Winnipeg poised to settle remaining police HQ fraud, deficiency lawsuits for $21.5M to $28M
Bartley Kives | CBC News | Posted: March 15, 2023 3:33 PM | Last Updated: March 16, 2023
Proposed deal would end claims against dozens of people and companies, including Caspian Construction
The City of Winnipeg is poised to settle with the remaining defendants in its lawsuits over the construction of its downtown police headquarters for $21.5 million to $28 million, depending on how long it takes for money to be paid back.
City council's executive policy committee voted unanimously Wednesday to approve a deal to settle fraud and deficiencies lawsuits against dozens of people and companies involved in the procurement and construction of the Winnipeg police headquarters on Graham Avenue.
The deal now comes before council as a whole on March 23.
The proposed settlement does not include former Winnipeg chief administrative officer Phil Sheegl and several other defendants in a legal action that was severed from the city's original lawsuit.
The settlement would end legal action against police HQ contractor Caspian Construction and its owner, Armik Babakhanians, among dozens of other defendants.
A court ruled last year that Sheegl accepted a $327,000 bribe from Babakhanians related to the police headquarters.
The proposed settlement would see the city recoup $21.5 million if the money is paid within a year of council approval, $22.5 million if the cash is received within two years and $23.5 million if the payment is made within three years.
If full payment is not made within three years, the city would receive $28 million.
Mayor Scott Gillingham described the proposed settlement as "a victory for the citizens of Winnipeg" after more than decade of political and administration turmoil related to the project.
"It provides certainty. It provides $21.5 million to taxpayers. It avoids a minimum of $6.4 million in additional legal costs and years of legal proceedings," Gillingham said Wednesday at city hall.
Proposal would head off 70-day trial
The police headquarters opened in 2016 after the city spent $214 million buying Canada Post's former office tower and warehouse complex on Graham Avenue and converting it into a new home for the Winnipeg Police Service.
City council originally approved the project in 2009 at a total cost of $135 million for both the purchase and construction. The construction component alone ballooned to $137.1 million by 2011 and then eventually to $156.4 million, not including additional work outside the scope of the core contract, described as "soft costs" by the city.
The construction component of the project was subject to a city-commissioned external audit in 2014 and a five-year RCMP investigation that concluded in 2019 without any charges.
The city then launched a civil action against dozens of people and companies, initially for deficiencies in the building and later for fraud related to the project.
The case against former CAO Sheegl and related defendants was severed from the suits against other defendants. In 2022, Chief Justice Glenn Joyal of the Court of King's Bench ruled in favour of the city's claim that Sheegl accepted a bribe and breached his duty as a city officer by accepting $327,000 from Caspian Construction.
That decision requires Sheegl to pay the city more than $1 million. Sheegl appealed the decision in January. It is not affected by the proposed settlement against Caspian, Babakhanians and other defendants.
In a report to the city's executive policy committee, acting Winnipeg solicitor Harold Dick said the proposed settlement would head off a 70-day trial over the alleged fraud slated for March to June 2024 and a month-long trial over the alleged deficiencies scheduled for November 2024.
"The settlement recommended by this report has been worked out with the various defendants in the fraud action and the deficiencies action. Given the number of parties involved and the complexity of these actions, this has been a time-consuming and difficult undertaking," Dick wrote in the report.
"In the end, the public service is recommending that council approve a settlement which would be all-inclusive in respect of all of the parties named in the fraud action and the deficiencies action (with the exception of the severed claim against the Sheegl defendants)."
Best realistic outcome for city: CAO
The acting solicitor's report warned the city could be on the hook for $6.4 million in additional legal costs if the settlement is not approved. That would bring the total legal bill up to $11 million.
Dick also said failing to approve the settlement could create the possibility the city would have to pay the defendants' legal costs.
Winnipeg chief administrative officer Michael Jack said he believes the proposed settlement is the best realistic outcome for the City of Winnipeg.
"In the end, the civil action is about money. There are many voices in the community seeking other types of accountability. Those are decisions made by other levels of government and other bodies," Jack said Wednesday at city hall.
"The city has done what we feel [is] everything we can do within the civil court sphere."
Jack did not disclose how the proposed payments to the city would be split up by the various defendants.
CBC News requested comment from the legal counsel for Babakhanians but did not immediately hear back.
Inquiry could jeopardize settlement: mayor
The proposed deal may also take the pressure off the province to call a public inquiry into a series of construction and real estate scandals that transpired during Sam Katz's mayoral administration.
City council called for an inquiry under Gillingham's predecessor, Brian Bowman.
Gillingham said he remains open to an inquiry but has not pressed Premier Heather Stefanson about it since he became mayor.
"I wouldn't want it [in] any way to muddy or jeopardize what's in front of us right here," he said.
The mayor said the lawsuits, the RCMP investigation and city audits have shone a light on past events at city hall.
Stefanson would not say whether she is open to an inquiry when she was asked to comment on the proposed settlement.
"The process has happened the way it has," she said following a post-budget announcement Wednesday.