Police HQ contractor pays $28M in city settlement Mayor says changes made to city policies should prevent ballooning costs, delays on future projects By: Joyanne Pursaga Posted: 2:29 PM CDT Friday, May. 22, 2026 Last Modified: 6:37 PM CDT Friday, May. 22, 2026 Updates

The main contractor for the Winnipeg Police Service headquarters project has finally paid a $28-million settlement for fraud and construction deficiency lawsuits.

Caspian Projects paid the amount to the City of Winnipeg’s external lawyers Friday, officials confirmed during the final day of the public inquiry that’s looking into the headquarters project.

“The conclusion of the inquiry, and also the receipt of these funds, is something that will, hopefully, … bring some satisfaction to the citizens that this is now over,” said Joseph Dunford, the city’s chief administrative officer.

The headquarters project at 245 Smith St. was rife with problems, including a ballooning budget and delays. The building opened in June 2016 at a cost of $214 million, well above its original $135-million price tag. An external audit found the project had been severely mismanaged.

RCMP completed a lengthy investigation into fraud and forgery allegations related to the project but no criminal charges were laid.

Dunford said the settlement funds are being held under trust conditions that must be met for the city to receive the payment.

While the city had noted it could take properties as part of the payment, Dunford said he doesn’t believe any are involved at this point.

The money adds to a $1.15-million payment the city received from former chief administrative officer Phil Sheegl, due to a court ruling that he accepted a $327,000 bribe from Caspian.

Sheegl denied accepting a bribe when he testified at the inquiry, stating payments from Caspian covered a real estate deal to sell one acre of land in Tartesso, Ariz.

“A major win for our city.”

“Nearly $30 million has now been recovered for Winnipeg taxpayers, which is a major win for our city,” said Mayor Scott Gillingham, in a press release.

“This outcome shows that pursuing this (legal) matter was the right call. I want to thank the city’s legal team and staff across the organization who worked for years to see this through. Their persistence delivered real results for Winnipeggers.”

The mayor could not be reached for further comment after the Friday afternoon announcement. When he spoke to reporters earlier in the day, Gillingham stressed the city has made several “substantial” changes to prevent the mistakes of the headquarters project from being repeated.

“Procurement practices are different. Real estate policy is different. We have a chief construction officer, we have a new governance model for our major capital projects,” he said.

During the inquiry, a report from auditing firm KPMG stated three “urgent” changes were still needed to add oversight on major city projects. It called on the city to tailor “fit-for-purpose” governance structures to large projects, clarify decision-making authority and provide detailed monthly reports for the largest, most complex projects.

An update from KPMG, which was shared by the city Friday, notes all three measures are now deemed to be “in progress.”

The provincial government called the public inquiry into the troubled project.

Justice Minister Matt Wiebe said he expects it to produce recommendations that help the city handle major projects in the future.

“I think most Manitobans are shocked by the information they’ve already seen and I know that the report that’s going to be generated is going to be comprehensive and it’s going to shed some light on, obviously, the mistakes that were made in the past. But what we really want is to inform how do we improve these public processes and ensure that this could never happen again,” said Wiebe, at a news conference Thursday.

The minister said he’s not concerned that the inquiry hearing dates were reduced from 48 days to 27.5 (when half days are factored in) to stay within the probe’s $2.3-million budget.

“We’ve got full confidence in the work that’s being done,” he said.

As the inquiry ended, a political pundit said its public nature could help to deter city staff and politicians from breaking rules in the future.

“I think that it shows that when you’re in a position of trust and power, that there might be some people looking into your behaviour, even if it’s some years later,” said Christopher Adams, a University of Manitoba political scientist.

“It should have been done 10 years ago … but it’s good that it’s now being done.”

While he doesn’t believe the inquiry revealed “earth-shattering” revelations, Adams said it was valuable.

“It should have been done 10 years ago … but it’s good that it’s now being done. (The headquarters was worth) hundreds of millions of dollars. This is civic money and it’s long overdue to get to the bottom of what happened here,” he said.

During the inquiry, a forensic accountant estimated $45 million to $50 million of excess claims were filed for the headquarters project. Armik Babakhanians, owner of Caspian Projects, strongly denied allegations that his company overcharged the city to receive that amount.

Babakhanians said his company did turn in hundreds of false invoices for the project, with a goal to ensure it was fully paid for its work and earned a profit.

“There were a number of officials who showed some measure of courage in speaking truth to power.”

Paul Thomas, professor emeritus of political science at the University of Manitoba, said the inquiry could explore whether stronger whistleblower protections could have helped city staff raise, or escalate, their concerns about the project.

“They need to be protected against retaliation … There were a number of officials who showed some measure of courage in speaking truth to power,” said Thomas.

Inquiry commissioner Garth Smorang is expected to file a report on the probe by the end of this year.

joyanne.pursaga@freepress.mb.ca

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