Former Winnipeg CAO got $200K 'secret commission' for helping contractor, RCMP alleged

Manitoba RCMPallegedthe former head of Winnipeg's public service gave inside information about the city's new police headquarters to a firm that paid him $200,000 and that he then shared the money with the city's formermayor.

In information provided to a judge as part of Project Dalton the investigation into the construction of Winnipeg's police headquarters the Mounties made breach-of-trust allegations against former Winnipeg chief administrative officer Phil Sheegl.

Police also alleged the owner of Caspian Construction paida secret commission to Sheeglfor showing favour to him in the award of a contract to transform a former Canada Post complex into the new home of the Winnipeg Police Service.

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RCMP also alleged Sheegl gave half the $200,000 payment to former Winnipeg mayor Sam Katz and labelled it a loan.

"This payment occurs less than two weeks after Sheegl, as CAO, is delegated authority to award (unlimited and unspecified) contracts for the WPS HQ project, a project for which Caspian is later awarded a [guaranteed maximum price] contract in excess of $100 million," RCMP Sgt. Breanne Chanel wrote in a sworn affidavit provided to a judge in June 2016, referring to the $200,000 payment to Sheegl.

Thisinformation wasprovided to a judgein order to obtain bank records and represents a snapshot of Project Dalton.Before police are allowed to search financial records, they are required to present evidence to support their request for institutions to produce documents.

Robert Tapper, the lawyer representing both Sheegl and Katz, acknowledged Caspian owner ArmikBabakhanians paid Sheegl and that Sheegl paid Katz, butdenied the RCMP'sbreach of trust allegations.

Tapper said Caspian'spayment to Sheeglwas part of a $327,000 real-estate deal his clients made with Babakhaniansin May or June 2011.

"We knew all along that Sam was doing land development in Arizona. We knew all along that Phil was doing land development in Arizona. We knew all along that the two of them are friends and did deals together. Is that a surprise?" Tapper said in an interview in his Winnipeg office on Wednesday.

"I mean the reality is the allegation that's being made here is vastly more serious than they breached some ethical rules. They're saying they took a bribe. That's offensive and wrong."

Babakhanians declined to comment.

RCMP alleges Winnipeg municipal skulduggery

8 years ago

Duration 1:35

Manitoba RCMP say the former head of Winnipeg's public service shared inside information with a firm that paid him $200K and that he shared the take with the city's former mayor

Private steakhouse meeting

RCMP also allegedSheegl shared confidential city emails about the police HQ with the Caspian president, told his son Shaun Babakhanians about other police HQ contract bidders and attended a private meeting with Caspian officials and the mayor at 529 Wellington, a high-end Winnipeg steakhouse, all before the construction contract was awarded.

"Dinner to discuss possible business arrangement. Shaun we need to arrange for a table. I have booked the table @6pm private room," the RCMP alleged Armik Babakhanians wrote in an email to himself, his son and a former Caspian employeeabout a steakhouse meeting slated for Oct. 1, 2010, six weeks before the city began entertaining police-HQ construction proposals.

The allegationsappeared in a June 2016 court application filed by the Mounties in order to obtain financial records related to two bank accounts belonging to Sheegl, who worked as a senior Winnipeg public servant from2008 to 2013, and a third account connected to Katz, Winnipeg's mayor from 2004 to 2014.

RCMP allegedBabakhanians funnelled$200,000through a Caspian-controlled numbered company operating as Mountain Construction to a Sheegl-controlled firm called F.S.S. Financial Support Services.

RCMPalleged Mountain paid F.S.S.$200,000 on July 22, 2011,two days after city council voted to give Sheegl the power to award police headquarters construction contracts on his own.

The Mounties alleged F.S.S. transferred $97,556 "to Sheegl's benefit"between July 25 and Aug. 13, 2011.

RCMP alleged Sheegl withdrew $1,500 cash, wrote a $14,352 cheque for "Jets Tickets"to an unnamed individual andthen transferred $81,704 into two of his personal bank accounts.

Of the money left over, the Mounties alleged Sheegl wrote a cheque for $100,000,payable to Katz, who was the city's mayor at the time.

"The Re: field on cheque showed 'loan,'" wrote Sgt. Chanel, who added the money was deposited into an account believed to be associated with Katz on Aug. 2, 2011.

Katz and Sheegl were friends before the latter was hired by the city to run its planning, property and development department in April 2008. Sheegl was promoted to deputy chief administrative officer later that year and was named CAO in May 2011.

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Sheegl resigned from the city in October 2013, after a second round of cost overruns at the police headquarters came to light and shortly before the release of a fire-paramedic station construction audit that was critical of his performance.

Katz left office in November2014, after he chose not to seek a third term as mayor.

Lawyer calls RCMP'sloppy'

Tapper, the lawyer for Sheegl and Katz, called the RCMP investigation sloppy.

"It's typical of theRCMP. Really,they see communistsin every closet? They see criminalseverywherethey look. They never once bothered to check this thing out. They never once bothered to talk to somebody involved," Tapper said.

"They could haveevenasked Phil, they didn't do that. They could have asked Sam, they didn't do that."

However, Tapper said "the optics are terrible" when it comes to the $200,000 payment to Sheegl.

Tapper said that cheque was a Babakhanians down payment on a 25 per cent portion of a propertyhis clients ownedin Tartesso, a community in Buckeye, Ariz., a western suburb of Phoenix.

Tapper said Sheegl and Katz's property was part of a larger parcel owned by a separate corporate entity.Tapper said he wasn't aware of the company's name or ownership, addinghe did not have enough time to obtain that information from his clients.

Tapper said the property transactionwas a handshake deal reached in May or June 2011 that Sheegl and Katz got around to putting on paper in May 2012. He presented CBC News a copy of a handwritten agreement that was signed by Sheegl and had a space for Babakhanians' signature.

"This was a land deal. It's as simple as that. I mean we don't have to disclose that we own a house. We don't have to disclose that we own a cottage," said Tapper, adding that in a perfect world, Sheeglmaybe should have disclosed the deal.

"But you know, they would say, 'What did you think? We were doing deals before, we'll do deals after and we were doing deals during.' That's what they did. That's how they made their revenue. That's how they made their lifestyles."

Asked why Sheegl marked "loan" onthe $100,000 cheque to Katz, Tapper said his client did not remember but thinks it was for tax purposes.

"Remember, you're talking about 4 years ago," he said.

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In September 2012, after CBC News reported Katz purchased an Arizonashell company from Sheegl, the CAO suggested he was no longer doing deals with the mayor.

"As I have said before, the mayor and I are not partners in any business," Sheegl said in a statement at the time.

Tapper saidKatz, Sheegl and Babakhaniansare all members of the same Winnipeg golf club, Glendale Golf & Country Club.

2-year RCMP investigation into police HQ

The allegationsare the latest made by the RCMPin the 25 months since they began investigating the construction component of Winnipeg's new downtown police headquarters, a $214-million purchase and renovation of a former Canada Post office tower and mail-sorting facility.

Thepolice headquartersopened in June 2016, four years behind schedule and $79 million over the budget approved by city council in 2009. TheRCMPbegan investigating the construction project in 2014, after Manitoba Justice asked the Mounties to review aKPMGproject audit that concluded there were problems with the procurement of the construction work.

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In information provided to judges as part of the investigation, the Mounties alleged Caspian president Babakhanians inflated police HQ invoices and along with a projectengineer and architect offered a $600,000 secret commission to project manager Ossama AbouZeid.

Sgt. Chanel's sworn affidavit in June 2016 said information obtained through previoussearches also revealed evidence former CAO Sheegl breached his duties as a public officer by accepting a payment from the construction company owner. Chanel allegedBabakhanians and Caspian employee Pam Anderson offered "a secret commission to Sheegl in exchange for favour towards Caspian in the award of contracts relating to the construction of the WPS HQ project."

'My strategy to get this done for you'

In theinformation Chanel provided to a judge, theRCMP alleged Sheegl shared confidential City of Winnipeg emails about the police HQ construction job with Babakhanians before Caspian was awarded a contract eventually worth $172 million.

RCMP alleged the Caspian owner was in discussions with several city employees about bonding changes eventually approved by Sheegl that would allow the Winnipeg firm to compete with larger, national construction companies also bidding on the job.

"I am about to send you a blind copy of a confidentialemail. Please be careful with it, it's part of my strategy to get this done for you," RCMPallegedSheeglwrote in anemailtoBabakhanianson Dec. 16, 2010.

RCMPallegedSheeglthen sentBabakhaniansa copy of anemailSheeglsent to former Winnipeg deputy chief administrator Alex Robinson and Winnipeg chief financial officer MikeRuta, advocating on Caspian's behalf.

"I just know his [believed to referenceBabakhanians'] next call is to Sam and the comment from Sam will be 'They [believed to reference Caspian] are strong enough for Canada Post and the Department of Defence, but we can't figure it out.'PLEASE make this thing work," theRCMPallegedSheeglwrote in hisemail.

The police HQ construction contract was awarded in two parts. The bidding period on the$50,000 first phase closed on Jan. 18,2011.

RCMP alleged Sheegl revealed the identity of the bidders to Caspian employee Shaun Babakhanians, Armik's son, three days later.

"Being evaluated as we speak, should have some idea by next Friday. Only four submissions PCL, Graham, Dominion and Caspian," the RCMP alleged Sheegltold Shaun Babakhanians via email.

'Phil and Sam are pulling for us'

RCMP also alleged that ShaunBabakhanians expressed fears that Barb D'Avignon, Winnipeg's director of materials management, favoured the other firms, all of which are larger companies with national profiles.

"Barb favors big players I know she does this is her last project and she wants this to be her little legacy we have to get thru this lady at this stage," the RCMP alleged Shaun Babakhanians wrote to his father on Feb. 7, 2011.

The RCMP alleged Armik Babakhanians wrote back to his son the same day: "Phil and Sam are pulling for us with a coupl of other Herbies is another one in the background but this Barb lady has her own agenda and they r not going against her."

The city awarded the $50,000 first phase of the construction contractto a Caspian-Akman Construction joint venture on Feb. 10,2011.

The RCMP alleged communications between Sheegl and Babakhaniansafter this date suggest"Armik and Sheegl had discussions concerning a payment or commission in exchange for Caspian being awarded the GMP [guaranteed maximum price]contract" for the police headquarters project.

'This will remain confidential'

TheRCMPalleged Armik Babakhanians wrote himself an emailon Feb. 17 about the final contract.

"Phil said he will get approval for $126m however I think he wanted 2+2 for sam andphil but the rest for us, he also wanted to see if he can built across the street for city. This will remain confidential for ever," the Mounties alleged Babakhanians wrote.

The jointventurewas dissolved on June 14, 2011, and the initial $50,000 contract was awarded to Caspian alone.

On July 20, 2011, council gave Sheeglthe authority to award the final contract,city records say. The $200,000 Caspian payment to Sheegl F.S.S. took place two days later.

The second phase of the police HQconstruction contract, initially worth$137 million, was awarded by Sheeglto Caspian onNov. 18, 2011, city records say.

Tapper, the lawyer for Sheegl and Katz, said there was nothing "sinister" about Sheegl's communications with Caspian officials.

"If in fact he showed favour by giving somebody a private email or information on who is bidding even though everybody knows who is bidding that's not a criminal matter. That might be,if he were still the CAO, something that he would have to come to terms with on an ethical breach,if that was what were alleged.I don't think it is," Tapper said.

"Right on paper, you've got a guy that's built airfields and the cargo buildings for Cold Lake, you've got a guy who built the post office at the Winnipeg RichardsonAirport. He looks good on paper. Isn't that something you want to do for the city when you're the CAO?"

None of the RCMP allegations have been proven in court and no charges have been laid.