The $28 million settlement from Caspian Construction to the City of Winnipeg marks the final financial resolution in a decade-long scandal over the troubled $214 million police headquarters project. The payment, announced on the last day of the public inquiry, closes the chapter on a saga that began in 2008 with the city’s decision to relocate its police service from the demolished Public Safety Building to a former Canada Post site downtown.
What Happened
The project, completed two years late in 2016, exceeded its budget by $79 million and became the subject of two external audits and a five-year RCMP investigation into allegations of fraud, forgeries, and secret commissions. While the criminal probe concluded without charges in 2019, civil lawsuits revealed a pattern of misconduct.
A 2022 court ruling found former city chief administrative officer Phil Sheegl had accepted a $327,200 bribe from Caspian Construction principal Armik Babakhanians to favor the company in the tendering process. An appeals court later ruled former mayor Sam Katz, who received half of that amount, could be considered a material witness—though he was never accused of wrongdoing. Caspian settled a separate lawsuit in 2023 for $28 million, with the final payment confirmed by city lawyer Gabrielle Lisi on the inquiry’s closing day.
The public hearings, which wrapped up after 27.5 days over four months, examined construction invoices, city policies, and the interactions between politicians and public servants. Testimony included denials from Sheegl and Katz, while former Caspian director Shaun Babakhanians claimed his father was told Katz and Sheegl had demanded $4 million after the contract was awarded. A lawyer for Sheegl questioned the accuracy of that recollection.
Why It Matters
The inquiry exposed systemic failures in Winnipeg’s oversight of major construction projects, with experts arguing the corruption stemmed from either flawed processes or a culture of unethical leadership. The city’s current chief administrative officer, Joseph Dunford—a former provincial deputy minister—described the present workplace as “transparent and professional,” a stark contrast to the era of the police headquarters procurement.
KPMG, which conducted audits in 2014 and 2026, reported the city is making progress in three areas previously identified as urgent priorities. However, the inquiry’s reduced scope—cut from 48 planned days to 27.5—raises questions about whether all critical evidence was fully explored. Commissioner Garth Smorang, overseeing the inquiry, called the public hearings a success but emphasized his report will focus on recommendations for future accountability.
Mayor Scott Gillingham defended the lawsuits as necessary to uncover the truth, while political scientist Paul Thomas noted that key figures avoided admitting misconduct or apologizing. “The hearings revealed hidden interactions at city hall,” Thomas said, suggesting deeper cultural issues may have enabled the corruption.
What May Happen Next
Commissioner Smorang’s final report could shape Winnipeg’s approach to major construction projects, though its recommendations remain speculative. Analysts expect the city to implement stricter oversight measures, potentially including independent audits and transparency reforms. The legal fallout may also influence future procurement processes, though no new charges are expected.
A possible next step could be legislative changes at the provincial level to strengthen municipal accountability, particularly if Smorang’s report identifies systemic weaknesses. The city’s current leadership may also push for stronger ethical training for public servants, given the contrast between past practices and Dunford’s testimony about today’s culture.
Frequently Asked Questions
[Question 1]
Will any criminal charges be filed as a result of the inquiry?
No. The RCMP’s five-year investigation into fraud, forgeries, and secret commissions concluded in 2019 without charges. The civil lawsuits and inquiry focused on financial settlements and accountability rather than criminal liability.
[Question 2]
How much did the police headquarters project cost in total?
The project’s original budget was $214 million, but it was completed for $79 million over budget, bringing the total cost to $293 million.
[Question 3]
What role did the KPMG report play in the inquiry?
KPMG provided two audits—one in 2014 and another in 2026—assessing the city’s management of major construction projects. The 2026 report highlighted progress in three areas previously identified as urgent needs, though the inquiry did not delve deeply into its specific findings during public hearings.
As Winnipeg moves forward, the question remains: Will the lessons from this scandal lead to lasting change, or will the cycle of oversight failures repeat in future projects?
