For years, hundreds of TTC staff scammed the employee health care plan and pocketed millions. The true story of the fraud, the investigation, and the lives left in ruins

Working for the TTC is a sturdy job, with good pay. Streetcar, subway and bus drivers start at $26 an hour, get bumped to $29 after a year, and by the end of year two make $34, which works out to about $70,000 a year. Many drivers, like a guy I’ll call Alfonso (he asked me to disguise his real name for reasons that will become clear), are drawn to the work because of the salary and the security. Alfonso was born in the Caribbean in the early 1980s and moved to Scarborough when he was 12. By the time he was 26, he had a wife and a small condo, and they’d soon welcome a baby girl. He gave up a job as a supply chain management specialist in an office block in Brampton to be a bus driver for the TTC. Sunny and affable, he loved driving and talking to people, and figured the job suited him much better.

But like any job, there were drawbacks. New hires got the worst shifts, usually nights, which threw their sleep patterns and family lives into disarray. The TTC, the saying went, held its employees hostage for the first 10 years. Cameras monitored nearly everything they did, and Alfonso was careful to obey the rules. If he found a $5 bill on the floor of his bus, he’d hold it up to the camera and drop it into the fare box in a kabuki of propriety. The pressure to be on schedule was immense, and not just from the supervisors, who hectored drivers for running late, but also from passengers, whose moods palpably soured if a driver ran even two minutes late. Many times a day, disgruntled riders would swear at Alfonso, give him the finger or try to provoke him. Alfonso never took the bait: he was recognized at least twice by his supervisor when riders wrote in commending him for his work.

What made the grief and grind more bearable was a generous benefits package. Whereas most private sector insurance is worth around $2,000 per year, the TTC plan, which was administered by Manulife, was worth nearly $10,000. Employees would pay up front and submit their claims to Manulife, which would reimburse them, and then the TTC would reimburse Manulife and pay an administration fee. In other words, Toronto taxpayers were ultimately funding the plan. And it covered a wide range of medical and therapeutic services that OHIP didn’t: prescription drugs, massages, semi-private hospital rooms, laser eye surgery, alcohol and drug treatment, $300 to help employees quit smoking, $1,000 a year for hearing aids and their batteries. It also provided coverage for compression sleeves—which are prescribed for everything from deep vein thrombosis to varicose veins—plus orthotics and orthopedic shoes. As long as a qualified doctor, surgeon, chiropractor, chiropodist or podiatrist wrote a prescription, beneficiaries were entitled to a new set of compression sleeves, orthotics and orthopedic shoes every year until retirement.

The plan was so robust, so generous, that many TTC employees grew to view it as an opportunity to wring more money out of their employer. Among those people, the name Adam Smith travelled like a speakeasy password. Smith operated an orthotics clinic called Healthy Fit, which sold orthopedic devices, including knee, ankle, wrist and elbow braces; compression arm sleeves and stockings; orthopedic shoes; and orthotics. But what made Smith’s operation different was that when TTC employees bought stuff from him, they made money, too.

One day at work, Alfonso noticed the shoes of a fellow driver—black leather orthopedic shoes that paired handsomely with their navy blue uniforms. Alfonso asked where he’d bought them. “Go to Healthy Fit,” the colleague said. “Go see Adam. His deal is the best.”

Adam Smith, who shares his name with the father of capitalism, is handsome and tall, with a full head of auburn hair and a trim beard. He is playful, funny, self-deprecating—he’s a fan of Seinfeld—and a devoted father to his two children. Smith was married to an occupational therapist, and the couple held a half-million-dollar mortgage on their two-storey home in Mississauga. The Smiths had owned and operated Healthy Fit since September 2010. For a time, they operated a clinic in Mississauga, but their flagship location was at 333 Wilson Avenue, the type of concrete medical arts building that manages to be both brutal and garish, with windows tinted rose gold and a marble lobby crowned with a filigree chandelier. The building is down the street from the Toronto Transit Commission’s enormous Wilson Yard, the hub that services the Yonge-University line’s subway cars. Over time, TTC workers flocked there by the hundreds, and by 2011 Smith was reporting his annual income as $192,285.

In 2014, Alfonso decided to pay Healthy Fit a visit. He didn’t have any foot problems, but he was using his feet to do his job, and it said right there in his benefits brochure that orthopedic shoes were covered. He called the clinic, but before the receptionist would schedule an appointment, Alfonso had to say who had referred him.

On the day of his appointment, Alfonso took the elevator up to Healthy Fit. Taped to the door, a piece of paper read, “Please Make Sure You Pay For Parking. Thank You : ) .” Through the door, a young administrative assistant sat beneath a Healthy Fit sign. A mannequin’s leg modelling a compression sock sat on the counter, and a rack of orthopedic shoes revolved slowly next to it. Some patients had brought their kids, who were playing in the waiting room. Everything looked so legitimate.

When Alfonso’s name was called, he was ushered into an office, where Smith launched into his pitch without even asking Alfonso what his symptoms were. He tried to sell Alfonso on orthotics, then compression sleeves, orthopedic socks, a wristband and a knee brace. All Alfonso really wanted was the shoes. “My process works the same as everybody else’s,” Alfonso recalls Smith saying. “The only difference with me is that instead of giving you one or two pairs of shoes, I’ll give you cash.”

“Cash is never really a good thing,” Alfonso thought, an alarm ringing in his head. But he’d been to a number of vendors who sold products covered by his benefits, and each offered some incentive to undercut competitors. He’d seen a door-to-door doctor who threw in Nikes and Timberlands with an orthotics purchase, then submitted claims on Alfonso’s behalf. No one ever called Alfonso on it, and he figured there was no real victim. Plus, hundreds of other TTC employees were Smith’s clients. If Manulife was approving all the claims, he figured, how could it be illegal?

Alfonso agreed to buy two sets of orthotics and orthopedic shoes, one for himself, the other for his wife, who was also covered under his plan. The chiropodist fit him right there on-site, asking a few quick questions and performing a cursory gait analysis. Alfonso got the products and paid Smith $1,500, which Smith said would cover the cost of all the items—though Alfonso says he had no idea what the true value of those items really was. He signed the forms and trusted Smith to fill out the rest. Manulife soon reimbursed Alfonso for the $1,500, and a few days later, Smith e-transferred Alfonso $500 more.

Smith’s scheme was as risky as it was simple. He was selling equipment that his customers didn’t need, wouldn’t receive or paid too much for, and then he’d split the profits with them, usually 60 per cent for the TTC employee, the rest for him. The scam required the complicity of a vast network of stakeholders—corrupt medical professionals and as many as 725 transit employees like Alfonso. But Smith had a system to minimize the chances of getting caught. Since customers had to be referred, country-club style, anyone walking through the door was ostensibly aware that they were in it together.

Smith had considered the other angles, too. To make the paper trail appear legitimate, he created fake receipts, which he attached to the claim. If the patient required a prescription, Smith would send them to a number of pre-approved doctors and chiropodists. If customers couldn’t afford to pay up front—which was often, especially for high-volume orders—Smith would hook them up with a financing company that could lend the money quickly.

That company was called S&S Executive Services, and it was run by his father, David Smith—the S’s most likely stood for Smith and Smith. David was also involved in provincial politics as the chief financial officer for the 2011 re-election campaign of Charles Sousa, now Ontario’s finance minister. S&S’s main business was providing financial and marketing support to film and television producers. But on the side, David loaned money to TTC employees to spend at his son’s clinic and would collect interest on it. He’d make his son’s clients sign promissory notes, so if they failed to repay the loan, S&S could start debt recovery proceedings against them, and even garnish their wages.

Smith was far from a pioneer in his craft. Health care fraud is epidemic in Canada. According to the Canadian Health Care Anti-Fraud Association, a watchdog organization that was subsumed by the Canadian Life and Health Insurance Association a few years ago, for every $10 spent on healing a patient, anywhere from 20 cents to one dollar is lost to corruption. Canadians spend around $200 billion every year on health care—70 per cent in the public system and 30 per cent in the private sector. Insurance fraud, in other words, is a $20-billion industry in Canada. And besides the immediate financial loss, benefits fraud also inflates insurance premiums as big companies try to recoup lost revenue.

Benefits fraud requires the participation of patients—but not always knowingly. It’s all too common for sketchy providers to prey on the ignorance and naïveté of their customers. In 2011, a group of medical practitioners in Mississauga exploited recently landed immigrants who were unfamiliar with the Canadian health care system. They convinced newcomers to hand over their login information for their insurer’s website, which allowed them to steal the reimbursements.

Other patients are willing collaborators, and a fraudster’s scheming is bound only by his inventiveness. Because many insurance plans provide for unlimited lenses, some unscrupulous employees buy designer sunglasses and then bill insurers for prescription glasses. Some scammers are brazen enough to bill insurance companies for the services of prostitutes in massage parlours, claiming to insurers that those treatments are therapeutic.

In a 2013 U.S. survey by the global management consultancy Accenture, nearly a quarter of respondents said it was acceptable to commit insurance fraud. Ten per cent said it was okay to submit a fraudulent claim for services that were never rendered. Smith’s scam, in other words, was all too typical. He was enabled in part by a regulatory blind spot: in Ontario, manufacturers of orthotics don’t need government approval. In Quebec, where government approval is required, there are half as many orthotics claims per capita.

Executives at the TTC had been aware of a problem with their orthotic and orthopedic benefits claims since as early as the winter of 2007, three years before Healthy Fit was founded. Management approached the transit union’s Local 113 with concerns that orthotic clinics were offering TTC employees cash vouchers as kickbacks for their patronage. Union executives suggested that the TTC issue a warning to their workers about such incentives.

Three years later, in early 2010, TTC management called a meeting with the executive vice-president of the union, Manny Sforza. According to Sforza, they wanted to address employees’ use of orthotic and orthopedic benefits. They were concerned that a disproportionately high number of employees were submitting claims. (Those senior executives say they have no recollection of the meeting.) Sforza says he suggested they implement a “preferred providers” list of four or five vetted clinics, and that all transactions be conducted electronically. According to Sforza, the senior executives scuttled the idea as anti–free market and instead instructed him to tell his workers to “be cautious.” TTC executives also began putting up posters at TTC offices reminding employees about insurance fraud.

By 2013, little had changed, except for an anonymous tip line called Integrity, which the TTC executive established to collect allegations of illegal or unethical behaviour by its employees. On April 2, 2014, at 1:13 p.m., a tip came through.

“I would like to report this particular organization, which is called Healthy Fit,” the anonymous whistle-blower said. “The director’s name is Adam Smith. Around 90 per cent of the TTC employees get their orthopedic, custom footwear through this organization. This clinic is fraudulent.” Twelve days later, another tip came through in an email to Manulife. One of the whistle-blowers said that Adam Smith was an old hand at this sort of scam. He wasn’t the first or only perpetrator, but he’d industrialized a business model that to that point had been operated mostly by mom-and-pop outfits.

The investigative unit of the TTC whirled into action. A staff sergeant was appointed to lead an internal investigation into the allegations and reached out to the director of claims fraud risk management at Manulife, and the two organizations teamed up. But, as it turned out, Manulife had failed to record the names of the vendors on individual claims. In other words, Healthy Fit’s name wasn’t on any of the fraudulent claims. The TTC had 14,000 employees, and Manulife’s investigators couldn’t realistically go through all of their records to reconstruct Healthy Fit’s chicanery. One of the whistle-blowers had a smart idea: “The best way to catch Adam Smith is to pose as an employee of the TTC and say you heard about the deal he offers to its workers.”

And so the Toronto Transit Commission and Manulife insurance started plotting a sting. Manulife hired a private investigation firm, Investigators Group, to infiltrate Healthy Fit. Investigators Group, which specializes in insurance fraud, put three of their PIs on the case, and the investigators were given a crash course in how to pass as TTC employees. They were each given a uniform, credentials, a badge and a benefits card. They learned the lingo, how to gossip and how to gripe.

One of the PIs was a 22-year-old Albanian-Canadian woman named Gloria Alla. Her cover story was that she was a driver who’d only been on the job since the winter. And though Alla was using her real name, she had all the fake paperwork she needed to pass as a TTC employee.

Alla first went to Healthy Fit on July 11, 2014, but Smith was on vacation in Edmonton for his wife’s family reunion. A chiropodist named Dominador Tomines saw her and made a foam cast of her foot. On her way out, the receptionist said that Smith would give her a call when he came back, to let her know when the orthotics were ready. Nearly two weeks later, he called.

“I don’t think we’ve met before,” Smith cautiously probed. “You work for the TTC right?”

“Yes,” Alla said. “I work for the TTC.”

“Okay. Not a problem. And you said you were referred to us?”

“Yes, one of my co-workers referred me to you,” Alla said.

“What’s her name?” Smith asked.

“Not sure, to be honest. I met her on my route. She was on her way home and we were talking about it. I think her name may have been May or Mary.”

“Okay,” Smith said. “Just see if you can find out the name of the person who referred you.” Once she did that, she could come in and pick up her orthotics.

Alla went back to Healthy Fit at the beginning of August, and once past reception, she saw Smith walk in alongside a TTC employee. He walked up to Alla and introduced himself.

“Hi, I’m Adam,” Smith said. “I think we talked on the phone last week.”

“Hi, I’m Gloria. Yes, we did.”

“What accent is that?” he asked, as he led her into a room.

“Albanian.”

“Who referred you to me?” he asked her again.

“I think her name was May. Mary? Maria….”

“I see,” Smith said. He couldn’t have known, but his entire future turned on what he’d say next. He bit: “I’m just going to write down basically a menu of services that you have available to you, and then you go for whatever you want to go for,” he said. As he’d done with Alfonso, Smith tried to sell her orthotics, plus shoes she didn’t need and would never receive. Trying to sell her the compression socks, he said, “Okay, let me show off my beautiful legs here,” pulling up his pant leg. “I get these ugly spider veins. I don’t know if you get these yet.” He tried to sell her a knee brace. “They go for $1,800. If you get the knee brace, you also get around $900,” he said. “So it’s funny—some of your co-workers, friends of mine, they say: ‘Well, shit—I got two legs, so I can get two knee braces!’ ” Alla agreed to the brace and the socks, but for both she’d need a doctor to sign a prescription. “Can I go in to a walk-in clinic?” she asked. “Yes, you can,” he said, “but sometimes it’s like the Soup Nazi—no socks for you! No sleeves for you! I do have a friend who’s also a doctor and can get you one.” His friend was a doctor who had a clinic in a basement unit on Weston Road, and if she mentioned Smith’s name, he could hook her up.

Smith pulled out the Manulife claim forms. “Okay, I have to put you to work a little bit,” he said. He wanted her handwriting on the claim form, not his. He sat beside Alla and told her exactly what to write. “Your plan is 86678,” he told her, and she wrote it down. “And this is your badge number,” he said, pointing to the blank line on the form. “Okay,” she said, “let me check my card because I can’t remember it.”

“If you’re a new employee it should start with a seven,” Smith told her.

But it didn’t. The TTC sergeant had given her badge number 30945, the number of someone who would have been working at the TTC for years, not a 22-year-old who’d been on the job only seven months. “Okay. Hmm. This is it, right?” she asked, handing her badge to Smith.

“It is…” Smith said, taking a closer look. “How come your number is so low?” he asked. “How long have you been working with the TTC?”

“I just started around December, January.”

Smith went quiet for almost a minute. It didn’t make any sense. Who was this woman? Who had referred her? He was somewhere way off, not a saying a word.

Finally he asked: “Who did you say referred you again?”

“May, Mary, Maria…something like that.”

“Okay,” he said. He would trust her. He told Alla to sign her name. Then he could file the claim for her, and they’d both be a little bit richer.

“If anyone asks you,” he added as he left for another client, “you have to say I gave you the shoes.”

Alla soon referred a second colleague, who corroborated her report, and the Toronto Police Service began a parallel investigation, tipped off by the TTC. They sicced Canada’s financial intelligence agency, FINTRAC (which is short for the Financial Transactions and Reports Analysis Centre of Canada) on Healthy Fit. FINTRAC has a mandate to detect, prevent and deter money laundering and the financing of terrorism. Their investigators can obtain the power to access criminal background databases and arrest records. They pored over the financial records of Healthy Fit, plus those of Smith, his wife and S&S Executive Services.

Smith’s problem was that he was too good at his scam. All told, as much as $6.9 million in TTC claims had flowed through Healthy Fit’s bank account, most of it bogus. He was sitting on a mountain of dough, but he couldn’t easily live off it. Every time the Healthy Fit account swelled close to $130,000, he’d transfer some of the money into his wife’s account, and then withdraw the remaining tens of thousands of dollars as cash. But Canada tightened its anti–money laundering rules after 9/11, making it harder for criminals to use the cash proceeds of their crimes to live lavishly. Today, purchases for $10,000 or more cannot be made in cash without the salesperson submitting a notice to FINTRAC. Even depositing $10,000 or more into a bank account raises red flags.

So Smith needed to move the cash in ways he thought were safe. He bought $76,840 worth of diamonds from a GTA-based dealer—diamonds are a favoured financial unit among money launderers, because they’re light and portable, and don’t come with serial numbers. In one instance, he moved $100,000 to his wife using a company that was owned by his accountant’s partner, to pay down their first mortgage on their house before securing a second, cheaper one. In a series of additional transactions, he transferred $300,000 the same way. Unbeknownst to the Smiths, FINTRAC investigators were watching their every move.

On July 21, 2015, police arrested Smith on his way into the office, handcuffed him and transported him for processing, and arrested and charged his two receptionists, although those charges were later withdrawn. Police searched the clinic, seizing hundreds of unclaimed medical devices, documents and other evidence.

The Crown charged Smith with one count of fraud over $5,000 and laundering the proceeds of crime, then later added conspiracy to commit an indictable offence and another fraud over $5,000 charge. When Smith made bail, one of the conditions was that he wasn’t allowed to deal with any asset worth more than $1,000 without notifying police.

Of the 725 TTC employees who used Healthy Fit, the police pursued charges against those with the most compelling evidence and the highest number of claims submitted. Ten former TTC employees are facing criminal charges. In total, 223 TTC employees have been fired, or have resigned or retired early to avoid being fired. Sources close to the investigation suggest that city employees from other divisions patronized Healthy Fit, too.

While Smith’s case worked its way through the courts, his family suffered financial disaster. When Healthy Fit closed, they lost their source of income. In late September, as the summer broke and the city eased into autumn, Smith made a deal with the Crown, pleading guilty to the two counts of fraud over $5,000, though the amount of money he’d helped steal was at least 1,000 times that. The TTC also sued Smith and his wife in civil court, and the court ordered that all of his family’s assets and property, including the house, be seized or frozen. The TTC then sued Manulife, their investigative partner, claiming that it was negligent in not catching a scam like Smith’s sooner. That case is still before the courts. Manulife denies the allegations, saying they are without merit. No charges were ever brought against Smith’s father, David.

Smith’s on-site chiropodist, Tomines, admitted his guilt in a professional disciplinary hearing, claiming responsibility for over $1 million worth of mainly TTC claims, which, at $100 a prescription, netted Tomines $200,000. He had his certificate of registration revoked. The adjudicator stated in his finding: “You have brought discredit to the profession, and to yourself. Public confidence in this profession has been put in jeopardy.”

At Smith’s sentencing, his lawyer argued that his business had started as a legitimate enterprise, but that corruption set in like a slow, insidious rot, and that Manulife’s negligence encouraged, even emboldened Smith and his TTC clients to be more crooked than they ever might have been. Smith’s lawyer argued that it was the system that was to blame, not just his client—aided and abetted by the entitled, aggrieved, often oblivious TTC workers, the insurance staff asleep at the switch, the doctors who wrote the prescriptions. The TTC workers’ union made a similar argument in arbitrations, stating that their leaders had tried to warn management back in 2007 but were rebuffed. It’s an unsettling thought—that Smith himself, and his innumerable customers, saw in his apparent impunity his legitimacy and behaved accordingly.

Smith pleaded guilty and was sentenced to two years in a federal penitentiary, plus three years of probation, and last fall he left his bankrupt family, put on his jumpsuit and went behind bars at Beaver Creek in Gravenhurst.

As for Alfonso, who was so hopeful about driving and so afraid of being accused of stealing a $5 bill, when his supervisor met him unannounced on his route in the summer of 2016, he figured he was being given another commendation for his good work. Instead, he was told he was under investigation for having pocketed $500 from Healthy Fit. He testified before TTC investigators that he had no idea that Healthy Fit was a scam; weeks later, he was fired. Not long after he told his wife he’d been fired, she left him. His daughter was only three. I believe Alfonso when he says he thought he did nothing wrong by being a customer of Healthy Fit—that $500 was just the free market at work, and besides, no one around him was getting in trouble for it.

Alfonso needed a new job, and he turned again to his love for the open road—which might yet make him happy—and the people who travel it. The same day he was fired from the TTC, he signed up to drive for Uber.

This story originally appeared in Toronto Life magazine. To subscribe, for just $29.95 a year, click here.