Broader questions remain after revelations

Opinion

Hey there, time traveller!
This article was published 01/03/2016 (3178 days ago), so information in it may no longer be current.

When a sitting mayor sells concert and hockey tickets to a contractor who bids on city work, the optics are terrible.

As columnist Dan Lett opined in Tuesday’s Free Press, former mayor Sam Katz appeared to demonstrate little regard for his office when he accepted cheques from Caspian Construction as payment for tickets to Winnipeg Jets games and concerts at the MTS Centre.

If optics were the only consideration, it was unwise for Katz to accept personal cheques from the company awarded Winnipeg’s police-headquarters contract, eventually valued at $172 million. But these transactions, revealed in the contents of a search warrant that allowed the RCMP to raid Caspian’s office in 2014, have ramifications beyond the realm of public relations.

The revelation of some form of personal relationship between Katz and Caspian president Armik Babakhanians, described as a friendship by one witness in the RCMP warrant, places three outstanding questions about the procurement of Winnipeg’s police headquarters in a new context.

These questions are aside from the RCMP’s avenue of investigation in 2014, when the Free Press first reported the Mounties were looking into allegations about doctored invoices at the police headquarters project.

They concern the larger question of how the police headquarters construction contract was awarded in the first place. These questions involve the security clearance granted to Caspian, changes to the construction-bonding requirement on the contract and the recipient of the contract itself.

The security-clearance issue first emerged in 2012, when the Free Press and CBC Manitoba reported Babakhanians had a business relationship on a downtown property with the late Ray Rybachuk, who had a lengthy criminal record and ties to organized crime.

Babakhanians moved quickly to sever his ties to Rybachuk, but the publicity forced Winnipeg police to reveal they conducted a special vetting of Babakhanians to ensure he posed no threat.

Typically, entities with ties to organized crime, however tenuous, are not permitted to bid on police work. Earlier, a police source who spoke to the Free Press alleged city hall exerted pressure to allow an individual with organized crime ties to bid on police headquarters work.

When asked about the allegation, former police chief Keith McCaskill said, “Look, it’s corporate.” Aside from this statement, there has never been independent corroboration of the source’s complaint.

The 2014 KPMG audit of the police headquarters project did not deal with the security clearance. It did, however, draw attention to a second question related to the award of the police headquarters construction contract.

The initial contract, for $50,000 worth of pre-construction services, was awarded to a joint venture between Caspian Projects and Akman Construction. This work was assigned to Caspian alone when Akman bowed out.

That was not problematic. The problem arose when the city awarded what initially was a $137-million construction contract to Caspian Projects without the firm ever submitting a solo bid.

“We note that Caspian did not submit a proposal, and that Caspian was awarded the construction contract,” the KPMG auditors wrote.

The third and final question related to the contract award pertains to a city decision to reduce the size of the construction bond, which is a pot of money a company must set aside as a form of assurance it can complete the work.

Six says before the police headquarters bid opportunity closed, the documents were amended to reduce the size of the construction bond to $25 million, or about one quarter of the value of the original construction estimate. The city later asserted in a report this was done to allow more companies to bid on the work. The city also said the reduction was conducted at the behest of the Surety Association of Canada, which represents the construction bonding industry.

As the Free Press reported in 2013, an official with the Surety Association of Canada called this “bullshit” and stated it would not recommend reducing a construction bond below the threshold of 50 per cent of the total construction estimate.

The cheaper bond resulted in cost savings, the city explained. The winning bid, from Caspian and Akman, was also the lowest.

None of these questions has ever been resolved. But they are worth asking again, now that Katz has established a personal relationship of some form with the president of Caspian Construction.

bartley.kives@freepress.mb.ca