A CN train passes by Dorval station in Montreal, January 23, 2012.Christinne Muschi/The Globe and Mail
Canadian National Railway Co. denied a report that alleges the Montreal-based freight carrier has overcharged Ontario taxpayers for construction work for the past 15 years.
The story by Southern Investigative Reporting Foundation also alleged CN misreported train departures and arrivals in order to achieve best-in-class efficiency measures that are closely watched by customers and investors.
A CN spokesman denied the allegations. "They are based on information provided by former employees who were terminated for fraud, including misappropriation of funds and falsifying documents, and are subject to ongoing litigation by CN," CN's Patrick Waldron said in an e-mail.
The Southern Investigative Reporting Foundation, which is funded by donations, said it relied on CN and contractor documents, interviews with current and former CN employees and lawsuit filings to write the story. Among the findings alleged:
- CN charged Metrolinx $10-million to build one mile of track, a 900-per-cent markup.
- CN improved the track around one of its Ontario yards, enabling freight trains to gain speed more quickly, and billed the project to Metrolinx, which operates Go Transit commuter train and bus service in the Greater Toronto Area and Hamilton.
- CN misreported train performance using so-called ghost tracks, recording late trains as on-time by, among other tactics, reporting their arrival on yard tracks that did not exist.
Some of the investigation's findings were backed by a recent report from Ontario's auditor-general.
The auditor-general found Metrolinx, the public transit arm of Ontario's Ministry of Transportation, has shoddy accounting practices and does not closely watch the construction charges filed by CN or Canadian Pacific Railway Ltd.
Much of Metrolinx track runs on land owned by CN, and to a lesser degree, CP, meaning either railway is the sole bidder on any work on their respective property. Over the past five years, Metrolinx has paid a total of $725-million to the railways, or 18 per cent of its construction budget, the auditor-general's report said.
"Metrolinx pays CN and CP excessive mark-up rates" for labour and track, said the report of auditor-general Bonnie Lysyk, who noted that CN on at least one occasion installed used equipment but charged for new.
In response to the auditor-general's report, Metrolinx said it would negotiate for the right to audit construction contracts and start assessing the amounts charged by the railways.
CN's Mr. Waldron said the auditor-general's report contained "several erroneous findings," and the company was not given a chance to respond before the report's release.
"CN is dedicated to transparency, fairness, accountability and the highest ethical standards of integrity in all its contracts and commercial agreements," Mr. Waldron said. "The projects we have partnered on utilize rigorous construction management processes covering project specifications and budgets to deliver quality work with strict oversight."
The auditor-general singled out CP for not providing any details of its construction charges.
"We employ best practices and industry standards when it comes to transparency and accuracy when dealing with customers," a CP spokesman said on Tuesday.