Documents lay out RCMP’s ongoing case against former Winnipeg CAO Phil Sheegl

Hey there, time traveller!
This article was published 25/01/2017 (2892 days ago), so information in it may no longer be current.

Former City of Winnipeg chief administrative officer Phil Sheegl has been accused of accepting a private $200,000 payment from a company bidding on a major city project – then sharing half the money with former Mayor Sam Katz under the guise of a business loan.

RCMP lay out a series of allegations against Sheegl and others in affidavits filed in order to obtain search warrants linked to Project Dalton, the ongoing probe looking into the construction of both the Winnipeg Police headquarters and Canada Post’s Winnipeg mail-processing plant.

The Free Press obtained a copy of the unsealed court materials on Thursday. They refer to business files, emails and other documents seized during a December 2014 raid of Caspian Construction’s offices, as well as bank records linked to Sheegl and Katz. None of the allegations have been proven in court and no criminal charges have been laid at this time.

However, RCMP write that Sheegl is under investigation for committing “a breach of trust in connection with the duties of his office by accepting $200,000 for showing favour to Armik Babakhanians with relation to the Winnipeg Police Service Headquarters.” The alleged offence occurred between May 1, 2011 and Dec. 11, 2013.

Babakhanians, the owner of Caspian, is also accused of “corruptly giving Phil Sheegl, an agent for the City of Winnipeg, a reward to wit, $200,000” on July 22, 2011. He allegedly did this by using a so-called “shell company” called Mountain Construction Ltd. Sheegl, in turn, accepted the money in a business called F.S.S. Financial Support Services.

RCMP Sgt. Breanne Chanel wrote in an affidavit that this payment just days after Sheegl was given authority to award contracts for the WPS headquarters project. Sheegl also attended a private meeting with Caspian officials and Katz at 529 Wellington prior to the the construction contract being awarded.

The Oct. 1, 2010 dinner gathering occurred six weeks before the city began hearing police-HQ proposals.

‘Sheegl could be a Caspian friend for a long time to come’

In a Dec. 10, 2010 email to Caspian employees about an upcoming meeting with Sheegl, Babakhanians allegedly wrote “Please, let’s have the place ready and welcome him with open arm he could be a Caspian friend for a long time to come.”

Chanel said the evidence gathered to date “suggests that Sheegl had influence which resulted in it not being a completely transparent and competitive bidding process.” Her affidavit includes numerous email exchanges between the two men which RCMP have obtained.

“I am about to send you a blind copy of a confidential email. Please be careful with it, it’s part of my strategy to get this done for you,” reads a Dec. 16, 2010 email Sheegl wrote to Babakhanians, according to the RCMP affidavit.

RCMP also included an email Sheegl allegedly sent that same day to Winnipeg deputy chief administrator Alex Robinson and Winnipeg chief financial officer Mike Ruta which played up Caspian’s bid.

“PLEASE make this thing work,” Sheegl wrote, according to RCMP.

“We really want this project,” Babakhanians wrote in a Jan. 26, 2011 email, according to RCMP.

“I know and you know I will do everything I can to help us all succeed here together,” Sheegl allegedly replied that same day.

Sheegl is also accused of sharing confidential city emails about the police HQ bidding with Babakhanians before Caspian was awarded the contract on Feb. 10, 2011.

HQ costs ballooned, prompted investigation

Caspian was the general contractor for the downtown project that converted the former Canada Post warehouse into the new police headquarters, which city council approved at a cost of $135 million. The final price tag for the conversion was $214 million, prompting city council to have two independent audits conducted. This prompted Manitoba justice officials to ask the RCMP to launch an investigation into suspected criminal activity more than two years ago.

Caspian also completed work on the Canada Post facility near the Richardson International Airport in 2010 at a cost of more than $100 million. The two-storey building has 250,000 square feet of mail-processing space and approximately 45,000 square feet of retail, office, cafeteria, kitchen and training space.

In the affidavits, RCMP say they’ve identified that Babakhanians and Pamela Anderson, Caspian’s office manager, “used inflated and altered sub-trade invoices and quotes to defraud the City of millions of dollars for work that was done at costs less than Caspian’s fraudulently submitted progress claims.”

“In addition to these frauds, police are investigating the use of a secret commission in order to acquire the WPS HQ construction contract,” Chanel wrote.

RCMP say they’ve seized two binders containing construction records and documents for the Canada Post mail processing plant which form the basis of potential fraud allegations against Babakhanians.

“These records are original and sub trades invoices with handwritten notes identifying them as being either ‘true’ or ‘inflated’ along with change orders and requests for progress payments claims with handwritten notes evidencing fraudulent billing and the payment of a secret commission,” RCMP Const. Davide Masi wrote.

“It was apparent that Canada Post received the ‘inflated’ version of the document rather than the ‘true” document. Because Canada Post had acted on an ‘inflated’ value quote, it appeared as though a fraud had occurred.”

Robert Tapper, the lawyer representing both Sheegl and Katz, called the criminal allegations “offensive” but declined to comment when reached by the Free Press on Thursday. He told CBC that Babakhanians paid Sheegl as part of a $327,000 real-estate deal in Arizona his clients made with Babakhanians in the spring of 2011.

Tapper admitted that Sheegl then gave Katz part of the money, writing “loan” on the $100,000 cheque deposited by Katz in August 2011. He told CBC that while the “optics are terrible” this was simply a business deal between three friends and fellow Glendale Golf & Country Club members.

Sheegl was named deputy chief administrative officer in 2008 and promoted to CAO in May 2011. He resigned from his post in October 2013 as controversy swirled about cost overruns at the police headquarters and other city projects, including an audit into the fire-paramedic station construction.

mike.mcintyre@freepress.mb.ca

Timeline