Winnipeg Free Press - PRINT EDITION

Wheeling, dealing at city hall

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The external audit of a string of real estate deals at city hall unearthed similar mismanagement and misconduct that peppered an earlier dissection of the fire-hall-construction fiasco, also under the watch of former chief administrative officer Phil Sheegl. But the review by EY (the consulting firm formerly known as Ernst and Young) reveals the city left itself vulnerable to the conduct and the resulting excessive costs it incurred on a number of high-profile, expensive deals.

First, Winnipeggers can see from the EY report Mr. Sheegl should never have received severance payment -- reportedly worth $240,000 -- when he left in late 2013, just before the fire-hall audit was made public. The first audit found development company Shindico was given preferential treatment, receiving information on the project other bidders weren't privy to. Mr. Sheegl was at the centre of much of it.

This new audit encompassed 33 real estate transactions, including purchases and sales of land, expropriations, purchases of buildings and lease agreements, and singled out a handful. Abuse of process was repeatedly found: Potential buyers again received information prior to public release. It was not unusual for estimates of land value to be rushed and the audit cast real doubt value for money was received in land swaps, sales and purchases.

And councillors were kept in the dark on key details when approving such transactions.

Council was told a parcel of city-owned land at The Forks, still vacant due to the aborted purchase by an Alberta developer, was worth about $6 million. Yet, an early valuation put it at $10 million. A potential buyer was told the land would be on the market prior to the official call for expressions of interest in the plot.

Similarly, a potential buyer of Polo Park land, vacated by the Blue Bombers, was given details later provided to all potential buyers.

The audit found Mr. Sheegl took control of handling the deals and agreements on a number of property contracts that saw an outside broker act for the city.

The purchase of the Graham Avenue post office, which led to an expensive refit for the police headquarters, was handled by Shindico, which was also contracted to manage the property. The auditors said the $800,000-plus commission paid to the firm for the purchase was grossly high.

Shindico received a $400,000 commission from the city in the sale of the Winnipeg Square Parkade, a particularly troublesome transaction.

It sold for $24 million despite an earlier valuation that said the property and the air rights above it were worth more than $40 million. Council was not told this, nor was it told Shindico also acted for the buyer, Crown Realty Partners, in the deal.

These deals were done without the involvement of the city's real estate manager, listed as the contract administrator in the public calls for interest because Mr. Sheegl took control and the city had no written rules for lines of responsibility.

The administration has agreed clearer rules for governance must be written -- who is to handle what part of the real estate transaction at various stages and when the advice of experts, such as the legal-services branch, must be engaged.

The rules must include clear consequences for those who skirt them and overreach their authority. Without that, rules are merely guidelines to be conveniently ignored.

This audit reads like the latest chapter in a long history of reviews that have shown the City of Winnipeg lax in its protocols and procedures. It appears there is a prevailing attitude that regards council, where public accountability starts and stops, with disdain. Councillors are given just enough (often bad) information to get the deals approved.

As with the fire-hall audit, nothing in this report points to illegal conduct, although other bidders for city business might have cause to challenge in court the conditions on which they were asked to compete.

Still, there was plenty of justification for firing a senior official.

But one left quietly and with pay. That is something the administration and Mayor Sam Katz have yet to explain to taxpayers.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien, Shannon Sampert, and Paul Samyn.

Republished from the Winnipeg Free Press print edition July 3, 2014 A12

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