Katz sold firm back to Sheegl for "closure"

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Mayor Sam Katz (WINNIPEG FREE PRESS) Photo Store

Saga of a shell company

March 29: Mayor Sam Katz purchases Duddy Enterprises LLC from city CAO and close friend Phil Sheegl.

Sept. 11: Katz tells reporters he bought Duddy Enterprises LLC for $1, and the company is dormant. He said he's a victim of a media "witch hunt." He added: "I'm looking around and I may do something with it. If Duddy ever turns into a business and I'm actively doing something with it, I will disclose it."

Sept. 12: Katz and Sheegl say selling the company probably wasn't a good idea. Sheegl said it may have been better if Katz incorporated his own shell company. "If I had to do this again, I would have paid three or four thousand dollars, found a lawyer and, boom, done that. No doubt about that. That's a very valuable lesson learned," Katz said.

Sept. 22: Katz sells Duddy Enterprises back to Sheegl.

Oct. 9: Documents are filed with the Arizona Corporation Commission, which names Sheegl as the company's current manager.

Oct. 17: Katz declines to speak to the Free Press about selling Duddy Enterprises back to Sheegl. His office said it's a private transaction that's not worth discussing.

Oct. 18: Katz says he sold the company back to Sheegl to give the issue "closure."

Mayor Sam Katz says he sold an Arizona shell company back to Phil Sheegl for $1 for "closure."

This morning, Katz said he decided to give the company, Duddy Enterprises LLC, back to Sheegl following media criticism over the transaction. He said if he kept the company the media would've continued to report about it, and he didn't want that grief and aggravation.

"There wasn't any conflict of interest. There never was. I still believe the easiest thing to do is bring closure to this," Katz said.

In March, Katz purchased Duddy Enterprises LLC from Sheegl, the city's chief administrative officer and the mayor's close friend. In September, the sale sparked questions about Katz and Sheegl's personal relationship and their business dealings in Arizona.

Katz initially said he was a victim of a "witch hunt" and insisted the transaction wasn't untoward. He said he bought the dormant shell company for $1.

Both Katz and Sheegl later conceded the sale was not a good idea due to the optics of the exchange between senior city officials. At the time, Katz said he would have paid money to hire a lawyer and set up his own company if he had to do it again, calling the experience a "valuable lesson learned."

One week later, Arizona Corporation Commission documents show Katz sold the shell company back to Sheegl. Sheegl signed an agreement on Sept. 22, and online corporation commission records reveal Sheegl officially took over as company manager on Oct. 9.

'Not a business relationship': mayor

Katz had declined to speak to the Free Press on Wednesday about the sale.

But today Katz answered questions on the subject while at a flag-raising ceremony marking the 75th anniversary of credit unions in Manitoba. He said he is not in a business relationship with Sheegl.

"That's not a business relationship. We don't have any business together," he said. "I don't have any businesses other than the ones you and everyone else knows about."

Sheegl declined to comment Wednesday.

The resale of Duddy Enterprises comes one month after Katz was forced to answer questions about his activities in Arizona, when it was revealed he acquired a home in Scottsdale's upscale Windgate Ranch development from the sister-in-law of Sandy Shindleman, the head of Shindico Realty.

Katz defended the property's purchase, but declined to answer questions about how long he's lived there or why the tax bill was sent to his Winnipeg home the year before he took possession of the property.

The mayor has bought and sold several Scottsdale properties during the last decade, but has refused to disclose how often he travels there, insisting it's a personal matter.

'Disappointing and inappropriate': councillor

Coun. Jenny Gerbasi (Fort Rouge) called the Duddy Enterprises transaction "disappointing and inappropriate" and said this kind of continued behaviour should stop. She said it creates the perception two people in positions of power are mixing business and personal relationships, jeopardizing the public's trust.

"They're in the highest position of powers politically and administratively and they're doing business transactions with each other," Gerbasi said. "That is going to stir up public mistrust and concern."

The shell company was first incorporated in Arizona in late 2002, and there is no information available to the public on the type of business for which Duddy Enterprises was incorporated. Sheegl was the company's manager until he sold it to Katz earlier this year.

The Arizona Corporation Commission requires businesses to report when there is a change in the company's directors or shareholders in person, by mail or by fax. However, it does not require companies to report any financial transactions or the purchase price of a company.

There are no rules compelling members of city council to disclose properties and businesses they own outside Winnipeg.

In early 2009, city council voted to call on the province to beef up Winnipeg's conflict-of-interest rules and create an ethics watchdog or a new position to govern Manitoba municipalities.

Little has happened since then, and Gerbasi said the city still needs better legislation to ensure there are consequences to breaching the code of conduct.

-- with files from Bartley Kives

jen.skerritt@freepress.mb.ca

Republished from the Winnipeg Free Press print edition October 18, 2012 A3