A public inquiry has concluded that former Winnipeg mayor Sam Katz breached the public trust and ex-chief administrative officer Phil Sheegl demonstrated a severe lack of ethical judgement by engaging in clear conflicts of interest with the owner of the construction company responsible for building the city’s police headquarters. The inquiry found that Armik Babakhanians of Caspian Construction engaged in unethical behavior to secure the police headquarters project, leading to a $42 million increase in construction costs and boosted profits for his company.
The inquiry commissioner, Garth Smorang, released a 193-page report criticizing Katz, Sheegl, Babakhanians, and others involved in the project for their actions related to procurement, management, oversight, and funding of the police headquarters. The report, titled “A Sad Tale of Mismanagement, Misconduct, and Misrepresentations,” specifically highlighted the financial transactions between Katz, Sheegl, and Babakhanians during the construction company selection process.
The report emphasized the insidious nature of conflicts of interest, noting that the public can never be certain that decisions made under such circumstances are unbiased. Smorang pointed out that the blatant conflicts of interest surrounding Katz and Sheegl would always raise questions that may never be fully answered.
The police headquarters project, which involved converting a former Canada Post office and warehouse complex into the new home of the Winnipeg Police Service, faced delays and cost overruns. The inquiry highlighted procurement and management issues that led to audits, investigations, and legal actions resulting in the recovery of millions for the city.
Smorang detailed various decisions made by Sheegl that favored Babakhanians, including awarding a construction contract to Caspian shortly after Sheegl took office as CAO. The report also outlined instances where Sheegl made decisions benefiting Caspian, such as removing initial construction firms and awarding contracts to companies with ties to Babakhanians.
Furthermore, Smorang highlighted how Armik Babakhanians and Caspian officials engaged in deceptive practices, including fabricating documents and inflating costs, resulting in $42 million in overpayments to the company. The report also mentioned additional overpayments and recommended changes to legislation and city policies to prevent such misconduct in the future.
The inquiry made 25 recommendations, including expanding the powers of the integrity commissioner, increasing oversight of major projects, and improving transparency in legal proceedings related to public investigations. Despite the findings, the inquiry commissioner clarified that he did not have the authority to revisit the criminal investigations into the project or question the decisions made by law enforcement agencies.
