Judge rules former Winnipeg CAO Phil Sheegl accepted $327K bribe and city owed $700K

A former City of Winnipeg CAO may be liable for more than $700,000 after a judge agreed with the city’s claim he accepted a bribe in connection with the construction of the downtown police headquarters.

“The city has persuaded me on a balance of probabilities that the elements of bribery have been satisfied,” Chief Justice Glenn Joyal wrote in a 126-page decision.

The city alleged Caspian Construction, along with dozens of others, including former CAO Phil Sheegl, orchestrated a wide conspiracy to inflate prices and quotes and ultimately drive up the cost of the project.

Caspian Construction was hired by the city to build the new Winnipeg Police Headquarters and the Canada Post mail processing plant at 1870 Wellington Ave.

The $214-million purchase-and-renovation project was $79 million over budget and was completed in 2016.

“This is a case about the acceptance of a bribe by a high-ranking city official, from a person with whom the city was then negotiating a multi-million-dollar contract,” Joyal said.

The city claimed Sheegl came up with the bogus land deal in order to cover up a $327,200 payment Caspian Construction owner Armik Babakhanians made to him.

Sheegl claimed it wasn’t a bribe, but instead a payment for a real estate deal to purchase land he and Winnipeg’s mayor at the time, Sam Katz, owned in Arizona.

Joyal said the deal was never disclosed to the city nor was there any evidence to support it.

“Were I to find that Sheegl’s undisclosed receipt of the $327,000 payment from Armik … did not constitute a breach of fiduciary duty, I would in my view be sending a preposterous message,” Joyal said. “That message would be nothing short of suggesting that high-ranking public officials can do business in secret with persons seeking contracts from the very public bodies for whom they work.”

The city was seeking roughly $700,000 in damages including the repayment of the $327,200, the $250,000 in severance paid to Sheegl and a further $100,000 in punitive and legal costs.

Joyal awarded the city the severance, punitive and legal costs and said Sheegl cannot keep the $327,000 paid to him as a bribe, but further legal submissions to the court will be necessary to determine where the money should go.

“We are encouraged by this award, as it is consistent with the allegations that the City has been making for several years,” current CAO Michael Jack said in a memo sent to city council Tuesday. “We remain hopeful that the main action against the remaining defendants can be brought to a favourable conclusion as soon as possible.”

Winnipeg Mayor Brian Bowman called the decision a historic win for taxpayers.

“This is one of the biggest scandals in Winnipeg’s history,” he said Wednesday afternoon. “What Winnipeggers have been demanding for many, many years is is accountability.”

While there remains ongoing litigation before the courts Bowman is renewing his call for the province to call a public inquiry into the issue.

“A public inquiry could see individuals compelled to provide testimony on the public record that may not be part of a narrow, specific legal actions,” he said. “So it’s one in which a public inquiry also allows for a broader examination of some of the related issues.”

Global News has reached out to Sheegl’s lawyer, Robert Tapper, and Katz for comment on the decision but has yet to hear back.

The civil suit came weeks after the conclusion of a five-year RCMP fraud-and-forgery investigation that ended without charges in 2019.

The commercial crimes section of the RCMP started its extensive investigation into the company in October of 2014.

In December 2014, RCMP raided a Caspian Construction head office on McGillivray Boulevard. During that search, 46 boxes and four filing cabinets of documents were seized. RCMP said the investigation resulted in the review of more than six terabytes of data, 200,000 emails, interviews with 130 witnesses, and 15 search warrants.

Court documents acquired in February 2016 alleged Caspian Construction manipulated documents in order to inflate payments.

Police HQ costs ballooned over the years, starting from a $135-million project and ending up a $214-million project.

Manitoba Justice said there was not enough evidence to charge anyone for serious allegations including fraud, forgery and money laundering relating to the building of the Winnipeg Police Service headquarters and a Canada Post processing plant.