Winnipeg (January 8, 2020) – The City of Winnipeg filed a lawsuit against more than 30 defendants including the contracting firm Caspian Construction and Winnipeg’s former chief administrative officer Phil Sheegl in connection to construction fraud regarding the new Winnipeg Police Headquarters building. The cost of the 5-year project exploded and ended up at $214 million. The city alleges the defendants wrongfully drove up the costs of the project by inflating invoices, altering quotes, and paying kickbacks. The city is suing for damages and punitive damages ‘in an amount to be proved at trial.’ The allegations have not been proven in court, and no statements of defense have been filed yet.
In relation to the construction of the new Winnipeg Police Headquarters building, on January 6, the city of Winnipeg filed a lawsuit with the Manitoba Court of Queen’s Bench against more than 30 defendants alleging a fraud scheme to deceive the city and thereby obtain monies under false pretenses. The lawsuit accuses Caspian Construction and its president, Armik Babakhanians; Pamela Anderson, Caspian office manager; Paul LaMontagne, president of Mountain Construction; Fabca-PMG Projects Ltd.; Dunmore Corporation; Ottawa-based GRC Architects; the Phil Sheegl-controlled company FSS Financial Support Services, and Winnipeg’s former chief administrative officer Phil Sheegl himself as well as eight ‘John Doe’ defendants.
Alleged construction fraud on the Winnipeg Police Headquarters building project
Starting in 2011, the former Canada Post office and mail-sorting plant has been converted into the new Winnipeg Police Headquarters building. Caspian was awarded a ‘guaranteed maximum price’ contract by Sheegl in November 2011.
When the project was finished in 2016, the project costs have exploded from originally about $135 million to $214 million. As a result of the zooming prices, the City Council already ordered an external audit in 2013, which finally lead to the launch of an RCMP investigation due to allegations of possible fraud, money laundering, and forgery.
The city’s Statement of Claim – ‘conspiracy to inflate prices and quotes’
Now, the city alleges in a Statement of Claim filed yesterday that the defendants ‘designed, orchestrated and implemented a scheme to defraud the City and thereby obtain monies under false pretenses (the “Scheme”).’ According to the statement of claim, the alleged construction fraud on the Winnipeg Police Headquarters building was conducted by wrongfully inflating the cost of the project. The defendants are accused of forging fraudulent invoices, altering bona fide sub-trade quotes as well as paying secret commissions and other benefits as kickbacks.
According to the lawsuit, one of the payments occurred in July 2011. The contracting business Caspian allegedly issued the payment of $200,000 to one of Caspian’s later subcontractors Mountain Construction. In turn, Mountain Construction supposedly issued a payment in the same amount to FSS Financial Support Services, which is owned and controlled by Sheegl. In November of the same year, Sheegl in his capacity as Winnipeg’s chief administrative officer awarded Caspian with the Police Headquarters project.
‘[T]he City was overcharged’
‘The city pleads that the liability of the defendants arises out of their fraud, embezzlement, misappropriation and/or defalcation while acting in a fiduciary capacity and/or resulted from obtaining property or services by false pretense and/or fraudulent misrepresentation,’ the lawsuit states.
The city is suing for damages including punitive damages, without claiming a specific amount: ‘[T]he City was overcharged for the Contractor’s services which resulted in an increase in the cost of the Project in an amount to be proved at trial.’ The allegations have not been proven in court, and no statements of defense have been filed yet.
Alleged deficiencies in the building and the RCMP investigation
Besides, the current lawsuit regarding the exploding costs of the new Winnipeg Police Headquarters, the city filed another Statement of Claim against Caspian in 2018 since several interior problems in the building continuing to pop up. Therefore, the city is seeking arbitration for the interior problems due to an alleged breach of contractual duties resulting in deficiencies in the building. The lawsuit is still pending.
Moreover, after the province asked the RCMP to review an audit of the project, they launched an investigation for possible fraud, money laundering and breach of trust in 2014. The Manitoba Prosecution Service (MPS) recently announced on December 13, 2019, that no criminal charges will be laid. The MPS argued that there is no ‘sufficient evidence to support a reasonable likelihood of conviction.’
‘The decision by the MPS to not proceed with criminal charges did not end the matter,’ said Michael Jack, Chief Corporate Services Officer for the City of Winnipeg. ‘The City has the right to seek damages to protect its interests when it has suffered loss or damages as a result of an alleged fraud or negligent conduct.’
Marina Burghard writes for Canadian Fraud News about fraud-related cases, whistleblower, jurisdiction, identity theft, consumer protection, etc. – essentially about scams and how to protect yourself against this kind of fraudulent criminal behavior. She holds a Master’s degree in Political Science where her interest in criminology grew. Besides fraud, Marina’s scientific interest lies in terrorism, extremism and how to deal with it as a society.