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Real estate audit raises serious issues; Katz questions methodology

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A damning audit of Winnipeg real-estate transactions has been met with criticism, praise and confusion, both inside and outside city hall.

At the behest of city council, consulting firm EY examined 33 Winnipeg real-estate transactions from 2006 to 2012 and paid particular attention to three transactions in 2009 — the $29.25-million acquisition of the Canada Post building, the Parker land swap and the $24-million sale of the Winnipeg Square — as well as the proposed sale of surface-parking lot Parcel Four in 2012 and the Canad Inns Stadium site sale, which both took place in 2012.

The auditors concluded land valuations for the parkade and Parcel Four were kept from city council, the Parker land swap was a "rush job," a car-wash expropriation was unnecessary and the city failed to obtain an independent appraisal of the Canada Post building or consider other places to create a new police headquarters.

Winnipeg Mayor Sam Katz said while he has not read the document in detail, he accepts many of its recommendations, but has problems with the methodology.

Katz told reporters he was "astounded" EY chose not to interview former chief administrative officer Phil Sheegl or officials with Shindico Realty, the firm that conducted due diligence on the Canada Post building, purchased the Canad Inns Stadium site along with Cadillac Fairview and handled other major transactions on behalf of the city.

Katz said he was disappointed the audit was titled a "real estate management review" and said genuine audits are based on facts, not opinions.

But the mayor refused to directly criticize City Auditor Brian Whiteside, who presented the report to the city on June 19. Katz said he was not told of its content before Wednesday, when he and Sheegl went on the offensive against the document.

Sheegl, who resigned in October, called the real estate audit "a joke" and "a political witch hunt," insisting EY made no attempt to interview him as part of an examination of major city real-estate transactions conducted from 2006 to 2012.

"This thing is a joke. It’s a political witch hunt. They never asked to speak to me," Sheegl said Wednesday in a telephone interview.

He said he found it ridiculous auditors interviewed Colin Craig of the Canadian Taxpayers Federation, former Katz advisor Brian Kelcey and other "activists," but not him.

"The auditors chose not to speak to me, so you tell me whether this reeks of a witch hunt," said Sheegl, noting auditors have "conveniently called it a review," not an audit.

Craig asked how it was possible for Sheegl to know he had been interviewed before the full version of the audit report was even released. He called on the Selinger government to call an inquiry — or if it’s not willing to do that, call in the RCMP.

Sheegl also took issue with some of the audit’s conclusions, including the contention the city did not seriously explore any building other than the former Canada Post building on Graham Avenue as the site of a new police headquarters.

"I’d like the auditor to show me which other post-disaster buildings are available in downtown Winnipeg," said Sheegl, insisting the police need a disaster-proof headquarters and the cost of building new would have been too expensive.

He said the auditor was also wrong to conclude Shindico Realty acted both for the city and the buyer of the Winnipeg Square Parkade. Shindico did nothing for the city on that $24-million transaction other than prematurely listing the structure, Sheegl said.

Sheegl also said there was nothing contentious about the city providing a Canad Inns Stadium site plan to Shindico and Cadillac Fairview in advance of the $29.25-million sale of the property. The city routinely provides site plans to anyone who asks, he said.

Sheegl said he had no knowledge that the Parcel Four surface lot was valued at $10 million before a report recommending its sale went to council in 2012 stating the property was worth $6 million.

Shindico president and CEO Sandy Shindleman also questioned the audit, asking how EY could charge the city $500,000 without interviewing him or other Shindico officials about transactions involving the firm.

"It’s impossible for them to know what they’re talking about," said Shindleman, surmising councillors sought an audit with pre-determined conclusions to fit their political agendas.

Shindleman said Shindico never acted on behalf of the city in the Winnipeg Square Parkade sale and questioned the auditor’s opinion that the city should have tendered services conducted by the firm to manage the tower at the Canada Post building.

He said as a person with 39 years of real estate and board experience, he would not have accepted the report as an audit.

The wave of criticism marks an attempt by Katz and others to discredit an audit into major city real-estate transactions, charged Fort Rouge Coun. Jenny Gerbasi, who authored the 2012 motion that got the audit rolling. She said Katz and St. Norbert Coun. Justin Swandel were trying to diminish the audit before Winnipeggers had a chance to evaluate its content.

She said she is only beginning to read the audit, but did not think it matters it was called a review on the title page.

"The reality is that the audit met the RFP requirements and what was asked for according to our auditor," she said.

Mynarski Coun. Ross Eadie said it’s clear things occurred that should not have occurred, such as the apparent suppression of a $10-million land valuation for the Parcel Four surface-parking lot in a report to council. Eadie said someone may deserve to be dismissed for that.

Daniel McIntyre Coun. Harvey Smith said acting CAO Deepak Joshi must go. He also said Katz raised legitimate questions as to why Sheegl was not interviewed by the auditing firm.

Smith also said the firm may wish to seek legal action against the city for not co-operating with the audit, claiming the mayor’s office and city administrators stymied the work of EY auditors.

River Heights-Fort Garry Coun. John Orlikow issued a statement claiming the audit shows "deceit favouritism and incompetence" at the city.

A special council meeting slated for Thursday has been cancelled to allow councillors more time to review the document. That meeting will come before council on July 9.

History

Updated on Wednesday, July 2, 2014 at 11:32 AM CDT: adds photo of stadium

11:50 AM: corrects link

12:00 PM: Adds audit document

1:11 PM: updates with full writethrough

1:43 PM: Updates with comments from Sheegl

3:20 PM: full writethrough

4:13 PM: adds quotes from Shindleman

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