‘We could have done this better’: former Caspian manager testifies at police HQ inquiry

A former manager of Caspian Projects said his company and the city had opposing views on how costs should be billed for the Winnipeg Police Service headquarters project, which played a key role in the company’s decision to alter hundreds of invoices.

Shaun Babakhanians, the son of Caspian owner Armik Babakhanians, testified at a public inquiry into the project on Thursday about the financial documents submitted to the city between roughly 2012 and 2014.

The city’s repeated requests for documents that back up subtrade costs were a source of frustration for Caspian, whose leaders believed a fixed price for the work made it unnecessary to share that level of detail, he said.

“On the city side, (the company’s view was) it’s none of your business. As in, what I pay my subtrade is irrelevant to you. You’ve negotiated a number with me overall,” said Babakhanians.

He noted he worked full-time for the company from about 2005 to 2016.

Earlier in the inquiry, Armik Babakhanians testified that he submitted hundreds of false invoices but he denied overcharging the city for the work.

While serving as project manager at the time of the headquarters project, Babakhanians said he worked on the city’s request for proposal on the headquarters.

He said Caspian initially believed it could bill the city for construction charges, plus his company’s profit and other costs. He said the city appears to have taken an opposite view, that only the cost of each step of the work should be billed.

Babakhanians confirmed he helped inflate and alter price quotes, while he said his father made the actual decisions to do so.

Inquiry commissioner Garth Smorang asked why the billing to the city didn’t spell out exactly what was being charged.

“You could have said ‘Here was our cost for work already done … here’s our proposed markup’ and then you could have negotiated with the city as to what a fair price would be, as opposed to leading the city or anyone reading those documents to believe that that was an actual quote, when in fact it wasn’t,” said Smorang.

“There’s no limit to the number of ways I’ve thought back onto how we could have done this better,” Babakhanians answered.

“The optics of this are eventually what exploded all of it … Why go that route, when you can go the more transparent route and have improved optics?” he added.

Smorang noted one bill to the city raised the amount from an original quote by $1 million, suggesting no construction client would approve that.

“If you’re transparent, (they’re) going to see that and (they’re) going to say ‘hell no’ … By being non-transparent, you get away with it,” he said.

Babakhanians suggested that, at the time, Caspian thought its main priority was to ensure the overall price was fair.

“If it appears fair, and ultimately, everything appears to be a fair price, what’s the harm?” he said.

Babakhanians said he agrees now that the way invoices were handled was “unacceptable.”

“The ideal thing to do would have been to just pump the brakes on the project,” he said.

However, he testified actually leaving the project after committing to do the work would have been very difficult, amid the need to provide police with a new building and complete the work before the next municipal election.

“At that time, the train has left the station … Everyone is pushing you from every (direction). Basically, it’s a full body vice to go,” said Babakhanians.

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Problems related to the headquarters at 245 Smith St. triggered multiple legal battles since it was completed in 2016. First expected to cost $135 million, the price soared to $214 million, when late flood damage and security upgrades are included.

Earlier this month, forensic accountant Victor Neufeld told the inquiry he estimates $45 million to $50 million in excess claims were filed for the HQ project.

The City of Winnipeg is taking steps to claim a combined settlement of up to $28 million for fraud and construction deficiency lawsuits it filed in relation to the headquarters project.

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.