Caspian on the hook for $21.5M after city drops claims against other defendants in Winnipeg police HQ case
Confidentiality clause in the settlement keeps details under wraps
The City of Winnipeg has dismissed its claims against dozens of people and companies involved in the Winnipeg Police Service headquarters construction project, leaving the contractor, Caspian, and Caspian-related defendants on the hook for the entire multimillion-dollar settlement payment.
Last March, city council voted in favour of settling civil lawsuits alleging fraud and deficiencies by those involved in the construction of the downtown police HQ.
The settlement called for the nearly 40 defendants in the case to pay the city $21.5 million to $28 million, depending how quickly the money is paid.
According to December court filings, the city said "the parties have agreed to resolve this matter amongst themselves."
No details were provided in the documents for why or how it was decided that only the Caspian defendants would foot the entire bill, but a Manitoba Court of King's Bench judge signed off on it.
"The City's claims as against all defendants, except the Caspian defendants, be andare hereby dismissed in their entirety without costs to any party, as though evidencehad been heard and judgment pronounced on its merits," said the Dec. 15 judgment.
The Caspian defendants are:
- Caspian Projects.
- Caspian Construction.
- Caspian owner Armik Babakhanians, his wife, Jenik, and son, Shaun.
- Triple D Consulting Services Inc.
- Former Caspian office manager Pamela Anderson.
- 4816774 Manitoba Ltd. (known as Mountain Construction).
- JAGS Development Ltd.
- Brooke Holdings Ltd.
- Logistic Holdings Ltd.
- JAW Enterprises Inc.
Twenty-nine of the defendants had also sued one another. The judgedismissed those cross claims.
In 2022, the city added John Garcea, his wife Mabel and a number of their companies, including S&J Construction, as defendants in the case. They were known as the Garcea Group.
In a statement to CBC News, the Garcea Group said it is pleased the court action is settled and this chapter is closed.
"The allegations made were serious and very troubling for us, particularly since part of the matter was played out through the media while the court proceedings took their ordinary and more confidential course," the statementsays.
The Garcea Group said it was not asked to contribute to the settlement payment nor did it do so.
CBC News reached out to the lawyer for the Caspian defendants and the lawyers for the other named parties in the case. None of them responded.
One of the lawyers involved in the case told CBC News the parties signed a confidentiality clause and could not provide details of the settlement or what led up to it.
That doesn't sit well with Neil McArthur, the director of the centre for professional and applied ethics at the University of Manitoba.
"People want to know what happened," McArthur said. "I think that to have it all just closed down like this is somewhere between unsettling and outright shocking, actually.
"If there was a settlement, that means something happened that shouldn't have happened or they wouldn't be paying out, they would be going to court to defend themselves."
The construction of Winnipeg's police headquarters was years behind schedule, $79 million over budget and the subject of two external audits by the time it opened in 2016.
In 2018, the city sued contractor Caspian Projects Inc. and engineering consultant Adjeleian Allen Rubeli Ltd., alleging there were more than $10 million in deficiencies in the building. The construction project was also the subject of a five-year RCMP investigation that closed in December 2019 with no charges laid.
In January 2020, the city once again sued Caspian and numerous others, including Caspian owner Armik Babakhanians, former CAO Phil Sheegland project director Ossama AbouZeid, alleging they conspired to defraud the city out of millions of dollars.
The settlement covers both lawsuits.
Sheegl successfully petitioned the court to have his case dealt with separately. Last year a judge found he had accepted a $327,200 bribe from Babakhanians. He has been ordered to pay more than a million dollars to the city.
The remaining defendants agreed to settle with the city instead of going to trial. They agreed to pay $21.5 million, but if the money isn't paid within a year, the figure risesto $22.5 million, and $23.5 million if it isn't paid within three years.
If full payment is not made within three years, the city will receive $28 million.
The city didn't respond to questions about the settlement, but said it has not yet received payment from Caspian.
Gavin Cameron, a British Columbia lawyer specializing in white-collar crime cases, is not involved in this case but agreed to provide insight.
Oftentimes,he says, settlements wouldn't happen if details of the agreements are made public.
"A strong motivator for defendants to settle is a guarantee of confidentiality," Cameron said in an interview.
He said the system favours settlements because if every case went to trial, the justice system would grind to a halt.
"I can see why taxpayers should know what's being done to recoup funds that belong to them," he said."But at the same time, if you want to actually be able to recover those funds in the absence of a lengthy trial, we need to incentivize people to settle."
McArthur believes if a confidentiality clause was the only way to get to a settlement, the city should have rejected it and proceeded with a trial.
"I think that knowing what happened is the key piece here. I think the money is actually kind of irrelevant at this point," said McArthur.
He says it's now more important than ever for the province to call a public inquiry into this case.
"We need to have confidence in our public officials. We also need to show to our public officials that we won't stand for this kind of misconduct and that we will be transparent and we will find out the truth if things go onthat shouldn't go on," McArthur said.
"It's looking more and more like the city has allowed these defendants to protect themselves in a way that will prevent the public from ever knowing, and I think that's a serious ethical breach on the part of the city."
Premier Wab Kinew has promised to call a public inquiry into Winnipeg construction and real-estate scandals, which included the police headquarters project.
Kinew said in December he expects that inquiry to be launched this calendar year.
McArthur worries the confidentiality clause will affect the testimony given at an inquiry.
"That's one of the worrying things, is that these kinds of settlements could interfere with the ability of that sort of inquiry to discover the truth."
with files from Bartley Kives
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