Katz strongly denies bribe allegations

WINNIPEG — Former Winnipeg mayor Sam Katz says he’s deeply hurt by allegations he accepted a bribe from the key construction company in the over-budget Winnipeg Police Service headquarters project, stating those accusations are “definitely not” true.

“I’m offended and disappointed … I take great offence to it. To me, the key thing in life is your reputation and your credibility,” Katz said.

One of the most highly anticipated witnesses at the public inquiry into the headquarters saga, the former politician was only person to answer questions throughout Thursday’s hearing.

Near the end of the session, lawyer Danny Gunn, who is representing Katz at the inquiry, asked his client how he felt about the accusation following his 10 years as mayor, which stretched from 2004 to 2014.

“I’m extremely disappointed and offended that anybody would think that would be anything but what it was, a sale of an interest in a piece of property,” Katz said.

Concerns surrounding the police headquarters project at 245 Smith St. have plagued city council for years. The city bought the former Canada Post building at Smith Street and Graham Avenue in 2009 to replace the police HQ in the Public Safety Building on Princess Street, which has since been demolished.

The new headquarters building opened in June 2016 at a cost of about $214 million, well above its original $135-million price tag, and an external audit found the project was severely mismanaged.

A court ruled in 2022 that Phil Sheegl, who was the city’s chief administrative officer during key parts of the project, had accepted a $327,000 bribe from Caspian Construction, a key contractor. The court ordered Sheegl to pay the city compensation.

Last month, the city revealed it had received a $1.15-million payment from Sheegl.

A 2023 Manitoba Court of Appeal ruling denied Sheegl’s appeal of the bribe finding. In that decision, Justice Christopher Mainella wrote that Katz “received precisely half of the money.”

That judgment notes Katz was not a defendant in the legal action against Sheegl, though it finds he can be considered a material witness.

“This means that, currently, nobody in this civil litigation has made a formal legal accusation against Katz of wrongful conduct and, accordingly, he is entitled in law to be presumed to have done nothing wrong,” it states.

Sheegl said the payment wasn’t a bribe, but covered a real estate deal to sell one acre of land he and Katz owned in Tartesso, Ariz.

On Thursday, through multiple rounds of questions, Katz repeatedly said that documents showing a payment from Caspian reflected that land sale.

Katz said he was a “silent investor” in that deal, not an active participant, while he confirmed Sheegl and others also invested in it. Katz said he sold the land when he did because it was a relatively small investment and there were other things he wished to invest in instead.

Michael Finlayson, a lawyer representing the city, displayed a July 2011 cheque showing a $100,000 payment from Sheegl to Katz, with a line that describes the payment as a “loan.” Katz said that money was for the land sale.

The former politician confirmed he did not tell any member of city council that he and Sheegl were involved in a land investment deal with the Caspian owner at the time. Katz said that sale did not influence his city council votes on the headquarters project.

When asked about the nature of his relationship with Armik Babakhanians, owner of Caspian Construction, he noted he knew him and saw him at a golf course.

Katz confirmed he was friends with Sheegl when he was hired at the city, though he said the two have drifted apart in recent years.

“Yes, I would say he was definitely a friend … but I haven’t been really communicating with Phil much lately,” he said.

Katz confirmed he voted on the police HQ matter at city council and did not declare a conflict of interest due to the investment with Sheegl in the land he said was sold to Babakhanians.

When asked if he now acknowledges he had a conflict of interest, Katz said he had since done so.

“I think I acknowledged that in 2018, in a (past media) scrum, saying it would have been so much better and appropriate if I had … made people aware of this,” he said.

Katz stressed that he took measures to control the price of the project as it soared higher.

The former mayor said he was reassured earlier in the project by a “guaranteed maximum price” set at $137 million. He said a tense meeting took place when costs were exceeding that amount in 2013.

“I called a meeting of everybody involved, the steering committee, basically, and I basically told them … that this project is not going any higher than the (guaranteed maximum price), stop pointing fingers at each other, find the solution. They never found the solution,” Katz said.

When city council approved a $17.2-million hike to the project’s cost in November 2013, many believed they had no choice but to approve the overrun, he said.

“We were kind of between a rock and a hard place … We had nowhere else to go,” he said.

Shannon Hanlin, a lawyer for the Winnipeg Police Service, presented documents explaining some change orders linked to some cost hikes in the project. She said that included a south wall that lacked durability and a concrete slab listed as in “poor shape” at the floor where cruiser cars would be stored.

When asked, Katz agreed the changes were both significant and came with a significant cost.

After he finished answering questions, Katz added that he takes pride in his work leading city council.

“We got a great deal done and we left the city in a much better place … A lot of the projects that we did were huge projects, on time, on budget. Like I say, no one ever talked about that, which is unfortunate,” he said.

Just prior to the start of the hearing, Katz briefly greeted and shook hands with reporters at the media table, who he knew from his time as mayor, smiling as he did so. When asked to speak with media afterward, he joked he would never miss a good scrum. After the hearing, however, he declined to comment, with his lawyer suggesting Katz likely won’t speak until after the inquiry ends.

The former mayor told a few light-hearted jokes upon taking the stand and maintained his composure.

» Winnipeg Free Press