Company named in condo lawsuit declares bankruptcy
By Karen Kleiss, Edmonton JournalApril 21, 2011 3:04 AM
The private safety code inspection company named in the multimillion-dollar Penhorwood condominium lawsuit has declared bankruptcy and resumed business under a new name.
Alberta Permit Pro and 21 other defendants have been embroiled in a $4.1-million lawsuit with the Fort McMurray condo owners since 2007, but the case made headlines six weeks ago when 300 people were evacuated in the middle of the night due to structural and safety concerns.
Critics say Permit Pro’s reincarnation illustrates the inadequate government regulation of the inspection industry in the province.
“Home buyers have no confidence in this system, and one of the reasons … is because these guys can just go to a lawyer, change their name, and carry on, business as usual,” Liberal MLA Hugh MacDonald said Thursday.
“This system clearly doesn’t work. Instead of passing the buck and trying to shift responsibility off to someone else, this government has to admit their mistakes and recognize that privatization of inspections doesn’t work.”
Safety Codes agencies carry out safety codes inspections on behalf of municipalities. The companies that do the work must be accredited by the Safety Codes Council.
The Safety Codes Council of Alberta confirmed that Alberta Permit Pro operators cancelled the company’s provincial inspection accreditation on April 1, three weeks after the same operators registered a new corporation called Innovative Inspection Agency.
Now, the phone number on the Permit Pro website leads callers to Innovative.
Municipal Affairs Minister Hector Goudreau said safety codes inspection agencies operate under clear rules and regulations. He suggested that once a company has paid its dues, it should be free to operate in Alberta.
“The reason that we were having difficulties and (Permit Pro was) asked to leave was because they weren’t following necessarily what they were supposed to do,” Goudreau said.
After learning the company had declared bankruptcy and the operators had set up a new company under another name, he said: “I guess we’ll have to watch that much closer. … We’ll just see what kind of performance they’ll provide.”
Goudreau said municipalities who hire the new agency "will have to be vigilant in terms of not getting caught up again in what they did a few years ago.
“If you’ve broken some rules and regulations and you’ve paid the price for having broken those rules and regulations, does that mean you can’t move at all in this province?”
Once the bankruptcy proceedings drain Permit Pro’s remaining assets, the people who run the business are no longer liable for financial damages assessed in lawsuits like the one filed by owners of Fort McMurray’s Penhorwood condos.
Since 2001, Alberta Permit Pro has been sued more than four dozen times, court records show.
Matthew Korobanik was the director of Permit Pro and is working as a consultant to Innovative director Richard Kerscher, who was himself the previous owner of Permit Pro.
Korobanik said Permit Pro was forced into bankruptcy and engaged in a long legal fight to try to stay solvent.
“We fought for one calendar year. We fought because we wanted to come out on the other side. We fought because we had a responsibility,” Korobanik said. “In no way did we declare bankruptcy to get out of all this.”
He said Innovative only offered to provide interim services for however long it took for the municipality to settle on who it would hire to continue the inspections in the region.
Gerald Baron, administrator of accreditation for Alberta’s Safety Codes Council, said the provincial Safety Codes Act gives the council the power to suspend and cancel accreditation. None of Alberta’s roughly 75 inspection agencies were sanctioned in 2010. Data for previous years was not available.
Baron said complaints typically boil down to a mistake by an individual inspector or a contract issue between the municipality and the inspection agency, he said.
“It’s a contract-management issue,” he said, adding he sometimes acts as mediator. “I can’t interfere in a contract you have with an agency.”
He said the only reason he would cancel an agency’s accreditation is if the applicants lied on the application form, and that even suspensions and reprimands are “very few and far between.”
Permit Pro’s accreditation was suspended in December 2008 when the company refused to hand over documents requested after an audit of the three largest inspection agencies in the province. The goal of the audit was to find out if the agencies had the money and staff to properly complete all the inspections they had been paid to do.
The company immediately appealed the suspension, which allowed it to continue doing business. The suspension was lifted the following year when the matter was resolved during the appeal hearing.
Neither the audit nor the inspection agency’s performance records are publicly available.
Innovative -the new company -was first accredited March 8. The Safety Codes Council has since received three complaints about it.
The Town of Wembly alleges Innovative Inspections took over its inspection contract from Alberta Permit Pro without the town’s approval. The Town of Sexmith and Vulcan County allege Innovative used municipal records that were open only to Alberta Permit Pro.
Korobanik said the complaints arose out of misunderstandings. Baron declined to comment because the matters are under investigation