Former AHS CEO files $1.7M lawsuit against health authority, minister alleging surgical contract ‘kickbacks’

A lawsuit filed by the former AHS CEO says the provincial government has been inflating health contracts to help its connections.

A $1.7-million lawsuit filed by the former head of Alberta Health Services alleges a government “kickback” scheme involving inflated contracts with private surgical companies, a witch hunt to shut down critics of the Smith government and threats to wind up any internal investigation of the practices.

CTV News obtained a lawsuit filed in Edmonton on Wednesday by Athana Mentzelopoulos, who had her contract terminated on Jan. 8, 2025.

It claims she was fired because she authorized an internal investigation and audit into various AHS contracts and procurement processes.

“In other words, Mentzelopoulos was purportedly terminated capriciously, arbitrarily, and in bad faith because she was actually carrying out her duties for AHS,” the lawsuit reads.

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The suit aims to recoup the $1.7 million in base salary and benefits Mentzelopoulos alleges she would have been owed for the remaining years of her AHS contract.

“Further, the purported termination of the employment contract on Jan. 8, 2025, was very likely done at the behest and direction of Minister LaGrange, and in circumstances that were not lawful or contractually compliant with the Employment Agreement,” the lawsuit reads.

In an emailed statement Wednesday evening, LaGrange said she has seen the filed statement of claim.

“It appears to reiterate many of the same allegations that were made in the letter that was obtained by the media. Upon initial review, many of the allegations and claims made are clearly false, while others will need to be investigated further as part of the auditor general’s work and the government’s internal review of this matter,” LaGrange said.

“As I am a named defendant in this claim, I will be filing a detailed statement of defence in short order. I very much look forward to doing so.”

None of the allegations have been proven in court.

‘Interference and pressure’

The suit claims Mentzelopoulos was subject to “interference and pressure” from various Government of Alberta officials throughout 2024, including the premier’s then chief of staff, Marshall Smith.

It says Mentzelopoulos was contacted by Smith, who advised her of “powerful people” who were upset about the X, formerly Twitter, feed of an AHS employee.

She says she was also previously pressured by Deputy Minister of Health Andre Tremblay, via text message, to terminate “purported critics of the government, including Carmella Steinke, Jeremy Theal and Sherri Kashuba.”

The suit also alleges Smith told Mentzelopoulos the government was using “private detectives, lawyers, and (apparently) hackers,” to discover the identity of another critic, an X feed called “Hansard the Cat.”’

Surgical contract allegations

The suit also focuses on alleged inflated contracts between AHS and Alberta Surgical Group (ASG). It claims friends of the UCP government were being given special treatment – at the expense of taxpayers.

“During 2024, Mentzelopoulos also learned that ASG was being promoted by former MLA Doug Horner and that ASG had somehow been awarded a two-year CSF contract despite having been uncompetitive in the initial RFP process for CSF contracts,” the lawsuit reads.

Additionally, it says Mentzelopoulos was told “Doug Horner was unhappy about ASG services being ‘capped.’” She then met with ASG officials in August 2024.

After a further review of the existing ASG contract, Mentzelopoulos claims there were significant differences in the ASG contract compared to other AHS procurement contracts.

“Among other issues, she noted that the ASG rates were higher than other comparable private service providers and that AHS was potentially paying ASG for services that were not being used,” the lawsuit reads.

After advising the AHS board about her concerns related to the ASG contracts, Mentzelopoulos claims she was told privately by a board member to be “’very careful’ about what she was doing and that she needed to potentially be cautious about her personal safety given some of the people potentially involved behind the scenes.”

The suit claims Mentzelopoulos received another call from Marshall Smith in September 2024, inquiring about the status of Chartered Surgical Facilities (CSF) negotiations in Red Deer and Lethbridge.

“Smith advised Mentzelopoulos that there were ‘serious businessmen’ who were unhappy with the delays in negotiations, and they needed AHS to approve the CSFs in order to secure financing,” the suit reads.

“Mentzelopoulos explained the reason for the delay, but Smith ended the conversation with a comment that the CSF principals were ‘serious people – do not mess with them.’”

‘Kickbacks’

The 17-page document also alleges an individual with ties to the premier’s office, who was installed within Alberta Health to work on health-care contracts, was receiving “kickbacks.”

The documents claim that Marshall Smith contacted Mentzelopoulos in early 2024 about an individual named Jitendra Prasad who was “his guy” and had been “put in place at Alberta Health to make sure that the government could ‘get contracting right.’”

“Shortly after this discussion, Prasad contacted Mentzelopoulos and advised that he was close to Marshall Smith, and he was working to set up a new health-care contracting group within Alberta Health,” the suit says.

“For her part, Mentzelopoulos was uncomfortable with the inference that Prasad would be taking some level of direction from Marshall Smith and potentially the premier’s office on AHS procurement and contract issues that were specific to AHS and that fell within Mentzelopoulos’ mandate as president and CEO.”

After Prasad allegedly put false information about the involvement of MHCare in an AHS deal to bring in children’s ibuprofen/acetaminophen from Turkey, Mentzelopoulos initiated an external forensic audit by the law firm Borden Ladner Gervais LLP in early November 2024.

“On Dec. 16, 2024, Mentzelopoulos attended a reception at the AIMCO offices and was approached by Kate White, deputy minister of treasury board and finance,” the suit reads.

“Ms. White asked Mentzelopoulos what was going on at Alberta Health and specifically referred to an investigation involving Prasad and ‘kickbacks’ (her phrase).”

On Dec. 23, 2024, Mentzelopoulos says she received a letter from Alberta Health Assistant Deputy Minister Chris Nickerson instructing her to wind up the investigation and “transfer all related files to Alberta Health.”

Mentzelopoulos then claims she spoke with the deputy minister of mental health and addictions on Jan. 2, who told her Minister Dan Williams was “very concerned” about the AHS internal investigations and the forensic audit, including the investigation of ‘our good friend JP’ (JP being a reference to Prasad).”

She says she responded to Nickerson’s letter on Jan. 6, saying the investigation and audit had been closed down and that the first batch of records was being sent over, with the remaining records to follow.

The next day, Minister LaGrange met with the AHS Board of Directors and demanded that they terminate Mentzelopoulos, the suit claims. The AHS Board refused the demand. She was then fired the next day, on Jan. 8, via a Zoom meeting with Tremblay and Connie Webster, AHS’s executive director of HRBP and ability management.

Auditor general examining contracts

Mentzelopoulos claims she was scheduled to have a meeting with the province’s auditor general on Jan. 10 about the investigation, two days after her contract was terminated.

Last week, Alberta Auditor General Doug Wylie announced he had launched an investigation into AHS’s procurement and contracting processes after Mentzelopoulos’ claims were made public in a letter originally obtained by the Globe and Mail.

Wylie said the examination would pertain to “chartered surgical facilities, medication (ibuprofen or acetaminophen), and COVID-19 personal protection equipment.”

Speaking in Washington on Wednesday before the lawsuit came to light, Premier Danielle Smith said LaGrange has her full support as her government navigates the allegations.

“I still have confidence in my health minister,” Smith told reporters Wednesday while in Washington with other premiers to lobby against U.S. tariffs.

“We have to see if there’s any wrongdoing first. And if there is, then we have to clean it up.”

It’s the first time Smith has spoken publicly about the allegations since they came to light in a Globe and Mail report a week ago. LaGrange’s only public comment came Tuesday, when she spoke with reporters for less than one minute on her way into a cabinet meeting at the Alberta legislature.

On Wednesday evening, Marshall Smith provided a statement denying the allegations:

“I am aware of allegations being reported this week from former AHS CEO Athana Mentzelopoulos. These allegations are outrageous and false,” the statement read.

“I am eager to meet with officials investigating this matter and I will have a more fulsome statement to make in the days to come.”

With files from Timm Bruch and The Canadian Press