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Katz says purchase unwise

Concedes buying firm from city CAO raised questions

One day after complaining about being the prey in a media "witch hunt," a more contrite Mayor Sam Katz conceded it wasn't a good idea to buy a shell company from the city's top bureaucrat.

In March, Katz purchased a Scottsdale, Ariz., entity called Duddy Enterprises LLC from Winnipeg chief administrative officer Phil Sheegl. When asked about the transaction on Tuesday, Katz said the company was dormant and suggested scrutiny of the move was part of a plan to discredit him.

Mayor Sam Katz says he did nothing wrong but concedes the optics of buying a company from the CAO are bad.

KEN GIGLIOTTI / WINNIPEG FREE PRESS

Mayor Sam Katz says he did nothing wrong but concedes the optics of buying a company from the CAO are bad. Photo Store

On Wednesday, Katz continued to insist he did nothing untoward -- but acknowledged it doesn't look great when the mayor buys a company from a senior city official, who is also a good friend.

"When you're in the world of politics, the sad statement is reality doesn't count. As you've heard the expression, perception is reality and perception appears to be extremely important. So should one exercise more caution? I think the answer is a definitive yes," Katz told reporters.

"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 repeated his assertion Duddy Enterprises is inactive. "It's been a dormant company, which has been verified. It was purchased for $1. Basically, you can call it a shell company. Call it what you want," said the mayor, adding he may activate it in the future.

Katz did not say whether the company has ever had any assets or what purpose it served Sheegl, who also did not answer queries about the company.

In a statement, the CAO repeated the company is dormant and expressed regret for selling it to Katz.

"In retrospect, it would have been better for the mayor to set up his own new company," Sheegl said, via email. "As I have said before, the mayor and I are not partners in any of my businesses."

The City of Winnipeg has no bylaw that explicitly prohibits politicians from doing business with senior officials, or vice versa, the city clerk's office said. But the practice was prohibited under an old code of conduct that has no longer has any legislative teeth.

Nonetheless, Mynarski Coun. Ross Eadie called on Sheegl to resign, claiming cynicism about government increases when the public learns a senior official has sold a company to the mayor.

"If you're running a city and you're supposed to have the skills to do so, you have to know you're not supposed to do that," Eadie said, calling for Sheegl to be fired if he does not resign.

"It's perception. He screwed up and the mayor should fire him. This personal relationship they have is untenable," Eadie said. "I don't care if it was an innocent transaction. What do you need a shell company for? How can we run a city with this going on all the time?"

Eadie was among five councillors who voted against hiring Sheegl as CAO in 2011, arguing the personal relationship between him and Katz would compromise their professional relationship.

bartley.kives@freepress.mb.ca

Republished from the Winnipeg Free Press print edition September 13, 2012 A4

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