Bowman renews call for public inquiry on police HQ project Former city CAO Sheegl awarded construction contract, then accepted $327,000 from owner of company, judge finds

Winnipeg’s mayor renewed his call for a public inquiry into the controversy-laden police headquarters construction project Wednesday after a judge found the city’s former top bureaucrat accepted a bribe from a key contractor.

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Winnipeg’s mayor renewed his call for a public inquiry into the controversy-laden police headquarters construction project Wednesday after a judge found the city’s former top bureaucrat accepted a bribe from a key contractor.

“This is one of the biggest scandals in Winnipeg’s history,” Brian Bowman told reporters.

Court of Queen’s Bench Chief Justice Glenn Joyal’s ruling states there is “ample evidence” of a conspiracy to induce the city to award Caspian Construction contracts on the HQ project. He says that involved Phil Sheegl and members of Caspian and includes the following:

On Dec. 15, 2010, after Sheegl blind-copied Armik Babakhanians (Caspian’s owner) on an email to the city advocating for the bid bonding to be lowered (as requested by Babakhanians), Babakhanians thanked Sheegl, stating “YOU ARE MY MAN I WILL DO YOU PROUD.” The city says this occurred before Caspian formally submitted a bid for the Phase 1 contract.

On. Jan. 26, 2011, Babakhanians reminded Sheegl that Caspian “really wanted this project,” to which Sheegl stated “I know and I will do everything I can to help us all succeed here together.”

Joyal wrote: “It would appear that by Sheegl’s own words, there is clearly a common purpose and a common intention to get Caspian the WPS HQ project.”

On Feb. 7, 2011, a Caspian email exchange states “Phil and (former mayor) Sam (Katz) are pulling for us” and “Phil assured us (that Caspian would get through phase 1).”

Court of Queen’s Bench Chief Justice Glenn Joyal issued a 126-page ruling Tuesday finding former chief administrative officer Phil Sheegl accepted a $327,000 bribe from Caspian Construction owner Armik Babakhanians.

Serious concerns over the renovation of the onetime Canada Post facility, at 266 Graham Ave., have plagued city council for years. The building opened in June 2016 at a cost of about $214 million, well above its original $135 million price tag, and an external audit found the project was severely mismanaged.

In February 2017, city council endorsed Bowman’s original call for the province to open a public inquiry. The RCMP conducted a lengthy investigation into fraud and forgery allegations, but no criminal charges were laid.

In 2020, the city launched a civil suit, alleging a fraudulent scheme took place. Bowman described the legal challenge as a last resort to seek answers and compensation for Winnipeggers.

“Taxpayers need to have confidence that when there are claims of bribery … individuals need to be held accountable,” he said.

In his ruling Tuesday, Joyal concluded that Sheegl should pay damages that could exceed $700,000. That figure includes $327,200 to equal the alleged bribe, $250,000 to equal a severance package he received from the city and $100,000 in punitive damages, along with “reasonable” city court costs that have yet to be determined.

MIKAELA MACKENZIE / FREE PRESS FILES
“I’m absolutely renewing my call today for the province to consider calling a public inquiry now,” Mayor Brian Bowman said Wednesday.

“Based on the evidence before me, were I to find that Sheegl’s undisclosed receipt of the $327,200 payment from Armik (for whatever reason), while Sheegl was an officer with the city and while he was negotiating a multi-million-dollar contract with Armik’s company, did not constitute a breach of fiduciary duty, I would in my view be sending a preposterous message,” the decision states.

“That message would be nothing short of suggesting that high-ranking public officials can do business in secret with persons seeking contracts from the very public bodies for whom public officials work. Neither the law nor common sense support or justify such a dubious conclusion or message.”

Bowman said the ruling has raised serious concerns that a public inquiry could help address.

“(It’s) one of the best ways to compel the testimony on record, of individuals who may no longer be in the city of Winnipeg… (and) better ensure that these sorts of things don’t happen again,” he said.

The mayor noted the city is still pursuing legal action against additional defendants, which could secure greater compensation, since the original civil suit was split up into smaller components.

“There is another action that is ongoing that involves much more significant dollars that we’re hoping to be able to recover,” he said.

Neither he nor city staff were able to pinpoint the precise amount of damages being sought Wednesday.

Despite Bowman’s argument, it doesn’t appear the province will take Bowman’s advice any time soon. Premier Heather Stefanson told reporters it would be “premature” to do so.

“There was just a ruling on one part of this,” she said. “This remains before the courts and obviously, before we make any decisions on whether or not to call any public inquiry, we need to make sure that all avenues are exhausted before that.”

The city alleged in the suit that in July 2011, shortly after Sheegl awarded the contract to Caspian, the company paid $200,000 to co-defendant Mountain Construction (also owned by Babakhanians), which then paid the same amount to Sheegl’s company, Financial Support Services Inc. A year later, the city says Babakhanians paid Sheegl another $127,000.

Sheegl claimed it wasn’t a bribe, but payment for a real estate deal to purchase an acre of land he and then-Winnipeg mayor Sam Katz owned in Tartesso, Ariz.

Joyal rejected that explanation.

BORIS MINKEVICH / WINNIPEG FREE PRESS
Phil Sheegl (left) claimed it wasn’t a bribe, but payment for a real estate deal to purchase an acre of land he and then-Winnipeg mayor Sam Katz owned in Tartesso, Ariz.

“The acceptance of the related explanation requires a suspension of reasonable belief not to mention an acceptance of a line of reasoning that only the most naïve could endorse or accept,” he wrote.

Coun. Jeff Browaty said the judge’s ruling appears “damning” and he’s concerned about the way the project was initially described to council.

“The changes that came about, the reasons that they gave us for (cost) overruns.… It brings into question a lot of what we were told at that time…. It’s deeply concerning and very frustrating,” said Browaty (North Kildonan), who was on council at the time.

Coun. Brian Mayes, who was elected in 2011, said he understands the city has a vested interest to take court action. But he said it’s not clear how much compensation that could secure.

“I don’t know that we’ll make all our money back, especially because we are suing dozens of other people, alleging some pretty serious things and I think we may be on the hook for legal costs.… On the other hand, if there was serious wrongdoing, you have to try and go after them,” said Mayes (St. Vital).

Sheegl, Babakhanians and Katz, as well as Sheegl’s lawyer Robert Tapper could not be reached for comment.

Joyanne.pursaga@freepress.mb.ca

Twitter: @joyanne_pursaga

Joyanne Pursaga

Joyanne Pursaga
Reporter

Born and raised in Winnipeg, Joyanne loves to tell the stories of this city, especially when politics is involved. Joyanne became the city hall reporter for the Winnipeg Free Press in early 2020.

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