Police HQ inquiry told about inaccurate billing that inflated cost

A forensic accounting expert says his review of costs related to the Winnipeg Police Service headquarters led him to conclude some invoices for different projects were “blended” together and inaccurately billed to the project, inflating its price.

On Wednesday, expert witness Victor Neufeld told the public inquiry that’s probing the HQ project that emails and other documents indicate some claims for work were tied to other construction projects.

For example, he believes documents linked to steel work for the headquarters show the city received bills for a “blended” tab of different construction projects, not just the headquarters work.

Neufeld said $2.6 million in claims was submitted for structural steel work at the headquarters, including $741,000 of identified paid costs and estimated excess claims of $1.9 million.

He previously estimated $45 million to $50 million in excess claims were filed for the HQ project overall.

For the steel work, he alleges main contractor Caspian Projects blended the costs of a Transit garage, canine unit building and the headquarters together on invoices billed for the HQ.

“The vast majority of those invoices relate to entirely non-project costs,” said Neufeld.

The accountant said the same steel subcontractor worked on all three construction projects, which meant some billing periods overlapped.

Ultimately, he asserts documents show $1.5 million of steel work charged to the headquarters covered other construction projects, mainly the Transit garage.

Neufeld said it’s not clear whether the city was also billed for steel costs at the Transit garage separately.

He also displayed multiple emails that he suggested support his analysis. In one case, an April 2013 email he said a Caspian office manager sent to company owner Armik Babakhanians suggests a subcontractor’s invoices posed a concern because most referenced a different project.

“All but one invoice makes reference to Transit. We can’t post Transit invoices into HQ because it is an obvious flag for the auditors,” the email states.

Another email attributed to Babakhanians, dated January 2013, advises a subcontractor on the Transit project that they need to “claim on police.”

Neufeld said he read that to be an instruction to file such claims to the headquarters project.

He said some contractors also told RCMP they did not issue invoices that were attributed to their companies.

Problems with the headquarters project at 245 Smith St. have plagued city council for years. An external audit found it had been severely mismanaged. Initially expected to cost $135 million, its price soared to $214 million when flood damage and some late security upgrades are included.

The city expects to receive a settlement of up to $28 million from fraud and construction-deficiency lawsuits linked to the project, though the exact amount depends on when the money is paid out.

In other findings, Neufeld said $33.1 million was claimed for electrical work on the project, including paid costs of $23.8 million and estimated excess claims of $9.4 million.

He said an electrical contract noting a price of $23.1 million was noted on a document found with a sticky note attached that states “Caspian Eyes Only HQ.”

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Neufeld also displayed records from multiple change orders on the project, including one in which Caspian billed the city about $124,000, while he said actual costs appeared to be just under $25,000.

The expert has previously faced questions about how complete his analysis is, given 1.7 million different documents were available to be reviewed.

He is expected to face further questions on his findings Thursday.

joyanne.pursaga@freepress.mb.ca

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Joyanne Pursaga
Reporter

Joyanne is city hall reporter for the Winnipeg Free Press. A reporter since 2004, she began covering politics exclusively in 2012, writing on city hall and the Manitoba Legislature for the Winnipeg Sun before joining the Free Press in early 2020. Read more about Joyanne.

Every piece of reporting Joyanne produces is reviewed by an editing team before it is posted online or published in print — part of the Free Press‘s tradition, since 1872, of producing reliable independent journalism. Read more about Free Press’s history and mandate, and learn how our newsroom operates.