No charges laid after 5-year investigation into Winnipeg police HQ construction

A five-year RCMP investigation into alleged fraud and forgery connected to the creation of a new downtown Winnipeg police headquarters has concluded with no charges being laid.

On Dec. 17, 2014, RCMP raided the McGillivray Boulevard offices of Caspian Construction, the primary contractor on a project that converted Canada Post's former complex into the new home of the police service.

At the time, RCMP said they were conducting a criminal investigation into the project, which cost the city $214 million in real estate and construction charges by the time it was finished in 2016.

The investigation, known as Project Dalton, was later expanded to include a second Caspian project, the construction of the Canada Post mail processing plant near the Winnipeg airport.

The RCMP had alleged in 2015 court documents that Caspian owner Armik Babakhanians "used inflated and altered subtrade invoices and quotes to defraud the city of millions of dollars for work that was done at costs less than his fraudulent submitted costs."

On Friday, the province issued a news release saying that, based on all available evidence, the Manitoba Prosecution Service is not authorizing any criminal charges.

"After a comprehensive review of the legal issues and the foundational facts provided through the investigation, MPS has concluded that there is not sufficient evidence to approve any criminal charges as there is not a reasonable likelihood of conviction," the release says.

The province said the police investigation lasted approximately 2½ years, then was sent to the Crown for review for possible charges. 

Initial court records alleged Caspian had billed the city for work that had nothing to do with the police HQ — such as the installation of a swimming pool at the house of Shaun Babakhanians, the son of Armik.

By the summer of 2016, the police investigation turned its attention to Phil Sheegl, the city's former CAO. RCMP alleged in court documents that Sheegl was paid "a secret commission" to help Caspian secure the contract to build the HQ.

The Mounties, searching bank accounts connected to Caspian and its owner, discovered a shell company controlled by Babakhanians and his office manager had made a $200,000 payment to a company owned by Sheegl, court documents said.

"This payment occurs less than two weeks after Sheegl, as CAO, is delegated authority to award (unlimited and unspecified) contracts for the WPS HQ project, a project for which Caspian is later awarded a contract in excess of $100 million," RCMP Sgt. Breanne Chanel wrote in a sworn affidavit provided to a judge in June 2016.

Winnipeg lawyer Robert Tapper, who represents former mayor Sam Katz and Sheegl, said the payment wasn't a bribe as alleged by the RCMP, but was part of a $327,000 real estate deal his clients made with Babakhanians in May or June 2011.

"I mean, the reality is the allegation that's being made here is vastly more serious than they breached some ethical rules. They're saying they took a bribe. That's offensive and wrong," Tapper said in a January 2017 interview with the CBC.

Tapper said earlier this week the fact the investigation dragged on for five years was "obscene."

On Friday, he repeated his assertion it shouldn't have taken this long to clear his clients' names.

The RCMP knew all along that Katz, Sheegl and Babakhanians were engaged in a real estate deal in Arizona, Tapper said.

"I am disgusted with the RCMP to have sat on this for five years, when they knew at the get-go what this was ... a commercial transaction. They had the documents," he said.

"The ethics were questionable. [If] you've got something that smells, you have to look into it — but once you know what it is, you have to say to yourself, 'Oh my, the investigation isn't going to produce anything.'

"There's a point where you look in the mirror and say 'Oops.'"

Babakhanians did not respond to requests for comment.

File sent to Crown in 2017

Two years ago, the Mounties said the file was sent to the Crown for review and police would be seeking charges. They later walked that back and said it was premature to make the statement.

When asked last month about the status of the case, the Crown said it had no comment and RCMP said the investigation is still ongoing.

"The intricacy of the process is reflective of the length and overall scope of the investigation," RCMP spokesperson Cpl. Julie Courchaine said in a Nov. 26 email to CBC News.

The province said the Crown consulted other prosecutors and considered a number of charges under the Criminal Code of Canada, including breach of trust, fraud exceeding $5,000, forgery of documents, uttering forged documents, keeping false books or documents, and money laundering.

"First, there must be sufficient evidence to support a reasonable likelihood of conviction. The second consideration is whether charges are in the public interest, but this can only be considered if the first standard is met," said a Manitoba Justice press release.

In the end, the Crown felt there wasn't enough evidence to support a conviction.

Kenneth Molloy, a retired Winnipeg police sergeant who spent 12 years investigating commercial crimes, said he was not surprised by the conclusion of the RCMP investigation.

"You're talking about an extremely lengthy, complex investigation," Molloy said in an interview, explaining it is difficult to manage so much data.

"As a police officer, when you're obtaining the search warrants, the production orders, you're working to a different standard than what the Crown is going to apply."

Molloy said police officers can get mired in the details of a case and believe they've gathered sufficient evidence to support a charge, while Crown prosecutors serve as an independent set of eyes.

"When somebody outside looks at it objectively and says you haven't met the standard, there's not enough here that we can move on, there's a little bit of doubt, there's a little bit of error issues, and so it's not surprising when the Crown comes back and says there's not enough." 

Molloy said fraud allegations involving construction work are difficult to prove because a change in an invoice could reflect profit getting built into the invoice, while breach of trust allegations are even more difficult because the actions of an individual must be connected to their public office.

Winnipeg police said while most of their commercial crimes investigations have been completed in two years or less, these kinds of cases are incredibly complex and have numerous layers and challenges.

"It is also not uncommon for investigators to make numerous applications for judicial authorizations, such as production orders and search warrants. These requirements add to the complexity of financial crime and can create some delays while respondents react to the court orders," Winnipeg police Const. Jay Murray said.

"We have been fortunate, in that we have been able to address most of our longer-term financial crime investigations within 18-24 months. But there are numerous factors that can result in an investigation taking longer — especially with multifaceted investigations."