The inquiry report into the downtown police headquarters project concludes the City of Winnipeg was overcharged and overpaid by $43.3 million. Inquiry commissioner Garth Smorang writes in his final report that this was based on the “many financial misrepresentations” made by Caspian Construction’s owners and their subcontractors. He says the final cost of the police station, which included the purchase and renovation of the former Canada Post building, was $209 million. Smorang also says former City CAO Phil Sheegl and former Mayor Sam Katz violated conflict of interest rules with their roles at the city. The inquiry heard Caspian owner Armik Babakhanians paid Sheegl and Katz $327,000. They testified the money was linked to a land deal in Arizona. The report says the money transaction occurred while Katz voted on motions to increase the project budget. Smorang says while he is unable to verify a legitimate land transaction existed, he says even if it did, Katz and Sheegl were in an obvious conflict of interest. “The conflicts of interest under which Katz and Sheegl operated were so blatant that they will always be questioned,” writes Smorang. Smorang also says Babakhanians engaged in unethical conduct when he sent the money to Sheegl and Katz. Speaking to CTV News on Monday, Katz said he’s long admitted he should have disclosed the transaction. “Life would have been a lot simpler if that had been the case,” he said. “Made a mistake. It was a real bad mistake.” However, Katz also insists the land deal was real. “I know there was a land transaction, because I own less of that property than I did before,” he said. CTV News has been unable to reach lawyers for both Sheegl and Babakhanians. Manitoba Prosecutions, who declined to pursue criminal charges after reviewing the case in 2019 and 2025, is currently reviewing the case again to determine if new evidence revealed during the inquiry could result in criminal charges. The report recommends for large-scale projects that the city have lawyers draft the request for proposal documents, have the mayor’s executive policy committee provide oversight, and that the Manitoba government review the makeup of EPC and how councillors are appointed. The inquiry cost $2.1 million and was held over four months earlier this year.
