HQ contractor billed city $20M on behalf of one subcontractor, for $2.3M work done by another: court documents

A forensic accountant hired by the City of Winnipeg to look into billing irregularities in the Winnipeg Police Service headquarters project, alleges the contractor inflated the cost of work done by several companies and billed the city claiming a different subcontractor had completed it, court documents reveal. 

In a sworn affidavit filed in the Manitoba Court of Queen's Bench this week, Winnipeg forensic investigative accountant Victor Neufeld says he was hired by the city in November 2018 after Tiger Ventures Ltd., a subcontractor on the police headquarters project raised concerns about how contractor Caspian billed the city for work Tiger had done.

Tiger Ventures was the demolition and asbestos subcontractor on the project and had a $2.3-million dollar contract with Caspian. But Neufeld's affidavit says the only Tiger invoices Caspian submitted to the city was for landfill dumping fees.

"Virtually all the work reported in the Caspian progress claims that may relate to the Tiger Scope of Work was supported by invoices submitted in the name of the defendant, Fabca Projects Ltd. ('Fabca')," said Neufeld.

He says in the affidavit, the Fabca invoices totalled approximately $20.7 million.

"It is unclear how Fabca could perform, without assistance from or involvement of other parties, the volume of Fabca-invoiced work given that Fabca had only 4 persons security-cleared to do Project work," the court document says.

In comparison, Tiger had over 150 security-cleared persons during construction, Neufeld wrote.

Neufeld says the city doesn't have the required paperwork needed to calculate the actual costs paid by Caspian to Fabca, Tiger and any other subcontractors, to compare to the $20.7 million of Fabca invoices submitted by Caspian and paid by the city. Nor does the city have the necessary documents to determine who actually did the work.

On Monday, the city filed a statement of claim against more than two dozen defendants, including Caspian Projects Inc., Caspian's president Armik Babakhanians, former Winnipeg CAO Phil Sheegl, Fabca Projects Ltd and related companies, as well as others accusing them of a "scheme" of fraud, embezzlement and kickbacks. 

The lawsuit alleges the project's cost was inflated through fraudulent quotes and invoices, altered quotes from subcontractors and secret kickbacks. And says the city was billed for work not yet performed and projects already completed. 

A five-year RCMP investigation into fraud allegations in the HQ project officially ended in December. The province said no charges would be laid as there wasn't enough evidence to prove the allegations beyond a reasonable doubt.

Fabca company formed during police HQ project: court documents

The city's statement of claim lists four Fabca related companies and their principals among the dozens of defendants. Peter Giannuzzi is one of them.

He was also a Caspian employee and on-site project manager according to a Caspian organization chart in the court documents.

Neufeld says Giannuzzi is a shareholder in a Fabca company that was incorporated during the HQ project, months after Caspian had already submitted the last known Fabca invoice to the city in July 2013.

Mountain Construction claimed work done by other companies: affidavit

The city alleges in the affidavit that Caspian billed taxpayers $9 million dollars on behalf of a numbered company operating as Mountain Construction. The invoices were for supplying and installing a variety of products including PVC windows, overhead doors and drywall.

Neufeld says his investigation revealed the description on the invoices mirrored the work done by other companies, according to the affidavit. Mountain only had one person security cleared to work on the HQ, Paul R. LaMontagne, who was listed as a Caspian employee and "safety officer" on a Caspian organizational chart filed in court.

Neufeld used a contact list Caspian had provided to the city during the construction project, containing the names of companies that had supplied key project components like doors and windows, to determine who may have actually provided the products described on the Mountain invoices. He also spoke with representatives of their companies, the documents say.

Of the 10 invoices Winnipeg company Wallace & Wallace provided to Neufeld totalling $515,000, Caspian had only submitted two, the affidavit says. The rest of their products and services were billed as provided by Mountain.

"It appears that the above-noted two Wallace invoices, a series of Mountain invoices and certain Project budget item claims may have been used by Caspian to claim approximately $1.3 million for products and work within the Wallace Scope of Work," says Neufeld in the affidavit.

Another local company, Shanahan's, told the city Caspian paid it $2.5 million for doors, hardware and accessories in the HQ project. But Neufeld says in the affidavit Caspian never submitted any Shanahan's invoices. Instead, the lawsuit alleges Caspian claimed Mountain did more than $4 million worth of work that falls within the scope of what Shanahan's said it did.

"It is unknown whether any of these examples may represent a form of progress invoicing that used identical monthly dollar amounts, or may represent duplicate invoices that were claimed by Caspian and paid by the City," the affidavit says.

The city also alleges there were inflated invoices for fireproofing, and combined invoices for structural steel work that was done by one company on two separate projects, and billed them both to the city.

None of the allegations have been tested in court.

Caspian, Fabca and its principals have not returned calls from CBC.