Court rules former Winnipeg CAO accepted $327K bribe, must pay at least $677K

A Manitoba court has ruled in favour of the City of Winnipeg's civil claim that former chief administrative officer Phil Sheegl accepted a bribe and breached his duty as a city officer by accepting $327,000 from the contractor who built the city's police headquarters.

In a 129-page decision issued Tuesday, Chief Justice Glenn Joyal of the Court of Queen's Bench granted the city's request for a summary judgment against Sheegland twoco-defendants FSS Financial Support Services Inc.and 2686814 Manitoba Ltd. under the torts of bribery and breach of fiduciary duty.

"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 wrote in his decision.

The city claimed Sheegl fabricated a land deal in Arizona with police headquarters contractor Armik Babakhanians of Caspian Construction in order tocover up a $327,200 payment Babakhanians made to Sheegl.

The city sought repayment of the $327,200, as well as $250,000 in severance paid to Sheegl when he left the city, along with $100,000 in punitive costs and legal costs.

Joyalawarded the city the severance, punitive and legal costs, and may yet award the city the $327,200, pending further legalsubmissions. Joyal said Sheegl should not be allowed to keep that money but it is unclear who should be repaid.

Thiscase dates back tothe city's 2009 purchase of Canada Post's former downtown Winnipeg warehouse-and-office tower complex and its subsequent conversion into the new headquarters of the Winnipeg Police Service.

The $214-million purchase-and-renovation project, completed $79 million over budget in 2016, has already beenthe subject of two City of Winnipeg audits as well as a five-yearRCMPfraud-and-forgery investigation that concluded without charges in 2019.

The city launched a civil lawsuit against Sheegl weeks after the RCMP ended that investigation.

In 2016 court documents, the RCMP allegedCaspian owner Babakhanianspaid Sheegl a $200,000 secret commission for showing favour to him in the award of a contract. Police said Sheeglthen split the money with former mayor Sam Katz.

In 2017, the RCMP changed the allegation, saying Sheeglcommitted a breach oftrust by engaging in business with Babakhanians and receiving a benefit from him while the former CAO was working on the police headquarters file.

At the time, Sheegl's lawyer Robert Tapper told CBC News the money was part of a real estate deal Sheegl and Katz made with Babakhaniansinvolving a parcel of land in Tartesso, Ariz.

Tapper said the property transaction was a handshake deal reached in May or June 2011 that Sheegl and Katz got around to putting on paper in May 2012.

He presented CBC News a copy of a handwritten agreement that was signed by Sheegl and had a space for Babakhanians' signature.

The city argued in its lawsuit the transaction was made up, pointing to a 2011 payment madeby Caspian-controlled Mountain Construction to the Sheegl-controlled FSS Financial Support Services.

That paymentwas made days afterSheegl, acting as Winnipeg's CAO, awarded Caspian a police-headquarters construction contract later set at $137 million.

The city initially filed civil suit against Sheegl and two dozen other defendants before Sheeglconvinced the court to sever his proceedings, together withFSSand 2686814 Manitoba Ltd.,from those of the other defendants. The city case against them remains before the court.

Both the city and Sheegl sought a summary judgment in the case of Sheegl and his two co-defendants. JusticeJoyal sided with the city, characterizing Sheegl's behaviour as reprehensible and scandalous in his decision.

"Based on the evidence before me, were I to find that Sheegl's undisclosed receipt of the $327,200 payment from Armik (for whatever reason), while Sheegl was an officer with the city and while he was negotiating a multi-million dollar contract with Armik's company, did not constitute a breach of fiduciary duty, I would in my view be sending a preposterous message," Joyal wrote.

"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 public officials work. Neither the law nor common sense support or justify such a dubious conclusion or message."

CBC News has sought comment from Sheegl and Babakhanians.

In an email to Mayor Brian Bowman and members of city council, Winnipeg chief administrative officer Michael Jack said the city is encouraged by Joyal's decision.

"It is consistent with the allegations that the city has been making for several years. We remain hopeful that the main action against the remaining defendants can be brought to a favourable conclusion as soon as possible," Jack wrote in a memo sent on Tuesday afternoon.

Jack said the city is still reviewing details of the decision. One loose end is who is in line to receive the $327,200 the city sought from Sheegl in lieu of the payment he received from Babakhanians.

"Insofar as the payment of the $327,200 did constitute a civil bribe, any portion of that tainted money paid to Sheegl cannot be permitted to remain with Sheegl," Joyalwrote, requesting oral submissions from lawyers for both parties.

Joyal also noted in his decision Sheegl only produced two emails between himself and Babakhanians as part of the discovery process even though hundreds of messages were sent between the two parties. Joyal called Sheegl's recollection of events that transpired before the police-HQ contract was awarded as "sketchy and selective."

Conspiracy outlined in court decision

Joyal said he agreed with the city's contention that Sheegl, Babakhanians, Armik's son Shaun Babakhanians and police-headquarters construction officialOssamaAbouZeid conspired to induce the city to award construction contracts to Caspian by providing Sheegl with secret commissions in exchange for improper procurement advantages.

Joyal itemizes these events as follows:

• On Dec. 15, 2010, after Sheegl blind copied ArmikBabakhanians on an email to the city advocating for construction bonding on the project to be lowered, as requested by Babakhanians, the latter thanked Sheegl, stating "YOU ARE MY MAN I WILL DO YOU PROUD."Joyal states Babakhanianstreatedthe award of the constructioncontracts to Caspian as a fait accompli.
• Joyal states Babakhanians "appeared to appreciate the questionable nature of his dealings" whenhe tells his son Shaun the same: "Integrity, well, when we deal with politicians that tends to be compromised to a certain extent."
• On Dec.16, 2010, Sheegl sent the elder Babakhanians an email, stating he was about to send him "a blind copy of a confidential email. Please be careful with it, it's part of my strategy to get this done for you."Within a minute, Sheegl forwardedBabakhanians a copy of an email whereSheegl continued to advocate for the bonding to be lowered.
• OnJan. 17, 2011, Babakhanians told AbouZeidCaspian was putting together a proposal for the police headquartersproject,that he would appreciate AbouZeid's help and that "Sheegl is on it."
• On Jan.26, 2011, Babakhanians reminded Sheegl Caspian "really wanted this project." Sheegl responded by stating "I know and I will do everything I can to help us all succeed here together." Joyal wrote "there is clearly a common purpose and a common intention" to get Caspian the police headquarters project.
• On Feb. 7, 2011, Armik and ShaunBabakhanians exchangedemails where they stated that "Phil and Sam[former Winnipeg Mayor Katz] are pulling for us" and that "Phil assured us" Caspian would get the project. Joyal wrote both Babakhaniansmade reference to a prior commitment by Sheegl and Katz to get Caspian the police headquarters project.
• On Feb.17, 2011, ArmikBabakhanians sent an email to himself, statingSheegl said he will get approval for a $126-million contract,"However I think he wanted 2+2 for sam and phil but the rest for us."
• On Feb.24, 2011, Shaun Babakhanians forwarded his email exchange with police service official AbdulAziz to Sheegl, commenting on a gentlemen'sagreement between himself, ArmikBabakhanians and Sheegl. "In particular, Shaun stated: "My letter was written knowing full well we as gentlemen have committed each other to get this done."

Former mayor Katz has also been asked to comment.

Jamie Kagan, legal counsel for AbouZeid, said his client is aware of the court's decision.

"We did not participate or take any position in the motions," he said in a statement."We filed no evidence, did not appear on the motions and no order against or affecting our client has been made."

Justice sides with city in lawsuit against former top civil servant Phil Sheegl

3 years ago

Duration 1:36

A Manitoba court has ruled in favour of the City of Winnipeg's civil claim that former chief administrative officer Phil Sheegl accepted a bribe and breached his duty as a city officer by accepting $327,000 from the contractor who built the city's police headquarters.