Jekyll and Hyde

Posted on Tuesday, November 18, 2008
Written by Carly Yoshida-Butryn

On March 7, 2007 Katerina Petaroudas approached her boss at the Rouge Valley Health System to tell him that something fishy was going on with the finances in the mental health program.

Petaroudas, a financial analyst for Rouge Valley, had noticed that the Scarborough hospital operator had paid over $200,000 to a community organization named Scarborough-York Mobile Rehabilitation (SMR), which didn’t appear to exist.

Her boss Lou Michelutti, then director of finance for Rouge Valley, did some more digging and couldn’t find any evidence that SMR had provided any services for the hospital operator or that the payments had been approved. He discovered that Rouge Valley had paid tens of thousands annually to another community group, Delisle Youth Services, for services that were never received. In total, it appeared the two charities had billed Rouge Valley over $2 million for non-existant services.

Michelutti meticulously traced the paper trail back to 1999. It led him to two men: Ryerson professor Sheldon Reinsilber, the former executive director of Delisle Youth Services and SMR, and Uwe Marshner, the general manager for the mental health program with Rouge Valley.

In the year and a half since the accountants uncovered the alleged fraud, Rouge Valley has sued the two men for $2.7 million, accusing them of a massive money-laundering scheme that apparently went undetected for eight years.

Marshner has lost his house and his car in the lawsuit and, until recently, virtually disappeared, leaving his family behind.

Reinsilber says he is innocent and Marshner duped him into joining the scheme. He stands to lose everything — including his career and reputation as a well-respected social worker and professor. Although he hopes to have the issue resolved in the new year, his lawyer says it could take over a year to untangle the whole mess.

None of the allegations have been proven in court, but if any of them are true, it would amount to one of Toronto’s largest and most bizarre fraud cases in recent memory.

Sheldon Reinsilber looks like the kind of man who plays catch with his grandkids on Sunday afternoons at the park. He has two cardboard boxes decorated with Christmas wrapping paper inside his office for people to make donations to help unwed mothers. A photo of his grandchildren is taped to his door. His silver hair and soft-spoken voice make him an approachable figure in the School of Child and Youth Care at Ryerson, where he works as the student affairs and internship coordinator.

He worked for Delisle from 1973 to 2003, taught part time at George Brown College and has an award for commitment and service to Ryerson up in his office.

He first met Marshner when they worked for different hospitals in the same clinic. “We were friendly,” he says. “But we didn’t double date.”

According to an affidavit by Michelutti, sometime in 1999, they concocted a scheme to defraud Rouge Valley of millions. Bank statements show that Delisle would bill Rouge Valley for services two or three times a month, usually for $9,900. Marshner would sign off on the payment to Delisle, which Reinsilber would deposit into the Delisle bank account. He then would sign a $9,000 payable cheque to Marshner and withdraw $890 in cash. Delisle never provided anything to Rouge Valley in exchange for the money.

During the time of the alleged scheme, Marshner did well for himself. He and his wife owned a palatial house in Scarborough near Rouge Valley Hospital, overlooking Colonel Danforth Park.

In 2003, Reinsilber left Delisle and founded SMR. The same pattern of invoices continued with the new organization, even though the charity never did any work (the professor says he registered the group and set up a bank account for it, but never got around to doing any social work with it). From 1999 to 2007, Rouge Valley received and paid 218 invoices from Delisle and SMR.

Finally, in the late winter of 2007, Petaroudas noticed that something wasn’t right.

Invoices in the Rouge Valley accounts payable file showed that SMR claimed to be an organization associated with Delisle and the United Way. But when Petaroudas tried to call SMR with the phone number on the invoices, the person at the other end identified the business as “MSR,” a computer software company. Even after she scoured the Internet for another telephone number or address, she could not find a location for SMR. She couldn’t find any evidence that SMR was even a real charity.

When Michelutti confronted Marshner with these allegations on March 8, 2007, he reassured his colleagues that there was an explanation, and he could provide proof that the services Rouge Valley was paying for had in fact been performed.
On March 27, he presented a photocopied report that appeared to have been written and signed by Dr. Steve Fishman, the Chief of psychiatry at Rouge Valley. In the report, Fishman wrote that he visited a family, only identified as “Family One,” and confirmed that they had received daily care for their disabled children from two child care workers since 2000, funded by the money Rouge Valley was paying to Delisle and SMR.

But at a later meeting, Michelutti was told that Marshner had never provided contact information for Family One to Fishman, and he had never met with them. In fact, he had never written or signed the report that Marshner presented, he said.

The plot was unraveling. And things were only going to get worse for Marshner. Last October, he failed to file a defence in the lawsuit, and he was ordered to pay a $2 million penalty.
According to Michelutti’s affidavit, Marshner admitted that SMR was a sham and that he had forged the SMR and Delisle invoices. But the long legal process of pretrial motions is still underway.

Reinsilber met with Marshner and Michelutti on March 21 and protested his innocence. He said that Marshner told him Rouge Valley was going to give him money to hire workers to provide home care to disabled children, but that the hospital operator needed to pass the money through a different social agency. He said Marshner told him this was standard procedure, and that the whole thing has been authorized by his superiors at Rouge Valley.

Reinsilber admitted to cashing the Rouge Valley cheques and transferring the funds to Marshner, but said he had nothing to do with issuing the invoices for non-existant services, and that the signature on the invoices isn’t his.
Keith Seel, director of non-profit studies at Mount Royal College in Calgary, confirms that agencies do sometimes use the arrangement Reinsilber described to provide funding for services, but “explicit and rigorous financial management practices” would need to be set up because the financial relationship would be complex.
Reinsilber maintains his innocence and says he just wants the case to be over. But with Marshner failing to show up for significant court dates, and pretrial motions still in the works, it looks like the case won’t be going away anytime soon.

Uwe Marshner’s old house sits on a quiet residential street in Scarborough. Its looming two-storey frame blends in well with the wrought iron fences and gargantuan lawns on the surrounding properties. Children deliver newspapers up and down the street with little red wagons and people park their BMWs in crescent driveways.

Not exactly the gang and gun Scarborough that most people think of.

But since the alleged scheme started to collapse, Marshner’s family has now been relocated to a much more modest house in Pickering after his assets were seized when he failed to show up for pretrial motions.

Marshner himself remains a mysterious figure: numerous court officials tried and failed to track him down to serve him with the lawsuit. His daughter and his wife refuse to comment on the ordeal, except to say that he no longer lives with them.

Reinsilber, for his part, says the whole thing has him stressed out and remains a looming shadow in the back of his mind. But his colleagues at Ryerson have been supportive. The idea that he would be involved in a multi-million dollar scam is inconceivable to them.

“He is a man of integrity,” said Ted Dunlop, director of the school of Child and Youth Care. “When I heard the story, my heart went out to him. He doesn’t deserve to go through this ordeal.”

His coworkers say that it is Reinsilber’s connections in the field that have helped them build the school’s internship program and that he is completely dedicated to helping students succeed.

“He’s always here. He’s always accessible. He really goes to bat for the students,” Dunlop says.

Francis Hare, another colleague and former head of the school of Child and Youth Care, has known Reinsilber for 15 years dating back to when he was executive director of Delisle. He said that Reinsilber was a great contact within the community when Ryerson’s child and youth care program was in its infancy, and Hare even brought him in to teach part-time when the school first opened.

“The idea that Sheldon would be doing anything detrimental to the agency that he worked for or detrimental to the kids that he was serving or anything illegal…the idea of Sheldon doing that was just inconceivable,” he says. “I never took accusations like that seriously. They’re just not believable.”
But regardless of the high esteem in which Reinsilber’s colleagues hold him, it doesn’t erase his name from the lawsuit.

For the first time in two years, he finally got to see his old friend Marshner face to face last month, when Marshner met with the lawyers. The details of the meeting are confidential.

“Just envision what it would be like to see a friend of yours, not necessarily a good friend, but a friend, who used you. How would you feel?” Reinsilber says. “The guy who did it admits it, and I’m still stuck in the middle here.”

And according to his lawyer, David Brooker, it will be a while before the case is resolved. It’s not ready for trial yet and there won’t be a decision made within the next year.

“Not all the pretrial steps have been taken yet,” he says. “If there is a trial, my estimation would be at least a year away.”

Rouge Valley’s lawyer, Greg MacKenzie, declined to comment on the case.

“There’s no question that I’ve done nothing wrong,” Reinsilber says. “It’s going to make a wonderful story when it’s over.”