallack, 54, now lives in Saskatchewan and takes what happened very seriously, defence lawyer Josh Weinstein said.

The company's sentence was broken down into two parts: It will pay the $78,000 to CN within weeks, and a $23,000 fine-and-costs order within six months.

"To the extent that it can, it puts people back in the place that (they) should be," Weinstein said.

james.turner@freepress.mb.ca

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