Council to consider settlement offer for police HQ lawsuits
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City council may soon accept a multimillion-dollar settlement offer in lawsuits it launched for cost overruns linked to the Winnipeg Police Service headquarters project.
Council’s executive policy committee unanimously approved the proposed settlement Wednesday. Full council will cast the final vote on the matter March 23.
Should council vote to accept the offer, it would end court action against all remaining defendants.
If passed, the city would receive: $21.5 million, if the payment is made in full within 12 months of council’s approval; $22.5 million, if paid within 24 months; or $23.5 million, if paid within 36 months, according to a city report published Wednesday morning.
If payment isn’t made within 36 months of a final council vote in favour, the city would ask the Court of King’s Bench to be paid $28 million.
“This is a victory for the City of Winnipeg. It provides certainty to taxpayers,” Mayor Scott Gillingham told reporters after the EPC meeting Wednesday.
If council rejects the settlement, it will be asked to approve an additional $6.4 million for added legal costs to pursue the court challenges, which would take place in 2024. (Such a move would add to the $4.6 million the city has already spent on those legal efforts.)
“In the absence of an approved settlement, declining to provide the requested funding would prevent the city from proceeding with the actions and pursuing them to trial, which would effectively end the last remaining opportunity to provide accountability to the citizens of the city, with respect to the actions of the parties involved in the project,” the report warns.
In 2018, the City of Winnipeg filed a statement of claim to seek unspecified damages for alleged construction deficiencies from major contractor Caspian Projects and structural engineering consultant Adjeleian Allen Rubeli. The statement alleged both companies were “negligent” in their work on the downtown WPS headquarters.
In 2020, the city launched a civil suit in the matter against Caspian, AAR and dozens of other defendants, alleging a fraudulent scheme took place that inflated the price of the project.
The allegations have not been proven in court.
Fraud allegations against former City of Winnipeg chief administrative officer Phil Sheegl, and companies connected to him, were separated from the civil suit. The proposed settlement does not apply to that court action.
In March 2022, a judge found Sheegl accepted a bribe from Caspian owner Armik Babakhanians. The court later ordered Sheegl to pay the city nearly $1.1 million. The former CAO denies the allegations and is appealing the decision.
If the proposed settlement is rejected by council, trial dates have been scheduled to consider the fraud allegations March 4 to June 7, 2024, while the deficiencies lawsuit would be heard Nov. 4-29, 2024. There’s no set timeline for when a court ruling would be reached after that point.
The city was confident in its legal challenges from the start, but the settlement is the best option to move forward, Winnipeg CAO Michael Jack said Wednesday. “The city has done what we feel (is) everything we can do within the civil court sphere and I think this is realistically the best outcome we can manage.”
The mayor, elected in 2022 after serving more than five years as council finance committee chairman, agreed.
“It avoids an additional $6.4 (million), at a minimum, in additional legal costs over the coming years. It avoids years of ongoing legal proceedings and it provides assurance and certainty… Today, I believe, this is the best deal for the people of Winnipeg and that’s certainly why I supported it,” Gillingham said.
“Today, I believe, this is the best deal for the people of Winnipeg and that’s certainly why I supported it.”–Mayor Scott Gillingham
Coun. Brian Mayes said the agreement could prevent the city from devoting much more money and time to the legal battles.
“It’s public knowledge that if you lose a fraud case, you’re on the hook for another party’s legal fees, which can be pretty substantial… This could otherwise drag on for many more years and we could end up losing money rather than coming out with a settlement,” Mayes said during the EPC meeting.
Serious concerns surrounding the WPS headquarters project, which included the purchase and renovation of a former Canada Post facility, have plagued city council for years.
The building opened at 245 Smith St. in June 2016, at a cost of about $214 million — well-above its original $135-million price tag. An external audit later found the project was severely mismanaged.
The city report notes the construction component of the project — excluding the building purchase and other “soft costs” — was expected to cost $137.1 million in 2011, but later increased to $156.4 million.
The RCMP conducted a lengthy investigation into fraud and forgery allegations, but no criminal charges were laid.
Former mayor Brian Bowman had asked the province to open a public inquiry into the matter, which council endorsed in February 2017. Gillingham did not explicitly repeat the call for a public inquiry Wednesday, instead indicating he would be “open” to one.
At an unrelated event Wednesday, Manitoba Premier Heather Stefanson did not commit to holding such a probe or outright reject it.
“As I understand it, this is before EPC right now, and we will see what unfolds from there,” said Stefanson.
When asked what it means to have a potential settlement on the issue, the premier said: “The process has taken place the way it has, and we respect that process.”
Former mayor Sam Katz, who led council when the police HQ project was approved, declined comment Wednesday, as did Caspian representatives.
AAR could not be reached for comment.
— with files from Martin Cash
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.
Updated on Wednesday, March 15, 2023 2:29 PM CDT: Updates with final verison
Updated on Wednesday, March 15, 2023 5:42 PM CDT: Pushes another write thru