GO Transit has called in its auditors to probe allegations of fraud involving millions of dollars during the expansion of GO Train rail lines west of Toronto between 2005 and 2008, CBC News has learned.

The internal probe was announced Wednesday after a former CN Rail construction supervisor, Scott Holmes, filed a complaint with the OPP, alleging that CN Rail overcharged GO Transit and improperly billed Ontario taxpayers for millions of dollars in upgrades to CN freight lines that had nothing to do with commuter train expansion along the Lakeshore West line.

In the mid-2000s, the province agreed to a $72-million expansion for CN Rail to build a dedicated commuter rail line for GO Transit between Burlington and Hamilton. It was completed in 2008.

"I know GO Transit and Metrolinx are taking this seriously. I understand they have a team of auditors looking into it," said Ontario Transportation Minister Glen Murray in a written statement.  “These are just allegations right now; nothing has been proven. GO Transit is doing its due diligence. I want to know the facts before I comment further."

Scott Holmes is embroiled in a bitter legal fight with CN after he was dismissed in 2008. The company filed a lawsuit and won a court application to seize his assets, alleging it was Holmes himself who was secretly defrauding CN by hiring his own companies to do construction work.  

Holmes denies the allegations and has filed a suit of his own against CN and CN Police.  The case has been dragging through the courts for five years.

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This past spring, Holmes met with detectives from the OPP Anti-Rackets branch who for months now have been pouring over reams of internal CN invoices, billing documents and emails. The members of the Anti-Corruption Unit are trying to determine whether to launch a full-blown criminal investigation.

A CN spokesman said the company denies the alleged financial improprieties with regard to the construction project.

Mark Hallman, in a statement to CBC, said: "The vast majority, if not all, of the contractual work carried out by CN on behalf of GO was done on a fixed-price basis. CN provided GO with an estimate of the work to be carried out and the cost associated with it prior to ordering material or performing specified work."

"GO had full authority to review and question the estimates, and approved the scope and cost of the work before CN started it.  GO has full authority to audit the work CN performed on its behalf and CN will co-operate fully should GO Transit decide to proceed with an audit," Hallman said.

CN said it would not comment further because the case is still before the courts.