Winnipeg Free Press - PRINT EDITION

Our mayor seems to be playing a shell game

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BATTER UP... Last week, like a bullpen trying to get that final out, a scrum of reporters took turns trying to throw one fastball of a question after another at Mayor Sam Katz.

Hoping, as they did, to find out more about the mayor's purchase of an Arizona house from the sister-in-law of his Winnipeg Goldeyes partner, city real estate developer Sandy Shindleman.

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Finally, tired of the mayor simply fouling off pitches, one wily reporter tried something off-speed.

He threw the mayor a curve.

The reporter referred to another controversial story from last month about another Arizona purchase. The one where the mayor paid $1 to his close pal and top Winnipeg civil servant, Phil Sheegl, for the purchase of a shell company known as Duddy Enterprises LLC. The reporter, in the process of framing his breaking pitch of a question, alluded to something the mayor said when the shell-company story broke. After acknowledging that, in retrospect, he should have "exercised more caution" in making the March 2012 deal, Katz said this: "If I had to do this again, I would have paid the $3,000, $4,000, found a lawyer, and boom, done that."

The implication the reporter and others drew was the true value of the shell company was between $3,000 and $4,000. Which, the reporter suggested in pitching the question to Katz last week, would have made it reportable to the city clerk under conflict-of-interest legislation. Either because it could be seen as a gift with a true value of more than $500. Or, if it wasn't a gift, its true value would qualify it to be disclosed under city council's code of ethics, which states: "Members must disclose any business or interest which may give rise to a reasonable apprehension of conflict."

I'd say a deal between the top political person in the city and his acknowledged buddy, the city's top bureaucrat, qualifies. And Katz's regret about not exercising more caution suggests that.

But then, in the course of denying there was any conflict whatsoever, the mayor smacked the reporter's curve ball right back at him.

"I'll tell you where you're wrong," Katz said.

He meant "wrong" about the value of the shell corporation he bought for a buck.

"If you talk to a lawyer," the mayor said, "you will find out that it has no value."

With all due respect, Your Worship, I'll tell you where you're wrong.

Shell companies do have value, even if you only calculate what it initially takes to set them up.

And, curiously enough, the one the mayor bought might well be valued in that $3,000 to $4,000 ballpark.

Or even more.

At least that's what I take after reading an award-winning Reuters investigative series from late last year entitled Shell Game. It delved into the uses of shell corporations -- both legitimate and illegitimate -- and what it called "a growing niche in the shell business" known as "shelf" companies.

They're shell companies set up and then placed on "the shelf" to "age."

"The older they are," Reuters reported, "the more expensive, like Scotch whisky."

"They're then sold later, to owners looking for a quick way to secure bank loans, bid on contracts, and project financial stability," Reuters said. "To speed up business activity, shelf corporations can often be purchased with established bank accounts, credit histories and tax returns filed with the Internal Revenue Service."

A shelf company, remember, is a shell company by another name -- a clean-slate shell company -- that has no real business history.

I went looking for some Arizona shelf companies on a website called Corporations Today Inc., that listed several "aged companies" from the state where the mayor bought his shell company from Phil Sheegl.

Among them was one called Eagle Eye Services LLC; a shelf company advertised as being incorporated four years ago. Its listed price: $2,795.

Duddy Enterprises LLC was incorporated on Nov. 27, 2002.

Ten years ago next month.

Still, according to the advice the mayor says he's been given -- and that he passed along to reporters last week -- Duddy Enterprises LLC has no value.

I beg to differ. For what it's worth.

gordon.sinclair@freepress.mb.ca

Republished from the Winnipeg Free Press print edition October 2, 2012 B1

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