Report finds more than $40M in excess claims, misconduct in Winnipeg police HQ construction

The lead construction company behind the downtown Winnipeg Police headquarters was overpaid by more than $40 million worth of taxpayer money, the commissioner of a public inquiry has found.

The final report, titled A Sad Tale of Mismanagement, Misconduct and Misrepresentations, was released by commissioner Garth Smorang Monday. The Manitoba government-ordered probe found that the contractor, Caspian Projects Inc., was significantly overpaid by $42 million, bringing the total project cost to $209 million.

The document found that without the overpayment, the headquarters construction project would have been below the budgeted $193.6 million.

“The way that it was handled was not to the level that one would expect a municipality to handle a construction project of that magnitude in so many respects. Never mind the ethical breaches and the conflicts, the staffing was so sorely understaffed,” Smorang told reporters at a news conference Monday afternoon, following the report’s release.

The document noted that an additional $1.3 million was directed to Triple D Consulting Services Inc., which had a Caspian employee serving as its sole director.

“There’s so many reasons why this didn’t work. And to the city’s credit, it has undertaken consultant reports, through KPMG and others, since then, and has made significant improvements,” Smorang said.

Despite the recent improvements, the final report alleges wrongdoing by former Winnipeg Mayor Sam Katz, as well as former city chief administrative officer, Phil Sheegl, in their interactions with Caspian president, Armik Babakhanians.

“Former mayor Katz violated the public trust and violated his obligations under the code of conduct that applies to council members and the mayor,” Smorang said. Speaking on Sheegl, he added that “the evidence that we have received led me to conclude a lack of moral compass.”

In total, it alleged misconduct by nine individuals.

Global News has reached out to representatives for Katz and Sheegl, but did not receive a response by publication.

Caspian was said to have betrayed the city’s trust by producing falsified invoices, according to the inquiry report. It found the company delivered adjusted invoices to the city with higher payments than what the company spent on the work.

The company’s principal testified to the commissioner that it would be “fair to say that hundreds of invoices were altered,” Smorang said.

“A certain document might have been submitted by a sub-trade at $300,000 but then was subsequently altered at Caspian to be an invoice for $1.3 million and then submitted to the city. That’s the kind of misrepresentation we’re talking about, and again, hundreds of times,” he continued.

A forensic accountant concluded that Caspian submitted and received payments for $45 million to $50 million in excess claims, the report said.

The inquiry was ordered in February of 2025 following the tumultuous construction project. It primarily focused on the work that occurred from 2010 to 2013, which saw climbing construction costs based on what were later discovered to be falsified invoices.

The RCMP previously investigated the purchase and renovation of the former Canada Post building at 266 Graham Avenue, including seizing documents from Caspian Projects Inc.

Police provided the documents to the Manitoba Prosecution Service, which announced in 2019 that no charges would be laid. In a news release Monday, the prosecution service said it is reviewing the report’s evidence to consider the possibility of charges.

In 2023, civil damages were awarded to the city after it launched litigation three years prior against the former CAO and Caspian.

The commissioner provided a total of 25 recommendations.

He recommended the City of Winnipeg take steps to protect itself in future large-scale projects by involving lawyers and independent consultants to help refine its project planning phase and ensure that estimates are reasonable and accurate. The commissioner also said that the city council should consider closed-door meetings in the future for confidential matters.

Responding to the commissioner’s report, Winnipeg’s current Mayor Scott Gilingham, who is seeking re-election, said since the events that were recounted in the report, the City of Winnipeg has made “significant improvements as to how major projects are managed.”

“In the end, I think this report confirms what many of us have suspected for years, that individuals who held positions of trust and authority violated that trust. And Winnipeg taxpayers paid the price,” Gillingham said.

“My sincere hope is that the report will finally help us turn the page on an ugly chapter in the City of Winnipeg’s history. Winnipeggers deserve to have confidence in their city government, that their government is acting on their best interest, protecting their tax dollars and conducting its business with integrity.”

Gillingham said he asked Winnipeg’s chief administrative officer Joseph Dunford to review the report’s recommendations and determine how they can be implemented by the city. Dunford said the city takes the inquiry’s findings, and the lack of public trust that arose following the headquarters project, very seriously.

“We will carefully review each recommendation and existing processes to determine what and how we can expand or adapt to large-scale projects,” the CAO said.

The city plans to prepare an implementation plan as soon as possible, according to the mayor.

Beyond Winnipeg, Smorang also called on the province to take steps, such as revising the City of Winnipeg Charter Act and working with municipalities to improve conflict of interest laws.

While speaking with 680 CJOB prior to the report’s public release last Thursday, Manitoba Premier Wab Kinew said he intends to accept all of the report’s recommendations.