Manitoba company headed by former CN Rail manager fined for kickbacks

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.

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.

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

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.

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

"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.

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.