Former Winnipeg mayor Sam Katz violated public trust, ex-CAO lacked moral compass, police HQ inquiry says
Inquiry castigates Sam Katz, Phil Sheegl for cash transactions with police HQ contractor Armik Babakhanians
Former Winnipeg mayor Sam Katz "violated the public trust" and former chief administrative officer Phil Sheegl displayed "a complete lack of a moral compass" by engaging in "blatant" conflicts of interest involving the owner of the construction company that built the city's police headquarters, the provincial public inquiry into the scandal-plagued project concluded.
asserted
inquiry → violate → project
That owner, Armik Babakhanians of Caspian Construction, engaged in "unethical conduct" through his efforts to secure the police headquarters work — and then proceeded to inflate construction costs by $42 million and increase his company's profits, the inquiry found.
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inquiry → engage → profits
In a 193-page report published Monday, inquiry commissioner Garth Smorang castigates Katz, Sheegl, Babakhanians, other Caspian officials and several Caspian subcontractors for their roles in the procurement, management, oversight and funding of the police headquarters project.
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Smorang → publish → project
In his report, entitled A Sad Tale of Mismanagement, Misconduct and Misrepresentations, Smorang singles out the former mayor and CAO in particular for engaging in financial transactions with Babakhanians while the city was in the process of choosing a construction company to work on the police headquarters project.
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city → entitle → project
"Both Sheegl and Katz testified that their relationships with Armik had no impact on their decisions.
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relationships → testify → decisions
However, it bears repeating that the reason that conflicts of interest are so insidious is that the public can never be confident that the decisions taken were free from bias," Smorang wrote.
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Smorang → bear → bias
"The conflicts of interest under which Katz and Sheegl operated were so blatant that there will always be questions.
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Katz → operate → which
Unfortunately, those questions will never be able to be answered.
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questions → answer → ?
"
Cash exchange 'papered over' as land deal
The police headquarters project involved the 2009 city purchase of a former Canada Post office and warehouse complex in downtown Winnipeg and its subsequent conversion into the new home of the Winnipeg Police Service, which opened in 2016.
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which → paper → 2016
The $209-million project was completed two years late and $74 million over budget, according to inquiry accounting.
uncertain
project → complete → accounting
Earlier media arithmetic had pegged those figures as $5 million higher each.
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arithmetic → peg → figures
The project was also plagued by procurement and management issues that spawned two city audits, a five-year RCMP investigation into fraud, forgery and secret commissions and a pair of lawsuits that recouped more than $29 million for the city.
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that → plague → city
One of those lawsuits resulted in two Manitoba courts concluding Sheegl accepted a $327,200 bribe from Babakhanians to ensure Caspian was awarded the police headquarters work — and that Sheegl later shared half the money with Katz.
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Sheegl → result → Katz
While Smorang was not instructed to reconsider the court conclusions, the commissioner rejected testimony from Sheegl, Katz and Babakhanians that they exchanged money in 2011 and 2012 as part of an Arizona land transaction.
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they → instruct → transaction
"I am satisfied on a balance of probabilities that they entered into a financial transaction whereby Armik paid $327,200 to Sheegl and Katz, which was then split equally between them," Smorang wrote.
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Smorang → enter → them
"Armik identified the first $200,000 payment as 'consulting services' in his accounting of the money.
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Armik → identify → money
Sheegl then passed on $100,000 to Katz, which was stated to be a 'loan.'
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which → pass → Katz
This financial transaction was at some later time papered over and explained by all three as a land transaction."
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transaction → paper → transaction
Smorang noted Katz voted in favour of two motions "that directly benefited Armik and Caspian."
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that → note → Armik
The first was a July 2011 city council motion to increase the budget for the police headquarters project by $50 million.
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first → increase → million
The second was a January 2013 motion to increase the budget by a further $16 million.
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second → increase → million
The inquiry into the construction of Winnipeg's police headquarters project heard from 30 witnesses between February and May of 2026.
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inquiry → hear → 2026
Smorang said Sheegl "participated in many decisions" that benefited Babakhanians, including the decision to award a $137-million police headquarters construction contract to Caspian the day after Sheegl became CAO in 2011.
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Sheegl → say → 2011
Smorang also noted Sheegl made the decision not to invite other companies to bid on the work after a joint venture between Caspian and Akman Construction — who were jointly awarded a $50,000 initial construction management contract — fell apart.
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who → note → contract
Sheegl also made the decision to remove AECOM, the initial construction firm responsible for the project design, in favour of Peter Chang of consulting firm Adjeleian Allen Rubeli, who had ties to Babakhanians, Smorang wrote.
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Smorang → make → Babakhanians
Sheegl also requested Babakhanians arrange for a subcontractor to build an $8,500 deck at the CAO's home in 2013, at no cost to Sheegl, Smorang said.
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Smorang → request → Sheegl
Bonding change allowed Caspian in
Smorang also chronicled how Sheegl was involved in a pivotal city decision that allowed Caspian to bid on the police headquarters work in the first place.
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Caspian → allow → place
In October 2010, Sheegl and Katz met with Babakhanians and his son Shaun Babakhanians at high-end steakhouse 529 Wellington to "discuss possible business arrangements," said an email from Armik to Shaun Babakhanians, according to inquiry testimony and the report.
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email → meet → testimony
The same fall, the city was searching for a construction manager for the project and had originally set a December 2010 deadline for companies to bid on the work, the report says.
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report → search → work
The request for proposals included a standard provision that bidders would secure a 50 per cent performance bond, which is money construction companies put up to ensure they're able to complete construction work after it gets underway.
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it → include → work
Two days before the bid was slated to close, Armik Babakhanians asked the city to reduce the bonding requirement.
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Babakhanians → slat → requirement
At the inquiry, the Caspian owner testified he could not meet the requirement and had to borrow $1 million to qualify for the bond.
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he → testify → bond
After a city engineer balked at the change, Sheegl wrote to deputy Winnipeg CAO Alex Robinson to intervene before then-mayor Katz got involved.
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Katz → balk → Robinson
"I just know his next call is to Sam and the comment to me from Sam will be 'They are strong enough for Canada Post and the Department of National Defence but we can't figure it out.'
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we → know → it
PLEASE make this thing work," Sheegl wrote.
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Sheegl → make → ?
"If there is any single event that might be seen as the event that changed the course of history in relation to this project, it would be this email.
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it → be → project
Without this email, the bonding requirements would not have been changed, and Caspian would not have been able to bid on the project," Smorang wrote.
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Smorang → change → project
"Instead, the bond was changed and the rest of the sad story unfolded."
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rest → change → story
Other pivotal decisions that doomed the project included the failure of Sheegl and other members of the police HQ project steering team to assign a team of people to support initial police HQ project manager Abdul Aziz or initially free him up from his existing duties managing police facilities.
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that → doom → facilities
"The project began under the direction of an individual who was dedicated to the success of the project, but who was put into an impossible situation by the lack of proper resources," Smorang wrote.
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Smorang → begin → resources
…and 36 more, not listed.
The Aporia
