The final public inquiry report into construction of Winnipeg Police Service headquarters concludes there was misconduct and inflated costs and calls on the city to make changes to prevent the project’s shortcomings from being repeated.
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The final public inquiry report into construction of Winnipeg Police Service headquarters concludes there was misconduct and inflated costs and calls on the city to make changes to prevent the project’s shortcomings from being repeated.
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The final public inquiry report into construction of Winnipeg Police Service headquarters concludes there was misconduct and inflated costs and calls on the city to make changes to prevent the project’s shortcomings from being repeated.
Problems related to the headquarters at 245 Smith St. have plagued the city for more than a decade. First expected to cost $135 million, the price soared to $214 million, and included expenses related to flood damage and security upgrades.
An external audit found the project was severely mismanaged. RCMP completed a lengthy investigation into fraud and forgery allegations but no criminal charges were laid.
RUTH BONNEVILLE / FREE PRESS
Inquiry commissioner Garth Smorang’s report finds “fictional” invoices show Babakhanians’ actions amount to “misconduct.”
During the inquiry, a forensic accountant estimated $45 million to $50 million in excess claims were filed. Armik Babakhanians, owner of main headquarters contractor Caspian Projects, strongly denied allegations that his company overcharged the city.
However, Babakhanians acknowledged his company did turn in hundreds of false invoices to ensure it was fully paid for its work and made a profit.
Inquiry commissioner Garth Smorang’s report finds “fictional” invoices show Babakhanians’ actions amount to “misconduct.”
“Nothing that happened on the HQ project happened by accident. Armik set out right from the start of the HQ project to inflate Caspian’s costs, to the detriment of the city,” Smorang writes.
Later in the report, Smorang agrees with the forensic accountants’ estimate.
“I fully accept… that the total excess claims made by Caspian and paid by the city ranged from $45 million to $50 million, all paid for by the taxpayers of Winnipeg directly into the pocket of Armik Babakhanians,” he writes.
Overall, he estimates the city overpaid by about $43.3 million for the project, with $42 million of that going to Caspian.
Smorang also takes issue with a payment Babakhanians made to former city chief administrative officer Phil Sheegl and former mayor Sam Katz, rejecting testimony from Katz and Sheegl that it was made to buy land in Arizona.
“I am satisfied on the balance of probabilities that they entered into a financial transaction whereby Armik paid $327,200 to Sheegl and Katz, which was then split equally between them.… I do not believe the testimony of the three participants as it pertains to the payments made in 2011 and 2012,” the commissioner writes.
Even if there was a land transaction, the financial transaction with the key contractor would still amount to “a gross and obvious conflict of interest,” he writes.
The inquiry was set up to answer questions about the construction project but witness testimony was not considered evidence that can be used in future criminal or civil cases.
“I cannot go so far as to conclude that conduct has amounted to a criminal act or a civil wrongdoing,” writes Smorang.
Caspian Projects paid a $28-million settlement for fraud and construction deficiency lawsuits to the city earlier this year.
Sheegl was ordered to pay the city $1.15 million following a court ruling that concluded he accepted a $327,000 bribe from Caspian. Sheegl has repeatedly denied accepting a bribe.
The two legal challenges were originally part of one lawsuit that was later split up.
The report provides 25 recommendations to improve large-scale construction projects in the future.
They include calls for the city to engage an independent quantity surveyor to certify payments and keep all subtrade invoices, and having all councillors who participate on selection panels complete a conflict-of-interest declaration.
Bylaw changes are proposed to allow city council hold private sessions when disclosing information could be harmful to the city’s economic interests, is considered “privileged” or “any other reason that city council deems appropriate.”
Smorang also suggests the city set a five-year term for the city’s integrity commissioner, provide that person immunity from being sued from action taken in their duties and extending the role’s mandate to cover senior members of the city’s public service.
The $2.3-million public inquiry into the headquarters project took place over 27.5 hearing dates between February and May.
joyanne.pursaga@winnipegfreepress.com
X: @joyanne_pursaga
Joyanne is city hall reporter for the Winnipeg Free Press. A reporter since 2004, she began covering politics exclusively in 2012, writing on city hall and the Manitoba Legislature for the Winnipeg Sun before joining the Free Press in early 2020. Read more about Joyanne.
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