Cracks appearing in alliance between Katz, CAO Sheegl

This has to be the slowest, most painful story ever told at city hall.

Mayor Sam Katz on Monday pledged to have city auditor Brian Whiteside and unidentified outside consultants review the propriety of a complex deal in which the city agreed to swap two aging fire halls and undeveloped city-owned land for privately owned land on which a new fire-paramedic station was built.

"(The outside consultants) will find out what went wrong, who did wrong, what department et cetera," Katz told the Free Press.

And yet, slow is not an adequate word to describe the pace at which the mayor finally experienced his epiphany. Katz has been under pressure since early September to conduct a proper review of the transactions. Refusing to do the right thing and go outside city hall, he watched in horror as the story not only did not die, but picked up momentum. And now, after a period of painful reflection, the mayor finally pledges to do the right thing.

For those of you scoring at home, we started three weeks ago with a 'this isn't a big deal,' moved quickly to 'let's have someone internally take a look at this,' which turned into 'we're hiring someone to help our internal person dig through this' and then finally on to 'we're calling in outside consultants to get to the bottom of this.'

Katz's decision to give Whiteside the room he needs to go forth and investigate cannot be good news for Phil Sheegl, the city's chief administrative officer, who came out almost immediately when the story broke and said he was "100 per cent confident" the deal was done by the book. Understatement warning: With his decision to turn the file over to Whiteside and outside experts, it appears Katz is no longer satisfied with Sheegl's assessment.

All that having been said, even with this latest decision, Katz continues to nibble away at the outer edges of a much larger concern at city hall. Namely, how and why the city has come to do so much of its real estate and development business with a single company -- Shindico Realty. It's not clear whether Whiteside will have the authority or the support to take a broader look at what's going on with the city's land transactions. It's also not clear the city auditor was the best person for the job. With no disrespect to the current city auditor, this is an office that has underperformed in the past when asked to take on thorny allegations of impropriety or conflict of interest. Even with the retention of outside resources to help him, this is a job that should have been taken completely outside the reach of anyone connected to local government.

Katz has as much to gain as he has to lose from a truly external review. Many have seized upon the fact Katz is connected, both socially and through business relationships, to those who seem to control a disproportionate amount of the city's land transactions. An allegation like that could be purely opportunistic -- Katz has suggested as much when his critics have pointed their fingers at him and his friends. However, it's come to a point where the mayor can no longer just dismiss the concerns. He has to clear the air.

This is the moment when the mayor has to show Winnipeggers he can create the conditions for a full and complete examination of the city's real estate and development transactions.

Regardless of the outcome of Whiteside's review, it appears the mayor may be preparing to part ways with Sheegl, a long-time friend. Sheegl was a controversial choice for CAO, and while Katz denied any role in securing the job for his good friend, Sheegl has started to become a millstone around the mayor's neck. This land deal has only underlined the liability Sheegl has become for the mayor.

By calling in outside resources to review an internal review of the paramedic-fire station deal that Sheegl had already pronounced fair and just, Katz is sending a signal that even if he isn't throwing Sheegl under the bus, he is certainly no longer willing to protect him. For Sheegl, anything less than a 100 per cent clean bill of health for this deal will leave him with only two explanations: He was ignorant of the facts of the deal when he defended it, or he was trying to hide the ugly details. Either way, it's not a rosy future.

We await the results of Whiteside's review with bated breath. We should not judge the success of that review on whether the city auditor is able to find wrongdoing. Instead, we should judge Whiteside on his ability to answer all of the troubling unanswered questions about this deal, and his ability to expand the review to the entire system of land transactions.

Anything short of that and Katz will find out that the slowest, most painful of city hall stories is just beginning.

dan.lett@freepress.mb.ca

Republished from the Winnipeg Free Press print edition September 26, 2012 A3