Former AHS CEO's lawsuit alleges pressure to sign private surgery deals she believed were overpriced

The former CEO of Alberta Health Services has filed a $1.7-million wrongful dismissal lawsuit against AHS and the province.

Athana Mentzelopoulos claims she was fired because she'd launched an investigation and forensic audit into various contracts and was reassessing deals she had concluded were overpriced with private surgical companies she said had links to government officials.

The allegations by Mentzelopoulos about improprieties, high-level government interference in AHS, and the quashing of her probes have roiled the UCP government and led to a full investigation by the Alberta auditor general.

Premier Danielle Smith has insisted she wasn't personally involved in any wrongdoing and has defended Health Minister Adriana LaGrange against critics' demands she resign, as the premier and her team await what might be a lengthy probe by the provincial watchdog, an internal review by AHS and potentially an RCMP investigation.

Mentzelopoulos claims in her lawsuit that Alberta Surgical Group (ASG), an Edmonton private clinic with its contract up for renewal, was projected to exceed its contract by almost $3.5 million in billings and at the same time wasn't performing the number of surgeries required under the terms of its deal with AHS.

That same firm was charging rates that were higher than other private firms, and their contract included a provision to pay for two overnight stays per procedure, something that was at odds with clinical advice, according to the legal claim filed in Edmonton court on Wednesday.

Mentzelopoulos alleges that throughout 2024, multiple government officials applied "influence and pressure" on her to extend the ASG contract and sign other ones. These officials included Marshall Smith, who was Premier Danielle Smith's chief of staff until last fall.

Despite the concerns Mentzelopoulos raised, Health Minister Adriana LaGrange issued a minister's directive. This order removed AHS's power to negotiate private surgery contracts, and set out rates for surgical clinics that were pricier than in comparable contracts "and would lead to significantly increased costs to AHS — and potentially hundreds of millions in profits for the [facilities] owners," the lawsuit says.

The statement of claim also highlights concerns about the apparent close ties Marshall Smith had to Jitendra Prasad, a top official in AHS's procurement department who also had close ties with major contractors the health agency has dealt with. 

The lawsuit notes the email address Prasad had in November 2022 with MHCare Medical, the company that would sign a $70-million contract for children's pain medication with AHS the following month, and says the official may also have had financial arrangements with people involved in private surgical facilities.

A statement of defence has not yet been filed. The province has 20 days in which to do so.

On Jan. 7, weeks after an Alberta Health official instructed Mentzelopoulos to end her investigations into MHCare and private surgery clinics, LaGrange met with the AHS board and demanded the directors fire the CEO, the lawsuit claims.

The board refused, and Mentzelopoulos claims she was fired over Zoom the next day, by Andre Tremblay, the senior provincial health bureaucrat who would replace her as interim CEO.

The lawsuit also states that Tremblay ordered AHS staff to cancel a meeting that same week with the auditor general about the forensic audit and internal review that Mentzelopoulos had told the provincial watchdog about.

A few weeks after Mentzelopoulos's termination — and the board's alleged refusal to fire her — LaGrange ousted all AHS directors and appointed Tremblay as the agency's official administrator, or one-man board.

In a statement to CBC News, LaGrange said many of the allegations and claims in the lawsuit "are clearly false, while others will need to be investigated further" by the auditor general and as part of the government's internal review.

LaGrange said she will be filing a detailed statement of defence "in short order."

And she reiterated that leadership changes at AHS did not have anything to do with any investigations into private surgical facilities or other procurement, but were rather made as part of the massive restructuring of AHS and the health-care system.

Much of the lawsuit repeats allegations contained in a letter sent from Mentzelopoulos's lawyer to AHS after her termination in January, which was first reported by the Globe and Mail and later obtained by CBC News. But it also goes into further details on many aspects of the improprieties that the ex-CEO alleges took place within AHS and by the government officials pressuring her to finalize contracts and end her investigations.

Among the new revelations claimed in the lawsuit is that one former AHS employee involved in procurement had subsequently joined MHCare, and then obtained an ownership stake in private surgery clinics proposed in Red Deer and Lethbridge.

Also, those clinics' leaders did not fully disclose their corporate ownership, "leaving AHS officials in the dark about who owned the remaining 12 per cent interest," the document says.

ASG, the lawsuit states, had not won an AHS contracting process that ended in 2022, and yet it had reached a separate two-year agreement with the health agency "potentially as a result of lobbying by the Honourable Doug Horner," a former Alberta finance minister who is registered as a lobbyist for the company.

AHS has announced that it will freeze granting any new contracts to the companies that are now part of its own internal review into the issues Mentzelopoulos raised, though the health agency has not specified which firms this includes.

In her lawsuit, the former CEO says that Prasad was assigned to lead the government's negotiations with private surgery providers. Marshall Smith, the premier's aide, told her that Prasad was "his guy" and was at the Alberta Health ministry to ensure government could "get contracting right," the document alleges.

Mentzelopoulos explains in the document she was concerned Smith's links to Prasad would mean the procurement official would be taking direction from the premier's office and aides, even though AHS contracts were the responsibility of the agency and its CEO, not the top politicians.

Her lawsuit details a Sept. 21 call from Marshall Smith inquiring about negotiations on two chartered surgical centres slated for Red Deer and Lethbridge. After she explained the reasons for delays the premier's chief of staff allegedly remarked that the facilities' principals were "serious people — do not mess with them."

In a statement, Marshall Smith called the allegations "outrageous and false," without going into any detail about them. He added that he's "eager" to meet with the groups investigating this matter.

Mentzelopoulos's lawsuit notes that Smith had called her last summer to complain that "powerful people" were angry about an AHS paramedic named Nate Pike, whose webcast and social media account The Breakdown has been critical of the Smith government and who has posted often about the Turkish children's medication situation.

The premier's aide warned Mentzelopoulos that Pike was "your employee" and "you're going to look very bad" and there would be "consequences." The AHS leader replied she wouldn't fire Pike, but did urge other executives to speak to Pike about tweeting while at work.

There was other government pressure, including by deputy minister Tremblay, to terminate additional AHS employees who'd been critical of the government. To support this, a top aide to LaGrange had sent the CEO "a screenshot of the allegedly offensive tweet that had been 'liked' by one of these individuals."

While the investigations Mentzelopoulos had launched initially concerned only chartered surgical facilities, she expanded them late last year to include several years worth of contracts with MHCare, the importer of $70 million of child medication from Turkey — the vast majority of which has either never come to Canada or was never distributed to pharmacies or hospitals.

In the lawsuit, she says she grew concerned when Prasad, the negotiator of that contract, had drafted a response to media questions about it by making a knowably "false" claim that AHS didn't have a contract with MHCare for the pharmaceuticals.

Further inquiries led Mentzelopoulos to learn that AHS had purchased about $614 million in supplies and services from that Edmonton-based company and others owned by Sam Mraiche. As a result, Mentzelopoulos commissioned an external forensic audit into those contracts by Borden Ladner Gervais.

Mraiche, the CEO of MHCare, was the subject of heavy media scrutiny as owner of an Edmonton Oilers corporate box that had hosted several cabinet ministers. In the lawsuit, Mentzelopoulos alleges that Marshall Smith told her he "'would be taken care of for the rest of his life' somehow in relation to 'Sam,'" which she took to mean Mraiche.

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Premier Smith said Wednesday that for eight months, her government had been trying to obtain "any indication of wrongdoing" from Mentzelopoulos without any success, an argument similar to one LaGrange had made earlier in the week.

In the statement of claim, Mentzelopoulos states that the "so-called repeated requests for information apparently by 'the government'" never happened. The first official query for information came in early December, the document says.

She further says that "all reasonable efforts" were made to keep LaGrange and the health department updated as investigations progressed.