Winnipeg Free Press - PRINT EDITION

A question of confidence

While some councillors have lost faith, city CAO says his leadership still has support from inside city hall

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For a remarkable three hours on Monday afternoon, Winnipeg's top civil servant sat behind a bench in the city council chamber to answer questions about what he knew about cost overruns at fire-paramedic Station No. 11 and when he knew it.

Such question-and-answer sessions are normally reserved for commissions of inquiry and U.S. Senate hearings. Chief administrative officers normally don't get grilled in public.

But after two months of failing to obtain answers about Winnipeg's fire-paramedic station replacement program, Charleswood-Tuxedo Coun. Paula Havixbeck decided it was time to place CAO Phil Sheegl on display.

"I feel like we're being asked to sign a blank cheque," said Havixbeck, at the time city council's protection and community services chairwoman, complaining about a lack of detail in a request for an additional $2.5 million.

On the surface, the grilling pertained to the station replacement program, which has already sparked an external review and a broader audit of major city real-estate transactions. But the de facto interrogation involved much higher political stakes.

The main object of the councillors' questioning was Sheegl, the entrepreneur-turned-civil servant who's become a lightning rod for criticism from almost every corner of city council.

After coming to the city in 2008 with the promise of being a different kind of bureaucrat -- a public servant with private-sector experience, prepared to cut through red tape in order to get things done -- Sheegl has incurred the ire of council for not just the fire-paramedic file, but a range of files that include the ballooning Winnipeg police headquarters project, this spring's aborted water-park development at The Forks and an abandoned effort to sell or lease city-owned golf courses.

According to the City of Winnipeg charter, the CAO is one of four city officials who report directly to city council. So far this fall, a third of council has either condemned Sheegl or called on him to resign.

Mynarski Coun. Ross Eadie was first to call for Sheegl to go in September, after the CAO sold an Arizona shell company, Duddy Enterprises, to close friend and confidante Sam Katz, Winnipeg's mayor. In October, Transcona Coun. Russ Wyatt, now deputy mayor, called on Sheegl to resign or face dismissal.

Daniel McIntyre Coun. Harvey Smith also joined the resignation chorus, while Point Douglas Coun. Mike Pagtakhan opined it may not be possible for Winnipeggers to regain confidence in the public service while Sheegl remains at the helm. Finally, Havixbeck placed Sheegl on the hot seat in a public meeting where officials initially tried to prevent TV news cameras from filming the CAO head on.

Sheegl, who retains the support of at the very least Katz and St. Norbert Coun. Justin Swandel, is not afraid to defend himself.

"For me as the CAO and the head of the administration, I have the support of (chief operations officer) Deepak Joshi and the CFO, my directors and my chiefs, who I believe have 110 per cent confidence in my leadership, as do I have 110 per cent confidence in their abilities," Sheegl told reporters on Monday.

That address came in response to the fire-paramedic issue. But given the toxic climate at city hall, Sheegl may as well have been addressing his overall performance to date.

 

Unlike most civil servants, Winnipeg's CAO has an entrepreneurial background. After obtaining a bachelor's degree in civil engineering, Sheegl worked as an agent for RE/Max. According to Katz, the two men first made their acquaintance almost 20 years ago, when the future CAO listed a home for the future mayor.

Later in the 1990s, the two friends purchased homes in the Phoenix suburb of Scottsdale. Since 1999, Sheegl and other business partners have bought, sold or carved up the ownership of several parcels of vacant Scottsdale land. Sheegl has been associated with 12 different Arizona companies, eight of which remain active.

Some of the deals involved parcels of vacant land in the vicinity of McDowell Mountain Ranch Road. After the collapse of the U.S. real estate market in 2008, one of Sheegl's companies was involved in an attempt to reduce the tax burden of one of these parcels, which went into $90,000 worth of tax arrears. After Sheegl's partners defaulted on payments, it eventually wound up in the hands of the Arizona State Land Department.

Only one of Sheegl's Arizona real estate deals involved Winnipeg's future mayor. In 2002, two years before entering politics, Katz sold a 50 per cent interest in a Raintree Drive condo to Sheegl's Winnix Corporation.

The name "Winnix" refers to Winnipeg and Phoenix. Other Sheegl-associated entities have similar names, including Winstar, Winjet, Wingold, Wingtwo, Wingfive and Winwin. Duddy Enterprises was one of the investors in Winwin, whose last major transaction was a $2.2-million land sale in May 2004.

Winwin was dissolved in March 2012, three days before Sheegl sold Duddy to Katz.

In October 1987, Katz told the Free Press his friends nicknamed him Duddy after the title character in Mordecai Richler's Apprenticeship of Duddy Kravitz. At the time, Katz said there were parallels between himself and the fictional Duddy, who came from humble beginnings and had major commercial ambitions. At that point in his career, the 36-year-old Katz already owned a concert-promoting company, a travel agency and a comedy club.

When the Duddy sale was made public in September, Katz initially accused the media of engaging in a witch hunt. He then conceded it was a mistake to purchase a shell company from the city's chief administrative officer. Within weeks, Katz sold Duddy back to Sheegl.

The Duddy affair reopened the question of whether it's wise for Winnipeg's mayor and top civil servant to be close friends. "You have to question if it could influence the way decisions are made between the administration and the political level, when you have those blended, mixed-up, grey-area relationships when there should be none," said Fort Rouge Coun. Jenny Gerbasi.

In a statement, Sheegl also conceded the Duddy exchange was an error. He has declined to comment on other aspects of his real estate work in Arizona or his role in starting Prescription Drugs Canada, which at one point had three locations in the Phoenix area.

Sheegl listed his work with the pharmacies and as a RE/Max agent as his main sources of professional experience when he applied to work for the City of Winnipeg.

 

Phil Sheegl first joined the city in April 2008, when he was a surprise appointment as the city's new director of planning, property and development. At the time, Sheegl led the sales team for Sky Waterfront Condominiums on Waterfront Drive and served as presiding officer for the board of revision, a quasi-judicial body that hears city property-tax appeals.

Sheegl said his decision to leave the private sector for a government job had nothing to do with the collapse of the U.S. real estate market, which started to decline in 2007 and collapsed in 2008. "I was semi-retired before I came here," he said this week.

For his part, Katz said he played no role in hiring Sheegl and tried to convince his friend not to apply for the job because he might find it frustrating "to deal with councillors, who have all sorts of opinions and agendas." The mayor also defused cronyism allegations by quickly owning up to the fact he and Sheegl were not just friends, but good friends.

The mayor also went on the offensive when Gerbasi immediately questioned Sheegl's qualifications. "When it comes to ability, intelligence and integrity, Coun. Gerbasi wouldn't even qualify to be in the same building, let alone the same room, as Phil Sheegl," Katz said at the time.

Swandel also rose to Sheegl's defence, penning an op-ed piece for this newspaper in which he praised the new property director as "an executive leader who was not overly qualified in any one area, but rather, who brought a skill set to the organization that would empower the talented professionals who apply their expertise and deliver for the citizens of Winnipeg."

Six months later, in October 2008, Sheegl was promoted to deputy chief administrative officer as part of then-CAO Glen Laubenstein's reorganization of the public service. Laubenstein's resignation in the middle of the 2010 civic election campaign opened the door for Sheegl to apply for the public service's top job.

According to a job-search document prepared by consulting firm Meyers Norris Penny, the successful applicant for the CAO's job required "10 years senior-level leadership experience in a large, multi-faceted service organization." At the time, Sheegl only had three years under his belt, but sources close to the hiring process said he interviewed extremely well and produced numerous letters of support.

The consultant wound up selecting Sheegl as the top prospect among 40 applicants, which included other internal candidates and at least one high-profile law-enforcement administrator. EPC members, meanwhile, considered Sheegl a high-risk, high-reward candidate.

"He was the one with the potential to get the most done and also make the most mistakes," said one councillor, speaking under condition of anonymity.

A total of five councillors -- Wyatt, Gerbasi, Eadie, Smith and River Heights Coun. John Orlikow -- voted against the decision to appoint Sheegl to the CAO's office in 2011.

Since then, Sheegl has been credited with acquiring the Canada Post building on behalf of the Winnipeg Police Service, fast-tracking the expansion of the Winnipeg Convention Centre and adding a pedestrian bridge to the Chief Peguis Trail extension at no extra cost.

But the same get-things-done mentality may be Sheegl's Achille's heel, given the inaccurate cost estimate for the police-headquarters renovation (the total project cost now exceeds the tab for building Winnipeg's new $190-million football stadium) and the complaints about the other files.

In essence, Sheegl is still trying to live up to his billing as entrepreneur-turned-public servant.

"There have been some tremendous blunders made by the city, and taxpayers have paid for those blunders. Phil has the tremendous knowledge to protect taxpayers from those blunders," Katz said when Sheegl first joined the city in 2008.

What remains to be seen is whether Sheegl is that protector -- or the official who winds up getting held to account for the City of Winnipeg's recent woes.

-- with files from Jen Skerritt

bartley.kives@freepress.mb.ca

Republished from the Winnipeg Free Press print edition November 3, 2012 A6

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