6 potential venues of inquiry

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This article was published 18/12/2014 (3926 days ago), so information in it may no longer be current.

1. The rationale behind the building purchase

The 2014 real-estate audit conducted by consulting firm EY suggested the city made no effort to seriously consider the purchase of any structure other than the Canada Post warehouse and tower at 266 Graham Ave. when it came to finding a new home for the Winnipeg Police Service.

“While an analysis was performed to assess whether 266 Graham could accommodate the police headquarters, EY did not observe file documentation evidencing that other properties other than 266 Graham were considered as potential locations for the new police headquarters,” the auditors wrote. “The city did not advertise the need for such property (i.e. EOI process) in order to identify the options available to the city.”

It is unclear whether any other buyer was interested in a 1950s-vintage office tower and warehouse building.

After the release of the audit, former Winnipeg chief administrative officer Phil Sheegl said no other disaster-proof building in downtown Winnipeg was available to the city.

A rainstorm last August damaged transformers in the building, delaying its opening.

 

2. The purchase with no appraisal

The EY real estate audit noted the city did not obtain an independent appraisal of the Canada Post building before buying it.

“The 266 Graham file did not include an appraisal relating to the acquisition of the property for $29.25 million,” the auditors wrote. “Conducting a thorough and comprehensive appraisal is essential to ensuring that value for money is acheived when the city is purchasing property, and to support that a fair and transparent decision-making process has occurred.”

In response, city managers noted it was given a chance to buy the building before it was placed on the open market.

 

3. The Ray Rybachuk connection

In 2011, the city awarded a $50,000 contract for construction-management services at the police HQ to a joint venture between Caspian Projects and Akman Construction.

The following year, the Winnipeg Police Service conducted a special vetting of Caspian owner Armik Babkhanians, who had a separate business partnership with the late Ray Rybachuk, an organized crime-connected ex-con listed as a “top-10 threat” by RCMP intelligence in 2010.

Babakhanians, who has high-level security clearance as a national defence contractor, was in business with Rybachuk at the Boyd Building on Portage Avenue.

“The city was aware that both Mr. Rybachuk and Mr. Babakhanians, along with others, had investments in the Boyd Building,” the city and the police service said in a joint statement. “Security checks, which included speaking with the owner of Caspian Construction, concluded there was no reason not to allow Caspian Construction to bid on the Winnipeg Police Service headquarters project.”

Police security checks are intended to screen out potential staff and suppliers with any connection to organized crime,.

Former police chief Keith McCaskill declined to comment on why Caspian received a separate vetting. “It’s corporate,” McCaskill said in June 2012.

After the vetting was revealed in 2012, Babakhanians severed his ties to Rybachuk, who died while snowmobiling in 2013.

 

4. The award of the contract to Caspian Construction

The 2010 search for police-HQ construction-management services produced bids from four entities: PCL Construction, Graham Construction, Stuart Olson Dominion Construction and the joint venture between the two Winnipeg firms.

In February 2011, the city awarded the $50,000 pre-construction contract to the joint venture. In June 2011, Akman left the project without public explanation. At Caspian’s request, the city assigned the contract to the firm after ensuring it could conduct the work on its own.

In November 2011, however, the city assigned a separate, full-construction contract, initially worth $137.1 million, to Caspian Projects. It was amended to $156.4 million in 2013.

The 2014 KPMG audit of the Winnipeg police headquarters concluded the latter contract was awarded to Caspian alone even though it “did not submit a proposal.”

In other words, the auditors concluded the city assigned a $156.4-million project to a firm that submitted no bid.

 

5. The last-minute bonding-requirement change

Six days before the bid period closed for the contract’s first phase, the city made a final addendum to the guidelines for bidders. The change involved a reduction in the threshold for what’s known in the construction industry as a performance bond — the amount of money a construction company has to put up to guarantee it can finish the job. The bond acts as insurance for a construction company’s client. If a firm can’t complete the work, the client can cash in the bond.

The original request for proposals for the project, issued in 2010, called for construction companies to put up a cheque for 50 per cent of the total bid price, or $51 million of what was then a $102-million project.

On Jan. 12, 2011, the city reduced this guarantee to a cheque for $25 million, less than one-quarter of the value of the work. The Surety Association of Canada, the national body for companies that issue construction bonds, said a 25 per cent bond is uncommon and noted the industry standard calls for 50 per cent or 100 per cent of the total value of the job.

The city, however, claimed in 2013 that it reduced the threshold at the Surety Association’s behest. The association denied issuing this direction — calling the city’s claim “bullshit” — and demanded to know why the city made such a assertion.

City officials responded by noting the higher bond threshold would have prevented smaller industry players from bidding.

The contract was awarded to the joint venture between the only two regional players in a field that included three large, national firms. The reduction of the construction-bond threshold was outside the scope of the KPMG audit.

 

6. Allegations of doctored invoices and a payment to a member of council

On July 10, 2014, former justice minister Andrew Swan and deputy justice minister Donna Miller were told in a letter a pair of whistleblowers went to Winnipeg police with allegations of doctored police-headquarters invoices, a payment to a member of city council and an instruction to inflate another invoice.

One whistleblower alleged invoices were inflated to “the benefit of the firm billing the city” and that “a company involved in the project also allegedly provided funds to a member of council” for reasons that are unclear.

The second witness claimed their firm “was also allegedly asked to invoice the city,” according to the letter.

Manitoba Justice forwarded the letter to the RCMP on Aug. 15.

— Bartley Kives