Court documents detail alleged frauds orchestrated by former NorQuest IT manager

After NorQuest College fired Clarence Orleski, its technology infrastructure manager, in December 2012, an investigation uncovered what the college alleged were two separate fraud schemes that cost the college nearly $2 million in damages.

Court documents filed in support of seizing documents and electronic records, freezing assets, and for a civil lawsuit against Orleski and several other defendants, detail how the college, and its hired forensic accountants, believed the alleged frauds were organized and executed.

NorQuest hired Orleski in June 2007. In an affidavit, a senior NorQuest executive said Orleski had signing authority for purchases of $10,000 or less. But that authority later was raised to $25,000, and he occasionally had signing authority of $50,000 when he filled in as acting director of information technology.

Cobalt Business Systems began invoicing NorQuest in January 2007.

In March 2008, Orleski incorporated a numbered company - 1389388 Alberta Ltd. - of which he is the sole director.

Alleged 'kickback' scheme

Evangelos (Van) Tsiclas was the Cobalt salesman who dealt directly with Orleski. The college alleged Tsiclas and Orleski were close friends.

Tsiclas operated his own company called Evangelos Photography.

Court documents show that between July 2008 and December 2010 Cobalt Business Systems billed NorQuest more than $2.6 million.

A forensic accountant determined that 84 per cent of the invoices from July 2008 to December 2010 that he reviewed appeared to have been either unnecessary or inflated. The college's statement of claim alleged the Cobalt fraud cost the college nearly $1.5 million.

The college alleged Orleski orchestrated a "kickback" scheme in which his numbered company billed Tsiclas' photography company.

The photography company allegedly was in turn paid by Cobalt Data Systems, a sister company of Cobalt Business Systems. Both companies are owned by Fred Johannesen, who was Tsiclas' boss.

Between May 2008 and December 2010, Cobalt Data Systems appears to have paid Evangelos Photography $543,000.

From May 2008 to January 2011, Evangelos Photography paid Orleski's numbered company $476,526, for "consulting" services.

"I can confirm that the records do not indicate that the photography business was used for any ongoing business aside from a few small photography jobs that appear to have been for personal wedding photography," NorQuest's chief financial officer, Jill Matthew, wrote in an affidavit.

Matthew alleged the amounts paid from Cobalt Data Systems to Evangelos Photography appear to closely match the amounts paid from Evangelos Photography to Orleski's numbered company.

She detailed one example in which the payments exactly matched.

Matthew cited cheques which showed that on June 26, 2008, Cobalt Data Systems paid Evangelos Photography $18,039. A day later Evangelos Photography issued a cheque to Orleski's numbered company for the same amount.

In a statement of defence, both Cobalt companies and their owner Fred Johannesen denied all the allegations.

Second alleged fraud

Robert Taylor, a forensic accountant hired by NorQuest, stated in an affidavit that Evangelos Tsiclas appeared to be a first cousin to Paul Tziklas. An affidavit from a NorQuest executive claimed Tziklas appeared to be an air traffic controller.

In May 2009, Paul Tziklas incorporated Alcon Systems Ltd. and was its sole director. The college alleges that two-and-a-half weeks later, NorQuest began doing business with Alcon directly through Orleski, even though Alcon appeared to have had no previous history in the IT industry.

Alcon's business address appeared to be Tziklas' home in St. Albert. Its mailing address was a post office box at a UPS store in west Edmonton.

In an interview with CBC News, Evangelos Tsiclas confirmed Paul Tziklas is his first cousin. He said he asked his cousin to incorporate Alcon but he stressed his cousin had no knowledge of, or involvement in, Alcon's activities. There is nothing in the court record that shows Paul Tziklas benefited in any way from Alcon's activities.

Evangelos Tsiclas said he is sorry he got his cousin into legal trouble. In a brief interview, Paul Tziklas, an air traffic controller, also told CBC News he had no involvement in Alcon's activities other than incorporating the company at his cousin's request.

Alcon billed NorQuest a total of $717,000 between June 8, 2009 and July 24, 2012. The forensic accountant found 78 per cent of the transactions were overpaid or unnecessary.

"The total cost of the unnecessary or over-paid transactions was found to be approximately $334,000," an affidavit states, although NorQuest's statement of claim alleged the Alcon fraud cost the college nearly $435,000.

As was the case with Cobalt, Orleski's numbered company was found to have invoiced Alcon for "consulting" services. The invoices from Orleski's numbered company totalled $273,000 between July 2009 and July 2012.

"Orleski appeared to be billing Alcon for amounts that approximated the over-payments and unnecessary charges for products and services billed by Alcon to NorQuest," said an affidavit by Jeff Uhlich, NorQuest's now former human resources manager.

Uhlich reviewed the invoices from Orleski's numbered company to Alcon and noticed a pattern in the invoice numbers.

In one case, Alcon's invoices to NorQuest were numbered 2627 and 2625. The total of these two invoices was $27,596.

Orleski's numbered company billed Alcon the exact same amount - $27,596 - through invoice number 26272625, which is a combination of the two invoice numbers from Alcon: 2627 and 2625.

NorQuest sued Orleski, Evangelos Tsiclas, Fred Johannesen, Paul Tziklas, and all their associated companies. All, except Evangelos Tsiclas, Paul Tziklas and Alcon filed statements of defence in which they denied all the allegations. None of the allegations was proven in court.

It appears the case was quietly settled earlier this year and the court record doesn't show how much, if any, money the college recouped.

Orleski, through his lawyer, declined an interview request from CBC News.

"The matter as between NorQuest and our client is concluded, and the terms governing the conclusion are confidential," the lawyer wrote.

Johannesen also declined comment through his lawyer, who said the matter was resolved and included "obligations of confidentiality."

In a brief statement, NorQuest said it had settled its civil action against Orleski and the other defendants and was "very satisfied with the results.

"We are confident we have strong controls in place to protect public assets and confidential information," the statement said, adding that the Edmonton police are "involved."

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