RCMP investigate offer of secret commission to Winnipeg police HQ project director
Caroline Barghout, Joanne Levasseur, Bartley Kives | CBC News | Posted: December 20, 2016 3:52 AM | Last Updated: December 20, 2016
Mounties say contractor, architect and engineer planned to offer $600K, creating environment for fraud
The RCMP investigation into Winnipeg's police headquarters has expanded into allegations of a plan to offer a $600,000 secret commission to the project director responsible for looking after the city's interests in the construction project.
In information presented to a judge in order to obtain financial records, the Mounties elaborate upon invoice-padding allegations against Caspian Construction owner Armik Babakhanians, the primary contractor for Winnipeg's police headquarters project, which council approved at a price of $135 million in 2009 but has cost $214 million to date.
"To date, police have identified that Armik [Babakhanians] used inflated and altered subtrade invoices and quotes to defraud the city of millions of dollars for work that was done at costs less than his fraudulent submitted costs. In addition to these frauds, police are investigating the use of a secret commission for the hiring of key project personnel," RCMP Const. Christopher Haskins says in an affidavit submitted to a judge in February in order to obtain bank records.
Before police are allowed to search financial records, they are required to present evidence to support their allegations. The Mounties have not disclosed whether they obtained anything of interest through their request for banking information.
The order is part of of what the RCMP call Project Dalton, the criminal investigation into Winnipeg's police headquarters project, which involved purchase and renovation of Canada Post's former downtown complex.
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The project was completed four years late this June at $79 million over budget. It has also been subject to two external audits as well as an RCMP investigation.
That investigation intensified in December 2014, when Mounties executed a search warrant at Caspian's McGillivray Boulevard headquarters. At the time, the Mounties were looking into fraud and forgery allegations pertaining to the construction of the downtown Winnipeg police headquarters.
According to Haskins' affidavit as part of the RCMP request to search bank documents, evidence collected during that initial raid paints a picture of a plan to replace key police HQ personnel and companies with officials and firms more friendly to Caspian Construction, creating what RCMP describe as "an opportunistic environment to facilitate fraudulent activities."
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Haskins alleges Babakhanians influenced the city's decision to replace Winnipeg's initial police HQ project manager, Winnipeg Police Service employee Abdul Aziz, with external project director Ossama AbouZeid, without disclosing a prior working relationship with the latter, according to the RCMP request.
Emails obtained by the RCMP show Babakhanians described AbouZeid as a "poppet" who could be influenced to do Caspian's bidding. In June 2011, the city awarded AbouZeid's Dunmore Corporation a $263,000 sole-sourced contract to direct the police HQ project.
"I have Ossama there because he brings no other value than agreeing to anything also he is on that board of some city related issues," Babakhanians states in an email included with the court documents.
In the request for banking information, the RCMP allege Babakhanians helped AbouZeid convince the City of Winnipeg to remove the original consulting firm hired by the city to design the police HQ job, AECOM, which had won a $5.3-million tendered contract, with a firm with ties to Caspian.
'[Caspian] has to be in charge of the design team and cost control'
"One major caveat must be [Caspian] has to be in charge of the design team, and cost control," Babakhanians emailed AbouZeid and former Winnipeg chief administrative officer Phil Sheegl on May 26, 2011, according to the RCMP. This was one week before AbouZeid became the police HQ project director.
"Are you insinuating we should replace the design team?" AbouZeid responded, according to the court documents.
In an October 2011 email, Babakhanians told AbouZeid he had spoken to Ottawa engineering firm Adjeleian Allen Rubeli and GRC Architects about the project, according to the RCMP document.
"They both have agreed to come on board, We both know there is a process in place but also know we have to pick [the] right group," Babakhanians said, according to the court documents.
Weeks later, Babakhanians asked AbouZeid how much money was available in the city budget for the new firms and then instructed AbouZeid to switch to text messaging because their emails would be monitored, according to the court documents.
In his affidavit, Const. Haskins states it's inappropriate for a general contractor to get involved in negotiations to replace a professional engineering consulting firm, which is expected "to independently protect and represent the interests of the city."
In 2012, AECOM was replaced with Adjeleian Allen Rubeli, also known as AAR, which was awarded sole-sourced contracts totalling $4.8 million to complete the job. That firm, in turn, subcontracted GRC Architects to supply architectural services.
The RCMP allege Caspian's Babakhanians, AAR principal Peter Chang and GRC senior associate Pat Dubuc conspired to offer AbouZeid $600,000, using a shell company called Triple D Consulting Services, which the RCMP allege was formed by Chang, Dubuc, Babakhanians and Caspian employee Pam Anderson.
In the affidavit, Haskins says he believes Triple D was set up in part to create a kitty to eventually pay what the court documents describe as a $600,000 "Ossama special" — a secret commission to the project director, after the police HQ project was complete.
"I believe money was incorporated into this contract to provide a source of funds for a secret commission to Ossama AbouZeid (agent) of the City of Winnipeg (principal) for the benefit of Chang, Dubuc and Armik [Babakhanians]," Haskins states in his affidavit, citing a fee schedule he alleges Chang sent to Babakhanians that includes payment to AbouZeid.
"While both AbouZeid and AAR are paid by the city, I believe there is no legitimate reason to factor in any money to AbouZeid within the AAR contract."
As of February 2016, Haskins did not believe the secret commission had been paid.
AbouZeid said he never asked for one, was never offered one and he never received one.
"In all my working life I have never asked for monies outside my contractual entitlements," AbouZeid said in a statement.
In the request to obtain bank records, Haskins states emails between all four indicate they "have close personal associations that go beyond normal business relationships. I believe Armik [Babakhanians] used these connections to create an environment for their personal financial benefit through his criminal activities."
For example, in one 2012 email cited by Haskins, Chang tells Babakhanians, "You truly are the brother that I never had and I love you dearly."
In another 2012 email, from Babakhanians to his son Shaun, the elder contractor claims he dismissed AECOM because they challenged Caspian, replacing city project director Aziz with Caspian "poppet" AbouZeid and bringing in AAR's Chang.
"He has one precious gift for us, tht's his unconditional love and loyalty which can no be ignored or questioned he will dnanything or me," Babakhanians said in reference to Chang, according to the request for banking information.
'Essentially paying themselves for services'
AAR paid an initial $1.3 million over three years to Triple D, which in turn paid funds to companies formed by Chang and Dubuc, Haskins states in his affidavit. He alleges this allowed the latter two men to receive money outside their respective firms' contracts, "essentially paying themselves for services that have not been confirmed to have been rendered."
He adds the Mounties could not confirm whether Triple D or the companies formed by Chang and Dubuc rendered any actual services.
"I believe they conspired to include fees for Triple D as part of [a] contract between AAR and the city as a method to personally financially benefit outside their original contract with the city, as well as provide a source of funds for a secret commission," Haskins states in the request for banking records.
"This provided a source of funds available to Armik [Babakhanians] in order to influence AbouZeid in hiring his close associates from AAR/GRC to the project."
The RCMP are also investigating a $100,000 payment to AbouZeid from Caspian weeks before AbouZeid became the police HQ project director.
The Mounties allege in their request for bank documents that Babakhanians asked AbouZeid for a $100,000 invoice on May 2, 2011, instructing him to say it was for consulting services. Babakhanians then asked the Caspian controller to transfer $100,000 to a numbered company operating as Mountain Construction. (This numbered company has no relation to Mountain Construction Inc.)
"The purpose of this transaction is not known and requires clarification," Haskins says in his affidavit.
Haskins also cited several emails where AbouZeid expressed concern Babakhanians was getting involved in the hiring of Adeleian Allen Rubeli.
"I find it increasingly difficult to continue in my role," AbouZeid wrote Babakhanians in November 2011, according to the RCMP request for bank records. "Asking you to facilitate a connection does not mean to get involved in negotiation, specially [when] we are suffering from credibility and trust."
AbouZeid said he received $100,000 because Caspian owed him money, explaining he had a 20 per cent interest in a building he sold to Caspian several years earlier.
"I was adamant to reach a solution before I embarked on a public project," he said.
'I will pretend that I know you'
The RCMP documents include emails where Babakhanians asks AbouZeid for help in securing the police-headquarters construction contract. In one email exchange, AbouZeid tells Babakhanians he did not disclose a meeting between the two to Abdul Aziz, the city's former project manager.
"Good," Babakhanians replied. "I will pretend that I know you because I used to work for you when I came to Canada. If you like I will not say anything however."
At the time of the RCMP request for bank records, the Mounties had not spoken to Babakhanians, Chang or Dubuc. The RCMP made contact with AbouZeid but had not interviewed him.
The allegations have not been proven in court and no charges have been laid.
Babakhanians did not respond to CBC requests for comment. Dubuc declined to comment. Chang said he's co-operating with the police.
In his statement, AbouZeid said he is angered by the RCMP allegations, which he described as outrageous, slanderous and damaging to his reputation and integrity.
"Any help I provided Caspian in early 2011 regarding this contract never exceeded providing professional references of their strength based on my previous experience," he added. "My perceived ability to influence the award of a city contract is absurd."
AbouZeid said he was involved in the award of the contract to Adjeleian Allen Rubeli "to ensure the amount and the scope were in line with the public tender of AECOM."
AbouZeid said every city payment to Caspian and every request for additional money was subject to his scrutiny, as well as that of the city staff, the police service and Adjeleian Allen Rubeli.
The RCMP have not said anything about their investigation into the police headquarters, other than it remains active.